10-Q

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 March 31, 2002.
[ ] 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 incorporation or organization)	(I.R.S. Employer Identification No.)
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 May 10, 2002
Common Stock, par value $0.20	19,650,686
ASTEC INDUSTRIES, INC.
INDEX
PART I - Financial Information		Page Number
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 2002 and December 31, 2001			1
Consolidated Statements of Operations for the Three Months Ended March 31, 2002 and 2001			2
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2002 and 2001			3
Notes to Unaudited Consolidated Financial Statements			4
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			7
Item 3. Quantitative and Qualitative Disclosures about Market Risk			15
PART II - Other Information
Item 1. Legal Proceedings			15
Item 6. Exhibits and Reports on Form 8-K			16

PART I - FINANCIAL INFORMATION
Item 1. Financial Statements

Astec Industries, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands)
Account Description	March 31, 2002 (Unaudited)	December 31, 2001 (Note 1)
ASSETS
Current Assets
Cash and cash equivalents	$ 5,950	$6,670
Receivables - net	93,367	68,499
Inventories	138,138	128,996
Prepaid expenses and other	16,773	21,096
Total current assets	254,228	225,261
Property and equipment - net	123,684	123,394
Goodwill	36,073	36,115
Other assets	22,340	15,921
Total assets	$436,325	$400,691
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Notes payable	$ 1,184	$1,812
Current maturities of long-term debt	521	556
Accounts payable - trade	37,870	26,246
Other accrued liabilities	37,382	34,780
Total current liabilities	76,957	63,394
Long-term debt, less current maturities	145,007	127,285
Other non-current liabilities	11,453	12,316
Minority interest in consolidated subsidiary	349	349
Total shareholders' equity	202,559	197,347
Total liabilities and shareholders' equity	$436,325	$400,691

Astec Industries, Inc. and Subsidiaries
Consolidated Statements of Operations
(In thousands)
(Unaudited)
	Three months ended
	March 31,
	2002	2001
Net sales	$122,442	$143,310
Cost of sales	94,566	111,987
Gross profit	27,876	31,323
Selling, general, administrative and engineering expenses	19,578	20,960
Income (loss) from operations	8,298	10,363
Interest expense	2,223	2,339
Other income, net of expense	675	644
Income (loss) before income taxes	6,750	8,668
Income taxes	2,097	3,337
Minority interest in earnings	18	28
Net (loss) income	$4,635	$5,303
Earnings (loss) per common share
Basic	$0.24	$0.27
Diluted	$0.23	$0.27
Weighted average common shares outstanding
Basic	19,617,025	19,324,234
Diluted	19,854,430	19,600,539

Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
	Three months ended March 31,
	2002	2001
Cash flows from operating activities:
Net income	$ 4,635	$ 5,303
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	3,272	4,110
Provision for doubtful accounts	212	109
Provision for inventory reserve	296	361
Provision for warranty reserve	2,154	823
(Gain) on sale and disposition of fixed assets	(251)	(3)
(Gain) on sale of lease portfolio	(88)	(474)
Minority interest in earnings of subsidiary	18	24
(Increase) decrease in:
Trade receivables	(32,213)	(25,924)
Finance receivables	688	(179)
Inventories	(9,438)	(593)
Prepaid expenses and other	4,335	1,503
Other receivables	8,456	568
Other non-current assets	(8,822)	(2,159)
Increase (decrease) in:
Accounts payable	11,624	4,318
Accrued product warranty	(1,796)	(588)
Other accrued liabilities	2,281	(522)
Income taxes payable	(901)	2,268
Other operating charges	61	(598)
Net cash (used) by operating activities	(15,477)	(11,653)
Cash flows from investing activities:
Proceeds from sale of property and equipment - net	368	23
Proceeds from sale and repayment of lease portfolio	3,874	11,633
Expenditures for property and equipment	(2,617)	(2,300)
Expenditures for equipment on operating lease	(3,874)	(10,373)
Net cash (used) by investing activities	(2,249)	(1,017)
Cash flows from financing activities:
Net borrowings (repayments) under revolving credit agreement	17,722	9,302
Net borrowings (repayments) under loan and note agreements	(664)	188
Proceeds from issuance of common stock	183	18
Net cash provided by financing activities	17,241	9,508
Effect of exchange rate changes on cash	(235)	(721)
Net (decrease) in cash	(720)	(3,883)
Cash at beginning of period	6,670	7,053
Cash at end of period	$ 5,950	$ 3,170

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 Form 10-Q and Article 10 of Regulation S-X promulgated under the Securities Act of 1933. 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 periods ended March 31, 2002 are not necessarily indicative of the results that may be expected for the year ended December 31, 2002.

The balance sheet at December 31, 2001 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.

Certain reclassifications were made to the prior year presentation to conform to the current year presentation. 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, 2001.

Note 2. Receivables
Receivables are net of allowance for doubtful accounts of $2,864,000 and $1,806,000 for March 31, 2002 and December 31, 2001, 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)

	March 31, 2002	December 31, 2001
Raw Materials	$ 49,243	$ 42,746
Work-in-Process	25,207	27,271
Finished Goods	63,688	58,979
Total	$138,138	$128,996

Note 4. Property and Equipment

Property and equipment is stated at cost. Property and equipment is net of accumulated depreciation of $70,738,000 and $69,813,000 for March 31, 2002 and December 31, 2001, 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 (loss) per share:

	Three Months Ended March 31,
	2002	2001
Numerator:
Net income (loss)	$ 4,635,000	$ 5,303,000
Denominator:
Denominator for basic earnings per share	19,617,025	19,324,234
Effect of dilutive securities:
Employee stock options	237,405	276,305
Denominator for diluted earnings per share	19,854,430	19,600,539
Earnings (loss) per common share: Basic Diluted	$ 0.24 $ 0.23	$ 0.27 $ 0.27

Note 6. Comprehensive Income

Total comprehensive income for the three months ended March 31, 2002 was $4,844,000 and total comprehensive income for the three months ended March 31, 2001 was $3,889,000. The components of comprehensive income or loss are set forth below:

	Three months ended
	March 31, 2002	March 31, 2001
Net income	$4,635,000	$5,303,000
Net increase (decrease) in accumulated fair value of derivative financial instruments	61,000	(719,000)
Increase (decrease) in foreign currency translation	148,000	(695,000)
Total comprehensive income (loss)	$4,844,000	$3,889,000

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 $11,748,000 at March 31, 2002 and $12,137,000 at December 31, 2001.

Note 8. Segment Information

(In thousands)

	Three months ended
	March 31, 2002
	Asphalt Group	Aggregate and Mining Group	Mobile Asphalt Paving Group	Underground Group	All Others	Total
Revenues from external customers	50,114	42,054	17,657	11,592	1,025	122,442
Intersegment revenues	4,376	4,440	(133)	-	939	9,622
Gross profit	9,414	10,403	4,942	2,811	305	27,875
Gross profit percent	18.8%	24.7%	28.0%	24.2%	29.8%	22.8%
Segment profit	5,089	2,644	2,046	768	(5,547)	5,000

Notes to Unaudited Financial Statements - Continued

	Three months ended
	March 31, 2001
	Asphalt Group	Aggregate and Mining Group	Mobile Asphalt Paving Group	Underground Group	All Others	Total
Revenues from external customers	48,776	60,559	20,401	12,964	610	143,310
Intersegment revenues	4,494	6,696	(496)	-	1,166	11,860
Gross profit	9,419	13,710	5,579	2,187	429	31,324
Gross profit percent	19.3%	22.6%	27.3%	16.9%	70.3%	21.9%
Segment profit	4,235	5,143	2,399	(761)	(5,960)	5,056

Reconciliations of the reportable segment totals for profit or loss to the Company's consolidated totals are as follows:

(In thousands)

	Three months ended March 31,
	2002	2001
Profit:
Total profit for reportable segments	10,547	11,016
Other profit (loss)	(5,547)	(5,960)
Equity in (loss)/income of joint venture	-	(48)
Minority interest in earnings	(18)	(28)
Elimination of intersegment (profit) loss	(347)	323
Total consolidated net income (loss)	4,635	5,303

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 - Contingencies" in Part I - Item 2 of this Report.

Note 10. Seasonality

Approximately 25% of the Company's business volume typically occurs during the first three months of the year. In the ordinary seasonal trend, the first two quarters of the year are normally the Company's strongest quarters for business volume, with the second quarter slightly stronger than the first quarter. The third quarter is normally weaker than the first two quarters with the fourth quarter consistently being the weakest quarter.

Note 11. Financial Instruments

Effective January 1, 2001, the Company adopted SFAS No. 133, which requires the Company to recognize derivative instruments on the balance sheet at fair value. The statement also establishes new accounting rules for hedging instruments, which depend on the nature of the hedge relationship. The Company has a cash flow hedge, which requires that the effective portion of the change in the fair value of the derivative instrument be recognized in Other Comprehensive Income (OCI), a component of Shareholders' Equity, and reclassified into earnings in the same period, or periods during which the hedged transaction affects earnings. The ineffective portion of the hedge, if any, is recognized in current operating earnings during the period of change in fair value.

Notes to Unaudited Financial Statements - Continued

The Company's captive finance subsidiary, Astec Financial Services, Inc. ("AFS") entered into an interest rate swap agreement on April 6, 2000, to fix interest rates on variable rate debt. The swap agreement is effective for five years with a notional amount of $7,500,000. The objective of the hedge is to offset the variability of cash flows relating to the interest payments on the variable rate debt outstanding under the Company's revolving credit facility. The sole source of the variability in the hedged cash flows results from changes in the benchmark market interest rate, which is three-month U.S. Dollar LIBOR. Changes in the cash flows of the interest rate swap are expected to be highly effective at offsetting the changes in overall cash flows (i.e., changes in interest rate payments) attributable to fluctuations in the benchmark market interest rate on the variable rate debt being hedged.

During the three-month period ended March 31, 2002, there was no material ineffectiveness related to the Company's derivative holdings and there was no component of the derivative instruments' gain or loss excluded from the assessment of hedge effectiveness.

Note 12. Recent Pronouncements

The Company adopted SFAS 142 effective January 1, 2002. Application of the non-amortization provision of SFAS 142 is expected to result in an increase in net income of approximately $2,154,000, or $0.11 per share in the current year. The Company tested goodwill for impairment using the two-step process prescribed in SFAS 142. The first step is a screen for potential impairment, while the second step measures impairment, if any. The Company completed the first of the required impairment tests of goodwill during the first quarter of 2002 and noted no impairment of goodwill.

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 (within the meaning of the Private Securities Litigation Reform Act of 1995) that involve certain risks and uncertainties. Statements in this Form 10-Q that are forward looking include, without limitation, statements regarding the expected recovery in the economy, the Company's expected effective tax rates during 2002, the Company's expected capital expenditures in 2002 and the ability of the Company to meet its working capital and capital expenditure requirements through March 31, 2003. 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 that are discussed from time to time herein and in the Company's reports filed with the SEC, most re cently in the Company's 2001 Annual Report on Form 10-K. 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 update the forward-looking statements.

Results of Operations

For the three months ended March 31, 2002, net sales decreased $20,868,000 or 14.6%, to $122,442,000 from $143,310,000 for the three months ended March 31, 2001. Domestic sales are generated primarily from equipment purchases made by customers for use in construction for privately funded infrastructure development and public sector spending on infrastructure development. The Company believes domestic sales were negatively impacted during 2001 and the first quarter of 2002 by a general economic slowdown and delays in capital expenditures by its customers concerned about the slow economy. In spite of the continued slow economy, the Company believes that its markets are beginning a slow recovery from the adverse market conditions it has experienced recently.

International sales by domestic subsidiaries for the first quarter of 2002 decreased to $12,509,000 from $15,950,000 for the same period of 2001. Total international sales for the quarter ended March 31, 2002, including sales from foreign subsidiaries, were $18,757,000, compared to $25,795,000 for the first quarter of 2001. Lower sales volumes in Africa and the West Indies accounted for the majority of the overall decrease in international sales for the first quarter of 2002 compared to the first quarter of 2001.

Gross profit for the three months ended March 31, 2002 decreased to $27,876,000 from $31,323,000 for the three months ended March 31, 2001, while the gross profit percentage for the three months ended March 31, 2002 increased to 22.8% from 21.9% for the same period of 2001. The total decrease in gross margin for the quarter ended March 31, 2002 compared to the quarter ended March 31, 2001 related to the decrease in sales volume during those periods. The increase in the gross margin percentages for the same periods related primarily to significantly reduced levels of under-absorbed overhead and utilization of plant capacity for the first quarter of 2002 compared to the first quarter of 2001.

