<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
[X] Filed by the Registrant
[ ] Filed by a Party other than the Registrant
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (S) 240.14a-12
A.S.V., Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
_________________________________________________________________
2) Aggregate number of securities to which transaction applies:
_______________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing is calculated and state how it was determined):
_________________________________________________________________
4) Proposed maximum aggregate value of transaction: _______________________
5) Total fee paid: ____________________________________________________
[ ] Fee paid previously by written preliminary materials.
Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: ____________________________________________
2) Form Schedule or Registration Statement No.:___________________________
3) Filing Party: ______________________________________________________
4) Date Filed: _______________________________________________________
<PAGE>
A.S.V., Inc.
--------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD
JANUARY 28, 1999
----------------------
The Special Meeting of Shareholders of A.S.V., Inc. will be held at [place]
on Thursday, January 28, 1999 at __:__ _.m. for the purpose of approving the
Securities Purchase Agreement dated October 14, 1998 between A.S.V., Inc. and
Caterpillar Inc. (the "Purchase Agreement") and transactions contemplated
thereunder, including the issuance and sale to Caterpillar Inc. of 1,000,000
shares of Common Stock of A.S.V., Inc., par value $.01 per share (the "Common
Stock"), a warrant to purchase 10,267,127 shares of Common Stock, and the
issuance of Common Stock upon exercise of the warrant.
Only shareholders of record shown on the books of the Company at the close
of business on December 18, 1998 will be entitled to vote at the meeting or any
adjournment thereof. Each shareholder is entitled to one vote per share on all
matters to be voted on at the meeting.
You are cordially invited to attend the meeting. Whether or not you plan
to attend the meeting, please sign, date and return your Proxy in the return
envelope provided as soon as possible. Your cooperation in promptly signing and
returning the Proxy will help avoid further solicitation expense to the Company.
By Order of the Board of Directors,
/s/ Edgar E. Hetteen
Edgar E. Hetteen
Secretary
Dated: December 23, 1998
Grand Rapids, Minnesota A.S.V., INC.
<PAGE>
A.S.V., INC.
840 LILY LANE
GRAND RAPIDS, MINNESOTA 55744
----------------------
PROXY STATEMENT
FOR
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 28, 1999
----------------------
INTRODUCTION
This Proxy Statement is being furnished to the shareholders of A.S.V., Inc.
("ASV" or the "Company"), in connection with the solicitation by the Board of
Directors of ASV of proxies to be voted at the Special Meeting of Shareholders
(the "Special Meeting") to be held on Thursday, January 28, 1999 at __:__ _.m.,
and at any adjournment thereof, for the purpose of approving the Securities
Purchase Agreement (the "Purchase Agreement") dated October 14, 1998 between
ASV and Caterpillar Inc. ("Caterpillar"), and the transactions contemplated
thereunder, including the issuance and sale to Caterpillar of 1,000,000 shares
of Common Stock and a warrant to purchase 10,267,127 shares of Common Stock and
the issuance of Common Stock upon exercise of the warrant (the "Transaction").
This Proxy Statement and the accompanying proxy were first mailed to
shareholders on or about December 23, 1998.
The cost of soliciting Proxies, including preparing, assembling and mailing
the Proxies and soliciting material, will be borne by the Company. Directors,
officers and regular employees of the Company may, without compensation other
than their regular compensation, solicit Proxies personally or by letter or
telephone.
Any shareholder giving a Proxy may revoke it at any time prior to its use
at the Special Meeting by giving written notice of such revocation to the
Secretary or other officer of the Company or by filing a new written Proxy with
an officer of the Company. Personal attendance at the Special Meeting is not,
by itself, sufficient to revoke a Proxy unless written notice of the revocation
or a subsequent Proxy is delivered to an officer before the revoked or
superseded Proxy is used at the Special Meeting.
The presence at the Special Meeting in person or by proxy of the holders of
a majority of the outstanding shares of ASV's Common Stock entitled to vote
shall constitute a quorum for the transaction of business. Proxies not revoked
will be voted in accordance with the instructions specified by shareholders by
means of the ballot provided on the Proxy for that purpose. Proxies which are
signed but which lack any such specific instructions with respect to the
proposal will, subject to the following, be voted in favor of the proposal set
forth in the Notice of Special Meeting. If a shareholder abstains from voting
as to the proposal, then the shares held by such shareholder shall be deemed
present at the Special Meeting for purposes of determining a quorum and for
purposes of calculating the vote with respect to the proposal, but shall not be
deemed to have been voted in favor of the proposal. Abstentions as to the
proposal, therefore, will have the same effect as votes against the proposal.
If a broker returns a "non-vote" proxy, indicating a lack of voting instruction
by the beneficial holder of the shares and a lack of discretionary authority on
the part of the broker to vote on the proposal, then the shares covered by such
non-vote proxy shall be deemed present at the Special Meeting for purposes of
determining a quorum, but shall not be deemed to be present at the Special
Meeting for purposes of calculating the vote required for approval of the
proposal.
OUTSTANDING SHARES AND VOTING RIGHTS
The Board of Directors of the Company has fixed December 18, 1998 as the
record date (the "Record Date") for determining shareholders entitled to vote at
the Special Meeting. Persons who were not shareholders on the Record Date will
not be allowed to vote at the Special Meeting. At the close of business on the
Record Date, _________ shares of ASV's Common Stock were issued and outstanding.
Each share of Common Stock is entitled to one vote on each matter to be voted
upon at the Special Meeting. Holders of the Common Stock are not entitled to
cumulative voting rights. Generally, the affirmative vote of a majority of the
shares of Common Stock present and entitled to vote is required for the approval
of the matter to be acted upon. However, if the shares present and entitled to
vote on the matter
<PAGE>
would not constitute a quorum for the transaction of business at the meeting,
then the matter must be approved by a majority of the voting power of the
minimum number of shares that would constitute such a quorum. Under the
Company's Bylaws, a majority of the shares entitled to vote constitutes a quorum
for the transaction of business at the meeting.
----------------------
PROPOSAL:
TO APPROVE THE PURCHASE AGREEMENT
AND THE ISSUANCE OF
THE SHARES, THE WARRANT AND THE WARRANT SHARES
TO CATERPILLAR INC.
----------------------
SUMMARY OF THE TRANSACTION
On October 14, 1998, ASV entered into the Purchase Agreement with
Caterpillar, pursuant to which 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 per share. The
Purchase 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 a commercial
alliance agreement (the "Commercial Alliance Agreement") pursuant to which,
following the closing, Caterpillar will provide the Company with access to its
worldwide dealer network and will make various management, financial and
engineering resources available to the Company, Caterpillar and the Company will
supply each other with certain components, Caterpillar will agree to allow the
Company to use certain of its trademarks and trade dress in the event certain
conditions are met and Caterpillar and the Company will agree to share certain
technologies, all at certain costs.
Second, the Company and Caterpillar have entered into an option agreement
(the "Option Agreement") pursuant to which Caterpillar has the option (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
at any time until October 14, 1999 or the closing of the transactions
contemplated by the Agreement, whichever is sooner (subject to certain
exceptions).
Finally, certain of the shareholders (the "Shareholders") of the Company
holding approximately 26.1% of the outstanding Common Stock of the Company and
Caterpillar have entered into a voting agreement (the "Voting Agreement")
pursuant to which the Shareholders have agreed to vote each of his or her shares
in favor of approval of the Purchase Agreement.
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 52.2% 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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<PAGE>
INFORMATION REGARDING ASV
ASV designs, manufactures and sells track-driven all-season vehicles. The
Company's two principal product lines, the Posi-Track(TM) product line and the
Track Truck(R) product line, use a rubber track suspension system that takes
advantage of the benefits of both traditional rubber wheels and steel tracks.
