EXHIBIT 10.4
COMMERCIAL ALLIANCE AGREEMENT
          THIS AGREEMENT made and entered into effective the 23rd day of
September, 2005, between VERMEER MANUFACTURING COMPANY, an Iowa corporation,
with its principal place of business at Pella, Iowa (hereinafter referred to as
“Vermeer”), and A.S.V., INC., a Minnesota corporation with its principal place
of business at 840 Lily Lane, Grand Rapids, MN 55744 (hereinafter referred to as
“ASV”).
          WHEREAS, Vermeer desires to utilize ASV’s expertise in the design,
manufacture and sale of all-terrain rubber tracked undercarriages to enhance
various Vermeer Products; and,
          WHEREAS, Vermeer desires to be the exclusive user of ASV OEM
Components (as defined below) in several product and market categories; and
          WHEREAS, ASV desires to enhance the sale of ASV Posi-Track Rubber
Track Loaders by having Vermeer grant ASV access to Vermeer’s distribution
system; and
          WHEREAS, ASV desires to supply ASV OEM Components to Vermeer for
inclusion in various Vermeer Products.
          NOW, THEREFORE, in consideration of the mutual covenants set forth
herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Parties hereto agree as
follows:
ARTICLE I
DISTRIBUTION OF ASV PRODUCTS TO VERMEER DEALERS

  1.   Consent by Vermeer. Vermeer hereby consents to ASV signing separate
dealer agreements with Vermeer’s Industrial Dealers for the distribution of ASV
products which do not directly compete with Vermeer products, and will not
require that ASV pay a distribution rights commission to Vermeer. ASV shall be
solely responsible for any rights and obligations arising out of supplying ASV
products to Vermeer’s Industrial Dealers.     2.   Withdrawal upon Failure of
Vermeer Industrial Dealer to Adequately Represent Vermeer Products. Vermeer
reserves the right to withdraw its consent with respect to a particular Vermeer
Industrial Dealer for ASV products to be distributed in the Vermeer-branded
facilities of such Vermeer Industrial Dealer in the event such Vermeer
Industrial Dealer, as a result of the distribution of ASV products by such
Vermeer Industrial Dealer, is not providing the adequate focus, effort, capital,
etc. to meet the reasonable goals and expectations uniformly applied to all
Vermeer Industrial Dealers.

Page 1 of 17

--------------------------------------------------------------------------------

 

ARTICLE II
SUPPLY OF ASV OEM COMPONENTS

  3.   Exclusive Supply of ASV OEM Components to Vermeer Target Markets. Subject
to the terms and conditions hereof, ASV agrees to exclusively sell, with respect
to the Vermeer Target Markets, the ASV OEM Components to Vermeer. For purposes
of this provision and this Agreement, ASV OEM Components shall mean any and all
undercarriages, tracks and track assemblies designed, manufactured and/or sold
by ASV and any related product offerings developed during the term of this
Agreement. For purposes of this provision and this Agreement, Vermeer Target
Markets shall mean those classes of uses, applications and/or customer types set
forth on Exhibit A hereto or such others as may be added by mutual agreement of
the Parties from time to time. During the term of this Agreement, ASV agrees not
to sell ASV OEM Components to other original equipment manufacturers for use in
direct competition to Vermeer Products in the Vermeer Target Markets.     4.  
Vermeer Conversion/Development of Products Utilizing ASV OEM Components. Vermeer
agrees that it shall be primarily responsible for Vermeer product development or
enhancement to include the use of ASV OEM Components. Vermeer shall support such
development or adaptation of ASV OEM Components to Vermeer Products in response
to market demands and constraints, mechanical fit-up, performance and economic
justification.     5.   Application Assistance Adapting ASV OEM Components. ASV
agrees to provide reasonable assistance to Vermeer to convert the ASV OEM
Components to be the primary ground drive system of the Vermeer Products that
will utilize such ASV OEM Components. Such assistance will include, but not be
limited to, FEA analyses, computer aided modeling of ASV OEM Components and the
equipment structures affixed thereto, load bearing tests, center of gravity
modeling, durability testing, stress testing and hydraulic system component
application approval.     6.   Documentation Assistance Regarding ASV OEM
Components. ASV agrees to provide, at no additional cost to Vermeer, written
and/or electronic versions or copies (in editable form) of Operators,
Maintenance/Service and Parts Manuals applicable to the ASV OEM Components and
ASV consents to Vermeer’s commercial use of such materials in the preparation of
any Operators, Maintenance/Service and Parts Manuals for Vermeer Products
containing such ASV OEM Components. ASV agrees to provide updates to Vermeer
regarding the ASV OEM Components previously supplied to Vermeer
contemporaneously with the timing of the release of such updates for ASV’s own
use with respect to ASV’s Posi-Track Rubber Track Loaders utilizing
substantially similar components. Vermeer is not required to use ASV parts
numbering scheme or otherwise indicate that the illustration provided is from
ASV.