Selling, general, administrative and engineering expenses for the three months ended March 31, 2002 were $19,578,000 or 16.0% of net sales, compared to $20,960,000 or 14.6% of net sales for the three months ended March 31, 2001, a decrease in dollars of $1,382,000 or 6.6%. The decrease in selling, general, administrative and engineering expenses for the first quarter of 2002 compared to the same period of 2001 related primarily to various cost reduction measures initiated throughout the Company during 2001. The increase in the selling, general, administrative and engineering percentage as a percent of sales relates to the decreased sales volume for the first quarter of 2002.

Interest expense decreased to $2,223,000 for the quarter ended March 31, 2002 from $2,339,000 for the quarter ended March 31, 2001. Interest expense as a percentage of net sales was approximately 1.8% and 1.6% for the three months ended March 31, 2002 and 2001, respectively. The decrease in interest expense for the first quarter of 2002 compared to the same period of 2001 is primarily related to the decrease in the prevailing U.S. interest rates during the economic downturn.

Other income, net of other expense, was $675,000 for the quarter ended March 31, 2002, compared to $644,000 for the quarter ended March 31, 2001. For the first quarter of 2002, in accordance with SFAS 142, goodwill was not amortized while for the first quarter of 2001, Other Income, Net of Expense included amortization expense of $623,000. The decrease in other income, net of other expense for the three months ended March 31, 2002 compared to the same period of 2001, was the result of lower gains from the sale of smaller volume lease and loan portfolios by Astec Financial Services, Inc., the Company's captive finance company. The reduced gains from portfolio sales during the first quarter of 2002 are directly related to the decreased sales volume experienced during the last half of 2001 and during the first quarter of 2002.

For the three months ended March 31, 2002 income tax expense was $2,097,000 compared to income tax expense of $3,337,000 for the three months ended March 31, 2001, a decrease of $1,240,000, or 37.2%. The effective tax rate for the three months ended March 31, 2002 and 2001 was 31.1% and 38.5%, respectively. The decrease in the effective tax rate for the quarter ended March 31, 2002 is due to tax credits received during the first quarter of 2002. The Company expects the effective tax rate for the remaining quarters of 2002 to be comparable to historical effective rates of approximately 38%.

Backlog of orders at March 31, 2002 was $70,412,000 compared to $74,342,000 at March 31, 2001, within 5% of the prior year backlog level. The decrease in the backlog of orders at March 31, 2002 compared to March 31, 2001 relates primarily to the decreased backlog of the Company's Asphalt and Mobile Asphalt Paving Groups, which is partially offset by an increase in backlog of orders of the Company's Aggregate and Mining Group. Although the backlog at March 31, 2002 is still below the March 31, 2001 level, the gap between the prior year and current year backlog levels continues to narrow. The Company is unable to determine whether this backlog effect was experienced by the industry as a whole.

Liquidity and Capital Resources

On September 10, 2001, the Company and Astec Financial Services, Inc. entered into a $125,000,000 revolving credit facility with a syndicate of banks that expires on September 10, 2004. Under this agreement, interest payments on all borrowing shall be payable (a) in arrears on the first day of each March, June, September and December, (b) on any date the borrowings are prepaid due to acceleration and (c) on maturity. Advances to Astec Financial Services, Inc. under this line of credit are limited to a certain percentage of "Eligible Equipment Receivables" of Astec Financial Services, Inc. as defined in the credit agreement that governs the credit facility.

Under terms of the credit agreement, the Company must maintain certain financial ratio levels and abide by certain covenants. Principal covenants under the loan agreement include the maintenance of minimum levels of net worth, leverage and fixed charge coverage ratios, a limitation of capital expenditures and rental expense, a prohibition against payment of dividends and a prohibition on large acquisitions except with the consent of the lenders.

On March 12, 2002, the Company executed the first amendment to the credit facility, which decreased the maximum amount available from $125,000,000 to $100,000,000, relaxed certain financial ratio covenants for 2002, provided security for the lenders in certain situations, added a .375% interest rate surcharge, and waived certain violations of financial ratios under the original agreement.

As of March 31, 2002 the Company was not in compliance with the Consolidated Funded Debt ratio of the amended revolving credit facility. This violation was waived as part of a second amendment to the credit agreement dated May 13, 2002, which amends the leverage ratio sliding scale on which interest and various fee rates are determined. Borrowings under the second amendment to the credit agreement bear interest at a rate equal to the London Interbank Offering Rate ("LIBOR") plus from 1.0% to 3.25% depending on the leverage ratio as defined by the credit agreement and applied to the sliding scale. At March 31, 2002, the Company was utilizing $43,900,000 of the amount available under the revolving credit facility for borrowing and an additional $20,200,000 to support outstanding letters of credit (primarily for industrial revenue bonds).

The Company currently anticipates that it will satisfy the revised financial ratio covenants of the credit facility for the next four calendar quarters. No assurances can be provided that financial ratio covenant violations or other covenant violations of the credit facility will not occur in the future or, if such violations occur, that the members of the Company's banking syndicate will not elect to pursue their contractual remedies under the credit facility, including requiring the immediate repayment in full of all amounts outstanding. There can also be no assurance that the Company can secure adequate or timely replacement financing to repay its banking syndicate in the event of an unanticipated repayment demand.

In addition to the bank revolving credit facility, the Company's South African subsidiary, Osborn Engineered Products SA (Pty) Ltd., has available a credit facility of $1,250,000 to finance short-term working capital needs and an additional $1,250,000 available to cover the short-term establishment of letter of credit performance guarantees.

On September 10, 2001, the Company and Astec Financial Services, Inc. entered into a note purchase agreement for $80,000,000 of senior notes, placed with private institutions, due September 11, 2011 at a fixed rate of interest of 7.56%. On September 10, 2005 and on each September 10 thereafter through the due date, the Company must make a principal payment of $10,714,286. Interest will be due and payable semiannually on each March 10 and September 10. As part of this agreement, the Company must maintain certain net worth and fixed charge coverage ratios. On March 12, 2002, the Company executed the first amendment to the note purchase agreement to relax certain financial ratio covenants for 2002 and to provide additional security for the note holders in certain situations. The first amendment to the note purchase agreement also added a 0.375% interest rate surcharge and waived certain violations of financial ratios under the original agreement.

At March 31, 2002, the Company was not in compliance with the Consolidated Operating Cash Flow covenant of the senior notes. The covenant, which is measured on a quarterly basis, requires maintenance of a minimum debt to consolidated operating cash flow ratio. The covenant violation was waived by the note holders in the second amendment agreement to the note purchase agreement executed May 13, 2002 effective April 1, 2002 with a .375% to 1.375% interest rate surcharge to be applied on a sliding scale based on the covenant calculation each quarter if the original covenant ratios are not met.

The Company currently anticipates that it will satisfy the revised financial ratio covenants of the note purchase agreement for the next four calendar quarters. No assurances can be provided that financial ratio covenant violations or other covenant violations of the note purchase agreement will not occur in the future or, if such violations occur, that the note holders will not elect to pursue their contractual remedies under the note purchase agreement, including requiring the immediate repayment in full of all amounts outstanding. There can also be no assurance that the Company can secure adequate or timely replacement financing to repay its note holders in the event of an unanticipated repayment demand.

The Company entered into a security agreement dated May 13, 2002 in order to comply with the terms of the credit agreement and the note purchase agreement. The Trigger Date, as defined in the credit agreement and the note purchase agreement, occurred on March 31, 2002, requiring the Company to secure its credit facility and the senior notes with its inventory, machinery and equipment, and trade receivables.

As of March 31, 2002, the Company had working capital of $177,271,000 compared to $161,867,000 at December 31, 2001. Total short-term borrowings, including current maturities of long-term debt, were $1,705,000 at March 31, 2002 compared to $2,368,000 at December 31, 2001. A financing agreement for imported, purchased inventory items accounted for $890,000 of the short-term borrowings at March 31, 2002, while outstanding Industrial Development Revenue Bonds accounted for $500,000 of the current maturities of long-term debt at March 31, 2002 and December 31, 2001. Net cash used by operating activities for the three months ended March 31, 2002 was approximately $15,477,000 compared to net cash used by operating activities of $11,653,000 for the three months ended March 31, 2001.

Long-term debt, less current maturities, increased to $145,007,000 at March 31, 2002 from $127,285,000 at December 31, 2001. At March 31, 2002, $80,000,000 was outstanding under the senior secured note agreement, $43,900,000 was outstanding under the revolving credit facility and $19,200,000 was outstanding under the long-term principal portion of Industrial Revenue Bonds. The increase in debt from December 31, 2001 to March 31, 2002 related to funding of working capital needs for the Company.

Capital expenditures in 2002 for plant expansion and for further modernization of the Company's manufacturing processes are expected to be approximately $6,581,000. The Company expects to finance these expenditures using internally generated funds and amounts available from its credit facilities. Capital expenditures for the three months ended March 31, 2002 were $2,617,000, compared to $2,300,000 at March 31, 2001.

Subject to the matters discussed above regarding the Company's ability to comply with its Senior Secured Note and revolving credit agreement covenants, or to obtain additional waivers related thereto, the Company believes that its current working capital, cash flows generated from future operations and availability remaining under its credit facility will be sufficient to meet the Company's working capital and capital expenditure requirements through March 31, 2003.

The following table discloses aggregate information about the Company's contractual obligations and the periods in which payments are due as of March 31, 2002:

	Payments Due by Period
Contractual Cash Obligations	Total	Less Than 1 year	2-3 Years	4-5 Years	After 5 Years
	(in thousands)
Long-term debt
Credit facility	$43,900		$43,900
Senior Secured Notes	80,000			$21,429	$58,571
Industrial Dev. Revenue Bonds	19,200	$ 500	1,000	500	17,200
Other Notes Payable	3,612	1,205	2,396	11	-
Operating leases	6,440	2,285	3,897	258	-
Total contractual cash obligations	$153,152	$3,990	$51,193	$22,198	$75,771

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 adequate general liability insurance coverage for product liability and other similar tort claims. The coverage is 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.

Certain customers have financed purchases of the Company's products through arrangements in which the Company is contingently liable for customer debt aggregating $11,748,000 at March 31, 2002. These obligations range from 36 to 48 months in duration and have minimal risk.

In addition, the Company is contingently liable under letters of credit of approximately $19,943,000 primarily related to Industrial Revenue Bonds.

Risk Factors

A decrease or delay in government funding of highway construction and maintenance may cause our revenues and profits to decrease.

Many of our customers depend substantially on government funding of highway construction and maintenance and other infrastructure projects. Any decrease or delay in government funding of highway construction and maintenance and other infrastructure projects could cause our revenues and profits to decrease. 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 of 1998 and covers federal spending through 2003. This legislation may be revised in future congressional sessions and federal funding of infrastructure may be decreased 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.

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 relates 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 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 would likely cause our revenues and profits to decrease. In fact, rising gasoline, diesel fuel and liquid asphalt prices significantly increased the operating and raw material costs of our contractor and aggregate producer customers, reducing their profits and causing delays in some of their capital equipment purchases. These delays, coupled with rising interest rates in 2000 and 2001, and a general slowdown in the U.S. economy, decreased demand for several key categories of products.

Downturns in the general economy or the commercial construction industry may adversely affect our revenues and operating results.

General economic downturns, including any downturns in the commercial construction industry, could result in a material decrease in our revenues and operating results. In fact, we believe that the economic downturn was the primary cause of our net losses for the third and fourth quarters of 2001. Demand for many of our products, especially in the commercial construction industry, is cyclical. Sales of our products are sensitive to the states of the U.S., foreign and regional economies in general, and in particular, changes in commercial construction spending and government infrastructure spending. In addition, many of our costs are fixed and cannot be quickly reduced in response to decreased demand. We could face a downturn in the commercial construction industry based upon a number of factors, including:

--a decrease in the availability of funds for construction;
- --labor disputes in the construction industry causing work stoppages;
- --rising gas and fuel oil prices;
- --rising interest rates;
- --energy or building materials shortages; and
- --inclement weather.

We may be unsuccessful in complying with the financial ratio covenants or other provisions of our credit facility and note purchase agreement.

As of March 31, 2002, the Company was not in compliance with a financial ratio covenant contained in the credit facility and a similar financial ratio covenant in the note purchase agreement. The covenant violation in the credit facility was waived by the Company's banking syndicate through an amendment entered into May 13, 2002 and the covenant violation in the note purchase agreement was waived by the note holders through an amendment entered into May 13, 2002. No assurances can be provided that financial ratio covenant violations or other violations of the credit facility or note purchase agreement will not occur in the future, or if such violations occur, that the banks and/or note holders, as the case may be, will not elect to pursue their contractual remedies under the credit facility or note purchase agreement, including requiring the immediate repayment in full of all amounts outstanding. There can also be no assurance that the Company can secure adequate or timely replacem ent financing to repay its banks or note holders in the event of an unanticipated repayment demand.

Acquisitions that we have made in the past and future acquisitions involve risks that could adversely affect our future financial results.

