FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended
December 31, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________________ to
____________________
Commission file number 0-14714
ASTEC INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Tennessee 62-0873631
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P. O. Box 72787, 4101 Jerome Avenue, Chattanooga, Tennessee 37407
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (423) 867-4210
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.20 par value
(Title of class)
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
(Form 10-K Cover Page - Continued)
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-
affiliates of the registrant was approximately $422,089,000
based upon the closing sales price reported by the NASDAQ
National Market on March 15, 2000, using beneficial ownership
of stock rules adopted pursuant to Section 13 of the
Securities Exchange Act of 1934 to exclude voting stock owned
by all directors and executive officers of the registrant,
some of whom may not be held to be affiliates upon judicial
determination.
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of the latest
practicable date:
As of March 15, 2000
Common Stock, par value $.20 - 19,134,915 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents have been
incorporated by reference into the Parts of this Annual Report
on Form 10-K indicated:
Document
Form 10-K
Proxy Statement relating to Part III
Annual Meeting of Shareholders
to be held on April 27, 2000
ASTEC INDUSTRIES, INC.
1999 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS Page
PART I
Item 1. Business 1
Item 2. Properties 17
Item 3. Legal Proceedings 18
Item 4. Submission of Matters to a Vote of Security
Holders 18
Executive Officers of the Registrant 18
PART II
Item 5. Market for Registrant's Common Equity and Related
Shareholder Matters 20
Item 6. Selected Financial Data 20
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 20
Item 8. Financial Statements and Supplementary Data 21
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure 21
PART III
Item 10. Directors and Executive Officers of the
Registrant 21
Item 11. Executive Compensation 21
Item 12. Security Ownership of Certain Beneficial Owners
and Management 21
Item 13. Certain Relationships and Related Transactions 21
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 22
Appendix A A-1
Signatures 27
PART I
Item 1. BUSINESS
General
Astec Industries, Inc. (the "Company") is a Tennessee
corporation, which was incorporated in 1972. The Company
designs, engineers, manufactures, markets, and finances
equipment and components used primarily in road building and
related construction activities. The Company's products are
used in each phase of road building, from quarrying and
crushing the aggregate to application of the road surface. In
addition, the Company is partner in a joint venture that makes
testing and sampling equipment for the asphalt mix and
aggregate processing industries. The Company also
manufactures certain equipment and components unrelated to
road construction, including trenching, auger boring,
directional drilling, environmental remediation and industrial
heat transfer equipment. The Company holds 99 United States
and 76 foreign patents, has 53 patent applications pending,
and has been responsible for many technological and
engineering innovations in the industry. The Company's
products are marketed both domestically and internationally.
In addition to plant and equipment sales, the Company
manufactures and sells replacement parts for equipment in each
of its product lines. The distribution and sale of
replacement parts is an integral part of the Company's
business.
The Company's twelve manufacturing subsidiaries are: (i)
Astec, Inc., which manufactures a line of hot-mix asphalt
plants, soil purification and environmental remediation
equipment and related components; (ii) Heatec, Inc., which
manufactures thermal fluid heaters, asphalt heaters, polymer
and rubber blending systems and other heat transfer equipment
used in the Company's asphalt mixing plants and in other
industries; (iii) CEI Enterprises, Inc., which manufactures
heat transfer equipment, polymer and rubber blending systems
for the hot-mix asphalt industry; (iv) Telsmith, Inc., which
manufactures aggregate processing equipment for the production
and classification of sand, gravel, and crushed stone for road
and other construction applications; (v) Kolberg-Pioneer,
Inc., which manufactures aggregate processing equipment for
the crushed stone, manufactured sand, recycle, top soil and
remediation markets; (vi) Johnson Crushers International,
Inc., which manufactures portable and stationary aggregate and
ore processing equipment; (vii) Production Engineered
Products, Inc., which designs, manufactures and markets high-
frequency vibrating screens for sand and gravel and asphalt
operations; (viii) Roadtec, Inc., which manufactures milling
machines used to recycle asphalt and concrete, asphalt paving
equipment and material transfer vehicles; (ix) Trencor, Inc.,
which manufactures chain and wheel trenching equipment and
excavating equipment; (x) Superior Industries of Morris, Inc.,
which manufactures conveyors and idlers for aggregate
processing; (xi) Breaker Technology Ltd., which manufactures
rock breaking and processing equipment and utility vehicles
for mining; and (xii) American Augers, Inc., which
manufactures auger boring and directional drilling equipment.
Astec Financial Services, Inc. ("AFS") was formed in
June 1996 as a wholly owned subsidiary of the Company to
provide a wide range of financing products for leasing or
acquiring the Company's equipment. AFS, a captive finance
company, is dedicated to working with the Company's
subsidiaries and their customers in arranging financing for
the Company's equipment. AFS provides loans, operating
leases, floor plans for dealers, fleet rental plans, and other
financing plans to meet the needs of the industry.
The Company is a 50% shareholder of Pavement Technology,
Inc. ("PTI"). PTI manufactures innovative testing and
sampling equipment and packages design laboratory products,
thus allowing customers to purchase a complete design
laboratory from one source. The pavement analyzer technology
has captured the interest of state departments of
transportation, universities and contractors as a new standard
for measuring pavement performance of hot-mix asphalt. The
pavement technology product line enhances the services and
equipment the Company is able to provide to its customers.
The Company's strategy is to be the low-cost producer in
each of its product lines while continuing to develop
innovative new products and provide first class service for
its customers. Management believes that the Company is the
technological innovator in the markets in which it operates
and is well positioned to capitalize on the need to rebuild
and enhance roadway infrastructure, both in the United States
and abroad.
Segment Reporting
In 1998, the Company adopted SFAS No. 131, Disclosures
about Segments of an Enterprise and Related Information, which
changed the way the Company reported information about its
operating segments. The information below conforms to current
presentation requirements.
The Company's business units have separate management
teams and offer different products and services. The business
units have been aggregated into three reportable business
segments based upon the nature of the product or services
produced, the type of customer for the products and the nature
of the production process. The reportable business segments
are (i) Hot-mix Asphalt Plants and Related Heat Transfer
Equipment, (ii) Aggregate Processing Equipment and (iii)
Mobile Asphalt Construction Equipment. All remaining business
units are included in the "Other" category for reporting.
Financial information in connection with the Company's
financial reporting for segments of a business under SFAS 131
is included in Note 12 to "Notes to Consolidated Financial
Statements - Operations by Industry Segment and Geographic
Area," appearing at Page A-11 of this report.
Hot-mix Asphalt Plants and Related Heat Transfer Equipment
The Hot-Mix Asphalt Plants and Related Heat Transfer
Equipment segment is made up of three business units--Astec,
Inc., Heatec, Inc. and CEI Enterprises, Inc. These business
units design, manufacture and market a complete line of
asphalt plants and related components, heating and heat
transfer processing equipment and storage tanks for the
asphalt paving and other non-related industries.
Products
Astec, Inc. designs, engineers, manufactures and markets
a complete line of portable, stationary and relocatable hot-
mix asphalt plants and related components under the ASTECr
trademark. An asphalt mixing plant typically consists of
heating and storage equipment for liquid asphalt (manufactured
by Heatec), cold feed bins for storing aggregates, a drum
mixer for drying, heating and mixing, a baghouse composed of
air filters and other pollution control devices, hot storage
bins or silos for temporary storage of hot-mix asphalt and a
control house. The Company introduced the concept of plant
portability in 1979. Its current generation of portable
asphalt plants is marketed as the Six PackTM and consists of
six portable components, which can be disassembled, moved to
the construction site and reassembled, which reduces
relocation expenses. Plant portability represents an industry
innovation developed and successfully marketed by the Company.
In 1996, an improved version of the Six PackTM plant was
developed, making it considerably easier to assemble and
capable of being separated into movable parts for transport
without the use of a crane. This design eliminated the use of
cranes for disassembly or erection. The enhanced version of
the Six PackTM, known as the Turbo Six PackTM, is a highly
portable plant which is especially useful in less populated
areas where plants must be moved from job to job.
The components in Astec's asphalt mixing plants are
fully automated and use microprocessor-based control systems
for efficient operation. The plants are manufactured to meet
or exceed federal and state clean air standards.
The Company has also developed specialized asphalt
recycling equipment for use with its hot-mix asphalt plants.
Many of its existing products are suited for blending,
vaporizing, drying and incinerating contaminated products. As
a result, Astec has developed a line of thermal purification
equipment for the remediation of petroleum-contaminated soil.
Heatec, Inc. designs, engineers, manufactures and
markets a variety of thermal fluid heaters, process heaters,
waste heat recovery equipment, liquid storage systems and
polymer and rubber blending systems under the HEATECr
trademark. For the construction industry, Heatec manufactures
a complete line of asphalt heating and storage equipment to
serve the hot-mix asphalt industry and water heaters for
concrete plants. In addition, Heatec builds a wide variety
of industrial heaters to fit a broad range of applications,
including equipment for emulsion plants, roofing material
plants, refineries, chemical processing, rubber plants and the
agribusiness. Heatec has the technical staff to custom design
heating systems and has systems operating as large as
50,000,000 BTU's per hour.
CEI Enterprises, Inc. ("CEI"), designs, engineers,
manufactures and markets heating equipment and storage tanks
for the asphalt paving industry and rubber and polymer
blending systems. CEI's heating equipment uses hot oil,
direct fired or electric heating processes. CEI's equipment
includes portable and stationary tank models with capacities
up to 35,000 gallons each.
Marketing
The Company markets its hot-mix asphalt and heat
transfer products both domestically and internationally. The
principal purchasers of asphalt and related equipment include
highway contractors and foreign and domestic governmental
agencies. Asphalt equipment is sold directly to its customers
with domestic, soil remediation and international sales
departments. Outside dealers are not used to market hot-mix
asphalt products, but agents are used to market asphalt plants
and their components internationally.
Heatec equipment is marketed through both direct sales
and dealer sales. Seventeen manufacturers' representatives
sell heating products for applications in industries other
than the asphalt industry. CEI equipment is marketed only
through direct sales. Direct sales employees are paid
salaries and are generally entitled to commissions after
obtaining certain sales quotas.
Raw Materials
Raw materials used in the manufacture of products
include carbon steel and various types of alloy steel, which
are normally purchased from distributors. Raw materials for
manufacturing are readily available. Some steel is delivered
on a "just-in-time" arrangement from the supplier to reduce
inventory requirements at the manufacturing facilities.
Competition
This industry segment faces strong competition in price,
service and product performance and competes with both large
publicly held companies with resources significantly greater
than those of the Company and with various smaller
manufacturers. Hot-mix asphalt plant competitors include CMI
Corporation; Cedarapids, Inc. a subsidiary of Terex
Corporation; and Gencor Industries, Inc. The market for the
Company's heat transfer equipment is diverse because of the
multiple applications for such equipment. Competitors for
heating equipment include Gencor/Hyway Heat Systems, American
Heating, Gentec and GTX Systems.
Employees
At December 31, 1999 the Hot-mix Asphalt Plant and Heat
Transfer Equipment segment employed 1,041 individuals, of
which, 830 were engaged in manufacturing, 81 in engineering
and 130 in selling, general and administrative functions.
Backlog
The backlog for the Hot-mix Asphalt and Heat Transfer
Equipment segment at December 31, 1999 and 1998 was
approximately $59,300,000 and $59,600,000, respectively.
Aggregate Processing Equipment
The Company's Aggregate Group is comprised of six
business units that are focused on the aggregate, metallic
mining and recycle markets. Each subsidiary achieves its
strength by distributing products into niche markets and
drawing on the advantages of brand recognition in the global
market. The business units in this group are Telsmith, Inc.,
Kolberg-Pioneer, Inc., Production Engineered Products, Inc.,
Johnson Crushers International, Inc., Superior Industries of
Morris, Inc. and Breaker Technology Ltd.
Products
Founded in 1906, Telsmith, Inc. is the oldest subsidiary
of the group. The primary markets served under the TELSMITHr
trade name are the aggregate and metallic mining industries.
Telsmith's core products are cone (Gyrasphere?), jaw and
impact crushers, which are recognized for their reliability.
A wide range of vibrating feeders for primary crushing
operations are complemented with large vibrating screens for
the difficult scalping applications and sizing screens to
handle the most rigorous specifications of finished aggregate
products. Telsmith offers all their products as portables
that are easily relocated to quarry sites to minimize the
costs of transporting crushed stone. Equipment furnished by
Telsmith can be purchased as individual components, as
portable plants for flexibility or as completely engineered
systems for both portable and stationary applications.
The stringent demands for quality aggregate to meet the
specifications of the "Superpave" asphalt mixes has led to
Telsmith's development of the Silver BulletT narrow band cone
crusher, which provides unparalleled results in producing a
cubical product, as well as enhancing overall machine productivity.
In metallic mining operations, TELSMITHr equipment is
used in primary crushing stages after the material has been
blasted from the deposit. Secondary and tertiary crushing
equipment, as well as vibrating screens, are employed in
systems to reduce the material down to sizes for grinding mill
feed or leech bed processes.
In 1994, Telsmith received ISO 9001 certification, the
international standard of quality assurance in the design,
development, production, installation and servicing of their
products. This designation is recognition of the quality of
Telsmith products and services in the worldwide marketplace.
Kolberg-Pioneer, Inc. ("KPI") designs, manufactures
and supports a complete line of aggregate processing equipment
for the sand and gravel, mining, quarrying and concrete
recycling markets. KPI manufactures the well-known Pioneerr
and Kolbergr product lines.
Pioneerr products include a complete line of primary,
secondary, tertiary and quaternary crushers, including jaws,
cones, horizontal shaft impactors, vertical shaft impactors
and roll crushers. Kolberg-Pioneer rock crushers are used by
mining, quarrying and sand and gravel producers to crush
oversized aggregate to salable size. Vibrating feeders are
used to convey aggregate to the primary crusher operations.
The incorporation of vibrating grizzly feeders and vibrating
scalpers allows small material to bypass the primary crusher.
Kolbergr sand classifying and washing equipment is
relied upon to clean, segregate and re-blend deposits to meet
the size specifications for critical applications. The
product line includes fine and coarse material washers, log
washers, blade mills and sand classifying tanks. Screening
plants are available in both stationary and highly portable
models, and are complemented by a full line of radial stacking
and overland belt conveyors.
Kolberg-Pioneer manufactures belt conveyors designed to
move or store aggregate and other bulk materials, typically in
radial cone-shaped stockpiles. Models offered include road
portable, telescoping stationary and overland styles.
In addition, Kolberg-Pioneer manufactures pugmills,
which are highly efficient homogenous mixing chambers
consisting of twin shafts with timed, overlapping paddles used
for soil remediation, cement-treated base and cold-mix
asphalt. Pugmills are typically combined with either a bulk
storage silo for introducing dry additives or with a pump for
liquids.
Production Engineered Products, Inc. ("PEP") designs,
manufactures and markets high-frequency vibrating screens for
sand and gravel customers, as well as customers engaged in
asphalt production. In addition, they incorporate the high-
frequency screens into portable crushing and screening plants
servicing the aggregate and industrial markets. High-
frequency screens are adept in separating out small mesh
particles where conventional screens are not ideally suited.
PEP's latest product development, the highly successful
"Fold`n Go" plant, incorporates features that allow the
aggregate producers to efficiently manufacture asphalt chips
and manufactured sand. This unit, with its on-plant
stockpiling conveyors and its own power source, is totally
self-contained.
Johnson Crushers International, Inc. ("JCI") designs,
manufactures and distributes portable and stationary aggregate
and ore processing equipment. This equipment is used in the
aggregate, mining and recycle industries. JCI's principal
products are cone crushers, three-shaft horizontal screens,
portable plants, and replacement parts for competitive
equipment. JCI offers completely re-manufactured cone
crushers and screens from its service repair facility.
JCI cone crushers are used primarily in secondary and
tertiary crushing applications, and come in both manual and
remotely adjusted models. Horizontal screens are low-profile
machines for use primarily in portable applications. They are
used to separate aggregate materials by sizes. Portable
plants combine various configurations of cone crushers,
horizontal screens and conveyors mounted on tow-away chassis.
Because today's transportation costs are high, producers use
portable equipment to operate nearer to their job sites.
Portable plants allow the aggregate producers to quickly and
efficiently move their equipment from one location to another.
Superior Industries of Morris, Inc. designs and
manufactures a complete line of portable and stationary
conveyors. Its portable line includes 150-foot telescoping
stacking conveyors, patented FD series axle assemblies and
stationary conveyor systems for all types of bulk material
handling, including stockpiling and overland transfer.
Superior's product line also includes screening plants, wash
plants, fine material washers and custom-built crushing
plants. Superior's component division builds a complete line
of conveyor idlers and maintains ISO 9001 certification for
quality assurance.
Breaker Technology Ltd. ("BTL") designs, manufactures
and markets hydraulic rock breaker systems for the aggregate,
mining and recycling industries. They also design and
manufacture a complete line of four-wheel drive articulated
utility vehicles for underground mines and quarries.
In addition to the quarry and mining industries, BTL
designs, manufactures and markets a complete line of hydraulic
attachments for the North American construction and demolition
markets. These attachments are sold on a variety of equipment
including excavators, backhoe loaders, wheel loaders, and skid
steer loaders. They include hydraulic breakers and compactors
for the construction market and include crushers, pulverizers,
shears and multi-processors for the demolition market.
BTL offers an extensive aftermarket sales and service
program through a highly qualified and trained dealer network.
Marketing
Aggregate processing equipment is marketed by 47 direct
sales employees, approximately 260 independent domestic
distributors and approximately 100 independent international
distributors. The principal purchasers of aggregate
processing equipment include highway and heavy equipment
contractors, open mine operators, quarry operators and foreign
and domestic governmental agencies.
Raw Materials
Raw materials used in the manufacture of products
include carbon steel and various types of alloy steel, which
are normally purchased from distributors. Raw materials for
manufacturing are readily available. Breaker Technology
purchases rock breakers under a long-term purchasing contract
from a Japanese supplier and also purchases crushers from an
Italian supplier. Both the Japanese and Italian suppliers
have sufficient capacity to meet the Company's anticipated
demand; however, alternative suppliers exist for both of these
components should any supply disruptions occur.
Competition
The aggregate processing equipment segment faces strong
competition in price, service and product performance.
Aggregate processing equipment competitors include Svedala and
its subsidiary Universal; Greystone; Cedarapids, Inc.,
Powerscreen, and Finley, subsidiaries of Terex Corporation;
Nordberg, Inc., and its subsidiaries Seco and Hewitt Robins;
Deister; Eagle Iron Works; and other smaller manufacturers,
both domestic and international.
Employees
At December 31, 1999 the Aggregate Processing Equipment
segment employed 1,218 individuals, of which 894 were engaged
in manufacturing, 101 in engineering and support functions,
and 223 in selling, general and administrative functions.
Backlog
At December 31, 1999 and 1998, the backlog for the
Aggregate Processing Equipment segment was approximately
$32,000,000 and $32,700,000, respectively. The 1998 backlog
is restated for the acquisitions of Breaker Technology Ltd.
and Superior Industries of Morris, Inc.
Mobile Construction Equipment
The Mobile Construction Equipment Group comprised of
Roadtec, Inc. which designs, engineers, manufactures and
markets asphalt pavers, material transfer vehicles and milling
machines. Roadtec engineers emphasize simplicity,
productivity, versatility and accessibility in product design
and use.
Products
Roadtec's patented Shuttle Buggyr is a mobile, self-
propelled material transfer vehicle which allows continuous
paving by separating truck unloading from the paving process
while remixing the asphalt surface material. A typical
asphalt paver must stop paving to permit truck unloading of
asphalt mix. By permitting continuous paving, the Shuttle
Buggyr allows the asphalt paver to produce a smoother road
surface. As a result of the pavement smoothness achieved with
this machine, certain states are now requiring the use of the
Shuttle Buggyr. Recent studies using infrared technology have
revealed problems caused by differential cooling of the hot-
mix during hauling. The Shuttle Buggyr remixes the material to
a uniform temperature and gradation, thus eliminating these
problems.
Asphalt pavers are used in the application of hot-mix
asphalt to the road surface. Roadtec pavers have been
designed to minimize maintenance costs while exceeding road
surface smoothness requirements. Roadtec also manufactures a
paver model that is designed to be used with the material
transfer vehicle described above.
Roadtec milling machines are designed to remove old
asphalt from the road surface before new asphalt mix is
applied. They are manufactured with a simplified control
system, wide conveyors, direct drives and a wide range of
horsepower and cutting capabilities to provide versatility in
product application. Additional upgrades and options are
available to enhance the products and their capabilities.
Marketing
Mobile Construction Equipment is marketed both
domestically and internationally to highway and heavy
equipment contractors, utility contractors and foreign and
domestic governmental agencies. Mobile construction equipment
is marketed both directly and through dealers. This segment
employs 14 direct sales staff, 29 foreign independent
distributors and 1 domestic independent distributor.
Raw Materials
Raw materials used in the manufacture of products
include carbon steel and various types of alloy steel, which
are normally purchased from steel mills and other sources.
Raw materials for manufacturing are readily available.
Competition
The paving equipment segment faces equally strong
competition in price, service and performance, as do the
Company's other operating segments. Mobile equipment
competitors include Caterpillar Paving Products, Inc., a
subsidiary of Caterpillar, Inc.; Blaw-Knox Construction
Equipment Company, a subsidiary of Ingersoll-Rand Company; and
Cedarapids, Inc., a subsidiary of Terex Corporation. The
segment's milling machine equipment competitors include CMI
Corporation; Caterpillar, Inc.; and Wirtgen America, Inc.
Employees
At December 31, 1999 the Mobile Construction Equipment
segment employed 322 individuals, of which, 240 were engaged
in manufacturing, 20 in engineering and support functions, and
62 in selling, general and administrative functions.
Backlog
The backlog for the Mobile Construction Equipment
segment at December 31, 1999 and 1998 was approximately
$1,200,000 and $4,200,000, respectively.
Others Business Units
This category consists of the Company's five other
business units that do not meet the requirements for separate
disclosure as an operating segment. These other operating
units include Trencor, Inc., American Augers, Inc., Astec
Financial Services, Inc., Astec Transportation, Inc. and the
parent company Astec Industries, Inc. Revenues in this
category are derived predominantly from the sale of trenching,
auger boring, horizontal directional drilling, mud/fluid
systems and associated accessories and spare parts. This
category also includes revenues from operating leases and
other financial products offered by Astec Financial Services,
Inc., the Company's finance subsidiary.
Products
Trencor, Inc. designs, engineers, manufactures and
markets chain and wheel trenching equipment, canal excavators,
rock saws, material processors and road miners.
Trencor's chain trenching machines utilize a heavy-duty
chain (equipped with cutting teeth attached to steel plates)
wrapped around a long moveable boom. These machines, with
weights up to 450,000 pounds, are capable of cutting a trench
up to eight feet wide and thirty-five feet deep through rock.
Trencor also makes foundation trenchers used in areas where
drilling and blasting are prohibited. In addition, the wheel
trenching machines are used in pipeline excavation in soil and
soft rock. The wheel trenchers weigh up to 390,000 pounds and
have a trench capacity of up to seven feet in width and ten
feet in depth.
Trencor canal excavators are used to make finished and
trimmed trapezoidal canal excavations within close tolerances
primarily for irrigation systems. The rock saw is used to lay
water and gas lines, fiber optic cable, and for constructing
highway drainage systems, among other applications.
Four Road Minerr models are available with an attachment
that allows them to cut a path up to twelve and a half feet
wide and five feet deep on a single pass. The Road Minerr has
applications in the road construction industry and in mining
and aggregate processing operations.
Trencor manufactures a material processor which includes
a crusher that operates independently from the trencher to
process rock and related material (spoil) removed from the
trench to make it suitable for use as a filler around pipes,
cables or other lines being installed.
American Augers, Inc. designs, manufactures, markets and
sells a wide range of trenchless equipment. Three decades of
dominant market leadership in horizontal auger boring has led
American Augers to a pioneering position in the rapidly
growing market for trenchless utility installation.
Complementary fluid/mud systems and downhole tooling are major
components of company revenues. American Augers has over
2,500 customers throughout the world that operate in the
sewer, power, fiber-optic telecommunication, electric, oil
and gas, and water industries.
Marketing
Trencor and American Augers market their products
domestically through direct sales representatives and
internationally through both direct sales and independent
dealers and sales agents.
Raw Materials
American Augers maintains excellent relationships with
its suppliers and has experienced minimal turnover. The
purchasing group has developed partnership relationships with
many of the company's key vendors to improve just-in-time
delivery and thus lower inventory. The predominant raw
material used to manufacture Trencor's and American Augers'
products is steel. Components used are engines, hydraulic
motors and pumps, gearboxes, power transmissions and
electronics systems.
Competition
Competition for sales of trenching, excavating, auger
boring, directional drilling, and fluid/mud equipment includes
Charles Machine Works (Ditch Witch); J.I. Case; Vermeer and
other smaller custom manufacturers. Competitors of the
captive finance company include General Electric Credit
Corporation, The CIT Group, Associates First Capital
Corporation, Safeco Credit Company, Inc. and local financial
institutions.
Employees
At December 31, 1999 the Other Business Units segment
employed 394 individuals, of which, 256 were engaged in
manufacturing, 37 in engineering and 101 in selling, general
and administrative functions.
Backlog
The backlog for the Other Business Units segment at
December 31, 1999 and 1998 was approximately $2,300,000 and
$3,000,000, respectively.
Common to All Operating Segments
Although the Company has three reportable business
segments, the following information applies to all operating
segments of the Company.
Government Regulations
None of the Company's operating segments operate within
highly regulated industries. However, air pollution control
equipment manufactured by the Company, principally for hot-mix
asphalt plants, must comply with certain performance standards
promulgated by the federal Environmental Protection Agency
under the Clean Air Act applicable to "new sources" or new
plants. Management believes that the Company's products meet
all material requirements of such regulations and of
applicable state pollution standards and environmental
protection laws.
In addition, due to the size and weight of certain
equipment the Company manufactures, the Company and its
customers sometimes confront conflicting state regulations on
maximum weights transportable on highways and roads. This
problem occurs most frequently in the movement of portable
asphalt mixing plants. Also, some states have regulations
governing the operation of asphalt mixing plants and most
states have regulations relating to the accuracy of weights
and measures, which affect some of the control systems
manufactured by the Company.
Compliance with these government regulations has no
material effect on capital expenditures, earnings, or the
Company's competitive position within the market.
Employees
At December 31, 1999, the Company and its subsidiaries
employed 2,975 persons, of which 2,220 were engaged in
manufacturing operations, 239 in engineering, including
support staff, and 516 in selling, administrative and
management functions.
Telsmith, Inc. has a labor agreement, which covers
approximately 190 employees, that expires on October 13, 2001.
None of the Company's other employees are covered by a
collective bargaining agreement.
On August 3, 1995, a union representation election was
held at the Trencor plant and a number of Trencor production
and maintenance employees voted to be represented by the
United States Steelworkers of America, AFL-CIO, and CLC.
Trencor filed a Petition for Review with the United States
Court of Appeals for the Fifth Circuit and requested that the
National Labor Relation Board's certification of the election
be overturned due to alleged improper activity by the union.
Trencor requested that a new representation election be held.
Recently, in response to Trencor's appeal, the United States
Court of Appeals for the Fifth Circuit returned the matter to
the National Labor Relations Board and ordered that an
evidentiary hearing on Trencor's complaints be held before an
administrative law judge. That hearing was held on January
15, 1998, with the administrative law judge rejecting
Trencor's claims. Consequently, Trencor appealed the decision
to the National Labor Relations Board which upheld the
administrative law judge's ruling. Management and union are
now negotiating in an effort to reach agreement on a
collective-bargaining agreement.
Notwithstanding the current effort to negotiate an
initial collective-bargaining effort at Trencor, the Company
considers its employee relations to be good.
Manufacturing
The Company manufactures many of the component parts and
related equipment for its products while several large
components of their products are purchased "ready for use";
such items include engines, axles, tires and hydraulics. In
many cases, the Company designs, engineers and manufactures
custom component parts and equipment to meet the particular
needs of individual customers. Manufacturing operations
during 1999 took place at nineteen separate locations. The
Company's manufacturing operations consist primarily of
fabricating steel components and the assembly and testing of
its products to ensure quality control standards have been
achieved.
Seminars and Technical Bulletins
The Company periodically conducts technical and service
seminars, which are primarily for contractors, employees and
owners of asphalt mixing plants. In 1999, approximately 385
representatives of contractors and owners of hot-mix asphalt
plants attended seminars held by the Company in Chattanooga,
Tennessee. These seminars, which are taught by Company
management and employees, cover a range of subjects including
technological innovations in the hot-mix asphalt, aggregate
processing, paving, milling, and recycle markets in which the
Company manufactures products.
The Company also sponsors executive seminars for the
management of the customers of Astec, Inc. Primarily the
management of the Company teaches the seminars, but outside
speakers are also utilized. In 1999, approximately 70
participants attended the executive seminars at the Company's
state-of-the-art training center.
The Company sponsors Paving Professionals workshops at
its training center for customers or potential customers of
Roadtec, Inc. In 1999, approximately 350 participants
attended these classroom sessions. Actual equipment
application experience was provided at the Roadtec facility.
In addition, service training seminars were also held at the
Roadtec facility for approximately 360 customer service
representatives.
During 1999, Telsmith had technical seminars for 78
English-speaking customer representatives and another multi-
lingual seminar with 26 attendees. Also during 1999, American
Augers held directional drilling and auger boring seminars
attended by approximately 40 customers.
In addition to seminars, the Company publishes a number
of technical bulletins detailing various technological and
business issues relating to the asphalt industry.
Patents and Trademarks
The Company seeks to obtain patents to protect the novel
features of its products. The Company and its subsidiaries
hold 99 United States patents and 76 foreign patents. There
are 53 United States and foreign patent applications pending.
The Company and its subsidiaries have approximately 73
trademarks registered in the United States including logos for
Astec, Telsmith, Roadtec and Trencor, and the names ASTEC,
TELSMITH, HEATEC, ROADTEC, TRENCOR, KOLBERG, JCI and PIONEER.
Thirteen trademarks are also registered in foreign countries,
including Canada, Great Britain, Mexico, New Zealand and
Indonesia. The Company has 20 United States and foreign
trademark applications pending.
The Company and its subsidiaries also license their
technology to other manufacturers.
Engineering and Product Development
The Company dedicates substantial resources to
engineering and product development. At December 31, 1999,
the Company and its subsidiaries had 239 full-time individuals
employed domestically in engineering and design capacities.
Seasonality and Backlog
During 1997, 1998 and 1999 the Company's business became less seasonal.
As of December 31, 1999, the Company had a backlog for
delivery of products at certain dates in the future of
approximately $94,830,000. At December 31, 1998, the total
backlog, updated to include Superior Industries of Morris,
Inc., Breaker Technology Ltd., and American Augers, Inc. was
approximately $99,460,000.
The Company's contracts reflected in the backlog are
not, by their terms, subject to termination. Management
believes that the Company is in substantial compliance with
all manufacturing and delivery timetables.
Competition
Each business segment operates in a highly competitive
domestic market in price, service and product quality. While
specific competitors are named within each business segment
discussion, imports do not generally constitute significant
competition for the Company in the United States. However, in
international sales, the Company generally competes with
foreign manufacturers that may have a local presence in the
market the Company is attempting to penetrate.
In addition, asphalt and concrete are generally
considered competitive products as a surface choice for new
roads and highways. A portion of the interstate highway
system is paved in concrete, but over 90% of all surfaced
roads in the United States are paved with asphalt. Although
concrete is used for some new road surfaces, asphalt is used
for virtually all resurfacing, even the resurfacing of most
concrete roads. Management does not believe that concrete, as
a competitive surface choice, materially impacts the Company's
business prospects.
Risk Factors
Investors should carefully consider the risks described
below before investing in Astec Industries, Inc. The risks
and uncertainties described below are not the only ones facing
the Company. Other risks or uncertainties that we have not
predicted or assessed may also adversely affect the Company.
If any of the following risks occur, our earnings, financial
condition or business could be materially harmed, and the
trading price of our common stock could decline.
A decrease in government funding of highway construction and
maintenance may adversely affect our revenues and operating
profits
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. Increases in fuel prices
could reduce demand for fuel products, reducing the taxes
collected into the Highway Trust Fund to be spent under TEA-
21. 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
operating profits.
Downturns in the general economy or the commercial
construction industry may adversely affect our revenues and
operating profits
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 profits.
Acquisitions that we have made in the past and future
acquisitions involve risks that could adversely affect our
future financial results
We have completed eight 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
administrative and operational 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;
-acquisitions may not perform in line with our
expectations which may adversely affect our
financial results;
-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;
-we may choose to acquire a company that has lower
profit margins than we do; and
-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
revenues 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 or the
adoption of new requirements applicable to our other products
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 upon
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. We
cannot assure you 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. We also cannot assure you 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 upon 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. We also cannot assure you
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
important 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 1999, international sales represented approximately
10% 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.
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,
which restricts transactions with significant
stockholders.
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.
FORWARD-LOOKING STATEMENTS
Some of the statements contained in this Annual Report
on Form 10-K are forward-looking statements within the meaning
of the Securities Act of 1933 and the Securities Exchange Act
of 1934. They include statements concerning:
-our growth and operating strategy;
-liquidity and capital expenditures;
-pending acquisitions;
-our financing plans; and
-industry trends.
You can identify these statements by forward-looking
words such as "expect," "believe," "goal," "plan," "intend,"
"estimate," "may," "will" and similar words. These forward-
looking statements involve known and unknown risks,
uncertainties and other factors, including those described in
the "Risk Factors" section and elsewhere in this prospectus,
that could cause our actual results to differ materially from
those suggested by these forward-looking statements.
Item 2. PROPERTIES
The location, approximate square footage, acreage
occupied and principal function of the properties owned or
leased by the Company are set forth below:
Approximate Approximate
Location Square Footage Acreage Principal Function
Chattanooga,
Tennessee 424,000 59 Corporate and subsidiary
offices, manufacturing -
Astec
Chattanooga,
Tennessee --- 63 Storage yard - Astec
Cleveland,
Tennessee 28,400 3 Offices and manufacturing -
Astec
Rossville,
Georgia 40,500 3 Manufacturing - Astec
Chattanooga,
Tennessee 84,200 5 Offices, manufacturing -
Heatec
Chattanooga,
Tennessee 135,000 15 Offices, manufacturing -
Roadtec
Chattanooga,
Tennessee 51,200 7 Manufacturing and parts
warehouse - Roadtec
Chattanooga,
Tennessee 5,000 2 Offices - Astec Financial
Services
Mequon,
Wisconsin 203,000 30 Offices and manufacturing -
Telsmith
Sterling,
Illinois 32,000 8 Offices and manufacturing -
PEP
Grapevine,
Texas 176,000 52 Offices, manufacturing -
Trencor
Lakeville,
Massachusetts 800 --- Leased sales and service
office - Telsmith
Libertyhill,
Texas 700 --- Leased sales and service
office - Telsmith
Eugene,
Oregon 23,800 --- Leased offices,
manufacturing - Johnson
Crushers International
(expires April 30, 2000)
Eugene,
Oregon 130,000 8 Offices and manufacturing -
Johnson Crushers
International
Eugene,
Oregon 25,600 --- Leased offices,
manufacturing - Johnson
Crushers International
Odessa,
Texas 4,100 1 Leased to a third party
Inman,
South Carolina 13,600 8 Leased to a third party
until September 30, 2000
with option to buy
Albuquerque,
New Mexico 110,700 14 Offices and manufacturing -
CEI (partially leased to
a third party)
Yankton,
South Dakota 252,000 50 Offices and manufacturing -
Kolberg-Pioneer
West Salem,
Ohio 60,000 29 Offices and manufacturing -
American Augers
Thornbury,
Ontario, Canada 55,000 12 Offices and manufacturing -
Breaker Technology Ltd.
Riverside,
California 18,000 --- Leased offices and
manufacturing - Breaker
Technology, Inc.
Solon,
Ohio 5,700 --- Leased offices and
manufacturing - Breaker
Technology, Inc.
Morris,
Minnesota 125,000 30 Offices and manufacturing -
Superior Industries of
Morris
Covington,
Georgia 11,000 6 Offices and manufacturing -
Pavement Technology
Management believes that each of the Company's
facilities provides office or manufacturing space suitable for
its current needs and considers the terms under which it
leases facilities to be reasonable.
Item 3. Legal Proceedings
Management has reviewed all claims and lawsuits and,
upon the advice of counsel, has made provision for any
estimable losses; however, the Company is unable to predict
the ultimate outcome of the outstanding claims and lawsuits.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Executive Officers of the Registrant
The name, title, ages and business experience of the
executive officers of the Company are listed below.
J. Don Brock, Ph.D., P.E., has been President and a
Director of the Company since its incorporation in 1972 and
assumed the additional position of Chairman of the Board in
1975. He was the Treasurer of the Company from 1972 until
1994. From 1969 to 1972, Dr. Brock was President of the
Asphalt Division of CMI Corporation. He earned his Ph.D.
degree in mechanical engineering from the Georgia Institute of
Technology. Dr. Brock and Thomas R. Campbell, President of
Roadtec, are first cousins. He is 61.
Richard W. Bethea, Jr., became Vice President, Corporate
Counsel and Secretary during 1997. Mr. Bethea has been a
practicing lawyer since 1978. He has an undergraduate degree
in accounting and a law degree from the University of Georgia.
Before joining the Company, Mr. Bethea was a member
(stockholder) and partner with the law firm Stophel & Stophel,
P. C., in Chattanooga, Tennessee. He has served as the
Company's litigation counsel since 1983. He is 47.
F. McKamy Hall, a Certified Public Accountant, became
Chief Financial Officer during 1998 and has served as Vice
President and Treasurer since 1997. He has served as
Corporate Controller of the Company since 1987. From 1985 to
1987, Mr. Hall was Vice President of Finance at Quadel
Management Corporation, a company engaged in real estate
management. Mr. Hall has an undergraduate degree in
accounting and a Master of Business Administration degree from
the University of Tennessee at Chattanooga. He is 57.
W. Norman Smith was appointed Group Vice President-
Asphalt in 1998 and has served as the President of Astec, Inc.
since 1994. He formerly served as President of Heatec, Inc.
from 1977 to 1994. From 1972 to 1977, Mr. Smith was a
Regional Sales Manager with the Company. From 1969 to 1972,
Mr. Smith was an engineer with the Asphalt Division of CMI
Corporation. Mr. Smith has also served as a director of the
Company since 1972. He is 60.
Robert G. Stafford was appointed Group Vice President-
Aggregate in 1998. Prior to that time he served as President
of Telsmith, Inc. since 1991. Between 1987 and 1991, Mr.
Stafford served as President of Telsmith, Inc., a subsidiary
of Barber-Greene. From 1984 until the Company's acquisition
of Barber-Greene in December 1986, Mr. Stafford was Vice
President - Operations of Barber-Greene and General Manager of
Telsmith. He became a director of the Company in March 1988.
He is 61.
Thomas R. Campbell has served as President of Roadtec,
Inc. since 1988. From 1981 to 1988 he served as Operations
Manager of Roadtec. Mr. Campbell and J. Don Brock, President
of the Company, are first cousins. He is 50.
James G. May has served as President of Heatec, Inc.
since 1994. From 1984 until 1994 he served as Vice President
of Engineering of Astec, Inc. He is 55.
Albert E. Guth has been President of Astec Financial
Services, Inc. since 1996. He served as Chief Financial
Officer of the Company from 1987 through 1996, as Senior Vice
President from 1984 to 1997, Secretary of the Company from
1972 to 1997, and Treasurer from 1994 to 1997. Mr. Guth, who
has been a director since 1972, was the Vice President of the
Company from 1972 until 1984. From 1969 to 1972, Mr. Guth was
the Controller of the Asphalt Division of CMI Corporation. He
is 60.
Richard A. Patek became President of Kolberg-Pioneer,
Inc. in 1997. From 1995 to 1997, he served as Director of
Materials of Telsmith, Inc. From 1992 to 1995, Mr. Patek was
Director of Materials and Manufacturing of the former
Milwaukee plant location. From 1978 to 1992, he held various
manufacturing management positions at Telsmith. Mr. Patek is
a graduate of Milwaukee School of Engineering. He is 43.
Ronald B. DeDiemar, P.E., became President of Telsmith,
Inc. on January 4, 1999. From 1996 to 1998 he served as
President of a consulting company, Cal-Mar Technology, Inc.
From 1978 to 1996 Mr. DeDiemar held various executive
positions with Process Technology Holdings, Inc., most
recently as President of the We-Kers and Tyler Divisions.
From 1960 to 1978 he held various engineering and marketing
positions at Telsmith, a division of Barber-Greene. He is 61.
Robert R. Hoitt has been the President of Johnson
Crushers International, Inc., which was acquired by the
Company on November 1, 1998, since July 1995. From April 1966
through June 1995 he served in various management positions,
including General Manager and Vice President of Cedarapids,
Inc. in its Eljay division. He is 56.
Frank D. Cargould became President of Breaker Technology
Ltd. and Breaker Technology, Inc. on October 18, 1999. The
Breaker Technology companies were formed on August 13, 1999
when the Company purchased substantially all of the assets of
Teledyne Specialty Equipment's Construction and Mining
business unit from Allegheny Teledyne Inc. From 1994 to 1995,
he was Director of Sales - East for Teledyne CM Products, Inc.
He is 57.
Roger K. Eve has been President of American Augers,
Inc., which was acquired by the Company on October 29, 1999,
since 1991. He was also appointed President of Trencor, Inc.,
on October 29, 1999. From 1981 to 1991, Mr. Eve served as
President of J.C.B., Inc. and J.C.B. Excavators Ltd. He is
54.
Neil E. Schmidgall has been President of Superior
Industries of Morris, Inc., which was acquired by the Company
on November 1, 1999, since 1972. Since 1992, Mr. Schmidgall
has been a director and partner of First Federal Savings Bank
of Morris. He is 54.
PART II
Item 5. Market for Registrant's Common Equity and Related Shareholder Matters
The Company's Common Stock is traded in the NASDAQ Stock
Market under the symbol "ASTE." The Company has never paid
any cash dividends on its Common Stock.
The high and low sales prices of the Company's Common
Stock as reported on the NASDAQ Stock Market for each quarter
during the last two fiscal years (adjusted to give effect to a
two-for-one stock split which took effect on January 18,
1999), are as follows:
Price Per Share
1999 High Low
1st Quarter 35-5/16 20-7/8
2nd Quarter 43-3/4 29-3/4
3rd Quarter 41-5/8 20-1/4
4th Quarter 29-3/8 14-3/4
Price Per Share
1998 High Low
1st Quarter 13-1/8 7-9/16
2nd Quarter 18-1/8 12-5/8
3rd Quarter 21-3/8 15-11/16
4th Quarter 28-3/4 17-3/4
As of March 15, 2000 there were approximately 4,200 holders of
the Company's Common Stock.
Item 6. Selected Financial Data
Selected financial data appear on page A-1 of this Report.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Management's discussion and analysis of financial
condition and results of operations appears on pages A-2 to A-5
of this Report.
Item 8. Financial Statements and Supplementary Data
Financial statements and supplementary financial
information appear on pages A-6 to A-23 of this Report.
Item 9. Changes In and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
Information regarding the Company's directors included
under the caption "Election of Directors - Certain Information
Concerning Nominees and Directors" in the Company's definitive
Proxy Statement to be delivered to the shareholders of the
Company in connection with the Annual Meeting of Shareholders
to be held on April 27, 2000, is incorporated herein by
reference. Information regarding compliance with Section
16(a) of the Exchange Act is also included under Section 16(a)
"Filing Requirements" in the Company's definitive Proxy
Statement, which is incorporated herein by reference.
Item 11. Executive Compensation
Information included under the caption, "Executive
Compensation" in the Company's definitive Proxy Statement to
be delivered to the shareholders of the Company in connection
with the Annual Meeting of Shareholders to be held on April
27, 2000, is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information included under the captions "Election of
Directors - Certain Information Concerning Nominees and
Directors," "Common Stock Ownership of Management" and "Common
Stock Ownership of Certain Beneficial Owners" in the Company's
definitive Proxy Statement to be delivered to the shareholders
of the Company in connection with the Annual Meeting of
Shareholders to be held on April 27, 2000, is incorporated
herein by reference.
Item 13. Certain Relationships and Related Transactions
On December 14, 1998, Edna F. Brock, the mother of Dr.