Rubber track vehicles provide the traction, stability and low ground pressure
necessary for operation on soft, wet, muddy, rough, boggy, slippery, snowy or
hilly terrain, but, unlike steel track vehicles, can be driven on groomed,
landscaped and paved surfaces without causing damage. The Company's products
are versatile machines used in the construction, agricultural, landscaping,
trail grooming and maintenance, vineyard, military, wildlife management and
other markets.
INFORMATION REGARDING CATERPILLAR
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.
Caterpillar operates in three principal business segments:
1. Machinery--design, manufacture, and marketing of construction, mining,
and agricultural machinery--track and wheel tractors, track and wheel
loaders, pipe layers, motor graders, wheel tractor-scrapers, track and
wheel excavators, backhoe loaders, mining shovels, log skidders, log
loaders, off-highway trucks, articulated trucks, paving products,
telescopic handlers, and related parts.
2. Engines--design, manufacture, and marketing of engines for earthmoving
and construction machines, on-highway trucks, and locomotives; marine,
petroleum, agricultural, industrial, and other applications; electric
power generation systems; and related parts.
3. Financial Products--provides financing alternatives for Caterpillar
and noncompetitive related equipment, and extends loans to
Caterpillar's customers and dealers. Also provides various forms of
insurance to Caterpillar's dealers and customers to help support their
purchase and financing of Caterpillar's equipment.
Caterpillar places great emphasis upon the high quality and performance of
its products and its dealers' service support. Machines are distributed
principally through a worldwide organization of dealers, 65 located in the
United States and 132 located outside the United States. Worldwide, these
dealers have more than 1,400 places of business.
THE TRANSACTION
SECURITIES PURCHASE AGREEMENT
Set forth below is a summary of certain of the material terms of the
Purchase Agreement. This description is only a summary and does not purport to
be complete and is qualified in its entirety by, and made subject to, the
Purchase Agreement, a copy of which is attached as Appendix A to this Proxy
Statement and incorporated herein by reference.
- General
ASV and Caterpillar entered into the Purchase Agreement on October 14,
1998. Pursuant to the Purchase Agreement, ASV has agreed to issue and sell to
Caterpillar and Caterpillar has agreed to purchase from ASV 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).
Concurrently with the execution of the Purchase Agreement, ASV issued to
Caterpillar the Option to purchase 1,579,000
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<PAGE>
shares of Common Stock at an exercise price of $18.00 per share, exercisable at
any time from the date of the Purchase Agreement until the closing of the
transactions contemplated by the Purchase Agreement (the "Closing") or October
14, 1999, whichever is sooner (subject to certain exceptions).
The Closing will take place as promptly as practicable (and in any event
within two business days) after satisfaction or waiver of the conditions to
closing set forth in the Purchase Agreement and described more fully below. At
the Closing, (i) Caterpillar will pay to ASV the Purchase Price; (ii) ASV will
issue to Caterpillar the Shares, (iii) ASV will issue to Caterpillar the
Warrant, and (iv) Caterpillar will surrender the Option to ASV for cancellation.
- COVENANTS
Under the Purchase Agreement, the parties have covenanted and agreed to
certain matters as described below.
Board of Directors. ASV and Caterpillar have agreed that concurrently with
the Closing, a meeting of the Board of Directors of ASV will be held, and at
that meeting the number of directors constituting the Board will be increased
from eight to ten, and two persons designated by Caterpillar will be added to
the Board. In addition, in the event Caterpillar's percentage ownership of the
Company increases following the Closing (whether by partial or full exercise of
the Warrant, other purchases of Common Stock by Caterpillar or a reduction in
the number of shares outstanding), the number of Directors designated by
Caterpillar will increase such that the ratio of the number of directors
designated by Caterpillar to the total number of directors is substantially
equal to the ratio of the number of shares of Common Stock owned by Caterpillar
to the total number of shares of Common Stock outstanding. Caterpillar will
have the right to designate a majority of the Board at such time as Caterpillar
owns a majority of the outstanding shares of Common Stock of ASV. The increase
in Caterpillar's percentage representation on the Board will be accomplished by
the resignation of then existing members of the Board and replacement by
directors designated by Caterpillar.
No Solicitation; Competing Offers. Under the Purchase Agreement neither
ASV, nor anyone acting on its behalf, may, 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, or otherwise
facilitate or encourage, any transaction which competes with the Transaction (a
"Competing Transaction"). Notwithstanding the foregoing, ASV may, in response
to an unsolicited offer with respect to a Competing Transaction which ASV's
Board of Directors determines, in good faith and after consultation with an
independent financial advisor, would result in a Competing Transaction more
favorable to ASV's shareholders than the transactions contemplated under the
Purchase Agreement, furnish confidential or non-public information to a
financially capable entity and negotiate with such entity if the Board of
Directors of ASV, 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 entity would be reasonably likely to
constitute a breach of its fiduciary duty to ASV's shareholders.
Conduct of ASV's Business Pending the Closing. ASV has agreed that, prior
to the Closing, ASV's business will, in all material respects, be conducted only
in the ordinary course of business, consistent with past practice.
Specifically, ASV has agreed that, without the consent of Caterpillar, it will
not (i) amend its Articles of Incorporation or Bylaws, (ii) issue any shares of
capital stock other than pursuant to its stock option plans, (iii) declare or
pay dividends, (iv) effect a stock split or stock repurchase program, (v)
acquire or invest in another company, (vi) purchase any property or assets,
other than in the ordinary course of business, (vii) incur any indebtedness,
make any loans or issue any debt securities, other than in the ordinary course
of business, (viii) enter into any contract or agreement, other than in the
ordinary course of business, (ix) increase the salaries of its officers or
employees or pay any existing material claims, other than in the ordinary course
of business, or (x) take any action which would make any representation or
warranty contained in the Purchase Agreement untrue.
Conduct of ASV's Business Following the Closing; Repurchase of Stock by
ASV. ASV has agreed that, between the date of the Closing and the termination
of the Warrant, unless approved by at least one-half of the directors of ASV
designated by Caterpillar, ASV will not (i) amend its Articles of Incorporation
or Bylaws, (ii) issue any shares of capital stock other than pursuant to its
stock option plans, (iii) declare or pay dividends, (iv) effect a stock split
or
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<PAGE>
stock repurchase program, (v) acquire or invest in another company, (vi)
purchase any property or assets, other than in the ordinary course of business,
(vii) incur any indebtedness, make any loans or issue any debt securities, other
than in the ordinary course of business, or (viii) enter into any contract or
agreement, other than in the ordinary course of business. Notwithstanding the
above, ASV will be entitled to and will be required to, to the extent reasonable
at such time, use the net proceeds received upon exercise of all or any portion
of the Warrant to repurchase shares of its Common Stock.
First Offer Rights. In the event ASV intends to issue any Common Stock or
other securities in the future, ASV must first offer to sell such securities to
Caterpillar and, if not purchased by Caterpillar, may only sell such securities
to others on terms no more favorable than those offered to Caterpillar.
Notwithstanding the foregoing, such limitation shall not apply to the issuance
of (i) Common Stock pursuant to the exercise or conversion of currently
outstanding options, warrants or other similar rights or compensation plans
outstanding or existing as of the date of the Purchase 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 ASV and (iv) Common Stock
upon exercise of the options referred to in clause (iii) of this sentence
("Permitted Issuances").
Additional Warrants. In the event that ASV issues or sells Common Stock or
other securities to anyone other than Caterpillar or other than Permitted
Issuances, ASV will issue to Caterpillar a stock purchase warrant containing
substantially the same terms as the Warrant, to purchase a number of shares of
Common Stock equal to the number of shares of Common Stock sold or issuable upon
conversion or exercise of the other security sold, at a purchase price equal to
the purchase, conversion or exercise price applicable to the Common Stock or
other security sold.
