Document:

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                                                                    Exhibit 4.13

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.

                         REPLACEMENT WARRANT CERTIFICATE

                To Purchase 9,767,127 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 9,767,127 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 31, 2000 (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
9,767,127 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 January 29, 2009, subject to the provisions of Article
V hereof (the "Warrant" and the shares to be issued upon the exercise thereof
are "Warrant Shares"). This Warrant is granted this 31st day of October, 2000.

         1.2 SHARES TO BE ISSUED; RESERVATION OF SHARES. The Company covenants
and agrees that (1) all Warrant Shares will upon issuance in accordance with the
terms hereof be duly authorized, validly issued and outstanding, fully paid and
non-assessable, and free from all taxes, liens and charges with respect to the
issuance thereof, (2) the Company will from time to time take all actions
necessary to assure that the par value per share of the Common Stock is at all
times equal to or less than the applicable purchase price per Warrant Share, and
(3) the Company will at all times during the exercise period have authorized and
reserved sufficient shares of Common Stock to provide for the exercise of the
Warrant in full.

II.      ADJUSTMENTS TO WARRANT RIGHTS

         2.1 STOCK SPLITS AND COMBINATIONS. If the Company shall combine all of
the outstanding Common Stock proportionately into a smaller number of shares,
the number of Warrant Shares issuable to the Holder upon exercise of the Warrant
shall be proportionately decreased and the purchase price per Warrant Share
hereunder in effect immediately prior to such combination shall be
proportionately increased, as of the effective date of such combination, as
follows: (a) the number of
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Warrant Shares purchasable upon the exercise of the Warrant immediately prior to
the effective date of such combination shall be adjusted so that the Holder of
the Warrant exercised on or after that date shall be entitled to receive the
number and kind of Warrant Shares which the Holder of the Warrant would have
owned and been entitled to receive as a result of the combination had the
Warrant been exercised immediately prior to that date, and (b) the purchase
price per Warrant Share in effect immediately prior to such adjustment shall be
adjusted by multiplying such purchase price by a fraction, the numerator of
which is the aggregate number of shares of Common Stock purchasable upon
exercise of the Warrant immediately prior to such adjustment, and the
denominator of which is the aggregate number of shares of Common Stock
purchasable upon exercise of the Warrant immediately thereafter. If the Company
shall effect a subdivision of the outstanding Common Stock, the number of
Warrant Shares issuable to the Holder upon exercise of the Warrant shall be
proportionally increased and the purchase price per Warrant Share hereunder in
effect prior to such subdivision shall be proportionately decreased, as of the
effective date of such subdivision, as follows: (a) the number of Warrant Shares
purchasable upon the exercise of the Warrant immediately prior to the effective
date of such subdivision, shall be adjusted so that the Holder of the Warrant
exercised on or after that date shall be entitled to receive the number and kind
of Warrant Shares which the Holder of the Warrant would have owned and been
entitled to receive as a result of the subdivision had the Warrant been
exercised immediately prior to that date (pro rated in the case of any partial
exercise), and (b) the purchase price per Warrant Share in effect immediately
prior to such adjustment shall be adjusted by multiplying the purchase price by
a fraction, the numerator of which is the aggregate number of shares of Common
Stock purchasable upon exercise of the Warrant immediately prior to such
adjustment, and the denominator of which is the aggregate number of shares of
Common Stock purchasable upon exercise of the Warrant immediately thereafter.

         2.2 STOCK DIVIDENDS AND DISTRIBUTIONS. If the Company shall make or fix
a record date for the holders of Common Stock entitled to receive a dividend or
other distribution payable in additional shares of Common Stock, then the number
of Warrant Shares issuable to the Holder upon exercise of the Warrant shall be
proportionately increased and the purchase price per Warrant Share hereunder in
effect prior to the time of such issuance or the close of business on such
record date shall be proportionately decreased, as of the time of such issuance,
or in the event such record date is fixed, as of the close of business on such
record date, as follows: (a) the number of Warrant Shares purchasable upon the
exercise of the Warrant immediately prior to the time of such issuance or the
close of business on such record date shall be adjusted so that the Holder of
the Warrant exercised after that date shall be entitled to receive the number
and kind of Warrant Shares which the Holder of the Warrant would have owned and
been entitled to receive as a result of the dividend or distribution had the
Warrant been exercised immediately prior to that date (pro rated in the case of
any partial exercise), and (b) the purchase price in effect immediately prior to
such adjustment shall be adjusted by multiplying such purchase price by a
fraction, the numerator of which is the aggregate number of shares of Common
Stock purchasable upon exercise of the Warrant immediately prior to such
adjustment, and the denominator of which is the aggregate number of shares of
Common Stock purchasable upon exercise of the Warrant immediately thereafter.

         2.3 OTHER DIVIDENDS AND DISTRIBUTIONS. If the Company shall make or fix
a record date for the holders of Common Stock entitled to receive a dividend or
other distribution payable in securities of the Company other than shares of
Common Stock, then lawful and adequate provision shall be made so that the
Holder of the Warrant shall be entitled to receive upon exercise of the Warrant,
for the aggregate purchase price in effect prior thereto, in addition to the
number of Warrant Shares immediately theretofore issuable upon exercise of the
Warrant, the kind and number of securities of the Company which the Holder would
have owned and been entitled to receive had the Warrant been exercised
immediately prior to that date (pro rated in the case of any partial exercise).

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         2.4 RECLASSIFICATION, EXCHANGE AND SUBSTITUTION. If the Common Stock is
changed into the same or a different number of shares of any class or classes of
stock, whether by recapitalization, reclassification or otherwise (other than a
subdivision or combination of shares or stock dividend or a reorganization,
merger, consolidation or sale of assets, provided for elsewhere in this Article
II), then the Holder of the Warrant shall be entitled to receive upon exercise
of the Warrant, in lieu of the Warrant Shares immediately theretofore issuable
upon exercise of the Warrant, for the aggregate purchase price in effect prior
thereto, the kind and amount of stock and other securities and property
receivable upon such recapitalization, reclassification or other change, by the
holders of the number of shares of Common Stock for which such Warrant could
have been exercised immediately prior to such recapitalization, reclassification
or change (pro rated in the case of any partial exercise).

         2.5 REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALES OF ASSETS. If any
of the following transactions (each, a "Special Transaction") shall become
effective: (i) a capital reorganization (other than a recapitalization,
subdivision, combination, reclassification or exchange of shares provided for
elsewhere in this Article II), (ii) a consolidation or merger of the Company
with and into another entity, or (iii) a sale or conveyance of all or
substantially all of the Company's assets, then as a condition of any such
Special Transaction, lawful and adequate provision shall be made so that the
Holder of the Warrant shall thereafter have the right to purchase and receive
upon exercise of the Warrant, in lieu of the Warrant Shares immediately
theretofore issuable upon exercise of the Warrant, for the aggregate purchase
price in effect immediately prior to such consummation, such shares of stock,
other securities, cash or other assets as may be issued or payable in and
pursuant to the terms of such Special Transaction to the holders of shares of
Common Stock for which such Warrant could have been exercised immediately prior
to such Special Transaction (pro rated in the case of any partial exercises). In
connection with any Special Transaction, appropriate provision shall be made
with respect to the rights and interests of the Holder of the Warrant to the end
that the provisions of the Warrant (including without limitation provisions for
adjustment of the purchase price and the number of Warrant Shares issuable upon
the exercise of the Warrant), shall thereafter be applicable, as nearly as may
be practicable, to any shares of stock, other securities, cash or other assets
thereafter deliverable upon the exercise of the Warrant. The Company shall not
effect any Special Transaction unless prior to or simultaneously with the
closing, the successor entity (if other than the Company), if any, resulting
from such consolidation or merger or the entity acquiring such assets shall
assume by a written instrument executed and mailed by certified mail or
delivered to the Holder of the Warrant at the address of the Holder appearing on
the books of the Company, the obligation of the Company or such successor
corporation to deliver to the Holder such shares of stock, securities, cash or
other assets, as in accordance with the foregoing provisions, which the Holder
shall have the right to purchase.

