FORM 10-KSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED MARCH 31, 1999
NORTON MOTORCYCLES, INC.
(Name of small business issuer in its charter)
Commission File Number: 33-8819-D
Colorado 84-1036901
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
14252 - 23rd Avenue North
Plymouth, MN 55447-4910
(Address of principle executive offices) (Zip code)
Issuer's telephone number: (612) 694-9880
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: None
Indicated by check mark whether the issuer (1) filed all reports
required by Section 13 or 15(d) of the Exchange Act during the preceding
12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing
requirements for at least the past 90 days. Yes [X] No [ ].
Check if there is no disclosure of delinquent filers in response to Item
405 Regulation S-b in this form, and no disclosure will be contained,
to the best of registrant's knowledge, in this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
Issuer's revenues for its most recent fiscal year: $-0-
Aggregate market value of registered voting stock held by non-affiliates
as of June 15, 1999: $ 3.9 million
Number of shares of Common Stock, no par value, outstanding as of June
15, 1999: 7,125,000.
Documents incorporated by reference: None.
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NORTON MOTORCYCLES, INC.
FORM 10-KSB
PART I
Information provided in this annual report may contain "forward-looking"
information. These cautionary statements are made with the objective of
obtaining the benefits of safe harbor provisions of applicable
legislation. The Company cautions investors that any forward looking
statements made by the Company are not guarantees of future performance
and actual results may differ materially from those in the forward
looking statements as a result of various factors including but not
limited to the development stage nature of the Company.
The Company's common stock was reverse split on a 1 share for 42 shares
basis effective April 30,1999. Unless otherwise stated, information in
this annual report is presented after giving effect to the reverse stock
split.
ITEM 1. DESCRIPTION OF BUSINESS
BUSINESS DEVELOPMENT
Norton Motorcycles, Inc., (Norton or the Company) was organized under
the laws of the State of Colorado on August 11, 1986, for the purpose of
evaluating and seeking merger candidates. In April 1999 the Company's
name was changed to Norton Motorcycles, Inc. from Hallmark Properties,
Inc.
Since its inception in 1986, the Company had no operations other than
management had been actively seeking business opportunities. Several
possibilities had been identified since 1986 however no transaction had
been completed through March 1999. As described more fully below, in
April 1999 the Company acquired the trade name Norton and certain assets
used to develop a line of high performance motorcycles (the Asset
Purchase).
BUSINESS OF ISSUER
Norton is a development stage enterprise now engaged in the development
of a line of high performance motorcycles. Norton's business strategy
is built on marketing world class motorcycles using the powerful Norton
tradename. The initial product line will consist of two sport bike and
three cruiser models. The sport bike product development is in an
advanced stage and the Company anticipates commencing commercial
production in 2000. Each of the models will be subject to regulatory
approval by various governmental authorities prior to the commencement
of sales.
Motorcycles have been marketed under the famous Norton tradename for
nearly 100 years, although new motorcycles have not been marketed under
the Norton tradename since the early 1990's. The name enjoys
substantial customer loyalty as evidenced by the popularity of the
Norton Owners Clubs particularily in the United States and Europe.
Norton continues to be associated with high performance, advanced
engineering and racing success.
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Through April 1999, approximately $4.3 million had been incurred in
motorcycle product line development costs by Norton Motors
International, Inc. (NMI), the entity which had been funding the
motorcycle development and whose assets and technology were acquired
via the Asset Purchase.
Melling Consultancy Design (MCD), a leading motor industry independent
engineering and design firm, has been engaged to design the initial
product line. The initial product line emphasizes high performance and
advanced engineering. For example, the flagship Nemesis sport bike is
expected to be the fastest and only production V-8 motorcycle in the
world. The Company is also developing a Manx sport bike using the
Company's inline-4 engine. The Nemesis and Manx models have been
completely designed and road testing is now underway using motorcycles
built with production parts. Both the Nemesis and the Manx have already
received favorable press coverage, especially by Motor Cycle News.
While limited quantities may be available for sale in late 1999,
commercial production of the Nemesis is expected to commence in 2000.
The three cruiser models in the initial product line will use the
Company's V-twin engine. The V-twin engine for the cruiser models has
been designed, working engines will be tested in late 1999 and two of
the cruiser models are expected to be introduced into the market place
in 2000.
The motorcycle production will take place in England, Norton's
traditional home. The Company will limit capital equipment requirements
by utilizing third party suppliers for parts fabrication. The Company
will maintain control over quality by performing the assembly function.
Norton owns an assembly plant in Shenstone England. The Company may
also consider other assembly sites in England and/or the United States.
Norton will market its motorcycle models and related merchandise through
dealers and distributors. Management is currently in the process of
selecting and entering into agreements with dealers and distributors in
the United States and Europe. Motorcycle related merchandise will also
be marketed through the Norton web site at www.nortonmotorcycles.com.
Information with respect to the motorcycle models and merchandise can be
found at the Norton web site.
The motorcycle industry is highly competitive. The Company's
competitors are larger with substantially more financial resources.
Competition is based on a variety of factors including product design,
features, styling, performance and pricing in addition to brand name
strength and customer service. While Norton's product development is not
yet complete, the Company believes that the product line being developed
coupled with the strength of the Norton tradename will have substantial
market potential.
The Company's motorcycles will be subject to regulation by a variety of
governmental authorities in the counties in which its motorcycles are
sold. The regulations, which are subject to revision, address safety,
noise and emission standards. Initially the Company will seek to have
its models approved for sale in the United Kingdom, Europe and the
United States.
The majority of the Company's efforts are focused on the design and
development of the initial motorcycle product line. As noted above, the
design and development is being performed by MCD, an engineering and
design firm owned by Al Melling. Currently Norton employs seven
employees. Later this year, the Company plans to commence adding
additional personnel in the production, marketing and administrative
areas.
With respect to possible computer malfunctions at the turn of the
millennium on January 1, 2000, the Company uses personal computer based
accounting software that is believed to be year 2000 compliant. The
Company has not yet acquired any of the software that will be used in
the management of its assembly operation.
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APRIL 1999 ASSET PURCHASE
On April 20, 1999 the board of directors of Norton authorized the
issuance of 6 million restricted common shares (252 million common
shares before the effect of the reverse stock split) to Norton
Acquisition Corporation, a Minnesota corporation (NAC) in exchange for
all of the assets of NAC. NAC had recently acquired substantially all
of the assets of NMI in exchange for all of the outstanding shares of
NAC. NMI was engaged in the design and development of a line of high
performance, premium motorcycles. The issuance of the Norton shares to
NAC did not involve a public offering and was made by Norton in reliance
upon exemption under Section 4(2) of the 1933 Act.
As a result of the one (1) share for forty-two (42) shares reverse
split effective April 30, 1999, NAC owned 6 million out of the
approximately 7 million post split then outstanding shares of Norton
(about 86 percent). NMI owns 100% of the issued and outstanding shares
of NAC. No loans were made for the purposes of acquiring the
aforementioned shares of Norton resulting in a controlling interest
therein. Additional consideration for the purchase of assets included
the assumption by Norton of approximately $500 thousand of trade account
payables, the assumption of $650 thousand of secured debt and the
payment by Norton of $25 thousand. The assets acquired by Norton
consisted of the assets that NAC had recently acquired from NMI. The
assets purchased were those used by NMI, a development stage enterprise,
in the design and development of a line of high performance motorcycles
and include all of its trademarks, an assembly plant in Shenstone,
England and all designs and prototypes.
RECENT DEVELOPMENTS
On June 30, 1999 the Company entered into agreements which provide for
significant cash investments in Norton and appointment of a new Chief
Executive Officer and a President. Mr. Robert Kilpatrick and Mr. John M.
Tastad will serve as Chief Executive Officer and President, respectively.
The initial cash advance to Norton is to be provided in the form of a $1
million US dollar Bridge Loan Facility which is to be fully funded by July 2,
1999. Additionally, NMI Investments, LLC, an entity owned by Messrs. Tastad
and Kilpatrick, committed to subscribe to purchase $4 million of the Norton
convertible preferred stock which the Company is preparing to offer via a
private placement. The Company will file a Form 8-K with the Securities
and Exchange Commission more fully describing the backgrounds of these two
individuals and the terms of these agreements.
REPORTS TO SECURITY HOLDERS
The Company currently files reports voluntarily with the Securities and
Exchange Commission (SEC) under Section 15(d) of the Securities Act of
1934. The Company currently files this report with the SEC and will
also quarterly file Form 10 QSB as well as Form 8-K when required to
disclose certain significant events. The Company is not required and
has no current plans to deliver an annual report to its stockholders.
As an electronic filer, filings made by the Company can be located at
the SEC's internet site found at www.sec.gov.
ITEM 2. DESCRIPTION OF PROPERTY
The Company's executive offices are located at 14252 - 23rd Avenue
North, Plymouth, MN 55447 in 900 square feet of space leased on a month
to month basis.
The Company owns an assembly facility located in Shenstone, England near
Birmingham. The Shenstone facility, which is currently largely idle, is
a steel-framed brick building with a one-story production/assembly area
of 21,500 square feet, an adjoining two-story office building of about
5,000 square feet and an ancillary workshop area of about 7,000 square
feet currently leased to a third party. The Shenstone facility is
subject to a $500 thousand mortgage payable in installments with the
final payment in 2002. The Company also leases 5,000 square feet of
design and development facilities in Rochdale, England from the owner of
MCD under a five year lease.
ITEM. 3 LEGAL PROCEEDINGS
The Company is not a party to any legal proceedings and the Company is
not aware of any such proceedings that a governmental authority is
contemplating.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The following shareholder resolutions were adopted by Norton at its
annual shareholders meeting on April 30, 1999 by an affirmative vote of
252,000,000 pre reverse stock split common shares out of a total of
293,983,696 pre reverse stock split common shares then outstanding:
1. The number of directors was increased to four and the following
individuals were elected to the Board of Directors of Norton effective
immediately, until the next annual meeting or until their successors are
elected or shall qualify:
a. Roberto Aquilini
b. Myron Calof
c. Mark Osterberg
d. John Tastad
2. The Company changed its name from Hallmark Properties, Inc. to
Norton Motorcycles, Inc.
3. The number of shares of Common Stock issued as of the date of the
shareholder meeting was reverse split on the basis of one (1) share for
each forty-two (42) shares outstanding and new certificates will be
issued to shareholders, for the number of shares resulting from such
reverse split rounded to the nearest full share, upon said shareholder's
surrender of their old share certificate.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
The Company's registered common stock is not eligible for listing on
NASDAQ or a national securities exchange. Although the registered stock
has been quoted from time to time on the OTC Bulletin Board or in the
"pink sheets" maintained by National Quotation Bureau, Inc., the common
stock has traded very infrequently during the last two years.