Other Covenants. ASV and Caterpillar have also covenanted and agreed to
certain matters regarding the following: (i) governmental or regulatory
notifications and filings; (ii) public announcements; (iii) additional
instruments or other documents necessary to effectuate the Transaction; (iv)
cooperation between the parties; (v) access to information; (vi) notifications;
(vii) preparation of this Proxy Statement; (viii) convening of the Special
Meeting; and (ix) filings under the Hart-Scott-Rodino Antitrust Improvement Act
of 1976, as amended, and the rules and regulations thereunder ("HSR Act").
- INDEMNIFICATION
ASV and Caterpillar have agreed to indemnify each other from and against
any and all losses, damages, liabilities, and expenses (including attorneys'
fees and expenses) resulting from any breach of a representation, warranty or
covenant by the other and all claims, charges, actions or proceedings incident
to or arising out of the foregoing.
- CONDITIONS TO CLOSING
Under the Purchase Agreement the respective obligations of each party to
effect the Closing will 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: (i) the Purchase Agreement and the
transactions contemplated thereunder will have been approved and adopted by the
vote of the holders of a majority of the shares of Common Stock voting on such
matter; (ii) no governmental authority or other agency or commission or federal
or state court of competent jurisdiction will have enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, executive order, decree,
injunction, or other order (whether temporary, preliminary or permanent) which
is in effect and which materially restricts, prevents or prohibits consummation
of the Closing or any transaction contemplated by the Purchase Agreement;
provided, however, that the parties will use their reasonable best efforts to
cause any such decree, judgment, injunction or other order to be vacated or
lifted; and (iii) any waiting period (and any extension thereof) applicable to
the consummation of the Closing under the HSR Act will have expired or been
terminated.
The obligations of Caterpillar to proceed with the Closing are further
subject to the fulfillment of the following additional conditions to Closing,
any of which may be waived, in whole or in part, to the extent permitted by
applicable law: (i) the representations and warranties of ASV contained in the
Purchase Agreement shall be true and correct as of
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<PAGE>
the Closing, except for changes permitted by the Purchase Agreement and those
that address matters only as of a particular date shall remain true and correct
as of such date, except in any case where the failure of the representations and
warranties to be true and correct, either individually or in the aggregate, will
not have a material adverse effect on ASV, (ii) ASV will have performed or
complied in all material respects with all agreements and covenants required by
the Purchase Agreement to be performed or complied with on or prior to the
Closing, and (iii) ASV will have executed the Marketing Agreement and the
Management Services Agreement contemplated by the Commercial Alliance Agreement
(collectively, the "Commercial Agreements").
The obligations of ASV to proceed with the Closing are further subject to
the fulfillment of the following additional conditions to Closing, any of which
may be waived, in whole or in part, to the extent permitted by applicable law:
(i) the representations and warranties of Caterpillar contained in the Purchase
agreement shall be true and correct as of the Closing, except for changes
permitted by the Purchase Agreement and those that address matters only as of a
particular date shall remain true and correct as of such date, except in any
case where the failure of the representations and warranties to be true and
correct, either individually or in the aggregate, will not have a material
adverse effect on Caterpillar, (ii) Caterpillar will have performed or complied
in all material respects with all agreements and covenants required by the
Purchase Agreement to be performed or complied with on or prior to the Closing,
and (iii) Caterpillar will have executed the Commercial Agreements.
- TERMINATION
Subject to certain conditions under the Purchase Agreement, each party, if
such conditions are met, has the option to terminate the Purchase Agreement
prior to Closing. The Purchase Agreement may be terminated (i) by mutual
written consent of ASV and Caterpillar, (ii) by Caterpillar, if Caterpillar is
not in material breach of the Purchase Agreement, if ASV is in material breach
of any of its representations, warranties or covenants or if any material
representation or warranty of ASV shall become untrue such that the conditions
to Caterpillar's obligation to proceed with the Closing are incapable of being
satisfied by March 31, 1999, (iii) by ASV, if ASV is not in material breach of
the Purchase Agreement, if Caterpillar is in material breach of any of its
representations, warranties or covenants or if any material representation or
warranty of Caterpillar shall become untrue such that the conditions to ASV's
obligation to proceed with the Closing are incapable of being satisfied by March
31, 1999, (iv) by either Caterpillar or ASV, but only if the terminating party
is not in material breach of the Purchase Agreement, if the conditions to the
obligations of either party to proceed with the Closing are not capable of being
satisfied by March 31, 1999 or the Closing has not occurred before March 31,
1999 or (iv) by ASV if any person or group has commenced an unsolicited tender
offer for all outstanding shares of Common Stock or made a written offer
proposing a merger or consolidation of ASV or the acquisition of all or
substantially all of ASV's assets and ASV's Board of Directors determines, based
on advice of an independent financial advisor, that such offer is a superior
proposal, and upon 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.
In the event of termination of the Purchase Agreement, there will be no
liability on the part of ASV or Caterpillar to each other and all rights and
obligations of any party thereto will cease; except that (i) neither party will
be relieved from liability for the breach of any of its representations,
warranties or covenants set forth in the Purchase Agreement, (ii) ASV's
obligation as to certain taxes relating to the issuance of the Option will
continue in full force and effect and (iii) the Option will continue to be in
full force and effect.
- ADDITIONAL MATTERS
Except as otherwise provided in the Purchase Agreement, the parties will
pay their own fees and expenses, including their own counsel fees, incurred in
connection with the Purchase Agreement and any transaction contemplated thereby.
THE OPTION
Upon signing of the Purchase Agreement, ASV granted to Caterpillar the
Option which entitles Caterpillar to purchase 1,579,000 shares of Common Stock
at a purchase price of $18.00 per share. The Option is exercisable in
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whole or in part at any time from October 14, 1998 until the Closing of the
Transaction or October 14, 1999, whichever is sooner, subject to certain
exceptions. In the event the Purchase Agreement is terminated as a result of (i)
a material breach by Caterpillar of any representation, warranty or covenant of
Caterpillar contained in the Purchase Agreement, (ii) the failure of both
parties to receive regulatory approvals, (iii) the existence of any statute,
decree, injunction or other order which restricts or prevents the consummation
of the Transaction, or (iv) Caterpillar's failure to satisfy the conditions to
the Company's obligation to consummate the Transaction, then the Option will
also terminate. In the event that the Purchase Agreement is terminated for any
other reason or the Transaction does not otherwise close, the Option will remain
outstanding and Caterpillar will have the right to acquire a number of shares of
Common Stock equal to approximately 19.9% of the number of shares outstanding as
of the date hereof until the expiration of the Option on October 14, 1999.
The foregoing is only a brief summary of certain of the material terms of
the Option. This summary does not purport to be complete and is qualified in
its entirety by, and made subject to, the Option Certificate, a copy of which is
attached as Appendix B to this Proxy Statement and incorporated herein by
reference.
THE WARRANT
ASV has also agreed under the Purchase Agreement to issue the Warrant at
the Closing. Upon issuance, the Warrant will entitle Caterpillar to purchase an
additional 10,267,127 shares of Common Stock of ASV at a purchase price of
$21.00 per share. The Warrant will be exercisable at any time from the date of
the Closing until the tenth anniversary of the date of the Closing, except that
the Warrant may expire with respect to a portion of the shares covered thereby
in the event that ASV meets certain revenue levels as follows:
Number of Shares
Amount of Revenues Remaining Subject to the Warrant
------------------ --------------------------------
$100 million 8,727,058
$150 million 6,673,632
$200 million 4,106,851
$250 million Zero
In the event that (i) ASV meets one of the revenue goals set forth above
for any four consecutive fiscal quarters, (ii) ASV's gross profit derived from
such revenues is at least 20%, and (iii) the market price of the Common Stock at
such time is greater than $21.00 per share, then ASV will have the right to give
an acceleration notice to Caterpillar and upon the expiration of 75 days
following the giving of such notice, the number of shares subject to the Warrant
will be reduced to a maximum of the number of shares set forth above
corresponding to the revenue goal achieved.
