<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 2, 1998
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
NORTH ATLANTIC ACQUISITION CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 6799 13-3853272
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION NO.) IDENTIFICATION NO.)
</TABLE>
------------------------
5 EAST 59TH STREET, 3RD FLOOR
NEW YORK, NEW YORK 10022
(212) 486-4444
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
DAVID J. MITCHELL
CHAIRMAN OF THE BOARD
5 EAST 59TH STREET, 3RD FLOOR
NEW YORK, NEW YORK 10022
(212) 486-4444
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
Copies to:
DAVID ALAN MILLER, ESQ. DAVID LERNER, ESQ.
GRAUBARD MOLLEN & MILLER MORRISON COHEN SINGER & WEINSTEIN, LLP
600 THIRD AVENUE 750 LEXINGTON AVENUE
NEW YORK, NEW YORK 10016-2097 NEW YORK, NEW YORK
(212) 818-8800 (212) 735-8600
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effectiveness of this Registration Statement and the
satisfaction or waiver of all other conditions to the merger (the "Merger") of
Moto Guzzi Corp., a Delaware corporation ("Guzzi Corp."), with and into North
Atlantic Acquisition Corp., a Delaware corporation ("Registrant"), pursuant to
the Agreement and Plan of Merger and Reorganization dated as of August 18, 1998
among the Registrant, Moto Guzzi and Trident Rowan Group, Inc. ("TRG"),
described in the enclosed Proxy Statement/Prospectus.
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /____.
If this form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /____.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: /x/
------------------------
<TABLE>
CALCULATION OF REGISTRATION FEE
PROPOSED
MAXIMUM
AMOUNT OFFERING
TITLE OF EACH CLASS TO BE DOLLAR AMOUNT PRICE PER
OF SECURITIES TO BE REGISTERED REGISTERED TO BE REGISTERED SECURITY
<S> <C> <C> <C>
Class A Common Stock, $.01 par value (1)...................... 5,000,000 -- --
Class B Preferred Stock, $.01 par value (2)................... 333,334(3) -- --
Class A Common Stock, $.01 par value.......................... 333,334(3) $5,000,010(4) --
Nominal Warrants (5).......................................... -- $9,500,000(3) --
Class A Common Stock, $.01 par value (6)...................... -- $9,500,000 --
Class A Common Stock, $.01 par value (8)...................... 360,000 -- $ 8.75
Class A Warrants (9).......................................... 360,000(3) -- $0.125
Class A Common Stock, $.01 par value (11)..................... 360,000 -- $9.00
Class A Common Stock, $.01 par value (13)..................... 15,000 -- $8.75
<CAPTION>
PROPOSED
MAXIMUM
TITLE OF EACH CLASS AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED OFFERING PRICE REGISTRATION FEE
<S> <C> <C>
Class A Common Stock, $.01 par value (1)...................... --
Class B Preferred Stock, $.01 par value (2)................... -- $ 5.90(7)
Class A Common Stock, $.01 par value.......................... $5,000,010
Nominal Warrants (5).......................................... $9,500,000
Class A Common Stock, $.01 par value (6)...................... $9,500,000
Class A Common Stock, $.01 par value (8)...................... $3,150,000 $ 929.25(10)
Class A Warrants (9).......................................... $45,000 $ 13.28(10)
Class A Common Stock, $.01 par value (11)..................... $3,240,000 $ 955.80(12)
Class A Common Stock, $.01 par value (13)..................... $131,250 $ 38.72(14)
Total Registration Fee................................................................$1942.95
</TABLE>
(footnotes on next page)
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SUCH SECTION 8(A), MAY DETERMINE.
------------------------
Pursuant to Rule 429 under the Securities Act, the prospectus contained
herein also relates to the Registrant's earlier Registration Statement on Form
SB-2 (No. 33-80647) and updates the information contained therein. Such
Registration Statement relates to, among other things, shares of Class A Common
Stock of the Registrant issuable upon the exercise of certain outstanding
Class A Warrants and Class A Common Stock and Class A Warrants issuable on
conversion of certain outstanding shares of Class B Common Stock.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
(footnotes from previous page)
(1) Represents shares of Class A Common Stock issuable in the Merger.
(2) Represents shares of Class B Preferred Stock issuable in the Merger.
(3) Pursuant to Rule 416, there are also being registered such additional
securities as may be issued pursuant to the anti-dilution provisions of the
Class B Preferred Stock, the Nominal Warrants and the Class A Warrants.
(4) Represents the market value of Class A Common Stock underlying the 333,334
shares of Class B Preferred Stock issuable in the Merger.
(5) Represents the maximum value of the Nominal Warrants.
(6) Represents the maximum value of the Class A Common Stock issuable upon the
exercise of the Nominal Warrants.
(7) Pursuant to Rule 457(f)(2) the registration fee of the 5,000,000 shares of
Class A Common Stock, 333,334 shares of Class B Preferred Stock, the
Class A Common Stock issuable on conversion of the Class B Preferred Stock,
$9,500,000 maximum value of the Nominal Warrants and the Class A Common
Stock issuable upon exercise of the Nominal Warrants, is based on one-third
of the par value of the 6,000,000 shares of Common Stock and 1,500,000
shares of Preferred Stock being acquired from the shareholders of Guzzi
Corp. which has an accumulated deficit of approximately $8,668,000 at
June 30, 1998.
(8) Represents 360,000 shares of Class A Common Stock issuable in the Class B
Common Stock Recapitalization ("Class B Recapitalization").
(9) Represents the Class A Warrants issuable in the Class B Recapitalization.
(10) Pursuant to Rule 457(f)(1), the registration fee is calculated on the basis
of the market price for the securities to be received by the Registrant.
(11) Represents the shares of Class A Common Stock underlying the Class A
Warrants issued in the Class B Recapitalization.
(12) Pursuant to Rule 457(i), the registration fee is being paid based on the
$9.00 to be paid for each share of Class A Common Stock on the exercise of
the Class A Warrants.
(13) Represents additional shares of Class A Common Stock issued in connection
with the Merger.
(14) Pursuant to Rule 457(c), the registration fee is being paid based on the
market price of a share of Class A Common Stock on a day within the five
days immediately preceding the filing of this Registration Statement.
ii
<PAGE>
NORTH ATLANTIC ACQUISITION CORP.
5 EAST 59TH STREET
NEW YORK, NEW YORK 10022
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON [ ]
------------------------
To the Stockholders of
North Atlantic Acquisition Corp.:
NOTICE IS HEREBY GIVEN that an Annual Meeting of the Stockholders of North
Atlantic Acquisition Corp., a Delaware corporation ("NAAC"), will be held on
[ ] at [ ] .m. local time at [ ], for the
following purposes:
1. To consider and act upon a proposal to approve an Agreement and
Plan of Merger and Reorganization, dated August 18, 1998 ("Merger
Agreement"), providing for the merger of Moto Guzzi Corp., a Delaware
corporation ("Guzzi Corp."), with and into NAAC, with NAAC being the
surviving corporation ("Merger").
2. To consider and act upon a proposal to approve the adoption of an
Amended and Restated Certificate of Incorporation to effect a series of
amendments to the Certificate of Incorporation of NAAC ("Certificate of
Incorporation") to effect the Merger: (A) to change the name of NAAC to
Moto Guzzi Corporation; (B) to increase the total number of shares which
NAAC will have authority to issue to Twenty Million (20,000,000), of which
(i) 15 Million (15,000,000) shall be Class A Common Stock, par value $.01
per share, (ii) Two Hundred Fifty Thousand (250,000) shall be Class B
Common Stock, par value $.01 per share, and (iii) Four Million Seven
Hundred and Fifty Thousand (4,750,000), shall be preferred stock, par value
$.01 per share, of which One Hundred (100) shall be designated Class A
Convertible Preferred Stock and Three Hundred Fifty Thousand (350,000)
shall be designated as Class B Convertible Preferred Stock; (C) to provide
for classification of the Board of Directors into three classes serving
staggered terms; (D) to require a vote of two-thirds of the outstanding
stock to amend or repeal the by-laws, or by affirmative vote of a majority
of the Board of Directors, subject to certain exceptions;(E) to provide
that the affirmative vote of two-thirds of all stock shall be required to
fill a vacancy in the Board of Directors created by an increase in the size
thereof or by termination of a director if not otherwise filled by the
remaining members of the Board of Directors; (F) to provide that members of
the Board of Directors may be removed only for cause and only by action of
the Board of Directors or upon the affirmative vote of two-thirds of all
stock; and (G) to require NAAC to indemnify its officers and directors,
subject to certain exceptions required by law.
3. To elect eight directors.
4. To consider and act upon a proposal to approve the 1998 Stock
Option Plan and 1998 Stock Plan for Outside Directors (together, "Stock
Option Plans").
5. To consider and act upon a proposal to amend the Certificate of
Incorporation to reclassify each share of NAAC Class B Common Stock into
two shares of NAAC Class A Common Stock and two NAAC Class A Warrants
("Class B Recapitalization").
6. To transact such other business as may properly come before the
Annual Meeting.
The Board of Directors has fixed the close of business on [ ] as
the record date for the determination of stockholders entitled to notice of and
to vote at the Annual Meeting. The holders of the NAAC Class A Common Stock and
NAAC Class B Common Stock vote together as a single class on all matters to be
considered at the Annual Meeting other than on Proposal 5 relating to the Class
B Recapitalization on which the holders of the NAAC Class B Common Stock will
vote as a separate class. Each holder of record of NAAC Class A Common Stock on
the record date is entitled to cast one vote for each share held. Each holder of
record of NAAC Class B Common Stock on the record date is entitled to cast two
votes for each share held on each
i
<PAGE>
proposal. The NAAC Class A Common Stock and NAAC Class B Common Stock are
collectively referred to as the "NAAC Common Stock". The affirmative vote by the
holders of two-thirds in interest of NAAC Common Stock is required to approve
the Merger Agreement and the Merger; however, if more than 20% of the
outstanding NAAC Class A Common Stock, excluding the 106,000 shares of Class A
Common Stock (the "Pre-IPO Shares") held by certain NAAC stockholders prior to
NAAC's initial public offering (the "Initial NAAC Stockholders") are submitted
to NAAC for redemption, NAAC will not consummate the Merger.
Holders of NAAC Class A Common Stock other than the Initial NAAC
Stockholders, have the right to have their shares redeemed for approximately
$ per share in cash if holders of no more than 20% of the outstanding NAAC
Class A Common Stock, other than the Pre-IPO Shares, seek redemption and the
Merger is approved and consummated. This redemption right must be exercised as
described in the accompanying Proxy Statement/Prospectus and written notice of
such exercise must be given to NAAC no later than 1998, the
twentieth day prior to the vote on the proposal to approve the Merger Agreement
and the Merger at the Annual Meeting.
The Initial NAAC Stockholders have agreed to vote their Pre-IPO Shares and
any other shares of NAAC Class A Common Stock of which they are the beneficial
owners on the record date for the Annual Meeting (approximately 11.7% of the
outstanding shares of NAAC Class A Common Stock) in accordance with the vote of
the majority in interest of all other holders of the NAAC Common Stock on the
proposal to approve the Merger Agreement and the Merger.
The Board of Directors unanimously recommends that stockholders vote "FOR"
approval of the Merger Agreement and the Merger. The Board of Directors also
unanimously recommends approval of the proposals (i) to adopt the Amended and
Restated Certificate of Incorporation, (ii) to elect the eight nominees as
directors to hold office commencing upon consummation of the Merger, and
(iii) to adopt the Stock Option Plans. Approval of these proposals by the NAAC
stockholders is a condition to the Merger and for each of these other proposals.
The Board of Directors unanimously recommends approval of the Class B
Recapitalization providing for the conversion of each share of NAAC Class B
Common Stock into two shares of NAAC Class A Common Stock and two NAAC Class A
Warrants. Approval of this proposal is not a condition to the Merger; however,
the Class B Recapitalization is conditioned on consummation of the Merger. As
described in the Proxy Statement under "Proposal 1: The Merger--Conflicts of
Interest," certain members of the Board of Directors of NAAC have conflicts of
interest arising out of certain agreements and arrangements with NAAC and their
ownership of NAAC Common Stock.
By Order of the Board of Directors,
C. THOMAS MCMILLEN
Secretary
October , 1998
EACH STOCKHOLDER OF NAAC CLASS A COMMON STOCK IS URGED TO COMPLETE, SIGN, DATE
AND RETURN THE ENCLOSED WHITE PROXY CARD AND EACH STOCKHOLDER OF NAAC CLASS B
COMMON STOCK IS URGED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED BLUE PROXY
CARD IN THE ENVELOPE PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES. A STOCKHOLDER WHO EXECUTES AND RETURNS A PROXY CAN REVOKE IT AT ANY TIME
BEFORE IT IS VOTED BY PROVIDING WRITTEN NOTICE TO THE PRESIDENT, BY SUBMITTING A
SUBSEQUENT PROXY RELATING TO THE SAME SHARES OR BY VOTING IN PERSON AT THE
MEETING. THE GIVING OF A PROXY DOES NOT AFFECT A STOCKHOLDER'S RIGHT TO ATTEND
AND VOTE IN PERSON AT THE MEETING. HOWEVER, PRESENCE AT THE MEETING WITHOUT
FURTHER ACTION WILL NOT REVOKE A STOCKHOLDER'S PROXY.
ii
<PAGE>
NORTH ATLANTIC ACQUISITION CORP.
PROXY STATEMENT/PROSPECTUS
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD [ ]
------------------------
5,000,000 SHARES OF NAAC CLASS A COMMON STOCK, 316,668 SHARES OF NAAC CLASS B
PREFERRED STOCK AND NOMINAL WARRANTS ISSUABLE IN CONNECTION WITH THE MERGER,
THE CONTRIBUTION OF INTERCOMPANY DEBT AND THE WARRANT EXCHANGE AND SHARES
OF NAAC CLASS A COMMON STOCK ISSUABLE UPON CONVERSION OR EXERCISE OF THE
NAAC CLASS B PREFERRED STOCK AND NOMINAL WARRANTS
360,000 SHARES OF NAAC CLASS A COMMON STOCK, 360,000 CLASS A WARRANTS ISSUABLE
IN CONNECTION WITH THE CLASS B RECAPITALIZATION AND 360,000 SHARES OF NAAC
CLASS A COMMON STOCK ISSUABLE UPON EXERCISE OF THE CLASS A WARRANTS
15,000 SHARES OF NAAC CLASS A COMMON STOCK TO BE SOLD BY THE SELLING STOCKHOLDER
This Proxy Statement/Prospectus is being distributed to obtain stockholder
approval of the proposed merger (the "Merger") of Moto Guzzi Corp. ("Guzzi
Corp."), a Delaware corporation, with and into North Atlantic Acquisition Corp.
("NAAC"), a Delaware corporation, with NAAC as the surviving corporation
pursuant to an Agreement and Plan of Merger and Reorganization dated August 18,
1998 (the "Merger Agreement") among NAAC, Guzzi Corp. and, for limited purposes,
Trident Rowan Group, Inc. ("TRG"), a Maryland corporation, the majority
stockholder of Guzzi Corp. This Proxy Statement/Prospectus also is being
distributed to obtain stockholder approval of certain amendments to the
Certificate of Incorporation, the election of eight persons as directors of
NAAC, of the 1998 Stock Option Plan and 1998 Stock Plan for Outside Directors,
and the recapitalization of each share of NAAC Class B Common Stock, $.01 par
value ("NAAC Class B Common Stock"), into two shares of NAAC Class A Common
Stock, $.01 par value ("NAAC Class A Common Stock"), and two Class A Warrants of
NAAC ("NAAC Class A Warrants") ("Class B Recapitalization").
At the effective time of the Merger ("Effective Time") each share of common
stock of Guzzi Corp., $.01 par value ("Guzzi Common Stock"), and each share of
Class A Convertible Preferred Stock of Guzzi Corp., $.01 par value ("Guzzi
Preferred Stock"), will be converted into (a) .4937 share of newly issued NAAC
Class A Common Stock, (b) .0313 share of newly issued NAAC Class B Convertible
Preferred Stock, $.01 par value ("NAAC Class B Preferred Stock"), having a
liquidation preference of $15 per share, convertible at any time for an equal
number of additional shares of NAAC Class A Common Stock, and bearing a
cumulative annual dividend rate, as and when declared, of 5% of the liquidation
preference, and (c) a warrant to purchase additional shares of NAAC Class A
Common Stock, if any, based on the operating income of Guzzi Corp. in its 2000
fiscal year and the market price of the NAAC Class A Common Stock, at an
exercise price of $.01 per share (the "Nominal Warrants").
This Proxy Statement/Prospectus is being furnished to the holders of NAAC
Common Stock as of the close of business on , 1998 ("Record Date")
in connection with the solicitation of proxies by the Board of Directors of NAAC
for use at the Annual Meeting of Stockholders to be held on , 1998
at a.m. local time, at (with any adjournment or
postponement thereof, the "Annual Meeting"). This Proxy Statement/Prospectus,
Notice of Annual Meeting and the accompanying form of proxy are first being
mailed to stockholders on or about , 1998.
This Proxy Statement/Prospectus is also being furnished in connection with
(i) the cancellation of the 1,500,000 outstanding warrants to purchase common
stock of Guzzi Corp. ("Guzzi Warrants") in exchange for a maximum of 259,510
shares of NAAC Class A Common Stock, 16,436 shares of Class B Preferred Stock of
NAAC ("NAAC Class B Preferred Stock") and 5.19% of the Nominal Warrants (each
Guzzi Warrant accepted
iii
<PAGE>
for exchange and cancellation will be exchanged into approximately .173 share of
NAAC Class A Common Stock, .011 share of NAAC Class B Preferred Stock and
.0000034% of the Nominal Warrants); (ii) the issuance of 1,038,040 shares of
NAAC Class A Common Stock, 65,743 shares of NAAC Class B Preferred Stock and
Nominal Warrants to purchase 20.76% of the NAAC Class A Common Stock thereunder
in exchange for the contribution to the capital of Guzzi Corp. of certain
intercompany debt held by TRG and its subsidiary O.A.M. S.p.A. ("OAM") as of the
effective time of the Merger ("Effective Time"); and (iii) the proposed
recapitalization of the NAAC Class B Common Stock by which each share of NAAC
Class B Common Stock will be converted into two shares of NAAC Class A Common
Stock and two NAAC Class A Warrants ("Class B Recapitalization") at the
effective time of the Merger.
This Proxy Statement/Prospectus also relates to the sale of up to 15,000
shares of NAAC Class A Common Stock by the Selling Shareholder. See "Selling
Stockholder."
The NAAC Class A Common Stock, NAAC Class B Common Stock and NAAC Class A
Warrants are quoted on the OTC Bulletin Board, and on August 17, 1998, the last
full trading day prior to the public announcement of the Merger Agreement, the
last reported high bid prices for these securities were $8.625, $9.375 and $.50,
respectively. On 1998, the most recent date for which it was
practicable to obtain market price information prior to the printing of this
Proxy Statement/Prospectus, such high bid prices for these securities were
$ , and $ , respectively.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE HEREOF.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY SUCH STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS , 1998
iv
<PAGE>
AVAILABLE INFORMATION
NAAC is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended ("Exchange Act"), and accordingly files
reports, proxy statements and other information with the Securities and Exchange
Commission ("Commission"). Such reports, proxy statements and other information
filed with the Commission are available for inspection and copying at the public
reference facilities maintained by the Commission in Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's Regional
Offices at Seven World Trade Center, 13th Floor, New York, New York 10048 and
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material also can be obtained from the Public Reference Section of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. The Commission maintains a Web site that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission. The Web site can be reached at
http://www.sec.gov.
NAAC has filed with the Commission a registration statement on Form S-4
(the "Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), of which this Proxy Statement/Prospectus is a part. This
Proxy Statement/Prospectus does not contain all of the information set forth in
the Registration Statement and the exhibits and schedules thereto. Statements
made in this Proxy Statement/Prospectus as to the contents of any contract,
agreement or other document referred to herein are not necessarily complete. In
each instance, for a more complete description of the matter involved, reference
is made to such contract, agreement or other document filed as an exhibit to the
Registration Statement or annexed to this Proxy Statement/Prospectus, and the
Registration Statement shall be deemed qualified in its entirety by such
reference.
NAAC ANNUAL REPORT ON FORM 10-K
NAAC will furnish without charge to each NAAC stockholder whose proxy is
being solicited, upon written request, a copy of NAAC's annual report on
Form 10-KSB, as amended, for the fiscal year ended August 31, 1997, including
the financial statements and schedules thereto. Requests for copies of such
report should be directed to North Atlantic Acquisition Corp., 5 East 59th
Street--Third Floor, New York, New York 10022, Attention: President.
All documents and reports subsequently filed by NAAC pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Proxy Statement/Prospectus and prior to the consummation of the offering made
hereby shall be deemed to be incorporated by reference in this Proxy
Statement/Prospectus and to be part hereof from the dates of filing of such
documents or reports. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Proxy Statement/Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Proxy Statement/Prospectus.
v
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
AVAILABLE INFORMATION...................................................................................... iii
NAAC ANNUAL REPORT ON FORM 10-K............................................................................ iii
SUMMARY.................................................................................................... 1
NAAC................................................................................................ 1
Guzzi Corp.......................................................................................... 1
The Merger.......................................................................................... 4
The Annual Meeting.................................................................................. 6
Proxies............................................................................................. 6
Recommendations of the Board of Directors........................................................... 7
Conflicts of Interest............................................................................... 7
Redemption Rights; No Appraisal Rights.............................................................. 8
NAAC Liquidation If No Business Combination......................................................... 8
Certain Federal Income Tax Consequences............................................................. 8
Accounting Treatment................................................................................ 8
Market Price Data................................................................................... 9
Class B Recapitalization............................................................................ 9
Risk Factors........................................................................................ 9
Summary Guzzi Corp. Consolidated Financial Data..................................................... 10
Summary NAAC Historical Financial Data.............................................................. 12
RISK FACTORS............................................................................................... 13
BUSINESS OF NAAC........................................................................................... 19
Introduction........................................................................................ 19
Characteristics of a Specialized Merger and Acquisition Allocated Risk Transaction Company.......... 19
Competition......................................................................................... 20
Management.......................................................................................... 20
Properties.......................................................................................... 21
Legal Proceedings................................................................................... 21
BUSINESS OF GUZZI CORP..................................................................................... 21
Guzzi Corp. Sales................................................................................... 24
Properties.......................................................................................... 26
Legal Proceedings................................................................................... 26
Exchange Rates...................................................................................... 26
THE ANNUAL MEETING......................................................................................... 27
Purpose of the Annual Meeting....................................................................... 27
Voting Rights....................................................................................... 28
Solicitation and Revocation of Proxies.............................................................. 29
Redemption Rights................................................................................... 29
NAAC Liquidation If No Business Combination......................................................... 30
Solicitation of Proxies............................................................................. 30
PROPOSAL 1: THE MERGER..................................................................................... 31
Background of the Merger............................................................................ 31
Reasons for the Merger; Recommendations of the Board of Directors................................... 32
Fairness Opinion of Allen & Company................................................................. 33
Conflicts of Interest............................................................................... 35
Use of Funds Available upon Consummation of the Merger.............................................. 36
Certain Federal Income Tax Consequences to NAAC Stockholders........................................ 37
Certain Federal Income Tax Consequences to Guzzi Corp. Shareholders................................. 37
Accounting Treatment................................................................................ 38
Resale of NAAC Class A Common Stock; Affiliates..................................................... 38
</TABLE>
vi
<PAGE>
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
COMPARISON OF RIGHTS OF HOLDERS OF SECURITIES OF GUZZI CORP. AND OF NAAC................................... 39
Guzzi Common Stock.................................................................................. 39
Guzzi Preferred Stock............................................................................... 39
Guzzi Warrants...................................................................................... 40
NAAC Class A Common Stock........................................................................... 41
NAAC Class B Common Stock........................................................................... 41
NAAC Class A Warrants............................................................................... 42
Preferred Stock..................................................................................... 42
NAAC Class A Preferred Stock........................................................................ 43
NAAC Class B Preferred Stock........................................................................ 43
Nominal Warrants.................................................................................... 44
Transfer Agent...................................................................................... 44
THE MERGER AGREEMENT....................................................................................... 44
Merger; Consideration............................................................................... 44
Representations and Warranties...................................................................... 45
Certain Covenants................................................................................... 45
Conditions.......................................................................................... 46
Amendment; Termination.............................................................................. 46
Expenses............................................................................................ 47
Interest of Certain Persons After the Merger........................................................ 47
Absence of Regulatory Filings and Approvals......................................................... 48
Exchange of Stock Certificates...................................................................... 48
Fractional Shares................................................................................... 49
Management After the Merger......................................................................... 49
Lock Up Agreements.................................................................................. 49
MARKET PRICES OF NAAC SECURITIES........................................................................... 50
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT............................................. 51
Beneficial Ownership of Shares of NAAC Common Stock................................................. 51
SELECTED NAAC HISTORICAL FINANCIAL DATA.................................................................... 53
MANAGEMENT'S DISCUSSION AND ANALYSIS OF NAAC'S FINANCIAL CONDITION AND RESULTS OF OPERATIONS............... 54
SELECTED GUZZI CORP. HISTORICAL CONSOLIDATED FINANCIAL DATA................................................ 54
MANAGEMENT'S DISCUSSION AND ANALYSIS OF GUZZI CORP. FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF GUZZI
CORP..................................................................................................... 56
General............................................................................................. 56
Results of Operations............................................................................... 57
Liquidity and Capital Resources..................................................................... 59
Results of Operations............................................................................... 62
Liquidity and Capital Resources..................................................................... 62
Future Liquidity Needs.............................................................................. 62
Capital Commitments................................................................................. 63
Potential Effects of the Year 2000 on Guzzi Corp.'s Business........................................ 63
Potential Effects of the European Common Currency on Guzzi Corp.'s Business......................... 64
</TABLE>
vii
<PAGE>
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
PROPOSAL 2: ADOPTION OF AMENDED AND RESTATED CERTIFICATE OF INCORPORATION.................................. 69
Name Change......................................................................................... 69
Increase in Authorized Capital...................................................................... 69
Amendment or Repeal of By-Laws...................................................................... 70
Classification of the NAAC Board.................................................................... 70
Removing Directors and Fillings Vacancies........................................................... 70
Indemnification..................................................................................... 70
Anti-Takeover Considerations........................................................................ 71
PROPOSAL 3: ELECTION OF DIRECTORS.......................................................................... 72
Compensation of Directors and Executive Officers.................................................... 73
NAAC Board Meetings and Committees.................................................................. 73
Compliance with Section 16(a) of the Exchange Act................................................... 74
Certain Relationships and Related Transactions...................................................... 74
PROPOSAL 4: APPROVAL OF STOCK OPTION PLAN.................................................................. 74
Summary of the 1998 Stock Option Plan............................................................... 74
Federal Income Tax Consequences..................................................................... 76
1998 Stock Plan for Outside Directors............................................................... 77
PROPOSAL NO. 5: CLASS B RECAPITALIZATION................................................................... 78
WARRANT EXCHANGE OFFER..................................................................................... 80
Description of Guzzi Warrant........................................................................ 80
Terms of the Exchange Offer; Period for Tendering................................................... 80
Procedures for Tendering Guzzi Warrants............................................................. 80
Acceptance of the Guzzi Warrants for Exchange and Cancellation; Delivery of Warrants................ 81
Conditions to the Exchange Offer.................................................................... 81
Fees and Expenses................................................................................... 81
Transfer Taxes...................................................................................... 81
INTERCOMPANY DEBT EXCHANGE................................................................................. 82
SELLING STOCKHOLDER........................................................................................ 82
EXPERTS.................................................................................................... 82
STOCKHOLDER PROPOSALS...................................................................................... 83
INDEX TO FINANCIAL STATEMENTS.............................................................................. F-2
</TABLE>
LIST OF ANNEXES
<TABLE>
<CAPTION>
SCHEDULE
NUMBER DESCRIPTION
- ----------- -----------
<S> <C>
Annex I Merger Agreement (without schedules and exhibits)
Annex II Opinion of Allen & Company
Annex III Form of Nominal Warrant
Annex IV Form of Amended and Restated NAAC Certificate of Amendment
Annex V Form of 1998 Stock Option Plan
Annex VI Form of 1998 Stock Option Plan for Outside Directors
Annex VII Alternative Form of Article Fourth of the Amended and Restated Certificate of Incorporation to
Effectuate to Class B Recapitalization
</TABLE>
viii
<PAGE>
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement/Prospectus. Reference is made to, and this summary is
qualified in its entirety by, the more detailed information contained in this
Proxy Statement/Prospectus and the Annexes hereto. Stockholders are urged to
read this Proxy Statement/Prospectus and the Annexes in their entirety.
Capitalized terms used herein and not defined have the meanings ascribed to them
elsewhere in this Proxy Statement/Prospectus. The portions of this Proxy
Statement/Prospectus that relate to future plans, events or performance are
forward-looking statements. Actual results, events or performance may differ
materially. Investors are cautioned that all such statements involve risks and
uncertainties, including the need for additional financing to achieve sales
growth goals, the acceptability of the products and services of Guzzi Corp. in
an intensely competitive marketplace, the ability of Guzzi Corp. timely to
deliver current and new products of acceptable quality, relationships with
domestic and foreign distributors, the impact of changes in world currency rates
compared to the Italian lire, domestic labor relations, and general economic
conditions. These factors, and others, are discussed more fully in the Proxy
Statement/Prospectus. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. NAAC
undertakes no obligation to release the result of any revisions to these
forward-looking statements that may be made to reflect events or circumstances
after the date hereof, or to reflect the occurrence of unanticipated events.
This Proxy Statement/Prospectus is issued in connection with the proposed
Merger.
NAAC
NAAC was organized on August 9, 1995 as a Specialized Merger and
Acquisition Allocated Risk Transaction(Registered) company, the objective of
which is to acquire an operating business (a "Target Business") by merger,
exchange of capital stock, asset or stock acquisition or other similar type of
transaction (a "Business Combination"). NAAC completed an initial public
offering of Class A Common Stock ("NAAC Class A Common Stock"), Class B Common
Stock ("NAAC Class B Common Stock") and Class A Warrants ("NAAC Class A
Warrants") on August 22, 1997 (the "IPO") and received net proceeds of
approximately $8,100,000 after payment of offering expenses. A substantial
portion of such net proceeds ($8,000,000) was placed in an interest-bearing
escrow account (the "Escrow Account") to be held until the earlier of NAAC's
(i) consummation of a Business Combination or (ii) liquidation. The remaining
net proceeds of the IPO not placed in the Escrow Account have been used by NAAC
to identify, evaluate and select a suitable Target Business, and to structure,
negotiate and consummate a Business Combination, as well as for general,
administrative and organizational expenses. The mailing address of NAAC's
principal executive office is 5 East 59th Street, New York, New York 10022, and
its telephone number is (212) 486-4444. See "Business of NAAC."
GUZZI CORP.
Guzzi Corp., through its Moto Guzzi S.p.A subsidiary ("Moto Guzzi"), is a
leading Italian manufacturer, marketer and distributor of performance and luxury
motorcycles and motorcycle parts, marketed under the "Moto Guzzi(Registered)"
brand name. Guzzi Corp. is a Delaware corporation formed in 1996 to acquire Moto
Guzzi, its manufacturing subsidiary and Moto America Inc. ("Moto America"), the
exclusive U.S. importer and distributor of "Moto Guzzi" brand motorcycles and
parts. All references herein to Guzzi Corp. are deemed to include its
subsidiaries, including Moto Guzzi and Moto America, Inc. ("Moto America")
unless otherwise indicated. The common stock of Guzzi Corp. is owned by Trident
Rowan Group, Inc., a Maryland corporation ("TRG"), whose common stock is traded
on the Nasdaq National Market under the symbol "TRGI", and by O.A.M. S.p.A.
("OAM") a company owned 84% by TRG and 16% by a subsidiary of Chrysler
Corporation. In addition, Guzzi Corp. has outstanding a class of Preferred Stock
that is held by approximately 40 persons, as well as 1,500,000 Guzzi Warrants to
purchase Guzzi Corp. common stock at $4.00 per share. Moto Guzzi is the
principal operating subsidiary of Guzzi Corp. and will become the principal
operating subsidiary of NAAC following the Merger. The mailing address of the
principal executive office of Guzzi Corp. is c/o Trident Rowan Group, Inc., Two
World's Fair Drive, Somerset, New Jersey 08873, and its telephone number is
(908) 868-9000. See "Business of Guzzi Corp."
<PAGE>
Products and Distribution
Moto Guzzi, over a period of more than 75 years, has earned a reputation as
one of the world's elite designers and manufacturers of performance and luxury
motorcycles. The Moto Guzzi models vary in engine displacement from 350cc to
1,100cc. In recent years, Moto Guzzi has focused its product design, development
and sales efforts on the heavyweight segment of the market. This segment has
experienced rapid growth with global new heavyweight registrations, increasing
17% in 1997. As part of the business strategy described below, Moto Guzzi is
currently evaluating expansion of its product line to include lower-cost small
displacement motorcycles and scooters. At present, Moto Guzzi's primary product
offerings include the following models:
<TABLE>
<S> <C>
o California EV Guzzi's classic cruiser with a 1064 cc engine and traditional
lines.
o Nevada Club A lower riding cruiser with a 744 cc engine and chrome accents.
o V10 Centauro A performance touring bike with a powerful 992 cc 4-valve
air-cooled engine.
o 1100 Sport Corsa A sleek sports bike with modern lines and a 1064 cc engine.
o Quota Guzzi's new entrant into the enduro segment.
o Police bikes Variations of Moto Guzzi's models targeted at government
agencies, national and local police forces and highway patrols.
</TABLE>
Moto Guzzi sells its products worldwide through a network of wholly and
partially owned importers and independent dealers. In Italy, Moto Guzzi
maintains a network of over 140 independent distributors. In Germany, Moto Guzzi
owns 25%, and has an option to buy a total of 90%, of MGI GmbH, which is the
exclusive importer-distributor of Moto Guzzi motorcycles and parts in that
country. In France, Moto Guzzi owns 100% of its importer-distributor. In the
United States, Guzzi Corp.'s wholly owned subsidiary Moto America serves as the
exclusive importer-distributor and maintains a national network of 100 dealers.
Moto Guzzi's sales by region are:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
GEOGRAPHIC AREA 1997 1996 1995
- --------------- ---- ---- ----
<S> <C> <C> <C>
Italy.......................................................... 37% 37% 35%
Europe (Other than Italy)...................................... 46% 43% 49%
United States.................................................. 13% 7% 6%
Elsewhere...................................................... 4% 13% 10%
</TABLE>
History and Recent Developments
Established in 1921, Moto Guzzi is one of the oldest motorcycle brands in
the world. Between 1921 and 1966, Moto Guzzi operated as an independent
privately owned entity. In 1972, Moto Guzzi was acquired by de Tomaso Industries
("de Tomaso"), the predecessor of TRG. Concurrent with an extended period during
which management attention was principally focused on de Tomaso's other
operating units, especially the luxury automobile manufacturer, Maserati, and
limited investment was made in Moto Guzzi's product design and development
activities as well as its manufacturing operations, sales declined from a high
of 46,487 units in 1971 to 3,274 units in 1993. Moto Guzzi has experienced
continuous losses for the last eleven years, including a loss of Lit. 10,569
million ($5,976,000) for the fiscal year ended December 31, 1997 and Lit. 3,406
million ($1,917,000) for the six months ended June 30, 1998.
In 1994, TRG retained Temporary Integrated Management S.p.A., a temporary
management service, to stabilize Moto Guzzi's operations and to begin the
process of developing a business plan to restore Moto Guzzi to financial health.
In 1996, Mario Tozzi-Condivi was hired as President of Moto Guzzi.
Mr. Tozzi-Condivi had previously been an independent consultant to automotive
distributors and dealers in the United Kingdom, Italy, Singapore and South
Africa for more than ten years and was Chairman of the Board of Maserati U.K.
Ltd. In 1997, Oscar Cecchinato, who served as Chief Executive Officer of
Aprilia, an Italian manufacturer of motor
2
<PAGE>
scooters during the implementation of a successful turnaround between 1991 and
1995, joined Moto Guzzi as Managing Director. Oscar Cecchinato's employment as
Managing Director terminated in September 1998 and his duties were assumed by
Mr. Tozzi-Condivi. In addition to further developing Moto Guzzi's business plan,
Messrs. Condivi and Cecchinato devoted their efforts to the recruitment of a new
senior management team that includes: Dino Falciola, Chief Operating Officer and
Director of Finance, who joined Moto Guzzi in November of 1997; Guido Locati,
Director of Operations, who joined Moto Guzzi in December 1997; Gianluca Lanaro,
Director of Marketing, who joined Moto Guzzi in May, 1995; Guido Ranalli,
Director of Sales, who joined Moto Guzzi in February, 1969 and Louisa Brenna,
Director of Purchasing, who joined Moto Guzzi in January, 1997.
In 1997 and early 1998, Guzzi Corp. completed a private placement of the
Guzzi Preferred Stock and Guzzi Warrants to purchase common stock that raised
approximately $5.2 million, net of fees and expenses, secured a Lit. 10 billion
($5.6 million) debt facility from Italian financial institutions and obtained
$4 million in financing from TRG. Proceeds from these financings were utilized
to fund Moto Guzzi's business plan, principally for purchasing equipment to
improve the efficiency of Moto Guzzi's manufacturing facility, the development
of new motorcycle models and for working capital purposes.
The new management team has focused its efforts on increasing sales as well
as the efficiency of Moto Guzzi's production process. Capital expenditures
increased from Lit. 1,801 million in 1995 to Lit. 3,887 in 1997. In the six
month period ended June 30, 1998, capital expenditures totalled Lit. 5,115
million versus Lit. 1,783 during the comparable period in 1997. In an effort to
enhance sales volumes by ensuring that new products meet the highest quality,
design and technical standards, investment in new product design and development
has recently been increased. Research and development expenditures rose to
Lit. 3,125 million in 1997 from Lit. 602 million in 1995. In the six month
period ended June 30, 1998, investment in research and development totalled Lit.
2,226 million versus Lit. 897 million for the comparable period in 1997.
Selling, general and administrative expense increased from Lit. 7,486 million in
1995 to Lit. 13,824 in 1997, reflecting higher staff costs associated with the
recruitment and employment of the new management team as well as higher
marketing and sales expenditures. Unit sales volumes increased from a low of
3,274 in 1993 to 5,598 in 1997. During this period, Moto Guzzi has also
experienced significant improvements in its cost structure, with gross margins
improving from 13.7% in 1993 to 19.2% during the six months ended June 30, 1998.
Strategy
Moto Guzzi's strategy is to further increase sales volumes by (i) focusing
on the breadth, quality and design of its product offerings, (ii) increasing its
marketing activities, (iii) enhancing its distribution network and
(iv) leveraging its brand name. Moto Guzzi believes that its reputation and rich
tradition as a technological innovator and quality manufacturer provides a solid
foundation for future sales increases. Moto Guzzi has built a loyal customer
base over the past 77 years through the outstanding performance and reliability
of its motorcycles, as well as its strong distribution network. The current
customer base ranges from professional motorcycle enthusiasts to government
agencies, police departments and highway patrols around the world.
Moto Guzzi plans to strengthen and expand its product line by exploiting
its heritage as one of the industry's design and technology innovators. For
example, it plans to increase its family of products to include entry level
motorcycles such as a "stripped" version of the California model, additional
sports bikes and, potentially, motor scooters. Moto Guzzi also plans to enhance
its core product line--the California and Nevada models. While public
administration sales have traditionally been a stable source of revenue for Moto
Guzzi, management believes that there are unexploited growth opportunities in
this market and plans to refocus its sales and marketing efforts in this product
category.
In terms of enhanced marketing and promotion activities, the U.S. market
represents the largest expansion opportunity for Moto Guzzi. Approximately half
of all motorcycles sold in the U.S. are in the heavyweight segment. Between 1996
and 1997, U.S. registrations of new heavyweight motorcycles increased by 9.7% to
165,700 units. Moto Guzzi plans to implement an aggressive marketing campaign
targeted at U.S. consumers that is designed to build brand value and name
recognition, as well as to emphasize the technical and design strengths of Moto
Guzzi's motorcycles.
In the United States, Moto Guzzi also plans to expand and enhance its
distribution network. In addition to increasing the size and quality of its
dealer network, Moto Guzzi also plans to introduce new sales incentives
3
<PAGE>
programs for dealers, as well as a floor plan financing program. Other
innovations that either have been or are expected to be introduced in the U.S.
include customer purchase financing and an extended, three year warranty
program.
Finally, Moto Guzzi plans to leverage the "Moto Guzzi" brand by expanding
into new products, markets and services that also offer the opportunity to
enhance its brand awareness and brand image. Moto Guzzi currently sells a
limited line of non-motorcycle merchandise. In the future, Moto Guzzi plans to
introduce a range of branded accessories such as hats, jackets, shirts and
luggage. Management also plans to exploit opportunities to license the "Moto
Guzzi" brand name to manufacturers and suppliers of other products and services.
THE MERGER
On August 18, 1998, NAAC entered into the Merger Agreement with Guzzi Corp.
and, for limited purposes, TRG. If the Merger is consummated, Guzzi Corp. will
merge with and into NAAC, with NAAC being the surviving corporation. Former
shareholders of Guzzi Corp. will own approximately 80.8% of the outstanding
shares of NAAC Class A Common Stock after the Merger (including the NAAC
Class A Common Stock underlying the NAAC Class B Preferred Stock) assuming the
Warrant Exchange is fully accepted and before taking into account the exercise
of any outstanding warrants or options of NAAC. See "Proposal 1: The Merger" and
"The Merger Agreement."
In consideration of the Merger, NAAC will issue to the holders of Guzzi
Common Stock and Guzzi Preferred Stock, an aggregate of 3,702,450 shares of NAAC
Class A Common Stock, 234,489 shares of NAAC Class B Preferred Stock and 74.05%
of the Nominal Warrants. If NAAC has less than $8,150,000 of cash assets at the
Effective Time, it will issue additional NAAC Class B Preferred Stock as
additional consideration in the Merger at the rate of one share for each $15.00
of cash assets less than $8,150,000. The consideration for the exchange and
cancellation of the Guzzi Warrants will be 259,510 shares of NAAC Class A Common
Stock, 16,436 Shares of NAAC Class B Preferred Stock and 5.19% of the Nominal
Warrants. Pursuant to the Merger Agreement, TRG and OAM will contribute to the
capital of Guzzi Corp. the outstanding balances of an intercompany loan to Guzzi
Corp of Lit. 12,919 million, plus interest thereon from January 1, 1998. TRG and
OAM will also contribute any amount of intercompany payables due them by Guzzi
Corp. and subsidiaries in excess of $800,000. In consideration for such
contributions, TRG and OAM will be issued an aggregate of 1,038,040 shares of
NAAC Class A Common Stock, 65,743 shares of NAAC Class B Preferred Stock and
20.76% of the Nominal Warrants. TRG and OAM have agreed to the terms of this
contribution and exchange by agreement dated August 18, 1998. Such remaining
intercompany debt of up to $800,000 will be paid by NAAC promptly following the
Closing. See "The Merger--Merger; Consideration" and "Intercompany Debt
Exchange."
The NAAC Class B Preferred Stock to be issued in connection with the Merger
(i) will be entitled to receive cash dividends accruing from January 1, 1999 and
payable annually commencing December 31, 1999, at the rate of 5% of the stated
value of $15.00 per share, (ii) will be senior in rank to all other classes and
series of capital stock of NAAC, (iii) will be convertible at the option of the
holder, at any time, into an equal number of shares of NAAC Class A Common
Stock, and (iv) will have a liquidation preference of the greater of $15.00 or
the amount payable to the NAAC Class A Common Stock into which the NAAC Class B
Preferred Stock is convertible. All the NAAC Class B Preferred Stock will be
deposited into escrow at the consummation of the Merger to be available to
reimburse NAAC for certain breaches of the representations and warranties of
Guzzi Corp. See "Comparison of Rights of Holders of Securities of Guzzi Corp.
and of NAAC--NAAC Class B Preferred Stock."
The Nominal Warrants to be issued in connection with the Merger entitle the
holders to purchase such number of shares of NAAC Class A Common Stock as
determined by a formula, at $.01 per share, during the period June 30, 2001
through 5:00 P.M. Eastern time on September 30, 2001. The number of shares of
NAAC Class A Common Stock to be issued upon exercise of the Nominal Warrants
will be a function of the operating income of NAAC in the 2000 fiscal year and
the market price of a share of NAAC Class A Common Stock for the 20 consecutive
trading days prior to June 30, 2001. If NAAC operating income is less than Lit.
20,169,600,000 the number of shares will be zero. Otherwise, the shares to be
issued upon exercise of the Nominal Warrants will have a market value between
$4,750,000 and $9,500,000 based upon Moto Guzzi's operating income for the
fiscal year ended December 31, 2000. The Nominal Warrants may be exercised by
TRG
4
<PAGE>
on behalf of the holders of the Nominal Warrants unless the authority to
exercise is specifically withdrawn in writing by the holder. See "Comparison of
Rights of Holders of Securities of Guzzi Corp. and of NAAC--Nominal Warrants."
NAAC is offering to exchange approximately .173 share of NAAC Class A
Common Stock, .011 share of NAAC Class B Preferred Stock and a pro rata portion
of 5.19% of the Nominal Warrants for each outstanding Guzzi Warrant that is
submitted to Guzzi Corp for exchange and cancellation (the "Exchange Offer"). A
total of 259,510 shares of NAAC Class A Common Stock, 16,436 shares of NAAC
Class B Preferred Stock and 5.19% of the Nominal Warrants will be exchanged for
the Guzzi Warrants if all holders thereof participate in the Exchange Offer,
Pursuant to the terms of the Merger Agreement and the agreements governing the
Guzzi Warrants, those Guzzi Warrants which are not exchanged and cancelled
pursuant to the Exchange Offer, will be exercisable for the same securities as
are being issued to holders of Guzzi Common Stock in connection with the Merger.
Guzzi Warrants not exchanged and cancelled will not be registered in this
offering and will be subject to the other terms, obligations and limitations of
the Guzzi Warrants, including the obligation to pay the exercise price of $4.00.
See "The Exchange Offer" and "Comparison of Rights of Holders of Guzzi Corp. and
NAAC."
The following table provides a graphical depiction of the ownership
interests of the NAAC Class A Common Stock, including NAAC Class B Preferred
Stock as converted, and holding company structure of NAAC immediately following
completion of the Merger.
<TABLE>
<S> <C> <C> <C> <C>
-------------------- ---------------------- ------------------ ----------------
| North Atlantic | | Old Guzzi Pfd. and | | Trident Rowan | | Chrysler |
| Shareholders | | Warrant Holders | | Group, Inc. | | Corp. |
-------------------- ---------------------- ------------------ ----------------
| | | \ 99.9% |
| | | \ |
| | | -------------------- |16.1%
| | | | Trident Rowan | |
| | | | Servizi, S.p.a. | |
| | | -------------------- |
| | | 83.9% | |
| | | -------------------- |
| | | | O.A.M., S.p.A. |----------
| | | --------------------
| | | | Total
| | -------------- ---------
| | |
Class A Shares(a) 1,266,000(b) 1,063,334(c) 4,253,334(d) 6,582,668
Percent 19.2% 16.2% 64.6% 100.0%
\ \ /
\ \ /
\ \ /
\ \ /
\ ------------------
\ | Moto Guzzi |
\ | Corporation |
---------------------| (formerly |
| NAAC) |
------------------
|
------------------------------------------
| 100.0% |
| |
----------------------- ----------------------
| Moto America, Inc. | | Moto Guzzi, S.p.A. |
----------------------- ----------------------
|
---------------------------
25.0% | | 100.0%
| |
------------ ---------------
| MGI GmbH | | Moto Guzzi |
| | | France, S.A.|
------------ ---------------
</TABLE>
- -----------------
(a) Includes NAAC Class B Preferred as if converted
(b) Pro forma for the Class B Recapitalization but prior to the exercise of the
NAAC Class A Warrants.
(c) Assumes full acceptance of the Warrant Exchange and does not include shares
issued upon the exercise of the Nominal Warrants.
(d) Does not include shares issued upon the exercise of the Nominal Warrants.
5
<PAGE>
THE ANNUAL MEETING
The Annual Meeting will be held on [ ], at [ ]---.m. local time at [ ].
At the Annual Meeting, the holders of NAAC Common Stock, voting together as a
single class, will be asked (i) to consider and vote upon a proposal to approve
the Merger Agreement and the Merger, (ii) to consider and act upon a proposal to
amend the Certificate of Incorporation, (iii) to elect eight directors to the
Board of Directors of NAAC (the "NAAC Board") as of the Effective Time, (iv) to
consider and act upon a proposal to adopt the Stock Option Plans, and (v) the
Class B Recapitalization. Voting separately as a class, the holders of the NAAC
Class B Common Stock will also be asked to consider and approve the Class B
Recapitalization. The approval by the holders of NAAC Common Stock of the
proposal relating to the Merger is contingent upon the approval of all other
proposals, other than the Class B Recapitalization, and implementation of all
the proposals is contingent on the consummation of the Merger.
The presence at the Annual Meeting, in person or by properly executed
proxy, of the holders of a majority in interest of the outstanding shares of
NAAC Common Stock entitled to vote at the Annual Meeting will constitute a
quorum. If a quorum is present at the Annual Meeting, the affirmative vote by
the holders of two-thirds in interest of the outstanding shares of NAAC Common
Stock is required to approve the Merger Agreement and the Merger; however, if
more than 20% of the outstanding shares of NAAC Class A Common Stock (excluding
the Pre-IPO Shares), or more than 160,000 shares, are submitted to NAAC for
redemption, NAAC will not consummate the Merger. Under the Delaware General
Corporation Law ("DGCL"), if a quorum is present at the Annual Meeting, ( i) the
affirmative vote of the holders of a majority in interest of outstanding shares
is required to approve each of the amendments to the Certificate of
Incorporation, (ii) those nominees for director receiving a plurality of the
votes cast will be elected directors and (iii) the affirmative vote of the
holders of a majority in interest of the shares present in person or represented
by proxy and entitled to vote at the Annual Meeting is required to approve the
Stock Option Plans. See "The Annual Meeting--Voting Rights."
In respect of the Class B Recapitalization, the presence at the Annual
Meeting, in person or by properly executed proxy, of the holders of a majority
of the outstanding shares of NAAC Class B Common Stock entitled to vote at the
Annual Meeting will constitute a quorum. If a quorum of the NAAC Class B Common
Stock is present at the Annual Meeting, the affirmative vote by the holders of a
majority of the outstanding shares of NAAC Class B Common Stock is required to
approve the Class B Recapitalization. See "The Annual Meeting--Voting Rights."
Only holders of record of NAAC Common Stock at the close of business on the
Record Date will be entitled to notice of and to vote at the Annual Meeting.
Each holder of record of NAAC Class A Common Stock is entitled to cast one vote,
and each holder of record of Class B Common Stock is entitled to cast two votes,
for each share held. On the Record Date, there were 906,000 shares of NAAC
Class A Common Stock and 150,000 shares of NAAC Class B Common Stock outstanding
and entitled to vote. With respect to the proposal to approve the Merger
Agreement and the Merger, the initial NAAC Stockholders have agreed to vote
their Pre-IPO Shares and any other shares of NAAC Class A Common Stock of which
they are the beneficial owners on the Record Date (approximately 11.7% of the
aggregate votes of the shares of NAAC Common Stock) in accordance with the vote
of the majority in interest of all other holders of NAAC Common Stock. The
holders of the NAAC Common Stock do not have any dissenters rights in connection
with the transactions for which their approval is sought.
PROXIES
Shares of NAAC Common Stock represented at the Annual Meeting by properly
executed proxies received prior to or at the Annual Meeting and not revoked will
be voted at the Annual Meeting in accordance with the instructions indicated on
such proxies. Holders of NAAC Class A Common Stock will be asked to use proxies
on white cards. Holders of NAAC Class B Common Stock will be asked to use
proxies on blue cards. IF NO INSTRUCTIONS ARE INDICATED, SUCH PROXIES WILL BE
VOTED "FOR" EACH OF THE PROPOSALS TO BE VOTED ON AT THE ANNUAL MEETING AND "FOR"
THE ELECTION OF THE PERSONS NOMINATED AS DIRECTORS. The NAAC Board is not aware
of any other matters which are to come before the Annual Meeting. If any other
matters are properly presented for consideration, the persons named in the
enclosed form of proxy will have discretion to vote on such matters in
accordance with their best judgement.
6
<PAGE>
Any proxy given pursuant to this solicitation can be revoked by the person
giving such proxy at any time before it is voted. Proxies can be revoked by
(i) filing with the President of NAAC, at or before the taking of the vote at
the Annual Meeting, a written notice of revocation bearing a later date than the
proxy, (ii) duly executing a subsequent proxy relating to the same shares and
delivering it to the President of NAAC before the Annual Meeting or (iii)
attending the Annual Meeting and voting in person (although presence at the
Annual Meeting without further action will not revoke a proxy). Any written
notice revoking a proxy should be sent to: North Atlantic Acquisition Corp.,
5 East 59th Street, New York, New York 10022, Attention: President, or hand
delivered to the President at or prior to the vote at the Annual Meeting.
Each proxy card accompanying this Proxy Statement/Prospectus calls for a
vote upon a proposal to approve an adjournment or postponement of the Annual
Meeting, if necessary, to permit further solicitation of proxies in the event
there are not a sufficient number of votes present in person or by proxy at the
Annual Meeting to approve the Merger, the amendments to the Certificate of
Incorporation, authorize the issuance of preferred stock, to change the name of
NAAC and to provide for classification of the Board of Directors of NAAC, elect
the nominees for directors and adopt the Stock Option Plans. A NAAC stockholder
opposed to any one or all of these proposals may decide to vote against the
adjournment or postponement.
RECOMMENDATIONS OF THE BOARD OF DIRECTORS
The NAAC Board has unanimously determined that the Merger Agreement and the
Merger are in the best interests of NAAC and its stockholders and unanimously
recommends that holders of NAAC Class A Common Stock vote "for" approval of the
Merger Agreement, and the Merger. See "Proposal 1: The Merger."
The NAAC Board unanimously recommends approval of the amendments to the
certificate of incorporation, the nominees for director, the stock option plans
and the Class B Recapitalization. See "Proposal 2: Adoption of Amended and
Restated Certificate of Incorporation," "Proposal 3: Election of Directors,"
"Proposal 4: Approval of NAAC 1998 Stock Option Plans," and "Proposal 5:
Class B Recapitalization."
CONFLICTS OF INTEREST
In considering the recommendation of the NAAC Board, NAAC stockholders
should be aware that members of the NAAC Board and management have various
conflicts of interest arising out of their ownership of NAAC Common Stock and
NAAC management options and future employment arrangements.
Each of the current directors and executive officers of NAAC owns Pre-IPO
Shares. Such persons hold a total of 40,000 Pre-IPO Shares, acquired for an
aggregate consideration of $4,000 (or $.10 per share). In addition, David J.
Mitchell, currently Chairman of the Board, Chief Executive Officer and a
director of NAAC, and C. Thomas McMillen, currently Secretary, Treasurer and a
director of NAAC, each holds NAAC Class A Options to acquire up to 50,000 units,
each unit consisting of one share of NAAC Class A Common Stock and one NAAC
Class A Warrant, exercisable at $12.50 per unit, for three years after
consummation of the Merger and each holds NAAC Class B Options to acquire 15,000
shares of NAAC Class B Common Stock, exercisable at $10.00 per share, until the
consummation of the Merger. Each of the holders of the NAAC Class B Options has
agreed to exercise the options immediately prior to the Effective Time.
If NAAC is liquidated as a result of its failure to consummate a Business
Combination prior to August 22, 1999, the current directors and executive
officers of NAAC would not participate in any distribution of assets with
respect to their Pre-IPO Shares. Thus, unless NAAC consummates the Merger or
another Business Combination, such persons' Pre-IPO Shares will have no value.
If the Merger or another Business Combination is consummated, such persons would
participate in any subsequent liquidation of NAAC with respect to their Pre-IPO
Shares and any subsequent increase in value of their Pre-IPO Shares.
If the Merger is consummated, Mr. David J. Mitchell will be employed as a
consultant by Guzzi Corp. for a period of three years following the Merger. As
compensation for his services, Mr. Mitchell will be granted an option to
purchase up to 30,000 shares of NAAC Class A Common Stock under the proposed
1998 Stock Option Plan, at an exercise price equal to the market value on the
date of grant, exercisable for ten years from the date of grant. In addition, as
member of the NAAC Board following completion of the Merger, Mr. Mitchell will
be granted options to purchase 12,500 shares of NAAC Class A Common Stock
exercisable for ten years at the
7
<PAGE>
prevailing market price on the date of grant for each year of service as a
director. If the Merger is not approved, these options will not be granted. See
"Proposal 1: The Merger--Conflicts of Interest."
REDEMPTION RIGHTS; NO APPRAISAL RIGHTS
Holders of NAAC Class A Common Stock, other than the Initial NAAC
Stockholders, have the right to require NAAC to redeem up to a maximum of 20% of
the NAAC Class A Common Stock, (other than the Pre-IPO Shares), if the Merger is
approved and consummated. To be effective, this redemption right must be
exercised as described in this Proxy Statement/Prospectus and written notice of
such exercise must be given to NAAC on or before the close of business on [ ],
the twentieth day before the Annual Meeting. The per share redemption price is
$ per share of NAAC Class A Common Stock. NAAC stockholders have no
appraisal or dissenters' rights with respect to the Merger. All demands for
redemption should be sent or delivered to North Atlantic Acquisition Corp., 5
East 59th Street, New York, New York 10022, Attention: Chief Executive Officer.
The failure of a NAAC stockholder to comply with such requirements will
terminate such stockholder's redemption rights. See "The Annual Meeting--
Redemption Rights."
NAAC LIQUIDATION IF NO BUSINESS COMBINATION
If the Merger or another Business Combination is not consummated by
August 22, 1999, NAAC will be dissolved and will distribute the amount held in
the Escrow Account to all holders of Class A Common Stock in respect of their
shares (excluding the Pre-IPO Shares). Following such a redemption of NAAC
Class A Common Stock, each outstanding share of NAAC Class B Common Stock will
be exchanged for two shares of NAAC Class A Common Stock. The NAAC Class B
Common Stock does not have the right to participate in any liquidating
distribution prior to the consummation of a Business Combination. The assets of
NAAC (other than the escrowed assets) will be used to pay NAAC's liabilities and
to redeem NAAC's outstanding Series A Preferred Stock at its liquidation value.
The initial NAAC Stockholders do not have the right to participate in any
liquidating distribution with respect to their Pre-IPO Shares prior to
consummation of a Business Combination. See "The Annual Meeting--NAAC
Liquidation If No Business Combination."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
NAAC stockholders whose shares of NAAC Class A Common Stock are redeemed
generally will recognize gain or loss equal to the difference between the amount
received from NAAC and such stockholder's adjusted tax basis in such shares. In
the event that NAAC liquidates, NAAC stockholders will recognize gain or loss in
an amount equal to the difference between the amount received from NAAC upon
liquidation and such stockholder's adjusted tax basis. NAAC stockholders are
urged to consult with their own tax advisors with respect to Federal, state,
local, foreign and other tax consequences of the redemption of NAAC Common Stock
or liquidation of NAAC. See "Proposal 1: The Merger--Certain Federal Income Tax
Consequences."
ACCOUNTING TREATMENT
The Merger will be treated as a reverse acquisition of NAAC by Guzzi Corp.
In a reverse acquisition, the existing shareholders of the corporation which
survives the merger will own, after the Merger, less than 50% of its outstanding
shares. The shareholders of Guzzi Corp. will receive approximately 80.8% of the
post-Merger shares of NAAC including NAAC Class A Common Stock underlying the
NAAC Class B Preferred Stock and excluding any shares of NAAC Class A Common
Stock issuable upon exercise of any options or warrants and assuming all Guzzi
Warrants are cancelled or exchanged. Guzzi Corp. will therefore be treated as
the acquiror from an accounting standpoint. The cost of the acquisition of NAAC
will be based on the fair value of NAAC's assets and liabilities as of the date
of the Merger (which amounts approximate the book value). As a result of the
reverse acquisition of NAAC by Guzzi Corp., the historical financial statements
of the surviving corporation for periods prior to the Merger will be those of
Guzzi Corp. rather than those of NAAC. See "Unaudited Pro Forma Condensed
Balance Sheets" and "Proposal 1: The Merger--Accounting Treatment."
Since all of the production and much of the sales of Moto Guzzi, and
therefore of Guzzi Corp., occur in Italy, Guzzi Corp.'s primary financial
statements are reported in Italian Lire, its functional currency as defined by
generally accepted accounting principles. Upon completion of the Merger, NAAC
will report results in Italian
8
<PAGE>
Lire and, from a future date to be determined, in Euros. See "Risk
Factors--Exposure of Results to Change in Exchange Rates" and "Adoption and
Implementation of Euro."
MARKET PRICE DATA
NAAC Class A Common Stock, NAAC Class A Warrants, NAAC Class B Common Stock
and units of one share of NAAC Class A Common Stock and one NAAC Class A Warrant
(the "Units") are traded in the over-the-counter market and quoted on the OTC
Bulletin Board, an inter-dealer automated quotation system sponsored and
operated by the National Association of Securities Dealers, Inc. ("NASD") for
equity securities not included in the Nasdaq System. There is no trading market
for either the Guzzi Corp. Common Stock or the Guzzi Corp. Preferred Stock. If
the Merger is consummated, NAAC intends to apply to the NASD to have the NAAC
Class A Common Stock and the NAAC Class A Warrants included in the Nasdaq
System.
On August 17, 1998, the last full trading day prior to the public
announcement of the execution and delivery of the Merger Agreement, the closing
prices of NAAC's Class A Common Stock, NAAC Class A Warrants, NAAC Class B
Common Stock and Units, as reported on the OTC Bulletin Board, were,
respectively: (i) a bid of $8.625 and an ask of $9.375, (ii) a bid of $0.50 and
an ask of $.75, (iii) a bid of $9.375 and an ask of $11.375 and (iv) a bid of
$9.375 and an ask of $11.00. On [ ], 1998, the most recent date for
which it was practicable to obtain market price information prior to the mailing
of this Proxy Statement/Prospectus such closing prices were: (i) a bid of
$ and an ask of $ for the NAAC Class A Common Stock, (ii) a bid of
$. and an ask of $. for the NAAC Class A Warrants, (iii) a bid of
$ and an ask of $ for the NAAC Class B Common Stock and (iv) a bid
of $ and an ask of $ for the Units. Stockholders are urged to obtain
current market information.
CLASS B RECAPITALIZATION
Each outstanding share of NAAC Class B Common Stock is convertible into two
shares of NAAC Class A Common Stock and two NAAC Class A Warrants at any time
between the 90th day after a Business Combination through the first year after a
Business Combination. The Class B Recapitalization is intended to accelerate
such conversion and eliminate the NAAC Class B Common Stock. The Class B
Recapitalization is subject to the condition that the Merger must have been
consummated. If approved and the Merger is consummated, each outstanding share
of NAAC Class B Common Stock will automatically be converted into two shares of
NAAC Class A Common Stock and two NAAC Class A Warrants at the Effective Time of
the Merger. Holders of the NAAC Class B Common Stock need not take any further
action; their certificates will represent the converted securities for all
corporate purposes. See "Proposal 5: Class B Reclassification."
RISK FACTORS
For a discussion of certain risk factors that should be considered
carefully by the NAAC stockholders in determining whether to vote in favor of
the Merger Agreement, see "Risk Factors" beginning on page 12.
9
<PAGE>
SUMMARY GUZZI CORP. CONSOLIDATED FINANCIAL DATA
[IN MILLIONS OF ITALIAN LIRE AND THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE
DATA]
The following table sets forth summary financial data for Guzzi Corp. on a
consolidated historical basis for the periods and the dates indicated. The
historical balance sheet data as of December 31, 1997 and 1996 and the
statements of operations data for each of the years then ended are derived from
the audited financial statements of Guzzi Corp. included in the Proxy
Statement/Prospectus. The historical balance sheet data as of December 31, 1995
and the statements of operations data for the year then ended are derived from
the unaudited financial statements of Guzzi Corp. for such year included in the
Proxy Statement/Prospectus. The historical balance sheet data and the statements
of operations data at the end of and for the six month periods ended June 30,
1998 and 1997 have been derived from unaudited consolidated financial statements
and in the opinion of Guzzi Corp.'s management, include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the financial position and results of operations for such
periods. Results for the six months ended June 30, 1998 are not necessarily
indicative of results to be expected for the full fiscal year. The information
should be read in conjunction with "Management's Discussion and Analysis of
Guzzi Corp. Financial Conditions and Results of Operations" and such financial
statements, including the notes thereto, included elsewhere in the Proxy
Statement/Prospectus.
<TABLE>
<CAPTION>
YEARS ENDED
SIX MONTHS ENDED JUNE 30, DECEMBER 31,
------------------------------------- ------------------------------------------
1998 1998 1997 1997 1997 1996
$000(1) LIT. M LIT. M $000(2) LIT. M LIT. M
------- ----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales........................ $27,006 Lit.47,989 Lit.41,665 $ 45,781 Lit.80,987 Lit.77,620
Gross profit..................... 5,197 9,234 5,851 5,378 9,514(3) 11,865
Selling, general and
administrative expense......... 4,424 7,861 6,702 7,815 13,824 10,210
Research and development
expenditures................... 1,253 2,226 897 1,767 3,125 1,177
Interest Expense(4).............. 1,241 2,206 2,040 2,058 3,640 4,346
Net loss......................... $(1,917) Lit.(3,406) Lit.(3,867) $ (5,967) Lit.(10,569) Lit.(1,996)
<CAPTION>
1995
LIT. M
-----------
<S> <C>
INCOME STATEMENT DATA:
Net sales........................ Lit.64,671
Gross profit..................... 10,071
Selling, general and
administrative expense......... 7,486
Research and development
expenditures................... 602
Interest Expense(4).............. 3,604
Net loss......................... Lit.(3,233)
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1998 JUNE 30, 1998 DECEMBER 31
---------------------- --------------------------- ---------------------------
AS ADJUSTED(5) ACTUAL ACTUAL
---------------------- --------------------------- ---------------------------
1998 1998 1997 1997 1997 1996
$000(1) LIT. M $000(1) LIT. M LIT. M LIT. M
------- ----------- ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents....... $ 4,191 Lit.7,447 $ 4,191 Lit.7,447 Lit.6,352 Lit.2,210
Current assets.................. 46,601 82,808 46,601 82,808 69,229 60,223
Total assets.................... 57,604 102,360 57,604 102,360 84,694 73,731
Short-term debt................. 20,032 35,597 20,032 35,597 20,012 23,173
Other current liabilities....... 20,238 35,969 20,238 35,969 30,669 26,419
Long-term debt, net of current
portion....................... 7,808 13,875 7,808 13,875 4,828 5,629
Parent Company financing........ -- -- 7,451 13,241 12,919 4,659
Preferred stock subject to
redemption.................... -- -- 7,252 12,886 11,629 5,101
Shareholder's equity............ $ 5,120 Lit.9,098 $ (9,583) Lit.(17,029) Lit.(12,366) Lit.1,596
<CAPTION>
1995
LIT. M
-----------
<S> <C>
BALANCE SHEET DATA:
Cash and cash equivalents....... Lit.2,718
Current assets.................. 52,382
Total assets.................... 58,594
Short-term debt................. 15,637
Other current liabilities....... 25,753
Long-term debt, net of current
portion....................... 4,198
Parent Company financing........ 2,883
Preferred stock subject to
redemption.................... --
Shareholder's equity............ Lit.2,822
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, YEARS ENDED DECEMBER 31,
----------------------------------- ----------------------------------------------------
1998 1998 1997 1997 1997 1996 1995
$000(1) LIT. M LIT. M $000(2) LIT. M LIT. M LIT. M
------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
EBITDA(6)............................. 419 746 (297) (2,383) (4,214) 4,189 2,774
Depreciation and amortization......... 824 1,465 1,357 1,402 2,480 1,807 2,303
Capital expenditure................... 2,878 5,115 1,783 2,197 3,887 5,951 1,801
Unit sales volumes (No. of
motorcycles)........................ 3,207 2,889 5,593 6,050 5,198
</TABLE>
(Footnotes on next page)
10
<PAGE>
(Footnotes from previous page)
- ------------------
(1) Translated solely for the convenience of the reader at the approximate
exchange rate as of June 30, 1998 of Lit. 1,777 to $1.00.
(2) Translated solely for the convenience of the reader at the approximate
exchange rate as of December 31, 1997 of Lit. 1,769 to $1.00.
(3) Gross margins declined between 1996 and 1997 principally as a result of
management's decision to maintain constant price levels in an attempt to
increase market share.
(4) Interest expense includes interest on intercompany loans from TRG and
affiliates amounting to Lit.323 million and Lit.132 million in the six
months to June 30, 1998 and six months to June 30, 1997, respectively, and
Lit.377, Lit. 275 and Lit. 36 million in the years to December 31, 1997,
1996 and 1995. All interest bearing intercompany debt, amounting to
Lit.13,241 million, including accrued interest, at June 30, 1998 is being
contributed to capital as part of the merger agreement. See "Intercompany
Debt Exchange".
(5) The Intercompany Debt Exchange and exchange of Guzzi Corp. redeemable
preferred stock for NAAC equity securities contemplated as part of the
Merger Agreement substantially represent a recapitalization by the holders
of the intercompany debt and of the preferred stock. The "As Adjusted"
figures reflect the effects of recapitalization. See "Merger Agreement",
"Intercompany Debt Exchange".
(6) EBITDA is defined as earnings before income taxes, interest expense,
depreciation and amortization. The Company believes that the presentation of
EBITDA facilitates an investor's understanding of the Company's operations.
EBITDA should not be considered by an investor as an alternative to net
income as an indicator of the Company's operating performance or to cash
flows as a measure of liquidity. EBITDA is not used in the presentation of
financial statements prepared in accordance with generally stated accounting
principles.
11
<PAGE>
SUMMARY NAAC HISTORICAL FINANCIAL DATA
The following selected historical financial data as of August 31, 1997 and
for the period September 1, 1995 (inception) to August 31, 1997 and for the
periods then ended are derived from the audited financial statements of NAAC
included in this Proxy Statement. The selected financial data as of May 31,
1998, May 31, 1997 and for the nine months ended May 31, 1998 and May 31, 1997
and for the period September 1, 1995 (inception) to May 31, 1998 are derived
from the unaudited financial statements of NAAC included in this Proxy
Statement. Such unaudited data includes, in management's opinion, all normal
recurring adjustments necessary to present fairly the results of operations and
financial position of NAAC for such periods. Results for interim periods are not
necessarily indicative of the results to be expected for an entire fiscal year.
The data should be read in conjunction with the financial statements, related
notes, "Management's Discussion and Analysis of NAAC's Financial Condition and
Results of Operations," the pro forma financial statements of Guzzi Corp. and
NAAC and other financial information included in this Proxy Statement.
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS SEPTEMBER 1, 1995 SEPTEMBER 1, 1995
ENDED ENDED YEAR ENDED (INCEPTION) TO (INCEPTION) TO
MAY 31, 1998 MAY 31, 1997 AUGUST 31, 1997 AUGUST 31, 1996 MAY 31, 1998
------------ ------------ --------------- ----------------- -----------------
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Interest income...................... $ 324 $ -- $ -- $ -- $ 324
General, administrative, other
expenses and taxes................. 166 4 39 31 236
Net income (loss).................... 126 (4) (39) (31) 56
Net income (loss) per common share... .12 (.04) (.33) (.29)
Weighted average common shares
outstanding........................ 1,056,000 106,000 119,014 106,000
</TABLE>
<TABLE>
<CAPTION>
MAY 31, 1998 MAY 31, 1997 AUGUST 31, 1997 AUGUST 31, 1996
------------ ------------ --------------- ---------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........... $ 136 $ 26 $ 402 $ 26
Short-term investments and accrued
interest thereon.................. -- -- -- --
U.S. Government securities deposited
in Escrow Account and accrued
interest thereon.................. 8,322 -- 7,998 --
Total assets........................ 8,458 204 8,401 204
Liabilities......................... 205 187 283 181
Common stock subject to possible
redemption........................ 1,664 -- 1,600 --
Stockholders' equity................ 6,589 17 6,518 23
</TABLE>
12
<PAGE>
RISK FACTORS
The following factors should be considered carefully by the stockholders of
NAAC in determining whether to vote in favor of the Merger Agreement. All
amounts reported in dollars are provided solely as a convenience to the reader
and is based upon a line-dollar conversion rate of Lit. 1,769 to $1.00.
History of Losses; Future Operating Results. Guzzi Corp., has sustained
net losses in each of the past 11 fiscal years. On a combined basis, Guzzi Corp.
lost Lit. 10,569 million ($5,967,000) in the fiscal year ended December 31,
1997, and Lit. 3,406 million ($1,917,000) for the six months ended June 30,
1998. Guzzi Corp.'s business is to some extent seasonal and results for the
first six months of 1998 may therefore not be indicative of the full year
results. (See "Industry Cyclicality and Demand for Products and Services,"
below). There can be no assurance that Guzzi Corp.'s operations, on a combined
basis, will become profitable.
Need to Manage Growth. Guzzi Corp. is contemplating an expansion of
production with a concomitant significant commitment of capital and increase of
outsourcing of components and subassemblies. This expansion may require Guzzi
Corp. to implement a variety of additional systems, procedures and controls to
manage higher inventory levels, higher levels of outsourcing and related working
capital requirements and may place significant strain on management, financial
and other resources. There can be no assurance that such expansion will be
successfully completed or that Guzzi Corp.'s systems, procedures, controls or
resources will be adequate to support expanded operations if they occur.
If Guzzi Corp. is unable to manage its contemplated expansion successfully,
its business and results of operations will be adversely affected. Guzzi Corp's
future operating results could also be adversely affected by an increase in
fixed costs and operating expenses related to the expansion of production if
revenues do not increase commensurately.
The growth of Moto America and Guzzi Corp's other wholly or partially owned
distributors in Germany and France is related directly to the ability of Moto
Guzzi to increase both market demand and production capacity to meet such demand
without sacrificing quality. Increasing penetration of the Italian, French,
German, U.S. and other markets, and Moto Guzzi's ability to increase production
to meet the anticipated demand, are two essential prerequisites to NAAC's future
ability to achieve growth and profitability.
Need for Additional Financing. Based on current operations and sales
projections, Guzzi Corp. believes that its existing capital resources and the
capital of NAAC at the Effective Time of the Merger, after payment of continuing
intercompany debt of up to $800,000, will be sufficient to fund its operations
for the next twelve months. Guzzi Corp., however, cannot provide assurance that
its existing capital resources, coupled with the capital acquired as a result of
this Merger, will be sufficient to meet its planned expansion of production
capacity and to finance the growth in Moto Guzzi sales anticipated for the next
12 months. Because much of the production machinery at Moto Guzzi's facility at
Mandello de Lario, Italy is aged and in need of extensive modification,
improvement or replacement, Guzzi Corp. expects that, over the next several
years, significant additional capital will be required to overhaul the facility.
While increases in sales during that period should provide some of the needed
capital, the existing equipment, enhanced or replaced with some or all of the
capital acquired in the Merger, anticipated internally generated cash, and
currently available bank financing, may not in the aggregate be sufficient to
enable Moto Guzzi to increase production and sales rapidly enough to generate
the remaining needed capital. Further, no assurance can be given that additional
sales will be realized to absorb some of the planned costs of facility
improvement and/or expansion. Moto Guzzi also currently requires capital to
develop designs for new motorcycle models and parts, to fund sales and marketing
programs and for working capital. Additional financing may be necessary to
further develop or expand operations. The availability of additional financing
will depend in part on the willingness of the banking system in Italy to
continue to finance working capital by way of advances against trade receivables
which financing is, therefore, dependent on short-term production levels and
subject to being substantially reduced in the case of production delays or
stoppages caused by any means or by any other factors which could affect sales
levels. Further, Guzzi Corp. and Moto Guzzi have only limited formal
arrangements in respect of Moto Guzzi's currently available bank credit lines
and these could be significantly reduced by the banks at any time for any
reason. For its long-term viability, NAAC, as the surviving corporation, may be
required to borrow or sell additional securities or seek other new sources of
financing or may be required to curtail or reduce its activities. Guzzi Corp.
has no current arrangements with any sources with respect to additional medium
or long-term financing. There can be no assurance that any sources of
13
<PAGE>
additional financing will be available to Guzzi Corp. on acceptable terms, or at
all. To the extent that any future financing involves the sale of equity
securities, the interest of NAAC's then-stockholders could be substantially
diluted.
Industry Cyclicality and Demand for Products and Services. In the past,
the motorcycle industry has been subject to substantial changes in demand due to
changing economic conditions. Historically, the motorcycle has been an 'entry
level' form of transport which has been supplanted by the automobile. Over
recent years, motor-cycle riding has also become established as a recognized
leisure activity in developed markets. Moto Guzzi motorcycles, being in the
larger and more expensive segment of the market, are principally targeted at the
leisure segment of the vehicular industry. Management believes that the recent
recognition of motorcycle riding as an acceptable leisure activity is one of the
major factors behind the steady growth in Moto Guzzi's market segment over the
last three years. Guzzi Corp. believes that this trend is likely to continue and
that its markets will not be subject to violent demand changes, although no
assurance can be provided that this will be the case. Among other factors,
prevailing economic conditions may unfavorably affect disposable income for
leisure activities and an increase in the cost of gasoline could have a negative
effect on the cost of motorcycling. Further, the introduction of the
standardized Euro currency may adversely affect overall economic conditions.
Accordingly, there can be no assurances that Guzzi Corp.'s markets will remain
in a growth phase or remain stable.
Moto Guzzi's performance is influenced by its ability to predict future
demand for existing and new products and timely to develop new products to fill
a perceived market niche. Guzzi Corp. plans its annual production levels and
long-term product development and introduction based on anticipated demand for
its products. For the majority of sales, Guzzi Corp. does not have long-term
purchase commitments or non-revocable orders. Moto Guzzi relies on its own
market assessment and ongoing communication with its customers to anticipate the
future volumes of purchase orders. A number of factors could cause customers to
delay or cancel orders. Moto Guzzi has experienced frequent delays in production
and shipment. If such delays continue to occur, Moto Guzzi could suffer
cancellation of orders or loss of significant customers, which would have an
adverse effect on its future business, financial condition and results of
operations.
Moto Guzzi's operations are characterized by seasonal fluctuations in
demand and production. Retail market demand is highest in the spring and early
summer, whereas most sales to Italian government agencies, both federal and
regional, take place in the fourth quarter. Production at Moto Guzzi, as at most
Italian companies, declines materially during August, the traditional vacation
month, and also declines somewhat over the Christmas holiday and shortly
thereafter as inventory is taken. While Moto Guzzi's management is seeking to
flatten production and sales fluctuations to improve cash flow, there can be no
assurance that such plans will be successful. See "Business of Guzzi
Corp.--Seasonal Nature of Business."
Competition. The manufacture and sale of motorcycles is a highly
competitive industry. Guzzi Corp. competes with companies which are far larger
and better capitalized, and many of which have greater name recognition,
including Yamaha, Kawasaki, Suzuki and Honda, the industry leaders from Japan,
Ducati of Italy, BMW of Germany, and Harley Davidson of the United States. It is
also considered likely by Guzzi Corp. that large manufacturers of smaller
displacement motorcycles, such as Aprilia of Italy, will also compete in Moto
Guzzi's large engine displacement markets in the near future. Each of these
competitors has a far larger market share than Moto Guzzi, and have access to
greater financial resources. Guzzi Corp. competes principally through such
intangible qualities as performance, reputation and quality of manufacture,
areas in which its competitors also excel. Moto Guzzi is considering entry into
the small engine-displacement market. Manufacturers of such vehicles, including
Honda of Japan and Aprilia of Italy, have far greater financial resources with
which to preserve market share.
Current competitors or new market entrants could produce new or enhanced
products with features that render Moto Guzzi's products or less marketable.
Moto Guzzi's ability to compete successfully will depend on its continuing
research and development of new and improved products and on its ability to
adapt to technological changes and advances in motorcycle transportation. There
can be no assurance that Moto Guzzi will be able to compete successfully, that
competitors will not develop technologies or products that render its products
less marketable, or that it will be able to successfully enhance its products or
develop new products. See "Business of Guzzi Corp.--Competition."
14
<PAGE>
Environmental, Safety and other Government Regulations. Motorcycles sold
in the United States, the European Union and other countries are subject to
environmental emissions regulations and safety standards with which Moto Guzzi
is obligated to comply. All motorcycles produced for sale are manufactured with
the intent to comply with all applicable safety standards in their destination
markets. All 1998 Moto Guzzi models substantially comply with all emission
standards applicable in all countries in which they are sold. There can be no
assurance, however, that Guzzi Corp. will be able to cost effectively comply
with any emissions or safety standards which the governments may hereafter adopt
(though the design of new products seeks to conform with such standards as are
believed likely to be introduced), in which event, Guzzi Corp. may be unable to
achieve the market growth that it desires.
As a foreign subsidiary of a U.S. corporation, Moto Guzzi is subject to
various U.S. laws and regulations limiting the countries into which Moto Guzzi
may sell its products. The sale by Moto Guzzi of products in contravention of
such laws and regulations may expose Guzzi Corp. (and consequently NAAC) to
fines and penalties.
Moto Guzzi is subject to a number of governmental regulations relating to
the use, storage, discharge and disposal of minerals and alloys used in the
manufacturing processes and to the safety standards of its facilities and
processes. Moto Guzzi may be required to perform restoration and other
remediation on its current facilities to ensure compliance with environmental,
worker safety and other regulatory schemes and upgrade or acquire new
fabrication and assembly equipment. Although Moto Guzzi has not been subject to
material environmental or safety claims in the past, the assertion of such
claims or the failure to comply with present or future regulations could result
in the assessment of damages or imposition of fines against Moto Guzzi,
suspension of production or cessation of certain activities. New regulations
could require Moto Guzzi to acquire costly equipment or incur other significant
expenses that could have an adverse effect on the results of operations. Any
failure by Moto Guzzi to control the use of, or adequately restrict the
discharge of hazardous substances or comply with safety requirements and
legislation could subject it to future liabilities. See "Business of Guzzi
Corp.--Compliance With Governmental Regulations."
Foreign Operations Risks. All Moto Guzzi motorcycle production has
heretofore been conducted, and is expected to remain, in Italy. Moto Guzzi
exports a significant percentage of its production: 63% in 1997 and 1996 and 65%
in 1995 respectively, principally to other European countries. As a result,
NAAC, as surviving corporation, could be adversely affected by events outside
its control such as increases in tariffs or duties, political circumstances and
governmental policy initiatives in Italy and the other countries which represent
its actual and target markets. See also below--"Exposure of Results to Changes
in Exchange Rates."
Adoption and Implementation of the Euro. The adoption and implementation
by certain members of the European Union of the European Common Currency, or the
Euro, is expected to have significant effects on Guzzi Corp.'s business, Among
many potential economic factors, the Euro is expected to increase competition
within the currency zone. Decreases in current Italian interest rates toward a
currently expected lower convergence rate of the participant countries is also
expected.
Moto Guzzi makes significant export sales outside the common currency zone
and the prices of certain commodities used in its manufacturing processes may be
affected by the value of the Euro. The implementation of the Euro within the
common currency zone could have unanticipated consequences on the economies of
the participant countries which affect demand for Moto Guzzi's products. The
common currency zone represents over 80% of Moto Guzzi's 1997 net sales and the
economic consequences of Euro implementation could have material affects,
adverse or beneficial, on Moto Guzzi's business.
During the two-year implementation phase of the Euro, both the Lira and the
Euro will be valid currencies for business transactions in Italy, although they
will be linked for exchange rate purposes.
The Euro could also have significant effects on Guzzi Corp.'s accounting
systems which could require significant modification or replacement. There can
be no assurance that such systems will be obtainable at reasonable cost, or will
be installed in such a manner so as not to materially interfere with the
ordinary operations of Guzzi Corp.
Exposure of Results to Changes in Exchange Rates. Guzzi Corp.'s sales and
operating profits will be affected by the impact of fluctuations in foreign
currency exchange rates on product prices and certain operating
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expenses. Fluctuations in the exchange rates of certain foreign currencies
(principally the U.S. Dollar) relative to the lire or euro may have an adverse
effect on Guzzi Corp.'s sales and operating results and the international
competitiveness of its Italian based manufacturing operations. Furthermore, a
weakening of the currencies of the countries in which Guzzi Corp.'s major
competitors operate, such as the U.S. Dollar and the Japanese Yen, could
negatively impact the Guzzi Corp.'s competitive position. Fluctuations in the
lira or euro to dollar exchange rate will affect Moto Guzzi's reported revenues
and operating results which are reported in lire or euro, Guzzi Corp.'s
functional currency at the present time and for the foreseeable future.
Exposure of Results to Raw Material and Commodity Prices. The operations
of Moto Guzzi are significantly affected by the prices of raw materials,
including commodities (principally steel and aluminum) which can be subject to
considerable short-term variations in price. While Moto Guzzi generally seeks to
pass on the effects of price increases of raw materials to its customers, it has
in the past not always been able to do so and in the future may not be able to
do so due to competitive pressures. Aluminum products, which are important in
the manufacture of motorcycles by Moto Guzzi, have in the past experienced sharp
price increases. The prices of raw materials and commodities, many of which are
not produced or sourced in Italy, are also subject to fluctuations as a
consequence of changes in foreign currency exchange rates. See "Exposure of
Results to Changes in Exchange Rates," "Management's Discussion and Analysis of
Guzzi Corp.'s Results of Operations and Financial Position--Impact of Changing
Prices and Exchange Rates" and "Business of Guzzi Corp.--Raw Materials and
Components."
Dependence on Third Party Suppliers and Manufacturers. Moto Guzzi
purchases many significant motorcycle components from third parties. Its
management believes that there are numerous available sources of supply for most
of them. While Moto Guzzi attempts to maintain alternative sources for its
supplies, certain significant components are available from only one or two
sources and it is therefore subject to the risk of price fluctuations and
possible delays in deliveries. Failure by suppliers to continue to supply Moto
Guzzi on commercially reasonable terms, or at all, would have a material adverse
effect on Moto Guzzi. Moto Guzzi generally does not maintain long-term supply
agreements with its suppliers and purchases required componentry pursuant to
purchase orders or short-term contracts in the ordinary course of business.
Failure or delay in receiving necessary raw materials and components by Moto
Guzzi would adversely affect its operations and its ability in turn to deliver
its products on a timely basis. There can be no assurance that adequate sources
of reliable outside suppliers will be identified and engaged at advantageous
terms, or on any terms at all.
Reliance on Main Manufacturing Facilities. All manufacturing of Moto Guzzi
motorcycles takes place at a single production facility at Mandello del Lario,
Italy. A significant interruption of production at this facility due to strikes
or other causes could have a material adverse effect on Moto Guzzi's business
and operating results.
Lack of Patent or Intellectual Property Protection. The design and
technology of motorcycles manufactured and sold by Moto Guzzi are not protected
by any patent, trademark or other intellectual property rights which would
create a competitive advantage for Guzzi Corp. other than the registered
trademark for "Moto Guzzi(R)" itself, and related trademarks which Guzzi Corp.
believes are well known and highly regarded. The component parts of motorcycles
are manufactured pursuant to well known techniques and include components which
are not unique to its products. Guzzi Corp. relies on design, manufacturing
skills and know-how to produce motorcycles which will find acceptance in the
market niche sought by Guzzi Corp. There can be no assurance that a competitor
of Moto Guzzi will not develop an enhancement to motorcycle transportation that
will be patentable or otherwise protected from duplication by others, including
Guzzi Corp. There can be no assurance that competitors do not have, or will not
develop, equivalent or superior manufacturing or design skills. See "Business of
Guzzi Corp.--Patents and Trademarks."
Product Liability. Moto Guzzi is engaged in a business which exposes it to
possible claims for personal injury from the use of its products. Moto Guzzi
maintains liability insurance with a per-occurrence, and aggregate one-year
claim limit of Lit. 18,000 million. Although no claims have been made against
Moto Guzzi in excess of existing insurance coverage, there can be no assurance
that such claims will not arise in the future or that the insurance coverage
will be sufficient to pay such claims. A partially or completely uninsured
claim, if successful and of significant magnitude, could have a material adverse
effect on NAAC, as surviving corporation.
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Litigation. Guzzi Corp. and its subsidiaries are involved in litigation in
the normal course of business. Management does not believe that the final
disposition of such litigation will have a material adverse effect on Guzzi
Corp. Guzzi Corp. has advised the Office of Foreign Assets Control ("OFAC") of a
contract for the sale of motorcycles by Moto Guzzi to a country to which sales
are restricted under U.S. law. The OFAC may require Guzzi Corp. to terminate the
contract and impose fines for violation of law. The potential loss of the value
of the contract, if cancelled, could have a material adverse effect on the
future operations of Moto Guzzi. The potential penalties which may be assessed
under the contract by the buyer for termination are not expected to have a
material adverse effect on the future operations of Moto Guzzi.
RISKS RELATING TO NAAC
Effect of Redemption on Capital of NAAC. The stockholders of the NAAC
Class A Common Stock, other than the Initial NAAC Stockholders, have the right
to have their NAAC Class A Common Stock, (other than the Pre-IPO shares),
redeemed by NAAC in certain circumstances. If the Merger is consummated and the
maximum number of shares of NAAC Class A Common Stock (20% or 160,000 shares)
entitled to be redeemed and to share in the Escrow Account without preventing
the Merger are redeemed, the amount of the funds available from the Escrow
Account upon consummation of the Merger will be reduced by approximately
$[ ]. Any redemption of a significant number of shares of NAAC
Class A Common Stock will adversely impact the ability of NAAC to fund the
future expansion and development of Guzzi Corp. Any reduction in the funds
available upon consummation of the Merger will result in the need for additional
funds earlier than anticipated.
Merger Agreement: Indemnification of NAAC. The Merger Agreement provides
for indemnification of NAAC, after the Merger, for a breach of the
representations and warranties made by Guzzi Corp. and TRG as of the Effective
Date, provided that the claims only may be brought (i) if the claim or claims
exceed $750,000, after application of various offsets for the sale of assets of
Guzzi Corp., and (ii) within periods ending in approximately March 1999 or March
2000 depending on which specified representations and warranties, if any, are
breached. Any amount payable in respect of indemnification of NAAC will only be
by a return and cancellation of up to 100,000 shares of NAAC Class A Common
Stock issued to TRG as part of the merger consideration and/or up to all the
shares of NAAC Class B Preferred Stock issued as part of the merger
consideration, which will be placed in escrow at the Effective Time.
Conflicts of Interests of Directors and Officers of NAAC. The directors
and officers of NAAC have various conflicts of interest, in certain cases,
arising out of their holdings of NAAC Class A Common Stock and the Class A
Options and Class B Options of NAAC ("Management Options"). Unless NAAC
completes the Merger, the securities held by these persons will have no value.
Limited Prior Market for NAAC Common Stock and NAAC Class A Warrants; No
Market for the Nominal Warrants. There has been only a limited trading market
for the NAAC Common Stock and NAAC Class A Warrants. There is no assurance that
an active or regular trading market will develop for these securities after the
Merger. Consequently, the holders of NAAC Common Stock and NAAC Class A Warrants
may not be able to sell them at any particular time or at a price which reflects
their actual value. Although NAAC intends to apply for listing of the NAAC
Class A Common Stock and NAAC Class A Warrants on the NASDAQ SmallCap Market, no
assurance can be given that NAAC will be able to obtain the listing of the
securities on that market. If the application is unsuccessful, the Company
anticipates that its securities will continue to trade on the OTC Market.
Because of the few number of holders, NAAC will not apply for a listing of the
NAAC Class B Preferred Stock and Nominal Warrants. NAAC does not anticipate that
there will be any market for the NAAC Class B Preferred Stock and Nominal
Warrants.
Adverse Effect on Market Price Resulting from Securities Eligible for
Future Sales. A substantial number of shares of NAAC Class A Common Stock will
be issued in the Merger. In addition, a substantial number of shares of NAAC
Class A Common Stock is subject to being issued under conversion and exercise
rights under outstanding NAAC Class B Common Stock, NAAC Class A Preferred Stock
and NAAC Class A Warrants and certain options. After the Merger, if all the
securities convertible or exercisable into NAAC Class A Common Stock are
converted or exercised and assuming all Guzzi Warrants are cancelled, there
would be 8,356,666 shares of NAAC Class A Common Stock outstanding (excluding
the number of shares of NAAC Class A Common Stock issuable upon conversion of
the NAAC Class B Preferred Stock and upon exercise of the Nominal
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Warrants because the number of shares is not currently calculable). Under the
Merger Agreement, shares of NAAC Class A Common Stock will be subject to
a six month lock-up and shares of NAAC Class A Common Stock will be subject
to a twelve month lock-up from the Effective Time.
Dividends Unlikely. NAAC has not paid any dividends in respect of the NAAC
Common Stock to date. After the consummation of the Merger, the payment of cash
dividends on the NAAC Common Stock will be subject to the discretion of the NAAC
Board, and the payment of cumulative cash dividends on the shares of NAAC
Class B Preferred Stock. It is unlikely that cash dividends will be paid on the
NAAC Common Stock in the foreseeable future.
Current Prospectus and State Blue Sky Registration Required to Convert or
Exercise Outstanding Securities. NAAC will be able to issue NAAC Class A Common
Stock on conversion and exercise of outstanding NAAC Class B Common Stock, NAAC
Class A Preferred Stock, NAAC Class B Preferred Stock, NAAC Class A Warrants and
Nominal Warrants only if there is then a current prospectus relating to the
security being converted or exercised or if there are appropriate exemptions
available under federal and state securities laws. Although NAAC intends to have
a current prospectus available and to seek to qualify for sale the securities
underlying the outstanding convertible and exercisable securities under the
applicable state blue sky laws, there can be no assurance that NAAC will be able
to do so. In such event, the holders of the convertible and exercisable
securities may be deprived of the value of the securities and the market for the
securities may be limited.
Control of NAAC by Certain Guzzi Corp. Shareholders. TRG and one of its
majority-owned subsidiaries will own, following the Merger, approximately 64.6%
of the outstanding Class A Common Stock (including the NAAC Class A Common Stock
underlying the NAAC Class B Preferred Stock) and will have the ability to
control the election of the Board of Directors and all other matters. Under the
terms of the Merger Agreement, the initial Board of Directors of the merged
corporation will consist of eight persons, of which Guzzi Corp. will nominate
five persons, and NAAC will nominate two persons. The eighth member will be
mutually nominated by Guzzi Corp. and NAAC. As a result of the Merger, there
will be a change of control of NAAC. See "Merger Agreement and Proposal 3:
Election of Directors."
Potential Adverse Impact of Anti-Takeover Provisions. The proposed Amended
and Restated Certificate of Incorporation contains provisions which may be
deemed to have the effect of discouraging a third party from pursuing a
non-negotiated takeover of NAAC because they have the effect of delaying,
deterring or preventing a change of control of NAAC. These provisions include
the staggered board of directors, the existence of "blank check" preferred stock
with such rights and preferences as may be determined from time to time by the
Board of Directors without stockholder approval, the requirement that by-laws
adopted by the stockholders be adopted by a vote of two-thirds of the
outstanding stock of the company entitled to vote thereon and the limitation on
removal of directors only for cause. Such provisions may have an adverse impact
on the price of the securities of NAAC.
Limited Liability of Directors; Persons Located Outside of the United
States. The Certificate of Incorporation of NAAC following the Merger limits
the liability of its directors to the maximum extent permitted by Delaware law.
Delaware law provides that directors of a corporation will not be liable to the
corporation or its stockholders for expenses incurred in derivative or third
party actions arising from a breach of their fiduciary duties as directors,
except in certain circumstances. Accordingly, except in certain circumstances,
the directors will not be liable to NAAC or its stockholders for breach of such
duty. The Certificate of Incorporation also provides for indemnification and
advancement of expenses to the fullest extent permitted by Delaware law,
incurred by officers and directors of NAAC in connection with actions against
them involving their behavior on its behalf. Although NAAC is incorporated, and
certain of its post-Merger directors are expected to be domiciled in the United
States, certain other directors and executive officers reside outside of the
United States. Moreover, a majority of NAAC's post-Merger assets will be located
outside of the United States. It may be difficult for investors in the United
States to enforce their legal rights, to effect service of process upon
directors and executive officers of NAAC after the Merger, or to enforce
judgments of United States courts predicated upon civil liabilities of such
directors or officers under United States federal securities laws. Further, it
is unclear if extradition treaties now in effect between the United States and
Italy would permit effective enforcement of the criminal penalties of the
Federal securities laws.
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BUSINESS OF NAAC
INTRODUCTION
NAAC was organized on August 9, 1995 as a Specialized Merger and
Acquisition Allocated Risk Transaction company, with the objective of acquiring
an operating business without limitation as to industry. Since its inception,
NAAC has not engaged in any substantive commercial business and its sole
activities have been to evaluate and select a suitable Target Business and to
structure, negotiate and consummate a Business Combination with such Target
Business. On August 22, 1997, NAAC sold 800,000 Units in the IPO at $10.00 per
Unit, each Unit consisting of one share of NAAC Class A Common Stock and one
NAAC Class A Warrant, and 150,000 shares of Class B Common Stock, at $10.00 per
share.
CHARACTERISTICS OF A SPECIALIZED MERGER AND ACQUISITION ALLOCATED RISK
TRANSACTION COMPANY
A Specialized Merger and Acquisition Allocated Risk Transaction company is
an entity incorporating the special provisions set forth below. Immediately
after the consummation of a Business Combination, such special provisions will
no longer apply. The proposed Merger constitutes a Business Combination.
Offering Proceeds Held in Escrow Account
NAAC completed the IPO on August 22, 1997 and received net proceeds of
approximately $8,100,000 after payment of offering expenses. A substantial
portion of such net proceeds ($8,000,000) was placed in the Escrow Account until
the earlier of NAAC's (i) consummation of a Business Combination or (ii)
liquidation. The remaining net proceeds of the IPO which were not placed in the
Escrow Account, and the interest earned thereon, have been used by NAAC to
identify, evaluate and select a suitable Target Business, and structure,
negotiate and consummate a Business Combination, and for general, administrative
and organizational expenses. As of July 31, 1998 there was approximately
$8,422,500 in the Escrow Account. See "Proposal 1: The Merger--Use of Funds
Available upon Consummation of the Merger."
Fair Market Value of Target Business
NAAC is not permitted to acquire a Target Business unless the fair market
value of such business (as determined by the NAAC Board based upon standards
generally accepted by the financial community, such as earnings and earnings
potential, cash flow and book value) is equal to at least 80% of the net assets
of NAAC at the time of such acquisition. The purpose of this requirement is to
ensure that any such acquisition will constitute a significant business
acquisition.
Stockholder Approval of Business Combination
NAAC, after signing a definitive agreement for the acquisition of a Target
Business, but prior to the consummation of any Business Combination, is required
to submit such transaction to holders of the NAAC Common Stock for approval,
even if such acquisition would not ordinarily require stockholder approval under
applicable state law. NAAC will only consummate a Business Combination if at
least two-thirds in interest of the outstanding shares of NAAC Common Stock are
voted in favor of the Business Combination and will not consummate a Business
Combination if more than 20% of the outstanding shares of NAAC Class A Common
Stock (excluding the Pre-IPO Shares), or more than 160,000 shares, are submitted
to NAAC for redemption.
The Initial NAAC Stockholders have agreed to vote their Pre-IPO Shares
(approximately 11.7% of the outstanding shares of NAAC Common Stock) in
accordance with the vote of the majority in interest of all other holders of
NAAC Common Stock on the proposal to approve the Merger Agreement and the
Merger. For this purpose they have given their proxy to the officers of NAAC.
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Redemption Rights
Holders of NAAC Class A Common Stock, other than the Initial NAAC
Stockholders, have the right to have NAAC redeem up to a maximum of 20% of the
NAAC Class A Common Stock (160,000 shares), other than the Pre-IPO shares,
redeemed for cash, if the Merger Agreement and Merger is approved and
consummated. If the Merger is not consummated, the right of redemption
terminates until a future proposed Business Combination. See "The Annual
Meeting--NAAC Liquidation If No Business Combination." The per-share redemption
price will be approximately $[ ]. The Initial NAAC Stockholders do not
have redemption rights with respect to their Pre-IPO Shares. The failure of a
stockholder to comply with the redemption requirements set forth in this Proxy
Statement will terminate such stockholder's redemption rights. See "The Annual
Meeting--Redemption Rights."
Escrow of the Pre-IPO Shares
The Pre-IPO Shares (approximately 11.7% of the outstanding shares) are held
in escrow with Greenbaum, Rowe, Smith, Ravin, Davis & Himmel LLP, as escrow
agent, until the earlier of the consummation of the first Business Combination
or August 22, 1999. During such escrow period, the Initial NAAC Stockholders are
unable to sell or otherwise transfer their respective Pre-IPO Shares, except
(i) in a transaction subsequent to consummation of a Business Combination which
is offered to all NAAC stockholders and (ii) to family members or pursuant to
the laws of descent. Accordingly, the Initial NAAC Stockholders cannot
separately negotiate the purchase of any portion of their Pre-IPO Shares as part
of a Business Combination.
Liquidation If No Business Combination
If NAAC does not consummate a Business Combination by August 22, 1999, NAAC
will be dissolved and will distribute to holders of NAAC Class A Common Stock
with respect to their shares (excluding the Pre-IPO Shares), the amount in the
Escrow Account, including any interest earned thereon. Following such a
redemption of NAAC Class A Common Stock, each outstanding share of NAAC Class B
Common Stock will be exchanged for two shares of NAAC Class A Common Stock. The
assets of NAAC (other than the escrowed assets) will be used to pay NAAC's
liabilities and to redeem NAAC's outstanding Series A Preferred Stock at its
liquidation value. The Initial NAAC Stockholders do not have the right to
participate in any liquidating distribution with respect to their Pre-IPO Shares
prior to consummation of a Business Combination.
COMPETITION
If the Merger is consummated, NAAC will become subject to competition from
competitors of Guzzi Corp. See "Business of Guzzi Corp.--Competition."
MANAGEMENT
The current executive officers of NAAC are David J. Mitchell (Chairman of
the Board, Chief Executive Officer and Director) and C. Thomas McMillen
(Secretary, Treasurer and Director). Since NAAC's inception, no executive
officer has received any cash compensation from NAAC for services rendered
(other than as set forth under "Business of NAAC--Properties" below). Subsequent
to the Merger, Mr. Mitchell will receive the compensation described under
"Proposal 3: Election of Directors--Compensation of Directors and Executive
Officers." Prior to the consummation of a Business Combination, none of NAAC's
officers or directors has received or will receive any compensation for services
other than (i) options to purchase 50,000 units, each unit consisting of one
share of NAAC Class A Common Stock and one NAAC Class A Warrant granted to each
of David J. Mitchell and C. Thomas McMillen and options to purchase 15,000
shares of NAAC Class B Common Stock in consideration for their service as
directors and officers of NAAC and (ii) reimbursement for out-of-pocket expenses
incurred in connection with NAAC's business. There is no limit on the amount of
such out-of-pocket expenses, and there has not been nor will there be any review
of the reasonableness of such expenses by anyone other than the Board of
Directors, which includes persons who have received, and may seek,
reimbursement. None of NAAC's officers or directors or Initial NAAC Stockholders
or their respective affiliates will receive any consulting or finder's fee or
other compensation in connection with the introduction of NAAC to, or evaluation
of, a Target Business or consummation of a Business Combination.
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PROPERTIES
Mitchell & Company, Ltd. has provided office space and certain office and
secretarial services to NAAC for which NAAC pays $2,500 per month. This
arrangement will terminate upon consummation of the Merger. See "Proposal 1: The
Merger--Conflicts of Interest."
LEGAL PROCEEDINGS
There are no legal proceedings pending against NAAC.
BUSINESS OF GUZZI CORP.
Guzzi Corp., through Moto Guzzi, is a leading Italian manufacturer,
marketer and distributor of performance and luxury motorcycles and motorcycle
parts, marketed under the "Moto Guzzi(Registered)" brand name. Guzzi Corp. is a
Delaware corporation formed in 1996 to acquire Moto Guzzi, its manufacturing
subsidiary and Moto America, the exclusive U.S. importer and distributor of
"Moto Guzzi" brand motorcycles and parts.
Strategy. Moto Guzzi's strategy is to further increase sales volumes by
(i) focusing on the breadth, quality and design of its product offerings,
(ii) increasing its marketing activities, (iii) enhancing its distribution
network and (iv) leveraging its brand name. Moto Guzzi believes that its
reputation and rich tradition as a technological innovator and quality
manufacturer provides a solid foundation for future sales increases. Moto Guzzi
has built a loyal customer base over the past 77 years through the outstanding
performance and reliability of its motorcycles, as well as its strong
distribution network. The current customer base ranges from professional
motorcycle enthusiasts to government agencies, police departments and highway
patrols around the world.
Moto Guzzi plans to strengthen and expand its product line by exploiting
its heritage as one of the industry's design and technology innovators. For
example, it plans to increase its family of products to include entry level
motorcycles such as a "stripped" version of the California model, additional
sports bikes and, potentially, motor scooters. Moto Guzzi also plans to enhance
its core product line--the California and Nevada models. While public
administration sales have traditionally been a stable source of revenue for Moto
Guzzi, management believes that there are unexploited growth opportunities in
this market and plans to refocus its sales and marketing efforts in this product
category.
In terms of enhanced marketing and promotion activities, the U.S. market
represents the largest expansion opportunity for Moto Guzzi. Approximately half
of all motorcycles sold in the U.S. are in the heavyweight segment. Between 1996
and 1997, U.S. registrations of new heavyweight motorcycles increased by 9.7% to
165,700 units. Moto Guzzi plans to implement an aggressive marketing campaign
targeted at U.S. consumers that is designed to build brand value and name
recognition, as well as to emphasize the technical and design strengths of Moto
Guzzi's motorcycles.
In the United States, Moto Guzzi also plans to expand and enhance its
distribution network. In addition to increasing the size and quality of its
dealer network, Moto Guzzi also plans to introduce new sales incentives programs
for dealers, as well as a floor plan financing program. Other innovations that
either have or will be introduced in the U.S. include customer purchase
financing and an extended, three year warranty program.
Finally, Moto Guzzi plans to leverage the "Moto Guzzi" brand by expanding
into new products, markets and services that also offer the opportunity to
enhance its brand awareness and brand image. Moto Guzzi currently sells a
limited line of non-motorcycle merchandise. In the future, Moto Guzzi plans to
introduce a range of branded accessories such as hats, jackets, shirts and
luggage. Management also plans to exploit opportunities to license the "Moto
Guzzi" brand name to manufacturers and suppliers of other products and services.
Motorcycle Industry Generally. Historically, the motorcycle had been an
"entry level" form of transport which has been supplanted by the automobile.
Over recent years, the industry has become established as a recognized leisure
industry in developed markets and Guzzi Corp.'s current range of motorcycles,
being in the larger and more expensive segment of the market, are principally
targeted at the leisure segment of the vehicular industry. The management of
Guzzi Corp. believes that the recent recognition of motorcycling as an
acceptable leisure activity is one of the major factors behind the growth in
Guzzi Corp.'s market segment over the last three years. The management of Guzzi
Corp. believes that this trend will continue in the short and medium term and
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that its markets will not be subject to significant demand changes, although no
assurance can be provided that this will be the case. Guzzi Corp. is also
exploring entry into small displacement motorcycles and scooters.
Manufacturing. Guzzi Corp. today manufactures a high priced line of
motorcycles, and distributes parts and accessories, under the trademark "Moto
Guzzi(Registered)." Guzzi Corp. motorcycles vary in engine displacement from
350cc to 1,100cc. Guzzi Corp. has, in recent years, concentrated development and
sales efforts on its largest motorcycles, having engines of 750cc or larger but,
as part of its growth plan, it is considering entry into the lower-cost, small
displacement market. Moto Guzzi parts were distributed through Centro Ricambi, a
100% owned subsidiary of Moto Guzzi until it was merged into Moto Guzzi in 1997.
All motorcycle manufacturing is conducted at a factory in Mandello del
Lario, Italy. Moto Guzzi manufactures certain power train components, acquires
certain other components from outside suppliers, and performs finishing work and
assembly into motorcycle bodies. Until 1994, Moto Guzzi internally produced a
majority of the components of its motorcycles. As a result of its decision to
increase outsourcing to increase production capacity, Moto Guzzi now produces
less than 40% of all components used in the assembly of its motorcycles.
Because much of the production machinery at the Mandello facility, as well
as the facility itself, is aged and in need of extensive modification,
improvement or replacement, the Company expects that, over the next several
years, significant capital will be required to complete the planned overhaul.
At the end of 1996 and the beginning of 1997, Guzzi Corp. completed a
private placement of preferred stock and common stock purchase warrants from
which Guzzi Corp. realized an aggregate of $5,218,000, net of expenses. Moto
Guzzi also secured from Italian financial institutions, and drew upon, a Lit.
10,000 million debt facility. Additionally, TRG committed to Guzzi Corp.
approximately $4 million from the proceeds of the $7 million public offering in
1997 of shares of TRG common stock and TRG common stock warrants.
The cash acquired as a result of the Merger, aggregating approximately
$8,000,000, if supplemented by increases in sales during the next few years if
growth is realized, should provide a significant portion, but may not provide
all, of the needed capital for the rehabilitation of the Mandello facility or
the implementation of Guzzi Corp.'s strategic business plan and for working
capital. See "Risk Factors--Need for Additional Capital."
Seasonal Nature of Business. Guzzi Corp.'s business is affected by
seasonal factors. Retail market demand is highest in the spring and early
summer, whereas most sales to the Italian government generally take place in the
last quarter of the year. Moto Guzzi, like most Italian companies, traditionally
shuts down production in August of each year and traditionally also has reduced
production over the Christmas holidays and in the period immediately following,
while inventory is being taken. As part of its effort to increase overall
production levels, Guzzi Corp. did not suspend production during the most recent
December-January period of physical inventory taking.
Compliance with Governmental Regulations. Moto Guzzi along with other
motorcycle manufacturers, incurs substantial costs in designing and testing
products to comply with safety and emissions requirements. Such standards have
added, and will continue to add, substantially to the price of the vehicles
although competitive pressures, importation expenses and importers margins have
kept export prices lower than domestic Italian sales prices.
Motorcycles sold in the United States, the European Economic Community and
all other countries are subject to environmental emissions regulations and
safety standards with which Guzzi Corp. is obligated to comply in order to
expand its presence in such countries. All motorcycles produced for sale are
manufactured with the intent to comply with all applicable safety standards. All
current Moto Guzzi models comply with all emission standards applicable in all
countries in which they are sold. There can be no assurance, however, that Guzzi
Corp. will be able cost effectively to comply with any emissions or safety
standards which the governments may hereafter adopt (though the design of new
products seeks to conform with such standards as are believed likely to be
introduced), in which event, Moto Guzzi may be unable to achieve the market
growth that it desires.
Moto Guzzi is subject to a number of governmental regulations relating to
the use, storage, discharge and disposal of minerals and alloys used in
manufacturing processes and to the safety standards of its facilities and
22
<PAGE>
processes. Although Moto Guzzi has not been subject to material environmental or
safety claims in the past, the assertion of such claims or the failure to comply
with present or future regulations could result in the assessment of damages or
imposition of fines against Moto Guzzi, suspension of production or cessation of
certain activities. New regulations could require Moto Guzzi to acquire costly
equipment or incur other significant expenses that could have an adverse effect
on the results of operations. Any failure by Moto Guzzi to control the use of,
or adequately restrict the discharge of hazardous substances or comply with
safety requirements and legislation could subject it to future liabilities.
As a foreign subsidiary of a U.S. corporation, Moto Guzzi is subject to
various U.S. laws and regulations limiting the countries into which Moto Guzzi
may sell its products. The sale by Moto Guzzi of products in contravention of
such laws and regulations may expose Guzzi Corp. (and consequently NAAC) to
fines and penalties. See "Business of Guzzi Corp.--Legal Proceedings."