         2.6 SALES BELOW WARRANT EXERCISE PRICE.

                  (a) In the event the Company shall sell and issue shares of
         Common Stock, or rights, options, warrants or convertible or
         exchangeable securities containing the right to subscribe for or
         purchase shares of Common Stock (excluding (i) shares, rights, options,
         warrants or convertible or exchangeable securities issued in any of the
         transactions described in Sections 2.1, 2.2, 2.3, 2.4 or 2.5 above),
         (ii) shares issuable upon exercise of currently outstanding options,
         warrants and convertible securities and (iii) options issued to
         employees and 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

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         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 after
         deduction of any expenses payable by the Company and any underwriting
         or similar commissions, compensation or concession in connection with
         such issue or sale, (B) to the extent it consists of property other
         than cash, be computed at the fair value of that property as determined
         by the Company's Board of Directors in good faith, (C) if such shares
         of Common Stock or rights, options, warrants or convertible securities
         are issued or sold together with other stock or securities or other
         assets of the Company for a consideration which covers both, be
         computed as that portion of the consideration so received that may be
         reasonably determined by the Board of Directors of the Company in good
         faith to be allocated to such shares of Common Stock, or rights,
         options, warrants or convertible or exchangeable securities, and (D) if
         the issuance shall be of such rights, options, warrants or convertible
         or exchangeable securities, be determined by dividing (X) the total
         amount receivable by the Company in consideration of the sale and
         issuance of such rights, options, warrants or convertible or
         exchangeable securities, plus the total consideration payable to the
         Company upon exercise, conversion or exchange thereof by (Y) the total
         number of shares of Common Stock covered by such rights, options,
         warrants or convertible or exchangeable securities.

                  (c) Upon each adjustment of the purchase price per Warrant
         Share pursuant to Section 2.6 hereof, the Warrant shall thereupon
         evidence the right to purchase that number of shares of Common Stock
         (calculated to the nearest hundredth of a share) obtained by
         multiplying the number of shares of Common Stock purchasable upon
         exercise immediately prior to such adjustment by the purchase price per
         Warrant Share in effect immediately prior to such adjustment and
         dividing the product so obtained by the purchase price per Warrant
         Share in effect immediately after such adjustment. The adjustment
         pursuant to this Section 2.6 to the number of shares of Common Stock
         purchasable upon exercise of a Warrant shall be made each time an
         adjustment of the purchase price is made pursuant to Section 2.6
         hereof.

         2.7 LIQUIDATION. If the Company shall, at any time prior to the
expiration of this Warrant, dissolve, liquidate or wind up its affairs, the
Holder shall have the right, but not the obligation, to exercise this Warrant.
Upon such exercise, the Holder shall have the right to receive, in lieu of the
shares of Common Stock that the Holder otherwise would have been entitled to
receive upon such exercise, the same kind and amount of assets as would have
been issued, distributed or paid to the Holder upon any such dissolution,
liquidation or winding up with respect to such shares of Common Stock had the
Holder been the holder of record of such shares of Common Stock receivable upon
exercise of this Warrant on the date for determining those entitled to receive
any such distribution. If any such dissolution, liquidation or winding up
results in any cash distribution in excess of the application 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

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Warrant Share to have been paid in full, and in making settlement to the Holder
shall deduct an amount equal to the applicable purchase price per Warrant Share
from the amount payable to the Holder.

         2.8 NOTICE. Whenever a Warrant or the number of Warrant Shares issuable
hereunder is to be adjusted as provided herein or a dividend or distribution (in
cash, stock or otherwise and including, without limitation, any liquidating
distributions) is to be declared by the Company, or a definitive agreement with
respect to a Special Transaction has been entered into, the Company shall
forthwith cause to be sent to the Holder at the last address of the Holder shown
on the books of the Company, by first-class mail, postage prepaid, at least ten
(10) days prior to the record date specified in (a) below or at least twenty
(20) days before the date specified in (b) below, a notice stating in reasonable
detail the relevant facts and any resulting adjustments and the calculation
thereof, if applicable, and stating (if applicable):

                  (a) the date to be used to determine (i) which holders of
         Common Stock will be entitled to receive notice of such dividend,
         distribution, subdivision or combination (the "Record Date"), and (ii)
         the date as of which such dividend distribution, subdivision or
         combination shall be made; or, if a record is not to be taken, the date
         as of which the holders of Common Stock of record to be entitled to
         such dividend, distribution, subdivision or combination are to be
         determined (provided, that in the event the Company institutes a policy
         of declaring cash dividends on a periodic basis, the Company need only
         provide the relevant information called for in this clause (a) with
         respect to the first cash dividend payment to be made pursuant to such
         policy and thereafter provide only notice of any changes in the amount
         or the frequency of any subsequent dividend payments), or

                  (b) the date on which a Special Transaction is expected to
         become effective, and the date as of which it is expected that holders
         of Common Stock of record shall be entitled to exchange their shares of
         Common Stock for securities or other property deliverable upon
         consummation of the Special Transaction (the "Exchange Date").

         2.9 FRACTIONAL INTERESTS. The Company shall not be required to issue
fractions of shares of Common Stock on the exercise of the Warrant. If any
fraction of a share of Common Stock would be issuable upon the exercise of the
Warrant, the Company shall, upon such issuance, purchase such fraction for an
amount in cash equal to the current value of such fraction, computed on the
basis of the last reported closing price of the Common Stock on NASDAQ on the
last business day prior to the date of exercise upon which such a sale shall
have been effected, or, if the Common Stock is not so quoted on NASDAQ, as the
Board of Directors of the Company may in good faith determine.

         2.10 EFFECT OF ALTERNATE SECURITIES. If at any time, as a result of an
adjustment made pursuant to this Article II, the Holder of the Warrant shall
thereafter become entitled to receive any securities of the Company other than
shares of Common Stock, then the number of such other securities receivable upon
exercise of the Warrant shall be subject to adjustment from time to time on
terms as nearly equivalent as practicable to the provisions with respect to
shares of Common Stock contained in this Article II.

         2.11 SUCCESSIVE APPLICATION. The provisions of this Article II shall
similarly apply from time to time to successive events covered by this Article
II.

III.     EXERCISE

         3.1 EXERCISE OF WARRANT.

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                  (a) The Holder may exercise their Warrant by (i) surrendering
         this Warrant Certificate, with the form of exercise notice attached
         hereto as Exhibit A duly executed by Holder, and (ii) making payment to
         the Company of the aggregate purchase price for the applicable Warrant
         Shares in cash, by certified check, bank check or wire transfer to an
         account designated by the Company. Upon any partial exercise of the
         Warrant, the Company, at its expense, shall promptly issue to the
         Holder for its surrendered Warrant Certificate a replacement Warrant
         Certificate identical in all respects to this Warrant Certificate,
         except that the number of Warrant Shares shall be reduced accordingly.

                  (b) Each person in whose name any Warrant Share certificate is
         issued upon exercise of a Warrant shall for all purposes been deemed to
         have become the holder of record of the Warrant Shares for which such
         Warrant was exercised, and such Warrant Share certificate shall be
         dated the date upon which the Warrant exercise notice was duly
         surrendered and payment of the purchase price was tendered to the
         Company.

         3.2 ISSUANCE OF WARRANT SHARES. The Warrant Shares purchased shall be
issued to the Holder exercising this Warrant as of the close of business on the
date on which all actions and payments required to be taken or made by the
Holder, pursuant to Section 3.1, shall have been so taken or made. Certificates
for the Warrant Shares so purchased shall be delivered to the Holder within
three (3) days after a Warrant is surrendered.

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 certificate 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 OF WARRANT

         5.1 ACCELERATION. Notwithstanding the provisions of Section 1.1 with
respect to the term of the Warrant, if and when the Company achieves an
Acceleration Goal (as defined below) and the average closing sale price for a
share of Common Stock on the principal trading market for the Common Stock for
the preceding ten trading days is above the current purchase price per Warrant
Share, the Company shall have the right, by giving of notice to the Holder (an
"Acceleration Notice"), to cause (i) a

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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 the sum of (i) 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, and
(ii) gross revenues received by the Holder for sales of Alliance Machines (as
defined in the Multi-Terrain Rubber-Tracked Loader Alliance Agreement), less the
amount of gross revenue already recognized by the Company for sales of Alliance
Machine undercarriages.

         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
receipt of the Acceleration Notice.