Under the terms of the Warrant, ASV has the right to terminate the Warrant
upon 60 days' prior written notice to Caterpillar in the event that ASV has
terminated any of the Commercial Alliance Agreement, the Marketing Agreement or
the Technology License Agreement as a result of a material breach by Caterpillar
which is not remedied by Caterpillar, or ASV has terminated one or more of the
Trademark and Trade Dress License Agreement, the Management Services Agreement,
a Supply Agreement or the Joint Venture Agreement as a result of a material
breach by Caterpillar which is not remedied by Caterpillar and ASV is materially
unable to realize the benefits provided collectively by those agreements. See
"The Commercial Alliance Agreement."
The Warrant provides for proportionate adjustment to the number of shares
subject to the Warrant and the Warrant exercise price in the event of stock
splits and combinations, stock dividends and distributions, reclassification of
stock, a reorganization of ASV, sales of shares below the Warrant's exercise
price or a liquidation of ASV.
The foregoing is only a brief summary of certain of the material terms of
the Warrant. This summary does not purport to be complete and is qualified in
its entirety by, and made subject to, the Warrant Certificate, a copy of which
is attached as Appendix C to this Proxy Statement and incorporated herein by
reference.
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<PAGE>
THE VOTING AGREEMENT
Each of the directors of ASV and Thomas Karges, the Chief Financial Officer
of ASV, together with certain of the spouses of such Shareholders and
Caterpillar have entered into a Voting Agreement dated as of October 13, 1998
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 ASV prior to the Closing except as
set forth therein and (ii) that the Shareholders will vote each of his or her
shares at every annual, special or adjourned meeting of the shareholders of ASV
(a) in favor of approval of the Purchase Agreement, (b) against any Competing
Transaction and (c) in favor of any other matter relating to the Closing.
THE COMMERCIAL ALLIANCE AGREEMENT
On October 14, 1998, ASV and Caterpillar entered into the Commercial
Alliance Agreement, effective conditioned upon the Closing of the Transaction.
The Commercial Alliance Agreement provides that the parties will enter into
certain agreements, each of which is discussed below.
- MARKETING AGREEMENT
The Commercial Alliance Agreement requires that the parties enter into a
Marketing Agreement in the form attached as an exhibit thereto (the "Marketing
Agreement"). The form of Marketing Agreement requires Caterpillar to provide
ASV with access to its worldwide distribution network, in part, by promoting the
sale of ASV's products to Caterpillar's dealers. Caterpillar will first promote
ASV's products in North America and gradually extend such promotion throughout
the world consistent with a joint marketing plan to be developed by ASV and
Caterpillar. In addition, under the Marketing Agreement, Caterpillar intends
to handle orders for ASV products and administer ASV's warranties. In
consideration for Caterpillar's services under the Marketing Agreement, ASV will
pay to Caterpillar a commission equal to a percentage of the dealer net price
for all products sold to Caterpillar's dealers plus the costs of certain
services provided by Caterpillar.
- TRADEMARK AND TRADE DRESS LICENSE AGREEMENT
The Marketing Agreement provides that the parties enter into a Trademark
and Trade Dress License Agreement in the form attached as an exhibit thereto
(the "License Agreement") at such time as ASV's products have been evaluated by
Caterpillar and have been found to meet Caterpillar's quality and safety
standards in accordance with Caterpillar's established testing and validation
procedures. The License Agreement will provide, in part, that Caterpillar will
grant to ASV the non-exclusive, non-transferable right and license to use
certain trademarks of Caterpillar on ASV products for a fee equal to a
percentage of the dealer net price for products sold to dealers with such
trademarks. The term of the License Agreement will be five years from the date
of the signing of the License Agreement, unless earlier terminated by mutual
consent of the parties. Although no time frame for the evaluation of ASV's
products has been agreed to, the Company anticipates that such process may take
from two to four years, or longer.
- MANAGEMENT SERVICES AGREEMENT
The Commercial Alliance Agreement provides that the parties will enter into
a Management Services Agreement in the form attached as an exhibit thereto (the
"Management Services Agreement"). Under the Management Services Agreement,
Caterpillar will make available to ASV general management support in connection
with the day-to-day operation of ASV's business, commercial development and
marketing research services, financial planning services, such other
administrative services as Caterpillar and ASV may subsequently agree in
writing, and manufacturing and engineering services. In consideration for
Caterpillar's obligations under the Management Services Agreement, ASV will pay
Caterpillar a fee equal to Caterpillar's fully-loaded cost, as defined in the
Management Services Agreement, plus an administrative surcharge (or such other
fee as the parties may agree upon). The Management Services Agreement will
commence upon signing and will remain in effect indefinitely until otherwise
terminated by the parties.
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<PAGE>
- OTHER AGREEMENTS
The Commercial Alliance Agreement also provides that ASV and Caterpillar
enter into several additional agreements, the terms of which, including the fees
and costs to be paid thereunder, are to be negotiated in the future. These
agreements are as follows:
(a) Service Agreements. The parties have agreed to enter into Service
Agreements pursuant to which Caterpillar will offer to ASV financial services,
logistics services and services to promote ASV's products to governmental
bodies, either through Caterpillar or a wholly owned subsidiary of Caterpillar,
and ASV will agree to use such services if the prices to be negotiated for such
services are competitive from a total value point of view.
(b) Supply Agreement (Caterpillar to ASV). The parties have agreed to
enter into a Supply Agreement (Caterpillar to ASV) pursuant to which Caterpillar
will offer to supply Caterpillar components to ASV for incorporation into ASV's
products, including, without limitation, diesel engines, and ASV will agree to
purchase such components from Caterpillar if the terms upon which such
components are offered for sale to ASV are competitive from a total value point
of view.
(c) Supply Agreement (ASV to Caterpillar). The parties have agreed to
enter into a Supply Agreement (ASV to Caterpillar) pursuant to which ASV will
offer to supply ASV components to Caterpillar for incorporation into
Caterpillar's products that do not compete with ASV's products and ASV will
further agree to license to Caterpillar the intellectual property rights
necessary for Caterpillar to manufacture such components in the event it becomes
economically impractical for ASV to supply such components.
(d) Technology License Agreement (ASV to Caterpillar). The parties have
agreed to enter into a Technology License Agreement (ASV to Caterpillar)
pursuant to which ASV will offer to license to Caterpillar, on an exclusive
(except as to ASV) and royalty bearing basis, the right 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 (subject to ASV's right to supply components to
Caterpillar pursuant to the Supply Agreement (ASV to Caterpillar) described
above).
(e) Joint Venture Agreement. The parties have agreed to enter into a Joint
Venture Agreement pursuant to which ASV and Caterpillar will establish a 50-50
joint venture company to design and develop a line of agricultural tractors
utilizing key aspects of the parties' respective technology and know-how.
USE OF PROCEEDS
ASV plans to use the $18,000,000 to be received from Caterpillar for the
purchase of the Shares and the Warrant to purchase capital equipment, fund
research and development and for working capital and general corporate purposes
as follows:
Purchase of Capital Equipment. The Company intends to use approximately
$1,000,000 of the net proceeds to purchase capital equipment necessary to
provide for and support increased production levels.
Research and Development. The Company intends to use approximately
$1,000,000 of the net proceed to fund research and development efforts to
develop new products and in connection with its planned joint venture with
Caterpillar.