Currently the Company's Common Stock is traded on the OTC Bulletin Board
operated by the NASD under the stock symbol NRTN. Since April 1999 the
range of the high and low bid had been $3 1/2 to $6. These bid reflect
interdealer prices, without retail mark-up, mark-down or commissions and
may not represent actual transactions.
HOLDERS
The approximate number of record holders of the Company's Common Stock,
no par value, as of June 15,1999 was 152. This amount does not reflect
an indeterminable number of shareholders whose shares are held in
"street name."
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DIVIDENDS
The Company has not paid a dividend with respect to its Common Stock and
is not expected to pay a dividend on its Common Stock in the foreseeable
future.
The Company's ability to pay dividends is restricted by provisions of
the Colorado Business Corporation Act which provides that a Colorado
corporation may only pay dividends if, after giving effect to the
dividend, the corporation would be able to pay its debts as they become
due in the usual course of business, or the corporation's total assets
would be less than its total liabilities plus the amount that would be
needed, if the corporation were to be dissolved at the time the
dividend, to satisfy the preferential rights upon dissolution of
shareholders whose preferential rights are superior to those
receiving the dividend.
RECENT SALES OF UNREGISTERED SECURITES
As more fully discussed under April 1999 Asset Purchase in Part 1 above,
on April 20, 1999 the board of directors of Norton authorized the
issuance of 6,000,000 restricted common shares. The issuance of these
shares did not involve a public offering and otherwise was exempt from
registration under the requirements of Section 4(2) of the Securities
and Exchange Act of 1933.
In April 1999, Genesis Capital Group agreed to lend $1 million to the
Company. The Company has indicated its intention to exercise its
contractual right to convert all amounts advanced by Genesis into
restricted common stock at $4 per share.
The issuance of these shares did not involve a public offering and
otherwise was exempt from registration under the requirements of Section
4(2) of the Securities and Exchange Act of 1933.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION
RESULTS OF OPERATIONS
The Company was inactive and had no operations during the years ended
March 13, 1998 and 1999.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1999 the Company had no assets, liabilities or financial
commitments. In April 1999 the Company acquired assets that were being
used in the development of a line of high performance motorcycles to be
marketed under the trade name Norton. The assets acquired included
trademarks, an assembly plant in Shenstone, England and motorcycle
designs and prototypes. See Note 4 to the March 31, 1999 financial
statements for additional information including an unaudited proforma
balance sheet reflecting the Asset Purchase as if it had occurred on
March 31, 1999.
In April 1999, Genesis Capital Group (Genesis) of Minneapolis agreed to
lend $1 million to the Company. The Company has indicated its intention
to exercise its contractual right to convert all amounts advanced by
Genesis into common stock at $4 per share. As of June 30, 1999 Genesis
had advanced $ 525 thousand out of its $1 million commitment and the
Company had no significant cash assets. On June 30, 1999 the Company
entered into agreements which contain commitments for significant cash
investments in Norton. The initial cash advance to Norton is to be
provided in the form of a $1 million US dollar Bridge Loan Facility
that is to be fully funded by July 2, 1999. Additionally, NMI Investments,
LLC, an entity owned by Messrs. Tastad and Kilpatrick, committed to
subscribe to purchase $4 million of Norton convertible preferred stock
which the Company is preparing to offer via a private placement.
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As a development stage enterprise, Norton currently has no significant
revenue base. The Company is actively seeking approximately $18 million
of additional capital resources (including the $4 million commitment to
purchase preferred stock described above). The additional capital resources
are required by Norton to complete its product development, fund expected
calendar 1999 and 2000 losses, fund plant and equipment additions, provide
working capital and commence profitable operations. The development of the
initial product line is expected to continue through 2000.
Additionally the Company faces certain other significant risks and
uncertainties including: the Company's competitors are larger with
substantially more financial resources; the Company has no motorcycle
manufacturing experience; none of the models in the initial product line
has been completed and regulatory approvals will be needed for each
model; a majority of the Company's costs will be denominated in British
pounds while a majority of the sales will be denominated in other
currencies; and another party claims to own the Norton tradmarks in
certain European countries.
While development is not complete and there are significant
uncertainties associated with developing new high performance
motorcycles, management believes that the motorcycle product line being
developed will have substantial market potential.
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ITEM 7. FINANCIAL STATEMENTS
Report of Independent Certified Public Accountant
April 30, 1999
(June 30, 1999 as to Note 4)
The Board of Directors
Norton Motorcycles, Inc
(A Development Stage Enterprise)
Minneapolis, Mn.
We have audited the Balance Sheets of Norton Motorcycles, Inc. (formerly
Hallmark Properties, Inc.), (a development stage company) as of March
31, 1998 and 1999, and the related Statements of Operations,
Stockholders' Equity and Cash Flows for each of the two years in the
periods then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an
opinion on these financial statements based upon our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits
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.
The Company is a development stage enterprise which acquired certain assets
in April 1999 in order to develop and market a new line of high preformance
motorcycle models. As described in Note 4, as of June 30, 1999 the Company
had no significant cash resources. On June 30, 1999 the Company entered into
agreements which contain commitments for cash investments to be made in the
Company. The Company is dependent on the funding of these commitments to
continue its operations and motorcycle development program.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Norton
Motorcycles, Inc. as of March 31, 1997 and 1998, and the results of its
operations and its cash flows for the years then ended in conformity
with generally accepted accounting principles.
/s/ Tannenbaum & Company, P.C.
TANNENBAUM & COMPANY, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
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Norton Motorcycles, Inc.
(A Development Stage Enterprise)
Balance Sheets
March 31, 1998 and 1999
In thousands except share amounts
1998 1999
-------- --------
Assets
Total assets $0 $0
======== ========
Liabilities and stockholders' equity
Total liabilities $0 $0
Stockholders' equity
Common stock, no par value, 400,000,000
shares authorized, 999,611 shares
issued and outstanding at
March 31, 1998 and 1999 296 296
Deficit accumulated during development
stage (296) (296)
-------- --------
Total stockholders' equity 0 0
-------- --------
Total liabilities and stockholders' equity $0 $0
======== ========
Statements of Operations
Years Ended March 31 1998 and 1999
In thousands except share and per share amounts
Cumulative
amount from
1998 1999 inception
-------- -------- -----------
Revenue $0 $0 $7
Expenses
Merger expenses 261
Salaries 19
Other 23
-------- -------- -----------
Total expenses 0 0 303
-------- -------- -----------
Loss before taxes 0 0 (296)
Income tax
-------- -------- -----------
Net loss $0 $0 (296)
===========
Accumulated deficit, beginning of year (296) (296)
-------- --------
Accumulated deficit, end of year (296) (296)
======== ========
Weighted average number of shares 999,611 999,611
======== ========
Loss per share $0 $0
======== ========
See also accompanying notes to financial statements.
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Norton Motorcycles, Inc.
(A Development Stage Enterprise)
Statements of Stockholders' Equity
Years Ended March 31, 1998 and 1999
In thousands except share amounts
Common Stock
--------------------
Number Accumulated Total
of shares Amount Deficit
Balance - April 1, 1997 999,611 $296 ($296) $0
-----------------------------------------------
Balance - March 31, 1998 999,611 296 (296) 0
-----------------------------------------------
Balance - March 31, 1999 999,611 $296 ($296) $0
===============================================
Norton Motorcycles, Inc.
(A Development Stage Enterprise)
Statements of Cash Flows
Years Ended March 31, 1998 and 1999
In thousands
Cumulative
amount from
1998 1999 inception
-------- -------- -----------
Cash used by operating activities $0 $0 ($272)
Cash from financing activities
Sale of common stock 272
Cash at beginning of year 0 0
-------- -------- -----------
Cash at end of year $0 0 $0
======== ======== ==========
See also accompanying notes to financial statements.
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Norton Motorcycles, Inc.
(A Development Stage Enterprise)
Notes to Financial Statements
1. The Company
Norton Motorcycles, Inc. (Norton or the Company), a development stage
enterprise, was organized under the laws of the State of Colorado on
August 11, 1986, for the purpose of evaluating and seeking merger
candidates. In April 1999 the Company's name was changed to Norton
Motorcycles, Inc. from Hallmark Properties, Inc.
Since inception in 1986, the Company had no operations other than
management had been actively seeking merger or other business
opportunities. Several possibilities had been identified since 1986
however no transaction had been completed through March 1999. As
discussed in Note 4, in April 1999 the Company acquired the trade name
Norton and certain assets used to develop a line of high performance
motorcycles (the Asset Purchase).
2. Significant Accounting Policies
The Company's fiscal year end is March 31. The financial statements are
presented in accordance with United States generally accepted accounting
principles and are stated in United States dollars.
The Company had no operating activities and incurred no expenses or
earned no revenues during either fiscal year 1998 or 1999. The costs
incurred since inception pertain to seeking merger candidates and
business opportunities.
During fiscal year 1998 and 1999 there were no changes in stockholders'
equity. On April 30, 1999 the Company's common stock was reverse split
on a 1 share for 42 shares basis which immediately became effective.
Unless otherwise indicated, all of the share and per share disclosure
amounts are presented as if the reverse stock split had occurred prior
to the beginning of the periods presented.
3. Income Taxes
In years prior to fiscal 1998, the Company incurred net operating losses
of approximately $296 thousand, of which $272 thousand expires in 2003
and $24 thousand expires in 2007. The Company has not yet evaluated
whether such net operating losses will be available to offset future
taxable income.
4. Subsequent Events - Asset Purchase (Unaudited)
The Company entered into an asset purchase agreement dated April 16,
1999 to acquire substantially all of the assets of Norton Acquisition
Corporation (NAC) in exchange for newly issued common stock, the
assumption by the Company of approximately $500 thousand of trade
accounts payable, the assumption of $650 thousand of debt and the
payment of $25 thousand in cash (the "Asset Purchase"). After the
impact of the 1 share for 42 shares reverse stock spilt, NAC owned 6
million shares out of 6,999,612 Norton common shares then outstanding.
NAC had recently acquired substantially all of the assets of Norton
Motors International, Inc. (NMI) in exchange for all of NAC's
outstanding common stock. NMI is a development stage enterprise that was
engaged in the development of a line of high performance motorcycles.
The assets acquired by the Company include all trademarks, an assembly
plant in Shenstone, England and all motorcycle designs and prototypes.
The long term debt assumed by the Company carries an 8% interest rate,
is collateralized by the assembly plant and intellectual property and is
payable as follows: $100 thousand in 2000, $150 thousand in 2001 and
$250 thousand in 2002.
