-----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, Kk0+9NK2OX3r6hM+50vjHex8oejjZZMKdD1eskdUYHD3LgkjBi+CjvmlNsaJrT1k hdbxrGzy7qPy3OIsfAvv1g== 0001045969-98-000769.txt : 19981028 0001045969-98-000769.hdr.sgml : 19981028 ACCESSION NUMBER: 0001045969-98-000769 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19981014 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19981027 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ASV INC /MN/ CENTRAL INDEX KEY: 0000926763 STANDARD INDUSTRIAL CLASSIFICATION: CONSTRUCTION MACHINERY & EQUIP [3531] IRS NUMBER: 411459569 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-25620 FILM NUMBER: 98731421 BUSINESS ADDRESS: STREET 1: P O BOX 5160 CITY: GRAND RAPIDS STATE: MN ZIP: 55744-5160 BUSINESS PHONE: 2183273434 MAIL ADDRESS: STREET 1: PO BOX 5160 CITY: GRAND RAPIDS STATE: MN ZIP: 55744-5160 8-K 1 FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------------------------- FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): October 14, 1998 A.S.V., INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Minnesota 0-25620 41-1459569 - -------------------------------------------------------------------------------- (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 840 Lily Lane, P.O. Box 5160, Grand Rapids, Minnesota 55744 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (218) 327-3434 Not Applicable - -------------------------------------------------------------------------------- (Former name or former address, if changed since last report) Item 5. OTHER EVENTS. On October 14, 1998 A.S.V., Inc. (the "Company"), a Minnesota corporation, entered into a Securities Purchase Agreement (the "Agreement") with Caterpillar Inc. ("Caterpillar"), a Delaware corporation. Under the terms of the Agreement, Caterpillar will acquire, for an aggregate purchase price of $18,000,000, one million newly issued shares of the Company's common stock and a warrant to purchase an additional 10,267,127 newly-issued shares of the Company's common stock at a price of $21.00. The Agreement provides that, upon closing, the Company's board of directors will be increased from eight to ten members and the Company's board of directors will appoint two members designated by Caterpillar. Caterpillar intends to pay for the transactions contemplated by the Agreement from its generally available cash funds. The consummation of the transactions contemplated by the Agreement is contingent upon receiving Company shareholder and regulatory approvals. In connection with entering into the Agreement, the Company, Caterpillar and certain shareholders of the Company have entered into several ancillary agreements. First, the Company and Caterpillar have entered into an Option Agreement pursuant to which Caterpillar has the option to purchase 1,579,000 shares of the Company's common stock, through a private issuance from the Company, at a price of $18.00 per share, exercisable in whole or in part at any time until October 14, 1999 or the closing of the transactions contemplated by the Agreement, whichever is sooner. Second, certain of the shareholders (the "Shareholders") of the Company and Caterpillar have entered into a Voting Agreement pursuant to which the Shareholders have agreed (i) that the Shareholders will not sell, transfer, pledge, grant a security interest in or lien on or otherwise dispose of or encumber any of their shares in the Company prior to the closing of the transactions contemplated by the Agreement and (ii) that the Shareholders will vote each of his or her shares at every annual, special or adjourned meeting of the shareholders of the Company (a) in favor of approval of the Agreement, (b) against any Competing Transaction (as defined in the Agreement) and (c) in favor of any other matter relating to the closing of the transactions contemplated by the Agreement. Finally, the Company and Caterpillar have entered into a Commercial Alliance Agreement pursuant to which Caterpillar will provide the Company with access to its dealer network and will make various management, financial and engineering resources available to the Company following the closing. Following the closing, Caterpillar will own approximately 8.8% of the Company's outstanding common stock (assuming the exercise or conversion of all outstanding options, warrants and convertible debentures) and will have the right to own up to approximately 52% of the Company's outstanding common stock (assuming the exercise or conversion of all outstanding options, warrants and convertible debentures) upon exercise of the warrant. 2 Item 7. FINANCIAL STATEMENTS AND EXHIBITS. (c) EXHIBITS Exhibit Description of Exhibit ------- ---------------------- 2(a) Securities Purchase Agreement dated as of October 14, 1998 between Caterpillar Inc. and A.S.V., Inc. (b) Form of Warrant Certificate to be issued to Caterpillar upon closing of the transactions contemplated by the Agreement (c) Option Certificate dated as of October 14, 1998 between Caterpillar Inc. and A.S.V., Inc. (d) Voting Agreement dated as of October 13, 1998 by certain shareholders of A.S.V., Inc. and Caterpillar Inc. (e) Commercial Alliance Agreement dated October 14, 1998 between Caterpillar Inc. and A.S.V., Inc. 99 Press release dated October 14, 1998 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 hereunto duly authorized. Date: October 27, 1998 A.S.V., INC. /s/ Gary D. Lemke ----------------------------------- Gary D. Lemke President and CEO 3 EXHIBIT INDEX Exhibit Description of Exhibit ------- ---------------------- 2(a) Securities Purchase Agreement dated as of October 14, 1998 between Caterpillar Inc. and A.S.V., Inc. (b) Form of Warrant Certificate to be issued to Caterpillar upon closing of the transactions contemplated by the Agreement (c) Option Certificate dated as of October 14, 1998 between Caterpillar Inc. and A.S.V., Inc. (d) Voting Agreement dated as of October 13, 1998 by certain shareholders of A.S.V., Inc. and Caterpillar Inc. (e) Commercial Alliance Agreement dated October 14, 1998 between Caterpillar Inc. and A.S.V., Inc. 99 Press release dated October 14, 1998 4 EX-2.(A) 2 SECURITIES PURCHASE AGREEMENT EXHIBIT 2(a) SECURITIES PURCHASE AGREEMENT This Securities Purchase Agreement (this "Agreement") is entered into as of October 14, 1998 between CATERPILLAR INC., a Delaware corporation (together with its successors and permitted assigns, "Investor"), and A.S.V., INC., a Minnesota corporation (together with its successors and permitted assigns, "Issuer"). Capitalized terms used but not otherwise defined herein shall have the meanings set forth in Section 6.1. RECITALS Subject to the terms and conditions of this Agreement, Investor desires to purchase, and Issuer desires to issue and sell to Investor, 1,000,000 shares of Issuer's common stock, par value $0.01 per share (the "Common Stock"), and a warrant to purchase an additional 10,267,127 shares of Common Stock. Concurrently herewith, Issuer is issuing to Investor an option to purchase 1,579,000 shares of Common Stock and Issuer and Investor are entering into a Commercial Alliance Agreement of even date herewith (the "Commercial Alliance Agreement"). Prior to the execution of this Agreement, Investor and certain Shareholders of Issuer entered into a Voting Agreement dated as of October 13, 1998. TERMS OF AGREEMENT In consideration of the mutual representations, warranties, covenants and agreements contained herein, the parties hereto agree as follows: ARTICLE I ISSUANCE AND PURCHASE OF COMMON STOCK, WARRANT, AND OPTION 1.1 Issuance and Purchase of Common Stock, Warrant, and Option. Subject to the terms and conditions of this Agreement, Issuer will issue and sell to Investor and Investor will purchase from Issuer for an aggregate purchase price of $18,000,000 (the "Purchase Price") (i) 1,000,000 shares of Common Stock (the "Shares") and (ii) a warrant (the "Warrant") to purchase an additional 10,267,127 shares of Common Stock at an exercise price of $21.00 per share, exercisable in whole or in part at any time and from time to time from the date of Closing until the tenth anniversary of the date of the Closing (subject to certain rights of the Company to accelerate such date), pursuant to the terms of the warrant certificate in the form attached hereto as Exhibit A (the "Warrant Certificate"). Concurrently with the execution hereof, Issuer is issuing to Investor an option (the "Option") to purchase 1,579,000 shares of Common Stock at an exercise price of $18.00 per share, exercisable in whole or in part at any time and from time to time from the date hereof until the termination date set forth therein, pursuant to the terms of the option certificate in the form attached hereto as Exhibit B (the "Option Certificate"). 1.2 Legend. Any certificate or certificates representing the Shares, the Warrant, the Option, any Common Stock issued upon exercise of the Warrant (the "Warrant Shares"), and any Common Stock issued upon exercise of the Option (the "Option Shares") shall bear the following legend: THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR UNDER ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION UNDER THE ACT OR AN OPINION OF COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER OR UNDER APPLICABLE STATE SECURITIES LAWS. ARTICLE II CLOSING 2.1 Closing. The closing of the transactions contemplated herein (the "Closing") shall take place as promptly as practicable (and in any event within two (2) business days) after satisfaction or waiver of the conditions set forth in Article VIII at the offices of McDermott, Will & Emery, 227 West Monroe Street, Chicago, Illinois 60606. At the Closing, (i) Investor shall pay to Issuer, by wire transfer of immediately available funds to an account designated in writing by Issuer, the Purchase Price; (ii) Issuer shall issue to Investor the Shares, and deliver to Investor certificates for the Shares duly registered in the name of Investor; (iii) Issuer shall issue to Investor the Warrant and deliver the Warrant Certificate to Investor; (iv) pursuant to the terms of the Option, Investor shall deliver to Issuer the Option and Issuer shall cancel the Option; and (v) all other agreements and other documents referred to in this Agreement shall be executed and delivered (if not done prior to the Closing). 2.2 Termination. This Agreement may be terminated at any time prior to the Closing: (a) by mutual written consent of Issuer and Investor; (b) by Investor, but only if Investor is not in material breach of this Agreement, upon a material breach of any representation, warranty, covenant or agreement on the part of Issuer set forth in this Agreement, or if any material representation or warranty of Issuer shall have become untrue, in either case such that the conditions in Section 8.2 would be incapable of being satisfied by March 31, 1999 (or as such date is otherwise extended pursuant to Section 2.2(e) below); (c) by Issuer, but only if Issuer is not in material breach of this Agreement, upon a material breach of any representation, warranty, covenant or agreement on the part of Investor set forth in this Agreement, or if any material representation or warranty of Investor shall have become untrue, in either case such that the conditions in Section 8.3 would be incapable of being satisfied by March 31, 1999 (or as such date is otherwise extended pursuant to Section 2.2(e) below); 2 (d) by either Investor or Issuer, but only if the terminating party is not in material breach of this Agreement at that time, if the conditions in Section 8.1 would be incapable of being satisfied by March 31, 1999; by Investor, but only if Investor is not in material breach of this Agreement at that time, if the conditions in Section 8.2 would be incapable of being satisfied by March 31, 1999; or by Issuer, but only if Issuer is not in material breach of this Agreement at that time, if the conditions in Section 8.3 would be incapable of being satisfied by March 31, 1999 (or, in each case, as such date is otherwise extended pursuant to Section 2.2(e) below); (e) by either Investor or Issuer, but only if the terminating party is not in material breach of this Agreement at that time, if the Closing shall not have been consummated before March 31, 1999; provided, however, that this Agreement may be extended by written notice of either Investor or Issuer to a date not later than June 30, 1999; or (f) by Issuer if (1) any Person or group ("Group"), as defined in the Exchange Act shall have commenced (as such term is used in Rule 14d-2(b) under the Exchange Act) an unsolicited bona fide tender offer for all outstanding shares of Common Stock or any person or Group shall have made an unsolicited bona fide written offer proposing a merger or consolidation of Issuer or the acquisition of all or substantially all of its assets, and (2) Issuer's Board of Directors shall determine, based on advice of Issuer's financial advisors, that such offer is a Superior Proposal (as herein defined), and (3) Issuer's Board of Directors determines upon the advice of its legal counsel that if they failed to recommend such offer or accept such proposal then such failure would be reasonably likely to result in a breach of the directors' fiduciary duties; provided however that Issuer may not terminate this Agreement pursuant to this Section 2.2(f) until the expiration of five business days after written notice of any such Superior Proposal has been delivered to Investor, together with a summary of the terms of any such offer or proposal. 2.3 Effect of Termination. In the event of termination of this Agreement pursuant to Section 2.2, this Agreement shall forthwith become void, there shall be no liability on the part of Issuer or Investor to each other and all rights and obligations of any party hereto shall cease; provided, however, that nothing herein shall relieve any party from liability for the breach of any of its representations, warranties, covenants or agreements set forth in this Agreement; further provided, however, nothing herein shall affect the terms and conditions of the Option contained in the Option Certificate; further, provided, however, that the terms of Section 9.5 of this Agreement shall continue to be in full force and effect following such termination. ARTICLE III REPRESENTATIONS AND WARRANTIES OF ISSUER As a material inducement to Investor entering into this Agreement and the Option Certificate and purchasing the Shares and the Warrant, Issuer represents and warrants to Investor as follows: 3 3.1 Corporate Status. Issuer is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Minnesota. Issuer has all requisite corporate power and authority to own or lease, as the case may be, its properties and to carry on its business as now conducted. Issuer and its Subsidiaries are qualified or licensed to conduct business in all jurisdictions where its or their ownership or lease of property and the conduct of its or their business requires such qualification or licensing, except to the extent that failure to so qualify or be licensed would not have a Material Adverse Effect on Issuer. There is no pending or threatened proceeding for the dissolution, liquidation, or insolvency of Issuer or any of its Subsidiaries. 3.2 Corporate Power and Authority. Issuer has the corporate power and authority to execute and deliver this Agreement, the Warrant Certificate, and the Option Certificate and to perform its obligations hereunder and thereunder and, subject, in the case of the Agreement and the Warrant Certificate but not in the case of the Option Certificate, to the applicable approval of Issuer's shareholders, to consummate the transactions contemplated hereby and thereby. Issuer has taken all necessary corporate action to authorize the execution, delivery and performance of the Option Certificate. Other than obtaining its shareholders' applicable approval, Issuer has taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement and the Warrant Certificate and the transactions contemplated hereby and thereby. 3.3 Execution, Delivery and Enforceability. Each of this Agreement and the Option Certificate has been duly executed and delivered by Issuer and constitutes a legal, valid and binding obligation of Issuer, enforceable against Issuer in accordance with its terms, except as the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and general equitable principles regardless of whether such enforceability is considered in a proceeding at law or in equity. 3.4 No Violation. Except as set forth on Schedule 3.4 hereto, the execution and delivery by Issuer of this Agreement, the Warrant Certificate, the Option Certificate, the consummation of the transactions contemplated hereby and thereby, and the compliance by Issuer with the terms and provisions hereof and thereof (including, without limitation, the issuance to Investor of the Shares, the Warrant Certificate and the Option Certificate, the issuance of the Warrant Shares as contemplated by and in accordance with the Warrant Certificate and the issuance of the Option Shares as contemplated by and in accordance with the Option Certificate), will not result in a default under (or give any other party the right, with the giving of notice or the passage of time (or both), to declare a default or accelerate any obligation under) or violate the Articles of Incorporation or Bylaws or any Contract to which Issuer or any of its Subsidiaries is a party or by which Issuer or its properties or assets are bound (except to the extent such a default would not, in the case of a Contract, have a Material Adverse Effect on Issuer), or any Requirement of Law applicable to Issuer or any of its Subsidiaries, or result in the creation or imposition of any Lien upon any of the capital stock, properties or assets of Issuer or any of its Subsidiaries (except where such Lien would not have a Material Adverse Effect on Issuer). 4 3.5 Consents/Approvals. Except as set forth on Schedule 3.5 hereto and except for filing and approval under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations thereunder ("HSR Act"), and the applicable approval of this Agreement and the transactions contemplated hereby (other than the Option Certificate) by the shareholders of Issuer, (a) no consents, filings, authorizations or other actions of any Governmental Authority are required for Issuer's execution, delivery and performance of this Agreement, the Warrant Certificate, or the Option Certificate and (b) no consent, approval, waiver or other action by any Person under any Contract to which Issuer or any of its Subsidiaries is a party or by which Issuer or any of its properties or assets are bound is required or necessary for the execution, delivery or performance by Issuer of this Agreement, the Warrant Certificate, or the Option Certificate and the consummation of the transactions contemplated hereby and thereby, except where the failure to obtain such consents would not have a Material Adverse Effect on Issuer. 3.6 Capitalization. The authorized capital stock of Issuer consists of 45,000,000 shares, of which 33,750,000 are shares of Common Stock and 11,250,000 are shares of preferred stock, par value $0.01 per share. As of the date hereof, 7,895,988 shares of Common Stock are validly issued and outstanding, fully paid, and non-assessable, and no shares of preferred stock are issued or outstanding. Except with respect to the Shares, the Warrant Shares, and the Option Shares, and except for options for 407,598 shares of Common Stock issued and 948,723 shares of Common Stock reserved for issuance pursuant to the A.S.V., INC. 1994 Long-Term Incentive and Stock Option Plan, as amended (the "1994 Plan"), options for 1,002,375 shares of Common Stock issued and 2,250,000 shares of Common Stock reserved for issuance pursuant to the A.S.V., INC. 1996 Incentive and Stock Option Plan, as amended (the "1996 Plan"), 450,000 shares of Common Stock reserved for issuance pursuant to the A.S.V., INC. 1998 Non-Employee Director Stock Option Plan, as amended (the "1998 Plan"), none of which have been issued, 681,812 shares of Common Stock issuable pursuant those certain senior convertible debentures issued October 1996 (the "Debentures"), and 337,500 shares of Common Stock issuable pursuant to that certain Warrant issued to Leo Partners, Inc. on December 1, 1996 (the "Leo Partners Warrant", together with the 1994 Plan, the 1996 Plan, the 1998 Plan, and the Debentures, being the "Derivative Equity Documents"), no other shares of Common Stock and no shares of preferred stock, or any rights, options, warrants, convertible securities, subscription rights or other agreements or commitments of any kind obligating Issuer to issue or sell any other shares of Common Stock or preferred stock, are outstanding or have been authorized, except that the number of shares issuable pursuant to the 1994 Plan (and therefore the number of shares reserved for issuance) automatically increases on an annual basis, subject to an overall limitation on the number of shares which may be issued pursuant to incentive stock options of 1,125,000 shares. Upon delivery to Investor of the certificates for the Shares, the Warrant Certificate, and the Option Certificate and payment of the Purchase Price, Investor will acquire good, valid and marketable title to and record ownership of the Shares, the Warrant, and the Option, respectively, and such Shares will be validly issued, fully paid and non-assessable. 3.7 SEC Reports and Nasdaq Compliance. Issuer has made all filings (the "SEC Reports") required to be made by it under the Securities Act, the Exchange Act and the securities 5 laws of any state, and any rules and regulations promulgated thereunder and pursuant to any Requirements of Law. The SEC Reports, when filed, complied in all material respects with all applicable requirements of the Securities Act, the Exchange Act and other Requirements of Law. None of the SEC Reports, at the time of filing, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading in light of the circumstances in which they were made. Issuer has taken all necessary actions to ensure its continued inclusion in, and the continued eligibility of the Common Stock for trading on the Nasdaq National Market under all currently effective and currently proposed inclusion requirements. 