Exhibit 32

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OAPYMolVHHuXkVdX2pneAtkvgpCRue5r+i4Jk7SYDv5su2wZT7ZQ8bXjxbzSIRdT 55wsvPtjqmoAIKRL+nwqjA== 0000792987-04-000075.txt : 20040809 0000792987-04-000075.hdr.sgml : 20040809 20040809092816 ACCESSION NUMBER: 0000792987-04-000075 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20040630 FILED AS OF DATE: 20040809 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ASTEC INDUSTRIES INC CENTRAL INDEX KEY: 0000792987 STANDARD INDUSTRIAL CLASSIFICATION: CONSTRUCTION MACHINERY & EQUIP [3531] IRS NUMBER: 620873631 STATE OF INCORPORATION: TN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-14714 FILM NUMBER: 04959572 BUSINESS ADDRESS: STREET 1: 1725 SHEPHERD ROAD CITY: CHATTANOOGA STATE: TN ZIP: 37421 BUSINESS PHONE: 4238995898 MAIL ADDRESS: STREET 1: 1725 SHEPHERD ROAD STREET 2: 1725 SHEPHERD ROAD CITY: CHATTANOOGA STATE: TN ZIP: 37421 10-Q 1 f10q63004.htm UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q

(Mark One)

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2004.

o 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.)

1725 Shepherd Road, Chattanooga, Tennessee	37421
(Address of principal executive offices )	(Zip Code)

(423) 899-5898
(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 ý

NO o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

YES ý

NO o

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Class	Outstanding at August 2, 2004
Common Stock, par value $0.20	19,845,766

ASTEC INDUSTRIES, INC.
	INDEX	Page Number
PART I - Financial Information
Item 1. Financial Statements

	Consolidated Balance Sheets as of June 30, 2004 and December 31, 2003	1
	Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2004 and 2003	2
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2004 and 2003	3
	Notes to Unaudited Consolidated Financial Statements	4
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		10
Item 3. Quantitative and Qualitative Disclosures about Market Risk		20
Item 4. Controls and Procedures		20
PART II - Other Information
Item 1. Legal Proceedings		20
Item 4. Submission of Matters to a Vote of Security Holders		21
Item 6. Exhibits and Reports on Form 8-K		21

PART I - FINANCIAL INFORMATION
Item 1. Financial Statements

Astec Industries, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands)
Account Description	June 30, 2004 (Unaudited)	December 31, 2003 (Note 1)
ASSETS
Current Assets:
Cash and cash equivalents	$ 20,325	$ 9,735
Trade receivables, net	61,891	44,764
Other receivables	1,935	1,254
Inventories	103,440	110,234
Prepaid expenses and other	9,114	18,166
Total current assets	196,705	184,153
Property and equipment - net	94,417	105,182
Goodwill	18,233	20,887
Assets held for sale	4,981	5,751
Other assets	4,598	4,983
Total assets	$ 318,934	$ 320,956
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Revolving credit loan	$ -	$ 27,997
Notes payable and current maturities of long-term debt	7,080	8,689
Accounts payable - trade	38,453	28,956
Accrued product warranty	5,292	3,613
Other accrued liabilities	46,121	33,897
Total current liabilities	96,946	103,152
Long-term debt, less current maturities	30,602	38,696
Other non-current liabilities	4,074	11,101
Minority interest in consolidated subsidiary	698	490
Total shareholders' equity	186,614	167,517
Total liabilities and shareholders' equity	$ 318,934	$320,956

Astec Industries, Inc. and Subsidiaries
Consolidated Statements of Operations
(In thousands)
(Unaudited)
	Three months ended			Six months ended
	June 30,			June 30,
	2004		2003	2004	2003
Net sales	$145,937		$103,437	$281,665	$218,523
Cost of sales	115,296		85,416	222,200	181,892
Gross profit	30,641		18,021	59,465	36,631
Selling, general, administrative and engineering expenses	19,913		17,580	39,786	37,984
Income (loss) from operations	10,728		441	19,679	(1,353)
Interest expense	1,072		2,096	2,151	4,435
Other income, net of expense	721		891	661	1,058
Senior note termination expense	-		(3,837)	-	(3,837)
Income (loss) from continuing operations before income taxes	10,377		(4,601)	18,189	(8,567)
Income taxes on continuing operations	4,015		(1,777)	7,014	(3,316)
Minority interest in earnings	36		10	46	31
Income (loss) from continuing operations	6,326		(2,834)	11,129	(5,282)
Income from discontinued operations	1,252		1,012	2,307	2,016
Income taxes on discontinued operations	483		390	888	776
Gain on disposal of discontinued operations (net of tax of $4,970)	5,507		-	5,507	-
Net income (loss)	$ 12,602		$ (2,212)	$ 18,055	$ (4,042)
Earnings per common share Income (loss) from continuing operations:
Basic	$ 0.32	$ (0.14)		$ 0.57	$ (0.27)
Diluted	$ 0.31	$ (0.14)		$ 0.55	$ (0.27)
Income from discontinued operations:
Basic	$ 0.32	$ 0.03		$ 0.35	$ 0.06
Diluted	$ 0.31	$ 0.03		$ 0.35	$ 0.06
Net income (loss): Basic	$ 0.64	$ (0.11)		$ 0.92	$ (0.21)
Diluted	$ 0.62	$ (0.11)		$ 0.90	$ (0.21)
Weighted average common shares outstanding
Basic	19,691,359	19,686,539		19,666,055	19,682,161
Diluted	20,179,112	19,686,539		20,057,591	19,682,161

Astec Industries, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
	Six months ended June 30,
	2004	2003
Cash flows from operating activities:
Net income (loss)	$ 18,055	$(4,042)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	5,692	7,232
Provision for doubtful accounts	411	120
Provision for inventory reserve	1,795	1,490
Provision for warranty reserve	4,931	2,016
Gain on disposal of discontinued operations, net of tax	(5,507)	-
Gain on sale and disposition of fixed assets	(208)	(968)
Minority interest in earnings of subsidiary	208	(10)
(Increase) decrease in:
Trade receivables	(22,587)	(4,882)
Inventories	2,263	5,007
Prepaid expenses and other	115	(1,208)
Deferred tax assets	4,622	-
Other non-current assets	2,117	(2,108)
Increase (decrease) in:
Accounts payable	12,560	479
Accrued product warranty	(3,097)	(1,923)
Other accrued liabilities	(1,139)	(3,789)
Income taxes payable	4,216	828
Other	143	206
Net cash provided (used) by operating activities	24,590	(1,552)
Cash flows from investing activities:
Proceeds from sale of property and equipment - net	816	7,908
Proceeds from sale and repayment of lease portfolio	65	23,157
Proceeds from disposal of discontinued operations, net	23,866	-
Repayments on notes receivable	27	-
Expenditures for property and equipment	(2,155)	(2,688)
Net cash provided by investing activities	22,619	28,377
Cash flows from financing activities:
Net repayments under revolving credit agreement	(29,590)	(83,154)
(Repayments) borrowings under loan and note agreements	(8,073)	37,000
Purchase of Company shares by supplemental executive retirement plan	(117)	(132)
Proceeds from issuance of common stock	1,049	99
Net cash used by financing activities	(36,731)	(46,187)
Effect of exchange rate changes on cash	112	301
Net increase (decrease) in cash and cash equivalents	10,590	(19,061)
Cash and cash equivalents at beginning of period	9,735	30,341
Cash and cash equivalents at end of period	$ 20,325	$ 11,280

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 and six-month periods ended June 30, 2004 are not necessarily indicative of the results that may be expected for the year ended December 31, 2004.

The balance sheet at December 31, 2003 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, 2003.

Note 2. Receivables

Receivables are net of allowance for doubtful accounts of $2,206,000 and $1,752,000 for June 30, 2004 and December 31, 2003, 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)
	June 30, 2004	December 31, 2003
Raw Materials	$ 51,612	$ 49,277
Work-in-Process	25,406	26,113
Finished Goods and Used Equipment	26,422	34,844
Total	$ 103,440	$ 110,234

Note 4. 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.

The following table sets forth the computation of basic and diluted earnings (loss) per share from continuing operations:

	Three Months Ended June 30,		Six Months Ended June 30,
	2004	2003	2004	2003
Numerator:
Net income (loss) from continuing operations	$6,326,000	$ (2,834,000)	$11,129,000	$ (5,282,000)
Denominator:
Denominator for basic earnings per share	19,691,359	19,686,539	19,666,055	19,682,161
Effect of dilutive securities:
Employee stock options	381,281	-	286,900	-
Supplemental Executive Retirement Plan	106,472	-	104,636	-
Denominator for diluted earnings per share	20,179,112	19,686,539	20,057,591	19,682,161
Basic	$ 0.32	$ (0.14)	$ 0.57	$ (0.27)
Diluted	$ 0.31	$ (0.14)	$ 0.55	$ (0.27)

Note 5. Property and Equipment

Property and equipment is stated at cost. Property and equipment is net of accumulated depreciation of $89,616,000 and $87,022,000 as of June 30, 2004 and December 31, 2003, respectively.

Note 6. Comprehensive Income

Total comprehensive income for the three and six-month periods ended June 30, 2004 was $12,922,000 and $17,944,000, respectively. Comprehensive income for the three and six-month periods ended June 30, 2003 was a loss of $873,000 and $1,544,000 respectively.

The components of comprehensive income or loss for the periods indicated are set forth below:

	(in thousands)
	Three months ended June 30,		Six months ended June 30,
	2004	2003	2004	2003
Net income (loss)	$ 12,602	$ (2,212)	$ 18,055	$ (4,042)
Net decrease in accumulated fair value of derivative financial instruments	(28)	(49)	(143)	(76)
Increase in foreign currency translation	348	1,388	32	2,574
Total comprehensive income (loss)	$ 12,922	$ (873)	$17,944	$ (1,544)

Note 7. Contingent Matters

Certain customers have financed purchases of Astec products through arrangements in which the Company is contingently liable for customer debt of approximately $17,518,000 and for residual value guarantees aggregating approximately $1,305,000 at June 30, 2004 and contingently liable for customer debt of approximately $19,820,000 and for residual value guarantees aggregating approximately $1,305,000 at December 31, 2003. The General Electric Capital Corporation credit facility dated May 14, 2003 limits contingent liabilities or guaranteed indebtedness created after May 14, 2003 to an aggregate total of $5,000,000 at any time, or to $2,000,000 for any one customer. As of June 30, 2004, guaranteed indebtedness created under the current loan agreement dated May 14, 2003 was $353,000. At June 30, 2004, the maximum potential amount of future payments for which the Company would be liable is equal to the amounts above. Because the Company does not believe it will be called on to fulfill a ny of these contingencies, the carrying amounts on the consolidated balance sheets of the Company for these contingent liabilities are zero.

In addition, the Company is contingently liable under letters of credit of approximately $16,674,000, of which $9,338,000 is related to Industrial Revenue Bonds. Under the Company's credit facility, the terms of letters of credit are limited to one year. As of June 30, 2004, the maximum potential amount of future payments for which the Company would be liable is approximately $16,674,000, of which $9,338,000 is recorded as debt in the accompanying consolidated balance sheet.

Management has reviewed all claims and lawsuits and, upon the advice of counsel, has made adequate provision for any estimable losses. However, the Company is unable to predict the ultimate outcome of the outstanding claims and lawsuits.

Note 8. Segment Information

	(in thousands)
	Three months ended
	June 30, 2004
	Asphalt Group	Aggregate and Mining Group	Mobile Asphalt Paving Group	Underground Group	All Others	Total
Revenues from external customers	$44,325	$56,975	$26,519	$18,073	$45	$145,937
Intersegment revenues	3,305	762	314	2	614	4,997
Gross profit	9,328	13,154	6,029	2,938	(808)	30,641
Gross profit percent	21.0%	23.1%	22.7%	16.3%	(1,795.6%)	21.0%
Segment profit (loss)	$4,966	$6,145	$2,780	$553	$(8,046)	$6,398

	(in thousands)
	Six months ended
	June 30, 2004
	Asphalt Group	Aggregate and Mining Group	Mobile Asphalt Paving Group	Underground Group	All Others	Total
Revenues from external customers	$87,588	$107,332	$50,650	$36,050	$45	$281,665
Intersegment revenues	5,137	2,197	707	2	614	8,657
Gross profit	17,968	25,320	12,159	5,060	(1,042)	59,465
Gross profit percent	20.5%	23.6%	24.0%	14.0%	(2,315.6%)	21.1%
Segment profit (loss)	$9,262	$11,276	$5,508	$(83)	$(14,682)	$11,281

	(in thousands)
	Three months ended
	June 30, 2003
	Asphalt Group	Aggregate and Mining Group	Mobile Asphalt Paving Group	Underground Group	All Others	Total
Revenues from external customers	$30,733	$39,730	$20,803	$11,933	$238	$103,437
Intersegment revenues	2,467	1,311	(356)	1,519	275	5,216
Gross profit	3,544	8,259	4,418	1,792	8	18,021
Gross profit percent	11.5%	20.8%	21.2%	15.0%	3.4%	17.4%
Segment profit (loss)	$(511)	$1,053	$946	$(1,115)	$(3,687)	$(3,314)

	(in thousands)
	Six months ended
	June 30, 2003
	Asphalt Group	Aggregate and Mining Group	Mobile Asphalt Paving Group	Underground Group	All Others	Total
Revenues from external customers	$75,055	$77,001	$41,259	$24,439	$769	$218,523
Intersegment revenues	4,588	2,864	85	1,519	1,465	10,521
Gross profit	10,120	15,806	8,709	1,762	234	36,631
Gross profit percent	13.5%	20.5%	21.1%	7.2%	30.4%	16.8%
Segment profit (loss)	$1,573	$1,861	$2,134	$(4,149)	$(7,145)	$(5,726)

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

	(in thousands)
	Three months ended June 30,		Six months ended June 30,
	2004	2003	2004	2003
Profit:
Total profit for reportable segments	$14,444	$ 373	$25,963	$ 1,419
Other profit (loss)	(8,046)	(3,687)	(14,682)	(7,145)
Minority interest in earnings	(36)	(10)	(46)	(31)
Recapture (elimination) of intersegment profit	(36)	490	(106)	475
Net income (loss) from continuing operations	6,326	(2,834)	11,129	(5,282)
Income from discontinued operations, net of tax	769	622	1,419	1,240
Gain on sale of discontinued operation, net of tax	5,507	-	5,507	-
Consolidated net income (loss)	$12,602	$(2,212)	$18,055	$(4,042)

Note 9. Discontinued Operations

On June 30, 2004, the Company completed the sale and transfer of substantially all of the assets and substantially all of the liabilities of Superior Industries of Morris, Inc. Under the terms of the agreement, the purchase price for the assets and liabilities of Superior was $24,000,000 in cash, which amount was subject to post-closing adjustment based on the performance of Superior in the second quarter of 2004. The adjusted sales price is $23,600,000, for which the difference in cash will be settled during the third quarter of 2004, subject to a post-closing audit to be completed by August 31. The sales price adjustment of approximately $400,000 will be returned to the buyer if no post-closing adjustments are made during the audit. As a result of the transaction, on June 20, 2004 the Company recorded an after-tax gain on the disposal of discontinued operations of $5,507,000. Income from discontinued operations, net of taxes for the qua rter and six months ended June 30, 2004, was $769,000 and $1,419,000, respectively, and for the quarter and six months ended June 30, 2003 was $622,000 and $1,240,000, respectively. Discontinued operations, after tax, are presented as discontinued operations in the Statements of Operations, as required by SFAS No. 144.