J. Don Brock, Chairman of the Board and President of the
Company, loaned $85,000 to the Company to supplement its
working capital revolving credit facility. The Company
executed a demand note payable to Mrs. Brock in connection
with this loan bearing interest at a rate equal to that paid
to Bank One N.A. under the Company's unsecured revolving line
of credit. At the time Mrs. Brock loaned these funds to the
Company, the Company's outstanding balance under its
$22,000,000 revolving credit facility was $10,000,000. The
Company is making monthly interest payments to Mrs. Brock.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K
(a)(1) The following financial statements and other
information appear in Appendix "A" to this Report and are
filed as a part hereof:
. Selected Consolidated Financial Data.
. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
. Report of Independent Auditors.
. Consolidated Balance Sheets at December 31, 1999
and 1998.
. Consolidated Statements of Income for the Years
Ended December 31, 1999, 1998 and 1997.
. Consolidated Statements of Shareholders' Equity
for the Years Ended December 31, 1999, 1998 and
1997.
. Consolidated Statements of Cash Flows for the
Years Ended December 31, 1999, 1998 and 1997.
. Notes to Consolidated Financial Statements.
(a)(2) Other than as described below, Financial
Statement Schedules are not filed with this Report because the
Schedules are either inapplicable or the required information
is presented in the Financial Statements or Notes thereto.
The following Schedules appear in Appendix "A" to this Report
and are filed as a part hereof:
. Consent of Independent Auditors.
. Schedule II - Valuation and Qualifying Accounts.
(a)(3) The following Exhibits* are incorporated by
reference into or are filed with this Report:
3.1 Restated Charter of the Company
(incorporated by reference from 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 from 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 from 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 from the Company Quarterly
Report on Form 10-Q for the period ended June 30, 1999, File No. 0-14714).
3.5 Amended and Restated Bylaws of the Company, adopted March 14, 1990
(incorporated by reference from 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 Firstar Trust Company, as
Trustee, dated as of February 1, 1994 (incorporated by reference from
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 from 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 from the Company's Current Report on Form 8-K
dated December 22, 1995, File No. 0-14714).
10.1 Loan Agreement between City of Mequon, Wisconsin and Telsmith, Inc.
dated as of February 1, 1994 (incorporated by reference from the
Company's Annual Report on Form 10-K for the year ended December 31,
1993, File No. 0-14714).
10.2 Credit Agreement by and between Telsmith, Inc. and M&I Marshall &
Ilsley Bank, dated as of February 1, 1994 (incorporated by reference from
the Company's Annual Report on Form 10-K for the year ended December 31,
1993, File No. 0-14714).
10.3 Security Agreement by and between Telsmith, Inc. and M&I Marshall &
Ilsley Bank, dated as of February 1, 1994 (incorporated by reference from
the Company's Annual Report on Form 10-K for the year ended December 31,
1993, File No. 0-14714).
10.4 Mortgage and Security Agreement and Fixture Financing Statement by and
between Telsmith, Inc. and M&I Marshall & Ilsley Bank, dated as of
February 1, 1994 (incorporated by reference from the Company's Annual
Report on Form 10-K for the year ended December 31, 1993, File No. 0-14714).
10.5 Guarantee of Astec Industries, Inc. in favor of M&I Ilsley Bank, dated
as of February 1, 1994 (incorporated by reference from the Company's
Annual Report on Form 10-K for the year ended December 31, 1993, File
No. 0-14714).
10.6 Loan Agreement dated as of April 1, 1994, between Grapevine Industrial
Development Corporation and Trencor, Inc. (incorporated by reference from
the Company's Annual Report on Form 10-K for the year ended December 31,
1994, File No. 0-14714).
10.7 Letter of Credit Agreement, dated April 1, 1994, between First Chicago
NBD and Trencor, Inc. (incorporated by reference from the Company's
Annual Report on Form 10-K for the year ended December 31, 1994, File
No. 0-14714).
10.8 Guaranty Agreement, dated April 1, 1994, between Astec Industries, Inc.
and Bank One, Texas, NA, as Trustee (incorporated by reference from the
Company's Annual Report on Form 10-K for the year ended December 31,
1994, File No. 0-14714).
10.9 Astec Guaranty, dated April 29, 1994, of debt of Trencor, Inc. in
favor of First Chicago NBD (incorporated by reference from the
Company's Annual Report on Form 10-K for the year ended December 31,
1994, File No. 0-14714).
10.10 Supplemental Executive Retirement Plan, dated February 1, 1996 to be
effective as of January 1, 1995 (incorporated by reference from the
Company's Annual Report on Form 10-K for the year ended December 31,
1995, File No. 0-14714). *
10.11 Trust under Astec Industries, Inc. Supplemental Retirement Plan, dated
January 1, 1996 (incorporated by reference from the Company's Annual
Report on Form 10-K for the year ended December 31, 1995, File No. 0-14714). *
10.12 Astec Industries, Inc. 1998 Long-Term Incentive Plan (incorporated by
reference from Appendix A of the Company's Proxy Statement for the
Annual Meeting of Shareholders held on April 23, 1998). *
10.13 Astec Industries, Inc. Executive Officer Annual Bonus Equity Election
Plan (incorporated by reference from Appendix B of the Company's Proxy
Statement for the Annual Meeting of Shareholders held on April 23, 1998). *
10.14 Astec Industries, Inc. Non-Employee Directors' Stock Incentive Plan. *
10.15 Second Amended and Restated Credit Agreement dated November 27, 1997
between the Company, Astec Financial Services, Inc. and First Chicago NBD
(incorporated by reference from the Company's Annual Report on Form 10-K
for the year ended December 31, 1997, File No. 0-14714).
10.16 First Amendment, dated October 30, 1998, to the Second Amended and
Restated Credit Agreement dated November 24, 1997, by and between
the Company and Astec Financial Services, Inc. and The First National Bank
of Chicago.
10.17 Second Amendment, dated June 3, 1999, to the Second Amended and
Restated Credit Agreement dated November 24, 1997, by and between
the Company and Astec Financial Services, Inc. and The First
National Bank of Chicago (incorporated by reference from the
Company's Quarterly Report on Form 10-Q for the period ended June 30,
1999, File No. 0-14714).
10.18 Third Amendment, dated August 11, 1999, to the Second Amended and
Restated Credit Agreement dated November 24, 1997, by and between
the Company and Astec Financial Services, Inc. and The First
National Bank of Chicago (incorporated by reference from the
Company's Quarterly Report on Form 10-Q for the period ended September
30, 1999, File No. 0-14714).
10.19 Revolving Line of Credit Note dated December 2, 1997 between Kolberg-
Pioneer, Inc. and Astec Holdings, Inc. (incorporated by reference from
the Company's Annual Report on Form 10-K for the year ended December 31,
1997, File No. 0-14714).
10.20 Guaranty Joinder Agreement dated December 1997 between Kolberg-
Pioneer, Inc. and Astec Holdings, Inc. in favor of the First National
Bank of Chicago. (incorporated by reference from the Company's Annual
Report on Form 10-K for the year ended December 31, 1997, File No. 0-14714).
10.21 Loan Agreement between the City of Yankton, South Dakota and Kolberg
Pioneer, Inc. dated August 11, 1998 for variable/fixed rate demand
Industrial Development Revenue Bonds, Series 1998 (incorporated by
reference from the Company's Annual Report on Form 10-K for the year
ended December 31, 1998, File No. 0-14714).
10.22 Letter of Credit Agreement dated August 12, 1998 between the First
National Bank of Chicago and Astec Industries, Inc., Astec Financial
Services, Inc. and Kolberg-Pioneer, Inc. (incorporated by reference from
the Company's Annual Report on Form 10-K for the year ended December 31,
1998, File No. 0-14714).
10.23 Promissory Note dated December 14, 1998 between Astec Industries, Inc.
and Edna F. Brock (incorporated by reference from the Company's Annual
Report on Form 10-K for the year ended December 31, 1998, File No. 0-14714).
10.24 Waiver for December 31, 1998, dated March 9, 1999, with respect to the
Second Amended and Restated Credit Agreement, dated November 24, 1997
by and between the Company and The First National Bank of Chicago
(incorporated by reference from the Company's Annual Report on Form 10-K
for the year ended December 31, 1998, File No. 0-14714).
10.25 Guaranty of Astec Industries, Inc., dated February 23, 1998, of debt of
Pavement Technology, Inc. in favor of Tucker Federal Bank (incorporated
by reference from the Company's Annual Report on Form 10-K for the
year ended December 31, 1998, File No. 0-14714).
10.26 Purchase Agreement dated October 30, 1998, effective October 31, 1998,
between Astec Industries, Inc. and Johnson Crushers International, Inc.
(incorporated by reference from the Company's Annual Report on Form 10-K
for the year ended December 31, 1998, File No. 0-14714).
10.27 Term Loan in the amount of $15,000,000 dated August 13, 1999 by
and between Astec Industries, Inc. and Bank One, NA (incorporated by
reference from the Company's Quarterly Report on Form 10-Q for
the period ended September 30, 1999, File No. 0-14714).
10.28 Asset Purchase and Sale Agreement, dated August 13, 1999, by and among
Teledyne Industries Canada Limited, Teledyne CM Products Inc. and Astec
Industries, Inc. (incorporated by reference from the Company's
Quarterly Report on Form 10-Q for the period ended September 30, 1999,
File No. 0-14714).
10.29 Stock Purchase Agreement, dated October 31, 1999, by and among
American Augers, Inc. and Its Shareholders and Astec Industries, Inc.
10.30 Stock Purchase Agreement, dated November 1, 1999, by and among
SIMCO, LLC and the Superior Industries of Morris, Inc. Employee
Stock Ownership Plan and Astec Industries, Inc.
10.31 Amended and Restated Master Note in the amount of $15,000,000 dated
December 29, 1999 by and between Astec Industries, Inc. and Bank One, NA.
10.32 Amended and Restated Master Note in the amount of $20,000,000 dated
December 29, 1999 by and between Astec Industries, Inc. and Bank One, NA.
22 Subsidiaries of the Registrant
23 Consent of Independent Auditors
* Management contract or compensatory plan or arrangement.
(b) No reports on Form 8-K were filed in the fourth
quarter.
(c) The Exhibits to this Report are listed under Item
14(a)(3) above.
(d) The Financial Statement Schedules to this
Report are listed under Item 14(a)(2) above.
*The Exhibits are numbered in accordance with Item 601 of
Regulation S-K. Inapplicable Exhibits are not included in the list.
APPENDIX "A" to ANNUAL REPORT ON FORM 10-K
ITEMS 8 and 14(a)(1) and (2), (c) and (d)
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
ASTEC INDUSTRIES, INC.
Contents Page
Selected Consolidated Financial Data A-1
Management's Discussion and Analysis of Financial Condition
and Results of Operations A-2
Consolidated Balance Sheets at December 31, 1999 and 1998 A-6
Consolidated Statements of Income for the Years Ended December
31, 1999, 1998 and 1997 A-7
Consolidated Statements of Shareholders' Equity for the Years
Ended December 31, 1999, 1998 and 1997 A-8
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1999, 1998 and 1997 A-9
Notes to Consolidated Financial Statements A-11
Report of Independent Auditors A-24
Schedule II - Valuation and Qualifying Accounts A-25
APPENDIX "A"
SELECTED CONSOLIDATED FINANCIAL DATA
(in thousands, except as noted *)
Consolidated Income Statement Data
1999 1998 1997 1996 1995
Net sales $449,627 $363,945 $265,365 $221,413 $242,601
Selling, general and
administrative expenses 56,280 46,796 36,125 35,346 35,025
Research and development 5,356 4,681 3,707 5,868 5,128
Loss on abandonment of
foreign subsidiary 7,037
Income from operations 52,521 40,427 24,661 8,051 2,566
Interest expense 4,253 2,709 2,398 1,656 2,125
Net income 31,712 24,436 13,809 4,345 4,560
Earnings per common share*(1)
Basic 1.66 1.30 .72 .22 .23
Diluted 1.59 1.26 .71 .21 .23
Consolidated Balance Sheet Data
Working capital $127,569 $81,865 $71,459 $69,884 $58,015
Total assets 355,437 248,320 192,243 167,853 154,356
Total short-term debt 596 646 500 2,051 774
Long-term debt,
less current maturities 102,685 47,220 35,230 30,497 17,150
Shareholders' equity 167,258 132,658 105,612 99,393 95,901
Book value per common
share at year-end*(1) 8.75 7.44 6.12 5.37 4.75
Quarterly Financial Highlights (Unaudited)
First Second Third Fourth
Quarter Quarter Quarter Quarter
Net sales $112,478 $119,958 $106,886 $110,305
Gross profit 28,009 33,839 27,779 24,549
Net income 8,567 11,155 7,915 4,075
Earnings per common share*(1)
Basic .45 .59 .41 .21
Diluted .43 .55 .40 .21
Net sales $88,164 $108,124 $88,798 $78,860
Gross profit 22,304 25,826 22,175 21,599
Net income 5,559 7,389 5,779 5,709
Earnings per common share*(1)
Basic .30 .39 .31 .30
Diluted .29 .38 .30 .29
Common Stock Price*(1)
1999
High 35-5/16 43-3/4 41-5/8 29-3/8
Low 20-7/8 29-3/4 20-1/4 14-3/4
1998
High 13-1/8 18-1/8 21-3/8 28-3/4
Low 7-9/16 12-5/8 15-11/16 17-3/4
The Company's common stock is traded on the National Association
of Securities Dealers Automated Quotation (NASDAQ) National
Market under the symbol ASTE. Prices shown are the high and low
bid prices as announced by NASDAQ. The Company has never paid
any dividends on its common stock. The number of common
shareholders is approximately 4,200. (1) Restated to
retroactively reflect the two-for-one stock split effected in
the form of a dividend on January 18, 1999.
Page A-1
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations; 1999 vs. 1998
Net income for 1999 was $31,712,000, or $1.59 per share
diluted compared to net income of $24,436,000, or $1.26 per
share diluted, in 1998, restated to reflect the two-for-one
stock split that took effect on January 18, 1999.
Net sales for 1999 were $449,627,000, an increase of
$85,682,000, or 23.5%, compared to 1998. The 1999 domestic
sales increased from $294,430,000 to $403,832,000, or
$109,402,000, for a 37.2% increase from 1998. The increase in
domestic sales is attributed to increased sales in all product
lines. A strong domestic economy and spending under the new
six-year highway bill, TEA-21, which authorizes $217 billion
in federal investment through 2003 for road repair,
improvement and other federal highway and transit projects are
the primary reasons for the increase in domestic sales.
Approximately 46% of the sales growth was generated
internally, while 54% was from acquisitions.
International sales for 1999 decreased $23,720,000, or 34.1%,
to approximately $45,795,000 compared to 1998 international
sales of $69,515,000. Sales in South America decreased 85% in
1999 from 1998 levels, with approximately 53% of the decrease
attributable to trenching equipment and the remaining decrease
split between asphalt equipment and aggregate processing
equipment. International sales represented 10.2% and 19.1% of
net sales in 1999 and 1998, respectively.
Gross profit margin was 25.4% in 1999 compared to 25.3% in
1998. Through September 30, 1999, the gross profit had
improved to 26.4%; however, in the fourth quarter the margin
was impacted by costs relating to the move of one aggregate
company to a new facility, by the costs of interruptions and
delays associated with a computer installation in another
company and the loss of international sales.
In 1999, selling, general, and administrative expenses
decreased to 12.5% of net sales from 12.9% of net sales in
1998. The volume increase in net sales is the primary factor
responsible for the decreased percentage. Approximately 58% of
the increase in dollars related to expenses of acquired
operations.
Although research and development expenses increased $675,000,
the percentage of net sales decreased to 1.2% in 1999 from
1.3% in the prior year. The increase in sales volume is the
primary reason for the reduction in the percentage.
Interest expense for 1999 increased to 0.9% of sales from 0.7%
of sales for 1998. The increase in dollars related primarily
to borrowings required for acquisitions.
Income tax expense for 1999 was $19,819,000, or 38.5% of pre-
tax income, compared to $15,126,000 for 1998, or 38.2% of pre-
tax income. The increase is the result of the Company's
decreased international sales and the mix of revenue by state.
The backlog at December 31, 1999 was $94,827,000 compared to
$99,461,000 at December 31, 1998 (restated for acquisitions).
The backlog contains a significant increase for asphalt plant
orders and a reduction for aggregate orders. The impact of
TEA-21 has been felt incrementally in 1998 and 1999, but the
full impact of the initial funds may not be felt until 2000 or
2001. The Company is unable to determine whether this backlog
mixture was experienced by the industry as a whole. While the
expectation of future business growth by our domestic
customers has had a positive impact on our backlog, we are
unable to assess the amount of the increase attributable to
the TEA-21 legislation which became effective in October 1998.
While the domestic backlog reflects a positive development
(increased from $88,335,000 to $90,936,000 at December 31,
1999 and 1998, respectively), management cannot confirm that
this increase represents a trend. International sales tend to
be stronger in the third and fourth quarters, offsetting
normal slowing of domestic sales in those quarters.
Page A-2
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
Hot-mix Asphalt Plant and Related Heat Transfer Equipment
Segment: This segment had increases in sales of $29,291,000,
or 17.9%, and segment profit of $3,884,000, or 18.0%, over
1998. The primary reason for the increase in sales was a
strong economy accompanied by the impact of TEA-21.
International sales in this segment decreased $9,490,000, or
35.3%, versus 1998.
Aggregate Processing Segment: The 1999 sales in this segment
increased $42,494,000, or 37.7%, over 1998, primarily due to
the acquisition of Johnson Crushers International, Inc.,
Superior Industries of Morris, Inc. and Breaker Technology
Ltd. Segment profit increased $5,237,000, or 40.4% over 1998.
International sales in this segment decreased $1,508,000, or
8.2% versus 1998.
Mobile Construction Equipment Segment: The 1999 sales in this
segment increased $7,050,000, or 11.7% over 1998. Segment
profit also increased $1,310,000, or 13.2%. The primary
increase in sales resulted from an increase in sales of our
patented material transfer vehicle, the Shuttle Buggy.
International sales in this segment decreased $2,850,000, or
36.5% versus 1998.
Results of Operations; 1998 vs. 1997
Net income for 1998 was $24,436,000, or $1.26 per share
diluted compared to net income of $13,809,000, or $0.71 per
share diluted in 1997, restated to reflect the two-for-one
stock split that took effect on January 18, 1999.
Net sales for 1998 were $363,945,000, an increase of
$98,580,000, or 37.1%, compared to 1997. The 1998 domestic
sales increased from $206,463,000 to $294,430,000, or
$87,967,000, for a 42.6% increase from 1997. The increase in
domestic sales is principally attributed to a strong domestic
economy and expectation of the initiation of spending under
TEA-21. Approximately 59% of the sales growth was generated
internally, while 41% was from acquisitions.
International sales for 1998 increased $10,613,000, or 18.0%,
to approximately $69,515,000 compared to 1997 international
sales of $58,902,000. Due to the economic instability of some
regions where the Company had done business in the past, the
Company redirected sales efforts in 1998 toward countries that
were financially capable of purchasing its equipment. As a
result, the $9,183,000 decrease in sales in Southeast Asia was
more than offset by increased sales of asphalt plants and
trenching equipment, primarily in Central and South America
and Canada. International sales represented 19.1% and 22.2% of
total sales in 1998 and 1997, respectively.
The gross profit margin was 25.3% in 1998 compared to 24.3% in
1997. The improvement primarily related to increased sales
volume. It can also be attributed to improved manufacturing
processes, better product design and the Company's continuing
efforts to minimize sales discounts and control costs.
In 1998, selling, general, and administrative expenses
decreased to 12.9% of net sales from 13.6% of net sales in
1997. The volume increase in net sales was the primary factor
responsible for the decreased percentage. Approximately 42% of
the increase in dollars related to expenses of acquired
operations. The single largest increase in expenses not
related to acquisitions was selling expenses.
Research and development expenses decreased to 1.3% of net
sales in 1998 from 1.4% in the prior year. The increase in
sales volume was the primary reason for the reduction in the
percentage. Acquisitions accounted for 81% of the increase in
dollars of research and development.
Page A-3
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
Interest expense for 1998 decreased to 0.7% of sales from 0.9%
of sales for 1997. The increase in dollars related primarily
to borrowings required for the growing captive finance company
and for acquisitions.
Income tax expense for 1998 was $15,126,381, or 38.2% of pre-
tax income, compared to $9,156,977 for 1997, or 39.9% of pre-
tax income. The reduction in the income tax rate was primarily
attributable to the addition of Kolberg-Pioneer, located in
South Dakota (which has no corporate income tax) and the
Company's increased utilization of a foreign sales
corporation.
The backlog at December 31, 1998 was $95,665,000 compared to
$67,435,000 at December 31, 1997, restated for acquisitions.
This represents a 41.9% increase over 1997. The increase was
principally attributed to increased asphalt plant and
aggregate processing orders. The Company is unable to
determine whether this increase in backlog was experienced by
the industry as a whole or whether it reflects an increase of
market share.
Hot-mix Asphalt Plant and Related Heat Transfer Equipment
Segment: This segment had increased sales of $30,271,000 in
1998, a 22.8% increase over 1997. Segment profit also
increased $7,455,000, or 52.8%, over 1997. The primary reason
for the increases was a strong economy accompanied by the
expected impact of TEA-21 legislation effective October, 1998.
International sales in this segment increased by 26.0% in 1998
over 1997.
Aggregate Processing Segment: The 1998 sales in this segment
increased $57,343,000, or 103.6%, over 1997, primarily due to
the acquisition of Kolberg-Pioneer, Inc. and Johnson Crushers
International, Inc. Segment profit increased $6,073,000, or
88.2%, over 1997. The growth due to acquisitions for 1998 over
1997 was approximately 35%. International sales in this
segment decreased approximately 12.1%
Mobile Construction Equipment Segment: The 1998 sales in this
segment increased $11,830,000, or 24.4% over 1997. Segment
profit also increased $3,369,000, a 51.7% increase over 1997.
The primary increase in sales results from an increase in
sales of our patented material transfer vehicle, the Shuttle
Buggy. International sales increased 6.7%. The increase in
profit was primarily a result of increased volume coupled with
gross margin improvement.
Liquidity and Capital
During 1999, the Company continued to maintain a strong
financial position, funding capital projects and working
capital needs principally with cash provided by operations,
while utilizing low interest rate industrial revenue bonds and
bank borrowings to fund business combinations. At December 31,
1999, working capital totaled $127,569,000 compared to
$81,865,000 at December 31, 1998. The working capital increase
was primarily the result of increased fourth quarter sales
that led to a $19,341,000 increase in trade receivables net of
customer deposits and a $28,113,000 increase in inventories.
$30,000,000 of the increase in working capital was the result
of the three acquisitions completed in August through
November.
The Company has an unsecured $90,000,000 revolving credit loan
agreement with Bank One, NA which expires on November 22,
2002. At December 31, 1999, the Company was utilizing
$47,370,000 of the amount available under the credit facility
for borrowing and an additional $20,026,000 to support
outstanding letters of credit (primarily for industrial
revenue bond issues). Principal covenants under the loan
agreement include (i) the maintenance of minimum levels of net
worth and compliance with minimum net worth, leverage and
interest coverage ratios, (ii) a limitation on capital
expenditures and rental expense, (iii) a
prohibition against the payment of dividends, and (iv) a
prohibition on large acquisitions except upon the consent of
the lenders. The Company was in compliance with all financial
covenants related to the credit facility at December 31, 1999.
The Company initiated two term loans in connection with the
1999 acquisitions. On August 13, 1999 and October 29, 1999,
the Company borrowed $15,000,000 and $20,000,000,
respectively, from Bank One, NA. The Company is in the process
of merging these term loans into the revolving credit loan
agreement.
Page A-4
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
The revolving credit facility with Bank One, NA provides for
a segregated portion of up to $40,000,000 for use by the
Company's captive finance subsidiary, Astec Financial
Services ("AFS"). Advances under this portion of the loan
agreement are limited to the "Eligible Receivables" of AFS
as defined in the loan agreement. At December 31, 1999, AFS
borrowings represented $16,870,000 of the total $47,370,000
outstanding under the loan agreement.
The Company considers the unused portion of its revolving
credit facility with Bank One, NA, coupled with cash expected
to be generated by operations, adequate to meet its
foreseeable funding needs, including planned 2000 capital
expenditures (excluding those for equipment leased to others)
of approximately $19,100,000. Capital expenditures (excluding
those for equipment leased to others) were $28,385,000 in
1999 and $18,465,000 in 1998.
For additional information on current and long-term debt, see
Note 6 to the Consolidated Financial Statements.
Contingencies
See Note 9 to Consolidated Financial Statements for
information on certain pending litigation and contingent
liabilities arising from recourse financing arrangements.
Environmental Matters
Based on information available, management believes the
Company has adequately reserved for potential environmental
liabilities and does not believe the potential liability will
materially impact the future position of the Company.
Goodwill
At December 31, 1999, goodwill totals $36,300,000, which is
21.7% of shareholders' equity and 10.3% of total assets.
Impact of Year 2000
In prior years, the Company discussed the potential impact of
Year 2000 issues and the nature and progress of its plans to
become Year 2000 compliant. In late 1999, the Company
completed remediation and testing of its systems, including
systems of recently acquired companies. In addition,
various measures were taken to notify and assist customers to
become Year 2000 compliant and 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. As a result of those
planning and implementation efforts, the Company experienced
no significant disruptions in mission-critical information
technology and non-information technology systems and
believes those systems responded successfully to the Year
2000 issues, either with its products, its internal systems
or the products and services of third parties.
The total expensed by the Company's Year 2000 project during
1999 was approximately $200,000 and was funded by the
revolving credit line and through operating cash flows. The
Company did not develop a fully documented contingency plan
in the event it did not complete all phases of the Year 2000
project, but it did develop documented prudent preventive
measures that could have been undertaken to secure
operational capabilities in case of system failure. Those
measures included 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. For the
near-term, the Company intends to keep in place these
preventive measures mainly for external factors beyond the
Company's immediate control which could impact operations.
The Company designates each of the statements made by it in
this section entitled Impact of Year 2000 as a Year 2000
Readiness Disclosure. Such statements are made pursuant to
the Year 2000 Information and Readiness Disclosure Act.
Page A-5
CONSOLIDATED BALANCE SHEETS
December 31,
Assets 1999 1998
Current assets:
Cash and cash equivalents Note 1 $ 3,725,070 $ 5,352,739
Trade receivables less allowance for
doubtful accounts of $1,966,000 in
1999 and $1,460,000 in 1998 60,093,938 44,922,366
Finance receivables Note 13 9,631,998 6,189,285
Notes and other receivables 11,639,809 1,315,650
Inventories Notes 1, 3 104,841,923 76,728,969
Prepaid expenses 4,308,596 2,717,896
Refundable income taxes 1,858,886 1,168,056
Deferred tax asset Note 8 6,931,749 6,424,860
Other current assets 319,358 7,303
Total current assets 203,351,327 144,827,124
Property and equipment, net Note 4 109,388,156 81,142,117
Other assets:
Goodwill 36,299,808 12,511,530
Finance receivables Note 13 4,273,936 7,120,082
Notes receivable 493,352 1,054,987
Other 1,630,452 1,664,436
Total other assets 42,697,548 22,351,035
Total assets $355,437,031 $248,320,276
Liabilities and Shareholders' Equity
Current liabilities:
Current maturities of
long-term debt Note 6 $ 595,635 $ 646,060
Accounts payable 36,430,028 27,418,287
Customer deposits 7,040,785 11,210,413
Accrued product warranty 4,075,358 3,624,252
Accrued payroll and related liabilities 14,579,479 11,516,286
Liabilities related to
abandoned subsidiary 125,000
Other accrued liabilities 13,061,524 8,421,594
Total current liabilities 75,782,809 62,961,892
Long-term debt, less current
maturities Note 6 102,685,470 47,220,000
Deferred tax liability Note 8 5,495,869 3,091,469
Deferred retirement costs Note 7 1,332,746 970,866
Other 2,882,561 1,415,095
Total liabilities 188,179,455 115,659,322
Shareholders' equity: Notes 1, 10
Preferred stock - authorized
4,000,000 shares of $1.00 par
value; none issued
Common stock - authorized
40,000,000 shares of $.20 par
value; issued and outstanding -
19,121,062 in 1999 and
18,967,232 in 1998 3,824,227 3,793,446
Additional paid-in capital 46,918,852 44,332,177
Accumulated other comprehensive
income Note 1 266,888
Retained earnings 116,247,609 84,535,331
Total shareholders' equity 167,257,576 132,660,954
Total liabilities and shareholders'
equity $355,437,031 $248,320,276
See Notes to Consolidated Financial Statements.
Page A-6
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
1999 1998 1997
Net sales $449,627,457 $363,945,191 $265,365,312
Cost of sales 335,471,243 272,040,941 200,872,181
Gross profit 114,156,214 91,904,250 64,493,131
Selling, general and
administrative expenses 56,279,937 46,796,409 36,124,728
Research and development
expenses 5,355,736 4,681,019 3,706,909
Income from operations 52,520,541 40,426,822 24,661,494
Other income (expense):
Interest expense (4,253,219) (2,708,981) (2,397,902)
Interest income 1,136,777 101,208 259,388
Other income - net 2,121,228 1,668,869 347,253
Equity in income of
joint venture 6,096 74,578 96,158
Income before income taxes 51,531,423 39,562,496 22,966,391
Income taxes Note 8 19,819,145 15,126,381 9,156,977
Net income $31,712,278 $24,436,115 $13,809,414
Earnings per Common Share
Net income:
Basic $1.66 $1.30 $.72
Diluted 1.59 1.26 .71
Weighted average number of
common shares outstanding: Note 1
Basic 19,064,516 18,799,063 19,111,880
Diluted 19,930,376 19,441,184 19,452,192
See Notes to Consolidated Financial Statements.
Page A-7
<TABLE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the Years Ended December 31, 1999, 1998 and 1997.
Accumulated
Additional Other Total
Common Stock Pain-in Retained Comprehensive Sharholders'
Shares Amount Capital Earnings Income Equity
Balance
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
December 31, 1996 20,074,398 $4,014,880 $49,218,215 $46,289,802 ($ 127,150) $ 99,395,747
Net income 13,809,414 13,809,414
Other comprehensive income
Minimum pension
liability adjustment 127,150 127,150
Comprehensive income 13,936,564
Exercise of stock
options, including
tax benefit 20,000 4,000 60,975 64,975
Repurchase and
retirement of
common stock (1,453,238) (290,648) (7,491,656) (7,782,304)
Balance
December 31, 1997 18,641,160 3,728,232 41,787,534 60,099,216 105,614,982
Net and
comprehensive
income 24,436,115 24,436,115
Exercise of stock
options,
including tax
benefit 326,072 65,214 2,544,643 2,609,857
Balance
December 31, 1998 18,967,232 3,793,446 44,332,177 84,535,331 132,660,954
Net income 31,712,278 31,712,278
Other comprehensive income
Foreign currency
translation
adjustment 266,888 266,888
Comprehensive income 31,979,166
Exercise of
stock options,
including tax
benefit 139,609 27,922 2,189,534 2,217,456
Stock issued in
business
combination 14,296 2,859 397,141 400,000
Balance
December 31, 1999 19,121,137 $3,824,227 $46,918,852 $116,247,609 $266,888 $167,257,576
</TABLE>
See Notes to Consolidated Financial Statements.
PAGE A-8
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
1999 1998 1997
Cash Flows from Operating Activities
Net income $31,712,278 $24,436,115 $13,809,414
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and amortization 11,695,862 8,129,585 6,944,918
Provision for doubtful accounts 425,557 1,092,185 272,578
Provision for inventory reserves 1,265,120 1,289,740 418,906
Provision for warranty 1,466,176 4,048,899 2,811,009
(Gain) loss on sale of fixed
assets (146,268) (341,575) 747,112
(Gain) loss on sale of equipment
on operating lease (969,845) (956,271) (505,473)
(Gain) on sale of finance
receivables (215,730) (278,824) (158,043)
Equity in (income) loss of
joint venture (6,096) (74,578) (96,158)
(Increase) decrease in:
Receivables (6,011,492) (11,352,173) 1,005,946
Inventories (11,136,071) (3,717,271) (1,833,029)
Prepaid expenses (1,683,262) (703,735) (2,010)
Deferred tax asset 1,229,527 (723,156) 209,978
Other assets 135,646 (444,725) 261,094
Increase (decrease) in:
Accounts payable 2,025,578 2,664,949 3,867,396
Customer deposits (4,171,065) 4,094,466 4,285,052
Accrued product warranty (2,090,771) (3,828,493) (2,143,242)
Income taxes payable (329,480) (817,515) 2,880,447
Other accrued liabilities 4,380,802 5,977,639 1,885,445
Net cash provided by
operating activities 27,576,466 28,495,262 34,661,340
Cash Flows from Investing Activities
Proceeds from sale of property
and equipment - net 266,601 992,841 459,025
Expenditures for property
and equipment (28,384,787) (18,465,257) (9,043,675)
Proceeds from sale of equipment
on operating lease 29,748,064 22,609,684 15,400,539
Expenditures for equipment
on operating lease (25,216,820) (28,015,599) (16,295,790)
Additions to finance receivables
(37,820,908) (18,398,321) (13,480,827)
Collections of finance
receivables 390,450 365,514 1,349,934
Proceeds from sale of
finance receivables 28,093,482 9,820,384 12,769,861
Additions to notes receivable (1,421,804) (12,386) (116,536)
Repayments on notes receivable 898,811 229,454 758,076
Cash payments in connection
with business combinations,
net of cash acquired (52,448,406) (8,506,458) (22,383,071)
Net cash (used) by
investing activities (85,895,317) (39,380,144) (30,582,464)
See Notes to Consolidated Financial Statements.
Page A-9
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Year Ended December 31,
1999 1998 1997
Cash Flows from Financing Activities
Repurchase and retirement
of common stock $(7,782,304)
Proceeds from issuance
of common stock $ 1,364,275 $1,350,510 64,975
Net borrowings under
revolving credit loan 55,788,775 3,290,000 9,908,000
Principal repayments of
industrial bonds, loans
and notes payable (503,057) (614,183) (6,725,737)
Proceeds from debt
and notes payable 41,189 9,285,000
Net cash provided (used) by
financing activities 56,691,182 13,311,327 (4,535,066)
Increase (decrease) in cash
and cash equivalents (1,627,669) 2,426,445 (456,190)
Cash and cash equivalents,
beginning of period 5,352,739 2,926,294 3,382,484
Cash and cash equivalents
end of period $3,725,070 $5,352,739 $2,926,294
Supplemental Cash Flow Information
Cash paid during the year for:
Interest $ 4,425,526 $ 2,778,422 $2,369,389
Income taxes $20,472,411 $16,545,127 $8,142,405
Tax benefits related to
stock options:
Refundable income taxes $ 856,000 $ 1,159,925
Deferred tax asset 99,422
Additional paid-in capital (856,000) (1,259,347)
See Notes to Consolidated Financial Statements.
Page A-10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1999, 1998, and 1997.
1. Summary of Significant Accounting Policies
Basis of Presentation - The consolidated financial statements include the
accounts of Astec Industries, Inc. and its subsidiaries. The Company's wholly-
owned subsidiaries at December 31, 1999 are as follows:
American Augers, Inc. Johnson Crushers International, Inc.
Astec, Inc. Kolberg-Pioneer, Inc.
Astec Financial Services, Inc. Production Engineered Products, Inc.
Breaker Technology, Inc. Roadtec, Inc.
Breaker Technology Ltd. Superior Industries of Morris, Inc.
CEI Enterprises, Inc. Telsmith, Inc.
Heatec, Inc. Trencor, Inc.
All significant intercompany transactions have been eliminated in consolidation.
The Company's investment in a 50% owned joint venture, Pavement Technology,
Inc., is accounted for on an equity basis.
Use of Estimates - The preparation of the financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Cash Equivalents - The Company considers all highly liquid instruments
purchased with a maturity of less than three months to be cash equivalents.
Inventories - Inventories (excluding used equipment) are stated at the lower of
first-in, first-out cost or market. Used equipment inventories are stated at
the lower of specific unit cost or market.
Property and Equipment - Property and equipment is stated at cost. Depreciation
is calculated for financial reporting purposes using the straight-line method
based on the estimated useful lives of the assets as follows: buildings
(40 years) and equipment (3 to 10 years). Both accelerated and straight-line
methods are used for tax reporting purposes.
Goodwill - Goodwill represents the excess of cost over the fair value of net
assets acquired. Goodwill amounts are being amortized using the straight-line
method over 20 years. Accumulated amortization balances netted against goodwill
were $3,071,000 and $1,898,000 at December 31, 1999 and 1998, respectively.
Revenue Recognition - A portion of the Company's equipment sales represents
equipment produced in the Company's plants under short-term contracts for a
specific customer project or equipment designed to meet a customer's specific
requirements. Equipment revenues are recognized in compliance with the terms
and conditions of each contract, which is ordinarily at the time the equipment
is shipped. Certain contracts include terms and conditions through which the
Company recognizes revenues upon completion of equipment production which is
subsequently stored at the Company's plant at the customer's request. Revenue
is recorded on such contracts upon the customer's assumption of title and all
risks of ownership.
Advertising Expense - The cost of advertising is expensed as incurred. The
Company incurred $3,964,000, $3,052,000, and $2,054,000 in advertising costs
during 1999, 1998 and 1997, respectively.
Stock Based Compensation - The Company grants stock options for a fixed number
of shares to employees with an exercise price equal to the fair value of the
shares at the date of grant. The Company accounts for employee stock options in
accordance with APB Opinion No. 25, Accounting for Stock Issued to Employees
and, accordingly, recognizes no compensation expense for the stock option
grants. The Company adopted SFAS No. 123, Accounting for Stock-based
Compensation, in 1996 and is utilizing the disclosure only option permitted by
the statement for employee stock options. See Note 10.
Page A-11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Common Stock - On December 10, 1998, the Board of Directors
declared a two-for-one split of the Company's common stock,
effected in the form of a stock dividend payable on January 18,
1999, to stockholders of record on December 31, 1998. All
agreements concerning stock options and other commitments
payable in shares of the Company's common stock provide for the
issuance of additional shares due to the declaration of the
stock split. This stock split has been reflected in the
Consolidated Statements of Shareholders' Equity at December 31,
1996. All references to number of shares, except shares
authorized, and to per share information in the accompanying
consolidated financial statements have been adjusted to reflect
the stock split on a retroactive basis.
Earnings Per Share - Basic and diluted earnings per share are
calculated in accordance with SFAS No. 128, Earnings per Share.
Basic earnings per share excludes any dilutive effects of
options, warrants and convertible securities.
The following table sets forth the computation of basic and
diluted earnings per share:
Year Ended December 31,
1999 1998 1997
Numerator:
Net income $31,712,278 $24,436,115 $13,809,414
Denominator:
Denominator for basic
earnings per share 19,064,516 18,799,063 19,111,880
Effect of dilutive securities:
Employee stock options 865,860 642,121 340,312
Denominator for diluted
earnings per share 19,930,376 19,441,184 19,452,192
Earnings per common share:
Basic $1.66 $1.30 $.72
Diluted $1.59 $1.26 $.71
Comprehensive Income - In 1998, the Company adopted SFAS No.
130, Reporting Comprehensive Income. SFAS No. 130 establishes
standards for the reporting and display of comprehensive income
and its components in a full set of general purpose financial
statements. Comprehensive income includes a foreign currency
translation adjustment, and is included as a component of
shareholders' equity.
Segment Information - Effective December 31, 1998, the Company
adopted SFAS No. 131, Disclosures About Segments of an
Enterprise and Related Information. The statement generally
requires that companies report segment information for operating
segments which are revenue producing components for which
separate financial information is produced internally.
Pensions and Other Post-retirement Benefit Plans - Effective
December 31, 1998, the Company adopted SFAS No. 132, Employers'
Disclosures About Pensions and Other Post-retirement Benefits.
The statement standardizes the disclosure requirements for
pension and other post-retirement benefits, but does not change
the measurement or recognition of the related benefit
obligations, plan assets, or periodic benefit costs.
Derivatives and Hedging Activities - In June 1998, the
Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities,
which was required to be adopted in years beginning after June
15, 1999. This statement was amended by SFAS No. 137, Accounting
for Derivative Instruments and Hedging Activities - Deferral of
the Effective Date of FASB 133, which postponed the effective
date to years beginning after June 15, 2000. Because of the
Company's minimal use of derivatives, management does not
anticipate that the adoption of the new statement will have a
significant effect on the Company's earnings or financial
position.
Reclassifications - Certain amounts for 1998 and 1997 have been
reclassified to conform with the 1999 presentation.
Page A-12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Business Combinations
The Company's acquisitions have been accounted for using the
purchase method of accounting, and accordingly the operating
results of the acquired businesses are included in the
Company's consolidated financial statements from the
respective acquisition dates. The assets and liabilities are
included based on an allocation of the purchase price. That
portion of the purchase price in excess of the fair market
value of the assets acquired is recorded as goodwill and is
being amortized using the straight-line method over 20 years.
On December 2, 1997, the Company acquired certain assets and
liabilities of the Construction Equipment Division of Portec,
Inc. for $19,978,000 in cash and renamed the business Kolberg-
Pioneer, Inc. ("KPI"). The purchase was initially financed
under the Company's revolving credit agreement but was
partially refinanced in 1998 using industrial revenue bonds.
In connection with the acquisition, the Company and KPI
entered into an equipment lease with Bank One, NA under which
the Company and KPI lease machinery and equipment. The terms
of the equipment leases range from 36 to 84 months, with total
monthly lease payments of approximately $69,000. These are
included in the lease commitments in Note 5.
On November 1, 1998, the Company acquired substantially all of
the assets and liabilities of Johnson Crushers International,
Inc. ("JCI") for $8,000,000 in cash. The terms of the JCI
acquisition agreement provide for additional consideration to
be paid to the former shareholders if JCI's results of
operations exceed certain targeted levels for 1999, 2000 and
2001. Such consideration is payable, at the Company's option,
in cash or up to 50% in the Company's common stock, and will
be recorded as additional purchase price when the amount is
determinable. The maximum amount of contingent consideration
to be paid is $6,660,000.
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 Inc. for
approximately $18,900,000 in cash. The acquired business unit,
having operations in both the United States and Canada,
operates as Breaker Technology, Inc. in the U.S. and as
Breaker Technology Ltd. in Canada ("BTI"). On October 29,
1999 the Company purchased the operating assets and
liabilities of American Augers, Inc. for approximately
$15,500,000 in cash and repayment of approximately $6,200,000
of debt. On November 1, 1999 the Company acquired the
operating assets and liabilities of Superior Industries of
Morris, Inc. ("Superior") for $17,000,000 in cash.
A summary of the net assets acquired is as follows:
AMERICAN
BTI AUGERS SUPERIOR JCI KPI
Current assets $12,218,333 $10,826,332 $6,446,529 $5,138,492 $16,530,866
Property, plant
and equipment 1,847,523 2,950,450 9,256,214 1,796,739 4,714,500
Other assets 573,505 109,038 1,035,735
Current
liabilities (6,159,326) (5,796,498) (1,865,435) (3,743,685) (5,032,911)
Other
liabilities (6,208,004) (1,189,218) (5,894) (492,000)
Goodwill 11,025,239 11,700,858 2,548,938 4,814,348 3,221,736
Net assets
acquired
excluding cash 18,931,769 14,046,643 15,306,066 8,000,000 19,977,926
Cash 0 1,445,543 1,693,934 0 250
Net assets
acquired $18,931,769 $15,492,186 $17,000,000 $ 8,000,000 $19,978,176
Page A-12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma summary presents the consolidated results of
operations as if the acquisitions discussed above had occurred at the beginning
of the year immediately preceding the year of acquisition. The unaudited pro
forma results have been prepared for comparative purposes only and include
certain adjustments, such as goodwill amortization expense and interest expense
on acquisition debt. They do not purport to be indicative of the results that
would have occurred had the acquisitions taken place at the beginning of the
periods presented or of results which may occur in the future.
Year Ended December 31,
1999 1998 1997
Net sales $521,756,000 $506,493,000 $ 314,314,000
Income from operations 60,651,000 56,160,000 28,142,000
Net income 34,422,000 30,000,000 14,609,000
Per common share outstanding:
Basic $1.80 $1.60 $.76
Diluted $1.73 $1.54 $.75
3. Inventories
Inventories consisted of the following:
December 31,
1999 1998
Raw materials and parts $45,640,440 $35,275,208
Work-in-process 15,884,177 18,138,057
Finished goods 31,606,965 15,807,998
Used equipment 11,710,341 7,507,706
Total $104,841,923 $76,728,969
4. Property and Equipment
Property and equipment consisted of the following:
December 31,
1999 1998
Land, land improvements and buildings $62,976,860 $48,436,468
Equipment 87,918,504 61,370,775
Less accumulated depreciation (44,012,938) (36,460,807)
Land, buildings and equipment - net 106,882,426 73,346,436
Rental property:
Equipment 2,996,026 8,439,708
Less accumulated depreciation (490,296) (644,027)
Rental property - net 2,505,730 7,795,681
Total $109,388,156 $81,142,117
Depreciation expense was approximately $10,664,000, $7,577,000 and $5,608,000
for the years ended December 31, 1999, 1998 and 1997, respectively.