3.8 Governing Documents. Issuer has delivered or made available to Investor true, accurate and complete copies of its Articles of Incorporation and Bylaws in effect as of the date hereof. 3.9 Subsidiaries. Except as set forth on Exhibit 22 to Issuer's Form 10-K for the fiscal year ended December 31, 1997, Issuer does not own, directly or indirectly, any outstanding voting securities of or other interests in, and does not control, any corporation, partnership, limited liability company, joint venture or other business entity. 3.10 Financial Statements. Each of the balance sheets included in the SEC Reports (including any related notes and schedules) fairly presents in all material respects the consolidated financial position of Issuer and its Subsidiaries as of its date, and each of the other financial statements included in the SEC Reports (including any related notes and schedules) fairly presents in all material respects the consolidated financial condition, results of operations, cash flows, or other information therein of Issuer and its Subsidiaries for the periods or as of the dates therein set forth in accordance with GAAP consistently applied during the periods involved (except that the interim reports are subject to normal recurring adjustments which might be required as a result of year end audit and except as otherwise stated therein). 3.11 Changes Since December 31, 1997. Except as set forth in the SEC Reports, since December 31, 1997, there has been no Material Adverse Change in Issuer. Except as set forth in the SEC Reports or on Schedule 3.11 hereto, (a) since December 31, 1997, there has not been (i) any direct or indirect redemption, purchase or other acquisition by Issuer of any shares of Issuer's capital stock or (ii) declaration, setting aside or payment of any dividend or other distribution by Issuer in respect of its capital stock, or (iii) issuance of any shares of capital stock of Issuer or any granting to any person of any option to purchase or other right to acquire shares of capital stock of Issuer other than pursuant to the Derivative Equity Documents, and (b) none of the officers or directors of Issuer (or any of their spouses or children) has (i) any direct or indirect investment or equity interest in, or power to control the business affairs of, any manufacturer, supplier, lender or provider of services or goods to Issuer, except for their interest in Issuer, (ii) any material contractual relationship with Issuer, and (iii) has any direct or indirect interest in any material right, property or asset which is owned or used by Issuer in the conduct of its business. 6 3.12 Environmental Matters. Except as set forth in the SEC Reports or on Schedule 3.12 hereto: (a) Issuer is and has at all times been in compliance with all Environmental Laws (as defined below) governing its business, operations, properties and assets, including, without limitation, Environmental Laws with respect to discharges into the ground water, surface water and soil, emissions into the ambient air, and generation, accumulation, storage, treatment, transportation, labeling or disposal of solid and hazardous waste materials and substances or process by-products, in each case, for which failure to comply could have a Material Adverse Effect on Issuer. Issuer is not currently liable for any penalties, fines or forfeitures for failure to comply with any of the foregoing, which penalty, fine or forfeiture could have a Material Adverse Effect on Issuer. Issuer is in compliance with all notice, record keeping and reporting requirements of all Environmental Laws, and has complied with all informational requests or demands arising under the Environmental Laws, where failure to comply could have a Material Adverse Effect on Issuer. (b) As used in this Agreement, "Environmental Laws" means all federal, state or local laws, rules, regulations, orders or ordinances or judicial or administrative interpretations thereof, any of which govern (or purport to govern) or relate to air emissions, water discharges, hazardous or toxic substances, solid or hazardous waste and occupational health and safety, as any of these terms are or may be defined in such laws, rules, regulations, orders, or ordinances, or judicial or administrative interpretations thereof, including, without limitation, the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act, as amended, by the Superfund Amendments and Reauthorization Act, the Hazardous Materials Transportation Act, the Toxic Substances Control Act, the Clean Air Act, the Clean Water Act and the Occupational Safety and Health Act. 3.13 No Commissions. Issuer has not incurred any obligation for any finder, broker or agent's fees or commissions in connection with the transactions contemplated hereby or by the Option Certificate. 3.14 Voting Agreement. James H. Dahl, Gary D. Lemke, JoAnn Lemke, Philip C. Smaby, Jerome T. Miner, Edgar E. Hetteen, Hannah Hetteen, Thomas R. Karges, Leland T. Lynch, Karlin S. Symons, and R.E. "Teddy" Turner, IV have entered into a voting agreement pursuant to which they have agreed to vote the shares of Common Stock benefically owned by them, which aggregate 2,061,352 shares, in favor of approving this Agreement and the transactions contemplated hereunder, a copy of which Voting Agreement is attached hereto as Exhibit C (the "Voting Agreement"). 3.15 Inapplicability of Section 302A.673 of Minnesota Business Corporation Act. The Board of Directors of Issuer, together with a separate committee of disinterested Directors of 7 Issuer, have each approved the execution and delivery by Issuer of this Agreement, the Warrant Certificate, and the Option Certificate, and the consummation of the transactions contemplated by this Agreement, the Warrant Certificate, and the Option Certificate, and the other transactions contemplated hereby and thereby, and each such approval is sufficient to render inapplicable to Investor and/or any affiliates or associates (as defined in Section 302A.673 of the Minnesota Business Corporation Act ("MBCA")) of Investor and/or all or any combination of such persons the provisions of Section 302A.673 of MBCA that restrict business combinations (as defined in Section 302A.673 of MBCA) between an interested shareholder and Issuer. 3.16 Fairness Opinion. Issuer has received an opinion from Piper Jaffray Inc. acceptable to its Board of Directors to the effect that the transactions set forth in this Agreement, the Warrant Certificate and the Option Certificate are fair from a financial point of view to the shareholders of Issuer. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF INVESTOR As a material inducement to Issuer entering into this Agreement and the Option Certificate and issuing the Shares, the Warrant, and the Option, Investor represents and warrants to Issuer as follows: 4.1 Corporate Status; Power and Authority. Investor is a corporation duly organized, validly existing, and in good standing under the laws of Delaware. Investor has the corporate power and authority to execute and deliver and to perform its obligations under this Agreement and consummate the transactions contemplated hereby. Investor has taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement and the transactions contemplated hereby. 4.2 No Violation. The execution and delivery by Investor of this Agreement, the consummation of the transactions contemplated hereby, and the compliance by Investor with the terms and provisions hereof, will not result in a default under (or give any other party the right, with the giving of notice or the passage of time (or both), to declare a default or accelerate any obligation under) or violate the Certificate of Incorporation or Bylaws of Investor or any Contract to which Investor is a party or by which it or its properties or assets are bound, or violate any Requirement of Law applicable to Investor, other than such violations, conflicts, defaults or breaches which, individually and in the aggregate, do not and will not have a Material Adverse Effect on Investor. 4.3 Consents/Approvals. Except for filing and approval under the HSR Act, (a) no consents, filings, authorizations or actions of any Governmental Authority are required for Investor's execution, delivery and performance of this Agreement, and (b) no consent, approval, waiver or other actions by any Person under any Contract to which Investor is a party or by which Investor or any of his properties or assets are bound is required or necessary for the execution, 8 delivery and performance by Investor of this Agreement and the consummation of the transactions contemplated hereby. 4.4 Enforceability. This Agreement has been duly executed and delivered by Investor and constitutes a legal, valid and binding obligation of Investor, enforceable against Investor in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditor's rights generally and general equitable principles regardless of whether enforceability is considered in a proceeding at law or in equity. 4.5 Investment Intent. Investor is acquiring the Shares, the Warrant, and the Option for its own account and with no present intention of distributing or selling such Shares, any interest in the Warrant or Warrant Shares acquired upon exercise thereof, or any interest in the Option or Option Shares acquired upon exercise thereof in violation of the Securities Act or any applicable state securities law. Investor agrees that it will not sell or otherwise dispose of any of the Shares, any interest in the Warrant or Warrant Shares acquired upon exercise thereof, or any interest in the Option or Option Shares acquired upon exercise thereof unless such sale or other disposition has been registered under the Securities Act or, in the opinion of counsel to Investor satisfactory to Issuer, is exempt from registration under the Securities Act and has been registered or qualified or, in the opinion of such counsel, is exempt from registration or qualification under applicable state securities laws. Investor understands that the sale of the Shares, the Warrant, the Option, the Warrant Shares, and the Option Shares, have not been registered under the Securities Act by reason of their contemplated issuance in transactions exempt from the registration and prospectus delivery requirements of the Securities Act pursuant to Section 4(2) thereof, and that the reliance of Issuer on such exemption from registration is predicated in part on the representations and warranties of Investor. Investor acknowledges that pursuant to Section 1.2 a restrictive legend consistent with the foregoing has been or will be placed on the certificates for the Shares, on the Warrant Certificate, on the Option Certificate, and on certificates for any Warrant Shares or Option Shares issued upon exercise thereof. 4.6 No Commissions. Investor has not incurred any obligation for any finder, broker, or agent's fees or commissions in connection with the transactions contemplated hereby or by the Warrant Certificate or the Option Certificate. ARTICLE V COVENANTS 5.1 Filings. Each of Investor and Issuer shall make on a prompt and timely basis all governmental or regulatory notifications and filings required to be made by it for the consummation of the transactions contemplated hereby. 5.2 Public Announcements. Except as required by law or the policies or rules of any stock exchange (or the Nasdaq National Market) on which Issuer's securities are listed or quoted 9 as of the date hereof, the form and content of all press releases or other public communications of any sort relating to the subject matter of this Agreement, and the method of their release or publication thereof, shall be subject to the prior approval of the parties hereto, which approval shall not be unreasonably withheld or delayed. 5.3 Further Assurances. Each party shall execute and deliver such additional instruments and other documents and shall take such further actions as may be necessary or appropriate to effectuate, carry out and comply with all of the terms of this Agreement and the transactions contemplated hereby. 5.4 Cooperation. Issuer and Investor each agree to cooperate with the other in the preparation and filing of all forms, notifications, reports and information, if any, required or reasonably deemed advisable pursuant to any Requirement of Law or the rules of any exchange on which the Common Stock is traded or the Nasdaq National Market in connection with the transactions contemplated by this Agreement and to use their respective reasonable best efforts to agree jointly on a method to overcome any objections by any Governmental Authority to any such transactions. Except as may be specifically required hereunder, neither of the parties hereto or their respective Affiliates shall be required to agree to take any action that in the reasonable opinion of such party would result in or produce a Material Adverse Effect on such party. 5.5 Board of Directors. Issuer and Investor agree that concurrently with the Closing, a meeting of the Board of Directors of Issuer shall be held, and at that meeting, (a) the number of directors constituting such Board shall be increased to ten (10), and (b) two (2) persons designated by Investor shall be added to such Board. Issuer and Investor further agree that at any time Investor's percentage interest in the outstanding Common Stock increases (whether by exercise of all or a portion of the Option or the Warrant or other purchase of Common Stock or by reduction in the number of outstanding shares of Common Stock), at the next meeting of the Board of Directors, (x) one or more existing Directors (other than the Directors designated by Investor), as selected by a plurality of the Directors of Issuer, or if no such plurality exists, then as selected by the Directors of Issuer designated by Investor, shall resign as a Director of Issuer effective at such time, and (y) one or more persons designated by Investor shall replace such resigning Director or Directors on such Board, so that the ratio of Directors designated by Investor to the total number of Directors on the Board shall be substantially equal to the ratio of the number of shares of Common Stock owned by Investor to the total number of issued and outstanding shares of Common Stock, provided that until Investor owns a majority of the outstanding Common Stock, at no time shall Investor have the right to increase the number of directors designated by Investor to a number such that the ratio of that number to the total number of directors is greater than Investor's percentage ownership of the outstanding Common Stock of Issuer and provided further that the Directors designated by Investor shall constitute a majority of the Board at such time as the Investor owns a majority of outstanding shares of Common Stock. 10 5.6 Access to Information. From the date hereof until the Closing, Issuer shall (and shall cause its Subsidiaries and its and their directors, officers, employees, auditors, counsel and agents to) afford Investor and its employees, counsel and agents reasonable access at all reasonable times to Issuer's properties, offices, and other facilities, to its officers and employees and to all books and records, and shall furnish Investor with all financial, operating and other data and information as may be reasonably requested. No information provided to or obtained by Investor shall affect any representation or warranty in this Agreement although Investor agrees to give notice to Issuer of any such information which would constitute a breach of Issuer's representations and warranties hereunder. Investor agrees to maintain the confidentiality of all such information which is confidential and not to disclose such information to any person other than its representatives and advisors who need to know such information in connection with the transactions and relationships contemplated hereby and by the Commercial Alliance Agreement; provided, however, such restriction shall not apply to any information which is (a) in the public domain prior to the time of disclosure, (b) obtained by Investor from a third party that has independently obtained such information, or (c) disclosed by or on behalf of Investor in connection with any action as required by a court of competent jurisdiction or Governmental Authority. 5.7 Notification of Certain Matters. Each party hereto shall give prompt notice to the other party hereto of the occurrence, or non-occurrence, of any event which would be likely to cause any representation or warranty herein to be untrue or inaccurate, or any covenant, condition or agreement herein not to be complied with or satisfied. 5.8 Proxy Statement. As promptly as practicable after the execution of this Agreement, Issuer shall prepare and file with the SEC, in compliance with applicable law and regulations, a proxy statement relating to the meeting of Issuer's shareholders to be held in connection with approving the transaction contemplated hereby (the "Proxy Statement"), and shall use its best efforts to have the Proxy Statement and/or any amendment or supplement thereto cleared by the SEC. Investor shall furnish all information concerning itself to Issuer as Issuer may reasonably request in connection with such actions and the preparation of the Proxy Statement. As promptly as practicable after clearance by the SEC, Issuer shall mail the Proxy Statement to its shareholders. Unless there is a Superior Proposal (as defined herein) outstanding and the Issuer's Board of Directors determines, in good faith and after consulting with its outside legal counsel that doing so would be reasonably likely to constitute a breach of its fiduciary duty to the Issuer's shareholders, the Proxy Statement shall include the recommendation of the Board of Directors of Issuer to the shareholders of Issuer in favor of approving this Agreement and the transactions contemplated hereby. 5.9 Shareholders' Meeting; Voting Agreement. Issuer shall call and hold a special meeting of its shareholders as promptly as practicable for the purpose of voting upon the approval of this Agreement and the transactions contemplated hereby. Issuer shall comply with all Requirements of Law applicable to such meeting. Issuer shall use its best efforts to solicit from its shareholders proxies in favor of approval of this Agreement and the transactions 11 contemplated hereby, and shall take all other action necessary or advisable to obtain the vote of its shareholders required by the requirements of the National Association of Securities, Inc. to obtain such approvals, unless there is a Superior Proposal (as defined herein) outstanding. In connection with the foregoing, Issuer shall cooperate and consult with Investor. Issuer will not take a position before any court or other tribunal, or otherwise, that the voting rights of the Shares, the Warrant Shares, or the Option Shares or the shares subject to the Voting Agreement are in any way limited, reduced or eliminated pursuant to the provisions of Section 302A.671 of the MBCA. 5.10 No Solicitation; Competing Offers. Neither Issuer nor any of its Subsidiaries, nor any of their respective officers, directors, employees, representatives, agents or Affiliates, shall, directly or indirectly, encourage, solicit, initiate, or participate in any way in any discussion or negotiations with, or provide any information to, or afford any access to the properties, offices, and other facilities, to the officers and employees, or to the books and records, of Issuer or any of its Subsidiaries, or otherwise assist, facilitate or encourage, any Person concerning any Competing Transaction. Notwithstanding the provisions of the prior sentence, the Issuer may, in response to an unsolicited offer with respect to a Competing Transaction which the Issuer's Board of Directors determines, in good faith and after consultation with its independent financial advisor, would result (if consummated pursuant to its terms) in a Competing Transaction more favorable to the Issuer's shareholders than the transactions contemplated hereby (any such offer or proposal being referred to as a "Superior Proposal") furnish (subject to the execution of a confidentiality agreement substantially similar to the confidentiality provisions applicable between Issuer and Investor), confidential or non-public information to a financially capable corporation, partnership, person or other entity or group (a "Potential Acquirer") and negotiate with such Potential Acquirer if the Board of Directors of the Issuer, after consulting with its outside legal counsel, determines in good faith that the failure to provide such confidential or non-public information to or negotiate with such Potential Acquirer would be reasonably likely to constitute a breach of its fiduciary duty to the Issuer's shareholders. Issuer shall immediately communicate to Investor the terms of any proposal, offer, discussion, negotiation or inquiry relating to a Competing Transaction and the identity of the party making such proposal, offer or inquiry which Issuer may receive in respect of any such Competing Transaction (which shall mean that any such communication shall be delivered no less promptly than by telephone within 24 hours of Issuer's receipt of any such proposal, offer or inquiry, followed by written notice by facsimile and overnight delivery), or Issuer's receipt of any request for information from the SEC or any other Governmental Authority with respect to any Competing Transaction. Unless there is a Superior Proposal outstanding and the Issuer's Board of Directors determines, in good faith and after consulting with its outside legal counsel that failure to do so would be reasonably likely to constitute a breach of its fiduciary duty to the Issuer's shareholders, (i) the Board of Directors of Issuer shall not modify or withdraw its approval or recommendation of this Agreement, (ii) shall refrain from recommending approval of or otherwise taking a position with respect to a Competing Transaction and, (iii) Issuer shall refrain from presenting an offer for a Competing Transaction to Issuer's shareholders. 