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Note 4 - continued
Genesis Capital Group (Genesis) of Minneapolis has agreed to lend an
initial $1 million to the Company. The Company has indicated its
intention to exercise its contractual right to convert all amounts
advanced by Genesis into common stock at $4 per share.
The following unaudited proforma adjusted condensed balance sheet
reflects the Asset Purchase and the $1.0 million to be advanced by
Genesis and the conversion of such Genesis advance into common stock as
if the transactions had occurred on March 31, 1999. The Asset Purchase
has been accounted for as an acquisition of assets. The acquired assets
were recorded on the basis of the historical cost to NMI. The proforma
balance sheet reflects the entire $1 million investment by Genesis and
the payoff of all trade accounts payable assumed in connection with the
Asset Purchase. As of June 23, 1999 Genesis had advanced $525 thousand
(out of the $1 million committed) to the Company.
Norton Motorcycles, Inc.
(A Development Stage Enterprise)
Unauditied Proforma Balance Sheet
In thousands
Proforma
Adjusted
----------
Assets
Current assets - cash $500
Property and equipment 625
Intangible assets - trademarks 400
----------
Total assets $1,525
==========
Liabilities and stockholders' equity
Current liabilities - notes payable $150
Long-term debt 500
Common stockholders' equity
Common stock, no par value, 7,249,612
proforma shares outstanding after reverse
stock split, Asset Purchase and conversion
of Genesis advance into common stock 1,171
Deficit accumulated during development stage (296)
----------
Total common stockholders' equity 875
----------
Total liabilities and common stockholders' equity $1,525
==========
Under generally accepted accounting principles in the United States,
research and development costs are expensed as incurred. Through
December 31,1998, NMI had invested approximately $4 million in design,
development and testing of high performance motorcycles and had raised
approximately $5 million cash through debt and equity offerings. As of
December 31, 1998, NMI had an unaudited accumulated deficit of
approximately $ 12.7 million.
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Note 4 Continued
Common shares shown in the proforma balance sheet were derived as
follows:
41,983,696 common shares
outstanding at March 31, 1999
which were reverse split on
April 30, 1999 999,612
Shares issues to NAC after
impact of reverse split 6,000,000
Restricted shares to be issued
to Genesis Capital 250,000
---------
Proforma common shares 7,249,612
=========
Subsequent to March 31, 1999 the Company granted 707,500 options to
acquire common stock to officers, directors, management and a consulting
firm. The options are exercisable at $4.00 per share.
As of June 30, 1999 Genesis had advanced $525 thousand out of its $1 million
commitment and the Company had no significant cash resources. On June 30,
1999 the Company entered into agreements which contain commitments for cash
investments in Norton. The intial cash advance to Norton is to be provided
in the form of a $1 million US dollar Bridge Loan Facility which is to be
fully funded by July 2, 1999. Additionally, NMI Investments, LLC, an entity
owned by Messrs. Tastad and Kilpatrick, committed to subscribe to purchase
$4 million of the Norton convertible preferred stock which the Company is
preparing to offer via a private placement. The Company is dependent on the
funding of these commitments to continue its operations and motorcycle
development program. The June 30, 1999 agreements provide that Messrs.
Kilpatrick and Tastad will serve as Chief Executive Officer and President,
respectively. These two indiviuals will be awarded stock options to purchase
up to 955,000 common shares at option prices ranging from $4.00 to $12.00 per
share over two years; the number of options awarded is conditional on the
achievement of contractually specified goals.
As a development stage enterprise, Norton currently has no significant
revenue base and is actively seeking additional investment funding to
support its motorcycle development program. The development of the
initial product line is expected to continue through calendar 2000. Norton
is actively seeking and will need to obtain capital resources in addition to
those described in the preceding paragraph to complete its product development,
fund expected losses, fund plant and equipment additions, provide working
capital and commence profitable operations.
While development is not complete and there are significant
uncertainties associated with developing new high performance
motorcycles, management believes that the motorcycle product line being
developed will have substantial market potential.
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ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in or disagreements with the Company's
accountants on accounting and financial disclosure.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS:
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
IDENTIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS.
The directors of the Company are elected to hold office until the next
meeting of shareholders and until their respective successors have been
elected and qualified. Officers of the Company are elected by the Board
of Directors and hold office until their successors are elected and
qualified.
Name Age Position
Mark W. Osterberg 48 Chief Executive Officer, Chief Financial
Officer, Secretary and Director
Myron Calof 52 Executive Vice President and Director
Roberto Aquilini 33 Director
Mark Osterberg has been the Company's Chief Executive Officer and
Director since April 1999. Prior to that he was Chief Financial Officer
and Treasurer of Norton Motors International, Inc. from December 1998 to
March 1999. From 1990 to March 1998, Mr. Osterberg was an executive
officer of Northwest Airlines Corporation, the world's fourth largest
airline where he served as Vice President and Chief Accounting Officer
and Vice President - Finance.
Myron Calof has been the Company's Executive Vice President and Director
since April 1999. Mr. Calof also serves as the Chief Executive Officer
and Director of Norton Motors International, Inc., a position that he
has held since November 1998. Mr. Calof is also Executive Vice
President of Aquilini Investment Group, a position he has held since
1994, during which time he has participated in the diverse operations of
the Aquilini Investment Group.
Roberto Aquilini is the Managing Director of Aquilini Investment Group.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
During the past five years, no director, executive officer, promoter or
control person of the Company has:
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(1) Had any bankruptcy petition filed by or against any business of
which such person was a general partner or executive officer either at
the time of the bankruptcy or within two years prior to that date;
(2) Been convicted in a criminal proceeding or been subject to a
pending criminal proceeding (excluding traffic violations and other
minor offenses);
(3) Been subject to any order, judgment, or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or likewise
limiting his involvement in any type of business, securities or banking
activities; or
(4) Been found by a court of competent jurisdiction (in a civil
action), the Commission or the Commodity Futures Trading Commission to
have violated a federal or state securities or commodities law, where
the judgment has not been reversed, suspended, or vacated.
COMPLIANCE WITH SECTIONS 16(A) OF THE EXCHANGE ACT
The Company's equity securities are not required to be registered
pursuant to Section 12 f of the 1934 Act and therefore this section is
not applicable.
ITEM 10. EXECUTIVE COMPENSATION
CASH COMPENSATION.
During the past three fiscal years, no officer of the Company received
any cash compensation.
COMPENSATION UNDER PLANS
As of March 31, 1999, no stock options or bonuses had been granted under
any stock option or bonus plan.
Subsequent to March 31, 1999, Messrs. Osterberg and Calof were each
granted options to purchase 215,000 shares common stock at $4.00 per
share. Each option has a five-year life from vesting date. Options
vest in the event of a change of control (other than one caused by the
dissolution of NMI) or in the event that the executive is terminated
without cause by the Company or in the event of the death or disability
of the executive. Options granted to Mr. Osterberg vest as follows:
81,000 on date of grant; 66,000 in July 1999; and 68,000 in April 2000.
Options granted to Mr. Calof vest as follows: 115,000 on date of grant
and 100,000 in July 1999.
OTHER COMPENSATION
No other compensation was paid or distributed to any officer of the
Company for services rendered as such during the last fiscal year.
COMPENSATION OF DIRECTORS
The Company does not pay cash compensation to its non-executive officer
directors for their services in that capacity; however, each director is
granted 15,000 options to purchase common stock. Options granted to
directors vest immediately. Officers and directors will receive
reimbursement for out-of-pocket expenses incurred by them in connection
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with the business of the Company. Currently, the Company does not pay
any directors fees for attendance at board meetings.
TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
The Company has entered into an employment contract with Mr. Osterberg
that provides for the payment of one year's salary in the event he is
terminated without cause or in the event there is a change in control of
the Company.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(A)(B) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of the date of filing of
this Report as to the beneficial ownership of shares of the Company's
Common Stock, by each person who, to the knowledge of the Company at
that date, was a beneficial owner of 5% or more of the outstanding
shares of Common Stock, by each person who is an officer and/or director
of the Company and by all officers and directors of the Company as a
group. The table does not include information regarding shares of Common
Stock held in names of certain depositories/clearing agencies as nominee
for various brokers and individuals. No such broker or individual is
believed to hold more than 5% of the Company's Common Stock.
Title of Name and Amount Percent
Class Address of and of Class
Beneficial Nature of
Owner Beneficial
Ownership
Common Norton Acquisition Corporation 6,000,000 84%
Stock 14252 - 23rd Avenue North
Plymouth, MN 55447
Norton Acquisition Corporation is a wholly-owned subsidiary of Norton
Motors International Inc. (NMI). Holders of more than 5 percent of the
stock of NMI are as follows (with percent of NMI common stock ownership
shown parenthetically): Cataract N.V. (42 percent); Minneapple Capital
(10 percent); and Joseph Novogratz (9 percent). NMI is not a public
company.
Mark Osterberg and Myron Calof have the right to acquire 147,000 shares
and 215,000 shares, respectively, within 60 days.
CHANGES IN CONTROL
Management is not aware of any arrangements that may result in a change
of control of the Company except that as NMI beneficially owns
approximately 84 percent and any dissolution of NMI may result in the
distribution and/or sale the Company's common stock held by NMI.
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ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
RELATED TRANSACTIONS
NAC was a party to the April 1999 Asset Purchase transaction described
under Item 1.
PARENTS OF NORTON
Approximately 84 percent of the outstanding voting securities is owned
by Norton Acquisition Corporation which is wholly owned subsidiary of
NMI.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required to be filed are listed below:
Number Description
2.0 Asset Purchase Agreement dated April 9, 1999 between
Norton Acquisition Corporation and Norton Motors International Inc.
2.1 Asset Purchase Agreement dated April 16, 1999 between Norton
Acquisition Corporation and Norton Motorcycles, Inc. f/k/a Hallmark
Properties, Inc.
3.1 Articles of Incorporation, as amended, incorporated by
reference from the Annual Report on Form 10-K for the five
fiscal years ended March 31, 1991.
3.2 Bylaws, incorporated by reference form the Annual Report
on Form 10-K for the five fiscal years ended March 31, 1991.
3.3 Articles of Amendment to the Articles of Incorporation,
incorporated by reference from the Form 8-K dated August
19, 1996 filed August 21, 1996.
3.4 Articles of Amendment to the Articles of Incorporation
of Norton Motorcycles, Inc. dated June 30, 1999.
27.0 Financial Data Schedule
(b) On May 4, 1999, a Current Report on Form 8-K was filed reporting
the April 1999 Asset Purchase, change in control of the Company, change
in corporate name and the reverse stock split.