Page 2 of 17

--------------------------------------------------------------------------------

 

  7.   Purchasing and Selling Procedure for ASV OEM Components.

  a)   Ordering Procedure. All orders by Vermeer for its inventory and/or for
resale to its dealers shall be placed through the issuance by Vermeer of a
purchase order subject to the provisions of this Agreement. ASV will acknowledge
each order stating its acceptance of both quantities and deliveries. In the
event of any conflict between the provisions of any purchase order, order
acknowledgement, or other document and this Agreement, the provisions of this
Agreement shall be controlling. Direct orders from dealers invoiced through
Vermeer shall be handled by the dealer purchase order.     b)   Forecast of
Orders. Vermeer will provide a rolling twelve (12) month forecast to ASV to give
visibility to its intended usage of ASV OEM Components. However, the forecast is
NOT a firm order. Orders can only be made by issuing a purchase order as set
forth in subsection (a) above.     c)   Delivery. The date of delivery shall be
set forth on Vermeer’s purchase order and accepted by ASV on the order
acknowledgment. ASV shall establish a firm delivery schedule in accordance with
the respective purchase order. Vermeer may, from time to time, direct ASV to
ship the ASV OEM Components directly to its authorized dealers or the ultimate
retail customer. Risk of loss and responsibility for all charges and freight for
ASV OEM Components ordered by Vermeer shall pass to Vermeer upon delivery to the
common carrier at ASV facility in Grand Rapids, Minnesota.     d)   Invoicing
and Payment. All ASV OEM Component orders placed by Vermeer or its dealers shall
be invoiced to Vermeer upon shipment in accordance with the applicable purchase
order, as accepted. Such Invoices shall be paid within thirty (30) days of the
date of invoice.

  8.   Parts Supply for ASV OEM Components.

  a)   Parts Supply. Vermeer agrees to purchase from ASV 100% of its
requirements for ASV OEM Components parts sourced or manufactured by ASV to its
design. ASV agrees to maintain sufficient supply capabilities for the purpose of
providing Vermeer a reasonable stock of service parts manufactured or sourced by
ASV for the ASV OEM Components sold to Vermeer. ASV’s obligations under this
subsection shall be in effect for a period of not less than ***** (*****) years
after delivery of ASV OEM Components to Vermeer for which service parts are
used. Obligations under this subsection shall not be affected by the termination
of this Agreement and shall extend to parts manufactured or sourced by ASV to
its design but shall not extend to off-the-shelf parts purchased by ASV from
outside sources which can be easily obtained by Vermeer.

 

*****   Denotes confidential information that has been omitted from the exhibit
and filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.

Page 3 of 17

--------------------------------------------------------------------------------

 

  b)   Dual Distribution Activities Regarding Parts. ASV will continue to have
the right to sell parts related to the ASV OEM Components provided to other
original equipment manufacturers for ASV OEM Components not in Vermeer Target
Markets. The following shall be applicable to ASV and Vermeer during the term of
parts supply:

  i)   No comparative claims to Other’s product. Vermeer and ASV agree not to
make comparative, compatibility or similarity claims or other comparison
graphics or matrices, between the ASV OEM Components sold to Vermeer and the
comparable, compatible or similar ASV OEM Components sold directly by a third
party or through a third party’s distribution channel. Neither Party may issue
advertising materials which include printed statements that acknowledge that the
ASV OEM Components are identical, if that is the case.     ii)   Exclusion of
Other Sales Materials in Product Packaging. ASV agrees not to provide
advertising or other materials regarding the ASV or other non-Vermeer branded
ASV OEM Components in any ASV OEM Component shipments to Vermeer, its dealers or
its customers.     iii)   Use of Information Gained Through Vermeer or ASV.
Vermeer and ASV agree to not use any customer lists provided from the other for
other than their intended purpose in carrying out their actions under this
Agreement. Each must independently source materials used to solicit customers in
such channels.

  9.   Pricing of ASV OEM Components. ASV agrees to provide ASV OEM Components
at prices to be established at a gross margin of ***** percent (*****%). Changes
in ASV’s cost structure necessitating an increase or decrease in the price shall
be provided in writing to Vermeer, to be effective with respect to all orders
placed more than thirty (30) days after delivery of such written notice. ASV
will, whenever possible, endeavor to change prices to coincide with Vermeer’s
annual price change to the Vermeer Industrial Dealers. Every effort will be made
to limit changes to such a time frame when possible. All prices are F.O.B. Grand
Rapids, Minnesota.     10.   Pricing of ASV OEM Component Parts. ASV shall sell
ASV OEM Component parts directly to Vermeer for distribution through Vermeer’s
parts distribution system. The parts will be sold to Vermeer at ASV’s dealer net
price minus ***** percent (*****%).     11.   Other Product and Distribution
Opportunities. Compact Skid-Steers, mini-excavators and other products, markets
and distribution opportunities may be added to Exhibit A to this Agreement as
mutually agreed upon by the Parties.

