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