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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 14, 1998
A.S.V., INC.
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(Exact name of registrant as specified in its charter)
Minnesota 0-25620 41-1459569
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
840 Lily Lane, P.O. Box 5160, Grand Rapids, Minnesota 55744
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (218) 327-3434
Not Applicable
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(Former name or former address, if changed since last report)
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Item 5. OTHER EVENTS.
On October 14, 1998 A.S.V., Inc. (the "Company"), a Minnesota corporation,
entered into a Securities Purchase Agreement (the "Agreement") with Caterpillar
Inc. ("Caterpillar"), a Delaware corporation. Under the terms of the Agreement,
Caterpillar will acquire, for an aggregate purchase price of $18,000,000, one
million newly issued shares of the Company's common stock and a warrant to
purchase an additional 10,267,127 newly-issued shares of the Company's common
stock at a price of $21.00. The Agreement provides that, upon closing, the
Company's board of directors will be increased from eight to ten members and the
Company's board of directors will appoint two members designated by Caterpillar.
Caterpillar intends to pay for the transactions contemplated by the Agreement
from its generally available cash funds. The consummation of the transactions
contemplated by the Agreement is contingent upon receiving Company shareholder
and regulatory approvals.
In connection with entering into the Agreement, the Company, Caterpillar
and certain shareholders of the Company have entered into several ancillary
agreements. First, the Company and Caterpillar have entered into an Option
Agreement pursuant to which Caterpillar has the option to purchase 1,579,000
shares of the Company's common stock, through a private issuance from the
Company, at a price of $18.00 per share, exercisable in whole or in part at any
time until October 14, 1999 or the closing of the transactions contemplated by
the Agreement, whichever is sooner.
Second, certain of the shareholders (the "Shareholders") of the Company and
Caterpillar have entered into a Voting Agreement pursuant to which the
Shareholders have agreed (i) that the Shareholders will not sell, transfer,
pledge, grant a security interest in or lien on or otherwise dispose of or
encumber any of their shares in the Company prior to the closing of the
transactions contemplated by the Agreement and (ii) that the Shareholders will
vote each of his or her shares at every annual, special or adjourned meeting of
the shareholders of the Company (a) in favor of approval of the Agreement, (b)
against any Competing Transaction (as defined in the Agreement) and (c) in favor
of any other matter relating to the closing of the transactions contemplated by
the Agreement.
Finally, the Company and Caterpillar have entered into a Commercial
Alliance Agreement pursuant to which Caterpillar will provide the Company with
access to its dealer network and will make various management, financial and
engineering resources available to the Company following the closing.
Following the closing, Caterpillar will own approximately 8.8% of the
Company's outstanding common stock (assuming the exercise or conversion of all
outstanding options, warrants and convertible debentures) and will have the
right to own up to approximately 52% of the Company's outstanding common stock
(assuming the exercise or conversion of all outstanding options, warrants and
convertible debentures) upon exercise of the warrant.
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Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) EXHIBITS
Exhibit Description of Exhibit
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2(a) Securities Purchase Agreement dated as of October 14, 1998 between
Caterpillar Inc. and A.S.V., Inc.
(b) Form of Warrant Certificate to be issued to Caterpillar upon closing
of the transactions contemplated by the Agreement
(c) Option Certificate dated as of October 14, 1998 between Caterpillar
Inc. and A.S.V., Inc.
(d) Voting Agreement dated as of October 13, 1998 by certain shareholders
of A.S.V., Inc. and Caterpillar Inc.
(e) Commercial Alliance Agreement dated October 14, 1998 between
Caterpillar Inc. and A.S.V., Inc.
99 Press release dated October 14, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: October 27, 1998 A.S.V., INC.
/s/ Gary D. Lemke
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Gary D. Lemke
President and CEO
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EXHIBIT INDEX
Exhibit Description of Exhibit
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2(a) Securities Purchase Agreement dated as of October 14, 1998 between
Caterpillar Inc. and A.S.V., Inc.
(b) Form of Warrant Certificate to be issued to Caterpillar upon closing
of the transactions contemplated by the Agreement
(c) Option Certificate dated as of October 14, 1998 between Caterpillar
Inc. and A.S.V., Inc.
(d) Voting Agreement dated as of October 13, 1998 by certain shareholders
of A.S.V., Inc. and Caterpillar Inc.
(e) Commercial Alliance Agreement dated October 14, 1998 between
Caterpillar Inc. and A.S.V., Inc.
99 Press release dated October 14, 1998
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EXHIBIT 2(a)
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is entered into
as of October 14, 1998 between CATERPILLAR INC., a Delaware corporation
(together with its successors and permitted assigns, "Investor"), and A.S.V.,
INC., a Minnesota corporation (together with its successors and permitted
assigns, "Issuer"). Capitalized terms used but not otherwise defined herein
shall have the meanings set forth in Section 6.1.
RECITALS
Subject to the terms and conditions of this Agreement, Investor desires
to purchase, and Issuer desires to issue and sell to Investor, 1,000,000 shares
of Issuer's common stock, par value $0.01 per share (the "Common Stock"), and a
warrant to purchase an additional 10,267,127 shares of Common Stock.
Concurrently herewith, Issuer is issuing to Investor an option to purchase
1,579,000 shares of Common Stock and Issuer and Investor are entering into a
Commercial Alliance Agreement of even date herewith (the "Commercial Alliance
Agreement"). Prior to the execution of this Agreement, Investor and certain
Shareholders of Issuer entered into a Voting Agreement dated as of October 13,
1998.
TERMS OF AGREEMENT
In consideration of the mutual representations, warranties, covenants
and agreements contained herein, the parties hereto agree as follows:
ARTICLE I
ISSUANCE AND PURCHASE OF COMMON STOCK, WARRANT, AND OPTION
1.1 Issuance and Purchase of Common Stock, Warrant, and Option. Subject
to the terms and conditions of this Agreement, Issuer will issue and sell to
Investor and Investor will purchase from Issuer for an aggregate purchase price
of $18,000,000 (the "Purchase Price") (i) 1,000,000 shares of Common Stock (the
"Shares") and (ii) a warrant (the "Warrant") to purchase an additional
10,267,127 shares of Common Stock at an exercise price of $21.00 per share,
exercisable in whole or in part at any time and from time to time from the date
of Closing until the tenth anniversary of the date of the Closing (subject to
certain rights of the Company to accelerate such date), pursuant to the terms of
the warrant certificate in the form attached hereto as Exhibit A (the "Warrant
Certificate"). Concurrently with the execution hereof, Issuer is issuing to
Investor an option (the "Option") to purchase 1,579,000 shares of Common Stock
at an exercise price of $18.00 per share, exercisable in whole or in part at any
time and from time to time from the date hereof until the termination date set
forth therein, pursuant to the terms of the option certificate in the form
attached hereto as Exhibit B (the "Option Certificate").
1.2 Legend. Any certificate or certificates representing the Shares,
the Warrant, the Option, any Common Stock issued upon exercise of the Warrant
(the "Warrant Shares"), and any Common Stock issued upon exercise of the Option
(the "Option Shares") shall bear the following legend:
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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);
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(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:
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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).
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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
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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.
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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
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Issuer, have each approved the execution and delivery by Issuer of this
Agreement, the Warrant Certificate, and the Option Certificate, and the
consummation of the transactions contemplated by this Agreement, the Warrant
Certificate, and the Option Certificate, and the other transactions contemplated
hereby and thereby, and each such approval is sufficient to render inapplicable
to Investor and/or any affiliates or associates (as defined in Section 302A.673
of the Minnesota Business Corporation Act ("MBCA")) of Investor and/or all or
any combination of such persons the provisions of Section 302A.673 of MBCA that
restrict business combinations (as defined in Section 302A.673 of MBCA) between
an interested shareholder and Issuer.
