SECURITIES & EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[ X ] Quarterly report pursuant to section 13 or 15(d) of
the Securities Exchange Act of 1934. For the quarterly
period ended September 30, 1999.
[ ] Transition report pursuant to section 13 or 15(d)
of the Securities Exchange Act of 1934. For the Transition
period from _______________ to _______________.
Commission File Number 0-14714
Astec Industries, Inc.
(Exact Name of Registrant as Specified in its Charter)
Tennessee 62-0873631
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4101 Jerome Avenue, Chattanooga, Tennessee 37407
(Address of Principal Executive Offices) (Zip Code)
(423) 867-4210
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or 15
(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90
days.
YES X NO _______
Indicate the number of shares outstanding of each of
the registrant's classes of stock as of the latest
practicable date.
Class Outstanding at November 10, 1999
Common Stock, par value $0.20 19,112,122
ASTEC INDUSTRIES, INC.
INDEX
Page Number
PART I - Financial Information
Item 1. Financial Statements-Unaudited
Consolidated Balance Sheets as of
September 30, 1999 and December 31, 1998 1
Consolidated Statements of Income
for the Three and Nine Months Ended September 30,
1999 and 1998 2
Consolidated Statements of Cash Flows
for the Nine Months Ended September 30, 1999
and 1998 3
Notes to Unaudited Consolidated Financial
Statements 4
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations
PART II - Other Information
Item 1. Legal Proceedings 13
Item 5. Other Items 14
Item 6. Exhibits and Reports on Form 8-K 14
PART I _ FINANCIAL INFORMATION
Item 1. Financial Statements
ASTEC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
ACCOUNT DESCRIPTION SEPTEMBER DECEMBER
30, 1999 31, 1998
ASSETS
CURRENT ASSETS
CASH AND CASH EQUIVALENTS $2,593 $5,353
RECEIVABLES _ NET 73,907 52,427
INVENTORIES 88,772 76,729
PREPAID EXPENSES AND OTHER 11,982 10,373
TOTAL CURRENT ASSETS 177,254 144,882
PROPERTY AND EQUIPMENT _ NET 91,984 81,142
OTHER ASSETS 43,169 23,140
TOTAL ASSETS $312,407 $249,164
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
NOTES PAYABLE $85 $146
CURRENT MATURITIES OF LONG-TERM DEBT 500 500
ACCOUNTS PAYABLE _ TRADE 32,250 27,418
OTHER ACCRUED LIABILITIES 38,635 34,953
TOTAL CURRENT LIABILITIES 71,470 63,017
LONG-TERM DEBT, LESS CURRENT MATURITIES 70,810 47,220
OTHER LONG-TERM LIABILITIES 8,262 6,269
TOTAL SHAREHOLDERS' EQUITY 161,865 132,658
TOTAL LIABILITIES AND SHAREHOLDERS' $312,407 $249,164
EQUITY
ASTEC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1999 1998 1999 1998
NET SALES $106,886 $88,797 $339,322 $285,085
COST OF SALES 79,107 66,622 249,695 214,780
GROSS PROFIT 27,779 22,175 89,627 70,305
S,G, & A EXPENSES 14,830 11,822 44,600 37,336
INCOME FROM OPERATIONS 12,949 10,353 45,027 32,969
INTEREST EXPENSE 1,065 660 2,707 2,061
OTHER INCOME, NET OF EXPENSE 989 (59) 2,851 241
INCOME BEFORE INCOME TAXES 12,873 9,634 45,171 31,149
INCOME TAXES 4,958 3,855 17,534 12,422
NET INCOME $7,915 $5,779 $27,637 $18,727
EARNINGS PER COMMON SHARE *
BASIC $0.41 $0.31 $1.45 $1.00
DILUTED $0.40 $0.31 $1.38 $0.97
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING *
BASIC 19,100,919 18,834,377 19,047,564 18,727,790
DILUTED 20,018,128 18,763,709 19,981,991 19,348,462
* Restated to retroactively reflect a two-for-one stock
split that took effect on January 18, 1999.
ASTEC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
SEPTEMBER SEPTEMBER
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $27,637 $18,727
ADJUSTMENTS TO RECONCILE NET INCOME
TO NET CASH PROVIDED BY OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION 8,355 5,764
PROVISION FOR DOUBTFUL ACCOUNTS 519 344
PROVISION FOR INVENTORY RESERVE 427 1,431
PROVISION FOR WARRANTY RESERVE 3,116 3,436
(GAIN) ON SALE OF FIXED ASSETS (232) (48)
PROVISION FOR PENSION RESERVE 117 121
(GAIN) ON SALE OF LEASE PORTFOLIO (657) (554)
(INCREASE) DECREASE IN:
TRADE RECEIVABLES (13,105) (16,304)
FINANCE RECEIVABLES 14,340) (11,225)
INVENTORIES (5,603) (568)
PREPAID EXPENSES AND OTHER (1,578) (11,142)
OTHER RECEIVABLES 229 (126)
OTHER NON-CURRENT ASSETS 939 (167)
INCREASE (DECREASE) IN:
ACCOUNTS PAYABLE 369 2,696
ACCRUED PRODUCT WARRANTY (2,800) (2,629)
OTHER ACCRUED LIABILITIES (160) 5,705
INCOME TAXES PAYABLE 3,706 12,480
TOTAL ADJUSTMENTS (20,698) (10,786)
NET CASH PROVIDED BY OPERATING ACTIVITIES 6,939 7,941
CASH FLOWS FROM INVESTING ACTIVITIES:
PROCEEDS FROM SALE OF PROPERTY AND
EQUIPMENT _ NET 109 318
PROCEEDS FROM SALE OF LEASE PORTFOLIO 32,368 17,566
EXPENDITURES FOR -PROPERTY AND EQUIPMENT (21,095) (11,675)
-EQUIPMENT ON OPERATING LEASE (20,390) (27,245)
CASH PAYMENTS IN CONNECTION WITH
BUSINESS COMBINATION, NET OF CASH (18,500)
NET CASH USED BY INVESTING ACTIVITIES (34,363) (14,181)
CASH FLOWS FROM FINANCING ACTIVITIES:
NET BORROWINGS (REPAYMENTS) UNDER
REVOLVING CREDIT AGREEMENT 8,158 (4,173)
NET BORROWINGS (REPAYMENTS) UNDER
LOAN AND NOTE AGREEMENTS 14,939 7,919
PROCEEDS FROM ISSUANCE OF COMMON STOCK 1,673 781
NET CASH PROVIDED BY FINANCING ACTIVITIES 24,770 4,527
EFFECT OF EXCHANGE RATE CHANGES ON CASH (106)
NET DECREASE IN CASH (2,760) (1,713)
CASH AT BEGINNING OF PERIOD 5,353 2,926
CASH AT END OF PERIOD $2,593 $1,213
ASTEC INDUSTRIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The accompanying unaudited consolidated financial statements
have been prepared in accordance with generally accepted
accounting principles for interim financial information and with
the instructions to From 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included.
Operating results for the three-month period ended September 30,
1999 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1999.
The balance sheet at December 31, 1998 has been derived from
the audited financial statements at that date but does not
include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements.
For further information, refer to the consolidated financial
statements and footnotes thereto included in the Astec
Industries, Inc. and subsidiaries annual report on Form 10-K for
the year ended December 31, 1998.
Note 2. Receivables.
Receivables are net of allowance for doubtful accounts of
$1,937,000 and $1,459,000 for September 30, 1999 and December 31,
1998, respectively.
Note 3. Inventories
Inventories are stated at the lower of first-in, first-out
cost or market and consist of the following:
(in thousands)
September 30, December 31,
1999 1998
Raw Materials $27,229 $35,275
Work-in-Process 24,384 18,138
Finished Goods 37,159 23,316
Total $88,772 $76,729
Note 4. Property and Equipment
Property and equipment is stated at cost. Property and
equipment is net of accumulated depreciation of $42,820,000 and
$36,759,000 for September 30, 1999 and December 31, 1998,
respectively.
Note 5. Earnings Per Share
Basic and diluted earnings per share are calculated in
accordance with SFAS No. 128. Basic earnings per share exclude
any dilutive effects of options, warrants and convertible
securities.
Notes to Unaudited Financial Statements - Continued
The following table sets forth the computation of basic and
diluted earnings per share:
Three Months Ended Nine Months Ended
September 30 September 30
1999 1998 1999 1998
Numerator
Net income $7,915,000 $5,779,000 $27,637,000 $18,727,000
Denominator:
Denominator for
basic earnings
per share 19,100,919 18,834,377 19,047,564 18,727,790
Effect of dilutive
securities:
Employee stock
options 917,209 654,511 934,427 620,672
Denominator for
diluted earnings
per share 20,018,128 19,488,888 19,981,991 19,348,462
Earnings per common
share:
Basic $0.41 $0.31 $1.45 $1.00
Diluted $0.40 $0.31 $1.38 $0.97
Note 6. Comprehensive Income
Total comprehensive income was $7,915,000 and $27,637,000
for the three and nine months ended September 30, 1999 and
$5,779,000 and $18,727,000 for the three and nine months ended
September 30, 1998.
Note 7. Contingent Matters
Certain customers have financed purchases of Astec products
through arrangements in which the Company is contingently liable
for customer debt aggregating approximately $7,344,000 at
September 30, 1999 and $1,271,000 at December 31, 1998.
Note 8. Segment Information
Three months ended
September 30, 1999
Hot-mix Aggregate Mobile Asphalt
Asphalt Processing Construction All
Plants Equipment quipment Others Total
Revenues from
external customers $45,414 $40,471 $14,879 $6,122 $106,886
Intersegment
revenues 4,19 3,012 234 606 8,048
Segment profit $6,618 $4,652 $2,383 ($5,694) $7,959
Three months ended
September 30, 1998
Hot-mix Aggregate Mobile Asphalt
Asphalt Processing Construction All
Plants Equipment Equipment Others Total
Revenues from
external customers $37,510 $27,423 $17,833 $6,031 $88,797
Intersegment
revenues 2,591 2,500 0 3,596 8,687
Segment profit $5,089 $2,623 $3,172 ($4,346) $6,538
Nine months ended
September 30, 1999
Hot-mix Aggregate Mobile Asphalt
Asphalt Processing Construction All
Plants Equipment Equipment Others Total
Revenues from
external customers $145,564 $118,222 $56,093 $19,443 $339,322
Intersegment
revenues 9,976 9,222 235 4,335 23,768
Segment profit $21,195 $15,819 $10,533 ($19,757) $27,790
Nine months ended
September 30, 1998
Hot-mix Aggregate Mobile Asphalt
Asphalt Processing Construction All
Plants Equipment Equipment Others Total
Revenues from
external customers $128,777 $86,239 $50,093 $19,976 $285,085
Intersegment
revenues 8,718 5,914 2 5,765 20,399
Segment profit $17,077 $9,769 $8,718 ($16,043) $19,521
Reconciliations of the reportable segment totals for profit or
loss to the Company's consolidated totals are as follows:
Three months ended Nine months ended
September 30, September 30,
1999 1998 1999 1998
Profit:
Total profit for $13,653 $10,884 $47,547 $35,564
reportable segments
Other profit (loss) (5,694) (4,346) (19,757) (16,043)
Equity in income of 0 (2) 52 94
joint venture
Elimination of (44) (757) (205) (888)
intersegment profit
Total consolidated $7,915 $5,779 $27,637 $18,727
net income
Note 9. Legal Matters
There have been no material developments in legal
proceedings previously reported. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations" in
Part I - Item 2 "Contingencies" of this Report.
Note 10. Seasonality
Due to varied product lines, the Company's business has
become less seasonal during the past few years; approximately 75%
to 80% of the Company's business volume occurs during the first
nine months of the year.
Item 2. Management's Discussion and Analysis Of Financial
Condition And Results Of Operations
When used in this report, press releases and elsewhere by
management or the Company from time to time, the words,
_believes,_ _anticipates,_ and _expects_ and similar expressions
are intended to identify forward-looking statements that involve
certain risks and uncertainties. A variety of factors could
cause actual results to differ materially from those anticipated
in the Company's forward-looking statements, which include the
risk factors discussed in this report, and other risk factors
that are discussed from time to time in the Company's SEC
reports. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date
such statements are made. The Company undertakes no obligations
to publicly release the results of any revisions to these
forward-looking statements that may be made to reflect events or
circumstances after the date such statements are made or to
reflect the occurrence of unanticipated events.
Results of Operations
For the three months ended September 30, 1999, net sales
increased to $106,886,000 from $88,797,000 for the three-months
ended September 30, 1998, representing a 20.4% increase. The
acquisition of Johnson Crushers International, Inc. during
October 1998 accounted for approximately $5,712,000 of the
increase in sales for the third quarter of 1999 over sales for
the third quarter of 1998. The acquisition of Breaker
Technology, Inc. in August 1999 accounts for an additional
$4,035,000 of the increase during the third quarter of 1999
versus the third quarter of 1998. The remainder of the increase
in net sales for the third quarter of 1999 compared to the third
quarter of 1998 related mainly to sales of asphalt mixing plants
and components and aggregate crushing equipment. International
sales for the third quarter of 1999 decreased to $8,938,000, from
$22,770,000 for the same period of 1998.
Net sales for the nine months ended September 30, 1999
increased approximately 19.0% to $339,322,000 from $285,085,000
for the nine months ended September 30, 1998. For the nine
months ended September 30, 1999, approximately $22,474,000, or
41.4% of the increase in net sales is attributable to Johnson
Crushers International, Inc. and $4,035,000, or 7.4% is
attributable to Breaker Technology, Inc. The remainder of the
increase in net sales for the nine months ended September 30,
1999 is primarily attributable to increased sales of asphalt
mixing plants and related components, and to a lesser extent to
both the sales of aggregate crushing equipment and mobile
construction equipment.
Gross profit for the three months ended September 30, 1999
increased to $27,779,000 (26.0%) from $22,175,000 (25.0%) for the
three months ended September 30, 1998. Gross profit for the nine
months ended September 30, 1999 was $89,627,000 (26.4%) compared
to gross profit of $70,305,000 (24.7%) for the nine months ended
September 30, 1998. The increase in the gross profit margin for
the three and nine months ended September 30, 1999 relates
primarily to the Company's initiation of several cost-reduction
and cost-control strategies to increase profit margins on several
product lines.
Selling, general and administrative expenses for the three
months ended September 30, 1999 were $14,830,000 or 13.9% of net
sales, compared to $11,822,000 or 13.3% of net sales for the
three months ended September 30, 1998. Approximately $679,000,
or 22.6% of the increase in selling, general and administrative
expenses for the three months ended September 30, 1999 compared
to the same quarter in 1998, relates to the acquisition of
Johnson Crushers International, Inc. An additional $674,000, or
22.4% of the increase in selling, general and administrative
expenses in the third quarter of 1999 as compared to the third
quarter of 1998 is due to the acquisition of Breaker Technology,
Inc. The remaining increase related to increased sales
department expenses at several subsidiaries.
Selling, general and administrative expenses for the nine
months ended September 30, 1999 increased to $44,600,000, from
$37,336,000 for the nine months ended September 30, 1998, an
increase of $7,264,000, or 19.5%. Approximately 27.3% of the
increase in selling, general and administrative expenses for the
nine months ended September 30, 1999 compared to the same period
of 1998 related to Johnson Crushers International, Inc., with an
additional 9.3% attributable to Breaker Technology, Inc. The
remaining increase in selling, general and administrative
expenses for the three and nine months ended September 30, 1999,
compared to the same period in the prior year, relates primarily
to increased sales department expenses at several subsidiaries.
Interest expense increased to $1,065,000 for the three
months ended September 30, 1999 from $660,000 for the three
months ended September 30, 1998. Interest expense as a
percentage of net sales increased slightly to approximately 1%
for the three months ended September 30, 1999 from .7% for the
quarter ended June 30, 1998.
Interest expense for the nine months ended September 30,
1999 compared to the nine months ended September 30, 1998
increased to $2,707,000 from $2,061,000. The increase in
interest expense for the three and nine months ended September
30, 1999 compared to the three and nine months ended September
30, 1998, is due mainly to increased borrowing under the
Company's revolving credit facility by the Company's captive
finance company. Approximately $150,000 of the increase in
interest expense three and nine months ended September 30, 1999
related to the acquisition of Breaker Technology in August 1999.
Other income, net of other expense, was $989,000, or .9% of
net sales for the quarter ended September 30, 1999, compared to
net other expense of $59,000, for the quarter ended September 30,
1998. Other income, net of other expense for the nine months
ended September 30, 1999 was $2,851,000 compared to other income,
net of other expense for the nine months ended September 30, 1998
of $241,000, an increase of $2,610,000. The increase in other
income, net of other expense for the three and nine months ended
September 30, 1999 over the three and nine months ended September
30, 1998, relates mainly to interest income and fees of lease
portfolios of the captive finance company and gains from lease
portfolio sales.
Income tax expense for the third quarter of 1999 increased
to $4,958,000 from $3,855,000 at September 30, 1998, an increase
of $1,103,000 or 28.6%. Tax expense is 4.6% and 4.3% of net
sales for the three months ended September 30, 1999 and 1998,
respectively. The effective tax rates for the three months ended
September 30, 1999 and 1998 were 38.5% and 40%, respectively.
For the nine months ended September 30, 1999 and 1998,
income tax expense was $17,534,000 and $12,422,000, or 5.2% and
4.4%, respectively. The effective tax rates for the nine months
ended September 30, 1999 and 1998 were 38.8% and 40%,
respectively.
Backlog of orders at September 30, 1999 was $78,895,000
compared to $72,477,000 at September 30, 1998, restated for
acquisitions. The majority of the increase in the backlog at
September 30, 1999 compared to that of September 30, 1998 related
to an increase in domestic orders for asphalt mixing plants.
Liquidity and Capital Resources
On August 13, 1999 the Company acquired substantially all of
the assets of Teledyne Specialty Equipment's Construction and
Mining business unit from Allegheny Teledyne Incorporated for
$18.5 million in cash. The acquired business has its
manufacturing operation in Thornbury, Ontario, Canada and
maintains product assembly and distribution centers in California
and Ohio. The Breaker Technology companies design, manufacture
and market hydraulic rock breakers and attachments, breaker
systems and mobile mining equipment commonly used in the rock
quarrying and mining industries. The Canadian manufacturing
business operates as Breaker Technology, Ltd. while the domestic
business locations operate as Breaker Technology, Inc., both of
which are wholly owned subsidiaries of Astec Industries, Inc.
As of September 30, 1999, the Company had working capital of
$105,784,000 compared to $78,512,000 at September 30, 1998.
Total short-term borrowings, including current maturities of
long-term debt, were $585,000 at September 30, 1999 compared to
$500,000 at September 30, 1998. The current portion of
outstanding Industrial Development Revenue Bonds account for
$500,000 of the current maturities of long-term debt at September
30, 1999.
Long-term debt, less current maturities was $70,810,000 at
September 30, 1999 and $38,975,000 at September 30, 1998. During
the second quarter of 1999 the Company increased its available
unsecured revolving credit line with First Chicago NBD from
$70,000,000 to $90,000,000, retaining the original expiration
date of November 22, 2002. At September 30, 1999 the Company was
utilizing approximately $35,610,000 of its available credit under
the revolving credit agreement. As part of the revolving credit
line with First Chicago NBD, the Company is subject to certain
minimum financial covenants. Principal covenants under the First
Chicago credit agreement include (i) the maintenance of certain
levels of net worth and compliance with certain net worth,
leverage and interest coverage ratios, (ii) a limitation on
capital expenditures and rental expense, (iii) a prohibition
against dividends, and (iv) a prohibition on large acquisitions
except upon the consent of the lenders. In addition, on August
13, 1999 a term loan in the amount of $15,000,000 made available
by First Chicago NBD. The Company used the $15,000,000 loan to
partially finance the acquisition of Breaker Technology on that
date.
The increase in outstanding debt at September 30, 1999
compared to the same period of 1998 is due to utilization of the
revolving line of credit and use of the term loan described above
for the purchase of Breaker Technology. The revolving line of
credit was also used to finance 1999 capital expenditures and
equipment leases of customers by the captive finance company.