Backlogs. As of September 14, 1998, Moto Guzzi had firm orders from its
dealer network for 562 motorcycles which had not yet been shipped, at an
approximate value of Lit. 6,182 million. Guzzi Corp. expects to fill all such
orders by year end. At September 30, 1997, Moto Guzzi had open unshipped orders
of 800 motorcycles, having an approximate value of Lit. 8,800 million. All such
orders were fulfilled by December 31, 1997. Moto Guzzi generally receives
cancellable orders from its non-Italian dealer body in respect of its
requirements for the upcoming year and uses these orders to plan production
schedules. Portions of these orders become firm, and other firm orders are
placed, as the anticipated shipment dates approach. Moto Guzzi uses ongoing
research from its sales and marketing departments to forecast expected order
volumes from the domestic Italian dealer network, and does not receive long term
firm orders from the domestic market.
Raw Materials and Components. There are multiple reliable sources for most
motorcycle raw materials, including aluminum for power train components.
However, certain significant components are available from only one or two
sources. In 1996, 1997 and 1998, situations arose where Guzzi Corp.'s suppliers
were unable to make timely deliveries of needed components due to production
problems incurred by such suppliers. All such delays adversely affect motorcycle
production.
While the cost of imported raw materials is affected by variations in the
value of the Italian lira relative to the currencies of Italy's primary trading
partners, currency exchange rates have not had a significant adverse effect on
costs and price competitiveness in 1995, 1996 or 1997.
Research, Development and Continuing Engineering. Guzzi Corp., while
continuously engaged in product improvement and development, has significantly
increased its commitment to develop new products. Aggregate 1997 research and
development expenditures by Guzzi Corp. were approximately Lit. 3,125 million,
compared to Lit. 1,177 million in 1996, and Lit. 602 million in 1995.
Expenditures in 1997 related primarily to development of models initially
scheduled for 1998 production but subsequently deferred or reconsidered.
On-going programs relate to specific models under development and, more
generally, developing more powerful two-cylinder air-cooled and other engines
with improved performance and durability characteristics, superior braking
systems, suspensions, frames, transmissions and other components applicable to
two-wheeled vehicles.
Sales, Marketing and Inventory. Guzzi Corp. primarily markets its products
through advertising in trade publications, participation in promotional events
and fairs, attendance at trade shows and from editorial coverage in trade and
general circulation press. All sales are invoiced in Italian lire except sales
to the United States which are invoiced in U.S. dollars. Prices are customarily
reviewed and are increased to cover increases in production costs at periodic
intervals and in light of prevailing exchange rates. Italian prices for
motorcycles traditionally have been higher than export prices. In March 1996,
Guzzi Corp. increased prices of its various models 5% on average for domestic
Italian sales and for export sales invoiced both in lire and in dollars. In
1997, Guzzi Corp. generally maintained its selling prices in order to maintain
market share, and increased prices by approximately 5% effective April, 1998.
Export sales continued to reflect lower margins than domestic Italian sales due
to importer margins and transportation costs.
Guzzi Corp. is not affected by any unusual industry practices relating to
returns of merchandise or extended payment. It is obliged to maintain 10 years'
inventory of parts for all motorcycles sold to Italian government agencies and,
in common with many other motor vehicle manufacturers, maintains significant
spare parts inventories for commercial reasons. Guzzi Corp.'s sales are pursuant
to open purchase orders rather than long-
23
<PAGE>
term contracts. By scheduling production in anticipation of fulfilling such
orders, it may end a given year with substantial inventory if orders are
canceled or deliveries not taken.
Distribution. Moto Guzzi maintains a distribution network throughout Italy
of over 120 independent dealers. No single Italian dealer accounted for more
than 5% of the sales of Moto Guzzi in 1997. The Italian dealers who distribute
Moto Guzzi motorcycles generally handle other brands as well.
In 1997, a single importer-distributor acted as exclusive
importer-distributor for Moto Guzzi in each of Argentina, Australia, Austria,
Belgium, the Czech Republic, Denmark, Finland, France, Germany, Greece, Holland,
Japan, Luxembourg, Malaysia, Malta, New Zealand, Norway, Portugal, Singapore,
Spain, Sweden, Switzerland, the United Kingdom, and the United States.
Moto America is Guzzi Corp.'s exclusive importer-distributor in the United
States. Until 1996, when it was acquired by TRG and later transferred to Guzzi
Corp., Moto America was an independent business. Today, Moto America distributes
through a network of 100 dealers.
In November 1996, Moto Guzzi replaced its independent French
importer-distributor with a newly created wholly-owned subsidiary of Moto Guzzi
which commenced operations in February 1997, and now operates through a network
of 78 dealers.
Moto Guzzi also owns a 25% equity interest in MGI GmbH, a German
corporation which became the exclusive importer-distributor of Guzzi Corp.
motorcycles and spare parts on January 1, 1997. Moto Guzzi has the right to
acquire up to a total of 90% of the equity interest of the new distributor
within three years. Until December 1996, Moto Guzzi also owned a 25% equity
interest in A+G Motorad GmbH ("A+G"), a German corporation, the majority of the
shares of which is owned by Aprilia S.p.A., another Italian manufacturer of
motorcycles with small displacement engines. A+G distributed the motorcycles of
both Moto Guzzi and Aprilia in the German market in 1996, but was replaced as
the Moto Guzzi distributor in 1997 by MGI GmbH, which distributes through a
network of 105 German dealers.
Guzzi Corp. provides support to its worldwide dealer network by, among
other things, operating a technical training and support facility at Mandello
del Lario. All dealers are required to attend training courses at the inception
of their relationship, and periodically thereafter.
Set forth below is a chart illustrating percentage of motorcycle sales
revenues attributable to various geographic areas in the three most recent
fiscal years. Sales outside Italy in 1997 were approximately Lit. 50,000
million, representing 63% of total sales.
GUZZI CORP. SALES
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31
----------------------
GEOGRAPHIC AREAS 1997 1996 1995
- ---------------- ---- ---- ----
<S> <C> <C> <C>
Italy.......................................................................... 37% 37% 35%
Europe (other than Italy)...................................................... 46% 43% 49%
United States.................................................................. 13% 7% 6%
Elsewhere...................................................................... 4% 13% 10%
</TABLE>
Competition. The sale of motorcycles is a highly competitive business,
with competition typically coming from all powered passenger vehicles, as well
as motorcycles. The overall motorcycle market in Italy (excluding scooters) grew
in 1997, with new vehicle registrations increasing by approximately 38% compared
to the same period in 1996. The market in Italy for larger motorcycles, in which
Guzzi Corp. is concentrating its sales and production efforts, increased by 29%
in 1997 compared to 1996, according to the Italian Ministry of Transportation.
Guzzi Corp. maintains an extremely small share of the world-wide motorcycle
market, which is dominated by many of the same manufacturers that predominate in
Italy. Many of such companies are far larger and better capitalized, with
greater name recognition. Guzzi Corp. competes principally through such
intangible qualities as performance, reputation and quality of manufacture,
areas in which its competitors also excel.
The Italian market today remains dominated by large, well-financed Japanese
manufacturers. A number of Italian and foreign manufacturers, principally
Ducati, Honda, BMW, Yamaha, Kawasaki, Aprilia and Suzuki, sell
24
<PAGE>
their products in the Italian market. In 1997, according to data from the
Italian Ministry of Transportation, the Italian market shares of the principal
competitors of Guzzi Corp. on a unit basis, excluding scooters, were as follows:
<TABLE>
<CAPTION>
ALL LARGE
MOTORCYCLES MOTORCYCLES
----------- -----------
<S> <C> <C>
Honda............................................................... 26.5% 29.9%
Yamaha.............................................................. 16.8% 18.4%
Suzuki.............................................................. 13.8% 14.7%
BMW................................................................. 8.4% 10.7%
Aprilia............................................................. 7.0% 3.7%
Kawasaki............................................................ 7.0% 5.3%
Ducati.............................................................. 6.9% 8.7%
Harley Davidson..................................................... 3.2% 4.1%
Cagiva.............................................................. 1.6% 0.8%
Guzzi Corp.......................................................... 2.7% 2.6%
Others.............................................................. 6.1% 2.1%
</TABLE>
Product Liability. Moto Guzzi's business exposes it to possible claims for
personal injury from the use of its products. Moto Guzzi maintains liability
insurance with a per-occurrence and aggregate one-year claim limit of Lit.
18,000 million. A partially or completely uninsured claim, if successful and of
significant magnitude, could have a material adverse effect on Guzzi Corp.
Patents and Trademarks. Except as described below, the business of Guzzi
Corp. is not and has not been in any material respect dependent upon patents,
licenses, franchises or concessions. The component parts of motorcycles are
manufactured pursuant to well known techniques and include components which are
not unique to its products, although some of these components are specially
styled and designed. Management believes that the registered trade name "Moto
Guzzi(Registered)" and the related trademarks are well known and highly regarded
throughout the world, and appropriate steps have been taken to protect Guzzi
Corp.'s rights in these trade names and trademarks in 67 countries, including
those countries representing significant markets.
Employees and Employee Relations. Relations with Guzzi employees are
considered by its management to be good. At December 31, 1997, Moto Guzzi S.p.A.
had 360 employees, compared to 358 at December 31, 1996, including employees of
Centro Ricambi, merged into Moto Guzzi in 1997, of whom approximately 71% were
engaged in factory production and the balance in various supervisory, sales,
purchasing, administrative, design, engineering and clerical activities.
Resolution of the national metal workers union contract in 1997 resulted in a
one-time payment to workers of Lit. 900,000 ($588) in respect of periods prior
to the date of the new agreement. An increase in Guzzi Corp.'s use of outsourced
components reduced overtime hours to 5.2% of total hours in 1997 compared to
7.7% in 1996.
Guzzi Corp. was not subjected to any significant local work stoppages or
strikes in 1997. In December 1997, however, Guzzi S.p.A. experienced a work
stoppage of one hour duration prompted by reports that management was
considering alternative locations as part of its long term expansion plans. In
1996, it was subjected to strikes totaling 2 1/2 production days, all concerning
the negotiation of a national contract for all workers in metal working
industries. The national strikes resulted in the loss of approximately four
production days because of additional time needed to restart production after
each strike. Guzzi S.p.A.'s "company" contract was renegotiated early in 1996.
Renegotiation of the "national" contract was completed in 1997.
Under Italian law, persons in a company acquire the right to severance pay
based upon salary and years of service. At December 31, 1997, Guzzi Corp. was
obligated to pay employees an aggregate of Lit. 8,003 million, and Lit.
7,154 million at December 31, 1996. See Note 2 of Notes to Guzzi Corp.
Consolidated Financial Statements.
25
<PAGE>
PROPERTIES
The following facilities were, and unless so indicated, are presently,
leased or owned by Guzzi Corp. or its subsidiaries in the active conduct of its
business:
(a) Moto Guzzi's factory and office facilities are owned in fee and
are located in Mandello del Lario, Italy in a group of one, two
and three story buildings aggregating 54,550 square meters. This
facility is currently operating at approximately 50% of production
capacity calculated as a percentage of available space. The
facilities are encumbered by mortgages to certain banks. See
Note 9 of Notes to Consolidated Unaudited Financial Statements.
(b) Office and warehouse facilities are owned in fee by Moto America
and are located in Angier, North Carolina. The facility aggregates
18,300 square feet, of which 2,000 square feet are used for office
functions, and the balance as a warehouse.
(c) Moto Guzzi's spare parts distribution facility is located at a
3,683 square meter facility in Modena, Italy, under a six year
lease expiring in 2002. The current year lease obligation is Lit.
239 million ($157,000), and is subject to incremental annual
increases.
LEGAL PROCEEDINGS
Guzzi Corp. and its subsidiaries are involved in litigation in the normal
course of business. Management does not believe that the final disposition of
such litigation will have a material adverse effect on Guzzi Corp. Guzzi Corp.
has advised the Office of Foreign Assets Control ("OFAC") of a contract for the
sale of motorcycles by Moto Guzzi to a country to which sales are restricted
under U.S. law. The OFAC may require Guzzi Corp. to terminate the contract and
impose fines for violation of law. The potential loss of the value of the
contract, if cancelled, could have a material adverse effect on the future
operations of Moto Guzzi. The potential penalties which may be assessed under
the contract by the buyer for termination are not expected to have a material
adverse effect on the future operations of Moto Guzzi.
EXCHANGE RATES
Since all of the production, and much of the sales of Moto Guzzi occur in
Italy, Guzzi Corp.'s primary financial statements are reported in Italian Lire,
its functional currency as defined by generally accepted accounting principles.
U.S. Dollar translations are provided solely for the reader's convenience and
have been made at the approximate rate of Lit. 1,769 to one dollar which
approximates the rate at December 31, 1997.
The following table sets forth, for the period indicated, the high, low,
average and end of period exchange rates expressed in lire per dollar (rounded
to the nearest lira):
<TABLE>
<CAPTION>
END OF
CALENDAR YEAR HIGH LOW AVERAGE PERIOD
- ------------- ------ ------ ------- ------
<C> <S> <C> <C> <C> <C>
1997 ................................................. 1,837 1,520 1,703 1,769
1996 ................................................. 1,606 1,499 1,543 1,530
1995 ................................................. 1,767 1,565 1,626 1,588
1994 ................................................. 1,689 1,539 1,612 1,622
1993 ................................................. 1,713 1,478 1,574 1,713
</TABLE>
Fluctuations in the exchange rates between the Italian lira and the U.S.
dollar will affect the dollar equivalents of Guzzi Corp.'s, and, therefore,
NAAC's reported revenues and earnings. Guzzi Corp. typically draws U.S. dollars
against its short term credit lines approximately 80% of amounts invoiced in
U.S. dollars, thus hedging against the effects of exchange rate changes between
the invoice date and collection. Sales in U.S. dollars are less than 15% of
total sales. All other sales are invoiced in lire.
In addition, fluctuations in the exchange rates of other foreign countries
relative to the lira may affect Guzzi Corp.'s and, therefore, NAAC's, results of
operations as a consequence of the competitiveness of Guzzi Corp. relative to
its competitors and due to effects on the cost of imported raw materials. See
also "Management's Discussion and Analysis of Guzzi Corp.'s Financial Condition
and Results of Operations."
26
<PAGE>
THE ANNUAL MEETING
This Proxy Statement/Prospectus is being furnished to holders of NAAC
Common Stock in connection with the solicitation of proxies by the NAAC Board
for use at the Annual Meeting to be held on [ ], at
[ ] .m. local time, at [ ].
PURPOSE OF THE ANNUAL MEETING
At the Annual Meeting, holders of NAAC Common Stock will be asked to
consider and vote upon a proposal to approve the Merger Agreement and the
Merger. Approval of this proposal is a condition to the consummation of the
Merger pursuant to the Merger Agreement. See "The Merger Agreement--Conditions."
Holders of NAAC Common Stock, voting together as a single class, also will
be asked to consider and act upon (A) a proposal to approve the adoption of an
Amended and Restated Certificate of Incorporation to effect a series of
amendments to the Certificate of Incorporation: (a) to change the name of NAAC
to "Moto Guzzi Corporation;" (b) to increase the total number of shares which
NAAC will have authority to issue to Twenty Million (20,000,000), of which
(i) 15 Million (15,000,000) shall be Class A Common Stock, par value $.01 per
share, (ii) Two Hundred Fifty Thousand (250,000) shall be Class B Common Stock,
par value $.01 per share, and (iii) Four Million Seven Hundred and Fifty
Thousand (4,750,000) shall be preferred stock, par value $.01 per share, of
which One Hundred (100) shall be designated Class A Convertible Preferred Stock
and Three Hundred Fifty Thousand (350,000) shall be designated as Class B
Convertible Preferred Stock; (c) to provide for classification of the Board of
Directors into three classes serving staggered terms; (d) to require a vote of
two-thirds of the outstanding stock to amend or repeal the by-laws, or by
affirmative vote of a majority of the Board of Directors, subject to certain
exceptions; (e) to provide that the affirmative vote of two-thirds of all stock
shall be required to fill a vacancy in the Board of Directors created by an
increase in the size thereof or by termination of a director if not otherwise
filled by the remaining members of the Board of Directors; (f) to provide that
members of the Board of Directors may be removed only for cause and only by
action of the Board of Directors or upon the affirmative vote of two-thirds of
all stock; and (g) to require NAAC to indemnify its officers and directors,
subject to certain exceptions required by law, (B) the election of eight persons
as the directors of NAAC to take office at the Effective Time, and (C) a
proposal to approve the adoption of the Stock Option Plans. The Merger is
contingent upon the approval by the holders of proposals A through C above. If
the Merger is not consummated for any reason, no change will be made to the
Certificate of Incorporation, the current directors will continue as the
directors of NAAC and the Stock Option Plans will be terminated, notwithstanding
stockholder approval of the proposals.
Holders of NAAC Common Stock, voting as separate classes will be asked to
approve the Class B Recapitalization. The consummation of the Merger is not
contingent upon approval of the Class B Recapitalization; however, the Class B
Recapitalization is conditioned on the approval and consummation of the Merger.
If the Merger is not consummated, the Class B Recapitalization will not be
implemented, notwithstanding stockholder approval.
27
<PAGE>
VOTING RIGHTS
The NAAC Board has fixed [ ] as the record date for the Annual
Meeting. Only holders of record of NAAC Common Stock at the close of business on
the Record Date will be entitled to notice of and to vote at the Annual Meeting.
Each holder of record of NAAC Class A Common Stock on the Record Date is
entitled to cast one vote for each share held on each proposal. Each holder of
record of NAAC Class B Common Stock on the Record Date is entitled to cast two
votes for each share held on each proposal including the proposal for the
Class B Recapitalization on which the NAAC Class B Common Stock votes as a
separate class. Other than on the proposal of the Class B Recapitalization, the
NAAC Class A Common Stock and NAAC Class B Common Stock will vote on all matters
as a single class. The vote of the NAAC Common Stock is exercisable by
stockholders acting in person or by properly executed proxy at the Annual
Meeting. As of the close of business on the Record Date, there were 906,000
shares of NAAC Class A Common Stock and 150,000 shares of NAAC Class B Common
Stock outstanding and entitled to vote.
The presence at the Annual Meeting, in person or by properly executed
proxy, of the holders of a majority in interest of outstanding shares of NAAC
Common Stock entitled to vote at the Annual Meeting will constitute a quorum.
The presence at the Annual Meeting, in person or by properly executed proxy, of
the holders of a majority in interest of outstanding shares of NAAC Class B
Common Stock entitled to vote at the Annual Meeting will constitute a quorum for
the proposal relating to the Class B Recapitalization. A NAAC stockholder who
abstains from a vote on a particular proposal by registering an abstention will
be deemed present at the Annual Meeting for quorum purposes, but will not be
deemed to have voted on the particular matter. Proxies relating to "street name"
shares that are voted by brokers on only some of the proposals will nevertheless
be treated as present for purposes of determining the presence of a quorum on
all matters but will not be entitled to vote on any proposal as to which the
broker does not have discretionary voting power and has not received
instructions from the beneficial owner ("broker non-votes").
If a quorum is present at the Annual Meeting, the affirmative vote by the
holders of two-thirds of the outstanding shares of NAAC Common Stock is required
to approve the Merger Agreement and the Merger; however, if the holders of more
than 20% (160,000) of the outstanding shares of NAAC Class A Common Stock
(excluding the Pre-IPO Shares) exercise their redemption rights, NAAC will not
consummate the Merger. Under the DGCL, if a quorum is present at the Annual
Meeting, those nominees for director receiving a plurality of the votes cast at
the Annual Meeting will be elected as directors; if the Merger is not
consummated, the current directors of NAAC will continue as directors. A
"plurality" means that the nominees who receive the greatest number of votes are
elected as the directors up to the maximum number of directors to be elected. If
a quorum is present at the Annual Meeting, the affirmative vote of the holders
of a majority in interest of outstanding shares of NAAC Common Stock is required
to approve the amendments to the Certificate of Incorporation and the
affirmative vote of the holders of a majority of the shares present in person or
represented by proxy and entitled to vote at the Annual Meeting is required to
approve the Stock Option Plans. If a quorum of the NAAC Class B Common Stock is
present at the Annual Meeting, the affirmative vote of the holders of a majority
in interest of the outstanding shares of NAAC Class B Common Stock is required
to approve the Class B Recapitalization.
Abstentions may be specified on the proxy card as to each of the proposals
to approve the Merger Agreement and the Merger, to elect the nominees to the
NAAC Board, to approve the amendments to the Certificate of Incorporation, to
approve the Stock Option Plans and, solely for the NAAC Class B Common Stock, to
approve the Class B Recapitalization. Holders of NAAC Common Stock who abstain
will be considered present and entitled to vote at the Annual Meeting, but will
not be counted as votes cast in the affirmative. Abstentions on the proposal to
approve the Merger Agreement and the Merger will have the effect of a negative
vote because this proposal requires the affirmative vote of two-thirds in
interest of the outstanding shares of NAAC Common Stock. Abstentions on the
proposal to approve the amendments to the Certificate of Incorporation will have
the effect of a negative vote because this proposal requires the affirmative
vote of a majority in interest of the outstanding shares of NAAC Common Stock.
Abstentions on the proposal to elect directors will have no effect because they
are not counted for the purposes of determining a plurality. Abstentions on the
proposal to approve the Stock Option Plans will have the effect of a negative
vote because this proposal requires the affirmative vote of a majority in
interest of the shares present in person or represented by proxy at the Annual
Meeting. Abstentions on the proposal to approve the Class B Recapitalization
will have the effect of a
28
<PAGE>
negative vote because this proposal requires the affirmative vote of a majority
in interest of the outstanding shares of NAAC Common Stock and NAAC Class B
Common Stock voting separately as a class.
Broker non-votes on the proposal to approve the Merger Agreement and the
Merger will have the effect of a negative vote because this proposal requires
the affirmative vote of two-thirds in interest of the outstanding shares of NAAC
Common Stock. Broker non-votes on the proposals to approve the amendments to the
Certificate of Incorporation will have the effect of a negative vote because
this proposal requires the affirmative vote of a majority in interest of the
outstanding shares of NAAC Common Stock. Broker non-votes on the proposals to
elect directors will have no effect on the vote because directors are elected by
a plurality of the votes cast. Broker non- votes on the proposal to approve the
Stock Option Plan will have no effect on the vote because the shares will not be
considered entitled to vote on matters as to which the brokers withhold
authority. Broker non-votes on the proposal to approve the Class B
Recapitalization will have the effect of a negative vote because this proposal
requires the affirmative vote of a majority in interest of the outstanding
shares of NAAC Common Stock and NAAC Class B Common Stock voting separately as a
class.
The Initial NAAC Stockholders have agreed to vote their Pre-IPO Shares
(approximately 11.7% of the outstanding shares of NAAC Class A Common Stock) in
accordance with the vote of the majority in interest of all other holders of
NAAC Common Stock on the proposal to approve the Merger Agreement and the
Merger. For this purpose they have given their proxy to the officers of NAAC.
SOLICITATION AND REVOCATION OF PROXIES
All shares of NAAC Common Stock represented at the Annual Meeting by
properly executed proxies received prior to or at the Annual Meeting, and not
revoked, will be voted at the Annual Meeting in accordance with the instructions
indicated on such proxies. Holders of NAAC Class A Common Stock will be asked to
use proxies on white cards. Holders of NAAC Class B Common Stock will be asked
to use proxies on blue cards. IF NO INSTRUCTIONS ARE INDICATED, SUCH PROXIES
WILL BE VOTED FOR EACH OF THE DIRECTOR NOMINEES AND "FOR" EACH OF THE OTHER
PROPOSALS TO BE VOTED ON AT THE ANNUAL MEETING. The NAAC Board is not aware of
any other matters which are to come before the Annual Meeting. If any other
matters are properly presented at the Annual Meeting for consideration, the
persons named in the enclosed proxy card will have discretion to vote on such
matters in accordance with their best judgment.
Any proxy given pursuant to this solicitation can be revoked by the person
giving it at any time before it is voted. Proxies can be revoked by (i) filing
with the President of NAAC, at or before the taking of the vote at the Annual
Meeting, a written notice of revocation bearing a later date than the proxy,
(ii) duly executing a subsequent proxy relating to the same shares and
delivering it to the President of NAAC before the Annual Meeting or (iii)
attending the Annual Meeting and voting in person (although presence at the
Annual Meeting without further action will not revoke a proxy). Any written
notice revoking a proxy should be sent to: North Atlantic Acquisition Corp., 5
East 59th Street, New York, New York 10022, Attention: President, or hand
delivered to the President at or prior to the vote at the Annual Meeting.
REDEMPTION RIGHTS
Holders of up to 20% or 160,000 shares, of the outstanding NAAC Class A
Common Stock (excluding the Pre-IPO Shares) have the right to have NAAC redeem
their shares for cash if the Merger is approved and consummated provided they
follow the procedure set forth below. The per-share redemption price will be
$[ ].
A holder of NAAC Class A Common Stock (excluding the Pre-IPO Shares) as of
the Record Date can give notice of his intention to have NAAC redeem such
stockholder's shares until the close of business on [ ] the twentieth day prior
to date of the Annual Meeting. A stockholder desiring to exercise the right of
redemption (a "Redeeming Stockholder") must deliver a written demand for
redemption to NAAC ("Redemption Notice"). The failure of a Redeeming Stockholder
to satisfy the notice requirement in the specified time limit will terminate the
Redeeming Stockholder's redemption right. A stockholder who purchases shares of
NAAC Common Stock after the Record Date will not have a redemption right with
respect to such shares.
The Redemption Notice must state that the Redeeming Stockholder demands
that all or a portion of such stockholder's shares be redeemed if the Merger is
consummated and specify the number of shares for which
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redemption has been requested by such stockholder and the address to which a
letter of transmittal and instructions regarding redemption should be sent. The
Redemption Notice must be signed by the Redeeming Stockholder (or such
stockholder's duly authorized representative) exactly as the holder's name
appears on the proxy card accompanying this Proxy Statement. A demand for
redemption of shares owned jointly by more than one person must identify and be
signed by all of such holders. Any person signing a demand for redemption on
behalf of a partnership or a corporation or in any representative capacity (such
as attorney-in-fact, executor, administrator, trustee or guardian) must indicate
such individual's title and, if NAAC so requests, furnish written proof of such
person's capacity and authority to sign the demand. Because only holders of
record may exercise redemption rights, persons who beneficially own shares held
of record by fiduciaries, nominees or others (e.g., "street name") who wish to
exercise their redemption rights must instruct the record holders of their
shares to satisfy the conditions described herein.
NAAC must receive Redemption Notices no later than the close of business on
[ ], at the following address: North Atlantic Acquisition Corp., 5 East 59th
Street, New York, New York 10022, Attention: President. Redeeming Stockholders
should send the Redemption Notice in a manner that assures such notice is
received by NAAC by such time and provides a record of delivery. Upon timely
receipt of a properly completed Redemption Notice, NAAC will mail to the
Redeeming Stockholder a letter of transmittal and instructions to be used by
such holder in forwarding certificates representing shares to be redeemed
("Certificates").
A Redeeming Stockholder should retain such stockholder's Certificates
pending consummation of the Merger and receipt of instructions from NAAC on how
and when to dispose of the Certificates and receive the redemption
consideration, and should not deliver such Certificates to NAAC. Instructions
will be provided to Redeeming Stockholders promptly following consummation of
the Merger. Thereafter, NAAC will distribute to each Redeeming Stockholder an
amount equal to the redemption price multiplied by the number of shares for
which redemption has been requested by such Redeeming Stockholder. Upon NAAC's
payment of the aggregate redemption consideration, Redeeming Stockholders will
cease to have any interest for such shares.
A Redeeming Stockholder may withdraw a demand for redemption at any time
prior but not subsequent to the Annual Meeting. NAAC stockholders have no
appraisal or dissenter's rights with respect to the Merger.
NAAC LIQUIDATION IF NO BUSINESS COMBINATION
If a Business Combination is not consummated by August 22, 1999, NAAC will
be dissolved and will distribute to holders of NAAC Class A Common Stock in
respect of their shares (excluding the Pre-IPO shares) the amount in the Escrow
Account, including interest earned thereon, divided by the number of shares of
NAAC Common Stock held by stockholders entitled to share in the Escrow Account.
Following such redemption of NAAC Class A Common Stock, each outstanding share
of NAAC Class B Common Stock will be exchanged for two shares of NAAC Class A
Common Stock. The assets of NAAC (other than the escrowed assets) will be used
to pay NAAC's liabilities and to redeem NAAC's outstanding Series A Preferred
Stock at its liquidation value. The Initial NAAC Stockholders do not have the
right to participate in any liquidating distribution with respect to their
Pre-IPO Shares prior to consummation of a Business Combination. Any liquidation
would occur after notice from NAAC to the trustee which would then commence
liquidating the Escrow Account and distribute the proceeds to NAAC's transfer
agent for distribution to stockholders. NAAC has incurred costs of $268,000
through May 31, 1998 in connection with evaluating various Target Businesses and
operating expenses and is incurring additional costs in connection with the
Merger. In the event NAAC is liquidated, its non-Escrow Account assets may not
be sufficient to pay all of its accounts payable and accrued expenses. See
"Management's Discussion and Analysis of NAAC's Financial Condition and Results
of Operations."
SOLICITATION OF PROXIES
In addition to solicitation by mail, directors and officers of NAAC listed
under "Proposal 4: Election of Directors" may solicit proxies by telephone,
facsimile or telegram or in person. Arrangements will also be made with
brokerage houses and other custodians, nominees and fiduciaries for the
forwarding of solicitation material to the beneficial owners of stock held of
record by such persons, and NAAC will reimburse such custodians, nominees and
fiduciaries for reasonable out-of-pocket expenses in connection therewith.
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[ ] will assist in the solicitation of proxies by NAAC for
a fee of approximately [$ ], plus reasonable out-of-pocket expenses.
PROPOSAL 1: THE MERGER
BACKGROUND OF THE MERGER
On August 23, 1997, NAAC initiated efforts to select and evaluate Target
Businesses. In the ensuing eleven months, NAAC analyzed approximately 60
companies, and held discussions in respect of a Business Combination with
representatives of approximately 30 companies. NAAC ultimately determined not to
proceed with any of these businesses.
In March 1998, the executives of NAAC and Guzzi Corp. commenced discussions
leading to a proposal to merge Guzzi Corp. into NAAC, with NAAC as the surviving
corporation. Guzzi Corp. indicated its interest in entering into the Merger for
a number of reasons. In the fourth quarter of 1997, Guzzi Corp. had examined
several alternative means to obtain capital needed to modernize the Mandello
facility and to achieve the sales growth it desired, including the private and
public securities markets, and had communications with numerous commercial and
investment banks. A merger with NAAC was considered because it was believed that
it would provide it with a timely and cost-effective method of securing the
needed financing. Guzzi Corp. did not seek or obtain an independent valuation of
its own assets, capital or financial condition.
During the following months, until the signing of the Merger Agreement,
each of the parties or its agents reviewed the assets, capital and financial
condition of the other and negotiated the terms of the Merger Agreement and
ancillary agreements. NAAC also sent its financial advisors and accountants and
personnel to Italy to review the facilities, operations and records of Guzzi
Corp.
On July 23, 1998, the NAAC Board considered the principal terms of the
Merger Agreement and the related documentation, and approved (i) the Merger
Agreement in draft form as of such date, with such changes as approved by the
officers of NAAC as they deemed to be in the best interests of NAAC (ii) the
amendments to the Certificate of Incorporation (a) to change the name of NAAC to
"Moto Guzzi Corporation;" (b) to increase the total number of shares which NAAC
will have authority to issue to Twenty Million (20,000,000), of which (A) 15
Million (15,000,000) shall be Class A Common Stock, par value $.01 per share,
(B) Two Hundred Fifty Thousand (250,000) shall be Class B Common Stock, par
value $.01 per share, and (C) Four Million Seven Hundred and Fifty Thousand
(4,750,000) shall be preferred stock, par value $.01 per share, of which One
Hundred (100) shall be designated Class A Convertible Preferred Stock and Three
Hundred Fifty Thousand (350,000) shall be designated as Class B Convertible
Preferred Stock; (c) to require a vote of two-thirds of the outstanding stock to
amend or repeal the by-laws, or by affirmative vote of a majority of the Board
of Directors, subject to certain exceptions; (d) to provide for classification
of the Board of Directors into three classes serving staggered terms; (e) to
require NAAC to indemnify its officers and directors, subject to certain
exceptions required by law; (f) to provide that the affirmative vote of
two-thirds of all stock shall be required to fill a vacancy in the Board of
Directors created by an increase in the size thereof or by termination of a
director if not otherwise filled by the remaining members of the Board of
Directors; and (g) to provide that members of the Board of Directors may be
removed only for cause and only by action of the Board of Directors or upon the
affirmative vote of two-thirds of all stock, (iii) the nomination of eight
persons to be elected to the NAAC Board to hold office commencing upon
consummation of the Merger, (iv) the Stock Option Plans, and (v) the Class B
Recapitalization. The NAAC Board also approved the issuance of NAAC Class A
Common Stock, NAAC Class B Preferred Stock and Nominal Warrants for the
contribution of intercompany debt by TRG and OAM to the capital of Guzzi Corp.
and the issuance of NAAC Class A Common Stock, NAAC Class B Preferred Stock and
Nominal Warrants for the cancellation of the Guzzi Warrants. The NAAC Board
voted to recommend unanimously that the stockholders of NAAC vote in favor of
each proposal requiring the vote of the holders of NAAC Common Stock and for the
nominees for directors.
The negotiations for the Merger Agreement were concluded on August 18, 1998
and the Merger Agreement and certain related agreements were executed. NAAC and
Guzzi Corp. announced the execution of the agreement and certain of its terms
through press releases issued on August 18, 1998.
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REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARD OF DIRECTORS
In making its determination to approve the Merger Agreement and the Merger,
the NAAC Board reviewed and discussed the results of management's due diligence
investigation, and analyzed the business opportunities for NAAC and certain
factors relevant to the proposed transaction.
The NAAC Board gave weight to the long history of Moto Guzzi, the stature
of the trademark of the Moto Guzzi name, customer loyalty and the reputation of
Moto Guzzi products. The NAAC Board also gave weight to the reorganization
efforts and investment of approximately Lit. 18.8 billion ($10.6 million) into
Moto Guzzi by TRG since 1994. The fact that the management of Moto Guzzi had
been strengthened by new employees and consultants was also a positive factor.
The increase in the annual production from a low of approximately 3,300 units in
1993 to approximately 5,600 units in 1997, the market acceptance of the "Nevada"
and "California" cruiser motorcycles and a sport motorcycle and the Company's
plans for an off-road cycle and its consideration of developing a scooter were
also considered. The fact that Moto Guzzi was investing in new production
machinery, introducing new designs, and entering into a design agreement for new
engines were significant in the consideration of the NAAC Board.
The NAAC Board then examined other companies in the motorcycle industry to
evaluate the pricing of the proposed transaction and the overall potential for
the industry in the immediate future. The NAAC Board also considered the general
improvement in the market for motorcycles and how they are becoming a leisure
activity apart from being a simple source of transportation.
The NAAC Board considered the principal risks associated with the proposed
transaction. Although Moto Guzzi had commenced a turnaround of its manufacturing
and marketing, it was acknowledged that there were many things to be done in the
future to complete the proposed business plan and make Moto Guzzi a profitable
enterprise. The NAAC Board considered various risks related to the production
facilities. These included the risks associated with the expense and needed
investment in machinery and the expense of maintaining the old facilities,
including environmental factors. One of the principal risks examined was Moto
Guzzi's financial condition and the need for the capital of NAAC and future
financings. The NAAC Board evaluated the projected capital requirements and the
potential sources of financing, including the possible sale of certain acquired
assets, the exercise of outstanding NAAC Class A Warrants, bank loans from
Italian institutional lenders and the capital markets. The NAAC Board also
considered the consequences of Moto Guzzi being unable to find adequate funding
for its currently proposed business plan.
The cyclicality of the motorcycle industry and the growing reliance on
sales of higher-end units to persons with greater disposable incomes available
for leisure activities were considered. The NAAC Board also considered the
sources of competition and the impact of competition on Moto Guzzi with
particular reference to the need to expand its product offerings and the timing
of the development of the proposed products. The NAAC Board considered the
recurrent problems of Moto Guzzi in obtaining parts from suppliers, the limited
number of suppliers for some essential parts, labor unrest and the importance of
certain public entity procurement programs, primarily in Italy.
The NAAC Board then considered the risks related to owning and operating a
business located in a foreign country with approximately 63% of its current
sales in many countries other than Italy. Among the specific factors considered
were the differences between financial reporting in United States dollars, using
United States GAAP as compared to the financial reporting by Guzzi Corp. in
Italian lire, currency translation and currency risks, the advent of the Euro,
the ability to find financing for foreign enterprises, the Italian labor and
other regulatory regimes which are considered substantially different than those
of the United States, the likelihood of communication differences and
difficulties, and various import and export requirements.
In view of the variety of factors considered, the NAAC Board did not find
it practicable to quantify or otherwise attempt to assign relative weights to
the specific factors considered in making its determination. Consequently, it
did not quantify the assumptions and results of its analysis in reaching its
determination that the Merger Agreement and the Merger are in the best interests
of NAAC and its stockholders. However, as a general matter, the NAAC Board
believed that the favorable factors about the business of Moto Guzzi supported
its decision to approve the Merger Agreement and outweighed the various risk
factors. The NAAC Board concluded that, notwithstanding the potentially negative
factors, a Business Combination with Guzzi Corp. is in the best
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interests of NAAC and its stockholders and is consistent with NAAC's business
objective of effecting a Business Combination with a suitable Target Business.
In reaching its conclusion to approve the Merger Agreement and the Merger,
the NAAC Board also was aware of certain conflicts of interest of NAAC's
directors and officers, including that unless NAAC consummates the Merger, such
persons' Pre-IPO Shares and NAAC Management Options would have no value and
Mr. David J. Mitchell would not be in a position to benefit from a future
consulting arrangement dependent on the Merger being consummated. See "Proposal
1: The Merger--Conflicts of Interest." The NAAC Board did not consider
liquidation as an alternative business strategy to consummating the Merger
because it believed that the Merger is in the best interests of NAAC and its
stockholders and is consistent with NAAC's business objective of effecting a
Business Combination with a suitable Target Business.
FAIRNESS OPINION OF ALLEN & COMPANY
On July 23, 1998, Allen & Company delivered to NAAC's Board of Directors
its written opinion to the effect that, as of such date, the terms of the Merger
are fair, from a financial point of view, to the holders of NAAC Class A Common
Stock.
The full text of the written opinion of Allen & Company, dated July 23,
1998, is set forth as Annex II to this Proxy Statement/Prospectus and describes
the assumptions made, matters considered and limits on the review undertaken.
The holders of NAAC Class A Common Stock are urged to read the opinion in its
entirety. Allen & Company's opinion is directed only to the fairness, from a
financial point of view, of the terms of the Merger and does not constitute a
recommendation of the Merger over other courses of action that may be available
to NAAC or constitute a recommendation to any holder of NAAC Class A Common
Stock concerning how such holder should vote with respect to the Merger. The
summary of the opinion of Allen & Company set forth in this Proxy
Statement/Prospectus is qualified in its entirety by reference to the full text
of such opinion.
In arriving at its opinion, Allen & Company (i) reviewed the terms and
conditions of the Merger, including the draft Merger Agreement and the draft
agreements ancillary thereto (none of which prior to the delivery of Allen &
Company's opinion had been executed by the parties); (ii) analyzed publicly
available historical business and financial information relating to NAAC, as
presented in documents filed with the Securities and Exchange Commission; (iii)
analyzed certain historical business and financial information relating to Guzzi
Corp. furnished by Guzzi Corp.; (iv) reviewed certain financial forecasts and
other data provided to Allen & Company by Guzzi Corp. relating to its business;
(v) conducted discussions with certain members of the senior management of NAAC
and Guzzi Corp. with respect to the financial condition, business operations,
strategic objectives and prospects of NAAC and Guzzi Corp., as well as trends
prevailing in Guzzi Corp.'s industry; (vi) reviewed and analyzed public
information, including certain stock market data and financial information
relating to selected public companies in lines of business which Allen & Company
believed to be comparable to Guzzi Corp.'s; (vii) reviewed trends in the
motorcycle industry; (viii) reviewed the trading history, market data and
financial information of selected companies in industries comparable to that of
Guzzi Corp.; (ix) reviewed public financial and transaction information relating
to merger and acquisition transactions Allen & Company deemed to be comparable
to the Merger; and (x) conducted such other financial analyses and
investigations and reviewed such other materials as Allen & Company deemed
necessary or appropriate for the purposes of the opinion expressed therein.
In connection with its review, Allen & Company assumed and relied on the
accuracy and completeness of the information it reviewed for the purpose of its
opinion and did not assume any responsibility for independent verification of
such information or for any independent evaluation or appraisal of the assets of
NAAC or Guzzi Corp. With respect to Guzzi Corp.'s financial forecasts, Allen &
Company assumed that they had been reasonably prepared on bases reflecting the
best currently available estimates and judgments of the management of Guzzi
Corp., and Allen & Company expressed no opinion with respect to such forecasts
or the assumptions on which they were based. Allen & Company's opinion was
necessarily based upon business, market, economic and other conditions as they
existed on, and could be evaluated as of, the date of its opinion. Allen &
Company's opinion does not imply any conclusion as to the likely trading range
of the NAAC Class A Common Stock following the consummation of the Merger, which
may vary depending on, among other factors, changes in
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interest rates, dividend rates, market conditions, general economic conditions
and other factors that generally influence the price of securities.
The following is a summary of the presentation made by Allen & Company to
the NAAC Board of Directors in connection with the rendering of Allen &
Company's fairness opinion:
Transaction Overview and Analysis. Allen & Company presented an overview
of the proposed transaction, including an analysis of the pro forma ownership of
the combined entity resulting from the Merger and Guzzi Corp.'s historical
operating results for the two years ended December 31, 1997 and its projected
operating results for the five years ending December 31, 1998 through 2002.
While noting that there were few publicly traded companies directly
comparable to Guzzi Corp., Allen & Company performed a comparable company
analysis by comparing Guzzi Corp.'s operating results to the operating results
of Harley-Davidson, Inc. ("HDI"). Utilizing certain of HDI's trading multiples
based upon projected 1998 operating results and based upon Guzzi Corp.'s
projected operating results for such period, Allen & Company's analysis yielded
a total enterprise value (the recent value of all equity securities plus
long-term debt less cash) for Guzzi Corp. of between $63.8 million and $99.5
million. In addition, Allen & Company considered the enterprise values of two
development-stage companies, Excelsior-Henderson Motorcycle Manufacturing
Company, a company publicly traded on Nasdaq (approximately $110.4 million), and
Norton Motors International Inc., a company which had filed a registration
statement for an initial public offering (approximately $69.7 million, based
upon the midpoint of the assumed offering range).
Allen & Company also performed a discounted cash flow analysis of Guzzi
Corp. based upon projections provided by Guzzi Corp. management and utilizing
certain other assumptions made by Allen & Company. The discounted cash flow
valuation of Guzzi Corp. was determined by adding (i) the present value of
projected unleveraged cash flow valuation of Guzzi Corp. through 2003 and
(ii) the present value of Guzzi Corp.'s terminal value in the year 2003. The
range of terminal values for Guzzi Corp. was calculated by applying a range of
multiples (from 6.0x to 8.0x) to Guzzi Corp.'s projected EBITDA. The cash flows
and terminal values of Guzzi Corp. were discounted to present value using
different discount rates (from 11.0% to 13.0%), chosen to reflect various
assumptions regarding costs of capital. Based upon this analysis, Allen &
Company derived a range of enterprise values for Guzzi Corp. of between
approximately $147.7 million and $208.2 million.
Allen & Company reviewed and analyzed certain financial and stock market
information relating to selected merger transactions occurring in the motorcycle
industry since July 1996 (the "Industry Transactions"). Allen & Company noted
that the lack of available publicly disclosed information concerning the
Industry Transactions limited its ability to use such transactions in evaluating
the Merger.
Based upon the analyses of Allen & Company described above, Allen & Company
noted that the average range of enterprise values for Guzzi Corp. was from
approximately $94 million to $139 million. Allen & Company noted that such
valuation range would imply a value for each share of NAAC Class A Common Stock
following the Merger of between approximately $11.26 and $16.07. Allen & Company
also noted that such implied valuation range would exceed the approximately
$10.00 plus accrued interest thereon which the holders of NAAC Class A Common
Stock would be entitled to receive upon the exercise of their redemption right.
No company used in the comparable company analyses summarized above is
identical to Guzzi Corp., and no transaction used in the comparable transaction
analysis summarized above is identical to the Merger. Accordingly, any such
analysis of the value of the consideration to be paid by NAAC pursuant to the
Merger involves complex considerations and judgments concerning differences in
the potential financial and operating characteristics of the comparable
companies and transactions and other factors in relation to the trading and
acquisition values of the comparable companies.
The preparation of a fairness opinion is not susceptible to partial
analysis or summary description. Allen & Company believes that its analyses and
the summary set forth above must be considered as a whole and that selecting
portions of its analyses and the factors considered by it, without considering
all analyses and factors, could create an incomplete view of the processes
underlying the analysis set forth in its opinion. Allen & Company has not
indicated that any of the analyses which it performed had a greater significance
than any other.
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In determining the appropriate analyses to conduct and when performing
those analyses, Allen & Company made numerous assumptions with respect to
industry performance, general business, financial, market and economic
conditions and other matters, many of which are beyond the control of NAAC or
Guzzi Corp. The analyses which Allen & Company performed are not necessarily
indicative of actual values or actual future results, which may be significantly
more or less favorable than suggested by such analyses. Such analyses were
prepared solely as part of Allen & Company's analysis of the fairness, from a
financial point of view, of the terms of the Merger to the holders of NAAC
Class A Common Stock. The analyses do not purport to be appraisals or to reflect
the prices at which a company might actually be sold or the prices at which any
securities may trade at the present time or at any time in the future.
Allen & Company is a nationally recognized investment banking firm that is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
bids, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. NAAC
retained Allen & Company based on such qualifications as well as its familiarity
with NAAC. In addition, as a part of its investment banking and securities
trading business, Allen & Company may hold positions in and trade in the
securities of NAAC from time to time.
NAAC entered into a letter agreement with Allen & Company as of May 4, 1998
(the "Engagement Letter"), pursuant to which Allen & Company agreed to act as
NAAC's financial advisor in connection with the Merger and to render an opinion
as to the fairness from a financial point of view of the terms of the Merger to
the holders of NAAC Class A Common Stock. Pursuant to the Engagement Letter,
NAAC agreed to pay Allen & Company a fee of $100,000 earned upon the delivery of
its written fairness opinion to the NAAC Board of Directors and payable at the
Effective Time. In addition, upon the closing of the Merger, NAAC has agreed
pursuant to the Engagement Letter to issue to Allen & Company a warrant to
purchase 350,000 shares of NAAC Class A Common Stock at an exercise price of
$10.00 per share, which warrant may be exercisable at any time prior to July 1,
2003. The shares of NAAC Class A Common Stock issuable upon the exercise of such
warrant may not be sold by Allen & Company prior to July 1, 2000. Whether or not
the Merger is consummated, NAAC has agreed, pursuant to the Engagement Letter,
to reimburse Allen & Company for all its out-of-pocket expenses up to $10,000,
including the fees and disbursements of its counsel, incurred in connection with
its engagement by NAAC and to indemnify Allen & Company against certain
liabilities and expenses in connection with its engagement.
CONFLICTS OF INTEREST
Members of the NAAC Board and management have various conflicts of interest
arising out of their ownership of NAAC Class A Common Stock and the NAAC
Management Options and the possible consulting arrangement for Mr. Mitchell upon
consummation of the Merger. The NAAC Board was aware of these interests when it
approved the Merger Agreement and the Merger.
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Each of the current directors and executive officers of NAAC owns Pre-IPO
Shares which were acquired for an aggregate of $4,000 (or approximately $.10 per
share). As of August 18, 1998, all directors and executive officers of NAAC as a
group owned a total of 40,000 shares of NAAC Common Stock. Two directors of
NAAC, Messrs. Mitchell and McMillen, also have Class B Options to purchase an
aggregate of 30,000 shares of NAAC Class B Common Stock at an exercise price of
$10.00 per share, which they have agreed to exercise as of the Effective Time of
the Merger, and Class A Options to purchase an aggregate of 100,000 units, each
unit consisting of one share of NAAC Class A Common Stock and one NAAC Class A
Warrant, at an exercise price of $12.50 per unit, until the third anniversary of
the Merger. NAAC has agreed to register the securities to be issued on the
exercise of the Class A Options as soon as practicable after the Merger.
If NAAC is liquidated as a result of its failure to consummate a Business
Combination by August 22, 1999, the current directors and executive officers of
NAAC would not participate in any distribution of assets with respect to their
Pre-IPO Shares. Thus, unless NAAC consummates the Merger or another Business
Combination, such persons' securities of NAAC will have no value. If the Merger
or another Business Combination is consummated thereafter, such persons would
participate in any subsequent liquidation of NAAC on the same base as other
security holders of NAAC.
David J. Mitchell will be engaged as a consultant after the Merger and as
compensation for his services will be granted an option to purchase 30,000
shares of NAAC Class A Common Stock. The option will vest one third on the date
of grant and one third each on succeeding anniversaries of the date of grant and
will be exercisable at the fair market value of the NAAC Class A Common Stock on
the date of grant for a period of ten years after the date of grant. In
addition, as a member of the NAAC Board after the Merger, Mr. Mitchell will be
granted options to purchase 12,500 shares of NAAC Class Common Stock for each
year of service, exercisable for ten years at the price of a share in the public
market on the date of grant. If the Merger is not approved, these options will
not be granted.
USE OF FUNDS AVAILABLE UPON CONSUMMATION OF THE MERGER
In connection with the IPO, NAAC received net proceeds of approximately
$8,100,000 after payment of offering expenses. As of July 31, 1998, the Escrow
Account contained $8,422,500 which, together with any interest earned since that
date, will be disbursed to NAAC upon consummation of the Merger and, among other
things, will be used (i) to finance the Merger, (ii) to satisfy the redemption
rights of NAAC stockholders, and (iii) for working capital of Guzzi Corp. See
"Management's Discussion and Analysis of Guzzi Corp.'s Financial Condition and
Results of Operations."
If the Merger is consummated and the maximum number of shares of NAAC
Class A Common Stock (other than the Pre-IPO Shares) entitled to be redeemed
without preventing the Merger are in fact converted (160,000 shares), the amount
of funds available to NAAC following consummation of the Merger would be reduced
by approximately $[ ].
Additionally, there are currently outstanding NAAC Class A Warrants to
purchase an aggregate of 800,000 shares of NAAC Class A Common Stock which will
be increased to 1,160,000 shares of NAAC Class A Common Stock if the Class B
Recapitalization is approved and effected, exercisable at $9 per share. If the
trading price of the Class A Common Stock exceeds $11 for 10 consecutive trading
days, the Class A Warrants may be redeemed by NAAC for $.05 per warrant unless
earlier exercised. Exercise of such warrants will provide gross proceeds to NAAC
of $10,440,000. An additional 243,333 Class A Warrants, each exercisable to
purchase a share of Class A Common Stock at $9 per share, may be issued upon
exercise of existing warrants or options.
Pending consummation of the Merger, but prior to the mailing of this Proxy
Statement/Prospectus, Guzzi Corp. may, with NAAC's approval, secure interim
equity or debt financing which shall be repaid upon consummation of the Merger.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO NAAC STOCKHOLDERS
The following discussion summarizes the material Federal income tax
consequences to NAAC stockholders (i) whose stock is redeemed in accordance with
the procedures set forth in this Proxy Statement or (ii) who receive a
distribution upon dissolution of NAAC if a Business Combination is not
consummated by August 22, 1999. This summary does not discuss all relevant
aspects of Federal income taxation and thus, for example, may not be applicable
to NAAC stockholders who are not U.S. citizens or residents; nor does it address
the effect of any applicable state, local, foreign or other tax laws. The
discussion assumes that each NAAC stockholder holds such stock as a capital
asset within the meaning of Section 1221 of the Internal Revenue Code of 1986,
as amended ("Code").
If a NAAC stockholder exercises the redemption right, redemption will
result in a complete termination of such stockholder's interest in the NAAC
Class A Common Stock being redeemed and will be treated as a sale or exchange
for Federal income tax purposes. If NAAC dissolves, the distribution in complete
liquidation of NAAC also will be treated as a sale or exchange for Federal
income tax purposes. In either case, a NAAC stockholder will recognize capital
gain or loss in an amount equal to the difference between the amount realized
(the amount received from NAAC with respect to such stockholder's shares upon
redemption or liquidation) and such stockholder's adjusted tax basis. Such gain
or loss will be long-term capital gain or loss if such stockholder has held such
shares for more than one year.
Unless a NAAC stockholder complies with certain reporting and/or
certification procedures or is an exempt recipient under applicable provisions
of the Code and Treasury Regulations promulgated thereunder, such stockholder
may be subject to "backup" withholding tax of 31% with respect to the amount
received upon redemption or liquidation. Foreign stockholders should consult
with their tax advisors regarding withholding taxes in general.
NAAC STOCKHOLDERS ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS WITH
RESPECT TO FEDERAL, STATE, LOCAL, FOREIGN OR OTHER TAX CONSEQUENCES OF THE
REDEMPTION OF NAAC CLASS A COMMON STOCK OR LIQUIDATION OF NAAC.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO GUZZI CORP. SHAREHOLDERS
The following discussion of certain federal income tax consequences of the
Merger to the shareholders of Guzzi Corp. does not address all aspects of
federal income taxation that may be relevant to a particular Guzzi Corp.
shareholder in light of his personal investment circumstances and to certain
types of shareholders subject to special treatment under the federal income tax
laws (for example, insurance companies, tax exempt organizations, financial
institutions or broker-dealers or persons who are not citizens or residents of
the United States or who are foreign corporations, foreign partnerships or
foreign estates or trusts) and does not discuss any aspects of state, local or
foreign taxation. Further, this discussion assumes that all Guzzi Corp.
shareholders will hold their shares of NAAC Class A Common Stock, Class B
Preferred Stock and Nominal Warrants as capital assets as of the date of the
Merger.
There can be no assurance that the Internal Revenue Service (the "IRS")
will not take a contrary view to those statements and conclusions expressed
herein. Moreover, legislative, judicial or administrative changes or
interpretations may be forthcoming that could alter or modify the statements and
conclusions set forth herein. Any such changes or interpretations may or may not
be retroactive and could affect the tax consequences to Guzzi Corp.
shareholders.
EACH GUZZI CORP. SHAREHOLDER IS URGED TO CONSULT HIS OWN TAX ADVISER AS TO
THE PARTICULAR TAX CONSEQUENCES TO HIM OF THE MERGER, INCLUDING THE
APPLICABILITY AND EFFECT OF ANY STATE, LOCAL AND FOREIGN TAX LAWS, AND OF
CHANGES IN APPLICABLE TAX LAWS.
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It is expected that the Merger of Guzzi Corp with and into NAAC will
qualify as a "reorganization" within the meaning of Section 368(a)(1) of the
Code, in which event the following federal income tax consequences will obtain:
1. Both Guzzi Corp. and NAAC will be parties to the reorganization
within the meaning of Section 368(b) of the Code.
2. No gain or loss will be recognized by Guzzi Corp. or NAAC solely by
reason of such Merger.
3. No gain or loss will be recognized by holders of Guzzi Common Stock
and Guzzi Preferred Stock as a result of the exchange of such shares,
pursuant to the Merger, for NAAC Class A Common Stock, NAAC Class B
Preferred Stock and Nominal Warrants, except that: (a) a Guzzi Corp.
shareholder who receives cash in lieu of fractional shares will be treated
as if such cash had been received in redemption for such fractional shares,
such redemption being treated either as a sale or exchange resulting in
capital gain or loss treatment, or, alternatively, as a dividend, depending
upon each Guzzi Corp. shareholder's particular facts and circumstances; and
(b) a portion of the NAAC Class A Common Stock to be received upon the
exercise of the Nominal Warrants will likely be treated as taxable interest
income upon such exercise.
4. The aggregate tax basis of the NAAC Class A Common Stock, NAAC
Class B Preferred Stock and Nominal Warrants received in the Merger will be
the same as the aggregate tax basis of the Guzzi Common Stock and Guzzi
Preferred Stock surrendered in exchange therefor.
5. The holding period for the NAAC Class A Common Stock, NAAC Class B
Preferred Stock and Nominal Warrants received in the Merger will include
the period during which the Guzzi Common Stock and Guzzi Preferred Stock
surrendered in exchange therefor were held.
If the Merger were not to constitute a reorganization under Section
368(a)(1) of the Code, then (A) Guzzi Corp. would be treated as if it had sold
all of its assets to NAAC at their fair market values and would recognize
taxable gain equal to the excess of such values over Guzzi Corp.'s tax basis in
such assets; and (B) the Guzzi Corp. shareholders would be treated as if they
had received a distribution in complete liquidation of Guzzi Corp. and, in
general, each would recognize taxable gain or loss equal to the difference
between (i) the fair market value of the NAAC Class A Common Stock, the NAAC
Class B Preferred Stock and the Nominal Warrants received in the merger, and
(ii) his basis in his Guzzi Common Stock and Guzzi Preferred Stock surrendered
in the Merger. The basis in the NAAC Class A Common Stock, NAAC Class B
Preferred Stock and Nominal Warrants received in such case would be equal to
their fair market values on the date of the merger.
ACCOUNTING TREATMENT
The Merger will be treated as a reverse acquisition of NAAC by Guzzi Corp.
In a reverse acquisition, the shareholders of the surviving corporation will
own, after the Merger, less than 50% of the post-Merger shares. The shareholders
of Guzzi Corp. will receive approximately 80.8% of the post-Merger shares of
NAAC, including NAAC Class A Common Stock underlying the NAAC Class B Preferred
Stock and excluding any shares of NAAC Class A Common Stock issuable upon
exercise of any options or warrants, and Guzzi Corp. therefore will be the
accounting acquiror. The cost of the acquisition of NAAC will be based on the
fair value of NAAC's assets and liabilities as of the date of the Merger (which
amounts approximate the book value). As a result of the reverse acquisition of
NAAC by Guzzi Corp., the historical financial statements of the surviving
corporation for periods prior to the Merger will be those of Guzzi Corp. rather
than those of NAAC. See "Unaudited Pro Forma Balance Sheets." Since all of the
production, and much of the sales of Moto Guzzi, and, therefore, of Guzzi Corp.,
occur in Italy, Guzzi Corp.'s primary financial statements are reported in
Italian Lire, its functional currency as defined by generally accepted
accounting principles. The merged company will report results in Italian lire
and, from a future date to be determined in the Euro. See "Risk
Factors--Exposure of results to change in Exchange Rates," and "--Adoption and
Implementation of Euro."
RESALE OF NAAC CLASS A COMMON STOCK; AFFILIATES
All shares of NAAC Class A Common Stock, NAAC Class B Preferred Stock and
Nominal Warrants, and, upon conversion or exercise of the NAAC Class B Preferred
Stock and Nominal Warrants, respectively, the NAAC Class A Common Stock received
by holders of Guzzi Common Stock and Guzzi Preferred Stock in the
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Merger, will be freely transferrable, except that NAAC Class A Common Stock,
NAAC Class B Preferred Stock and Nominal Warrants and the underlying securities
received by persons who are deemed to be "affiliates" (as such term is defined
under the Securities Act) of NAAC or Guzzi Corp. prior to the Merger may be
resold by them only in transactions permitted by the resale provisions of
Rule 145 under the Securities Act with respect to affiliates of Guzzi Corp., or
Rule 144 under the Securities Act with respect to persons who are or become
affiliates of NAAC. Persons who may be deemed to be affiliates of NAAC or Guzzi
Corp. generally include individuals or entities that control, are controlled by
or are under common control with either NAAC or Guzzi Corp., as the case may be,
and may include certain officers and directors of such party as well as
principal stockholders of such party.
Pursuant to the Merger Agreement, Guzzi Corp. is required to deliver to
NAAC a letter identifying all persons who are, in Guzzi Corp.'s reasonable
judgment, affiliates, and caused each of its affiliates to deliver to NAAC
written agreements (the "Guzzi Affiliate Agreements") providing, among other
things, that such persons will not offer to sell, sell or otherwise dispose of
any of NAAC's stock issued to such person in the Merger in violation of the
Securities Act and Rule 145 promulgated thereunder, as they may be amended from
time to time. In addition, certain individuals, including such affiliates, are
required to execute six month lockup agreements.
The NAAC Class A Common Stock, NAAC Class B Common Stock and NAAC Class A
Warrants are traded on the OTC Market. NAAC intends to apply for listing of the
NAAC Class A Common Stock and NAAC Class A Warrants on the Nasdaq SmallCap
Market, although no assurance can be given that the listing application will be
accepted. NAAC will not apply for the listing of the NAAC Class B Preferred
Stock or Nominal Warrants; therefore no assurance can be given that these
securities will be readily tradeable.
COMPARISON OF RIGHTS OF HOLDERS OF SECURITIES OF GUZZI CORP. AND OF NAAC
The following discussion compares the principal rights and privileges with
respect to the existing securities of Guzzi Corp. with the securities of NAAC
now existing and which will be existing following consummation of the Merger.
Both Guzzi Corp. and NAAC are Delaware corporations, and therefore the Merger
will not affect the law applicable to the shareholders of either corporation.
GUZZI COMMON STOCK
Each share of Guzzi Common Stock entitles the holder thereof to one vote on
all matters submitted to a vote of the stockholders. Since the holders of Guzzi
Common Stock do not have cumulative voting rights, holders of more than 50% of
the outstanding shares can elect all of members of Guzzi Corp.'s board of
directors and holders of the remaining shares by themselves cannot elect any
directors. The holders of Guzzi Common Stock do not have preemptive rights or
rights to convert their Guzzi Common Stock into other securities. In the event
of a liquidation, dissolution or winding up of Guzzi Corp., holders of the Guzzi
Common Stock have the right to a ratable portion of the assets remaining after
payment of liabilities and the liquidation preference of the holders of any
Preferred Stock.
The holders of shares of Guzzi Common Stock are entitled to dividends when
and as declared by the Guzzi Corp. Board of Directors from funds legally
available therefor.
GUZZI PREFERRED STOCK
The Guzzi Corp. Board of Directors has authority to issue the authorized
2,000,000 shares of Preferred Stock in one or more series, each series to have
such designation and number of shares as the Board of Directors may fix prior to
the issuance of any shares of such series. Each series may have such preferences
and relative, participating, optional or other special rights, with such
qualifications, limitations or restrictions, as are stated in the resolution or
resolutions providing for the issue of such series as may be adopted from time
to time by the Board of Directors prior to the issuance of any shares of such
series. There is currently outstanding the series of Guzzi Preferred Stock
containing, among other preferences and rights, the following:
Dividends. The Guzzi Preferred Stock does not pay dividends.
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Liquidation Preferences. Upon liquidation of Guzzi Corp. (including a sale
by Guzzi Corp. of all or substantially all of its assets or a merger or
consolidation of Guzzi Corp. with another company in which Guzzi Corp. is not
the surviving entity), the holders of the Guzzi Preferred Stock shall be
entitled to receive, prior to the distribution to the other security holders of
Guzzi Corp., an amount per share equal to the greater of (i) $4.00 ("Stated
Value"), or (ii) the amount they would have received had they converted the
Guzzi Preferred Stock to Guzzi Common Stock on the business day immediately
prior to such liquidation, merger or consolidation.
Ranking. The Guzzi Preferred Stock, with respect to liquidation rights,
ranks senior to all other classes of the capital stock of Guzzi Corp.,
including, but not limited to, any other series of Preferred Stock issued by
Guzzi Corp.
Conversion. Each share of Guzzi Preferred Stock may be converted, at the
option of the holder thereof, into shares of Guzzi Common Stock ("Conversion
Shares") at the rate of one share of Guzzi Common Stock for each share of Guzzi
Preferred Stock, subject to adjustment to protect against events of dilution as
described below ("Conversion Price"). Each share of Guzzi Preferred Stock shall
be automatically converted into Conversion Shares upon the consummation by Guzzi
Corp. of an underwritten public offering of the Guzzi Common Stock that raises
gross proceeds for Guzzi Corp. of at least $8 million ("Qualified IPO"). The
conversion rate in connection with the Qualified IPO ("IPO Conversion Price")
will be the lesser of the then-applicable Conversion Price or 75% of the per
share public offering price in a Qualified IPO. Insofar as a Qualified IPO has
not been consummated by June 30, 1998, the majority holders of the Guzzi
Preferred Stock have the right to elect a majority of the directors of Guzzi
Corp., which right, however, has not been exercised. The proposed Merger is not
a Qualified IPO.
Redemption. If not previously converted to Conversion Shares, each share
of Guzzi Preferred Stock outstanding shall be redeemed by Guzzi Corp., solely at
the option of the holder thereof, at any time after the fifth anniversary of the
issuance thereof, at a price of twice the then-Stated Value.
Voting. The holders of the Guzzi Preferred Stock vote with the holders of
Guzzi Common Stock on an as-converted basis, and, to the extent required by law,
as a separate class.
Anti-Dilution Adjustment. There shall be full adjustments to the
Conversion Price for stock splits, stock dividends and any other combinations or
distributions to holders of securities of Guzzi Corp. In addition, anti-
dilution adjustments shall be made to the Conversion Price if securities of
Guzzi Corp. are issued below the then Conversion Price, subject to certain
limitations.
Preemptive Rights. If at any time prior to the consummation of a Qualified
IPO, Guzzi Corp. proposes to offer or sell shares, or securities convertible
into or exercisable for shares of any class of its capital stock, except in
connection with a Qualified IPO, Guzzi Corp. is required to offer to the holders
of the Guzzi Preferred Stock the preemptive right, on the same terms as such
shares (or other securities) are offered or sold to the third parties, to
purchase a number of such shares (or other securities) sufficient to permit the
holders of the Guzzi Preferred Stock to maintain their proportionate economic
interest in Guzzi Corp.
GUZZI WARRANTS
Each Guzzi Warrant entitles the registered holder to purchase one share of
Guzzi Common Stock at an exercise price equal to the lesser of $4.00, as
adjusted, or the initial public offering price of the Guzzi Common Stock,
exercisable for a period of three years from issuance of the Guzzi Warrant.
Unless extended by Guzzi Corp. at its discretion, the Warrants expire at 5:00
p.m. Eastern Standard time, on the day preceding the third anniversary date of
issuance thereof. In the event a holder of the Warrants fails to exercise his or
her Warrants prior to their expiration, such Warrants will expire and the holder
thereof will have no further rights with respect to the Warrants. A holder of
the Warrants will not have any rights, privileges or liabilities as a
shareholder of Guzzi Corp. prior to exercise of the Warrants. Guzzi Corp. is
required to keep reserved a sufficient number of authorized shares of Guzzi
Common Stock to permit the exercise of the Warrants. Subject to certain
limitations, the exercise price of the Warrants and the number of shares of
Guzzi Common Stock issuable upon exercise of the Warrants will be subject to a
"full ratchet" adjustment to protect against dilution in the event of stock
dividends, stock splits, combinations, subdivisions and reclassifications or the
issuance of shares of Guzzi Common Stock for less than the then Conversion Price
of the Preferred Stock. In the event of certain corporate
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events, including a merger in which Guzzi Corp. is not the surviving entity,
holders of the Guzzi Warrant continue to have the right to exercise their
warrants to acquire such securities they would have received had they exercised
their warrants prior to the consummation of such corporate events.
In connection with the Merger, those Guzzi Warrant holders who submit their
warrants for exchange and cancellation will receive their proportionate interest
in 259,510 shares of Class A Common Stock, in 16,436 shares of Class B Preferred
Stock and in 5.19% of the Nominal Warrants, as reduced to account for those
Guzzi Warrant holders not accepting the Warrant Exchange. The securities which a
Guzzi Warrant holder may acquire upon exercise following the Merger are not
being registered in this Offering. Such holders must rely for market liquidity
on their existing registration rights and Rule 144.
NAAC CLASS A COMMON STOCK
The holders of NAAC Class A Common Stock are entitled to one vote for each
share held of record on all matters to be voted on by holders of the NAAC Common
Stock voting together as a single class. The holders of NAAC Class A Common
Stock also are entitled to vote as a separate class on all matters affecting the
rights of the class independently of all the other classes. There is no
cumulative voting with respect to the election of directors, with the result
that the holders of more than 50% of all the voting authority of the NAAC Common
Stock voted can elect all of the directors then being elected. The holders of
NAAC Class A Common Stock are entitled to receive dividends when, as and if
declared by the board of directors out of funds legally available therefor,
subject to the dividend rights of those classes ranking superior in dividend
rights. In the event of liquidation, dissolution or winding up of the Company,
the holders of NAAC Class A Common Stock (except for the Initial Stockholders
who have agreed with respect to any shares of Pre-IPO Stock to waive their
rights in any distribution relating to a liquidation of NAAC due to the failure
of NAAC to consummate a Business Combination) are entitled to share ratably in
all assets remaining available for distribution to them after payment of
liabilities and after provision has been made for each class of stock, if any,
having preference over the NAAC Class A Common Stock. In the event of a
liquidation because a Business Combination is not consummated, the NAAC Class A
Common Stock would be canceled. Holders of shares of NAAC Class A Common Stock,
as such, have no conversion, preemptive or other subscription rights, and except
as described under "The Annual Meeting--Redemption Rights," there are no
redemption provisions applicable to the NAAC Class A Common Stock.
NAAC CLASS B COMMON STOCK
The holders of NAAC Class B Common Stock are entitled to two votes for each
share held of record on all matters to be voted on by the holders of the NAAC
Common Stock, voting together as a single class. The holders of NAAC Class B
Common Stock also are entitled to vote as a separate class on all matters
affecting the rights of the class independently of all the other classes. There
is no cumulative voting with respect to the election of directors, with the
result that the holders of more than 50% of all the voting authority of the NAAC
Common Stock voted together as a single class can elect all of the directors
then being selected. The holders of NAAC Class B Common Stock are entitled to
receive dividends when, as and if declared by the Board of directors out of
funds legally available therefor, subject to the dividend rights of those
classes ranking superior in dividend rights. In the event of liquidation,
dissolution or winding up of the Company, the holders of NAAC Class B Common
Stock are entitled to share ratably in all assets remaining available for
distribution to them after payment of liabilities and after provision has been
made for each class of stock, if any, having preference over the NAAC Class B
Common Stock (except for a liquidation, dissolution or winding up of NAAC prior
to the consummation of a Business Combination in which event they would not
share in any assets of NAAC but would be the sole class of common stock
outstanding after liquidation of the NAAC Class A Common Stock and would
automatically convert into two shares of NAAC Class A Common Stock for each
share of NAAC Class B Common Stock). Holders of shares of NAAC Class B Common
Stock, as such, have no redemption, preemptive or other subscription rights.
Each share of the NAAC Class B Common Stock is convertible, with no additional
payment, into two shares of NAAC Class A Common Stock and two NAAC Class A
Warrants, at any time from the 90th day after the first Business Combination
until the end of the first year after the first Business Combination of NAAC.
The proposed Merger will qualify as the first Business Combination.
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NAAC CLASS A WARRANTS
Each NAAC Class A Warrant entitles the registered holder to purchase one
share of NAAC Class A Common Stock for $9.00, subject to adjustment in certain
circumstances, at any time commencing on the consummation of a Business
Combination and ending at 5:00 p.m., New York City time, on August 22, 2002, at
which time the NAAC Class A Warrants expire. The Company may call the NAAC
Class A Warrants for redemption, in whole and not in part, at a price of $.05
per NAAC Class A Warrant, at any time after they become exercisable upon notice
to the warrant-holders, of not less then 30 days if the last sale price of the
NAAC Class A Common Stock has been at least $11.00 ("redemption price") for the
10 consecutive trading days ending on the day immediately prior to the day on
which NAAC gives notice of redemption. The warrant-holders will have exercise
rights until the close of business on the date fixed for redemption.
The NAAC Class A Warrants are issued in registered form under a Warrant
Agency Agreement between NAAC and American Stock Transfer & Trust Company, as
Warrant Agent. Reference is made to the Warrant Agency Agreement (which has been
filed as an exhibit to this Registration Statement of which this Proxy
Statement/Prospectus is a part) for a complete description of the terms and
conditions applicable to the NAAC Class A Warrants (the description herein
contained being qualified in its entirety by reference to such Warrant Agency
Agreement).
The exercise price and the number of shares of NAAC Class A Common Stock
issuable on exercise of the NAAC Class A Warrants are subject to adjustment in
certain circumstances, including a stock dividend, recapitalization,
reorganization, merger or consolidation of NAAC. The NAAC Class A Warrants are
not subject to adjustment for issuance of shares of NAAC Class A Common Stock or
rights to purchase NAAC Class A Common Stock at prices less than the exercise
price of the NAAC Class A Warrants.
The NAAC Class A Warrants may be exercised upon surrender of the warrant
certificates on or prior to the expiration date at the offices of the Warrant
Agent, with the exercise form on the reverse side of the NAAC Class A Warrant
certificate completed and executed as indicated, accompanied by full payment of
the exercise price for the number of NAAC Class A Warrants being exercised. The
warrant-holders do not have the rights or privileges of holders of NAAC Class A
Common Stock prior to the exercise of the NAAC Class A Warrants.
No NAAC Class A Warrants will be exercisable unless at the time of exercise
there is a current prospectus covering the shares of NAAC Class A Common Stock
issuable upon exercise of such NAAC Class A Warrants under an effective
registration statement filed with the Securities and Exchange Commission and
such shares have been qualified for sale or are exempt from qualification under
the securities laws of the state of residence of the holder of such NAAC
Class A Warrants being exercised. Although NAAC intends to have all shares so
qualified for sale in those states where the NAAC Class A Warrants were offered
for sale in the IPO and to maintain a current prospectus relating thereto until
the expiration of the NAAC Class A Warrants, subject to the terms of the Warrant
Agency Agreement, there can be no assurance that it will be able to do so.
No fractional shares will be issued upon exercise of the NAAC Class A
Warrants. Any fraction equal to or greater than one-half shall be rounded up to
the next full share and any fraction less than one-half shall be eliminated.
PREFERRED STOCK
The Certificate of Incorporation authorizes the issuance of 1,000,000
shares of preferred stock ("Preferred Stock") with such designations, rights and
preferences as may be determined from time to time by the NAAC Board.
Accordingly, the NAAC Board is empowered, without stockholder approval, to issue
Preferred Stock with dividend, liquidation, conversion, voting or other rights
which could adversely affect the voting power or other rights of the holders of
the NAAC Common Stock. NAAC may issue some or all of such shares in connection
with a Business Combination. In addition, the Preferred Stock could be utilized,
under certain circumstances, as a method of discouraging, delaying or preventing
a change in control of NAAC. Although NAAC does not currently intend to issue
any shares of Preferred Stock other than the NAAC Class B Preferred Stock to be
issued in the Merger, if approved, there can be no assurance that, if the Merger
is not approved, NAAC will not do so in the future.
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NAAC CLASS A PREFERRED STOCK
NAAC has designated 100 shares of the Preferred Stock as the NAAC Class A
Preferred Stock and issued 94 shares of NAAC Class A Preferred Stock. The NAAC
Class A Preferred Stock is non-voting, does not have a right to dividends, and
has a liquidation value of $100.00 per share. Each share of the NAAC Class A
Preferred Stock is convertible into 1,000 shares of NAAC Class A Common Stock
for a period of one year following the consummation of a Business Combination at
the option of the holder. In the event that a Business Combination does not
occur prior to August 22, 1999, the NAAC Class A Preferred Stock will be
redeemed by NAAC for its liquidation value of $9,400 after payment to the
holders of NAAC Class A Common Stock (excluding the Pre-IPO Shares) of their
liquidation payment from the Escrow Account. NAAC has agreed to register the
NAAC Class A Common Stock issuable upon conversion of the NAAC Class A Preferred
Stock at the time of the Business Combination, which shares, however, are not
being registered hereunder or otherwise at this time.
NAAC CLASS B PREFERRED STOCK
The NAAC Class B Preferred Stock to be issued in connection with the
Merger, the conversion of Intercompany Debt, the Warrant Exchange or in respect
of the exercise of the Guzzi Warrants not submitted for cancellation will have
the following preferences and rights:
Dividends. The NAAC Class B Preferred Stock will be entitled to receive
out of any assets legally available therefor, annual, cumulative cash dividends
of 5% of the stated value of $15.00 of each share, payable annually on December
31st commencing December 31, 1999. Dividends will accrue from January 1, 1999.
Ranking. The NAAC Class B Preferred Stock will rank senior to all classes
and series of capital stock of NAAC now or hereinafter authorized, issued or
outstanding. In addition, NAAC will not issue any class or series of any class
or capital stock which ranks pari passu with the NAAC Class B Preferred Stock.
Conversion. The NAAC Class B Preferred Stock will be convertible at the
option of the holder, at any time, into such number of shares of NAAC Class A
Common Stock as is determined by dividing (i) the stated value of $15.00 times
the number of shares of NAAC Class B Preferred Stock being converted, by (ii) a
conversion price of $15.00 per share (subject to adjustment in certain
circumstances).
Voting. The holders of the NAAC Class B Preferred Stock may vote with the
holders of the NAAC Common Stock, voting as a single class, on all matters
presented to the holders of NAAC Common Stock for a vote. The NAAC Class B
Preferred Stock will have one vote for every whole share of NAAC Class A Common
Stock into which the NAAC Class B Preferred Stock is convertible on the record
date for the stockholders meeting. The NAAC Class B Preferred Stock is also
entitled to vote as a separate class on matters pertaining exclusively to that
class pursuant to the DGCL.
Anti-Dilution Adjustment. There shall be adjustments to the conversion
price for stock splits, stock dividends, and other stock combinations. Provision
will also be made in the number of shares of NAAC Class A Common Stock into
which the NAAC Class B Common Stock is convertible in the event of a
reorganization, consolidation or merger where NAAC is not the surviving
corporation.
Liquidation Preference. Upon liquidation of NAAC, the holders of NAAC
Class B Preferred Stock shall be entitled to receive, prior to distribution to
the other security holders of NAAC, an amount equal to the greater of $15.00
plus all accrued and unpaid dividends or the amount the holders would have
received if they had converted the NAAC Class B Preferred Stock into NAAC Class
A Common Stock.
All the NAAC Class B Preferred Stock, whether issued as Merger
Consideration, as consideration for the contribution of intercompany debt, as
part of the Warrant Exchange or as a result of the Guzzi Warrants not exchanged,
will be deposited into escrow to provide a fund for the reimbursement of NAAC
for damages as a result of the breach of a representation or warranty by Guzzi
Corp. Claims by NAAC are subject to the requirement that they are made prior to
approximately 60 days after the end of the 1998 and 1999 fiscal years in respect
of different representations and warranties and the claims must aggregate
$750,000 (subject to certain offsets for the sale of certain assets of Guzzi
Corp.) before they may be made. To the extent claims are made, shares of NAAC
Class B Preferred Stock for the amount of the claim will be held in escrow until
final resolution. Upon final resolution, that number of shares of NAAC Class B
Preferred Stock equal to the amount of the claim,
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based on the market value of the NAAC Class A Common Stock into which such
shares are convertible, plus $1.00, will be returned to NAAC for cancellation.
NOMINAL WARRANTS
Each Nominal Warrant entitles the registered holder to purchase at $.01 per
share, such number of shares of NAAC Class A Common Stock as is determined by
the below stated formula, during the period June 30, 2001 through 5:00 P.M.
Eastern time on September 30, 2001. The number of shares of NAAC Class A Common
Stock to be issued upon exercise of the Nominal Warrants will be a function of
the operating income of NAAC in the 2000 fiscal year. If the NAAC operating
income is less than Lit. 20,169,600,000, the number of shares will be zero.
Otherwise, the number of shares shall be determined by dividing (i) the result
of multiplying $5,700,000 by the fraction obtained when fiscal year 2000
operating income for NAAC is divided by Lit. 20,169,600,000, but such result
shall not exceed $9,500,000, by (ii) the average closing sale price of the NAAC
Class A Common Stock for the 20 consecutive trading days prior to June 30, 2001
and then multiplying the result by the percentage which the actual number of
Nominal Warrants issued bears to the maximum number of Nominal Warrants issuable
as a result of the Merger, the contribution of intercompany debt and the Warrant
Exchange. The Nominal Warrants may be exercised by TRG unless the authority to
exercise is specifically withdrawn in writing by the holder. A holder of the
Nominal Warrants will not have any rights, privileges or liabilities as a
shareholder of NAAC prior to exercise of the Nominal Warrants. NAAC is required
to keep reserved a sufficient number of shares of NAAC Class A Common Stock
issuable on exercise of Nominal Warrants. The Nominal Warrants are subject to
anti-dilution protections in the event of stock splits, combinations, dividends
and reclassifications and reorganizations, consolidations and mergers where NAAC
is not the surviving company. The form of Nominal Warrant is attached to this
Proxy Statement/Prospectus as Annex III.
TRANSFER AGENT
The transfer agent and registrar, and warrant agent, of the NAAC Class A
Common Stock, NAAC Class B Common Stock and NAAC Class A Warrants is American
Stock Transfer & Trust Company, 40 Wall Street, New York, New York, 10005.
THE MERGER AGREEMENT
The discussion below of the Merger Agreement is subject to and qualified in
its entirety by reference to the Merger Agreement, a copy of which is attached
to this Proxy Statement/Prospectus as Annex I.
MERGER; CONSIDERATION
On August 18, 1998, NAAC entered into the Merger Agreement, pursuant to
which Guzzi Corp. will merge with and into NAAC, with NAAC being the surviving
corporation. The consideration to be paid by NAAC to the shareholders of Guzzi
Corp. for their Guzzi Common Stock and Guzzi Preferred Stock ("Merger
Consideration"), at the consummation of the Merger, will consist of 3,702,450
shares of NAAC Class A Common Stock, 234,489 shares of NAAC Class B Preferred
Stock, and 74.05% of all of the NAAC Class A Common Stock issuable under the
Nominal Warrants. The Merger Agreement also provides for the issuance to TRG and
OAM of 1,038,040 shares of NAAC Class A Common Stock, 65,743 shares of NAAC
Class B Preferred Stock and 20.76% of all of the NAAC Class A Common Stock
issuable under the Nominal Warrants (see "Intercompany Debt Exchange"), and the
issuance to holders of Guzzi Warrants of up to 259,510 shares of NAAC Class A
Common Stock, 16,436 shares of NAAC Class B Preferred Stock and 5.19% of all of
the shares of NAAC Class A Common Stock issuable under the Nominal Warrants. See
"Exchange Offer." The Merger Consideration and the terms of the Intercompany
Debt Exchange and Warrant Exchange were determined through arm's-length
negotiations among NAAC, and Guzzi Corp. The fees and expenses of the
transaction, other than a portion of the fees of Graubard Mollen & Miller,
counsel to NAAC, which will be paid by the issuance of shares of Class A Common
Stock, and a warrant to purchase up to 350,000 shares of NAAC Class A Common
Stock to be issued to Allen & Company, will be paid from NAAC's liquid assets,
including Escrow Account proceeds.
44
<PAGE>
If at the Effective Time NAAC, net of all unpaid costs and expenses other
than as may be attributable to the redemption rights of stockholders of NAAC
Class A Common Stock, has cash of less than $8,150,000 the number of shares of
NAAC Class B Preferred Stock issuable in connection with the Merger will be
increased by one share for each $15 of such shortfall.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties of
Guzzi Corp., relating to, among other things, (i) due organization,
capitalization, outstanding securities and similar corporate matters, (ii)
authorization, execution, delivery, consummation and enforceability of the
Merger Agreement and related matters, (iii) absence of any conflict with Guzzi
Corp.'s Certificate of Incorporation and By-Laws, required consents and
violations of instruments or laws, (iv) financial statements of Guzzi Corp.,
(v) absence of undisclosed liabilities, (vi) ownership of leasehold interests
in, title to and condition of real and personal property and intangible rights,
(vii) existence of certain contracts and other agreements, (viii) absence of
defaults under certain contracts and other agreements, (ix) compliance with
applicable law and permits, (x) filing of tax returns and payment of taxes,
(xi) absence of certain changes in the business of Guzzi Corp., (xiii) absence
of judicial or governmental orders or litigation, (xiii) labor relations, (xiv)
absence of illegal or improper transactions, (xv) related transactions, (xvi)
environmental matters and health matters, (xvii) bank accounts, (xviii) records,
(xix) insurance, (xx) absence of brokers and (xxi) certain disclosure. Most of
these representations and warranties are subject to various limitations based on
specific criteria relating to Moto Guzzi or their material adverse effect on
Guzzi Corp. taken as a whole.
The Merger Agreement also contains various representations and warranties
of NAAC relating to, among other things, (i) due organization and similar
corporate matters with respect to NAAC, (ii) authorization, execution, delivery,
consummation and enforceability of the Merger Agreement and the related matters,
(iii) absence of any conflict with NAAC's Certificate of Incorporation and
Bylaws, required consents and violations of instruments or laws, (iv) financial
statements of NAAC, (v) reports filed with the Commission, (vi) the funds held
in the Escrow Account will not be less than $8,391,000 and NAAC will have no
less than $8,000,000 in cash assets at the Effective Time after payment of
certain cash amounts (less payments to redeeming NAAC Class A Common Stock and
dissenters of Guzzi Corp.), (vii) absence of undisclosed liabilities,
(viii) absence of any conflict with NAAC's Certificate of Incorporation and
By-Laws, required consents and violations of instruments or law, (ix) absence of
brokers' fees, (x) absence of defaults under certain contracts and other
agreements, (xi) compliance with applicable law and permits and payment of
certain license fees, (xii) absence of certain changes in its business,
(xiii) filing of tax returns and payment of taxes, (xiv) absence of judicial
orders or litigation, (xv) absence of illegal or improper transactions,
(xv) bank accounts, (xvi) records, and (xvii) disclosure.
CERTAIN COVENANTS
Pursuant to the Merger Agreement, Guzzi Corp. has agreed that, prior to
consummation of the Merger, unless otherwise consented to by NAAC, it will
conduct its business in the ordinary course, consistent with past practice and
use its best efforts to preserve its business. Guzzi Corp. also agreed, among
other things, (i) not to sell or transfer any rights or interests in Guzzi Corp.
or the shares of Common Stock of Guzzi Corp., (ii) not to negotiate with any
other purchaser of the assets or securities of Guzzi Corp., (iii) not to sell
any capital securities of Guzzi Corp., and (iv) not to declare any dividend or
make any distribution on the outstanding securities of Guzzi Corp. The Merger
Agreement further provides that (i) NAAC will be given full access to the books,
records, accounts and properties of Guzzi Corp. until the consummation of the
Merger, (ii) Guzzi Corp. confidential information will be maintained in
confidence by NAAC, (iii) Guzzi Corp. will not solicit, initiate or encourage
submission of any bid, offer or proposal involving the sale of all or any
portion of the stock or assets of Guzzi Corp. or any merger, consolidation or
business combination with Guzzi Corp., (iv) Guzzi Corp. will maintain certain
levels of insurance, make disclosure of certain matters affecting Guzzi Corp.,
(v) Guzzi Corp. will provide accurate information for use in this Proxy
Statement/Prospectus, (vi) Guzzi Corp. will provide lockup agreements for
certain Guzzi Corp. security holders under which they agree not to sell for six
months the NAAC securities received in the Merger or intercompany debt
contribution, and (vii) Guzzi Corp. will conduct a lien search on various assets
located in Italy. Notwithstanding certain of the above limitations, Guzzi Corp.
may
45
<PAGE>
enter into interim financing arrangements prior to the effective date of the
Registration Statement if repaid at the Effective Time or promptly thereafter,
provided NAAC consents to the financing. NAAC consent is not required for any
interim financing where the consideration therefor is exclusively the issuance
of warrants or other equity securities that do not reduce the equity ownership
of NAAC stockholders in the combined company on a post-Merger basis.
NAAC has similarly agreed, among other things, to conduct its business only
in the ordinary course, not to solicit or negotiate any other Business
Combination transactions, to preserve the confidentiality of Guzzi Corp.
information and to deliver the resignation of all the members of the current
NAAC Board. In addition, NAAC agreed that it will hold a stockholders' meeting
to consider the Merger Agreement and the Merger to approve certain amendments to
its Certificate of Incorporation, adopt the Stock Option Plans and elect eight
nominees to the NAAC Board of which five persons are Guzzi Corp. nominees and
one is selected by Guzzi Corp. and NAAC together and to seek the approval of the
holders of the NAAC Class B Common Stock for the Class B Reorganization.
CONDITIONS
The respective obligations of NAAC and Guzzi Corp. to consummate the Merger
are subject to, among other things, satisfaction or waiver of (i)
representations and warranties of the other party being true and correct in all
material respects (as defined in the Merger Agreement), (ii) performance of and
compliance in all material respects with the covenants, agreements and
conditions contained in the Merger Agreement to be performed or complied with at
or before consummation of the Merger, (iii) absence of any pending claim,
action, suit, investigation or governmental proceeding which would render it
unlawful to consummate the Merger, and (iv) receipt of all necessary consents,
approvals or waivers.
The obligation of NAAC to consummate the Merger is also subject to various
conditions, including (i) that there has been no material adverse change (which
includes certain specific events) in Guzzi Corp.'s properties, business, results
of operations, financial condition and prospects, since December 31, 1997,
subject to certain exceptions, (ii) approval by the stockholders of NAAC of the
Merger Agreement and the Merger and all of the proposals to amend the
Certificate of Incorporation, to elect the eight nominees or directors of NAAC
after the Merger and to adopt the Stock Option Plans by NAAC stockholders, and
(iii) the condition that holders of NAAC Class A Common Stock do not exercise
their right of redemption in excess of 20% of the NAAC Class A Common Stock
(other than the Pre-IPO Shares) outstanding on the date of the Merger Agreement
and owned by persons other than the Initial NAAC Stockholders.
AMENDMENT; TERMINATION
The Merger Agreement can be amended, modified, altered or supplemented by
written agreement of the parties at any time prior to consummation of the
Merger.
The Merger Agreement can be terminated at any time prior to consummation of
the Merger (i) by mutual consent of NAAC and Guzzi Corp., (ii) by either party
if the Merger is not consummated before February 18, 1999, (iii) by Guzzi Corp.
if the cash assets of NAAC at the time of the Merger are less than $8,000,000
(after various cash expenses of NAAC), (iv) by the appropriate party if there is
a material default or breach with respect to the due and timely performance of
any of covenants and agreements which cannot be cured within a reasonable period
of time, subject to various limitations and exceptions relating to materiality
(as defined in the Merger Agreement), (v) by NAAC if there has been a material
adverse change (as defined in the Merger Agreement) in the condition of Guzzi
Corp. since the date of the Merger Agreement or there is a withdrawal of the
recommendation by the Guzzi Corp. board of directors to approve the Merger, or
(vi) by Guzzi Corp. if an event occurs after the date of the Merger Agreement
which reflects a material adverse effect on NAAC's condition or there is a
withdrawal of the recommendation by the NAAC Board to approve the Merger.
If the Merger Agreement is terminated as a result of a breach of a
representation, warranty or covenant by one party, the other party may seek to
recover damages therefor, but Guzzi Corp. may only seek to recover up to a
maximum amount measured by the amount of cash in excess of that deposited in the
Escrow Account by NAAC after its IPO and required to be available for
distribution to the holders of NAAC Class A Common Stock, and NAAC may only seek
to recover its actual documented out-of-pocket expenses. If Guzzi Corp. enters
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<PAGE>
into a Business Combination agreement with another party and consummates such
agreement within 365 days thereof, or refuses to consummate the Merger despite
the satisfaction by NAAC of all of its conditions precedent to closing,
including its performance of all obligations under the Merger Agreement, Guzzi
Corp. will be obligated to pay NAAC, the greater of the sum of $500,000 as
liquidated damages in lieu of any other claim or the actual documented
out-of-pocket expenses of NAAC related solely and directly to the terminated
Merger transaction. If Guzzi Corp. does not pay these amounts, TRG is obligated
to pay them. If NAAC enters into a Business Combination transaction with another
party, or refuses to consummate the Merger despite the satisfaction by Guzzi
Corp. of all of its conditions precedent to closing, including its performance
of all obligations under the Merger Agreement, and, within 365 days thereafter
consummates a Business Combination with a third party, NAAC will be obligated to
pay Guzzi Corp. the sum of $500,000 as liquidated damages in lieu of any other
claim at such time as it consummates such Business Combination.
In the event the Merger is consummated, most of the representations and
warranties of Guzzi Corp. will survive for approximately 60 days following the
completion of the audit of NAAC's 1998 fiscal year results of operations.
Certain other representations and warranties will survive an additional year.
All 316,668 shares of NAAC Class B Preferred Stock to be issued to the former
Guzzi Corp. security holders and, if and to the extent that such shares are
insufficient, 100,000 shares of NAAC Class A Common Stock issued to TRG as part
of the Merger Consideration will be held by TRG in escrow to fund any claims
timely asserted by NAAC arising from a breach of such representations and
warranties, to the extent that, after resolution or adjudication of such claims
the damages sustained by NAAC exceed $750,000, net of any realized increase in
value in certain Guzzi Corp. assets owned on the Merger consummation date.
Damage sustained by NAAC in excess of the value of the securities in the escrow
fund will not be indemnified.
EXPENSES
Pursuant to the Merger Agreement, each party is solely responsible for all
expenses incurred by it or on its behalf in connection with the preparation and
execution of the Merger Agreement, except that TRG will pay the expenses of
Guzzi Corp., which amount shall be included in the $800,000 of intercompany
indebtedness that will remain after the contribution of all other intercompany
indebtedness by TRG and OAM. The remaining intercompany indebtedness will be
paid by NAAC promptly following the Closing. See "Intercompany Debt Exchange."
INTEREST OF CERTAIN PERSONS AFTER THE MERGER
Certain officers and directors of Guzzi Corp. have an interest in and may
receive benefits from the Merger which may differ from the interests of the
Guzzi Corp. shareholders or the benefits they may receive from the Merger.
Pursuant to the Merger Agreement, Guzzi Corp. will deliver to NAAC a letter
identifying all persons who are, in Guzzi Corp.'s reasonable judgment,
affiliates, and cause each of its affiliates to deliver to NAAC the Guzzi
affiliate agreements providing, among other things, that such persons will not
offer to sell, sell or otherwise dispose of any of NAAC's stock issued to such
person in the Merger in violation of the Securities Act and Rule 145 promulgated
thereunder, as they may be amended from time to time. In addition, certain
individuals, including such affiliates, will execute six month lockup
agreements.
Additionally, at the Effective Time, NAAC, as the surviving corporation,
will enter into employment and/or consulting agreements with each of Mark S.
Hauser, Howard E. Chase, Emanuel Arbib and David Mitchell. Messrs. Hauser, Chase
and Arbib are currently directors of Guzzi Corp. and Mr. Mitchell is currently a
director of NAAC. All of these persons will be directors of NAAC on and after
the Effective Time. Mr. Hauser is the president and a director of TRG and an
affiliate of Tamarix Investors, LDC ("Tamarix"), which in turn is an affiliate
of TRG. Mr. Chase is the chairman of the board of directors of TRG. Emanuel
Arbib, a director of Guzzi Corp., is also a director of TRG and an affiliate of
Tamarix.
Mr. Hauser will be engaged under a three year agreement as Executive
Chairman at a salary of $90,000 per year, plus reimbursement of reasonable
expenses. Mr. Hauser may also allocate to NAAC, as surviving corporation, a
reasonable portion of his office expenses incurred at Tamarix Capital
Corporation. Mr. Hauser will be granted an option to purchase up to 150,000
shares of NAAC Class A Common Stock under the 1998 Stock Option Plan. The
options will vest one-third on the date of grant and one-third on each of the
two succeeding
47
<PAGE>
anniversaries. The options will be exercisable at the fair market value of the
NAAC Class A Common Stock on the date of grant for a period of ten years after
the date of grant.
Mr. Chase will be engaged under a three year agreement as Special Counsel
at compensation of $60,000 per year, plus reimbursement of reasonable expenses.
Mr. Chase will be granted an option to purchase up to 45,000 shares of NAAC
Class A Common Stock under the 1998 Stock Option Plan. The options will vest one
third on the date of grant and one third on each of the two succeeding
anniversaries. The options will be exercisable at the fair market value of the
NAAC Class A Common Stock on the date of grant for a period of ten years from
the date of grant.
Mr. Arbib will be engaged as a financial consultant under a three year
agreement at compensation of $30,000 per year. Mr. Arbib will be granted an
option to purchase up to 30,000 shares of NAAC Class A Common Stock outside of
the 1998 Stock Option Plan. The options will vest one third on the date of grant
and one third each on succeeding anniversaries. The options will be exercisable
at the fair market value of the NAAC Class A Common Stock on the date of grant
for a period of ten years from the date of grant.
Mr. Mitchell will be engaged as a consultant and as consideration for these
services he will be granted an option to purchase up to 30,000 shares of NAAC
Class A Common Stock under the 1998 Stock Option Plan. The options will vest one
third on the date of grant and one third on each of the two succeeding
anniversaries. The options will be exercisable at the fair market value of the
NAAC Class A Common Stock on the date of grant for a period of ten years from
the date of grant.
Each of Messrs. Chase, Arbib and Mitchell also will be granted options to
purchase up to 12,500 shares of NAAC Class A Common Stock under the 1998
Directors' Plan on the effective date of the Merger and, so long as they
continue to serve as directors, on January 2, 2000 and each subsequent
January 2 in each year in which they serve as directors.
ABSENCE OF REGULATORY FILINGS AND APPROVALS
The Merger is not subject to the requirements of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
thereunder, which provide that certain merger transactions may not be
consummated until required information and material have been furnished to the
Antitrust Division of the Department of Justice and the Federal Trade Commission
and certain waiting periods have expired or been terminated. Other than certain
filings to be made and approvals obtained under certain state securities or
"blue sky" laws, there are no federal or state regulatory requirements that must
be complied with or approval obtained in connection with the Merger.
EXCHANGE OF STOCK CERTIFICATES
As of the Effective Time, each certificate formerly representing Guzzi
Common Stock and Guzzi Preferred Stock ("Guzzi Certificates") shall be deemed
for all purposes to evidence ownership of NAAC Class A Common Stock, NAAC
Class B Preferred Stock and Nominal Warrants, all in proportion to the
individual components of the Merger Consideration, until surrendered to the
exchange agent, American Stock Transfer & Trust Company ("Exchange Agent").
As soon as practicable after the Effective Time, a letter of transmittal
and instructions will be mailed to each holder of record of Guzzi Certificates
to be used by such holder in forwarding the Guzzi Certificates to the Exchange
Agent. Each such shareholder will be asked to return a properly completed
transmittal letter, together with any Guzzi Certificates listed on the
transmittal letter, to the Exchange Agent in order to receive a the number of
shares of NAAC Class A Common Stock and NAAC Class B Preferred Stock and the
number of Nominal Warrants to which the security holder is entitled.
SHAREHOLDERS OF GUZZI CORP. SHOULD NOT SEND THEIR CERTIFICATES TO THE EXCHANGE
AGENT UNTIL THEY RECEIVE A TRANSMITTAL LETTER.
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<PAGE>
FRACTIONAL SHARES
No fractional shares will be issued as part of the Merger Consideration,
but will be rounded up to the next whole share.
MANAGEMENT AFTER THE MERGER
As contemplated by the Merger Agreement, after the Effective Time, if all
the persons nominated to be directors of NAAC are elected by the NAAC
stockholders at the Annual Meeting, the NAAC Board will consist of Messrs
, , Emanuel Arbib, Howard Chase and Mark Hauser,
nominees of Guzzi Corp., Messrs. David J. Mitchell and Dr. Peter Hobbins,
nominees of NAAC, and Mr. Frank J. O'Connell, a nominee selected by both Guzzi
Corp. and NAAC. After the Effective Time, the nominees of Guzzi Corp. will
represent the majority of the NAAC Board. In addition after the Effective Time,
the current officers of Guzzi Corp. and TRG will be appointed to similar
positions with NAAC and the officers and directors of the subsidiary
corporations of Guzzi Corp., including Moto Guzzi, will continue as the officers
and directors of those companies. Thus, the nominees and management of Guzzi
Corp., and TRG will be in a position to direct the business affairs of NAAC
after the Merger.
LOCK UP AGREEMENTS
The current directors and officers of NAAC have agreed not to sell publicly
any of the NAAC Class A Common Stock of which they are the current owners, or
which they may own in the future, for a period ending on the six month
anniversary of the Effective Time. In addition, 7,500 additional shares of NAAC
Class A Common Stock are subject to agreements not to sell publicly such
securities until August 22, 1999. Pursuant to the Merger Agreement, certain of
the persons to be issued NAAC Class A Common Stock, NAAC Class B Preferred Stock
and the Nominal Warrants have agreed not to sell publicly any of the NAAC
Class A Common Stock received as part of the Merger Consideration or upon
conversion of the NAAC Class B Preferred Stock for a period of six months after
the Merger. TRG and OAM have agreed not to sell publicly any of the NAAC
Class A Common Stock received as part of the Merger Consideration or as part of
the Intercompany Debt Exchange or upon conversion of the NAAC Class B Preferred
Stock for a period of twelve months after the Merger.
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<PAGE>
MARKET PRICES OF NAAC SECURITIES
NAAC Class A Common Stock, NAAC Class A Warrants, NAAC Class B Common Stock
and Units are traded in the over-the-counter market and quoted on the OTC
Bulletin Board under the symbols NACQA, NACQW, NACQB, NACQU, respectively. NAAC
has not declared or paid any dividends on NAAC Common Stock since its inception.
The following table sets forth the range of high and low closing trading
prices for NAAC Class A Common Stock, NAAC Class A Warrants, NAAC Class B Common
Stock and Units for the period since August 22, 1997, as reported by the OTC
Bulletin Board. The OTC Bulletin Board is an inter-dealer automated quotation
system sponsored and operated by the NASD for equity securities not included in
the Nasdaq System. Such over-the-counter market quotations reflect inter-dealer
prices, without retail mark-up, mark-down or commission and may not necessarily
reflect actual transactions.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS A
UNITS COMMON STOCK COMMON STOCK WARRANTS
--------------- --------------- --------------- ---------------
HIGH LOW HIGH LOW HIGH LOW HIGH LOW
------ ----- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year ended August 31, 1997:
Fourth Quarter (from August 22,
1997).............................. 10.00 9.25 N/A N/A 10.00 10.00 N/A N/A
Year ended August 31, 1998..............
First Quarter......................... 10.125 9.00 8.375 8.375 10.50 9.25 .50 .50
Second Quarter........................ 10.00 8.875 8.500 8.375 10.00 9.25 .50 .50
Third Quarter......................... 9.25 9.00 9.00 8.50 9.75 9.25 .50 .50
Fourth Quarter........................ 9.313 9.13 9.375 8.625 9.75 9.375 .50 .50
</TABLE>
The Units were sold for $10.00 per Unit, and the NAAC Class B Common Stock
was sold for $10.00 per share in the IPO. On August 17, 1998, the last full
trading day prior to the public announcement of the execution and delivery of
the Merger Agreement, the closing bid and sale prices of NAAC Class A Common
Stock, NAAC Class A Warrants, NAAC Class B Common Stock and Units, as reported
on the OTC Bulletin Board, were (i) for NAAC Class A Common Stock, a bid of
$8.625 and ask of $9.375, (ii) for the NAAC Class A Warrants, a bid of $.50 and
ask of $.75, (iii) for the NAAC Class B Common Stock, a bid of $9.375 and ask of
$11.375 and (iv) for the Units, a bid of $9.375 and ask of $11.00. On
[ ], the most recent date for which it was practicable to obtain
market price information prior to the mailing of this Proxy
Statement/Prospectus, such bid and ask closing bid prices were for (i) NAAC
Class A Common Stock, a bid of $[ ] and ask of $[ ], (ii) for the NAAC
Class A Warrants, a bid of $[ ] and ask of $[ ], (iii) for the Class B
Common Stock, a bid of [ ] and ask of [ ] and (iv) for the Units, a bid
of [$ ] and ask of [$ ]. Stockholders are urged to obtain current market
quotations.
As of the Record Date, there were approximately [ ], [ ] and
[ ] holders of record of NAAC Class A Common Stock, NAAC Class B Common
Stock and NAAC Class A Warrants, respectively. Because Units are separable into
NAAC Class A Common Stock and NAAC Class A Warrants, a transfer of Units is
recorded by NAAC's transfer agent only as a transfer of NAAC Class A Common
Stock and NAAC Class A Warrants. Consequently, the number of holders of record
of Units is not available.
NAAC stockholders are urged to obtain current market quotations.
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<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of NAAC Common Stock as of [ ] by (i) each stockholder
known by NAAC to be the beneficial owner of more than 5% of outstanding NAAC
Common Stock, (ii) each current director and (iii) all current directors and
executive officers as a group. NAAC believes that the beneficial owners of NAAC
Common Stock listed below, based on information furnished by such owners, have
sole investment and voting power with respect to such shares, subject to
community property laws where applicable.
BENEFICIAL OWNERSHIP OF SHARES OF NAAC COMMON STOCK
<TABLE>
<CAPTION>
PERCENT OF ALL
PERCENT OF CLASS A COMMON STOCK
CLASS A CLASS B COMMON STOCK BENEFICIALLY
NAME COMMON STOCK COMMON STOCK BENEFICIALLY OWNED OWNED
- ---- ------------ ------------ ------------------ --------------
<S> <C> <C> <C> <C>
David J. Mitchell(1)................. 172,500(2) 15,000(3) 16.2% 14.5%
C. Thomas McMillen(1)................ 172,500(2) 15,000(3) 16.2% 14.5%
A.J. Nasser(1)....................... 15,000 -0- 1.7% 1.2%
All NAAC officers and directors as a 360,000(4) 30,000(4) 23.3% 26.5%
group (3 persons)..................
</TABLE>
- ------------------
* Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission ("Commission") and generally includes
voting or investment power with respect to securities. Shares of common stock
issuable upon the exercise of options or warrants currently exercisable, or
exercisable or convertible within 60 days, are deemed outstanding for
computing the percentage ownership of the person holding such options or
warrants but are not deemed outstanding for computing the percentage
ownership of any other person.
(1) The address of each of Messrs. Mitchell, McMillen and Nasser is c/o Mitchell
& Company, 3rd Floor 5 East 59th Street, New York New York 10022.
(2) Includes 50,000 shares of NAAC Class A Common Stock and the 50,000 shares of
NAAC Class A Common Stock underlying a like number of NAAC Class A Warrants
issuable upon exercise of the Class A Options and 60,000 shares of NAAC
Class A Common Stock issuable upon conversion of the NAAC Class B Common
Stock and exercise of the NAAC Class A Warrants underlying the NAAC Class B
Common Stock subject to the Class B Options.
(3) Includes the NAAC Class B Common Stock issuable upon exercise of the Class B
Option.
(4) Includes the NAAC Class A Common Stock and NAAC Class B Common Stock set
forth in Notes (2) and (3) above.
The following table sets forth certain information regarding the beneficial
ownership of NAAC Common Stock after giving effect to the consummation of the
Merger, the acceptance of the Exchange Offer and the approval and effect of the
Class B Recapitalization by (i) each stockholder known to NAAC to be the
beneficial owner of more than 5% of the outstanding NAAC Class A Common Stock
after the Merger, (ii) each nominee for election as a director of NAAC, and
(iii) all directors and officers of NAAC after the Merger as a group. Except as
otherwise indicated, NAAC believes that the beneficial owners of the NAAC
Class A Common Stock listed below, based on information furnished by such
owners, have sole investment and voting power with respect to such shares,
subject to community property laws where applicable.
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<PAGE>
<TABLE>
<CAPTION>
NAAC CLASS A COMMON STOCK
BENEFICIALLY OWNED* AFTER
MERGER
---------------------------
NAMES NUMBER OF SHARES PERCENT
- ----- ---------------- -------
<S> <C> <C>
Trident Rowan Group, Inc. ............................................................ 4,253,334(1) 64.62%
Two Worlds Fair Drive
Somerset, New Jersey 08873
Tamarix Investors LDC ................................................................ 4,253,334(2) 64.62
444 Madison Avenue
New York, New York 10022
Howard E. Chase(3).................................................................... 4,268,334(4) 64.70
Emanuel Arbib(3)...................................................................... 4,263,334(4) 64.70
Mark S. Hauser(3)..................................................................... 4,303,334(4) 64.90
David Mitchell(3)..................................................................... 182,500(5) 2.6
Peter Hobbins(3)...................................................................... -0- -0-
Frank J. O'Connell(3)................................................................. -0- -0-
All NAAC officers and directors as a group (8 persons after Merger)................... 4,515,834(6) 67.68
</TABLE>
- ------------------
* Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission ("Commission") and generally includes
voting or investment power with respect to securities. Shares of common stock
issuable upon the exercise of options or warrants currently exercisable, or
exercisable or convertible within 60 days, are deemed outstanding for
computing the percentage ownership of the person holding such options or
warrants but are not deemed outstanding for computing the percentage
ownership of any other person.
(1) Includes shares of NAAC Class A Common Stock beneficially owned by TRG and
by OAM, a subsidiary thereof.
(2) As the beneficial owner of approximately 55% of the common stock of TRG
deemed issued and outstanding for purposes of determining beneficial
ownership, Tamarix Investors LDC may be viewed as a controlling shareholder
of TRG and thus the beneficial owner of all shares of NAAC Class A Common
Stock of which TRG is the beneficial holder.
(3) The address of Mr. Mitchell and Dr. Hobbins is c/o Mitchell & Company Ltd.,
5 East 59th Street, 3rd Floor, New York, New York 10022. The address of
Messrs. Arbib, Chase and Hauser is Two Worlds Fair Drive, Somerset, New
Jersey 08873. The address of Mr. O'Connell is c/o Gibson Greetings, Inc.,
2100 Section Road, Cincinnati, Ohio 45232.
(4) As a director of TRG, the shareholder may also be viewed as a beneficial
owner of all shares of NAAC Class A Common Stock beneficially owned by TRG.
The total shown also includes shares subject to exercisable stock options
owned individually.
(5) Includes 50,000 shares of NAAC Class A Common Stock and the 50,000 shares of
NAAC Class A Common Stock underlying a like number of NAAC Class A Warrants
issuable upon exercise of the Class A Options and 60,000 shares of NAAC
Class A Common Stock issuable upon conversion of the NAAC Class B Common
Stock and exercise of the NAAC Class A Warrants underlying the NAAC Class B
Common Stock subject to the Class B Options. On the post-Merger basis
includes an option to purchase an additional 10,000 shares of NAAC Class A
Common Stock.
(6) Includes 90,000 shares of NAAC Common Stock underlying exercisable options
to be issued at the Effective Time.
52
<PAGE>
SELECTED NAAC HISTORICAL FINANCIAL DATA
The following selected historical financial data as of August 31, 1997 and
for the period September 1, 1995 (inception) to August 31, 1997 and for the
periods then ended are derived from the audited financial statements of NAAC
included in this Proxy Statement. The selected financial data as of May 31,
1998, May 31, 1997 and for the nine months ended May 31, 1998 and May 31, 1997
and for the period September 1, 1995 (inception) to May 31, 1998 are derived
from the unaudited financial statements of NAAC included in this Proxy
Statement. Such unaudited data includes, in management's opinion, all normal
recurring adjustments necessary to present fairly the results of operations and
financial position of NAAC for such periods. Results for interim periods are not
necessarily indicative of the results to be expected for an entire fiscal year.
The data should be read in conjunction with the financial statements, related
notes, "Management's Discussion and Analysis of NAAC's Financial Condition and
Results of Operations," the pro forma financial statements of Guzzi Corp. and
NAAC and other financial information included in this Proxy Statement.
<TABLE>
<CAPTION>
SEPTEMBER 1,
1995
(INCEPTION)
NINE MONTHS NINE MONTHS TO SEPTEMBER 1, 1995
ENDED ENDED YEAR ENDED AUGUST 31, (INCEPTION) TO
MAY 31, 1998 MAY 31, 1997 AUGUST 31, 1997 1996 MAY 31, 1998
------------------ ------------ --------------- ------------ ------------------
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Interest income.................... $ 324 $ -- $ -- $ -- $ 324
General, administrative, other
expenses and taxes............... 166 4 39 31 236
Net income (loss).................. 126 (4) (39) (31) 56
Net income (loss) per common
share............................ .12 (.04) (.33) (.29) --
Weighted average common shares
outstanding...................... 1,056,000 106,000 119,014 106,000
</TABLE>
<TABLE>
<CAPTION>
AUGUST 31,
MAY 31, 1998 MAY 31, 1997 AUGUST 31, 1997 1996
------------------ ------------ --------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.......... $ 136 $ 26 $ 402 $ 26
Short-term investments and accrued
interest
thereon.......................... -- -- -- --
U.S. Government securities
deposited in Escrow Account and
accrued interest thereon......... 8,322 -- 7,998 --
Total assets....................... 8,458 204 8,401 204
Liabilities........................ 205 187 283 181
Common stock subject to possible
redemption....................... 1,664 -- 1,600 --
Stockholders' equity............... 6,589 17 6,518 23
</TABLE>
53
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
NAAC'S FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NAAC is a Specialized Merger and Acquisition Allocated Risk Transaction
company, the objective of which is to acquire a Target Business.