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
SECTION 15(d) OF THE EXCHANGE ACT BY REGISTRANTS WHICH HAVE NOT
REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE EXCHANGE ACT:
The Registrant has not sent to its security holders any annual report or
proxy material during the last fiscal year. If such report or proxy
material is furnished to security holders subsequent to the filing of
this Form 10-K, the Registrant shall furnish copies of such material
to the Commission when it is sent to security holders.
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SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant caused this 10-K report to be signed on its behalf
by the undersigned, thereunto duly authorized.
Dated: June 30, 1999 NORTON MOTORCYCLES, INC.
By: /s/ MARK W. OSTERBERG
---------------------------------
Mark W. Osterberg
Chief Executive Officer and Director
In accordance with the Securities Exchange Act of 1934, this report
has been signed below by the following person on behalf of the
Registrant and in the capacities and on the date indicated.
Dated: June 30, 1999 By: /s/ MARK W. OTERBERG
-------------------------
Mark W. Osterberg
Chief Executive Officer
Chief Financial Officer
Principle Accounting Officer
Director
Dated: June 30, 1999 By: /s/ MYRON CALOF
-------------------------
Myron Calof
Executive Vice President
Director
Dated: June 30, 1999 By: /s/ ROBERTO AQUILINI
-------------------------
Roberto Aquilini
Director
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EXHIBIT 2
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") is made and entered
into this 9th day of April, 1999, by and between Norton Acquisition
Corporation, a Minnesota corporation ("Buyer") and Norton Motors
International Inc., a Minnesota corporation ("Seller").
WITNESSETH:
WHEREAS, Seller is developing a line-up of engines and motorcycles
for manufacture and sale (the "Business");
WHEREAS, Seller has acquired certain assets from Norton Motorcycles
Limited pursuant to the Asset Purchase Agreement dated March 11, 1998
(the "Norton Agreement") which has enabled it to develop the Business;
and,
WHEREAS, Buyer desires to acquire from Seller the Business and
substantially all of Seller's assets (including those acquired through
the Norton Agreement) used in the Business on a going concern basis and
Seller desires to sell the Business and such assets on a going concern
basis in the manner and upon the terms and conditions stated herein.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements contained herein and for other good
and valuable consideration, the receipt and sufficiency of which are
mutually acknowledged and accepted, Seller and Buyer, intending to be
legally bound, hereby agree as follows:
ARTICLE 1
SALE AND PURCHASE OF ASSETS
1.1 Assets To Be Purchased By Buyer. Subject to the terms and
conditions set forth herein, Seller agrees to sell, transfer, convey
and assign to Buyer, and Buyer agrees to purchase and acquire from
Seller all of Seller's assets of any kind or type whatsoever,
including, but not limited to, the assets listed on Exhibits 1.1 and
1.1(B) attached hereto (the "Purchased Assets").
1.2 Excluded Assets. Notwithstanding anything to the contrary in
Section 1.1, the Purchased Assets shall not include any of the assets
expressly listed on Exhibit 1.2 attached hereto (the "Excluded
Assets").
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ARTICLE 2
ASSUMPTION OF LIABILITIES
2.1 Assumed Liabilities. At the Closing, Buyer shall assume and agree
to discharge and perform when due, the following expressly identified
liabilities and obligations of Seller ( the "Assumed Liabilities"):
2.1.1 Such pending purchase orders issued by Seller relating
to the Business as Buyer shall, in its sole discretion,
agree to assume. Buyer shall have ninety (90) days
from Closing in which to assume or reject any such
pending purchase orders. In connection with any such
purchase orders, Seller assigns to Buyer any rights of
Seller with respect to any prepaid deposits previously
paid by third parties for the benefit of Seller.
2.1.2 Such Seller's Trade Accounts Payable for suppliers and
developers set forth on Exhibit 2.1.2 attached hereto,
as Buyer assumes in writing, in its sole discretion, on
or before the 90th day following the Closing Date
("Trade Accounts Payable").
2.1.3 The liability and principal balance of the secured
loans to Donald F. Shiff, Joseph Novogratz, Global Coin
Corporation ("Global") and Cataract N.V. ("Cataract")
(including, without limitation, the registered or
unregistered mortgage of Global and Cataract covering
the Norton Factory (on Lynn Lane in Shenstone,
Staffordshire, England) that Buyer shall assume as of
the Closing Date in the amounts and pursuant to the
terms specifically identified on Exhibit 2.1.3
("Secured Liability").This amount includes any unpaid
interest amounts owing on such debt prior to the
Closing Date, which Buyer shall assume and pay. If at
Closing said mortgage has not yet been registered, then
said mortgage shall be reissued by the Buyer and
registered. Buyer may in such regard take the benefit
of any funds which were to be used to pay any stamp
duty taxes on said mortgage.
2.1.4 Certain additional obligations arising from the Norton
Agreement as the same are listed on Exhibit 2.1.4
attached hereto.
2.2 Excluded Liabilities. Except as specifically set forth in Section
2.1 above, Buyer is not assuming any other liability or obligation of
Seller whatsoever, whether or not any such liability or obligation
pertains to the Business or the Purchased Assets, including any such
liability or obligation arising under any contract of Seller (all such
liabilities and obligations not specifically assumed by Buyer pursuant
to the Agreement shall be the "Excluded Liabilities"). Without
limiting the foregoing and notwithstanding the provisions of Section
2.1, Buyer is expressly not assuming the following liabilities:
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2.2.1 Any liabilities of Seller for taxes, including without
limitation income, FICA, sales, use, franchise, excise
and transfer taxes.
2.2.2 Any liabilities and obligations of Seller under any
contracts, agreements, leases, licenses, instruments,
commitments, arrangements or undertakings of any kind,
including, but not limited to, trade payable
liabilities of any kind whatsoever, except those
liabilities and obligations specifically set forth in
Section 2.1.
2.2.3 Any liability or obligation of Seller for warranty
claims with respect to products sold or services
rendered by Seller prior to the Closing Date.
2.2.4 Any indebtedness of Seller to banks, other financial
institutions or with respect to borrowed money, except
those specific liabilities set forth and expressly
assumed in Section 2.1.
2.2.5 Any liabilities to or with respect to former employees
of Seller whether or not hired by Buyer, relating to
any period prior to the Closing Date (including without
limitation any liabilities to employees or plans with
respect to post-retirement health benefits or
pensions), and any liabilities with respect to any
other employees or former employees of Seller
(including without limitation any severance or COBRA
liabilities or any liabilities to employees or plans
with respect to post-retirement health benefits or
pensions).
2.2.6 Any claims against or liabilities of Seller for injury
to or death of persons or damage to or destruction of
property arising out of acts occurring, products sold
or services rendered prior to the Closing Date.
2.2.7 Any liabilities arising out of or in connection with
any violation of any federal, state or local government
statute or rule, regulation or directive, or arising
out of any release or disposal of any hazardous or
toxic substance, including without limitation a
"hazardous substance" as defined in 42 U.S.C.
9601(14) and oil, gasoline and other petroleum-based
substances, which violation, release or disposal
occurred prior to the Closing Date.
2.2.8 Any liabilities for legal, accounting, audit and other
professional fees incurred by Seller with respect to
the preparation and negotiation of this Agreement or
any document or other agreement related thereto.
2.2.9 Any liability to, or on account of, any employee
benefit plan of Seller, any of its Affiliates or any
predecessor employer of any employee, including, but
not limited to any health and medical, sick pay,
severance, long term disability, pension, retirement,
savings, Section 401(k), stock option and/or deferred
compensation plan or arrangement, whether written or
oral and whether "qualified" or "non-qualified" under
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the Internal Revenue Code of 1986, as amended, or to
any employee as a result of or following upon the
consummation of the transactions contemplated herein.
2.2.10 Any liabilities of Seller to the extent that their
existence or magnitude constitutes or results in a
breach of a representation, warranty or covenant of
Seller in this Agreement.
ARTICLE 3
PURCHASE PRICE
3.1 Purchase Price: Time of Payment. In addition to assumption of the
Assumed Liabilities, as expressly stated herein, the Buyer shall
provide the following consideration to Seller:
a) Cash Payment. A cash payment at Closing of twenty-five thousand
dollars ($25,000);
b) Stock of Buyer. Buyer shall cause to be issued in the name of the
Seller, Six Million (6,000,000) restricted shares of its common
stock on the Closing Date pursuant to the terms of the Subscription
Agreement attached hereto as Exhibit 3.1(the "Securities"). The
Securities shall be issued pursuant to applicable state and federal
securities laws exemptions and shall contain an appropriate legend
restricting their transferability.
c) Merger of Buyer into Public Shell. Within forty-five (45) days
after the Closing, Buyer agrees to either merge into, or become a
wholly owned subsidiary of (the "Merger"), Hallmark Properties,
Inc. a Colorado public shell corporation ("Hallmark"). Buyer
further agrees that, as a result of a reverse split or other
adjustment, Seller will, immediately after the Merger, own 6/7ths
or 85.71% of the then issued and outstanding shares of stock in
Hallmark. Nothing herein shall prohibit Hallmark from thereafter
issuing additional shares of its stock for fair consideration
pursuant to a subsequent registered or exempt offering. Buyer
agrees that Buyer's failure to comply with the terms of this
section 3.1(c) shall be deemed a material default and Seller shall
have the immediate right to declare this Agreement null and void
with full right to rescind the transfers of the Purchased Assets
made hereunder.
3.2 Allocation of Purchase Price. The Purchase Price shall be
allocated among the Purchased Assets ( including the
liabilities assumed) either in the manner set forth on the
attached Exhibit 3.2 (or as approved in writing by the parties
hereto at or after Closing) for all purposes and each of the
parties shall file with the Internal Revenue Service Form 8594
on a basis consistent therewith.
3.3 Further Assurances. Each of the parties hereto, before, at and
after the Closing, upon the request from time to time of any other
party hereto and without further consideration, shall do each and
every act and thing as may be necessary or reasonably desirable to
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consummate the transactions contemplated hereby and to effect an
orderly transfer to Buyer of the Purchased Assets.
ARTICLE 4
CLOSING
4.1 Binding Nature of Agreement. The sale contemplated by this
Agreement shall be a legally binding obligation of the parties hereto
upon execution thereof by officers of the respective parties, subject
only to rescission by the affirmative vote of a majority of the
shareholders of Seller. The Seller hereby agrees and warrants to
deliver, on or before Closing, either by irrevocable proxy or vote at
a duly called and noticed shareholder meeting, the affirmative vote
of at least a majority of the shareholders of the Seller approving
the sale contemplated by this Agreement.