 

*****   Denotes confidential information that has been omitted from the exhibit
and filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.

Page 4 of 17

--------------------------------------------------------------------------------

 

  12.   Term of Agreement. This Agreement shall commence on the date hereof and
shall remain in force for eight (8) years with automatic one-year renewal
periods unless either party gives the other party prior written notice of
termination at least 6 months before the end of the current term.
Notwithstanding the foregoing, this Agreement may be terminated earlier by
mutual agreement of the Parties or as set forth in subsections (a), (b) or
(c) below:

  a)   Termination by ASV. If Vermeer fails to perform this Agreement in any
material respect (and does not remedy such failure to the satisfaction of ASV
within sixty (60) days after written notice thereof has been delivered to
Vermeer), or becomes insolvent, bankrupt or consents to the appointment of a
trustee or receiver, or if a trustee or receiver is appointed for Vermeer
without the consent of Vermeer and such trustee or receiver is not discharged
within sixty (60) days, or if any bankruptcy, reorganization, arrangement or
liquidation proceedings are instituted by Vermeer or instituted against it and
consented to by Vermeer or permitted to remain undismissed for sixty (60) days,
or if Vermeer’s shares, management, ownership or substantially all Vermeer’s
property is confiscated, nationalized, expropriated or otherwise taken by
governmental action, then in such event(s), ASV may terminate this Agreement
immediately upon written notice to Vermeer.     b)   Termination by Vermeer. If
ASV fails to perform this Agreement in any material respect (and does not remedy
such failure to the satisfaction of Vermeer within sixty (60) days after written
notice thereof has been delivered to ASV), or becomes insolvent, bankrupt or
consents to the appointment of a trustee or receiver, or if a trustee or
receiver is appointed for ASV without the consent of ASV and such trustee or
receiver is not discharged within sixty (60) days, or if any bankruptcy,
reorganization, arrangement or liquidation proceedings are instituted by ASV or
instituted against it and consented to by ASV or permitted to remain undismissed
for sixty (60) days, or if ASV’s shares, management, ownership or substantially
all ASV’s property is confiscated, nationalized, expropriated or otherwise taken
by governmental action, then in such event(s), Vermeer may terminate this
Agreement immediately upon written notice to ASV.     c)   Change in Control of
ASV. In the event of a change in control of ASV (as defined below) Vermeer shall
have the right to terminate this Agreement effective immediately. For purposes
of this subsection (c), “Change in Control” shall mean:

  i)   The acquisition by any third party or group of parties acting in concert
of at least thirty percent (30%) of the outstanding shares of common stock of
ASV; or     ii)   A change in a majority of the directors of ASV occurring in a
period of less than one year, excluding, to the extent no solicitation in
opposition has theretofore been announced or commenced, changes in directors
resulting from the election of directors at the next regularly scheduled annual
meeting of ASV’s shareholders; or

Page 5 of 17

--------------------------------------------------------------------------------

 

  iii)   The sale, exchange, transfer or other disposition to a third party of
all or substantially all the assets of ASV.

  d)   Change in Control of Vermeer. In the event of a change in control of
Vermeer (as defined below) ASV shall have the right to terminate this Agreement
effective immediately. For purposes of this subsection (d), “Change in Control”
shall mean:

  i)   The acquisition by any third party or group of parties (other than
current Vermeer shareholders) acting in concert of at least thirty percent (30%)
of the outstanding shares of common stock of Vermeer; or     ii)   The sale,
exchange, transfer or other disposition to a third party of all or substantially
all the assets of Vermeer.

  13.   Product Responsibility.

  a)   Design Responsibility for ASV OEM Components. ASV shall be completely and
solely responsible for final decisions on the design, safety labeling or
instruction, development, engineering and research concerning ASV OEM
Components. Vermeer may from time to time suggest new features or changes in the
design of ASV OEM Components and ASV shall incorporate such new features and/or
design changes wherever it believes that such will not adversely affect the
performance, durability or safety of ASV OEM Components or cause such ASV OEM
Components to infringe on any intellectual property rights of third parties.    
b)   Disclosure of Failures. ASV shall also provide Vermeer with a report of
product liability insurance claims made during the preceding five (5) years
which includes, to the best of ASV’s knowledge, the names of any persons alleged
to have been injured for reasons alleged to be caused by the ASV OEM Components,
the circumstances surrounding such claim(s) and the resolution of such claim(s).
ASV shall have a continuing duty during the term of this Agreement and for five
(5) years after its termination to generate such report upon the specific
request of Vermeer. As of the date of this Agreement, ASV represents and
warrants that, to the best of ASV’s knowledge there are no present or threatened
claims asserted by any persons with regard to the ASV OEM Components.