12 5.11 HSR Act and Other Actions. Each of the parties hereto shall (i) make promptly its respective filings, and thereafter make any other required submissions, under the HSR Act, with respect to the transactions contemplated hereby, and (ii) use its reasonable best efforts to take, or cause to be taken, all appropriate actions, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated herein, including, without limitation, using its reasonable best efforts to obtain all licenses, permits, consents, approvals, authorizations, qualifications and orders of Governmental Authorities and parties to contracts with Issuer and its Subsidiaries as are necessary for the consummation of the transactions contemplated hereby. Investor shall make payment of the applicable HSR Act filing fee. The parties also agree to use their reasonable best efforts to defend all lawsuits or other legal proceedings challenging this Agreement, the Warrant Certificate, or the Option Certificate or the consummation of the transactions contemplated hereby or thereby and to lift or rescind any injunction or restraining order or other order adversely affecting the ability of the parties to consummate the transactions contemplated. 5.12 Conduct of Issuer's Business Pending the Closing. Issuer covenants and agrees that, between the date of this Agreement and the Closing, unless Investor shall have consented in writing (such consent not to be unreasonably withheld), the businesses of each of Issuer and its Subsidiaries shall in all material respects be conducted only in, and each of Issuer and its Subsidiaries shall not take any material action except in, the ordinary course of business, consistent with past practice; and each of Issuer and its Subsidiaries shall use its best efforts to preserve intact is business organization, to keep available the services of its and its Subsidiaries' current officers, employees and consultants and to preserve its and its Subsidiaries' present relationships with customers, suppliers and other persons with which it or any of its Subsidiaries has significant business relations. By way of amplification and not limitation, except as contemplated by this Agreement, neither Issuer nor any of its Subsidiaries shall, between the date of this Agreement and the Closing, directly or indirectly do or propose or agree to do any of the following without the prior written consent of Investor, which consent shall not unreasonably be withheld: (a) amend or otherwise change the Articles of Incorporation or Bylaws or equivalent organizational documents; (b) except pursuant to Issuer's Option plans, issue, sell, pledge, dispose of, encumber, or, authorize the issuance, sale, pledge, disposition, grant or encumbrance of: (i) any shares of capital stock of any class of it or its Subsidiaries, or any options, warrants, convertible securities or other rights of any kind to acquire any shares of such capital stock, or any other ownership interest, of it or any of its Subsidiaries, or (ii) any assets, tangible or intangible, of Issuer or any of its Subsidiaries, except for the grant of options pursuant to Issuer's stock option plans or the exercise or conversion of options, warrants or other similar rights issued pursuant to or contained in the Derivative Equity Documents in effect on the date of this Agreement; 13 (c) declare, set aside, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to any of its capital stock; (d) reclassify, combine, split, subdivide or redeem, purchase or otherwise acquire, directly or indirectly, any of its capital stock; (e) (i) acquire (including, without limitation, for cash or shares of stock, by merger, consolidation, or acquisition of stock or assets) any interest in any corporation, partnership, limited liability company, or other business organization or division thereof or any assets, or make any investment (other than in the ordinary course of business) either by purchase of stock or securities, contributions of capital (other than to wholly owned Subsidiaries) or property transfer, or, except in the ordinary course of business, purchase any property or assets of any other Person, (ii) incur any indebtedness for borrowed money or issue any debt securities or assume, guarantee or endorse or otherwise as an accommodation become responsible for, the obligations of any person, or make any loans or advances, except in the ordinary course of business and consistent with past practice, or (iii) enter into any contract or agreement other than in the ordinary course of business; (f) increase the compensation payable or to become payable to its officers or employees, except for increases in the ordinary course of business consistent with past practices, or, except as presently bound to do, grant any severance or termination pay to, or enter into any employment or severance agreement with, any director, officer or other employee of it or any of its Subsidiaries, or establish, adopt, enter into or amend in any material respect or take any action to accelerate any rights or benefits under any collective bargaining, bonus, profit sharing, trust, compensation, stock option, restricted stock, pension retirement, deferred compensation, employment, termination, severance or other plan, agreement, trust, fund, policy or arrangement for the benefit of any directors, officers or employees; (g) take any action other than in the ordinary course of business and in a manner consistent with past practice with respect to accounting policies or procedures; (h) pay, discharge or satisfy any existing material claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction in the ordinary course of business and consistent with past practice or liabilities reflected or reserved against in the consolidated financial statements of Issuer and its Subsidiaries or incurred after the date hereof in the ordinary course of business; or (i) agree, in writing or otherwise, to take any of the foregoing actions or any action which would make any representation or warranty in Article III untrue or incorrect in any material respect. 14 Notwithstanding the foregoing, Investor acknowledges that Issuer may seek to induce the holders of the Debentures to convert such Debentures and agrees that such action will not violate any of the representations, warranties or covenants contained herein, provided that no more than 641,812 shares are issued upon conversion. 5.13 Conduct of Issuer's Business Following the Closing. Issuer covenants and agrees that, between the date of the Closing and the termination of the Warrant, unless such action shall be approved by at least one-half of the Directors of Issuer designated by Investor, Issuer shall not directly or indirectly do or propose or agree to do any of the actions specified in clauses (a), (b), (c), (d) or (e) of Section 5.12 above other than in the ordinary course of business; provided, however, Issuer shall be entitled to and shall, to the extent reasonable, use the net proceeds received upon exercise of all or any portion of the Warrant to repurchases of shares of its Common Stock. 5.14 First Offer Rights and Additional Warrants. (a) Except for the issuance of (i) Common Stock pursuant to the exercise or conversion of currently outstanding options, warrants or other similar rights issued pursuant to or contained in the Derivative Equity Documents as of the date of this Agreement, (ii) Common Stock upon any partial or full exercise of the Warrant or the Option, (iii) options to acquire up to an additional 500,000 shares of Common Stock which may be granted to employees, directors or consultants of the Issuer and (iv) Common Stock upon exercise of the options referred to in clause (iii) of this sentence ("Permitted Issuances"), if Issuer authorizes the issuance or sale of any shares of Common Stock or other voting securities, or any securities convertible into or containing options or rights to acquire any shares of Common Stock or other voting securities, Issuer shall first offer to sell to Investor all of such stock or securities. Investor shall be entitled to purchase such stock or securities at the most favorable price and on the most favorable terms as such stock or securities are to be offered to any other Persons. (b) In order to exercise its purchase rights hereunder, Investor must within 30 days after receipt of written notice from Issuer describing in reasonable detail the stock or securities being offered, the purchase price thereof, and the payment terms thereof deliver a written notice to Issuer describing its election hereunder. (c) Upon the expiration of the 30-day offering period described above, Issuer shall be entitled to sell any such stock or securities which Investor has not elected to purchase during the 90 days following such expiration on terms and conditions no more favorable to the purchasers thereof than those offered to Investor. (d) Upon a sale, grant or issuance of such stock, options or other securities to a purchaser or optionee other than Investor, and other than Permitted Issuances, Issuer shall, concurrent with the consummation of such sale, grant or issuance, issue to Investor a stock purchase warrant on substantially the same terms as the Warrant (other than the provisions of Article V thereof, 15 provided that such warrant shall expire upon final expiration of the Warrant) at an exercise price per share equal to the exercise or purchase price applicable to the stock, options or other securities sold, granted or issued to such other purchaser or optionee. Such stock purchase warrant to Investor shall be exercisable for the number of shares of Common Stock sold, granted or issued to such other purchaser and/or the maximum number of shares of Common Stock into which such stock, options or other securities sold or granted to such purchaser or optionee are exercisable or convertible. Such stock purchase warrant shall be issued immediately upon issuance of the stock, options or other securities to the other purchaser or optionee except in the case of employee, director or consultant options and other than Permitted Issuances, in which case the stock purchase warrant shall be issued in January on a weighted average price basis with respect to all options granted in the preceding calendar year. (e) Any stock, options or securities offered or sold by Issuer after such 90-day period must be reoffered to Investor pursuant to the terms of this Section 5.14. (f) Notwithstanding the provisions of paragraph (a) hereof, nothing contained herein shall require Issuer to offer to sell shares of Common Stock to Investor in connection with (i) increases in the number of shares of Common Stock available for issuance under the 1994, 1996 or 1998 Plans, (ii) Issuer adopting additional compensatory option plans covering employees, directors or consultants of Issuer, (iii) Issuer issuing such increased number of options, awards or other grants or additional options to employees or directors of Issuer, or (iv) Issuer issuing shares of Common Stock upon exercise of such options, awards or other grants; provided however, that in connection with any such grant of options or issuance of Common Stock, the Issuer shall issue to Investor a stock purchase warrant pursuant to clause (d) of this Section 5.14. ARTICLE VI DEFINITIONS 6.1 Defined Terms. As used herein the following terms shall have the following meanings: "Affiliate" shall have the meaning ascribed to it in Rule 12b-2 of the General Rules and Regulations under the Exchange Act, as in effect on the date hereof. "Articles of Incorporation" means Issuer's Second Restated Articles of Incorporation, as the same may be or have been supplemented, amended or restated from time to time. "Bylaws" means Issuer's Restated Bylaws, as the same may be or have been supplemented, amended or restated from time to time. "Closing" has the meaning specified in Section 2.1 of this Agreement. 16 "Commercial Agreements" has the meaning specified in Section 8.2(c) of this Agreement. "Commercial Alliance Agreement" has the meaning specified in the Recitals to this Agreement. "Common Stock" has the meaning specified in the Recitals to this Agreement. "Competing Transaction" means a proposed merger, consolidation, share exchange, business combination, recapitalization, liquidation, or similar transaction involving Issuer or its shareholders, as applicable, a direct or indirect sale of all or any significant portion of the assets or business of Issuer or any of its Subsidiaries or a direct or indirect sale or issuance of any material portion of the capital stock of Issuer. "Contract" means any indenture, lease, sublease, loan agreement, mortgage, note, restriction, commitment, obligation or other contract, agreement or instrument. "Debentures" has the meaning specified in Section 3.6 of this Agreement. "Derivative Equity Documents" has the meaning specified in Section 3.6 of this Agreement. "Environmental Laws" has the meaning specified in Section 3.12(b) of this Agreement. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "GAAP" means generally accepted accounting principles in effect in the United States of America from time to time. "Governmental Authority" means any nation or government, any state or other political subdivision thereof, and any entity or official exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "HSR Act" has the meaning specified in Section 3.5 of this Agreement. "Indemnified Party" has the meaning specified in Section 7.2 of this Agreement. "Indemnifying Party" has the meaning specified in Section 7.1 of this Agreement. "Issuer" means A.S.V., Inc., a Minnesota corporation. "Investor" means Caterpillar Inc., a Delaware corporation. "Leo Partners Warrant" has the meaning specified in Section 3.6 of this Agreement. 17 "Lien" means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof, and the filing of or agreement to give a financing statement under the Uniform Commercial Code or comparable law of any jurisdiction in connection with such mortgage, pledge, security interest, encumbrance, lien or charge). "Material Adverse Change (or Effect)" means a change (or effect), in the condition (financial or otherwise), properties, assets, liabilities, rights, obligations, operations, business or prospects which change (or effect) individually or in the aggregate with other such changes (or effects) is materially adverse to such condition, properties, assets, liabilities, rights, obligations, operations, business or prospects. "MBCA" has the meaning specified in Section 3.15 of this Agreement. "1994 Plan" has the meaning specified in Section 3.6 of this Agreement. "1996 Plan" has the meaning specified in Section 3.6 of this Agreement. "1998 Plan" has the meaning specified in Section 3.6 of this Agreement. "Option" has the meaning specified in Section 1.1 of this Agreement. "Option Certificate" has the meaning specified in Section 1.1 of this Agreement. "Option Shares" has the meaning specified in Section 1.2 of this Agreement. "Person" means an individual, partnership, corporation, limited liability company, business trust, joint stock company, estate, trust, unincorporated association, joint venture, Governmental Authority or other entity, of whatever nature. "Proxy Statement" has the meaning specified in Section 5.8 of this Agreement. "Purchase Price" has the meaning specified in Section 1.1 of this Agreement. "Requirement of Law" means as to any Person, the articles of incorporation, by-laws or other organizational or governing documents of such person, and any domestic or foreign and federal, state or local law, rule, regulation, statute or ordinance or determination of any arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its properties or to which such Person or any of its property is subject. "SEC" means the Securities and Exchange Commission. "SEC Reports" has the meaning specified in Section 3.7 of this Agreement. 18 "Securities Act" means the Securities Act of 1933, as amended. "Shares" has the meaning specified in Section 1.1 of this Agreement. "Subsidiary" means as to any Person, a corporation of which more than 50% of the outstanding capital stock having full voting power is at the time directly or indirectly owned or controlled by such Person. "Superior Proposal" has the meaning specified in Section 5.10 of this Agreement. "Voting Agreement" has the meaning specified in Section 3.14 of this Agreement. "Warrant" has the meaning specified in Section 1.1 of this Agreement. "Warrant Certificate" has the meaning specified in Section 1.1 of this Agreement. "Warrant Shares" has the meaning specified in Section 1.2 of this Agreement. 6.2 Other Definitional Provisions. (a) All terms defined in this Agreement shall have the defined meanings when used in any certificates, reports or other documents made or delivered pursuant hereto or thereto, unless the context otherwise requires. (b) Terms defined in the singular shall have a comparable meaning when used in the plural, and vice versa. (c) All matters of an accounting nature in connection with this Agreement and the transactions contemplated hereby shall be determined in accordance with GAAP applied on a basis consistent with prior periods, where applicable. (d) As used herein, the neuter gender shall also denote the masculine and feminine, and the masculine gender shall also denote the neuter and feminine, where the context so permits. 6.3 The words "hereof", "herein" and "hereunder", and words of similar import, when used in this Agreement shall refer to this Agreement as a whole (including any Exhibits or Schedules hereto) and not to any particular provision of this Agreement. ARTICLE VII INDEMNIFICATION 7.1 Indemnification Generally. Issuer, on the one hand, and Investor, on the other hand (each an "Indemnifying Party"), shall indemnify the other from and against any and all losses, 19 damages, liabilities, claims, charges, actions, proceedings, demands, judgments, settlement costs and expenses of any nature whatsoever (including, without limitation, attorneys' fees and expenses) or deficiencies resulting from any breach of a representation, warranty or covenant by the Indemnifying Party and all claims, charges, actions or proceedings incident to or arising out of the foregoing. 7.2 Indemnification Procedures. Each person entitled to indemnification under this Section (an "Indemnified Party") shall give notice as promptly as reasonably practicable to each Indemnifying Party required to provide indemnification under this Article VII of any action commenced against or by it in respect of which indemnity may be sought hereunder, but failure to so notify an Indemnifying Party shall not relieve such Indemnifying Party from any liability that it may have otherwise than on account of this indemnity agreement so long as such failure shall not have materially prejudiced the position of the Indemnifying Party. Upon such notification, the Indemnifying Party shall assume the defense of such action if it is a claim brought by a third party. If and after such assumption the Indemnified Party shall not be entitled to reimbursement of any expenses incurred by it in connection with such action except as described below. In any such action, any Indemnified Party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless (i) the Indemnifying Party and the Indemnified Party shall have mutually agreed to the contrary or (ii) the named parties in any such action (including any impleaded parties) include both the Indemnifying Party and the Indemnified Party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing or conflicting interests between them. The Indemnifying Party shall not be liable for any settlement of any proceeding effected without its written consent (which shall not be unreasonably withheld or delayed by such Indemnifying party), but if settled with such consent or if there be final judgment for the plaintiff, the Indemnifying Party shall indemnify the Indemnified Party from and against any loss, damage or liability by reason of such settlement or judgment. ARTICLE VIII CONDITIONS TO CLOSING 8.1 Conditions to Obligation of Each Party to Effect the Closing. The respective obligations of each party to effect the Closing shall be subject to the fulfillment of the following conditions any and all of which may be waived, in whole or in part, to the extent permitted by applicable law: (a) Shareholder Approval. This Agreement and the transactions contemplated hereunder shall have been approved and adopted by the vote of the holders of a majority of the shares of Common Stock voting on such matters in accordance with the Articles of Incorporation, Bylaws and the MBCA; (b) No Order. No governmental authority or other agency or commission or federal or state court of competent jurisdiction shall have enacted, issued, promulgated, 20 enforced or entered any statute, rule, regulation, executive order, decree, injunction, or other order (whether temporary, preliminary or permanent) which is in effect and which materially restricts, prevents or prohibits consummation of the Closing or any transaction contemplated by this Agreement; provided, however, that the parties shall use their reasonable best efforts to cause any such decree, judgment, injunction or other order to be vacated or lifted; and (c) Hart-Scott-Rodino Act. Any waiting period (and any extension thereof) applicable to the consummation of the Closing under the HSR Act shall have expired or been terminated. 