UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. _____)*
A.S.V., INC.
(Name of Issuer)
Common Stock, $0.01 Par Value
(Title of Class of Securities)
001963107
(CUSIP Number)
CATERPILLAR INC.
(Name of Persons Filing Statement)
R. RENNIE ATTERBURY III
Vice President, Secretary and General Counsel
Caterpillar Inc.
100 NE Adams Street
Peoria, IL 61629-7310
Tel. No.: (309) 675-1000
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
October 14, 1998
(Date of Event which Requires Filing of this Statement)
Check the following box if a fee is being paid with the statement [ X ]. (A fee
is not required only if the reporting person: (1) has a previous statement on
file reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the act (however, see the
Notes).
SCHEDULE 13D
CUSIP No. 001963107 Page 2 of 6 Pages
(1) NAMES OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE
PERSONS
Caterpillar Inc.
FEIN: 37-0602744
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [ ]
(3) SEC USE ONLY
(4) SOURCE OF FUNDS* WC
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
(7) SOLE VOTING POWER
1,579,000
NUMBER OF SHARES
BENEFICIALLY OWNED
BY EACH REPORTING
PERSON WITH
(8) SHARED VOTING POWER
None
(9) SOLE DISPOSITIVE POWER
1,579,000
(10) SHARED DISPOSITIVE POWER
None
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,579,000
(12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES* [ ]
(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
16.7%
(14) TYPE OF REPORTING PERSON*
CO
PRELIMINARY NOTE
The Reporting Person (as defined below) listed on the cover page to this
Schedule 13D hereby makes the following Statement pursuant to Section 13(d) of
the Securities Exchange Act of 1934 (the "Exchange Act") and the rules and
regulations promulgated thereunder.
The shares of common stock, par value $0.01 per share (the "Common Stock"),
of A.S.V., Inc. (the "Issuer") covered by this report are purchasable by
Caterpillar Inc. ("Caterpillar") subject to the terms and conditions of and upon
the exercise of the Option Certificate, which is attached hereto as Exhibit 2,
(the "Option Certificate") granting an option to Caterpillar (the "Option")
pursuant to the Securities Purchase Agreement dated October 14, 1998 by and
between Caterpillar and the Issuer, and described in Item 4 of this Report (the
"Securities Purchase Agreement"), which is attached hereto as Exhibit 1.
With respect to each contract, agreement or other document referred to
herein and filed with the Securities and Exchange Commission as an exhibit to
this Statement, reference is made to the exhibit for a more complete description
of the matter involved, and this Statement shall be deemed qualified in its
entirety by such reference.
ITEM 1. SECURITY AND ISSUER
This Schedule 13D relates to the common stock, par value $0.01 per share
(the "Common Stock" or the "Shares," an individual share of which is a "Share"),
of A.S.V., Inc., a Minnesota corporation (the "Issuer"). The principal
executive offices of the Issuer are located at 840 Lily Lane, Grand Rapids,
Minnesota 55744.
ITEM 2. IDENTITY AND BACKGROUND
This Schedule 13D is filed by Caterpillar, Inc. ("Caterpillar" or the
"Reporting Person"), a Delaware corporation, which is a leading manufacturer of
earthmoving and construction equipment. Caterpillar distributes its products
through its worldwide network of independent dealers. Caterpillar's principal
offices are located at 100 NE Adams Street, Peoria, Illinois 61629.
During the last five years, to the best of Caterpillar's knowledge, neither
Caterpillar nor any of its executive officers or directors has been convicted in
a criminal proceeding (excluding traffic violations or similar misdemeanors) or
has been a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction resulting in a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to, federal
or state securities laws, or finding any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
Option Granted to Caterpillar
This Schedule 13D primarily relates to the Option granted to Caterpillar by
the Issuer to purchase shares of Common Stock from the Issuer pursuant to the
terms of the Option Certificate, which is included as Exhibit 2 hereto. The
Option entitles Caterpillar to purchase up to 1,579,000 Shares (the "Option
Shares") under the circumstances specified in the Option Certificate and as
described in Item 4 below, for a purchase price of $18.00 per Share (the
"Purchase Price"). The number of Option Shares will be adjusted in certain
circumstances as set forth in the Option Certificate, including (i) stock splits
and combinations, (ii) dividends and distributions, (iii) reclassification,
exchange, and substitution, (iv) reorganizations, mergers, consolidations or
sales of assets, and (v) sales below the Option exercise price.