Working Capital and General Corporate Purposes. The remaining proceeds
will be used for working capital and general corporate purposes, including
payment of the expenses relating to the Transaction estimated at $400,000.
Initially, working capital will be used to increase the Company's sales and
marketing efforts to the Caterpillar dealers who are not currently authorized
Posi-Track dealers. The Company anticipates that additional working capital
will be used to purchase higher levels of inventory and finance higher levels
of accounts receivable as product sales increase.
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<PAGE>
Although the timing and amount of proceeds to be received from Caterpillar,
if any, upon exercise of the Warrant can not be determined at this time, it is
anticipated that any such proceeds will be used to further expand ASV's
production, distribution and marketing capabilities and develop new products.
The use of proceeds described herein is only an estimate, and the amount
and timing of the expenditures and the actual uses of the net proceeds for these
purposes will depend on numerous factors, including the timing and status of the
Company's growth, including the need for additional facilities, distribution,
research and development and sales and marketing efforts.
Pending utilization of the proceeds to be received in the Transaction, the
Company plans to invest such proceeds in short-term or mid-term, investment
grade securities or other short-term or mid-term debt instruments.
NEAR TERM FINANCIAL IMPACT OF THE TRANSACTION
As a result of the Transaction, ASV's near term revenues, profitability and
other financial results are expected to be lower than if the Transaction were
not announced or entered into. The decline is related to a number of factors,
including (i) the commission to be paid to Caterpillar for sales made through
Caterpillar's dealers, (ii) transition issues affecting orders from the
preexisting non-Caterpillar affiliated dealers, and (iii) certain other costs of
implementing the Transaction and the agreements contemplated by the Commercial
Alliance Agreement. Over the longer term, however, management believes that the
Company will be able to achieve improved financial results due to the
Transaction and the Commercial Alliance Agreement.
EFFECT OF THE TRANSACTION ON EXISTING SHAREHOLDERS
Following the Transaction, the existing holders of ASV's Common Stock will
continue to own the shares of ASV Common Stock owned by them prior to the
Transaction. However, following the Transaction, Caterpillar will own 1,000,000
shares of ASV's Common Stock, representing approximately 11.2% of the shares to
be outstanding following such acquisition and approximately 8.8% of the
outstanding shares assuming the exercise or conversion of all options, warrants
and convertible debentures outstanding on the date hereof (other than the
Option), and will have the right to acquire an additional 10,267,127 shares
pursuant to the Warrant, which will give Caterpillar the right to own
approximately 58.8% of the shares of Common Stock assuming the full exercise of
the Warrant, and approximately 52.2% assuming the exercise of the Warrant and
the exercise or conversion of all options, warrants and convertible debentures
outstanding on the date hereof (other than the Option). As a result, following
the Transaction, Caterpillar will have the right to influence the business and
operations of the Company to a significant extent, and will have the ability to
greatly influence any vote of the shareholders, including votes concerning the
election of directors and changes in control. In addition, to the extent
Caterpillar acquires a controlling interest in the Company through the exercise
of the Warrant, other purchases of Common Stock, or otherwise, Caterpillar will
have the ability to control the outcome of any such shareholder votes regardless
of the votes of any other shareholder, including any such vote relating to the
acquisition of the remaining interest in ASV by Caterpillar. Therefore,
Caterpillar may be in a position to control the timing and the terms upon which
any such acquisition or other business combination involving ASV may occur,
subject to the fiduciary duties it might have as a majority shareholder to the
remaining shareholders.
FAIRNESS OPINION
ASV retained Piper Jaffray Inc.("Piper Jaffray") to render an opinion as to
the fairness, from a financial point of view, of the consideration to be
received by the Company in the proposed issuance to Caterpillar of 1,000,000
shares of Common Stock at $18 per share plus warrants to purchase an additional
10,267,127 shares of Common Stock at $21 per share (the "Common Stock and
Warrant Transaction"). Piper Jaffray has rendered its written opinion to the
Board of Directors of ASV that, given certain assumptions, as of October 14,
1998 and as of the date of this Proxy Statement, the consideration to be
received by the Company in the Common Stock and Warrant Transaction is fair,
from a financial point of view, to the Company. Piper Jaffray's opinion is
directed to the Board of Directors of ASV in connection with the financial terms
of the Common Stock and Warrant Transaction, and does not constitute a
recommendation to any shareholder of ASV as to how such shareholder should vote
at the Special Meeting.
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<PAGE>
A copy of Piper Jaffray's written opinion dated the date hereof, which sets
forth, among other things, the assumptions made, procedures followed, matters
considered, and limitations of the review undertaken, is attached as Appendix D
to this Proxy Statement, and is considered a part of this discussion. The
description of the opinion set forth herein is qualified in its entirety by
reference to the full text of such opinion. ASV Shareholders are urged to read
the opinion in its entirety.
In arriving at its written opinion dated as of the date hereof, Piper
Jaffray, among other things, (i) reviewed the Purchase Agreement, (ii) reviewed
certain publicly available and internal financial and other information related
to ASV, (iii) reviewed certain financial information for ASV on both a stand-
alone basis and as a party to the agreements contemplated by the Commercial
Alliance Agreement (the " Commercial Alliance") furnished to them by management
of ASV, (iv) performed certain analyses of the projected earnings per share of
ASV on both a stand-alone basis and as a party to the Commercial Alliance, (v)
performed certain discounted cash flow valuation analyses based on the stand-
alone financial projections of ASV and the financial projections of ASV as a
party to the Commercial Alliance, (vi) reviewed certain securities data for ASV,
(vii) held discussions with members of the management and the board of ASV
concerning the financial condition, operating results and business outlook for
ASV both on a stand-alone basis and as a party to the Commercial Alliance, and
(viii) met with the management of Caterpillar to discuss their general
expectations with regard to the Commercial Alliance.
Piper Jaffray relied upon and assumed the accuracy, completeness and
fairness of the financial statements, assumptions and other information provided
to it by ASV, or otherwise made available to it, and did not assume
responsibility independently to verify such information. Piper Jaffray relied
upon the assurances of the management of ASV that the information provided to
Piper Jaffray by management of ASV, either directly or through their respective
representatives, was prepared on a reasonable basis, and, with respect to
financial planning data and other business outlook information, reflected the
best currently available estimates and judgments, and that management of ASV was
not aware of any information or facts that would make the information provided
to Piper Jaffray incomplete or misleading.
Piper Jaffray's opinion does not express any opinion as to the prices at
which shares of ASV Common Stock have traded or may trade at any future time,
the terms of the Commercial Alliance or the business decision to proceed with or
effect the Transaction, the Option, or the adequacy of any minority shareholder
protections should Caterpillar ultimately control 51% of ASV's Common Stock that
are provided either in the Purchase Agreement or under Minnesota law.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors of ASV has determined that the Transaction and the
arrangements contemplated by the Commercial Alliance Agreement are fair to, and
in the best interests of, ASV and its shareholders, and unanimously recommends
that the shareholders of ASV vote in favor of the approval of the Purchase
Agreement and the consummation of the transactions contemplated thereunder,
including the issuance and sale to Caterpillar of the Shares, the Warrant and
the shares of Common Stock issuable upon exercise of the Warrant.
BACKGROUND OF THE TRANSACTION
In March 1998, Gary Lemke, the President and Chief Executive Officer of ASV
initiated discussions with Caterpillar by inviting representatives from
Caterpillar to visit ASV's facilities for the purpose of learning more about
ASV, its products and its technology. Representatives from Caterpillar accepted
Mr. Lemke's invitation and visited the Company's facilities on March 11, 1998
and again on April 13, 1998. Following these meetings, Caterpillar invited Mr.