8.2 Additional Conditions to the Obligations of Investor. The obligation of Investor to proceed with the Closing is also subject to the following conditions any and all of which may be waived, in whole or in part, to the extent permitted by applicable law: (a) Representations and Warranties. Each of the representations and warranties of Issuer contained in this Agreement shall be true and correct as of the Closing as though made on and as of the Closing, except (i) for changes specifically permitted by this Agreement, and (ii) that those representations and warranties which address matters only as of a particular date shall remain true and correct as of such date, except in any case for such failures to be true and correct which would not, individually or in the aggregate, have a Material Adverse Effect on Issuer. Investor shall have received a certificate of the chief executive officer and chief financial officer of Issuer to such effect; (b) Agreement and Covenants. Issuer shall have performed or complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by it on or prior to the Closing. Investor shall have received a certificate of the chief executive officer and chief financial officer of Issuer to such effect; and (c) Commercial Agreements. Issuer shall have executed the Marketing Agreement and Management Services Agreement contemplated by the Commercial Alliance Agreement and the Exhibits thereto (collectively, the "Commercial Agreements") each between Issuer and Investor substantially in the forms attached to the Commercial Alliance Agreement and the Marketing Agreement. 8.3 Additional Conditions to the Obligations of Issuer. The obligation of Issuer to proceed with the Closing is also subject to the following conditions any and all of which may be waived, in whole or in part, to the extent permitted by applicable law: (a) Representations and Warranties. Each of the representations and warranties of Investor contained in this Agreement shall be true and correct as of the Closing as though made on and as of the Closing, except (i) for changes specifically permitted by 21 this Agreement, and (ii) that those representations and warranties which address matters only as of a particular date shall remain true and correct as of such date, except in any case for such failures to be true and correct which would not, individually or in the aggregate, have a Material Adverse Effect on Investor. Issuer shall have received a certificate of an authorized officer of Investor to such effect; (b) Agreement and Covenants. Investor shall have performed or complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by it on or prior to the Closing. Issuer shall have received a certificate of an authorized officer of Investor to such effect; (c) Commercial Agreements. Investor shall have executed each of the Commercial Agreements; and (d) Fairness Opinion Bring Down. Issuer shall have received the updated fairness opinion of Piper Jaffray, Inc., dated the date of the Proxy Statement, to the effect set forth in Section 3.16. ARTICLE IX MISCELLANEOUS 9.1 Notices. All notices, requests, demands, claims, and other communications hereunder shall be in writing and shall be delivered by certified or registered mail (first class postage pre-paid), guaranteed overnight delivery, or facsimile transmission (provided sender receives a return facsimile acknowledging receipt of the notice), to the following addresses and facsimile numbers (or to such other addresses or facsimile numbers which such party shall designate in writing to the other party): (a) if to Issuer to: A.S.V., Inc. 840 Lily Lane Grand Rapids, Minnesota 55744 Attention: Mr. Gary D. Lemke Fax: (218) 326-5579 Telephone:(218) 327-3434 with a copy to: Dorsey & Whitney, LLP Pillsbury Center South 220 South Sixth Street Minneapolis, Minnesota 55402-1498 Attention: Amy E. Ayotte Fax: (612) 340-8738 Email: Telephone:(612) 340-6323 22 (b) if to Investor to: Caterpillar Inc. 100 Northeast Adams Street Peoria, Illinois 61629-2495 Attention: Richard A. Benson, Vice President, Diversified Products Division Fax: (309) 675-4777 Email: Benson_Richard_A@cat.com Telephone:(309) 675-1000 with a copy to: Caterpillar Inc. 100 Northeast Adams Street Peoria, Illinois 61629-2495 Attention: Henry T. Ames, Assistant General Counsel Telephone: (309) 675-1000 Email: Ames_Hank_T@cat.com Facsimile: (309) 675-6620 with a copy to: McDermott, Will & Emery 227 West Monroe Street Chicago, Illinois 60606 Attention: Thomas J. Murphy Fax: (312) 984-3669 Email:Telephone: (312) 372-2000 9.2 Survival. Notwithstanding any knowledge of facts determined or determinable by Investor or Issuer by investigation, Investor and Issuer shall have the right to fully rely on the representations, warranties, covenants and agreements of Issuer contained in this Agreement or in any other documents or papers delivered in connection herewith. Each representation, warranty, covenant and agreement of the parties set forth in this Agreement is independent of each other representation, warranty, covenant and agreement. Each representation and warranty made by any party in this Agreement shall survive the Closing for a period of two years. 9.3 Remedies. (a) Each of Investor and Issuer acknowledge that the other party would not have an adequate remedy at law for money damages in the event that any of the covenants or agreements of such party in this Agreement was not performed in accordance with its terms, and it is therefore agreed that each of Investor and Issuer in addition to and without limiting any other remedy or right such party may have, shall have the right to an injunction or other equitable relief in any court of competent jurisdiction, enjoining any such breach and enforcing specifically the terms and provisions hereof, and each of Investor and Issuer hereby waive any and all defenses 23 such party may have on the ground of lack of jurisdiction or competence of the court to grant such an injunction or other equitable relief. (b) All rights, powers and remedies under this Agreement or otherwise available in respect hereof at law or in equity shall be cumulative and not alternative, and the exercise or beginning of the exercise of any thereof by any party shall not preclude the simultaneous or later exercise of any other such right, power or remedy by such party. 9.4 Entire Agreement. This Agreement and the Commercial Alliance Agreement (including the Exhibits and Schedules attached hereto and thereto), the Option Certificate, and the documents to be delivered at the Closing pursuant hereto, contain the entire understanding of the parties in respect of its subject matter and supersede all prior agreements and understandings between or among the parties with respect to such subject matter. The Exhibits and Schedules hereto constitute a part hereof as though set forth in full above. 9.5 Expenses; Taxes. Except as otherwise provided in this Agreement, the parties shall pay their own fees and expenses, including their own counsel fees, incurred in connection with this Agreement or any transaction contemplated hereby. Any sales tax, stamp, duty, deed transfer or other tax (except taxes based on the income of Investor) arising out of the sale of the Shares, the Warrant, or the Option by Issuer to Investor, the issuance of Warrant Shares upon exercise of the Warrant, the issuance of Option Shares upon exercise of the Option, and the consummation of the transactions contemplated by this Agreement, the Warrant Certificate and the Option Certificate shall be paid by Issuer. 9.6 Amendment; Waiver. Each of this Agreement, the Warrant Certificate and the Option Certificate may not be modified, amended, supplemented, canceled or discharged, except by written instrument executed by both parties. No failure to exercise, and no delay in exercising, any right, power or privilege under each of this Agreement, the Warrant Certificate and the Option Certificate shall operate as a waiver, nor shall any single or partial exercise of any right, power or privilege hereunder or thereunder preclude the exercise of any other right, power or privilege. No waiver of any breach of any provision hereunder or thereunder shall be deemed to be a waiver of any preceding or succeeding breach of the same or any other provision, nor shall any waiver be implied from any course of dealing between the parties. No extension of time for performance of any obligations or other acts hereunder, thereunder, or under any other agreement shall be deemed to be an extension of the time for performance of any other obligations or any other acts. 9.7 Binding Effect; Assignment. The rights and obligations of this Agreement, the Warrant Certificate and the Option Certificate shall bind and inure to the benefit of the parties and their respective successors and legal assigns. The rights and obligations of this Agreement may not be assigned by any party without the prior written consent of the other party. 24 9.8 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one and the same instrument. 9.9 Headings. The headings contained in this Agreement are for convenience of reference only and are not to be given any legal effect and shall not affect the meaning or interpretation of this Agreement. 9.10 Governing Law; Interpretation. This Agreement shall be construed in accordance with and governed for all purposes by the laws of the State of Minnesota applicable to contracts executed and to be wholly performed within such State. 9.11 Severability. The parties stipulate that the terms and provisions of this Agreement, the Warrant Certificate and the Option Certificate are fair and reasonable as of the date hereof. However, if any provision of this Agreement, the Warrant Certificate or the Option Certificate shall be determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement, the Warrant Certificate or the Option Certificate, as applicable, shall remain in full force and effect and shall in no way be affected, impaired or invalidated. If, moreover, any of those provisions shall for any reason be determined by a court of competent jurisdiction to be unenforceable because excessively broad or vague as to duration, geographical scope, activity or subject, it shall be construed by limiting, reducing or defining it, so as to be enforceable. * * * 25 IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed and delivered as of the day and year first above written. A.S.V., INC. By: /s/ Gary D. Lemke -------------------------------- Name: Gary D. Lemke Title: President CATERPILLAR INC. By: /s/ Richard A. Benson -------------------------------- Name: Richard A. Benson Title: Vice President 26 EX-2.(B) 3 FORM OF WARRANT CERTIFICATE EXHIBIT 2(b) THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR UNDER ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION UNDER THE ACT OR AN OPINION OF COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER OR UNDER APPLICABLE STATE SECURITIES LAWS. WARRANT CERTIFICATE To Purchase 10,267,127 Shares of Common Stock of: A.S.V., INC. THIS IS TO CERTIFY THAT CATERILLAR INC. (the "Holder"), or Holder's registered assigns, is entitled to purchase from A.S.V., INC., a Minnesota corporation (the "Company"), up to 10,267,127 shares of the Company's common stock, par value $.01 per share (the "Common Stock"), on the terms and conditions hereinafter set forth. This warrant is being issued in connection with a Securities Purchase Agreement between the Company and the Holder dated October 14, 1998 (the "Purchase Agreement"). Capitalized terms used but not defined herein shall have the meanings set forth in the Purchase Agreement. I. GRANT OF WARRANT 1.1 GRANT. The Company hereby grants the Holder a warrant to purchase 10,267,127 shares of Common Stock at a purchase price of $21.00 per share, exercisable in whole or in part at any time and from time to time from the date hereof until 6:00 p.m. on the tenth anniversary of the date hereof, subject to the provisions of Article V hereof (the "Warrant" and the shares to be issued upon the exercise thereof the "Warrant Shares"). 1.2 SHARES TO BE ISSUED; RESERVATION OF SHARES. The Company covenants and agrees that (1) all Warrant Shares will upon issuance in accordance with the terms hereof be duly authorized, validly issued and outstanding, fully paid and non-assessable, and free from all taxes, liens and charges with respect to the issuance thereof, (2) the Company will from time to time take all actions necessary to assure that the par value per share of the Common Stock is at all times equal to or less than the applicable purchase price per Warrant Share, and (3) the Company will at all times during the exercise period have authorized and reserved sufficient shares of Common Stock to provide for the exercise of the Warrant in full. II. ADJUSTMENTS TO WARRANT RIGHTS 2.1 STOCK SPLITS AND COMBINATIONS. If the Company shall combine all of the outstanding Common Stock proportionately into a smaller number of shares, the number of Warrant Shares issuable to the Holder upon exercise of the Warrant shall be proportionately decreased and the purchase price per Warrant Share hereunder in effect immediately prior to such combination shall be proportionately increased, as of the effective date of such combination, as follows: (a) the number of Warrant Shares purchasable upon the exercise of the Warrant immediately prior to the effective date of such combination shall be adjusted so that the Holder of the Warrant exercised on or after that date shall be entitled to receive the number and kind of Warrant Shares which the Holder of the Warrant would have owned and been entitled to receive as a result of the combination had the Warrant been exercised immediately prior to that date, and (b) the purchase price per Warrant Share in effect immediately prior to such adjustment shall be adjusted by multiplying such purchase price by a fraction, the numerator of which is the aggregate number of shares of Common Stock purchasable upon exercise of the Warrant immediately prior to such adjustment, and the denominator of which is the aggregate number of shares of Common Stock purchasable upon exercise of the Warrant immediately thereafter. If the Company shall effect a subdivision of the outstanding Common Stock, the number of Warrant Shares issuable to the Holder upon exercise of the Warrant shall be proportionally increased and the purchase price per Warrant Share hereunder in effect prior to such subdivision shall be proportionately decreased, as of the effective date of such subdivision, as follows: (a) the number of Warrant Shares purchasable upon the exercise of the Warrant immediately prior to the effective date of such subdivision, shall be adjusted so that the Holder of the Warrant exercised on or after that date shall be entitled to receive the number and kind of Warrant Shares which the Holder of the Warrant would have owned and been entitled to receive as a result of the subdivision had the Warrant been exercised immediately prior to that date (pro rated in the case of any partial exercise), and (b) the purchase price per Warrant Share in effect immediately prior to such adjustment shall be adjusted by multiplying the purchase price by a fraction, the numerator of which is the aggregate number of shares of Common Stock purchasable upon exercise of the Warrant immediately prior to such adjustment, and the denominator of which is the aggregate number of shares of Common Stock purchasable upon exercise of the Warrant immediately thereafter. 2.2 STOCK DIVIDENDS AND DISTRIBUTIONS. If the Company shall make or fix a record date for the holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock, then the number of Warrant Shares issuable to the Holder upon exercise of the Warrant shall be proportionately increased and the purchase price per Warrant Share hereunder in effect prior to the time of such issuance or the close of business on such record date shall be proportionately decreased, as of the time of such issuance, or in the event such record date is fixed, as of the close of business on such record date, as follows: (a) the number of Warrant Shares purchasable upon the exercise of the Warrant immediately prior to the time of such issuance or the close of business on such record date shall be adjusted so that the Holder of the Warrant exercised after that date shall be entitled to receive the number and kind of Warrant Shares which the Holder of the Warrant would have owned and been entitled to receive as a result of the dividend or distribution had the Warrant been exercised immediately prior to that date (pro rated in the case of any partial exercise), and (b) the purchase price in effect immediately prior to such adjustment shall be adjusted by multiplying such purchase price by a fraction, the numerator of which is the aggregate number of shares of Common Stock purchasable upon exercise of the Warrant 2 immediately prior to such adjustment, and the denominator of which is the aggregate number of shares of Common Stock purchasable upon exercise of the Warrant immediately thereafter. 2.3 OTHER DIVIDENDS AND DISTRIBUTIONS. If the Company shall make or fix a record date for the holders of Common Stock entitled to receive a dividend or other distribution payable in securities of the Company other than shares of Common Stock, then lawful and adequate provision shall be made so that the Holder of the Warrant shall be entitled to receive upon exercise of the Warrant, for the aggregate purchase price in effect prior thereto, in addition to the number of Warrant Shares immediately theretofore issuable upon exercise of the Warrant, the kind and number of securities of the Company which the Holder would have owned and been entitled to receive had the Warrant been exercised immediately prior to that date (pro rated in the case of any partial exercise). 2.4 RECLASSIFICATION, EXCHANGE AND SUBSTITUTION. If the Common Stock is changed into the same or a different number of shares of any class or classes of stock, whether by recapitalization, reclassification or otherwise (other than a subdivision or combination of shares or stock dividend or a reorganization, merger, consolidation or sale of assets, provided for elsewhere in this Article II), then the Holder of the Warrant shall be entitled to receive upon exercise of the Warrant, in lieu of the Warrant Shares immediately theretofore issuable upon exercise of the Warrant, for the aggregate purchase price in effect prior thereto, the kind and amount of stock and other securities and property receivable upon such recapitalization, reclassification or other change, by the holders of the number of shares of Common Stock for which such Warrant could have been exercised immediately prior to such recapitalization, reclassification or change (pro rated in the case of any partial exercise). 2.5 REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALES OF ASSETS. If any of the following transactions (each, a "Special Transaction") shall become effective: (i) a capital reorganization (other than a recapitalization, subdivision, combination, reclassification or exchange of shares provided for elsewhere in this Article II), (ii) a consolidation or merger of the Company with and into another entity, or (iii) a sale or conveyance of all or substantially all of the Company's assets, then as a condition of any such Special Transaction, lawful and adequate provision shall be made so that the Holder of the Warrant shall thereafter have the right to purchase and receive upon exercise of the Warrant, in lieu of the Warrant Shares immediately theretofore issuable upon exercise of the Warrant, for the aggregate purchase price in effect immediately prior to such consummation, such shares of stock, other securities, cash or other assets as may be issued or payable in and pursuant to the terms of such Special Transaction to the holders of shares of Common Stock for which such Warrant could have been exercised immediately prior to such Special Transaction (pro rated in the case of any partial exercises). In connection with any Special Transaction, appropriate provision shall be made with respect to the rights and interests of the Holder of the Warrant to the end that the provisions of the Warrant (including without limitation provisions for adjustment of the purchase price and the number of Warrant Shares issuable upon the exercise of the Warrant), shall thereafter be applicable, as nearly as may be practicable, to any shares of stock, other securities, cash or other assets thereafter deliverable upon the exercise of the Warrant. The 3 Company shall not effect any Special Transaction unless prior to or simultaneously with the closing, the successor entity (if other than the Company), if any, resulting from such consolidation or merger or the entity acquiring such assets shall assume by a written instrument executed and mailed by certified mail or delivered to the Holder of the Warrant at the address of the Holder appearing on the books of the Company, the obligation of the Company or such successor corporation to deliver to the Holder such shares of stock, securities, cash or other assets, as in accordance with the foregoing provisions, which the Holder shall have the right to purchase. 