3.16 Fairness Opinion. Issuer has received an opinion from Piper
Jaffray Inc. acceptable to its Board of Directors to the effect that the
transactions set forth in this Agreement, the Warrant Certificate and the Option
Certificate are fair from a financial point of view to the shareholders of
Issuer.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF INVESTOR
As a material inducement to Issuer entering into this Agreement and the
Option Certificate and issuing the Shares, the Warrant, and the Option, Investor
represents and warrants to Issuer as follows:
4.1 Corporate Status; Power and Authority. Investor is a corporation
duly organized, validly existing, and in good standing under the laws of
Delaware. Investor has the corporate power and authority to execute and deliver
and to perform its obligations under this Agreement and consummate the
transactions contemplated hereby. Investor has taken all necessary corporate
action to authorize the execution, delivery and performance of this Agreement
and the transactions contemplated hereby.
4.2 No Violation. The execution and delivery by Investor of this
Agreement, the consummation of the transactions contemplated hereby, and the
compliance by Investor with the terms and provisions hereof, will not result in
a default under (or give any other party the right, with the giving of notice or
the passage of time (or both), to declare a default or accelerate any obligation
under) or violate the Certificate of Incorporation or Bylaws of Investor or any
Contract to which Investor is a party or by which it or its properties or assets
are bound, or violate any Requirement of Law applicable to Investor, other than
such violations, conflicts, defaults or breaches which, individually and in the
aggregate, do not and will not have a Material Adverse Effect on Investor.
4.3 Consents/Approvals. Except for filing and approval under the HSR
Act, (a) no consents, filings, authorizations or actions of any Governmental
Authority are required for Investor's execution, delivery and performance of
this Agreement, and (b) no consent, approval, waiver or other actions by any
Person under any Contract to which Investor is a party or by which Investor or
any of his properties or assets are bound is required or necessary for the
execution,
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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
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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.
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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
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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.
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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;
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(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.
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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,
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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.
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"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.
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"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.
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"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,
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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,
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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
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this Agreement, and (ii) that those representations and warranties
which address matters only as of a particular date shall remain true
and correct as of such date, except in any case for such failures to be
true and correct which would not, individually or in the aggregate,
have a Material Adverse Effect on Investor. Issuer shall have received
a certificate of an authorized officer of Investor to such effect;
(b) Agreement and Covenants. Investor shall have performed or
complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it on or
prior to the Closing. Issuer shall have received a certificate of an
authorized officer of Investor to such effect;
(c) Commercial Agreements. Investor shall have executed
each of the Commercial Agreements; and
(d) Fairness Opinion Bring Down. Issuer shall have received
the updated fairness opinion of Piper Jaffray, Inc., dated the date of
the Proxy Statement, to the effect set forth in Section 3.16.
ARTICLE IX
MISCELLANEOUS
9.1 Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing and shall be delivered by certified
or registered mail (first class postage pre-paid), guaranteed overnight
delivery, or facsimile transmission (provided sender receives a return facsimile
acknowledging receipt of the notice), to the following addresses and facsimile
numbers (or to such other addresses or facsimile numbers which such party shall
designate in writing to the other party):
(a) if to Issuer to: A.S.V., Inc.
840 Lily Lane
Grand Rapids, Minnesota 55744
Attention: Mr. Gary D. Lemke
Fax: (218) 326-5579
Telephone:(218) 327-3434
with a copy to: Dorsey & Whitney, LLP
Pillsbury Center South
220 South Sixth Street
Minneapolis, Minnesota 55402-1498
Attention: Amy E. Ayotte
Fax: (612) 340-8738
Email:
Telephone:(612) 340-6323
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(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: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
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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.
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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.
* * *
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IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed and delivered as of the day and year
first above written.
A.S.V., INC.
By: /s/ Gary D. Lemke
--------------------------------
Name: Gary D. Lemke
Title: President
CATERPILLAR INC.
By: /s/ Richard A. Benson
--------------------------------
Name: Richard A. Benson
Title: Vice President
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EXHIBIT 2(b)
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT") OR UNDER ANY APPLICABLE STATE SECURITIES LAW
AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION UNDER THE ACT OR AN OPINION OF COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE ACT AND THE RULES AND REGULATIONS
PROMULGATED THEREUNDER OR UNDER APPLICABLE STATE SECURITIES LAWS.
WARRANT CERTIFICATE
To Purchase 10,267,127 Shares of Common Stock of:
A.S.V., INC.
THIS IS TO CERTIFY THAT CATERILLAR INC. (the "Holder"), or Holder's
registered assigns, is entitled to purchase from A.S.V., INC., a Minnesota
corporation (the "Company"), up to 10,267,127 shares of the Company's common
stock, par value $.01 per share (the "Common Stock"), on the terms and
conditions hereinafter set forth. This warrant is being issued in connection
with a Securities Purchase Agreement between the Company and the Holder dated
October 14, 1998 (the "Purchase Agreement"). Capitalized terms used but not
defined herein shall have the meanings set forth in the Purchase Agreement.
I. GRANT OF WARRANT
1.1 GRANT. The Company hereby grants the Holder a warrant to purchase
10,267,127 shares of Common Stock at a purchase price of $21.00 per share,
exercisable in whole or in part at any time and from time to time from the date
hereof until 6:00 p.m. on the tenth anniversary of the date hereof, subject to
the provisions of Article V hereof (the "Warrant" and the shares to be issued
upon the exercise thereof the "Warrant Shares").
1.2 SHARES TO BE ISSUED; RESERVATION OF SHARES. The Company covenants
and agrees that (1) all Warrant Shares will upon issuance in accordance with the
terms hereof be duly authorized, validly issued and outstanding, fully paid and
non-assessable, and free from all taxes, liens and charges with respect to the
issuance thereof, (2) the Company will from time to time take all actions
necessary to assure that the par value per share of the Common Stock is at all
times equal to or less than the applicable purchase price per Warrant Share, and
(3) the Company will at all times during the exercise period have authorized and
reserved sufficient shares of Common Stock to provide for the exercise of the
Warrant in full.
II. ADJUSTMENTS TO WARRANT RIGHTS
2.1 STOCK SPLITS AND COMBINATIONS. If the Company shall combine all of
the outstanding Common Stock proportionately into a smaller number of shares,
the number of Warrant Shares issuable to the Holder upon exercise of the Warrant
shall be proportionately decreased and
<PAGE>
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
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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
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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
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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
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"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
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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
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Warrant Share, the Company shall have the right, by giving of notice to the
Holder (an "Acceleration Notice"), to cause (i) a Reduced Amount (as defined
below) of Warrant Shares to remain subject to the Warrant for the original term
and (ii) the balance of any Warrant Shares then subject to the Warrant to remain
subject to the Warrant only for a period of 75 days from the giving of the
Acceleration Notice. An "Acceleration Goal" shall mean the reporting by the
Company of Qualifying Revenues (as herein defined) for the immediately preceding
four fiscal quarters in the amounts specified in the table below and the
"Reduced Amount" shall mean the number of Warrant Shares specified in the table
below that shall then remain subject to the Warrant in accordance with its
terms:
Amount of Qualifying Revenues Reduced Amount
----------------------------- --------------
$100 million 8,727,058
$150 million 6,673,632
$200 million 4,106,851
$250 million Zero
"Qualifying Revenues" for a fiscal period shall mean net sales of the Company
from continuing operations determined in accordance with GAAP consistently
applied throughout the period, and reported in periodic reports filed by the
Company pursuant to the Exchange Act (the "Reports"); provided that the gross
profit (net sales less cost of goods sold) derived from such revenues and
reported by the Company in the Reports, exceeds 20% of such revenues.