5. Leases
The Company leases certain land, buildings and equipment which are used in its
operations. Total rental expense charged to operations under operating leases
was approximately $3,329,000, $2,597,000, and $1,569,000 for the years ended
December 31, 1999, 1998 and 1997, respectively.
Minimum rental commitments for all noncancelable operating leases at December
31, 1999 are as follows:
2000 $2,999,426
2001 2,482,667
2002 1,079,801
2003 538,903
2004 255,020
Thereafter -
Page A-13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company also leases equipment to customers under contracts generally
ranging from two months to forty-eight months. Rental income under such leases
was $2,467,000, $1,994,000 and $1,181,000 for the years ended December 31,
1999, 1998 and 1997, respectively.
Minimum rental payments to be received for equipment leased to others at
December 31, 1999 are as follows:
2000 $389,921 2003 $255,521
2001 255,521 2004 215,328
2002 255,521 Thereafter 244,540
6. Long-term Debt
Long-term debt consisted of the following:
December 31,
1999 1998
Revolving credit loan of $90,000,000
at December 31, 1999, available through
November 22, 2002, at interest rates
from 6.31% to 8.25% at December 31,
1999, and at interest rates from 5.75%
to 7.25% at December 31, 1998 $47,369,835 $26,520,000
Industrial Development Revenue Bonds
payable in annual installments through
2006 at weekly negotiated interest rates 3,500,000 4,000,000
Industrial Development Revenue Bonds due
in 2019 at weekly negotiated interest rates 8,000,000 8,000,000
Industrial Development Revenue Bonds due
in 2028 at weekly negotiated interest rates 9,200,000 9,200,000
Term loan dated August 13, 1999 at the corporate
base rate or 1.25% plus the Eurodollar rate
due on January 2, 2001 15,000,000
Term loan dated October 29, 1999 at the
Corporate base rate or 1.25% plus the
Eurodollar rate due on January 2, 2001 20,000,000
Other current notes payable 211,270 146,060
Total long-term debt 103,281,105 47,866,060
Less current maturities 595,635 646,060
Long-term debt less
current maturities $102,685,470 $ 47,220,000
The Company has an unsecured $90,000,000 revolving line of credit with Bank
One, NA. The agreement contains borrowing sub-limits which allow the Company
and its subsidiary, Astec Financial Services, Inc., to borrow up to $70,000,000
and $40,000,000 respectively, not to exceed the total commitment amount.
Advances under Astec Financial's sub-limit are limited to eligible receivables
as defined in the agreement. Amounts outstanding under the agreement bear
interest, at the Company's option, at a rate from .25% below prime to prime
plus .50%, or from .75% to 2.00% above the London Interbank Offering Rate. The
interest rate applied to borrowings is based upon a leverage ratio, calculated
quarterly, as defined by the credit agreement. The credit agreement contains
certain restrictive covenants relative to operating ratios
and capital expenditures and also restricts the payment of dividends. The
Company was in compliance with all financial covenants related to the above
loan agreement at December 31, 1999.
The aggregate of all maturities of long-term debt in each of the next five
years is as follows:
2000 $ 595,635 2003 $ 511,779
2001 35,524,365 2004 510,635
2002 47,894,200 Thereafter 18,244,491
For 1999, the weighted average interest rate on short-term borrowings, which
includes current maturities of Industrial Revenue Bonds, was 6.1%.
Page A-14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. Retirement Benefits
The Company sponsors a defined benefit pension plan that
covers all employees of its Kolberg-Pioneer subsidiary.
Benefits paid under this plan are based on years of service
multiplied by a monthly amount. In addition, the Company also
sponsors two post-retirement medical and life insurance plans
covering the employees of its Kolberg-Pioneer and Telsmith
subsidiaries and retirees of its former Barber-Greene
subsidiary. The Company's funding policy for all plans is to
make the minimum annual contributions required by applicable
regulations.
The following provides information regarding benefit
obligations, plan assets and the funded status of the plans:
Pension Benefits Other Benefits
1999 1998 1999 1998
Change in benefit obligation
Benefit obligation at
beginning of year $6,948,91 $9,571,211 $1,463,502 $1,270,785
Service cost 329,864 315,111 80,326 74,681
Interest cost 449,209 647,654 82,311 87,419
Actuarial gain/loss (1,077,018) 386,433 (200,982) 24,506
Participant contributions - - 125,109 74,542
Benefits paid (343,021) (582,080) (159,299) (68,431)
Effect of termination - (3,389,415) - -
Benefit obligation at
end of year $6,307,948 $6,948,914 $1,390,967 $1,463,502
Change in plan assets
Fair value of plan assets
at beginning of year 6,607,594 9,394,007 - -
Actual return on
plan assets 727,585 629,415 - -
Benefits paid (343,021) (582,080) - -
Effect of termination - (2,833,798) - -
Fair value of plan assets
at end of year $ 6,992,158 $ 6,607,544 - -
Funded status
(underfunded) 684,210 (341,320) (1,390,967) (1,463,502)
Unrecognized net actuarial
(gain) loss (897,149) 315,446 271,160 492,636
Prepaid (accrued)
benefit cost $(212,939) $(25,874) $(1,119,807) $(970,866)
Weighted-average assumptions as of December 31
Discount rate 6.75% 6.75% 7.42% 6.75%
Expected return on
plan assets 9.00% 9.00% - -
Rate of compensation increase 4.00% 4.00% - -
The weighted average annual assumed rate of increase in per
capita health care costs is 7.7% for 2000 and is assumed to
decrease gradually to 7.0% for 2003 and remain at that level
thereafter. A 1% increase or decrease in the medical inflation
rate would not have a significant effect on either the benefit
obligation or the aggregate service and interest cost
components of net periodic benefit cost.
Net periodic benefit cost for 1999, 1998 and 1997 included the
following components:
Pension Benefit Other Benefits
1999 1998 1997 1999 1998 1997
Components of net periodic benefit cost
Service cost $329,864 $315,111 $ 15,382 $80,326 $74,681 $56,468
Interest cost 449,209 647,654 222,812 82,311 87,419 55,241
Expected return on plan assets
(592,008) (797,619) (226,050) - - -
Amortization of
prior service
cost - 19,614 19,614 - - -
Amortization of
transition
obligation - - - 33,700 33,700 33,700
Recognized net
actuarial (gain)
loss - - - (11,180) (205) (1,473)
Curtailment/
settlement loss - 1,136,000 - - - -
Net periodic
benefit cost $187,065 $1,320,760 $31,758 $185,157 $195,595 $143,936
Page A-15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Income Taxes
For financial reporting purposes, income before income taxes includes the
following components:
Year Ended December 31,
1999 1998 1997
United States $51,836,482 $39,318,695 $22,738,605
Foreign (305,059) 243,801 227,786
Income before income taxes $51,531,423 $39,562,496 $22,966,391
The provision for income taxes consisted of the following:
Year Ended December 31,
1999 1998 1997
Current $19,188,853 $15,849,539 $9,264,743
Deferred provision (benefit) 630,292 (723,158) (107,766)
Total provision for
income taxes $19,819,145 $15,126,381 $9,156,977
A reconciliation of the provision for income taxes at the statutory Federal
rate to the amount provided is as follows:
Year Ended December 31,
1999 1998 1997
Tax at statutory rates $18,035,999 $13,846,874 $8,038,237
Benefit from foreign
sales corporation (241,012) (620,000) (360,000)
State taxes, net of federal
income tax benefit 1,578,250 1,377,000 912,000
Income taxes of other
countries (4,000) 11,000 38,000
Other items 449,908 511,507 528,740
Income taxes $19,819,145 $15,126,381 $9,156,977
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial statement
purposes and the amounts used for income tax purposes.
At December 31, 1999, the Company had deferred tax assets of approximately
$8,055,600, and deferred tax liabilities of approximately $6,619,600, related to
temporary differences and tax loss carryforwards.
Significant components of the Company's deferred tax liabilities and assets are
as follows:
Year Ended December 31,
1999 1998
Deferred tax assets:
Inventory reserves $2,253,400 $1,444,700
Warranty reserves 1,262,100 1,250,600
Bad debt reserves 781,200 524,400
Other accrued expenses 3,758,900 3,889,500
Other credit carryforwards 159,300
Total deferred tax assets 8,055,600 7,268,500
Deferred tax liabilities:
Property and equipment 6,024,200 3,879,800
Other 595,400 55,300
Total deferred tax liabilities 6,619,600 3,935,100
Net deferred tax asset $1,436,000 $3,333,400
Page A-16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. Contingencies
Management has reviewed all claims and lawsuits and, upon the
advice of counsel, has made adequate provision for any estimable
losses. However, the Company is unable to predict the ultimate
outcome of the outstanding claims and lawsuits.
Certain customers have financed purchases of the Company's
products through arrangements in which the Company is
contingently liable for customer debt aggregating approximately
$11,776,000 and $1,271,000 at December 31, 1999 and 1998,
respectively. These obligations average five years in duration
and have minimal risk. Astec Financial Services, Inc. sold both
finance and operating leases with limited recourse, generally
not exceeding 15% of the purchase price, subject to elimination
of recourse responsibilities through remarketing of equipment.
Other - The Company is contingently liable under letters of
credit of approximately $20,025,555 primarily related to
Industrial Revenue Bonds.
10. Shareholders' Equity
The Company has elected to follow Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees (APB
25) and related interpretations in accounting for its employee
stock options because, as discussed below, the alternative fair
value accounting provided for under SFAS No. 123, Accounting for
Stock-based Compensation, requires use of option valuation
models that were not developed for use in valuing employee stock
options. Under APB 25, when the exercise price of the Company's
employee stock options equals or exceeds the market price of the
underlying stock on the date of grant, no compensation expense
is generally recognized.
Under terms of the Company's stock option plans, officers and
certain other employees may be granted options to purchase the
Company's common stock at no less than 100% of the market price
on the date the option is granted. The Company has reserved
shares of common stock for exercise of outstanding non-qualified
options and incentive options of officers and employees of the
Company and its subsidiaries at prices determined by the Board
of Directors. The shares reserved under the various stock option
plans are as follows: (1) 1992 Stock Option Plan - 49,600, (2)
1998 Long-term Incentive Plan - 1,726,339 and (3) Executive
Officer Annual Bonus Equity Election Plan - 292,772.
In addition, a Non-employee Directors Stock Incentive Plan has
been established to allow non-employee directors to have a
personal financial stake in the Company through an ownership
interest. Directors may elect to receive their compensation in
common stock, deferred stock or stock options. Options granted
under the Non-employee Directors Stock Incentive Plan and the
Executive Officer Annual Bonus Equity Election Plan vest and
become fully exercisable immediately. All other options
outstanding vest over 12 months. All stock options have a ten-
year term.
Pro forma information regarding net income and earnings per
share is required by SFAS No. 123, and has been determined as if
the Company had accounted for its employee stock options under
the fair value method of that Statement. The fair value for
these options was estimated at the date of grant using a Black-
Scholes option pricing model with the following weighted-average
assumptions for 1997, 1998, and 1999, respectively; risk-free
interest rates of 5.78%, 4.70% and 5.58%; volatility factors of
the expected market price of the Company's common stock of .281,
.329 and .381; and a weighted-average expected life of the
option of four years.
The Black-Scholes option valuation model was developed for use
in estimating the fair value of traded options which have no
vesting restrictions and are fully transferable. In addition,
option valuation models required the input of highly subjective
assumptions, including the expected stock price volatility.
Because the Company's employee stock options have
characteristics significantly different from those of traded
options, and because changes in the subjective input assumptions
can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a
reliable single measure of the fair value of its employee stock
options.
For purposes of pro forma disclosures, the estimated fair value
of the options is amortized to expense over the options' vesting
period. The Company's pro forma information follows.
Page A-17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1999 1998 1997
Pro forma net income $30,466,266 $23,179,000 $13,782,000
Pro forma earnings per share:
Basic $ 1.59 $ 1.23 $ .72
Diluted $ 1.53 $ 1.19 $ .71
A summary of the Company's stock option activity and related
information for the years ended December 31, 1999, 1998 and 1997
follows:
Year Ended December 31,
1999 199 1997
Weighted Weighted Weighted
Avg. Avg. Avg.
Exercise Exercise Exercise
Options Price Options Price Options Price
Options
outstanding,
beginning
of year 1,389,800 $10.91 1,052,000 $ 4.64 1,098,000 $4.62
Options
granted 620,161 $29.74 663,800 $17.53 20,000 $4.57
Options
forfeited 3,895 $29.59 46,000 $4.70
Options
exercised 139,336 $ 9.77 326,000 $ 4.31 20,000 $3.25
Options
outstanding,
end of
year 1,866,730 $16.29 1,389,800 $10.87 1,052,000 $4.64
The weighted average fair value of options granted whose
exercise price was equal to the market price of the stock on the
grant date was $10.75, $5.71 and $2.07 for the years ended
December 31, 1999, 1998 and 1997. The weighted average fair
value of options granted whose exercise price exceeded the
market price of the stock on the grant date was $12.04 and $8.36
for the years ended December 31, 1999 and 1998. The range of
exercise prices for options outstanding and exercisable as of
December 31, 1999 are as follows: 631,000 options from $0.69 to
$7.43 and 629,764 options from $17.38 to $36.00. The remaining
outstanding options become exercisable on March 9, 2000.
The Company has adopted a Shareholder Protection Rights
Agreement and declared a distribution of one right (the
"Right") for each outstanding share of Company common stock,
par value $0.20 per share (the "Common Stock"). Each Right
entitles the registered holder to purchase from the Company one
one-hundredth of a share (a "Unit") of Series A Participating
Preferred Stock, par value $1.00 per share (the "Preferred
Stock"), at a purchase price of $18.00 per Unit, subject to
adjustment. The rights currently attach to the certificates
representing shares of outstanding Company Common Stock, and no
separate Rights certificates will be distributed. The Rights
will separate from the Common Stock upon the earlier of ten
business days (unless otherwise delayed by the Board) following
the (i) public announcement that a person or group of affiliated
or associated persons (the "Acquiring Person") has acquired,
obtained the right to acquire, or otherwise obtained beneficial
ownership of 15% or more of the then outstanding shares of
Common Stock, or (ii) commencement of a tender offer or exchange
offer that would result in an Acquiring Person beneficially
owning 15% or more of the then outstanding shares of Common
Stock. The Board of Directors may terminate the Rights without
any payment to the holders thereof at any time prior to the
close of business ten business days following announcement by
the Company that a person has become an Acquiring Person. The
Rights, which do not have voting power and are not entitled to
dividends, expire on December 21, 2005. In the event of a
merger, consolidation, statutory share exchange or other
transaction in which shares of Common Stock are exchanged, each
Unit of Preferred Stock will be entitled to receive the per
share amount paid in respect of each share of Common Stock.
11. Financial Instruments
Credit Risk - The Company sells products to a wide variety of
customers. The Company performs ongoing credit evaluations of
its customers and generally does not require collateral. The
Company maintains an allowance for doubtful accounts at a level
which management believes is sufficient to cover potential
credit losses. As of December 31, 1999, concentrations of credit
risk with respect to receivables are limited due to the wide
variety of customers.
Fair Value of Financial Instruments - The book value of the
Company's financial instruments approximates their fair value.
Financial instruments include cash, accounts receivable, finance
receivables, accounts payable, long- and short-term debt and an
interest rate swap agreement. Substantially all of the Company's
short- and long-term debt is floating rate debt and,
accordingly, book value approximates its fair value.
Page A-18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Interest Rate Swap Agreement - During 1998, the Company's
captive finance subsidiary, Astec Financial Services, Inc.
("AFS"), entered into an interest rate swap agreement with
a notional amount of $10,000,000 to fix interest rates on
variable rate debt and reduce exposure to interest rate
fluctuations. The swap agreement was effective for five
years. During 1999, the counter party exercised the right to
terminate the agreement. AFS received $400,000 related to the
termination, which is being recognized over the remaining
life of the agreement.
12. Operations by Industry Segment and Geographic Area
The Company has three reportable operating segments. These
segments are combinations of business units that offer
different products and services. The business units are each
managed separately because they manufacture and distribute
distinct products that require different marketing
strategies. A brief description of each segment is as
follows:
Hot-mix Asphalt Plant and Related Heat Transfer Equipment -
This segment consists of three operating units that design,
manufacture and market a complete line of portable,
stationary and relocatable hot-mix asphalt plants and related
components and a variety of heaters, heat transfer processing
equipment and thermal fluid storage tanks. The principal
purchasers of these products are asphalt producers, highway
and heavy equipment contractors and foreign and domestic
governmental agencies.
Aggregate Processing Equipment - This segment consists of
six operating units that design, manufacture and market a
complete line of rock crushers, feeders, conveyors, screens
and washing equipment. The principal purchasers of these
products are open mine and quarry operators.
Mobile Asphalt Construction Equipment - This segment
consists of one operating unit that designs, manufactures and
markets asphalt pavers, asphalt material transfer vehicles
and milling machines. The principal purchasers of these
products are highway and heavy equipment contractors and
foreign and domestic governmental agencies.
All Others - This category consists of the Company's four
other business units that do not meet the requirements for
separate disclosure as an operating segment. Revenues in this
category are derived primarily from the sale of trenching and
excavating equipment and from operating leases owned by the
Company's finance subsidiary.
The Company evaluates performance and allocates resources
based on profit or loss from operations before federal income
taxes and corporate overhead. The accounting policies of the
reportable segments are the same as those described in the
summary of significant accounting policies.
Intersegment sales and transfers are valued at prices
comparable to those for unrelated parties. For management
purposes, the Company does not allocate Federal income taxes
or corporate overhead (including interest expense related to
the Company's revolving line of credit with Bank One, NA) to
its business units.
Segment information for 1999
Hot-mix Aggregate Mobile
Asphalt Processing Construction
Plants Equipment Equipment All Others Total
Revenues from
external
customers $192,525,695 $155,199,535 $67,374,684 $34,527,543 $449,627,457
Intersegment
revenues 11,232,452 10,883,366 1,265,153 (216,617) 23,164,354
Interest
expense 57,447 683,404 93,875 3,418,493 4,253,219
Depreciation
and
amortization 4,153,143 3,049,886 1,274,471 3,218,362 11,695,862
Segment profit 25,449,090 18,198,871 11,200,103 (24,310,649) 30,537,415
Segment assets 150,032,995 184,015,782 43,619,752 290,843,992 668,512,521
Capital
expenditures 8,962,862 10,883,070 3,442,706 7,591,052 30,879,690
Page A-19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Segment information for 1998
Hot-mix Aggregate Mobile Asphalt
Asphalt Processing Construction
Plants Equipment Equipment All Others Total
Revenues from
external
customers $163,234,857 $112,705,508 $60,324,759 $27,680,067 $363,945,191
Intersegment
revenues 11,316,496 7,039,559 662,270 7,952,842 26,971,167
Interest
expense 10,397 333,186 38,698 2,326,700 2,708,981
Depreciation
and
amortization 3,236,621 1,662,560 1,019,281 2,211,123 8,129,585
Segment profit 21,565,578 12,961,727 9,890,188 (18,799,821) 25,617,672
Segment
assets 129,794,248 115,980,822 35,649,089 189,045,689 470,469,848
Capital
expenditures 10,899,368 4,930,963 2,347,673 1,199,737 19,377,741
Segment information for 1997
Hot-mix Aggregate Mobile Asphalt
Asphalt Processing Construction
Plants Equipment Equipment All Others Total
Revenues
from
external
customers $132,964,101 $55,362,319 $ 48,495,151 $28,543,741 $265,365,312
Intersegment
revenues 8,808,916 1,536,222 1,491,976 3,476,457 15,313,571
Interest
expense 130,788 251,376 56,142 1,959,596 2,397,902
Depreciation
and
amortization 2,819,408 1,038,511 834,845 2,252,154 6,944,918
Segment
profit 14,110,492 6,888,381 6,520,863 (12,746,808) 14,772,928
Segment
assets 101,877,245 86,902,667 27,909,735 155,226,915 371,916,562
Capital
expenditures 3,361,074 1,797,757 1,515,724 589,854 7,264,409
Page A-20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Reconciliations of the reportable segment totals for revenues, profit or loss,
assets, interest expense, depreciation and amortization and capital
expenditures to the Company's consolidated totals are as follows:
Year Ended December 31,
1999 1998 1997
Revenues:
Total external revenues
for reportable segments $415,099,914 $336,265,124 $236,821,571
Intersegment revenues
for reportable segments 18,791,541 19,018,325 15,313,571
Other revenues 34,527,543 27,680,067 28,543,741
Elimination of
intersegment revenues (18,791,541) (19,018,325) (15,313,571)
Total consolidated revenues $449,627,457 $363,945,191 $265,365,312
Profit:
Total profit for
reportable segments $54,848,064 $44,417,493 $27,519,736
Other profit (loss) (24,310,649) (18,799,821) (12,746,808)
Equity in income of
joint venture 6,096 74,578 96,158
Elimination of
intersegment profit 1,168,767 (1,256,135) (1,059,672)
Total consolidated
net income $31,712,278 $24,436,115 $13,809,414
Assets:
Total assets for
reportable segments $377,668,529 $281,424,159 $216,689,647
Other assets 290,843,992 189,045,689 155,226,915
Elimination of intercompany
profit in inventory
and leased equipment (1,241,297) (2,410,064) (592,475)
Elimination of intercompany
receivables (172,653,814) (118,730,950) (101,660,138)
Elimination of investment
in subsidiaries (118,643,805) (84,228,341) (76,228,341)
Other eliminations (21,433,081) (16,780,222) (1,192,509)
Total consolidated assets $354,540,524 $249,163,951 $192,243,099
Interest expense:
Total interest expense
for reportable segments $834,726 $454,629 $438,306
Other interest expense 3,418,493 2,329,358 1,959,596
Total consolidated
interest expense $4,253,219 $2,783,987 $2,397,902
Depreciation and amortization:
Total depreciation and
amortization for
reportable segments $8,477,500 $5,918,462 $4,692,764
Other depreciation and
amortization 3,218,362 2,211,123 2,252,154
Total consolidated depreciation
and amortization $11,695,862 $8,129,585 $6,944,918
Capital expenditures:
Total capital expenditures
for reportable segments $23,288,638 $18,178,004 $6,674,555
Other capital expenditures 7,591,052 1,199,737 2,515,144
Total consolidated capital expenditures
(excluding those for equipment
leased to others) $30,879,690 $19,377,741 $9,189,699
Page A-21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
International sales by domestic subsidiaries by major region
Were as follows:
Year Ended December 31,
1999 1998 1997
Asia $2,814,288 $5,363,481 $2,820,044
Southeast Asia 808,771 2,214,930 11,397,733
Europe 7,148,982 3,471,656 3,076,510
South America 4,280,998 20,712,903 10,000,648
Canada 12,694,606 12,072,217 8,618,053
Australia 962,743 1,467,738 4,298,554
Africa 1,434,304 2,668,923 444,313
Central America 9,995,037 11,893,005 7,461,261
Middle East 1,080,697 6,164,493 5,224,857
West Indies 4,365,563 3,176,713 2,998,406
Other 209,208 308,542 2,561,868
Total $45,795,197 $69,514,601 $58,902,247
13. Finance Receivables
Finance receivables are receivables of Astec Financial Services, Inc.
Contractual maturities of outstanding receivables at December 31, 1999 were:
Amounts Due In
Financing
Leases Notes Total
2000 $5,529,580 $4,551,092 $10,080,672
2001 829,572 1,385,403 2,214,975
2002 562,280 906,726 1,469,006
2003 298,466 657,404 955,870
2004 45,679 118,355 164,034
Thereafter 7,613 6,758 14,371
7,273,170 7,625,738 14,898,928
Less unearned income (382,758) (610,236) (992,994)
Total $6,890,412 $7,015,502 $13,905,934
Receivables may be paid prior to contractual maturity generally by payment of a
prepayment penalty. At December 31, 1999, there were no impaired loans or
leases. Recognition of income on finance receivables is suspended when
management determines that collection of future income is not probable. Accrual
is resumed if the receivable becomes contractually current and collection doubts
are removed. Previously suspended income is recognized at that time.
Page A-22
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Astec Industries, Inc.
We have audited the accompanying consolidated balance sheets
of Astec Industries, Inc. and subsidiaries as of December 31,
1999 and 1998 and the related consolidated statements of
income, shareholders' equity, and cash flows for each of the
three years in the period ended December 31, 1999. Our audits
also included the financial statement schedule listed in the
Index at Item 14(a). These financial statements and schedule
are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards
require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting amounts and
disclosures in the financial statements. An audit also
includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the
consolidated financial position of Astec Industries, Inc. and
subsidiaries at December 31, 1999 and 1998, and the
consolidated results of their operations and their cash flows
for each of the three years in the period ended December 31,
1999, in conformity with accounting principles generally
accepted in the United States. Also, in our opinion, the
related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set
forth therein.
/S/ Ernst & Young LLP
Chattanooga, Tennessee
February 18, 2000
Page A-23
ASTEC INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE (II)
VALUATION AND QUALIFYING ACCOUNTS FOR CONTINUING OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
DESCRIPTION BEGINNING ADDITIONS OTHER ENDING
BALANCE CHARGES TO ADDITIONS DEDUCTIONS BALANCE
COSTS &
EXPENSES
December 31, 1999
Reserves deducted from assets to which they apply:
Allowance for
doubtful
accounts $1,460,000 $425,557 $287,854 (3) $207,160 (1) $1,966,251
Reserve for
inventory $3,683,292 $1,265,120 $1,639,600 (3) $1,456,837 $5,131,175
Other
Reserves:
Product
warranty $3,624,252 $1,466,176 $1,075,700 (3) $2,090,770(2) $4,075,358
December 31, 1998:
Reserves deducted from assets to which they apply:
Allowance for
doubtful
accounts $1,553,237 $1,092,185 $ $1,185,422(1) $1,460,000
Reserve for
inventory $4,328,170 $1,289,740 $ $1,934,618 $3,683,292
Other
Reserves:
Product
warranty $3,206,372 $4,048,899 $ $3,631,019(2) $3,624,252
December 31, 1997:
Reserves deducted from assets to which they apply:
Allowance for
doubtful
accounts $1,266,939 $272,578 $523,507(3) $509,787(1) $1,553,237
Reserve for
inventory $4,873,922 $418,906 $ $964,658 $4,328,170
Other
Reserves:
Product
warranty $2,364,705 $2,811,009 $173,900 (3) $2,143,242(2) $3,206,372
(1) Uncollectible accounts written off, net of recoveries.
(2) Warranty costs charged to the reserve.
(3) Represents reserve balances of subsidiaries acquired in
the year.
Schedule (II)
Page A-24
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, Astec Industries, Inc.
has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ASTEC INDUSTRIES, INC.
BY:/s/ J. Don Brock
J. Don Brock, Chairman of the Board and President
(Principal Executive Officer)
BY:/s/ F. McKamy Hall
F. McKamy Hall, Chief Financial Officer, Vice President and Treasurer
(Principal Financial and Accounting Officer)
Date: March 13, 2000
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by a majority
of the Board of Directors of the Registrant on the dates
indicated:
SIGNATURE TITLE DATE
/s/ J. Don Bro ck Chairman of the Board March 13, 2000
J. Don Brock and President
/s/ Albert E. Guth President, Astec Financial March 13, 2000
Albert E. Guth Services, Inc. and Director
/s/ W. Norman Smith President - Astec, Inc. March 13, 2000
W. Norman Smith and Director
/s/ Robert G. Stafford Group Vice President-Aggregates March 13, 2000
Robert G. Stafford and Director
/s/ E.D. Sloan Director March 13, 2000
E. D. Sloan, Jr.
/s/ William B. Sansom Director March 14, 2000
William B. Sansom
/s/ Ronald W. Dunmire Director March 13, 2000
Ronald W. Dunmire
/s/ George C. Dillon Director March 13, 2000
George C. Dillon
/s/ William D. Gehl Director March 13, 2000
William D. Gehl
/s/ Daniel K. Frierson Director March 13, 2000
Daniel K. Frierson
/s/ Robert Dressler Director March 13, 2000
Robert Dressler
Commission File No. 0-14714
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS FILED WITH ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
ASTEC INDUSTRIES, INC.
4101 Jerome Avenue
Chattanooga, Tennessee 37407
ASTEC INDUSTRIES, INC.
FORM 10-K
INDEX TO EXHIBITS
Exhibit Number Description
Exhibit 10.14 Astec Industries, Inc. Non-Employee
Directors' Stock Incentive Plan.
Exhibit 10.16 First Amendment, dated October 30, 1998, to the Second
Amended and Restated Credit Agreement dated
November 24, 1997, by and between the
Company and Astec Financial Services,
Inc. and The First National Bank of Chicago.
Exhibit 10.29 Stock Purchase Agreement, dated October 31, 1999,
by and among American Augers, Inc. and Its
Shareholders and Astec Industries, Inc.
Exhibit 10.30 Stock Purchase Agreement, dated November 1, 1999,
by and among SIMCO, LLC and the Superior Industries of
Morris, Inc. Employee Stock Ownership
Plan and Astec Industries, Inc.
Exhibit 10.31 Amended and Restated Master Note in the amount of
$15,000,000 dated December 29, 1999 by and between Astec
Industries, Inc. and Bank One, NA.
Exhibit 10.32 Amended and Restated Master Note in the amount of
$20,000,000 dated December 29, 1999 by and between Astec
Industries, Inc. and Bank One, NA.
Exhibit 22 Subsidiaries of the registrant.
Exhibit 23 Consent of independent auditors.
EXHIBIT 10.14
Astec Industries, Inc. Non-Employee Directors' Stock Incentive Plan
March 3, 1998
ASTEC INDUSTRIES, INC.
1998 NON-EMPLOYEE DIRECTORS STOCK INCENTIVE PLAN
1. Purpose. The purpose of the Astec Industries, Inc. 1998 Non-Employee
Directors Stock Incentive Plan is to attract, retain and compensate
highly-qualified individuals who are not employees of Astec Industries, Inc.
or any of its subsidiaries or affiliates for service as members of the Board by
providing them with an ownership interest in the Common Stock of the Company.
The Company intends that the Plan will benefit the Company and its stockholders
by allowing Non-Employee Directors to have a personal financial stake in the
Company through an ownership interest in the Common Stock and will closely
associate the interests of Non-Employee Directors with that of the
Company's stockholders.
2. Defined Terms. Unless the context clearly
indicates otherwise, the following terms shall have the following meanings:
"Annual Retainer" means the annual retainer payable by
the Company to a Non-Employee Director for service as a director of the Company,
as such amount may be changed from time to time.
"Board" means the Board of Directors of the Company.
"Company" means Astec Industries, Inc., a Tennessee corporation.
"Committee" has the meaning assigned such term in Section 3.
"Common Stock" means the common stock, par value $0.20 per share, of the
Company.
"Deferral Period" has the meaning set forth in Section 6(b) of the Plan.
"Deferral Termination Date" has the meaning set forth in Section 6(b) of
the Plan.
"Deferred Grant Date" has the meaning set forth in Section 6(b) of the Plan.
"Distributions" has the meaning set forth in Section 6(b) of the Plan.
"Election Form" means a form approved by the Committee pursuant to which a
Non-Employee Director elects a method of payment of Annual Retainer and whether
payment will be deferred, as provided herein.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value", on any date, means (i) if the Common Stock is listed on a
securities exchange or is traded over the Nasdaq National Market, the
closing sales price on such exchange or over such system on such date or,
in the absence of reported sales on such date, the closing sales price on the
immediately preceding date on which sales were reported, or (ii) if the
Common Stock is not listed on a securities exchange or traded over
the Nasdaq National Market, the mean between the bid and
offered prices as quoted by Nasdaq for such date, provided that if it is
determined that the fair market value is not properly reflected by such
Nasdaq quotations, Fair Market Value will be determined by
such other method as the Committee determines in good faith
to be reasonable.
"Hardship" has the meaning set forth in Section 6(c) of the Plan.
"Non-Employee Director" means a director of the Company who is not an
employee of the Company or of any of its subsidiaries or affiliates.
"Option" means an option to purchase Shares granted under Section 7.
Options granted under the Plan are not incentive stock options within
the meaning of Section 422 of the Internal Revenue Code.
"Option Grant Date" means the date upon which an Option
is granted to a Non-Employee Director pursuant to Section 7.
"Option Notice" means a written notice, agreement or
certificate with a Non-Employee Director from the Company evidencing an Option.
"Optionee" means a Non-Employee Director of the Company
to whom an Option has been granted or, in the event of such Non-Employee
Director's death prior to the expiration of an Option, such Non-Employee
Director's estate or other designated beneficiary.
"Options Election Period" means the period designated
by the Committee each year during which Non-Employee Directors may elect to
receive Options as payment of some or all of their Annual Retainer. The
Options Election Period shall end on or before December 31 of each year for
the following Plan Year.
"Participant" means any Non-Employee Director who is participating in the
Plan.
"Permitted Transferee" of an Optionee means (i) one or
more of the following family members of the Optionee: spouse, former spouse,
child (whether natural or adopted), stepchild, any other lineal descendent of
the Optionee; (ii) a trust, partnership or other entity established and
existing for the sole benefit of, or under the sole control
of, one or more of the above family members of the Optionee,
or (iii) any other transferee specifically approved by the Committee after
taking into account any state or federal tax, securities or other laws
applicable to transferable options.
"Plan" means the Astec Industries, Inc. 1998 Non-
Employee Directors Stock Incentive Plan, as amended from time to time.
"Plan Year" means the twelve-month period ending on
December 31 of each year which, for purposes of the Plan, is the period for
which Annual Retainers are earned.
"Stock Grant Date" has the meaning set forth in Section 6(a) of the Plan.
"Rule 16b-3" means Rule 16b-3, as amended from time to
time, of the Securities and Exchange Commission as promulgated under the
Exchange Act.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means shares of Common Stock.
3. Administration. The Plan shall be administered by the Compensation
Committee of the Board of Directors (the "Committee"). Subject to the
provisions of the Plan, the Committee shall be authorized to interpret the
Plan, to establish, amend and rescind any rules and regulations relating to
the Plan, and to make all other determinations necessary or advisable for
the administration of the Plan; provided, however, that the Committee shall
have no discretion with respect to the eligibility or
selection of Non-Employee Directors to receive awards under
the Plan, the number of Shares subject to any such awards or the time at
which any such awards are to be granted. The Committee's interpretation
of the Plan, and all actions taken and determinations
made by the Committee pursuant to the powers vested in it
hereunder, shall be conclusive and binding upon all parties concerned
including the Company, its stockholders and persons granted awards under the
Plan. The Committee may appoint a plan administrator to carry out the
ministerial functions of the Plan, but the administrator shall have no other
authority or powers of the Committee. Notwithstanding the
foregoing, the Board shall exercise any and all rights,
duties and powers of the Committee under the Plan to the extent required by the
applicable exemptive conditions of Rule 16b-3, as determined by the Board its
sole discretion.
4. Shares Subject to Plan. The Shares issued under the Plan shall not exceed
in the aggregate 25,000 Shares of Common Stock. Such Shares
may be authorized and unissued Shares or treasury Shares.
5. Participants. All active Non-Employee Directors shall
be eligible to participate in the Plan.
6. Stock Awards.
(a) Grant Dates and Formula for Grants. Unless a Non-Employee
Director has elected pursuant to Section 7 to receive Options
as payment of his or her Annual Retainer for such Plan Year or to defer
receipt of Shares as provided in Section 6(b), Shares of Common Stock shall be
automatically granted on the date that Annual Retainers are payable in any Plan
Year (each such date is hereinafter referred to as a "Stock Grant Date") to
each eligible Non-Employee Director commencing with the 1999 Stock Grant Date.
The total number of Shares included in each grant under this Section 6(a) shall
be determined by dividing the Annual Retainer amount by the Fair Market Value
per Share on the Stock Grant Date. Fractions will be rounded to the next
highest Share. The Shares or rights to which a Participant is entitled under
this Section 6(a) shall be in lieu of the payment of his or her Annual Retainer
in cash or Options.
(b) Deferral of Receipt of Shares.
(i) Election to Defer. Each Participant will have the right to elect,
pursuant to a written Election Form delivered to the
Committee or the plan administrator prior to the commencement of each Plan Year,
to defer the grant of the Shares that would otherwise be granted to the
Participant during the next ensuing Plan Year until the earlier of (i) the
Participant's termination of service as a director or (ii) another designated
date at least three years after the date of such
deferral election (in either case, the "Deferral Termination
Date"). Pursuant to this Election Form, the Participant will elect whether all
of the deferred grant will be (a) granted within 30 days after the Deferral
Termination Date or (b) granted in approximately equal annual installments of
Shares over a period of two to ten years (as the Participant may elect) after
the Deferral Termination Date, each such annual grant to be made within 30
days after the anniversary of the Deferral
Termination Date. The deferral Election Form signed by the
Participant prior to the Plan Year will be irrevocable except in case of
Hardship (as defined in Section 6(c)) as determined in good faith by the Board
pursuant to Section 6(c). No Shares will be issued until the grant date(s) so
deferred (the "Deferred Grant Date") at which time the Company agrees to issue
the Shares to the Participant. The Participant will have no rights as a
stockholder with respect to the deferred rights to Shares, and the rights to
such Shares will be unsecured.
(ii) Deferred Dividend Account. If any dividends or other rights
or distributions of any kind ("Distributions") are
distributed to holders of Common Stock during the period from the applicable
Stock Grant Date until the Deferral Termination Date (the "Deferral Period")
but prior to the Participant's termination of service, an amount equal to the
cash value of such Distributions on their distribution date, as such value is
determined by the Committee, will be credited to a deferred dividend account
for the Participant as follows: the account will be credited with the right
to receive Shares having a Fair Market Value as of
the date of the Distribution equal to the cash value of the
Distribution. The Company will issue Shares equal to the cumulative total of
rights to Shares in such account within 30 days after the Participant's
Deferral Termination Date.
If a Distribution is distributed to holders of Common Stock after the
Participant's Deferral Termination Date but prior to the
issuance in full of the deferred Shares, an amount equal to the cash value of
such Distributions pertaining to any Shares still deferred shall be converted
into Shares equivalent in value to the Distribution (based on the Fair Market
Value as of the date of Distribution) and such Shares will be issued to the
Participant as soon as practical after the date of the Distribution.
No right or interest in the deferred dividend account shall be subject to
liability for the debts, contracts or engagements of the Participant or shall
be subject to disposition by transfer, alienation, anticipation,
pledge, encumbrance, assignment or any other means whether such disposition be
voluntary or involuntary or by operation of law by judgment, levy,
attachment, garnishment or any other legal or equitable proceedings (including
bankruptcy), and any attempted disposition thereof shall be null and void and
of no effect; provided, however, that nothing in this Section 6(b) shall
prevent transfers by will or by the applicable laws of descent and distribution.
The Committee will have the right to adopt other regulations and procedures
to govern deferral of grants of Shares.
(c) Hardship. The Board may accelerate the distribution of all or a
portion of a Participant's deferred grants of Shares on account of his or her
Hardship, subject to the following requirements: (i) the value of such
accelerated distribution shall not exceed the amount necessary to satisfy
the Hardship, less the amount which can be satisfied from other resources which
are reasonably available to the Participant, (ii) the denial of the
Participant's request for a Hardship acceleration would result in severe
financial hardship to the Participant, and (iii) the Participant has not
received an accelerated distribution on account of Hardship within the
12-month period preceding the acceleration.
For purposes of this Plan, "Hardship" of a Participant, as determined by
the Board in its discretion on the basis of all relevant
facts and circumstances and in accordance with the following
nondiscriminatory and objective standards
uniformly interpreted and consistently applied, shall mean a
severe financial hardship to the Participant resulting from a sudden and
unexpected illness or accident of the Participant or of his or her dependent,
loss of the Participant's property due to casualty, or other extraordinary and
unforeseeable circumstances arising as a result of events beyond the control of
the Participant. A financial need shall not constitute a Hardship unless it is
for at least $1,000,000 or the entire value of the principal amount of the
Participant's deferred grants.
7. Stock Option Awards.
(a) Election to Receive Options. A Non-Employee Director may elect
to defer 100% of his or her Annual Retainer by conversion to Options in
accordance with this Section 7. A Non-Employee Director who wishes to receive
his or her Annual Retainer for a Plan Year in the form of Options must
irrevocably elect to do so during the Options Election Period for such Plan
Year, by delivering a valid Election Form to the Committee or the
plan administrator. A Non-Employee Director's participation in Section 7 of
the Plan will be effective with respect to the Annual Retainer to be earned in
the first Plan Year beginning after the Committee or the plan administrator
receives the Non-Employee Director's Election Form.
(b) Irrevocable, Annual Election. Elections to receive Options as
payment of Annual Retainer are irrevocable and shall be valid only for one Plan
Year. New elections must be made for participation in Section 7 of the Plan
for subsequent Plan Years.
(c) Time of Grant. Options shall be granted to each Non-Employee
Director who, during the applicable Options Election Period, filed with the
Committee or the plan administrator a written irrevocable election to receive
Options as payment of such Non-Employee Director's Annual Retainer payable in
the following Plan Year. Such Options will be granted on the date the Annual
Retainer for such Plan Year is otherwise payable.
(d) Number of Options. The Committee or the plan administrator
shall cause to be calculated in the month of November of each year the Black-
Scholes value of an Option under the Plan to purchase one Share of Common
Stock. Such Black-Scholes value shall apply for purposes of this Section
7(d) for all Options to be granted in the following Plan Year. The
number of Shares subject to an Option granted pursuant to this Section 7 shall
be the number of whole Shares equal to:
(A times B) divided by C, where:
A = the dollar amount of the Annual Retainer that the Non-Employee
Director elects shall be payable in Options; and
B = the quotient of 1 divided by the Black-Scholes value of
an Option for one Share (expressed as a percentage of the Fair Market Value
of one Share of Common Stock); and
C = the Fair Market Value per Share on the Option Grant Date.
In determining the number of Shares subject to an Option, any
fraction of a Share will be rounded to the next highest whole number of
Shares.
For example:
Assume that a Non-Employee Director has elected to defer $5,000 of his
or her Annual Retainer, that the Fair Market Value per Share on the Option
Grant Date was $16, and that the most recently determined Black-
Scholes value of an Option was 50% of the Fair Market Value. The Non-Employee
Director would be granted 625 Options as payment of the $5,000 compensation.
($5,000 times 1/50%) divided by $16 FMV = 625 Options granted.
(e) Exercise Price. The total price paid per Share under each Option
granted under this Section 7 shall be the Fair Market Value per Share on the
Option Grant Date.
(f) Exercise of Options. Each Option shall be fully exercisable upon
grant and will remain exercisable for 10 years from the Option Grant Date
regardless of whether the Optionee remains a director of the Company throughout
such term. An Option, or portion thereof, may be exercised in whole or in part
only with respect to whole Shares.
(g) Payment of Exercise Price. Shares shall be issued to the Optionee
(or his Permitted Transferee) pursuant to the exercise of an Option only upon
receipt by the Company from the Optionee (or his Permitted Transferee) of
payment in full of the exercise price. The exercise price shall be payable in
United States dollars upon the exercise of the Option and may be paid in
cash, by check, or in Shares having a total Fair Market Value on the
date of exercise equal to the exercise price; provided that if the Shares
surrendered in payment of the exercise price were themselves acquired otherwise
than on the open market, such Shares shall have been held for at least six
months. The Committee may permit the use of any cashless exercise methods that
are permitted by law.
(h) Option Notice. Each Option granted under the Plan shall be
evidenced by an Option Notice which shall be executed by an authorized
officer of the Company. Such Option Notice shall contain provisions
regarding (a) the number of Shares that may be issued upon exercise of the
Option, (b) the exercise price per Share of the Option and the means of
payment therefor, (c) the term of the Option, and (d) such other terms and
conditions not inconsistent with the Plan as may be determined from time to
time by the Committee.
(i) Transferability of Options. No Option shall be
assignable or transferable by the Optionee other than by will or the laws
of descent and distribution or to a Permitted Transferee. Any transfer to a
Permitted Transferee shall be subject to the following terms and conditions:
(i) An Option transferred to a Permitted Transferee shall not be
assignable or transferable by the Permitted Transferee other
than by will or the laws of descent and distribution.
(ii) Transferred Options shall continue to be subject
to all the terms and conditions of the Option as applicable to the
original Optionee (other than the ability to further transfer the Option).
