KTII K-Tron International (MM)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

 

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No.  )

 

Filed by the Registrant  þ

 

Filed by a Party other than the Registrant  o

 

Check the appropriate box:

 

o   Preliminary Proxy Statement

o   Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

þ   Definitive Proxy Statement

o   Definitive Additional Materials

o   Soliciting Material Pursuant to §240.14a-12

 

K-TRON INTERNATIONAL, INC.

(Name of Registrant as Specified in Its Charter)

 

N/A

(Name of Person(s) Filing Proxy Statement, if other than Registrant)

 

Payment of Filing Fee (Check the appropriate box):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Routes 55 & 553
P.O. Box 888
Pitman, New Jersey 08071-0888
(856) 589-0500

 

February 26, 2010

 

To our Shareholders:

 

You are cordially invited to attend a special meeting of the shareholders of K-Tron International, Inc. (the “Company”), at the offices of Morgan, Lewis & Bockius LLP located at 1701 Market Street, Philadelphia, Pennsylvania 19103 on Thursday, April 1, 2010, beginning at 10:00 a.m. local time.

 

At the special meeting, you will be asked to consider and vote upon a proposal to approve the Agreement and Plan of Merger (“Merger Agreement”), dated as of January 8, 2010, among Hillenbrand, Inc. (“Parent”), Krusher Acquisition Corp., a wholly-owned subsidiary of Parent (“Merger Sub”), and the Company.

 

The Merger Agreement provides for, among other things, the merger of Merger Sub with and into the Company, with the Company as the surviving corporation in the merger (the “Merger”). As a result of the Merger, the Company will become a wholly-owned subsidiary of Parent. If the Merger is completed, you will be entitled to receive $150.00 in cash (as may be increased in certain limited circumstances as set forth in the Merger Agreement), without interest and less any required withholding tax, for each share of our common stock you own at the consummation of the Merger, as more fully described in the enclosed proxy statement.

 

Our Board of Directors has unanimously approved the Merger Agreement, the Merger and the transactions contemplated by the Merger Agreement and has determined that the Merger Agreement, the Merger and transactions contemplated by the Merger Agreement are fair to, advisable and in the best interests of the Company and the Company’s shareholders. Accordingly, our Board of Directors unanimously recommends that you vote “FOR” the proposal to approve the Merger Agreement .

 

The proxy statement attached to this letter provides you with information about the proposed Merger and the special meeting. We encourage you to read the entire proxy statement carefully because it explains the proposed Merger and related matters, including the conditions to the completion of the Merger. You may also obtain more information about the Company from documents we have filed with the Securities and Exchange Commission.

 

Your vote is very important . The Merger cannot be completed unless the Merger Agreement is approved by the affirmative vote of two-thirds of the votes cast at the special meeting by the holders of the outstanding shares of our common stock. The Company’s directors and executive officers have entered into a voting agreement with Parent and Merger Sub under which they have agreed to vote substantially all of their shares of common stock in favor of the approval of the Merger Agreement. Collectively, this voting agreement relates to approximately 10% of the Company’s outstanding shares of common stock.

 

Please do not send your common stock certificates to us at this time. If the Merger is completed, you will be sent instructions regarding surrender of your certificates.

 

Whether or not you plan to attend the special meeting, it is important that your shares be represented. Accordingly, we urge you to vote by completing, signing, dating and promptly returning the enclosed proxy card in the envelope provided, which requires no postage if mailed in the United States. Alternatively, you may vote through the Internet or by telephone as directed on the enclosed proxy card. If you receive more than one proxy card because you own shares that are registered differently, please vote all of your shares shown on all of your proxy cards.

Voting by proxy will not prevent you from voting your shares in person if you subsequently choose to attend the special meeting. If you hold your shares through a broker or nominee, you should follow the procedures provided by your broker or nominee.

 

We look forward to seeing you at the special meeting.

 

Sincerely,

 

Edward B. Cloues, II

Chairman and Chief Executive Officer

 

Neither the U.S. Securities and Exchange Commission nor any state securities regulatory agency has approved or disapproved the Merger, passed upon the merits or fairness of the Merger or passed upon the adequacy or accuracy of the disclosures in this document. Any representation to the contrary is a criminal offense.

 

This proxy statement is dated February 26, 2010 and is first being mailed to shareholders on or about March 1, 2010.

 

Routes 55 & 553
P.O. Box 888
Pitman, New Jersey 08071-0888
(856) 589-0500

 

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 1, 2010

 

DEAR SHAREHOLDER:

 

We will hold a special meeting of shareholders of K-Tron International, Inc., a New Jersey corporation (“K-Tron” or the “Company”), on Thursday, April 1, 2010 at 10:00 a.m. local time at the offices of Morgan, Lewis & Bockius LLP located at 1701 Market Street, Philadelphia, Pennsylvania 19103, in order to:

 

1. consider and vote on a proposal to approve the Agreement and Plan of Merger (the “Merger Agreement”), dated as of January 8, 2010, among Hillenbrand, Inc. (“Parent”), Krusher Acquisition Corp., a wholly-owned subsidiary of Parent (“Merger Sub”), and the Company, as a result of which, among other things, each share of common stock of K-Tron issued and outstanding immediately prior to the effective time of the merger, except for shares owned directly or indirectly by the Company, Parent or Merger Sub (in each case, other than any such shares held on behalf of third parties), will be cancelled and converted automatically into the right to receive $150.00 in cash (as may be increased in certain limited circumstances as set forth in the Merger Agreement), without interest and less any required withholding tax. A copy of the Merger Agreement is attached as Annex A to the accompanying proxy statement;

 

2. consider and vote upon a proposal to adjourn the special meeting if necessary or appropriate to permit further solicitation of proxies if there are not sufficient votes at the time of the special meeting to approve the Merger Agreement referred to in Item 1; and

 

3. transact such other business as may properly come before the special meeting or any adjournment or postponement thereof.

 

Your vote is important, regardless of the number of shares of stock that you own . The approval of the Merger Agreement requires the affirmative vote of two-thirds of the votes cast at the special meeting by the holders of the outstanding shares of our common stock. The proposal to adjourn the meeting to solicit additional proxies requires the affirmative vote of a majority of the votes cast at the special meeting by the holders of the outstanding shares of our common stock. Failing to vote on the Merger Agreement will have no effect on the approval of the Merger Agreement, assuming that a quorum is present.

 

Only holders of record of shares of our common stock at the close of business on February 24, 2010, the record date for the special meeting, are entitled to notice of the meeting and to vote at the meeting and at any adjournment or postponement of the meeting. A list of shareholders will be available for inspection at the special meeting. All shareholders of record are cordially invited to attend the special meeting in person.

 

We urge you to read the entire proxy statement carefully. Whether or not you plan to attend the special meeting, please vote by promptly completing the enclosed proxy card and then signing, dating and returning it in the postage-prepaid envelope provided so that your shares may be represented at the special meeting. Alternatively, you may vote your shares of stock through the Internet or by telephone, as indicated on the proxy card. Prior to the vote, you may revoke your proxy in the manner described in the proxy statement. Your failure to vote will have no effect on the proposal to approve the Merger Agreement, assuming that a quorum is present. If you hold shares through a broker or other nominee, you should follow the procedures provided by your broker or nominee.

By Order of the Board of Directors,

 

Mary E. Vaccara,

Secretary

 

Dated: February 26, 2010

 

TABLE OF CONTENTS

 

 

TABLE OF CONTENTS — (Continued)

 

 

The following summary highlights selected information from this proxy statement and may not contain all of the information that is important to you. Accordingly, we encourage you to read carefully this entire proxy statement, its annexes and the documents referred to in this proxy statement. Each item in this summary includes a page reference directing you to a more complete description of that item in this proxy statement. See “Where Shareholders Can Find Additional Information” beginning on page 67.

 

Unless we otherwise indicate or unless the context otherwise requires: all references in this proxy statement to “Company,” “K-Tron,” “we,” “our” and “us” refer to K-Tron International, Inc. and, where appropriate, its subsidiaries; all references to “Parent” refer to Hillenbrand, Inc.; all references to “Merger Sub” refer to Krusher Acquisition Corp.; all references to “Merger Agreement” refer to the Agreement and Plan of Merger, dated as of January 8, 2010, among Parent, Merger Sub and the Company, as it may be amended from time to time, a copy of which is attached as Annex A to this proxy statement; all references to the “Merger” refer to the merger contemplated by the Merger Agreement; all references to “Merger Consideration” refer to the per share merger consideration of $150.00 in cash (as may be increased in certain limited circumstances as set forth in the Merger Agreement), without interest and subject to reduction for any required withholding taxes, contemplated to be received by the holders of our Common Stock pursuant to the Merger Agreement; all references to “Board of Directors” refer to K-Tron’s Board of Directors; and all references to “Common Stock” refer to the Company’s common stock, par value $0.01 per share.

 

K-Tron International, Inc.   K-Tron International, Inc., a New Jersey corporation, and its subsidiaries design, produce, market and service material handling equipment and systems for a wide variety of industrial markets particularly in the plastics, food, chemical, pharmaceutical, power generation, coal mining, pulp and paper, wood and forest products and biomass energy generation industries. The Company has manufacturing facilities in the United States, Switzerland and the People’s Republic of China, and its equipment is sold throughout the world. The Company serves the bulk solids material handling markets through two separate business lines which focus primarily on feeding and pneumatic conveying equipment and on size reduction equipment, conveying systems and screening equipment.

 

Hillenbrand, Inc.   Hillenbrand, Inc., an Indiana corporation, is the parent holding company of its wholly-owned subsidiary, Batesville Services, Inc., which we refer to as Batesville. Through Batesville, Parent manufactures, distributes and sells Batesville branded funeral service products to licensed funeral directors who operate licensed funeral homes in North America. Parent’s products consist primarily of burial and cremation caskets, but also include containers and urns, selection room display fixturing for funeral homes and other personalization and memorialization products and services, including the creation and hosting of websites for funeral homes.

 

Krusher Acquisition Corp.   Krusher Acquisition Corp. is a New Jersey corporation formed for the sole purpose of completing the Merger with the Company. Krusher Acquisition Corp. is a wholly-owned subsidiary of Parent and has not carried on any activities to date, except for activities incidental to its incorporation and activities undertaken in connection with the transactions contemplated by the Merger Agreement.

 

On January 8, 2010, the Company entered into the Merger Agreement. Upon the terms and subject to the conditions of the Merger Agreement, Merger Sub will merge with and into the Company, with the Company as the surviving corporation. We will become a wholly-owned subsidiary of Parent. You will have no equity interest in the Company or Parent after the effective time of the Merger. At the effective time of the Merger:

 

 

 

If the Merger is completed and you hold shares of Common Stock at the effective time of the Merger, you will be entitled to receive the Merger Consideration for each share of Common Stock you own. As a result of the Merger, the Company will cease to be an independent, publicly traded company. You will not own any shares of the surviving corporation or of Parent.

 

The special meeting will be held on Thursday, April 1, 2010 starting at 10:00 a.m. local time at the offices of Morgan, Lewis & Bockius LLP located at 1701 Market Street, Philadelphia, Pennsylvania 19103. At the special meeting, you will be asked to vote upon a proposal to approve the Merger Agreement, pursuant to which Merger Sub will merge with and into the Company, and to approve the proposal to adjourn the special meeting if necessary or appropriate to solicit additional proxies.

 

Shareholders of record at the close of business on February 24, 2010 are entitled to notice of, and to vote at, the special meeting. The presence at the meeting, in person or by proxy, of the holders of a majority of the issued and outstanding shares of Common Stock as of the close of business on the record date will constitute a quorum. As of the record date, there were 2,841,787 shares of Common Stock outstanding and entitled to vote. Shareholders of record as of the record date are entitled to cast one vote per share of Common Stock they hold.

 

The approval of the Merger Agreement requires the affirmative vote of two-thirds of the votes cast at the special meeting by the holders of the outstanding shares of Common Stock. The approval of the meeting adjournment proposal requires the affirmative vote of a majority of the votes cast at the special meeting by the holders of the outstanding shares of our Common Stock. Failure to vote your shares of Common Stock will have no effect on the proposal to approve the Merger Agreement, assuming a quorum is present, or the proposal to adjourn the special meeting.

 

As of February 24, 2010, the record date for the special meeting, our current directors and executive officers beneficially owned, in the aggregate, 357,720 shares of Common Stock representing approximately 12.36% of our outstanding Common Stock. Such directors and executive officers are parties to a voting agreement with Parent and Merger Sub, a copy of which is attached as Annex B to this proxy statement, pursuant to which they have agreed, among other things, to vote all of their shares of Common Stock, other than certain shares owned beneficially by Mr. Cloues pursuant to powers of attorney and certain shares which he intends to donate to charity, which shares in total represent less than 1% of our outstanding Common Stock, “FOR” the approval of the Merger Agreement and against any merger agreement proposed by other parties or any action that would hinder or prevent the transactions contemplated by the Merger Agreement.

 

Our Board of Directors has unanimously (i) approved the Merger Agreement and the Merger, (ii) determined that the Merger Agreement, the Merger and the transactions contemplated by the Merger Agreement are fair to, advisable and in the best interests of the Company and our shareholders, (iii) recommended that our shareholders vote “FOR” the approval of the Merger Agreement and (iv) recommended that our shareholders vote “FOR” the approval of any proposal to adjourn the special meeting if necessary or appropriate to solicit additional proxies in the event that there are not sufficient votes in favor of approval of the Merger Agreement at the time of the special meeting.

 

For a discussion of the material factors considered by the Board of Directors in reaching their conclusions, see “The Merger — Reasons for the Merger; Recommendation of Our Board of Directors” beginning on page 22.

 

Goldman Sachs & Co. (“Goldman Sachs”) delivered its opinion to the Company’s Board of Directors that, as of January 8, 2010 and based upon and subject to the factors and assumptions set forth therein, the $150.00 per share in cash to be paid to the holders (other than Parent and its affiliates) of shares of Common Stock pursuant to the Merger Agreement was fair from a financial point of view to such holders.

 

The full text of the written opinion of Goldman Sachs, dated January 8, 2010, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex C to this proxy statement. Goldman Sachs provided its opinion for the information and assistance of the Company’s Board of Directors in connection with its consideration of the Merger and such opinion does not constitute a recommendation as to how any holder of shares of Common Stock should vote with respect to the Merger or any other matter. Pursuant to an engagement letter between the Company and Goldman Sachs, the Company has agreed to pay Goldman Sachs a transaction fee of approximately $5 million, the principal portion of which is contingent upon consummation of the Merger.

 

Parent expects to use cash on hand and proceeds from debt financing to fund the aggregate Merger Consideration upon consummation of the Merger. Parent was formed in connection with the spin-off of Batesville to the shareholders of Hillenbrand Industries, Inc. (n/k/a Hill-Rom Holdings, Inc.) in March 2008. Pursuant to a covenant contained in the Distribution Agreement between Parent and Hillenbrand Industries, Inc. related to the spin-off of Batesville, Parent is prohibited from consummating the Merger using only proceeds from debt financing if the incurrence of such amount of debt would cause Parent to exceed a specified leverage ratio test.

 

The obligations of Parent and Merger Sub under the Merger Agreement are not conditioned in any manner upon their obtaining financing. If the closing of the Merger has not occurred on or prior to April 30, 2010 as a consequence of Parent’s failure to have sufficient funds to pay the Merger Consideration (so long as the Company has satisfied all conditions it must satisfy by such date), the Merger Consideration will be increased by an amount in cash equal to $0.05 per share for each day during the period commencing May 1, 2010 through the date of closing.

 

In the Merger Agreement, we have agreed that we will not:

 

 

 

Notwithstanding these restrictions, the Merger Agreement provides that if we receive a bona fide written unsolicited Takeover Proposal from a third party prior to the approval of the Merger Agreement by our shareholders that is, or would reasonably be expected to result in, a “Superior Proposal” (as such term is defined in the Merger Agreement), the Company may engage in discussions with the third party and provide information to the third party in regard to the Takeover Proposal, provided that we enter into a confidentiality agreement with such third party meeting certain requirements and that we provide notice to Parent in accordance with the requirements of the Merger Agreement.

 

We may terminate the Merger Agreement and enter into a definitive agreement and/or effect a Change in Recommendation (as defined in the Merger Agreement) with respect to a Superior Proposal, provided that our Board of Directors concludes in good faith it is a Superior Proposal and we have given four (4) business days prior written notice to Parent, which includes a description of the terms and conditions of the Superior Proposal and a copy of the proposed transaction agreement (and a new notice if there are any material changes to such Superior Proposal). If the Merger Agreement is terminated upon the receipt of such Superior Proposal or a Change in Recommendation is effected, we would be required to pay Parent a termination fee of $12 million.

 

Conditions to Each Party’s Obligation.

 

Each party’s obligation to complete the Merger is subject to the satisfaction or waiver of the following conditions:

 

 

Conditions to Parent and Merger Sub’s Obligation.

 

The obligation of Parent and Merger Sub to complete the Merger is subject to the satisfaction or waiver at or before the closing date of the following additional conditions:

 

 

Conditions to the Company’s Obligation.

 

Our obligation to complete the Merger is subject to the satisfaction or waiver at or before the closing date of the following additional conditions: the representations and warranties of Parent and Merger Sub qualified by materiality or Parent Material Adverse Effect (as defined in the Merger Agreement) were true and correct in all respects and the representations and warranties of Parent not qualified by materiality or Parent Material Adverse Effect were true and correct in all material respects as of the date of the Merger Agreement; the representations and warranties of Parent and Merger Sub must be true and correct as of the closing date, except where the failure to be so true and correct individually or in the aggregate has not had and would not reasonably be expected to have a Parent Material Adverse Effect; Parent and Merger Sub have each performed in all material respects its obligations and complied in all material respects with all covenants required to be performed or complied with by it; and Parent and Merger Sub have delivered a certificate signed on behalf of Parent by the chief executive officer and chief financial officer of Parent certifying each of the foregoing.