The Option was granted by the Issuer to Caterpillar as consideration for
Caterpillar to enter into the Securities Purchase Agreement and the related
Commercial Alliance Agreement. If the transactions contemplated by the
Securities Purchase Agreement are consummated, the Option will automatically
terminate. No additional consideration was paid by Caterpillar to the Issuer
for the Option. If Caterpillar elects to exercise the Option, it currently
anticipates that the funds to pay the Purchase Price will be generated by
available working capital.
Reference is hereby made to the Option Certificate, which is included as
Exhibit 2 hereto for the full text of its terms, including the conditions upon
which it may be exercised.
Shares and Warrant to be Issued to Caterpillar
Pursuant to the Securities Purchase Agreement and subject to the terms and
conditions therein (including approval by the Issuer's stockholders and various
regulatory agencies), Issuer will issue and sell to Caterpillar and Caterpillar
will purchase from Issuer for an aggregate purchase price of $18,000,000 (i)
1,000,000 shares of Common Stock 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 of the Securities Purchase Agreement (the "Closing
Date") until the tenth anniversary of the Closing Date (subject to certain
rights of the Issuer to accelerate such date), pursuant to the terms of the
Warrant Certificate, which is attached hereto as Exhibit 3, (the "Warrant
Certificate"). The source of the $18,000,000 used by Caterpillar for its
purchase of 1,000,000 shares of Common Stock and the Warrant to purchase an
additional 10,267,127 shares of Common Stock from the Issuer will be from
available working capital. If and when Caterpillar elects to exercise the
Warrant held by it, Caterpillar presently anticipates that the up to
$215,609,667 that would be required to be paid by Caterpillar for the shares of
Common Stock issuable upon the exercise of the Warrant will be from available
working capital and funds borrowed by Caterpillar in the ordinary course of
business. Reference is hereby made to the Securities Purchase
Agreement, which is included as Exhibit 1 hereto, and the Warrant Certificate,
which is included as Exhibit 3 hereto, for the full text of their terms,
including the conditions upon which they may be exercised or terminated as
applicable.
ITEM 4. PURPOSE OF TRANSACTION
On October 13, 1998, James H. Dahl, Gary D. Lemke, JoAnn Lemke, Philip C.
Smaby, Jerome T. Minor, 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 entered
into the Voting Agreement, which is attached hereto as Exhibit 4, (the "Voting
Agreement") pursuant to which the Shareholders accepted certain restrictions on
the transfers of their Shares and agreed to vote the shares of Common Stock
beneficially owned by them, which aggregate 2,061,352 Shares, in favor of
approving the contemplated Securities Purchase Agreement and the consummation of
the transactions contemplated thereunder.
On October 14, 1998, the Issuer and Caterpillar entered into the Securities
Purchase Agreement, pursuant to which the Issuer agreed to issue and sell to
Caterpillar and Caterpillar agreed to purchase from Issuer for an aggregate
purchase price of $18,000,000 (i) 1,000,000 shares of Common Stock and (ii) 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 Closing Date until the tenth anniversary of the
Closing Date (subject to certain rights of the Issuer to accelerate such date),
pursuant to the terms of the Warrant Certificate.