Lemke to visit their compact equipment group in North Carolina, which Mr. Lemke
did in May 1998. Thereafter, Caterpillar invited Mr. Lemke to meet with
management of Caterpillar to discuss possible business relationships between
Caterpillar and ASV. Mr. Lemke informed the Board of Directors of ASV at a
regular meeting held on July 14, 1998, that he intended to meet with management
of Caterpillar.
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<PAGE>
Mr. Lemke first met with management of Caterpillar on July 15, 1998, at
which time various possible business relationships between the parties were
discussed. Discussions continued between management of ASV and Caterpillar, and
on September 21, 1998, management of ASV and Caterpillar, along with each
parties' legal advisors, met to agree on the principal business terms of the
Transaction. Between July 15,1998, and September 29, 1998, management of ASV
held a series of informal discussions with the members of the Board of Directors
regarding the discussions taking place between ASV and Caterpillar.
On September 29, 1998, the Board of Directors formally met to discuss the
terms of the Transaction with ASV's management and legal advisors. At the
September 29, 1998 meeting, the Board of Directors unanimously approved
proceeding with the negotiation of the Purchase Agreement and the related
documents, and authorized the officers of the Company to engage a financial
advisor to render an opinion that the consideration to be received by the
Company in the Common Stock and Warrant Transaction is fair, from a financial
point of view, to the Company.
At a meeting of the Board of Directors held on October 13, 1998, the Board
of Directors reviewed the terms of the Transaction and the Purchase Agreement
and related documents with ASV's management and its financial and legal advisors
and determined that the Transaction is fair and in the best interests of ASV and
its shareholders, approved the Purchase Agreement and the related transaction
documents, and resolved to recommend that the shareholders of ASV vote FOR the
approval of the Purchase Agreement and the transactions contemplated thereby,
including the issuance to Caterpillar of the Shares, the Warrant, and the
Common Stock issuable upon exercise of the Warrant.
REASONS FOR THE TRANSACTION
In reaching its determination that the Transaction and the arrangements
contemplated by the Commercial Alliance Agreement are in the best interests of
ASV and ASV's shareholders, the Board of Directors considered a number of
factors, including, but not limited to, the following:
(i) access to Caterpillar's worldwide distribution network will provide
ASV with the needed distribution channels necessary to expand its sales in
the United States and foreign markets;
(ii) the proceeds from the sale of the Shares and the Warrant will
provide ASV with needed capital for (A) funding the expansion of its
business, including the purchase of capital equipment designed to decrease
manufacturing costs and increase manufacturing efficiencies, (B) funding
expanded research and development relating to new products and (C) funding
increased levels of inventories and accounts receivable resulting from
increased sales and demand;
(iii) ASV's association with a company with the worldwide prestige of
Caterpillar, the largest manufacturer of capital goods in the world,
validates ASV's technology to third parties;
(iv) the use of the Caterpillar name on ASV's products, if and when ASV
passes Caterpillar's validation testing and procedures, may increase the
customer's perception of ASV's products and make ASV's products more
generally recognized and accepted throughout the world;
(v) Caterpillar already has in place the infrastructure necessary for ASV
to address and service the domestic and international markets, and
Caterpillar has agreed to provide ASV with access to such infrastructure so
that ASV is not required to independently develop its own infrastructure;
(vi) Caterpillar has agreed to make available to ASV certain valuable
management, engineering, manufacturing and other services that would not
otherwise be available to ASV;
(vii) ASV may be able to take advantage of the purchasing power and
other resources of a large manufacturer which may result in lower costs to
ASV;
(viii) the joint venture which ASV and Caterpillar intend to form will
provide ASV with a means to broaden the markets which it serves;
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<PAGE>
(ix) the transactions contemplated by the Commercial Alliance Agreement
and related agreements would not have been made available to ASV absent the
investment in ASV by Caterpillar;
(x) the ability of the existing shareholders of ASV to benefit from ASV's
future growth which may be made possible by the relationships with
Caterpillar; and
(xi) the opinion of Piper Jaffray that the consideration to be received
by the Company in the Common Stock and Warrant Transaction is fair, from a
financial point of view, to the Company.
REASON FOR SHAREHOLDER VOTE
Minnesota law does not require shareholder approval of the Transaction;
however, the Company's Common Stock is quoted on The Nasdaq National Market.
Pursuant to the rules of the National Association of Securities Dealers, the
Company, in order to maintain its eligibility to have its Common Stock quoted on
The Nasdaq National Market, must obtain shareholder approval for the issuance of
Common Stock or securities convertible or exercisable for Common Stock if the
number of shares to be issued or issuable upon conversion or exercise of such
securities, equals or exceeds 20% of the number of shares of Common Stock
outstanding on the date such securities are first issued. Since the number of
shares proposed to be issued to Caterpillar together with the shares issuable
upon exercise of the Warrant would exceed the foregoing requirement, the Company
is seeking the approval of its shareholders as required by such rules.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to
beneficial ownership of the Company's Common Stock as of November 12, 1998 by:
(i) each director of the Company, (ii) each executive officer of the Company,
(iii) all directors and executive officers of the Company as a group and (iv)
each person or entity known by the Company to own beneficially more than five
percent of the Company's Common Stock. Unless otherwise indicated, the business
address of the individuals listed below is 840 Lily Lane, Grand Rapids, MN
55744.
<TABLE>
<CAPTION>
Prior to the Transaction After theTransaction
---------------------------------- -----------------------------------
Shares Percent of Shares Percent of
Beneficially Outstanding Beneficially Outstanding
Name Owned (1) Shares (1) Owned(1)(2) Shares(1)(2)
-------------- -------------- --------------- --------------
<S> <C> <C> <C> <C>
James H. Dahl (3) 934,289 (4) 11.6% 951,164 (4) 10.5%
Gary D. Lemke 552,941 (5) 6.8% 891,565 (5) 9.4%
Philip C. Smaby 383,231 (6) 4.8% 397,856 (6) 4.5%
Jerome T. Miner 369,225 (7) 4.7% 383,850 (7) 4.3%
Edgar E. Hetteen 299,227 (8) 3.8% 373,477 (8) 3.3%
Leland T. Lynch (9) 39,375 (10) * % 58,500 (10) * %
Karlin S. Symons (11) 21,913 (12) * % 41,041 (12) * %
R.E. "Teddy" Turner, IV (13) 7,313 (14) * % 27,000 (14) * %
Thomas R. Karges 76,201 (15) 1.0% 140,326 (15) 1.6%
All executive officers and
directors as a group (9 persons) 2,683,715 (16) 31.5% 3,264,779 (16) 32.4%
Caterpillar Inc. (17) 1,579,000 (18) 16.7% 11,267,127 (18) 58.8%
</TABLE>
- -------------------------------------------------
* Less than 1%.
(1) Beneficial ownership is determined in accordance with rules of the
Securities and Exchange Commission, and includes generally voting power
and/or investment power with respect to securities. Shares of Common Stock
subject to options or warrants currently exercisable or exercisable within
60 days of November 12, 1998 are deemed outstanding for computing the
beneficial ownership percentage of the person holding such options but are
not deemed outstanding for computing the beneficial ownership percentage of
any other person. Except as
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indicated by footnote, the persons named in the table above have the sole
voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by them.
(2) Options held by officers and directors of the Company issued under the
Company's stock option plans will become fully vested as of the closing of
the Transaction.
(3) The business address of Mr. Dahl is 1200 Riverplace Boulevard, Suite 902,
Jacksonville, FL 32207.
(4) Includes 9,375 shares prior to the Transaction and 26,250 shares after the
Transaction subject to options exercisable within 60 days, 626,967 shares
owned by Rock Creek Partners, Ltd., an investment partnership, of which Mr.