(iii) The Optionee and the Permitted Transferee shall execute any
and all documents reasonably requested by the Committee or the plan
administrator, including without limitation documents (A) to confirm the
status of the transferee as a Permitted Transferee, (B) to satisfy any
requirements for an exemption for the transfer under applicable federal and
state securities laws, and (C) to evidence the transfer.
(iv) Shares acquired by a Permitted Transferee through exercise of
an Option may not be transferred, nor will any assignee or transferee thereof
be recognized as an owner of such Shares by the Company for any
purpose, unless a registration statement under the Securities Act and any
applicable state securities act with respect to such Shares shall then be in
effect or unless the availability of an exemption from registration with
respect to any proposed transfer or disposition of such Shares shall be
established to the satisfaction of counsel for the Company.
8. Prorated Grants. If on any date, Shares of Common Stock are not
available under the Plan to grant to Non-Employee Directors
the full amount of a grant contemplated by the Plan, then each such director
shall receive an award equal to the number of Shares of Common Stock then
available under the Plan divided by the number of Non-Employee Directors
entitled to a grant of Shares or Options on such date.
Fractional Shares shall be ignored and not granted. Any
shortfall resulting from such proration shall be paid in the form of cash.
9. Withholding. Except with respect to the exercise of Options transferred
to Permitted Transferees, whenever the Company issues Shares
under the Plan, the Company shall have the right to withhold from sums due the
recipient, or to require the recipient to remit to the Company, any amount
sufficient to satisfy any federal, state and/or local withholding tax
requirements prior to the delivery of any certificate for such Shares.
10. Adjustments.
(a) Subject to Section 10(c) but notwithstanding any other term of this
Plan, in the event that the Committee determines that any Distribution (whether
in the form of cash, Common Stock, other securities, or other
property), recapitalization, reclassification, stock split, reverse
stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, or exchange of Common Stock or other securities of the
Company, issuance of warrants or other rights to purchase Common Stock or other
securities of the Company, or other similar corporate transaction or event, in
the Committee's sole discretion, affects the Common Stock such that an
adjustment is determined by the Committee to be
appropriate in order to prevent dilution or enlargement of
the benefits or potential benefits intended to be made available under the Plan
or with respect to an award or awards hereunder, then the Committee shall, in
such manner as it may deem equitable, adjust the number and type of shares
(or other securities or property) which may be granted under the Plan
(including, but not limited to, adjustments of the maximum number and kind
of securities which may be issued); provided, however, that to the extent
required by the applicable exemptive conditions of Rule 16b-3, any such
adjustment shall be subject to approval by the Board.
(b) Subject to Section 10(c) but notwithstanding any other term of this
Plan, in the event of any corporate transaction or event described in
paragraph (a) which results in Shares being exchanged for or converted into
cash, securities or other property (including securities of another
corporation), all stock grants deferred under Section 6 shall become the right
to receive such cash, securities or other property, and there shall be
substituted on an equitable basis for each Share of Common Stock then
subject to an Option granted pursuant to Section 7 the
consideration payable with respect to the outstanding Shares
of Common Stock in connection with such corporate transaction or event, all
without any change in the aggregate purchase price for the Shares then subject
to the Option.
(c) The number of Shares finally granted under this Plan shall always
be rounded to the next highest whole Share.
(d) Any decision of the Committee pursuant to the terms of this
Section 10 shall be final, binding and conclusive upon the Participants, the
Company and all other interested parties; provided, however, that to the extent
required by the applicable exemptive conditions of Rule 16b-3, any such
decision shall be subject to approval by the Board.
11. Amendment. The Committee may terminate or suspend the Plan at any
time, without stockholder approval. The Committee may amend
the Plan at any time and for any reason without stockholder approval; provided,
however, that the Committee may condition any amendment on the approval of
stockholders of the Company if such approval is necessary or deemed advisable
with respect to tax, securities or other applicable laws, policies or
regulations. No termination, modification or amendment of
the Plan may, without the consent of a Participant, adversely
affect a Participant's rights under an award granted prior thereto.
12. Indemnification. Each person who is or has been a member of the
Committee or who otherwise participates in the administration
or operation of this Plan shall be indemnified by the Company against, and held
harmless from, any loss, cost, liability or expense that may be imposed upon or
incurred by him or her in connection with or resulting from any claim, action,
suit or proceeding in which such person may be involved by reason of any
action taken or failure to act under the Plan and shall be fully
reimbursed by the Company for any and all amounts paid by
such person in satisfaction of judgment against him or her in any such action,
suit or proceeding, provided he or she will give the Company an opportunity, by
written notice to the Committee, to defend the
same at the Company's own expense before he or she undertakes
to defend it on his or her own behalf. This right of indemnification shall not
be exclusive of any other rights of indemnification.
The Committee and the Board may rely upon any information furnished by the
Company, its public accountants and other experts. No
individual will have personal liability by reason of anything done or omitted
to be done by the Company, the Committee or the Board in connection with the
Plan.
13. Duration of the Plan. The Plan shall remain in effect until the tenth
anniversary of the Effective Date, unless terminated earlier
by the Committee.
14. Expenses of the Plan. The expenses of administering the Plan shall be
borne by the Company.
15. Effective Date. The Plan was originally adopted by the Board on March
12, 1998, and became effective upon the approval thereof by the stockholders
of the Company on April 23, 1998 (the "Effective Date").
ASTEC INDUSTRIES, INC.
By: /s/ Richared W. Bethea, Jr.
Its: Secretary
EXHIBIT 10.16
First Amendment, dated October 30, 1998, to the Second Amended
and Restated Credit Agreement dated November 24, 1997, by and
between the Company and Astec Financial Services, Inc. and The
First National Bank of Chicago.
EXHIBIT 10.16
FIRST AMENDMENT AND WAIVER TO
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
THIS FIRST AMENDMENT AND WAIVER TO SECOND
AMENDED AND RESTATED CREDIT AGREEMENT (this
"Agreement") dated as of October 30, 1998 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 "Borrower" and
collectively as "Borrowers"), the financial institutions parties hereto
in their capacities as lenders hereunder (collectively, the "Lenders",
and each individually, a "Lender"), The First National Bank of
Chicago, as agent (in its individual capacity, "FNBC"), for itself, as
Lender, and as administrative agent for the other Lenders ("Agent").
RECITALS
WHEREAS, Borrowers, Lenders, and Agent entered into a certain
Second Amended and Restated Credit Agreement dated as of
November 24, 1997 (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 Lenders provided certain revolving credit and swing line
facilities to Borrowers which facilities were guaranteed by certain
guarantors defined therein; and
WHEREAS, the parties hereto wish to amend and consent to certain
provisions of the Credit Agreement on the terms and conditions set
forth herein as of the date first written above (the "First Amendment
Effective Date").
NOW, THEREFORE, for and in consideration of the terms and
conditions contained herein, and other good and valuable
consideration the receipt and sufficiency of which is hereby
acknowledged, Borrowers, Agent and Lenders hereby agree as
follows:
Section 1. Amendments and Waiver.
1.1. Article I. From and after the First Amendment Effective
Date, Article I of the Credit Agreement is hereby amended by (a)
inserting the following:
"Consolidated Net Revenue" means the consolidated net revenue of
the Credit Parties for the most recently completed fiscal year
determined on a consolidated basis in accordance with Agreement
Accounting Principles.
and (b) inserting the following:
"Johnson Acquisition" means the purchase of assets of Johnson
Crushers International, Inc. pursuant to that certain Asset Purchase
Agreement dated as of October __, 1998 between Johnson Crushers
International, Inc. and Astec.
1.2. Section 6.16. From and after the First Amendment Effective
Date, Section 6.16 of the Credit Agreement is hereby amended by
inserting the following:
(k) The Johnson Acquisition; provided, however, that (i) the
purchase price is no more than $15,000,000, (ii) Astec submits a
certificate prior to the closing transaction certifying that the Credit
Parties are in compliance with the financial and other covenants
hereunder on a pro forma basis, after giving effect to the Johnson
Acquisition, and (iii) the purchaser thereunder and any Affiliate of
Astec formed in connection therewith (if not a Credit Party on the
date hereof) executes and delivers a guaranty to the Lenders in
substantially the form of the Guaranty.
1.3. Section 6.23. From and after the First Amendment Effective
Date, Section 6.23 of the Credit Agreement is hereby amended by
deleting Section 6.23 in its entirety and inserting the following in
substitution therefor:
6.23. Fixed Asset Expenditure. The Borrowers will not, nor will
they permit any Credit Party to, expend, or be committed to expend,
in the acquisition of fixed assets, in excess of five percent (5%) of
Consolidated Net Revenue during any one fiscal year.
The Agent and the Lenders hereby waive any Default that exists
under Section 6.23 of the Credit Agreement for the period ending
September 30, 1998. This waiver is specifically limited as set forth
above and does not constitute a waiver of any provisions of the
Credit Agreement in connection with any other period.
2. Reference to and Effect on the Credit Agreement.
2.1. Except as specifically amended above, the Credit Agreement
shall remain in full force and effect and is hereby ratified and
confirmed.
2.2. Except as specifically provided herein, the execution,
delivery and effectiveness of this Agreement shall not operate as a
waiver of any right, power or remedy of Agent or Lenders 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 Agreement,
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 Second Amended and Restated
Guaranty, taking into account this Amendment.
3. Representations and Warranties. To induce Agent and
Lenders to execute this Agreement, the Borrowers represent and
warrant to Agent and Lenders as follows:
3.1. The Borrowers have all requisite power and authority to
execute, deliver and perform this Agreement.
3.2. The execution, delivery and performance of this Agreement
(i) has been duly authorized by all requisite action of 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 Borrowers,
(2) any order of any court, or any rule, regulation or order of any
other agency of government binding upon Borrowers, or (3) any
provisions of any material indenture, agreement or other instrument
to which Borrowers are a party, or by which Borrowers or any of
their properties or assets is or may be bound, (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 Agreement 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 this date.
4. Compliance. 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. Borrowers further acknowledge and agree that as
of the date hereof they have no offsets or claims against Agent or
Lenders under the Loan Documents or under other agreements
between Borrowers and Lenders, or any defenses to Agent's or
Lenders' enforcement of their rights and remedies under the Loan
Documents.
5. Miscellaneous.
5.1. Entire Agreement. This Agreement, including all schedules
and other documents attached hereto or incorporated by reference
herein, 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. Counterparts. This Agreement 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. Costs and Expenses. In accordance with Section 9.7 of the
Credit Agreement, Borrower agrees to promptly pay all reasonable
fees, costs and expenses incurred by Agent in connection with the
preparation, execution and delivery of this Agreement.
5.4. CHOICE OF LAW. 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.
5.5. Headings. Section headings in this Agreement are included
herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.
5.6. Successors and Assigns. This Agreement shall be binding
upon each of the parties hereto and their respective successors and
assigns, except that Borrower may not assign its rights or obligations
hereunder without the written consent of Agent and Lenders.
[SIGNATURE PAGES TO FOLLOW]
IN WITNESS WHEREOF, the Borrowers, the Lenders, the Guarantors
and the Agent have executed this Agreement as of the date first
above written.
ASTEC INDUSTRIES, INC.
By: /s/ Richard W. Bethea, Jr.
Print Name: Richard W. Bethea, Jr.
Title: Vice President
Address: 4101 Jerome Avenue
Chattanooga, Tennessee 37407
Telecopy: (423) 867-4127
Telephone: (423) 867-4210
Attention: F. McKamy Hall ASTEC FINANCIAL SERVICES,
INC.
By: /s/ Albert E. Guth
Print Name: Albert E. Guth
Title: President
Address: 6400 Lee Highway, Suite 107
Chattanooga, Tennessee 37421
Telecopy: (423) 899-4456
Telephone: (423) 899-5898
Attention: Albert E. Guth
IN WITNESS WHEREOF, the Borrowers, the Lenders, the Guarantors
and the Agent have executed this Agreement as of the date first
above written.
HEATEC, INC.
By: /s/ Richard W. Bethea, Jr.
Its: Secretary
TELSMITH, INC.
By: /s/ Richard W. Bethea, Jr.
Its: Secretary
ROADTEC, INC.
By: /s/ Richard W. Bethea, Jr.
Its: Secretary
ASTEC TRANSPORTATION, INC.
By: /s/ Richard W. Bethea, Jr.
Its: Secretary
TRENCOR, INC.
By: /s/ Richard W. Bethea, Jr.
Its: Secretary
PRODUCTION ENGINEERED PRODUCTS, INC.
By: /s/ Richard W. Bethea, Jr.
Its: Secretary
ASTEC, INC.
By: /s/ Richard W. Bethea, Jr.
Its: Secretary
CEI ENTERPRISES, INC.
By: /s/ Richard W. Bethea, Jr.
Its: Secretary
KOLBERG-PIONEER, INC.
By: /s/ Richard W. Bethea, Jr.
Its: Secretary
ASTEC HOLDINGS, INC.
By: /s/ Richard W. Bethea, Jr.
Its: Secretary
IN WITNESS WHEREOF, the Borrowers, the Lenders, the Guarantors
and the Agent have executed this Agreement 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 Agreement 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, Tennessee 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 Agreement 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, Tennessee 37402
Telecopy: (423) 752-1558
Telephone: (423) 752-1623
Attention: Steven Anderson
EXHIBIT 10.29
Stock Purchase Agreement, dated October 31, 1999, by and among
American Augers, Inc. and Its Shareholders and Astec
Industries, Inc.
STOCK PURCHASE AGREEMENT
BY AND AMONG
AMERICAN AUGERS, INC.
AND
ITS SHAREHOLDERS
AND
ASTEC INDUSTRIES, INC.
TABLE OF CONTENTS Page No.
ARTICLE 1
PURCHASE AND SALE OF COMPANY SHARES
1.1 BASIC TRANSACTION.
1.2 PURCHASE PRICE.
1.3 PURCHASE PRICE ADJUSTMENT.
1.4 HOLD BACK ACCOUNT.
1.5 PURCHASE PRICE COLLECTION AGENT.
1.6 THE CLOSING.
1.7 DELIVERIES AT THE CLOSING.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
2.1 AUTHORITY.
2.2 EXECUTION; BINDING EFFECT.
2.3 OWNERSHIP OF AND TITLE TO THE SHARES.
2.4 NO CONFLICT.
2.5 CAPITAL STOCK AND STOCKHOLDER RELATIONS.
2.6 ORGANIZATION, QUALIFICATION, AND CORPORATE POWER OF THE COMPANY
AND THE TRUST.
2.7 ORGANIZATIONAL DOCUMENTS.
2.8 BROKERS' FEES.
2.9 TITLE TO ASSETS.
2.10 SUBSIDIARIES AND AFFILIATES.
2.11 FINANCIAL STATEMENTS.
2.12 EVENTS SUBSEQUENT TO THE BASELINE FINANCIAL STATEMENT.
2.13 UNDISCLOSED LIABILITIES.
2.14 LEGAL COMPLIANCE.
2.15 TAX MATTERS.
2.16 INTELLECTUAL PROPERTY.
2.17 CONTRACTS.
2.18 EMPLOYEE ARRANGEMENTS, UNION AGREEMENTS AND BENEFIT PLANS
AND GOVERNMENT COMPLIANCE.
2.19 NOTES AND ACCOUNTS RECEIVABLE.
2.20 POWERS OF ATTORNEY.
2.21 INSURANCE.
2.22 GUARANTIES.
2.23 ENVIRONMENTAL, HEALTH, AND SAFETY MATTERS. ENVIRONMENTAL
PROTECTION.
2.24 ABSENCE OF CERTAIN PAYMENTS.
2.25 ORGANIZATIONS AND CLUBS.
2.26 BANK ACCOUNTS.
2.27 CUSTOMERS AND SUPPLIERS OF THE COMPANY.
2.28 EMPLOYEE BENEFITS.
2.29 INVENTORY.
2.30 LITIGATION; ORDERS.
2.31 REAL PROPERTY.
(a) Owned Real Property.
(b) Leased Real Property.
2.32 YEAR 2000 COMPLIANCE.
2.33 COMPLETENESS OF STATEMENTS; EFFECT OF REPRESENTATIONS AND
WARRANTIES.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE BUYER
3.1 ORGANIZATION OF THE BUYER.
3.2 AUTHORIZATION OF TRANSACTION.
3.3 NONCONTRAVENTION.
3.4 BROKERS' FEES.
3.5 INVESTMENT.
3.6 EMPLOYEES OF THE COMPANY.
3.7 NO ADVERSE TAX ELECTIONS.
3.8 SUFFICIENT FUNDS.
ARTICLE 4
PRE-CLOSING COVENANTS
4.1 GENERAL.
4.2 NOTICES AND CONSENTS.
4.3 OPERATION OF BUSINESS.
4.4 PRESERVATION OF BUSINESS.
4.5 FULL ACCESS.
4.6 NOTICE OF DEVELOPMENTS.
4.7 EXCLUSIVITY.
4.8 SURVEY.
ARTICLE 5
POST-CLOSING COVENANTS
5.1 GENERAL.
5.2 LITIGATION SUPPORT.
5.3 TRANSITION.
5.4 CONFIDENTIALITY.
5.5 ACCESS TO RECORDS.
ARTICLE 6
CONDITIONS TO OBLIGATION TO CLOSE
6.1 CONDITIONS TO OBLIGATION OF THE BUYER.
6.2 CONDITIONS TO OBLIGATION OF THE SELLERS.
ARTICLE 7
REMEDIES FOR BREACHES OF THIS AGREEMENT
7.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
7.2 INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE BUYER.
7.3 INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE SELLERS.
7.4 MATTERS INVOLVING THIRD PARTIES.
7.5 OFFER OF SETTLEMENT.
7.6 INFRINGEMENT CLAIMS.
7.7 NOTICE OF CLAIM.
7.8 OTHER INDEMNIFICATION PROVISIONS.
ARTICLE 8
TAX MATTERS
8.1 TAX PERIODS ENDING ON OR BEFORE THE CLOSING DATE.
8.2 TAX PERIODS BEGINNING BEFORE AND ENDING AFTER THE CLOSING DATE.
8.3 DISPUTES AS TO TAX RETURNS.
8.4 COOPERATION ON TAX MATTERS.
8.5 CERTAIN TAXES.
ARTICLE 9
TERMINATION
9.1 TERMINATION OF AGREEMENT.
9.2 EFFECT OF TERMINATION.
ARTICLE 10
DEFINITIONS, SCHEDULES AND EXHIBITS
10.1 DEFINITIONS.
10.2 10.2 LIST OF SCHEDULES AND EXHIBITS.
ARTICLE 11
MISCELLANEOUS
11.1 SELLER AGENTS.
11.2 KNOWLEDGE.
11.3 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS.
11.4 NO THIRD-PARTY BENEFICIARIES.
11.5 ENTIRE AGREEMENT.
11.6 SUCCESSION AND ASSIGNMENT.
11.7 COUNTERPARTS.
11.8 HEADINGS.
11.9 NOTICES.
11.10 GOVERNING LAW.
11.11 AMENDMENTS AND WAIVERS.
11.12 SEVERABILITY.
11.13 EXPENSES.
11.14 CONSTRUCTION.
11.15 INCORPORATION OF EXHIBITS AND SCHEDULES.
11.16 SPECIFIC PERFORMANCE.
STOCK PURCHASE AGREEMENT
THIS AGREEMENT made by and among
Astec Industries, Inc., a Tennessee
corporation (the "Buyer"), and American
Augers, Inc., a Delaware corporation (the
"Company") and Phil Jenkins ("Jenkins"),
and Roger K. Eve ("Eve"), the Phil
Jenkins Revocable Living Trust dated
1/6/67, as amended (the "Revocable
Trust"), the Ann Arbor Hands-On Museum
Irrevocable Trust dated 9/17/99 (the
"Museum Trust"), the Dexter
Intergenerational Care Center, Inc.
Irrevocable Trust dated 9/18/99 (the
"Dexter Trust"), the Chelsea Community
Hospital Irrevocable Trust Dated 9/18/99
(the "Hospital Trust"), Michael T. Mooney
("Mooney"), Denis Fox ("Fox"), Thomas
Hartzler ("Hartzler"), William Riel
("Riel"), Leonard Craig Johnson
("Johnson"), Lisa King ("King") and Tim
Small ("Small") (Eve, the Revocable
Trust, the Museum Trust, the Dexter Trust,
the Hospital Trust, Mooney, Fox, Hartzler,
Riel, Johnson, King and Small are
hereinafter referred to individually as a
"Seller" or collectively as the
"Sellers") is entered into on September
21, 1999. The Buyer and Sellers are
referred to collectively herein as the
"Parties".
W I T N E S S E T H:
WHEREAS, the Sellers collectively own (or
will own on the Closing Date) all of the
outstanding capital stock of the Company (the
"Shares"); and
WHEREAS, the Sellers desire to sell and
the Buyer desires to purchase the Shares
pursuant to the terms and conditions of this
Agreement;
NOW THEREFORE, in consideration of the
mutual promises and conditions contained herein
and for other good and valuable consideration,
the receipt and adequacy of which is hereby
acknowledged, the Company and the Parties,
intending to be legally bound hereby, agree as
follows:
ARTICLE
PURCHASE AND SALE OF COMPANY SHARES
Basic Transaction.
On and subject to the terms and conditions
of this Agreement, the Buyer agrees to purchase
from the Sellers, and the Sellers agree to
sell, transfer, assign and deliver to the
Buyer, the Shares.
Purchase Price.
The Buyer agrees to pay to the Collection
Agent (as defined below) on behalf of the
Sellers at the Closing as consideration for the
Shares an amount equal to Nineteen Million Six
Hundred Seventy Thousand Dollars ($19,670,000)
less the sum of (a) all long-term debt existing
as of the Closing Date (including the current
portion of the long-term debt) (the "Long-Term
Debt") and set forth on Schedule 1.2(a) and
(b) all loans to the Company from any Sellers
existing as of the Closing Date and set forth
on Schedule 1.2(a) (the "Shareholder Loans").
For purposes of this Agreement, mortgage debt
secured by the Company's real property that was
incurred for expansion of the Company's
facilities with the written approval of the
Buyer shall not be considered Long-Term Debt.
The amount resulting from the calculation in
the first sentence of this Section 1.2 shall be
referred to as the "Purchase Price". For
purposes of an example, based on the Baseline
Financial Statements (as defined below and set
forth on Schedule 2.11), the Long-Term Debt
would be $1,597,405 and the Shareholders Loan
would be $4,480,500, the sum of which is
$6,077,905; accordingly, the Purchase Price
would be $13,592,095. All but Five Hundred
Thousand Dollars ($500,000) (the "Hold Back
Amount") of the Purchase Price shall be paid
to the Sellers by the Buyer at Closing in
immediately available funds pursuant to wire
transfer instructions delivered to the Buyer
prior to the Closing Date. The Hold Back
Amount shall be deposited into the Hold Back
Account pursuant to Section 1.4. Immediately
after the post-Closing adjustment has been made
pursuant to Section 1.3, the Buyer shall make
payment to the Collection Agent in immediately
available funds equal to any additional portion
of the Purchase Price owed to the Sellers.
Purchase Price Adjustment.
The Purchase Price will be adjusted upward
or downward, as applicable, by the difference
between (i) the net book value of the Company
determined from the June 30, 1999 balance sheet
of the Company (the "Baseline Financial
Statement"), calculated in accordance with
generally accepted accounting principles
("GAAP") applied on a consistent basis and
(ii) the net book value of the Company on the
Closing Date, calculated in accordance with
GAAP applied on a consistent basis and subject
to a confirming inventory observed by the Buyer
and conducted in a manner acceptable to the
Buyer (the "Closing Date Statement"). The
Closing Date Statement shall be subject to
certain pro forma adjustments which are set
forth on Schedule 1.3. Schedule 1.3 also sets
forth the mutually agreed upon methodology that
will be used for the valuation of the Company's
inventory for the Closing Date Statement. The
Closing Date Statement shall be prepared by the
Sellers and delivered to the Buyer as soon as
practicable, but in any event not later than
thirty-seven (37) days after the Closing Date.
The Buyer shall have thirty (30) days from
receipt of the Closing Date Statement to
review, analyze, audit and propose changes to
the Closing Date Statement. If any changes are
proposed, the Buyer and the Sellers shall in
good faith as soon as reasonably possible reach
agreement on the Closing Date Statement and
determine the adjustments and the Purchase
Price. If they are unable to do so, the
specific matters in dispute shall be submitted
to KPMG's Cleveland, Ohio office or to another
national, independent accounting firm (other
than Ernst & Young, L.L.P. or Arthur Andersen,
L.L.P.) approved by the Sellers and the Buyer.
As expeditiously as possible, and in any event
within ten (10) days of submission, KPMG (or
such other independent accounting firm) will
deliver to the Sellers and the Buyer its
determination of the specified matters in
dispute, which determination shall be final and
binding on the parties hereto. The fees and
expenses of KPMG (or such other independent
accounting firm) shall be borne one-half by the
Sellers and one-half by the Buyer. Immediately
thereafter, the remaining portion of the
Purchase Price owed to the Sellers, if any,
shall be distributed from the Hold Back Account
to the Collection Agent, and the remaining
balance of the Hold Back Account shall be
distributed to the Buyer. If the adjustment
causes the Purchase Price to be in excess of
the Purchase Price calculated in Section 1.2,
then the Buyer shall pay such additional amount
to the Collection Agent within ten (10) days
within ten (10) days after the delivery of such
determination from the independent accountants.
If the adjustment causes the Purchase Price to
be more than Five Hundred Thousand Dollars
($500,000) less than the Purchase Price
calculated in Section 1.2, then the Sellers
shall pay such additional amount to the Buyer
within ten (10) days after the delivery of such
determination from the independent accountants.
The Parties anticipate that the Closing Date
will be on or before October 31, 1999. If the
Closing Date does not take place by October 31,
1999, then the Sellers, the Seller Agents and
the Buyer shall use their best efforts to agree
upon a final Closing Date Statement by December
31, 1999.
Prior to the execution of this Agreement,
the Revocable Trust granted non-qualified stock
options to the employees of the Company set
forth in Schedule 1.3(b) ("Optioned Employees")
in the amount of shares set opposite their
respective names in Schedule 1.3(b).
Immediately prior to the Closing Date, the
Optioned Employees will exercise their options
and receive from the Revocable Trust an
aggregate of Two Hundred Seventeen (217)
Shares. The exercise price with respect to
said options is $2,243.42 per share (the
"Exercise Price"). The parties recognize that
the fair market value of the options is in
excess of the Exercise Price, and that the
aggregate fair market value of the underlying
Shares to be received upon the exercise of said
options is approximately $2,200,000 (said
amount to be verified and determined as of the
Closing Date).
The parties agree that the grant of the
stock options and the exercise of the stock
options described in the above paragraph have
no impact on the net book value of the Company
except for federal and state income tax
consequences. The parties recognize that under
Section 83 of the Code, and provided the
parties comply with all applicable Code consent
provisions, the difference between the fair
market value of the options and the Exercise
Price will entitle the Company to a federal
income tax deduction and a corresponding
recognition of taxable income to the Optioned
Employees. Although the exact fair market
value of the options is not presently
determinable, the parties anticipate that the
difference between the fair market value of the
options and the Exercise Price could be in the
range of $8,000.00 per share. Accordingly, the
parties anticipate that the Company's tax
deduction could be in the range of $1,700,000
resulting in a tax benefit of approximately
$600,000 and a corresponding $600,000 increase
in net book value of the Company as of the
Closing Date.
Hold Back Account.
On or before the Closing Date, the Buyer
shall deposit Five Hundred Thousand Dollars
($500,000) of the Purchase Price into an escrow
account held by Firstar Bank, N.A. (the "Hold
Back Account") until the post-closing
adjustment set forth in Section 1.3 has been
completed. The Hold Back Account shall be
subject to the terms and conditions of an
escrow agreement in the form attached hereto as
Exhibit A (the "Escrow Agreement") and this
Agreement.
Purchase Price Collection Agent.
(a) By the Closing Date, each Seller
shall have irrevocably made, constituted
and appointed, Firstar Bank, N.A. as such
Seller's true and lawful attorney-in-fact
and agent (the "Collection Agent") to act
for such Seller in such Seller's name, to
collect from the Buyer and disburse the
Purchase Price (and any post-Closing
Adjustments thereto) to the Sellers
pursuant to the terms and conditions of a
collection agent agreement in the form
attached hereto as Exhibit B (the
"Collection Agent Agreement").
(b) Each Seller hereby releases the
Buyer, Firstar Bank, N.A. and their
respective affiliates from any liability
or loss incurred by such Seller as a
result of the performance by the
Collection Agent of its obligations in
connection with this Agreement.
The Closing.
The delivery of the Purchase Price less
the Hold Back Amount, the sale, transfer, and
delivery of the Shares pursuant to Section 1.1
hereof and the delivery of the other
instruments, certificates and legal opinions
required hereunder (the "Closing"), shall take
place at the offices of Kahn, Kleinman,
Yanowitz & Arnson, 2600 Tower at Erieview,
Cleveland, Ohio, on the third business day
after the expiration or early termination of
the statutory waiting period under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976
as amended or such other time and date as the
parties may agree upon (the date and time of
the Closing being referred to herein as the
"Closing Date").
Deliveries at the Closing.
At the Closing, (i) the Sellers (or the
Seller Agents) will deliver to the Buyer the
certificates, instruments, and documents
referred to in Section 6.1 below, (ii) the
Buyer will deliver to the Sellers (or the
Seller Agents) the certificates, instruments,
and documents referred to in Section 6.2 below,
(iii) each of the Sellers (or the Seller
Agents) will deliver to the Buyer stock
certificates representing all of his or its
Shares, endorsed in blank or accompanied by
duly executed assignment documents, and (iv)
the Buyer will deliver to the Collection Agent
the consideration specified in Section 1.2
above. The Company shall pay off the
Shareholder Loans and the Long-Term Debt at the
Closing.
ARTICLE
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
In order to induce the Buyer to enter into
this Agreement and the consummate the
transactions contemplated hereby, the Sellers,
Jenkins and the Company jointly and severally
represent and warrant (except as to Sections
2.1, 2.2, 2.3 and 2.4, which the Sellers,
Jenkins and the Company severally represent and
warrant) that as of the date hereof and as of
the Closing Date, the following representations
and warranties are true, complete and accurate,
and all such representations and warranties
shall be continuing and shall survive the
closing pursuant to section 7.1 below:
Authority.
The Sellers, Jenkins and the Company have
the absolute and unrestricted right, power,
authority and capacity to execute and deliver
this Agreement and all ancillary documents or
agreements related to this Agreement and the
transactions contemplated thereby
(collectively, the "Closing Documents") to
which they are a party and to perform their
obligations thereunder. No consents of any
nature are required to complete the sale of the
Shares, or if any consents are required, those
consents will be obtained prior to the Closing.
Execution; Binding Effect.
The Closing Documents have been duly
authorized and this Agreement has been, and the
other Closing Documents have been or will be,
duly and validly executed and delivered by the
Company and the Sellers, and this Agreement
constitutes, and the other Closing Documents
constitute or will constitute, valid and
binding agreements of the Company and the
Sellers, enforceable against the Company and
the Sellers, in accordance with their
respective terms, except as enforceability may
be limited by applicable bankruptcy,
insolvency, or similar laws affecting
creditors' rights generally or by general
equitable principles.
Ownership of and Title to the Shares.
Each Seller represents and warrants that
as concerns the shares he, she or it owns (or
will own on the Closing Date) the Shares set
forth opposite such Seller's name on Schedule
2.3, that each such Seller has (or will have on
the Closing Date) good and marketable title to
the Shares set forth after his or its name,
free and clear of all liens, encumbrances,
restrictions on transfer, options, charges,
security interests, equities and claims
whatsoever, that each has the full legal right,
capacity and power to execute, deliver and
perform this Agreement; that this Agreement and
the collateral documents referenced herein
executed by each such Seller constitutes the
legal, valid and binding obligation of each
such Seller according to its respective terms;
that each such Seller has full legal right and
power to sell, transfer and deliver such Shares
in the manner provided in this Agreement; that
upon delivery of, and payment for, such Shares
pursuant to this Agreement, the Buyer will
acquire good and marketable title thereto, free
and clear of all liens, encumbrances,
restrictions on transfer, options, charges,
security interests, equities and claims
whatsoever; and that such Shares are at the
date hereof and will on the Closing Date be
duly authorized, validly issued and
outstanding, fully-paid and non-assessable,
with no personal liability attaching to the
ownership thereof.
No Conflict.
Except as set forth on Schedule 2.4(a),
neither the execution and the delivery of this
Agreement, nor the consummation of the
transactions contemplated hereby, will (i)
violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any
government, governmental agency, or court to
which the Sellers or the Company are subject or
any provision of the charter, bylaws or other
organizational document of the Company or (ii)
conflict with, result in a breach of,
constitute a default under, result in the
acceleration of, create in any party the right
to accelerate, terminate, modify, cancel, or
require any notice under any agreement,
contract, lease, license, instrument, or other
arrangement to which the Sellers or the Company
are a party or by which they are bound or to
which any of the Company's assets are subject
which would have a material impact or effect on
this transaction or the operations of the
Company, or (iii) result in the imposition of
any lien, charge, encumbrance or other security
interest upon any of the Company's assets.
Except as set forth on Schedule 2.4(b), there
is no option, warrant, purchase right, or other
contract or commitment that could require the
sale, transfer, or other disposal of any
capital stock or other securities of the
Company (other than this Agreement). There are
no outstanding or authorized options, warrants,
purchase rights, subscription rights,
conversion rights, exchange rights, or other
contracts or commitments that could require the
Company to issue, sell, or otherwise cause to
become outstanding any of its capital stock or
any other securities. Except as set forth on
Schedule 2.4(c), there are no outstanding or
authorized stock appreciation, phantom stock,
profit participation, or similar rights with
respect to the Company. Except as set forth on
Schedule 2.4(d), there are no voting trusts,
proxies, or other agreements or understandings
with respect to the voting of the capital stock
of the Company. Except as set forth on Schedule
2.4(e), neither the Sellers nor the Company are
required to give any notice to, make any filing
with, or obtain any authorization, consent, or
approval of any government or governmental
agency, lenders, lessors or other third parties
(including consents for assignments under any
agreement that considers a change of a control
to be an assignment) in order for the parties
to consummate the transactions contemplated by
this Agreement, other than compliance with the
provisions of the Hart-Scott-Rodino Antitrust
Improvements Act.
Capital Stock and Stockholder
Relations.
Except as set forth on Schedule 2.5(a),
the issued and outstanding capital stock of the
Company consists solely of the Shares. All of
the Shares have been duly authorized, validly
issued, fully paid, and are nonassessable.
There are no outstanding options, warrants,
contracts, preemptive rights, proxies, calls,
commitments or demands of rights of any
character obligating the Company to issue any
shares of capital stock of the Company or
options or rights with respect thereto or any
other securities, and there are not existing or
outstanding securities of any kind convertible
into or exchangeable for capital stock of the
Company. There are no outstanding obligations
of the Company to repurchase, redeem or
otherwise acquire any shares of its capital
stock including the Shares. To the knowledge
of the Company or the Sellers (i) no current or
former stockholder of the Company or of any
corporation heretofore merged with or into the
Company has any claim or cause of action
whatsoever against the Company arising out of
or in any way connected with any occurrence or
state of facts in existence prior to the
Closing Date and (ii) no such present or former
stockholder shall come to have any claim or
cause of action whatsoever against the Company,
or any officer, director or stockholder of the
Company, by virtue of, or in any way connected
with, the transactions contemplated by this
Agreement or otherwise. Except as set forth on
Schedule 2.5(b), by the execution of this
Agreement, the Sellers and Jenkins as of the
Closing waive any and all rights, options,
calls, equities or other claims (other than
claims they may have pursuant to this
Agreement) which the Sellers may have with
respect to the Shares by reason of the
transactions contemplated by this Agreement or
any prior transaction, or any other claim or
demand whatsoever that they may have against
the Company. All of the Shares have been
issued in compliance with all federal and state
securities laws.
Organization, Qualification, and
Corporate Power of the Company and the Trust.
The Company is a corporation duly
organized, validly existing, and in good
standing under the laws of the State of
Delaware. The Company is duly authorized to
conduct business and is in good standing under
the laws of each jurisdiction where such
qualification is required, all such
jurisdictions being set forth on Schedule 2.6.
The Company has all requisite authority,
corporate or otherwise and all authorizations
necessary to carry on and conduct the
businesses in which it is engaged and to own or
lease and use the properties and assets owned
and used by it. The Company is not in default
under or in violation of any provision of its
charter, bylaws or other organizational or
governing instrument. Jenkins represents and
warrants that the Revocable Trust, the Museum
Trust, the Dexter Trust and the Chelsea Trust
are duly organized and validly existing.
Organizational Documents.
The Sellers have delivered to the Buyer
(or will deliver prior to the Closing) correct,
complete and certified copies of the charter
documents and bylaws of the Company (as amended
and in effect as of the date hereof), the
minute books (containing complete, correct and
true records of meetings of the stockholders,
the board of directors, and any committees of
the board of directors), the stock certificate
books, and the stock record books of the
Company (containing the complete, true and
accurate record of stock issuances as of the
date of delivery). Schedule 2.7 contains a
true and complete list of all of the current
officers and directors of the Company.
Brokers' Fees.
Except for the fee and/or commission due
to McDonald Investments, Inc. from the Sellers,
neither the Company nor the Sellers have any
liability or obligation to pay any fees or
commissions to any broker, finder, or agent
with respect to the transactions contemplated
by this Agreement. Any such fee or commission
will be paid by the Sellers and not by the
Company.
Title to Assets.
Except as set forth on Schedule 2.9, The
Company has good and marketable title to, or a
valid leasehold interest in, the properties and
assets used by it, wherever located, including
those shown on the Baseline Financial Statement
(as defined below), or acquired after the date
thereof, free and clear of all security
interests, except for properties and assets
disposed of in the ordinary course of business
since the date of the aforesaid balance sheet.
Subsidiaries and Affiliates.
Except as set forth on Schedule 2.10, the
Company does not have any subsidiaries or
affiliated businesses or operations, and there
are no other assets, operations, personnel,
know how or the like owned, employed or used by
the Company in the operation of the business
known as "American Augers" that would not inure
to the sole benefit and control of the Buyer
upon consummation of the transactions
contemplated by the Agreement.
Financial Statements.
Attached hereto as Schedule 2.11 are the
revised financial statements of the Company
dated as of June 30, 1999, as mutually approved
by the Buyer and the Sellers (the "Baseline
Financial Statement"). The Baseline Financial
Statement has been prepared in accordance with
GAAP applied on a consistent basis throughout
the periods covered thereby, presents fairly
the financial condition of the Company as of
such date and the results of operations of the
Company for such periods, are correct and
complete, and are consistent with the books and
records of the Company (which books and records
are correct and complete and kept in accordance
with GAAP); provided, however, that the
Baseline Financial Statement is subject to
year-end adjustments which will not in the
aggregate result in a material adverse change
to the Baseline Financial Statement. The
Baseline Financial Statement will also lack
footnotes and other normal presentation items.
Events Subsequent to the Baseline
Financial Statement.
Since June 30, 1999 and other than as set
forth in Schedule 2.12, the Company has
conducted its business in the ordinary course
and there has not been any change in the
business, financial condition, operations,
results of operations, relationships with any
suppliers or customers or future prospects of
the Company which will or is likely to have a
material adverse effect on either the net
income or stockholders' equity of the Company.
Without limiting the generality of the
foregoing, since that date and except as set
forth on Schedule 2.12:
the Company has not sold, leased,
transferred, or assigned any of its
assets, tangible or intangible, other than
for a fair consideration in the ordinary
course of business having a fair market
value in excess of Fifty Thousand Dollars
($50,000);
the Company has not entered into any
material agreement, contract, lease, or
license (or series of related agreements,
contracts, leases, and licenses) or any
agreement, contract, lease, or license (or
series of related agreements, contracts,
leases and licenses) outside the ordinary
course of business;
no party (including the Company) has
accelerated, terminated, modified, or
canceled any material agreement, contract,
lease, or license (or series of related
agreements, contracts, leases, and
licenses) to which the Company is a party
or by which the Company is bound;
the Company has not granted or
allowed to be imposed any lien, claim,
charge, security interest or other
encumbrance in excess of Fifty Thousand
Dollars ($50,000) upon any of its assets;
the Company has not made any material
capital expenditure (or series of related
capital expenditures) or any capital
expenditure outside the ordinary course of
business in excess of Fifty Thousand
Dollars ($50,000) that has not been
reflected on the Baseline Financial
Statement;
other than in the ordinary course of
business, the Company has not made any
capital investment in, or any acquisition
of the securities or assets of, any third
party in excess of Fifty Thousand Dollars
($50,000);
the Company has not made any loan or
advance to, and has not received a loan or
advance from the Sellers which will remain
outstanding at the Closing;
the Company has not issued any note,
bond, or other debt instrument or created,
incurred, assumed, or guaranteed any
indebtedness for borrowed money or
capitalized lease obligation;
the Company has not unreasonably
delayed or postponed the payment of
accounts payable or other liabilities
beyond the payment terms applicable to
said accounts payable or liabilities;
the Company has not canceled,
compromised, waived, or released any right
or claim (or series of related rights and
claims) either involving more than Fifty
Thousand Dollars ($50,000) or outside the
ordinary course of business;
the Company has not granted any
license or sublicense of any rights under
or with respect to any of the Company
Intellectual Property (as defined below);
other than as set forth in the
documents delivered pursuant to Section
2.7, there has been no change made or
authorized in the charter or bylaws of the
Company;
the Company has not issued, sold, or
otherwise disposed of any shares of its
capital stock, or granted any options,
warrants, or other rights to purchase or
obtain (including upon conversion,
exchange, or exercise) any shares of its
capital stock;
the Company has not declared, set
aside, nor paid any dividend or made any
distribution with respect to the Shares
(whether in cash or in kind) or redeemed,
purchased, or otherwise acquired any of
the Shares;
the Company has not experienced any
damage, destruction, or loss (whether or
not covered by insurance) in excess of
Fifty Thousand Dollars ($50,000) and which
adversely affects its properties or
business;
the Company has not made any loan to,
or entered into any other transaction with
or on behalf of (including but not limited
to guarantees of debt), any of its
directors, officers, and employees other
than normal salary, bonuses and employee
benefits paid or granted in the ordinary
course of business consistent with past
practice; provided, however that none of
the Sellers will directly or indirectly
have received any bonuses, dividends or
other forms of compensation (other than
routine monthly salary paid in the
ordinary course) from June 30, 1999
through the Closing;
the Company has not granted any
increase in the base compensation of any
of its directors, officers, and employees
outside the ordinary course of business,
and has not adopted, amended, modified, or
terminated any bonus, profit-sharing,
incentive, severance, or other plan,
contract, or commitment for the benefit of
any of its directors, officers, and
employees (or taken any such action with
respect to any other Employee Benefit
Plan);
the Company has not made any other
change in employment terms for any of its
directors, officers, and employees;
other than in the ordinary course of
business, the Company has not made or
pledged to make any charitable or other
capital contribution;
there has not been any other material
adverse occurrence, event, incident,
action, failure to act, or transaction
outside the ordinary course of business
involving the Company, and the Company has
concluded its business in the ordinary and
usual course and in a reasonable business
manner;
the Company has not incurred any
liability, contingent or otherwise, in
excess of Fifty Thousand Dollars
($50,000), except in the ordinary and
usual course of business; and
the Company has not made any change
in any method of accounting or principle
of accounting.
Undisclosed Liabilities.
Except as set forth on Schedule 2.13, the
Company does not have any liability or
obligation whatsoever, whether accrued,
absolute, contingent or otherwise (and the
Sellers and the Company have no knowledge of a
basis for any present or future action, suit,
proceeding, hearing, investigation, charge,
complaint, claim, or demand against it giving
rise to any liability), except for liabilities
set forth and adequately reserved against in
the Baseline Financial Statement.
Legal Compliance.
Except as set forth on Schedule 2.14, to
the Company's knowledge the Company has
complied with all applicable laws (including
rules, regulations, codes, plans, injunctions,
judgments, orders, decrees, rulings, and
charges thereunder) of federal, state, local,
and foreign governments (and all agencies
thereof), and no material action, suit,
proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been
filed, commenced or threatened against it
alleging any failure so to comply.
Tax Matters.
Except as set forth on Schedule
2.15(a) and subject to the indemnity
limitations of Section 7.9:
The Company has filed all tax
returns and reports that it was required
to file. All such tax returns and reports
were correct and complete. All taxes owed
by the Company (whether or not shown on
any tax return) have been paid or accrued
on the Baseline Financial Statement. The
Company currently is not the beneficiary
of any extension of time within which to
file any tax return or report or to make
any tax payment. No claim has ever been
made by an authority in a jurisdiction
where the Company does not file tax
returns or reports that the Company is or
may be subject to taxation by that
jurisdiction.