         5.2 TERMINATION. Notwithstanding anything contained herein to the
contrary, Issuer shall have the right to terminate this Warrant by giving sixty
(60) days prior written notice to Holder in the event that: (i) Holder has
failed to perform the Marketing Agreement in any material respect and has not
remedied such failure and the Company has terminated the Marketing Agreement
pursuant to Section 4.1 thereof; (ii) Holder and the Company have entered into
the Technology License Agreement contemplated by Section 6 of the Commercial
Alliance Agreement, Holder has materially breached the terms of that Technology
License Agreement and has not remedied such breach and the Company has
terminated the Technology License Agreement pursuant to its terms; or (iii)
Holder and the Company have entered into and Holder has materially breached one
or more of the Trademark and Trade Dress License Agreement, the Management
Services Agreement, the Supply Agreements or the Joint Venture Agreement
contemplated by the Commercial Alliance Agreement and Holder has not remedied
such breach, the Company has terminated one or more of such agreement 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.

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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 until such time as the Warrant Shares are duly registered for resale:

         THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER
         THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR UNDER
         ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT BE
         TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
         AN EFFECTIVE REGISTRATION UNDER THE ACT OR AN OPINION OF
         COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT
         AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER OR SUCH
         STATE SECURITIES LAWS.

VIII.    MISCELLANEOUS

         8.1 NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing and shall be delivered by certified
or registered mail (first class postage pre-paid), or guaranteed overnight
delivery, to the Company at the address at which its principal business office
is located from time to time, and the Holder at the address it advises the
Company of.

         8.2 EXPENSES; TAXES. Any sales tax, stamp duty, deed transfer or other
tax (except only taxes based on the income of Holder) arising out of the
issuance and sale of the Warrant or the Warrant Shares issuable upon exercise of
the Warrant and consummation of the transactions contemplated by this Warrant
Certificate shall be paid by the Company.

         8.3 AMENDMENT; WAIVER. This Warrant Certificate may not be modified,
amended, supplemented, canceled or discharged, except by written instrument
executed by the Company and the Holder. No failure to exercise, and no delay in
exercising, any right, power or privilege under this Warrant Certificate shall
operate as a waiver, nor shall any single or partial exercise of any right,
power or privilege hereunder preclude the exercise of any other right, power or
privilege. No waiver of any breach of any provision shall be deemed to be a
waiver of any preceding or succeeding breach of the same or any other provision,
nor shall any waiver be implied from any course of dealing between the Company
and the Holder. No extension of time for performance of any obligations or other
acts hereunder or under any other agreement shall be deemed to be an extension
of the time for performance of any other obligations or any other acts.

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         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.

                                      * * *

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         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: /s/ Gary Lemke
                                             -----------------------------------
                                          Name: Gary Lemke
                                               ---------------------------------
                                          Title: President
                                                --------------------------------

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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)

                                      -11-
<PAGE>

                                    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>

                                                                   EXHIBIT 10.16

             Multi-Terrain Rubber-Tracked Loader Alliance Agreement
             ------------------------------------------------------

         This Multi-Terrain Rubber-Tracked Loader Alliance Agreement
("Agreement"), is entered into as of October 31, 2000 ("Effective Date") by and
between A.S.V., Inc., ("ASV") a Minnesota corporation with a principal place of
business at 840 Lily Lane, Grand Rapids, Minnesota 55744 and Caterpillar Inc.,
("Caterpillar") a Delaware corporation with a principal place of business at 100
Northeast Adams, Peoria, Illinois 61629, (each a "Party" and collectively, the
"Parties").

         WHEREAS, the Parties closed certain transactions on January 29, 1999,
including a Stock Purchase Agreement whereby Caterpillar purchased 1,000,000
shares of ASV's common stock, a Commercial Alliance Agreement whereby
Caterpillar agreed to assist ASV with marketing, logistics, management and other
functional areas of ASV's business, and a Warrant Agreement whereby ASV issued a
warrant to Caterpillar for 10,267,127 shares of ASV's common stock;

         WHEREAS, ASV is the developer and manufacturer of small rubber-tracked
loaders which incorporate the Maximum Traction and Support System ("MTSS")
technology;

         WHEREAS, Caterpillar is a developer and manufacturer of mining,
construction and other heavy equipment including small loaders;

         WHEREAS, the Parties wish to enter into this Agreement pursuant to
which they will jointly develop, manufacture and bring to market a five-model
line of Caterpillar-branded, positive drive, rubber-tracked loaders,
incorporating the ASV MTSS technology, combined with Caterpillar skid steer
loader machine technology; and

         WHEREAS, contemporaneous with this Agreement, the Parties shall enter
into a Stock Purchase Agreement whereby Caterpillar shall purchase 500,000
shares of ASV's common stock ("SPA") and ASV shall issue a replacement warrant
to Caterpillar to reduce the number of available shares under the replacement
warrant to 9,767,127 shares of ASV's common stock ("Replacement Warrant").

         NOW, THEREFORE, the Parties agree as follows:

                                    ARTICLE I
                          DEFINTIONS AND EFFECTIVE DATE

         1.1 Definitions. All capitalized terms that are not otherwise defined
herein shall have the meanings set forth below:

                  (a) "Affiliate" means any person (individual, corporation,
         partnership, limited liability company or other entity) that directly
         or indirectly controls, is under common control of or is controlled by
         either Party to this Agreement. "Control" means the ownership, direct
         or indirect, of fifty percent (50%) or more of the voting shares or
         capital of such person.

                                       1
<PAGE>

                  (b) "Alliance Machine(s)" means a five model line of
         multi-terrain, Caterpillar-branded, positive drive, rubber-track
         loaders incorporating the ASV MTSS technology combined with Caterpillar
         skid steer loader machine technology. The Parties agree that these
         models shall generally be larger than the ASV "R" series and smaller
         than the ASV 4800 series. A detailed description of the proposed
         product line as currently contemplated is provided in Exhibit A.

                  (c) "Alliance Products" means Alliance Machines, Alliance
         Machine parts and Work Tools.

                  (d) "Annual Meeting" shall have the meaning ascribed in
         Section 2.1(b).

                  (e) "ASV Cost" shall have the meaning ascribed in Section 6.1.

                  (f) "Audited Party" shall have the meaning ascribed in Section
         6.5.

                  (g) "Auditing Party" shall have the meaning ascribed in
         Section 6.5.

                  (h) "Business Plan" shall have the meaning ascribed in Section
         2.1(a).

                  (i) "Caterpillar Cost" shall have the meaning ascribed in
         Section 6.1.

                  (j) "Change in Control" shall have the meaning ascribed in
         Section 12.2.

                  (k) "Confidential Information" means all trade secrets,
         confidential knowledge, and proprietary data of any kind or nature
         whatsoever relating to this Agreement, or the businesses of either
         Party and its Affiliates. Confidential Information also shall include
         any information prepared or developed by a Party in connection with
         this Agreement, which reflects, interprets, evaluates, includes or is
         derived from the Confidential Information of another Party.
         Confidential Information shall include, but not be limited to,
         technical specifications, diagrams, discoveries, economic models, pro
         forma and other financial information, designs, business opportunities,
         cost and pricing data, records, customer lists, and engineering,
         manufacturing, and marketing know-how. Confidential Information does
         not include information which (i) was generally known or available to
         the public at the time of its disclosure hereunder, or which after such
         disclosure became generally known or available to the public, provided
         that such disclosure was made or occurred through no fault of the
         Receiving Party (defined below) or its Affiliates, or its or their
         officers, directors, or employees; (ii) was in the possession of the
         Receiving Party prior to its disclosure hereunder; (iii) was known by
         the Receiving Party at the time of its disclosure hereunder or was
         independently developed at any time by the Receiving Party without
         reference to the Disclosing Party's (defined below) Confidential
         Information; (iv) is required to be furnished pursuant to law or legal
         process; or (v) is rightfully obtained, subsequent to its disclosure
         hereunder, by the Receiving Party or its Affiliates from a third party
         who is lawfully in possession of such information and who is not under
         an obligation of confidentiality to the Disclosing Party.

                                       2
<PAGE>

                  (l) "Dealer Net-Net Price" shall mean the *** minus (i) any
         *** and (ii) any ***.

                  (m) "Dealer Prices" shall mean the actual selling prices (net
         of any actual dealer trade discounts and actual Variances) of Alliance
         Machines from Caterpillar to Caterpillar dealers.