If the Company has the right to and does give an Acceleration Notice,
only the associated Reduced Amount of Warrant Shares shall remain subject to the
Warrant for the original term. With respect to all other Warrant Shares then
subject to the Warrant, the Holder shall have a period of 75 days from the date
of such Acceleration Notice to exercise its rights hereunder and if not so
exercised such rights shall elapse and terminate on the 76TH day following the
giving of the Acceleration Notice.
5.2 TERMINATION. Notwithstanding anything contained herein to the
contrary, Issuer shall have the right to terminate this Warrant by giving sixty
(60) days prior written notice to Holder in the event that: (i) Holder has
failed to perform the Marketing Agreement in any material respect and has not
remedied such failure and the Company has terminated the Marketing Agreement
pursuant to Section 4.1 thereof; (ii) Holder and the Company have entered into
the Technology License Agreement contemplated by Section 6 of the Commercial
Alliance Agreement, Holder has materially breached the terms of that Technology
License Agreement and has not remedied such breach and the Company has
terminated the Technology License Agreement pursuant to its terms; or (iii)
Holder and the Company have entered into and Holder has materially breached one
or more of the Trademark and Trade Dress License Agreement, the Management
Services Agreement, the Supply Agreements or the Joint Venture Agreement
contemplated by the Commercial Alliance
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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.
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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:
----------------------------
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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)
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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)
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EXHIBIT 2(c)
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT") OR UNDER ANY APPLICABLE STATE SECURITIES LAW
AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION UNDER THE ACT OR AN OPINION OF COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE ACT AND THE RULES AND REGULATIONS
PROMULGATED THEREUNDER OR UNDER APPLICABLE STATE SECURITIES LAWS.
OPTION CERTIFICATE
To Purchase 1,579,000 Shares of Common Stock of:
A.S.V., INC.
THIS IS TO CERTIFY THAT CATERPILLAR INC. (the "Holder"), or Holder's
registered assigns, is entitled to purchase from A.S.V., Inc., a Minnesota
corporation (the "Company"), up to 1,579,000 shares of the Company's common
stock, par value $.01 per share (the "Common Stock"), on the terms and
conditions hereinafter set forth. This option is being issued in connection with
a Securities Purchase Agreement between the Company and the Holder dated October
14, 1998 (the "Purchase Agreement"). Capitalized terms used but not defined
herein shall have the meanings set forth in the Purchase Agreement.
I. GRANT OF OPTION
1.1 GRANT. The Company hereby grants the Holder an option to purchase 1,579,000
shares of Common Stock at a purchase price of $18.00 per share, exercisable in
whole or in part at any time and from time to time from the date hereof until
6:00 p.m. on the first anniversary of the date hereof, subject to earlier
termination, if any, as provided in Article V (the "Option" and the shares to be
issued upon the exercise thereof, the "Option Shares").
1.2 SHARES TO BE ISSUED; RESERVATION OF SHARES. The Company covenants and agrees
that (1) all Option Shares will upon issuance in accordance with the terms
thereof be duly authorized, validly issued and outstanding, fully paid and
non-assessable, and free from all taxes, liens and charges with respect to the
issuance thereof, (2) the Company will from time to time take all actions
necessary to assure that the par value per share of the Common Stock is at all
times equal to or less than the applicable purchase price per Option Share, and
(3) the Company will at all times during the exercise period have authorized and
reserved sufficient shares of Common Stock to provide for the exercise of the
Option in full.
II. ADJUSTMENTS TO OPTION RIGHTS
<PAGE>
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
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number of shares of Common Stock purchasable upon exercise of the Option
immediately prior to such adjustment, and the denominator of which is the
aggregate number of shares of Common Stock purchasable upon exercise of the
Option immediately thereafter.
2.3 OTHER DIVIDENDS AND DISTRIBUTIONS. If the Company shall make or fix a record
date for the holders of Common Stock entitled to receive a dividend or other
distribution payable in securities of the Company other than shares of Common
Stock, then lawful and adequate provision shall be made so that the Holder of
the Option shall be entitled to receive upon exercise of the Option, for the
aggregate purchase price in effect prior thereto, in addition to the number of
Option Shares immediately theretofore issuable upon exercise of the Option, the
kind and number of securities of the Company which the Holder would have owned
and been entitled to receive had the Option been exercised immediately prior to
that date (pro rated in the case of any partial exercise).
2.4 RECLASSIFICATION, EXCHANGE AND SUBSTITUTION. If the Common Stock is changed
into the same or a different number of shares of any class or classes of stock,
whether by recapitalization, reclassification or otherwise (other than a
subdivision or combination of shares or stock dividend or a reorganization,
merger, consolidation or sale of assets, provided for elsewhere in this Article
II), then the Holder of the Option shall be entitled to receive upon exercise of
the Option, in lieu of the Option Shares immediately theretofore issuable upon
exercise of the Option, for the aggregate purchase price in effect prior
thereto, the kind and amount of stock and other securities and property
receivable upon such recapitalization, reclassification or other change, by the
holders of the number of shares of Common Stock for which such Option could have
been exercised immediately prior to such recapitalization, reclassification or
change (pro rated in the case of any partial exercise).
2.5 REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALES OF ASSETS. If any of the
following transactions (each, a "Special Transaction") shall become effective:
(i) a capital reorganization (other than a recapitalization, subdivision,
combination, reclassification or exchange of shares provided for elsewhere in
this Article II), (ii) a consolidation or merger of the Company with and into
another entity, or (iii) a sale or conveyance of all or substantially all of the
Company's assets, then as a condition of any such Special Transaction, lawful
and adequate provision shall be made so that the Holder of the Option shall
thereafter have the right to purchase and receive upon exercise of the Option,
in lieu of the Option Shares immediately theretofore issuable upon exercise of
the Option, for the aggregate purchase price in effect immediately prior to such
consummation, such shares of stock, other securities, cash or other assets as
may be issued or payable in and pursuant to the terms of such Special
Transaction to the holders of shares of Common Stock for which such Option could
have been exercised immediately prior to such Special Transaction (pro rated in
the case of any partial exercises). In connection with any Special Transaction,
appropriate provision shall be made with respect to the rights and interests of
the Holder of the Option to the end that the provisions of the Option (including
without limitation provisions for adjustment of the purchase price and the
number of Option Shares issuable upon the exercise of the Option), shall
thereafter be applicable, as nearly as may be practicable, to any shares of
stock, other securities, cash or other assets thereafter deliverable upon the
exercise of the Option. The Company shall not effect
3
<PAGE>
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
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<PAGE>
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
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(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.
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(b) Each person in whose name any Option Share certificate is issued upon
exercise of a Option shall for all purposes been deemed to have become the
holder of record of the Option Shares for which such Option was exercised, and
such Option Share certificate shall be dated the date upon which the Option
exercise notice was duly surrendered and payment of the purchase price was
tendered to the Company.
3.2 ISSUANCE OF OPTION SHARES. The Option Shares purchased shall be issued to
the Holder exercising this Option as of the close of business on the date on
which all actions and payments required to be taken or made by the Holder,
pursuant to Section 3.1, shall have been so taken or made. Certificates for the
Option Shares so purchased shall be delivered to the Holder within three (3)
days after a Option is surrendered and payment therefore is made.
IV. RIGHTS OF HOLDER
4.1 OPTIONHOLDER RIGHTS. Holder shall not, solely by virtue of the Option and
prior to the issuance of the Option Shares upon due exercise thereof, be
entitled to any rights of a shareholder in the Company.
4.2 NO IMPAIRMENT. The Company shall not by any action including, without
limitation, amending its articles of incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Option, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect the
rights of the Holder against impairment. Without limiting the generality of the
foregoing, the Company will (a) take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of Common Stock upon the exercise of this Option and
(b) use its best efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be
necessary to enable the company to perform its obligations under this Option.
Upon the request of the Holder, the Company will at any time during the period
this Option is outstanding acknowledge in writing, in form satisfactory to the
Holder, the continuing validity of this Option and the obligations of the
Company hereunder.