Capital expenditures in 1999 for plant expansion and for
further modernization of the Company's manufacturing processes
are expected to be approximately $27,000,000. The Company
expects to finance these expenditures using the revolving credit
facility. Capital expenditures for the nine months ended
September 30, 1999 were $21,095,000.
As part of the Company's $90,000,000 revolving credit
facility, Astec Financial Services, Inc. has a segregated portion
of $30,000,000. At September 30, 1999, Astec Financial Services,
Inc. had utilized $20,240,000 of this line, which is included in
the above stated utilization. Advances under this line of credit
are limited to _Eligible Receivables_ of Astec Financial
Services, Inc. as defined in the credit agreement. The Company
was in compliance with all financial covenants related to the
line of credit at September 30, 1999.
Year 2000
The Company recognizes the need to ensure its operations
will not be adversely impacted by Year 2000 software failures.
The term _Year 2000_ is a general term used to describe the
various problems that may result from the improper processing of
dates and date-sensitive calculations by computers and other
machinery as the year 2000 is approached and reached. Many
computer systems process dates using two digits rather than four
to define a specific year. Absent corrective actions, a program
may recognize a date using _00_ as the year 1900 rather than the
year 2000. Such an occurrence could result in system failures or
miscalculations causing disruptions to various activities.
Software failures due to processing errors potentially arising
from calculations using the Year 2000 date are a known risk.
Management presently believes that with modifications or
replacements of existing software and certain hardware, the Year
2000 issue will be mitigated. However, in the unlikely event
such modifications and replacements are not completed timely, the
Year 2000 issue could have a material impact on the operations of
the Company.
The Company's plan to resolve the Year 2000 issue involves
four phases: assessment, remediation, testing and
implementation. The Company has completed its assessment of all
systems that could be significantly affected by the Year 2000.
In addition, the Company completed the acquisition of Breaker
Technology on August 13, 1999, this Year 2000 project update
includes the Year 2000 efforts of the newly acquired company.
A limited amount of operating equipment, used mainly in
manufacturing, is date sensitive. Manufacturers of this
equipment were contacted and the Company has installed update
modifications and has completed or is in the process of testing
modifications. The remediation, implementation and testing
phases of updating the operating equipment is more than 97%
complete. Additional testing of modifications is scheduled for
completion by November 30, 1999.
The Company manufactures products that use either internally
or externally developed software that is susceptible to Year
2000. Various measures were taken to notify and assist customers
to become Year 2000 compliant. Although customer response
determines the readiness for Year 2000 of the Company's products
already in the hands of customers, the Company is 100% complete
in the remediation, testing and implementation phases of
modifying product systems for Year 2000.
The Company queried its significant suppliers and other
external agents (no external agents share information systems
with the Company) as to their readiness for the Year 2000. The
assessment phase of querying significant third party associations
is 100% complete. The Company is more than 95% complete in
remediation, testing and implementation of various processes with
significant suppliers and external agents.
The total cost of the Year 2000 project is estimated to be
approximately $3,000,000 and is being funded by the revolving
credit line and through operating cash flows. During 1998, the
Company incurred approximately $2,200,000, related to all phases
of the Year 2000 project. The originally budgeted capitalized
expenditures for 1999 were estimated at $620,000. Currently,
with additional information, and considering additional software
and hardware requirements, the Company expects 1999 capital
expenditures related to the Year 2000 project to reach
$1,000,000. The related expensed Y2K project costs have been
updated to include the expenses of the Breaker Technology. Also,
the estimated costs have increased slightly from the prior
quarter at several subsidiaries and are expected to approximate
$185,000 at December 31, 1999.
Management of the Company believes it has an effective
program in place to timely resolve the Year 2000 issue. In the
event that the company does not complete any additional phases,
the Company could lose revenues due to inability to manufacture
its product to specified quality or deliver equipment as
scheduled.
Year 2000 issues could also hinder the Company's ability to
provide customer technical support or to provide customer parts
orders as quickly as necessary, among other potential risks. In
addition, the Company could be subject to litigation for computer
systems product failure or for failure to properly date business
records. Also, for applications using software and systems
dependent on outside technical support, depending upon demand,
technical support may not be available with sufficient time to
prevent adverse effects on operations. In the unlikely event any
of the situations described above occur, the amount of potential
liability and lost revenues cannot be reasonably estimated at
this time.
The Company does not have a fully documented contingency
plan in place in the event it does not complete all phases of the
Year 2000 project, but it has documented prudent preventive
measures that can be undertaken to secure operational
capabilities in case of system failure. These measures include
identifying secondary sources for raw materials, goods and
services; identifying alternate manufacturing routing methods;
stocking additional critical raw materials; printing of paper
documents and reports as reference tools; and performing disaster
recovery testing for potential power interruptions or machine
failures. The Company currently evaluating the status of
completion of the Year 2000 project and continues to set
contingency plans mainly for external factors beyond the
Company's immediate control which could impact operations. These
external factors could include interruptions related to energy,
raw materials or transportation.
The Company designates each of the statements made by it in
this section entitled Year 2000 as a Year 2000 Readiness
Disclosure. Such statements are made pursuant to the Year 2000
Information and Readiness Disclosure Act.
Contingencies
The Company is engaged in certain pending litigation
involving claims or other matters arising in the ordinary course
of business. Most of these claims involve product liability or
other tort claims for property damage or personal injury against
which the Company is insured. As a part of its litigation
management program, the Company maintains general liability
insurance covering product liability and other similar tort
claims providing the Company coverage of $8,000,000 subject to a
substantial self-insured retention under the terms of which the
Company has the right to coordinate and control the management of
its claims and the defense of these actions.
Management has reviewed all claims and lawsuits and, upon
the advice of its litigation counsel, has made provision for any
estimable losses. Notwithstanding the foregoing, the Company is
unable to predict the ultimate outcome of any outstanding claims
and lawsuits.
RISK FACTORS
A decrease in government funding of highway construction and
maintenance may adversely affect our operating results
Many of our customers depend substantially on government
funding of highway construction and maintenance and other
infrastructure projects. Federal government funding of
infrastructure projects is usually accomplished through bills
which establish funding over a multi-year period. The most
recent spending bill was signed into law in June 1998 and covers
federal spending through 2003. We cannot assure you that this
legislation will not be revised in future congressional sessions,
that recent increases in federal funding of infrastructure will
continue or that federal funding will not decrease in the future,
especially in the event of an economic recession. In addition,
Congress could pass legislation in future sessions which would
allow for the diversion of highway funds for other national
purposes or could restrict funding of infrastructure projects
unless states comply with certain federal policies. Any decrease
or delay in government funding of highway construction and
maintenance and other infrastructure projects could reduce our
revenues and profits.
Downturns in the general economy or the commercial construction
industry may adversely affect our revenues and operating results.
Demand for many of our products, especially in the
commercial construction industry, is cyclical. Sales of our
products are sensitive to the state of the U.S., foreign and
regional economies in general, and in particular, changes in
commercial construction spending and government infrastructure
spending. We could face a downturn in the commercial
construction industry based upon a number of factors, including:
. the level of interest rates;
. availability of funds for construction;
. labor disputes in the construction industry causing work
stoppages;
. energy or building materials shortages; and
. inclement weather.
General economic downturns, including any downturns in the
commercial construction industry, could result in a material
decrease in our revenues and operating results.
Acquisitions that we have made in the past and future
acquisitions involve risks that could adversely affect our future
financial results
We have completed six business and asset acquisitions since
1994 and plan to acquire additional businesses in the future. We
cannot guarantee that we will achieve the benefits expected to be
realized from our acquisitions. Our future success may be
limited because of unforeseen expenses, difficulties,
complications, delays and other risks inherent in acquiring
businesses, including the following:
. we may have difficulty integrating the financial and
administrative functions of acquired businesses
. acquisitions may divert management's attention from our
existing operations
. we may have difficulty in competing successfully for available
acquisition candidates, completing future acquisitions or
accurately estimating the financial effect of any businesses
we acquire
. we may have delays in realizing the benefits of our strategies
for an acquired business
. we may not be able to retain key employees necessary to
continue the operations of the acquired business
. acquisition costs may deplete significant cash amounts or may
decrease our operating income
. we may choose to acquire a company that is less profitable
than we are or has lower profit margins than we do
. future acquired companies may have unknown liabilities that
could require us to spend significant amounts of additional
capital
Competition could reduce revenue from our products and services
We currently face strong competition in product performance,
price and service. Some of our national competitors have greater
financial, product development and marketing resources than we
have. If competition in our industry intensifies or our current
competitors lower their prices for competing products, we may be
required to lower the prices we charge for our products. We may
also lose sales and be required to lower our prices as our
competitors further develop and enhance their product lines.
This may reduce revenue from our products and services.
We may face product liability claims or other liabilities due to
the nature of our business
We manufacture heavy machinery that is used by our customers
at excavation and construction sites and on high-traffic roads.
Any defect in, or improper operation of, our equipment can result
in personal injury and death, and damage to or destruction of
property, any of which could cause product liability claims to be
filed against us. The amount and scope of our insurance coverage
may not be adequate to cover all losses or liabilities we may
incur in the event of a product liability claim. We may not be
able to maintain insurance of the types or at the levels we deem
necessary or adequate or at rates we consider reasonable. Any
liabilities not covered by insurance could reduce our
profitability or have an adverse effect on our financial
condition.
We may be adversely affected by governmental regulations
Our hot-mix asphalt plants contain air pollution control
equipment that must comply with performance standards promulgated
by the Environmental Protection Agency. We cannot assure you
that these performance standards will not be increased in the
future. Changes in these requirements could cause us to
undertake costly measures to redesign or modify our equipment or
otherwise adversely affect the manufacturing processes of our
products. Such changes could have a material adverse effect on
our operating results.
Also, due to the size and weight of some of the equipment
that we manufacture, we often are required to comply with
conflicting state regulations on the maximum weight transportable
on highways and roads. In addition, some states regulate the
operation of our component equipment, including asphalt mixing
plants and soil remediation equipment, and most states regulate
the accuracy of weights and measures, which affect some of the
control systems that we manufacture. We cannot assure you that
we will not incur material costs or liabilities in connection
with the regulatory requirements applicable to our business.
An increase in the price of oil or decrease in the availability
of oil could reduce demand for our products.
A significant portion of our revenues relate to the sale of
equipment that produces asphalt mix. A major component of
asphalt is oil and asphalt prices correlate with the price and
availability of oil. A material rise in the price of oil or a
material decrease in the availability of oil would increase the
cost of producing asphalt, which would likely decrease demand for
asphalt, resulting in decreased demand for our products. This
could have a material adverse effect on our revenues and results
of operations.
We rely on proprietary technologies that we may be unable to
protect from infringement or which may infringe technology owned
by others
We hold numerous patents covering technology and
applications related to many of our products and systems, and
numerous trademarks and trade names registered with the U.S.
Patent and Trademark Office and in foreign countries. There can
be no assurance that the breadth or degree of protection of our
existing or future patents or trademarks will adequately protect
us against infringements, or that any pending patent or trademark
applications will result in issued patents or trademarks. There
can also be no assurance that our patents, registered trademarks
or patent applications, if any, will be upheld if challenged, or
that competitors will not develop similar or superior methods or
products outside the protection of our patents. This could
reduce demand for our products and materially decrease our
revenues. It is possible that our existing patents, trademarks
or other rights may not be valid or that we may infringe existing
or future patents, trademarks or proprietary rights of our
competitors. In the event that our products are deemed to
infringe upon the patents or proprietary rights of others, we
could be required to modify the design of our products, change
the name of our products or obtain a license for the use of some
of the technologies used in our products. There can be no
assurance that we would be able to do any of the foregoing in a
timely manner, upon acceptable terms and conditions, or at all,
and the failure to do so could have an adverse effect on our
business and results of operations.
Our success depends on key members of our management and other
employees
Dr. J. Don Brock, our Chairman and President, is of
significant importance to our business and operations. The loss
of his services may adversely affect our business. In addition,
our ability to attract and retain qualified engineers, skilled
manufacturing personnel and other professionals, either through
direct hiring, or acquisition of other businesses employing such
professionals, will also be an important factor in determining
our future success.
We face risks of managing and expanding in international markets
In 1998, international sales represented approximately 19%
of our total sales. We plan to continue to increase our presence
in international markets. In connection with any increase in
international sales efforts, we will need to hire, train and
retain qualified personnel in countries where language, cultural
or regulatory barriers may exist. In addition, international
revenues are subject to the following risks:
. fluctuating currency exchange rates which can reduce the
profitability of foreign sales;
. the burden of complying with a wide variety of foreign laws
and regulations;
. dependence on foreign sales agents;
. political and economic instability of governments; and
. the imposition of protective legislation such as import or
export barriers.
We could suffer Year 2000 computer problems that could disrupt
our operations
Our business, financial condition and results of operations
may be adversely impacted by computer system issues related to
the Year 2000. We have completed our assessment of Year 2000
readiness of our information technology computer hardware and
software and non-information technology equipment and systems. We
are currently in the process of the remediation, testing and
implementation phases of our Year 2000 plan. However, we do not
have a fully documented contingency plan in place if we do not
complete our Year 2000 improvements, or the improvements fail to
make our systems Year 2000 ready. We may not be successful in
implementing Year 2000 solutions at a cost that does not
materially adversely affect our business, financial condition and
results of operations. Any failure on our part to have Year 2000
compliant programs and systems in place in a timely manner could
disrupt our operations.
We manufacture products that use either internally or
externally developed software that is date sensitive and
susceptible to the Year 2000 problem. In addition, a portion of
our manufactured products are automated and utilize personal
computers to operate. Therefore, there is uncertainty about the
broader scope of the Year 2000 issue as it may affect third
parties, including our suppliers and customers, which are
critical to our operations. We have taken various measures to
notify and assist customers to become Year 2000 compliant
depending on the type and age of the products they own. We have
also queried our significant suppliers and other external agents
as to their readiness for the Year 2000. However, our efforts
may not be adequate to ensure that the products purchased from
our suppliers or sold to our customers will not malfunction due
to Year 2000 issues. Any such failures could significantly hurt
our supplier and customer relations and reduce our revenues and
operating results.
Year 2000 issues could also hinder our ability to provide
customer technical support or to provide customer parts orders as
quickly as necessary, among other potential risks. In addition,
we could be subject to litigation for computer systems product
failure. Also, for applications using software and systems
dependent on outside technical support, technical support may not
be available with sufficient time to prevent adverse effects on
operations. In the event any of the situations described above
occur, we wold face potential liability and lost revenues.
Our quarterly operating results are likely to fluctuate,
which may decrease our stock price
Our quarterly revenues, expenses and operating results
have varied significantly in the past and are likely to vary
significantly from quarter to quarter in the future. As a
result, our operating results may fall below the
expectations of securities analysts and investors in some
quarters, which could result in a decrease in the market
price of our common stock. The reasons our quarterly
results may fluctuate include:
. general competitive and economic conditions;
. delays in, or uneven timing in the delivery of, customer
orders;
. the introduction of new products by us or our competitors;
. product supply shortages; and
. reduced demand due to adverse weather conditions.
Period to period comparisons of such items are not
necessarily meaningful and, as a result, should not be
relied on as indications of future performance.
Our Articles of Incorporation, Bylaws, Rights Agreement and
Tennessee law may inhibit a takeover.
Our charter, bylaws and Tennessee law contain provisions
that may delay, deter or inhibit a future acquisition, or an
attempt to obtain control, of Astec. This could occur even if
our shareholders are offered an attractive value for their shares
or if a substantial number or even a majority of our shareholders
believe the takeover is in their best interest. These provisions
are intended to encourage any person interested in acquiring us
or obtaining control of us to negotiate with and obtain the
approval of our Board of Directors in connection with the
transaction. Provisions that could delay, deter or inhibit a
future acquisition, or an attempt to obtain control, of us
include the following:
. a staggered Board of Directors;
. requiring a two-thirds vote of the total number of shares
issued and outstanding to remove directors other than for
cause;
. requiring advanced notice of actions proposed by shareholders
for consideration at shareholder meetings;
. limiting the right of shareholders to call a special meeting
of shareholders;
. requiring that all shareholders entitled to vote on an action
provide written consent in order for shareholders to act
without holding a shareholders meeting; and
. the Tennessee Control Share Acquisition Act.
In addition, the rights of holders of our common stock will
be subject to, and may be adversely affected by, the rights of
the holders of our preferred stock that may be issued in the
future and that may be senior to the rights of holders of our
common stock. On December 22, 1995, our Board of Directors
approved a Shareholder Protection Rights Agreement which provides
for one preferred stock purchase right in respect of each share
of our common stock. These rights become exercisable upon a
person or group of affiliated persons acquiring 15% or more of
our then-outstanding common stock by all persons other than an
existing 15% shareholder. This Rights Agreement also could
discourage bids for your shares of common stock at a premium and
could have a material adverse effect on the market price of your
shares.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There have been no material developments in the legal
proceedings previously reported by the registrant since the
filing of its Annual Report on Form 10-K for the year ended
December 31, 1998. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Contingencies" in
Part I - Item 2 of this Report.
Shareholder Proposals
The proxy statement solicited by the Board of Directors of
the Company with respect to the 2000 Annual Meeting of
Shareholders will confer discretionary authority on the proxies
named therein to vote on any shareholder proposals intended to be
presented for consideration at such Annual Meeting that are
submitted to the Company after November 22, 1999.
(a) Exhibits:
Exhibit No. Description
3.1 Restated Charter of the Company (incorporated by
reference to the Company's Registration Statement on
Form S-1, effective June 18, 1986, File No. 33-5348).
3.2 Articles of Amendment to the Restated Charter of the
Company, effective
September 12, 1988 (incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1988, File No. 0-14714).
3.3 Articles of Amendment to the Restated Charter of the
Company, effective June 8, 1989 (incorporated by
reference to the Company's Annual Report on Form 10-K
for the year ended December 31, 1989, File No. 0-
14714).
3.4 Articles of Amendment to the Restated Charter of the
Company, effective January 15, 1999 (incorporated by
reference to the Company's Quarterly Report on Form 10-
Q for the quarter ended June 30, 1999, File No. 0-
14714).
3.5 Amended and Restated Bylaws of the Company, adopted
March 14, 1990 (incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1989, File No. 0-14714).
4.1 Trust Indenture between City of Mequon and FirstStar
Trust Company, as Trustee, dated as of February 1, 1994
(incorporated by reference to the Company's Annual
Report on Form 10-K for the year ended December 31,
1993, File No. 0-14714).
4.2 Indenture of Trust, dated April 1, 1994, by and between
Grapevine Industrial Development Corporation and Bank
One, Texas, NA, as Trustee (incorporated by reference
to the Company's Annual Report on Form 10-K for the
year ended December 31, 1993, File No. 0-14714).
4.3 Shareholder Protection Rights Agreement, dated December
22, 1995 (incorporated by reference to the Company's
Current Report on Form 8-K dated December 22, 1995,
File No. 0-14714).
10.1 Term Loan in the amount of $15,000,000 dated August 13,
1999 by and between Astec Industries, Inc. and The
First National Bank of Chicago.
10.2 Asset Purchase Agreement dated August 13, 1999 by and
between Teledyne Industries Canada Ltd. and Astec
Industries, Inc. for the purchase of substantially all
of assets of Teledyne Specialty Equipment's
Construction and Mining business.
10.3 Third Amendment to Second Amended and Restated Credit
Amendment dated August 11, 1999 by and between Astec
Industries, Inc. and Astec Financial Services, Inc. and
The First National Bank of Chicago.
27 Financial Data Schedule (EDGAR Filing Only).
(b) Reports on Form 8-K:
No reports on Form 8-K have been filed during the quarter
ended September 30, 1999.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
ASTEC INDUSTRIES, INC.
(Registrant)
11/12/99 /s/ J. Don Brock
Date J. Don Brock
Chairman of the Board
and President
11/12/99 /s/ F. McKamy Hall
Date F. McKamy Hall
Vice President and Chief
Financial Officer
EXHIBIT INDEX
Exhibit No. Description
10.1 Term Loan in the amount of $15,000,000 dated August 13,
1999 by and between Astec Industries, Inc. and The
First National Bank of Chicago.