The carrying amounts of the major classes of assets and liabilities disposed on June 30, 2004 were as follows:

Assets:
	Cash	$ 118,000
	Accounts receivable	3,636,000
	Inventory	2,736,000
	Prepaid and other assets	32,000
	Property and equipment	8,154,000
	Goodwill	2,438,000
Total assets		17,114,000
Liabilities:
	Accounts payable	3,141,000
	Other liabilities	836,000
Total liabilities		3,977,000
Net assets and liabilities		$13,137,000

Note 10. 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 11. Seasonality

Approximately 50% to 55% of the Company's business volume typically occurs during the first six months of the year. During the usual seasonal trend, the first three quarters of the year are the Company's stronger quarters for business volume, with the fourth quarter normally being the weakest quarter.

Note 12. Financial Instruments

For the three and six months ended June 30, 2004, the Company had Other Comprehensive Income ("OCI") amortized through interest expense of approximately $115,000 and $230,000, respectively. Monthly amortization of OCI through interest expense is expected to approximate $38,000 through April 2005.

Note 13. Goodwill

At June 30, 2004 and December 31, 2003 the Company had unamortized goodwill in the amount of $18,232,601 and $20,887,084, respectively.

The changes in the carrying amount of goodwill by operating segment for the quarter ended June 30, 2004 are as follows:

	Asphalt Group	Aggregate and Mining Group	Mobile Asphalt Paving Group	Underground Group	Total
Balance December 31, 2003	$ 1,156,818	$18,083,875	$ 1,646,391	$ -	$20,887,084
Foreign currency translation		(216,381)			(216,381)
Sale of subsidiary		(2,438,102)			(2,438,102)
Balance June 30, 2004	$1,156,818	$15,429,392	$ 1,646,391	$ -	$18,232,601

Note 14. Long-term Debt

On May 14, 2003, the Company refinanced its revolving credit facility and senior note agreement with new credit facilities of up to $150,000,000, secured by the Company's assets. The Company entered into a credit facility of up to $145,000,000 with General Electric Capital Corporation, while the Company and its Canadian subsidiary entered into a credit facility of up to $5,000,000 with General Electric Capital Canada, Inc. As part of the $145,000,000 GE Capital agreement, the Company entered into a term loan in the amount of $37,500,000 with an interest rate of one-percent (1%) above the higher of the Wall Street Journal prime rate and the Federal Funds Rate plus one-half of one percent (1/2%) or, at the election of the Company, three-percent (3%) above the London Interbank Offered Rate ("LIBOR"). The term loan maturity date is May 14, 2007.

The May 14, 2003 credit agreement also included a revolving credit facility of up to $107,500,000, of which available credit under the facility is based on a percentage of the Company's eligible accounts receivable and inventories. Availability under the revolving facility is adjusted monthly and interest is due in arrears. The revolving credit facility has a maturity date of May 14, 2007 and at inception, the interest rate on the revolving credit loan was one-percent (1%) above the higher of the Wall Street Journal prime rate and the Federal Funds Rate plus one-half of one percent (1/2%) or, at the election of the Company, three-percent (3%) above LIBOR. The credit facility contains certain restrictive financial covenants relative to operating ratios and capital expenditures.

On September 30, 2003, related to the syndication of the loan by GE Capital, the Company entered into an amendment to the Credit Agreement that reduced the availability under the credit facility from $107,500,000 to $82,500,000. In addition, the amendment increased the interest rate on the term loan and the revolving facility to one and one-half (1.5%) percent above the higher of Wall Street Journal prime rate and the Federal Funds Rate plus one-half of one percent (1/2%) or, at the election of the Company, to three and one-half (3.5%) percent above LIBOR. The Company requested the reduction in the revolving credit facility to reduce the fees paid for the daily available, but unused portion of the revolving facility.

The Company was in compliance with the financial covenants under its credit facility as of June 30, 2004.

The Company's Canadian subsidiary, Breaker Technology Ltd, has available a credit facility issued by General Electric Capital Canada, Inc. dated May 14, 2003 with a term of four years for $5,000,000 to finance short-term working capital needs, as well as to cover the short-term establishment of letter of credit guarantees. As of June 30, 2004, Breaker Technology Ltd had no outstanding cash balance due under the credit facility, but approximately $189,000 in letter of credit guarantees under the facility. The Company is the primary guarantor to GE Capital of payment and performance for this $5,000,000 credit facility. The term of the guarantee is equal to the related debt. The maximum potential amount of future payments the Company would be required to make under its guarantee at June 30, 2004 is $189,000.

In accordance with Emerging Issues Task Force (EITF) Issue 95-22 Balance Sheet Classification of Borrowings Outstanding Under Revolving Credit Agreements That Include Both a Subjective Acceleration Clause and a Lock-Box Arrangement, the Company classifies the revolving credit facility as a current liability in its financial statements.

Note 15. Stock-based Compensation

The following summary presents the Company's net income (loss) and per share earnings (loss) that would have been reported had the Company determined stock compensation cost using the fair value method of accounting set forth under SFAS 123. There is no stock-based employee compensation cost in net income (loss) as reported.

The pro forma impact on net income (loss) shown below may not be representative of future effects.

	(in thousands, except per share amounts)
	Three months ended		Six months ended
	June 30,		June 30,
	2004	2003	2004	2003
Net income (loss), as reported	$12,602	$(2,212)	$18,055	$(4,042)
Stock compensation expense under SFAS 123, net of taxes	(23)	(9)	(40)	(24)
Adjusted net income (loss)	$12,579	$(2,221)	$18,015	$(4,066)

Basic earnings (loss) per share, as reported	$ 0.64	$(0.11)	$ 0.92	$(0.21)
Stock compensation expense under SFAS 123, net of taxes	-	-	-	-
Adjusted basic earnings (loss) per share	$ 0.64	$(0.11)	$ 0.92	$(0.21)

Diluted earnings (loss) per share, as reported	$ 0.62	$(0.11)	$ 0.90	$(0.21)
Stock compensation expense under SFAS 123, net of taxes	-	-	-	-
Adjusted diluted earnings (loss) per share	$ 0.62	$(0.11)	$ 0.90	$(0.21)

Note 16. Product Warranty Reserves

Changes in the Company's product warranty liability for the six months ended June 30, 2004 are as follows:

(in thousands)
Reserve balance at beginning of period	$ 3,613
Warranty liabilities accrued during the period	4,931
Warranty liabilities settled during the period	(3,252)
Reserve balance at the end of the period	$5,292

The Company warrants its products against manufacturing defects and performance to specified standards. The warranty period and performance standards vary by market and uses of its products. The Company estimates the costs that may be incurred under its warranties and records a liability at the time product sales are recorded. The warrant liability is primarily based on historical claim rates, nature of claims and the associated cost.

Note 17. Assets Held for Sale

In 2002 the Company acquired a 300,000 square-feet manufacturing facility located on 108 acres in Loudon, Tennessee. Related to this transaction, the Trencor, Inc. manufacturing operations formerly located in Grapevine, Texas were relocated to the Loudon, Tennessee facility during the fourth quarter of 2002. A portion of the office space of the Grapevine, Texas facility is currently leased to an unrelated party. The Company continues to actively pursue a buyer for the Grapevine, Texas facility and believes it will be sold in 2004 for a gain. The carrying value of equipment, land and building totaling $4,980,757 is classified as "assets held for sale" in the balance sheet and is included in the assets of the Underground Group segment.

Note 18. Post Retirement Benefits

The Company previously disclosed in its financial statements for the year ended December 31, 2003, that it expected to contribute $1,400,000 to its pension plan and $62,000 in other benefits during 2004. As of June 30, 2004, approximately $600,000 of the contributions had been made to the pension plan and approximately $69,000 was paid for other benefits. The Company presently anticipates contributing an additional $1,000,000 for a total of $1,600,000 to fund its pension plan in 2004 and anticipates contributing an additional $65,000 for other benefits during 2004.

The components of net periodic pension cost for the six months ended June 30, 2004 and 2003 are as follows:

	(in thousands)
	Pension Benefit		Other Benefits
	2004	2003	2004	2003
Service cost	$ -	$ 182	$ 59	$ 58
Interest cost	273	304	54	53
Expected return on assets	(242)	(170)	-	-
Amortization of prior service cost	-	-	17	17
Amortization of net (gain) loss	27	90	(13)	(16)
Net periodic benefit cost	$ 58	$ 406	$ 117	$ 112

The Company's two post-retirement medical and life insurance plans provide prescription drug benefits that may be affected by the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the "Act"), signed into law in December 2003. In accordance with FASB Staff Position FAS 106-1, Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003, the effects of the Act on the Company's medical plans have not been included in the measurement of the accumulated post-retirement benefit obligation or net periodic post-retirement benefit cost for 2003. Specific authoritative guidance from the FASB on the accounting for the federal subsidy is pending and that guidance, when issued, may require the Company to restate previously reported information and may require the Company to amend its plans to benefit from the Act.

Item 2. Management's Discussion and Analysis of Financial Condition And Results of Operations

This Quarterly Report on Form 10-Q contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Statements contained anywhere in this Quarterly Report on Form 10-Q that are not limited to historical information are considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and are sometimes identified by the words, "believes," "anticipates," "intends," and "expects" and similar expressions. Such forward-looking statements< A NAME="_DV_M157"> include, without limitation, statements regarding the Company's expected sales during 2004, the Company's expected effective tax rates for 2004, the Company's expected capital expenditures in 2004, the expected benefit of financing arrangements, the ability of the Company to meet its working capital and capital expenditure requirements through June 30, 2005, the impact of the enactment of the highway bill, the improving economic environment as it affects the Company, the timing and impact of the improving economy, the Company being called upon to fulfill certain contingencies, the timing and effects of the sale of the Grapevine, Texas facility, and the expected increase of the Company's presence in international markets.

These forward-looking statements are based largely on management's expectations which are subject to a number of known and unknown risks, uncertainties and other factors discussed in this report and in other documents filed by the Company with the Securities and Exchange Commission, which may cause actual results, financial or otherwise, to be materially different from those anticipated, expressed or implied by the forward-looking statements. All forward-looking statements included in this document are based on information available to the Company on the date hereof, and the Company assumes no obligation to update any such forward-looking statements to reflect future events or circumstances.

In addition to the risks and uncertainties identified elsewhere herein and in other documents filed by the Company with the Securities and Exchange Commission , most recently in the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2004, the risk factors described in the section under the caption "Risk Factors" should be carefully considered when evaluating the Company's business and future prospects.

Overview

The Company is a leading manufacturer and marketer of road building equipment. The Company's businesses:

design, engineer, manufacture and market equipment that is used in each phase of road building, from quarrying and crushing the aggregate to testing the mix for application of the road surface;

manufacture certain equipment and components unrelated to road construction, including trenching, auger boring, directional drilling, industrial heat transfer; and

manufacture and sell replacement parts for equipment in each of its product lines.

The Company has four reportable operating segments, which include the Asphalt Group, the Aggregate and Mining Group, the Mobile Asphalt Paving Group and the Underground Group. The business units in the Asphalt Group design, manufacture and market a complete line of asphalt plants and related components, heating and heat transfer processing equipment and storage tanks for the asphalt paving and other non-related industries. The business units in the Aggregate and Mining Group design, manufacture and market equipment for the aggregate, metallic mining and recycling industries. The business units in the Mobile Asphalt Paving Group design, manufacture and market asphalt pavers, material transfer vehicles, milling machines, screeds, and trench compaction machines. The business units in the Underground Group design, manufacture and market a complete line of trenching equipment and directional drills for the underground construction market. The Company also has one other categor y that contains the business units that do not meet the requirements for separate disclosure as an operating segment. The business units in the other category include Astec Insurance Company and Astec Industries, Inc., the parent company.

On June 30, 2004, the Company sold substantially all of the assets and liabilities of Superior Industries of Morris, Inc. (Superior) to Superior Industries, LLC. Superior was part of the Company's Aggregate and Mining Group. Superior's financial results are included in the income from discontinued operations line and are excluded from all other lines on the statement of operations.

The Company's financial performance is affected by a number of factors, including the cyclical nature and varying conditions of the markets it serves. Demand in these markets fluctuates in response to overall economic conditions and is particularly sensitive to the amount of public sector spending on infrastructure development and privately funded infrastructure development and changes in the price of crude oil (fuel costs).

Public sector spending at the federal, state and local levels has been driven in large part by federal spending under the six-year federal-aid highway program, the Transportation Equity Act for the 21st Century ("TEA-21"), enacted in June 1998. TEA-21 authorized the appropriation of $217 billion in federal aid for road, highway and bridge construction, repair and improvement and other federal highway and transit projects for federal fiscal years October 1, 1998 through September 30, 2003. A new appropriation was enacted setting funding at a level of $33.6 billion for October 1, 2003 through September 30, 2004, but authorizing payment of such funds only through February 29, 2004. The date has been extended until September 30, 2004. A new six-year bill is under consideration. The amounts proposed by the U.S. Senate and the U.S. House of Representatives for funding under such long-term bill each exceed the amount of funding currently in place. However, President Bush has st ated that he prefers that the amount of funding under the long-term legislation remain at its current level equal to $256 billion for the next six years. The Company does not know when the new highway funding bill will be enacted or the amount of funding that will be provided under such bill. The House and Senate members of the "conference committee" were instructed to present "compromise" proposals in an effort to reach an agreement on the overall funding level of a multi-year bill. Congress is in recess until September 7, but conference leaders agreed to direct their staffs to review achievable funding under House and Senate proposals.