V. TERMINATION OF OPTION
5.1 TERMINATION AND CLOSING. Upon the Closing (as defined in the
Purchase Agreement) the Option shall terminate and the Holder shall have no
further rights thereunder.
5.2 OTHER TERMINATIONS. The Option shall terminate and the Holder shall
have no further rights thereunder if the Purchase Agreement is terminated:
(a) by the Company pursuant to the provisions of Section 2.2(c)
thereof;
7
<PAGE>
(b) by the Company or the Holder pursuant to the provisions of
Section 2.2(d) thereof, solely as a result of the result of the failure of the
conditions specified in Section 8.1(b) or (c) to be satisfied; or
(c) by the Company pursuant to the provisions of Section
2.2(d) thereof, solely as a result of the failure of the conditions specified in
Section 8.3 to be satisfied.
VI. TRANSFERABILITY
The Holder hereby represents and warrants that it is acquiring the Option and,
upon the exercise thereof, the Option Shares, for investment and not with a view
to resale or distribution thereof. Subject to compliance with federal and state
securities laws, the Holder may sell, assign, transfer or otherwise dispose of
all or any portion of the Option or the Option Shares acquired upon any exercise
hereof at any time and from time to time; provided however, that the Option may
only be transferred to an Affiliate of the Holder. Upon the sale, assignment,
transfer or other disposition of all or any portion of the Option, the Holder
shall deliver to Company a written notice of such in the form attached hereto as
Exhibit B duly executed by the Holder which includes the identity and address of
any purchaser, assignor, or transferee.
VII. LEGEND ON OPTION SHARES
Certificates evidencing the Option Shares shall bear the following legend:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT") OR UNDER ANY APPLICABLE STATE SECURITIES LAW
AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION UNDER THE ACT OR AN OPINION OF COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE ACT AND THE RULES AND REGULATIONS
PROMULGATED THEREUNDER OR SUCH STATE SECURITIES LAWS.
VIII. MISCELLANEOUS
8.1 NOTICES. All notices, requests, demands, claims, and other communications
hereunder shall be in writing and shall be delivered by certified or registered
mail (first class postage pre-paid), or guaranteed overnight delivery, to the
Company at the address at which its principal business office is located from
time to time, and the Holder at the address it advises the Company of.
8.2 EXPENSES; TAXES. Any sales tax, stamp duty, deed transfer or other tax
(except only taxes based on the income of Holder) arising out of the issuance
and sale of the Option
8
<PAGE>
or the Option Shares issuable upon exercise of the Option and consummation of
the transactions contemplated by this Option Certificate shall be paid by the
Company.
8.3 AMENDMENT; WAIVER. This Option Certificate may not be modified, amended,
supplemented, canceled or discharged, except by written instrument executed by
the Company and the Holder. No failure to exercise, and no delay in exercising,
any right, power or privilege under this Option Certificate shall operate as a
waiver, nor shall any single or partial exercise of any right, power or
privilege hereunder preclude the exercise of any other right, power or
privilege. No waiver of any breach of any provision shall be deemed to be a
waiver of any preceding or succeeding breach of the same or any other provision,
nor shall any waiver be implied from any course of dealing between the Company
and the Holder. No extension of time for performance of any obligations or other
acts hereunder or under any other agreement shall be deemed to be an extension
of the time for performance of any other obligations or any other acts.
8.4 HEADINGS. The headings contained in this Option Certificate are for
convenience of reference only and are not to be given any legal effect and shall
not affect the meaning or interpretation of this Option Certificate.
8.5 GOVERNING LAW; INTERPRETATION. This Option Certificate shall be construed in
accordance with and governed for all purposes by the laws of the State of
Minnesota.
* * *
9
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Option Certificate to be duly
executed and delivered as of the day and year first above written.
A.S.V., INC.
By: /s/ Gary D. Lemke
-------------------------------
Name: Gary D. Lemke
Title: President
10
<PAGE>
EXHIBIT A
EXERCISE NOTICE
[To be executed only upon exercise of Option]
The undersigned registered owner of this Option irrevocably exercises this
Option for the purchase of the number of shares of Common Stock of A.S.V., Inc.
as is set forth below, and herewith makes payment therefor, all at the price and
on the terms and conditions specified in the attached Option Certificate and
requests that certificates for the shares of Common Stock hereby purchased (and
any securities or other property issuable upon such exercise) be issued in the
name of and delivered to the person specified below whose address is set forth
below, and, if such shares of Common Stock shall not include all of the shares
of Common Stock now and hereafter issuable as provided in the attached Option
Certificate, then A.S.V., Inc. shall, at its own expense, promptly issue to the
undersigned a new Option Certificate of like tenor and date for the balance of
the shares of Common Stock issuable thereunder.
Date: ____________________
Amount of Shares Purchased: ______________
Aggregate Purchase Price: $_____________
Printed Name of Registered Holder: ________________________________
Signature of Registered Holder: ________________________________
NOTICE: The signature on this Exercise Notice must correspond with the name as
written upon the face of the attached Option Certificate in every particular,
without alteration or enlargement or any change whatsoever.
Stock Certificates to be issued and registered in the following name, and
delivered to the following address:
-----------------------------------
(Name)
-----------------------------------
(Street Address)
-----------------------------------
(City) (State) (Zip Code)
-----------------------------------
(Tax identification or Social
Security Number)
11
<PAGE>
EXHIBIT B
ASSIGNMENT NOTICE
[To be executed only upon transfer of Option]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto the
person named below, whose address is set forth below, the rights represented by
the attached Option Certificate to purchase the number of shares of the Common
Stock of A.S.V., Inc. ("ASV") as is set forth below, to which the attached
Option Certificate relates, and appoints ____________________________ attorney
to transfer such rights on the books of ASV with full power of substitution in
the premises. If such shares of Common Stock of ASV shall not include all of the
shares of Common Stock now and hereafter issuable as provided in the attached
Option Certificate, then ASV, at its own expense, shall promptly issue to the
undersigned a new Option of like tenor and date for the balance of the Common
Stock issuable thereunder.
Date: ____________________
Amount of Option Transferred: ______________
Printed Name of Registered Holder: ________________________________
Signature of Registered Holder: ________________________________
NOTICE: The signature on this Assignment Notice must correspond with the name as
written upon the face of the attached Option Certificate in every particular,
without alteration or enlargement or any change whatsoever.
Option Certificate for transferred Option to be issued and registered in the
following name, and delivered to the following address:
-----------------------------------
(Name)
-----------------------------------
(Street Address)
-----------------------------------
(City) (State) (Zip Code)
12
<PAGE>
Exhibit 2(d)
VOTING AGREEMENT
This Voting Agreement (this "Agreement") is entered into and delivered
as of October 13, 1998 by James H. Dahl, Gary D. Lemke, JoAnn Lemke, Philip C.
Smaby, Jerome T. Miner, Edgar E. Hetteen, Hannah Hetteen, Leland T. Lynch,
Karlin S. Symons, R.E. "Teddy" Turner, IV, and Thomas R. Karges (individually, a
"Shareholder", and collectively, the "Shareholders"), and Caterpillar Inc., a
Delaware corporation ("Investor").
RECITALS
As of the date of this Agreement, each Shareholder owns of record or
otherwise controls the voting power of the shares of common stock, par value
$0.01 per share ("Common Stock"), of A.S.V., Inc., a Minnesota corporation
("ASV") set forth under his or her name on the signature page hereto. All such
shares, together with any shares of ASV Common Stock acquired by a Shareholder
or as to which a Shareholder acquires the control of voting power prior to the
termination of this Agreement, are sometimes referred to herein as the "Shares"
and the Shares owned or controlled by an individual Shareholder are sometimes
referred to herein as "his or her Shares."