                  (n) "Disclosing Party" means a Party that discloses
         Confidential Information hereunder.

                  (o) "Effective Date" means October 31, 2000.

                  (p) "Lower Frame Assembly" means that component of the Machine
         Upper that allows attachment of the Machine Undercarriage to the
         Machine Upper. A more detailed description of the Machine
         Undercarriages as currently contemplated is provided in Exhibit A.

                  (q) "Machine Undercarriage(s)" means those rubber-tracked
         undercarriages that incorporate the ASV MTSS technology and that are
         designed to be combined with the Machine Uppers as contemplated herein.
         The Parties acknowledge that each of the Alliance Machines may require
         a different Machine Undercarriage. A more detailed description of the
         Machine Undercarriages as currently contemplated is provided in Exhibit
         A.

                  (r) "Machine Upper(s)" means the upper portion of the Alliance
         Machines that incorporates Caterpillar skid steer loader machine
         technology and that is designed to be combined with the Machine
         Undercarriages as contemplated herein. The Parties acknowledge that
         each of the Alliance Machines may require a different Machine Upper. A
         more detailed description of the Machine Upper as currently
         contemplated is provided in Exhibit A.

                  (s) "Manufacturing Costs" means, to the extent actually
         incurred by a Party hereunder in accordance with generally acceptable
         accounting principles, (i) the direct costs of materials; (ii) the
         direct labor costs, (iii) the direct burden costs (including shipping
         costs: (A) to Caterpillar, (B) from Caterpillar to NACD dealers and (C)
         from Caterpillar to any North American ports or depots for transit
         outside of North America) and (iv) the overhead allocated at such
         Party's overhead application rate and to the extent agreed at the
         Annual Meeting.

                  (t) "Material Losses" shall have the meaning ascribed to it in
         Section 9.5(a).

                  (u) "NACD" means Caterpillar's North American Commercial
         Division.

                  (v) "Planning Group" shall have the meaning ascribed in
         Section 2.1(a).

                  (w) "Receiving Party" means a Party that receives Confidential
         Information hereunder.

--------
*** 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.

                                       3
<PAGE>

                  (x) "Replacement Warrant" shall have the meaning ascribed in
         the Recitals hereto.

                  (y) "SPA" shall have the meaning ascribed in the Recitals
         hereto.

                  (z) "Variances" means ***.

                  (aa) "Work Tools" means those interchangeable portions of the
         Machine Upper designed to accomplish different tasks (e.g., bulldozer,
         snow plow, etc.).

         1.2 Closing. This Agreement is conditioned upon the closing of the SPA
and the issuance of the Replacement Warrant and is effective as of the Effective
Date.

                                   ARTICLE II
            STRUCTURE OF ALLIANCE, RESPONSIBILITIES, USE OF PROCEEDS

         2.1 Planning Group and Annual Meeting.

                  (a) Caterpillar and ASV shall identify and designate
         sufficient business, financial and technical personnel and resources to
         form a joint planning group ("Planning Group"). The Planning Group
         shall develop a business plan ("Business Plan") consistent with the
         principles outlined herein. The Business Plan shall include, among
         other things, the annual proposed budget, the proposed product line,
         target dates for introduction of each model, the development schedule
         and the estimated and budgeted development costs for each model,
         personnel requirements, and equipment and tooling requirements for each
         model. Each Party shall bear their own costs and expenses incurred in
         developing the Business Plan. The Business Plan shall be updated on an
         annual basis not later than the date of the Annual Meeting (as defined
         below).

                  (b) The Parties shall hold an annual meeting for each calendar
         year of this Agreement no later than November 15th ("Annual Meeting").
         The members of the Planning Group shall attend such Annual Meeting. At
         the Annual Meeting, the Parties shall (i) finalize or update the
         Business Plan, including the annual budget, (ii) determine their
         respective Manufacturing Costs as described in Section 6.1, (iii)
         determine and update the forecast of the annual Alliance Machine
         production, and (iv) make any other decisions material to the success
         of the development and commercialization of the Alliance Machines as
         contemplated hereunder. It is contemplated that the Parties will incur
         losses during fiscal year 2001. At the 2000 Annual Meeting, the Parties
         shall address this issue and discuss ways to limit these projected
         losses.

         2.2 Caterpillar Responsibilities. Caterpillar shall be responsible, at
its own expense, for designing, developing, manufacturing, painting, improving
and testing the Machine Upper in accordance with the Business Plan. Any designs,
developments or modifications to the Machine Upper necessary to (a) combine the
Machine Upper with the Machine Undercarriage and (b) to

--------
*** 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.

                                       4
<PAGE>

ensure the proper functionality of the Machine Upper with the Machine
Undercarriage, in both cases, shall be subject to and included in Section 2.4.
To the maximum extent practicable, Caterpillar shall incorporate existing
Caterpillar parts and components into the Machine Uppers.

         2.3 ASV Responsibilities. ASV shall be responsible, at its own expense,
for designing, developing, manufacturing, painting, improving and testing the
Machine Undercarriages using mutual agreed standards developed by both
Caterpillar and ASV and in accordance with the Business Plan. ASV shall use
commercially reasonable efforts to incorporate Caterpillar parts and components
into the Machine Undercarriages. ASV shall supply the Machine Undercarriages to
Caterpillar as set forth below.

         2.4 Development of Combination Technology. Caterpillar and ASV shall
cooperate in the design, development, improvement and testing of the process,
technology and parts (including the Lower Frame Assembly, axles and Machine
Upper modifications) necessary to combine the Machine Upper with the Machine
Undercarriage, in accordance with the Business Plan. The costs of such design,
development, improvement and testing shall be borne by ASV. To the extent that
Caterpillar incurs any of such costs, it shall provide ASV with a monthly
written invoice, detailing the costs (including direct materials, direct labor
and expenses) incurred during the prior month, and ASV shall pay such amounts
within thirty (30) days of receiving such invoice.

         2.5 Additional Responsibilities of Caterpillar. Caterpillar shall have
the following additional responsibilities: (a) project management, (b) design
and testing of structures, hydraulic and electrical systems and Alliance Machine
performance analysis, including the Lower Frame Assembly, (c) process and
reliability planning for the Alliance Machine, (d) completion of the necessary
new product introduction to use the Caterpillar brand and (e) process and
quality control planning for the Machine Upper components.

         2.6 Additional Responsibilities of ASV. ASV shall have the following
additional responsibilities: (a) assistance in the design of the Lower Frame
Assembly, (b) rapid prototyping and development process and (c) process and
quality control planning for the Machine Undercarriage components.

         2.7 Work Tools. Caterpillar shall design, manufacture and market all
Work Tools for the Alliance Machines. Until December 31, 2004, Caterpillar shall
pay to ASV *** percent (***%)of the Dealer Net-Net Price received by Caterpillar
for the sale of such Work Tools which occur with the sale of any Alliance
Machine. After December 31, 2004, ASV shall not receive any amounts for the sale
of Work Tools.

         2.8 Use of Proceeds. ASV shall allocate the proceeds of the sale of ASV
Common Stock to Caterpillar pursuant to the SPA for its obligations hereunder,
to the extent provided for in the Business Plan. The Parties contemplate that,
at a minimum, ASV shall pay for:

--------
*** 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.

                                       5
<PAGE>

(a) research, development, designs, modification and improvements by either ASV
and Caterpillar (separately or jointly) of the process or technology necessary
to combine the Machine Upper and Machine Undercarriage as contemplated in
Section 2.4 and (b) all machinery and equipment for (i) combining the Machine
Upper and the Machine Undercarriage and (ii) testing such combination process or
technology. ASV shall retain title to any machinery and equipment that it
purchases. To the extent that any such machinery and equipment is located in a
Caterpillar facility, Caterpillar agrees to keep and maintain such machinery and
equipment in good working order, at Caterpillar's own cost (such cost to be
included as a Manufacturing Cost), and to return such machinery and equipment to
ASV promptly after termination or expiration of this Agreement for any reason.

                                   ARTICLE III
                          PRODUCT LINE; NON-COMPETITION

         3.1 Product Line. The Alliance Machine product line shall mean a five
model line of multi-terrain, Caterpillar-branded, positive drive, rubber-track
loaders incorporating the ASV MTSS technology combined with Caterpillar skid
steer loader machine technology. The Parties agree that these models shall
generally be larger than the ASV "R" series and smaller than the ASV 4800
series. A more detailed description of the proposed product line as currently
contemplated is provided in Exhibit A.