In addition to public sector funding, the economies in the markets the Company serves, the price of oil and the price of steel affect the Company's financial performance. Economic downturns, like the one experienced over the past three years, generally result in decreased purchasing by the Company's customers, which in turn, causes reductions in sales and pricing pressure on the Company's products. Rising interest rates also typically has the effect of negatively impacting customers' attitude toward purchasing equipment. In addition, a significant portion of the Company's revenues relate to the sale of equipment that produces asphalt mix. A major component of asphalt is oil. A rise in the price of oil increases the cost of providing asphalt, which would likely decrease demand for asphalt, and therefore decrease demand for the Company's products. Steel is a major component in the Company's equipment. As steel prices have increased during 2004, the cost of goods of the Com pany's products and the costs of purchased parts and components also have increased. If the Company is not able to raise the prices of its products enough to cover the increased in costs of goods, the Company's financial results will be negatively affected. In addition to the factors stated above, many of the Company's markets are highly competitive, and its products compete worldwide with a number of other manufacturers and distributors that produce and sell similar products.

The Company believes that, based on its backlog and customer activity, the economic environment as it impacts the Company will continue to improve. The Company believes that the highway bill, when enacted, will result in sustained or increased federal availability of highway funds and such funding should have a positive impact on customers' attitudes toward purchasing new equipment. In addition, the Company believes that an improving economy should increase state highway funding revenues and private commercial projects.

Results of Operations

For the three months ended June 30, 2004, net sales increased $42,500,000, or 41.1%, to $145,937,000 from $103,437,000 for the three months ended June 30, 2003. Sales are generated primarily from new equipment purchases made by customers for use in construction for privately funded infrastructure development and public sector spending on infrastructure development. For the second quarter of 2004 compared to the second quarter of 2003, net sales for the Aggregate and Mining Group increased approximately $17,245,000, Asphalt Group net sales increased approximately $13,592,000, Underground Group net sales increased approximately $6,140,000 and Mobile Asphalt Group sales increased $5,716,000. For the second quarter of 2004 compared to the same period of 2003, net sales reported under the All Others category decreased $193,000.

For the six months ended June 30, 2004, net sales increased $63,142,000, or 28.9%, to $281,665,000 from $218,523,000 for the six months ended June 30, 2003. For the six months ended June 30, 2004 compared to the same period of 2003, net sales for the Aggregate and Mining Group increased $30,331,000, Asphalt Group net sales increased $12,533,000, Underground Group sales increased approximately $11,611,000 and Mobile Asphalt Paving Group sales increased $9,391,000. For the six months ended June 30, 2004 compared to the same period of 2003, net sales reported under the All Others category decreased $724,000. For the quarter and the six months ended June 30, 2004, compared to the same periods of 2003, the Company believes that the increase in the sales for all business segments related to a general improvement in the economy and pent-up demand in the equipment markets the Company serves. The decrease in sales in the All Others category for the three and six months ended June 30, 2004 compared to the same period of 2003 related primarily to the decreased lease portfolio income from the Company's former captive finance subsidiary. Net sales for the three and six months ended June 30, 2003 were restated to exclude discontinued operations of Superior Industries of Morris, Inc.

International sales for the second quarter of 2004 increased $16,202,000, or 73.8%, to $38,145,000, compared to $21,943,000 for the second quarter of 2003. For the three months ended June 30, 2004 and 2003, international sales accounted for approximately 26.1% and 21.2% of net sales, respectively. International sales increased for the second quarter of 2004 compared to the same period of 2003 primarily in Europe and the Middle East, followed by Asia, China, and Central America. The Company believes the increase in international sales relates to pent-up demand for its equipment, and to benefits from the weakened dollar.

International sales for the six months ended June 30, 2004 compared to the six months ended June 30, 2003 increased $21,709,000, or 48% to $66,914,000. For the six months ended June 30, 2004 and 2003, international sales accounted for approximately 23.8% and 20.7% of net sales, respectively. The increase in international sales for the first half of 2004 compared to sales for the same period of 2003 is due primarily to increased sales in Europe, Canada and Africa. The Company is unable to determine whether or not the increase in international sales volume for the three and six months ended June 30, 2004 compared to the same periods of 2003 will be a trend or if the market as a whole experienced it. International sales for the three and six months ended June 30, 2003 were restated for discontinued operations of Superior Industries of Morris, Inc.

Gross profit for the three months ended June 30, 2004 increased $12,620,000, or 70.0%, to $30,641,000 from $18,021,000 for the three months ended June 30, 2003. Gross profit as a percentage of sales for the three months ended June 30, 2004 and 2003 was 21.0% and 17.4%, respectively.

Gross profit for the six months ended June 30, 2004 increased $22,834,000, or 62.3%, to $59,465,000 from $36,631,000 for the six months ended June 30, 2003. Gross profit as a percentage of sales for the six months ended June 30, 2004 and 2003 was 21.1% and 16.8%, respectively. The gross profit increase for the second quarter and the six months ended June 30, 2004 compared to the same period of 2003 related primarily to increased volume through the manufacturing facilities and greater utilization of manufacturing capacity, which was negatively impacted by increased steel and purchase parts prices and the write-down of used equipment.

Selling, general, administrative and engineering expenses for the three months ended June 30, 2004 were $19,913,000 or 13.6% of net sales, compared to $17,580,000 or 17.0% of net sales for the three months ended June 30, 2003, an increase of $2,333,000 or 13.3%. During the second quarter of 2003, the Company incurred legal and professional fees of approximately $369,000 incurred in negotiating with the prior lenders, primarily regarding the payoff of the senior notes and the related make-whole provision.

Selling, general, administrative and engineering expenses for the six months ended June 30, 2004 were $39,786,000 or 14.1% of net sales, compared to $37,984,000 or 17.4% of net sales for the six months ended June 30, 2003, an increase of $1,802,000 or 4.7%. The increase in selling, general, administrative and engineering expenses for the three and six months ended June 30, 2004 compared to the same periods of 2003 relate primarily to increased bonus accruals for subsidiary financial performance during the current year and increased health insurance expenses related to health claims experience. For the six months ended June 30, 2003, the Company incurred non-recurring expenses of approximately $2,153,000 related to refinancing the former lending arrangements. Non-recurring expenses included legal and professional fees related to negotiations as described above, financial consultants required under the former lending arrangement and real estate recording fees.

For the quarter ended June 30, 2004 compared to the quarter ended June 30, 2003, interest expense decreased $1,024,000, or 48.9%, to $1,072,000 from $2,096,000. Interest expense as a percentage of net sales was 0.7% and 2.0% for the quarters ended June 30, 2004 and 2003, respectively.

For the six months ended June 30, 2004 compared to the six months ended June 30, 2003, interest expense decreased $2,284,000, or 51.5%, to $2,151,000 from $4,435,000. Interest expense as a percentage of net sales was 0.8% and 2.0% for the six months ended June 30, 2004 and 2003, respectively. The decrease in interest expense for the three and six months ended June 30, 2004 compared to the same period of 2003 related primarily to the decrease in outstanding debt and the lower interest rate on debt under the current lending arrangement.

Other income, net of other expense, was $721,000 for the quarter ended June 30, 2004, compared to other income net of expense of $891,000 for the quarter ended June 30, 2003, a decrease of $170,000 or 19.1%. The primary reason for the decrease related to foreign currency exchange losses incurred by the Aggregate and Mining Group.

For the six months ended June 30, 2004, other income, net of other expense, decreased $397,000 to $661,000 from $1,058,000 for the six months ended June 30, 2003. The decrease related primarily to a gain on the sale of fixed assets during the second quarter of 2003, which was generated by the sale of the Company's large tractor-trailers used primarily for the delivery of its Asphalt Group equipment, to a local trucking company. The Company contracts to outside trucking companies substantially all of its equipment delivery.

In the second quarter of 2003, the Company incurred expense of $3,837,000 related to termination of the former lending arrangement. A comparable expense was not incurred during 2004.

For the three months ended June 30, 2004, the Company recorded income tax expense on continuing operations of $4,015,000, compared to income tax benefit from continuing operations of $1,777,000 for the three months ended June 30, 2003. For the six months ended June 30, 2004, the Company recorded income tax expense from continuing operations of $7,014,000, compared to an income tax benefit from continuing operations of $3,316,000 for the six months ended June 30, 2003. The Company expects the effective tax rate for continuing operations for 2004 to be comparable to historical effective rates.

For the three months ended June 30, 2004 the Company had income continuing operations of $6,326,000 compared to a loss from continuing operations of $2,834,000 for the three months ended June 30, 2003. Income from continuing operations for the six months ended June 30, 2004 was $11,129,000 compared to a loss from continuing operations of $5,282,000 for the six months ended June 30, 2003.

For the three months ended June 30, 2004, the Company had income from discontinued operations, net of tax related to the sale of substantially all of the assets and liabilities of Superior Industries of Morris, Inc., of $769,000 and income from discontinued operations of $622,000 for the three months ended June 30, 2003. For the six months ended June 30, 2004 and 2003, income from discontinued operations, net of tax was $1,419,000 and $1,240,000, respectively. The effective tax rate for discontinued operations was comparable to historical effective tax rates for continuing operations.

At June 30, 2004, the Company recorded a gain on the disposal of discontinued operations, net of tax in the amount of $5,507,000. The tax expense recorded related to the gain on disposal at June 30, 2004 was $4,970,000. The higher effective tax rate (47%) of the net gain on disposition was the result of goodwill on the books of Superior Industries, which is not deductible in the calculation of the tax expense.

For the three months ended June 30, 2004 the Company had net income of $12,602,000 compared to a net loss of $2,212,000 for the three months ended June 30, 2003. Earnings per diluted share for the three months ended June 30, 2004 were $0.62 compared to a net loss per share for the quarter ended June 30, 2003 of $0.11. Diluted shares outstanding for the three months ended June 30, 2004 and 2003 were 20,179,112 and 19,686,539, respectively.

For the six months ended June 30, 2004, net income was $18,055,000, compared to a net loss of $4,042,000 for the six months ended June 30, 2003. Earnings per diluted share for the six months ended June 20, 2004 were $0.90 compared to a net loss per share for the six months ended June 20, 2003 of $0.21. Diluted shares outstanding for the six months ended June 30, 2004 and 2003 were 20,057,591 and 19,682,161, respectively.

Backlog of orders for continuing operations at June 30, 2004 was $68,678,000, compared to $41,932,000 at June 30, 2003, an increase of $26,746,000 or 64%. The June 30, 2003 backlog has been restated to exclude the discontinued operations of Superior Industries of Morris, Inc. The increase in the backlog of orders at June 30, 2004 compared to June 30, 2003 related to increased domestic orders totaling approximately $14,941,000 and increased international orders of approximately $11,805,000. The increase in domestic and international orders at June 30, 2004 related primarily to increased orders for the Company's Aggregate and Mining Group, which increased approximately $12,917,000 and 7,091,000, respectively. The Company is unable to determine whether the increase in backlog was experienced by the industry as a whole.

Liquidity and Capital Resources

On October 29, 2003, related to the syndication of the loan by GE Capital, the Company amended its credit agreement to, among other things: 1) raise the threshold of required lender approval to at least eighty-one percent (81%) for certain material amendments to the credit agreement; and 2) require any over-advances (over the borrowing base formula contained therein) be repaid, at the latest, within sixty (60) days. On March 3, 2004, the Company amended its credit facility to revise the fixed charge coverage ratio for the second, third and fourth quarters of 2004.

Total short-term borrowings, including current maturities of long-term debt, were $7,080,000 at June 30, 2004, compared to $36,686,000 at December 31, 2003. As of June 30, 2004, short-term borrowings included current portion of the GECC term loan totaling $6,357,000, the current portion of Industrial Revenue Bonds totaling $500,000 and a short term note payable for financed insurance premiums that totaled $223,000. The balance of the GECC revolving credit facility at June 30, 2004 was zero. At December 31, 2003, short-term borrowings consisted primarily of the GECC revolving line of credit totaling $27,997,000, the current portion of the GECC term loan totaling $6,357,000, financed insurance premiums totaling $1,820,000 and the current portion of Industrial Development Revenue Bonds totaling $500,000.

Net cash provided by operating activities for the six months ended June 30, 2004 was $24,590,000 compared to net cash used by operating activities of $1,552,000 for the six months ended June 30, 2003. The increase in cash from operating activities for the six months ended June 30, 2004 compared to the same period of 2003 related primarily to net income, the gain on disposal of discontinued operations and increased accounts payable, offset by increases in trade receivables.

Long-term debt, less current maturities, decreased to $30,602,000 at June 30, 2004 from $38,696,000 at December 31, 2003. At June 30, 2004, $20,902,000 was outstanding under the long-term principal portion of the GECC term loan and $9,700,000 was outstanding under the long-term principal portion of Industrial Revenue Bonds. With the proceeds from the disposition of Superior Industries on June 30, 2004, the Company made a principal payment on the GECC term loan of $4,500,000 and paid the outstanding balance of the revolving credit facility of approximately $13,000,000 on that date.

The Company's South African subsidiary, Osborn Engineered Products SA (Pty) Ltd., has available a credit facility of approximately $3,212,000 to finance short-term working capital needs, as well as to cover the short-term establishment of letter of credit performance guarantees. As of June 30, 2004, Osborn Engineered Products had no outstanding borrowings under the credit facility, but had approximately $1,351,000 in performance and retention bonds guaranteed under the facility. The facility is secured by a cession of the Company's accounts receivable, retention and cash balance. The available facility fluctuates monthly based upon 50% of the Company's accounts receivables and retention at the end of the prior month.

The Company believes that its current working capital, cash flows generated from future operations and available capacity remaining under its credit facility will be sufficient to meet the Company's working capital and capital expenditure requirements through June 30, 2005.

Capital expenditures for 2004 are forecasted to total approximately $5,460,000. The Company expects to finance these expenditures using internally generated funds and amounts available from its credit facilities. Net cash provided by investing activities for the six months ended June 30, 2004 was approximately $22,619,000, compared to net cash provided by investing activities of $28,377,000, for the six months ended June 30, 2003. Capital expenditures for the six months ended June 30, 2004 were $2,155,000, compared to $2,688,000 for the six months ended June 30, 2003. Proceeds from the repayment of loans was approximately $65,000 for the six months ended June 30, 2004, compared to proceeds from the sale and repayment of lease portfolios and finance receivables of $23,157,000 for the six months ended June 30, 2003. Since the closing of the Company's captive finance company effective December 31, 2002, the Company has not entered into new leasing arrangements. Fo r the six months ended June 30, 2004, proceeds from the disposal of discontinued operations was $23,866,000, which is net of cash of approximately $118,000 included in the assets disposed.

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.