2.6 SALES BELOW WARRANT EXERCISE PRICE. (a) In the event the Company shall sell and issue shares of Common Stock, or rights, options, warrants or convertible or exchangeable securities containing the right to subscribe for or purchase shares of Common Stock (excluding (i) shares, rights, options, warrants or convertible or exchangeable securities issued in any of the transactions described in Sections 2.1, 2.2, 2.3, 2.4 or 2.5 above, (ii) shares issuable upon exercise of currently outstanding options, warrants and convertible securities and (iii) options issued to employees or directors of the Company or shares issued upon exercise thereof provided the exercise price of any such options on the date of grant shall be equal to or greater than the fair market value as of such date) at a price per share less than the purchase price per Warrant Share in effect as of the date the Company fixes the offering price of such shares, rights, options, warrants or convertible or exchangeable securities, then the purchase price per Warrant Share shall immediately be reduced to a price determined by multiplying the then current purchase price per Warrant Share by a fraction (i) the numerator of which shall be the number of shares of Common Stock outstanding at the close of business on the date next preceding the date of such issue or sale, plus the number of shares of Common Stock which the aggregate consideration received by the Company for the total number of shares of Common Stock, or rights, options, warrants or convertible or exchangeable securities so issued would purchase at the then current purchase price per Warrant Share, and (ii) the denominator of which shall be the number of shares of Common Stock outstanding at the close of business on the date of such issuance after giving effect to such issuance. (b) For the purpose of making any adjustment required under this Section 2.6, the consideration received by the Company for any issue or sale of securities shall (A) to the extent it consists of cash be computed at the gross amount of cash received by the Company before deduction of any expenses payable by the Company and any underwriting or similar commissions, compensation or concession in connection with such issue or sale, (B) to the extent it consists of property other than cash, be computed at the fair value of that property as determined by the Company's Board of Directors in good faith, (C) if such shares of Common Stock or rights, options, warrants or convertible securities are issued or sold together with other stock or securities or other assets of the Company for a consideration which covers both, be computed as that portion of the consideration so received that may be reasonably determined by the Board of Directors of the Company in good faith to be allocated to such shares of Common Stock, or rights, options, warrants or convertible or exchangeable securities, and (D) if the issuance shall be of such rights, options, warrants or convertible or exchangeable securities, be determined by dividing (X) the total amount 4 receivable by the Company in consideration of the sale and issuance of such rights, options, warrants or convertible or exchangeable securities, plus the total consideration payable to the Company upon exercise, conversion or exchange thereof by (Y) the total number of shares of Common Stock covered by such rights, options, warrants or convertible or exchangeable securities. (c) Upon each adjustment of the purchase price per Warrant Share pursuant to Section 2.6 hereof, the Warrant shall thereupon evidence the right to purchase that number of shares of Common Stock (calculated to the nearest hundredth of a share) obtained by multiplying the number of shares of Common Stock purchasable upon exercise immediately prior to such adjustment by the purchase price per Warrant Share in effect immediately prior to such adjustment and dividing the product so obtained by the purchase price per Warrant Share in effect immediately after such adjustment. The adjustment pursuant to this Section 2.6 to the number of shares of Common Stock purchasable upon exercise of a Warrant shall be made each time an adjustment of the purchase price is made pursuant to Section 2.6 hereof. 2.7 LIQUIDATION. If the Company shall, at any time prior to the expiration of this Warrant, dissolve, liquidate or wind up its affairs, the Holder shall have the right, but not the obligation, to exercise this Warrant. Upon such exercise, the Holder shall have the right to receive, in lieu of the shares of Common Stock that the Holder otherwise would have been entitled to receive upon such exercise, the same kind and amount of assets as would have been issued, distributed or paid to the Holder upon any such dissolution, liquidation or winding up with respect to such shares of Common Stock had the Holder been the holder of record of such shares of Common Stock receivable upon exercise of this Warrant on the date for determining those entitled to receive any such distribution. If any such dissolution, liquidation or winding up results in any cash distribution in excess of the applicable purchase price per Warrant Share provided for by this Warrant, the Holder may, at the Holder's option, exercise this Warrant without making payment of the applicable purchase price per Warrant Share and, in such case, the Company shall, upon distribution to the Holder, consider the applicable purchase price per Warrant Share to have been paid in full, and in making settlement to the Holder shall deduct an amount equal to the applicable purchase price per Warrant Share from the amount payable to the Holder. 2.8 NOTICE. Whenever a Warrant or the number of Warrant Shares issuable hereunder is to be adjusted as provided herein or a dividend or distribution (in cash, stock or otherwise and including, without limitation, any liquidating distributions) is to be declared by the Company, or a definitive agreement with respect to a Special Transaction has been entered into, the Company shall forthwith cause to be sent to the Holder at the last address of the Holder shown on the books of the Company, by first-class mail, postage prepaid, at least ten (10) days prior to the record date specified in (a) below or at least twenty (20) days before the date specified in (b) below, a notice stating in reasonable detail the relevant facts and any resulting adjustments and the calculation thereof, if applicable, and stating (if applicable): (a) the date to be used to determine (i) which holders of Common Stock will be entitled to receive notice of such dividend, distribution, subdivision or combination (the 5 "Record Date"), and (ii) the date as of which such dividend distribution, subdivision or combination shall be made; or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution, subdivision or combination are to be determined (provided, that in the event the Company institutes a policy of declaring cash dividends on a periodic basis, the Company need only provide the relevant information called for in this clause (a) with respect to the first cash dividend payment to be made pursuant to such policy and thereafter provide only notice of any changes in the amount or the frequency of any subsequent dividend payments), or (b) the date on which a Special Transaction is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon consummation of the Special Transaction (the "Exchange Date"). 2.9 FRACTIONAL INTERESTS. The Company shall not be required to issue fractions of shares of Common Stock on the exercise of the Warrant. If any fraction of a share of Common Stock would be issuable upon the exercise of the Warrant, the Company shall, upon such issuance, purchase such fraction for an amount in cash equal to the current value of such fraction, computed on the basis of the last reported closing price of the Common Stock on Nasdaq on the last business day prior to the date of exercise upon which such a sale shall have been effected, or, if the Common Stock is not so quoted on Nasdaq, as the Board of Directors of the Company may in good faith determine. 2.10 EFFECT OF ALTERNATE SECURITIES. If at any time, as a result of an adjustment made pursuant to this Article II, the Holder of the Warrant shall thereafter become entitled to receive any securities of the Company other than shares of Common Stock, then the number of such other securities receivable upon exercise of the Warrant shall be subject to adjustment from time to time on terms as nearly equivalent as practicable to the provisions with respect to shares of Common Stock contained in this Article II. 2.11 SUCCESSIVE APPLICATION. The provisions of this Article II shall similarly apply from time to time to successive events covered by this Article II. III. EXERCISE 3.1 EXERCISE OF WARRANT. (a) The Holder may exercise this Warrant by (i) surrendering this Warrant Certificate, with the form of exercise notice attached hereto as Exhibit A duly executed by Holder, and (ii) making payment to the Company of the aggregate purchase price for the applicable Warrant Shares in cash, by certified check, bank check or wire transfer to an account designated by the Company. Upon any partial exercise of the Warrant, the Company, at its expense, shall promptly issue to the Holder for its surrendered Warrant Certificate a replacement Warrant Certificate identical in all 6 respects to this Warrant Certificate, except that the number of Warrant Shares shall be reduced accordingly. (b) Each person in whose name any Warrant Share certificate is issued upon exercise of a Warrant shall for all purposes been deemed to have become the holder of record of the Warrant Shares for which such Warrant was exercised, and such Warrant Share certificate shall be dated the date upon which the Warrant exercise notice was duly surrendered and payment of the purchase price was tendered to the Company. 3.2 ISSUANCE OF WARRANT SHARES. The Warrant Shares purchased shall be issued to the Holder exercising this Warrant as of the close of business on the date on which all actions and payments required to be taken or made by the Holder, pursuant to Section 3.1, shall have been so taken or made. Certificates for the Warrant Shares so purchased shall be delivered to the Holder within three (3) days after a Warrant is surrendered and payment therefore is made. IV. RIGHTS OF HOLDER 4.1 WARRANTHOLDER RIGHTS. Holder shall not, solely by virtue of the Warrant and prior to the issuance of the Warrant Shares upon due exercise thereof, be entitled to any rights of a shareholder in the Company. 4.2 NO IMPAIRMENT. The Company shall not by any action including, without limitation, amending its articles of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of the Holder against impairment. Without limiting the generality of the foregoing, the Company will (a) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant and (b) use its best efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the company to perform its obligations under this Warrant. Upon the request of the Holder, the Company will at any time during the period this Warrant is outstanding acknowledge in writing, in form satisfactory to the Holder, the continuing validity of this Warrant and the obligations of the Company hereunder. V. PARTIAL ACCELERATION AND TERMINATION OF WARRANT 5.1 ACCELERATION. Notwithstanding the provisions of Section 1.1 with respect to the term of the Warrant, if and when the Company achieves an Acceleration Goal (as defined below) and the average closing sale price for a share of Common Stock on the principal trading market for the Common Stock for the preceding ten trading days is above the current purchase price per 7 Warrant Share, the Company shall have the right, by giving of notice to the Holder (an "Acceleration Notice"), to cause (i) a Reduced Amount (as defined below) of Warrant Shares to remain subject to the Warrant for the original term and (ii) the balance of any Warrant Shares then subject to the Warrant to remain subject to the Warrant only for a period of 75 days from the giving of the Acceleration Notice. An "Acceleration Goal" shall mean the reporting by the Company of Qualifying Revenues (as herein defined) for the immediately preceding four fiscal quarters in the amounts specified in the table below and the "Reduced Amount" shall mean the number of Warrant Shares specified in the table below that shall then remain subject to the Warrant in accordance with its terms: Amount of Qualifying Revenues Reduced Amount ----------------------------- -------------- $100 million 8,727,058 $150 million 6,673,632 $200 million 4,106,851 $250 million Zero "Qualifying Revenues" for a fiscal period shall mean net sales of the Company from continuing operations determined in accordance with GAAP consistently applied throughout the period, and reported in periodic reports filed by the Company pursuant to the Exchange Act (the "Reports"); provided that the gross profit (net sales less cost of goods sold) derived from such revenues and reported by the Company in the Reports, exceeds 20% of such revenues. If the Company has the right to and does give an Acceleration Notice, only the associated Reduced Amount of Warrant Shares shall remain subject to the Warrant for the original term. With respect to all other Warrant Shares then subject to the Warrant, the Holder shall have a period of 75 days from the date of such Acceleration Notice to exercise its rights hereunder and if not so exercised such rights shall elapse and terminate on the 76TH day following the giving of the Acceleration Notice. 5.2 TERMINATION. Notwithstanding anything contained herein to the contrary, Issuer shall have the right to terminate this Warrant by giving sixty (60) days prior written notice to Holder in the event that: (i) Holder has failed to perform the Marketing Agreement in any material respect and has not remedied such failure and the Company has terminated the Marketing Agreement pursuant to Section 4.1 thereof; (ii) Holder and the Company have entered into the Technology License Agreement contemplated by Section 6 of the Commercial Alliance Agreement, Holder has materially breached the terms of that Technology License Agreement and has not remedied such breach and the Company has terminated the Technology License Agreement pursuant to its terms; or (iii) Holder and the Company have entered into and Holder has materially breached one or more of the Trademark and Trade Dress License Agreement, the Management Services Agreement, the Supply Agreements or the Joint Venture Agreement contemplated by the Commercial Alliance 8 Agreement and Holder has not remedied such breach, the Company has terminated one or more of such agreements pursuant to their terms and the material breach by Holder, collectively with all other breaches of such agreements by the Holder, are of sufficient materiality to cause the Company to be materially unable to realize the benefits provided collectively by those agreements to Holder; provided, however, that during any such sixty (60) day period of termination notice, this Warrant shall remain exercisable in accordance with its terms. The Reduced Amounts set forth in the table above shall be subject to adjustment in accordance with the provisions of Article II hereof. VI. TRANSFERABILITY The Holder hereby represents and warrants that it is acquiring the Warrant and, upon the exercise thereof, the Warrant Shares, for investment and not with a view to resale or distribution thereof. Subject to compliance with federal and state securities laws, the Holder may sell, assign, transfer or otherwise dispose of all or any portion of the Warrant or the Warrant Shares acquired upon any exercise hereof at any time and from time to time; provided however, that the Warrant may only be transferred to an Affiliate of the Holder. Upon the sale, assignment, transfer or other disposition of all or any portion of the Warrant, the Holder shall deliver to Company a written notice of such in the form attached hereto as Exhibit B duly executed by the Holder which includes the identity and address of any purchaser, assignor, or transferee. VII. LEGEND ON WARRANT SHARES Certificates evidencing the Warrant Shares shall bear the following legend: THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR UNDER ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION UNDER THE ACT OR AN OPINION OF COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER OR SUCH STATE SECURITIES LAWS. VIII. MISCELLANEOUS 8.1 NOTICES. All notices, requests, demands, claims, and other communications hereunder shall be in writing and shall be delivered by certified or registered mail (first class postage pre-paid), or guaranteed overnight delivery, to the Company at the address at which its principal business office is located from time to time, and the Holder at the address it advises the Company of. 9 8.2 EXPENSES; TAXES. Any sales tax, stamp duty, deed transfer or other tax (except only taxes based on the income of Holder) arising out of the issuance and sale of the Warrant or the Warrant Shares issuable upon exercise of the Warrant and consummation of the transactions contemplated by this Warrant Certificate shall be paid by the Company. 8.3 AMENDMENT; WAIVER. This Warrant Certificate may not be modified, amended, supplemented, canceled or discharged, except by written instrument executed by the Company and the Holder. No failure to exercise, and no delay in exercising, any right, power or privilege under this Warrant Certificate shall operate as a waiver, nor shall any single or partial exercise of any right, power or privilege hereunder preclude the exercise of any other right, power or privilege. No waiver of any breach of any provision shall be deemed to be a waiver of any preceding or succeeding breach of the same or any other provision, nor shall any waiver be implied from any course of dealing between the Company and the Holder. No extension of time for performance of any obligations or other acts hereunder or under any other agreement shall be deemed to be an extension of the time for performance of any other obligations or any other acts. 8.4 HEADINGS. The headings contained in this Warrant Certificate are for convenience of reference only and are not to be given any legal effect and shall not affect the meaning or interpretation of this Warrant Certificate. 8.5 GOVERNING LAW; INTERPRETATION. This Warrant Certificate shall be construed in accordance with and governed for all purposes by the laws of the State of Minnesota. IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be duly executed and delivered as of the day and year first above written. A.S.V., INC. By: ------------------------------- Name: ----------------------------- Title: ---------------------------- 10 EXHIBIT A EXERCISE NOTICE [To be executed only upon exercise of Warrant] The undersigned registered owner of this Warrant irrevocably exercises this Warrant for the purchase of the number of shares of Common Stock of A.S.V., Inc. as is set forth below, and herewith makes payment therefor, all at the price and on the terms and conditions specified in the attached Warrant Certificate and requests that certificates for the shares of Common Stock hereby purchased (and any securities or other property issuable upon such exercise) be issued in the name of and delivered to the person specified below whose address is set forth below, and, if such shares of Common Stock shall not include all of the shares of Common Stock now and hereafter issuable as provided in the attached Warrant Certificate, then A.S.V., Inc. shall, at its own expense, promptly issue to the undersigned a new Warrant Certificate of like tenor and date for the balance of the shares of Common Stock issuable thereunder. Date: ____________________ Amount of Shares Purchased: ______________ Aggregate Purchase Price: $_____________ Printed Name of Registered Holder: ________________________________ Signature of Registered Holder: ________________________________ NOTICE: The signature on this Exercise Notice must correspond with the name as written upon the face of the attached Warrant Certificate in every particular, without alteration or enlargement or any change whatsoever. Stock Certificates to be issued and registered in the following name, and delivered to the following address: ----------------------------------- (Name) ----------------------------------- (Street Address) ----------------------------------- (City) (State) (Zip Code) ----------------------------------- (Tax Identification or Social Security Number) 11 EXHIBIT B ASSIGNMENT NOTICE [To be executed only upon transfer of Warrant] FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto the person named below, whose address is set forth below, the rights represented by the attached Warrant Certificate to purchase the number of shares of the Common Stock of A.S.V., Inc. ("ASV") as is set forth below, to which the attached Warrant Certificate relates, and appoints ____________________________ attorney to transfer such rights on the books of ASV with full power of substitution in the premises. If such shares of Common Stock of ASV shall not include all of the shares of Common Stock now and hereafter issuable as provided in the attached Warrant Certificate, then ASV, at its own expense, shall promptly issue to the undersigned a new Warrant of like tenor and date for the balance of the Common Stock issuable thereunder. Date: ____________________ Amount of Warrant Transferred: ______________ Printed Name of Registered Holder: ________________________________ Signature of Registered Holder: ________________________________ NOTICE: The signature on this Assignment Notice must correspond with the name as written upon the face of the attached Warrant Certificate in every particular, without alteration or enlargement or any change whatsoever. Warrant Certificate for transferred Warrant to be issued and registered in the following name, and delivered to the following address: ----------------------------------- (Name) ----------------------------------- (Street Address) ----------------------------------- (City) (State) (Zip Code) 12 EX-2.(C) 4 OPTION CERTIFICATE EXHIBIT 2(c) THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR UNDER ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION UNDER THE ACT OR AN OPINION OF COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER OR UNDER APPLICABLE STATE SECURITIES LAWS. OPTION CERTIFICATE To Purchase 1,579,000 Shares of Common Stock of: A.S.V., INC. THIS IS TO CERTIFY THAT CATERPILLAR INC. (the "Holder"), or Holder's registered assigns, is entitled to purchase from A.S.V., Inc., a Minnesota corporation (the "Company"), up to 1,579,000 shares of the Company's common stock, par value $.01 per share (the "Common Stock"), on the terms and conditions hereinafter set forth. This option is being issued in connection with a Securities Purchase Agreement between the Company and the Holder dated October 14, 1998 (the "Purchase Agreement"). Capitalized terms used but not defined herein shall have the meanings set forth in the Purchase Agreement. I. GRANT OF OPTION 1.1 GRANT. The Company hereby grants the Holder an option to purchase 1,579,000 shares of Common Stock at a purchase price of $18.00 per share, exercisable in whole or in part at any time and from time to time from the date hereof until 6:00 p.m. on the first anniversary of the date hereof, subject to earlier termination, if any, as provided in Article V (the "Option" and the shares to be issued upon the exercise thereof, the "Option Shares"). 