         3.2 Non-Competition. During the term of this Agreement, neither
Caterpillar nor ASV shall develop, market or sell a rubber-track product that
substantially competes with any of the Alliance Machines. Notwithstanding the
foregoing, the Parties agree that (a) the current ASV 4810 and R Series products
(***) and other products developed from these power trains and the Caterpillar
Building Construction Products (and their derivatives) do not compete with the
Alliance Machines and are excluded from this Agreement, and (b) any products
developed by a Caterpillar/ASV agricultural joint venture do not compete with
the Alliance Machines and are excluded from this Agreement. In addition, ASV
shall discontinue its 2800 series machines in its present configuration after
inventory quantities are depleted; provided, however, that ASV may continue to
develop and sell (only to Caterpillar and ASV dealers) the 2800 series machines
for special applications requiring bi-directional capabilities or other unique
capabilities. ASV is currently a party to a long-term supply contract (which
expires January 1, 2010) with the United States Defense Supply Center covering
the MD70, the 2800 Series and the ASV 4810. The supply of these machines under
this contract shall not be considered competing with the Alliance Machines.
After this contract expires, ASV shall direct the United States Defense Supply
Center to Alliance Machines for future contracts (except to the extent the
United States Defense Supply Center needs functionality provided by the MD 70,
the R Series and the ASV 4810).

         3.3 Sale of Undercarriages. During the term of this Agreement, ASV
shall not knowingly sell any Machine Undercarriage to any party who shall
manufacture, or to any party who shall resell a Machine Undercarriage to a party
who shall manufacture, a machine that substantially competes with any of the
Alliance Machines.

--------
*** 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.

                                       6
<PAGE>

                                   ARTICLE IV
                        DISTRIBUTION OF ALLIANCE MACHINES

         4.1 Distribution by Caterpillar.

                  (a) Caterpillar shall market and distribute the Alliance
         Machines through its dealer network as described in the Business Plan;
         provided that from the commercial introduction of the first Alliance
         Machine until December 31, 2001, Caterpillar shall engage ASV to market
         the Alliance Machines to Caterpillar dealers on the terms set forth in
         Section 4.2 below.

                  (b) Caterpillar shall provide certain business support
         functions including developing executive production schedules,
         receiving dealer orders and resolving grief associated with these
         orders, answering dealer order inquiries, processing order changes,
         maintaining product compatibility tables, providing price lists to
         dealers, and shall set up and load all Caterpillar pricing and
         scheduling systems.

                  (c) Caterpillar shall develop and distribute product support
         materials including parts and service manuals. ASV shall assist
         Caterpillar in developing such materials as they relate to the Machine
         Undercarriage.

         4.2 Distribution Assistance by ASV. ASV shall assist Caterpillar (and
at Caterpillar's direction) in the marketing of the Alliance Machines as
follows:

                  (a) ASV shall develop marketing materials (e.g., specification
         sheets, product bulletins, videos, sales presentations and dealer
         advertising materials) in support of the Alliance Machines. Such
         marketing materials shall be subject to review and approval by
         Caterpillar. Caterpillar shall distribute such materials prepared by
         ASV.

                  (b) From the commercial introduction of the first Alliance
         Machine until December 31, 2001, ASV shall provide field representative
         coverage through its existing field force for the Alliance Machines for
         up to fifteen (15) Caterpillar dealers. Caterpillar and ASV shall
         jointly select the Caterpillar dealers where ASV shall provide such
         field representative coverage.

                                    ARTICLE V
                             MANUFACTURE AND SUPPLY

         5.1 Purchase and Supply of Machine Undercarriages. ASV shall supply and
Caterpillar shall purchase one hundred percent (100%) of Caterpillar's
requirements for Machine Undercarriages on the terms set forth herein.

         5.2 Forecasts. Caterpillar shall submit to ASV, at least ninety (90)
days in advance of the first applicable month, a written forecast of its
requirements for Machine Undercarriages for the following twelve (12) month
period, with the initial forecast being attached hereto as

                                       7
<PAGE>

Exhibit B. Caterpillar shall update such forecasts in writing on a monthly
rolling basis. The first two (2) months of such updated forecasts shall be firm
on the Parties, and the remaining ten (10) months shall be the Parties' best
estimate.

         5.3 Purchase Orders. Caterpillar shall submit to ASV written purchase
orders for purchases of Machine Undercarriages in quantities consistent with its
firm forecasts; and ASV shall accept such purchase orders. In addition, ASV
shall use commercially reasonable efforts to accept, by written notice to
Caterpillar, and fill any purchase orders for quantities in excess of the firm
forecasted amounts.

         5.4 Shipping and Delivery. ASV shall deliver all Machine Undercarriages
to Caterpillar's Building Construction assembly facility in Sanford, North
Carolina (or to another United States facility as directed by Caterpillar). ASV
shall be responsible for all shipping charges (which charges shall be included
in ASV Cost) and the risk of loss until the Machine Undercarriages arrive at the
Caterpillar facility.

         5.5 Final Assembly and Styling. Caterpillar shall perform the final
assembly, final testing and additional painting (if any) of the Machine Upper
and the Machine Undercarriage. Caterpillar shall have the final decision in all
design related matters concerning the styling of the Alliance Machines and
nomenclature.

         5.6 Sale of Parts.

                  (a) ASV shall sell and direct ship parts for the Machine
         Undercarriages to Caterpillar dealers in NACD via Caterpillar's parts
         distribution system. Caterpillar shall process all parts orders and
         collect payment for all ASV parts shipped to Caterpillar dealers. ASV
         shall invoice Caterpillar for such parts at the time of shipment. Such
         invoices shall be batched by Caterpillar not less than monthly.
         Caterpillar shall pay all invoices issued during a month not later than
         the last day of the following month. ASV shall tender to Caterpillar a
         fee of *** percent (***%)*** of each ASV part which Caterpillar
         processes. Caterpillar shall issue a monthly invoice detailing such
         processing fees and ASV shall pay such amounts within thirty (30) days
         of receiving such invoice.

                  (b) For all parts sales outside of NACD, Caterpillar and ASV
         shall develop a strategy and incorporate it into the Business Plan once
         non-NACD sales of the Alliance Machines occur.

                  (c) ASV covenants to satisfy the following parts availability
         requirements: (i) at least one (1) piece part stocking for one-hundred
         percent (100%) of all Machine Undercarriage serviced parts and (ii) at
         least a thirty (30) day supply of ninety-five percent (95%) of Machine
         Undercarriage new serviced parts. The Parties shall address any changes
         to this parts availability requirement in the Business Plan.

--------
*** 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.

                                       8
<PAGE>

                  (d) ASV hereby agrees to supply all necessary parts for the
         Machine Undercarriage to Caterpillar dealers during the term of this
         Agreement and for a period of seven (7) years after (i) termination or
         (ii) expiration of this Agreement.

                  (e) Caterpillar shall provide all parts for the Machine Upper,
         and shall retain one hundred percent (100%) of the profit for any parts
         sales related to the Machine Uppers.

                  (f) During the term of this Agreement and to the extent that
         Caterpillar purchases any Machine Undercarriage parts, Caterpillar
         agrees to purchase one hundred percent (100%) of its requirements for
         parts for the Machine Undercarriage from ASV. Caterpillar shall not
         offer to Caterpillar dealers any parts for the Machine Undercarriages
         other than ASV parts. The limitation in this Section 5.6(f) shall not
         apply to any Caterpillar components incorporated in to the Machine
         Undercarriages.

                                   ARTICLE VI
                                   FINANCIALS

         6.1 Determination of Manufacturing Costs. At or before the Annual
Meeting, Caterpillar and ASV shall determine (a) the Caterpillar Manufacturing
Costs for manufacturing, testing and painting the Machine Uppers and assembling,
testing and delivering the Alliance Machines (collectively, "Caterpillar Cost"),
and (b) the ASV Manufacturing Cost for manufacturing, testing, painting,
shipping and delivering the Machine Undercarriages (collectively, "ASV Cost").
Such Caterpillar Cost and ASV Cost shall be applicable during the calendar year
following such Annual Meeting. Any cost savings realized by a Party over such
twelve (12) month period shall be ***, and the new cost structure shall be the
starting point for the ASV Cost and the Caterpillar Cost for the next twelve
(12) month period.