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. On September 30, 2003, the six-year federal-aid highway program, the Transportation Equity Act for the 21^st Century ("TEA-21"), expired. Congress is currently negotiating a six-year TEA-21 reauthorization bill. As part of the fiscal year 2004 budget resolution, the Surface Transportation Extension Act of 2003 provided for $14.1 billion for road resurfacing. In addition, on September 30, 2003, President Bush signed legislation that extended the authority to distribute federal highway and transit funds until February 29, 2004. Fur ther legislation has been entered into to extend authorization of the funding through September 30, 2004. Short-term extensions are necessary to keep federal highway and transit funds flowing while Congress continues working to enact the six-year TEA-21 reauthorization measure. If the reauthorization measure is not enacted into law by the September 30 extension deadline and if further extensions are not entered into, highway funding may stop until such reauthorization bill or extensions are enacted. Even if entered into, the highway 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.

The Company is contingently liable for certain customer debt. If the Company must repay a significant portion of the total contingent liability, it could adversely affect the available operating liquidity of the Company.

Certain customers have financed purchases of the Company's products through arrangements in which the Company is contingently liable for customer debt and for residual value guarantees. These obligations range from 7 to 84 months in duration. If our customers default on this debt, the Company will have to pay the agreed contingency to the lender on behalf of the customer. The financed equipment collateralizes the underlying debt and under contract terms can reduce the amount of the Company's contingent liability in the case of customer default. In the event of customer default, recovery from the lender from the sale of collateral may not be sufficient to repay amounts paid by the Company related to contingent liabilities. Significant cash payments for which the company is contingently liable could adversely affect the Company's available operating funds.

An increase in the price of oil or decrease in the availability of oil could reduce demand for our products. Significant increases in the purchase price of certain raw materials used to manufacture our equipment could have a negative impact on the cost of production and related gross margins.

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, along with the slowdown in the U.S. economy, decreased demand for several key categories of products in 2003.

The Company was notified of and incurred steel price increases and steel surcharges beginning in early 2004. Factors contributing to the increased steel costs are: 1) China's strong economy and its increased steel consumption and purchase of U.S. scrap steel; 2) the weakened U.S. dollar's dissuasion of foreign steel exports to the U.S.; 3) shortages of coke and iron ore; and 4) increased demand for steel in Korea and the U.S. Some types of steel are currently only available on an allocation basis determined by prior year purchases. Although the Company is passing along a portion of the increased steel costs to its customers by way of surcharges and temporary price increases, continued significant steel cost increases to the Company, in addition to potential limitation of the steel supply by mills, could negatively impact the Company's gross margins and financial results.

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

General economic downturns, including 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 and political uncertainty during 2003 has negatively affected our expected revenue growth, which has increased the competitive pricing pressure in the market. 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 steel prices and steel-up charges;
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 amended credit agreement.

The Company was in compliance with financial covenants at March 31 and June 30, 2004. For the quarter ended December 31, 2003, the Company was not in compliance with one financial covenant contained in the credit agreement dated as of May 14, 2003, as amended. On March 3, 2004, the Company's lending syndicate waived the covenant violation and amended the covenant requirement through 2004 with an amendment effective December 31, 2003. The Company may be unable to comply with the amended covenant or the other financial covenants in the credit facility. If such violations occur, the lenders could elect to pursue their contractual remedies under the credit facility, including requiring immediate repayment in full of all amounts outstanding. The Company may also be unable to secure adequate or timely replacement of financing to repay its lenders in the event of an unanticipated repayment demand.

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 2002 in an effort to make sales as demand in our industry slowed. As a result, we experienced price erosion and lower gross margins.

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

We have completed numerous acquisitions since 1994 and may 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.

As an innovative leader in the asphalt and aggregate industries, we occasionally undertake the engineering, design, manufacturing and construction of equipment systems that are new to the market. Estimating the cost of such innovative equipment can be difficult and could result in our realization of significantly reduced or negative margins on such projects.

During 2002 and 2003, the Company experienced negative margins on certain large, specialized aggregate systems projects. These large contracts included both existing and innovative equipment designs, on-site construction and minimum production levels. Since it can be difficult to achieve the expected production results during the project design phase, field testing and redesign may be required during project installation, resulting in added cost. In addition, due to any number of unforeseen circumstances, which can include adverse weather conditions, projects can incur extended construction and testing delays, which can cause significant cost overruns. We may not be able to sufficiently predict the extent of such unforeseen cost overruns and may experience significant losses on specialized projects.

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.

Due to the cyclical nature of our industry, the necessity of government highway funding and the customization of the equipment we sell, we may not be able to accurately forecast our expected quarterly results.

The Company sells equipment primarily to contractors whose demand for equipment depends greatly upon the volume of road or utility construction projects underway or to be scheduled by both government and private entities. Much of the customized equipment manufactured requires significant manufacturing lead-time and specific delivery dates, that allow the expected revenue stream to be included in the manufacturing backlog total. As a result, we may not be able to accurately forecast our expected quarterly results.

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.

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 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, 2003.

Item 4. Controls and Procedures

The Company 's management , with the participation of its the Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company's "disclosure controls and procedures" (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective in timely making known to them material information relating to the Company and the Company's consolidated subsidiaries required to be disclosed in the Company's reports filed or submitted under the Exchange Act. There has been no change in the Company's internal control over financial reporting during the quarter ended June 30, 2004 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

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, 2003. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Contingencies" in Part I - Item 2 of this Report.

Item 4. Submission of Matters to a Vote of Security holders

The Annual Meeting of the Shareholders was held on Tuesday, April 27, 2004, in Chattanooga, Tennessee, at which the following matters were submitted to a vote of the shareholders:

a. Votes regarding the election of four Directors for a term expiring in 2007 were as follows:

Name of Director	FOR	WITHHELD
J. Don Brock	18,748,913	72,612
Albert E. Guth	18,714,717	106,808
W. Norman Smith	18,745,627	75,898
William B. Sansom	18,645,008	176,517

b. Votes regarding the election of one Director for a term expiring in 2006 were as follows:

Name of Director	FOR	WITHHELD
R. Douglas Moffat	18,743,696	77,829

Additional Directors, whose terms of office as Directors continued after the meeting, are as follows:

Term Expiring in 2005
William D. Gehl
Ronald W. Dunmire
Ronald F. Green

Term Expiring in 2006
Daniel K. Frierson
Robert G. Stafford

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	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).

10.43	Purchase of Assets and Real Estate from Superior Industries of Morris, Inc. and Astec Industries, Inc. by Superior Industries, LLC dated June 30, 2004.

10.44	Amendment to Asset Purchase Agreement of Superior Industries of Morris, Inc. to Superior Industries, LLC dated June 30, 2004.

31.1	Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32*	Certification of Chief Executive Officer and Chief Financial Officer of Astec Industries, Inc. pursuant to 18 U.S.C . Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b) Reports on Form 8-K:

	On June 1, 2004, the Registrant filed a Current Report on Form 8-K for the purpose of furnishing a press release announcing an agreement to sell substantially all of the assets and transfer substantially all of the liabilities of Superior Industries of Morris, Inc.
	On June 30, 2004, the Registrant filed a Current Report on Form 8-K for the purpose of furnishing a press release announcing that it had completed the previously announced sale and transfer of substantially all of the assets and substantially all of the liabilities of Superior Industries of Morris, Inc.
	On July 7, 2004, the Registrant filed a Current Report on Form 8-K/A for the purpose of furnishing a press release announcing that it had completed the previously announced sale and transfer of substantially all of the assets and substantially all of the liabilities of Superior Industries of Morris, Inc.
	On July 21, 2004, the Registrant filed a Current Report on Form 8-K for the purpose of furnishing a press release announcing its financial results for its quarter ended June 30, 2004.
______________________

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

* In accordance with Release No. 34-47551, this exhibit is hereby furnished to the SEC as an accompanying document and is not to be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section , nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended.

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 8/9/2004	/s/ J. Don Brock
	J. Don Brock
	Chairman of the Board and President



Date 8/9/2004	/s/ F. McKamy Hall
	F. McKamy Hall
	Vice President, Chief Financial Officer and Treasurer

EXHIBIT INDEX


10.43	Purchase of Assets and Real Estate from Superior Industries of Morris, Inc. and Astec Industries, Inc. by Superior Industries, LLC dated June 30, 2004.

10.44	Amendment to Asset Purchase Agreement of Superior Industries of Morris, Inc. to Superior Industries, LLC dated June 30, 2004.

31.1	Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32*	Certification of Chief Executive Officer and Chief Financial Officer of Astec Industries, Inc. pursuant to 18 U.S.C . Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

EX-10 2 saleagree.htm EXHIBIT 10.43

ASSET SALE OF

SUPERIOR INDUSTRIES OF MORRIS, INC.

TO

SUPERIOR INDUSTRIES, LLC

TABLE OF CONTENTS

Headings Page No.

ARTICLE I : DEFINITIONS

Section 1.1 Specific Definitions.

Section 1.2 Other Terms.

Section 1.3 Other Definitional Provisions.

ARTICLE II : PURCHASE OF ASSETS AND ASSUMPTION OF LIABILITIES

Section 2.1 Purchase of Assets from Seller.

Section 2.2 Excluded Assets.

Section 2.3 Assumed Liabilities.

Section 2.4 Excluded Liabilities and Obligations.

Section 2.5 Sales, Use and Deed Taxes.

Section 2.6 Purchase and Sale of Premises.

Section 2.7 Retention of Second Quarter 2004 Profit by Seller.

ARTICLE III : PURCHASE PRICE AND PAYMENT

Section 3.1 Purchase Price.

Section 3.2 Payment of Purchase Price.

Section 3.3 Allocation of Purchase Price.

Section 3.4 Closing; Delivery and Payment.

ARTICLE IV : REPRESENTATIONS AND WARRANTIES OF SELLER AND ASTEC

Section 4.1 Organization and Authority of Seller.

Section 4.2 Financial Statements.

Section 4.3 Litigation.

Section 4.4 Consents and Approvals.

Section 4.5 Tax Matters.

Section 4.6 Benefit Plans.

Section 4.7 Brokers and Finders.

Section 4.8 Insurance.

Section 4.9 Completeness of Statements; Effect of Representations and Warranties.

Section 4.10 Real Property.

ARTICLE V : REPRESENTATIONS AND WARRANTIES OF BUYER

Section 5.1 Organization and Authority of Buyer.

Section 5.2 Brokers and Finders.

Section 5.3 Legal Proceedings.

Section 5.4 Consents and Approvals.

ARTICLE VI : TAX MATTERS

Section 6.1 Tax Indemnification.

Section 6.2 Tax Returns.

Section 6.3 Contest Provisions.

Section 6.4 Assistance and Cooperation.

Section 6.5 Survival of Obligations.

ARTICLE VII : CERTAIN COVENANTS AND AGREEMENTS OF SELLER

Section 7.1 Access and Information.

Section 7.2 Registrations, Filings and Consents.

Section 7.3 Conduct of Business.

Section 7.4 Best Efforts.

Section 7.5 Retention of Books and Records.

Section 7.6 Further Assurances.

ARTICLE VIII : CONDITIONS TO THE PURCHASE AND SALE

Section 8.1 General Conditions to the Purchase and Sale Relating to Parties.

Section 8.2 Conditions to Purchase by Buyer.

Section 8.3 Conditions to Sale by Seller.

ARTICLE IX : INDEMNIFICATION

Section 9.1 Survival; Rights and Remedies Not Affected by Knowledge.

Section 9.2 Indemnification and Payment of Damages By Astec.

Section 9.3 Indemnification By Buyer.

Section 9.4 Indemnity Claims.

ARTICLE X : TERMINATION

Section 10.1 Termination

ARTICLE XI : MISCELLANEOUS

Section 11.1 Expenses.

Section 11.2 Best Efforts; Further Assurances.

Section 11.3 Public Disclosure.

Section 11.4 Assignment.

Section 11.5 Amendments and Waivers.

Section 11.6 Entire Agreement.

Section 11.7 Schedules.

Section 11.8 Notices.

Section 11.9 Governing Law.

Section 11.10 Severability.

Section 11.11 Section Headings.

Section 11.12 Counterparts.

Section 11.13 Representation By Counsel; Interpretation.

Section 11.14 Arbitration Clause.

Section 11.15 Confidentiality.

ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT ("Agreement") is made and entered into this 1^st day of June, 2004 ("Effective Date") by and among Astec Industries, Inc., a Tennessee corporation ("Astec") Superior Industries of Morris, Inc., a Minnesota corporation ("Seller"), and Superior Industries, LLC, a Minnesota limited liability company ("Buyer").

R E C I T A L S:

WHEREAS, Seller is a wholly owned subsidiary of Astec;

WHEREAS, Seller has been engaged in the business of manufacturing equipment for aggregate processing applications ("Business"); and

WHEREAS, Seller owns certain property, plant, equipment, goodwill, assets and real property from which Seller conducts the Business; and

WHEREAS, Seller desires to sell and transfer to Buyer, and Buyer desires to purchase from Seller, the Purchased Assets of Seller, as more specifically provided herein; and

WHEREAS, Seller owns real property and improvements located in Morris, Minnesota, which constitutes all the real property and improvements used in connection with Seller's Business (the "Premises"); and

WHEREAS, Seller desires to sell and transfer to Buyer and Buyer desires to purchase from Seller, the Premises, as more specifically provided herein.

NOW, THEREFORE, in consideration of the mutual covenants and undertakings contained herein, and subject to and on the terms and conditions herein set forth, the parties intending to be legally bound hereby agree as follows:

ARTICLE I : DEFINITIONS

Section 1.1 Specific Definitions.

As used in this Agreement and any Exhibits, Schedules, or certificates delivered pursuant hereto, the following terms shall have the following meanings:

"Accounts Receivable" has the meaning set forth in Section 2.1(i).

"Advances to Corporate" has the meaning set forth in Section 2.2(b).

"Agreement" means this Agreement and all Exhibits and Schedules.

"Affiliate" means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, such other Person. For the purposes of this definition, "control" of a Person means the power, direct or indirect, to direct or cause the direction of the management and policies of such Person, whether by ownership of securities, contract, law or otherwise and the terms "controlling" and "controlled" shall have meanings correlative to the foregoing.

"Assets" has the meaning set forth in Section 2.1.

"Astec" means Astec Industries, Inc. a Tennessee corporation.

"Base Purchase Price" has the meaning set forth in Section 3.1(a)(i).

"Benefit Plans" has the meaning set forth in Section 4.6.

"Breach" has the meaning set forth in Section 9.2(a).

"Business" has the meaning set forth in the Recitals.

"Buyer" means Superior Industries, LLC, a Minnesota limited liability company.

