<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 24, 1997
REGISTRATION NO. 333-21595
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-1/A
AMENDMENT NO. 1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
TRIDENT ROWAN GROUP, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
MARYLAND 3751 52-0466460
(State or other jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or organization) Industrial Classification Identification No.)
Code Number)
</TABLE>
--------------------------
TWO WORLDS FAIR DRIVE, FRANKLIN TOWNSHIP, SOMERSET, N.J. 08873
(908) 868-9000
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
------------------------------
HOWARD E. CHASE
PRESIDENT AND CHIEF EXECUTIVE OFFICER
TWO WORLDS FAIR DRIVE
FRANKLIN TOWNSHIP, SOMERSET, N.J. 08873
(908) 868-9000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------------
COPIES OF ALL COMMUNICATIONS REGARDING THIS REGISTRATION STATEMENT SHOULD BE
SENT TO:
<TABLE>
<S> <C>
STEPHEN I. BUDOW, ESQ. DAVID ALAN MILLER, ESQ.
DAVID LERNER, ESQ. GRAUBARD, MOLLEN & MILLER
MORRISON COHEN SINGER & WEINSTEIN, LLP 600 THIRD AVENUE
750 LEXINGTON AVENUE NEW YORK, NEW YORK 10022
NEW YORK, NEW YORK 10022 (212) 818-8800 (TELEPHONE)
(212) 735-8600 (TELEPHONE) (212) 818-8881 (FACSIMILE)
(212) 735-8708 (FACSIMILE)
</TABLE>
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
--------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE
TO BE REGISTERED REGISTERED PER SECURITY OFFERING PRICE
<S> <C> <C> <C>
Common Stock, par value $0.01.......................... 1,437,500 (1) $8.44(2) $12,132,500
Common Stock, par value $0.01.......................... 1,635,000 (3) $7.38(4) $12,066,300
Warrants............................................... 1,437,500 (1) $.10 $143,750
Common Stock issuable upon exercise of Warrants........ 1,437,500 $10.13 (2) $14,561,875
Common Stock issuable upon exercise of other Common
Stock Purchase Warrants.............................. 1,250,000 (5) $7.38(4) $9,225,000
Common Stock issuable upon exercise of Representative's
Purchase Option...................................... 125,000 $9.28(2) $1,160,000
Warrants issuable upon exercise of
Representative's Purchase Option..................... 125,000 $0.11(2) $13,750
Common Stock issuable upon exercise of warrants
issuable upon exercise of Representative's
Purchase Option...................................... 125,000 $10.13(2) $1,266,250
Subtotal......................................................................................
Amount previously paid............................................................................................
Total.........................................................................................................
<CAPTION>
TITLE OF SECURITIES AMOUNT OF
TO BE REGISTERED REGISTRATION FEE
<S> <C>
Common Stock, par value $0.01.......................... $3,676.15
Common Stock, par value $0.01.......................... $3,656.45
Warrants............................................... $43.56
Common Stock issuable upon exercise of Warrants........ $4,412.25
Common Stock issuable upon exercise of other Common
Stock Purchase Warrants.............................. $2,795.45
Common Stock issuable upon exercise of Representative's
Purchase Option...................................... $351.48
Warrants issuable upon exercise of
Representative's Purchase Option..................... $4.17
Common Stock issuable upon exercise of warrants
issuable upon exercise of Representative's
Purchase Option...................................... $383.67
Subtotal........................................... $15,323.18
Amount previously paid............................. 8,871.28
-----------------
Total.......................................... 6,451.90
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
(FOOTNOTES FROM PREVIOUS PAGE)
- ------------------------
(1) Includes 187,500 shares of Common Stock or 187,500 Warrants, as the case may
be, issuable upon exercise of the Underwriters' over-allotment option.
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(c) of the Securities Act of 1933, as amended ("Securities Act")
based on the last sale price of the Registrant's Common Stock on the Nasdaq
SmallCap Market on February 4, 1997 which is within five business days of
the filing day of the Registrant's original registration statement on Form
S-1 (Reg. No. 333-21595).
(3) Such shares of Common Stock are being registered for resale by a
securityholder on a delayed or continuous basis, pursuant to Rule 415 under
the Securities Act. Of such amount, 1,000,000 shares will be privately sold
from one shareholder to another shareholder prior to the effective date of
this Registration Statement pursuant to an Agreement to Purchase Common
Stock dated March 7, 1997 between the shareholders and 635,000 shares will
be sold pursuant to a put and call option granted pursuant to such Agreement
to Purchase Common Stock.
(4) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(c) of the Securities Act based on the last reported sale price
of the Registrant's Common Stock on the Nasdaq SmallCap Market on April 22,
1997.
(5) Such shares of Common Stock are being registered for resale by a
securityholder on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act. The Warrant pursuant to which the shares are issuable
will be issued by the Company to the selling securityholder prior to the
date of this Prospectus pursuant to an Inducement Agreement dated April 8,
1997 between the Company and an entity of which the selling securityholder
is the manager.
Pursuant to Rule 416, there are also being registered hereby such
indeterminable number of additional shares of Common Stock as may be issued as a
result of the antidilution provisions of the Warrant and the Representative's
Purchase Option.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
TRIDENT ROWAN GROUP, INC.
CROSS-REFERENCE SHEET BETWEEN ITEMS OF FORM S-1 AND
FORM OF PROSPECTUS PURSUANT TO REGULATION S-K, ITEM 501(B)
<TABLE>
<CAPTION>
ITEM NO. LOCATION IN PROSPECTUS
- ------------- ----------------------------------------------------
<S> <C> <C>
1. Forepart of Registration Statement and Outside Front
Cover Page of Prospectus............................ Facing Page, Outside Front Cover Page
2. Inside Front and Outside Back Cover
Pages of Prospectus................................. Inside Front Cover Page, Outside Back Cover Page
3. Summary Information, Risk Factors and Ratio Ratio of
Earnings to Fixed Charges........................... Summary, Risk Factors
4. Use of Proceeds..................................... Summary, Use of Proceeds
5. Determination of Offering Price..................... Outside Front Cover Page, Underwriting
6. Dilution............................................ Inapplicable
7. Selling Security Holders............................ Inapplicable
8. Plan of Distribution................................ Underwriting; Inside Front Cover Page
9. Description of Securities to be Registered.......... Description of Securities
10. Interests of Named Experts and Counsel.............. Inapplicable
11. Information with Respect to the
Registrant.......................................... Summary, Summary Consolidated Financial Data,
Capitalization, Selected Consolidated Financial
Data, Risk Factors, Management's Discussion and
Analysis of Financial Condition and Results of
Operations, Business, Management, Certain
Transactions, Principal Shareholders, Description of
Securities
12. Disclosure of Commission Position on Indemnification
for
Securities Act Liabilities.......................... Inapplicable
</TABLE>
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectus: one prospectus
to be used in connection with an offering of 1,437,500 shares of Common Stock
and 1,437,500 Redeemable Common Stock Purchase Warrants (inclusive of shares and
warrants issuable pursuant to the underwriters' overallotment option and the
shares issuable upon exercise of the Redeemable Common Stock Purchase Warrants,
the "Underwritten Offering Prospectus,"); and another prospectus to be used in
connection with the resale of up to 2,885,000 shares of Common Stock by certain
shareholders of the Company (consisting of 1,635,000 shares of Common Stock to
be acquired by Tamarix Investors, LDC ("Tamarix"), a Cayman Islands limited
duration company from Finprogetti S.p.A. ("Finprogetti") pursuant to an
agreement between them dated March 7, 1997 (the "Tamarix/Finprogetti Acquisition
Agreement") and 1,250,000 shares issuable upon the exercise of common stock
purchase warrants ("Centaurus Warrant") issued to Centaurus Management, LDC
("Centaurus"), a Cayman Islands limited duration company and the Manager of
Tamarix, by the Company pursuant to an Inducement Agreement with Tamarix dated
April 8, 1997 ("Inducement Agreement"), the "Tamarix Prospectus"). Pursuant to
an agreement between Tamarix and GKN Securities Corp., the Representative of the
underwriters in the Underwritten Offering, Tamarix and Centaurus each has agreed
not to sell or otherwise transfer any of their shares of Common Stock or any
securities convertible into Common Stock for a period of 18 months from the
effective date of the Registration Statement. The Underwritten Offering
Prospectus and the Tamarix Prospectus will be identical except for the
alternative pages for the Tamarix Prospectus included herein which are labeled
"Alternative Page for Tamarix Prospectus."
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS, DATED APRIL 24, 1997
PROSPECTUS
[LOGO]
1,250,000 SHARES OF COMMON STOCK AND
1,250,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
All of the shares of common stock ("Common Stock") and Redeemable Common Stock
Purchase Warrants ("Warrants") offered hereby (collectively, "Securities") are
being sold by Trident Rowan Group, Inc. ("Company" or "TRG"). Each Warrant is
exercisable for four years commencing one year from the date of this Prospectus
at an exercise price of $ [120% of the offering price per share of
Common Stock]. The Company may redeem the Warrants at a price of $.01 per
Warrant at any time after they become exercisable if notice of not less than 30
days is given and the last sale price of the Common Stock has been at least
133 1/3% of the then exercise price of the Warrants on all 20 trading days
ending on the third day prior to the day on which notice is given. See
"Description of Securities."
The Common Stock is traded on the Nasdaq SmallCap Market under the symbol
"TRGI." The last sale price of the Common Stock on April 16, 1997 was $8.13.
Prior to this Offering there has been no public market for the Warrants and
there can be no assurance that any such market will develop. The Company has
applied for quotation of the Common Stock and Warrants on the Nasdaq National
Market System under the symbols TRGI and TRGIW, respectively.
------------------------
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
BEGINNING ON PAGE 8.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS
TO DISCOUNTS AND TO
PUBLIC COMMISSIONS(1) COMPANY(2)
<S> <C> <C> <C>
Per Share............................................................... $ $ $
Per Warrant............................................................. $ $ $
Total(3)................................................................ $ $ $
</TABLE>
(1) Does not include a 3% nonaccountable expense allowance which the Company has
agreed to pay to the Representative of the Underwriters. The Company has
also agreed to sell to the Representative of the Underwriters an option
("Representative's Purchase Option") to purchase up to 125,000 shares of
Common Stock and/or 125,000 Warrants and to indemnify the Underwriters
against certain liabilities, including liabilities under the Securities Act
of 1933, as amended ("Securities Act"). See "Underwriting."
(2) Before deducting expenses payable by the Company, including the
nonaccountable expense allowance, estimated at approximately $ .
(3) The Company has granted to the Underwriters an option exercisable within 45
days from the date of this Prospectus, to purchase up to an additional
187,500 shares of Common Stock and/or 187,500 Warrants on the same terms as
set forth above, solely to cover over-allotments, if any. If such
over-allotment option is exercised in full, the total Price to Public,
Underwriting Discounts and Commissions and Proceeds to Company will be
$ , $ and $ , respectively. See "Underwriting."
The Securities are being offered by the Underwriters subject to prior sale,
when, as and if delivered to and accepted by the Underwriters and subject to the
approval of certain legal matters by counsel and certain other conditions. The
Underwriters reserve the right to withdraw, cancel or modify this Offering and
to reject any order in whole or in part. It is expected that delivery of
certificates representing the Securities will be made against payment therefor
at the offices of GKN Securities Corp. in New York City on or about ,
1997.
GKN SECURITIES CORP. SOUTHEAST RESEARCH PARTNERS, INC.
, 1997
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICES OF THE SECURITIES, INCLUDING
OVER-ALLOTMENT, STABILIZING AND SYNDICATE SHORT COVERING TRANSACTIONS AND
PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO, AND
SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL
STATEMENTS (INCLUDING THE NOTES THERETO) APPEARING ELSEWHERE IN THIS PROSPECTUS.
EACH INVESTOR IS URGED TO READ THIS PROSPECTUS IN ITS ENTIRETY. THIS PROSPECTUS
CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND UNCERTAINTIES. THE
COMPANY'S ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THE RESULTS DISCUSSED IN
THE FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE
INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN "RISK FACTORS." THE COMPANY
UNDERTAKES NO OBLIGATION TO RELEASE THE RESULT OF ANY REVISIONS TO THESE
FORWARD-LOOKING STATEMENTS THAT MAY BE MADE TO REFLECT EVENTS OR CIRCUMSTANCES
AFTER THE DATE HEREOF, OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.
THE COMPANY
Trident Rowan Group, Inc. ("TRG" or the "Company") is a U.S. holding company
which owns Moto Guzzi, S.p.A. ("Moto Guzzi"), an Italian manufacturer of luxury
motorcycles, L.I.T.A. S.p.A., an Italian manufacturer of welded steel tubes used
principally by the automobile and furniture industries, and Temporary Integrated
Management S.p.A. ("T.I.M."), which provides temporary management to troubled
businesses located primarily in Italy. The Company's strategic objective is to
make investments in troubled businesses identified through the management
activities of T.I.M. and through the Company's merchant banking group.
MOTO GUZZI
Moto Guzzi was founded 75 years ago and has earned a reputation as one of
the elite motorcycle manufacturers in the world. Moto Guzzi also sells
motorcycle spare parts through its wholly-owned subsidiary, Centro Ricambi
S.r.l. Moto Guzzi distributes its motorcycles worldwide through a network of
wholly or partially owned importers and independent dealers. Recognizing the
strategic importance to its growth of the U.S. market, in 1996 Moto Guzzi
acquired Moto America, Inc., the exclusive U.S. importer and distributor of its
products.
For more than 10 years, Moto Guzzi has failed to operate profitably. In
1994, TRG engaged T.I.M., then an independent management company, and, since
1995, a wholly owned subsidiary of the Company, to provide emergency temporary
management services to Moto Guzzi. T.I.M. developed a strategic plan to improve
the operating results of Moto Guzzi and materially enhance its value. Under
T.I.M.'s management, Moto Guzzi has implemented a program of selective component
outsourcing and has improved both production levels and results of operations.
Moto Guzzi currently produces five principal models, the "V-10 Centauro," the
"Daytona RS" (which may be marketed under another name in the United States),
the "Sport 1100," the "California 1100" and the "Nevada 750." New models are
also planned. Additionally, Moto Guzzi manufactures military and police models.
Since May 1994, Moto Guzzi has made significant progress in its turnaround
of operations, increasing sales and production from approximately 3,600 units in
1993 to more than 6,000 units in 1996. Although Moto Guzzi realized a net loss
in 1996, revenues increased by 20% in 1996 compared to 1995, and motorcycle unit
production increased nearly 16%. Under the strategic plan proposed by T.I.M.,
significant increases in production are planned for each of the next few years,
financed in part by the proceeds of a recent $6 million private offering of
securities by the Company's subsidiary, Moto Guzzi Corp., a Delaware corporation
which owns 100% of the capital stock of Moto Guzzi ("Moto Guzzi Financing"). See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
Moto Guzzi has recently hired as its new Managing Director Mr. Oscar
Cecchinato, the former chief executive officer of Aprilia S.p.A., Italy's
largest motorcycle manufacturer.
3
<PAGE>
L.I.T.A.
L.I.T.A. manufactures specialty steel tubes used principally in the
automotive and furniture industries. T.I.M. had been engaged by L.I.T.A. after a
material decline in L.I.T.A.'s operations. The Company acquired L.I.T.A. in
1995. The Company is seeking to enhance the value of L.I.T.A. by increasing
sales to a level which will permit a sale to, or merger with, a competitor on
favorable terms. In 1996, although sales increased 23% over 1995, falling steel
prices in the first half of 1996 forced L.I.T.A. to lower prices of its finished
product, which resulted in losses. Stability in steel prices and further
increases in sales are likely to be preconditions for eventual realization of
value from L.I.T.A.
T.I.M.
T.I.M. provides temporary management for companies facing special problems.
It does so through a network of experienced and qualified managers which it
makes available to operate all or strategic portions of the businesses of its
clients. Managers are selected based on a client's specific needs and are
supported by T.I.M.'s management and administrative resources. T.I.M. analyzes
the client's businesses and develops strategic business plans based on the
client's objectives which, upon agreement with the client, define the goals and
standards upon which T.I.M.'s performance and incentive compensation will be
measured at the end of each engagement. A significant component of T.I.M.'s
compensation is performance related.
A typical T.I.M. engagement requires the appointment of a T.I.M. manager to
act as a temporary Chief Executive Officer, or, less frequently, as Chief
Financial Officer, Chief Operating Officer or as an executive responsible for a
specific functional team or project. The engagement might require the adoption
of a fundamental corporate restructuring, a sale or other divestiture of assets,
the reorganization of marketing or distribution functions, financial
restructuring, or managing technological innovation. T.I.M.'s strategic plans
usually focus on reestablishing profitability and increasing net worth,
achieving productivity growth and managing staff reductions, accelerating the
decision-making process, and bridging cultural gaps which may have inhibited
growth. Engagements are typically of a duration of 12 to 24 months.
The Company's merchant banking group analyzes investment opportunities that
arise out of, or which could involve, T.I.M.'s management engagements, and then
negotiates the terms of such investments. It is the Company's policy that such
investments will be made only in companies in which it provides senior level
temporary management.
CHANGE OF CONTROL
Finprogetti S.p.A. ("Finprogetti") has agreed pursuant to an agreement dated
March 7, 1997 (the "Tamarix/Finprogetti Acquisition Agreement"), to sell to
Tamarix Investors, LDC ("Tamarix") a Cayman Islands limited duration company,
prior to the effective date of this Registration Statement 1,000,000 shares of
Common Stock of the Company owned by Finprogetti. Tamarix and Finprogetti have
agreed that Finprogetti shall have a put right and Tamarix shall have a call
right with respect to an additional 635,000 shares of Common Stock owned by
Finprogetti. The put option is exercisable for a one-year period, beginning on
the first anniversary of the closing of the 1,000,000 share purchase and the
call option is exercisable during the two years beginning on such closing date.
During such two-year period, Tamarix will have a proxy from Finprogetti to vote
such 635,000 shares. In addition, prior to the effective date of this
Registration Statement, Finprogetti is required to deliver the resignations of
certain members of the Company's Board of Directors who had been nominated by
Finprogetti. In connection with the Tamarix/Finprogetti Acquisition Agreement,
the Company has agreed to (a) issue to Centaurus Management, LDC ("Centaurus"),
a Cayman Islands limited duration company and the Manager of Tamarix, a Warrant
(the "Centaurus Warrant") to purchase 1,250,000 shares of Common Stock at an
exercise price equal to the per-share offering price in this Offering,
exercisable for a three-year period commencing on the date of this Prospectus,
(b) register for resale the shares of Common Stock purchased from Finprogetti,
as well as
4
<PAGE>
the shares underlying the Centaurus Warrant, and (c) cause the By-Laws or the
Certificate of Incorporation of the Company to be amended to provide for (i) a
staggered Board of Directors which shall include at least one person nominated
by Tamarix in each of the three classes, (ii) provide for a representative of
Tamarix to be Chairman of the Board of the Company, (iii) provide that Tamarix's
consent will be required to further amend the Company's Certificate of
Incorporation, and (iv) require that the Board of Directors be expanded and
limited to not more than 11 members, such Board to include three Tamarix
nominees and an additional three independent directors who are experienced in
business matters and otherwise reasonably acceptable to Tamarix. The Company may
not declare and pay dividends without the approval of the Tamarix-nominated
directors. The Company has also agreed to engage Tamarix Capital Corporation, an
affiliate of Tamarix, for three years to provide certain financial advisory
services to the Company at a cost of $200,000 per year, payable quarterly, plus
reasonable expenses. As financial advisor, Tamarix Capital Corporation will,
among other things, identify potential investment or acquisition opportunities
for the Company, and sources of capital for the Company and its portfolio
companies. Tamarix Capital Corporation is a New York-based merchant and
investment banking firm founded by Messrs. Mark Hauser and William Spier.
Tamarix Capital Corporation acts as advisor to and, through its affiliates,
makes principal investments in, public and private companies in a variety of
growth industries, both in the U.S. and internationally.
TRG was organized in Maryland in 1917 as Rowan Controller, Inc., changing
its name to Rowan Industries, Inc. and then De Tomaso Industries, Inc. before
becoming Trident Rowan Group, Inc. in 1996. Its principal executive office is
located at Two Worlds Fair Drive, Franklin Township, Somerset, New Jersey 08873,
and its telephone number is (908) 868-9000.
5
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Securities Offered by the Company......... 1,250,000 shares of Common Stock and 1,250,000
Warrants. Each Warrant will entitle the
registered holder thereof to purchase one share
of Common Stock at a price of 120% of the
offering price per share of Common Stock. The
Company may redeem the Warrants at a price of
$.01 per Warrant at any time after they become
exercisable if notice of not less than 30 days
is given and the last sale price of the Common
Stock has been at least 133 1/3% of the then
exercise price of the Warrants on all 20
trading days ending on the third day prior to
the day on which notice is given.
Common Stock Outstanding Prior
to the Offering......................... 3,902,540 shares, including 849,640 shares that
are subject to repurchase. See
"Business--Recent Transactions
--Finprogetti Acquisition" and "--Repurchase of
Former Chairman's Shares."
Common Stock to be Outstanding
after the Offering...................... 5,152,540 shares
Use of Proceeds........................... To make investments in the Company's
subsidiaries and for working capital and
general corporate purposes. See "Use of
Proceeds."
Risk Factors.............................. The Securities offered hereby involve a high
degree of risk, including without limitation,
the Company's history of losses, intense
competition, seasonality of the Company's
business and quarterly fluctuations,
sensitivity to foreign currency exchange rates,
and other foreign operations risks. See "Risk
Factors."
Nasdaq SmallCap Market Common Stock
symbol.................................. TRGI
Proposed Nasdaq National Market Common
Stock and Warrant symbols,
respectively............................ TRGI, TRGIW
</TABLE>
UNLESS OTHERWISE INDICATED, THE INFORMATION IN THIS PROSPECTUS DOES NOT GIVE
EFFECT TO THE EXERCISE OF THE WARRANTS, THE UNDERWRITERS' OVER-ALLOTMENT OPTION,
THE REPRESENTATIVE'S PURCHASE OPTION, ANY OPTIONS GRANTED UNDER THE COMPANY'S
1995 NON-QUALIFIED STOCK OPTION PLAN OR 1995 OUTSIDE DIRECTORS' PLAN, THE
CENTAURUS WARRANT, OR WARRANTS TO PURCHASE 173,306 SHARES OF COMMON STOCK TO BE
ISSUED TO CERTAIN SHAREHOLDERS OF THE COMPANY. SEE "BUSINESS--RECENT
TRANSACTIONS--TRANSFER OF CONTROLLING INTEREST TO TAMARIX," "MANAGEMENT--
EXECUTIVE COMPENSATION" AND "STOCK OPTION PLANS," "PRINCIPAL SHAREHOLDERS,"
"CERTAIN TRANSACTIONS," "DESCRIPTION OF SECURITIES--WARRANTS," "DESCRIPTION OF
SECURITIES--COMMON STOCK," "SHARES ELIGIBLE FOR FUTURE SALE," AND NOTE 15 OF
NOTES TO FINANCIAL STATEMENTS.
6
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(In millions of Italian Lire and thousands of U.S. Dollars, except per share
data)
The following table sets forth summary financial data for the Company on a
consolidated historical basis for the periods and dates indicated. The
historical balance sheet data as of December 31, 1996 and 1995 and the statement
of operations data for each of the three years ended December 31, 1996, 1995 and
1994 are derived from the audited financial statements of the Company included
in this Prospectus. The information should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and such financial statements, including the notes thereto, included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1996
$000(1)
EXCEPT
PER-
SHARE 1996 1995 1994
DATA LIT.M LIT.M LIT.M
--------- ----------- --------------- -----------
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net sales................................................................ $ 63,272 Lit. 96,806 Lit. 72,253 Lit. 51,994
Gross profit............................................................. 8,262 12,641 9,445 5,935
Selling, general and administrative expenses............................. 14,007 21,430 16,230 10,818
Net loss................................................................. (9,806 ) (15,001) (6,980) (3,277)
Net loss per share....................................................... $ (2.14 ) Lit. (3,268) Lit. (2,065)(2) Lit.(1,593)
Weighted average number of common and common
equivalent shares(3)................................................... 4,590,539 4,590,539 3,380,441 2,057,446
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------------
PRO FORMA
ACTUAL PRO FORMA(4) AS ADJUSTED(5) ACTUAL
----------------------- ----------------------- --------------------- ----------------------
1996 1996 1996 1996 1996 1996 1995 1994
$000(1) LIT.M $000(1) LIT.M $000(1) LIT.M LIT.M LIT.M
----------- ---------- ----------- ---------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Cash and cash
equivalents............ $ 5,412 Lit. 8,281 $ 6,999 Lit.10,709 $ 15,560 Lit.23,808 Lit.24,137 Lit.10,286
Current assets........... 54,304 83,084 57,825 88,472 66,387 101,571 95,689 80,041
Total assets............. 102,297 156,512 95,949 146,800 104,510 159,899 182,830 118,661
Current liabilities
excluding short-term
debt................... 24,187 37,005 24,187 37,005 24,187 37,005 33,788 24,854
Short-term debt.......... 24,217 37,051 20,950 32,053 20,950 32,053 38,575 21,465
Long-term debt, net of
current portion........ 10,763 16,468 7,682 11,754 7,682 11,754 18,098 5,004
Shareholders' equity..... $ 13,615 Lit.20,830 $ 12,655 Lit.19,361 $ 21,216 Lit.32,460 Lit.51,221 Lit.43,157
</TABLE>
- ------------------------
(1) Translated solely for the convenience of the reader at the approximate
exchange rate as of December 31, 1996 of Lire 1,530 to $1.00.
(2) In July 1995, 1,000,000 preferred shares were converted to shares of Common
Stock and 703,774 of such shares of Common Stock were acquired by the
Company. Had such conversion and purchase taken place on January 1, 1995,
the loss per share would have been Lit. (1,978) translated solely for the
convenience of the reader as $(1.29).
(3) 1,000,000 authorized and outstanding preferred shares were considered to be
anti-dilutive in 1994. They were converted to shares of Common Stock in
1995, see note (2) above.
(4) Gives effect to the sale on April 15, 1997 of the Company's subsidiary which
owned property in Cologne, Italy ("Cologne Sale").
(5) Gives effect to the Cologne Sale and the receipt by the Company of
$8,561,000 of net proceeds of this Offering at the assumed price of $8.00
per share and $.10 per Warrant.
7
<PAGE>
RISK FACTORS
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE IN NATURE AND INVOLVE A HIGH
DEGREE OF RISK. ACCORDINGLY, IN ANALYZING AN INVESTMENT IN THESE SECURITIES,
PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY, ALONG WITH THE OTHER MATTERS
REFERRED TO HEREIN, THE FOLLOWING RISK FACTORS.
HISTORY OF OPERATING LOSSES, ACCUMULATED DEFICIT. The Company has sustained
net losses from continuing operations in each of the past five years, and for
all quarters in those five years, with the exception of the last quarter of
1995. By far the largest portion of these losses through the second quarter of
1993 was attributable to the operations of Maserati. In 1993, the Company
disposed of its remaining 51% equity interest in Maserati, and has significantly
reduced net losses. Nevertheless, the Company has not realized net income in any
succeeding year. For the year ended December 31, 1996, the Company reported a
net loss of Lit. 15,001 million ($9,806,000)* and an accumulated deficit of
approximately Lit. 31,000 million ($20,261,000). Moto Guzzi, the Company's
principal operating subsidiary, has sustained net losses in each of the past ten
years. There can be no assurance that Moto Guzzi or the Company's consolidated
operations will achieve profitability. Until that occurs, the Company will have
to fund its operating losses and the operating losses of its subsidiaries.
POTENTIAL INABILITY TO MANAGE GROWTH OF MOTO GUZZI. The strategic plan for
Moto Guzzi contemplates a significant repair and rehabilitation, and subsequent
expansion, of production capabilities with a significant commitment of capital
and increased use of outsourcing of components and subassemblies. This expansion
may require the Company to implement a variety of additional systems, procedures
and controls to manage higher inventory levels and higher levels of outsourcing
and working capital requirements and may place significant strain on management,
financial and other resources. There can be no assurance that such expansion
will be successfully completed or that the Company's systems, procedures,
controls or resources will be adequate to support expanded operations. If the
Company is unable to manage its contemplated expansion successfully, its
business and results of operations could be adversely affected. The Company's
operating results could also be adversely affected by an increase in fixed costs
and operating expenses related to the expansion of production if revenues do not
increase commensurately. See "Industry Cyclicality and Demand for the Company's
Products and Services--Motorcycle Industry."
ACQUISITION OF CONTROL OF COMPANY, RIGHT TO NOMINATE DIRECTORS. As a
consequence of the purchase by Tamarix of 1,000,000 shares of Common Stock from
Finprogetti and the right and obligation to purchase the remaining 635,000
shares of Common Stock held by Finprogetti pursuant to the Tamarix/Finprogetti
Acquisition Agreement coupled with the Centaurus Warrant granted by the Company
to Centaurus pursuant to an agreement by and between Tamarix and the Company
dated April 8, 1997 ("Inducement Agreement") and changes to the composition of
the Company's Board of Directors required pursuant the Inducement Agreement,
Tamarix may be viewed as having acquired control of the Company. See
"Business--Recent Transactions--Transfer of Controlling Interest to Tamarix".
RISKS OF ENTERING INTO MERCHANT BANKING BUSINESS. The Company's growth
strategy depends in part on its ability to make additional entrepreneurial
investments and acquisitions, such as its acquisition of L.I.T.A., and to add
value to such investments through the management skills provided by T.I.M. and
the investment and capital finance skills provided by the Company's merchant
banking group. However, the Company's management does not collectively have
experience operating a merchant bank and has only limited experience managing
all of the subsidiaries of the Company collectively. Even assuming the success
of T.I.M. in obtaining the type of engagements which could stimulate
opportunities to provide investment capital to or to make acquisitions of its
client companies, there can be no assurance that any such opportunity will
result in an investment in or acquisition of a client company ("Portfolio
Company") on
- ------------------------
* Throughout this Prospectus, amounts reported in Lire as at December 31, 1996
are translated solely for the convenience of the reader at the approximate
exchange rate at such date of 1,530 Lire to the U.S. Dollar.
8
<PAGE>
favorable terms or at all. Further, even if an investment or acquisition is
consummated, there can be no assurance that the Company will be able
successfully to realize all or any portion of the enhanced value it hopes to add
to the particular client or Portfolio Company.
POSSIBLE LOSS OF CONTROL OVER PRINCIPAL OPERATING SUBSIDIARY. The Company,
directly and through a majority-owned subsidiary, has the ability to control the
election of the board of directors of Moto Guzzi Corp. and all other matters
relating to such corporation, which owns 100% of the equity of Moto Guzzi.
However, if there is no initial public offering of such corporation's stock by
July 1998, the holders of shares of preferred stock of Moto Guzzi Corp. issued
in the Moto Guzzi Financing, although owning only a minority of Moto Guzzi
Corp.'s capital stock (treating the preferred stock as a common stock
equivalent), will have the right to elect a majority of its board of directors.
There can be no assurance that there will be any such public offering.
Additionally, if the warrants to purchase Moto Guzzi Corp. common stock issued
in connection with the Moto Guzzi Financing are exercised, the Company's
percentage ownership of the equity of Moto Guzzi Corp., and thereby of Moto
Guzzi, will be diluted.
INDUSTRY CYCLICALITY AND DEMAND FOR THE COMPANY'S PRODUCTS AND
SERVICES--MOTORCYCLE INDUSTRY. In the past, the overall motorcycle industry has
been subject to dramatic changes in demand due to changing social and economic
conditions. Among other factors, prevailing economic conditions may unfavorably
affect disposable income for leisure activities and the increased cost of
gasoline could have a negative effect on the cost of motorcycling. Accordingly,
there can be no assurance that Moto Guzzi's markets will remain in a growth
phase or remain stable.
Moto Guzzi's performance is influenced by its ability to predict future
demand for existing and new products. Moto Guzzi plans its annual production
levels and long-term product development and introduction based on anticipated
demand for its products. For the majority of sales, the Company does not have
long-term purchase commitments or irrevocable orders. The Company relies on its
own market assessment and ongoing communication with its customers to anticipate
the future volumes of purchase orders. A number of factors could cause customers
to delay or cancel orders. Moto Guzzi has experienced frequent delays in
production and shipment. Delays in production and shipment by the Company could
also cause cancellation of orders or loss of significant customers and have an
adverse effect on the Company's business, financial condition and results of
operations. See "Seasonal Business; Quarterly Fluctuations-- Moto Guzzi."
DEPENDENCE ON LIMITED NUMBER OF THIRD PARTY SUPPLIERS AND MANUFACTURERS FOR
KEY COMPONENTS. Moto Guzzi purchases many significant motorcycle components from
third parties. The Company believes that there are numerous available sources of
supply for most of them. Although Moto Guzzi attempts to maintain alternative
sources for its supplies, certain significant components are available from only
one or two sources and Moto Guzzi may therefore be unable to obtain advantageous
pricing, and is subject to the risk of possible delays in deliveries. Delays in
deliveries of certain components have occurred as recently as December 1996.
Failure by suppliers to continue to supply Moto Guzzi on commercially reasonable
terms, or at all, would have a material adverse effect on the Company. Moto
Guzzi generally does not maintain long-term supply agreements with its suppliers
and purchases required componentry pursuant to purchase orders or short-term
contracts in the ordinary course of business. Failures or delays in receipt of
necessary raw materials and components by Moto Guzzi would adversely affect the
Company's operations and its ability in turn to deliver its products on a timely
basis. Moto Guzzi is seeking to increase its reliance on outside suppliers for
assembly of partially completed componentry, as a means of reducing direct labor
expenses. There can be no assurance that adequate sources of reliable outside
suppliers will be identified and engaged at advantageous terms, or at all. See
"Business--Moto Guzzi--Manufacturing."
SEASONAL BUSINESS; QUARTERLY FLUCTUATIONS--MOTO GUZZI. Moto Guzzi's
operations are characterized by seasonal fluctuations in demand and production.
Retail market demand is highest in the spring and early summer, whereas most
sales to Italian government agencies, both federal and regional, take place in
the fourth quarter. Production at Moto Guzzi, as at most Italian companies,
declines materially during
9
<PAGE>
August, the traditional holiday month, and also declines somewhat over the
Christmas holiday and shortly thereafter as inventory is taken. As the Company's
largest operating subsidiary, sales and production declines at Moto Guzzi
significantly affect the Company's consolidated results of operations. Although
Moto Guzzi's management is implementing plans to try to reduce production and
sales fluctuations, there can be no assurance that such plans will be
successful. See "Business--Moto Guzzi--Competition."
SEASONAL BUSINESS--L.I.T.A. L.I.T.A.'s operations have historically been
seasonal due to L.I.T.A.'s dependence on the automobile industry. Demand is
lowest over the period from November to February and is also significantly
reduced in the traditional holiday month of August. Since 1995, L.I.T.A. has
sought to reduce this seasonality by expanding the markets it serves to include
the furniture industry, which is less seasonal, but a majority of its sales
continues to be to the automobile industry. See "Business--Moto
Guzzi--L.I.T.A.--Customers."
COMPETITION--MOTO GUZZI. In the manufacture and sale of motorcycles, Moto
Guzzi competes with companies which are far larger and better capitalized, and
many of which have greater name recognition, including Yamaha, Kawasaki, Suzuki
and Honda, the industry leaders from Japan, Aprilia and Cagiva of Italy, and
Harley Davidson of the United States. Each of these competitors has a far larger
market share than Moto Guzzi, and access to greater financial resources. Moto
Guzzi competes principally through such intangible qualities as performance,
reputation and quality of manufacture, areas in which its current and potential
competitors also excel. See "Business--Moto Guzzi--Competition."
COMPETITION--L.I.T.A. L.I.T.A.'s competitors are principally represented by
larger companies, many of them subsidiaries of steel manufacturers. These are
predominantly Italian companies and include Profilmec S.p.A. and Ispadue S.p.A.,
the Lombarda Tubi division of the Marcegaglia Group and ITAS S.p.A. The size of
these competitors and the support of their parent companies enable them to
compete aggressively in the market. L.I.T.A. competes principally on quality,
flexibility of service and timeliness of delivery, factors which its competitors
also seek to offer to the market. There can be no assurance that L.I.T.A. will
be able to continue to compete successfully, if at all.
COMPETITION--MERCHANT BANKING DIVISION. Many companies, including the large
investment banking firms of the United States and Europe, such as Goldman Sachs
& Company and Salomon Inc., U.S. and European venture capital funds such as
Advent International, 3I Investors in Industry, and Upside 1, and the investment
banking divisions of Italian and European commercial banks such as Medio
Credito, can be expected to compete with the Company. Most of these competitors
are larger and have considerably greater financial and marketing resources than
the Company. Although only a few of these competitors, such as Wexford Capital
and Upside 1, currently invest in troubled companies in Italy, there can be no
assurance that these and other companies will not provide increasing competition
to the Company for investing in troubled Italian companies in the future.
ENVIRONMENTAL, SAFETY AND OTHER GOVERNMENTAL REGULATIONS. Motorcycles sold
in the United States and the European Economic Community and other countries are
subject to environmental emissions regulations and safety standards with which
Moto Guzzi must comply. All 1997 Moto Guzzi models substantially comply with all
emission standards applicable in all countries in which they are sold. There can
be no assurance, however, that Moto Guzzi will be able to cost-effectively
comply with any emissions or safety standards which governments may hereafter
adopt (though the design of new products seeks to conform with such standards as
are believed likely to be introduced). In the event its compliance is not
cost-effective in the future, Moto Guzzi may be unable to achieve the market
growth that it desires.
Moto Guzzi and L.I.T.A. are subject to a number of governmental regulations
relating to the use, storage, discharge and disposal of minerals and alloys used
in their manufacturing processes and to the safety standards of their facilities
and processes. Claims or the failure to comply with present or future
regulations could result in the assessment of damages or imposition of fines
against the Company, suspension of production or cessation of certain activities
which could adversely affect the Company's
10
<PAGE>
operating results. New regulations could require the Company to acquire costly
equipment or incur other significant expenses that could have an adverse effect
on the Company's financial condition and results of operations. Any failure by
the Company to control the use of, or adequately restrict the discharge of,
hazardous substances or otherwise comply with applicable safety requirements or
current or future legislation could subject it to future liabilities. See
"Business--Moto Guzzi--Compliance with Governmental Regulations" and
"Business--L.I.T.A.--Compliance with Governmental Regulations."
RISK OF STRIKES. Both Moto Guzzi and L.I.T.A. operate in heavily unionized
industries, subjecting them to risk of strikes and other work stoppage. The
Company has been and may in the future be subject to day-long strikes and work
stoppages at its Moto Guzzi facility in connection with the negotiation of
national labor contracts. Any increase in the duration of any strike or in the
number of strikes may have a material adverse effect on production at Moto
Guzzi.
BROAD DISCRETION IN APPLICATION OF PROCEEDS. The Company will have broad
discretion regarding how and when the Offering proceeds will be applied and will
use a portion of such proceeds to pay salaries, including salaries of its
executive officers. See "Use of Proceeds" and "Certain Transactions."
FUTURE CAPITAL NEEDS--T.I.M., MERCHANT BANKING; UNCERTAINTY OF ACCESS TO
CAPITAL. The proceeds of this Offering are not expected to be sufficient to
permit the Company to make all of the entrepreneurial cash investments which
could foreseeably become available to it through T.I.M. and the Company's
merchant banking business. The Company also plans to use its Common Stock for
the purpose of carrying out its investments and acquisitions, but there can be
no assurance that the capital requirements of a particular current or future
Portfolio Company could be satisfied through the issuance of the Company's
Common Stock. Additionally, the Company may develop or be presented with
opportunities in which the willingness of third parties to provide needed
capital infusions to a client or Portfolio Company to enable it to achieve the
strategic plan created by T.I.M. would be contingent on the Company's
willingness and ability itself to participate in such financing. See "Use of
Proceeds" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations-- Future Liquidity Needs."
FUTURE CAPITAL NEEDS--MOTO GUZZI. Although the Company believes that its
existing capital resources, coupled with the proceeds of the Moto Guzzi
Financing and the net proceeds of this Offering, will be sufficient to meet Moto
Guzzi's regular cash requirements for the next 12 to 18 months, they will not be
sufficient to also fund the full planned rehabilitation and expansion of the
Moto Guzzi production capacity and growth in sales, if any. Additional financing
will be necessary to complete the process of rehabilitating and expanding
operations and also possibly in order to meet future working capital needs. The
extent of available additional financing will also depend on the willingness of
the banking system in Italy to continue to provide advances against trade
receivables. Such financing therefore is dependent on short-term production
levels and is subject to being withdrawn in the case of production delays or
stoppages caused by any means or by any other factors which could affect sales
levels. Further, Moto Guzzi has only limited formal arrangements regarding its
currently available bank credit lines which could be significantly reduced by
the banks at any time and for any reason. For its long-term viability, the
Company will be required to borrow or sell additional securities or seek other
new sources of financing or may be required to curtail or reduce Moto Guzzi's
activities. Prior to the Moto Guzzi Financing, some of Moto Guzzi's capital
needs were provided by the Company. The Company, however, has no commitment to
provide additional financing to Moto Guzzi except for a portion of the proceeds
from this Offering. To the extent that any future financing involves the sale of
the Company's equity securities, the interest of the Company's then-shareholders
could be substantially diluted. There can be no assurance that any sources of
additional financing will be available to Moto Guzzi or the Company on
acceptable terms, if at all. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources"
and "Use of Proceeds."
INTERNATIONAL NATURE OF BUSINESS. The Company's principal operating
subsidiaries, Moto Guzzi and L.I.T.A., manufacture their products in Italy and
distribute them in many countries. As a result, the
11
<PAGE>
Company's business is subject to various risks beyond its control such as
changes in laws and policies affecting labor, trade and investment (including
trademark protection) and the instability of foreign economies and governments.
The Company has taken applicable laws and regulations into account in
structuring its business on a global basis, which has been done in a manner
which seeks to achieve operational and tax efficiencies. Changes in such laws,
including tax laws, could adversely affect the Company's results of operations,
cash flows and financial condition.
ENFORCEMENT OF JUDGMENTS; EFFECT OF FOREIGN LAW. The Company is a
corporation organized under the laws of the State of Maryland. The majority of
its directors and executive officers are non-residents of the United States. All
or a substantial portion of the assets of such persons and of the Company are
located outside the United States. As a result, it may not be possible for
investors to effect service of process within the United States upon such
persons or to enforce against them judgments obtained in U.S. courts predicated
upon civil liability provisions of the federal securities laws of the United
States. There can be no assurance as to the enforceability in Italy in original
actions or in actions for enforcement of judgments of U.S. courts, of civil
liabilities predicated solely upon the federal securities laws of the United
States. In addition, awards of punitive damages in actions brought in the United
States or elsewhere may be unenforceable in Italy.
EXPOSURE OF RESULTS TO CHANGES IN EXCHANGE RATES. Moto Guzzi's sales and
operating profits will be affected by the impact of fluctuations in foreign
currency exchange rates on product prices and certain operating expenses. It is
expected that L.I.T.A.'s sales and operating profits will also be affected by
the impact of fluctuations in foreign currency exchange rates on product prices
as it seeks to expand export sales, which are not currently material.
Fluctuations in the exchange rates of certain foreign currencies (principally
the Deutschemark and the U.S. Dollar, as Germany and the U.S. are or are
expected to be significant markets for Moto Guzzi) relative to the Italian Lira
may have an adverse effect on the Company's sales and operating results and the
international competitiveness of its Italian-based manufacturing operations. In
1993 and 1994, the Company substantially benefited from the depreciation of the
Italian Lira against the major European currencies and the U.S. Dollar, although
there can be no assurance that such depreciation will occur in the future. See
"Exposure of Results to Raw Material and Commodity Prices."
EFFECT OF CURRENCY EXCHANGE RATES ON MARKET PRICE. Fluctuations in the
lira-to-dollar exchange rate will affect the Company's reported revenues and
operating results and are likely to have an effect on the market price of the
Company's shares.
EFFECT OF CHANGES OF EXCHANGE RATES ON OBLIGATIONS DENOMINATED IN U.S.
DOLLARS. The Company maintains its liquid capital in Italy in Italian Lire. The
Company has an obligation to repurchase 776,530 shares formerly held by the
Company's ex-chairman, now held in trust, at $11.27 on June 30, 1998. The
Company has deposited investments with an expected maturity value at June 30,
1998 of Lit. 15,000 million to collateralize a letter of credit issued to secure
its repurchase obligation. The Company also issued promissory notes of
$1,863,000 payable in October 1998 in connection with its share repurchase
program which was completed in October 1996. The Company has not hedged against
exchange rate risks connected with either of these commitments.
Should the exchange rate between the U.S. Dollar and the Lira be higher than
Lit. 1,714 to the U.S. Dollar, the investments deposited as collateral for the
repurchase of the 776,530 shares will be insufficient to satisfy such
obligation, and any excess will have to be funded from general working capital,
including the proceeds of this Offering. Increases in the value of the U.S.
Dollar against the Lira may also have material adverse effects on earnings
reported in U.S. Dollars.
EXPOSURE OF RESULTS TO RAW MATERIAL AND COMMODITY PRICES. The operations of
Moto Guzzi and L.I.T.A. are significantly affected by the prices of raw
materials, including commodities (principally steel and aluminum), which can be
subject to considerable short-term variations in price. Although the
12
<PAGE>
Company generally seeks to pass on the effects of price increases of raw
materials to its customers, in the past it has not always been able to do so and
in the future may not be able to do so due to competitive pressures. In the
first half of 1996, the revenues and results of operations of L.I.T.A. were
adversely affected by a steep fall in the prices of the various grades of steel
which form its principal supply of raw material. This led to a steep fall in the
market prices of finished products and L.I.T.A. incurred losses on inventories
of steel purchased prior to the fall in steel prices. Aluminum products, which
are important in the manufacture of motorcycles by Moto Guzzi, increased in
price by approximately 30% in 1995 compared to 1994 as a result of increases in
the price of aluminum. Aluminum prices in 1996 were largely unchanged. The
prices of other raw materials and commodities, many of which are not produced or
sourced in the countries in which the Company operates, are also subject to
fluctuations as a consequence of changes in foreign currency exchange rates. See
"Exposure of Results to Changes in Exchange Rates," "Business--Moto Guzzi--Raw
Materials and Components" and "Business--L.I.T.A.--Raw Materials and
Components."
RELIANCE ON MAIN MANUFACTURING FACILITIES. All of the manufacture of Moto
Guzzi motorcycles takes place at a single production facility in Mandello del
Lario, Italy. All of L.I.T.A.'s manufacture of steel tubing products takes place
at a single factory in Torino, Italy. A significant interruption of production
at either of these facilities due to strikes or other causes could have a
material adverse effect on the Company's business and operating results. Various
health and safety repairs are also required to be made at the Moto Guzzi
facility. Such repairs, if costly, could have an adverse effect on the Company.
See "Use of Proceeds" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations--General."
LACK OF PATENT OR INTELLECTUAL PROPERTY PROTECTION. The design and
technology of motorcycles manufactured and sold by Moto Guzzi are not protected
by any patent, trademark or other intellectual property rights which would
create a competitive advantage for the Company, other than the registered
trademark for "Moto Guzzi-Registered Trademark-" itself, and related trademarks
which the Company believes are well known and highly regarded. The component
parts of motorcycles are manufactured pursuant to well-known techniques and
include components which are not unique to Moto Guzzi's products. Moto Guzzi
relies on design, manufacturing skills and know-how to produce motorcycles which
it believes will find acceptance in its market niche. There can be no assurance
that a competitor of Moto Guzzi will not develop an enhancement to motorcycle
transportation that will be superior and patentable or otherwise protected from
duplication by others. There can be no assurance that competitors do not have,
or will not develop, equivalent or superior manufacturing or design skills. See
"Business--Moto Guzzi--Patents and Trademarks."
PRODUCT LIABILITY. Moto Guzzi is engaged in a business which exposes it to
possible claims for personal injury from the use of its products. Moto Guzzi
maintains product liability insurance with a per-occurrence limit of Lit. 2,000
million. Although no claims have been made against the subsidiary in excess of
insurance coverage, there can be no assurance that such claims will not arise in
the future or that the insurance coverage will be sufficient to pay such claims.
A partially or completely uninsured claim, if successful and of significant
magnitude, could have a material adverse effect on the Company.
RELIANCE ON CURRENT MANAGEMENT. The success of the Company in achieving its
growth objectives depends, in part, on the continued participation of certain
key executives of the Company, including Howard E. Chase (President and Chief
Executive Officer), Albino Collini (Executive Vice President and Chief Operating
Officer), Mario Tozzi-Condivi (Vice Chairman of the Board and President of Moto
Guzzi) and Domenico Costa (Managing Director of T.I.M.). Effective upon the
consummation of the Tamarix/Finprogetti Acquisition Agreement, the Company will
also rely on the participation of William Spier, its new chairman, and upon his
merchant banking experience and skill. Although the Company has entered into
employment agreements with Messrs. Chase and Collini, and a consulting agreement
with Como Consultants, Limited, a corporation which provides the services of Mr.
Tozzi-Condivi, each expiring
13
<PAGE>
in 2000 and employment agreements with Mr. Costa and Mr. Carlo Previtali
(Secretary and Treasurer), each expiring in 1998, there can be no assurance that
the Company will be able to retain its key executives on a long-term basis. The
key executives, who each have experience in aspects of the Company's business
operations, have limited experience operating the Company together, and are
inexperienced at managing a publicly held holding company and in merchant
banking. See "Risks of Entering Into Merchant Banking Business."
SHARES ELIGIBLE FOR FUTURE SALE. Future sales of Common Stock in the public
market following this Offering could adversely affect the market price of the
Common Stock or the Warrants. See "Shares Eligible for Future Sale."
POSSIBLE VOLATILITY OF STOCK PRICE. The market price of the Common Stock
could be subject to significant fluctuations in response to such factors as,
among others, variations in the anticipated or actual results of operations of
the Company or its subsidiaries, changes in economic or political conditions
affecting the U.S., Italy or the other countries in which the Company will
operate, the financial markets generally, and changes in the motorcycle industry
specifically. The Company's Common Stock has fluctuated between a low bid price
of $2 per share and a high bid price of $11 per share in the past three years.