We have completed ten acquisitions since 1994 and plan to acquire additional businesses in the future. We may be unable to achieve the benefits expected to be realized from our acquisitions. In addition, we may incur additional costs and our management's attention may be diverted 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 or has lower profit margins than our company; and future acquired companies may have unknown liabilities that could require us to spend significant amounts of additional capital.

Competition could reduce revenue from our products and services and cause us to lose market share.

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 if our current competitors enhance their products or lower their prices for competing products, we may lose sales or be required to lower the prices we charge for our products. This may reduce revenue from our products and services, lower our gross margins or cause us to lose market share. In fact, some key competitors slashed prices in 2001 in an effort to make sales as demand in our industry slowed. As a result, we experienced price erosion and lower gross margins.

We may face product liability claims or other liabilities due to the nature of our business. If we are unable to obtain or maintain insurance or if our insurance does not cover liabilities, we may incur significant costs which could reduce our profitability.

We manufacture heavy machinery, which 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.

If we become subject to increased governmental regulation, we may incur significant costs.

Our hot-mix asphalt plants contain air pollution control equipment that must comply with performance standards promulgated by the Environmental Protection Agency. These performance standards may increase 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 may incur material costs or liabilities in connection with the regulatory requirements applicable to our business.

If we are unable to protect our proprietary technology from infringement or if our technology infringes technology owned by others, then the demand for our products may decrease or we may be forced to modify our products, which could increase our costs.

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. Our existing or future patents or trademarks may not adequately protect us against infringements and pending patent or trademark applications may not result in issued patents or trademarks. Our patents, registered trademarks and patent applications, if any, may not be upheld if challenged, and competitors may 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. If our products are deemed to infringe upon the patents or proprietary rights of others, we could be required to modify the design of our products, change the name of our products or obtain a license for the use of some of the technologies used in our products. We may be unable 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 cause us to incur additional costs or lose revenues.

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.

Difficulties in managing and expanding in international markets could divert management's attention from our existing operations.

In the first quarter of 2002, international sales represented approximately 15.3% 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. Any difficulties in expanding our international sales may divert management's attention from our existing operations. In addition, international revenues are subject to the following risks:

--fluctuating currency exchange rates which can reduce the profitability of foreign sales;
- --the burden of complying with a wide variety of foreign laws and regulations;
- --dependence on foreign sales agents;
- --political and economic instability of governments; and
- --the imposition of protective legislation such as import or export barriers.

Our quarterly operating results are likely to fluctuate, which may decrease our stock price.

Our quarterly revenues, expenses and operating results have varied significantly in the past and are likely to vary significantly from quarter to quarter in the future. As a result, our operating results may fall below the expectations of securities analysts and investors in some quarters, which could result in a decrease in the market price of our common stock. The reasons our quarterly results may fluctuate include:

- --general competitive and economic conditions;
- --delays in, or uneven timing in the delivery of, customer orders;
- --the introduction of new products by us or our competitors;
- --product supply shortages; and
- --reduced demand due to adverse weather conditions.

Period to period comparisons of such items are not should not be relied on as indications of future performance.

Our Articles of Incorporation, Bylaws, Rights Agreement and Tennessee law may inhibit a takeover, which could delay or prevent a transaction in which shareholders might receive a premium over market price for their shares.

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:

--having 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
- --being governed by 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 the shares of common stock at a premium and could have a material adverse effect on the market price of our shares.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We have no material changes to the disclosure on this matter made in our Annual Report on Form 10-K for the year ended December 31, 2001.

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, 2000. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Contingencies" in Part I - Item 2 of this Report.

Item 6. Exhibits and Reports on Form 8-K

(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).

10.36 Credit Agreement, dated September 10, 2001, between the Company and Astec Financial Services, Inc. as Borrowers and the Named Lenders with Bank One, NA as Agent (incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001, File No. 0-14714).

10.37 Note Purchase Agreement, dated September 10, 2001 between the Company and Astec Financial Services, Inc. and Names Private Institutional Investors (incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001, File No. 0-14714).

10.38 First Amendment Agreement, effective March 12, 2002, to Note Purchase Agreement, dated September 10, 2001, between the Company and Astec Financial Services, Inc. and Named Private Institutional Investors (incorporated by reference to the Company's Annual Report of Form 10-K for the year ended December 31, 2001, File No. 0-14714).

 10.39 First Amendment to Credit Agreement, effective March 12, 2002, to Credit Agreement dated September 10, 2001, between the Company and Astec Financial Services, Inc. as Borrowers and the Named Lenders with Bank One, NA as Agent (incorporated by reference to the Company's Annual Report of Form 10-K for the year ended December 31, 2001, File No. 0-14714).

10.40 Amendment No. 2 to Credit Agreement and Waiver dated May 13, 2002, by and among Astec Industries, Inc. and Astec Financial Services, Inc. and Bank One, NA as Agent.

10.41 Second Amendment Agreement, effective April 1, 2002, to Note Purchase Agreement dated September 10, 2001, between the Company and Astec Financial Services, Inc. and Named Private Institutional Investors.

10.42 Security Agreement dated May 13, 2002 by and among Astec Industries, Inc. and Astec Financial Services, Inc. and the other and Bank One, NA as Agent.

(b) Reports on Form 8-K:

A Current Report on Form 8-K was filed on March 15, 2002 disclosing market segment sales volumes and related gross margins.

______________________

The Exhibits are numbered in accordance with Item 601 of Regulation S-K. Inapplicable Exhibits are not included in the list.

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)

Date 5/14/2002	/s/ J. Don Brock
	Dr. J. Don Brock
	Chairman of the Board and President
Date 5/14/2002	/s/ F. McKamy Hall
	F. McKamy Hall
	Vice President, Chief Financial Officer and Treasurer

EX-10

AMENDMENT NO. 2 TO CREDIT AGREEMENT AND WAIVER

This Amendment and Waiver (this "Amendment") is entered into as of May13, 2002, by and among Astec Industries, Inc., a Tennessee corporation ("Astec"), Astec Financial Services, Inc., a Tennessee corporation ("AFS" and together with Astec, the "Borrowers"), Bank One, NA, individually and as agent ("Agent"), and the other financial institutions signatory hereto.

RECITALS

A. The Borrowers, the Agent and the Lenders are party to that certain credit agreement, dated as of September 10, 2001 (as previously amended, the "Credit Agreement"). Unless otherwise specified herein, capitalized terms used in this Amendment shall have the meanings ascribed to them by the Credit Agreement.

B. The Borrower, the Agent and the undersigned Lenders wish to amend the Credit Agreement and waive certain provisions thereof on the terms and conditions set forth below.

Now, therefore, in consideration of the mutual execution hereof and other good and valuable consideration, the parties hereto agree as follows:

1. Amendment to Credit Agreement. The Credit Agreement is hereby amended by:
1. deleting in its entirety the chart found in the definition of "Applicable Margin" found in Article I of the Credit Agreement and replacing it with the following chart which shall be deemed effective as of March 31, 2002:

	Leverage Ratio	Eurodollar Advances	Floating Rate Advances	Letter of Credit Fee	Commitment Fee
Level 1	< 1.5:1.0	1.00%	0.00%	1.00%	0.25%
Level 2	1.5:1.0<X<2.0:1.0	1.125%	0.125%	1.125%	0.25%
Level 3	2.0:1.0<X<2.25:1.0	1.25%	0.25%	1.25%	0.25%
Level 4	2.25:1.0<X<2.5:1.0	1.375%	0.375%	1.375%	0.375%
Level 5	2.5:1.0<X<3.0:1.0	1.625%	0.625%	1.625%	0.375%
Level 6	3.0:1.0<X<3.5:1.0	2.25%	1.25%	2.25%	0.50%
Level 7	3.5:1.0<X<4.0:1.0	2.50%	1.50%	2.50%	0.50%
Level 8	4.0:1.0<X<4.5:1.0	2.75%	1.75%	2.75%	0.50%
Level 9	4.5:1.0<X<5.0	3.00%	2.00%	3.00%	0.50%
Level 10	>5.0	3.25%	2.25%	3.25%	0.50%

2. inserting the words "and no Default has occurred and is continuing" in Section 8.4 of the Credit Agreement after the words "as of the end of two consecutive fiscal quarters".
3.  
   deleting the chart found in Section 6.21.1 and replacing it with the following:

Period	Leverage Ratio
Prior to and including March 31, 2002	5.25:1.0
April 1, 2002 through and including June 30, 2002	5.25:1.0
July 1, 2002 through and including September 30, 2002	4.50:1.0
October 1, 2002 through and including December 31, 2002	3.50:1.0
January 1, 2003 and thereafter	3.00:1.0

and

4. deleting the chart found in Section 6.21.4 and replacing it with the following:

Date	Fixed Charge Coverage Ratio
March 31, 2002	1.00:1.0
June 30, 2002	1.00:1.0
September 30, 2002	1.25:1.0
December 31, 2002 and the date of each fiscal quarter end thereafter	2.00:1.0

1. Consent and Waiver. The Lenders hereby waive (a) any breach of Section 6.21.1 of the Credit Agreement arising solely out of the Leverage Ratio exceeding 5.25:1.0 as of March 31, 2002, and (b) any breach of Section 6.29 of the Credit Agreement arising out of the Credit Parties' and Collateral Agent's not entering into a security agreement with the Collateral Agent within 30 days of the effective date of the First Amendment to the Credit Agreement.
2. Representations and Warranties of the Borrower. The Borrowers represent and warrant that:
1. The execution, delivery and performance by the Borrowers of this Amendment have been duly authorized by all necessary corporate action and that this Amendment is a legal, valid and binding obligation of the Borrowers enforceable against the Borrowers in accordance with its terms, except as the enforcement thereof may be subject to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar law affecting creditors' rights generally;
2. Each of the representations and warranties contained in the Credit Agreement is true and correct in all material respects on and as of the date hereof as if made on the date hereof;
3. After giving effect to this Amendment, no Default or Unmatured Default has occurred and is continuing.
4. As of the date hereof, the Borrowers and each other applicable Credit Party have entered into a security agreement with the Collateral Agent in form and substance consistent with the requirements of Section 6.29 of the Credit Agreement and have delivered all related certificates, opinions and UCC financing statements as requested by the Collateral Agent.
3. Effective Date. This Amendment shall become effective upon (a) the execution and delivery hereof by the Borrowers, the Agent and the Required Lenders (without respect to whether it has been executed and delivered by all the Lenders) (b) payment of the fee specified in Section 6(b) of this Amendment and (c) the execution and delivery by the Borrowers and the Majority Purchasers of an amendment to the Note Purchase Agreements and/or waiver of certain terms thereof in form and substance satisfactory to the Required Lenders (the "Effective Date").
4. Reference to and Effect Upon the Credit Agreement.
1. Except as specifically amended or waived above, the Credit Agreement and the other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed.
2. The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of the Agent or any Lender under the Credit Agreement or any Loan Document, nor constitute a waiver of any provision of the Credit Agreement or any Loan Document, except as specifically set forth herein. Upon the effectiveness of this Amendment, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of similar import shall mean and be a reference to the Credit Agreement as amended hereby.
5. Costs and Expenses.
1. The Borrower hereby affirms its obligation under Section 9.7 of the Credit Agreement to reimburse the Agent for all reasonable costs, internal charges and out-of-pocket expenses paid or incurred by the Agent in connection with the preparation, negotiation, execution and delivery of this Amendment, including but not limited to the attorneys' fees and time charges of attorneys for the Agent with respect thereto.
2. The Borrower hereby agrees that on the Effective Date, the Borrower shall pay to the Agent (a) an arrangement fee agreed upon separately by the Agent and the Borrowers and (b) (for the ratable benefit of the Lenders) an amendment fee of $125,000, which fees shall be deemed fully earned and non-refundable on the date hereof.
6. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (INCLUDING WITHOUT LIMITATION 735 ILCS SECTION 105/5-1 ET SEQ, BUT OTHERWISE WITHOUT REGARD TO CONFLICTS OF LAWS PROVISIONS) OF THE STATE OF ILLINOIS BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
7. Headings. 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 purposes.
8. Counterparts. 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.

IN WITNESS WHEREOF, the parties have executed this Amendment as of the date and year first above written.