Dahl is the Managing General Partner, 136,363 shares subject to a
convertible debenture convertible within 60 days owned by Rock Creek
Partners, Ltd. and 140,700 shares owned by a trust established for the
benefit of Mr. Dahl's minor children.
(5) Includes 277,125 shares prior to the Transaction and 615,750 shares after
the Transaction subject to options exercisable within 60 days, 143,209
shares held jointly with Mr. Lemke's wife, 61,363 shares held by Mr.
Lemke's wife and 5,566 shares held in the Company's 401(k) Plan.
(6) Includes 9,375 shares prior to the Transaction and 24,000 shares after the
Transaction subject to options exercisable within 60 days and 44,500 shares
held by the Smaby Family Limited Partnership of which Mr. Smaby is the sole
general partner.
(7) Includes 9,375 shares prior to the Transaction and 24,000 shares after the
Transaction subject to options exercisable within 60 days.
(8) Includes 65,250 shares prior to the Transaction and 139,500 shares after
the Transaction subject to options exercisable within 60 days and 113,100
shares held by Mr. Hetteen's wife.
(9) The business address of Mr. Lynch is 800 Hennepin Avenue, Minneapolis, MN
55403.
(10) Includes 22,875 shares prior to the Transaction and 42,000 shares after the
Transaction subject to options exercisable within 60 days.
(11) The business address of Ms. Symons is 5500 Norwest Center, 90 South Seventh
St., Minneapolis, MN 55402.
(12) Includes 8,810 shares prior to the Transaction and 27,938 shares after the
Transaction subject to options exercisable within 60 days.
(13) The business address of Mr. Turner is 170 Highway A1A, Ponte Vedra, FL
32082.
(14) Includes 6,563 shares prior to the Transaction and 26,250 shares after the
Transaction subject to options exercisable within 60 days.
(15) Includes 65,550 shares prior to the Transaction and 129,675 shares after
the Transaction subject to options exercisable within 60 days, 3,300 shares
held jointly with the Mr. Karges' wife and 3,134 shares held in the
Company's 401(k) Plan, of which 522 shares are not fully vested to Mr.
Karges.
(16) Includes an aggregate of 474,298 shares prior to the Transaction and
1,055,363 shares after the Transaction subject to options exercisable
within 60 days by executive officers and directors, 136,363 shares that are
subject to a convertible debenture from the Company convertible within 60
days and 8,700 shares held in the Company's 401(k) Plan.
(17) The address of Caterpillar Inc. is 100 Northeast Adams Street, Peoria,
Illinois 61629-2495.
(18) Prior to the Transaction, includes 1,579,000 shares subject to an option
exercisable within 60 days and following the Transaction, includes
10,267,127 shares subject to a warrant exercisable within 60 days of the
closing of the Transaction.
OTHER MATTERS
SHAREHOLDER PROPOSALS
In order to be eligible for inclusion in ASV's proxy solicitation materials
for its 1999 annual meeting of shareholders, any shareholder proposal to be
considered at such meeting must be received at ASV's principal executive
offices, 840 Lily Lane, Grand Rapids, Minnesota 55744, not later than February
19, 1999. Any such proposal will be subject to the requirements of the proxy
rules adopted under the Exchange Act.
ADDITIONAL MATTERS
The Board of Directors of ASV does not presently know of any matters to be
presented for consideration at the Special Meeting other than matters described
in the Notice of Special Meeting mailed together with this Proxy
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Statement, but if other matters are presented, it is the intention of the
persons named in the accompanying proxy to vote on such matters in accordance
with their best judgment. The proxy confers discretionary authority to vote only
with respect to matters that the Board of Directors of ASV did not know, prior
to May 5, 1999, were to be presented at the Special Meeting.
AVAILABLE INFORMATION
ASV is subject to the informational requirements of the Securities Exchange
Act of 1934, and, in accordance therewith, files reports and other information
with the Securities and Exchange Commission (the "Commission"). Reports, proxy
statements and other information filed by ASV can be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the following Regional Offices of
the Commission: Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661, and Seven World Trade Center, Suite 1300, New York, New York
10048. Copies of such material also can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. The Commission also maintains a Web site address,
http://www.sec.gov. ASV Common Stock is listed and traded on The Nasdaq Stock
Market; reports, proxy statements and other information concerning ASV may be
inspected at the offices of Nasdaq Operations, 1735 K Street, N.W., Washington,
D.C. 20006.
By Order of the Board of Directors,
/s/ Edgar E. Hetteen
Edgar E. Hetteen
Grand Rapids, Minnesota
December 23, 1998
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APPENDIX 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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APPENDIX 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.
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
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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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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;
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(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
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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.
* * *
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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
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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)
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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)
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APPENDIX 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.
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
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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
3
<PAGE>
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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<PAGE>
receivable by the Company in consideration of the sale and issuance of such
rights, options, warrants or convertible or exchangeable securities, plus the
total consideration payable to the Company upon exercise, conversion or exchange
thereof by (Y) the total number of shares of Common Stock covered by such
rights, options, warrants or convertible or exchangeable securities.
(c) Upon each adjustment of the purchase price per Warrant Share
pursuant to Section 2.6 hereof, the Warrant shall thereupon evidence the right
to purchase that number of shares of Common Stock (calculated to the nearest
hundredth of a share) obtained by multiplying the number of shares of Common
Stock purchasable upon exercise immediately prior to such adjustment by the
purchase price per Warrant Share in effect immediately prior to such adjustment
and dividing the product so obtained by the purchase price per Warrant Share in
effect immediately after such adjustment. The adjustment pursuant to this
Section 2.6 to the number of shares of Common Stock purchasable upon exercise of
a Warrant shall be made each time an adjustment of the purchase price is made
pursuant to Section 2.6 hereof.
2.7 LIQUIDATION. If the Company shall, at any time prior to the
expiration of this Warrant, dissolve, liquidate or wind up its affairs, the
Holder shall have the right, but not the obligation, to exercise this Warrant.
Upon such exercise, the Holder shall have the right to receive, in lieu of the
shares of Common Stock that the Holder otherwise would have been entitled to
receive upon such exercise, the same kind and amount of assets as would have
been issued, distributed or paid to the Holder upon any such dissolution,
liquidation or winding up with respect to such shares of Common Stock had the
Holder been the holder of record of such shares of Common Stock receivable upon
exercise of this Warrant on the date for determining those entitled to receive
any such distribution. If any such dissolution, liquidation or winding up
results in any cash distribution in excess of the applicable purchase price per
Warrant Share provided for by this Warrant, the Holder may, at the Holder's
option, exercise this Warrant without making payment of the applicable purchase
price per Warrant Share and, in such case, the Company shall, upon distribution
to the Holder, consider the applicable purchase price per Warrant Share to have
been paid in full, and in making settlement to the Holder shall deduct an amount
equal to the applicable purchase price per Warrant Share from the amount payable
to the Holder.
2.8 NOTICE. Whenever a Warrant or the number of Warrant Shares issuable
hereunder is to be adjusted as provided herein or a dividend or distribution (in
cash, stock or otherwise and including, without limitation, any liquidating
distributions) is to be declared by the Company, or a definitive agreement with
respect to a Special Transaction has been entered into, the Company shall
forthwith cause to be sent to the Holder at the last address of the Holder shown
on the books of the Company, by first-class mail, postage prepaid, at least ten
(10) days prior to the record date specified in (a) below or at least twenty
(20) days before the date specified in (b) below, a notice stating in reasonable
detail the relevant facts and any resulting adjustments and the calculation
thereof, if applicable, and stating (if applicable):
(a) the date to be used to determine (i) which holders of Common
Stock will be entitled to receive notice of such dividend,
distribution, subdivision or combination (the
5
<PAGE>
"Record Date"), and (ii) the date as of which such dividend
distribution, subdivision or combination shall be made; or, if a
record is not to be taken, the date as of which the holders of Common
Stock of record to be entitled to such dividend, distribution,
subdivision or combination are to be determined (provided, that in the
event the Company institutes a policy of declaring cash dividends on a
periodic basis, the Company need only provide the relevant information
called for in this clause (a) with respect to the first cash dividend
payment to be made pursuant to such policy and thereafter provide only
notice of any changes in the amount or the frequency of any subsequent
dividend payments), or
(b) the date on which a Special Transaction is expected to become
effective, and the date as of which it is expected that holders of
Common Stock of record shall be entitled to exchange their shares of
Common Stock for securities or other property deliverable upon
consummation of the Special Transaction (the "Exchange Date").