ANTI-TAKEOVER EFFECT OF MARYLAND CORPORATE LAW. The Company is not
currently, but may in the future become, subject to certain provisions of the
Maryland corporate law which may have the effect of deterring hostile takeovers
or delaying or preventing changes in the control or management of the Company,
including transactions in which shareholders might otherwise receive a premium
for their shares over the then current market prices. See "Description of
Securities--Maryland Takeover Statute."
ANTI-TAKEOVER EFFECT OF RECENT TRANSACTION. Pursuant to the Inducement
Agreement, the Board of Directors has agreed to propose amendments to the
Company's Certificate of Incorporation and By-Laws which will, among other
things, provide that members of the Board of Directors will serve in classes,
each class to hold office for three years with staggered terms, and prohibit the
Board of Directors from proposing further amendments to the Certificate of
Incorporation without the consent of Tamarix. The adoption of the amendments and
the creation of such a staggered board structure may deter a future potential
acquiror from attempting to make a hostile acquisition of the Company. See
"Business--Recent Transactions--Transfer of Controlling Interest to Tamarix."
ABSENCE OF DIVIDENDS. The Company has not paid any dividends on its Common
Stock and does not anticipate paying dividends in the foreseeable future.
Additionally, under the Inducement Agreement, the Company may not pay dividends
unless the Tamarix-appointed members of the Board have approved. See "Dividend
Policy."
POTENTIAL LOSS OF ACTIVE TRADING MARKET. There has been no prior market for
the Warrants, and there can be no assurance that a public market for the
Warrants will develop or be sustained after the Offering. The Company's Common
Stock is traded on the Nasdaq SmallCap Market ("Nasdaq SmallCap"). The Company
has applied to have the Common Stock and Warrants approved for trading on the
Nasdaq National Market, although there is no assurance that such listing will be
approved. The Company has simultaneously applied for listing of the Warrants on
Nasdaq SmallCap and in the event that the Securities are not approved for
listing on the Nasdaq National Market, the Company anticipates that the Common
Stock will continue to be listed and the Warrants will commence trading on the
Nasdaq SmallCap. To continue to be listed on Nasdaq after the Offering, the
Company must satisfy certain maintenance criteria. The failure to meet these
maintenance criteria in the future may result in the Common Stock or Warrants
being ineligible for quotations on Nasdaq and trading, if any, of the Common
Stock and the Warrants would thereafter be conducted on the OTC Bulletin Board.
As a result of such ineligibility for quotations, an investor may find it more
difficult to dispose of, or to obtain accurate quotations as to the market value
of the Common Stock or the Warrants. See "Possible Volatility of Stock Price."
14
<PAGE>
POTENTIAL ADVERSE EFFECT OF REDEMPTION OF WARRANTS. The Company may redeem
the Warrants once they become exercisable, at a price of $.01 per Warrant, at
any time upon not less than 30 days prior written notice if the last sale price
of Common Stock has been at least 133 1/3% of the then-exercise price of the
Warrants on 20 consecutive trading days ending on the third day prior to the
date on which notice is given. Notice of redemption of the Warrants could force
the holders to exercise the Warrants and pay the exercise price at a time when
it may be disadvantageous for them to do so, to sell the Warrants at the current
market price when they might otherwise wish to hold the Warrants, or to accept
the redemption price which would be substantially less than the market value of
the Warrants at the time of redemption. See "Description of
Securities--Warrants."
CURRENT PROSPECTUS AND STATE BLUE SKY REGISTRATION REQUIRED TO EXERCISE
WARRANTS. The Company will be able to issue shares of its Common Stock upon
exercise of the Warrants only if there is then a current prospectus relating to
such Common Stock, and only if such Common Stock is qualified for sale or exempt
from qualification under applicable state securities laws of the jurisdictions
in which the various holders of the Warrants reside. The Company has undertaken
to file and keep current a prospectus which will permit the purchase and sale of
the Common Stock underlying the Warrants, but there can be no assurance that the
Company will be able to do so. Although the Company intends to seek to qualify
for sale the shares of Common Stock underlying the Warrants in those states in
which the securities are to be offered, no assurance can be given that such
qualification will occur. The Warrants may be deprived of any value and the
market for the Warrants may be limited if a current prospectus covering the
Common Stock issuable upon the exercise of the Warrants is not kept effective or
if such Common Stock is not qualified or is exempt from qualification in the
jurisdiction in which the holders of the Warrants reside. See "Description of
Securities--Warrants."
RISKS ASSOCIATED WITH FORWARD LOOKING STATEMENTS. This Prospectus contains
certain forward looking statements within the meaning of Section 27A of the
Securities Act, and Section 21E of the Exchange Act, which are intended to be
covered by the safe harbors created thereby. Investors are cautioned that all
forward looking statements involve risks and uncertainty, including without
limitation, the ability of the Company to implement its strategy and identify
new market and product opportunities, product development costs, and the
dependence of the Company on certain manufacturers, as well as general market
conditions, competition and pricing. Although the Company believes that the
assumptions underlying the forward looking statements contained herein are
reasonable, any of the assumptions could be inaccurate, and therefore, there can
be no assurance that the forward looking statements included in this Prospectus
will prove to be accurate. In light of the significant uncertainties inherent in
the forward looking statements included herein, the inclusion of such
information should not be regarded as a representation by the Company or any
other person that the objectives and plans of the Company will be achieved.
15
<PAGE>
THE COMPANY
The Company was organized in Maryland in 1917 as Rowan Controller, Inc.
changing its name to Rowan Industries, Inc. and then to De Tomaso Industries,
Inc. before changing its name in August 1996 to Trident Rowan Group, Inc. In
1993, the Company, through one of its Italian subsidiaries, disposed of its 51%
equity interest in its then-largest operating company, Maserati S.p.A. which for
years had been sustaining substantial losses. Since the sale of Maserati, the
Company's largest operating subsidiary has been Moto Guzzi, which had also
incurred years of losses. In 1995, the Company acquired substantially all of the
operating assets of Finprogetti S.p.A., a small private Italian merchant bank,
including T.I.M. The Company's principal executive office is located at Two
Worlds Fair Drive, Franklin Township, Somerset, New Jersey 08873 and its
telephone number is (908) 868-9000.
USE OF PROCEEDS
The net proceeds to the Company from the sale of Common Stock and Warrants
offered hereby are estimated to be approximately $8,561,000 (approximately
$9,845,000 if the Underwriters' over-allotment option is exercised in full),
based on an assumed initial offering price of $8.00 per share of Common Stock
and $.10 per Warrant, less underwriting discounts and commissions and offering
expenses payable by the Company.
The Company intends to use approximately $4 million of the net proceeds to
provide funds for some of the planned growth of Moto Guzzi, whose projected
significant expansion in production in the upcoming years requires significant
capital expenditure and working capital, to repair, replace and/or rehabilitate
aged production equipment. See "Business--Recent Transactions--Moto Guzzi
Financing."
Approximately $1 million will be used to finance increased working capital
and the acquisition of plant and machinery at L.I.T.A. to support its growth.
The balance of the net proceeds of this Offering is allocated for working
capital and general corporate purposes including, among other things, payment of
expenses incurred or to be incurred by the Company in connection with its
operations and payment of general corporate expenses including salaries of
officers. Pending the use of net proceeds as described above, the Company will
transfer the proceeds to Italy and invest them in Italian government securities,
short-term deposits or other investment grade, short-term interest-bearing
investments.
The Company will also consider entrepreneurial investment and acquisition
opportunities arising out of its temporary management engagements and otherwise.
Although the Company currently has no arrangements, understandings or agreements
with respect to any such acquisitions or investments, the immediate availability
of funds is likely to be a determining factor in negotiating advantageous terms
for such possible transactions.
The Company believes that the proceeds of the Offering together with
available cash, cash equivalents and marketable securities, plus anticipated
future revenues, will be adequate to satisfy the regular cash requirements of
Moto Guzzi and L.I.T.A. for the next 12 to 18 months, but such funds will not be
adequate to satisfy all of the reasonably foreseeable capital needs which such
subsidiaries will have, including full rehabilitation and expansion of
production capacity and increased sales. See "Risk Factors--Future Capital
Needs." If, however, the Company's plans or assumptions change or prove to be
inaccurate with respect to the proceeds of the Offering, and/or cash generated
from future revenues, if any, prove to be insufficient to fund operations (due
to unanticipated expenses, problems or otherwise), the Company may find it
necessary and/or advisable to reallocate some of the proceeds within the
above-described categories or to use portions thereof for other purposes and
therefore management will have significant discretion how and when the proceeds
will be applied.
16
<PAGE>
MARKET PRICE OF COMMON STOCK
Since September 24, 1994, the Common Stock has traded on the Nasdaq SmallCap
Market under the symbol DTOM and since August 22, 1996 under the symbol TRGI.
The following table sets forth the ranges of high and low sale prices for the
Common Stock as reported by Nasdaq, which is the principal trading market for
the Company's securities.
<TABLE>
<CAPTION>
SALE PRICES
------------------
<S> <C> <C>
HIGH LOW
------- -------
1995
1st Quarter..................................................................................... 9 1/4 7 3/4
2nd Quarter..................................................................................... 9 7/8 8 1/2
3rd Quarter..................................................................................... 10 9 3/8
4th Quarter..................................................................................... 10 3/8 9 5/8
1996
1st Quarter..................................................................................... 11 10 3/8
2nd Quarter..................................................................................... 10 3/4 9 3/4
3rd Quarter..................................................................................... 10 7/8 9
4th Quarter..................................................................................... 10 3/4 8
1997
1st Quarter..................................................................................... 9 3/8 7 3/8
2nd Quarter through April 22, 1997.............................................................. 8 1/8 7 3/8
</TABLE>
As of April 22, 1997, there were 1,258 holders of record of the Company's
Common Stock. See the cover page of this Prospectus for a recent closing price
of the Common Stock on the Nasdaq SmallCap Market.
DIVIDEND POLICY
The Company has not paid any dividends since its inception and does not
anticipate paying any dividends on its Common Stock for the foreseeable future.
Management intends to retain earnings, if any, for use in its business and to
support development and expansion of the Company's business. The Inducement
Agreement requires the approval of the Tamarix-designated directors as a
condition of paying dividends.
17
<PAGE>
CAPITALIZATION
The tables below show (i) the actual debt and capitalization of the Company
as of December 31, 1996; and (ii) on an as adjusted basis to give effect to the
issuance and sale by the Company of 1,250,000 shares of Common Stock and
Warrants offered hereby at an assumed public offering price of $8.00 per share
of Common Stock and $0.10 per Warrant, and after deduction of estimated
underwriting commissions and offering expenses payable by the Company.
<TABLE>
<CAPTION>
THOUSANDS OF
DOLLARS(1)
MILLIONS OF LIRE --------------------
-------------------------- AS
ACTUAL AS ADJUSTED ACTUAL ADJUSTED
------------ ------------ --------- ---------
<S> <C> <C> <C> <C>
Advances from banks.................................................. Lit. 29,783 Lit. 29,783 $ 19,466 $ 19,466
Current portion of long-term debt(2)................................. 7,268 7,268 4,751 4,751
------------ ------------ --------- ---------
------------ ------------ --------- ---------
Long-term debt, net of current portion(2)............................ 16,468 16,468 10,763 10,763
Minority interests................................................... 14,788 14,788 9,665 9,665
Preferred stock of subsidiary........................................ 5,101 5,101 3,334 3,334
Common stock subject to repurchase(3)................................ 13,968 13,968 9,129 9,129
Shareholders' equity:
Common stock, $0.01 par value, 50,000,000 shares authorized,
3,902,540(3) shares issued and outstanding; 5,152,540 as
adjusted......................................................... 69 88 45 58
Additional paid in capital......................................... 77,145 90,225 50,422 58,971
Treasury stock..................................................... (27,411) (27,411) (17,916) (17,916)
Other.............................................................. 1,954 1,954 1,277 1,277
Accumulated deficit................................................ (30,927) (30,927) (20,213) (20,213)
------------ ------------ --------- ---------
Total shareholders' equity......................................... 20,830 33,929 13,615 22,176
------------ ------------ --------- ---------
------------ ------------ --------- ---------
Total capitalization............................................... Lit. 71,155 Lit. 84,254 $ 46,506 $ 55,067
------------ ------------ --------- ---------
------------ ------------ --------- ---------
</TABLE>
- ------------------------
(1) Translated solely for the convenience of the reader from lire into Dollars
at the approximate exchange rate at December 31, 1996 of Lit. 1,530 to
$1.00.
(2) Long-term debt of Lit. 9,712 million ($6,348,000), inclusive of current
portion, has been eliminated on sale of property in April 1997. See
"Business--Commercial Real Estate Development."
(3) Shares issued includes 849,640 shares subject to repurchase, classified
outside shareholders' equity as "Common stock subject to repurchase" and
subject to repurchase on the following dates:
<TABLE>
<CAPTION>
SHARES
---------
<S> <C> <C> <C>
June 30, 1997........................................... 22,380 Lit.m 450 $ 294,000
December 31, 1997....................................... 22,380 Lit.m 450 $ 294,000
June 30, 1998........................................... 28,350 Lit.m 570 $ 372,000
June 30, 1998........................................... 776,530 Lit.m 13,390 $ 8,751,000
</TABLE>
18
<PAGE>
EXCHANGE RATES
Since all of the production and much of the sales of the Company occur in
Italy, the Company's primary financial statements are reported in Italian Lire,
the functional currency of the Company as defined by generally accepted
accounting principles. U.S. Dollar translations are provided solely for the
reader's convenience and have been made at the approximate rate of Lit. 1,530 to
the U.S. $1.00 as of December 31, 1996 unless otherwise indicated.
Prior to September 1992, the Bank of Italy maintained the value of the Lira
within the narrow band contemplated by the Exchange Rate Mechanism ("ERM") of
the European Monetary System ("EMS"). On September 17, 1992, in response to
strong downward pressure on the exchange rate of the Lira against other EMS
currencies that continued despite intervention by the Bank of Italy and the
central banks of the other nations participating in EMS, the Italian Government,
in consultation with the Bank of Italy, suspended the Lira from ERM. Following
this suspension, the value of the Lira immediately declined by approximately 20%
against the main EMS currencies with similar consequent depreciation against the
U.S. Dollar. The Lira was readmitted into ERM on November 25, 1996.
The following table sets forth, for the period indicated, the high, low,
average and end of period exchange rates expressed in Lire per $1.00 (rounded to
the nearest Lira):
<TABLE>
<CAPTION>
CALENDAR YEAR HIGH LOW AVERAGE END OF PERIOD
- -------------------------------------------------------- --------- --------- ----------- ---------------
<S> <C> <C> <C> <C>
1997 through March 31................................... 1,710 1,520 1,639 1,677
1996.................................................... 1,606 1,499 1,542 1,530
1995.................................................... 1,767 1,565 1,626 1,588
1994.................................................... 1,689 1,539 1,612 1,622
1993.................................................... 1,713 1,478 1,574 1,713
1992.................................................... 1,475 1,066 1,243 1,478
1991.................................................... 1,364 1,089 1,241 1,147
</TABLE>
Fluctuations in the exchange rates between the Lira and the Dollar will
affect the Dollar equivalents of the Company's reported revenues and earnings.
The Company does not currently engage in hedging activities to reduce its
exposure to exchange rate fluctuations.
In addition, fluctuations in the exchange rates of other foreign countries
relative to the Lira may affect the Company's results of operations as a
consequence of the competitiveness of the Company relative to its competitors
and due to effects on the cost of imported raw materials. See "Risk
Factors--Exposure of Results to Changes in Exchange Rates," "Risk
Factors--Effect of Changes in Exchange Rates on Obligations Denominated in U.S.
Dollars."
19
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and such financial statements, including the notes
thereto, included elsewhere in this Prospectus. Selected consolidated financial
data for the years ended December 31, 1996, 1995 and 1994 have been derived from
the Company's audited financial statements for those years, which are included
elsewhere in this Prospectus. Selected consolidated financial data for the years
ended December 1, 1993 and 1992 have been derived from the Company's audited
financial statements for those years, which are not included in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------
1996(1) 1996 1995 1994 1993 1992
------------ ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
US$000 (MILLIONS OF ITALIAN LIRE
(EXCEPT PER- EXCEPT PER-SHARE AMOUNTS)
SHARE DATA)
Net sales..................... $ 63,272 Lit. 96,806 Lit. 72,253 Lit. 51,994 Lit. 41,919 Lit. 45,346
Loss from continuing
operations before
extraordinary items......... (9,806) (15,001) (6,980) (3,277) (6,736) (3,967)
Net (loss)/income............. (9,806) (15,001) (6,980) (3,277) 153,497(2) (75,984)
Loss per share from continuing
operations before
extraordinary items......... (2.14) (3,268) (2,065) (1,593) (2,203) (1,928)
Net (loss)/income per share... (2.14) (3,268) (2,065) (1,593) 50,204(2) (36,931)
Total assets.................. 102,297 156,512 182,830 118,661 127,556 223,295
Long-term debt................ $ 10,763 Lit. 16,468 Lit. 18,098 Lit. 5,004 Lit. 5,738 Lit. 71,949(3)
Cash dividends paid per common
share....................... -- -- -- -- -- --
</TABLE>
- ------------------------
(1) The above information for the year ended December 31, 1996, expressed in
Italian Lire, has been translated into U.S. Dollar equivalents in thousands
of dollars (except per-share amounts), at the rate of exchange prevailing at
December 31, 1996.
(2) Includes a gain of Lit. 160,233 million (Lit. 52,407 per share) resulting
from the sale of the Company's 51% interest in Maserati S.p.A. to Fiat.
(3) Long-term debt in 1992 includes advances from affiliates of Lit. 61,000
million.
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THE DISCUSSION AND ANALYSIS BELOW SHOULD BE READ IN CONJUNCTION WITH THE
CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY AND THE NOTES THERETO INCLUDED
ELSEWHERE IN THIS PROSPECTUS. IN ADDITION TO HISTORICAL INFORMATION, THE
FOLLOWING DISCUSSION AND ANALYSIS CONTAINS FORWARD-LOOKING STATEMENTS THAT
INVOLVE RISKS AND UNCERTAINTIES WITHIN THE MEANING OF SECTION 27A OF THE
SECURITIES ACT AND SECTION 21E OF THE EXCHANGE ACT, WHICH ARE INTENDED TO BE
COVERED BY THE SAFE HARBORS CREATED THEREBY. ALTHOUGH THE COMPANY BELIEVES THAT
THE ASSUMPTIONS UNDERLYING THE FORWARD LOOKING STATEMENTS CONTAINED HEREIN ARE
REASONABLE, ANY OF THE ASSUMPTIONS COULD BE INACCURATE, AND THEREFORE, THERE CAN
BE NO ASSURANCE THAT THE FORWARD LOOKING STATEMENTS INCLUDED IN THIS PROSPECTUS
WILL PROVE TO BE ACCURATE. FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
FROM THE RESULTS SPECIFICALLY DISCUSSED IN THE FORWARD LOOKING STATEMENTS
INCLUDING, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN "RISK FACTORS." IN LIGHT
OF THE SIGNIFICANT UNCERTAINTIES INHERENT IN THE FORWARD LOOKING STATEMENTS
INCLUDED HEREIN, THE INCLUSION OF INFORMATION SHOULD NOT BE REGARDED AS A
REPRESENTATION BY THE COMPANY OR ANY OTHER PERSON THAT THE OBJECTIVES AND PLANS
OF THE COMPANY WILL BE ACHIEVED.
GENERAL
The Company's revenues are dominated by the results of Moto Guzzi, its
principal operating subsidiary, which represent 80% of 1996 consolidated net
sales. Operating results in 1996 are significantly affected by the results of
Moto Guzzi and also by reserves and expenses deriving from the real estate
portfolio acquired from Finprogetti in 1995. A significant step forward in the
disposition of the real estate portfolio was achieved upon sale of the largest
property in April 1997. The major part of the Company's internal restructuring
and reorganization was also completed in 1996, including the completion of its
stock repurchase offer in October 1996.
Recognizing the strategic importance of the U.S. market to Moto Guzzi's
growth, the Company acquired, effective January 1, 1996, Moto America, Inc., the
exclusive U.S. importer and distributor of Moto Guzzi products. After
elimination of intercompany sales and purchases, the results of Moto America
were not material to the consolidated results of operations in 1996.
Both Moto Guzzi and L.I.T.A., the Company's steel tubing subsidiary, are
cyclical businesses, subject to fluctuating raw material prices, and operate in
heavily unionized industries, subjecting them to risk of strikes and other work
stoppages. Each business operates from its respective single factory in Italy.
In general, neither business sells its products under long-term contracts or
other arrangements, and by scheduling production in anticipation of fulfilling
open orders, each business may be left with substantial inventory if such orders
are cancelled. Moto Guzzi's business is seasonal, with retail sales highest in
warm weather months. This effect is offset by demand from government agencies,
which is highest in the fourth quarter.
Most Italian companies are closed in August and for approximately 10 days
for the Christmas holiday, which affects both production and sales at those
times. Moto Guzzi's business is capital intensive, particularly so at the
present time as the business is in the midst of a significant refurbishing and
expansion of its production facility. Both Moto Guzzi and L.I.T.A. are subject
to currency fluctuations, as both export their products.
The 1995 acquisition of T.I.M., as part of the acquisition of the principal
operating subsidiaries of Finprogetti, enables the Company to apply T.I.M.'s
management skills to "turn around" troubled companies, enhancing their value.
The significant progress achieved at Moto Guzzi under the management of T.I.M.,
at which an operating profit of Lit. 478 million ($312,000) was realized in 1996
after 10 years of losses, reflects the importance of the acquisition of T.I.M.
and its turnaround capabilities. See "Business-- Recent
Transactions--Finprogetti Acquisition."
21
<PAGE>
In January 1997, the Company completed a $6,000,000 (Lit. 9,180 million)
private placement of securities of its Moto Guzzi Corp. subsidiary to partially
fund rehabilitation and expansion of motorcycle production capacity in Italy.
T.I.M. RELATED INVESTMENTS. The acquisition of L.I.T.A. in 1995 at a price
substantially below its book value illustrates how a T.I.M. management
engagement for a client can create or lead to an investment opportunity.
L.I.T.A. has made a material contribution to operations in 1996. See
"Business--L.I.T.A.-- Background."
MANAGEMENT INPUT. T.I.M. management engagements frequently involve "turn
around" plans which, in turn, involve financial restructurings, often with the
need for new capital as well as the need for creditors to forgive debt or to
convert debt into equity. Each such engagement affords the Company the potential
for an investment opportunity. The most prominent distinguishing factor between
the Company and other financial investors is that the Company, in investing its
capital, relies on its own management skills rather than those of others.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C> <C> <C>
---------------------------- ----------------------------
<CAPTION>
LIRE M. LIRE M.
<S> <C> <C> <C> <C>
Net sales............................................ Lit. 96,806 100.0% Lit. 72,253 100.0%
Cost of sales........................................ (84,165) (86.9%) (62,808) (86.9%)
-------------- --------------
12,641 13.1% 9,445 13.1%
Selling, general and administrative expenses......... (21,430) (22.1%) (16,230) (22.5%)
Research and development............................. (1,177) (1.2%) (602) (0.8%)
Rental income........................................ 1,483 1.5% 770 1.1%
-------------- --------------
Operating loss....................................... (8,483) (8.8%) (6,617) (9.2%)
Impairment losses for real estate properties......... (4,180) (4.3%) -- --
Other income, net.................................... 1,452 1.5% 513 0.7%
Interest expense..................................... (6,563) (6.8%) (4,448) (6.2%)
Interest income...................................... 3,747 3.9% 4,442 6.2%
-------------- --------------
Loss before income taxes and minority interests...... (14,027) (14.5%) (6,110) (8.5%)
Income taxes......................................... (595) (0.6%) (420) (0.6%)
Minority interests................................... (379) (0.4%) (450) (0.6%)
-------------- --------------
Net loss............................................. Lit. (15,001) (15.5%) Lit. (6,980) (9.7%)
-------------- --------------
-------------- --------------
</TABLE>
NET SALES
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
LIRE M. LIRE M.
Motorcycles....................................................... Lit. 77,620 Lit. 64,671
Steel tubing...................................................... 17,313 5,836
Corporate and other............................................... 3,517 2,458
Intersegment eliminations......................................... (1,644) (712)
------------ ------------
Lit. 96,806 Lit. 72,253
------------ ------------
------------ ------------
</TABLE>
22
<PAGE>
OVERALL. Net sales increased 34% in 1996 compared to 1995, principally as a
result of a 20% increase in sales of Moto Guzzi motorcycles and spare parts and
a 197% increase in sales of steel tubing from the inclusion of L.I.T.A. for a
full year, compared to 5 months in 1995.
MOTO GUZZI. Net sales of motorcycles and spare parts to unaffiliated
third parties increased in 1996 over 1995 by 23.2 % and 1.4% respectively.
Growth in motorcycle sales derives from increased volumes. Units sold by Moto
Guzzi increased from 5,198 in 1995 (excluding sales of Benelli inventory in
1995) to 6,050 in 1996. Sales of the largest units, those with engine
displacement greater than 750cc, increased only by 6% in 1996 over 1995. Sales
of these units were held back in 1996 by delays in introducing the new Centauro
model. Sales of 750cc units, principally the Nevada 750 model, increased by 68%
and sales of units under 750cc were unchanged from 1995. The growth in spare
part sales is attributable to the contribution of Moto America Inc. Sales of
spare parts by the Company's Italian spare parts distribution subsidiary were
limited by a relocation of its warehouse during the year.
L.I.T.A. Net sales for 1996 increased 19.0% over 1995. This growth
reflects volume increases of 23.3% to 12,056 tons and decreases in selling
prices due to falling steel prices, principally in the first and second
quarters. Volume growth has been achieved by increasing export sales which
amounted to 8.7% in 1996 compared to 1.2% in 1995 and growth in domestic
(Italian) markets.
COST OF SALES AND MARGINS. Overall, margins remained constant at 13.1%.
Margins at Moto Guzzi increased from 13.1% to 15.3% largely due to the absence
of exceptional costs from writedowns of tooling and inventories following the
strategic decision to wind down production of smaller "Moto Guzzi" and "Benelli"
models which had a negative impact on 1995 margins. Margins at L.I.T.A. fell
from 22% in the 5 months ended December 31, 1995 to 7% for 1996, principally as
a result of losses on inventory holdings caused by a sharp decrease in raw
material costs during the first half of 1996.
MOTO GUZZI. Margins in 1996 benefitted from higher volumes, which had
the effect of lowering per-unit fixed costs, but were negatively impacted by
higher costs from the outsourcing of components. Sales price increases
implemented in March 1996 averaged 5%. The Company had hoped that the gains from
volume increases in 1996 would exceed the extra cost of outsourcing, but this
was not realized in 1996 due to production shortages of approximately 400 units
in the third and fourth quarters, as described below. See "Risk
Factors--Dependence on Limited Number of Third Party Suppliers and Manufacturers
for Key Components."
<TABLE>
<CAPTION>
UNIT PRODUCTION
---------------------------------
1996 CHANGE 1995
--------- ----------- ---------
<S> <C> <C> <C>
First Quarter.................................................... 1,520 87.2% 812
Second Quarter................................................... 1,760 21.0% 1,455
Third Quarter.................................................... 1,103 (11.1%) 1,241
Fourth Quarter................................................... 1,644 (3.6%) 1,706
--------- ---------
6,027 15.6% 5,214
--------- ---------
--------- ---------
</TABLE>
The growth in production in the first quarter was primarily due to a
relatively large improvement in on-going operations in January 1996, whereas in
1995 and prior years production had been curtailed to allow for inventory taking
and production planning. Production delays occurred in August 1996 due to late
delivery of parts by suppliers. In September, Moto Guzzi commenced production of
its new Centauro model which temporarily reduced the overall production rate. In
November 1996, Moto Guzzi unit output was again limited due to delays at
suppliers and strikes connected with the renewal of national labor contracts. In
consequence, Moto Guzzi fell short of its production targets by approximately
400 units.
Cost of sales at Moto Guzzi increased due to an inflationary increase in raw
material prices and wages and increased costs for purchases of components which
had previously been manufactured in-house.
23
<PAGE>
Aluminum prices, which had been a significant factor in raw material cost
increases in 1995, were stable in 1996, with a decrease in the second half of
the year, which helped to offset price rises of other components. Total
production labor costs increased by 8.0% in 1996 compared to 1995, as a
consequence of an increase in the number of employees and effects of pay
increases, offset by reduced overtime hours of 7.7% compared to 9.6% in 1995.
L.I.T.A. Costs of sales and margins were significantly affected by a
fall in steel prices averaging 22% in the first half of 1996. L.I.T.A. purchased
steel at market prices at the time but when finished goods were sold, their
selling price reflected the falling steel price and a loss on inventories
resulted. The negative effect of these losses on margins for 1996 is estimated
at Lit. 600 million ($392,000). Raw material prices stabilized in the second
half of 1996 and margins recovered in the fourth quarter.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. The increase in selling,
general and administrative expenses results principally from the inclusion of
the costs of the Company's enlarged structure following the Finprogetti
acquisition for a full year against six months in 1995, increases at Moto Guzzi
for higher business levels and expenses to improve logistics and management
informations systems and the acquisition of Moto America, Inc. In 1996, the
Company also sustained substantial non-recurring legal, accounting and tax
advisory fees in connection with its share repurchase program, internal
restructuring and reorganization and in connection with the agreement,
subsequently terminated by mutual agreement, to acquire the Carey Winston
Company ("Carey Winston"), a U.S. real estate services company.
RESEARCH AND DEVELOPMENT. Amounts of research and product development
relating to Moto Guzzi, have increased in respect of planned new models and
continuing development of existing models.
RENTAL INCOME. The increase reflects the inclusion of the operations
acquired from Finprogetti for a full year against inclusion for six months in
1995, plus a small increase in rentals for inflationary adjustments.
OPERATING LOSS
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
LIRE M. LIRE M.
Motorcycles............................................................... 478 (45)
Steel tubing.............................................................. (385) 235
Real estate............................................................... 826 (92)
Corporate and other....................................................... (9,402) (6,809)
Intersegment eliminations................................................. - 94
--------- ---------
(8,483) (6,617)
--------- ---------
--------- ---------
</TABLE>
Operating loss increased by Lit. 1,866 million ($1,220,000) or 28.2% in 1996
compared to 1995, principally as a result of higher corporate overheads arising
from the Company's enlarged structure following the acquisition of Finprogetti
in July 1995 and losses at L.I.T.A. due to falling steel prices in the first
half of 1996. These changes more than offset the improved operating results from
Moto Guzzi and from real estate operations.
IMPAIRMENT LOSSES ON REAL ESTATE. The Company recorded a reserve of Lit.
2,500 million ($1,634,000) in the third quarter of 1996 following the expiration
of an option held by third parties to acquire the Company's interest in
undeveloped land in Sardinia, Italy. The market value of this property decreased
in 1996 due to changes in rules and practices by the local and regional
government relating to construction permits and environmental authorizations
which increased development risks. Also in the third quarter, the Company
recorded reserves of Lit. 450 million ($294,000) for maintenance in respect of
its Cologne, Italy property. Further reserves of Lit. 1,230 million ($804,000)
were recorded in the fourth quarter of 1996
24
<PAGE>
to reflect the terms of the agreement to sell the Cologne property made in March
1997 which was consummated in April.
OTHER INCOME, NET. Other income in 1996 primarily consists of gains of
sales of assets for Lit. 1,211 million ($792,000) (Lit. 321 million in 1995), a
government grant of Lit. 450 million ($294,000) received by Moto Guzzi in
respect of research and development in prior years and Lit. 527 million
($344,000) (1995-- Lit. 547 million) of miscellaneous items offset by currency
losses of Lit. 848 million ($554,000) (1995--Lit. 443 million). Gains on
disposals of assets primarily related to disposals of two surplus properties,
one in Rome, Italy and one in Baltimore, Maryland. Other income, net, also
includes, in both 1996 and 1995, finance income and expense relating to
factoring operations acquired as part of the Finprogetti acquisition which are
being wound down, with no significant net income in either year from such
operations.
INTEREST EXPENSE AND INTEREST INCOME. Higher interest expense in 1996
primarily resulted from the inclusion of real estate loans acquired as part of
the Finprogetti transaction for a full 12 months compared to six months in 1995
and in respect of increased interest expense on advances from banks which have
financed the growth of Moto Guzzi and L.I.T.A. Interest rates were slightly
lower in 1996 compared to 1995. Interest income decreased in 1996 compared to
1995, principally as a result of reduced cash balances reflecting cash used in
operations and cash used at the beginning of November 1996 to consummate the
Company's share repurchase program.
INCOME TAXES. Because Italian companies are taxed in Italy on their
individual results and are not able to file consolidated returns, one of the
Company's Italian subsidiaries had income tax expense in 1996 and 1995 on
interest income and gains on disposals of assets, despite consolidated operating
losses from operations in both years.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C> <C> <C>
--------------------------
--------------------------
</TABLE>
<TABLE>
<CAPTION>
LIRE M. LIRE M.
<S> <C> <C> <C> <C>
Net sales............................................... Lit. 72,253 100.0% Lit. 51,994 100.0%
Cost of sales........................................... (63,410) (87.8) (46,256) (89.0)
------------- -------------
8,843 12.2 5,738 11.0
Selling, general and administrative expenses............ (16,230) (22.5) (10,818) (20.8)
Rental income........................................... 770 1.1 -- --
------------- -------------
Operating loss.......................................... (6,617) (9.2) (5,080) (9.8)
Other income/(expense), net............................. 513 0.7 990 1.9
Interest expense........................................ (4,448) (6.2) (3,874) (7.5)
Interest income......................................... 4,442 6.2 5,536 10.6
------------- -------------
Loss before income taxes and minority interests......... (6,110) (8.5) (2,428) (4.7)
Income taxes............................................ (420) (0.6) (39) (0.1)
------------- -------------
Loss before minority interests.......................... (6,530) (9.0) (2,467) (4.7)
Minority interests...................................... (450) (0.6) (810) (1.6)
------------- -------------
Loss.................................................... Lit. (6,980) (9.7%) Lit. (3,277) (6.3%)
------------- -------------
------------- -------------
</TABLE>
25
<PAGE>
NET SALES
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
LIRE M. LIRE M.
Motorcycles................................................. Lit. 64,671 Lit. 48,849
Steel tubing................................................ 5,836 --
Hotel operations............................................ -- 1,073
Corporate and other......................................... 2,458 2,305
Intersegment eliminations................................... (712) (233)
------------ ------------
Lit. 72,253 Lit. 51,994
</TABLE>
OVERALL. Net sales increased 40% in 1995 compared to 1994 principally as a
result of a 30.4% increase in net sales of Moto Guzzi motorcycles and spare
parts and the inclusion of the operations of L.I.T.A. for the last five months
of 1995. The Company also reported net sales in 1995 of Lit. 2,458 million
($1,607,000) relating to the operations of T.I.M. and other businesses acquired
in July 1995 as a result of the Finprogetti Acquisition, and to residual sales
of Maserati spare parts. Net sales in 1994 included Lit. 2,305 million
($1,507,000) relating to residual sales of Maserati inventory and spare parts.
Net sales in 1994 also included revenues of Lit. 1,073 ($701,000) million from
operations of the Hotel Roma, which the Company disposed of in 1995.
MOTO GUZZI. Net sales of motorcycles and spare parts to unaffiliated
customers (net of sales by Moto Guzzi to its spare parts distribution
subsidiary) increased in 1995 over 1994 by 35.6%, to Lit. 55,218 million
($36,090,000), and 16.2%, to Lit. 9,453 million ($6,178,000), respectively. Unit
sales of motorcycles (excluding old Benelli inventory) increased to 5,198 in
1995, compared to 4,278 in 1994. Sales of motorcycles of the Company's largest,
most profitable units, those with engine displacement greater than 750cc,
increased in the period from 3,044 to 3,766. Sales to the public administration
sector (military and police) declined to 16.2% of total sales in 1995, from
17.7% in 1994. While sales to Italian and foreign government bodies are
significant as a whole to Moto Guzzi, sales to no single government agency were
significant in 1995.
L.I.T.A. The Company acquired the steel tube manufacturing subsidiary
on July 26, 1995. Accordingly, 1994 does not include any operations from
L.I.T.A., and 1995 includes its operations for only the last five months of the
year. In that period, L.I.T.A.'s net sales aggregated Lit. 5,836 million
($3,814,000), while total net sales of L.I.T.A. in 1995, including the period
prior to its acquisition by the Company, aggregated Lit. 14,541 million
($9,504,000). More than 99% of such 1995 sales were made in Italy, and 65%
thereof were in the automotive sector. Approximately 14% of its net sales were
to the aluminum furniture market and the balance to the bicycle frame and
household appliances markets.
COST OF SALES AND MARGINS. Margins improved to 12.2% of net sales in 1995,
compared to 11% of net sales in 1994, principally as a result of improved
operations at Moto Guzzi and the inclusion of operations of L.I.T.A. in 1995.
Margins in 1994 benefitted by the reversal of reserves against inventories of
spare parts for Maserati automobiles. Largely as a result of increased unit
sales, thereby lowering per unit fixed costs, and generally higher selling price
increases compared to production cost increases, Moto Guzzi's margins increased
to 12.1% of net sales in 1995 from 8.3% in 1994, including the effects of
non-recurring write-downs aggregating approximately Lit. 1,800 million
($1,176,000) of inventories and tooling resulting from the strategic decision to
concentrate on larger motorcycles and largely abandon the smaller "Moto Guzzi"
and "Benelli" models, and of approximately Lit. 664 million ($434,000) of
increased research and development expenses over 1994's levels.
Cost of sales at Moto Guzzi in 1995 increased due to a combination of 4.8%
inflation in raw materials prices, due primarily to a 30% increase in aluminum
prices in 1995, increased labor costs resulting from a greater number of workers
(357 in 1995 compared to 322 in 1994), an average 3.4% pay increase over 1994,
including wages and bonuses, and higher overtime levels (aggregating 9.6% of all
production hours in 1995
26
<PAGE>
compared to 5.9% in 1994), although on a per-unit basis, labor costs declined
almost 18% in 1996 compared to 1995 and increased use of outsourcing, which
contributed 1.2% to unit motorcycle costs.
Both raw material costs and export selling prices are affected by exchange
rates. Approximately 67% by units and 65.3% by sales of the business of Moto
Guzzi in 1995 were represented by exports. Other than sales to the United
States, which are denominated in U.S. Dollars and which were not significant to
overall 1995 sales, all export sales are denominated in Lire. Exchange rates
were relatively stable in 1995 against other major currencies. To the extent
permitted by competitive pressures, Moto Guzzi seeks to pass its increased costs
from changing prices on to its customers by increasing selling prices. In 1995,
Moto Guzzi continued to benefit from the devaluation of the Lira in 1993
following its exit from the European Exchange Mechanism, and was able to pass on
cost increases in its 1995 selling prices. See "Exchange Rates."
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses reflect an increase of approximately Lit. 2,200 million
($1,438,000) resulting from the acquisitions of Finprogetti and L.I.T.A. Direct
transaction costs of Lit. 1,224 million ($800,000) were capitalized as part of
the purchase costs but, more generally, costs of reorganizing the Company's
operating structure have added to expense in 1995, compared to 1994, while the
anticipated benefits are expected to accrue to future periods. The Company's new
operational structure, which was put in place in the second half of 1995, has a
higher cost than in prior periods. The Company will seek to (i) reduce these
costs in future years by bringing certain accounting and legal functions
in-house, (ii) increase retainer and success fees from services to third
parties, and (iii) realize operating profits and investment gains from Portfolio
Companies. Selling, general and administrative expenses in 1994 for corporate
operations included expenses relating to evaluating the Company and Moto Guzzi
following the sale of Maserati, redefining the Company's strategic mission,
write-offs of expired Italian tax refund rights, and accruals for costs to
remove satisfied mortgages of record against property in Italy. Expenses for
1995 were also increased due to the inclusion of Lit. 862 million ($563,000)
relating to the operation of the real estate assets acquired from Finprogetti.
Administrative costs at Moto Guzzi increased in 1995 as a result of an
investment in personnel to manage new computer systems, and the installation of
a management group to control outsourcing, an exceptional bad debt expense of
Lit. 425 million ($278,000) and exchange losses of Lit. 338 million ($221,000).
OPERATING LOSS
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
LIRE M. LIRE M.
Motorcycles....................................................... Lit. (45) Lit. (632)
Steel tubing...................................................... 235 --
Real estate....................................................... (92) --
Hotel operations.................................................. -- (164)
Corporate and other............................................... (6,809) (5,034)
Intersegment eliminations......................................... 94 750
------------ ------------
Lit. (6,617) Lit. (5,080)
</TABLE>
Operating loss increased by Lit. 1,537 million ($1,005,000), or 30.3%, in
1995 compared to 1994, but declined to 9.2% of net sales in 1995, compared to
9.8% of net sales in 1994. The change is a result of improved operating results
at Moto Guzzi, which sustained an operating loss of Lit. 45 million ($29,000) in
1995 compared to Lit. 632 million ($413,000) in 1994, and a Lit. 235 million
($154,000) operating profit at L.I.T.A. net of Lit. 184 million ($120,000) in
fees paid to T.I.M. for managing the business. The single largest component of
the Company's operating loss, however, in 1995 as in 1994, related to the
Company's corporate operations, particularly costs associated with the
restructuring of its business plan and strategic focus. In 1994, these costs
were offset by high margins due to the reversal of Maserati inventory reserves.
27
<PAGE>
OTHER INCOME/(EXPENSE). Results for 1995 include exchange losses of
approximately Lit. 900 million ($588,000) arising from a domestic currency swap
related to the planned stock repurchase program which commenced in September
1996 and from short-term intercompany advances from subsidiaries, and Lit. 890
million ($582,000) in expense and Lit. 978 million ($639,000) in income relating
to the residual operations of Finproservice, S.p.A., one of the businesses
acquired from Finprogetti which was later wound down by the Company. Results for
1994 include a gain of Lit. 2,841 million ($1,857,000) from the sale of certain
fixed assets, including an electric power generating plant, and currency
exchange losses of Lit. 1,022 million ($668,000), consisting of a loss of Lit.
425 million ($278,000) from a loan denominated in Swiss francs (paid in 1995),
and the balance derived principally from the collection and payment by Moto
Guzzi and other Italian subsidiaries of foreign accounts receivable and payable.
The Company also realized a loss in 1994 of Lit. 829 million ($542,000) from a
variety of sources, no one of which was material.
RENTAL INCOME. As a consequence of the July 1995 Finprogetti Acquisition,
the Company realized rental income of Lit. 690 million ($451,000) in the
remaining six months of 1995 from one commercial property, located in Cologne,
Italy, approximately 80% of which is leased to a multinational company at an
annual rental of Lit. 1,280 million ($837,000), and Lit. 80 million ($52,000)
from a parking concession in Genoa, Italy. Rentals for Cologne are tied to the
cost of living index and the rental agreement expires in July 1998. The Company
does not plan to remain engaged in the operation of the former Finprogetti real
estate assets on a long-term basis.
INTEREST EXPENSE. Interest expense increased by Lit. 584 million
($382,000), or 15%, compared to 1994, although as a percentage of net sales,
interest expense declined by 17.3%, to 6.2% of net sales in 1995 from 7.5% of
net sales in 1994. The increase in interest expense is due to the assumption of
loans relating to the real property acquired in the 1995 Finprogetti
acquisition, and to external interest expense at Moto Guzzi, which rose due to a
build-up of inventory levels in 1995 compared to 1994.
INTEREST INCOME. Interest income declined in 1995 by Lit. 1,084 million
($708,000), or 19.5%, compared to 1994. As a percentage of net sales, interest
income declined 41.5%, to 6.2% of 1995 net sales, from 10.6% of 1994 net sales.
Interest income for 1994 included Lit. 2,976 million ($1,945,000) of imputed
interest on the final installment of Lit. 27,000 million due from Fiat Auto
S.p.A. in connection with the 1993 sale of Maserati, which was received on
January 1, 1995. Following receipt, a portion of the Maserati proceeds were used
to finance losses in subsidiary operations.
INCOME TAXES. Because Italian companies are taxed in Italy on their
individual results and are not permitted to file consolidated returns, the
Company's Italian subsidiaries had income tax liabilities of Lit. 420 million
($275,000) despite operating losses from continuing operations of Lit. 6,110
million ($3,993,000).
LIQUIDITY AND CAPITAL RESOURCES
WORKING CAPITAL
MOTO GUZZI. Inventories increased by Lit. 4,715 million ($3,082,000) at
December 31, 1996 compared to December 31, 1995 as a result of increased
activities and the acquisition of Moto America Inc. During 1996, inventory
levels rose to Lit. 37,722 million ($24,655,000) at the end of the third
quarter, as a result of production interruptions and delays in receipt of
outsourced components as well as the request of certain public administration
customers to defer delivery of completed motorcycles. The Company, after
additional delays in receipt of components, recovered some lost production in
December 1996 and was able to reduce inventory in the fourth quarter. Trade
receivables of Moto Guzzi increased by approximately Lit. 2,690 million
($1,758,000), or 10.8%, to Lit. 24,828 million ($16,227,000) at December 31,
1996, primarily due to increased sales levels. Trade and other payables
increased by Lit. 2,104 million ($1,375,000) to Lit. 26,078 million ($17,044)
due to increased purchases for higher business volumes, increased outsourcing
and scheduled reductions in payment terms as Moto Guzzi seeks to
28
<PAGE>
collaborate and build relations with its key suppliers. The net increase in
working capital accounts (inventories, trade and other receivables less trade
and other payables) was financed by increases in short-term bank borrowings.
L.I.T.A. Inventories decreased from Lit. 4,683 million at December 31,
1995 to Lit. 2,097 million ($1,371,000) at December 31, 1996 as a result of raw
material price decreases and controls imposed by management. Trade receivables
and trade payables increased in line with higher business levels. Overall,
working capital balances were reduced as a consequence of the inventory
reductions. Working capital is financed by advances from banks which remained at
a comparable level as the end of 1995.
OTHER BALANCES. Finance receivables relating to the residual activities of
a factoring company acquired as part of the Finprogetti acquisition decreased
from Lit. 7,597 million to Lit. 3,573 million ($2,336,000), reflecting the
winding down of these activities. Advances from banks to finance these
activities decreased in line with the reduction in receivables. Other
receivables at December 31, 1996 include an advance of $1,000,000 (Lit. 1,530
million) to Carey Winston in accordance with the agreement to purchase Carey
Winston, which agreement was subsequently terminated. The advance is to be
repaid in four installments by April 1, 1998. At December 31, 1995, other
receivables included Lit. 920 million related to sales of residual assets of the
Company's U.S. Maserati distributorship, which was closed in 1995. The balance
of other receivables is primarily represented by valued added tax balances
carried forward and to be offset in 1997 by value added taxes payable.
INVESTING ACTIVITIES
Purchases of plant and equipment amounted to Lit. 6,895 million
($4,506,000), principally for refurbishments at the Moto Guzzi facility. These
expenditures were financed from short-term bank borrowings in anticipation of
the receipt of capital from the Moto Guzzi Financing. See "Business-- Recent
Transactions." A further Lit. 1,573 million ($1,028,000) of capital expenditures
at Moto Guzzi were financed by leases.
Surplus properties relating to the closed Maserati U.S. distributor and a
building in Rome were disposed of in 1996. The proceeds of $1,175,000 (Lit.
1,798 million) and Lit. 1,600 million ($1,046,000), respectively, are the
principal elements of the Lit. 4,183 million ($2,734,000) generated by asset
disposals. The Company received reimbursements of Italian tax receivables
aggregating Lit. 6,245 million ($4,082,000) in 1996, primarily from repayment of
valued added tax of Lit. 5,259 million ($3,437,000) in the first quarter of
1996.
In connection with the Moto America, Inc. acquisition, which was effected
January 1, 1996, the Company acquired Lit. 577 million ($377,000) of cash and
issued the Company's stock with an agreed value of $300,000 (Lit. 471 million at
the then prevailing exchange rate).
In June 1996, the Company disposed of its 66.7% interest in Immobiliare
Broseta S.r.l to its 25% affiliate Domer S.r.l., in a non-cash transaction,
receiving loan notes with a fair value aggregating Lit. 4,708 million
($3,077,000) and eliminating Lit. 12,200 million ($7,974,000) of real estate,
Lit. 5,049 million ($3,300,000) of real estate loans and Lit. 2,354 million
($1,539,000) of minority interests from the balance sheet. Lit. 1,800 million
($1,176,000) of the loan notes received by the Company in the Immobiliare
Broseta transaction represent the Company's proportional share, along with the
other shareholders, of financing for several real estate development projects
being conducted by Domer S.r.l. The note has an annual expiry at December 31 and
is renewable. The note will be repaid when Domer S.r.l. reduces its external
debt on completion of a commercial development project now in course. At
December 31, 1996, the note was renewed and it has been classified in the
balance sheet as long term. The other loan note is payable based on a percentage
of sales of apartments of the Immobiliare Broseta S.r.l. property or by June 30,
1998 and has also been classified as long-term.
29
<PAGE>
FINANCING ACTIVITIES
ADVANCES FROM BANKS--WORKING CAPITAL FINANCING ARRANGEMENTS. The net
increase in advances from banks represents increases at L.I.T.A. and Moto Guzzi
to finance working capital and temporarily finance capital expenditures in
anticipation of the Moto Guzzi Financing. See "Business--Recent Transactions".
Advances from banks for finance activities decreased in line with the reduction
in these balances. Moto Guzzi and L.I.T.A. have lines of credit largely secured
by trade receivables amounting to approximately Lit. 39,000 million
($25,490,000) and Lit. 5,650 million ($3,693,000), respectively. Significant
production shortfalls, such as occurred at Moto Guzzi in the third and fourth
quarters of 1996, have the effect of reducing the Company's ability to draw down
on the financing facilities. In 1996, the Company opened unsecured credit lines
of Lit. 1,000 million ($654,000), backed by letters acknowledging the Company's
ownership of Moto Guzzi to cover temporary cash difficulties. The lines of
credit are mainly informal subject to frequent variation. The Company uses a
number of banks with aggregate facilities in excess of actual requirements so as
to obtain the best interest rates.