ASTEC INDUSTRIES, INC.
By: /s/ F. McKamy Hall
Print Name: F. McKamy Hall
Title: CFO, Vice President and Treasurer
Address: 4101 Jerome Avenue
Chattanooga, Tennessee 37407
Facsimile: (423) 867-4127
Telephone: (423) 867-4210
Attention: F. McKamy Hall

ASTEC FINANCIAL SERVICES, INC.
By: /s/ Albert E. Guth
Print Name: Albert E. Guth
Title: President
Address: 1725 Shepherd Road
Chattanooga, Tennessee 37421
Facsimile: (423) 899-4456
Telephone: (423) 899-5898
Attention: Albert E. Guth

BANK ONE, NA,
individually and as Agent
By: /s/ David T. McNeela
Print Name: David T. McNeela
Title: Vice President
Address: 1 Bank One Plaza
Chicago, Illinois 60670
Facsimile: (312) 732-5296
Telephone: (312) 732-5730
Attention: David T. McNeela

SUNTRUST BANK
 
By: /s/ Jim Sloan
Print Name: Jim Sloan
Title: Vice President
Address: 201 Fourth Avenue North
Nashville, Tennessee 37219
Facsimile: (615) 748-5269
Telephone: (615) 748-5745
Attention: Jim Sloan

AMSOUTH BANK

By: /s/ Tracy Brown
Print Name: Tracy Brown
Title:
Address: 601 Market Center
Chattanooga, Tennessee 37402
Facsimile: (423) 752-1558
Telephone: (423) 752-1535
Attention: Tracy Brown

BRANCH BANK & TRUST CO.

 
By: /s/ James Stallings
Print Name: James Stallings
Title:
Address: Corporate Accounts Division
P.O. Box 15008
Winston-Salem, North Carolina 27113
Facsimile: (336) 733-3254
Telephone: (336) 733-3251
Attention: James Stallings

 
 
FIRSTAR BANK

 
By: /s/ Russell Rogers
Print Name: Russell Rogers
Title:
Address: 150 Fourth Avenue North, 2d Floor
Nashville, Tennessee 37219
Facsimile: (615) 251-9247
Telephone: (615) 251-9280
Attention: Russell Rogers

EX-10

Second Amendment Agreement
to

Re: Note Purchase Agreements Dated as of September 10, 2001

and 7.56% Secured Notes due September 10, 2011

Dated as of

May 13, 2002

To Each of the holders listed in Schedule A to this Second Amendment Agreement

Ladies and Gentlemen:

Reference is made to (i) the separate Note Purchase Agreements each dated as of September 10, 2001 as amended by the First Amendment Agreement dated as of March 12, 2002, (the "First Amendment Agreement") among the Obligors (defined below) and each of you (the "Existing Note Purchase Agreements" and, as amended hereby, the "Note Purchase Agreements"), among Astec Industries, Inc., a Tennessee corporation (the "Company"), Astec Financial Services, Inc., a Tennessee corporation ("Financial" and, together with the Company, the "Obligors"), and the holders named on Schedule A attached thereto, respectively, (ii) the $80,000,000 aggregate principal amount of 7.56% Senior Secured Notes due September 10, 2011 of the Obligors, as amended by the First Amendment (the "Existing Notes" and, as amended hereby, the "Notes") and (iii) the Pledge Agreement dated as of September 10, 2001 between the Company and the C ollateral Agent (the "Pledge Agreement").

For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Obligors request the amendment of certain provisions of the Existing Note Purchase Agreements and the Existing Notes as hereinafter provided.

Upon your acceptance hereof in the manner hereinafter provided and upon satisfaction of all conditions to the effectiveness hereof and receipt by the Obligors of similar acceptances from the holders of the Existing Notes, this Second Amendment Agreement shall constitute a contract between us amending the Existing Note Purchase Agreements and the Existing Notes, in each case, as of May 13, 2002, but only in the respects hereinafter set forth:

Section 1. Omnibus Amendment.

In the event that the Leverage Ratio is greater than 3.00 to 1.00 as of the last day of any fiscal quarter of the Obligors beginning with the fiscal quarter ending March 31, 2002, the Notes shall bear an additional amount of interest (in addition to the stated rate of interest or the stated overdue rate of interest and in addition to the additional amount accrued from January 1, 2002 to March 31, 2002, pursuant to the First Amendment Agreement) equal to the respective percentage per annum (the "Percentage") on the unpaid principal amount of the Notes for the immediately succeeding fiscal quarter (such additional amount of interest being referred to as the "Additional Amount") which corresponds to the respective Leverage Ratio as of the last day of each such fiscal quarter, as set forth in the chart below:

Leverage Ratio	Percentage
3.0:1.0<X<3.5:1.0	.375%
3.5:1.0<X<4.0:1.0	.625%
4.0:1.0<X<4.5:1.0	.875%
4.5:1.0<X<5.0	1.125%
>5.0	1.375%

All accrued and unpaid Additional Amounts shall be paid concurrently with the payment of all other accrued and unpaid interest on the Notes. The Obligors and each of the holders acknowledge that the Existing Note Purchase Agreements and the Existing Notes shall be and are hereby amended to incorporate the provisions of this Section 1.

In the event any Additional Amount is required to be paid hereunder, the Company shall give each holder a reasonably detailed calculation thereof with respect to such holder's Notes not less than 10 days prior to the date on which such Additional Amount is required to be paid.

Section 2. Additional Amendments to Existing Note Purchase Agreements.

Section 2.1. Section 10.3 of the Existing Note Purchase Agreements shall be and is hereby amended in its entirety to read as follows:

"Section 10.3. Consolidated Total Debt Coverage. The Obligors will not permit, as at the end of each fiscal quarter, the ratio of Consolidated Total Debt to Consolidated Operating Cash Flow to exceed (a) 5.25 to 1.00 for the fiscal quarter ending on March 31, 2002, (b) 5.25 to 1.00 for the fiscal quarter ending on June 30, 2002, (c) 4.50 to 1.00 for the fiscal quarter ending on September 30, 2002, (d) 3.50 to 1.00 for the fiscal quarter ending on December 31, 2002 or (e) 3.00 to 1.00 for the fiscal quarters ending on or after March 31, 2003, in each case for the immediately preceding four quarter period, taken as a single accounting period ending on the date of calculation."

Section 2.2. Section 10.4 of the Existing Note Purchase Agreements shall be and is hereby amended in its entirety to read as follows:

"Section 10.4. Fixed Charge Coverage. The Obligors will not permit, as at the end of each fiscal quarter, the ratio of Consolidated Earnings Available for Fixed Charges to Consolidated Fixed Charges to be less than (a) 1.00 to 1.00 for the fiscal quarter ending on March 31, 2002, (b) 1.00 to 1.00 for the fiscal quarter ending on June 30, 2002, (c) 1.25 to 1.00 for the fiscal quarter ending on September 30, 2002 or (d) 2.00 to 1.00 each fiscal quarter ending on or after December 31, 2002, in each case for the immediately preceding four quarter period, taken as a single accounting period ending on the date of calculation."

Section 2.3. Section 12.5 of the Existing Note Purchase Agreements shall be and is hereby amended by adding "and no Default has occurred and is continuing" after the words "as of the end of two consecutive fiscal quarters".

Section 2.4. Schedule B to the Existing Note Purchase Agreements shall be and is hereby amended by adding the following definition thereto in alphabetical order:

"'Second Amendment Agreement' shall mean the Second Amendment Agreement dated as of May 13, 2002 to the Note Purchase Agreements dated as of September 10, 2001, as amended by the First Amendment Agreement, between and among the Obligors and the holders."

Section 3. Limited Waiver of Default under Existing Note Purchase Agreements.

The Required Holders waive the Events of Default arising under Section 10.3 and 10.12 of the Existing Purchase Agreements to the extent that (i) the Leverage Ratio was greater than 5.25 to 1.0 as of March 31, 2002, but not greater than 5.77 to 1.0, and (ii) the parties did not enter into a Security Agreement, within 30 days of the effective date of the First Amendment Agreement.

Section 4. Conditions Precedent.

Section 4.1. This Second Amendment Agreement shall not become effective until, and shall become effective on, the Business Day when each of the following conditions shall have been satisfied:

(a) Each holder shall have received this Second Amendment Agreement, duly executed by the Obligors.

(b) The holders shall have consented to this Second Amendment Agreement as evidenced by their execution thereof.

(c) The representations and warranties of the Obligors set forth in Section 4 hereof shall be true and correct in all material respects as of the date of the execution and delivery of this Second Amendment Agreement.

(d) Any consents or approvals from any holder or holders of any outstanding Security of the Obligors or any Subsidiary and any amendments of agreements pursuant to which any Securities may have been issued which shall be necessary to permit the consummation of the transactions contemplated hereby shall have been obtained and all such consents or amendments shall be reasonably satisfactory in form and substance to the holders and their special counsel.

(e) Each holder shall have received such Officer's Certificate and such certificates of a secretarial officer of each Obligor as it may reasonably request with respect to this Second Amendment Agreement and the transactions contemplated hereby.

(f) Each holder shall have received the opinion of counsel for the Obligors covering the matters set forth in Exhibit A hereto and such other matters incident to the transactions contemplated hereby as the holders may reasonably request.

(g) The Obligors shall have paid the fees and disbursements of the holders' special counsel, Chapman and Cutler, incurred in connection with the negotiation, preparation, execution and delivery of this Second Amendment Agreement and the transactions contemplated hereby which fees and disbursements are reflected in the statement of such special counsel delivered to the Obligors at the time of the execution and delivery of this Second Amendment Agreement. Upon receipt of any supplemental statement after the execution of this Second Amendment Agreement, the Obligors will pay such additional fees and disbursements of the holders' special counsel which were not reflected in its accounting records as of the time of the delivery of the initial statement of fees and disbursements.

(h) The Obligors shall have paid to the holders, on a pro rata basis based on the aggregate outstanding principal amounts of the Notes held by said Noteholders on the date hereof a non-refundable fee of $100,000.

(i) Each holder shall have received a fully executed copy of the Second Amendment to Credit Agreement dated as of May 13, 2002 among the Obligors, the lender parties thereto and Bank One NA, as agent for such lenders (the "Second Amendment to Credit Agreement"), satisfactory in form and substance to the holders, a copy of which is attached hereto as Exhibit B.

(j) Each holder shall have received a fully executed copy of the Security Agreement dated as of May 13, 2002 among the Obligors, each subsidiary of the Obligors and Bank One NA, in its capacity as collateral agent (the "Security Agreement"), satisfactory in form and substance to the holders, a copy of which is attached hereto as Exhibit C.

(k) Each holder shall have received a fully executed copy of the First Amendment to Intercreditor and Collateral Agency Agreement dated as of May ____, 2002 among Bank One NA, in its capacity as collateral agent, agent and lender, the lenders party thereto and the holders party thereto (the "First Amendment to Intercreditor"), satisfactory in form and substance to the holders, a copy of which is attached hereto as Exhibit D.

(l) All corporate and other proceedings in connection with the transactions contemplated by this Second Amendment Agreement and all documents and instruments incident to such transactions shall be satisfactory to you and your special counsel, and you and your special counsel shall have received all such counterpart originals or certified or other copies of such documents as you or they may reasonably request.

Section 5. Representations and Warranties.

The Obligors hereby represent and warrant that as of the date hereof and as of the date of execution and delivery of this Second Amendment Agreement:

(a) Each Obligor is duly incorporated, validly existing and in good standing under the laws of the State of Tennessee.

(b) Each Obligor has the corporate power to own its property and to carry on its business as now being conducted.

(c) Each Obligor is duly qualified and in good standing as a foreign corporation authorized to do business in each jurisdiction in which the failure to do so would, individually or in the aggregate, have a material adverse effect on the business, condition (financial or other), assets, operations, properties or prospects of such Obligor.

(d) This Second Amendment Agreement and the transactions contemplated hereby are within the corporate powers of each Obligor, have been duly authorized by all necessary corporate action on the part of each Obligor and this Second Amendment Agreement has been duly executed and delivered by each Obligor and constitute legal, valid and binding obligations of each Obligor enforceable in accordance with their respective terms.

(e) Each Obligor represents and warrants that there are no other defaults under the Existing Note Purchase Agreements other than defaults under the provisions of the Existing Note Purchase Agreements as a result of violations of Sections 10.3 and 10.12 thereof as a result of (i) the Consolidated Total Debt Coverage Ratio being greater than 5.25 to 1.0 as of March 31, 2002, but not greater than 5.77 to 1.0 and (ii) any default caused by the parties not having entered into a Security Agreement within 30 days of the effective date of the First Amendment Agreement.

(f) The execution, delivery and performance of this Second Amendment Agreement by each Obligor does not and will not result in a violation of or default under (A) the articles of incorporation or bylaws of such Obligor, (B) any material agreement to which each Obligor is a party or by which it is bound or to which such Obligor or any of its properties is subject, (C) any material order, writ, injunction or decree binding on each Obligor, or (D) any material statute, regulation, rule or other law applicable to each Obligor.

(g) No authorization, consent, approval, exemption or action by or notice to or filing with any court or administrative or governmental body (other than periodic filings with regulatory authorities, none of which are required to be filed as of the effective date of this Second Amendment Agreement) is required in connection with the execution and delivery of this Second Amendment Agreement or the consummation of the transactions contemplated thereby.