ASV and Investor propose to enter into a Securities Purchase Agreement
within one day of the date hereof (as the same may be amended from time to time,
the "Purchase Agreement"), which is to provide for Investor to purchase, and ASV
to issue to Investor, 1,000,000 shares of Common Stock and a warrant to purchase
an additional 10,267,127 shares of Common Stock (the "Investment"), on the terms
set forth in the Purchase Agreement.
Investor has required, as a condition to its willingness to enter into
the Purchase Agreement, that each Shareholder enter into this Agreement.
TERMS OF AGREEMENT
In consideration of the mutual representations, warranties, covenants,
and agreements set forth in the Purchase Agreement and in order to induce
Investor to enter into the Purchase Agreement, and to consummate the
transactions contemplated thereby, each Shareholder hereby agrees as follows:
ARTICLE I
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
The Shareholders hereby represent and warrant to Investor as follows:
1.1 Authority, Etc. Each Shareholder is an individual with competence
and authority under applicable law to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. Each Shareholder has all
necessary authority to execute, deliver, and perform this Agreement and the
grant of the rights covered hereby. This Agreement has been duly executed and
delivered by each Shareholder and constitutes a legal, valid, and binding
<PAGE>
obligation of each such Shareholder, enforceable against such Shareholder in
accordance with its terms, except as the same may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally and general equitable principles, regardless of
whether such enforceability is considered in a proceeding at law or in equity.
1.2 Title to Shares. Each Shareholder is the record and beneficial
owner of or otherwise controls the voting power of the number of Shares set
forth under his or her name on the signature page hereto and owns or controls
such Shares free and clear of liens, claims, charges or encumbrances of any kind
or any proxy or voting restriction.
ARTICLE II
TRANSFER AND VOTING OF SHARES
2.1 Restriction on Transfer of Shares. During the Term (as defined
below), except as set forth in the following sentence, each Shareholder shall
not (a) sell, transfer, pledge, grant a security interest in or lien on or
otherwise dispose of or encumber any of his or her Shares or relinquish control
of the voting power with respect to any of his or her Shares, (b) deposit any of
his or her Shares into a voting trust, enter into a voting agreement or
arrangement or grant any proxy (except a proxy under the Proxy Statement voted
in accordance with this Agreement) with respect to any of his or her Shares, or
(c) enter into any contract, option or other arrangement or undertaking with
respect to the direct or indirect acquisition or sale, assignment, transfer,
pledge, grant of a security interest in or lien on or other disposition of or
encumbrance on his or her Shares. Notwithstanding the foregoing, it shall not
constitute a breach of this Agreement if (i) any Shareholder delivers Shares in
payment of the exercise price of options to purchase Common Stock or (ii) the
following Shareholders sell or transfer up to the amount of Shares indicated
after their names in connection with gift or charitable contributions or sales
made for the purpose of paying income taxes incurred by them in 1998: Edgar E.
Hetteen - 50,000 Shares; Philip C. Smaby - 50,000 Shares; Karlin S. Symons -
1,500 Shares; and Thomas R. Karges - 1,000 Shares.
2.2 Voting of Shares. Each Shareholder does hereby irrevocably agree to
vote each of his or her Shares at every annual, special or adjourned meeting of
the shareholders (including any consent in lieu of a meeting) of ASV during the
term of this Agreement (i) in favor of the approval of the Purchase Agreement
and the Investment by Investor and its permitted assigns pursuant to the
Purchase Agreement and consummation of all other transactions contemplated by
the Purchase Agreement, (ii) against any Competing Transaction (as defined in
the Purchase Agreement) involving ASV, or any action or agreement that would
result in a breach of any covenant, representation or warranty or any other
obligation or agreement of ASV under the Purchase Agreement or which could
result in any of the conditions to ASV's obligations under the Purchase
Agreement not being fulfilled, and (iii) in favor of any other matter relating
to the consummation of the transactions contemplated by the Purchase Agreement.
For the purposes of this Agreement, "Term" shall mean the period from the date
of execution of this Agreement until
2
<PAGE>
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
<PAGE>
3.7 Counterparts. This Agreement may be executed in one or more
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, each Shareholder has caused this Agreement to be
duly executed and delivered as of the day and year first written above.
THE SHAREHOLDERS:
/s/ James H. Dahl
-----------------------------------
James H. Dahl
788,550 shares of Common Stock
/s/ Gary D. Lemke
-----------------------------------
Gary D. Lemke
65,678 shares of Common Stock
/s/ Gary Lemke
-----------------------------------
Gary and JoAnn Lemke by Gary Lemke
143,209 shares of Common Stock
/s/ JoAnn Lemke
-----------------------------------
JoAnn Lemke
61,363 shares of Common Stock
/s/ Philip C. Smaby
-----------------------------------
Philip C. Smaby
374,006 shares of Common Stock
/s/ Jerome T. Miner
-----------------------------------
Jerome T. Miner
359,850 shares of Common Stock
/s/ Edgar E. Hetteen
-----------------------------------
Edgar E. Hetteen
120,877 shares of Common Stock
4
<PAGE>
/s/ Hannah Hetteen
-----------------------------------
Hannah Hetteen
113,100 shares of Common
/s/ Leland T. Lynch
-----------------------------------
Leland T. Lynch
16,500 shares of Common Stock
/s/ Karlin S. Symons
-----------------------------------
Karlin S. Symons
13,103 shares of Common Stock
/s/ R. E. Turner, IV
-----------------------------------
R.E. "Teddy" Turner, IV
750 shares of Common Stock
/s/ Thomas R. Karges
-----------------------------------
Thomas R. Karges
4,366 shares of Common Stock
ACCEPTED AND AGREED:
- --------------------
CATERPILLAR INC.
By:
-------------------------------
Its:
5
<PAGE>
Exhibit 2(e)
COMMERCIAL ALLIANCE AGREEMENT
This Agreement, dated October 14, 1998 is between A.S.V., Inc., a
Minnesota corporation with a principal place of business at 840 Lily Lane, Grand
Rapids, Minnesota 55744 ("ASV") and Caterpillar Inc., a Delaware corporation
with a principal place of business at 100 Northeast Adams, Peoria, Illinois
61629 ("Caterpillar").
WHEREAS, ASV is engaged in the design, manufacture and sale of
all-terrain rubber tracked vehicles;
WHEREAS, Caterpillar is a manufacturer of earthmoving and construction
equipment, which it distributes through its worldwide network of independent
dealers;
WHEREAS, pursuant to that certain Securities Purchase Agreement of even
date herewith ("SPA") between the parties, Caterpillar has agreed to purchase an
equity interest in ASV and ASV has granted Caterpillar a warrant to purchase a
controlling interest in ASV;
WHEREAS, ASV and Caterpillar also wish to form a commercial alliance
that will, among other things, enhance sales of ASV's products by Caterpillar
granting ASV access to Caterpillar's distribution system and to Caterpillar's
components for incororation in ASV's products, ASV granting Caterpillar access
to ASV's technology and components for incorporation in Caterpillar's products
and establishing a framework for joint development of new agricultural equipment
products;
NOW, THEREFORE, the parties agree as follows:
PART I
SPA AND MARKETING AGREEMENT
1. This Agreement shall enter into effect conditioned upon and at the
time of the closing of the SPA (as defined therein) (the "Closing"), except for
Sections 11 through and including 23, which shall be effective as of the date
hereof.
2. At the Closing, ASV and Caterpillar shall enter into a Marketing
Agreement in the form attached hereto as EXHIBIT A.
PART II
OTHER AGREEMENTS
3. As soon as practicable after the Closing, Caterpillar and ASV shall
negotiate in good faith to reach and execute Service Agreements as follows:
3.1. Caterpillar will offer to ASV financial services, via
Caterpillar's wholly-owned finance subsidiary, Caterpillar Financial
Services Corporation. "Financial
<PAGE>
services" shall include, without limitation, customer financing and
dealer rental fleet financing.