1.2 SHARES TO BE ISSUED; RESERVATION OF SHARES. The Company covenants and agrees that (1) all Option Shares will upon issuance in accordance with the terms thereof be duly authorized, validly issued and outstanding, fully paid and non-assessable, and free from all taxes, liens and charges with respect to the issuance thereof, (2) the Company will from time to time take all actions necessary to assure that the par value per share of the Common Stock is at all times equal to or less than the applicable purchase price per Option Share, and (3) the Company will at all times during the exercise period have authorized and reserved sufficient shares of Common Stock to provide for the exercise of the Option in full. II. ADJUSTMENTS TO OPTION RIGHTS 2.1 STOCK SPLITS AND COMBINATIONS. If the Company shall combine all of the outstanding Common Stock proportionately into a smaller number of shares, the number of Option Shares issuable to the Holder upon exercise of the Option shall be proportionately decreased and the purchase price per Option Share hereunder in effect immediately prior to such combination shall be proportionately increased, as of the effective date of such combination, as follows: (a) the number of Option Shares purchasable upon the exercise of the Option immediately prior to the effective date of such combination shall be adjusted so that the Holder of the Option exercised on or after that date shall be entitled to receive the number and kind of Option Shares which the Holder of the Option would have owned and been entitled to receive as a result of the combination had the Option been exercised immediately prior to that date, and (b) the purchase price per Option Share in effect immediately prior to such adjustment shall be adjusted by multiplying such purchase price by a fraction, the numerator of which is the aggregate number of shares of Common Stock purchasable upon exercise of the Option immediately prior to such adjustment, and the denominator of which is the aggregate number of shares of Common Stock purchasable upon exercise of the Option immediately thereafter. If the Company shall effect a subdivision of the outstanding Common Stock, the number of Option Shares issuable to the Holder upon exercise of the Option shall be proportionally increased and the purchase price per Option Share hereunder in effect prior to such subdivision shall be proportionately decreased, as of the effective date of such subdivision, as follows: (a) the number of Option Shares purchasable upon the exercise of the Option immediately prior to the effective date of such subdivision, shall be adjusted so that the Holder of the Option exercised on or after that date shall be entitled to receive the number and kind of Option Shares which the Holder of the Option would have owned and been entitled to receive as a result of the subdivision had the Option been exercised immediately prior to that date (pro rated in the case of any partial exercise), and (b) the purchase price per Option Share in effect immediately prior to such adjustment shall be adjusted by multiplying the purchase price by a fraction, the numerator of which is the aggregate number of shares of Common Stock purchasable upon exercise of the Option immediately prior to such adjustment, and the denominator of which is the aggregate number of shares of Common Stock purchasable upon exercise of the Option immediately thereafter. 2.2 STOCK DIVIDENDS AND DISTRIBUTIONS. If the Company shall make or fix a record date for the holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock, then the number of Option Shares issuable to the Holder upon exercise of the Option shall be proportionately increased and the purchase price per Option Share hereunder in effect prior to the time of such issuance or the close of business on such record date shall be proportionately decreased, as of the time of such issuance, or in the event such record date is fixed, as of the close of business on such record date, as follows: (a) the number of Option Shares purchasable upon the exercise of the Option immediately prior to the time of such issuance or the close of business on such record date shall be adjusted so that the Holder of the Option exercised after that date shall be entitled to receive the number and kind of Option Shares which the Holder of the Option would have owned and been entitled to receive as a result of the dividend or distribution had the Option been exercised immediately prior to that date (pro rated in the case of any partial exercise), and (b) the purchase price in effect immediately prior to such adjustment shall be adjusted by multiplying such purchase price by a fraction, the numerator of which is the aggregate 2 number of shares of Common Stock purchasable upon exercise of the Option immediately prior to such adjustment, and the denominator of which is the aggregate number of shares of Common Stock purchasable upon exercise of the Option immediately thereafter. 2.3 OTHER DIVIDENDS AND DISTRIBUTIONS. If the Company shall make or fix a record date for the holders of Common Stock entitled to receive a dividend or other distribution payable in securities of the Company other than shares of Common Stock, then lawful and adequate provision shall be made so that the Holder of the Option shall be entitled to receive upon exercise of the Option, for the aggregate purchase price in effect prior thereto, in addition to the number of Option Shares immediately theretofore issuable upon exercise of the Option, the kind and number of securities of the Company which the Holder would have owned and been entitled to receive had the Option been exercised immediately prior to that date (pro rated in the case of any partial exercise). 2.4 RECLASSIFICATION, EXCHANGE AND SUBSTITUTION. If the Common Stock is changed into the same or a different number of shares of any class or classes of stock, whether by recapitalization, reclassification or otherwise (other than a subdivision or combination of shares or stock dividend or a reorganization, merger, consolidation or sale of assets, provided for elsewhere in this Article II), then the Holder of the Option shall be entitled to receive upon exercise of the Option, in lieu of the Option Shares immediately theretofore issuable upon exercise of the Option, for the aggregate purchase price in effect prior thereto, the kind and amount of stock and other securities and property receivable upon such recapitalization, reclassification or other change, by the holders of the number of shares of Common Stock for which such Option could have been exercised immediately prior to such recapitalization, reclassification or change (pro rated in the case of any partial exercise). 2.5 REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALES OF ASSETS. If any of the following transactions (each, a "Special Transaction") shall become effective: (i) a capital reorganization (other than a recapitalization, subdivision, combination, reclassification or exchange of shares provided for elsewhere in this Article II), (ii) a consolidation or merger of the Company with and into another entity, or (iii) a sale or conveyance of all or substantially all of the Company's assets, then as a condition of any such Special Transaction, lawful and adequate provision shall be made so that the Holder of the Option shall thereafter have the right to purchase and receive upon exercise of the Option, in lieu of the Option Shares immediately theretofore issuable upon exercise of the Option, for the aggregate purchase price in effect immediately prior to such consummation, such shares of stock, other securities, cash or other assets as may be issued or payable in and pursuant to the terms of such Special Transaction to the holders of shares of Common Stock for which such Option could have been exercised immediately prior to such Special Transaction (pro rated in the case of any partial exercises). In connection with any Special Transaction, appropriate provision shall be made with respect to the rights and interests of the Holder of the Option to the end that the provisions of the Option (including without limitation provisions for adjustment of the purchase price and the number of Option Shares issuable upon the exercise of the Option), shall thereafter be applicable, as nearly as may be practicable, to any shares of stock, other securities, cash or other assets thereafter deliverable upon the exercise of the Option. The Company shall not effect 3 any Special Transaction unless prior to or simultaneously with the closing, the successor entity (if other than the Company), if any, resulting from such consolidation or merger or the entity acquiring such assets shall assume by a written instrument executed and mailed by certified mail or delivered to the Holder of the Option at the address of the Holder appearing on the books of the Company, the obligation of the Company or such successor corporation to deliver to the Holder such shares of stock, securities, cash or other assets, as in accordance with the foregoing provisions, which the Holder shall have the right to purchase. 2.6 SALES BELOW OPTION EXERCISE PRICE. (a) In the event the Company shall sell and issue shares of Common Stock, or rights, options, warrants or convertible or exchangeable securities containing the right to subscribe for or purchase shares of Common Stock (excluding (i) shares, rights, options, warrants or convertible or exchangeable securities issued in any of the transactions described in Sections 2.1, 2.2, 2.3, 2.4 or 2.5 above, (ii) shares issuable upon exercise of currently outstanding options, warrants and convertible securities and (iii) options issued to employees or directors of the Company or shares issued upon exercise thereof, provided the exercise price of any such options on the date of grant shall be equal to or greater than the fair market value as of such date) at a price per share less than the purchase price per Option Share in effect as of the date the Company fixes the offering price of such shares, rights, options, warrants or convertible or exchangeable securities, then the purchase price per Option Share shall immediately be reduced to a price determined by multiplying the then current purchase price per Option Share by a fraction (i) the numerator of which shall be the number of shares of Common Stock outstanding at the close of business on the date next preceding the date of such issue or sale, plus the number of shares of Common Stock which the aggregate consideration received by the Company for the total number of shares of Common Stock, or rights, options, warrants or convertible or exchangeable securities so issued would purchase at the then current purchase price per Option Share, and (ii) the denominator of which shall be the number of shares of Common Stock outstanding at the close of business on the date of such issuance after giving effect to such issuance. (b) For the purpose of making any adjustment required under this Section 2.6, the consideration received by the Company for any issue or sale of securities shall (A) to the extent it consists of cash be computed at the gross amount of cash received by the Company before deduction of any expenses payable by the Company and any underwriting or similar commissions, compensation or concession in connection with such issue or sale, (B) to the extent it consists of property other than cash, be computed at the fair value of that property as determined by the Company's Board of Directors in good faith, (C) if such shares of Common Stock or rights, options, warrants or convertible securities are issued or sold together with other stock or securities or other assets of the Company for a consideration which covers both, be computed as that portion of the consideration so received that may be reasonably determined by the Board of Directors of the Company in good faith to be allocated to such shares of Common Stock, or rights, options, warrants or convertible or exchangeable securities, and (D) if the issuance shall be of such rights, options, warrants or convertible or exchangeable securities, be determined by dividing (X) the total amount receivable 4 by the Company in consideration of the sale and issuance of such rights, options, warrants or convertible or exchangeable securities, plus the total consideration payable to the Company upon exercise, conversion or exchange thereof by (Y) the total number of shares of Common Stock covered by such rights, options, warrants or convertible or exchangeable securities. (c) Upon each adjustment of the purchase price per Option Share pursuant to Section 2.6 hereof, the Option shall thereupon evidence the right to purchase that number of shares of Common Stock (calculated to the nearest hundredth of a share) obtained by multiplying the number of shares of Common Stock purchasable upon exercise immediately prior to such adjustment by the purchase price per Option Share in effect immediately prior to such adjustment and dividing the product so obtained by the purchase price per Option Share in effect immediately after such adjustment. The adjustment pursuant to this Section 2.6 to the number of shares of Common Stock purchasable upon exercise of a Option shall be made each time an adjustment of the purchase price is made pursuant to Section 2.6 hereof. 2.7 LIQUIDATION. If the Company shall, at any time prior to the expiration of this Option, dissolve, liquidate or wind up its affairs, the Holder shall have the right, but not the obligation, to exercise this Option. Upon such exercise, the Holder shall have the right to receive, in lieu of the shares of Common Stock that the Holder otherwise would have been entitled to receive upon such exercise, the same kind and amount of assets as would have been issued, distributed or paid to the Holder upon any such dissolution, liquidation or winding up with respect to such shares of Common Stock had the Holder been the holder of record of such shares of Common Stock receivable upon exercise of this Option on the date for determining those entitled to receive any such distribution. If any such dissolution, liquidation or winding up results in any cash distribution in excess of the applicable purchase price per Option Share provided for by this Option, the Holder may, at the Holder's option, exercise this Option without making payment of the applicable purchase price per Option Share and, in such case, the Company shall, upon distribution to the Holder, consider the applicable purchase price per Option Share to have been paid in full, and in making settlement to the Holder shall deduct an amount equal to the applicable purchase price per Option Share from the amount payable to the Holder. 2.8 NOTICE. Whenever a Option or the number of Option Shares issuable hereunder is to be adjusted as provided herein or a dividend or distribution (in cash, stock or otherwise and including, without limitation, any liquidating distributions) is to be declared by the Company, or a definitive agreement with respect to a Special Transaction has been entered into, the Company shall forthwith cause to be sent to the Holder at the last address of the Holder shown on the books of the Company, by first-class mail, postage prepaid, at least ten (10) days prior to the record date specified in (a) below or at least twenty (20) days before the date specified in (b) below, a notice stating in reasonable detail the relevant facts and any resulting adjustments and the calculation thereof, if applicable, and stating (if applicable): (a) the date to be used to determine (i) which holders of Common Stock will be entitled to receive notice of such dividend, distribution, subdivision or combination (the "Record Date"), and 5 (ii) the date as of which such dividend distribution, subdivision or combination shall be made; or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution, subdivision or combination are to be determined (provided, that in the event the Company institutes a policy of declaring cash dividends on a periodic basis, the Company need only provide the relevant information called for in this clause (a) with respect to the first cash dividend payment to be made pursuant to such policy and thereafter provide only notice of any changes in the amount or the frequency of any subsequent dividend payments), or (b) the date on which a Special Transaction is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon consummation of the Special Transaction (the "Exchange Date"). 2.9 FRACTIONAL INTERESTS. The Company shall not be required to issue fractions of shares of Common Stock on the exercise of the Option. If any fraction of a share of Common Stock would be issuable upon the exercise of the Option, the Company shall, upon such issuance, purchase such fraction for an amount in cash equal to the current value of such fraction, computed on the basis of the last reported closing price of the Common Stock on Nasdaq on the last business day prior to the date of exercise upon which such a sale shall have been effected, or, if the Common Stock is not so quoted on Nasdaq, as the Board of Directors of the Company may in good faith determine. 2.10 EFFECT OF ALTERNATE SECURITIES. If at any time, as a result of an adjustment made pursuant to this Article II, the Holder of the Option shall thereafter become entitled to receive any securities of the Company other than shares of Common Stock, then the number of such other securities receivable upon exercise of the Option shall be subject to adjustment from time to time on terms as nearly equivalent as practicable to the provisions with respect to shares of Common Stock contained in this Article II. 2.11 SUCCESSIVE APPLICATION. The provisions of this Article II shall similarly apply from time to time to successive events covered by this Article II. III. EXERCISE 3.1 EXERCISE OF OPTION. (a) The Holder may exercise this Option by (i) surrendering this Option Certificate, with the form of exercise notice attached hereto as Exhibit A duly executed by Holder, and (ii) making payment to the Company of the aggregate purchase price for the applicable Option Shares in cash, by certified check, bank check or wire transfer to an account designated by the Company. Upon any partial exercise of the Option, the Company, at its expense, shall promptly issue to the Holder for its surrendered Option Certificate a replacement Option Certificate identical in all respects to this Option Certificate, except that the number of Option Shares shall be reduced accordingly. 6 (b) Each person in whose name any Option Share certificate is issued upon exercise of a Option shall for all purposes been deemed to have become the holder of record of the Option Shares for which such Option was exercised, and such Option Share certificate shall be dated the date upon which the Option exercise notice was duly surrendered and payment of the purchase price was tendered to the Company. 3.2 ISSUANCE OF OPTION SHARES. The Option Shares purchased shall be issued to the Holder exercising this Option as of the close of business on the date on which all actions and payments required to be taken or made by the Holder, pursuant to Section 3.1, shall have been so taken or made. Certificates for the Option Shares so purchased shall be delivered to the Holder within three (3) days after a Option is surrendered and payment therefore is made. IV. RIGHTS OF HOLDER 4.1 OPTIONHOLDER RIGHTS. Holder shall not, solely by virtue of the Option and prior to the issuance of the Option Shares upon due exercise thereof, be entitled to any rights of a shareholder in the Company. 4.2 NO IMPAIRMENT. The Company shall not by any action including, without limitation, amending its articles of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Option, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of the Holder against impairment. Without limiting the generality of the foregoing, the Company will (a) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Option and (b) use its best efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the company to perform its obligations under this Option. Upon the request of the Holder, the Company will at any time during the period this Option is outstanding acknowledge in writing, in form satisfactory to the Holder, the continuing validity of this Option and the obligations of the Company hereunder. V. TERMINATION OF OPTION 5.1 TERMINATION AND CLOSING. Upon the Closing (as defined in the Purchase Agreement) the Option shall terminate and the Holder shall have no further rights thereunder. 5.2 OTHER TERMINATIONS. The Option shall terminate and the Holder shall have no further rights thereunder if the Purchase Agreement is terminated: (a) by the Company pursuant to the provisions of Section 2.2(c) thereof; 7 (b) by the Company or the Holder pursuant to the provisions of Section 2.2(d) thereof, solely as a result of the result of the failure of the conditions specified in Section 8.1(b) or (c) to be satisfied; or (c) by the Company pursuant to the provisions of Section 2.2(d) thereof, solely as a result of the failure of the conditions specified in Section 8.3 to be satisfied. VI. TRANSFERABILITY The Holder hereby represents and warrants that it is acquiring the Option and, upon the exercise thereof, the Option Shares, for investment and not with a view to resale or distribution thereof. Subject to compliance with federal and state securities laws, the Holder may sell, assign, transfer or otherwise dispose of all or any portion of the Option or the Option Shares acquired upon any exercise hereof at any time and from time to time; provided however, that the Option may only be transferred to an Affiliate of the Holder. Upon the sale, assignment, transfer or other disposition of all or any portion of the Option, the Holder shall deliver to Company a written notice of such in the form attached hereto as Exhibit B duly executed by the Holder which includes the identity and address of any purchaser, assignor, or transferee. VII. LEGEND ON OPTION SHARES Certificates evidencing the Option Shares shall bear the following legend: THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR UNDER ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION UNDER THE ACT OR AN OPINION OF COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER OR SUCH STATE SECURITIES LAWS. VIII. MISCELLANEOUS 8.1 NOTICES. All notices, requests, demands, claims, and other communications hereunder shall be in writing and shall be delivered by certified or registered mail (first class postage pre-paid), or guaranteed overnight delivery, to the Company at the address at which its principal business office is located from time to time, and the Holder at the address it advises the Company of. 8.2 EXPENSES; TAXES. Any sales tax, stamp duty, deed transfer or other tax (except only taxes based on the income of Holder) arising out of the issuance and sale of the Option 8 or the Option Shares issuable upon exercise of the Option and consummation of the transactions contemplated by this Option Certificate shall be paid by the Company. 