 

The Merger Agreement may be terminated at any time upon the mutual written consent of the Company and Parent. Other circumstances under which the Company or Parent may terminate the Merger Agreement are described under “Terms of the Merger Agreement — Termination of the Merger Agreement” beginning on page 55. If the Merger Agreement is terminated, in certain circumstances we will be required to pay a termination fee of $12 million to Parent. Additionally, in certain circumstances we will be required to reimburse Parent’s out-of-pocket expenses incurred related to the Merger, up to a maximum of $10 million. The specific circumstances in which we are required to pay a termination fee and reimburse expenses are described under “Terms of the Merger Agreement — Fees and Expenses” beginning on page 56.

 

The Merger is subject to review by the Antitrust Division of the Department of Justice (the “Antitrust Division”) and the Federal Trade Commission (“FTC”) under the HSR Act. The HSR Act provides that transactions such as the Merger may not be completed until certain information and documents have been submitted to the Antitrust Division and the FTC and certain waiting period requirements have been observed. On January 22, 2010, the Company and Parent each filed a Notification and Report Form with the Antitrust Division and the FTC and requested early termination of the waiting period. On February 2, 2010, the Company and Parent were notified that early termination of the waiting period under the HSR Act had been granted.

 

Except as noted above with respect to the required filings under the HSR Act, we are unaware of any material federal, state or foreign regulatory requirements or approvals required for the execution of the Merger Agreement or completion of the Merger.

 

Generally, the Merger will be taxable to our shareholders who are U.S. holders for U.S. federal income tax purposes. A U.S. holder of our Common Stock receiving cash in the Merger generally will recognize gain or loss for U.S. federal income tax purposes in an amount equal to the difference between the amount of cash received and the holder’s adjusted tax basis in our Common Stock surrendered. You should consult your own tax advisor for a full understanding of how the Merger will affect your particular tax circumstances.

 

In considering the recommendation of our Board of Directors with respect to the Merger, you should be aware that certain of our directors and officers may have interests in the Merger that are different from, or in addition to, your interests as a shareholder and that may present actual or potential conflicts of interest. Edward B. Cloues, II, our Chairman and Chief Executive Officer, has been invited to join Parent’s board of directors after the Merger closes. Mr. Cloues has indicated he would accept this position. Under the Merger Agreement, Parent and the surviving corporation agreed to assume and perform the obligations of K-Tron under employment agreements that the Company has with certain members of the Company’s senior management team. In addition to the assumption

of those employment agreements, certain members of the Company’s senior management team were also presented with proposed compensation packages and proposed sign-on bonuses from Parent, subject to the completion of the Merger and acceptance of continued employment with Parent. The proposed compensation packages would increase each of the senior management members’ compensation and provide additional benefits. Our Board of Directors was aware of these interests and considered that the interests may be different from or in addition to the interests of our shareholders generally, among other matters, in approving the Merger Agreement and the transactions contemplated thereby, including the Merger, and in determining to recommend that our shareholders vote for approval of the Merger Agreement. You should consider these and other interests of our directors and executive officers that are described in this proxy statement.

 

As soon as reasonably practicable after the effective time of the Merger (and in any event within five (5) business days following the effective time of the Merger), American Stock Transfer & Trust Company, LLC, the paying agent, will mail a letter of transmittal and instructions to all Company shareholders of record. The letter of transmittal and instructions will tell you how to surrender your stock certificates or book-entry shares in exchange for the Merger Consideration. You should not return any share certificates you hold with the enclosed proxy card, and you should not forward your share certificates to the paying agent without a letter of transmittal.

 

Our Common Stock is listed on The NASDAQ Global Select Market under the trading symbol “KTII.” The closing sale price of Common Stock on January 8, 2010, which was the last trading day before the announcement of the execution of the Merger Agreement, was $113.52 per share. On February 24, 2010, the closing sale price of our Common Stock was $149.53 per share.

 

Under New Jersey law, holders of shares of the Company’s Common Stock are not entitled to dissenters’ rights in connection with the proposed Merger.

 

The following questions and answers are intended to briefly address some commonly asked questions regarding the Merger, the Merger Agreement and the special meeting. These questions and answers may not address all questions that may be important to you as a K-Tron shareholder. Please refer to the “Summary” and the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents referred to or incorporated by reference in this proxy statement, which you should read carefully. See “Where Shareholders Can Find Additional Information” beginning on page 67.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

You may also abstain from voting with respect to the approval of the Merger Agreement and the proposal to adjourn the special meeting.

 

 

 

You should read “The Merger — Reasons for the Merger; Recommendation of Our Board of Directors” beginning on page 22 for a discussion of the factors that our Board of Directors considered in deciding to recommend the approval of the Merger Agreement. See also “The Merger — Interests of K-Tron’s Directors and Officers in the Merger” beginning on page 34.

 

 

 

 

 

 

 

 

 

 

 

If you hold your shares through a broker, bank or other nominee, you should follow the separate voting instructions provided by the broker, bank or other nominee with the proxy statement. Your broker, bank or other nominee may allow you to submit your proxy through the Internet or by telephone. Please contact your broker, bank or other nominee to determine how to cast your vote.

 

 

 

If you hold your shares through a broker, bank or other nominee, you may vote those shares in person at the meeting only if you obtain and bring with you a signed proxy from the appropriate nominee giving you the right to vote the shares. To do this, you should contact your broker, bank or nominee.

 

 

 

 

Simply attending the special meeting will not constitute revocation of a proxy. If your shares are held in “street name,” you should follow the instructions of your broker, bank or other nominee regarding revocation or change of vote. If your broker, bank or other nominee allows you to submit a vote by telephone or through the Internet, you may be able to change your vote by submitting new voting instructions by telephone or through the Internet.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

You should read “The Merger — Material U.S. Federal Income Tax Consequences of the Merger to Our Shareholders” beginning on page 40 for a more complete discussion of the U.S. federal income tax consequences of the Merger to U.S. Holders. Tax matters can be complicated, and the tax consequences of the Merger to you will depend on your particular tax situation. We urge you to consult your tax advisor on the tax consequences of the Merger to you.

 

 

 

 

 

 

 

This proxy statement and the documents to which we refer you in this proxy statement contain statements that are not historical facts and that are considered “forward-looking” within the meaning of the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). You can identify these statements by the fact that they do not relate strictly to historical or current facts and are based, at least in part, upon estimates or assumptions we have made. We have based these forward-looking statements on our current expectations about future events. Statements that include words such as “may,” “will,” “project,” “might,” “expect,” “believe,” “anticipate,” “intend,” “could,” “would,” “estimate,” “continue” or “pursue,” or the negative thereof, or other words or expressions of similar meaning, may identify forward-looking statements. These forward-looking statements include, without limitation, those relating to future actions, strategies, future performance and future financial results. Although we believe that the expectations underlying these forward-looking statements are reasonable, there are a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. These forward-looking statements should, therefore, be considered in light of various important factors set forth from time to time in our filings with the Securities and Exchange Commission, which we refer to as the “SEC.” In addition to other factors and matters contained or incorporated in this proxy statement, these statements are subject to risks, uncertainties and other factors, including, among others:

 

 

The foregoing sets forth some, but not all, of the factors that could impact our ability to achieve results described in any forward-looking statements. A more complete description of the risks applicable to us is provided in our filings with the SEC available at the SEC’s web site at www.sec.gov, including our most recent filings on Forms 10-Q and 10-K. Investors are cautioned not to place undue reliance on these forward-looking statements. Investors also should understand that is not possible to predict or identify all risk factors and that neither this list nor the factors identified in our SEC filings should be considered a complete statement of all potential risks and uncertainties. These forward-looking statements speak only as of the date on which they were made and we expressly disclaim any obligation to publicly update or release any revisions to these forward-looking statements to reflect events or circumstances after the date of this proxy statement, except as may be required by law.

 

K-Tron

 

K-Tron International, Inc.

Routes 55 & 553

P.O. Box 888

Pitman, New Jersey 08071-0888

Phone: (856) 589-0500

 

K-Tron International, Inc., or the Company, a New Jersey corporation, and its subsidiaries design, produce, market and service material handling equipment and systems for a wide variety of industrial markets, particularly in the plastics, food, chemical, pharmaceutical, power generation, coal mining, pulp and paper, wood and forest products and biomass energy generation industries. The Company has manufacturing facilities in the United States, Switzerland and the People’s Republic of China, and its equipment is sold throughout the world. The Company serves the bulk solids material handling markets through two separate business lines which focus primarily on feeding and pneumatic conveying equipment (the “Process Group”) and on size reduction equipment, conveying systems and screening equipment (the “Size Reduction Group”). The Process Group designs, produces, markets, sells and services both feeder equipment, which controls the flow of materials into a manufacturing process by weight (known as gravimetric feeding) or by volume (known as volumetric feeding), and pneumatic conveying equipment, which transports bulk solids from one point to another point with negative pressure (known as vacuum conveying) or with positive pressure (known as pressure conveying). The Process Group markets and sells this equipment under two main brands: K-Tron Feeders and K-Tron Premier. The Size Reduction Group designs, manufactures, markets and sells size reduction equipment, such as hammermills, wood hogs and double roll crushers. This equipment is used to resize various materials to a given smaller size, and the principal industries served are the power generation, coal and minerals mining, pulp and paper and wood and forest products industries. The Size Reduction Group markets and sells this equipment under the Pennsylvania Crusher, Gundlach and Jeffrey Rader brands.

 

Detailed descriptions about the Company’s business and financial results are contained in our Annual Report on Form 10-K, which is incorporated in this proxy statement by reference. See “Where Shareholders Can Find Additional Information” beginning on page 67.

 

Parent and Merger Sub

 

Hillenbrand, Inc.

Krusher Acquisition Corp.

One Batesville Boulevard

Batesville, Indiana 47006

Phone: (812) 934-7000

 

Hillenbrand, Inc., or Parent, an Indiana corporation, is the parent holding company of its wholly-owned subsidiary, Batesville Services, Inc., or Batesville. Through Batesville, Parent manufactures, distributes and sells Batesville branded funeral service products to licensed funeral directors who operate licensed funeral homes in North America. Parent’s products consist primarily of burial and cremation caskets, but also include containers and urns, selection room display fixturing for funeral homes, and other personalization and memorialization products and services, including the creation and hosting of websites for funeral homes.

 

Krusher Acquisition Corp., or Merger Sub, is a New Jersey corporation formed for the sole purpose of completing the Merger with the Company. Merger Sub is a wholly-owned subsidiary of Parent. Merger Sub has not conducted any business operations except for activities incidental to its formation and as contemplated by the Merger Agreement. Upon consummation of the proposed Merger, Merger Sub will cease to exist and the Company will continue as the surviving corporation, under the name “K-Tron International, Inc.”

 

The enclosed proxy is solicited on behalf of our Board of Directors for use at a special meeting of shareholders to be held on Thursday, April 1, 2010, at 10:00 a.m. local time, or at any adjournments or postponements of the special meeting. The special meeting will be held at the offices of Morgan, Lewis & Bockius LLP located at 1701 Market Street, Philadelphia, Pennsylvania 19103. The Company intends to mail this proxy statement and the accompanying proxy card on or about March 1, 2010 to all shareholders entitled to notice of, and to vote at, the special meeting.

 

At the special meeting, shareholders will be asked to:

 

1. consider and vote on a proposal to approve the Merger Agreement among the Company, Parent and Merger Sub, as a result of which, among other things, each share of Common Stock of K-Tron outstanding immediately prior to the effective time of the Merger, except for shares owned directly or indirectly by the Company, Parent or Merger Sub (in each case, other than any such shares held on behalf of third parties), will be converted into the right to receive the Merger Consideration; and

 

2. consider and vote upon a proposal to adjourn the special meeting if necessary or appropriate to permit further solicitation of proxies if there are not sufficient votes at the time of the special meeting to approve the Merger Agreement.

 

The Company does not expect a vote to be taken on any other matters at the special meeting. If any other matters are properly presented at the special meeting, however, the persons appointed as proxies on the enclosed proxy card will have discretionary authority to vote the shares represented by duly executed proxies in accordance with their discretion and judgment.

 

Shareholders of record at the close of business on February 24, 2010 are entitled to notice of, and to vote at, the special meeting. As of the record date, there were 2,841,787 shares of Common Stock outstanding and entitled to vote. Shareholders of record as of the record date are entitled to cast one vote per share of Common Stock they hold.

 

A quorum must be present for the special meeting to be held. The presence at the meeting, in person or by proxy, of the holders of a majority of the issued and outstanding shares of Common Stock as of the close of business on the record date will constitute a quorum. Whether or not a quorum exists, the meeting may be adjourned by the affirmative vote of a majority of the votes cast at the special meeting by the holders of the outstanding shares of Common Stock.

 

For us to complete the Merger, we need the affirmative vote of two-thirds of the votes cast at the special meeting by the holders of the outstanding shares of our Common Stock. The proposal to adjourn the special meeting if necessary or appropriate to solicit additional proxies, requires the affirmative vote of a majority of the votes cast at the special meeting by the holders of the outstanding shares of our Common Stock.

 

In order for your Common Stock to be included in the vote, if you are a registered shareholder (that is, if you hold your Common Stock in certificated form), you must submit your proxy and vote your shares by returning the enclosed proxy, marked, signed and dated, in the postage prepaid envelope provided, or by telephone or through the Internet, as indicated on the proxy card, or you may vote in person at the special meeting.

 

Abstentions and broker non-votes, if any, will be treated as shares that are present and entitled to vote at the special meeting for purposes of determining whether a quorum exists. A broker non-vote occurs when, as is the case with respect to the approval of the Merger Agreement, brokers are prohibited from exercising discretionary authority in voting for beneficial owners who have not provided voting instructions. Failures to vote, abstentions and broker non-votes, if any, are not considered votes “cast” and therefore will have no effect on the vote and will not be considered in determining whether the proposals have received the requisite shareholder vote.

 

As of February 24, 2010, the record date for the special meeting, our current directors and executive officers beneficially owned, in the aggregate, 357,720 shares of Common Stock representing approximately 12.36% of our outstanding Common Stock. Such directors and executive officers are parties to a voting agreement with Parent and Merger Sub, a copy of which is attached as Annex B to this proxy statement, pursuant to which they have agreed, among other things, to vote all of their shares of Common Stock, other than certain shares owned beneficially by Mr. Cloues pursuant to powers of attorney and certain shares which he intends to donate to charity, which shares in total represent less than 1% of our outstanding Common Stock, in favor of the approval of the Merger Agreement and against any merger agreement proposed by other parties or any action that would hinder or prevent the transactions contemplated by the Merger Agreement.

 

If you vote your shares of Common Stock by returning a signed proxy card by mail, or through the Internet or by telephone as indicated on the proxy card, your shares will be voted at the special meeting in accordance with the instructions given. If no instructions are indicated on your signed proxy card, your shares will be voted “ FOR ” the approval of the Merger Agreement, “ FOR ” adjournment of the special meeting if necessary or appropriate to permit further solicitation of proxies, and, for any other matters properly brought before the special meeting for a vote, the persons named on the enclosed proxy card will have authority to vote the shares represented by duly executed proxies in their discretion.

 

If you wish to change your vote and your shares are held in street name, you should follow the instructions of your broker, bank or other nominee regarding revocation or change of votes. If your broker, bank or other nominee allows you to submit a vote by telephone or through the Internet, you may be able to change your vote by submitting new voting instructions by telephone or through the Internet.

 

You may revoke or change your proxy at any time before the vote is taken at the special meeting, except as otherwise described below. If you have not voted through your broker, bank or other nominee because you are the registered shareholder, you may revoke or change your proxy before it is voted by:

 

 

The Company does not expect that any matter other than the proposal to approve the Merger Agreement and, if necessary or appropriate, the proposal to adjourn the special meeting will be brought before the special meeting. If, however, such a matter is properly presented at the special meeting or any adjournment or postponement of the special meeting, the persons appointed as proxies on the enclosed proxy card will have discretionary authority to vote the shares represented by duly executed proxies in accordance with their discretion and judgment.

 

Please do NOT send in your share certificates with your proxy card. If the Merger is completed, shareholders will be mailed a transmittal form following the completion of the Merger with instructions for use in effecting the surrender of certificates in exchange for the Merger Consideration.

 

Although it is not currently expected, the special meeting may be adjourned or postponed if necessary or appropriate for the purpose of soliciting additional proxies if there are not sufficient votes at the time of the special meeting to approve the Merger Agreement. To adjourn the special meeting for this purpose, the affirmative vote of a majority of the votes cast at the special meeting by the holders of the outstanding shares of our Common Stock is required to approve the proposal to adjourn the special meeting. Any adjournment or postponement of the special meeting for the purpose of soliciting additional proxies will allow our shareholders who have already sent in their proxies to revoke them at any time prior to their use at the special meeting as adjourned or postponed, provided that such revocation is in compliance with the instructions on the enclosed proxy card. The adjournment or postponement proposal only relates to an adjournment of the special meeting for the purpose of soliciting additional proxies for the approval of the proposal to approve of the Merger Agreement. Our Board of Directors retains full authority to adjourn or postpone the meeting for any other purpose allowable by law.