         6.2 Pricing of Alliance Machines to Caterpillar Dealers. The Dealer
Prices, Dealer Net-Net Prices and Variances for the Alliance Machines shall be
determined solely by Caterpillar without input from ASV in any manner.

         6.3 Pricing of Machine Undercarriages to Caterpillar.

                  (a) Until December 31, 2004, Caterpillar shall purchase the
         Machine Undercarriages from ASV at the applicable ASV Cost as agreed to
         by the Parties during the Annual Meeting, plus an amount equal to the
         following (to be determined for each model of Alliance Machine): (i)
         *** less the ***, less the *** then multiplied by (ii) *** percent
         (***%). By way of example only, if the *** equals $***, minus the ***
         of $*** minus the *** of $***, then multiplied by *** percent (***%),
         the amount invoiced by ASV shall equal the applicable *** plus $***.
         ASV shall invoice Caterpillar on a monthly basis for Machine
         Undercarriages

--------
*** 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.

                                       9
<PAGE>

         manufactured and delivered in the previous month. Caterpillar shall pay
         such invoices within thirty (30) days of receiving such invoice.

                  (b) Beginning January 1, 2005, Caterpillar shall purchase the
         Machine Undercarriages from ASV at the applicable ASV Cost as agreed to
         by the Parties during the Annual Meeting, plus an amount equal to the
         following (to be determined for each model of Alliance Machine): (i)
         *** less the ***, less the *** then multiplied by (ii) *** percent
         (***%). By way of example only, if the *** equals $***, minus the ***
         of $*** minus the *** of $***, then multiplied by *** (***%) percent,
         the amount invoiced by ASV shall equal the applicable *** plus $***.
         ASV shall invoice Caterpillar on a monthly basis for Machine
         Undercarriages manufactured and delivered in the previous month.
         Caterpillar shall pay such invoices within thirty (30) days of
         receiving such invoice.

         6.4 Quarterly True-Up. Within thirty (30) days after the close of each
calendar quarter, if the *** of the Alliance Machines were more or less than the
*** used to determine the amounts paid to ASV under Section 6.3, Caterpillar
shall (a) determine the amount by which it has overpaid or underpaid ASV under
Section 6.3 for Machine Undercarriages during such calendar quarter and (b) in
the case of underpayment, shall remit to ASV the amount of such underpayment,
and in the case of overpayment, shall provide ASV a written statement of such
overpayment, which ASV shall credit against its subsequent invoices to
Caterpillar for purchases of Machine Undercarriages until such overpayment is
fully credited.

         6.5 Audit Rights. Each Party (the "Audited Party") shall keep true and
accurate records of their respective Manufacturing Costs, and in the case of
Caterpillar, (a) any development and equipment costs to be reimbursed by ASV
pursuant to Section 2.4 or 2.8, (b) the Dealer Prices, Dealer Net-Net Prices and
Variances and (c) any warranty costs and expenses to be reimbursed by ASV
pursuant to Section 7.2(d). The other Party (the "Auditing Party") shall have
the right to review and audit such books and records, using internal personnel
or independent certified public accountants reasonably acceptable to the Audited
Party, upon reasonable written notice to the Audited Party and during normal
business hours. The Auditing Party shall bear the costs of such audit, unless
such audit reveals that the Audited Party underpaid or overcharged by more than
ten percent (10%) of the amount claimed by the Audited Party. In such case, the
Audited Party shall bear the Auditing Party's out-of-pocket costs for such
audit.

                                   ARTICLE VII
                                PRODUCT WARRANTY

         7.1 Warranty for Machine Undercarriage and Rubber Belts.

                  (a) ASV warrants to Caterpillar each Machine Undercarriage
         (excluding the Machine Undercarriage rubber belts) under the same terms
         and during the same period that Caterpillar warrants the Alliance
         Machines to its end-user customers pursuant to Caterpillar's standard
         (e.g., not extended) warranty certificate. The Parties contemplate that
         the standard

--------
*** 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.

                                       10
<PAGE>

         Caterpillar warranty certificate may change from time to time and
         hereby agree that the warranty under this Section 7.1 shall change to
         match any new Caterpillar standard warranty certificate.

                  (b) ASV warrants to Caterpillar the Machine Undercarriage
         rubber belts in accordance with the warranty as set forth in Exhibit C.

         7.2 Warranty Service and Payment.

                  (a) Caterpillar shall be responsible to the Caterpillar
         dealers and the end user customers for any warranty issues on the
         Alliance Machines. Caterpillar may authorize any warranty repairs on
         the Alliance Machines at its discretion. However, for twelve (12)
         months after the Effective Date, Caterpillar shall not receive any
         amounts for warranty repairs on Machine Undercarriages under Section
         7.2(d) without the review and approval of ASV, not to be unreasonably
         withheld. After such twelve (12) month period, Caterpillar and ASV
         shall review the authorization requirement in this Section.

                  (b) Caterpillar shall track all warranty claims for the
         Alliance Machines and shall provide to ASV, on a monthly basis, a
         written report of all warranty claims relating to the Machine
         Undercarriage, including notice of specific Machine Undercarriage
         failures, and summary information on the causes of such failure.

                  (c) Warranty repairs shall be performed by Caterpillar
         dealers, and no Machine Undercarriage shall be returned to ASV for
         repairs unless ASV specifically requests such return in writing and at
         ASV's sole expense, such request not to be unreasonably given.

                  (d) ASV shall reimburse Caterpillar for the parts costs
         actually incurred by Caterpillar dealers and charged back to
         Caterpillar for repairs to Machine Undercarriages pursuant to warranty
         claims as set forth in Section 7.2(a). The Parties acknowledge that ***
         currently responsible for labor costs associated with such repairs.
         Caterpillar shall invoice ASV for such costs on a monthly basis, and
         ASV shall pay such invoices within thirty (30) days of receiving such
         invoice. Such reimbursement shall be ASV's sole liability and
         Caterpillar's sole remedy under the warranty set forth in Section 7.1,
         except for (i) any indemnity provided in Article XI or (ii) a
         comprehensive Alliance Machine recall due to a defect in materials or
         workmanship of the Machine Undercarriage.

         7.3 Additional Warranty Programs. Claims for Caterpillar's "Product
Improvement Programs" (PIP), "Product Support Programs" (PSP), "Extended
Warranty" and other warranty programs are to be negotiated on a case-by-case
basis by both Parties. Participation in these programs shall be based on an
amount to be mutually agreed by Caterpillar and ASV.

         7.4 Warranty Disclaimer. ASV MAKES NO WARRANTIES WITH RESPECT TO THE
MACHINE UNDERCARRIAGES OTHER THAN THOSE EXPRESSLY SET FORTH IN SECTION 7.1, AND
HEREBY DISCLAIMS ALL OTHER WARRANTIES,

--------
*** 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.

                                       11
<PAGE>

EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, THE WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.

         7.5 WAIVER. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY
FOR ANY INDIRECT, INCIDENTAL, SPECIAL, CONSEQUENTIAL, EXEMPLARY, PUNITIVE OR
RELIANCE DAMAGES ARISING OUT OF THIS AGREEMENT ON ANY THEORY OF LIABILITY EVEN
IF SUCH PARTY IS ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

                                  ARTICLE VIII
                          INTELLECTUAL PROPERTY RIGHTS

         8.1 Intellectual Property Relating to Machine Uppers. 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 Machine Uppers shall belong to Caterpillar. ASV agrees to
acknowledge and deliver promptly to Caterpillar without charge such written
instruments as may be necessary to vest the entire right, title and interest in
the same in Caterpillar subject to a grant back to ASV of a royalty-free license
to make, use and sell any improvements developed by ASV (either solely or
jointly with Caterpillar) and assigned to Caterpillar hereunder in its own
non-competing products.

         8.2 Intellectual Property Relating to Machine Undercarriages. 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 Machine Undercarriages shall belong to ASV.
Caterpillar 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 subject to a grant back to Caterpillar of a
royalty-free license to make, use and sell any improvements developed by
Caterpillar (either solely or jointly with ASV) and assigned to ASV hereunder in
its own non-competing products.