In August 1997, NAAC raised net proceeds of approximately $8,100,000, after
payment of underwriting discounts, the underwriter's non-accountable expense
allowance, and other offering costs in an initial public offering. NAAC
deposited approximately 90% ($8,000,000) of such net proceeds in the Escrow
Account. At July 31, 1998, the Escrow Account amounted to $8,422,500. Cumulative
interest earned on the Escrow Account and other funds was an aggregate of
approximately $324,000 as of May 31, 1998. In the event NAAC is liquidated, the
non-Escrow Account assets may not be sufficient to pay all of its accounts
payable and accrued expenses.
Substantially all of NAAC's working capital needs subsequent to the public
offering have been attributable to the identification, evaluation and selection
of a suitable Target Business and to structure, negotiate and consummate the
acquisition of Guzzi Corp. NAAC has incurred costs of approximately $268,000 in
connection with its business activities through May 31, 1998, and is incurring
additional costs in connection with the Merger. NAAC will satisfy all of its
working capital needs with its existing cash balances and working capital after
consummation of the Merger. All income through May 31, 1998 has been from
interest. Except for its efforts to acquire a Target Business, NAAC has not
engaged in any business activities.
On August 18, 1998, NAAC entered into the Merger Agreement to merge with
acquire Guzzi Corp. See "Proposal 1: The Merger Agreement--Merger;
Consideration."
NAAC believes that subsequent to the Merger there will be sufficient funds
for the working capital needs of the combined companies for 12 months. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operation of Guzzi Corp." for a discussion of the capital requirements of Guzzi
Corp. after the Merger.
If NAAC does not consummate a Business Combination by August 22, 1999, it
will be dissolved and will distribute the Escrow Account proceeds, inclusive of
any interest thereon, plus any remaining net assets of NAAC, to the holders of
the NAAC Class A Common Stock in proportion to their shares (excluding the
Pre-IPO Shares). The per-share liquidation price is equal to the amount in the
Escrow Account, including interest earned thereon, divided by the number of
shares of NAAC Class A Common Stock held by stockholders entitled to share in
the Escrow Account. Holders of NAAC Class A Common Stock (excluding the Pre-IPO
Shares) have the right to redeem their shares, provided that if more than 20% of
the shares are to be redeemed, the Merger will not be consummated and the right
of redemption will terminated until such time as another acquisition is
submitted for approval of the NAAC stockholders.
Many existing computer programs use only two digits to identify a year in
the date field. These programs do not consider the impact of the upcoming change
in the century. Currently, the Company does not have any operations or computer
systems to evaluate for year 2000 compliance. See "Management's Discussion and
Analysis of Guzzi Corp. Financial Condition and Results of Operations of Guzzi
Corp.--Potential Effects of the Year 2000 on Guzzi Corp.'s Business" for a
discussion of the potential impact of year 2000 on the post-Merger company.
SELECTED GUZZI CORP. HISTORICAL CONSOLIDATED FINANCIAL DATA
The selected historical financial data for the years ended December 31,
1997 and 1996 are derived from the audited financial statements of Guzzi Corp.
included in this Proxy Statement/Prospectus and should be read in conjunction
with those financial statements and notes related thereto. The selected
historical financial data for the year ended December 31, 1995 and for the six
months ended June 30, 1998 and 1997 are derived from the unaudited financial
statements of Guzzi Corp. included in this Proxy Statement/Prospectus and should
be read in conjunction with those financial statements and selected information
thereto. The selected historical financial data for the years ended
December 31, 1994 and 1993 are derived from the unaudited financial statements
for those years, which are not included in this Proxy Statement. Such unaudited
data includes, in management's
54
<PAGE>
opinion, all normal recurring adjustments, necessary to present fairly the
results of operations and financial position of Guzzi Corp. for such periods.
Results for interim periods are not necessarily indicative of the results to be
expected for an entire fiscal year. The following data should also be read in
conjunction with the financial statements, related notes, "Management's
Discussion and Analysis of Guzzi Corp. Financial Condition and Results of
Operations," the pro forma financial statements of Guzzi Corp. and NAAC and
other financial information included in this Proxy Statement/Prospectus.
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, YEARS ENDED DECEMBER 31,
----------------------------------- ------------------------------------------------------------
1998 1998 1997 1997 1997 1996 1995 1994
$000(1) LIT. M LIT. M $000(2) LIT. M LIT. M LIT. M LIT. M
------- ------------ ---------- ------- ----------- ---------- ---------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net sales............ $27,006 Lit. 47,989 Lit.41,665 $45,781 Lit. 80,987 Lit.77,620 Lit.64,671 Lit.48,849
Gross profit......... 5,197 9,234 5,851 5,378 9,514 11,865 10,071 4,071
Selling, general and
administrative
expenses........... 4,424 7,861 6,702 7,815 13,824 10,210 7,486 4,703
Research and
development
expenditure........ 1,253 2,226 897 1,767 3,125 1,177 602 197
Interest expense..... 1,241 2,206 2,040 2,058 3,640 4,346 3,604 3,533
Net loss............. (1,917) (3,406) (3,867) (5,976) (10,569) (1,996) (3,233) (1,671)
Cash dividends per
common share....... -- -- -- -- -- -- -- --
BALANCE SHEET DATA
Cash and cash
equivalents........ $ 4,191 Lit. 7,447 3,403 $ 3,591 Lit. 6,352 Lit. 2,210 Lit. 2,718 Lit. 3,679
Current assets....... 46,601 82,808 67,716 39,135 69,229 60,223 52,382 39,155
Total assets......... 57,604 102,360 81,040 47,877 84,694 73,731 58,594 47,607
Short-term debt...... 20,032 35,597 30,294 16,401 29,012 23,173 15,637 9,480
Long-term debt, net
of current
portion............ 7,808 13,875 5,065 2,729 4,828 5,629 4,198 4,151
Parent company
financing.......... 7,451 13,241 5,659 7,303 12,919 4,659 2,883(4) 13,197
Preferred stock
subject to
redemption......... 7,252 12,886 10,017 6,574 11,629 5,101 -- --
Shareholders'
equity............. $(9,583) Lit. (17,029) (4,091) $(6,991) Lit.(12,366) Lit. 1,596 Lit. 2,822(4) Lit. (7,180)
OTHER DATA
EBITDA............... $ 419 Lit. 746 (297) $(2,383) Lit. (4,214) Lit. 4,189 Lit. 2,774 Lit. 3,829
Depreciation and
amortization....... 824 1,465 1,357 1,402 2,480 1,807 2,303 1,967
Capital
expenditures....... 2,878 5,115 1,783 2,197 3,887 5,951 1,801 1,106
Number of motorcycles
sold............... 3,027 2,889 5,593 6,050 5,198 4,149
<CAPTION>
1993
LIT. M
----------
<S> <C>
INCOME STATEMENT DATA
Net sales............ Lit.37,484
Gross profit......... 5,149
Selling, general and
administrative
expenses........... 6,012
Research and
development
expenditure........ 409
Interest expense..... 4,969
Net loss............. (4,058)
Cash dividends per
common share....... --
BALANCE SHEET DATA
Cash and cash
equivalents........ Lit. 329
Current assets....... 34,889
Total assets......... 41,190
Short-term debt...... 16,566(3)
Long-term debt, net
of current
portion............ --(3)
Parent company
financing.......... 9,883
Preferred stock
subject to
redemption......... --
Shareholders'
equity............. Lit. (3,122)
OTHER DATA
EBITDA............... Lit. --
Depreciation and
amortization....... --
Capital
expenditures....... --
Number of motorcycles
sold............... 3,274
</TABLE>
- ------------------
(1) Translated solely for the convenience of the reader at the approximate
exchange rate as of June 30, 1998 of Lit. 1,777 to $1.00.
(2) Translated solely for the convenience of the reader at the approximate
exchange rate as of December 31, 1997 of Lit. 1,769 to $1.00.
(3) At December 31, 1993 Moto Guzzi was past due on outstanding loans of
Lit. 5,120 which were classified as current liabilities.
(4) In 1995, Lit. 12,632 million of parent company financing was contributed to
capital.
55
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
GUZZI CORP. FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF GUZZI CORP.
GENERAL
Guzzi Corp. is a Delaware corporation formed in 1996 to acquire Moto Guzzi,
its manufacturing subsidiary, and Moto America, the exclusive U.S. importer and
distributor of "Moto Guzzi"(Registered) brand motorcycles and spare parts. Guzzi
Corp. is a majority-owned subsidiary of TRG.
Moto Guzzi has earned a reputation as one of the elite motorcycle
manufacturers in the world, and distributes its products worldwide through a
network of wholly or partially owned importers and independent dealers. By the
end of 1993, Moto Guzzi, then operating under the name G.B.M. S.p.A., had been
suffering from many years of declining sales and production, and increasing
losses, which threatened its viability. In 1994, TRG brought outside emergency
temporary management services to Moto Guzzi and developed a strategic plan to
restore its subsidiary to financial health.
Since that initiative, Moto Guzzi has significantly increased unit sales
from approximately 3,300 in 1993 to approximately 5,600 in 1997. In the four
fiscal quarters ended June 30, 1998, unit sales had increased to 5,916, although
the company continues to operate at a loss.
Since 1994, Moto Guzzi has made investments in reinforcing management and
in logistical and production control systems and has increased outsourcing of
components to qualified suppliers. It has also introduced one new model, the
"Centauro", and updated versions of its "California" and "Nevada" models which
have been well received by customers. In January 1996, Moto America Inc., the
exclusive U.S. importer and distributor was acquired and in February 1997, a new
wholly-owned importer distributor was established in France as part of Guzzi
Corp.'s investments to strengthen distribution in important markets. Also, in
January 1997, distribution in Germany was transferred to a new 25% owned
affiliate, MGI GmbH. Guzzi Corp. has a 3 year option to acquire up to 90% of
this new German exclusive importer-distributor.
From 1994 through 1996, financing for Guzzi Corp. was supplied by its
parent company, TRG. In early January 1997, a private placement of Guzzi Corp.
redeemable preferred stock provided it capital of approximately $5.2 million and
in June 1997, TRG committed to Guzzi Corp. approximately US$ 4 million from the
proceeds of a public offering of TRG common stock and common stock warrants.
Further, in early 1998, Moto Guzzi negotiated a Lit. 10 billion (approximately
US$ 5.6 million) long-term credit facility, which it drew down in April 1998.
With the proceeds from the above, Moto Guzzi has started to make
investments in research and model development, expenditure on which more than
doubled in 1997 compared to 1996, and in plant and machinery of Lit. 3.9 billion
in 1997 and Lit. 5.1 billion in the first six months of 1998. To enable
substantial further growth in production and sales, Guzzi Corp.'s strategic plan
contemplates total investments in research, product development, plant and
machinery of approximately Lit. 50 billion (approximately US$ 28 million) in the
four year period from 1997 through 2000.
56
<PAGE>
RESULTS OF OPERATIONS
3 MONTHS ENDED
JUNE 30, 1998 COMPARED TO JUNE 30, 1997
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
-----------------------------------------
1998 1997
LIRE M. LIRE M.
------- -------
<S> <C> <C> <C> <C>
Net sales............................................................... 22,403 100.0% 23,253 100.0%
Cost of Sales........................................................... (17,833) (79.6%) (20,052) (86.2%)
------- -------
4,570 20.4% 3,201 13.8%
Selling, general and administrative expenses............................ (4,548) (20.3%) (4,150) (17.8%)
Research and product development........................................ (1,352) (6.0%) (455) (2.0%)
Other income, net....................................................... 243 1.1% 12 0.1%
------- -------
Operating loss.......................................................... (1,087) (4.9%) (1,392) (6.0%)
Interest expense........................................................ (1,220) (5.5%) (1,019) (4.4%)
------- -------
Loss before income taxes................................................ (2,307) (10.3) (2,411) (10.4%)
Income taxes............................................................ (264) (1.2%) (94) (0.4%)
------- -------
Net loss................................................................ (2,571) (11.5%) (2,505) (10.8%)
------- -------
------- -------
</TABLE>
The 4% decrease in net sales in the three months ended June 30, 1998
compared to the quarter ended June 30, 1997 resulted principally from a decrease
of 10% in units sold from 1,660 units in 1997 to 1,490 in 1998, offset by
increases in selling prices which became effective in March, 1998. Sales in the
quarter were affected by delays in the introduction of two revised models, the
California Special and 1998 Quota 1100, principally resulting from late supply
of certain components. Management estimates that sales of approximately 400
units were lost in the quarter as a result of these delays and that, due to
seasonality, many of the lost sales will not be recovered in the third quarter.
Net unit sales by Moto America decreased 30% to 170 in 1998 compared to 243 in
1997, due principally to dealers reducing their inventory levels. Net unit sales
at the French importer-distributor increased 23% to 176 in 1998 compared to 143
in 1997.
The increase in gross margin as a percentage of sales to 20.4% from 13.8%,
principally reflects fixed manufacturing costs spread over production volumes
which increased from 1,644 in the three months ended June 30, 1997 to 2,016 in
the comparable 1998 period and the beneficial effects of sales price increases
effective from the beginning of the second quarter. In 1997, selling prices had
been maintained at 1996 levels in an effort to build market share.
Increases in selling, general and administrative expenses reflect increases
in Italy, principally relating to new management personnel at Moto Guzzi.
Continuing a management policy initiated in mid-1997, research and
development in the three months ended June 30, 1998, principally on new products
intended for 1998 and 1999 introduction and for new engines, is at levels
approximately three times those of the second quarter of 1997.
Other income in 1998 and 1997 is principally composed of interest income of
Lit. 112 million in the three months ended June 30, 1998 (1997--Lit. 22
million), less exchange differences and other minor items. Interest income in
1998 derives from short-term investment in bank deposits of part of the proceeds
of a Lit. 10 billion long-term loan, drawn down in April 1998.
Interest expense increased by Lit. 201 million from Lit. 1,019 million in
the second quarter of 1997 to Lit. 1,220 million in the second quarter of 1998.
The increase reflects interest expense on the long-term loan drawn down in April
1998, on increased levels of advances from banks financing working capital and
increases in loans from TRG and its subsidiaries. The effects of increased
indebtedness more than offset the benefits of lower interest rates to 1998
compared to 1997.
Income tax in 1998 principally relates to operations in Italy, whereas it
related to operations in the U.S. in 1997. Despite operating losses at Moto
Guzzi in Italy, income taxes are accrued as certain business expenses,
principally finance expense and labor costs, are not deductible against income
for the purposes of a new income tax, introduced in 1998.
57
<PAGE>
RESULTS OF OPERATIONS
6 MONTHS ENDED
JUNE 30, 1998 COMPARED TO JUNE 30, 1997
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-----------------------------------------
1998 1997
LIRE M. LIRE M.
------- -------
<S> <C> <C> <C> <C>
Net sales............................................................... 47,989 100.% 41,665 100.0%
Cost of Sales........................................................... (38,755) (80.8%) (35,814) (86.0%)
------- -------
9,234 19.2% 5,851 14.0%
Selling, general and administrative expenses............................ (7,861) (16.4%) (6,702) (16.1%)
Research and product development........................................ (2,226) (4.6%) (897) (2.2%)
Other income, net....................................................... 134 0.3% 94 0.2%
------- -------
Operating loss.......................................................... (719) (1.5%) (1,654) (4.0%)
Interest expense........................................................ (2,206) (4.6%) (2,040) (4.9%)
------- -------
Loss before income taxes................................................ (2,925) (6.1%) (3,694) (8.9%)
Income taxes............................................................ (481) (1.0%) (173) (0.4%)
------- -------
Net loss................................................................ (3,406) (7.1%) (3,867) (9.3%)
------- -------
------- -------
</TABLE>
The 15% increase in net sales in the six months ended June 30, 1998
compared to the six months ended June 30, 1997 resulted principally from first
quarter sales activities. Units sold in the six months increased from 2,889
units in 1997 to 3,207 in 1998. As noted above, sales in May and June of 1998
were adversely affected by delays in the introduction of two revised models so
that the growth in the first quarter was not maintained in the second quarter.
Net unit sales at Moto America decreased 4% to 382 in 1998 compared to 399 in
1997, due principally to dealers reducing their inventory levels in the second
quarter. Net unit sales at the French importer-distributor, which commenced
operations in February 1997, increased 90% to 338 in 1998 compared to 178 in
1997. In the first quarter of 1998, sales by Moto Guzzi in Italy also benefitted
from 312 units sold to public administration customers which sales had
originally been scheduled for December 1997 delivery but which were delayed
until 1998 for completion of compliance testing by the buyers.
The increase in gross margin as a percentage of sales to 19.2% from 14.0%,
principally reflects fixed manufacturing costs spread over production volumes
which increased from 3,078 in the six months ended June 30, 1997 to 3,481 in the
comparable 1998 period and the beneficial effects of price increases effective
from March 1998. In 1997, selling prices had been maintained at 1996 levels in
an effort to build market share.
Increases in selling, general and administrative expenses reflect increases
in Italy, principally relating to new management personnel at Moto Guzzi and
increases, principally in the first quarter, at the wholly owned importers in
the U.S. and France.
Continuing a Moto Guzzi management policy initiated in mid-1997, research
and development in the six months ended June 30, 1998, principally on new
products intended for 1998 and 1999 introduction and for new engines, is at
levels more than double those incurred in the first six months of 1997.
Other income, net is principally comprised of interest income of Lit.
124 million (1997--Lit. 26 million) and foreign exchange differences.
The increase in interest expense in the first half of 1998 compared to
1997, reflects interest expense on the long-term loan drawn down in April 1998,
on increased levels of advances from banks financing working capital and on
increases in loans from affiliates of TRG, the parent company. The effects of
this increased indebtedness more than offset the benefits of lower interest
rates to 1998 compared to 1997.
Income tax in the first six months of 1998 principally relates to
operations in Italy, whereas it related to operations in the U.S. in 1997.
Despite operating losses at Moto Guzzi, income taxes are accrued as certain
business expenses, principally finance expense and labor costs, are not
deductible against income for the purposes of a new income tax, introduced in
1998.
58
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Operations and working capital
Losses from operations of Lit. 3.4 billion for the six months ended
June 30, 1998 include depreciation and other adjustments for non-cash items of
Lit. 1.5 billion. Lit. 7.5 billion of cash used in operations for the six months
to June 30, 1998 results from working capital movements.
Trade and other receivables increased by approximately Lit. 6.5 billion at
June 30, 1998 compared to December 31, 1997. The increase principally results
from sales to Italian public administration customers in the first quarter of
1998. Public administration receivables typically have collection times in
excess of four months. Inventories at June 30, 1998 increased by Lit.
5.8 billion compared to December 31, 1997. This increase reflects seasonal
factors and increased levels of components and partly assembled motorcycles at
Moto Guzzi resulting from the delays in introducing two new models. Finished
motorcycle inventories also increased at Moto America Inc. due to reduction of
inventories by dealers at the end of second quarter and at Moto Guzzi France
S.a.r.l. due to expansion in business volumes. Guzzi Corp. is implementing
plans, including incentives to dealers and other promotions, to reduce finished
goods levels at Moto America. Offsetting the effects of the above increases in
working capital, trade and other payables at Moto Guzzi increased by
approximately Lit. 5.2 billion, reflecting increased production levels.
Investing activity
Expenditure on plant and equipment principally relates to expenditure at
the production facility of Moto Guzzi S.p.A. Expenditure of Lit. 5.1 billion in
the first half of 1998 compared to Lit. 1.8 billion in the first half of 1997,
reflects the start of investments in plant and machinery in accordance with
Guzzi Corp's strategic plan.
Financing activities
The increase in advances from banks of approximately Lit. 6.5 billion
principally reflects financing of increased trade receivables, as noted above.
In April 1998, Moto Guzzi drew down Lit. 10 billion under a 10 year long-term
loan facility granted by Italian banks, with principal due to be repaid over the
last 8 years. At June 30, 1998, approximately Lit. 5.0 billion of these
proceeds, destined for further investments in product development, plant and
machinery and working capital finance were on deposit with local banks.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
COMPARED TO YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996
LIRE M. LIRE M.
------------------ ------------------
<S> <C> <C> <C> <C>
Net sales....................................................... 80,987 100.0% 77,620 100.0%
Cost of sales................................................... (71,473) (88.3%) (65,755) (84.7%)
------- -------
9,514 11.7% 11,865 15.3%
Selling, general and administrative expenses.................... (13,824) (17.1%) (10,210) (13.2%)
Research and development........................................ (3,125) (3.9%) (1,177) (1.5%)
Other income, net............................................... 741 0.9% 1,904 2.5%
------- -------
Operating (loss)/profit......................................... (6,694) (8.3%) 2,382 3.1%
Interest expense................................................ (3,640) (4.5%) (4,346) (5.6%)
------- -------
Loss before income taxes........................................ (10,334) (12.8%) (1,964) (2.5%)
Income taxes.................................................... (235) (0.3%) (32) (0.0%)
------- -------
Net loss........................................................ (10,569) (13.1%) (1,996) (2.6%)
------- -------
------- -------
</TABLE>
Despite a 7.4% decline in unit sales in 1997 over 1996, net sales at Guzzi
Corp. increased by 4.3%, due principally to a more favorable sales mix. Total
unit sales in 1997 were 5,593 compared to 6,050 in 1996. One of the most
significant factors leading to the decrease in units sales was lower sales to
public administration bodies,
59
<PAGE>
principally in Italy, whereas unit sales to the private sector, in both the
Italian and export markets, increased over 1996. Management believes that the
principal cause of such decrease of public administration sales was general
economic conditions affecting public spending in Italy, including planned
government expenditure reduction in order to meet the qualification criteria for
Italy's participation in the European Common Currency. Net sales in 1997 also
reflected that approximately Lit. 3,800 million at sales value of motorcycles
manufactured for public administration customers whose sale was planned for
December 1997, but for which the necessary technical checks and clearance were
not completed until the first quarter of 1998 and could not be recorded in 1997.
Consolidated net sales of parts increased 13% in 1997 over 1996.
Net sales of Guzzi Corp.'s exclusive U.S. importer increased by 113% to
Lit. 13,000 million, reflecting a 93% increase in local currency terms and the
effects of conversion of dollars into lire.
Gross margin as a percentage of sales decreased in 1997 compared to 1996 as
a result of the Company's policy substantially not to pass on increased
component costs to customers. Guzzi Corp. also incurred higher charges for
inventory obsolescence in 1997 reflecting continuing moves to higher quality
outsourced components and modifications to model specifications. Production
increased in 1997 compared to 1996 by 3.4% from 6,027 units to 6,234 units.
Guzzi Corp. also made increased investments in development of new products
in 1997 with research and development expenditure increasing from Lit.
1,177 million to Lit. 3,125 million. Research and development expenditure
encompasses projects for upgrades and restyling of models introduced in late
1997 and for proposed introduction in 1998 as well as longer-term projects
related to new motors and new models whose introduction, if at all, will be
after 1998.
Sales general and administrative expenses increased in 1997 compared to
1996 by approximately 35%, reflecting increased activities in the U.S. importer
and the newly formed French importer as well as increased sales and marketing
and general management expense at Guzzi Corp. S.p.A. as the Company seeks to
redefine and improve its operations in all areas.
The principal components of Other income, net in 1997 were currency
exchange gains of Lit. 133 million (1996--139 million), gains on sales of assets
of Lit. 489 million (1996--Lit. 552 million) and interest income of Lit.
288 million (1996--Lit. 111 million), net of other minor items aggregating Lit.
171 million (1996--income of Lit 652 million). In 1996, the Company also
received a grant for research performed in prior years of Lit. 450 million.
Guzzi Corp.'s operating loss of Lit. 6,694 million in 1997, compared to an
operating profit of Lit. 2,382 million in 1996, arose principally from the
following: 1) the decision to maintain 1996 sales prices to support sales
objectives; 2) higher levels of inventory obsolescence resulting from product
changes and a switch to higher quality components; 3) increased research and
development expenditure; 4) increased marketing, sales and general management in
connection with expansion of operations in the U.S. and France and plans to
improve all areas of its business and 5) lower levels of other income, net.
Management believes the investments made in 1997 in quality and new model
development and in building a strong management team will produce benefits in
1998 and future years.
The decrease in interest expense in 1997 compared to 1996 is due to
decreased interest rates more than compensating for higher levels of bank
advances and loans from TRG companies in 1997 compared to the previous year.
Income taxes relate entirely to the U.S. importer in 1997. In 1996, income
taxes reflected Lit. 92 million relative to the U.S. importer and a credit of
Lit. 60 million at Guzzi Corp. S.p.A. in Italy, representing a correction of
estimates for prior years.
60
<PAGE>
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
COMPARED TO YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
LIRE M. LIRE M.
------------------ ------------------
<S> <C> <C> <C> <C>
Net sales....................................................... 77,620 100.0% 64,671 100.0%
Cost of sales................................................... (65,755) (84.7%) (54,600) (84.4%)
------- -------
11,865 15.3% 10,071 15.6%
Selling, general and administrative expenses.................... (10,210) (13.2%) (7,486) (11.6%)
Research and development........................................ (1,177) (1.5%) (602) (0.9%)
Abandonment of Benelli production line.......................... (1,631) (2.5%)
Other income, net............................................... 1,904 2.5% 119 0.2%
------- -------
Operating profit................................................ 2,382 3.1% 471 0.7%
Interest expense................................................ (4,346) (5.6%) (3,604) (5.6%)
------- -------
Loss before income taxes........................................ (1,964) (2.5%) (3,133) (4.8%)
Income taxes.................................................... (32) (0.0%) (100) (0.2%)
------- -------
Net loss........................................................ (1,996) (2.6%) (3,233) (5.0%)
------- -------
------- -------
</TABLE>
Net sales of motorcycles and parts to unaffiliated third parties increased
in 1996 over 1995 by 23.2% and 1.4% respectively. Growth in motorcycle sales
principally was attributable to increased volumes. Units sold by Guzzi Corp.
increased from 5,198 in 1995 to 6,050 in 1996 (excluding sales of old Benelli
brand small motorcycle inventory in 1995). Sales of the largest units, those
with engine displacement greater than 750cc, increased only by 6% in 1996 over
1995 as they were held back in 1996 by delays in introducing the new Centauro
model. Sales growth in 1996 is also in part attributable to the contribution of
Moto America Inc. Sales of parts by Guzzi Corp.'s Italian parts distribution
business were limited by a relocation of its warehouse during the year.
Margins in 1996 benefitted from higher volumes, which had the effect of
lowering per-unit fixed costs, but were negatively impacted by higher costs from
the outsourcing of components. Sales price increases implemented in March 1996
averaged 5%. Guzzi Corp. had hoped that the gains from volume increases in 1996
would exceed the extra cost of outsourcing, but this was not realized in 1996
due to production shortages of approximately 400 units in the autumn due to late
delivery of parts by suppliers. In September, Guzzi Corp. commenced production
of its new Centauro model which temporarily slowed production rate.
Cost of sales at Guzzi Corp. was adversely impacted by inflationary
increases in raw material prices and wages and increased costs for purchases of
components which had previously been manufactured in-house. Aluminum prices,
which had been a significant factor in raw material cost increases in 1995, were
stable in 1996, with a decrease in the second half of the year, which helped to
offset price rises of other components.
Research and product development expense increased to Lit. 1,177 million in
1996 compared to Lit. 602 million in 1995 in respect of planned new models and
continuing development of existing models.
In 1995 Guzzi Corp. made a strategic decision to wind down production of
smaller Guzzi Corp. and Benelli models leading to exceptional costs for
write-downs of tooling and inventories of Lit. 1,631 million.
The principal components of Other income, net in 1996 were currency
exchange gains of Lit. 139 million (1995--exchange losses of Lit. 442 million),
gains on sales of assets of Lit. 552 million (1995--Lit. 160 million), interest
income of Lit. 111 million (1995--Lit. 133 million), a grant for research
performed in prior years of Lit. 450 million plus other minor items aggregating
Lit. 652 million (1995--Lit. 268 million).
The increase in interest expense in 1996 compared to 1995 is due to higher
levels of bank advances, principally financing working capital, compared to
1995, compensated partly by decreases in interest rates during 1996.
61
<PAGE>
In 1996, income taxes reflected Lit. 92 million relative to the U.S.
importer and a credit of Lit. 60 million at Moto Guzzi S.p.A. in Italy,
representing a correction of estimates for prior years. Income taxes in 1995
were relative to Moto Guzzi S.p.A.
LIQUIDITY AND CAPITAL RESOURCES
Operations and working capital
Negative operating cash flow at December 31, 1997 reflects operating losses
at Moto Guzzi and working capital requirements.
The Lit. 8.2 billion decrease in trade and other receivables principally
reflects that in 1997 Guzzi Corp.'s German sales were to a new 25% owned
affiliate, resulting in a corresponding increase in related party receivables of
Lit. 5.4 billion. The decline in trade and related party receivables, taken
together, reflects the reduction in the level of motorcycle sales in the last
quarter of 1997, compared to the last quarter of 1996, principally from
decreased sales to the public sector.
Inventories increased by Lit. 10.5 billion from December 31, 1996 to
December 31, 1997, after adjusting for non-cash reserves made in 1997 of Lit.
3.2 billion. The principal causes for the increase were: 1) the delayed delivery
of certain public sector motorcycles planned for 1997 sale but were in finished
goods inventories at year end; 2) an increase of 324 units in finished goods
destined for various markets reflecting orders awaiting credit clearance and a
build-up of buffer stocks; and 3) inventories at the newly formed French
distributor and an increase due to higher activity levels at the Guzzi Corp.'s
U.S. distributor.
Trade payables and other payables and accruals increased by Lit. 3.8
billion at December 31, 1997, compared to December 31, 1996, reflecting longer
payment terms accepted by Guzzi Corp.'s suppliers and an increase in line with
increased operations.
Investing activities
Investments in plant, property and equipment principally relate to Guzzi
Corp.'s Italian operations where it also incurred research and product
development expenses in 1997 of Lit. 3.1 billion which are reported in the
statement of operations. In addition to the purchase of plant and equipment for
Lit. 3.9 billion, Guzzi Corp. acquired fixed assets for Lit. 760 million by way
of leasing, assuming Lit. 570 million of lease obligations at the inception of
such leases.
Financing activities
The net increase in advances from banks principally represents increases to
finance working capital. Guzzi Corp. has lines of credit, with banks and other
credit institutions amounting to approximately Lit. 4.6 billion, which credit
lines are largely secured by trade receivables. While bank advances against
receivables are invariably less than 100% of the face value of receivables, bank
advances are able to exceed consolidated trade receivables, as advances are
available against receivables from the consolidated U.S. and French importers
and also against confirmed public administration orders.
Lit. 2.9 billion was received from the sale of Guzzi Corp. convertible
preferred stock and warrants in January 1997: Lit. 5.1 billion was received in
December 1996 from such private placement for a total of Lit. 8.0 billion.
Lit. 7.8 billion of financing from TRG, principally represents funds
committed by the Board of TRG from the proceeds of its public offering of its
common stock in June 1997.
FUTURE LIQUIDITY NEEDS
Moto Guzzi finances working capital principally by way of advances from
banks against trade receivables. No financing is available in Italy for
component and other inventories. As Moto Guzzi closes production for most of
August, sales for that month are limited and, therefore, Moto Guzzi's ability to
draw down on its bank credit lines is reduced. At the same time, trade payables
reflecting purchases in June and July are at normal levels.
62
<PAGE>
Accordingly, Moto Guzzi, having already drawn the remaining Lit. 5.0 billion
liquidity from the proceeds of long-term debt, above, since June 30, will seek
to extend supplier credit through this seasonal liquidity low point and will
actively seek to secure interim financing pending the consummation of the Merger
in order to remain current with its suppliers. While no arrangements have been
made, management believes that extended payment terms, coupled with interim
short-term financing, will sufficiently cover liquidity needs until consummation
of the Merger and increased sales enable Guzzi Corp. to resume increased
drawings against credit lines.
Much of the production machinery at Moto Guzzi's facility is aged and in
need of extensive modification, improvement or replacement. Moto Guzzi obtained
a Lit. 10 billion ten-year credit facility in February 1998, with principal to
be repaid in the final eight years. Management intends that, subject to
short-term cash flow needs, the proceeds, drawn down in April 1998, will be
principally applied to investments in plant and machinery and to continuing
research and product development.
Management expects that, over the next four years, significant further
capital, in addition to the amounts raised through the private placement of
Guzzi Corp. preferred stock, amounts committed by TRG from proceeds of its
public offering and the proceeds of the Lit. 10,000 million debt facilities,
will be required to complete the planned overhaul. While anticipated increases
in sales during the four-year period, if realized, would provide a significant
portion of the needed capital, anticipated internally generated cash and
currently available bank financing, in the aggregate, will not be sufficient to
enable Moto Guzzi to increase production and sales rapidly enough to generate
the remaining needed capital. The cash which will obtained by Guzzi Corp. as a
result of the Merger, if consummated, would significantly enhance Guzzi Corp.'s
ability to undertake the restoration and rehabilitation program. The exercise of
outstanding NAAC warrants and options could, additionally, generate aggregate
proceeds to the merged company in excess of U.S. $18 million. These include the
NAAC Class A warrants with aggregate proceeds on exercise of over $10 million
which are callable by NAAC under certain conditions related to share price
performance.
CAPITAL COMMITMENTS
Guzzi Corp. will have to make significant investments in its existing plant
at Mandello de Lario, Italy to modernize its facility in order that it can
operate competitively. Such required modernization could cause production
interruptions.
POTENTIAL EFFECTS OF THE YEAR 2000 ON GUZZI CORP.'S BUSINESS
Many older computer systems and electronic devices are based on software
systems which, because of how dates are stored and manipulated, assume that all
years occur only in the 20th century. Consequently, after December 31, 1999,
such devices may not function correctly. Guzzi Corp., like many other businesses
and individuals, is potentially subject to adverse consequences arising both
from the incorrect functioning of systems used in its own business, such as
accounting, production control, inventory and automated equipment systems and
also from the incorrect functioning of systems used by suppliers, customers,
utilities, banks and financial institutions and others with whom it interacts in
the normal course of its business.
Guzzi Corp. has over the last two years refurbished production and
inventory computer systems at its Moto Guzzi manufacturing operation, which
relies to the greatest extent on computerized systems for its business.
Management has sought assurances from suppliers that the new systems would be
compliant with requirements related to the year 2000. Guzzi Corp.'s business
does not have unique or custom-tailored requirements for their accounting
systems and could rapidly and inexpensively change to "off-the-shelf" systems
which are year 2000 compliant if their current systems are found not to be year
2000 compliant despite any assurances to the contrary. Over the next 12 months,
management will institute procedures to address potential problems which could
arise in relation to suppliers and customers, with particular regard to
suppliers' ability to provide components on a timely basis. Management believes
that it is reasonable to assume that utility suppliers and the banks and
financial institutions with which it has relationships, generally national or
large regional institutions, are themselves addressing potential problems on a
timely basis so as to be able to provide necessary services to Moto Guzzi. Moto
Guzzi has many banking relationships and alternatives for banking services.
63
<PAGE>
POTENTIAL EFFECTS OF THE EUROPEAN COMMON CURRENCY ON GUZZI CORP.'S BUSINESS
Guzzi Corp.'s businesses are substantially located and operate in Europe
and its sole production facility is in Italy. In May 1998, Italy confirmed its
participation as one of eleven European countries in a proposed European common
currency, the Euro.
The European Common Currency is expected to have significant effects on
Guzzi Corp.'s business. Among the many potential economic implications, the
proposed common currency is expected to increase competition within the common
currency zone. Further small decreases in current Italian interest rates toward
a currently expected lower convergence rate of the participant countries is also
expected and the likelihood of Italy's participation is widely believed to have
been a significant factor in decreases in Italian interest rates in 1997.
Guzzi Corp. makes significant export sales outside the proposed common
currency zone and the prices of certain commodities used in its manufacturing
processes may be affected by the value of the Euro against other major
currencies such as the Dollar and the Yen. The value of the Euro will also
affect the competitiveness of Guzzi Corp. relative to competitors operating
outside the Euro zone. The implementation of the Euro within the common currency
zone could have unanticipated consequences on the economies of participant
countries which could affect demand for Guzzi Corp.'s products. The common
currency zone encompasses countries representing over three-quarters of Guzzi
Corp.'s 1997 net sales and economic consequences could have material affects on
its consolidated business.
Adoption of the Euro is expected to take place over a transition phase in
which, initially, both the Lira and the Euro would be valid currencies for
non-cash business transactions in Italy and within the common currency zone.
The European Common Currency could have a significant effect on Guzzi
Corp.'s accounting systems which could require significant modification or
replacement. Management believes that Guzzi Corp.'s business does not have
unique or custom-tailored requirements for accounting systems and that it could
rapidly and inexpensively change to "off-the-shelf" systems at an appropriate
time if existing systems prove not to be adequate. Guzzi Corp. is not able to
evaluate these matters or the effects on international financial and payment
systems with which it interacts at the present time. Guzzi Corp. will address
these issues during the current year and in 1999 as further guidelines and
information become available. Adoption of the Euro will also lead to Guzzi Corp.
reporting its results in that currency instead of the Italian Lira from some
point, as yet not defined.
64
<PAGE>
UNAUDITED PRO FORMA BALANCE SHEETS
The merger between NAAC and Guzzi Corp. will be treated as a reverse
acquisition of NAAC by Moto Guzzi Corp. as the shareholders of Guzzi Corp. will
hold a majority of the common stock of the post merger company. As NAAC is a
shell company with substantial cash but no operations, the substance of the
merger transaction is the sale or issuance of Guzzi Corp. stock for the cash and
other net assets of NAAC. In consequence, no pro forma financial information is
required to be presented in respect of the combination as it is not a business
combination as defined by APB 16.
The Merger Agreement contemplates, inter alia, an intercompany debt
exchange whereby intercompany debt owed to TRG and OAM amounting to Lit. 13,241
million at June 30, 1998 will be exchanged for NAAC securities. Directors of
NAAC have also agreed to exercise certain options held by them. Further, up to
160,000 of the outstanding shares of NAAC Class A Common Stock could be required
to be redeemed upon closing of the Merger. If holders of more than 160,000
shares of NAAC Class A Common Stock elect for redemption of their shares, the
Merger will not be consummated. See "Merger Agreement." The effects of these
matters are (i) a contemporaneous recapitalization of the merged company at the
Effective Time of the Merger; and (ii) uncertainty as to the liquid resources
and net equity of the merged company in respect of the potential redemption of
NAAC Class A Common Stock.
The following Unaudited Pro Forma Balance Sheets at June 30, 1998 give
effect to the matters contemplated in the Merger Agreement and the Merger as if
it had occurred on such date. The Unaudited Pro Forma Balance Sheets at June 30,
1998 illustrate two scenarios: where no exercise of redemption rights is made by
NAAC shareholders; and where the maximum exercise of 160,000 shares of
Class Common Stock is made by NAAC shareholders. The actual number of shares of
NAAC Class A Common Stock to be redeemed could be any number between 0 and
160,000. The Unaudited Pro Forma Balance Sheets at June 30, 1998 have been
derived by adjusting the unaudited historical financial statements of Guzzi
Corp. and NAAC for certain transactions contemplated by the Merger Agreement and
for the estimated costs of the transaction, which will be expensed to capital.
The Unaudited Pro Forma Balance Sheets at June 30, 1998 are stated in Italian
lire as this will be the functional currency of the post merger company and
should be read in conjunction with the historical financial statements of Guzzi
Corp. and NAAC, included elsewhere in this Proxy Statement/Prospectus.
65
<PAGE>
MOTO GUZZI CORP.--NORTH ATLANTIC ACQUISITION CORP.
UNAUDITED PRO FORMA
CONSOLIDATED BALANCE SHEETS
ASSUMING NO EXERCISE OF REDEMPTION RIGHTS BY NAAC SHAREHOLDERS
JUNE 30, 1998
<TABLE>
<CAPTION>
NAAC INTER-COMPANY
MG CORP. ACTUAL DEBT EXCHANGE RECLASSIFY SHARES
ACTUAL MAY 31, 1998 CLASS B MERGER AND NO LONGER SUBJECT MERGER
JUNE 30, 1998 (SEE NOTE) OPTION EXERCISE REORGANIZATION TO REDEMPTION EXPENSES
LIT. M LIT. M LIT. M LIT. M LIT. M LIT. M
------------- ------------ --------------- -------------- ----------------- --------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents.............. 7,447 12,072 533(a) 2,958 (d)
Receivables............................ 29,478
Inventories............................ 44,959
Prepaid expenses....................... 924
------- ------ --- -------- ------- ----
Total current assets................... 82,808 12,072 533 0 2,958 0
Property, plant and equipment.......... 17,606
Cash in escrow for redemption of
stock................................ 2,958(d) (d) (2,958)(d)
Other assets........................... 1,946
------- ------ --- -------- ------- ----
Total assets........................... 102,360 15,030 533 0 0 0
------- ------ --- -------- ------- ----
------- ------ --- -------- ------- ----
LIABILITIES AND SHAREHOLDERS' EQUITY
Advances from banks.................... 33,795
Current portion of long-term debt...... 1,802
Accounts payable....................... 27,663
Accrued expenses and other payables.... 7,447 363 600(e)
Amounts due to related and affiliated
parties.............................. 853
------- ------ --- -------- ------- ----
Total Current Liabilities.............. 71,560 363 0 0 0 600
Long-term debt, less current
position............................. 13,875
Parent company loans................... 13,241 (13,241)(b) 0
Stock subject to redemption............ 12,886 2,958 (12,886)(c) (2,958)(d) 0
Termination indemnities................ 7,827
Shareholders' (deficit)/equity (Note
(f).................................. (17,029) 11,709 533(a) 26,127 (b,c) 2,958 (d) (600)(e)
------- ------ --- -------- ------- ----
Total liabilities and
(deficit)/equity..................... 102,360 15,030 533 0 0 0
------- ------ --- -------- ------- ----
------- ------ --- -------- ------- ----
<CAPTION>
PRO FORMA
-----------------
US$
LIT. M 000
------- -------
<S> <C> <C>
ASSETS
Cash and cash equivalents.............. 23,010 12,949
Receivables............................ 29,478 16,589
Inventories............................ 44,959 25,301
Prepaid expenses....................... 924 520
------- -------
Total current assets................... 98,371 55,359
Property, plant and equipment.......... 17,606 9,908
Cash in escrow for redemption of
stock................................ 0 0
Other assets........................... 1,946 1,095
------- -------
Total assets........................... 117,923 66,362
------- -------
------- -------
LIABILITIES AND SHAREHOLDERS' EQUITY
Advances from banks.................... 33,795 18,538
Current portion of long-term debt...... 1,802 988
Accounts payable....................... 27,663 15,174
Accrued expenses and other payables.... 8,410 4,613
Amounts due to related and affiliated
parties.............................. 853 468
------- -------
Total Current Liabilities.............. 72,523 39,781
Long-term debt, less current
position............................. 13,875 7,611
Parent company loans................... 0
Stock subject to redemption............ 0
Termination indemnities................ 7,827 4,292
Shareholders' (deficit)/equity (Note
(f).................................. 23,698 12,999
------- -------
Total liabilities and
(deficit)/equity..................... 117,923 64,683
------- -------
------- -------
</TABLE>
Note: The balance sheet of NAAC has been converted from the U.S. Dollar to the
Italian Lira using the approximate exchange rate at June 30, 1998 of Lit.
1,777 to the U.S. Dollar.
66
<PAGE>
MOTO GUZZI CORP.
NORTH ATLANTIC ACQUISITION CORP.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEETS
ASSUMING MAXIMUM PERMITTED EXERCISE OF REDEMPTION RIGHTS BY NAAC SHAREHOLDERS
JUNE 30, 1998
<TABLE>
<CAPTION>
NAAC
MG CORP. ACTUAL INTER-COMPANY REDEMPTION OF
ACTUAL MAY 31, CLASS B DEBT EXCHANGE MAXIMUM NUMBER PRO
JUNE 30, 1998 OPTION MERGER AND OF CLASS A MERGER FORMA
1998 (SEE NOTE) EXERCISE REORGANIZATION SHARES EXPENSES -------
LIT. M LIT. M LIT. M LIT. M LIT. M LIT. M LIT. M
-------- ---------- -------- -------------- -------------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents.............. 7,447 12,072 533(a) 20,052
Receivables............................ 29,478 29,478
Inventories............................ 44,959 44,959
Prepaid expenses....................... 924 924
-------- ------ ---- -------- ------ ---- -------
Total current assets................... 82,808 12,072 533 0 0 0 95,413
Property, plant and equipment.......... 17,606 17,606
Cash in Escrow for redemption of
stock................................ 2,958 (d) (2,958)(d) 0 0
Other assets........................... 1,946 1,946
-------- ------ ---- -------- ------ ---- -------
Total assets........................... 102,360 15,030 533 0 (2,958) 0 114,965
-------- ------ ---- -------- ------ ---- -------
-------- ------ ---- -------- ------ ---- -------
LIABILITIES AND SHAREHOLDERS' EQUITY
Advances from banks.................... 33,795 33,795
Current portion of long-term debt...... 1,802 1,802
Accounts payable....................... 27,663 27,663
Accrued expenses and other payables.... 7,447 363 600 (e) 8,410
Amounts due to related and affiliated
parties ............................. 853 853
-------- ------ ---- -------- ------ ---- -------
Total current liabilities.............. 71,560 363 0 0 0 600 72,523
Long-tern debt, less current
position............................. 13,875 13,875
Parent company loans................... 13,241 (13,241)(b) 0
Stock subject to redemption............ 12,886 2,958 (12,886)(c) (2,958)(d) 0
Termination indemnities................ 7,827 7,827
Shareholders' (deficit) equity (Note
(f).................................. (17,029) 11,709 533(a) 26,127 (b,c) (600)(e) 20,740
-------- ------ ---- -------- ------ ---- -------
Total liabilities and
(deficit)/equity..................... 102,360 15,030 533 0 (2,958) 0 114,965
-------- ------ ---- -------- ------ ---- -------
-------- ------ ---- -------- ------ ---- -------
<CAPTION>
US$ 000
-------
<S> <C>
ASSETS
Cash and cash equivalents.............. 11,284
Receivables............................ 16,58
Inventories............................ 25,301
Prepaid expenses....................... 520
-------
Total current assets................... 55,694
Property, plant and equipment.......... 9,908
Cash in Escrow for redemption of
stock................................
Other assets........................... 1,095
-------
Total assets........................... 64,697
-------
-------
LIABILITIES AND SHAREHOLDERS' EQUITY
Advances from banks.................... 18,538
Current portion of long-term debt...... 988
Accounts payable....................... 15,174
Accrued expenses and other payables.... 4,613
Amounts due to related and affiliated
parties ............................. 468
-------
Total current liabilities.............. 39,781
Long-tern debt, less current
position............................. 7,611
Parent company loans................... 0
Stock subject to redemption............ 0
Termination indemnities................ 4,292
Shareholders' (deficit) equity (Note
(f).................................. 11,377
-------
Total liabilities and
(deficit)/equity..................... 63,061
-------
-------
</TABLE>
Note: The balance sheet of NAAC has been converted from the U.S. Dollar to the
Italian Lira using the approximate exchange rate at June 30, 1998 of Lit.
1,777 to the U.S. Dollar.
67
<PAGE>
NOTES TO UNAUDITED PRO FORMA BALANCE SHEETS AT JUNE 30, 1998:
(a) Represents exercise of 30,000 Class B Options for 60,000 shares of
NAAC Class A Common Stock and 60,000 NAAC Class A Warrants by the officers
of NAAC. The proceeds of exercise will be $300,000 (Lit. 533 million).
(b) Represents the Intercompany Debt Exchange under which OAM and TRG
will exchange intercompany debt due to it by Guzzi Corp. of Lit. 12,919
million plus interest accrued from January 1, 1998 for a total of Lit.
13,241 million at June 30, 1998, for 1,038,040 shares of NAAC Class A
Common Stock, 65,743 shares of NAAC Class B Preferred Stock and 20.76% of
the Nominal Warrants that may be issued subject to certain future
performance criteria. See also note (f) below.
(c) Represents the exchange of all outstanding Guzzi Corp. redeemable
convertible preferred stock, classified outside shareholders
equity/(deficit) in the financial statements of Guzzi Corp., for 740,490
shares of NAAC Class A Common Stock, 46,898 shares of NAAC Class B
Preferred Stock and 14.81% of the Nominal Warrants that may be issued
subject to certain future performance criteria. See also note (f) below.
(d) In the situation where there is no exercise of redemption rights
made by holders of shares of NAAC Class A Common Stock, represents
termination of such redemption rights and relief of restriction over cash
reserved for such contingent redemption.
In the situation involving the maximum exercise of redemption rights
of 160,000 shares of NAAC Class A Common Stock are made by holders of such
shares, represents repurchase of such shares.
(e) Represents estimated merger expenses to be incurred by NAAC, to be
charged to capital. In accordance with the Merger Agreement, merger
expenses incurred on behalf of Guzzi Corp. will be paid by TRG. This will
be accounted for as a contribution by TRG to Guzzi Corp., recorded as a
debit to merger expenses and a credit to additional paid-in capital. As the
merged company will charge all merger expenses against additional paid-in
capital, there will be no effect in the income statement and no net effect
on shareholder's equity.
(f) The merger will be accounted for as a reverse acquisition by Guzzi
Corp. of NAAC. Pursuant to this:
(i) Share capital and additional paid-in capital will be
restated for the issuance of a total of the 3,702,450 shares of NAAC
Class A Common Stock and 234,489 shares of NAAC Class B Preferred
Stock in exchange for the outstanding Common Stock of Guzzi Corp. and
for the shares issued in exchange for the Intercompany Debt (note
(b) above) and redeemable convertible preferred stock (note
(c) above) of Guzzi Corp.;
(ii) The retained earnings of NAAC will be canceled against
additional paid in capital at the date of the merger; and
(iii) The share capital of Guzzi Corp. will eliminate against
additional paid-in capital.
The functional currency of the merged company will be the Italian lira* as
substantially all of the Company's consolidated assets and production are in
Italy and the majority of its consolidated sales will be made from Italy. As
NAAC will be the parent company, its share capital and additional paid-in
capital will be those reported for the consolidated entity. For financial
reporting purposes, the amounts in lire* to be reported for share capital and
additional paid in capital of NAAC, which maintains its accounting records in
U.S. Dollars, will be fixed at the rate of exchange prevailing at the date of
the merger.
The above accounting will be applied retrospectively for the presentation
of balance sheets at dates prior to the date of the merger.
- ------------------
* Until the company elects to or is required to report in Euro (See "Guzzi
Corp.: Management's Discussion and Analysis: Potential effects of proposed
European Common Currency on the Company's Business") or unless its business
circumstances change so as to determine a change in functional currency.
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PROPOSAL 2:
ADOPTION OF AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
A series of amendments to the Certificate of Incorporation of NAAC is
required to be made in order to enable the Merger to be effected. Since all such
changes are required, the Board of Directors of NAAC has proposed to amend and
restate the Certificate of Incorporation for ease of reference, and has proposed
that all such amendments be voted on in a single proposal. Collectively, the
amendments would: (A) change the corporate name of NAAC to "Moto Guzzi
Corporation"; (B) increase the total number of shares which NAAC will have
authority to issue to Twenty Million (20,000,000), of which (i) 15 Million
(15,000,000) shall be Class A Common Stock, par value $.01 per share, (ii) Two
Hundred Fifty Thousand (250,000) shall be Class B Common Stock, par value $.01
per share, and (iii) Four Million Seven Hundred and Fifty Thousand (4,750,000)
shall be preferred stock, par value $.01 per share, of which One Hundred (100)
shall be designated Class A Convertible Preferred Stock and Three Hundred Fifty
Thousand (350,000) shall be designated as Class B Convertible Preferred Stock;
(C) provide for classification of the Board of Directors into three classes
serving staggered terms;(D) require a vote of two-thirds of the outstanding
stock to amend or repeal the by-laws, or by affirmative vote of a majority of
the Board of Directors, subject to certain exceptions; (E) provide that the
affirmative vote of two-thirds of all stock shall be required to fill a vacancy
in the Board of Directors created by an increase in the size thereof or by
termination of a director if not otherwise filled by the remaining members of
the Board of Directors; (F) provide that members of the Board of Directors may
be removed only for cause and only by action of the Board of Directors or upon
the affirmative vote of two-thirds of all stock; and (G) require NAAC to
indemnify its officers and directors, subject to certain exceptions required by
law.
The affirmative vote of a majority in interest of the outstanding NAAC
Common Shares is required to adopt the Amended and Restated Certificate of
Incorporation. If the Merger is not consummated, the Certificate of
Incorporation will not be amended notwithstanding stockholder approval of such
proposal. Approval of the Amended and Restated Certificate of Incorporation by
the NAAC stockholders is a condition to the Merger. Consequently, if the NAAC
stockholders fail to approve this proposal, the Merger will not be consummated,
regardless of whether the Merger was approved, and in such event the current
provisions of the NAAC Certificate of Incorporation and the Delaware General
Corporation Law will continue to govern.
NAME CHANGE
The Board of Directors believes that, following the Merger, the name Moto
Guzzi Corporation will be more representative of the business in which NAAC will
be engaged.
INCREASE IN AUTHORIZED CAPITAL
The Certificate of Incorporation of NAAC currently authorizes an aggregate
of 11,250,000 shares of stock, of which 10,250,000 are shares of common stock,
$.01 par value per share, and 1,000,000 are shares of preferred stock, $.01 par
value per share. Of the common stock, 10,000,000 shares are designated as NAAC
Class A Common Stock, and 250,000 shares are designated as NAAC Class B Common
Stock. Of the preferred stock, 100 shares are designated as Series A Convertible
Preferred Stock. The Board of Directors of NAAC believes that the capital
structure needs to be amended in connection with the Merger to increase the NAAC
Class A Common Stock to 15,000,000 in order to permit the issuance of shares
subject to existing NAAC options and warrants, to permit the issuance of
sufficient shares to the shareholders of Guzzi Corp. and to enable shares of
NAAC Class A Common to be used for possible future acquisitions. The Board of
Directors also believes that it is appropriate to increase the number of shares
of preferred stock to 5,000,000 in order to permit the issuance of sufficient
shares in connection with the Merger, and to enable preferred shares to be used
for possible future acquisitions or financings. There are no present plans to
make any such acquisitions or to secure financings.
As required by the Merger Agreement, the NAAC Class B Preferred Stock will
have a stated value of $15 per share, will entitle the holders thereof to
receive cumulative dividends of 5% of such stated value as and when declared by
the Board of Directors, payable annually on December 31 of each year commencing
in 1999. Such dividends will accrue from January 1, 1999. In the event of any
voluntary or involuntary liquidation, dissolution or winding up of NAAC, the
holders of NAAC Class B Preferred Stock are entitled to receive the greater of
such stated value plus all accrued and unpaid dividends or the amount that would
have been received had such shares
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been converted into NAAC Class A Common Stock prior to any distributions to
holders of such NAAC Class A Common Stock. The holders of NAAC Class B Preferred
Stock are entitled to vote with the holders of the NAAC Common Stock as if the
shares of NAAC Class B Preferred Stock had been converted. The NAAC Class B
Preferred Stock will be convertible at any time into an equal number of shares
of NAAC Class A Common Stock, subject to certain adjustments. No change is being
made under this Proposal to the terms of the NAAC Class A Preferred Stock or the
NAAC Class B Common Stock. Under Proposal No. 5, to be voted upon separately
from this Proposal No. 2, the holders of the NAAC Class B Common Stock, voting
separately as a class, will be asked to amend the Certificate of Incorporation
to eliminate authorization of the NAAC Class B Common Stock.
AMENDMENT OR REPEAL OF BY-LAWS
The proposal includes a provision to require a vote of two-thirds of all
outstanding shares of stock to effect the adoption of new by-laws or the
amendment of any existing by-laws, in addition to the power to amend the by-
laws currently held by the Board NAAC. Absent such a provision, the vote of a
simple majority of the outstanding shares could effect such amendments. By-laws
adopted by vote of the shareholders may not thereafter be amended by the NAAC
Board.
CLASSIFICATION OF THE NAAC BOARD
Under the amendment, the NAAC Board will consist of three classes, each
class as nearly equal as possible, serving staggered terms of three years (after
expiration of an initial term which for two classes will be less than three
years; see "PROPOSAL 3: ELECTION OF DIRECTORS"), with one class being elected
each year. Assuming stockholder approval of this proposal, the nominees for
election to the NAAC Board would be classified as recommended in Proposal 3, and
the stockholders would vote for the nominees for the terms set forth in such
Proposal.
The NAAC Board believes that the staggered three-year term of a classified
board of directors, as opposed to the one-year term that the current Certificate
of Incorporation provides for, will help to assure the continuity and stability
of the NAAC's policies in the future, because a majority of the directors at any
given time will have prior experience as directors of NAAC. It is, additionally,
a condition of the Merger.
In order to establish three staggered classes, certain of the directors
elected at the Annual Meeting would serve initial terms of less than three
years: the term of one class of two directors (Class I) would terminate at the
annual meeting of stockholders to be held during the 1999 fiscal year, the term
of the second class of three directors (Class II) would terminate at the annual
meeting of stockholders to be held during the 2000 fiscal year, and the term of
the third class of three directors (Class III) would terminate at the annual
meeting of stockholders to be held during the 2001 fiscal year.
There is no cumulative voting in the election of directors; therefore, a
plurality of the votes cast at a meeting for directors of a class would elect
all the directors of that class. The classification provision will apply to
every election of directors, whether or not a change in a majority of the board
of directors arguably might be beneficial to NAAC and its stockholders and
whether or not a majority of the NAAC stockholders believes that such a change
might be desirable.
REMOVING DIRECTORS AND FILLINGS VACANCIES
The proposal will permit a member of the NAAC Board to be removed only for
cause, and a vacancy created thereby or by an increase in the size of the NAAC
Board may be filled, only by vote of the remaining members of the Board of
Directors or by affirmative vote of two-thirds of the outstanding stock. The
NAAC Board believes that these provisions facilitate attracting qualified
outside directors to serve on the NAAC Board.
INDEMNIFICATION
The proposal includes a provision to require the Corporation to indemnify
its officers and directors to the extent permitted under applicable Delaware
law. The NAAC Board believes that NAAC will be better able to attract and retain
qualified outside directors by adopting the indemnification provisions of the
Delaware General Corporation Law.
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ANTI-TAKEOVER CONSIDERATIONS
The provisions of the proposed Certificate of Incorporation relating to the
creation of a staggered board of directors, the requirement that two-thirds of
the outstanding stock is needed to amend or repeal the by-laws for the
stockholders to act on such a proposal, the requirement that an affirmative vote
of two-thirds of the outstanding stock is needed to fill a vacancy on the board
of directors not otherwise filled by the board of directors, and the provision
that directors may only be removed for cause and only by action of the board of
directors or upon the affirmative vote of two-thirds of all stock, may have
together and independently anti-takeover effects. These proposals, if adopted,
may discourage attempts by others to acquire control of NAAC without negotiation
with the NAAC Board and are an attempt to insure that transactions are on terms
favorable to all the stockholders of NAAC. For various reasons, however, these
proposals may not always be in the best interests of NAAC or its stockholders.
The Company's Certificate of Incorporation already permits the NAAC Board
to issue preferred stock, with rights and powers as determined by the NAAC Board
in its sole discretion. These issuances may be used as a means to discourage
takeovers. The proposal to amend the Certificate of Incorporation will increase
the authorized NAAC Class A Common Stock and NAAC Preferred Stock which may have
anti-takeover consequences.
The overall effect of the proposed amendments and certain provisions of the
Certificate of Incorporation is to render more difficult a hostile takeover or
tender offer attempt and to make more difficult the removal of management.
None of these proposals is the result of any specific effort to accumulate
securities of NAAC or to obtain control by means of merger, tender offer,
solicitation in opposition to management or otherwise.
Classified Board. If included in the Certificate of Incorporation, the
classification of the board will apply to every future election of directors.
The classification of directors will have the effect of making it more difficult
to change the overall composition of the NAAC Board. At least two stockholders'
meetings will be required for stockholders to effect a change in a majority of
the NAAC Board. Currently, by operation of DGCL and the NAAC Certificate of
Incorporation, as it would otherwise be in effect after the consummation of the
Merger, only one stockholders' meeting would be required to effect a change in
the majority of the NAAC Board. Although there has been no problem in the past
with the continuity or stability of the NAAC Board, the NAAC Board believes that
the longer time required to elect a majority of a classified board of directors
will help assure continuity and stability in the management of the business and
affairs of NAAC in the future, because a majority of the directors at any given
time will have prior experience as directors of NAAC. A classified board of
directors may also provide additional time to review any proposal for a business
combination, corporate restructuring, or other significant transactions and the
alternatives to such transactions. Accordingly, there would be a greater
opportunity to assure that the interest of the NAAC stockholders are protected
to the maximum extent possible.
Under the DGCL, directors may be removed at any time without cause by the
holders of a majority of the shares then entitled to vote at an election of
directors unless the board of directors is classified. This proposal for a
classified board of directors and the proposal to eliminate the right to remove
directors other than for cause, will remove the stockholders right to remove a
director without cause.
Supermajority Provisions. The proposals to provide that at least
two-thirds of the outstanding stock approve amendments to the by-laws by action
of the stockholders, to fill a vacancy on the board of directors not otherwise
filled by the board of directors, and to remove a director for cause, is
designed to prevent a person holding or controlling a majority but less than
two-thirds, of the outstanding stock of NAAC from avoiding the requirements of
these proposed amendments by simply working around them. Under the current
Certificate of Incorporation and the DGCL, these actions could be taken by
simple majority vote of the outstanding stock.
Although NAAC believes that the material provisions of the amendment to the
Certificate of Incorporation are set forth above, reference should be made to
the text of such NAAC Certificate of Amendment for the form of amendment, a copy
of which is attached to this Proxy Statement/Prospectus as Annex IV.
THE NAAC BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE ADOPTION
OF THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION.
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PROPOSAL 3:
ELECTION OF DIRECTORS
At the Annual Meeting, eight directors are to be elected to hold office
commencing upon the consummation of the Merger. If the proposed amendment to the
NAAC Certificate of Incorporation providing for classification of the NAAC Board
into three classes, as described under "Proposal 2: Adoption of Amended and
Restated Certificate of Incorporation," is adopted, two directors (Class I) will
be elected for a term expiring at the annual meeting of stockholders to be held
during the 1999 fiscal year, three directors (Class II) will be elected for a
term expiring at the annual meeting of stockholders to be held during the 2000
fiscal year and three directors (Class III) will be elected for a term expiring
at the annual meeting of stockholders to be held during the 2001 fiscal year.
The Class I nominees are and Frank J. O'Connell. The Class II nominees
are , Emanual Arbib and Peter Hobbins. The Class III nominees are Howard
E. Chase, Mark S. Hauser and David J. Mitchell. Of the nominees, Mr. Mitchell
currently serves as a director of NAAC. Upon the expiration of the initial terms
of the directors in each of the classes, their successors will be elected for
terms of three years. Those nominees for director in each class receiving a
plurality of the votes cast at the Annual Meeting for directors for such class
will be elected.
If the proposed amendment to the NAAC Certificate of Incorporation
providing for classification of the NAAC Board is not adopted, or if the Merger
is not consummated, none of these nominees will serve as directors of NAAC
except Mr. Mitchell who with the two other current directors of NAAC, Messrs.
McMillen and Nasser, will continue as the board of directors of NAAC.
Unless otherwise specified, the proxies solicited by NAAC will be voted
"FOR" the nominees mentioned above. In case any such nominee becomes unavailable
for election to the NAAC Board, which is not anticipated, the persons named in
the enclosed form of proxy will have full discretion to vote or refrain from
voting for any other nominee in accordance with their best judgment.
The nominees, their ages, the year in which each first became a director
and the positions held on the date hereof, if any, are as follows:
<TABLE>
<CAPTION>
DIRECTOR
NOMINEE AGE SINCE CURRENT POSITION
- ------- --- -------- ----------------
<S> <C> <C> <C>
Emanuel Arbib.............................. 31 -- Director Nominee
Howard E. Chase............................ 62 -- Director Nominee
Mark S. Hauser............................. 40 -- Director Nominee
Peter Hobbins.............................. 69 -- Director Nominee
David J. Mitchell.......................... 37 1996 Chief Executive Officer and Director
Frank J. O'Connell......................... 55 -- Director Nominee
.......................... -- -- Director Nominee
.......................... -- -- Director Nominee
</TABLE>
Emanuel Arbib has been the Chief Financial Officer of TRG since March 1998.
He became a director of TRG on May 2, 1997. He is the Managing Director of
Capital Management Ltd, an international money management firm based in Jersey,
Channel Islands. He is also the co-founder and Managing Director of Global
Investment Advisors, a London-based investment company. Since January 1996, he
has served as managing Director of BioSafe Europe, an affiliate of BioSafe
International Inc., a publicly traded company engaged in waste management and
landfill reclamation. Since September, 1996, he has served as a director of
International Capital Growth Ltd., and its European subsidiary Capital Growth
(Europe) Ltd., investment banking firms.
Howard E. Chase has served as Chairman of the Board of TRG since March
1998, as a director thereof since 1971, as Secretary and as outside counsel from
1971 until September, 1995 and as President and Chief Executive Officer thereof
from October, 1995 to March 1998. He has also served as vice-president of TRG
from 1986 to October, 1995; a partner of Morrison Cohen Singer &
Weinstein, LLP, outside counsel to TRG, from April, 1984 until September, 1995;
and a director of Thoratec Laboratories, Inc., a Nasdaq-traded company, since
1987.
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Mark S. Hauser has been the President and Chief Executive Officer of TRG
since March 1998, and a director of TRG since May 2, 1997. He is an attorney and
a founder and Managing Director of Tamarix Capital Corporation, a New York-based
merchant and investment banking firm. Between 1986 and 1990, Mr. Hauser was
Managing Director of Ocean Capital Corporation, an international investment
banking firm. He currently serves as a director of Integrated Technologies of
Israel, Ltd., a joint venture of an investment group and Israel Aircraft
Industries, and of Direct Language Communications, Inc., a multilingual
communications services company.
Dr. Peter Hobbins has been a director of Tarimco, Ltd., a Switzerland-based
portfolio management firm since 1987. Dr. Hobbins also serves as a Member of the
Board Strategy Committee of Danzas, a Swiss based, global forwarding and
logistics corporation. From 1993 to 1995, Dr. Hobbins was a director of Corange
Ltd., a company in the health care industry, and from 1990 to 1995, he was a
director of Forum Corporation, a company in the field of management education.
Dr. Hobbins also spent 10 years with McKinsey & Company in Europe. Dr. Hobbins
is the uncle of Mr. Mitchell.
David J. Mitchell has been Chairman of the Board, Chief Executive Officer
and a director of the Company since October 1996. He also has been President of
Mitchell & Company, Ltd., a New York-based merchant banking company founded by
him in January 1991 and President of AmeriCash L.L.C., a national network of
automated teller machines in non-bank locations and is co-owner of Crunch
Cosmetics L.L.C., a joint venture with Crunch Fitness International, Inc.
Mr. Mitchell has also been a partner of Petherton Capital Corporation, a
privately owned real estate investment company, since March 1992. Mr. Mitchell
is a director of Kellstrom Industries, Inc., a NASDAQ-listed company, and Bogen
Communications International, Inc., an American Stock Exchange Company, as well
as several private companies.
Frank J. O'Connell has been Chairman of the Board of Gibson Greetings, Inc.
since April, 1997 and has been Chief Executive Officer and President since
August, 1996. He was a business consultant from May, 1995 to August, 1996. He
served as the President and Chief Executive Officer of SkyBox International,
Inc. ("SkyBox"), a trading card manufacturer, from July, 1991 to May, 1995.
Prior to joining SkyBox, he was a venture capital consultant from February, 1990
to July, 1991, and served as President of Reebok Brands, North America from
February, 1988 to February, 1990.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
No executive officer of NAAC has received any cash compensation from NAAC
since its inception for services rendered. David J. Mitchell and C. Thomas
McMillen, in consideration for their service as directors and officers of NAAC
were each granted options to purchase an aggregate of 50,000 units, each unit
consisting of one share of NAAC Class A Common Stock and one NAAC Class A
Warrant, at an exercise price of $12.50 per unit, until the third anniversary of
a Business Combination and options to purchase an aggregate of 15,000 shares of
NAAC Class B Common Stock at $10.00 per share, which each has agreed to exercise
at the Effective Time of the Merger. Directors receive reimbursement for any
out-of-pocket expenses incurred in connection with NAAC's business. See "The
Merger Agreement--Certain Relationships and Related Transactions." The Company
does not pay directors' fees. Under the Merger Agreement, non-employee directors
will annually receive options to purchase 12,500 shares of NAAC Class A Common
Stock commencing on the effective date of the Merger and on each January 2 in a
year in which they serve as directors, commencing on January 2, 2000.
NAAC BOARD MEETINGS AND COMMITTEES
During the fiscal year ended August 31, 1998, the NAAC Board met or
otherwise took other action on one occasion. All the members of the NAAC Board
attended the meeting. The NAAC Board has established no committees. The NAAC
Board has no compensation policies required to be disclosed as none of its
executive officers receives any compensation. See "The Merger
Agreement--Interest of Certain Persons After the Merger" for a discussion of
certain compensation to be paid to the officers and directors of the post-Merger
corporation.
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COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires officers, directors and persons
who beneficially own more than 10% of a registered class of equity securities of
NAAC ("10% stockholders") to file reports of ownership and changes in ownership
with the Commission. Officers, directors and 10% stockholders also are required
to furnish NAAC with copies of all Section 16(a) forms they file. Based solely
on its review of the copies of such forms furnished to it, and written
representations that no other reports were required, NAAC believes that during
the fiscal year ended August 31, 1998, each of its officers, directors and 10%
stockholders complied with the Section 16(a) reporting requirements.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
NAAC pays $2,500 per month to Mitchell & Company, Ltd. for office space and
certain office and secretarial services. David J. Mitchell, a director, Chairman
of the Board, and Chief Executive Officer of NAAC, also controls Mitchell &
Company, Ltd. NAAC management believes that this arrangement is on terms at
least as favorable as would be available from an unaffiliated third party. This
agreement will terminate upon consummation of the Merger.
Upon consummation of the Merger directors and executive officers of NAAC
will receive compensation for their services in the form of stock options and
reimbursement of expenses. See "THE MERGER AGREEMENT--Interest of Certain
Persons After the Merger."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ELECTION
OF THE EIGHT NOMINEES LISTED ABOVE AS DIRECTORS
PROPOSAL 4:
APPROVAL OF STOCK OPTION PLANS
On July 23, 1998, the NAAC Board adopted the Stock Option Plans, subject to
tockholder approval and consummation of the Merger. The 1998 Stock Option Plan
provides for the grant of options to purchase up to an aggregate of 1,250,000
shares of NAAC Class A Common Stock to be made to employees, officers, directors
and consultants of NAAC and its subsidiaries after the Merger. An aggregate of
625,000 of such options will be granted at the Effective Time. The 1998 Stock
Plan for Outside Directors provides for the grant of options to purchase up to
an aggregate of 400,000 shares of NAAC Class A Common Stock, to the non-employee
directors of NAAC, each grant to be on the effective date of the Merger and on
each January 2, beginning January 2, 2000, of options to purchase 12,500 shares
of NAAC Class A Common Stock. The Stock Option Plans are intended to assist NAAC
and its subsidiaries after the Merger in attracting, retaining and motivating
employees, officers, directors and consultants of particular merit.
The affirmative vote of a majority in interest of shares of NAAC Common
Stock present in person or represented by proxy at the Annual Meeting is
required to approve the Stock Option Plans. Approval of the Stock Option Plans
by the NAAC stockholders is a condition to the Merger. The following summaries
of each plan are subject in all respects to the full texts thereof attached as
Annex V and VI hereto.
THE NAAC BOARD UNANIMOUSLY RECOMMENDS A
VOTE "FOR" THE APPROVAL OF THE STOCK OPTION PLANS
SUMMARY OF THE 1998 STOCK OPTION PLAN
Administration
The 1998 Stock Option Plan will be administered by the NAAC Board of
Directors or by a committee ("Committee") appointed by the NAAC Board, whose
members will serve at the pleasure of the NAAC Board of Directors. If appointed,
the Committee will have two or more members, each of whom will be a "Non-
Employee Director" within the meaning of the Exchange Act, (i.e., is not an
officer of the issuer, receives no
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compensation other than as a director, has no interest in any transactions or
any engagement in business relationships with the issuer or its subsidiaries
requiring disclosure under the Exchange Act) and is an "outside director" within
the meaning of the Code. If no Committee is so designated, then the 1998 Stock
Option Plan will be administered by the NAAC Board. The NAAC Board or, if
appointed, the Committee, has full authority, subject to the provisions of the
Stock Option Plan, to (i) grant options and determine their exercise price,
(ii) designate options as Incentive Stock Options or Non-Qualified Stock Option,
and (iii) determine the grantees of the options.
The Committee cannot, without approval of the NAAC Board, (i) accelerate
the vesting of any options, (ii) alter the exercise price or (iii) alter any
other term of an option after grant. The interpretation and construction by the
Board or the Committee of any provisions of, and the determination of any
questions arising under, the 1998 Stock Option Plan or any rule or regulation
established by the NAAC Board or the Committee pursuant to the 1998 Stock Option
Plan will be final, conclusive and binding on all persons interested in the 1998
Stock Option Plan.
Shares Subject to the Plan; General Terms
The 1998 Stock Option Plan provides for the issuance of options to purchase
up to 1,250,000 shares of NAAC Class A Common Stock. In order to prevent the
dilution or enlargement of the rights of grantees under the 1998 Stock Option
Plan, the number of shares of NAAC Class A Common Stock authorized by the Stock
Option Plan is subject to adjustment by the NAAC Board in the event of any
increase or decrease in the number of shares of outstanding NAAC Class A Common
Stock resulting from a stock dividend, stock split, reverse stock split, merger,
reorganization, consolidation, recapitalization or other change in corporate
structure affecting the NAAC Class A Common Stock. If any option granted under
the 1998 Stock Option Plan is forfeited or terminated, the shares of NAAC
Class A Common Stock that were available pursuant to such award of options will
again be available for distribution in connection with awards subsequently
granted under the 1998 Stock Option Plan.
Eligibility
Subject to the provisions of the 1998 Stock Option Plan, awards of options
may be granted to key employees, officers, directors, consultants and other
persons who are deemed to have rendered or to be able to render significant
services to NAAC or its subsidiaries and are deemed to have contributed or to
have the potential to contribute to the success of NAAC. Incentive Options (as
hereinafter defined) may be awarded only to persons who, at the time of such
awards, are employees of NAAC or its subsidiaries.
Types of Options
The 1998 Stock Option Plan provides both for "incentive stock options"
("Incentive Options") as defined in Section 422 of the Code, and for options not
qualifying as Incentive Options ("Non-qualified Options"), both of which may be
granted with any other stock-based award under the 1998 Stock Option Plan. The
NAAC Board or the Committee will determine the exercise price for each share of
NAAC Class A Common Stock purchasable under an Incentive or Non-qualified Option
(collectively, "Options"). The exercise price of a Non-qualified Option may be
less than 100% of the fair market value on the last trading day before the date
of the grant. The exercise price of an Incentive Option may not be less than
100% of the fair market value on the last trading day before the date of grant
(or, in the case of an Incentive Option granted to a person possessing at the
time of grant more than 10% of the total combined voting power of all classes of
stock of NAAC, not less than 110% of such fair market value).
The NAAC Board or the Committee determines when Options are to be granted
and when they may be exercised. However, Options may only be granted within a
ten-year period commencing on July 23, 1998 and Incentive Options may only be
exercised within ten years of the date of the grant (or within five years in the
case of an Incentive Option granted to a person who, at the time of the grant,
owns stock possessing more than 10% of the total combined voting power of all
classes of stock of NAAC or of its parent or any subsidiary). Subject to any
limitations or conditions of the 1998 Stock Option Plan and as imposed by the
NAAC Board of Directors or the Committee, Options may be exercised, in whole or
in part, during the term of the Option by giving written notice of exercise to
NAAC specifying the number of shares of NAAC Class A Common Stock to be
purchased.
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Such notice must be accompanied by payment in full of the purchase price, either
in cash or in securities of NAAC, or by a combination thereof. Options granted
under the 1998 Stock Option Plan are exercisable only by the grantee during his
or her lifetime and may not be transferred other than by will or by the laws of
descent and distribution.
Generally, if the grantee received an option as an employee of NAAC or a
subsidiary, no Option, or any portion thereof, granted under the 1998 Stock
Option Plan may be exercised by the grantee unless he or she is employed by NAAC
or a subsidiary at the time of the exercise and has been so employed
continuously from the time the Option was granted and for the 60 days following
termination unless terminated for cause. However, in the event the holder's
employment with NAAC is terminated due to disability, the grantee may still
exercise his or her Option for a period of one year (or such other lesser period
as the Board or the Committee may specify at the time of grant) from the date of
such termination or until the expiration of the stated term of the Option,
whichever period is shorter. Similarly, should a grantee die while in the
employment of NAAC or a subsidiary, his or her legal representative or legatee
under his or her will may exercise the decedent grantee's Option for a period of
two years from death (or such other greater or lesser period as the NAAC Board
or the Committee specifies at the time of grant) or until the expiration of the
stated term of the Option, whichever is shorter.
Withholding Taxes
Upon the exercise of any option granted under the 1998 Stock Option Plan,
the grantee may be required to remit to NAAC an amount sufficient to satisfy all
Federal, state and local withholding tax requirements prior to delivery of any
certificate or certificates for NAAC Class A Common Shares. Subject to certain
stringent limitations under the 1998 Stock Option Plan and at the discretion of
NAAC, the grantee may satisfy these requirements by electing to have NAAC
withhold a portion of the shares to be received upon the exercise of the option
having a value equal to the amount of the withholding tax due under applicable
Federal, state and local laws.
Agreements
Options granted under the 1998 Stock Option Plan will be evidenced by
agreements consistent with the 1998 Stock Option Plan in such form as the Board
or the Committee may prescribe. Neither the 1998 Stock Option Plan nor
agreements thereunder confer any right to continued employment upon any grantee.
Term and Termination of the 1998 Stock Option Plan
The 1998 Stock Option Plan will be effective as of July 23, 1998
("Effective Date"), subject to the approval of the 1998 Stock Option Plan by the
stockholders of NAAC. Unless terminated by the NAAC Board, the 1998 Stock Option
Plan shall continue to remain effective until such time as no further options
may be granted and all Awards granted under the 1998 Stock Option Plan are no
longer outstanding.
Amendments to the 1998 Stock Option Plan
The NAAC Board may at any time, and from time to time, amend, alter,
suspend or discontinue any of the provisions of the 1998 Stock Option Plan, but
no amendment, alteration, suspension or discontinuance shall be made that would
impair the rights of a grantee of any option theretofore granted, without his or
her consent.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion of the Federal income tax consequences of
participation in the 1998 Stock Option Plan is only a summary of the general
rules applicable to the grant and exercise of stock options and does not purport
to give specific details on every variable and does not cover, among other
things, state, local and foreign tax treatment of participation in the 1998
Stock Option Plan. The information is based on present law and regulations,
which are subject to being changed prospectively or retroactively.
76
<PAGE>
Incentive Options
The Participant will recognize no taxable income and NAAC will not qualify
for any deduction upon the grant or exercise of an Incentive Option. Upon a
disposition of the shares underlying the Option after the later of two years
from the date of grant or one year after the issuance of the shares to the
optionee, the optionee will recognize the difference, if any, between the amount
realized and the exercise price as long-term capital gain or long-term capital
loss (as the case may be) if the shares are capital assets. The excess, if any,
of the fair market value of the shares on the date of exercise of an Incentive
Option over the exercise price will be treated as an item of adjustment in
computing the alternative minimum tax for an optionee's taxable year in which
the exercise occurs and may result in an alternative minimum tax liability for
the optionee. If shares of NAAC Class A Common Stock are acquired upon the
exercise of an Incentive Option are disposed of before expiration of the
necessary holding period of two years from the date of the grant of the Option
and one year after the exercise of the Option, (i) the Optionee will recognize
ordinary compensation income in the taxable year of disposition in an amount
equal to the excess, if any, of the lesser of the fair market value of the
shares on the date of exercise or the amount realized on the disposition of the
shares, over the exercise price paid for such shares; and (ii) NAAC will qualify
for a deduction equal to any such amount recognized, subject to the limitation
that the compensation be reasonable. To the extent the aggregate fair market
value of stock with respect to which Options are exercised for the first time by
an individual during any calendar year exceeds $100,000, such Options will not
quality as Incentive Options. The optionee will recognize the excess, if any, of
the amount realized over the fair market value of the shares on the date of
exercise, if the shares are capital assets, as short-term or long-term capital
gain, depending on the length of time that the optionee held the shares, and
NAAC will not qualify for a deduction with respect to such excess. In the case
of a disposition of shares in the same taxable year as the exercise of the
Option, where the amount realized on the disposition is less than the fair
market value of the shares on the date of exercise, there will be no adjustment
since the amount treated as an item of adjustment, for alternative minimum tax
purposes, is limited to the excess of the amount realized on such disposition
over the exercise price, which is the same amount included in regular taxable
income and certain limitations that apply with respect to highly compensated
officers.
Non-qualified Options
With respect to Non-qualified Options (i) upon grant of the Option, the
optionee will recognize no income; (ii) upon exercise of the Option (if the
shares of NAAC Class A Common Stock are not transferable or subject to a
substantial risk of forfeiture), the optionee will recognize ordinary
compensation income in an amount equal to the excess, if any, of the fair market
value of the shares on the date of exercise over the exercise price, and NAAC
will qualify for a deduction in the same amount, subject to the requirement that
the compensation be reasonable; and (iii) NAAC will be required to comply with
applicable Federal income tax withholding requirements with respect to the
amount of ordinary compensation income recognized by the optionee. On a
disposition of the shares, the optionee will recognize gain or loss equal to the
difference between the amount realized and the sum of the exercise price and the
ordinary compensation income recognized. Such gain or loss will be treated as
capital gain or loss if the shares are capital assets and as short-term or
long-term capital gain or loss, depending upon the length of time that the
optionee held the shares.
If the shares acquired upon exercise of a Non-qualified Option are not
transferable and subject to a substantial risk of forfeiture, the optionee will
recognize income at the time when the shares become transferable or the
substantial risk of forfeiture is removed and NAAC will qualify for a
corresponding deduction at such time.
1998 STOCK PLAN FOR OUTSIDE DIRECTORS
The following summary of the principal provisions of the 1998 Stock Option
Plan for Outside Directors ("1998 Directors Plan"). The 1998 Directors Plan
provides for the issuance of options to purchase up to 400,000 shares of NAAC
Class A Common Stock. All options will be non-incentive options. The number of
shares of NAAC Class A Common Stock are subject to adjustment by the NAAC Board
in the event of any increase or decrease resulting from a stock dividend, stock
split, reverse stock split, merger, reorganization, consolidation,
recapitalization or other change in corporate structure affecting the NAAC
Class A Common Stock.
77
<PAGE>
All non-employee directors will annually receive, on the Effective Date of
the Merger and on each January 2 beginning in 2000, options to purchase 12,500
shares under the 1998 Directors Plan.
Each option will be nontransferable except in the event of death and will
expire upon the earlier of ten years following the date of grant or three months
following the date on which the grantee ceases to serve as a director.
All options will be exercisable at the reported closing price of the NAAC
Class A Common Stock on the last trading day before the date of grant.
The authority to grant options under the 1998 Directors Plan will terminate
on the earlier of December 31, 2008 or upon the issuance of the maximum number
of shares of stock reserved for issuance under the plan.
The plan may be amended by the NAAC Board except that provisions thereof
concerning granting of options may not be amended more than once every six
months unless necessary to comply with the Code or the Employee Retirement
Income Security Act. Amendments which require shareholder approval under Rule
16b-3 of the Exchange Act shall be submitted for such approval, but failure to
obtain such approval will not invalidate the amendment.
Federal Income Tax Consequences
Options granted under the 1998 Directors Plan are intended to be
non-qualified stock options for federal income tax purposes. No taxable income
results to an optionee upon the grant of such stock options. Generally, Section
83 of the Code requires that upon exercise of an option, the optionee recognizes
ordinary income in an amount equal to the difference between the option's
exercise price and the fair market value of the shares on the date of exercise.
Such amount, subject to certain limitations, is deductible as an expense by the
Company for federal income tax purposes. The ordinary income resulting from the
exercise of such options is subject to applicable withholding taxes. Generally,
any profit or loss on the subsequent disposition of such shares shall be treated
as a short-term or long-term capital gain or loss, depending upon the holding
period for the shares.
Under the changes made by the Securities and Exchange Commission to the
rules adopted under Section 16(b) of the Exchange Act, the exercise (more than
six months after the date of the issuance of the option) of an "in-the-money"
stock option is no longer deemed to be a purchase under Section 16(b) of the
Exchange Act. Accordingly, as long as a non-qualified stock option has been held
for more than six months from the date of the grant, an optionee subject to
Section 16 is now able to sell the underlying shares immediately following the
exercise of such an option without triggering potential liability under that
Section 16(b). If a non-qualified option is exercised by a person subject to
Section 16 less than six months after the date of grant, the taxable event will
be deferred until the date which is six months after the date of grant unless
the optionee files an election to be taxed on the date of exercise.
PROPOSAL NO. 5:
CLASS B RECAPITALIZATION
Under the current Certificate of Incorporation, the Corporation is
authorized to issue, and has issued, shares of NAAC Class B Common Stock. The
NAAC Class B Common Stock has rights identical to the NAAC Class A Common Stock
with the following exceptions: it is convertible at the option of the holder
from the 90th day anniversary to the one year anniversary of the consummation of
a Business Combination into two shares of NAAC Class A Common Stock and two
Class A NAAC Warrants, and until such conversion, it carries the right to cast
two votes on any matter on which the NAAC Class A Common Stock may vote. Under
the Proposal, Article FOURTH, paragraph (a) of the Amended and Restated
Certificate of Incorporation will be amended to eliminate any reference to the
NAAC Class B Common Stock, paragraph (d) will be deleted, and references to such
paragraph (d) in other paragraphs of Article FOURTH will be eliminated. The full
text of such revised Article FOURTH is annexed to this Proxy
Statement/Prospectus as Annex VII.
Upon the elimination of authorization of the NAAC Class B Common Stock, as
described below, NAAC will issue to such holders two shares of Class A Common
Stock and two NAAC Class A Warrants for each outstanding share of NAAC Class B
Common Stock. The approval of the Merger and of the other proposals before the
holders of NAAC Common Stock is not conditioned upon the adoption of this
Proposal, but the
78
<PAGE>
adoption of this Proposal is conditioned upon the approval of the Merger and
Merger Agreement and consummation of the Merger and the filing of the Amended
and Restated Certificate of Incorporation of NAAC. The NAAC Board believes that
the elimination of the NAAC Class B Common Stock will result in a capital
structure which is more customary in an operating manufacturing company of the
size and nature of NAAC after the Merger, and thus will find greater acceptance
in the public securities markets. The affirmative vote of a majority of the
outstanding shares of NAAC Class B Common Stock is required to approve this
Proposal No. 5.
If the Class B Recapitalization is approved, holders of the NAAC Class B
Common Stock need not take any further action: their certificates will represent
the converted securities for all corporate purposes. If the Class B
Recapitalization is approved, each holder will be sent a transmittal letter with
which he may submit his certificate representing the NAAC Class B Common Stock
for reissuance as the NAAC Class A Common Stock and NAAC Class A Warrants into
which the NAAC Class B Common Stock was converted. It is recommended that the
holders of the NAAC Class B Common Stock submit their certificates for
conversion.
THE NAAC BOARD UNANIMOUSLY RECOMMENDS A VOTE
"FOR" THE APPROVAL OF THE CLASS B RECAPITALIZATION
79
<PAGE>
WARRANT EXCHANGE OFFER
DESCRIPTION OF GUZZI WARRANT
Each Guzzi Warrant entitles the registered holder to purchase one share of
Guzzi Common Stock at an exercise price equal to the lesser of $4.00, as
adjusted, until January 17, 2000. The holders of the Guzzi Warrants do not have
any rights, privileges or liabilities as a shareholder of Guzzi Corp. prior to
exercise of the Guzzi Warrants. Guzzi Corp. is required to keep reserved a
sufficient number of authorized shares of Common Stock to permit the exercise of
the Guzzi Warrants.
If Guzzi Warrants are not submitted to Guzzi Corp. or NAAC for exchange and
cancellation for the offered securities of NAAC pursuant to the Exchange Offer,
then upon consummation of the Merger, the Merger Agreement and the Guzzi Warrant
Agreement provides that each Guzzi Warrant will be exercisable for such number
of shares of NAAC Class A Common Stock, NAAC Class B Preferred Stock and Nominal
Warrants at an exercise price of $4.00, as adjusted, as would been obtained if
such Guzzi Warrant had been exercised and the remaining terms and provisions of
the Guzzi Warrant will continue in full force and effect, with NAAC having
replaced Guzzi Corp. in the warrant agreement. The Guzzi Warrants and the
underlying securities are not now and will not be registered for resales in the
public securities markets, but the holders of the Guzzi Warrants have demand and
"piggyback" registration rights for the underlying securities issuable on
exercise as set forth in the Guzzi Warrant Agreement.
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING
NAAC is offering to exchange each Guzzi Warrant for .1173 share of NAAC
Class A Common Stock, .0195 shares of NAAC Class B Preferred stock and .0000034%
of the Nominal Warrants. The expiration date of the Exchange Offer will be
1998 ("Expiration Date"), unless the Exchange Offer is extended
without further notice in the sole discretion of NAAC, in which case the
Expiration Date will be the latest date and time to which the Exchange Offer is
extended. Tenders of the Guzzi Warrants may not be withdrawn. Upon the terms and
subject to the conditions set forth in this Proxy Statement/Prospectus and in
the Conversion Agreement, NAAC will exchange and cancel the Guzzi Warrant
properly tendered on or prior to the Expiration Date.
NAAC reserves the right to amend or terminate the Exchange Offer and not to
accept for exchange any Guzzi Warrants not theretofore accepted upon the
occurrence of any of the conditions of the Exchange Offer specified below under
"Certain Conditions to the Exchange Offer." To the extent the Exchange Offer is
terminated, the Guzzi Warrants not accepted for exchange and cancellation will
be returned without expense to the tendering holder as promptly as practicable
after the termination of the Exchange Offer. NAAC will give written notice of
any amendment, non-acceptance, or termination to the registered holder of the
Guzzi Warrants as promptly as practicable.
PROCEDURES FOR TENDERING GUZZI WARRANTS
The tender by a holder of any Guzzi Warrants as set forth below and the
acceptance thereof by NAAC will constitute a binding agreement between the
tendering holder and NAAC upon the terms and subject to the conditions set forth
in this Proxy Statement/Prospectus and in the Conversion Agreement. Except as
set forth below, a holder who wishes to tender Guzzi Warrants for exchange and
cancellation pursuant to the Exchange Offer must transmit the Guzzi Warrants,
together with a properly completed and duly executed Conversion Agreement, to
NAAC or to TRG for delivery to NAAC at , on or prior to
the expiration of the Exchange Offer. THE METHOD OF DELIVERY OF THE GUZZI
WARRANTS, LETTERS OF TRANSMITTAL, AND ALL OTHER REQUIRED DOCUMENTS IS AT THE
ELECTION AND RISK OF THE HOLDERS. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED
THAT REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY.
80
<PAGE>
All questions as to the validity, form, eligibility (including time of
receipt), acceptance, and withdrawal of the Guzzi Warrants tendered for exchange
and cancellation will be determined jointly by NAAC and TRG, which determination
shall be final and binding. NAAC and TRG, jointly, reserve the absolute right to
reject any and all tenders of any of the Guzzi Warrants not properly tendered or
to reject any of the Guzzi Warrants, the acceptance of which might, in the
judgment of NAAC or Guzzi Corp. or their respective counsel, be unlawful. NAAC
and TRG also jointly reserve the absolute right to waive any defects or
irregularities in the tender or conditions of the Exchange Offer as to any of
the Guzzi Warrants (including the right to waive the ineligibility of any holder
who seeks to tender the Guzzi Warrants in the Exchange Offer). The
interpretation of the terms and conditions of the Exchange Offer (including the
Letter of Transmittal and the instructions thereto) by NAAC and TRG shall be
final and binding on all parties. Unless waived, any defects or irregularities
in connection with tenders of Guzzi Warrants for exchange must be cured within
such time as NAAC and TRG shall determine. Neither NAAC, TRG nor any other
person shall be under any duty to give notification of defects or irregularities
with respect to tenders of Guzzi Warrants for exchange and cancellation, nor
shall any of them incur any liability for failure to give such notification.
Tenders of the Guzzi Warrants will not be deemed to have been made until such
irregularities have been cured or waived.
If any Conversion Agreement, endorsement, or other document is signed by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation, or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and unless waived by NAAC or TRG,
proper evidence satisfactory to NAAC or TRG of such person's authority to so act
must be submitted.
ACCEPTANCE OF THE GUZZI WARRANTS FOR EXCHANGE AND CANCELLATION; DELIVERY OF
WARRANTS
Upon the consummation of the Merger and upon satisfaction or waiver of all
other conditions to the Exchange Offer, NAAC will, promptly after the Merger, in
exchange for all the Guzzi Warrants properly tendered and cancelled issue the
shares of NAAC Class A Common Stock, NAAC Class B Preferred Stock and Nominal
Warrants described above. See "Description of NAAC Capital Stock."
If any tendered Guzzi Warrants are not accepted for any reason set forth in
the terms and conditions of the Exchange Offer or if less than all of the Guzzi
Warrants are submitted by a holder for exchange and cancellation, such
unaccepted Guzzi Warrants will be returned without expense to the tendering
warrant holder as promptly as practicable after the rejection of tender or the
Expiration Date.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, NAAC shall not
be required to accept for exchange, or to issue the NAAC Class A Common Stock,
NAAC Class B Preferred Stock and Nominal Warrants in exchange for, any Guzzi
Warrants if the Merger Agreement is terminated.
In addition, NAAC will not accept for exchange any Guzzi Warrants tendered,
and no securities of NAAC will be issued in exchange for any such Guzzi Warrants
if, at such time, any stop order shall be threatened or in effect with respect
to the Registration Statement of which this Proxy Statement/Prospectus is a
part.
FEES AND EXPENSES
NAAC will not make any payments to brokers, dealers, or others soliciting
acceptances of the Exchange Offer.
TRANSFER TAXES
NAAC will pay all transfer taxes, if any, applicable to the exchange of
Guzzi Warrants pursuant to the Exchange Offer. If, however, tendered Guzzi
Warrants are registered in the name of any person other than the person signing
the Letter of Transmittal or if a transfer tax is imposed for any reason other
than the exchange of Guzzi Warrants pursuant to the Exchange Offer, the amount
of any such transfer tax (whether imposed on the registered holder or any other
person) will be payable by the tendering holder. If satisfactory evidence of
payment of such tax or exemption therefrom is not submitted, the amount of such
transfer tax will be billed directly to such tendering holder.
81
<PAGE>
INTERCOMPANY DEBT EXCHANGE
Pursuant to the Merger Agreement, if the Merger is consummated, TRG and OAM
will contribute to the capital of Guzzi Corp. the outstanding balances of
intercompany loans to Guzzi Corp. of Lit. 12.919 million, plus interest due
thereon from January 1, 1998. At June 30, 1998, the intercompany debt was
approximately Lit. 13,241 million. In consideration for such contributions, TRG
and OAM will be issued an aggregate of 1,038,000 shares of NAAC Class A Common
Stock, 65,743 shares of NAAC Class B Preferred Stock and Nominal Warrants to
purchase 20.76% of the NAAC Class A Common Stock thereunder. TRG and OAM have
agreed to the terms of this contribution by agreement dated August 18, 1998
contingent on the consummation of the Merger. TRG and OAM will also contribute
any amount of intercompany payables due to them by Guzzi Corp. and subsidiaries
in excess of $800,000. The Merger Agreement provides that the remaining
intercompany debt of up to $800,000 will be paid promptly after the Closing.
SELLING STOCKHOLDER
In connection with the Merger, NAAC entered into an agreement ("Fee
Agreement") with Graubard Mollen & Miller ("GMM"), its legal counsel, to pay a
portion of GMM's fees by the issuance of shares of NAAC Class A Common Stock.
NAAC has registered these shares for resale by GMM on the Registration Statement
of which this Proxy Statement/Prospectus is a part. GMM possesses sole voting
and investment power with respect to the shares of NAAC Class A Common Stock
shown on the table below.
<TABLE>
<CAPTION>
NUMBER OF SHARES AFTER OFFERING
BENEFICIALLY --------------------------------
OWNED PRIOR TO NUMBER OF SHARES NUMBER OF SHARES
NAME OFFERING TO BE SOLD BENEFICIALLY OWNED % OF CLASS
- ---- ---------------- ---------------- ------------------ ----------
<S> <C> <C> <C> <C>
Graubard Mollen & Miller -0- -0-
</TABLE>
The shares of NAAC Class A Common Stock may be offered and sold from time
to time by GMM as market conditions permit in the over-the-counter market, or
otherwise, at prices and terms then prevailing or at prices related to the then
current market price, or in negotiated transactions. The shares of NAAC Class A
Common Stock may be sold by one or more of the following methods, without
limitation: (i) a block trade in which a broker or dealer so engaged will
attempt to sell the shares as agent, but may position and resell a portion of
the block as principal to facilitate the transaction; (ii) purchases by a broker
or dealer as principal and resale by such broker or dealer for its account
pursuant to this Proxy Statement/Prospectus; (iii) ordinary brokerage
transactions and transactions in which the broker solicits purchases; and (iv)
face-to-face transactions between sellers and purchasers without a
broker/dealer. In effecting sales, brokers or dealers engaged by GMM (including
Allen & Company) may arrange for other brokers or dealers to participate. Such
brokers or dealers may receive commissions or discounts from GMM in amounts to
be negotiated. Such brokers and dealers and any other participating brokers or
dealers may be deemed to be "underwriters" within the meaning of the Securities
Act, in connection with such sales. From time to time, GMM may pledge,
hypothecate or grant a security interest in some or all of the securities owned
by them, and the pledgees, secured parties or persons to whom such securities
have been hypothecated shall, upon foreclosure in the event of a default, be
deemed to be a selling stockholder for purposes hereof.
EXPERTS
The consolidated financial statements of Moto Guzzi Corp. as of December
31, 1997 and 1996, have been audited by Arthur Andersen, LLP, independent public
accountants, as indicated in their report with respect thereto, and are included
herein in reliance upon the authority of said firm as experts in giving said
report.
The financial statements of NAAC as of August 31, 1997 and for each of the
periods then ended have been audited by BDO Seidman, LLP, independent certified
public accountants, as indicated in their report with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving such report.
82
<PAGE>
STOCKHOLDER PROPOSALS
Any NAAC stockholder who wishes to submit a proposal for presentation to
the 1998 Annual Meeting of Stockholders must submit the proposal to North
Atlantic Acquisition Corp., 5 East 59th Street, New York, New York 10022,
Attention: President, no later than [ ], for inclusion, if
appropriate, in NAAC's proxy statement and the form of proxy relating to the
1998 Annual Meeting. NAAC reserves the right to exclude any proposal which does
not meet all requirements for inclusion established by the Commission in effect
at that time.
Stockholders are advised that NAAC's management will be permitted to
exercise discretionary voting authority under proxies it solicits and obtains
for the Company's 1999 Annual Meeting of Stockholders with respect to any
proposal presented by a stockholder at such meeting, without any discussion of
the proposal in the Company's proxy statement for such meeting, unless the
Company receives notice of such proposal at its principal office in New York,
New York not later than 1999.
By Order of the Board of Directors,
NORTH ATLANTIC ACQUISITION CORP.
C. THOMAS MCMILLEN
Secretary
83
<PAGE>
NORTH ATLANTIC ACQUISITION CORP.
(FORMERLY ORION ACQUISITION CORP. I)
(A CORPORATION IN THE DEVELOPMENT STAGE)
FINANCIAL STATEMENTS
YEARS ENDED AUGUST 31, 1997 AND 1996
F-1
<PAGE>
NORTH ATLANTIC ACQUISITION CORP.
(FORMERLY ORION ACQUISITION CORP. I)
(A CORPORATION IN THE DEVELOPMENT STAGE)
CONTENTS
<TABLE>
<CAPTION>
PAGE
----------
<S> <C>
Report of independent certified public accountants................................................. F-3
Financial statements:
Balance sheet.................................................................................... F-4
Statements of operations......................................................................... F-5
Statements of stockholders' equity............................................................... F-6
Statements of cash flows......................................................................... F-7
Notes to financial statements.................................................................... F-8 - F-12
</TABLE>
F-2
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders of
North Atlantic Acquisition Corp.
New York, New York
We have audited the accompanying balance sheet of North Atlantic Acquisition
Corp. (formerly Orion Acquisition Corp. I) (a corporation in the development
stage) as of August 31, 1997, and the related statements of operations,
stockholders' equity, and cash flows for the years ended August 31, 1997 and
1996, and the period September 1, 1995 (date of inception) to August 31, 1997.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of North Atlantic Acquisition
Corp. as of August 31, 1997, and the results of its operations and its cash
flows for the years ended August 31, 1997 and 1996, and the period September 1,
1995 (date of inception) to August 31, 1997, in conformity with generally
accepted accounting principles.
BDO SEIDMAN, LLP
New York, New York
November 4, 1997
F-3
<PAGE>
NORTH ATLANTIC ACQUISITION CORP.
(FORMERLY ORION ACQUISITION CORP. I)
(A CORPORATION IN THE DEVELOPMENT STAGE)
BALANCE SHEET
<TABLE>
<CAPTION>
AUGUST 31,
1997
----------
<S> <C>
ASSETS
Cash.................................................................................................. $ 400,535
Cash held in escrow................................................................................... 1,676
Investment in treasury securities held in escrow (Notes 2 and 4)...................................... 7,998,324
----------
$8,400,535
----------
----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accrued expenses.................................................................................... $ 182,431
Notes payable (Note 6).............................................................................. 100,000
----------
Total liabilities................................................................................ 282,431
----------
----------
Commitments (Note 5)
Common stock subject to possible conversion, 160,000 shares at redemption value (Note 2).............. 1,600,000
Stockholders' equity (Notes 1, 2, 3 and 6):
Convertible preferred stock, $.01 par value--shares authorized 1,000,000, outstanding none;
subscribed 94; liquidation value--$9,400......................................................... 1
Subscription receivable............................................................................. (9,400)
Class A common stock, $.01 par value--shares authorized 10,000,000; outstanding 906,000............. 9,060
Class B common stock, $.01 par value--shares authorized 250,000; issued and outstanding 150,000..... 1,500
Additional paid-in capital.......................................................................... 6,586,948
Deficit accumulated during the development stage.................................................... (70,005)
----------
Total stockholders' equity....................................................................... 6,518,104
----------
$8,400,535
----------
----------
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
NORTH ATLANTIC ACQUISITION CORP.
(FORMERLY ORION ACQUISITION CORP. I)
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED AUGUST PERIOD FROM
31, SEPTEMBER 1, 1995
-------------------- (INCEPTION) TO
1997 1996 AUGUST 31, 1997
-------- -------- -----------------
<S> <C> <C> <C>
General and administrative expenses and debt costs..................... $ 38,920 $ 31,085 $ 70,005
-------- -------- ---------
Net loss............................................................... $(38,920) $(31,085) $ (70,005)
-------- -------- ---------
-------- -------- ---------
Net loss per common share.............................................. $ (.33) $ (.29)
-------- --------
-------- --------
Weighted average common shares outstanding............................. 119,014 106,000
-------- --------
-------- --------
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
NORTH ATLANTIC ACQUISITION CORP.
(FORMERLY ORION ACQUISITION CORP. I)
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
DEFICIT
PREFERRED CLASS A CLASS B ACCUMULATED
STOCK COMMON STOCK COMMON STOCK ADDITIONAL DURING THE TOTAL
-------------- SUBSCRIPTION --------------- --------------- PAID-IN DEVELOPMENT STOCKHOLDERS'
SHARES AMOUNT RECEIVABLE SHARES AMOUNT SHARES AMOUNT CAPITAL STAGE EQUITY
------ ------ ------------ ------- ------ ------- ------ ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of founders'
shares............. -- $ -- $ -- 86,000 $ 860 -- $ -- $ 7,740 $ -- $ 8,600
Sale of common
stock............ -- -- -- 20,000 200 -- -- 44,800 -- 45,000
Subscription
receivable....... 94 1 (9,400) -- -- -- -- 9,399 -- --
Net loss........... -- -- -- -- -- -- -- -- (31,085) (31,085)
-- ---- -------- ------- ------ ------- ------ ------------ --------- -----------
Balance, August 31,
1996............... 94 1 (9,400) 106,000 1,060 -- -- 61,939 (31,085) 22,515
Net loss........... -- -- -- -- -- -- -- -- (38,920) (38,920)
Sale of common
stock, net....... -- -- -- 800,000 8,000 150,000 1,500 8,125,009 -- 8,134,509
Reclassification to
redeemable common
stock............ -- -- -- -- -- -- -- (1,600,000) -- (1,600,000)
-- ---- -------- ------- ------ ------- ------ ------------ --------- -----------
Balance, August 31,
1997............... 94 $ 1 $ (9,400) 906,000 $9,060 150,000 $1,500 $ 6,586,948 $ (70,005) $ 6,518,104
-- ---- -------- ------- ------ ------- ------ ------------ --------- -----------
-- ---- -------- ------- ------ ------- ------ ------------ --------- -----------
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
NORTH ATLANTIC ACQUISITION CORP.
(FORMERLY ORION ACQUISITION CORP. I)
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED AUGUST 31, SEPTEMBER 1, 1995
-------------------------- (INCEPTION) TO
1997 1996 AUGUST 31, 1997
----------- ----------- -----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss....................................................... $ (38,920) $ (31,085) $ (70,005)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Amortization of deferred debt costs......................... -- 9,800 9,800
Amortization of discount on notes payable................... 17,088 17,912 35,000
Changes in assets and liabilities--accrued expenses......... 84,332 8,099 92,431
----------- ----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES................. 62,500 4,726 67,226
----------- ----------- -----------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchase of treasury securities in escrow...................... (7,998,324) -- (7,998,324)
Increase in cash held in escrow................................ (1,676) -- (1,676)
----------- ----------- -----------
NET CASH USED IN INVESTING ACTIVITIES..................... (8,000,000) -- (8,000,000)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock, net........................ 8,134,509 53,600 8,188,109
Deferred costs:
Registration................................................ 177,792 (87,792) 90,000
Debt........................................................ -- (9,800) (9,800)
Proceeds from issuance of notes payable........................ -- 65,000 65,000
----------- ----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES................. 8,312,301 21,008 8,333,309
----------- ----------- -----------
NET INCREASE IN CASH............................................. 374,801 25,734 400,535
CASH, BEGINNING OF PERIOD........................................ 25,734 -- --
----------- ----------- -----------
CASH, END OF PERIOD.............................................. $ 400,535 $ 25,734 $ 400,535
----------- ----------- -----------
----------- ----------- -----------
SUPPLEMENTAL DISCLOSURES FOR CASH FLOW INFORMATION:
Cash paid for:
Interest.................................................... $ -- $ -- $ --
Taxes....................................................... -- -- --
</TABLE>
In fiscal 1996, the Company received a note for subscribed preferred stock
amounting to $9,400, which is a noncash financing activity.
In fiscal 1996, the Company has recorded a $90,000 liability relating to a
license agreement (Note 1), which is a noncash financing activity.
See accompanying notes to financial statements.
F-7
<PAGE>
NORTH ATLANTIC ACQUISITION CORP.
(FORMERLY ORION ACQUISITION CORP. I)
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Deferred Debt Costs
Net unamortized costs incurred in connection with the notes payable (Note
5(a)) of $9,800 were amortized over six months (the estimated term of the debt)
using the straight-line method. Amortization expense was $9,800 for the period
from September 1, 1995 (inception) to August 31, 1996.
Income Taxes
The Company follows the Financial Accounting Standards Board ("FASB")
Statement No. 109. This statement requires that deferred income taxes be
recorded following the liability method of accounting and be adjusted
periodically when income tax rates change.
As of August 31, 1997 and 1996, the Company has a net operating loss
carryforward of approximately $70,000 and $31,000, respectively, which results
in a deferred tax asset of approximately $27,000 and $12,000, respectively,
which has been offset by a valuation allowance.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Earnings Per Share
Earnings per share of common stock is computed based on the weighted
average number of common stock and common stock equivalent shares outstanding
during the period. Common stock and warrants issued for consideration below the
proposed public offering price have been included as if they had been
outstanding for all periods presented. Stock equivalents have not been included
since their effect would be antidilutive.
Accounting for Stock-based Compensation
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-based
Compensation". Beginning in 1996, SFAS No. 123 requires expanded disclosures of
stock-based compensation arrangements with employees and encourages, but does
not require, the recognition of employee compensation expense related to stock
compensation based on the fair value of the equity instrument granted. Companies
that do not adopt the fair value recognition provisions of SFAS No. 123 and
continue to follow the existing APB Opinion No. 25 rules to recognize and
measure compensation will be required to disclose the pro forma amounts of net
income and earnings per share that would have been reported had the Company
elected to follow the fair value recognition rules of SFAS No. 123. The Company
has elected to continue to use the intrinsic value-based method of APB Opinion
No. 25, and has adopted the disclosure requirements of SFAS No. 123.
Disclosure of Fair Value of Financial Instruments
The carrying amount of financial instruments including cash, treasury
securities in escrow and accrued expenses approximated fair value as of
August 31, 1997 because of the relatively short maturity of these instruments.
F-8
<PAGE>
NORTH ATLANTIC ACQUISITION CORP.
(FORMERLY ORION ACQUISITION CORP. I)
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Recent Accounting Pronouncements
In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share". SFAS
No. 128 is effective for financial statements issued for periods ending after
December 15, 1997. SFAS No. 128 simplifies the computation of earnings per share
by replacing the presentation of primary earnings per share with a presentation
of basic earnings per share, as defined. The statement requires dual
presentation of basic and diluted earnings per share by entities with complex
capital structures. Basic earnings per share includes no dilution and is
computed by dividing income available to common stockholders by the weighted
average number of shares outstanding for the period. Diluted earnings per share
reflects the potential dilution of securities that could share in the earnings
of an entity similar to fully diluted earnings per share. SFAS No. 128 is not
expected to have a significant impact on the Company's financial statements.
In June 1997, SFAS No. 130, "Reporting Comprehensive Income" and SFAS
No. 131, "Disclosure about Segments of an Enterprise and Related Information,"
were issued. SFAS No. 130 addresses standards for reporting and display of
comprehensive income and its components and SFAS No. 131 requires disclosure of
reportable operating segments. Both statements are effective for the Company's
1998 fiscal year. These pronouncements are not expected to affect the Company's
financial statements.
2. ORGANIZATION AND BUSINESS OPERATIONS
The Company was incorporated in Delaware on August 9, 1995 to acquire an
operating business. Operations did not occur until September; accordingly,
financial statements have been presented commencing on September 1, 1995. At
August 31, 1997, the Company had not yet commenced any formal business
operations and all activity to date relates to the Company's formation and fund
raising.
The Registration Statement for the Company's Initial Public Offering (the
"Offering") became effective August 22, 1997. The Company consummated the
Offering on August 27, 1997 and raised net proceeds of approximately $8,100,000
(see Note 3). The Company's management has broad discretion with respect to the
specific application of the net proceeds of this Offering, although
substantially all of the net proceeds of this Offering are intended to be
generally applied toward consummating a business combination with an operating
business ("Business Combination"). Furthermore, there is no assurance that the
Company will be able to successfully effect a Business Combination. An aggregate
of $8,000,000 of the net proceeds is being held in an escrow account which will
be invested, until released, in short-term United States Government Securities,
including treasury bills and cash and cash equivalents ("Proceeds Escrow
Account"), subject to release at the earlier of (i) consummation of its first
Business Combination or (ii) distribution of the Class A stock (see below).