8.3 AMENDMENT; WAIVER. This Option Certificate may not be modified, amended, supplemented, canceled or discharged, except by written instrument executed by the Company and the Holder. No failure to exercise, and no delay in exercising, any right, power or privilege under this Option Certificate shall operate as a waiver, nor shall any single or partial exercise of any right, power or privilege hereunder preclude the exercise of any other right, power or privilege. No waiver of any breach of any provision shall be deemed to be a waiver of any preceding or succeeding breach of the same or any other provision, nor shall any waiver be implied from any course of dealing between the Company and the Holder. No extension of time for performance of any obligations or other acts hereunder or under any other agreement shall be deemed to be an extension of the time for performance of any other obligations or any other acts. 8.4 HEADINGS. The headings contained in this Option Certificate are for convenience of reference only and are not to be given any legal effect and shall not affect the meaning or interpretation of this Option Certificate. 8.5 GOVERNING LAW; INTERPRETATION. This Option Certificate shall be construed in accordance with and governed for all purposes by the laws of the State of Minnesota. * * * 9 IN WITNESS WHEREOF, the Company has caused this Option Certificate to be duly executed and delivered as of the day and year first above written. A.S.V., INC. By: /s/ Gary D. Lemke ------------------------------- Name: Gary D. Lemke Title: President 10 EXHIBIT A EXERCISE NOTICE [To be executed only upon exercise of Option] The undersigned registered owner of this Option irrevocably exercises this Option for the purchase of the number of shares of Common Stock of A.S.V., Inc. as is set forth below, and herewith makes payment therefor, all at the price and on the terms and conditions specified in the attached Option Certificate and requests that certificates for the shares of Common Stock hereby purchased (and any securities or other property issuable upon such exercise) be issued in the name of and delivered to the person specified below whose address is set forth below, and, if such shares of Common Stock shall not include all of the shares of Common Stock now and hereafter issuable as provided in the attached Option Certificate, then A.S.V., Inc. shall, at its own expense, promptly issue to the undersigned a new Option Certificate of like tenor and date for the balance of the shares of Common Stock issuable thereunder. Date: ____________________ Amount of Shares Purchased: ______________ Aggregate Purchase Price: $_____________ Printed Name of Registered Holder: ________________________________ Signature of Registered Holder: ________________________________ NOTICE: The signature on this Exercise Notice must correspond with the name as written upon the face of the attached Option Certificate in every particular, without alteration or enlargement or any change whatsoever. Stock Certificates to be issued and registered in the following name, and delivered to the following address: ----------------------------------- (Name) ----------------------------------- (Street Address) ----------------------------------- (City) (State) (Zip Code) ----------------------------------- (Tax identification or Social Security Number) 11 EXHIBIT B ASSIGNMENT NOTICE [To be executed only upon transfer of Option] FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto the person named below, whose address is set forth below, the rights represented by the attached Option Certificate to purchase the number of shares of the Common Stock of A.S.V., Inc. ("ASV") as is set forth below, to which the attached Option Certificate relates, and appoints ____________________________ attorney to transfer such rights on the books of ASV with full power of substitution in the premises. If such shares of Common Stock of ASV shall not include all of the shares of Common Stock now and hereafter issuable as provided in the attached Option Certificate, then ASV, at its own expense, shall promptly issue to the undersigned a new Option of like tenor and date for the balance of the Common Stock issuable thereunder. Date: ____________________ Amount of Option Transferred: ______________ Printed Name of Registered Holder: ________________________________ Signature of Registered Holder: ________________________________ NOTICE: The signature on this Assignment Notice must correspond with the name as written upon the face of the attached Option Certificate in every particular, without alteration or enlargement or any change whatsoever. Option Certificate for transferred Option to be issued and registered in the following name, and delivered to the following address: ----------------------------------- (Name) ----------------------------------- (Street Address) ----------------------------------- (City) (State) (Zip Code) 12 EX-2.(D) 5 VOTING AGREEMENT Exhibit 2(d) VOTING AGREEMENT This Voting Agreement (this "Agreement") is entered into and delivered as of October 13, 1998 by James H. Dahl, Gary D. Lemke, JoAnn Lemke, Philip C. Smaby, Jerome T. Miner, Edgar E. Hetteen, Hannah Hetteen, Leland T. Lynch, Karlin S. Symons, R.E. "Teddy" Turner, IV, and Thomas R. Karges (individually, a "Shareholder", and collectively, the "Shareholders"), and Caterpillar Inc., a Delaware corporation ("Investor"). RECITALS As of the date of this Agreement, each Shareholder owns of record or otherwise controls the voting power of the shares of common stock, par value $0.01 per share ("Common Stock"), of A.S.V., Inc., a Minnesota corporation ("ASV") set forth under his or her name on the signature page hereto. All such shares, together with any shares of ASV Common Stock acquired by a Shareholder or as to which a Shareholder acquires the control of voting power prior to the termination of this Agreement, are sometimes referred to herein as the "Shares" and the Shares owned or controlled by an individual Shareholder are sometimes referred to herein as "his or her Shares." ASV and Investor propose to enter into a Securities Purchase Agreement within one day of the date hereof (as the same may be amended from time to time, the "Purchase Agreement"), which is to provide for Investor to purchase, and ASV to issue to Investor, 1,000,000 shares of Common Stock and a warrant to purchase an additional 10,267,127 shares of Common Stock (the "Investment"), on the terms set forth in the Purchase Agreement. Investor has required, as a condition to its willingness to enter into the Purchase Agreement, that each Shareholder enter into this Agreement. TERMS OF AGREEMENT In consideration of the mutual representations, warranties, covenants, and agreements set forth in the Purchase Agreement and in order to induce Investor to enter into the Purchase Agreement, and to consummate the transactions contemplated thereby, each Shareholder hereby agrees as follows: ARTICLE I REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS The Shareholders hereby represent and warrant to Investor as follows: 1.1 Authority, Etc. Each Shareholder is an individual with competence and authority under applicable law to execute and deliver this Agreement and to consummate the transactions contemplated hereby. Each Shareholder has all necessary authority to execute, deliver, and perform this Agreement and the grant of the rights covered hereby. This Agreement has been duly executed and delivered by each Shareholder and constitutes a legal, valid, and binding obligation of each such Shareholder, enforceable against such Shareholder in accordance with its terms, except as the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally and general equitable principles, regardless of whether such enforceability is considered in a proceeding at law or in equity. 1.2 Title to Shares. Each Shareholder is the record and beneficial owner of or otherwise controls the voting power of the number of Shares set forth under his or her name on the signature page hereto and owns or controls such Shares free and clear of liens, claims, charges or encumbrances of any kind or any proxy or voting restriction. ARTICLE II TRANSFER AND VOTING OF SHARES 2.1 Restriction on Transfer of Shares. During the Term (as defined below), except as set forth in the following sentence, each Shareholder shall not (a) sell, transfer, pledge, grant a security interest in or lien on or otherwise dispose of or encumber any of his or her Shares or relinquish control of the voting power with respect to any of his or her Shares, (b) deposit any of his or her Shares into a voting trust, enter into a voting agreement or arrangement or grant any proxy (except a proxy under the Proxy Statement voted in accordance with this Agreement) with respect to any of his or her Shares, or (c) enter into any contract, option or other arrangement or undertaking with respect to the direct or indirect acquisition or sale, assignment, transfer, pledge, grant of a security interest in or lien on or other disposition of or encumbrance on his or her Shares. Notwithstanding the foregoing, it shall not constitute a breach of this Agreement if (i) any Shareholder delivers Shares in payment of the exercise price of options to purchase Common Stock or (ii) the following Shareholders sell or transfer up to the amount of Shares indicated after their names in connection with gift or charitable contributions or sales made for the purpose of paying income taxes incurred by them in 1998: Edgar E. Hetteen - 50,000 Shares; Philip C. Smaby - 50,000 Shares; Karlin S. Symons - 1,500 Shares; and Thomas R. Karges - 1,000 Shares. 2.2 Voting of Shares. Each Shareholder does hereby irrevocably agree to vote each of his or her Shares at every annual, special or adjourned meeting of the shareholders (including any consent in lieu of a meeting) of ASV during the term of this Agreement (i) in favor of the approval of the Purchase Agreement and the Investment by Investor and its permitted assigns pursuant to the Purchase Agreement and consummation of all other transactions contemplated by the Purchase Agreement, (ii) against any Competing Transaction (as defined in the Purchase Agreement) involving ASV, or any action or agreement that would result in a breach of any covenant, representation or warranty or any other obligation or agreement of ASV under the Purchase Agreement or which could result in any of the conditions to ASV's obligations under the Purchase Agreement not being fulfilled, and (iii) in favor of any other matter relating to the consummation of the transactions contemplated by the Purchase Agreement. For the purposes of this Agreement, "Term" shall mean the period from the date of execution of this Agreement until 2 the earlier of the date of termination of the Purchase Agreement or the date of the closing of the transactions contemplated thereby. 2.3 Further Assurances. Each Shareholder shall take such further actions and execute such further documents and instruments as may reasonably be requested by Investor to carry out the provisions of this Agreement. ARTICLE III GENERAL PROVISIONS 3.1 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, each Shareholder agrees to negotiate with Investor in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible to the fullest extent permitted by applicable law in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible. 3.2 Entire Agreement. This Agreement constitutes the entire agreement of the parties and supersedes all prior agreements and undertakings, both written and oral, between each Shareholder and Investor, with respect to the subject matter hereof. 3.3 Assignment. Except as provided herein, this Agreement shall not be assigned by operation of law or otherwise. This Agreement shall be binding upon each Shareholder and his or her successors and assigns. 3.4 Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of Investor, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement. 3.5 Specific Performance. Each Shareholder agrees that irreparable damage would occur in the event any provision of this Agreement was not performed in accordance with the terms hereof and that Investor shall be entitled to specific performance of the terms hereof, in addition to any other remedy at law or in equity. 3.6 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Minnesota applicable to contracts executed and to be performed entirely within that State. Any and all service of process and any other notice in any such action, suit or proceeding shall be effective against each Shareholder if given by mail, postage prepaid, mailed to such Shareholder at his or her address as currently reflected on the records of ASV. 3 3.7 Counterparts. This Agreement may be executed in one or more counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same instrument. IN WITNESS WHEREOF, each Shareholder has caused this Agreement to be duly executed and delivered as of the day and year first written above. THE SHAREHOLDERS: /s/ James H. Dahl ----------------------------------- James H. Dahl 788,550 shares of Common Stock /s/ Gary D. Lemke ----------------------------------- Gary D. Lemke 65,678 shares of Common Stock /s/ Gary Lemke ----------------------------------- Gary and JoAnn Lemke by Gary Lemke 143,209 shares of Common Stock /s/ JoAnn Lemke ----------------------------------- JoAnn Lemke 61,363 shares of Common Stock /s/ Philip C. Smaby ----------------------------------- Philip C. Smaby 374,006 shares of Common Stock /s/ Jerome T. Miner ----------------------------------- Jerome T. Miner 359,850 shares of Common Stock /s/ Edgar E. Hetteen ----------------------------------- Edgar E. Hetteen 120,877 shares of Common Stock 4 /s/ Hannah Hetteen ----------------------------------- Hannah Hetteen 113,100 shares of Common /s/ Leland T. Lynch ----------------------------------- Leland T. Lynch 16,500 shares of Common Stock /s/ Karlin S. Symons ----------------------------------- Karlin S. Symons 13,103 shares of Common Stock /s/ R. E. Turner, IV ----------------------------------- R.E. "Teddy" Turner, IV 750 shares of Common Stock /s/ Thomas R. Karges ----------------------------------- Thomas R. Karges 4,366 shares of Common Stock ACCEPTED AND AGREED: - -------------------- CATERPILLAR INC. By: ------------------------------- Its: 5 EX-2.(E) 6 COMMERCIAL ALLIANCE AGREEMENT Exhibit 2(e) COMMERCIAL ALLIANCE AGREEMENT This Agreement, dated October 14, 1998 is between A.S.V., Inc., a Minnesota corporation with a principal place of business at 840 Lily Lane, Grand Rapids, Minnesota 55744 ("ASV") and Caterpillar Inc., a Delaware corporation with a principal place of business at 100 Northeast Adams, Peoria, Illinois 61629 ("Caterpillar"). WHEREAS, ASV is engaged in the design, manufacture and sale of all-terrain rubber tracked vehicles; WHEREAS, Caterpillar is a manufacturer of earthmoving and construction equipment, which it distributes through its worldwide network of independent dealers; WHEREAS, pursuant to that certain Securities Purchase Agreement of even date herewith ("SPA") between the parties, Caterpillar has agreed to purchase an equity interest in ASV and ASV has granted Caterpillar a warrant to purchase a controlling interest in ASV; WHEREAS, ASV and Caterpillar also wish to form a commercial alliance that will, among other things, enhance sales of ASV's products by Caterpillar granting ASV access to Caterpillar's distribution system and to Caterpillar's components for incororation in ASV's products, ASV granting Caterpillar access to ASV's technology and components for incorporation in Caterpillar's products and establishing a framework for joint development of new agricultural equipment products; NOW, THEREFORE, the parties agree as follows: PART I SPA AND MARKETING AGREEMENT 1. This Agreement shall enter into effect conditioned upon and at the time of the closing of the SPA (as defined therein) (the "Closing"), except for Sections 11 through and including 23, which shall be effective as of the date hereof. 2. At the Closing, ASV and Caterpillar shall enter into a Marketing Agreement in the form attached hereto as EXHIBIT A. PART II OTHER AGREEMENTS 3. As soon as practicable after the Closing, Caterpillar and ASV shall negotiate in good faith to reach and execute Service Agreements as follows: 3.1. Caterpillar will offer to ASV financial services, via Caterpillar's wholly-owned finance subsidiary, Caterpillar Financial Services Corporation. "Financial services" shall include, without limitation, customer financing and dealer rental fleet financing. 3.2 Caterpillar will offer to ASV logistics services, via Caterpillar's wholly-owned logistics subsidiary, Caterpillar Logistics Services, Inc. "Logistics services" shall include parts warehousing, inventory management and distribution services to support ASV's products on a worldwide basis. 3.3 Caterpillar's defense and federal products group will offer its services in promoting sales of ASV's products to governmental bodies worldwide. 3.4 If the services offered by Caterpillar are competitive, from a total-value point of view, with similar services offered by other service providers, ASV will utilize such services, working directly with the relevant Caterpillar subsidiary or division. 4. As soon as practicable after the Closing, Caterpillar and ASV shall negotiate in good faith to reach and execute a Supply Agreement (Caterpillar to ASV) as follows: 4.1 Caterpillar will offer to supply Caterpillar components to ASV for incorporation in ASV's products, including without limitation, diesel engines. 4.2 Caterpillar will use its best reasonable efforts to ensure that the terms of Caterpillar's offers are competitive, from a total-value point of view, with the terms offered by other manufacturers of similar quality components. 4.3 If the terms of Caterpillar's offer to supply are competitive, from a total-value point of view, with the terms offered by other component suppliers and the relevant Caterpillar components may be installed on ASV's products without undue expense, ASV will contract with Caterpillar to purchase its requirements for such components from Caterpillar. 4.4 The term of the Supply Agreement shall be the shorter of (i) ten years from the Closing or (ii) the final expiration of the Warrant as defined in the SPA. 5. As soon as practicable after the Closing, Caterpillar and ASV shall negotiate in good faith to reach and execute a Supply Agreement (ASV to Caterpillar) as follows: 5.1 ASV will offer to supply ASV components, including without limitation, suspension systems, to Caterpillar for incorporation in Caterpillar's products that do not compete directly with ASV products. 2 5.2 If Caterpillar decides in its sole discretion to purchase ASV components, Caterpillar will contract with ASV to purchase some or all of its requirements for such components from ASV. 5.3 The term of the Supply Agreement shall be the shorter of (i) ten years from the Closing of the SPA or (ii) the final expiration of the Warrant as defined in the SPA. 5.4 To the extent it is or becomes economically impractical for ASV to supply such components, ASV will offer to license its related intellectual property rights (including patents and know-how) to Caterpillar to make, or have made, those components in accordance with the license agreement described in Section 6. 6. As soon as practicable after the Closing, Caterpillar and ASV shall negotiate in good faith to reach and execute a Technology License Agreement (ASV to Caterpillar) as follows: 6.1 Subject to ASV's right to supply components as described in Section 5, ASV will offer to license Caterpillar, on an exclusive (except as to ASV) and royalty bearing basis, to use ASV's proprietary patents and know-how relating to all-terrain rubber track vehicles in the design, manufacture, use and sale of Caterpillar's products that do not compete directly with ASV's products. 6.2 The term of the Technology License Agreement shall be the shorter of (i) ten years from the Closing or (ii) the final expiration of the Warrant as defined in the SPA. 7. As soon as practicable after the Closing, Caterpillar and ASV shall negotiate in good faith to reach and execute a Joint Venture Agreement on the following basic terms: 7.1 ASV and Caterpillar shall establish a 50-50 joint venture company ("Newco") as a Delaware Limited Liability Company. 7.2 The site of Newco operations shall be Grand Rapids, Minnesota. 7.3 The purpose of Newco shall be to design and develop a line of agricultural tractors in the 30-125 hp range utilizing key aspects of the parties' respective technology and know-how. 7.4 Both ASV and Caterpillar shall provide Newco with a technological base by licensing or assigning mutually agreed aspects of their respective proprietary information and know-how. 7.5 Both ASV and Caterpillar shall second mutually agreed personnel to Newco. 3 7.6 Both ASV and Caterpillar shall sell parts and components to Newco at market-based prices. 