3.2 Caterpillar will offer to ASV logistics services, via
Caterpillar's wholly-owned logistics subsidiary, Caterpillar Logistics
Services, Inc. "Logistics services" shall include parts warehousing,
inventory management and distribution services to support ASV's
products on a worldwide basis.
3.3 Caterpillar's defense and federal products group will offer
its services in promoting sales of ASV's products to governmental
bodies worldwide.
3.4 If the services offered by Caterpillar are competitive, from
a total-value point of view, with similar services offered by other
service providers, ASV will utilize such services, working directly
with the relevant Caterpillar subsidiary or division.
4. As soon as practicable after the Closing, Caterpillar and ASV shall
negotiate in good faith to reach and execute a Supply Agreement (Caterpillar to
ASV) as follows:
4.1 Caterpillar will offer to supply Caterpillar components to
ASV for incorporation in ASV's products, including without limitation,
diesel engines.
4.2 Caterpillar will use its best reasonable efforts to ensure
that the terms of Caterpillar's offers are competitive, from a
total-value point of view, with the terms offered by other
manufacturers of similar quality components.
4.3 If the terms of Caterpillar's offer to supply are
competitive, from a total-value point of view, with the terms offered
by other component suppliers and the relevant Caterpillar components
may be installed on ASV's products without undue expense, ASV will
contract with Caterpillar to purchase its requirements for such
components from Caterpillar.
4.4 The term of the Supply Agreement shall be the shorter of (i)
ten years from the Closing or (ii) the final expiration of the Warrant
as defined in the SPA.
5. As soon as practicable after the Closing, Caterpillar and ASV shall
negotiate in good faith to reach and execute a Supply Agreement (ASV to
Caterpillar) as follows:
5.1 ASV will offer to supply ASV components, including without
limitation, suspension systems, to Caterpillar for incorporation in
Caterpillar's products that do not compete directly with ASV products.
2
<PAGE>
5.2 If Caterpillar decides in its sole discretion to purchase ASV
components, Caterpillar will contract with ASV to purchase some or all
of its requirements for such components from ASV.
5.3 The term of the Supply Agreement shall be the shorter of (i)
ten years from the Closing of the SPA or (ii) the final expiration of
the Warrant as defined in the SPA.
5.4 To the extent it is or becomes economically impractical for
ASV to supply such components, ASV will offer to license its related
intellectual property rights (including patents and know-how) to
Caterpillar to make, or have made, those components in accordance with
the license agreement described in Section 6.
6. As soon as practicable after the Closing, Caterpillar and ASV shall
negotiate in good faith to reach and execute a Technology License Agreement (ASV
to Caterpillar) as follows:
6.1 Subject to ASV's right to supply components as described in
Section 5, ASV will offer to license Caterpillar, on an exclusive
(except as to ASV) and royalty bearing basis, to use ASV's proprietary
patents and know-how relating to all-terrain rubber track vehicles in
the design, manufacture, use and sale of Caterpillar's products that
do not compete directly with ASV's products.
6.2 The term of the Technology License Agreement shall be the
shorter of (i) ten years from the Closing or (ii) the final expiration
of the Warrant as defined in the SPA.
7. As soon as practicable after the Closing, Caterpillar and ASV shall
negotiate in good faith to reach and execute a Joint Venture Agreement on the
following basic terms:
7.1 ASV and Caterpillar shall establish a 50-50 joint venture
company ("Newco") as a Delaware Limited Liability Company.
7.2 The site of Newco operations shall be Grand Rapids,
Minnesota.
7.3 The purpose of Newco shall be to design and develop a line of
agricultural tractors in the 30-125 hp range utilizing key aspects of
the parties' respective technology and know-how.
7.4 Both ASV and Caterpillar shall provide Newco with a
technological base by licensing or assigning mutually agreed aspects
of their respective proprietary information and know-how.
7.5 Both ASV and Caterpillar shall second mutually agreed
personnel to Newco.
3
<PAGE>
7.6 Both ASV and Caterpillar shall sell parts and components to
Newco at market-based prices.
7.7 Products designed and developed by Newco shall be marketed
and supported exclusively under the Caterpillar name through
Caterpillar dealers.
8. At the Closing, Caterpillar and ASV shall execute a Management
Services Agreement in the form attached hereto as Exhibit B.
9. All agreements referred to above in Part II shall be hereinafter
referred to as "Other Agreements".
PART III
TERM AND TERMINATION
10. Unless earlier terminated by mutual agreement of the parties or
pursuant to sub-sections 10.1 and 10.2 below, this Agreement shall remain in
effect until the last of the Other Agreements has been executed.
10.1 If either party fails to perform this Agreement in any
material respect (and does not remedy such failure to the complete
satisfaction of the non-defaulting party, within sixty (60) days after
written notice thereof has been sent to the other party) or becomes
insolvent, bankrupt or consents to the appointment of a trustee or
receiver, or if any trustee or receiver is appointed for the greater
part of either party's properties without the consent of that party and
such trustee or receiver is not discharged within sixty (60) days, or
if any bankruptcy, reorganization, arrangement or liquidation
proceedings are instituted by either party or if instituted against
either party are consented to by it or permitted to remain undismissed
for sixty (60) days, or if either party's shares, management, ownership
or substantially all of either party's property is confiscated,
nationalized, expropriated or otherwise taken by any government action,
then, in such event, the other party may terminate this Agreement
immediately upon written notice.
10.2 In the event of any Change in Control of ASV (as defined
below), Caterpillar shall have the right to terminate this Agreement
effective immediately.
For purposes of this Section 10.2, "Change in Control" shall mean,
except pursuant to the terms of the SPA and the Warrant or with the
prior written consent of Caterpillar:
(a) The acquisition by any third party or group of
parties acting in concert of at least thirty percent (30%) of
the outstanding shares of common stock of ASV; or
4
<PAGE>
(b) A change of the majority of the directors of ASV
occurring in a period of less than one year, excluding, to the
extent no solicitation in opposition has theretofore been
announced or commenced, changes in directors resulting from
the election of directors at the next regularly scheduled
annual meeting of ASV's shareholders; or
(c) The sale, exchange, transfer or other disposition
to a third party of all or substantially all of the assets of
ASV.
PART IV
DEFINITIONS
11. In this Agreement, the following terms shall be defined as follows:
11.1 "Affiliate" means any person (individual, corporation,
partnership, limited liability company or other entity) that directly
or indirectly controls, is under common control of or is controlled by
either party to this Agreement. "Control" means the ownership, direct
or indirect, of fifty percent (50%) or more of the voting shares or
capital of such person.
11.2 "Confidential Information" means all trade secrets,
confidential knowledge, and proprietary data of any kind or nature
whatsoever relating to this Agreement, or the businesses of either
party and its Affiliates. Confidential Information also shall include
any information prepared or developed by a party in connection with
this Agreement, which reflects, interprets, evaluates, includes or is
derived from the Confidential Information of another party.
Confidential Information shall include, but not be limited to,
technical specifications, diagrams, discoveries, economic models, pro
forma and other financial information, designs, business opportunities,
cost and pricing data, records, customer lists, and engineering,
manufacturing, and marketing know-how. Confidential Information does
not include information which (i) was generally known or available to
the public at the time of its disclosure hereunder, or which after such
disclosure became generally known or available to the public, provided
that such disclosure was made or occurred through no fault of the
Receiving Party (defined below) or its Affiliates, or its or their
officers, directors, or employees; (ii) was in the possession of the
Receiving Party prior to its disclosure hereunder; (iii) was known by
the Receiving Party at the time of its disclosure hereunder or was
independently developed at any time by the Receiving Party without
reference to the Disclosing Party's (defined below) Confidential
Information; (iv) is required to be furnished pursuant to law or legal
process; or (v) is rightfully obtained, subsequent to its disclosure
hereunder, by the Receiving Party or its Affiliates from a third party
who is lawfully in possession of such information and who is not under
an obligation of confidentiality to the Disclosing Party.