"Buyer Indemnitees" has the meaning set forth in Section 9.2.

"Cash" has the meaning set forth in Section 2.1(j).

"Claim" has the meaning set forth in Section 9.4(a).

"Claim Notice" has the meaning set forth in Section 9.4(a).

"Closing" has the meaning set forth in Section 3.4.

"Closing Date" means the date of the Closing.

"Closing Date Financial Statements" has the meaning set forth in Section 2.7.

"Code" means the Internal Revenue Code of 1986, as amended to the date hereof.

"Contracts" has the meaning set forth in Section 2.1(h).

"Damages" means debts, obligations, losses, claims, damages (including incidental and consequential damages), liabilities, deficiencies, proceedings, demands, assessments, orders, judgments, writs, decrees, costs and other expenses (including costs of investigation and defense and reasonable attorneys' fees) or diminution of value, whether or not involving a third-party claim, of any nature and of any kind whatsoever.

"Effective Date" has the meaning set forth in the Preamble.

"Encumbrances" means any charges, claims, community property interests, conditions, equitable interests, liens, mortgages, easements, rights-of-way, options, pledges, security interests, rights of first refusal or restrictions of any kind, including any restrictions on use, voting, transfer, receipt of income or exercise of any other attribute of ownership.

"Equipment" has the meaning set forth in Section 2.1(a).

"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.

"Excluded Assets" has the meaning set forth in Section 2.2.

"FDAA" mean the Fold Down Axle Assembly.

"Final Reconciliation" has the meaning set forth in Section 2.7.

"Financial Statements" has the meaning set forth in Section 4.2.

"GAAP" means generally accepted accounting principles in the United States of America, as in effect from time to time.

"Indemnitee" has the meaning set forth in Section 9.4.

"Indemnifying Party" has the meaning set forth in Section 9.4.

"Intangible Property" has the meaning set forth in Section 2.1(c).

"Interim Financial Statements" has the meaning set forth in Section 4.2.

"Inventory" has the meaning set forth in Section 2.1(d).

"IRS" means the Internal Revenue Service.

"KPI" has the meaning set forth in Section 8.3(b).

"Letter of Understanding" means that letter of understanding dated May 14, 2004, entered into between the parties, a copy of which is attached hereto as Exhibit A.

"Licenses and Permits" has the meaning set forth in Section 2.1(e).

"Material Adverse Effect" means a material adverse effect on the business, operations, properties, assets, prospects or condition (financial or otherwise) of Seller, taken as a whole, the Premises, or on any Seller's ability to perform any of their obligations under this Agreement and consummate the transactions contemplated hereby.

"Net Transactional Income Tax" has the meaning set forth in Section 3.1(a)(ii).

"Patents" has the meaning set forth in Section 2.1(c)(iii).

"Pension Plan" has the meaning set forth in Section 4.6.

"Person" means an individual, corporation, partnership, trust or unincorporated organization or government or any agency or political subdivision thereof.

"Personal Property Leases" has the meaning set forth in Section 2.1(g).

"Premises" has that meaning set forth in the recitals.

"Pre-Paid Income Tax" has the meaning set forth in Section 2.2(c).

"Purchase Price" has that meaning set forth in Section 3.1.

"Real Estate Leases" has the meaning set forth in Section 2.1(f).

"Securities Act" means the Securities Act of 1933, as amended.

"Seller" means Superior Industries of Morris, Inc., a Minnesota corporation.

"Seller Indemnitees" has the meaning set forth in Section 9.3.

"Tax" or "Taxes" means any federal, state, local or foreign income, gross receipts, windfall profits, severance, property, production, sales, use, stock transfer, conveyance, intangible, stamp, duty, transfer, reporting, recording, license, excise, franchise or similar taxes, together with any interest, additions or penalties with respect thereto and any interest in respect of such additions or penalties.

"Tax Returns" means all federal, state, local and foreign Tax returns, Tax reports, and declarations of estimated Tax, including without limitation federal income tax returns that include Seller.

"Technology" has the meaning set forth in Section 2.1(c)(iv).

"Third Party Claim" has the meaning set forth in Section 9.4(b).

"Transactional Income Tax" has the meaning set forth in Section 3.1(a)(ii).

"Vehicles" has the meaning set forth in Section 2.1(b).

"Work in Process" has the meaning set forth in Section 2.1(k).

Section 1.2 Other Terms.

Other terms may be defined elsewhere in the text of this Agreement and shall have the meanings indicated throughout this Agreement.

Section 1.3 Other Definitional Provisions.

For all purposes of this Agreement, except as otherwise expressly provided:

a. The terms defined in this Article 1 have the meanings assigned to them in this Article 1 and include the plural as well as the singular;

b. All accounting terms not otherwise defined herein having the meanings assigned under GAAP or under Astec standard operating procedures;

c. All references to Articles, Sections, Exhibits and Schedules are to the designated Articles, Sections, Exhibits and Schedules, respectively, to this Agreement;

d. Pronouns of either gender and neuter shall include, as appropriate, the other pronoun forms;

e. The words "herein", "hereof", and "hereunder" and other words of similar import refer to this Agreement as a whole and not any particular Article, Section, or other subdivision;

f. The use herein of the word "include" or "including", when following any general statement, term or matter, shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not nonlimiting language (such as "without limitation" or "but not limited to" or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that fall within the broadest possible scope of such general statement, term or matter;

g. For the purposes of this Agreement, "knowledge" means actual knowledge or knowledge that would exist upon reasonable inquiry. A Person's knowledge shall specifically include the actual knowledge of any officer or trustee thereof, if applicable, or knowledge that would exist upon reasonable inquiry by any officer or trustee thereof, if applicable. "Astec's knowledge" means the actual knowledge of J. Don Brock, Robert G. Stafford, F. McKamy Hall, or Albert E. Guth, or knowledge that would exist upon reasonable inquiry by those individuals.

h. For purposes of this Agreement, the term "ordinary course of business" shall mean an action that is consistent with the past practices of the applicable party and is taken in the ordinary course of the normal day-to-day operations of the applicable party, is not required to be authorized by the board of directors or similar governing body of the applicable party and is similar in nature and magnitude to actions customarily taken without any authorization by the board of directors of a corporation in the same line of business as the applicable party.

ARTICLE II : PURCHASE OF ASSETS AND ASSUMPTION OF LIABILITIES

Section 2.1 Purchase of Assets from Seller.

Subject to the terms and conditions hereof, Seller agrees on the Closing Date (as hereinafter defined) to assign, sell, transfer, convey, and deliver to Buyer, and Buyer agrees on the Closing Date to purchase from Seller, all of the assets and personal property of Seller (except only the assets specifically identified as "Excluded Assets" in Section 2.2 herein) related to or used in the operation of the Business, wherever the same may be located (collectively referred to as the "Assets"), including, without limitation, the following (all exhibits incorporated in Section 2.1 and 2.2 reflect information as of March 31, 2004, unless stated otherwise):

a. All furniture, equipment, machinery, tooling, trade fixtures and leasehold improvements reflected on Seller's books and records for the Business, including those items identified on Exhibit 2.1(a) ("Equipment");

b. All vehicles including those vehicles identified on Exhibit 2.1(b) hereto ("Vehicles");

c. All intangible personal property, business records, customer lists and goodwill ("Intangible Property"), including the following:

(i) All assumed names under which Seller conducts the Business, including those identified on Exhibit 2.1(c)(i) hereto;

(ii) All tradenames, trademarks or service mark registrations and applications, common law trademarks, including those identified on Exhibit 2.1(c)(ii) hereto;

(iii) All domestic and foreign letters patent, patent applications, and patent and know-how licenses, including those identified in Exhibit 2.1(c)(iii) hereto ("Patents"); and

(iv) All technology, know-how, trade secrets, manufacturing processes, formulae, drawings, designs, computer programs, copyrights (including registrations and applications therefor identified on Exhibit 2.1(c)(iv) hereto, related to the Business, and all documentary evidence thereof ("Technology");

d. All inventory, including raw materials, supplies, work in process and finished inventory of the Business as of the Closing Date ("Inventory");

e. To the extent transferable or assignable, all permits, licensing approvals and notifications, governmental or otherwise, relating to the Business ("Licenses and Permits");

f. To the extent transferable or assignable, all of Seller's contract rights and benefits under its real estate leases ("Real Estate Leases") used in the Business, including leases identified in Exhibit 2.1(f) hereto, subject to the terms and conditions thereof;

g. To the extent transferable or assignable, all of Seller's contract rights and benefits under all of its personal property leases for tangible personal property used in the Business, including those leases identified in Exhibit 2.1(g) hereto, subject to the terms and conditions thereof ("Personal Property Leases");

h. All other contract rights related to the Business, subject to the terms and conditions thereof identified on Exhibit 2.1(h) ("Contracts");

i. All accounts receivable of Seller relating to the Business identified on Exhibit 2.1(i) ("Accounts Receivable");

j. All cash on hand of Seller as of the Closing Date identified on Exhibit 2.1(j) ("Cash");

k. All work in process, customer orders and vendor requests identified on Exhibit 2.1(k) ("Work in Process"); and

l. The Premises as legally described on Exhibit 2.1(l).

Section 2.2 Excluded Assets.

Notwithstanding anything herein to the contrary, Buyer does not purchase, and Seller does not sell, any of the following assets ("Excluded Assets"):

a. Seller's corporate minute book and corporate records (provided that Seller will provide copies thereof relating to the Business to Buyer upon request by Buyer for reasonable business purposes).

b. Net funds sent by Seller to Astec, referred to herein as "Advances to Corporate" which shall be more fully described on Exhibit 2.2(b).

c. Seller's pre-paid income tax which shall be more fully described on Exhibit 2.2(c) ("Pre-Paid Income Tax").

d. Seller's prepaid property casualty insurance premiums.

Section 2.3 Assumed Liabilities.

Subject to the terms and conditions hereof, and with the exception of those excluded liabilities set forth in Section 2.4, upon the Closing Date, Buyer shall assume the obligation to pay all known and unknown liabilities of the Seller, including warranty and product liability claims.

Section 2.4 Excluded Liabilities and Obligations.

Buyer does not assume and Seller does not transfer or assign any of the following liabilities or obligations relating to Seller and the Business:

Any obligation incurred by Seller for accounting, legal or other professional fees which are related to the consummation of the transaction contemplated herein;

All obligations or liabilities of Seller known to Astec but not disclosed to Buyer prior to the Closing Date;

Any state or local taxes based upon or measured by revenue or profits from sales to end users in the operation of the Business from November 1, 1999 through the Closing Date.

All obligations or liabilities of Seller for federal, state or local income taxes or excise or franchise taxes arising from Ernst & Young prepared tax returns from November 1, 1999 through the Closing Date;

All obligations or liabilities incurred by Seller or Astec in connection with the Purchase Agreement and the transactions provided for herein, including any liabilities to Astec's shareholders or shareholder's claims and any claims by unsuccessful "bidders" for the purchase of the assets of Seller;

All obligations or liabilities of Seller or Astec under any credit agreement with Seller's or Astec's current or past lenders;

All obligations and liabilities of Seller relating to any covered medical or dental plan benefits provided by an Astec sponsored benefit plan for any eligible and insured employee of Seller from 11/01/99 to 6/30/04 where the claim is incurred prior to the Closing Date;

All obligations and liabilities of Seller relating to contributions to Astec's 401K retirement plan with respect to any employee of Seller for 11/01/99 to 6/30/04;

All claims or potential claims against Seller arising out of or relating to Superior or the ownership or operation of Superior by Seller which were actually known to Seller but not disclosed to Buyer prior to the Closing Date; and

All obligations and liabilities, if any, of Seller relating to the Astec Employee Bonus Plan.

Section 2.5 Sales, Use and Deed Taxes.

Except as otherwise provided herein, Buyer shall be responsible for payment of any sales, use or deed taxes assessable with respect to the transfer of the Purchased Assets contemplated herein.

Section 2.6 Purchase and Sale of Premises.

Upon the terms and subject to the conditions of this Agreement, Buyer and Seller agree that Seller shall transfer, sell and assign the Premises to Buyer.

Section 2.7 Retention of Second Quarter 2004 Profit by Seller.

The parties agree that the account balance of Advances to Corporate as of March 31, 2004 is $9,287,848, and shall be subject to the adjustments described below. The adjustments to the account balance of Advances to Corporate for the period of March 31, 2004 through and including June 30, 2004 will be reconciled by the parties to Seller's pre-tax earnings for the second calendar quarter ending June 30, 2004. The March 31, 2004 balance in shareholder's equity was $23,319,928 and the March 31, 2004 balance in Advances to Corporate was $9,287,848. Seller's pre-tax income from March 31, 2004 to June 30, 2004 will be compared to the change in Advances to Corporate from March 31, 2004 to June 30, 2004. If the increase in Advances to Corporate exceeds Seller's pre-tax income for the quarter ended June 30, 2004, Seller will owe Buyer such difference. If the increase in Advances to Corporate is less than Seller's pre-tax income for the quarter ended June 30, 2004, Buyer will owe Seller s uch difference. By August 31, 2004, a reconciliation (true-up) of the audited or reviewed June 30, 2004 financial statements (the "Closing Date Financial Statements") to the March 31, 2004 financial statements shall be made and the difference shall be paid within thirty (30) days by the Buyer or the Seller to the other party ("Final Reconciliation"). The Closing Date Financial Statements will be prepared in accordance with GAAP and Astec's standard operating procedures. The Closing Date Financial Statements shall be reviewed by Astec's Corporate Staff and Ernst & Young auditors as required and by Buyer's auditors if desired by Buyer. The balance sheet accounts and other financial information shall be analyzed and detailed contents reconciled to the general ledger as of June 30, 2004 in accordance with the "client assistance package" provided by Ernst & Young, which is attached as Exhibit 2.7. Such client assistance package shall be completed by Seller's accounting personnel on or before August 2, 200 4 and submitted to Astec's Chief Financial Officer. If the Closing Date is delayed for any reason, the dates set forth above shall be adjusted accordingly.

ARTICLE III : PURCHASE PRICE AND PAYMENT

Section 3.1 Purchase Price.