Therefore, the remaining proceeds from the Offering will be used to pay for
business, legal and accounting, due diligence on prospective acquisitions, costs
relating to the public offering and continuing general and administrative
expenses in addition to other expenses.
The Company, prior to the consummation of any Business Combination, will
submit such transaction to the Company's stockholders for their approval, even
if the nature of the acquisition is such as would not ordinarily require
stockholder approval under applicable state law. All of the Company's prior
stockholders, including all directors and the Company's executive officer, have
agreed to vote their respective shares of Class A stock in accordance with the
vote of the majority of the shares voted by all other stockholders of the
Company ("nonaffiliated public stockholders") with respect to any such Business
Combination. A Business Combination will not be consummated unless approved by a
vote of two-thirds of the shares of common stock owned by nonaffiliated public
stockholders.
At the time the Company seeks stockholder approval of any potential
Business Combination, the Company will offer ("Redemption Offer") each of the
nonaffiliated public Class A stockholders the right, for a specified
F-9
<PAGE>
NORTH ATLANTIC ACQUISITION CORP.
(FORMERLY ORION ACQUISITION CORP. I)
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
2. ORGANIZATION AND BUSINESS OPERATIONS--(CONTINUED)
period of time not less than 20 calendar days, to redeem his shares of Class A
stock. The per share redemption price will be determined by dividing the greater
of (i) the Company's net worth or (ii) the amount of assets of the Company in
the escrow account (including all interest earned thereon) by the number of
shares of Class A stock held by such nonaffiliated public stockholders. In
connection with the Redemption Offer, if nonaffiliated public stockholders
holding less than 20% of the Class A stock elect to redeem their shares, the
Company may, but will not be required to, proceed with such Business Combination
and, if the Company elects to so proceed, will redeem such shares by dividing
(a) the greater of (i) the Company's net worth as reflected in the Company's
financial statements or (ii) the amount of the proceeds of the Company in the
escrow account by (b) the number of shares of Class A stock held by
nonaffiliated public stockholders ("Liquidation Value"). Accordingly, a portion
of the net proceeds from the Offering (20% of the cash and treasury securities
held in escrow) has been classified as common stock subject to possible
redemption in the accompanying balance sheet at the estimated value. In any
case, if nonaffiliated public stockholders holding 20% or more of the Class A
stock elect to redeem their shares, the Company will not proceed with such
potential Business Combination and will not redeem such shares.
All shares of the escrowed stock outstanding immediately prior to the date
of the Offering will be placed in escrow until the earlier of (i) the occurrence
of the first Business Combination, (ii) 18 months from the effective date of the
Offering or (iii) 24 months from the effective date of the Offering if prior to
the expiration of such 18 month period the Company has become a party to a
letter of intent or a definitive agreement to effect a Business Combination, in
which case such period shall be extended six months. During the escrow period,
the holders of escrowed shares of common stock will not be able to sell or
otherwise transfer their respective shares of common stock (with certain
exceptions), but will retain all other rights as stockholders of the Company,
including, without limitation, the right to vote escrowed shares of Class A
stock, subject to their agreement to vote their shares in accordance with a vote
of a majority of the shares voted by nonaffiliated public stockholders with
respect to a Business Combination or liquidation proposal.
If the Company does not effect a Business Combination within 18 months from
the effective date or 24 months from the effective date if the extension
criteria have been satisfied, the Company will submit for stockholder
consideration a proposal to distribute to the then holders of Class A stock
(issued in the Offering or acquired in the open market thereafter) in redemption
of such shares, the amounts in the escrow account. Following such redemption of
Class A stock, each outstanding share of Class B stock will be exchanged for two
shares of Class A stock.
In the event of liquidation, it is likely that the per share value of the
residual assets remaining available for distribution to the holders of common
stock purchased in the Offering (including escrow account assets) will
approximately equal the initial public offering price per unit in the Offering.
3. PUBLIC OFFERING
On August 27, 1997, the Company sold 800,000 units ("Units") in the
Offering and 150,000 shares of Class B exchangeable common stock. Each Unit
consists of one share of the Company's Class A common stock and one Class A
redeemable common stock purchase warrant ("Class A Warrant"). Each Class A
Warrant entitles the holder to purchase from the Company one share of common
stock at an exercise price of $9.00; each Class B Stock entitles the holder to
receive two Units in exchange 90 days after the date of a Business Combination.
Concurrent with the Offering, the Company amended and restated its
certificate of incorporation to increase its authorized common stock to
10,250,000 shares, of which 10,000,000 shares are designated Class A stock and
250,000 shares are designated Class B stock. The Company also increased its
authorized preferred stock to
F-10
<PAGE>
NORTH ATLANTIC ACQUISITION CORP.
(FORMERLY ORION ACQUISITION CORP. I)
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
3. PUBLIC OFFERING--(CONTINUED)
1,000,000 shares. The financial statements have been retroactively adjusted for
this change for all periods presented.
4. TREASURY SECURITIES HELD IN ESCROW
On August 28, 1997, the Company invested the cash held in escrow into three
treasury securities for a total of $7,998,324, with the excess cash of $1,676
remaining in the escrow account. The treasury securities are summarized below:
<TABLE>
<CAPTION>
MATURITY INTEREST MATURITY
COST AMOUNT RATE DATE
---------- ---------- -------- -----------------
<S> <C> <C> <C> <C>
Treasury bill......................................... $3,999,718 $4,106,000 5.12% February 26, 1998
Treasury bill......................................... 1,999,514 2,109,000 5.23 August 20, 1998
---------- ----------
Total treasury bills............................. 5,999,232 6,215,000
Treasury note......................................... 1,999,092 2,018,000 5.00 February 15, 1999
---------- ---------- ----
Total treasury securities held in escrow......... $7,998,324 $8,233,000
---------- ----------
---------- ----------
</TABLE>
At August 31, 1997, the cost of each of the above-listed treasury
securities approximated its market value.
5. COMMITMENTS
The Company has entered into an oral agreement with David J. Mitchell,
Chairman and Chief Executive Officer, to lease office space, as well as certain
office and secretarial services, commencing upon the closing of this Offering.
The Company will pay $2,500 per month to Mr. Mitchell for such services.
6. STOCKHOLDERS' EQUITY
(a) Private Placement
In November 1995, the Company completed a private offering to a limited
group of investors which consisted, in the aggregate, of $100,000 in unsecured
promissory notes bearing interest at 8% per annum. The notes are payable upon
the earlier of May 1998 or the completion of an initial public offering. As of
August 31, 1997, the notes, together with accrued interest, were not repaid. In
addition, the Company also issued to the private placement investors 20,000
shares of common stock for $10,000. The notes were discounted $35,000 for
financial reporting purposes as a result of additional fair value attributed to
the common stock issued to the private placement shareholders. The effective
rate on the notes is approximately 45%.
(b) Preferred Stock
The Company is authorized to issue 1,000,000 shares of "blank check"
preferred stock with such designations, voting and other rights and preferences
as may be determined from time to time by the Board of Directors.
The Company has outstanding 94 shares of Series A preferred stock, owned by
CDIJ Capital Partners, L.P., an indirect affiliate of Bright Licensing Corp.
(Note 1). The purchase price for such shares, $100.00 per share or $9,400 in the
aggregate, is payable to the Company, without interest, upon the earlier of
November 15, 1996 or the closing of the Offering. As of August 31, 1997, the
$9,400 was not received by the Company. The Series A preferred stock is
nonvoting, does not bear a dividend and has a liquidation value of $100.00 per
share. Each share of Series A preferred stock will be convertible into 1,000
shares of common stock for a period one year
F-11
<PAGE>
NORTH ATLANTIC ACQUISITION CORP.
(FORMERLY ORION ACQUISITION CORP. I)
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
6. STOCKHOLDERS' EQUITY--(CONTINUED)
following the consummation of a Business Combination. In the event that a
Business Combination does not occur within 18 months from the effective date or
24 months from the effective date if the extension criteria are satisfied, the
Series A preferred stock will be redeemed by the Company for its liquidation
value.
(c) Options
The Company granted options to purchase 100,000 Units to the founders, in
consideration for their service as directors, and officers of the Company. The
options are exercisable for a period of three years from the date of a Business
Combination at an exercise price of $12.50 per Unit. The options are fully
vested. The shares issuable upon exercise of the options and underlying warrants
may not be sold or otherwise transferred until 120 days after the first Business
Combination.
In October 1996, the Company cancelled the 100,000 options and granted
additional options to purchase 133,333.3 Units to the Company's two new
directors and to a founder. The options are exercisable for a period of three
(3) years from the date of a Business Combination at an exercise price of $12.50
per Unit.
The Company has granted options to purchase 30,000 shares of the Company's
Class B Stock to two directors at an exercise price of $10.00 per share. The
options will expire, if not sooner exercised, upon consummation of a Business
Combination.
(d) Warrants
In connection with the Offering described in Note 3, the Company sold
800,000 Class A Warrants which entitle the holder to purchase one share of
Class A common stock at a price of $9.00 per share. The Class A Warrants are
redeemable, each as a class, in whole and not in part, at a price of $.05 per
warrant upon 30 days' notice at any time provided that the Company's
stockholders have approved a Business Combination and the last sale price of the
common stock, if the common stock is listed for trading on all 10 of the trading
days prior to the day on which the Company gives notice of redemption, has been
$11.00 or higher. The Class A Warrants will become exercisable 90 days following
a Business Combination and will expire on the fifth anniversary of the Offering.
In addition, the Company sold to the underwriters 80,000 Units and 15,000
Class B Warrants for $15.00 (the "Representative's Warrants"). The
Representative's Warrants are exercisable at a price of $11.00 per Unit and
$11.00 per Class B Warrant for a period of four years commencing one year from
the date of the Offering. The Units and Class B Warrants, issuable upon the
exercise of the Representative's Warrants, are the same as the Units and
Class B stock described in Note 3.
F-12
<PAGE>
NORTH ATLANTIC ACQUISITION CORP.
(formerly Orion Acquisition Corp. I)
(a corporation in the development stage)
UNAUDITED FINANCIAL STATEMENTS AS OF
May 31, 1998
F-13
<PAGE>
NORTH ATLANTIC ACQUISITION CORP.
(formerly Orion Acquisition Corp. I)
(a corporation in the development stage)
Contents
Page
----
Financial statements:
Balance sheets as of May 31, 1998 ............................... F-15
Statements of operations for the nine months ended
May 31, 1998 and 1997 and period September 1, 1995
to May 31, 1998 ................................................ F-16
Statements of stockholders' equity for the period
September 1, 1995 to May 31, 1998 .............................. F-17
Statements of cash flows for the nine months ended
May 31, 1998 and period September 1, 1995 to
May 31, 1998 ................................................... F-18
Notes to financial statements ................................... F-19
F-14
<PAGE>
North Atlantic Acquisition Corp.
(formerly Orion Acquisition Corp. I)
(a corporation in the development stage)
Balance Sheets
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
May 31,
1998
-------------------------------------------------------------------------------------------
(Unaudited)
<S> <C>
Assets
Cash $ 135,726
Cash held in escrow 324
Investment in treasury securities held in escrow 8,321,852
-------------------------------------------------------------------------------------------
$ 8,457,902
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Liabilities:
Accrued expenses $ 204,499
Notes payable -
-------------------------------------------------------------------------------------------
Total liabilities 204,499
-------------------------------------------------------------------------------------------
Commitments
Common stock subject to possible conversion, 160,000 shares at
redemption value 1,664,435
-------------------------------------------------------------------------------------------
Stockholders' equity:
Convertible preferred stock, $.01 par value - shares authorized
1,000,000; outstanding none; subscribed 94; liquidation
value - $9,400 1
Subscription receivable (100)
Class A common stock, $.01 par value - shares authorized
10,000,000; outstanding 906,000 9,060
Class B common stock, $.01 par value - shares authorized
250,000; issued and outstanding 150,000 1,500
Additional paid-in capital 6,586,948
Earnings (deficit) accumulated during the development stage
(8,441)
--------------------------------------------------------------------------------------------
Total stockholders' equity 6,588,968
--------------------------------------------------------------------------------------------
$ 8,457,902
--------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
F-15
<PAGE>
North Atlantic Acquisition Corp.
(formerly Orion Acquisition Corp. I)
(a corporation in the development stage)
Statements of Operations
(Unaudited)
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
Period from
September 1,
Nine months ended May 31, 1995 (inception)
1998 1997 to May 31, 1998
----------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income $ 324,004 $ - $324,004
General and administrative
expenses and debt costs 166,005 3,846 236,010
Income taxes 32,000 - 32,000
----------------------------------------------------------------------------------
Net income (loss) $ 125,999 $ (3,846) $ 55,994
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
Net income (loss) per common
share $ .12 $ (.04)
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
Weighted average common shares
outstanding 1,056,600 106,000
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
F-16
<PAGE>
North Atlantic Acquisition Corp.
(formerly Orion Acquisition Corp. I)
(a corporation in the development stage)
Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Period from September 1, 1995 to May 31, 1998
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
Class A Class B
Preferred stock Subscription Common Stock Common Stock
Shares Amount receivable Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of founders'
shares - $ - $ - 86,000 $ 860 - $ -
Sale of common stock - - - 20,000 200 - -
Subscription receivable 94 1 (9,400) - - - -
Net loss - - - - - - -
- -------------------------------------------------------------------------------------------------------------------------------
Balance, August 31, 1996 94 1 (9,400) 106,000 1,060 - -
Net loss - - - - - - -
Sale of common stock, - - - 800,000 8,000 150,000 1,500
net
Reclassification to
redeemable common
stock - - - - - - -
- -------------------------------------------------------------------------------------------------------------------------------
Balance, August 31,
1997 (audited) 94 1 (9,400) 906,000 9,060 150,000 1,500
Subscription paid - - 9,300 - - - -
Net income - - - - - - -
Accretion to redemption
value of common
stock - - - - - - -
- -------------------------------------------------------------------------------------------------------------------------------
Balance, May 31, 1998
(unaudited) 94 $ 1 $ (100) 906,000 $ 9,060 150,000 $ 1,500
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Period from September 1, 1995 to May 31, 1998
- -------------------------------------------------------------------
- -------------------------------------------------------------------
Earnings
(deficit)
accumulated
Additional during the Total
paid-in development stockholders'
capital stage equity
- -------------------------------------------------------------------
<S> <C> <C> <C>
Issuance of founders'
shares $ 7,740 $ - $ 8,600
Sale of common stock 44,800 - 45,000
Subscription receivable 9,399 - -
Net loss - (31,085) (31,085)
- -------------------------------------------------------------------
Balance, August 31, 1996 61,939 (31,085) 22,515
Net loss - (38,920) (38,920)
Sale of common stock, 8,125,009 - 8,134,509
net
Reclassification to
redeemable common
stock (1,600,000) - (1,600,000)
- -------------------------------------------------------------------
Balance, August 31,
1997 (audited) 6,586,948 (70,005) 6,518,104
Subscription paid - - 9,300
Net income - 125,999 125,999
Accretion to redemption
value of common
stock - (64,435) (64,435)
- -------------------------------------------------------------------
Balance, May 31, 1998
(unaudited) $ 6,586,948 $ (8,441) $ 6,588,968
- -------------------------------------------------------------------
- -------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
F-17
<PAGE>
North Atlantic Acquisition Corp.
(formerly Orion Acquisition Corp. I)
(a corporation in the development stage)
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Period from
September 1, 1995
Nine months ended May 31, (inception) to
1998 1997 May 31, 1998
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 125,999 $ (3,846) $ 55,994
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Amortization of deferred debt costs - - 9,800
Amortization of discount on notes payable - 3,846 35,000
Changes in assets and liabilities:
Accrued expenses 22,068 - (33,600)
Interest receivable on investments (271,654) - (123,555)
- ------------------------------------------------------------------------------------------------------------------------------
Net cash used in operating activities (123,587) - (56,361)
- ------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchase of treasury securities in escrow (4,157,874) - (12,156,198)
Sale of treasury securities in escrow 4,106,000 - 4,104,324
Decrease in cash held in escrow 1,352 - 1,352
- ------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (50,522) - (8,050,522)
- ------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from sale of common stock, net - - 8,188,109
Subscription paid 9,300 - 9,300
Deferred costs:
Registration - - 90,000
Debt - - (9,800)
Repayment of notes payable (100,000) - (100,000)
Proceeds from issuance of notes payable - - 65,000
- ------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing
activities (90,700) - 8,242,609
- ------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash (264,809) - 135,726
Cash, beginning of period 400,535 25,734 -
- ------------------------------------------------------------------------------------------------------------------------------
Cash, end of period $ 135,726 $ 25,734 $ 135,726
- ------------------------------------------------------------------------------------------------------------------------------
Supplemental disclosures of cash flow information:
Cash paid for:
Interest $ - $ - $ -
Taxes - - -
</TABLE>
In fiscal 1996, NAAC received a note for subscribed preferred stock
amounting to $9,400, which is a noncash financing activity.
In fiscal 1996, NAAC has recorded a $90,000 liability relating to a
license agreement, which is a noncash financing activity.
See accompanying notes to financial statements.
F-18
<PAGE>
North Atlantic Acquisition Corp.
(formerly Orion Acquisition Corp. I)
(a corporation in the development stage)
Notes to Financial Statements
- ------------------------------------------------------------------------------
1. Basis of The financial information has been prepared in
Presentation accordance with NAAC's customary accounting
practices and has not been audited. In the opinion of
management, the information presents all adjustments
necessary for a fair statement of interim results. All
such adjustments are of a normal and recurring nature.
The foregoing interim results are not necessarily
indicative of the results of operations to be expected
for a full year.
2. Investments NAAC has invested the majority of the proceeds
from the initial public offering in United States
Treasury Bills. These treasury bills, which were
purchased at a discount, are presented at their
accreted cost, which approximates its market value.
F-19
<PAGE>
MOTO GUZZI CORP.
AUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS AS OF
DECEMBER 31, 1997 AND 1996
UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS AS OF
DECEMBER 31, 1995
F-20
<PAGE>
MOTO GUZZI CORP.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----------
<S> <C>
Report of Independent Public Accountants........................................................... F-22
Consolidated Balance Sheets--Assets................................................................ F-23
Consolidated Balance Sheets--Liabilities and Shareholders' Equity.................................. F-23
Consolidated Statements of Operations.............................................................. F-24
Consolidated Statements of Changes in Shareholders' Equity......................................... F-25
Consolidated Statements of Cash Flows.............................................................. F-26
Notes to Consolidated Financial Statements......................................................... F-27 - F-35
</TABLE>
F-21
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
of Moto Guzzi Corp.:
We have audited the accompanying consolidated balance sheets of Moto Guzzi
Corp., a Delaware holding company, and subsidiaries as of December 31, 1997 and
1996, and the related consolidated statements of operations, shareholders'
equity and cash flows for the years then ended, expressed in Italian Lire. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Moto Guzzi Corp. and
subsidiaries as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for the years then ended, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN
Milan, July 16, 1998
F-22
<PAGE>
MOTO GUZZI CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1997 1996
US$'000 LIRE M. LIRE M.
-------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents................................................. $ 3,591 Lit. 6,352 Lit. 2,210
Receivables............................................................... 13,254 23,446 27,017
Trade, less allowance of Lit. 1,903 (1996, Lit. 1,065).................. 7,596 13,437 24,202
Receivables from related parties........................................ 3,162 5,594 217
Other receivables....................................................... 2,496 4,415 2,598
Inventories............................................................... 22,222 39,311 30,741
Raw material, spare parts and work-in-progress.......................... 12,944 22,898 21,275
Finished products....................................................... 9,278 16,413 9,466
Prepaid expenses.......................................................... 68 120 255
-------- ----------- -----------
CURRENT ASSETS............................................................ 39,135 69,229 60,223
-------- ----------- -----------
Property, plant and equipment............................................. 8,109 14,345 12,483
Land.................................................................... 424 750 750
Buildings............................................................... 1,495 2,644 2,554
Machinery and equipment................................................. 19,050 33,699 31,567
-------- ----------- -----------
20,968 37,093 34,871
Less allowances for depreciation........................................ (12,859) (22,748) (22,388)
-------- ----------- -----------
Goodwill, net of amortization of Lit. 104 (1996, Lit. 52)................. 89 158 210
Other assets.............................................................. 544 962 815
-------- ----------- -----------
ASSETS.................................................................... $47,877 Lit. 84,694 Lit. 73,731
-------- ----------- -----------
-------- ----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Advances from banks....................................................... $15,456 Lit. 27,341 Lit. 21,801
Current portion of long-term debt......................................... 945 1,671 1,372
Accounts payable.......................................................... 13,401 23,707 19,592
Amounts due to related parties............................................ 596 1,055 411
Accrued expenses and other payables....................................... 3,340 5,907 6,416
-------- ----------- -----------
CURRENT LIABILITIES....................................................... 33,737 59,681 49,592
-------- ----------- -----------
Long-term debt, less current portion...................................... 2,729 4,828 5,629
Loans from parent company and affiliates.................................. 7,303 12,919 4,659
Termination indemnities................................................... 4,525 8,003 7,154
Preferred stock subject to redemption..................................... 6,574 11,629 5,101
SHAREHOLDERS' (DEFICIT)/EQUITY............................................ (6,991) (12,366) 1,596
Series "A" preferred stock, par value $0.01 per share; Authorized
1,500,000 shares, 1,500,000 (1996, 978,125) shares issued and
outstanding.......................................................... -- -- --
Common stock, par value $0.01 per share; Authorized 20,000,000
shares, 6,000,000 (1996, 6,000,000) shares issued and outstanding.... 51 91 91
Additional paid in capital.............................................. 1,665 2,945 2,945
Accretion expense and related foreign exchange.......................... (2,032) (3,595) --
Cumulative translation adjustment....................................... 127 225 23
Accumulated deficit..................................................... (6,802) (12,032) (1,463)
-------- ----------- -----------
$47,877 Lit. 84,694 Lit. 73,731
-------- ----------- -----------
-------- ----------- -----------
</TABLE>
See Notes to Consolidated Financial Statements
F-23
<PAGE>
MOTO GUZZI CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
DECEMBER 31, 1997 AND 1996, AND 1995 (UNAUDITED)
<TABLE>
<CAPTION>
1997 1997 1996 1995
US$'000 LIRE M. LIRE M. LIRE M.
------------- ------------- ------------- -------------
UNAUDITED
<S> <C> <C> <C> <C>
Net sales................................ $ 45,781 Lit. 80,987 Lit. 77,620 Lit. 64,671
Cost of sales............................ (40,403) (71,473) (65,755) (54,600)
--------- ------------- ------------- -------------
5,378 9,514 11,865 10,071
Selling, general and administrative
expenses............................... (7,815) (13,824) (10,210) (7,486)
Research and development expense ........ (1,767) (3,125) (1,177) (602)
Abandonment of Benelli production line... -- -- -- (1,631)
--------- ------------- ------------- -------------
Other income, net........................ 419 741 1,904 119
--------- ------------- ------------- -------------
(3,785) (6,694) 2,382 471
Interest expense......................... (2,058) (3,640) (4,346) (3,604)
--------- ------------- ------------- -------------
Loss before income taxes................. (5,843) (10,334) (1,964) (3,133)
Income taxes............................. (133) (235) (32) (100)
--------- ------------- ------------- -------------
Net loss................................. $ (5,976) Lit. (10,569) Lit. (1,996) Lit. (3,233)
--------- ------------- ------------- -------------
--------- ------------- ------------- -------------
</TABLE>
See Notes to Consolidated Financial Statements
F-24
<PAGE>
MOTO GUZZI CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY/(DEFICIT)
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
ADDITIONAL CUMULATIVE
PREFERRED COMMON PAID-IN ACCRETION TRANSLATION ACCUMULATED
STOCK STOCK CAPITAL EXPENSE ADJUSTMENT DEFICIT TOTAL
--------- ------ ---------- --------- ---------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AT JANUARY 1, 1996................ Lit.m -- 91 2,731 -- -- -- 2,822
Net loss.......................... -- -- (533) -- -- (1,463) (1,996)
Translation adjustment............ -- -- (18) -- 23 -- 5
Contribution of Moto America...... -- -- 765 -- -- -- 765
----- ------ ------ ------- ---- --------- --------
AT DECEMBER 31, 1996.............. Lit.m -- 91 2,945 -- 23 (1,463) 1,596
Net loss.......................... -- -- -- -- -- (10,569) (10,569)
Translation adjustment............ -- -- -- -- 202 -- 202
Accretion expense................. -- -- -- (3,595) -- -- (3,595)
----- ------ ------ ------- ---- --------- --------
AT DECEMBER 31, 1997.............. Lit.m -- 91 2,945 (3,595) 225 (12,032) (12,366)
----- ------ ------ ------- ---- --------- --------
----- ------ ------ ------- ---- --------- --------
AT DECEMBER 31, 1997.............. $'000 -- 51 1,665 (2,032) 127 (6,802) (6,991)
----- ------ ------ ------- ---- --------- --------
----- ------ ------ ------- ---- --------- --------
</TABLE>
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS'
(DEFICIT)/EQUITY
DECEMBER 31, 1995
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN
STOCK CAPITAL TOTAL
------ ---------- --------
<S> <C> <C> <C> <C>
AT JANUARY 1, 1995......................................... Lit.m 91 (7,271) (7,180)
Contribution of debt....................................... -- 12,632 12,632
Purchase of minorities..................................... -- 603 603
Net loss................................................... -- (3,233) (3,233)
------ -------- --------
AT DECEMBER 31, 1995....................................... Lit.m 91 2,731 2,822
------ -------- --------
------ -------- --------
</TABLE>
In July 1995, an increase of capital of Moto Guzzi S.p.A. was made as required
under Italian corporate law as there was a deficit in equity as calculated
according to Italian accounting principles. The increase was made by
contribution by Trident Rowan Group, Inc. of intercompany debt of Lit.
12,632 million. At the same time, the preemption rights of minority shareholders
to participate in the recapitalization of Moto Guzzi S.p.A. were acquired by
Trident Rowan Group, Inc. for Lit. 603 million, being the fair value of 30,000
shares if its common stock issued to effect the purchase.
See Notes to Consolidated Financial Statements
F-25
<PAGE>
MOTO GUZZI CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997 AND 1996, AND 1995 (UNAUDITED)
<TABLE>
<CAPTION>
1997 1997 1996 1995
US$'000 LIRE M. LIRE M. LIRE M.
------- ---------------- --------------- ---------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net loss.................................................... $(5,976) Lit. (10,569) Lit. (1,996) Lit. (3,233)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization............................. 1,402 2,480 1,807 2,303
Gain on sales of operating assets......................... (276) (489) (552) --
Reserves for termination indemnities...................... 690 1,221 1,132 1,128
Payments of termination indemnities....................... (210) (372) (1,279) (882)
Reserves for inventories and receivables.................. 1,833 3,243 122 2,111
Other operating activities................................ 317 559 (479) (13)
Changes in operating assets and liabilities:
Trade and other receivables............................... 4,638 8,205 (6,916) (3,575)
Related party receivables................................. (3,080) (5,448) 2,724 (1,420)
Inventories............................................... (5,945) (10,516) (3,754) (9,092)
Prepaid expenses.......................................... (37) (65) (65) (63)
Accounts payable and accrued expenses..................... 2,131 3,769 826 6,867
Related party payables.................................... 113 200 (1,199) (453)
------- ---------------- --------------- ---------------
Net cash used in operating activities....................... (4,400) (7,782) (9,629) (6,322)
------- ---------------- --------------- ---------------
Investing activities:
Purchase of subsidiaries, net of cash acquired............ -- -- 555 --
Proceeds on disposal of operating assets.................. 350 619 567 --
Purchases of property, plant and equipment................ (2,197) (3,887) (5,951) (1,801)
------- ---------------- --------------- ---------------
Net cash used in investing activities....................... (1,847) (3,268) (4,829) (1,801)
------- ---------------- --------------- ---------------
Financing activities:
Net increase/(decrease) in advances from banks............ 3,132 5,540 7,214 5,107
Proceeds from share issues................................ 1,658 2,933 5,101 --
Loans from parent company and affiliates.................. 4,409 7,800 1,500 2,580
Proceeds from long-term debt.............................. 120 212 1,248 --
Principal payments of long-term debt...................... (761) (1,347) (1,113) (525)
------- ---------------- --------------- ---------------
Net cash provided by financing activities................... 8,558 15,138 13,950 7,162
------- ---------------- --------------- ---------------
Increase/(decrease) in cash and cash equivalents............ 2,311 4,088 (508) (961)
Effect of exchange rate changes on cash and cash
equivalents............................................... 31 54 (22) --
Cash and cash equivalents, beginning of year................ 1,249 2,210 2,740 3,679
------- ---------------- --------------- ---------------
Cash and cash equivalents, end of year...................... $ 3,591 Lit. 6,352 Lit. 2,210 Lit. 2,718
------- ---------------- --------------- ---------------
------- ---------------- --------------- ---------------
</TABLE>
SUPPLEMENTAL NOTES ON NON-CASH ACTIVITIES
Fixed assets for Lit. 760 million were acquired in 1997 and for Lit.
1,830 million in 1996 by way of finance leases, assuming lease obligations at
inception of Lit. 570 million in 1997 and Lit. 1,573 million in 1996.
TRG issued 30,000 shares of its common stock valued at Lit. 471 million in 1996
to effect the acquisition of Moto America Inc. Cash acquired amounted to Lit.
555 million. See Note 4.
OTHER SUPPLEMENTAL INFORMATION
Interest paid amounted to Lit. 3,268 million, Lit. 4,071 million in 1997 and
1996, respectively.
See Notes to Consolidated Financial Statements
F-26
<PAGE>
MOTO GUZZI CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. BACKGROUND AND ORGANIZATION
Activities
Moto Guzzi Corp., is a Delaware incorporated holding company whose
subsidiaries manufacture and distribute "Moto Guzzi" brand motorcycles, parts
and accessories in Italy, Europe and elsewhere in the world. The Company has a
single manufacturing site at Mandello del Lario, Lecco, Italy.
Corporate background
Moto Guzzi S.p.A., the Italian manufacturer of Moto Guzzi motorcycles, had
been a subsidiary of Trident Rowan Group, Inc. ("TRG") since 1972 and a owned
wholly subsidiary of TRG from July 1995. Effective January 1, 1996, TRG acquired
100% of the outstanding capital of Moto America Inc., the exclusive importer of
Moto Guzzi motorcycles in the United States. On October 9, 1996, TRG formed Moto
Guzzi Corp. as a holding company for its interests in the Moto Guzzi motorcycle
operations and transferred its 100% interests in Moto Guzzi S.p.A. and Moto
America Inc. to Moto Guzzi Corp. in exchange for 6,000,000 shares of common
stock.
Private Offering of Convertible Preferred Securities in 1996/1997
In December 1996 and January 1997, Moto Guzzi Corp. consummated a private
offering of redeemable convertible preferred stock and common stock purchase
warrants which raised an aggregate of approximately $5,218,000 (Lit. 8,034
million at the then prevailing exchange rates), net of expenses.
Moto Guzzi Corp. issued 1,500,000 units, each consisting of one share of
Class A Redeemable Convertible Preferred Stock and one common stock purchase
warrant exercisable for three years for the lesser of $4.00 or the initial
public offering price of the common stock. The preferred stock is convertible at
the option of the holder into an equal number of shares of common stock, subject
to adjustment to protect against events of dilution and is automatically
converted upon consummation of an initial public offering of Moto Guzzi Corp.
common stock which raises gross proceeds of at least $8,000,000. The conversion
rate for the preferred stock in such event will be the lesser of the then
applicable conversion rate or 75% of the per share initial offering price. If
such an initial public offering is not consummated by June 30, 1998, the holders
of a majority of the shares of preferred stock will have the right to select a
majority of the Moto Guzzi Corp. board of directors. The holders of the
preferred stock also have a right to redeem their shares at $8.00 per share if
no public offering is completed on or before January 16, 2002.
The convertible preferred stock was recorded in the consolidated balance
sheet outside shareholders' equity as "preferred stock subject to redemption" in
the amount of Lit. 5,101 million at December 31, 1996 and a further Lit. 2,933
million was recorded in January 1997 as a result of the completion of the
private placement. At December 31, 1997, the Company has recorded Lit. 3,595
million as accretion expense to reflect amortization of the difference between
the net proceeds received and the contingent redemption of such shares in
January 2002 and the effects of changing exchange rates on such repurchase
commitment.
Reporting currency
The primary financial statements are shown in Italian Lire because
substantially all the Company's material operations are based and operate in
Italy. Translation of lire amounts into U.S. Dollar amounts is included solely
for the convenience of the readers of the financial statements and has been
calculated at the rate of Lit. 1,769 to $1.00, the approximate exchange rate at
December 31, 1997. It should not be construed that the assets and liabilities,
expressed in U.S. dollar equivalents, can actually be realized in or
extinguished in U.S. dollars at that or any other rate. All currency amounts in
these financial statements are in Lire unless specifically designated in other
currencies.
F-27
<PAGE>
MOTO GUZZI CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997
2. SIGNIFICANT ACCOUNTING POLICIES
Accounting principles
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles in the United States of America.
Transfer by TRG of operating subsidiaries
The financial statements include the effects of the 1996 acquisition of
Moto America Inc. as such transaction was reflected in the financial statements
of the parent company, TRG. Additionally, the issuance of 6,000,000 shares of
the Company's common stock to TRG in exchange for the outstanding shares of Moto
Guzzi S.p.A. and Moto America Inc. was accounted for at TRG's carrying value of
the consolidated net assets of such companies at the effective date of
October 1, 1996. See Notes 3 and 4.
Principles of consolidation
The consolidated financial statements include the accounts of the Company
and its majority owned subsidiaries. Significant intercompany accounts and
transactions have been eliminated in consolidation.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.
Foreign currency translation
The financial statements of non-Italian entities have been translated from
the applicable functional currency to Italian lire using the year-end exchange
rate for balance sheet items and the average exchange rate for the year for
statement of operation items. The translation differences resulting from the
change in exchange rates from year to year have been reported separately as a
component of shareholders' equity.
Foreign currency transactions
Transactions, receivables and payables denominated in currencies other than
the functional currency are recorded at the exchange rate in effect on the
transaction date. Such receivables and payables are adjusted to current exchange
rates as of the date paid or the balance sheet date, whichever is earlier. Gains
and losses are included in "other income, net" in the statements of operations.
Cash equivalents
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
Revenue recognition
Revenues from sale of products are recorded upon shipment, which is when
title passes.
Research and development
The Company is continuously engaged in company-sponsored programs of
product improvement and development. Research and development costs are expensed
as they are incurred.
Inventories
Inventories are stated at the lower of cost or market with cost being
determined principally by the last- in, first-out (LIFO) method applying average
cost of the year to increases in inventory quantities. If inventories had been
determined by the lower of cost or market value using the first-in, first-out
(FIFO) method, which
F-28
<PAGE>
MOTO GUZZI CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997
2. SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
approximates current cost, inventories would have been greater by approximately
Lit. 3,000 million in 1997 and Lit. 2,000 million in 1996.
Long-lived assets
The Company adopted Financial Accounting Standards Board (FASB) Statement
No. 121, "Accounting for the Impairment of Long-lived Assets and for Long-lived
Assets to be Disposed of" in 1996. This statement requires impairment losses to
be recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be generated
by those assets are less than the assets' carrying amounts and also addresses
the accounting for long-lived assets that are expected to be disposed of. The
effect of the initial adoption of FASB Statement No. 121 in 1996 was not
material. The Company continually reviews the carrying value of long-lived
assets and long-lived assets to be disposed of.
Goodwill
On purchases of businesses, the excess of the purchase price over the fair
value of assets acquired is accounted for as goodwill and is amortized on a
straight-line basis over a period determined by the Company taking into
consideration the nature of the business acquired.
Property, plant and equipment
Property, plant and equipment are recorded at cost. Depreciation is
provided on the straight-line method over the estimated useful lives of the
assets. Buildings are depreciated over 30 years and plant and machinery, tooling
and computer equipment over lives ranging from 3 to 10 years.
Termination indemnities
All employees of the Company's Italian subsidiary are entitled to receive
severance pay in accordance with the terms of applicable national labor law and
contracts. The liability for severance pay is accrued for service to date and is
payable immediately on termination. The liability is calculated in accordance
with the individual employee's length of service, employment category and
compensation and is adjusted annually by a cost of living index provided by the
Italian Government. There is no vesting period or funding requirement associated
with the liability. The liability recorded in the consolidated balance sheets is
the amount that the employee would be entitled to if the employee separates from
the Company immediately.
Income taxes
Income taxes are provided by each entity included in the consolidation in
accordance with local laws. Deferred income taxes have been provided using the
liability method in accordance with FASB Statement No. 109, "Accounting for
Income Taxes."
Statements of cash flows
Advances from banks arise primarily under the Company's short-term lines of
credit with its banks. These short-term obligations are payable on demand. The
cash flows for these items are included in the caption "Net increase in advances
from banks" in the Consolidated Statements of Cash Flows.
3. ACQUISITION OF MOTO GUZZI S.P.A.
TRG (then Rowan Industries Inc. and subsequently De Tomaso Industries Inc.
from 1972 through August 1996) acquired a controlling interest in Moto Guzzi in
December 1972 and subsequently made further investments in 1974 and 1975 before
purchasing the remaining minority interests in 1995.
The original purchase of a controlling interest in Moto Guzzi (then
S.E.I.M.M.) in 1972 was part of a series of related transactions in which TRG
first loaned money to Fratelli Benelli Fabbrica Motocicli e Costruzioni
Meccaniche S.p.A. (Benelli) to enable this company to purchase S.E.I.M.M. and
then TRG subsequently
F-29
<PAGE>
MOTO GUZZI CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997
purchased a controlling interest in Benelli. Benelli was an Italian motorcycle
manufacturer whose operations and facilities were later disposed of, though Moto
Guzzi S.p.A. continued to manufacture motorcycles under the Benelli brand name
until 1995. The initial 1972 acquisition of a controlling interest in Benelli
and Moto Guzzi was accounted for as a purchase. The fair value of the
consolidated net assets of Benelli were in excess of the fair value of the TRG
shares issued to consummate the transaction and the excess was applied to reduce
the fair value of trademarks, goodwill and other intangible assets acquired. In
1974 and 1975, further shares in Benelli were purchased by TRG and the fair
value of the shares issued as consideration was again less than the fair value
of consolidated assets and the excess applied to further reduce intangible
assets.
On purchase of the minority interest in Moto Guzzi in July 1995, which was
consummated by the issue of 30,000 shares of its common stock by TRG to purchase
the rights of the minority shareholders to participate in the recapitalization
of Moto Guzzi S.p.A. then required by local law, the fair value of the shares
issued of Lit. 603 million for such preemption rights was allocated to land and
buildings.
The Financial Statements include the effects of stating the tangible assets
of Moto Guzzi S.p.A., primarily land and buildings, at their fair values at the
date of purchase and the reduction of the values of long-term intangible assets
acquired in respect of the excess of assets acquired over the fair value of the
consideration given, less accumulated depreciation and amortization. All
intangible assets acquired were fully amortized prior to 1996.
4. ACQUISITION OF MOTO AMERICA INC.
Effective January 1, 1996, TRG completed its acquisition of the outstanding
shares of Moto America Inc., the sole distributor of Moto Guzzi motorcycles in
the United States. The acquisition was consummated by the issuance of 30,000
shares of common stock of TRG and the purchase price of Lit. 471 million
reflected the shares issued at their fair value at such date. The acquisition
has been accounted for as a purchase and the excess of the purchase
consideration over the fair value of assets acquired has been accounted for as
goodwill, determined in the amount of Lit. 262 million, which is being amortized
over 5 years. Subsequently, TRG purchased from Moto Guzzi S.p.A. a receivable of
U.S.$ 190,614, equal to Lit. 294 million at the then prevailing exchange rate,
and made an additional investment in Moto America Inc. by way of contribution of
such receivable.
The results of Moto America Inc. are included in the consolidated financial
statements from January 1, 1996. Goodwill amortization amounted to Lit.
52 million in each of 1997 and 1996. The effects of the acquisition are not
material to the operations of the Company.
5. RECEIVABLES FROM RELATED PARTIES
<TABLE>
<CAPTION>
1997 1997 1996
US$'000 LIRE M. LIRE M.
------- ------- -------
<S> <C> <C> <C>
MGI Motorcycle GmbH........................................................ 3,043 5,383 --
Finproservice S.p.A........................................................ 113 201 30
TRG........................................................................ 6 10 187
----- ----- -----
3,162 5,594 217
----- ----- -----
----- ----- -----
</TABLE>
The amount at December 31, 1997 due from MGI Motorcycle GmbH, a 25% owned
entity acquired in 1997, resulted from the purchase of products and services
from the Company. Sales to MGI Motorcycle GmbH, consisting primarily of
motorcycles and parts were Lit. 14,410 million in 1997.
Finproservice S.p.A. is a factoring subsidiary of TRG. The amounts above
relates to residual balances collected by Finproservice from receivables sold to
it by Moto Guzzi S.p.A. Management believe the charges for the factoring
arrangements, which have been discontinued in 1998, are in line with market
prices.
The balance due from TRG relates to a receivable purchased from Moto Guzzi
S.p.A., at book value, in 1996, less amounts offset by advances made by TRG to
meet certain expenses of Moto Guzzi S.p.A. in 1997.
F-30
<PAGE>
MOTO GUZZI CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997
6. ADVANCES FROM BANKS AND CREDIT ARRANGEMENTS
The Company's subsidiary, Moto Guzzi S.p.A., has lines of credit
arrangements with a number of Italian banks and financial institutions. Under
these, the Company, at December 31, 1997, could have borrowed up to
approximately Lit. 46,000 million. The line of credit arrangements do not have
termination dates and are periodically reviewed. The average interest rate on
advances from banks was approximately 8.25% and 12.25% at December 31, 1997 and
1996, respectively.
7. AMOUNTS DUE TO RELATED PARTIES
Current liabilities
<TABLE>
<CAPTION>
1997 1997 1996
US$'000 LIRE M. LIRE M.
------- ------- -------
<S> <C> <C> <C>
TRG......................................................................... 596 1,055 197
T.I.M. S.p.A................................................................ -- -- 37
OAM S.p.A................................................................... -- -- 177
----- ------- -----
596 1,055 411
----- ------- -----
----- ------- -----
</TABLE>
The balance due to TRG is primarily for costs incurred on behalf of Moto
Guzzi Corp. in connection with the private placement of Moto Guzzi Corp.
convertible preferred stock in December 1996 and January 1997 and advances by
TRG during 1997. T.I.M. S.p.A. and OAM S.p.A. are subsidiaries of TRG.
Loans from parent company and affiliates
<TABLE>
<CAPTION>
1997 1997 1996
US$'000 LIRE M. LIRE M.
------- ------- -------
<S> <C> <C> <C>
OAM S.p.A................................................................... 7,303 12,919 4,659
----- ------- -----
----- ------- -----
</TABLE>
The loans carry interest calculated in reference to market rates. Interest
amounted to Lit. 377 million and Lit. 275 million in 1997 and 1996,
respectively. No payments of interest were made in either 1997 or 1996.
8. ACCRUED EXPENSES AND OTHER PAYABLES
<TABLE>
<CAPTION>
1997 1997 1996
US$'000 LIRE M. LIRE M.
------- ------- -------
<S> <C> <C> <C>
Salaries, wages and related items........................................... 2,440 4,316 3,614
Value added and other non income taxes...................................... 204 361 1,692
Other accrued expenses...................................................... 813 1,437 1,180
----- ------- -----
3,457 6,114 6,486
----- ------- -----
----- ------- -----
</TABLE>
9. LONG-TERM DEBT
<TABLE>
<CAPTION>
1997 1997 1996
US$'000 LIRE M. LIRE M.
------- ------- -------
<S> <C> <C> <C>
Notes payable, secured by second mortgage over properties of
Moto Guzzi S.p.A.:
Interest 12.40%, payable in semi-annual installments through 2001......... 1,780 3,149 4,198
Industry Ministry L. 46/82, 1.9875% through 2002 and 7.95% thereafter,
payable in installments commencing from 2002.............................. 496 878 878
Mortgage note secured by property of Moto America Inc., interest 8.25%,
payable monthly through 2011.............................................. 231 409 365
Finance leases.............................................................. 1,027 1,817 1,512
Sundry notes payable........................................................ 139 246 48
----- ------- -------
3,673 6,499 7,001
Less current portion........................................................ (945) (1,671) (1,372)
----- ------- -------
2,728 4,828 5,629
----- ------- -------
----- ------- -------
</TABLE>
F-31
<PAGE>
MOTO GUZZI CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997
9. LONG-TERM DEBT--(CONTINUED)
Maturities of long-term debt as of December 31, 1997:
<TABLE>
<CAPTION>
US$'000 LIRE M
------- -------
<S> <C> <C>
1998........................................................................ 945 1,671
1999........................................................................ 965 1,707
2000........................................................................ 840 1,486
2001........................................................................ 163 289
2002........................................................................ 121 214
Subsequent to 2002.......................................................... 639 1,133
----- -------
3,673 6,499
----- -------
----- -------
</TABLE>
In February 1998, Moto Guzzi S.p.A. obtained a new 10 year loan facility
from Centrobanca and Banca Agricola Mantovana collateralized by a third mortgage
on its properties in Mandello del Lario, Lecco, Italy. The entire amount of the
facility of Lit. 10,000 million was drawn down in April 1998. The loan is
repayable in quarterly installments from May 2000 through February 2008 and
bears interest at 6% through May 2000 and thereafter at the ROLINT rate plus
1.25%.
10. OTHER INCOME
<TABLE>
<CAPTION>
1997 1997 1996 1995
US$'000 LIRE M. LIRE M. LIRE M.
------- ------- ------- ---------
UNAUDITED
<S> <C> <C> <C> <C>
Currency exchange gain........................................ 75 133 139 (442)
Gains on sale of assets....................................... 276 489 552 160
Government grants............................................. -- -- 450 --
Interest income............................................... 163 288 111 133
Other expense/(income)........................................ (95) (171) 652 268
------- ------- ------- -------
419 741 1,904 119
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
11. INCOME TAXES
(Loss)/Income before income taxes consisted of the following:
<TABLE>
<CAPTION>
1997 1997 1996 1995
US$'000 LIRE M. LIRE M. LIRE M.
------- ------- ------- ---------
UNAUDITED
<S> <C> <C> <C> <C>
United States................................................. (145) (255) 204 --
Foreign, principally Italy.................................... (5,698) (10,079) (2,168) (3,133)
------- ------- ------- -------
(5,843) (10,334) (1,964) (3,133)
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
F-32
<PAGE>
MOTO GUZZI CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997
11. INCOME TAXES--(CONTINUED)
The provision/(credit) for income taxes consisted of the following:
<TABLE>
<CAPTION>
1997 1997 1996 1995
US$'000 LIRE M. LIRE M. LIRE M.
------- ------- ------- ---------
UNAUDITED
<S> <C> <C> <C> <C>
Current:
United States............................................... 133 235 92 --
Foreign..................................................... -- -- (60) 100
------- ------- ------- -------
133 235 32 100
------- ------- ------- -------
------- ------- ------- -------
Deferred: .................................................... -- -- -- --
------- ------- ------- -------
------- ------- ------- -------
------- ------- ------- -------
Total......................................................... 133 235 32 100
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Valuation allowances have
been recorded for the deferred tax assets as management believes it more likely
than not that these assets will not be realized. Significant components of the
Company's deferred tax assets are as follows:
<TABLE>
<CAPTION>
1997 1997 1996
US$'000 LIRE M. LIRE M.
------- ------- -------
<S> <C> <C> <C>
Short-term reserves........................................... 1,773 3,136 1,678
Carrying value of fixed assets................................ 996 1,762 1,632
Net operating loss carryforwards.............................. 722 1,277 1,430
Research expenses capitalized for tax purposes................ 1,129 1,997 978
------- ------- -------
4,620 8,172 5,718
Valuation allowance........................................... (4,620) (8,172) (5,718)
------- ------- -------
Net deferred tax assets....................................... -- -- --
------- ------- -------
------- ------- -------
</TABLE>
The effective provision for income taxes varied from the income tax credit
calculated at the statutory U.S. federal income tax rate as follows:
<TABLE>
<CAPTION>
1997 1997 1996 1995
US$'000 LIRE M. LIRE M. LIRE M.
------- ------- ------- ---------
UNAUDITED
<S> <C> <C> <C> <C>
Computed tax credit at U.S. federal rate...................... (2,045) (3,617) (688) (1,097)
Losses and timing differences for which valuation allowance
provided.................................................... 1,969 3,483 556 821
Elimination of intercompany profits........................... 75 132 326 496
Government grant.............................................. -- -- (158) --
Non-deductible expenses and other............................. 120 213 36 (120)
Prior year adjustment......................................... -- -- (60) --
Local taxes................................................... 14 24 20 --
------- ------- ------- -------
133 235 32 100
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
At December 31, 1997 the Company had net operating loss carryforwards for
Italian federal income tax purposes which expire as follows:
<TABLE>
<CAPTION>
1997 1997
US$'000 LIRE M.
------- -------
<S> <C> <C>
2002..................................................................... 1,950 3,450
------- -------
------- -------
</TABLE>
F-33
<PAGE>
MOTO GUZZI CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997
11. INCOME TAXES--(CONTINUED)
As a result of the merger of Centro Ricambi Srl and Moto Guzzi S.p.A. in
1997, approximately Lit. 3,259 million of Italian net operating loss
carryforwards were forfeited.
12. EXPORT SALES AND GEOGRAPHIC INFORMATION
Export sales
The Company's motorcycle business exports its products throughout the
world. Sales of motorcycles by geographic destination were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Italy.............................................................................. 37% 37% 35%
Europe other than Italy............................................................ 46% 43% 49%
United States...................................................................... 13% 7% 6%
Elsewhere.......................................................................... 4% 13% 10%
</TABLE>
Sales to Germany represented approximately 17.8% of motorcycle sales in
1997 (19% and 14% in 1996 and 1996 respectively). No other country represented
over 10% of motorcycle sales.
Transfers of products between geographical areas
Sales of motorcycles and parts from the Italian production facilities of
the Company's motorcycle business to its U.S. exclusive importer, Moto America
Inc., amounted to Lit. 10,631 million in 1997 (1996--Lit. 5,800 million). Prior
to 1996, Moto America Inc. was an unaffiliated company. Sales to the French
exclusive importer, Moto Guzzi France Sarl, constituted in 1997, amounted to
Lit. 6,959 million in 1997. Sales prices are accounted for on a basis comparable
to those for non affiliated customers.
Identifiable assets
At 31 December 1997 and 1996, all material operating assets of the Company
were located in Italy.
13. COMMITMENTS AND CONTINGENCIES
Litigation
The Company and its subsidiaries are involved in litigation in the normal
course of business. Management does not believe, based on the advice of its
legal advisors, that the final settlement of such litigation will have an
adverse effect on the Company's consolidated financial statements as of
December 31, 1997.
Contingent preferred stock redemption obligation.
As more fully described in Note 1, the Company's convertible preferred
stock is redeemable at the holders behest if the Company does not complete an
initial public offering of its common stock by January 16, 2002.
14. CONCENTRATION OF CREDIT RISKS
Concentrations of credit risk with respect to trade accounts receivable are
limited due to the large number of entities in the customer base. Sales to
governmental bodies in Italy are significant as a whole, but no single
government body represents more than 10% of net sales.
The Company maintains cash and cash equivalents, and short and long term
investments with various financial institutions of national standing in Italy
and the United States.
15. FINANCIAL INSTRUMENTS
The Company does not enter into foreign exchange contracts in the normal
course of its operating activities. Moto Guzzi S.p.A. makes all its sales in
Lire except those to Moto America Inc. which are expressed in U.S. Dollars. Moto
Guzzi S.p.A. typically draws down U.S. Dollar advances up to 80% of outstanding
invoices to
F-34
<PAGE>
MOTO GUZZI CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997
15. FINANCIAL INSTRUMENTS--(CONTINUED)
Moto America Inc. on its short-term bank credit lines, see Note 6, thus
effectively hedging 80% of short-term exchange risk through collection.
Fair value of financial instruments
The following methods and assumptions were used by the Company in
estimating its fair value disclosure for financial instruments.
Cash and cash equivalents: the carrying amount of cash and cash
equivalents reported by the Company approximates their fair value.
Short and long term debt: the carrying amount of the Company's borrowings
under its short-term credit arrangements approximates their fair value. The fair
values of the Company's long-term debt are estimated using cash flow analyses,
based on the Company's incremental borrowing rates for similar types of
borrowing arrangements.
16. SUBSEQUENT EVENTS
Agreement to purchase industrial site at Monza, Italy
In April 1998 Moto Guzzi S.p.A. entered into an agreement with Philips
S.p.A. for the purchase by Moto Guzzi of Philips Vision Industries' plant in
Monza, Italy. The agreement, which is subject to the fulfilment of certain
conditions including the assent of certain labor unions, contemplates a payment
on or about August 1998 of approximately Lit. 26,000 million, including
applicable value added taxes. Financing for the acquisition is being actively
sought from Italian financial institutions and elsewhere. While indications are
that funds for the purchase of the plant will be available from Italian
institutions, the Company has not yet received any legally binding commitment.
F-35
<PAGE>
MOTO GUZZI CORP.
UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS AS OF
JUNE 30, 1998
F-36
<PAGE>
MOTO GUZZI CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 1998
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1998 1998 DEC. 31,
US$'000' LIRE M. 1997
UNAUDITED UNAUDITED LIRE M.
----------- ------------ ------------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents.............................................. $ 4,191 Lit. 7,447 Lit. 6,352
Receivables............................................................ 16,589 29,478 23,446
Trade, less allowance of Lit. 1,903.................................. 11,703 20,796 13,437
Receivables from related parties..................................... 2,372 4,215 5,594
Other receivables.................................................... 2,515 4,467 4,415
Inventories............................................................ 25,301 44,959 39,311
Raw material, spare parts and work-in-progress....................... 13,947 24,784 22,898
Finished products.................................................... 11,353 20,175 16,413
Prepaid expenses....................................................... 520 924 120
--------- ------------ ------------
CURRENT ASSETS......................................................... 46,601 82,808 69,229
--------- ------------ ------------
Property, plant and equipment.......................................... 9,908 17,606 14,345
Land................................................................. 422 750 750
Buildings............................................................ 1,488 2,644 2,644
Machinery and equipment.............................................. 21,448 38,144 33,699
--------- ------------ ------------
23,358 41,508 37,093
Less allowances for depreciation..................................... (13,450) (23,902) (22,748)
--------- ------------ ------------
Goodwill, net of amortization of Lit. 130 (1997, Lit. 104)............. 45 132 158
Other assets........................................................... 1,050 1,814 962
--------- ------------ ------------
TOTAL ASSETS........................................................... $ 57,604 Lit.102,360 Lit.84,694
--------- ------------ ------------
--------- ------------ ------------
LIABILITIES AND SHAREHOLDERS' DEFICIT
Advances from banks.................................................... $ 19,018 Lit. 33,795 Lit. 27,341
Current portion of long-term debt...................................... 1,014 1,802 1,671
Accounts payable....................................................... 15,567 27,663 23,707
Amounts due to related parties......................................... 480 853 1,055
Accrued expenses and other payables.................................... 4,191 7,447 5,907
--------- ------------ ------------
CURRENT LIABILITIES.................................................... 40,270 71,566 59,681
--------- ------------ ------------
Long-term debt, less current portion................................... 7,808 13,875 4,828
Loans from parent company and affiliates............................... 7,451 13,241 12,919
Termination indemnities................................................ 4,406 7,827 8,003
Preferred stock subject to redemption.................................. 7,252 12,886 11,629
SHAREHOLDERS' DEFICIT.................................................. (9,583) (17,029) (12,366)
Series "A" preferred stock, par value $0.01 per share; Authorized
1,500,000 shares, 1,500,000 shares issued and outstanding.......... -- -- --
Common stock, par value $0.01 per share; Authorized 20,000,000
shares, 6,000,000 shares issued and outstanding.................... 51 91 91
Additional paid in capital........................................... 1,657 2,945 2,945
Accretion expense and related foreign exchange....................... (2,730) (4,852) (3,595)
Cumulative translation adjustment.................................... 127 225 225
Accumulated deficit.................................................. (8,688) (15,438) (12,032)
--------- ------------ ------------
LIABILITIES AND SHAREHOLDERS' DEFICIT.................................. $ 57,604 Lit.102,360 Lit.84,694
--------- ------------ ------------
--------- ------------ ------------
</TABLE>
Note: The balance sheet as at December 31, 1997 has been derived from the
audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles.
See Notes to Unaudited Condensed Consolidated Financial Statements.
F-37
<PAGE>
MOTO GUZZI CORP. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
3 MONTHS ENDED JUNE 30, 1998 AND 1997
<TABLE>
<CAPTION>
JUNE 30 JUNE 30 JUNE 30
1998 1998 1997
US$'000 LIRE M. LIRE M.
------------- ------------- -------------
<S> <C> <C> <C>
Net sales................................................... $ 12,607 Lit. 22,403 Lit. 23,253
Cost of sales............................................... (10,035) (17,833) (20,052)
--------- ------------- -------------
2,572 4,570 3,201
Selling, general and administrative expenses................ (2,559) (4,548) (4,150)
Research and development expense............................ (761) (1,352) (455)
Other income, net........................................... 137 243 12
--------- ------------- -------------
(611) (1,087) (1,392)
Interest expense............................................ (687) (1,220) (1,019)
--------- ------------- -------------
Loss before income taxes.................................... (1,298) (2,307) (2,411)
Income taxes................................................ (119) (264) (94)
--------- ------------- -------------
Net loss.................................................... $ (1,447) Lit. (2,571) Lit. (2,505)
--------- ------------- -------------
--------- ------------- -------------
</TABLE>
See Notes to Unaudited Condensed Consolidated Financial Statements
F-38
<PAGE>
MOTO GUZZI CORP. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
6 MONTHS ENDED JUNE 30, 1998 AND 1997
<TABLE>
<CAPTION>
JUNE 30,
JUNE 30, 1998 1998 JUNE 30, 1997
US$'000 LIRE M. LIRE M.
------------- ------------- -------------
<S> <C> <C> <C>
Net sales............................................................ $ 27006 Lit. 47989 Lit. 41665
Cost of sales........................................................ (21,809) (38,755) (35,814)
--------- ------------- -------------
5,197 9,234 5,851
Selling, general and administrative expenses......................... (4,424) (7,861) (6,702)
Research and development expense..................................... (1,253) (2,226) (897)
Other income, net.................................................... 75 134 94
--------- ------------- -------------
(405) (719) (1,654)
Interest expense..................................................... (1,241) (2,206) (2,040)
--------- ------------- -------------
Loss before income taxes............................................. (1,646) (2,925) (3,694)
Income taxes......................................................... (271) (481) (173)
--------- ------------- -------------
Net loss............................................................. $ (1,917) Lit. (3,406) Lit. (3,867)
--------- ------------- -------------
--------- ------------- -------------
</TABLE>
See Notes to Unaudited Condensed Consolidated Financial Statements
F-39
<PAGE>
MOTO GUZZI CORP. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
6 MONTHS ENDED JUNE 30, 1998 AND 1997
<TABLE>
<CAPTION>
JUNE 30 JUNE 30 JUNE 30
1998 1998 1997
US$'000 LIRE M. LIRE M.
------- --------------- ---------------
<S> <C> <C> <C>
Net loss................................................................... $(1,917) Lit. (3,406) Lit. (3,867)
Adjustments to reconcile net loss to net cash used in operating
activities:........................................................... (3,387) (6,019) (3,655)
------- --------------- ---------------
Net cash used in operating activities.................................... (5,304) (9,425) (7,522)
------- --------------- ---------------
Investing activities:
Purchases of property, plant and equipment............................... (2,878) (5,115) (1,783)
------- --------------- ---------------
Net cash used in investing activities...................................... (2,878) (5,115) (1,783)
------- --------------- ---------------
Financing activities:
Net increase in advances from banks...................................... 3,632 6,454 7,109
Proceeds from share issues............................................... -- -- 2,933
Loans from parent company and affiliates................................. -- -- 1,000
Proceeds fron long-term debt............................................. 5,627 10,000 --
Principal payments of long-term debt..................................... (464) (825) (596)
------- --------------- ---------------
Net cash provided by financing activities.................................. 8,795 15,629 10,446
Increase in cash and cash equivalents...................................... 613 1,089 1,141
Effect of exchange rate changes on cash and cash equivalents............... 3 6 52
Cash and cash equivalents, beginning of period............................. 3,575 6,352 2,210
------- --------------- ---------------
Cash and cash equivalents, end of period................................... $ 4,191 Lit. 7,447 Lit. 3,403
------- --------------- ---------------
------- --------------- ---------------
</TABLE>
See Notes to Unaudited Condensed Consolidated Financial Statements
F-40
<PAGE>
MOTO GUZZI CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements have
been prepared in accordance with the instructions to Form 10-Q. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted. For a summary of the Company's accounting principles, and
other footnote information, reference is made to the Company's 1997 audited
financial statements. All adjustments necessary for the fair presentation of the
results of operations for the interim periods covered by this report have been
included. All of such adjustments are of a normal and recurring nature. The
results of operations for the three and six months ended June 30, 1998 are not
necessarily indicative of the operating results for the full year.
The primary financial statements are shown in Italian lire because all of
the Company's material operating entities are based and operate in Italy.
Translation of lire amounts into U.S. Dollar amounts is included solely for the
convenience of the readers of the financial statements and has been made at the
rate of Lire 1,777 to U.S. $1, the approximate exchange rate at June 30, 1998.
It should not be construed that the assets and liabilities, expressed in US
dollar equivalents, can actually be realized in or extinguished by U.S. dollars
at that or any other rate.
2. COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board issued Statement No.
130, "Reporting Comprehensive Income" ("SFAS 130"), which is effective for
fiscal years beginning after December 15, 1997. Reclassification of financial
statements for earlier periods is required. In the Company's case, comprehensive
income includes net losses, unrealized gains/losses from translation and
accretion expense (including related foreign currency translation effects) in
respect of shares of preferred stock subject to repurchase.
<TABLE>
<CAPTION>
3 MONTHS ENDED JUNE 30,
-----------------------------
1998 1998 1997
US$'000 LIRE M. LIRE M.
------- ------- -------
<S> <C> <C> <C>
Net loss................................................................... (1,447) (2,571) (2,305)
------- ------- -------
Cumulative translation adjustment.......................................... (19) (33) 17
Accretion expense and related foreign currency translation effects......... (160) (284) (698)
------- ------- -------
Total other comprehensive loss............................................. (179) (317) (681)
------- ------- -------
Comprehensive loss......................................................... (1,626) (2,888) (2,986)
------- ------- -------
------- ------- -------
</TABLE>
<TABLE>
<CAPTION>
6 MONTHS ENDED JUNE 30,
-----------------------------
1998 1998 1997
US$'000 LIRE M. LIRE M.
------- ------- -------
<S> <C> <C> <C>
Net loss................................................................... (1,917) (3,406) (3,867)
------- ------- -------
Cumulative translation adjustment.......................................... -- -- 163
Accretion expense and related foreign currency translation effects......... (707) (1,257) (1,983)
------- ------- -------
Total other comprehensive loss............................................. (707) (1,257) (1,820)
------- ------- -------
Comprehensive loss......................................................... (2,624) (4,663) (5,687)
------- ------- -------
------- ------- -------
</TABLE>
F-41
<PAGE>
MOTO GUZZI CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
JUNE 30, 1998
2. COMPREHENSIVE INCOME--(CONTINUED)
Changes in components of comprehensive loss for the six months ended June
30, 1998 are as follows:
<TABLE>
<CAPTION>
ACCUMULATED
CUMULATIVE OTHER
TRANSLATION ACCRETION COMPREHENSIVE
ADJUSTMENT EXPENSE LOSS
---------- --------- -------------
<S> <C> <C> <C>
Balance, January 1, 1998.................................................. 225 (3,595) (3,370)
Change for period......................................................... -- (1,257) (1,257)
---- ------- -------
Balance, June 30, 1998.................................................... 225 (4,852) (4,627)
---- ------- -------
---- ------- -------
</TABLE>
3. GRANT OF PARENT COMPANY OPTIONS
On March 18, 1998, Trident Rowan Group, Inc. the ultimate parent company of
Moto Guzzi Corp. granted 65,000 options, exercisable at $5.00, to purchase
shares of its common stock to Oscar Cecchinato, a director of the Company and
the managing director of the Company's principal operating subsidiary, Moto
Guzzi S.p.A.
The Company and Trident Rowan Group, Inc. have both elected the
disclosure-only provisions of FASB Statement No. 123, "Accounting for Stock
Based Compensation" and apply, or in the Company's case, will apply, APB Opinion
No. 25 and related interpretations in accounting for their stock option plans.
Based on the fair value of the award at the grant date, compensation cost in
respect of the parent company stock options, above, was not material.
4. AGREEMENT TO PURCHASE NEW PLANT
In April 1998 Moto Guzzi S.p.A. entered into an agreement with Philips
S.p.A. for the purchase by Moto Guzzi of Philips Vision Industries' plant in
Monza, Italy. While the agreement has expired in accordance with its terms, the
parties are continuing in discussions which could lead to a renewal of the
agreement. The agreement, was subject to the fulfilment of certain conditions
including the assent of certain labour unions, contemplates a payment of
approximately Lit. 26,000 million, including applicable value added taxes. Moto
Guzzi continues to seek financing for the possible acquisition from Italian
financial institutions and elsewhere. While negotiations with unions and other
labor representatives may continue during the discusssions with Philips, they
have been suspended during the traditional August closure of Moto Guzzi. There
can be no assurances that such discussions, either with Philips or with the
unions will be successful, or that the purchase of the plant will be
consummated.
5. MERGER AGREEMENT WITH NORTH ATLANTIC ACQUISITION CORP.
On August 18, 1998, Moto Guzzi Corp., and for limited purposes TRG, entered
into a Merger Agreement to merge with North Atlantic Acquisition Corp. (NAAC).
NAAC was organized in August 1995 as a specialized merger and acquisition
allocated risk transaction company with the objective of acquiring an operating
business. NAAC has not engaged in any substantive commercial business and will,
at the effective time of the Merger, have approximately $8 million in cash, net
of Merger expenses, to finance the operations of merged companies, although such
amount could be reduced by approximately $1.7 million pursuant to certain
redemption rights of existing NAAC shareholders. In addition, NAAC has
outstanding warrants and options, certain of which can be redeemed by NAAC for a
nominal sum, subject to achievement of certain share price performance criteria,
which could potentially provide further cash of approximately $10.4 million.
If consummated, Moto Guzzi Corp. will merge with and into NAAC with NAAC
being the surviving corporation. Moto Guzzi Corp. shareholders will receive NAAC
Class A Common Stock, NAAC Class B
F-42
<PAGE>
MOTO GUZZI CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
JUNE 30, 1998
5. MERGER AGREEMENT WITH NORTH ATLANTIC ACQUISITION CORP.--(CONTINUED)
Preferred Stock and Nominal Warrants entitling the holder, depending on future
performance of the merged company, to purchase additional shares of NAAC
Class A Common Stock on payment of a nominal amount. The Merger Agreement
provides that parent company loans, shown in Moto Guzzi Corp.'s balance sheet at
Lit. 13,241 million at June 30, 1998, would be exchanged for NAAC securities and
also entitles holders of outstanding Moto Guzzi Corp. common stock warrants,
exercisable at $4.00 through January 17, 2000, to cancel their warrants or
otherwise exchange them for NAAC equity securities ("the Warrant Exchange"). The
Merger is subject, among other conditions, to approval by NAAC shareholders. If
consummated, the merged company intends to apply for a listing on NASDAQ, though
there can be no assurance that such application would be successful.
If consummated, the shareholders of Moto Guzzi Corp. will own approximately
80.8% of the merged company, including the NAAC Class A Common Stock underlying
the NAAC Class B Preferred Stock and assuming the Warrant Exchange is fully
accepted and that there is no exercise of any outstanding options or warrants of
NAAC. The transaction will be accounted for as a reverse acquisition of NAAC by
Moto Guzzi Corp. As a result of the reverse acquisition, the historical
financial statements of the merged company will be those of Moto Guzzi Corp. and
the primary financial statements will continue to be reported in Italian Lire.
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ANNEX I
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION, dated August 18, 1998,
among NORTH ATLANTIC ACQUISITION CORP., a Delaware corporation, ("North"), MOTO
GUZZI CORP., a Delaware corporation ("Motoguzzi") and, as to those applicable
provisions of ARTICLE II, ARTICLE III, ARTICLE V, ARTICLE VI, ARTICLE VIII,
ARTICLE X, ARTICLE XI AND ARTICLE XIII hereof, TRIDENT ROWAN GROUP, INC., a
Maryland corporation ("TRG") and significant shareholder of Motoguzzi.
WHEREAS, North was formed to serve as a vehicle to effect a merger,
exchange of capital stock, acquisition or other business combination with an
operating business;
WHEREAS, Motoguzzi, through its wholly and partially owned subsidiaries is
in the business of designing, manufacturing and selling motorcycles, spare parts
and similar products;
WHEREAS, subject to the terms and conditions of this Agreement and Plan of
Merger and Reorganization ("Agreement"), the Parties desire to consummate a
merger, as contemplated herein, pursuant to which Motoguzzi will merge with and
into North, with North being the surviving corporation (North, after the
consummation of the Merger, the "Surviving Corporation"); and
WHEREAS, for Federal income tax purposes, the parties intend, by approving
resolutions authorizing this Agreement, that such merger qualify as a
reorganization under the provisions of Section 368(a)(1)(A) of the United States
Internal Revenue Code of 1986, as amended (the "Code").
IT IS AGREED:
ARTICLE I
THE MERGER
SECTION 1.01 Definitions. Certain capitalized terms used in this Agreement
shall have the meanings specified in ARTICLE XII.
SECTION 1.02 The Merger. Upon the terms and subject to the conditions
hereof and in accordance with the relevant provisions of the General Corporation
Law of the State of Delaware (the "DGCL"), at the Effective Time (as defined
herein) North and Motoguzzi shall consummate a merger ("Merger") of Motoguzzi
with and into North. Following the Merger, (i) North shall continue as the
surviving corporation and shall continue its existence under the laws of the
State of Delaware and (ii) the separate corporate existence of Motoguzzi shall
cease.
SECTION 1.03 Effective Time. On the Closing Date, North and Motoguzzi
shall file with the Secretary of State of the State of Delaware in accordance
with the DGCL an executed copy of the Certificate of Merger in the form of
Exhibit A hereto (the "Certificate of Merger"). The Merger shall become
effective at such time as the Certificate of Merger is filed with the Secretary
of State of the State of Delaware (the "Effective Time").
SECTION 1.04 Effects of the Merger. The Merger shall have the effects set
forth in Section 259 of the DGCL.
SECTION 1.05 Changes to Certificate of Incorporation and By-Laws of the
Surviving Corporation. The Certificate of Merger will also amend the
Certificate of Incorporation of the Surviving Corporation to effect a change in
the name of North from "North Atlantic Acquisition Corp." to "Moto Guzzi
Corporation", to increase the authorized capital stock of the Surviving
Corporation, to authorize the issuance of one or more classes of preferred stock
and to provide for a board of directors with staggered terms of three years, in
the form attached hereto as Exhibit A. The By-Laws of Moto Guzzi Corp. shall be
the By-Laws of the Surviving Corporation. The Certificate of Incorporation as so
modified and such By-Laws shall be the Certificate of Incorporation and By-Laws
of the Surviving Corporation.
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SECTION 1.06 Directors and Officers of the Surviving Corporation After the
Effective Time. At the Effective Time, the Board of Directors of the Surviving
Corporation shall consist of eight persons, of which two will be nominated by
the management of North, five will be nominated by Motoguzzi and one will be a
nominee mutually acceptable to both Motoguzzi and North, each to serve until his
successor is elected and qualified. Such persons, and the classes in which they
shall serve, as well as certain compensation arrangements and certain options to
purchase shares of Class A Common Stock to be granted to certain directors and
executive officers of the Surviving Corporation (the "Executive Options") are
listed in Schedule 1.06. The officers of North at the Effective Time shall
consist of the persons listed in Schedule 1.06, each to serve until his or her
successor is elected. Each of North and Motoguzzi may, at any time prior to the
Effective Time, change their nominees.
SECTION 1.07 The Closing. Subject to the terms and conditions of this
Agreement, the consummation of the Merger and the other transactions
contemplated by this Agreement shall take place at a closing (the "Closing") to
be held at 10:00 a.m., local time, on the third Business Day after the date on
which the last of the conditions to Closing set forth in Article IX hereof is
fulfilled or waived by the appropriate Party, as the case may be, at the offices
of Graubard Mollen & Miller, 600 Third Avenue, New York, New York 10016, or at
such other time, date or place as the Parties may agree upon in writing. The
date on which the Closing occurs is referred to herein as the "Closing Date."
SECTION 1.08 Tax Free Reorganization. The parties intend to adopt this
Agreement as a tax-free plan of reorganization and to consummate the Merger in
accordance with the provisions of Section 368(a)(1)(A) of the Code, and shall
not take a position on any tax return inconsistent therewith. In addition, North
represents now, and as of the Closing, that it presently intends to continue
Motoguzzi's historic business or use a significant portion of Motoguzzi's
business assets in a business, in each case within the meaning of Treasury
Regulation Section 1.368-1(d).
ARTICLE II
CONVERSION OF SHARES AND RELATED MATTERS
SECTION 2.01 Outstanding Stock of North. Upon consummation of the Merger,
the outstanding capital stock of North shall continue to be the issued and
outstanding capital stock of the Surviving Corporation.
SECTION 2.02 Conversion of Outstanding Stock of Motoguzzi.
(a) Except as provided in Section 2.03, upon consummation of the Merger,
(i) the shares of common stock, $.01 par value, ("Old Motoguzzi Common Stock")
of Motoguzzi outstanding on the date of this Agreement and immediately prior to
the Effective Time and the shares of preferred stock, $.01 par value, ("Old
Motoguzzi Preferred Stock") of Motoguzzi outstanding on the date of this
Agreement and immediately prior to the Effective Time, shall, by virtue of the
Merger and without any action on the part of the holder thereof, and subject to
reduction in accordance with Section 2.03 below and increase in accordance with
Section 2.02(c) below, be converted into and exchanged for (A) 3,702,450 shares
of the Class A Common Stock, $.01 par value ("Class A Common Stock") of North,
subject to adjustment as herein provided, (B) 234,489 shares of Class B
Convertible Preferred Stock having such rights and preferences as are described
in the amended Certificate of Incorporation of the Surviving Corporation ("Class
B Preferred Stock"), and (C) warrants in the form attached as Exhibit B hereto
(the "Nominal Warrants") to purchase such number of shares of Class A Common
Stock as is equal to 74.05% of the number of shares of Class A Common Stock
which may be purchased under the "Maximum Nominal Warrants" (as defined below),
(ii) in consideration of the contribution to the capital of Motoguzzi of certain
intercompany indebtedness described in Section 2.06(b) there shall be issued to
the holders of such indebtedness 1,038,040 shares of Class A Common Stock,
65,743 shares of Class B Preferred Stock and Nominal Warrants to purchase 20.76%
of the number of shares of Class A Common Stock which may be purchased under the
Maximum Nominal Warrants, and (iii) if all outstanding Warrants to purchase an
aggregate of 1,500,000 shares of Old Motoguzzi Common Stock at $4.00 per share
(the "Old Motoguzzi Warrants") are surrendered (as provided in Section 2.06(a))
there shall be issued to such surrendering warrant holders 259,510 shares of
Class A Common Stock, 16,436 shares of Class B Preferred Stock and Nominal
Warrants to purchase 5.19% of the number of shares of Class A Common Stock which
may be purchased under the Maximum Nominal Warrants. The Class A Common Stock,
the Class B Preferred Stock and the Nominal Warrants are together referred to
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herein as the "Merger Consideration". The number of shares of Class A Common
Stock, Class B Preferred Stock and the number of Nominal Warrants payable as the
Merger Consideration shall be rounded up or down to the nearest whole number of
shares or warrants. If the holders of less than all Old Motoguzzi Warrants
surrender same, then the Merger Consideration described in the preceding
clause (iii) shall be reduced by multiplying the Merger Consideration in clause
(iii) by the percentage of Old Motoguzzi Warrants so surrendered and each Old
Motoguzzi Warrant not so surrendered shall, after the Effective Time, have such
continuing rights as are provided by the terms thereof. The term "Maximum
Nominal Warrants" shall mean Nominal Warrants to purchase such number of shares
of Class A Common Stock as would be acquired hereunder if all Old Motoguzzi
Warrants are surrendered as provided in Section 2.06(a).
(b) Except as otherwise provided in this Agreement and except for shares
with respect to which the holder thereof votes against the Merger ("Dissenter")
and ultimately receives payment thereon pursuant to Section 262 of the DGCL
("Dissenter Securities"), each share of Old Motoguzzi Common Stock outstanding
on the date hereof and immediately prior to the Effective Time and each share of
Old Motoguzzi Preferred Stock outstanding on the date hereof and immediately
prior to the Effective Time will be converted into .4937 shares of Class A
Common Stock, .0313 shares of Class B Preferred Stock and Nominal Warrants for
such number of shares of Class A Common Stock as equals the number of shares of
Class A Common Stock which may be purchased under 74.05% of the Maximum Nominal
Warrants multiplied by a fraction, the numerator of which is 1 and the
denominator of which is 7,500,000.
(c) If Available Cash (as defined in Section 4.05 below) is less than
$8,150,000 at the Effective Time, the number of shares of Class B Preferred
Stock issued as part of the Merger Consideration shall be increased by one share
for each $15 of such shortfall, allocable pro rata as provided in
Section 2.02(a).
SECTION 2.03 Dissenters.
(a) The Merger Consideration will be reduced, on a pro rata basis, as a
result of any Dissenter seeking the appraisal rights pursuant to Section 262 of
the DGCL, with respect to his shares of Old Motoguzzi Common Stock or Old
Motoguzzi Preferred Stock.
(b) If after the Effective Time a Dissenter loses the right to receive
payment pursuant to Section 262 of the DGCL, the Dissenter Securities held by
the Dissenter will be treated as if they had been converted as of the Effective
Time into the Merger Consideration.
(c) Motoguzzi will promptly provide North with copies of any written demand
for payment to be received by a Dissenter, and North will have the right to
participate in all negotiations and proceedings with respect to any demand by a
Dissenter. Motoguzzi will not, except with the prior written consent of North or
as may be required by law, make any payment prior to the Effective Time with
respect to, or settle or offer to settle, any demand of a Dissenter. All
Dissenter Securities acquired by Motoguzzi or by the Surviving Corporation will
be canceled after payment therefor has been made in accordance with the DGCL.
SECTION 2.04 Surrender and Payment.
(a) Prior to the Effective Time, North will appoint American Stock Transfer
& Trust Company, New York, New York, as its agent ("Exchange Agent") for the
purpose of exchanging certificates representing the Old Motoguzzi Common Stock,
Old Motoguzzi Preferred Stock and Old Motoguzzi Warrants ("Motoguzzi
Securities") for certificates of Class A Common Stock, Class B Preferred Stock
and Nominal Warrants representing the appropriate portion of the Merger
Consideration. Promptly after the Effective Time, North will cause the Exchange
Agent to send, to each holder of Motoguzzi Securities being exchanged a letter
of transmittal for use in the exchange. North will make available to the
Exchange Agent, as needed, stock certificates and Nominal Warrant certificates
representing the Merger Consideration to be issued in respect of the Motoguzzi
Securities.
(b) Except as provided in Section 10.02, for each Motoguzzi Security being
exchanged, upon the surrender of the certificate or certificates representing
them together with a properly completed letter of transmittal, the holder will
be entitled to receive certificates for the Class A Common Stock, Class B
Preferred Stock and Nominal Warrants representing that portion of the Merger
Consideration issuable in respect of the Motoguzzi
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Securities. Until so surrendered, each such certificate will, after the
Effective Time, represent for all purposes, only the right to receive a
proportionate amount of the Merger Consideration.
(c) After the Effective Time, there will be no further registration of
transfers of Motoguzzi Securities held prior to the Effective Time, except as
may be permitted by Section 262 of the DGCL. After the Effective Time, all
certificates formerly representing Motoguzzi Securities which are presented to
North or the Exchange Agent will be canceled and exchanged for the consideration
provided for in this Article II.
SECTION 2.05 Adjustments. If, notwithstanding Section 7.01 hereof, at any
time during the period between the date of this Agreement and the Effective
Time, the outstanding shares of the capital stock of North is changed into a
different number of shares or a different class by reason of any stock dividend,
subdivision, reclassification, recapitalization, split, combination or exchange
of shares, the Merger Consideration will be appropriately adjusted to reflect
such stock dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of shares.
SECTION 2.06 Surrender of Old Motoguzzi Warrants and Contribution of
Intercompany Indebtedness.
(a) Each holder of an Old Motoguzzi Warrant who wishes to surrender such
warrant (a "Surrendered Warrant") shall do so prior to the Closing Date by
delivering same to TRG together with a Warrant Surrender Agreement and such
other documents as TRG and North shall reasonably require.
(b) TRG covenants and agrees that Lit 12,719 million principal amount of
indebtedness, plus interest thereon, owed by Motoguzzi to TRG and/or to O.A.M.
S.p.A., a subsidiary of TRG ("OAM"), shall be contributed to the capital of
Motoguzzi, simultaneously with the consummation of the Merger. After such
capital contribution, the amount of indebtedness owed by Motoguzzi and its
subsidiaries to TRG and its subsidiaries other than Motoguzzi and the Motoguzzi
Subsidiaries at the Effective Time, including all interest, will not be greater
than $800,000, and if such indebtedness exceeds such amount, any excess
automatically and without any action on the part of TRG, OAM or TRG's
subsidiaries shall be contributed to the capital of Motoguzzi at the Effective
Time with no adjustment in the Merger Consideration set forth in
Section 2.02(a)(ii) and the Surviving Corporation will be under no obligation
whatsoever to pay same. TRG shall cause OAM to evidence its agreement to such
capital contribution by executing the form of acknowledgment annexed hereto as
Exhibit C.
ARTICLE III
REPRESENTATIONS
AND WARRANTIES OF MOTOGUZZI AND TRG
Motoguzzi represents and warrants to North as follows:
SECTION 3.01 Organization.
(a) Motoguzzi. Motoguzzi is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. Except as
described on any of the Motoguzzi Disclosure Schedules attached hereto,
Motoguzzi does not own, directly or indirectly, any capital stock or other
securities of any issuer or any equity interest in any other entity, including
any partnership, limited partnership, limited liability company, business trust
and any other business entity, and is not a party to any agreement to acquire
any such securities or interest. Motoguzzi is qualified to do business in each
state where the nature of the business it conducts or the properties it owns,
leases or operates requires it to so qualify (which states are listed in
SCHEDULE 3.01(ii)), except where the failure to so qualify would not, singly or
in the aggregate, have a Motoguzzi Material Adverse Effect. Motoguzzi has all
requisite corporate power to own, lease and operate its properties and to carry
on its business as now being conducted and as presently contemplated by
Motoguzzi to be conducted in the future.
(b) Subsidiaries of Motoguzzi. Each Motoguzzi Subsidiary is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation. Each Motoguzzi Subsidiary is qualified to do
business in each jurisdiction where the nature of the business it conducts or
the properties it owns, leases or operates requires it to so qualify (which
jurisdictions are listed in SCHEDULE 3.01 (iii)), except where the failure to so
qualify would not, singly or in the aggregate, have a Motoguzzi Material Adverse
Effect. Each Motoguzzi Subsidiary has all requisite corporate power to own,
lease and operate its properties and to carry on its
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business as now being conducted and as presently contemplated by each of the
Motoguzzi Subsidiaries in the future. Motoguzzi owns, directly or indirectly,
the shares of each Motoguzzi Subsidiary as set forth in SCHEDULE 3.01(i) free
and clear of any Liens.
(c) Holding Company. Motoguzzi is a holding company, the only assets of
which are the shares of the Motoguzzi Subsidiaries. Motoguzzi has no material
liabilities other than the liabilities of the Motoguzzi Subsidiaries. Motoguzzi
does not conduct any material business through any entity other than the
Motoguzzi Subsidiaries.
SECTION 3.02 Authority; Corporate Action. Motoguzzi has all necessary
corporate power and authority to enter into this Agreement and to consummate the
Merger and other transactions contemplated hereby and thereby. All action,
corporate and otherwise, necessary to be taken by Motoguzzi to authorize the
execution, delivery and performance of this Agreement and the other agreements
and instruments delivered by Motoguzzi in connection with the transactions
contemplated hereby or thereby has or at the Closing will have been duly and
validly taken. Subject to the terms and conditions hereof, this Agreement and
the other agreements and instruments delivered by Motoguzzi in connection with
the transactions contemplated hereby shall constitute the valid, binding and
enforceable obligation of Motoguzzi enforceable against it in accordance with
their respective terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or
similar laws of general application now or hereafter in effect affecting the
rights and remedies of creditors and by general principles of equity (regardless
of whether enforcement is sought in a proceeding at law or in equity).
SECTION 3.03 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement (and the other agreements
contemplated hereby) by Motoguzzi does not, and the performance by Motoguzzi of
its obligations under this Agreement (and any other agreement contemplated
hereby) will not, (i) conflict with or violate its Certificate of Incorporation,
By-laws or other organizational documents (ii) conflict with or violate any law,
statute, ordinance, rule, regulation, order, judgment or decree applicable to
Motoguzzi or any Motoguzzi Subsidiary or by which any of their respective
properties or assets is bound or affected, or (iii) result in any breach of, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of a Lien
on any of the properties or assets of Motoguzzi or any Motoguzzi Subsidiary
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which Motoguzzi
or any Motoguzzi Subsidiary is a party or by which Motoguzzi or any Motoguzzi
Subsidiary or any of their respective properties or assets is bound or affected,
except, in the case of clauses (ii) and (iii), above, for any such conflicts,
violations, breaches, defaults or other occurrences that would not have, either
singly or in the aggregate, a Motoguzzi Material Adverse Effect.
(b) The execution and delivery of this Agreement (and the other agreements
contemplated hereby) by Motoguzzi does not, and the performance of this
Agreement (and the other agreements contemplated hereby) by Motoguzzi will not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Entity, except for (i) compliance with the
applicable requirements, if any, of the DGCL and Certificate of Incorporation
and Bylaws of Motoguzzi (including but not limited to, the approval of this
Agreement and the Merger by the stockholders of Motoguzzi), (ii) filing and
recordation of appropriate merger documents as required by the laws of the State
of Delaware, (iii) those consents, approvals, authorizations, permits, filings
or notifications applicable to Motoguzzi and the Motoguzzi Subsidiaries listed
in SCHEDULE 3.03(b), and (iv) where failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not
(a) have either singly or in the aggregate, a Motoguzzi Material Adverse Effect
or (b) affect the ability of Motoguzzi to consummate the Merger and other
agreements contemplated by this Agreement.
SECTION 3.04 Motoguzzi Capitalization. The total authorized capital stock
of Motoguzzi consists of 20,000,000 shares of Old Motoguzzi Common Stock and
2,000,000 shares of Old Motoguzzi Preferred Stock, of which 6,000,000 shares of
Old Motoguzzi Common Stock and 1,500,000 shares of Old Motoguzzi Preferred Stock
are issued and outstanding. Except for Old Motoguzzi Preferred Stock and Old
Motoguzzi Warrants, there are no existing options, warrants, calls, commitments
or other rights of any character including conversion or
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preemptive rights relating to the acquisition of any issued or unissued capital
stock or other securities of Motoguzzi. The outstanding Old Motoguzzi Warrants
have been duly and validly authorized and issued. All of the outstanding shares
of Old Motoguzzi Common Stock and Old Motoguzzi Preferred Stock are duly and
validly authorized and issued, fully paid and non-assessable. SCHEDULE
3.04(a) correctly sets forth the record owners of all of the Old Motoguzzi
Common Stock, Old Motoguzzi Preferred Stock and Old Motoguzzi Warrants.
Motoguzzi complied with all applicable federal and state securities laws and
regulations in connection with the offer and sale of all of the outstanding Old
Motoguzzi Common Stock, Old Motoguzzi Preferred Stock and Old Motoguzzi
Warrants, and there are no rescission rights relating thereto except for such of
the foregoing as would not have a Motoguzzi Material Adverse Effect. There are
no options, warrants, convertible securities or other rights permitting or
requiring the Motoguzzi Subsidiaries to issue, or which give anyone the right to
purchase any securities of the Motoguzzi Subsidiaries or rights convertible into
securities of the Motoguzzi Subsidiaries and the Motoguzzi Subsidiaries have not
agreed to issue or sell any shares of their capital stock or securities
convertible into their capital stock.
SECTION 3.05 Licenses and Permits; Compliance with Laws. Each of Motoguzzi
and the Motoguzzi Subsidiaries hold all permits, licenses and approvals
(collectively, the "Permits") from all federal, state and local governmental
authorities in the United States, Italy, and other countries necessary for it to
own, lease and operate its properties and to carry on its businesses as now
being conducted, except for such of the foregoing, the absence of which would
not have a Motoguzzi Material Adverse Effect. Motoguzzi has no knowledge that
any such Permit has been rescinded and, to its knowledge, all such Permits are
in full force and effect and listed on SCHEDULE 3.05. Except as set forth in any
of the Motoguzzi Disclosure Schedules attached hereto, the business of each of
Motoguzzi and the Motoguzzi Subsidiaries is being and has been conducted in
compliance with the Permits and all applicable laws, statutes, ordinances,
regulations judgments, orders, decrees, concessions, grants and other
authorizations of any governmental authority except where any non compliance,
singly or in the aggregate would not have a Motoguzzi Material Adverse Effect.
Neither Motoguzzi nor the Motoguzzi Subsidiaries is in default under any of such
Permits and no event has occurred and no condition exists which, with the giving
of notice, the passage of time, or both, would constitute a default thereunder
which would result in a Motoguzzi Material Adverse Effect. Neither the execution
and delivery of this Agreement or any of the other documents contemplated
hereby, nor the consummation of the transactions contemplated hereby or thereby,
nor compliance by Motoguzzi and the Motoguzzi Subsidiaries with any of the
provisions hereof or thereof, will result in any suspension, revocation,
impairment, forfeiture or nonrenewal of any Permit, and all of which shall be in
effect as of the Closing, except for such of the foregoing, the absence of which
would not have a Motoguzzi Material Adverse Effect.
SECTION 3.06 Financial Statements.
(a) Motoguzzi has caused to be delivered to North consolidated financial
statements of Motoguzzi for the years ended December 31, 1996 and 1997 audited
and reported on by Arthur Andersen, LLP, and unaudited consolidated financial
statements of Motoguzzi for the year ended December 31, 1995 and for the three
months ended March 31, 1998 and March 31, 1997 and summary unaudited
consolidated financial statements for the three and six month periods ended June
30, 1998 and June 30, 1997 (collectively, the "Motoguzzi Financial Statements").
The Motoguzzi Financial Statements, including all related notes and schedules
thereto, fairly present in all material respects the consolidated financial
position of Motoguzzi as at the respective dates thereof and the results of
operations and cash flows of Motoguzzi for the periods indicated in accordance
with United States generally accepted accounting principles ("GAAP") applied on
a consistent basis throughout the periods involved (except as may be noted
therein) and subject, in the case of interim financial statements, to normal
year-end adjustments, and in the case of summary financial statements, to
omission of certain items customarily included in interim financial statements.
(b) Except for liabilities, costs, expenses, debts, commitments or
obligations arising in connection with this Agreement and the transactions
contemplated hereby, or resulting from actions taken in furtherance of the
transactions identified in Items 1 through 4 of SCHEDULE 3.08 of the Motoguzzi
Disclosure Schedules attached hereto, to the knowledge of Motoguzzi, Motoguzzi,
on a consolidated basis, has no debts, liabilities, commitments or obligations
(including, without limitation, unasserted claims), whether absolute or
contingent, liquidated or unliquidated, or due or to become due or otherwise
except for liabilities and obligations (a) reflected as liabilities on the March
31, 1998 balance sheet ("Balance Sheet"), (b) that have arisen since March 31,
1998
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in the ordinary course of business of Motoguzzi and the Motoguzzi Subsidiaries,
(c) that are described herein or in any of the Motoguzzi Disclosure Schedules
attached hereto, or (d) which singly or in the aggregate do not have a Motoguzzi
Material Adverse Effect.
SECTION 3.07 Real Property.
(a) SCHEDULE 3.07 contains a true, correct and complete list and brief
description of all real property owned, leased or subleased by Motoguzzi and the
Motoguzzi Subsidiaries, all of which are hereinafter referred to as the "Real
Property." Motoguzzi has made available to North true, correct and complete
copies of the deeds and leases of the Real Property.
(b) Except as set forth in any of the Motoguzzi Disclosure Schedules
attached hereto, all buildings, structures, improvements, fixtures, facilities,
equipment, all components of all buildings, structures and other improvements
included within the Real Property owned by Motoguzzi and the Motoguzzi
Subsidiaries conforms in all material respects to all applicable statutes,
rules, regulations, ordinances, orders, writs, injunctions, judgments, decrees,
awards and restrictions of every governmental authority having jurisdic tion
over any of the Real Property owned by Motoguzzi and the Motoguzzi Subsidiaries,
and every instrumentality or agency thereof (including, without limitation,
applicable statutes, rules, regulations, orders and restrictions relating to
zoning, land use, safety, health, environment, hazardous substances, pollution
controls, employment and employment practices and access by the handicapped)
(collectively, "Laws"), except where nonconformance would not have a Motoguzzi
Material Adverse Effect.
(c) Except as set forth in any of the Motoguzzi Disclosure Schedules
attached hereto, the use and operation of the Real Property owned by Motoguzzi
and the Motoguzzi Subsidiaries is in full compliance with all Laws, covenants,
conditions, restrictions, easements, disposition agreements and similar matters
affecting the Real Property except where non compliance would not have a
Motoguzzi Material Adverse Effect. Motoguzzi and the Motoguzzi Subsidiaries have
not received any notice of any violation (or claimed violation) of or
investigation regarding any Laws except where such violation or claimed
violation would not have a Motoguzzi Material Adverse Effect.
(d) Except as set forth in any of the Motoguzzi Disclosure Schedules,
Motoguzzi and the Motoguzzi Subsidiaries have not received notice of, or
otherwise have knowledge of, any condemnation, fire, health, safety, building,
environmental, hazardous substances, pollution control, zoning or other land use
regulatory proceedings, either instituted or planned to be instituted, which
would have an adverse effect on the use and operation of any portion of the Real
Property or the value of any material portion of the Real Property, nor have
Motoguzzi and the Motoguzzi Subsidiaries received notice of any special
assessment proceedings affecting any of the Real Property except for such of the
foregoing which would not have a Motoguzzi Material Adverse Effect.
(e) Motoguzzi has made available for inspection by North true, correct and
complete title policies and surveys with respect to the Real Property.
SECTION 3.08 Material Contracts.
(a) SCHEDULE 3.08(a) sets forth a complete and correct list of all
agreements, including without limitation, leases, currently in effect which are
material to the assets, financial condition, business or operations of Motoguzzi
and the Motoguzzi Subsidiaries, taken as a whole, (collectively, the "Material
Contracts"); when the foregoing representation is restated as of the Closing
Date, any change to SCHEDULE 3.08(a) shall not be deemed a breach of such
representation, for purposes of Article IX or Article XI hereof, unless such
change, either singly or in the aggregate, would cause a Motoguzzi Material
Adverse Effect. True and complete copies of all Material Contracts have been
delivered to North or made available for inspection.
(b) Except as set forth in any of the Motoguzzi Disclosure Schedules
attached hereto, all Material Contracts are valid and in full force and effect
and neither Motoguzzi nor any of the Motoguzzi Subsidiaries has received notice
from any other party thereto that it has violated any provision of, or committed
or failed to perform any act which with or without notice, lapse of time or both
would constitute a default under the provisions of, any Material Contract,
except for defaults which would not have, either singly or in the aggregate, a
Motoguzzi Material Adverse Effect. None of the rights of Motoguzzi or any of the
Motoguzzi Subsidiaries under any of the
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Material Contracts are subject to any Liens of record, except for Liens granted
in the ordinary course of business and Liens which, either singly or in the
aggregate do not have a Motoguzzi Material Adverse Effect. Except as set forth
in any of the Motoguzzi Disclosure Schedules, neither Motoguzzi nor any of the
Motoguzzi Subsidiaries received notice from any other party thereto that it has
breached any express or implied representations, warranties or covenants in
connection with the sale or provision of its services or goods, except for
breaches that, either singly or in the aggregate, will not have a Motoguzzi
Material Adverse Effect.
SECTION 3.09 Litigation. Except as set forth in any of the Motoguzzi
Disclosure Schedules attached hereto, there are no actions, suits, arbitrations,
mediation or other proceedings pending or, to its knowledge, threatened against
Motoguzzi or any of the Motoguzzi Subsidiaries at law or in equity before any
court, Federal, state, municipal or other governmental department or agency or
other tribunal and neither Motoguzzi nor any of the Motoguzzi Subsidiaries, nor
any of their respective properties, is subject to any order, judgment,
injunction or decree; when the foregoing representation is restated as of the
Closing Date, any change to any of the Motoguzzi Disclosure Schedules shall not
be deemed a breach of such representation, for purposes of Article IX or Article
XI hereof, unless such change is reasonably likely to have, either singly or in
the aggregate, a Motoguzzi Material Adverse Effect.
SECTION 3.10 Taxes, Tax Returns and Audits. Motoguzzi and the Motoguzzi
Subsidiaries have (or, in the case of returns becoming due after the date hereof
and on or before the Effective Time, will have prior to the Effective Time)
filed or caused to be filed, or have properly filed extensions for, all tax
returns which are required to be filed and have paid or caused to be paid all
taxes required therein to be paid and all assessments received by them to the
extent that such taxes have become due, except taxes the validity or amount of
which is being contested in good faith by appropriate proceedings and with
respect to which adequate reserves have been set aside and except for such of
the foregoing as would not cause a Motoguzzi Material Adverse Effect. Motoguzzi
and the Motoguzzi Subsidiaries have or will have established adequate reserves
on its books and records and financial statements (including the Balance Sheet)
for such payment in accordance with GAAP. Motoguzzi and the Motoguzzi
Subsidiaries have withheld from each payment made to any of its present or
former employees, officers, directors or other party all amounts required by law
to be withheld and have, where required, remitted such amounts within the
applicable periods to the appropriate governmental authorities. Motoguzzi and
the Motoguzzi Subsidiaries have paid or caused to be paid, or have established
reserves that they reasonably believe to be adequate in all material respects,
for all tax liabilities applicable to them for all fiscal years which have not
been examined and reported on by the taxing authorities (or closed by applicable
statutes).
SECTION 3.11 Absence of Certain Changes. Since March 31, 1998, except as
set forth in any of the Motoguzzi Disclosure Schedules attached hereto, and
except for costs, expenses or liabilities incurred or actions taken in
connection with this Agreement and the transactions contemplated hereby (which
costs, expenses and liability are to be paid by TRG), or action taken in
furtherance of the transactions identified in Items 1 through 4 of SCHEDULE 3.08
of the Motoguzzi Disclosure Schedules attached hereto, neither Motoguzzi nor any
of the Motoguzzi Subsidiaries has:
(a) issued, delivered or agreed to issue any stock, bonds or other
corporate securities (whether authorized and unissued or held in the treasury),
or granted or agreed to grant any options (including employee stock options),
warrants or other rights for the issue thereof;
(b) borrowed or agreed to borrow any funds except in the ordinary course of
business consistent with past practices;
(c) incurred any obligation or liability, absolute, accrued, contingent or
otherwise, whether due or to become due, except current liabilities incurred in
the ordinary course of business consistent with prior practice and liabilities
to TRG which, together with other liabilities to TRG, OAM and their subsidiaries
(other than Motoguzzi and the Motoguzzi Subsidiaries) shall not exceed $800,000
in the aggregate as of the Closing Date, or, when the foregoing representation
is restated as of the Closing Date, such obligations or liabilities as do not
either singly or in the aggregate, have a Motoguzzi Material Adverse Effect;
(d) sold, transferred, leased to others or otherwise disposed of any assets
outside of the ordinary course of business or canceled or compromised any debt
or claim, or waived or released any right of substantial value;
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(e) received any notice of termination of any Material Contract or Permit
or suffered any damage, destruction or loss if not covered by insurance, which,
as to any of the foregoing, has resulted in a Motoguzzi Material Adverse Effect:
(f) encountered any labor union organizing activity, labor disputes or had
any material change in its relations with its employees or agents, clients or
insurance carriers which has resulted in a Motoguzzi Material Adverse Effect;
(g) paid any monies to TRG or OAM or any of their subsidiaries;
(h) suffered any Motoguzzi Material Adverse Change.
SECTION 3.12 Labor Relations. Except as set forth in any of the Motoguzzi
Disclosure Schedules attached hereto, neither Motoguzzi nor any of the Motoguzzi
Subsidiaries is a party to any collective bargaining agreement or other contract
or agreement with any labor organization or other representative of any of the
employees of Motoguzzi and/or any of the Motoguzzi Subsidiaries. Motoguzzi and
the Motoguzzi Subsidiaries are in compliance in all material respects with all
laws relating to the employment or the workplace, including, without limitation,
provisions relating to wages, hours, collective bargaining, safety and health,
work authorization, equal employment opportunity, immigration and the
withholding of income taxes, unemployment compensation, worker's compensation,
employee privacy and right to know and social security contributions, except
where noncompliance would not have a Motoguzzi Material Adverse Effect. There
are no pending or, to its knowledge, threatened, proceedings or grievances with
respect to labor matters concerning Motoguzzi and the Motoguzzi Subsidiaries
which would have, either singly or in the aggregate, a Motoguzzi Material
Adverse Effect.
SECTION 3.13 Insurance Policies; Claims. SCHEDULE 3.13 sets forth all
insurance policies and bonds maintained by or on behalf of Motoguzzi and the
Motoguzzi Subsidiaries. There are no unresolved claims have been made against
Motoguzzi and/or any of the Motoguzzi Subsidiaries in respect of allegedly
defective products and Motoguzzi does not know of any written assertion of any
such claim, except for such of the foregoing which, if proven, would not have a
Motoguzzi Material Adverse Effect.
SECTION 3.14 Intellectual Property.
(a) Right, Title and Interest. Motoguzzi and the Motoguzzi Subsidiaries own
or possess sufficient right, title and interest in and to, or a valid and
enforceable license in or other right to use all of the Intellectual Property
(as defined below) to entitle them to conduct their businesses as heretofore
conducted and as presently intended to be conducted in the future, except for
such of the foregoing, the absence of which would not have a Motoguzzi Material
Adverse Effect. To its knowledge, Motoguzzi and the Motoguzzi Subsidiaries have
not infringed, misappropriated or otherwise violated any Intellectual Property
of any other person except for such of the foregoing as would not have a
Motoguzzi Material Adverse Effect. To its knowledge, no person is infringing
upon any Intellectual Property right of Motoguzzi and the Motoguzzi Subsidiaries
except for such of the foregoing as would not have a Motoguzzi Material Adverse
Effect.
(b) "Intellectual Property" means all patents, patent applications and
patent disclosures; all inventions (whether or not patentable and whether or not
reduced to practice); all trademarks, service marks, trade dress, trade names
and corporate names and all the goodwill associated therewith; all registered
and unregistered statutory and common law copyrights; all registrations,
applications and renewals for any of the foregoing; all protocols, codes and
operating systems; and all trade secrets, confidential information, know-how,
technical and computer data, software, and related proprietary property. All of
the material Intellectual Property of Motoguzzi and the Motoguzzi Subsidiaries
is listed on SCHEDULE 3.14(b) hereto. SECTION 3.15 Properties; Assets. Except as
provided in any of the Motoguzzi Disclosure Schedules attached hereto, Motoguzzi
and the Motoguzzi Subsidiaries (a) have good and marketable title to all the
properties and assets reflected on the Balance Sheet as being owned by Motoguzzi
and the Motoguzzi Subsidiaries (except properties sold or otherwise disposed of
since the date thereof in the ordinary course of business or properties sold or
disposed of after the date hereof, which does not cause a Motoguzzi Material
Adverse Effect), and those properties acquired after the date thereof and not
thereafter disposed of, free and clear of all Liens, except (i) statutory liens
securing payments not yet due, and (ii) such imperfections or irregularities of
title, claims, liens, charges, security interests or encumbrances which do not
materially affect the use or marketability of the properties or assets subject
thereto or affected thereby or
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otherwise materially impair business operations at such properties, and (b) is
the lessee of all personal property reflected on the Balance Sheet as being
leased by it as of March 31, 1998 (except for leases that have expired by their
terms since March 31, 1998) and those properties leased after the date thereof.
Except as set forth in any of the Motoguzzi Disclosure Schedules attached
hereto, the assets and properties of Motoguzzi and the Motoguzzi Subsidiaries
are in good operating condition and repair (ordinary wear and tear excepted)
except for such of the foregoing as do not represent a Motoguzzi Material
Adverse Effect, and constitute all of the assets, right and properties which are
necessary for the businesses and operations of Motoguzzi as a whole to be
conducted as presently conducted. There are no Liens on any assets of Motoguzzi
or of any of the Motoguzzi Subsidiaries securing indebtedness of TRG or any
subsidiary thereof (other than Motoguzzi or any Motoguzzi Subsidiary;
"Intercompany Liens").
SECTION 3.16 Bank Accounts. SCHEDULE 3.16 sets forth the name of each bank
in which Motoguzzi and the Motoguzzi Subsidiaries have an account or safe
deposit box, vault, lock-box or other arrangement, the account number and
description of each account at each bank and the names of all persons authorized
to draw thereon or to have access thereto; and the names of all persons, if any,
holding tax or other powers of attorney from Motoguzzi and/or any of the
Motoguzzi Subsidiaries.
SECTION 3.17 Brokers. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Motoguzzi.
SECTION 3.18 Records. The books of account, minute books, stock
certificate books and stock transfer ledgers of Motoguzzi and the Motoguzzi
Subsidiaries are complete and correct in all material respects, and there have
been no material transactions involving Motoguzzi and the Motoguzzi Subsidiaries
of the type typically recorded in such records which were not so recorded.
SECTION 3.19 No Illegal or Improper Transactions. Neither Motoguzzi and
the Motoguzzi Subsidiaries nor any officer, director, employee, agent or
affiliate of Motoguzzi and the Motoguzzi Subsidiaries has offered, paid or
agreed to pay to any person or entity (including any governmental official) or
solicited, received or agreed to receive from any such person or entity,
directly or indirectly, any money or anything of value for the purpose or with
the intent of (i) obtaining or maintaining business for the benefit of Motoguzzi
and the Motoguzzi Subsidiaries, (ii) illegally or improperly facilitating the
purchase or sale of any product or service, or (iii) avoiding the imposition of
any fine or penalty, in any manner which is in violation of any applicable
ordinance, regulation or law.
SECTION 3.20 Related Transactions. Except as set forth in any of the
Motoguzzi Disclosure Schedules attached hereto, and for compensation and related
arrangements with employees or consultants for services rendered consistent with
past practices, no current or former director, officer or, to Motoguzzi's
knowledge, employee of Motoguzzi and/or any of the Motoguzzi Subsidiaries is
presently, or during the last two fiscal years has been, (a) a party to any
transaction with Motoguzzi and/or any of the Motoguzzi Subsidiaries, (including,
but not limited to, any contract, agreement or other arrangements providing for
the furnishing of services by, or rental of real or personal property from, or
otherwise requiring payments to, any such director, officer, employee or
shareholder), or (b) the direct or, to Motoguzzi's knowledge, indirect owner of
an interest in any corporation, firm, association or business organization which
is a current (or potential) competitor, supplier or customer of Motoguzzi and/or
any of the Motoguzzi Subsidiaries, nor, to Motoguzzi's knowledge, does any such
person receive income from any source other than Motoguzzi and/or any of the
Motoguzzi Subsidiaries which relates to the business of, or should properly
accrue to, Motoguzzi and/or any of the Motoguzzi Subsidiaries.
SECTION 3.21 Disclosure. No representation or warranty by Motoguzzi
contained in this Agreement and no information contained in any schedule,
financial statement or other instrument furnished or to be furnished by
Motoguzzi to North pursuant to this Agreement or in connection with the
transactions contemplated hereby, contains or will contain any untrue statement
of a material fact or omits or will omit to state a material fact necessary in
order to make the statements contained herein or therein not misleading.
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SECTION 3.22 Environmental, Health and Safety Matters. Except as set forth
in any of the Motoguzzi Disclosure Schedules attached hereto:
(a) Motoguzzi and the Motoguzzi Subsidiaries are in compliance with
Environmental, Health and Safety Requirements, except for such noncompliance as
would not reasonably be expected to have, either singly or in the aggregate, a
Motoguzzi Material Adverse Effect.
(b) Motoguzzi and the Motoguzzi Subsidiaries have not received any written
notice, report or other information regarding any actual or alleged material
violation of Environmental, Health and Safety Requirements, or any material
liabilities or potential material liabilities (whether accrued, absolute,
contingent, unliquidated or otherwise), including any investigatory, remedial or
corrective obligations, relating to Motoguzzi or its property arising under
Environmental, Health, and Safety Requirements, the subject of which would
reasonably be expected to have, either singly or in the aggregate, a Motoguzzi
Material Adverse Effect.
SECTION 3.23 Year 2000 Compliance. Third parties have been engaged by
Motoguzzi to evaluate and, if required, upgrade, all operating codes, programs,
utilities and other software, as well as all hardware and systems, utilized by
Motoguzzi and the Motoguzzi Subsidiaries in their businesses, or in the
provisions of services, or comprising software, hardware and/or systems sold by
Motoguzzi and the Motoguzzi Subsidiaries to third parties, in order to record,
store, process, and present calendar dates falling on or after January 1, 2000
in the same manner, and with the same functionality, as provided on or before
December 31, 1999. and Motoguzzi is relying exclusively upon the expertise of
such third parties to achieve such operability.
TRG represent and warrants to North as follows:
SECTION 3.24 Organization. TRG (i) is a corporation duly organized,
validly existing and in good standing under the laws of Maryland and (ii) owns
1,500,000 shares of Old Motoguzzi Common Stock, and OAM owns 4,500,000 shares of
Old Motoguzzi Common Stock, representing 25% and 75%, respectively, of the
outstanding shares on the date hereof of Old Motoguzzi Common Stock.
SECTION 3.25 Authority; Corporate Action. TRG has all necessary corporate
power and authority to enter into this Agreement and to consummate such of the
transactions contemplated hereby as are applicable to TRG. All action, corporate
and otherwise, necessary to be taken by TRG for the execution, delivery and
performance of this Agreement and the other agreements and instruments delivered
by TRG in connection with the transactions contemplated hereby or thereby has or
at the Closing will have been duly and validly taken. Subject to the terms and
conditions hereof, this Agreement and the other agreements and instruments
delivered by TRG in connection with the transactions contemplated hereby shall
constitute the valid, binding and enforceable obligation of TRG enforceable
against it in accordance with their respective terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer or similar laws of general application now or hereafter in
effect affecting the rights and remedies of creditors and by general principles
of equity (regardless of whether enforcement is sought in a proceeding at law or
in equity).
SECTION 3.26 No Conflict; Required Filings and Consents. The execution and
delivery of this Agreement (and the other agreements contemplated hereby) by TRG
does not, and the performance by TRG of its obligations under this Agreement
(and any other agreement contemplated hereby) will not, (i) conflict with or
violate its Certificate of Incorporation, By-laws or other organizational
documents (ii) conflict with or violate any law, statute, ordinance, rule,
regulation, order, judgment or decree applicable to TRG or by which any of its
properties or assets is bound or affected, or (iii) result in any breach of, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of a Lien
on any of the properties or assets of TRG pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which TRG is a party or by which TRG or any of its
properties or assets is bound or affected, except, in the case of clauses (ii)
and (iii), above, for any such conflicts, violations, breaches, defaults or
other occurrences that would not have, either singly or in the aggregate, a
material adverse effect on TRG and its subsidiaries, taken as a whole.
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SECTION 3.27 Brokers. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of TRG.
SECTION 3.28 Disclosure. No representation or warranty by TRG contained in
this Agreement and no information contained in any schedule, financial statement
or other instrument furnished or to be furnished by TRG to North pursuant to
this Agreement or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary in order to make the statements
contained herein or therein not misleading.