10.2 Asset Purchase Agreement dated August 13, 1999 by and
between Teledyne Industries Canada Ltd. and Astec
Industries, Inc. for the purchase of substantially all
of assets of Teledyne Specialty Equipment's
Construction and Mining business.
10.3 Third Amendment to Second Amended and Restated Credit
Amendment dated August 11, 1999 by and between Astec
Industries, Inc. and Astec Financial Services, Inc. and
The First National Bank of Chicago.
27 Financial Data Schedule (EDGAR Filing Only).
EXHIBIT 10.1
$15,000,000 TERM LOAN DATED AUGUST 13, 1999 BY AND BETWEEN
ASTEC INDUSTRIES, INC. AND THE FIRST NATIONAL BANK OF CHICAGO.
EXHIBIT 10.1
MASTER NOTE
(FIXED AND FLOATING RATES)
$15,000,000.00 Date: August 13, 1999
FOR VALUE RECEIVED, ASTEC INDUSTRIES, INC. (the "Borrower")
promises to pay to the order of THE FIRST NATIONAL BANK OF
CHICAGO (the "Bank"), in lawful money of the United States at the
office of the Bank at One First National Plaza, Chicago,
Illinois, or as the Bank may otherwise direct, the lesser of
Fifteen Million and No/100ths Dollars ($15,000,000.00) or the
aggregate outstanding unpaid principal amount of loans evidenced
hereby ("Loans"), together with interest as provided below.
Any person authorized to borrow on behalf of the Borrower (an
"Authorized Person") may request a Loan by telephone or telex.
The Borrower agrees that the Bank is authorized to honor requests
which it believes, in good faith, to emanate from an Authorized
Person, whether in fact that be the case or not.
Loans may bear interest at either a fixed rate ("Fixed Rate
Loans") or a floating rate ("Floating Rate Loans"). Loans shall
be Floating Rate Loans unless the Bank and the Borrower agree to
a fixed rate for a specific interest period. Subject to
availability and for an interest period to be agreed upon Fixed
Rate Loans shall bear interest at a rate equal to the sum of the
Applicable Margin plus the Eurodollar Rate, where the Applicable
Margin is .75% per annum from the funding date to and including
October 31, 1999, 1.00% per annum from November 1, 1999 to and
including December 31, 1999 and 1.25% per annum thereafter and
the Eurodollar Rate is the rate at which deposits in U.S. dollars
in the amount and for a maturity corresponding to that of the
applicable interest period are offered by the Bank in the
offshore interbank market at approximately 10 a.m. (Chicago time)
two business days prior to the first date of such interest
period, adjusted for maximum statutory reserve requirements.
At the expiration of an interest period applicable to a Fixed
Rate Loan, such Fixed Rate Loan shall automatically convert into
a Floating Rate Loan unless the Bank and the Borrower agree to a
fixed rate for a new interest period. All Floating Rate Loans
and all Fixed Rate Loans shall be payable on the date which is
the six month anniversary of the date of this note (the "Maturity
Date"). Interest on each Fixed Rate Loan shall be payable on the
last day of the interest period for such Fixed Rate Loan.
Floating Rate Loans shall bear interest at a rate equal to the
corporate base rate of interest announced by the Bank from time
to time, changing when and as the corporate base rate changes.
Interest on Floating Rate Loans shall be payable on the Maturity
Date and on demand thereafter. Any Floating Rate Loan or Fixed
Rate Loan which is not paid on the Maturity Date (or any earlier
accelerated maturity date) shall bear interest at a rate equal to
the sum of the corporate base rate of interest announced by the
Bank from time to time, plus 2% per annum, changing when and as
the corporate base rate changes.
Each payment of principal or interest hereunder shall be made in
immediately available funds. If any payment shall become due and
payable on a Saturday, Sunday or legal holiday under the laws of
Illinois, such payment shall be made on the next succeeding
business day in Illinois and any such extended time of the
payment of principal or interest shall be included in computing
interest. All interest hereunder shall be computed for the
actual number of days elapsed on a 360-day year basis. The
Borrower hereby authorizes the Bank to deposit the proceeds of
Loans to, and to charge payments of principal and interest
against, the Borrower's deposit account with the Bank.
A Fixed Rate Loan may not be prepaid prior to the last day of its
applicable interest period without the written consent of the
Bank. If, for any reason, any payment of a Fixed Rate Loan
occurs prior to the last day of its applicable interest period,
the Borrower will indemnify the Bank for any loss or cost which
the Bank determines is attributable to such payment, including,
without limitation, any loss or cost in liquidating or employing
deposits acquired to fund or maintain such Fixed Rate Loan.
Loans bearing interest at a rate related to the corporate base
rate may be prepaid by the Borrower, without premium or penalty.
The Borrower hereby authorizes the Bank to record Loans, interest
rates, interest periods, repayments, and payment dates on the
schedule attached to this Note or otherwise in accordance with
the Bank's usual practice. The obligation of the Borrower to
repay each Loan made hereunder shall be absolute and
unconditional notwithstanding any failure of the Bank to enter
such amounts on such schedule or to receive written confirmation
of the transaction from the Borrower. If the Bank requests a
written confirmation of a requested Loan, the Borrower will
confirm the terms of each Loan by mailing a confirmation letter
to the Bank signed by any authorized person. If the Bank elects
to confirm the terms of a Loan to the Borrower, the Borrower will
notify the Bank in writing within 10 days after the Borrower's
receipt of such confirmation if it believes such confirmation to
be inaccurate, and the Borrower hereby waives any right to
contest the accuracy of such confirmation after such 10-day
period. In the event of disagreement as to the terms of a
transaction, the Bank's records shall govern, absent manifest
error.
If any change in any law, rule, regulation or directive
(including, without limitation, Regulation D of the Board of
Governors of the Federal Reserve System) imposes any condition
the result of which is to increase the cost to the Bank of
making, funding or maintaining any Fixed Rate Loan or reduces any
amount receivable by the Bank hereunder in connection with a
Fixed Rate Loan, the Borrower shall pay the Bank the amount of
such increased expense incurred or the reduction in any amount
received which the Bank determines is attributable to making,
funding and maintaining the Fixed Rate Loans.
The Bank may elect to sell participations in or assign its rights
under Loans. The Borrower agrees that if it fails to pay any
Loan when due, any purchaser of an interest in such Loan shall be
entitled to seek enforcement of this note if the purchaser is
permitted to do so pursuant to the terms of the participation
agreement between the Bank and such purchaser.
The Borrower hereby authorizes the Bank and any other holder of
an interest in this Note (a "Holder") to disclose confidential
information relating to the financial condition or operations of
the Borrower (i) to any affiliate of the Bank or any Holder, (ii)
to any purchaser or prospective purchaser of an interest in any
Loan, (iii) to legal counsel, accountants, and other professional
advisors to the Bank or any Holder, (iv) to regulatory officials,
(v) as requested or required by law, regulation, or legal process
or (vi) in connection with any legal proceeding to which the Bank
or any other holder is a party.
This Note is the Note issued pursuant to, and is entitled to the
benefits of, the letter agreement between the Borrower and the
Bank dated as of August 13, 1999 (which, as it may be amended or
modified and in effect from time to time, is herein called the
"Letter Agreement"), to which Letter Agreement reference is
hereby made for a statement of the terms and conditions governing
this Note, including the terms and conditions under which the
maturity of this Note may be accelerated. Nothing in this Note
shall constitute a commitment to make loans to the Borrower.
If any amount payable hereunder is not paid when due or upon
demand, as applicable, then any indebtedness from the Bank to the
Borrower may be offset and applied toward the payment of all
unpaid principal, interest and fees payable hereunder, whether or
not such amounts, or any part thereof, shall then be due. The
Borrower expressly waives any presentment, demand, protest or
notice in connection with this note now, or hereafter, required
by applicable law and agrees to pay all costs and expenses of
collection.
THIS NOTE SHALL BE GOVERNED BY THE INTERNAL LAW (AND NOT THE LAW
OF CONFLICTS) OF THE STATE OF ILLINOIS, GIVING EFFECT, HOWEVER,
TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS. THE BORROWER AND
THE BANK EACH HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL
PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER
SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT
OF, RELATED TO, OR CONNECTED WITH THIS NOTE OR THE RELATIONSHIP
ESTABLISHED HEREUNDER.
ASTEC INDUSTRIES, INC.
By: /s/ Richard W. Bethea, Jr.
Title: Secretary
EXHIBIT 10.2
ASSET PURCHASE AGREEMENT DATED AUGUST 13, 1999 BY AND BETWEEN
TELEDYNE INDUSTRIES CANADA LTD. AND ASTEC INDUSTRIES, INC.
EXHIBIT 10.2
ASSET PURCHASE AND SALE AGREEMENT
BY AND AMONG
TELEDYNE INDUSTRIES CANADA LIMITED,
TELEDYNE CM PRODUCTS INC.
AND
ASTEC INDUSTRIES, INC.
DATED AS OF AUGUST 13, 1999
1
2
3
4
5 ASSET PURCHASE AND SALE AGREEMENT
6
7 THIS ASSET PURCHASE AND SALE AGREEMENT (_Agreement_ ),
8 is dated and entered into as of August 13, 1999, by and among
9 Teledyne Industries Canada Limited, an Ontario corporation
10 (_Teledyne Canada_ ), Teledyne CM Products Inc., an Ontario
11 corporation (_CM Products_ ) (Teledyne Canada and CM Products
12 are hereinafter collectively referred to as the _Sellers_ ), and
13 Astec Industries, Inc., a Tennessee corporation, (the
14 _Purchaser_ ), with reference to the following:
15 RECITALS
16 A. The Sellers, through the Construction and Mining
17 business unit (the _CM Division_ ) of Teledyne Specialty
18 Equipment, are the owners of certain assets more particularly
19 described in this Agreement used by the CM Division in the
20 manufacture and sale of construction and mining equipment (the
21 _Business_ ).
22 B. The Purchaser wishes to purchase the Business and
23 certain of the assets of the CM Division, and the Sellers are
24 willing to sell the Business and such assets of the CM Division
25 on the terms and conditions set forth herein.
26 NOW, THEREFORE, in consideration of the foregoing and
27 of the mutual representations, warranties, covenants, agreements,
28 terms and conditions set forth below, the receipt and adequacy of
29 which are hereby acknowledged, the parties hereto, intending to
30 be legally bound hereby, covenant and agree as follows:
31 Section 1: Definitions. For purposes of this Agreement, the
32 following terms have the meanings set forth below:
33
34 _Affiliate_ has the meaning set forth in Rule 12b-2
35 of the regulations promulgated under the United States Securities
36 Exchange Act of 1934, as amended.
37 _Agreement_ means this Asset Purchase and Sale
38 Agreement, as the same may be amended from time to time in
39 accordance with the terms hereof.
40 _Ancillary Agreements_ means, collectively, the
41 Patent Assignment Agreement, the Assignment and Assumption
1 Agreement, the Deed and the Bill of Sale and any other closing
2 documents necessary to transfer to the Purchaser the Purchased
3 Assets.
4 _Arbitrator_ has the meaning set forth in Section
5 2.5(b).
6 _Assignment and Assumption Agreement_ has the meaning
7 set forth in Section 3.3.
8 _Assumed Contracts_ has the meaning set forth in
9 Section 2.3(a)(ii).
10 _Assumed Liabilities_ has the meaning set forth in
11 Section 2.3(a).
12 _Bill of Sale_ has the meaning set forth in Section
13 3.3.
14 _Business_ has the meaning set forth in the Recitals
15 to this Agreement.
16 _Cash_ means cash on hand or in banks and cash
17 equivalents, marketable securities and short-term investments.
18 _CERCLA_ means the United States Comprehensive
19 Environmental Response, Compensation and Liability Act of 1980,
20 as amended.
21 _Closing_ has the meaning set forth in Section 3.1.
22 _Closing Date_ has the meaning set forth in Section
23 3.2.
24 _Closing Inventory_ has the meaning set forth in
25 Section 2.5(a).
26 _Closing Statement_ has the meaning set forth in
27 Section 2.5(a).
28 _CM Division_ has the meaning set forth in the
29 recitals to this Agreement.
30 _CM Products_ has the meaning set forth in the
31 Preamble to this Agreement.
32 _COBRA Provisions_ has the meaning set forth in
33 Section 8(c).
34 _Code_ means the United States Internal Revenue Code
35 of 1986, as amended.
36 _Competition Act_ means Competition Act, R.S.C. 1985,
37 Chap. C-34, as amended.
1 _Confidentiality Agreement_ means the confidentiality
2 letter agreement dated March 30, 1999, executed by the
3 Purchaser.
4 _Contracts_ has the meaning set forth in Section
5 2.1(e).
6 _Deed_ has the meaning set forth in Section 3.3.
7 _Disclosure Schedules_ means, collectively, the
8 various Schedules referred to in this Agreement.
9 _Employees_ means all of the employees who are
10 employed in relation to Business immediately prior to the Closing
11 Date, including those employees who are on temporary leave for
12 purposes of jury duty, vacation, annual military duty,
13 disability, workers' compensation or sick leave, as set out in
14 Schedule 8(a) of the Disclosure Schedules.
15 _Employee Benefit Plan_ means an Employee Pension
16 Benefit Plan or an Employee Welfare Benefit Plan, where no
17 distinction is required by the context in which the term is used.
18 _Employee Pension Benefit Plan_ has the meaning set
19 forth in Section 3(2) of ERISA.
20 _Employee Welfare Benefit Plan_ has the meaning set
21 forth in Section 3(1) of ERISA.
22 _Environmental Law_ means any Law relating to the
23 protection of the air, surface water, groundwater or land, and/or
24 governing the handling, use, generation, treatment, storage or
25 disposal of Hazardous Materials, but not including any Law
26 relating to matters administered by the Occupational Safety and
27 Health Administration or by any state, provincial, local,
28 domestic or foreign equivalent thereof.
29 _Environmental Losses_ has the meaning set forth in
30 Section 10.6(a).
31 _ERISA_ means the United States Employee Retirement
32 Income Security Act of 1974, as amended.
33 _ETA_ means the Excise Tax Act, R.S.C. 1985, Chap. E-
34 15, as amended.
35 _Excluded Assets_ has the meaning set forth in
36 Section 2.2.
37 _Excluded Liabilities_ has the meaning set forth in
38 Section 2.3(b).
39 _Specialty Equipment_ has the meaning set forth in
40 the recitals to this Agreement.
1 _Governmental Entity_ means any government or any
2 governmental agency, bureau, board, commission, department or
3 political subdivision, whether federal, state, provincial or
4 local, domestic or foreign.
5 _GST_ means all taxes payable under the ETA or under
6 any provincial legislation similar to the ETA, and any reference
7 to a specific provision of the ETA or any such provincial
8 legislation shall refer to any successor provision thereto of
9 like or similar effect.
10 _Hazardous Materials_ means each and every element,
11 compound, chemical mixture, contaminant, pollutant, material,
12 waste or other substance which is defined, determined or
13 identified as hazardous or toxic or the Release of which is
14 regulated. Without limiting the generality of the foregoing, the
15 term will include (a) _hazardous substances_ as defined in
16 CERCLA, (b) _extremely hazardous substances_ as defined in
17 Title III of the United States Superfund Amendments and
18 Reauthorization Act, each as amended, and regulations promulgated
19 thereunder, (c) _hazardous waste_ as defined in the United
20 States Resource Conservation and Recovery Act of 1976, as
21 amended, and regulations promulgated thereunder, (d) _hazardous
22 materials_ as defined in the United States Hazardous Materials
23 Transportation Act, as amended, and regulations promulgated
24 thereunder and (e) _chemical substance or mixture_ as defined
25 in the United States Toxic Substances Control Act, as amended,
26 and regulations promulgated thereunder.
27 _Indemnified Party_ has the meaning set forth in
28 Section 10.4.
29 _Indemnifying Party_ has the meaning set forth in
30 Section 10.4.
31 _ITA_ means the Income Tax Act, Chapter 1 (5th
32 Supp.), R.S.C. 1985, as amended.
33 _Intellectual Property_ has the meaning set forth in
34 Section 4.10.
35 _Inventories_ has the meaning set forth in Section
36 2.1(d).
37 _Knowledge_ as applied to the Sellers means the
38 actual knowledge of the members of the management of the CM
39 Division identified on Schedule 1.1 of the Disclosure Schedules.
40 _Law_ means any federal, state, provincial or local,
41 domestic or foreign, constitutional provision, statute, law,
42 rule, regulation, Permit, decree, injunction, judgment, order or
43 legally binding ruling, determination, finding or writ of any
44 Governmental Entity enacted as of the date hereof.
1 _Lien_ means any lien, mortgage, pledge, security
2 interest, charge, claim or other encumbrance.
3 _Leased Real Property_ has the meaning set forth in
4 Section 2.1(b)(ii).
5 _Notification_ means either a Short Form Notification
6 or Long Form Notification required by the Competition Bureau
7 (Canada) pursuant to the Competition Act (Canada) for
8 transactions which exceed the applicable party and transaction
9 size thresholds.
10 _Owned Real Property_ has the meaning set forth in
11 Section 2.1(b)(i).
12 _Patent Assignment Agreement_ has the meaning set
13 forth in Section 3.3.
14 _Permit_ means any license, permit, franchise,
15 certificate of authority or order, certificate of occupancy,
16 building, safety and fire and health approval, or any waiver of
17 the foregoing, issued by any Governmental Entity.
18 _Permitted Lien_ means (a) any Lien for Taxes,
19 assessments or governmental charges or claims that are not yet
20 delinquent, (b) any mechanics', materialmens' or similar Liens
21 with respect to amounts that are not yet delinquent, (c) the
22 purchase money Liens and the Liens securing rental payments under
23 capital lease arrangements set forth on Schedule 1.2 of the
24 Disclosure Schedules, and (d) all other Liens set forth on
25 Schedule 1.2 of the Disclosure Schedules.
26 _Person_ means an individual, a partnership, a
27 corporation, a limited liability company, an association, a joint
28 stock company, a trust, a joint venture, an unincorporated
29 organization or a Governmental Entity.
30 _Purchase Price_ has the meaning set forth in Section
31 2.4.
32 _Purchased Assets_ has the meaning set forth in
33 Section 2.1.
34 _Purchaser_ has the meaning set forth in the Preamble
35 to this Agreement.
36 _Purchaser Indemnified Parties_ has the meaning set
37 forth in Section 10.2(a).
38 _RAMCOZ Inventory_ has the meaning set forth in
39 Section 7.5(a).
40 _RAMCOZ Receivable_ has the meaning set forth in
41 Section 7.5(b).
1 _Reference Statement_ means the statement as of May
2 31, 1999 attached hereto as Schedule 2.5(a) of the Disclosure
3 Schedules.
4 _Release_ means any spilling, leaking, pumping,
5 pouring, emitting, emptying, discharging, injecting, escaping,
6 leaching, dumping, discarding, burying, abandoning or disposing
7 into the environment.
8 _RSTA_ means the Retail Sales Tax Act, R.S.O. 1990,
9 Chap. R.31, as amended.
10 _Schedule_ means, unless the context otherwise
11 requires, the referenced Schedule included in the Disclosure
12 Schedules.
13 _Securities Act_ means the Securities Act of 1933, as
14 amended.
15 _Sellers_ has the meaning set forth in the Preamble
16 to this Agreement.
17 _Seller Indemnified Parties_ has the meaning set
18 forth in Section 10.3(a).
19 _Seller Plans_ has the meaning set forth in Section
20 4.12.
21 _Tax_ or _Taxes_ means any federal, state,
22 provincial, local or foreign net income, gross income, gross
23 receipts, sales, use, goods and services or other value-added or
24 ad-valorem, transfer, franchise, profits, license, lease,
25 service, service use, withholding, payroll, employment, excise,
26 severance, stamp, occupation, premium, property, windfall
27 profits, customs, duties or other tax, fee, assessment or charge,
28 including any related interest, penalty or addition thereto.