The Company has withheld and
paid all taxes required to have been
withheld and paid in connection with
amounts paid or owing to any employee or
stockholder.
The Sellers and the Company
have no knowledge that any authority may
assess any additional taxes for any period
for which tax returns have been filed.
There is no dispute or claim concerning
any tax liability of the Company either
(i) claimed or raised by any authority in
writing or (ii) as to which either any of
the Sellers or any of the officers and
employees of the Company responsible for
tax matters has been notified or has
knowledge based upon personal contact with
any agent of such authority.
The unpaid taxes of the Company
(i) did not, as of the date of the
Baseline Financial Statement, exceed the
reserve for tax liability set forth on the
face of the Baseline Financial Statement
and (ii) do not exceed that reserve as
adjusted for the passage of time through
the Closing Date in accordance with the
past custom and practice of the Company in
filing tax returns.
As concerns income tax, Schedule
2.15(b) sets forth all federal, state and
local tax returns filed with respect to
the Company for taxable periods ended on
or after December 31, 1996, indicates
those tax returns that have been audited,
and indicates those tax returns that
currently are the subject of audit,
investigation or other inquiry. The
Sellers have delivered to the Buyer
correct and complete copies of all federal
and state income tax returns, examination
reports, and statements of deficiencies
assessed against or agreed to by the
Company since December 31, 1994. Schedule
2.15(b) also sets forth all other tax
returns and reports filed with respect to
the Company for taxable periods ended on
or after December 31, 1996, indicates
those tax returns that have been audited,
and indicates those tax returns that
currently are the subject of audit,
investigation or other inquiry.
The Company has not waived any
statute of limitations in respect of taxes
or agreed to any extension of time with
respect to a tax assessment or deficiency.
Schedule 2.15(d) sets forth the
following information with respect to the
Company as of the most recent practicable
date: (i) the basis of the Company in its
assets; and (ii) the amount of any net
operating loss, net capital loss, unused
investment or other credit, unused foreign
tax, or excess charitable contribution
allocable to the Company.
Intellectual Property.
Set forth on Schedule 2.16 is a complete
and accurate list of all patents, trademarks,
trade names, service marks, logos and
registered copyrights, owned by or licensed to
the Company, (including the name "American
Augers" and all variations thereof)
(collectively the "Company Intellectual
Property"). To the Company's knowledge:
There are no other forms of
intellectual property rights necessary for
the operation of the businesses of the
Company as presently conducted other than
the Company Intellectual Property. Each
item of the Company Intellectual Property
owned or used by the Company immediately
prior to the Closing hereunder will be
owned or available for use by the Company
on identical terms and conditions
immediately subsequent to the Closing
hereunder.
The Company has never interfered
with, infringed upon, misappropriated or
otherwise come into conflict with any
intellectual property rights of third
parties, other than as listed in Schedule
2.16(b), and none of the Sellers and the
directors and officers (and employees with
responsibility for intellectual property
matters) of the Company has ever received
any charge, complaint, claim, demand, or
notice alleging any such interference,
infringement, misappropriation, or
violation (including any claim that the
Company must license or refrain from using
any intellectual property rights of any
third party). No third party has
interfered with, infringed upon,
misappropriated, or otherwise come into
conflict with any of the Company
Intellectual Property. The Company will
not interfere with, infringe upon,
misappropriate, or otherwise come into
conflict with, any intellectual property
rights of third parties as a result of the
continued operation of its businesses as
presently conducted.
With regard to each item of the
Company Intellectual Property:
the Company possesses all right,
title, and interest in and to the
item, free and clear of any security
interest, license, or other
restriction;
the item is not subject to any
outstanding injunction, judgment,
order, decree, ruling, or charge;
no action, suit,
proceeding, hearing, investigation,
charge, complaint, claim, or demand
is pending or threatened which
challenges the legality, validity,
enforceability, use, or ownership of
the item; and
the Company has never agreed to
indemnify any of the Sellers or any
other third party for or against any
interference, infringement,
misappropriation, or other conflict
with respect to the item.
Contracts.
Schedule 2.17 sets forth a true and
accurate list of the following oral and written
contracts and other agreements to which the
Company is a party:
any agreement (or group of related
agreements) for the lease of personal
property to or from any of the Sellers or
any third party providing for lease
payments in excess of Fifty Thousand
Dollars ($50,000) per annum;
any agreement (or group of related
agreements) for the purchase or sale of
supplies, products, or other personal
property, or for the furnishing or receipt
of services, the performance of which will
extend over a period of more than one year
or involve consideration in excess of
Fifty Thousand Dollars ($50,000):
any agreement concerning a
partnership or joint venture;
any agreement (or group of related
agreements) under which the Company has
created, incurred, assumed, or guaranteed
any indebtedness for borrowed money, or
any capitalized lease obligation, in
excess of Twenty-five Thousand Dollars
($25,000), or under which it has imposed a
lien on any of its assets, tangible or
intangible;
any agreement concerning
confidentiality or noncompetition;
any agreement with any of the
Sellers;
any agreement under which it has
advanced or loaned any amount to any of
its directors, officers, and employees;
any agreement under which the
consequences of a default or termination
could have an adverse effect on the
business, financial condition, operations,
results of operations, or future prospects
of the Company in excess of Fifty Thousand
Dollars ($50,000) in earnings before
interest, taxes, depreciation and
amortization; or
any other agreement (or group of
related agreements) the performance of
which involves consideration in excess of
Twenty-Five Thousand Dollars ($25,000).
The Sellers have delivered to the Buyer a
correct and complete copy of each written
agreement set forth on Schedule 2.17 (as
amended to date) and a written summary setting
forth the terms and conditions of each oral
agreement referred to in Schedule 2.17. With
respect to each such agreement: (i) the
agreement is legal, valid, binding,
enforceable, and in full force and effect; (ii)
the agreement will continue to be legal, valid,
binding, enforceable, and in full force and
effect on identical terms following the
consummation of the transactions contemplated
hereby; (iii) no party is in breach or default,
and to the knowledge of the Sellers and the
Company no event has occurred which with notice
or lapse of time would constitute a breach or
default, or permit termination, modification,
or acceleration, under the agreement; (iv) no
party has repudiated any provision of the
agreement; and (v) to the knowledge of the
Sellers and the Company, no party is the
subject of bankruptcy proceedings, has had a
trustee appointed on its behalf or is
insolvent.
Employee Arrangements, Union
Agreements and Benefit Plans and Government
Compliance.
Schedule 2.18(a) sets forth a
complete and accurate list and description
of all oral or written employment,
consulting or collective bargaining
contracts, deferred compensation, change
in control agreements, golden parachute
agreements, profit-sharing, bonus, option,
share purchase or other benefit or
compensation commitment, benefit plans,
arrangements, policies or plans, including
all welfare plans of or pertaining to the
present or former employees of the
Company. Except as set forth on Schedule
2.18(a), to the Company's knowledge the
Company has complied with all of its
obligations, including the payment of all
contributions, the filing of all reports,
and the payment or accrual of all expenses
for the period between the end of the
previous plan year and the Closing Date,
with respect to such contracts,
commitments, arrangements and plans. To
the Company's knowledge, the plans have
been maintained in compliance with all
applicable laws and regulations. To the
Company's knowledge, the levels of
insurance reserves and accrued liabilities
with regard to all such plans are
reasonable and are sufficient to provide
for all incurred but unreported claims and
any retroactive premium adjustments.
Except as set forth on Schedule
2.18(b), the Company has no any oral or
written employment, consulting or
collective bargaining contracts, deferred
compensation, change in control
agreements, golden parachute agreements,
profit-sharing, bonus, option, share
purchase or other benefit or compensation
commitment, benefit plans, arrangements or
plans, including all welfare plans of or
pertaining to the present or former
employees of the Company.
Schedule 2.18(c) sets forth the name
of each salaried employee of the Company
and such employee's annual salary,
position and hire date.
Except as disclosed on Schedule
2.18(d), the Company is in compliance with
all worker compensation laws and
requirements of all applicable states.
Except to the extent set forth in
Schedule 2.18(e):
To the Company's knowledge, the
Company is in compliance with all
applicable laws and collective
bargaining agreements respecting
employment and employment practices,
terms and conditions of employment
and wages and hours and occupational
safety and health;
There is no unfair labor
practice, charge or complaint or any
other matter against or involving the
Company or pending or, to the
Company's knowledge, threatened
before the National Labor Relations
Board or any court of law;
There is no labor strike,
dispute, slowdown or stoppage
actually pending or, to the Company's
knowledge, threatened against the
Company;
To the Company's knowledge, no
certification or decertification
question or organizational drive
exists or has existed within the past
twenty-four months respecting the
employees of the Company;
No grievance proceeding or
arbitration proceeding arising out of
or under any collective bargaining
agreement is pending against the
Company or, to the knowledge of the
Sellers or the Company, threatened;
and, to the knowledge of the Company
or the Sellers, no basis for any
claim therefor exists;
Except for general labor
relation laws, there is no agreement
(including any collective bargaining
agreement), arbitration or court
decision or governmental order which
is binding on the Company or in any
way limits or restricts the Company
from relocating or closing any of its
operations;
The Company has not
experienced any organized work
stoppage or other labor difficulty
since January 1, 1996; and
There are no charges, or
known administrative proceedings or
formal complaints of discrimination
(including discrimination based upon
sex, age, marital status, race,
national origin, sexual preference,
handicap or veteran status) pending
before the Equal Employment
Opportunity Commission or any
federal, state or local agency or
court against the Company. Except as
disclosed in Schedule 2.18(e), since
January 1, 1994, there have been no
governmental audits of the equal
employment opportunity practices of
the Company.
Notes and Accounts Receivable.
Except as set forth on Schedule 2.19, in
the ordinary course of business all notes and
accounts receivable of the Company are
reflected properly on its books and records,
are valid receivables subject to no refunds,
adjustments, defenses, restrictions,
assignments, disputes, setoffs or
counterclaims, are current and collectible, and
will be collected in accordance with their
terms at their recorded amounts within 120 days
of the date incurred without resorting to legal
process, subject only to the reserve for bad
debts set forth on the face of the Baseline
Financial Statement as adjusted for the passage
of time through the Closing Date in accordance
with the past custom and practice of the
Company.
Powers of Attorney.
Except as set forth on Schedule 2.20,
there are no outstanding powers of attorney
executed on behalf of the Company.
Insurance.
Schedule 2.21 sets forth the following
information with respect to each insurance
policy (including policies providing property,
casualty, liability, and workers' compensation
coverage and bond and surety arrangements) to
which the Company has been a party, a named
insured, or otherwise the beneficiary of
coverage at any time within the past three (3)
years:
the name, address, and telephone
number of the agent;
the name of the insurer, the name of
the policyholder, and the name of each
covered insured;
the policy number and the period of
coverage;
the scope (including an indication of
whether the coverage was on a claim made,
occurrence, or other basis) and amount
(including a description of how
deductibles and ceilings are calculated
and operate) of coverage; and
a description of any retroactive
premium adjustments or other loss-sharing
arrangements.
With respect to each such insurance
policy: (i) the policy is legal, valid,
binding, enforceable, and in full force and
effect; (ii) the policy will continue to be
legal, valid, binding, enforceable, and in full
force and effect on identical terms following
the consummation of the transactions
contemplated hereby (subject to (A) the terms
of the policy, (B) the payment of premiums and
(C) to no notice of cancellation by the Company
subsequent to the Closing); (iii) neither the
Company nor any other party to the policy is in
breach or default (including with respect to
the payment of premiums or the giving of
notices), and no event has occurred which, with
notice or the lapse of time, would constitute
such a breach or default, or permit
termination, modification, or acceleration,
under the policy; and (iv) no party to the
policy has repudiated any provision thereof.
The Company has been covered during the past
five (5) years by insurance in scope and amount
customary and reasonable for the businesses in
which it has engaged during the aforementioned
period. Schedule 2.21 describes any self-
insurance arrangements affecting the Company.
Guaranties.
The Company is not a guarantor nor
otherwise liable for any liability or
obligation (including indebtedness) of any
other person or entity.
Environmental, Health, and Safety
Matters. Environmental Protection.
To the Company's knowledge, the Company
has obtained all permits, licenses and other
authorizations and filed all notices and
reports which are required to be obtained or
filed by it for the operation of its business
under federal, state and local laws relating to
environmental matters, health and safety,
pollution, or protection of the environment
(the "HSE Laws"). To the Company's knowledge,
the Company is in compliance in all respects
with all terms and conditions of such required
permits, licenses and authorizations. To the
Company's knowledge, the Company is in
compliance in all respects with all other
applicable limitations, restrictions,
conditions, standards, prohibitions,
requirements, obligations, schedules and
timetables contained in the HSE Laws or
contained in any law, regulation, code, plan,
order, degree, judgment, notice or demand
letter issued, entered, promulgated or approved
thereunder. Except as disclosed on Schedule
2.23, to the Company's knowledge there are no
past or present events, conditions,
circumstances, activities, practices,
incidents, actions or plans which may interfere
with or prevent continued compliance in all
material respects with, or which may give rise
to any material common law or statutory
liability, or otherwise form the basis of any
material claim, action, suit, notice of
violation, proceeding, or hearing pursuant to
the HSE Laws, nor has there been any
distribution, use, treatment, storage,
disposal, transport, handling, emission,
discharge, release or threatened release into
the environment of any pollutant, contaminant,
or hazardous or toxic material or waste with
respect to the Company or its business. Except
as disclosed on Schedule 2.23, the Company has
received no notice of violation or the like of
any complaint or other threat of any actions by
any party related in any way to the HSE Laws.
The real property owned or leased by the
Company does not contain any asbestos, urea-
formaldehyde, lead-based paint, or PCBs in any
form. The Buyer may conduct a Phase I
Environmental Site Assessment ("ESA") of the
real property owned by the Company at the
Buyer's expense. The Buyer may, at its option
conduct a Phase II ESA on any item of concern
noted in the Phase I ESA. Any material
violation of the HSE Laws documented by the
Phase II ESA but not reported by the Company on
Schedule 2.23, shall be, at the Buyer's option,
corrected to the satisfaction of the
appropriate governmental authority by or at the
cost of the Sellers, or corrected by the Buyer
with the cost of correction deducted from the
Purchase Price.
Absence of Certain Payments.
Other than for services legitimately and
openly performed under applicable law, business
discounts customarily granted in the ordinary
course of business and nominal non-cash gifts,
neither the Company nor, to any Seller's
knowledge, any agent, employee or
representative of the Company has made or
offered to make to any customer, supplier,
government official, insurance carrier,
referral source, employee or agent or any other
person or entity, any payment, gratuity, gift,
service or thing of material value. Other than
for services legitimately and openly performed
under applicable law, business discounts
customarily granted in the ordinary course of
business and nominal non-cash gifts, neither
the Company nor, to any Seller's knowledge, any
agent, employee or representative of the
Company has received or sought from any
customer, supplier, government official,
insurance carrier, referral source, employee or
agent or any other person or entity, any
payment, gratuity, gift, service or thing of
material value.
Organizations and Clubs.
Set forth on Schedule 2.25 is a listing of
all organizations and clubs of which the
Company is a member or to which it pays dues or
fees on behalf of itself or any person, which
person shall be identified in the schedule.
Bank Accounts.
Schedule 2.26 sets forth a complete and
accurate list of each bank or financial
institution at which the Company has an account
or safe deposit box (giving the address and
account numbers) and the names of the persons
authorized to draw thereon or to have access
thereto.
Customers and Suppliers of the
Company.
Customers. Schedule 2.27(a) sets
forth a true and complete list of the ten
(10) customers of each location of the
Company that had the highest dollar
billings over the twelve (12) months ended
June 30, 1999. Except as set forth in
Schedule 2.27(a), neither the Company nor
the Sellers has any knowledge that any of
the customers listed on the schedule has
terminated or plans to terminate its
relationship with the Company. The
Company has disclosed to the Buyer its
standard terms and conditions for sales by
the Company, and those cases and customers
with annual purchases in excess of $50,000
which have been granted a deviation from
such standard terms and conditions.
Suppliers. Schedule 2.27(b) sets
forth a true and complete list of the ten
(10) suppliers which did the highest
dollar volume of business with the Company
for the twelve (12) months ended June 30,
1999. Except as set forth on Schedule
2.27(b), to the knowledge of the Company
and the Sellers, no supplier of the
Company has ceased or refused to do
business with the Company and neither the
Company nor the Sellers have received oral
or written notice that any supplier of the
Company will cease or refuse to do
business with the Company after the
Closing and all suppliers of the Company
will continue to do business with the
Company consistent with prior practices
after the Closing. Except as set forth on
Schedule 2.27(b), neither the Company nor
any Seller have any knowledge of any
disruption (including delayed deliveries
or allocations by suppliers or service
providers) in the availability of the
materials, products, supplies or services
used by the Company, nor has the Company
or the Sellers received oral or written
notice that the Company (whether before or
after the Closing) will be subject to any
such material disruption. Neither the
Company nor any Seller has knowledge of
any condition (financial or otherwise)
affecting any key supplier of the Company
that is likely to reduce such supplier's
ability to do business with the Company
consistent with such supplier's prior
business practices with the Company.
There has been no change in the purchasing
or payment practices of the Company with
respect to its suppliers (including the
availability and use of discounts) since
June 30, 1999.
Employee Benefits.
The attached Schedule 2.28 is a true and
complete list of the employee benefit plans
maintained by or sponsored by the Company.
Except as set forth on Schedule 2.28, the
Company is not, and has not been, a "Plan
Sponsor" (as defined in section 3(16)(B) of
the Employee Retirement Income Security Act of
1974, as amended ("ERISA") or an "ERISA
Affiliate" (which shall mean, with respect to
the Company, any other entity that, together
with the Company, would be treated as a single
employer under section 414 of the Internal
Revenue Code of 1986, as amended (the
"Code")). Except as set forth on the
schedule, neither the Company nor an ERISA
Affiliate has contributed to or does not
contribute to any "employee pension benefit
plans" ("Pension Plans") or "employee welfare
benefit plans" ("Welfare Plans") (as described
in section 3(2) and (1), respectively of
ERISA), or "multiemployer plan"
("Multiemployer Plans") (as defined in either
section 3(37) of ERISA or section 414(f) of the
Code, or any other benefit plans governed by
ERISA or the Code ("Other Plans"). Except as
set forth on the schedule, neither the Company
nor an ERISA Affiliate has, nor has the Company
or an ERISA Affiliate had at any time, any
obligation, arrangement, practice, plan or
agreement to provide present or future
benefits, other than salary and bonus, as
compensation for services rendered, to any of
its present or former employees, officers,
directors, agents or representatives, nor any
voluntary employees' beneficiary association
under section 501(c)(9) of the Code ("VEBA")
whose members include employees of the Company
or an ERISA Affiliate, nor any obligation,
arrangement, practice, plan or agreement
providing stock options, stock purchase,
deferred compensation, severance, "fringe
benefits" (as described in section 132 of the
Code), or any other employee benefits of any
nature whatsoever ("Compensation Plans").
Pension Plans, Welfare Plans, Multiemployer
Plans, Other Plans and Compensation Plans are
collectively referred to as "Benefit Plans."
The consummation of the transactions
contemplated by this Agreement will not result
in the payment, vesting or acceleration of any
benefit or right under any Benefit Plan. All
Benefit Plans have been maintained in
accordance with ERISA and/or the Code, as the
case may be. Except as reflected on the
Baseline Financial Statement, neither the
Company nor any Shareholder has knowledge of
any liabilities related to any of the Benefit
Plans.
Inventory.
All inventory of the Company, whether or
not reflected in the Baseline Financial
Statement, consists of a quality and quantity
usable and salable in the ordinary course of
business, except for obsolete items and items
of below-standard quality which have been
written off or written down to net realizable
value in the Baseline Financial Statement or on
the accounting records of the Company as of the
Closing Date, as the case may be. All
inventories not written off have been priced at
the lower of average cost or net realizable
value. To the knowledge of the Company and the
Sellers, the quantities of each item of
inventory (whether raw materials, work-in-
process, or finished goods) are not excessive,
but are reasonable in the present circumstances
of the Company. The inventory obsolescence
policies of the Company are appropriate for the
nature of the products sold and the marketing
methods used by the Company, the reserve for
inventory obsolescence contained in the
Baseline Financial Statement fairly reflects
the amount of obsolete inventory as of the date
of the Baseline Financial Statement and the
reserve for inventory obsolescence to be
contained in the accounting records of the
Company as of the Closing Date shall fairly
reflect the amount of obsolete inventory as of
the Closing Date. No items included in the
inventories are pledged as collateral or held
by the Company on consignment from another
except as set forth on Schedule 2.29. Schedule
1.3 sets forth the mutually agreed upon
methodology that will be used for the valuation
of the Company's inventory for the Closing Date
Statement.
Litigation; Orders.
Except as set forth on Schedule 2.30 and
subject to the indemnity limitations of Section
7.9, there is no proceeding pending, or to the
knowledge of the Company or the Sellers
threatened, against or relating to the Company
or its property or assets. Except as set forth
on Schedule 2.30 and subject to the indemnity
limitations of Section 7.9, the Company and
Sellers do not know of any basis or alleged
basis for any such proceedings or of any
governmental investigation relative to the
Company, its property or assets, and no event
has occurred, nor to the knowledge of the
Company and the Seller does any circumstance
exist, that may give rise to or serve as a
basis for the commencement of any such
proceedings.
Real Property.
Owned Real Property.
Schedule 2.31(a) sets forth and
describes briefly all real property
that the Company owns. With respect
to each such parcel of owned real
property:
there are no pending, or to the
knowledge of the Company and the
Sellers threatened, condemnation
proceedings relating to the property
or other matters affecting the
current use, occupancy, or value
thereof;
all properties and facilities
have received all governmental
authorizations required in connection
with the ownership or operation
thereof and have been operated and
maintained in accordance with all
applicable legal requirements;
there are no leases,
subleases, licenses, concessions, or
other agreements, written or oral,
granting to any party or parties the
right of use or occupancy of any
portion of the parcel of real
property;
there are no outstanding options
or rights of first refusal to
purchase the parcel of real property,
or any portion thereof or interest
therein;
there are no parties (other than
the Company) in possession of the
parcel of real property, other than
tenants under any leases disclosed in
the schedule who are in possession of
space to which they are entitled;
Leased Real Property.
The Company does not lease any real
property.
Year 2000 Compliance.
To the Company's knowledge, the computer
software, computer firmware, computer hardware
(whether general or specific purpose), and
other similar or related items of automated,
computerized, and/or software system(s) that
are used or relied on, or have been purchased
to be used and relied on, by the Company in the
conduct of its business (collectively,
"Information Technology") is designed to be
used prior to, during, and after the calendar
year 2000 A.D., and the Information Technology
used during each such time period will
accurately receive, provide and process
date/time data (including, but not limited to,
calculating, comparing and sequencing) from,
into and between the twentieth and twenty-first
centuries, including the years 1999 and 2000,
and leap year calculations and will not
malfunction, cease to function, or provide
invalid or incorrect results as a result of
date/time data, to the extent that other
Information Technology, used in combination
with the Information Technology of the Company,
properly exchanges data/time data with it.
Completeness of Statements; Effect of
Representations and Warranties.
To the knowledge of the Company and the
Sellers, no representation or warranty of the
Company or the Sellers in the Closing Documents
contains any untrue statement of a material
fact, omits any material fact necessary to make
such representation or warranty, under the
circumstances which it was made, not
misleading, or contains any misstatement of a
material fact. The Company and the Sellers
have made reasonable inquiry and investigation
concerning the matters to which the
representations and warranties of the Company
and the Sellers under this Agreement pertain
and neither the Company nor the Sellers know of
any facts, events or circumstances which have
not been disclosed to the Buyer which are
material to the Company or its business.
Limited Representations and
Warranties/Concerning the Schedules.
(a) Except for those matters
expressly set forth in this Agreement or
any Schedule or Exhibit to this Agreement,
Sellers do not make, and expressly
disclaim, any representations or warranty
as to the accuracy or completeness of any
understanding, communication, disclosure,
documentation, information (financial or
otherwise,), reports or other materials
furnished to Buyer whether prior to or
following the date of this Agreement. Any
financial projections provided to Buyer
whether from the Sellers, the Company, the
Company's agents, attorneys, or
accountants are uncertain and subject to
numerous hypotheses and assumption that
may or may not occur, and therefore may
not be relied upon by Buyer.
(b) Disclosure of an item in any
part of any Schedule or other attachment
to this Agreement, or any other documents
or instruments delivered hereunder or any
Schedule, Exhibit or attachment thereto,
should the existence of the item or its
contents be relevant to any other section
or paragraph of this Agreement or any
Schedule or Exhibit to this Agreement,
shall be deemed to be disclosed in that
other section or paragraph of this
Agreement or Exhibit to this Agreement,
whether or not an express cross reference
appears.
ARTICLE
REPRESENTATIONS AND WARRANTIES OF THE BUYER
In order to induce the Sellers to enter
into this Agreement and the consummate the
transactions contemplated hereby, the Buyer
represents and warrants that as of the date
hereof and as of the Closing Date, the
following representations and warranties are
true, complete and accurate, and all such
representations and warranties shall be
continuing and shall survive the Closing
pursuant to Section 7.1 below:
Organization of the Buyer.
The Buyer is a corporation duly organized,
validly existing, and in good standing under
the laws of the State of Tennessee.
Authorization of Transaction.
The Buyer has full power and authority
(including full corporate power and authority)
to execute and deliver the Closing Documents
and to perform its obligations thereunder.
This Agreement and the Closing Documents
constitute the valid and legally binding
obligation of the Buyer, enforceable in
accordance with its terms and conditions.
Except for compliance with the provisions of
the Hart-Scott-Rodino Antitrust Improvements
Act and as set forth on Schedule 3.2, the Buyer
need not give any notice to, make any filing
with, or obtain any authorization, consent, or
approval of any government, governmental
agency, lender or other third party in order to
consummate the transactions contemplated by
this Agreement.
Noncontravention.
Neither the execution and the delivery of
this Agreement, nor the consummation of the
transactions contemplated hereby, will (a)
violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any
government, governmental agency or court to
which the Buyer is subject or any provision of
its charter or bylaws or (b) conflict with,
result in a breach of, constitute a default
under, result in the acceleration of, create in
any party the right to accelerate, terminate,
modify, or cancel, or require any notice under
any agreement, contract, lease, license,
instrument, loan, note or other arrangement to
which the Buyer is a party or by which it is
bound or to which any of its assets is subject.
Brokers' Fees.
The Buyer has no liability or obligation
to pay any fees or commissions to any broker,
finder, or agent with respect to the
transactions contemplated by this Agreement for
which any Seller could become liable or
obligated.
Investment.
The Buyer is not acquiring the Shares with
a view to or for sale in connection with any
distribution thereof within the meaning of the
Securities Act of 1933.
Employees of the Company.
The Buyer represents and warrants that it
is the Buyer's present intention not to
terminate any of the Company's present
employees. The Buyer covenants and agrees that
it will not cause or permit the Company to
engage in a "mass layoff" or "plant closing"
(as defined in the Worker Adjustment and
Retraining Notification Act of 1988, as
amended), at any time within ninety (90) days
following the Closing Date.
No Adverse Tax Elections.
The Buyer covenants and agrees it will not
cause the Company to make any election under
Section 338 of the Code, if the effect of such
election or other action would adversely affect
the Sellers' federal, state, local or foreign
income tax liabilities.
Sufficient Funds.
At the Closing, the Buyer will have
sufficient cash to pay the Purchase Price, the
Shareholder Loans and Long-Term Debt.
ARTICLE
PRE-CLOSING COVENANTS
The Parties agree as follows with respect
to the period between the execution of this
Agreement and the Closing.
General.
Each of the Parties will use his or its
best efforts to take all action and to do all
things necessary, proper, or advisable in order
to consummate and make effective the
transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the
closing conditions set forth in Article 6
below).
Notices and Consents.
The Sellers will cause the Company to give
any notices to third parties, and will cause
the Company to use its best efforts to obtain
any third party consents, that the Buyer may
request in connection with the matters referred
to in Section 2.4 above. Each of the Parties
will give any notices to, make any filings
with, and use its best efforts to obtain any
authorizations, consents, and approvals of
governments and governmental agencies in
connection with the matters referred to in
Section 2.4 above. Without limiting the
generality of the foregoing, each of the
Parties will file any Notification and Report
Forms and related material that it may be
required to file with the Federal Trade
Commission and the Antitrust Division of the
United States Department of Justice under the
Hart-Scott-Rodino Antitrust Improvements Act,
will use his or its best efforts to obtain an
early termination of the applicable waiting
period, and will make any further filings
pursuant thereto that may be necessary, proper,
or advisable in connection therewith.
Operation of Business.
The Sellers will not cause or permit the
Company to engage in any practice, take any
action, or enter into any transaction outside
the ordinary course of business. Without
limiting the generality of the foregoing, the
Sellers without prior written consent from the
Buyer will not cause or permit the Company to
(a) declare, set aside, or pay any dividend or
make any distribution with respect to its
capital stock or redeem, purchase, or otherwise
acquire any of its capital stock, (b) enter
into a transaction with the Sellers, or (c)
otherwise engage in any practice, take any
action, or enter into any transaction of the
sort described in Section 2.12 above.
Preservation of Business.
The Sellers will cause the Company to keep
its business and properties substantially
intact, including its present operations,
physical facilities, working conditions, and
relationships with lessors, licensors,
suppliers, customers, and employees. The
Sellers will promptly notify the Buyer upon the
Sellers or the Company receiving any oral or
written notice that a customer or certain
customers intends to reduce substantially or
cease doing business with the Company. For
purposes of this Section, "customer" shall mean
a customer who individually accounts for five
percent (5%) of the Company's annual gross
revenue and "certain customers" shall mean
customers who in the aggregate (whether related
or not) account for five percent (5%) of the
Company's annual gross revenue.
Full Access.
The Sellers will permit, and the Sellers
will cause the Company to permit,
representatives of the Buyer to have full
access at all reasonable times, including
permitting the Buyer's independent accountants
to conduct an audit of the Company, and in a
manner so as not to interfere with the normal
business operations of the Company, to all
premises, properties, personnel, books, records
(including tax records), contracts, and
documents of or pertaining to the Company.
Notice of Developments.
Each Party will give prompt written notice
to the others of any material adverse
development causing a breach of any of their
respective representations and warranties in
Article 2 and Article 3 above.
Exclusivity.
None of the Sellers will (and the Sellers
will not cause or permit the Company to) (a)
solicit, initiate, or encourage the submission
of any proposal or offer from any person or
entity relating to the acquisition of any
capital stock or other voting securities, or
any substantial portion of the assets, of the
Company (including any acquisition structured
as a merger, consolidation, or share exchange)
or (b) participate in any discussions or
negotiations regarding, furnish any information
with respect to, assist or participate in, or
facilitate in any other manner any effort or
attempt by any person or entity to do or seek
any of the foregoing. None of the Sellers will
vote their respective Shares in favor of any
such acquisition structured as a merger,
consolidation, share exchange or purchase of
assets. The Sellers will notify the Buyer
immediately if any person or entity makes any
proposal, offer, inquiry, or contact with
respect to any of the foregoing.
Survey.
With respect to the real property owned by
the Company, the Sellers will cause the Company
to procure in preparation for the Closing a
current survey of the real property owned by
the Company certified to the Buyer, prepared by
a licensed surveyor and conforming to current
ATLA Minimum Detail Requirements for Land Title
Surveys, disclosing the location of all
improvements, easements, party walls,
sidewalks, roadways, utility lines, and other
matters shown customarily on such surveys, and
showing access affirmatively to public streets
and roads (the "Survey"). There shall be no
survey defect or encroachment from or onto any
property owned or leased by the Company which
has not been cured or insured over prior to the
Closing, except such defects or encumbrances
that, in the aggregate, do not have a material
adverse effect on the marketability of said
property.
ARTICLE
POST-CLOSING COVENANTS
The Parties agree as follows with respect
to the period following the Closing.
General.
In case at any time after the Closing any
further action is necessary or desirable to
carry out the purposes of this Agreement, each
of the Parties will promptly take without
further consideration such further action
(including the execution and delivery of such
further instruments and documents) as any other
Party reasonably may request. The Sellers
acknowledge and agree that from and after the
Closing the Buyer will be entitled to
possession of all documents, books, records
(including tax records), agreements, and
financial data of any sort relating to the
Company.
Litigation Support.
In the event and for so long as any Party
actively is contesting or defending against any
action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or
demand in connection with (a) any transaction
contemplated under this Agreement or (b) any
fact, situation, circumstance, status,
condition, activity, practice, plan,
occurrence, event, incident, action, failure to
act, or transaction on or prior to the Closing
Date involving the Company, each of the other
Parties will cooperate with him or it and his
or its counsel in the contest or defense, make
available their personnel, and provide such
testimony and access to their books and records
as shall be necessary in connection with the
contest or defense, all at the sole cost and
expense of the contesting or defending Party
(unless the contesting or defending Party is
entitled to indemnification therefor under
Article 8 below).
Transition.
The Sellers will not take any action that
is designed or intended to have the effect of
discouraging any lessor, licensor, customer,
supplier, or other business associate of the
Company from maintaining the same business
relationships with the Company after the
Closing as it maintained with the Company prior
to the Closing. The Sellers will refer all
customer inquiries relating to the business of
the Company to the Company from and after the
Closing.
Confidentiality.
Each Seller will treat and hold all
nonpublic information of the Company as
confidential information for a period of three
(3) years subsequent to the Closing and refrain
from using any of the confidential information
except in connection with this Agreement, and
deliver promptly to the Buyer or destroy, at
the request and option of the Buyer, all
tangible embodiments (and all copies) of the
confidential information which are in his or
its possession. In the event that any of the
Sellers are requested or required (by oral
question or request for information or document
sin any legal proceeding, interrogatory,
subpoena, civil investigative demand, or
similar process) to disclose any confidential
information, that the Sellers will notify the
Buyer promptly of the request or requirement so
that the Buyer may seek an appropriate
protective order or waive compliance with the
provisions of this Section. If, in the absence
of a protective order or the receipt of a
waiver hereunder, any of the Sellers is, on the
advice of counsel, compelled to disclose any
confidential information to any tribunal or
else stand liable for contempt, that the
Sellers may disclose the confidential
information to the tribunal; provided, however,
that the disclosing Seller shall use his or its
reasonable best efforts to obtain, at the
reasonable request of the Buyer, an order or
other assurance that confidential treatment
will be accorded to such portion of the
confidential information required to be
disclosed as the Buyer shall designate. The
foregoing provisions shall not apply to any
confidential information which is generally
available to the public immediately prior to
the time of disclosure so long as such general
availability is not due to a breach by the
Sellers with the provisions of this Section.
Access to Records.
The Company will maintain the records of
the Company in accordance with the Buyer's
record retention policy. From and after the
Closing Date, the Seller Agents (as defined
below) and their representatives shall be
allowed, upon reasonable request for proper
business purposes, to inspect and copy at their
expense the business records and accounts of
the Company pertaining to transactions
occurring or assets held at or before the
Closing to the extent the Company then has
possession of or access to such business
records and accounts.
ARTICLE
CONDITIONS TO OBLIGATION TO CLOSE
Conditions to Obligation of the
Buyer.
The obligation of the Buyer to consummate
the transactions to be performed by it in
connection with the Closing is subject to
satisfaction of the following conditions:
the representations and warranties,
as updated, set forth in Article 2 shall
be true and correct in all material
respects at and as of the Closing Date;
the Sellers shall have performed and
complied with all of their covenants
hereunder in all material respects through
the Closing;
the Company and the Sellers shall
have procured the Survey and all of the
third party consents specified on Schedule
2.4(e) (except for those consents covered
under Section 6.1(f) below);
no action, suit, or proceeding shall
be pending or threatened before any court
or quasi-judicial or administrative agency
of any federal, state, local, or foreign
jurisdiction or before any arbitrator
wherein an unfavorable injunction,
judgment, order, decree, ruling, or charge
would (i) prevent consummation of any of
the transactions contemplated by this
Agreement, (ii) cause any of the
transactions contemplated by this
Agreement to be rescinded following
consummation, (iii) affect adversely the
right of the Buyer to own the Shares and
to control the Company, or (iv) affect
adversely the right of the Company to own
its assets and to operate its businesses
(and no such injunction, judgment, order,
decree, ruling, or charge shall be in
effect);
The Sellers shall have delivered to
the Buyer a certificate to the effect that
each of the conditions specified above in
Section 6.1(a)-(d) is satisfied in all
respects;
all applicable waiting periods (and
any extensions thereof) under the Hart-
Scott-Rodino Antitrust Improvements Act
shall have expired or otherwise been
terminated and the Parties shall have
received all other authorizations,
consents, and approvals of governments and
governmental agencies;
Eve shall have entered into an
employment and non-competition agreement
with the Company and the Buyer in the form
of Exhibit C hereto (the "Eve Employment
Agreement");
Jenkins shall have entered into a
non-competition and consulting agreement
with the Company and the Buyer in the form
of Exhibit D hereto (the "Jenkins Non-
Competition and Consulting Agreement");
the Buyer shall have received from
counsel for the Sellers an opinion, dated
the Closing Date and in the form of
Exhibit E;
the Buyer shall have received the
resignations, effective as of the Closing,
of each director and officer of the
Company other than those whom the Buyer
shall have specified in writing prior to
the Closing; such resignation to be
accompanied by a waiver of any and all
claims against the Company in the form of
Exhibit F;
there shall not have occurred any
material adverse change since June 30,
1999 in the business, properties, assets,
liabilities, results of operations,
prospects or financial condition of the
Company or physical loss or damage to any
of the properties or assets (which, if
covered by insurance could not be fully
replaced within thirty (30) days of such
loss or damage without payment by the
Company of a deductible in excess of three
percent (3%) of the loss amount) of the
Company which materially and adversely
affects or impairs the business now being
or to be conducted by the Company, and the
Sellers shall have delivered to the Buyer
a certificate, signed by the Sellers and
dated the Closing Date, to all such
effects;
the Sellers shall have delivered to
the Buyer: (i) a certified copy of the
charter of the Company from the Delaware
Secretary of State; (ii) certificates of
good standing from the Ohio Secretary of
State and the Delaware Secretary of State
(and any other state in which the Company
is qualified); and (iii) a certified copy
of the Company's bylaws;
at Closing, the Sellers shall issue a
"bring down" certificate certifying that
there have been no material changes in the
information contained in the Schedules
since the date of the prior certification,
or if there have been changes, such
changes, in the aggregate, will not have a
material adverse effect on the Company;
the Buyer shall have been given an
opportunity to review all financial and
legal aspects of the Company's business,
including an inspection of its facilities,
observation of a closing inventory,
environmental assessment and a review of
its accounting and tax records, and to
conduct interviews of its officers and
employees, and shall have discovered no
information or circumstances that cause it
to believe that the Company may suffer a
material liability in the future that has
not been adequately disclosed and/or
reserved for on the Baseline Financial
Statement.
the Company shall have terminated its
401(k) Pension Plan prior to the Closing
Date, and the employees of the Company
shall be eligible to participate in the
Buyer's 401(k) Plan, according to its
terms, effective as of the Closing Date;
the Company shall have terminated its
employment contract with Eve;
the 1996 Stockholders Agreement dated
as of October 1, 1996, as amended, by and
among the Company and certain Sellers
shall have been terminated;
the Sellers shall have provided the
Buyer with proof of the approval by the
shareholders of the Company (in accordance
with Delaware law and the Company's
bylaws) of any direct or constructive
payments to any employee, officer or
director of the Company on account of a
change of control of the Company so as
comply with the exceptions for closely-
held corporations under section 280G of
the Code; and
the Revocable Trust shall facilitate
the exercise of certain options to
purchase shares between the Revocable
Trust, Eve and certain other employees of
the Company in such a manner so as to
qualify as a tax deductible transaction to
the Company under Section 1.83-6(d) of the
Code regulations, which shall have been
confirmed by the Buyer's auditors.
Furthermore, all amounts necessary to meet
the tax withholding obligations of the
Company on such exercises shall have been
deposited with the Company before the
Closing.
The Buyer may waive any condition
specified in this Section 6.1 if it executes a
writing so stating at or prior to the Closing.
Conditions to Obligation of the
Sellers.
The obligation of the Sellers to
consummate the transactions to be performed by
them in connection with the Closing is subject
to satisfaction of the following conditions:
the representations and warranties
set forth in Article 3 above shall be true
and correct in all material respects at
and as of the Closing Date;
the Buyer shall have performed and
complied with all of its covenants
hereunder in all material respects through
the Closing;
no action, suit, or proceeding shall
be pending or threatened before any court
or quasi-judicial or administrative agency
of any federal, state, local, or foreign
jurisdiction or before any arbitrator
wherein an unfavorable injunction,
judgment, order, decree, ruling, or charge
would (i) prevent consummation of any of
the transactions contemplated by this
Agreement or (ii) cause any of the
transactions contemplated by this
Agreement to be rescinded following
consummation (and no such injunction,
judgment, order, decree, ruling, or charge
shall be in effect);
the Buyer shall have delivered to the
Sellers a certificate to the effect that
each of the conditions specified above in
Section 6.2(a)-(c) is satisfied in all
respects;
all applicable waiting periods (and
any extensions thereof) under the Hart-
Scott-Rodino Antitrust Improvements Act
shall have expired and otherwise been
terminated and the Parties and the Company
shall have received all other
authorizations, consents, and approvals of
governments and governmental agencies;
the Buyer shall have executed the Eve
Employment Agreement;
the Buyer shall have executed the
Jenkins Non-Competition and Consulting
Agreement;
the Sellers shall have received from
counsel for the Buyer an opinion, dated the
Closing Date and in the form of Exhibit G; and
the Buyer shall have procured all of
the third party consents specified on Schedule
3.2; and
all actions to be taken by the Buyer
in connection with consummation of the
transactions contemplated hereby and all
certificates, opinions, instruments, and other
documents required to effect the transactions
contemplated hereby will be reasonably
satisfactory in form and substance to the
Sellers.
The Sellers may waive any condition
specified in this Section 6.2 if they execute a
writing so stating that or prior to the
Closing.
ARTICLE
REMEDIES FOR BREACHES OF THIS AGREEMENT
Survival of Representations and
Warranties.
Except as otherwise provided herein, all
of the representations and warranties contained
in this Agreement or in any certificate
delivered pursuant to this Agreement relating
to the representations and warranties contained
in this Agreement will survive the Closing
(even if the damaged party knew or had reason
to know of any misrepresentation or breach of
warranty or covenant at the time of the
Closing) and continue in full force and effect
for a period of three (3) years after the
Closing Date; provided, however, that (i) the
representations and warranties set forth in
Sections 2.3 and 2.9 shall survive indefinitely
and (ii) the representations set forth in
Sections 2.14, 2.15 and 2.23 shall survive
until the expiration of the applicable state or
federal statutory period of limitations to
which the claim relates. No party will have any
obligation to indemnify and Person pursuant to
this Agreement with respect to any breach of a
representation or warranty unless a specific
claim has been validly made under this
Agreement on or prior to the applicable
survival period set forth above. The parties'
indemnification obligations with respect to any
breach of a representation in writing under
this Agreement shall survive the applicable
survival period to the extent (and solely to
the extent) a claim has been properly asserted
in writing prior to the expiration of the
applicable survival period.
Indemnification Provisions for
Benefit of the Buyer.
Subject to Section 7.9(b), the
Sellers and Jenkins jointly and severally
agree to defend, indemnify and hold the
Buyer harmless from and against and with
respect to any and all loss, damage,
liability, deficiency, cost, obligation,
or expense resulting from or with respect
to (i) any breach of any covenant or
warranty or representation or any material
inaccuracy or material misrepresentation
by the Sellers or the Company contained in
this Agreement or any certificate or
document delivered to the Buyer by the
Sellers or the Company in connection with
the transactions contemplated hereby; (ii)
the failure of the Sellers, or any of the
Sellers, to perform or comply with any
covenant, agreement or obligation required
by this Agreement to be performed or
complied with by the Sellers; and (iii)
all undisclosed, unbooked, under accrued
or under reserved liabilities, including,
but not limited to, assessments, taxes,
penalties, interest, claims, losses, fines
and judgments.
Notwithstanding anything contained
herein, no claim for indemnification shall
be made by the Buyer hereunder against the
Sellers or Jenkins for any claim (or
related claims) under Section 7.2(a) that
does not exceed Fifty Thousand Dollars
($50,000), at which time the Sellers and
Jenkins jointly and severally shall incur
liability for the entire amount of any
such claim (or related claims). In any
event, the Sellers and Jenkins shall have
no liability hereunder to the Buyer for
any claims hereunder once the amount paid,
in the aggregate, by the Sellers and
Jenkins exceeds $10,000,000.