(h) The Obligors have not paid or agreed to pay any fees or other consideration, or given any additional security or collateral, or shortened the maturity or average life of any indebtedness or permanently reduced any borrowing capacity, in each case, in connection with the obtaining of any consents or approvals in connection with the transactions contemplated hereby including, without limitation thereof, in connection with the Credit Agreement dated as of September 10, 2001, as amended among the Obligors, the lender parties thereto and Bank One NA, as agent for such lenders, other than (i) the reduction of total commitment under the Bank Credit Agreement from $125,000,000 to $100,000,000, (ii) the payment of legal fees of counsel to the Lenders and the Agent under the First Amendment to Credit Agreement and the Second Amendment to Credit Agreement, (iii) the payment of the fees referred to in Section 4.3 of the First Amendment to Credit Agreement in an aggr egate amount not in excess of $125,000 plus such other fees payable to the Agent as have been separately agreed to by the Agent and Obligors in connection with the First Amendment to Credit Agreement and (iv) the payment of the fees referred to in Section 4(b) of the Second Amendment to Credit Agreement in an aggregate amount not in excess of $125,000 plus such other fees payable to the Agent as have been separately agreed to by the Agent and Obligors in connection with the Second Amendment to Credit Agreement.

(i) The Trigger Date has occurred on March 31, 2002.

(j) The additional amount of accrued interest (as contemplated in the First Amendment Agreement) for the period from January 1, 2002 up to but not including April 1, 2002 was $75,000, and $57,500 of such amount has been paid in full on March 10, 2002.

(k) The Leverage Ratio was greater than 5.25 to 1.00 as of March 31, 2002 and, accordingly, the Additional Amount which began to accrue as of April 1, 2002 up to but not including July 1, 2002 is $275,000 in the absence of any principal prepayment of the Notes.

Section 6. Miscellaneous.

Section 6.1. Except as amended herein, all terms and provisions of the Existing Note Purchase Agreements, the Existing Notes, the Pledge Agreement and related agreements and instruments are hereby ratified, confirmed and approved in all respects.

Section 6.2. Any and all notices, requests, certificates and other instruments, including the Notes, may refer to any of the Financing Documents without making specific reference to this Second Amendment Agreement, but nevertheless all such references shall be deemed to include this Second Amendment Agreement unless the context shall otherwise require. Your acceptance hereof will also constitute your agreement that prior to any sale, assignment, transfer, pledge or other disposition by you of any Notes, you shall either (i) impose on the Notes so to be disposed of an appropriate endorsement referring to this Second Amendment Agreement as binding on the parties hereto and upon any and all future holders of such Notes or (ii) at your option at any time, surrender such Notes for new Notes of the same form and tenor as the Notes so surrendered but revised to contain express textual reference to this Second Amendment Agreement. All expenses for the preparation of such new Not es and the exchange for such new Notes are to be borne by the Obligor.

Section 6.3. This Second Amendment Agreement and all covenants herein contained shall be binding upon and inure to the benefit of the respective successors and assigns of the parties hereunder. All covenants made by the Obligors herein shall survive the closing and the delivery of this Second Amendment Agreement.

Section 6.4. This Second Amendment Agreement shall be governed by and construed in accordance with Illinois law.

Section 6.5. The capitalized terms used in this Second Amendment Agreement shall have the respective meanings specified in the Note Purchase Agreements unless otherwise herein defined, or the context hereof shall otherwise require.

The execution hereof by the holders shall constitute a contract among the Obligors and the holders for the uses and purposes hereinabove set forth. This Second Amendment Agreement may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one agreement.

Astec Industries, Inc.

By /s/ Richard W. Bethea

Its Executive Vice President and Secretary

Astec Financial Services, Inc.

By /s/ Albert E. Guth

Its President

This foregoing Second Amendment Agreement is hereby accepted and agreed to as of the date aforesaid. The execution by each holder listed below shall constitute its respective several and not joint confirmation that it is the owner and holder of the Notes set opposite its name on Schedule I hereto and that it has not sold or otherwise transferred any of the Notes originally purchased by it pursuant to the Note Purchase Agreements.

American United Life Insurance Company

By /s/ Christopher D. Pahlke

Name: Christopher D. Pahlke

Title: Vice President

This foregoing Second Amendment Agreement is hereby accepted and agreed to as of the date aforesaid. The execution by each holder listed below shall constitute its respective several and not joint confirmation that it is the owner and holder of the Notes set opposite its name on Schedule I hereto and that it has not sold or otherwise transferred any of the Notes originally purchased by it pursuant to the Note Purchase Agreements.

The Guardian Life Insurance Company of America

By /s/ Brian Keating

Name: Brian Keating

Title: Director, Fixed Income

The Guardian Insurance & Annuity Company, Inc.

By /s/ Brian Keating

Name: Brian Keating

Title: Director, Fixed Income

Fort Dearborn Life Insurance Company

By: Guardian Investor Services LLC

By /s/ Brian Keating

Name: Brian Keating

Title: Director, Fixed Income

The Berkshire Life Insurance Company of America

By /s/ Brian Keating

Name: Brian Keating

Title: Director, Fixed Income

This foregoing Second Amendment Agreement is hereby accepted and agreed to as of the date aforesaid. The execution by each holder listed below shall constitute its respective several and not joint confirmation that it is the owner and holder of the Notes set opposite its name on Schedule I hereto and that it has not sold or otherwise transferred any of the Notes originally purchased by it pursuant to the Note Purchase Agreements.

National Life Insurance Company

By

Name:

Title: 

Life Insurance Company of the Southwest

By

Name:

Title:

This foregoing Second Amendment Agreement is hereby accepted and agreed to as of the date aforesaid. The execution by each holder listed below shall constitute its respective several and not joint confirmation that it is the owner and holder of the Notes set opposite its name on Schedule I hereto and that it has not sold or otherwise transferred any of the Notes originally purchased by it pursuant to the Note Purchase Agreements.

Unum Life Insurance Company of America

By: Provident Investment Management, LLC, its Agent

By /s/ David Fussell

Name: David Fussell

Title: Senior Vice President

This foregoing Second Amendment Agreement is hereby accepted and agreed to as of the date aforesaid. The execution by each holder listed below shall constitute its respective several and not joint confirmation that it is the owner and holder of the Notes set opposite its name on Schedule I hereto and that it has not sold or otherwise transferred any of the Notes originally purchased by it pursuant to the Note Purchase Agreements.

United of Omaha Life Insurance Company

By /s/ Edwin H. Garrison, Jr.

Name: Edwin H. Garrison, Jr.

Title: First Vice President

Companion Life Insurance Company

By /s/ Edwin H. Garrison, Jr.

Name: Edwin H. Garrison, Jr.

Title: Authorized Signer

This foregoing Second Amendment Agreement is hereby accepted and agreed to as of the date aforesaid. The execution by each holder listed below shall constitute its respective several and not joint confirmation that it is the owner and holder of the Notes set opposite its name on Schedule I hereto and that it has not sold or otherwise transferred any of the Notes originally purchased by it pursuant to the Note Purchase Agreements.

Nationwide Life Insurance Company

By /s/ Mark W. Poeppelman

Name: Mark W. Poeppelman

Title: Associate Vice President

Nationwide Life and Annuity Insurance Company

By /s/ Mark W. Poeppelman

Name: Mark W. Poeppelman

Title: Associate Vie President

This foregoing Second Amendment Agreement is hereby accepted and agreed to as of the date aforesaid. The execution by each holder listed below shall constitute its respective several and not joint confirmation that it is the owner and holder of the Notes set opposite its name on Schedule I hereto and that it has not sold or otherwise transferred any of the Notes originally purchased by it pursuant to the Note Purchase Agreements.

Teachers Insurance and Annuity Association of America

By /s/ Estelle Simsolo

Name: Estelle Simsolo

Title: Director-Private Placements

Name of Holder	Outstanding Principal Amount and Series of Notes Held as of March 12, 2002
American United Life Insurance Company	$3,000,000
CUDD & CO. (as nominee of The Guardian Life Insurance Company of America)	$5,000,000 $2,500,000
CUDD & CO. (as nominee of The Berkshire Life Insurance Company of America)	$5,000,000
CUDD & CO. (as nominee of The Guardian Insurance & Annuity Company, Inc.)	$1,000,000
Bank One & Co. (as nominee of Fort Dearborn Life Insurance Company)	$1,000,000 $500,000
National Life Insurance Company	$4,000,000
Life Insurance Company of the Southwest	$3,000,000
CUDD & CO. (as nominee of Unum Life Insurance Company of America)	$15,000,000
United of Omaha Life Insurance Company	$13,000,000
Companion Life Insurance Company	$2,000,000
Nationwide Life Insurance Company	$5,000,000
Nationwide Life and Annuity Insurance Company	$2,000,000
Teachers Insurance and Annuity Association of America	$18,000,000

EX-10

SECURITY AGREEMENT

THIS PLEDGE AND SECURITY AGREEMENT is entered into as of May 13, 2002, by and among Astec Industries, Inc., a Tennessee corporation ("Astec"), Astec Financial Services, Inc., a Tennessee corporation ("AFS"; each of AFS and Astec being a "Borrower" and collectively constituting the "Borrowers"), the other Credit Parties (as defined below and together with the Borrowers, the "Grantors") and Bank One, NA, a national banking association having its principal office in Chicago, Illinois, in its capacity as collateral agent (the "Collateral Agent").

PRELIMINARY STATEMENTS

The Borrowers, the Agent and the Lenders have entered into a Credit Agreement, dated as of September 10, 2001 (as it has been or may be amended or modified from time to time, the "Credit Agreement").

The Borrowers and the Purchasers have entered into separate Note Purchase Agreements, dated as of September 10, 2001 (as such agreements have been or may be amended or modified from time to time, the "Note Purchase Agreements").

The Borrowers and the other Credit Parties are entering into this Security Agreement (as it may be amended or modified from time to time, the "Security Agreement") in order to comply with the terms of the Credit Agreement and the Note Purchase Agreements and to induce the Lenders and the Purchasers to continue to extend credit to the Borrowers under the Credit Agreement and the Note Purchase Agreements, respectively. A Trigger Date (as defined in the Credit Agreement and the Note Purchase Agreements) has occurred.

ACCORDINGLY, the Grantors and the Collateral Agent hereby agree as follows:

1. DEFINITIONS

1.1 Terms Defined in Pledge Agreement. All capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in that certain Pledge Agreement, dated as of September 10, 2001 (the "Pledge Agreement"), by and between Astec and the Collateral Agent (but not the meanings assigned to such terms in any other agreement (including the Note Purchase Agreements and the Credit Agreement) referred to in the Pledge Agreement). All capitalized terms used herein and defined by reference to a third party agreement such as the Credit Agreement or the Note Purchase Agreements shall have the meanings given such terms in such third party agreements as in effect on the date hereof.

1.2 Terms Defined in Illinois Uniform Commercial Code. Terms defined in the Illinois UCC which are not otherwise defined in this Security Agreement are used herein as defined in the Illinois UCC.

1.3 Definitions of Certain Terms Used Herein. As used in this Security Agreement, in addition to the terms defined in the Preamble and the Preliminary Statements, the following terms shall have the following meanings:

"Accounts" shall have the meaning set forth in Article 9 of the Illinois UCC.

"Article" means a numbered article of this Security Agreement, unless another document is specifically referenced.

"Chattel Paper" shall have the meaning set forth in Article 9 of the Illinois UCC.

"Collateral" means all Accounts, Chattel Paper, Commercial Tort Claims, Documents, Equipment, Fixtures, General Intangibles, Instruments, Inventory, Investment Property (other than Investment Property pledged pursuant to the Pledge Agreement), Pledged Deposits, and Other Collateral, wherever located, in which each Grantor now has or hereafter acquires any right or interest, and the proceeds, insurance proceeds and products thereof, together with all books and records, customer lists, credit files, computer files, programs, printouts and other computer materials and records related thereto.

"Collateral Documents" means this Security Agreement, the Pledge Agreement and any other agreement delivered pursuant to Section 6.28 or Section 6.30 of the Credit Agreement or Section 9.7 or Section 10.13 of the Note Purchase Agreements.

"Commercial Tort Claims" means those certain currently existing commercial tort claims of the Borrower as set forth on Schedule 1.3(a) hereto.

"Control" shall have the meaning set forth in Article 8 or, if applicable, in Section 9-104, 9-105, 9-106 or 9-107 of Article 9 of the Illinois UCC.

"Credit Party" means Astec, AFS and each Subsidiary of Astec and AFS.

"Default" means an event described in Section 5.1.

"Deposit Accounts" shall have the meaning set forth in Article 9 of the Illinois UCC.

"Documents" shall have the meaning set forth in Article 9 of the Illinois UCC.

"Equipment" shall have the meaning set forth in Article 9 of the Illinois UCC.