29 _Tax Return_ or _Tax Returns_ means any return,
30 declaration, report, claim for refund or information return or
31 statement relating to Taxes, including any schedule or attachment
32 thereto.
33 _Teledyne Canada_ has the meaning set forth in the
34 Preamble to this Agreement.
35 _Transfer Taxes_ means all taxes, filing fees,
36 registration costs or similar expenses relating to the transfer
37 of the Purchased Assets.
38 _Transferred Employees_ has the meaning set forth in
39 Section 8(b).
40 _US Dollars_ and _US$_ and _$_ means the lawful
41 currency of the United States of America.
1 _WIP Payment_ has the meaning set forth in Section
2 7.5(a).
3 _Y2K Deficiencies_ has the meaning set forth in
4 Section 4.19.
5 Section 2: The Transaction.
6 2.1. Sale and Purchase of Assets. At the Closing, the Sellers
7 will sell, transfer, assign, convey, set over and deliver to the
8 Purchaser, and the Purchaser will purchase, acquire and accept
9 from the Sellers all right, title and interest of the Sellers in
10 and to all of the assets, rights and properties of the CM
11 Division that are owned by the Sellers and used primarily in
12 connection with the conduct of the Business, other than the
13 Excluded Assets (collectively, the _Purchased Assets_ )
14 including, without limitation, the following assets, rights and
15 properties:
16 (a) all machinery, equipment, motor vehicles,
17 tools, dies, spare parts, furniture, fixtures and leasehold
18 improvements, used or held for use primarily in connection with
19 the Business as of the Closing Date;
20 (b) the real property owned by CM Products
21 identified on Schedule 2.1(b)(i) of the Disclosure Schedules and
22 all the buildings and improvements thereon (the _Owned Real
23 Property_) and the Sellers' interest in the leased real property
24 described on Schedule 2.1(b)(ii) of the Disclosure Schedules (the
25 _Leased Real Property_ );
26 (c) all accounts receivable of the Sellers arising
27 from the operation of the Business;
28 (d) all inventories of raw materials, work in
29 process, finished products, goods, spare parts, replacement and
30 component parts, and office, packaging and other supplies (the
31 _Inventories_ );
32 (e) all contracts, agreements, leases,
33 commitments, instruments, guaranties, bids, orders and proposals
34 to which either Seller is a party primarily in connection with
35 the Business as of the Closing Date (the _Contracts_ ),
36 excluding all corporate-wide purchasing arrangements which relate
37 generally to the Business and other divisions or business units
38 of the Sellers or any of their Affiliates and any other
39 arrangements with other divisions or business units of the
40 Sellers or any of their Affiliates;
41 (f) to the extent legally assignable, all Permits
42 held by either Seller in connection with the Business as of the
43 Closing Date;
44 (g) all books, records (including personnel
45 records for Transferred Employees so long as such records are
1 used in the ordinary course of business and in compliance with
2 applicable Law), ledgers, files, documents, correspondence,
3 lists, plans, drawings, creative materials, advertising and
4 promotional materials, studies, reports and other printed or
5 written or computer stored materials used or held for use by the
6 Sellers primarily in connection with the Business and are
7 material to continuing the operation of the Business as going
8 concerns; and
9 (h) all of the Sellers' rights to the Intellectual
10 Property used by Specialty Equipment and relating primarily to
11 the Business, including (i) the Sellers' rights in the
12 designation _CM_ and in the goodwill of the Business relating
13 thereto and (ii) the patents identified on Schedule 4.10.
14 Purchaser anticipates designating at or prior to the
15 Closing a newly-formed wholly-owned Canadian subsidiary to
16 complete the purchase of the Purchased Assets located in Canada
17 and a newly-formed wholly-owned United States subsidiary to
18 purchase the Purchased Assets located in the United States.
19 Purchaser and such subsidiaries shall be jointly and severally
20 responsible for the obligations of the Purchaser under this
21 Agreement.
22 2.2. Excluded Assets. Notwithstanding the provisions of Section
23 2.1, the Purchased Assets will not include any assets which are
24 not used primarily in the operation of the Business, including,
25 without limitation, any of the following assets, rights or
26 properties (collectively, the _Excluded Assets_ ):
27 (a) any and all assets, rights and properties of
28 the Sellers or any of their Affiliates other than those used by
29 the CM Division in connection with the operation of the Business;
30 (b) any assets located at the CM Division's
31 facilities which are identified on Schedule 2.2(b) of the
32 Disclosure Schedules;
33 (c) any Cash, including all bank accounts;
34 (d) any rights or claims of the Sellers or any of
35 their Affiliates with respect to any Tax refund, carryback or
36 carryforward or other credits to the Sellers for periods ending
37 prior to the Closing Date;
38 (e) any property, casualty, workers' compensation
39 or other insurance policy or related insurance services contract
40 relating to the Sellers or any of their Affiliates, and any
41 rights of the Sellers under any such insurance policy or
42 contract, including, but not limited to, rights to any
43 cancellation value;
1 (f) any rights of the Sellers under this
2 Agreement, the Ancillary Agreements or under any other agreement
3 between the Sellers and the Purchaser;
4 (g) all _Teledyne_ and _ Allegheny Teledyne_
5 marks, including any and all trademarks or service marks, trade
6 names, registered and unregistered designs, slogans or other like
7 property relating to or including the names _Teledyne_ or
8 _Allegheny Teledyne,_ the marks Teledyne and Allegheny
9 Teledyne, and any derivative thereof and the Teledyne and
10 Allegheny Teledyne logos or any derivatives thereof and any and
11 all related trade dress; the Sellers' proprietary computer
12 programs or other software, including but not limited to the
13 Sellers' proprietary data bases (including environmental
14 databases), accounting and reporting formats, systems and
15 procedures which are not used primarily in the Business; and any
16 documents or information which are subject to the attorney-client
17 or work product privilege;
18 (h) proprietary or confidential non-technical
19 business information, books, files, papers, records, data and
20 policies of the Sellers or any of their Affiliates that do not
21 relate primarily to the Business, including proprietary business
22 management software used by the Sellers or any of their
23 Affiliates other than the Business, such as the Teledyne
24 corporate directories, management procedures and guidelines,
25 proprietary data bases, accounting and financial reporting
26 formats, systems and procedures, instructions and organization
27 manuals;
28 (i) any claim, cause of action, suit, judgment,
29 demand or right of any nature against third parties to the extent
30 relating to any Excluded Liability or Excluded Asset and all
31 attorney-client, work product and other legal privileges of the
32 Sellers related thereto;
33 (j) any pension assets attributable to Employees
34 or any former employee of the Sellers under any Seller Plans; and
35 (k) the consideration to be paid to the Sellers
36 pursuant to this Agreement.
37 2.3. Assumption of Liabilities.
38 (a) At the Closing, the Purchaser will assume and
39 become responsible for, and will thereafter pay, perform and
40 discharge when due, the following liabilities of, or arising from
41 the use of the Purchased Assets or the operation of the Business
42 whether accrued, absolute, contingent or otherwise (collectively,
43 the _Assumed Liabilities_ ):
44 (i) all of the obligations and liabilities
45 reflected on the Reference Statement which have not been
46 satisfied on or prior to the Closing Date and all of the
47 obligations and liabilities of the Sellers relating to the
1 Business arising in the ordinary course of business between the
2 date of the Reference Statement and the Closing Date.
3 (ii) those liabilities and obligations of the
4 Sellers under the Contracts listed on Schedule 2.3(a)(ii) (the
5 _Assumed Contracts_ ).
6 (iii) those liabilities and obligations of the
7 Sellers with respect to the Employees which the Purchaser has
8 expressly agreed to assume pursuant to this Agreement;
9 (iv) those liabilities and obligations of the
10 Sellers with respect to warranty obligations; and
11 (v) all other debts, liabilities and
12 obligations arising out of or relating to events or transactions
13 on or after the Closing Date in connection with the operation of
14 the Business or use of the Purchased Assets by the Purchaser.
15 (b) The Purchaser will not assume, and will not be
16 deemed to have assumed, any other obligation or liability of the
17 Sellers whatsoever other than as set forth in Section 2.3(a)
18 (collectively, the _Excluded Liabilities_ ), including, without
19 limitation:
20 (i) any liabilities or obligations of the
21 Sellers under the Seller Plans, except to the extent accrued on
22 the Closing Statement;
23 (ii) any liabilities or obligations of the
24 Sellers with respect to Taxes arising from the operation of the
25 Business prior to the Closing, except ad valorem and property
26 taxes to the extent accrued on the Closing Statement;
27 (iii) any liabilities of the Sellers for any
28 incentive compensation payable to the employees of the Business
29 with respect to periods prior to the Closing; and
30 (iv) subject to Section 10.6 hereof, any
31 liabilities or obligations of the Sellers under Environmental
32 Laws which were caused by the Sellers' operation of the Business
33 prior to the Closing.
34 2.4. Determination and Payment of Consideration. In
35 consideration of the sale and transfer of the Purchased Assets to
36 the Purchaser and the other undertakings of the Sellers
37 hereunder, the Purchaser shall (i) pay the sum of Eighteen
38 Million Five Hundred Thousand US Dollars (US$18,500,000) (the
39 _Purchase Price_ ) plus applicable Taxes to the Sellers at the
40 Closing in immediately available funds by wire transfer to a bank
41 account or accounts specified by the Sellers and (ii) assume the
42 Assumed Liabilities. The Purchase Price payable by the Purchaser
43 at the Closing consists of US $11,653,000 for Purchased Assets
44 located in Canada and US $6,847,000 for Purchased Assets located
1 in the United States and will be subject to adjustment as
2 provided in Section 2.5.
3 2.5. Purchase Price Adjustment.
4 (a) The Purchase Price will be subject to
5 adjustment upward or downward, as the case may be, following the
6 Closing, in an amount equal to the difference, if any, between
7 $7,021,376 US Dollars (to be adjusted for Excluded Liabilities
8 (including income, payroll and sales taxes) as determined from
9 the May 31, 1999 financial statements attached) and the Closing
10 Net Working Capital. For purposes of this Agreement, _Closing
11 Net Working Capital_ shall mean an amount equal to the sum of
12 (i) the difference between (A) net accounts receivable (including
13 any reserve for doubtful accounts), net inventories (including
14 any obsolescence reserve) and prepaid expenses and (B) accounts
15 payable and accrued liabilities (including warranty reserves and
16 accruals but excluding any Excluded Liability), in each case as
17 reflected on the Closing Statement, plus (ii) capital
18 expenditures of the Business between May 31, 1999 and the Closing
19 Date. In connection with the Closing, the Sellers and the
20 Purchaser shall perform a physical count of the gross inventories
21 of the Business as of the Closing Date (the _Closing
22 Inventory_). The _ Closing Statement_ shall be prepared by the
23 Purchaser and delivered to the Sellers as soon as practicable,
24 but in any event not later than 30 days after the Closing Date.
25 The Closing Statement shall be prepared on a consistent basis
26 with the Reference Statement. There shall be no elimination of
27 intercompany accounts for purposes of the Closing Statement. The
28 Purchase Price adjustment shall be made on the basis of the
29 Closing Statement.
30 (b) The Sellers will deliver to the Purchaser a
31 statement of any objections relating to the Closing Statement and
32 the related Purchase Price adjustment, if any, as soon as
33 practicable, but in any event not later than 60 days after the
34 date of the delivery of the Closing Statement. The Purchaser and
35 the Sellers shall cooperate and negotiate in good faith to
36 reconcile any disputes. In the event of any dispute or any
37 failure to reach agreement with respect to the objections of the
38 Sellers relating to the Closing Statement and any related
39 Purchase Price adjustment within 45 days after the date of
40 delivery by the Sellers to the Purchaser of the Sellers'
41 statement of objections, the items in dispute (and no other
42 items) will be submitted to, and the amount of such Purchase
43 Price adjustment will be determined by, arbitration by KPMG Peat
44 Marwick certified public accountants (the _Arbitrator_ ). The
45 Arbitrator will deliver its written decision regarding any
46 disputed items to both parties within 30 days after the
47 submission of such dispute to the Arbitrator. The determination
48 of the Arbitrator will be in all respects final, binding and
49 conclusive on the parties hereto.
50 (c) To the extent that any amounts payable under
51 this Section 2.5 are not affected by objections of the Sellers,
1 such amounts will be paid by wire transfer of immediately
2 available US Dollars to accounts designated by the applicable
3 party not more than 30 days after delivery of the Closing
4 Statement to the Sellers. To the extent that any amounts payable
5 under this Section 2.5 are affected by objections of the Sellers,
6 such amounts will be paid by wire transfer of immediately
7 available funds to accounts designated by the applicable party
8 not more than five days after the mutual agreement of the
9 Purchaser and the Sellers or the final determination of the
10 Arbitrator, as the case may be. The provisions of this Section
11 2.5 will survive the Closing.
12 Section 3: Closing and Closing Date.
13 3.1. Closing. Subject to the provisions of Section 11, the
14 consummation of the transactions contemplated by this Agreement
15 (the _Closing_ ) will take place at the offices of Kirkpatrick &
16 Lockhart LLP, 1500 Oliver Building, Pittsburgh, PA 15222, at
17 10:00 a.m. local time, on August 13, 1999 or at such other place
18 or on such other date as the Purchaser and the Sellers may agree.
19 The Closing will be deemed effective as of 11:59 p.m. Pittsburgh,
20 Pennsylvania time, on the Closing Date.
21 3.2. Closing Date. The date on which the Closing actually takes
22 place is referred to in this Agreement as the _Closing Date._
23 3.3. Deliveries at the Closing. At the Closing, (i) the Sellers
24 will deliver to the Purchaser the various certificates,
25 instruments and documents referred to in Section 9.1, (ii) the
26 Purchaser will deliver to the Sellers the various certificates,
27 instruments and documents referred to in Section 9.2, (iii) the
28 Sellers will execute, acknowledge (if appropriate) and deliver,
29 or cause to be executed, acknowledged (if appropriate) and
30 delivered, to the Purchaser (1) a Bill of Sale (the _Bill of
31 Sale_) in the form attached to this Agreement as Exhibit A
32 a Patent Assignment Agreement (the _Patent Assignment
33 Agreement_) in the form attached to this Agreement as Exhibit B
34 (3) Deed (the _Deed_ ) for the Owned Real Property in the form
35 attached hereto as Exhibit C, (4) the Assignment and Assumption
36 Agreement (the _Assignment and Assumption Agreement_ ) in the
37 form attached to this Agreement as Exhibit D, (5) the favorable
38 opinion of counsel to Sellers in a form satisfactory to Purchaser
39 dated as of the Closing Date and (6) such other instruments of
40 sale, transfer, conveyance, and assignment as the Purchaser
41 reasonably may request in form reasonably satisfactory to the
42 Sellers and the Purchaser or as required by applicable
43 Governmental Entities, (iv) the Purchaser will execute,
44 acknowledge and deliver to the Sellers the Assignment and
45 Assumption Agreement, and (2) such other instruments of
46 assumption as the Sellers reasonably may request in form
47 reasonably satisfactory to the Sellers and the Purchaser or as
48 required by applicable Governmental Entities and (v) the
49 Purchaser will deliver to the Sellers the Purchase Price as
50 specified in Section 2.4 and the Purchaser's share of any Taxes
1 and recording and filing fees required to be paid by the
2 Purchaser pursuant to Section 12.2.
3 3.4. Allocation of Value. The Purchaser and the Sellers hereby
4 agree to allocate the Purchase Price to the Purchased Assets as
5 mutually agreed by the Sellers and the Purchaser within 180 days
6 following the Closing Date and that such allocation shall be used
7 by the Purchaser and the Sellers in preparing their respective
8 Tax Returns and neither the Purchaser nor the Sellers shall
9 dispute such allocation in connection with any audit or other
10 proceeding. If the Sellers and the Purchaser are unable to agree
11 to such allocation, each party will prepare its Tax Returns based
12 on its good faith determination of such allocation.
13 Section 4: Representations and Warranties of the Sellers.
14 The Sellers jointly and severally represent and warrant
15 to the Purchaser as follows:
16 4.1. Organization of the Sellers. Each Seller is a corporation
17 duly organized, validly existing and in good standing under the
18 laws of the jurisdiction of its organization and is licensed or
19 qualified to transact business as a foreign corporation, and is
20 in good standing, under the laws of all jurisdictions where the
21 Business would require it to be so licensed or qualified, except
22 where the failure to be so licensed or qualified would not have a
23 material adverse effect on the Business.
24 4.2. Authorization of Transaction. Each Seller has full
25 corporate power and authority and has taken all requisite
26 corporate action to enable it to execute and deliver this
27 Agreement and each of the Ancillary Agreements to which it is a
28 party and to perform its obligations hereunder and thereunder.
29 This Agreement constitutes, and each of the Ancillary Agreements
30 when executed and delivered by the Sellers will constitute, the
31 valid and legally binding obligation of the Sellers enforceable
32 against the Sellers in accordance with their respective terms and
33 conditions, subject to bankruptcy, insolvency, fraudulent
34 conveyance, reorganization, arrangement, moratorium and similar
35 Laws now or hereafter in effect relating to creditors' and
36 landlords' rights and general principles of equity, including
37 commercial reasonableness, good faith and fair dealing.
38
39 4.3. Noncontravention; Consents. Neither the execution and
40 delivery of this Agreement or any of the Ancillary Agreements by
41 the Sellers, nor the consummation by the Sellers of the
42 transactions contemplated hereby or thereby, will violate any
43 provision of the charter or bylaws of either Seller or any Law to
44 which either Seller is subject, except violations of Law which
45 would not have a material adverse effect on the Business or
46 Sellers' ability to consummate the transactions contemplated by
47 the Agreement. Except (i) as set forth on Schedule 4.3 of the
48 Disclosure Schedules, (ii) to the extent that the effect is not
1 materially adverse to the Business or the Sellers' ability to
2 consummate the transactions contemplated by this Agreement, and
3 (iii) consents which may be required for the assignment of
4 certain of the Contracts (a list of which are set forth on
5 Schedule 4.3 of the Disclosure Schedules), neither the execution
6 and delivery of this Agreement or any of the Ancillary Agreements
7 by the Sellers, nor the consummation by the Sellers of the
8 transactions contemplated hereby or thereby, will constitute a
9 violation of, constitute or create a default under or result in
10 the creation or imposition of any Lien upon any of the Purchased
11 Assets pursuant to any agreement or commitment to which any
12 Seller is a party or by which any Seller or any of the Purchased
13 Assets is bound. As of the Closing Date, except as set forth on
14 Schedule 4.3 of the Disclosure Schedules, the Sellers will have
15 given all required notices and obtained all material licenses,
16 permits, consents, approvals, authorizations and orders of
17 Governmental Entities as are required in order to enable the
18 Sellers to perform their respective obligations under this
19 Agreement and each of the Ancillary Agreements.
20 4.4. Financial Statements. Set forth as Schedule 4.4 of the
21 Disclosure Schedules are correct and complete copies of the
22 unaudited balance sheet of the Business as of May 31, 1999 and
23 the related statements of income for the period then ended
24 (the _Financial Statements_ ). The Financial Statements were
25 prepared in accordance with the Business' historic accounting
26 practices, consistently applied, and were derived in all material
27 respects from the books and records of the Business and are
28 complete and accurate in all material respects. The Financial
29 Statements fairly present the financial position and results of
30 operations of the Business for the periods therein indicated.
31 4.5. Subsequent Events. Since May 31, 1999, except as set forth
32 on Schedule 4.5 of the Disclosure Schedules, there has not been
33 any material adverse change in the business, financial condition,
34 operations or results of operations, assets or liabilities of the
35 Business. Without limiting the generality of the foregoing,
36 since such date and in each case in connection with the Purchased
37 Assets and the Assumed Liabilities, except as contemplated by the
38 Agreement:
39 (a) the Sellers have not sold, leased, transferred
40 or assigned any material portion of the assets of the Business,
41 other than in the ordinary course of business;
42 (b) the Sellers have not experienced any casualty
43 damage, destruction or loss (whether or not covered by insurance)
44 to its property in excess of $25,000 affecting any of the
45 Purchased Assets used in the operations of the Business as
46 presently conducted; and
47 (c) the Sellers have not (i) entered into any
48 employment, deferred compensation or other similar agreement or
49 arrangement with any of the Employees or (ii) increased the
1 compensation, bonus or other benefits payable to any of the
2 Employees, other than in the ordinary course of business and
3 consistent with past practice or as required by Law.