Indemnification Provisions for
Benefit of the Sellers.
The Buyer agrees to defend, indemnify and
hold the Sellers harmless from and against and
with respect to any and all loss, damage,
liability, deficiency, cost, obligation, or
expense resulting from or with respect to (i)
any breach of any covenant or warranty or
representation or any material inaccuracy or
material misrepresentation by the Buyer
contained in this Agreement or any certificate
or document delivered by the Buyer to the
Sellers in connection with the transactions
contemplated hereby; and (ii) the failure of
the Buyer to perform or comply with any
covenant, agreement or obligation required by
this Agreement to be performed or compiled with
by the Buyer.
Matters Involving Third Parties.
If any third party shall notify any
Party (the "Indemnified Party") with
respect to any matter (a "Third Party
Claim") which may give rise to a claim
for indemnification against any other
Party (the "Indemnifying Party") under
this Article 7, then the Indemnified Party
shall promptly notify each Indemnifying
Party thereof in writing; provided,
however, that no delay on the part of the
Indemnified Party in notifying any
Indemnifying Party shall relieve the
Indemnifying Party from any obligation
hereunder unless (and then solely to the
extent) the Indemnifying Party thereby is
prejudiced.
Any Indemnifying Party will have the
right to defend the Indemnified Party
against the Third Party Claim with counsel
of its choice reasonably satisfactory to
the Indemnified Party so long as (i) the
Indemnifying Party notifies the
Indemnified Party in writing within
fifteen (15) days after the Indemnified
Party has given notice of the Third Party
Claim that the Indemnifying Party will
indemnify the Indemnified Party from and
against the entirety of any losses the
Indemnified Party may suffer resulting
from, arising out of, relating to, in the
nature of, or caused by the Third Party
Claim, (ii) the Indemnifying Party
provides the Indemnified Party with
evidence reasonably acceptable to the
Indemnified Party that the Indemnifying
Party will have the financial resources to
defend against the Third Party Claim and
fulfill its indemnification obligations
hereunder, (iii) the Third Party Claim
involves only money damages and does not
seek an injunction or other equitable
relief, (iv) settlement of, or an adverse
judgment with respect to, the Third Party
Claim is not, in the good faith judgment
of the Indemnified Party, likely to
establish a precedential custom or
practice materially adverse to the
continuing business interests of the
Indemnified Party, and (v) the
Indemnifying Party conducts the defense of
the Third Party Claim actively and
diligently.
So long as the Indemnifying Party is
conducting the defense of the Third Party
Claim in accordance with Section 7.4(b)
above, (i) the Indemnified Party may
retain separate co-counsel at its sole
cost and expense and participate in the
defense of the Third Party Claim, (ii) the
Indemnified Party will not consent to the
entry of any judgment or enter into any
settlement with respect to the Third Party
Claim without prior written consent of the
Indemnifying Party (not to be withheld
unreasonably), and (iii) the Indemnifying
Party will not consent to the entry of any
judgment or enter into any settlement with
respect to the Third Party Claim without
the prior written consent of the
Indemnified Party (not to be withheld
unreasonably).
In the event any of the conditions in
Section 7.4(b) above is or becomes
unsatisfied, however, (i) the Indemnified
Party may defend against, and consent to
the entry of any judgment or enter into
any settlement with respect to, the Third
Party Claim in any manner it reasonably
may deem appropriate (and the Indemnified
Party need not consult with, or obtain any
consent from, any Indemnifying Party in
connection therewith), (ii) the
Indemnifying Parties will reimburse the
Indemnified Party promptly and
periodically for the costs of defending
against the Third Party Claim (including
reasonable attorneys' fees and expenses),
and (iii) the Indemnifying Parties will
remain responsible for any adverse
consequences the Indemnified Party may
suffer resulting from, arising out of,
relating to, in the nature of, or caused
by the Third Party Claim to the fullest
extent provided in this Article 7.
Offer of Settlement.
Notwithstanding anything contained in this
Article 7 to the contrary, if a full and
unconditional settlement offer solely for money
damages is made by the applicable third party
involved in the Third Party Claim, which offer
the Indemnifying Party notifies the Indemnified
Party in writing of the Indemnifying Party's
willingness to accept, and the Indemnified
Party declines to accept such settlement offer,
the Indemnified Party may continue to contest
such claim, free of any participation by the
Indemnifying Party, at the Indemnified Party's
sole expense, and the amount of any ultimate
liability with respect to which the
Indemnifying Party has any obligation to pay
hereunder shall be equal to the lesser of: (i)
the amount of the settlement offer which the
Indemnified Party declined to accept; or (ii)
the ultimate losses incurred by the Indemnified
Party but subject to the limitations of
liability set forth in Section 7.4.
Infringement Claims.
If any Third Party Claim arises as a
result of the infringement or alleged
infringement by the Company due to its use or
sale of any Company Intellectual Property
("Infringement Claim"), the Buyer agrees that
in the event it or the Company continues the
activities or services giving rise to the
Infringement Claim after it or the Company has
notice thereof, then notwithstanding anything
to the contrary herein contained, such
Infringement Claim shall not be subject to
indemnification by Sellers hereunder to the
extent such Infringement Claim relates to the
continued action of such activities, including
any special damages attributable to knowingly
continuing such activities. In the event an
Infringement Claim is settled or otherwise
disposed of through a licensing, royalty or
similar arrangement requiring payments based on
future sales of the products by Buyer or the
Company, Buyer shall make (or shall cause the
Company to make) such payments itself, and such
payments shall not be subject to
indemnification hereunder.
Notice of Claim.
When a Party determines in good faith that
it has a claim or potential claim for
indemnification pursuant to this Article 7 it
shall deliver notice thereof to the other Party
at the address specified in Section 11.7. Such
notice shall set forth the section or sections
under this Agreement pursuant to which such
claim is made and the amount or estimate of the
claim and shall state, in reasonable detail,
the basis for such claim. The Indemnifying
Party shall have twenty (20) days after receipt
of a notice of claim within which to either pay
such claim or notify the Indemnified Party of
the Indemnifying Party's disagreement with all
or a portion of said claim. If the Indemnified
Party has not received notice of disagreement
from the Indemnifying Party within the twenty
(20) day period, the amount of the claim shall
be compensible in full. If the Indemnified
Party receives within the twenty (20) day
period a notice of disagreement regarding only
a portion of a claim, the portion of the claim
not subject to disagreement shall be
compensible. If the Parties are unable to
resolve the validity or the amount of a claim
after said twenty (20) day period, then the
dispute may be resolved by arbitration to be
conducted in Chattanooga, Tennessee, in
accordance with the Arbitration Rules of the
Center for Public Resources, New York, New York
for Non-Administered Arbitration of Business
Disputes, as they exist on the date of this
Agreement, and the decision rendered by the
arbitrator (who shall be selected by mutual
consent by the Parties and, if the Parties are
unable to agree on an arbitrator, an arbitrator
shall be selected by the Center for Public
Resources in New York, New York) shall be
binding upon the Parties. Any such arbitration
shall take place in Chattanooga, Tennessee.
Any judgment upon any arbitration award may be
entered in the highest state or federal court
having jurisdiction thereof. Nothing herein
shall be deemed to prevent the Buyer from
making a claim for indemnification hereunder
for potential or contingent claim or demand to
the extent then feasible and the Buyer has
reasonable grounds to believe that such a claim
or demand may be made.
Other Indemnification Provisions.
The foregoing indemnification provisions
are in addition to, and not in derogation of,
any statutory, equitable, or common law remedy
any Party may have with respect to the Company
or the transactions contemplated by this
Agreement. The Sellers hereby agree that they
will not make any claim for indemnification
against the Company by reason of the fact that
any of them was a director, officer, employee,
or agent of any such entity or was serving at
the request of any such entity as a partner,
trustee, director, officer, employee, or agent
of another entity (whether such claim is for
judgments, damages, penalties, fines, costs,
amounts paid in settlement, losses, expenses or
otherwise and whether such claim is pursuant to
any statute, charter document, bylaw,
agreement, or otherwise) with respect to any
action, suit, proceeding, complaint, claim, or
demand brought by the Buyer against the Sellers
(whether such action, suit, proceeding,
complaint, claim, or demand is pursuant to this
Agreement, applicable law, or otherwise).
Indemnification Limitations
The Company will have no duty to
indemnify any Seller or contribute funds
for the benefit of any Seller, and each
Seller waives any right to indemnification
or contribution from the Company.
Notwithstanding anything to the
contrary contained in this Article 7: (i)
the Sellers shall not be liable for
incidental damages, indirect damages, or
speculative damages; (ii) the Buyer shall
not be entitled to recover more than once
for any loss, damage, liability,
deficiency, cost, obligation, or expense
that may have resulted from the breach of
more than one of the Company, Jenkins or
Sellers' representations or warranties or
the breach of more than one of the
Company, Jenkins or Sellers' covenants or
agreements hereunder; (iii) in no event
will the total liability of any of the
Sellers for all losses, damages,
liabilities, deficiencies, costs,
obligations, or expenses pursuant to this
Article 7 or elsewhere in this Agreement
exceed an amount equal to such Seller's
Pro Rata Percentage of the Purchase Price.
As used herein, the term "Pro Rata
Percentage" shall mean a percentage
calculated by dividing the number of
Shares owned by a Seller by the total
number of outstanding Shares as of the
Closing Date. For example, if a Seller's
Pro Rata Percentage of the Purchase Price
equals $100,000, then the maximum amount
for which that Seller would be liable
under this Section 7 would be $100,000 in
the aggregate.
Notwithstanding anything to the
contrary contained in this Article 7, the
Sellers and Jenkins shall have no
indemnification obligations in connection
with or related to state sales and use
taxes and penalties and interest thereon.
The Company has insurance coverage of
$4,000,000 to cover the possible damages,
costs and expenses incurred in connection
with that certain case styled Estate of
Kenneth Lane v. American Augers, Inc. The
Sellers and Jenkins shall have no
indemnification obligations relating to
said case; provided, however, that if the
insurance carrier denies any coverage or
covers less than the full amount of all
damages, costs and expenses, in the
aggregate, up to $4,000,000 in connection
with the defense of said case then the
Sellers and Jenkins shall have the
indemnification obligations set forth in
Section 7.2.
The Company has insurance coverage of
$2,000,000 to cover the possible damages,
costs and expenses incurred in connection
with that certain case styled Dana J.
Stickler, Widow and administratrix of the
Estate of Harry D. Stickler, deceased v.
American Augers, Inc. The Sellers and
Jenkins shall have no indemnification
obligations relating to said case;
provided, however, that if the insurance
carrier denies any coverage or covers less
than the full amount of all damages, costs
and expenses, in the aggregate, less than
$2,000,000 in connection with the defense
of said case then the Sellers and Jenkins
shall have the indemnification obligations
set forth in Section 7.2.
.
ARTICLE
TAX MATTERS
The following provisions shall govern the
allocation of responsibility as between the
Buyer and the Sellers for certain tax matters
following the Closing Date:
Tax Periods Ending on or Before the
Closing Date.
The Buyer shall prepare or cause to be
prepared in accordance with the terms of this
Agreement and file or cause to be filed all tax
returns for the Company for all periods ending
on or prior to the Closing Date which are filed
after the Closing Date. The Buyer shall permit
the Sellers to review and comment on each such
tax return described in the preceding sentence
prior to filing. The Sellers' obligation to
reimburse the Buyer for taxes of the Company
with respect to such period to the extent such
taxes are not reflected in the reserve for tax
liability is set forth in Section 7.2.
Tax Periods Beginning Before and
Ending After the Closing Date.
The Buyer shall prepare or cause to be
prepared and file or cause to be filed any tax
returns of the Company for tax periods which
begin before the Closing Date and end after the
Closing Date. The Sellers' obligation to
reimburse the Buyer an amount equal to the
portion of such taxes which relates to the
portion of such taxable period ending on the
Closing Date to the extent such taxes are not
reflected in the reserve for tax liability is
set forth in Section 7.2. For purposes of this
Section, in the case of any taxes that are
imposed a periodic basis and are payable for a
taxable period that includes (but does not end
on) the Closing Date, the portion of such tax
which relates to the portion of such taxable
period ending on the Closing Date shall (a) in
the case of any taxes other than taxes based
upon or related to income or receipts, be
deemed to be the amount of such tax for the
entire taxable period multiplied by a fraction
the numerator of which is the number of days in
the taxable period ending on the Closing Date
and the denominator of which is the number of
days in the entire taxable period, and (b) in
the case of any tax based upon or related to
income or receipts be deemed equal to the
amount which would be payable if the relevant
taxable period ended on the Closing Date. Any
credits relating to a taxable period that
begins before and ends after the Closing Date
shall be allocated in the same manner. All
determinations necessary to give effect to the
foregoing allocations shall be made in a manner
consistent with prior practice of the Company.
Disputes as to Tax Returns.
If the Sellers have an obligation to
reimburse the Buyer for taxes under either
Section 8.1 or Section 8.2 and if the Sellers
object to matters on the tax returns filed
thereunder, then the specific matters in
dispute shall be submitted to KPMG's Cleveland,
Ohio office or to another national, independent
accounting firm (other than Ernst & Young,
L.L.P. or Arthur Andersen, L.L.P.) approved by
the Sellers and the Buyer. As expeditiously as
possible, and in any event within ten (10) days
of submission, KPMG (or such other independent
accounting firm) will deliver to the Sellers
and the Buyer its determination of the
specified matters in dispute, which
determination shall be final and binding on the
parties hereto. The fees and expenses of KPMG
(or such other independent accounting firm)
shall be borne one-half by the Sellers and one-
half by the Buyer.
Cooperation on Tax Matters.
the Buyer and the Sellers shall
cooperate fully, as and to the extent
reasonably requested by the other Party,
in connection with the filing of tax
returns pursuant to this Section and any
audit, litigation or other proceeding with
respect to taxes. Such cooperation shall
include the retention and (upon the other
Party's request) the provision of records
and information which are reasonably
relevant to any such audit, litigation or
other proceeding and making employees
available on a mutually convenient basis
to provide additional information and
explanation of any material provided
hereunder.
the Buyer and the Sellers further
agree, upon request, to use their best
efforts to obtain any certificate or other
document from any governmental authority
or any other person or entity as may be
necessary to mitigate, reduce or eliminate
any tax that could be imposed (including,
but not limited to, with respect to the
transactions contemplated hereby).
the Buyer and the Sellers further
agree, upon request, to provide the other
Party with all information that either
party may be required to report pursuant
to Section 6043 of the Code and all
regulations promulgated thereunder.
Certain Taxes.
All transfer, documentary, sales, use,
stamp, registration and other such taxes and
fees (including any penalties and interest)
incurred in connection with this Agreement,
shall be paid by the Buyer when due, and the
Buyer will, at its own expense, file all
necessary tax returns and other documentation
with respect to all such transfer, documentary,
sales, use, stamp, registration and other taxes
and fees, and, if required by applicable law,
the Sellers will join in the execution of any
such tax returns and other documentation.
ARTICLE
TERMINATION
Termination of Agreement.
The Parties may terminate this Agreement
as provided below:
the Buyer and the Sellers may
terminate this Agreement by mutual consent
at any time prior to the Closing;
the Buyer may terminate this
Agreement by giving written notice to the
Sellers on or before the Closing Date if
the Buyer's continuing business, legal,
environmental, and accounting due
diligence regarding the Company reveals
any fact or facts that would or could
reasonably likely result in materially
adverse consequences or changes to the
business of the Company as presently
conducted subsequent to the consummation
of the transactions contemplated by this
Agreement;
the Buyer may terminate this
Agreement by giving written notice to the
Sellers at any time prior to the Closing
(i) in the event any of the Sellers have
breached any material representation,
warranty, or covenant contained in this
Agreement in any material respect, the
Buyer has notified the Sellers of the
breach, and the breach has continued
without cure for a period of thirty (30)
days after the notice of the breach or
(ii) if the Closing shall not have
occurred on or before November 30, 1999,
by reason of the failure of any condition
precedent under Section 6.1 hereof (unless
the failure results primarily from the
Buyer itself breaching any representation,
warranty, or covenant contained in this
Agreement); and
the Sellers may terminate this
Agreement by giving written notice to the
Buyer at any time prior to the Closing in
the event the Buyer has breached any
material representation, warranty, or
covenant contained in this Agreement in
any material respect, any of the Sellers
has notified the Buyer of the breach, and
the breach has continued without cure for
a period of thirty (30) days after the
notice of breach or (ii) if the Closing
shall not have occurred on or before
November 30, 1999, by reason of the
failure of any condition precedent under
Section 6.1 hereof (unless the failure
results primarily from the Company, the
Sellers or Jenkins itself or themselves
breaching any representation, warranty, or
covenant contained in this Agreement).
Effect of Termination.
If any Party terminates this Agreement
pursuant to Section 9.1 above, all rights and
obligations of the Parties hereunder shall
terminate without any liability of any Party to
any other Party (except for any liability of
any Party then in breach).
MISCELLANEOUS
Seller Agents.
(a) Each Seller has made, constituted and
appointed, and by the execution of this
Agreement irrevocably makes, constitutes
and appoints Roger K. Eve and Phil Jenkins
as such Seller's true and lawful
attorneys-in-fact and agents (the "Seller
Agents") to act for such Seller in such
Seller's name, (i) to participate in the
Closing and take all other such actions in
connection with the transactions
contemplated hereby and to receive,
respond to and settle all claim notices
and to receive, respond to and settle all
other notices, communications and matters
directed to such Seller under this
Agreement (or to the Seller Agents on
behalf of such Seller) and to take any
action (or to determine to take no action)
with respect thereto at or following the
Closing as the Seller Agents may deem
appropriate as effectively as such Seller
could act for himself including, without
limitation, delivery of
certificates?representing the Shares and
acceptance of payments due at the Closing,
execution and delivery of documents and
certificates and the settlement and
compromise of any issue, dispute or
controversy relating to the transactions
contemplated hereby, (ii) to negotiate,
terminate or amend this Agreement and the
Closing Documents and (ii) to execute and
deliver all instruments and documents of
every kind incident to the foregoing for
all intents and purposes and with the same
effect as such Seller could do personally,
and each such Seller hereby ratifies and
confirms as such Seller's own act all that
the Seller Agents shall do or cause to be
done pursuant to the provisions hereof.
(b) The death, incapacity, termination or
dissolution of any Seller shall terminate
the authority and agency of the Seller
Agents with respect to such Seller.
(c) Each Seller hereby agrees to
indemnify the Seller Agents and hold the
Seller Agents harmless against any loss,
liability or expense incurred without
negligent conduct or bad faith on the part
of the Seller Agents and arising out of or
in connection with his duties as Seller
Agents for such Seller, including the
costs and expenses incurred by such Seller
Agents in defending against any claim of
liability in connection therewith.
(d) Each Seller hereby releases the Buyer
from any liability or loss incurred by
such Seller as a result of the performance
or failure to perform by the Seller Agents
of their obligations in connection with
this Agreement.
(e) By their execution hereof, Roger K.
Eve and Phil Jenkins accept their
appointment as Seller Agents hereunder by
each Seller, agrees to exercise the rights
and perform the obligations of Seller
Agents in accordance with the terms and
conditions of this Agreement, and
acknowledges that they are accepting the
position of Seller Agents solely in
reliance upon the provisions of this
Agreement and not, either in whole or in
part, upon any other contract, agreement,
commitment or understanding
Knowledge.
As used herein, the term "knowledge" (or words
of similar import) means that an individual
shall be deemed to have knowledge of a
particular fact or other matter if (a) such
individual is actually aware of such fact or
other matter, or (b) a prudent individual
similarly situated could be expected to
discover or otherwise become aware of such fact
or other matter in the course of carrying out
his or her duties or conducting a reasonably
comprehensive investigation concerning the
existence of such fact or other matter; the
term "to the Company's knowledge" or "to the
knowledge of the Company" (or words of similar
import) means the knowledge of all key
management personnel of the Company concerning
the matters to which such representations and
warranties relate, including, but not limited
to, Roger K. Eve, Chairman and Chief Executive
Officer, Michael T. Mooney, Chief Financial
Officer, and Brad Dolan, Controller.
Press Releases and Public
Announcements.
It is the understanding of the parties
that on or within three (3) days after the date
of execution of this Agreement, the Sellers and
the Buyer will jointly announce the subject
matter of this Agreement to the employees of
the Company, and the Buyer will issue press
releases and make the requisite government
notice filings.
No Third-Party Beneficiaries.
This Agreement shall not confer any rights
or remedies upon any person or entity other
than the Parties and their respective
successors and permitted assigns.
Entire Agreement.
This Agreement (including the documents,
schedules and exhibits referred to herein)
constitutes the entire agreement among the
Parties and supersedes any prior
understandings, agreements, or representations
by or among the Parties, written or oral, to
the extent they related in any way to the
subject matter hereof.
Succession and Assignment.
This Agreement shall be binding upon and
inure to the benefit of the Company and the
Parties named herein and their respective
heirs, personal representative, estates,
successors and permitted assigns. Neither the
Company nor any Party may assign either this
Agreement or any of his or its rights,
interests, or obligations hereunder without the
prior written approval of the Buyer and the
Sellers; provided, however, that the Buyer may
(i) assign any or all of its rights and
interests hereunder to one or more of its
affiliated companies and (ii) designate one or
more of its affiliate companies to perform its
obligations hereunder (in any or all of which
cases the Buyer nonetheless shall remain
responsible for the performance of all of its
obligations hereunder).
Counterparts.
This Agreement may be executed in one or
more counterparts, each of which shall be
deemed an original but all of which together
will constitute one and the same instrument.
Headings.
The section headings contained in this
Agreement are inserted for convenience only and
shall not affect in any way the meaning or
interpretation of this Agreement.
Notices.
All notices, requests, demands, claims,
and other communications hereunder will be in
writing. Any notice, request, demand, claim,
or other communication hereunder shall be
deemed duly given if (and then two business
days after) it is sent by registered or
certified mail, return receipt requested,
postage prepaid, and addressed to the intended
recipient as set forth below:
If to the Buyer:
Astec Industries, Inc.
P. O. Box 72787
4101 Jerome Ave.
Chattanooga, TN 37407
Attn: Richard Bethea
Fax: (423) 877-1818
With a Copy to:
Chambliss, Bahner & Stophel, P.C.
1000 Tallan Building
Two Union Square
Chattanooga, TN 37402
Attn: E. Stephen Jett
Fax: (423) 265-9574
If to the Sellers and/or Seller Agents:
Roger K. Eve
4334 Woodlake Trail
Wooster, OH 44691
Fax: (330) 345-8575
Phil Jenkins
6589 Jackson Road
Ann Arbor, MI 48103
Fax: (734) 663-3553
With a Copy to:
Kahn, Kleinman, Yanowitz & Arnson, L.P.A.
The Tower at Erieview
Suite 2600
Cleveland, OH 44114
Attn: Marc H. Morgenstern
Fax: (216) 696-1009
Any Party may send any notice, request,
demand, claim , or other communication
hereunder to the intended recipient at the
address set forth above using any other means
(including personal delivery, expedited
courier, messenger service, telecopy or
ordinary mail), but no such notice, request,
demand, claim, or other communication shall be
deemed to have been duly given unless and until
it actually is received by the intended
recipient. Any Party may change the address to
which notices, requests, demands, claims, and
other communications hereunder are to be
delivered by giving the other Parties notice in
the manner herein set forth.
Governing Law.
This Agreement shall be governed by and
construed in accordance with the domestic laws
of the State of Tennessee without giving effect
to any choice or conflict of law provision or
rule (whether of the State of Tennessee or any
other jurisdiction) that would cause the
application of the laws of any jurisdiction
other than the State of Tennessee.
Amendments and Waivers.
No amendment of any provision of this
Agreement shall be valid unless the same shall
be in writing and signed by the Buyer and the
Seller Agents. No waiver by any Party of any
default, misrepresentation, or breach of
warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend
to any prior or subsequent fault,
misrepresentation, or breach of warranty or
covenant hereunder or affect in any way any
rights arising by virtue of any prior or
subsequent such occurrence. The course of
conduct or course of dealing of the parties
shall not operate to modify or waive the
provisions of this Section.
Severability.
Any term or provision of this Agreement
that is invalid or unenforceable in any
situation in any jurisdiction shall not affect
the validity or enforceability of the remaining
terms and provisions hereof or the validity or
enforceability of the offending term or
provision in any other situation or in any
other jurisdiction. In such event, the
offending provision shall be modified to the
minimum extent necessary to make it valid and
enforceable.
Expenses.
Each of the Parties shall bear its own
costs and expenses (including legal fees and
expenses) incurred in connection with this
Agreement and the transactions contemplated
hereby.
Construction.
The Parties have participated jointly in
the negotiation and drafting of this Agreement.
In the event an ambiguity or question of intent
or interpretation arise, this Agreement shall
be construed as if drafted jointly by the
Parties and no presumption or burden of proof
shall arise favoring or disfavoring any Party
by virtue of the authorship of any of the
provisions of this Agreement. Any reference to
any federal, state, local, or foreign statute
or law shall be deemed also to refer to all
rules and regulations promulgated thereunder,
unless the context requires otherwise. The
word "including" shall mean including without
limitation. The Parties intend that each
representation, warranty, and covenant
contained herein shall have independent
significance. If any Party has breached any
representation, warranty, or covenant contained
herein in any respect, the fact that there
exists another representation, warranty, or
covenant relating to the same subject matter
(regardless of the relative levels of
specificity) which the Party has not breached
shall not detract from or mitigate the fact
that the Party is in breach of the first
representation, warranty, or covenant.
Incorporation of Exhibits and
Schedules.
The Exhibits and Schedules identified in
this Agreement are incorporated herein by
reference and made a part hereof.
Specific Performance.
Each of the Parties acknowledges and
agrees that the other Parties would be damaged
irreparably in the event any of the provisions
of this Agreement are not performed in
accordance with their specific terms or
otherwise are breached. Accordingly, each of
the Parties agrees that the other Party shall
be entitled to an injunction or injunctions to
prevent breaches of the provisions of this
Agreement and to enforce specifically this
Agreement and the terms and provisions hereof
in any action instituted in any court of the
United States or any state thereof having
jurisdiction over the Parties and the matter,
in addition to any other remedy to which they
may be entitled, at law or in equity.
IN WITNESS WHEREOF, the Parties hereto
have executed this Agreement on the date first
above written.
ASTEC INDUSTRIES, INC.
By:
Title:/s/ Richard W. Bethea
SELLERS:
/s/ Roger K. Eve
Roger K. Eve
The Phil Jenkins Revocable Living Trust dated
1/6/67
By: /s/ Steve Tracy
Steve Tracy, Trustee
The Ann Arbor Hands-On Museum Irrevocable Trust
dated 9/17/99
By: /s/ Steve Tracy
Steve Tracy, Trustee
The Dexter Intergenerational Care Center, Inc.
Irrevocable Trust dated 9/18/99
By: /s/ Steve Tracy
Steve Tracy, Trustee
The Chelsea Community Hospital Irrevocable
Trust dated 9/18/99
By: /s/ Steve Tracy
Steve Tracy, Trustee
/s/ Michael T. Mooney
Michael T. Mooney
/s/ Denis Fox
Denis Fox
/s/ Thomas Hartzler
Thomas Hartzler
/s/ William Riel
William Riel
/s/ Leonard Craig Johnson
Leonard Craig Johnson
/s/ Lisa King
Lisa King
/s/Tim Small
Tim Small
COMPANY:
AMERICAN AUGERS, INC.
By:/s/ Phil Jenkins
Phil Jenkins
EXHIBIT 10.30
Stock Purchase Agreement, dated November 1, 1999, by and
among SIMCO, LLC and the Superior Industries
of Morris, Inc. Employee Stock Ownership Plan
and Astec Industries, Inc.
ACQUISITION OF SUPERIOR INDUSTRIES OF MORRIS, INC.
BY
ASTEC INDUSTRIES, INC.
November 1, 1999
TABLE OF CONTENTS
Headings Page No.
ARTICLE 1: DEFINITIONS 2
SECTION 1.1 SPECIFIC DEFINITIONS. 2
SECTION 1.2 OTHER TERMS. 5
SECTION 1.3 OTHER DEFINITIONAL PROVISIONS. 5
ARTICLE 2: PURCHASE AND SALE OF SHARES 6
SECTION 2.1 PURCHASE AND SALE OF SHARES. 6
SECTION 2.2 PURCHASE AND SALE OF PREMISES. 6
SECTION 2.3 SHARE CONSIDERATION, REAL ESTATE
CONSIDERATION AND ESCROW AMOUNT. 6
SECTION 2.4 CLOSING; DELIVERY AND PAYMENT. 7
ARTICLE 3: REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE MAJORITY
SHAREHOLDERS 7
SECTION 3.1 ORGANIZATION AND AUTHORITY OF COMPANY. 7
SECTION 3.2 CAPITALIZATION OF COMPANY. 7
SECTION 3.3 FINANCIAL STATEMENTS. 8
SECTION 3.4 ABSENCE OF CERTAIN CHANGES, EVENTS
OR LIABILITIES. 8
SECTION 3.5 LITIGATION. 10
SECTION 3.6 COMPLIANCE WITH LAW; PERMITS. 10
SECTION 3.7 CONSENTS AND APPROVALS. 11
SECTION 3.8 TAX MATTERS. 11
SECTION 3.9 MATERIAL CONTRACTS. 11
SECTION 3.10 LABOR MATTERS. 12
SECTION 3.11 BENEFIT PLANS. 12
SECTION 3.12 ENVIRONMENTAL MATTERS. 13
SECTION 3.13 BROKERS AND FINDERS. 13
SECTION 3.14 TANGIBLE ASSETS. 14
SECTION 3.15 INTANGIBLE ASSETS. 14
SECTION 3.16 EMPLOYEES. 14
SECTION 3.17 INSURANCE. 15
SECTION 3.18 INVENTORY. 16
SECTION 3.19 YEAR 2000 COMPLIANCE. 16
SECTION 3.20 COMPLETENESS OF STATEMENTS; EFFECT OF
REPRESENTATIONS AND WARRANTIES. 17
ARTICLE 4: REPRESENTATIONS AND WARRANTIES OF
SIMCO AND THE MAJORITY SHAREHOLDERS 17
SECTION 4.1 ORGANIZATION AND AUTHORITY OF SIMCO. 17
SECTION 4.2 BROKERS AND FINDERS. 17
SECTION 4.3 REAL PROPERTY. 18
SECTION 4.4 ENVIRONMENTAL MATTERS. 19
SECTION 4.5 LEGAL PROCEEDINGS. 19
SECTION 4.6 CONSENTS AND APPROVALS. 19
SECTION 4.7 COMPLETENESS OF STATEMENTS; EFFECT OF
REPRESENTATIONS AND WARRANTIES. 19
ARTICLE 5: REPRESENTATIONS AND WARRANTIES OF
THE MAJORITY SHAREHOLDERS 20
SECTION 5.1 BROKERS AND FINDERS. 20
SECTION 5.2 REAL PROPERTY. 20
SECTION 5.3 ENVIRONMENTAL MATTERS. 21
SECTION 5.4 LEGAL PROCEEDINGS. 22
SECTION 5.5 CONSENTS AND APPROVALS. 22
SECTION 5.6 SECTION 1031 EXCHANGE. 22
SECTION 5.7 COMPLETENESS OF STATEMENTS; EFFECT OF
REPRESENTATIONS AND WARRANTIES. 22
ARTICLE 6: REPRESENTATIONS AND WARRANTIES OF THE
ESOP AND THE MAJORITY SHAREHOLDERS 23
SECTION 6.1 AUTHORITY OF THE ESOP. 23
SECTION 6.2 BROKERS AND FINDERS. 23
SECTION 6.3 ESOP SHARES. 23
SECTION 6.4 LEGAL PROCEEDINGS. 23
SECTION 6.5 CONSENTS AND APPROVALS. 24
SECTION 6.6 NO DISSENTERS' RIGHTS. 24
SECTION 6.7 COMPLETENESS OF STATEMENTS; EFFECT OF
REPRESENTATIONS AND WARRANTIES. 24
ARTICLE 7: REPRESENTATIONS AND WARRANTIES OF BUYER 24
SECTION 7.1 ORGANIZATION AND AUTHORITY OF BUYER. 24
SECTION 7.2 BROKERS AND FINDERS. 25
SECTION 7.3 FINANCIAL CAPABILITY. 25
SECTION 7.4 SECURITIES ACT. 25
SECTION 7.5 LEGAL PROCEEDINGS. 25
SECTION 7.6 CONSENTS AND APPROVALS. 25
ARTICLE 8: TAX MATTERS 26
SECTION 8.1 TAX INDEMNIFICATION. 26
SECTION 8.2 TAX RETURNS. 26
SECTION 8.3 CONTEST PROVISIONS. 27
SECTION 8.4 ASSISTANCE AND COOPERATION. 27
SECTION 8.5 TRANSFER TAXES. 28
SECTION 8.6 SURVIVAL OF OBLIGATIONS. 28
ARTICLE 9: CERTAIN COVENANTS AND AGREEMENTS 28
SECTION 9.1 ACCESS AND INFORMATION. 28
SECTION 9.2 REGISTRATIONS, FILINGS AND CONSENTS. 28
SECTION 9.3 CONDUCT OF BUSINESS. 29
SECTION 9.4 BEST EFFORTS. 29
SECTION 9.5 RETENTION OF BOOKS AND RECORDS. 29
SECTION 9.6 HART-SCOTT-RODINO. 30
SECTION 9.7 FURTHER ASSURANCES. 30
SECTION 9.8 ENVIRONMENTAL CONCERNS. 30
SECTION 9.9 EMPLOYEE BENEFIT MATTERS. 31
ARTICLE 10:0 CONDITIONS TO THE PURCHASE AND SALE 31
SECTION 10.1 GENERAL CONDITIONS TO THE PURCHASE AND
SALE RELATING TO PARTIES. 31
SECTION 10.2 CONDITIONS TO PURCHASE BY BUYER. 32
SECTION 10.3 CONDITIONS TO SALE BY SELLERS. 33
ARTICLE 11:0 INDEMNIFICATION 34
SECTION 11.1 SURVIVAL; RIGHTS AND REMEDIES NOT
AFFECTED BY KNOWLEDGE. 34
SECTION 11.2 INDEMNIFICATION AND PAYMENT OF DAMAGES
BY THE MAJORITY SHAREHOLDERS. 34
SECTION 11.3 INDEMNIFICATION AND PAYMENT OF DAMAGES
BY SIMCO. 36
SECTION 11.4 INDEMNIFICATION BY BUYER. 37
SECTION 11.5 INDEMNITY CLAIMS. 37
SECTION 11.6 NO LIABILITY OF COMPANY. 39
ARTICLE 12:0 TERMINATION 39
SECTION 12.1 TERMINATION. 39
ARTICLE 13:0 MISCELLANEOUS 40
SECTION 13.1 EXPENSES. 40
SECTION 13.2 BEST EFFORTS; FURTHER ASSURANCES. 40
SECTION 13.3 PUBLIC DISCLOSURE. 41
SECTION 13.4 ASSIGNMENT. 41
SECTION 13.5 AMENDMENTS AND WAIVERS. 41
SECTION 13.6 ENTIRE AGREEMENT. 41
SECTION 13.7 SCHEDULES. 41
SECTION 13.8 NOTICES. 41
SECTION 13.9 GOVERNING LAW. 41
SECTION 13.10 SEVERABILITY. 42
SECTION 13.11 SECTION HEADINGS. 42
SECTION 13.12 COUNTERPARTS. 42
SECTION 13.13 REPRESENTATION BY COUNSEL; INTERPRETATION. 42
SECTION 13.14 ARBITRATION CLAUSE. 42
ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT (this "Agreement") is made and
entered into by and among Neil E. Schmidgall and Linda M.
Schmidgall, individually and as Trustees of the Neil E.
Schmidgall Revocable Living Trust and the Linda M. Schmidgall
Revocable Living Trust, Paul Schmidgall, individually and as
trustee of the Neil E. Schmidgall and Linda M. Schmidgall
Charitable Remainder Unitrust, and Shawn Schmidgall (each of the
foregoing referred to individually as "Majority Shareholder" and
collectively as "Majority Shareholders"), SIMCO, LLC, a
Minnesota limited liability company ("SIMCO"), the Superior
Industries of Morris, Inc. Employee Stock Ownership Plan (the
"ESOP"), Superior Industries of Morris, Inc., a Minnesota
corporation (the "Company"), and Astec Industries, Inc., a
Tennessee corporation (the "Buyer").
R E C I T A L S:
WHEREAS, the Majority Shareholders collectively own
140,000 issued and outstanding shares of capital stock of the
Company (the "Schmidgall Shares") in the respective amounts set
forth in Exhibit A; and
WHEREAS, the ESOP owns the remaining 60,000 shares of the
issued and outstanding shares of the capital stock of the
Company (the "ESOP Shares"; the ESOP Shares and the Schmidgall
Shares are referred to collectively as the "Company Shares");
and
WHEREAS, the Majority Shareholders and the ESOP desire to
sell and transfer to Buyer (as defined herein), and Buyer
desires to purchase from the Majority Shareholders and the ESOP,
the Company Shares, as more specifically provided herein; and
WHEREAS, SIMCO and Neil Schmidgall collectively own real
property and improvements located in Morris, Minnesota, which
constitutes all the real property and improvements used in
connection with the business operations of the Company (the
"Premises"); and
WHEREAS, SIMCO and Neil Schmidgall desire to sell and
transfer the Premises, as more specifically provided herein.
NOW, THEREFORE, in consideration of the mutual covenants
and undertakings contained herein, and subject to and on the
terms and conditions herein set forth, the parties intending to
be legally bound hereby agree as follows:
ARTICLE : DEFINITIONS
Section 1.1 Specific Definitions.
As used in this Agreement and any Exhibits, Schedules, or
certificates delivered pursuant hereto, the following terms
shall have the following meanings:
"Agreement" means this Agreement and all Exhibits and
Schedules.
"Affiliate" means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by, or
under common control with, such other Person. For the purposes
of this definition, "control" of a Person means the power,
direct or indirect, to direct or cause the direction of the
management and policies of such Person, whether by ownership of
securities, contract, law or otherwise and the terms
"controlling" and "controlled" shall have meanings correlative
to the foregoing.
"Antitrust Division" means the Antitrust Division of the
United States Department of Justice.
"Benefit Plans" has the meaning set forth in Section 3.11
"Breach" has the meaning set forth in Section 11.2
"Buyer" means Astec Industries, Inc., a Tennessee
corporation. Buyer may designate at or prior to the Closing
Date a wholly-owned subsidiary to complete the transactions set
forth in the Agreement. Buyer and such subsidiary shall be
jointly and severally responsible for the obligations of the
Buyer under this Agreement.
"Buyer's Indemnitees" has the meaning set forth in Section 11.2.
"Claim" has the meaning set forth in Section 11.5.
"Claim Notice" has the meaning set forth in Section 11.5.
"Closing" has the meaning set forth in Section 2.4.
"Closing Date" means the date of the Closing.
"Code" means the Internal Revenue Code of 1986, as amended to the
date hereof.
"Company" means Superior Industries of Morris, Inc., a
Minnesota corporation.
"Company Shares" has that meaning set forth in the
recitals.
"Damages" means debts, obligations, losses, claims,
damages (including incidental and consequential damages),
liabilities, deficiencies, proceedings, demands, assessments,
orders, judgments, writs, decrees, costs and other expenses
(including costs of investigation and defense and reasonable
attorneys' fees) or diminution of value, whether or not
involving a third-party claim, of any nature and of any kind
whatsoever.
"EEOC" has the meaning set forth in Section 3.10.
"Encumbrances" means any charges, claims, community
property interests, conditions, equitable interests, liens,
mortgages, easements, rights-of way, options, pledges, security
interests, rights of first refusal or restrictions of any kind,
including any restrictions on use, voting, transfer, receipt of
income or exercise of any other attribute of ownership.
"Environmental Concerns" has the meaning set forth in Section 9.8.
"Environmental Laws" has the meaning set forth in Section 3.12.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"ESOP" means the Superior Industries of Morris, Inc.
Employee Stock Ownership Plan.
"ESOP Shares" has that meaning set forth in the recitals.
"Financial Statements" has the meaning set forth in Section 3.3.
"FTC" means the Federal Trade Commission.
"GAAP" means generally accepted accounting principles in
the United States of America, as in effect from time to time.
"Hazardous Activity" means the distribution, generation,
handling, importing, management, manufacturing, processing,
production, refinement, release, storage, transfer,
transportation, treatment, or use (including any withdrawal or
other use of groundwater) of Hazardous Materials in, on, under,
about, or from the Premises or any part thereof into the
environment, and any other act, business, operation, or a thing
that increases the danger, or a risk of danger, or poses an
unreasonable risk of harm to persons or property on or off the
Premises, or that may affect the value of the Premises or the
Company.
"Hazardous Materials" means any waste or other substance
that is listed, defined, designated, or classified as, or
otherwise determined to be, hazardous, radioactive, or toxic or
a pollutant or a contaminate under or pursuant to any
Environmental Law, including any mixture or solution thereof,
and specifically including petroleum and all derivatives thereof
or synthetic substance therefor and asbestos or asbestos-
containing materials.
"HSR Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"Indemnitee" has the meaning set forth in Section 11.5.
"Indemnifying Party" has the meaning set forth in Section 11.5.
"Information Technology" has the meaning set forth in Section 3.19.
"Interim Financial Statements" has the meaning set forth in Section 3.3.
"IRS" means the Internal Revenue Service.
"Majority Shareholders" has the meaning set forth in the recitals.
"Material Adverse Effect" means a material adverse
effect on the business, operations, properties, assets,
prospects or condition (financial or otherwise) of Company,
taken as a whole, the Premises, or on any Seller's
ability to perform any of their obligations under this Agreement
and consummate the transactions contemplated hereby.
"Material Contracts" has the meaning set forth in Section 3.9.
"NLRB " has the meaning set forth in Section 3.10.
"Pension Plan" has the meaning set forth in Section 3.11.
"Person" means an individual, corporation, partnership,
trust or unincorporated organization or government or any agency
or political subdivision thereof.
"Premises" has that meaning set forth in the recitals.
"Profit Sharing Plan" has the meaning set forth in Section 9.9.
"Real Estate Consideration" has that meaning set forth in Section 2.3.
"Report" has the meaning set forth in Section 9.6.
"Section 1031 Exchange" has that meaning set forth in Section 5.6.
"Securities Act" means the Securities Act of 1933, as amended.
"Sellers" has that meaning set forth in Article 7.
"Schmidgall Premises" has the meaning set forth in Section 5.2.
"Schmidgall Shares" has the meaning set forth in the recitals.
"Share Consideration" has that meaning set forth in Section 2.3.
"SIMCO" means SIMCO, LLC, a Minnesota limited liability company.
"SIMCO Premises" has the meaning set forth in Section 4.3.
"Tax" or "Taxes" means any federal, state, local or
foreign income, gross receipts, windfall profits, severance,
property, production, sales, use, stock transfer, conveyance,
intangible, stamp, duty, transfer, reporting, recording,
license, excise, franchise or similar taxes, together with any
interest, additions or penalties with respect thereto and any
interest in respect of such additions or penalties.
"Tax Returns" means all federal, state, local and foreign
Tax returns, Tax reports, and declarations of estimated Tax,
including without limitation federal income tax returns that
include the Company.
"Third Party Claim" has the meaning set forth in Section 11.5.
"UCC" means the Uniform Commercial Code as in effect on
the date hereof in the State of Minnesota.
Section 1.2
Other Terms.
Other terms may be defined elsewhere in the text of this
Agreement and shall have the meanings indicated throughout this
Agreement.
Section 1.3
Other Definitional Provisions.
For all purposes of this Agreement, except as otherwise
expressly provided:
The terms defined in this Article 1 have the
meanings assigned to them in this Article 1 and include the
plural as well as the singular;
All accounting terms not otherwise defined herein
having the meanings assigned under GAAP;
All references to Articles, Sections, Exhibits and
Schedules are to the designated Articles, Sections, Exhibits and
Schedules, respectively, to this Agreement;
Pronouns of either gender and neuter shall
include, as appropriate, the other pronoun forms;
The words "herein", "hereof", and "hereunder" and
other words of similar import refer to this Agreement as a whole
and not any particular Article, Section, or other subdivision;
The use herein of the word "include" or
"including", when following any general statement, term or
matter, shall not be construed to limit such statement, term or
matter to the specific items or matters set forth immediately
following such word or to similar items or matters, whether or
not nonlimiting language (such as "without limitation" or "but
not limited to" or words of similar import) is used with
reference thereto, but rather shall be deemed to refer to all
other items or matters that fall within the broadest possible
scope of such general statement, term or matter;
For the purposes of this Agreement, "knowledge" or
"known" means actual knowledge or knowledge that would exist
upon reasonable inquiry. A Person's knowledge shall
specifically include the actual knowledge of any officer or
trustee thereof, if applicable, or knowledge that would exist
upon reasonable inquiry by any officer or trustee thereof, if
applicable.