In accordance with the Securities Purchase Agreement, concurrently with the
closing of the transactions contemplated thereunder, the number of directors
constituting the Board of Directors of the Issuer shall be increased to ten (10)
and two persons designated by Caterpillar shall be added to such Board. The
Issuer and Caterpillar further agreed in the Securities Purchase Agreement that
at any time Caterpillar'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, (i) one
or more existing Directors (other than the Directors designated by Caterpillar),
as selected by a plurality of the Directors of the Issuer, or if no such
plurality exists, then as selected by the Directors of the Issuer designated by
Caterpillar, shall resign as a Director of the Issuer effective at such time,
and (ii) one or more persons designated by Caterpillar shall replace such
resigning Director or Directors on such Board, so that the ratio of Directors
designated by Caterpillar 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 Caterpillar to the total number of issued and outstanding shares of Common
Stock, provided that until Caterpillar owns a majority of the outstanding Common
Stock, at no time shall Caterpillar have the right to increase the number of
Directors designated by Caterpillar to a number such that the ratio of that
number to the total number of Directors is greater than Caterpillar's percentage
ownership of the outstanding Common Stock of the Issuer and provided further
that the Directors designated by Caterpillar shall constitute a majority of the
Board at such time as Caterpillar owns a majority of the outstanding shares of
Common Stock.
As stated above, the Option was granted on October 14, 1998 to Caterpillar
as consideration to Caterpillar to enter into the Securities Purchase Agreement
and the related Commercial Alliance Agreement. The Option is exercisable in
whole or in part at any time and from time to time from October 14, 1998 until
the Closing Date, pursuant to the terms of the Option Certificate. The Option
will automatically terminate if and when the transactions contemplated by the
Securities Purchase Agreement are consummated.
The descriptions herein of the Securities Purchase Agreement, the Warrant
Certificate, the Option Certificate, and the Voting Agreement are qualified in
their entirety by reference to such agreements, copies of which are filed as
exhibits hereto and which are incorporated herein by reference in their
entirety.
Other than as described above, Caterpillar has no plans or proposals which
relate to, or may result in, any of the matters listed in Items 4(a) (j) of
Schedule 13D (although Caterpillar reserves the right to develop such plans).
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
As of result of the issuance of the Option, Caterpillar may be deemed to be
the beneficial owner of 1,579,000 Shares, which would represent approximately
16.7% of the Shares outstanding after exercise of the Option (based on the
number of Shares outstanding as of October 14, 1998). If Caterpillar exercises
the Option and acquires the Option Shares, Caterpillar will have sole voting and
dispositive power with respect to such Shares. The Option Shares described
herein are subject to the Option, which is exercisable in whole or in part at
any time and from time to time from October 14, 1998 until the Closing Date.
Upon consummation of the transactions contemplated by the Securities
Purchase Agreement, Caterpillar will own 1,000,000 shares of Common Stock and
will have the right to acquire an additional 10,267,127 shares of Common Stock
(the "Warrant Shares") through the exercise of the Warrant more fully described
in Item 4 and attached as Exhibit 3. As a result, Caterpillar will have, if the
Warrant is exercised in full, the sole power to vote or direct the voting of,
and to dispose or to direct the disposition of, 11,267,127 shares of Common
Stock. As stated above, if the transactions contemplated by the Securities
Purchase Agreement are consummated, the Option will automatically terminate.
Except as described herein, neither Caterpillar nor, to the best of
Caterpillar's knowledge, any director or executive officer of Caterpillar,
beneficially owns or has acquired or disposed of any Shares of the Issuer during
the past 60 days.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER
Except for the Securities Purchase Agreement, the Option Certificate, the
Warrant Certificate, and the Voting Agreement, none of the persons named in Item
2 has any contracts, arrangements, understandings or relationships (legal or
otherwise) with any persons with respect to any securities of the Issuer,
including, but not limited to, transfers or voting of any securities, finder's
fees, joint ventures, loan or option arrangements, puts or calls, guarantees of
profits, division of profits or loss, or the giving or withholding of proxies.
ITEM 7. MATERIALS TO BE FILED AS EXHIBITS
Exhibit Description
1 Securities Purchase Agreement dated as of October 14, 1998
between Caterpillar Inc., as Investor, and A.S.V., Inc., as
Issuer.
2 Option Certificate dated as of October 14, 1998 between
Caterpillar Inc., as Holder, and A.S.V., Inc.
3 Warrant Certificate dated October 14, 1998 between
Caterpillar Inc., as Holder, and A.S.V., Inc.