MOTO GUZZI FINANCING. Net proceeds through December 31, 1996 from the
private sale of convertible preferred stock and warrants of the Company's Moto
Guzzi Corp. subsidiary amounted to $3,352,000 (Lit. 5,101 million). A further
$1,886,000 (Lit. 2,979 million) was received in January 1997.
LONG-TERM DEBT. Principal repayments of long-term debt in 1996 are
represented by Lit. 4,834 million ($3,159,000) of real estate loans and the
balance principally relating to repayments of loans of Moto Guzzi. Principal
repayments of real estate loans were financed by decreases in investments and
the amounts received for reimbursement of tax receivables. Loan principal
repayments by Moto Guzzi were financed
primarily by short-term borrowings. In December 1996, Moto Guzzi received a loan
of Lit. 878 million ($574,000), and a cash grant of Lit. 450 million ($294,000),
representing an 80% advance of government grants for research and development
performed in prior years. The Company also obtained a loan of U.S. $ 240,000
(Lit. 370 million) to finance the purchase of premises for its U.S. Moto Guzzi
distributor.
In April 1997, the Company sold its Cologne property and all related
mortgage loans of Lit. 9,712 million ($6,348,000), of which Lit. 4,998 million
($3,267,000) would have been due before December 31, 1997. See "Business
- --Commercial Real Estate Development."
FUTURE LIQUIDITY NEEDS
The net proceeds of the Moto Guzzi Financing, and the expected net proceeds
of this Offering, will not be sufficient to complete the needed rehabilitation
and expansion program at Moto Guzzi at the rate planned by management, although
they are forecast to be sufficient to sustain a significantly reduced rate of
expansion activities at Moto Guzzi. Further, the Company contemplates conducting
a public offering of Moto Guzzi Corp. securities on or before June 30, 1998 to
provide additional capital that the Company expects will be needed by Moto
Guzzi. No assurance can be given, however, that such an offering will be made on
acceptable terms or at all by such date.
The Company also anticipates realizing capital from the disposition of
certain assets, including the Sardinia property and certain parking rights in
Genoa and from the receipt of Italian tax receivables, and amounts due on the
promissory notes from the sale of its Immobiliare Broseta S.r.l. subsidiary, as
discusssed above, although the timing of such realization is uncertain. In the
absence of said realization, available cash, and proceeds from the sale of
Cologne, and from the repayment by Carey Winston of advances, are not expected
to be sufficient to meet all of the Company's planned cash needs in 1997 without
reducing planned activities and Moto Guzzi's rehabilitation program. If capital
is not available when needed, the Company may also have to decline opportunities
for future investments.
30
<PAGE>
CAPITAL COMMITMENTS
In connection with the resolution of certain matters deriving from the
acquisition of the majority of Finprogetti's operating subsidiaries in July
1995, Finprogetti assumed responsibility for a claim which was successfully
brought against one such subsidiary. The Company agreed to repurchase 105,440
shares issued to Finprogetti at a present value of Lit. 1,940 million
($1,268,000). The Company repurchased a total of 32,330 shares for Lit. 650
million ($425,000) in 1996. The Company's remaining commitment is to repurchase
the remaining 73,110 shares at an aggregate present value of Lit. 1,330 million
($869,000) in June 1997, December 1997 and June 1998. See "Business--Recent
Transactions--Finprogetti Acquisition."
The Company's obligation to repurchase 776,530 shares from a trust on June
30, 1998 at $11.27 per share, which shares were previously owned by the
Company's former Chairman of the Board, is denominated in U.S. Dollars. The
Company has deposited lire denominated investments amounting to Lit. 14,511
million and with an expected maturity value at June 30, 1998 of Lit. 15,000
million, to collateralize a letter of credit issued in respect of its repurchase
obligation. The Company has not hedged the exchange risks deriving from its
repurchase obligation. Adverse exchange movements could result in the obligation
exceeding the maturity value of investments deposited, reducing liquidity
available for the Company's business. See "Business--Recent
Transactions--Repurchase of Former Chairman's Shares."
In connection with its share repurchase program, the Company repurchased
761,995 shares in October 1996 for $9,342,000 (Lit. 14,172 million) paying cash
of $7,479,000 (Lit. 11,635 million) and issuing 8% promissory notes due October
1998 of $1,863,000 (Lit. 2,827 million). An annual interest payment of
approximately $144,000 is due on the first anniversary of the notes. Principal
and interest are due on the second anniversary.
Available cash is expected to be sufficient to pay all such capital
commitments in 1997.
31
<PAGE>
BUSINESS
OVERVIEW
The Company owns Moto Guzzi, an Italian manufacturer of luxury and
high-performance motorcycles, and L.I.T.A., an Italian manufacturer of welded
steel tubes used principally in the automobile and furniture industries, and
provides temporary management and capital and merchant banking services to
troubled businesses located primarily in Italy.
In connection with the Company's temporary management services, the Company
earns fees from its management engagements (including the potential for
negotiated bonuses in the form of cash or equity for achieving agreed upon
results), and obtains the opportunity to make minority or controlling equity
investments, alone or with other strategic or financial investors, in managed
businesses ("Portfolio Companies"). The Company plans to realize income from (i)
the operations of wholly or majority owned Portfolio Companies and (ii) the
disposition of its equity interests in the Portfolio Companies and in managed
companies in which it owns minority interests at enhanced values resulting from
the rendering of management services to these companies.
Until 1993, the Company was primarily in the business of luxury automobile
manufacture through its former Maserati S.p.A. subsidiary, and secondarily in
the motorcycle business through Moto Guzzi. In 1993, after the Maserati sale,
the Company's only operating subsidiary was Moto Guzzi, which the Company had
acquired in 1972. At that time, Moto Guzzi was a manufacturer of medium and high
priced motorcycles which for years had been both unprofitable and
undercapitalized. The Company's Board of Directors was prepared to consider a
capital investment by or joint venture with a third party, the sale of its
interest in Moto Guzzi, or some other form of business combination to repair
Moto Guzzi's capital deficiencies and financial condition.
When those efforts proved unsuccessful, the Company, in May 1994, engaged
the predecessor of T.I.M. to provide Moto Guzzi with critically needed temporary
management in order to staunch losses and to design a capital plan for future
growth or sale of the subsidiary. Under T.I.M.'s direction, Moto Guzzi increased
production and sales, reduced costs, and achieved a small operating profit in
1996. Moto Guzzi today manufactures a high priced line of motorcycles under the
trademark "Moto Guzzi-Registered Trademark-". Moto Guzzi has determined to focus
its future sales and development efforts on its larger motorcycles, having
engines of 750cc or greater. Moto Guzzi has recently hired as its Managing
Director Mr. Oscar Cecchinato, formerly the chief executive officer of Aprilia
S.p.A., Italy's largest motorcycle manufacturer.
L.I.T.A. was acquired in July 1995 and represents the first merchant banking
investment by the Company in a client arising out of a T.I.M. engagement. T.I.M.
had been engaged by L.I.T.A.'s prior owners in 1994 to manage the company
through an operational crisis and to prepare the company for sale. Since its
acquisition by the Company, L.I.T.A. has expanded its customer base and has
initiated an export program, though at present export sales are not material to
its operations. L.I.T.A. produces welded steel tubes.
T.I.M.
T.I.M. is a wholly-owned subsidiary of the Company, having been acquired in
1995 as part of the purchase of substantially all of the operating subsidiaries
of Finprogetti (see "Recent Transactions-- Finprogetti Acquisition"). While the
operations of T.I.M. to date have not been material to the consolidated results
of operations of the Company, the acquisition of T.I.M. was an essential
component of the Company's strategic redirection, as it permits the Company to
combine T.I.M.'s skill and knowledge in providing capable management to troubled
businesses with the Company's abilities in analyzing capital requirements and
transaction structuring, and to apply such capabilities to investment
opportunities arising out of T.I.M.'s management engagement.
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<PAGE>
T.I.M. provides temporary management for companies facing special problems
through a network of experienced and qualified managers which it makes available
to operate all or strategic portions of the businesses of its clients. Managers
are selected based on a client's specific needs and are supported by T.I.M.'s
management and administrative resources. T.I.M. analyzes the client's businesses
and develops strategic business plans based on the client's objectives which,
upon agreement with the client, define the goals and standards by which T.I.M.'s
performance and incentive compensation will be measured at the end of each
engagement. A significant component of T.I.M.'s compensation is performance
related.
A typical T.I.M. engagement requires the appointment of a T.I.M. manager as
temporary Chief Executive Officer, or, less frequently, as Chief Financial
Officer, Chief Operating Officer or as an executive responsible for a specific
functional team or project. The engagement might require the adoption of a
fundamental corporate restructuring, a sale or other divestiture of assets, the
reorganization of marketing or distribution functions, a financial
restructuring, or the management of technological innovation. T.I.M.'s strategic
plans usually focus on reestablishing profitability and increasing net worth,
achieving productivity growth and managing staff reductions, accelerating the
decision-making process, and bridging cultural gaps which may have inhibited
growth.
T.I.M. is compensated for its services by receiving a monthly fee. It also
negotiates a success fee based on achievement of agreed-upon results. T.I.M.
engagements normally continue for one to two years, beginning with an analysis
phase and continuing with a business plan implementation and review phase.
Among the management projects on which T.I.M. is currently engaged are the
following: a flexible plastic packaging company with sales of Lit. 150,000
million ($98,039,000), for which a T.I.M. manager is acting as President and
Chief Executive Officer to strengthen its marketing division and guide the
company to a possible public offering; an Italian publicly-held carpentry tool
manufacturer with production facilities in Italy and France, for which T.I.M.
has been engaged to manage operational restructuring; and an internationally
known sewing and knitting machine manufacturer that is a division of a
publicly-held company and has sales of Lit. 120,000 million ($78,431,000), for
which T.I.M. has been engaged to carry out a major financial and operational
restructuring.
Additionally, the Company is negotiating the purchase of a minority interest
in a company to be formed with CEMB, a current T.I.M. client, to acquire the
operating assets of Hofmann Maschinenbau GmbH.
SALES AND MARKETING. T.I.M. seeks new management engagements through
marketing efforts directed at financial and legal professionals, and
entrepreneurs, in Italy and elsewhere in Europe. T.I.M. conducts seminars and
symposia.
The ability of T.I.M. to generate management services income and investment
opportunities for the Company is in part dependent on the availability of and
ability to attract suitably qualified managers to collaborate with T.I.M. The
availability of suitably qualified managers will depend on, among other factors,
the general economy in Italy and demand for managers, the actions of companies
that seek to compete with T.I.M. or offer alternative employment options to such
managers, and the ability of T.I.M. to negotiate attractive engagements and
attractive engagement terms for potential manager candidates.
The ability of the Company to achieve its broader long-term strategic goal
of investing in troubled companies and enhancing their values will depend in
large measure on the ability of T.I.M. to provide its services to troubled
businesses in need of management intervention. While T.I.M. is not expected to
earn substantial revenue or profits from such temporary management engagements
in relation to the Company's consolidated revenues and earnings, such
engagements are expected to provide a significant source of entrepreneurial
investment opportunities for the Company, whether through acquisition or
merchant banking. However, there can be no assurance that T.I.M.'s management
engagements will prove to be a sufficient source of quality investment
opportunities.
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MOTO GUZZI
OVERVIEW. The motorcycle segment continued to dominate reported
consolidated results of operations in 1996, accounting for approximately 80% of
the Company's consolidated net sales. Moto Guzzi, the Company's majority-owned
subsidiary, was acquired by the Company in 1972. For 75 years, Moto Guzzi was a
manufacturer of medium and high priced motorcycles. For many years it had been
both unprofitable and undercapitalized.
In 1994, following the engagement of T.I.M. to improve manufacturing and
sales results, Moto Guzzi's overall unit sales improved by 28% and production of
the Company's larger motorcycles (having engine displacements of at least 750cc)
expanded to 3,048 units from 2,175 units in 1993. Unit sales grew approximately
23% in 1995, and in 1996, overall unit sales increased by a further 16.4% to
6,050 units, of which 5,548 had engine displacements of 750cc or greater,
compared to 4,690 in 1995. A portion of the Offering proceeds will be used to
rehabilitate old production machinery and equipment to help Moto Guzzi increase
production of these larger units.
INDUSTRY GENERALLY. Historically, the motorcycle had been an "entry level"
form of transport which has been supplanted by the automobile. Over recent
years, the industry has become established as a recognized leisure industry in
developed markets and Moto Guzzi motorcycles, being larger and more expensive,
are principally targeted at the leisure segment of the vehicular industry. The
Company believes that the recent recognition of motorcycling as an acceptable
leisure activity is one of the major factors behind the steady growth in Moto
Guzzi's market segment over the last two years. The Company believes that this
trend will continue in the short and medium term and that its markets will not
be subject to violent demand changes, although no assurance can be provided that
this will be the case.
The Italian market today remains dominated by large, well-financed Japanese
manufacturers. A number of Italian and foreign manufacturers, principally
Cagiva, Honda, BMW, Yamaha, Kawasaki and Suzuki, sell their products in the
Italian market. In 1996, according to data from the Ministry of Transportation,
the Italian market shares of the principal competitors of Moto Guzzi on a unit
basis were as follows:
<TABLE>
<CAPTION>
LARGE ALL
MOTORCYCLES MOTORCYCLES
--------------- ---------------
<S> <C> <C>
BMW.................................................................. 19.3% 7.6%
Honda................................................................ 19.2% 27.8%
Harley Davidson...................................................... 15.7% 4.1%
Yamaha............................................................... 13.8% 16.1%
Kawasaki............................................................. 10.2% 7.6%
Ducati............................................................... 8.7% 4.6%
Suzuki............................................................... 6.8% 9.7%
Moto Guzzi........................................................... 3.2% 3.0%
Triumph.............................................................. 2.1% -
Aprilia.............................................................. - 10.0%
Cagiva............................................................... - 3.7%
</TABLE>
MANUFACTURING. Moto Guzzi today manufactures a high priced line of
motorcycles, and distributes spare parts, under the trademark "Moto
Guzzi-Registered Trademark-." Moto Guzzi motorcycles vary in engine displacement
from 350cc to 1,100cc, although Moto Guzzi has made a strategic decision to
concentrate development and sales efforts on its largest motorcycles, having
engines of 750cc or larger. Moto Guzzi spare parts are distributed through
Centro Ricambi, a 100% owned subsidiary of Moto Guzzi. Moto Guzzi had also
manufactured and sold smaller and lower priced cycles under the "Benelli"
trademark, but ceased production of these vehicles in 1993.
All motorcycle manufacturing is conducted at a factory in Mandello del
Lario, Italy. Moto Guzzi manufactures certain power train components, acquires
certain other components from outside suppliers,
34
<PAGE>
and performs finishing work and assembly into motorcycle bodies. Until 1994,
Moto Guzzi internally produced a majority of the components of its motorcycles.
As a result of its decision to increase outsourcing to increase production
capacity, Moto Guzzi produced fewer than 40% of all motorcycle components in
1996.
Because much of the production machinery at Moto Guzzi's facility is aged
and in need of extensive modification, improvement or replacement, the Company
expects that, over the next four years, significant additional capital will be
required to complete the required overhaul. While anticipated increases in
sales, if any, during that period would provide some of the needed capital,
anticipated internally generated cash and currently available bank financing,
will not in the aggregate be sufficient to enable Moto Guzzi to increase
production and sales rapidly enough to generate the remaining needed capital.
SEASONAL NATURE OF BUSINESS. Moto Guzzi's business has been turned around
to the point that again it is affected by seasonal factors. Retail market demand
is highest in the spring and early summer, whereas most sales to the Italian
government generally take place in the last quarter of the year. Moto Guzzi,
like most Italian companies, traditionally shuts down production in August of
each year and traditionally also has reduced production over the Christmas
holidays and in the period immediately following, while inventory is being
taken. As part of its effort to increase overall production levels, Moto Guzzi
is not suspending production during the December-January period of physical
inventory taking.
COMPLIANCE WITH GOVERNMENTAL REGULATIONS. Moto Guzzi, along with other
motorcycle manufacturers, incurs substantial costs in designing and testing
products to comply with safety and emissions requirements. Such standards have
added, and will continue to add, substantially to the price of the vehicles
while competitive pressures have kept export prices lower than domestic Italian
sales prices.
Motorcycles sold in the United States, the European Economic Community and
all other countries are subject to environmental emissions regulations and
safety standards with which Moto Guzzi must comply in order to expand its
presence in such countries. All motorcycles produced for sale are manufactured
with the intent to comply with all applicable safety standards. All 1997 Moto
Guzzi models comply with all emission standards applicable in all countries in
which they are sold. There can be no assurance, however, that Moto Guzzi will be
able to cost effectively comply with any emissions or safety standards which the
governments may hereafter adopt (though the design of new products seeks to
conform with such standards as are believed likely to be introduced), in which
event, Moto Guzzi may be unable to achieve the market growth that it desires.
Moto Guzzi is subject to a number of governmental regulations relating to
the use, storage, discharge and disposal of minerals and alloys used in their
manufacturing processes and to the safety standards of its facilities and
processes. Although neither the Company nor Moto Guzzi has been subject to
material environmental or safety claims in the past and the Company believes
that the activities of its operating subsidiaries conform in all material
respects to presently applicable environmental and safety regulations, claims or
the failure to comply with present or future regulations could result in the
assessment of damages or imposition of fines against the Company, suspension of
production or cessation of certain activities. New regulations could require the
Company to acquire costly equipment or incur other significant expenses that
could have an adverse effect on the results of operations. Any failure by the
Company to control the use of, or adequately restrict the discharge of hazardous
substances or comply with safety requirements and legislation could subject it
to future liabilities.
BACKLOGS. On January 1, 1996, Moto Guzzi had open orders for its entire
1996 production capacity. Orders for 1997 delivery also exceed production
capacity and the Company expects it will again be unable fully to satisfy demand
for its motorcycles in the current year. Such orders are subject to cancellation
without penalty.
RAW MATERIALS AND COMPONENTS. There are multiple reliable sources for most
motorcycle raw materials, including aluminum for power train components.
However, certain significant components are
35
<PAGE>
available from only one or two sources. In November 1996, two of Moto Guzzi's
suppliers were unable to make timely deliveries of needed components due to
production problems incurred by such suppliers. All such delays adversely affect
motorcycle production.
The cost of imported raw materials is affected by variations in currency
exchange rates. In 1994, the value of the Italian Lira had declined relative to
the currency of Italy's primary trading partners which resulted simultaneously
in an increase in the cost of imported raw materials and in an improvement in
the price competitiveness of Italian-made finished goods, such as Moto Guzzi's
motorcycles. In 1995 and 1996, as a result of greater stability, currency
exchange rates had a less significant effect on costs and price competitiveness.
RESEARCH AND DEVELOPMENT AND CONTINUING ENGINEERING. Moto Guzzi is
continuously engaged in product improvement and development. Aggregate 1996
research and development expenditures by Moto Guzzi were approximately Lit.
1,177 million ($769,000) compared to Lit. 602 million in 1995, and Lit. 197
million in 1994. Expenditures in 1996 related primarily to development of models
scheduled to commence production in 1997. These on-going programs currently
relate to developing more powerful two-cylinder air-cooled engines with improved
performance and durability characteristics, superior braking systems,
suspensions, frames, transmissions and other components applicable to
two-wheeled vehicles.
SALES AND MARKETING. Moto Guzzi primarily markets its products through
advertising in trade publications, participation in promotional events and
fairs, attendance at trade shows and from editorial coverage in trade and
general circulation press. All sales are invoiced in Italian lire except sales
to the United States which are invoiced in U.S. Dollars. Prices are customarily
reviewed and are increased to cover increases in production costs at periodic
intervals and in light of prevailing exchange rates. Italian prices for
motorcycles traditionally have been higher than export prices. In 1996, Moto
Guzzi increased prices of its various models twice, with such increases
aggregating approximately 3% on average for domestic sales and for export sales
invoiced both in lire and in dollars. Export sales continued to reflect lower
margins than domestic Italian sales.
Moto Guzzi is not affected by any unusual industry practices relating to
returns of merchandise or extended payment. It is obliged to maintain 10 years'
inventory of spare parts for all motorcycles sold to Italian government agencies
and, in common with many other motor vehicle manufacturers, maintains
significant spare parts inventories for commercial reasons.
DISTRIBUTION. Moto Guzzi maintains a distribution network throughout Italy
of over 150 independent dealers. No single Italian dealer accounted for more
than 5% of the sales of Moto Guzzi in 1996. The Italian dealers who distribute
Moto Guzzi motorcycles generally handle other brands as well.
In 1996, a single importer-distributor acted as exclusive
importer-distributor for Moto Guzzi in each of Argentina, Australia, Austria,
Belgium, the Czech Republic, Denmark, Finland, France, Germany, Greece, Holland,
Japan, Luxembourg, Malaysia, Malta, New Zealand, Norway, Portugal, Singapore,
Spain, Sweden, Switzerland, the United Kingdom, and the United States.
Moto America is Moto Guzzi's exclusive importer-distributor in the United
States. Until 1996, when it was acquired by TRG and later transferred to Moto
Guzzi Corp., Moto America was an independent business.
In November 1996, Moto Guzzi replaced the independent French
import-distributor with a newly created wholly-owned subsidiary of Moto Guzzi.
Moto Guzzi also owns a 25% equity interest in MGI GmbH, a new German
corporation which became the exclusive importer-distributor of Moto Guzzi
motorcycles and spare parts on January 1, 1997. Moto Guzzi has the right to
acquire up to a total of 90% of the equity interest within four years. Until
December 1996, Moto Guzzi also owned a 25% equity interest in A+G Motorrad GmbH
("A+G"), a German corporation, the majority of the shares of which is owned by
Aprilia S.p.A., another Italian manufacturer of motorcycles with small
displacement engines. A+G distributed the motorcycles of both Moto Guzzi and
Aprilia in the German market in 1996, but was replaced in 1997 by MGI GmbH.
36
<PAGE>
Moto Guzzi provides support to its worldwide dealer network by, among other
things, operating a technical training and support facility at Mandello del
Lario. All dealers are required to attend training courses at the inception of
their relationship, and periodically thereafter.
Set forth below is a chart illustrating percentage of motorcycle sales
revenues attributable to various geographic areas in the three most recent
fiscal years. Sales outside Italy in 1996 were Lit. 40,927 million
($26,750,000), 63% of total sales.
MOTO GUZZI SALES
<TABLE>
<CAPTION>
GEOGRAPHIC AREAS 1996 1995 1994
- ---------------------------------------------------------------- ----- ----- -----
<S> <C> <C> <C>
Italy........................................................... 37% 35% 38%
Europe (other than Italy)....................................... 43% 49% 51%
United States................................................... 7% 6% 5%
Elsewhere....................................................... 13% 10% 6%
</TABLE>
COMPETITION. The sale of motorcycles is a highly competitive business, with
competition typically coming from all powered passenger vehicles, as well as
motorcycles. The overall market in Italy continued to contract slightly in 1996
with new vehicle registrations in Italy declining by approximately 5.1%,
compared to the same period in 1995. The market in Italy for larger motorcycles,
in which Moto Guzzi is concentrating its sales and production efforts, increased
by 18.5% in 1996 compared to 1995, according to the Italian Ministry of
Transportation. Moto Guzzi maintains an extremely small share of the world-wide
motorcycle market, which is dominated by many of the same manufacturers that
predominate in Italy. Many of such companies are far larger and better
capitalized, with greater name recognition. Moto Guzzi competes principally
through such intangible qualities as performance, reputation and quality of
manufacture, areas in which its competitors also excel. See "Risk
Factors--Competition--Moto Guzzi."
PRODUCT LIABILITY. Moto Guzzi is engaged in a business which exposes it to
possible claims for personal injury from the use of its products. Moto Guzzi
maintains liability insurance with a per-occurrence limit of Lit. 2,000 million.
Although no claims have been made against the subsidiary in excess of insurance
coverage, there can be no assurance that such claims will not arise in the
future or that the insurance coverage will be sufficient to pay such claims. A
partially or completely uninsured claim, if successful and of significant
magnitude, could have a material adverse effect on the Company.
PATENTS AND TRADEMARKS. Except as described below, the business of Moto
Guzzi is not and has not been in any material respect dependent upon patents,
licenses, franchises or concessions. The component parts of motorcycles are
manufactured pursuant to well known techniques and include components which are
not unique to its products, although some of these components are specially
styled and designed. Management believes that the registered trade name "Moto
Guzzi-Registered Trademark-" and the related trademarks are well known and
highly regarded throughout the world, and appropriate steps have been taken to
protect Moto Guzzi's rights in these trade names and trademarks in 67 countries,
including those countries representing significant markets.
EMPLOYEES AND EMPLOYEE RELATIONS. Relations with Moto Guzzi employees are
considered by management to be excellent. At December 31, 1996, Moto Guzzi had
344 employees, compared to 338 at December 31, 1995, of whom approximately 72%
were engaged in factory production and the balance in various supervisory,
sales, purchasing, administrative, design, engineering and clerical activities.
Moto Guzzi workers each received bonuses aggregating Lit. 377,000 ($246) for
reaching 1996 production targets. Additionally, resolution of the national metal
workers union contract will result in a one-time payment to workers of Lit.
900,000 in respect of periods prior to the date of the new agreement. An
increase in Moto Guzzi's use of outsourced components reduced overtime hours to
7.7% of total hours in 1996 compared to
37
<PAGE>
9.6% in 1995. At December 31, 1996, the Company's Centro Ricambi parts
subsidiary had 14 employees who are engaged in various warehouse and shipping,
purchasing, administrative and clerical activities.
Moto Guzzi was subjected to strikes totaling 2-1/2 production days in 1996,
all concerning the negotiation of a national contract for all workers in metal
working industries. Moto Guzzi was not subjected to any local work stoppages or
strikes in 1996. The national strikes resulted in the loss of approximately four
production days because of additional time needed to restart production after
each strike. Moto Guzzi's "company" contract was renegotiated early in 1996.
Renegotiation of the "national" contract was recently completed; the new
contract is not expected to have a significant impact on labor costs in 1997
above the overall inflation rate.
Under Italian law, persons in a company acquire the right to severance pay
based upon salary and years of service. At December 31, 1996, Moto Guzzi was
obligated to pay employees an aggregate of Lit. 7,154 million ($4,676,000), and
Lit. 7,301 million at December 31, 1995. See Note 2 of Notes to Consolidated
Financial Statements of the Company.
L.I.T.A.
BACKGROUND. On July 25, 1995, in the first application of its new business
plan following its acquisition of Finprogetti's operating subsidiaries, the
Company, through one of its Italian subsidiaries, acquired L.I.T.A. T.I.M. had
been retained to manage L.I.T.A. after a material decline in L.I.T.A.'s
operations, and to oversee its sale to a third party to be identified by T.I.M.
The physical and operational presence of T.I.M. at L.I.T.A., its ability to
examine and comprehensively analyze the managed company's operational and
capital needs and T.I.M.'s ability to help its client to meet its strategic
objective of selling L.I.T.A. represents an example of an investment opportunity
arising from T.I.M.'s management business. The stock of L.I.T.A. was acquired at
a cost of Lit. 615 million ($402,000), representing a discount of approximately
Lit. 1,600 million ($1,046,000) from the book value of L.I.T.A.'s assets of Lit.
2,264 million ($1,480,000).
MANUFACTURING. L.I.T.A. manufactures plain and perforated welded specialty
steel tubes used principally in the automotive and furniture industries. The
subsidiary's 10,000 square meter factory in Turin, Italy has a two-shift
production capacity of approximately 15,000 tons. In 1996, following the
installation of T.I.M. management, L.I.T.A.'s production equaled 80% of
capacity; in prior years, production rarely reached 60% of capacity.
IMPACT OF CHANGING PRICES AND CURRENCY MOVEMENTS. Steel prices have a
material effect on the business of L.I.T.A. Finished product prices are affected
by the cost of steel; market and competitive pressures are such that selling
prices react quickly to changes in the price of steel. From January to June
1996, the prices of various qualities of steel used by L.I.T.A. decreased, on
average, by approximately 22%. Finished product selling prices fell in response
and margins were burdened by losses on inventories of steel. The negative effect
on margins over the first six months of 1996 has been estimated as approximately
Lit. 600 million. Steel prices stabilized in the fourth quarter of 1996. To the
extent permitted by competition, L.I.T.A. seeks to pass on increased costs from
changing prices to its customers by increasing selling prices.
Exchange rates historically did not have a significant effect on the
business of L.I.T.A., as export sales were not significant to overall sales.
However, as export sales are expected to increase in 1997 and thereafter,
L.I.T.A. will become more sensitive to exchange rates between Italy and the
countries of export.
PLANT AND MACHINERY. L.I.T.A.'s plant and machinery were acquired many
years ago. When the Company acquired L.I.T.A. in July 1995, the fair value of
the assets acquired was in excess of the price paid. This excess, in accordance
with generally accepted accounting principles, was applied to reduce the
carrying values of long-term assets and fixed assets. Depreciation expenses are
therefore significantly lower
38
<PAGE>
than if they were based on current prices. Plant and machinery will be replaced
over many years at higher costs with higher depreciation charges which, in many
cases, may be offset by technological improvements.
RESEARCH AND DEVELOPMENT. Because L.I.T.A. manufactures according to a
well-known and relatively uncomplicated process, L.I.T.A.'s actual annual and
forecast research and development expenditure is approximately Lit. 150 million,
less than 1% of actual and projected revenues.
SALES AND MARKETING. L.I.T.A. distributes its products directly in all
countries except in the U.K. (which represents approximately 5% of net sales),
where it distributes through exclusive agents and in certain regions of Italy
(which represent approximately 20% of net sales).
CUSTOMERS. L.I.T.A. has begun developing a market in the low-cost furniture
industry, which provides a steadier flow of production and demand than the
automotive industry. L.I.T.A. currently has a number of customers representing
between 5% and 9% of net sales. As a consequence of the current and planned
expansion of the business, including expansion of export sales and expansion in
markets other than the automobile market, it is expected that in the medium term
the importance of any single customer will decrease.
BACKLOGS. L.I.T.A. has no long-term contracts with customers and orders
typically reflect the requirements of customers for the following one to two
months. Its largest customer has placed a cancellable order for 1,200 tons of
exhaust tubing for 1997 delivery.
EXPORT SALES. L.I.T.A. did not have significant export sales prior to 1996.
In 1996, 90% of net sales were made in Italy, 7% elsewhere in Europe, and 3%
elsewhere in the world.
SUPPLIERS. There are multiple suppliers of the special clad and coated
steels used by L.I.T.A. L.I.T.A. does not have written long-term contracts with
such suppliers except in respect of a particular steel quality which is not
significant to net sales. L.I.T.A. is seeking to formalize its arrangements with
major suppliers to reduce the business risks associated with its planned
expansion and to reflect the fact that close collaboration with the steel
suppliers is required to ensure consistent quality and to shorten lead times for
significant change in supply levels, which currently can run from 12 to 18
months.
COMPETITION. L.I.T.A.'s competitors are principally larger companies, many
of them subsidiaries of Italian steel manufacturers, including Profilmec,
S.p.A., Ispadue S.p.A., Lombarda Tubi (a division of the Marcegaglia Group) and
ITAS, S.p.A. The size of these competitors and the support of their parent
companies enable them to compete aggressively in the market. L.I.T.A. competes
principally on quality, flexibility of service and timeliness of delivery,
factors which its competitors also seek to offer to the market. L.I.T.A. is
currently the leading supplier in Italy of aluminized steel tubes for automotive
exhaust systems. While automotive original equipment manufacturers are
increasing their usage of higher grade stainless steel, which L.I.T.A. does not
currently supply in material quantities, the automotive aftermarket in Italy and
elsewhere in Europe is increasing its purchases of aluminized steel tubing as a
cost-effective compromise between lower-grade cold steel tubing and the higher
priced stainless steel. Tubifici DiTermi S.p.A. is the largest supplier of
stainless steel exhaust tubing in Europe.
SEASONAL NATURE OF BUSINESS. L.I.T.A.'s operations historically have been
characterized by seasonal factors due to the company's dependence on the
automobile industry. Demand is lowest over the period from November to February
and is also significantly reduced in the traditional holiday month of August.
Since 1995, L.I.T.A. has sought to reduce this seasonality by expanding its
markets in the furniture industry, which is less seasonal, but which is more
price sensitive and less profitable.
NUMBER OF EMPLOYEES. Labor relations with L.I.T.A.'s employees are
considered by management to be excellent. L.I.T.A. was not subjected to any
strikes or work stoppages in 1996. As of December 31, 1996 L.I.T.A. had 34
employees, of which 28 are engaged in production and 6 in management, sales and
39
<PAGE>
administrative roles. At December 31, 1996, the amount of L.I.T.A.'s severance
pay obligation to employees was Lit. 850 million ($556,000).
COMPLIANCE WITH GOVERNMENTAL REGULATIONS. L.I.T.A. is subject to a number
of governmental regulations relating to the use, storage, discharge and disposal
of minerals and alloys used in its manufacturing processes and to the safety
standards of its facilities and processes. L.I.T.A. has not been the subject of
material environmental or safety claims in the past and its management believes
that L.I.T.A.'s activities conform in all respects to presently applicable
regulations. The anticipated costs of compliance with regulations are not
expected to be significant to L.I.T.A.'s operations.
COMMERCIAL REAL ESTATE DEVELOPMENT
The Company acquired, as part of the Finprogetti transaction, a real estate
portfolio of which it has been disposing and will continue to seek to liquidate
at opportune times.
In June 1996, the Company sold its 66.7% equity interest in Immobiliare
Broseta S.r.l. which owns industrial and commercial holdings and additional
surrounding land aggregating approximately 66,000 square meters in Bergamo,
Italy to its 25%-owned affiliate Domer S.r.l. The remaining 33.3% equity
interest in Immobiliare Broseta S.r.l. was owned by Interim S.p.A., a subsidiary
of Domer S.r.l. and was transferred to Domer. The Company had sought offers from
third parties through an independent broker and the sale price of Lit. 5,200
million offered by Domer S.r.l. was the highest of the offers received. Domer
S.r.l. issued a promissory note for Lit. 1,800 million of the sale price, due
December 31, 1996, which note was subsequently extended for another year,
bearing an interest rate equal to the official Lira discount rate plus 3%. The
balance due of Lit. 3,400 million will be received from the sales of apartments
which are being developed from the Immobiliare Broseta S.r.l. property or on
June 30, 1999, whichever is the earlier. This amount of Lit. 3,400 million
carries an interest rate of 6%, payable bi-annually, and has been accounted for
at its estimated net present value of Lit. 2,908 million, applying a discount
rate of 12%, considered to be a fair market rate for similar notes receivable.
The book value of the 66.7% interest in Immobiliare Broseta S.r.l. was Lit.
4,708 million and no gain or loss was recorded on the transaction.
In April 1997, the Company sold its interest in Finprogetti Investimenti
Immobiliare, S.p.A., ("FII"), the Italian entity which had owned commercial
property at Cologne, Italy. The Cologne property is subject to a lease expiring
in 1998 and is encumbered by two mortgages. In addition to assuming all of the
Company's mortgage indebtedness, the purchaser agreed to pay to the Company
approximately Lit. 6,508 million, of which Lit. 500 million was paid on March
18, 1997, Lit. 1,928 million was paid on April 15, 1997, Lit. 2,040 million is
payable on July 1, 1997 and the balance is payable on December 31, 1997. The
last installment may be paid, at the option of the purchaser, by delivery of
120,000 shares of Common Stock of the Company. In connection with the sale of
FII, the purchaser undertook to pay to the Company the proceeds of a tax
receivable owned by FII, at such time as the proceeds are received.
The Company owns a minority interest in Interim S.p.A. (through a 25%
indirect interest in Domer S.r.l., which, in turn, owns 68.2% of Interim
S.p.A.). Interim S.p.A. is a property development company based in Brescia,
Italy which has several projects under active development. This investment had a
book value of Lit. 1,530 million ($1,000,000) at December 31, 1996.
The Company owns an 80% interest in unimproved land aggregating 2,539,020
square meters near Cagliari (Sardinia), Italy which had a book value at December
31, 1996 of Lit. 3,500 million ($2,288,000), net of reserves for risks connected
with the permitted use of the land and its development. An option held by an
unaffiliated third party to purchase the Company's interest in this land, for an
amount above book value, expired unexercised on June 30, 1996. The land has
development potential for tourism or residential purposes and the Company is
exploring its disposition.
The Company owns 99.9% of Pastorino Strade S.r.l., which owns concession
rights for 196 spaces in a municipal parking garage in Genoa, Italy. The book
value of the concession rights is Lit. 4,549 million
40
<PAGE>
($2,973,000) at December 31, 1996. The rights expire in the year 2041 and are
being depreciated over the period from acquisition to this date. The Company has
sub-contracted management of the parking spaces under a three-year contract and
will consider disposition of the concession rights upon the termination of this
contract or sooner, depending on market conditions. The interest in Pastorino
was pledged as collateral for loans relating to the Cologne property.
Unrelated to the real estate acquired from Finprogetti, the Company owned
and subsequently sold surplus property remaining after the Maserati sale and the
winding down of the automobile spare parts operation. A parcel in Rome, Italy
was sold in December 1996 for approximately Lit. 1,533 million ($1,002,000), and
a parcel in Baltimore, Maryland in July 1996 for approximately $1,100,000.
RECENT TRANSACTIONS
MOTO GUZZI FINANCING. The Company's newly-formed subsidiary, Moto Guzzi
Corp., acquired all of the equity interest of the Company in Moto Guzzi and in
Moto America, in exchange for 6,000,000 shares of common stock of Moto Guzzi
Corp. In December 1996 and January 1997, Moto Guzzi Corp. consummated a private
offering of convertible preferred stock and common stock purchase warrants which
raised an aggregate of approximately $5,300,000 for Moto Guzzi Corp. net of
expenses. The bulk of the proceeds were used to commence needed repairs and
rehabilitation of production equipment at Moto Guzzi.
In connection with the Moto Guzzi Financing, Moto Guzzi Corp. issued
1,500,000 units, each consisting of one share of Class A Convertible Preferred
Stock and one common stock purchase warrant exercisable for three years for the
lesser of $4.00 or the initial public offering price of Moto Guzzi Corp. common
stock. The preferred stock is convertible at the option of the holder into an
equal number of shares of common stock, subject to adjustment to protect against
events of dilution, and is automatically converted upon consummation of an
initial public offering of Moto Guzzi Corp. common stock which raises gross
proceeds of at least $8 million. The conversion rate for the preferred stock in
such event will be the lesser of the then-applicable conversion rate or 75% of
the per-share initial public offering price. If such an initial public offering
is not consummated by June 30, 1998, the holders of a majority of the shares of
preferred stock will have the right to select a majority of the Moto Guzzi Corp.
board of directors. Additionally, the holders of the preferred stock will have a
right to cause Moto Guzzi Corp. to redeem their shares at $8.00 per share if a
public offering has not been consummated. GKN Securities Corp. acted as
placement agent for the Moto Guzzi Financing. See "Underwriting."
STOCK REPURCHASE PROGRAM. The Company initiated a stock repurchase program
on September 25, 1996, which was completed on October 23, 1996. The program was
initiated to accommodate a number of shareholders who held the view that the
Company, following the sale of the Maserati business in 1993, was no longer
engaged in the business activity which had initially led them to invest in the
Company's shares. Two mutually exclusive alternative offers were made to
shareholders. The first offer was to purchase up to 80% of a shareholder's
Common Stock for a combination of cash and non-negotiable promissory notes
having a face value aggregating $12.26 per share (the "80% offer") and the
second offer was to purchase up to 50% of a shareholder's Common Stock for
$12.26 cash per share (the "50% offer"). Of the 4,742,865 then-issued shares of
the Company, shareholders representing 3,167,010 shares (66.8%) had agreed in
advance not to participate.
Of the remaining 1,575,855 shares, 506,359 were tendered under the 80% offer
and 255,636 under the 50% offer, all of which were accepted by the Company. In
consequence, the Company repurchased 761,995 shares for a total amount of
$7,478,657.58 (Lit. 11,442 million) in cash and $1,863,401.12 (Lit. 2,851
million) in the form of non-negotiable two-year promissory notes, bearing
interest at 8% per annum. An annual interest payment is due on the first
anniversary of the notes and principal and accrued interest are due and payable
on the second anniversary.
41
<PAGE>
FINPROGETTI ACQUISITION. Effective July 1, 1995, the Company acquired
substantially all of the operating subsidiaries of Finprogetti, including its
Italian real estate interests, its T.I.M. subsidiary, a leasing and factoring
company and certain Italian tax receivables aggregating Lit. 5,150 million
($3,366,000)*, in exchange for newly issued shares of Common Stock, valued at
Lit. 20,106.73 per share ($12.26 at the then-prevailing exchange rate). As part
of the transaction, Finprogetti committed to make itself or cause others to
purchase up to Lit. 15,000 million ($9,804,000) of additional shares of Common
Stock, at the same per-share price of Lit. 20,106.73. If less than Lit. 15,000
million of shares were purchased, the acquisition consideration would be
adjusted. In total, 408,008 shares of Common Stock were purchased by various
Finprogetti shareholders and affiliates the ("Finprogetti Affiliate
Shareholders") for Lit. 8,204 million (approximately $5,000,000). Consequently,
the number of shares issued in the merger was adjusted to 1,922,652.
The total purchase price of Lit. 39,447 million ($25,780,000) reported in
the balance sheet to effect the Finprogetti Acquisition reflects Lit. 38,223
million (Lit. 16,400 per share; $10.00 per share at then prevailing rates)
assigned to the 2,330,660 shares issued (including the shares owned by the
Finprogetti Affiliate Shareholders) plus costs of Lit. 1,224 million incurred in
connection with the acquisition. The acquisition has been accounted for by the
purchase method. Accordingly, the purchase price has been allocated to the
assets purchased and the liabilities assumed based on the fair values at the
date of the acquisition. The purchase price was allocated as follows:
<TABLE>
<CAPTION>
US$000 LIRE M.
---------- ------------
<S> <C> <C>
Cash................................................................ $ 5,362 Lit. 8,204
Real estate interests............................................... 22,293 34,109
Concession rights over real estate.................................. 3,072 4,700
Less: related long-term debt........................................ (12,700) (19,431)
Trademark and other intangible assets............................... 3,268 5,000
Other assets and liabilities, net................................... 3,483 5,329
Goodwill............................................................ 1,004 1,536
---------- ------------
$ 25,782 Lit. 39,447
</TABLE>
The former Finprogetti real estate assets acquired by the Company are not
presently intended to be held long term. The Company has recently disposed of
certain of such real estate assets, and either will seek a strategic partner to
help manage the remaining properties or will continue to seek to dispose of them
in due course and at maximally favorable values, although there can be no
assurance that such will occur.
On November 7, 1996 the Company entered into two agreements with Finprogetti
to resolve certain open matters deriving from the Finprogetti Acquisition.
Pursuant to the first agreement, a balance due from Finprogetti to the Company
of Lit. 763 million ($499,000) was eliminated by Finprogetti surrendering to the
Company 46,000 shares at a value of Lit. 16,587 per share ($10.84 per share).
Pursuant to the second agreement, Finprogetti agreed to accept responsibility
for a claim for Lit. 2,120 million which was successfully brought against one of
the Company's subsidiaries acquired from Finprogetti. Pursuant to this
agreement, Finprogetti assumed responsibility for payments resulting from the
claim, which are payable in installments through June 1998, and, to facilitate
those payments, the Company agreed that, on the request
- ------------------------
* Unless otherwise indicated, U.S. Dollar translations for historical events
are expressed at the approximate exchange rate at December 31, 1996 of Lit.
1,530 per U.S. Dollar, and do not represent historical values of such events
in U.S. Dollars at then-prevailing exchange rates.
42
<PAGE>
of Finprogetti, the Company will repurchase an aggregate of 105,440 shares for
cash at the dates and in the amounts of each installment payment listed below.
<TABLE>
<CAPTION>
REPURCHASE PRICE
-------------------------------
REPURCHASE DATE NO. OF SHARES LIRE M. U.S. $
- --------------------------------------------- --------------- ----------------- ------------
<S> <C> <C> <C>
November 8, 1996............................. 9,950 shares Lit. 200 million ($131,000)
December 31, 1996............................ 22,380 shares Lit. 450 million ($294,000)
June 30, 1997................................ 22,380 shares Lit. 450 million ($294,000)
December 31, 1997............................ 22,380 shares Lit. 450 million ($294,000)
June 30, 1998................................ 28,350 shares Lit. 570 million ($373,000)
</TABLE>
The Company has reclassified outside of shareholders' equity these 105,440
shares thus subject to repurchase in the amount of the present value of the
amounts payable, applying a discount rate of 10%. The resulting value of the
105,440 shares subject to repurchase is Lit. 1,940 million ($1,268,000) or Lit.
18,399 per share ($12.03 per share). On November 8, 1996 and December 31, 1996,
at Finprogetti's request the Company repurchased 9,950 and 22,380 shares,
respectively. As of December 31, 1996, the present value of the remaining 73,110
shares subject to repurchase was Lit. 1,333 million ($871,000).
REPURCHASE OF FORMER CHAIRMAN'S SHARES. On April 10, 1995, the Company
entered into an agreement with Alejandro De Tomaso, then the Chairman of the
Board, under which the Company would repurchase Mr. De Tomaso's 1,000,000 shares
of preferred stock and 480,304 shares of Common Stock at a negotiated price of
Lit. 18,400 per share, converted into dollars at 1,637 lire per dollar, the
exchange rate in effect on the closing date. Mr. De Tomaso thereafter conveyed
his stock to an individual who reconveyed such stock to two trusts, which
assumed his obligations and rights under the agreement.
Contemporaneously with the closing of the Finprogetti Acquisition, 703,774
of the shares of preferred and Common Stock formerly owned by Mr. De Tomaso were
delivered to the Company in exchange for the Company's interests in the Hotel
Canalgrande and the Hotel Roma, its two hotel properties, valued by the Board of
Directors at Lit. 4,700 million ($3,072,000) in the aggregate based upon
independent appraisals, a collection of Maserati vehicles and engines valued by
the Board at Lit. 3,200 million ($2,092,000) and Lit. 5,000 million ($3,268,000)
in cash. The transaction was accounted for at the assets' aggregate book value
of Lit. 6,629 million and no gain or loss resulted. Contemporaneously with the
repurchase of the initial block of shares formerly held by Mr. De Tomaso, Mr. De
Tomaso resigned all directorships and offices which he had held in the Company
and all of its subsidiaries.
The remaining 776,530 preferred shares and Common Stock formerly held by Mr.
De Tomaso were exchanged for an equal number of shares of newly issued Common
Stock, which the Company is required to register for sale at the request of the
holder. Each share of preferred and Common Stock was valued identically because
Mr. De Tomaso agreed not to accept any premium for his preferred stock, despite
its three-vote per share preference. The Company may purchase any or all of such
776,530 shares at $11.27 per share, at any time prior to the third anniversary
of the Finprogetti Acquisition, subject to the holder's right to withdraw such
shares from such purchase right. Furthermore, the Company is obligated to
purchase all remaining shares on June 30, 1998, at $11.27 per share. A bank
letter of credit has been obtained by the Company to guaranty payment of the
repurchase price, secured by cash and certain investment securities owned by the
Company. See also Note 3 of Notes to Consolidated Financial Statements.
Management believes that the transaction with Mr. De Tomaso was on terms as
favorable as those which would have been available from an independent third
party.
CAREY WINSTON. On August 14, 1996, the Company and its wholly-owned
subsidiary, DTI Acquisition Corporation ("Acquisition"), a Delaware corporation,
entered into an Agreement and Plan of Merger (the "Merger Agreement") with Carey
Winston, a commercial real estate services provider in the greater Washington
D.C., Baltimore and northern Virginia metropolitan area. The Company had agreed
to lend to Carey Winston $2 million of working capital at or before the closing
of a merger between the Company
43
<PAGE>
and Carey Winston, of which $1 million was funded by the Company to Carey
Winston on September 17, 1996 as an interim loan. Carey Winston and the Company
subsequently determined to terminate the Merger Agreement, with the Company's
loan being repayable, with interest, over 14 months and the Company being
entitled to liquidated damages of $200,000 in lieu of reimbursement for
expenses, and, if a change of control of Carey Winston occurs within 15 months,
liquidated damages in lieu of potential claims for non-consummation of the
merger of $500,000. Carey Winston has paid the full liquidated damages in
respect of expenses to the Company. Separately, the Company and Carey Winston
have agreed to jointly explore European real estate management and related
business opportunities.
TRANSFER OF CONTROLLING INTEREST TO TAMARIX. Finprogetti has agreed
pursuant to the Taramix/Finprogetti Acquisition Agreement to sell to Tamarix
prior to the effective date of this Registration Statement 1,000,000 shares of
Common Stock owned by Finprogetti. Tamarix and Finprogetti have agreed that
Finprogetti shall have a put right and Tamarix shall have a call right with
respect to an additional 635,000 shares of Common Stock owned by Finprogetti.
The put option is exercisable for a one-year period, beginning on the first
anniversary of the closing of the 1,000,000 share purchase and the call option
is exercisable during the two years beginning on such closing date. During such
two-year period, Tamarix will have a proxy from Finprogetti to vote such 635,000
shares. In addition, prior to the effective date of this Registration Statement,
Finprogetti is required to deliver the resignations of certain members of the
Company's Board of Directors who had been nominated by Finprogetti. In
connection with the Tamarix/Finprogetti Acquisition Agreement, the Company has
agreed to (a) issue to Centaurus, the Manager of Tamarix, the Centaurus Warrant
to purchase 1,250,000 shares of Common Stock with an exercise price equal to the
offering price per-share of Common Stock in this Offering, exercisable for a
three-year period commencing on the date of this Prospectus, (b) register the
shares of the Company purchased from Finprogetti as well as the shares
underlying the Centaurus Warrant, and (c) cause the By-Laws or the Certificate
of Incorporation of the Company to be amended to provide for (i) a staggered
Board of Directors which shall include at least one person nominated by Tamarix
in each of the three classes, (ii) provide for a representative of Tamarix to be
Chairman of the Board of the Company, (iii) provide that Tamarix's consent will
be required to further amend the Company's Certificate of Incorporation, and
(iv) require that the Board of Directors be expanded and limited to not more
than 11 members, such Board to include three Tamarix nominees and an additional
three independent directors who are experienced in business matters and
otherwise reasonably acceptable to Tamarix. The Company may not declare and pay
dividends without the approval of the Tamarix-nominated directors. The Company
has also agreed to engage Tamarix Capital Corporation, for three years to
provide certain financial advisory services to the Company at a cost of $200,000
per year, payable quarterly, plus reasonable expenses. As financial advisor,
Tamarix Capital Corporation will, among other things, identify potential
investment or acquisition opportunities for the Company, and sources of capital
for the Company and its Portfolio Companies. Tamarix Capital Corporation is a
New York-based merchant and investment banking firm founded by Messrs. Mark
Hauser and William Spier. Tamarix Capital Corporation acts as advisor to and,
through its affiliates, makes principal investments in, public and private
companies in a variety of growth industries, both in the U.S. and
internationally.