The total purchase price shall consist of a base purchase price and the Net Transactional Income Tax (collectively, "Purchase Price"):

For the purpose of defining the Purchase Price, the following definitions shall control:

"Base Purchase Price" shall mean the sum of Twenty Three Million and no/100ths Dollars ($23,000,000.00), together with the balance of liabilities assumed in Section 2.3;

"Transactional Income Tax" shall mean the sum of all federal and state income tax payable by Seller and Astec as a result of the consummation of the transaction contemplated by this Agreement (with this transaction consummated as an "asset" as opposed to a "stock" transaction), which amount shall not exceed Three Million Three Hundred Sixty Seven Thousand Seven Hundred Three and no/100 Dollars ($3,367,703.00). The amount of Three Million Three Hundred Sixty Seven Thousand Seven Hundred Three and no/100 Dollars ($3,367,703.00) will be divided equally between Buyer and Seller and shall then be reduced by a number resulting from the following formula: the excess of Seller's actual pre-tax earnings over its forecasted pre-tax earnings for the period of March 31, 2004 through and including June 30, 2004 multiplied by a factor of .60 (tax effected) and the result of application of the formula will then be referred to as the "Net Transactional Income Tax". For purposes of illustration, if the Seller's pre-tax earnings are $1,400,000 for the applicable period, the calculation would be as follows:

$3,367,703 Estimated Tax to convert this transaction to an asset sale

divided by 2, 50/50 division between Seller/Buyer

$1,683,851

- 318,000 [Est. $1,400,000 - Forecast $870,000 = Pre-Tax $530,000

x Tax Effect 60%]

Credit for after tax earnings in excess of 2^nd Qtr. forecast

$1,365,851 Net Transactional Income Tax

The Purchase Price shall be the sum of the Base Purchase Price and the Net Transactional Income Tax, subject to adjustment, upon final audit or review as provided for in Section 3.1 (a)(ii) above on or before August 31, 2004.

Cash in the amount of Twenty Four Million and no/100 Dollars ($24,000,000.00) shall be payable by Buyer to Seller in collected funds at Closing. The calculation of the Purchase Price will be finalized upon completion of an audit as described in Section 3.1 (a)(ii) above.

At Closing, Seller shall provide Buyer with a credit of Fifteen Thousand and no/100 Dollars ($15,000.00) against the Purchase Price as Seller's contribution towards the cost of the issuance of a commitment for title insurance on the Premises and the state deed tax required for the transfer the Premises. Buyer shall assume the remaining cost of the issuance of a commitment for title insurance on the Premises and the remaining state deed tax required for the transfer of the Premises.

Section 3.2 Payment of Purchase Price.

The Purchase Price shall be paid as follows:

Payment at Closing. Buyer shall deliver to Seller the sum of Twenty-four Million and no/100 Dollars ($24,000,000.00) of the Purchase Price at the Closing by wire transfer to a bank account designated by Seller. The balance of the Purchase Price, if any, shall be paid in accordance with Section 3.2(b) hereafter.

Payment of the Balance of the Purchase Price. The balance of the Purchase Price shall be paid by Buyer to Seller by wire transfer to a bank account designated by Seller within thirty (30) days of the completion of the Final Reconciliation.

Section 3.3 Allocation of Purchase Price.

The Purchase Price shall be allocated by the parties in accordance with Exhibit 3.3 attached hereto.

Section 3.4 Closing; Delivery and Payment.

The closing of the sale and purchase of the Assets and the Premises contemplated herein (the "Closing") shall take place at the offices of Mansfield, Tanick & Cohen, P.A., 1700 Pillsbury Center South, 220 South Sixth Street, Minneapolis, Minnesota 55402-4511 at 10:00 a.m. CST on June 30, 2004, or at such other time or place as is mutually agreed to by the parties hereto. The Closing shall be facilitated by a pre-closing held on or before June 29, 2004.

ARTICLE IV : REPRESENTATIONS AND WARRANTIES OF SELLER AND ASTEC

Seller and Astec jointly and severally represent and warrant to Buyer as follows:

Section 4.1 Organization and Authority of Seller.

Seller is duly formed and validly existing as a corporation under the laws of the State of Minnesota. Seller has all necessary corporate power, capacity and authority to execute, deliver and perform this Agreement. This Agreement has been duly authorized by all requisite corporate action on the part of Seller, executed and delivered by Seller and constitutes the valid and binding obligation of Seller, enforceable in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws affecting creditors' rights generally and by general principles of equity. Neither the execution and delivery by Seller of this Agreement nor consummation of the transactions contemplated hereby will violate any provision of the articles of incorporation or bylaws of Seller; or any contract provision, license, franchise or permit to which Seller is a party or by which it is bound; or any law, statute or regulation or any injunction, order or decree of any government agency or authority or court to which Seller is subject except to the extent, in each case, that such a violation would not prohibit or materially impair Seller's ability to perform its obligations under this Agreement.

Section 4.2 Financial Statements.

Astec has heretofore furnished to Buyer copies of the following financial statements: unaudited balance sheets of Seller as of December 31 in each of the years 1999 through 2003, and the related unaudited statements of income, changes in stockholders' equity, and cash flow for each of the fiscal years then ended, and an unaudited balance sheet of Seller as of April 30, 2004 and the related unaudited statements of income, changes in stockholders' equity, and cash flow for the four (4) months then ended (the "Interim Financial Statements"; with all of those items referred to above collectively referred to as the "Financial Statements"). The Financial Statements represent actual, bona fide transactions and have been prepared in conformity with GAAP applied on a consistent basis (except for changes, if any, required by GAAP and disclosed therein) and in accordance with Astec's standard operating procedures, and the results of operations, changes in stockholders' equity and cash flows of Seller for such periods are consistent with the books and records of Seller. Such Financial Statements fairly present in all material respects the financial position of Seller as at the respective date thereof and the results of operations and cash flows of Seller for the periods then ended.

Section 4.3 Litigation.

Except as set forth in Schedule 4.3, there are no actions, suits, proceedings or investigations pending or, to the best of Seller's or Astec's knowledge, overtly threatened against Seller at law, in equity or otherwise in, before, or by, any court or governmental agency or authority which individually or in the aggregate would reasonably be expected to have a Material Adverse Effect.

Section 4.4 Consents and Approvals.

Except as set forth in Schedule 4.4, the execution, delivery and performance of this Agreement by Seller or Astec will not require any consent, waiver, authorization or approval of, or the making of any filing with or giving of notice to, any person, entity or governmental authority except for such consents, waivers, authorizations or approvals which if not obtained would not reasonably be expected to have a Material Adverse Effect.

Section 4.5 Tax Matters.

(i) Astec has provided a true and complete copy of Seller's federal and state income tax returns filed for the period ending December 31, 2002. (ii) The income tax returns for the period ending December 31, 2003 have been properly extended and will be filed within the extension period. (iii) Except as set forth in Schedule 4.5, all federal and state income Tax Returns that are required to be filed on or before the Closing Date by or with respect to Seller have been filed, all Taxes shown to be due on the Tax Returns referred to in clauses (i) and (ii) have been or will be paid in full, any deficiencies asserted or assessments made as a result of any examinations of the Tax Returns referred to in clauses (i) and (ii) by the IRS or the relevant state, local or foreign taxing authority have been or will be paid in full, no issues that have been raised by the relevant taxing authority in connection with any such examination of any of the Tax Returns referred to in cla use (i) are currently pending, and no waivers of statutes of limitations have been given or requested by or with respect to any federal or state income Taxes of Seller.

Section 4.6 Benefit Plans.

a. Schedule 4.6(a) lists each "employee benefit pension plan", as such term is defined in Section 3(2) of ERISA (a "Pension Plan"), and each "employee welfare benefit plan", as such term is defined in Section 3(1) of ERISA (together with the Pension Plans, the "Benefit Plans"), which is maintained by Astec and contributed to by Seller for the benefit of employees of Seller and which is subject to ERISA. Each Benefit Plan has been from its inception and remains in compliance in all material respects with such Plan's terms and, where applicable, with ERISA and the Code.

b. Except as set forth in Schedule 4.6(b), to the knowledge of Astec, Seller has no incentive compensation, bonus, deferred compensation, stock option, stock ownership, stock bonus, stock purchase, savings, retirement, pension, profit-sharing, severance or other similar plan or arrangement with or for the benefit of any officer or employee.

c. Each Pension Plan that is intended to be qualified under Section 401(a) of the Code has received a favorable determination letter from the IRS that it is a qualified plan for purposes of Section 401(a) of the Code, and there has been no amendment to any Pension Plan subsequent to the determination letter which would reasonably be expected to materially adversely affect such Plan's qualified status. .

d. Since November 1, 1999, all contributions required to be made to any Benefit Plan have been timely made or reflected in the Financial Statements in all material respects. No Pension Plan has an "accumulated funding deficiency", as such term is defined in Section 302 of ERISA and Section 412 of the Code (whether or not waived).

e. Since November 1, 1999, Seller has not incurred any liability to the Pension Benefit Guaranty Corporation under Title IV of ERISA, other than for the payment of premiums, if any, all of which have been paid when due.

f. Since November 1, 1999, Seller has never contributed or been required to contribute to any "multiemployer plan", as such term is defined in Section 3(37) of ERISA.

g. Since November 1, 1999, Seller has not engaged in any "prohibited transaction", as such term is defined in Section 4975 of the Code, or a transaction prohibited by Section 406 of ERISA, for which a statutory or administrative exemption is not available and that would result in a material tax or a material penalty under Section 4975 of the Code or Section 502(i) of ERISA.

Section 4.7 Brokers and Finders.

Astec has not employed any broker, finder, consultant or intermediary in connection with the transactions contemplated by this Agreement who would be entitled to a broker's, finder's or similar fee or commission in connection therewith or upon the consummation thereof.

Section 4.8 Insurance.

As of the Closing the following information will have been provided by Astec with respect to each insurance policy (including policies providing property, casualty, liability, and workers' compensation coverage and bond and surety arrangements) to which Seller has to Astec's knowledge been a party, a named insured, or otherwise the beneficiary of coverage at any time within the past three (3) years:

a. the name, address, and telephone number of the agent;

b. the name of the insurer, the name of the policyholder, and the name of each covered insured;

c. the policy number and the period of coverage;

d. the scope (including an indication of whether the coverage was on a claims made, occurrence, or other basis) and amount (including a description of how deductibles and ceilings are calculated and operate) of coverage; and

e. description of any retroactive premium adjustments or other loss sharing arrangements.

At Buyer's request, Astec shall provide a certificate of such coverage issued by McGriff, Seibels & Williams.

Section 4.9 Completeness of Statements; Effect of Representations and Warranties.

To the best of Astec's knowledge, no representation or warranty of Seller and Astec in the Agreement contains any untrue statement of a material fact, omits any material fact necessary to make such representation or warranty, under the circumstances which it was made, not misleading, or contains any misstatement of a material fact. Seller and Astec have made due inquiry and investigation concerning the matters to which the representations and warranties of Seller and Astec under this Agreement pertains and Seller and Astec do not know of any facts, events or circumstances which have not been disclosed to Buyer which are material to Seller or its Business.

Section 4.10 Real Property.

Attached as Exhibit 4.10 is a commitment for title insurance issued by Chicago Title Insurance Company which describes the premises owned by Seller. The Premises will be conveyed by Seller to Buyer according to the terms of such title insurance commitment and subject to the encumbrances listed therein except that the encumbrances reflecting obligations to General Electric Capital Corporation shall have been removed at Closing. With respect to the Premises:

Seller shall pay the cost of recording any documents necessary to clear any objections to marketable title for the Premises.

Seller shall pay one-half of the cost incurred with the title company for the purposes of the Closing and transferring the Premises to Buyer. Buyer shall pay one-half of the cost incurred with the title company for the purposes of the Closing and transferring the Premises to Buyer.

At Closing, Seller shall provide Buyer with a credit of Fifteen Thousand and no/ 100 Dollars ($15,000.00) against the Purchase Price as Seller's contribution towards the cost of the issuance of a commitment for title insurance and the state deed tax required for the transfer of any real property which may be the subject of this transaction.

ARTICLE V : REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer represents and warrants to Seller and Astec as follows:

Section 5.1 Organization and Authority of Buyer.

Buyer has been duly organized and is validly existing under the laws of Minnesota, with the limited liability power and authority to enter into this Agreement and perform its obligations hereunder. This Agreement has been duly authorized, executed and delivered by Buyer and constitutes a legal, valid and binding obligation of Buyer, enforceable in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws affecting creditors' rights generally and to general principles of equity. No other proceedings on the part of Buyer are necessary to authorize this Agreement and the consummation of transactions contemplated hereby. Neither the execution and delivery of this Agreement nor compliance by Buyer with its terms and provisions will violate: (a) any provision of the operating agreement or member control agreement of Buyer; or (b) any contract provision, license, franchise or permit to which Buyer is a party or by which it is bound; or (c) any law, statute or regulation or any injunction, order or decree of any government agency or authority or court to which Buyer is subject except to the extent, in each case, that such a violation would not have a Material Adverse Effect.

Section 5.2 Brokers and Finders.

Buyer has not employed any broker, finder, consultant or intermediary in connection with the transactions contemplated by this Agreement who would be entitled to a broker's, finder's or similar fee or commission in connection therewith or upon the consummation thereof.

Section 5.3 Legal Proceedings.

There are no actions, suits, proceedings or investigations pending or, to Buyer's knowledge, overtly threatened against Buyer at law, in equity or otherwise in, before, or by, any court or governmental agency or authority which individually or in the aggregate would reasonably be expected to have a Material Adverse Effect.

Section 5.4 Consents and Approvals.

Except as set forth in Schedule 5.4, the execution, delivery and performance of this Agreement by Buyer will not require any consent, waiver, authorization or approval of, or the making of any filing with or giving of notice to, any Person, entity or governmental authority, except for such consent, waivers, authorizations or approvals which the failure to obtain would not have a Material Adverse Effect.

ARTICLE VI : TAX MATTERS

Section 6.1 Tax Indemnification.

Except to the extent disclosed on Schedule 4.5, or as otherwise provided for in the Financial Statements, Seller shall be liable for, indemnify and hold the Buyer harmless against any federal or state Taxes imposed on Seller, the Assets or the Premises for any taxable year or period after October 31, 1999 (or portion thereof) that ends on or before the Closing Date.

Buyer shall be liable for, indemnify and hold Seller harmless against, any Taxes imposed on the Assets or the Premises that are allocable or attributable to any taxable year or period that begins after the Closing Date. Buyer shall be entitled to any refund of such Taxes that are allocable to such periods.

Section 6.2 Tax Returns.

Tax Returns that are required to be filed by or with respect to Seller shall be filed as follows:

a. Seller shall file or cause to be filed when due (taking into account extensions) all Tax Returns that are required to be filed by or with respect to Seller, the Assets and the Premises for taxable years or periods ending on or before the Closing Date. Except as otherwise agreed, such Tax Returns shall be completed in a manner consistent with past practice.

b. Buyer shall file or cause to be filed when due (taking into account extensions) all Tax Returns that are required to be filed by or with respect to the Assets and the Premises for taxable years or periods ending after the Closing Date. Except as otherwise agreed, such Tax Returns shall be completed in a manner consistent with past practice.