4.2 Time and Place of Closing. The closing of the transactions
contemplated hereby (the "Closing") shall take place at the offices
of Duckson & Carlson, LLC, 10 South Fifth Street, Suite 300,
Minneapolis, Minnesota 55402, on April 16, 1999 at 2:00 p.m. or at
such other place or on such other date which the parties may mutually
agree in writing ("Closing Date"). All transfers and other proceedings
required to be made or taken at the Closing shall be deemed to have
taken place simultaneously, and no delivery shall be considered to
have been made until all such proceedings have been completed. Legal
title, equitable title and risk of loss with respect to the Purchased
Assets shall be deemed to have passed to Buyer on transfer of such
Purchased Assets on Closing.
4.3 Seller's Deliveries At Closing. At the Closing, Seller shall
deliver to Buyer the following:
(a) A release of each existing security interest of record
relating to the Purchased Assets, which is not expressly
assumed by Buyer;
(b) Any Bill of Sale document reasonably requested by the Buyer
evidencing the transfer of any tangible assets transferred
hereby and such deeds (together with affidavits of title),
assignments, certificates of title, and other instruments of
conveyance as Buyer shall reasonably require to convey to
Buyer the Purchased Assets, including, without limitation,
assignments of any Proprietary Rights included in the
Purchased Assets;
(c) A fully executed Subscription Agreement in the form attached
hereto as Exhibit 3.1;
(d) Any consents from third parties, including but not limited
to, secured parties listed on Exhibit 2.1.3 required to
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permit Buyer to obtain the benefits of all the Purchased
Assets under the same terms and conditions as are applicable
to Seller and to prevent a breach of any agreement or
security interest relating to the Purchased Assets. In
addition, Seller shall deliver to Buyer, from time to time,
such documentation as Buyer may reasonably request to assure
Buyer the benefit of any of the Purchased Assets for which
consents were not required;
(e) A certificate executed by the CEO or Secretary of Seller, in
form satisfactory to Buyer and the Buyer's counsel, setting
forth the resolutions adopted by the Board of Directors and
shareholders of Seller authorizing the execution of this
Agreement and the taking of any and all actions deemed
necessary or advisable to consummate the transactions
contemplated hereby;
(f) The books and records of the Business, which may be
delivered by Seller at an alternative location to the
location of the Closing upon the written agreement of
Seller and Buyer;
(g) All other documents, instruments and writings required by
this Agreement or reasonably requested by Buyer to be
delivered at Closing; and,
Seller further agrees, before, at and after the closing upon reasonable
request by Buyer, and without additional consideration, to execute any
additional documentation reasonably necessary to transfer the Purchased
Assets to Buyer.
4.4 Buyer's Deliveries At Closing. At the Closing, Buyer shall
deliver to Seller the following:
(a) One or more stock certificates duly approved and executed
by authorized representatives of the Buyer evidencing the
shares of Buyer to be delivered pursuant to Section 3.1
hereof; and,
(b) A certificate from the Secretary of Buyer, in a form
reasonably satisfactory to Seller and Seller's counsel,
setting forth the resolutions adopted by the Board of
Directors of Buyer authorizing the execution of this
Agreement and the taking of any and all actions deemed
necessary or advisable to consummate the transactions
contemplated hereby.
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as of the Closing Date as
follows:
5.1 Organization: Power and Authority. Seller is a corporation
duly organized, validly existing and in good standing under
the laws of the State of Minnesota, and has all requisite
power and authority to execute, deliver and perform its
obligations under this Agreement and to consummate the
transactions contemplated hereby. Seller has full corporate
power and authority to carry on the Business as it is now
being conducted and to own, license, lease and operate the
Purchased Assets.
5.2 Due Authorization and Execution: Effect of Agreement. The
Board of Directors and shareholders of Seller have taken all
action required by law, its Articles of Incorporation, its
Bylaws or otherwise to authorize the execution and delivery of
this Agreement and the transactions contemplated hereby and no
other corporate action is necessary to authorize the execution
and delivery hereof or the consummation of the transactions
contemplated hereby.
5.3 Litigation Involving Seller. Except as disclosed in Exhibit 5.3,
and except as qualified by Section 5.6 below, there is no action,
suit, proceeding or investigation pending (including, without
limitation, any action, suit, proceeding or investigation with
respect to any federal, state or local laws, rules or regulations),
or to Seller's knowledge, threatened against or detrimentally
affecting Seller, or any of the Purchased Assets which could
materially and adversely affect the Business or any of the Purchased
Assets and no governmental entity has served upon Seller any notice
claiming any violation of any statute, ordinance, or regulation or
noting the need for any repair or remediation with respect to the
Purchased Assets, requesting data or access, requiring testing or
other investigation relating to environmental conditions or requiring
any change in the Purchased Assets or in Seller's means or method of
conducting the Business.
5.4 Consents. No consent, approval or authorization of, exemption by,
or filing with, any governmental or regulatory authority or any third
party is required in connection with the execution, delivery or
performance by Seller of this Agreement and the consummation of the
transactions contemplated hereby.
5.5 Financial Information. Seller has furnished Buyer with true and
complete copies of Seller's financial statements and other financial
information with respect to the Business for the periods ending prior
to the date hereof (the "Financial Statements"). The Financial
Statements are preliminary and unaudited but otherwise present fairly,
in all material respects, the financial position of the Seller and the
results of its operations as of the respective dates and periods
thereof in conformity with generally accepted accounting principles
("GAAP"). Seller has no liabilities or obligations with respect to
the Business of any nature (absolute, accrued, contingent or
otherwise) which are not reflected or reserved against on the
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Financial Statements, except as referred to herein or for commercial
liability and obligations incurred in the ordinary course of business
and consistent with past practice since the date thereof.
5.6 Disclosure of Defaults. Seller has disclosed that it is in default
under various contracts or with respect to various creditors.
Notwithstanding the above, there are no undisclosed pending
foreclosure actions involving the Purchased Assets and since at least
April 1, 1998 Seller has not sold any material assets of the Business,
except in the ordinary course of its business.
5.7 Compliance with Applicable Laws. To the best of its knowledge,
Seller is in compliance with all federal, state and local and foreign
laws, statutes, rules and regulations applicable to Seller, the
Business and the Purchased Assets. Except as disclosed in writing in
an exhibit attached to this agreement, Seller has, to the best of its
knowledge, conducted the Business in compliance with all federal,
state, local and foreign laws, statutes, rules and regulations
applicable to Seller, the Business and the Purchased Assets.
5.8 Title to Purchased Assets. Seller has (or, as of the Closing, will
have) or is entitled to good and marketable title to the Purchased
Assets free and clear of all liens, security interests, mortgages,
pledges or other encumbrances other than the Assumed Liabilities
expressly assumed by Buyer hereunder.
5.9 Use and Condition of Property. To the best of Seller's knowledge,
the tangible Purchased Assets are in operating condition and repair,
ordinary wear excepted, are fit and usable for the purposes for which
they are being used, conform to all applicable laws and regulations
and no notice of any violation of any law, statute, ordinary or
regulation relating to any such property or assets has been received
by Seller. Provided, however, that those Purchased Assets under
development or construction are in various stages of development or
completion.
5.10 Accounts Receivable. The Account Receivables reflected on
the Financial Statements and all the Accounts Receivable
arising after such dates are valid and genuine and arose from
bona fide transactions in the ordinary course of the Business
and have been recorded in accordance with GAAP. No Accounts
Receivable included in the Purchased Assets have been assigned
or pledged to any third party (except for such security
interests of which shall be expressly assumed by Buyer at
Closing pursuant to the terms hereof) and the account obligors
have not asserted a defense or setoff to any such Account
Receivable included in the Purchased Assets.
5.11 Intellectual Property Rights. Seller owns those Proprietary
Rights used in the Business and as set forth in the Exhibit
5.11 and as otherwise disclosed herein. Except as otherwise
disclosed in writing by Seller, the Proprietary Rights of
Seller are not subject to any outstanding orders, decrees,
judgments stipulations, claims or settlements nor is any item
of such Proprietary Rights subject to any mortgage, license,
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option, lease, covenant, condition, agreement, lien, security
interest, adverse claim, restriction, charge or encumbrance
except the Assumed Liabilities, the potential solicitor's lien
of the law firm of Shapiro & Cohen and claims brought by Al
Melling, Melling Design Consultancy or MCD Limited.
Furthermore, there are no pending or threatened claims,
proceedings or lawsuits relating to, affecting or otherwise
impairing the Seller's rights in the Proprietary Rights.
Notwithstanding the above, Buyer acknowledges that various
trademark applications may be subject to government and/or
public inquiries and oppositions.
To the Seller's knowledge, there are no facts that would be
detrimental to the ownership, use or validity of any of the
Proprietary Rights. On or after the execution of this
Agreement, there will be no licenses or rights granted to any
other person or entity with respect to any such Proprietary
Rights except for any rights of Heidelberg Typing and Desktop
Publishing under its agreement with Seller dated December 1,
1998.
Further, Seller is not, to the best of its knowledge,
infringing upon or violating any intellectual property rights
of any other person or entity in the conduct of the Business.
5.12 Taxes. Seller has filed, or will file before Closing, in proper
form all federal, state, local and foreign tax returns required to be
filed prior to the date hereof which relate to the Purchased Assets or
to the Business.
5.13 No Liability For Employee Benefits. Buyer will incur no liability
to, or on account of any employee benefit plan of Seller, any of its
Affiliates or any predecessor employer of any employee.
5.14 Permits, etc. All permits, licenses, registrations and approvals of
and from all governmental authorities necessary for the operation by
Seller of the Business and the Purchased Assets, if any, and are in
full force and effect, and are readily transferable to Buyer without
the consent of any such governmental authority or other third party.
5.15 Brokers, Finders, etc. All negotiations relating to this Agreement
and the transactions contemplated hereby have been carried on without
the intervention of any person acting on behalf of Seller in such
manner as to give rise to any valid claim against Seller or Buyer for
any brokerage or finder's commission, fee or similar compensation.
5.17 Investment Intent. The Seller intends to acquire and hold
the shares of stock issued hereunder (the "Securities") for
its own account and for investment purposes only, and not with
a view to, or for resale in connection with, the distribution
thereof within the meaning of the Securities Act of 1933, as
amended (the "Act The Seller recognizes (i) that an investment
in the securities involves a high degree of risk, and that
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such risks may result in the loss of the total amount of this
investment; (ii) that the purchase of the Securities is a long-
term investment; (iii) that transferability and sale of the
Securities is restricted in many ways; (iv) that the Buyer
makes no representations whatsoever concerning the present or
prospective value of the Securities; and (v) that in the event
of disposition of the Securities, the undersigned could
sustain a total loss of its investment.