For purposes of this Agreement, the term "ordinary
course of business" shall mean an action that is consistent with
the past practices of the applicable party and is taken in the
ordinary course of the normal day-to-day operations of the
applicable party, is not required to be authorized by the board
of directors or similar governing body of the applicable party
and is similar in nature and magnitude to actions customarily
taken without any authorization by the board of directors of a
corporation in the same line of business as the applicable
party.
ARTICLE : PURCHASE AND SALE OF SHARES
Section
Purchase and Sale of Shares.
Upon the terms and subject to the conditions of this
Agreement, Buyer agrees to purchase from the Majority
Shareholders and the ESOP, and the Majority Shareholders and
ESOP agree to sell to Buyer, the Company Shares for the Share
Consideration specified in Section 2.3(a).
Section
Purchase and Sale of Premises.
Upon the terms and subject to the conditions of this
Agreement, Buyer, SIMCO and Neil Schmidgall agree that SIMCO and
Neil Schmidgall shall transfer, sell and assign the Premises to
the Company and Buyer shall pay the Real Estate Consideration to
SIMCO and Neil Schmidgall for such transfer, sale and assignment
on the terms specified in Section 2.3.
Section
Share Consideration, Real Estate Consideration
and Escrow Amount.
The purchase price for the Company Shares shall be
Thirteen Million Five Hundred Thousand Dollars ($13,500,000)
(the "Share Consideration"). The Share Consideration shall be
paid to the Majority Shareholders and the ESOP in the respective
amounts set forth on Schedule 2.3(a).
The purchase price for the Premises shall Three
Million Six Hundred Fifty-two Thousand Five Hundred Dollars
($3,652,500) (the "Real Estate Consideration"). The Real Estate
Consideration shall be paid to SIMCO and Neil Schmidgall in the
amounts set forth in Schedule 2.3(b).
Section
Closing; Delivery and Payment.
The closing of the sale and purchase of the Company
Shares and the Premises contemplated herein (the "Closing")
shall take place at the offices of Mansfield, Tanick & Cohen,
P.A., 1560 International Centre, 900 Second Avenue, Minneapolis,
Minnesota 55402 at 10:00 a.m. CDT on September 30, 1999, or at
such other time or place as is mutually agreed to by the parties
hereto.
ARTICLE : REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE MAJORITY SHAREHOLDERS
The Company and the Majority Shareholders jointly and
severally represent and warrant to Buyer as follows:
Section
Organization and Authority of Company.
The Company is duly formed and validly existing as a
corporation under the laws of the State of Minnesota. Seller has
all necessary corporate power, capacity and authority to
execute, deliver and perform this Agreement. This Agreement has
been duly authorized by all requisite corporate action on the
part of the Company, executed and delivered by the Company and
constitutes the valid and binding obligation of the Company,
enforceable in accordance with its terms, except as enforcement
may be limited by bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws affecting creditors'
rights generally and by general principles of equity. Neither
the execution and delivery by the Company of this Agreement nor
consummation of the transactions contemplated hereby will
violate any provision of the articles or certificate of
incorporation or bylaws of the Company; or any contract
provision, license, franchise or permit to which Company is a
party or by which it is bound; or any law, statute or
regulation or any injunction, order or decree of any government
agency or authority or court to which the Company is subject
except to the extent, in each case, that such a violation would
not prohibit or materially impair the Company's ability to
perform its obligations under this Agreement.
Section
Capitalization of Company.
The authorized capital stock of Company consists of
500,000 shares of no par, common stock of which 200,000 shares
are outstanding. The Majority Shareholders and the ESOP are the
only shareholders of the Company and respectively own,
beneficially and of record, that certain number of shares set
forth in Schedule 3.2, free and clear of any Encumbrances. The
Company Shares are duly authorized, validly issued, fully paid
and nonassessable. There are no outstanding options, warrants
or other rights to subscribe for or purchase from the Company,
or any plans, contracts, or commitments providing for the
issuance of, or the granting of rights to acquire, any capital
stock of the Company or securities convertible into or
exchangeable for capital stock of the Company and there are no
shares of capital stock reserved for issuance by the Company.
There are no unsatisfied preemptive rights in respect of capital
stock of the Company. Immediately after the sale of the Company
Shares by the Majority Shareholders and the ESOP pursuant to
this Agreement, upon the registration of the Company Shares in
the name of Buyer in the stock records of the Company and
assuming that Buyer does not have any "notice" of any "adverse
claim" to the Company Shares (as such terms are defined in the
UCC), Buyer shall be a "protected purchaser" (as such term is
defined in the UCC).
Section
Financial Statements.
Company or the Majority Shareholders have heretofore
furnished to Buyer copies of the following financial statements:
unaudited balance sheets of the Company as at October 31 in
each of the years 1994 through 1998, and the related unaudited
statements of income, changes in stockholders' equity, and cash
flow for each of the fiscal years then ended, and an
unaudited balance sheet of the Company as at April 30, 1999 and
the related unaudited statements of income, changes in
stockholders' equity, and cash flow for the six (6) months then
ended, including in each case the notes thereto (the "Interim
Financial Statements"; all of those items in (a) and (b) above
are referred to herein collectively as the "Financial
Statements"). The Financial Statements represent actual, bona
fide transactions and have been prepared in conformity with GAAP
applied on a consistent basis (except for changes, if any,
required by GAAP and disclosed therein), and the results of
operations, changes in stockholders' equity and cash flows of
the Company for such periods are consistent with the books and
records of the Company and do not contain any items of special
or non-recurring nature. Such Financial Statements fairly
present in all material respects the financial position of the
Company as at the respective date thereof and the results of
operations and cash flows of the Company for the periods then
ended.
Section
Absence of Certain Changes, Events or Liabilities.
Except as set forth on Schedule 3.4(a), since
April 30, 1999, and restated again through the Closing Date, the
Company has not:
issued, sold, purchased or redeemed any
stock, bonds, debentures, notes or other corporate securities,
or issued, sold or granted any option, warrant or right to
acquire any thereof;
waived or released any debts, claims or
rights of value or suffered any extraordinary loss or written
down the value of any inventories or other assets or written
down or off any receivable in excess of the amounts reflected in
the Interim Financial Statements;
except as reflected in the Interim
Financial Statements, made any capital expenditures or capital
commitments in excess of $20,000 for any single transaction or
any series of related transactions or in excess of $50,000 in
the aggregate;
made any change in the business or
operations or the manner of conducting business or operations of
the Company, other than changes in the ordinary course of
business, none of which has, and which in the aggregate have not
had, a Material Adverse Effect;
terminated, placed on probation,
disciplined, or warned any officer or supervisory employee of
the Company;
experienced any resignations of, or had any
disputes involving the employment or agency relationship with
any of, the employees or agents of the Company which could have
a Material Adverse Effect;
suffered any casualty, damage, destruction
or loss to any of its assets or properties in excess of $25,000
for any one event or in excess of $100,000 in the aggregate;
declared, set aside or paid any dividends
or distributions in respect of the Company Shares (except as
reflected on the Interim Financial Statements);
paid or obligated itself to pay any bonuses
or extraordinary compensation to, or made any increase (except
increases in the ordinary course of business) in the
compensation payable (or to become payable by it) to, any of its
directors, officers, employees, agents or other representatives
of the Company (except as reflected on the Interim Financial
Statements);
terminated or amended or suffered the
termination or amendment of any contract, lease, agreement,
license or other instrument to which it is or was a party which
could have a Material Adverse Effect;
adopted, modified or amended any plan or
agreement so as to increase the benefits due the employees of
the Company under any such plan or agreement;
made any loan or advance to any person
(except a normal travel or other reasonable expense advance to
its officers and employees);
suffered a Material Adverse Effect;
subjected any of its assets or properties to any Encumbrances;
paid any funds to any of its officers or
directors, or to any family member of any of them, or any person
in which any of the foregoing has any direct or indirect
interest, except for the payment of installments of annual
salaries reflected on the Interim Financial Statements;
disposed of or agreed to dispose of any of
its properties or assets other than in the ordinary course of
business;
entered into any transactions other than in
the ordinary course of business;
made any change in accounting principles,
methods or practices;
entered into any agreement, contract, lease
or license (or series of related agreements, contracts, leases
or licenses) involving more than $25,000 or made outside the
ordinary course of business;
delayed or postponed the payment of any
accounts payable and other liabilities outside the ordinary
course of business;
been a party to any other occurrence,
event, action, failure to act, or transaction outside the
ordinary course of business involving the Company; or
entered into any agreement or commitment
(whether or not in writing) to do any of the above; and
Except as set forth on Schedule 3.4(b), since
April 30, 1999, and restated again through the Closing Date, the
Company has:
used its reasonable best efforts to
preserve the business and organization of the Company, and to
keep available, without entering into any binding agreement, the
services of the Company's employees, and to preserve the
goodwill of the Company's customers and others having business
relationships with the Company; and
continued its business and maintained its
operations and equipment, books of account, records and files in
the ordinary course of business.
Except as set forth on Schedule 3.4(c), the
Company does not have any liabilities of a material nature of
the type required to be reflected as liabilities on a balance
sheet prepared in accordance with GAAP, whether known or
unknown, accrued or unaccrued, absolute or contingent or
otherwise, except such liabilities that are reflected or
disclosed in the financial statements referred to in Section
3.3, were incurred after April 30, 1999 in the ordinary
course of business or the existence of which would not
reasonably be expected to have a Material Adverse Effect.
Section
Litigation.
Except as set forth in Schedule 3.5, there are no
actions, suits, proceedings or investigations pending or, to the
best of the Company's and the Majority Shareholders' knowledge,
overtly threatened against Company at law, in equity or
otherwise in, before, or by, any court or governmental agency or
authority which individually or in the aggregate would
reasonably be expected to have a Material Adverse Effect.
Section
Compliance with Law; Permits.
To the best of the Company's and the Majority
Shareholders' knowledge, the Company has conducted its business
in compliance with the requirements of all applicable laws,
rules, regulations and orders of any governmental authority,
noncompliance with which would have a Material Adverse Effect.
To the best of the Company's and the Majority
Shareholders' knowledge, the Company has all permits,
governmental licenses, registrations and approvals necessary or
required by law or rules or regulations of any governmental
entity having jurisdiction over the Company to carry on its
business as presently conducted, except for such permits,
governmental licenses, registrations and approvals the lack of
which has not had and will not have a Material Adverse Effect.
Section
Consents and Approvals.
Except as set forth in Schedule 3.7, the execution,
delivery and performance of this Agreement by Seller will not
require any consent, waiver, authorization or approval of, or
the making of any filing with or giving of notice to, any
person, entity or governmental authority (other than as required
under the HSR Act), except for such consents, waivers,
authorizations or approvals which if not obtained would not
reasonably be expected to have a Material Adverse Effect.
Section
Tax Matters.
The Company or the Majority Shareholders have provided
true and complete copy of the Company's income tax return filed
for the period ending October 31, 1998. To the best of the
Company's and the Majority Shareholders' knowledge, except as
set forth in Schedule 3.8, all Tax Returns that are required
to be filed on or before the Closing Date by or with respect to
the Company have been filed, all Taxes shown to be due on
the Tax Returns referred to in clause (i) have been paid in
full, any deficiencies asserted or assessments made as a
result of any examinations of the Tax Returns referred to in
clause (i) by the IRS or the relevant state, local or foreign
taxing authority have been paid in full, no issues that
have been raised by the relevant taxing authority in connection
with any such examination of any of the Tax Returns referred to
in clause (i) are currently pending, and no waivers of
statutes of limitations have been given or requested by or with
respect to any Taxes of the Company.
Section
Material Contracts.
Schedule 3.9 lists all contracts or arrangements of
the Company which obligate the Company to pay more than $50,000
in any fiscal year or entitle the Company to receive more than
$50,000 in any fiscal year, in each case including arrangements
under which the Company would be obligated to purchase or sell
pursuant to a purchase order; financing documents, loan
agreements, capital leases or agreements providing for the
guaranty of such obligations of any party other than the Company
(in each case in excess of $50,000); distributorship, dealer
or sales representative agreements or other agreements of the
Company resulting in the marketing of products or services which
individually involved the distribution of more than $50,000 of
products or services in fiscal 1998 or the payment of more than
$50,000 in commissions in fiscal 1998, respectively, or may be
reasonably expected to do so in fiscal 1999; and employment
or consulting contracts pursuant to which the Company paid more
than $50,000 in fiscal 1998, or may be reasonably expected to do
so in fiscal 1999, or which include change in control provisions
(all of the foregoing are collectively referred to herein as the
"Material Contracts"). The Company is not in default under, or
in violation of, any Material Contract, except to the extent
such violation or default would not reasonably be expected to
have a Material Adverse Effect. True, correct and complete
copies of all of the Material Contracts have been made available
to Buyer.
Section
Labor Matters.
The Company is in compliance in all material respects
with all applicable federal and state laws respecting employment
and employment practices, terms and conditions of employment,
wages and hours, and is not engaged in any unfair labor or
employment practice. Except as set forth in Schedule 3.10
there is no: (a) unlawful employment practice discrimination
charge pending before the Equal Employment Opportunity
Commission (the "EEOC") or any EEOC recognized state "referral
agency" or, to the best of Company's and the Majority
Shareholders' knowledge, threatened against or involving or
affecting the Company; (b) unfair labor practice charge or
complaint against the Company pending before the National Labor
Relations Board (the "NLRB") or, to the best of Company's and
the Majority Shareholders' knowledge, threatened against or
involving or affecting the Company; (c) labor strike, dispute,
slow down or stoppage actually pending or, to the best of
Company's and the Majority Shareholders' knowledge, threatened
against or involving or affecting the Company and no NLRB
representation question exists respecting any of the employees
of the Company; (d) grievance or arbitration proceeding pending
and no written claim therefor exists; or (e) collective
bargaining agreement that is binding on the Company. To the
best of Company's and the Majority Shareholders' knowledge, no
organizational efforts are presently being made involving any of
the Company's employees and, for the past five years, none have
been made. No union or other collective bargaining unit has
been certified or recognized by the Company as representing any
of the Company's employees during the past five years. During
the past five years, no union or collective bargaining unit has
sought such certification or recognition, and, to the best of
Company's and the Majority Shareholders' knowledge, no union or
collective bargaining unit is seeking or currently contemplating
seeking such certification or recognition.
Section
Benefit Plans.
Schedule 3.11 lists each "employee benefit pension
plan", as such term is defined in Section 3(2) of ERISA (a
"Pension Plan"), and each "employee welfare benefit plan", as
such term is defined in Section 3(1) of ERISA (together with the
Pension Plans, the "Benefit Plans"), which is maintained by or
contributed to by the Company and which is subject to ERISA.
Each Benefit Plan has been from its inception and remains in
compliance in all material respects with such Plan's terms and,
where applicable, with ERISA and the Code.
Except for the ESOP and as set forth in Schedule
3.11, the Company has no incentive compensation, bonus, deferred
compensation, stock option, stock ownership, stock bonus, stock
purchase, savings, retirement, pension, profit-sharing,
severance or other similar plan or arrangement with or for the
benefit of any officer or employee.
Each Pension Plan that is intended to be qualified
under Section 401(a) of the Code has received a favorable
determination letter from the IRS that it is a qualified plan
for purposes of Section 401(a) of the Code, and there has been
no amendment to any Pension Plan subsequent to the determination
letter which would reasonably be expected to materially
adversely affect such Plan's qualified status. To the best of
the Company's and the Majority Shareholders' knowledge, nothing
has occurred during the administration of the ESOP or any other
Pension Plan that would materially adversely affect such Plan's
qualified status.
All contributions required to be made to any
Benefit Plan have been timely made or reflected in the Financial
Statements in all material respects. No Pension Plan has an
"accumulated funding deficiency", as such term is defined in
Section 302 of ERISA and Section 412 of the Code (whether or not
waived).
The Company has not incurred any liability to the
Pension Benefit Guaranty Corporation under Title IV of ERISA,
other than for the payment of premiums, if any, all of which
have been paid when due.
The Company has never contributed or been required
to contribute to any "multiemployer plan", as such term is
defined in Section 3(37) of ERISA.
The Company has not engaged in any "prohibited
transaction", as such term is defined in Section 4975 of the
Code, or a transaction prohibited by Section 406 of ERISA, for
which a statutory or administrative exemption is not available
and that would result in a material tax or a material penalty
under Section 4975 of the Code or Section 502(i) of ERISA.
Section
Environmental Matters.
To the best of the Company's and the Majority
Shareholders' knowledge, except as set forth in Schedule 3.12:
(a) the Company is in compliance with all applicable federal,
state, foreign and local laws and regulations relating to
pollution or protection of human health or the environment
(including, without limitation, ambient air, surface water,
ground water, land surface or sub-surface strata) (collectively,
"Environmental Laws"), except for instances of non-compliance
that individually or in the aggregate do not, and would not
reasonably be expected to, have a Material Adverse Effect; (b)
the Company has not received written notice of and is not the
subject of, any actions, causes of actions, claims,
investigations, demands or notices by any person or entity
alleging liability or non-compliance with any Environmental Law;
(c) there are no conditions existing which would reasonably be
expected to form the basis of a claim against the Company for
the violation or non-compliance with any Environmental Law which
would have a Material Adverse Effect; and (d) there are no
circumstances which would reasonably be expected to prevent or
interfere in the future with the Company's material compliance
with all Environmental Laws.
Section
Brokers and Finders.
The Company has not employed any broker, finder,
consultant or intermediary in connection with the transactions
contemplated by this Agreement who would be entitled to a
broker's, finder's or similar fee or commission in connection
therewith or upon the consummation thereof.
Section
Tangible Assets.
The Company has valid leasehold interests in (in the
case of leasehold interests in real or personal property), or
good and marketable title to (in the case of all other
personal property), all of their respective properties and
assets reflected in the Financial Statements free and clear of
all liens, security interests and other encumbrances, except
liens, security interests and other encumbrances that: are
reflected in the Financial Statements, are not material in
amount, are incurred or made in the ordinary course of
business and which do not materially adversely impair the
usefulness of such properties or assets in the conduct of the
business of the Company; constitute statutory liens of
landlords, carriers, warehousemen, mechanics, repairman, workmen
and materialmen and other liens imposed by law, in each case in
the ordinary course of business; are liens for taxes,
assessments, water or sewer rents or governmental charges or
claims which are not yet delinquent or can be paid without
penalty or are being contested in good faith and by appropriate
proceedings; are covenants, easements, rights of ways,
restrictions, encroachments and other imperfections or defects
in title, in each
case which do not interfere in any material respect with the
ordinary conduct of the business of the Company or result in a
material diminution in value of such assets; or are set
forth on Schedule 3.14.
Section
Intangible Assets.
The Company owns, or holds adequate licenses or other
rights to use, all trademarks, service marks, tradenames,
copyrighted material, patents, and other intangible personal
property (including the tradenames set forth on Schedule 3.15)
necessary to the conduct of its business as presently conducted,
and such use does not infringe or violate any rights of any
third parties.
Section
Employees.
Schedule 3.16 is a true and complete list of all
officers and employees of the Company including the amount of
the current annual salary or hourly rate, date of birth, job
title, vacation accrued, along with a description of any
commitments to such officers and employees with respect to
compensation payable hereafter. The Company has not, because of
past practices or previous commitments with respect to the
Company's officers or employees, established any rights or
expectations on the part of such officers or employees to
receive additional compensation inconsistent with past practices
with respect to any period after the date hereof. Except as set
forth in Schedule 3.16, none of the Company's officers or
employees has given notice to the Company that he or she intends
to leave the Company's employment. Except as set forth on the
schedule, the Company has no reason to believe that any of the
Company's officers or employees shall leave such employment.
Set forth on Schedule 3.16 is a description of all claims made
against the Company by officers or employees of the Company
within the last twelve (12) months.
Except as set forth in Schedule 3.16, the Company
is not a party to or bound by any oral or written:
employee collective bargaining agreement,
employment agreement (other than employment agreements
terminable by the Company without premium or penalty on notice
of thirty (30) days or less under which the only monetary
obligation of the Company is to make current wage or salary
payments and provide current employee benefits), consulting,
advisory or service agreement, deferred compensation agreement,
confidentiality agreement or covenant not to compete; or
contract or agreement with any officer or
employee (other than employment agreements disclosed in response
to clause (i) or excluded from the scope of clause (i)), agent,
or attorney in fact of the Company; or
obligation to provide, presently or in the
future, retiree medical insurance coverage, retiree life
insurance coverage, and other benefits for retired employees or
directors of the Company, or their dependents.
No officer, employee or director of the Company is
a party to, or is otherwise bound by, any agreement or
arrangement, including any confidentiality, noncompetition, or
proprietary rights agreement, between such officer, employee or
director and any other Person that in any way has or will have a
Material Adverse Effect.
Section
Insurance.
At least ten (10) days prior to the Closing, the
following information will have been provided by the Company
with respect to each insurance policy (including policies
providing property, casualty, liability, and workers'
compensation coverage and bond and surety arrangements) to which
the Company has been a party, a named insured, or otherwise the
beneficiary of coverage at any time within the past three (3)
years:
the name, address, and telephone number of the
agent;
the name of the insurer, the name of the
policyholder, and the name of each covered insured;
the policy number and the period of coverage;
the scope (including an indication of whether the
coverage was on a claims made, occurrence, or other basis) and
amount (including a description of how deductibles and ceilings
are calculated and operate) of coverage; and
description of any retroactive premium adjustments
or other loss sharing arrangements.
With respect to each such insurance policy which is in
force as of the Closing: (1) the policy is legal, valid,
binding, enforceable, and in full force and effect; (2) the
policy shall continue to be legal, valid, binding, enforceable,
and in full force and effect on identical terms following the
consummation of the contemplated transactions under this
Agreement; (3) to the best of Company's and the Majority
Shareholders' knowledge, the policy has been issued by an
insurer that is financially sound and reputable; (4) the Company
is not in breach or default (including with respect to the
payment of premiums or the giving of notices), and to the best
of Company's and the Majority Shareholders' knowledge, no event
has occurred which, with notice or the lapse of time, would
constitute such a breach or default, or permit termination,
modification, or acceleration, under the policy; (5) the policy
does not provide for any retrospective premium adjustment or
other experience-based liability on the part of the Company; (6)
to the best of Company's and the Majority Shareholders'
knowledge, the policies collectively provide adequate insurance
coverage for the assets and the operations of the Company; and
(7) to the best of Company's and the Majority Shareholders'
knowledge, no party to the policy has repudiated any provision
thereof. To the best of Company's and the Majority
Shareholders' knowledge, the Company has been covered during the
past five (5) years by insurance in scope and amount customary
and reasonable for the businesses in which it has engaged during
the aforementioned period.
Section
Inventory.
All inventory of the Company, whether or not reflected in
the Interim Financial Statements, consists of a quality and
quantity usable and salable in the ordinary course of business,
except for obsolete items and items of below-standard quality
which have been written off or written down to net realizable
value in the Interim Financial Statements. All inventories not
written off have been priced at the lower of average cost or net
realizable value. To the best of Company's and the Majority
Shareholders' knowledge, the quantities of each item of
inventory (whether raw materials, work-in-process, or finished
goods) are not excessive, but are reasonable in the present
circumstances of the Company. The Company has maintained no
reserve for inventory obsolescence. Except as set forth in
Schedule 3.14, no items included in the inventories are pledged
as collateral or held by the Company on consignment from
another.
Section
Year 2000 Compliance.
Except as set forth in Schedule 3.19, to the best of
Company's and the Majority Shareholders' knowledge, the computer
software, computer firmware, computer hardware (whether general
or specific purpose), and other similar or related items of
automated, computerized, and/or software system(s) that are used
or relied on, or have been purchased to be used and relied on,
by the Company in the conduct of its business (collectively,
"Information Technology") is designed to be used prior to,
during, and after the calendar year 2000 A.D., and the
Information Technology used during each such time period will
accurately receive, provide and process date/time data
(including, but not limited to, calculating, comparing and
sequencing) from, into and between the twentieth and twenty-
first centuries, including the years 1999 and 2000, and leap
year calculations and will not malfunction, cease to function,
or provide invalid or incorrect results as a result of date/time
data, to the extent that other Information Technology, used in
combination with the Information Technology of the Company,
properly exchanges data/time data with it.
Section
Completeness of Statements; Effect of Representations and Warranties.
To the best of Company's and the Majority Shareholders'
knowledge, no representation or warranty of the Company or the
Majority Shareholders in the Agreement contains any untrue
statement of a material fact, omits any material fact necessary
to make such representation or warranty, under the circumstances
which it was made, not misleading, or contains any misstatement
of a material fact. The Company and the Majority Shareholders
have made due inquiry and investigation concerning the matters
to which the representations and warranties of the Company and
the Majority Shareholders under this Agreement pertain and
neither the Company nor the Majority Shareholders know of any
facts, events or circumstances which have not been disclosed to
Buyer which are material to the Company or its business.
ARTICLE : REPRESENTATIONS AND WARRANTIES OF SIMCO AND THE
MAJORITY SHAREHOLDERS
SIMCO and the Majority Shareholders jointly and severally
represent and warrant to Buyer as follows:
Section
Organization and Authority of SIMCO.
SIMCO has been duly organized, is validly existing and is
in good standing as a limited liability company under the laws
of its jurisdiction of organization, with all necessary power,
capacity and authority to enter into this Agreement and perform
its obligations hereunder. This Agreement has been duly
authorized, executed and delivered by SIMCO and constitutes a
legal, valid and binding obligation of SIMCO, enforceable in
accordance with its terms, except as enforcement may be limited
by bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws affecting creditors' rights
generally and to general principles of equity. No other
proceedings on the part of SIMCO are necessary to authorize this
Agreement and the consummation of transactions contemplated
hereby. Neither the execution and delivery of this Agreement nor
compliance by SIMCO with its terms and provisions will violate
any provision of the articles of organization or operating
agreement of SIMCO; or any contract provision, license,
franchise or permit to which SIMCO is a party or by which it is
bound; or any law, statute or regulation or any injunction,
order or decree of any government agency or authority or court
to which SIMCO is subject except to the extent, in each case,
that such a violation would not prohibit or materially impair
SIMCO's ability to perform its obligations under this Agreement.
Section
Brokers and Finders.
SIMCO has not employed any broker, finder, consultant or
intermediary in connection with the transactions contemplated by
this Agreement who would be entitled to a broker's, finder's or
similar fee or commission in connection therewith or upon the
consummation thereof
Section
Real Property.
The attached Schedule 4.3 lists and describes briefly the
particular parcels of the Premises that are owned by SIMCO (the
"SIMCO Premises"). With respect to each such parcel of real
property comprising the SIMCO Premises:
SIMCO has good and marketable title to the parcel
of real property, free and clear of any Encumbrances, except as
set forth on Schedule 4.3, except for installments of special
assessments not yet delinquent and recorded easements,
covenants, and other restrictions, none of which individually or
together impair the current use, occupancy, value or
marketability of title of the property subject thereto;
there are no pending, or to the best of SIMCO's
and the Majority Shareholders' knowledge, threatened,
condemnation proceedings relating to the property or other
matters affecting the current use, occupancy, or value thereof;
the legal description for the parcel contained in
the deed thereof describes such parcel fully and adequately, the
buildings and improvements are located within the boundary lines
of the described parcels of land, are not in violation of
applicable setback requirements, zoning laws, and ordinances
(and none of the properties or buildings or improvements thereon
are subject to "permitted nonconforming use" or "permitted
nonconforming structure" classifications), and do not encroach
on any easement which may burden the land, and the land does not
serve any adjoining property for any purpose inconsistent with
the use of the land, and the property is not located within any
flood plain or subject to any similar type restriction for which
any permits or licenses necessary to the use thereof have not
been obtained;
all properties and facilities have received all
licenses, permits, consents, titles or registrations required in
connection with the ownership or operation thereof and have been
operated and maintained in accordance with all applicable
federal, state, local, municipal, foreign, international,
multinational or other administrative orders, constitutions,
laws, ordinances, principles of common law, regulations,
statutes or treaties;
except as set forth in Schedule 4.3, there are no
leases, subleases, licenses, concessions, or other agreements,
written or oral, granting to any party or parties the right of
use or occupancy of any portion of the parcel of real property;
there are no outstanding options or rights of
first refusal to purchase the parcel of real property, or any
portion thereof or interest therein;
there are no parties (other than SIMCO) in
possession of the parcel of real property, other than tenants
under any leases disclosed in the schedule who are in possession
of space to which they are entitled;
all facilities located on the parcel of real
property are supplied with or have access to utilities and other
services necessary for the operation of such facilities,
including gas, electricity, water, telephone, and sanitary
sewer, all of which services are adequate in accordance with all
applicable laws, ordinances, rules, and regulations and are
provided via public roads or via permanent, irrevocable,
appurtenant easements benefiting the parcel of real property;
and
each parcel of real property abuts on and has
direct vehicular access to a public road, or has access to a
public road via a permanent, irrevocable, appurtenant easement
benefiting the parcel of real property, and access to the
property is provided by paved public right-of-way with adequate
curb cuts available.
Section
Environmental Matters.
To the best of SIMCO's and the Majority Shareholders'
knowledge, except as set forth in Schedule 4.4, with respect to
the SIMCO Premises: (a) SIMCO is in compliance with all
applicable Environmental Laws, except for instances of
non-compliance that individually or in the aggregate do not, and
would not reasonably be expected to, have a Material Adverse
Effect; (b) SIMCO has not received written notice of and is not
the subject of, any actions, causes of actions, claims,
investigations, demands or notices by any person or entity
alleging liability or non-compliance with any Environmental Law;
(c) there are no conditions existing which would reasonably be
expected to form the basis of a claim against SIMCO for the
violation or non-compliance with any Environmental Law which
would have a Material Adverse Effect; and (d) there are no
circumstances which would reasonably be expected to prevent or
interfere in the future with the Company's material compliance
with all Environmental Laws.
Section
Legal Proceedings.
Except as set forth in Section 4.5, there are no actions,
suits, proceedings or investigations pending or, to the best of
SIMCO's and the Majority Shareholders' knowledge, overtly
threatened against SIMCO at law, in equity or otherwise in,
before, or by, any court or governmental agency or authority
which individually or in the aggregate would reasonably be
expected to have a Material Adverse Effect.
Section
Consents and Approvals.
Except as set forth in Schedule 4.6 annexed hereto, the
execution, delivery and performance of this Agreement by SIMCO
will not require any consent, waiver, authorization or approval
of, or the making of any filing with or giving of notice to, any
Person, entity or governmental authority (other than as required
under the HSR Act), except for such consent, waivers,
authorizations or approvals which the failure to obtain would
not reasonably be expected to have a Material Adverse Effect.
Section
Completeness of Statements; Effect of
Representations and Warranties.
To the best of SIMCO's and the Majority Shareholders'
knowledge, no representation or warranty of SIMCO or the
Majority Shareholders in the Agreement contains any untrue
statement of a material fact, omits any material fact necessary
to make such representation or warranty, under the circumstances
which it was made, not misleading, or contains any misstatement
of a material fact. SIMCO and the Majority Shareholders have
made due inquiry and investigation concerning the matters to
which the representations and warranties of SIMCO and the
Majority Shareholders under this Agreement pertain and SIMCO and
the Majority Shareholders do not know of any facts, events or
circumstances which have not been disclosed to Buyer which are
material to SIMCO or the SIMCO Premises.
ARTICLE : REPRESENTATIONS AND WARRANTIES OF THE MAJORITY SHAREHOLDERS
The Majority Shareholders jointly and severally represent
and warrant to Buyer as follows:
Section
Brokers and Finders.
No Shareholder has employed any broker, finder,
consultant or intermediary in connection with the transactions
contemplated by this Agreement who would be entitled to a
broker's, finder's or similar fee or commission in connection
therewith or upon the consummation thereof
Section
Real Property.
The attached Schedule 5.2 lists and describes briefly the
particular parcels of the Premises that are owned by Neil
Schmidgall (the "Schmidgall Premises"). With respect to each
such parcel of real property comprising the Schmidgall Premises:
Neil Schmidgall has good and marketable title to
the parcel of real property, free and clear of any Encumbrances,
except as set forth on Schedule 5.2, except for installments of
special assessments not yet delinquent and recorded easements,
covenants, and other restrictions, none of which individually or
together impair the current use, occupancy, value or
marketability of title of the property subject thereto;
there are no pending, or to the best of the
Majority Shareholders' knowledge, threatened, condemnation
proceedings relating to the property or other matters affecting
the current use, occupancy, or value thereof;
the legal description for the parcel contained in
the deed thereof describes such parcel fully and adequately, the
buildings and improvements are located within the boundary lines
of the described parcels of land, are not in violation of
applicable setback requirements, zoning laws, and ordinances
(and none of the properties or buildings or improvements thereon
are subject to "permitted nonconforming use" or "permitted
nonconforming structure" classifications), and do not encroach
on any easement which may burden the land, and the land does not
serve any adjoining property for any purpose inconsistent with
the use of the land, and the property is not located within any
flood plain or subject to any similar type restriction for which
any permits or licenses necessary to the use thereof have not
been obtained;
all properties and facilities have received all
licenses, permits, consents, titles or registrations required in
connection with the ownership or operation thereof and have been
operated and maintained in accordance with all applicable
federal, state, local, municipal, foreign, international,
multinational or other administrative orders, constitutions,
laws, ordinances, principles of common law, regulations,
statutes or treaties;
except as set forth in Schedule 5.2, there are no
leases, subleases, licenses, concessions, or other agreements,
written or oral, granting to any party or parties the right of
use or occupancy of any portion of the parcel of real property;
there are no outstanding options or rights of
first refusal to purchase the parcel of real property, or any
portion thereof or interest therein;
there are no parties (other than Neil Schmidgall)
in possession of the parcel of real property, other than tenants
under any leases disclosed in the schedule who are in possession
of space to which they are entitled;
all facilities located on the parcel of real
property are supplied with or have access to utilities and other
services necessary for the operation of such facilities,
including gas, electricity, water, telephone, and sanitary
sewer, all of which services are adequate in accordance with all
applicable laws, ordinances, rules, and regulations and are
provided via public roads or via permanent, irrevocable,
appurtenant easements benefiting the parcel of real property;
and
each parcel of real property abuts on and has
direct vehicular access to a public road, or has access to a
public road via a permanent, irrevocable, appurtenant easement
benefiting the parcel of real property, and access to the
property is provided by paved public right-of-way with adequate
curb cuts available.
Section
Environmental Matters.
To the best of the Majority Shareholders' knowledge,
except as set forth in Schedule 5.3, with respect to the
Schmidgall Premises: (a) Neil Schmidgall is in compliance with
all applicable Environmental Laws, except for instances of
non-compliance that individually or in the aggregate does not,
and would not reasonably be expected to, have a Material Adverse
Effect; (b) Neil Schmidgall has not received written notice of
and is not the subject of, any actions, causes of actions,
claims, investigations, demands or notices by any person or
entity alleging liability or non-compliance with any
Environmental Law; (c) there are no conditions existing which
would reasonably be expected to form the basis of a claim
against Neil Schmidgall for the violation or non-compliance with
any Environmental Law which would have a Material Adverse
Effect; and (d) there are no circumstances which would
reasonably be expected to prevent or interfere in the future
with the Company's material compliance with all Environmental
Laws.
Section
Legal Proceedings.
Except as set forth in Schedule 4.5, there are no
actions, suits, proceedings or investigations pending or, to the
best of Neil Schmidgall's and the other Majority Shareholders'
knowledge, overtly threatened against Neil Schmidgall at law, in
equity or otherwise in, before, or by, any court or governmental
agency or authority which individually or in the aggregate would
reasonably be expected to have a Material Adverse Effect.
Section
Consents and Approvals.
Except as set forth in Schedule 5.5 annexed hereto, the
execution, delivery and performance of this Agreement by Neil
Schmidgall will not require any consent, waiver, authorization
or approval of, or the making of any filing with or giving of
notice to, any Person, entity or governmental authority (other
than as required under the HSR Act), except for such consent,
waivers, authorizations or approvals which the failure to obtain
would not reasonably be expected to have a Material Adverse
Effect.
Section
Section 1031 Exchange.
At or prior to Closing, Neil E. Schmidgall may enter into
a Section 1031 exchange agreement for exchange of the Schmidgall
Premises for other qualified property. The exchange shall be
made pursuant to Section 1031 of the Internal Revenue Code (a
"Section 1031 Exchange") and may take place simultaneously with
the Closing or as a deferred exchange in accordance with
Internal Revenue Code Section 1031 and the governing Treasury
Regulations. Buyer agrees to cooperate with Neil E. Schmidgall
in effecting the exchange, including: (i) execution of such
documentation as shall be reasonably necessary to accomplish the
Section 1031 Exchange; and (ii) accepting a conveyance of the
Schmidgall Premises in accordance with the exchange agreement.
Buyer's obligations under this Section 5.6 shall be specifically
conditioned upon Buyer not incurring any excess costs and
expenses in participating in the Section 1031 Exchange. Buyer's
excess costs and expenses shall be defined as those additional
costs and expenses which may be incurred with regard to the
acceptance of the conveyance of the Schmidgall Premises in
excess of those costs and expenses that would have been incurred
in accepting conveyance of the Schmidgall Premises directly from
Neil E. Schmidgall in accordance with the terms of the Agreement
but for the Section 1031 Exchange. Notwithstanding the
foregoing, upon payment of the Real Estate Consideration, Buyer
will acquire the Schmidgall Premises without condition. In
addition, Buyer (i) makes no and shall not make any
representation whatsoever concerning the tax qualification or
implication of the Section 1031 Exchange and (ii) shall not be
required to acquire title to any other property other than the
Schmidgall Premises.
Section
Completeness of Statements; Effect of Representations and Warranties.
To the best of the Majority Shareholders' knowledge, no
representation or warranty of the Majority Shareholders in the
Agreement contains any untrue statement of a material fact,
omits any material fact necessary to make such representation or
warranty, under the circumstances which it was made, not
misleading, or contains any misstatement of a material fact.
The Majority Shareholders have made due inquiry and
investigation concerning the matters to which the
representations and warranties of the Majority Shareholders
under this Agreement pertain and the Majority Shareholders do
not know of any facts, events or circumstances which have not
been disclosed to Buyer which are material to the Schmidgall
Premises.
ARTICLE : REPRESENTATIONS AND WARRANTIES OF THE ESOP AND
THE MAJORITY SHAREHOLDERS
The ESOP and the Majority Shareholders jointly and
severally represent and warrant to Buyer as follows:
Section
Authority of the ESOP.
This Agreement has been duly authorized, executed and
delivered by the ESOP and constitutes a legal, valid and binding
obligation of the ESOP, enforceable in accordance with its
terms, except as enforcement may be limited by bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and
similar laws affecting creditors' rights generally and to
general principles of equity. No other proceedings on the part
of the ESOP are necessary to authorize this Agreement and the
consummation of transactions contemplated hereby. Neither the
execution and delivery of this Agreement nor compliance by the
ESOP with its terms and provisions will violate any
provision of the ESOP; or any law, statute or regulation or
any injunction, order or decree of any government agency or
authority or court to which the ESOP is subject except to the
extent, in each case, that such a violation would not have a
Material Adverse Effect.
Section
Brokers and Finders.
The ESOP has not employed any broker, finder, consultant
or intermediary in connection with the transactions contemplated
by this Agreement who would be entitled to a broker's, finder's
or similar fee or commission in connection therewith or upon the
consummation thereof
Section
ESOP Shares.
The ESOP owns, beneficially and of record, the ESOP
Shares free and clear of all Encumbrances. The ESOP Shares are
duly authorized, validly issued, fully paid and nonassessable.
Immediately after the sale of the ESOP Shares by the ESOP
pursuant to this Agreement, upon the registration of the ESOP
Shares in the name of Buyer in the stock records of the Company
and assuming that Buyer does not have any "notice" of any
"adverse claim" to the ESOP Shares (as such terms are defined in
the UCC), Buyer shall be a "protected purchaser" (as such term
is defined in the UCC).
Section
Legal Proceedings.
There are no actions, suits, proceedings or
investigations pending or, to the best of the ESOP's or the
Majority Shareholders' knowledge, overtly threatened against the
ESOP at law, in equity or otherwise in, before, or by, any court
or governmental agency or authority which individually or in the
aggregate would reasonably be expected to have a Material
Adverse Effect.
Section
Consents and Approvals.
The execution, delivery and performance of this Agreement
by the ESOP will not require any consent, waiver, authorization
or approval of, or the making of any filing with or giving of
notice to, any Person, entity or governmental authority (other
than as required under the HSR Act), except for such consent,
waivers, authorizations or approvals which the failure to obtain
would not reasonably be expected to have a Material Adverse
Effect.
Section
No Dissenters' Rights.
The execution, delivery and performance of this Agreement
by the ESOP shall not create any rights for any Person
(including, without limitation, the ESOP, or any participant in
or beneficiary of the ESOP) under Section 302A.471 of the
Business Corporations Chapter of the Minnesota Statutes, or any
similar law or statute.
Section
Completeness of Statements; Effect of Representations and Warranties.
To the best of the ESOP's and the Majority Shareholders'
knowledge, no representation or warranty of the ESOP in the
Agreement contains any untrue statement of a material fact,
omits any material fact necessary to make such representation or
warranty, under the circumstances which it was made, not
misleading, or contains any misstatement of a material fact.
The ESOP and the Majority Shareholders have made due inquiry and
investigation concerning the matters to which the
representations and warranties of the ESOP and the Majority
Shareholders under this Agreement pertain and the ESOP and the
Majority Shareholders do not know of any facts, events or
circumstances which have not been disclosed to Buyer which are
material to the ESOP.
ARTICLE : REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Majority
Shareholders, the Company, the ESOP and SIMCO (the "Sellers") as
follows:
Section
Organization and Authority of Buyer.
Buyer has been duly incorporated and is validly existing
under the laws of Tennessee, with the corporate power and
authority to enter into this Agreement and perform its
obligations hereunder. This Agreement has been duly authorized,
executed and delivered by Buyer and constitutes a legal, valid
and binding obligation of Buyer, enforceable in accordance with
its terms, except as enforcement may be limited by bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and
similar laws affecting creditors' rights generally and to
general principles of equity. No other proceedings on the part
of Buyer are necessary to authorize this Agreement and the
consummation of transactions contemplated hereby. Neither the
execution and delivery of this Agreement nor compliance by Buyer
with its terms and provisions will violate any provision of
the charter or bylaws of Buyer; or any contract provision,
license, franchise or permit to which Buyer is a party or by
which it is bound; or any law, statute or regulation or any
injunction, order or decree of any government agency or
authority or court to which Buyer is subject except to the
extent, in each case, that such a violation would not have a
Material Adverse Effect.
Section
Brokers and Finders.
Buyer has not employed any broker, finder, consultant or
intermediary in connection with the transactions contemplated by
this Agreement who would be entitled to a broker's, finder's or
similar fee or commission in connection therewith or upon the
consummation thereof
Section
Financial Capability.
Buyer has sufficient funds available to purchase the
Company Shares and the Premises on the terms and conditions
contained in this Agreement and will have such funds on the
Closing Date.
Section
Securities Act.
Buyer is acquiring the Company Shares solely for the
purpose of investment and not with a view to, or for sale in
connection with, any distribution thereof in violation of the
Securities Act. Buyer acknowledges that the Company Shares are
not registered under the Securities Act or any applicable state
securities law, and that such Company Shares may not be
transferred or sold except pursuant to the registration
provisions of such Securities Act or pursuant to an applicable
exemption therefrom and pursuant to state securities laws and
regulations as applicable.
Section
Legal Proceedings.
There are no actions, suits, proceedings or
investigations pending or, to Buyer's knowledge, overtly
threatened against Buyer at law, in equity or otherwise in,
before, or by, any court or governmental agency or authority
which individually or in the aggregate would reasonably be
expected to have a Material Adverse Effect.
Section
Consents and Approvals.
Except as set forth in Schedule 7.6, the execution,
delivery and performance of this Agreement by Buyer will not
require any consent, waiver, authorization or approval of, or
the making of any filing with or giving of notice to, any
Person, entity or governmental authority (other than as required
under the HSR Act), except for such consent, waivers,
authorizations or approvals which the failure to obtain would
not have a Material Adverse Effect.