 

This proxy solicitation is being made and paid for by K-Tron on behalf of our Board of Directors. In addition, we have retained Georgeson Inc. (“Georgeson”) to assist in the solicitation. We estimate that we will pay Georgeson a fee of approximately $10,000, and will reimburse them for reasonable out-of-pocket expenses incurred in connection with the solicitation. Our directors, officers and employees may also solicit proxies by personal interview, mail, e-mail, telephone, facsimile or other means of communication. These persons will not be paid additional or special remuneration for their efforts. We will also request brokers and other fiduciaries to forward proxy solicitation material to the beneficial owners of shares of Common Stock that the brokers and fiduciaries hold of record and obtain such holders’ voting instructions. Upon request, we will reimburse such brokers and fiduciaries for their reasonable out-of-pocket expenses.

 

If you have more questions about the Merger or how to submit your proxy, or if you need additional copies of this proxy statement or the enclosed proxy card or voting instructions, please call the Company’s Investor Relations or Georgeson:

 

K-Tron International, Inc.
Routes 55 & 553
P.O. Box 888
Pitman, New Jersey 08071-0888
Telephone: (856) 589-0500

 

 

Georgeson Inc.
199 Water Street
26 ^th Floor
New York, New York 10038
Telephone: (800) 501-4383

 

This discussion of the Merger is qualified in its entirety by reference to the Merger Agreement, which is attached to this proxy statement as Annex A . You should read the entire Merger Agreement carefully as it is the legal document that governs the Merger.

 

From time to time, K-Tron and the Board of Directors have, with their legal and financial advisors, reviewed and evaluated strategic opportunities and alternatives with a view to enhancing shareholder value. In June 2008, after considering proposals and presentations by five financial advisory firms, the Board of Directors engaged Goldman, Sachs & Co. (“Goldman Sachs”) to act as its exclusive financial advisor in connection with a possible sale of K-Tron. On behalf and at the direction of K-Tron, Goldman Sachs reached out to 77 potential purchasers during the next three months. A number of these potential purchasers expressed preliminary interest in acquiring K-Tron and 16 potential purchasers executed confidentiality agreements with K-Tron. These 16 potential purchasers were provided with high-level summary information regarding K-Tron and were asked to submit non-binding indicative offers. For the reasons described below, all of the potential purchasers, other than a private equity sponsor (“Party A”), withdrew from the process without submitting an indicative offer. On Friday, September 12, 2008, when K-Tron Common Stock was trading at approximately $150 per share, Party A submitted a non-binding indicative offer to acquire K-Tron for $165 a share, subject to conducting due diligence, obtaining financing and other material conditions. As worldwide economic conditions dramatically declined in the next two weeks, Party A withdrew from the process, indicating that it could not obtain financing.

 

Accordingly, in light of rapidly deteriorating worldwide economic conditions and the lack of interest evidenced by the potential purchasers, K-Tron terminated the sale process.

 

The Board of Directors made a number of important observations regarding the 2008 managed sale process that were important to its consideration of the 2009 opportunity with Parent: first, no potential purchaser in 2008 was interested in acquiring both of K-Tron’s business lines (the Size Reduction Group and the Process Group) at a customary premium to K-Tron’s current stock trading price; second, certain of the mining equipment companies contacted were interested in acquiring the Size Reduction Group, but were not interested in acquiring the Process Group; third, certain of the process equipment companies contacted were interested in acquiring the Process Group, but were not interested in acquiring the Size Reduction Group; and fourth, the Board of Directors did not believe there was an efficient way to sell the two Groups separately from a tax perspective.

 

On Monday, September 21, 2009, a representative from Parent’s financial advisor, P&M Corporate Finance, LLC (“PMCF”), sent an email to Edward B. Cloues, II, the Chairman and Chief Executive Officer of K-Tron, asking to schedule a meeting between Mr. Cloues and Kenneth A. Camp, the President and Chief Executive Officer of Parent, to discuss a possible transaction between K-Tron and Parent. The email also stated that Parent wanted to keep K-Tron and its management group intact and outlined Parent’s key acquisition criteria, noting that K-Tron met such acquisition criteria. On September 23, 2009, Mr. Cloues spoke with the representative from PMCF about Parent and agreed to schedule a meeting with Mr. Camp.

 

On Wednesday, September 30, 2009, Mr. Cloues met with Mr. Camp at a restaurant near K-Tron’s offices in Pitman, New Jersey. At this meeting, Mr. Camp and Mr. Cloues discussed a possible transaction between the companies, and Mr. Cloues noted that K-Tron would expect a significant premium to the Company’s stock price (which was then trading at approximately $95 per share) were it to move forward with Parent. These discussions were of a preliminary nature and did not result in any agreement regarding terms of a potential transaction or any agreement to work toward a potential transaction.

 

On Monday, October 5, 2009, K-Tron and Parent entered into a confidentiality agreement, which, among other things, imposed confidentiality, standstill and non-solicitation obligations on Parent in connection with the evaluation of a possible business combination transaction. Thereafter, Mr. Cloues informally consulted with one other K-Tron director regarding Parent’s interest in K-Tron and an appropriate valuation for the Company. On Tuesday, October 13, 2009, Mr. Cloues visited Parent’s headquarters in Batesville, Indiana to receive an

introductory presentation and tour of Parent’s facilities there. During this visit, Mr. Camp and Mr. Cloues had a preliminary discussion regarding an appropriate valuation for K-Tron. Mr. Cloues indicated that, while there had been no discussions of the Board of Directors regarding valuation, he personally thought that Parent would need to offer between $150 - $160 per share in cash before the Board of Directors would be interested in pursuing a business combination transaction.

 

On Wednesday, October 21, 2009, members of the K-Tron management team and the Parent management team met at the offices of Morgan, Lewis & Bockius LLP, counsel to K-Tron (“Morgan Lewis”), in Philadelphia, Pennsylvania. K-Tron’s management team provided Parent with an overview of K-Tron’s business. At this meeting, the parties continued preliminary discussions regarding the opportunity for a business combination between the two companies. There were no discussions regarding the value of K-Tron at this meeting.

 

On October 23, 2009, a representative of PMCF and Mr. Cloues spoke by telephone and discussed due diligence and other transaction-related matters. There were no discussions regarding the value of K-Tron during this call.

 

On November 2, 2009 and November 3, 2009, Lukas Guenthardt, Senior Vice President, Corporate Development of K-Tron, visited Parent’s headquarters in Batesville, Indiana to become acquainted with Parent’s business.

 

Between November 2, 2009 and November 17, 2009, Jan Santerre, a Vice President of Parent, visited certain of K-Tron’s locations inside and outside of the United States with members of K-Tron’s management team.

 

On Friday, November 6, 2009, a regularly scheduled meeting of the Board of Directors was held that was also attended by members of management. At this meeting, Mr. Cloues advised the Board of Directors of the exploratory discussions and due diligence process with Parent. The Board of Directors authorized Mr. Cloues to continue due diligence and discussions with Parent.

 

On Monday, November 9, 2009, the Company made due diligence materials available to Parent through an online data room. This data room had originally been developed for K-Tron’s 2008 process, and was updated for developments since that time. Mr. Cloues informed Mr. Camp that K-Tron required an indication of a compelling valuation before it would commit its executive management to undertake the substantial additional effort required to respond to Parent’s supplemental due diligence requests. Representatives of Parent promptly commenced review of the due diligence materials in the online data room.

 

On Thursday, November 12, 2009, K-Tron informed representatives of Goldman Sachs that it was again contemplating a potential transaction and requested Goldman Sachs’ assistance in connection with such potential transaction pursuant to the terms of the June 2008 engagement letter.

 

On Friday, November 13, 2009, Mr. Cloues sent an email to the Board of Directors with an update on recent transaction developments.

 

On November 18, 2009, representatives of Parent delivered a due diligence request list to K-Tron.

 

On Friday, November 20, 2009, Mr. Camp, John R. Zerkle, Senior Vice President, General Counsel and Secretary of Parent, and Mr. Cloues spoke by telephone. During this conversation, Mr. Camp advised Mr. Cloues that the Acquisitions Committee of Parent’s board of directors had recently met and given preliminary approval to proceeding with the proposed transaction. Mr. Camp also advised Mr. Cloues that Parent was suggesting a valuation for each share of K-Tron Common Stock in the low $140s (also referred to by the principals as a “$140 plus value”), which might be increased to the mid $140s following diligence, in an acquisition made pursuant to a “two-step” merger involving an all cash tender offer for the shares of K-Tron Common Stock. At this time K-Tron Common Stock was trading at approximately $100 per share. Mr. Camp stated that senior management continuity at K-Tron was a critical requirement of any potential transaction, and was especially necessary for Parent in light of K-Tron representing new product lines for Parent. Mr. Camp also noted that Parent’s valuation was subject to further due diligence, negotiation of definitive documentation and approval of the board of directors of Parent. Mr. Camp also expressed to Mr. Cloues that, as a condition to Parent continuing to conduct due diligence in pursuit of a transaction with K-Tron, K-Tron could not speak to any other party regarding a potential strategic transaction and that if K-Tron entered into any such discussions, Parent would cease working towards a transaction with K-Tron. After this Friday conversation, Mr. Cloues provided a brief summary of these developments to the Board of Directors, scheduled a meeting of the Board of Directors for the following Monday morning, and also discussed these developments with representatives of Goldman Sachs.

On Sunday, November 22, 2009, Mr. Cloues sent an email to Mr. Camp encouraging him to consider a higher value. Mr. Cloues provided Mr. Camp with some thoughts on the valuation of K-Tron.

 

On Monday, November 23, 2009, the Board of Directors held a telephonic meeting at which representatives from Morgan Lewis were present. Also present were Mr. Guenthardt and Robert E. Wisniewski, Senior Vice President, Chief Financial Officer and Treasurer of K-Tron. At the meeting, Mr. Cloues updated the Board of Directors on the status of the discussions with Parent. Mr. Cloues reported that Parent had proposed the $140 plus value per share of Common Stock in cash, which might be increased following additional due diligence to the mid $140s. He also informed the Board of Directors that the proposed transaction would be structured as a “two-step” merger involving a tender offer. The Board of Directors also considered Goldman Sachs’ preliminary financial analyses with respect to the transaction, which representatives from Goldman Sachs had previously discussed with Mr. Cloues. The Board of Directors had a wide-ranging discussion regarding Parent’s proposal and advised Mr. Cloues that the suggested valuation was inadequate and did not fully reflect K-Tron’s fair value. The Board of Directors directed Mr. Cloues to advise Parent that K-Tron was not interested in proceeding at the $140 plus value and to encourage Parent to increase its proposed valuation.

 

Promptly after this Board of Directors meeting, Mr. Cloues sent Mr. Camp an email indicating that the Board of Directors deemed the proposed $140 plus value per share of Common Stock in cash to be below what the Board of Directors believed was the fair value of the Company. Mr. Cloues indicated that the Board of Directors was not interested in a transaction with Parent unless the shareholders received a compelling price, which the Board of Directors believed was in the range of $150 - $160 per share in cash. Further, Mr. Cloues told Mr. Camp that the Board of Directors did not believe that the proposed $140 plus value was compelling and was not interested in proceeding with the transaction with Parent at this price. Mr. Cloues expressed his continued interest in pursuing a business combination with Parent and encouraged Mr. Camp and Parent to give consideration to a higher valuation for K-Tron. Mr. Camp suggested that $145 per share would be his “top price,” but after further discussions between the executives, each executive agreed to explore with his board of directors the viability of a value of $150 per share.

 

On Tuesday, November 24, 2009, Mr. Cloues sent Mr. Camp an email indicating that he had reached three of the four other members of the Board of Directors and they were interested in proceeding at the $150 valuation.

 

On Wednesday, November 25, 2009, while K-Tron Common Stock continued to trade around approximately $100 per share, Mr. Camp called Mr. Cloues informing him that the board of directors of Parent was increasing its valuation to $150 per share in cash, subject to certain conditions, including that K-Tron not speak to any other party regarding a potential strategic transaction, further due diligence and the importance of continuity of senior management. During this call, Mr. Cloues confirmed that he had reached the fourth member of the Board of Directors, who was also interested in proceeding at the $150 valuation. Promptly following his conversation with Mr. Camp, Mr. Cloues notified the Board of Directors of these developments. Also on November 25, 2009, Parent delivered a supplemental due diligence request list to K-Tron.

 

On December 3 and 4, 2009, the management teams of K-Tron and Parent met at the offices of Morgan Lewis in Philadelphia, Pennsylvania. Representatives from PMCF, Goldman Sachs, Morgan Lewis and Baker & Daniels LLP, counsel to Parent (“Baker & Daniels”), also attended the December 3 meeting. Members of K-Tron’s management team answered due diligence questions from the Parent management team and Baker & Daniels in connection with numerous aspects of K-Tron’s business. Over dinner on the evening of December 3, 2009 and on December 4, 2009, members of the management teams from K-Tron and Parent continued their discussions regarding K-Tron’s business.

 

Between December 3, 2009 and January 7, 2010, K-Tron continued to update the online data room in response to due diligence requests from members of Parent’s management team and Parent’s financial and legal advisors. On December 5, 2009, K-Tron permitted Parent to proceed with Phase I environmental reports for each major parcel of real property owned or leased by K-Tron inside and outside the United States. From December 4, 2009 through January 7, 2010, representatives of Parent completed their review of K-Tron’s business.

 

On Thursday, December 3, 2009, Skadden, Arps, Slate, Meagher & Flom LLP, counsel to Parent (“Skadden Arps”), distributed to Morgan Lewis a draft of a “two-step” merger agreement and a draft of a tender and support agreement, pursuant to which certain shareholders of the Company would be asked to agree to tender their shares in

support of the transaction with Parent. These drafts were reviewed and discussed by Morgan Lewis and members of K-Tron’s management team.

 

On Monday, December 7, 2009, the Board of Directors held a telephonic meeting. Representatives from Morgan Lewis were present. Also present were Mr. Guenthardt and Mr. Wisniewski. The Board of Directors discussed the status of the negotiations with Parent and the drafts of the merger agreement and the tender and support agreement, including certain provisions in the merger agreement, such as the Board of Directors’ ability to consider a superior proposal and the absence of a financing condition. The Board of Directors also decided to schedule a subsequent meeting for the principal purpose of discussing with Goldman Sachs that firm’s updated preliminary financial analyses with respect to the transaction.

 

On the afternoon of Wednesday, December 9, 2009 and on Thursday, December 10, 2009, members of K-Tron’s and Parent’s management and financial teams met with Ernst & Young, LLP, Parent’s financial due diligence advisors, at the offices of Morgan Lewis in Philadelphia, Pennsylvania, to discuss financial due diligence matters.

 

On Thursday, December 10, 2009, Morgan Lewis distributed a revised draft of the merger agreement to Skadden Arps, and on December 11, 2009, Morgan Lewis distributed comments on the tender and support agreement.

 

On Friday, December 11, 2009, Mr. Cloues met with Ray Hillenbrand and James Henderson, the Chairman and Vice Chairman, respectively, of the board of directors of Parent at a lunch meeting in Philadelphia, Pennsylvania. At this meeting, Mr. Hillenbrand and Mr. Henderson expressed their continued interest in completing the potential transaction with K-Tron and in offering Mr. Cloues a seat on Parent’s board of directors after the transaction closed.

 

On the afternoon of Friday, December 11, 2009, the Board of Directors held a telephonic meeting. Representatives from Morgan Lewis and Goldman Sachs participated in the meeting. Also present were Mr. Guenthardt and Mr. Wisniewski. During this meeting, representatives of Goldman Sachs reviewed its updated preliminary financial analyses with respect to the transaction. The Board of Directors also discussed the price negotiations between the Company and Parent with respect to the valuation of $150 per share. The Board of Directors also received an update from Morgan Lewis on the status of the negotiations with Parent, including a review of the current draft of the “two-step” merger agreement, and an overview of its fiduciary duties under applicable law in the context of the proposed transaction with Parent.

 

On Sunday, December 13, 2009, Morgan Lewis distributed the initial draft of the disclosure letter to the merger agreement to Skadden Arps and Baker & Daniels.

 

On Monday, December 14, 2009, Skadden Arps distributed a revised draft of the merger agreement to Morgan Lewis. Between December 15, 2009 and December 17, 2009, numerous discussions were held between Morgan Lewis and Skadden Arps. These discussions included details of the structure of the transaction, the scope of the representations, warranties and covenants contained in the draft of the merger agreement, the conditions under which Parent would be obligated to close the tender offer, the Board of Directors’ ability to consider alternative transactions and the amount of the termination fee.

 

As discussions related to the Merger progressed during late December 2009, Doug Wilson, Senior Vice President, Human Resources of Parent met individually with Kevin Bowen, Senior Vice President, Process Group of K-Tron, Mr. Guenthardt, Donald Melchiorre, Senior Vice President, Size Reduction Group of K-Tron, and Mr. Wisniewski to express Parent’s desire to retain such employees and to discuss proposed compensation packages and sign-on bonuses after the closing of the Merger.

 

On Wednesday, December 16, 2009, Mr. Camp informed Mr. Cloues that Parent had not succeeded in renegotiating the Distribution Agreement, dated as of March 14, 2008, between Hillenbrand Industries, Inc. (n/k/a Hill-Rom Holdings, Inc.), its former parent, and Parent (the “Distribution Agreement”), to permit Parent to exceed a leverage ratio under the Distribution Agreement. As a result, Parent would not be able to implement its financing plan for a “two-step” merger involving a tender offer.