"Exhibit" refers to a specific exhibit to this Security Agreement, unless another document is specifically referenced.

"Fixtures" shall have the meaning set forth in Article 9 of the Illinois UCC.

"General Intangibles" shall have the meaning set forth in Article 9 of the Illinois UCC.

"Illinois UCC" means the Illinois Uniform Commercial Code as in effect from time to time.

"Instruments" shall have the meaning set forth in Article 9 of the Illinois UCC.

"Intercreditor Agreement" means that certain Intercreditor and Collateral Agency Agreement, dated as of September 10, 2001, by and among the Collateral Agent, the Agent, the Lenders and the Purchasers and acknowledged by the Borrowers, as such agreement may be amended, restated or otherwise modified from time to time.

"Inventory" shall have the meaning set forth in Article 9 of the Illinois UCC.

"Investment Property" shall have the meaning set forth in Article 9 of the Illinois UCC.

"Lien" means any security interest, mortgage, pledge, lien, encumbrance, title retention agreement or lessor's interest, in, of or on any of the Collateral.

"Other Collateral" means any property of each Grantor, other than real estate, not included within the defined terms Accounts, Chattel Paper, Commercial Tort Claims, Documents, Equipment, Fixtures, General Intangibles, Instruments, Inventory, Investment Property and Pledged Deposits, including, without limitation, all cash on hand, letter-of-credit rights, letters of credit (but not including Facility Letters of Credit (as defined in the Credit Agreement) or the related letter of credit rights).

"Person" means any natural person, corporation, firm, joint venture, partnership, limited liability company, association, enterprise, trust or other entity or organization, or any government or political subdivision or any agency, department or instrumentality thereof.

"Pledged Deposits" means all time deposits of money (other than Deposit Accounts and Instruments), whether or not evidenced by certificates, which the Borrower may from time to time designate as pledged to the Collateral Agent or to any Lender as security for any Secured Obligation, and all rights to receive interest on said deposits.

"Receivables" means the Accounts, Chattel Paper, Documents, Investment Property, Instruments or Pledged Deposits, and any other rights or claims to receive money which are General Intangibles or which are otherwise included as Collateral.

"Required Credit Secured Parties" means (a) prior to an acceleration of the obligations under the Credit Agreement, the Required Lenders (as defined in the Credit Agreement), and (b) after an acceleration of the obligations under the Credit Agreement, Lenders holding in the aggregate at least 67% of the total of (i) the unpaid principal amount of outstanding Advances (as defined in the Credit Agreement), (ii) Reimbursement Obligations (as defined in the Credit Agreement) and (iii) the aggregate net early termination payments then due and unpaid from the Borrower to the Lenders under Rate Hedging Agreements (as defined in the Credit Agreement) entered into in connection with the Credit Agreement, as determined by the Agent in its reasonable discretion.

"Required Note Secured Parties" means, at any time, the holders of at least 51% in principal amount of the Senior Notes at the time outstanding (exclusive of Senior Notes then owned by the Borrowers or any of their Affiliates).

"Section" means a numbered section of this Security Agreement, unless another document is specifically referenced.

"Secured Obligations" means, collectively, (a) the Secured Obligations (as such term is defined in the Credit Agreement), (b) the Note Obligations, and (c) all obligations of any Credit Party under any Collateral Document.

"Secured Parties" means the Lenders, the Purchasers, the Agent, and the Collateral Agent.

"Security" has the meaning set forth in Article 8 of the Illinois UCC.

"Security Default" means a Default.

"Trigger Date" shall mean and include "Trigger Date" as such term is defined in the Credit Agreement or the Note Purchase Agreements.

"Unmatured Default" means an event which but for the lapse of time or the giving of notice, or both, would constitute a Default.

The foregoing definitions shall be equally applicable to both the singular and plural forms of the defined terms.

ARTICLE II

GRANT OF SECURITY INTEREST

The Grantors hereby pledge, assign and grant to the Collateral Agent, on behalf of and for the ratable benefit of the Secured Parties and (to the extent specifically provided herein) their Affiliates, a security interest in all of each Grantor's right, title and interest in and to the Collateral to secure the prompt and complete payment and performance of the Secured Obligations.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

Each Grantor represents and warrants to the Collateral Agent as of the date hereof and as of the date of each subsequent Credit Extension Date (as defined in the Credit Agreement) that:

3.1 Title, Authorization, Validity and Enforceability. Each Grantor has good and valid rights in or the power to transfer the Collateral and title to the Collateral with respect to which it has purported to grant a security interest hereunder, free and clear of all Liens except for Liens permitted under Section 4.1.6, and has full power and authority to grant to the Collateral Agent the security interest in such Collateral pursuant hereto. The execution and delivery by each Grantor of this Security Agreement has been duly authorized by proper corporate proceedings, and this Security Agreement constitutes a legal, valid and binding obligation of each Grantor and creates a security interest which is enforceable against Grantor in all now owned and hereafter acquired Collateral. When financing statements have been filed in the appropriate offices against each Grantor in the locations listed on Exhibit F, the Collateral Agent will have a fully perfected first priority security in terest in that Collateral in which a security interest may be perfected by filing, subject only to Liens permitted under Section 4.1.6.

3.2 Conflicting Laws and Contracts. Neither the execution and delivery by each Grantor of this Security Agreement, the creation and perfection of the security interest in the Collateral granted hereunder, nor compliance with the terms and provisions hereof will violate any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on any Grantor or any Borrower or any Credit Party's articles or certificate of incorporation or by-laws, the provisions of any indenture, instrument or agreement to which any Grantor is a party or is subject, or by which it, or its property, is bound, or conflict with or constitute a default thereunder, or result in the creation or imposition of any Lien pursuant to the terms of any such indenture, instrument or agreement (other than any Lien of the Collateral Agent on behalf of the Secured Parties).

3.3 Type and Jurisdiction of Organization. Each Grantor is an entity organized under the laws of the jurisdiction set forth opposite each Grantor's name on Exhibit A hereto.

3.4 Principal Location. Each Grantor's mailing address and the location of its respective place of business (if it has only one) or its chief executive office (if it has more than one place of business), is disclosed in Exhibit A; as of the date hereof, each Grantor has no other places of business except those set forth in Exhibit A.

3.5 Property Locations. The Inventory, Equipment and Fixtures are located solely at the locations described in Exhibit A. All of said locations are owned by the applicable Grantor except for locations (i) which are leased by the applicable Grantor as lessee and designated in Part B of Exhibit A and (ii) at which Inventory is held in a public warehouse or is otherwise held by a bailee or on consignment as designated in Part C of Exhibit A, with respect to which Inventory the applicable Grantor has delivered bailment agreements, warehouse receipts, financing statements or other documents satisfactory to the Collateral Agent to protect the Secured Parties' security interest in such Inventory.

3.6 No Other Names. In the five year period prior to the date hereof, no Grantor has conducted business under any name except the name in which each such party has executed this Security Agreement, which is the exact name as it appears in such party's organizational documents, as amended, as filed with such party's jurisdiction of organization.

3.7 No Default. No Default or Unmatured Default exists.

3.8 Accounts and Chattel Paper. The names of the obligors, amounts owing, due dates and other information with respect to the Accounts and Chattel Paper are and will be correctly stated in all records of the applicable Grantor relating thereto and in all invoices and reports with respect thereto furnished to the Collateral Agent by the Grantors from time to time. As of the time when each Account or each item of Chattel Paper arises, the applicable Grantor shall be deemed to have represented and warranted that such Account or Chattel Paper, as the case may be, and all records relating thereto, are genuine and in all respects what they purport to be.

3.9 Filing Requirements. None of the Equipment is covered by any certificate of title, except for the vehicles described in Part A of Exhibit B. None of the Collateral is of a type for which security interests or liens may be perfected by filing under any federal statute except for (i) the vehicles described in Part B of Exhibit B and (ii) patents, trademarks and copyrights held by the Borrower and described in Part C of Exhibit B. The legal description, county and street address of the property on which any Fixtures are located is set forth in Exhibit C together with the name and address of the record owner of each such property.

3.10 No Financing Statements. No financing statement describing all or any portion of the Collateral which has not lapsed or been terminated naming any Grantor as debtor has been filed in any jurisdiction except (i) financing statements naming the Collateral Agent on behalf of the Secured Parties as the secured party, (ii) as described in Exhibit D and (iii) as permitted by Section 4.1.6.

3.11 Federal Employer Identification Number. The Federal employer identification number of each Grantor is set forth opposite each such Person's name on Exhibit A hereto.

3.12 State Organization Number. If any Grantor is a registered organization (as defined in the Illinois UCC), such Person's organization number is set forth opposite each such Person's name on Exhibit A hereto.

ARTICLE IV

COVENANTS

From the date of this Security Agreement, and thereafter until this Security Agreement is terminated:

4.1 General.

4.1.1 Inspection. Each Grantor will permit the Collateral Agent, by its representatives and agents (i) to inspect the Collateral, (ii) to examine and make copies of the records of the applicable Grantor relating to the Collateral and (iii) to discuss the Collateral and the related records of the applicable Grantor with, and to be advised as to the same by, the applicable Grantor's officers and employees (and, in the case of any Receivable, with any person or entity which is or may be obligated thereon), all at such reasonable times and intervals as the Collateral Agent may determine, and all at the applicable Grantor's expense.

4.1.2 Taxes. Each Grantor will pay when due all taxes, assessments and governmental charges and levies upon the Collateral, except those which are being contested in good faith by appropriate proceedings and with respect to which no Lien exists.

4.1.3 Records and Reports; Notification of Default. Each Grantor will maintain complete and accurate books and records with respect to the Collateral, and furnish to the Collateral Agent, with sufficient copies for each of the Lenders and Purchasers, such reports relating to the Collateral as the Collateral Agent shall from time to time request. The Borrower will give prompt notice in writing to the Collateral Agent, the Agent and the Purchasers of the occurrence of any Default or Unmatured Default and of any other development, financial or otherwise, which might materially and adversely affect the Collateral.

4.1.4 Financing Statements and Other Actions; Defense of Title. Each Grantor hereby authorizes the Collateral Agent to file, and if requested will execute and deliver to the Collateral Agent, all financing statements and other documents and take such other actions as may from time to time be requested by the Collateral Agent in order to maintain a first perfected security interest in and, if applicable, Control of, the Collateral. Each Grantor will take any and all actions necessary to defend title to the Collateral against all persons and to defend the security interest of the Collateral Agent in the Collateral and the priority thereof against any Lien not expressly permitted hereunder.

4.1.5 Disposition of Collateral. No Grantor will sell, lease or otherwise dispose of the Collateral except (i) prior to the occurrence of a Default or Unmatured Default, dispositions specifically permitted pursuant to Section 6.13 and Section 6.14 of the Credit Agreement and Section 10.10 of the Note Purchase Agreements, (ii) until such time following the occurrence of a Default as the Borrower receives a notice from the Collateral Agent instructing the applicable Grantor to cease such transactions, sales or leases of Inventory in the ordinary course of business, (iii) until such time as the applicable Grantor receives a notice from the Collateral Agent pursuant to Article VII, proceeds of Inventory and Accounts collected in the ordinary course of business and (iv) if a Default or Unmatured Default has occurred, until such time as AFS receives a notice from the Collateral Agent instructing it to cease such transactions, sales of Receivables which are both (a) o riginated by AFS in the ordinary course of its business and (b) permitted under Section 6.13 and Section 6.14 of the Credit Agreement and Section 10.10 of the Note Purchase Agreements; it being understood that no disposition of Collateral under this Section 4.1.5 shall be permitted that would violate Section 6.13 or Section 6.14 of the Credit Agreement or Section 10.10 of the Note Purchase Agreements unless such disposition has been consented to by the Lenders or the Purchasers, as applicable, pursuant to the terms of the applicable agreement. Upon the sale of Receivables by AFS as permitted by either clause (i) or clause (iv) of this Section 4.1.5, the Collateral Agent's Lien on such Receivables shall automatically terminate, but the Collateral Agent's Lien on the proceeds of such sale shall continue.

4.1.6 Liens. No Grantor will create, incur, or suffer to exist any Lien on the Collateral except (i) the security interest created by this Security Agreement, (ii) existing Liens described in Exhibit D and (iii) other Liens permitted pursuant to Section 6.18 of the Credit Agreement and Section 10.8 of the Note Purchase Agreements.