4 4.6. Tax Matters.
5 To the Sellers' Knowledge: (i) there is no
6 dispute or claim concerning any tax liability of the Sellers with
7 respect to the Business which constitutes an Assumed Liability;
8 (ii) the Sellers have duly filed on a timely basis all Tax
9 Returns required to be filed by them and have paid all Taxes that
10 are due and payable, and all assessments, reassessments,
11 governmental charges, penalties, interest and fines due and
12 payable by them for any period ending on or before the Closing
13 Date; (iii) the Sellers have made adequate provision for Taxes
14 payable in respect of the Business for the current period and any
15 previous period for which Tax returns are not yet required to be
16 filed; (iv) there are no actions, suits, proceedings,
17 investigations or claims pending or threatened against the
18 Sellers in respect of Taxes, governmental charges or assessments,
19 nor are any material matters under discussion with any
20 governmental authority in respect to taxes, governmental charges
21 or assessments asserted by any such authority; (v) the Sellers
22 have withheld from each payment made to any of their past or
23 present employees, officers or directors, and to any non-
24 residents of Canada, the amount of all Taxes and other deductions
25 required to be withheld therefrom under applicable law, and have
26 paid the same to the proper tax or other receiving officers
27 within the time required under applicable law; and (vi) the
28 Sellers have remitted to the appropriate tax authority, when
29 required by law to do so, all amounts collected by them on
30 account of GST.
31 4.7. Contracts.
32 (a) Except for the Contracts listed on
33 Schedule 4.7 of the Disclosure Schedules and the contracts and
34 agreements constituting Excluded Assets, the Sellers with respect
35 to the Business have no liabilities or obligations under, and are
36 not otherwise bound by, any executory written (i) mortgage,
37 indenture, note, installment obligation or other instrument
38 relating to the borrowing of money, (ii) guarantee of any
39 obligation, (iii) letter of credit, bond or other indemnity
40 (excluding endorsements of instruments for collection in the
41 ordinary course of the operation of the Business), (iv) agreement
42 requiring the payment by either Seller of more than $50,000 in
43 any 12-month period for the purchase or lease of any machinery,
44 equipment or other capital assets, (v) collective bargaining
45 agreement, employment, international sales agent, representative
46 or consulting agreement or agreement providing for severance
47 payments or other additional similar rights or benefits (whether
48 or not optional) in the event of the sale of any of the Business,
49 (vi) joint venture agreement, (vii) agreement requiring the
50 payment by the Sellers with respect to the Business to any Person
51 (other than any division, unit or Affiliate of the Sellers) of
52 more than $50,000 in any 12-month period for the purchase of
1 goods or services, or (viii) agreement requiring the payment to
2 the Sellers by any Person (other than any division, unit or
3 Affiliate of the Sellers) of more than $50,000 in any 12-month
4 period for the sale of goods or services provided by the
5 Business.
6 (b) The Sellers have delivered or made available
7 to the Purchaser correct and complete copies of each written
8 agreement listed on Schedule 4.7 of the Disclosure Schedules.
9 (c) Each Contract listed on Schedule 4.7 of the
10 Disclosure Schedules is, to the Sellers' Knowledge, a valid,
11 binding and enforceable obligation of the other party or parties
12 thereto (subject to applicable bankruptcy, insolvency, fraudulent
13 conveyance, reorganization, moratorium and similar Laws affecting
14 creditors' or landlords' rights and remedies generally and
15 subject as to enforceability to general principles of equity,
16 including principles of commercial reasonableness, good faith and
17 fair dealing) and is in full force and effect.
18 4.8. Real Property. (a) Schedule 4.8(i) of the Disclosure
19 Schedules lists and describes in reasonable detail the Owned Real
20 Property. With respect to the Owned Real Property, except as
21 disclosed on Schedule 4.8(i) of the Disclosure Schedules:
22 (i) the party identified on Schedule 4.8(i)
23 of the Disclosure Schedules has good and valid title, free and
24 clear of any Lien (other than Permitted Liens);
25 (ii) the Sellers have not received written
26 notice of any condemnation proceedings, lawsuits or
27 administrative actions relating to such property;
28 (iii) the Sellers have not received written
29 notice that the use or occupancy of such property violates any
30 covenants, conditions or restrictions that encumber such property
31 or that any such property is subject to any restriction for which
32 any Permits necessary to the current use thereof have not been
33 obtained; and
34 (iv) there are no leases, subleases,
35 licenses, concessions or other agreements granting to any Person
36 the right of use or occupancy of any portion of the Real
37 Property.
38 (b) Schedule 4.8(ii) of the Disclosure Schedules
39 describes in reasonable detail the Leased Real Property. With
40 respect to the Leased Real Property, except as set forth on
41 Schedule 4.8(ii) of the Disclosure Schedules:
42 (i) the party identified on Schedule 4.8(ii)
43 has a valid leasehold interest in the Leased Real Property, free
44 and clear of all Liens (other than Permitted Liens);
1 (ii) the Sellers have not received written
2 notice of any condemnation proceedings, lawsuits or
3 administrative actions relating to the Leased Property;
4 (iii) the Sellers have not received written
5 notice that the use or occupancy of the Leased Property violates
6 any covenants, conditions or restrictions that encumber such
7 property, or that any such property is subject to any restriction
8 for which any Permits necessary to the current use thereof have
9 not been obtained;
10 (iv) to the knowledge of the Sellers, there
11 are no subleases, licenses, concessions or other agreements
12 granting to any Person the right of use or occupancy of any
13 portion of the Leased Real Property; and
14 (v) Sellers are not and, to Sellers'
15 knowledge, no party to the leases of the Leased Real Property is
16 in breach or default, and no event has occurred which, with
17 notice or lapse of time would constitute a breach or default or
18 permit termination, modification or acceleration thereunder.
19 4.9. Title. The Sellers have and will convey to the Purchaser on
20 the Closing Date good and marketable title to all the Purchased
21 Assets owned by the Sellers (other than the Owned Real Property,
22 as to which representations and warranties are made pursuant to
23 Section 4.8(i), and the Intellectual Property, as to which
24 representations and warranties are made pursuant to Section 4.10)
25 free and clear of all Liens (other than Permitted Liens).
26 4.10. Intellectual Property. Schedule 4.10 of the Disclosure
27 Schedules identifies each patent forming a part of the Purchased
28 Assets (the _Intellectual Property_ ). With respect to each
29 item of Intellectual Property identified in Schedule 4.10 of the
30 Disclosure Schedules, no action, suit, proceeding, hearing,
31 investigation, charge, complaint, claim or demand is pending or,
32 to the Sellers' Knowledge, threatened which challenges the
33 legality, validity, enforceability, use or ownership of the item.
34 Except as disclosed on Schedule 4.10, no Seller has received any
35 written notice that it is infringing upon the intellectual
36 property rights of others in connection with the Business or the
37 Sellers' operation of the Business.
38 4.11. Litigation. Except as set forth on Schedule 4.11 of
39 the Disclosure Schedules, the Sellers in connection with the
40 Business are not (a) subject to any unsatisfied judgment, order,
41 decree, stipulation, injunction or criminal charge or (b) a party
42 to or, to the Sellers' Knowledge, threatened to be made a party
43 to any complaint, action, suit, criminal charge, proceeding,
44 hearing or investigation against the Sellers with respect to the
45 Business of or in any court or quasi-judicial or administrative
46 agency of any Governmental Entity. There are no judicial or
47 administrative actions, proceedings or investigations pending or,
48 to the Sellers' Knowledge, threatened that question the validity
1 of this Agreement or any of the Ancillary Agreements or any
2 action taken or to be taken by the Sellers in connection with
3 this Agreement or any of the Ancillary Agreements or that, if
4 adversely determined, would have a material adverse effect upon
5 the Sellers' ability to enter into or perform their obligations
6 under this Agreement or any of the Ancillary Agreements to which
7 it is a party.
8 4.12. Employee Benefits. Schedule 4.12 of the Disclosure
9 Schedules sets forth and identifies a complete and correct list
10 of all Employee Pension Benefit Plans, material Employee Welfare
11 Benefit Plans and any other material employee benefit
12 arrangements or payroll practices (including employment
13 agreements and severance agreements) maintained by the Sellers or
14 to which the Sellers contribute or have any existing liability,
15 in each case with respect to any Employees (collectively, the
16 _Seller Plans_ ).
17 4.13. Labor Relations. Except as set forth on Schedule 4.13
18 of the Disclosure Schedules, there are no disputes, claims or
19 actions pending or, to the Sellers' Knowledge, threatened between
20 the Sellers and any Employee or any labor or other collective
21 bargaining unit representing any Employee, in each case that
22 could reasonably be expected to result in a labor strike, slow-
23 down or work stoppage.
24 4.14. Environmental Matters. Except as set forth on Schedule
25 4.14 of the Disclosure Schedules, to the Sellers' Knowledge,
26 (a) there exists no material fact, condition or occurrence
27 concerning the Sellers' compliance with or remediation
28 obligations under Environmental Laws relating to the Business
29 which is not disclosed in the information delivered or made
30 available to the Purchaser on or prior to the date of this
31 Agreement; (b) no unresolved complaint, notice of violation,
32 citation, summons or order has been issued or filed alleging any
33 violation by the Sellers of any Environmental Law that is
34 reasonably expected to have a material adverse effect on the
35 operations or financial condition of the Business; and (c) the
36 operation of the Business by the Sellers is in compliance in all
37 material respects with applicable Environmental Laws.
38 4.15. Legal Compliance. Except (a) with respect to
39 compliance with Environmental Laws (as to which representations
40 and warranties are made pursuant to Section 4.14), and (b) as set
41 forth on Schedule 4.15 of the Disclosure Schedules, to the
42 Sellers' Knowledge, the Sellers in connection with the Business
43 have complied with all applicable Laws (except where the failure
44 to comply would not have a material adverse affect on the
45 operations or the financial condition of the Business).
46 4.16. Permits. To the Sellers' Knowledge, the Sellers hold
47 all material Permits that are required by any Government Entity
48 to permit the Sellers to operate the Business and the Purchased
1 Assets as they are presently operated. Each such material Permit
2 is listed on Schedule 4.16 of the Disclosure Schedules.
3 4.17. Brokers' Fees. No Seller has any liability or
4 obligation to pay any fees or commissions to any broker, finder
5 or agent with respect to the transactions contemplated by this
6 Agreement for which the Purchaser could become liable or
7 obligated.
8 4.18. Residency. Sellers are not non-residents of Canada as
9 such term is construed under the ITA.
10 4.19. Year 2000. To the knowledge of Sellers, except as
11 disclosed on Schedule 4.19 of the Disclosure Schedules, there are
12 no deficiencies with respect to the computer hardware and
13 software systems included in the Purchased Assets with respect
14 handling date information for all dates before, on or after
15 January 1, 2000 (_Y2K Deficiencies_ ), except any deficiencies
16 which would not have a Material Adverse Effect on the Business.
17 To the knowledge of Sellers, without any independent
18 investigation, the Business' suppliers, vendors and customers
19 have no Y2K Deficiencies which would reasonably be expected to
20 have a Material Adverse Effect on the Business.
21 4.20. LIMITED WARRANTIES. EXCEPT AS OTHERWISE EXPRESSLY
22 PROVIDED IN THIS SECTION 4, THE SELLERS MAKE NO REPRESENTATION OR
23 WARRANTY WHATSOEVER TO THE PURCHASER, EXPRESS, IMPLIED OR
24 STATUTORY, CONCERNING THE PURCHASED ASSETS, THE ASSUMED
25 LIABILITIES OR THE BUSINESS. WITHOUT LIMITING THE GENERALITY OF
26 THE FOREGOING, THE SELLERS MAKE NO REPRESENTATION OR WARRANTY AS
27 TO VALUE, QUALITY, QUANTITY, CONDITION, MERCHANTABILITY, FITNESS
28 FOR A PARTICULAR PURPOSE, WORKING ORDER, COMPLIANCE WITH LAW,
29 FUTURE PROFITABILITY OF CONTRACTS OR COMMITMENTS, OR ANY
30 PROJECTED FINANCIAL STATEMENTS OR OTHER PROJECTED FINANCIAL
31 INFORMATION, PROSPECTS OR FUTURE RESULTS OF OPERATIONS OF THE
32 BUSINESS. ANY WARRANTIES OTHER THAN THOSE EXPRESSLY PROVIDED FOR
33 IN THIS SECTION 4, WHETHER EXPRESS, IMPLIED OR STATUTORY, WRITTEN
34 OR ORAL, ARE HEREBY EXPRESSLY DISCLAIMED. THE PURCHASER
35 ACKNOWLEDGES THAT IT HAS HAD AN OPPORTUNITY TO THOROUGHLY INSPECT
36 THE PURCHASED ASSETS.
37 Section 5: Representations and Warranties of the Purchaser.
38 The Purchaser represents and warrants to the Sellers as
39 follows:
40 5.1. Organization of the Purchaser. The Purchaser is a
41 corporation duly organized, validly existing and in good standing
42 under the laws of the State of Tennessee and is licensed or
43 qualified to transact business as a foreign corporation, and is
44 in good standing, under the laws of all states in the United
45 States where its business would require it to be so licensed or
46 qualified except where the failure to be so licensed or qualified
47 would not have a material adverse effect on the Purchaser.
1 5.2. Authorization of Transaction. The Purchaser has full
2 corporate power and authority and has taken all action to enable
3 it to execute and deliver this Agreement and each of the
4 Ancillary Agreements to which it is a party and to perform its
5 obligations hereunder and thereunder. This Agreement
6 constitutes, and each of the Ancillary Agreements when executed
7 and delivered by the Purchaser will constitute, the valid and
8 legally binding obligation of the Purchaser enforceable against
9 the Purchaser in accordance with their respective terms and
10 conditions, subject to bankruptcy, insolvency, fraudulent
11 conveyance, reorganization, arrangement, moratorium and similar
12 Laws now or hereafter in effect relating to creditors' and
13 landlords' rights and general principles of equity, including
14 commercial reasonableness, good faith and fair dealing.
15 5.3. Noncontravention; Consents. Neither the execution and the
16 delivery of this Agreement or any of the Ancillary Agreements by
17 the Purchaser, nor the consummation by the Purchaser of the
18 transactions contemplated hereby or thereby, will violate any
19 provision of the charter or bylaws of the Purchaser or any Law to
20 which the Purchaser is subject. Neither the execution and
21 delivery of this Agreement or any of the Ancillary Agreements by
22 the Purchaser, nor the consummation by the Purchaser of the
23 transactions contemplated hereby or thereby, will constitute a
24 violation of or constitute or create a default under, any
25 agreement or commitment to which the Purchaser is a party or by
26 which the Purchaser or any of its properties are bound or to
27 which the Purchaser of any of such properties are subject. As of
28 the Closing Date, the Purchaser will have given all required
29 notices and obtained all licenses, Permits, consents, approvals,
30 authorizations, certificates, and orders of Governmental Entities
31 as are required in order to enable the Purchaser to perform its
32 obligations under this Agreement and each of the Ancillary
33 Agreements.
34 5.4. Litigation. There are no judicial or administrative
35 actions, proceedings or investigations pending or, to the
36 Purchaser's knowledge, threatened that question the validity of
37 this Agreement or any of the Ancillary Agreements or any action
38 taken or to be taken by the Purchaser in connection with this
39 Agreement or any of the Ancillary Agreements or that, if
40 adversely determined, would have a material adverse effect upon
41 the Purchaser's ability to enter into or perform its obligations
42 under this Agreement or any of the Ancillary Agreements to which
43 it is a party.
44 5.5. Brokers' Fees. The Purchaser has no liability or obligation
45 to pay any fees or commissions to any broker, finder or agent
46 with respect to the transactions contemplated by this Agreement
47 for which the Sellers could become liable or obligated.
48 5.6. Financing. The Purchaser has cash resources or available
49 financing sufficient to consummate the transactions contemplated
50 by this Agreement.
1 Section 6 : Pre-Closing Covenants. Between the date hereof
2 and the Closing:
3 6.1. General. Each of the parties will use its best efforts to
4 take all actions and to do all things necessary, proper or
5 advisable to consummate and make effective the transactions
6 contemplated by this Agreement (including satisfying the closing
7 conditions set forth in Section 9).
8 6.2. Notices and Consents. The Sellers will prior to the Closing
9 Date give all notices to third parties and will use reasonable
10 efforts at their expense to obtain all third party approvals,
11 consents, novations and waivers that are required to be obtained
12 by the Sellers in connection with the transactions contemplated
13 by this Agreement; provided that the Sellers will not be
14 obligated hereunder to pay any consideration to the third party
15 from whom such approval, consent, novation or waiver is
16 requested. The Purchaser hereby agrees to cooperate with the
17 Sellers in the Sellers efforts to obtain such third party
18 consents and where necessary will give or procure the giving of
19 security to a contracting third party in order to obtain such
20 approval, consent, novation or waiver. The Sellers and the
21 Purchaser will file a Notification and related material with the
22 Competition Bureau (Canada) to the extent applicable and will
23 make all further filings pursuant thereto that may be necessary,
24 proper or advisable.
25 6.3. Carry on in Regular Course. The Sellers will carry on the
26 operations of the Business substantially in the same manner as
27 heretofore conducted. The Sellers will not make or institute any
28 material change in the methods of manufacture, management,
29 accounting or operation of the Business.
30 6.4. Contracts and Commitments. The Sellers in connection with
31 the Business will not enter into any material contract or
32 commitment or engage in any transaction, including any contract,
33 commitment or engagement with any other division, unit or
34 Affiliate of the Sellers, or effect any change to any program,
35 not in the usual and ordinary course of business and consistent
36 with the past operation of the Business.
37 6.5. Sale of Capital Assets. Other than pursuant to this
38 Agreement and the sale or disposition of excess or obsolete
39 equipment in the usual and ordinary course of business consistent
40 with the past operation of the Business, no Seller will sell or
41 otherwise dispose of any capital asset relating to the Business.
42 6.6. Access. The Sellers will permit representatives of the
43 Purchaser to have access at reasonable times to the Purchased
44 Assets. The Purchaser agrees that it will use all reasonable
45 efforts to schedule its review of such items at such times which
46 are not disruptive to the operations of the Business. Prior to
47 the Closing Date, the Purchaser will be permitted to complete, at
48 the sole cost and expense of the Purchaser, a Phase I
1 environmental study of the Owned Real Property; provided,
2 however, that no such Phase I or other environmental review by
3 the Purchaser will involve sampling, Phase II testing or invasive
4 investigatory work without prior written consent of the Sellers.
5 The Purchaser will deliver to the Sellers a copy of any Phase I
6 or other third party report generated by any permitted
7 environmental investigation. The Purchaser will treat any
8 environmental review of the Owned Real Property as confidential
9 information.
10 6.7. Notice of Developments; Disclosure Schedules; Updating
11 Disclosure Schedules.
12 (a) Each party will give prompt written notice to
13 the other of any development affecting the ability or obligation
14 of the parties to consummate the transactions contemplated by
15 this Agreement or any of the Ancillary Agreements. Except as
16 provided in Section 6.7(c), no such written notice of a
17 development will be deemed to have amended the Disclosure
18 Schedules, to have qualified the representations and warranties
19 contained herein or to have cured any misrepresentation or breach
20 of warranty that otherwise might have existed hereunder by reason
21 of such material development.
22 (b) Complete copies of the Disclosure Schedules
23 referred herein are being delivered simultaneously with the
24 execution of this Agreement.