5
<PAGE>
11.3 The party that discloses Confidential Information shall
be referred to as the "Disclosing Party".
11.4 The party that receives Confidential Information shall be
referred to as the "Receiving Party".
PART V
MISCELLANEOUS
12. The parties shall maintain the secrecy of Confidential Information
as follows:
12.1 In connection with performance of this Agreement, the
parties may disclose to one another certain Confidential Information.
12.2 The Receiving Party shall hold the Disclosing Party's
Confidential Information in strictest confidence and trust and shall
use the Confidential Information only in connection with the purposes
of this Agreement. The Receiving Party shall not disclose Confidential
Information provided by the Disclosing Party and/or its Affiliates, or
the fact that it has been made available to the Receiving Party, except
that the Receiving Party may disclose Confidential Information and the
fact that it has been provided to those employees, officers, directors,
agents, consultants and representatives of the Receiving Party and its
Affiliates who have a reasonable need to know such information in
connection with the purposes of this Agreement. The Receiving Party
shall be liable for any breach of the confidentiality obligation
hereunder by any of its Affiliates, or by any of the respective
employees, officers, directors, agents, consultants and contractors of
the Receiving Party and/or its Affiliates.
12.3 If the Receiving Party is required by law or legal
process to disclose any of the Confidential Information of the
Disclosing Party, the Receiving Party shall promptly notify the
Disclosing Party in writing so that the Disclosing Party may seek an
appropriate protective order or other remedy at the sole cost of the
Disclosing Party. If no such protective order or other remedy is
obtained, the Receiving Party shall furnish only that portion of such
Confidential Information that is legally required and will exercise its
reasonable efforts to obtain reliable assurances from all parties
receiving the designated portions of such Confidential Information that
confidential treatment will be accorded to such Confidential
Information. Notwithstanding any such disclosure, any such Confidential
Information so disclosed shall, for all other purposes, continue to be
treated as Confidential Information under this Agreement.
12.4 Nothing contained herein shall be construed to obligate
either party to disclose to the other any Confidential Information. The
disclosure of Confidential Information pursuant to this Agreement, and
any prior or future discussions, evaluations or other communications
between the parties, shall not confer any right nor impose or
6
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create any obligation on the parties other than those expressly agreed
to in this Agreement.
12.5 All reports, notes, data, memoranda, records, or other
tangible expressions of Confidential Information of the other party,
including any electronically stored data, will be returned to the
Disclosing Party promptly upon request of such Disclosing Party.
12.6 The confidentiality obligation shall survive expiration
or termination of this Agreement for any reason for a period of five
(5) years.
13. It is understood and agreed by the parties that each may be
irreparably injured by a breach of Sections 2, 8, 11 or 12 of this Agreement and
that monetary damages may not be a sufficient remedy for any actual or
threatened breach thereof. In addition to any remedies available at law, the
non-breaching party may also be entitled to equitable relief, including
injunction and specific performance.
14. No failure or omission by either party in the performance of any of
its obligations under this Agreement shall be deemed a breach of this Agreement,
nor create any liability or give rise to any right to terminate this Agreement,
if the same shall arise from or as a consequence of a fire, flood, severe
weather or other act of God, war, insurrection, civil disturbance, or any other
cause beyond the reasonable control of such party, whether similar to or
different from the causes above enumerated, and any such cause shall absolve the
affected party from responsibility for such failure to perform said obligation.
15. Neither party shall make any announcement concerning the nature and
details of this Agreement or any of the Other Agreements referred to herein
without the express written consent of the other party.
16. This Agreement may not be assigned by either party without the
prior written consent of the other party, except that Caterpillar may assign
this Agreement to a wholly-owned subsidiary with the consent of ASV, which
consent shall not be unreasonably withheld.
17. The parties agree that this Agreement shall be construed,
interpreted, and applied in accordance with the laws of the State of Illinois,
without reference to its conflict of laws provisions.
18. This Agreement, including the Exhibits attached hereto or referred
to herein, constitutes the entire agreement between the parties and there are no
prior understandings, agreements, representations or warranties between the
parties relating hereto. No modification or amendment to this Agreement or any
of its provisions shall be binding unless contained in a writing signed by both
parties.
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19. When written notice is required by this Agreement, it shall be sent
by registered mail, by courier or by such other method as will permit the sender
to verify delivery, to the addresses set forth below:
For Caterpillar: Caterpillar Inc.
Attn: Richard A. Benson, Vice President
100 Northeast Adams Street
Peoria, Illinois 61629-2495
Telephone: (309) 675-1000
Facsimile: (309) 675-4777
For ASV: A.S.V., Inc.
Attn: Mr. Gary D. Lemke
840 Lily Lane
Grand Rapids, Minnesota 55744
Telephone: (218) 327-3434
Facsimile: (218) 326-5579
Written notice may also be sent by facsimile to the numbers listed above, but
such notice shall not be effective unless the sender receives a return facsimile
acknowledging receipt of the notice. Notice shall be deemed received when
actually delivered to the recipient as demonstrated by postal records. Facsimile
notice shall be deemed received upon receipt by the sender of an acknowledgement
as described above. The addresses and transmittal numbers set forth above can be
changed only by written notice, which complies with the requirements of this
Section 19.
20. The relationship between Caterpillar and ASV shall be that of
independent contractors, and nothing in this Agreement shall be construed to
establish a fiduciary, partnership, agency, or joint venture relationship
between the parties, or constitute Caterpillar, its agents and employees as the
agents or employees of ASV or to grant them any power or authority to act for,
bind or otherwise create or assume any obligation on behalf of ASV for any
purpose whatsoever.
21. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of the remainder
hereof.
22. This Agreement may be executed in any number of counterparts, each
of which shall be an original but all of which together shall constitute one and
the same instrument.
23. The headings to the sections of this Agreement are solely for
convenience of reference, and they shall not govern, limit or aid in the
interpretation of any terms or provisions of this Agreement.
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IN WITNESS WHEREOF, the authorized representative of each party has
duly executed this Agreement as of the date and year set forth above.
Caterpillar Inc.: A.S.V., Inc.:
By: /s/ Richard A. Benson By: /s/ Gary D. Lemke
------------------------------ -------------------------------
Richard A. Benson, Vice President Gary D. Lemke, President
Exhibit A - Marketing Agreement
Exhibit B - Management Services Agreement
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EXHIBIT 99
CAT AND ASV Forge Ownership Agreement; Caterpillar To Acquire Interest in
Northern Minnesota Firm
GRAND RAPIDS, Minn., Oct. 14 /PRNewswire/ -- One of the fastest growing
companies in America, A.S.V., Inc. (Nasdaq: ASVI), may grow even faster thanks
to an agreement that has the potential to significantly expand its dealer base,
and provides the cash flow necessary for continued growth.
ASV announced today an agreement with Caterpillar Inc. (NYSE: CAT), the
world's largest manufacturer of construction equipment. Under the terms of the
agreement, Caterpillar will acquire one million shares of ASV stock at $18 per
share and warrants to acquire a majority ownership at $21 per share.
Under the agreement, ASV products will gradually become available to
Caterpillar's worldwide dealer network in more than 200 countries. ASV's
Posi-Track (TM), a rubber-tracked work vehicle, moves over nearly any terrain
with minimal damage to the ground, making it effective in numerous applications
and industries.
Upon closing, Caterpillar will place two members on ASV's board of eight
directors, for a total of ten, and will make various management, financial and
engineering resources available to ASV. ASV, which has achieved 14 consecutive
record quarters, had sales of $24 million in 1997, and is on pace to do more
than $40 million in 1998.