  14.   Intellectual Property Rights.

  a)   Intellectual Property Relating to Vermeer Machines. Any patents,
copyrights, trade secrets, designs, drawings, know-how or any other intellectual
property developed by either Party or jointly developed by the Parties
specifically for the Vermeer machine shall be owned by Vermeer. ASV agrees to
acknowledge and deliver promptly to Vermeer without charge such written
instruments as may be necessary to vest the entire right, title and interest in
the same in Vermeer.

Page 6 of 17

--------------------------------------------------------------------------------

 

      Vermeer agrees to negotiate in good faith with ASV for licensing such
intellectual property to ASV on a non-exclusive, reasonable royalty basis, if so
requested by ASV.

  b)   Intellectual Property Relating to ASV OEM Components. Any patents,
copyrights, trade secrets, designs, drawings, know-how or any other intellectual
property developed by either Party or jointly developed by the Parties
specifically for the ASV OEM Components shall be owned by ASV. Vermeer agrees to
acknowledge and deliver promptly to ASV without charge such written instruments
as may be necessary to vest the entire right, title and interest in the same in
ASV. ASV agrees to negotiate in good faith with Vermeer for licensing such
intellectual property to Vermeer on a non-exclusive, reasonable royalty basis,
if so requested by Vermeer.     c)   Intellectual Property Jointly Developed.
Any patents, copyrights, trade secrets, designs, drawings, know-how or any other
intellectual property jointly developed by the Parties which is not covered by
Sections 14(a) or 14(b) shall be jointly owned by the Parties; provided,
however, that a party shall seek the express, written approval of the other
before the jointly developed intellectual property is licensed by such party to
another, with appropriate provisions made for accounting of royalties received
on such joint intellectual property.

  15.   ASV Quality Agreement.

  a)   Workmanship shall be such that the ASV OEM Components will be free of any
defects, improper manufacturing or assembly practices that are detrimental to
the performance of the ASV OEM Components.     b)   A quality system shall be
maintained and documented. Detailed test and inspection methods used to assure
the quality of the ASV OEM Components must be submitted for Vermeer’s review.
ASV OEM Components shall be numbered with ASV serial numbers. ASV and Vermeer
shall cooperate in recording and tracking units.     c)   Inspection records of
all inspections, tests, audits, and critical/major characteristic inspection
shall be maintained and available for Vermeer’s review during regular business
hours. At least a quarterly on-site review by a Vermeer representative is
anticipated.     d)   Service parts manufactured by ASV will be governed by all
of the above items.

  16.   Warranty. ASV expressly warrants that all ASV OEM Components sold to
Vermeer pursuant to this Agreement will conform to the specifications, drawings,
samples, or other descriptions furnished and specified by ASV and will be free
of defects in design, material, workmanship, manufacturing, warning or
instruction material at the time of delivery to Vermeer and as set forth below.

Page 7 of 17

--------------------------------------------------------------------------------

 

  a)   Replacement or Credit Prior to Retail Sale. ASV will, without expense to
Vermeer, replace or credit to the account of Vermeer as ASV may elect, any of
such ASV OEM Components which, prior to resale by Vermeer, may be found not to
meet this warranty and which are returned to ASV with prior notification.     b)
  Warranty. ASV agrees to a one (1) year warranty from date of final customer
purchase on product defects due to design, material, workmanship or
manufacturing, warning or instruction material. ASV liability for repair will be
limited to repair or replacement of defective parts and a provision for
reasonable labor to make such repair in accordance with the rates established
under Vermeer’s dealer warranty reimbursement program and shall be a credit to
Vermeer’s account with ASV in the event Vermeer provides the required part or
labor reimbursement on to its dealer performing the warranty service. Warranty
work must be performed by the selling Vermeer authorized dealer. The machine
owner is responsible for causing the delivery of the machine to that selling
authorized Vermeer dealer. ASV will not reimburse transportation, rental or
inconvenience costs. ASV reserves the right to inspect the part prior to any
decision involving a warranty claim. In no case shall ASV grant a remedy that
exceeds the purchase price of the component or part. ASV warrants its rubber
tracks pursuant to its standard warranty attached hereto as Exhibit B.     c)  
Widespread Failure. In addition to the obligations hereunder imposed upon ASV,
should any widespread failure due to design, material, workmanship or
manufacturing on ASV OEM Components occur, then and in such instance, ASV shall
be responsible for parts and labor (or at ASV’s option pay for Vermeer labor) as
shall be required to remedy such failure, both with respect to ASV OEM
Components in use and in inventory of Vermeer or affiliated companies and that
of their dealer organizations. Vermeer, pending correction of the failure, may
defer further purchases of the ASV OEM Components affected. If within sixty
(60) days of advise from Vermeer of a widespread failure ASV shall not have
instituted reasonable procedures for the rectification of such failure, Vermeer
may return to ASV for full purchase price credit (including freight) all ASV OEM
Components affected by the failure then in the inventory of Vermeer or its
affiliated companies and of their dealer organizations, together with such ASV
OEM Components as have been returned by users thereof, and Vermeer shall be
relieved of any and all obligation to purchase any additional ASV OEM Components
hereunder and at Vermeer’s election either terminate the contract or defer an
obligation until such time that the failure has been rectified. For purposes of
this Paragraph 16.c., “widespread failure” shall mean the occurrence of defects
and failures in the warranty period in excess of *****% on units purchased,
after a minimum population of twelve (12) months of sales is established.     d)
  Widespread Failure Exemption. *****.