25 (c) The Sellers will deliver to the Purchaser
26 prior to the Closing Date a written update or supplement to the
27 Disclosure Schedules reflecting events occurring and contracts
28 and agreements from the date of this Agreement through the
29 Closing Date. To the extent that such updated or supplemental
30 Disclosure Schedules reflect matters or events (i) which
31 constitute, and which are identified specifically as, Excluded
32 Assets or Excluded Liabilities or (ii) which have occurred after
33 the date of this Agreement in the ordinary course of business of
34 the Business, which do not constitute a violation of any of
35 Sellers' covenants set forth in Section 6 and which do not in the
36 reasonable judgment of the Purchaser, represent a material
37 adverse change in the business, financial condition, operations
38 or results of operations of the Business, then the Disclosure
39 Schedules shall be deemed to be amended as of the Closing Date to
40 include the information set forth on such updated or supplemental
41 Disclosure Schedules. To the extent that such updated or
42 supplemental Disclosure Schedules reflect matters or events which
43 have occurred after the date of this Agreement and which in the
44 reasonable judgment of Purchaser, represent a material adverse
45 change in the business, financial condition, operations or
46 results of operations of the Business, then (i) the parties will
47 negotiate in good faith during the seven-day period immediately
48 after delivery of the update or supplemental Disclosure Schedules
49 to determine the consequences of such disclosures, (ii) the
50 Disclosure Schedules will be amended only to the extent that the
51 parties mutually agree as a result of such negotiation and
1 (iii) the Purchaser may elect to terminate this Agreement after
2 the expiration of such seven-day period, in which event the
3 Sellers and the Purchaser will have no liability to the other as
4 a result of such termination.
5 6.8. Tax Matters.
6 (a) Any retail sales tax under the RSTA (Ontario)
7 attributable to the transfer of the Purchased Assets on the
8 Closing Date shall be borne by the Purchaser.
9 (b) On or before the Closing Date, the Sellers
10 shall deliver to the Purchaser a duplicate copy of a certificate
11 issued pursuant to Section 6 of the RSTA (Ontario). On the
12 Closing Date, the Purchaser shall provide the Sellers with a
13 purchase exemption certificate with respect to inventories of
14 goods held for resale or for incorporation into goods to be held
15 for resale, and with respect to any exempt manufacturing
16 equipment. On the Closing Date, the Purchaser shall pay to the
17 Sellers any Tax payable under the RSTA (Ontario) with respect to
18 any Purchased Assets not covered by the purchase exemption
19 certificate and the Sellers shall remit such Taxes to the
20 appropriate Tax authority.
21 (c) Purchaser will be duly registered for the
22 purposes of GST prior to or at Closing. The Sellers are duly
23 registered for purposes of GST and its registration number is
24 105166276RT006. The Sellers represent and warrant that the
25 Purchaser is acquiring under this Agreement all or substantially
26 all (at least 90%) of the property that can be regarded as
27 reasonably necessary for the Purchaser to carry on the Business
28 as conducted as of the Closing Date.
29 (d) The Purchaser and the Sellers shall make the
30 joint election provided for under Section 167(1.1) of the ETA in
31 order that no GST shall be payable with respect to the
32 transactions contemplated by this Agreement. The Purchaser and
33 the Sellers shall jointly complete Form GST-44 with respect to
34 the foregoing election and the Purchaser shall file said
35 Form GST-44 no later than the due date for the Purchaser's GST
36 returns for the first reporting period in which GST would, in the
37 absence of such an election, become payable in connection with
38 the transactions contemplated by this Agreement. In the event
39 that an election under Section 167(1.1) of the ETA cannot validly
40 be made by the parties or the Department of Revenue does not
41 accept in whole or part such an election by the parties,
42 Purchaser shall promptly reimburse the Sellers for an amount
43 equal to one-half of the GST and any Tax, penalties or interest
44 payable by the Sellers, provided that in the event GST is payable
45 as a result of the failure of Purchaser or the Sellers to comply
46 with this Agreement, such non-complying party will be liable for
47 the entire amount payable.
1 (e) The Sellers and the Purchaser shall execute an
2 election as to the sale of accounts receivable under Section 22
3 of the ITA.
4 (f) At the Closing, Purchaser shall provide
5 Sellers with a certificate of resale issued by the State of
6 California exempting the sale of Inventories located in
7 California from California sales tax, and Sellers shall not
8 assess or charge sales tax on the purchase of such Inventories.
9 (g) It is anticipated that the transfer of the
10 Purchased Assets located in the State of Ohio will be exempt from
11 Ohio sales tax and no such sales tax shall be charged by Sellers
12 on the sale of such Purchased Assets.
13
14 Section 7: Post-Closing Covenants. The parties agree as
15 follows with respect to the period following the Closing Date:
16 7.1. General. In case at any time after the Closing Date any
17 further action is necessary or desirable to carry out the
18 purposes of this Agreement, each of the parties will take such
19 further action (including the execution and delivery of such
20 further instruments and documents) as the other party reasonably
21 may request, at the sole cost and expense of the requesting party
22 (unless the requesting party is entitled to indemnification
23 therefor under Section 10 of this Agreement).
24 7.2. Post-Closing Consents; Nonassignable Contracts.
25 (a) The Sellers will use reasonable efforts after
26 the Closing Date to obtain all third party approvals, consents,
27 novations and waivers that are not obtained prior to the Closing
28 Date and that are required in connection with the transactions
29 contemplated by this Agreement; provided that the Sellers will
30 not be obligated hereunder to pay any consideration to the third
31 party from whom such approval, consent, novation or waiver is
32 required. The Purchaser hereby agrees to cooperate with the
33 Sellers in their efforts to obtain such third party approvals,
34 consents, novations and waivers and where necessary will give or
35 procure the giving of security to obtain such third party
36 approval, consent, novation or waiver.
37 (b) To the extent that any Contract is not capable
38 of being transferred by the Sellers to the Purchaser pursuant to
39 this Agreement without the consent of a third party and such
40 consent is not obtained prior to Closing, or if such transfer or
41 attempted transfer would constitute a breach or a violation of
42 any Law, nothing in this Agreement will constitute a transfer or
43 an attempted transfer thereof.
44 (c) In the event that any required consent is not
45 obtained on or prior to the Closing Date, the Sellers will,
46 subject to Section 7.2(b), use its reasonable efforts to
1 (i) provide to the Purchaser the benefits of the applicable
2 Contract, (ii) cooperate in any reasonable and lawful arrangement
3 designed to provide such benefits to the Purchaser, and
4 (iii) enforce at the request and expense of the Purchaser and for
5 the account of the Purchaser, any rights of the Sellers arising
6 from any such Contract (including the right to elect to terminate
7 such Contract in accordance with the terms thereof upon the
8 request of the Purchaser).
9 (d) The Purchaser will perform the obligations
10 arising under all Contracts referred to in Section 7.2(b) for the
11 benefit of the Sellers and the other party or parties thereto.
12 (e) After the Closing, the Sellers, at the
13 reasonable request of the Purchaser, shall promptly execute and
14 deliver to the Purchaser all such further assignments, bills of
15 sale, endorsements and other documents in form and substances
16 satisfactory to the Purchaser and its counsel as the Purchaser
17 may reasonably request in order to (i) vest in the Purchaser
18 title to and possession of the Purchased Assets and
19 (ii) otherwise carry out or evidence the terms of this Agreement.
20 7.3. Litigation Support; Tax Return Preparation; Records
21 Retention; Transitional Services.
22 (a) In the event and for so long as any party is
23 actively investigating, contesting, defending against or
24 prosecuting any charge, complaint, action, suit, contract appeal,
25 proceeding, hearing, investigation, claim, demand or audit
26 (including routine audits and contract close-outs) in connection
27 with (i) any transaction contemplated under this Agreement or
28 (ii) any fact, situation, circumstance, status, condition,
29 activity, practice, plan, occurrence, event, incident, action,
30 failure to act or transaction on or prior to the Closing Date
31 involving the Business, the other party will cooperate with the
32 contesting or defending party and its counsel in the contest or
33 defense, make available its personnel and provide such testimony
34 and access to its books and records as may be reasonably
35 necessary in connection with the contest or defense.
36 (b) The Sellers and the Purchaser will each
37 provide the other party with such assistance as may reasonably be
38 requested in connection with the preparation of any Tax Return,
39 audit or other examination by any taxing authority or judicial or
40 administrative proceeding relating to liability for Taxes and
41 will provide to the other party all records and other information
42 which may be relevant to any such Tax Return, audit or
43 examination, proceeding or determination and with any final
44 determination of any such audit or examination, proceeding or
45 determination that affects any amount required to be shown on any
46 Tax Return of the other party for any period.
47 (c) The Purchaser will cause appropriate Employees
48 of the Business to prepare usual and customary tax return
49 packages with respect to the tax periods beginning January 1,
1 1999 and ending as of the Closing Date. Such tax return packages
2 will be delivered to the Sellers not later than sixty days
3 following the Closing Date.
4 (d) The Purchaser will provide reasonable
5 assistance to the Sellers in connection with any Tax audits or
6 other administrative or judicial proceedings involving the
7 Business and affecting such income Tax Returns or declarations
8 for any period all or any portion of which is prior to the
9 Closing Date, including the participation of the then current
10 personnel of the Purchaser in such audits and proceedings. The
11 Purchaser will not, without the prior written consent of the
12 Sellers, or except as required by Law, initiate any contract or
13 voluntarily enter into any agreements with, or volunteer any
14 information to, any taxing authorities with regard to specific
15 items on such Tax Returns or declarations.
16 (e) The Purchaser will maintain all original
17 books, records, files, documents, papers and agreements
18 pertaining to the Purchased Assets, the Assumed Liabilities or
19 otherwise relating to the Business as conducted before the
20 Closing Date for at least seven years following the Closing Date
21 or such longer period as may be required by Law. Sellers agree
22 that it will maintain all original books, records, files,
23 documents, papers and agreements relating to any of the Purchased
24 Assets or Assumed Liabilities which are not included in the
25 Purchased Assets for at least seven years following the Closing
26 Date or such longer period as may be required by Law. The
27 Sellers and the Purchaser agree that before destroying or
28 discarding any materials required to be retained pursuant to this
29 Section 7.3(f), it will notify the other in writing (which notice
30 will include a description of the materials to be destroyed or
31 discarded) and such other party may, at its expense, remove or
32 make copies of such materials within 90 days following the date
33 of such written notice. In the event the other party has not
34 removed such materials within such 90-day period, the party
35 desiring to destroy or discard such materials may proceed with
36 such action without any liability to the other.
37 (f) If requested by the Sellers, the Purchaser
38 will enter into a transition services agreement with the Sellers
39 pursuant to which the Purchaser would agree to cause the Business
40 to provide certain agreed upon transition services to the Sellers
41 for a reasonable period after the Closing Date. Without limiting
42 the generality of the foregoing, after the Closing Date the
43 Purchaser will provide services, assistance and reasonable
44 cooperation to the Sellers in connection with:
45 (i) the completion and delivery to the
46 Sellers of the financial statements and the general ledger of the
47 Business as of the Closing Date;
48 (ii) the preparation of quarterly, semi-
49 annual and annual reports required to be prepared by the Sellers
1 (either by Law or in accordance with the Sellers' internal
2 reporting systems and procedures) in connection with the
3 operation of the Business prior to the Closing Date and with the
4 transactions provided for herein;
5 (iii) the preparation of audit information
6 packages required to be prepared by the Sellers (either by Law or
7 in accordance with the Sellers' internal reporting systems and
8 procedures) in connection with the operation of the Business
9 prior to the Closing Date, the transactions provided for in this
10 Agreement and the Sellers' year-end financial audit;
11 (iv) the Sellers' administration of the
12 Excluded Liabilities; and
13 (v) such other services as the Sellers may
14 reasonably request incidental to the orderly transfer of the
15 Business and the Purchased Assets to the Purchaser.
16 7.4. Signage and Labels. The Purchaser will remove the Sellers'
17 names from all exterior signs located at the Owned Real Property
18 and the Leased Real Property as soon as practicable but in any
19 event within two months after the Closing Date. The Purchaser
20 may use the Sellers' name on finished goods inventory which
21 constitutes part of the Purchased Assets but will change or
22 otherwise replace the stamps and dies bearing the Sellers' name
23 as soon as reasonably practicable after the Closing Date, but in
24 any event within six (6) months of the Closing Date. The
25 Purchaser may not use publicly any business records described in
26 Section 2.1(h) without first removing therefrom, or obliterating
27 all portrayals or references to, any of the Sellers' trade names,
28 trademarks or service marks or other intangible property
29 contained in such records, unless the Sellers consent in writing
30 to such usage. In operating the Business until December 31,
31 2000, Purchaser shall be entitled to append the statement
32 _formerly Teledyne Specialty Equipment_ or words to that effect
33 to the name used by Purchaser for the Business on advertising,
34 packaging materials, business forms, stationery and marketing
35 materials. Nothing in this Agreement shall prevent Purchaser
36 from using product names, model numbers and other product
37 designations used by Sellers in the operation of the Business so
38 long as such use does not include any Excluded Assets identified
39 in Section 2.2(g) of this Agreement.
40 7.5 Zambian WIP and Receivable. (a) Sellers agree to purchase
41 from Purchaser certain work-in-progress inventory identified on
42 Schedule 7.5 hereto (the _RAMCOZ Inventory_ ) in the event such
43 inventory has not been sold by Purchaser on or before February
44 16, 2000. The amount payable for the RAMCOZ Inventory (the _WIP
45 Payment_) shall be equal to the value of such inventory
46 reflected on the Closing Statement plus the amount of any
47 additional cost incurred by the Purchaser in preparing such
48 inventory for sale, computed on a basis consistent with the
1 Business' historical accounting practice. The Purchaser agrees
2 to use its best efforts to sell the RAMCOZ Inventory.
3 (b) The Purchaser agrees to use commercially
4 reasonable efforts to collect all accounts receivable of Sellers
5 from RAMCOZ outstanding as of the Closing Date (the _RAMCOZ
6 Receivable_) and further agrees that any amount received by the
7 Purchaser after the Closing Date from RAMCOZ shall be applied
8 first against the RAMCOZ Receivable and not against amounts owing
9 to the Purchaser for goods sold or services rendered by the
10 Purchaser to RAMCOZ after the Closing Date. In the event that
11 any amount of the RAMCOZ Receivable remains uncollected on June
12 16, 2000, the Purchaser shall promptly notify Sellers and
13 reassign to Sellers such uncollected receivable (without recourse
14 or warranty), the Sellers shall promptly pay the Purchaser cash
15 in the aggregate amount of the then outstanding RAMCOZ Receivable
16 and thereafter such uncollected receivable shall be Sellers'
17 property and Sellers shall be free to collect such accounts in
18 their sole and absolute discretion. The foregoing payment
19 obligations shall not be subject to the limitations of Section
20 10.2(c) of this Agreement.
21 Section 8: Employee Benefits.
22 (a) On or prior to the Closing Date, the Purchaser
23 shall offer employment, effective as of the Closing Date and
24 conditional on the Closing, to all Employees on terms and
25 conditions, determined on an employee-by-employee basis which
26 are, taken as a whole, substantially similar to the terms and
27 conditions on which the Employees are employed immediately prior
28 to the Closing Date. Such offer shall include wages and benefits
29 substantially comparable to the wages and benefits provided by
30 the Sellers to the Employees immediately prior to the Closing
31 Date and shall recognize each Employee's service with the Sellers
32 prior to the Closing Date. Purchaser acknowledges and agrees
33 that Sellers make no representation or warranty that any of the
34 Employees will accept employment with Purchaser and the
35 acceptance by Employees of offers of employment with Purchaser
36 shall not constitute a condition to Purchaser's obligation to
37 complete the Purchase under this Agreement. Notwithstanding the
38 foregoing, Sellers agree that Teledyne GmbH shall continue to pay
39 the salary of Mr. Thorston Stellmacher for a period of up to six
40 (6) months after the Closing Date. The Purchaser will reimburse
41 Teledyne GmbH for all payments made to Mr. Stellmacher on a
42 monthly basis within fifteen days after any payments are made to
43 him. The Purchaser agrees to use its best efforts to qualify to
44 transact business in Germany as soon as practicable.
45 (b) Any Employees who accept offers of employment
46 by Purchaser (the _Transferred Employees_ ), effective as of the
47 Closing Date, shall cease to participate in all Seller Plans and
48 shall be entitled to participate in Purchaser's benefit plans,
49 programs, policies and arrangements (the _Purchaser Plans_ ).
50 Periods of employment with the Sellers (including periods of
51 employment with any other employer, to the extent recognized
1 under the Seller Plans) immediately prior to the Closing Date,
2 shall be taken into account for purposes of determining, as
3 applicable, eligibility and vesting under the Purchaser Plans.
4 (i) Without limiting the generality of the
5 foregoing, Purchaser shall cause Purchaser's medical and
6 prescription drug, dental, life insurance, disability and other
7 health plans to immediately, and without any waiting period, be
8 available to cover each Transferred Employee (and his or her
9 eligible dependents) as of the Closing Date, and cause such plans
10 to waive any limitation of coverage of Transferred Employees (and
11 their eligible dependents) due to pre-existing conditions. Any
12 claims incurred with regard to any Transferred Employees before
13 the Closing Date and which are covered under the Seller Plans
14 shall be payable under the terms of the applicable plan of the
15 Sellers. All other claims incurred with regard to any
16 Transferred Employees and which are covered under the Purchaser's
17 Plans shall be payable under the terms of the applicable plan of
18 the Purchaser.
19 (ii) The Purchaser shall assume all
20 liabilities of the Sellers in respect of the Transferred
21 Employees to the extent that such liabilities arise on or after
22 the Closing Date, and in addition, shall assume liability for any
23 termination obligations which relate to the Transferred
24 Employees' service with the Sellers prior to the Closing Date.
25 (c) For purposes of the COBRA health continuation
26 of coverage provisions (hereafter referred to as the _COBRA
27 Provisions_) contained in Section 4980 (f) of the Code and in
28 Section 601 through 608 of ERISA, the Transferred Employees shall
29 be considered to have undergone a termination of employment with
30 the Sellers. It is the understanding and intention of the
31 Sellers and the Purchaser that no group health plan maintained by
32 the Purchaser shall constitute a successor plan to any of the
33 Sellers' group health plans and the Purchaser is not a successor
34 employer with respect to any of the Sellers' group health plans
35 and the Sellers are not predecessor employers with respect to the
36 Purchaser's group health plans, within the meaning of the COBRA
37 Provisions. It is the further understanding and intention of the
38 Sellers and the Purchaser, however, that the health plan coverage
39 to be afforded to the Transferred Employees pursuant to
40 Section 8(b)(i) shall be coverage that, pursuant to
41 Section 602(2)(D)(i) of ERISA, terminates any continuation
42 coverage rights the Transferred Employees might otherwise have
43 under the COBRA Provisions as a result of termination of
44 employment with the Sellers.
45 (d) As soon as practicable following the Closing
46 Date, in respect of all Transferred Employees who have an account
47 in a Canadian Group Registered Retirement Savings Plan
48 administered by either of the Sellers, the parties shall
49 cooperate to transfer all amounts from each such account to
1 accounts administered under the Purchaser's Canadian group
2 Registered Retirement Savings Plan.
3 (e) As of a date (the _Account Transfer Date_ )
4 as soon as reasonably practicable after the Closing Date,
5 Teledyne, Inc. shall cause to be transferred from the 401(k) plan
6 sponsored by Teledyne, Inc. (the _Seller 401(k) Plan_ ) to the
7 401(k) plan sponsored by the Purchaser (the _Purchaser 401(k)
8 Plan_) an amount in cash equal to the aggregate account balances
9 of all participants in the Seller 401(k) Plan as of such Account
10 Transfer Date who are Transferred Employees, except that all
11 promissory notes reflecting participant loans to Seller 401(k)
12 Plan participants outstanding as of such Account Transfer Date
13 shall be transferred in kind. In the event any Transferred
14 Employee has a qualified domestic relations order pending or
15 approved in the Seller 401(k) Plan at the time of transfer, all
16 documentation concerning such qualified domestic relations order
17 shall be assigned to the Purchaser 401(k) Plan. During the
18 period commencing on the Closing Date and ending on the Account
19 Transfer Date, any Transferred Employee who has an outstanding
20 loan balance under the Seller 401(k) Plan on the Closing Date
21 shall continue the scheduled loan repayments directly to the
22 Seller 401(k) Plan pursuant to the applicable terms and
23 conditions of such Plan. All Transferred Employee loan
24 repayments due and payable after the Account Transfer Date shall
25 be made to the Purchaser's 401(k) Plan, as appropriate, in
26 accordance with the applicable loan provisions of such Plan.