 

On the morning of Thursday, December 17, 2009, Mr. Cloues provided the Board of Directors with an update on recent transaction developments.

Representatives from K-Tron and Parent, along with their respective financial and legal advisors, discussed alternative structures for the transaction. From December 17, 2009 to January 4, 2010, members of K-Tron’s management team and representatives of Goldman Sachs consulted with Parent’s management team and PMCF to discuss financing sources available to Parent to fund the proposed transaction.

 

On Friday, December 18, 2009, Morgan Lewis distributed a revised draft of the merger agreement to Skadden Arps. In addition, on Friday, December 18, 2009, Mr. Cloues sent an email to the Board of Directors to provide an update on recent transaction developments. Later in the day, Mr. Cloues sent another email to the Board of Directors with additional developments. On Tuesday, December 22, 2009, representatives from K-Tron and Parent, along with their respective financial and legal advisors, determined to proceed with the transaction using a “one-step” merger structure that was expected to close in late March 2010 (compared to the earlier closing, late January 2010, expected with the “two-step” merger involving a tender offer). As was the case with the “two-step” transaction, there would not be a financing condition.

 

On Wednesday, December 23, 2009, Mr. Cloues sent an email to the Board of Directors detailing the discussions with Parent to date. Later in the day, Mr. Cloues supplemented his prior email communication to the Board of Directors with some background material and a summary of Parent’s leverage ratio issue prepared by Morgan Lewis. On December 23, 2009, Skadden Arps distributed a revised draft of the merger agreement reflecting the change from a “two-step” merger involving a tender offer to a “one-step” merger transaction.

 

On Thursday, December 24, 2009, Mr. Cloues emailed Mr. Camp to raise several questions regarding Parent’s compliance with the leverage ratio under the Distribution Agreement and to request further deal protections in the merger agreement in light of the new structure of the transaction, including Parent’s commitment to consummate a debt or equity financing in the event that Parent did not have sufficient funds to consummate the transaction and, additionally, an increase in the price per share for any delay in closing caused by Parent’s failure to have sufficient funds to consummate the transaction. Between December 18, 2009 and December 30, 2009, several email communications were exchanged between K-Tron and its financial and legal advisors and Parent and its financial and legal advisors. The communications included details regarding enforcement of Parent’s obligation to finance the transaction and due diligence responses from Parent regarding the availability of sources to fund the anticipated closing of the proposed transaction in late March 2010.

 

On Tuesday, December 29, 2009, Skadden Arps distributed a revised draft of the tender and support agreement (now a voting agreement), which had been modified to reflect the “one-step” merger transaction structure. Pursuant to the terms of the voting agreement, the executive officers and members of the Board of Directors would be asked to agree to vote their shares in favor of the approval of the merger agreement. On December 30, 2009, Morgan Lewis distributed a revised draft of the merger agreement to Skadden Arps.

 

During the week of January 4, 2010, numerous discussions related to the disclosure letter to the merger agreement were held between Morgan Lewis and Baker & Daniels and between Morgan Lewis and representatives from K-Tron. Drafts of the document were distributed by Morgan Lewis and Baker & Daniels.

 

On Monday, January 4, 2010, Skadden Arps distributed a revised draft of the merger agreement to Morgan Lewis. On the afternoon of January 5, 2010, Morgan Lewis and Skadden Arps held a telephonic meeting to discuss the open issues in the draft of the merger agreement. Mr. Cloues and Mr. Guenthardt from K-Tron and Mr. Zerkle from Parent participated in this call. From January 5, 2010 to January 8, 2010, numerous discussions were held between Morgan Lewis and Skadden Arps related to the merger agreement and the voting agreement, and revised drafts of these documents were exchanged.

 

On the morning of Friday, January 8, 2010, Mr. Cloues was invited to join Parent’s board of directors after the transaction closed. Mr. Cloues indicated that he would accept this position.

 

On the afternoon of Friday, January 8, 2010, the Board of Directors held an in-person meeting at the offices of Morgan Lewis in Philadelphia, Pennsylvania at which representatives from Goldman Sachs, Morgan Lewis and Flaster/Greenberg P.C., special New Jersey counsel to K-Tron (“Flaster/Greenberg”), were present. A representative from Flaster/Greenberg reviewed with the Board of Directors its fiduciary duties under New Jersey law and the legal standards applicable to its decision-making process. At the meeting, representatives of Morgan Lewis reviewed the principal terms of the merger agreement and the voting agreement, near-final copies of which had been

distributed to the Board of Directors on January 6, 2010. Also at this meeting, Goldman Sachs reviewed with the Board of Directors its financial analyses of the proposed transaction and delivered to the Board of Directors an oral opinion, which was subsequently confirmed in writing, that as of January 8, 2010 and based upon and subject to the factors and assumptions set forth therein, the $150 per share in cash to be paid to the holders (other than Parent and its affiliates) of shares of Common Stock pursuant to the Merger Agreement was fair from a financial point of view to such holders. For further information, see “The Merger — Opinion of the Company’s Financial Advisor” beginning on page 24.

 

The Board of Directors engaged in extensive discussions concerning the potential benefits of the proposed merger transaction with Parent to K-Tron and its shareholders, employees and customers. Late in the afternoon, following further discussion and after consultation with its financial advisor and counsel, the Board of Directors unanimously (i) approved the Merger Agreement and the Merger, (ii) determined that the Merger Agreement, the Merger and the transactions contemplated by the Merger Agreement were fair to, advisable and in the best interests of the Company and our shareholders, (iii) recommended that our shareholders vote for the approval of the Merger Agreement, (iv) directed that the approval of the Merger Agreement be submitted for consideration of our shareholders at a duly called meeting of the shareholders held for the purpose of approving the transactions contemplated thereby, (v) adopted resolutions to (A) render the provisions of the Rights Agreement, dated as of October 16, 2001, between K-Tron and American Stock Transfer & Trust Company, LLC (the “Rights Agreement”), including the associated purchase rights (the “Rights”) or issuance of the Rights, inapplicable to the Merger Agreement, the voting agreement and the transactions contemplated thereby, including the Merger, until the earlier of the effective time of the Merger or termination of the Merger Agreement, (B) ensure that neither Parent nor any of its affiliates is or will become an Acquiring Person (as defined in the Rights Agreement) and that a Distribution Date (as defined in the Rights Agreement) shall not occur, and the Rights shall not become exercisable, by reason of the Merger Agreement, the voting agreement and the transactions contemplated thereby, including the Merger and (C) cause the Rights Agreement to terminate and the Rights to expire immediately prior to the effective time of the Merger, (vi) adopted resolutions rendering the restrictions on business combinations contained in Section 14A:10A of the New Jersey Business Corporation Act inapplicable to the Merger, the Merger Agreement and the transactions contemplated thereby and (vii) to the extent permitted by law, authorized our officers to take all other actions necessary to irrevocably exempt the Merger, the Merger Agreement and the transactions contemplated thereby from the restrictions imposed by any other “fair price,” “moratorium,” “control share acquisition,” “interested shareholder,” “business combination” or similar statute or regulation.

 

On the evening of January 8, 2010, K-Tron, Parent and Merger Sub executed the Merger Agreement and Parent, Merger Sub and each director and executive officer of K-Tron executed the voting agreement. Early in the morning of Monday, January 11, 2010, K-Tron and Parent announced the transaction in a jointly issued press release.

 

On Tuesday, January 12, 2010, Parent provided proposed compensation packages after the completion of the Merger and proposed sign-on bonuses to each of Messrs. Bowen, Guenthardt, Melchiorre and Wisniewski for their consideration. See “The Merger — Interests of K-Tron’s Directors and Officers in the Merger — Arrangements with Parent” beginning on page 39 for more information.

 

 

Our Board of Directors, at a special meeting held on January 8, 2010, unanimously (i) approved the Merger Agreement and the Merger, (ii) determined that the Merger Agreement, the Merger and the transactions contemplated by the Merger Agreement are fair to, advisable and in the best interests of the Company and our shareholders and (iii) recommended that our shareholders vote “ FOR ” the approval of the Merger Agreement.

 

In the course of determining that the Merger Agreement and the Merger and the transactions contemplated thereby are fair to, advisable and in the best interests of the Company and our shareholders, our Board of Directors consulted with management, as well as its legal and financial advisors, and considered the following potentially positive factors:

 

 

 

 

Our Board of Directors also considered a number of potentially negative factors in its deliberations concerning the Merger, including, but not limited to:

 

 

 

During its consideration of the transaction with Parent, our Board of Directors was also aware that some of our directors and executive officers may have interests in the Merger that are, or may be, different from, or in addition to, those of our shareholders generally, as described under “The Merger — Interests of K-Tron’s Directors and Officers in the Merger” beginning on page 34.

 

While our Board of Directors considered potentially negative and potentially positive factors, our Board of Directors concluded that, overall, the potentially positive factors far outweighed the potentially negative factors.

 

The foregoing discussion summarizes the material information and factors considered by our Board of Directors in its consideration of the Merger. Our Board of Directors collectively reached the unanimous decision to approve the Merger Agreement in light of the factors described above and other factors that each member of our Board of Directors felt were appropriate. In view of the variety of factors and the quality and amount of information considered, our Board of Directors as a whole did not find it practicable to and did not quantify or otherwise assign relative weights to the specific factors considered in reaching its determination but conducted an overall analysis of the transaction. Individual members of our Board of Directors may have given different relative consideration to different factors.

 

Our Board of Directors recommends that you vote “FOR” the approval of the Merger Agreement.

 

Goldman Sachs delivered its opinion to the Company’s Board of Directors that, as of January 8, 2010 and based upon and subject to the factors and assumptions set forth therein, the $150.00 per share in cash to be paid to the holders (other than Parent and its affiliates) of shares of Common Stock pursuant to the Merger Agreement was fair from a financial point of view to such holders.

 

The full text of the written opinion of Goldman Sachs, dated January 8, 2010, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex C to this proxy statement. Goldman Sachs provided its opinion for the information and assistance of the Company’s Board of Directors in connection with its consideration of the Merger and such opinion does not constitute a recommendation as to how any holder of shares of Common Stock should vote with respect to the Merger or any other matter.

 

In connection with rendering the opinion described above and performing its related financial analyses, Goldman Sachs reviewed, among other things:

 

 

Goldman Sachs also held discussions with members of the senior management of the Company regarding their assessment of the past and current business operations, financial condition and future prospects of the Company. In addition, Goldman Sachs reviewed the reported price and trading activity for the shares of Common Stock, compared certain financial and stock market information for the Company with similar information for certain other companies the securities of which are publicly traded, reviewed the financial terms of certain recent business combinations in the crushing and process handling industries specifically and in other industries generally and performed such other studies and analyses, and considered such other factors, as Goldman Sachs considered appropriate.

 

For purposes of rendering the opinion described above, Goldman Sachs relied upon and assumed, without assuming any responsibility for independent verification, the accuracy and completeness of all of the financial, legal, regulatory, tax, accounting and other information provided to, discussed with or reviewed by Goldman Sachs, and Goldman Sachs does not assume any liability for any such information. In that regard, Goldman Sachs assumed with the Company’s Board of Directors’ consent that the Forecasts have been reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of the Company. In addition, Goldman Sachs did not make an independent evaluation or appraisal of the assets and liabilities (including any contingent, derivative or off-balance-sheet assets and liabilities) of the Company or any of its subsidiaries and Goldman Sachs was not furnished with any such evaluation or appraisal. Goldman Sachs assumed that all governmental, regulatory or other consents and approvals necessary for the consummation of the Merger will be obtained without any adverse effect on the expected benefits of the Merger in any way meaningful to Goldman Sachs’ analysis. Goldman Sachs also assumed that the Merger will be consummated on the terms set forth in the Merger Agreement, without the waiver or modification of any term or condition the effect of which would be in any way meaningful to Goldman Sachs’ analysis. Goldman Sachs did not express any opinion as to the impact of the Merger on the solvency or viability of the Company or Parent or the ability of the Company or Parent to pay its obligations when they come due. Goldman Sachs’ opinion did not address any legal, regulatory, tax or accounting matters, nor did it address the underlying business decision of the Company to engage in the Merger, or the relative merits of the Merger as compared to any strategic alternatives that may be available to the Company. Since the termination by the Company of its review of potential strategic alternatives in September 2008, Goldman Sachs was not requested to solicit, and did not solicit, interest from other parties with respect to an acquisition of, or other business combination with, the Company or any other alternative transaction. Goldman Sachs’ opinion addressed only the fairness from a financial point of view, as of the date of the opinion, of the $150.00 per share in cash to be paid to the holders (other than Parent and its affiliates) of shares of Common Stock pursuant to the Merger Agreement. Goldman Sachs did not express any view on, and its opinion did not address, any other term or aspect of the Merger Agreement or the Merger or any term or aspect of any other agreement or instrument contemplated by the Merger Agreement or entered into or amended in connection with the Merger, including, without limitation, the fairness of the Merger to, or any consideration received in connection therewith by, the holders of any other class of securities, creditors, or other constituencies of the Company, nor as to the fairness of the amount or nature of any compensation to be paid or payable to any of the officers, directors or employees of the Company, or class of such persons, in connection with the Merger, whether relative to the $150.00 per share in cash to be paid to the holders (other than Parent and its affiliates) of shares of Common Stock pursuant to the Merger Agreement or otherwise. Goldman Sachs’ opinion was necessarily based on economic, monetary, market and other conditions as in effect on, and the information made available to Goldman Sachs as of, the date of the opinion and Goldman Sachs assumes no responsibility for updating, revising or reaffirming its opinion based on circumstances, developments or events occurring after the date of its opinion. Goldman Sachs’ advisory services and the opinion of Goldman Sachs were provided for the information and assistance of the Company’s Board of Directors in connection with its consideration of the Merger and such opinion does not constitute a recommendation as to how any holder of shares of Common Stock should vote with respect to the Merger or any other matter. Goldman Sachs’ opinion was approved by a fairness committee of Goldman Sachs.

 

The following is a summary of the material financial analyses delivered by Goldman Sachs to the Company’s Board of Directors in connection with rendering the opinion described above. The following summary, however, does not purport to be a complete description of the financial analyses performed by Goldman Sachs, nor does the order of analyses described represent relative importance or weight given to those analyses by Goldman Sachs. Some of the summaries of the financial analyses include information presented in tabular format. The tables must be

read together with the full text of each summary and are alone not a complete description of Goldman Sachs’ financial analyses. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before January 4, 2010 and is not necessarily indicative of current market conditions.

 

Premia Paid Analysis.   Goldman Sachs analyzed the $150.00 per share in cash to be paid to the holders of shares of Common Stock pursuant to the Merger Agreement in relation to the closing price of shares of Common Stock on January 4, 2010, the high price of shares of Common Stock for the 52-week period ended January 4, 2010, and the Volume Weighted Average Prices (“VWAP”) of the shares of Common Stock during the one-month, three-month, six-month, and one-year periods ended January 4, 2010.

 

This analysis indicated that the $150.00 per share in cash to be paid to the holders of shares of Common Stock pursuant to the Merger Agreement represented:

 

 

Historical Trading Multiples Analysis.   Goldman Sachs calculated (i) the average ratios of the market price of the Company’s shares of Common Stock to the Company’s last twelve months (“LTM”) earnings per share (“P/E”) during the ten-year, five-year, three-year and one-year periods ended January 4, 2010, (ii) the Company’s LTM P/E ratio on January 4, 2010, (iii) the average ratios of the enterprise value (“EV”) of the Company to the Company’s LTM earnings before interest, taxes, depreciation and amortization (“EBITDA”) during the ten-year, five-year, three-year and one-year periods ended January 4, 2010 and (iv) the Company’s ratio of EV to LTM EBITDA on January 4, 2010. The following table presents the results of this analysis:

 

 

Analysis of Multiples at Offer Price.   Goldman Sachs performed certain analyses, based on the Forecasts and market data from publicly available resources. Based on the $112.95 closing price per share on January 4, 2010 and the $150.00 per share in cash to be paid to the holders of shares of Common Stock pursuant to the Merger Agreement, Goldman Sachs calculated for the Company:

 

 

 

The following table presents the results of this analysis:

 

 

Illustrative Discounted Cash Flow Analysis.   Goldman Sachs performed an illustrative discounted cash flow analysis on the Company using the Forecasts. Goldman Sachs calculated indications of net present value of unlevered free cash flows for the Company for the years 2010 through 2014 using discount rates ranging from 11.0% to 13.0%, reflecting estimates of the Company’s weighted average cost of capital. Illustrative terminal values were calculated using perpetuity free cash flow growth rates ranging from 3.0% to 5.0%. These illustrative terminal values were then discounted to calculate implied indications of the present values of these illustrative terminal values using discount rates ranging from 11.0% to 13.0%. This analysis resulted in a range of illustrative present value indications per share of $109.85 to $162.92.

 

Illustrative Present Value of Future Share Price Analysis.   Goldman Sachs performed an illustrative analysis of the implied present value of the future price per share, which is designed to provide an indication of the present value of a theoretical future value of a company’s equity as a function of such company’s estimated future earnings and its assumed price to future earnings multiples. For this analysis, Goldman Sachs used the earnings reflected in the Forecasts for the calendar years 2011 through 2014. Goldman Sachs calculated the implied present values per share by applying price to forward earnings per share multiples ranging from 14.0x to 16.0x to estimated earnings per share for the calendar years 2011 through 2014, and then discounted the resulting values to present value using a discount rate of 12.3%, reflecting an estimate of the Company’s cost of equity. This analysis resulted in a range of implied present values per share of $104.79 to $144.06.