 

*****   Denotes confidential information that has been omitted from the exhibit
and filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.

Page 8 of 17

--------------------------------------------------------------------------------

 

  e)   Disclaimer of Other Warranties. THIS WARRANTY IS IN LIEU OF ALL OTHER
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, IMPLIED WARRANTIES
OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.

  17.   Product Liability.

  a)   Duty to Indemnify, etc. ASV agrees, now and hereafter, to defend,
protect, hold harmless and indemnify Vermeer and its affiliates from and against
any and all claims for injury, loss or damage of any kind, whether direct or
consequential, compensatory or punitive, which results or allegedly results from
a defect in design, material, workmanship, manufacturing, safety labeling,
warning or instructional material of the ASV OEM Components. Said indemnity
shall include all expenses and reasonable attorney’s fees attributable thereto.
Vermeer agrees to promptly notify ASV of any such claim or suit and ASV shall be
obligated to defend, settle or otherwise dispose of such claim or suit through
counsel of its own choosing. This undertaking to indemnify and hold harmless by
ASV is understood by the Parties to deal with negligence, as well as other
grounds of liability, and shall not be avoided on the ground that contractual
indemnification of a party against its own actual or alleged negligence is
unenforceable or contrary to public policy due to the absence of a clear
undertaking.     b)   Duty to Indemnify, etc. Vermeer agrees, now and hereafter,
to defend, protect, hold harmless and indemnify ASV and its affiliates from and
against any and all claims for injury, loss or damage of any kind, whether
direct or consequential, compensatory or punitive, which results or allegedly
results from a defect in design, material, workmanship, manufacturing, safety
labeling, warning or instructional material of the Vermeer machines, excluding
the ASV OEM Components. Said indemnity shall include all expenses and reasonable
attorney’s fees attributable thereto. ASV agrees to promptly notify Vermeer of
any such claim or suit and Vermeer shall be obligated to defend, settle or
otherwise dispose of such claim or suit through counsel of its own choosing.
This undertaking to indemnify and hold harmless by Vermeer is understood by the
Parties to deal with negligence, as well as other grounds of liability, and
shall not be avoided on the ground that contractual indemnification of a party
against its own actual or alleged negligence is unenforceable or contrary to
public policy due to the absence of a clear undertaking.     c)   Insurance. ASV
agrees to purchase and maintain, from an insurance company acceptable to
Vermeer, product and completed operation liability and blanket contractual
liability insurances (providing coverage at least equivalent to that under the
rating bureau’s standard comprehensive general liability policy) with limits of
$***** per occurrence and in the aggregate annually for bodily injury

 

*****   Denotes confidential information that has been omitted from the exhibit
and filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.

Page 9 of 17

--------------------------------------------------------------------------------

 

      and property damage. ASV agrees to submit to Vermeer upon execution hereof
and thereafter to keep on file with Vermeer a current Certificate of Insurance
evidencing compliance with the aforementioned insurance requirements and
obligating the insurer to give Vermeer at least thirty (30) days’ prior written
notice of cancellation, material change or intent not to renew. In the event ASV
fails to purchase the aforementioned insurance or to pay any premium thereon
when due, Vermeer, at its option, may, after giving written notice to ASV,
purchase such insurance or pay any premium due and subsequently charge ASV for
the amount thereof or offset said amount from any balances due ASV.