The Seller acknowledges that the Securities have not been
registered under the Act and that the Securities may not be
sold, assigned or otherwise transferred (i) except pursuant to
an effective registration statement under the Act and
applicable State securities laws or (ii) unless the Seller
supplies the Buyer with an opinion of an attorney of the
undersigned's choosing to the effect that the proposed sale,
assignment or other transfer is exempt from registration under
applicable federal and state securities laws. As a result
thereof, the Seller may be required to hold the Securities for
an indefinite period of time.
The Seller acknowledges that its agents and advisors have been
afforded the opportunity to examine all books, records,
agreements and other documents relevant to the Buyer and these
Securities and that it has been given an opportunity to ask
questions and receive answers from duly designated
representatives of the Buyer concerning its investment in the
Securities.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
6.1 Organization: Power and Authority. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of
the State of Minnesota, and has all requisite power and authority to
carry on its business as it is now being conducted, to execute,
deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby.
6.2 Due Authorization and Execution: Effect of Agreement. The
execution, delivery and performance by Buyer of this Agreement and
the consummation of Buyer of the transactions contemplated hereby have
been duly authorized by all necessary corporate action required to be
taken on the part of Buyer. This Agreement has been duly and validly
executed and delivered by Buyer and constitutes a valid and binding
obligation of Buyer, enforceable in accordance with its terms.
6.3 Consents. No consent, approval or authorization of exemption by, or
filing with, any governmental or regulatory authority or any other
third party is required in connection with the execution, delivery or
performance by Buyer of this Agreement, except for consents,
approvals, authorizations, exemptions and filings, if any, which: (a)
have been, or by the Closing Date will be, obtained; and (b) Seller
is required to obtain or make.
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6.4 Brokers, Finders, etc. All negotiations relating to this Agreement
and the transactions contemplated hereby have been carried on without
the intervention of any person acting on behalf of Buyer in such
manner as to give rise to any valid claim against Seller or Buyer for
any brokerage or finder's commission, fee or similar compensation.
ARTICLE 7
CONDITION PRECEDENT TO BUYER'S PERFORMANCE
The obligations of Buyer are subject to the fulfillment, prior to or on
the Closing Date, of each of the following conditions:
7.1 Accuracy of Representations and Warranties. All representations
and warranties by the Seller in this Agreement shall be true and
correct on and as of the Closing Date.
7.2 Seller's Compliance. Seller shall have performed, satisfied and
complied with all covenants, assignments, agreements and conditions
required by this Agreement to be performed or complied with by Seller.
ARTICLE 8
CONDITIONS PRECEDENT TO SELLER'S PERFORMANCE
The obligations of Seller under this Agreement are subject to the
satisfaction, on or before the Closing Date of the following conditions.
8.1 Accuracy of Representations and Warranties. All representations
and warranties by the Buyer in this Agreement shall be true on and
as of the Closing Date.
8.2 Compliance by Buyer. The Buyer shall have performed, satisfied and
complied with all covenants, agreements and conditions required by
this Agreement to be performed or complied with by the Buyer.
ARTICLE 9
INDEMNIFICATION
9.1 Indemnification by Seller. Seller hereby agrees to indemnify and
hold the Buyer, its affiliates, and its employees, officers, directors
and agents harmless from, against and in respect of (and shall on
demand reimburse the Buyer for) any and all losses, liabilities,
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damages, claims, costs and expenses (whether or not arising out of
third party claims, including without limitation interest, penalties
and reasonable attorneys' fees) sustained or incurred by the Buyer
in connection with or arising out of:
(a) any untrue representation, breach of warranty, or
nonfulfillment of any covenant by Seller contained herein;
or,
(b) any liabilities or obligations of Seller not specifically
assumed by the Buyer pursuant to the terms of this
Agreement.
9.2 Indemnification by the Buyer. The Buyer shall indemnify and hold
Seller harmless from and against any and all liabilities incurred in
connection with or arising out of any untrue representation, breach
of warranty or nonfulfillment of any covenant by the Buyer contained
herein.
ARTICLE 10
TRANSFER OF INTELLECTUAL PROPERTY RIGHTS
Notwithstanding other obligations of the parties hereunder the parties
expressly agree as follows:
10.1 Change of Corporate Name. Immediately after the Closing, the
Seller shall take such action as may be required to change its
corporate name to one that will not include the name "Norton" (or
other trademark transferred hereby) or otherwise imply a relationship
or sponsorship of Buyer. Immediately after the Closing Buyer shall
forthwith be entitled to change its corporate name to Norton Motors,
Inc. or such other name it shall in its sole discretion choose,
including, but not limited to any name incorporating the name "Norton"
(or other trademark transferred hereby.)
10.2 Transfer of Trademarks and other Intellectual Property Rights.
Contemporaneously with the Closing or thereafter, at the request of
Buyer and without additional consideration therefore, Seller shall
sign all documents necessary to transfer all trademark rights owned
by Seller to the Norton name as well as all other intellectual
property rights transferred hereunder.
ARTICLE 11
DEFAULTS AND REMEDIES
11.1 Event of Default. Any of the following events shall constitute an
"Event of Default" under this Agreement:
(a) The Buyer shall not pay when due the monetary consideration
or issue the stock as required by Article 3.1 of this
Agreement;
(b) The Seller shall fail to take any action required hereunder
to transfer any of the Purchased Assets to Buyer; or,
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(c) Any representation made by the Buyer or Seller in this
Agreement or in any document made collateral to this
Agreement shall prove to be untrue in any material respect
or materially misleading at the time such representation or
warranty was made.
11.2 Notice of Default. Upon the occurrence of one of the defaults
described in this Agreement, the non-breaching party shall give
written notice to the other specifying:
(a) the default;
(b) the action required to cure the default;
(c) if applicable, a date not less than thirty (30) days
from the date the notice is mailed to the party in which
such default must be cured; and
(d) that failure to cure such default on or before the date
specified in the notice shall result in the non-breaching
exercising its remedies at law or as specified in this
Agreement.
11.3 Remedies. Upon the occurrence of an Event of Default,
the non-breaching party, shall be entitled to bring an action
for all remedies to which it might by law be entitled.
11.4 Remedies Not Exclusive. No right or remedy by this
Agreement or by any document or instrument delivered by a
party hereto, shall be or is intended to be exclusive of any
other right or remedy, and each and every right and remedy
shall be cumulative and in addition to any other right or
remedy now or hereafter existing at law or in equity or by
statute.
11.5 Waiver; Forbearance. Except as the parties may hereafter
otherwise agree in writing, no waiver by a party of any breach
or default of the other party, of any of its obligations,
agreements or covenants under this Agreement shall be deemed
to be waiver of any subsequent breach of the same, or any
other obligation, agreement or covenant under this Agreement,
nor shall forbearance by a party to seek a remedy for such
breach be deemed a waiver of its rights and remedies with
respect to such breach, nor shall a party be deemed to have
waived any of its rights and remedies unless it be in writing
and executed with the same formality as this Agreement.
ARTICLE 12
MISCELLANEOUS
12.1 Survival. The representations and warranties made in this
Agreement or in any certificate or other document delivered
pursuant hereto or in connection herewith and the covenants
and agreements contained herein to be performed or complied
with at the Closing, prior to the Closing Date or in
connection with the Closing shall survive the Closing and the
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purchase and sale of the Purchased Assets contemplated hereby.
12.2 Entire Agreement: Amendment. This Agreement, including the
Exhibits and other writing referred to herein or delivered
pursuant to this Agreement constitutes the sole understanding
of the parties with respect to the subject matter hereof and
it supercedes all prior oral or written agreements,
commitments or understandings with respect to the matters
provided for herein. No amendment, modification or alteration
of the terms or provisions of this Agreement shall be binding
unless the same shall be in writing and duly executed by the
parties hereto.
12.3 Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon
the respective successors and assigns of the parties hereto;
provided, however, that this Agreement may not be assigned by
any party without the express prior written consent of the
other party hereto. If this Agreement is assigned with such
consent the terms and conditions hereof shall be binding upon
and shall inure to the benefit of such assignee; provided,
however, that no assignment of this Agreement or any of the
rights or obligations hereof shall relieve any party of its
obligations under this Agreement.
12.4 Counterparts. This Agreement may be executed in counterparts,
each of which shall, for all purposes, be deemed to be an
original and all of which taken together shall constitute the
same instrument.
12.5 Headings. The headings of the Articles, Sections and
paragraphs of this Agreement are inserted for convenience only
and shall not be deemed to constitute part of this Agreement
or to affect the construction hereof.
12.6 Waiver. Any of the terms or conditions of this Agreement may
be waived in writing at any time by the party which is
entitled to the benefits thereof. No waiver of any of the
provisions of this Agreement shall be deemed or shall
constitute a waiver of such provisions at any time in the
future or a waiver of any other provision hereof.
12.7 Expenses. Seller and Buyer shall each pay all costs and
expenses incurred by themselves or on their behalf in
connection with this Agreement and the transactions
contemplated hereby, including without limitation, fees and
expenses of their own financial consultants, accountants and
counsel.
12.8 Notices. Any notice, request, instruction, consent or other
document to be given hereunder by any party hereto to any
other party shall be in writing and delivered personally or
sent by registered or certified mail, postage prepaid, and
shall be deemed given when postmarked and addressed as
follows:
If to Buyer: Norton Acquisition Corporation ______
B.A. Johnson__________ 10 South Fifth Street
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Suite 300
Minneapolis, MN 55402
with a copy to: Duckson & Carlson, LLC
10 South Fifth Street
Suite 300
Minneapolis, MN 55402
Attention: Todd A. Duckson
If to Seller: Norton Motors International Inc.
14252 - 23rd Avenue North
Plymouth, MN 55447-4910
with a copy to: Norton Motors Department
c/o Aquilini Investment Group
ATTN : Myron Calof
Standard Building-Main Level
510 West Hastings
Vancouver, BC V6B 1L8
or at such other address for a party as shall be specified by
like notice. Any notice which is delivered personally in the
manner provided herein shall be deemed to have been duly given
to the party to whom it is directed upon actual receipt by
such party or its agent for notices hereunder.
12.9 Governing Law. This Agreement shall be construed in accordance
with and governed by the laws of the State of Minnesota.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed on its behalf as of the date first above
written.
Buyer: NORTON ACQUISITION CORPORATION
------------------------------
By: /s/ B.A. Johnson
Its: President
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Seller: NORTON MOTORS INTERNATIONAL INC.