         8.3 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 Section 8.1 or 8.2 ,
shall be jointly owned by the Parties.

         8.4 Assistance. From time to time, Caterpillar may make recommendations
to ASV or its agents regarding measures ASV might take to protect its
intellectual property rights in the Alliance Machine, at its own expense. ASV
shall, however, retain its own counsel in such matters, and shall be responsible
for all final decisions regarding such protection.

         8.5 Copyright License. ASV hereby grants Caterpillar an irrevocable,
non-exclusive, paid-up, worldwide license under each ASV copyright applicable to
any works of authorship fixed in any tangible medium of expression (including
but not limited to drawings, manuals and specifications) furnished to
Caterpillar in the course of this Agreement, to reproduce and distribute the
copyrighted work, and to prepare derivative works therefrom, all of which may be
used by Caterpillar solely for the purposes of this Agreement.

                                       12
<PAGE>

                                   ARTICLE IX
                              TERM AND TERMINATION

         9.1 Term.

                  (a) This Agreement shall have an initial term of five (5)
         years, unless earlier terminated pursuant to this Article IX.
         Thereafter, this Agreement shall automatically be renewed for
         additional terms of one (1) year each unless either Party gives written
         notice to terminate at least three (3) months prior to the end of the
         initial term or any additional term.

                  (b) Notwithstanding the foregoing, neither Party shall
         terminate this Agreement under Section 9.1(a) due solely to the
         application of the economics described in Section 6.3(b), unless such
         Party is experiencing the conditions described in Section 9.5.

         9.2 Termination for Default. If either Party fails to perform this
Agreement in any material respect (and does not remedy such failure to the
reasonable satisfaction of the non-defaulting Party within ninety (90) days
after written notice thereof has been sent to the other Party), then the
non-defaulting Party may terminate this Agreement.

         9.3 Termination for Frustration of Performance. If performance of the
Agreement becomes impossible or its purpose is frustrated in any material
respect for any reason (and such impossibility or frustration of purpose
continues for more than one (1) year following written notice by either Party)
in a manner that affects, directly or indirectly, the notifying Party's
interests related to this Agreement, the notifying Party may terminate this
Agreement upon one hundred eighty (180) days written notice to the other Party.

         9.4 Termination for Bankruptcy. Either Party may terminate this
Agreement upon written notice to the other Party if any of the following occurs:
(a) appointment of a trustee or receiver for all or any part of the assets or
property of the other Party; (b) insolvency or bankruptcy of the other Party;
(c) the other Party makes a general assignment for the benefit of creditors; or
(d) dissolution or liquidation of the other Party.

         9.5 Termination for Material Losses.

                  (a) A "Material Loss" occurs when the earnings before
         interest, taxes, depreciation and amortization that a Party receives
         attributable solely to the sale of Alliance Products for a fiscal year
         divided by the revenue that a Party receives attributable solely to the
         sale of Alliance Products for such fiscal year multiplied by 100 is
         less than the annualized thirty (30) day Treasury Bill rate of such
         fiscal year.

                  (b) Beginning January 1, 2004, if either Party suffers a
         Material Loss for the prior calendar year (including calendar year
         2003) and additional Material Losses are foreseeable for the next two
         (2) upcoming calendar years, then such Party may give the other Party
         written notice of the terminating Party's desire to terminate this
         Agreement. Such termination notice must be given no later than April
         30th of a given calendar year. Termination of the Agreement under this
         Section 9.5(b) shall become effective January 1st of the following
         calendar year.

                                       13
<PAGE>

         9.6 Effect of Termination or Expiration.

                  (a) Except for termination by Caterpillar in the event of
         ASV's breach of this Agreement, termination of this Agreement shall not
         relieve Caterpillar of its obligations with respect to any firm
         forecasts and accepted purchase orders in effect as of such
         termination. Promptly after termination or expiration of this
         Agreement, Caterpillar shall return to ASV all machinery and equipment
         that ASV purchased pursuant to Section 2.8 and which is in
         Caterpillar's facilities. The costs associated with the return of the
         machinery and equipment shall be born equally between Caterpillar and
         ASV.

                  (b) Termination or expiration of this Agreement shall not
         affect any rights or obligations accrued prior to the date of such
         termination or expiration. Upon termination or expiration of this
         Agreement, the Parties shall promptly return to each other such other
         Party's Confidential Information.

                                    ARTICLE X
                                 CONFIDENTIALITY

         The Parties shall maintain the secrecy of Confidential Information as
follows:

         10.1 Disclosure of Information. In connection with performance of this
Agreement, the Parties may disclose to one another certain Confidential
Information.

         10.2 Restrictions on Disclosure and Use. The Receiving Party shall hold
the Disclosing Party's Confidential Information in strictest confidence and
trust and shall use the Confidential Information only in connection with the
purposes of this Agreement. The Receiving Party shall not disclose Confidential
Information provided by the Disclosing Party and/or its Affiliates, or the fact
that it has been made available to the Receiving Party, except that the
Receiving Party may disclose Confidential Information and the fact that it has
been provided to those employees, officers, directors, agents, consultants and
representatives of the Receiving Party and its Affiliates who have a reasonable
need to know such information in connection with the purposes of this Agreement.
The Receiving Party shall be liable for any breach of the confidentiality
obligation hereunder by any of its Affiliates, or by any of the respective
employees, officers, directors, agents, consultants and representatives of the
Receiving Party and/or its Affiliates.

         10.3 Disclosure by Law or Regulation. If the Receiving Party is
required by law or legal process to disclose any of the Confidential Information
of the Disclosing Party, the Receiving Party shall promptly notify the
Disclosing Party in writing so that the Disclosing Party may seek an appropriate
protective order or other remedy at the sole cost of the Disclosing Party. If no
such protective order or other remedy is obtained, the Receiving Party shall
furnish only that portion of such Confidential Information that is legally
required and shall exercise its reasonable efforts to obtain reliable assurances
from all Parties receiving the designated portions of such Confidential
Information that confidential treatment shall be accorded to such Confidential
Information. Notwithstanding any such disclosure, any such Confidential

                                       14
<PAGE>

Information so disclosed shall, for all other purposes, continue to be treated
as Confidential Information under this Agreement.

         10.4 No Implied Licenses. The disclosure of Confidential Information
pursuant to this Agreement, and any prior or future discussions, evaluations or
other communications between the Parties, shall not confer any right nor impose
or create any obligation on the Parties other than those expressly agreed to in
this Agreement.

         10.5 Return of Confidential Information. All reports, notes, data,
memoranda, records, or other tangible expressions of Confidential Information of
the other Party, including any electronically stored data, shall be returned to
the Disclosing Party by the Receiving Party promptly upon request of such
Disclosing Party.

         10.6 Survival. The confidentiality obligation shall survive expiration
or termination of this Agreement for any reason for a period of five (5) years.

                                   ARTICLE XI
                                 INDEMNIFICATION

         11.1 Personal Injury and Property Indemnification by ASV. ASV agrees to
indemnify, defend and hold Caterpillar, its subsidiaries, Affiliates, directors,
officers, employees and agents harmless from and against all third party claims,
demands, liabilities, losses, damages, costs, and expenses, of whatsoever
nature, including attorneys' fees, arising from or in any way connected with the
injury or death of any person or loss or damage to property as a consequence of,
or attributable to, any defect of design, material, or workmanship of Machine
Undercarriages or failure of Machine Undercarriages to conform with the Parties'
agreed written specifications, drawings and data therefor.

         11.2 Personal Injury and Property Indemnification by Caterpillar.
Caterpillar agrees to indemnify, defend and hold ASV, its subsidiaries,
Affiliates, directors, officers, employees and agents harmless from and against
all third party claims, demands, liabilities, losses, damages, costs, and
expenses, of whatsoever nature, including attorneys' fees, arising from or in
any way connected with the injury or death of any person or loss or damage to
property as a consequence of, or attributable to, any defect of design,
material, or workmanship of Alliance Machines or failure of Alliance Machines to
conform with the Parties' agreed written specifications, drawings and data
therefor, except to the extent that the foregoing is covered by ASV's
indemnification obligation under Section 11.1.