  18.   Safety Standards. ASV OEM Components shall comply with all North
American industry and governmental standards in effect at the time of shipment,
including labeling requirements of such standards. Additional safety features
developed by ASV or common to other similar ASV OEM Components, will be
incorporated into ASV OEM Components sold to Vermeer as soon as practical and at
least as soon as similar features are incorporated into ASV’s other similar ASV
OEM Components.     19.   Modification of ASV OEM Component Design and New
Designs. The Parties agree to cooperate to ensure that ASV OEM Components are
modified and improved to remain fully competitive in the market. ASV agrees to
provide Vermeer a 30-day option (from the date the working prototype is
submitted for evaluation) to purchase, exclusively for the Vermeer Target
Markets, any new ASV OEM Components ASV develops, under the terms of this
Agreement.     20.   Parts Return Option. Vermeer may, at its election, annually
return to ASV ***** percent (*****%) of the previous year’s dollar volume of
new, saleable and undamaged repair parts. Annual periods under this Paragraph
shall be the Vermeer fiscal year, November 1 to October 31. Vermeer shall be
credited upon such return an amount equal to ***** percent (*****%) of the
Vermeer invoice prices not later than October 31 of each year. All costs of
redelivering such parts to the place of business of ASV shall be borne by
Vermeer.     21.   Patents. In the event a suit or proceeding is brought against
either Party, so far as it is based on a claim that any ASV OEM Component, or
any part thereof furnished under this Agreement, constitutes an infringement of
any patent of the U.S. or other sovereign nation, ASV shall defend such suit or
proceeding at its sole expense. ASV shall pay all damages and costs awarded
therein. In case said ASV OEM Component or part thereof is in such suit held to
constitute infringement and the use of said ASV OEM Components or part is
enjoined, then ASV shall at its expense, either procure for Vermeer the right to
continue using the ASV OEM Components or part, replace the infringing element
with a noninfringing substitute, or modify the ASV OEM Components so it becomes
noninfringing, or remove the ASV OEM Components and refund the purchase price
and the transportation cost thereof.

Page 10 of 17

--------------------------------------------------------------------------------

 

  22.   Force Majeure. Notwithstanding these provisions or other Paragraphs to
the contrary, neither ASV nor Vermeer shall be liable for failure to perform
hereunder arising from causes or events beyond the control and without fault or
negligence of ASV or including without limitation causes or events such as
strikes, insurrection, war, riot, natural disaster, shortage of material or Acts
of God.     23.   Confidential Information. The Parties hereto agree to use
reasonable efforts to prevent the disclosure to third parties, during the term
of this Agreement, of all confidential information which may be or has been
disclosed by either Party to the other (including business information of the
Parties which is exchanged in developing and operating under this Agreement),
and agree to maintain such information in confidence for a period of not less
than five (5) years after termination of this Agreement; provided, however, that
each of the Parties hereto shall be free to use and disclose such information if
it: (a) was in its possession prior to the effective date of this Agreement
without obligation of confidentiality to the other party hereto (any prior
confidentiality agreements entered into between the parties hereto shall remain
in effect); or (b) is acquired from a third party who had the right to convey
the information; or (c) is otherwise publicly available; provided further, that
either Party may make any public disclosure it believes in good faith is
required by applicable law or any listing or trading agreement concerning its
publicly traded securities (in which case the disclosing Party will use its
reasonable best efforts to advise the other Party prior to making the
disclosure.)-     24.   Notice. Notice to be given by either party under this
Agreement shall be in writing and shall be given by Certified or Registered
Mail.

Notices to ASV shall be sent to:
A.S.V., Inc.
840 Lily Lane
Grand Rapids, MN 55744

Page 11 of 17

--------------------------------------------------------------------------------

 

Notices to Vermeer shall be sent to:
Vermeer Manufacturing Company
Underground Installation Solutions Segment
P.O. Box 200
1210 Vermeer Road East
Pella, Iowa 50219
With a copy to:
Vermeer Manufacturing Company
P.O. Box 200
1210 Vermeer Road East
Pella, Iowa 50219
Attn.: Legal Dept.

  25.   Entire Agreement. This Agreement contains the entire and only agreement
between the parties hereto relating to the ASV products and ASV OEM Components
and wholly cancels, terminates and supersedes any agreement written or verbally
made or purported to have been made heretofore between the parties with respect
to the manufacture and sale of ASV OEM Components and ASV products unless
referred to herein.     26.   Amendment. No amendment or addition to or deletion
from this Agreement or any of the provisions thereof shall be binding upon the
parties unless made in writing and signed by duly authorized employees of both.
    27.   Waiver. No departure from or waiver of or omissions to require
compliance with any of the terms hereof by either party shall be deemed to
authorize any prior or subsequent departure or waiver or permit or agree to any
subsequent departure or waiver.     28.   Assignment. This Agreement shall not
be assignable by either party without the express written consent of the other
party. This Agreement shall, however, be binding upon any successor to the
business of either party.     29.   Choice of Law. This Agreement shall be
governed and construed in accordance with the laws of the State of Delaware.    
30.   Exclusive Remedy. The parties agree that all claims, controversies and
disputes which arise out of or relate to this Agreement, or which relate to the
interpretation or breach of this Agreement (hereinafter collectively referred to
as “claims”) shall be resolved in accordance with mediation and arbitration
provisions specified herein.     31.   Mediation, Arbitration. If a dispute,
controversy, or claim arises out of or relates to this Agreement, its
termination or non-renewal, or the alleged breach thereof, and if said dispute
cannot be settled through direct discussions between the Parties, the Parties
agree to first endeavor to settle the dispute in an amicable manner by mediation
with an independent mediator selected by mutual agreement of the Parties.