4.1.7 Change in Corporate Existence, Type or Jurisdiction of Organization, Location, Name. Each Grantor will:

1. preserve its existence as a corporation and not, in one transaction or a series of related transactions, merge into or consolidate with any other entity, or sell all or substantially all of its assets;
2. not change its state of organization;
3. not maintain its place of business (if it has only one) or its chief executive office (if it has more than one place of business) at a location other than a location specified on Exhibit A; and
4. not (i) have any Inventory, Equipment or Fixtures or proceeds or products thereof (other than Inventory and proceeds thereof disposed of as permitted by Section 4.1.5) at a location other than a location specified in Exhibit A, (ii) change its name or taxpayer identification number or (iii) change its mailing address,

unless the applicable Grantor shall have given the Collateral Agent not less than 30 days' prior written notice of such event or occurrence and the Collateral Agent shall have either (x) determined that such event or occurrence will not adversely affect the validity, perfection or priority of the Collateral Agent's security interest in the Collateral, or (y) taken such steps (with the cooperation of the applicable Grantor to the extent necessary or advisable) as are necessary or advisable to properly maintain the validity, perfection and priority of the Collateral Agent's security interest in the Collateral.

4.1.8 Other Financing Statements. No Grantor will sign or authorize the signing on its behalf or the filing of any financing statement naming it as debtor covering all or any portion of the Collateral, except as permitted by Section 4.1.6.

4.2 Receivables.

4.2.1 Certain Agreements on Receivables. No Grantor will make or agree to make any discount, credit, rebate or other reduction in the original amount owing on a Receivable or accept in satisfaction of a Receivable less than the original amount thereof, except that a Grantor may reduce the amount of Accounts arising from the sale of Inventory, Chattel Paper or Instruments in accordance with its present policies and in the ordinary course of business.

4.2.2 Collection of Receivables. Except as otherwise provided in this Security Agreement, each Grantor will collect and enforce, at such Grantor's sole expense, all amounts due or hereafter due to such Grantor under the Receivables.

4.2.3 Delivery of Invoices. Each Grantor will deliver to the Collateral Agent immediately upon its request after the occurrence of a Default duplicate invoices with respect to each Account bearing such language of assignment as the Collateral Agent shall specify.

4.2.4 Disclosure of Counterclaims on Receivables. If (i) any discount, credit or agreement to make a rebate or to otherwise reduce the amount owing on a Receivable exists or (ii) if, to the knowledge of the applicable Grantor, any dispute, setoff, claim, counterclaim or defense exists or has been asserted or threatened with respect to a Receivable, the applicable Grantor will disclose such fact to the Collateral Agent in writing in connection with the inspection by the Collateral Agent of any record of the applicable Grantor relating to such Receivable and in connection with any invoice or report furnished by the applicable Grantor to the Collateral Agent relating to such Receivable.

4.3 Inventory and Equipment.

4.3.1 Maintenance of Goods. Each Grantor will do all things necessary to maintain, preserve, protect and keep the Inventory and the Equipment in good repair and working and saleable condition.

4.3.2 Insurance. Each Grantor will (i) maintain fire and extended coverage insurance on the Inventory and Equipment containing a lender's loss payable clause in favor of the Collateral Agent, on behalf of the Secured Parties and providing that said insurance will not be terminated except after at least 30 days' written notice from the insurance company to the Collateral Agent, (ii) maintain such other insurance on the Collateral for the benefit of the Collateral Agent as the Collateral Agent shall from time to time request, (iii) furnish to the Collateral Agent upon the request of the Collateral Agent from time to time the originals of all policies of insurance on the Collateral and certificates with respect to such insurance and (iv) maintain general liability insurance naming the Collateral Agent, on behalf of the Lenders, Purchasers and Agent, as an additional insured.

4.3.3 Titled Vehicles. After a Default, each Grantor will give the Collateral Agent notice of its acquisition of any vehicle covered by a certificate of title and, upon the request of the Collateral Agent after a Default, deliver to the Collateral Agent the original of any vehicle title certificate and do all things necessary to have the Lien of the Collateral Agent noted on any such certificate.

4.4 Instruments, Chattel Paper, Documents and Pledged Deposits. Each Grantor will upon the Collateral Agent's request, after the occurrence and during the continuance of a Default, deliver to the Collateral Agent (and thereafter hold in trust for the Collateral Agent upon receipt and immediately deliver to the Collateral Agent) any Chattel Paper, Instrument or Document evidencing or constituting Collateral and upon the designation of any Pledged Deposits (as set forth in the definition thereof), deliver to the Collateral Agent such Pledged Deposits which are evidenced by certificates included in the Collateral endorsed in blank, marked with such legends and assigned as the Collateral Agent shall specify.

4.5 Pledged Deposits. No Grantor will withdraw all or any portion of any Pledged Deposit or fail to rollover said Pledged Deposit without the prior written consent of the Collateral Agent.

4.6 Deposit Accounts. Upon the Collateral Agent's request after the occurrence and during the continuance of a Default, each Grantor will deliver to each bank or other financial institution in which it maintains a Deposit Account a letter, in form and substance acceptable to the Collateral Agent, transferring ownership of the Deposit Account to the Collateral Agent or transferring dominion and control over such Deposit Account to the Collateral Agent until such time as no Default exists.

4.7 Letter-of-Credit Rights. Each Grantor will upon the Collateral Agent's request, cause each issuer of a letter of credit (except Facility Letters of Credit), to consent to the assignment of proceeds of the letter of credit in order to give the Collateral Agent Control of the letter-of-credit rights to such letter of credit.

4.8 Federal, State or Municipal Claims. Each Grantor will notify the Collateral Agent of any Collateral which constitutes a claim against the United States government or any state or local government or any instrumentality or agency thereof, the assignment of which claim is restricted by federal, state or municipal law.

ARTICLE V

DEFAULT

5.1 Defaults. The occurrence of any one or more of the following events shall constitute a Default:

5.1.1 Any representation or warranty made by or on behalf of any Grantor under or in connection with this Security Agreement shall be materially false as of the date on which made.

5.1.2 The breach by any Grantor of Section 4.1.1, 4.1.4, 4.1.5, 4.1.6, 4.1.7, 4.1.8, 4.2.1, or 4.5, or any of the terms or provisions of Article VII.

5.1.3 The breach by any Grantor (other than a breach which constitutes a Default under Section 5.1.1 or 5.1.2) of any of the terms or provisions of this Security Agreement which is not remedied within 10 days after the giving of written notice to such Grantor by the Collateral Agent.

5.1.4 Any material portion of the Collateral shall be transferred or otherwise disposed of, either voluntarily or involuntarily, in any manner not permitted by Section 4.1.5 or 8.7 or shall be lost, stolen, damaged or destroyed.

5.1.5 The occurrence of any "Default" under, and as defined in, the Credit Agreement or any "Event of Default" under, and as defined in, the Note Purchase Agreements.

5.2 Acceleration and Remedies. If any Default occurs, then, upon the election of the Collateral Agent, the Collateral Agent may exercise any or all of the following rights and remedies:

5.2.1 Those rights and remedies provided in this Security Agreement, the Credit Agreement, the Pledge Agreement or any other Collateral Document, provided that this Section 5.2.1 shall not be understood to limit any rights or remedies available to any Secured Party prior to a Default.

5.2.2 Those rights and remedies available to a secured party under the Illinois UCC (whether or not the Illinois UCC applies to the affected Collateral) or under any other applicable law (including, without limitation, any law governing the exercise of a bank's right of setoff or bankers' lien) when a debtor is in default under a security agreement.

5.2.3 Without notice except as specifically provided in Section 8.1 or elsewhere herein, sell, lease, assign, grant an option or options to purchase or otherwise dispose of the Collateral or any part thereof in one or more parcels at public or private sale, for cash, on credit or for future delivery, and upon such other terms as the Collateral Agent may deem commercially reasonable.

The Collateral Agent, on behalf of the Secured Parties, may comply with any applicable state or federal law requirements in connection with a disposition of the Collateral and compliance will not be considered to adversely affect the commercial reasonableness of any sale of the Collateral.

5.3 Debtors' Obligations Upon Default. Upon the request of the Collateral Agent after the occurrence of a Default, each Grantor will:

5.3.1 Assembly of Collateral. Assemble and make available to the Collateral Agent the Collateral and all records relating thereto at any place or places specified by the Collateral Agent.

5.3.2 Secured Party Access. Permit the Collateral Agent, by the Collateral Agent's representatives and agents, to enter any premises where all or any part of the Collateral, or the books and records relating thereto, or both, are located, to take possession of all or any part of the Collateral and to remove all or any part of the Collateral.

5.4 License. The Collateral Agent is hereby granted a license or other right to use following the occurrence and during the continuance of a Default, without charge, each Grantor's labels, patents, copyrights, rights of use of any name, trade secrets, trade names, trademarks, service marks, customer lists and advertising matter, or any property of a similar nature, as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral, and, following the occurrence and during the continuance of a Default, each Grantor's rights under all licenses and all franchise agreements shall inure to the Collateral Agent's benefit. In addition, each Grantor hereby irrevocably agrees that the Collateral Agent may, following the occurrence and during the continuance of a Default, sell any of such Grantor's Inventory directly to any person, including without limitation persons who have previously purchased such Grantor's Inventory fro m such Grantor and in connection with any such sale or other enforcement of the Collateral Agent's rights under this Security Agreement, may sell Inventory which bears any trademark owned by or licensed to such Grantor and any Inventory that is covered by any copyright owned by or licensed to such Grantor and the Collateral Agent may finish any work in process and affix any trademark owned by or licensed to such Grantor and sell such Inventory as provided herein.

ARTICLE VI

WAIVERS, AMENDMENTS AND REMEDIES

No delay or omission of the Collateral Agent to exercise any right or remedy granted under this Security Agreement shall impair such right or remedy or be construed to be a waiver of any Default or an acquiescence therein, and any single or partial exercise of any such right or remedy shall not preclude other or further exercise thereof or the exercise of any other right or remedy, and no waiver, amendment or other variation of the terms, conditions or provisions of this Security Agreement whatsoever shall be valid unless in writing signed by the Collateral Agent, with the consent of the Required Credit Secured Parties (or including, if and to the extent required by the Credit Agreement, all the Lenders) and the Required Note Secured Parties, and then only to the extent in such writing specifically set forth. All rights and remedies contained in this Security Agreement or by law afforded shall be cumulative and all shall be available to the Collateral Agent until all of the Secured Obligations have been paid in full.

ARTICLE VII

PROCEEDS; COLLECTION OF RECEIVABLES

7.1 Lockboxes. Upon request of the Collateral Agent, each Grantor shall execute and deliver to the Collateral Agent irrevocable lockbox agreements in the form provided by or otherwise acceptable to the Collateral Agent, which agreements shall be accompanied by an acknowledgment by the bank where the lockbox is located of the Lien of the Collateral Agent granted hereunder and of irrevocable instructions to wire all amounts collected therein to a special collateral account at the Collateral Agent. In such event the applicable Grantor shall, and shall permit the Collateral Agent to, direct the account debtors or obligors under the Receivables to make payment of all amounts then or thereafter due under the Receivables directly to such a lockbox.

7.2 Collection of Receivables. The Collateral Agent may at any time after the occurrence of a Default, by giving a Grantor written notice, elect to require that the Receivables be paid directly to the Collateral Agent for the benefit of the Secured Parties. In such event, the applicable Grantor shall, and shall permit the Collateral Agent to, promptly notify the account debtors or obligors under the Receivables of the Secured Parties' interest therein and direct such account debtors or obligors to make payment of all amounts then or thereafter due under the Receivables directly to the Collateral Agent. Upon receipt of any such notice from the Collateral Agent, the applicable Grantor shall thereafter hold in trust for the Collateral Agent, on behalf of the Secured Parties, all amounts and proceeds received by it with respect to the Receivables and Other Collateral and immediately and at all times thereafter deliver to the Collateral Agent all such amounts and p roceeds in the same form as so received, whether by cash, check, draft or otherwise, with any necessary endorsements. The Collateral Agent shall hold and apply funds so received as provided by the terms of Section 7.3.

7.3 Application of Proceeds. The proceeds of the Collateral, including but not limited to amounts or items deposited in Deposit Accounts, lockboxes, blocked accounts or other similar arrangements, shall be applied by the Agent to payment of the Secured Obligations in the order specified in Section 3a. of the Intercreditor Agreement unless a court of competent jurisdiction shall otherwise direct.

ARTICLE VIII

GENERAL PROVISIONS

8.1 Notice of Disposition of Collateral; Condition of Collateral. Each Grantor hereby waives notice of the time and place of any public sale or the time after which any private sale or other disposition of all or any part of the Collateral may be made. To the extent such notice may not be waived under applicable law, any notice made shall be deemed reasonable if sent to the applicable Grantor, addressed as set forth in Article IX, at least ten days prior to (i) the date of any such public sale or (ii) the time after which any such private sale or other disposition may be made. The Collateral Agent shall have no obligation to clean up or otherwise prepare the Collateral for sale.