44
<PAGE>
STRUCTURE OF THE COMPANY
The Company was incorporated under the laws of the State of Maryland in
1917. The following chart depicts the current structure of the Company.
[The following is a textual summary of the current organizational chart of
the Company. The chart in graphical form is included in the paper version of
this filing:
The Company owns 100% of the equity interest in Temporary Integrated
Management, S.p.A., an Italian corporation, a 99.9% equity interest in Trident
Rowan Servizi S.p.A. ("TRS"), an Italian corporation, a 20% equity interest in
Moto Guzzi Corp., a Delaware corporation, and a 95.54% equity interest in
Finproservice S.p.A., an Italian corporation.
TRS owns an 83.92% equity interest in O.A.M. S.p.A. ("OAM"), an Italian
corporation.
OAM owns a 60% equity interest in Moto Guzzi Corp., a 100% equity interest
in Finprogetti International Holdings, S.A., a Luxembourg corporation ("FIH"), a
99.9% equity interest in Pastorino Strade, S.r.l., a 25% equity interest in
Domer S.r.l., and an 80% equity interest in Grand Hotel Bitia S.r.l. FIH owns
the remaining .1% equity interest in Pastorino Strade. Domer owns a 68.19%
equity interest in Interim S.p.A. and a 100% equity interest in Immobiliare
Broseta S.r.l., all Italian entities. Interim S.p.A. owns a 100% equity interest
in Villa Giosis S.r.l.
FIH owns a 99.6% equity interest in L.I.T.A. S.p.A. OAM. owns the remaining
0.4% interest in L.I.T.A.
Moto Guzzi Corp. owns a 100% equity interest in Moto Guzzi S.p.A. ("Moto
Guzzi"), an Italian corporation and in Moto America, Inc., a North Carolina
corporation.
Moto Guzzi owns a 100% equity interest in Centro Ricambi S.r.l., an Italian
corporation, a 25% equity interest in MGI GmbH, a German corporation, and a 100%
equity interest in Moto Guzzi France, S.A., a French corporation.]
PROPERTIES
The following facilities were in 1996, and are presently, leased or owned by
the Company in the active conduct of its business:
(a) 1,700 square feet of office space at Two Worlds Fair Drive, Franklin
Township, Somerset, NJ 08873, in which are located the United States
administrative office of the Company, and which is occupied under a
five-year lease expiring in 2001, at a monthly rental of approximately
$2,200.
(b) Factory and office facilities owned in fee and located in Mandello
del Lario, Italy in a group of one, two and three story buildings
aggregating 54,550 square meters, and which is used by Moto Guzzi. This
facility is currently operating at approximately 55% of production capacity
calculated as a percentage of available space.
(c) Centro Ricambi's spare parts distribution facility is located at a
3,683 square meter facility in Modena, Italy, under a six-year lease
expiring in 2002. The current year lease obligation is Lit. 239 million
($157,000), and is subject to incremental annual increases.
(d) Offices aggregating 480 square meters in Milan, Italy, used by
Finprogetti Servizi, Trident Rowan Servizi, Finprogetti Investimenti
Immobiliari and T.I.M. are leased from an entity affiliated with Francesco
Pugno Vanoni, the Chairman of the Board of the Company, and his brother, at
a cost of Lit. 148 million ($97,000) in 1996 under a lease expiring on
August 31, 2000. The rental is believed to be comparable to rents paid for
similar facilities elsewhere in Milan.
45
<PAGE>
(e) Unimproved land aggregating 2,539,020 square meters in Cagliari,
Italy. The Company, through OAM, owns an 80% interest therein, and is
exploring its disposition. An unaffiliated third party had an option to
purchase the Company's interest, which expired unexercised on June 30, 1996
for Lit. 10,600 million ($6,928,000), less outstanding debt.
(f) Offices aggregating 150 square meters in Brescia, Italy used by
Finproservice S.p.A. at an annual rental of Lit. 16 million ($10,458) under
a six-year lease expiring in 2001.
(g) Factory and related commercial facility aggregating approximately
10,000 square meters in Torino, Italy leased by L.I.T.A., at an annual
rental of Lit. 510 million ($333,000) in 1996 and used at approximately 80%
of present production capacity, based on present equipment in place.
LEGAL PROCEEDINGS
The Company and its subsidiaries are involved in litigation in the normal
course of business. Management does not believe, based on the advice of its
legal advisors, that the final disposition of such litigation will have a
material adverse effect on the Company.
46
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following information concerns the directors, officers, key employees of
and consultants to the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Howard E. Chase...................................... 60 President, Chief Executive Officer, Director and
member of the Executive Committee
Albino Collini....................................... 55 Executive Vice President, Chief Operating Officer,
Director and member of the Executive Committee
Mario Tozzi-Condivi.................................. 71 Vice Chairman, Director and member of the Executive
Committee
Carlo Previtali...................................... 52 Secretary and Treasurer
Santiago De Tomaso................................... 40 Director
Emanuel Arbib*....................................... 30 Director
Nicola Caiola*....................................... 71 Director
Mark S. Hauser*...................................... 39 Director
Dr. Arno Morenz*..................................... 58 Director
Louis Perlman*....................................... 50 Director
William Spier*....................................... 62 Director TRIANGLE
Giovanni Avallone**.................................. 54 Director and member of the Executive Committee
Roberto Corradi**.................................... 59 Director
Carlo Garavaglia**................................... 52 Director
Francesco Pugno Vanoni**............................. 67 Chairman of the Board and member of the Executive
Committee
Maria Luisa Ruzzon**................................. 49 Director
</TABLE>
- ------------------------------
* Upon consummation of the Tamarix/Finprogetti Acquisition Agreement, these
persons will be appointed to the Board of Directors.
** Upon consummation of the Tamarix/Finprogetti Acquisition Agreement, these
directors have agreed to resign from their positions with the Company. (See
"Business--Recent Transactions--Transfer of Controlling Interest to
Tamarix")
TRIANGLE Upon consummation of the Tamarix/Finprogetti Acquisition Agreement,
Mr. Spier will be appointed Chairman of the Board.
HOWARD E. CHASE has served as Director of the Company since 1971, as
Secretary of the Company and as Company counsel from 1971 until September 1995
and as President and Chief Executive Officer of the Company since October 1995.
He has also served as Vice-President of the Company from 1986 to October 1995; a
partner of Morrison Cohen Singer & Weinstein, LLP from April 1984 until
September 1995; and a director of Thoratec Laboratories, Inc., a Nasdaq-traded
company since 1987.
ALBINO COLLINI has served as Director of the Company since 1995, and
Executive Vice President and Chief Operating Officer of the Company since
October 1995. He has also served as a Director of Moto
47
<PAGE>
Guzzi since July 1995; founder and President of T.I.M. S.p.A. and predecessors
since 1987; Managing Director of Finprogetti S.p.A. from July 1995 until May
1996; and Director of Finprogetti International Holding, S.A. since October
1993.
MARIO TOZZI-CONDIVI has served as Director of the Company since 1993, and as
Vice Chairman since October 1995. He has also served as Director of Moto Guzzi,
S.p.A. since July 1995; President of Maserati Automobiles Incorporated, the
Company's former subsidiary, from February 1989 until 1996; Chairman of the
Board of Maserati U.K. Ltd., 1986 to 1987; and has been an independent
consultant to automobile importers, distributors and dealers in England, Italy,
Singapore and South Africa, since 1984.
CARLO PREVITALI has served as Secretary and Treasurer of the Company since
July 1995. He has also served as Director of Finprogetti International Holding,
S.A. from November 1988 to December 1994; Director of Nolan S.r.l., a
manufacturer of motorbike helmets, from May 1989 to November 1990; Chief
Executive Officer of Profin S.p.A., an investment company from January 1990 to
December 1995; Director of Cem S.p.A., a manufacturer of compressors, from March
1990 to January 1991; Chief Executive Officer of Unifin, S.r.l., an investment
company, from March 1990 to October 1991; Director of Progetti Cosmetics S.r.l.
from June 1991 to June 1994; Director of Oikos S.r.l., an investment company,
from September 1991 to March 1993; Director of Team Finanziaria S.r.l., an
investment company, from October 1991 to July 1993; Chief Executive Officer of
Finprogetti Investimenti Immobiliare, S.p.A. from February 1993 to October 1995;
Director of Finproservice, S.p.A. from March 1993 to September 1994; Director of
O.A.M., S.p.A. since July 1995; Director of American Finance, S.p.A. since July
1995; Director of Opticos S.r.l., a manufacturer of sport glasses, from May 1983
to July 1991; San Giorgio S.r.l., in which Mr. Previtali held a non-executive
post until he resigned in November 1993, has been in "controlled administration"
in Italy since 1995. Controlled Administration is roughly analogous to United
States bankruptcy reorganization. He served as an officer of Finprogetti S.p.A.
from 1983 until June 1996.
SANTIAGO DE TOMASO has served as Director of the Company since 1993 and
President and Chief Operating Officer of the Company from 1993 to October 1995;
as Sales and Promotion Manager and Member of the Board of Directors of De Tomaso
Modena S.p.A., an unrelated company, for more than the past five years; Vice
President of Immobiliare Canalgrande S.p.A. for more than the past five years;
Administratore Unico of Storm S.r.l. since May 1992; and as a Director of Moto
Guzzi S.p.A. and of Trident Rowan Servizi S.p.A., each for more than the past
five years.
EMANUEL ARBIB is the Managing Director of Capital Management Ltd, an
international money management firm based in Jersey, Channel Islands with more
than $200 million under management. The firm specializes in the high quality
sector of the global fixed income market. He is also the co-founder and Managing
Director of Global Investment Advisors, a London-based investment company. Since
January 1996 he has served as managing Director of BioSafe Europe, an affiliate
of BioSafe International Inc., a publicly traded company engaged in waste
management and landfill reclamation. Since September 1996, he has served as a
director of International Capital Growth Ltd., and its European subsidiary
Capital Growth (Europe) Ltd., investment banking firms. From 1990 until 1991 Mr.
Arbib headed the Italian desk for Eurobond sales at Prudential Bache Securities
(UK) Ltd.
NICOLA CAIOLA has been the sole shareholder, chairman and Managing Director
of Services Financiers S.A., a Swiss private financial consulting firm in the
mergers and acquisitions field, since 1979.
MARK S. HAUSER is an attorney and a founder and Managing Director of Tamarix
Capital Corporation, a New York-based merchant and investment banking firm.
Between 1986 and 1990, Mr. Hauser was Managing Director of Ocean Capital
Corporation, an international investment banking firm. In 1991, Mr. Hauser
founded Hauser, Richards & Company, also an international investment banking
firm. He currently serves as Vice Chairman and a director of Holmes Protection
Group, a security alarm company, and a director of ICC Technologies, Inc., a
high-technology air conditioning manufacturer, EA Industries, Inc., an
electronics contract manufacturer, Global One Distribution and Merchandising,
Inc., a trend merchandising company, Integrated Technologies of Israel, Ltd., a
joint venture of an investment group
48
<PAGE>
and Israel Aircraft Industries, and of Direct Language Communications, Inc., a
multilingual communications services company.
DR. ARNO MORENZ served as the chairman of the board of management of Achener
Ruckversicherung, a German reinsurance firm, from 1984 until 1996, when the firm
was acquired by a unit of General Electric Capital. He was subsequently
appointed to the firm's supervisory board, and is the chairman of three
companies within the larger reinsurance group which specialize in
non-traditional re-insurance.
LOUIS PERLMAN is engaged in the business of investing in, acquiring and
managing troubled companies. Since 1996 he has served as a director of and
substantial investor in Multi-Color Corp., a publicly held commercial printing
and packaging company. Between 1988, when he acquired it from McGraw-Hill, Inc.,
and 1996 when the company was sold, he served as chairman and chief executive
officer of Chemical Week Associates, a publisher of trade periodicals in the
chemical industry. He has also invested in, and served on the boards of
directors of, Technogenetics, Inc. and Innovir Laboratories, Inc., both publicly
held companies.
WILLIAM SPIER is a founder and Managing Director of Tamarix Capital
Corporation. From May 1991 until October 1996, he was chairman and chief
executive officer of DeSoto, Inc., a manufacturer of household cleaners and
detergents. DeSoto was acquired by Keystone Consolidated Industries, Inc., a
Texas-based manufacturer of steel and wire rods, of which Mr. Spier is a
director. Mr. Spier is also currently a director of Geotek Communications, Inc.,
a wireless telecommunications company, Video Lottery Technologies, a supplier of
software, equipment and related services on-line and video lotteries and gaming
programs, EA Industries, Inc., and Integrated Technologies, Inc., a computer
peripheral and telecommunications device and software company. From 1982 until
1989, Mr. Spier was a private investor, having been Vice Chairman of
Phibro-Salomon, Inc. until 1982.
GIOVANNI AVALLONE has served as Director of the Company since July 1995 and
has served as Director of Finprogetti from February 1993 until June 1996. He has
also served as Director and President of L.I.T.A. S.p.A. since February 1995; a
Director of T.I.M. since December 1994 and Director of Interim S.p.A. since
April 1993. Mr. Avallone has served as a director of financial and strategic
planning at Ori Martin S.p.A., a steel mill, since 1990. Since 1990 he has
served in a similar capacity at Finoger S.p.A. which is engaged in investment
finance. Mr. Avallone served as President of Comadepur, a water purification
joint venture from 1990 to 1994, and served as the manager responsible for
mergers and acquisitions at Viveco S.r.l. from 1990-1995.
ROBERTO CORRADI has served as Director of the Company since 1989, and as
Chairman of Progetto S.a.A. di Roberto Corradi & Co., an architectural firm,
since 1987.
CARLO GARAVAGLIA has served as Director of the Company since 1995, and as a
Member of Studio Legale Tributario Associates, a law firm in Milan, for more
than five years. He has also served as a Director of Trident Rowan Servizi since
May 1994 and Chairman of its board of directors since July 1995; Director and
President of Moto Guzzi since July 1995; Director of O.A.M. since May 1994;
Chairman of the Board of O.A.M. since July 1995; Director of Finprogetti
Investimenti Immobiliare S.p.A. since October 1993; Director of Grand Hotel
Bitia S.r.l. since March 1994; Director of T.I.M. since December 1994; Director
of Tridentis Financiere S.r.l. since December 1990; and Director of Finprogetti
S.p.A. from September 1993 until June 1996.
FRANCESCO PUGNO VANONI has served as Chairman of the Board since October
1995 and as President and director of Finprogetti S.p.A. for more than five
years prior thereto. He is also, and has been for more than the past five years,
the President and Director of Ceccato, S.p.A., which is a major European
manufacturer of vehicle washing equipment and systems and air compressors, which
are sold internationally.
MARIA LUISA RUZZON has served as Director of the Company since July 1995 and
had served as Director of Finprogetti from February 1993 until June 1996. She
was the sole Director of Filatura di Novana, a
49
<PAGE>
textile mill, from 1990 until 1992, has been a Director of Metano Parese S.p.A.,
a natural gas distributor, since 1990, and a General Manager of Maglificio
Giovanni Brugnoli S.p.A. since June 1993.
Each of Finprogetti, Mario Tozzi-Condivi, Albino Collini, Howard E. Chase
and Francesco Pugno Vanoni had agreed in connection with the Finprogetti
Acquisition, to vote all shares he or it may hold in favor of a slate of
nominees consisting of five persons designated by Finprogetti and five persons
designated by management. Upon consummation of the Tamarix/Finprogetti
Acquisition Agreement, each of such persons has agreed to terminate the voting
agreement. Pursuant to the Tamarix/Finprogetti Acquisition Agreement, however,
Tamarix will have the right to designate three nominees for election as
Directors, and the right to reasonably approve three other independent
directors. See "Transfer of Controlling Interest to Tamarix."
None of the present directors of the Company except Mr. Chase is a director
of any other company with a class of securities registered pursuant to Section
12 of the Securities Exchange Act of 1934 ("Exchange Act") or of any company
registered as an Investment Company under the Investment Company Act of 1940.
There is no family relationship among any of the members of the Board of
Directors or the officers of the Company. Upon reconstitution of the Board
following consummation of the Tamarix/Finprogetti Acquisition Agreement, Messrs.
Hauser, Perlman and Spier will also be Directors of the Company who also serve
as directors of other companies with a class of securities registered under the
Exchange Act.
The Board of Directors established an Audit Committee in 1995, which
currently consists of the following: Howard E. Chase, Carlo Garavaglia and
Roberto Corradi. The Audit Committee is charged with the responsibility to
review the performance of the independent accountants as auditors for the
Company, discuss and review the scope and the fees of the prospective annual
audit, review with the auditors the corporate accounting practices and policies
and recommend to whom reports should be submitted within the Company, review
their final report with the auditors, review with the auditors overall
accounting and financial controls, and be available to the auditors during the
year for consultation purposes. In addition, the Audit Committee is charged with
conducting an appropriate review of all related party transactions on an ongoing
basis and a review of potential conflict of interest situations. The Board of
Directors also authorized, but has not yet appointed members of, a Compensation
Committee, charged with the responsibility to review and make recommendations to
the Board regarding salaries, compensation and benefits of executive officers
and key employees of the Company.
50
<PAGE>
EXECUTIVE COMPENSATION
The following table shows, for the three years ended December 31, 1996, 1995
and 1994, the cash compensation paid or accrued for those years to the President
of the Company and each of the other four most highly compensated executive
officers of the Company whose aggregate annual salary and bonus exceeded
$100,000 for the Company's last year in all the capacities in which they served
("Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-------------
AWARDS
ANNUAL -------------
COMPENSATION OTHER OPTIONS/
--------------- ANNUAL SARS
NAME AND PRINCIPAL POSITION YEAR SALARY(LIT./$)(1) COMPENSATION (#)
- --------------------------------------------------- --------- --------------- -------------- -------------
<S> <C> <C> <C> <C>
Santiago De Tomaso................................. 1994 Lit.100,000,000/ -0- -0-
President of the Company until October 28, 1995 ($65,359)
1995 Lit.76,500,000/ -0- 30,000
($50,000)
Howard E. Chase.................................... 1995 Lit.155,737,000/ -0- 300,000
President and Chief Executive Officer since 1996 ($101,789) -0- -0-
October 28, 1995 Lit.573,750,000/
($375,000)
Albino Collini(2).................................. 1995 Lit.186,700,000/ Lit.50,000,000/ 150,000
Executive Vice President since October 28, 1995 1996 ($122,026) ($32,680) -0-
Lit.382,500,000/ Lit.76,500,000/
($250,000) ($50,000)
Mario Tozzi-Condivi(3)............................. 1995 Lit.93,414,000/ -0- 200,000
Vice Chairman since October 28, 1995 1996 ($61,055) -0- -0-
Lit.283,050,000/
($185,000)
Domenico Costa..................................... 1995 Lit.237,850,000/ -0- 60,000
President of T.I.M. 1996 ($155,458) -0- -0-
Lit.240,000,000/
($156,863)
Arnolfo Sacchi..................................... 1994 Lit.192,000,000/ -0- -0-
Administrative Delegato of Moto Guzzi since 1994 1995 ($125,490) -0- -0-
1996 Lit.223,519,700/ -0- -0-
($146,092)
Lit.240,000,000/
($156,863)
Carlo Previtali.................................... 1996 Lit.240,000,000/ -0- -0-
Treasurer and Secretary ($156,863)
</TABLE>
- ------------------------------
The aggregate amount of all perquisites and other personal benefits paid to
each of the Named Executive Officers did not exceed the greater of $50,000 or
10% of such Officer's salary.
(1) Lire amounts have been converted to dollars at the rate of 1,530 lire per
U.S. Dollar, the approximate rate in effect on December 31, 1996.
(2) Does not include Lit. 376,767,000 ($246,253) received in respect of a
certain T.I.M. engagement predating the Company's acquisition of T.I.M. as
part of the Finprogetti Transaction.
(3) The above amounts plus expenses were paid to Como Consultants Limited, an
Isle of Jersey company, which provides the Company with the services of Mr.
Tozzi-Condivi. No other form of compensation was paid to Como Consultants or
to Mr. Tozzi-Condivi.
51
<PAGE>
STOCK OPTION PLANS
In order to attract and retain employees, the Board of Directors adopted,
and the shareholders approved, the 1995 Non-Qualified Stock Option Plan ("1995
NQ Plan") and the 1995 Stock Option Plan for Outside Directors ("1995 Directors
Plan"). The 1995 NQ Plan and the 1995 Directors Plan are referred to
collectively as the "1995 Plans." Options to purchase an aggregate of 2,150,000
shares of common stock (subject to antidilution adjustments under certain
circumstances) may be awarded under the 1995 Plans.
1995 NQ PLAN
The Board of Directors has authorized the grant of 2,000,000 options under
the 1995 NQ Plan. In connection with the execution of employment agreements, a
total of 960,000 of such options were granted in 1995, each at an exercise price
of $12.26 per share to ten officers and key employees, six of whom are also
members of the Board of Directors. An additional 22,500 options were granted in
1996, each with an exercise price of $12.26 per share to the two executive
officers of Moto America, Inc. in connection with the Company's acquisition. The
options vest over three or five years in equal proportions. See "Option Grants."
The 1995 NQ Plan is administered by a committee consisting of two members of
the Board, neither of whom for at least one year prior to such member's
commencement of service, received any discretionary grant of options under the
1995 NQ Plan or otherwise. Members of the committee are not entitled to receive
grants under the 1995 NQ Plan. The maximum number of options which any optionee
may receive is 350,000 per calendar year.
All officers and employees who, in the opinion of the committee have made or
are expected to make key contributions to the success of the Company are
eligible to receive options under the Plan. The committee may determine, subject
to the terms of the 1995 NQ Plan, the persons to whom options will be awarded,
the number of shares and the specific terms of each option granted. Officers and
key employees of companies acquired or operated by the Company or its
subsidiaries may also be option recipients. Specific performance or other
criteria governing the granting of the remaining options have not yet been
established by the committee. Options may not be granted at an exercise price
below the fair market value on the date of grant.
If an option expires unexercised, is surrendered by the grantee for
cancellation, is canceled or otherwise becomes unexercisable, the shares
underlying the grant will again become available for the granting of new options
under the 1995 NQ Plan.
The plan is subject to amendment by a majority of those members of the Board
of Directors who are ineligible to receive options, but the Board may not (i)
change the total number of shares of stock available for options; (ii) increase
the maximum number of options; (iii) extend the duration of the plan; (iv)
decrease the minimum option price or otherwise materially increase the benefits
accruing to recipients; or (v) materially modify the eligibility requirements.
1995 DIRECTORS' PLAN
All non-employee directors, who were never previously employed by the
Company or eligible to receive options, will annually receive, on each January 2
beginning in 1996, options to purchase 5,000 shares under the 1995 Directors
Plan. Newly appointed or elected non-employee directors receive a grant upon
taking office.
A total of 20,000 options under the plan were granted in each of 1996 and
1997. Options granted in 1996 are exercisable at $12.26 per share and options
granted on January 2, 1997 are exercisable at $9.313 per share. Options to be
granted in future years will be exercisable at the reported closing price of the
stock on January 2 of the year of grant. Options are not exercisable until the
later of January 2 of the year succeeding the date of grant or six months
following the date of grant.
52
<PAGE>
The authority to grant options under the 1995 Directors Plan will terminate
on the earlier of December 31, 2005 or upon the issuance of the maximum number
of shares of stock reserved for issuance under the plan which is 150,000,
110,000 of which remain available for issuance.
The 1995 Directors Plan may be amended by the Board of Directors except that
provisions thereof concerning granting of options may not be amended more than
once every six months unless necessary to comply with the Internal Revenue Code
or the Employee Retirement Income Security Act.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
No stock options or SARs were granted in the fiscal year ended December 31,
1996 to any of the Named Executive Officers.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
The following table summarizes the number of exercisable and unexercisable
options held by the Named Executive Officers at the end of 1996. None of the
unexercised options held by the Named Executive Officers at the end of 1996 were
in the money.
<TABLE>
<CAPTION>
NUMBER OF SHARES
NUMBER OF UNDERLYING UNEXERCISED
SHARES OPTIONS/SARS AT
ACQUIRED FISCAL YEAR-END
ON ------------------------
NAME EXERCISE(1) EXERCISABLE UNEXERCISABLE
- ------------------------------------------------------------ ----------------- ----------- -----------
<S> <C> <C> <C>
Howard E. Chase, CEO........................................ -- 60,000 240,000
Mario Tozzi Condivi......................................... -- 40,000 160,000
Albino Collini.............................................. -- 30,000 120,000
Santiago De Tomaso.......................................... -- 10,000 20,000
Domenico Costa.............................................. -- 20,000 40,000
Arnolfo Sacchi.............................................. -- 20,000 40,000
- ------------------------
(1) None of the Named Executive Officers exercised any stock options in 1996.
</TABLE>
COMPENSATION OF DIRECTORS
Non-employee members of the Board of Directors of the Company will each be
paid $4,000 per year from the Company for services rendered in their capacity as
such and will receive automatic grants of stock options. See "Stock Option
Plans--1995 Directors' Plan." Officers of the Company or its subsidiaries who
are members of the Board of Directors of the Company and employees receive
compensation for services rendered in their capacities as officers only, and may
be entitled to discretionary grants of stock options.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Board of Directors established a compensation committee on
October 28, 1995, but it has not convened. The Company and each of its
subsidiaries has, to date, addressed all compensation issues through its or
their respective boards of directors. All present members of the Board of
Directors other than Ms. Ruzzon and Mr. Corradi served as executive officers
and/or employees of the Company and/or one or more of the Company's subsidiaries
in 1996.
Messrs. Tozzi-Condivi, Chase, Pugno Vanoni, Garavaglia and Previtali engaged
in transactions with the Company during 1996 in addition to serving as a
director and/or officer of the Company. See "Certain Transactions."
53
<PAGE>
EMPLOYMENT CONTRACTS
In November 1995, the Company entered into employment agreements with each
of Howard E. Chase, Albino Collini, Giovanni Avallone, Domenico Costa and Carlo
Previtali, an agreement for limited services with Francesco Pugno Vanoni, and a
Consulting Agreement with Como Consultants, Limited, a corporation which
provides the services of Mario Tozzi-Condivi. The agreements with Messrs. Chase,
Collini and Pugno Vanoni and with Como Consultants are for a term of five years,
and all other agreements are for a term of three years, subject, in all cases,
to early termination under certain conditions. Pursuant to such agreements Mr.
Chase serves as President and Chief Executive Officer at a base salary of
$375,000 per year, Mr. Collini serves as Chief Operating Officer at a base
salary of $250,000 per year plus a guaranteed additional payment of $50,000 per
year and Mr. Tozzi-Condivi serves as Vice Chairman of the Board and Chairman of
the Executive Committee at a base compensation of $185,000 per year. All such
agreements include cost-of-living increases and non-competition provisions for a
period of two years after termination of employment. The three-year agreement
with Mr. Previtali provides for his serving as Treasurer of the Company at a
salary of Lit. 240 million ($156,863) per year, the agreement with Mr. Avallone
provides for his serving on a part-time basis as Director of Special Projects
and Merchant Banking at an annual salary of Lit. 60 million ($39,216), and the
agreement with Mr. Pugno Vanoni provides that in any year in which he serves on
the Company's Executive Committee, he will receive a salary of Lit. 80 million
($52,288) for such year. Mr. Costa is employed as Managing Director of T.I.M.
for three years at a salary of Lit. 240 million ($156,863) per year. In
connection with the Tamarix/Finprogetti Acquisition Agreement, Mr. Pugno Vanoni
and Mr. Avallone have agreed to terminate their employment agreements.
The compensation of the Named Executive Officers in 1996 was the result of
the negotiated employment agreements described above, and not the implementation
of a compensation policy.
54
<PAGE>
CERTAIN TRANSACTIONS
In 1995, the Company repurchased shares previously owned by its former
Chairman of the Board, and agreed to repurchase the remaining 776,530 shares
formerly so held. See "Business--Recent Transactions--Repurchase of Former
Chairman's Shares." The Company has also agreed to repurchase 73,110 shares from
Finprogetti currently a 43.8% shareholder, at a specified time and price. See
"Business-- Finprogetti Acquisition."
The law firm of Morrison Cohen Singer & Weinstein, LLP is counsel to the
Company. Howard E. Chase, a Director of the Company and its Chief Executive
Officer, was a member of such firm until September 1, 1995, and he is now of
counsel to such firm. Fees paid by the Company and subsidiaries to Morrison
Cohen Singer & Weinstein, LLP in 1996 did not exceed 5% of such firm's gross
revenues for that period.
Como Consultants Limited, an Isle of Jersey company which employs Mario
Tozzi-Condivi, a Director of the Company and its Vice-Chairman, was paid
$185,000 in 1996 for consulting services rendered to the Company.
Mr. Carlo Garavaglia, a Director of the Company, is a member of a law firm
which was paid by the Company and its subsidiaries in 1996 for legal and
statutory auditing services rendered, an amount less than 5% of such firm's
gross revenues in such period.
Mr. Pugno Vanoni and his brother own offices in Milan which are leased to
certain subsidiaries of the Company acquired from Finprogetti at a rental of
Lit. 148 million ($97,000) per year.
Mr. Carlo Previtali, Mr. Giovanni Avallone, Ms. Maria Luisa Ruzzon, Mr.
Carlo Garavaglia and Mr. Francesco Pugno Vanoni all served as directors of
Finprogetti until July 19, 1996.
Mr. Mark Hauser and Mr. William Spier, who will become directors of the
Company following consummation of the Tamarix/Finprogetti Acquisition Agreement,
are Managing Directors of Tamarix Capital Corporation.
Upon consummation of the Tamarix/Finprogetti Acquisition Agreement, Tamarix
Capital Corporation, an affiliate of Tamarix, will be retained by the Company as
a financial advisor for a period of three years at an annual fee of $200,000
payable in quarterly installments. Centaurus, the Manager of Tamarix, will be
granted warrants to purchase 1,250,000 shares of Common Stock. Messrs. Hauser,
Spier and Emanuel Arbib collectively control Centaurus. See "Business--Recent
Transactions--Transfer of Controlling Interest to Tamarix."
The Cologne property has been sold to a company affiliated with Antonio
Bertoni who is a shareholder of Domer S.r.l. and Managing Director of Interim
S.p.A. The Company is a minority shareholder in both such entities. See
"Business--Commercial Real Estate Development Segment."
All transactions between the Company and its officers, directors, principal
shareholders or other affiliates have been on terms no less favorable than those
that are generally available from unaffiliated third parties. Any such future
transactions will be on terms no less favorable to the Company than could be
obtained from an unaffiliated third party on an arm's-length basis and will be
approved by a majority of the Company's independent and disinterested directors.
55
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information concerning the beneficial
ownership of Common Stock as of April 18, 1997, and as adjusted to reflect the
sale of the Securities offered hereby, the transactions contemplated by the
Tamarix/Finprogetti Acquisition Agreement and the grant of the Centaurus
Warrant, by (i) each person who is known by the Company to own beneficially 5%
or more of the Common Stock, (ii) each of the Company's directors, director
nominees and Named Executive Officers, and (iii) all directors and executive
officers as a group. Unless otherwise indicated, each person in the table has
sole voting and investment power with respect to the shares shown.
<TABLE>
<CAPTION>
PERCENTAGE
BENEFICIALLY OWNED
-------------------
<S> <C> <C> <C>
NUMBER OF SHARES BEFORE AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER** BENEFICIALLY OWNED OFFERING OFFERING
- -------------------------------------------------------------------------------- -------------------- -------- --------
Finprogetti, S.p.A.............................................................. 1,708,350(1)(2) 43.8% * %
Via Fieno 8
Milan, Italy 20123
TAMARIX INVESTORS LDC........................................................... 2,885,000(2)(3) 0 45.0
444 MADISON AVE.
NEW YORK, NY 10022
Tail Trust...................................................................... 776,530 19.9 15.1
c/o Pirunico Trustees (Jersey)(4)
Limited Account 282
44 Esplanade House
St. Helier, Jersey
Channel Islands
Howard E. Chase(5).............................................................. 70,000 1.8 1.3
Albino Collini(6)............................................................... 165,972 4.3 3.2
Francesco Pugno Vanoni(6)....................................................... 32,971 * *
Mario Tozzi-Condivi(7).......................................................... 40,000 * *
Santiago De Tomaso(8)........................................................... 10,000 * *
Domenico Costa(9)............................................................... 20,000 * *
Arnolfo Sacchi(9)............................................................... 20,000 * *
Giovanni Avallone............................................................... 20,000 * *
Roberto Corradi................................................................. 5,000 * *
Carlo Garavaglia................................................................ 5,000 * *
Maria Luisa Ruzzon.............................................................. 5,000 * *
Emanuel Arbib(10)............................................................... 2,885,000 0 45.0
Nicola Caiola................................................................... 0
Mark S. Hauser(10)(11).......................................................... 2,885,000 0 45.0
Dr. Arno Morenz................................................................. 0
Louis Perlman................................................................... 0
William Spier(10)(11)........................................................... 2,885,000 0 45.0
All officers and directors as a Group (18 persons).............................. 3,298,943(12) 9.7% 51.0%
</TABLE>
- ------------------------
* Less than 1%.
** Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission ("Commission") and generally includes
voting or investment power with respect to securities. Shares of Common
Stock upon the exercise of options, warrants currently exercisable, or
exercisable or convertible within 60 days, are deemed outstanding for
computing the percentage ownership of the person holding such options or
warrants but are not deemed outstanding for computing the percentage
ownership of any other person.
(1) Excludes 165,972 shares owned beneficially by Albino Collini and 32,971
shares owned beneficially by Francesco Pugno Vanoni. Includes 73,110 shares
which are subject to repurchase pursuant to an agreement with the Company.
56
<PAGE>
(2) 1,635,000 of such shares are subject to the Tamarix/Finprogetti Acquisition
Agreement. See "Recent Transactions--Transfer of Controlling Interest to
Tamarix" for a description of Finprogetti's agreement to sell such shares to
Tamarix. Upon consummation of the Tamarix/Finprogetti Acquisition Agreement,
Tamarix and affiliates thereof will be the beneficial owner of 2,885,000
shares, including the 635,000 shares held by Finprogetti subject to a call
option by Tamarix and a put option by Finprogetti. Finprogetti, in such
event, will own less than 1% of the shares outstanding, substantially all of
which are subject to purchase by the Company. See "Recent
Transactions--Finprogetti Acquisition."
(3) Includes 1,250,000 shares of stock underlying warrants granted to
Centaurus.
(4) Pirunico Trustees (Jersey) Limited is the trustee of the Tail Trust, which
acquired by gift shares formerly owned by the Company's former principal
shareholder and Chairman.
(5) Includes 60,000 shares purchasable upon exercise of options.
(6) Mr. Collini is a former officer and Mr. Pugno Vanoni is a former officer and
director and a current shareholder, of Finprogetti, which beneficially owns
1,708,350 shares. Neither has authority to dispose of or vote the shares of
Finprogetti, and disclaims beneficial ownership thereof. Of the shares owned
beneficially by Mr. Collini, 135,972 are held of record by Tairona, S.A., a
Luxembourg corporation affiliated with Mr. Collini, and 30,000 represent
options exercisable within 60 days. Of the shares owned by Mr. Pugno Vanoni,
8,000 represent options exercisable within 60 days.
(7) Includes 40,000 shares purchasable upon exercise of options.
(8) Includes 10,000 shares purchasable upon exercise of options.
(9) Includes 20,000 shares purchasable upon exercise of options.
(10) Messrs. Hauser, Spier and Arbib indirectly own controlling interests in
Tamarix and Centaurus, and may therefore be viewed as having beneficial
ownership of the Common Stock being acquired by Tamarix and the Centaurus
Warrant.
(11) Messrs. Hauser and Spier are principals of Tamarix Capital Corporation, an
affiliate of Tamarix.
(12) Includes 228,000 shares purchasable upon exercise of options, as well as,
after the Offering, the Common Stock being acquired by Tamarix and the
Centaurus Warrant, with respect to which Messrs. Hauser, Spier and Arbib may
be viewed as having beneficial ownership.
DESCRIPTION OF SECURITIES
As of the date of this Prospectus, the authorized capital stock of the
Company consisted of 50,000,000 shares of Common Stock, par value $0.01 per
share, 3,902,540 of which are outstanding. The securities offered in this
Offering consist of 1,250,000 shares of Common Stock and 1,250,000 Warrants.
COMMON STOCK
The issued and outstanding shares of Common Stock are, and the shares of
Common Stock being offered hereby by the Company, when sold and issued in
accordance herewith will be, validly issued, fully paid and non-assessable. The
holders of outstanding shares of Common Stock are entitled to receive dividends
out of assets legally available therefor at such times and in such amounts as
the Board of Directors may from time to time determine. See "Dividends" and
"Risk Factors--Absence of Dividends."
All shares of Common Stock have equal voting rights and, when validly issued
and outstanding, the holders of shares of Common Stock are entitled to one vote
for each share held on record on all matters to be voted on by the shareholders.
Cumulative voting in the election of directors is not allowed, which means that
the holders of more than 50% of the outstanding shares can elect all of the
directors if they choose to do so and, in such event, the holders of the
remaining shares will not be able to elect any directors. See however
"Business--Recent Transactions--Transfer of Controlling Interest to Tamarix."
57
<PAGE>
Holders of shares of Common Stock have no preemptive, subscription, or
redemption rights and there are no conversion provisions applicable to the
Common Stock. Upon liquidation, dissolution or winding-up of the Company, the
holders of Common Stock are entitled to receive pro rata the assets of the
Company which are legally available for distribution to shareholders, unless
there are outstanding shares of preferred stock with priority rights. Currently,
there is no class of preferred stock authorized to be issued by the Company.
WARRANTS
Each Warrant will entitle the registered holder thereof to purchase one
share of Common Stock at an exercise price of 120% of the offering price per
share of Common Stock for four years commencing one year from the date of this
Prospectus. The Company may redeem the Warrants at a price of $.01 per Warrant
at any time after they become exercisable if notice of not less than 30 days is
given and the last sale price of the Common Stock has been at least 133 1/3% of
the then exercise price of the Warrants on all 20 trading days ending on the
third day prior to the day on which notice is given.
Unless extended by the Company at its discretion, the Warrants will expire
at 5:00 p.m., New York time, on the fifth anniversary of the date of this
Prospectus. In the event a holder of Warrants fails to exercise the Warrants
prior to their expiration, the Warrants will expire and the holder will have no
further rights with respect to the Warrants.
The Warrants will be issued in registered form under a warrant agreement by
and between the Company and American Stock Transfer & Trust Company as Warrant
Agent. Reference is made to said Warrant Agreement (which has been filed as an
exhibit to the registration statement of which this Prospectus forms a part) for
a complete description of the terms and conditions of the Warrants contained
therein (the description herein being qualified in its entirety by reference
therein).
The exercise price of the Warrants and the number of shares of Common Stock
to be obtained upon exercise of the Warrants are subject to adjustment to
protect against dilution in the event of a stock dividend, stock split,
recapitalization, reorganization or other similar event. No assurance can be
given that the market price of the Common Stock will exceed the exercise price
of the Warrants at any time during the exercise period.
No Warrant will be exercisable unless at the time of exercise there is a
current prospectus covering the shares of Common Stock issuable upon exercise of
such Warrant under an effective registration statement filed with the Commission
and such shares have been qualified for sale or are exempt from qualification
under the securities laws of the state of residence of the holder of such
Warrants. Although the Company has undertaken to have all shares so qualified
for sale in those states where the Securities are being offered and to maintain
a current prospectus relating thereto until the expiration of the Warrants,
subject to the terms of the Warrant Agreement, there can be no assurance that
the Company will be able to do so.
The Warrants do not confer upon the holder thereof any voting or preemptive
rights, or any other rights of a shareholder of the Company. The Company is
required to reserve a sufficient number of authorized shares of Common Stock to
permit the exercise of the Warrants.
A Warrant may be exercised upon the surrender of a duly completed
certificate on or prior to its expiration at the office of the Warrant Agent,
accompanied by cash or a certified or official bank check payable to the order
of the Warrant Agent for the exercise price.
CENTAURUS WARRANT; OTHER WARRANTS
The Company has agreed to issue the Centaurus Warrant to Centaurus to
purchase 1,250,000 shares of Common Stock with an exercise price equal to the
per-share offering price in this Offering, exercisable for a three-year period
commencing on the date of this Prospectus. The Company has also agreed to issue
a similar warrant, to purchase an aggregate of 173,306 shares, to two
shareholders of the Company who acquired their shares in connection with the
Finprogetti Acquisition.
58
<PAGE>
MARYLAND TAKEOVER STATUTE
Under Section 3-602 of the Maryland General Corporation Laws, which prevents
an "interested shareholder" (defined in Section 601, generally, as a person
owning 15% or more of a corporation's outstanding voting stock) from engaging in
a "business combination" with a publicly held Maryland corporation for five
years following the date such person became an interested shareholder, unless:
(i) before such person became an interested shareholder, the board of directors
of the corporation approved the transaction in which the interested shareholder
became an interested shareholder or approved the business combination; (ii) upon
consummation of the transaction that resulted in the interested shareholder's
becoming an interested shareholder, the interested shareholder owns at least 80%
of the voting stock of the corporation outstanding at the time the transaction
commenced (subject to certain exceptions); or (iii) following the transaction in
which such person became an interested shareholder, the business combination is
approved by the board of directors of the corporation and authorized at a
meeting of shareholders by the affirmative vote of the holders of 66% of the
outstanding voting stock of the corporation not owned by the interested
shareholder. A "business combination" includes mergers, stock or asset sales and
other transactions resulting in a financial benefit to the interested
shareholder. The Company is not currently subject to such statute.
INDEMNIFICATION OF DIRECTORS
A Maryland corporation may indemnify any director or officer made a party to
any proceeding by reason of service in that capacity unless it is established
that:
(1) The act or omission of the director was material to the matter
giving rise to the proceeding; and (a) was committed in bad faith; or (b)
was the result of active and deliberate dishonesty; or
(2) The director received an improper personal benefit in money,
property, or services; or
(3) In the case of any criminal proceeding, the director has reasonable
cause to believe that the act or omission was unlawful.
Under most circumstances, a court may order indemnification as it deems
proper if it determines that the director or officer is fairly and reasonable
entitled to indemnification in view of all the relevant circumstances, whether
or nor the director has met the foregoing standards. A determination that a
director has met the foregoing standards can be made by a majority of the Board
of Directors who are not parties to the proceeding, by special legal counsel
selected by the Board of Directors, or by the shareholder. Such director shall
be reimbursed for reasonable expenses incurred by a director in connection with
the proceeding, the determination of what constitutes reasonable expenses is
made at the same proceeding that authorized the indemnification. Neither the
articles of incorporation nor by-laws of the Company contain any provision which
varies or amplifies the provision of the Maryland GCL. Certain officers and
employees are entitled to indemnification by the Company pursuant to existing
employment agreements.
TRANSFER AGENT, WARRANT AGENT AND REGISTRAR
American Stock Transfer and Trust Company, New York, New York, is the
transfer agent, Warrant agent and registrar for the Company's Common Stock and
Warrants.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering, the Company will have 5,152,540 shares of
Common Stock outstanding, assuming no exercise of the Warrants, the
Underwriters' over-allotment option, currently outstanding options to purchase
1,045,000 shares of Common Stock, the Representative's Purchase Option, the
Centaurus Warrant or warrants to be granted to certain shareholders of the
Company to purchase 173,306 shares of Common Stock. The 1,250,000 shares of
Common Stock being sold pursuant to this Offering (plus any additional shares of
Common Stock sold upon exercise of the Underwriters' over-allotment option) will
be, and an additional 813,680 outstanding shares are, freely transferable as of
the
59
<PAGE>
date of this Prospectus without restriction under the Securities Act, unless
they are held by "affiliates" of the Company as that term is used under the
Securities Act and the regulations promulgated thereunder. The remaining
3,088,860 shares of Common Stock currently outstanding ("Restricted Shares")
were sold by the Company in reliance on exemptions from the registration
requirements of the Securities Act and are "restricted securities" under the
Securities Act. Subject to lock-up restrictions and other contractual
restrictions described below, such Restricted Shares are now eligible for sale
pursuant to Rule 144 of the Securities Act, as amended.
In addition to the possibility of such Restricted Shares being sold freely
now or after certain time periods pursuant to Rule 144, the Company is required
to register 776,530 Restricted Shares under the Securities Act, at the expense
of the Company, if demanded by the holder of such shares, and to maintain the
effectiveness of such registration statement until June 30, 1998 (or the earlier
sale of all such shares). The Company is obligated to purchase on June 30, 1998,
at $11.27 per share all of such shares not theretofore sold by the holder and
with respect to which the holder did not reject an earlier offer by the Company,
if any, to purchase same at such price. The Company is also required to register
upon demand, on up to two occasions, at any time after June 30, 1997, 408,008
Restricted Shares which were issued to certain investors in connection with the
Finprogetti Acquisition. The Company is also obligated to purchase 73,110 shares
from Finprogetti under the November 7, 1996 agreement.
The holders of 234,702 Restricted Shares have agreed, subject to certain
limited exceptions, not to sell or otherwise dispose of any of the shares held
by them and/or securities convertible into shares of Common Stock prior to six
months from the date of this Prospectus. In addition, pursuant to the
Underwriting Agreement, all of the officers and directors of the Company, who
beneficially own in the aggregate 413,943 shares of Common Stock, and Tamarix
and Centaurus, who collectively beneficially own 2,885,000 shares of Common
Stock following the consummation of the Tamarix/Finprogetti Aquisition, have
agreed not to sell any of their shares of Common Stock and/or securities
convertible into shares of Common Stock until eighteen months from the date of
this Prospectus without obtaining the prior written consent of the
Representative. In consideration for their agreement to accept a lock-up for 18
months, Finoger S.p.A. and Canopus International Tyles, both shareholders of the
Company who acquired their shares in connection with the 1995 Finprogetti
Acquisition, will be issued warrants to purchase 118,607 and 54,699 shares of
Common Stock, respectively, on terms comparable to the Centaurus Warrrant.
In general, under Rule 144 as amended, a person (or persons whose shares are
aggregated), including any person who may be deemed an "affiliate" of the
Company, who has beneficially owned any restricted securities for at least one
year is entitled to sell within any three-month period a number of restricted
securities that does not exceed the greater of 1% of the then outstanding shares
of Common Stock and the average weekly trading volume in the over-the-counter
market during the four calendar weeks preceding such sale, provided that at
least one year has elapsed since such shares were acquired from the Company and
certain manner of sale, notice requirements and requirements as to the
availability of current public information about the Company are satisfied. Any
person who is deemed to be an affiliate of the Company must comply with the
provisions of Rule 144 (other than the one-year holding period requirement) in
order to sell shares of Common Stock which are not restricted securities (such
as shares acquired by affiliates in this offering). In addition, under Rule
144(k), as amended, a person who is deemed not to be an affiliate of the
Company, and who is deemed not to have been an affiliate of the Company at any
time during the 90 days preceding any sale, is entitled to sell such shares
without regard to the foregoing limitations, provided at least two years have
elapsed since the shares were acquired from the Company or a non-affiliate of
the Company.
No predictions can be made of the effect, if any, that future sales of
shares or the availability of shares for sale will have on the market price
prevailing from time to time. Nevertheless, sales of substantial amounts of the
Common Stock in the public market could adversely affect the then prevailing
market price.
60
<PAGE>
UNDERWRITING
The Underwriters named below for whom GKN Securities Corp.
("Representative") is acting as Representative (collectively "Underwriters"),
have agreed, subject to the terms and conditions of the Underwriting Agreement,
to purchase from the Company a total of 1,250,000 shares of Common Stock and
1,250,000 Warrants.
The number of Securities which each such Underwriter has agreed to purchase
is set forth opposite its name:
<TABLE>
<CAPTION>
UNDERWRITERS COMMON STOCK WARRANTS
- ------------------------------------------------------------------------- -------------- ----------
<S> <C> <C>
GKN Securities Corp......................................................
Southeast Research Partners, Inc.........................................
Total.................................................................... 1,250,000 1,250,000
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to the approval of certain legal matters by counsel to the
Underwriters and various other conditions precedent, and the Underwriters are
obligated to purchase all of the Securities offered by this Prospectus (other
than the Securities covered by the over-allotment option described below), if
any are purchased.
The Representative has advised the Company that the Underwriters propose to
offer the Securities to the public at the public offering prices set forth on
the cover page of this Prospectus and to certain dealers, who are members of the
National Association of Securities Dealers, Inc. ("NASD"), at those prices less
a concession not in excess of $ per share of Common Stock and $
per Warrant, of which not in excess of $ per share of Common Stock and
$ per Warrant may be further reallowed to other dealers who are also
members of the NASD. After this Offering, the offering price and other selling
terms may be changed by the Representative.
The Company has granted to the Underwriters an option, exercisable during
the 45-day period after the date of this Prospectus, to purchase from the
Company at the offering prices set forth on the cover page of this Prospectus,
less underwriting discounts and commissions, up to an additional 187,500 shares
of Common Stock and/or an additional 187,500 Warrants for the sole purpose of
covering over-allotments, if any.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liability under the Securities Act. The Company has
agreed to pay to the Representative a non-accountable expense allowance of 3% of
the aggregate gross proceeds of the Offering (including the Underwriters'
over-allotment option, if exercised), of which $60,000 has been paid to date.
