COMMERCIAL ALLIANCE
AGREEMENT
THIS
AGREEMENT made and entered into effective the 23
rd day of September, 2005, between VERMEER
MANUFACTURING COMPANY , an Iowa corporation, with its principal
place of business at Pella, Iowa (hereinafter referred to as
“Vermeer”), and A.S.V., INC. , a Minnesota
corporation with its principal place of business at 840 Lily Lane,
Grand Rapids, MN 55744 (hereinafter referred to as
“ASV”).
WHEREAS,
Vermeer desires to utilize ASV’s expertise in the design,
manufacture and sale of all-terrain rubber tracked undercarriages
to enhance various Vermeer Products; and,
WHEREAS,
Vermeer desires to be the exclusive user of ASV OEM Components (as
defined below) in several product and market categories;
and
WHEREAS,
ASV desires to enhance the sale of ASV Posi-Track Rubber Track
Loaders by having Vermeer grant ASV access to Vermeer’s
distribution system; and
WHEREAS,
ASV desires to supply ASV OEM Components to Vermeer for inclusion
in various Vermeer Products.
NOW,
THEREFORE, in consideration of the mutual covenants set forth
herein and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the Parties hereto
agree as follows:
ARTICLE I
DISTRIBUTION OF ASV PRODUCTS TO VERMEER DEALERS
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1.
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Consent by Vermeer
. Vermeer hereby
consents to ASV signing separate dealer agreements with
Vermeer’s Industrial Dealers for the distribution of ASV
products which do not directly compete with Vermeer products, and
will not require that ASV pay a distribution rights commission to
Vermeer. ASV shall be solely responsible for any rights and
obligations arising out of supplying ASV products to
Vermeer’s Industrial Dealers.
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2.
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Withdrawal upon Failure of Vermeer
Industrial Dealer to Adequately Represent Vermeer
Products .
Vermeer reserves the right to withdraw its consent with respect to
a particular Vermeer Industrial Dealer for ASV products to be
distributed in the Vermeer-branded facilities of such Vermeer
Industrial Dealer in the event such Vermeer Industrial Dealer, as a
result of the distribution of ASV products by such Vermeer
Industrial Dealer, is not providing the adequate focus, effort,
capital, etc. to meet the reasonable goals and expectations
uniformly applied to all Vermeer Industrial Dealers.
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Page 1 of 17
ARTICLE II
SUPPLY OF ASV OEM COMPONENTS
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3.
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Exclusive Supply of ASV OEM
Components to Vermeer Target Markets . Subject to the terms and
conditions hereof, ASV agrees to exclusively sell, with respect to
the Vermeer Target Markets, the ASV OEM Components to Vermeer. For
purposes of this provision and this Agreement, ASV OEM Components
shall mean any and all undercarriages, tracks and track assemblies
designed, manufactured and/or sold by ASV and any related product
offerings developed during the term of this Agreement. For purposes
of this provision and this Agreement, Vermeer Target Markets shall
mean those classes of uses, applications and/or customer types set
forth on Exhibit A hereto or such others as may be added by
mutual agreement of the Parties from time to time. During the term
of this Agreement, ASV agrees not to sell ASV OEM Components to
other original equipment manufacturers for use in direct
competition to Vermeer Products in the Vermeer Target
Markets.
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4.
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Vermeer Conversion/Development of
Products Utilizing ASV OEM Components . Vermeer agrees that it shall be
primarily responsible for Vermeer product development or
enhancement to include the use of ASV OEM Components. Vermeer shall
support such development or adaptation of ASV OEM Components to
Vermeer Products in response to market demands and constraints,
mechanical fit-up, performance and economic
justification.
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5.
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Application Assistance Adapting ASV
OEM Components . ASV agrees to provide reasonable
assistance to Vermeer to convert the ASV OEM Components to be the
primary ground drive system of the Vermeer Products that will
utilize such ASV OEM Components. Such assistance will include, but
not be limited to, FEA analyses, computer aided modeling of ASV OEM
Components and the equipment structures affixed thereto, load
bearing tests, center of gravity modeling, durability testing,
stress testing and hydraulic system component application
approval.
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6.
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Documentation Assistance Regarding
ASV OEM Components . ASV agrees to provide, at no
additional cost to Vermeer, written and/or electronic versions or
copies (in editable form) of Operators, Maintenance/Service and
Parts Manuals applicable to the ASV OEM Components and ASV consents
to Vermeer’s commercial use of such materials in the
preparation of any Operators, Maintenance/Service and Parts Manuals
for Vermeer Products containing such ASV OEM Components. ASV agrees
to provide updates to Vermeer regarding the ASV OEM Components
previously supplied to Vermeer contemporaneously with the timing of
the release of such updates for ASV’s own use with respect to
ASV’s Posi-Track Rubber Track Loaders utilizing substantially
similar components. Vermeer is not required to use ASV parts
numbering scheme or otherwise indicate that the illustration
provided is from ASV.