"Many of the issues we've been working on--expanding our dealer network,
cash flow, and meeting growing demand--will be solved with this agreement," said
Gary Lemke, president of ASV. "We've known for 10 years that we're building,
pound-for-pound, the best work vehicle in the world, and we're gaining awareness
and customers every day. With Caterpillar behind us, we expect to push our
company's momentum years ahead of schedule."
Dick Benson, a Caterpillar vice president with administrative
responsibilities for its Diversified Products Division, said ASV's
rubber-tracked technology is what intrigued Caterpillar, and made an association
with ASV attractive to Caterpillar.
"ASV's undercarriage technology allows the Posi-Track to go over nearly any
terrain with high flotation and very low ground pressure--there really is
nothing like it on the market," Benson said. "By combining ASV's suspension
system technology with Caterpillar's legendary track know-how, ASV will be
ideally positioned to develop new business and new products around the world."
The agreement, subject to regulatory and ASV shareholder approval, is
expected to be finalized within 90 days. Upon completion, the two sides will
introduce the Posi-Track to Caterpillar dealers, first in North America, then
internationally.
"We have a solid, growing base of dealers, but with Caterpillar, the
Posi-Track could be available virtually everywhere," said Lemke. He added that
the additional cash will be used to ramp up production of the Posi-Track, market
products, and begin development of additional vehicles with Caterpillar.
ASV, which has approximately 110 employees, was founded in 1983 by Lemke
and Edgar Hetteen in the small village of Marcell, Minn. It moved to its current
facility in Grand Rapids in 1995. Hetteen, now 78, also founded both Polaris
Industries and Arctic Enterprises, the two largest snowmobile companies in the
U.S.
"I believe the market for the Posi-Track is much larger than the market for
the snowmobile--likely well into billions of dollars," Hetteen said. "To now
have Caterpillar behind
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us, many of the obstacles for developing those markets have been removed. It's
an exciting time here, perhaps even more exciting than it was at Polaris and
Arctic."
With its patent-pending Maximum Traction and Support System (TM)
undercarriage, ASV leads all rubber-tracked, low-ground pressure crawlers in
technology and innovation. ASV is dedicated to quality, reliability and total
customer satisfaction. More information on ASV can be found on its Web site at
www.asvi.com.
Caterpillar is the world's largest manufacturer of construction and mining
equipment, diesel and natural gas engines, and industrial gas turbines.
Caterpillar posted record sales in 1997 of $18.93 billion.
The statements regarding ASV Inc. contained in this release that are not
historical in nature, particularly those that utilize terminology such as "may,"
"will," "expects, " "anticipates," "believes," "could," or "plans," are
forward-looking statements based on current expectations and assumptions, and
entail various risks and uncertainties that could cause actual results to differ
materially from those expressed in such forward-looking statements. Important
factors known to ASV that could cause such material differences are discussed on
pages 4 through 6 in the Management's Discussion and Analysis section of ASV's
1997 Annual Report to Stockholders, and ASV's 10-Q for the quarter ended June
30, 1998 under the caption Management's Discussion and Analysis. Additional
factors include ASV's ability to obtain the necessary shareholder and regulatory
approvals, consummate the transactions contemplated by the agreement with
Caterpillar, successfully negotiate various financing, licensing and service
agreements with Caterpillar and realize the anticipated benefits from the
relationship with Caterpillar.
Background Information
All Season Vehicles, Inc. (ASV)
The Company
-- ASV designs, builds and markets the Posi-Track (TM), an all-season,
rubber-tracked vehicle used primarily in construction, agriculture and
landscaping.
-- ASV was founded in 1983 by Gary Lemke, one of the top snowmobile
dealers in the nation, and Edgar Hetteen, who also founded leading snowmobile
manufacturers Polaris and Arctic Cat.
-- Today, ASV's senior management team includes Gary Lemke, president;
Edgar Hetteen, vice president; Tom Karges, chief financial officer and Brad
Lemke, national product manager.
-- ASV employs about 110 people at its headquarters in Grand Rapids,
Minnesota.
Posi-Track
-- Its most popular and successful product, the Posi-Track, comes in
nine different models and accounts for 98% of ASV's current sales.
<PAGE>
-- Posi-Tracks perform the functions of skid-steer loaders, small
dozers and small tractors, and have sold well in the markets for such vehicles,
like construction, agriculture and landscaping. In these markets, it competes
with traditional skid-steer and tractor manufacturers such as Bobcat, Case, Dehl
and John Deere.
-- However, the Posi-Track is much more versatile than these other work
vehicles because:
1) its rubber tracks allow it to operate on any terrain, be it wet,
steep, fragile or rough;
2) its patent-pending undercarriage system exerts only two pounds per
square inch of ground pressure (less than a human);
3) its undercarriage system is maintenance free; and
4) its quick-attach mechanism allows it to use a variety of attachments,
including loaders, backhoes, augers and planers.
-- So unlike other work vehicles, the Posi-Track is at home in muddy, boggy
or soft conditions, where it won't sink into the ground, or on the golf course,
where it leaves minimal turf disturbance on greens and fairways.
-- Due to its versatility and wide range of applications, there are many
other markets for the Posi-Track that remain to be tapped.
Unique Applications
-- Military -- After being equipped with remote control units, Posi-Tracks
have been extremely successful in the removal of unexploded ordnances
(ammunition and bombs that have not detonated), where the work in bombing grids
too dangerous for humans. These Posi-Track "robots" have also been deployed to
the Middle East to disarm large threats (such as bomb-laden trucks) that may
appear outside of bases. In the future, Posi-Tracks may be used to locate and
disarm anti-personnel landmines.
-- Ski Resorts -- Posi-Tracks are ideal for snow blowing and general
maintenance. Unlike wheeled work machines, they perform well in the snow. And
unlike steel-cleated tracked vehicles, they don't damage finished surfaces, such
as parking lots and sidewalks.
-- Vineyards -- Posi-Tracks are used at the Gallo wineries in California,
where they can work between rows of grapevines without compacting the soil or
creating damaging ruts.
-- Hobby Farms/Ranches -- Posi-Tracks can be found dozing dirt on Ted
Turner's ranches, planing trees in Mary Hart's backyard and maintaining the
lawns at Pierre duPont's Longwood Gardens Estate.
<PAGE>
Financials
-- In late 1994, ASV conducted its IPO on the Nasdaq (symbol: ASVI) stock
market with an initial offering of $3.25 a share. Since that time, ASV's stock
has more than quintupled. ASV's analysts currently rate it a "strong buy."
-- Including second quarter 1998 results, ASV has reported 14 consecutive
quarters of record sales.
-- In 1997, ASV reported over $24.3 million in sales and more than $2.3
million in earnings. It was the fourth consecutive year ASV has doubled its
yearly sales figures.
-- Investors Business Daily has rated ASV the 11th fastest growing new
issue in the U.S. since 1990 (1/20/98).
For More Information
-- Call 218-327-3434 to request ASV product brochures or annual reports. Or
visit the ASV website at http://www.asvi.com.
-- For financial information, check the following sources:
http://www.nasdaq.com or http://www.abcnews.com.
SOURCE ASV Inc.
-0- 10/13/98
/EDITOR'S NOTE: Please see announcement released by Caterpillar regarding
this agreement/
/CONTACT: Gary Lemke of ASV Inc., 218-327-3434. or Stephen Dupont of
Carmichael Lynch Spong, 612-334-6235, [email protected]. for ASV Inc./
/Photo: http://www.newscom.com/cgi-bin/prnh/19981013/MNW004
http://www.newscom.com/cgi-bin/prnh/19981013/MNW004-b or NewsCom, 213-237-5431;
AP PhotoExpress Network, PRN6; PRN7; PressLink Online, 800-888-6195/
/Web site: http://www.asvi.com/
(ASVI CAT)