2.9 FRACTIONAL INTERESTS. The Company shall not be required to issue
fractions of shares of Common Stock on the exercise of the Warrant. If any
fraction of a share of Common Stock would be issuable upon the exercise of the
Warrant, the Company shall, upon such issuance, purchase such fraction for an
amount in cash equal to the current value of such fraction, computed on the
basis of the last reported closing price of the Common Stock on Nasdaq on the
last business day prior to the date of exercise upon which such a sale shall
have been effected, or, if the Common Stock is not so quoted on Nasdaq, as the
Board of Directors of the Company may in good faith determine.
2.10 EFFECT OF ALTERNATE SECURITIES. If at any time, as a result of an
adjustment made pursuant to this Article II, the Holder of the Warrant shall
thereafter become entitled to receive any securities of the Company other than
shares of Common Stock, then the number of such other securities receivable upon
exercise of the Warrant shall be subject to adjustment from time to time on
terms as nearly equivalent as practicable to the provisions with respect to
shares of Common Stock contained in this Article II.
2.11 SUCCESSIVE APPLICATION. The provisions of this Article II shall
similarly apply from time to time to successive events covered by this Article
II.
III. EXERCISE
3.1 EXERCISE OF WARRANT.
(a) The Holder may exercise this Warrant by (i) surrendering this
Warrant Certificate, with the form of exercise notice attached hereto as Exhibit
A duly executed by Holder, and (ii) making payment to the Company of the
aggregate purchase price for the applicable Warrant Shares in cash, by certified
check, bank check or wire transfer to an account designated by the Company.
Upon any partial exercise of the Warrant, the Company, at its expense, shall
promptly issue to the Holder for its surrendered Warrant Certificate a
replacement Warrant Certificate identical in all
6
<PAGE>
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
8
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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)
12
<PAGE>
APPENDIX D
[FORM OF OPINION]
, 1998
The Board of Directors
A.S.V., Inc.
840 Lily Lane
Grand Rapids, MN 55744
Attention: Gary Lemke
President and Director
Members of the Board:
You have requested our opinion as of , 1998 as to the fairness,
from a financial point of view, to A.S.V., Inc. ("ASV" or the "Company), of the
consideration to be received by the Company in the proposed issuance to
Caterpillar Inc. ("CAT" or the "Investor") of 1,000,000 shares of common stock
at $18 per share (representing an approximately 8.8% ownership interest in the
Company) plus warrants to purchase an additional 10,267,127 shares of common
stock at $21 per share (representing approximately 42% ownership interest in
ASV) (the "Transaction").
The securities described above are being issued in a private placement pursuant
to a Securities Purchase Agreement dated October 14, 1998 (the "Agreement") as
part of a broad commercial alliance (the "Commercial Alliance") between ASV and
CAT. Our analysis is based in large part on the strategic advantages and
financial implications, as described to us by Management, of the Commercial
Alliance and certain key assumptions provided by the Company, including
financial projections and their impact on the average life of the warrants. The
Agreement states that the Transaction is contingent upon approval of the
Transaction by ASV's shareholders. Additionally, we understand that CAT will not
be granted any registration rights in respect of the Common Stock or Warrants to
be issued pursuant to the Private Placement. We understand that the Common
Stock to be issued will have the same rights and preferences as the currently
outstanding Common Stock of the Company.
Piper Jaffray Inc., as a customary part of its investment banking business, is
regularly engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, minority investments, underwritings
and secondary distributions of securities, private placements and valuations for
estate, corporate and other purposes. We will receive a fee for our services in
rendering this opinion which is not contingent upon the consummation of the
Transaction. ASV has also agreed to indemnify us against certain liabilities in
connection with our services. In the ordinary course of our business, we and
our affiliates may actively trade the securities of ASV for our own account or
the account of our customers and, accordingly, may at any time hold a long or
short position in such securities.
In arriving at our opinion, we have undertaken such review, analyses and
inquiries as we deemed necessary and appropriate under the circumstances. Among
other things, we have (i) reviewed the
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A.S.V. Inc.
Page 2
Agreement, (ii) reviewed certain publicly available and internal financial and
other information related to ASV, (iii) reviewed certain financial information
for ASV on both a stand-alone basis and as a party to the Commercial Alliance
furnished to us by the management of ASV, (iv) performed certain analyses of the
projected earnings per share of ASV on both a stand-alone basis and as a party
to the Commercial Alliance, (v) performed certain discounted cash flow valuation
analyses based on the stand-alone financial projections of ASV and the financial
projections of ASV as a party to the Commercial Alliance, and (vi) reviewed
certain securities data for ASV. In addition, we had discussions with members of
the management and board of ASV concerning the financial condition, operating
results and business outlook for ASV both on (a) a stand-alone basis and (b) as
a party to the Commercial Alliance. We also met with the management of CAT to
discuss their general expectations with regard to the Commercial Alliance.
Supplemental to our analyses described above we (i) reviewed the premiums paid
in certain change in control transactions, (ii) reviewed discounts received in
certain private placement transactions, and (iii) performed analyses of certain
transactions in the heavy equipment sector that we deemed comparable to ASV's
underlying business.
We have relied upon and assumed the accuracy, completeness and fairness of the
financial statements, assumptions and other information provided to us by ASV,
or otherwise made available to us, and have not assumed responsibility
independently to verify such information. We have relied upon the assurances of
the management of ASV that the information provided to us by them, either
directly or through their respective representatives, has been prepared on a
reasonable basis, and, with respect to financial planning data and other
business outlook information, reflects the best currently available estimates
and judgments, and that they are not aware of any information or facts that
would make the information provided to us incomplete or misleading.
This opinion is necessarily based upon the information available to us and facts
and circumstances as they exist and are subject to evaluation on the date
hereof; events occurring after the date hereof could materially affect the
assumptions used in preparing this opinion. We are not expressing any opinion
herein as to the prices at which shares of ASV common stock have traded or may
trade at any future time. We were not requested to opine as to, and this
opinion does not address, the terms of the Commercial Alliance or the basic
business decision to proceed with or effect the Transaction. Furthermore, we
were not requested to opine as to, and this opinion does not address, the option
granted to CAT to purchase 1,579,000 shares of ASV common stock or the potential
$3 million Competing Transaction Fee, both of which expire at the time the
Transaction closes. We are also not opining as to the minority shareholder
protections, should CAT ultimately control 51% of the Company, that are provided
either in the Agreement or by Minnesota corporate law.
This opinion is directed to the Board of Directors of ASV in connection with the
Transaction and is not intended to be and does not constitute a recommendation
to any stockholder of the Company. Except as provided in our engagement letter,
this opinion shall not be published or otherwise used, nor shall any public
references to us be made, without our prior written approval.
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A.S.V. Inc.
Page 3
Based upon and subject to the foregoing and based upon such other factors, as we
consider relevant, it is our opinion, as of , 1998, that the
consideration to be received by the Company in the Transaction is fair, from a
financial point of view, to the Company.
Sincerely,
PIPER JAFFRAY INC.