SECTION 3.29 Voting Agreement. TRG and OAM have each executed and
delivered to North an agreement in the form of EXHIBIT D hereto with respect to
voting in favor of the consummation of the Merger at any meeting of shareholders
of Motoguzzi.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF NORTH
North represents and warrants to Motoguzzi as follows:
SECTION 4.01 Organization. North is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. North
does not own, directly or indirectly, any capital stock or other securities of
any issuer or any equity interest in any other entity, including any
partnership, limited partnership, limited liability company, business trust or
any other business entity, and is not a party to any agreement to acquire any
such securities or interest. North is qualified to do business in each state
where the nature of the business it conducts or the properties it owns, leases
or operates requires it to so qualify, except where the failure to so qualify
would not, singly or in the aggregate, have a North Material Adverse Effect.
North has all requisite corporate power to own, lease and operate its properties
and to carry on its business.
SECTION 4.02 Authority; Corporate Action. North has all necessary
corporate power and authority to enter into this Agreement and the other
agreements contemplated by this Agreement and to consummate the transactions
contemplated hereby and thereby. All action, corporate and otherwise, necessary
to be taken by North to authorize the execution, delivery and performance of
this Agreement and all other agreements delivered or to be delivered by North in
connection with the transactions contemplated hereby or thereby has, or at the
Closing will have been, duly and validly taken. Subject to the terms and
conditions hereof, this Agreement and all the other agreements contemplated
hereby constitute valid, binding and enforceable obligations of North, as the
case may be, enforceable in accordance with its terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer or similar laws of general application now or hereafter in
effect affecting the rights and remedies of creditors and by general principles
of equity (regardless of whether enforcement is sought in a proceeding at law or
in equity).
SECTION 4.03 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement (and the other agreements
contemplated hereby) by North does not, and the performance by North of its
obligations under this Agreement (and any other agreement contemplated hereby)
will not, (i) conflict with or violate the Certificate of Incorporation, By-laws
or other organizational documents of North, (ii) conflict with or violate any
law, statute, ordinance, rule, regulation, order, judgment or decree applicable
to North or by which any of its properties or assets is bound or affected, or
(iii) result in any breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, or result
in the creation of a Lien on any of the properties or assets of North pursuant
to, any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which North is a party or
by which North or any of its properties or assets is bound or affected, except,
in the case of clauses (ii) and (iii), above, for any such conflicts,
violations, breaches, defaults or other occurrences that would not have, either
singly or in the aggregate, a North Material Adverse Effect.
(b) The execution and delivery of this Agreement and all the other
agreements contemplated hereby by North does not, and the performance of this
Agreement and all the other agreements contemplated hereby by
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North will not, require any consent, approval, authorization or permit of, or
filing with or notification to, any Governmental Entity, except for
(i) compliance with the applicable requirements, if any, of the Certificate of
Incorporation and Bylaws of North (including, but not limited to, the approval
of this Agreement and the Merger by the Stockholders of North), Exchange Act,
Securities Act, state securities laws, state takeover laws, Nasdaq and
(ii) filing and recordation of appropriate merger documents as required by the
laws of the State of Delaware, and (iii) where failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications,
would not have, either singly or in the aggregate, a North Material Adverse
Effect.
SECTION 4.04 North Capitalization. The number of authorized and issued
shares of capital stock of North is set forth on SCHEDULE 4.04 which amount will
be increased on or before the Effective Time by 30,000 shares of Class B Common
Stock of North upon exercise of the Class B Options and payment to North of the
aggregate of $300,000 Class B Option exercise price; (such shares of Class B
Common Stock to be converted into 60,000 shares of Class A Common Stock either
(i) as of the Effective Time if all of the actions described in Section 7.06 are
approved, or (ii) if not, within 90 days of the Effective Time in accordance
with the agreement attached hereto as EXHIBIT E). North does not have any
treasury stock. Except as set forth on SCHEDULE 4.04 and except for (x) the
Executive Options and (y) a warrant to purchase 350,000 shares of Class A Common
Stock to be issued at the Effective Time to Allen & Company (the Executive
Options and such warrant, collectively the "Closing Date Options"), there are no
options, warrants, calls, commitments or other rights of any character including
conversion or preemptive rights relating to the acquisition of any issued or
unissued capital stock or other securities of North. All of the outstanding
shares of common stock and preferred stock of North are duly and validly
authorized and issued, fully paid and non-assessable. SCHEDULE 4.04 correctly
sets forth the record owners of all of the options of North. North has complied
with all applicable federal and state securities laws and regulations in
connection with the offer and sale of all of the common stock, preferred stock,
warrants and options of North and there are no rescission rights relating
thereto except for such of the foregoing as would not have a North Material
Adverse Effect. SCHEDULE 4.04 sets forth the registration rights of all holders
of securities of North, either on a "demand" or a "piggyback" basis.
SECTION 4.05 Escrow Account. As of the date hereof and at the Closing
Date, North has and covenants that it will have no less than $8,391,000 invested
in government securities in an escrow account with Chase Manhattan Bank. Upon
consummation of the Merger, all conditions to the release of such funds from
escrow will be satisfied. Immediately prior to the Closing Date, after provision
for (i) all unpaid costs, expenses and liabilities of North heretofore incurred
or hereafter incurred at any time prior to the Closing Date, all of which (other
than those described in clause (ii) hereof) to the best of North's knowledge are
set forth in SCHEDULE 4.05 hereto, and (ii) all unpaid costs and expenses
incurred by North in connection with the transactions contemplated by this
Agreement in an aggregate amount, to the extent payable in cash, of not more
than $625,000, all of which, or reasonable estimates thereof, together with all
documentation in North's possession related thereto are also set forth on
SCHEDULE 4.05 (the net amount of cash so remaining is referred to herein as
"Available Cash"), North covenants that it will have not less than $8,000,000 of
Available Cash, less only such amounts, if any, as North is required to pay
stockholders who are not officers and directors of North who elect to have their
shares redeemed in accordance with the provisions of the Certificate of
Incorporation of North. SCHEDULE 4.05 also lists all costs and expenses incurred
by North in connection with the transactions contemplated by this Agreement and
paid by North.
SECTION 4.06 North Securities and Exchange Commission Reports; Financial
Statement.
(a) North has filed all forms, reports, statements and other documents
required to be filed with the Commission when and as required to be filed, and
has heretofore made them available to Motoguzzi, in the same form as filed with
the Commission, together with any amendments thereto, copies of its (i) Annual
Report on Form 10-K for the year ended August 31, 1997 and all Quarterly Reports
on Form 10-Q filed since August 31, 1997, and (ii) all reports on Form 8-K since
August 31, 1997 (collectively, the "North Reports"). As of their respective
filing dates, the North Reports (i) complied as to form in all material respects
with the requirements of the Exchange Act and the Securities Act and (ii) did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
Except as disclosed in a filing subsequently made in accordance with the
requirements of the Exchange Act prior to the date hereof and except for such
filing of a report on Form 8-K as may be required to disclose this Agreement and
the transactions as contemplated by this
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Agreement, no event has occurred subsequent to the date of filing of each such
North Report as would make any statement contained therein materially untrue or
misleading or would make any omission therefrom materially misleading in light
of the occurrence of such event.
(b) The financial statements of North for the year ended August 31, 1997,
audited and reported on by BDO Seidman, LLP and unaudited financial statements
of North for the nine months ended May 31, 1998 (collectively, the "North
Financial Statements") are contained in the Annual Report on Form 10-K for the
year ended August 31, 1997 and the Quarterly Report on Form 10-Q for the quarter
ended May 31, 1998, respectively, each of which has been delivered to TRG as
part of the North Reports. The North Financial Statements , including all
related notes and schedules thereto, fairly present in all material respects the
consolidated financial position of North as at the respective dates thereof and
the consolidated results of operations and cash flows of North for the periods
indicated in accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be noted therein) and subject, in the case of
interim financial statements, to normal year-end adjustments.
(c) Other than as set forth on the May 31, 1998 balance sheet contained in
the North Financial Statements and such of the following as are incurred in
connection with the negotiation and consummation of the transactions
contemplated by this Agreement, estimates of which are set forth in SCHEDULE
4.05, North has, on the date hereof and North covenants that it will have as of
the Closing Date, no debts, liabilities, financial commitments or financial
obligations (including, without limitation, unasserted claims) whether absolute
or contingent, liquidated or unliquidated, or due or to become due or otherwise,
except those incurred in the ordinary course of business, consistent with past
practices, since the date of such balance sheet which are set forth in SCHEDULE
4.05.
SECTION 4.07 North Material Contracts.
(a) SCHEDULE 4.07(a) sets forth a complete and correct list of all
agreements which are material to the assets, financial condition, business or
operations of North. True and complete copies of all Material Contracts have
been delivered to Motoguzzi or made available for inspection.
(b) Except as set forth in any of the North Disclosure Schedules, all
Material Contracts are valid and in full force and effect and North has not
received notice from any other party thereto that it has violated any provision
of, or committed or failed to perform any act which with or without notice,
lapse of time or both would constitute a default under the provisions of, any
Material Contract, except for defaults that would not reasonably be expected to
have, either singly or in the aggregate, a North Material Adverse Effect. None
of the rights of North under any of the Material Contracts is subject to any
Liens of record. Except as set forth in any of the North Disclosure Schedules,
North has not received notice from any other party thereto that it has breached
any express or implied representations, warranties or covenants in connection
with such Material Contracts, except for breaches that, individually and in the
aggregate, will not have a North Material Adverse Effect.
SECTION 4.08 Litigation Other than as set forth on any of the North
Disclosure Schedules, there are no actions, suits, arbitrations, mediations or
other proceedings pending or, to its knowledge, threatened against North at law
or in equity before any court, Federal, state, municipal or other governmental
department or agency or other tribunal. Neither North nor its property is
subject to any order, judgment, injunction or decree which could have either
singly or in the aggregate, a North Material Adverse Effect.
SECTION 4.09 Bank Accounts. SCHEDULE 4.09 sets forth the name of each bank
in which North has an account, safe deposit, vault, lock-box or other
arrangement, the account number and description of each account at each bank and
the names of all persons authorized to draw thereon or to have access thereto
and the names of all persons, if any, holding powers of attorney over such
accounts from North.
SECTION 4.10 Disclosure. No representation or warranty by North contained
in this Agreement and no information contained in any schedule, financial
statement or other instrument furnished or to be furnished to Motoguzzi by North
pursuant to this Agreement or in connection with the transactions contemplated
hereby, when taken together with the North Reports, contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact necessary in order to make the statements contained herein or therein not
misleading.
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SECTION 4.11 Investment Bankers. Other than fees payable to and expenses
of Allen & Company Incorporated, which fees and expenses will be paid solely by
North, in cash and warrants as provided herein and in the North Disclosure
Schedules, no broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the transaction
contemplated by this Agreement based upon arrangements made by or on behalf of
North.
SECTION 4.12 Securities Issued as Merger Consideration. The Class A Common
Stock, Class B Preferred Stock and Nominal Warrants, when issued as a result of
the Merger shall be duly authorized and issued by North and the Class A Common
Stock and Class B Preferred Stock will be fully paid and non-assessable shares
of capital stock of North. The shares of Class A Common Stock purchasable upon
exercise of the Nominal Warrants and the Continuation Warrants have been duly
reserved for issuance and, when issued in accordance with the terms of the
Nominal Warrants and the Continuation Warrants, shall be duly authorized and
issued by North and fully paid and non-assessable.
SECTION 4.13 Licenses and Permits; Compliance with Laws. North holds all
permits, licenses and approvals from all federal, state and local governmental
authorities, foreign or domestic, necessary for it to own its properties and to
carry on its business as now being conducted except for such of the foregoing,
the absence of which would not have a North Material Adverse Effect. North is
not an "investment company" within the meaning of the Investment Company Act of
1940, as amended ("Investment Company Act") and is not, and has not been,
required to register under the Investment Company Act.
SECTION 4.14 Records. The books of account, minutes books, stock
certificate ledger and stock transfer ledger of North are complete and correct
in all material respects , and there have been no material transactions
involving North of the type typically recorded in such records which were not so
recorded.
SECTION 4.15 No Illegal or Improper Transactions. Neither North, nor any
officer, director, employee, agent or affiliate of North, has offered, paid or
agreed to pay to any person or entity (including any governmental official) or
solicited, received or agreed to receive from any such person or entity,
directly or indirectly, any money or anything of value for the purpose or with
the intent of (i) obtaining or maintaining business for the benefit of North,
(ii) illegally or improperly facilitating the purchase or sale of any product or
service, or (iii) avoiding the imposition of any fine or penalty, in any manner
which is in violation of any applicable ordinance, regulation or law.
SECTION 4.16 License Fee. All fees payable in connection with the use of
the "Sma2rt" and or other related trademarks have been paid by North.
SECTION 4.17 Indemnification Agreements. Other than as provided in the
Certificate of Incorporation or By Laws of North, North is not a party to any
agreement, undertaking, understanding or obligation, express or implied, to
indemnify any current or former director of North arising out of any acts or
events occurring prior the date hereof.
SECTION 4.18 Taxes, Tax Returns and Audits. North has (or, in the case of
returns becoming due after the date hereof and on or before the Effective Time,
will have prior to the Effective Time) filed or caused to be filed, or have
properly filed extensions for, all tax returns which are required to be filed
and have paid or caused to be paid all taxes required therein to be paid and all
assessments received by them to the extent that such taxes have become due,
except taxes the validity or amount of which is being contested in good faith by
appropriate proceedings and with respect to which adequate reserves have been
set aside. North has or will have established adequate reserves on its books and
records and financial statements (including the May 31, 1998 balance sheet) for
such payment in accordance with GAAP. North has withheld from each payment made
to any of its present or former employees, officers, directors or other party
all amounts required by law to be withheld and has, where required, remitted
such amounts within the applicable periods to the appropriate governmental
authorities. North has paid or caused to be paid, or has established reserves
that it reasonably believes to be adequate in all material respects, for all tax
liabilities applicable to it for all fiscal years which have not been examined
and reported on by the taxing authorities (or closed by applicable statutes).
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ARTICLE V
NATURE AND SURVIVAL OF
REPRESENTATIONS AND WARRANTIES OF THE PARTIES.
SECTION 5.01 Survival. Each statement, representation, warranty, covenant
and agreement made by any Party to another under this Agreement shall remain in
effect continuously until the Closing, and the representations, warranties,
covenants, and agreements made by Motoguzzi and TRG shall survive the Closing
and shall terminate at such time as the right of North to assert claims against
the Remedy Fund (as hereinafter defined) under such statement, representation,
warranty, covenant or agreement as provided in ARTICLE X so terminates, provided
that such termination shall not affect North's rights in respect of any claims
asserted in accordance with ARTICLE X prior to such termination, and provided
further that nothing contained herein shall limit any Party's rights and
remedies under ARTICLE XI.
ARTICLE VI
COVENANTS OF MOTOGUZZI AND TRG
SECTION 6.01 Conduct of Business. Motoguzzi covenants and agrees that,
from the date hereof through the Closing Date, except as otherwise set forth in
or as contemplated by this Agreement, including without limitation the actions
described in SECTION 6.13, and except for actions taken in furtherance of any
transaction specified in any of the Motoguzzi Disclosure Schedules attached
hereto, Motoguzzi and the Motoguzzi Subsidiaries shall:
(a) conduct their businesses only in the ordinary course and in a
manner consistent with the current practice of such business, preserve
substantially intact the business organization of Motoguzzi and the
Motoguzzi Subsidiaries, use their best efforts to preserve the current
relationships of Motoguzzi and the Motoguzzi Subsidiaries with customers
and other persons with which Motoguzzi and the Motoguzzi Subsidiaries have
significant business relations, taken as a whole, preserve the goodwill of
Motoguzzi and the Motoguzzi Subsidiaries, taken as a whole, and comply with
all requirements of law, the violation of which are reasonably likely to
have a Motoguzzi Material Adverse Effect;
(b) not sell, transfer or dispose of all or any part of its capital
stock;
(c) not (i) issue any shares of its capital stock nor any options,
obligations, rights, warrants or other securities convertible into or
exchangeable for its capital stock or any other class of equity securities
of Motoguzzi; or (ii) amend or otherwise modify the terms of any such
securities, options, obligations, rights or warrants in a manner
inconsistent with the provisions of this Agreement or if the effect thereof
shall be to make such terms more favorable to the holders thereof;
(d) not declare any dividend or make any distribution in cash,
securities or otherwise on the outstanding shares of its capital stock, or
directly or indirectly redeem or purchase any such capital stock except for
dividends or distributions by a Motoguzzi Subsidiary to Motoguzzi, or
redemptions or purchases of capital stock of Motoguzzi Subsidiaries;
(e) not, in any manner whatsoever, advance, transfer (other than in
payment for goods received or services rendered in the ordinary course of
business), or distribute to any security holder of Motoguzzi, including
without limitation TRG, OAM or any of their affiliates, or otherwise
withdraw, cash or cash equivalents in any manner inconsistent with its
established cash management practices, except to pay existing obligations
of Motoguzzi and the Motoguzzi Subsidiaries in accordance with their terms;
(f) not change any of its methods of accounting in effect at March 31,
1998;
(g) not prepay, before the scheduled maturity thereof, any of its
long-term debt, or incur any obligation for borrowed money, whether or not
evidenced by a note, bond, debenture or similar instrument, other than
indebtedness incurred in the ordinary course of business consistent with
past practices and as contemplated by this Agreement;
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(h) not enter into, or modify in any material respect or terminate any
Material Contract or Permit if same would cause a Motoguzzi Material
Adverse Effect, except as required by applicable law;
(i) not take any action that will, or could reasonably be expected to,
result in any of its representations and warranties set forth in this
Agreement being inaccurate as of the Closing Date or in any of the
conditions to the Merger not being satisfied, if such inaccuracy or
non-satisfaction of condition would permit termination of this Agreement by
North in accordance with ARTICLE IX hereof; or
(j) not agree in writing or otherwise to do any of the foregoing.
SECTION 6.02 Access to Information; Confidentiality.
(a) Between the date of this Agreement and the Closing Date, Motoguzzi will
(i) permit North and their Representatives reasonable access to all of the
books, records, reports and other related materials, offices and other
facilities and properties of Motoguzzi and the Motoguzzi Subsidiaries;
(ii) permit North and their Representatives to make such inspections thereof as
they may reasonably request; and (iii) furnish North and their Representatives
with such financial and operating data (including without limitation the work
papers of Motoguzzi's accountants) and other information with respect to
Motoguzzi and the Motoguzzi Subsidiaries as North may from time to time
reasonably request.
(b) TRG and Motoguzzi shall hold and shall cause their affiliates and
Representatives to hold in strict confidence, unless compelled to disclose by
judicial or administrative process or by other requirements of law, all
documents and information concerning North furnished to them by North or their
Representatives in connection with the transactions contemplated by this
Agreement (except to the extent that such information can be shown to have been
(i) previously known by TRG or Motoguzzi, (ii) in the public domain through no
fault of TRG or Motoguzzi or (iii) later lawfully acquired by TRG or Motoguzzi
from another source, which source shall not be the agent of North or person
under confidentiality obligation to North) and, except as otherwise required by
applicable law, rule or regulation, neither TRG nor Motoguzzi shall release or
disclose such information to any other person, except its auditors, actuaries,
attorneys, financial advisors, bankers and other consultants and advisors who
need to know same in connection with this Agreement.
SECTION 6.03 Maintenance of Insurance. Through the Closing Date, Motoguzzi
shall maintain insurance policies providing insurance coverage for its
consolidated business and the assets of Motoguzzi of substantially the same
kinds, in substantially the same amounts and against substantially the same
risks as are in effect on the date hereof to the extent that such coverage is
available at a cost not greater than 200% of the present cost of such coverage.
SECTION 6.04 No Other Negotiations. Unless and until this Agreement shall
have been terminated pursuant to its terms, neither Motoguzzi nor any of its
Representatives, officers, directors or affiliates shall, directly or
indirectly, solicit, institute, initiate, or pursue or respond to any inquiries
or enter into discussions, proposals or negotiations with any person concerning
any merger, sale of substantial assets, tender offer, sale of shares of stock or
similar transaction involving Motoguzzi or any of its assets or disclose,
directly or indirectly, other than to the shareholders of Motoguzzi, any
information not customarily disclosed to the public or such shareholders
concerning Motoguzzi, or except as required by law, afford to any other person
access to the properties, books or records of Motoguzzi, or otherwise assist any
person preparing to make or who has made such an offer, or enter into any
agreement with any third party providing for a business combination transaction,
equity investment or sale of significant amount of assets of Motoguzzi or
recommend to its shareholders any of the foregoing. Motoguzzi shall promptly
notify North of any direct or indirect inquiries, discussions, proposals or
negotiations.
SECTION 6.05 No Securities Transactions. Neither Motoguzzi nor any of its
affiliates shall engage in any transactions involving the securities of North
prior to the Closing Date.
SECTION 6.06 Fulfillment of Conditions. TRG and Motoguzzi shall use its
respective commercially reasonable efforts to fulfill, or cause to be fulfilled,
the conditions specified in ARTICLES VIII AND IX applicable to it to the extent
that the fulfillment of such conditions is within its respective control. The
foregoing obligation includes taking or refraining from such reasonable actions
as may be necessary to fulfill such conditions (including Motoguzzi and the
Motoguzzi Subsidiaries conducting their businesses in such manner that
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on the Closing Date the representations and warranties of TRG and Motoguzzi
contained herein shall be accurate as though then made, except as contemplated
or permitted by the terms hereof).
SECTION 6.07 Disclosure of Certain Matters. During the period from the
date hereof through the Closing Date, each of TRG and Motoguzzi shall give North
prompt written notice of any event or development that occurs that (a) had it
existed or been known on the date hereof would have been required to be
disclosed under this Agreement, (b) would cause its respective representations
and warranties contained herein to be inaccurate or otherwise misleading in a
material respect, (c) could reasonably be expected to give North any reason to
believe that any of the conditions set forth in ARTICLE IX will not be
satisfied, or (d) is of a nature that such constitutes or may constitute a
Motoguzzi Material Adverse Change.
SECTION 6.08 Assignment or Transfer of Contracts, Leases and
Permits. Motoguzzi shall, in consultation with North and its Representatives,
promptly take all necessary action to, and shall use its commercially reasonable
efforts to obtain consents under all Material Contracts and Permits which
require the consent of any other party or person to the assignment or transfer
thereof either by the terms thereof or as a matter of law to the extent that any
assignment or transfer thereof would be deemed to have occurred thereunder by
reason of the consummation of the Merger.
SECTION 6.09 Information for Proxy Statement. Motoguzzi will cooperate
with North in the preparation of North's Proxy and Registration Statement
referred to in SECTION 7.05 and furnish to North all information concerning
itself and its officers and directors as North or its counsel may reasonably
request and that is required or customary for inclusion in such Proxy and
Registration Statement. Motoguzzi covenants that all of such information which
has been approved by TRG, Motoguzzi or their counsel (which approval will be
evidenced by a writing identifying the document, by draft date or otherwise,
prior to filing thereof with the Securities and Exchange Commission) and is
included in such Proxy and Registration Statement and any other written
information furnished by Motoguzzi for inclusion in the Proxy and Registration
Statement will comply in all material respects with the applicable provisions of
the Securities Exchange Act of 1934 ("Exchange Act") and will not at the time of
the effectiveness of the Proxy and Registration Statement and any amendments
thereof or supplements thereto and at the time of the North stockholders meeting
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein and necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading or necessary to correct any statement in any earlier filing with the
Commission of such Proxy and Registration Statement or any amendment thereof or
any supplement thereto or any earlier communication to the stockholders of North
with respect to the transactions contemplated by this Agreement.
SECTION 6.10 Cold Comfort Letter. Upon North providing Arthur Andersen,
LLP, the accountants for Motoguzzi ("Motoguzzi Accountants"), with a
representation letter in accordance with paragraphs 5, 6 and 7 of the Statement
on Auditing Standards regarding Letters for Underwriters, Motoguzzi shall cause
to be delivered to North a letter of Motoguzzi's Accountants, dated the
effective date of the Proxy and Registration Statement, and addressed to North,
in form and substance satisfactory to North (with such changes to which North
shall consent, it being understood that such consent shall not be unreasonably
withheld), to the effect that:
(a) they are independent certified public accountants with respect to
Motoguzzi within the meaning of the Exchange Act, including the applicable
published regulations thereunder;
(b) the consolidated financial statements of Motoguzzi certified by
them and included in the Proxy and Registration Statement comply as to form
in all material respects with the applicable accounting requirements of the
Exchange Act, including the published regulations thereunder; and
(c) they have carried out procedures to a specified date not more than
five business days prior to the date of the Proxy and Registration
Statement that do not constitute an audit in accordance with GAAP of the
consolidated financial statements of Motoguzzi, as follows: (i) read the
unaudited financial statements of Motoguzzi included in the Proxy and
Registration Statement, (ii) read the unaudited consolidated financial
statements of Motoguzzi for the period from the date of the most recent
financial statements included in the Proxy and Registration Statement
through the date of the latest available interim financial statements,
(iii) read the minutes of the meetings of stockholders and Boards of
Directors of Motoguzzi from the date of the most recent financial
statements of Motoguzzi included in the Proxy and Registration Statement to
such
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date not more than five business days prior to the date of the Proxy and
Registration Statement and (iv) consulted with certain officers of
Motoguzzi responsible for financial and accounting matters as to whether
any of the changes or decreases referred to below has occurred, and based
on such procedures, nothing has come to their attention which would cause
them to believe that (A) any unaudited financial statements of Motoguzzi
included in the Proxy and Registration Statement do not comply as to form
in all material respects with the applicable accounting requirements of the
Exchange Act and of the published regulations thereunder; (B) such
unaudited financial statements are not fairly presented in conformity with
GAAP applied on a basis substantially consistent with that of the audited
consolidated financial statements of Motoguzzi included in the Proxy and
Registration Statement; (C) as of such date not more than five business
days prior to the date of the Proxy and Registration Statement, there was
not, except as set forth in such letter, any (1) change in capital stock,
treasury stock or long-term debt of Motoguzzi or (2) any decrease in
capital in excess of par value, retained earnings, net assets, net current
assets or investments of Motoguzzi, in each case as compared with the
amounts shown in the most recent balance sheet of Motoguzzi included in the
Proxy and Registration Statement or (D) for the period from the date of
such balance sheet to the end of the month immediately preceding the date
of the Proxy and Registration Statement, there were not, except as set
forth in such letter, any decreases, as compared with the corresponding
period in the preceding year, in revenues or in the total or per share
amounts of income before extraordinary items, income before income taxes or
net income of Motoguzzi.
SECTION 6.11 Rule 145. Prior to the Closing Date Motoguzzi will identify
in a certificate from its president to North all persons who he reasonably
believes at the Effective Time will be deemed to be "affiliates" of Motoguzzi
for the purposes of Rule 145 under the Securities Act. The certificates
representing any securities to be issued pursuant to this Agreement to such
"affiliates" will bear an appropriate legend reflecting the requirements of
Rule 145. Prior to the Closing Date Motoguzzi will use its best efforts to cause
each such person to enter into an agreement in form and substance reasonably
acceptable to North pursuant to which each such person acknowledges his or its
responsibilities as an "affiliate."
SECTION 6.12 Lock-Up Agreements. At the Closing Date, Motoguzzi will
deliver to North agreements from such of its common stockholders and preferred
stockholders as set forth in SCHEDULE 6.12 to the effect that the those persons
will not publicly sell any of the Class A Common Stock to be received upon the
Merger or receivable upon conversion of the Class B Preferred Stock for a period
of six months from the Effective Time without the consent of the Independent
Committee (as hereinafter defined) of the Surviving Corporation. The
certificates representing any securities subject to these agreements will bear
an appropriate legend reflecting the terms of the agreement.
SECTION 6.13 Interim Financing. Motoguzzi and the Motoguzzi Subsidiaries
may enter into negotiations to obtain financing and may enter into such loan
agreements and other agreements related thereto, including without limitation
issuance of warrants or other equity securities, as Motoguzzi determines,
provided that (i) neither Motoguzzi nor the Motoguzzi Subsidiaries shall enter
into any such agreements unless North has consented thereto in writing, which
consent shall not be unreasonably withheld, provided that such consent shall not
be required for the issuance of (and notwithstanding anything to the contrary
provided in this Agreement, Motoguzzi may issue) warrants or other equity
securities issued in connection therewith if such issuance does not reduce the
equity ownership by North's stockholders in the Surviving Corporation (in which
event appropriate adjustment shall be made to the amount of Merger Consideration
allocated among the holders of outstanding Motoguzzi securities, but the
aggregate Merger Consideration shall not be increased), provided further that
North's consent shall be required and same may be withheld in North's sole
discretion, for the issuance of any warrants or other equity securities which
would reduce the equity ownership of North's stockholders in the Surviving
Corporation, (ii) such financing shall be repaid by Surviving Corporation
contemporaneously with or promptly following the Closing Date, unless otherwise
agreed to by North in writing and (iii) such financing shall not be entered into
after the Proxy and Registration Statement has been declared effective and
mailed to North's Stockholders.
SECTION 6.14 Lien Search. Motoguzzi shall use its best efforts to cause a
search to be made to ascertain whether there are any Intercompany Liens on any
assets of any Motoguzzi Subsidiary in Italy, provided that such kind of search
is generally available in Italy and the cost thereof is not greater than
$10,000.
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ARTICLE VII
COVENANTS OF NORTH
SECTION 7.01 North Conduct of Business. North covenants and agrees that,
from the date hereof through the Closing Date, except as otherwise set forth in
this Agreement, it will:
(a) conduct its business only in the ordinary course and in a manner
consistent with the current practice of such business, preserve
substantially intact the business organization of North, keep available the
services of the current employees of North, preserve the current
relationships with which North has significant business relations, preserve
the goodwill of North and comply with all requirements of law, the
violation of which could have a material adverse effect on the business or
operation of North; practices of such business;
(b) except for the granting of the Closing Date Options and for the
issuance of shares of stock as described in SECTION 4.04, not pledge, sell,
transfer, dispose of, or otherwise encumber or grant any rights or
interests to others of any kind with respect to, all or any part of its
capital stock or enter into any discussions or negotiations with any other
party to do so;
(c) not (i) issue any shares of its capital stock nor any options
(other than the Closing Date Options and the issuance of shares of stock as
described in SECTION 4.04), obligations, rights, warrants or other
securities convertible into or exchangeable for its capital stock, or any
other class of securities, whether debt or equity; or (ii) amend or
otherwise modify the terms of any such securities, options, obligations,
rights or warrants in a manner inconsistent with the provisions of this
Agreement or if the effect thereof shall be to make such terms more
favorable to the holders thereof;
(d) not declare any dividend or make any distribution in cash,
securities or otherwise on the outstanding shares of its capital stock, or
directly or indirectly redeem or purchase any such capital stock or except
as required by the Certificate of Incorporation of North in connection with
the redemption of less than 20% of the outstanding shares of Class A Common
Stock from persons who are not directors or officers of North.
(e) not, in any manner whatsoever, advance, transfer (other than in
payment for goods received or services rendered in the ordinary course of
business and as set forth on Schedule 4.05), or distribute to any security
holders of North or any of their affiliates, or otherwise withdraw, cash or
cash equivalents in any manner inconsistent with established cash
management practices, except to pay existing obligations of North in
accordance with its terms;
(f) not change any of its methods of accounting in effect at August
31, 1997;
(g) except pursuant to this Agreement, not prepay, before the
scheduled maturity thereof, any of its long-term debt, or incur any
obligation for borrowed money, whether or not evidenced by a note, bond,
debenture or similar instrument, other than indebtedness incurred in the
ordinary course of business consistent with past practices;
(h) not enter into or modify in any material respect any material
contract or lease of North;
(i) not take any action that will, or could reasonably be expected to,
result in any of its representations and warranties set forth in this
Agreement being inaccurate as of the Closing Date or in any of the
conditions to the Merger not being satisfied, if such inaccuracy or
non-satisfaction of condition would permit termination of this Agreement by
Motoguzzi or TRG in accordance with ARTICLE IX hereof;
(j) not agree in writing or otherwise to do any of the foregoing; of
(k) not incur any expenses or liabilities except to the extent
contemplated herein and described in SCHEDULE 4.05, without the prior
written consent of Motoguzzi.
SECTION 7.02 Fulfillment of Conditions. North shall use its best efforts
to fulfill the conditions specified in ARTICLES VIII AND IX to the extent that
the fulfillment of such conditions is within its control. The foregoing
obligation includes taking or refraining from such actions as may be necessary
to fulfill such conditions (including conducting the business of North in such
manner that on the Closing Date the representations and warranties of North
contained herein shall be accurate as though then made).
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SECTION 7.03 Filing of Initial Listing Application with Nasdaq. As soon as
practicable after the execution of this Agreement, North shall file with Nasdaq
an application to approve listing on the Nasdaq Stock Market of the shares of
Class A Common Stock and North shall take such actions as it reasonably deems
appropriate to cause such application to be approved.
SECTION 7.04 Access to Information; Confidentiality.
(a) Between the date of this Agreement and the Closing Date, North
will (i) permit Motoguzzi and its Representatives reasonable access to all
of the books, records, reports and other related materials, offices and
other facilities and properties of North; (ii) permit Motoguzzi and its
Representatives to make such inspections thereof as they may reasonably
request; and (iii) furnish Motoguzzi and its Representatives with such
financial and operating data (including without limitation the work papers
of North's accountants) and other information with respect to North as
Motoguzzi may from time to time reasonably request.
(b) North shall hold and shall cause their Representatives to hold in
strict confidence, unless compelled to disclose by judicial or
administrative process or by other requirements of law, all documents and
information concerning TRG or its affiliates furnished to them by Motoguzzi
or its Representatives in connection with the transactions contemplated by
this Agreement (except to the extent that such information can be shown to
have been (i) previously known by North, (ii) in the public domain through
no fault of North, or (iii) later lawfully acquired by North from another
source, which source shall not be the agent of North or person under
confidentiality obligation to Motoguzzi or its affiliates) and, except as
otherwise required by applicable law, rule or regulation, North shall not
release or disclose such information to any other person, except its
auditors, actuaries, attorneys, financial advisors, bankers and other
consultants and advisors who need to know same in connection with this
Agreement.
SECTION 7.05 Proxy and Registration Statement.
(a) North will prepare and file with the Securities and Exchange
Commission ("Commission") as soon as reasonably practicable after the date
hereof a proxy statement to be filed under the Exchange Act ("Proxy and
Registration Statement") by North, to be distributed by North in connection
with the North stockholder meeting and may be distributed by Motoguzzi in
connection with the Motoguzzi stockholder meeting and to register the
Merger Consideration, including shares of Class A Common Stock of North
issuable upon conversion of the Class B Preferred Stock and upon exercise
of the Nominal Warrants. During the course of the preparation of the Proxy
and Registration Statement, Motoguzzi will be given reasonable opportunity
to review and comment upon drafts of the Proxy and Registration Statement
and the comments of the Commission thereon and responses thereto.
(b) North covenants to Motoguzzi that the Proxy and Registration
Statement will comply in all material respects with the applicable
provisions of the Exchange Act and will not at the time of the
effectiveness of the Proxy and Registration Statement and any amendments
thereof or supplements thereto and at the time of the North stockholder
meeting contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading or necessary to correct any statement in any
earlier filing with the Commission of such Proxy and Registration Statement
or any amendment thereof or any supplement thereto or any earlier
communication to the stockholders of North with respect to the transactions
contemplated by this Agreement; provided, however, that no representation,
covenant or agreement is made by North with respect to information supplied
or approved by or on behalf of Motoguzzi or its affiliates for inclusion in
the Proxy and Registration Statement, as provided in SECTION 6.09 hereof.
Subject to the fiduciary duty of the Board of Directors of North, the Proxy
and Registration Statement shall contain statements, where appropriate, to
the effect that the Board of Directors of North has approved this Agreement
and the Merger and unanimously recommends that the stockholders of North
vote in favor of approving this Agreement and the Merger and the other
proposals presented in the Proxy and Registration Statement.
SECTION 7.06 Amendments to Certificate of Incorporation and Stock Option
Plan. The Proxy and Registration Statement will include provisions for the
adoption of amendments to the Certificate of Incorporation of North to change
the name of North from "North Atlantic Acquisition Corp." to "Moto Guzzi
Corporation,"
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to increase the authorized capital stock of North, to authorize the issuance of
one or more classes of preferred stock and to provide for a board of directors
with staggered terms of three years (five of whom are to be nominees of
Motoguzzi, two of whom are to be nominees of North and one of whom is to be a
nominee mutually acceptable to both Motoguzzi and North) and for the approval of
one or more stock option plans which will include the Closing Date Options,
conditioned upon the consummation of the Merger. The Proxy and Registration
Statement will also include provisions for the voting by shareholders for the
elimination of North's Class B Common Stock, which shall be recommended by
North's Board of Directors, but the consummation of the Merger shall not be
conditioned upon such action being approved by North's stockholders.
SECTION 7.07 No Securities Transactions. Neither North nor any of its
Representatives or affiliates shall engage in any transactions involving the
securities of TRG or Motoguzzi prior to the Closing Date.
SECTION 7.08 No Other Negotiations. Until this Agreement shall have been
terminated pursuant to its terms, neither North nor any of its Representatives,
officers, directors or affiliates shall, directly or indirectly, solicit,
institute, initiate, pursue or respond to any inquiries or enter into any
discussions, proposals or negotiations with any person concerning any merger,
sale of substantial assets, tender offer, sale of shares of stock or similar
transaction involving North or any of its assets or disclose, directly or
indirectly, other than to the shareholders of North, any information not
customarily disclosed to the public or such shareholders concerning North, or
except as required by law, afford to any other person access to the properties,
books or records of North, or otherwise assist any person preparing to make or
who has made such an offer, or enter into any agreement with any third party
providing for a business combination transaction, equity investment or sale of
significant amount of assets of North or recommend to its shareholders any of
the foregoing. North shall promptly notify Motoguzzi of any direct or indirect
inquiries, discussions, proposals or negotiations.
SECTION 7.09 Disclosure of Certain Matters. During the period from the
date hereof through the Closing Date, North shall give Motoguzzi prompt written
notice of any event or development that occurs that (a) had it existed or been
known on the date hereof would have been required to be disclosed under this
Agreement, (b) would cause its of the representations and warranties contained
herein to be inaccurate or otherwise misleading, (c) could reasonably be
expected to give Motoguzzi any reason to believe that any of the conditions set
forth in ARTICLE IX will not be satisfied, or (d) is of a nature that is or may
be materially adverse to the operations, prospects or condition (financial or
otherwise) of North.
SECTION 7.10 Blue Sky Compliance. North shall make such filings in each
jurisdiction wherein resides a shareholder of Motoguzzi as may be necessary
under the laws of such jurisdiction to permit the issuance of the Merger
Consideration thereto to the extent the laws of such jurisdiction permit such
issuance.
SECTION 7.11 Filing of Current Reports on Form 8-K. Promptly after
execution of this Agreement, North shall file a Current Report on Form 8-K with
the Commission to report the proposed Merger and the terms thereof.
SECTION 7.12 Directors' and Officers' Resignations. North will obtain the
resignations of all of the members of its Board of Directors and all of its
officers, effective at the Effective Time.
SECTION 7.13 Cold Comfort Letter. Upon Motoguzzi providing BDO Seidman,
the accountants for North ("North Accountants"), with a representation letter in
accordance with paragraphs 5, 6 and 7 of the Statement on Auditing Standards
regarding Letters for Underwriters, North shall cause to be delivered to
Motoguzzi a letter of North's Accountants, dated the effective date of the Proxy
and Registration Statement, and addressed to Motoguzzi, in form and substance
satisfactory to Motoguzzi (with such changes to which Motoguzzi shall consent,
it being understood that such consent shall not be unreasonably withheld), to
the effect that:
(a) they are independent certified public accountants with respect to
North within the meaning of the Exchange Act, including the applicable
published regulations thereunder;
(b) the consolidated financial statements of North certified by them
and included in the Proxy and Registration Statement comply as to form in
all material respects with the applicable accounting requirements of the
Exchange Act, including the published regulations thereunder; and
(c) they have carried out procedures to a specified date not more than
five business days prior to the date of the Proxy and Registration
Statement that do not constitute an audit in accordance with GAAP of the
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consolidated financial statements of North, as follows: (i) read the
unaudited financial statements of North included in the Proxy and
Registration Statement, (ii) read the unaudited consolidated financial
statements of North for the period from the date of the most recent
financial statements included in the Proxy and Registration Statement
through the date of the latest available interim financial statements,
(iii) read the minutes of the meetings of stockholders and Boards of
Directors of North from the date of the most recent financial statements of
North included in the Proxy and Registration Statement to such date not
more than five business days prior to the date of the Proxy and
Registration Statement and (iv) consulted with certain officers of North
responsible for financial and accounting matters as to whether any of the
changes or decreases referred to below has occurred, and based on such
procedures, nothing has come to their attention which would cause them to
believe that (A) any unaudited financial statements of North included in
the Proxy and Registration Statement do not comply as to form in all
material respects with the applicable accounting requirements of the
Exchange Act and of the published regulations thereunder; (B) such
unaudited financial statements are not fairly presented in conformity with
GAAP applied on a basis substantially consistent with that of the audited
consolidated financial statements of North included in the Proxy and
Registration Statement; (C) as of such date not more than five business
days prior to the date of the Proxy and Registration Statement, there was
not, except as set forth in such letter, any (1) change in capital stock,
treasury stock or long-term debt of North or (2) any decrease in capital in
excess of par value, retained earnings, net assets, net current assets or
investments of North, in each case as compared with the amounts shown in
the most recent balance sheet of North included in the Proxy and
Registration Statement or (D) for the period from the date of such balance
sheet to the end of the month immediately preceding the date of the Proxy
and Registration Statement, there were not, except as set forth in such
letter, any decreases, as compared with the corresponding period in the
preceding year, in revenues or in the total or per share amounts of income
before extraordinary items, income before income taxes or net income of
North.
SECTION 7.14 Lock-Up Agreements. At the Closing Date, North will deliver
to Motoguzzi agreements from all of its officers and directors to the effect
that those persons will not publicly sell any of the securities of the Surviving
Corporation for a period of six months from the Effective Time without the
consent of the Surviving Corporation.
ARTICLE VIII
JOINT COVENANTS OF THE PARTIES
SECTION 8.01 Further Action. Each of the Parties shall promptly execute
such documents and other papers and take such further actions as may be
reasonably required or desirable to carry out the provisions hereof and the
transactions contemplated hereby. Upon the terms and subject to the conditions
hereof, each of the Parties shall use its best efforts to take, or cause to be
taken, all actions and to do, or cause to be done and make effective as promptly
as practicable the transactions contemplated by this Agreement.
SECTION 8.02 Schedules. The Parties shall have the obligation to
supplement or amend the schedules being delivered concurrently with the
execution of this Agreement and annexed hereto with respect to any matter
hereafter arising or discovered which, if existing or known at the date of this
Agreement, would have been required to be set forth or described in the
schedules. Supplementation or amendment of a representation or warranty that has
a Motoguzzi Material Adverse Effect qualifier shall not create a right to
terminate this Agreement under SECTION 11.01(b) or 11.01(c) unless such
supplementation or amendment reflects a Motoguzzi Material Adverse Effect. The
obligations of the Parties to amend or supplement the schedules being delivered
herewith shall terminate on the Closing Date. Notwithstanding any such amendment
or supplementation, for purposes of ARTICLE X hereof, the representations and
warranties of the Parties shall be made with reference to the schedules as they
exist at the time of execution of this Agreement.
SECTION 8.03 Regulatory and Other Authorizations. The Parties will
promptly make all necessary filings and use their best efforts to obtain all
authorizations, consents, orders and approvals of all Federal, state and other
regulatory bodies and officials that are required for the consummation of the
transactions contemplated by this Agreement, including but not limited to the
Securities and Exchange Commission and self-regulatory agencies, and will
cooperate fully with each other in connection therewith.
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SECTION 8.04 Committees of the Board of Surviving Corporation. Prior to
the Closing Date, the Parties will designate (i) three persons from among the
proposed directors of the Surviving Corporation to be elected to a committee
("Independent Committee") of the Board of Directors of the Surviving
Corporation, which will have the authority, among other things to determine if
any action should or should not be instituted to recover Damages from the Remedy
Fund and (ii) such other committees of the Board of Directors as would be
required by Nasdaq if the Class A Common Stock were traded on Nasdaq. The
Independent Committee shall be comprised of persons who are not and have not
been during the ten years prior to the Effective Time employed by, affiliated
with or a shareholder of TRG, OAM, Motoguzzi or any Motoguzzi Subsidiary.
SECTION 8.05 Indemnification and Director and Officer Liability Insurance.
(a) North and Motoguzzi agree that all rights to indemnification for acts
or omissions occurring prior to the Effective Time now existing in favor of the
current directors and officers of North and Motoguzzi as provided in the
certificate of incorporation or bylaws of North and Motoguzzi, respectively,
shall survive the Merger and shall continue in full force and effect in
accordance with their terms.
(b) For a period of six (6) years after the Effective Time, the Surviving
Corporation shall cause to be maintained in effect the current policies of
directors' and officers' liability insurance maintained by Motoguzzi, or by TRG
to the extent that such policies provide coverage for Motoguzzi directors and
officers (or policies of at least the same coverage and amounts containing terms
and conditions that are no less advantageous) with respect to claims arising
from facts or events that occurred before the Effective Time; provided, however,
that the Surviving Corporation shall not be obligated to make annual premium
payments for such insurance to the extent that such premiums exceed an amount
equal to 200% of the annual premiums paid as of the date hereof for such
insurance and if such premiums exceed such amount the Surviving Corporation
shall purchase insurance policies in amounts and with coverage as reasonably can
be purchased for such amount.
(c) The Surviving Corporation agrees to remain liable for any
indemnification obligations to North's and Motoguzzi's current directors and
officers, in all capacities in which such directors or officers served North and
Motoguzzi prior to the Effective Time, as set forth in North's and Motoguzzi's
certificate of incorporation and bylaws to the extent such indemnification by
North and Motoguzzi is permitted under the DGCL.
(d) In the event the Surviving Corporation or any of its successors or
assigns (i) consolidates with or merges into any other person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger, or (ii) transfers or conveys all or substantially all of its properties
and assets to any person, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of the
Surviving Corporation assume the obligations set forth in this SECTION 8.05.
(e) The provisions of this SECTION 8.05 are intended to be for the benefit
of, and shall be enforceable by, each indemnified party and his or her heirs and
representatives.
SECTION 8.06 Payment of Intercompany Indebtedness. All indebtedness owed
by Motoguzzi and the Motoguzzi Subsidiaries to TRG and its subsidiaries, up to
$800,000, remaining after the actions described in SECTION 2.06(b) are taken,
subject to reduction in accordance with SECTION 11.01(b), shall be paid by
Motoguzzi to TRG as soon after the Effective Time as practicable.
ARTICLE IX
CONDITIONS TO CLOSING
SECTION 9.01 Conditions to Each Party's Obligations. The respective
obligations of each Party to consummate the Merger and the other transactions
contemplated by this Agreement shall be subject to the fulfillment, or waiver by
the other Party, at or prior to the Closing Date of the following conditions:
(a) Approval by North's Stockholders. This Agreement shall have been
approved by a vote of two-thirds in interest of the Class A Common Stock
and Class B Common Stock (the latter of which is entitled to two votes per
share), voting together as a single class in accordance with the DGCL and
the Certificate of Incorporation and By-Laws of North, the other
transactions contemplated hereby (other than those described in the last
sentence of SECTION 7.06) shall have been approved by such vote of the
Class A Common
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Stock and the Class B Common Stock as is required by the DGCL and the
Certificate of Incorporation and By-Laws of North, and the aggregate number
of shares of Class A Common Stock of North held by stockholders who are not
officers and directors of North who exercise their right to have North
redeem the shares of Class A Common Stock owned by them for cash in
accordance with the Certificate of Incorporation of North shall not be more
than 20% of the Class A Common Stock owned by such persons, outstanding as
of the record date for approval of the transaction.
(b) Approval by Motoguzzi Stockholders. The Merger will have been
approved and adopted by the holders of the Old Motoguzzi Common Stock and
Old Motoguzzi Preferred Stock, voting together as a single class in
accordance with the DGCL and Certificate of Incorporation and By-Laws of
Motoguzzi.
(c) Directors and Officers of Surviving Corporation. The persons
listed in SCHEDULE 1.06 shall have been elected or appointed the directors
or officers of Surviving Corporation, effective upon consummation of the
Merger.
(d) No Governmental Order or Regulation. There shall not be in effect
any order, decree or injunction (whether preliminary, final or appealable)
of a United States Federal or state court of competent jurisdiction, and no
regulation shall have been enacted or promulgated by any governmental
authority or agency, that prohibits consummation of the Merger.
(e) Dissenters. At the Closing Date, persons who are Dissenters and
persons who reside in jurisdictions in which North may not legally offer
the Merger Consideration will be the holders of such number of issued and
outstanding Old Motoguzzi Common Stock and Old Motoguzzi Preferred Stock as
would entitle them to receive, if they were not Dissenters, no more than
10% of the Merger Consideration.
(f) Effectiveness of Registration Statement. The Proxy and
Registration Statement shall have been declared effective under the
Securities Act, no stop order suspending the effectiveness of the Proxy and
Registration Statement shall have been issued, and no proceedings for that
purpose shall have been instituted.
(g) Blue Sky. There shall be delivered to North and Motoguzzi a Blue
Sky Memorandum prepared by North's counsel indicating the jurisdictions in
which the Merger Consideration may be paid to holders of Old Motoguzzi
Common Stock, Old Motoguzzi Preferred Stock and Old Motoguzzi Warrants,
based upon, among other things, their mailing addresses.
SECTION 9.02 Conditions to Obligations of Motoguzzi and TRG. The
obligations of Motoguzzi to consummate the Merger and the obligations of
Motoguzzi and TRG to consummate the other transactions contemplated by this
Agreement shall be subject to the fulfillment or waiver by Motoguzzi and TRG, as
applicable, at or prior to the Closing, of each of the following conditions:
(a) Representations and Warranties; Covenants. Without supplementation
after the date hereof, the representations and warranties of North
contained in this Agreement shall be, with respect to those representations
and warranties qualified by any materiality standard, true and correct in
all respects as of the Closing Date, and with respect to all other
representations and warranties, true and correct in all material respects
as of the Closing Date, with the same force and effect as if made as of the
Closing Date, and all the covenants contained in this Agreement to be
complied with by North on or before the Closing Date shall have been
complied with in all material respects, and Motoguzzi shall have received a
certificate from an appropriate officer of North to such effect.
(b) Legal Opinion. Motoguzzi shall have received from Graubard Mollen
& Miller, counsel to North, a legal opinion addressed to Motoguzzi and
dated the Closing Date, in the form of EXHIBIT F annexed hereto.
(c) Necessary Proceedings. All proceedings, corporate or otherwise, to
be taken by North in connection with the consummation of the transactions
contemplated by this Agreement shall have been duly and validly taken, and
copies of all documents, resolutions and certificates incident thereto,
duly certified by officers of North as of the Closing, shall have been
delivered to Motoguzzi and TRG.
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(d) Lock-Up Agreements. Motoguzzi shall have received from North the
lock up agreements from all of North's officers and directors which provide
that their securities of the Surviving Corporation may not be publicly sold
for six months after the Effective Time unless such public sale is approved
by the Surviving Corporation.
(e) Cold Comfort Letter. TRG and Motoguzzi shall have received the
cold comfort letter referred to in SECTION 7.13.
(f) Inducement Letters. Motoguzzi shall have received from David
Mitchell, in his capacity as Chief Executive Officer and Chairman of the
Board of North, and from each other North director, acting in such
capacity, a letter, reasonably satisfactory to Motoguzzi, to the effect
that such person has not taken any actions and is not aware of any actions
taken by any other party acting on behalf of North which would cause any of
the representations, warranties and agreements of North contained herein to
be breached in any material respect.
(g) Tax Opinion. Motoguzzi shall have received an opinion of Morrison
Cohen Singer & Weinstein, LLP to the effect that the Merger will constitute
a tax-free reorganization pursuant to Code Section 368(a)(1)(A) (and the
officers of North and Motoguzzi shall have delivered to such counsel
customary representation certificates of a kind reasonably necessary to
support such an opinion).
SECTION 9.03 Conditions to Obligations of North. The obligations of North
to consummate the Merger and the other transactions contemplated by this
Agreement shall be subject to the fulfillment or waiver by North, at or prior to
the Closing, of each of the following conditions:
(a) Representations and Warranties; Covenants. Without supplementation
after the date hereof, except as permitted by SECTION 8.02, the
representations and warranties of TRG and Motoguzzi contained in this
Agreement shall be, with respect to those representations and warranties
qualified by any materiality standard, true and correct in all respects as
of the Closing Date, and with respect to all other representations and
warranties, true and correct in all material respects as of the Closing
Date with the same force and effect as if made as of the Closing Date, and
all the covenants and agreements contained in this Agreement to be complied
with by TRG or Motoguzzi on or before the Closing Date, shall have been
complied with in all material respects by TRG and Motoguzzi, respectively,
except that TRG and Motoguzzi shall not be in breach of their obligation
contained herein as a result of non-compliance with a covenant or agreement
which is substantively the same as a representation and warranty unless
such representation and warranty is not true and correct as provided above,
when restated as of the Closing Date, and North shall have received
certificates from an appropriate officer of each of TRG and Motoguzzi,
respectively, to such effect.
(b) Legal Opinion. North shall have received from Morrison Cohen
Singer & Weinstein, LLP, counsel to Motoguzzi, a legal opinion addressed to
North dated the Closing Date, in the form of EXHIBIT G-1 annexed hereto.
North shall have received from Italian counsel to Motoguzzi, a legal
opinion relating to matters of Italian law addressed to North dated the
Closing Date, in the form of EXHIBIT G-2 annexed hereto. North shall have
received a legal opinion addressed to TRG and North from Maryland counsel
to TRG, a copy of which is attached as EXHIBIT G-3.
(c) Consents. Motoguzzi shall have obtained and delivered to North
consents to the Merger of such third parties, if any, as are necessary to
ensure the uninterrupted continuation of the Material Contracts, Leases and
Permits with respect to the business of Motoguzzi and the Motoguzzi
Subsidiaries.
(d) No Motoguzzi Material Adverse Change. At the Closing, there shall
have been no Motoguzzi Material Adverse Change.
(e) Necessary Proceedings. All proceedings, corporate or otherwise, to
be taken by TRG and Motoguzzi in connection with the consummation of the
transactions contemplated by this Agreement shall have been duly and
validly taken, and copies of all documents, resolutions and certificates
incident thereto, duly certified by the officers of TRG and Motoguzzi as of
the Closing, shall have been delivered to North.
(f) Rule 145 List. North shall have received from Motoguzzi the list
of deemed "affiliates" under Rule 145.
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(g) Lock-Up Agreements. North shall have received from Motoguzzi the
lock up agreements from the specified holders of Old Motoguzzi Common Stock
and Old Motoguzzi Preferred Stock which provides that their Merger
Consideration may not be publicly sold for six months after the Effective
Time unless such public sale is approved by the Independent Committee.
(h) Cold Comfort Letter. North shall have received from Arthur
Andersen LLP, the comfort letter referred to in SECTION 6.10.
(i) Fairness Opinion. North shall have received from Allen & Company
Incorporated a fairness opinion dated on or prior to the effective date of
the Proxy and Registration Statement in customary form stating in substance
that the terms of the proposed transaction are fair, from a financial point
of view, to the holders of North's Class A Common Stock.
ARTICLE X
REMEDIES OF NORTH FOLLOWING MERGER
SECTION 10.01 Scope of Article. This ARTICLE X shall apply solely in the
event the Merger is consummated in accordance with this Agreement. This ARTICLE
X is the sole and exclusive remedy for any Damages which may be suffered by any
of the Parties or by the Surviving Corporation in connection with or relating to
this Agreement, from and after consummation of the Merger.
SECTION 10.02 Establishment of Remedy Fund. Contemporaneous with the
consummation of the Merger, the Exchange Agent shall deliver in escrow to TRG,
as escrow agent pursuant to the Escrow Agreement attached hereto as EXHIBIT H
and subject to the provisions of SECTION 10.03, below, (x) all of the
certificates for shares of Class B Preferred Stock comprising part of the Merger
Consideration, (the "Preferred Escrow Shares") and (y) certificates for 100,000
shares of Class A Common Stock comprising part of the Merger Consideration
registered in the name of TRG (the "TRG Escrow Shares"; together with the
Preferred Escrow Shares, collectively the "Remedy Fund"). To facilitate the
transfer of the Preferred Escrow Shares pursuant to the Escrow Agreement, TRG is
hereby designated and appointed by each holder of Class B Preferred Stock as the
agent with irrevocable power of attorney to execute such stock powers as may be
required to effectuate any transfer of the Preferred Escrow Shares. The Remedy
Fund shall also include any and all stock distributions made in respect of the
securities in the Remedy Fund, such distributions to be held pursuant to the
Escrow Agreement. Subject to the limitations set forth in this ARTICLE X,
hereof, from and after the Effective Time, (i) the entire Remedy Fund shall be
available to compensate the Surviving Corporation for any Damages which may be
sustained, suffered or incurred by it, whether as a result of any Third Party
Claim or otherwise, which arise from or are in connection with or are
attributable to (x) the breach of any of the covenants, representations,
warranties, agreements, obligations or undertakings of Motoguzzi contained in
this Agreement, or (y) any judgment, order, government notice, government demand
or other government sanction, including any remediation or other action taken in
response thereto, arising out of or based upon any condition existing at the
Closing Date which is not described in the Ecoservice Srl report identified in
the Motoguzzi Disclosure Schedules and which violates any Laws, regardless of
whether the representation in SECTION 3.07 (b) or (c) is breached, and (ii) the
TRG Escrow Shares and such of the Preferred Escrow Shares as are owned by TRG
shall also be available to compensate the Surviving Corporation for any Damages
which may be sustained, suffered or incurred by it, whether as a result of any
Third Party Claim or otherwise, which arise from or are in connection with or
are attributable to the breach of any of the covenants, representations,
warranties, agreements, obligations or undertakings of TRG contained in this
Agreement. Upon final adjudication or resolution of a claim under this ARTICLE
X, TRG shall first deliver to the Surviving Corporation, such full number of the
Preferred Escrow Shares held in the Remedy Fund as equals or fractionally
exceeds the adjudicated or resolved amount of such claim divided by the Market
Price (as defined below) of the Class A Common Stock plus $1.00, and if the
claim is not fully recompensed by the delivery of the Preferred Escrow Shares,
then, additionally, that full number of TRG Escrow Shares held in the Remedy
Fund as equals or fractionally exceeds the amount of such claim remaining after
delivery of the Preferred Escrow Shares divided by the Market Price of the
Class A Common Stock. The "Market Price" of a share of Class A Common Stock will
be deemed to be the average of the last sales prices of the Class A Common Stock
for the ten business days ending on the day immediately prior to the final
adjudication or resolution of a claim under this ARTICLE X, as reported by The
Nasdaq Stock Market or any other United States stock
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exchange on which the Class A Common Stock is listed, or in the absence of such
reported prices, the determination of Market Price shall be made jointly by TRG
and the Independent Committee. Any TRG Escrow Shares and Preferred Escrow Shares
delivered to the Surviving Corporation in settlement of a claim under this
ARTICLE X will be canceled and returned to the status of authorized and
un-issued shares of capital stock of the Surviving Corporation. If the Merger is
consummated, TRG shall not, in any event, have any liability to North, the
Surviving Corporation, their respective stockholders or any other person for any
Damages except to the extent of its interest in the Remedy Fund.
SECTION 10.03 Claims Against Remedy Fund. TRG is hereby designated the
agent of holders of Class B Preferred Stock for purposes of prosecuting,
defending or settling any claim brought under this ARTICLE X. Actions taken or
omitted to be taken, and or consents given, or omitted to be given, by TRG in
connection with any such claim shall bind the interests of all of such holders
of Class B Preferred Stock in respect of such claim. Upon determination by the
Independent Committee that an event giving rise to a claim under SECTION 10.02
above has occurred, the Independent Committee shall give notice to TRG of such
determination, specifying (i) the covenant, representation or warranty,
agreement, undertaking or obligation contained herein which it asserts has been
breached, (ii) in reasonable detail, the nature and dollar amount of any claim
the Surviving Corporation may have against the Remedy Fund as a result thereof,
and (iii) whether such claim arises from the commencement of a Third Party
Claim. The Independent Committee and TRG shall, in good faith, attempt to
resolve any such claim. If, within 30 days of its notification to TRG, any claim
has not been resolved, the Independent Committee or TRG, individually and as
agent for all holders of Class B Preferred Stock, shall have the right, but not
the obligation, to seek to have the claim resolved by mediation by submission to
JAMS/Endispute or its successor, and if the matter is not resolved through such
mediation process within the first to occur of (i) the expiration of 60 days
from such submission, or (ii) the holding of two meetings of TRG and North
(acting by such independent Committee) with such mediator, then such claim shall
be submitted to final and binding arbitration, provided, however, that (x)
except for an action arising out of a breach by TRG of any of the
representations or warranties made, or covenants given, by TRG hereunder, no
mediation or arbitration shall be brought against TRG except solely in its
capacity as agent for the holders of Class B Preferred Stock and (y) any claim
which arises from a Third Party Claim shall not be resolved or submitted to
mediation or arbitration until 30 days following resolution of such Third Party
Claim, and TRG, as agent for the Surviving Corporation, (i) shall have the right
to assume the defense of such Third Party Claim, by counsel reasonably
acceptable to the Independent Committee, the cost thereof to be borne by the
Surviving Corporation, subject to reimbursement if it is determined that the
claim is compensable to the Surviving Corporation as provided in this ARTICLE X,
in which event such costs shall constitute part of the Damages, recoverable as
and to the extent provided in this ARTICLE X and (ii) TRG may settle any such
Third Party Claim on behalf of the Surviving Corporation, subject to the
reasonable approval of the Independent Committee. Upon final adjudication or
settlement of any claim under SECTION 10.02, TRG shall deliver to the Surviving
Corporation that number of Preferred Escrow Shares and TRG Escrow Shares
sufficient to recompense Surviving Corporation in satisfaction of such claim as
calculated in SECTION 10.02 above, from the Remedy Fund; provided, however, that
the TRG Escrow Shares shall not be so delivered unless and until all of the
Preferred Escrow Shares have been so delivered. In any action or proceeding
between the Parties hereto, each Party shall bear its own costs and expense,
except as otherwise provided in SECTION 10.08.
SECTION 10.04 Duration of Remedy Fund. Other than claims for breach of the
representations and warranties made by Motoguzzi under SECTIONS 3.01, 3.02,
3.04, 3.10, 3.22 and the first sentence of SECTION 3.15 (collectively "Core
Claims"), no notice of claim against the Remedy Fund may be given and shall not
be valid if given, after the 60th day following the mailing by certified mail,
return receipt requested, or delivery by hand, to each then-serving member of
the Board of Directors of the Surviving Corporation of the audited financial
statements of the Surviving Corporation for its fiscal year ending December 31,
1998, together with the executed report of the auditors, and on such 60th day,
there shall be released to TRG the TRG Escrow Shares except to the extent of the
amount by which the aggregate dollar amount of all claims then asserted under
this ARTICLE X exceeds the value of the Preferred Escrow Shares then remaining
in the Remedy Fund as calculated in SECTION 10.02 above. Notice of Core Claims
against the Remedy Fund may not be given, and shall not be valid if given, after
the 60th day following the mailing by certified mail, return receipt requested,
or delivery by hand, to each then-serving member of the Board of Directors of
the Surviving Corporation of the audited financial statements of the Surviving
Corporation for the fiscal year ending December 31, 1999, together
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with the executed report of the auditors. Except as provided hereinabove in
respect of the TRG Escrow Shares, the Remedy Fund will remain in place until the
later of (i) the date of final settlement or adjudication of any pending claims
made against the securities in the Remedy Fund and delivery of the appropriate
securities, or (ii) the date after which no notice of claims may be given. After
delivery of securities from the Remedy Fund to the Surviving Corporation in full
settlement of any claims, TRG shall deliver to the registered owners thereof all
shares then held by it in the Remedy Fund.
SECTION 10.05 Amount of Claim. No claim may be brought against the Remedy
Fund unless, and then and only to the extent that, the amount of Damages
suffered in respect of all claims asserted, without duplication, net of any
offsets pursuant to SECTION 10.06 below exceeds $750,000.
SECTION 10.06 Offset. There shall be offset against the amount of Damages
otherwise recoverable under this ARTICLE X, an amount equal to the difference
obtained (not less than $0) by subtracting (x) the Book Value (as defined below)
of all Specified Assets (as defined below) which are sold or disposed of as
provided in clause (y), from (y) the aggregate consideration paid and agreed to
be paid (after deduction for sales commissions, sale expenses and sales and
income taxes and any similar deductions) to Motoguzzi from the sale to a bona
fide, third party purchaser in an arms-length transaction, of such Specified
Assets or the receipt by Motoguzzi of insurance or condemnation proceeds in
respect of the total or partial loss of or condemnation in respect of such
Specified Assets, in all events at any time after December 31, 1997 and prior to
resolution of any claim brought against the Remedy Fund, less the amount of any
loss sustained upon a sale of a Specified Asset or upon a destruction or
condemnation of a Specified Asset from the Book Value of that Specified Asset.
The amount of such offset shall be further reduced by the amount of any
consideration for any Specified Asset agreed to be paid to the extent that such
consideration must be discounted in accordance with GAAP. In no event shall the
amount of offset hereunder be less than $0. The Book Value of a Specified Asset
shall be derived from the Motoguzzi Consolidated Balance Sheet as at December
31, 1997, increased by any amount actually expended by Motoguzzi since December
31, 1997 to improve its cash sale value. The Specified Assets shall include only
those assets of Motoguzzi as of December 31, 1997 in the following categories:
real property, fixtures, plant, equipment and machinery, and those items
comprising the Motoguzzi Museum, none of which has been sold as of the date
hereof, except for non-material sales which, in the aggregate, have resulted in
a gain of not more than $15,000.
SECTION 10.07 Representations and Warranties. For purposes of this
ARTICLE X, for breach of a representation or warranty of a Party under this
Agreement, the representations and warranties shall be the representations and
warranties of a Party made herein, on the date hereof, without subsequent
supplementation, modification or amendment.
SECTION 10.08 Mediation and Arbitration. Subject to the provisions of
Section 10.03, the Parties agree that any and all disputes, claims or
controversies arising out of or relating to the Escrow Fund or any other claim
for Damages under this ARTICLE X, including without limitation the validity of
such claim or the amount of Damages, if not resolved by the Parties, will be
submitted to JAMS/Endispute, or its successor, for mediation, and if the matter
is not resolved through mediation, then it will be submitted for final and
binding arbitration. Any such arbitration shall be final and binding
arbitration, conducted in accordance with the commercial arbitration rules of
the American Arbitration Association, and shall be held in New York City. The
costs of mediation and arbitration shall be allocated by the mediator or by
order of the arbitrators, as the case may be.
ARTICLE XI
TERMINATION
SECTION 11.01 Methods of Termination. The transactions contemplated herein
may be terminated and/or abandoned at any time prior to the Closing only as
follows:
(a) By mutual written consent of North on the one hand and Motoguzzi
and TRG on the other hand;
(b) By either Motoguzzi or TRG on the one hand or North on the other
hand (if the terminating party is not then in material breach of its
obligations hereunder) if (i) a material default or breach shall be made by
the other Party with respect to the due and timely performance of any of
its covenants and agreements contained herein and such default cannot be
cured within a reasonable period of time, provided, however,
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that with respect to those covenants and agreements made by Motoguzzi or
TRG which are substantively the same as representations and warranties of
Motoguzzi or TRG, the foregoing shall be limited to only those covenants
and agreements, the non-performance of which also results in such
representation and warranty not being true and correct as provided in
clause (ii) hereof, or (ii) if any of the other Party's representations and
warranties (x) made without any materiality standard, are not true and
correct in all material respects as of the Closing Date or (y) made with
any materiality standard, are not true and correct as of the Closing Date.
Notwithstanding the foregoing, if, on the Closing Date there are any
Intercompany Liens, then (A) if such Intercompany Liens secure indebtedness
in an aggregate amount greater than U.S. $1,500,000 then North may
terminate this Agreement and (B) if such Intercompany Liens secure
indebtedness in an aggregate amount greater than U.S. $550,000, then for
purposes of this SECTION 11.01(b) neither Motoguzzi nor TRG shall be deemed
to have breached any representation or warranty contained in this
Agreement, provided that such indebtedness in excess of U.S. $550,000 shall
be reduced by reduction of the $800,000 intercompany indebtedness described
in Section 2.06(b), on a dollar-for-dollar basis, and application of the
amount of such reduction of intercompany indebtedness to reduce the
indebtedness in excess of $550,000 which is secured by such Intercompany
Liens.
(c) By North if (i) Motoguzzi makes an amendment or supplement to any
Schedule hereto in accordance with SECTION 8.02 hereof and such amendment
or supplement reflects a Motoguzzi Material Adverse Effect after the date
hereof, or (ii) a Motoguzzi Material Adverse Change shall have occurred
after the date hereof, or (iii) Motoguzzi enters into any agreement to
effect any transaction described in SECTION 6.04 or Motoguzzi's Board of
Directors withdraws its recommendation of the Merger or recommends to
Motoguzzi's shareholders the approval of any such transaction other than
the Merger;
(d) By Motoguzzi if (i) North makes an amendment or supplement to any
schedule hereto in accordance with SECTION 8.02 hereof and such amendment
or supplement reflects a North Material Adverse Effect, after the date
hereof, or (ii) North enters into any agreement to effect any transaction
described in SECTION 7.08 or North's Board of Directors withdraws its
recommendation of the Merger or recommends to North shareholders the
approval of any such transaction other than the Merger;
(e) By Motoguzzi or TRG on the one hand or North on the other hand if
the Effective Time has not occurred within six months following the date of
this Agreement for any reason unless the Parties agree to an extension in
writing, provided that the right to terminate this Agreement under this
Paragraph (e) shall not be available to a Party that is in breach of any
representation, warranty or covenant in this Agreement, which breach would
entitle any other Party to terminate this Agreement;
SECTION 11.02 Effect of Termination. In the event of termination pursuant
to SECTION 11.01 hereof, written notice thereof shall forthwith be given to the
other Parties and all obligations (except as set forth in this SECTION 11.02) of
the Parties shall terminate and no Party shall have any right against any other
Party hereto. Notwithstanding the foregoing, (i) if this Agreement is so
terminated by any Party under SECTION 11.01(b), (c) or (d) above, (other than a
termination resulting from a breach of a representation or warranty which was
true when made, but which cannot subsequently be restated as true as a result of
the occurrence of events or circumstances beyond the control of the representing
Party), it is expressly agreed and understood that the terminating Party's right
to pursue all legal remedies for breach of contract or otherwise, including,
without limitation, Damages (other than consequential damages, which damages
shall not be recoverable), relating thereto, shall survive such termination
unimpaired, subject however to SECTION 11.03 and to the extent North recovers
any Damages against Motoguzzi, TRG will pay such Damages if not paid promptly by
Motoguzzi; or (ii) if this Agreement is terminated by North under
SECTION 11.01(c)(iii) and within 365 days thereafter Motoguzzi consummates any
transaction described in SECTION 6.04, or if Motoguzzi refuses to consummate the
Merger despite the satisfaction of all conditions precedent to Motoguzzi's
obligation to do so, or Motoguzzi does not in good faith use its commercially
reasonable efforts to satisfy all the conditions precedent to North's obligation
to consummate the Merger which are within Motoguzzi's control, and provided that
North is not in material breach of its obligations contained in this Agreement,
Motoguzzi shall pay to North in lieu of any other right or remedy of North or
any claim for any Damages which North might otherwise have, the greater of
(A) the sum of $500,000 as liquidated damages and not as a penalty, or (B) the
actual documented out-of-pocket expenses of North related solely and directly to
the transaction contemplated by this Agreement (such applicable amount being
referred to as the "Motoguzzi Breakup Fee") promptly following demand therefor
by North and if
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Motoguzzi fails to do so, then TRG shall pay the Motoguzzi Break-Up Fee; or
(iii) if this Agreement is terminated by Motoguzzi under
SECTION 11.01(d)(ii) or if North refuses to consummate the Merger despite the
satisfaction of all conditions precedent to North's obligation to do so, or
North does not in good faith use its commercially reasonable efforts to satisfy
all the conditions precedent to Motoguzzi's obligation to consummate the Merger
which are within North's control, and provided that Motoguzzi is not in material
breach of its obligations contained in this Agreement and if, but only if, in
any such event, within 365 days thereafter North consummates any transaction
described in SECTION 7.08, North shall pay to Motoguzzi, as liquidated damages
and not as a penalty, and in lieu of any other right or remedy of Motoguzzi or
any claim for Damages which Motoguzzi or TRG might otherwise have, the sum of
$500,000 ("North Breakup Fee") promptly following demand therefor by Motoguzzi.
If the transactions contemplated by this Agreement are terminated and/or
abandoned as provided herein:
(a) Each Party hereto will return all documents, work papers and other
material (and all copies thereof) of the other Party, relating to the
transactions contemplated hereby, whether so obtained before or after the
execution hereof, to the Party furnishing the same; and
(b) All confidential information received by either Party hereto with
respect to the business of the other Party shall be treated in accordance
with SECTIONS 6.02(b) and 7.04(b) hereof which sections shall survive
termination and abandonment.
SECTION 11.03 Limitation on Damages. Notwithstanding anything to the
contrary elsewhere in this Agreement, neither TRG, Motoguzzi, any Motoguzzi
Subsidiary or any officers, directors, affiliates, agents or Representatives of
any of the foregoing will make any monetary claim against North to the extent
that such claim would adversely affect the amount of funds available for
distribution to North's Class A stockholders from the escrow funds held by Chase
Manhattan Bank established with part of the proceeds of the public offering by
North in August 1997, except in the circumstances in which North would be
obligated to pay the North Breakup Fee (and in such event only to the extent of
such North Breakup Fee). Notwithstanding anything to the contrary elsewhere in
this Agreement, if the Merger is not consummated, neither North, nor any
officers, directors, affiliates, agents or Representatives of North will make
any monetary claim against Motoguzzi or TRG in excess of the actual documented
out-of-pocket costs and expenses incurred by North in connection with the
transactions contemplated by this Agreement, except in the circumstances in
which Motoguzzi would be obligated to pay the Motoguzzi Breakup Fee (and in such
event only to the extent of the Motoguzzi Breakup Fee).
ARTICLE XII
DEFINITIONS
SECTION 12.01 Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"Business Day" means a day of the year on which banks are not required
or authorized to be closed in the City of New York.
"Damages" means the dollar amount of any loss, damage, expense or
liability, including, without limitation, reasonable attorneys' fees and
disbursements incurred by a Party in any action or proceeding between such
Party and the other Party or Parties hereto or between such Party and a
third party, which is determined (as provided in ARTICLE X or ARTICLE XI)
to have been sustained, suffered or incurred by a Party and to have arisen
from or in connection with an event or state of facts which is subject to
claim under such ARTICLE X or ARTICLE XI; the amount of Damages shall be
the amount finally determined by a court of competent jurisdiction or
appropriate governmental administrative agency (after the exhaustion of all
appeals) or the amount agreed to upon settlement in accordance with the
terms of this Agreement.
"Environmental, Health, and Safety Requirements" means all federal,
state, local and foreign statutes, regulations, and ordinances concerning
public health and safety, worker health and safety, and pollution or
protection of the environment, including without limitation all those
relating to the presence, use, production, generation, handling,
transportation, treatment, storage, disposal, distribution, labeling,
testing,
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processing, discharge, release, threatened release, control, or cleanup of
any hazardous materials, substances or wastes, as such requirements are
enacted and in effect on or prior to the Closing Date.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Lien" means any lien, claim, charge, option, security interest,
restriction or encumbrance.
"Motoguzzi Material Adverse Change" means any material adverse change
in the condition, financial or otherwise, of Motoguzzi and the Motoguzzi
Subsidiaries, taken as a whole, from such condition as it existed at
December 31, 1997, and as reflected in Motoguzzi's December 31, 1997
Financial Statements, excluding, however, (i) any suspension of operations
of Motoguzzi and the Motoguzzi Subsidiaries, taken as a whole unless such
suspension continues for more than 30 consecutive business days, (ii) any
decrease in sales of Motoguzzi motorcycles to unaffiliated third parties
unless such decrease is at a rate, determined on a cumulative basis for the
period January 1, 1998 through the end of the month immediately preceding
the month in which a determination is made (the "Operating Period"), which
is greater than 900 motorcycles below the Motoguzzi 1998 motorcycles sales
budget for the Operating Period, provided that motorcycles which are sold
at more than 30% off of Motoguzzi's suggested retail price shall not be
deemed sold for purposes hereof, (iii) any recall of motorcycles unless
such recall is for more than 1,000 motorcycles and requires that repairs be
made which will cost greater than 20% of Motoguzzi's suggested retail price
of such motorcycles, (iv) any interruption in supply of material components
or other materials necessary for the manufacture and assembly of
motorcycles, unless such interruption lasts for more than 60 days and
results in a decrease in production of more than 500 motorcycles, or
(v) the assertion after the date hereof of any claims, the incurring after
the date hereof of any liabilities or the occurrence after the date hereof
of any other event or circumstance unless such claims or liabilities, or
losses or costs related to such events or circumstances, individually or in
the aggregate are in excess of $3 million after reduction to the extent of
any applicable insurance coverage and (A) if it is a claim or liability, it
has a manifestly reasonable likelihood of success, and (B) if it is a claim
or liability which results from a notice or demand by any governmental
agency, (x) such governmental agency shall have competent jurisdiction and
(y) the ability of such governmental agency to enforce against Motoguzzi
any claim or liability in respect thereof would not terminate as a result
of Motoguzzi relocating its manufacturing and assembly operations away from
its present premises at Mondello, Italy or the substance of such claim
would not be cured by Motoguzzi incurring capital expenditures which are
included in its capital expenditure budget.
"Motoguzzi Material Adverse Effect" means a material adverse effect on
the results of operations, financial condition, business, assets or
prospects of Motoguzzi and the Motoguzzi Subsidiaries (as defined
hereinafter) taken as a whole; provided that if the foregoing has a
financial effect then a Motoguzzi Material Adverse Effect shall be deemed
to exist if such financial effect is greater than $750,000; provided
further, that if the applicable event, circumstance or occurrence is
included in any of clauses (i) through (v) of the definition of Motoguzzi
Material Adverse Change, then only for purposes of determining whether the
condition in SECTION 9.03(a) has been satisfied and whether this Agreement
may be terminated as provided in SECTION 11.01(b) or SECTION 11.01(c), a
Motoguzzi Material Adverse Effect shall not be caused thereby unless a
Motoguzzi Material Adverse Change would have resulted therefrom.
"Motoguzzi Subsidiaries" means Motoguzzi S.p.A, Moto Guzzi France
S.A., and Moto America, Inc.
"North Material Adverse Effect" means a material adverse effect on the
results of operations, financial condition, business, assets or prospects
of North.
"Party" means each of North, Motoguzzi and TRG (collectively, the
"Parties").
"Representatives" of either Party means such Party's employees,
accountants, auditors, actuaries, counsel, financial advisors, bankers,
investment bankers and consultants.
"Securities Act" means the Securities Act of 1933, as amended.
"Tax" or "Taxes" means all income, gross receipts, sales, stock
transfer, excise, bulk transfer, use, employment, franchise, profits,
property or other taxes, fees, stamp taxes and duties, assessments, levies
or charges of any kind whatsoever, together with any interest and any
penalties, additions to tax or additional amounts imposed by any taxing
authority with respect thereto.
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"Third Party Claim" means a claim, demand, suit, proceeding or action
by a person, firm, corporation or government entity other than a Party or
any affiliate of such Party.
ARTICLE XIII
GENERAL PROVISIONS
SECTION 13.01 Expenses. Except as otherwise provided herein, all costs and
expenses, including, without limitation, fees and disbursements of
Representatives, incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the Party incurring such costs and
expenses, whether or not the Closing shall have occurred. Notwithstanding the
foregoing, if the Closing shall occur, then such costs and expenses incurred by
TRG, Motoguzzi and the Motoguzzi Subsidiaries shall be paid by TRG and the
amount thereof shall be included in the intercompany indebtedness referred to in
Section 8.06. Motoguzzi and TRG acknowledge and agree that in SCHEDULE 4.05
North has disclosed that it is obligated and will become further obligated for
fees and expenses (including without limitation the fees and expenses of
Graubard Mollen & Miller, its counsel, Allen & Company, its investment bankers,
and BDO Seidman, LLP its independent accountants) incurred by it in connection
with the transactions contemplated by this Agreement. It is understood and
agreed that, subject to the limitations set forth in SECTIONS 4.05 and 7.01(k)
hereof, certain of such fees and expenses may be paid by North prior to the
execution of this Agreement. Motoguzzi and TRG agree to refrain from taking any
action which would prevent or delay the timely payment by North of reasonable
fees duly and lawfully incurred, to the extent consistent with the limitations
set forth in ARTICLE IV hereof. Subject to the foregoing, the Surviving
Corporation shall take all action necessary to pay promptly all of the foregoing
fees and expenses incurred, but not paid, by North prior to the Effective Time.
SECTION 13.02 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered if delivered personally or by telecopy, one day
after delivery to a nationally recognized courier, or three business days after
mailed by registered mail (postage prepaid, return receipt requested), in each
case, to the Parties at the following addresses (or at such other address for a
Party as shall be specified by like notice, except that notices of changes of
address shall be effective upon receipt):
(a) If to TRG or Motoguzzi,
c/o Trident Rowan Group, Inc.
Two Worlds Fair Drive
Franklin Township, Somerset, New Jersey 08873
in all cases with a copy to:
Morrison Cohen Singer & Weinstein, LLP
750 Lexington Avenue
New York, New York 10022
Attention: David Lerner, Esq.
Telecopier # 212-735-8708
(b) If to North:
North Atlantic Acquisition Corp.
5 East 59th Street
Third Floor
New York, New York 10022
Attention: David Mitchell
Telecopier No.: 212-588-0286
with a copy to: Graubard Mollen & Miller
600 Third Avenue
New York, New York 10016
Attention: David Alan Miller, Esq.
Telecopier No.: 212-818-8881
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SECTION 13.03 Press Release; Public Announcements. Promptly after
execution of this Agreement, North and TRG may issue press releases in the form
attached hereto as EXHIBIT I. The Parties shall not make any other public
announcements in respect of this Agreement or the transactions contemplated
herein without prior consultation and approval by the other Party as to the form
and content thereof, which approval shall not be unreasonably withheld.
Notwithstanding the foregoing, any Party may make any disclosure which its
counsel advises is required by applicable law or regulation, in which case the
other Party shall be given such reasonable advance notice as is practicable in
the circumstances and the Parties shall use their best efforts to cause a
mutually agreeable release or announcement to be issued.
SECTION 13.04 Amendment. This Agreement may not be amended or modified
except by an instrument in writing signed by the Parties.
SECTION 13.05 Waiver. At any time prior to the Closing, either Party may
(a) extend the time for the performance of any of the obligations or other acts
of the other Party, (b) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto and (c)
waive compliance with any of the agreements or conditions contained herein. Any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed by the Party to be bound thereby.
SECTION 13.06 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 13.07 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any Party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the Parties shall negotiate
in good faith to modify this Agreement so as to effect the original intent of
the Parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the extent possible.
SECTION 13.08 Entire Agreement. This Agreement and the schedules and
exhibits hereto and the documents executed contemporaneously herewith constitute
the entire agreement and supersede all prior agreements and undertakings, both
written and oral, among the Parties with respect to the subject matter hereof
and, except as otherwise expressly provided herein, are not intended to confer
upon any other person any rights or remedies hereunder.
SECTION 13.09 Benefit; Assignment. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of the
Parties. This Agreement is not assignable by any Party without the express
written consent of the other Parties.
SECTION 13.10 Governing Law; Consent to Jurisdiction; Specific
Performance. This Agreement shall be governed by, and construed in accordance
with, the law of the State of New York, regardless of the laws that might
otherwise govern under applicable principles of conflicts of law. Each Party
hereby submits to the exclusive jurisdiction of the courts (city, state and
federal) located in the County of New York, State of New York, for any action,
proceeding or claim brought by any other Party pursuant to this Agreement or any
other agreement, instrument or other document executed and delivered in
connection with this Agreement or pursuant hereto and waives any objection to
the venue of any such suit, action or proceeding and the right to assert that
such forum is not a convenient forum. Service of process in any such action or
proceeding brought against a Party may be made by registered mail addressed to
such Party at the address set forth in SECTION 13.02 or to such other address as
such Party shall notify the other Party in writing is to be used for such
purpose pursuant to SECTION 13.02. Any Party may enforce any right arising
hereunder by action or other appropriate proceeding, either in equity or at law,
and may seek specific performance of any of the obligations arising hereunder.
SECTION 13.11 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different Parties in separate counterparts, each of
which when executed shall be deemed to be an original but all of which when
taken together shall constitute one and the same agreement.
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
as of the date first written above.
MOTO GUZZI CORP. NORTH ATLANTIC ACQUISITION CORP.
By: /s/ HOWARD CHASE By: /s/ DAVID J. MITCHELL
---------------------------- -----------------------------
Name: Howard Chase Name: David J. Mitchell
Authorized Signatory Title: Chairman of the Board
TRIDENT ROWAN GROUP, INC.
(With respect to applicable portions of Articles II, III, V, VI, VIII,
X, XI and XIII only)
By: /s/ HOWARD CHASE
------------------------
Name: Howard Chase
Title: President
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ANNEX II
July 23, 1998
Board of Directors
North Atlantic Acquisition Corporation
5 East 59th Street
3rd Floor
New York, NY 10022
Gentlemen:
We have been advised that North Atlantic Acquisition Corporation ("NAAC")
has entered into a merger agreement (the "Merger Agreement") with Moto Guzzi
Corporation ("Guzzi Corp.") whereby Guzzi Corp. would exchange all of its
outstanding common and preferred stock for common shares of NAAC, convertible
redeemable preferred shares of NAAC and nominal warrants (the "Merger").
Pursuant to an agreement letter dated May 8, 1998 (the "Engagement
Letter"), you have asked us to render our opinion as to the fairness, from a
financial point of view, of the terms of the Merger to the Class A common
stockholders of NAAC.
As you know, pursuant to the Engagement Letter, Allen & Company
Incorporated ("Allen") has also been providing NAAC with certain financial
advice and assistance in consummation of the Merger and, upon consummation of
the Merger, will, at NAAC's request, provide NAAC with certain additional
financial advisory services including (i) reviewing NAAC's financial plans,
strategic plans and business alternatives; (ii) advising NAAC with respect to
financing alternatives involving equity, debt or a combination thereof; and
(iii) advising NAAC with respect to strategic acquisitions. In consideration of
these services, upon consummation of the Acquisition, Allen will receive
warrants to purchase 350,000 NAAC Common Shares upon the terms and conditions
previously agreed.
As part of its investment banking business, Allen is continually engaged in
the valuation of businesses and their securities in connection with mergers and
acquisitions, private placements and related financings, bankruptcy
reorganizations and similar recapitalizations, negotiated underwritings,
secondary distributions of listed and unlisted securities and valuations for
corporate and other purposes.
In arriving at our conclusion, we have considered, among other factors we
deemed relevant, (i) the nature of the operations and financial history of Guzzi
Corp., including discussions with senior management of Guzzi Corp. relating to,
among other things, Guzzi Corp.'s operating budget and business plan;
(ii) Guzzi Corp.'s audited and unaudited financial statements through March 31,
1998, as provided to us by Guzzi Corp.'s management; (iii) certain financial and
stock market information for certain other companies in businesses we deemed
comparable or related to those of Guzzi Corp.; (iv) the terms of the Merger
Agreement; and (v) NAAC's audited and unaudited financial statements.
In arriving at our conclusion, Allen among other things: (i) performed, a
discounted cash flow analysis relating to Guzzi Corp.'s financial projections;
(ii) reviewed and analyzed public information, including certain stock market
data and financial information relating to selected companies with operating
statistics and dynamics similar to those of Guzzi Corp.; and (iii) reviewed
public financial and transaction information relating to consideration paid in
certain merger and acquisition transactions for selected companies similar to
Guzzi Corp.
In arriving at our conclusion, we have assumed and relied upon the accuracy
and completeness of the financial and other information provided by each of NAAC
and Guzzi Corp., without undertaking any independent verification of such
information or any independent valuation or appraisal of the value of NAAC or of
the assets or businesses of Guzzi Corp. With respect to the operating budget and
business plan information of Guzzi Corp. which we reviewed, we assumed such
materials were reasonably prepared on a basis reflecting the
A-II-1
<PAGE>
best currently available information and judgements of the senior management of
Guzzi Corp. as to the future financial performance of Guzzi Corp. Our analysis
was performed at the request and solely for the benefit of the NAAC Board of
Directors, and not to offer or provide advice to any other party. Our conclusion
in connection therewith does not constitute a recommendation that any
stockholder of NAAC vote to approve, ratify, disapprove or abstain from voting
in connection with any action considered by the stockholders of NAAC.
Based upon and subject to the foregoing, it is our opinion that as of the
date hereof, the Merger is fair, from a financial point of view, to the Class A
Common Stockholders of NAAC.
Very truly yours,
ALLEN & COMPANY INCORPORATED
By /s/ Robert Cosgriff
----------------------------------
A-II-2
<PAGE>
ANNEX III
This Warrant entitles the Registered
Holder thereof to purchase % of the
aggregate number of shares of Class A
Common Stock which may be acquired upon
exercise of all of the Warrants of like
tenor issued contemporaneously with
this Warrant.
No.
WARRANT FOR THE PURCHASE OF
SHARES OF CLASS A COMMON STOCK
OF
MOTO GUZZI CORPORATION
(A DELAWARE CORPORATION)
Moto Guzzi Corporation, a Delaware corporation (the "Company"), hereby
certifies that for value received, of , or his, her or its
registered assigns (the "Registered Holder"), is entitled, subject to the terms
set forth below, to purchase from the Company, at any time or from time to time
during the period commencing on June 30, 2001 and ending at 5:00 p.m. E.S.T. on
September 30, 2001 ("Expiration Date"), such number of shares of Class A Common
Stock, $.01 par value, of the Company ("Common Stock"), at a purchase price per
share equal to $.01 ("Purchase Price") as is determined in accordance with
Section 2 hereof. The number of shares of Common Stock which may be acquired
upon exercise of this Warrant, as adjusted from time to time pursuant to the
provisions of this Warrant, is hereinafter referred to as the "Warrant Shares".
All rights granted hereunder shall expire on the Expiration Date.
1. CERTAIN DEFINITIONS
(a) "Actual Operating Income" shall mean the profit before interest,
taxes, minority interests, extraordinary items and the cumulative effects
of changes in accounting policies, of the Company, on a consolidated basis,
for its fiscal year ending December 31, 2000, derived from the Company's
audited Statements of Income/Loss for such fiscal year, prepared in
accordance with U.S. generally accepted accounting principles consistently
applied, expressed in Lire.
(b) "Market Price" shall mean the average closing sale price of the
Company's common stock on the national securities exchange on which such
securities are traded, if any, or if not traded on a national securities
exchange, then as reported by the National Association of Securities
Dealers, Inc.'s Automated Quotation System, in either event for the 20
consecutive trading days prior to June 30, 2001, or, if such securities are
not so traded, at the fair market value thereof on such date as reasonably
determined by the Board of Directors of the Company.
(c) Minimum Operating Income" shall mean Lit. 20,169,600,000.
(d) "Percentage Interest" shall mean % [(i) FOR WARRANTS ISSUED
UNDER SECTION 2.02(a)(i), THE PRODUCT OF (x) 74.05% MULTIPLIED BY A
FRACTION, THE NUMERATOR OF WHICH IS THE NUMBER OF SHARES OF CAPITAL STOCK
OF MOTO GUZZI CORP. OWNED BY THE REGISTERED HOLDER AT THE MERGER EFFECTIVE
TIME, AND THE DENOMINATOR OF WHICH IS 7,500,000; (ii) FOR WARRANTS ISSUED
UNDER SECTION 2.02(a)(ii), 20.76%; AND (iii) FOR WARRANTS ISSUED UNDER
SECTION 2.02(a)(iii), THE PRODUCT OF (x) 5.19% MULTIPLIED BY (y) A
FRACTION, THE NUMERATOR OF WHICH IS THE NUMBER OF OLD MOTO GUZZI WARRANTS
SURRENDERED BY THE REGISTERED HOLDER AT THE MERGER EFFECTIVE TIME AND THE
DENOMINATOR OF WHICH IS 1,500,000.]
(e) "Aggregate Value" shall mean:
(i) zero if Actual Operating Income is less than Minimum Operating
Income;
A-III-1
<PAGE>
(ii) the amount of $4,750,000 if Actual Operating Income equals
Minimum Operating Income; and
(iii) if Actual Operating Income exceeds Minimum Operating Income,
an amount equal to $4,750,000 multiplied by 120% of the percentage which
Actual Operating Income bears to Minimum Operating Income, provided,
however, such Aggregate Value shall not exceed $9,500,000.
2. SCOPE OF WARRANT The number of shares of Common Stock which may be
acquired by the Registered Holder upon exercise of this Warrant shall be
determined by application of the following formula:
(AV / MP) x PI
rounded up to the next whole number of shares, where AV means the Aggregate
Value, MP means the Market Price, and PI means the Percentage Interest.
By way of example, if Actual Operating Income is Lit. 25,169,600,000, then
the percentage which Lit 25,169,600,000 bears to Lit 20,169,600,000 is 124.79%.
Such percentage, when multiplied by 120%, would equal 149.75%; application of
such resulting percentage to $4,750,000, would yield an AV equal to $7,113,018;
if MP were $15 then 474,201 aggregate shares of Common Stock would be purchased
if all of the Warrants of like tenor, issued contemporaneously with this
Warrant, were exercised.
3. NOTICE OF AGGREGATE VALUE AND EXERCISE.
(a) As soon after June 30, 2001 as practicable if Actual Operating
Income has exceeded Minimum Operating Income, the Company shall notify the
Registered Holder hereof of the amount of the Aggregate Value, by notice
given in accordance with Section 14 hereof.
(b) The Registered Holder hereby appoints Trident Rowan Group, Inc.
("TRG"), with full power of substitution, as the attorney in fact of the
Registered Holder and authorizes TRG to deliver to the Company any notice
of exercise which may be given hereunder. Such authority shall be deemed
null and void if the Registered Holder delivers written notice to TRG
revoking such authority at any time prior to the date on which TRG delivers
any notice of exercise hereunder. This Warrant may be exercised by the
Registered Holder, in whole but not in part, or by TRG as agent for the
Registered Holder, by the surrender of this Warrant (with the Notice of
Exercise Form attached hereto as Exhibit I duly executed by such Registered
Holder) at the principal office of the Company, or at such other office or
agency as the Company may designate, accompanied by payment in full, in
lawful money of the United States, of an amount equal to the then
applicable Purchase Price multiplied by the whole number of Warrant Shares
which may be purchased upon such exercise, together with any and all
applicable taxes due in connection with such exercise. This Warrant may not
be exercised by, or shares of Common Stock issued to, any Registered Holder
in any state in which such exercise would be unlawful.
(c) Each exercise of this Warrant shall be deemed to have been
effected immediately prior to the close of business on the day on which
this Warrant shall have been surrendered to the Company as provided in
subsection 3(b) above. At such time, the person or persons in whose name or
names any certificates for Warrant Shares shall be issuable upon such
exercise as provided in subsection 3(d) below shall be deemed to have
become the holder or holders of record of the Warrant Shares represented by
such certificates.
(d) As soon as practicable after the exercise of the purchase right
represented by this Warrant, the Company at its expense will use its best
efforts to cause to be issued in the name of, and delivered to, the
Registered Holder, or, subject to the terms and conditions hereof, to such
other individual or entity as such Registered Holder (upon payment by such
Registered Holder of any applicable transfer taxes) may direct a
certificate or certificates for the number of full shares of Warrant Shares
to which such Registered Holder shall be entitled upon such exercise plus,
in lieu of any fractional share to which such Registered Holder would
otherwise be entitled, cash in an amount determined pursuant to Section 5
hereof.
4. ADJUSTMENTS.
(a) Split, Subdivision or Combination of Shares. If the Company,
after the date on which this Warrant becomes initially exercisable and
prior to exercise, fixes a record date for the effectuation of a split or
subdivision of the outstanding shares of Common Stock or the determination
of holders of Common Stock entitled to receive a dividend or other
distribution payable in additional shares of Common Stock without
A-III-2
<PAGE>
payment of any consideration by such holder for the additional shares of
Common Stock, then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the
Purchase Price shall be appropriately decreased and the number of Warrant
Shares which may be acquired hereunder shall be increased in proportion to
such increase in the aggregate number of shares of Common Stock
outstanding. If the number of shares of Common Stock outstanding at any
time after the date hereof is decreased by a combination of the outstanding
shares of Common Stock or otherwise, then, following the record date of
such combination or other event, the Purchase Price shall be appropriately
increased and the number of Warrant Shares which may be acquired hereunder
shall be decreased in proportion to such decrease in the aggregate number
of shares of Common Stock outstanding.
(b) Reclassification, Reorganization, Consolidation or Merger. In the
case of any reclassification of the Common Stock (other than a change in
par value or a subdivision or combination as provided for in subsection
4(a) above), or any reorganization, consolidation or merger of the Company
with or into another corporation (other than a merger or reorganization
with respect to which the Company is the continuing corporation and which
does not result in any reclassification of the Common Stock), or a transfer
of all or substantially all of the assets of the Company, or the payment of
a liquidating distribution then, as part of any such reorganization,
reclassification, consolidation, merger, sale or liquidating distribution,
lawful provision shall be made so that the Registered Holder of this
Warrant shall have the right thereafter to receive upon the exercise hereof
(to the extent, if any, still exercisable) the kind and amount of shares of
stock or other securities or property which such Registered Holder would
have been entitled to receive if, immediately prior to any such
reorganization, reclassification, consolidation, merger, sale or
liquidating distribution, as the case may be, such Registered Holder had
held the number of shares of Common Stock which were then purchasable upon
the exercise of this Warrant or if this Warrant shall not then be
exerciseable, such other consideration as the Board of Directors of the
Company shall reasonably determine to be of comparable value. In any such
case, appropriate adjustment (as reasonably determined by the Board of
Directors of the Company) shall be made in the application of the
provisions set forth herein with respect to the rights and interests
thereafter of the Registered Holder of this Warrant such that the
provisions set forth in this Section 4 (including provisions with respect
to the Purchase Price) shall thereafter be applicable, as nearly as is
reasonably practicable, in relation to any shares of stock or other
securities or property thereafter deliverable upon the exercise of this
Warrant.
(c) Price Reduction. Notwithstanding any other provision set forth in
this Warrant, at any time and from time to time during the period that this
Warrant is exercisable the Company in it sole discretion may reduce the
Purchase Price.
(d) No Impairment. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization,
recapitalization, 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 to be observed or
performed hereunder by the Company but will at all times in good faith
assist in the carrying out of all the provisions of this Section 4 and in
the taking of all such actions as may be necessary or appropriate in order
to protect against impairment of the rights of the Registered Holder of
this Warrant to adjustments in the Purchase Price.
(e) Notice of Adjustment. Upon the occurrence of each adjustment or
readjustment of the Purchase Price or the number of Warrant Shares which
may be acquired hereunder, the Company, at its expense, shall promptly
compute such adjustment or readjustment in accordance with the terms hereof
and prepare and furnish written notice thereto to the Registered Holder of
this Warrant within a reasonable amount of time from the adjustment or
readjustment stating the adjustment or readjustment and showing in
reasonable detail the facts upon which such adjustment or readjustment is
based.
5. NOTICES OF RECORD DATE.
In case:
(a) the Company shall take a record of the holders of its Common Stock
(or other stock or securities at the time deliverable upon the exercise of
this Warrant) for the purpose of entitling or enabling them to receive any
dividend or other distribution (other than a dividend or distribution
payable solely in capital
A-III-3
<PAGE>
stock of the Company or out of funds legally available therefor), or to
receive any right to subscribe for or purchase any shares of any class or
any other securities, or to receive any other right, or
(b) of any capital reorganization of the Company, any reclassification
of the capital stock of the Company, any consolidation or merger of the
Company with or into another corporation (other than a consolidation or
merger in which the Company is the surviving entity), or any transfer of
all or substantially all of the assets of the Company, or
(c) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then, and in each such case, the Company will mail or cause to be mailed to the
Registered Holder of this Warrant a notice specifying, as the case may be, (i)
the date on which a record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, or (ii) the effective date on which such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation or
winding-up is to take place, and the time, if any is to be fixed, as of which
the holders of record of Common Stock (or such other stock or securities at the
time deliverable upon the exercise of this Warrant) shall be entitled to
exchange their shares of Common Stock (or such other stock or securities) for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation or
winding-up. Such notice shall be mailed at least twenty (20) days prior to the
record date or effective date for the event specified in such notice, provided
that the failure to mail such notice shall not affect the legality or validity
of any such action.
6. RESERVATION OF STOCK. The Company will at all times reserve and keep
available, solely for issuance and delivery upon the exercise of this Warrant,
such shares of Warrant Shares and other stock, securities and property, as from
time to time shall be issuable upon the exercise of this Warrant.
7. REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) upon delivery of an
indemnity agreement (with surety if reasonably required) in an amount reasonably
satisfactory to the Company, or (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will issue, in lieu thereof, a new
Warrant of like tenor.
8. TRANSFER AND EXCHANGE OF WARRANTS.
(a) The Company will maintain a register containing the names and
addresses of the Registered Holders of this Warrant. Any Registered Holder
may change its, his or her address as shown on the warrant register by
written notice to the Company requesting such change, given in accordance
with Section 14 hereof.
(b) Until any transfer of this Warrant is made in the warrant
register, the Company may treat the Registered Holder of this Warrant as
the absolute owner hereof for all purposes; provided, however, that if and
when this Warrant is properly assigned in blank, the Company may (but shall
not be obligated to) treat the bearer hereof as the absolute owner hereof
for all purposes, notwithstanding any notice to the contrary.
(c) The Company shall register the transfer from time to time, of this
Warrant upon the register maintained by the Company for such purpose, upon
surrender of this Warrant for transfer, upon written instructions with
signatures guaranteed. Upon any such transfer, a new Warrant representing
an equal aggregate Percentage Interest shall be issued and this Warrant
shall be canceled.
(d) This Warrant may be surrendered to the Company, together with a
written request for exchange, and thereupon the Company shall issue in
exchange therefor one or more new Warrants as requested by the Registered
Holder of this Warrant, representing in the aggregate an equal Percentage
Interest; provided, however, that in the event that this Warrant bears a
restrictive legend, the Company shall not cancel this Warrant nor issue a
new Warrant in exchange therefor unless the Company has received an opinion
of counsel stating that such transfer may be made and indicating whether
the new Warrant(s) must also bear a restrictive legend.
9. NO RIGHTS AS SHAREHOLDER. Until the exercise of this Warrant, the
Registered Holder of this Warrant shall not have or exercise any rights by
virtue hereof as a shareholder of the Company.
A-III-4
<PAGE>
10. CHANGE OR WAIVER. Any term of this Warrant may be changed or waived
only by an instrument in writing signed by the party against which enforcement
of the change or waiver is sought.
11. HEADINGS. The headings in this Warrant are for purposes of reference
only and shall not limit or otherwise affect the meaning of any provision of
this Warrant.
12. GOVERNING LAW. This Warrant shall be governed by and construed in
accordance with the laws of the State of New York as such laws are applied to
contracts made and to be fully performed entirely within that state between
residents of that state.
13. JURISDICTION AND VENUE. The Company (i) agrees that any legal suit,
action or proceeding arising out of or relating to this Warrant shall be
instituted exclusively in New York State Supreme Court, County of New York or in
the United States District Court for the Southern District of New York, (ii)
waives any objection to the venue of any such suit, action or proceeding and the
right to assert that such forum is not a convenient forum, and
(iii) irrevocably consents to the jurisdiction of the New York State Supreme
Court, County of New York, and the United States District Court for the Southern
District of New York in any such suit, action or proceeding, and the Company
further agrees to accept and acknowledge service or any and all process which
may be served in any such suit, action or proceeding in New York State Supreme
Court, County of New York or in the United States District Court for the
Southern District of New York and agrees that service of process upon it mailed
by certified mail to its address shall be deemed in every respect effective
service of process upon it in any suit, action or proceeding.
14. MAILING OF NOTICES. ETC. All notices and other communications under
this Warrant (except payment) shall be in writing and shall be sufficiently
given if delivered to the addressees in person, by Federal Express or similar
receipt delivery, by facsimile delivery or, if mailed, postage prepaid, by
certified mail, return receipt requested, as follows:
Registered Holder: To his or her address on page 1 of this Warrant.
Moto Guzzi Corporation
c/o Trident Rowan Group, Inc.
Two Worlds Fair Drive
Franklin Township
Somerset, NJ 08873
Attn: Mr. Mark S. Hauser, President
The Company: Fax: (732) 868-0193
In either case, with a copy to:
Morrison Cohen Singer & Weinstein, LLP
750 Lexington Avenue
New York, NY 10022
Attn: David Lerner, Esq.
Fax: (212) 735-8708
or to such other address as any of them, by notice to the others may designate
from time to time. Time shall be counted to, or from, as the case may be, the
delivery in person or by mailing.
MOTO GUZZI CORPORATION
By:
----------------------------------
Print Name:
--------------------------
Title:
-------------------------------
A-III-5
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
To: Moto Guzzi Corporation
c/o Trident Rowan Group, Inc.
Two Worlds Fair Drive
Franklin Township
Somerset, NJ 08873
1. The undersigned hereby elects to purchase such number of shares of the
Common Stock of Moto Guzzi Corporation, pursuant to the terms of the attached
Warrant, as equals the undersigned's entire interest in this Warrant, and
tenders herewith payment of the purchase price of such shares in full, together
with all applicable transfer taxes, if any.
2. Please issue a certificate or certificates representing said shares of
the Common Stock in the name of the undersigned or in such other name as is
specified below:
-------------------------------------
(Name)
-------------------------------------
(Address)
-------------------------------------
Taxpayer Identification Number)
- ---------------------------------------
[print name of Registered Holder]
By:
------------------------------------
Title:
---------------------------------
Date:
----------------------------------
A-III-6
<PAGE>
ANNEX IV
CERTIFICATE OF MERGER
OF
MOTO GUZZI CORP.
WITH AND INTO
NORTH ATLANTIC ACQUISITION CORP.
Pursuant to the General Corporation Law of the State of Delaware, the
undersigned corporations DO HEREBY CERTIFY that:
FIRST: The name and state of incorporation of each of the constituent
corporations of the merger is as follows:
NAME STATE OF INCORPORATION
- ------------------------------------- ------------------------------------
Moto Guzzi Corp. Delaware
North Atlantic Acquisition Corp. Delaware
SECOND: An Agreement and Plan of Merger and Reorganization dated as of
, among Moto Guzzi Corp., a Delaware corporation, North
Atlantic Acquisition Corp., a Delaware corporation, and Trident Rowan Group,
Inc., a Maryland corporation (the "Agreement and Plan of Merger"), has been
adopted, approved, certified, executed and acknowledged by each of the
constituent corporations to the merger in accordance with the requirements of
Section 251 of the General Corporation Law of the State of Delaware.
THIRD: The name of the surviving corporation of the merger is North
Atlantic Acquisition Corp., a Delaware corporation ("Surviving Corporation"),
whose name shall be changed to Moto Guzzi Corporation.
FOURTH: The Certificate of Incorporation of Surviving Corporation is hereby
amended and restated to read as set forth on Exhibit A hereto.
FIFTH: The executed Agreement and Plan of Merger is on file at the
principal place of business of Surviving Corporation. The address of said
principal place of business is 5 East 59th Street, New York, NY 10022.
SIXTH: A copy of the Agreement and Plan of Merger will be furnished by the
Surviving Corporation on request and without cost to any stockholder of either
constituent corporation.
Dated:
---------------------------
Attest: NORTH ATLANTIC ACQUISITION CORP.
By:
------------------------------
Title:
Attest: MOTO GUZZI CORP.
By:
- --------------------------------- ------------------------------
Title:
A-IV-1
<PAGE>
EXHIBIT A
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
NORTH ATLANTIC ACQUISITION CORP.
FIRST: The name of this corporation is:
MOTO GUZZI CORPORATION
SECOND: The name and address of the registered agent of the corporation in
the State of Delaware is:
The Corporation Trust Company
1209 Orange Street
Wilmington, Delaware 19801
THIRD: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH: (a) The total number of shares which the Corporation shall have
authority to issue is Twenty Million (20,000,000) of which (i) Fifteen Million
(15,000,000) shares, par value $.01 per share shall be Class A Common Stock
(hereinafter called "Class A Common Stock"), (ii) Two Hundred Fifty Thousand
(250,000) shares, par value $.01 per share shall be Class B Exchangeable Common
Stock (hereinafter called "Class B Common Stock; the Class A Common Stock and
the Class B Common Stock, hereinafter collectively, the "Common Stock"), and
(iii) Four Million Seven Hundred and Fifty Thousand (4,750,000) shares, par
value $.01 per share shall be Preferred Stock (hereinafter called "Preferred
Stock"). One Hundred (100) shares of the Preferred Stock shall be designated as
Series A Convertible Preferred Stock (hereinafter called "Class A Preferred
Stock") and Three Hundred Fifty Thousand (350,000) shares of the Preferred Stock
are designated as Class B Convertible Preferred Stock (hereinafter called the
"Class B Preferred Stock").
(b) The Common Stock shall have the following rights, preferences,
privileges and restrictions:
(1) The holders of the Common Stock shall be entitled to receive such
dividends as may be declared thereon from time to time by the Board of
Directors, in its discretion, from any assets legally available for the
payment of dividends, provided that no dividends may be paid on the Common
Stock unless all accrued and unpaid dividends on all Preferred Stock are
paid.
(2) In the event of the dissolution of the Corporation, whether
voluntary or involuntary, the holders of Common Stock shall be entitled to
share ratably in the distribution of the assets of the Corporation after
payment or provision for payment of such amounts as the holders of
Preferred Stock shall be entitled to receive.
(3) Except as provided in Section (c)(1) of Article FOURTH hereof, and
as otherwise required by law, all shares of Common Stock shall have equal
voting rights and shall have one vote, in person or by proxy, for each
share thereof held.
(c) The holders of the Class B Common Stock shall have the following
rights:
(1) Each share of Class B Common Stock shall be entitled to two votes
per share in the election of directors and on any other matter presented to
the shareholders.
(2) The Class B Common Stock is exchangeable into two Units, each
consisting of one share of Class A Common Stock and one Class A Purchase
Warrant entitling the holder to purchase one share of Class A Common Stock
at a purchase price of $9.00 per share, subject to adjustment, 90 days
after the date on which this Amended and Restated Certificate of
Incorporation is filed with the Secretary of State of the State of
Delaware, or any earlier date that H.J. Meyers & Co., Inc., as underwriter
in the initial public offering of the Common Stock of the Company, in its
sole discretion so elects. This conversion privilege shall expire at
5:00 p.m., New York City time, on the first anniversary of the date on
which this Amended and Restated Certificate of Incorporation is filed with
the Security of State of the State of Delaware.
A-1
<PAGE>
(d) The Class A Preferred Stock shall have the following rights,
preferences, privileges and restrictions:
(1) The holder of shares of Class A Preferred Stock shall not be
entitled to vote with respect to the election of directors or on any other
matter submitted to stockholders, unless required by law.
(2) Each share of the Class A Preferred Stock is convertible into
Class A Common Stock of the Company at any time until 5:00 p.m. New York
City time, on the first anniversary of the date on which this Amended and
Restated Certificate of Incorporation is filed with the Secretary of State
of the State of Delaware.
(3) In the event of a liquidation or dissolution of the Corporation,
the rights of the holders of the Corporation's Common Stock are subordinate
to the rights of the holders of the Class A Preferred Stock.