The Company has also agreed to pay all expenses in connection with qualifying
the Securities offered hereby for sale under the laws of such states as the
Representative may designate and for obtaining the clearance of this Offering
with the NASD including fees and expenses of counsel retained for such purposes
by the Representative and the costs of investigative searches of the Company's
executive officers. The Company has also agreed to sell to the Representative,
for $100, an option ("Representative's Purchase Option") to purchase up to an
aggregate of 125,000 shares of Common Stock and/or 125,000 Warrants. The
Representative's Purchase Option is exercisable for four years commencing one
year from the date of this Prospectus, at an exercise price of % of the
public offering price of the Common Stock or Warrants, as the case may be. The
Representative's Purchase Option grants to the holders thereof certain
"piggyback" rights and one demand right for a period of seven and five years,
respectively, from the date of this Prospectus with respect to registration
under the Securities Act of the securities directly and indirectly issuable upon
exercise of the Representative's Purchase Option. The Representative's Purchase
Option cannot be transferred, sold, assigned or hypothecated during the one-year
period following the date of this Prospectus, except to officers of the
Representative and to the Underwriters and selected dealers and their officers
or partners.
The Company has engaged the Representative, on a non-exclusive basis, as its
agent for the solicitation of the exercise of the Warrants. Other NASD members
may be engaged by the Representative
61
<PAGE>
in its solicitation efforts. To the extent not inconsistent with the guidelines
of the NASD and the rules and regulations of the Commission, the Company has
agreed to pay the Representative for bona fide services rendered a commission
equal to 5% of the exercise price for each Warrant exercised after one year from
the date of this Prospectus if the exercise was solicited by the Representative.
In addition to soliciting, either orally or in writing, the exercise of the
Warrants, such services may also include disseminating information, either
orally or in writing, to Warrant holders about the Company or the market for the
Company's securities, and assisting in the processing of the exercise of the
Warrants. No compensation will be paid to the Representative in connection with
the exercise of the Warrants if the market price of the underlying shares of
Common Stock is lower than the exercise price, the Warrants are held in a
discretionary account, the Warrants are exercised in an unsolicited transaction,
the Warrant holder has not confirmed in writing that the Representative
solicited such exercise or the arrangement to pay the commission is not
disclosed in the prospectus provided to Warrant holders at the time of exercise.
In addition, unless granted an exemption by the Commission from Regulation M
under the Exchange Act, while it is soliciting exercise of the Warrants, the
Representative will be prohibited from engaging in any market-making activities
or solicited brokerage activities with regard to the Company's securities unless
the Representative has waived its right to receive a fee for the exercise of the
Warrants.
The Underwriting Agreement provides that for a period of five years from the
date of this Prospectus, the Company will use its best efforts to elect up to
two designees of the Representative to its Board of Directors. If the
Representative does not exercise its option to designate at least one member of
the Company's Board of Directors, then it shall nevertheless be entitled to send
a representative to observe each meeting of such Board of Directors. GKN has not
yet selected a designee or representative.
The Underwriters may engage in over-allotment, stabilizing transactions,
syndicate short covering transactions and penalty bids in accordance with
Regulation M under the Exchange Act. Over-allotment involves sales by the
underwriting syndicate in excess of the offering size, which creates a syndicate
short position. Stabilizing transactions permit bids to purchase the Securities
so long as the stabilizing bids do not exceed a specified maximum. Syndicate
short covering transactions involve purchases of the Securities in the open
market after the distribution has been completed in order to cover syndicate
short positions. Penalty bids permit the Underwriters to reclaim a selling
concession from a selling group member when the Securities originally sold by
such selling group member are repurchased in the open market by the
Underwriters. Such stabilizing transactions, syndicate short covering
transactions and penalty bids may cause the prices of the Securities to be
higher than they would otherwise be in the absence of such transactions. These
transactions may be effected on the Nasdaq SmallCap Market, the Nasdaq National
Market or otherwise and, if commenced, may be discontinued at any time.
In December 1996 and January 1997, the Representative acted as placement
agent for the Moto Guzzi Financing and was paid in the aggregate commissions and
expenses of $570,000.
LEGAL MATTERS
The validity of the Securities offered hereby and certain legal matters will
be passed upon for the Company by Morrison Cohen Singer & Weinstein, LLP, New
York, New York. Graubard, Mollen & Miller, New York, New York, has acted as
counsel for the Underwriters in connection with this Offering.
EXPERTS
The financial statements and schedules of the Company at December 31, 1996,
and for the year then ended, included in this Prospectus and Registration
Statement, have been audited by Arthur Andersen LLP, independent public
accountants, and at December 31, 1995 and for each of the two years in the
period ended December 31, 1995, by Reconta Ernst & Young, independent auditors,
as set forth in their respective reports appearing elsewhere herein, and are
included, in reliance upon the authority of said firms as experts in giving said
reports.
62
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement under the Securities Act with respect to
the Common Stock and Warrants offered hereby. This Prospectus, which is part of
the Registration Statement, does not contain all of the information set forth in
the Registration Statement and the exhibits and schedules thereto, certain items
of which are omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and the
Securities offered by this Prospectus and such omitted information, reference is
hereby made to the Registration Statement and such exhibits, amendments and
schedules filed as a part thereof, which may be inspected, without charge, at
the Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at its New York Regional Office, Seven
World Trade Center, 13th Floor, New York, New York 10048. Copies of all or any
portion of the Registration Statement may be obtained from the Public Reference
Section of the Commission, upon payment of prescribed fees. The Commission
maintains a Web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. The Web site can be reached at http://www.sec.gov.
Statements contained in this Prospectus as to the contents of any contract,
agreement or other document referred to are of necessity brief descriptions
thereof and are not necessarily complete. With respect to each such contract,
agreement or other document filed as an exhibit to the Registration Statement,
reference is made to the copy of the document filed as an exhibit for a more
complete description of the matter involved, each such statement being qualified
in its entirety by such reference.
The Company intends to furnish its shareholders with annual reports
containing consolidated financial statements audited by an independent
accounting firm and quarterly reports containing unaudited consolidated
financial information for each of the first three fiscal quarters of each fiscal
year of the Company following the end of such quarter and such other periodic
reports as the Company may determine to be appropriate or as may be required by
law.
This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits thereto; certain portions have been
omitted from the prospectus in accordance with the rules and regulations of the
Commission. For further information with respect to the Company, the Securities
offered by this Prospectus and such omitted information, reference is made to
the Registration Statement, including any and all exhibits and amendments
thereto.
63
<PAGE>
TRIDENT ROWAN GROUP, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Report of Independent Public Accountants................................................................... F-2
Report of Independent Auditors............................................................................. F-3
AUDITED FINANCIAL STATEMENTS AT DECEMBER 31, 1996:
Consolidated Balance Sheets as of December 31, 1996 and 1995............................................... F-4
Consolidated Statements of Operations for Years Ended December 31, 1996, 1995 and 1994..................... F-6
Consolidated Statements of Changes in Shareholders' Equity................................................. F-7
Consolidated Statements of Cash Flows for Years Ended December 31, 1996, 1995 and 1994..................... F-8
Notes to Financial Statements.............................................................................. F-10
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
Trident Rowan Group, Inc.:
We have audited the accompanying consolidated balance sheet of Trident Rowan
Group, Inc. (a Maryland corporation) and subsidiaries as of December 31, 1996,
and the related consolidated statements of operations, shareholders' equity and
cash flows for the year then ended, expressed in Italian Lire. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above, present fairly,
in all material respects, the financial position of Trident Rowan Group, Inc.
and subsidiaries as of December 31, 1996 and the results of their operations and
their cash flows for the year then ended, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
March 26, 1997
Roseland, New Jersey
F-2
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
De Tomaso Industries, Inc.
We have audited the consolidated balance sheet of De Tomaso Industries, Inc.
and subsidiaries as of December 31, 1995, and the related consolidated
statements of operations, shareholders' equity and cash flows for each of the
two years in the period ended December 31, 1995, all expressed in Italian Lire.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above,
present fairly, in all material respects, the consolidated financial position of
De Tomaso Industries, Inc. and subsidiaries at December 31, 1995, and the
consolidated results of its operations and its cash flows for each of the two
years in the period ended December 31, 1995, in conformity with accounting
principles generally accepted in the United States of America.
/s/ RECONTA ERNST & YOUNG
April 3, 1996
Milan, Italy
F-3
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996)
CONSOLIDATED BALANCE SHEETS--ASSETS
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1996 1995
NOTE US$'000 LIRE M. LIRE M.
----- ---------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents...................................... $ 5,412 Lit. 8,281 Lit. 24,137
Receivables.................................................... 26,624 40,734 39,726
TRADE, LESS ALLOWANCE OF LIT. 1,300 IN 1996
AND LIT. 1,268 IN 1995..................................... 21,086 32,261 23,725
FINANCE RECEIVABLES, LESS ALLOWANCE OF LIT. 2,400
IN 1996 AND LIT. 2,200 IN 1995............................. 2,335 3,573 7,597
RECEIVABLES FROM RELATED PARTIES............................. 16 41 63 3,624
OTHER RECEIVABLES............................................ 3,162 4,837 4,780
Inventories.................................................... 21,463 32,838 30,717
RAW MATERIAL, SPARE PARTS AND WORK-IN-PROGRESS............... 13,010 19,906 21,469
FINISHED PRODUCTS............................................ 8,453 12,932 9,248
Prepaid expenses............................................... 805 1,231 1,109
---------- ------------- -------------
TOTAL CURRENT ASSETS........................................... 54,304 83,084 95,689
---------- ------------- -------------
Property, plant and equipment.................................. 9,099 13,922 7,709
LAND......................................................... 490 750 1,078
BUILDINGS.................................................... 1,669 2,554 4,418
MACHINERY AND EQUIPMENT...................................... 21,787 33,334 30,388
---------- ------------- -------------
23,946 36,638 35,884
LESS ALLOWANCES FOR DEPRECIATION............................. (14,847) (22,716) (28,175)
---------- ------------- -------------
Trademarks and other intangible assets, net of amortization of
Lit. 750 (1995--Lit. 250).................................... 2,778 4,250 4,750
Goodwill, net of amortization of Lit. 283
(1995--Lit. 77).............................................. 990 1,515 1,459
Real estate held for sale...................................... 7 9,869 15,100 28,227
Land for development, net of reserve of Lit. 2,500............. 6 2,288 3,500 6,000
Investments in unconsolidated companies........................ 1,029 1,574 2,205
Marketable and other securities and investments................ 8 9,807 15,004 17,176
Receivables from related parties............................... 16 3,077 4,708 --
Other assets................................................... 9 9,056 13,855 19,615
---------- ------------- -------------
TOTAL ASSETS................................................... $ 102,297 Lit. 156,512 Lit. 182,830
---------- ------------- -------------
---------- ------------- -------------
</TABLE>
See Notes to Consolidated Financial Statements
F-4
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996)
CONSOLIDATED BALANCE SHEETS--LIABILITIES AND SHAREHOLDERS' EQUITY
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1996 1995
NOTE US$'000 LIRE M. LIRE M.
----- ---------- ------------- -------------
<S> <C> <C> <C> <C>
LIABILITIES
Advances from banks............................................. 10 $ 16,565 Lit. 25,344 Lit. 18,538
Advances from banks for finance activities...................... 10 2,901 4,439 8,621
Current portion of long-term real estate debt................... 12 3,267 4,998 9,550
Current portion of other long-term debt......................... 12 1,484 2,270 1,866
Accounts payable................................................ 16,713 25,571 23,570
Accrued expenses and other payables............................. 11 7,461 11,414 9,092
Amounts due to related and affiliated parties................... 16 -- -- 509
Income taxes payable............................................ 13 20 617
---------- ------------- -------------
TOTAL CURRENT LIABILITIES....................................... 48,404 74,056 72,363
---------- ------------- -------------
Long-term real estate debt, less current portion................ 12 3,081 4,714 9,712
Other long-term debt, less current portion...................... 12 7,682 11,754 8,386
Termination indemnities......................................... 5,249 8,031 8,231
Provision for claims............................................ 2,138 3,270 3,595
Minority interests.............................................. 9,665 14,788 16,773
Common stock subject to repurchase.............................. 9,129 13,968 12,549
Preferred stock of subsidiary................................... 5 3,334 5,101 --
SHAREHOLDERS' EQUITY............................................ 13,615 20,830 51,221
COMMON STOCK, PAR VALUE $0.01 (1995--$2.50) PER SHARE:
AUTHORIZED 50,000,000 (1995--10,000,000) SHARES; 3,902,540
(1995--4,712,865) SHARES ISSUED AND OUTSTANDING LESS 849,640
(1995--775,530) SHARES
SUBJECT TO REPURCHASE......................................... 45 69 6,744
ADDITIONAL PAID IN CAPITAL...................................... 50,422 77,145 71,332
ACCUMULATED DEFICIT............................................. (20,213) (30,927) (15,926)
TREASURY STOCK, AT COST, 1,544,099 (1995--703,774) SHARES....... (17,916) (27,411) (11,826)
CUMULATIVE TRANSLATION ADJUSTMENT............................... 1,212 1,854 711
ACCRETION EXPENSE AND RELATED EXCHANGE GAINS.................... 65 100 186
---------- ------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY........................................................ $ 102,297 Lit. 156,512 Lit. 182,830
---------- ------------- -------------
---------- ------------- -------------
</TABLE>
See Notes to Consolidated Financial Statements
F-5
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996)
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1996 1995 1994
NOTE US$'000 LIRE M. LIRE M. LIRE M.
----- ------------ ------------ ----------- -------------
<S> <C> <C> <C> <C> <C>
Net sales........................................ $ 63,272 Lit. 96,806 Lit.72,253 Lit. 51,994
Cost of sales.................................... (55,010) (84,165) (62,808) (46,059)
------------ ------------ ----------- -------------
8,262 12,641 9,445 5,935
Selling, general and administrative expenses..... (14,007) (21,430) (16,230) (10,818)
Research and development......................... (769) (1,177) (602) (197)
Impairment losses on real estate................. 6,7 (2,732) (4,180) -- --
Rental income.................................... 969 1,483 770 --
Other income, net................................ 13 949 1,452 513 990
------------ ------------ ----------- -------------
(7,328) (11,211) (6,104) (4,090)
Interest expense................................. (4,290) (6,563) (4,448) (3,874)
Interest income.................................. 2,449 3,747 4,442 5,536
------------ ------------ ----------- -------------
Loss before income taxes and minority
interests...................................... (9,169) (14,027) (6,110) (2,428)
Income taxes..................................... 14 (389) (595) (420) (39)
Minority interests............................... (248) (379) (450) (810)
------------ ------------ ----------- -------------
Net loss......................................... $ (9,806) Lit. (15,001) Lit. (6,980) Lit. (3,277)
------------ ------------ ----------- -------------
------------ ------------ ----------- -------------
<CAPTION>
LOSS PER SHARE:.................................. US$ Lire Lire Lire
<S> <C> <C> <C> <C> <C>
Loss per share................................... $ (2.14) Lit. (3,268) Lit. (2,065) Lit. (1,593)
------------ ------------ ----------- -------------
------------ ------------ ----------- -------------
Weighted average number of common shares
outstanding during the year.................... 4,590,539 4,590,539 3,380,441 2,057,446
------------ ------------ ----------- -------------
------------ ------------ ----------- -------------
</TABLE>
See Notes to Consolidated Financial Statements
F-6
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
VOTING ADDITIONAL CUMULATIVE
PREFERRED COMMON PAID-IN ACCUMULATED TREASURY TRANSLATION
STOCK STOCK CAPITAL DEFICIT STOCK ADJUSTMENT
--------------- ----------- ----------- ------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1994.................. Lit.m 1,453 2,988 47,543 (5,669) -- (434)
Net loss.................................... -- -- -- (3,277) -- --
Translation adjustment...................... -- -- -- -- -- 553
--------------- ----------- ----------- ------------- --------- -----
Balance at December 31, 1994................ Lit.m 1,453 2,988 47,543 (8,946) -- 119
Net loss.................................... -- -- -- (6,980) -- --
Translation adjustment...................... -- -- -- -- -- 592
Conversion of shares........................ (1,453) 1,453 -- -- -- --
Repurchase of shares........................ -- -- -- -- (11,826) --
Reclassify shares subject to repurchase..... -- (1,128) (11,607) -- -- --
Accretion expense, net of exchange
movements................................. -- -- -- --
Issuance of shares.......................... -- 3,431 35,396 -- -- --
--------------- ----------- ----------- ------------- --------- -----
Balance at December 31, 1995................ Lit.m -- 6,744 71,332 (15,926) (11,826) 711
Net loss.................................... -- -- -- (15,001) -- --
Translation adjustment...................... -- -- -- -- -- 1,143
Issuance of shares.......................... -- 44 427 -- -- --
Change of par value to $0.01 per share...... -- (6,717) 6,717 -- -- --
Repurchase of shares........................ -- -- 607 -- (15,585) --
Reclassify shares subject to repurchase..... -- (2) (1,938) -- -- --
Accretion expense, net of exchange
movements................................. -- -- -- -- -- --
--------------- ----------- ----------- ------------- --------- -----
Balance at December 31, 1996................ Lit.m -- 69 77,145 (30,927) (27,411) 1,854
--------------- ----------- ----------- ------------- --------- -----
--------------- ----------- ----------- ------------- --------- -----
December 31, 1996........................... $'000 -- 45 50,442 (20,213 ) (17,916) 1,212
--------------- ----------- ----------- ------------- --------- -----
--------------- ----------- ----------- ------------- --------- -----
<CAPTION>
ACCRETION TOTAL SHARES
EXPENSE, SHAREHOLDERS' SUBJECT TO
NET EQUITY REPURCHASE
----------- -------------- -----------
<S> <C> <C> <C>
Balance at January 1, 1994.................. -- 45,881 --
Net loss.................................... -- (3,277) --
Translation adjustment...................... -- 553
--- ------- -----------
Balance at December 31, 1994................ -- 43,157 --
Net loss.................................... -- (6,980) --
Translation adjustment...................... -- 592 --
Conversion of shares........................ -- -- --
Repurchase of shares........................ -- (11,826) --
Reclassify shares subject to repurchase..... -- (12,735) 12,735
Accretion expense, net of exchange
movements................................. 186 186 (186)
Issuance of shares.......................... -- 38,827 --
--- ------- -----------
Balance at December 31, 1995................ 186 51,221 12,549
Net loss.................................... -- (15,001) --
Translation adjustment...................... -- 1,143 --
Issuance of shares.......................... -- 471 --
Change of par value to $0.01 per share...... -- -- --
Repurchase of shares........................ 43 (14,935) (650)
Reclassify shares subject to repurchase..... -- (1,940) 1,940
Accretion expense, net of exchange
movements................................. (129) (129) 129
--- ------- -----------
Balance at December 31, 1996................ 100 20,830 13,968
--- ------- -----------
--- ------- -----------
December 31, 1996........................... 65 13,615 9,129
--- ------- -----------
--- ------- -----------
</TABLE>
F-7
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996)
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1996 1995 1994
US$'000 LIRE M. LIRE M. LIRE M.
---------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Net loss.................................................. $ (9,806) Lit. (15,001) Lit. (6,980) Lit. (3,277)
Adjustments to reconcile net loss to net cash
(used in)/provided by operating activities:
DEPRECIATION AND AMORTIZATION............................. 1,837 2,811 2,990 1,907
GAIN ON SALES OF OPERATING ASSETS......................... (733) (1,122) (244) (2,841)
MINORITY INTERESTS IN NET INCOME.......................... 248 379 450 810
PROVISION FOR TERMINATION INDEMNITIES..................... 826 1,264 1,196 1,027
PAYMENTS OF TERMINATION INDEMNITIES....................... (938) (1,435) (1,013) (1,135)
RESERVES FOR IMPAIRMENT LOSSES............................ 2,732 4,180 -- --
PROVISION FOR INVENTORY AND RECEIVABLES................... 146 222 1,572 669
OTHER OPERATING ACTIVITIES................................ (776) (1,187) 2,089 1,512
Changes in operating assets and liabilities:
RECEIPT OF TAX RECEIVABLES................................ 4,082 6,245 -- --
TRADE AND OTHER RECEIVABLES............................... (3,160) (4,835) 1,217 (1,103)
RELATED PARTY RECEIVABLES................................. 1,774 2,714 (1,361) 903
INVENTORIES............................................... (1,217) (1,862) (9,055) 509
PREPAID EXPENSES.......................................... (84) (129) 427 (546)
ACCOUNTS PAYABLE AND ACCRUED EXPENSES..................... 1,375 2,103 3,308 2,170
RELATED PARTY PAYABLES.................................... (322) (492) (786) (178)
---------- ------------- ------------ ------------
Net cash (used in)/provided by operating activities....... (4,016) (6,145) (6,190) 427
---------- ------------- ------------ ------------
INVESTING ACTIVITIES:
NET DECREASE/(INCREASE) IN INVESTMENTS.................... 1,312 2,007 3,236 (14,468)
PURCHASE OF SUBSIDIARIES, NET OF CASH ACQUIRED............ 363 555 (1,193) --
PROCEEDS ON DISPOSAL OF OPERATING ASSETS.................. 2,734 4,183 1,079 2,911
DEFERRED RECEIPTS FROM SALE OF MASERATI................... -- -- 27,000 23,750
PURCHASES OF PROPERTY, PLANT AND EQUIPMENT................ (4,507) (6,895) (2,775) (1,131)
---------- ------------- ------------ ------------
Net cash (used in)/provided by investing activities....... (98) (150) 27,347 11,062
---------- ------------- ------------ ------------
FINANCING ACTIVITIES:
NET INCREASE/(DECREASE) IN ADVANCES FROM BANKS............ 1,715 2,624 (3,770) (7,211)
PROCEEDS FROM SHARE ISSUES................................ 3,334 5,101 8,204 --
REPURCHASE OF SHARES...................................... (7,840) (11,995) (5,000) --
PROCEEDS FROM LONG-TERM DEBT.............................. 1,033 1,581 392 --
PRINCIPAL PAYMENTS OF LONG-TERM DEBT...................... (4,391) (6,718) (2,091) (1,654)
---------- ------------- ------------ ------------
Net cash used in financing activities..................... (6,149) (9,407) (2,265) (8,865)
---------- ------------- ------------ ------------
Decrease/(increase) in cash and cash equivalents.......... (10,263) (15,702) 18,892 2,624
Effect of exchange rate changes on cash and cash
equivalents............................................. (101) (154) (41) --
Cash and cash equivalents, beginning of year.............. 15,776 24,137 5,286 2,662
---------- ------------- ------------ ------------
Cash and cash equivalents, end of year.................... $ 5,412 Lit. 8,281 Lit. 24,137 Lit. 5,286
---------- ------------- ------------ ------------
---------- ------------- ------------ ------------
</TABLE>
See Notes to Consolidated Financial Statements
F-8
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996)
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
SUPPLEMENTAL SCHEDULE OF NONCASH ACTIVITIES
1996
The Company issued promissory notes of $1,863,000 (Lit. 2,851 million) in
connection with its share repurchase program--see Note 4. The Company also
assigned a receivable of Lit. 763 million ($499,000) as a part of the
consideration for repurchase of shares from Finprogetti, also discussed in Note
4.
The Company sold its 66.7% interest in Immobiliare Broseta S.r.l., receiving
promissory notes amounting to Lit. 4,708 million, net of present value
adjustments. As a result of this disposal, real estate loans of Lit. 5,049
million, real estate of Lit. 12,200 million and minority interests of Lit. 2,354
million were eliminated from the balance sheet. Cash disposed of amounted to
Lit. 22 million. See Note 5.
The Company issued 30,000 shares of its common stock with a value of Lit.
471 million to effect the acquisition of 100% of the outstanding common stock
Moto America Inc. Cash acquired amounted to Lit. 577 million. See Note 5.
The Company acquired fixed assets for Lit. 1,830 million in 1996 by way of
finance leases, assuming lease obligations of Lit. 1,573 million, net of initial
payments at the inception of the leases.
1995
In connection with the Finprogetti acquisition, the Company issued shares
for Lit. 38,223 million in exchange for cash of Lit. 8,204 million and assets
with a fair value of Lit. 29,707 million, net of advances from banks of Lit.
12,572 million and long-term debt of Lit. 19,431 million. Cash acquired amounted
to Lit. 631 million. The Company also paid costs, included in the total purchase
price, of Lit. 1,224 million in this transaction which is described in Note 5.
In connection with the repurchase of stock formerly owned by the ex
Chairman, described in Note 4, the Company gave assets with a book value of Lit.
6,629 million as part of the consideration for the stock repurchased.
The Company issued shares with a value of Lit. 603 million to purchase the
minority shareholder interest in its motorcycle subsidiary, GBM S.p.A.
The Company assumed advances from banks of Lit. 3,425 million in connection
with the acquisition of L.I.T.A. S.p.A. and acquired cash of Lit. 15 million.
OTHER SUPPLEMENTAL INFORMATION
Interest paid amounted to Lit. 6,721 million, Lit. 4,416 million and Lit.
4,051 million in 1996, 1995 and 1994, respectively.
See Notes to Consolidated Financial Statements
F-9
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. BACKGROUND AND ORGANIZATION
Trident Rowan Group, Inc. (De Tomaso Industries, Inc. through August 22,
1996) is a holding company incorporated in the United States which owns
subsidiaries that operate primarily in Italy. Trident Rowan Group, Inc. and
subsidiaries are referred to herein as the Company. The Company provides
temporary management services to third parties and its subsidiaries which
operate in two industry segments: the manufacture and distribution of "Moto
Guzzi" brand motorcycles in Italy, Europe and elsewhere in the world and the
manufacture and distribution of steel tubes for the automotive and furniture
markets. Additionally, the Company holds for development and sale commercial
real estate property. Information on the Company's operations by segment and
geographic area are included in Notes 17 and 18 to the Financial Statements.
The primary financial statements are shown in Italian Lire because all of
the Company's material operating entities are based and operate entirely in
Italy. Translation of lire amounts into U.S. Dollar amounts is included solely
for the convenience of the readers of the financial statements and has been
calculated at the rate of Lit. 1,530 to $1.00, the approximate exchange rate at
December 31, 1996. It should not be construed that the assets and liabilities,
expressed in U.S. dollar equivalents, can actually be realized in or
extinguished in U.S. dollars at that or any other rate.
2. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its majority owned subsidiaries. Significant intercompany accounts and
transactions have been eliminated in consolidation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.
FOREIGN CURRENCY TRANSLATION
The financial statements of non-Italian entities have been translated from
the applicable functional currency to Italian lire using the year-end exchange
rate for balance sheet items and the average exchange rate for the year for
statement of operation items. The translation differences resulting from the
change in exchange rates from year to year have been reported separately as a
component of shareholders' equity.
FOREIGN CURRENCY TRANSACTIONS
Transactions, receivables and payables denominated in currencies other than
the functional currency are recorded at the exchange rate in effect on the
transaction date. Such receivables and payables are adjusted to current exchange
rates as of the date paid or the balance sheet date, whichever is earlier. Gains
and losses are included in "other income, net" in the statements of operations.
F-10
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
REVENUE RECOGNITION
Revenues from sale of products are recorded upon shipment, which is when
title passes.
RESEARCH AND DEVELOPMENT
The Company's motorcycle business is continuously engaged in
company-sponsored programs of product improvement and development. Other
businesses do not conduct research and development activities. Research and
development costs are expensed as they are incurred.
INVENTORIES
Inventories are stated at the lower of cost or market with cost being
determined principally by the last-in, first-out (LIFO) method applying average
cost of the year to increases in inventory quantities. If inventories had been
determined by the lower of cost or market value using the first-in, first-out
(FIFO) method, which approximates current cost, inventories would have been
greater by approximately Lit. 2,000 million in 1996 and 1995.
LONG-LIVED ASSETS
The Company adopted Financial Accounting Standards Board (FASB) Statement
No. 121, "Accounting for the Impairment of Long-lived Assets and for Long-lived
Assets to be Disposed of" in 1996. This statement requires impairment losses to
be recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be generated
by those assets are less than the assets' carrying amounts and also addresses
the accounting for long-lived assets that are expected to be disposed of. The
effect of the initial adoption of FASB Statement No. 121 was not material.
Subsequent to its adoption, the Company recorded impairment losses against the
carrying values of long-lived real estate assets--see Notes 6 and 7.
The Company continually reviews the carrying value of long-lived assets and
long-lived assets to be disposed of. In determining the undiscounted cash flows
estimated to be generated by the Company's temporary management subsidiary, the
Company considers estimated cash flows from services to third parties and from
eventual realization of managed portfolio companies through divestiture.
GOODWILL AND OTHER INTANGIBLES
On purchases of businesses, the excess of the purchase price over the fair
value of assets acquired is accounted for as goodwill and is amortized on a
straight-line basis over a period determined by the Company taking into
consideration the nature of the business acquired. Goodwill relative to the
Finprogetti acquisition is being amortized over 10 years.
F-11
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Trademarks and other intangibles relating to the Company's temporary
management subsidiary, are being amortized over 10 years. Concession rights are
amortized over the life of the concession.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost. Depreciation is provided
on the straight-line method over the estimated useful lives of the assets.
Buildings are depreciated over 30 years and plant and machinery, tooling and
computer equipment over lives ranging from 3 to 10 years.
MARKETABLE AND OTHER SECURITIES AND INVESTMENTS
Marketable and other securities and investments consist primarily of fixed
income investments which cannot be readily sold using established markets.
Securities as of December 31, 1996 and 1995 are held-to-maturity and are
represented by Italian government-backed securities. Such securities are carried
at cost plus accrued interest.
TERMINATION INDEMNITIES
All employees of the Company's Italian subsidiaries are entitled to receive
severance pay in accordance with the terms of applicable national labor law and
contracts. The liability for severance pay is accrued for service to date and is
payable immediately on termination. The liability is calculated in accordance
with the individual employee's length of service, employment category and
compensation and is adjusted annually by a cost of living index provided by the
Italian Government. There is no vesting period or funding requirement associated
with the liability. The liability recorded in the consolidated balance sheets is
the amount that the employee would be entitled to if the employee separates from
the Company immediately.
INCOME TAXES
Income taxes are provided by each entity included in the consolidation in
accordance with local laws. Deferred income taxes have been provided using the
liability method in accordance with FASB Statement No. 109, "Accounting for
Income Taxes."
STATEMENTS OF CASH FLOW
The cash flows for the roll-over of maturing fixed-term securities into new
securities is included in the caption "Net decrease/(increase) in investments"
in the Consolidated Statements of Cash Flows. Advances from banks arise
primarily under the Company's short-term lines of credit with its banks. These
short-term obligations are payable on demand. The cash flows for these items are
included in the caption "Net increase/(decrease) in advances from banks" in the
Consolidated Statements of Cash Flow.
RECLASSIFICATIONS
Comparative figures for 1995 and 1994 have been reclassified to conform with
the 1996 presentation.
F-12
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
3. NET LOSS PER COMMON SHARE
Net loss per common share is based on the weighted average number of shares
of common stock outstanding during each period, including those shares subject
to repurchase. All outstanding convertible preferred stock of the Company (which
were converted during 1995) were considered to be common stock equivalents and
were considered anti-dilutive for 1994. Had the preferred shares which were
converted as of July 1, 1995 been converted as of January 1, 1995, then the loss
per share for 1995 would have been Lit. 1,978.
SHARES SUBJECT TO REPURCHASE--PRO FORMA LOSS PER SHARE INFORMATION
As discussed in Note 4, the Company is committed to repurchase 849,640
shares, 776,530 of which are secured by Lit. 14,511 million of marketable and
other investments deposited by the Company. Interest income on these investments
is included in the statements of operations. No security has been granted in
respect of the remaining 73,110 shares subject to repurchase. On a Pro Forma
basis the net loss and the net loss per share for 1996 and 1995, as if shares
subject to repurchase had been repurchased as at January 1, 1996 and January 1,
1995, would have been as follows.
<TABLE>
<CAPTION>
1996 1996 1995
U.S.$'000 LIRE M. LIRE M.
-------------- ------------- -------------
<S> <C> <C> <C>
Net loss....................................... $ (10,364) Lit. (15,855) Lit. (7,505)
-------------- ------------- -------------
-------------- ------------- -------------
Net loss per share............................. $ (2.77) Lit. (4,238) Lit. (2,508)
-------------- ------------- -------------
-------------- ------------- -------------
</TABLE>
4. REPURCHASE OF SHARES AND SHARES SUBJECT TO REPURCHASE
1996 STOCK REPURCHASE PROGRAM
The Company completed its stock repurchase program on October 23, 1996. The
program was initiated to accommodate a number of shareholders who held the view
that the Company, following the sale of the Maserati business in 1993, was no
longer engaged in the business activity which had initially led them to invest
in the Company's shares. Two mutually exclusive alternative offers were made to
shareholders. The first offer was to purchase up to 80% of a shareholder's
common stock for a combination of cash and non-negotiable promissory notes
having a face value aggregating $12.26 per share ("the 80% offer") and the
second offer was to purchase up to 50% of a shareholder's common stock for
$12.26 cash (the "50% offer"). Of the 4,742,865 issued shares of the Company at
the date of the repurchase program, shareholders representing 3,167,010 shares
(66.8%) had agreed in advance not to participate.
Of the remaining 1,575,855 shares, 506,359 were tendered under the 80% offer
and 255,636 under the 50% offer, all of which were accepted by the Company. On
consummation of the transaction, the Company repurchased 761,995 shares for a
total amount of $7,478,658 (Lit. 11,345 million at the approximate exchange rate
on October 23, 1996 of Lire 1,517 to $1.00) in cash and $1,863,401 (Lit. 2,827
million) in the form of non-negotiable promissory notes, bearing interest at 8%
per annum, maturing on October 23, 1998.
F-13
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
4. REPURCHASE OF SHARES AND SHARES SUBJECT TO REPURCHASE (CONTINUED)
1996 REPURCHASE OF SHARES FROM FINPROGETTI
On November 7, 1996, the Company entered into an agreement with Finprogetti
S.p.A. to resolve certain open matters deriving from the acquisition of the
majority of Finprogetti's operating subsidiaries in July 1995--See Note 5. A
balance due by Finprogetti of Lit. 763 million ($499,000) was settled by the
Company repurchasing 46,000 shares at a value of Lit. 16,587 per share ($10.89
per share). Finprogetti also agreed to accept responsibility for a claim which
was successfully brought against one of the subsidiaries acquired in the
Finprogetti Acquisition for Lit. 2,120 million.
In accordance with the terms of the Finprogetti Agreement, the Company would
have paid such claim and received in compensation 105,440 of the shares issued
to Finprogetti in July 1995. The Company and Finprogetti agreed that Finprogetti
would assume the responsibility for payments resulting from the claim, which are
payable in installments through June 1998, and that the Company would, on the
request of Finprogetti, repurchase shares for cash at the dates and in the
amounts of each installment payment.
The Company has reclassified the 105,440 shares subject to repurchase
outside of shareholders' equity in the amount of the present value of the
amounts payable under the repurchase commitment, applying a discount rate of
10%. The resulting value of the 105,440 shares subject to repurchase was Lit.
1,940 million ($1,274,000) or Lit. 18,399 per share ($12.08 per share).
Immediately following the agreement, Finprogetti requested that the Company
repurchase 9,950 shares for Lit. 200 million ($131,000) in respect of the first
installment and on December 31, 1996 requested that a further 22,380 shares be
repurchased for Lit. 450 million ($294,000). The dates, number of shares and
financial commitment for further possible repurchases of shares from Finprogetti
are as follows:
<TABLE>
<S> <C> <C>
22,380 Lit. 450 million
June 30, 1997....................... shares ($294,000)
22,380 Lit. 450 million
December 31, 1997................... shares ($294,000)
28,350 Lit. 570 million
June 30, 1998....................... shares ($373,000)
</TABLE>
1995 PURCHASE OF TREASURY STOCK FROM FORMER CHAIRMAN
In April 1995, the Company entered into an agreement with Mr. Alejandro De
Tomaso (De Tomaso Agreement), then the Chairman of the Board, under which the
Company would repurchase Mr. De Tomaso's 1,000,000 shares of preferred stock and
480,304 shares of common stock at a negotiated price of Lit. 18,400 per share,
converted into dollars at the exchange rate in effect on closing date of Lit.
1,637. Prior to the closing of that transaction, Mr. De Tomaso conveyed such
shares, subject to the DeTomaso Agreement, by gift. The shares are currently
held by a trust.
Performance under the De Tomaso Agreement was conditional upon the
consummation of the Finprogetti Acquisition--see Note 5. Contemporaneously with
the closing of that transaction, 703,774 of the preferred and common shares
formerly owned by Mr. De Tomaso were delivered to the Company in exchange for
cash of Lit. 5,000 million and properties (a hotel valued by the Board of
Directors based upon independent appraisals of Lit. 4,700 million and a museum
collection of Maserati vehicles and engines valued by the Board of Directors at
Lit. 3,200 million) that had a book carrying value of Lit. 6,629 million. The
remaining preferred and common shares formerly owned by Mr. De Tomaso were
exchanged for an
F-14
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
4. REPURCHASE OF SHARES AND SHARES SUBJECT TO REPURCHASE (CONTINUED)
equal number of shares of newly issued common stock, which the Company is
required to register for sale at the request of the holder.
The value of Lit. 11,826 million (Lit. 16,804 per share; $10.26 per share)
placed on the treasury stock acquired in 1995 pursuant to the De Tomaso
Agreement represents the book value of the consideration, including taxes
payable of Lit. 197 million, given in exchange for the treasury stock and no net
gain or loss was recognized on the transaction.
Under the terms of the De Tomaso Agreement, if the remaining 776,530 shares
are not sold by their current owner prior to July 17, 1998 (the third
anniversary of the Finprogetti transaction), the Company is committed to acquire
the shares at $11.27 per share. The Company has obtained a letter of credit to
guarantee payment of the repurchase price which is collateralized by certain
investment securities owned by the Company and reported in the balance sheet in
the amount of Lit. 14,511 million ($9,484,000). The agreement also provides that
(a) at any time prior to July 17, 1998, the Company may offer to buy any part or
all of such shares at $11.27 per share and (b) if such an offer made by the
Company is not accepted, the Company's commitment to buy the remaining 776,530
shares is reduced by the number of shares stipulated in the offer that was not
accepted. These 776,530 shares were recorded on the balance sheet at July 17,
1995 at estimated market value of $10.00 (Lit. 16,400 per share) as shares
subject to repurchase and are not included in shareholders' equity. The
difference between $10.00 and the redemption price of $11.27 is being amortized
over the period to July 17, 1998.
5. ACQUISITIONS AND DISPOSALS
1996 SALE OF MOTORCYCLE SUBSIDIARY SECURITIES
The Company's newly formed wholly-owned subsidiary, Moto Guzzi Corp.,
acquired all of the equity interest of the Company in Moto Guzzi S.p.A. and in
Moto America Inc. in exchange for 6,000,000 shares of common stock of Moto Guzzi
Corp. In December 1996 and January 1997, Moto Guzzi Corp. consummated a private
offering of convertible preferred stock and common stock purchase warrants which
raised an aggregate of approximately $5,300,000 (Lit. 8,109 million) for Moto
Guzzi Corp., net of expenses. Moto Guzzi Corp. issued 1,500,000 units, each
consisting of one share of Class A Convertible Preferred Stock and one common
stock purchase warrant exercisable for three years for the lesser of $4.00 or
the initial public offering price of the common stock. The preferred stock is
convertible at the option of the holder into an equal number of shares of common
stock, subject to adjustment to protect against events of dilution and is
automatically converted upon consummation of an initial public offering of Moto
Guzzi Corp. common stock which raises gross proceeds of at least $8,000,000
(Lit. 12,240 million). The conversion rate for the preferred stock in such event
will be the lesser of the then-applicable conversion rate or 75% of the
per-share initial offering price. If such an initial public offering is not
consummated by June 30, 1998, the holders of a majority of the shares of
preferred stock will have the right to select a majority of the Moto Guzzi Corp.
board of directors. The holders of the Preferred Stock also have a right to
redeem their shares at $8.00 per share if no public offering is completed on or
before January 16, 2002.
The Moto Guzzi Corp. preferred stock has been recorded in the consolidated
balance sheet as preferred stock of subsidiary in the amount of Lit. 5,101
million ($3,334,000) at December 31, 1996. An
F-15
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
5. ACQUISITIONS AND DISPOSALS (CONTINUED)
additional Lit. 2,971 million ($1,889,000) will be recorded in the first quarter
of 1997 as a result of the completion of the private placement in January 1997.
1996 ACQUISITION OF MOTO AMERICA INC.
Effective January 1, 1996, the Company completed its acquisition of the
outstanding shares of Moto America Inc., the sole distributor of Moto Guzzi
motorcycles in the United States. The acquisition was consummated by the
issuance of 30,000 shares of common stock of the Company and the purchase price
of Lit. 471 million reflects the shares issued at a fair value of $10.00 per
share (Lit. 15,710 per share at such date). The acquisition has been accounted
for as a purchase and the excess of the purchase consideration over the fair
value of assets acquired has been accounted for as goodwill, determined in the
amount of Lit. 262 million, which is being amortized over 5 years. The effects
of the acquisition are not material to the operations of the Company.
1996 DISPOSAL OF IMMOBILIARE BROSETA S.R.L.
In June 1996, the Company sold its 66.7% equity interest in Immobiliare
Broseta S.r.l. to its 25% owned affiliate Domer S.r.l. The remaining 33.3%
equity interest in Immobiliare Broseta S.r.l. was owned by Interim S.p.A., a
subsidiary of Domer S.r.l. and was subsequently transferred to Domer S.r.l. The
Company had sought offers from third parties through an independent broker and
the sale price of Lit. 5,200 million offered by Domer S.r.l. was the highest of
the offers received. Lit. 1,800 million of the sale price was evidenced by a
promissory note of Domer S.r.l. due December 31, 1996 (subsequently renewed
until December 31, 1997), bearing an interest rate equal to the official Lire
discount rate plus 3%. The balance of Lit. 3,400 million will be received
pro-rata from the sales of apartments which are being developed from the
Immobiliare Broseta S.r.l. property or on June 30, 1999, whichever is earlier.
This amount of Lit. 3,400 million carries an interest rate of 6% payable
bi-annually and has been accounted for at its estimated net present value of
Lit. 2,908 million applying a discount rate of 12%, considered to be a fair
market rate for similar notes receivable. The book value of the 66.7% interest
in Immobiliare Broseta S.r.l. was Lit. 4,708 million and no gain or loss has
been recorded on the transaction pending receipt of the deferred payments.
1995 FINPROGETTI ACQUISITION
On July 17, 1995, effective July 1, 1995, the Company acquired from
Finprogetti S.p.A. (an Italian entity) all of that company's equity interests in
its principal operating subsidiaries and a tax receivable of Lit. 5,150 million
in exchange for shares of the Company. The operating subsidiaries comprised TIM,
a temporary management company specialized in the "turnaround" of troubled and
underperforming Italian and foreign companies, subsidiaries holding Italian real
estate buildings and concession rights and a leasing/factoring company. As part
of the same transaction, the Company acquired the minority interest in TIM from
Dott. Albino Collini, its founder and CEO. Under the terms of the Finprogetti
Agreement, the final number of the Company's shares to be issued was conditional
on the purchase before September 30, 1995 by Finprogetti S.p.A., or its
shareholders or third parties directed by it, of a specified number of shares in
the Company at a stipulated price of Lit. 20,106.73 ($12.26 at then current
exchange rates) per share. After the receipt of cash of Lit. 8,204 million
(approximately $5,000,000) for the subscription to
F-16
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
5. ACQUISITIONS AND DISPOSALS (CONTINUED)
408,008 shares, the Company adjusted the number of shares to be given so that
1,922,652 shares were issued to effect the acquisition from Finprogetti S.p.A.,
in addition to the shares issued in exchange for cash. Of the shares issued,
248,673 were initially placed in escrow and in February 1997 were released
following legal transfer to the Company of the tax receivable included in the
assets acquired.
The Lit. 39,447 million total purchase price reported in the balance sheet
to effect the Finprogetti Agreement reflects Lit. 38,223 million (Lit. 16,400
per share; $10.00 per share) assigned to the 2,330,660 shares issued plus costs
of Lit. 1,224 million incurred in connection with the acquisition.
The value of $10.00 per share represented the fair value of the shares
issued, approximating the trading price of the Company's shares at the date of
the acquisition and supported by the Company's estimate of the fair values of
assets and liabilities acquired. The acquisition was accounted for by the
purchase method. Accordingly, the purchase price was allocated to the assets
purchased and the liabilities assumed based on the fair values at the date of
the acquisition, as follows:
<TABLE>
<CAPTION>
US$'000(1) LIRE M.
----------- -------------
<S> <C> <C>
Cash.............................................................. $ 5,166 Lit. 8,204
Real estate interest.............................................. 21,479 34,109
Concession rights over real estate................................ 2,960 4,700
Less: Related long-term debt...................................... (12,238) (19,431)
Trademark and other intangibles................................... 3,148 5,000
Other assets and liabilities, net................................. 3,355 5,329
Goodwill.......................................................... 967 1,536
----------- -------------
$ 24,837 Lit. 39,447
----------- -------------
----------- -------------
</TABLE>
- ------------------------
(1) At the approximate exchange rate as of July 17, 1995 of Lire 1,640 to $1.00
The excess of the purchase price paid over the fair values of the net assets
acquired was recorded as goodwill, which is being amortized over 10 years.
Results of the Finprogetti companies are included in operations from July 1,
1995. Goodwill amortization for 1996 was Lit. 154 million (1995--Lit. 77
million).
L.I.T.A. ACQUISITION
On July 25, 1995, the Company acquired L.I.T.A. S.p.A., an Italian
manufacturer of steel tubes for the motor vehicle and furniture industries for
cash in the amount of Lit. 615 million ($402,000). The fair value of the assets
received was Lit. 1,649 million ($1,078,000) in excess of the purchase price.
This excess has been allocated to reduce the carrying value of property, plant
and equipment by Lit. 1,482 million ($969,000) and other non-current assets by
Lit. 167 million ($109,000). A valuation allowance was established against the
deferred tax asset arising from the adjustment of the book basis of the assets.
When realized, the tax benefit will be credited to income.
F-17
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
5. ACQUISITIONS AND DISPOSALS (CONTINUED)
PROFORMA INFORMATION
The Pro Forma unaudited results of operations for the years ended December
31, 1995 and 1994, assuming the Finprogetti and L.I.T.A. acquisitions and the
repurchase of shares from the former Chairman had been consummated as at January
1, 1995 and 1994, are as follows:
<TABLE>
<CAPTION>
1995 1994
LIRE M. LIRE M.
------------ ------------
<S> <C> <C>
Net sales......................................................... Lit. 82,403 Lit. 66,870
Rental income..................................................... 1,927 4,640
Finance income.................................................... 1,032 2,686
------------ ------------
Net loss.......................................................... (7,699) (7,021)
------------ ------------
Net loss per common share......................................... Lit. (1,369) Lit. (1,499)
------------ ------------
</TABLE>
It cannot be inferred that the proforma operating results as shown above
would have resulted had the acquisitions and repurchase of shares been
consummated as at the assumed dates as transactions between the entities
acquired and their then parent companies may not have occurred or may have
occurred on different terms and conditions.
6. LAND FOR DEVELOPMENT
Undeveloped land, acquired as part of the Finprogetti transaction,
represents an area in Sardinia for development of hotel and leisure facilities
and is owned by the Company through an 80% interest in Grand Hotel Bitia S.r.l.
The minority shareholder had an option, which expired unexercised on June 30,
1996, to purchase the Company's interest at a price above its then carrying
value of Lit. 6,000 million.
The Company has begun to investigate other ways to realize value from this
property. A decrease in market values in 1996, coupled with complications
connected with changing rules and practice by local and regional government in
respect of construction and environmental authorizations has increased
uncertainty with respect to development of the property for tourism or other
purposes. In accordance with FASB Statement No. 121, the Company has recorded a
reserve of Lit. 2,500 million ($1,634,000) against the property. The land has
been reclassified from "real estate held for sale" to "land for development" as
management believes it probable that the Company will own the land until
authorizations are obtained from the proper authorities.
F-18
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
7. REAL ESTATE HELD FOR SALE
<TABLE>
<CAPTION>
1996 1996 1995
US$'000 LIRE M. LIRE M.
----------- ------------ ------------
<S> <C> <C> <C>
Building held for sale..................................................... $ 9,869 Lit. 15,100 Lit. 16,276
Real estate under development:
Buildings.................................................................. -- -- 8,842
Industrial areas........................................................... -- -- 3,109
----------- ------------ ------------
$ 9,869 Lit. 15,100 Lit. 28,227
----------- ------------ ------------
----------- ------------ ------------
</TABLE>
All of the real property was acquired as part of the Finprogetti
transaction. The building and industrial areas were sold to the Company's
affiliate, Domer S.r.l., in the second quarter of 1996--see Note 5.
As discussed in Note 22, on March 18, 1997 the Company entered into an
agreement to sell the remaining property which is rented to a third party under
an operating lease expiring in 1998 and is encumbered by a mortgage over the
building and a lien over the rentals received--see Note 12. In accordance with
FASB Statement No. 121, the Company has recorded reserves of Lit. 1,280 million
($836,000) against this property in 1996 and has accrued Lit. 500 million
($328,000) for maintenance work that the Company expects will be required prior
to the sale of the building.
8. MARKETABLE AND OTHER SECURITIES
<TABLE>
<CAPTION>
1996 1996 1995
US$'000 LIRE M. LIRE M.
----------- ------------ ------------
<S> <C> <C> <C>
Italian government backed floating rate note, 2004......................... $ 5,832 Lit. 8,923 Lit. 9,410
Italian treasury bills, 12.5%, 1998........................................ -- -- 4,901
Italian government backed floating rate note, 12/28/96..................... -- -- 2,207
Banco Nazionale di Lavoro, zero coupon, 1998............................... 3,333 5,100 --
Other...................................................................... 642 981 658
----------- ------------ ------------
$ 9,807 Lit. 15,004 Lit. 17,176
----------- ------------ ------------
----------- ------------ ------------
</TABLE>
All marketable and other securities are held-to-maturity. Lit. 14,511
million ($9,484,000) of such amounts are deposited as collateral for the
Company's share repurchase commitment--see Note 4.
9. OTHER ASSETS
<TABLE>
<CAPTION>
1996 1996 1995
US$'000 LIRE M. LIRE M.