         11.3 Intellectual Property Indemnification by ASV. ASV agrees to
indemnify, defend and hold Caterpillar, its dealers, subsidiaries, Affiliates,
directors, officers, employees and agents harmless from and against any and all
suits, actions, or proceedings brought against all third party claims, demands,
liabilities, losses, damages, costs, and expenses, of whatsoever nature,
including attorneys' fees, arising from or related to actual or alleged
infringement of any third party intellectual property rights arising because or
on account of the design, manufacture, use or sale of the Machine Undercarriage.
It is expressly understood that this Section does not apply to the extent any
suit, action, or proceeding is based upon actual or alleged infringement by

                                       15
<PAGE>

improvements developed by Caterpillar, Caterpillar-supplied components or
Caterpillar-supplied component parts.

         11.4 Intellectual Property Indemnification by Caterpillar. Caterpillar
agrees to indemnify, defend and hold ASV, its subsidiaries, Affiliates,
directors, officers, employees and agents harmless from and against any and all
suits, actions, or proceedings brought against all third party claims, demands,
liabilities, losses, damages, costs, and expenses, of whatsoever nature,
including attorneys' fees, arising from or related to actual or alleged
infringement of any third party intellectual property rights arising because or
on account of the design, manufacture, use or sale of the Alliance Machines,
except to the extent the foregoing is covered by ASV's indemnification
obligation under Section 11.3.

         11.5 Indemnification Procedure. Any Party seeking indemnification
hereunder shall promptly notify the indemnifying Party of the nature of the
claim for which the indemnified Party seeks indemnification. The indemnified
Party shall give complete control of, and cooperate with, the defense of such
claim to the indemnifying Party and the indemnified Party shall not settle any
claim without the prior written approval of the indemnifying Party, such
approval not to be unreasonably withheld.

                                   ARTICLE XII
                                CHANGE IN CONTROL

         12.1 Right to Terminate. In the event of any Change in Control of ASV
(as defined below), Caterpillar shall have the right to terminate this Agreement
effective immediately upon written notice to ASV.

         12.2 Definition of Change in Control. For purposes of this Article XII,
"Change in Control" shall mean:

                  (a) The acquisition (directly, indirectly or beneficially) by
         any third party or group of parties acting in concert of securities
         reflecting at least thirty percent (30%) of the outstanding voting
         power of ASV;

                  (b) A change of the majority of the directors of ASV occurring
         in a period of less than one (1) year, excluding to the extent no
         solicitation in opposition has theretofore been announced or commenced,
         changes in directors resulting from the election of directors at the
         next regularly scheduled annual meeting of ASV's shareholders; or

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

         12.3 Acquisition by Caterpillar. Notwithstanding the foregoing, no
termination right shall be given by Caterpillar in the event that Caterpillar
acquires (directly, indirectly or beneficially) securities reflecting at least
thirty percent (30%) of the outstanding voting power of ASV.

                                       16
<PAGE>

                                  ARTICLE XIII
                                 MISCELLANEOUS

         13.1 Injunctive Relief. It is understood and agreed by the Parties that
each may be irreparably injured by a breach of Article X (Confidentiality) and
that monetary damages may not be a sufficient remedy for any actual or
threatened breach thereof. In addition to any remedies available at law, the
non-breaching Party may also be entitled to equitable relief, including
injunction and specific performance.

         13.2 Force Majeure. No failure or omission by either Party in the
performance of any of its obligations under this Agreement shall be deemed a
breach of this Agreement, nor create any liability or give rise to any right to
terminate this Agreement, if the same shall arise from or as a consequence of a
fire, flood, drought, hurricane, severe weather or other act of God, war,
insurrection, civil disturbance, labor dispute or any other cause beyond the
reasonable control of such Party, whether similar to or different from the
causes above enumerated, and any such cause shall absolve the affected Party
from responsibility for such failure to perform said obligation.

         13.3 Announcement. Neither Party shall make any announcement concerning
the nature and details of this Agreement without the express written consent of
the other Party, such consent not to be unreasonably withheld.

         13.4 Assignment. This Agreement may not be assigned by either Party
without the prior written consent of the other Party, except that Caterpillar
may assign this Agreement to a wholly-owned subsidiary with the consent of ASV,
which consent shall not be unreasonably withheld.

         13.5 Applicable Law. The Parties agree that this Agreement shall be
construed, interpreted, and applied in accordance with the laws of the State of
Illinois, without reference to its conflict of laws provisions.

         13.6 Entire Agreement, Amendment. This Agreement, the SPA and the
Replacement Warrant including any Exhibits attached thereto or referred to
therein, constitutes the entire agreement between the Parties and there are no
prior understandings, agreements, representations or warranties between the
Parties relating hereto. No modification or amendment to this Agreement or any
of its provisions shall be binding unless contained in a writing signed by both
Parties.

         13.7 Notices. When written notice is required by this Agreement, it
shall be sent by registered mail, by courier or by such other method as shall
permit the sender to verify delivery, to the addresses set forth below:

For Caterpillar:             Caterpillar Inc.
                             Attn:  Donald M. Ings, Vice President
                             Building Construction Products Division
                             Caterpillar Inc.

                                       17
<PAGE>

                             Suite 300
                             100 Regency Forest Drive
                             Cary, North Carolina 27511
                             Telephone: (919) 465 2777
                             Fax: (919) 465 2868

                             Copy To:
                             Sean P. Leuba
                             Caterpillar Inc.
                             100 N.E. Adams Street
                             Peoria, Illinois  61615
                             Telephone: (309) 675-5654
                             Fax: (309) 675-1795

For ASV:                     A.S.V., Inc.
                             Attn: Mr. Gary D. Lemke
                             840 Lily Lane
                             Grand Rapids, Minnesota  55744
                             Telephone:  (218) 327-3434
                             Facsimile:  (218) 326-5579

                             Copy To:
                             Amy E. Ayotte
                             Dorsey & Whitney
                             Pillsbury Center South
                             220 South Sixth Street
                             Minneapolis, Minnesota 55402
                             Telephone: (612) 340-2600
                             Fax: (612) 340-8738

Written notice may also be sent by facsimile to the numbers listed above, but
such notice shall not be effective unless the sender receives a return facsimile
acknowledging receipt of the notice. Notice shall be deemed received when
actually delivered to the recipient as demonstrated by postal records. Facsimile
notice shall be deemed received upon receipt by the sender of an acknowledgement
as described above. The addresses and transmittal numbers set forth above can be
changed only by written notice, which complies with the requirements of this
Article XIII.

         13.8 Independent Contractor. The relationship between the Parties shall
be that of independent contractors, and nothing in this Agreement shall be
construed to establish a fiduciary, partnership, agency, or joint venture
relationship between the Parties, or constitute either Party, its agents and
employees as the agents or employees of the other Party or to grant them any
power or authority to act for, bind or otherwise create or assume any obligation
on behalf of the first Party for any purpose whatsoever.

                                       18
<PAGE>

         13.9 Severability. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of the
remainder hereof.

         13.10 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.

         13.11 Headings. The headings to the sections of this Agreement are
solely for convenience of reference, and they shall not govern, limit or aid in
the interpretation of any terms or provisions of this Agreement.

         13.12 Survivability. Section 5.6 and Articles VII, VIII, X, XI and XIII
shall survive termination of this Agreement.

         13.13 No Waiver. The provisions of this Agreement may be waived,
altered, amended, or repealed in whole or in part only upon the written consent
of the Parties. The waiver by either Party of any breach of this Agreement shall
not be deemed or construed as a waiver of any other breach, whether prior,
subsequent or contemporaneous, of this Agreement.

                     SIGNATURES APPEAR ON THE FOLLOWING PAGE

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

                                       19
<PAGE>

         IN WITNESS WHEREOF, the authorized representative of each Party have
duly executed this Agreement as of the Effective Date.

                                    CATERPILLAR INC.

                                    /s/ Donald M. Ings
                                    ------------------------------
                                    Donald M. Ings
                                    Vice President

                                    ASV, INC.

                                    /s/ Gary D. Lemke
                                    ------------------------------
                                    Gary D. Lemke
                                    President

List of Exhibits
----------------

Exhibit A:  Alliance Machines, Machine Uppers and Machine Undercarriages
Exhibit B:  Initial Forecast
Exhibit C:  Warranty for Machine Undercarriage Rubber Belts

                                       20

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