--------------------------------
By: /s/ Mark Osterberg /s/ Myron Calof
Its: CFO and CEO
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INDEX TO EXHIBITS
Exhibit 1.1 Purchased Assets
Exhibit 1.1(B) Additional Transferred Rights
EXHIBIT 1.2 Excluded Assets
Exhibit 2.1.2 Trade Accounts Payable
Exhibit 2.1.3 Secured Liabilities
Exhibit 2.1.4 Liabilities Assumed from the Norton Agreement
Exhibit 3.1 Subscription Agreement
Exhibit 3.2 Allocation of Purchase Price
Exhibit 5.3 Litigation or Claims Involving Seller
Exhibit 5.11 Intellectual Property Rights
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EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") is made and entered
into this 16th day of April, 1999, by and between Hallmark Properties,
Inc., a Colorado corporation ("Buyer") and Norton Acquisition
Corporation, a Minnesota corporation ("Seller").
WITNESSETH:
WHEREAS, Seller has acquired substantially all of the assets of
Norton Motors International Inc. (the "Norton Assets") pursuant to the
terms of the Asset Purchase Agreement dated April 9, 1999 (the "Norton
Acquisition Agreement"-a true fully executed copy of which is attached
hereto as Exhibit 1);
WHEREAS, pursuant to the terms of the Norton Acquisition Agreement,
the Seller agreed to assume, discharge and perform when due certain
liabilities and obligations of Norton Motors International Inc. that
were expressly identified in the Norton Acquisition Agreement (the
"Assumed Liabilities"); and,
WHEREAS, Buyer desires to acquire from Seller the Norton Assets and
Seller desires to sell the Norton Assets upon the terms and conditions
stated herein.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements contained herein and for other good
and valuable consideration, the receipt and sufficiency of which are
mutually acknowledged and accepted, Seller and Buyer, intending to be
legally bound, hereby agree as follows:
ARTICLE 1
SALE AND PURCHASE OF ASSETS
1.1 Assets To Be Purchased By Buyer. Subject to the terms and
conditions set forth herein, Seller agrees to sell, transfer, convey
and assign to Buyer, and Buyer agrees to purchase and acquire from
Seller all of Seller's right, title and interest in and to the Norton
Assets transferred to Seller pursuant to the Norton Acquisition
Agreement.
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ARTICLE 2
PURCHASE PRICE
2.1 Purchase Price and Other Consideration. The Buyer shall provide the
following consideration to Seller in exchange for the Norton Assets :
a) Cash Payment. A cash payment at Closing of twenty-five thousand
dollars ($25,000).
b) Stock of Buyer. Buyer shall cause to be issued in the name of the
Seller, Two hundred and fifty two million (252,000,000) restricted
shares of its common stock on the Closing Date pursuant to the
terms of the Subscription Agreement attached hereto as Exhibit 2.1
(the "Securities"). The Securities shall be issued pursuant to
applicable state and federal securities laws exemptions and shall
contain an appropriate legend restricting their transferability.
c) Assumption of Liabilities. As additional consideration for the
transfer of the Norton Assets, the Buyer agrees to be jointly and
severally liable with the Seller for the Assumed Liabilities to
the same extent and degree as Seller. Notwithstanding the above,
to the extent the Seller has discretion over the assumption and
payment of the Assumed Liabilities the Buyer shall also be given
the right to exercise discretion over its obligation for the
Assumed Liabilities.
2.2 Allocation of Purchase Price. The Purchase Price shall be
allocated among the Norton Assets as approved in writing by
the parties hereto at or after Closing for all purposes and
each of the parties shall file with the Internal Revenue
Service Form 8594 on a basis consistent therewith.
2.3 Further Assurances. Each of the parties hereto, before, at and
after the Closing, upon the request from time to time of
any other party hereto and without further consideration,
shall do each and every act and thing as may be necessary or
reasonably desirable to consummate the transactions
contemplated hereby and to effect an orderly transfer to Buyer
of the Norton Assets.
ARTICLE 3
CLOSING
3.1 Binding Nature of Agreement. The sale contemplated by this
Agreement shall be a legally binding obligation of the parties hereto
upon execution thereof by officers of the respective parties, subject
only to rescission by the affirmative vote of a majority of the
shareholders of Seller. The Seller hereby agrees and warrants to
deliver, on or before Closing, the affirmative vote of at least a
majority of the shareholders of the Seller approving the sale
contemplated by this Agreement.
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3.2 Time and Place of Closing. The closing of the transactions
contemplated hereby (the "Closing") shall take place at the
offices of Duckson & Carlson, LLC, 10 South Fifth Street, Suite 300,
Minneapolis, Minnesota 55402, on April 30 , 1999 at 2:00 p.m. or at
such other place or on such other date which the parties may mutually
agree in writing ("Closing Date"). All transfers and other proceedings
required to be made or taken at the Closing shall be deemed to have
taken place simultaneously, and no delivery shall be considered to
have been made until all such proceedings have been completed. Legal
title, equitable title and risk of loss with respect to the Norton
Assets shall be deemed to have passed to Buyer on transfer of such
Norton Assets on Closing.
3.4 Seller's Deliveries At Closing. At the Closing, Seller shall
deliver to Buyer the following:
(a) Any Bill of Sale document reasonably requested by the Buyer
evidencing the transfer of any tangible assets transferred
hereby and such deeds (together with affidavits of title),
assignments, certificates of title, and other instruments of
conveyance as Buyer shall reasonably require to convey to
Buyer the Norton Assets, including, without limitation,
assignments of any Proprietary Rights included in the Norton
Assets;
(b) A fully executed Subscription Agreement in the form attached
hereto as Exhibit 2.1;
(c) Any consents from third required to permit Buyer to obtain
the benefits of all the Norton Assets under the same terms
and conditions as are applicable to Seller and to prevent
a breach of any agreement or security interest relating to
the Norton Assets. In addition, Seller shall deliver to
Buyer, from time to time, such documentation as Buyer may
reasonably request to assure Buyer the benefit of any of
the Norton Assets for which consents were not required;
(d) A certificate executed by the President or Secretary of
Seller, in form satisfactory to Buyer and the Buyer's
counsel, setting forth the resolutions adopted by the Board
of Directors and shareholders of Seller authorizing the
execution of this Agreement and the taking of any and
all actions deemed necessary or advisable to consummate the
transactions contemplated hereby;
(e) The books and records of the Business, which may be
delivered by Seller at an alternative location to the
location of the Closing upon the written agreement of Seller
and Buyer;
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(f) All other documents, instruments and writings required by
this Agreement or reasonably requested by Buyer to be
delivered at Closing; and,
Seller further agrees, before, at and after the closing upon reasonable
request by Buyer, and without additional consideration, to execute any
additional documentation reasonably necessary to transfer the Norton
Assets to Buyer.
3.5 Buyer's Deliveries At Closing. At the Closing, Buyer shall
deliver to Seller the following:
(a) One or more stock certificates duly approved and executed
by authorized representatives of the Buyer evidencing the
shares of Buyer to be delivered pursuant to Section 3.1
hereof; and,
(b) A certificate from the Secretary of Buyer, in a form
reasonably satisfactory to Seller and Seller's counsel,
setting forth the resolutions adopted by the Board of
Directors of Buyer authorizing the execution of this
Agreement and the taking of any and all actions deemed
necessary or advisable to consummate the transactions
contemplated hereby.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as of the Closing Date as
follows:
4.1 Organization: Power and Authority. Seller is a corporation
duly organized, validly existing and in good standing under
the laws of the State of Minnesota, and has all requisite
power and authority to execute, deliver and perform its
obligations under this Agreement and to consummate the
transactions contemplated hereby.
4.2 Due Authorization and Execution: Effect of Agreement. The Board of
Directors and shareholders of Seller have taken all action required
by law, its Articles of Incorporation, its Bylaws or otherwise to
authorize the execution and delivery of this Agreement and the
transactions contemplated hereby and no other corporate action is
necessary to authorize the execution and delivery hereof or the
consummation of the transactions contemplated hereby.
4.3 Litigation Involving Seller. There is no action, suit, proceeding
or investigation pending (including, without limitation, any action,
suit, proceeding or investigation with respect to any federal, state
or local laws, rules or regulations), or to Seller's knowledge,
threatened against or detrimentally affecting Seller and no
governmental entity has served upon Seller any notice claiming any
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violation of any statute, ordinance, or regulation or noting the need
for any repair or remediation, requesting data or access, requiring
testing or other investigation relating to environmental conditions
or otherwise.
4.4 Compliance with Applicable Laws. To the best of its knowledge,
Seller is in compliance with all federal, state and local and foreign
laws, statutes, rules and regulations applicable to Seller.
4.5 No Liability For Employee Benefits. Buyer will incur no liability
to, or on account of any employee benefit plan of Seller, any of its
Affiliates or any predecessor employer of any employee.
4.6 Brokers, Finders, etc. All negotiations relating to this Agreement
and the transactions contemplated hereby have been carried on without
the intervention of any person acting on behalf of Seller in such
manner as to give rise to any valid claim against Seller or Buyer
for any brokerage or finder's commission, fee or similar compensation.
4.7 Investment Intent. The Seller intends to acquire and hold
the shares of stock issued hereunder (the "Securities") for
its own account and for investment purposes only, and not with
a view to, or for resale in connection with, the distribution
thereof within the meaning of the Securities Act of 1933, as
amended (the "Act"). The Seller recognizes (i) that an
investment in the securities involves a high degree of risk,
and that such risks may result in the loss of the total amount
of this investment; (ii) that the purchase of the Securities
is a long-term investment; (iii) that transferability and sale
of the Securities is restricted in many ways; (iv) that the
Buyer makes no representations whatsoever concerning the
present or prospective value of the Securities; and (v) that
in the event of disposition of the Securities, the undersigned
could sustain a total loss of its investment.
The Seller acknowledges that the Securities have not been
registered under the Act and that the Securities may not be
sold, assigned or otherwise transferred (i) except pursuant to
an effective registration statement under the Act and
applicable State securities laws or (ii) unless the Seller
supplies the Buyer with an opinion of an attorney of the
undersigned's choosing to the effect that the proposed sale,
assignment or other transfer is exempt from registration under
applicable federal and state securities laws. As a result
thereof, the Seller may be required to hold the Securities for
an indefinite period of time.
The Seller acknowledges that its agents and advisors have been
afforded the opportunity to examine all books, records,
agreements and other documents relevant to the Buyer and these
Securities and that it has been given an opportunity to ask
questions and receive answers from duly designated
representatives of the Buyer concerning its investment in the
Securities.