----------- ------------ ------------
<S> <C> <C> <C>
Concession rights, net of amortization of Lit. 151......................... $ 2,973 Lit. 4,549 Lit. 4,641
Tax receivables............................................................ 5,938 9,085 14,546
Other...................................................................... 145 221 428
----------- ------------ ------------
$ 9,056 Lit. 13,855 Lit. 19,615
----------- ------------ ------------
----------- ------------ ------------
</TABLE>
F-19
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
9. OTHER ASSETS (CONTINUED)
A mortgage over the concession rights relating to parking spaces in Genoa,
Italy, has been granted as collateral for certain loans--see Note 12. The
concession rights expire in February, 2041 and are being amortized on a
straight-line basis. Tax receivables represent amounts for which reimbursement
has been requested. The times for reimbursement in Italy have, in the recent
past, invariably been in excess of 12 months and, accordingly, amounts for which
reimbursement has been requested are not classified as current assets. Interest
accrues on these receivables at rates set from time to time by the Italian
Government.
10. ADVANCES FROM BANKS AND CREDIT ARRANGEMENTS
The operating subsidiaries of the Company have lines of credit arrangements
with a number of Italian banks. Under these, the Company, at December 31, 1996,
could have borrowed up to approximately Lit. 44,000 million ($28,750,000). The
line of credit arrangements do not have termination dates and are periodically
reviewed. The average interest rate on advances from banks was approximately
11.75% and 12.75% at December 31, 1996 and 1995, respectively. Advances from
banks for finance activities relate to residual factoring and leasing activities
of a company acquired in the Finprogetti acquisition and are partly secured by
guarantees given by Finprogetti S.p.A. The average interest rate on these
borrowings was approximately 13% and 12.75% as at December 31, 1996 and 1995,
respectively.
11. ACCRUED EXPENSES AND OTHER PAYABLES
<TABLE>
<CAPTION>
1996 1996 1995
US$'000 LIRE M. LIRE M.
----------- ------------ -----------
<S> <C> <C> <C>
Salaries, wages and related items............................................ $ 2,695 Lit. 4,123 Lit. 3,471
Value added and other non income taxes....................................... 1,597 2,444 1,590
Other accrued expenses....................................................... 3,169 4,847 4,031
----------- ------------ -----------
$ 7,461 Lit. 11,414 Lit. 9,092
----------- ------------ -----------
----------- ------------ -----------
</TABLE>
F-20
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
12. LONG-TERM DEBT
LONG TERM DEBT FROM REAL ESTATE ACTIVITIES:
<TABLE>
<CAPTION>
1996 1996 1995
US$'000 LIRE M. LIRE M.
--------- ------------ ------------
<S> <C> <C> <C>
Mortgage note payable, secured by land and buildings, interest rate 11.95%,
payable in semi-annual installments, final installment due in 1998....... $ 3,530 Lit. 5,400 Lit. 9,000
Mortgage note payable, secured by land, buildings, concession rights and
lien on rents, interest rate 11.95%, payable in semi-annual installments,
final installment due in 1998............................................ 2,818 4,312 5,546
Advances in respect of mortgage loan granted but not yet drawn down........ -- -- 4,716
--------- ------------ ------------
6,348 9,712 19,262
Less current portion....................................................... (3,267) (4,998) (9,550)
--------- ------------ ------------
$ 3,081 Lit. 4,714 Lit. 9,712
--------- ------------ ------------
--------- ------------ ------------
</TABLE>
All of the above long-term debt was acquired in 1995 as part of the
Finprogetti transaction--see Note 5. The loan advance of Lit. 4,716 million as
at December 31, 1995 was eliminated in the second quarter of 1996 on disposal of
the related property--see Note 5.
All of the debt at December 31, 1996, after principal repayments of Lit. 333
million in 1997, will be eliminated as a consequence of the 1997 sale of the
property and assumption of such debt by the purchaser--see Note 22.
F-21
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
12. LONG-TERM DEBT (CONTINUED)
OTHER LONG TERM DEBT:
<TABLE>
<CAPTION>
1996 1996 1995
US$'000 LIRE M. LIRE M.
--------- ------------ ------------
<S> <C> <C> <C>
Mortgage note payable, secured by substantially all fixed assets of
motorcycle operation, interest 10.08%, payable in semi-annual
installments through 2001................................................ $ 1,658 Lit. 2,536 Lit. 2,913
Notes payable, secured by second mortgage over properties of motorcycle
operations:
Interest 12.40%, payable in semi-annual installments through 2001........ 2,744 4,198 5,248
Interest 12.36%, payable in semi-annual installments through 1999........ 1,069 1,636 2,066
Industry Ministry L. 46/82, 1.9875%, through 2002 and 7.95% thereafter,
payable in installments commencing from 2002............................. 574 878 --
Unsecured loan note denominated in US$, interest 8%, payable on October 23,
1998..................................................................... 1,863 2,851 --
Mortgage note secured by property of Moto America Inc., interest 8.25%,
payable monthly through 2011............................................. 239 365 --
Finance leases............................................................. 988 1,512 --
Sundry notes payable....................................................... 31 48 25
--------- ------------ ------------
9,166 14,024 10,252
Less current portion....................................................... (1,484) (2,270) (1,866)
--------- ------------ ------------
$ 7,682 Lit. 11,754 Lit. 8,386
--------- ------------ ------------
--------- ------------ ------------
</TABLE>
MATURITIES OF LONG-TERM DEBT AS OF DECEMBER 31, 1996:
<TABLE>
<CAPTION>
REAL ESTATE LOANS (1) OTHER LOANS
------------------------ -------------------------
<S> <C> <C> <C> <C>
US$'000 LIRE M. US$'000 LIRE M.
----------- ----------- ----------- ------------
1997............................................... $ 3,267 Lit. 4,998 $1,484 Lit. 2,270
1998............................................... 2,213 3,386 3,425 5,241
1999............................................... 868 1,328 1,643 2,514
2000............................................... -- -- 1,278 1,955
2001............................................... -- -- 575 881
Subsequent to 2001................................. -- -- 761 1,163
----------- ----------- ----------- ------------
$ 6,348 Lit. 9,712 $9,166 Lit. 14,024
----------- ----------- ----------- ------------
----------- ----------- ----------- ------------
</TABLE>
- ------------------------
(1) This debt will be eliminated on sale of the property--see Note 22.
F-22
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
13. OTHER INCOME
<TABLE>
<CAPTION>
1996 1996 1995 1994
US$'000 LIRE M. LIRE M. LIRE M.
----------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Currency exchange loss.......................................... $ (554) Lit. (848) Lit. (443) Lit. (1,022)
Gain on sale of assets.......................................... 792 1,211 321 2,841
Finance income.................................................. 751 1,149 978 --
Finance expense................................................. (678) (1,037) (890) --
Government grants............................................... 294 450 -- --
Other........................................................... 344 527 547 (829)
----- ------------ ---------- ------------
$ 949 Lit. 1,452 Lit. 513 Lit. 990
----- ------------ ---------- ------------
----- ------------ ---------- ------------
</TABLE>
Finance income and expense represent the residual finance activities of
Finproservice, acquired as part of the Finprogetti acquisition in July 1995, and
whose operations are being wound down. Gains on sales of assets in 1996
principally relate to the sale of surplus properties in the United States and
Italy and sales of tooling by Moto Guzzi. The gain on sale of assets in 1994
derived principally from the sale of an electric power generating plant by the
motorcycle subsidiary, Moto Guzzi.
14. INCOME TAXES
Loss before income taxes and minority interests consisted of the following:
<TABLE>
<CAPTION>
1996 1996 1995 1994
US$'000 LIRE M. LIRE M. LIRE M.
---------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
United States.......................... $ (4,307) Lit. (6,589) Lit. (5,942) Lit. (413)
Italy.................................. (4,862) (7,438) (168) (2,015)
---------- ------------- ------------ ------------
$ (9,169) Lit. (14,027) Lit. (6,110) Lit. (2,428)
---------- ------------- ------------ ------------
---------- ------------- ------------ ------------
</TABLE>
The provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
1996 1996 1995 1994
US$'000 LIRE M. LIRE M. LIRE M.
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Current:
United States......................... $ 14 Lit. 22 Lit. -- Lit. --
Italy................................. 375 573 420 39
----- ------------ ------------ ------------
389 595 420 39
----- ------------ ------------ ------------
----- ------------ ------------ ------------
Deferred:............................... -- -- -- --
----- ------------ ------------ ------------
----- ------------ ------------ ------------
Total................................... $ 389 Lit. 595 Lit. 420 Lit. 39
----- ------------ ------------ ------------
----- ------------ ------------ ------------
</TABLE>
F-23
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
14. INCOME TAXES (CONTINUED)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Valuation allowances have
been recorded for the deferred tax assets as management believes it more likely
than not that these assets will not be realized. Significant components of the
Company's deferred tax assets are as follows:
<TABLE>
<CAPTION>
1996 1996 1995
US$'000 LIRE M. LIRE M.
---------- ------------- -------------
<S> <C> <C> <C>
Short-term reserves................................. $ 447 Lit. 683 Lit. 4,234
Carrying value of fixed assets...................... 2,000 3,060 3,212
Net operating loss carryforwards.................... 9,320 14,259 12,710
Other............................................... 536 821 191
---------- ------------- -------------
12,303 18,823 20,347
Valuation allowance................................. (12,303) (18,823) (20,347)
---------- ------------- -------------
Net deferred tax assets............................. $ -- Lit. -- Lit. --
---------- ------------- -------------
---------- ------------- -------------
</TABLE>
The effective provision for income taxes varied from the income tax credit
calculated at the statutory U.S. federal income tax rate as follows:
<TABLE>
<CAPTION>
1996 1996 1995 1994
US$'000 LIRE M. LIRE M. LIRE M.
--------- ------------ ------------ ----------
<S> <C> <C> <C> <C>
Computed tax credit at U.S. federal rate... $ (3,209) Lit. (4,910) Lit. (2,138) Lit. (850)
Losses and reversals of short-term reserves
for which valuation allowance provided... 4,003 6,125 3,181 889
Utilization of tax losses.................. (942) (1,441) (780) --
Elimination of intercompany profits........ 213 326 496 --
Non-deductible expenses and other.......... 324 495 (339) --
--------- ------------ ------------ ----------
$ 389 Lit. 595 Lit. 420 Lit. 39
--------- ------------ ------------ ----------
--------- ------------ ------------ ----------
</TABLE>
For U.S. federal income tax purposes, the Company has net operating loss
carryforwards of approximately $11,000,000 at December 31, 1996. These losses
expire from 2003 through 2011. United States income taxes have not been provided
on unremitted earnings of subsidiaries located outside the United States as such
earnings are considered to be permanently reinvested. Approximately Lit. 4,800
million of retained earnings of Italian subsidiaries cannot be distributed under
local laws.
F-24
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
14. INCOME TAXES (CONTINUED)
At December 31, 1996 the Company had net operating loss carryforwards for
Italian federal income tax purposes which expire as follows:
<TABLE>
<CAPTION>
1996 1996
US$'000 LIRE M.
--------- ------------
<S> <C> <C>
1997................................................................. $ 1,990 Lit. 3,045
1998................................................................. 8,750 13,388
1999................................................................. 2,110 3,228
2000................................................................. 307 469
2001................................................................. 918 1,404
--------- ------------
$ 14,075 Lit. 21,534
--------- ------------
--------- ------------
</TABLE>
15. STOCK OPTIONS
The Company's "1995 Non-Qualified Plan" provides for the grant of
non-qualified stock options for officers and key employees. Total options of
2,000,000 shares have been authorized by the Board. Grants were made in 1996 and
1995 of 22,500 and 960,000 shares respectively, all at an exercise price of
$12.26. The options granted can be exercised as follows:
<TABLE>
<S> <C>
Currently exercisable.............................................. 232,500
1997............................................................... 232,500
1998............................................................... 232,500
1999............................................................... 142,500
2000............................................................... 142,500
---------
982,500
---------
---------
</TABLE>
Under the "1995 Director's Plan," 5,000 options are granted annually to each
non-employee Director of the Company for each full year of service, reduced pro
rata for incomplete years of service. The exercise price is fixed at $12.26 for
1995 and, for years after 1995, at the reported closing price of the stock on
January 2 of the following year. 20,000 options were granted on each of January
2, 1996 and January 2, 1997 at $12.26 and $9.3125, respectively.
The Company has elected the disclosure-only provisions of FASB Statement No.
123, "Accounting for Stock Based Compensation" and applies APB Opinion No. 25
and related interpretations in accounting for their stock option plans. If the
Company had elected to recognize compensation cost based on the fair value of
awards at grant dates, the pro forma net loss and loss per share for 1996 would
be Lit. 18,230 million ($11,916,000) and Lit. 3,971 ($2.60) per share.
The fair value of the Company's options is the estimated present value at
the date of grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions: risk-free interest rate of approximately
5.5%; expected volatility of approximately 60%; expected life of 4 years; and
dividend yield of 0%.
F-25
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
15. STOCK OPTIONS (CONTINUED)
The following is a summary of transactions pertaining to the Plans:
<TABLE>
<CAPTION>
1996 1995
----------------------- ----------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE EXERCISE
SHARES PRICE SHARES PRICE
---------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Outstanding, January 1.......................... 960,000 $ 12.26 0 $ 0
Granted......................................... 43,000 12.26 960,000 12.26
Exercised....................................... 0 0 0 0
Forfeited....................................... 0 0 0 0
---------- ----------- --------- -----------
Outstanding, December 31........................ 1,003,000 $ 12.26 960,000 $ 12.26
---------- ----------- --------- -----------
Options exercisable, December 31................ 233,000 $ 12.26 0 $ 0
---------- ----------- --------- -----------
</TABLE>
The following is a summary of the status of stock options outstanding and
exercisable under the Plans as of December 31, 1996:
<TABLE>
<CAPTION>
STOCK OPTIONS
STOCK OPTIONS OUTSTANDING
------------------------------------ EXERCISABLE
WEIGHTED ----------------------
WEIGHTED AVERAGE WEIGHTED
AVERAGE REMAINING AVERAGE
EXERCISE EXERCISE CONTRACTUAL EXERCISE
PRICE SHARES PRICE LIFE SHARES PRICE
- ------------- ---------- ----------- ----------- --------- -----------
<C> <C> <C> <S> <C> <C>
$ 12.26 1,003,000 $ 12.26 3.77 years 233,000 $ 12.26
</TABLE>
16. RELATED PARTY TRANSACTIONS
Receivables from related parties and affiliates consists of the following:
<TABLE>
<CAPTION>
1996 1996 1995
US$'000 LIRE M. LIRE M.
----------- ----------- -----------
<S> <C> <C> <C>
A+G Motorad GmbH.......................................... $ -- Lit.-- Lit. 2,761
Finprogetti S.p.A. and affiliates......................... 41 63 847
Other..................................................... -- -- 16
----------- ----------- -----------
Included in current assets................................ 41 63 3,624
----------- ----------- -----------
----------- ----------- -----------
Domer S.r.l. due after more than 12 months................ $ 3,077 Lit. 4,708 Lit.--
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The balance with Finprogetti S.p.A. and affiliates at December 31, 1996
results from administrative services provided by the Company. A receivable of
Lit. 763 million ($499,000) included in the December 31, 1995 balance was
settled for 46,000 shares of the Company in 1996--see Note 5. The balances with
Domer S.r.l. relate to promissory notes resulting from the sale by the Company
of its 66.7% interest in Immobiliare Broseta S.r.l.--see Note 5. The amounts at
December 31, 1995 due from A+G Motorad GmbH, a 25% owned entity disposed of in
1996, resulted from the purchase of products and services from
F-26
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
16. RELATED PARTY TRANSACTIONS (CONTINUED)
the Company. Sales to A+G Motorad GmbH, consisting primarily of motorcycles and
parts were Lit. 7,660 million ($4,823,000) in 1995 and Lit. 4,736 million in
1994.
AMOUNTS DUE TO RELATED PARTIES AND AFFILIATES CONSISTS OF THE FOLLOWING:
<TABLE>
<CAPTION>
1996 1996 1995
US$'000 LIRE. M. LIRE M.
----------- --------- ---------
<S> <C> <C> <C>
Finprogetti S.p.A. and affiliates............................. $ -- Lit.-- Lit. 345
Domer S.r.l. and subsidiaries................................. -- -- 155
Other......................................................... -- -- 9
--- --------- ---------
$ -- Lit.-- Lit. 509
--- --------- ---------
--- --------- ---------
</TABLE>
Amounts due to Finprogetti S.p.A. and affiliates at December 31, 1995
represent balances arising from a group value added tax system which was in
effect prior to the acquisition by the Company, personnel of Finprogetti S.p.A.
who worked for the Company from July 17, 1995 but who became employees of the
Company as of December 31, 1995 and for office machinery and furniture sold to
the Company. Amounts due to Domer S.r.l.'s subsidiary, Interim S.p.A. represent
real estate consulting and management services rendered to the Company's real
estate subsidiaries.
TRANSACTIONS AND ARRANGEMENTS WITH FORMER CHAIRMAN
The 1995 repurchase of shares formerly owned by the ex-Chairman and
commitment of the Company to acquire the remaining shares formerly owned by him
are detailed in Note 4.
MORRISON COHEN SINGER & WEINSTEIN, LLP
The law firm of Morrison Cohen Singer & Weinstein, LLP, of which Howard E.
Chase, a Director of the Company and its Chief Executive Officer, was a member
until September 1, 1995, and to which he is now of counsel, was paid by the
Company and its subsidiaries in 1996 an aggregate of Lit. 793 million ($518,000)
in legal fees and disbursements for services rendered (1995--Lit. 1,327
million).
CARLO GARAVAGLIA
Mr. Garavaglia, a Director of the Company, is a member of a law firm which
was paid an aggregate of Lit. 228 million ($149,000) by the Company and its
subsidiaries in 1996 for legal, statutory audit and tax consulting services
rendered (1995--Lit. 268 million).
RENTAL AGREEMENTS
Mr. Francesco Pugno Vanoni, a Director of the Company, and his brother own
offices in Milan which are leased to certain subsidiaries of the Company
acquired from Finprogetti at a rental of Lit. 119 million ($78,000) per year.
Management believes this rate of rental conforms with prevailing market rates.
F-27
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
17. EXPORT SALES AND GEOGRAPHIC INFORMATION
EXPORT SALES
The Company's motorcycle business exports its products throughout the world.
Sales of motorcycles by geographic destination were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Italy.................................................................... 37% 35% 38%
Europe other than Italy.................................................. 43% 49% 51%
United States............................................................ 7% 6% 5%
Elsewhere................................................................ 13% 10% 6%
</TABLE>
Sales to Germany represented approximately 19% of motorcycle sales in 1996
(14% in 1995). No other country represented over 10% of motorcycle sales. The
Company's other businesses do not have significant export sales.
TRANSFERS OF PRODUCTS BETWEEN GEOGRAPHICAL AREAS
Sales of motorcycles and parts from the Italian production facilities of the
Company's motorcycle business to its U.S. exclusive importer, Moto America Inc.,
amounted to Lit. 5,800 million ($3,791,000) in 1996. Prior to 1996, Moto America
Inc. was an unaffiliated company. Sales prices are accounted for on a basis
comparable to those for non affiliated customers.
IDENTIFIABLE ASSETS
As of December 31, 1996, all material operating subsidiaries of the Company
were located in Italy. The Company has assets in the United States consisting of
offices which deal with regulatory matters and its importer of Moto Guzzi
motorcycles. Identifiable assets in the United States are not significant to the
Company.
F-28
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
18. INDUSTRY SEGMENT ANALYSIS
The following tables shows net sales, operating profit and identifiable
assets for the Company's industry segments:
NET SALES
<TABLE>
<CAPTION>
1996 1996 1995 1994
US$'000 LIRE M. LIRE M. LIRE M.
--------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Motorcycles and spare parts............ $ 60,122 Lit. 91,986 Lit. 72,854 Lit. 54,961
Less: intrasegment sales............... (9,390) (14,366) (8,183) (6,112)
--------- ------------- ------------ ------------
Net motorcycle segment sales........... 50,732 77,620 64,671 48,849
Steel tubing........................... 11,316 17,313 5,836 --
Other:
Management services.................. 1,538 2,352 1,526 --
Corporate services and other......... 761 1,165 932 2,305
Disposed hotel operations.............. -- -- -- 1,073
--------- ------------- ------------ ------------
64,347 98,450 72,965 52,227
Less: intersegment sales............... (1,075) (1,644) (712) (233)
--------- ------------- ------------ ------------
Total net sales........................ 63,272 96,806 72,253 51,994
--------- ------------- ------------ ------------
--------- ------------- ------------ ------------
Real estate segment--rentals........... $ 969 Lit. 1,483 Lit. 770 Lit. --
--------- ------------- ------------ ------------
--------- ------------- ------------ ------------
</TABLE>
Intrasegment sales represent sales of spare parts by the Company's
motorcycle production subsidiary to its spare parts distribution subsidiary and
sales to the US exclusive importer. Intersegment sales represent management and
corporate services. Intrasegment and intersegment sales are accounted for at
prices comparable to unaffiliated customers.
OPERATING PROFIT/(LOSS)
<TABLE>
<CAPTION>
1996 1996 1995 1994
US$'000 LIRE M. LIRE M. LIRE M.
--------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Motorcycles............................. $ 312 Lit. 478 Lit. (45) Lit. (632)
Steel tubing............................ (252) (385) 235 --
Real estate............................. 540 816 (92) --
--------- ------------- ------------ ------------
Operating profit (loss)................. 600 919 98 (632)
Corporate expenses, less other income... (5,444) (8,329) (6,652) (4,368)
Reserves for value of real estate
properties............................ (2,732) (4,180) -- --
Interest, net........................... (1,841) (2,816) (6) 1,662
Income taxes............................ (389) (595) (420) (39)
--------- ------------- ------------ ------------
Net loss................................ $ (9,806) Lit. (15,001) Lit. (6,980) Lit. (3,277)
--------- ------------- ------------ ------------
--------- ------------- ------------ ------------
</TABLE>
F-29
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
18. INDUSTRY SEGMENT ANALYSIS (CONTINUED)
Operating profit/(loss) is total revenues less operating expenses, excluding
interest, corporate expenses and other income/(expense).
CAPITAL EXPENDITURE AND DEPRECIATION EXPENSE
Capital expenditure and depreciation expense relate primarily to the
Company's motorcycle segment in 1996, 1995 and 1994.
IDENTIFIABLE ASSETS
<TABLE>
<CAPTION>
1996 1996 1995 1994
US$'000 LIRE M. LIRE M. LIRE M.
---------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Motorcycles........................ $ 48,190 Lit. 73,731 Lit. 58,656 Lit. 47,206
Steel tubing....................... 6,314 9,661 8,808 --
Real estate........................ 19,778 30,260 41,904 --
Corporate.......................... 28,015 42,860 73,462 71,475
---------- ------------- ------------- -------------
$ 102,297 Lit. 156,512 Lit. 182,830 Lit. 118,681
---------- ------------- ------------- -------------
---------- ------------- ------------- -------------
</TABLE>
Identifiable assets for operating industry segments are those identifiable
assets used by those industry segments. There are no shared assets. Corporate
assets are represented by cash, investments, tax and other receivables,
financing of the operating industry segments.
19. COMMITMENTS AND CONTINGENCIES
COMMITMENTS TO REPURCHASE SHARES
The Company is required to deposit investments in the amount of Lit. 15,000
million, which amount has been reduced by investment in zero coupon securities,
as collateral for a letter of credit securing the repurchase of 776,530 shares
formerly owned by Mr. De Tomaso--see Note 4. As of December 31, 1996,
investments for a total of Lit. 14,511 million are held as security for the
repurchase. The Company also has commitments, unsecured, to repurchase 73,100
shares from Finprogetti--see Note 4. The estimated fair value of such commitment
is Lit. 1,333 million at December 31, 1996.
LITIGATION
The Company and its subsidiaries are involved in litigation in the normal
course of business. Management does not believe, based on the advice of its
legal advisors, that the final settlement of such litigation will have an
adverse effect on the Company's consolidated financial statements as of December
31, 1996.
LOSS OF CONTROL OVER MATERIAL SUBSIDIARY AND CONTINGENT SHARE REPURCHASE
OBLIGATION
As more fully described in Note 5, the terms of sale of preferred stock in
the Company's Moto Guzzi Corp. subsidiary provide for certain adverse
consequences if the Company does not complete an initial public offering of Moto
Guzzi Corp. common stock by June 30, 1998 or January 16, 2002.
F-30
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
20. CONCENTRATION OF CREDIT RISKS
Concentrations of credit risk with respect to trade accounts receivable are
limited due to the large number of entities in the customer base. Sales to
governmental bodies in Italy are significant as a whole, but no single
government body represents more than 10% of net sales.
The Company maintains cash and cash equivalents, and short and long term
investments with various financial institutions of national standing in Italy
and the United States.
21. FINANCIAL INSTRUMENTS
The Company does not enter into foreign exchange contracts in the normal
course of its business. In 1995 and 1996 the Company entered into a domestic
currency swap through March 1996 for U.S. $10,000,000 in connection with the
redemption offer discussed in Note 4.
OFF BALANCE SHEET RISK
As described in Note 5, the Company has a commitment denominated in U.S.
Dollars to repurchase shares formerly owned by its ex-Chairman, Mr. De Tomaso.
At the exchange rate at December 31, 1996, this commitment amounts to Lit.
13,390 million. The Company has not hedged against this off balance sheet
exchange risk.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in estimating
its fair value disclosure for financial instruments.
Cash and cash equivalents: the carrying amount of cash and cash equivalents
reported by the Company approximates their fair value.
Short and long term debt: the carrying amount of the Company's borrowings
under its short-term credit arrangements approximates their fair value. The fair
values of the Company's long-term debt are estimated using cash flow analyses,
based on the Company's incremental borrowing rates for similar types of
borrowing arrangements.
Fixed interest securities which have maturities from one to three years:
fair value for marketable quoted securities is based on market price and for non
marketable securities, is estimated using discounted cash flow analysis based on
similar investments available as at the balance sheet date. There are no
significant differences between fair value and carrying value for any of the
Company's financial instruments as at December 31, 1996 and 1995.
22. SUBSEQUENT EVENTS
SALE OF REAL ESTATE
On March 18, 1997, the Company entered into an agreement to sell its
subsidiary which owns the Cologne, Italy property.
Under the terms of the agreement, the purchaser will assume the mortgage
loans over the property and pay the balance of the purchase price in
installments through December 31, 1997. The Company has
F-31
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
22. SUBSEQUENT EVENTS (CONTINUED)
granted the purchaser an option to settle the final installment in cash of Lit.
2,040 million or by way of 120,000 shares of the Company's common stock to be
valued at the higher of $10.00 and the market value of the shares at December
31, 1997. The sale is expected to close by the transfer of shares of the
Company's subsidiary in early April 1997. An advance of Lit. 500 million was
received on March 18, 1997 and a further installment of Lit. 1,928 million and a
bank guarantee over the second installment of Lit. 2,040 million, due July 1,
1997, will be delivered against transfer of the shares.
On closing, the purchaser, who is a shareholder of Domer S.r.l. a company
which is 25% owned by the Company, has pledged to deliver 120,000 of the
Company's shares to collateralize the final installment. When the transaction is
accounted for in 1997, the Company will reclassify these 120,000 shares from
'shareholders' equity' to 'shares subject to repurchase' to reflect this option.
In accordance with FASB Statement No. 121, the Company has made reserves of
Lit. 1,680 million ($1,098,000) against this property in 1996 which reserves
include amounts to reflect the current market price of its shares of
approximately $8.00 compared to the $10.00 minimum value of the option conceded.
As part of the agreement, the Company has also guaranteed 80% of the current
level of rentals for a period of one year in the case that the existing rental
contract is not renewed in July 1998. The Company has the right, in such
circumstances, to seek other tenants and mitigate this contingent liability.
TERMINATION OF AGREEMENT TO ACQUIRE CAREY WINSTON
In February 1997, the Company and Carey Winston agreed to terminate their
agreement pursuant to which the Company was to acquire Carey Winston. The
termination was mutually agreed to by the parties in accordance with the terms
of their agreement.
Carey Winston will pay the Company $1,200,000 (Lit. 1,836 million),
representing repayment of a loan of $1,000,000 (Lit. 1,530 million) previously
made and a payment in respect of expenses incurred and an additional sum payable
under certain circumstances.
TRANSFER OF CONTROLLING INTEREST
Finprogetti S.p.A., the largest shareholder of the Company, agreed in March
1997 to sell to Tamarix Investors, LDC, 1,000,000 shares of the Company's common
stock. Tamarix and Finprogetti have agreed that Finprogetti shall have a put
right and Tamarix shall have a call right with respect to an additional 635,000
shares of common stock owned by Finprogetti. The put option is exercisable for a
one year period, beginning on the first anniversary of the closing of the
1,000,000 share purchase and sale and the call option is exercisable during the
two year period beginning on such closing date. During such two year period,
Tamarix will have a proxy from Finprogetti to vote such 635,000 shares.
In addition, Finprogetti is required to deliver the resignations from the
Company's Board of Directors of certain persons. In connection with the
foregoing the Company has agreed to (a) engage Tamarix Capital Corporation to
provide financial advisory services to the Company at a cost of $200,000 per
year, (b) issue to Centaurus Management LDC, the manager of Tamarix a warrant to
purchase 1,250,000 shares of common stock with an exercise price equal to the
offering price per share of common stock in a public securities offering of the
Company as to which the Company filed a registration statement in February 1997,
exercisable for a three-year period, (c) register the shares of the Company
purchased by Tamarix
F-32
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
22. SUBSEQUENT EVENTS (CONTINUED)
from Finprogetti as well as the shares underlying such warrants, and (d) cause
the By-Laws or the Certificate of Incorporation of the Company to be amended to
provide for (i) a staggered Board of Directors which shall include at least one
person nominated by Tamarix in each of the three classes, (ii) provide for a
representative of Tamarix to be Chairman of the Board of the Company, (iii)
provide that Tamarix's consent will be required to further amend the Company's
Certificate of Incorporation, and (iv) require that the Board of Directors be
expanded and limited to not more than 11 members, such Board to include the
Tamarix nominees and an additional three independent directors who are
experienced in business matters and otherwise reasonably acceptable to Tamarix.
F-33
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR BY THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY ANY SECURITY
OTHER THAN THE SECURITIES OFFERED BY THIS PROSPECTUS, OR AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES BY ANY PERSON IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IS UNLAWFUL. THE
DELIVERY OF THIS PROSPECTUS SHALL NOT, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE OF THIS PROSPECTUS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Summary......................................... 3
Risk Factors.................................... 8
The Company..................................... 16
Use of Proceeds................................. 16
Market Price of Common Stock.................... 17
Dividend Policy................................. 17
Capitalization.................................. 18
Exchange Rates.................................. 19
Selected Consolidated Financial Data............ 20
Management's Discussion and Analysis
of Financial Condition and Plan
of Operations.................................. 21
Business........................................ 32
Management...................................... 47
Certain Transactions............................ 55
Principal Shareholders.......................... 56
Description of Securities....................... 57
Shares Eligible for Future Sale................. 59
Underwriting.................................... 61
Legal Matters................................... 62
Experts......................................... 62
Available Information........................... 63
Index to Consolidated Financial
Statements..................................... F-1
</TABLE>
[LOGO]
1,250,000 SHARES OF COMMON STOCK
AND
1,250,000 REDEEMABLE COMMON STOCK
PURCHASE WARRANTS
--------------
PROSPECTUS
--------------
GKN SECURITIES CORP.
SOUTHEAST RESEARCH
PARTNERS, INC.
, 1997
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED APRIL 24, 1997
PROSPECTUS
TRIDENT ROWAN GROUP, INC.
2,885,000 SHARES OF COMMON STOCK
This Prospectus relates to the possible sale in the aggregate of 2,885,000
shares of Common Stock of Trident Rowan Group, Inc. (the "Company"), $.01 par
value per share. ("Common Stock") by Tamarix Investors, LDC ("Tamarix"), a
Cayman Islands limited duration company and Centaurus Management LDC
("Centaurus"), a Cayman Islands limited duration company which is the manager of
Tamarix. Such number of shares (collectively the "Tamarix Shares") consisting of
the following: (a) 1,000,000 shares of Common Stock which Tamarix has agreed to
acquire from Finprogetti S.p.A. ("Finprogetti"), an Italian corporation and a
shareholder of the Company prior to the closing of the Underwritten Offering (as
defined below). The terms of the agreement to purchase the shares are set forth
in an Agreement to Purchase Common Stock between them dated March 7, 1997
("Stock Purchase Agreement"); (b) 635,000 shares of Common Stock owned by
Finprogetti as to which Finprogetti has a right to put such shares to Tamarix at
any time between April , 1998 and April , 1999, and Tamarix has a
right to call such shares from Finprogetti at any time prior to April ,
1999; and (c) 1,250,000 shares of Common Stock purchasable by Centaurus upon
exercise of a common stock purchase warrant (the "Centaurus Warrant") issued to
Centaurus by the Company pursuant to an Inducement Agreement between the Company
and Tamarix dated April 8, 1997. Each Centaurus Warrant is exercisable for a
period of three years from issuance at an exercise price equal to the public
offering price of the Common Stock issued in the Underwritten Offering.
This Prospectus does not relate to the resale of the Centaurus Warrant
itself.
The Company will not receive any of the proceeds from the sale of the
Tamarix Shares. The Tamarix Shares may be offered from time to time by Tamarix,
Centaurus and their respective transferees, pledgees and/or donees, through
ordinary brokerage transactions, through sales to one or more dealers for resale
as principals, in privately negotiated transactions or otherwise, at market
prices prevailing at the time of sale or at negotiated prices. Usual and
customary or specifically negotiated brokerage fees or commissions may be paid
by Tamarix, Centaurus and their respective pledgees or donees, in connection
with the sale of the Tamarix Shares. Tamarix and Centaurus have agreed not to
sell any of the Tamarix Shares being registered hereunder for a period of 18
months from the date hereof without the prior written consent of GKN Securities
Corp., the representative of the underwriters in an underwritten offering of
securities of the Company also being registered hereunder.
Tamarix and Centaurus, and their respective pledgees and/or donees, may be
deemed to be "underwriters" as defined in the Securities Act of 1933, as amended
(the "Securities Act"). If any broker-dealers are used by Tamarix, Centaurus or
their respective pledgees or donees, any commission paid to broker-dealers and,
if broker-dealers purchase any such shares as principals, any profits received
by such broker-dealers on the resale of such shares, may be deemed underwriting
discounts or commissions under the Securities Act. In addition, any profits
realized by Tamarix, Centaurus, or their pledgees and/or donees, may be deemed
to be underwriting commission.
None of the Company, Tamarix or Centaurus has employed an underwriter for
the sale of the Tamarix Shares. All costs, expenses and fees in connection with
the registration of the Tamarix Shares will be borne by the Company except for
any commission paid to broker-dealers.
On the date of this Prospectus, a registration statement under the
Securities Act with respect to an underwritten public offering of 1,437,500
shares of Common Stock and 1,437,500 redeemable Common Stock purchase warrants
(including the underwriters' overallotment option granted to the Underwriters)
was declared effective by the Securities and Exchange Commission (such offering
being referred to as the "Underwritten Offering"). All references to the
"Offering" in this Prospectus and to facts and circumstances as they are
expected to exist on completion of the "Offering" means the Underwritten
Offering.
The Company's Common Stock is traded on the Nasdaq SmallCap Market under the
symbol "TRGI." The last sale price of the Common Stock on April 16, 1997 was
$8.13. The Company has made application for the Common Stock to trade on the
Nasdaq National Market System under the symbol TRGI.
THE TAMARIX SHARES WHICH MAY BE SOLD HEREUNDER INVOLVE A HIGH DEGREE OF
RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 8.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OF ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Securities Registered(1).......... 2,885,000 shares of Common Stock. See "Description of
Securities" and "Plan of Distribution."
Selling Security Holders
1,635,000 shares.............. Tamarix Investors, LDC
1,250,000 shares.............. Centaurus Management LDC
</TABLE>
- ------------------------
(1) Includes (a) 1,000,000 shares of Common Stock which Tamarix has agreed to
acquire from Finprogetti; (b) 635,000 shares of Common Stock owned by
Finprogetti as to which Finprogetti has a right to put such shares to
Tamarix and Tamarix has a right to call such shares from Finprogetti; and
(c) 1,250,000 shares of Common Stock purchasable by Centaurus upon exercise
of the Centaurus Warrant issued by the Company.
3
<PAGE>
SELLING SECURITY HOLDERS; PLAN OF DISTRIBUTION
Tamarix and/or Centaurus may, from time to time, sell or offer to sell up to
2,885,000 Tamarix Shares, including 1,250,000 shares purchasable by Centaurus
upon exercise of warrants granted by the Company in connection with the
execution of that certain Inducement Agreement between the Company and Tamarix.
On the date of this Prospectus, Tamarix owns 1,000,000 shares of Common Stock of
record. Tamarix has the right to acquire an additional 635,000 shares from
Finprogetti at any time prior to April , 1999, and has the obligation to
acquire such shares from Finprogetti at Finprogetti's request at any time during
the one year period ending April , 1999.
As of the date of this Prospectus three nominees of Tamarix currently serve
on the Board of Directors of the Company. Additionally, pursuant to the
Inducement Agreement, Tamarix has the right to grant its reasonable approval to
the nomination of up to three other members of the Board of Directors. See
"Management."
Prior to the consummation of the Tamarix/Finprogetti Acquisition Agreement,
neither Tamarix nor Centaurus beneficially owned any shares of Common Stock.
They currently beneficially own an aggregate of 45% of the outstanding shares of
Common Stock of the Company, after giving effect to the consummation of the
Offering.
Tamarix and Centaurus have advised the Company that sales of the Tamarix
Shares may be effected from time to time in transactions (which may include
block transactions) on the Nasdaq SmallCap Market or, if the Company's
application for National Market System listing is approved, on the National
Market System, through sales to one or more dealers for resale as principals, in
privately negotiated transactions or otherwise, at market prices prevailing at
the time of sale or at negotiated prices. Usual and customary or specifically
negotiated brokerage fees or commission may be paid by Tamarix, Centaurus and
their respective pledgees or donees, in connection with the sale of the Tamarix
Shares. Tamarix and Centaurus have each agreed not to sell any of the Tamarix
Shares being registered hereunder for a period of 18 months from the date hereof
without the prior written consent of GKN Securities Corp., the representative of
the underwriters in the Underwritten Offering. The Company will not receive any
of the proceeds from the sale of the Tamarix Shares. Sales of the Tamarix
Shares, or even the potential of such sales, would likely have an adverse effect
on the market price of the Company's Common Stock.
Tamarix and Centaurus, and their respective pledgees and/or donees, may be
deemed to be "underwriters" as defined in the Securities Act of 1933, as amended
(the "Securities Act"). If any broker-dealers are used by Tamarix, Centaurus or
their respective pledgees or donees, any commission paid to broker-dealers and,
if broker-dealers purchase any such shares as principals, any profits received
by such broker-dealers on the resale of such shares, may be deemed underwriting
discounts or commissions under the Securities Act. In addition, any profits
realized by Tamarix, Centaurus, or their pledgees and/or donees, may be deemed
to be underwriting commission.
None of the Company, Tamarix or Centaurus has employed an underwriter for
the sale of the Tamarix Shares. All costs, expenses and fees in connection with
the registration of the Tamarix Shares will be borne by the Company except for
any commission paid to broker-dealers. Tamarix and Centaurus may agree to
indemnify any agent, dealer or broker-dealer that participates in transactions
involving sales of the Tamarix Shares against certain liability, including
liabilities arising under the Securities Act.
At the time a particular offer of any Tamarix Shares is made by or on behalf
of Tamarix or Centaurus, to the extent required, a prospectus supplement will be
distributed which will set forth the number of such Tamarix Shares being offered
and the terms of the offering, including the name or names of any underwriters,
dealers or agents, the purchase price paid by any underwriter for shares
purchased from Tamarix or Centaurus, and any discounts, commission or
concessions allowed or paid to dealers, and the proposed selling price to the
public.
4
<PAGE>
Under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and the regulations promulgated thereunder, any person engaged in a distribution
of Company securities offered by this Prospectus may not simultaneously engage
in market-making activities with respect to Company securities during the
applicable restricted period under Regulation M prior to the commencement of
such distribution, and will be subject to the other restrictions contained
therein, which provisions may limit the timing of purchases and sales of the
Tamarix Shares.
5
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR BY THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY ANY SECURITY
OTHER THAN THE SECURITIES OFFERED BY THIS PROSPECTUS, OR AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES BY ANY PERSON IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IS UNLAWFUL. THE
DELIVERY OF THIS PROSPECTUS SHALL NOT, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE OF THIS PROSPECTUS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Summary......................................... 3
Risk Factors.................................... 8
The Company..................................... 16
Use of Proceeds................................. 16
Market Price of Common Stock.................... 17
Dividend Policy................................. 17
Capitalization.................................. 18
Exchange Rates.................................. 19
Selected Consolidated Financial Data............ 20
Management's Discussion and Analysis
of Financial Condition and Plan
of Operations.................................. 21
Business........................................ 32
Management...................................... 47
Certain Transactions............................ 55
Principal Shareholders.......................... 56
Description of Securities....................... 57
Shares Eligible for Future Sale................. 59
Selling Securityholders, Plan of Distribution... 61
Legal Matters................................... 63
Experts......................................... 63
Available Information........................... 63
Index to Consolidated Financial
Statements..................................... F-1
</TABLE>
[LOGO]
2,885,000 SHARES OF COMMON STOCK
--------------
PROSPECTUS
--------------
, 1997
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses expected to be incurred
by the Registrant in connection with the sale and distribution of the securities
being registered hereby, other than underwriting discounts and commissions. All
amounts are estimated except the Securities and Exchange Commission registration
fee and the National Association of Securities Dealers, Inc. filing fee.
<TABLE>
<CAPTION>
PAYABLE BY
REGISTRANT
-------------
<S> <C>
SEC registration fee........................................................... $ 15,323.18
National Association of Securities Dealers, Inc. filing fee.................... 5,556.94
Blue Sky fees and expenses..................................................... 50,000.00
Nasdaq listing fee............................................................. 5,000.00
Accounting fees and expenses................................................... 100,000.00
Legal fees and expenses........................................................ 150,000.00
Printing and engraving expenses................................................ 100,000.00
Registrar and Transfer Agent's fees............................................
Miscellaneous fees and expenses................................................ 24,370
-------------
Total...................................................................... $ 450,250.12
-------------
-------------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Maryland General Corporation Law provides for the indemnification of
officers, directors, and other corporate agents in terms sufficiently broad to
indemnify such persons under certain circumstances for liabilities (including
reimbursement of expenses incurred) arising under the Securities Act of 1933, as
amended ("Act"). The Registrant has also entered into agreements with each of
its directors that provide for the indemnification of and the advancement of
expenses to such persons to the greatest extent permitted by Maryland law.
At present, there is no pending litigation or proceeding involving a
director, officer, employee or other agent of the Registrant where
indemnification will be required or permitted. The Registrant is not aware of
any threatened litigation or proceeding that may result in a claim for
indemnification by any director, officer, employee or other agent.
The Underwriting Agreement (Exhibit 1.1) provides for indemnification by the
Underwriters of the Registrant and its directors and officers for certain
liabilities, including liabilities arising under the Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Within the past three years, the Registrant has sold and issued the
following securities that were not registered under the Act:
(1) In July 1995 the Company issued (a) 1,922,652 shares of Common Stock
(after adjustment) to Finprogetti S.p.A. in consideration of the purchase of
assets from Finprogetti S.p.A., (b) 408,008 shares of Common Stock in
consideration of cash subscriptions by various purchasers (most of whom were
shareholders of Finprogetti S.p.A. and (c) 30,000 shares of Common Stock in
exchange for minority interests in the Registrant's majority-owned
subsidiary, Moto Guzzi S.p.A.
(2) As of January 1, 1996 the Registrant issued 30,000 shares of Common
Stock to four persons in consideration of the acquisition of 100% of the
stock of Moto America, Inc., the U.S. importer of motorcycles manufactured
by the Registrant's subsidiary, Moto Guzzi.
II-1
<PAGE>
(3) The Registrant has granted options to 13 persons options to purchase
1,005,000 shares of Common Stock under its 1995 Non-Qualified Stock Option
Plan and options to 4 persons to purchase a total of 40,000 shares of Common
Stock under its 1995 Directors Plan. The Registrant has also agreed to grant
warrants for 1,250,000 shares, 118,607 shares and 54,699 shares to Centaurus
Management LDC, Finoger S.A. and Canopus International Tyles, respectively.
The sale and issuance of securities in the transactions described above in
paragraph (1) were deemed to be exempt from registration under the Act by virtue
of Section 4(2) thereof and Regulation S thereunder as transactions not
involving any public offering and involving offers and sales made outside the
United States. The sale and issuance of securities in the transaction described
above in paragraph (2) were deemed to be exempt from registration under the Act
by virtue of Section 4(2) thereof and Regulation D thereunder as transactions
not involving any public offering. The purchasers of all of the above-described
shares represented their intention to acquire the shares for investment only and
not with a view to the distribution thereof and appropriate legends were affixed
to the certificates representing securities issued in such transactions. Similar
representations of investment intent were obtained and similar legends imposed
in connection with any subsequent sales of any such securities. All purchasers
had adequate access, through employment or other relationships, to information
about the Registrant.
No registration was required with respect to the grant of the options
described above in paragraph (3) by virtue of Section 4(2) of the Act as a
transaction not involving a public offering, in light of the small number of
persons to whom such options were granted as well as their familiarity with the
business and affairs of the Registrant.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT
NO.
- ---------
<C> <S>
1.1 Proposed form of Underwriting Agreement.
2.1 Agreement and Plan of Merger dated August 14, 1996 (filed on August 21, 1996 as Exhibit 99.1 to Current
Report on Form 8-K).
2.2 Termination of Agreement and Plan of Merger dated February 12, 1997 (filed as Exhibit 2.2 to 1996 Annual
Report on Form 10-K).
3.1 Restated Articles of Incorporation of the Company, as amended (filed as Exhibit 3.1 to 1996 Annual Report
on Form 10-K).
3.2 Bylaws of the Company (filed as Exhibit 3.2 to 1996 Annual Report on Form 10-K).
4.1 Form of Common Stock Certificate (to be filed by amendment).
4.2 Proposed form of Warrant Agreement (with form of Warrant Certificate attached thereto as Exhibit A to be
filed by amendment).
5.1 Opinion of Morrison Cohen Singer & Weinstein, LLP, as to the legality of the shares of Common Stock (to
be filed by amendment).
10.1 1995 Non-Qualified Stock Option Plan (filed as Exhibit A to the Company's Preliminary Proxy Statement
filed May 24, 1996).
10.2 1995 Directors Plan (filed as Exhibit B to the Company's Preliminary Proxy Statement filed May 24, 1996).
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO.
- ---------
<C> <S>
10.3 Voting Agreement dated July 17, 1995 among Finprogetti, S.p.A. and Messrs Howard E. Chase, Mario
Tozzi-Condivi and Albino Collini (filed as Exhibit 10.1 to Current Report on Form 8-K for Event Dated
July 17, 1995).
10.4 Agreement dated July 20, 1995 between De Tomaso Industries, Inc. and Pirunico Trustees (Jersey) Limited
(filed as Exhibit 10.2 to Current Report on Form 8-K for Event Dated July 17, 1995).
10.5 Amended and Restated Stock Purchase Agreement dated July 17, 1995 between DeTomaso Industries, Inc. and
Finprogetti S.p.A. (filed as Exhibit 2.1 to Current Report on Form 8-K for Event Dated July 17, 1995).
10.6 Agreement dated May 17, 1993 between O.A.M. S.p.A., Fiat Auto S.p.A., and others (filed as Exhibit 10.1
to the Current Report Dated May 17, 1993 filed on Form 8-K).
10.7 Agreement dated April 27, 1993 between Registrant and Finprogetti, S.p.A., together with Exhibits A-D
thereto (filed as Exhibit 10(b) to 1994 Annual Report on Form 10-K/A, Amendment No. 2).
10.8 Agreement dated April 10, 1995 between Registrant and Alejandro DeTomaso (filed as Exhibit 10(c) to 1994
Annual Report on Form 10-K/A, Amendment No. 2).
10.9 Agreement dated as of November 1, 1995 between the Registrant and Howard E. Chase (filed as Exhibit 10(g)
to 1995 Annual Report on Form 10-K).
10.10 Agreement dated as of November 1, 1995 between the Registrant and Albino Collini (filed as Exhibit 10(h)
to 1995 Annual Report on Form 10-K).
10.11 Agreement dated as of November 1, 1995 between the Registrant and Francesco Pugno Vanoni (filed as
Exhibit 10(i) to 1995 Annual Report on Form 10-K).
10.12 Agreement dated as of November 1, 1995 between the Registrant and Como Consultants, Limited (filed as
Exhibit 10(j) to 1995 Annual Report on Form 10-K).
10.13 Agreement dated as of November 1, 1995 between the Registrant and Domenico Costa (filed as Exhibit 10(k)
to 1995 Annual Report on Form 10-K).
10.14 Agreement dated as of November 1, 1995 between the Registrant and Carlo Previtali (filed as Exhibit 10(l)
to 1995 Annual Report on Form 10-K).
10.15 Agreement dated as of November 1, 1995 between the Registrant and Giovanni Avallone (filed as Exhibit
10(m) to 1995 Annual Report on Form 10-K).
10.16 Option Agreement between the Registrant and Howard E. Chase (filed as Exhibit 10(n) to 1995 Annual Report
on Form 10-K).
10.17 Option Agreement between the Registrant and Albino Collini (filed as Exhibit 10(o) to 1995 Annual Report
on Form 10-K).
10.18 Option Agreement between the Registrant and Como Consultants, Limited (filed as Exhibit 10(p) to 1995
Annual Report on Form 10-K).
10.19 Option Agreement between the Registrant and Domenico Costa (filed as Exhibit 10(q) to 1995 Annual Report
on Form 10-K).
10.20 Option Agreement between the Registrant and Carlo Previtali (filed as Exhibit 10(r) to 1995 Annual Report
on Form 10-K).
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO.
- ---------
<C> <S>
10.21 Option Agreement between the Registrant and Giovanni Avallone (filed as Exhibit 10(s) to 1995 Annual
Report on Form 10-K).
10.22 Option Agreement between the Registrant and Santiago De Tomaso (filed as Exhibit 10(t) to 1995 Annual
Report on Form 10-K).
10.23 Description of 8% 2 year promissory notes issued in connection with the Company's Stock Repurchase Plan
included in the Company's Schedule 13E-4 dated September 20, 1996.