(e) The Class B Preferred Stock shall have the following rights,
preferences, privileges and restrictions:
(1) Rank. The Class B Preferred Stock shall, with respect to
liquidation, rank senior to all classes and series of capital stock of the
Corporation now or hereafter authorized, issued or outstanding, including,
without limitation, any preferred stock of the Corporation or common stock,
and/or any other class and series of stock of the Corporation now or
hereafter authorized, issued or outstanding (collectively, the "Junior
Securities"). In addition, the Corporation will not issue any class or
series of any class or capital stock which ranks pari passu with the
Class B Preferred Stock with respect to rights on liquidation, and
winding-up or dissolution of the Corporation.
(2) Dividends.
A. The holders of the Class B Preferred Stock shall be entitled to
receive out of any assets legally available therefor cumulative
dividends at the per share rate of five percent (5%) of U.S. $15.00 (the
"Stated Value") for each share of Class B Preferred Stock, per annum,
payable annually on December 31 of each year, commencing December 31,
1999 (each a "Dividend Payment Date"), or if earlier, upon conversion of
shares of Class B Preferred Stock, in preference and priority to any
payment of any dividend on any Junior Security. Such dividends shall
accrue on any given share from January 1, 1999 and thereafter from the
most recent date on which a dividend has been paid with respect to such
share, or if no dividends have been paid, from January 1, 1999, and such
dividends shall accrue from day to day whether or not declared, based on
the actual number of days elapsed. If at any time dividends on
outstanding shares of Class B Preferred Stock at the rate set forth
above shall not have been paid or declared and set apart for payment
with respect to all preceding periods, the amount of the deficiency
shall be fully paid or declared and set apart for payment, but without
interest, before any distribution, whether by way of dividend or
otherwise, shall be declared or paid upon or set apart for the shares of
any class of Junior Security.
B. In the event the Corporation shall declare a dividend or other
distribution payable in something other than shares of Common Stock,
then, in each such case, the holders of the Class B Preferred Stock
shall be entitled to a proportionate share of any such distribution as
though they were the holders of the number of shares of Common Stock of
the Corporation into which their shares of Class B Preferred Stock are
convertible as of the record date fixed for the determination of the
holders of Common Stock of the Corporation entitled to receive such
distribution. The Corporation may not redeem, purchase or otherwise
acquire, Junior Securities, unless and until all shares of Class B
Preferred Stock are no longer outstanding, except for the redemption of
the Company's Class A Purchase Warrants.
(3) Liquidation, Dissolution or Winding Up, Etc.
In the event of any voluntary or involuntary liquidation (including a sale
by the Corporation of all or substantially all of its assets), dissolution or
winding up of the Corporation, the assets of the Corporation available for
distribution to shareholders, whether from capital, surplus or earnings, shall
be distributed in the following order of priority:
(i) The holders of Class B Preferred Stock shall be entitled to
receive, prior and in preference to any distribution to the holders of
any Junior Securities an amount equal to the greater of (A) the Stated
Value for each share of Class B Preferred Stock then outstanding plus
all accrued and unpaid dividends
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thereon, or (B) the amount the holders of Class B Preferred Stock would
have received had they converted the Class B Preferred Stock into Common
Stock as provided herein in Section (5) of paragraph (e) of Article
FOURTH hereof, on the business day immediately prior to the voluntary or
involuntary liquidation.
(ii) If there is a distribution pursuant to the preceding Section
(3)A(i), the remaining assets of the Corporation available for
distribution, if any, to the shareholders of the Corporation shall be
distributed to the holders of Junior Securities.
(4) Voting Rights. The holders of the Class B Preferred Stock shall
vote with the holders of Common Stock on all matters presented to the
holders of Common Stock for a vote as if all the shares of Class B
Preferred Stock have been converted as of the applicable record date, such
that a holder of Class B Preferred Stock will be entitled to one vote for
every whole share of Common Stock into which his or her Class B Preferred
Stock is convertible and, to the extent required by applicable law, shall
also be entitled to vote as a separate class.
(5) Conversion of Class B Preferred Stock.
A. Right to Convert. The holders of Class B Preferred Stock shall
have the right, at each holders' option, at any time or from time to
time, to convert any or all of such holders' shares of Class B Preferred
Stock into such number of shares of Class A Common Stock ("Converted
Shares") as is determined by dividing (i) the Stated Value times the
number of shares of Class B Preferred Stock being converted, by (ii) a
conversion price of (x) $15.00, subject to adjustment as hereinafter
provided (the "Conversion Price").
B. Mechanics of Conversion. Before any holder of Class B Preferred
Stock shall be entitled to convert the same into Converted Shares, such
holder shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the Corporation or of any transfer agent for
the Class B Preferred Stock, and shall give written notice to the
Corporation at its principal corporate office, of the election to
convert the same and shall state therein the name or names in which the
certificate or certificates for Converted Shares are to be issued. The
Corporation shall, as soon as practicable thereafter, issue and deliver
at such office to such holder of Class B Preferred Stock, or to the
nominee or nominees of such holder, a certificate or certificates for
the number of Converted Shares to which such holder shall be entitled as
aforesaid. Such conversion shall be deemed to have been made immediately
prior to the close of business on the date of such surrender of the
shares of Class B Preferred Stock to be converted, and the person or
persons entitled to receive the Converted Shares shall be treated for
all purposes as the record holder or holders of such shares of Common
Stock as of such date.
C. No Fractional Shares. The Corporation shall not be required to
issue fractions of Converted Shares. If any fractions of a share would,
but for this Section, be issuable upon any conversion of Class B
Preferred Stock, in lieu of such fractional share the Corporation will
round up to the next whole Converted Share and issue the next whole
share of Common Stock to the holder.
D. Reservation of Shares. The Corporation shall reserve and shall
at all times have reserved from its authorized but unissued shares of
Common Stock sufficient shares of Common Stock to permit the conversion
of the then outstanding shares of the Class B Preferred Stock pursuant
to Section (5) of paragraph (e) of Article FOURTH hereof. All Converted
Shares shall be validly issued, fully paid and nonassessable.
E. Conversion Price Adjustments of Class B Preferred Stock. The
Conversion Price in effect at any time for conversion of Class B
Preferred Stock into Common Stock pursuant to Section (5) of paragraph
(e) of Article FOURTH hereof shall be subject to adjustment from time to
time as follows:
(i) Additional Outstanding Shares. If the Corporation shall,
after the date upon which any shares of Class B Preferred Stock are
first issued ("Issue Date"), fix a record date for the effectuation
of a split or subdivision of the outstanding shares of Common Stock
or the determination of holders of Common Stock entitled to receive a
dividend or other distribution
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payable in additional shares of Common Stock without payment of any
consideration by such holder for the additional shares of Common
Stock, then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the
Conversion Price of the Class B Preferred Stock shall be
appropriately decreased so that the number of Conversion Shares
issuable on conversion of each share of such Class B Preferred Stock
shall be increased in proportion to such increase in the aggregate
number of shares of Common Stock outstanding.
(ii) Decrease of Outstanding Shares. If the number of shares of
Common Stock outstanding at any time after the Issue Date is
decreased by a combination of the outstanding shares of Common Stock
or otherwise, then, following the record date of such combination or
other event, the Conversion Price for the Class B Preferred Stock
shall be appropriately increased so that the number of shares of
Converted Stock issuable on conversion of each share of such Class B
Preferred Stock shall be decreased in proportion to such decrease in
the aggregate number of shares of Common Stock outstanding.
(iii) Recapitalization. If at any time or from time to time
there shall be a reclassification of the Common Stock (other than a
subdivision or combination provided for in clauses (i) or
(ii) above) or any reorganization, consolidation or merger of the
Corporation with or into another corporation (other than a merger or
reorganization with respect to which the Corporation is the
continuing corporation and which does not result in any
reclassification of the Common Stock), or a transfer of all or
substantially all of the assets of the Corporation, or the payment of
a liquidating distribution then, as part of any such reorganization,
reclassification, consolidation, merger, sale or liquidating
distribution, lawful provision shall be made so that the holders of
the Class B Preferred Stock shall thereafter be entitled to receive,
upon conversion of the Class B Preferred Stock, the kind and amount
of shares of stock or other securities or property which such holder
of Class B Preferred Stock would have been entitled to receive if,
immediately prior to any such reorganization, reclassification,
consolidation, merger, sale or liquidating distribution, as the case
may be, such holder of Class B Preferred Stock had held the number of
shares of Common Stock which were then deliverable upon conversion.
In any such case, appropriate adjustment shall be made in the
application of the provisions of Section (5) of paragraph (e) of
Article FOURTH hereof with respect to the rights of the holders of
the Class B Preferred Stock thereafter to the end that the provisions
of Section (5) of paragraph (e) of Article FOURTH hereof (including
adjustment of the Conversion Price then in effect and the number of
Converted Shares issuable upon conversion of the Class B Preferred
Stock) shall be applicable after that event as nearly equivalent as
may be practicable.
F. No Impairment. The Corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization,
recapitalization, 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
to be observed or performed hereunder by the Corporation, but will at
all times in good faith assist in the carrying out of all the provisions
of Section (5) of Paragraph (e) of Article FOURTH hereof and in the
taking of all such action as may be necessary or appropriate in order to
protect the Conversion Rights of the holders of the Class B Preferred
Stock against impairment.
G. Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Price of Class B Preferred
Stock pursuant to Section (5)E of Paragraph (e) of Article FOURTH
hereof, the Corporation, at its expense, shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and
prepare and furnish to each holder of Class B Preferred Stock a
certificate setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is based.
The Corporation shall, upon the written request at any time of any
holder of Class B Preferred Stock, furnish or cause to be furnished to
such holder a like certificate setting forth (A) such adjustment and
readjustment, (B) the Conversion Price for such Class B Preferred Stock
at the time in effect, and (C) the number of shares of Common Stock and
the amount, if any, of other property which at the time would be
received upon the conversion of a share of Class B Preferred Stock.
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H. Notices of Record Date. In the event of any setting by the
Corporation of a record of the holders of any class of securities for
the purpose of determining the holders thereof who are entitled to
receive any dividend (other than a cash dividend) or other distribution,
any right to subscribe for, purchase or otherwise acquire any shares of
stock of any class or any other securities or property, or to receive
any other right, the Corporation shall mail to each holder of Class B
Preferred Stock, at least twenty (20) days prior to the date specified
therein, a notice specifying the date on which any such record is to be
taken for the purpose of such dividend, distribution or right, and the
amount and character of such dividend, distribution or right.
I. Notices. Any notice required by the provisions of Section
(5) of Paragraph (e) of Article FOURTH hereof to be given to the holders
of shares of Class B Preferred Stock shall be deemed given if deposited
in the United States mail, postage prepaid, and addressed to each holder
of record at his address appearing on the books of this Corporation.
J. Cancellation. In the event any shares of Class B Preferred
Stock shall be converted pursuant to Section (5) of Paragraph (e) of
Article FOURTH hereof, the shares so converted shall be canceled and
returned to the status of authorized and unissued shares of preferred
stock, without any class designation.
(f) The Board of Directors is authorized, subject to limitations prescribed
by law and the provisions of this Article FOURTH, to provide for the issuance of
the shares of Preferred Stock in series, and by filing a certificate pursuant to
the applicable law of the State of Delaware, to establish from time to time the
number of shares to be included in each such series, and to fix the designation,
powers, preferences and rights of the shares of each such series and the
qualifications, limitations or restrictions thereof. The holders of shares of
the Preferred Stock of each such series shall be entitled to receive, when and
as declared by the Board of Directors, out of funds legally available for the
payment of dividends, dividends (if any) at the rates fixed by the Board of
Directors for such series, and no more, before any cash dividends shall be
declared and paid, or set apart for payment, on the Common Stock with respect to
the same dividend period. The holders of shares of the Preferred Stock of each
such series shall be entitled upon liquidation or dissolution or upon the
distribution of the assets of the Corporation to such preferences as provided in
the resolution or resolutions creating such series of Preferred Stock, and no
more, before any distribution of the assets of the Corporation shall be made to
the holders of shares of the Common Stock. Whenever the holders of shares of the
Preferred Stock of each such series shall have been paid the full amounts to
which they shall be entitled, the holders of shares of the Common Stock shall be
entitled to share ratably in all remaining assets of the Corporation.
The authority of the Board of Directors with respect to each such series
shall include, but not be limited to, the determination or fixing of the
following:
(1) The distinctive designation and number of shares comprising such
series, which number may (except where otherwise provided by the Board of
Directors in creating such series) be increased or decreased (but not below
the number of shares then outstanding) from time to time by like action of
the Board of Directors;
(2) The dividend rate of such series, the conditions and time upon
which such dividends shall be payable, the relation which such dividends
shall bear to the dividends payable on any other class or classes of stock
or series thereof, or any other series of the same class, and whether such
dividends shall be cumulative or non-cumulative;
(3) The conditions upon which the shares of such series shall be
subject to redemption by the Corporation and the times, prices and other
terms and provisions upon which the shares of the series may be redeemed
including the date or date upon or after which they may be redeemed, and
the amount per share payable in case of redemption, which amount may vary
under different conditions and at different redemption dates;
(4) Whether or not the shares of the series shall be subject to the
operation of a retirement or sinking fund to be applied to the purchase or
redemption of such shares and, if such retirement or sinking fund be
established, the annual amount thereof and the terms and provisions
relative to the operation thereof;
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(5) Whether or not the shares of the series shall be convertible into
or exchangeable for shares of any other class or classes, with or without
par value, or of any other series of the same class, and, if provision is
made for conversion or exchange, the times, prices, rates, adjustments, and
other terms and conditions of such conversion or exchange as the Board of
Directors shall determine;
(1) Whether or not the shares of the series shall have voting
rights, in addition to the voting rights provided by law, and, if so,
the terms of such voting rights;
(2) The rights of the shares of the series in the event of
voluntary or involuntary liquidation, dissolution or the winding up of
the Corporation, and the relative rights of priority, if any, of payment
of shares of that series;
(3) Any other powers, preferences and relative participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof, of the shares of such series, as the Board of
Directors may deem advisable and as shall not be inconsistent with the
provisions of this Certificate of Incorporation.
FIFTH: The Corporation is to have perpetual existence.
SIXTH: New By-laws may be adopted or the By-laws may be amended or repealed
by a vote of holders of two-thirds (66-2/3%) of the outstanding stock of the
Corporation entitled to vote thereon. By-laws may also be adopted, amended or
repealed by resolutions adopted by the affirmative vote of a majority of the
directors and as provided or permitted by law; provided, however, that (a) the
Board of Directors may not repeal or amend a Bylaw adopted by the shareholders;
and (b) any By-law amendment adopted, amended or repealed by the Board of
Directors increasing or reducing the authorized number of directors shall
require a resolution adopted by the affirmative vote of not less than two-thirds
(66-2/3%) of the directors.
SEVENTH: (a) The number of directors of the Corporation shall be the number
fixed from time to time in the manner provided by the By-laws of the
Corporation, pursuant to a resolution adopted by a majority of the total number
of authorized directors (whether or not there exist any vacancies in previously
authorized directorships at the time such resolution in presented to the Board
for adoption), but in no event shall such number be fewer than three (3) nor
more than ten (10).
(b) The Board of Directors shall be divided into three classes with each
class to be as nearly equal in number as possible, with the term of office of
the first class to expire at the first annual meeting of stockholders held after
the annual or special meeting of stockholders at which the Board is first
classified, the term of office of the second class to expire at the second
annual meeting of stockholders held after the annual or special meeting of
stockholders at which the Board is first classified and the term of office of
the third class to expire at the third annual meeting of stockholders held after
the annual or special meeting of stockholders at which the Board is first
classified. At each annual meeting following that at which the Board is
initially classified and elected in three classes, directors elected to succeed
those directors whose terms expire shall be elected for a term expiring at the
third succeeding annual meeting of stockholders after their election, and until
their successors shall be elected and qualified. No increase in the number of
directors shall shorten the term of any incumbent director.
(c) Except as otherwise fixed pursuant to the provisions of Article SEVENTH
hereof, newly created directorships resulting from any increase in the number of
directors and any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other cause may be filled (i) by the
affirmative vote of a majority of the remaining directors then in office even
though less than a quorum of the Board of Directors, or by a sole remaining
director, or (ii) by the affirmative vote of the holders of at least two thirds
(66-2/3%) of the total voting power of all outstanding shares of stock entitled
to vote generally in the election of directors. Any director elected in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the directorship for which the vacancy occurred and until such
director's successor shall have been elected and qualified. No decrease in the
number of directors constituting the Board of Directors shall shorten the term
of any incumbent directors.
(d) Except as otherwise fixed pursuant to the provisions of Article SEVENTH
hereof, any director, or the entire Board of Directors, may be removed from
office at any time only for cause and only (i) by the affirmative vote of the
holders of not less than two-thirds (66- 2/3%) of the total voting power of all
outstanding shares of
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stock entitled to vote generally in the election of directors, voting together
as a single class, or (ii) by action of the Board of Directors.
EIGHTH: A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived any improper
personal benefit. The Corporation shall indemnify any and all of its directors
or officers or former directors, or officers or any person who may have served
at its request as a director or officer of another corporation in which it owns
shares of capital stock or of which it is a creditor, against expenses actually
and necessarily incurred by them in connection with the defense of any action,
suit or proceeding, civil or criminal, in which they, or any of them, are made
parties, or a party, by reason of being or having been directors or officers or
a director or officer of the Corporation, or of such other corporation, except
in relation to matters as to which any such director or officer or former
director or officer or person shall be adjudged in such action, suit or
proceeding, civil or criminal, to be liable for any breach of the director's
duty of loyalty to the Corporation or its stockholders, for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, under section 174 of the General Corporation Law of Delaware or for any
transaction from which such officer or director derived an improper benefit.
Such indemnification shall not be deemed exclusive of any other rights to which
those hereby indemnified may be entitled, under any By-law, agreement, vote of
stockholders or otherwise.
NINTH: No holder of any share or shares of any class of stock of the
Corporation shall have any preemptive right to subscribe for any shares of stock
of any class of the Corporation now or hereafter authorized or for any bonds,
debentures, or other evidences of indebtedness whether or not convertible into
or exchangeable for shares of stock of any class or for any securities, warrants
or options convertible into or carrying any rights to purchase any shares of
stock of any class of the Corporation now or hereafter authorized; provided,
however, that no provision of this Certificate of Incorporation shall be deemed
to deny to the Board of Directors the right, in its discretion, to grant to its
employees and to the holders of shares of any class of stock at the time
outstanding the right to purchase or subscribe for shares of stock of any class
or any other securities or any evidence of indebtedness of the Corporation now
or hereafter authorized, at such prices and upon such other terms and conditions
as the Board of Directors, in its discretion, may fix.
TENTH: The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred on stockholders
herein are granted subject to this reservation. Notwithstanding the foregoing,
the provisions set forth in Articles FIFTH, SIXTH, SEVENTH, EIGHTH and this
Article TENTH may not be repealed or amended in any respect unless such repeal
or amendment is approved by the affirmative vote of the holders of not less than
two thirds (66 2/3%) of the total voting power of all outstanding shares of
voting stock entitled to vote generally in the election of directors, voting as
a single class.
IN WITNESS WHEREOF, this Amended and Restated Certificate of Incorporation
has been duly executed by the Corporation as of the day of , 1998.
NORTH ATLANTIC ACQUISITION CORP.
By:
----------------------------------
Name:
Title:
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ANNEX V
MOTO GUZZI CORPORATION
1998 STOCK OPTION PLAN
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MOTO GUZZI CORPORATION
1998 STOCK OPTION PLAN
ARTICLE 1
ESTABLISHMENT AND PURPOSES
1.1 Establishment and Effective Date. Moto Guzzi Corporation, a Delaware
corporation (the "Corporation"), hereby establishes a stock option plan to be
known as the Moto Guzzi Corporation 1998 Stock Option Plan (the "Plan"). The
Plan shall become effective as of July 23, 1998, subject to the approval of the
stockholders of the Corporation (which is to be obtained within twelve (12)
months from the effective date of the Plan). Upon approval of the Plan by the
Board of Directors of the Corporation (the "Board"), awards may be made through
the agency of the committee appointed by the Board under Article 3 of the Plan
(the "Committee"). In the event that such stockholder approval is not obtained
within such 12 month period, any awards made hereunder shall be canceled and all
rights of optionees hereunder ("Optionees") with respect to such awards shall
thereupon automatically cease.
1.2 Purposes. The purposes of the Plan are (i) to encourage and enable
employees, directors and consultants (subject to such requirements as may be
prescribed by the Committee) of the Corporation, its subsidiaries and its
affiliates to acquire a proprietary interest in the growth and performance of
the Corporation, (ii) to generate an increased incentive for key employees,
directors and consultants to contribute to the Corporation's future success and
prosperity (as well as the success and prosperity of its subsidiaries and
affiliates), thus enhancing the value of the Corporation for the benefit of its
stockholders, and (iii) to enhance the ability of the Corporation, its
subsidiaries and its affiliates to attract and retain key employees, directors
and consultants who are essential to the progress, growth and profitability of
the Corporation, its subsidiaries and its affiliates, in each case through the
ownership of the Corporation's common stock ("Common Stock"), and certain other
rights relating to the Common Stock.
1.3 References to Law. References to specific provisions of law shall be
deemed to include references to amendments or supplements thereto or subsequent
provisions of law of similar import.
ARTICLE 2
AWARDS
2.1 Form of Awards. Awards under the Plan may be granted in either or both
of the following forms: (i) incentive stock options ("Incentive Stock Options")
meeting the requirements of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code") and the terms of Sections 5.3 and 5.7 of this Plan.; and
(ii) non-qualified stock options ("Non-qualified Stock Options") (unless
otherwise indicated, references in the Plan to "Options" shall include both
Incentive Stock Options and Non-qualified Stock Options).
2.2 Maximum Shares Available; Maximum Annual Awards. The maximum aggregate
number of shares of Common Stock available for award under the Plan (pursuant to
the granting of Options) is 1,250,000, subject to adjustment pursuant to Article
8 hereof. The maximum aggregate number of shares of Common Stock that may be
awarded under the Plan (pursuant to the granting of Options) to any individual
during any calender year is 210,000, subject to the limitations of Section 5.7
as to Incentive Stock Options and also subject to adjustment pursuant to Article
8 hereof. Shares of Common Stock issued under the Plan (pursuant to the granting
of Options) may be either authorized but unissued shares or issued shares
reacquired by the Corporation. In the event that prior to the end of the period
during which Options may be granted under the Plan, any Option under the Plan
expires unexercised or is terminated, surrendered or canceled without being
exercised in whole or in part for any reason, then such unexercised shares shall
be available for subsequent awards under the Plan upon such terms and conditions
as the Committee may determine.
2.3 Return of Prior Awards. As a condition to any subsequent award to an
Optionee under the Plan, the Committee shall have the right, in its sole
discretion, to require the Optionee to return to the Corporation awards
previously granted under the Plan. Subject to the provisions of the Plan, such
new award shall be upon such terms and conditions as are specified by the
Committee at the time the new award is granted.
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ARTICLE 3
ADMINISTRATION
3.1 Committee. Awards of Options shall be determined, and the Plan shall
be administered by the Committee. The Committee shall be appointed from time to
time by the Board and shall serve at the pleasure of the Board. The Committee
shall consist solely of two or more persons, each of whom shall qualify as
(i) a "Non-Employee Director", as that term is defined in subparagraph
(b)(3)(i) of Rule 16b-3 ("Rule 16b-3") promulgated under the Securities Exchange
Act of 1934, as amended (the "1934 Act"), and (ii) an "outside director", within
the meaning of Section 162(m) of the Code.
3.2 Powers of the Committee. Subject to the express provisions of the
Plan, the Committee shall have the power and authority: (i) to grant Options and
to determine the purchase price of the shares of Common Stock covered by each
Option, the term of each Option, the number of shares of Common Stock to be
covered by each Option, the time or times at which each Option shall become
exercisable and the duration of the exercise period applicable to each Option;
(ii) to designate Options as Incentive Stock Options or Non-qualified Stock
Options; (iii) to determine the employees, directors and consultants to whom,
and the time or times at which, Options shall be granted or made and; and (iv)
to take all other actions contemplated to be taken by the Committee under the
Plan, including, but not limited to, interpreting the Plan and authorizing any
written agreement relating to any award made hereunder, as well as any amendment
thereto. Notwithstanding the foregoing, (i) any acceleration of vesting as set
forth herein, (ii) any change in the purchase price per share of Common Stock
under an Option and (iii) any change in any of the provisions of any Option
after such Option has been granted, if effectuated by the Committee, must be
approved by the Board, in addition to the Committee.
3.3 Delegation. The Committee may delegate to one or more of its
respective members or to any other person or persons such ministerial duties
hereunder as it may deem advisable; PROVIDED, HOWEVER, that the Committee may
not delegate any of its responsibilities hereunder to any person who is not both
a "Non-Employee Director", as that term is defined in subparagraph (b)(3)(i) of
Rule 16b-3, and an "outside director", within the meaning of Section 162(m) of
the Code. The Committee may also employ attorneys, consultants, accountants or
other professional advisors and shall be entitled reasonably to rely upon the
advice opinions or valuations of any such advisors.
3.4 Interpretations. The Committee shall have discretionary authority to
interpret the terms of the Plan, to adopt and revise rules, regulations and
policies to administer the Plan and to make any other factual determinations
which it believes to be necessary or advisable for the administration of the
Plan. All actions taken and interpretations and determinations made by the
Committee in good faith shall be final and binding upon the Corporation, all
Optionees and all other interested persons.
3.5 Liability; Indemnification. No member of the Board or the Committee,
nor any person to whom ministerial duties have been delegated, shall be
personally liable for any action, interpretation or determination made with
respect to the Plan or awards made thereunder, and each member of the Committee
shall be fully indemnified, held harmless and protected by the Corporation with
respect to any liability he or she may incur with respect to any such action,
interpretation or determination, to the extent permitted by applicable law and,
in addition, to the extent provided in the Corporation's articles of
incorporation and by-laws, as amended from time to time, or under any agreement
between any such member and the Corporation.
ARTICLE 4
ELIGIBILITY
Awards may be made to all full-time or part-time employees and all
directors of and all consultants to the Corporation or any of its subsidiaries
or affiliates (subject to such requirements as may be prescribed by the
Committee). In determining the employees, directors and consultants to whom
awards shall be granted and the number of shares of Common Stock to be covered
by each award the Committee shall take into account the nature of the services
rendered by such employees, directors and consultants, their present and
potential contributions to the success of the Corporation, its subsidiaries and
its affiliates and such other factors as the Committee in its sole discretion
shall deem relevant. Notwithstanding the foregoing, only employees of the
Corporation and any corporation which is a "subsidiary corporation" of the
Corporation (as such term is defined in Section 424(f) of the Code) shall be
eligible to receive Incentive Stock Options.
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ARTICLE 5
STOCK OPTIONS
5.1 Grant of Options. Options may be granted under the Plan for the
purchase of shares of Common Stock. Options shall be granted in such form and
upon such terms and conditions, including the satisfaction of corporate or
individual performance objectives and other vesting standards as the Committee
shall from time to time determine.
5.2 Designation as Non-qualified Stock Option or Incentive Stock
Option. In connection with any grant of Options, the Committee shall designate
in the written agreement required pursuant to Article 10 hereof whether the
Options granted shall be Incentive Stock Options or Non-qualified Stock Options,
or in case both are granted, the number of shares of Common Stock of each.
5.3 Purchase Price. The purchase price per share of Common Stock under
each Incentive Stock Option shall be not less than the Market Price (as
hereinafter defined) of the Common Stock on the date the Incentive Stock Option
is granted. The purchase price per share of Common Stock under each
Non-Qualified Stock Option shall be determined by the Committee. In the case of
an Incentive Stock Option granted to an Optionee owning (actually or
constructively under Section 424(d) of the Code) more than 10% of the total
combined voting power of all classes of stock of the Corporation or of a
subsidiary (a "10% Stockholder"), the purchase price shall not be less than 110%
of the Market Price of the Common Stock on the date of grant. "Market Price"
shall mean the per share value of the Common Stock and shall be determined as
follows: (i) if the Common Stock is not listed on a national stock exchange,
quoted on NASDAQ or reported on by the National Quotation Bureau, Inc., the
Market Price on any day shall be the fair market value of one share of Common
Stock on such day as determined by the Committee, which shall take into account
any valuation of the Common Stock by an independent valuation firm made within
90 days of such determination; (ii) if the Common Stock is listed on a national
securities exchange or quoted through the NASDAQ National Market System, the
Market Price on any day shall be, in the sole discretion of the Committee,
either (x) the average of the high and low reported consolidated trading sales
prices, or if no such sale is made on such day, the average of the closing bid
and asked prices reported on the consolidated trading listing for such day or
(y) the closing price reported on the consolidated trading listing for such day;
(iii) if the Common Stock is quoted on the NASDAQ interdealer quotation system,
the Market Price on any day shall be the average of the representative bid and
asked prices at the close of business for such day; or (iv) if the Common Stock
is not listed on a national stock exchange or quoted on NASDAQ, the Market Price
on any day shall be the average of the high bid and low asked prices reported by
the National Quotation Bureau, Inc. for such day. In no event shall the Market
Price of a share of Common Stock subject to an Incentive Stock Option be less
than the fair market value as determined for purposes of Section 422(b)(4) of
the Code.
5.4 Exercise and Payment. Options may be exercised in whole or in part.
Shares of Common Stock purchased upon the exercise of Options shall be paid for
at the time of purchase. Such payment may be made as follows (or by any
combination of the following), in the sole discretion of the Committee: (i) in
United States currency by delivery of a certified check, bank draft or postal or
express money order payable to the order of the Corporation, (ii) by surrender
of a number of Mature Shares (as defined below) of Common Stock held by the
optionee exercising the Option equal to the quotient obtained by dividing (A)
the aggregate purchase price payable with respect to the Options then being
exercised by (B) the Market Price on the date of exercise or (iii) if the
Corporation has established a program for the cashless exercise of Options
through a broker or other similar arrangements or programs, then in accordance
with the terms and conditions of such programs and arrangements. Any shares so
delivered shall be valued at their Market Price on the date of exercise. Upon
receipt of a notice of exercise and payment in accordance with procedures set
forth above, the Corporation or its agent shall deliver to the persons
exercising the Option(s) (or his or her designee) a certificate for such Shares.
In the event that payment for exercised Options is made through the surrender of
Mature Shares of Common Stock, the Committee in accordance with procedures
established by it may grant Non-qualified Stock Options ("Restoration Options")
to the person exercising the Option(s) for the purchase of a number of shares
equal to the number of shares of Common Stock delivered to the Corporation in
connection with the payment of the exercise price of the Option(s) and the
payment of or surrender of shares for any withholding taxes due upon such
exercise. The purchase price per share under each Restoration Option shall be
the Market Price of the Common Stock on the date the Restoration Option is
granted. "Mature Shares" shall mean shares of Common Stock owned by the
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optionee for a period of at least six consecutive months prior to the exercise
of the Option(s) in question. The Committee may in its sole discretion, pursuant
to a general program established by it in connection with the Plan and made
available to all Optionees under the Plan, lend money to an optionee, the
proceeds of which shall be used by the Optionee to exercise all or a portion of
the Options granted hereunder. If a loan is made by the Corporation to the
Optionee as contemplated in the foregoing sentence, the Optionee shall execute a
promissory note evidencing such loan and such note shall (i) provide for full
recourse to the maker, (ii) be secured by collateral which is satisfactory to
the Committee (other than the pledge of the shares of Common Stock issued upon
exercise of the option), (iii) bear interest at a rate no less than the
applicable Federal rate (within the meaning of Section 1274 of the Code, and
(iv) contain such other terms as the Committee in its sole discretion shall
require.
5.5 Vesting. Options granted to Optionees shall vest in whole when granted
or in such number of periodic installments as the Committee may establish.
5.6 No Rights as a Stockholder. A recipient of Options shall have no
rights as a stockholder with respect to any shares issuable or transferable upon
exercise thereof until the date a stock certificate representing such shares is
issued to such recipient. Except as otherwise expressly provided in the Plan or
by the Committee, no adjustment shall be made for cash dividends or other rights
for which the record date is prior to the date such stock certificate is issued.
5.7 Incentive Stock Options. The terms of any Incentive Stock Option
granted under the Plan shall comply in all respects with the provisions of
Section 422 of the Code, or any successor provision thereto, and any regulations
promulgated thereunder and the Plan shall be interpreted accordingly. The
aggregate Market Price (determined at the time of grant of the Incentive Stock
Option) of the Common Stock with respect to which the Incentive Stock Options
become exercisable for the first time by an optionee in any calendar year (under
all plans of the Corporation and its subsidiaries) shall not exceed $100,000.
Any Option grants that exceed such amount shall be granted as Non-qualified
Options. No grant of an Incentive Stock Option shall be made under the Plan more
than ten (10) years after the effective date of the Plan, nor shall any
Incentive Stock Option be exercisable after the expiration of ten (10) years
from the date such Option is granted, or 5 years from the date the Option is
granted in the case of a 10% Stockholder (as defined in Section 5.3).
5.8 Conversion of Incentive Stock Options. The Committee, at the written
request of any Optionee, may in its discretion, take such actions as may be
necessary to convert such Optionee's Incentive Stock Options (or any portions
thereof) that have not been exercised on the date of conversion into
Non-qualified Options at any time prior to the expiration of such Incentive
Stock Options. At the time of such conversion, the Committee may impose such
conditions on the exercise of the resulting Non-qualified Options, consistent
with this Plan, as the Committee in its discretion may determine. Nothing in the
Plan shall be deemed to give any Optionee the right to have such Optionee's
Incentive Stock Options converted into Non-qualified Options.
ARTICLE 6
NONTRANSFERABILITY OF OPTIONS
No Option may be transferred, assigned, pledged or hypothecated (whether by
operation of law or otherwise), except as provided by will or the applicable
laws of descent and distribution, and no Option shall be subject to execution,
attachment or similar process. Any attempted assignment, transfer, pledge,
hypothecation or other disposition of an Option not specifically permitted
herein shall be null and void and without effect. An Option may be exercised
only by the recipient during his or her lifetime, or following his or her death
pursuant to Section 7.3 hereof. Notwithstanding anything to the contrary in the
preceding paragraph, the Committee may, in its sole discretion, cause the
written agreement relating to any Non-qualified Stock Options granted hereunder
to provide that the recipient of such Non-qualified Stock Options may transfer
any of such Non-qualified Stock Options other than by will or the laws of
descent and distribution in any manner authorized under applicable law;
PROVIDED, HOWEVER, that in no event may the Committee permit any transfers which
would cause the Plan to fail to satisfy the applicable requirements of
Rule 16b-3 under the 1934 Act or which would cause any recipient of awards
hereunder to fail to be entitled to the benefits Rule 16b-3 or other exemptive
rules under Section 16 of the 1934 Act or be subject to liability thereunder.
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ARTICLE 7
EFFECT OF TERMINATION OF EMPLOYMENT, DISABILITY, RETIREMENT, OR DEATH
7.1 General Rule. Except as expressly provided in the written agreement
relating to any Option or as otherwise expressly determined by the Committee in
its sole discretion, in the event an Optionee ceases to be an employee or
director of the Corporation, its subsidiaries or affiliates (a "Terminated
Person") for any reason other than Disability or Retirement (as hereinafter
defined) or death, any Options which were held by such Terminated Person on the
date on which he or she ceased to be an employee or director (the "Termination
Date") and which were otherwise exercisable on such date shall terminate unless
exercised within the period of 60 days following the Termination Date, but in no
event after the expiration of the exercise period of such Options. Except as
expressly provided in the written agreement relating to the Options or as
otherwise expressly determined by the Committee in its sole discretion, it may
cause any Option to be forfeited upon an employee's termination of employment or
a director's removal from the Board or any board of directors of a subsidiary or
affiliate of the Corporation, or termination of a consultant's engagement by the
Corporation or any subsidiary or affiliate of the Corporation if the Optionee
was terminated for "cause". For purposes of this Section 7.1, the term "cause"
shall mean any one (or more) of the following: (i) the Optionee's commission of
any fraud, misappropriation or misconduct which causes demonstrable injury to
the Corporation or a subsidiary or affiliate; or (ii) an act of dishonesty by
the Optionee resulting or intended to result, directly or indirectly, in gain or
personal enrichment at the expense of the Corporation or a subsidiary or
affiliate; or (iii) in the case of an employee or consultant such meaning, if
any, as set forth in any employment agreement or consulting agreement between
the employee or the consultant, respectively, and the Corporation. It shall be
within the sole discretion of the Committee to determine whether an employee's
termination was for one of the foregoing reasons, and its decision shall be
final and conclusive.
7.2 Disability or Retirement. Except as expressly provided otherwise in
the written agreement relating to any Options granted under the Plan or as
otherwise determined by the Committee in its sole discretion, in the event of a
termination of employment arrangement of a Terminated Person due to the
Disability (as defined below) or Retirement (as defined below) of such Person,
any Options which were held by such Person on the Termination Date and which
were otherwise exercisable on such date shall expire unless exercised within the
period of 365 days following such date, but in no event after the expiration
date of the exercise period of such Options; PROVIDED, HOWEVER, that any
Incentive Stock Option of such Terminated Person shall no longer be treated as
an Incentive Stock Option unless exercised within three (3) months of the
Termination Date (or within one (1) year of the Termination Date, in the case of
an employee whose termination of employment occurs by reason of a Disability).
"Disability" shall have the meaning set forth in Section 22(e)(3) of the Code.
"Retirement" shall mean a termination of employment or consulting arrangement
with the Corporation or a subsidiary or affiliate with the written consent of
the Committee in its sole discretion. The decision of the Committee shall be
final and conclusive.
7.3 Death. Except as expressly provided in the written agreement relating
to the Options or as otherwise expressly determined by the Committee in its sole
discretion, in the event of the death of a recipient of Options, any Options
which were held by such Terminated Person at the date of death and which were
otherwise exercisable on such date shall be exercisable by the beneficiary
designated by the Optionee for such purpose (the "Designated Beneficiary") or if
no Designated Beneficiary shall be appointed or if the Designated Beneficiary
shall predecease the Optionee, by the Optionee's personal representatives, heirs
or legatees for a period of two (2) years from the date of death, but in no
event later than the expiration date of the exercise period of such Options, at
which time such Options shall expire.
7.4 Termination of Unvested Options. All Options which were not
exercisable by a Terminated Person as of the Termination Date of such Terminated
Person shall terminate as of such date, except as expressly provided in the
written agreement relating to the Options or as otherwise expressly determined
by the Committee in its sole discretion. Options shall not be affected by any
change of employment so long as the recipient continues to be employed by either
the Corporation or a subsidiary or affiliate.
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ARTICLE 8
ADJUSTMENT UPON CHANGES IN CAPITALIZATION, ETC.
8.1 Adjustments. Upon the occurrence of any of the events described in
subparagraphs 8.2, 8.3 or 8.4, an Optionee's rights with respect to Options
shall be adjusted as and to the extent hereinafter required, unless otherwise
specifically provided in the written agreement between the Optionee and the
Corporation relating to such Option.
8.2 Stock-dividends and Stock Splits. If the shares of Common Stock shall
be subdivided or combined into a greater or smaller number of shares or if the
Corporation shall issue any shares of Common Stock as a stock dividend on its
outstanding Common Stock, the number of shares of Common Stock deliverable upon
the exercise of Options shall be appropriately increased or decreased
proportionately and appropriate adjustments shall be made in the purchase price
per share to reflect such subdivision, combination or stock dividend.
8.3 Consolidation, Acquisition or Merger. If the Corporation is to be
consolidated with or acquired by another entity in a merger, sale of all or
substantially all of the Corporation's assets or otherwise (an "Acquisition"),
the Committee or the board of directors of any entity assuming the obligations
of the Corporation hereunder (the "Successor Board"), shall, as to outstanding
Options, either (i) make appropriate provision for the continuation of such
Options by substitution on an equitable basis for the shares then subject to
such Options the consideration payable with respect to the outstanding shares of
Common Stock in connection with the Acquisition; (ii) upon written notice to the
Optionees, provide that all Options must be exercised, to the extent then
exercisable (or in the discretion of the Committee or the Successor Board, also
provide that all unvested options shall be, or become at the time which the
Committee shall determine, either immediately exercisable or immediately
terminate), within a specified number of days of the date of such notice, at the
end of which period the Options shall terminate; or (iii) terminate all Options
in exchange for a cash payment or other consideration equal to the excess of the
Market Price of the shares subject to such Options (to the extent then
exercisable, or in the discretion of the Committee or the Successor Board,
whether or not then exercisable) over the exercise price thereof.
8.4 Recapitalization or Reorganization. In the event of a recapitalization
or reorganization of the Corporation (other than a transaction described in
subparagraph 8.3 above) pursuant to which securities of the Corporation or of
another corporation are issued with respect to the outstanding shares of Common
Stock, an Optionee upon exercising an Option shall be entitled to receive for
the purchase price paid upon such exercise, the securities he would have
received if he had exercised his Option immediately prior to such
recapitalization or reorganization.
8.5 Modification of ISOs. Notwithstanding the foregoing, any adjustments
made pursuant to subparagraphs 8.2, 8.3 or 8.4 with respect to Incentive Stock
Options shall be made only after the Committee, after consulting with counsel
for the Corporation, determines whether such adjustments would constitute a
"modification" of such Incentive Stock Options (as that term is defined in
Section 424 of the Code) or would cause any adverse tax consequences for the
holders of such Incentive Stock Options. If the Committee determines that such
adjustments made with respect to Incentive Stock Options would constitute a
modification of such Incentive Stock Options, it may refrain from making such
adjustments.
8.6 Dissolution or Liquidation. In the event of the proposed dissolution
or liquidation of the Corporation, each Option will terminate immediately prior
to the consummation of such proposed action or at such other time and subject to
such other conditions as shall be determined by the Committee.
8.7 Issuances of Securities. Except as expressly provided herein, no
issuance by the Corporation of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
subject to Options. No adjustments shall be made for dividends paid in cash or
in property other than securities of the Corporation.
8.8 Fractional Shares. No fractional shares shall be issued under the Plan
and the Optionee shall receive from the Corporation cash in lieu of such
fractional shares.
8.9 Adjustments. Upon the happening of any of the events described in
subparagraphs 8.2, 8.3 or 8.4 above, the class and aggregate number of shares
set forth in Section 2.2 hereof that are subject to Options which previously
have been or subsequently may be granted under the Plan shall also be
appropriately adjusted to reflect the events described in such subparagraphs. If
changes in the capitalization of the Corporation shall occur
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other than those referred to above in this Article 8, the Committee shall make
such adjustments, if any, in the number of shares covered by each Option and in
the per share purchase price as the Committee in its discretion may consider
appropriate. The Committee or, if applicable, the Successor Board, shall
determine the specific adjustments to be made under this Section 8 and its
determination shall be conclusive.
ARTICLE 9
TERM; AMENDMENT AND TERMINATION
No Option shall be granted under the Plan after the earlier of (i) ten (10)
years from the effective date of the Plan, or (ii) the termination of the Plan
pursuant to this Article 9. However, unless otherwise expressly provided in the
Plan or in an applicable written agreement required pursuant to Article 10, any
Option theretofore granted may extend beyond such date, and any authority of the
Committee to amend, alter, suspend, discontinue or terminate any such Option, or
to waive any conditions or rights under any such Option and the authority of the
Board to amend the Plan, shall extend beyond such date. The Board may suspend,
terminate, modify or amend the Plan, provided that any amendment that would (i)
materially increase the aggregate number of shares which may be issued under the
Plan, (ii) materially increase the benefits accruing to Optionees under the
Plan, or (iii) materially modify the requirements as to eligibility for
participation in the Plan, shall be subject to the approval of the Corporation's
stockholders, except that any such increase or modification that may result from
adjustments authorized by Article 8 hereof shall not require such stockholder
approval. If the Plan is terminated, the terms of the Plan shall,
notwithstanding such termination, continue to apply to awards granted prior to
such termination. No suspension, termination, modification or amendment of the
Plan may, without the consent of the Optionee to whom an award shall theretofore
have been granted, adversely affect the rights of such under such award and
provided further that if any amendment would require stockholder approval to
satisfy the requirements of Rule 16 b-3 under the 1934 Act, then such amendment
shall be presented to stockholders for approval, provided however that failure
to obtain such approval shall not affect the validity of this Plan or the
options granted hereunder.
ARTICLE 10
WRITTEN AGREEMENT
Each award of Options shall be evidenced by a written agreement containing
such restrictions, terms and conditions, if any, as the Committee may require.
In the event of any conflict between a written agreement and the Plan, the terms
of the Plan shall govern.
ARTICLE 11
MISCELLANEOUS PROVISIONS
11.1 Tax Withholding. The Corporation shall have the right to require
Optionees or their beneficiaries or legal representatives to remit to the
Corporation an amount sufficient to satisfy Federal, state and local withholding
tax requirements, or to deduct from all payments under the Plan amounts
sufficient to satisfy all withholding tax requirements. Whenever payments under
the Plan are to be made to an Optionee in cash, such payments shall be net of
any amounts sufficient to satisfy all Federal, state and local withholding tax
requirements. The Committee may, in its sole discretion, permit an Optionee to
satisfy his or her tax withholding obligations either by (i) surrendering of
Common Stock owned by the Optionee or (ii) having the Corporation withhold from
shares of Common Stock, or other compensation, otherwise deliverable or payable
to the Optionee. Shares of Common Stock surrendered or withheld shall be valued
at their Market Price as of the date on which income is required to be
recognized for income tax purposes.
11.2 Securities Laws. Each Option granted under the Plan shall be subject
to the requirement that, if at any time the Board shall determine, in its sole
discretion, that the listing, registration or qualification of the shares of
Common Stock issuable or transferable upon exercise thereof upon any securities
exchange or under any state or Federal law, including without limitation the
Securities Act of 1933, as amended, or the consent or approval of any
governmental regulatory body, is necessary or desirable as a condition of, or in
connection with, the granting of such Option or the issue, transfer, or purchase
of the shares of Common Stock thereunder, such Option may
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not be exercised in whole or in part unless such listing, registration,
qualification, consent, or approval shall have been effected or obtained free of
any conditions not acceptable to the Board. The foregoing shall not be construed
to require the Corporation to effect or obtain any such listing, registration,
qualification, consent or approval. The Committee may, in connection with the
granting of any Option, require the individual to whom the Option is to be
granted to enter into an agreement with the Corporation stating that as a
condition precedent to each exercise of the Option, in whole or in part, such
individual shall if then required by the Corporation, represent to the
Corporation in writing that such exercise is for investment only and not with a
view to distribution, and also setting forth such other terms and conditions as
the Committee may prescribe.
11.3 Compliance with Section 16(b). In the case of Optionees who are or
may be subject to Section 16 of the 1934 Act, it is the intent of the
Corporation that the Plan and any award granted hereunder satisfy and be
interpreted in a manner that satisfies the applicable requirements of
Rule 16b-3 so that such persons will be entitled to the benefits of Rule 16b-3
or other exemptive rules under Section 16 of the 1934 Act and will not be
subjected to liability thereunder. If any provision of the Plan or any award
would otherwise conflict with the intent expressed herein, that provision, to
the extent possible, shall be interpreted and deemed amended so as to avoid such
conflict. To the extent of any remaining irreconcilable conflict with such
intent, such provision shall be deemed void as applicable to Optionees who are
or may be subject to Section 16 of the 1934 Act.
11.4 Successors. The obligations of the Corporation under the Plan shall
be binding upon any successor corporation or organization resulting from the
merger, consolidation or other reorganization of the Corporation, or upon any
successor corporation or organization succeeding to all or substantially all of
the assets and business of the Corporation. In the event of any of the
foregoing, the Committee may, in its discretion prior to the consummation of the
transaction and subject to Article 8 hereof, cancel, offer to purchase,
exchange, adjust or modify any outstanding awards, at such time and in such
manner as the Committee deems appropriate and in accordance with applicable law.
11.5 General Creditor Status. Optionees shall have no right, title, or
interest whatsoever in or to any investments which the Corporation may make to
aid it in meeting its obligations under the Plan. Nothing contained in the Plan,
and no action taken pursuant to its provisions, shall create or be construed to
create a trust of any kind, or a fiduciary relationship between the Corporation
and any Optionee, beneficiary or legal representative of such Optionee. To the
extent that any person acquires a right to receive payments from the Corporation
under the Plan, such right shall be no greater than the right of an unsecured
general creditor of the Corporation. All payments to be made hereunder shall be
paid from the general funds of the Corporation and no special or separate fund
shall be established and no segregation of assets shall be made to assure
payment of such amounts except as expressly set forth in the Plan.
11.6 No Right to Employment. Nothing in the Plan or in any written
agreement entered into pursuant to Article 10 hereof, nor the grant of any
award, shall confer upon any Optionee any right to continue in the employ of or
engagement by the Corporation or a subsidiary or affiliate or to be entitled to
any remuneration or benefits not set forth in the Plan or such written agreement
or interfere with or limit the right of the Corporation or a subsidiary or
affiliate to modify the terms of or terminate such Optionee's employment or
engagement at any time.
11.7 Notices. Notices required or permitted to be given under the Plan
shall be sufficiently given if in writing and personally delivered to the
Optionee or sent by regular mail addressed (a) to the Optionee at the Optionee's
address as set forth in the books and records of the Corporation or its
subsidiaries or affiliates, or (b) to the Corporation or the Committee at the
principal office of the Corporation clearly marked "Attention: Compensation
Committee."
11.8 Severability. In the event that any provision of the Plan shall be
held illegal or invalid for any reason, such illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.
11.9 Governing Law. To the extent not preempted by Federal law, the Plan,
and all agreements hereunder, shall be construed in accordance with and governed
by the laws of the state of Delaware.
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ANNEX VI
MOTO GUZZI CORPORATION
1998 STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
I. PURPOSE.
The purpose of the Moto Guzzi Corporation ("Company") 1998 Stock Option
Plan for Outside Directors (the "Outside Directors' Option Plan") is to promote
the growth and profitability of the Company and to provide outside directors of
the Company with an incentive to achieve the long-term objectives of the
Company, attract and retain non-employee directors of outstanding competence and
to provide such outside directors with an opportunity to acquire an equity
interest in the Company. Options granted under the Outside Directors' Option
Plan are not intended to be characterized as incentive stock options under
Internal Revenue Code Section 422.
II. GRANT OF OPTIONS.
(a) Initial Grant. Each member of the Board of Directors of the Company
who is not an employee of the Company ("Outside Director") shall, on the
earliest practicable date following shareholder approval of this plan, be
granted stock options to purchase 12,500 shares of the Company's Class A Common
Stock, $0.001 par value per share (as such par value may be changed from time to
time, "Common Stock"), subject to adjustment as provided in Section IV (the
"Initial Grant"). The purchase price per share of the Common Stock deliverable
upon the exercise of each stock option shall be the Fair Market Value (as
defined below) of the Common Stock on the date of the grant of the option being
exercised. As used herein, "Fair Market Value" shall mean the closing price of
the Common Stock as reported by the National Association of Securities Dealers
(as published by the Wall Street Journal, if published).
(b) Grants Subsequent to Initial Grant. Each person who is an Outside
Director of the Corporation on the effective date of the merger of Moto Guzzi
Corp. with and into the Corporation shall be granted on such effective date, and
each person who is an Outside Director on January 2 of each calendar year
subsequent to the year in which the shareholders have approved this Outside
Directors' Option Plan, other than January 2, 1999, shall be granted on each
such January 2 stock options to purchase 12,500 shares of Common Stock, subject
to adjustment pursuant to Section IV. The purchase price per share of the Common
Stock deliverable upon the exercise of each such option shall be the Fair Market
Value of the Common Stock on the date of the grant of the option being
exercised.
(c) Ineligibility. An option under the Outside Directors' Option Plan
shall not be granted to any Outside Director who at any previous time was an
employee of the Company or was eligible to receive any options to purchase
Common Stock.
(d) Continuing Plan. The Outside Directors' Option Plan and the grant of
options subsequent to the Initial Grant pursuant thereto are part of a
continuing plan.
III. TERMS AND CONDITIONS.
(a) Option Agreement. Each option shall be evidenced by a written option
agreement between the Company and the Outside Director specifying the number of
shares of Common Stock that may be acquired through its exercise and containing
such other terms and conditions which are not inconsistent with the terms of
this Outside Directors' Option Plan.
(b) Termination of Option. Each option shall expire upon the earlier of
(i) ten (10) years following the date of grant, or (ii) three (3) months
following the date on which the Outside Director ceases to serve in such
capacity for any reason other than removal for cause. If the Outside Director
dies before fully exercising any portion of an option then exercisable, such
option may be exercised by such Outside Director's personal representative(s),
designee(s), heir(s) or devisee(s) at any time within the one (1) year period
following his or her death; provided, however, that in no event shall the option
be exercisable more than ten (10) years after the date of its grant. If the
Outside Director is removed for cause all options awarded to him shall expire
upon such termination.
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(c) Limitations on and Manner of Exercise. Each option may be exercised,
in whole or part, in accordance with the terms of the instrument of grant.
Subject to the foregoing, any option may be exercised from time to time, in
whole or in part, by delivering a written notice of exercise to the Chief
Executive Officer or the Chief Financial Officer of the Company. Such notice is
irrevocable and must be accompanied by full payment of the purchase price in
cash or shares of previously acquired Common Stock of the Company. If previously
acquired shares of Common Stock are tendered in payment of all or part of the
exercise price, the value of such shares shall be the Fair Market Value of such
shares determined as of the date of such exercise.
(d) Transferability. Each option granted hereby is not transferable by the
optionee and may be exercised only by the Outside Director to whom it is issued
or in the event of the Outside Director's death, his or her personal
representative(s) designee(s), heir(s), or devisee(s) pursuant to the terms of
Section III(b).
(e) Six Month Holding Period. In accordance with Rule 16b-3(c)(1)
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), Outside Directors shall not be permitted to dispose of Common Stock
underlying an option granted pursuant to this Outside Directors' Option Plan
during the six month period commencing from the date of the acquisition of such
option.
(f) Conditions Upon Issuance of Shares of Common Stock. No shares of
Common Stock shall be delivered pursuant to the exercise of any option granted
under this Outside Directors' Option Plan unless the delivery of such shares
shall comply (in the opinion of counsel to the Company) with all relevant
provisions of law, including, without limitation, the Securities Act of 1933, as
amended (the "Act"), the rules and regulations promulgated thereunder, any
applicable state securities laws, and the requirements of any stock exchange
upon which the Common Stock may then be listed. As a condition to the exercise
of an option, the Company may require the exercising optionee to make such
written representations and warranties as may be necessary to assure the
availability of an exemption from any registration requirements of federal or
state securities laws. Certificates representing shares of Common Stock issued
upon the exercise of any option may bear a legend restricting transfer of the
shares except in compliance with federal and state securities statutes or an
exemption therefrom, if available. The failure of any certificates to contain
such a legend shall not constitute a waiver by the Company of any such
registration requirements.
IV. COMMON STOCK SUBJECT TO THE OUTSIDE DIRECTORS' OPTION PLAN.
The shares of Common Stock which shall be issued and delivered upon
exercise of options granted under the Outside Directors' Option Plan may be
either authorized and unissued shares of Common Stock or authorized and issued
shares of Common Stock held by the Company as treasury stock. The number of
shares of Common Stock reserved for issuance under the Outside Directors' Option
Plan shall not exceed four hundred thousand (400,000) shares of the Common Stock
of the Company subject to adjustment pursuant to this Section IV. Any shares of
Common Stock subject to an option which for any reason either terminates
unexercised or expires, shall again be available for issuance under the Outside
Directors' Option Plan.
In the event of any change or changes in the outstanding Common Stock of
the Company by reason of any stock dividend or split, recapitalization,
reorganization, merger, consolidation, split-off, combination or any similar
corporate change, or other increase or decrease in such shares effected without
receipt or payment of consideration by the Company, the number of shares of
Common Stock which may be issued under this Outside Directors' Option Plan, the
number of shares of Common Stock subject to options granted under this Outside
Directors' Option Plan and the option price of such options, shall be
automatically adjusted to prevent dilution or enlargement of the rights granted
to an Outside Director under the Outside Directors' Option Plan.
V. EFFECTIVE DATE OF THE PLAN; STOCKHOLDER APPROVAL.
The Outside Directors' Option Plan has been adopted by the Board of
Directors and shall become effective on the date that the Outside Directors'
Option Plan is approved by the vote of the Company's stockholders holding a
majority of the shares of Common Stock entitled to vote thereon. The Outside
Directors' Option Plan shall be presented to stockholders of the Company for
approval for purposes of obtaining favorable treatment under Section 16(b) of
the Exchange Act.
A-VI-2
<PAGE>
VI. TERMINATION OF THE PLAN.
The right to grant options under the Outside Directors' Option Plan shall
terminate upon the earlier of December 31, 2008 and the issuance of the Common
Stock or exercise of options equal to the maximum number of shares of Common
Stock reserved for under this Outside Directors' Option Plan.
VII. AMENDMENT OF THE PLAN.
The Outside Directors' Option Plan may be amended, from time to time, by
the Board of Directors of the Company, provided that Section II, "Grant of
Options", shall not be amended more than once every six months other than to
comport with the Internal Revenue Code of 1986, as amended, or the Employee
Retirement Income Security Act of 1974, as amended, or the rules promulgated
thereunder. Except as provided in Section IV hereof, rights and obligations
under any option granted before an amendment shall not be altered or impaired by
such amendment without the written consent of the optionee. If the Outside
Directors' Option Plan becomes qualified under Rule 16b-3 promulgated under the
Exchange Act and an amendment would require stockholder approval under such Rule
16b-3 to retain the Outside Directors' Option Plan's qualification, then such
amendment shall be presented to stockholders for approval; provided, however,
the failure to obtain stockholder approval shall not affect the validity of this
Outside Directors' Option Plan as so amended and the options granted thereunder.
VIII. APPLICABLE LAW.
This Outside Directors' Plan shall be administered, construed and
interpreted in accordance with the laws of the State of New York, without giving
effect to principles of conflict of laws.
IX. ADMINISTRATION.
Awards of options under this Outside Directors' Option Plan are automatic.
This Outside Directors' Option Plan is intended to be a "Formula Award" plan as
recognized by Rule 16b-3(c)(2)(ii) promulgated under the Exchange Act, and shall
be interpreted accordingly.
X. REGISTRATION OF SHARES.
Nothing contained in this Outside Directors' Option Plan shall be construed
to require the Company to register under the Act any shares of Common Stock
underlying options granted under this Outside Directors' Option Plan.
XI. HEADINGS.
The headings contained herein are for the purpose of convenience only and
are not intended to define or limit the contents of this Outside Directors'
Option Plan.
A-VI-3
<PAGE>
ANNEX VII
ALTERNATIVE FORM OF ARTICLE FOURTH OF AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
(TO EFFECTUATE CLASS B RECAPITALIZATION)
FOURTH: (a) The total number of shares which the Corporation shall have
authority to issue is Twenty Million (20,000,000) of which (i) Fifteen Million
Two Hundred Fifty Thousand (15,250,000) shares, par value $.01 per share shall
be Common Stock (hereinafter called "Common Stock"), and (ii) Four Million Seven
Hundred and Fifty Thousand (4,750,000) shares, par value $.01 per share shall be
Preferred Stock (hereinafter called "Preferred Stock"). One Hundred (100) shares
of the Preferred Stock shall be designated as Series A Convertible Preferred
Stock (hereinafter called "Class A Preferred Stock") and Three Hundred Fifty
Thousand (350,000) shares of the Preferred Stock are designated as Class B
Convertible Preferred Stock (hereinafter called the "Class B Preferred Stock").
(b) The Common Stock shall have the following rights, preferences,
privileges and restrictions:
(1) The holders of the Common Stock shall be entitled to receive such
dividends as may be declared thereon from time to time by the Board of
Directors, in its discretion, from any assets legally available for the
payment of dividends, provided that no dividends may be paid on the Common
Stock unless all accrued and unpaid dividends on all Preferred Stock are
paid.
(2) In the event of the dissolution of the Corporation, whether
voluntary or involuntary, the holders of Common Stock shall be entitled to
share ratably in the distribution of the assets of the Corporation after
payment or provision for payment of such amounts as the holders of
Preferred Stock shall be entitled to receive.
(3) All shares of Common Stock shall have equal voting rights and
shall have one vote, in person or by proxy, for each share thereof held.
(c) The Class A Preferred Stock shall have the following rights,
preferences, privileges and restrictions:
(1) The holder of shares of Class A Preferred Stock shall not be
entitled to vote with respect to the election of directors or on any other
matter submitted to stockholders, unless required by law.
(2) Each share of the Class A Preferred Stock is convertible into
Common Stock of the Company at any time until 5:00 p.m. New York City time,
on the first anniversary of the date on which this Amended and Restated
Certificate of Incorporation is filed with the Secretary of State of the
State of Delaware.
(3) In the event of a liquidation or dissolution of the Corporation,
the rights of the holders of the Corporation's Common Stock are subordinate
to the rights of the holders of the Class A Preferred Stock.
(d) [Reserved]
(e) The Class B Preferred Stock shall have the following rights,
preferences, privileges and restrictions:
(1) Rank. The Class B Preferred Stock shall, with respect to
liquidation, rank senior to all classes and series of capital stock of the
Corporation now or hereafter authorized, issued or outstanding, including,
without limitation, any preferred stock of the Corporation or common stock,
and/or any other class and series of stock of the Corporation now or
hereafter authorized, issued or outstanding (collectively, the "Junior
Securities"). In addition, the Corporation will not issue any class or
series of any class or capital stock which ranks pari passu with the
Class B Preferred Stock with respect to rights on liquidation, and
winding-up or dissolution of the Corporation.
(2) Dividends.
A-VII-1
<PAGE>
A. The holders of the Class B Preferred Stock shall be entitled to
receive out of any assets legally available therefor cumulative
dividends at the per share rate of five percent (5%) of U.S. $15.00 (the
"Stated Value") for each share of Class B Preferred Stock, per annum,
payable annually on December 31 of each year, commencing December 31,
1999 (each a "Dividend Payment Date"), or if earlier, upon conversion of
shares of Class B Preferred Stock, in preference and priority to any
payment of any dividend on any Junior Security. Such dividends shall
accrue on any given share from January 1, 1999 and thereafter from the
most recent date on which a dividend has been paid with respect to such
share, or if no dividends have been paid, from January 1, 1999, and such
dividends shall accrue from day to day whether or not declared, based on
the actual number of days elapsed. If at any time dividends on
outstanding shares of Class B Preferred Stock at the rate set forth
above shall not have been paid or declared and set apart for payment
with respect to all preceding periods, the amount of the deficiency
shall be fully paid or declared and set apart for payment, but without
interest, before any distribution, whether by way of dividend or
otherwise, shall be declared or paid upon or set apart for the shares of
any class of Junior Security.
B. In the event the Corporation shall declare a dividend or other
distribution payable in something other than shares of Common Stock,
then, in each such case, the holders of the Class B Preferred Stock
shall be entitled to a proportionate share of any such distribution as
though they were the holders of the number of shares of Common Stock of
the Corporation into which their shares of Class B Preferred Stock are
convertible as of the record date fixed for the determination of the
holders of Common Stock of the Corporation entitled to receive such
distribution. The Corporation may not redeem, purchase or otherwise
acquire, Junior Securities, unless and until all shares of Class B
Preferred Stock are no longer outstanding, except for the redemption of
the Company's Class A Purchase Warrants.
(3) Liquidation, Dissolution or Winding Up, Etc.
In the event of any voluntary or involuntary liquidation (including a sale
by the Corporation of all or substantially all of its assets), dissolution
or winding up of the Corporation, the assets of the Corporation available
for distribution to shareholders, whether from capital, surplus or earnings,
shall be distributed in the following order of priority:
(i) The holders of Class B Preferred Stock shall be entitled to
receive, prior and in preference to any distribution to the holders of
any Junior Securities an amount equal to the greater of (A) the Stated
Value for each share of Class B Preferred Stock then outstanding plus
all accrued and unpaid dividends thereon, or (B) the amount the holders
of Class B Preferred Stock would have received had they converted the
Class B Preferred Stock into Common Stock as provided herein in Section
(5) of paragraph (e) of Article FOURTH hereof, on the business day
immediately prior to the voluntary or involuntary liquidation.
(ii) If there is a distribution pursuant to the preceding Section
(3)A(i), the remaining assets of the Corporation available for
distribution, if any, to the shareholders of the Corporation shall be
distributed to the holders of Junior Securities.
(4) Voting Rights. The holders of the Class B Preferred Stock shall
vote with the holders of Common Stock on all matters presented to the
holders of Common Stock for a vote as if all the shares of Class B
Preferred Stock have been converted as of the applicable record date, such
that a holder of Class B Preferred Stock will be entitled to one vote for
every whole share of Common Stock into which his or her Class B Preferred
Stock is convertible and, to the extent required by applicable law, shall
also be entitled to vote as a separate class.
(5) Conversion of Class B Preferred Stock.
A. Right to Convert. The holders of Class B Preferred Stock shall
have the right, at each holders' option, at any time or from time to
time, to convert any or all of such holders' shares of Class B Preferred
Stock into such number of shares of Common Stock ("Converted Shares") as
is determined by dividing (i) the Stated Value times the number of
shares of Class B Preferred Stock being converted, by (ii) a conversion
price of (x) $15.00, subject to adjustment as hereinafter provided (the
"Conversion Price").
A-VII-2
<PAGE>
B. Mechanics of Conversion. Before any holder of Class B Preferred
Stock shall be entitled to convert the same into Converted Shares, such
holder shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the Corporation or of any transfer agent for
the Class B Preferred Stock, and shall give written notice to the
Corporation at its principal corporate office, of the election to
convert the same and shall state therein the name or names in which the
certificate or certificates for Converted Shares are to be issued. The
Corporation shall, as soon as practicable thereafter, issue and deliver
at such office to such holder of Class B Preferred Stock, or to the
nominee or nominees of such holder, a certificate or certificates for
the number of Converted Shares to which such holder shall be entitled as
aforesaid. Such conversion shall be deemed to have been made immediately
prior to the close of business on the date of such surrender of the
shares of Class B Preferred Stock to be converted, and the person or
persons entitled to receive the Converted Shares shall be treated for
all purposes as the record holder or holders of such shares of Common
Stock as of such date.
C. No Fractional Shares. The Corporation shall not be required to
issue fractions of Converted Shares. If any fractions of a share would,
but for this Section, be issuable upon any conversion of Class B
Preferred Stock, in lieu of such fractional share the Corporation will
round up to the next whole Converted Share and issue the next whole
share of Common Stock to the holder.
D. Reservation of Shares. The Corporation shall reserve and shall
at all times have reserved from its authorized but unissued shares of
Common Stock sufficient shares of Common Stock to permit the conversion
of the then outstanding shares of the Class B Preferred Stock pursuant
to Section (5) of paragraph (e) of Article FOURTH hereof. All Converted
Shares shall be validly issued, fully paid and nonassessable.
E. Conversion Price Adjustments of Class B Preferred Stock. The
Conversion Price in effect at any time for conversion of Class B
Preferred Stock into Common Stock pursuant to Section (5) of paragraph
(e) of Article FOURTH hereof shall be subject to adjustment from time to
time as follows:
(i) Additional Outstanding Shares. If the Corporation shall,
after the date upon which any shares of Class B Preferred Stock are
first issued ("Issue Date"), fix a record date for the effectuation
of a split or subdivision of the outstanding shares of Common Stock
or the determination of holders of Common Stock entitled to receive a
dividend or other distribution payable in additional shares of Common
Stock without payment of any consideration by such holder for the
additional shares of Common Stock, then, as of such record date (or
the date of such dividend distribution, split or subdivision if no
record date is fixed), the Conversion Price of the Class B Preferred
Stock shall be appropriately decreased so that the number of
Conversion Shares issuable on conversion of each share of such
Class B Preferred Stock shall be increased in proportion to such
increase in the aggregate number of shares of Common Stock
outstanding.
(ii) Decrease of Outstanding Shares. If the number of shares of
Common Stock outstanding at any time after the Issue Date is
decreased by a combination of the outstanding shares of Common Stock
or otherwise, then, following the record date of such combination or
other event, the Conversion Price for the Class B Preferred Stock
shall be appropriately increased so that the number of shares of
Converted Stock issuable on conversion of each share of such Class B
Preferred Stock shall be decreased in proportion to such decrease in
the aggregate number of shares of Common Stock outstanding.
(iii) Recapitalization. If at any time or from time to time
there shall be a reclassification of the Common Stock (other than a
subdivision or combination provided for in clauses (i) or (ii) above)
or any reorganization, consolidation or merger of the Corporation
with or into another corporation (other than a merger or
reorganization with respect to which the Corporation is the
continuing corporation and which does not result in any
reclassification of the Common Stock), or a transfer of all or
substantially all of the assets of the Corporation, or the payment of
a liquidating distribution then, as part of any such reorganization,
reclassification, consolidation, merger, sale or liquidating
distribution, lawful provision shall be made so that the holders of
the Class B Preferred Stock shall thereafter be entitled to receive,
upon conversion of the Class B Preferred Stock, the
A-VII-3
<PAGE>
kind and amount of shares of stock or other securities or property
which such holder of Class B Preferred Stock would have been entitled
to receive if, immediately prior to any such reorganization,
reclassification, consolidation, merger, sale or liquidating
distribution, as the case may be, such holder of Class B Preferred
Stock had held the number of shares of Common Stock which were then
deliverable upon conversion. In any such case, appropriate adjustment
shall be made in the application of the provisions of Section (5) of
paragraph (e) of Article FOURTH hereof with respect to the rights of
the holders of the Class B Preferred Stock thereafter to the end that
the provisions of Section (5) of paragraph (e) of Article FOURTH
hereof (including adjustment of the Conversion Price then in effect
and the number of Converted Shares issuable upon conversion of the
Class B Preferred Stock) shall be applicable after that event as
nearly equivalent as may be practicable.
F. No Impairment. The Corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization,
recapitalization, 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
to be observed or performed hereunder by the Corporation, but will at
all times in good faith assist in the carrying out of all the provisions
of Section (5) of Paragraph (e) of Article FOURTH hereof and in the
taking of all such action as may be necessary or appropriate in order to
protect the Conversion Rights of the holders of the Class B Preferred
Stock against impairment.
G. Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Price of Class B Preferred
Stock pursuant to Section (5)E of Paragraph (e) of Article FOURTH
hereof, the Corporation, at its expense, shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and
prepare and furnish to each holder of Class B Preferred Stock a
certificate setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is based.
The Corporation shall, upon the written request at any time of any
holder of Class B Preferred Stock, furnish or cause to be furnished to
such holder a like certificate setting forth (A) such adjustment and
readjustment, (B) the Conversion Price for such Class B Preferred Stock
at the time in effect, and (C) the number of shares of Common Stock and
the amount, if any, of other property which at the time would be
received upon the conversion of a share of Class B Preferred Stock.
H. Notices of Record Date. In the event of any setting by the
Corporation of a record of the holders of any class of securities for
the purpose of determining the holders thereof who are entitled to
receive any dividend (other than a cash dividend) or other distribution,
any right to subscribe for, purchase or otherwise acquire any shares of
stock of any class or any other securities or property, or to receive
any other right, the Corporation shall mail to each holder of Class B
Preferred Stock, at least twenty (20) days prior to the date specified
therein, a notice specifying the date on which any such record is to be
taken for the purpose of such dividend, distribution or right, and the
amount and character of such dividend, distribution or right.
I. Notices. Any notice required by the provisions of Section
(5) of Paragraph (e) of Article FOURTH hereof to be given to the holders
of shares of Class B Preferred Stock shall be deemed given if deposited
in the United States mail, postage prepaid, and addressed to each holder
of record at his address appearing on the books of this Corporation.
J. Cancellation. In the event any shares of Class B Preferred
Stock shall be converted pursuant to Section (5) of Paragraph (e) of
Article FOURTH hereof, the shares so converted shall be canceled and
returned to the status of authorized and unissued shares of preferred
stock, without any class designation.
(f) The Board of Directors is authorized, subject to limitations
prescribed by law and the provisions of this Article FOURTH, to provide for
the issuance of the shares of Preferred Stock in series, and by filing a
certificate pursuant to the applicable law of the State of Delaware, to
establish from time to time the number of shares to be included in each
such series, and to fix the designation, powers, preferences and rights of
the shares of each such series and the qualifications, limitations or
restrictions thereof. The holders of shares of the Preferred Stock of each
such series shall be entitled to receive, when and as declared by the Board
of
A-VII-4
<PAGE>
Directors, out of funds legally available for the payment of dividends,
dividends (if any) at the rates fixed by the Board of Directors for such
series, and no more, before any cash dividends shall be declared and paid,
or set apart for payment, on the Common Stock with respect to the same
dividend period. The holders of shares of the Preferred Stock of each such
series shall be entitled upon liquidation or dissolution or upon the
distribution of the assets of the Corporation to such preferences as
provided in the resolution or resolutions creating such series of Preferred
Stock, and no more, before any distribution of the assets of the
Corporation shall be made to the holders of shares of the Common Stock.
Whenever the holders of shares of the Preferred Stock of each such series
shall have been paid the full amounts to which they shall be entitled, the
holders of shares of the Common Stock shall be entitled to share ratably in
all remaining assets of the Corporation.
The authority of the Board of Directors with respect to each such series
shall include, but not be limited to, the determination or fixing of the
following:
(1) The distinctive designation and number of shares comprising
such series, which number may (except where otherwise provided by the
Board of Directors in creating such series) be increased or decreased
(but not below the number of shares then outstanding) from time to time
by like action of the Board of Directors;
(2) The dividend rate of such series, the conditions and time upon
which such dividends shall be payable, the relation which such dividends
shall bear to the dividends payable on any other class or classes of
stock or series thereof, or any other series of the same class, and
whether such dividends shall be cumulative or non-cumulative;
(3) The conditions upon which the shares of such series shall be
subject to redemption by the Corporation and the times, prices and other
terms and provisions upon which the shares of the series may be redeemed
including the date or date upon or after which they may be redeemed, and
the amount per share payable in case of redemption, which amount may
vary under different conditions and at different redemption dates;
(4) Whether or not the shares of the series shall be subject to the
operation of a retirement or sinking fund to be applied to the purchase
or redemption of such shares and, if such retirement or sinking fund be
established, the annual amount thereof and the terms and provisions
relative to the operation thereof;
(5) Whether or not the shares of the series shall be convertible
into or exchangeable for shares of any other class or classes, with or
without par value, or of any other series of the same class, and, if
provision is made for conversion or exchange, the times, prices, rates,
adjustments, and other terms and conditions of such conversion or
exchange as the Board of Directors shall determine;
(6) Whether or not the shares of the series shall have voting
rights, in addition to the voting rights provided by law, and, if so,
the terms of such voting rights;
(7) The rights of the shares of the series in the event of
voluntary or involuntary liquidation, dissolution or the winding up of
the Corporation, and the relative rights of priority, if any, of payment
of shares of that series;
(8) Any other powers, preferences and relative participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof, of the shares of such series, as the Board of
Directors may deem advisable and as shall not be inconsistent with the
provisions of this Certificate of Incorporation.
(g) All outstanding shares of "Class B Common Stock" as described in
and authorized under the Certificate of Incorporation in effect prior to
the effective date of the Amended and Restated Certificate of Incorporation
of the Company which includes this Article FOURTH shall be automatically
converted as of such effective date, without any action having to be taken
by the holders thereof, into such securities of the Company into which the
Class B Common Stock was convertible in accordance with the Certificate of
Incorporation as in effective prior to the effective date of the Amended
and Restated Certificate of Incorporation.
A-VII-5
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICER
Section 145 of the Delaware General Corporation Law ("Section 145") permits
indemnification of directors, officers, employees, agents and controlling
persons of a corporation under certain conditions and subject to certain
limitations. Section 145 empowers a corporation to indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director, officer or
agent of the corporation or another enterprise if serving at the request of the
corporation. Depending on the character of the proceeding, a corporation may
indemnify against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred in connection with
such action, suit or proceeding if the person indemnified acted in good faith
and in a manner he reasonably believed to be in or not opposed to, the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. In the
case of an action by or in the right of the corporation, no indemnification may
be made with respect to any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the extent
that the court of chancery or the court in which such action or suit was brought
shall determine that despite the adjudication of liability such person is fairly
and reasonably entitled to indemnity for such expenses which the court shall
deem proper. Section 145 further provides that to the extent a director or
officer of a corporation has been successful in the defense of any action, suit
or proceeding referred to above or in the defense of any claim, issue or matter
therein, he shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith.
Section 3.13 of the Company's By-laws (Exhibit 3.2 hereto) provides for the
indemnification of directors, officers and other authorized representatives of
the Company to the maximum extent permitted by the Delaware General Corporation
Law, as may be amended (but in the case of such amendment, only to the extent
that such amendment permits the Company to provide broader indemnification
rights than the law permitted the Corporation to provide prior to the Amendment)
against all expense, loss and liability (including, without limitation,
judgments, fines, amounts paid in settlement and reasonable expenses, including
attorneys' fees), actually and necessarily incurred or suffered by such person
in connection with the defense of or as a result of such proceeding, or in
connection with any appeal therein. Section 3.13 of the Company's By-laws permit
it to purchase insurance for the indemnification of directors, officers and
employees to the full extent permitted by the Delaware General Corporation Law.
The By-laws provide that the right to indemnification conferred in the
By-laws are contract rights and shall include the right to be paid by the
Corporation the expenses incurred in defending any such proceeding in advance of
its final disposition; provided, however, that if the Delaware General
Corporation Law requires: the payment of such expenses incurred by a director or
officer in his or her capacity as a director or officer (and not in any other
capacity in which service was or is rendered by such person while a director or
officer, including, without limitation, service to an employee benefit plan) in
advance of the final disposition of a proceeding, shall be made only upon
delivery to the Corporation of an undertaking by or on behalf of such director
or officer, to repay all amounts so advanced if it shall ultimately be
determined that such director or officer is not entitled to be indemnified under
this Bylaw or otherwise.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ---------------------------------------------------------------------------------------------------
<S> <C>
2.1* Agreement and Plan of Reorganization, dated August 18, 1995
3.1 Amended and Restated Certificate of Incorporation of the Registrant (Exhibit 3.1)(1)
3.2 By-laws of the Registrant (Exhibit 3.2)(1)
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ---------------------------------------------------------------------------------------------------
<S> <C>
3.3* By-laws of the Registrant upon consummation of the Merger
4.1 Warrant Agency Agreement dated May 28, 1996 between American Stock Transfer & Company and the
Registrant (Exhibit 4.2)(1)
4.2 Form of Representative's Warrant Agreement of Registrant (Exhibit 4.5)(1)
4.3 Form of Class A Common Stock Certificate of Registrant (Exhibit 4.1)(1)
4.4 Form of Class B Stock Certificate of the Registrant (Exhibit 4.4)(1)
4.5 Form of Class A Common Stock Purchase Warrant Certificate of the Registrant (Exhibit 4.3)(1)
4.6* Form of Warrant (Nominal Warrant) to Purchase Shares of Class A Common Stock
5.1+ Opinion of Graubard Mollen and Miller
10.1 Underwriting Agreement (Exhibit 1.1)(1)
10.2 Form of Escrow Agreement for proceeds from sale of Units (Exhibit 10.1)(1)
10.3 Amended and Restated License Agreement, dated May 9, 1997, between Bright Capital, Ltd. and the
Company (Exhibit 10.3)(1)
10.4 Management Unit Purchase Option Plan (Exhibit 10.4)(1)
10.5 Form of Class B Stock Option Agreement (Exhibit 10.5)(1)
10.6* Form of Registration Rights Agreement, undated
10.7 Form of Escrow Agreement for outstanding Common Stock (Exhibit 10.2)(1)
10.8* Form of Subscription Agreement, dated August 29, 1995 between the Company and Investors
10.9* Form of Escrow Agreement for Class B Preferred Stock and certain shares of Class A Common Stock to
be dated the Merger Effective Time.
23.1+ Consent of Graubard Mollen & Miller (included in its opinion filed as Exhibit 5.1 hereto)
23.2* Consent of BDO Seidman, LLP regarding the Registrant
23.3* Consent of Arthur Andersen, LLP regarding Moto Guzzi
23.4* Consent of Allen & Company regarding their Fairness Opinion (included in its opinion filed as Annex
II to the Proxy Statement/Prospectus)
24.1* Powers of Attorney (included on signature page)
27.1* Financial Data Schedule
99.1* Form of Proxy Card
</TABLE>
- ------------------
* Filed herewith.
+ To be filed by amendment.
(1) Filed as an Exhibit to the Registrant's Registration Statement on Form
SB-2 (No. 33-80647) declared effective August 22, 1997.
(b) Financial Statement Schedules:
All schedules are omitted because of the absence of conditions under which
they are required or because the required information is given in the financial
statements or notes thereto.
ITEM 22. UNDERTAKINGS
(1) The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
II-2
<PAGE>
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
provided, however, that paragraphs (1)(a)(i) and (1)(a)(ii) do not apply if
the registration statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registration pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(2) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(3) The registrant undertakes that every prospectus (a) that is filed
pursuant to paragraph (2) immediately preceding, or (b) that purports to meet
the requirements of section 10(a)(3) of the Securities Act of 1933 and is used
in connection with an offering of securities subject to Rule 415, will be filed
as a part of an amendment to the registration statement and will not be used
until such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at the time shall be deemed
to be the initial bona fide offering thereof.
(4) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plans, annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(5) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to
II-3
<PAGE>
a court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
(6) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(7) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
(8) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN NEW YORK, NEW YORK, ON
OCTOBER 2, 1998.
By: /s/ David J. Mitchell
----------------------------------
David J. Mitchell
Chairman of the Board and Chief
Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATE INDICATED. EACH PERSON WHOSE SIGNATURE APPEARS BELOW
IN SO SIGNING ALSO MAKES, CONSTITUTES AND APPOINTS DAVID J. MITCHELL AND C.
THOMAS MCMILLEN, AND EACH OF THEM ACTING ALONE, HIS TRUE AND LAWFUL
ATTORNEY-IN-FACT, WITH FULL POWER OF SUBSTITUTION, FOR HIM IN ANY AND ALL
CAPACITIES, TO EXECUTE AND CAUSE TO BE FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION ANY OR ALL AMENDMENTS AND POST-EFFECTIVE AMENDMENTS TO THIS
REGISTRATION STATEMENT, WITH EXHIBITS THERETO AND OTHER DOCUMENTS IN CONNECTION
THEREWITH, AND HEREBY RATIFIES AND CONFIRMS ALL THAT SAID ATTORNEY-IN-FACT OR
HIS SUBSTITUTE OR SUBSTITUTES MAY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------------------------- ---------------
<S> <C> <C>
/s/ David J. Mitchell Chairman of the Board, Chief Executive Officer October 2, 1998
- ------------------------------------------ and Director (Principal Executive Officer)
David J. Mitchell
/s/ C. Thomas McMillen Secretary, Treasurer and Director (Principal October 2, 1998
- ------------------------------------------ Accounting Officer)
C. Thomas McMillen
/s/ A. J. Nasser Director October 2, 1998
- ------------------------------------------
A. J. Nasser
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
2.1* -- Agreement and Plan of Reorganization, dated August 18, 1995
3.1 -- Amended and Restated Certificate of Incorporation of the Registrant (Exhibit 3.1)(1)
3.2 -- By-laws of the Registrant (Exhibit 3.2)(1)
3.3* -- By-laws of the Registrant upon consummation of the Merger
4.1 -- Warrant Agency Agreement dated May 28, 1996 between American Stock Transfer & Company and the
Registrant (Exhibit 4.2)(1)
4.2 -- Form of Representative's Warrant Agreement of Registrant (Exhibit 4.5)(1)
4.3 -- Form of Class A Common Stock Certificate of Registrant (Exhibit 4.1)(1)
4.4 -- Form of Class B Stock Certificate of the Registrant (Exhibit 4.4)(1)
4.5 -- Form of Class A Common Stock Purchase Warrant Certificate of the Registrant (Exhibit 4.3)(1)
4.6* -- Form of Warrant (Nominal Warrant) to Purchase Shares of Class A Common Stock
5.1+ -- Opinion of Graubard Mollen and Miller
10.1 -- Underwriting Agreement (Exhibit 1.1)(1)
10.2 -- Form of Escrow Agreement for proceeds from sale of Units (Exhibit 10.1)(1)
10.3 -- Amended and Restated License Agreement, dated May 9, 1997, between Bright Capital, Ltd. and the
Company (Exhibit 10.3)(1)
10.4 -- Management Unit Purchase Option Plan (Exhibit 10.4)(1)
10.5 -- Form of Class B Stock Option Agreement (Exhibit 10.5)(1)
10.6* -- Form of Registration Rights Agreement, undated
10.7 -- Form of Escrow Agreement for outstanding Common Stock (Exhibit 10.2)(1)
10.8* -- Form of Subscription Agreement, dated August 29, 1995 between the Company and Investors
10.9* -- Form of Escrow Agreement for Class B Preferred Stock and certain shares of Class A Common Stock to
be dated the Merger Effective Time.
23.1+ -- Consent of Graubard Mollen & Miller (included in its opinion filed as Exhibit 5.1 hereto)
23.2* -- Consent of BDO Seidman, LLP regarding the Registrant
23.3* -- Consent of Arthur Andersen, LLP regarding Moto Guzzi
23.4* -- Consent of Allen & Company regarding their Fairness Opinion (included in its opinion filed as Annex
II to the Proxy Statement/Prospectus)
24.1* -- Powers of Attorney (included on signature page)
27.1* -- Financial Data Schedule
99.1* -- Form of Proxy Card
</TABLE>
- ------------------
* Filed herewith.
+ To be filed by amendment.
(1) Filed as an Exhibit to the Registrant's Registration Statement on Form SB-2
(No. 33-80647) declared effective August 22, 1997.
<PAGE>
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION, dated August 18, 1998,
among NORTH ATLANTIC ACQUISITION CORP., a Delaware corporation, ("North"), MOTO
GUZZI CORP., a Delaware corporation ("Motoguzzi") and, as to those applicable
provisions of ARTICLE II, ARTICLE III, ARTICLE V, ARTICLE VI, ARTICLE VIII,
ARTICLE X, ARTICLE XI AND ARTICLE XIII hereof, TRIDENT ROWAN GROUP, INC., a
Maryland corporation ("TRG") and significant shareholder of Motoguzzi.
WHEREAS, North was formed to serve as a vehicle to effect a merger,
exchange of capital stock, acquisition or other business combination with an
operating business;
WHEREAS, Motoguzzi, through its wholly and partially owned subsidiaries is
in the business of designing, manufacturing and selling motorcycles, spare parts
and similar products;
WHEREAS, subject to the terms and conditions of this Agreement and Plan of
Merger and Reorganization ("Agreement"), the Parties desire to consummate a
merger, as contemplated herein, pursuant to which Motoguzzi will merge with and
into North, with North being the surviving corporation (North, after the
consummation of the Merger, the "Surviving Corporation"); and
WHEREAS, for Federal income tax purposes, the parties intend, by approving
resolutions authorizing this Agreement, that such merger qualify as a
reorganization under the provisions of Section 368(a)(1)(A) of the United States
Internal Revenue Code of 1986, as amended (the "Code").
IT IS AGREED:
ARTICLE I
THE MERGER
SECTION 1.01 Definitions. Certain capitalized terms used in this Agreement
shall have the meanings specified in ARTICLE XII.
SECTION 1.02 The Merger. Upon the terms and subject to the conditions
hereof and in accordance with the relevant provisions of the General Corporation
Law of the State of Delaware (the "DGCL"), at the Effective Time (as defined
herein) North and Motoguzzi shall consummate a merger ("Merger") of Motoguzzi
with and into North. Following the Merger, (i) North shall continue as the
surviving corporation and shall continue its existence under the laws of the
State of Delaware and (ii) the separate corporate existence of Motoguzzi shall
cease.
<PAGE>
SECTION 1.03 Effective Time. On the Closing Date, North and Motoguzzi shall
file with the Secretary of State of the State of Delaware in accordance with the
DGCL an executed copy of the Certificate of Merger in the form of EXHIBIT A
hereto (the "Certificate of Merger"). The Merger shall become effective at such
time as the Certificate of Merger is filed with the Secretary of State of the
State of Delaware (the "Effective Time").
SECTION 1.04 Effects of the Merger. The Merger shall have the effects set
forth in Section 259 of the DGCL.
SECTION 1.05 Changes to Certificate of Incorporation and By-Laws of the
Surviving Corporation. The Certificate of Merger will also amend the Certificate
of Incorporation of the Surviving Corporation to effect a change in the name of
North from "North Atlantic Acquisition Corp." to "Moto Guzzi Corporation", to
increase the authorized capital stock of the Surviving Corporation, to authorize
the issuance of one or more classes of preferred stock and to provide for a
board of directors with staggered terms of three years, in the form attached
hereto as EXHIBIT A. The By-Laws of Moto Guzzi Corp. shall be the By-Laws of the
Surviving Corporation. The Certificate of Incorporation as so modified and such
By-Laws shall be the Certificate of Incorporation and By-Laws of the Surviving
Corporation.
SECTION 1.06 Directors and Officers of the Surviving Corporation After the
Effective Time. At the Effective Time, the Board of Directors of the Surviving
Corporation shall consist of eight persons, of which two will be nominated by
the management of North, five will be nominated by Motoguzzi and one will be a
nominee mutually acceptable to both Motoguzzi and North, each to serve until his
successor is elected and qualified. Such persons, and the classes in which they
shall serve, as well as certain compensation arrangements and certain options to
purchase shares of Class A Common Stock to be granted to certain directors and
executive officers of the Surviving Corporation (the "Executive Options") are
listed in SCHEDULE 1.06. The officers of North at the Effective Time shall
consist of the persons listed in SCHEDULE 1.06, each to serve until his or her
successor is elected. Each of North and Motoguzzi may, at any time prior to the
Effective Time, change their nominees.
SECTION 1.07 The Closing. Subject to the terms and conditions of this
Agreement, the consummation of the Merger and the other transactions
contemplated by this Agreement shall take place at a closing (the "Closing") to
be held at 10:00 a.m., local time, on the third Business Day after the date on
which the last of the conditions to Closing set forth in ARTICLE IX hereof is
fulfilled or waived by the appropriate Party, as the case may be, at the offices
of Graubard Mollen & Miller, 600 Third Avenue, New York, New York 10016, or at
such other time, date or place as the Parties may agree upon in writing. The
date on which the Closing occurs is referred to herein as the "Closing Date."
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<PAGE>
SECTION 1.08 Tax Free Reorganization. The parties intend to adopt this
Agreement as a tax-free plan of reorganization and to consummate the Merger in
accordance with the provisions of Section 368(a)(1)(A) of the Code, and shall
not take a position on any tax return inconsistent therewith. In addition, North
represents now, and as of the Closing, that it presently intends to continue
Motoguzzi's historic business or use a significant portion of Motoguzzi's
business assets in a business, in each case within the meaning of Treasury
Regulation Section 1.368-1(d).
ARTICLE II
CONVERSION OF SHARES AND RELATED MATTERS
SECTION 2.01 Outstanding Stock of North. Upon consummation of the Merger,
the outstanding capital stock of North shall continue to be the issued and
outstanding capital stock of the Surviving Corporation.
SECTION 2.02 Conversion of Outstanding Stock of Motoguzzi.
(a) Except as provided in SECTION 2.03, upon consummation of the Merger,
(i) the shares of common stock, $.01 par value, ("Old Motoguzzi Common Stock")
of Motoguzzi outstanding on the date of this Agreement and immediately prior to
the Effective Time and the shares of preferred stock, $.01 par value, ("Old
Motoguzzi Preferred Stock") of Motoguzzi outstanding on the date of this
Agreement and immediately prior to the Effective Time, shall, by virtue of the
Merger and without any action on the part of the holder thereof, and subject to
reduction in accordance with Section 2.03 below and increase in accordance with
Section 2.02(c) below, be converted into and exchanged for (A) 3,702,450 shares
of the Class A Common Stock, $.01 par value ("Class A Common Stock") of North,
subject to adjustment as herein provided, (B) 234,489 shares of Class B
Convertible Preferred Stock having such rights and preferences as are described
in the amended Certificate of Incorporation of the Surviving Corporation ("Class
B Preferred Stock"), and (C) warrants in the form attached as EXHIBIT B hereto
(the "Nominal Warrants") to purchase such number of shares of Class A Common
Stock as is equal to 74.05% of the number of shares of Class A Common Stock
which may be purchased under the "Maximum Nominal Warrants" (as defined below),
(ii) in consideration of the contribution to the capital of Motoguzzi of certain
intercompany indebtedness described in Section 2.06(b) there shall be issued to
the holders of such indebtedness 1,038,040 shares of Class A Common Stock,
65,743 shares of Class B Preferred Stock and Nominal Warrants to purchase 20.76%
of the number of shares of Class A Common Stock which may be purchased under the
Maximum Nominal Warrants, and (iii) if all outstanding Warrants to purchase an
aggregate of 1,500,000 shares of Old Motoguzzi Common Stock at $4.00 per share
(the "Old Motoguzzi Warrants") are surrendered (as provided in Section 2.06(a))
there shall be issued to such surrendering warrant holders 259,510 shares of
Class A Common Stock, 16,436 shares of Class B Preferred Stock and Nominal
Warrants
3
<PAGE>
to purchase 5.19% of the number of shares of Class A Common Stock which may be
purchased under the Maximum Nominal Warrants. The Class A Common Stock, the
Class B Preferred Stock and the Nominal Warrants are together referred to herein
as the "Merger Consideration". The number of shares of Class A Common Stock,
Class B Preferred Stock and the number of Nominal Warrants payable as the Merger
Consideration shall be rounded up or down to the nearest whole number of shares
or warrants. If the holders of less than all Old Motoguzzi Warrants surrender
same, then the Merger Consideration described in the preceding clause (iii)
shall be reduced by multiplying the Merger Consideration in clause (iii) by the
percentage of Old Motoguzzi Warrants so surrendered and each Old Motoguzzi
Warrant not so surrendered shall, after the Effective Time, have such continuing
rights as are provided by the terms thereof. The term "Maximum Nominal Warrants"
shall mean Nominal Warrants to purchase such number of shares of Class A Common
Stock as would be acquired hereunder if all Old Motoguzzi Warrants are
surrendered as provided in Section 2.06(a).
(b) Except as otherwise provided in this Agreement and except for shares
with respect to which the holder thereof votes against the Merger ("Dissenter")
and ultimately receives payment thereon pursuant to Section 262 of the DGCL
("Dissenter Securities"), each share of Old Motoguzzi Common Stock outstanding
on the date hereof and immediately prior to the Effective Time and each share of
Old Motoguzzi Preferred Stock outstanding on the date hereof and immediately
prior to the Effective Time will be converted into .4937 shares of Class A
Common Stock, .0313 shares of Class B Preferred Stock and Nominal Warrants for
such number of shares of Class A Common Stock as equals the number of shares of
Class A Common Stock which may be purchased under 74.05% of the Maximum Nominal
Warrants multiplied by a fraction, the numerator of which is 1 and the
denominator of which is 7,500,000.
(c) If Available Cash (as defined in Section 4.05 below) is less than
$8,150,000 at the Effective Time, the number of shares of Class B Preferred
Stock issued as part of the Merger Consideration shall be increased by one share
for each $15 of such shortfall, allocable pro rata as provided in SECTION
2.02(a).
SECTION 2.03 Dissenters.
(a) The Merger Consideration will be reduced, on a pro rata basis, as a
result of any Dissenter seeking the appraisal rights pursuant to Section 262 of
the DGCL, with respect to his shares of Old Motoguzzi Common Stock or Old
Motoguzzi Preferred Stock.
(b) If after the Effective Time a Dissenter loses the right to receive
payment pursuant to Section 262 of the DGCL, the Dissenter Securities held by
the Dissenter will be treated as if they had been converted as of the Effective
Time into the Merger Consideration.
4
<PAGE>
(c) Motoguzzi will promptly provide North with copies of any written demand
for payment to be received by a Dissenter, and North will have the right to
participate in all negotiations and proceedings with respect to any demand by a
Dissenter. Motoguzzi will not, except with the prior written consent of North or
as may be required by law, make any payment prior to the Effective Time with
respect to, or settle or offer to settle, any demand of a Dissenter. All
Dissenter Securities acquired by Motoguzzi or by the Surviving Corporation will
be canceled after payment therefor has been made in accordance with the DGCL.
SECTION 2.04 Surrender and Payment.
(a) Prior to the Effective Time, North will appoint American Stock Transfer
& Trust Company, New York, New York, as its agent ("Exchange Agent') for the
purpose of exchanging certificates representing the Old Motoguzzi Common Stock,
Old Motoguzzi Preferred Stock and Old Motoguzzi Warrants ("Motoguzzi
Securities") for certificates of Class A Common Stock, Class B Preferred Stock
and Nominal Warrants representing the appropriate portion of the Merger
Consideration. Promptly after the Effective Time, North will cause the Exchange
Agent to send, to each holder of Motoguzzi Securities being exchanged a letter
of transmittal for use in the exchange. North will make available to the
Exchange Agent, as needed, stock certificates and Nominal Warrant certificates
representing the Merger Consideration to be issued in respect of the Motoguzzi
Securities.
(b) Except as provided in SECTION 10.02, for each Motoguzzi Security being
exchanged, upon the surrender of the certificate or certificates representing
them together with a properly completed letter of transmittal, the holder will
be entitled to receive certificates for the Class A Common Stock, Class B
Preferred Stock and Nominal Warrants representing that portion of the Merger
Consideration issuable in respect of the Motoguzzi Securities. Until so
surrendered, each such certificate will, after the Effective Time, represent for
all purposes, only the right to receive a proportionate amount of the Merger
Consideration.
(c) After the Effective Time, there will be no further registration of
transfers of Motoguzzi Securities held prior to the Effective Time, except as
may be permitted by Section 262 of the DGCL. After the Effective Time, all
certificates formerly representing Motoguzzi Securities which are presented to
North or the Exchange Agent will be canceled and exchanged for the consideration
provided for in this ARTICLE II.
SECTION 2.05 Adjustments. If, notwithstanding SECTION 7.01 hereof, at any
time during the period between the date of this Agreement and the Effective
Time, the outstanding shares of the capital stock of North is changed into a
different number of shares or a different class by reason of any stock dividend,
subdivision, reclassification, recapitalization, split, combination or exchange
of shares, the Merger
5
<PAGE>
Consideration will be appropriately adjusted to reflect such stock dividend,
subdivision, reclassification, recapitalization, split, combination or exchange
of shares.
SECTION 2.06 Surrender of Old Motoguzzi Warrants and Contribution of
Intercompany Indebtedness. (a) Each holder of an Old Motoguzzi Warrant who
wishes to surrender such warrant (a "Surrendered Warrant") shall do so prior to
the Closing Date by delivering same to TRG together with a Warrant Surrender
Agreement and such other documents as TRG and North shall reasonably require.
(b) TRG covenants and agrees that Lit 12,719 million principal amount of
indebtedness, plus interest thereon, owed by Motoguzzi to TRG and/or to O.A.M.
S.p.A., a subsidiary of TRG ("OAM"), shall be contributed to the capital of
Motoguzzi, simultaneously with the consummation of the Merger. After such
capital contribution, the amount of indebtedness owed by Motoguzzi and its
subsidiaries to TRG and its subsidiaries other than Motoguzzi and the Motoguzzi
Subsidiaries at the Effective Time, including all interest, will not be greater
than $800,000, and if such indebtedness exceeds such amount, any excess
automatically and without any action on the part of TRG, OAM or TRG's
subsidiaries shall be contributed to the capital of Motoguzzi at the Effective
Time with no adjustment in the Merger Consideration set forth in SECTION 2.02
(a)(ii) and the Surviving Corporation will be under no obligation whatsoever to
pay same. TRG shall cause OAM to evidence its agreement to such capital
contribution by executing the form of acknowledgment annexed hereto as EXHIBIT
C.
ARTICLE III
REPRESENTATIONS
AND WARRANTIES OF MOTOGUZZI AND TRG
Motoguzzi represents and warrants to North as follows:
SECTION 3.01 Organization.
(a) Motoguzzi. Motoguzzi is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. Except as
described on any of the Motoguzzi Disclosure Schedules attached hereto,
Motoguzzi does not own, directly or indirectly, any capital stock or other
securities of any issuer or any equity interest in any other entity, including
any partnership, limited partnership, limited liability company, business trust
and any other business entity, and is not a party to any agreement to acquire
any such securities or interest. Motoguzzi is qualified to do business in each
state where the nature of the business it conducts or the properties it owns,
leases or operates requires it to so qualify (which states are listed in
SCHEDULE 3.01(ii)), except where the failure to so qualify would not, singly or
in the aggregate, have a Motoguzzi Material Adverse Effect. Motoguzzi has all
requisite corporate power to own, lease and operate
6
<PAGE>
its properties and to carry on its business as now being conducted and as
presently contemplated by Motoguzzi to be conducted in the future.
(b) Subsidiaries of Motoguzzi. Each Motoguzzi Subsidiary is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation. Each Motoguzzi Subsidiary is qualified to do
business in each jurisdiction where the nature of the business it conducts or
the properties it owns, leases or operates requires it to so qualify (which
jurisdictions are listed in SCHEDULE 3.01 (iii)), except where the failure to so
qualify would not, singly or in the aggregate, have a Motoguzzi Material Adverse
Effect. Each Motoguzzi Subsidiary has all requisite corporate power to own,
lease and operate its properties and to carry on its business as now being
conducted and as presently contemplated by each of the Motoguzzi Subsidiaries in
the future. Motoguzzi owns, directly or indirectly, the shares of each Motoguzzi
Subsidiary as set forth in SCHEDULE 3.01(i) free and clear of any Liens.
(c) Holding Company. Motoguzzi is a holding company, the only assets of
which are the shares of the Motoguzzi Subsidiaries. Motoguzzi has no material
liabilities other than the liabilities of the Motoguzzi Subsidiaries. Motoguzzi
does not conduct any material business through any entity other than the
Motoguzzi Subsidiaries.
SECTION 3.02 Authority; Corporate Action. Motoguzzi has all necessary
corporate power and authority to enter into this Agreement and to consummate the
Merger and other transactions contemplated hereby and thereby. All action,
corporate and otherwise, necessary to be taken by Motoguzzi to authorize the
execution, delivery and performance of this Agreement and the other agreements
and instruments delivered by Motoguzzi in connection with the transactions
contemplated hereby or thereby has or at the Closing will have been duly and
validly taken. Subject to the terms and conditions hereof, this Agreement and
the other agreements and instruments delivered by Motoguzzi in connection with
the transactions contemplated hereby shall constitute the valid, binding and
enforceable obligation of Motoguzzi enforceable against it in accordance with
their respective terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or
similar laws of general application now or hereafter in effect affecting the
rights and remedies of creditors and by general principles of equity (regardless
of whether enforcement is sought in a proceeding at law or in equity).
SECTION 3.03 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement (and the other agreements
contemplated hereby) by Motoguzzi does not, and the performance by Motoguzzi of
its obligations under this Agreement (and any other agreement contemplated
hereby) will not, (i) conflict with or violate its Certificate of Incorporation,
By-laws or other organizational documents (ii) conflict with or violate any law,
statute, ordinance, rule, regulation, order, judgment or decree applicable to
Motoguzzi or any Motoguzzi Subsidiary
7
<PAGE>
or by which any of their respective properties or assets is bound or affected,
or (iii) result in any breach of, or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of, or
result in the creation of a Lien on any of the properties or assets of Motoguzzi
or any Motoguzzi Subsidiary pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which Motoguzzi or any Motoguzzi Subsidiary is a party or by which
Motoguzzi or any Motoguzzi Subsidiary or any of their respective properties or
assets is bound or affected, except, in the case of clauses (ii) and (iii),
above, for any such conflicts, violations, breaches, defaults or other
occurrences that would not have, either singly or in the aggregate, a Motoguzzi
Material Adverse Effect.
(b) The execution and delivery of this Agreement (and the other agreements
contemplated hereby) by Motoguzzi does not, and the performance of this
Agreement (and the other agreements contemplated hereby) by Motoguzzi will not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Entity, except for (i) compliance with the
applicable requirements, if any, of the DGCL and Certificate of Incorporation
and Bylaws of Motoguzzi (including but not limited to, the approval of this
Agreement and the Merger by the stockholders of Motoguzzi), (ii) filing and
recordation of appropriate merger documents as required by the laws of the State
of Delaware, (iii) those consents, approvals, authorizations, permits, filings
or notifications applicable to Motoguzzi and the Motoguzzi Subsidiaries listed
in SCHEDULE 3.03(b), and (iv) where failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not
(a) have either singly or in the aggregate, a Motoguzzi Material Adverse Effect
or (b) affect the ability of Motoguzzi to consummate the Merger and other
agreements contemplated by this Agreement.
SECTION 3.04 Motoguzzi Capitalization. The total authorized capital stock
of Motoguzzi consists of 20,000,000 shares of Old Motoguzzi Common Stock and
2,000,000 shares of Old Motoguzzi Preferred Stock, of which 6,000,000 shares of
Old Motoguzzi Common Stock and 1,500,000 shares of Old Motoguzzi Preferred Stock
are issued and outstanding. Except for Old Motoguzzi Preferred Stock and Old
Motoguzzi Warrants, there are no existing options, warrants, calls, commitments
or other rights of any character including conversion or preemptive rights
relating to the acquisition of any issued or unissued capital stock or other
securities of Motoguzzi. The outstanding Old Motoguzzi Warrants have been duly
and validly authorized and issued. All of the outstanding shares of Old
Motoguzzi Common Stock and Old Motoguzzi Preferred Stock are duly and validly
authorized and issued, fully paid and non-assessable. SCHEDULE 3.04(a) correctly
sets forth the record owners of all of the Old Motoguzzi Common Stock, Old
Motoguzzi Preferred Stock and Old Motoguzzi Warrants. Motoguzzi complied with
all applicable federal and state securities laws and regulations in connection
with the offer and sale of all of the outstanding Old Motoguzzi Common Stock,
Old Motoguzzi Preferred Stock and Old Motoguzzi Warrants, and there are no
rescission rights relating thereto except for such of the foregoing as would not
have a Motoguzzi Material Adverse Effect. There are no options, warrants,
convertible securities or other rights permitting or requiring the Motoguzzi
Subsidiaries to issue, or which give
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anyone the right to purchase any securities of the Motoguzzi Subsidiaries or
rights convertible into securities of the Motoguzzi Subsidiaries and the
Motoguzzi Subsidiaries have not agreed to issue or sell any shares of their
capital stock or securities convertible into their capital stock.
SECTION 3.05 Licenses and Permits; Compliance with Laws. Each of Motoguzzi
and the Motoguzzi Subsidiaries hold all permits, licenses and approvals
(collectively, the "Permits") from all federal, state and local governmental
authorities in the United States, Italy, and other countries necessary for it to
own, lease and operate its properties and to carry on its businesses as now
being conducted, except for such of the foregoing, the absence of which would
not have a Motoguzzi Material Adverse Effect. Motoguzzi has no knowledge that
any such Permit has been rescinded and, to its knowledge, all such Permits are
in full force and effect and listed on SCHEDULE 3.05. Except as set forth in any
of the Motoguzzi Disclosure Schedules attached hereto, the business of each of
Motoguzzi and the Motoguzzi Subsidiaries is being and has been conducted in
compliance with the Permits and all applicable laws, statutes, ordinances,
regulations judgments, orders, decrees, concessions, grants and other
authorizations of any governmental authority except where any non compliance,
singly or in the aggregate would not have a Motoguzzi Material Adverse Effect.
Neither Motoguzzi nor the Motoguzzi Subsidiaries is in default under any of such
Permits and no event has occurred and no condition exists which, with the giving
of notice, the passage of time, or both, would constitute a default thereunder
which would result in a Motoguzzi Material Adverse Effect. Neither the execution
and delivery of this Agreement or any of the other documents contemplated
hereby, nor the consummation of the transactions contemplated hereby or thereby,
nor compliance by Motoguzzi and the Motoguzzi Subsidiaries with any of the
provisions hereof or thereof, will result in any suspension, revocation,
impairment, forfeiture or nonrenewal of any Permit, and all of which shall be in
effect as of the Closing, except for such of the foregoing, the absence of which
would not have a Motoguzzi Material Adverse Effect.
SECTION 3.06 Financial Statements.
(a) Motoguzzi has caused to be delivered to North consolidated financial
statements of Motoguzzi for the years ended December 31, 1996 and 1997 audited
and reported on by Arthur Andersen, LLP, and unaudited consolidated financial
statements of Motoguzzi for the year ended December 31, 1995 and for the three
months ended March 31, 1998 and March 31, 1997 and summary unaudited
consolidated financial statements for the three and six month periods ended June
30, 1998 and June 30, 1997 (collectively, the "Motoguzzi Financial Statements").
The Motoguzzi Financial Statements, including all related notes and schedules
thereto, fairly present in all material respects the consolidated financial
position of Motoguzzi as at the respective dates thereof and the results of
operations and cash flows of Motoguzzi for the periods indicated in accordance
with United States generally accepted accounting principles ("GAAP") applied on
a consistent basis throughout the periods involved (except as may be noted
therein) and subject, in the case of interim financial statements, to normal
year-end adjustments, and in the case of summary financial statements, to
omission of certain items customarily included in interim financial statements.
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(b) Except for liabilities, costs, expenses, debts, commitments or
obligations arising in connection with this Agreement and the transactions
contemplated hereby, or resulting from actions taken in furtherance of the
transactions identified in Items 1 through 4 of SCHEDULE 3.08 of the Motoguzzi
Disclosure Schedules attached hereto, to the knowledge of Motoguzzi, Motoguzzi,
on a consolidated basis, has no debts, liabilities, commitments or obligations
(including, without limitation, unasserted claims), whether absolute or
contingent, liquidated or unliquidated, or due or to become due or otherwise
except for liabilities and obligations (a) reflected as liabilities on the March
31, 1998 balance sheet ("Balance Sheet"), (b) that have arisen since March 31,
1998 in the ordinary course of business of Motoguzzi and the Motoguzzi
Subsidiaries, (c) that are described herein or in any of the Motoguzzi
Disclosure Schedules attached hereto, or (d) which singly or in the aggregate do
not have a Motoguzzi Material Adverse Effect.
SECTION 3.07 Real Property.
(a) SCHEDULE 3.07 contains a true, correct and complete list and brief
description of all real property owned, leased or subleased by Motoguzzi and the
Motoguzzi Subsidiaries, all of which are hereinafter referred to as the "Real
Property." Motoguzzi has made available to North true, correct and complete
copies of the deeds and leases of the Real Property.
(b) Except as set forth in any of the Motoguzzi Disclosure Schedules
attached hereto, all buildings, structures, improvements, fixtures, facilities,
equipment, all components of all buildings, structures and other improvements
included within the Real Property owned by Motoguzzi and the Motoguzzi
Subsidiaries conforms in all material respects to all applicable statutes,
rules, regulations, ordinances, orders, writs, injunctions, judgments, decrees,
awards and restrictions of every governmental authority having jurisdic tion
over any of the Real Property owned by Motoguzzi and the Motoguzzi Subsidiaries,
and every instrumentality or agency thereof (including, without limitation,
applicable statutes, rules, regulations, orders and restrictions relating to
zoning, land use, safety, health, environment, hazardous substances, pollution
controls, employment and employment practices and access by the handicapped)
(collectively, "Laws"), except where nonconformance would not have a Motoguzzi
Material Adverse Effect.
(c) Except as set forth in any of the Motoguzzi Disclosure Schedules
attached hereto, the use and operation of the Real Property owned by Motoguzzi
and the Motoguzzi Subsidiaries is in full compliance with all Laws, covenants,
conditions, restrictions, easements, disposition agreements and similar matters
affecting the Real Property except where non compliance would not have a
Motoguzzi Material Adverse Effect. Motoguzzi and the Motoguzzi Subsidiaries have
not received any notice of any violation (or claimed violation) of or
investigation regarding any Laws except where such violation or claimed
violation would not have a Motoguzzi Material Adverse Effect.
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(d) Except as set forth in any of the Motoguzzi Disclosure Schedules,
Motoguzzi and the Motoguzzi Subsidiaries have not received notice of, or
otherwise have knowledge of, any condemnation, fire, health, safety, building,
environmental, hazardous substances, pollution control, zoning or other land use
regulatory proceedings, either instituted or planned to be instituted, which
would have an adverse effect on the use and operation of any portion of the Real
Property or the value of any material portion of the Real Property, nor have
Motoguzzi and the Motoguzzi Subsidiaries received notice of any special
assessment proceedings affecting any of the Real Property except for such of the
foregoing which would not have a Motoguzzi Material Adverse Effect.
(e) Motoguzzi has made available for inspection by North true, correct and
complete title policies and surveys with respect to the Real Property.