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Page 2 of 17
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7.
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Purchasing and Selling Procedure for
ASV OEM Components .
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a)
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Ordering Procedure
. All orders by Vermeer
for its inventory and/or for resale to its dealers shall be placed
through the issuance by Vermeer of a purchase order subject to the
provisions of this Agreement. ASV will acknowledge each order
stating its acceptance of both quantities and deliveries. In the
event of any conflict between the provisions of any purchase order,
order acknowledgement, or other document and this Agreement, the
provisions of this Agreement shall be controlling. Direct orders
from dealers invoiced through Vermeer shall be handled by the
dealer purchase order.
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b)
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Forecast of Orders
. Vermeer will provide a
rolling twelve (12) month forecast to ASV to give visibility
to its intended usage of ASV OEM Components. However, the forecast
is NOT a firm order. Orders can only be made by issuing a purchase
order as set forth in subsection (a) above.
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c)
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Delivery . The date of delivery shall be set
forth on Vermeer’s purchase order and accepted by ASV on the
order acknowledgment. ASV shall establish a firm delivery schedule
in accordance with the respective purchase order. Vermeer may, from
time to time, direct ASV to ship the ASV OEM Components directly to
its authorized dealers or the ultimate retail customer. Risk of
loss and responsibility for all charges and freight for ASV OEM
Components ordered by Vermeer shall pass to Vermeer upon delivery
to the common carrier at ASV facility in Grand Rapids,
Minnesota.
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d)
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Invoicing and Payment
. All ASV OEM Component
orders placed by Vermeer or its dealers shall be invoiced to
Vermeer upon shipment in accordance with the applicable purchase
order, as accepted. Such Invoices shall be paid within thirty (30)
days of the date of invoice.
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8.
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Parts Supply for ASV OEM
Components .
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a)
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Parts Supply . Vermeer agrees to purchase from
ASV 100% of its requirements for ASV OEM Components parts sourced
or manufactured by ASV to its design. ASV agrees to maintain
sufficient supply capabilities for the purpose of providing Vermeer
a reasonable stock of service parts manufactured or sourced by ASV
for the ASV OEM Components sold to Vermeer. ASV’s obligations
under this subsection shall be in effect for a period of not less
than ***** (*****) years after delivery of ASV OEM Components to
Vermeer for which service parts are used. Obligations under this
subsection shall not be affected by the termination of this
Agreement and shall extend to parts manufactured or sourced by ASV
to its design but shall not extend to off-the-shelf parts purchased
by ASV from outside sources which can be easily obtained by
Vermeer.
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*****
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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.
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Page 3 of 17
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b)
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Dual Distribution Activities
Regarding Parts . ASV will continue to have the
right to sell parts related to the ASV OEM Components provided to
other original equipment manufacturers for ASV OEM Components not
in Vermeer Target Markets. The following shall be applicable to ASV
and Vermeer during the term of parts supply:
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i)
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No comparative claims to
Other’s product . Vermeer and ASV agree not to make
comparative, compatibility or similarity claims or other comparison
graphics or matrices, between the ASV OEM Components sold to
Vermeer and the comparable, compatible or similar ASV OEM
Components sold directly by a third party or through a third
party’s distribution channel. Neither Party may issue
advertising materials which include printed statements that
acknowledge that the ASV OEM Components are identical, if that is
the case.
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ii)
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Exclusion of Other Sales Materials
in Product Packaging . ASV agrees not to provide
advertising or other materials regarding the ASV or other
non-Vermeer branded ASV OEM Components in any ASV OEM Component
shipments to Vermeer, its dealers or its customers.
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iii)
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Use of Information Gained Through
Vermeer or ASV . Vermeer and ASV agree to not use
any customer lists provided from the other for other than their
intended purpose in carrying out their actions under this
Agreement. Each must independently source materials used to solicit
customers in such channels.
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9.
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Pricing of ASV OEM
Components .
ASV agrees to provide ASV OEM Components at prices to be
established at a gross margin of ***** percent (*****%). Changes in
ASV’s cost structure necessitating an increase or decrease in
the price shall be provided in writing to Vermeer, to be effective
with respect to all orders placed more than thirty (30) days after
delivery of such written notice. ASV will, whenever possible,
endeavor to change prices to coincide with Vermeer’s annual
price change to the Vermeer Industrial Dealers. Every effort will
be made to limit changes to such a time frame when possible. All
prices are F.O.B. Grand Rapids, Minnesota.
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10.
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Pricing of ASV OEM Component
Parts . ASV
shall sell ASV OEM Component parts directly to Vermeer for
distribution through Vermeer’s parts distribution system. The
parts will be sold to Vermeer at ASV’s dealer net price minus
***** percent (*****%).
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11.
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Other Product and Distribution
Opportunities . Compact Skid-Steers,
mini-excavators and other products, markets and distribution
opportunities may be added to Exhibit A to this Agreement as
mutually agreed upon by the Parties.