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
5.1 Organization: Power and Authority. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Colorado, and has all requisite power and authority to carry
on its business as it is now being conducted, to execute, deliver and
perform its obligations under this Agreement and to consummate the
transactions contemplated hereby.
5.2 Due Authorization and Execution: Effect of Agreement. The execution,
delivery and performance by Buyer of this Agreement and the
consummation of Buyer of the transactions contemplated hereby have
been duly authorized by all necessary corporate action required to be
taken on the part of Buyer. This Agreement has been duly and validly
executed and delivered by Buyer and constitutes a valid and binding
obligation of Buyer, enforceable in accordance with its terms.
5.3 Consents. No consent, approval or authorization of exemption by, or
filing with, any governmental or regulatory authority or any other
third party is required in connection with the execution, delivery or
performance by Buyer of this Agreement, except for consents,
approvals, authorizations, exemptions and filings, if any, which: (a)
have been, or by the Closing Date will be, obtained; and (b) Seller
is required to obtain or make.
5.4 Brokers, Finders, etc. All negotiations relating to this Agreement
and the transactions contemplated hereby have been carried on without
the intervention of any person acting on behalf of Buyer in such
manner as to give rise to any valid claim against Seller or Buyer for
any brokerage or finder's commission, fee or similar compensation.
ARTICLE 6
CONDITION PRECEDENT TO BUYER'S PERFORMANCE
The obligations of Buyer are subject to the fulfillment, prior to or on
the Closing Date, of each of the following conditions:
6.1 Accuracy of Representations and Warranties. All representations
and warranties by the Seller in this Agreement shall be true and
correct on and as of the Closing Date.
6.2 Seller's Compliance. Seller shall have performed, satisfied and
complied with all covenants, assignments, agreements and conditions
required by this Agreement to be performed or complied with by
Seller.
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ARTICLE 7
CONDITIONS PRECEDENT TO SELLER'S PERFORMANCE
The obligations of Seller under this Agreement are subject to the
satisfaction, on or before the Closing Date of the following conditions.
7.1 Accuracy of Representations and Warranties. All representations
and warranties by the Buyer in this Agreement shall be true on and
as of the Closing Date.
7.2 Compliance by Buyer. The Buyer shall have performed, satisfied and
complied with all covenants, agreements and conditions required by
this Agreement to be performed or complied with by the Buyer.
ARTICLE 8
INDEMNIFICATION
8.1 Indemnification by Seller. Seller hereby agrees to indemnify and
hold the Buyer, its affiliates, and its employees, officers, directors
and agents harmless from, against and in respect of (and shall on
demand reimburse the Buyer for) any and all losses, liabilities,
damages, claims, costs and expenses (whether or not arising out of
third party claims, including without limitation interest, penalties
and reasonable attorneys' fees) sustained or incurred by the Buyer
in connection with or arising out of:
(a) any untrue representation, breach of warranty, or
nonfulfillment of any covenant by Seller contained herein;
or,
(b) any liabilities or obligations of Seller not specifically
assumed by the Buyer pursuant to the terms of this
Agreement.
8.2 Indemnification by the Buyer. Buyer hereby agrees to indemnify
and hold the Seller, its affiliates, and its employees,
officers, directors and agents harmless from, against and in
respect of (and shall on demand reimburse the Seller for) any
and all losses, liabilities, damages, claims, costs and
expenses (whether or not arising out of third party claims,
including without limitation interest, penalties and
reasonable attorneys' fees) sustained or incurred by the
Seller in connection with or arising out of:
(c) any untrue representation, breach of warranty, or
nonfulfillment of any covenant by Buyer contained herein;
or,
(d) any liabilities or obligations of Buyer not specifically
assumed by the Seller pursuant to the terms of this
Agreement.
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ARTICLE 9
TRANSFER OF INTELLECTUAL PROPERTY RIGHTS
9.1 Transfer of Trademarks and other Intellectual Property Rights.
Contemporaneously with the Closing or thereafter, at the request of
Buyer and without additional consideration therefore, Seller shall
sign all documents necessary to transfer to Buyer all trademark rights
owned by Seller to the Norton name as well as all other intellectual
property rights transferred hereunder.
ARTICLE 10
DEFAULTS AND REMEDIES
10.1 Event of Default. Any of the following events shall constitute an
"Event of Default" under this Agreement:
(a) The Buyer shall not pay when due the monetary consideration
or issue the stock as required by Article 2.1 of this
Agreement;
(b) The Seller shall fail to take any action required hereunder
to transfer any of the Norton Assets to Buyer; or,
(e) Any representation made by the Buyer or Seller in this
Agreement or in any document made collateral to this
Agreement shall prove to be untrue in any material respect
or materially misleading at the time such representation or
warranty was made.
10.2 Notice of Default. Upon the occurrence of one of the defaults
described in this Agreement, the non-breaching party shall give
written notice to the other specifying:
(a) the default;
(b) the action required to cure the default;
(c) if applicable, a date not less than thirty (30) days from
the date the notice is mailed to the party in which such
default must be cured; and
(d) that failure to cure such default on or before the date
specified in the notice shall result in the non-breaching
exercising its remedies at law or as specified in this
Agreement.
10.3 Remedies. Upon the occurrence of an Event of Default, the non-
breaching party, shall be entitled to bring an action for all
remedies to which it might by law be entitled.
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10.4 Remedies Not Exclusive. No right or remedy by this Agreement or by
any document or instrument delivered by a party hereto, shall be or
is intended to be exclusive of any other right or remedy, and each
and every right and remedy shall be cumulative and in addition to any
other right or remedy now or hereafter existing at law or in equity
or by statute.
10.5 Waiver; Forbearance. Except as the parties may hereafter
otherwise agree in writing, no waiver by a party of any breach
or default of the other party, of any of its obligations,
agreements or covenants under this Agreement shall be deemed
to be waiver of any subsequent breach of the same, or any
other obligation, agreement or covenant under this Agreement,
nor shall forbearance by a party to seek a remedy for such
breach be deemed a waiver of its rights and remedies with
respect to such breach, nor shall a party be deemed to have
waived any of its rights and remedies unless it be in writing
and executed with the same formality as this Agreement.
ARTICLE 11
MISCELLANEOUS
11.1 Survival. The representations and warranties made in this
Agreement or in any certificate or other document delivered
pursuant hereto or in connection herewith and the covenants
and agreements contained herein to be performed or complied
with at the Closing, prior to the Closing Date or in
connection with the Closing shall survive the Closing and the
purchase and sale of the Norton Assets contemplated hereby.
11.2 Entire Agreement: Amendment. This Agreement, including the
Exhibits and other writing referred to herein or delivered
pursuant to this Agreement constitutes the sole understanding
of the parties with respect to the subject matter hereof and
it supercedes all prior oral or written agreements,
commitments or understandings with respect to the matters
provided for herein. No amendment, modification or alteration
of the terms or provisions of this Agreement shall be binding
unless the same shall be in writing and duly executed by the
parties hereto.
11.3 Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon
the respective successors and assigns of the parties hereto;
provided, however, that this Agreement may not be assigned by
any party without the express prior written consent of the
other party hereto. If this Agreement is assigned with such
consent the terms and conditions hereof shall be binding upon
and shall inure to the benefit of such assignee; provided,
however, that no assignment of this Agreement or any of the
rights or obligations hereof shall relieve any party of its
obligations under this Agreement.
9
<PAGE>
11.4 Counterparts. This Agreement may be executed in counterparts,
each of which shall, for all purposes, be deemed to be an
original and all of which taken together shall constitute the
same instrument.
11.5 Headings. The headings of the Articles, Sections and
paragraphs of this Agreement are inserted for convenience only
and shall not be deemed to constitute part of this Agreement
or to affect the construction hereof.
11.6 Waiver. Any of the terms or conditions of this Agreement may
be waived in writing at any time by the party which is
entitled to the benefits thereof. No waiver of any of the
provisions of this Agreement shall be deemed or shall
constitute a waiver of such provisions at any time in the
future or a waiver of any other provision hereof.
11.7 Expenses. Seller and Buyer shall each pay all costs and
expenses incurred by themselves or on their behalf in
connection with this Agreement and the transactions
contemplated hereby, including without limitation, fees and
expenses of their own financial consultants, accountants and
counsel.
11.8 Notices. Any notice, request, instruction, consent or other
document to be given hereunder by any party hereto to any
other party shall be in writing and delivered personally or
sent by registered or certified mail, postage prepaid, and
shall be deemed given when postmarked and addressed as
follows:
If to Buyer: Hallmark Properties, Inc.
14252 23rd Avenue North
Plymouth, MN 55447-4910
If to Seller: Norton Acquisition Corporation
Ten South Fifth Street
Minneapolis, MN 55402
or at such other address for a party as shall be specified by
like notice. Any notice which is delivered personally in the
manner provided herein shall be deemed to have been duly given
to the party to whom it is directed upon actual receipt by
such party or its agent for notices hereunder.
11.9 Governing Law. This Agreement shall be construed in accordance
with and governed by the laws of the State of Minnesota.
10
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed on its behalf as of the date first above
written.
Buyer: HALLMARK PROPERTIES, INC.
By: /s/ Mark Osterberg
Its: CEO
Seller: NORTON ACQUISITION CORPORATION
By: /s/ B.A. Johnson
Its: President
11
<PAGE>
INDEX TO EXHIBITS
EXHIBIT 1 Norton Acquisition Agreement (w/Exhibits)
Exhibit 2.1 Subscription Agreement
12
EXHIBIT 3.4
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
HALLMARK PROPERTIES, INC.
Pursuant to the applicable provisions of the Colorado Corporation
statutes, the undersigned corporation adopts the following amendment to
its current Articles of Incorporation effective as of the date written
below:
1. That ARTICLE 1 shall be amended to reflect the corporation's change
of name to NORTON MOTORCYCLES, INC.
2. That ARTICLE 4 shall be amended to note that the shares of Common
Stock outstanding as of April 30, 1999 shall be reverse split on the
basis of one (1) share for each forty-two (42) shares outstanding.
3. That there being sufficient shares voting in favor of adopting said
amendments the same has been approved by a vote of the shareholders
pursuant to the applicable provisions of the Colorado Business
Corporations Act effective April 30, 1999.
HALLMARK PROPERTIES, INC.
By: /s/ Mark Osterberg, CEO
Effective Date : April 30, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM NORTON MOTORCYCLES,
INC. FORM 10-KSB FOR THE YEAR ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FILING.
</LEGEND>
<CIK> 0000802203
<NAME> NORTON MOTORCYCLES, INC.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> MAR-31-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 296,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
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<EXTRAORDINARY> 0
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<NET-INCOME> 0
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</TABLE>