 

Selected Transactions Analysis.   Goldman Sachs analyzed certain information relating to the following selected transactions in the crushing and process handling industries:

 

 

 

For each of the selected transactions, Goldman Sachs calculated and compared EV as a multiple of the target’s LTM Sales and EV as a multiple of the target’s LTM EBITDA. While none of the selected transactions or the selected companies that participated in the selected transactions are directly comparable to the Merger or the Company, the companies that participated in the selected transactions are companies with operations that, for the purposes of analysis, may be considered similar to certain operations of the Company.

 

The following table presents the results of this analysis:

 

 

Illustrative Leveraged Buyout Analysis.   Goldman Sachs performed an illustrative leveraged buyout analysis for the Company using publicly available historical financial information and the Forecasts. In performing the illustrative leveraged buyout analysis, Goldman Sachs assumed a hypothetical financial buyer purchase price per share of $120 and total debt to EBITDA multiples ranging from 4.0x to 5.0x. This analysis was based on a range of illustrative trailing exit EBITDA multiples of 7.5x to 9.5x for the assumed exit at the end of 2014. The analysis resulted in illustrative internal rate of equity returns to a hypothetical buyer ranging from 21.0% to 30.9%.

 

Selected Companies Analysis.   Goldman Sachs reviewed and compared certain financial information, ratios and public market multiples for the Company to corresponding financial information, ratios and public market multiples for the following publicly traded corporations:

 

Small Cap Diversified Industrials :

 

 

Process Equipment Companies :

 

 

Size Reduction Equipment Companies :

 

 

Although none of the selected companies is directly comparable to the Company, the companies included were chosen because they are publicly traded companies with operations that, for purposes of analysis, may be considered similar to certain operations of the Company.

 

Goldman Sachs calculated and compared various financial multiples and ratios for the selected companies based on financial data as of January 4, 2010, information obtained from public filings, Institutional Brokers’ Estimate System estimates as well as other Wall Street research. The multiples and ratios of the Company were based on financial data as of January 4, 2010 and the Forecasts for 2009, 2010 and 2011. With respect to each of the selected companies and the Company, Goldman Sachs calculated:

 

 

The results of these analyses are summarized as follows:

 

 

The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary set forth above, without considering the analyses as a whole, could create an incomplete view of the processes underlying Goldman Sachs’ opinion. In arriving at its fairness determination, Goldman Sachs considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis considered by it. Rather, Goldman Sachs made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all of its analyses. No company or transaction used in the above analyses as a comparison is directly comparable to the Company, Parent or the Merger.

Goldman Sachs prepared these analyses for purposes of Goldman Sachs providing its opinion to the Company’s Board of Directors as to the fairness from a financial point of view to the holders (other than Parent and its affiliates) of shares of Common Stock of the $150.00 per share in cash to be paid to such holders pursuant to the Merger Agreement. These analyses do not purport to be appraisals nor do they necessarily reflect the prices at which businesses or securities actually may be sold. Analyses based upon forecasts of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by these analyses. Because these analyses are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the parties or their respective advisors, none of the Company, Parent, Goldman Sachs or any other person assumes responsibility if future results are materially different from those forecast.

 

The merger consideration was determined through arm’s-length negotiations between the Company and Parent and was approved by the Company’s Board of Directors. Goldman Sachs provided advice to the Company during these negotiations. Goldman Sachs did not, however, recommend any specific amount of consideration to the Company or the Company’s Board of Directors or that any specific amount of consideration constituted the only appropriate consideration for the Merger.

 

As described above, Goldman Sachs’ opinion to the Company’s Board of Directors was one of many factors taken into consideration by the Company’s Board of Directors in making its determination to approve the Merger Agreement. The foregoing summary does not purport to be a complete description of the analyses performed by Goldman Sachs in connection with its opinion and is qualified in its entirety by reference to the full text of the written opinion of Goldman Sachs attached as Annex C to this proxy statement.

 

Goldman Sachs and its affiliates are engaged in investment banking and financial advisory services, commercial banking, securities trading, investment management, principal investment, financial planning, benefits counseling, risk management, hedging, financing, brokerage activities and other financial and non-financial activities and services for various persons and entities. In the ordinary course of these activities and services, Goldman Sachs and its affiliates may at any time make or hold long or short positions and investments, as well as actively trade or effect transactions, in the equity, debt and other securities (or related derivative securities) and financial instruments (including bank loans and other obligations) of third parties, the Company, Parent and any of their respective affiliates or any currency or commodity that may be involved in the transaction contemplated by the Merger Agreement for their own account and for the accounts of their customers. Goldman Sachs acted as financial advisor to the Company in connection with, and participated in certain of the negotiations leading to, the Merger. Goldman Sachs has provided certain investment banking and other financial services to Parent and its affiliates from time to time, including having acted as co-financial advisor to Hillenbrand Industries Inc., now known as Hill-Rom Holdings Inc. (“Hill-Rom”), in connection with the spin-off of Batesville Holdings Inc., now known as Hillenbrand, Inc. in March 2008; as a counterparty with respect to various derivatives transactions entered into by Hillenbrand Industries Inc. in March 2008; as co-manager in connection with Hillenbrand Industries Inc.’s tender offer to acquire its 4.5% Senior Notes due 2009 (aggregate principal amount $250 million) in March 2008; as a participant in Parent’s credit facility (aggregate principal amount $400 million) in April 2008; and as a participant in Hill-Rom’s credit facility (aggregate principal amount $500 million) in April 2008. Goldman Sachs also may provide investment banking and other financial services to the Company and Parent and their respective affiliates in the future. In connection with the above-described services Goldman Sachs has received, and may receive in the future, compensation.

 

The Company’s Board of Directors selected Goldman Sachs as its financial advisor because it is an internationally recognized investment banking firm that has substantial experience in transactions similar to the Merger. Pursuant to a letter agreement, dated June 13, 2008, the Company engaged Goldman Sachs to act as its financial advisor in connection with the Merger. Pursuant to the terms of this engagement letter, the Company has agreed to pay Goldman Sachs a transaction fee of approximately $5 million, the principal portion of which is contingent upon consummation of the Merger. In addition, the Company has agreed to reimburse Goldman Sachs for its expenses, including attorneys’ fees and disbursements, and to indemnify Goldman Sachs and related persons against various liabilities, including certain liabilities under the federal securities laws.

 

We do not, as a matter of course, make public forecasts or projections as to future performance or financial performance and are especially wary of making projections for extended earnings periods due to the inherent unpredictability of the underlying assumptions and estimates. In the course of the process resulting in the Merger Agreement, management of the Company prepared non-public financial projections, which projections were based on management’s estimate of the Company’s future financial performance as of the date they were prepared (the “Forecasts”). The Forecasts, which were prepared in November 2009, included projected revenues, EBITDA, EBIT, net income and EPS for the years 2009 through 2014. The Forecasts for 2009 were based on actual results for the first three fiscal quarters of the year, and projected results for the fourth fiscal quarter of the year. The Forecasts were provided by the management of the Company to the Board of Directors and Goldman Sachs. The Forecasts (other than projected net income and EPS) were also provided to Parent. The Company approved the use by Goldman Sachs of the Forecasts in connection with Goldman Sachs’ financial analyses of the proposed transaction and its opinion dated January 8, 2010 that, as of such date and based upon and subject to the factors and assumptions set forth therein, the $150.00 per share in cash to be paid to the holders (other than Parent and its affiliates) of shares of Common Stock pursuant to the Merger Agreement was fair from a financial point of view to such holders. Consistent with K-Tron’s prior practice, the Forecasts did not include the effects of any potential future acquisitions by K-Tron. At Parent’s request, the Company’s management prepared and provided to Parent and Goldman Sachs, certain additional projected financial information relating to potential future acquisitions by the Company. The Company did not authorize Goldman Sachs to use such additional projected financial information in connection with Goldman Sachs’ financial analyses of the proposed transaction or its opinion.

 

The Forecasts were not prepared with a view to public disclosure and are included in this proxy statement only because such Forecasts were provided to the Board of Directors, Goldman Sachs and Parent. The Forecasts were not prepared with a view to compliance with the published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants regarding projections. The Company’s Independent Registered Public Accounting Firm has not examined, compiled or performed any procedures with respect to the Forecasts and accordingly does not provide any form of assurance with respect to the Forecasts. Neither we nor any of our affiliates or representatives has made or makes any representations to any person regarding the ultimate performance of the Company compared to the information contained in the Forecasts, and neither we nor any of our affiliates intend to provide any update or revision thereof.

 

Forecasts

 

 

 

 

Cautionary Statement Regarding the Forecasts

 

The Forecasts are subjective in many respects and thus susceptible to various interpretations based on actual experience and business developments. The Forecasts were based on a number of assumptions that may not be realized and are subject to significant uncertainties and contingencies, many of which are beyond the control of the Company. The Forecasts are considered “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to the risks and uncertainties described under “Cautionary Statement

Concerning Forward-Looking Information” beginning on page 12 and the risk factors referred to therein. Accordingly, there can be no assurance that the assumptions made in preparing the Forecasts will prove accurate, and actual results may be materially different than those contained in the Forecasts. The Company does not intend to make publicly available any update or other revisions to the Forecasts to reflect circumstances existing after the date of the Forecasts. Neither the Company’s independent auditors nor any of its representatives assumes any responsibility for the validity, reasonableness, accuracy or completeness of the projected financial information, and the Company has made no representations to Parent and makes no representations to shareholders regarding such information. The inclusion of the Forecasts in this proxy statement should not be regarded as an indication that Parent considered the Forecasts predictive of actual future events or that the Forecasts should be relied on for that purpose. In light of the uncertainties inherent in any projected data, our shareholders are cautioned not to rely on the Forecasts.

 

 

Effects of the Merger on Outstanding K-Tron Common Stock, Stock Options, Stock Appreciation Rights, Restricted Stock Units and Restricted Stock

 

If the Merger Agreement is approved by our shareholders and the other conditions to the completion of the Merger are either satisfied or waived, Merger Sub will be merged with and into the Company, with the Company continuing as the surviving corporation. Upon the completion of the Merger, each issued and outstanding share of Common Stock, except for shares owned directly or indirectly by the Company, Parent or Merger Sub (in each case, other than any such shares held on behalf of third parties), will be cancelled and converted automatically into the right to receive the Merger Consideration. Our shareholders will be required to surrender their shares of Common Stock upon the completion of the Merger in exchange for such cash payments and will not own any shares of the surviving corporation or Parent as a result of surrendering such shares of Common Stock. After completion of the Merger, shareholders will not have the opportunity to liquidate their shares at a time and for a price of their own choosing. If all eligible shares are converted, the total Merger Consideration (excluding consideration to be paid to holders of options, unvested restricted stock and restricted stock units) expected to be paid is approximately $422,518,050.

 

At the effective time of the Merger, each option to acquire shares of Common Stock and each stock appreciation right, whether vested or unvested, that is outstanding and unexercised immediately prior to the effective time of the Merger will be cancelled and exchanged for a cash payment equal to the product of (a) the excess (if any) of the Merger Consideration over the exercise price per share or right and (b) the number of shares of Common Stock or rights subject to such option or stock appreciation right. The total amount expected to be paid in respect of options is approximately $7,200,220. No stock appreciation rights are outstanding and the Company will not issue any such rights prior to the Merger.

 

At the effective time of the Merger, each restricted stock unit that is outstanding immediately prior to the effective time of the Merger will vest and be cancelled and converted into the right to receive the Merger Consideration in respect of each share of Common Stock underlying such restricted stock unit. The total amount expected to be paid in respect of restricted stock units is approximately $1,732,500.

 

At the effective time of the Merger, each share of unvested restricted stock outstanding immediately prior to the effective time of the Merger will vest and be cancelled and converted automatically into the right to receive the Merger Consideration. The total amount expected to be paid in respect of unvested restricted stock is approximately $3,750,000.

 

The total amount expected to be paid in respect of options, restricted stock units and unvested restricted stock is approximately $12,682,720.

 

Effect on Listing; Registration and Status of K-Tron Common Stock

 

Our Common Stock is registered as a class of equity securities under the Exchange Act and is traded on the NASDAQ Global Select Market under the symbol “KTII.” As a result of the Merger, K-Tron will be a wholly owned, privately-held subsidiary of Parent, with no public market for its Common Stock. After the Merger, our Common Stock will cease to be traded on the NASDAQ Global Select Market, and price quotations with respect to

sales of shares of our Common Stock in the public market will no longer be available. In addition, registration of our Common Stock under the Exchange Act will be terminated. This termination and the delisting of K-Tron’s Common Stock from the NASDAQ Global Select Market will make the provisions of the Exchange Act inapplicable to K-Tron as a stand-alone company, including such provisions as:

 

 

In addition, K-Tron will no longer be required to file periodic reports with the SEC after the effective time of the Merger.

 

 

Set forth below are certain risks relating to the proposed Merger. The following is not intended to be an exhaustive list of the risks relating to the Merger and should be read in conjunction with the other information in this proxy statement. In addition, you should refer to the section entitled “Risk Factors” in the Company’s Annual Report on Form 10-K, which is incorporated in this proxy statement by reference, for other risks relating to the Company’s business:

 

Failure to complete the Merger could negatively affect the market price of K-Tron’s Common Stock.

 

If the Merger is not completed for any reason, the Company will be subject to a number of material risks, including the following:

 

 

If the Merger is not approved by our shareholders at the special meeting, the Company, Parent and Merger Sub will not be permitted under New Jersey law to complete the Merger, and each of the Company and Parent will have the right to terminate the Merger Agreement. Upon such termination, the Company may be required, under certain circumstances, to pay Parent a termination fee. See “Terms of the Merger Agreement — Termination of the Merger Agreement” beginning on page 55.

 

Further, if the Merger Agreement is terminated and our Board of Directors seeks another merger or business combination, shareholders cannot be certain that we will be able to find a party willing to pay an equivalent or better price than the price to be paid in the proposed Merger.

 

Unless the Merger Agreement is terminated, K-Tron will not be able to enter into a merger or business combination with another party at a favorable price because of restrictions in the Merger Agreement.

 

Unless and until the Merger Agreement is terminated, subject to specified exceptions, K-Tron is restricted from initiating, soliciting or taking any action to facilitate or encourage the submission of any offer or proposal relating to an alternative transaction with any person or entity other than Parent. In addition, K-Tron will not be able to enter into an alternative transaction on more favorable terms, unless and until the Merger Agreement is terminated, which would result in K-Tron paying a $12 million termination fee to Parent. See “Terms of the Merger

Agreement — Conduct of Business Pending the Merger — Restrictions on Solicitations” beginning on page 50 of this proxy statement and “Terms of the Merger Agreement — Termination of the Merger Agreement” beginning on page 55 of this proxy statement.

 

Uncertainties associated with the Merger may cause K-Tron to lose key personnel and affect employee morale.

 

Our current and prospective employees may be uncertain about their future roles and relationships with K-Tron following the completion of the Merger. This uncertainty may adversely affect our ability to attract and retain key management and personnel, and may negatively affect the morale of our workforce.

 

 

Parent expects to use cash on hand and proceeds from debt financing to fund the aggregate Merger Consideration upon consummation of the Merger. Parent was formed in connection with the spin-off of Batesville to the shareholders of Hillenbrand Industries, Inc. (n/k/a Hill-Rom Holdings, Inc.) in March 2008. Pursuant to a covenant contained in the Distribution Agreement between Parent and Hillenbrand Industries, Inc. related to the spin-off of Batesville, Parent is prohibited from consummating the Merger using only proceeds from debt financing if the incurrence of such amount of debt would cause Parent to exceed a specified leverage ratio test.

 

The obligations of Parent and Merger Sub under the Merger Agreement are not conditioned in any manner upon their obtaining financing. If the closing of the Merger has not occurred on or prior to April 30, 2010 as a consequence of Parent’s failure to have sufficient funds to pay the Merger Consideration (so long as the Company has satisfied all conditions it must satisfy by such date), the Merger Consideration will be increased by an amount in cash equal to $0.05 per share for each day during the period commencing May 1, 2010 through the date of closing.

 

 

In considering the recommendation of our Board of Directors, you should be aware that K-Tron’s directors and executive officers may be deemed to have interests in the transaction that are different from or in addition to the interests of our shareholders generally and that may present a conflict of interest. Our Board of Directors was aware of these interests and considered that the interests may be different from or in addition to the interests of our shareholders generally, among other matters, in approving the Merger Agreement and the transactions contemplated thereby and in determining to recommend that our shareholders vote for approval of the Merger Agreement.

 

Treatment of Stock Options

 

The Merger Agreement provides that each option to purchase our Common Stock granted under any K-Tron equity compensation plan, whether vested or unvested, that is outstanding and unexercised immediately prior to the effective time of the Merger will be cancelled and exchanged for a cash payment equal to the product of (a) the excess (if any) of the Merger Consideration over the exercise price of the option and (b) the number of shares of Common Stock subject to such option.

 

The following table provides information for each of our directors and executive officers regarding the aggregate number of shares of Common Stock subject to outstanding vested options as of February 24, 2010, the weighted average exercise price and the value of the vested options. The information in the table assumes that all currently outstanding options will remain outstanding immediately prior to the effective time of the Merger.

 

 

 

 

Treatment of Restricted Stock Units

 

The Merger Agreement provides that each restricted stock unit granted under any K-Tron equity compensation plan that is outstanding immediately prior to the effective time of the Merger will vest and be cancelled and converted into the right to receive the Merger Consideration in respect of each share of Common Stock underlying such restricted stock unit.