Page 12 of 17

--------------------------------------------------------------------------------

 

      If the Parties are unable to agree on a mediator, mediation shall be
administered by the American Arbitration Association under its Commercial
Mediation Rules. If the matter has not been resolved through mediation within
thirty (30) days of the commencement of such mediation (which period may be
extended by mutual agreement in writing), then any unresolved dispute,
controversy, or claim arising out of or relating to this Agreement, its
termination or non-renewal, or the alleged breach thereof, shall be settled by
arbitration administered by the American Arbitration Association in accordance
with its Commercial Arbitration rules, and judgment upon the award rendered by
the arbitrator, may be entered in the Iowa District Court for Polk County or any
state or federal court having jurisdiction. The arbitration shall be conducted
by a single arbitrator. The arbitration proceedings shall be governed by and
conducted in accordance with Iowa Code Chapter 679A (1998), as amended from time
to time, as supplemented by the Commercial Arbitration Rules of the American
Arbitration Association, to the extent not inconsistent with Chapter 679A. The
arbitrator shall allow each Party to conduct limited relevant discovery. The
arbitrator shall have no authority to award punitive damages or any damages not
measured by the prevailing Party’s actual damages, and may not, in any event,
make any ruling, finding or award that does not conform to the terms and
conditions of this Agreement. All fees and expenses of the arbitration shall be
borne equally by the Parties; provided, however, each Party shall bear the
expenses of their respective counsel, experts, witnesses, and preparation and
presentation of the arbitration matters. Any such arbitration shall be conducted
in Polk County, Iowa, unless mutually agreed in writing by the Parties. The
provisions of this Article of this Agreement shall survive the termination of
this Agreement and shall be a complete bar and defense to any suit, action or
proceeding instituted in any court or tribunal with respect to any controversy
or dispute which is arbitrable as set forth in this Agreement.

     IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed by their respective officers authorized in that behalf.

 
Vermeer Manufacturing Company
 
By   /s/ Kevin L. Alft
 
Title  Kevin L. Alft, VP — Underground
 
A.S.V., Inc.
 
By   /s/ Mark S. Glasnapp
 
Title  Mark S. Glasnapp, President

Page 13 of 17

--------------------------------------------------------------------------------

 

EXHIBIT A
VERMEER TARGET MARKETS
*****
 

*****   Denotes confidential information that has been omitted from the exhibit
and filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.

Page 14 of 17

--------------------------------------------------------------------------------

 

EXHIBIT B
[See attached ASV Rubber Track Warranty]

Page 15 of 17

--------------------------------------------------------------------------------

 

ASV WARRANTY
R-Series All Surface Loader Rubber Track
A.S.V., Inc. warrants new rubber tracks sold by it for use on ASV Rubber Track
loaders to be free from defects in material and workmanship.
The warranty is subject to the following:
Warranty Period
The warranty period is 24 months or 1000 operating hours, whichever occurs
first, starting from date of delivery to the first user.
ASV Responsibilities
If a disabling defect in material or workmanship is found during the warranty
period, ASV will, during normal working hours and at a place of business of an
ASV dealer or other source approved by ASV:

  •   At ASV’s choice, repair or provide an allowance toward the purchase of a
new rubber track. Such allowance will be based on accrued hours. Allowance will
be calculated as follows:

User Allowance

     
Track hours
  X 100 = User Cost (%)
 
1000 hours
   

  •   Figures can be obtained from your ASV dealer.

User Responsibilities
The user is responsible for:

  •   Providing proof of the delivery date to the first user.     •   The cost
associated with transporting the product to and from the place of business of an
ASV dealer or other source approved by ASV.     •   Costs associated with labor.
    •   Local taxes, if applicable.     •   Parts shipping charges in excess of
those, which are usual and customary.     •   Costs to investigate complaints,
unless the problem is caused by a defect in ASV material or workmanship.     •  
Giving timely notice of a warrantable failure and promptly making the product
available for repair.