27 The Sellers and the Purchaser agree to cooperate fully with
28 respect to any governmental filings, including but not limited
29 to, the filing of any Internal Revenue Service Form 5310A
30 reporting obligations and information necessary to effect the
31 transactions contemplated by this Section 8(e).
32 Section 9: Closing Conditions.
33 9.1. Conditions to Obligation of the Purchaser. The obligation
34 of the Purchaser to consummate the transactions to be performed
35 by it in connection with the Closing is subject to satisfaction
36 of the following conditions:
37 (a) the representations and warranties set forth
38 in Section 4 will be true and correct in all material respects at
39 and as of the Closing Date:
40 (b) the Sellers will have performed and complied
41 with all of its covenants hereunder in all material respects
42 through the Closing;
43 (c) there will not be any action, suit or
44 proceeding pending or threatened before any Governmental Entity
45 or before any arbitrator wherein an unfavorable injunction,
46 judgment, order, decree, ruling or charge would (i) prevent
47 consummation of any of the transactions contemplated by this
48 Agreement or any Ancillary Agreement, or (ii) cause any of the
1 transactions contemplated by this Agreement or Ancillary
2 Agreement to be rescinded following consummation;
3 (d) the Sellers will have delivered to the
4 Purchaser a certificate to the effect that each of the conditions
5 specified above are satisfied in all respects; and
6 (e) the Sellers will have executed and delivered
7 to the Purchaser the documents identified in Section 3.3.
8 The Purchaser may waive any condition specified in this
9 Section 9.1 if it executes a writing so stating at or prior to
10 the Closing.
11 9.2. Conditions to Obligation of the Sellers. The obligation of
12 the Sellers to consummate the transactions to be performed by it
13 in connection with the Closing is subject to satisfaction of the
14 following conditions:
15 (a) the representations and warranties set forth
16 in Section 5 will be true and correct in all material respects at
17 and as of the Closing Date;
18 (b) the Purchaser will have performed and complied
19 with all of its covenants hereunder in all material respects
20 through the Closing;
21 (c) there will not be any action, suit or
22 proceeding pending or threatened before any Governmental Entity
23 or before any arbitrator wherein an unfavorable injunction,
24 judgment, order, decree, ruling or charge would (i) prevent the
25 consummation of any of the transactions contemplated by this
26 Agreement or any Ancillary Agreement or (ii) cause any of the
27 transactions contemplated by this Agreement or any Ancillary
28 Agreement to be rescinded following consummation;
29 (d) the Purchaser will have delivered to the
30 Sellers a certificate to the effect that each of the conditions
31 specified above is satisfied in all respects;
32 (e) the Purchaser will have executed and delivered
33 to the Sellers the documents identified in Section 3.3; and
34 (f) the Purchaser will have delivered to the
35 Sellers the Purchase Price.
36 The Sellers may waive any conditions specified in this
37 Section 9.2 if it executes a writing so stating at or prior to
38 the Closing.
39 Section 10: Remedies for Breaches of this Agreement.
40 10.1. Survival. Except as otherwise provided herein, all of
41 the representations and warranties contained in this Agreement or
42 in any certificate delivered pursuant to this Agreement relating
1 to the representations and warranties contained in this Agreement
2 will survive the Closing and continue in full force and effect
3 for a period of eighteen (18) months after the Closing Date;
4 provided, however, that (i) the representations and warranties
5 set forth in Section 4.9 shall survive indefinitely and (ii) the
6 representations and warranties set forth in Sections 4.6, 4.14
7 and 6.8 shall survive until the expiration of the applicable
8 statutory period of limitations to which the claim relates..
9 10.2. Indemnification Provisions for Benefit of the
10 Purchaser.
11 (a) In the event the Sellers breach any of their
12 representations, warranties or covenants contained in this
13 Agreement and provided that the Purchaser within the applicable
14 survival period makes a written claim for indemnification against
15 the Sellers setting forth in reasonable detail the circumstances
16 regarding the claim and, if ascertainable, an estimate of the
17 amount thereof, then the Sellers jointly and severally agree to
18 indemnify, defend and hold the Purchaser harmless from and
19 against the entirety of any losses, expenses, costs, damages,
20 fines, penalties and other liabilities (collectively, _Losses_ )
21 the Purchaser or any of its Affiliates, or any of their
22 respective directors, officers, employees, agents or
23 representatives (collectively, the _Purchaser Indemnified
24 Parties_), suffer to the extent such Losses result from, arise
25 out of or are caused by such breach.
26 (b) The Sellers jointly and severally further
27 agree to indemnify, defend and hold the Purchaser Indemnified
28 Parties harmless from and against any Losses the Purchaser
29 Indemnified Parties suffer to the extent such Losses result from,
30 arise out of, or are caused by any Excluded Liability (which, in
31 the context of Losses arising under Environmental Law shall
32 include, subject to Section 10.6, the necessary and reasonable
33 costs of remediation and compliance under any Environmental Law
34 or in connection with any Hazardous Materials).
35 (c) The Sellers will not have any obligation to
36 indemnify the Purchaser Indemnified Parties from and against any
37 Losses (i) until the Purchaser Indemnified Parties have suffered
38 Losses by reason of all such breaches which exceed, in the
39 aggregate, $500,000, after which point the Sellers will be
40 obligated to indemnify the Purchaser from and against only those
41 additional Losses suffered by the Purchaser Indemnified Parties
42 in excess of such amount; provided, however, that Purchaser
43 Indemnified Parties shall have no right to indemnification with
44 respect to any individual Loss which is less than $50,000 and no
45 such Loss shall be taken into account in determining whether or
46 the extent to which the $500,000 deductible has been exceeded, or
47 (ii) to the extent the Losses the Purchaser Indemnified Parties
48 have suffered exceed, in the aggregate, an amount equal to 30% of
49 the Purchase Price after which point the Sellers will have no
50 obligation to indemnify the Purchaser Indemnified Parties from
1 and against further Losses in excess of such amount except as
2 provided in Section 10.2(b).
3 (d) Notwithstanding anything to the contrary
4 contained in this Agreement, the Sellers' obligation to indemnify
5 Purchaser Indemnified Parties with respect to Losses, including
6 Environmental Losses, shall automatically terminate on the third
7 anniversary of the Closing Date except to the extent of and with
8 respect to claims for indemnification properly made in
9 accordance with this Section 10 prior to such third anniversary;
10 provided, however, that Sellers' obligation to indemnify
11 Purchaser Indemnified Parties with respect to Environmental
12 Losses arising from the former heat treat operation and the
13 outdoor barrel storage area shall terminate on the tenth
14 anniversary of the Closing Date except to the extent of and with
15 respect to claims for indemnification properly made in accordance
16 with this Section 10 prior thereto. In addition, the limitations
17 set forth in Section 10.2(c) shall not apply to Environmental
18 Losses directly related to the former heat treat operation and/or
19 the outdoor barrel storage area.
20 10.3. Indemnification Provisions for Benefit of the Sellers.
21 (a) In the event the Purchaser breaches any of its
22 representations, warranties or covenants contained in this
23 Agreement, including, without limitation, any breach of Section
24 8(a) hereof, or in any certificate delivered by the Purchaser
25 pursuant to this Agreement and provided that the Sellers make a
26 written claim for indemnification against the Purchaser setting
27 forth in reasonable detail the circumstances regarding the claim
28 and, if ascertainable, an estimate of the amount thereof, then
29 the Purchaser agrees to indemnify, defend and hold the Sellers
30 harmless from and against the entirety of any Losses the Sellers
31 or any of its Affiliates, or any of their respective directors,
32 officers, employees, agents or representatives (collectively, the
33 _Seller Indemnified Parties_ ), suffer to the extent such Losses
34 result from, arise out of or are caused by such breach.
35 (b) The Purchaser further agrees to indemnify,
36 defend and hold the Sellers harmless from and against the
37 entirety of any Losses the Seller Indemnified Parties suffer to
38 the extent such Losses result from, arise out of or are caused by
39 any Assumed Liabilities.
40 (c) The Purchaser further agrees to indemnify,
41 defend and hold the Sellers harmless from and against the
42 entirety of any Losses the Seller Indemnified Parties suffer to
43 the extent such Losses result from, arise out of or are caused by
44 the operation of the Business or use of the Purchased Assets
45 after the Closing Date. In particular, the Purchaser agrees to
46 indemnify, defend and hold the Seller Indemnified Parties
47 harmless from and against the entirety of any Losses the Seller
48 Indemnified Parties suffer arising from the employment by
49 Teledyne GmbH or its successors of Thorston Stellmacher pursuant
50 to Section 8(a) of this Agreement, including, without limitation,
1 any third party claims arising from the employment of Mr.
2 Stellmacher, any Losses arising out of actions taken or omitted
3 to be taken by Mr. Stellmacher and/or Losses arising out of
4 claims brought by Mr. Stellmacher in connection with such
5 employment.
6 10.4. Matters Involving Third Parties. If any third party
7 notifies any party hereto (the _Indemnified Party_ ) with
8 respect to any matter which may give rise to a claim for
9 indemnification against the other party hereto (the
10 _Indemnifying Party_ ) under this Section 10, then the
11 Indemnified Party will notify the Indemnifying Party thereof
12 promptly and in any event within 10 days after receiving any
13 written notice from a third party; provided that no delay on the
14 part of the Indemnified Party in notifying the Indemnifying Party
15 will relieve the Indemnifying Party from any obligation hereunder
16 unless, and then solely to the extent that, the Indemnifying
17 Party is prejudiced thereby. Once the Indemnified Party has
18 given notice of the matter to the Indemnifying Party, the
19 Indemnified Party may defend against the matter in any manner it
20 reasonably may deem appropriate. In the event the Indemnifying
21 Party notifies the Indemnified Party within 10 days after the
22 date the Indemnified Party has given notice of the matter that
23 the Indemnifying Party is assuming the defense of such matter
24 (a) the Indemnifying Party will defend the Indemnified Party
25 against the matter with counsel of its choice reasonably
26 satisfactory to the Indemnified Party, (b) the Indemnified Party
27 may retain separate counsel at its sole cost and expense (except
28 that the Indemnifying Party will be responsible for the fees and
29 expenses of such separate co-counsel to the extent the
30 Indemnified Party reasonably concludes in good faith that the
31 Indemnified Party has defenses available to it that may conflict
32 with those of the Indemnifying Party), (c) the Indemnified Party
33 will not consent to the entry of a judgment or enter into any
34 settlement with respect to the matter without the written consent
35 of the Indemnifying Party (not to be withheld or delayed
36 unreasonably) and (d) the Indemnifying Party will not consent to
37 the entry of a judgment with respect to the matter or enter into
38 any settlement which does not include a provision whereby the
39 plaintiff or claimant in the matter releases the Indemnified
40 Party from all liability with respect thereto, without the
41 written consent of the Indemnified Party (not to be withheld or
42 delayed unreasonably).
43 10.5. Indemnification Limitations. Neither party hereto will
44 be liable to the other hereunder for any punitive or
45 consequential incidental damages (including loss of revenue or
46 income, business interruption, cost of capital or loss of
47 business reputation or opportunity) relating to any claim for
48 which either such party may be entitled to recover under this
49 Agreement (other than indemnification of amounts paid or payable
50 to third parties in respect of any third party claim for which
51 indemnification hereunder is required). Neither the Purchaser
52 nor the Sellers will file or otherwise commence any other action,
1 suit or proceeding against the other in respect of this Agreement
2 or the transactions contemplated hereby unless (a) such party
3 notifies the other of its intent to do so and (b) a period
4 commencing with such notice and expiring on the earlier of the
5 date on which a meeting between officers of the Purchaser and the
6 Sellers has been completed and 30 days after the date of such
7 notice. Such officers will meet at a mutually convenient time
8 and location during such 30-day period for the purpose of
9 attempting to resolve in good faith the claims described in such
10 notice. No claim for the recovery of Losses based upon breach of
11 any representation, warranty, covenant or agreement may be
12 asserted by Seller Indemnified Parties or Purchaser Indemnified
13 Parties against the Purchaser or the Sellers, as the case may be
14 if any of the Seller Indemnified Parties or the Purchaser
15 Indemnified Parties, as the case may be, had knowledge of such
16 breach on or before the Closing Date.
17 10.6. Indemnification for Environmental Matters.
18 (a) With respect to any Losses relating to or
19 arising from any Environmental Law for which the Purchaser seeks
20 indemnity in connection with the operation of the Business on the
21 Owned Real Property or the Leased Real Property (_Environmental
22 Losses_), the Purchaser shall provide notice to the Sellers
23 pursuant to Section 12.8 hereof specifying in reasonable detail,
24 to the extent known, the nature of the Environmental Losses and
25 the estimated amount to remediate the condition giving rise to
26 the Environmental Losses, to the extent it is then quantifiable
27 (which estimate shall not be conclusive of the final amount of
28 any Environmental Losses).
29 (b) The Sellers shall have the right to control
30 and investigate and/or remediate any condition giving rise to a
31 claim or demand for indemnification by the Purchaser under this
32 Agreement with respect to any Environmental Losses; provided,
33 however, that if after written notice and a reasonable
34 opportunity to cure the Sellers do not exercise such right, the
35 Purchaser may exercise such right. The Sellers and their
36 employees, contractors, representatives and agents shall have
37 reasonable access at reasonable times to the facilities for the
38 purpose of conducting any investigation and/or remediation,
39 including any sampling or monitoring required to be performed by
40 the Sellers, which may include intrusive investigations or
41 remedial action, after the Closing Date or at any time
42 thereafter. The Sellers shall use all reasonable efforts to
43 minimize disruption to the Business as a result of conducting any
44 such investigation or remediation.
45 (c) The Purchaser shall use reasonable efforts to
46 cooperate with the Sellers to minimize costs with respect to
47 Environmental Losses. Nothing in this Agreement shall require
48 the Sellers to perform any environmental remediation activities
49 or other environmental testing, sampling or monitoring activities
50 beyond the minimum required by applicable Environmental Laws to
51 permit the use of the Owned Real Property consistent with its
1 current use, which may include leaving Hazardous Materials in
2 place or the use of deed restrictions.
3 (d) The Purchaser shall give prompt written notice
4 to the Sellers of any report or other document submitted, whether
5 voluntarily or by requirement of a Government Entity, to a
6 Governmental Entity which describes any Environmental Condition
7 existing prior to the Closing Date. To the extent reasonably
8 possible in the circumstances, the Sellers shall have the right
9 to review and comment upon any submission to a Governmental
10 Entity which describes or addresses any Environmental Condition
11 for which the Purchaser is claiming indemnification from the
12 Sellers hereunder (and the Sellers will cooperate with the
13 Purchaser in responding to such requests, including making
14 available all relevant records in its possession or under its
15 control), and the Purchaser shall revise such submission in
16 accordance with the Sellers' reasonable comments thereon. To the
17 extent reasonably possible in the circumstances, the Purchaser
18 shall give the Sellers prompt written notice of, and the Sellers
19 and/or its representatives shall have the right to participate
20 in, any phone call or meeting with any Governmental Entity at
21 which any Environmental Condition for which the Purchaser is
22 claiming indemnification from the Sellers hereunder is to be
23 discussed or addressed in any manner.
24 (e) The Sellers shall not have any obligation to
25 indemnify any Purchaser Indemnified Party from and against
26 (i) any Environmental Losses arising from or related to a use of
27 the facilities after the Closing Date that is not substantially a
28 continuation of the operation of the Business as conducted on the
29 Closing Date, or (ii) any Environmental Losses arising from or
30 related to any change in the use after the Closing Date of the
31 Owned Real Property from industrial use, or by the installation
32 or construction of new buildings, pavement or other structures or
33 improvements on, or alteration of the topography of, the Owned
34 Real Property other than described in subparagraph (i) above, or
35 (iii) any Environmental Losses arising from or related to any
36 amendment to or change in any Environmental Law from that which
37 is in effect on the date hereof. Notwithstanding anything to the
38 contrary contained herein, the Sellers will not have any
39 obligation to indemnify the Purchaser Indemnified Parties from
40 and against any Environmental Losses (i) which are not asserted
41 by a third party and in existence prior to Closing, (ii) arising
42 with respect to any release of a Hazardous Material by the
43 Purchaser, (iii) resulting from the Purchaser, its agents and
44 representatives, conducting invasive investigations, sampling or
45 monitoring of the facilities unless (A) required to do so by
46 Environmental Law or a Governmental Entity, or (B) conducted in
47 response to a material claim asserted by a third party, or
48 (iii) resulting from any act or knowing failure to act of the
49 Purchaser, its employees, contractors, representatives or agents
50 to further cause or exacerbate the leaking, migration or release
51 of any Hazardous Materials at the facilities in each case to the
52 extent resulting from any act or failure to act of the Purchaser.
1 The Sellers will not have any obligation to indemnify the
2 Purchaser with respect to ongoing operation, maintenance,
3 monitoring or reporting costs incurred in connection with any
4 remediation performed by the Sellers for which the Purchaser
5 seeks indemnity. The Purchaser acknowledges that nothing
6 contained herein absolves it of any obligation under any
7 Environmental Law for Environmental Losses with respect to
8 violations of Environmental Laws by the Purchaser, its employees,
9 contractors, representatives or agents.
10 (f)If the Purchaser undertakes environmental
11 remediation activities or other environmental testing, sampling
12 or monitoring activities in connection with Environmental Losses
13 which are not required by a Governmental Entity or in response to
14 a third party claim asserting liability for an environmental
15 condition at the facilities, subject to the limitations contained
16 in Section 10.2, the Sellers shall only be obligated to indemnify
17 the Purchaser in respect of 50 cents out of each dollar of such
18 Environmental Losses, to the extent such Environmental Losses do
19 not exceed $500,000.
20 10.7. EXCLUSIVE REMEDY. THE INDEMNIFICATION PROVISIONS
21 CONTAINED IN THIS SECTION 10 WILL CONSTITUTE THE SOLE AND
22 EXCLUSIVE RECOURSE AND REMEDY OF THE PARTIES FOR MONETARY DAMAGES
23 WITH RESPECT TO ANY BREACH OF ANY OF THE REPRESENTATIONS,
24 WARRANTIES OR COVENANTS CONTAINED IN THIS AGREEMENT OR ANY OF THE
25 ANCILLARY AGREEMENTS OR WITH RESPECT TO ANY LOSSES RESULTING
26 FROM, ARISING OUT OF, OR CAUSED BY EXCLUDED LIABILITIES. THE
27 PROVISIONS OF THIS SECTION 10 WILL NOT RESTRICT THE RIGHT OF ANY
28 PARTY TO SEEK SPECIFIC PERFORMANCE OR OTHER EQUITABLE REMEDIES IN
29 CONNECTION WITH ANY BREACH OF ANY OF THE COVENANTS CONTAINED IN
30 THIS AGREEMENT OR ANY OF THE ANCILLARY AGREEMENTS. THE PURCHASER
31 ACKNOWLEDGES THAT IT HAS NO RIGHT TO RESCIND THIS AGREEMENT
32 EITHER FOR A BREACH OF CONTRACT OR FOR NEGLIGENT OR INNOCENT
33 MISREPRESENTATION. NOTWITHSTANDING ANY OTHER PROVISIONS OF THE
34 AGREEMENT, THE PROVISIONS OF THIS SECTION 10.7 SHALL NOT APPLY TO
35 EXCLUDE OR LIMIT THE LIABILITY OF THE SELLERS TO THE EXTENT THAT
36 ANY CLAIM ARISES BY REASON OF ANY FRAUD OR FRAUDULENT
37 MISREPRESENTATION OF ANY SUCH PARTY.
38 10.8. Minimizing Losses. Each party agrees to use all
39 commercially reasonable efforts to minimize all Losses for which
40 it may seek indemnification from the other party pursuant to this
41 Section 10, and to minimize the amount of such indemnification
42 obligation by reasonably pursuing the maximum possible insurance
43 recovery or recovery from other available sources with respect to
44 such Losses and nothing herein will in any way diminish each
45 party's common law duty to mitigate its Loss.