 

The following table provides information for each of our directors and executive officers regarding the aggregate number of shares of Common Stock that, as of February 24, 2010, underlie the unvested restricted stock units that will become vested and the value of the unvested restricted stock units. The information in the table assumes that all currently outstanding restricted stock units will remain outstanding immediately prior to the effective time of the Merger.

 

 

 

 

Treatment of Restricted Stock

 

The Merger Agreement provides that at the effective time of the Merger, each share of unvested restricted stock outstanding immediately prior to the effective time of the Merger shall vest and shall be cancelled and converted automatically into the right to receive the Merger Consideration.

 

The following table provides information for each of our directors and executive officers regarding the aggregate number of shares of outstanding unvested restricted stock held by such persons, as of February 24, 2010, that will become vested in connection with the Merger and the aggregate value of such unvested restricted stock. The information in the table below assumes that all shares of currently outstanding unvested restricted stock will remain unvested immediately prior to the effective time of the Merger.

 

 

 

 

Severance Payments and Benefits Under Employment Agreements

 

Consummation of the Merger will constitute a change of control under the employment agreements between Messrs. Cloues, Bowen, Guenthardt and Wisniewski, respectively, and us. The following is a description of the severance payments each executive officer would be entitled to receive in the event of his termination of employment under his employment agreement. We have not entered into an employment agreement with Mr. Melchiorre.

 

Mr. Cloues

 

Mr. Cloues’ employment agreement provides that he can terminate his employment, with or without good reason, upon not less than 90 days’ prior written notice. For purposes of Mr. Cloues’ employment agreement, the term “good reason” means the failure by us to observe or perform any of the material terms or provisions set forth in Mr. Cloues’ employment agreement. We may terminate his employment without cause (as defined in his employment agreement) upon not less than 30 days’ prior written notice to Mr. Cloues. In the absence of a change of control, if we terminate his employment without cause or Mr. Cloues terminates his employment for good reason, Mr. Cloues will be entitled to a lump sum payment equal to 200% of his then-annual base salary and car allowance. In addition, Mr. Cloues will receive a lump sum payment equal to the cost that would be incurred under our plans to provide health care benefits for the two-year period following his termination date comparable to the coverage existing at the time of termination, less the cost paid by active employees for comparable coverage, with the difference being grossed up to cover the estimated federal, state and local income and FICA taxes on such amount. If Mr. Cloues’ employment was terminated by us without cause or had he resigned for good reason, in either case effective as of February 24, 2010, in the absence of a change of control, he would be entitled to receive an aggregate lump sum payment equal to approximately $1,115,943. In addition, he would be entitled to receive a

payment for the value of supplemental health insurance currently provided to him and his dependents for certain health care costs not otherwise covered by his existing health insurance for a two-year period, which value is difficult to quantify since the program is effectively self-insured by the Company up to $100,000 per calendar year for the insured employee and his dependents.

 

Mr. Cloues’ employment agreement includes provisions relating to a termination of employment that occurs during the period beginning on the date of a change of control (as defined in his employment agreement) and ending on the first to occur of (i) the date that is one year after the change of control or (ii) March 1 following the end of the calendar year in which the change of control occurs. If, during this period, Mr. Cloues’ employment is terminated by us or any successor for any reason other than death, disability or cause or Mr. Cloues resigns for any reason, we will pay him (i) an amount equal to three times his annual base salary and car allowance in effect either immediately prior to his termination of employment or immediately prior to the change of control, whichever is higher; (ii) an amount equal to the cost that would be incurred by Mr. Cloues for medical and other health care benefits that were provided to Mr. Cloues immediately prior to the termination of his employment or immediately prior to the change of control, whichever is higher, for the two-year period following his termination date comparable to the coverage existing at the time of termination, less the cost paid by active K-Tron employees for comparable coverage, with the difference being grossed up to cover the estimated federal, state and local income and FICA taxes on such amount; (iii) an amount equal to the after-tax cost that Mr. Cloues would incur to continue certain specified life and disability insurance coverages for the two-year period following his termination date; and (iv) an amount equal to the spread on any stock options held by him, whether or not such stock options were exercisable at the date of his termination.

 

In the event that Mr. Cloues’ employment was terminated in connection with the Merger as of February 24, 2010, he would be entitled to receive an aggregate lump sum payment equal to approximately $1,715,680. In addition, he would be entitled to receive a payment for the value of supplemental health insurance currently provided to him and his dependents for certain health care costs not otherwise covered by his existing health insurance for a two-year period, which value is difficult to quantify since the program is effectively self-insured by the Company up to $100,000 per calendar year for the insured employee and his dependents. This amount does not include the value of his stock options, restricted stock units and shares of unvested restricted stock which will be cashed out in connection with the Merger as described above under the sections titled “— Treatment of Stock Options,” “— Treatment of Restricted Stock Units,” and “— Treatment of Restricted Stock,” respectively.

 

The employment agreement provides that if any payments to be made to Mr. Cloues in connection with a change of control would result in his being subject to the excise tax imposed by Section 4999 of the Internal Revenue Code, we will pay Mr. Cloues an additional gross-up amount to cover the excise taxes imposed by Section 4999 of the Internal Revenue Code and taxes resulting from such gross-up payment. No amount is expected to be payable to Mr. Cloues as an excise tax gross-up payment as a result of the Merger.

 

Messrs. Bowen, Guenthardt, Melchiorre and Wisniewski

 

Under each of Messrs. Bowen’s, Guenthardt’s and Wisniewski’s employment agreement, we have the right to terminate the employment of the executive at any time without cause upon 30 days’ prior written notice and the executive may resign for good reason upon 90 days’ prior written notice. For purposes of the employment agreements with Messrs. Bowen, Guenthardt and Wisniewski, before the occurrence of a change of control, “good reason” means any action or inaction that constitutes a material breach of the employment agreement by us or our subsidiaries, including failure to obtain from our successors the express assumption required by the employment agreement. On or after a change of control, the term “good reason” means: (i) a material diminution of the executive’s base salary; (ii) a material change in the geographic location at which the executive must perform services, which means the relocation of the executive’s principal location of work to any location that is in excess of 50 miles from the location immediately prior to such relocation; (iii) a material diminution in the executive’s authority, duties or responsibilities; or (iv) any action or inaction that constitutes a material breach of the employment agreement by us or our subsidiaries, including failure to obtain from our successors the express assumption required under the employment agreement.

 

If we terminate the executive’s employment without cause or the executive resigns for good reason, and he executes a written release, we will pay him a lump sum amount equal to 100% of his then-annual base salary and car

allowance. In addition, he will receive a lump sum payment equal to the cost that would be incurred under our plans to continue health care benefits for the one-year period following his termination date, less the cost paid by active employees for comparable coverage, with the difference being grossed up to cover the estimated federal, state and local income and FICA taxes on such amount. If the employment of Messrs. Bowen, Guenthardt and Wisniewski were terminated without cause or such executive resigned for good reason, in either case effective as of February 24, 2010, such executive would be entitled to receive aggregate lump sum payments of approximately $291,103, $252,000 and $258,471 respectively. In addition, Messrs. Bowen, Guenthardt and Wisniewski would be entitled to receive a payment for the value of supplemental health insurance currently provided to each of them and their dependents for certain health care costs not otherwise covered by their existing health insurance for a one-year period, which value is difficult to quantify since the program is effectively self-insured by the Company up to $100,000 per calendar year for the insured employee and their dependents.

 

Messrs. Bowen, Guenthardt, Melchiorre and Wisniewski each hold shares of unvested restricted stock and restricted stock units. See the above sections titled “— Treatment of Restricted Stock” and “— Treatment of Restricted Stock Units” for a description of the treatment of such equity awards in the Merger. Messrs. Bowen and Guenhardt also hold stock options. See the above section titled “— Treatment of Stock Options” for a description of the treatment of stock options in the Merger. We have not entered into an employment agreement with Mr. Melchiorre.

 

Transaction Bonus Plan

 

K-Tron has established a transaction bonus plan whereby the Company’s Chief Executive Officer, with the approval of the Company’s Compensation and Human Resources Committee of the Board of Directors, can direct that certain bonuses be paid by the Company to those of its employees, including the executive officers, who have provided special assistance in connection with the transactions contemplated by the Merger Agreement. The aggregate amount of bonuses payable under the transaction bonus plan will not exceed $500,000. Payment to an executive officer from the transaction bonus plan, if any, will be determined by Mr. Cloues with the approval of the Compensation and Human Resources Committee and will be paid not later than six (6) months after the closing date. However, as of February 24, 2010, the Chief Executive Officer had not selected the employees, or determined the amounts of the awards to be paid to them, pursuant to the transaction bonus plan.

 

Indemnification of Executive Officers and Directors

 

The Merger Agreement contains provisions relating to the indemnification of and insurance for our directors and officers. Under the Merger Agreement, Parent and Merger Sub have agreed that all rights to exculpation, indemnification and advancement of expenses for acts or omissions occurring at or prior to the effective time of the Merger (as in effect as of the date of the Merger Agreement) in favor of the current or former directors or officers of K-Tron, as provided under K-Tron’s certificate of incorporation or bylaws or in any agreement of K-Tron with such persons, shall survive the Merger and shall continue in full force and effect in accordance with their terms. From and after the effective time of the Merger, Parent will cause the surviving corporation to assume and to pay, perform and discharge, in accordance with their respective terms, K-Tron’s obligations with respect to such rights to exculpation, indemnification and advancement of expenses.

 

Directors’ and Officers’ Insurance

 

Under the Merger Agreement, Parent has agreed that for a period of six years following the effective time of the Merger, Parent will maintain the current policies of directors’ and officers’ liability insurance and fiduciary liability insurance maintained by K-Tron with respect to acts or omissions arising at or before the effective time of the Merger; provided, however, that Parent may substitute such policies with policies that provide substantially equivalent coverage and amounts and terms no less favorable to such directors and officers; provided, further, that if any such policy expires or is terminated or cancelled during such period, then Parent shall use commercially reasonable efforts to obtain substantially similar insurance. After the effective time of the Merger, Parent will not be obligated to pay annual premiums in excess of 150% of the last annual premium paid by the Company prior to the date of the Merger Agreement in respect of the coverages required to be obtained; provided however, that if the annual premiums for such insurance coverage exceed such amount, Parent will be obligated to obtain a policy with as much coverage as reasonably practicable for such amount.

The foregoing summary of the indemnification of executive officers and directors and directors’ and officers’ insurance is not complete and is qualified in its entirety by reference to the Merger Agreement, which is attached to this proxy statement as Annex A .

 

Arrangements with Parent

 

Except as described below, as of the date of this proxy statement, none of our executive officers has entered into any agreement, arrangement or understanding with Parent or its affiliates regarding employment with, or the right to participate in the equity of, Parent on a going-forward basis following the completion of the Merger and no member of our Board of Directors has entered into any agreement, arrangement or understanding with Parent or its affiliates regarding the right to participate in the equity of Parent following the completion of the Merger. Mr. Cloues has been invited to join Parent’s board of directors after the completion of the Merger and Mr. Cloues has indicated he would accept this position. Under the Merger Agreement, Parent and the surviving corporation also agreed to assume and perform the applicable obligations of K-Tron under the employment agreements, described above, between K-Tron and each of Messrs. Cloues, Bowen, Guenthardt and Wisniewski. In addition to the assumption of those agreements, Parent provided to each of Messrs. Bowen, Guenthardt, Melchiorre and Wisniewski proposed compensation packages and proposed sign-on bonuses, subject to the completion of the Merger and continued employment with Parent. We were not involved with the preparation or negotiation of the proposed compensation packages and proposed sign-on bonuses prepared by Parent. The following information regarding such proposed compensation packages and proposed sign-on bonuses was provided by Parent.

 

Kevin Bowen.   Parent’s proposal to Mr. Bowen was as follows:

 

 

Lukas Guenthardt.   Parent’s proposal to Mr. Guenthardt was as follows:

 

 

 

Donald Melchiorre.   Parent’s proposal to Mr. Melchiorre was as follows:

 

 

Robert Wisniewski.   Parent’s proposal to Mr. Wisniewski was as follows:

 

 

The following is a summary of the material U.S. federal income tax consequences of the Merger to U.S. Holders (as defined below) of our Common Stock. This summary is based on the Internal Revenue Code of 1986, as amended, referred to as the “Code” in this proxy statement, regulations promulgated under the Code, administrative rulings and pronouncements issued by the Internal Revenue Service and court decisions now in effect. All of these authorities are subject to change, possibly with retroactive effect so as to result in tax consequences different from those described below. We have not sought any ruling from the IRS with respect to

statements made and conclusions reached in this discussion, and the statements and conclusions in this proxy are not binding on the IRS or any court. We can provide no assurances that the tax consequences described below will not be challenged by the IRS or will be sustained by a court if so challenged.

 

This summary does not address all of the U.S. federal income tax consequences that may be applicable to a particular holder of our Common Stock. In addition, this summary does not address the U.S. federal income tax consequences of the Merger to U.S. Holders of our Common Stock who are subject to special treatment under U.S. federal income tax laws, including, for example, banks and other financial institutions, insurance companies, tax-exempt investors, S corporations, U.S. expatriates, dealers in securities, traders in securities who elect the mark-to-market method of accounting for their securities, regulated investment companies, mutual funds, regulated investment companies, real estate investment trusts, cooperatives, holders who hold their Common Stock as part of a hedge, straddle or conversion transaction, holders whose functional currency is not the U.S. dollar, holders who own 5% or more of all our Common Stock, holders who acquired our Common Stock through the exercise of employee stock options or other compensatory arrangements, holders who are subject to the alternative minimum tax provisions of the Code and holders who do not hold their shares of our Common Stock as “capital assets” within the meaning of Section 1221 of the Code.

 

For purposes of this summary, a “U.S. Holder” means a beneficial owner of Common Stock that is, for U.S. federal income tax purposes: (a) an individual who is a citizen or resident of the United States; (b) a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in the United States or under the laws of the United States or any political subdivision thereof; (c) an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or (d) a trust if (i) a court within the United States is able to exercise primary supervision over its administration and (ii) one or more U.S. persons has the authority to control all of the substantial decisions of the trust. Accordingly, this discussion does not address the U.S. federal income tax consequences to any holder of our Common Stock who or which, for U.S. federal income tax purposes, is not a U.S. Holder, such as a nonresident alien individual, a foreign corporation, a foreign partnership or a foreign estate or trust. In addition, this discussion does not address U.S. federal estate or gift tax consequences of the Merger, or the tax consequences of the Merger under state, local or foreign tax laws.

 

If a partnership or other passthrough entity (including any entity treated as a partnership for U.S. federal income tax purposes) is a beneficial owner of our Common Stock, the tax treatment of a partner in the partnership generally will depend upon the status of the partner and the activities of the partnership. A beneficial owner that is a partnership and partners in such a partnership should consult their tax advisors about the U.S. federal income tax consequences of the Merger.

 

This summary is provided for general information purposes only and is not intended as a substitute for individual tax advice. Each holder of our Common Stock should consult such holder’s tax advisor as to the specific tax consequences of the Merger to such holder, including the applicability and effect of federal, state, local, foreign and other tax laws and the possible effect of changes to such laws.

 

Exchange of Common Stock for Cash.   Generally, the Merger will be taxable to U.S. Holders of our Common Stock for U.S. federal income tax purposes. A U.S. Holder of our Common Stock receiving cash in the Merger generally will recognize gain or loss for U.S. federal income tax purposes in an amount equal to the difference between the amount of cash received and the U.S. Holder’s adjusted tax basis in our Common Stock surrendered. Any such gain or loss generally will be capital gain or loss if our Common Stock is held as a capital asset at the effective time of the Merger. Any capital gain or loss will be taxed as long-term capital gain or loss if the U.S. Holder has held our Common Stock for more than one year prior to the effective time of the Merger. If the U.S. Holder has held our Common Stock for one year or less prior to the effective time of the Merger, any capital gain or loss will be taxed as short-term capital gain or loss. Currently, most long-term capital gains for non-corporate taxpayers are taxed at a maximum federal tax rate of 15%. The deductibility of capital losses is subject to certain limitations. If a U.S. Holder acquired different blocks of our Common Stock at different times and different prices, such holder must determine the adjusted tax basis and holding period separately with respect to each such block of our Common Stock.

 

Information Reporting and Backup Withholding.   Generally, U.S. Holders of our Common Stock will be subject to information reporting on the cash received in the Merger unless such a holder is a corporation or other

exempt recipient. In addition, under the U.S. federal backup withholding tax rules, the paying agent will be required to withhold 28% of all cash payments to which a holder of Common Stock is entitled in connection with the Merger unless such holder provides under penalties of perjury on a Form W-9 (or appropriate substitute form) a tax identification number, certifies that such holder is a U.S. person and that the tax identification number is correct and that no backup withholding is otherwise required, and otherwise complies with such backup withholding rules. Each U.S. Holder of our Common Stock should complete and sign the Form W-9 (or appropriate substitute form) included as part of the letter of transmittal and return it to the paying agent, in order to certify that the U.S. Holder is exempt from backup withholding or to provide the necessary information to avoid backup withholding. Backup withholding is not an additional tax. Any amount withheld from a payment to a U.S. Holder of Common Stock under these rules will be allowed as a credit against such holder’s U.S. federal income tax liability and may entitle such holder to a refund, provided that the required information is furnished timely to the IRS.

 

HOLDERS OF OUR COMMON STOCK ARE STRONGLY URGED TO CONSULT THEIR TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX LAWS IN THEIR PARTICULAR CIRCUMSTANCES.