Limitations
ASV is not responsible for failures resulting from:

  •   Any use or installation, which ASV judges improper.     •   Abuse, neglect
and/or improper repair.     •   User’s delay in making the product available
after being notified of a potential product problem.

(Continued on reverse side...)

Page 16 of 17

--------------------------------------------------------------------------------

 

For products operating outside of Australia, Fiji, Nauru, New Caledonia, New
Zealand, Papua New Guinea, The Solomon Islands and Tahiti, the following is
applicable:
NEITHER THE FOREGOING EXPRESS WARRANTY NOR ANY OTHER WARRANTY BY ASV, EXPRESS OR
IMPLIED, IS APPLICABLE TO ANY ITEM ASV SELLS WHICH IS WARRANTED DIRECTLY TO THE
USER BY ITS MANUFACTURER.
THIS WARRANTY IS EXPRESSLY IN LIEU OF ANY OTHER WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
REMEDIES UNDER THIS WARRANTY ARE LIMITED TO THE PROVISION OF MATERIAL AND
SERVICES, AS SPECIFIED HERIN. ASV IS NOT RESPONSIBLE FOR INCIDENTAL OR
CONSEQUENTIAL DAMAGES.
ASV EXCLUDES ALL LIABILITY FOR OR ARISING FROM ANY NEGLIGENCE ON ITS PART OR ON
THE PART OF ANY OF ITS EMPLOYEES, AGENTS OR REPRESENTATIVES IN RESPECT OF THE
MANUFACUTRE OR SUPPLY OF GOODS OR THE PROVISION OF SERVICES RELATING TO THE
GOODS.
IF OTHERWISE APPLICABLE, THE VIENNA CONVENTION (CONTRACTS FOR THE INTERNATIONAL
SALE OF GOODS) IS EXCLUDED IN ITS ENTIRETY.
For products operating in Australia, Fiji, Nauru, New Caledonia, New Zealand,
Papua New Guinea, the Solomon Islands and Tahiti, the following is applicable:
THIS WARRANTY IS IN ADDITION TO WARRANTIES AND CONDITIONS IMPLIED BY STATUTE AND
OTHER STATUTORY RIGHTS AND OBLIGATIONS THAT BY ANY APPLICABLE LAW CANNOT BE
EXCLUDED, RESTRICTED OR MODIFIED (“MANDATORY RIGHTS”). ALL OTHER WARRANTIES OR
CONDITIONS, EXPRESS OR IMPLIED (BY STATUTE OR OTHERWISE), ARE EXCLUDED.
NEITHER THIS WARRANTY NOR ANY OTHER CONDITION OR WARRANTY BY ASV, EXPRESS OR
IMPLIED (SUBJECT ONLY TO THE MANDATORY RIGHTS), IS APPLICABLE TO ANY ITEM ASV
SELLS WHICH IS WARRANTED DIRECTLY TO THE USER BY ITS MANUFACTURER.
TO THE EXTENT PERMITTED UNDER THE MANDATORY RIGHTS, IF ASV IS THE SUPPLIER TO
THE USER ASV’S LIABILITY SHALL BE LIMITED AT ITS OPTION TO (a) IN THE CASE OF
SERVICES, THE SUPPLY OF THE SERVICES AGAIN OR THE PAYMENT OF THE COST HAVING THE
SERVICES SUPPLIED AGAIN, AND (b) IN THE CASE OF GOODS, THE REPAIR OR REPLACEMENT
OF THE GOODS, THE SUPPLY OF EQUIVALENT GOODS, THE PAYMENT OF THE COST OF SUCH
REPAIR OR REPLACEMENT OR THE ACQUISITION OF EQUIVALENT GOODS.
ASV EXCLUDES ALL LIABILITY FOR OR ARISING FROM ANY NEGLIGENCE ON ITS PART OR ON
THE PART OF ANY OF ITS EMPLOYEES, AGENTS OR REPRESENTATIVES IN RESPECT OF THE
MANUFACTURE OR SUPPLY OF GOODS OR THE PROVISION OF SERVICES RELATING TO THE
GOODS.
ASV IS NOT LIABLE FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES UNLESS IMPOSED UNDER
MANDATORY RIGHTS.
IF OTHERWISE APPLICABLE, THE VIENNA CONVENTION (CONTRACTS FOR THE INTERNATIONAL
SALE OF GOODS) IS EXCLUDED IN ITS ENTIRETY.
This warranty covers every major component of the products. Claims under this
warranty should be submitted to a place of business of an ASV dealer or other
source approved by ASV. For further information concerning either the location
to submit claims or ASV as the issuer of this warranty, write: All Season
Vehicles, Inc. (ASV), 840 Lily Lane, Grand Rapids, Minnesota 55744 USA.

Page 17 of 17