SECTION 3.08 Material Contracts.
(a) SCHEDULE 3.08(a) sets forth a complete and correct list of all
agreements, including without limitation, leases, currently in effect which are
material to the assets, financial condition, business or operations of Motoguzzi
and the Motoguzzi Subsidiaries, taken as a whole, (collectively, the "Material
Contracts"); when the foregoing representation is restated as of the Closing
Date, any change to SCHEDULE 3.08(a) shall not be deemed a breach of such
representation, for purposes of Article IX or Article XI hereof, unless such
change, either singly or in the aggregate, would cause a Motoguzzi Material
Adverse Effect. True and complete copies of all Material Contracts have been
delivered to North or made available for inspection.
(b) Except as set forth in any of the Motoguzzi Disclosure Schedules
attached hereto, all Material Contracts are valid and in full force and effect
and neither Motoguzzi nor any of the Motoguzzi Subsidiaries has received notice
from any other party thereto that it has violated any provision of, or committed
or failed to perform any act which with or without notice, lapse of time or both
would constitute a default under the provisions of, any Material Contract,
except for defaults which would not have, either singly or in the aggregate, a
Motoguzzi Material Adverse Effect. None of the rights of Motoguzzi or any of the
Motoguzzi Subsidiaries under any of the Material Contracts are subject to any
Liens of record, except for Liens granted in the ordinary course of business and
Liens which, either singly or in the aggregate do not have a Motoguzzi Material
Adverse Effect. Except as set forth in any of the Motoguzzi Disclosure
Schedules, neither Motoguzzi nor any of the Motoguzzi Subsidiaries received
notice from any other party thereto that it has breached any express or implied
representations, warranties or covenants in connection with the sale or
provision of its services or goods, except for breaches that, either singly or
in the aggregate, will not have a Motoguzzi Material Adverse Effect.
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SECTION 3.09 Litigation. Except as set forth in any of the Motoguzzi
Disclosure Schedules attached hereto, there are no actions, suits, arbitrations,
mediation or other proceedings pending or, to its knowledge, threatened against
Motoguzzi or any of the Motoguzzi Subsidiaries at law or in equity before any
court, Federal, state, municipal or other governmental department or agency or
other tribunal and neither Motoguzzi nor any of the Motoguzzi Subsidiaries, nor
any of their respective properties, is subject to any order, judgment,
injunction or decree; when the foregoing representation is restated as of the
Closing Date, any change to any of the Motoguzzi Disclosure Schedules shall not
be deemed a breach of such representation, for purposes of Article IX or Article
XI hereof, unless such change is reasonably likely to have, either singly or in
the aggregate, a Motoguzzi Material Adverse Effect.
SECTION 3.10 Taxes, Tax Returns and Audits. Motoguzzi and the Motoguzzi
Subsidiaries have (or, in the case of returns becoming due after the date hereof
and on or before the Effective Time, will have prior to the Effective Time)
filed or caused to be filed, or have properly filed extensions for, all tax
returns which are required to be filed and have paid or caused to be paid all
taxes required therein to be paid and all assessments received by them to the
extent that such taxes have become due, except taxes the validity or amount of
which is being contested in good faith by appropriate proceedings and with
respect to which adequate reserves have been set aside and except for such of
the foregoing as would not cause a Motoguzzi Material Adverse Effect. Motoguzzi
and the Motoguzzi Subsidiaries have or will have established adequate reserves
on its books and records and financial statements (including the Balance Sheet)
for such payment in accordance with GAAP. Motoguzzi and the Motoguzzi
Subsidiaries have withheld from each payment made to any of its present or
former employees, officers, directors or other party all amounts required by law
to be withheld and have, where required, remitted such amounts within the
applicable periods to the appropriate governmental authorities. Motoguzzi and
the Motoguzzi Subsidiaries have paid or caused to be paid, or have established
reserves that they reasonably believe to be adequate in all material respects,
for all tax liabilities applicable to them for all fiscal years which have not
been examined and reported on by the taxing authorities (or closed by applicable
statutes).
SECTION 3.11 Absence of Certain Changes. Since March 31, 1998, except as
set forth in any of the Motoguzzi Disclosure Schedules attached hereto, and
except for costs, expenses or liabilities incurred or actions taken in
connection with this Agreement and the transactions contemplated hereby (which
costs, expenses and liability are to be paid by TRG), or action taken in
furtherance of the transactions identified in Items 1 through 4 of SCHEDULE 3.08
of the Motoguzzi Disclosure Schedules attached hereto, neither Motoguzzi nor any
of the Motoguzzi Subsidiaries has:
(a) issued, delivered or agreed to issue any stock, bonds or other
corporate securities (whether authorized and unissued or held in the treasury),
or granted or agreed to grant any options (including employee stock options),
warrants or other rights for the issue thereof;
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(b) borrowed or agreed to borrow any funds except in the ordinary course of
business consistent with past practices;
(c) incurred any obligation or liability, absolute, accrued, contingent or
otherwise, whether due or to become due, except current liabilities incurred in
the ordinary course of business consistent with prior practice and liabilities
to TRG which, together with other liabilities to TRG, OAM and their subsidiaries
(other than Motoguzzi and the Motoguzzi Subsidiaries) shall not exceed $800,000
in the aggregate as of the Closing Date, or, when the foregoing representation
is restated as of the Closing Date, such obligations or liabilities as do not
either singly or in the aggregate, have a Motoguzzi Material Adverse Effect;
(d) sold, transferred, leased to others or otherwise disposed of any assets
outside of the ordinary course of business or canceled or compromised any debt
or claim, or waived or released any right of substantial value;
(e) received any notice of termination of any Material Contract or Permit
or suffered any damage, destruction or loss if not covered by insurance, which,
as to any of the foregoing, has resulted in a Motoguzzi Material Adverse Effect:
(f) encountered any labor union organizing activity, labor disputes or had
any material change in its relations with its employees or agents, clients or
insurance carriers which has resulted in a Motoguzzi Material Adverse Effect;
(g) paid any monies to TRG or OAM or any of their subsidiaries;
(h) suffered any Motoguzzi Material Adverse Change.
SECTION 3.12 Labor Relations. Except as set forth in any of the Motoguzzi
Disclosure Schedules attached hereto, neither Motoguzzi nor any of the Motoguzzi
Subsidiaries is a party to any collective bargaining agreement or other contract
or agreement with any labor organization or other representative of any of the
employees of Motoguzzi and/or any of the Motoguzzi Subsidiaries. Motoguzzi and
the Motoguzzi Subsidiaries are in compliance in all material respects with all
laws relating to the employment or the workplace, including, without limitation,
provisions relating to wages, hours, collective bargaining, safety and health,
work authorization, equal employment opportunity, immigration and the
withholding of income taxes, unemployment compensation, worker's compensation,
employee privacy and right to know and social security contributions, except
where noncompliance would not have a Motoguzzi Material Adverse Effect. There
are no pending or, to its knowledge, threatened, proceedings or grievances with
respect to labor matters concerning Motoguzzi
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and the Motoguzzi Subsidiaries which would have, either singly or in the
aggregate, a Motoguzzi Material Adverse Effect.
SECTION 3.13 Insurance Policies; Claims. SCHEDULE 3.13 sets forth all
insurance policies and bonds maintained by or on behalf of Motoguzzi and the
Motoguzzi Subsidiaries. There are no unresolved claims have been made against
Motoguzzi and/or any of the Motoguzzi Subsidiaries in respect of allegedly
defective products and Motoguzzi does not know of any written assertion of any
such claim, except for such of the foregoing which, if proven, would not have a
Motoguzzi Material Adverse Effect.
SECTION 3.14 Intellectual Property.
(a) Right, Title and Interest. Motoguzzi and the Motoguzzi Subsidiaries own
or possess sufficient right, title and interest in and to, or a valid and
enforceable license in or other right to use all of the Intellectual Property
(as defined below) to entitle them to conduct their businesses as heretofore
conducted and as presently intended to be conducted in the future, except for
such of the foregoing, the absence of which would not have a Motoguzzi Material
Adverse Effect. To its knowledge, Motoguzzi and the Motoguzzi Subsidiaries have
not infringed, misappropriated or otherwise violated any Intellectual Property
of any other person except for such of the foregoing as would not have a
Motoguzzi Material Adverse Effect. To its knowledge, no person is infringing
upon any Intellectual Property right of Motoguzzi and the Motoguzzi Subsidiaries
except for such of the foregoing as would not have a Motoguzzi Material Adverse
Effect.
(b) "Intellectual Property" means all patents, patent applications and
patent disclosures; all inventions (whether or not patentable and whether or not
reduced to practice); all trademarks, service marks, trade dress, trade names
and corporate names and all the goodwill associated therewith; all registered
and unregistered statutory and common law copyrights; all registrations,
applications and renewals for any of the foregoing; all protocols, codes and
operating systems; and all trade secrets, confidential information, know-how,
technical and computer data, software, and related proprietary property. All of
the material Intellectual Property of Motoguzzi and the Motoguzzi Subsidiaries
is listed on SCHEDULE 3.14(b) hereto.
SECTION 3.15 Properties; Assets. Except as provided in any of the Motoguzzi
Disclosure Schedules attached hereto, Motoguzzi and the Motoguzzi Subsidiaries
(a) have good and marketable title to all the properties and assets reflected on
the Balance Sheet as being owned by Motoguzzi and the Motoguzzi Subsidiaries
(except properties sold or otherwise disposed of since the date thereof in the
ordinary course of business or properties sold or disposed of after the date
hereof, which does not cause a Motoguzzi Material Adverse Effect), and those
properties acquired after the date thereof and not thereafter disposed of, free
and clear of all Liens, except (i) statutory liens securing payments not yet
due, and (ii) such imperfections or irregularities of title, claims, liens,
charges, security interests or encumbrances which do not materially affect
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the use or marketability of the properties or assets subject thereto or affected
thereby or otherwise materially impair business operations at such properties,
and (b) is the lessee of all personal property reflected on the Balance Sheet as
being leased by it as of March 31, 1998 (except for leases that have expired by
their terms since March 31, 1998) and those properties leased after the date
thereof. Except as set forth in any of the Motoguzzi Disclosure Schedules
attached hereto, the assets and properties of Motoguzzi and the Motoguzzi
Subsidiaries are in good operating condition and repair (ordinary wear and tear
excepted) except for such of the foregoing as do not represent a Motoguzzi
Material Adverse Effect, and constitute all of the assets, right and properties
which are necessary for the businesses and operations of Motoguzzi as a whole to
be conducted as presently conducted. There are no Liens on any assets of
Motoguzzi or of any of the Motoguzzi Subsidiaries securing indebtedness of TRG
or any subsidiary thereof (other than Motoguzzi or any Motoguzzi Subsidiary;
"Intercompany Liens").
SECTION 3.16 Bank Accounts. SCHEDULE 3.16 sets forth the name of each bank
in which Motoguzzi and the Motoguzzi Subsidiaries have an account or safe
deposit box, vault, lock-box or other arrangement, the account number and
description of each account at each bank and the names of all persons authorized
to draw thereon or to have access thereto; and the names of all persons, if any,
holding tax or other powers of attorney from Motoguzzi and/or any of the
Motoguzzi Subsidiaries.
SECTION 3.17 Brokers. No broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Motoguzzi.
SECTION 3.18 Records. The books of account, minute books, stock certificate
books and stock transfer ledgers of Motoguzzi and the Motoguzzi Subsidiaries are
complete and correct in all material respects, and there have been no material
transactions involving Motoguzzi and the Motoguzzi Subsidiaries of the type
typically recorded in such records which were not so recorded.
SECTION 3.19 No Illegal or Improper Transactions. Neither Motoguzzi and the
Motoguzzi Subsidiaries nor any officer, director, employee, agent or affiliate
of Motoguzzi and the Motoguzzi Subsidiaries has offered, paid or agreed to pay
to any person or entity (including any governmental official) or solicited,
received or agreed to receive from any such person or entity, directly or
indirectly, any money or anything of value for the purpose or with the intent of
(i) obtaining or maintaining business for the benefit of Motoguzzi and the
Motoguzzi Subsidiaries, (ii) illegally or improperly facilitating the purchase
or sale of any product or service, or (iii) avoiding the imposition of any fine
or penalty, in any manner which is in violation of any applicable ordinance,
regulation or law.
SECTION 3.20 Related Transactions. Except as set forth in any of the
Motoguzzi Disclosure Schedules attached hereto, and for compensation and related
arrangements with employees or consultants
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for services rendered consistent with past practices, no current or former
director, officer or, to Motoguzzi's knowledge, employee of Motoguzzi and/or any
of the Motoguzzi Subsidiaries is presently, or during the last two fiscal years
has been, (a) a party to any transaction with Motoguzzi and/or any of the
Motoguzzi Subsidiaries, (including, but not limited to, any contract, agreement
or other arrangements providing for the furnishing of services by, or rental of
real or personal property from, or otherwise requiring payments to, any such
director, officer, employee or shareholder), or (b) the direct or, to
Motoguzzi's knowledge, indirect owner of an interest in any corporation, firm,
association or business organization which is a current (or potential)
competitor, supplier or customer of Motoguzzi and/or any of the Motoguzzi
Subsidiaries, nor, to Motoguzzi's knowledge, does any such person receive income
from any source other than Motoguzzi and/or any of the Motoguzzi Subsidiaries
which relates to the business of, or should properly accrue to, Motoguzzi and/or
any of the Motoguzzi Subsidiaries.
SECTION 3.21 Disclosure. No representation or warranty by Motoguzzi
contained in this Agreement and no information contained in any schedule,
financial statement or other instrument furnished or to be furnished by
Motoguzzi to North pursuant to this Agreement or in connection with the
transactions contemplated hereby, contains or will contain any untrue statement
of a material fact or omits or will omit to state a material fact necessary in
order to make the statements contained herein or therein not misleading.
SECTION 3.22 Environmental, Health and Safety Matters. Except as set forth
in any of the Motoguzzi Disclosure Schedules attached hereto:
(a) Motoguzzi and the Motoguzzi Subsidiaries are in compliance with
Environmental, Health and Safety Requirements, except for such noncompliance as
would not reasonably be expected to have, either singly or in the aggregate, a
Motoguzzi Material Adverse Effect.
(b) Motoguzzi and the Motoguzzi Subsidiaries have not received any written
notice, report or other information regarding any actual or alleged material
violation of Environmental, Health and Safety Requirements, or any material
liabilities or potential material liabilities (whether accrued, absolute,
contingent, unliquidated or otherwise), including any investigatory, remedial or
corrective obligations, relating to Motoguzzi or its property arising under
Environmental, Health, and Safety Requirements, the subject of which would
reasonably be expected to have, either singly or in the aggregate, a Motoguzzi
Material Adverse Effect.
SECTION 3.23 Year 2000 Compliance. Third parties have been engaged by
Motoguzzi to evaluate and, if required, upgrade, all operating codes, programs,
utilities and other software, as well as all hardware and systems, utilized by
Motoguzzi and the Motoguzzi Subsidiaries in their businesses, or in the
provisions of services, or comprising software, hardware and/or systems sold by
Motoguzzi and the Motoguzzi Subsidiaries to third parties, in order to record,
store, process, and present calendar dates falling
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on or after January 1, 2000 in the same manner, and with the same functionality,
as provided on or before December 31, 1999. and Motoguzzi is relying exclusively
upon the expertise of such third parties to achieve such operability.
TRG represent and warrants to North as follows:
SECTION 3.24 Organization. TRG (i) is a corporation duly organized, validly
existing and in good standing under the laws of Maryland and (ii) owns 1,500,000
shares of Old Motoguzzi Common Stock, and OAM owns 4,500,000 shares of Old
Motoguzzi Common Stock, representing 25% and 75%, respectively, of the
outstanding shares on the date hereof of Old Motoguzzi Common Stock.
SECTION 3.25 Authority; Corporate Action. TRG has all necessary corporate
power and authority to enter into this Agreement and to consummate such of the
transactions contemplated hereby as are applicable to TRG. All action, corporate
and otherwise, necessary to be taken by TRG for the execution, delivery and
performance of this Agreement and the other agreements and instruments delivered
by TRG in connection with the transactions contemplated hereby or thereby has or
at the Closing will have been duly and validly taken. Subject to the terms and
conditions hereof, this Agreement and the other agreements and instruments
delivered by TRG in connection with the transactions contemplated hereby shall
constitute the valid, binding and enforceable obligation of TRG enforceable
against it in accordance with their respective terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer or similar laws of general application now or hereafter in
effect affecting the rights and remedies of creditors and by general principles
of equity (regardless of whether enforcement is sought in a proceeding at law or
in equity).
SECTION 3.26 No Conflict; Required Filings and Consents. The execution and
delivery of this Agreement (and the other agreements contemplated hereby) by TRG
does not, and the performance by TRG of its obligations under this Agreement
(and any other agreement contemplated hereby) will not, (i) conflict with or
violate its Certificate of Incorporation, By-laws or other organizational
documents (ii) conflict with or violate any law, statute, ordinance, rule,
regulation, order, judgment or decree applicable to TRG or by which any of its
properties or assets is bound or affected, or (iii) result in any breach of, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of a Lien
on any of the properties or assets of TRG pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which TRG is a party or by which TRG or any of its
properties or assets is bound or affected, except, in the case of clauses (ii)
and (iii), above, for any such conflicts, violations, breaches, defaults or
other occurrences that would not have, either singly or in the aggregate, a
material adverse effect on TRG and its subsidiaries, taken as a whole.
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SECTION 3.27 Brokers. No broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of TRG.
SECTION 3.28 Disclosure. No representation or warranty by TRG contained in
this Agreement and no information contained in any schedule, financial statement
or other instrument furnished or to be furnished by TRG to North pursuant to
this Agreement or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary in order to make the statements
contained herein or therein not misleading.
SECTION 3.29 Voting Agreement. TRG and OAM have each executed and delivered
to North an agreement in the form of EXHIBIT D hereto with respect to voting in
favor of the consummation of the Merger at any meeting of shareholders of
Motoguzzi.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF NORTH
North represents and warrants to Motoguzzi as follows:
SECTION 4.01 Organization. North is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. North
does not own, directly or indirectly, any capital stock or other securities of
any issuer or any equity interest in any other entity, including any
partnership, limited partnership, limited liability company, business trust or
any other business entity, and is not a party to any agreement to acquire any
such securities or interest. North is qualified to do business in each state
where the nature of the business it conducts or the properties it owns, leases
or operates requires it to so qualify, except where the failure to so qualify
would not, singly or in the aggregate, have a North Material Adverse Effect.
North has all requisite corporate power to own, lease and operate its properties
and to carry on its business.
SECTION 4.02 Authority; Corporate Action. North has all necessary corporate
power and authority to enter into this Agreement and the other agreements
contemplated by this Agreement and to consummate the transactions contemplated
hereby and thereby. All action, corporate and otherwise, necessary to be taken
by North to authorize the execution, delivery and performance of this Agreement
and all other agreements delivered or to be delivered by North in connection
with the transactions contemplated hereby or thereby has, or at the Closing will
have been, duly and validly taken. Subject to the terms and conditions hereof,
this Agreement and all the other agreements contemplated hereby constitute
valid, binding and enforceable obligations of North, as the case may be,
enforceable in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent
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transfer or similar laws of general application now or hereafter in effect
affecting the rights and remedies of creditors and by general principles of
equity (regardless of whether enforcement is sought in a proceeding at law or in
equity).
SECTION 4.03 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement (and the other agreements
contemplated hereby) by North does not, and the performance by North of its
obligations under this Agreement (and any other agreement contemplated hereby)
will not, (i) conflict with or violate the Certificate of Incorporation, By-laws
or other organizational documents of North, (ii) conflict with or violate any
law, statute, ordinance, rule, regulation, order, judgment or decree applicable
to North or by which any of its properties or assets is bound or affected, or
(iii) result in any breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, or result
in the creation of a Lien on any of the properties or assets of North pursuant
to, any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which North is a party or
by which North or any of its properties or assets is bound or affected, except,
in the case of clauses (ii) and (iii), above, for any such conflicts,
violations, breaches, defaults or other occurrences that would not have, either
singly or in the aggregate, a North Material Adverse Effect.
(b) The execution and delivery of this Agreement and all the other
agreements contemplated hereby by North does not, and the performance of this
Agreement and all the other agreements contemplated hereby by North will not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Entity, except for (i) compliance with the
applicable requirements, if any, of the Certificate of Incorporation and Bylaws
of North (including, but not limited to, the approval of this Agreement and the
Merger by the Stockholders of North), Exchange Act, Securities Act, state
securities laws, state takeover laws, Nasdaq and (ii) filing and recordation of
appropriate merger documents as required by the laws of the State of Delaware,
and (iii) where failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, would not have, either singly
or in the aggregate, a North Material Adverse Effect.
SECTION 4.04 North Capitalization. The number of authorized and issued
shares of capital stock of North is set forth on SCHEDULE 4.04 which amount will
be increased on or before the Effective Time by 30,000 shares of Class B Common
Stock of North upon exercise of the Class B Options and payment to North of the
aggregate of $300,000 Class B Option exercise price; (such shares of Class B
Common Stock to be converted into 60,000 shares of Class A Common Stock either
(i) as of the Effective Time if all of the actions described in Section 7.06 are
approved, or (ii) if not, within 90 days of the Effective Time in accordance
with the agreement attached hereto as EXHIBIT E). North does not have any
treasury stock. Except as set forth
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on SCHEDULE 4.04 and except for (x) the Executive Options and (y) a warrant to
purchase 350,000 shares of Class A Common Stock to be issued at the Effective
Time to Allen & Company (the Executive Options and such warrant, collectively
the "Closing Date Options"), there are no options, warrants, calls, commitments
or other rights of any character including conversion or preemptive rights
relating to the acquisition of any issued or unissued capital stock or other
securities of North. All of the outstanding shares of common stock and preferred
stock of North are duly and validly authorized and issued, fully paid and
non-assessable. SCHEDULE 4.04 correctly sets forth the record owners of all of
the options of North. North has complied with all applicable federal and state
securities laws and regulations in connection with the offer and sale of all of
the common stock, preferred stock, warrants and options of North and there are
no rescission rights relating thereto except for such of the foregoing as would
not have a North Material Adverse Effect. SCHEDULE 4.04 sets forth the
registration rights of all holders of securities of North, either on a "demand"
or a "piggyback" basis.
SECTION 4.05 Escrow Account. As of the date hereof and at the Closing Date,
North has and covenants that it will have no less than $8,391,000 invested in
government securities in an escrow account with Chase Manhattan Bank. Upon
consummation of the Merger, all conditions to the release of such funds from
escrow will be satisfied. Immediately prior to the Closing Date, after provision
for (i) all unpaid costs, expenses and liabilities of North heretofore incurred
or hereafter incurred at any time prior to the Closing Date, all of which (other
than those described in clause (ii) hereof) to the best of North's knowledge are
set forth in SCHEDULE 4.05 hereto, and (ii) all unpaid costs and expenses
incurred by North in connection with the transactions contemplated by this
Agreement in an aggregate amount, to the extent payable in cash, of not more
than $625,000, all of which, or reasonable estimates thereof, together with all
documentation in North's possession related thereto are also set forth on
SCHEDULE 4.05 (the net amount of cash so remaining is referred to herein as
"Available Cash"), North covenants that it will have not less than $8,000,000 of
Available Cash, less only such amounts, if any, as North is required to pay
stockholders who are not officers and directors of North who elect to have their
shares redeemed in accordance with the provisions of the Certificate of
Incorporation of North. SCHEDULE 4.05 also lists all costs and expenses incurred
by North in connection with the transactions contemplated by this Agreement and
paid by North.
SECTION 4.06 North Securities and Exchange Commission Reports; Financial
Statement.
(a) North has filed all forms, reports, statements and other documents
required to be filed with the Commission when and as required to be filed, and
has heretofore made them available to Motoguzzi, in the same form as filed with
the Commission, together with any amendments thereto, copies of its (i) Annual
Report on Form 10-K for the year ended August 31, 1997 and all Quarterly Reports
on Form 10-Q filed since August 31, 1997, and (ii) all reports on Form 8-K
since August 31, 1997 (collectively, the "North Reports"). As of their
respective filing dates, the North Reports (i) complied as to form in all
material respects with the requirements of the Exchange Act and the Securities
Act and (ii) did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
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statements therein, in the light of the circumstances under which they were
made, not misleading. Except as disclosed in a filing subsequently made in
accordance with the requirements of the Exchange Act prior to the date hereof
and except for such filing of a report on Form 8-K as may be required to
disclose this Agreement and the transactions as contemplated by this Agreement,
no event has occurred subsequent to the date of filing of each such North Report
as would make any statement contained therein materially untrue or misleading or
would make any omission therefrom materially misleading in light of the
occurrence of such event.
(b) The financial statements of North for the year ended August 31, 1997,
audited and reported on by BDO Seidman, LLP and unaudited financial statements
of North for the nine months ended May 31, 1998 (collectively, the "North
Financial Statements") are contained in the Annual Report on Form 10-K for the
year ended August 31, 1997 and the Quarterly Report on Form 10-Q for the quarter
ended May 31, 1998, respectively, each of which has been delivered to TRG as
part of the North Reports. The North Financial Statements , including all
related notes and schedules thereto, fairly present in all material respects the
consolidated financial position of North as at the respective dates thereof and
the consolidated results of operations and cash flows of North for the periods
indicated in accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be noted therein) and subject, in the case of
interim financial statements, to normal year-end adjustments.
(c) Other than as set forth on the May 31, 1998 balance sheet contained in
the North Financial Statements and such of the following as are incurred in
connection with the negotiation and consummation of the transactions
contemplated by this Agreement, estimates of which are set forth in SCHEDULE
4.05, North has, on the date hereof and North covenants that it will have as of
the Closing Date, no debts, liabilities, financial commitments or financial
obligations (including, without limitation, unasserted claims) whether absolute
or contingent, liquidated or unliquidated, or due or to become due or otherwise,
except those incurred in the ordinary course of business, consistent with past
practices, since the date of such balance sheet which are set forth in SCHEDULE
4.05.
SECTION 4.07 North Material Contracts.
(a) SCHEDULE 4.07(a) sets forth a complete and correct list of all
agreements which are material to the assets, financial condition, business or
operations of North. True and complete copies of all Material Contracts have
been delivered to Motoguzzi or made available for inspection.
(b) Except as set forth in any of the North Disclosure Schedules, all
Material Contracts are valid and in full force and effect and North has not
received notice from any other party thereto that it has violated any provision
of, or committed or failed to perform any act which with or without notice,
lapse of time or both would constitute a default under the provisions of, any
Material Contract, except for defaults that would
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not reasonably be expected to have, either singly or in the aggregate, a North
Material Adverse Effect. None of the rights of North under any of the Material
Contracts is subject to any Liens of record. Except as set forth in any of the
North Disclosure Schedules, North has not received notice from any other party
thereto that it has breached any express or implied representations, warranties
or covenants in connection with such Material Contracts, except for breaches
that, individually and in the aggregate, will not have a North Material Adverse
Effect.
SECTION 4.08 Litigation. Other than as set forth on any of the North
Disclosure Schedules, there are no actions, suits, arbitrations, mediations or
other proceedings pending or, to its knowledge, threatened against North at law
or in equity before any court, Federal, state, municipal or other governmental
department or agency or other tribunal. Neither North nor its property is
subject to any order, judgment, injunction or decree which could have either
singly or in the aggregate, a North Material Adverse Effect.
SECTION 4.09 Bank Accounts. SCHEDULE 4.09 sets forth the name of each bank
in which North has an account, safe deposit, vault, lock-box or other
arrangement, the account number and description of each account at each bank and
the names of all persons authorized to draw thereon or to have access thereto
and the names of all persons, if any, holding powers of attorney over such
accounts from North.
SECTION 4.10 Disclosure. No representation or warranty by North contained
in this Agreement and no information contained in any schedule, financial
statement or other instrument furnished or to be furnished to Motoguzzi by North
pursuant to this Agreement or in connection with the transactions contemplated
hereby, when taken together with the North Reports, contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact necessary in order to make the statements contained herein or therein not
misleading.
SECTION 4.11 Investment Bankers. Other than fees payable to and expenses of
Allen & Company Incorporated, which fees and expenses will be paid solely by
North, in cash and warrants as provided herein and in the North Disclosure
Schedules, no broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the transaction
contemplated by this Agreement based upon arrangements made by or on behalf of
North.
SECTION 4.12 Securities Issued as Merger Consideration. The Class A Common
Stock, Class B Preferred Stock and Nominal Warrants, when issued as a result of
the Merger shall be duly authorized and issued by North and the Class A Common
Stock and Class B Preferred Stock will be fully paid and non-assessable shares
of capital stock of North. The shares of Class A Common Stock purchasable upon
exercise of the Nominal Warrants and the Continuation Warrants have been duly
reserved for issuance and, when issued in accordance with the terms of the
Nominal Warrants and the Continuation Warrants, shall be duly authorized and
issued by North and fully paid and non-assessable.
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SECTION 4.13 Licenses and Permits; Compliance with Laws. North holds all
permits, licenses and approvals from all federal, state and local governmental
authorities, foreign or domestic, necessary for it to own its properties and to
carry on its business as now being conducted except for such of the foregoing,
the absence of which would not have a North Material Adverse Effect. North is
not an "investment company" within the meaning of the Investment Company Act of
1940, as amended ("Investment Company Act") and is not, and has not been,
required to register under the Investment Company Act.
SECTION 4.14 Records. The books of account, minutes books, stock
certificate ledger and stock transfer ledger of North are complete and correct
in all material respects , and there have been no material transactions
involving North of the type typically recorded in such records which were not so
recorded.
SECTION 4.15 No Illegal or Improper Transactions. Neither North, nor any
officer, director, employee, agent or affiliate of North, has offered, paid or
agreed to pay to any person or entity (including any governmental official) or
solicited, received or agreed to receive from any such person or entity,
directly or indirectly, any money or anything of value for the purpose or with
the intent of (i) obtaining or maintaining business for the benefit of North,
(ii) illegally or improperly facilitating the purchase or sale of any product or
service, or (iii) avoiding the imposition of any fine or penalty, in any manner
which is in violation of any applicable ordinance, regulation or law.
SECTION 4.16 License Fee. All fees payable in connection with the use of
the "Sma2rt" and or other related trademarks have been paid by North.
SECTION 4.17 Indemnification Agreements. Other than as provided in the
Certificate of Incorporation or By Laws of North, North is not a party to any
agreement, undertaking, understanding or obligation, express or implied, to
indemnify any current or former director of North arising out of any acts or
events occurring prior the date hereof.
SECTION 4.18 Taxes, Tax Returns and Audits. North has (or, in the case of
returns becoming due after the date hereof and on or before the Effective Time,
will have prior to the Effective Time) filed or caused to be filed, or have
properly filed extensions for, all tax returns which are required to be filed
and have paid or caused to be paid all taxes required therein to be paid and all
assessments received by them to the extent that such taxes have become due,
except taxes the validity or amount of which is being contested in good faith by
appropriate proceedings and with respect to which adequate reserves have been
set aside. North has or will have established adequate reserves on its books and
records and financial statements (including the May 31, 1998 balance sheet) for
such payment in accordance with GAAP. North has withheld from each payment made
to any of its present or former employees, officers, directors or other party
all amounts required by law to be withheld and has, where required, remitted
such amounts within the applicable
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periods to the appropriate governmental authorities. North has paid or caused to
be paid, or has established reserves that it reasonably believes to be adequate
in all material respects, for all tax liabilities applicable to it for all
fiscal years which have not been examined and reported on by the taxing
authorities (or closed by applicable statutes).
ARTICLE V
NATURE AND SURVIVAL OF
REPRESENTATIONS AND WARRANTIES OF THE PARTIES.
SECTION 5.01 Survival. Each statement, representation, warranty, covenant
and agreement made by any Party to another under this Agreement shall remain in
effect continuously until the Closing, and the representations, warranties,
covenants, and agreements made by Motoguzzi and TRG shall survive the Closing
and shall terminate at such time as the right of North to assert claims against
the Remedy Fund (as hereinafter defined) under such statement, representation,
warranty, covenant or agreement as provided in ARTICLE X so terminates, provided
that such termination shall not affect North's rights in respect of any claims
asserted in accordance with ARTICLE X prior to such termination, and provided
further that nothing contained herein shall limit any Party's rights and
remedies under ARTICLE XI.
ARTICLE VI
COVENANTS OF MOTOGUZZI AND TRG
SECTION 6.01 Conduct of Business. Motoguzzi covenants and agrees that, from
the date hereof through the Closing Date, except as otherwise set forth in or as
contemplated by this Agreement, including without limitation the actions
described in SECTION 6.13, and except for actions taken in furtherance of any
transaction specified in any of the Motoguzzi Disclosure Schedules attached
hereto, Motoguzzi and the Motoguzzi Subsidiaries shall:
(a) conduct their businesses only in the ordinary course and in a manner
consistent with the current practice of such business, preserve substantially
intact the business organization of Motoguzzi and the Motoguzzi Subsidiaries,
use their best efforts to preserve the current relationships of Motoguzzi and
the Motoguzzi Subsidiaries with customers and other persons with which Motoguzzi
and the Motoguzzi Subsidiaries have significant business relations, taken as a
whole, preserve the goodwill of Motoguzzi and the Motoguzzi Subsidiaries, taken
as a whole, and comply with all requirements of law, the violation of which are
reasonably likely to have a Motoguzzi Material Adverse Effect;
(b) not sell, transfer or dispose of all or any part of its capital stock;
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(c) not (i) issue any shares of its capital stock nor any options,
obligations, rights, warrants or other securities convertible into or
exchangeable for its capital stock or any other class of equity securities of
Motoguzzi; or (ii) amend or otherwise modify the terms of any such securities,
options, obligations, rights or warrants in a manner inconsistent with the
provisions of this Agreement or if the effect thereof shall be to make such
terms more favorable to the holders thereof;
(d) not declare any dividend or make any distribution in cash, securities
or otherwise on the outstanding shares of its capital stock, or directly or
indirectly redeem or purchase any such capital stock except for dividends or
distributions by a Motoguzzi Subsidiary to Motoguzzi, or redemptions or
purchases of capital stock of Motoguzzi Subsidiaries;
(e) not, in any manner whatsoever, advance, transfer (other than in payment
for goods received or services rendered in the ordinary course of business), or
distribute to any security holder of Motoguzzi, including without limitation
TRG, OAM or any of their affiliates, or otherwise withdraw, cash or cash
equivalents in any manner inconsistent with its established cash management
practices, except to pay existing obligations of Motoguzzi and the Motoguzzi
Subsidiaries in accordance with their terms;
(f) not change any of its methods of accounting in effect at March 31,
1998;
(g) not prepay, before the scheduled maturity thereof, any of its long-term
debt, or incur any obligation for borrowed money, whether or not evidenced by a
note, bond, debenture or similar instrument, other than indebtedness incurred in
the ordinary course of business consistent with past practices and as
contemplated by this Agreement;
(h) not enter into, or modify in any material respect or terminate any
Material Contract or Permit if same would cause a Motoguzzi Material Adverse
Effect, except as required by applicable law;
(i) not take any action that will, or could reasonably be expected to,
result in any of its representations and warranties set forth in this Agreement
being inaccurate as of the Closing Date or in any of the conditions to the
Merger not being satisfied, if such inaccuracy or non-satisfaction of condition
would permit termination of this Agreement by North in accordance with ARTICLE
IX hereof; or
(j) not agree in writing or otherwise to do any of the foregoing.
SECTION 6.02 Access to Information; Confidentiality.
(a) Between the date of this Agreement and the Closing Date, Motoguzzi will
(i) permit North and their Representatives reasonable access to all of the
books, records, reports and other related
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materials, offices and other facilities and properties of Motoguzzi and the
Motoguzzi Subsidiaries; (ii) permit North and their Representatives to make such
inspections thereof as they may reasonably request; and (iii) furnish North and
their Representatives with such financial and operating data (including without
limitation the work papers of Motoguzzi's accountants) and other information
with respect to Motoguzzi and the Motoguzzi Subsidiaries as North may from time
to time reasonably request.
(b) TRG and Motoguzzi shall hold and shall cause their affiliates and
Representatives to hold in strict confidence, unless compelled to disclose by
judicial or administrative process or by other requirements of law, all
documents and information concerning North furnished to them by North or their
Representatives in connection with the transactions contemplated by this
Agreement (except to the extent that such information can be shown to have been
(i) previously known by TRG or Motoguzzi, (ii) in the public domain through no
fault of TRG or Motoguzzi or (iii) later lawfully acquired by TRG or Motoguzzi
from another source, which source shall not be the agent of North or person
under confidentiality obligation to North) and, except as otherwise required by
applicable law, rule or regulation, neither TRG nor Motoguzzi shall release or
disclose such information to any other person, except its auditors, actuaries,
attorneys, financial advisors, bankers and other consultants and advisors who
need to know same in connection with this Agreement.
SECTION 6.03 Maintenance of Insurance. Through the Closing Date, Motoguzzi
shall maintain insurance policies providing insurance coverage for its
consolidated business and the assets of Motoguzzi of substantially the same
kinds, in substantially the same amounts and against substantially the same
risks as are in effect on the date hereof to the extent that such coverage is
available at a cost not greater than 200% of the present cost of such coverage.
SECTION 6.04 No Other Negotiations. Unless and until this Agreement shall
have been terminated pursuant to its terms, neither Motoguzzi nor any of its
Representatives, officers, directors or affiliates shall, directly or
indirectly, solicit, institute, initiate, or pursue or respond to any inquiries
or enter into discussions, proposals or negotiations with any person concerning
any merger, sale of substantial assets, tender offer, sale of shares of stock or
similar transaction involving Motoguzzi or any of its assets or disclose,
directly or indirectly, other than to the shareholders of Motoguzzi, any
information not customarily disclosed to the public or such shareholders
concerning Motoguzzi, or except as required by law, afford to any other person
access to the properties, books or records of Motoguzzi, or otherwise assist any
person preparing to make or who has made such an offer, or enter into any
agreement with any third party providing for a business combination transaction,
equity investment or sale of significant amount of assets of Motoguzzi or
recommend to its shareholders any of the foregoing. Motoguzzi shall promptly
notify North of any direct or indirect inquiries, discussions, proposals or
negotiations.
SECTION 6.05 No Securities Transactions. Neither Motoguzzi nor any of its
affiliates shall engage in any transactions involving the securities of North
prior to the Closing Date.
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SECTION 6.06 Fulfillment of Conditions. TRG and Motoguzzi shall use its
respective commercially reasonable efforts to fulfill, or cause to be fulfilled,
the conditions specified in ARTICLES VIII AND IX applicable to it to the extent
that the fulfillment of such conditions is within its respective control. The
foregoing obligation includes taking or refraining from such reasonable actions
as may be necessary to fulfill such conditions (including Motoguzzi and the
Motoguzzi Subsidiaries conducting their businesses in such manner that on the
Closing Date the representations and warranties of TRG and Motoguzzi contained
herein shall be accurate as though then made, except as contemplated or
permitted by the terms hereof).
SECTION 6.07 Disclosure of Certain Matters. During the period from the date
hereof through the Closing Date, each of TRG and Motoguzzi shall give North
prompt written notice of any event or development that occurs that (a) had it
existed or been known on the date hereof would have been required to be
disclosed under this Agreement, (b) would cause its respective representations
and warranties contained herein to be inaccurate or otherwise misleading in a
material respect, (c) could reasonably be expected to give North any reason to
believe that any of the conditions set forth in ARTICLE IX will not be
satisfied, or (d) is of a nature that such constitutes or may constitute a
Motoguzzi Material Adverse Change.
SECTION 6.08 Assignment or Transfer of Contracts, Leases and Permits.
Motoguzzi shall, in consultation with North and its Representatives, promptly
take all necessary action to, and shall use its commercially reasonable efforts
to obtain consents under all Material Contracts and Permits which require the
consent of any other party or person to the assignment or transfer thereof
either by the terms thereof or as a matter of law to the extent that any
assignment or transfer thereof would be deemed to have occurred thereunder by
reason of the consummation of the Merger.
SECTION 6.09 Information for Proxy Statement. Motoguzzi will cooperate with
North in the preparation of North's Proxy and Registration Statement referred to
in SECTION 7.05 and furnish to North all information concerning itself and its
officers and directors as North or its counsel may reasonably request and that
is required or customary for inclusion in such Proxy and Registration Statement.
Motoguzzi covenants that all of such information which has been approved by TRG,
Motoguzzi or their counsel (which approval will be evidenced by a writing
identifying the document, by draft date or otherwise, prior to filing thereof
with the Securities and Exchange Commission) and is included in such Proxy and
Registration Statement and any other written information furnished by Motoguzzi
for inclusion in the Proxy and Registration Statement will comply in all
material respects with the applicable provisions of the Securities Exchange Act
of 1934 ("Exchange Act") and will not at the time of the effectiveness of the
Proxy and Registration Statement and any amendments thereof or supplements
thereto and at the time of the North stockholders meeting contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein and necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading or
necessary to correct any statement in any earlier filing with the Commission of
such
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Proxy and Registration Statement or any amendment thereof or any supplement
thereto or any earlier communication to the stockholders of North with respect
to the transactions contemplated by this Agreement.
SECTION 6.10 Cold Comfort Letter. Upon North providing Arthur Andersen,
LLP, the accountants for Motoguzzi ("Motoguzzi Accountants"), with a
representation letter in accordance with paragraphs 5, 6 and 7 of the Statement
on Auditing Standards regarding Letters for Underwriters, Motoguzzi shall cause
to be delivered to North a letter of Motoguzzi's Accountants, dated the
effective date of the Proxy and Registration Statement, and addressed to North,
in form and substance satisfactory to North (with such changes to which North
shall consent, it being understood that such consent shall not be unreasonably
withheld), to the effect that:
(a) they are independent certified public accountants with respect to
Motoguzzi within the meaning of the Exchange Act, including the applicable
published regulations thereunder;
(b) the consolidated financial statements of Motoguzzi certified by them
and included in the Proxy and Registration Statement comply as to form in all
material respects with the applicable accounting requirements of the Exchange
Act, including the published regulations thereunder; and
(c) they have carried out procedures to a specified date not more than five
business days prior to the date of the Proxy and Registration Statement that do
not constitute an audit in accordance with GAAP of the consolidated financial
statements of Motoguzzi, as follows: (i) read the unaudited financial statements
of Motoguzzi included in the Proxy and Registration Statement, (ii) read the
unaudited consolidated financial statements of Motoguzzi for the period from the
date of the most recent financial statements included in the Proxy and
Registration Statement through the date of the latest available interim
financial statements, (iii) read the minutes of the meetings of stockholders and
Boards of Directors of Motoguzzi from the date of the most recent financial
statements of Motoguzzi included in the Proxy and Registration Statement to such
date not more than five business days prior to the date of the Proxy and
Registration Statement and (iv) consulted with certain officers of Motoguzzi
responsible for financial and accounting matters as to whether any of the
changes or decreases referred to below has occurred, and based on such
procedures, nothing has come to their attention which would cause them to
believe that (A) any unaudited financial statements of Motoguzzi included in the
Proxy and Registration Statement do not comply as to form in all material
respects with the applicable accounting requirements of the Exchange Act and of
the published regulations thereunder; (B) such unaudited financial statements
are not fairly presented in conformity with GAAP applied on a basis
substantially consistent with that of the audited consolidated financial
statements of Motoguzzi included in the Proxy and Registration Statement; (C) as
of such date not more than five business days prior to the date of the Proxy and
Registration Statement, there was not, except as set forth in such letter, any
(1) change in capital stock, treasury stock or long-term debt of Motoguzzi or
(2) any decrease in capital in excess of par value, retained earnings, net
assets, net current assets or investments
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of Motoguzzi, in each case as compared with the amounts shown in the most recent
balance sheet of Motoguzzi included in the Proxy and Registration Statement or
(D) for the period from the date of such balance sheet to the end of the month
immediately preceding the date of the Proxy and Registration Statement, there
were not, except as set forth in such letter, any decreases, as compared with
the corresponding period in the preceding year, in revenues or in the total or
per share amounts of income before extraordinary items, income before income
taxes or net income of Motoguzzi.
SECTION 6.11 Rule 145. Prior to the Closing Date Motoguzzi will identify in
a certificate from its president to North all persons who he reasonably believes
at the Effective Time will be deemed to be "affiliates" of Motoguzzi for the
purposes of Rule 145 under the Securities Act. The certificates representing any
securities to be issued pursuant to this Agreement to such "affiliates" will
bear an appropriate legend reflecting the requirements of Rule 145. Prior to the
Closing Date Motoguzzi will use its best efforts to cause each such person to
enter into an agreement in form and substance reasonably acceptable to North
pursuant to which each such person acknowledges his or its responsibilities as
an "affiliate."
SECTION 6.12 Lock-Up Agreements. At the Closing Date, Motoguzzi will
deliver to North agreements from such of its common stockholders and preferred
stockholders as set forth in SCHEDULE 6.12 to the effect that the those persons
will not publicly sell any of the Class A Common Stock to be received upon the
Merger or receivable upon conversion of the Class B Preferred Stock for a period
of six months from the Effective Time without the consent of the Independent
Committee (as hereinafter defined) of the Surviving Corporation. The
certificates representing any securities subject to these agreements will bear
an appropriate legend reflecting the terms of the agreement.
SECTION 6.13 Interim Financing. Motoguzzi and the Motoguzzi Subsidiaries
may enter into negotiations to obtain financing and may enter into such loan
agreements and other agreements related thereto, including without limitation
issuance of warrants or other equity securities, as Motoguzzi determines,
provided that (i) neither Motoguzzi nor the Motoguzzi Subsidiaries shall enter
into any such agreements unless North has consented thereto in writing, which
consent shall not be unreasonably withheld, provided that such consent shall not
be required for the issuance of (and notwithstanding anything to the contrary
provided in this Agreement, Motoguzzi may issue) warrants or other equity
securities issued in connection therewith if such issuance does not reduce the
equity ownership by North's stockholders in the Surviving Corporation (in which
event appropriate adjustment shall be made to the amount of Merger Consideration
allocated among the holders of outstanding Motoguzzi securities, but the
aggregate Merger Consideration shall not be increased), provided further that
North's consent shall be required and same may be withheld in North's sole
discretion, for the issuance of any warrants or other equity securities which
would reduce the equity ownership of North's stockholders in the Surviving
Corporation, (ii) such financing shall be repaid by Surviving Corporation
contemporaneously with or promptly following the Closing Date, unless otherwise
agreed to by North in writing
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and (iii) such financing shall not be entered into after the Proxy and
Registration Statement has been declared effective and mailed to North's
Stockholders.
SECTION 6.14 Lien Search. Motoguzzi shall use its best efforts to cause a
search to be made to ascertain whether there are any Intercompany Liens on any
assets of any Motoguzzi Subsidiary in Italy, provided that such kind of search
is generally available in Italy and the cost thereof is not greater than
$10,000.
ARTICLE VII
COVENANTS OF NORTH
SECTION 7.01 North Conduct of Business. North covenants and agrees that,
from the date hereof through the Closing Date, except as otherwise set forth in
this Agreement, it will:
(a) conduct its business only in the ordinary course and in a manner
consistent with the current practice of such business, preserve substantially
intact the business organization of North, keep available the services of the
current employees of North, preserve the current relationships with which North
has significant business relations, preserve the goodwill of North and comply
with all requirements of law, the violation of which could have a material
adverse effect on the business or operation of North; practices of such
business;
(b) except for the granting of the Closing Date Options and for the
issuance of shares of stock as described in SECTION 4.04, not pledge, sell,
transfer, dispose of, or otherwise encumber or grant any rights or interests to
others of any kind with respect to, all or any part of its capital stock or
enter into any discussions or negotiations with any other party to do so;
(c) not (i) issue any shares of its capital stock nor any options (other
than the Closing Date Options and the issuance of shares of stock as described
in SECTION 4.04), obligations, rights, warrants or other securities convertible
into or exchangeable for its capital stock, or any other class of securities,
whether debt or equity; or (ii) amend or otherwise modify the terms of any such
securities, options, obligations, rights or warrants in a manner inconsistent
with the provisions of this Agreement or if the effect thereof shall be to make
such terms more favorable to the holders thereof;
(d) not declare any dividend or make any distribution in cash, securities
or otherwise on the outstanding shares of its capital stock, or directly or
indirectly redeem or purchase any such capital stock or except as required by
the Certificate of Incorporation of North in connection with the redemption of
less than 20% of the outstanding shares of Class A Common Stock from persons who
are not directors or officers of North.
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(e) not, in any manner whatsoever, advance, transfer (other than in payment
for goods received or services rendered in the ordinary course of business and
as set forth on Schedule 4.05), or distribute to any security holders of North
or any of their affiliates, or otherwise withdraw, cash or cash equivalents in
any manner inconsistent with established cash management practices, except to
pay existing obligations of North in accordance with its terms;
(f) not change any of its methods of accounting in effect at August 31,
1997;
(g) except pursuant to this Agreement, not prepay, before the scheduled
maturity thereof, any of its long-term debt, or incur any obligation for
borrowed money, whether or not evidenced by a note, bond, debenture or similar
instrument, other than indebtedness incurred in the ordinary course of business
consistent with past practices;
(h) not enter into or modify in any material respect any material contract
or lease of North;
(i) not take any action that will, or could reasonably be expected to,
result in any of its representations and warranties set forth in this Agreement
being inaccurate as of the Closing Date or in any of the conditions to the
Merger not being satisfied, if such inaccuracy or non-satisfaction of condition
would permit termination of this Agreement by Motoguzzi or TRG in accordance
with ARTICLE IX hereof;
(j) not agree in writing or otherwise to do any of the foregoing; of
(k) not incur any expenses or liabilities except to the extent contemplated
herein and described in SCHEDULE 4.05, without the prior written consent of
Motoguzzi.
SECTION 7.02 Fulfillment of Conditions. North shall use its best efforts to
fulfill the conditions specified in ARTICLES VIII AND IX to the extent that the
fulfillment of such conditions is within its control. The foregoing obligation
includes taking or refraining from such actions as may be necessary to fulfill
such conditions (including conducting the business of North in such manner that
on the Closing Date the representations and warranties of North contained herein
shall be accurate as though then made).
SECTION 7.03 Filing of Initial Listing Application with Nasdaq. As soon as
practicable after the execution of this Agreement, North shall file with Nasdaq
an application to approve listing on the Nasdaq Stock Market of the shares of
Class A Common Stock and North shall take such actions as it reasonably deems
appropriate to cause such application to be approved.
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SECTION 7.04 Access to Information; Confidentiality.
(a) Between the date of this Agreement and the Closing Date, North will (i)
permit Motoguzzi and its Representatives reasonable access to all of the books,
records, reports and other related materials, offices and other facilities and
properties of North; (ii) permit Motoguzzi and its Representatives to make such
inspections thereof as they may reasonably request; and (iii) furnish Motoguzzi
and its Representatives with such financial and operating data (including
without limitation the work papers of North's accountants) and other information
with respect to North as Motoguzzi may from time to time reasonably request.
(b) North shall hold and shall cause their Representatives to hold in
strict confidence, unless compelled to disclose by judicial or administrative
process or by other requirements of law, all documents and information
concerning TRG or its affiliates furnished to them by Motoguzzi or its
Representatives in connection with the transactions contemplated by this
Agreement (except to the extent that such information can be shown to have been
(i) previously known by North, (ii) in the public domain through no fault of
North, or (iii) later lawfully acquired by North from another source, which
source shall not be the agent of North or person under confidentiality
obligation to Motoguzzi or its affiliates) and, except as otherwise required by
applicable law, rule or regulation, North shall not release or disclose such
information to any other person, except its auditors, actuaries, attorneys,
financial advisors, bankers and other consultants and advisors who need to know
same in connection with this Agreement.
SECTION 7.05 Proxy and Registration Statement.
(a) North will prepare and file with the Securities and Exchange Commission
("Commission") as soon as reasonably practicable after the date hereof a proxy
statement to be filed under the Exchange Act ("Proxy and Registration
Statement") by North, to be distributed by North in connection with the North
stockholder meeting and may be distributed by Motoguzzi in connection with the
Motoguzzi stockholder meeting and to register the Merger Consideration,
including shares of Class A Common Stock of North issuable upon conversion of
the Class B Preferred Stock and upon exercise of the Nominal Warrants. During
the course of the preparation of the Proxy and Registration Statement, Motoguzzi
will be given reasonable opportunity to review and comment upon drafts of the
Proxy and Registration Statement and the comments of the Commission thereon and
responses thereto.
(b) North covenants to Motoguzzi that the Proxy and Registration Statement
will comply in all material respects with the applicable provisions of the
Exchange Act and will not at the time of the effectiveness of the Proxy and
Registration Statement and any amendments thereof or supplements thereto and at
the time of the North stockholder meeting contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements
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therein, in light of the circumstances under which they were made, not
misleading or necessary to correct any statement in any earlier filing with the
Commission of such Proxy and Registration Statement or any amendment thereof or
any supplement thereto or any earlier communication to the stockholders of North
with respect to the transactions contemplated by this Agreement; provided,
however, that no representation, covenant or agreement is made by North with
respect to information supplied or approved by or on behalf of Motoguzzi or its
affiliates for inclusion in the Proxy and Registration Statement, as provided in
SECTION 6.09 hereof. Subject to the fiduciary duty of the Board of Directors of
North, the Proxy and Registration Statement shall contain statements, where
appropriate, to the effect that the Board of Directors of North has approved
this Agreement and the Merger and unanimously recommends that the stockholders
of North vote in favor of approving this Agreement and the Merger and the other
proposals presented in the Proxy and Registration Statement.
SECTION 7.06 Amendments to Certificate of Incorporation and Stock Option
Plan. The Proxy and Registration Statement will include provisions for the
adoption of amendments to the Certificate of Incorporation of North to change
the name of North from "North Atlantic Acquisition Corp." to "Moto Guzzi
Corporation," to increase the authorized capital stock of North, to authorize
the issuance of one or more classes of preferred stock and to provide for a
board of directors with staggered terms of three years (five of whom are to be
nominees of Motoguzzi, two of whom are to be nominees of North and one of whom
is to be a nominee mutually acceptable to both Motoguzzi and North) and for the
approval of one or more stock option plans which will include the Closing Date
Options, conditioned upon the consummation of the Merger. The Proxy and
Registration Statement will also include provisions for the voting by
shareholders for the elimination of North's Class B Common Stock, which shall be
recommended by North's Board of Directors, but the consummation of the Merger
shall not be conditioned upon such action being approved by North's
stockholders.
SECTION 7.07 No Securities Transactions. Neither North nor any of its
Representatives or affiliates shall engage in any transactions involving the
securities of TRG or Motoguzzi prior to the Closing Date.
SECTION 7.08 No Other Negotiations. Until this Agreement shall have been
terminated pursuant to its terms, neither North nor any of its Representatives,
officers, directors or affiliates shall, directly or indirectly, solicit,
institute, initiate, pursue or respond to any inquiries or enter into any
discussions, proposals or negotiations with any person concerning any merger,
sale of substantial assets, tender offer, sale of shares of stock or similar
transaction involving North or any of its assets or disclose, directly or
indirectly, other than to the shareholders of North, any information not
customarily disclosed to the public or such shareholders concerning North, or
except as required by law, afford to any other person access to the properties,
books or records of North, or otherwise assist any person preparing to make or
who has made such an offer, or enter into any agreement with any third party
providing for a business combination transaction, equity investment
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or sale of significant amount of assets of North or recommend to its
shareholders any of the foregoing. North shall promptly notify Motoguzzi of any
direct or indirect inquiries, discussions, proposals or negotiations.
SECTION 7.09 Disclosure of Certain Matters. During the period from the date
hereof through the Closing Date, North shall give Motoguzzi prompt written
notice of any event or development that occurs that (a) had it existed or been
known on the date hereof would have been required to be disclosed under this
Agreement, (b) would cause its of the representations and warranties contained
herein to be inaccurate or otherwise misleading, (c) could reasonably be
expected to give Motoguzzi any reason to believe that any of the conditions set
forth in ARTICLE IX will not be satisfied, or (d) is of a nature that is or may
be materially adverse to the operations, prospects or condition (financial or
otherwise) of North.
SECTION 7.10 Blue Sky Compliance. North shall make such filings in each
jurisdiction wherein resides a shareholder of Motoguzzi as may be necessary
under the laws of such jurisdiction to permit the issuance of the Merger
Consideration thereto to the extent the laws of such jurisdiction permit such
issuance.
SECTION 7.11 Filing of Current Reports on Form 8-K. Promptly after
execution of this Agreement, North shall file a Current Report on Form 8-K with
the Commission to report the proposed Merger and the terms thereof.
SECTION 7.12 Directors' and Officers' Resignations. North will obtain the
resignations of all of the members of its Board of Directors and all of its
officers, effective at the Effective Time.
SECTION 7.13 Cold Comfort Letter. Upon Motoguzzi providing BDO Seidman, the
accountants for North ("North Accountants"), with a representation letter in
accordance with paragraphs 5, 6 and 7 of the Statement on Auditing Standards
regarding Letters for Underwriters, North shall cause to be delivered to
Motoguzzi a letter of North's Accountants, dated the effective date of the Proxy
and Registration Statement, and addressed to Motoguzzi, in form and substance
satisfactory to Motoguzzi (with such changes to which Motoguzzi shall consent,
it being understood that such consent shall not be unreasonably withheld), to
the effect that:
(a) they are independent certified public accountants with respect to North
within the meaning of the Exchange Act, including the applicable published
regulations thereunder;
(b) the consolidated financial statements of North certified by them and
included in the Proxy and Registration Statement comply as to form in all
material respects with the applicable accounting requirements of the Exchange
Act, including the published regulations thereunder; and
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(c) they have carried out procedures to a specified date not more than five
business days prior to the date of the Proxy and Registration Statement that do
not constitute an audit in accordance with GAAP of the consolidated financial
statements of North, as follows: (i) read the unaudited financial statements of
North included in the Proxy and Registration Statement, (ii) read the unaudited
consolidated financial statements of North for the period from the date of the
most recent financial statements included in the Proxy and Registration
Statement through the date of the latest available interim financial statements,
(iii) read the minutes of the meetings of stockholders and Boards of Directors
of North from the date of the most recent financial statements of North included
in the Proxy and Registration Statement to such date not more than five business
days prior to the date of the Proxy and Registration Statement and (iv)
consulted with certain officers of North responsible for financial and
accounting matters as to whether any of the changes or decreases referred to
below has occurred, and based on such procedures, nothing has come to their
attention which would cause them to believe that (A) any unaudited financial
statements of North included in the Proxy and Registration Statement do not
comply as to form in all material respects with the applicable accounting
requirements of the Exchange Act and of the published regulations thereunder;
(B) such unaudited financial statements are not fairly presented in conformity
with GAAP applied on a basis substantially consistent with that of the audited
consolidated financial statements of North included in the Proxy and
Registration Statement; (C) as of such date not more than five business days
prior to the date of the Proxy and Registration Statement, there was not, except
as set forth in such letter, any (1) change in capital stock, treasury stock or
long-term debt of North or (2) any decrease in capital in excess of par value,
retained earnings, net assets, net current assets or investments of North, in
each case as compared with the amounts shown in the most recent balance sheet of
North included in the Proxy and Registration Statement or (D) for the period
from the date of such balance sheet to the end of the month immediately
preceding the date of the Proxy and Registration Statement, there were not,
except as set forth in such letter, any decreases, as compared with the
corresponding period in the preceding year, in revenues or in the total or per
share amounts of income before extraordinary items, income before income taxes
or net income of North.
SECTION 7.14 Lock-Up Agreements. At the Closing Date, North will deliver to
Motoguzzi agreements from all of its officers and directors to the effect that
those persons will not publicly sell any of the securities of the Surviving
Corporation for a period of six months from the Effective Time without the
consent of the Surviving Corporation.
ARTICLE VIII
JOINT COVENANTS OF THE PARTIES
SECTION 8.01 Further Action. Each of the Parties shall promptly execute
such documents and other papers and take such further actions as may be
reasonably required or desirable to carry out the provisions hereof and the
transactions contemplated hereby. Upon the terms and subject to the conditions
hereof, each of the Parties shall use its best efforts to take, or cause to be
taken, all actions and to do, or
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cause to be done, all other things necessary, proper or advisable to consummate
and make effective as promptly as practicable the transactions contemplated by
this Agreement.
SECTION 8.02 Schedules. The Parties shall have the obligation to supplement
or amend the schedules being delivered concurrently with the execution of this
Agreement and annexed hereto with respect to any matter hereafter arising or
discovered which, if existing or known at the date of this Agreement, would have
been required to be set forth or described in the schedules. Supplementation or
amendment of a representation or warranty that has a Motoguzzi Material Adverse
Effect qualifier shall not create a right to terminate this Agreement under
SECTION 11.01(b) or 11.01(c) unless such supplementation or amendment reflects a
Motoguzzi Material Adverse Effect. The obligations of the Parties to amend or
supplement the schedules being delivered herewith shall terminate on the Closing
Date. Notwithstanding any such amendment or supplementation, for purposes of
ARTICLE X hereof, the representations and warranties of the Parties shall be
made with reference to the schedules as they exist at the time of execution of
this Agreement.
SECTION 8.03 Regulatory and Other Authorizations. The Parties will promptly
make all necessary filings and use their best efforts to obtain all
authorizations, consents, orders and approvals of all Federal, state and other
regulatory bodies and officials that are required for the consummation of the
transactions contemplated by this Agreement, including but not limited to the
Securities and Exchange Commission and self-regulatory agencies, and will
cooperate fully with each other in connection therewith.
SECTION 8.04 Committees of the Board of Surviving Corporation. Prior to the
Closing Date, the Parties will designate (i) three persons from among the
proposed directors of the Surviving Corporation to be elected to a committee
("Independent Committee") of the Board of Directors of the Surviving
Corporation, which will have the authority, among other things to determine if
any action should or should not be instituted to recover Damages from the Remedy
Fund and (ii) such other committees of the Board of Directors as would be
required by Nasdaq if the Class A Common Stock were traded on Nasdaq. The
Independent Committee shall be comprised of persons who are not and have not
been during the ten years prior to the Effective Time employed by, affiliated
with or a shareholder of TRG, OAM, Motoguzzi or any Motoguzzi Subsidiary.
SECTION 8.05 Indemnification and Director and Officer Liability Insurance.
(a) North and Motoguzzi agree that all rights to indemnification for acts
or omissions occurring prior to the Effective Time now existing in favor of the
current directors and officers of North and Motoguzzi as provided in the
certificate of incorporation or bylaws of North and Motoguzzi, respectively,
shall survive the Merger and shall continue in full force and effect in
accordance with their terms.
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(b) For a period of six (6) years after the Effective Time, the Surviving
Corporation shall cause to be maintained in effect the current policies of
directors' and officers' liability insurance maintained by Motoguzzi, or by TRG
to the extent that such policies provide coverage for Motoguzzi directors and
officers (or policies of at least the same coverage and amounts containing terms
and conditions that are no less advantageous) with respect to claims arising
from facts or events that occurred before the Effective Time; provided, however,
that the Surviving Corporation shall not be obligated to make annual premium
payments for such insurance to the extent that such premiums exceed an amount
equal to 200% of the annual premiums paid as of the date hereof for such
insurance and if such premiums exceed such amount the Surviving Corporation
shall purchase insurance policies in amounts and with coverage as reasonably can
be purchased for such amount.
(c) The Surviving Corporation agrees to remain liable for any
indemnification obligations to North's and Motoguzzi's current directors and
officers, in all capacities in which such directors or officers served North and
Motoguzzi prior to the Effective Time, as set forth in North's and Motoguzzi's
certificate of incorporation and bylaws to the extent such indemnification by
North and Motoguzzi is permitted under the DGCL.
(d) In the event the Surviving Corporation or any of its successors or
assigns (i) consolidates with or merges into any other person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger, or (ii) transfers or conveys all or substantially all of its properties
and assets to any person, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of the
Surviving Corporation assume the obligations set forth in this SECTION 8.05.
(e) The provisions of this SECTION 8.05 are intended to be for the benefit
of, and shall be enforceable by, each indemnified party and his or her heirs and
representatives.
SECTION 8.06 Payment of Intercompany Indebtedness. All indebtedness owed by
Motoguzzi and the Motoguzzi Subsidiaries to TRG and its subsidiaries, up to
$800,000, remaining after the actions described in SECTION 2.06(b) are taken,
subject to reduction in accordance with SECTION 11.01(b), shall be paid by
Motoguzzi to TRG as soon after the Effective Time as practicable.
ARTICLE IX
CONDITIONS TO CLOSING
SECTION 9.01 Conditions to Each Party's Obligations. The respective
obligations of each Party to consummate the Merger and the other transactions
contemplated by this Agreement shall be subject to the fulfillment, or waiver by
the other Party, at or prior to the Closing Date of the following conditions:
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(a) Approval by North's Stockholders. This Agreement shall have been
approved by a vote of two-thirds in interest of the Class A Common Stock and
Class B Common Stock (the latter of which is entitled to two votes per share),
voting together as a single class in accordance with the DGCL and the
Certificate of Incorporation and By-Laws of North, the other transactions
contemplated hereby (other than those described in the last sentence of SECTION
7.06) shall have been approved by such vote of the Class A Common Stock and the
Class B Common Stock as is required by the DGCL and the Certificate of
Incorporation and By-Laws of North, and the aggregate number of shares of Class
A Common Stock of North held by stockholders who are not officers and directors
of North who exercise their right to have North redeem the shares of Class A
Common Stock owned by them for cash in accordance with the Certificate of
Incorporation of North shall not be more than 20% of the Class A Common Stock
owned by such persons, outstanding as of the record date for approval of the
transaction.
(b) Approval by Motoguzzi Stockholders. The Merger will have been approved
and adopted by the holders of the Old Motoguzzi Common Stock and Old Motoguzzi
Preferred Stock, voting together as a single class in accordance with the DGCL
and Certificate of Incorporation and By-Laws of Motoguzzi.
(c) Directors and Officers of Surviving Corporation. The persons listed in
SCHEDULE 1.06 shall have been elected or appointed the directors or officers of
Surviving Corporation, effective upon consummation of the Merger.
(d) No Governmental Order or Regulation. There shall not be in effect any
order, decree or injunction (whether preliminary, final or appealable) of a
United States Federal or state court of competent jurisdiction, and no
regulation shall have been enacted or promulgated by any governmental authority
or agency, that prohibits consummation of the Merger.
(e) Dissenters. At the Closing Date, persons who are Dissenters and persons
who reside in jurisdictions in which North may not legally offer the Merger
Consideration will be the holders of such number of issued and outstanding Old
Motoguzzi Common Stock and Old Motoguzzi Preferred Stock as would entitle them
to receive, if they were not Dissenters, no more than 10% of the Merger
Consideration.
(f) Effectiveness of Registration Statement. The Proxy and Registration
Statement shall have been declared effective under the Securities Act, no stop
order suspending the effectiveness of the Proxy and Registration Statement shall
have been issued, and no proceedings for that purpose shall have been
instituted.
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(g) Blue Sky. There shall be delivered to North and Motoguzzi a Blue Sky
Memorandum prepared by North's counsel indicating the jurisdictions in which the
Merger Consideration may be paid to holders of Old Motoguzzi Common Stock, Old
Motoguzzi Preferred Stock and Old Motoguzzi Warrants, based upon, among other
things, their mailing addresses.
SECTION 9.02 Conditions to Obligations of Motoguzzi and TRG. The
obligations of Motoguzzi to consummate the Merger and the obligations of
Motoguzzi and TRG to consummate the other transactions contemplated by this
Agreement shall be subject to the fulfillment or waiver by Motoguzzi and TRG, as
applicable, at or prior to the Closing, of each of the following conditions:
(a) Representations and Warranties; Covenants. Without supplementation
after the date hereof, the representations and warranties of North contained in
this Agreement shall be, with respect to those representations and warranties
qualified by any materiality standard, true and correct in all respects as of
the Closing Date, and with respect to all other representations and warranties,
true and correct in all material respects as of the Closing Date, with the same
force and effect as if made as of the Closing Date, and all the covenants
contained in this Agreement to be complied with by North on or before the
Closing Date shall have been complied with in all material respects, and
Motoguzzi shall have received a certificate from an appropriate officer of North
to such effect.
(b) Legal Opinion. Motoguzzi shall have received from Graubard Mollen &
Miller, counsel to North, a legal opinion addressed to Motoguzzi and dated the
Closing Date, in the form of EXHIBIT F annexed hereto.
(c) Necessary Proceedings. All proceedings, corporate or otherwise, to be
taken by North in connection with the consummation of the transactions
contemplated by this Agreement shall have been duly and validly taken, and
copies of all documents, resolutions and certificates incident thereto, duly
certified by officers of North as of the Closing, shall have been delivered to
Motoguzzi and TRG.
(d) Lock-Up Agreements. Motoguzzi shall have received from North the lock
up agreements from all of North's officers and directors which provide that
their securities of the Surviving Corporation may not be publicly sold for six
months after the Effective Time unless such public sale is approved by the
Surviving Corporation.
(e) Cold Comfort Letter. TRG and Motoguzzi shall have received the cold
comfort letter referred to in SECTION 7.13.
(f) Inducement Letters. Motoguzzi shall have received from David Mitchell,
in his capacity as Chief Executive Officer and Chairman of the Board of North,
and from each other North director,
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acting in such capacity, a letter, reasonably satisfactory to Motoguzzi, to the
effect that such person has not taken any actions and is not aware of any
actions taken by any other party acting on behalf of North which would cause any
of the representations, warranties and agreements of North contained herein to
be breached in any material respect.
(g) Tax Opinion. Motoguzzi shall have received an opinion of Morrison Cohen
Singer & Weinstein, LLP to the effect that the Merger will constitute a tax-free
reorganization pursuant to Code Section 368(a)(1)(A) (and the officers of North
and Motoguzzi shall have delivered to such counsel customary representation
certificates of a kind reasonably necessary to support such an opinion).
SECTION 9.03 Conditions to Obligations of North. The obligations of North
to consummate the Merger and the other transactions contemplated by this
Agreement shall be subject to the fulfillment or waiver by North, at or prior to
the Closing, of each of the following conditions.
(a) Representations and Warranties; Covenants. Without supplementation
after the date hereof, except as permitted by SECTION 8.02, the representations
and warranties of TRG and Motoguzzi contained in this Agreement shall be, with
respect to those representations and warranties qualified by any materiality
standard, true and correct in all respects as of the Closing Date, and with
respect to all other representations and warranties, true and correct in all
material respects as of the Closing Date with the same force and effect as if
made as of the Closing Date, and all the covenants and agreements contained in
this Agreement to be complied with by TRG or Motoguzzi on or before the Closing
Date, shall have been complied with in all material respects by TRG and
Motoguzzi, respectively, except that TRG and Motoguzzi shall not be in breach of
their obligation contained herein as a result of non-compliance with a covenant
or agreement which is substantively the same as a representation and warranty
unless such representation and warranty is not true and correct as provided
above, when restated as of the Closing Date, and North shall have received
certificates from an appropriate officer of each of TRG and Motoguzzi,
respectively, to such effect.
(b) Legal Opinion. North shall have received from Morrison Cohen Singer &
Weinstein, LLP, counsel to Motoguzzi, a legal opinion addressed to North dated
the Closing Date, in the form of EXHIBIT G-1 annexed hereto. North shall have
received from Italian counsel to Motoguzzi, a legal opinion relating to matters
of Italian law addressed to North dated the Closing Date, in the form of EXHIBIT
G-2 annexed hereto. North shall have received a legal opinion addressed to TRG
and North from Maryland counsel to TRG, a copy of which is attached as EXHIBIT
G-3.
(c) Consents. Motoguzzi shall have obtained and delivered to North consents
to the Merger of such third parties, if any, as are necessary to ensure the
uninterrupted continuation of the Material Contracts, Leases and Permits with
respect to the business of Motoguzzi and the Motoguzzi Subsidiaries.
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(d) No Motoguzzi Material Adverse Change. At the Closing, there shall have
been no Motoguzzi Material Adverse Change.
(e) Necessary Proceedings. All proceedings, corporate or otherwise, to be
taken by TRG and Motoguzzi in connection with the consummation of the
transactions contemplated by this Agreement shall have been duly and validly
taken, and copies of all documents, resolutions and certificates incident
thereto, duly certified by the officers of TRG and Motoguzzi as of the Closing,
shall have been delivered to North.
(f) Rule 145 List. North shall have received from Motoguzzi the list of
deemed "affiliates" under Rule 145.
(g) Lock-Up Agreements. North shall have received from Motoguzzi the lock
up agreements from the specified holders of Old Motoguzzi Common Stock and Old
Motoguzzi Preferred Stock which provides that their Merger Consideration may not
be publicly sold for six months after the Effective Time unless such public sale
is approved by the Independent Committee.
(h) Cold Comfort Letter. North shall have received from Arthur Andersen
LLP, the comfort letter referred to in SECTION 6.10.
(i) Fairness Opinion. North shall have received from Allen & Company
Incorporated a fairness opinion dated on or prior to the effective date of the
Proxy and Registration Statement in customary form stating in substance that the
terms of the proposed transaction are fair, from a financial point of view, to
the holders of North's Class A Common Stock.
ARTICLE X
REMEDIES OF NORTH FOLLOWING MERGER
SECTION 10.01 Scope of Article. This ARTICLE X shall apply solely in the
event the Merger is consummated in accordance with this Agreement. This ARTICLE
X is the sole and exclusive remedy for any Damages which may be suffered by any
of the Parties or by the Surviving Corporation in connection with or relating to
this Agreement, from and after consummation of the Merger.
SECTION 10.02 Establishment of Remedy Fund. Contemporaneous with the
consummation of the Merger, the Exchange Agent shall deliver in escrow to TRG,
as escrow agent pursuant to the Escrow Agreement attached hereto as EXHIBIT H
and subject to the provisions of SECTION 10.03, below, (x) all of the
certificates for shares of Class B Preferred Stock comprising part of the Merger
Consideration, (the "Preferred
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Escrow Shares") and (y) certificates for 100,000 shares of Class A Common Stock
comprising part of the Merger Consideration registered in the name of TRG (the
"TRG Escrow Shares"; together with the Preferred Escrow Shares, collectively the
"Remedy Fund"). To facilitate the transfer of the Preferred Escrow Shares
pursuant to the Escrow Agreement, TRG is hereby designated and appointed by each
holder of Class B Preferred Stock as the agent with irrevocable power of
attorney to execute such stock powers as may be required to effectuate any
transfer of the Preferred Escrow Shares. The Remedy Fund shall also include any
and all stock distributions made in respect of the securities in the Remedy
Fund, such distributions to be held pursuant to the Escrow Agreement. Subject to
the limitations set forth in this ARTICLE X, hereof, from and after the
Effective Time, (i) the entire Remedy Fund shall be available to compensate the
Surviving Corporation for any Damages which may be sustained, suffered or
incurred by it, whether as a result of any Third Party Claim or otherwise, which
arise from or are in connection with or are attributable to (x) the breach of
any of the covenants, representations, warranties, agreements, obligations or
undertakings of Motoguzzi contained in this Agreement, or (y) any judgment,
order, government notice, government demand or other government sanction,
including any remediation or other action taken in response thereto, arising out
of or based upon any condition existing at the Closing Date which is not
described in the Ecoservice Srl report identified in the Motoguzzi Disclosure
Schedules and which violates any Laws, regardless of whether the representation
in SECTION 3.07 (b) or (c) is breached, and (ii) the TRG Escrow Shares and such
of the Preferred Escrow Shares as are owned by TRG shall also be available to
compensate the Surviving Corporation for any Damages which may be sustained,
suffered or incurred by it, whether as a result of any Third Party Claim or
otherwise, which arise from or are in connection with or are attributable to the
breach of any of the covenants, representations, warranties, agreements,
obligations or undertakings of TRG contained in this Agreement. Upon final
adjudication or resolution of a claim under this ARTICLE X, TRG shall first
deliver to the Surviving Corporation, such full number of the Preferred Escrow
Shares held in the Remedy Fund as equals or fractionally exceeds the adjudicated
or resolved amount of such claim divided by the Market Price (as defined below)
of the Class A Common Stock plus $1.00, and if the claim is not fully
recompensed by the delivery of the Preferred Escrow Shares, then, additionally,
that full number of TRG Escrow Shares held in the Remedy Fund as equals or
fractionally exceeds the amount of such claim remaining after delivery of the
Preferred Escrow Shares divided by the Market Price of the Class A Common Stock.
The "Market Price" of a share of Class A Common Stock will be deemed to be the
average of the last sales prices of the Class A Common Stock for the ten
business days ending on the day immediately prior to the final adjudication or
resolution of a claim under this ARTICLE X, as reported by The Nasdaq Stock
Market or any other United States stock exchange on which the Class A Common
Stock is listed, or in the absence of such reported prices, the determination of
Market Price shall be made jointly by TRG and the Independent Committee. Any TRG
Escrow Shares and Preferred Escrow Shares delivered to the Surviving Corporation
in settlement of a claim under this ARTICLE X will be canceled and returned to
the status of authorized and un-issued shares of capital stock of the Surviving
Corporation. If the Merger is consummated, TRG shall not, in any event, have any
liability to North, the Surviving Corporation, their respective stockholders or
any other person for any Damages except to the extent of its interest in the
Remedy Fund.
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SECTION 10.03 Claims Against Remedy Fund. TRG is hereby designated the
agent of holders of Class B Preferred Stock for purposes of prosecuting,
defending or settling any claim brought under this ARTICLE X. Actions taken or
omitted to be taken, and or consents given, or omitted to be given, by TRG in
connection with any such claim shall bind the interests of all of such holders
of Class B Preferred Stock in respect of such claim. Upon determination by the
Independent Committee that an event giving rise to a claim under SECTION 10.02
above has occurred, the Independent Committee shall give notice to TRG of such
determination, specifying (i) the covenant, representation or warranty,
agreement, undertaking or obligation contained herein which it asserts has been
breached, (ii) in reasonable detail, the nature and dollar amount of any claim
the Surviving Corporation may have against the Remedy Fund as a result thereof,
and (iii) whether such claim arises from the commencement of a Third Party
Claim. The Independent Committee and TRG shall, in good faith, attempt to
resolve any such claim. If, within 30 days of its notification to TRG, any claim
has not been resolved, the Independent Committee or TRG, individually and as
agent for all holders of Class B Preferred Stock, shall have the right, but not
the obligation, to seek to have the claim resolved by mediation by submission to
JAMS/Endispute or its successor, and if the matter is not resolved through such
mediation process within the first to occur of (i) the expiration of 60 days
from such submission, or (ii) the holding of two meetings of TRG and North
(acting by such independent Committee) with such mediator, then such claim shall
be submitted to final and binding arbitration, provided, however, that (x)
except for an action arising out of a breach by TRG of any of the
representations or warranties made, or covenants given, by TRG hereunder, no
mediation or arbitration shall be brought against TRG except solely in its
capacity as agent for the holders of Class B Preferred Stock and (y) any claim
which arises from a Third Party Claim shall not be resolved or submitted to
mediation or arbitration until 30 days following resolution of such Third Party
Claim, and TRG, as agent for the Surviving Corporation, (i) shall have the right
to assume the defense of such Third Party Claim, by counsel reasonably
acceptable to the Independent Committee, the cost thereof to be borne by the
Surviving Corporation, subject to reimbursement if it is determined that the
claim is compensable to the Surviving Corporation as provided in this ARTICLE X,
in which event such costs shall constitute part of the Damages, recoverable as
and to the extent provided in this ARTICLE X and (ii) TRG may settle any such
Third Party Claim on behalf of the Surviving Corporation, subject to the
reasonable approval of the Independent Committee. Upon final adjudication or
settlement of any claim under SECTION 10.02, TRG shall deliver to the Surviving
Corporation that number of Preferred Escrow Shares and TRG Escrow Shares
sufficient to recompense Surviving Corporation in satisfaction of such claim as
calculated in SECTION 10.02 above, from the Remedy Fund; provided, however, that
the TRG Escrow Shares shall not be so delivered unless and until all of the
Preferred Escrow Shares have been so delivered. In any action or proceeding
between the Parties hereto, each Party shall bear its own costs and expense,
except as otherwise provided in SECTION 10.08.
SECTION 10.04 Duration of Remedy Fund. Other than claims for breach of the
representations and warranties made by Motoguzzi under SECTIONS 3.01, 3.02,
3.04, 3.10, 3.22 and the first sentence of SECTION 3.15 (collectively "Core
Claims"), no notice of claim against the Remedy Fund may be given and shall
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not be valid if given, after the 60th day following the mailing by certified
mail, return receipt requested, or delivery by hand, to each then-serving member
of the Board of Directors of the Surviving Corporation of the audited financial
statements of the Surviving Corporation for its fiscal year ending December 31,
1998, together with the executed report of the auditors, and on such 60th day,
there shall be released to TRG the TRG Escrow Shares except to the extent of the
amount by which the aggregate dollar amount of all claims then asserted under
this ARTICLE X exceeds the value of the Preferred Escrow Shares then remaining
in the Remedy Fund as calculated in SECTION 10.02 above. Notice of Core Claims
against the Remedy Fund may not be given, and shall not be valid if given, after
the 60th day following the mailing by certified mail, return receipt requested,
or delivery by hand, to each then-serving member of the Board of Directors of
the Surviving Corporation of the audited financial statements of the Surviving
Corporation for the fiscal year ending December 31, 1999, together with the
executed report of the auditors. Except as provided hereinabove in respect of
the TRG Escrow Shares, the Remedy Fund will remain in place until the later of
(i) the date of final settlement or adjudication of any pending claims made
against the securities in the Remedy Fund and delivery of the appropriate
securities, or (ii) the date after which no notice of claims may be given. After
delivery of securities from the Remedy Fund to the Surviving Corporation in full
settlement of any claims, TRG shall deliver to the registered owners thereof all
shares then held by it in the Remedy Fund.
SECTION 10.05 Amount of Claim. No claim may be brought against the Remedy
Fund unless, and then and only to the extent that, the amount of Damages
suffered in respect of all claims asserted, without duplication, net of any
offsets pursuant to SECTION 10.06 below exceeds $750,000.
SECTION 10.06 Offset. There shall be offset against the amount of Damages
otherwise recoverable under this ARTICLE X, an amount equal to the difference
obtained (not less than $0) by subtracting (x) the Book Value (as defined below)
of all Specified Assets (as defined below) which are sold or disposed of as
provided in clause (y), from (y) the aggregate consideration paid and agreed to
be paid (after deduction for sales commissions, sale expenses and sales and
income taxes and any similar deductions) to Motoguzzi from the sale to a bona
fide, third party purchaser in an arms-length transaction, of such Specified
Assets or the receipt by Motoguzzi of insurance or condemnation proceeds in
respect of the total or partial loss of or condemnation in respect of such
Specified Assets, in all events at any time after December 31, 1997 and prior to
resolution of any claim brought against the Remedy Fund, less the amount of any
loss sustained upon a sale of a Specified Asset or upon a destruction or
condemnation of a Specified Asset from the Book Value of that Specified Asset.
The amount of such offset shall be further reduced by the amount of any
consideration for any Specified Asset agreed to be paid to the extent that such
consideration must be discounted in accordance with GAAP. In no event shall the
amount of offset hereunder be less than $0. The Book Value of a Specified Asset
shall be derived from the Motoguzzi Consolidated Balance Sheet as at December
31, 1997, increased by any amount actually expended by Motoguzzi since December
31, 1997 to improve its cash sale value. The Specified Assets shall include only
those assets of Motoguzzi as of December 31, 1997 in the following categories:
real property, fixtures, plant, equipment and machinery, and
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those items comprising the Motoguzzi Museum, none of which has been sold as of
the date hereof, except for non-material sales which, in the aggregate, have
resulted in a gain of not more than $15,000.
SECTION 10.07 Representations and Warranties. For purposes of this ARTICLE
X, for breach of a representation or warranty of a Party under this Agreement,
the representations and warranties shall be the representations and warranties
of a Party made herein, on the date hereof, without subsequent supplementation,
modification or amendment.
SECTION 10.08 Mediation and Arbitration. Subject to the provisions of
Section 10.03, the Parties agree that any and all disputes, claims or
controversies arising out of or relating to the Escrow Fund or any other claim
for Damages under this ARTICLE X, including without limitation the validity of
such claim or the amount of Damages, if not resolved by the Parties, will be
submitted to JAMS/Endispute, or its successor, for mediation, and if the matter
is not resolved through mediation, then it will be submitted for final and
binding arbitration. Any such arbitration shall be final and binding
arbitration, conducted in accordance with the commercial arbitration rules of
the American Arbitration Association, and shall be held in New York City. The
costs of mediation and arbitration shall be allocated by the mediator or by
order of the arbitrators, as the case may be.
ARTICLE XI
TERMINATION
SECTION 11.01 Methods of Termination. The transactions contemplated herein
may be terminated and/or abandoned at any time prior to the Closing only as
follows:
(a) By mutual written consent of North on the one hand and Motoguzzi and
TRG on the other hand;
(b) By either Motoguzzi or TRG on the one hand or North on the other hand
(if the terminating party is not then in material breach of its obligations
hereunder) if (i) a material default or breach shall be made by the other Party
with respect to the due and timely performance of any of its covenants and
agreements contained herein and such default cannot be cured within a reasonable
period of time, provided, however, that with respect to those covenants and
agreements made by Motoguzzi or TRG which are substantively the same as
representations and warranties of Motoguzzi or TRG, the foregoing shall be
limited to only those covenants and agreements, the non-performance of which
also results in such representation and warranty not being true and correct as
provided in clause (ii) hereof, or (ii) if any of the other Party's
representations and warranties (x) made without any materiality standard, are
not true and correct in all material respects as of the Closing Date or (y) made
with any materiality standard, are not true and correct as of the Closing Date.
Notwithstanding the foregoing, if, on the Closing Date there are any
Intercompany
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Liens, then (A) if such Intercompany Liens secure indebtedness in an aggregate
amount greater than U.S. $1,500,000 then North may terminate this Agreement and
(B) if such Intercompany Liens secure indebtedness in an aggregate amount
greater than U.S. $550,000, then for purposes of this SECTION 11.01(b) neither
Motoguzzi nor TRG shall be deemed to have breached any representation or
warranty contained in this Agreement, provided that such indebtedness in excess
of U.S. $550,000 shall be reduced by reduction of the $800,000 intercompany
indebtedness described in Section 2.06(b), on a dollar-for-dollar basis, and
application of the amount of such reduction of intercompany indebtedness to
reduce the indebtedness in excess of $550,000 which is secured by such
Intercompany Liens.
(c) By North if (i) Motoguzzi makes an amendment or supplement to any
Schedule hereto in accordance with SECTION 8.02 hereof and such amendment or
supplement reflects a Motoguzzi Material Adverse Effect after the date hereof,
or (ii) a Motoguzzi Material Adverse Change shall have occurred after the date
hereof, or (iii) Motoguzzi enters into any agreement to effect any transaction
described in SECTION 6.04 or Motoguzzi's Board of Directors withdraws its
recommendation of the Merger or recommends to Motoguzzi's shareholders the
approval of any such transaction other than the Merger;
(d) By Motoguzzi if (i) North makes an amendment or supplement to any
schedule hereto in accordance with SECTION 8.02 hereof and such amendment or
supplement reflects a North Material Adverse Effect, after the date hereof, or
(ii) North enters into any agreement to effect any transaction described in
SECTION 7.08 or North's Board of Directors withdraws its recommendation of the
Merger or recommends to North shareholders the approval of any such transaction
other than the Merger;
(e) By Motoguzzi or TRG on the one hand or North on the other hand if the
Effective Time has not occurred within six months following the date of this
Agreement for any reason unless the Parties agree to an extension in writing,
provided that the right to terminate this Agreement under this Paragraph (e)
shall not be available to a Party that is in breach of any representation,
warranty or covenant in this Agreement, which breach would entitle any other
Party to terminate this Agreement;
SECTION 11.02 Effect of Termination. In the event of termination pursuant
to SECTION 11.01 hereof, written notice thereof shall forthwith be given to the
other Parties and all obligations (except as set forth in this SECTION 11.02) of
the Parties shall terminate and no Party shall have any right against any other
Party hereto. Notwithstanding the foregoing, (i) if this Agreement is so
terminated by any Party under SECTION 11.01(b), (c) or (d) above, (other than a
termination resulting from a breach of a representation or warranty which was
true when made, but which cannot subsequently be restated as true as a result of
the occurrence of events or circumstances beyond the control of the representing
Party), it is expressly agreed and understood that the terminating Party's right
to pursue all legal remedies for breach of contract or otherwise, including,
without limitation, Damages (other than consequential damages, which damages
shall not be recoverable), relating thereto, shall survive such termination
unimpaired, subject however to SECTION 11.03
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and to the extent North recovers any Damages against Motoguzzi, TRG will pay
such Damages if not paid promptly by Motoguzzi; or (ii) if this Agreement is
terminated by North under SECTION 11.01(c)(iii) and within 365 days thereafter
Motoguzzi consummates any transaction described in SECTION 6.04, or if Motoguzzi
refuses to consummate the Merger despite the satisfaction of all conditions
precedent to Motoguzzi's obligation to do so, or Motoguzzi does not in good
faith use its commercially reasonable efforts to satisfy all the conditions
precedent to North's obligation to consummate the Merger which are within
Motoguzzi's control, and provided that North is not in material breach of its
obligations contained in this Agreement, Motoguzzi shall pay to North in lieu of
any other right or remedy of North or any claim for any Damages which North
might otherwise have, the greater of (A) the sum of $500,000 as liquidated
damages and not as a penalty, or (B) the actual documented out-of-pocket
expenses of North related solely and directly to the transaction contemplated by
this Agreement (such applicable amount being referred to as the "Motoguzzi
Breakup Fee") promptly following demand therefor by North and if Motoguzzi fails
to do so, then TRG shall pay the Motoguzzi Break-Up Fee; or (iii) if this
Agreement is terminated by Motoguzzi under SECTION 11.01(d)(ii) or if North
refuses to consummate the Merger despite the satisfaction of all conditions
precedent to North's obligation to do so, or North does not in good faith use
its commercially reasonable efforts to satisfy all the conditions precedent to
Motoguzzi's obligation to consummate the Merger which are within North's
control, and provided that Motoguzzi is not in material breach of its
obligations contained in this Agreement and if, but only if, in any such event,
within 365 days thereafter North consummates any transaction described in
SECTION 7.08, North shall pay to Motoguzzi, as liquidated damages and not as a
penalty, and in lieu of any other right or remedy of Motoguzzi or any claim for
Damages which Motoguzzi or TRG might otherwise have, the sum of $500,000 ("North
Breakup Fee") promptly following demand therefor by Motoguzzi. If the
transactions contemplated by this Agreement are terminated and/or abandoned as
provided herein:
(a) Each Party hereto will return all documents, work papers and other
material (and all copies thereof) of the other Party, relating to the
transactions contemplated hereby, whether so obtained before or after the
execution hereof, to the Party furnishing the same; and
(b) All confidential information received by either Party hereto with
respect to the business of the other Party shall be treated in accordance with
SECTIONS 6.02(b) and 7.04(b) hereof which sections shall survive termination and
abandonment.
SECTION 11.03 Limitation on Damages. Notwithstanding anything to the
contrary elsewhere in this Agreement, neither TRG, Motoguzzi, any Motoguzzi
Subsidiary or any officers, directors, affiliates, agents or Representatives of
any of the foregoing will make any monetary claim against North to the extent
that such claim would adversely affect the amount of funds available for
distribution to North's Class A stockholders from the escrow funds held by Chase
Manhattan Bank established with part of the proceeds of the public offering by
North in August 1997, except in the circumstances in which North would be
obligated to pay the
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North Breakup Fee (and in such event only to the extent of such North Breakup
Fee). Notwithstanding anything to the contrary elsewhere in this Agreement, if
the Merger is not consummated, neither North, nor any officers, directors,
affiliates, agents or Representatives of North will make any monetary claim
against Motoguzzi or TRG in excess of the actual documented out-of-pocket costs
and expenses incurred by North in connection with the transactions contemplated
by this Agreement, except in the circumstances in which Motoguzzi would be
obligated to pay the Motoguzzi Breakup Fee (and in such event only to the extent
of the Motoguzzi Breakup Fee).
ARTICLE XII
DEFINITIONS
SECTION 12.01 Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"Business Day" means a day of the year on which banks are not required or
authorized to be closed in the City of New York.
"Damages" means the dollar amount of any loss, damage, expense or
liability, including, without limitation, reasonable attorneys' fees and
disbursements incurred by a Party in any action or proceeding between such Party
and the other Party or Parties hereto or between such Party and a third party,
which is determined (as provided in ARTICLE X or ARTICLE XI) to have been
sustained, suffered or incurred by a Party and to have arisen from or in
connection with an event or state of facts which is subject to claim under such
ARTICLE X or ARTICLE XI; the amount of Damages shall be the amount finally
determined by a court of competent jurisdiction or appropriate governmental
administrative agency (after the exhaustion of all appeals) or the amount agreed
to upon settlement in accordance with the terms of this Agreement.
"Environmental, Health, and Safety Requirements" means all federal, state,
local and foreign statutes, regulations, and ordinances concerning public health
and safety, worker health and safety, and pollution or protection of the
environment, including without limitation all those relating to the presence,
use, production, generation, handling, transportation, treatment, storage,
disposal, distribution, labeling, testing, processing, discharge, release,
threatened release, control, or cleanup of any hazardous materials, substances
or wastes, as such requirements are enacted and in effect on or prior to the
Closing Date.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Lien" means any lien, claim, charge, option, security interest,
restriction or encumbrance.
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"Motoguzzi Material Adverse Change" means any material adverse change in
the condition, financial or otherwise, of Motoguzzi and the Motoguzzi
Subsidiaries, taken as a whole, from such condition as it existed at December
31, 1997, and as reflected in Motoguzzi's December 31, 1997 Financial
Statements, excluding, however, (i) any suspension of operations of Motoguzzi
and the Motoguzzi Subsidiaries, taken as a whole unless such suspension
continues for more than 30 consecutive business days, (ii) any decrease in sales
of Motoguzzi motorcycles to unaffiliated third parties unless such decrease is
at a rate, determined on a cumulative basis for the period January 1, 1998
through the end of the month immediately preceding the month in which a
determination is made (the "Operating Period"), which is greater than 900
motorcycles below the Motoguzzi 1998 motorcycles sales budget for the Operating
Period, provided that motorcycles which are sold at more than 30% off of
Motoguzzi's suggested retail price shall not be deemed sold for purposes hereof,
(iii) any recall of motorcycles unless such recall is for more than 1,000
motorcycles and requires that repairs be made which will cost greater than 20%
of Motoguzzi's suggested retail price of such motorcycles, (iv) any interruption
in supply of material components or other materials necessary for the
manufacture and assembly of motorcycles, unless such interruption lasts for more
than 60 days and results in a decrease in production of more than 500
motorcycles, or (v) the assertion after the date hereof of any claims, the
incurring after the date hereof of any liabilities or the occurrence after the
date hereof of any other event or circumstance unless such claims or
liabilities, or losses or costs related to such events or circumstances,
individually or in the aggregate are in excess of $3 million after reduction to
the extent of any applicable insurance coverage and (A) if it is a claim or
liability, it has a manifestly reasonable likelihood of success, and (B) if it
is a claim or liability which results from a notice or demand by any
governmental agency, (x) such governmental agency shall have competent
jurisdiction and (y) the ability of such governmental agency to enforce against
Motoguzzi any claim or liability in respect thereof would not terminate as a
result of Motoguzzi relocating its manufacturing and assembly operations away
from its present premises at Mondello, Italy or the substance of such claim
would not be cured by Motoguzzi incurring capital expenditures which are
included in its capital expenditure budget.
"Motoguzzi Material Adverse Effect" means a material adverse effect on the
results of operations, financial condition, business, assets or prospects of
Motoguzzi and the Motoguzzi Subsidiaries (as defined hereinafter) taken as a
whole; provided that if the foregoing has a financial effect then a Motoguzzi
Material Adverse Effect shall be deemed to exist if such financial effect is
greater than $750,000; provided further, that if the applicable event,
circumstance or occurrence is included in any of clauses (i) through (v) of the
definition of Motoguzzi Material Adverse Change, then only for purposes of
determining whether the condition in SECTION 9.03(a) has been satisfied and
whether this Agreement may be terminated as provided in SECTION 11.01(b) or
SECTION 11.01(c), a Motoguzzi Material Adverse Effect shall not be caused
thereby unless a Motoguzzi Material Adverse Change would have resulted
therefrom.
"Motoguzzi Subsidiaries" means Motoguzzi S.p.A, Moto Guzzi France S.A., and
Moto America, Inc.
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"North Material Adverse Effect" means a material adverse effect on the
results of operations, financial condition, business, assets or prospects of
North.
"Party" means each of North, Motoguzzi and TRG (collectively, the
"Parties").
"Representatives" of either Party means such Party's employees,
accountants, auditors, actuaries, counsel, financial advisors, bankers,
investment bankers and consultants.
"Securities Act" means the Securities Act of 1933, as amended.
"Tax" or "Taxes" means all income, gross receipts, sales, stock transfer,
excise, bulk transfer, use, employment, franchise, profits, property or other
taxes, fees, stamp taxes and duties, assessments, levies or charges of any kind
whatsoever, together with any interest and any penalties, additions to tax or
additional amounts imposed by any taxing authority with respect thereto.
"Third Party Claim" means a claim, demand, suit, proceeding or action by a
person, firm, corporation or government entity other than a Party or any
affiliate of such Party.
ARTICLE XIII
GENERAL PROVISIONS
SECTION 13.01 Expenses. Except as otherwise provided herein, all costs and
expenses, including, without limitation, fees and disbursements of
Representatives, incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the Party incurring such costs and
expenses, whether or not the Closing shall have occurred. Notwithstanding the
foregoing, if the Closing shall occur, then such costs and expenses incurred by
TRG, Motoguzzi and the Motoguzzi Subsidiaries shall be paid by TRG and the
amount thereof shall be included in the intercompany indebtedness referred to in
Section 8.06. Motoguzzi and TRG acknowledge and agree that in SCHEDULE 4.05
North has disclosed that it is obligated and will become further obligated for
fees and expenses (including without limitation the fees and expenses of
Graubard Mollen & Miller, its counsel, Allen & Company, its investment bankers,
and BDO Seidman, LLP its independent accountants) incurred by it in connection
with the transactions contemplated by this Agreement. It is understood and
agreed that, subject to the limitations set forth in SECTIONS 4.05 and 7.01(k)
hereof, certain of such fees and expenses may be paid by North prior to the
execution of this Agreement. Motoguzzi and TRG agree to refrain from taking any
action which would prevent or delay the timely payment by North of reasonable
fees duly and lawfully incurred, to the extent consistent with the limitations
set forth in ARTICLE IV hereof. Subject to the foregoing, the Surviving
Corporation shall take all action
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necessary to pay promptly all of the foregoing fees and expenses incurred, but
not paid, by North prior to the Effective Time.
SECTION 13.02 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered if delivered personally or by telecopy, one day
after delivery to a nationally recognized courier, or three business days after
mailed by registered mail (postage prepaid, return receipt requested), in each
case, to the Parties at the following addresses (or at such other address for a
Party as shall be specified by like notice, except that notices of changes of
address shall be effective upon receipt):
(a) If to TRG or Motoguzzi,
c/o Trident Rowan Group, Inc.
Two Worlds Fair Drive
Franklin Township, Somerset, New Jersey 08873
in all cases with a copy to:
Morrison Cohen Singer & Weinstein, LLP
750 Lexington Avenue
New York, New York 10022
Attention: David Lerner, Esq.
Telecopier # 212-735-8708
(b) If to North:
North Atlantic Acquisition Corp.
5 East 59th Street
Third Floor
New York, New York 10022
Attention: David Mitchell
Telecopier No.: 212-588-0286
with a copy to: Graubard Mollen & Miller
600 Third Avenue
New York, New York 10016
Attention: David Alan Miller, Esq.
Telecopier No.: 212-818-8881
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SECTION 13.03 Press Release; Public Announcements. Promptly after execution
of this Agreement, North and TRG may issue press releases in the form attached
hereto as EXHIBIT I. The Parties shall not make any other public announcements
in respect of this Agreement or the transactions contemplated herein without
prior consultation and approval by the other Party as to the form and content
thereof, which approval shall not be unreasonably withheld. Notwithstanding the
foregoing, any Party may make any disclosure which its counsel advises is
required by applicable law or regulation, in which case the other Party shall be
given such reasonable advance notice as is practicable in the circumstances and
the Parties shall use their best efforts to cause a mutually agreeable release
or announcement to be issued.
SECTION 13.04 Amendment. This Agreement may not be amended or modified
except by an instrument in writing signed by the Parties.
SECTION 13.05 Waiver. At any time prior to the Closing, either Party may
(a) extend the time for the performance of any of the obligations or other acts
of the other Party, (b) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto and (c)
waive compliance with any of the agreements or conditions contained herein. Any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed by the Party to be bound thereby.
SECTION 13.06 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 13.07 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any Party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the Parties shall negotiate
in good faith to modify this Agreement so as to effect the original intent of
the Parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the extent possible.
SECTION 13.08 Entire Agreement. This Agreement and the schedules and
exhibits hereto and the documents executed contemporaneously herewith constitute
the entire agreement and supersede all prior agreements and undertakings, both
written and oral, among the Parties with respect to the subject matter hereof
and, except as otherwise expressly provided herein, are not intended to confer
upon any other person any rights or remedies hereunder.
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SECTION 13.09 Benefit; Assignment. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of the
Parties. This Agreement is not assignable by any Party without the express
written consent of the other Parties.
SECTION 13.10 Governing Law; Consent to Jurisdiction; Specific Performance.
This Agreement shall be governed by, and construed in accordance with, the law
of the State of New York, regardless of the laws that might otherwise govern
under applicable principles of conflicts of law. Each Party hereby submits to
the exclusive jurisdiction of the courts (city, state and federal) located in
the County of New York, State of New York, for any action, proceeding or claim
brought by any other Party pursuant to this Agreement or any other agreement,
instrument or other document executed and delivered in connection with this
Agreement or pursuant hereto and waives any objection to the venue of any such
suit, action or proceeding and the right to assert that such forum is not a
convenient forum. Service of process in any such action or proceeding brought
against a Party may be made by registered mail addressed to such Party at the
address set forth in SECTION 13.02 or to such other address as such Party shall
notify the other Party in writing is to be used for such purpose pursuant to
SECTION 13.02. Any Party may enforce any right arising hereunder by action or
other appropriate proceeding, either in equity or at law, and may seek specific
performance of any of the obligations arising hereunder.
SECTION 13.11 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different Parties in separate counterparts, each of
which when executed shall be deemed to be an original but all of which when
taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
as of the date first written above.
MOTO GUZZI CORP. NORTH ATLANTIC ACQUISITION CORP.
By: /s/ Howard Chase By: /s/ David J. Mitchell
------------------------------- -----------------------------
Name: Howard Chase Name: David J. Mitchell
Title: Authorized Signatory Title: Chairman of the Board
TRIDENT ROWAN GROUP, INC.
(With respect to applicable portions of Articles II, III, V, VI, VIII, X, XI and
XIII only)
By: /s/ Howard Chase
-------------------------------
Name: Howard Chase
Title: President
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BY-LAWS
OF
MOTO GUZZI CORPORATION
(A DELAWARE CORPORATION)
------------------------
ARTICLE 1
DEFINITIONS
As used in these By-laws, unless the context otherwise requires, the term:
1.1 "Assistant Secretary" means an Assistant Secretary of the Corporation.
1.2 "Assistant Treasurer" means an Assistant Treasurer of the Corporation.
1.3 "Board" means the Board of the Corporation.
1.4 "By-laws" means the initial By-laws of the Corporation, as amended from
time to time.
1.5 "Certificate of Incorporation" means the initial certificate of
incorporation of the Corporation, as amended, supplemented or restated from time
to time.
1.6 "Corporation" means Moto Guzzi Corporation.
1.7 "Directors" means directors of the Corporation.
1.8 "General Corporation Law" means the General Corporation Law of the
State of Delaware, as amended from time to time.
1.9 "Office of the Corporation" means executive office of the Corporation,
anything in Section 131 of the General Corporation Law to the contrary
notwithstanding.
1.10 "President" means the President of the Corporation.
1.11 "Secretary" means the Secretary of the Corporation.
1.12 "Stockholders" means stockholders of the Corporation.
1.13 "Treasurer" means the Treasurer of the Corporation.
ARTICLE 2
STOCKHOLDERS
2.1 Place of Meetings. Every meeting of the stockholders shall be held at
the office of the Corporation or at such other place within or without the State
of Delaware as shall be specified or fixed in the notice of such meeting or in
the waiver of notice thereof.
2.2 Annual Meeting. A meeting of stockholders shall be held annually for
the election of directors or the transaction of other business at such hour and
on such business day in December as may be determined by the Board and
designated in the notice of meeting.
2.3 Deferred Meeting for Election of Directors, Etc. If the annual meeting
of stockholders for the election of directors and the transaction of other
business is not held on the date fixed in Section 2.2, the Board shall call a
meeting of stockholders for the election of directors and the transaction of
other business as soon thereafter as convenient.
2.4 Other Special Meetings. A special meeting of stockholders (other than
a special meeting for the election of directors), unless otherwise prescribed by
statute, may be called at any time by the Board or by the President or by the
Secretary. At any special meeting of stockholders only such business may be
transacted which is related to the purpose or purposes of such meeting set forth
in the notice thereof given pursuant to Section 2.6 of the By-laws or in any
waiver of notice thereof given pursuant to Section 2.7 of the By-laws.
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2.5 Fixing Record Date. For all purposes of action, the Board may fix, in
advance, a date as the record date for any determination by stockholders. If no
such record date is fixed, the record date for determining stockholders:
(a) entitled to notice of or to vote at a meeting of stockholders
shall be at the close of business on the day next preceding the day on
which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held;
(b) entitled to express consent to corporate action in writing without
a meeting, when no prior action by the Board is necessary, shall be the day
on which the first written consent is expressed;
(c) for any purpose other than that specified in Sections (a) and (b)
shall be at the close of business on the day on which the Board adopts the
resolution relating thereto. When a determination of stockholders entitled
to notice of or to vote at any meeting of stockholders has been made as
provided in this Section 2.5, such determination shall apply to any
adjournment thereof.
2.6 Notice of Meetings of Stockholders. Except as otherwise provided in
Sections 2.5 and 2.7 of the By-laws, whenever under the General Corporation Law
or the Certificate of Incorporation or the By-laws, stockholders are required or
permitted to take any action at a meeting, written notice shall be given stating
the place, date and hour of the meeting and, in the case of a special meeting,
the purpose or purposes for which the meeting is called. A copy of the notice of
any meeting shall be given, personally or by mail, not less than ten nor more
than sixty days before the date of the meeting, to each stockholder entitled to
notice of or to vote at such meeting. If mailed, such notice shall be deemed to
be given when deposited in the United States mail, with postage prepaid,
directed to the stockholder at his address as it appears on the records of the
Corporation. An affidavit of the Secretary or an Assistant Secretary or of the
transfer agent of the Corporation that the notice required by this section has
been given shall, in the absence of fraud, be prima facie evidence of the facts
stated therein. When a meeting is adjourned to another time or place, notice
shall be given of the adjourned meeting, and at the adjourned meeting any
business may be transacted that might have been transacted at the meeting as
originally called.
2.7 Waivers of Notice. Whenever notice is required to be given to any
stockholder under any provision of the General Corporation Law or of the
Certificate of Incorporation or the By-laws, a written waiver thereof, signed by
the stockholder entitled to notice, whether before or after the time stated
therein, shall be deemed equivalent to notice. Attendance of a stockholder at a
meeting shall constitute a waiver of notice of such meeting, except when the
stockholder attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the stockholders need be
specified in any written waiver of notice.
2.8 Quorum of Stockholders; Adjournment. The holders of two-thirds of the
shares of stock entitled to vote at any meeting of stockholders, present in
person or represented by proxy, shall constitute a quorum for the transaction of
any business at such meeting. When a quorum is once present to organize a
meeting of stockholders, it is not broken by the subsequent withdrawal of any
stockholders. The holders of a majority of the shares of stock present in person
or represented by proxy at any meeting of stockholders, including an adjourned
meeting, whether or not a quorum is present, may adjourn such meeting to another
time and place.
2.9 Voting; Proxies. Unless otherwise provided in the Certificate of
Incorporation every stockholder of record shall be entitled at every meeting of
stockholders to one vote for each share of capital stock standing in his or her
name on the record of stockholders determined in accordance with Section 2.5 of
the By-laws.
If the Certificate of Incorporation provides for more or less than one vote
for any share on any matter, every reference in the By-laws or the General
Corporation Law to a majority or other proportion of stock shall refer to such
majority or other proportion of the votes of such stock. The provisions of
Sections 212 and 217 of the General Corporation Law shall apply in determining
whether any shares of capital stock may be voted and the persons, if any,
entitled to vote such shares; but the Corporation shall be protected in treating
the persons in whose names shares of capital stock stand on the record of
stockholders as owners thereof for all purposes. At any meeting of stockholders
(at which a quorum was present to organize the meeting), all matters, except as
otherwise provided by law or by the Certificate of Incorporation or by the
By-laws, shall be decided by a
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majority of the votes cast at such meeting by the holders of shares present in
person or represented by proxy and entitled to vote thereon, whether or not a
quorum is present when the vote is taken. All elections of directors shall be
written ballot unless otherwise provided in the Certificate of Incorporation. In
voting on any other question on which a vote by ballot is required by law or is
demanded by any stockholder entitled to vote, the voting shall be by ballot.
Each ballot shall be signed by the stockholder voting or by his proxy, and shall
state the number of shares voted. On all other questions, the voting may be viva
voce. Every stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent without a meeting may authorize another person or
persons to act for him by proxy. The validity and enforceability of any proxy
shall be determined in accordance with Section 212 of the General Corporation
Law.
2.10 Selection and Duties of the Inspectors at Meetings of
Stockholders. As required by law, the Board, in advance of any meeting of
stockholders, may appoint one or more inspectors to act at the meeting or any
adjournment thereof and to act in attendance therein.
2.11 Organization. At every meeting of stockholders, the President, or in
the absence of the President a Vice President, and in case more than one Vice
President shall be present, that Vice President designated by the Board (or in
the absence of any such designation, the most senior Vice President, based on
age, present) shall act as chairperson of the meeting. The Secretary, or in his
or her absence one of the Assistant Secretaries, shall act as secretary of the
meeting. In case none of the officers above designated to act as chairperson or
secretary of the meeting, respectively, shall be present, a chairperson or
secretary of the meeting, as the case may be, shall be chosen by a majority of
the votes cast at such meeting by the holders of shares of capital stock present
in person or represented by proxy and entitled to vote at the meeting.
2.12 Order of Business. The order of business at all meetings of
stockholders shall be determined by the chairperson of the meeting, but the
order of business to be followed at any meeting at which a quorum is present may
be changed by a majority of the votes cast at such meeting by the holders of
shares of capital stock present in person or represented by proxy and entitled
to vote at the meeting.
2.13 Written Consent of Stockholders Without a Meeting. Unless otherwise
provided in the Certificate of Incorporation, any action required by the General
Corporation Law to be taken at any annual or special meeting of stockholders of
the Corporation, or any action which may be taken at any annual or special
meeting of such stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
ARTICLE 3
DIRECTORS
3.1 General Powers. Except as otherwise provided in the Certificate of
Incorporation, the business and affairs of the Corporation shall be managed by
or under the direction of the Board. The Board may adopt such rules and
regulations, not inconsistent with the Certificate of Incorporation or the
By-laws or applicable laws, as it may deem proper for the conduct of its
meetings and the management of the Corporation. In addition to the powers
expressly conferred by the By-laws, the Board may exercise all powers and
perform all acts which are not required, by the By-laws or the Certificate of
Incorporation or by law, to be exercised and performed by the stockholders.
3.2 Number; Qualification; Term of Office. The Board shall consist of one
or more members, but not less than the number of stockholders, unless there are
more than three stockholders. The number of directors shall be fixed initially
by the incorporator and may thereafter be changed from time to time by action of
the stockholders or of the Board. Directors need not be stockholders. Each
director shall hold office until his or her successor is elected and qualified
or until his or her earlier death, resignation or removal.
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3.3 Election. Directors shall, except as otherwise required by law or by
the Certificate of Incorporation, be elected by a plurality of the votes cast at
a meeting of stockholders by the holders of shares entitled to vote in the
election.