4 Voting Agreement dated as of October 13, 1998 between James
H. Dahl, Gary D. Lemke, JoAnn Lemke, Philip C. Smaby, Jerome
T. Minor, 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.
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
October 26, 1998
CATERPILLAR INC.
By: /s/ R.Rennie Atterbury III
Name: R. Rennie Atterbury III
Title: Vice President and Secretary
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);
(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:
3.1. 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).
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 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.
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 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
7this 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, 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 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.
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 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.
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;
(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.
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, 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.
"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.
"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.
"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, 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, 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 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: [email protected]
Telephone:(612) 340-6323
(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: [email protected]
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: [email protected]
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:[email protected]
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 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.
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.
* * *
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:
Name: Gary D. Lemke
Title: President
CATERPILLAR INC.
By:
Name: Richard A. Benson
Title: Vice President
SCHEDULE OF EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES
SECURITIES PURCHASE AGREEMENT
BETWEEN
CATERPILLAR INC. AND A.S.V., INC.
Dated October 14, 1998
Section 3.4 No Violation
Credit Agreement dated May 22, 1997 between Norwest Bank Minnesota North,
National Association (the "Bank") and A.S.V., Inc. (the "Company"), as amended
on June 30, 1998, requires the consent of the Bank prior to the Company
permitting or suffering any change, direct or indirect, in its capital
ownership.
Underwriting Agreement dated August 11, 1994 between the Company and Summit
Investment Corporation ("Summit"), Section 12, provides that for a period of
five years following the date of the Underwriting Agreement, Summit is entitled
to the right of first consideration and a right of first refusal to act as
underwriter in connection with all equity or long-term debt financings of the
Company.
Section 3.5 Consents/Approvals.
See items listed under Section 3.4 (No Violation).
Section 3.11 Changes Since December 31, 1997.
Since December 31, 1997, certain officers and directors of the Company have
exercised stock options by the delivery to the Company of previously owned
shares of the Company.
A three-for-two stock split of the Company's Common Stock was effected on
May 14, 1998.
Karlin Symons, a Director of the Company, is a partner in Kaplan, Strangis
& Kaplan, a law firm that has provided services to the Company.
Lee Lynch, a Director of the Company, is Managing Partner, Chairman and
Chief Executive Officer of Carmichael Lynch Inc., an advertising agency which
provides services to the Company.
The Company purchases grocery items from an entity controlled by Jerome
Miner, a Director of the Company.
Section 3.12 Environmental Matters.
In January 1998, the Company purchased a piece of property on which,
subsequent to its purchase, a "complaint investigation" was commenced by the
Minnesota Pollution Control Agency. The Company has contracted with an
environmental clean-up firm to eradicate the problem, which work is near
completion.
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 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 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 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 (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.
(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;
(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 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.
* * *
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: _______________________________
Name: _____________________________
Title: ______________________________
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)
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)
EXHIBIT A
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 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 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 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 "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 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 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 Reduced Amount
Revenues
$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 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.
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: _____________________________
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)
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)
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 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.
3.7 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:
_______________________________
James H. Dahl
788,550 shares of Common Stock
_______________________________
Gary D. Lemke
65,678 shares of Common Stock
_______________________________
Gary and JoAnn Lemke by Gary Lemke
143,209 shares of Common Stock
_______________________________
JoAnn Lemke
61,363 shares of Common Stock
_______________________________
Philip C. Smaby
374,006 shares of Common Stock
_______________________________
Jerome T. Miner
359,850 shares of Common Stock
_______________________________
Edgar E. Hetteen
120,877 shares of Common Stock
_______________________________
Hannah Hetteen
113,100 shares of Common
_______________________________
Leland T. Lynch
16,500 shares of Common Stock
_______________________________
Karlin S. Symons
13,103 shares of Common Stock
_______________________________
R.E. "Teddy" Turner, IV
750 shares of Common Stock
_______________________________
Thomas R. Karges
4,366 shares of Common Stock
ACCEPTED AND AGREED:
CATERPILLAR INC.
By:______________________________
Its:
