A.S.V., INC.

                    FORM OF INCENTIVE STOCK OPTION AGREEMENT

                                   (EMPLOYEE)



            Option Agreement, made and entered into this ___ day of ________,

____, between A.S.V., Inc., a Minnesota corporation (the "Company") and

____________, an individual resident of ____________, Minnesota ("Employee").



            WHEREAS, the Company has adopted the A.S.V., Inc. 1996 Incentive and

Stock Option Plan (the "Plan") which permits issuance of stock options for the

purchase of shares of common stock of the Company, and the Company has taken all

necessary actions to grant the following option pursuant and subject to the

terms of the Plan.



            NOW THEREFORE, for good and valuable consideration, the receipt and

adequacy of which are hereby acknowledged, the Company and Employee hereby agree

as follows:



            1.    Grant of Option. The Company hereby grants Employee the right

                  and option (hereinafter called the "Option") to purchase all

or any part of an aggregate (minimum ___ shares) of _________________ (____)

shares of the Company's common stock at the option price of ______________

Dollars and _____ cents ($_____) per share on the terms and conditions set forth

in this agreement and in the Plan. It is understood and agreed that the Option

price is the per share fair market value of such shares on the date of grant.

The Company intends that the Option shall be an Incentive Stock Option governed

by the provisions of Section 422 of the Internal Revenue Code of 1986, as

amended (the "Code"). The terms of the Plan and the Option shall be interpreted

and administered so as to satisfy the requirements of the Code. The Option is

issued pursuant to the Plan and is subject to its terms. A copy of the Plan will

be furnished upon request of Employee.



            2.    Vesting of Option Rights. Except as otherwise provided in

section 3 of this agreement, the Option may be exercised by Employee in

accordance with the following schedule:



{TABLE}

{CAPTION}

                                               Number of

On or after each of                     shares with respect to

the following dates                which the Option is exercisable

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

{S}                                {C}

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

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

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

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

{/TABLE}



                                       17

{PAGE}



            Notwithstanding the foregoing, the Option may be exercised as to

100% of the shares of common stock of the Company for which the Option was

granted on the date of a "change of control", as hereinafter defined. A "change

of control" shall mean any of the following: (i) a public announcement that any

person has acquired 51% or more of the then outstanding shares of common stock

of the Company and, for this purpose, the term "person" shall have the meaning

provided in Section 13(d) of the Securities Exchange Act of 1934 or related

rules promulgated by the Securities and Exchange Commission; (ii) the

commencement of or public announcement of an intention to make a tender or

exchange offer for 51% or more of the then outstanding shares of the common

stock of the Company; (iii) a sale of all or substantially all of the assets of

the Company, or (iv) the Board of Directors of the Company, in its sole and

absolute discretion, determines that there has been a sufficient change in the

stock ownership of the Company to constitute a change in control of the Company.

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