7.7 Products designed and developed by Newco shall be marketed and supported exclusively under the Caterpillar name through Caterpillar dealers. 8. At the Closing, Caterpillar and ASV shall execute a Management Services Agreement in the form attached hereto as Exhibit B. 9. All agreements referred to above in Part II shall be hereinafter referred to as "Other Agreements". PART III TERM AND TERMINATION 10. Unless earlier terminated by mutual agreement of the parties or pursuant to sub-sections 10.1 and 10.2 below, this Agreement shall remain in effect until the last of the Other Agreements has been executed. 10.1 If either party fails to perform this Agreement in any material respect (and does not remedy such failure to the complete satisfaction of the non-defaulting party, within sixty (60) days after written notice thereof has been sent to the other party) or becomes insolvent, bankrupt or consents to the appointment of a trustee or receiver, or if any trustee or receiver is appointed for the greater part of either party's properties without the consent of that party and such trustee or receiver is not discharged within sixty (60) days, or if any bankruptcy, reorganization, arrangement or liquidation proceedings are instituted by either party or if instituted against either party are consented to by it or permitted to remain undismissed for sixty (60) days, or if either party's shares, management, ownership or substantially all of either party's property is confiscated, nationalized, expropriated or otherwise taken by any government action, then, in such event, the other party may terminate this Agreement immediately upon written notice. 10.2 In the event of any Change in Control of ASV (as defined below), Caterpillar shall have the right to terminate this Agreement effective immediately. For purposes of this Section 10.2, "Change in Control" shall mean, except pursuant to the terms of the SPA and the Warrant or with the prior written consent of Caterpillar: (a) The acquisition by any third party or group of parties acting in concert of at least thirty percent (30%) of the outstanding shares of common stock of ASV; or 4 (b) A change of the majority of the directors of ASV occurring in a period of less than one year, excluding, to the extent no solicitation in opposition has theretofore been announced or commenced, changes in directors resulting from the election of directors at the next regularly scheduled annual meeting of ASV's shareholders; or (c) The sale, exchange, transfer or other disposition to a third party of all or substantially all of the assets of ASV. PART IV DEFINITIONS 11. In this Agreement, the following terms shall be defined as follows: 11.1 "Affiliate" means any person (individual, corporation, partnership, limited liability company or other entity) that directly or indirectly controls, is under common control of or is controlled by either party to this Agreement. "Control" means the ownership, direct or indirect, of fifty percent (50%) or more of the voting shares or capital of such person. 11.2 "Confidential Information" means all trade secrets, confidential knowledge, and proprietary data of any kind or nature whatsoever relating to this Agreement, or the businesses of either party and its Affiliates. Confidential Information also shall include any information prepared or developed by a party in connection with this Agreement, which reflects, interprets, evaluates, includes or is derived from the Confidential Information of another party. Confidential Information shall include, but not be limited to, technical specifications, diagrams, discoveries, economic models, pro forma and other financial information, designs, business opportunities, cost and pricing data, records, customer lists, and engineering, manufacturing, and marketing know-how. Confidential Information does not include information which (i) was generally known or available to the public at the time of its disclosure hereunder, or which after such disclosure became generally known or available to the public, provided that such disclosure was made or occurred through no fault of the Receiving Party (defined below) or its Affiliates, or its or their officers, directors, or employees; (ii) was in the possession of the Receiving Party prior to its disclosure hereunder; (iii) was known by the Receiving Party at the time of its disclosure hereunder or was independently developed at any time by the Receiving Party without reference to the Disclosing Party's (defined below) Confidential Information; (iv) is required to be furnished pursuant to law or legal process; or (v) is rightfully obtained, subsequent to its disclosure hereunder, by the Receiving Party or its Affiliates from a third party who is lawfully in possession of such information and who is not under an obligation of confidentiality to the Disclosing Party. 5 11.3 The party that discloses Confidential Information shall be referred to as the "Disclosing Party". 11.4 The party that receives Confidential Information shall be referred to as the "Receiving Party". PART V MISCELLANEOUS 12. The parties shall maintain the secrecy of Confidential Information as follows: 12.1 In connection with performance of this Agreement, the parties may disclose to one another certain Confidential Information. 12.2 The Receiving Party shall hold the Disclosing Party's Confidential Information in strictest confidence and trust and shall use the Confidential Information only in connection with the purposes of this Agreement. The Receiving Party shall not disclose Confidential Information provided by the Disclosing Party and/or its Affiliates, or the fact that it has been made available to the Receiving Party, except that the Receiving Party may disclose Confidential Information and the fact that it has been provided to those employees, officers, directors, agents, consultants and representatives of the Receiving Party and its Affiliates who have a reasonable need to know such information in connection with the purposes of this Agreement. The Receiving Party shall be liable for any breach of the confidentiality obligation hereunder by any of its Affiliates, or by any of the respective employees, officers, directors, agents, consultants and contractors of the Receiving Party and/or its Affiliates. 12.3 If the Receiving Party is required by law or legal process to disclose any of the Confidential Information of the Disclosing Party, the Receiving Party shall promptly notify the Disclosing Party in writing so that the Disclosing Party may seek an appropriate protective order or other remedy at the sole cost of the Disclosing Party. If no such protective order or other remedy is obtained, the Receiving Party shall furnish only that portion of such Confidential Information that is legally required and will exercise its reasonable efforts to obtain reliable assurances from all parties receiving the designated portions of such Confidential Information that confidential treatment will be accorded to such Confidential Information. Notwithstanding any such disclosure, any such Confidential Information so disclosed shall, for all other purposes, continue to be treated as Confidential Information under this Agreement. 12.4 Nothing contained herein shall be construed to obligate either party to disclose to the other any Confidential Information. The disclosure of Confidential Information pursuant to this Agreement, and any prior or future discussions, evaluations or other communications between the parties, shall not confer any right nor impose or 6 create any obligation on the parties other than those expressly agreed to in this Agreement. 12.5 All reports, notes, data, memoranda, records, or other tangible expressions of Confidential Information of the other party, including any electronically stored data, will be returned to the Disclosing Party promptly upon request of such Disclosing Party. 12.6 The confidentiality obligation shall survive expiration or termination of this Agreement for any reason for a period of five (5) years. 13. It is understood and agreed by the parties that each may be irreparably injured by a breach of Sections 2, 8, 11 or 12 of this Agreement and that monetary damages may not be a sufficient remedy for any actual or threatened breach thereof. In addition to any remedies available at law, the non-breaching party may also be entitled to equitable relief, including injunction and specific performance. 14. No failure or omission by either party in the performance of any of its obligations under this Agreement shall be deemed a breach of this Agreement, nor create any liability or give rise to any right to terminate this Agreement, if the same shall arise from or as a consequence of a fire, flood, severe weather or other act of God, war, insurrection, civil disturbance, or any other cause beyond the reasonable control of such party, whether similar to or different from the causes above enumerated, and any such cause shall absolve the affected party from responsibility for such failure to perform said obligation. 15. Neither party shall make any announcement concerning the nature and details of this Agreement or any of the Other Agreements referred to herein without the express written consent of the other party. 16. This Agreement may not be assigned by either party without the prior written consent of the other party, except that Caterpillar may assign this Agreement to a wholly-owned subsidiary with the consent of ASV, which consent shall not be unreasonably withheld. 17. The parties agree that this Agreement shall be construed, interpreted, and applied in accordance with the laws of the State of Illinois, without reference to its conflict of laws provisions. 18. This Agreement, including the Exhibits attached hereto or referred to herein, constitutes the entire agreement between the parties and there are no prior understandings, agreements, representations or warranties between the parties relating hereto. No modification or amendment to this Agreement or any of its provisions shall be binding unless contained in a writing signed by both parties. 7 19. When written notice is required by this Agreement, it shall be sent by registered mail, by courier or by such other method as will permit the sender to verify delivery, to the addresses set forth below: For Caterpillar: Caterpillar Inc. Attn: Richard A. Benson, Vice President 100 Northeast Adams Street Peoria, Illinois 61629-2495 Telephone: (309) 675-1000 Facsimile: (309) 675-4777 For ASV: A.S.V., Inc. Attn: Mr. Gary D. Lemke 840 Lily Lane Grand Rapids, Minnesota 55744 Telephone: (218) 327-3434 Facsimile: (218) 326-5579 Written notice may also be sent by facsimile to the numbers listed above, but such notice shall not be effective unless the sender receives a return facsimile acknowledging receipt of the notice. Notice shall be deemed received when actually delivered to the recipient as demonstrated by postal records. Facsimile notice shall be deemed received upon receipt by the sender of an acknowledgement as described above. The addresses and transmittal numbers set forth above can be changed only by written notice, which complies with the requirements of this Section 19. 20. The relationship between Caterpillar and ASV shall be that of independent contractors, and nothing in this Agreement shall be construed to establish a fiduciary, partnership, agency, or joint venture relationship between the parties, or constitute Caterpillar, its agents and employees as the agents or employees of ASV or to grant them any power or authority to act for, bind or otherwise create or assume any obligation on behalf of ASV for any purpose whatsoever. 21. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of the remainder hereof. 22. This Agreement may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one and the same instrument. 23. The headings to the sections of this Agreement are solely for convenience of reference, and they shall not govern, limit or aid in the interpretation of any terms or provisions of this Agreement. 8 IN WITNESS WHEREOF, the authorized representative of each party has duly executed this Agreement as of the date and year set forth above. Caterpillar Inc.: A.S.V., Inc.: By: /s/ Richard A. Benson By: /s/ Gary D. Lemke ------------------------------ ------------------------------- Richard A. Benson, Vice President Gary D. Lemke, President Exhibit A - Marketing Agreement Exhibit B - Management Services Agreement 9 EX-99 7 PRESS RELEASE EXHIBIT 99 CAT AND ASV Forge Ownership Agreement; Caterpillar To Acquire Interest in Northern Minnesota Firm GRAND RAPIDS, Minn., Oct. 14 /PRNewswire/ -- One of the fastest growing companies in America, A.S.V., Inc. (Nasdaq: ASVI), may grow even faster thanks to an agreement that has the potential to significantly expand its dealer base, and provides the cash flow necessary for continued growth. ASV announced today an agreement with Caterpillar Inc. (NYSE: CAT), the world's largest manufacturer of construction equipment. Under the terms of the agreement, Caterpillar will acquire one million shares of ASV stock at $18 per share and warrants to acquire a majority ownership at $21 per share. Under the agreement, ASV products will gradually become available to Caterpillar's worldwide dealer network in more than 200 countries. ASV's Posi-Track (TM), a rubber-tracked work vehicle, moves over nearly any terrain with minimal damage to the ground, making it effective in numerous applications and industries. Upon closing, Caterpillar will place two members on ASV's board of eight directors, for a total of ten, and will make various management, financial and engineering resources available to ASV. ASV, which has achieved 14 consecutive record quarters, had sales of $24 million in 1997, and is on pace to do more than $40 million in 1998. "Many of the issues we've been working on--expanding our dealer network, cash flow, and meeting growing demand--will be solved with this agreement," said Gary Lemke, president of ASV. "We've known for 10 years that we're building, pound-for-pound, the best work vehicle in the world, and we're gaining awareness and customers every day. With Caterpillar behind us, we expect to push our company's momentum years ahead of schedule." Dick Benson, a Caterpillar vice president with administrative responsibilities for its Diversified Products Division, said ASV's rubber-tracked technology is what intrigued Caterpillar, and made an association with ASV attractive to Caterpillar. "ASV's undercarriage technology allows the Posi-Track to go over nearly any terrain with high flotation and very low ground pressure--there really is nothing like it on the market," Benson said. "By combining ASV's suspension system technology with Caterpillar's legendary track know-how, ASV will be ideally positioned to develop new business and new products around the world." The agreement, subject to regulatory and ASV shareholder approval, is expected to be finalized within 90 days. Upon completion, the two sides will introduce the Posi-Track to Caterpillar dealers, first in North America, then internationally. "We have a solid, growing base of dealers, but with Caterpillar, the Posi-Track could be available virtually everywhere," said Lemke. He added that the additional cash will be used to ramp up production of the Posi-Track, market products, and begin development of additional vehicles with Caterpillar. ASV, which has approximately 110 employees, was founded in 1983 by Lemke and Edgar Hetteen in the small village of Marcell, Minn. It moved to its current facility in Grand Rapids in 1995. Hetteen, now 78, also founded both Polaris Industries and Arctic Enterprises, the two largest snowmobile companies in the U.S. "I believe the market for the Posi-Track is much larger than the market for the snowmobile--likely well into billions of dollars," Hetteen said. "To now have Caterpillar behind us, many of the obstacles for developing those markets have been removed. It's an exciting time here, perhaps even more exciting than it was at Polaris and Arctic." With its patent-pending Maximum Traction and Support System (TM) undercarriage, ASV leads all rubber-tracked, low-ground pressure crawlers in technology and innovation. ASV is dedicated to quality, reliability and total customer satisfaction. More information on ASV can be found on its Web site at www.asvi.com. Caterpillar is the world's largest manufacturer of construction and mining equipment, diesel and natural gas engines, and industrial gas turbines. Caterpillar posted record sales in 1997 of $18.93 billion. The statements regarding ASV Inc. contained in this release that are not historical in nature, particularly those that utilize terminology such as "may," "will," "expects, " "anticipates," "believes," "could," or "plans," are forward-looking statements based on current expectations and assumptions, and entail various risks and uncertainties that could cause actual results to differ materially from those expressed in such forward-looking statements. Important factors known to ASV that could cause such material differences are discussed on pages 4 through 6 in the Management's Discussion and Analysis section of ASV's 1997 Annual Report to Stockholders, and ASV's 10-Q for the quarter ended June 30, 1998 under the caption Management's Discussion and Analysis. Additional factors include ASV's ability to obtain the necessary shareholder and regulatory approvals, consummate the transactions contemplated by the agreement with Caterpillar, successfully negotiate various financing, licensing and service agreements with Caterpillar and realize the anticipated benefits from the relationship with Caterpillar. Background Information All Season Vehicles, Inc. (ASV) The Company -- ASV designs, builds and markets the Posi-Track (TM), an all-season, rubber-tracked vehicle used primarily in construction, agriculture and landscaping. -- ASV was founded in 1983 by Gary Lemke, one of the top snowmobile dealers in the nation, and Edgar Hetteen, who also founded leading snowmobile manufacturers Polaris and Arctic Cat. -- Today, ASV's senior management team includes Gary Lemke, president; Edgar Hetteen, vice president; Tom Karges, chief financial officer and Brad Lemke, national product manager. -- ASV employs about 110 people at its headquarters in Grand Rapids, Minnesota. Posi-Track -- Its most popular and successful product, the Posi-Track, comes in nine different models and accounts for 98% of ASV's current sales. -- Posi-Tracks perform the functions of skid-steer loaders, small dozers and small tractors, and have sold well in the markets for such vehicles, like construction, agriculture and landscaping. In these markets, it competes with traditional skid-steer and tractor manufacturers such as Bobcat, Case, Dehl and John Deere. -- However, the Posi-Track is much more versatile than these other work vehicles because: 1) its rubber tracks allow it to operate on any terrain, be it wet, steep, fragile or rough; 2) its patent-pending undercarriage system exerts only two pounds per square inch of ground pressure (less than a human); 3) its undercarriage system is maintenance free; and 4) its quick-attach mechanism allows it to use a variety of attachments, including loaders, backhoes, augers and planers. -- So unlike other work vehicles, the Posi-Track is at home in muddy, boggy or soft conditions, where it won't sink into the ground, or on the golf course, where it leaves minimal turf disturbance on greens and fairways. -- Due to its versatility and wide range of applications, there are many other markets for the Posi-Track that remain to be tapped. Unique Applications -- Military -- After being equipped with remote control units, Posi-Tracks have been extremely successful in the removal of unexploded ordnances (ammunition and bombs that have not detonated), where the work in bombing grids too dangerous for humans. These Posi-Track "robots" have also been deployed to the Middle East to disarm large threats (such as bomb-laden trucks) that may appear outside of bases. In the future, Posi-Tracks may be used to locate and disarm anti-personnel landmines. -- Ski Resorts -- Posi-Tracks are ideal for snow blowing and general maintenance. Unlike wheeled work machines, they perform well in the snow. And unlike steel-cleated tracked vehicles, they don't damage finished surfaces, such as parking lots and sidewalks. -- Vineyards -- Posi-Tracks are used at the Gallo wineries in California, where they can work between rows of grapevines without compacting the soil or creating damaging ruts. -- Hobby Farms/Ranches -- Posi-Tracks can be found dozing dirt on Ted Turner's ranches, planing trees in Mary Hart's backyard and maintaining the lawns at Pierre duPont's Longwood Gardens Estate. Financials -- In late 1994, ASV conducted its IPO on the Nasdaq (symbol: ASVI) stock market with an initial offering of $3.25 a share. Since that time, ASV's stock has more than quintupled. ASV's analysts currently rate it a "strong buy." -- Including second quarter 1998 results, ASV has reported 14 consecutive quarters of record sales. -- In 1997, ASV reported over $24.3 million in sales and more than $2.3 million in earnings. It was the fourth consecutive year ASV has doubled its yearly sales figures. -- Investors Business Daily has rated ASV the 11th fastest growing new issue in the U.S. since 1990 (1/20/98). For More Information -- Call 218-327-3434 to request ASV product brochures or annual reports. Or visit the ASV website at http://www.asvi.com. -- For financial information, check the following sources: http://www.nasdaq.com or http://www.abcnews.com. SOURCE ASV Inc. -0- 10/13/98 /EDITOR'S NOTE: Please see announcement released by Caterpillar regarding this agreement/ /CONTACT: Gary Lemke of ASV Inc., 218-327-3434. or Stephen Dupont of Carmichael Lynch Spong, 612-334-6235, sdupont@clynch.com. for ASV Inc./ /Photo: http://www.newscom.com/cgi-bin/prnh/19981013/MNW004 http://www.newscom.com/cgi-bin/prnh/19981013/MNW004-b or NewsCom, 213-237-5431; AP PhotoExpress Network, PRN6; PRN7; PressLink Online, 800-888-6195/ /Web site: http://www.asvi.com/ (ASVI CAT) -----END PRIVACY-ENHANCED MESSAGE-----