 

The HSR Act and related rules provide that transactions such as the Merger may not be completed until certain information and documents have been submitted to the FTC and the Antitrust Division and specified waiting period requirements have been observed. On January 22, 2010, the Company and Parent each filed a Notification and Report Form with the Antitrust Division and the FTC and requested early termination of the waiting period. On February 2, 2010, the Company and Parent were notified that early termination of the waiting period under the HSR Act had been granted.

 

Under the Merger Agreement, the Company, Parent and Merger Sub have agreed to use their reasonable best efforts to obtain all required governmental approvals in connection with the execution of the Merger Agreement and completion of the Merger. Except as noted above with respect to the required filings under the HSR Act, at or before the effective date of the Merger, we are unaware of any material federal, state or foreign regulatory requirements or approvals required for the execution of the Merger Agreement or completion of the Merger.

 

On January 8, 2010, K-Tron and American Stock Transfer & Trust Company, LLC (the “Rights Agent”) amended the Rights Agreement between K-Tron and the Rights Agent, dated October 16, 2001. The amendment, among other things, permits the execution of the Merger Agreement and the performance and consummation of the transactions contemplated by the Merger Agreement, including the Merger, without triggering the provisions of the Rights Agreement.

 

The following is a summary of the material provisions of the Merger Agreement and is qualified in its entirety by reference to the complete text of the Merger Agreement which is attached as Annex A to this proxy statement. We urge you to read the Merger Agreement carefully and in its entirety because it, and not this proxy statement, is the legal document that governs the Merger.

 

At the effective time of the Merger, upon the terms and subject to the satisfaction or waiver of the conditions of the Merger Agreement and in accordance with the New Jersey Business Corporation Act (the “NJBCA”), Merger Sub will merge with and into K-Tron, the separate corporate existence of Merger Sub shall cease and K-Tron shall be the surviving corporation of the Merger and shall be governed by the NJBCA. As of the effective time of the Merger, the certificate of incorporation of the surviving corporation shall be amended and restated as set forth in Exhibit C to the Merger Agreement, and Merger Sub’s bylaws will be the bylaws of the surviving corporation, except all references to Merger Sub’s name will be replaced with references to K-Tron International, Inc.

 

The directors of Merger Sub immediately prior to the effective time of the Merger will, from and after the effective time of the Merger, be the initial directors of the surviving corporation. Our officers immediately prior to the effective time of the Merger will, from and after the effective time of the Merger, be the initial officers of the surviving corporation.

 

The Company and Merger Sub will file a certificate of merger (“Certificate of Merger”) with the Office of the Treasurer of the State of New Jersey (the “Treasurer”), as promptly as practicable after the satisfaction or waiver of the conditions to the Merger Agreement. The Merger will become effective at the time the Certificate of Merger is duly filed with the Treasurer or at some later date agreed upon by Parent and the Company.

 

If our shareholders approve the Merger Agreement, the Company and Parent will complete the Merger on a date to be specified by the parties, which date shall be no later than three (3) business days following the satisfaction or waiver of all conditions to the Merger Agreement. Because the Merger is subject to certain conditions, the exact timing of the effectiveness of the Merger cannot be determined.

 

Conversion of Our Common Stock

 

The Merger Agreement provides that our Common Stock will be treated as follows at the effective time of the Merger:

 

 

 

Treatment of Stock Options and Other Equity-Based Awards

 

Prior to the effective time of the Merger, we have agreed to terminate our equity compensation plans, any predecessor plans and each other plan pursuant to which equity awards were or may be granted. The Merger Agreement provides that stock options, stock appreciation rights, restricted stock units and unvested restricted Common Stock will be treated as follows at the effective time of the Merger:

 

 

The Merger Agreement provides that, prior to the effective time of the Merger, the Company will take all necessary action (i) to cause the transactions contemplated by the Merger Agreement, including the disposition of our Common Stock (including derivative securities with respect to such Common Stock) by each individual who is or will be subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to the Company to be exempt under Rule 16b-3 under the Exchange Act, (ii) to provide that the treatment of stock options, stock appreciation rights, restricted stock units and unvested restricted stock be exempt under Rule 16b-3(d) or (e), as applicable, under the Exchange Act, and (iii) to effect the treatment of Company equity plans, stock options, stock appreciation rights, restricted stock units and unvested restricted stock as set forth above. Further, the Company and Parent have agreed to take all action required to effect the transactions as set forth above to ensure that, following the effective time of the Merger, no person other than Parent and its subsidiaries shall have any right to acquire any of our securities, or to receive payment for any other equity or equity-based award other than consideration to be paid for our stock options, restricted stock units and unvested restricted stock as set forth above.

 

At or prior to the effective time of the Merger, Parent will deposit with American Stock Transfer & Trust Company, LLC (the “Paying Agent”) cash sufficient to pay our shareholders the aggregate Merger Consideration to which they are entitled under the Merger Agreement. The Merger Consideration will be payable upon surrender of the certificates (“Certificates”) that represented our Common Stock immediately prior to the effective time of the Merger, or non-certificated shares of Common Stock represented by book entry (“Book Entry Shares”). The cash payable pursuant to the foregoing is referred to as the “exchange fund.”

 

As soon as reasonably practicable after the effective time of the Merger (and in any event within five (5) business days following the effective time of the Merger), the Paying Agent will mail to each record holder of our Common Stock a letter of transmittal and instructions for use in effecting the surrender of Certificates or Book-Entry Shares in exchange for the Merger Consideration. Each shareholder will be entitled to receive the appropriate Merger Consideration upon surrendering to the Paying Agent such shareholder’s Certificates or Book-Entry Shares, together with a properly executed letter of transmittal and any other documents required by the Paying Agent. The Merger Consideration and any other consideration paid under the Merger Agreement may be reduced by any applicable withholding taxes as required by law.

 

If a payment is to be made to a person who received shares of Common Stock pursuant to a transfer that was not registered in our transfer records, such person may receive the appropriate Merger Consideration for these

transferred shares by presenting the Certificate representing such shares to the Paying Agent, together with documents to evidence the transfer and evidence that applicable transfer taxes have been paid or are not applicable.

 

At the effective time of the Merger, the stock transfer books of the Company will be closed and there will be no further registration of transfers of our Common Stock in the stock transfer books of the surviving corporation. From and after the effective time of the Merger, the holders of Certificates or Book-Entry Shares shall cease to have any rights as a shareholder of K-Tron except as provided under the Merger Agreement or applicable law. If, after the effective time of the Merger, any Certificates are presented to the surviving corporation or the Paying Agent for transfer or transfer is sought for Book-Entry Shares, such Certificates and Book-Entry Shares will be cancelled and exchanged for payment of the appropriate Merger Consideration.

 

The Paying Agent shall invest the cash in the exchange fund as directed by Parent; provided, however, that no such investment income or gain or loss thereon shall affect the amounts payable to holders of our Common Stock. Any interest and other income resulting from such investments shall be the sole and exclusive property of Parent payable to Parent upon its request, and no part of such earnings shall accrue to the benefit of holders of our Common Stock.

 

Any portion of the exchange fund that remains undistributed to our shareholders after the six-month anniversary of the effective time of the Merger will be delivered by the Paying Agent to the surviving corporation upon demand, and any of our shareholders who have not previously surrendered their shares of Common Stock for the Merger Consideration will be entitled to look only to the surviving corporation for payment of the Merger Consideration, without interest, due in respect of their shares of Common Stock. Parent, Merger Sub, the surviving corporation and Paying Agent will not be liable to any former K-Tron shareholder for any Merger Consideration delivered to a public official pursuant to applicable abandoned property, escheat or similar laws. Any Merger Consideration remaining unclaimed by our shareholders immediately prior to such time as such amounts would otherwise escheat to or become the property of any governmental entity, will, to the fullest extent permitted by law, become the property of the surviving corporation, free and clear of all claims or interests.

 

If any Certificate is lost, stolen or destroyed, the Paying Agent will deliver the applicable Merger Consideration due with respect to the shares formerly represented by such Certificate if:

 

 

The Merger Agreement contains representations and warranties of the Company, Merger Sub and Parent, negotiated between the parties and made as of specific dates solely for purposes of the Merger Agreement, including setting forth the respective rights of the parties with respect to their obligations to complete the Merger. The representations and warranties are qualified by information in our filings with the SEC since January 1, 2006 and the confidential disclosure letter provided by the Company to Parent and Merger Sub in connection with the signing of the Merger Agreement, and may be subject to important limitations and qualifications as set forth in the Merger Agreement, including a contractual standard of materiality different from that generally applicable under federal securities laws. The confidential disclosure letter contains information that modifies, qualifies and creates exceptions to the representations and warranties set forth in the Merger Agreement. Moreover, certain representations and warranties in the Merger Agreement were used for the purpose of allocating risk between the Company on one hand and Parent and Merger Sub on the other hand, rather than establishing matters as facts. Accordingly,

you should not rely on the representations and warranties in the Merger Agreement as characterizations of the actual state of facts about the Company, Parent or Merger Sub.

 

The Merger Agreement contains a number of representations and warranties made by the Company, Parent and Merger Sub that relate to, among other things:

 

 

The Company’s representations and warranties also relate to, among other things:

 

 

 

Parent and Merger Sub also make representations and warranties relating to the availability of funds to consummate the Merger, the ownership, operations and assets of Merger Sub and the accuracy of the information provided to the Company for inclusion in this proxy statement.

 

Many of our representations and warranties are qualified as to “materiality” or “Company Material Adverse Effect.” For purposes of the Merger Agreement, “Company Material Adverse Effect” means any circumstance, condition, change, event, occurrence, development, state of facts or effect (a “Change”), that, individually or in the aggregate, (i) has had or will have or would be reasonably expected to have a material adverse effect on the business, financial condition, properties, assets, liabilities (contingent or otherwise) or results of operations of the Company and our subsidiaries, taken as a whole, or (ii) will, or would be reasonably expected to, prevent or materially impede, materially hinder or materially delay the consummation by the Company of the Merger or the other transactions contemplated by the Merger Agreement; provided, however, that none of the following shall constitute or shall be considered in determining whether a Company Material Adverse Effect has occurred:

 

 

The representations and warranties of the parties to the Merger Agreement will expire upon the effective time of the Merger or the termination of the Merger Agreement (other than the representations and warranties of the Company, Parent and Merger Sub regarding brokers’, finders’ and other similar fees in connection with the Merger which survive termination of the Merger Agreement).

 

Interim Operations of K-Tron

 

We have agreed to restrictions on the operation of the business of the Company and our subsidiaries until either the effective time of the Merger or the termination of the Merger Agreement. In general, we have agreed to conduct our business in the ordinary course and in a commercially reasonable manner consistent with past practice and to use commercially reasonable efforts to preserve intact our business organization and goodwill and key relationships with our customers, suppliers, employees, contractors and distributors; keep available the services of our current

officers and key employees; and preserve our tangible assets and properties in their current states of repair and condition (ordinary wear and tear excepted). In addition, we have agreed that, among other things and subject to certain exceptions, we are restricted from and must prevent any of our subsidiaries from, without Parent’s prior written consent:

 

 

 

Restrictions on Solicitations

 

We have agreed that prior to the effective time of the Merger the Company and our subsidiaries will not, and we will use our reasonable best efforts to ensure our representatives do not, directly or indirectly:

 

 

We have agreed to immediately cease and terminate and use our reasonable best efforts to cause our representatives to immediately cease and terminate all existing activities, discussions or negotiations with any third party with respect to any Takeover Proposal, and we have agreed to use our reasonable best efforts to cause any such third party in possession of any confidential information about the Company that was previously furnished to such parties since November 1, 2008 to return or destroy such information. We have also agreed not to release any third party from the confidentiality and standstill provisions of any agreement (or terminate, amend, modify or waive any provision of any such agreement) to which we are or may become a party to and have agreed to enforce, to the fullest extent permitted under applicable law, the provisions of any such agreement.

 

Notwithstanding the restrictions on solicitation set forth above, we may at any time prior to the approval of the Merger Agreement by our shareholders, in response to a bona fide written unsolicited Takeover Proposal (so long as such Takeover Proposal was received after the date of Merger Agreement and was not initiated, solicited, encouraged or knowingly induced or facilitated, directly or indirectly, in violation of the restrictions on solicitation set forth above and we have complied with the provisions of the restrictions on solicitation set forth above):

 

 

provided, in each case, such Takeover Proposal constitutes a Superior Proposal or our Board of Directors reasonably determines (after consultation with the Company’s financial advisors and outside legal counsel) that such Takeover Proposal would reasonably be expected to lead to a Superior Proposal. The Company must provide promptly (and in any event within twenty-four (24) hours) to Parent any material nonpublic information regarding the Company provided to the third party making such Takeover Proposal which was not previously provided to Parent.

 

We are required to provide Parent with prompt oral and written notice (and in any event within twenty-four (24) hours and prior to providing such third party with any material non-public information) of the receipt of a

Takeover Proposal, which notice shall include the identity of the third party making such inquiry, proposal or offer, the material terms and conditions of any such inquiry, proposal or offer, and copies of all correspondence and written materials provided to the Company by the third party making such Takeover Proposal that describe any material terms and conditions of any inquiry, proposal or offer (and any subsequent changes to such terms and conditions) and written summaries of any oral communications addressing such matters. We are also required to keep Parent reasonably informed of the status and details of any Takeover Proposal and promptly, upon receipt, provide copies of all correspondence and written materials that describe the material terms and conditions relating to the Takeover Proposal, including, if applicable, drafts and final versions of agreements and any comments thereon relating to the Takeover Proposal.

 

We have agreed that the Board of Directors or any committee thereof will not (i) withdraw (or modify or qualify in any manner adverse to Parent or Merger Sub), or resolve to or publicly propose to withdraw (or modify or qualify in a manner adverse to Parent or Merger Sub), the Board of Directors’ recommendation to our shareholders to approve the Merger Agreement or otherwise take any action or make any statement in connection with the transactions contemplated by the Merger Agreement that is inconsistent with such recommendation, (ii) adopt, approve, endorse or recommend, or resolve to or publicly propose to adopt, approve, endorse or recommend, any Takeover Proposal or (iii) adopt, approve, endorse or recommend, or publicly propose to adopt, approve, endorse or recommend, or allow the Company or any of our subsidiaries to execute or enter into, any binding or nonbinding letter of intent, option, joint venture, partnership or other arrangement or understanding in connection with any Takeover Proposal. Notwithstanding the foregoing, in the event that our Board of Directors concludes in good faith that a Takeover Proposal constitutes a Superior Proposal, and provides Parent with four (4) business days prior written notice, which notice shall describe the material terms and conditions of such Superior Proposal (and be updated upon any material revisions of such Superior Proposal) and include a copy of the proposed transaction agreement, our Board of Directors may, prior to the approval of the Merger Agreement by our shareholders:

 

 

Parent has the right during the four business day notice period to propose changes to the Merger Agreement. If the financial or material terms of the Superior Proposal are amended, the four business day notice period will commence following our delivery to Parent of written notice of the amended Superior Proposal. In the event that our Board of Directors changes its recommendation and/or terminates the Merger Agreement to enter into an agreement with respect to a Superior Proposal, we would be required to pay Parent a termination fee of $12 million.

 

As set forth in the Merger Agreement:

 

 

Shareholder Meeting

 

As promptly as reasonably practicable following the clearance of this proxy statement by the SEC, the Company has agreed, acting through the Board of Directors, to hold a meeting of our shareholders for the purpose of approving the Merger Agreement and to use its reasonable best efforts to solicit from our shareholders proxies in favor of the approval of the Merger Agreement.

 

Employee Benefit Matters

 

Following the effective time of the Merger, and for the shorter of one year after the effective time of the Merger or until the termination of an assumed employee (an individual who is an employee of the Company or one of our subsidiaries at the effective time of the Merger and whose employment will continue following the effective time of the Merger), Parent is obligated to provide, or cause the surviving corporation to provide, to all individuals who are actively employed with the Company or any our subsidiaries at the effective time of the Merger compensation and employee benefits that are in the aggregate no less favorable than those in effect as of the date of the Merger Agreement for such employees under Company benefit plans (excluding any equity, equity-related or incentive compensation, bonus, change in control, sabbatical or similar plans, programs, policies, agreements or arrangements).

 

Following the effective time of the Merger, each assumed employee will be credited with his or her years of service to the extent credited under Company benefit plans prior to the effective time of the Merger for purposes of determining eligibility to participate and vesting (but not for any other purpose including benefit accrual or determination of levels of benefits purposes) for the same purposes under comparable employee benefit plans of Parent and the surviving corporation in which such employee participates following the effective time of the Merger (other than under any equity, equity-related, incentive compensation, bonus or sabbatical plans, programs, agreements or arrangements). Notwithstanding the foregoing, there is no requirement to provide coverage to any assumed employee under any benefit plan of Parent or any subsidiary or to duplicate any benefit provided to, or service credited on behalf of, any assumed employee.

 

To the extent permitted under the applicable plan or contract of Parent or any applicable subsidiary in which assumed employees participate following the effective time of the Merger, Parent and the surviving corporation will cause all: (i) pre-existing conditions for all assumed employees and their covered dependents as of the closing to be waived to the extent that such conditions were satisfied under a comparable Company benefit plan as of the effective time of the Merger and (ii) waiting periods under each plan that would otherwise be applicable to newly hired employees to be waived to the same extent waived or satisfied under the Company benefit plans as of the effective time of the Merger. In addition, Parent and the surviving corporation will honor any expenditures incurred by assumed employees and their covered dependents in satisfying the deductible, co-payment and out-of-pocket maximums under the Company benefit plans during the portion of the applicable plan year that includes the effective time of the Merger in satisfying any deductibles, co-payments or out-of-pocket maximums under any plans of Parent or the surviving corporation in which they are eligible to participate after the effective time of the Merger for the portion of the applicable plan year that includes the effective time of the Merger.