10.24 Retainer Agreement dated March 7, 1997 between the Registrant and Tamarix Capital Corporation.
10.25 Inducement Agreement dated April 8, 1997 between the Registrant and Tamarix Investors LDC.
21. Subsidiaries: The Registrant's significant subsidiaries, the jurisdiction of their incorporation and
nature of their respective activities is contained in the current Registration Statement.
23.1 Consent of Morrison Cohen Singer & Weinstein, LLP (included in the Opinion of Morrison Cohen Singer &
Weinstein, LLP to be filed by amendment as Exhibit 5.1).
23.2 Consent of Reconta Ernst & Young S.p.A.
23.3 Consent of Arthur Andersen LLP.
</TABLE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Financial Statement Schedules filed as part of this Registration Statement:
Report of Independent Auditors and Public Accountants on Schedule.......................................... S-1
Schedule II--Valuation and Qualifying Accounts............................................................. S-3
</TABLE>
ITEM 17. UNDERTAKINGS
The Registrant hereby undertakes to provide to the underwriters at the
closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
II-4
<PAGE>
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(3) During any period in which offers or sales are being made, it will
file a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, indvidually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) Section230.424(b) of this chapter) if,
in the aggregate, the changes in volume and price represent no more than
20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
(4) For the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(5) It will remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to its Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of New
York, State of New York, on April 22, 1997.
TRIDENT ROWAN GROUP, INC.
BY /S/ HOWARD E. CHASE
-----------------------------------------
Howard E. Chase
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
NAME TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ CARLO PREVITALI Secretary and Treasurer April 22, 1997
- ------------------------------
Carlo Previtali
/s/ FRANCESCO PUGNO VANONI Director and Chairman of April 22, 1997
- ------------------------------ the Board
Francesco Pugno Vanoni
/s/ MARIO TOZZI-CONDIVI Director and Vice Chairman April 22, 1997
- ------------------------------ of the Board
Mario Tozzi-Condivi
/s/ HOWARD E. CHASE Director, President and April 22, 1997
- ------------------------------ Chief Executive Officer
Howard E. Chase
/s/ ALBINO COLLINI Director, Executive Vice April 22, 1997
- ------------------------------ President and Chief
Albino Collini Operating Officer
/s/ CARLO GARAVAGLIA Director April 22, 1997
- ------------------------------
Carlo Garavaglia
/s/ GIOVANNI AVALLONE Director April 22, 1997
- ------------------------------
Giovanni Avallone
/s/ MARIA LUISA RUZZON Director April 22, 1997
- ------------------------------
Maria Luisa Ruzzon
/s/ SANTIAGO DE TOMASO Director April 22, 1997
- ------------------------------
Santiago De Tomaso
/s/ ROBERTO CORRADI Director April 22, 1997
- ------------------------------
Roberto Corradi
II-6
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Trident Rowan Group, Inc.:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements of Trident Rowan Group, Inc. and
subsidiaries included in this registration statement and have issued our report
thereon dated March 26, 1997. Our audit was made for the purpose of forming an
opinion on the basic financial statements taken as a whole. The schedule listed
in item 16 is the responsibility of the Company's management and is presented
for purposes of complying with the Securities and Exchange Commission's rules
and is not part of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, fairly state in all material respects the
financial data required to be set forth therein in relating to the basic
financial statements taken as a whole.
ARTHUR ANDERSEN LLP
March 26, 1997
Roseland, New Jersey
S-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
De Tomaso Industries, Inc.
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements of De Tomaso Industries, Inc. and
subsidiaries included in this registration statement and have issued our report
thereon dated April 3, 1996. Our audit was made for the purpose of forming an
opinion on the basic financial statements taken as a whole. The schedule listed
in item 16 is the responsibility of the Company's management and is presented
for purposes of complying with the Securities and Exchange Commission's rules
and is not part of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, fairly states in all material respects the
financial data required to be set forth therein in relating to the basic
financial statements taken as a whole.
/s/ RECONTA ERNST & YOUNG
April 3, 1996
Milan, Italy
S-2
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
COL A COL. B COL. C COL. D COL. E
(1) (2)
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER ACCOUNTS DEDUCTIONS END
DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE OF PERIOD
<S> <C> <C> <C> <C> <C>
IN MILLIONS OF ITALIAN LIRE
YEAR ENDED DECEMBER 31, 1996
Deducted from asset accounts:
Allowance for doubtful accounts........................... 3,468 708 -- (476)(a) 3,700
Inventory obsolescence reserve............................ 6,612 702 -- (2,013)(b) 5,301
Impairment losses for real estate......................... -- 3,680 -- 3,680
---------- ----- ----- ---------- ----------
10,080 5,090 -- (2,489) 12,681
---------- ----- ----- ---------- ----------
---------- ----- ----- ---------- ----------
YEAR ENDED DECEMBER 31, 1995
Deducted from asset accounts:
Allowance for doubtful accounts........................... 571 433 2,464(c) 3,468
Inventory obsolescence reserve............................ 5,451 1,772 -- (611)(b) 6,612
---------- ----- ----- ---------- ----------
6,022 2,205 2,464 (611) 10,080
---------- ----- ----- ---------- ----------
---------- ----- ----- ---------- ----------
YEAR ENDED DECEMBER 31, 1994
Deducted from asset accounts:
Allowance for doubtful accounts........................... 588 91 -- (108) 571
Inventory obsolescence reserve............................ 7,144 669 -- (2,362) 5,451
---------- ----- ----- ---------- ----------
7,732 760 -- (2,470) 6,022
---------- ----- ----- ---------- ----------
---------- ----- ----- ---------- ----------
IN THOUSANDS OF US DOLLARS(1)
YEAR ENDED DECEMBER 31, 1996
Deducted from asset accounts:
Allowance for doubtful accounts........................... 2,266 462 -- (312) 2,416
Inventory obsolescence reserve............................ 4,321 458 -- (1,316) 3,463
Impairment losses for real estate......................... -- 2,405 -- 2,405
---------- ----- ----- ---------- ----------
6,587 3,325 -- (1,628) 8,284
---------- ----- ----- ---------- ----------
---------- ----- ----- ---------- ----------
</TABLE>
- ------------------------
(a) Amounts written off
(b) Disposal of inventory
(c) Acquisitions of business
(1) Translated solely for the convenience of the reader at the approximate
exchange rate at December 31, 1996 of $1.00 : Lit. 1,530
S-3
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- ---------------------------------------------------------------------------------------------
<S> <C> <C>
1.1 Proposed form of Underwriting Agreement.
2.1 Agreement and Plan of Merger dated August 14, 1996 (filed on August 21, 1996 as Exhibit 99.1
to Current Report on Form 8-K).
2.2 Termination of Agreement and Plan of Merger dated February 12, 1997 (filed as Exhibit 2.2 to
1996 Annual Report on Form 10-K).
3.1 Restated Articles of Incorporation of the Company, as amended (filed as Exhibit 3.1 to 1996
Annual Report on Form 10-K).
3.2 Bylaws of the Company (filed as Exhibit 3.2 to 1996 Annual Report on Form 10-K).
4.1 Form of Common Stock Certificate (to be filed by amendment).
4.2 Proposed form of Warrant Agreement (with form of Warrant Certificate attached thereto as
Exhibit A) (to be filed by amendment).
5.1 Opinion of Morrison Cohen Singer & Weinstein, LLP, as to the legality of the shares of Common
Stock (to be filed by amendment).
10.1 1995 Non-Qualified Stock Option Plan (filed as Exhibit A to the Company's Preliminary Proxy
Statement filed May 24, 1996).
10.2 1995 Directors Plan (filed as Exhibit B to the Company's Preliminary Proxy Statement filed
May 24, 1996).
10.3 Voting Agreement dated July 17, 1995 among Finprogetti, S.p.A. and Messrs Howard E. Chase,
Mario Tozzi-Condivi and Albino Collini (filed as Exhibit 10.1 to Current Report on Form 8-K
for Event Dated July 17, 1995).
10.4 Agreement dated July 20, 1995 between De Tomaso Industries, Inc. and Pirunico Trustees
(Jersey) Limited (filed as Exhibit 10.2 to Current Report on Form 8-K for Event Dated July
17, 1995).
10.5 Amended and Restated Stock Purchase Agreement dated July 17, 1995 between DeTomaso
Industries, Inc. and Finprogetti S.p.A. (filed as Exhibit 2.1 to Current Report on Form 8-K
for Event Dated July 17, 1995).
10.6 Agreement dated May 17, 1993 between O.A.M. S.p.A., Fiat Auto S.p.A., and others (filed as
Exhibit 10.1 to the Current Report Dated May 17, 1993 filed on Form 8-K).
10.7 Agreement dated April 27, 1993 between Registrant and Finprogetti, S.p.A., together with
Exhibits A-D thereto (filed as Exhibit 10(b) to 1994 Annual Report on Form 10-K/A, Amendment
No. 2).
10.8 Agreement dated April 10, 1995 between Registrant and Alejandro DeTomaso (filed as Exhibit
10(c) to 1994 Annual Report on Form 10-K/A, Amendment No. 2).
10.9 Agreement dated as of November 1, 1995 between the Registrant and Howard E. Chase (filed as
Exhibit 10(g) to 1995 Annual Report on Form 10-K).
10.10 Agreement dated as of November 1, 1995 between the Registrant and Albino Collini (filed as
Exhibit 10(h) to 1995 Annual Report on Form 10-K).
10.11 Agreement dated as of November 1, 1995 between the Registrant and Francesco Pugno Vanoni
(filed as Exhibit 10(i) to 1995 Annual Report on Form 10-K).
10.12 Agreement dated as of November 1, 1995 between the Registrant and Como Consultants, Limited
(filed as Exhibit 10(j) to 1995 Annual Report on Form 10-K).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- ---------------------------------------------------------------------------------------------
<S> <C> <C>
10.13 Agreement dated as of November 1, 1995 between the Registrant and Domenico Costa (filed as
Exhibit 10(k) to 1995 Annual Report on Form 10-K).
10.14 Agreement dated as of November 1, 1995 between the Registrant and Carlo Previtali (filed as
Exhibit 10(l) to 1995 Annual Report on Form 10-K).
10.15 Agreement dated as of November 1, 1995 between the Registrant and Giovanni Avallone (filed as
Exhibit 10(m) to 1995 Annual Report on Form 10-K).
10.16 Option Agreement between the Registrant and Howard E. Chase (filed as Exhibit 10(n) to 1995
Annual Report on Form 10-K).
10.17 Option Agreement between the Registrant and Albino Collini (filed as Exhibit 10(o) to 1995
Annual Report on Form 10-K).
10.18 Option Agreement between the Registrant and Como Consultants, Limited (filed as Exhibit 10(p)
to 1995 Annual Report on Form 10-K).
10.19 Option Agreement between the Registrant and Domenico Costa (filed as Exhibit 10(q) to 1995
Annual Report on Form 10-K).
10.20 Option Agreement between the Registrant and Carlo Previtali (filed as Exhibit 10(r) to 1995
Annual Report on Form 10-K).
10.21 Option Agreement between the Registrant and Giovanni Avallone (filed as Exhibit 10(s) to 1995
Annual Report on Form 10-K).
10.22 Option Agreement between the Registrant and Santiago De Tomaso (filed as Exhibit 10(t) to
1995 Annual Report on Form 10-K).
10.23 Description of 8% 2 year promissory notes issued in connection with the Company's Stock
Repurchase Plan included in the Company's Schedule 13E-4 dated September 20, 1996.
10.24 Retainer Agreement dated March 7, 1997 between the Registrant and Tamarix Capital
Corporation.
10.25 Inducement Agreement dated April 8, 1997 between the Registrant and Tamarix Investors LDC.
21. Subsidiaries: The Registrant's significant subsidiaries, the jurisdiction of their
incorporation and nature of their respective activities is contained in the current
Registration Statement.
23.1 Consent of Morrison Cohen Singer & Weinstein, LLP (included in the Opinion of Morrison Cohen
Singer & Weinstein, LLP to be filed by amendment as Exhibit 5.1).
23.2 Consent of Reconta Ernst & Young S.p.A.
23.3 Consent of Arthur Andersen LLP.
</TABLE>
<PAGE>
EXHIBIT 1.1
DRAFT 3/26/97
UNDERWRITING AGREEMENT
BETWEEN
TRIDENT ROWAN GROUP, INC.
AND
GKN SECURITIES CORP.
DATED: __________ __, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
INDEX OF DEFINITIONS...........................................................v
1. Purchase and Sale of Securities...........................................2
1.1 Firm Securities......................................................2
1.1.1 Purchase of Firm Securities................................2
1.1.2 Payment and Delivery.......................................2
1.2 Over-Allotment Option................................................3
1.2.1 Option Securities..........................................3
1.2.2 Exercise of Option.........................................3
1.2.3 Payment and Delivery.......................................3
1.3 Representative's Purchase Option.....................................4
1.3.1 Purchase Option............................................4
1.3.2 Payment and Delivery.......................................4
2. Representations and Warranties of the Company.............................4
2.1 Filing of Registration Statement.....................................4
2.1.1 Pursuant to the Act........................................4
2.1.2 Pursuant to the Exchange Act...............................5
2.2 No Stop Orders, Etc..................................................5
2.3 Disclosures in Registration Statement................................5
2.3.1 Securities Act and Exchange Act Representation.............5
2.3.2 Disclosure of Contracts....................................5
2.3.3 Prior Securities Transactions..............................6
2.4 Changes After Dates in Registration Statement........................6
2.4.1 No Material Adverse Change.................................6
2.4.2 Recent Securities Transactions, Etc........................6
2.5 Independent Accountants..............................................6
2.6 Financial Statements.................................................6
2.7 Authorized Capital; Options; Etc.....................................6
2.8 Valid Issuance of Securities; Etc....................................7
2.8.1 Outstanding Securities.....................................7
2.8.2 Securities Sold Pursuant to this Agreement.................7
2.9 Registration or Repurchase Rights of Third Parties...................7
2.10 Validity and Binding Effect of Agreements............................7
2.11 No Conflicts, Etc....................................................8
2.12 No Defaults; Violations..............................................8
2.13 Corporate Power; Licenses; Consents..................................8
2.13.1 Conduct of Business........................................8
2.13.2 Transactions Contemplated Herein...........................9
2.14 Title to Property; Insurance.........................................9
2.15 Litigation; Governmental Proceedings.................................9
2.16 Good Standing........................................................9
i
<PAGE>
PAGE
2.17 Taxes................................................................9
2.18 Employees' Options..................................................10
2.19 Transactions Affecting Disclosure to NASD...........................10
2.19.1 Finder's Fees.............................................10
2.19.2 Payments Within Twelve Months.............................10
2.19.3 Use of Proceeds...........................................10
2.19.4 Insiders' NASD Affiliation................................10
2.20 Foreign Corrupt Practices Act.......................................10
2.21 Nasdaq Eligibility..................................................11
2.22 Intangibles.........................................................11
2.23 Relations With Employees............................................11
2.23.1 Employee Matters..........................................11
2.23.2 Employee Benefit Plans....................................11
2.24 Officers' Certificate...............................................12
2.25 Warrant Agreement...................................................12
2.26 Agreements With Insiders............................................12
2.27 Subsidiaries........................................................12
2.28 Unaudited Financials................................................12
2.29 Exchange Act Reports................................................12
2.30 Repurchase..........................................................12
2.31 No Obligations. ....................................................13
3. Covenants of the Company. ..............................................13
3.1 Amendments to Registration Statement................................13
3.2 Federal Securities Laws.............................................13
3.2.1 Compliance................................................13
3.2.2 Filing of Final Prospectus................................13
3.2.3 Exchange Act Registration.................................13
3.3 Blue Sky Filing.....................................................13
3.4 Delivery to the Underwriters of Prospectuses........................14
3.5 Events Requiring Notice to the Representative.......................14
3.6 Review of Financial Statements......................................14
3.7 Reserved............................................................14
3.8 Standard & Poor's...................................................14
3.9 Nasdaq Maintenance. ...............................................14
3.10 Warrant Solicitation and Representative Warrant Solicitation Fees...14
3.11 Registration of Common Stock........................................15
3.12 Reports to the Representative and Others............................15
3.12.1 Periodic Reports, Etc.....................................15
3.12.2 Transfer Sheets and Weekly Position Listings..............15
3.13 Agreements between the Representative and the Company...............16
3.13.1 Representative's Purchase Option..........................16
3.14 Disqualification of Form S-1........................................16
3.15 Payment of Expenses.................................................16
ii
<PAGE>
PAGE
3.15.1 General Expenses..........................................16
3.15.2 Non-Accountable Expenses..................................17
3.16 Application of Net Proceeds.........................................17
3.17 Delivery of Earnings Statements to Security Holders.................17
3.18 Key Person Life Insurance...........................................17
3.19 Stabilization.......................................................17
3.20 Internal Controls...................................................17
3.21 Accountants and Lawyers.............................................18
3.22 Transfer Agent......................................................18
3.23 Sale of Securities; Exercise Price of Options.......................18
3.24 ....................................................................18
4. Conditions of the Underwriters' Obligations..............................18
4.1 Regulatory Matters..................................................18
4.1.1 Effectiveness of Registration Statement...................18
4.1.2 NASD Clearance............................................19
4.1.3 No Blue Sky Stop Orders...................................19
4.2 Company Counsel Matters.............................................19
4.2.1 Effective Date Opinion of Counsel.........................19
4.2.2 Closing Date and Option Closing Date Opinion of Counsel...23
[4.2.3 RELIANCE..................................................23
4.3 Cold Comfort Letter.................................................23
4.4 Officers' Certificates..............................................24
4.4.1 Officers' Certificate.....................................24
4.4.2 Secretary's Certificate...................................25
4.5 No Material Changes.................................................25
4.6 Delivery of Agreements..............................................25
4.7 Opinion of Counsel for the Representative...........................25
5. Indemnification..........................................................26
5.1 Indemnification of the Underwriter..................................26
5.1.1 General...................................................26
5.1.2 Procedure.................................................26
5.2 Indemnification of the Company......................................27
5.3 Contribution........................................................27
5.3.1 Contribution Rights.......................................27
5.3.2 Contribution Procedure....................................28
6. Default by an Underwriter................................................28
6.1 Default Not Exceeding 10% of Firm Securities........................28
6.2 Default Exceeding 10% of Firm Securities............................28
6.3 Postponement of Closing Date........................................29
7. Additional Covenants.....................................................29
iii
<PAGE>
PAGE
7.1 Board Designee......................................................29
7.2 Press Releases......................................................29
7.3 Form S-8 or any Similar Form........................................29
7.4 Compensation and Other Arrangements.................................29
8. Representations and Agreements to Survive Delivery.......................29
9. Effective Date of This Agreement and Termination Thereof.................30
9.1 Effective Date......................................................30
9.2 Termination.........................................................30
9.3 Notice..............................................................30
9.4 Expenses............................................................30
9.5 Indemnification.....................................................30
10. Miscellaneous............................................................31
10.1 Notices.............................................................31
10.2 Headings............................................................31
10.3 Amendment...........................................................31
10.4 Entire Agreement....................................................31
10.5 Binding Effect......................................................32
10.6 Governing Law; Jurisdiction.........................................32
10.7 Execution in Counterparts...........................................32
10.8 Waiver, Etc.........................................................32
iv
<PAGE>
INDEX OF DEFINITIONS
Term Section
Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.1
Closing Date. . . . . . . . . . . . . . . . . . . . . . . . 1.1.2
Code. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.23.2
Commission. . . . . . . . . . . . . . . . . . . . . . . . . 2.1.1
Common Stock. . . . . . . . . . . . . . . . . . . . . . . . 1.1.1
Company . . . . . . . . . . . . . . . . . . . . . . . . . . Introductory
Paragraph
Effective Date. . . . . . . . . . . . . . . . . . . . . . . 1.2.2
ERISA Plans . . . . . . . . . . . . . . . . . . . . . . . . 2.23.2
Exchange Act. . . . . . . . . . . . . . . . . . . . . . . . 2.1.2
Filing Date . . . . . . . . . . . . . . . . . . . . . . . . 2.19.2
Firm Securities . . . . . . . . . . . . . . . . . . . . . . 1.1.1
Insiders. . . . . . . . . . . . . . . . . . . . . . . . . . 2.26
Intangibles . . . . . . . . . . . . . . . . . . . . . . . . 2.22
NASD. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.19.1
Nasdaq. . . . . . . . . . . . . . . . . . . . . . . . . . . 2.21
Option Closing Date . . . . . . . . . . . . . . . . . . . . 1.2.2
Option Securities . . . . . . . . . . . . . . . . . . . . . 1.2.1
Over-allotment Option . . . . . . . . . . . . . . . . . . . 1.2.1
Preliminary Prospectus. . . . . . . . . . . . . . . . . . . 2.1.1
Prospectus. . . . . . . . . . . . . . . . . . . . . . . . . 2.1.1
Public Securities . . . . . . . . . . . . . . . . . . . . . 1.2.1
Registration Statement. . . . . . . . . . . . . . . . . . . 2.1.1
Regulations . . . . . . . . . . . . . . . . . . . . . . . . 2.1.1
Representative. . . . . . . . . . . . . . . . . . . . . . . Introductory
Paragraph
Representative's Securities . . . . . . . . . . . . . . . . 1.3.1
Representative's Shares . . . . . . . . . . . . . . . . . . 1.3.1
Representative's Warrants . . . . . . . . . . . . . . . . . 1.3.1
Securities. . . . . . . . . . . . . . . . . . . . . . . . . 1.3.1
Subsidiary(ies) . . . . . . . . . . . . . . . . . . . . . . 2.27
Transfer Agent. . . . . . . . . . . . . . . . . . . . . . . 3.22
Unaudited Financials. . . . . . . . . . . . . . . . . . . . 2.28
Underwriters. . . . . . . . . . . . . . . . . . . . . . . . Introductory
Paragraph
Warrant . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1.1
Warrant Agreement . . . . . . . . . . . . . . . . . . . . . 2.25
<PAGE>
TRIDENT ROWAN GROUP, INC.
1,250,000 Shares of Common Stock
and
1,250,000 Redeemable Common Stock Purchase Warrants
UNDERWRITING AGREEMENT
New York, New York
__________ ___, 1997
GKN Securities Corp.
61 Broadway
New York, New York 10006
Ladies and Gentlemen:
The undersigned, Trident Rowan Group, Inc., a Maryland corporation
("Company"), hereby confirms its agreement with GKN Securities Corp. ("GKN"
being referred to herein variously as the "Representative" or "you") and the
other underwriters named on Schedule I hereto (the Representative and the other
underwriters being collectively called the "Underwriters" or individually, an
"Underwriter") as follows:
1. PURCHASE AND SALE OF SECURITIES.
1.1 FIRM SECURITIES.
1.1.1 PURCHASE OF FIRM SECURITIES. On the basis of the
representations and warranties herein contained, but subject to the terms and
conditions herein set forth, the Company agrees to issue and sell, severally and
not jointly, to the several Underwriters 1,250,000 shares of the Company's
Common Stock, par value $.01 per share ("Common Stock") at a purchase price (net
of commissions) of $_____ per share ("Common Stock") and 1,250,000 Redeemable
Common Stock Purchase Warrants ("Warrant(s)") at a purchase price (net of
commissions) of $_____ per Warrant. Each Warrant shall entitle the holder
thereof to purchase one share of Common Stock commencing one year after the
effective date ("Effective Date") of the Registration Statement (as hereinafter
defined) and expiring at the close of business on the last day of the five-year
period following the Effective Date. The exercise price of the Warrants shall
be 120% of the per-share public offering price of the Common Stock (these shares
of Common Stock and Warrants being referred to herein as "Firm Securities").
The Underwriters, severally and not jointly, agree to purchase from the Company
the number of Firm Securities set forth opposite their respective names on
Schedule I attached hereto and made a part hereof at a purchase price of $_____
per share of Common Stock and $_____ per Warrant.
1.1.2 PAYMENT AND DELIVERY. Delivery and payment for the Firm
Securities shall be made at 10:00 A.M., New York time, on or before the third
business day following the date that the Firm Securities commence trading or at
such earlier time as the Representative shall determine, or at such other time
as shall be agreed upon by the Representative and the Company at the New York
2
<PAGE>
City office of GKN or at such other place as shall be agreed upon by the
Representative and the Company. The hour and date of delivery and payment for
the Firm Securities are called the "Closing Date." Payment for the Firm
Securities shall be made on the Closing Date at the Representative's election by
certified or bank cashier's check(s) in New York Clearing House funds, payable
to the order of the Company upon delivery to you of certificates (in form and
substance satisfactory to the Representative) representing the Firm Securities
for the respective accounts of the Underwriters. The Firm Securities shall be
registered in such name or names and in such authorized denominations as the
Representative may request in writing at least two full business days prior to
the Closing Date. The Company will permit the Representative to examine and
package the Firm Securities for delivery, at least one full business day prior
to the Closing Date. The Company shall not be obligated to sell or deliver the
Firm Securities except upon tender of payment by the Underwriters for all the
Firm Securities.
1.2 OVER-ALLOTMENT OPTION.
1.2.1 OPTION SECURITIES. For the purposes of covering any over-
allotments in connection with the distribution and sale of the Firm Securities,
the Underwriters are hereby granted an option to purchase up to an additional
187,500 shares of Common Stock and/or 187,500 Warrants from the Company
("Over-allotment Option"). Such additional 187,500 shares of Common Stock and
187,500 Warrants are hereinafter referred to as the "Option Securities." The
Firm Securities and the Option Securities are, together with the shares of
Common Stock issuable upon exercise of the Warrants, hereinafter referred to
collectively as the "Public Securities." The purchase price to be paid for the
Option Securities will be the same price per Option Security as the price per
Firm Security set forth in Section 1.1.1 hereof.
1.2.2 EXERCISE OF OPTION. The Over-allotment Option granted
pursuant to Section 1.2.1 hereof may be exercised by the Representative on
behalf of the Underwriters as to all or any part of the Option Securities at any
time, from time to time, within forty-five days after the Effective Date of the
Registration Statement. The Underwriters will not be under any obligation to
purchase any Option Securities prior to the exercise of the Over-allotment
Option. The Over-allotment Option granted hereby may be exercised by the giving
of oral notice to the Company from GKN, which must be confirmed within 24 hours
thereof by a letter or telecopy setting forth the number of Option Securities to
be purchased, the date and time for delivery of and payment for the Option
Securities and stating that the Option Securities referred to therein are to be
used for the purpose of covering over-allotments in connection with the
distribution and sale of the Firm Securities. If such notice is given at least
two full business days prior to the Closing Date, the date set forth therein for
such delivery and payment will be the Closing Date. If such notice is given
thereafter, the date set forth therein for such delivery and payment will not be
earlier than five full business days after the date of the notice, unless we
mutually agree to an earlier date. If such delivery and payment for the Option
Securities does not occur on the Closing Date, the date and time of the closing
for such Option Securities will be as set forth in the notice (hereinafter the
"Option Closing Date"). Upon exercise of the Over-allotment Option, the Company
will become obligated to convey to the Underwriters, and, subject to the terms
and conditions set forth herein, the Underwriters will become obligated to
purchase, the number of Option Securities specified in such notice.
1.2.3 PAYMENT AND DELIVERY. Payment for the Option Securities
will be at the Representative's election by certified or bank cashier's check(s)
in New York Clearing House funds, payable to the order of the Company at the
offices of GKN or at such other place as shall be agreed upon by the
Representative and the Company upon delivery to the Representative of
certificates
3
<PAGE>
representing such securities for the respective accounts of the Underwriters.
The certificates representing the Option Securities to be delivered will be in
such denominations and registered in such names as the request not less than two
full business days prior to the Closing Date or the Option Closing Date, as the
case may be, and will be made available to the Representative for inspection,
checking and packaging at the aforesaid office of the Company's transfer agent
or correspondent not less than one full business day prior to such Closing Date.
1.3 REPRESENTATIVE'S PURCHASE OPTION.
1.3.1 PURCHASE OPTION. The Company hereby agrees to issue and
sell to the Representative (and/or its designees) on the Closing Date, for an
aggregate purchase price of $100, an option ("Representative's Purchase
Option"), exercisable at any time, in whole or in part, between the first and
fifth anniversary dates of the Effective Date, for the purchase of an aggregate
of 125,000 shares of Common Stock ("Representative's Shares") at an initial
exercise price of ______ of the initial offering price of a share of Common
Stock (i.e., $_____ per share of Common Stock) and/or 125,000 Warrants
("Representative's Warrants") at an initial exercise price ________ of the
initial offering price of a Warrant (i.e. $____ per Warrant). Each of the
Representative's Shares and the Representative's Warrants is identical to the
Firm Securities. The Representative's Purchase Option, the Representative's
Shares, the Representative's Warrants and the shares of Common Stock issuable
upon exercise of the Representative's Warrants are hereinafter referred to
collectively as the "Representative's Securities." The Public Securities and
the Representative's Securities are hereinafter referred to collectively as the
"Securities."
1.3.2 PAYMENT AND DELIVERY. Delivery and payment for the Purchase
Option shall be made on the Closing Date. The Company shall deliver to the
Representative, upon payment therefor, certificates for the Purchase Option in
the name or names and in such authorized denominations as the Representative may
request.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and
warrants to the Representative as follows:
2.1 FILING OF REGISTRATION STATEMENT.
2.1.1 PURSUANT TO THE ACT. The Company has filed with the
Securities and Exchange Commission ("Commission") a registration statement and
an amendment or amendments thereto, on Form S-1 (No. 333-21595) including any
related preliminary prospectus ("Preliminary Prospectus"), for the registration
of the Public Securities under the Securities Act of 1933, as amended ("Act"),
which registration statement and amendment or amendments have been prepared by
the Company in conformity with the requirements of the Act, and the rules and
regulations ("Regulations") of the Commission under the Act. Except as the
context may otherwise require, such registration statement, as amended, on file
with the Commission at the time the registration statement becomes effective
(including the prospectus, financial statements, schedules, exhibits and all
other documents filed as a part thereof or incorporated therein and all
information deemed to be a part thereof as of such time pursuant to paragraph
(b) of Rule 430A of the Regulations), is hereinafter called the "Registration
Statement," and the form of the final prospectus dated the Effective Date (or,
if applicable, the form of final prospectus filed with the Commission pursuant
to Rule 424 of the Regulations), is hereinafter called the "Prospectus." The
Registration Statement has been declared effective by the Commission on the date
hereof.
4
<PAGE>
2.1.2 PURSUANT TO THE EXCHANGE ACT. The Company has filed with
the commission a registration statement on Form 8-A providing for the
registration under the Securities Exchange Act of 1934, as amended ("Exchange
Act"), of the Public Securities. Such registration of the Public Securities has
been declared effective by the Commission on the date hereof.
2.2 NO STOP ORDERS, ETC. Neither the Commission nor, to the best of the
Company's knowledge, any state regulatory authority has issued any order
preventing or suspending the use of any Preliminary Prospectus or has instituted
or, to the best of the Company's knowledge, threatened to institute any
proceedings with respect to such an order.
2.3 DISCLOSURES IN REGISTRATION STATEMENT.
2.3.1 SECURITIES ACT AND EXCHANGE ACT REPRESENTATION. At the time
the Registration Statement became effective and at all times subsequent thereto
up to and including the Closing Date and the Option Closing Date, if any, the
Registration Statement and the Prospectus and any amendment or supplement
thereto contained and will contain all material statements which are required to
be stated therein in accordance with the Act and the Regulations, and conformed
and will conform in all material respects to the requirements of the Act and the
Regulations; neither the Registration Statement nor the Prospectus, nor any
amendment or supplement thereto, during such time period and on such dates,
contained or will contain any untrue statement of a material fact or omitted or
will omit to state any material fact required to be stated therein or necessary
to make the statements therein not misleading, nor did they or will they contain
any untrue statement of a material fact or did they or will they omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. When any Preliminary Prospectus was first filed with the
Commission (whether filed as part of the Registration Statement for the
registration of the Securities or any amendment thereto or pursuant to Rule
424(a) of the Regulations) and when any amendment thereof or supplement thereto
was first filed with the Commission, such Preliminary Prospectus and any
amendments thereof and supplements thereto at the time such filing was made
complied in all material respects with the applicable provisions of the Act and
the Regulations. The representation and warranty made in this Section 2.3.1
does not apply to statements made or statements omitted in reliance upon and in
conformity with written information furnished to the Company with respect to the
Underwriters by the Representative expressly for use in the Registration
Statement or Prospectus or any amendment thereof or supplement thereto.
2.3.2 DISCLOSURE OF CONTRACTS. The description in the
Registration Statement and the Prospectus of contracts and other documents is
accurate and presents fairly the information required to be disclosed and there
are no contracts or other documents required to be described in the Registration
Statement or the Prospectus or to be filed with the Commission as exhibits to
the Registration Statement, which have not been so described or filed. Each
contract or other instrument (however characterized or described) to which the
Company is a party or by which its property or business is or may be bound or
affected and (i) which is referred to in the Prospectus, or (ii) is material to
the Company's business, has been duly and validly executed, is in full force and
effect in all material respects and is enforceable against the parties thereto
in accordance with its terms, and none of such contracts or instruments has been
assigned by the Company, and neither the Company nor, to the best of the
Company's knowledge, any other party is in default thereunder and, to the best
of the Company's knowledge, no event has occurred which, with the lapse of time
or the giving of notice, or both, would constitute a default thereunder. None
of the material provisions of such contracts or instruments violates or will
result in a violation of any existing
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applicable law, rule, regulation, judgment, order or decree of any governmental
agency or court having jurisdiction over the Company or any of its respective
assets or businesses, including, without limitation, those relating to
environmental laws and regulations.
2.3.3 PRIOR SECURITIES TRANSACTIONS. No securities of the Company
have been sold by the Company or to the best of the Company's knowledge, by or
on behalf of, or for the benefit of, any person or persons controlling,
controlled by, or under common control with the Company within the three years
prior to the date hereof, except as disclosed in the Registration Statement.
2.4 CHANGES AFTER DATES IN REGISTRATION STATEMENT.
2.4.1 NO MATERIAL ADVERSE CHANGE. Since the respective dates as
of which information is given in the Registration Statement and the Prospectus,
except as otherwise specifically stated therein, (i) there has been no material
adverse change in the condition, financial or otherwise, or in the results of
operations, business or business prospects of the Company, including, but not
limited to, a material loss or interference with its business from fire, storm,
explosion, flood or other casualty, whether or not covered by insurance, or from
any labor dispute or court or governmental action, order or decree, whether or
not arising in the ordinary course of business, and (ii) there have been no
transactions entered into by the Company, other than those in the ordinary
course of business, which are material with respect to the condition, financial
or otherwise, or to the results of operations, business or business prospects of
the Company.
2.4.2 RECENT SECURITIES TRANSACTIONS, ETC. Subsequent to the
respective dates as of which information is given in the Registration Statement
and the Prospectus, and except as may otherwise be indicated or contemplated
herein or therein, the Company has not (i) issued any securities or incurred any
liability or obligation, direct or contingent, for borrowed money; or
(ii) declared or paid any dividend or made any other distribution on or in
respect to its capital stock.
2.5 INDEPENDENT ACCOUNTANTS. Reconta Ernst & Young and Arthur Andersen
LLP whose reports are filed with the Commission as part of the Registration
Statement, are independent accountants as required by the Act and the
Regulations as of the dates of their respective reports.
2.6 FINANCIAL STATEMENTS. The financial statements, including the notes
thereto and supporting schedules included in the Registration Statement and
Prospectus, fairly present the financial position and the results of operations
of the Company at the dates and for the periods to which they apply; and such
financial statements have been prepared in conformity with generally accepted
accounting principles, consistently applied throughout the periods involved; and
the supporting schedules included in the Registration Statement present fairly
the information required to be stated therein. The pro forma consolidated
financial information set forth in the Registration Statement reflects all
significant assumptions and adjustments relating to the business, operations and
recent transactions of the Company, including [THE RECENT PURCHASES BY THE
COMPANY OF ITS STOCK, THE COMPANY'S ACQUISITION OF L.I.T.A. S.P.A. AND CERTAIN
ASSETS OF FINPROGETTI AND THE RECENT SALE OF STOCK BY MOTO GUZZI CORP., THE
COMPANY'S SUBSIDIARY].
2.7 AUTHORIZED CAPITAL; OPTIONS; ETC. The Company had at the date or
dates indicated in the Prospectus duly authorized, issued and outstanding
capitalization as set forth in the Registration Statement and the Prospectus.
Based on the assumptions stated in the Registration Statement and the
Prospectus, the Company will have on the Closing Date the adjusted stock
capitalization set forth therein. Except as set forth in the Registration
Statement and the Prospectus,
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on the Effective Date and on the Closing Date there will be no options,
warrants, or other rights to purchase or otherwise acquire any authorized but
unissued shares of Common Stock of the Company, including any issuances pursuant
to anti-dilution provisions, or any security convertible into shares of Common
Stock of the Company, or any contracts or commitments to issue or sell shares of
Common Stock or any such options, warrants, rights or convertible securities.
2.8 VALID ISSUANCE OF SECURITIES; ETC.
2.8.1 OUTSTANDING SECURITIES. All issued and outstanding
securities of the Company have been duly authorized and validly issued and are
fully paid and non-assessable; the holders thereof have no rights of rescission
with respect thereto, and are not subject to personal liability by reason of
being such holders; and none of such securities were issued in violation of the
preemptive rights of any holders of any security of the Company or similar
contractual rights granted by the Company. The outstanding options and warrants
to purchase shares of Common Stock constitute the valid and binding obligations
of the Company, enforceable in accordance with their terms. The authorized
Common Stock and outstanding options and warrants to purchase shares of Common
Stock conform in all material respects to all statements relating thereto
contained in the Registration Statement and the Prospectus. The offers and
sales of the outstanding Common Stock, options and warrants to purchase shares
of Common Stock were at all relevant times either registered or qualified under
the Act and the applicable state securities or Blue Sky Laws or exempt from such
registration requirements.
2.8.2 SECURITIES SOLD PURSUANT TO THIS AGREEMENT. The Securities
have been duly authorized and, when issued and paid for, will be validly issued,
fully paid and non-assessable; the holders thereof are not and will not be
subject to personal liability by reason of being such holders; the Securities
are not and will not be subject to the preemptive rights of any holders of any
security of the Company or similar contractual rights granted by the Company;
and all corporate action required to be taken for the authorization, issuance
and sale of the Securities has been duly and validly taken. When issued, the
Representative's Purchase Option, the Representative's Warrants and the Warrants
will constitute valid and binding obligations of the Company to issue and sell,
upon exercise thereof and payment therefor, the number and type of securities of
the Company called for thereby and the Representative's Purchase Option, the
Representative's Warrants and the Warrants will be enforceable against the
Company in accordance with their respective terms, except (i) as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally, (ii) as enforceability of
any indemnification provision may be limited under the federal and state
securities laws, and (iii) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
2.9 REGISTRATION OR REPURCHASE RIGHTS OF THIRD PARTIES. Except as set
forth in the Prospectus, no holders of any securities of the Company or of any
options or warrants of the Company exercisable for or convertible or
exchangeable into securities of the Company have the right to require the
Company to repurchase or register any such securities of the Company under the
Act, or to include any such securities in a registration statement to be filed
by the Company.
2.10 VALIDITY AND BINDING EFFECT OF AGREEMENTS. This Agreement, the
Warrant Agreement (as hereinafter defined) and the Representative's Purchase
Option have been duly and validly authorized by the Company, and this Agreement,
the Warrant Agreement and the Representative's Purchase Option when executed and
delivered pursuant to this Agreement, will constitute, the valid
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and binding agreements of the Company, enforceable against the Company in
accordance with their respective terms, except (i) as such enforceability may be
limited by bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally, (ii) as enforceability of any indemnification
provision may be limited under the federal and state securities laws, and (iii)
that the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to the equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought.
2.11 NO CONFLICTS, ETC. The execution, delivery, and performance by the
Company of this Agreement, the Warrant Agreement and the Representative's
Purchase Option, and the consummation by the Company of the transactions herein
and therein contemplated and the compliance by the Company with the terms hereof
and thereof have been duly authorized by all necessary corporate action and do
not and will not, with or without the giving of notice or the lapse of time or
both, (i) result in a breach of, or conflict with any of the terms and
provisions of, or constitute a default under, or result in the creation,
modification, termination or imposition of any lien, charge or encumbrance upon
any property or assets of the Company pursuant to the terms of any indenture,
mortgage, deed of trust, note, loan or credit agreement or any other agreement
or instrument evidencing an obligation for borrowed money, or any other
agreement or instrument to which the Company is a party or by which the Company
may be bound or to which any of the property or assets of the Company is
subject; (ii) result in any violation of the provisions of the Certificate of
Incorporation or the By-Laws of the Company; (iii) violate any existing
applicable law, rule, regulation, judgment, order or decree of any governmental
agency or court, domestic or foreign, having jurisdiction over the Company or
any of its properties or business; or (iv) have a material adverse effect on any
permit, license, certificate, registration, approval, consent, license or
franchise concerning the Company.
2.12 NO DEFAULTS; VIOLATIONS. Except as described in the Prospectus, no
default exists in the due performance and observance of any term, covenant or
condition of any material license, contract, indenture, mortgage, deed of trust,
note, loan or credit agreement, or any other agreement or instrument evidencing
an obligation for borrowed money, or any other material agreement or instrument
to which the Company is a party or by which the Company may be bound or to which
any of the properties or assets of the Company is subject, the result of which
would have, singly or in the aggregate, a material adverse effect on the
Company, its assets or its operations. The Company is not in violation of any
term or provision of its Certificate of Incorporation or By-Laws or in violation
of any franchise, license, permit, applicable law, rule, regulation, judgment or
decree of any governmental agency or court, domestic or foreign, having
jurisdiction over the Company or any of its properties or business, except as
described in the Prospectus.
2.13 CORPORATE POWER; LICENSES; CONSENTS.
2.13.1 CONDUCT OF BUSINESS. The Company has all requisite
corporate power and authority, and has all necessary authorizations, approvals,
orders, licenses, certificates and permits of and from all governmental
regulatory officials and bodies to own or lease its properties and conduct its
business as described in the Prospectus, and the Company is and has been doing
business in compliance with all such material authorizations, approvals, orders,
licenses, certificates and permits and all federal, state and local laws, rules
and regulations. The disclosures in the Registration Statement concerning the
effects of federal, state and local regulation of the Company's business as
currently contemplated are correct in all material respects and do not omit to
state a material fact.
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2.13.2 TRANSACTIONS CONTEMPLATED HEREIN. The Company has all
corporate power and authority to enter into this Agreement and to carry out the
provisions and conditions hereof, and all consents, authorizations, approvals
and orders required in connection therewith have been obtained. No consent,
authorization or order of, and no filing with, any court, government agency or
other body is required for the valid issuance, sale and delivery, of the
Securities pursuant to this Agreement, the Warrant Agreement and the
Representative's Purchase Option, and as contemplated by the Prospectus, except
with respect to applicable federal and state securities laws.
2.14 TITLE TO PROPERTY; INSURANCE. The Company has good and marketable
title to, or valid and enforceable leasehold estates in, all items of real and
personal property (tangible and intangible) owned or leased by it, free and
clear of all liens, encumbrances, claims, security interests, defects and
restrictions of any material nature whatsoever, other than those referred to in
the Prospectus and liens for taxes not yet due and payable. The Company has
adequately insured its properties against loss or damage by fire or other
casualty and maintains, in adequate amounts, such other insurance as is usually
maintained by companies engaged in the same or similar business.
2.15 LITIGATION; GOVERNMENTAL PROCEEDINGS. Except as set forth in the
Prospectus, there is no action, suit, proceeding, inquiry, arbitration,
investigation, litigation or governmental proceeding pending or threatened
against, or involving the properties or business of, the Company which might
materially and adversely affect the financial position, prospects, value or the
operation or the properties or the business of the Company, or which question
the validity of the capital stock of the Company or this Agreement or of any
action taken or to be taken by the Company pursuant to, or in connection with,
this Agreement. There are no outstanding orders, judgments or decrees of any
court, governmental agency or other tribunal naming the Company and enjoining
the Company from taking, or requiring the Company to take, any action, or to
which the Company, its properties or business is bound or subject.
2.16 GOOD STANDING. The Company has been duly organized and is validly
existing as a corporation and is in good standing under the laws of the state of
its incorporation. The Company is duly qualified and licensed and in good
standing as a foreign corporation in each jurisdiction in which ownership or
leasing of any properties or the character of its operations requires such
qualification or licensing, except where the failure to qualify would not have a
material adverse effect on the Company.
2.17 TAXES. The Company has filed all returns (as hereinafter defined)
required to be filed with taxing authorities prior to the date hereof or has
duly obtained extensions of time for the filing thereof. The Company has paid
all taxes (as hereinafter defined) shown as due on such returns that were filed
and has paid all taxes imposed on or assessed against the Company. The
provisions for taxes payable, if any, shown on the financial statements filed
with or as part of the Registration Statement are sufficient for all accrued and
unpaid taxes, whether or not disputed, and for all periods to and including the
dates of such consolidated financial statements. Except as disclosed in writing
to the Representative, (i) no issues have been raised (and are currently
pending) by any taxing authority in connection with any of the returns or taxes
asserted as due from the Company except as set forth on Schedule 2.17 hereto,
and (ii) no waivers of statutes of limitation with respect to the returns or
collection of taxes have been given by or requested from the Company. The term
"taxes" mean all federal, state, local, foreign, and other net income, gross
income, gross receipts, sales, use, ad valorem, transfer, franchise, profits,
license, lease, service, service use, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property, windfall profits, customs,
duties or other taxes, fees, assessments, or charges of any kind whatever,
together with any interest
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and any penalties, additions to tax, or additional amounts with respect thereto.
The term "returns" means all returns, declarations, reports, statements, and
other documents required to be filed in respect to taxes.
2.18 EMPLOYEES' OPTIONS. No shares of Common Stock are eligible for sale
pursuant to Rule 701 promulgated under the Act other than those subject to the
provisions of the lock-up agreements required by Section 2.26 hereof.
2.19 TRANSACTIONS AFFECTING DISCLOSURE TO NASD.
2.19.1 FINDER'S FEES. There are no claims, payments, issuances,
arrangements or understandings for services in the nature of a finder's or
origination fee to which any of the Company or any of its officers, directors or
their respective affiliates is a party, with respect to the sale of the
Securities hereunder or any other arrangements, agreements, understandings,
payments or issuance with respect to the Company that may affect the
compensation, as determined by the National Association of Securities Dealers,
Inc. ("NASD").
2.19.2 PAYMENTS WITHIN TWELVE MONTHS. The Company has not made any
direct or indirect payments (in cash, securities or otherwise) to (i) any
person, as a finder's fee, investing fee or otherwise, in consideration of such
person raising capital for the Company or introducing to the Company persons who
provided capital to the Company, (ii) to any NASD member, or (iii) to any person
or entity that has any direct or indirect affiliation or association with any
NASD member within the twelve month period prior to the date on which the
Registration Statement was filed with the Commission ("Filing Date") or
thereafter, other than payments to the Representative.
2.19.3 USE OF PROCEEDS. None of the net proceeds of the offering
will be paid by the Company to any participating NASD member or any affiliate or
associate of any NASD member, except as specifically authorized herein.
2.19.4 INSIDERS' NASD AFFILIATION. No officer or director of the
Company or owner of any of the Company's unregistered securities has any direct
or indirect affiliation or association with any NASD member. The Company will
advise the Representative and the NASD if any stockholder of the Company is or
becomes an affiliate or associated person of an NASD member participating in the
offering or distribution.
2.20 FOREIGN CORRUPT PRACTICES ACT. Neither the Company nor any of its
officers, directors, employees, agents or any other person acting on behalf of
the Company has, directly or indirectly, given or agreed to give any money, gift
or similar benefit (other than legal price concessions to customers in the
ordinary course of business) to any customer, supplier, employee or agent of a
customer or supplier, or official or employee of any governmental agency or
instrumentality of any government (domestic or foreign) or any political party
or candidate for office (domestic or foreign) or any political party or
candidate for office (domestic or foreign) or other person who was, is, or may
be in a position to help or hinder the business of the Company (or assist it in
connection with any actual or proposed transaction) which (i) might subject the
Company to any damage or penalty in any civil, criminal or governmental
litigation or proceeding, (ii) if not given in the past, might have had a
materially adverse effect on the assets, business or operations of the Company
as reflected in any of the financial statements contained in the Prospectus or
(iii) if continued in the future, might adversely affect the assets, business,
operations or prospects of the Company. The Company's
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internal accounting controls and procedures are sufficient to cause the Company
to comply with the Foreign Corrupt Practices Act of 1977, as amended.
2.21 NASDAQ ELIGIBILITY. As of the Effective Date, the Public Securities
have been approved for quotation on the Nasdaq National Market ("Nasdaq").
2.22 INTANGIBLES. The Company owns or possesses the requisite licenses or
rights to use all trademarks, service marks, service names, trade names, patents
and patent applications, copyrights and other rights (collectively,
"Intangibles") described as being licensed to or owned by it in the Registration
Statement. The Company's Intangibles which have been registered in the United
States Patent and Trademark Office or the United States Copyright Office, as the
case may be, have been fully maintained and are in full force and effect. There
is no claim or action by any person pertaining to, or proceeding pending or
threatened and the Company has not received any notice of conflict with the
asserted rights of others which challenges the exclusive right of the Company
with respect to any Intangibles used in the conduct of the Company's business
except as described in the Prospectus. The Intangibles and the Company's
current products, services and processes do not infringe on any intangibles held
by any third party. To the best of the Company's knowledge, no others have
infringed upon the Intangibles of the Company.
2.23 RELATIONS WITH EMPLOYEES.
2.23.1 EMPLOYEE MATTERS. The Company has generally enjoyed a
satisfactory employer-employee relationship with its employees and is in
compliance in all material respects with all United States federal, state and
local laws, regulations and all applicable Italian laws and regulations
respecting the employment of its employees and employment practices, terms and
conditions of employment and wages and hours relating thereto. There are no
pending investigations involving the Company by the U.S. Department of Labor, or
any other United States or Italian governmental agency responsible for the
enforcement of labor, federal, state or local laws and regulations. There is no
unfair labor practice charge or complaint against the Company pending before the
National Labor Relations Board or similar Italian regulatory agency, or any
strike, picketing, boycott, dispute, slowdown or stoppage pending or threatened
against or involving the Company or any predecessor entity, and none has ever
occurred except as described in the Registration Statement. No question
concerning representation exists respecting the employees of the Company and no
collective bargaining agreement or modification thereof is currently being
negotiated by the Company except as described in the Registration Statement. No
grievance or arbitration proceeding is pending under any expired or existing
collective bargaining agreements of the Company, if any.