3.4 Newly Created Directorships and Vacancies. Unless otherwise provided
in the Certificate of Incorporation, newly created directorships resulting from
an increase in the number of directors and vacancies occurring in the Board for
any reason, including the removal of directors without cause, may be filled by
vote of a majority of the directors then in office, although less than a quorum,
or by a sole remaining director, any meeting of the Board or may be elected by a
plurality of the votes cast by the holders of shares of capital stock entitled
to vote in the election at a special meeting of stockholders called for that
purpose. A director elected to fill a vacancy shall be elected to hold office
until his or her successor is elected and qualified, or until his or her earlier
death, resignation or removal.
3.5 Resignations. Any director may resign at any time by written notice to
the Corporation. Such resignation shall take effect at the time therein
specified, and, unless otherwise specified, the acceptance of such resignation
shall not be necessary to make it effective.
3.6 Removal of Directors. Unless otherwise provided in the Certificate of
Incorporation and except as otherwise provided by law, any or all of the
directors may be removed with or without cause, by vote of the holders of a
majority of the shares then entitled to vote at an election of directors.
3.7 Compensation. Each director, in consideration of his or her service as
such, shall be entitled to receive from the Corporation such amount per annum or
such fees for attendance at directors' meetings, or both, as the Board may from
time to time determine, together with reimbursement for the reasonable expenses
incurred by him or her in connection with the performance of such director's
duties. Each director who shall serve as a member of any committee of directors
in consideration of his or her serving as such shall be entitled to such
additional amount per annum or such fees for attendance at committee meetings,
or both, as the Board may from time to time determine, together with
reimbursement for the reasonable expenses incurred by him or her in the
performance of such director's duties. Nothing in this section contained shall
preclude any director from serving the Corporation or its subsidiaries in any
other capacity and receiving proper compensation therefor.
3.8 Place and Time of Meetings of the Board. Meetings of the Board,
regular or special, may be held at any place within or without the State of
Delaware. The times and places for holding meetings of the Board may be fixed
from time to time by resolution of the Board or (unless contrary to resolution
of the Board) in the notice of the meeting.
3.9 Annual Meetings. On the day when and at the place where the annual
meeting of stockholders for the election of directors is held, and as soon as
practicable thereafter, the Board may hold its annual meeting, without notice of
such meeting, for the purpose of organization, the election of officers and the
transaction of other business. The annual meeting of the Board may be held at
any other time and place specified in a notice given as provided in
Section 3.11 of the By-laws for special meetings of the Board or in a waiver of
notice thereof.
3.10 Regular Meetings. Regular meetings of the Board may be held at such
times and places as may be fixed from time to time by the Board. Unless
otherwise required by the Board, regular meetings of the Board may be held
without notice. If any day fixed for a regular meeting of the Board be a
Saturday or Sunday or a legal holiday at the place where such meeting is to be
held, then such meeting shall be held at the same hour at the same place on the
first business day thereafter which is not a Saturday, Sunday or legal holiday.
3.11 Special Meetings. Special meetings of the Board shall be held
whenever called by the President or the Secretary or by any two or more
directors. Notice of each special meeting of the Board shall, if mailed, be
addressed to each director at the address designated by him or her for that
purpose or, if none is designated, at such director's last known address at
least two days before the date on which the meeting is to be held; or such
notice shall be sent to each director at such address by telegraph, cable or
wireless, or be delivered to him or her personally, not later than the day
before the date on which such meeting is to be held. Every such notice shall
state the time, place and the purposes of the meeting. If mailed, each notice
shall be deemed given when deposited, with postage thereon prepaid, in a post
office official depository or with a private expedited post service. Such
mailing shall be by first class mail if sent by official mail. Such notice may
be given by verified tele-facsimile and shall be deemed given as of the day
following its transmission.
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3.12 Adjourned Meetings. A majority of the directors present at any
meeting of the Board, including an adjourned meeting, whether or not a quorum is
present, may adjourn such meeting to another time and place. Notice of any
adjourned meeting of the Board need not be given to any director whether or not
present at the time of the adjournment. Any business may be transacted at any
adjourned meeting that might have been transacted at the meeting as originally
called.
3.13 Waiver of Notice. Whenever notice is required to be given to any
director or member of a committee of directors under any provision of the
General Corporation Law or the Certificate of Incorporation or By-laws, a
written waiver thereof, signed by the person entitled to notice, whether before
or after the time stated therein, shall be deemed equivalent to notice.
Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting, except when the person attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
directors, or members of a committee of directors, need be specified in any
written waiver of notice.
3.14 Organization. At each meeting of the Board, the President of the
Corporation, or in the absence of the President, a chairperson chosen by the
majority of the directors present, shall preside. The Secretary shall act as
secretary at each meeting of the Board. In case the Secretary shall be absent
from any meeting of the Board, an Assistant Secretary shall perform the duties
of secretary at such meeting; and in the absence from any such meeting of the
Secretary and Assistant Secretaries, the person presiding at the meeting may
appoint any person to act as secretary of the meeting.
3.15 Quorum of Directors. Two-thirds of the directors then in office shall
constitute a quorum for the transaction of business or of any specified item of
business at any meeting of the Board.
3.16 Action by the Board. All corporate action taken by the Board or any
committee thereof shall be taken at a meeting of the Board, or of such
committee, as the case may be, except that any action required or permitted to
be taken at any meeting of the Board, or of any committee thereof, may be taken
without a meeting if the requisite number of members of the Board or committee,
as the case may be, consent thereto in writing, the writing or writings are
filed with the minutes of proceedings of the Board or committee. Members of the
Board, or any committee designated by the Board, may participate in a meeting of
the Board, or of such committee, as the case may be, by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
pursuant to this Section 3.16 shall constitute presence in person at such
meeting. Except as otherwise provided by the Certificate of Incorporation or by
law, the vote of a majority of the directors present (including those who
participate by means of conference telephone or similar communications
equipment) at the time of the vote, if a quorum is present at such time, shall
be the act of the Board.
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ARTICLE 4
COMMITTEES OF THE BOARD
The Board may, by resolution passed by a majority of the whole Board,
designate one or more committees, each committee to consist of one or more of
the directors of the corporation. Any such committee, to the extent provided in
the resolution of the Board, shall have and may exercise all the powers and
authority of the Board in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the Certificate of Incorporation, adopting an
agreement of merger or consolidation, recommending to the stockholders the sale,
lease or exchange of all or substantially all of the Corporation's property and
assets, recommending to the stock holders a dissolution of the Corporation or
revocation of a dissolution, amending the By-laws of the Corporation, or
declaring a dividend or authorizing the issuance or redemption of stock.
ARTICLE 5
OFFICERS
5.1 Officers. The Board shall elect a President, a Secretary and a
Treasurer, and may elect or appoint one or more Vice Presidents and such other
officers as it may determine. The Board may designate one or more Vice
Presidents as Executive Vice Presidents, and may use descriptive words or
phrases to designate the standing, seniority or area of special competence of
the Vice Presidents elected by or appointed by it. Each officer shall hold his
office until his or her successor is elected and qualified or until such
officer's earlier death, resignation or removal in the manner provided in
Section 5.2 of the By-laws. Any two or more offices may be held in the same
person. All officers, as between themselves and the Corporation, shall have such
authority and perform such duties in the management of the Corporation as may be
provided in the By-laws or as the Board may from time to time determine.
5.2 Removal of Officers. Any officers elected or appointed by Board may be
removed by the Board with or without cause. The removal of an officer without
cause shall be without prejudice to such officer's contract rights, if any. The
election or appointment of an officer shall not of itself create contract
rights.
5.3 Resignations. Any officer may resign at any time in writing by
notifying the Board or the President or the Secretary. Such resignation shall
take effect at the date of receipt of such notice or at such later time as is
therein specified, and, unless otherwise specified, the acceptance of such
resignation shall not be necessary to make it effective. The resignation of an
officer shall be without prejudice to the contract rights of the Corporation, if
any.
5.4 Vacancies. A vacancy in any office because of death, resignation,
removal, disqualification or any other cause shall be filled for the unexpired
portion of the term in the manner prescribed in the By-laws for the regular
election or appointment to such office.
5.5 Compensation. Salaries or other compensation of the officers may be
fixed from time to time by the Board. No officer shall be prevented from
receiving a salary or other compensation by reason of the fact that such officer
is also a director.
5.6 President. The President shall be the chief executive officer of the
Corporation and shall have general supervision over the business of the
Corporation, subject, however, to the control of the Board and of any duly
authorized committee of directors. The President shall, if present, preside at
all meetings of the stockholders and at all meetings of the Board. The President
may, with the Secretary or the Treasurer or an Assistant Secretary or an
Assistant Treasurer, sign certificates for shares of capital stock of the
Corporation. The President may sign and execute in the name of the Corporation
deeds, mortgages, bonds, contracts and other instruments, except in cases where
the signing and execution thereof shall be expressly delegated by the Board or
by the By-laws to some other officer or agent of the Corporation, or shall be
required by law otherwise to be signed or executed; and, in general the
President shall perform all duties incident to the office of President and such
other duties as from time to time may be assigned to the President by the Board.
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5.7 Vice Presidents. At the request of the President, or in the
President's absence, at the request of the Board, the Vice President(s) shall
(in such order as may be designated by the Board or in the absence of any such
designation in order of seniority based on age) perform all of the duties of the
President and so acting shall have all the powers of and be subject to all
restrictions upon the President. Any Vice President may also, with the Secretary
or Treasurer or an Assistant Secretary or an Assistant Treasurer, sign
certificates for shares of capital stock of the Corporation; may sign and
execute in the name of the Corporation deeds, mortgages, bonds, contracts or
other instruments authorized by the Board, except in cases where the signing and
execution thereof shall be expressly delegated by the Board or by the By-laws to
some other officer or agent of the Corporation, or shall be required by law
otherwise to be signed or executed; and shall perform such other duties as from
time to time may be assigned to him or her by the Board or by the President.
5.8 Secretary. The Secretary, if present, shall act as secretary of all
meetings of the stockholders and of the Board, and shall keep the minutes
thereof in the proper book or books to be provided for that purpose; the
Secretary shall see that all notices required to be given by the Corporation are
duly given and served; the Secretary may, with the President or Vice President,
sign certificates for shares of capital stock of the Corporation; the Secretary
shall be custodian of the seal of the Corporation, or facsimile thereof, all
certificates for shares of capital stock of the Corporation and all documents
the execution of which on behalf of the Corporation under its corporate seal is
authorized in accordance with the provisions of the By-laws; the Secretary shall
have charge of the stock ledger and also of the other books, records and papers
of the Corporation relating to its organization and management as a Corporation,
and shall see that the reports, statements and other documents required by law
are properly kept and filed; and shall, in general, perform all the duties
incident to the office of Secretary and such other duties as from time to time
may be assigned to the Secretary by the Board or by the President.
5.9 Treasurer. The Treasurer shall have charge and custody of, and be
responsible for, all funds, securities and notes of the Corporation; receive and
give receipts for moneys due and payable to the Corporation from any sources
whatsoever; deposit all such moneys in the name of the Corporation in such
banks, trust companies or other depositaries as shall be selected in accordance
with these By-laws; against proper vouchers, cause such funds to be disbursed by
checks or drafts on the authorized depositaries of the Corporation signed in
such manner as shall be determined in accordance with any provisions of the
By-laws, and be responsible for the accuracy of the amounts of all moneys so
disbursed; regularly enter or cause to be entered in books to be kept by the
Treasurer or under the Treasurer's direction full and adequate account of all
moneys received or paid by the Treasurer for the account of the Cor poration;
have the right to require, from time to time, reports or statements giving such
information as the Treasurer may desire with respect to any and all financial
transactions of the Corporation from the officers or agents transacting the
same; render to the President or the Board, whenever the President or the Board,
respectively, shall require the Treasurer so to do, an account of the financial
condition of the Corporation and of all his or her transactions as Treasurer;
exhibit at all reasonable times his or her books of account and other records to
any of the directors upon application at the office of the Corporation where
such books and records are kept; and in general, perform all the duties incident
to the office or Treasurer and such other duties as from time to time may be
assigned to the Treasurer by the Board or by the President; and the Treasurer
may sign, with the President, or a Vice President certificates for shares of
capital stock of the Corporation.
5.10 Assistant Secretaries and Assistant Treasurers. Assistant Secretaries
and Assistant Treasurers shall perform such duties as shall be assigned to them
by the Secretary or by the Treasurer, respectively, or by the Board or by the
President. Assistant Secretaries and Assistant Treasurers may, with the
President or a Vice President, sign certificates for shares of capital stock of
the Corporation.
ARTICLE 6
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
6.1 Execution of Contracts. The Board may authorize any officer, employee
or agent, in the name and on behalf of the Corporation, to enter into any
contract or execute and satisfy any instruments, and any such authority may be
general or confined to specific instances, or otherwise limited.
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6.2 Loans. The President or any other officer, employee or agent
authorized by the By-laws or by the Board may effect loans and advances at any
time for the Corporation from any bank, trust company or other institution or
from any firm, corporation or individual and for such loans and advances may
make, execute and deliver promissory notes, bonds or other certificates or
evidences of indebtedness of the Corporation, and when authorized so to do may
pledge and hypothecate or transfer any securities or other property of the
Corporation as security for any such loans or advances. Such authority conferred
by the Board may be general or confined to specific instances or otherwise
limited.
6.3 Checks, Drafts, Etc. All checks, drafts and other orders for the
payment of money out of the funds of the Corporation and all notes or other
evidences of indebtedness of the Corporation shall be signed on behalf of the
Corporation in such manner as shall from time to time be determined by
resolution of the Board.
6.4 Deposits. The funds of the Corporation not otherwise employed shall be
deposited from time to time to the order of the Corporation in such banks, trust
companies or other depositaries as the Board may select or as may be selected by
an officer, employee or agent of the Corporation to whom such power may from
time to time be delegated by the Board.
ARTICLE 7
STOCK AND DIVIDENDS
7.1 Certificates Representing Shares. The shares of capital stock of the
Corporation shall be represented by certificates in such form (consistent with
the provisions of Section 158 of the General Corporation Law) as shall be
approved by the Board. Such certificates shall be signed by the President or a
Vice President and by the Secretary or an Assistant Secretary or the Treasurer
or an Assistant Treasurer, and may be sealed with the seal of the Corporation or
a facsimile thereof. The signatures of the officers upon a certificate may be
facsimiles, if the certificate is countersigned by a transfer agent or registrar
or other than the Corporation itself or its employee. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature has been
placed upon any certificate shall have ceased to be such offices, transfer agent
or registrar before such certificate is issued, such certificate may, unless
otherwise ordered by the Board, be issued by the Corporation with the same
effect as if such person were such officer, transfer agent or registrar at the
date of issue.
7.2 Transfer of Shares. Transfers of shares of capital stock of the
Corporation shall be made only on the books of the Corporation by the holder
thereof or by such holder's duly authorized attorney appointed by a power of
attorney duly executed and filed with the Secretary or a transfer agent of the
Corporation, and on surrender of the certificate or certificates representing
such shares of capital stock properly endorsed for transfer and upon payment of
all necessary transfer taxes. Every certificate exchanged, returned or
surrendered to the Corporation shall be marked "Cancelled," with the date of
cancellation, by the Secretary or an Assistant Secretary or the transfer agent
of the Corporation. A person in whose name shares of capital stock shall stand
on the books of the Corporation shall be deemed the owner thereof to receive
dividends, to vote as such owner and for all other purposes as respects the
Corporation. No transfer of shares of capital stock shall be valid as against
the Corporation, its stockholders and creditors for any purpose, except to
render the transferee liable for the debts of the Corporation to the extent
provided by law, until such transfer shall have been entered on the books of the
Corporation by an entry showing from and to whom transferred.
7.3 Transfer and Registry Agents. The Corporation may from time to time
maintain one or more transfer offices or agent and registry offices or agents at
such place or places as may be determined from time to time by the Board.
7.4 Lost, Destroyed, Stolen and Mutilated Certificates. The holder of any
shares of capital stock of the Corporation shall immediately notify the
Corporation of any loss, destruction, theft or mutilation of the certificate
representing such shares, and the Corporation may issue a new certificate to
replace the certificate alleged to have been lost, stolen or mutilated. The
Board may, in its discretion, as a condition to the issue of any such new
certificate require the owner of the lost, stolen or mutilated certificate, or
such owner's legal representatives, to make proof satisfactory to the Board of
such loss, destruction, theft or mutilation and to advertise such fact in such
manner as the Board may require, and to give the Corporation and its transfer
agents and registrars, or such of them as the Board may require, a bond in such
form, in such sum and with such surety or sureties as the Board
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may direct, to indemnify the Corporation and its transfer agents and registrars
against any claims that may be made against any of them on account of the
continued existence of any such certificate so alleged to have been lost,
destroyed, stolen or mutilated and against any expense in connection with such
claim.
7.5 Regulations. The Board may make such rules and regulations as it may
deem expedient, not inconsistent with the By-laws or with the Certificate of
Incorporation, concerning the issue, transfer and registration of certificates
representing shares of its capital stock.
7.6 Restriction on Transfer of Stock. A written restriction on the
transfer or registration of transfer of capital stock of the Corporation, if
permitted by Section 202 of the General Corporation Law and noted conspicuously
on the certificate representing such capital stock, may be enforced against the
holder of the restricted capital stock or any successor or transferee of the
holder including an executor, administrator, trustee, guardian or other
fiduciary entrusted with like responsibility for the person or estate of the
holder. Unless noted conspicuously on the certificate representing such capital
stock, a restriction, even though permitted by Section 202 of the General
Corporation Law, shall be ineffective except against a person with actual
knowledge of the restriction. A restriction on the transfer or registration of
transfer of capital stock of the Corporation may be imposed either by the
Certificate of Incorporation or by an agreement among any number of stockholders
or among such stockholders and the Corporation. No restriction so imposed shall
be binding with respect to capital stock issued prior to the adoption of the
restriction unless the holders of such capital stock are parties to an agreement
or voted in favor of the restriction.
7.7 Dividends, Surplus, Etc. Subject to the provisions of the Certificate
of Incorporation and of law, the Board:
7.7.1 May declare and pay dividends or make other distributions on the
outstanding shares of capital stock in such amounts and at such time or times
as, in its discretion, the condition of the affairs of the Corporation shall
render advisable;
7.7.2 May use and apply, in its discretion, any of the surplus of the
Corporation in purchasing or acquiring any shares of capital stock of the
Corporation, or purchase warrants therefor, in accordance with law, or any of
its bonds, debentures, notes, scrip or other securities or evidences of
indebtedness;
7.7.3 May set aside from time to time out of such surplus or net profits
such sum or sums as, in its discretion, it may think proper, as a reserve fund
to meet contingencies, or for equalizing dividends or for the purpose of
maintaining or increasing the property or business of the Corporation, or for
any purpose it may think conducive to the best interests of the Corporation.
ARTICLE 8
INDEMNIFICATION
8.1 Indemnification of Officers and Directors. The Corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that
such person is or was a director or an officer of the Corporation, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding to the fullest extent and in the manner set forth in
and permitted by the General Corporation Law, and any other applicable law, as
from time to time in effect. Such right of indemnification shall not be deemed
exclusive of any other rights to which such director or officer may be entitled
apart from the foregoing provisions. The foregoing provisions of this
Section 8.1 shall be deemed to be a contract between the Corporation and each
director and officer who serves in such capacity at any time while this
Article 8 and the relevant provisions of the General Corporation Law and other
applicable law, if any, are in effect and any repeal or modification thereof
shall not affect any rights or obligations then existing with respect to any
state of facts then or theretofore existing or any action, suit or proceeding
theretofore or thereafter brought or threatened based in whole or in part upon
any such state of facts.
8.2 Indemnification of Other Persons. The Corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether
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civil, criminal, administrative or investigative by reason of the fact that he
is or was an employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
Corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorney's fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding to the extent and in the manner set forth in and
permitted by the General Corporation Law, and any other applicable law, as from
time to time in effect. Such right of indemnification shall not be deemed
exclusive of any other rights to which such person may be entitled apart from
the foregoing provisions.
8.3 Insurance. The Corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
or a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the Corporation would have power to indemnify him against
such liability under the provisions of Section 8.1 and 8.2 of the By-laws or
under Section 145 of the General Corporation Law or any other provision of Law.
ARTICLE 9
BOOKS AND RECORDS
9.1 Books and Records. The Corporation shall keep correct and complete
books and records of account and shall keep minutes of the proceedings of the
stockholders, the Board and any committee of the Board. The Corporation shall
keep at the office designated in the Certificate of Incorporation or at the
office of the transfer agent or registrar of the Corporation in Delaware, a
record containing the names and addresses of all stockholders, the number and
class of shares held by each and the dates when they respectively became the
owners of record thereof.
9.2 Form of Records. Any records maintained by the Corporation in the
regular course of its business including its stock ledger, books of account, and
minute books, may be kept on, or be in the form of, diskettes, magnetic tape,
photographs, microphotographs, or any other information storage device, provided
that the records so kept can be converted into clearly legible written form
within a reasonable time. The Corporation shall so convert any records so kept
upon the request of any person entitled to inspect the same.
9.3 Inspection of Books and Records. Except as otherwise provided by law,
the Board shall determine from time to time whether, and, if allowed, when and
under what conditions and regulations the accounts, books, minutes and other
records of the Corporation shall be open to the inspection of any stockholder or
director.
ARTICLE 10
SEAL
The Board may adopt a corporate seal which shall be in the form of a circle
and shall bear the full name of the Corporation, the year of its incorporation
and the word "Delaware."
ARTICLE 11
FISCAL YEAR
The fiscal year of the Corporation shall be determined, and may be changed,
by resolution of the Board.
ARTICLE 12
VOTING OF SHARES HELD
Unless otherwise provided by resolution of the Board, the President may,
from time to time, appoint one or more attorneys or agents of the Corporation,
in the name and on behalf of the Corporation, to cast the votes which the
Corporation may be entitled to cast as a stockholder or otherwise in any other
corporation, any of whose shares or securities may be held by the Corporation,
at meetings of the holders of stock or other securities of such other
corporation, or to consent in writing to any action by any such other
corporation, and may instruct
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the person or persons so appointed as to the manner of casting such votes or
giving such consent, and may execute or cause to be executed on behalf of the
Corporation and under its corporate seal, or otherwise, such written proxies,
consents, waivers or other instruments as the President may deem necessary or
proper in the premises; or the President may attend in person any meeting of the
holders of the stock or other securities of any such other corporation and
thereat vote or exercise any or all other powers of the Corporation as the
holder of such stock or other securities of such other corporation.
ARTICLE 13
AMENDMENTS
Unless otherwise provided in the Certificate of Incorporation, the By-laws
may be altered, amended, supplemented or repealed, or new By-laws may be
adopted, by vote of the holders of the shares entitled to vote in the election
of directors. The By-laws may be altered, amended, supplemented, repealed, or
new By-laws may be adopted, by the Board, provided that the vote of a majority
of the entire Board shall be required to change the number of authorized
directors. Any By-laws adopted, altered, amended or supplemented by the Board
may be altered, amended or supplemented or repealed by the stockholders entitled
to vote thereon.
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ANNEX III
This Warrant entitles the Registered Holder
thereof to purchase __% of the aggregate number of
shares of Class A Common Stock which may be
acquired upon exercise of all of the Warrants of
like tenor issued contemporaneously with this
Warrant.
No. __
WARRANT FOR THE PURCHASE OF
SHARES OF CLASS A COMMON STOCK
OF
MOTO GUZZI CORPORATION
(A Delaware corporation)
Moto Guzzi Corporation, a Delaware corporation (the "Company"), hereby
certifies that for value received, __________ of ____________, or his, her or
its registered assigns (the "Registered Holder"), is entitled, subject to the
terms set forth below, to purchase from the Company, at any time or from time to
time during the period commencing on June 30, 2001 and ending at 5:00 p.m.
E.S.T. on September 30, 2001 ("Expiration Date"), such number of shares of Class
A Common Stock, $.01 par value, of the Company ("Common Stock"), at a purchase
price per share equal to $.01 ("Purchase Price") as is determined in accordance
with Section 2 hereof. The number of shares of Common Stock which may be
acquired upon exercise of this Warrant, as adjusted from time to time pursuant
to the provisions of this Warrant, is hereinafter referred to as the "Warrant
Shares". All rights granted hereunder shall expire on the Expiration Date.
1. CERTAIN DEFINITIONS
(a) "Actual Operating Income" shall mean the profit before interest,
taxes, minority interests, extraordinary items and the cumulative effects
of changes in accounting policies, of the Company, on a consolidated basis,
for its fiscal year ending December 31, 2000, derived from
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the Company's audited Statements of Income/Loss for such fiscal year,
prepared in accordance with U.S. generally accepted accounting principles
consistently applied, expressed in Lire.
(b) "Market Price" shall mean the average closing sale price of the
Company's common stock on the national securities exchange on which such
securities are traded, if any, or if not traded on a national securities
exchange, then as reported by the National Association of Securities
Dealers, Inc.'s Automated Quotation System, in either event for the 20
consecutive trading days prior to June 30, 2001, or, if such securities are
not so traded, at the fair market value thereof on such date as reasonably
determined by the Board of Directors of the Company.
(c) Minimum Operating Income" shall mean Lit. 20,169,600,000.
(d) "Percentage Interest" shall mean _____% [(i) FOR WARRANTS ISSUED
UNDER SECTION 2.02(a)(i), THE PRODUCT OF (x) 74.05% MULTIPLIED BY A
FRACTION, THE NUMERATOR OF WHICH IS THE NUMBER OF SHARES OF CAPITAL STOCK
OF MOTO GUZZI CORP. OWNED BY THE REGISTERED HOLDER AT THE MERGER EFFECTIVE
TIME, AND THE DENOMINATOR OF WHICH IS 7,500,000; (ii) FOR WARRANTS ISSUED
UNDER SECTION 2.02(a)(ii), 20.76%; AND (iii) FOR WARRANTS ISSUED UNDER
SECTION 2.02(a)(iii), THE PRODUCT OF (x) 5.19% MULTIPLIED BY (y) A
FRACTION, THE NUMERATOR OF WHICH IS THE NUMBER OF OLD MOTO GUZZI WARRANTS
SURRENDERED BY THE REGISTERED HOLDER AT THE MERGER EFFECTIVE TIME AND THE
DENOMINATOR OF WHICH IS 1,500,000.]
(e) "Aggregate Value" shall mean:
(i) zero if Actual Operating Income is less than Minimum
Operating Income;
(ii) the amount of $4,750,000 if Actual Operating Income equals
Minimum Operating Income; and
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(iii) if Actual Operating Income exceeds Minimum Operating
Income, an amount equal to $4,750,000 multiplied by 120% of the
percentage which Actual Operating Income bears to Minimum Operating
Income, provided, however, such Aggregate Value shall not exceed
$9,500,000.
2. SCOPE OF WARRANT The number of shares of Common Stock which may be
acquired by the Registered Holder upon exercise of this Warrant shall be
determined by application of the following formula:
(AV / MP) x PI
rounded up to the next whole number of shares, where AV means the Aggregate
Value, MP means the Market Price, and PI means the Percentage Interest.
By way of example, if Actual Operating Income is Lit. 25,169,600,000, then
the percentage which Lit 25,169,600,000 bears to Lit 20,169,600,000 is 124.79%.
Such percentage, when multiplied by 120%, would equal 149.75%; application of
such resulting percentage to $4,750,000, would yield an AV equal to $7,113,018;
if MP were $15 then 474,201 aggregate shares of Common Stock would be purchased
if all of the Warrants of like tenor, issued contemporaneously with this
Warrant, were exercised.
3. NOTICE OF AGGREGATE VALUE AND EXERCISE.
(a) As soon after June 30, 2001 as practicable if Actual Operating
Income has exceeded Minimum Operating Income, the Company shall notify the
Registered Holder hereof of the amount of the Aggregate Value, by notice
given in accordance with Section 14 hereof.
(b) The Registered Holder hereby appoints Trident Rowan Group, Inc.
("TRG"), with full power of substitution, as the attorney in fact of the
Registered Holder and authorizes TRG to deliver to the Company any notice
of exercise which may be given hereunder. Such authority shall be deemed
null and void if the Registered Holder delivers written notice to TRG
revoking such
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authority at any time prior to the date on which TRG delivers any notice of
exercise hereunder. This Warrant may be exercised by the Registered Holder,
in whole but not in part, or by TRG as agent for the Registered Holder, by
the surrender of this Warrant (with the Notice of Exercise Form attached
hereto as Exhibit I duly executed by such Registered Holder) at the
principal office of the Company, or at such other office or agency as the
Company may designate, accompanied by payment in full, in lawful money of
the United States, of an amount equal to the then applicable Purchase Price
multiplied by the whole number of Warrant Shares which may be purchased
upon such exercise, together with any and all applicable taxes due in
connection with such exercise. This Warrant may not be exercised by, or
shares of Common Stock issued to, any Registered Holder in any state in
which such exercise would be unlawful.
(c) Each exercise of this Warrant shall be deemed to have been
effected immediately prior to the close of business on the day on which
this Warrant shall have been surrendered to the Company as provided in
subsection 3(b) above. At such time, the person or persons in whose name or
names any certificates for Warrant Shares shall be issuable upon such
exercise as provided in subsection 3(d) below shall be deemed to have
become the holder or holders of record of the Warrant Shares represented by
such certificates.
(d) As soon as practicable after the exercise of the purchase right
represented by this Warrant, the Company at its expense will use its best
efforts to cause to be issued in the name of, and delivered to, the
Registered Holder, or, subject to the terms and conditions hereof, to such
other individual or entity as such Registered Holder (upon payment by such
Registered Holder of any applicable transfer taxes) may direct a
certificate or certificates for the number of full shares of Warrant Shares
to which such Registered Holder shall be entitled upon such exercise plus,
in lieu of any fractional share to which such Registered Holder would
otherwise be entitled, cash in an amount determined pursuant to Section 5
hereof.
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4. ADJUSTMENTS.
(a) Split, Subdivision or Combination of Shares. If the Company, after
the date on which this Warrant becomes initially exercisable and prior to
exercise, fixes a record date for the effectuation of a split or
subdivision of the outstanding shares of Common Stock or the determination
of holders of Common Stock entitled to receive a dividend or other
distribution payable in additional shares of Common Stock without payment
of any consideration by such holder for the additional shares of Common
Stock, then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the
Purchase Price shall be appropriately decreased and the number of Warrant
Shares which may be acquired hereunder shall be increased in proportion to
such increase in the aggregate number of shares of Common Stock
outstanding. If the number of shares of Common Stock outstanding at any
time after the date hereof is decreased by a combination of the outstanding
shares of Common Stock or otherwise, then, following the record date of
such combination or other event, the Purchase Price shall be appropriately
increased and the number of Warrant Shares which may be acquired hereunder
shall be decreased in proportion to such decrease in the aggregate number
of shares of Common Stock outstanding.
(b) Reclassification, Reorganization, Consolidation or Merger. In the
case of any reclassification of the Common Stock (other than a change in
par value or a subdivision or combination as provided for in subsection
4(a) above), or any reorganization, consolidation or merger of the Company
with or into another corporation (other than a merger or reorganization
with respect to which the Company is the continuing corporation and which
does not result in any reclassification of the Common Stock), or a transfer
of all or substantially all of the assets of the Company, or the payment of
a liquidating distribution then, as part of any such reorganization,
reclassification, consolidation, merger, sale or liquidating distribution,
lawful provision shall be made so that the Registered Holder of this
Warrant shall have the right thereafter to receive upon the exercise hereof
(to the extent, if any, still exercisable) the kind and amount of shares of
stock or other securities or property which such Registered Holder would
have been entitled to receive if,
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immediately prior to any such reorganization, reclassification,
consolidation, merger, sale or liquidating distribution, as the case may
be, such Registered Holder had held the number of shares of Common Stock
which were then purchasable upon the exercise of this Warrant or if this
Warrant shall not then be exerciseable, such other consideration as the
Board of Directors of the Company shall reasonably determine to be of
comparable value. In any such case, appropriate adjustment (as reasonably
determined by the Board of Directors of the Company) shall be made in the
application of the provisions set forth herein with respect to the rights
and interests thereafter of the Registered Holder of this Warrant such that
the provisions set forth in this Section 4 (including provisions with
respect to the Purchase Price) shall thereafter be applicable, as nearly as
is reasonably practicable, in relation to any shares of stock or other
securities or property thereafter deliverable upon the exercise of this
Warrant.
(c) Price Reduction. Notwithstanding any other provision set forth in
this Warrant, at any time and from time to time during the period that this
Warrant is exercisable the Company in it sole discretion may reduce the
Purchase Price.
(d) No Impairment. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization,
recapitalization, 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 to be observed or
performed hereunder by the Company but will at all times in good faith
assist in the carrying out of all the provisions of this Section 4 and in
the taking of all such actions as may be necessary or appropriate in order
to protect against impairment of the rights of the Registered Holder of
this Warrant to adjustments in the Purchase Price.
(e) Notice of Adjustment. Upon the occurrence of each adjustment or
readjustment of the Purchase Price or the number of Warrant Shares which
may be acquired hereunder, the Company, at its expense, shall promptly
compute such adjustment or readjustment in accordance with the terms hereof
and prepare and furnish written notice thereto to the Registered
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Holder of this Warrant within a reasonable amount of time from the
adjustment or readjustment stating the adjustment or readjustment and
showing in reasonable detail the facts upon which such adjustment or
readjustment is based.
5. NOTICES OF RECORD DATE.
In case:
(a) the Company shall take a record of the holders of its Common Stock
(or other stock or securities at the time deliverable upon the exercise of
this Warrant) for the purpose of entitling or enabling them to receive any
dividend or other distribution (other than a dividend or distribution
payable solely in capital stock of the Company or out of funds legally
available therefor), or to receive any right to subscribe for or purchase
any shares of any class or any other securities, or to receive any other
right, or
(b) of any capital reorganization of the Company, any reclassification
of the capital stock of the Company, any consolidation or merger of the
Company with or into another corporation (other than a consolidation or
merger in which the Company is the surviving entity), or any transfer of
all or substantially all of the assets of the Company, or
(c) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then, and in each such case, the Company will mail or cause to be mailed to the
Registered Holder of this Warrant a notice specifying, as the case may be, (i)
the date on which a record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, or (ii) the effective date on which such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation or
winding-up is to take place, and the time, if any is to be fixed, as of which
the holders of record of Common Stock (or such
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other stock or securities at the time deliverable upon the exercise of this
Warrant) shall be entitled to exchange their shares of Common Stock (or such
other stock or securities) for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, transfer,
dissolution, liquidation or winding-up. Such notice shall be mailed at least
twenty (20) days prior to the record date or effective date for the event
specified in such notice, provided that the failure to mail such notice shall
not affect the legality or validity of any such action.
6. RESERVATION OF STOCK. The Company will at all times reserve and keep
available, solely for issuance and delivery upon the exercise of this Warrant,
such shares of Warrant Shares and other stock, securities and property, as from
time to time shall be issuable upon the exercise of this Warrant.
7. REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) upon delivery of an
indemnity agreement (with surety if reasonably required) in an amount reasonably
satisfactory to the Company, or (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will issue, in lieu thereof, a new
Warrant of like tenor.
8. TRANSFER AND EXCHANGE OF WARRANTS.
(a) The Company will maintain a register containing the names and
addresses of the Registered Holders of this Warrant. Any Registered Holder
may change its, his or her address as shown on the warrant register by
written notice to the Company requesting such change, given in accordance
with Section 14 hereof.
(b) Until any transfer of this Warrant is made in the warrant
register, the Company may treat the Registered Holder of this Warrant as
the absolute owner hereof for all purposes; provided, however, that if and
when this Warrant is properly assigned in blank, the
8
<PAGE>
Company may (but shall not be obligated to) treat the bearer hereof as the
absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.
(c) The Company shall register the transfer from time to time, of this
Warrant upon the register maintained by the Company for such purpose, upon
surrender of this Warrant for transfer, upon written instructions with
signatures guaranteed. Upon any such transfer, a new Warrant representing
an equal aggregate Percentage Interest shall be issued and this Warrant
shall be canceled.
(d) This Warrant may be surrendered to the Company, together with a
written request for exchange, and thereupon the Company shall issue in
exchange therefor one or more new Warrants as requested by the Registered
Holder of this Warrant, representing in the aggregate an equal Percentage
Interest; provided, however, that in the event that this Warrant bears a
restrictive legend, the Company shall not cancel this Warrant nor issue a
new Warrant in exchange therefor unless the Company has received an opinion
of counsel stating that such transfer may be made and indicating whether
the new Warrant(s) must also bear a restrictive legend.
9. NO RIGHTS AS SHAREHOLDER. Until the exercise of this Warrant, the
Registered Holder of this Warrant shall not have or exercise any rights by
virtue hereof as a shareholder of the Company.
10. CHANGE OR WAIVER. Any term of this Warrant may be changed or waived
only by an instrument in writing signed by the party against which enforcement
of the change or waiver is sought.
11. HEADINGS. The headings in this Warrant are for purposes of reference
only and shall not limit or otherwise affect the meaning of any provision of
this Warrant.
9
<PAGE>
12. GOVERNING LAW. This Warrant shall be governed by and construed in
accordance with the laws of the State of New York as such laws are applied to
contracts made and to be fully performed entirely within that state between
residents of that state.
13. JURISDICTION AND VENUE. The Company (i) agrees that any legal suit,
action or proceeding arising out of or relating to this Warrant shall be
instituted exclusively in New York State Supreme Court, County of New York or in
the United States District Court for the Southern District of New York, (ii)
waives any objection to the venue of any such suit, action or proceeding and the
right to assert that such forum is not a convenient forum, and (iii) irrevocably
consents to the jurisdiction of the New York State Supreme Court, County of New
York, and the United States District Court for the Southern District of New York
in any such suit, action or proceeding, and the Company further agrees to accept
and acknowledge service or any and all process which may be served in any such
suit, action or proceeding in New York State Supreme Court, County of New York
or in the United States District Court for the Southern District of New York and
agrees that service of process upon it mailed by certified mail to its address
shall be deemed in every respect effective service of process upon it in any
suit, action or proceeding.
14. MAILING OF NOTICES. ETC. All notices and other communications under
this Warrant (except payment) shall be in writing and shall be sufficiently
given if delivered to the addressees in person, by Federal Express or similar
receipt delivery, by facsimile delivery or, if mailed, postage prepaid, by
certified mail, return receipt requested, as follows:
Registered Holder: To his or her address on page 1 of this Warrant.
The Company: Moto Guzzi Corporation
c/o Trident Rowan Group, Inc.
Two Worlds Fair Drive
Franklin Township
Somerset, NJ 08873
Attn: Mr. Mark S. Hauser, President
Fax: (732) 868-0193
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<PAGE>
In either case, with a copy to:
Morrison Cohen Singer & Weinstein, LLP
750 Lexington Avenue
New York, NY 10022
Attn: David Lerner, Esq.
Fax: (212) 735-8708
or to such other address as any of them, by notice to the others may designate
from time to time. Time shall be counted to, or from, as the case may be, the
delivery in person or by mailing.
MOTO GUZZI CORPORATION
By:____________________________________
Print Name:____________________________
Title:_________________________________
EXHIBIT I
NOTICE OF EXERCISE
To: Moto Guzzi Corporation
c/o Trident Rowan Group, Inc.
Two Worlds Fair Drive
Franklin Township
Somerset, NJ 08873
1. The undersigned hereby elects to purchase such number of shares of the
Common Stock of Moto Guzzi Corporation, pursuant to the terms of the attached
Warrant, as equals the undersigned's entire interest in this Warrant, and
tenders herewith payment of the purchase price of such shares in full, together
with all applicable transfer taxes, if any.
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<PAGE>
2. Please issue a certificate or certificates representing said shares of
the Common Stock in the name of the undersigned or in such other name as is
specified below:
---------------------------------------
(Name)
---------------------------------------
(Address)
---------------------------------------
Taxpayer Identification Number)
- ---------------------------------
[print name of Registered Holder]
By:
------------------------------
Title:
---------------------------
Date:
---------------------------
12
<PAGE>
REGISTRATION RIGHTS AGREEMENT
Dated as of , 1995
relating to
21,000 Shares of Common Stock
and
94,000 Shares of Common Stock which will be issued upon
Conversion of 94 Shares of Series A Preferred Stock
by and between
Orion Acquisition Corp. I
and
The Several Shareholders listed on Schedule A hereto
<PAGE>
This Registration Rights Agreement (the "Agreement") is made
and entered into as of , 1995, by and between Orion Acquisition Corp I, a
Delaware corporation (the "Company") and The Several Shareholders listed on
Schedule A attached hereto (the "Shareholders") who have purchased 21,000
shares of the Common Stock of the Company and 94 Shares of Series A Preferred
Stock which are convertible into 94,000 shares of common stock ("Shares") in
private transactions. As an inducement to the Shareholders to purchase the
Shares, the Company has agreed to provide the registration rights set forth in
this Agreement.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized
following meanings:
Act: The Securities Act of 1933, as amended.
Business Combination: A merger, exchange of capital stock,
asset acquisition or other business combination between the Company and an
operating business.
Closing Date: The date on which a Business Combination is
consummated.
Commission: The Securities and Exchange Commission.
Common Stock: The voting Common Stock, par value $.01 per
share, of the Company.
Effectiveness Target Date: As defined in Section 4.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Holders: As defined in Section 2(b) hereof.
NASD: National Association of Securities Dealers, Inc.
Offering Memorandum: The Offering Memorandum, dated
October , 1993, and all amendments and supplements thereto, relating to
the Shares and prepared by the Company.
Person: An individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political
subdivision thereof.
Prospectus: The prospectus included in the Registration
Statement (as defined herein), as amended or supplemented by any prospectus
supplement with respect to the terms of the offering of any portion of the
Transfer Restricted Securities (as defined herein) covered by the Registration
Statement and by all other amendments and supplements to the prospectus,
including post-effective amendments, and all material which may be
incorporated by reference into such prospectus.
2
<PAGE>
Record Holders: Holders of Transfer Restricted Securities as
set forth on the books and records of the Company on the Closing Date.
Registration Statement: As defined in Section 3(a) hereof.
Transfer Restricted Securities: Each Share of Common Stock
of the Company until such Shares (i) have been effectively registered under
the Securities Act and disposed of in accordance with the Registration
Statement covering it, (ii) are distributed to the public pursuant to Rule 144
or (iii) may be sold or transferred pursuant to Rule 144(k) (or any similar
provisions then in force) under the Securities Act or otherwise.
Underwriter: Any Underwriter, placement agent, selling
broker, dealer manager, qualified independent Underwriter or similar
securities industry professional.
Underwritten Registration or Underwritten Offering: An
offering in which securities of the Company are sold to an Underwriter or with
the assistance of such Underwriter for reoffering to the public on a firm
commitment or best efforts basis.
SECTIONS 2. SECURITIES SUBJECT TO THIS AGREEMENT
(a) Transfer Restricted Securities. The securities entitled
to the benefits of this Agreement are the Transfer Restricted Securities.
(b) Holders of Transfer Restricted Securities. A Person is
deemed to be a holder of Transfer Restricted Securities (each, a "Holder")
whenever such Person owns Transfer Restricted Securities.
SECTION 3. REGISTRATION
(a) The Company shall cause to filed with the Commission on
or prior to 75 days after the Closing Date, a registration statement under the
Act (the "Registration Statement") on Form S-1 to cover resales of Transfer
Restricted Securities by the Holders thereof who satisfy certain conditions
relating to the provision of information in connection with the Registration
Statement. The Holders of such Transfer Restricted Securities shall have
provided the representations required pursuant to Section 3(g) hereof. The
Company shall use its best efforts to cause such Registration Statement to be
declared effective by the Commission on or prior to 150 days after the Closing
Date. The Company further agrees to use its best efforts to prevent the
happening of any event that would cause the Registration Statement to contain
a material misstatement or omission or to be not effective and usable for
resale of the Transfer Restricted Securities during the period that such
Registration Statement is required to be effective and usable.
Upon the occurrence of any event that would cause the
Registration Statement (i) to contain a material misstatement or omission or
(ii) to be not effective and usable for resale of Transfer Restricted
Securities during the period that such Registration Statement is required to
be effective and usable, the Company shall promptly as reasonably practicable
file an
3
<PAGE>
amendment to the Registration Statement, in the case of clause (i), correcting
any such misstatement or omission, and in the case of either clause (i) or
(ii), use its best efforts to cause such amendment to be declared effective
and such Registration Statement to become usable as soon as practicable
thereafter.
(b) None of the Company nor any of its security holders
(other than the Holders of Transfer Restricted Securities in such capacity)
shall have the right to include any of the Company's securities in the
Registration Statement.
(c) If holder of a majority of the shares of Common Stock to
be registered in the Registration Statement so elect, an offering of Transfer
Restricted Securities pursuant to the Registration Statement may be effected
in the form of an Underwriting Offering. In such event, and if the Underwriter
advises the Company and the Holders of such Transfer Restricted Securities in
writing that in their opinion the amount of Transfer Restricted Securities
proposed to be sold in such offering exceeds the amount of Transfer Restricted
Securities which can be sold in such offering, there shall be included in such
Underwritten Offering the amount of such Transfer Restricted Securities which
in the opinion of such Underwriters can be sold, and such amount or number of
shares shall be allocated pro rata among the Holders of such Transfer
Restricted Securities, as the case may be, requested to be included by such
Holders. The Holders of the Transfer Restricted Securities to be registered
shall pay all underwriting discounts and commissions of such Underwriters.
(d) If any of the Transfer Restricted Securities covered by
the Registration Statement are to be sold in an Underwritten Offering, the
Underwriter(s) that will administer the offering will be selected by the
Holders of a majority of the shares of Common Stock, provided, however, that
such Underwriter(s) shall be reasonably satisfactory to the Company.
(e) Each Holder whose Transfer Restricted Securities are
covered by a Registration Statement filed pursuant to this Section 3 agrees,
upon the request of the Underwriter(s) in any Underwritten Offering, not to
effect any public sale or distribution of securities of the Company of the
same class as the securities included in such Registration Statement,
including a sale pursuant to Rule 144 under the Act (except as part of such
registration), during the 10-day period prior to, and during the 90-day period
beginning on, the closing date of any Underwritten Offering made pursuant to
such Registration Statement, to the extent timely notified in writing by such
Underwriter(s); provided, however, that each Holder of Transfer Restricted
Securities shall be subject to the hold-back restrictions of this Section 3(e)
only once during the term of this Agreement.
The foregoing provisions of this Section 3(e) shall also
apply to any Holder of Transfer Restricted Securities if such Holder is
prevented by applicable statute or regulation from entering into any such
agreement; provided, however, that any such Holder shall undertake, in its
request to participate in any such Underwritten Offering, not to effect any
public or sale or distribution of any of its Transfer Restricted Securities
commencing on the date of sale of Transfer Restricted Securities unless it has
provided 90 days written notice of such sale or distribution to the
Underwriter(s).
4
<PAGE>
(f) The Company agrees (i) not to effect any public or
private offer, sale or distribution of Securities of the same quality and
nature of the Transfer Restricted Securities to be registered in an
Underwritten Offering including a sale pursuant to Regulation D under the Act,
during the 10-day period prior to, and during the 90-day period beginning on,
the closing date of each Underwritten Offering made pursuant to the
Registration Statement, to the extent timely notified in writing by the
Underwriter(s) (except as part of such registration, if permitted), unless the
Underwriter(s) shall consent in writing to a shorter period of time; provided,
however, that the foregoing provisions of this Section 3(f)(i) shall not be
applicable during the 180 days following the termination of any such period in
connection with an Underwritten Offering made pursuant to the Registration
Statement and, provided, further, that any such agreement shall permit (A) the
issuance by the Company of any shares of Common Stock issued to employees of
the Company or any of its Subsidiaries or to any other eligible person
pursuant to any employee stock option plan, stock ownership plan, stock bonus
plan, stock compensation plan, stock purchase plan or dividend reinvestment
plan of the Company in effect on the date of such Underwritten Offering, (B)
the issuance by the Company of Common Stock upon the conversion of securities,
or the exercise of options or warrants, outstanding at the date of such
Underwritten Offering, and (c) the issuance by the Company of Common Stock in
one or more private placements not to exceed in aggregate 5% of the fully
diluted outstanding Common Stock of the Company as of the date of such
Underwritten Offering solely in exchange for property other than cash; and
(ii) to cause each holder of its privately placed subordinated debt, Common
Stock and any security convertible into or exchangeable or exercisable for
subordinated debt or Common Stock purchased from the Company at any time on or
after the date of this Agreement to agree not to effect any public sale or
distribution of any such securities during such period, including a sale
pursuant to Rule 144 under the Act (except as part of such Underwritten
Offering, if permitted).
(g) No Holder of Transfer Restricted Securities may include
any of its Transfer Restricted Securities in any Registration Statement
pursuant to this Agreement unless such Holder furnishes to the Company in
writing, within 10 business days after receipt of a request therefor, such
information as the Company may reasonably request for use in connection with
any Registration Statement or Prospectus or preliminary Prospectus included
therein.
SECTION 4. LIQUIDATED DAMAGES
If (i) the Registration Statement is not filed with the
Commission on or prior to 75 days after the Closing Date, (ii) the
Registration Statement has not been declared effective by the Commissioner
within 150 days after the Closing Date (the "Effectiveness Target Date"), or
(iii) the Registration Statement is filed and declared effective but shall
thereafter cease to be effective or useable for resale without being succeeded
immediately by any additional Registration Statement filed and declared
effective (each such event referred to in clause (i) through (iii), a
"Registration Default"), the Company will pay liquidated damages to each
Holder of Transfer Restricted Securities who has complied with such Holder's
obligations under this Agreement, during the first 90-day period immediately
following the occurrence of such Registration Default in an amount equal to
$.01 per week per share (subject to adjustment in the event of stock splits,
stock recombinations, stock dividends and the like) of Common Stock
constituting Transfer Restricted Securities held by such Holder. The amount of
the liquidated
5
<PAGE>
damages will increase by an additional $.01 per week per share (subject to
adjustment as set forth above) of Common Stock constituting Transfer
Restricted Securities for each subsequent 90 day period until the applicable
Registration Statement is filed and the applicable Registration Statement is
declared effective, or the Registration Statement again becomes effective, as
the case may be, up to a maximum amount of liquidated damages of $.05 per week
per share (subject to adjustment as set forth above) of Common Stock
constituting Transfer Restricted Securities. All accrued liquidated damages
shall be paid to Record Holders by wire transfer of immediately available
funds or by Federal funds check by the Company on each Damages Payment Date.
Following the cure of a Registration Default, liquidated damages will cease to
accrue with respect to such Registration Defaults. No Liquidated Damages shall
be payable with respect to any week commencing three years or more after the
Closing Date.
All of the Company's obligations set forth in the preceding
paragraph which are outstanding with respect to any Transfer Restricted
Security at the time such security ceases to be a Transfer Restricted Security
shall survive until such time as all such obligations with respect to such
security shall have been satisfied in full.
SECTION 5. REGISTRATION PROCEDURES
In connection with the Registration Statement, the Company
will use its best efforts to effect such registration to permit the sale of
the Transfer Restricted Securities being sold in accordance with the intended
method or methods of distribution or disposition thereof, and pursuant thereto
the Company will as expeditiously as possible;
(a) prepare and file with the Commission a Registration
Statement relating to the registration on any appropriate form under the Act,
which form shall be available for the sale of the Transfer Restricted
Securities in accordance with the intended method or methods of distribution
thereof and shall include all financial statements; cooperate and assist in
any filings required to be made with the NASD and use its reasonable best
efforts to cause such Registration Statement to become effective and approved
by such government agencies or authorities as may be necessary to enable the
selling Holders to consummate the disposition of such Transfer Restricted
Securities; provided, however, that before filing a Registration Statement or
any Prospectus, or any amendments or supplements (other than documents
incorporated by reference after the initial filing of the Registration
Statement), the Company will furnish to the Holders and the Underwriter(s), if
any, copies of all such documents proposed to be filed, and the Company will
not file any Registration Statement or amendment thereto or any Prospectus or
supplement thereto which (i) the Underwriter(s), if any, shall reasonably
object or (ii) if there are no Underwriters, Holders of a majority of the
shares of Common Stock so registered in the Registration Statement shall
reasonably object, in such case within five business days after the receipt
thereof. A Holder or Underwriter, if any, shall be deemed to have reasonably
objected to such filing if the Registration Statement, amendment, Prospectus
or supplement, as applicable, as proposed to be filed contains a material
misstatement or omission which misstatement or omission is specifically
identified to the Company in writing within such five business days;
(b) prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement as may be necessary to
keep the Registration
6
<PAGE>
Statement effective for the applicable period set forth in Section 3(a)
hereof, or such shorter period as will terminate when all Transfer Restricted
Securities covered by such Registration Statement have been sold; cause the
Prospectus to be supplemented by any required Prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 under the Act, and to comply
fully with the applicable provisions of Rules 424 and 430A under the Act in a
timely manner; and comply with the provisions of the Act with respect to the
disposition of all securities covered by such Registration Statement during
the applicable period in accordance with the intended method or methods of
distribution by the sellers thereof set forth in such Registration Statement
or supplement to the Prospectus;
(c) if requested by the Holders of Transfer Restricted
Securities being sold in an Underwritten Offering or the Underwriter(s)
thereof, promptly incorporate in a Prospectus supplement or post-effective
amendment such information as such Underwriter(s) and the Holders of Transfer
Restricted Securities being sold agree should be included therein relating to
the plan of distribution of the Transfer Restricted Securities, including,
without limitation, information with respect to the principal amount of
Transfer Restricted Securities being sold to such Underwriter(s), the purchase
price being paid therefor and with respect to any other terms of the offering
of the Transfer Restricted Securities to be sold in such offering; and make
all required filings of such Prospectus supplement or post-effective amendment
as soon as practicable after the Company is notified of the matters to be
incorporated in such Prospectus supplement or post-effective amendment;
(d) advise the Underwriter(s), if any, and selling Holders
promptly and, if requested by such Persons, to confirm such advice in writing,
(i) when the Prospectus or any Prospectus supplement or post-effective
amendment has been filed, and, with respect to the Registration Statement or
any post-effective amendment thereto, when the same has become effective, (ii)
of any request by the Commission for amendments the Registration Statement or
any amendments or supplements to the Prospectus or for additional information
relating thereto, (iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement under the Act or of
the suspension by any state securities commission of the qualification of the
Transfer Restricted Securities for offering or sale in any jurisdiction, or
the initiation of any proceeding for any of the preceding purposes, (iv) if at
any time the representations and warranties of the Company contemplated by
paragraph (m)(i) below cease to be true and correct, and (v) of the existence
of any fact and the happening of any event that makes any statement of a
material fact made in the Registration Statement, the Prospectus, any
amendment or supplement thereto, or any document incorporated by reference
therein untrue, or that requires the making of any additions to or changes in
the Registration Statement or the Prospectus in order to make the statements
therein not misleading. If at any time the Commission shall issue any stop
order suspending the effectiveness of the Registration Statement, or any state
securities commission or other regulatory authority shall issue an order
suspending the qualification or exemption from qualification of the Transfer
Restricted Securities under state securities or Blue Sky laws, the Company
shall use their best efforts to obtain the withdrawal or lifting of such order
at earliest possible time;
(e) promptly following the filing of any document that is to
be incorporated by reference into the Registration Statement or the Prospectus
(after initial filing of the
7
<PAGE>
Registration Statement), provide copies of such document to the Holders;
(f) furnish to each Holder and each of the Underwriter(s),
if any, without charge, at least one copy of the Registration Statement, as
first filed with the Commission, and of each amendment thereto, including all
documents incorporated by reference therein and all exhibits (excluding
exhibits incorporated therein by reference unless requested by such Holder);
(g) deliver to each selling Holder and each of the
Underwriter(s), if any, without charge, as many copies of the Prospectus
(including each preliminary prospectus) and any amendment or supplement
thereto as such Persons may reasonably request; the Company consents to the
use of the Prospectus and any amendment or supplement thereto by each of the
selling Holders and each of the Underwriter(s), if any, in connection with the
public offering and the sale of the Transfer Restricted Securities covered by
the Prospectus or any amendment or supplement thereto;
(h) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders, the Underwriter(s), if any,
and their respective counsel in connection with the registration and
qualification of the Transfer Restricted Securities under the securities or
Blue Sky laws of such jurisdictions as the selling Holders or Underwriter(s)
may request and do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Transfer Restricted
Securities covered by the Registration Statement; provided, however, that the
Company shall not be required (i) to register or qualify as a foreign
corporation where it is now so qualified, (ii) to take any action that would
subject it to the service or process in suits, other than as to matters and
transactions relating to the Registration Statement, in any jurisdiction where
it is not so subject, or (iii) to take any action that would subject it to
taxation in any jurisdiction in an amount greater it would be so subject
without having taken such action;
(i) cooperate with the selling Holders and the
Underwriter(s), if any, to facilitate the timely preparation and delivery of
certificates representing Transfer Restricted Securities to be sold and not
bearing any restrictive legends; and enable such Transfer Restricted
Securities to be in such denominations and registered in such names as the
Holders or the Underwriter(s), if any, may request at least two business days
prior to any sale or Transfer Restricted Securities made by such
Underwriter(s);
(j) use its best efforts to cause the Transfer Restricted
Securities covered by the Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof or the Underwriter(s), if
any, to consummate the disposition of such Transfer Restricted Securities,
subject to the proviso contained in clause (h) above;
(k) if any fact or event contemplated by clause (d)(v) above
shall exist or have occurred, prepare a supplement or post-effective amendment
to the Registration Statement or related Prospectus or any document
incorporated therein by reference or file any other required document so that,
as thereafter delivered to the purchasers of Transfer Restricted Securities,
the Prospectus will not contain an untrue statement of a material fact or omit
to state any material
8
<PAGE>
fact necessary to make the statements therein not misleading;
(l) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of the Registration Statement and
provide the transfer agent for the Common Stock with printed certificates for
the Transfer Restricted Securities;
(m) enter in such agreements (including an underwriting
agreement) and take all such other actions in connection therewith as may
reasonably be required in order to expedite or facilitate the disposition of
the Transfer Restricted Securities pursuant to the Registration Agreement, in
connection with an Underwritten Registration, and (i) make such
representations and warranties to the Holders and the Underwriter(s), in form,
substance arid scope as they may reasonably request and as are customarily
made by issuers to Underwriters in primary Underwritten Offerings and covering
matters including, but not limited to, those set forth in an underwriting
agreement; (ii) obtain opinions of counsel to the Company and updates thereof
in customary form and covering matters reasonably requested by the
Underwriter(s) of the type customarily covered in legal opinions to
Underwriters in connection with primary underwritten offerings addressed to
each selling Holder and the Underwriter requesting the same and covering the
matters as may be reasonably requested by such Holders and Underwriters; (iii)
obtain "cold comfort" letters and updates thereof from the Company's
independent certified public accountants addressed to the selling Holders of
Transfer Restricted Securities and Underwriters requesting the same, such
letters to be in customary form and covering matters of the type customarily
covered in "cold comfort" letters to Underwriters in connection with primary
underwritten offerings; (iv) set forth in full or incorporate by reference in
the underwriting agreement the indemnification provisions and procedures of
Section 7 hereof with respect to all parties to be indemnified pursuant to
said Section; and (v) deliver such documents and certificates as may be
reasonably requested by the Holders of the Transfer Restricted Securities
being sold or the Underwriter(s) of such Underwritten Offering to evidence
compliance with clause (i) above and with any customary conditions contained
in the underwriting agreement entered into by the Company pursuant to this
clause (m). The above shall be done at each closing under such underwriting
agreement, as and to the extent required thereunder.
(n) make available at reasonable times and in a reasonable
manner for inspection by a representative of the Holders of the Transfer
Restricted Securities, any Underwriter participating in any disposition
pursuant to such Registration Statement, and any attorney or accountant
retained by such selling Holders or any of the Underwriters, all financial and
other records, pertinent corporate documents and properties of the Company and
cause the Company's officers, directors and employees to supply all
information reasonably requested by any such Holder, Underwriter, attorney or
accountant in connection with such Registration Statement subsequent to the
filing thereof and prior to its effectiveness, provided, however, that such
representatives, attorneys or accountants shall agree to keep confidential
(which agreement shall be confirmed in writing in advance to the Company if
the Company shall so request) all information, records or documents made
available to such persons which is not otherwise available to the general
public unless disclosure of such records, information or documents is required
by court or administrative order (of which the Company shall have been given
prior notice and an opportunity to defend) after the exhaustion of all appeals
therefrom, and to use such information obtained pursuant to this provision
only in connection with the transaction for
9
<PAGE>
which such information was obtained, and not for any other purpose;
(o) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make generally
available to its security holders, as soon as practicable, a consolidated
earnings statement (which need not be audited) for the twelve-month period (i)
commencing at the end of any fiscal quarter in which Transfer Restricted
Securities are sold to Underwriters in a firm or best efforts Underwritten
Offering or (ii) if not sold to Underwriters in such an offering, beginning
with the first month of the Company's first fiscal quarter commencing after
the effective date of the Registration Statement;
(p) make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of the Registration Statement at the
earliest possible moment;
(q) cause all Transfer Restricted Securities covered by the
Registration Statement to be listed on each securities exchange or quotation
system on which similar securities issued by the Company are then listed if
requested by the Holders of a majority in aggregate principal amount of such
Transfer Restricted Securities or the Underwriters, if any;
(r) cause the Transfer Restricted Securities covered by the
Registration Statement to be rated with the appropriate rating agencies, if so
requested by the Holders of a majority in aggregate principal amount of such
Transfer Restricted Securities or the Underwriters, if any; and
(s) cooperate and assist in any filings required to be made
with the NASD and in the performance of any due diligence investigation by any
Underwriter (including any "qualified independent Underwriter" that is
required to be retained in accordance with the rules and regulations of the
NASD).
Each Holder as to which any Registration Statement is being
effected agrees to furnish promptly to the Company all information required to
be disclosed in order to make the information previously furnished to the
Company by such Holder not materially misleading.
Each Holder agrees by acquisition of such Transfer
Restricted Securities that, upon receipt of any notice from the Company of the
existence of any fact of the kind described in Section 5(d)(v) hereof, such
Holder will forthwith discontinue disposition of Transfer Restricted
Securities until such Holder's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 5(k) hereof, or until it is advised
in writing (the "Advice") by the Company that the use of the Prospectus may be
resumed, and has received copies of any additional or supplemental filings
which are incorporated by reference in the Prospectus. If so directed by the
Company, each Holder will deliver to the Company (at the Company's expense)
all copies, other than permanent file copies then in such Holder's possession,
of the Prospectus covering such Transfer Restricted Securities current at the
time of receipt of such notice. In the event the Company shall give any such
notice, the time period regarding the effectiveness of the Registration
Statement set forth in Section 3(a) hereof shall be extended by the number of
days during the period from and including the date of the giving of such
notice pursuant to Section 5(d)(v) hereof to and including the date when each
selling Holder covered by such Registration
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Statement shall have received the copies of the supplemented or amended
Prospectus contemplated by Section 5(k) hereof or shall have received the
Advice.
SECTION 6. REGISTRATION EXPENSES
(a) All expenses incident to the Company's performance of or
compliance with this Agreement will be borne by the Company, regardless
whether a Registration Statement becomes effective, including without
limitation:
(i) all registration and filing fees and expenses
(including filings made with the NASD);
(ii) fees and expenses of compliance with federal
securities or state blue sky laws;
(iii) expenses of printing including, without
limitation, expenses of printing or engraving certificates for the Transfer
Restricted Securities and of printing prospectuses), messenger and delivery
service and telephone;
(iv) reasonable fees and disbursements of counsel for
the Company and for the Holders of the Transfer Restricted Securities (subject
to the provisions of Section 5(b) hereof);
(v) fees and disbursements of all independent certified
public accountants of the Company (including the expenses of any special audit
and "cold comfort" letters required by or incident to such performance);
(vi) fees and expenses associated with any NASD filing
required to be made in connection with the Registration Statement, including,
if applicable, the fees and expenses of any "qualified independent
Underwriter" (and its counsel) that is required to be retained in accordance
with the rules and regulations of the NASD; and
(vii) fees and expenses of listing the Transfer
Restricted Securities on any securities exchange or quotation system in
accordance with Section 5(m) hereof. All such expenses being herein called
"Registration Expense."
The Company will, in any event, bear its internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting dues), the expenses of any annual
audit, rating agency fees and the fees and expenses of any Person, including
special experts, retained by the Company. The Holders of Transfer Restricted
Securities shall bear the expense of any broker's commission or Underwriters'
discount or commission.
(b) In connection with the Registration Statement, the
Company will reimburse the Holders of Transfer Restricted Securities being
registered pursuant to such Registration Statement for the fees and
disbursements of not more than one counsel chosen by the Holders
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of a majority of the shares of Common Stock to be included in such
Underwritten Offering. Notwithstanding the provisions of this Section 6, each
Holder of Transfer Restricted Securities shall pay all registration expenses
to the extent required by applicable law.
SECTION 7. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless each
Holder (each such Holder an "Indemnified Holder") and in the case of an
Underwritten Offering, each Underwriter participating in the distribution
(each such Underwriter an "Indemnified Underwriter") and each person that
controls each Indemnified Holder or Indemnified Underwriter within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act, and agents,
employees, officers and directors or any such controlling person of any
Indemnified Holder or Indemnified Underwriter from and against any and all
losses, claims, damages, judgments, liabilities and expenses (including the
reasonable fees and expenses of counsel and other expenses in connection with
investigating, defending or settling any such action or claim) as they are
incurred arising out of or based upon any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or the
Prospectus (as amended or supplemented if the Company shall have furnished any
amendments or supplements thereto) or any preliminary Prospectus or arising
out of or based upon any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, except (i) the Company shall not be liable
to any Indemnified Holder or Indemnified Underwriter in any such case insofar
as such losses, claims, damages, judgments, liabilities or expenses arise out
of, or are based upon any such untrue statement or omission or alleged untrue
statement or omission based upon information relating to such Indemnified
Holder or Indemnified Underwriter furnished in writing by such Indemnified
Holder or Indemnified Underwriter to the Company expressly for use therein and
(ii) the Company shall not be liable to any Indemnified Holder or Indemnified
Underwriter under the indemnity agreement in this Section 7(a) with respect to
any preliminary Prospectus to the extent that any such loss, claim, damage,
judgment, liability or expense results solely from the fact that any
Indemnified Holder or Indemnified underwriter sold Transfer Restricted
Securities to a person to whom there was not sent or given, at or prior to the
written confirmation of such sale, a copy of the Prospectus as then amended or
supplemented, if the Company has previously furnished sufficient copies
thereof to the Indemnified Holder or Indemnified Underwriter.
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(b) If any action or proceeding (including any governmental
or regulatory investigation or proceeding) shall be brought or asserted
against any Indemnified Holder or Indemnified Underwriter with respect to
which indemnity may be sought against the Company pursuant to this Section
7(b), such Indemnified Holder or Indemnified Underwriter shall promptly notify
the Company in writing, and the Company shall have the right to assume the
defense thereof, including the employment of counsel reasonably satisfactory
of such Indemnified Holder or Indemnified Underwriter and payment of all fees
and expenses; provided, however, that the omission so to notify the Company
shall not relieve the Company from any liability that they may have to any
Indemnified Holder or Indemnified Underwriter (except to the extent that the
Company is materially prejudiced or otherwise forfeits substantive rights or
defenses by reason of such failure). An Indemnified Holder or Indemnified
Underwriter shall have the right to employ separate counsel in any such action
or proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Holder or
Indemnified Underwriter, unless (i) the Company agrees in writing to pay such
fees and expenses, (ii) the Company has failed promptly to assume the defense
and employ counsel satisfactory to the Indemnified Holder or Indemnified
Underwriter or (iii) the named parties to any such action or proceeding
(including any impleaded parties) include both the Indemnified Holder or
Indemnified Underwriter and the Company and such Indemnified Holder and
Indemnified Underwriter shall have been advised in writing by its counsel that
representation of them and the Company by the same counsel would be
inappropriate under applicable standards of professional conduct (whether or
not such representation has been proposed) due to actual or potential
differing interests between them (in which case the Company shall not have the
right to assume the defense of such action on behalf of such Indemnified
Holder or Indemnified Underwriter). It is understood that the Company shall
not, in connection with any one such action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel) at
any time for such Indemnified Holders or Indemnified Underwriters, which firm
shall be designated in writing by the Holders of the majority of the number of
shares of Common Stock, as the case may be, on behalf of, and that all such
fees and expenses shall be reimbursed as they are incurred. The Company shall
not be liable for any settlement of any such action effected without the
written consent of the Company, but if settled with the written consent of the
Company, or if there is a final judgment with respect thereto, the Company
agrees to indemnify and hold harmless each Indemnified Holder or Indemnified
Underwriter from and against any loss or Liability by reason of such
settlement or judgment. The Company shall not, without the prior written
consent of each Indemnified Holder or Indemnified Underwriter affected
thereby, effect any settlement of any pending or threatened proceeding in
which such Indemnified Holder or Indemnified Underwriter has sought indemnity
hereunder, unless such settlement includes an unconditional release of such
Indemnified Holder or Indemnified Underwriter from all liability arising out
of such action, claim, litigation or proceeding.
(c) Each Indemnified Holder and Indemnified Underwriter
agrees to indemnify and hold harmless the Company, its directors, its officers
who sign the Registration Statement and any person controlling the Company
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act
(collectively, the "Company Indemnified Parties") to the same extent as the
foregoing indemnity from the Company to any Indemnified Holder or Indemnified
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Underwriter, but only with respect to information relating to each Indemnified
Holder or Indemnified Underwriter furnished to the Company in writing by each
Indemnified Holder or Indemnified Underwriter, respectively, expressly for use
in the Registration Statement, Prospectus (or any amendment of supplement
thereto), or any preliminary Prospectus. In case any action shall be brought
against any Company Indemnified Party based on the Registration Statement,
Prospectus (or any amendment of supplement), or any preliminary Prospectus and
in respect of which indemnification may be sought against each Indemnified
Holder and Indemnified Underwriter pursuant to this Section 7(c), each
Indemnified Holder and Indemnified Underwriter shall have the rights and
duties given to the Company by Section 7(a) (except that if the Company shall
have assumed the defense thereof, each Indemnified Holder and Indemnified
Underwriter may, but shall not be required to employ separate counsel therein
and participate in the defense thereof and the fees and expenses of such
counsel shall be at the expense of the Indemnified Holder or Indemnified
Underwriter) and the Company Indemnified Parties shall have the rights and
duties given to the Indemnified Holders or Indemnified Underwriters by Section
7(b).
(d) If the indemnification provided for in this Section 7 is
unavailable to any party entitled to indemnification pursuant to Section 7(a)
or 7(c), then each indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, judgments,
liabilities and expenses (i) in such proportion as is appropriate to reflect
the relative benefits received by the Company on the one hand and each
Indemnified Holder or Indemnified Underwriter on the other from the offering
of the Transfer Restricted Securities or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the Company on the one hand and each
Indemnified Holder or Indemnified Underwriter on the other in connection with
the statements or omissions which resulted in such losses, claims, damages,
judgments, liabilities or expenses, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and each Indemnified Holder or Indemnified Underwriter on the other hand shall
be deemed to be in the same proportions as the total net proceeds from the
offering (before deducting expenses) received by the Company bear to the total
net discounts and commissions received by each Indemnified Holder or
Indemnified Underwriter, in each case as set forth in the table on the cover
page of the Prospectus. The relative fault of the Company on the one hand and
each Indemnified Holder and Indemnified Underwriter on the other shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Company on the
one hand or by each Indemnified Holder and Indemnified Underwriter on the
other and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
(e) The Company and each Indemnified Holder and Indemnified
Underwriter agree that it would not be just and equitable if contribution
pursuant to Section 7(d) were determined by pro rata allocation or by any
other method of allocation that does not take account of the equitable
considerations referred to in Section 7(d). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages, liabilities or
expenses referred to
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in the immediately preceding paragraph shall be deemed to include, subject to
the limitations set forth above, any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or
defending any such action or claim. No person found guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not found guilty of such
fraudulent misrepresentation.
(f) The indemnity and contribution agreements contained in
this Section 7 are in addition to any liability. that any indemnifying party
may otherwise have to any indemnified party.
SECTION 8. RULE 144A
The Company hereby agrees with each Holder, for so long as
any of the shares of Common Stock that are Transfer Restricted Securities
remain outstanding and during any period in which the Company is not subject
to Section 13 or 15(d) of the Exchange Act, to make available to the
Shareholders of the shares of such Common Stock in connection with any sale
thereof and any prospective purchaser of such Common Stock from such
Shareholders, the information required by Rule 144A(d)(4) under the Act in
order to permit resales of such Transfer Restricted Securities pursuant to
Rule 144A.
SECTION 9. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Offering
hereunder unless such Holder (a) agrees to sell such Holder's Transfer
Restricted Securities on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements, (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements and (c) furnishes the Company in writing information
in accordance with Section 3(g) and agrees to indemnify and hold harmless the
Company, its directors, its officers who sign the Registration Statement and
any person controlling the Company within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act as contemplated by Section 7(c).
SECTION 10. SELECTION OF UNDERWRITERS
The Holders of Transfer Restricted Securities covered by the
Registration Statement who desire to do so may sell such Transfer Restricted
Securities in an Underwritten Offering. In any such Underwritten Offering, the
Underwriter(s) that will administer the offering will be selected by the
Holders of the Transfer Restricted Securities included in such offering in the
manner specified in Section 3(c); provided, however, that such Underwriters
must be reasonably satisfactory to the Company.
SECTION 11. MISCELLANEOUS
(a) Remedies. Each Holder or Transfer Restricted Securities,
in addition to being entitled to exercise all rights provided herein, and as
provided in the Purchase Agreement and granted by law, including recovery of
damages, will be entitled to specific performance of
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such Holder's rights under this Agreement. The Company agrees that monetary
damages would not be adequate compensation for any loss incurred by reason of
a breach by it of the provisions of this Agreement and hereby agrees to waive
the defense in any action for specific performance that a remedy at law would
be adequate.
(b) No Inconsistent Agreements. The Company will not on or
after the date of this Agreement enter into any agreement with respect to its
securities that is inconsistent with the rights granted to the Holders of
Transfer Restricted Securities in this Agreement or otherwise conflicts with
the provisions hereof. The rights granted to the Holders or Transfer
Restricted Securities hereunder do not in any way conflict with and are not
inconsistent with the rights granted to the Holders of the Company's
securities under any other agreements.
(c) Amendments and Waivers. The provisions of this
Agreement, including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given unless the Company has obtained the written
consent of Holders of a majority of the Holders of the shares of Common Stock
constituting Transfer Restricted Securities affected by such amendment,
modification, supplement, waiver or departure. Notwithstanding the foregoing,
a waiver or consent to departure from the provisions hereof that relates
exclusively to the rights of Holders of Transfer Restricted Securities whose
securities are being sold pursuant to such Registration Statement and that
does not directly or indirectly affect the rights of other Holders of Transfer
Restricted Securities shall be valid only with the written consent of Holders
of at least 66-2/3% of the Transfer Restricted Securities being sold, in each
case calculated in accordance with the provisions of Section 3(e).
(d) Notices. All notices and other communications provided
for or permitted hereunder shall be made in writing by hand-delivery,
first-class mail (registered or certified, return receipt requested), telex,
telecopier, or air courier guaranteeing overnight delivery;
(i) if to a Holder of Transfer Restricted
Securities, at the address set forth on the records of the Company, with a
copy to the Registrar, and
(ii) if to the Company at the principal offices of
the Company; and
(iii) if to the Shareholders, initially at each
address as set forth on Schedule A hereto and thereafter at such other
address, notice of which is given in accordance with the provisions of this
Section.
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; five
business days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt acknowledged, if telecopied; and
on the next business day, if timely delivered to an air courier guaranteeing
overnight delivery.
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(e) Successors and Assigns. This Agreement shall inure to
the benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent Holders of Transfer Restricted Securities; provided.
however, that this Agreement shall not inure to the benefit of or be binding
upon a successor or assign of a Holder of Transfer Restricted Securities
unless and to the extent such successor or assign acquired Transfer Restricted
Securities from such Holder; and provided further that nothing herein shall be
deemed to permit any assignment, transfer or any disposition of Transfer
Restricted Securities, in any manner, whether by operation of law or
otherwise, such Transfer Restricted Securities shall be held subject to all of
the terms of this Agreement and by taking and holding such Transfer Restricted
Securities such person shall be conclusively deemed to have agreed to be bound
by and to perform all of the terms and provisions of this Agreement and such
Person shall be entitled to receive the benefits hereof.
(f) Counterparts. This Agreement may be executed in any
number of counterparts by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE AND PROCEDURAL LAWS OF THE STATE
OF NEW JERSEY, WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF.
(i) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance,
is held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the
remaining provisions contained herein shall not be affected or impaired
thereby.
(j) Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties
hereto in respect of the subject matter contained herein. There are
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
ORION ACQUISITION CORP. I
By:_______________________________
Arthur H. Goldberg, Chairman
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SHAREHOLDERS:
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SUBSCRIPTION AGREEMENT
ACQUISITION CORPORATION II
RE: ACQUISITION CORPORATION II
(the "Company")
Gentlemen:
1. Receipt of Description Statement.
The undersigned ("Undersigned" or "Subscriber") hereby
acknowledges receipt of one copy of the Description Statement for the Company,
dated August 29, 1995 (the "Statement"). All of the terms and provisions of the
Statement are incorporated herein by reference and the Undersigned acknowledges
that the Undersigned has read the same.
2. Acceptance of Subscription.
2.1 Execution of this Agreement by the Undersigned shall
constitute an offer by the Undersigned to subscribe for shares of the Company
("Shares") in the amount and on the terms and conditions specified herein. It
is understood and agreed that the Company, in its sole discretion and for any
reason whatsoever, shall have the right to accept or reject this Subscription,
in whole or in part, and that the same shall be deemed to be accepted by the
Company only when it is signed by the president of the Company.
2.2 Deposit and collection of the check paid simultaneously
herewith shall not be deemed acceptance of the offer by the Undersigned to
subscribe for the Shares. The sole evidence for such acceptance is a
counterpart of this Subscription Agreement duly executed by the Company and
delivered to the Undersigned. The Undersigned acknowledges that until such
execution and delivery, such offer has not been accepted and that no sale to
him of a Unit has occurred.
3. Subscription for Shares: Delivery of the Capital
Contribution; Escrow Thereof.
3.1 The Undersigned hereby subscribes for and agrees to
purchase ____________ Shares and irrevocably tenders this Subscription
Agreement together with a check in the amount of $___________ ($0.10 per Share)
representing payment of the Capital Contribution for said Shares.
3.2 The delivery of the check, payable to Acquisition
Corporation II, and this Agreement, is being made and sent to W. Raymond
Felton, Esq., c/o Greenbaum, Rowe, Smith, Ravin & Davis, P.O. Box 5600,
Woodbridge, New Jersey 07095. In the alternative, the Capital Contribution may
be made by wire transfer pursuant to instructions which may be obtained from
the Company.
<PAGE>
4. Representations and Warranties of the Undersigned.
The undersigned hereby represents and warrants to the
Company, the following facts and understandings:
4.1 The Undersigned has received and read and is familiar
with the Statement. The Undersigned is not relying on any offering literature
or prospectus other than the Statement and no oral representations or
warranties have been made to him. The Company assumes no responsibility for the
accuracy or adequacy of the information contained in the Statement.
4.2 The Undersigned is familiar with the activities of the
Company and recognizes that the Company is now being organized for this venture
and has no material history and an investment in the Shares involves a
substantial degree of risk.
4.3 The Undersigned has been advised by the Company to
consult with the Undersigned's own personal tax advisor to determine the effect
of an investment in the Company on the Undersigned's Federal income tax status.
4.4 All documents, records and books pertaining to this
investment have been made available for inspection by the Undersigned or, if
applicable, Undersigned's attorney and/or accountant and/or "Purchaser
Representative" (as set forth in Paragraph 4.15 hereof); and the Undersigned
understands that the books and records of the Company will be available during
reasonable business hours at its principal place of business.
4.5 The Undersigned and/or his attorney and/or accountant
and/or Purchaser Representative has had the opportunity to obtain any
additional information requested necessary to verify the accuracy of the
contents of the Statement, and to confer with the officers of the Company and
to ask questions of, and receive answers from, the Company or a person
authorized to act on its behalf concerning the terms and conditions of the
transaction or the Statement, and any additional information requested was
supplied to the Undersigned and/or such attorney and/or accountant and/or
Purchaser Representative.
4.6 The Undersigned understands that the Offering of Units
and the operation of the Company's proposed business is subject to numerous
conflicts of interest and risks and has carefully read the description of
certain of these conflicts and risks contained in the Statement. The
Undersigned is able to bear the economic risk of the investment (i.e., he can
afford a complete loss of his investment).
4.7 The Undersigned is familiar with the nature of and risks
incident to investment in real estate and securities, and has determined
(either alone or if need be on the basis of consultation with his business and
tax advisors) that the purchase of his Shares is consistent with his investment
objectives and income prospects.
4.8 The Shares for which the Undersigned subscribes will be
acquired for investment and not with a view to the resale or distribution of
such Shares; and such Shares is being acquired by the Undersigned for the
Undersigned's own account and with the
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Undersigned's own funds and no person, other than the Undersigned, has a direct
or indirect beneficial interest in such Shares.
4.9 The Undersigned further understands that holding the
investment for any pre-defined period of time does not constitute holding for
investment or an agreement to hold the Shares for investment and not with a
view to resale or distribution.
4.10 The Undersigned has adequate means of providing for the
Undersigned's current needs and foreseeable personal contingencies, has no need
for liquidity in this investment, and anticipates no need now or in the
foreseeable future to sell the Shares for which the Undersigned hereby
subscribes.
4.11 The Undersigned has a net worth of at least $1,000,000
(exclusive of home, home furnishings and automobile), or has and anticipates
that the Undersigned will continue to have in the next few years, annual
taxable income of at least $200,000.
4.12 The Undersigned understands that the Company will engage
in a highly competitive business and there can be no assurance that it will be
able to operate profitably. This investment involves a high degree of risk and
is not recommended for any investor (a) whose marginal Federal income tax
bracket, after taking into account the losses incurred as a result of this
investment, is not at least 31% for 1994, or (b) who has significant "tax
preference items."
4.13 The Undersigned understands that the Shares have not
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), in reliance on an exemption for private offerings and the fact that the
Undersigned is purchasing Shares in the Company without being furnished any
offering literature or prospectus other than the Statement. Because the Company
has no obligation to effect such registration the Undersigned may have to
continue to bear the economic risk of the Undersigned's investment in such
Shares for an indefinite period; and the Undersigned will not be permitted to
transfer Shares in the absence of an opinion of counsel satisfactory to counsel
for the Company that registration is not required under the Securities Act or
under applicable state securities laws and unless the Members have waived their
right of first refusal pursuant to the provisions of the Statement.
4.14 The Undersigned understands that this Offering of the
Shares in the Company has not been registered with securities agencies of any
State in which they are offered in reliance upon exemptions from registration
as a private placement. The Offering of Shares has not been approved or
disapproved by the local security authorities passed upon the accuracy or
adequacy of the Statement.
4.15 (If applicable). ____________________________ has
acted as the Undersigned's "Purchaser Representative" defined in Rule 501
promulgated under the Securities Act; and
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The Undersigned has relied upon the advice of the
Purchaser Representative as to the merits of an investment in the Company and
the suitability of that investment for the Undersigned.
The Purchaser Representative has confirmed to the
Undersigned, in writing, any past, present or future material relationship,
actual or contemplated, between the Purchaser Representative and the Company
and its affiliates, and any compensation received or to be received as a
result of such relationship.
4.16 (If 4.15 is not applicable). The Undersigned has, by
virtue of the Undersigned's own investment acumen, business experience or
independent financial and tax advice, the capability of evaluating the risks
and merits of investing in the Units; and the decision of the Undersigned to
purchase a Unit in the Company is based upon the Undersigned's independent
analysis of the Statement, the Undersigned's financial objectives and the
advice of the Undersigned's business and tax advisors.
4.17 No assurances are or have been made regarding the tax
advantages which may inure to the benefit of the Unit holders nor has any
assurance been made that existing tax laws and regulations will not be modified
in the future, thus denying to the Unit holders or the Company all or a portion
of the tax benefits which may presently be available under existing tax laws
and regulations and if all or any part of such tax benefits are disallowed by
the Internal Revenue Service, the undersigned may have to pay substantial
additional income taxes.
4.18 The Undersigned has received no representations or
warranties from the Company other than those contained in the Statement.
4.19 The address set forth below is the Undersigned's true
and correct residence, and the Undersigned has no present intention of becoming
a resident of any other state or jurisdiction.
4.20 The Undersigned acknowledges that Greenbaum, Rowe,
Smith, Ravin & Davis has represented the Company in this transaction and has
not acted as counsel to the Undersigned in connection with his investment in
the Company. The Undersigned has been advised of his right to retain
independent counsel in connection with this investment.
4.21 The Undersigned represents, if an individual, that the
undersigned is at least 21 years of age.
4.22 The Undersigned covenants that the foregoing
representations and warrants will be true and accurate as of, and acknowledge
that such representations and warranties shall survive, the date of his
admission as a member.
5. Acknowledgments of the Undersigned.
Subscribers residing in one of the states noted below
acknowledge and/or represent as follows:
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<PAGE>
NOTICE TO RESIDENTS OF ALL STATES:
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR
OWN EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE
MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY
FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE,
THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE
ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE APPLICABLE
STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS
OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
NOTICE TO RESIDENTS OF NEW YORK ONLY:
THIS PRIVATE OFFERING MEMORANDUM HAS NOT BEEN REVIEWED BY THE
ATTORNEY GENERAL PRIOR TO ITS ISSUANCE AND USE. THE ATTORNEY GENERAL OF THE
STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING.
ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
6. Indemnification by the Undersigned.
The Undersigned acknowledges that the Undersigned understands
the meaning and legal consequences of the representation and warranties in
Paragraphs 4 and 5 hereof and the Undersigned hereby agrees to indemnify and
hold harmless the Company and its directors and officers thereof from and
against any and all loss, damage or liability due to or arising out of a breach
of any such representations or warranties. Notwithstanding the foregoing,
however, no representation, warranty, acknowledgment or agreement made herein
by the Undersigned shall in any manner be deemed to constitute a waiver of any
rights granted to him under federal or state securities laws.
7. Share Escrow; Voting.
(a) Subscriber hereby acknowledges and agrees that not later
than the effective date (the "Effective Date") of the registration statement
with respect to the Company's initial public offering (the "Initial Public
Offering"), all Shares purchased by Subscriber pursuant hereto will be placed
in escrow, in accordance with the terms of an escrow agreement, substantially
in the form attached hereto as Exhibit A, until the earlier of (i) the
occurrence of the first merger, exchange of capital stock, asset acquisition or
other similar business
5
<PAGE>
combination (a "Business Combination"), (ii) 18 months from the Effective Date
or (iii) 24 months from the Effective Date if prior to the expiration of such
18-month period the Company has become a party to a letter of intent or a
definitive agreement to effect a Business Combination, in which case such
period shall be extended by six months.
(b) In connection with any stockholder vote relating to the
approval of a Business Combination, the Subscriber by his signature below
hereby agrees with respect to the Shares and to any other shares of Common
Stock hereafter owned, beneficially or of record, by him, his successors or to
vote such shares of Common Stock in accordance with the vote with respect to
such Business Combination of the majority of the shares beneficially owned by
stockholders other than officers and directors and purchasers of shares from
the Company in offerings preceding the Initial Public Offering made in reliance
on exemptions from the registration requirements of the Act (the
"non-affiliated stockholders").
(c) In connection with any stockholder vote relating to a
liquidation of the Company (a "Liquidation Proposal") or due to the failure of
the Company to effect a Business Combination within 18 months of the Effective
Date or 24 months of the Effective Date, if prior to the expiration of such
18-month period the Company has become a party to a letter of intent or a
definitive agreement to effect a Business Combination, the Subscriber by his
signature below hereby agrees with respect to the Shares and to any other
shares of Common Stock hereafter owned, beneficially or of record, by him, his
successors or assigns to vote all such shares of Common Stock in accordance
with the vote with respect to such Liquidation Proposal of the majority of the
shares beneficially owned by non-affiliated stockholders.
(d) Subscriber hereby waives his right (i) to receive any
distribution with respect to the Shares if a Liquidation Proposal is approved
and (ii) to participate in an offer by the Company to Stockholders to redeem
their Share of Common Stock in connection with a Business Combination.
(e) If, in connection with the Initial Public Offering, the
staff of the SEC, the National Association of Securities Dealers, Inc. or any
other governmental agency or body (collectively, the "Authorities") requires,
as a condition to its approval of the Initial Public Offering or the listing of
the Company's securities on the National Association of Securities Dealers,
Inc. Automated Quotation System, a reduction in the aggregate number of shares
owned by the officers, directors and initial stockholders (the total number of
shares to be purchased thereby being 85,000), the Subscriber hereby agrees (i)
that the number of shares owned by each such person (and including the
Subscriber) shall be reduced pro rata, based upon the number of shares owned by
each such person as a percentage of the shares owned by all of them (or by such
other method as may be required by any of the Authorities) and (ii) the
Subscriber shall return to the Company the number of shares of Common Stock by
which the Shares are so reduced (the determination of the Company in respect
thereto to be final and conclusive, absent manifest error), subject to the
return of the portion of the Subscription Price allocable thereto.
(f) Subscriber hereby agrees, that (i) Subscriber will not
sell, transfer or convey any shares purchased hereby for a period of two years
from the Effective Date without the prior written consent of the Company (and
if Comprehensive Capital Corporation (the
6
<PAGE>
"Proposed Underwriter") is the managing or principal underwriter of the Initial
Public Offering, of the Proposed Underwriter); provided that subject to
compliance with applicable securities laws, any such Subscriber may transfer
his or her stock to a member of his or her family (with the consent of the
Proposed Underwriter which will not be unreasonably withheld) or in the event
of death by will or operation of law, provided that any such transferee shall
agree as a condition to such transfer to be bound by the restrictions on
transfer applicable to the Subscriber and the Subscriber continues to be deemed
the beneficial owner of the shares so transferred in accordance with Rule 13d-3
promulgated by the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934, as amended, and (ii) if the Proposed
Underwriter is the managing or principal underwriter of the Initial Public
Offering, that (x) for a period of three years commencing two years after the
Effective Date, all public sales of shares of Common Stock purchased pursuant
hereto will be effected through or with the Proposed Underwriter on an
exclusive basis, provided that the Proposed Underwriter's services are
reasonably competitive with those of other brokerage firms as to both price and
execution and (y) for a period of three years commencing two years from the
Effective Date, if Subscriber proposes to sell the shares of Common Stock
purchased pursuant hereto in a private transaction pursuant to a bona fide
third party offer, then the investor will so notify the Proposed Underwriter in
writing, which will have the right, for a five-day period after receipt of such
notice, to purchase (or sell to a suitable purchaser) such shares on the same
terms as contained in such offer; provided, if, thereafter, the terms of the
sale are modified in any material respect, Subscriber will so notify the
Proposed Underwriter which will have the same rights as with respect to the
original proposed sale as set forth above.
8. Responsibility.
The Company and its directors and officers shall not be
liable, responsible or accountable in damages or otherwise to the Undersigned
for any act or omission performed or omitted by them in good faith on behalf of
the Company and in a manner reasonably believed by them to be within the scope
of the authority granted to them by this Agreement and in the best interests of
the Company, provided that the Company and its directors and officers were not
guilty of gross negligence, willful misconduct, fraud or bad faith with respect
to such acts or omissions.
9. Miscellaneous.
9.1 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.
9.2 Entire Agreement. This Agreement, contains the entire
agreement between the parties hereto with respect to the subject matter hereof.
The provisions of this Agreement may not be modified or waived except in
writing and signed by the party to be charged.
9.3 Headings. The headings of this Agreement are for
convenient reference only and they shall not limit or otherwise affect the
interpretation or effect of any term or provision hereof.
7
<PAGE>
9.4 Heirs and Assigns. This Agreement and the rights, powers
and duties set forth herein, binds and inures to the benefit of the heirs,
executors, administrators, legal representatives, successors and assigns of the
parties hereto.
9.5 Assignment. The Undersigned may not assign any of his
rights or participation in and under this Agreement without the prior written
consent of the Company and any attempted assignment without such consent shall
be void and without effect.
IN NO EVENT, EXCEPT IN THE EVENT OF FRAUD, GROSS NEGLIGENCE
OR WILLFUL MISREPRESENTATION, WILL THE COMPANY, ITS DIRECTORS AND OFFICERS, ANY
SUBSIDIARIES, AFFILIATES, OFFICERS OR DIRECTORS THEREOF, OR PROFESSIONAL
ADVISORS ENGAGED BY ANY OF THEM BE LIABLE IF FOR ANY REASON IT SHALL BE
DETERMINED THAT THE TAX AND ECONOMIC BENEFITS CONTEMPLATED TO BE AFFORDED TO
THE MEMBERS AS A RESULT OF THE PROPOSED INVESTMENT ARE NOT AVAILABLE IN WHOLE
OR IN PART.
IN WITNESS WHEREOF, the Undersigned has executed this
Subscription Agreement as of the 29th day of August, 1995.
- --------------------------------- ---------------------------------
WITNESS SIGNATURE
- --------------------------------- ---------------------------------
SOCIAL SECURITY NUMBER NAMED TYPED OR PRINTED
- --------------------------------- ---------------------------------
MAILING ADDRESS RESIDENCE ADDRESS
- --------------------------------- ---------------------------------
CITY, STATE AND ZIP CODE CITY, STATE AND ZIP CODE
Accepted and Agreed to:
Acquisition Corporation II
BY:
-------------------------------
Arthur H. Goldberg, Chairman
8
<PAGE>
Exhibit 10.9
ESCROW AGREEMENT
ESCROW AGREEMENT dated ________, 1998 between NORTH ATLANTIC
ACQUISITION CORP., a Delaware corporation ("North"), and TRIDENT ROWAN GROUP,
INC, a Maryland corporation ("TRG"), for itself and as escrow agent (the
"Escrow Agent") and the persons set forth on Schedule 1 hereto
("Stockholders").
WHEREAS, North, TRG and Moto Guzzi Corp., a Delaware
corporation ("Motoguzzi") are the parties to an Agreement and Plan of Merger
and Reorganization dated as of_______, 1998 (the "Merger Agreement") pursuant
to which Motoguzzi merged into North, with North being the surviving
corporation;
WHEREAS, pursuant to the Merger Agreement, a portion of the
Merger Consideration is to be placed in an escrow fund ("Escrow Fund") for the
indemnification of North, as the surviving corporation, for breaches of the
representations and warranties of Motoguzzi and TRG as set forth in the Merger
Agreement;
WHEREAS, the parties desire to establish the Escrow Fund as
collateral security for the indemnification obligation under Article X of the
Merger Agreement.
The parties agree as follows:
1. (a) Capitalized terms used herein which are
not otherwise defined herein shall have the meanings ascribed to them in the
Merger Agreement.
(b) Concurrently with the execution hereof,
(i) each of the Stockholders has caused to be delivered to the Escrow Agent
the number of shares of Class B Preferred Stock of North set forth against the
name of the Stockholder on Schedule 1, representing all the Class B Preferred
Stock issued by North to such Stockholders pursuant to the Merger Agreement
and (ii) TRG has delivered to the Escrow Agent 100,000 shares of Class A
Common Stock of North issued by North to TRG pursuant to the Merger Agreement
("Escrow Stock"). Such Escrow Stock will include any stock dividends and
distributions made by North with respect to the Escrow Stock.
(c) The Escrow Agent hereby agrees to act as
the escrow agent and to hold, safeguard and disburse the Escrow Fund pursuant
to the terms and conditions hereof. Its duties hereunder shall cease upon its
distribution of the entire Escrow Fund in accordance with this Agreement.
2. (a) The Independent Committee of the Board of Directors of
North may give notice of a claim for indemnification pursuant to Section 10.03
of the Merger Agreement ("Indemnity Claim") and for distribution of Escrow
Stock from the Escrow Fund by giving notice (a "Notice") of the claim to TRG on
behalf of North, specifying (i) the covenant, representation
<PAGE>
or warranty, agreement, undertaking or obligation contained in the Merger
Agreement which it asserts has been breached, (ii) in reasonable detail, the
nature and dollar amount of any claim which may result in a distribution from
the Escrow Fund, and (iii) whether the claim arises from a Third Party Claim.
The procedure for resolving any claim is set forth
in paragraphs (b) and (c) below. Any distribution from the Escrow Fund by
reason of a claim shall be made in accordance with paragraph (e) below.
(b) After giving of a Notice, the Independent
Committee and TRG shall attempt to resolve such dispute by voluntary
settlement. If the Independent Committee and TRG reach a settlement with
respect to any such dispute, they will jointly execute a written notice of
such settlement specifying the terms thereof which shall be deemed an
Established Claim (as hereinafter defined). If the Independent Committee and
TRG are unable to reach a settlement with respect to a dispute, such dispute
shall be resolved in accordance with paragraph (c) below.
(c) (i) North and TRG agree that any and all
claims arising out of or relating to Article X of the Merger Agreement that
are not Third Party claims which are not resolved in accordance with paragraph
(b) above shall be submitted to JAMS/ENDISPUTE, or its successor, for
mediation. If the matter is not resolved in mediation after two sessions which
must be held within 60 days of the request for mediation, then either party
may submit the claim for final and binding arbitration as provided in
paragraph (c) (ii) below. Either party may commence mediation by providing to
JAMS/ENDISPUTE and the other party with a written request for mediation. The
parties will cooperate with JAMS/ENDISPUTE and with one another in selecting a
mediator from JAMS/ENDISPUTE's panel of neutral mediators, and in scheduling
the mediation proceedings. The parties covenant that they will participate in
the mediation in good faith, and that they will share equally in the cost,
unless the mediator recommends otherwise. All offers, promises, conduct and
statements, whether oral or written, made in the course of the mediation by
any of the parties, their agents, employees, experts and attorneys, and by the
mediator or any JAMS/ENDISPUTE employees, are confidential, privileged and
inadmissible for any purpose, including impeachment, in any arbitration or
other proceeding involving the parties, provided that evidence that is
otherwise admissible or discoverable shall not be rendered inadmissible or
non-discoverable as a result of its use in the mediation. The mediation may
continue after the commencement of arbitration if the parties so desire.
Unless otherwise agreed by the parties, the mediator shall be disqualified
from serving as arbitrator in the case. The provisions of this paragraph may
be enforced in any court of competent jurisdiction and the party seeking
enforcement shall be entitled to an award of all costs, fees and expenses,
including attorney's fees, to be paid by the party against whom enforcement is
ordered.
(ii) For claims that are Third Party Claims or for
claims that cannot be resolved in accordance with paragraph (c) (i) above, the
resolution thereof shall be by final and binding arbitration before a single
arbitrator in New York City in accordance with the commercial arbitration rules
of the American Arbitration Association then in effect. The parties shall
attempt to agree upon an arbitrator; if the parties are unable to agree upon an
arbitrator within 10 days after the proposed list of arbitrators is submitted to
the parties, then any of the parties to the arbitration may apply for
appointment of an arbitrator by the American Arbitration Association (or any
successor thereto). Each party shall pay the fees and expenses of counsel used
by it and 50% of
2
<PAGE>
the fees and expenses of the arbitrator and of other expenses of the
arbitration. The arbitrator shall render his decision within 90 days after his
appointment and, notwithstanding the foregoing sentence, may award costs to any
of the parties if, in his sole opinion, the claims made by any other party or
parties had no reasonable basis and were arbitrary and capricious. Such
decision and award shall be in writing and shall be final and conclusive on the
parties, and counterpart copies thereof shall be delivered to each of the
parties. Judgment may be obtained on the deci sion of the arbitrator so
rendered in any court having jurisdiction and may be enforced in accordance
with the laws of the State of New York. If the arbitrator shall fail to render
his decision or award within such 90-day period, either North or TRG may apply
to any New York or federal court then having jurisdiction by action, proceeding
or otherwise, as may be proper to determine the matter in dispute consistently
with the provisions of this Agreement. The parties consent to the jurisdiction
of the New York courts sitting in the Borough of Manhattan and the United
States District Court for the Southern District of New York for this purpose.
The prevailing party (or either party, in the case of a decision or award
rendered in part for each party) shall send a copy of the arbitration decision
or of any judgment of the New York or federal court to the Escrow Agent.
(d) As used in this Agreement,
"Established Claim" means any (i) claim deemed established pursuant to the
penultimate sentence of paragraph 2(b) above, (ii) any claim established by
mediation or arbitration pursuant to paragraph 2 (c) above, resulting in a
dollar award to North, (iii) a Third Party Claim which has been sustained by a
final determination by arbitration pursuant to paragraph 2 (c) (ii) above, or
(v) a Third Party Claim which the Independent Committee and TRG have jointly
notified the Escrow Agent has been settled by settlement of the parties.
(e) (i) Promptly after a claim becomes an
Established Claim, the Independent Committee shall deliver a notice to the
Escrow Agent directing the Escrow Agent to deliver to North such number of the
Class B Preferred Stock in the Escrow Fund for cancellation as equals or
fractionally exceeds the adjudicated or resolved amount of the claim, divided
by the Market Price of the Class A Common Stock, plus $1.00, and if the claim
is not fully recompensed by the delivery of the Class B Preferred Stock, then,
additionally, that full number of shares of Class A Common Stock in the Escrow
Fund as equals or fractionally exceeds the amount of the claim remaining after
delivery of the Class B Preferred Stock divided by the Market Price of the
Class A Common Stock. To the extent shares of Class B Preferred are to be
delivered to North, they shall be delivered pro rata among all the
Stockholders holding Class B Preferred Stock, in respect of an Established
Claim.
(ii) If the amount of an Established
Claim against the Escrow Fund is greater than the value of the Escrow Stock in
the Escrow Fund, the Stockholders and TRG will not remain liable to North for
the deficiency thereof.
3. On the 61st day after the mailing by certified mail,
return receipt requested, or delivery by hand, to each of the then serving
members of the Board of Directors of North, of the audited financial statements
of North (with copies of the signed report of the independent auditors of
North) for its fiscal year ending December 31, 1998, the Escrow Agent shall
release to TRG, the Class A Common Stock in the Escrow Fund, except to the
extent that the aggregate dollar amount of all Indemnity Claims then asserted
exceeds the value of the shares of Class
3
<PAGE>
B Preferred Stock then remaining in the Escrow Fund, in accordance with Section
2(e) above, and on the 61st day after mailing by certified mail, return receipt
requested, or delivery by hand, to each of the then serving members of the
Board of Directors of North, of the audited financial statements of North (with
copies of the signed report of the independent auditors of North) of its fiscal
year ending December 31, 1999, the Escrow Agent shall release from the Escrow
Fund all the Escrow Stock, except to the extent of the value of Escrow Shares
equal to the amount of any Indemnity Claims against the Escrow Fund with
respect to which Notices have been received but which have not been resolved
pursuant to Section 2 hereof ("Pending Claims"). Thereafter, if any Pending
Claim becomes an Established Claim, the Escrow Agent shall promptly deliver to
North that number of shares of Escrow Stock equal to the number determined in
accordance with paragraph 2(e) above. Subject to this paragraph, no Escrow
Stock will be delivered to TRG on behalf of itself and the Stockholders if
there are any Pending Claims. Upon resolution of all Pending Claims, by
whatever means or procedures used, the Escrow Agent shall distribute to TRG on
behalf of itself and the Stockholders the Escrow Stock remaining in the Escrow
Fund.
4. The Escrow Agent shall cooperate in all respects with the
Independent Committee in the calculation of any amounts determined to be
distributable to North in accordance with this Agreement.
5. (a) The Escrow Agent undertakes to perform only such
duties as are expressly set forth herein.
(b) The Escrow Agent may rely and shall be
protected in acting or refraining from acting upon any written notice,
instruction or request furnished to it hereunder and believed by it to be
genuine and to have been signed or presented by the proper party or parties,
including an award made by an arbitration or a judgment entered by a court of
competent jurisdiction. The Escrow Agent may conclusively presume that the
undersigned representative of any party hereto which is a legal entity other
than a natural person has full power and authority to instruct the Escrow
Agent on behalf of that party unless written notice to the contrary is
received by the Escrow Agent.
(c) The Escrow Agent's sole responsibility
upon receipt of any notice requiring any delivery of Escrow Stock to North
pursuant to paragraph 2(e) of this Agreement is to deliver to North the number
of shares of Escrow Stock as determined in accordance with this Agreement, and
the Escrow Agent shall have no duty to determine the validity, authenticity or
enforceability of any specification or certification made in such notice.
(d) The Escrow Agent shall not be liable for
any action taken by it in good faith and believed by it to be authorized or
within the rights or powers conferred upon it by this Agreement, and may
consult with counsel of its own choice and shall have full and complete
authorization and protection for any action taken or suffered by it hereunder
in good faith and in accordance with the opinion of such counsel.
(e) The Escrow Agent may resign and be
discharged from its duties or obligations hereunder by giving notice in
writing of such resignation specifying a date upon which such resignation
shall take effect, whereupon a successor Escrow Agent, which shall be
4
<PAGE>
a bank or trust company with an office in New York City and a combined capital
and surplus of not less than $50,000,000, shall be appointed by the Independent
Committee.
(f) In the event of a dispute between the
parties as to the proper disposition of the Escrow Fund, the Escrow Agent
shall be entitled (but not required) to deliver the Escrow Fund into the
United States District Court for the Southern District of New York and, giving
notice to North, the Independent Committee and TRG (if TRG is no longer the
Escrow Agent) of such action, shall thereupon be relieved of all further
responsibility.
(g) As long as TRG is the Escrow Agent, there
shall be no fees or expenses payable to the Escrow Agent for its services
hereunder. If the Escrow Agent is not TRG or an affiliate of TRG, North and
TRG each agree to pay or reimburse the Escrow Agent, upon request, for 50% of
all expenses, disbursements and advances, including reasonable attorneys'
fees, incurred or made by it in connection with the performance of its duties
hereunder.
6. This Agreement expressly sets forth all the duties of the
Escrow Agent with respect to any and all matters pertinent hereto. No implied
duties or obligations shall be read into this Agreement against the Escrow
Agent. The Escrow Agent shall not be bound by the provisions of any agreement
among the parties hereto except this Agreement and shall have no duty to
inquire into the terms and conditions of any agreement made or entered into in
connection with this Agreement, including, without limitation, the Merger
Agreement.
7. This Agreement shall inure to the benefit of and be
binding upon the parties and their respective heirs, successors, assigns and
legal representatives, shall be governed by and construed in accordance with
the law of New York applicable to contracts made and to be performed therein
and cannot be changed or terminated except by a writing signed by North (with
the written consent of the Independent Committee), TRG and the Escrow Agent (if
no longer TRG).
8. Any claim or controversy arising out of this Agreement
shall be submitted to arbitration in the manner provided by paragraph 2 (c)
(ii) above.
9. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered or mailed if delivered personally or by
telecopy, one day after delivery to a nationally recognized courier, or three
business days after mailed by registered mail (postage prepaid, return receipt
requested), in each case, to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice, except that
notices of changes of address shall be effective upon receipt):
A. If to North or the Independent Committee, to it at
North Atlantic Acquisition Corp.
5 East 59th Street, 3rd Floor
New York, New York 10022
Attention: David Jan Mitchell
5
<PAGE>
Telecopier No.: 212-588-0286
with a copy to:
Graubard Mollen & Miller
600 Third Avenue
New York, New York 10016
Attention: David Alan Miller, Esq.
Telecopier No.: 212-818-8881
B. If to the or the Escrow Agent, to it at:
Trident Rowan Group, Inc.
Two Worlds Fair Drive
Franklin Township, Somerset
New Jersey 08878
Attention: Howard Chase, Esq.
with a copy to:
Morrison Cohen Singer & Weinstein, LLP
750 Lexington Avenue
New York, New York 10022
Attention: David Lerner, Esq.
Telecopier: 212-753-8708
or to such other person or address as any of the parties hereto shall specify
by notice in writing to all the other parties hereto.
10. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original instrument and
all of which together shall constitute a single agreement.
IN WITNESS WHEREOF, each of the parties hereto has duly
executed this Agreement on the date first above written.
NORTH ATLANTIC ACQUISITION CORP.
By:____________________________
Name: David Jan Mitchell
Title: Chief Executive Officer
TRIDENT ROWAN GROUP, INC.,
For itself, as agent for the stockholders
and as escrow agent
6
<PAGE>
By:________________________________
Name:
Title:
7
<PAGE>
SCHEDULE I
Number of Shares
and Stock
Name of Issuee Address Certificate Number
- -------------- ------- ------------------
Subtotal
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
North Atlantic Acquisition Corp.
New York, New York
We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement on Form S-4 of our report dated November 4, 1997 relating
to the financial statements of North Atlantic Acquisition Corp., appearing in
the Company's Annual Report on Form 10-KSB for the year ended August 31, 1997,
which is contained in that prospectus.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
BDO Seidman, LLP
New York, New York
October 1, 1998
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
To Moto Guzzi Corp.:
As independent public accountants, we hereby consent to the use of our reports
and to all references to our firm included in or made a part of this prospectus.
ARTHUR ANDERSEN LLP
Milan, Italy
October 1, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> AUG-31-1997
<CASH> 402,211
<SECURITIES> 7,998,324
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,401,443
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 8,400,535
<CURRENT-LIABILITIES> 282,431
<BONDS> 0
0
1
<COMMON> 10,560
<OTHER-SE> 6,507,543
<TOTAL-LIABILITY-AND-EQUITY> 8,400,535
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 38,920
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (38,920)
<EPS-PRIMARY> (0.33)
<EPS-DILUTED> 0.00
</TABLE>
<PAGE>
PROXY
NORTH ATLANTIC ACQUISITION CORP - PROXY
Solicited by the Board of Directors
for the Annual Meeting of Stockholders to be Held on ________, 1998
The undersigned Stockholder(s) of NORTH ATLANTIC ACQUISITION
CORP., a Delaware corporation ("NAAC"), hereby appoints David J. Mitchell and
C. Thomas McMillen, or either of them, with full power of substitution and to
act without the other, as the agents, attorneys and proxies of the
undersigned, to vote the shares standing in the name of the undersigned at the
Annual Meeting of Stockholders of NAAC to be held on ______, 1998 and at all
adjournments thereof. This proxy will be voted and will be voted in accordance
with the instructions given below. If no instructions are given, this proxy
will be voted FOR all of the following proposals.
1. To approve the Merger Agreement, dated August 18, 1998, providing for the
merger of Moto Guzzi Corp., with and into NAAC, with NAAC continuing as the
surviving corporation.
FOR |_| AGAINST |_| ABSTAIN |_|
2. To adopt an Amended and Restated Certificate of Incorporation to effect a
series of amendments to the Certificate of Incorporation of NAAC.
FOR |_| AGAINST |_| ABSTAIN |_|
3. Election of the following Directors:
FOR all nominees listed below except WITHHOLD AUTHORITY to vote for all
as marked to the contrary below |_| nominees listed below |_|
_____ and Frank J. O'Connell (Class I), _____, Emanual Arbib and Peter Hobbins
(Class II), and Howard E. Chase, Mark S. Hauser and David J. Mitchell (Class
III)
(If Proposal 2 above is approved, the directors will serve in the classes
indicated.)
INSTRUCTIONS: To withhold authority to vote for any individual nominee,
write that nominee's name in the space below.
-----------------------------------------------------
4. To approve the 1998 Stock Option Plan and 1998 Stock Plan for Outside
Directors:
FOR |_| AGAINST |_| ABSTAIN |_|
5. To adopt an amendment to the Certificate of Incorporation to reclassify
each share of NAAC Class B Common Stock into two shares of NAAC Class A
Common Stock and two NAAC Class A Warrants.
FOR |_| AGAINST |_| ABSTAIN |_|
6. In their discretion, the proxies are authorized to vote upon such other
business as may come before the meeting or any adjournment thereof.
|_| I plan on attending the Annual Meeting of Stockholders.
<PAGE>
Date 1998
-----------------------------,
----------------------------------------
Signature
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Signature if held jointly
Please sign exactly as name appears above. When
shares are held by joint tenants, both should sign.
When signing as attorney, executor, administrator,
trustee or guardian, please give full title as
such. If a corporation, please sign in full
corporate name by President or other authorized
officer. If a partnership, please sign in
partnership name by authorized person.