Section 6.3 Contest Provisions.

Buyer shall promptly notify Astec in writing upon receipt by Buyer, Seller or any of their respective Affiliates of notice of any pending or threatened federal, state, local or foreign audits or assessments which may materially affect the liabilities for Taxes of Seller for which Seller would be required to indemnify Buyer pursuant to Section 6.1; provided that failure to comply with this provision shall not affect Buyer's right to indemnification hereunder except to the extent Seller is prejudiced by such failure. Astec shall have the sole right to represent the interests of Seller in any such audit or administrative or court proceeding relating to taxable periods for which they may be required to indemnify Buyer pursuant to Section 6.1, and to employ counsel of their choice at their expense. Neither Buyer nor Seller may agree to settle any such claim for the portion of a taxable year or period which may be the subject of indemnification by Seller under Section 6.1 without the prior written consent of Astec, which consent shall not be unreasonably withheld.

Section 6.4 Assistance and Cooperation.

After the Closing Date, each of Seller and Buyer shall:

a. assist (and cause their respective affiliates to assist) the other party in preparing any Tax Returns which such other party is responsible for preparing and filing, including all necessary tax information through the Closing Date;

b. cooperate fully in preparing for any audits of, or disputes with taxing authorities regarding, any Tax Returns of Seller, and in the collection of reimbursement owed by customers or other third parties for Taxes paid by either Astec, Seller or Buyer;

c. make available to the other and to any taxing authority as reasonably requested all information, records, and documents relating to Taxes of Seller;

d. provide timely notice to the other in writing of any pending or threatened tax audits or assessments of Seller for taxable periods for which the other may have a liability under Section 6.1; and

e. furnish the other with copies of all correspondence received from any taxing authority in connection with any tax audit or information request with respect to any such taxable period.

Section 6.5 Survival of Obligations.

The obligations of the parties set forth in this Article 6 shall remain in effect until the expiration of the applicable statute of limitations (including any waivers thereof).

ARTICLE VII : CERTAIN COVENANTS AND AGREEMENTS OF SELLER

Section 7.1 Access and Information.

Seller shall permit Buyer and its representatives after the date of execution of this Agreement to have reasonable access, during regular business hours and upon reasonable advance notice, to any financial and operating data and other information that is available with respect to the business and Assets of Seller and the Premises as Buyer shall from time to time reasonably request. In the event of the termination of this Agreement, Buyer shall promptly deliver (without retaining any copies thereof) to all applicable parties, or (at such parties' option) certify to such parties that it has destroyed, all documents, workpapers and other material obtained by Buyer or on its behalf from Seller or from any of their respective advisors, agents, employees or representatives as a result hereof or in connection with the matters contemplated by this Agreement, and all documents, workpapers and other materials prepared by Buyer or its advisors, agents, employees or representatives in connecti on with the matters contemplated by this Agreement, in each case whether so obtained or prepared before or after the execution hereof. Buyer shall at all times prior to the Closing Date, and in the event of termination of this Agreement, cause any information so obtained or prepared to be kept confidential and will not use, or permit the use of, such documents, workpapers and other materials in its business or in any other manner or for any other purpose except as contemplated hereby.

Section 7.2 Registrations, Filings and Consents.

Prior to the Closing, Seller, Astec and Buyer shall cooperate and use their respective best efforts to make all registrations, filings and applications, to give all notices and to obtain any governmental or other consents, transfers, approvals, orders, qualifications and waivers necessary or desirable for the consummation of the transactions contemplated hereby.

Section 7.3 Conduct of Business.

Prior to the Closing, and except as otherwise contemplated by this Agreement or consented to or approved by Buyer, Seller shall cause its officers and managers:

a. To operate the Business of Seller in the ordinary course consistent with past practices and to use its commercially reasonable best efforts to preserve the business and goodwill of customers and suppliers;

b. Not to change or amend its articles or certificates of incorporation or bylaws, issue, sell or redeem any shares of its capital stock, or issue or sell any securities convertible into, or options with respect to, or warrants to purchase or rights to subscribe to, any shares of its capital stock or enter into any agreement obligating it to do any of the foregoing, enter into any amendment of any Material Contract which materially adversely affects the rights of Seller thereunder or enter into any new, or make any amendment to any existing, collective bargaining agreement or Benefit Plan which materially adversely affects the rights of Seller thereunder, except as required by law, in which case Seller shall give prompt notice to Buyer; and

c. Not to make, or enter into any agreement to make, any acquisition or sale of property or assets (tangible or intangible) other than in the ordinary course of business consistent with past practices.

Section 7.4 Best Efforts.

Prior to Closing, each of the parties hereto shall use its commercially reasonable best efforts to fulfill or obtain the fulfillment of the conditions to Closing, including, without limitation, the execution and delivery of all agreements or other documents contemplated hereunder to be so executed and delivered.

Section 7.5 Retention of Books and Records.

After the Closing Date, Buyer shall retain all books, records and other documents pertaining to Seller in existence on the Closing Date and make the same available after the Closing Date for inspection and copying by Astec or its agents at its expense, upon reasonable request and upon reasonable notice, for a period of seven (7) years after the Closing Date. No such books, records or documents of Seller shall be destroyed by Buyer without first advising Astec in writing and giving Astec a reasonable opportunity to obtain possession of at least a copy thereof.

Section 7.6 Further Assurances.

At any time after the Closing Date, Seller, Astec and Buyer shall promptly execute, acknowledge and deliver any other assurances or documents reasonably requested by any other party and necessary for such other party to satisfy its obligations hereunder.

ARTICLE VIII : CONDITIONS TO THE PURCHASE AND SALE

Section 8.1 General Conditions to the Purchase and Sale Relating to Parties.

The obligations of the parties to consummate the sale and purchase of the Assets and the Premises at the Closing as contemplated by this Agreement shall be subject to the satisfaction or waiver by the parties on or prior to the Closing Date of the following conditions:

a. No action or proceeding shall have been instituted and remain pending on the Closing Date before any court or governmental body or authority pertaining to the acquisition by Buyer of the Assets, or the result of which could prevent or make illegal the consummation of such acquisition.

b. Any required consents of third parties disclosed on Schedule 4.7, Schedule 5.4 and Section 7.2 hereto shall have been obtained.

c. For a period of one (1) year from Closing, Buyer shall be provided primary supplier status by Astec and its subsidiaries for component products to be sold at a fixed price, which price may be adjusted only for raw material costs.

d. At or following Closing, Astec and Buyer shall enter into an agreement which shall allow Astec's subsidiary, Telsmith, to sell, under its name, stationary system conveyors produced by Buyer. Astec and Buyer agree to use their good faith best efforts to negotiate the terms and conditions of this agreement, including pricing.

e. From and after Closing, through December 31, 2004, Buyer shall continue to service Astec's intellectual property licensing companies in return for the management fee and rent currently being paid by Astec to Seller, the details of which and copies thereof shall be provided on Schedule 8.1(e).

Section 8.2 Conditions to Purchase by Buyer.

The obligation of Buyer to consummate the purchase of the Assets and the Premises at the Closing as contemplated by this Agreement shall be subject to the satisfaction or waiver by Buyer on or prior to the Closing Date of each of the following conditions:

(i) Each of the representations and warranties of Astec and Seller contained in this Agreement shall be true in all material respects when made and as of the Closing Date, with the same effect as though such representations and warranties had been made on and as of the Closing Date (except representations and warranties that are made as of a specific date need be true in all material respects only as of such date); (ii) each of the covenants and agreements of Astec and Seller in this Agreement to be performed on or prior to the Closing Date shall have been duly performed in all material respects; (iii) Buyer shall have received at the Closing a certificate of a duly authorized officer of Astec and Seller as to the satisfaction of the conditions set forth in clause (i) and clause (ii) of this Section 8.2(a), dated as of the Closing Date.

During the period from the date hereof to the Closing Date, no event or condition shall have occurred which results in a Material Adverse Effect.

Buyer shall have had delivered to it a warranty deed conveying to Buyer good and marketable fee simple title to the Premises effective as of the Closing Date in form reasonably acceptable to Buyer.

At least ten (10) days prior to the Closing Date, Buyer shall have had delivered to it a real estate title abstract or a commitment for an owner's title insurance policy in an amount acceptable to the Buyer issued by a title insurance company acceptable to Buyer covering the Premises and containing only exceptions which would not adversely affect the use or marketability of the Premises.

Buyer shall have received a certified copy of resolutions of the board of directors of Seller approving the transaction set forth in and execution of this Agreement.

Buyer shall have received a certified copy of resolutions of the board of directors of Astec approving the transactions set forth in and execution of this Agreement.

Buyer shall have received financing for the Purchase Price on terms and conditions satisfactory to Buyer, in its sole discretion.

Buyer shall have received notices of termination and release of all employment contracts and non-compete agreements for employees of Seller.

Buyer shall have received a release from a lien held in favor of G.E. Capital on the Assets and the Premises;

Buyer shall have received an opinion from legal counsel of Seller in form and substance satisfactory to the Buyer and its counsel.

Buyer shall have received such other documents as may be reasonably necessary to effect the Closing as anticipated in this Agreement.

Section 8.3 Conditions to Sale by Seller.

The obligation of Seller to consummate the sale of the Assets and the Premises at the Closing as contemplated by this Agreement shall be subject to the satisfaction or waiver by Seller on or prior to the Closing Date of each of the following conditions:

a. (i) Each of the representations and warranties of Buyer contained in this Agreement shall be true in all material respects when made and as of the Closing Date, with the same effect as though such representations and warranties had been made on and as of the Closing Date (except representations and warranties that are made as of a specific date need be true in all material respects only as of such date); (ii) each of the covenants and agreements of Buyer in this Agreement to be performed on or prior to the Closing Date shall have been duly performed in all material respects; and (iii) Seller shall have received at the Closing a certificate of a duly authorized officer of Buyer as to the satisfaction of the conditions set forth in clause (i) and clause (ii) of this Section 8.3, dated as of the Closing Date.

b. Buyer and Astec or its designee shall have entered into a License Agreement for the intellectual properties involving the FDAA allowing Kolberg-Pioneer, Inc. ("KPI") the licensed use of the intellectual property for a royalty of One Thousand and no/100 Dollars ($1,000.00) per axle. This license would be nontransferable and would be limited to application for axles intended for the use on KPI conveyors.

c. Buyer and Astec or its designee shall have entered into a License Agreement for future patents issued for link conveyor technology obligating that they be shared.

d. Seller shall have received certified copies of resolutions of the board of governors of Buyer approving the transaction set forth in and executed for this Agreement.

e. Seller shall have received payment of the Purchase Price by wire transfer of immediately available funds to accounts designated by Seller prior to Closing.

f. Seller shall have received an opinion from legal counsel to Buyer in form and substance satisfactory to Seller and their counsel.

g. Seller shall have received approval and release from G.E. Capital, as may be necessary pursuant to a loan agreement and related documents, of Seller's Assets and Premises.

h. Seller shall have received such other documents as may be reasonably necessary to effect the Closing as anticipated in this Agreement.

ARTICLE IX : INDEMNIFICATION

Section 9.1 Survival; Rights and Remedies Not Affected by Knowledge.

The representations and warranties in this Agreement, the Schedules, any supplements to the Schedules, any other certificate or document delivered pursuant to this Agreement and any other Closing Document will survive the Closing. The rights to indemnification and payment of Damages and all other rights or remedies provided herein, including those relating to any representations, warranties, covenants and obligations, will not be affected by any investigation conducted with respect to, or any knowledge acquired at any time, whether before or after the execution and delivery of this Agreement or the Closing Date, with respect to the accuracy or inaccuracy of or compliance with, any such representation, warranty, covenant or obligation. The waiver of any condition based on the accuracy of any representation or warranty, or on the performance of or compliance with any covenant or obligation, will not affect the right to indemnification, payment of Damages or other remedy based on such rep resentations, warranties, covenants and obligations.

Section 9.2 Indemnification and Payment of Damages By Astec.

Astec shall indemnify and hold Buyer and its officers, directors, governors, members, managers, Affiliates, successors and assigns ("Buyer Indemnitees") harmless for, and shall pay to the Buyer Indemnitees the amount, to the extent not covered by insurance, of all Damages arising, directly or indirectly, from or in connection with:

a. any breach or nonfulfillment of or failure to comply with in any respect ("Breach") any representation or warranty made by Astec or Seller;

b. any Breach by Seller of any covenant, agreement or obligation of Seller and Astec;

c. any Damages arising out of the ownership, use or conduct of the Business or operations of Seller on or prior to the Closing Date or any act, omission, transaction, circumstance, fact, agreement, or other condition relating to Seller, any of which were known to Astec and existed on or prior to the Closing Date but was not fully and properly disclosed to Buyer in the Financial Statements, the Schedules, the Exhibits or any other part of the Agreement.

Section 9.3 Indemnification By Buyer.

Buyer shall indemnify and hold Astec, Seller and their successors and assigns ("Seller Indemnitees") harmless for, and will pay to the Seller Indemnitees the amount of, all Damages, to the extent not covered by insurance, arising directly or indirectly from or in connection with:

a. any Breach of any representation or warranty made by Buyer;

b. any Breach by Buyer of any covenant, agreement or obligation of the Buyer;

c. any Damages arising out of the ownership, use or conduct of the Business or operations of the Assets and the Premises after the Closing Date or any act, omission, transaction, circumstance, fact, agreement, or other condition relating to Seller which exists after the Closing Date.