ARTICLE : TAX MATTERS
Section
Tax Indemnification.
Except to the extent disclosed on Schedule 3.8, or
as otherwise provided for in the Financial Statements, the
Majority Shareholders shall be liable for, indemnify and hold
the Buyer harmless against any Taxes imposed on the Company
(including, without limitation, any Taxes imposed on the Company
in connection with any Benefit Plans) or the Premises for any
taxable year or period (or portion thereof) that ends on or
before the Closing Date to the extent such Taxes in the
aggregate exceed the aggregate reserve or accrued amounts for
Taxes shown on the Interim Financial Statements, which shall be
a good faith estimate of such Tax liabilities of the Company as
of the Closing Date, prepared in accordance with GAAP; provided,
however, that the Majority Shareholders shall not be liable for,
and shall not indemnify Buyer or the Company for, any Taxes
resulting from any actual or deemed election pursuant to Section
338 of the Code in connection with the purchase of the Company
Shares. The Majority Shareholders shall be entitled to any
refund of Taxes of the Company that are allocable to such
periods.
Buyer shall be liable for, indemnify and hold the
Majority Shareholders harmless against, any Taxes imposed on the
Company that are allocable or attributable to any taxable year
or period that begins after the Closing Date and, with respect
to any taxable year or period beginning before and ending after
the Closing Date, the portion of such taxable year or period
beginning after the Closing Date. Buyer shall be entitled to any
refund of such Taxes that are allocable to such periods.
For purposes of paragraphs (a) and (b) of this
Section 8.1, in order to apportion appropriately any Taxes
relating to any taxable year or period that begins before and
ends after the Closing Date, the parties hereto shall, to the
extent permitted by applicable law, elect with the relevant
taxing authority to treat for all purposes the Closing Date as
the end of the taxable year of the Company. In any case where
applicable law does not permit the Company to treat the Closing
Date as the end of a taxable year of the Company, then whenever
it is necessary to determine the liability of the Company for
Taxes for a portion of a taxable year or period that begins
before and ends after the Closing Date, the determination of the
Taxes of the Company for the portion of the year or period
ending on, and the portion of the year or period beginning
after, the Closing Date shall be determined by assuming that the
Company had a taxable year or period which ended with the
Closing Date, except that exemptions, allowances or deductions
that are calculated on an annual basis, such as the deduction
for depreciation, shall be apportioned on a time basis.
Section
Tax Returns.
Tax Returns that are required to be filed by or with
respect to the Company shall be filed as follows:
The Majority Shareholders shall file or cause to
be filed when due (taking into account extensions) all Tax
Returns that are required to be filed by or with respect to the
Company for taxable years or periods ending on or before the
Closing Date. Except as otherwise agreed, such Tax Returns
shall be completed in a manner consistent with past practice.
Buyer shall file or cause to be filed when due
(taking into account extensions) all Tax Returns that are
required to be filed by or with respect to the Company for
taxable years or periods ending after the Closing Date. Except
as otherwise agreed, such Tax Returns shall be completed in a
manner consistent with past practice.
Section
Contest Provisions.
Buyer shall promptly notify the Majority Shareholders in
writing upon receipt by Buyer, the Company or any of their
respective Affiliates of notice of any pending or threatened
federal, state, local or foreign audits or assessments which may
materially affect the liabilities for Taxes of the Company for
which the Majority Shareholders would be required to indemnify
Buyer pursuant to Section 8.1; provided that failure to comply
with this provision shall not affect Buyer's right to
indemnification hereunder except to the extent the Majority
Shareholders is prejudiced by such failure. The Majority
Shareholders shall have the right to be represented in any such
audit or administrative or court proceeding relating to taxable
periods for which they may be required to indemnify Buyer
pursuant to Section 8.1, and to employ counsel of their choice
at their expense. Neither Buyer nor Company may agree to settle
any such claim for the portion of a taxable year or period which
may be the subject of indemnification by the Majority
Shareholders under Section 8.1 without the prior written consent
of the Majority Shareholders, which consent shall not be
unreasonably withheld.
Section
Assistance and Cooperation.
After the Closing Date, each of the Majority Shareholders
and Buyer shall:
assist (and cause their respective affiliates to
assist) the other party in preparing any Tax Returns which such
other party is responsible for preparing and filing;
cooperate fully in preparing for any audits of, or
disputes with taxing authorities regarding, any Tax Returns of
the Company;
make available to the other and to any taxing
authority as reasonably requested all information, records, and
documents relating to Taxes of the Company;
provide timely notice to the other in writing of
any pending or threatened tax audits or assessments of the
Company for taxable periods for which the other may have a
liability under Section 8.1; and
furnish the other with copies of all
correspondence received from any taxing authority in connection
with any tax audit or information request with respect to any
such taxable period.
Section
Transfer Taxes.
Buyer shall be liable for any sales, use, stock transfer,
conveyance, intangible, stamp, duty, transfer, reporting,
recording and similar fees, charges and Taxes applicable in
connection with the transfer of the Company Shares or the
Premises, together with any interest or penalties thereon.
Section
Survival of Obligations.
The obligations of the parties set forth in this Article
8 shall remain in effect until the expiration of the applicable
statute of limitations (including any waivers thereof).
ARTICLE : CERTAIN COVENANTS AND AGREEMENTS
Section
Access and Information.
The Sellers shall permit Buyer and its representatives
after the date of execution of this Agreement to have reasonable
access, during regular business hours and upon reasonable
advance notice, to any financial and operating data and other
information that is available with respect to the business and
assets of the Company, the Company Shares and the Premises as
Buyer shall from time to time reasonably request. In the event
of the termination of this Agreement, Buyer shall promptly
deliver (without retaining any copies thereof) to all applicable
parties, or (at such parties' option) certify to such parties
that it has destroyed, all documents, workpapers and other
material obtained by Buyer or on its behalf from the Sellers or
from any of their respective advisors, agents, employees or
representatives as a result hereof or in connection with the
matters contemplated by this Agreement, and all documents,
workpapers and other materials prepared by Buyer or its
advisors, agents, employees or representatives in connection
with the matters contemplated by this Agreement, in each case
whether so obtained or prepared before or after the execution
hereof. Buyer shall at all times prior to the Closing Date, and
in the event of termination of this Agreement, cause any
information so obtained or prepared to be kept confidential and
will not use, or permit the use of, such documents, workpapers
and other materials in its business or in any other manner or
for any other purpose except as contemplated hereby.
Section
Registrations, Filings and Consents.
Prior to the Closing, the Sellers and Buyer shall
cooperate and use their respective best efforts to make all
registrations, filings and applications, to give all notices and
to obtain any governmental or other consents, transfers,
approvals, orders, qualifications and waivers necessary or
desirable for the consummation of the transactions contemplated
hereby.
Section
Conduct of Business.
Prior to the Closing, and except as otherwise
contemplated by this Agreement or consented to or approved by
Buyer, the Majority Shareholders covenant and agree that the
Majority Shareholders shall cause the Company:
To operate its business in the ordinary
course consistent with past practices and to use its
commercially reasonable best efforts to preserve the business
and goodwill of customers and suppliers;
Not to change or amend its articles or
certificates of incorporation or bylaws, issue, sell or
redeem any shares of its capital stock, or issue or sell any
securities convertible into, or options with respect to, or
warrants to purchase or rights to subscribe to, any shares of
its capital stock or enter into any agreement obligating it to
do any of the foregoing, enter into any amendment of any
Material Contract which materially adversely affects the rights
of the Company thereunder or enter into any new, or make
any amendment to any existing, collective bargaining agreement
or Benefit Plan which materially adversely affects the rights of
the Company thereunder, except as required by law, in which case
the Majority Shareholders shall give prompt notice to Buyer; and
Not to make, or enter into any agreement to
make, any acquisition or sale of property or assets (tangible or
intangible) other than in the ordinary course of business
consistent with past practices.
Section
Best Efforts.
Prior to Closing, each of the parties hereto shall use
its commercially reasonable best efforts to fulfill or obtain
the fulfillment of the conditions to Closing, including, without
limitation, the execution and delivery of all agreements or
other documents contemplated hereunder to be so executed and
delivered.
Section
Retention of Books and Records.
After the Closing Date, Buyer shall cause the Company to
retain all books, records and other documents pertaining to the
Company in existence on the Closing Date and to make the same
available after the Closing Date for inspection and copying by
the Majority Shareholders or their agents at such parties'
expense, upon reasonable request and upon reasonable notice, for
a period of three years after the Closing Date. For a period of
five (5) years after the Closing, no such books, records or
documents shall be destroyed by Buyer or the Company without
first advising the Majority Shareholders in writing and giving
the Majority Shareholders a reasonable opportunity to obtain
possession thereof.
Section
Hart-Scott-Rodino.
Each party who is required to do so shall file with the
FTC and the Antitrust Division the notification and report form
(the "Report") required under the HSR Act with respect to the
sale and purchase of the Company Shares and the Premises. Each
such party hereby covenants to prepare and file the Report
required to be filed by it no later than thirty days following
the date hereof, to cooperate with the other parties to the
extent necessary to assist the other party in the preparation of
its Report, to request early termination of the waiting period
required by the HSR Act and, if requested, to promptly amend or
furnish additional information thereunder.
Section
Further Assurances.
At any time after the Closing Date, the Majority
Shareholders and Buyer shall, and Buyer shall cause the Company
to, promptly execute, acknowledge and deliver any other
assurances or documents reasonably requested by Buyer or the
Majority Shareholders, as the case may be, and necessary for
Buyer or the Majority Shareholders, as the case may be, to
satisfy its obligations hereunder.
Section
Environmental Concerns.
Buyer shall have further investigated the environmental
impact of those matters disclosed on Schedule 3.12 (the
"Environmental Concerns") and determined in its reasonable
discretion that no further investigation or remedial efforts are
necessary with respect thereto. If Buyer determines in its
reasonable discretion that further investigation or remedial
efforts are necessary with respect to the Environmental
Concerns, Buyer shall have the right to engage the services of
an environmental consultant to perform further investigation
activities as may be warranted in the reasonable discretion of
Buyer. Company and the Majority Shareholders shall provide
Buyer reasonable access to the Premises for the purpose of
conducting further investigation activities, and Buyer shall use
its best efforts to minimize any disruption to Company's
business operations. The expense of any additional
investigation and remedial activities shall be borne by Buyer.
If Buyer determines in its reasonable discretion that further
investigation or remedial efforts are necessary with respect to
the Environmental Concerns, Buyer shall have the right to
postpone the Closing Date until a date not later than December
31, 1999 by providing notice to Company thereof. If Buyer
determines in its reasonable discretion that further remedial
efforts are necessary with respect to the Environmental
Concerns, Buyer shall provide notice to Company outlining the
remedial efforts that are necessary. Provided, however, that if
Company does not consent to the taking of further remedial
efforts outlined in any notice from Buyer to Company delivered
pursuant to the preceding sentence or if Buyer determines at any
time prior to the Closing Date that the Environmental Concerns
cannot be cured to the reasonable satisfaction of Buyer and
provides notice to Company setting forth the reasons for such
determination, Buyer shall not be obligated to consummate the
purchase of the Company Shares and the Premises at the Closing
as contemplated by this Agreement.
Section
Employee Benefit Matters.
The Majority Shareholders and the Company shall cause the
Superior Industries of Morris, Inc. Employees' Profit Sharing
Plan (the "Profit Sharing Plan") to be terminated no later than
one (1) day preceding the Closing Date; provided, however, that
no distributions shall be made to the Profit Sharing Plan
participants on account of termination until the Company has
obtained a favorable determination letter from the Internal
Revenue Service with respect to such termination. Such
termination shall be effected by adopting Board Resolutions and
a Profit Sharing Plan amendment substantially in the form
attached hereto as Exhibit B. Also, no later than thirty (30)
days following the Closing Date, the Majority Shareholders and
the Company shall (i) cause the ESOP to be terminated; and (ii)
file with the Internal Revenue Service an application to receive
a determination letter with respect to the termination of the
ESOP. No distributions shall be made to ESOP participants on
account of termination until the Company has obtained a
favorable determination letter from the Internal Revenue Service
with respect to such termination.
ARTICLE : CONDITIONS TO THE PURCHASE AND SALE
Section
General Conditions to the Purchase and Sale Relating to Parties.
The obligations of the parties to consummate the sale and
purchase of the Company Shares and the Premises at the Closing
as contemplated by this Agreement shall be subject to the
satisfaction or waiver by the parties on or prior to the Closing
Date of the following conditions:
No action or proceeding shall have been instituted
and remain pending on the Closing Date before any court or
governmental body or authority pertaining to the acquisition by
Buyer of the Company Shares, or the result of which could
prevent or make illegal the consummation of such acquisition.
If applicable, the waiting period required by the
HSR Act, and any extensions thereof obtained by request or other
action of the FTC and/or the Antitrust Division, shall have
expired or been terminated by the FTC and the Antitrust
Division.
Any required consents of third parties disclosed
on Schedule 3.7, Schedule 4.5, Schedule 5.5, Schedule 6.5 and
Schedule 7.6 annexed hereto shall have been obtained.
As of the time of Closing, Company shall have
purchased the airplane presently owned by 73 Charlie Company
(the "Airplane") at its fair market value and on such other
terms as are reasonably acceptable to Buyer and 73 Charlie
Company.
Section
Conditions to Purchase by Buyer.
The obligation of Buyer to consummate the purchase of the
Company Shares and the Premises at the Closing as contemplated
by this Agreement shall be subject to the satisfaction or waiver
by Buyer on or prior to the Closing Date of each of the
following conditions:
Each of the representations and warranties of
the Sellers contained in this Agreement shall be true in all
material respects when made and as of the Closing Date, with the
same effect as though such representations and warranties had
been made on and as of the Closing Date (except representations
and warranties that are made as of a specific date need be true
in all material respects only as of such date); each of the
covenants and agreements of the Sellers in this Agreement to be
performed on or prior to the Closing Date shall have been duly
performed in all material respects; Buyer shall have
received at the Closing a certificate of a duly authorized
officer of the Company as to the satisfaction of the Company's
conditions set forth in clause (i) and clause (ii) of this
Section 10.2, dated as of the Closing Date; Buyer shall
have received at the Closing a certificate of a duly authorized
officers of SIMCO as to the satisfaction of SIMCO's conditions
set forth in clause (i) and clause (ii) of this Section 10.2,
dated as of the Closing Date; and Buyer shall have received
at the Closing a certificate of the duly authorized trustee of
the ESOP as to the satisfaction of the ESOP's conditions set
forth in clause (i) and clause (ii) of this Section 10.2, dated
as of the Closing Date.
During the period from the date hereof to the
Closing Date, no event or condition shall have occurred which
results in a Material Adverse Effect.
Company shall have amended its corporate charter
to permit Buyer to be a shareholder of the Company.
Buyer shall have received certificates
representing the Company Shares duly endorsed in blank for
transfer or accompanied by duly signed stock powers in blank.
Buyer shall have had delivered to it warranty
deeds conveying to the Company good and marketable fee simple
title to the Premises effective as of the Closing Date in form
reasonably acceptable to Buyer.
At least ten (10) days prior to the Closing Date,
Buyer shall have had delivered to it a real estate title
abstract or a commitment for an owner's title insurance policy
in an amount equal to the Real Estate Consideration issued by a
title insurance company acceptable to Buyer covering the
Premises and containing only exceptions which would not
adversely affect the use or marketability of the Premises.
Buyer shall have received a certified copy of
resolutions of the board of directors of the Company approving
the transaction set forth in and execution of this Agreement.
Buyer shall have received a certified copy of
resolutions of the members or Board of Governors, as
appropriate, of SIMCO approving the transactions set forth in
and execution of this Agreement.
The directors of the Company shall have tendered
their written resignations effective as of the Closing Date.
The Company shall have entered into employment
agreements with Paul Schmidgall and Stan Wulf substantially in
the form of Exhibit C attached hereto.
The Company shall have entered into an employment
agreement with Neil Schmidgall substantially in the form of
Exhibit D attached hereto.
Buyer shall have received an opinion from legal
counsel to the Company in form and substance satisfactory to the
Buyer and its counsel.
Buyer shall have receive an opinion from legal
counsel to SIMCO in form and substance satisfactory to Buyer and
its counsel.
Buyer shall have received an opinion from legal
counsel to the ESOP in form and substance satisfactory to the
Buyer and its counsel.
Company shall have entered into agreement(s) with
Wayne Riser providing him with access to the Airplane and
employing him as a pilot on terms reasonably acceptable to the
Buyer.
Buyer shall have received such other documents as
may be reasonably necessary to effect the Closing as anticipated
in this Agreement.
Section Conditions to Sale by Sellers.
The obligation of Sellers to consummate the sale of the
Company Shares and the Premises at the Closing as contemplated
by this Agreement shall be subject to the satisfaction or waiver
by Sellers on or prior to the Closing Date of each of the
following conditions:
Each of the representations and warranties of
Buyer contained in this Agreement shall be true in all material
respects when made and as of the Closing Date, with the same
effect as though such representations and warranties had been
made on and as of the Closing Date (except representations and
warranties that are made as of a specific date need be true in
all material respects only as of such date); each of the
covenants and agreements of Buyer in this Agreement to be
performed on or prior to the Closing Date shall have been duly
performed in all material respects; and Sellers shall have
received at the Closing a certificate of a duly authorized
officer of Buyer as to the satisfaction of the conditions set
forth in clause (i) and clause (ii) of this Section 10.3, dated
as of the Closing Date.
Sellers shall have received certified copies of
resolutions of the executive committee of the board of directors
of the Buyer approving the transaction set forth in and
execution of this Agreement.
The Majority Shareholders and ESOP shall have
received payment of the Share Consideration in their respective
amounts as set forth in Schedule 2.3(a) by wire transfer of
immediately available funds to accounts designated by each party
prior to the Closing.
SIMCO and Neil Schmidgall shall have received
payment of the Real Estate Consideration in their respective
amounts as set forth in Schedule 2.3(b) by wire transfer of
immediately available funds to accounts designated by SIMCO and
Neil Schmidgall prior to Closing.
Sellers shall have received an opinion from legal
counsel to Buyer in form and substance satisfactory to Sellers
and their counsel.
Sellers shall have received such other documents
as may be reasonably necessary to effect the Closing as
anticipated in this Agreement.
ARTICLE : INDEMNIFICATION
Section
Survival; Rights and Remedies Not Affected by Knowledge.
The representations and warranties in this Agreement, the
Schedules, any supplements to the Schedules, the certificates
delivered pursuant to Article 10, any other certificate or
document delivered pursuant to this Agreement and any other
Closing Document will survive the Closing. The rights to
indemnification and payment of Damages and all other rights or
remedies provided herein, including those relating to any
representations, warranties, covenants and obligations, will not
be affected by any investigation conducted with respect to, or
any knowledge acquired at any time, whether before or after the
execution and delivery of this Agreement or the Closing Date,
with respect to the accuracy or inaccuracy of or compliance
with, any such representation, warranty, covenant or obligation.
The waiver of any condition based on the accuracy of any
representation or warranty, or on the performance of or
compliance with any covenant or obligation, will not affect the
right to indemnification, payment of Damages or other remedy
based on such representations, warranties, covenants and
obligations.
Section
Indemnification and Payment of Damages By The Majority Shareholders.
The Majority Shareholders shall indemnify and hold the
Company, Buyer and their officers, directors, governors,
members, managers, Affiliates, successors and assigns ("Buyer
Indemnitees") harmless for, and shall pay to the Buyer
Indemnitees the amount, to the extent not covered by insurance,
of all Damages arising, directly or indirectly, from or in
connection with:
any breach or nonfulfillment of or failure to
comply with in any respect ("Breach") any representation or
warranty made by the Sellers;
any Breach by the Sellers of any covenant,
agreement or obligation of the Sellers;
any Damages arising out of the ownership, use or
conduct of the business or operations of the Company on or prior
to the Closing Date or any act, omission, transaction,
circumstance, fact, agreement, or other condition relating to
the Company, known to the Sellers, which existed on or prior to
the Closing Date and was not fully and properly disclosed to
Buyer in the Financial Statements, the Schedules, the Exhibits
or any other part of the Agreement;
any act, omission, transaction, circumstance,
fact, agreement, or other condition known to the Sellers, which
existed on or prior to the Closing Date and was not fully and
properly disclosed to Buyer in the Financial Statements, the
Schedules, the Exhibits or any other part of the Agreement,
relating to the following: (i)(A) the ownership, operation, or
condition at any time on or prior to the Closing Date of any
properties (including without limitation the Premises) and
assets (whether real, personal, or mixed and whether tangible or
intangible) in which the Company, SIMCO or the Majority
Shareholders have or had an interest, or (B) any Hazardous
Materials or other contaminants (including any tanks, equipment
or other personal property or materials relating thereto) that
were at any time prior to the Closing Date or are as of the
Closing Date present on such properties or assets (including
without limitation the Premises); or (ii)(A) any Hazardous
Materials or other contaminants (and including any tanks,
equipment or other personal property or materials relating
thereto), wherever located, that were, or were allegedly,
generated, transported, stored, treated, released or otherwise
handled by the Company, SIMCO or the Majority Shareholders or by
any other Person for whose conduct the Company, SIMCO or the
Majority Shareholders are or may be held responsible at any time
on or prior to the Closing Date, or (B) any Hazardous Activities
that were, or were allegedly, conducted by the Company, SIMCO or
the Majority Shareholders or by any other Person for whose
conduct the Company, SIMCO or the Majority Shareholders are or
may be held responsible; or
any act, omission, transaction, circumstance,
fact, agreement, or other condition known to the Sellers, which
existed on or prior to the Closing Date and was not fully and
properly disclosed to Buyer in the Financial Statements, the
Schedules, the Exhibits or any other part of the Agreement,
relating to the following: any bodily injury (including
illness, disability, and death, and regardless of when any such
bodily injury occurred, was incurred, or manifested itself),
personal injury, property damage (including trespass, nuisance,
wrongful eviction, and deprivation of the use of real property),
or other damage of or to any Person, including any employee or
former employee of the Company, SIMCO or the Majority
Shareholders or any other Person for whose conduct the Company,
SIMCO or the Majority Shareholders are or may be held
responsible, in any way arising from or allegedly arising from
any Hazardous Activity conducted or allegedly conducted with
respect to the Premises or properties or other assets of or
leased or subleased or used or operated by the Company or the
operations of the Company prior to the Closing Date, or from
Hazardous Material that was (1) present or suspected to be
present on or before the Closing Date on or at such Premises or
properties (or present or suspected to be present on any other
property, if such Hazardous Material emanated or allegedly
emanated from any of such Premises or properties and was present
or suspected to be present on any of such Premises or properties
on or prior to the Closing Date) or (2) released or allegedly
released by the Majority Shareholders, SIMCO or the Company or
any other Person for whose conduct the Company, SIMCO or the
Majority Shareholders are or may be held responsible, at any
time on or prior to the Closing Date.
Buyer will be entitled to control any cleanup costs or
corrective action, including any investigation, cleanup,
removal, containment, or other remediation or response action,
any related proceeding, and any other proceeding with respect to
which indemnity may be sought under this Section 11.2.
Section
Indemnification and Payment of Damages By SIMCO.
SIMCO shall indemnify and hold the Buyer Indemnitees
harmless for, and shall pay to the Buyer Indemnitees the amount,
to the extent not covered by insurance, of all Damages, arising,
directly or indirectly, from or in connection with:
any Breach of any representation or warranty made
by SIMCO;
any Breach by SIMCO of any covenant, agreement or
obligation of SIMCO;
any act, omission, transaction, circumstance,
fact, agreement, or other condition known to the Sellers, which
existed on or prior to the Closing Date and was not fully and
properly disclosed to Buyer in the Financial Statements, the
Schedules, the Exhibits or any other part of the Agreement,
relating to the following: (i)(A) the ownership, operation, or
condition at any time on or prior to the Closing Date of the
SIMCO Premises, or (B) any Hazardous Materials or other
contaminants (and including any tanks, equipment or other
personal property or materials relating thereto) that were at
any time prior to the Closing Date or are as of the Closing Date
present the SIMCO Premises; or (ii)(A) any Hazardous Materials
or other contaminants (and including any tanks, equipment or
other personal property or materials relating thereto), wherever
located on the SIMCO Premises, that were, or were allegedly,
generated, transported, stored, treated, released or otherwise
handled by the Company, SIMCO or the Majority Shareholders or by
any other Person for whose conduct the Company, SIMCO or the
Majority Shareholders are or may be held responsible at any time
on or prior to the Closing Date, or (B) any Hazardous Activities
that were, or were allegedly, conducted on the SIMCO Premises by
the Company, SIMCO or the Majority Shareholders or by any other
Person for whose conduct the Company, SIMCO or the Majority
Shareholders are or may be held responsible; or
any act, omission, transaction, circumstance,
fact, agreement, or other condition known to the Sellers, which
existed on or prior to the Closing Date and was not fully and
properly disclosed to Buyer in the Financial Statements, the
Schedules, the Exhibits or any other part of the Agreement,
relating to the following: any bodily injury (including
illness, disability, and death, and regardless of when any such
bodily injury occurred, was incurred, or manifested itself),
personal injury, property damage (including trespass, nuisance,
wrongful eviction, and deprivation of the use of real property),
or other damage of or to any Person, including any employee or
former employee of the Company, SIMCO or the Majority
Shareholders or any other Person for whose conduct the Company,
SIMCO or the Majority Shareholders are or may be held
responsible, in any way arising from or allegedly arising from
any Hazardous Activity conducted or allegedly conducted on the
SIMCO Premises prior to the Closing Date, or from Hazardous
Material that was (1) present or suspected to be present on or
before the Closing Date on or at the SIMCO Premises (or present
or suspected to be present on any other property, if such
Hazardous Material emanated or allegedly emanated from any of
such SIMCO Premises and was present or suspected to be present
on any of such SIMCO Premises on or prior to the Closing Date)
or (2) released or allegedly released on or from the SIMCO
Premises by the Majority Shareholders, SIMCO or the Company or
any other Person for whose conduct the Company, SIMCO or the
Majority Shareholders are or may be held responsible, at any
time on or prior to the Closing Date.
Buyer will be entitled to control any cleanup costs or
corrective action, including any investigation, cleanup,
removal, containment, or other remediation or response action,
any related proceeding, and any other proceeding with respect to
which indemnity may be sought under this Section 11.3.
Section
Indemnification By Buyer.
Buyer shall indemnify and hold the Sellers and their
successors and assigns ("Shareholder Indemnitees") harmless for,
and will pay to the Shareholder Indemnitees the amount of, all
Damages, to the extent not covered by insurance, arising
directly or indirectly from or in connection with:
any Breach of any representation or warranty made
by Buyer;
any Breach by Buyer of any covenant, agreement or
obligation of the Buyer;
any Damages arising out of the ownership, use or
conduct of the business or operations of the Company after the
Closing Date or any act, omission, transaction, circumstance,
fact, agreement, or other condition relating to the Company
which exists after the Closing Date.
Section
Indemnity Claims.
Claims. In the event that any claim ("Claim") is
hereafter asserted by a party hereto as to which such party may
be entitled to indemnification hereunder, such party
("Indemnitee") shall notify the party required by the terms of
this Agreement to indemnify the Indemnitee ("Indemnifying
Party") thereof ("Claim Notice") within 30 days after (1)
receipt of notice of commencement of any third-party litigation
against such Indemnitee, (2) receipt by such Indemnitee of
written notice of any third-party claim pursuant to an invoice,
notice of claim or assessment, against such Indemnitee, or (3)
such Indemnitee becomes aware of the existence of any other
event in respect of which indemnification may be sought from the
Indemnifying Party. The Claim Notice shall describe the Claim
and the specific facts and circumstances in reasonable detail,
shall include a copy of the Notice referred to in (1) and (2),
above, shall indicate the amount, if known, or an estimate, if
possible, of Damages that have been or may be incurred or
suffered.
Defense of Third Party Claim by Indemnifying
Party. The Indemnifying Party may elect to defend or compromise
any Claim by a third party ("Third Party Claim"), at its or his
own expense and by its or his own counsel, who shall be
reasonably acceptable to the Indemnitee. The election by the
Indemnifying Party to defend or compromise a claim shall
constitute an avowal by the Indemnifying Party that the
Indemnifying Party is obligated to indemnify the Indemnitee with
respect to such claim. The Indemnitee may participate, at its
or his own expense, in the defense of any Claim assumed by the
Indemnifying Party. Without the approval of the Indemnitee,
which approval shall not be unreasonably withheld or delayed,
the Indemnifying Party shall not agree to any compromise of a
Claim defended by the Indemnifying Party which would require the
Indemnitee to perform or take any action or to refrain from
performing or taking any action. The Trustees of the ESOP shall
receive Claim Notice from the Indemnitee for any claims,
including a Third Party Claim, involving either the ESOP or its
Trustees and shall be afforded the opportunity to defend against
such claim or claims in accordance with the provisions set forth
above.
Assumption of Defense by Indemnitee.
Notwithstanding the foregoing, if an Indemnitee determines in
good faith that there is a reasonable probability that a
proceeding may adversely affect it or its Affiliates other than
as a result of monetary damages for which it would be entitled
to indemnification under this Agreement, the Indemnitee may, by
notice to the Indemnifying Party, assume the exclusive right to
defend, compromise, or settle such proceeding, but the
Indemnifying Party will not be bound by any determination of a
proceeding so defended or any compromise or settlement effected
without its consent (which may not be unreasonably withheld or
delayed).
Defense of Claim by Indemnitee. If, within thirty
(30) days of the Indemnifying Party's receipt of a Claim Notice
involving a Third Party Claim, the Indemnifying Party shall not
have notified the Indemnitee of its or his election to assume
the defense, the Indemnitee shall have the right to assume
control of the defense or compromise of such Claim, and the
costs and expenses of such defense, including costs of
investigation and reasonable attorneys' fees, shall be added to
the Claim. The Indemnitee shall have the right to compromise
such Claim without the consent of the Indemnifying Party.
Cooperation of Parties. The party assuming the
defense of any Claim shall keep the other party reasonably
informed at all times of the progress and development of the
party's defense of and compromise efforts with respect to such
Claim and shall furnish the other party with copies of all
relevant pleading, correspondence and other papers. In
addition, the parties to this Agreement shall cooperate with
each other, and make available to each other and their
representatives all available relevant records or other
materials required by them for their use in defending,
compromising or contesting any Claim. The failure to timely
notify the Indemnifying Party of the commencement of such
actions in accordance with Section 11.7(a) shall relieve the
Indemnifying Party from the obligation to indemnify but only to
the extent the Indemnifying Party establishes by competent
evidence that it is has been materially and adversely prejudiced
thereby.
Section
No Liability of Company.
In the event a Claim is made against the Majority
Shareholders, the ESOP or SIMCO for Buyer's Damages, the ESOP or
SIMCO pursuant to this Agreement for Buyer's Damages, the
Majority Shareholders, the ESOP and SIMCO shall not, nor shall
they be entitled to, maintain, assert or make a claim against
the Company, or the directors, officers, affiliates, successor
or assigns of the Company for contribution, indemnity or for any
other recovery, it being the intention of the parties hereto
that after the Closing, the Company shall have no liability,
obligation or responsibility for any Breach of the
representations, warranties, covenants or obligations of the
Sellers made in this Agreement.
ARTICLE : TERMINATION
Section
Termination.
Notwithstanding anything herein to the contrary,
this Agreement shall terminate if the Closing does not occur on
or before December 31, 1999, unless extended by mutual written
agreement of the parties to this Agreement.
This Agreement may be terminated by the mutual
written consent of the parties to this Agreement, (x) by
Buyer, if there has been a material misrepresentation or other
material breach by Sellers of any of their representations,
warranties, covenants and agreements set forth herein and there
shall not have occurred and be continuing a breach or violation
by Buyer, in any material respect, of any of its
representations, warranties, covenants and agreements set forth
herein and (y) by any of the Sellers if there has been a
material misrepresentation or other material breach by Buyer of
any of its representations, warranties, covenants and agreements
set forth herein and there shall not have occurred and be
continuing a breach or violation by any of the Sellers, in any
material respect, of any of their representations, warranties,
covenants and agreements set forth herein; provided, however,
that if the breach by the non-terminating party is susceptible
to cure, such party shall have 30 business days after receipt of
written notice from the other party of its intention to
terminate this Agreement in which to cure such breach, by
Buyer if any of the Sellers or Buyer shall receive a request for
further information under the HSR Act with respect to its filing
thereunder from either the FTC or the Antitrust Division and
Buyer believes, based on advice of counsel, that such request
for additional information will likely result in a challenge by
the FTC or Antitrust Division of the transactions contemplated
by this Agreement (provided that Buyer exercises its right to
terminate this Agreement prior to any of the Sellers making a
responsive filing to such request) by delivering written notice
of such termination to the Sellers, and any party hereto,
on or after October 31, 1999, by written notice to the other
parties, if (A) the Closing shall then not have occurred for any
reason other than the breach or violation by the notifying
party, in any material respect, of any of its representations,
warranties, covenants and agreements set forth in this Agreement
and (B) there shall not have occurred and be continuing a breach
or violation by the notifying party, in any material respect, of
any of such representations, warranties, covenants and
agreements.
If this Agreement is terminated pursuant to
Section 12.1, this Agreement, other than with respect to the
obligations under Sections 9.1, 13.1 and 13.3 hereof, shall
thereafter have no effect, except that termination of this
Agreement will not relieve either party of any liability for
breach of any covenants or agreements set forth herein occurring
prior to such termination.
ARTICLE : MISCELLANEOUS
Section
Expenses.
Unless otherwise indicated, the parties shall bear their
own respective expenses (including, but not limited to, all
compensation and expenses of counsel, financial advisors,
consultants, actuaries and independent accountants) incurred in
connection with the preparation and execution of this Agreement
and consummation of the transactions contemplated hereby.
Section
Best Efforts; Further Assurances.
Commitment to Best Efforts. Subject to the rights
of any Seller or the Buyer, as the case may be, under Section
12.1, each party hereto shall use its best efforts to cause
all conditions to its obligations hereunder to be timely
satisfied and to perform and fulfill all obligations on its part
to be performed and fulfilled under this Agreement, to the end
that the transactions contemplated by this Agreement shall be
effected substantially in accordance with its terms as soon as
reasonably practicable, each party shall cooperate with the
other party in such actions and in securing requisite consents
and each party shall execute and deliver such further
documents and take such other actions as may be necessary or
appropriate to consummate or implement the transactions
contemplated hereby or to evidence such events or matters.
Limitation. As used in this Agreement, the term
"best efforts" shall not mean efforts which require the
performing party to do any act that is commercially unreasonable
under the circumstances, to make any capital contribution or to
expend any funds other than in payment of reasonable
out-of-pocket expenses incurred in satisfying obligations
hereunder, including but not limited to the fees, expenses and
disbursements of its accountants, counsel and other professional
advisors.
Exclusive Dealing. Until the Closing Date or the
earlier termination of this Agreement, the Sellers will not, nor
will any of them permit any officers, directors, employees or
other advisors or representatives to (i) solicit, initiate or
encourage submission of any proposal to purchase the Company
Shares, the Premises or any of the Company's assets, other than
in the ordinary course of business; or (ii) enter into any
agreement with respect to any such proposal.
Section
Public Disclosure.
Prior to the Closing Date, none of the parties will make
any public release of information regarding any matters
contemplated herein without the consent of the other parties,
except for press releases issued by Astec as required by law.
Section
Assignment.
This Agreement may not be assigned by either party, by
operation of law or otherwise.
Section
Amendments and Waivers.
The provisions of this Agreement may not be amended,
supplemented or changed orally, but only by writing signed by
Buyer and Sellers and making specific reference to this
Agreement.
Section
Entire Agreement.
This Agreement constitutes the entire agreement and
supersedes all prior agreements and understandings, both written
and oral, among the parties, with respect to the subject matter
hereof, except as otherwise contemplated herein; and is not
intended to confer upon any other persons any rights or remedies
hereunder.
Section
Schedules.
The inclusion of any matter in any Schedule or Exhibit to
this Agreement shall be deemed to be an inclusion for all
purposes of this Agreement, including each representation to
which it may relate.
Section
Notices.
All notices, requests, demands or other communications
herein required or permitted to be given shall be in writing and
may be personally served, telecopied, telexed or sent by United
States mail and shall be deemed to have given when delivered in
person, upon receipt of telecopy or telex (with confirmed
answerback) or five business days after deposit in the United
States mail, registered or certified, postage prepaid and
properly addressed to the party's address as set forth on the
signature pages hereof. Any party may change the address to
which notices are to be addressed by giving the other party
written notice in the manner herein set forth.
Section
Governing Law.
This Agreement shall be governed by, construed in
accordance with, the laws of the State of Tennessee, without
regard to conflicts of law principles. However, the sale,
transfer and assignment of the Premises to the Company shall be
governed by and construed in accordance with the laws and local
practice of the State of Minnesota and all matters dealing with
the governance of the ESOP and those matters dealing with the
fiduciary obligations and responsibilities of the Trustees of
the ESOP, except as preempted by ERISA, shall be governed by the
laws of the State of Minnesota.
Section
Severability.
In case any provision in this Agreement shall be invalid,
illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way
be affected or impaired thereby.
Section
Section Headings.
The section and paragraph headings contained in this
Agreement are for reference purposes only and shall not in any
way affect the meaning or interpretation of this Agreement.
Section
Counterparts.
This Agreement and any amendments hereto may be executed
in one or more counterparts, each of which shall be deemed to be
an original, but all of which shall be considered one and the
same instrument.
Section
Representation By Counsel; Interpretation.
Each party acknowledges that such party has been
represented by counsel in connection with this Agreement and the
transactions contemplated by this Agreement. Accordingly, any
rule of law, or any legal decision that would require
interpretation of any claimed ambiguities in this Agreement
against the party that drafted it has no application and is
expressly waived. The provisions of this Agreement shall be
interpreted in a reasonable manner to effect the intent of the
parties.
Section
Arbitration Clause.
Any dispute pertaining to this Agreement or the matters
addressed herein shall be referred to arbitration at the request
of any party before a single arbitrator. In any arbitration the
parties shall be entitled to be legally represented. This
matter shall be arbitrated solely under Title 35 United States
Code, as interpreted by the United States Court of Appeals for
the Federal Circuit, and pursuant to Title 9 United States Code,
the Federal Arbitration Act. The Arbitration Rules of the
Center for Public Resources, New York, New York for Non-
Administered Arbitration of Business Disputes, as they exist on
the date of this Agreement, are adopted as the rules governing
this arbitration. Interpretation and enforcement of this
instrument and all of this Agreement and all questions, issues
or claims regarding the performance of the parties hereunder
shall be controlled and governed by the law of the State of
Tennessee except as otherwise specifically stated to the
contrary in this Agreement. The arbitration shall take place in
Morris, Minnesota, at a mutually agreeable site.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their respective
officers therein duly authorized as of the 1st day of
November, 1999.
BUYER: COMPANY:
ASTEC INDUSTRIES, INC. SUPERIOR INDUSTRIES
OF MORRIS, INC.
By: /s/ Richard W. Bethea, Jr. By: /s/Neil Schmidgall
Title: Secretary Title: President
MAJORITY SHAREHOLDERS:
Neil Schmidgall Paul Schmidgall
Linda Schmidgall Shawn Schmidgall
NEIL E. SCHMIDGALL LINDA M. SCHMIDGALL
REVOCABLE LIVING TRUST REVOCABLE LIVING TRUST
By:/s/ Neil Schmidgall By:/s/ Paul Schmidgall
Trustee Trustee
By:/s/Linda Schmidgall By:/s/Shawn Schmidgall
Trustee Trustee
ESOP:
SUPERIOR INDUSTRIES OF
MORRIS, INC. EMPLOYEE STOCK
OWNERSHIP PLAN
By:
Trustee
SIMCO, LLC
By:
Title: Chief Manager
By: Trustee
NEIL E. SCHMIDGALL AND LINDA
M. SCHMIDGALL CHARITABLE
REMAINDER UNITRUST
By: Neil E. Schmidgall
Trustee
EXHIBIT 10.31
Amended and Restated Master Note in the amount of $15,000,000
dated December 29, 1999 by and between Astec Industries, Inc.
and Bank One, NA.
AMENDED AND RESTATED MASTER NOTE
(FIXED AND FLOATING RATES)
$15,000,000.00 Date: December 15, 1999
FOR VALUE RECEIVED, ASTEC INDUSTRIES, INC. (the "Borrower") promises to
pay to the order of BANK ONE, NA(the "Bank"), in lawful money of the
United States at the office of the Bank at Bank One 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 January 2, 2001 (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" as amended by that certain amendment to letter agreement
dated as of December 15, 1999), 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 10.32
Amended and Restated Master Note in the amount of $20,000,000
dated December 29, 1999 by and between Astec Industries, Inc.
and Bank One, NA.
AMENDED AND RESTATED MASTER NOTE
(FIXED AND FLOATING RATES)
$20,000,000.00 Date: December 15, 1999
FOR VALUE RECEIVED, ASTEC INDUSTRIES, INC. (the
"Borrower") promises to pay to the order of
BANK ONE, NA (the "Bank"), in lawful money of
the United States at the office of the Bank at
1 Bank One Plaza, Chicago, Illinois, or as the
Bank may otherwise direct, the lesser of Twenty
Million and No/100ths Dollars ($20,000,000.00)
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 January 31, 2000, 1.00% per annum
from February 1, 2000 to and including March
31, 2000 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
January 2, 2001 (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 October 29, 1999 (which, as it may
be amended or modified and in effect from time
to time, is herein called the "Letter
Agreement" as amended by that certain amendment
to letter agreement dated as of December 15,
1999), 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 22
Subsidiaries of the Registrant
LIST OF SUBSIDIARIES
Name Owned Jurisdiction of Incorporation
American Augers, Inc. 100 Delaware
Astec, Inc. 100 Tennessee
Astec Financial
Services, Inc. 100 Tennessee
Astec Holdings, Inc. 100 Tennessee
Astec Transportation, Inc. 100 Tennessee
Breaker Technology, Inc. 100 Tennessee
Breaker Technology Ltd. 100 Ontario, Canada
CEI Enterprises, Inc. 100 Tennessee
Heatec, Inc. 100 Tennessee
Johnson Crushers
International, Inc. 100 Tennessee
Kolberg-Pioneer, Inc. 100 Tennessee
Pavement Technology, Inc. 50 Georgia
Production Engineered
Products, Inc. 100 Nevada
Roadtec, Inc. 100 Tennessee
Superior Industries
of Morris, Inc. 100 Minnesota
Telsmith, Inc. 100 Delaware
Trencor, Inc. 100 Texas
EXHIBIT 23
Consent of Independent Auditors
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Forms S-8 No. 33-14738 and 0-14714) pertaining to the Astec Industries,
Inc. 1986 and 1992 Stock Option Plans, and to the 1998 Long-Term Incentive
Stock Plan of our report dated February 18, 2000, with respect to the
consolidated financial statements and schedule of Astec Industries,
Inc. included in the Annual Report (Form 10-K) for the year ended
December 31, 1999.
ERNST & YOUNG LLP
Chattanooga, Tennessee
March 22, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1999
<PERIOD-END> DEC-31-1999 DEC-31-1999
<CASH> 3,725,070 3,725,070
<SECURITIES> 0 0
<RECEIVABLES> 83,331,745 83,331,745
<ALLOWANCES> 1,966,000 1,966,000
<INVENTORY> 104,841,923 104,841,923
<CURRENT-ASSETS> 203,351,327 203,351,327
<PP&E> 153,891,390 153,891,390
<DEPRECIATION> 44,503,234 44,503,234
<TOTAL-ASSETS> 355,437,031 355,437,031
<CURRENT-LIABILITIES> 75,782,809 75,782,809
<BONDS> 0 0
0 0
0 0
<COMMON> 3,824,227 3,824,227
<OTHER-SE> 163,433,349 163,433,349
<TOTAL-LIABILITY-AND-EQUITY> 355,437,031 355,437,031
<SALES> 110,305,000 449,627,457
<TOTAL-REVENUES> 110,305,000 449,627,457
<CGS> 85,776,000 335,471,243
<TOTAL-COSTS> 85,776,000 335,471,243
<OTHER-EXPENSES> 17,036,000 61,635,673
<LOSS-PROVISION> (93,000) 425,557
<INTEREST-EXPENSE> 1,546,000 4,253,219
<INCOME-PRETAX> 6,360,000 51,531,423
<INCOME-TAX> 2,285,000 19,819,145
<INCOME-CONTINUING> 4,075,000 31,712,278
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 4,075,000 31,712,278
<EPS-BASIC> $ .21 $ 1.66
<EPS-DILUTED> $ .21 $ 1.59
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