8.2 Compromises and Collection of Collateral. Each Grantor and the Collateral Agent recognize that setoffs, counterclaims, defenses and other claims may be asserted by obligors with respect to certain of the Receivables, that certain of the Receivables may be or become uncollectible in whole or in part and that the expense and probability of success in litigating a disputed Receivable may exceed the amount that reasonably may be expected to be recovered with respect to a Receivable. In view of the foregoing, the Borrower agrees that the Collateral Agent may at any time and from time to time, if a Default has occurred and is continuing, compromise with the obligor on any Receivable, accept in full payment of any Receivable such amount as the Collateral Agent in its sole discretion shall determine or abandon any Receivable, and any such action by the Collateral Agent shall be commercially reasonable so long as the Collateral Agent acts in good faith based on inf ormation known to it at the time it takes any such action.

8.3 Secured Party Performance of Debtor Obligations. Without having any obligation to do so, the Collateral Agent may perform or pay any obligation which each Grantor has agreed to perform or pay in this Security Agreement and each Grantor shall reimburse the Collateral Agent for any amounts paid by the Collateral Agent pursuant to this Section 8.3. Each Grantor's obligation to reimburse the Collateral Agent pursuant to the preceding sentence shall be a Secured Obligation payable on demand.

8.4 Authorization for Secured Party to Take Certain Action. Each Grantor irrevocably authorizes the Collateral Agent at any time and from time to time in the sole discretion of the Collateral Agent and appoints the Collateral Agent as its attorney in fact (i) to execute on behalf of each Grantor as debtor and to file financing statements necessary or desirable in the Collateral Agent's sole discretion to perfect and to maintain the perfection and priority of the Collateral Agent's security interest in the Collateral, (ii) to indorse and collect any cash proceeds of the Collateral, (iii) to file a carbon, photographic or other reproduction of this Security Agreement or any financing statement with respect to the Collateral as a financing statement and to file any other financing statement or amendment of a financing statement (which does not add new collateral or add a debtor) in such offices as the Collateral Agent in its sole discretion deems necessary or des irable to perfect and to maintain the perfection and priority of the Collateral Agent's security interest in the Collateral, (iv) to contact and enter into one or more agreements with the issuers of uncertificated securities which are Collateral and which are Securities or with financial intermediaries holding other Investment Property as may be necessary or advisable to give the Collateral Agent Control over such Securities or other Investment Property, (v) subject to the terms of Section 4.1.5, to enforce payment of the Receivables in the name of the Collateral Agent or the applicable Grantor, (vi) to apply the proceeds of any Collateral received by the Collateral Agent to the Secured Obligations as provided in Article VII and (vii) to discharge past due taxes, assessments, charges, fees or Liens on the Collateral (except for such Liens as are specifically permitted hereunder), and each Grantor agrees to reimburse the Collateral Agent on demand for any payment made or any expense incurred by the Collateral Agent in connection therewith, provided that this authorization shall not relieve any Grantor of any of its obligations under this Security Agreement.

8.5 Specific Performance of Certain Covenants. Each Grantor acknowledges and agrees that a breach of any of the covenants contained in Sections 4.1.5, 4.1.6, 4.4, 5.3, or 8.7 or in Article VII will cause irreparable injury to the Secured Parties, that the Secured Parties have no adequate remedy at law in respect of such breaches and therefore agrees, without limiting the right of the Secured Parties to seek and obtain specific performance of other obligations of the Grantors contained in this Security Agreement, that the covenants of the Grantors contained in the Sections referred to in this Section 8.5 shall be specifically enforceable against the Grantors.

8.6 Use and Possession of Certain Premises. Upon the occurrence of a Default, the Collateral Agent shall be entitled to occupy and use any premises owned or leased by any Grantor where any of the Collateral or any records relating to the Collateral are located until the Secured Obligations are paid or the Collateral is removed therefrom, whichever first occurs, without any obligation to pay such Grantor for such use and occupancy.

8.7 Dispositions Not Authorized. No Grantor is authorized to sell or otherwise dispose of the Collateral except as set forth in Section 4.1.5 and notwithstanding any course of dealing between any Grantor and the Collateral Agent or other conduct of the Collateral Agent, no authorization to sell or otherwise dispose of the Collateral (except as set forth in Section 4.1.5) shall be binding upon the Collateral Agent or the Secured Parties unless such authorization is in writing signed by the Collateral Agent with the consent or at the direction of the Required Credit Secured Parties and the Required Note Secured Parties.

8.8 Benefit of Agreement. The terms and provisions of this Security Agreement shall be binding upon and inure to the benefit of the Grantors, the Collateral Agent, the Lenders, the Purchasers, the Agent and their respective successors and assigns (including all persons who become bound as a debtor to this Security Agreement), except that no Grantor shall have the right to assign its rights or delegate its obligations under this Security Agreement or any interest herein, without the prior written consent of the Collateral Agent.

8.9 Survival of Representations. All representations and warranties of the Grantors contained in this Security Agreement shall survive the execution and delivery of this Security Agreement.

8.10 Taxes and Expenses. Any taxes (including income taxes) payable or ruled payable by Federal or State authority in respect of this Security Agreement shall be paid by the Borrower, together with interest and penalties, if any. The Grantors shall reimburse the Collateral Agent for any and all out-of-pocket expenses and internal charges (including reasonable attorneys', auditors' and accountants' fees and reasonable time charges of attorneys, paralegals, auditors and accountants who may be employees of the Collateral Agent) paid or incurred by the Collateral Agent in connection with the preparation, execution, delivery, administration, collection and enforcement of this Security Agreement and in the audit, analysis, administration, collection, preservation or sale of the Collateral (including the expenses and charges associated with any periodic or special audit of the Collateral). Any and all costs and expenses incurred by any Grantor in the performance of a ctions required pursuant to the terms hereof shall be borne solely by such Grantor.

8.11 Headings. The title of and section headings in this Security Agreement are for convenience of reference only, and shall not govern the interpretation of any of the terms and provisions of this Security Agreement.

8.12 Termination. This Security Agreement shall continue in effect (notwithstanding the fact that from time to time there may be no Secured Obligations outstanding) until (i) the Credit Agreement has terminated pursuant to its express terms, (ii) the Note Purchase Agreements have terminated pursuant to their express terms and (iii) all of the Secured Obligations have been indefeasibly paid and performed in full and no commitments of the Collateral Agent, Agent, Purchasers or the Lenders which could give rise to any Secured Obligations are outstanding.

8.13 Entire Agreement. This Security Agreement embodies the entire agreement and understanding between the Grantors and the Collateral Agent relating to the Collateral and supersedes all prior agreements and understandings between the Grantors and the Collateral Agent relating to the Collateral.

8.14 CHOICE OF LAW. THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND 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.

8.15 Distribution of Reports. Each Grantor authorizes the Collateral Agent, as the Collateral Agent may elect in its sole discretion, to discuss with and furnish to its affiliates and to the other Secured Parties or to any other person or entity having an interest in the Secured Obligations (whether as a guarantor, pledgor of collateral, participant or otherwise) all financial statements, audit reports and other information pertaining to the Grantors and their Subsidiaries whether such information was provided by the Grantors or prepared or obtained by the Collateral Agent. Neither the Collateral Agent nor any of its employees, officers, directors or agents makes any representation or warranty regarding any audit reports or other analyses of the Grantors' and their Subsidiaries' condition which the Collateral Agent may in its sole discretion prepare and elect to distribute, nor shall the Agent or any of its employees, officers, directors or agents be liable to any person or entity receiving a copy of such reports or analyses for any inaccuracy or omission contained in or relating thereto.

8.16 Indemnity. Each Grantor hereby agrees to indemnify the Collateral Agent and the other Secured Parties, and their respective successors, assigns, agents and employees, from and against any and all liabilities, damages, penalties, suits, costs, and expenses of any kind and nature (including, without limitation, all expenses of litigation or preparation therefor whether or not the Collateral Agent or any other Secured Party is a party thereto) imposed on, incurred by or asserted against the Collateral Agent or any other Secured Party, or their respective successors, assigns, agents and employees, in any way relating to or arising out of this Security Agreement, or the manufacture, purchase, acceptance, rejection, ownership, delivery, lease, possession, use, operation, condition, sale, return or other disposition of any Collateral (including, without limitation, latent and other defects, whether or not discoverable by the Collateral Agent or any other Secured Party or any Grantor, and any claim for patent, trademark or copyright infringement).

8.17 Release. If the Leverage Ratio (as defined in the Credit Agreement and the Note Purchase Agreements) is less than 3.00:1.0 as of the end of two consecutive fiscal quarters following a Trigger Date, and no Default or Unmatured Default has occurred and is continuing, then upon the request of the Agent, the Collateral Agent shall terminate the security interest of the Collateral Agent in the Collateral and, except with respect to Section 8.10 and Section 8.16 hereof, this Security Agreement shall no longer be in effect.

ARTICLE IX

NOTICES

9.1 Sending Notices. Any notice required or permitted to be given under this Security Agreement shall be sent (and deemed received) in the manner and to the addresses set forth in Section 13.1of the Credit Agreement and Section 18 of the Note Purchase Agreements when deposited in the United States mail, postage prepaid or by telegraph or telex when delivered to the appropriate office for transmission, charges prepaid, addressed to the applicable Grantor at the address set forth opposite such Grantor's name on Exhibit A hereto or to the Collateral Agent at the address set forth in the Credit Agreement.

9.2 Change in Address for Notices. Each of the Grantors and the Collateral Agent may change the address for service of notice upon it by a notice in writing to the other parties.

ARTICLE X

THE COLLATERAL AGENT

Bank One, NA has been appointed Collateral Agent for the Lenders hereunder pursuant to the Intercreditor Agreement. It is expressly understood and agreed by the parties to this Security Agreement that any authority conferred upon the Collateral Agent hereunder is subject to the terms of the delegation of authority made by the other Secured Parties to the Collateral Agent pursuant to the Intercreditor Agreement (including, without limitation, pursuant to Sections 1 and 2 of the Intercreditor Agreement), and that the Collateral Agent has agreed to act (and any successor Collateral Agent shall act) as such hereunder only on the express conditions contained in such Intercreditor Agreement. Any successor Collateral Agent appointed pursuant to the Intercreditor Agreement shall be entitled to all the rights, interests and benefits of the Collateral Agent hereunder.

[Signature pages follow]

IN WITNESS WHEREOF, the Grantors and the Collateral Agent have executed this Security Agreement as of the date first above written.

BANK ONE, NA,

as Collateral Agent

By: /s/ David T. McNeela

Title: Vice President

AI DEVELOPMENT GROUP, INC

By: /s/ Neil E. Schmidgall

Title: President

AI ENTERPRISES, INC.

By: /s/ William Meek

Title: Secretary

AMERICAN AUGERS, INC.

By: /s/ E. Stephen Jett

Title: Asst. Secretary

ASTEC FINANCIAL SERVICES, INC.

By: /s/ E. Stephen Jett

Title: Asst. Secretary

ASTEC HOLDINGS, INC.

By: /s/ E. Stephen Jett

Title: Asst. Secretary

ASTEC, INC.

By: /s/ E. Stephen Jett

Title: Asst. Secretary

ASTEC INDUSTRIES, INC.

By: /s/ E. Stephen Jett

Title: Asst. Secretary

ASTEC INVESTMENTS, INC.

By: /s/ E. Stephen Jett

Title: Asst. Secretary

ASTEC SYSTEMS, INC.

By: /s/ E. Stephen Jett

Title: Asst. Secretary

ASTEC TRANSPORTATION, INC.

By: /s/ E. Stephen Jett

Title: Asst. Secretary

BREAKER TECHNOLOGY, INC.

By: /s/ E. Stephen Jett

Title: Asst. Secretary

CARLSON PAVING PRODUCTS, INC.

By: /s/ E. Stephen Jett

Title: Asst. Secretary

CEI ENTERPRISES, INC.

By: /s/ E. Stephen Jett

Title: Asst. Secretary

HEATEC, INC.

By: /s/ E. Stephen Jett

Title: Asst. Secretary

JOHNSON CRUSHERS INTERNATIONAL, INC.

By: /s/ E. Stephen Jett

Title: Asst. Secretary

KOLBERG-PIONEER, INC.

By: /s/ E. Stephen Jett

Title: Asst. Secretary

PRODUCTION ENGINEERED PRODUCTS, INC.

By: /s/ E. Stephen Jett

Title: Asst. Secretary

RI PROPERTIES, INC.

By: /s/ William Meek

Title: Secretary

ROADTEC, INC.

By: /s/ E. Stephen Jett

Title: Asst. Secretary

SUPERIOR INDUSTRIES OF MORRIS, INC.

By: /s/ E. Stephen Jett

Title: Asst. Secretary

TI SERVICES, INC.

By: /s/ William Meek

Title: Secretary

TELSMITH, INC.

By: /s/ E. Stephen Jett

Title: Asst. Secretary

TRENCOR, INC.

By: /s/ E. Stephen Jett

Title: Asst. Secretary