46 Section 11: Termination.
1 11.1. Termination of Agreement. The parties may terminate
2 this Agreement as provided below:
3 (a) the parties may terminate this Agreement by
4 mutual written consent at any time prior to the Closing;
5 (b) the Purchaser may terminate this Agreement by
6 giving written notice to the Sellers at any time prior to the
7 Closing if the Closing has not occurred on or before September
8 15, 1999, unless failure results primarily from the Purchaser
9 itself breaching any representation, warranty or covenant
10 contained in this Agreement, or unless an extension is mutually
11 agreeable to the Sellers and the Purchaser; and
12 (c) the Sellers may terminate this Agreement by
13 giving written notice to the Purchaser at any time prior to the
14 Closing if the Closing has not occurred on or before September
15 15, 1999, unless failure results primarily from the Sellers
16 breaching any representation, warranty or covenant contained in
17 this Agreement, or unless an extension is mutually agreeable to
18 the Sellers and the Purchaser.
1 11.2. Effect of Termination. If any party terminates this
2 Agreement pursuant to Section 11.1, all obligations of the
3 parties hereunder will terminate without liability of any party
4 to the other party (except for any liability of any party then in
5 breach); provided that the provisions of Sections 12.1 and 12.3
6 of this Agreement and the Confidentiality Agreement will survive
7 termination and remain in full force and effect thereafter.
8 Section 12: Miscellaneous.
9 12.1. Press Releases and Announcements. No party will issue
10 any press release or announcement relating to the subject matter
11 of this Agreement prior to the Closing Date without the prior
12 approval of the other party; provided that any party may make any
13 public disclosure it believes in good faith is required by Law or
14 the rules of any national securities exchange or any automated
15 inter-dealer quotation system on which the securities of either
16 party (or any Affiliate thereof) are listed or admitted for
17 trading (in which case the disclosing party will advise the other
18 party at least one business day prior to making such disclosure).
19 12.2. Expenses; Transfer Taxes. Each of the parties hereto
20 will bear all legal, accounting, investment banking and other
21 expenses incurred by it or on its behalf in connection with the
22 transactions contemplated by this Agreement, whether or not such
23 transactions are consummated. The Purchaser will pay and hold
24 the Sellers harmless from payment of all sales, use, transfer and
25 documentary taxes applicable to the transfer of the Purchased
26 Assets to the Purchaser. Without limiting the foregoing, the
27 Purchaser shall reimburse the Sellers for any such taxes which
28 the Sellers are required to pay under applicable Law.
29 12.3. Consent to Amendments. The provisions of this
30 Agreement may be amended or waived only by a written agreement
31 executed and delivered by the Sellers and the Purchaser.
32 No other course of dealing between the parties to this Agreement
33 or any delay in exercising any rights hereunder will operate as a
34 waiver of any rights of such parties.
35 12.4. Successors and Assigns. No party hereto may assign or
36 delegate any of such party's rights or obligations under or in
37 connection with this Agreement without the written consent of the
38 other party hereto. Except as otherwise expressly provided
39 herein, all covenants and agreements contained in this Agreement
40 by or on behalf of any of the parties hereto will be binding upon
41 and enforceable against the respective successors and assigns of
42 such party and will be enforceable by and will inure to the
43 benefit of the respective successors and permitted assigns of
44 such party.
45 12.5. Severability. Whenever possible, each provision of
46 this Agreement will be interpreted in such manner as to be
47 effective and valid under applicable Law, but if any provision of
48 this Agreement is held to be prohibited by or invalid under
49 applicable Law, such provision will be ineffective only to the
1 extent of such prohibition of invalidity, without invalidating
2 the remainder of this Agreement.
3 12.6. Counterparts. This Agreement may be executed
4 simultaneously in two or more counterparts, any one of which need
5 not contain the signatures of more than one party, but all such
6 counterparts taken together will constitute one and the same
7 Agreement.
8 12.7. Descriptive Headings. The descriptive headings of this
9 Agreement are inserted for convenience only and do not constitute
10 a part of this Agreement.
11 12.8. Notices. All notices, demands or other communications
12 to be given or delivered under or by reason of the provisions of
13 this Agreement will be in writing and will be deemed to have been
14 given when delivered personally to the recipient or when sent to
15 the recipient by telecopy (receipt confirmed), one business day
16 after the date when sent to the recipient by reputable express
17 courier service (charges prepaid) or two business days after the
18 date when mailed to the recipient by certified or registered
19 mail, return receipt requested and postage prepaid. Such
20 notices, demands and other communications will be sent to the
21 Purchaser and the Sellers at the respective address indicated
22 below:
23 If to the Purchaser:
24 Astec Industries, Inc.
25 P.O. Box 72787
26 4101 Jerome Avenue
27 Chattanooga, TN 37407
28 Attention: Richard W. Bethea, Jr.
29 Vice President and Corporate Counsel
30 Telephone: (423) 867-4210
31 Facsimile: (423) 827-1818
32
33 If to the Sellers:
34 Teledyne Industries, Inc.
35 c/o Allegheny Teledyne Incorporated
36 1000 Six PPG Place
37 Pittsburgh, Pennsylvania 15222
38 Attention: Jon D. Walton
39 Senior Vice President, General Counsel and
40 Secretary
41 Telephone: (412) 394-2836
42 Facsimile: (412) 394-3010
43
1 12.9. No Third-Party Beneficiaries. This Agreement will not
2 confer any rights or remedies upon any Person other than the
3 parties hereto and their respective successors and permitted
4 assigns.
5 12.10. Entire Agreement. This Agreement, and the documents
6 referred to in it, constitute the entire Agreement and
7 understanding of the parties and supersede any previous agreement
8 between the parties relating to the subject matter of this
9 Agreement. Each of the parties acknowledges and agrees that in
10 entering into this Agreement, and the documents referred to in
11 it, it does not rely on, and shall have no remedy in respect of
12 any statement, representation, warranty or understanding (whether
13 negligently or innocently made) of any person (whether party to
14 this Agreement or not) other than as expressly set out in this
15 Agreement. The only remedy available to it for breach of the
16 warranties shall be for breach of contract under the terms of
17 this Agreement.
18 12.11. Construction. The language used in this Agreement will
19 be deemed to be the language chosen by the parties to express
20 their mutual intent and no rule of strict construction will be
21 applied against any party. The use of the word _including_ in
22 this Agreement means _including without limitation_ and is
23 intended by the parties to be by way of example rather than
24 limitation.
25 12.12. Incorporation of Exhibits and Schedules. The Exhibits
26 and Schedules identified in this Agreement are incorporated
27 herein by reference and made a part hereof.
28 12.13. Bulk Transfer Laws. The Purchaser acknowledges that
29 the Sellers will not comply with the provisions of any bulk
30 transfer laws of any jurisdiction, local or foreign, in
31 connection with the transactions contemplated by this Agreement.
32 The Sellers hereby covenant and agree to indemnify and hold the
33 Purchaser harmless from and against any and all liabilities other
34 than Assumed Liabilities which the Purchaser may incur as a
35 result of any failure to comply with any applicable bulk transfer
36 laws in connection with this Agreement. Such indemnification
37 shall not be subject to the limitations set forth in Section
38 10.2(c) of this Agreement.
39 12.14. GOVERNING LAW. WITH RESPECT TO THE SELLERS AND THE
40 PURCHASER, ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY
41 AND INTERPRETATION OF THIS AGREEMENT AND THE EXHIBITS AND
42 SCHEDULES HERETO WILL BE GOVERNED BY THE INTERNAL LAW, AND NOT
43 THE LAW OF CONFLICTS, OF THE COMMONWEALTH OF PENNSYLVANIA.
44 12.15. TIME IS OF THE ESSENCE. With regard to all dates and
45 time periods set forth in this Agreement, time is of the essence.
1
2 [REST OF PAGE INTENTIONALLY LEFT BLANK]
1 IN WITNESS WHEREOF the parties hereto have executed and
2 delivered this Agreement on the date first written above.
3
4 TELEDYNE INDUSTRIES CANADA
5 LIMITED
6 /s/ Jon D. Walton
7 Jon D. Walton
8 President
9
10
11 TELEDYNE CM PRODUCTS, INC.
12 /s/ Jon D. Walton
13 Jon D. Walton
14 Chairman of the Board and Secretary
15
16
17 ASTEC INDUSTRIES, INC.
18 By: /s/ Richard W. Bethea, Jr.
19
20 Name: Richard W. Bethea, Jr.
21
22 Title: Secretary
23
24 Teledyne Industries, Inc., a California corporation, hereby
25 agrees to be bound by the provisions of Sections 7.5, 10 and
26 12.13 of the foregoing Agreement.
27
28 TELEDYNE INDUSTRIES, INC.
29 /s/ Jon D. Walton
30 Jon D. Walton
31 Senior Vice President, General
32 Counsel and Secretary
33
34
EXHIBIT 10.3
THIRD AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT
AGREEMENT
DATED AUGUST 11, 1999 BY AND AMONG ASTEC INDUSTRIES, INC.
AND ASTEC FINANCIAL SERVICES, INC. AND THE FIRST NATIONAL
BANK OF CHICAGO
EXHIBIT 10.3
THIRD AMENDMENT
TO
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
THIS THIRD AMENDMENT TO SECOND AMENDED AND
RESTATED CREDIT AGREEMENT (this _Amendment_ ) dated as of
August 11, 1999 is by and among Astec Industries, Inc., a
Tennessee corporation (_ Astec_ ), Astec Financial Services,
Inc., a Tennessee corporation (_AFS_ ; Astec and AFS are
sometimes referred to herein individually as a _Borrower_
and collectively as the _ Borrowers_ ), the financial
institutions parties hereto in their capacities as lenders
(individually, a _Lender_ and collectively, the
_ Lenders _ ) and The First National Bank of Chicago, as
agent (the _Agent_ ).
RECITALS
WHEREAS, the Borrowers, the Lenders and the Agent
have entered into a certain Second Amended and Restated
Credit Agreement dated as of November 24, 1997, as amended
by a First Amendment and Waiver dated as of October 30, 1998
and a Second Amendment dated as of June 3, 1999 (as so
amended, the _Credit Agreement_ ; all capitalized terms
used but not otherwise defined herein shall have the
respective meanings ascribed thereto in the Credit
Agreement), pursuant to which the Lenders have provided
certain revolving credit, letter of credit and swing line
facilities to the Borrowers, which facilities are guaranteed
by certain guarantors defined therein;
WHEREAS, the Borrowers, the Required Lenders and
the Agent wish to amend certain other provisions of the
Credit Agreement on the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the terms and
conditions set forth herein, and for other good and valuable
consideration the receipt and sufficiency of which are
hereby acknowledged, the Borrowers, the Lenders and the
Agent hereby agree as follows:
1. Amendment.
1.1. Section 6.11 of the Credit Agreement is
hereby amended by inserting a new paragraph (i) thereof to
read as follows:
"(i)other unsecured Indebtedness of the
Borrowers not to exceed $35,000,000 in the
aggregate at any time outstanding."
2. Reference to and Effect on the Credit
Agreement.
2.1. Except as specifically amended hereby, the
Credit Agreement shall remain in full force and effect and
is hereby ratified and confirmed.
2.2. The execution, delivery and effectiveness of
this Amendment shall not operate as a waiver of any right,
power or remedy of the Lenders or the Agent under the Credit
Agreement or any of the other Loan Documents, or constitute
a waiver of any provision of the Credit Agreement or any of
the other Loan Documents. Upon the effectiveness of this
Amendment, each reference in the Credit Agreement to _ this
Agreement,_ _ hereunder,_ _ hereof_ or words of similar
import shall mean and be a reference to the Credit Agreement
as amended hereby.
2.3. Each Guarantor joins in this Amendment solely
for the purpose of consenting to the terms hereof, and each
Guarantor hereby unconditionally consents to the terms of
this Amendment and fully ratifies and affirms the Guaranty,
after giving effect to this Amendment, and Astec Holdings,
Inc. (_Astec Holdings_ ) and Kolberg-Pioneer, Inc. (_KPI_)
join in this Amendment, in addition, for the purpose of
confirming that the Obligations under the Credit Agreement,
as amended by this Amendment, and KPI's guaranty thereof
pursuant to the Guaranty constitute _Senior Debt_ as
defined in the Subordination Agreement dated as of December
2, 1997 (the_Subordination Agreement_) between Astec
Holdings and the Agent, and fully ratify and affirm the
Subordination Agreement, after giving effect to this
Amendment.
3. Representations and Warranties. To induce
the Lenders and the Agent to execute this Agreement, the
Borrowers represent and warrant to the Lenders and the Agent
as follows:
3.1. The Borrowers have all requisite power and
authority to execute, deliver and perform this Amendment.
3.2. The execution, delivery and performance of
this Amendment (i) have been duly authorized by all
necessary corporate action of the Borrowers and (ii) will
not (A) violate (1) any provision of law, statute, rule or
regulation or the articles/certificate of incorporation or
other constitutive documents or the by-laws or regulations
of the Borrowers, (2) any order of any court, or any rule,
regulation or order of any other agency of government
binding upon the Borrowers, or (3) any provisions of any
material indenture, agreement or other instrument to which
the Borrowers are a party, or by which the Borrowers or any
of their properties or assets is or may be bound, or (B) be
in conflict with, result in a breach of or constitute (alone
or with notice or lapse of time or both) a default under any
indenture, agreement or other instrument referred to in
clause (ii)(A)(3) above.
3.3. This Amendment constitutes the legal, valid
and binding obligation of Borrowers enforceable in
accordance with its terms.
3.4. The representations and warranties in the
Loan Documents are true and correct in all material respects
with the same effect as though made on and as of the date
hereof.
3.5. The Borrowers are in compliance with all of
the terms and provisions set forth in the Credit Agreement
and the other Loan Documents and no Default or Unmatured
Default has occurred and is continuing.
4. Effectiveness. This Amendment shall become
effective as of the date upon which the Agent shall have
executed a counterpart of this Amendment and shall have
received executed counterparts of this Amendment from the
Borrowers, each Guarantor and the Required Lenders.
5. Miscellaneous.
5.1. This Amendment, including all schedules
attached hereto, constitutes the entire agreement of the
parties with respect to the subject matter hereof and
supersedes all other understandings, oral or written, with
respect to the subject matter hereof.
5.2. This Amendment may be executed in any number
of counterparts, each of which when so executed shall be
deemed an original, but all such counterparts shall
constitute one and the same instrument.
5.3. In accordance with Section 9.7 of the Credit
Agreement, the Borrowers agree, jointly and severally, to
promptly pay all reasonable fees, costs and expenses
incurred by the Agent in connection with the preparation,
execution and delivery of this Amendment.
5.4. The Borrowers acknowledge and agree that as
of the date hereof they have no offsets or claims against
the Lenders or the Agent under the Loan Documents or under
other agreements between the Borrowers and the Lenders, or
any defenses to the Lenders' or the Agent's enforcement of
their rights and remedies under the Loan Documents.
5.5. THE LOAN DOCUMENTS (OTHER THAN THOSE
CONTAINING A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL
BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT
THE LAW OF CONFLICTS) OF THE STATE OF ILLINOIS, BUT GIVING
EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
5.6. Section headings in this Amendment are
included herein for convenience of reference only and shall
not constitute a part of this Amendment for any other
purpose.
5.7. This Amendment shall be binding upon each of
the parties hereto and their respective successors and
assigns, except that the Borrowers may not assign their
rights or obligations hereunder without the written consent
of the Lenders and the Agent.
[SIGNATURE PAGES TO FOLLOW]
IN WITNESS WHEREOF, the Borrowers, the Lenders,
the Guarantors and the Agent have executed this Amendment as
of the date first above written.
ASTEC INDUSTRIES, INC. ASTEC FINANCIAL SERVICES, INC.
By: /S/ Richard W. Bethea, Jr. By: /s/ Albert E. Guth
Print Name: Richard W. Bethea, Print Name: Albert E. Guth
Jr. Title: President
Title: Secretary
Address: 4101 Jerome Avenue Address: 6400 Lee Highway,
Chattanooga, Tennessee Suite 107
37407 Chattanooga,
Tennessee 37421
Telecopy: (423) 867-4127 Telecopy: (423) 899-4456
Telephone: (423) 867-4210 Telephone: (423) 899-5898
Attention: F. McKamy Hall Attention: Albert E. Guth
IN WITNESS WHEREOF, the Borrowers, the Lenders,
the Guarantors and the Agent have executed this Amendment as
of the date first above written.
HEATEC, INC. TELSMITH, INC.
By:/s/ Richard W. Bethea, By:/s/ Richard W. Bethea, Jr.
Jr. Its: Secretary
Its: Secretary
ROADTEC, INC. ASTEC TRANSPORTATION, INC.
By:/s/ Richard W. Bethea, By:/s/ Richard W. Bethea, Jr.
Jr. Its: Secretary
Its: Secretary
TRENCOR, INC. PRODUCTION ENGINEERED
PRODUCTS, INC.
By:/s/ Richard W. Bethea, By:/s/ Richard W. Bethea, Jr.
Jr. Its: Secretary
Its: Secretary
ASTEC, INC. CEI ENTERPRISES, INC.
By:/s/ Richard W. Bethea, By:/s/ Richard W. Bethea, Jr.
Jr. Its: Secretary
Its: Secretary
KOLBERG-PIONEER, INC. ASTEC HOLDINGS, INC.
By:/s/ Richard W. Bethea, By:/s/ Richard W. Bethea, Jr.
Jr. Its: Secretary
Its: Secretary
ASTEC INVESTMENTS, INC. JOHNSON CRUSHERS
INTERNATIONAL, INC.
By:/s/ Richard W. Bethea, By:/s/ Richard W. Bethea, Jr.
Jr. Its: Secretary
Its: Secretary
IN WITNESS WHEREOF, the Borrowers, the Lenders,
the Guarantors and the Agent have executed this Amendment as
of the date first above written.
THE FIRST NATIONAL BANK OF
CHICAGO, individually and as
Agent
By:/s/ David T. McNeela
Print Name: David T. McNeela
Title: Vice President
Address: One First National
Plaza
Chicago, Illinois
60670
Telecopy: (312) 732-5296
Telephone: (312) 732-5730
Attention: David T. McNeela
IN WITNESS WHEREOF, the Borrowers, the Lenders,
the Guarantors and the Agent have executed this Amendment as
of the date first above written.
FIRST AMERICAN NATIONAL BANK
By: /s/ Michael Metcalf
Print Name: Michael Metcalf
Title: Vice President
Address: One Union Square,
Suite 100
Chattanooga, TN
37402
Telecopy: (423) 755-6014
Telephone: (423) 755-6022
Attention: Michael Metcalf
IN WITNESS WHEREOF, the Borrowers, the Lenders,
the Guarantors and the Agent have executed this Amendment as
of the date first above written.
AMSOUTH BANK
By: /s/ Steven Anderson
Print Name: Steven Anderson
Title: Vice President
Address: 601 Market Center
Chattanooga, TN 37402
Telecopy: (423) 752-1558
Telephone:(423) 752-1623
Attention: Steven Anderson
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 2593
<SECURITIES> 0
<RECEIVABLES> 75844
<ALLOWANCES> 1937
<INVENTORY> 88772
<CURRENT-ASSETS> 177254
<PP&E> 134805
<DEPRECIATION> 42820
<TOTAL-ASSETS> 312407
<CURRENT-LIABILITIES> 71470
<BONDS> 0
0
0
<COMMON> 3822
<OTHER-SE> 158043
<TOTAL-LIABILITY-AND-EQUITY> 312407
<SALES> 106886
<TOTAL-REVENUES> 106886
<CGS> 79107
<TOTAL-COSTS> 79107
<OTHER-EXPENSES> 14830
<LOSS-PROVISION> 506
<INTEREST-EXPENSE> 1065
<INCOME-PRETAX> 12873
<INCOME-TAX> 4958
<INCOME-CONTINUING> 4958
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4958
<EPS-BASIC> .41
<EPS-DILUTED> .40
</TABLE>