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*****
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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.
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Page 4 of 17
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12.
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Term of Agreement
. This Agreement shall
commence on the date hereof and shall remain in force for eight
(8) years with automatic one-year renewal periods unless
either party gives the other party prior written notice of
termination at least 6 months before the end of the current
term. Notwithstanding the foregoing, this Agreement may be
terminated earlier by mutual agreement of the Parties or as set
forth in subsections (a), (b) or (c) below:
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a)
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Termination by ASV
. If Vermeer fails to
perform this Agreement in any material respect (and does not remedy
such failure to the satisfaction of ASV within sixty (60) days
after written notice thereof has been delivered to Vermeer), or
becomes insolvent, bankrupt or consents to the appointment of a
trustee or receiver, or if a trustee or receiver is appointed for
Vermeer without the consent of Vermeer and such trustee or receiver
is not discharged within sixty (60) days, or if any
bankruptcy, reorganization, arrangement or liquidation proceedings
are instituted by Vermeer or instituted against it and consented to
by Vermeer or permitted to remain undismissed for sixty
(60) days, or if Vermeer’s shares, management, ownership
or substantially all Vermeer’s property is confiscated,
nationalized, expropriated or otherwise taken by governmental
action, then in such event(s), ASV may terminate this Agreement
immediately upon written notice to Vermeer.
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b)
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Termination by Vermeer
. If ASV fails to
perform this Agreement in any material respect (and does not remedy
such failure to the satisfaction of Vermeer within sixty
(60) days after written notice thereof has been delivered to
ASV), or becomes insolvent, bankrupt or consents to the appointment
of a trustee or receiver, or if a trustee or receiver is appointed
for ASV without the consent of ASV and such trustee or receiver is
not discharged within sixty (60) days, or if any bankruptcy,
reorganization, arrangement or liquidation proceedings are
instituted by ASV or instituted against it and consented to by ASV
or permitted to remain undismissed for sixty (60) days, or if
ASV’s shares, management, ownership or substantially all
ASV’s property is confiscated, nationalized, expropriated or
otherwise taken by governmental action, then in such event(s),
Vermeer may terminate this Agreement immediately upon written
notice to ASV.
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c)
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Change in Control of ASV
. In the event of a
change in control of ASV (as defined below) Vermeer shall have the
right to terminate this Agreement effective immediately. For
purposes of this subsection (c), “Change in Control”
shall mean:
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i)
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The
acquisition by any third party or group of parties acting in
concert of at least thirty percent (30%) of the outstanding shares
of common stock of ASV; or
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ii)
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A
change in a majority of the directors of ASV occurring in a period
of less than one year, excluding, to the extent no solicitation in
opposition has theretofore been announced or commenced, changes in
directors resulting from the election of directors at the next
regularly scheduled annual meeting of ASV’s shareholders;
or
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Page 5 of 17
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iii)
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The
sale, exchange, transfer or other disposition to a third party of
all or substantially all the assets of ASV.
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d)
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Change in Control of
Vermeer . In
the event of a change in control of Vermeer (as defined below) ASV
shall have the right to terminate this Agreement effective
immediately. For purposes of this subsection (d), “Change in
Control” shall mean:
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i)
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The
acquisition by any third party or group of parties (other than
current Vermeer shareholders) acting in concert of at least thirty
percent (30%) of the outstanding shares of common stock of Vermeer;
or
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ii)
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The
sale, exchange, transfer or other disposition to a third party of
all or substantially all the assets of Vermeer.
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13.
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Product Responsibility.
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a)
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Design Responsibility for ASV OEM
Components .
ASV shall be completely and solely responsible for final decisions
on the design, safety labeling or instruction, development,
engineering and research concerning ASV OEM Components. Vermeer may
from time to time suggest new features or changes in the design of
ASV OEM Components and ASV shall incorporate such new features
and/or design changes wherever it believes that such will not
adversely affect the performance, durability or safety of ASV OEM
Components or cause such ASV OEM Components to infringe on any
intellectual property rights of third parties.
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b)
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Disclosure of Failures
. ASV shall also provide
Vermeer with a report of product liability insurance claims made
during the preceding five (5) years which includes, to the
best of ASV’s knowledge, the names of any persons alleged to
have been injured for reasons alleged to be caused by the ASV OEM
Components, the circumstances surrounding such claim(s) and the
resolution of such claim(s). ASV shall have a continuing duty
during the term of this Agreement and for five (5) years after
its termination to generate such report upon the specific request
of Vermeer. As of the date of this Agreement, ASV represents and
warrants that, to the best of ASV’s knowledge there are no
present or threatened claims asserted by any persons with regard to
the ASV OEM Components.
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14.
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Intellectual Property
Rights.
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a)
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Intellectual Property Relating to
Vermeer Machines . Any patents, copyrights, trade
secrets, designs, drawings, know-how or any other intellectual
property developed by either Party or jointl
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