 

With respect to the plan year in which the effective time of the Merger occurs, Parent and the surviving corporation will give each assumed employee credit, for purposes of the vacation policy applicable to such employee and/or other paid leave benefit programs, for such assumed employee’s accrued and unpaid vacation and/or paid leave balance as of the effective time of the Merger.

The Company will, at or prior to closing, award to employees bonuses under a transaction bonus plan, such bonuses to be paid not later than six (6) months after the closing date (subject to the terms and conditions of such transaction bonus plan) less any withholding required by applicable law.

 

Parent and the surviving corporation have agreed to assume and perform the applicable obligations of the Company under the employment agreements between K-Tron and each of Messrs. Cloues, Bowen, Guenthardt and Wisniewski. For a more detailed description of other employee-related matters, see the above section titled “The Merger — Interests of K-Tron’s Directors and Officers in the Merger” beginning on page 34.

 

Further Action; Reasonable Best Efforts

 

The Company, Parent and Merger Sub have agreed to use their reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to complete the Merger and the other transactions contemplated by the Merger Agreement. The Company, Parent and Merger Sub have agreed to make appropriate filings pursuant to any applicable competition laws.

 

In addition, Parent has agreed to take such actions, including the sale of assets or debt or equity securities or the incurrence of additional indebtedness, as may be necessary so that Parent has sufficient funds to consummate the Merger on or before the third business day after the satisfaction or waiver (to the extent permitted by applicable law) of certain closing conditions (other than those conditions that by their nature are to be satisfied at the closing).

 

Indemnification and Insurance

 

Parent and Merger Sub have agreed that all rights to exculpation, indemnification and advancement of expenses for acts or omissions occurring at or prior to the effective time of the Merger (as in effect as of the date of the Merger Agreement) in favor of the current or former directors or officers of K-Tron, as provided under K-Tron’s certificate of incorporation or bylaws or in any agreement of K-Tron with such persons, shall survive the Merger and shall continue in full force and effect in accordance with their terms. From and after the effective time of the Merger, Parent will cause the surviving corporation to assume and to pay, perform and discharge, in accordance with their respective terms, K-Tron’s obligations with respect to such rights to exculpation, indemnification and advancement of expenses.

 

Parent has agreed that for a period of six years following the effective time of the Merger, Parent will maintain the current policies of directors’ and officers’ liability insurance and fiduciary liability insurance maintained by the Company with respect to acts or omissions arising at or before the effective time of the Merger; provided, however, that Parent may substitute such policies with policies that provide substantially equivalent coverage and amounts and terms no less favorable to such directors and officers; provided, further, that if any such policy expires or is terminated or cancelled during such period, then Parent shall use commercially reasonable efforts to obtain substantially similar insurance. After the effective time of the Merger, Parent will not be obligated to pay annual premiums in excess of 150% of the last annual premium paid by the Company prior to the date of the Merger Agreement in respect of the coverages required to be obtained; provided however, that if the annual premiums for such insurance coverage exceed such amount, Parent will be obligated to obtain a policy with as much coverage as reasonably practicable for such amount.

 

Certain Other Covenants

 

The Merger Agreement contains additional mutual covenants, including covenants relating to access to information, preparation and filing of this proxy statement, defense and settlement of lawsuits and legal proceedings relating to the Merger or the Merger Agreement, cooperation regarding filings with governmental and other agencies and organizations and obtaining any governmental or third-party consents or approvals, notification of certain matters and public announcements.

 

Conditions to Each Party’s Obligation.

 

The obligation of each of Parent, Merger Sub and the Company to consummate the Merger is subject to the satisfaction or waiver at or before the effective time of the Merger of the following conditions:

 

 

Conditions to Parent and Merger Sub’s Obligation.

 

The obligation of each of Parent and Merger Sub to complete the Merger is subject to the satisfaction or waiver at or before the closing date of the following additional conditions:

 

 

Conditions to the Company’s Obligation.

 

The obligation of the Company to complete the Merger is subject to the satisfaction or waiver at or before the closing date of the following additional conditions:

 

 

For purposes of the Merger Agreement, “Parent Material Adverse Effect” means any circumstance, condition, change, event, occurrence, development, state of facts or effect that, individually or in the aggregate, prevents or materially impedes, materially hinders or materially delays the consummation by Parent of the Merger or the other transactions contemplated by the Merger Agreement.

 

The Merger Agreement may be terminated at any time prior to the effective time of the Merger:

 

 

 

 

 

 

 

If the Merger Agreement is validly terminated, all obligations thereunder will terminate. However, our confidentiality agreement with Parent and the provisions of the Merger Agreement relating to confidentiality, representations and warranties regarding brokers’ or finders’ fees, termination fees and expenses, non-survival of representations, warranties and agreements, third party beneficiaries, assignment and governing law will remain in full force and effect. Upon such termination, there shall be no liability of any party except for (i) liability arising from fraud or a willful and material breach of the Merger Agreement or as provided in our confidentiality agreement with Parent, in which case the aggrieved party will be entitled to all rights and remedies available at law or in equity, or (ii) payment of a termination fee in certain circumstances discussed below.

 

The Merger Agreement generally provides that each party will pay its own fees and expenses in connection with the Merger Agreement and the transactions contemplated by the Merger Agreement, whether or not the Merger is completed. In no event will the Company be required to pay a termination fee or the Expenses (as defined below) on more than one occasion.

 

Termination Fees and Expenses Payable by the Company

 

We have agreed to pay Parent a termination fee of $12 million (the “Termination Fee”) if any of the following events occur:

 

 

 

 

 

If a Takeover Proposal or intention to make a Takeover Proposal (whether or not conditional) is made to our shareholders, otherwise publicly disclosed or proposed or is communicated to our senior management, the Board of Directors or a committee thereof and Parent thereafter terminates the Merger Agreement due to the Company’s willful breach or failure to perform any covenant or agreement under the Merger Agreement that would cause the conditions to closing not to be satisfied and such breach is incurable or has not been cured by the Company within fifteen (15) days after notice of the breach by Parent (or cured by June 29, 2010 if such date is less than fifteen (15) days after written notice) at a time when a Takeover Proposal is pending, we have agreed to pay to Parent, within two (2) business days after receipt of documentation, the documented reasonable out-of-pocket fees and expenses incurred or paid on behalf of Parent, Merger Sub or any of their affiliates (the “Expenses”) in connection with the Merger and the other transactions contemplated by the Merger Agreement in an amount not to exceed $10 million.

 

If we fail to pay the Termination Fee or Expenses as described above, we have also agreed to pay any costs and expenses (including reasonable legal fees and expenses) incurred by Parent and Merger Sub in connection with any suit to obtain payment of the Termination Fee or Expenses that results in a judgment against the Company for all or a portion of the Termination Fee or Expenses, together with interest on such amounts at a rate per annum equal to the prime lending rate of the Bank of New York in effect on the date such payment was due plus one percent (1%).

 

Any provision of the Merger Agreement may be amended or waived before the effective time of the Merger only if the amendment or waiver is in writing and signed, in the case of an amendment, by each party to the Merger Agreement or, in the case of a waiver, by each party against whom the waiver is to be effective; provided that, after approval of the Merger Agreement by our shareholders, no amendment or waiver that requires shareholder approval under applicable law may be made, without their further approval.

 

Parent, Merger Sub and the Company have agreed that irreparable damage would occur in the event that any provision of the Merger Agreement was not performed in accordance with its specific terms or was otherwise breached. Therefore, Parent, Merger Sub and the Company will be entitled to an injunction or injunctions to prevent breaches of the Merger Agreement and to specific performance of the terms and provisions of the Merger Agreement in any court of competent jurisdiction, this being in addition to any other remedy to which they are entitled at law or in equity.

 

The following description summarizes the material provisions of the voting agreement and is qualified in its entirety by reference to the complete text of the voting agreement. The voting agreement, attached as Annex B to this proxy statement, contains the complete terms of that agreement and you should read it carefully and in its entirety.

 

In connection with the execution of the Merger Agreement, all of our directors and executive officers entered into a voting agreement with Parent and Merger Sub. Our directors and executive officers have agreed to vote (or cause to be voted) substantially all of their shares of Common Stock (approximately 10% of the outstanding shares of our Common Stock as of the record date) in favor of the approval of the Merger Agreement, the approval of any proposal to adjourn or postpone the special meeting to a later date if there are not sufficient votes for approval of the Merger Agreement on the date on which the special meeting is held and the approval of any other matter necessary for consummation of the transactions contemplated by the Merger Agreement, which is considered at the special meeting.

 

Each of these shareholders also agreed, until any termination of the voting agreement, to vote these shares of Common Stock held by that shareholder against the following:

 

 

In connection with the voting agreement, each shareholder further agreed not to, directly or indirectly:

 

 

 

Each of the shareholder parties to the voting agreement has irrevocably granted to, and appointed Parent and its designees, as the shareholder’s proxy and attorney-in-fact to vote, or grant a consent or approval with respect to, all of such shareholder’s shares of Common Stock subject to the voting agreement in accordance with the voting agreement as described above. The proxy granted by each shareholder party to the voting agreement is irrevocable until the termination of the Merger Agreement.

 

The voting agreement terminates on the earlier to occur of the effective time of the Merger or the date of termination of the Merger Agreement.

 

Except for its deemed beneficial ownership of shares of Common Stock as a result of the voting agreement, based on a Schedule 13D filed by Parent with the SEC on January 15, 2010, Parent does not own any shares of our Common Stock.

 

Except as described under “The Merger — Background of the Merger” beginning on page 17, there have not been any past contacts, transactions or negotiations during the past two years concerning any merger, consolidation, acquisition, tender offer or other acquisition of any class of K-Tron’s securities, election of K-Tron’s directors or sale or other transfer of a material amount of K-Tron’s assets (i) between K-Tron or any of its affiliates, on the one hand, and Parent and Merger Sub, their respective executive officers, directors, members or controlling persons, on the other hand, (ii) between any affiliates of K-Tron or (iii) between K-Tron and its affiliates, on the one hand, and any person not affiliated with K-Tron who would have a direct interest in such matters, on the other hand.

 

Our Common Stock trades on the NASDAQ Global Select Market under the symbol “KTII.” As of February 24, 2010, there were 2,841,787 shares of Common Stock outstanding, held by approximately 143 shareholders of record. Our Common Stock began trading on the NASDAQ Global Select Market at the beginning of 2008. The following table sets forth the high and low sales prices per share for each quarter in fiscal 2008 and 2009, as well as through February 24, 2010, as quoted on the NASDAQ Global Select Market.

 

Market Information

 

 

The closing sale price of our Common Stock on January 8, 2010, which was the last trading day before the announcement of the execution of the Merger Agreement, was $113.52 per share. On February 24, 2010, the closing sale price of our Common Stock was $149.53 per share. We have never paid a cash dividend on our Common Stock, and we currently intend to retain all future earnings for use in our business. In addition, under the Merger Agreement, we have agreed not to pay any cash dividends on our Common Stock before the completion of the Merger. After the completion of the Merger, K-Tron will be a privately-held subsidiary of Parent.

 

Shareholders should obtain a current market quotation for K-Tron’s Common Stock before making any decision with respect to the Merger.

 

The NJBCA provides that in some mergers involving a New Jersey corporation, a shareholder who complies with statutory requirements has the right to receive, instead of the merger consideration, cash for each of the shareholder’s shares in an amount equal to the fair value of each share as of the day prior to the shareholder meeting approving the merger. If the corporation and the shareholder are unable to agree upon the fair value of the shares, then the fair value will be appraised by the New Jersey Superior Court. However, this right to appraisal is not available under the NJBCA to holders of K-Tron’s Common Stock in connection with the Merger. Section 14A:11-1 of the NJBCA provides that shareholders do not have a right to dissent from any plan of merger or consolidation with respect to shares (1) of a class or series which is listed on a national securities exchange or is held of record by not less than 1,000 holders or (2) for which, pursuant to the plan of merger or consolidation, such shareholder will receive (a) cash, (b) shares, obligations or other securities which, upon consummation of the merger or consolidation, will either be listed on a national securities exchange or held of record by not less than 1,000 holders or (c) cash and such securities. Accordingly, K-Tron shareholders will not be entitled to exercise any such dissenters’ rights of appraisal in connection with the transactions contemplated by the Merger Agreement. If the Merger Agreement is approved and the Merger is completed, holders of K-Tron’s Common Stock who voted against the approval of the Merger Agreement will be treated the same as shareholders who voted for the approval of the Merger Agreement and their shares will converted automatically into the right to receive the Merger Consideration.

 

The following table sets forth certain information as of February 24, 2010 (or as of such other dates as are indicated in footnotes 5 through 8 to such table) with respect to shares of our Common Stock beneficially owned by each of our directors and named executive officers, all of our directors and executive officers as a group and each person we believe to be the beneficial owner of more than 5% of the outstanding shares of our Common Stock. Except as indicated below, the shareholders who are directors and named executive officers share voting and investment power with respect to shares owned by each of them, with Parent, pursuant to the terms of the voting agreement. In addition, except as indicated in, and based on the information provided in, footnotes 5 through 8 to the table below, we understand that the “Other 5% Shareholders” listed in the table have sole voting and investment power with respect to the shares owned by them. The number of shares in the table below includes shares issuable upon the exercise of outstanding stock options to the extent that such options are exercisable by the director, executive officer or shareholder on or within 60 days after February 24, 2010. In the case of our directors and executive officers, the information below has been provided by such persons at our request.

 

 

 

 

If the Merger is completed, there will be no public participation in any future meetings of the Company’s shareholders. If the Merger is not completed, however, our shareholders will continue to be entitled to attend and participate in meetings of shareholders. If the Merger is not completed, we will inform our shareholders, by press release or other means determined reasonable by the Company, of the date by which shareholder proposals must be received by the Company for inclusion in the proxy materials relating to the Company’s 2010 annual meeting, which proposals must comply with the rules and regulations of the SEC then in effect.

 

Our Board of Directors does not know of any other business that may be presented for consideration at the special meeting. If any business not described herein should come before the special meeting, the persons named in the enclosed proxy card will vote on those matters in accordance with their discretion.

 

The Company files annual, quarterly and current reports, proxy statements and other documents with the SEC under the Exchange Act. These reports, proxy statements and other information contain additional information about the Company. Shareholders may read and copy any reports, statements or other information filed by the Company at the SEC’s public reference room at Station Place, 100 F Street, N.E., Washington, D.C. 20549. You may also obtain copies of this information by mail from the public reference section of the SEC at Station Place, 100 F Street, N.E., Washington, D.C. 20549, at prescribed rates. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference room. The Company’s SEC filings made electronically through the SEC’s EDGAR system are available to the public at the SEC’s website located at www.sec.gov.

 

A list of shareholders will be available for inspection by shareholders at the special meeting or any adjournments thereof.

 

The SEC allows the Company to “incorporate by reference” information that it files with the SEC in other documents into this proxy statement. This means that the Company may disclose important information to you by referring you to another document filed separately with the SEC. The information incorporated by reference is considered to be part of this proxy statement. This proxy statement and the information that the Company files later with the SEC may update and supersede the information incorporated by reference. Such updated and superseded information will not, except as so modified or superseded, constitute part of this proxy statement.

 

The Company incorporates by reference each document it files under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of the initial filing of this proxy statement and before the special meeting. The Company also incorporates by reference in this proxy statement the following documents filed by it with the SEC under the Exchange Act:

 

 

The Company undertakes to provide without charge to each person to whom a copy of this proxy statement has been delivered, upon request, by first class mail or other equally prompt means, a copy of any or all of the documents incorporated by reference in this proxy statement, other than the exhibits to these documents, unless the exhibits are specifically incorporated by reference into the information that this proxy statement incorporates. You may obtain documents incorporated by reference by requesting them in writing or by telephone at the following address and telephone number:

 

K-Tron International, Inc.
Attn: Corporate Secretary
Routes 55 & 553
P.O. Box 888
Pitman, New Jersey 08071-0888

(856) 589-0500

 

Documents should be requested by March 25, 2010 in order to receive them before the special meeting. You should be sure to include your complete name and address in your request.

 

Parent and Merger Sub have supplied, and the Company has not independently verified, the information in this proxy statement relating to Parent and Merger Sub.

 

This proxy statement does not constitute the solicitation of a proxy in any jurisdiction to or from any person to whom or from whom it is unlawful to make such a proxy solicitation in such jurisdiction.

Shareholders should not rely on information other than that contained in or incorporated by reference in this proxy statement. The Company has not authorized anyone to provide information that is different from that contained in this proxy statement. This proxy statement is dated February 26, 2010. No assumption should be made that the information contained in this proxy statement is accurate as of any date other than that date, and the mailing of this proxy statement will not create any implication to the contrary. Notwithstanding the foregoing, in the event of any material change in any of the information previously disclosed, the Company will, where relevant and if required by applicable law, update such information through a supplement to this proxy statement.

 

Annex A

 

 

AGREEMENT AND PLAN OF MERGER
BY AND AMONG
HILLENBRAND, INC.,
KRUSHER ACQUISITION CORP.,
AND
K-TRON INTERNATIONAL, INC.
DATED AS OF
JANUARY 8, 2010

 

 

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