Section 9.4 Indemnity Claims.

a. Claims. In the event that any claim ("Claim") is hereafter asserted by a party hereto as to which such party may be entitled to indemnification hereunder, such party ("Indemnitee") shall notify the party required by the terms of this Agreement to indemnify the Indemnitee ("Indemnifying Party") thereof ("Claim Notice") within 30 days after (1) receipt of notice of commencement of any third-party litigation against such Indemnitee, (2) receipt by such Indemnitee of written notice of any third-party claim pursuant to an invoice, notice of claim or assessment, against such Indemnitee, or (3) such Indemnitee becomes aware of the existence of any other event in respect of which indemnification may be sought from the Indemnifying Party. The Claim Notice shall describe the Claim and the specific facts and circumstances in reasonable detail, shall include a copy of the Notice referred to in (1) and (2), above, shall indicate the amount, if known, or an estimate, if possible, of Dam ages that have been or may be incurred or suffered.

b. Defense of Third Party Claim by Indemnifying Party. The Indemnifying Party may elect to defend or compromise any Claim by a third party ("Third Party Claim"), at its or his own expense and by its or his own counsel, who shall be reasonably acceptable to the Indemnitee. The election by the Indemnifying Party to defend or compromise a claim shall constitute an avowal by the Indemnifying Party that the Indemnifying Party is obligated to indemnify the Indemnitee with respect to such claim. The Indemnitee may participate, at its or his own expense, in the defense of any Claim assumed by the Indemnifying Party. Without the approval of the Indemnitee, which approval shall not be unreasonably withheld or delayed, the Indemnifying Party shall not agree to any compromise of a Claim defended by the Indemnifying Party which would require the Indemnitee to perform or take any action or to refrain from performing or taking any action.

c. Assumption of Defense by Indemnitee. Notwithstanding the foregoing, if an Indemnitee determines in good faith that there is a reasonable probability that a proceeding may adversely affect it or its Affiliates other than as a result of monetary damages for which it would be entitled to indemnification under this Agreement, the Indemnitee may, by notice to the Indemnifying Party, assume the exclusive right to defend, compromise, or settle such proceeding, but the Indemnifying Party will not be bound by any determination of a proceeding so defended or any compromise or settlement effected without its consent (which may not be unreasonably withheld or delayed).

d. Defense of Claim by Indemnitee. If, within thirty (30) days of the Indemnifying Party's receipt of a Claim Notice involving a Third Party Claim, the Indemnifying Party shall not have notified the Indemnitee of its or his election to assume the defense, the Indemnitee shall have the right to assume control of the defense or compromise of such Claim, and the costs and expenses of such defense, including costs of investigation and reasonable attorneys' fees, shall be added to the Claim. The Indemnitee shall have the right to compromise such Claim without the consent of the Indemnifying Party.

e. Cooperation of Parties. The party assuming the defense of any Claim shall keep the other party reasonably informed at all times of the progress and development of the party's defense of and compromise efforts with respect to such Claim and shall furnish the other party with copies of all relevant pleading, correspondence and other papers. In addition, the parties to this Agreement shall cooperate with each other, and make available to each other and their representatives all available relevant records or other materials required by them for their use in defending, compromising or contesting any Claim. The failure to timely notify the Indemnifying Party of the commencement of such actions in accordance with Section 9.4(a) shall relieve the Indemnifying Party from the obligation to indemnify but only to the extent the Indemnifying Party establishes by competent evidence that it is has been materially and adversely prejudiced thereby.

ARTICLE X : TERMINATION

Section 10.1 Termination.

a. Notwithstanding anything herein to the contrary, this Agreement shall terminate if the Closing does not occur on or before June 30, 2004, unless extended by mutual written agreement of the parties to this Agreement.

b. This Agreement may be terminated (i) by the mutual written consent of the parties to this Agreement, (ii) (a) by Buyer, if there has been a material misrepresentation or other material breach by Seller or Astec of any of their representations, warranties, covenants and agreements set forth herein and there shall not have occurred and be continuing a breach or violation by Seller or Astec, in any material respect, of any of its representations, warranties, covenants and agreements set forth herein and (b) by Seller if there has been a material misrepresentation or other material breach by Buyer of any of its representations, warranties, covenants and agreements set forth herein and there shall not have occurred and be continuing a breach or violation by Buyer, in any material respect, of any of their representations, warranties, covenants and agreements set forth herein; provided, however, that if the breach by the non-terminating party is susceptible to cure, such party shall have thirty (30) business days after receipt of written notice from the other party of its intention to terminate this Agreement or June 30, 2004, whichever is earlier, in which to cure such breach, and (iii) any party hereto, on or after June 30, 2004, by written notice to the other parties, if (a) the Closing shall then not have occurred for any reason other than the breach or violation by the notifying party, in any material respect, of any of its representations, warranties, covenants and agreements set forth in this Agreement and (b) there shall not have occurred and be continuing a breach or violation by the notifying party, in any material respect, of any of such representations, warranties, covenants and agreements.

c. If this Agreement is terminated pursuant to Section 10.1, this Agreement, other than with respect to the obligations under Sections 7.1, 11.1 and 11.3 hereof, shall thereafter have no effect, except that termination of this Agreement will not relieve either party of any liability for breach of any covenants or agreements set forth herein occurring prior to such termination.

ARTICLE XI : MISCELLANEOUS

Section 11.1 Expenses.

Unless otherwise indicated, the parties shall bear their own respective expenses (including, but not limited to, all compensation and expenses of counsel, financial advisors, consultants, actuaries and independent accountants) incurred in connection with the preparation and execution of this Agreement and consummation of the transactions contemplated hereby.

Section 11.2 Best Efforts; Further Assurances.

a. Commitment to Best Efforts. Subject to the rights of the parties under Section 10.1, (i) each party hereto shall use its best efforts to cause all conditions to its obligations hereunder to be timely satisfied and to perform and fulfill all obligations on its part to be performed and fulfilled under this Agreement, to the end that the transactions contemplated by this Agreement shall be effected substantially in accordance with its terms as soon as reasonably practicable, (ii) each party shall cooperate with the other parties in such actions and in securing requisite consents and (iii) each party shall execute and deliver such further documents and take such other actions as may be necessary or appropriate to consummate or implement the transactions contemplated hereby or to evidence such events or matters.

b. Limitation. As used in this Agreement, the term "best efforts" shall not mean efforts which require the performing party to do any act that is commercially unreasonable under the circumstances, to make any capital contribution or to expend any funds other than in payment of reasonable out-of-pocket expenses incurred in satisfying obligations hereunder, including but not limited to the fees, expenses and disbursements of its accountants, counsel and other professional advisors.

c. Exclusive Dealing. Until the Closing Date or the earlier termination of this Agreement, Astec will not, nor will it permit any officers, directors, employees or other advisors or representatives to (i) solicit, initiate or encourage submission of any proposal to purchase the Assets, the Premises or any of Seller's assets, other than in the ordinary course of business; or (ii) enter into any agreement with respect to any such proposal.

Section 11.3 Public Disclosure.

Prior to the Closing Date, none of the parties will make any public release of information regarding any matters contemplated herein without the consent of the other parties, except for press releases issued by Astec as may be required by law.

Section 11.4 Assignment.

This Agreement may not be assigned by either party, by operation of law or otherwise.

Section 11.5 Amendments and Waivers.

The provisions of this Agreement may not be amended, supplemented or changed orally, but only by writing signed by Buyer, Seller and Astec and making specific reference to this Agreement.

Section 11.6 Entire Agreement.

This Agreement constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties, with respect to the subject matter hereof, except as otherwise contemplated herein; and is not intended to confer upon any other persons any rights or remedies hereunder.

Section 11.7 Schedules.

The inclusion of any matter in any Schedule or Exhibit to this Agreement shall be deemed to be an inclusion for all purposes of this Agreement, including each representation to which it may relate.

Section 11.8 Notices.

All notices, requests, demands or other communications herein required or permitted to be given shall be in writing and may be personally served, telecopied, telexed or sent by United States mail and shall be deemed to have given when delivered in person, upon receipt of telecopy or telex (with confirmed answerback) or five business days after deposit in the United States mail, registered or certified, postage prepaid and properly addressed to the party's address as set forth on the signature pages hereof. Any party may change the address to which notices are to be addressed by giving the other party written notice in the manner herein set forth.

Section 11.9 Governing Law.

This Agreement shall be governed by, and construed in accordance with, the laws of the State of Tennessee, without regard to conflicts of law principles. However, the sale, transfer and assignment of the Premises shall be governed by and construed in accordance with the laws and local practice of the State of Minnesota.

Section 11.10 Severability.

In case any provision in this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

Section 11.11 Section Headings.

The section and paragraph headings contained in this Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement.

Section 11.12 Counterparts.

This Agreement and any amendments hereto may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which shall be considered one and the same instrument.

Section 11.13 Representation By Counsel; Interpretation.

Each party acknowledges that such party has been represented by counsel in connection with this Agreement and the transactions contemplated by this Agreement. Accordingly, any rule of law, or any legal decision that would require interpretation of any claimed ambiguities in this Agreement against the party that drafted it has no application and is expressly waived. The provisions of this Agreement shall be interpreted in a reasonable manner to effect the intent of the parties.

Section 11.14 Arbitration Clause.

Except for any dispute concerning the financial statements of Seller, any dispute pertaining to this Agreement or the matters addressed herein shall be referred to arbitration at the request of any party before a single arbitrator. In any arbitration the parties shall be entitled to be legally represented. This matter shall be arbitrated solely under Title 35 United States Code, as interpreted by the United States Court of Appeals for the Federal Circuit, and pursuant to Title 9 United States Code, the Federal Arbitration Act. The Arbitration Rules of the Center for Public Resources, New York, New York for Non-Administered Arbitration of Business Disputes, as they exist on the date of this Agreement, are adopted as the rules governing this arbitration. Interpretation and enforcement of this instrument and all of this Agreement and all questions, issues or claims regarding the performance of the parties hereunder shall be controlled and governed by the law of the State of Tennessee except as otherwise specifically stated to the contrary in this Agreement. The arbitration shall take place in Kansas City, Missouri at a mutually agreeable site. Provided, however, that any dispute concerning the financial statements of Seller, including the Financial Statements, the Interim Financial Statements, and the Closing Date Financial Statements, shall be submitted for determination to a national accounting firm, other than Ernst & Young, mutually selected by Astec and Buyer on terms agreed by Astec and Buyer. In the event Astec and Buyer are unable to agree on the selection of an accounting firm or the scope of the terms of submission to such firm, an arbitrator selected by mutual agreement between Astec and Buyer shall determine the accounting firm, the scope and the terms of submission of such dispute.

Section 11.15 Confidentiality.

Buyer shall not, nor will it permit any officers, directors, employees, advisors or representatives of Buyer to, disclose or publish any information regarding the Business of Seller, Astec or other subsidiaries of Astec, their customers or assets ("Information") that Buyer or any of such individuals has received or has been privy to as an officer or employee of Seller, whether marked "confidential" or not, to any person, firm or corporation outside of Seller, and such Information shall remain confidential, other than to their attorneys, accountants, tax advisors, or as may be required by either judicial or administrative order. Buyer shall use the highest degree of care to avoid such outside disclosure, publication, or use of such Information. The parties further agree that any information contained in any digital, written, visual or verbal presentation or demonstration describing the above stated Information shall be considered proprietary and shall come under the terms of thi s Section 11.15. After Closing, all Astec consolidating and consolidated financial statements shall be returned to Astec.

[Signatures on Following Page]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective officers therein duly authorized as of the 1 day of June, 2004.

BUYER:	SELLER:
SUPERIOR INDUSTRIES, LLC	ASTEC INDUSTRIES, INC.
By: /s/ Micah Zeltwanger	By: /s/ Albert E. Guth
Title: Secretary/Treasurer	Title: Group Vice President

ASTEC

SUPERIOR INDUSTRIES OF MORRIS, INC.

By: /s/ Albert E. Guth

Title: Secretary

EX-10 3 amendment.htm EXHIBIT 10.44

AMENDMENT TO

ASSET PURCHASE AGREEMENT

THIS AMENDMENT TO ASSET PURCHASE AGREEMENT ("Amendment"), is made as of June 30, 2004 by and between Astec Industries, Inc., a Tennessee corporation ("Astec"), Superior Industries of Morris, Inc., a Minnesota corporation ("Seller"), and Superior Industries, LLC, a Minnesota limited liability company ("Buyer").

WHEREAS, Astec, Seller and Buyer entered into that certain Asset Purchase Agreement dated June 1, 2004 ("Purchase Agreement") for Buyer's purchase of Seller's assets and real property located in Morris, Stevens County, Minnesota.

WHEREAS, Astec, Seller and Buyer desire to amend the Purchase Agreement to amend and/or update certain Exhibits and Schedules attached thereto, specifically Exhibits 2.1(c)(i), 2.1(l) and Schedule 4.10.

NOW, THEREFORE, in consideration of the foregoing premises, mutual covenants and agreements hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Astec, Seller and Buyer hereby agree as follows:

1. Exhibit 2.1(c)(i) to the Purchase Agreement shall be amended as provided in Amended Exhibit 2.1(c)(i), attached hereto and incorporated herein by reference.

2. Exhibit 2.1(l) to the Purchase Agreement shall be amended as provided in Amended Exhibit 2.1(l), attached hereto and incorporated herein by reference.

3. Schedule 4.10 to the Purchase Agreement shall be amended as provided in Amended Schedule 4.10, attached hereto and incorporated herein by reference.

4. Astec, Seller and Buyer agree to execute such additional documents, and to take such further action as the other party shall reasonably request in order to carry out the purpose of this Amendment.

5. All other terms and conditions of the Agreement, as amended herein, shall remain in full force and effect.

IN WITNESS WHEREOF, Astec, Seller and Buyer have executed this Amendment to Purchase Agreement as of the day and year first written above.

SELLER:

SUPERIOR INDUSTRIES OF MORRIS, INC.

By: /s/ Albert E. Guth

Its: Secretary

BUYER:

SUPERIOR INDUSTRIES, LLC

By: /s/ Micah Zeltwanger

Its: Secretary/Treasurer

ASTEC:

ASTEC INDUSTRIES, INC.

By: /s/ Albert E. Guth

Its: Group V.P. and Secretary

EX-31 4 ex311.htm Exhibit 31.1

CERTIFICATION PURSUNAT TO RULE 13a-14(a) / 15d-14(a)

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Dr. J. Don Brock, CEO, certify that:

I have reviewed this quarterly report on Form 10-Q of Astec Industries, Inc.;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
[Paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986];
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation ; and

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information ; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 9, 2004	/s/ J. Don Brock
	J. Don Brock
	Chairman of the Board, CEO and President

EX-31 5 ex312.htm Exhibit 31.2

CERTIFICATION PURSUNAT TO RULE 13a-14(a) / 15d-14(a)

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, F. McKamy Hall, CFO, certify that:

I have reviewed this quarterly report on Form 10-Q of Astec Industries, Inc.;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

[Paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986];

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation ; and

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information ; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 9, 2004	/s/ F. McKamy Hall
	F. McKamy Hall
	CFO, Vice President and Treasurer

EX-32 6 ex32.htm Exhibit 32 Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Astec Industries, Inc. (the "Company") on Form 10-Q for the period ended June 30, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, J. Don Brock, Chief Executive Officer of the Company, and F. McKamy Hall, Chief Financial Officer of the "Company", certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ J. Don Brock

J. Don Brock

Chairman of the Board, Chief Executive Officer and President

August 9, 2004

/s/ F. McKamy Hall

F. McKamy Hall

Chief Financial Officer, Vice President and Treasurer

August 9, 2004

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