2.23.2 EMPLOYEE BENEFIT PLANS. Other than as set forth in the
Registration Statement, the Company neither maintains, sponsors nor contributes
to, nor is it required to contribute to, any program or arrangement that is an
"employee pension benefit plan," an "employee welfare benefit plan," or a,
"multi-employer plan" as such terms are defined in Sections 3(2), 3(1) and
3(37), respectively, of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") or similar employment benefit plan as provided for under
Italian law ("ERISA Plans"). The Company does not, and has at no time,
maintained or contributed to a defined benefit plan, as defined in Section 3(35)
of ERISA. If the Company does maintain or contribute to a defined benefit plan,
any termination of the plan on the date hereof would not give rise to liability
under Title IV of ERISA. No ERISA Plan (or any trust created thereunder) has
engaged in a "prohibited transaction" within the meaning of Section 406 of ERISA
or Section 4975 of the Internal Revenue Code of 1986,
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as amended ("Code"), which could subject the Company to any tax penalty for
prohibited transactions and which has not adequately been corrected. Each ERISA
Plan is in compliance with all material reporting, disclosure and other
requirements of the Code and ERISA as they relate to any such ERISA Plan.
Determination letters have been received from the Internal Revenue Service with
respect to each ERISA Plan which is intended to comply with Code Section 401(a),
stating that such ERISA Plan and the attendant trust are qualified thereunder.
The Company has never completely or partially withdrawn from a "multi-employer
plan".
2.24 OFFICERS' CERTIFICATE. Any certificate signed by any duly authorized
officer of the Company and delivered to the Representative or to its counsel
shall be deemed a representation and warranty by the Company to the
Representative as to the matters covered thereby.
2.25 WARRANT AGREEMENT. The Company has entered into a warrant agreement
with respect to the Warrants substantially in the form filed as an exhibit to
the Registration Statement ("Warrant Agreement") with Continental Stock Transfer
& Trust Company, in form and substance satisfactory to the Representative,
providing for among other things, (i) no redemption of the Warrants without the
consent of GKN and (ii) for the payment of a warrant solicitation fee as
contemplated by Section 3.10 hereof.
2.26 AGREEMENTS WITH INSIDERS. The Company has caused to be duly executed
a legally binding and enforceable agreements pursuant to which (i) all of the
officers and directors of the Company and all of the shareholders owning 1% or
more of the outstanding Common Stock of the Company (collectively "Insiders")
have agreed not to sell any shares of Common Stock owned by them (either
pursuant to Rule 144 of the Regulations or otherwise) for a period of 18 months
following the Effective Date except with the prior written consent of GKN; and
all shareholders owning less than 1% of the outstanding Common Stock have agreed
not to sell any shares of Common Stock owned by them (either pursuant to Rule
144 of the Regulations or otherwise) for a period of 6 months following the
Effective Date except with the prior written consent of GKN. Attached as
Exhibit 2.26 is a list of such persons subject to lock-up restrictions.
2.27 SUBSIDIARIES. The representations and warranties made by the Company
in this Agreement shall also apply and be true with respect to each subsidiary
of the Company (a "subsidiary(ies)"), individually and taken as a whole with the
Company and all other subsidiaries, as if each representation and warranty
contained herein made specific reference to the subsidiary each time the term
"Company" was used.
2.28 UNAUDITED FINANCIALS. The Company has furnished to the Representative
as early as practicable prior to the date hereof a copy of the latest available
unaudited interim financial statements ("Unaudited Financials") of the Company
(which in no event shall be as of a date more than thirty days prior to the
Effective Date) which have been read by the Company's independent accountants,
as stated in their letter to be furnished pursuant to Section 4.3 hereof.
2.29 EXCHANGE ACT REPORTS. The Company is subject to the Exchange Act
reporting requirements and has filed all reports required by such Act in a
complete and timely manner. The information set forth in each such report was
true and correct as of the date of the filing of each such report with the
Commission.
2.30 REPURCHASE. The recent repurchases by the Company of its Common Stock
on October 23, 1996, November 7, 1996 and December 31, 1996, were effected in
accordance with
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all applicable laws and regulations and no persons have any outstanding rights
or obligations with respect to any of such repurchases.
2.31 NO OBLIGATIONS. The Company does not have any obligations or
liability pursuant to a recently aborted acquisition transaction with respect to
a real estate services company.
3. COVENANTS OF THE COMPANY. The Company covenants and agrees as follows:
3.1 AMENDMENTS TO REGISTRATION STATEMENT. The Company will deliver to the
Representative, prior to filing, any amendment or supplement to the Registration
Statement or Prospectus proposed to be filed after the Effective Date and not
file any such amendment or supplement to which the Representative shall
reasonably object.
3.2 FEDERAL SECURITIES LAWS.
3.2.1 COMPLIANCE. During the time when a Prospectus is required
to be delivered under the Act the Company will use all reasonable efforts to
comply with all requirements imposed upon it by the Act, the Regulations and the
Exchange Act and by the regulations under the Exchange Act, as from time to time
in force, so far as necessary to permit the continuance of sales of or dealings
in the Public Securities in accordance with the provisions hereof and the
Prospectus. If at any time when a Prospectus relating to the Public Securities
is required to be delivered under the Act any event shall have occurred as a
result of which, in the opinion of counsel for the Company or counsel for the
Representative, the Prospectus, as then amended or supplemented, includes an
untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, or if it is
necessary at any time to amend the Prospectus to comply with the Act, the
Company will notify the Representative promptly and prepare and file with the
Commission, subject to Section 3.1 hereof, an appropriate amendment or
supplement in accordance with Section 10 of the Act.
3.2.2 FILING OF FINAL PROSPECTUS. The Company will file the
Prospectus (in form and substance satisfactory to the Underwriter) with the
Commission pursuant to the requirements of Rule 424 of the Regulations.
3.2.3 EXCHANGE ACT REGISTRATION. For a period of five years from
the Effective Date, the Company will use its best efforts to maintain the
registration of the Common Stock and Warrants under the provisions of the
Exchange Act.
3.3 BLUE SKY FILING. The Company will endeavor in good faith, in
cooperation with the Representative, at or prior to the time the Registration
Statement becomes effective, to qualify the Public Securities for offering and
sale under the securities laws of such jurisdictions as the Representative may
reasonably designate, provided that no such qualification shall be required in
any jurisdiction where, as a result thereof, the Company would be subject to
service of general process or to taxation as a foreign corporation doing
business in such jurisdiction. In each jurisdiction where such qualification
shall be effected, the Company will, unless the Representative agree that such
action is not at the time necessary or advisable, use all reasonable efforts to
file and make such statements or reports at such times as are or may be required
by the laws of such jurisdiction.
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3.4 DELIVERY TO THE UNDERWRITERS OF PROSPECTUSES. The Company will
deliver to each of the several Underwriters, without charge, from time to time
during the period when the Prospectus is required to be delivered under the Act
or the Exchange Act such number of copies of each Preliminary Prospectus and the
Prospectus as such Underwriter may reasonably request and, as soon as the
Registration Statement or any amendment or supplement thereto becomes effective,
deliver to the Representative two original executed Registration Statements,
including exhibits, and all post-effective amendments thereto and copies of all
exhibits filed therewith or incorporated therein by reference and all original
executed consents of certified experts.
3.5 EVENTS REQUIRING NOTICE TO THE REPRESENTATIVE. The Company will
notify the Representative immediately upon its becoming aware, and confirm the
notice in writing, (i) of the effectiveness of the Registration Statement and
any amendment thereto, (ii) of the issuance by the Commission of any stop order
or of the initiation, or the threatening, of any proceeding for that purpose,
(iii) of the issuance by any state securities commission of any proceedings for
the suspension of the qualification of the Public Securities for offering or
sale in any jurisdiction or of the initiation, or the threatening, of any
proceeding for that purpose, (iv) of the mailing and delivery to the Commission
for filing of any amendment or supplement to the Registration Statement or
Prospectus, (v) of the receipt of any comments or request for any additional
information from the Commission, and (vi) of the happening of any event during
the period described in Section 3.4 hereof which, in the judgment of the
Company, makes any statement of a material fact made in the Registration
Statement or the Prospectus untrue or which requires the making of any changes
in the Registration Statement or the Prospectus in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. If the Commission or any state securities commission shall enter a
stop order or suspend such qualification at any time, the Company will make
every reasonable effort to obtain promptly the lifting of such order.
3.6 REVIEW OF FINANCIAL STATEMENTS. For a period of five years from the
Effective Date, the Company, at its expense, shall cause its regularly engaged
independent certified public accountants to participate in the preparation and
presentation (but not audit) of the Company's financial statements for each of
the first three fiscal quarters prior to the announcement of quarterly financial
information, the filing of the Company's Form 10-Q quarterly report and the
mailing of any quarterly financial information to stockholders.
3.7 RESERVED.
3.8 STANDARD & POOR'S. The Company will take all necessary and
appropriate actions to achieve accelerated publication in Standard and Poor's
Corporation Records Corporate Descriptions (within 30 days after the Effective
Date) and to maintain such publication with updated quarterly information for a
period of five years from the Effective Date, including the payment of any
necessary fees and expenses.
3.9 NASDAQ MAINTENANCE. For a period of five years from the date hereof,
the Company will use its best efforts to maintain the quotation by Nasdaq of the
Common Stock, and, if outstanding, the Warrants and, if the Company no longer
satisfies the inclusion standards of the Nasdaq, to apply for and maintain
quotations by the Nasdaq SmallCap of such securities during such period.
3.10 WARRANT SOLICITATION AND REPRESENTATIVE WARRANT SOLICITATION FEES The
Company hereby engages the Representative, on a non-exclusive basis, as its
agent for the solicitation of the
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exercise of the Warrants. The Company, at its cost, will (i) assist the
Representative with respect to such solicitation, if requested by the
Representative and will (ii) provide the Representative, and direct the
Company's transfer and warrant agent to provide to the Representative, lists of
the record and, to the extent known, beneficial owners of the Company's
Warrants. During the period commencing one year after the Effective Date, the
Company will pay to GKN (on behalf of the Representative) a commission of five
percent of the Warrant exercise price for each Warrant exercised, payable on the
date of such exercise, on the terms provided for in the Warrant Agreement, if
allowed under the rules and regulations of the NASD and only if the
Representative has provided bona fide securities to the Company in connection
with the exercise of Warrants. In addition to soliciting either orally or in
writing, the exercise of Warrants, such services may also include disseminating
information, either orally or in writing to Warrant holders about the Company or
the market for the Company's securities, and the assisting in the processing of
Warrants. The Representative may engage sub-agents in its solicitation efforts.
The Company will disclose the arrangement to pay such solicitation fees to the
Representative in any prospectus used by the Company in connection with the
registration of the shares of Common Stock underlying the Warrants.
3.11 REGISTRATION OF COMMON STOCK The Company agrees that prior to the
date that the Warrants become exercisable, it shall file all necessary
amendments to the Registration Statement, if possible, or a new registration
statement to register, under the Act, the Common Stock issuable upon exercise of
the Warrants. In either case, the Company shall cause the same to be effective
prior to the date that the Warrants become exercisable and shall maintain the
effectiveness of such registration statement and keep current a prospectus
thereunder and maintain such qualification until the expiration of the Warrants
and the Representative's Warrants in accordance with the provisions of the
Agreement. The provisions of this Section 3.11 may not be modified, amended or
deleted without the prior written consent of the Representative.
3.12 REPORTS TO THE REPRESENTATIVE AND OTHERS.
3.12.1 PERIODIC REPORTS, ETC. For a period of five years from the
Effective Date, the Company will promptly furnish to the Representative, and to
each other Underwriter who may so request, copies of such financial statements
and other periodic and special reports as the Company from time to time files
with any governmental authority or furnishes generally to holders of any class
of its securities, and promptly furnish to the Representative (i) a copy of each
periodic report the Company shall be required to file with the Commission, (ii)
a copy of every press release and every news item and article with respect to
the Company or its affairs which was released by the Company, (iii) copies of
each Form SR, (iv) a copy of each Form 8-K or Schedules 13D, 13G, 14D-1 or 13E-4
received or prepared by the Company, and (v) such additional documents and
information with respect to the Company and the affairs of any future
subsidiaries of the Company as the Representative may from time to time
reasonably request.
3.12.2 TRANSFER SHEETS AND WEEKLY POSITION LISTINGS. For a period
of five years from the Closing Date, the Company will furnish to the
Representative at the Company's sole expense such transfer sheets and position
listings of the Company's securities as the Representative may reasonably
request, including the daily, weekly and monthly consolidated transfer sheets of
the transfer agent of the Company and the weekly position listings of the
Depository Trust Company.
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3.13 AGREEMENTS BETWEEN THE REPRESENTATIVE AND THE COMPANY.
3.13.1 REPRESENTATIVE'S PURCHASE OPTION. On the Closing Date, the
Company will execute and deliver the Representative's Purchase Option to the
Representative substantially in the form filed as an exhibit to the Registration
Statement.
3.14 DISQUALIFICATION OF FORM S-1. For a period equal to five years from
the date hereof, the Company will not take any action or actions which may
prevent or disqualify the Company's use of Form S-1 (or other appropriate form)
for the registration of the Warrants and the Representative's Purchase Option
and the securities issuable upon exercise of those securities under the Act.
3.15 PAYMENT OF EXPENSES.
3.15.1 GENERAL EXPENSES. The Company hereby agrees to pay on each
of the Closing Date and the Option Closing Date, if any, to the extent not paid
at Closing Date, all expenses incident to the performance of the obligations of
the Company under this Agreement, including but not limited to (i) the
preparation, printing, filing, delivery and mailing (including the payment of
postage with respect to such mailing) of the Registration Statement, the
Prospectus and the Preliminary Prospectuses and the printing and mailing of this
Agreement and related documents, including the cost of all copies thereof and
any amendments thereof or supplements thereto supplied to the Underwriters in
quantities as may be required by the Underwriters, (ii) the printing, engraving,
issuance and delivery of the shares of Common Stock, the Warrants and the
Representative's Purchase Option, including any transfer or other taxes payable
thereon, (iii) the qualification of the Public Securities under state or foreign
securities or Blue Sky laws, including the filing fees under such Blue Sky laws,
the costs of printing and mailing the "Preliminary Blue Sky Memorandum," and all
amendments and supplements thereto, fees up to an aggregate of $35,000 and
disbursements of the Representative's counsel, and fees and disbursements of
local counsel, if any, retained for such purpose, (iv) costs associated with
applications for assignments of a rating of the Public Securities by qualified
rating agencies, (v) filing fees, costs and expenses (including fees and
disbursements for the Representative's counsel) incurred in registering the
offering with the NASD, (vi) costs of placing "tombstone" advertisements in THE
WALL STREET JOURNAL, THE NEW YORK TIMES and a third publication to be selected
by the Representative, (vii) fees and disbursements of the transfer and warrant
agent, (viii) the Company's expenses associated with "due diligence" meetings
arranged by the Representative, (ix) the preparation, binding and delivery of
transaction "bibles," in number, form and style reasonably satisfactory to the
Representative and transaction lucite cubes or similar commemorative items in a
style and quantity as reasonably requested by the Representative, (x) any
listing of the Public Securities on Nasdaq, and any securities exchange or any
listing in Standard & Poor's and (xi) all other costs and expenses incident to
the performance of its obligations hereunder which are not otherwise
specifically provided for in this Section 3.15.1. Since an important part of
the public offering process is for the Company to appropriately and accurately
describe both the background of the principals of the Company and the Company's
competitive position in its industry, the Company has engaged and will pay for
an investigative search firm of the Representative's choice to conduct an
investigation of principals of the Company mutually selected by the
Representative and the Company. The Representative may deduct from the net
proceeds of the offering payable to the Company on the Closing Date, or the
Option Closing Date, if any, the expenses set forth herein to be paid by the
Company to the Representative and/or to third parties.
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3.15.2 NON-ACCOUNTABLE EXPENSES. The Company further agrees that,
in addition to the expenses payable pursuant to Section 3.15.1 it will pay to
the Representative a non-accountable expense allowance equal to three percent
(3%) of the gross proceeds received by the Company from the sale of the Public
Securities, of which $60,000 has been paid to date, and the Company will pay the
balance on the Closing Date and any additional monies owed attributable to the
Option Securities or otherwise on the Option Closing Date by certified or bank
cashier's check or, at the election of the Representative, by deduction from the
proceeds of the offering contemplated herein. If the offering contemplated by
this Agreement is not consummated for any reason whatsoever then the following
provisions shall apply: The Company's liability for payment to the
Representative of the non-accountable expense allowance shall be equal to the
sum of the Representative's actual out-of-pocket expenses (including, but not
limited to, counsel fees, "road-show" and due diligence expenses). The
Representative shall retain such part of the non-accountable expense allowance
previously paid as shall equal such actual out-of-pocket expenses. If the
amount previously paid is insufficient to cover such actual out-of-pocket
expenses, the Company shall remain liable for and promptly pay any other actual
out-of-pocket expenses. If the amount previously paid exceeds the amount of
actual out-of-pocket expenses, the Representative shall promptly remit to the
Company any such excess.
3.16 APPLICATION OF NET PROCEEDS. The Company will apply the net proceeds
from the offering received by it in a manner consistent with the application
described under the caption "USE OF PROCEEDS" in the Prospectus. The Company
hereby agrees that, other than described under "USE OF PROCEEDS" in the
Prospectus, the Company will not apply any net proceeds from the offering to pay
(i) any debt for borrowed funds, other than periodic payments, in the ordinary
course, under bank or other institutional credit lines, or (ii) any debt or
obligation owed to any shareholder owning one percent or more of the outstanding
shares of Common Stock on the Closing Date, or by any family member or affiliate
of any of the foregoing persons, or by any option holder who would have the
ability to sell the shares underlying his option under Rule 701 under the Act.
3.17 DELIVERY OF EARNINGS STATEMENTS TO SECURITY HOLDERS. The Company will
make generally available to its security holders as soon as practicable, but not
later than the first day of the fifteenth full calendar month following the
Effective Date, an earnings statement (which need not be certified by
independent public or independent certified public accountants unless required
by the Act or the Regulations, but which shall satisfy the provisions of Rule
158(a) under Section 11(a) of the Act) covering a period of at least twelve
consecutive months beginning after the Effective Date.
3.18 KEY PERSON LIFE INSURANCE. The Company has key person life insurance
in an amount no less than $1,000,000 on the lives of Albino Collini and Mario
Tozzi-Condivi and pay the annual premium therefor naming the Company as the sole
beneficiary thereof for at least three years following the Effective Date.
3.19 STABILIZATION. Neither the Company, nor, to its knowledge, any of its
employees, directors or stockholders has taken or will take, directly or
indirectly, any action designed to or which has constituted or which might
reasonably be expected to cause or result in, under the Exchange Act, or
otherwise, stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Public Securities.
3.20 INTERNAL CONTROLS. The Company maintains and will continue to
maintain a system of internal accounting controls sufficient to provide
reasonable assurances that: (i) transactions are executed in accordance with
management's general or specific authorization, (ii) transactions are
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recorded as necessary in order to permit preparation of financial statements in
accordance with generally accepted accounting principles and to maintain
accountability for assets, (iii) access to assets is permitted only in
accordance with management's general or specific authorization, and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
3.21 ACCOUNTANTS AND LAWYERS. For a period of five years from the
Effective Date, the Company shall retain independent public accountants and
securities lawyers reasonably acceptable to the Representative. Accountants
Arthur Andersen, LLP and lawyers Morrison Cohen Singer & Weinstein, L.L.P. are
acceptable to the Company.
3.22 TRANSFER AGENT. For a period of five years from the Effective Date,
the Company shall retain a transfer agent for the Common Stock and Warrants
acceptable to the Representative. American Stock Transfer & Trust Company
("Transfer Agent") is acceptable to the Company.
3.23 SALE OF SECURITIES; EXERCISE PRICE OF OPTIONS. To the extent it has
the ability, the Company agrees not to permit or cause a private or public sale
or private or public offering of any of its securities (in any manner, including
pursuant to Rule 144 under the Act) owned nominally or beneficially by the
Insiders for a period of 18 months following the Effective Date without
obtaining the prior written approval of GKN. The Company will not issue any
shares of Common Stock, options, warrants or other convertible securities during
a three year period from the date of the Agreement for an issuance or exercise
price, as the case may be, of less than the fair market value on the date of
issuance or grant without the prior written consent of GKN.
3.24 RIGHT OF FIRST REFUSAL. During the three-year period following the
Effective Date, GKN shall have the right to purchase for GKN's account or to
sell for the account of the Insiders, any securities sold by the Insiders or by
any family member or affiliate of any of the Insiders on the open market,
including pursuant to Rule 144 under the Act. Each Insider will agree to
consult with GKN with regard to any such sales and will offer GKN the exclusive
opportunity to purchase or sell such securities on terms at least as favorable
to the Insider as they can secure elsewhere. If GKN fails to accept in writing
any such proposal for sale by the Insider within 24 hours after receipt of a
notice containing such proposal, then GKN shall have no claim or right with
respect to any such sales contained in any such notice. If, thereafter, such
proposal is modified in any material respect, the Insider shall adopt the same
procedure as with respect to the original proposal.
4. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The obligations of the
several Underwriters to purchase and pay for the Securities, as provided herein,
shall be subject to the continuing accuracy of the representations and
warranties of the Company as of the date hereof and as of each of the Closing
Date and the Option Closing Date, if any, to the accuracy of the statements of
officers of the Company made pursuant to the provisions hereof and to the
performance by the Company of its obligations hereunder and to the following
conditions:
4.1 REGULATORY MATTERS.
4.1.1 EFFECTIVENESS OF REGISTRATION STATEMENT. The Registration
Statement has been declared effective on the date of this Agreement and, at each
of the Closing Date and the Option Closing Date, no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for the purpose shall have been instituted or shall be pending or
contemplated by the Commission and any request on the part of the Commission for
additional
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information shall have been complied with to the reasonable satisfaction of
Graubard Mollen & Miller, counsel to the Representative.
4.1.2 NASD CLEARANCE. By the Effective Date, the Representative
shall have received clearance from the NASD as to the amount of compensation
allowable or payable to the Representative as described in the Registration
Statement.
4.1.3 NO BLUE SKY STOP ORDERS. No order suspending the sale of
the Securities in any jurisdiction designated by you pursuant to Section 3.3
hereof shall have been issued on either on the Closing Date or the Option
Closing Date, and no proceedings for that purpose shall have been instituted or
shall be contemplated.
4.2 COMPANY COUNSEL MATTERS.
4.2.1 EFFECTIVE DATE OPINION OF COUNSEL. On the Effective Date,
the Representative shall have received the favorable opinion of Morrison Cohen
Singer & Weinstein, L.L.P., counsel to the Company, dated the Effective Date,
addressed to the Representative and in form and substance satisfactory to
Graubard Mollen & Miller, counsel to the Representative, to the effect that:
(i) The Company has been duly organized and is validly existing
as a corporation and is in good standing under the laws of its state of
incorporation. The Company is duly qualified and licensed and in good standing
as a foreign corporation in each jurisdiction in which it owns or leases any
real property or to the best of our knowledge the character of its operations as
described in the Prospectus requires such qualification or licensing, except
where the failure would have a material adverse effect on the business of the
Company.
(ii) The Company has all requisite corporate power and
authority, and has all necessary authorizations, approvals, orders, licenses,
certificates and permits of and from all governmental or regulatory officials
and bodies to own or lease its properties and conduct its business as described
in the Prospectus, except where failure to have same would not have, either
singly or in the aggregate, a material adverse effect on the Company or its
operations. The Company has all corporate power and authority to enter into
this Agreement and to carry out the provisions and conditions hereof, and all
consents, authorizations, approvals and orders required by it in connection
therewith have been obtained. No consents, approvals, authorizations or orders
of, and no filing with any court or governmental agency or body (other than such
as may be required under the Act and applicable Blue Sky laws), is required by
it for the valid authorization, issuance, sale and delivery of the Securities,
and the consummation of the transactions and agreements contemplated by this
Agreement, the Warrant Agreement and the Representative's Purchase Option or if
so required, all such authorizations, approvals, consents, orders,
registrations, licenses and permits have been duly obtained by it and are in
full force and effect and have been disclosed to the Representative.
(iii) All issued and outstanding securities of the Company have
been duly authorized and validly issued and are fully paid and non-assessable;
the holders thereof have no rights of rescission with respect thereto, and are
not subject to personal liability by reason of being such holders; and none of
such securities were issued in violation of the preemptive rights of any holders
of any security of the Company or similar contractual rights granted by the
Company and known to us. The outstanding options and warrants issued by the
Company to purchase shares of Common Stock known to us constitute the valid and
binding obligations of the Company,
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enforceable in accordance with their terms. The offers and sales of the
outstanding Common Stock and options and warrants to purchase shares of Common
Stock were at all relevant times either registered under the Act or exempt from
such registration requirements. The authorized capital stock of the Company is
as set forth under the caption "Capitalization" in the Prospectus.
(iv) The Securities have been duly authorized and, when issued
and paid for, will be validly issued, fully paid and non-assessable; the holders
thereof are not and will not be subject to personal liability by reason of being
such holders. The Securities are not and will not be subject to the preemptive
rights of any holders of any security of the Company or, to the best of such
counsel's knowledge, similar contractual rights granted by the Company. All
corporate action required to be taken for the authorization, issuance, and sale
of the Securities has been duly and validly taken. When issued, the
Representative's Purchase Option, the Representative's Warrants and the Warrants
will constitute valid and binding obligations of the Company to issue and sell,
upon exercise thereof and payment therefor, the number and type of securities of
the Company called for thereby.
(v) To the best of such counsel's knowledge, except as set forth
in the Prospectus, no holders of any securities of the Company or of any
options, warrants or securities of the Company exercisable for or convertible or
exchangeable into securities of the Company and issued by the Company have the
right to require the Company to repurchase, or register any such securities of
the Company under the Act or to include any such securities in a registration
statement to be filed by the Company under the Act.
(vi) To the best of such counsel's knowledge, the shares of
Common Stock and the Warrants are eligible for quotation on Nasdaq.
(vii) This Agreement, the Representative's Purchase Option and
the Warrant Agreement have each been duly and validly authorized by the Company
and, when executed and delivered by the Company, will constitute valid and
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, except (a) as such enforceability may be
limited by bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally, (b) as enforceability of any indemnification
provisions may be limited under the federal and state securities laws, and (c)
that the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to the equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought.
(viii) The execution, delivery and performance by the Company of
this Agreement, the Representative's Purchase Option and the Warrant Agreement,
the issuance and sale of the Securities, the consummation of the transactions
contemplated hereby and thereby and the compliance by the Company with the terms
and provisions hereof and thereof, do not and will not, with or without the
giving of notice or the lapse of time, or both, (a) conflict with, or result in
a breach of, any of the terms or provisions of, or constitute a default under,
or result in the creation or modification of any lien, security interest, charge
or encumbrance upon any of the properties or assets of the Company pursuant to
the terms of, any material mortgage, deed of trust, note, indenture, loan,
contract, commitment or other material agreement or instrument, to which the
Company is a party or by which the Company or any of its properties or assets
may be bound and of which such counsel has knowledge, (b) result in any
violation of the provisions of the Certificate of Incorporation or the By-Laws
of the Company, (c) violate any statute or any judgment, order or decree, rule
or regulation applicable to the Company of any court, domestic or foreign, or of
any
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federal, state or other regulatory authority or other governmental body having
jurisdiction over the Company, its properties or assets and of which such
counsel has knowledge, or (d) have a material effect on any permit,
certification, registration, approval, consent, license or franchise of the
Company that is known to such counsel.
(ix) The Registration Statement, each Preliminary Prospectus and
the Prospectus and any post-effective amendments or supplements thereto (other
than the financial statements included therein, as to which no opinion need be
rendered) comply as to form in all material respects with the requirements of
the Act and Regulations. The Securities and all other securities issued or
issuable by the Company and described in the Registration Statement and the
Prospectus conform in all respects to the description thereof contained in the
Registration Statement and the Prospectus. The statements in the Prospectus
regarding the Company have been reviewed by such counsel, and insofar as they
refer to statements of law, descriptions of statutes, licenses, rules or
regulations or legal conclusions are correct in all material respects. No
statute or regulation or legal or governmental proceeding required to be
described in the Prospectus is not described as required, nor are any contracts
or documents of a character required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits to the Registration
Statement and known to counsel not so described or filed as required.
(x) Counsel has participated in conferences with officers and
other representatives of the Company, representatives of the independent public
accountants for the Company and representatives of the Underwriters at which the
contents of the Registration Statement, the Prospectus and related matters were
discussed and although such counsel is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement and Prospectus (except as otherwise set
forth in this opinion), no facts have come to the attention of such counsel
which lead them to believe that either the Registration Statement or the
Prospectus nor any amendment or supplement thereto, as of the date of such
opinion, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading (it being understood that such counsel need express no opinion with
respect to the financial statements and schedules and other financial and
statistical data included in the Registration Statement or Prospectus).
(xi) The Securities and Exchange Commission has informed counsel
that the Registration Statement is effective under the Act, and, to the best of
such counsel's knowledge, no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose have
been instituted or are pending or threatened under the Act or applicable state
securities laws.
(xii) To such counsel's knowledge, except as described in the
Prospectus, no default exists in the due performance and observance of any term,
covenant or condition of any license, contract, indenture, mortgage, deed of
trust, note, loan or credit agreement, or any other agreement or instrument
evidencing an obligation for borrowed money, or any other agreement or
instrument to which the Company is a party or by which the Company may be bound
or to which any of the properties or assets of the Company is subject, except
where such defaults, either singly or in the aggregate, would not have a
material adverse effect on the Company or its operations. To such counsel's
knowledge, the Company is not in violation of any term or provision of its
Certificate of Incorporation or By-Laws. The Company is not in violation of any
franchise, license, permit, applicable law, rule, regulation, judgment or decree
of any governmental agency or court, domestic
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or foreign, having jurisdiction over the Company or any of its properties or
business, except where such violations, either singly or in the aggregate, would
not have a material adverse effect on the Company or its operations.
(xiii) To the best of counsel's knowledge, (a) the Company owns
or possesses, free and clear of all liens and encumbrances, and rights thereto,
other than as disclosed in the Prospectus, the rights to all patents, patent
applications, patent rights, trademark applications or copyrights used by the
Company in its businesses (collectively, "Intellectual Property"); (b) the
Company has not received any notice of infringement or of conflict with rights
on claims of other with respect to any Intellectual Property owned or used by it
which, singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, could result in any material adverse effect upon the Company,
except as described in the Prospectus, and (c) counsel and the Company have no
knowledge without any independent investigation of patent rights of others which
are or would be infringed by specific products or processes referred to in the
Prospectus in such a manner as to materially and adversely affect the Company,
except as described in the Prospectus.
(xiv) To the best of such counsel's knowledge, except as
described in the Prospectus, the Company does not own an interest in any
corporation, partnership, joint venture, trust or other business entity.
(xv) To the best of such counsel's knowledge, except as set
forth in the Prospectus, there is no action, suit or proceeding before or by any
court or governmental agency or body, domestic or foreign, now pending, or
threatened against the Company, which might result in any material and adverse
change in the condition (financial or otherwise), business or prospects of the
Company, or might materially and adversely affect the properties or assets
thereof.
(xvi) To the best of such counsel's knowledge, except as
described in the Prospectus, there are no claims, payments, issuances,
arrangements or understandings with the Company for services in the nature of a
finder's or origination fee with respect to the sale of the Securities hereunder
or financial consulting arrangements or any other arrangements, agreements,
understandings, payments or issuances that may affect the Representative's
compensation, as determined by the NASD.
(xvii) To the best of such counsel's knowledge, the Company has
filed all Exchange Act reports in a complete and timely manner and the
information set forth in such reports is true and correct as of the respective
filing dates of each such report with the Commission.
(xviii) The recent repurchases by the Company of its Common
Stock on October 23, 1996, November 7, 1996 and December 31, 1996, were effected
in accordance with all applicable laws and regulations and to the best of such
counsel's knowledge, no persons have any outstanding rights or obligations with
respect to such repurchases.
(xix) The Company does not have any obligation or liability
pursuant to a recently aborted transaction with respect to a real estate
services company.
Unless the context clearly indicates otherwise, the term "Company" as
used in this Section 4.2.1 shall include each subsidiary of the Company. The
opinion of counsel for the Company and any opinion relied upon by such counsel
for the Company shall include a statement
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to the effect that it may be relied upon by counsel for the Representative in
its opinion delivered to the Representative.
4.2.2 CLOSING DATE AND OPTION CLOSING DATE OPINION OF COUNSEL. On
each of the Closing Date and the Option Closing Date, if any, the Representative
shall have received the favorable opinion of Morrison Cohen Singer & Weinstein,
L.L.P., counsel to the Company, dated the Closing Date or the Option Closing
Date, as the case may be, addressed to the Representative and in form and
substance satisfactory to Graubard Mollen & Miller, counsel to the
Representative, confirming as of the Closing Date and, if applicable, the Option
Closing Date, the statements made by Morrison Cohen Singer & Weinstein, L.L.P.
in its opinion delivered on the Effective Date.
[4.2.3 RELIANCE. IN RENDERING SUCH OPINION, SUCH COUNSEL MAY RELY
(I) AS TO MATTERS INVOLVING THE APPLICATION OF LAWS OTHER THAN THE LAWS OF THE
UNITED STATES AND JURISDICTIONS IN WHICH THEY ARE ADMITTED, TO THE EXTENT SUCH
COUNSEL DEEMS PROPER AND TO THE EXTENT SPECIFIED IN SUCH OPINION, IF AT ALL,
UPON AN OPINION OR OPINIONS (IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO
COUNSEL) OF OTHER COUNSEL REASONABLY ACCEPTABLE TO COUNSEL, FAMILIAR WITH THE
APPLICABLE LAWS, AND (II) AS TO MATTERS OF FACT, TO THE EXTENT THEY DEEM PROPER,
ON CERTIFICATES OR OTHER WRITTEN STATEMENTS OF OFFICERS OF DEPARTMENTS OF
VARIOUS JURISDICTION HAVING CUSTODY OF DOCUMENTS RESPECTING THE CORPORATE
EXISTENCE OR GOOD STANDING OF THE COMPANY, PROVIDED THAT COPIES OF ANY SUCH
STATEMENTS OR CERTIFICATES SHALL BE DELIVERED TO COUNSEL IF REQUESTED. THE
OPINION OF COUNSEL FOR THE COMPANY SHALL INCLUDE A STATEMENT TO THE EFFECT THAT
IT MAY BE RELIED UPON BY COUNSEL FOR THE REPRESENTATIVE IN ITS OPINION DELIVERED
TO THE REPRESENTATIVE.]
4.3 COLD COMFORT LETTER. At the time this Agreement is executed, and at
each of the Closing Date and the Option Closing Date, if any, you shall have
received a letter, addressed to the Representative and in form and substance
satisfactory in all respects (including the non-material nature of the changes
or decreases, if any, referred to in clause (iii) below) to you and to Graubard
Mollen & Miller, counsel for the Representative, from each of Reconta Ernst &
Young, and Arthur Andersen LLP dated, respectively, as of the date of this
Agreement and as of the Closing Date and the Option Closing Date, if any:
(i) Confirming that they are independent accountants with respect
to the Company within the meaning of the Act and the applicable Regulations;
(ii) Stating that in their opinion the financial statements of the
Company prepared by them and included in the Registration Statement and
Prospectus comply as to form in all material respects with the applicable
accounting requirements of the Act and the published Regulations thereunder;
(iii) (WITH RESPECT ONLY TO ARTHUR ANDERSEN) Stating that, based on
the performance of procedures specified by the American Institute of Certified
Public Accountants for a review of the latest available unaudited interim
financial statements of the Company (as described in SAS No. 71 Interim
Financial Information), with an indication of the date of the latest available
unaudited interim financial statements, a reading of the latest available
minutes of the stockholders and board of directors and the various committees of
the board of directors, consultations with officers and other employees of the
Company responsible for financial and accounting matters and other specified
procedures and inquiries, nothing has come to their attention which would lead
them to believe that (a) the unaudited financial statements of the Company and
the pro forma financial information
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included in the Registration Statement do not comply as to form in all material
respects with the applicable accounting requirements of the Act and the
Regulations or any material modification should be made to the unaudited interim
financial statements and/or pro forma financial information included in the
Registration Statement for them to be in conformity with generally accepted
accounting principles applied on a basis substantially consistent with that of
the audited financial statements of the Company included in the Registration
Statement, (b) at a date not later than five days prior to the Effective Date,
Closing Date or Option Closing Date, as the case may be, there was any change in
the capital stock or long-term debt of the Company, or any decrease in the
stockholders' equity of the Company as compared with amounts shown in the
December 31, 1996 balance sheet included in the Registration Statement, other
than as set forth in or contemplated by the Registration Statement, or, if there
was any decrease, setting forth the amount of such decrease, and (c) during the
period from January 1, 1997 to a specified date not later than five days prior
to the Effective Date, Closing Date or Option Closing Date, as the case may be,
there was any decrease in revenues, net earnings or net earnings per share of
Common Stock or increase in net loss or net loss per share of Common Stock, in
each case as compared with the corresponding period in the preceding year and as
compared with the corresponding period in the preceding quarter, other than as
set forth in or contemplated by the Registration Statement, or, if there was any
such decrease, setting forth the amount of such decrease;
(iv) (WITH RESPECT ONLY TO ARTHUR ANDERSEN) Setting forth, at a
date not later than five days prior to the Effective Date, the amount of
liabilities of the Company (including a break-down of commercial papers and
notes payable to banks);
(v) Stating that they have compared specific dollar amounts,
numbers of shares, percentages of revenues and earnings, statements and other
financial information pertaining to the Company set forth in the Prospectus in
each case to the extent that such amounts, numbers, percentages, statements and
information may be derived from the general accounting records, and work sheets,
of the Company with the results obtained from the application of specified
readings, inquiries and other appropriate procedures (which procedures do not
constitute an examination in accordance with generally accepted auditing
standards) set forth in the letter and found them to be in agreement;
(vi) Stating that they have not during the immediately preceding
five year period brought to the attention of the Company's management any
reportable condition related to internal structure, design or operation as
defined in the Statement on Auditing Standards No. 60 -- "Communication of
Internal Control Structure Related Matters Noted in an Audit," in the Company's
internal controls; and
(vii) Statements as to such other matters incident to the
transaction contemplated hereby as you may reasonably request.
4.4 OFFICERS' CERTIFICATES.
4.4.1 OFFICERS' CERTIFICATE. At each of the Closing Date and the
Option Closing Date, if any, the Representative shall have received a
certificate of the Company signed by the Chairman of the Board or the President
and the Secretary of the Company, dated the Closing Date or the Option Closing
Date, as the case may be, respectively, to the effect that the Company has
performed all covenants and complied with all conditions required by this
Agreement to be performed or complied with by the Company prior to and as of the
Closing Date, or the Option
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Closing Date, as the case may be, and that the conditions set forth in Section
4.5 hereof have been satisfied as of such date and that, as of Closing Date and
the Option Closing Date, as the case may be, the representations and warranties
of the Company set forth in Section 2 hereof are true and correct. In addition,
the Representative will have received such other and further certificates of
officers of the Company as the Representative may reasonably request.
4.4.2 SECRETARY'S CERTIFICATE. At each of the Closing Date and the
Option Closing Date, if any, the Representative shall have received a
certificate of the Company signed by the Secretary of the Company, dated the
Closing Date or the Option Date, as the case may be, respectively, certifying
(i) that the By-Laws and Certificate of Incorporation, as amended, of the
Company are true and complete, have not been modified and are in full force and
effect, (ii) that the resolutions relating to the public offering contemplated
by this Agreement are in full force and effect and have not been modified, (iii)
all correspondence between the Company or its counsel and the Commission, (iv)
all correspondence between the Company or its counsel and the NASD concerning
inclusion on Nasdaq, and (vi) as to the incumbency of the officers of the
Company. The documents referred to in such certificate shall be attached to
such certificate.
4.5 NO MATERIAL CHANGES. Prior to and on each of the Closing Date and the
Option Closing Date, if any, (i) there shall have been no material adverse
change or development involving a prospective material change in the condition
or prospects or the business activities, financial or otherwise, of the Company
from the latest dates as of which such condition is set forth in the
Registration Statement and Prospectus, (ii) there shall have been no
transaction, not in the ordinary course of business, entered into by the Company
from the latest date as of which the financial condition of the Company is set
forth in the Registration Statement and Prospectus which is materially adverse
to the Company, taken as a whole, (iii) the Company shall not be in default
under any provision of any instrument relating to any outstanding indebtedness
which default would have a material adverse effect on the Company, (iv) no
material amount of the assets of the Company shall have been pledged or
mortgaged, except as set forth in the Registration Statement and Prospectus, (v)
no action suit or proceeding, at law or in equity, shall have been pending or
threatened against the Company or affecting any of its property or business
before or by any court or federal or state commission, board or other
administrative agency wherein an unfavorable decision, ruling or finding may
materially adversely affect the business, operations, prospects or financial
condition or income of the Company, except as set forth in the Registration
Statement and Prospectus, (vi) no stop order shall have been issued under the
Act and no proceedings therefor shall have been initiated or threatened by the
Commission, and (vii) the Registration Statement and the Prospectus and any
amendments or supplements thereto contain all material statements which are
required to be stated therein in accordance with the Act and the Regulations and
conform in all material respects to the requirements of the Act and the
Regulations, and neither the Registration Statement nor the Prospectus nor any
amendment or supplement thereto contains any untrue statement of a material fact
or omits to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
4.6 DELIVERY OF AGREEMENTS. The Company has delivered to the
Representative an executed copy of the Representative's Purchase Option.
4.7 OPINION OF COUNSEL FOR THE REPRESENTATIVE. All proceedings taken in
connection with the authorization, issuance or sale of the Securities as herein
contemplated shall be reasonably satisfactory in form and substance to you and
to Graubard Mollen & Miller, counsel to the
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Representative, and you shall have received from such counsel a favorable
opinion, dated the Closing Date and the Option Closing Date, if any, with
respect to such of these proceedings as you may reasonably require. On or prior
to the Effective Date, the Closing Date and the Option Closing Date, as the case
may be, counsel for the Representative shall have been furnished such documents,
certificates and opinions as they may reasonably require for the purpose of
enabling them to review or pass upon the matters referred to in this Section
4.7, or in order to evidence the accuracy, completeness or satisfaction of any
of the representations, warranties or conditions herein contained.
5. INDEMNIFICATION.
5.1 INDEMNIFICATION OF THE UNDERWRITERS.
5.1.1 GENERAL. Subject to the conditions set forth below, the
Company agrees to indemnify and hold harmless each of the Underwriters, their
respective directors, officers, agents and employees and each person, if any,
who controls any such Underwriter ("controlling person") within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act, against any and all
loss, liability, claim, damage and expense whatsoever (including but not limited
to any and all legal or other expenses reasonably incurred in investigating,
preparing or defending against any litigation, commenced or threatened, whether
arising out of any action between any of the Underwriters and the Company or
between any of the Underwriters and any third-party or otherwise) to which they
or any of them may become subject under the Act, the Exchange Act or any other
statute or at common law or otherwise or under the laws of foreign countries,
arising out of or based upon any untrue statement or alleged untrue statement of
a material fact contained in (i) the Registration Statement or the Prospectus
(as from time to time each may be amended and supplemented); (ii) in any
post-effective amendment or amendments or any new registration statement and
prospectus in which is included securities of the Company issued or issuable
upon exercise of the Purchase Option; or (iii) any application or other document
or written communication (in this Section 5 collectively called "application")
executed by the Company or based upon written information furnished by the
Company in any jurisdiction in order to qualify the Securities under the
securities laws thereof or filed with the Commission, any state securities
commission or agency, Nasdaq or any securities exchange; or the omission or
alleged omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, unless such statement or omission
was made in reliance upon, and in strict conformity with, written information
furnished to the Company with respect to any Underwriter by or on behalf of such
Underwriter expressly for use in any Preliminary Prospectus, the Registration
Statement or Prospectus, or any amendment or supplement thereof, or in any
application, as the case may be.
5.1.2 PROCEDURE. If any action is brought against an Underwriter or
controlling person in respect of which indemnity may be sought against the
Company pursuant to Section 5.1.1, such Underwriter shall promptly notify the
Company in writing of the institution of such action and the Company shall
assume the defense of such action, including the employment and fees of counsel
(subject to the approval of such Underwriter) and payment of actual expenses.
Such Underwriter or controlling person shall have the right to employ its or
their own counsel in any such case, but the fees and expenses of such counsel
shall be at the expense of such Underwriter or such controlling person unless
(i) the employment of such counsel shall have been authorized in writing by the
Company in connection with the defense of such action, or (ii) the Company shall
not have employed counsel to have charge of the defense of such action, or (iii)
such indemnified party
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or parties shall have reasonably concluded that there may be defenses available
to it or them which are different from or additional to those available to the
Company (in which case the Company shall not have the right to direct the
defense of such action on behalf of the indemnified party or parties), in any of
which events the fees and expenses of not more than one additional firm of
attorneys selected by the Underwriter and/or controlling person shall be borne
by the Company. Notwithstanding anything to the contrary contained herein, if
an Underwriter or controlling person shall assume the defense of such action as
provided above, the Company shall have the right to approve the terms of any
settlement of such action which approval shall not be unreasonably withheld.
5.2 INDEMNIFICATION OF THE COMPANY. Each Underwriter, severally and not
jointly, agrees to indemnify and hold harmless the Company against any and all
loss, liability, claim, damage and expense described in the foregoing indemnity
from the Company to the several Underwriters, as incurred, but only with respect
to untrue statements or omissions, or alleged untrue statements or omissions
directly relating to the transactions effected by the Underwriters in connection
with this offering made in any Preliminary Prospectus, the Registration
Statement or Prospectus or any amendment or supplement thereto or in any
application in reliance upon, and in strict conformity with, written information
furnished to the Company with respect to such Underwriter by or on behalf of
such Underwriter expressly for use in such Preliminary Prospectus, the
Registration Statement or Prospectus or any amendment or supplement thereto or
in any such application. In case any action shall be brought against the
Company or any other person so indemnified based on any Preliminary Prospectus,
the Registration Statement or Prospectus or any amendment or supplement thereto
or any application, and in respect of which indemnity may be sought against any
Underwriter, such Underwriter shall have the rights and duties given to the
Company, and the Company and each other person so indemnified shall have the
rights and duties given to the several Underwriters by the provisions of Section
5.1.2. The Company agrees promptly to notify the Representative of the
commencement of any litigation or proceedings against the Company or any of its
officers, directors or controlling persons in connection with the issue and sale
of the Securities or in connection with the Registration Statement or
Prospectus.
5.3 CONTRIBUTION.
5.3.1 CONTRIBUTION RIGHTS. In order to provide for just and
equitable contribution under the Act in any case in which (i) any person
entitled to indemnification under this Section 5 makes claim for indemnification
pursuant hereto but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Section 5 provides for indemnification in such case, or (ii) contribution
under the Act, the Exchange Act or otherwise may be required on the part of any
such person in circumstances for which indemnification is provided under this
Section 5, then, and in each such case, the Company and the Underwriters shall
contribute to the aggregate losses, liabilities, claims, damages and expenses of
the nature contemplated by said indemnity agreement incurred by the Company and
the Underwriters, as incurred, in such proportions that the Underwriters are
responsible for that portion represented by the percentage that the underwriting
discount appearing on the cover page of the Prospectus bears to the initial
offering price appearing thereon and the Company is responsible for the balance;
provided, that, no person guilty of a fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. Notwithstanding
the provisions of this Section 5.3, no Underwriter shall not be required to
contribute any amount in
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excess of the amount by which the total price at which the Public Securities
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages which such Underwriter has otherwise been
required to pay in respect of such losses, liabilities, claims, damages and
expenses. For purposes of this Section, each director, officer and employee of
an Underwriter, and each person, if any, who controls an Underwriter within the
meaning of Section 15 of the Act shall have the same rights to contribution as
such Underwriter.
5.3.2 CONTRIBUTION PROCEDURE. Within fifteen days after receipt by
any party to this Agreement (or its representative) of notice of the
commencement of any action, suit or proceeding, such party will, if a claim for
contribution in respect thereof is to be made against another party
("contributing party"), notify the contributing party of the commencement
thereof, but the omission to so notify the contributing party will not relieve
it from any liability which it may have to any other party other than for
contribution hereunder. In case any such action, suit or proceeding is brought
against any party, and such party notifies a contributing party or its
representative of the commencement thereof within the aforesaid fifteen days,
the contributing party will be entitled to participate therein with the
notifying party and any other contributing party similarly notified. Any such
contributing party shall not be liable to any party seeking contribution on
account of any settlement of any claim, action or proceeding effected by such
party seeking contribution on account of any settlement of any claim, action or
proceeding which was effected by such party without the written consent of such
contributing party. The contribution provisions contained in this Section are
intended to supersede, to the extent permitted by law, any right to contribution
under the Act, the Exchange Act or otherwise available.
6. DEFAULT BY AN UNDERWRITER.
6.1 DEFAULT NOT EXCEEDING 10% OF FIRM SECURITIES. If any Underwriter or
Underwriters shall default in its or their obligations to purchase the Firm
Securities or the Option Securities if exercised, hereunder, and if the number
of the Firm Securities with respect to which such default relates does not
exceed in the aggregate 10% of the number of Firm Securities or Option
Securities which all Underwriters have agreed to purchase hereunder, then such
Firm Securities or Option Securities to which the default relates shall be
purchased by the non-defaulting Underwriters in proportion to their respective
commitments hereunder.
6.2 DEFAULT EXCEEDING 10% OF FIRM SECURITIES. In the event that such
default relates to more than 10% of the Firm Securities or Option Securities,
you may in your discretion arrange for yourself or for another party or parties
to purchase such Firm Securities or Option Securities to which such default
relates on the terms contained herein. If within one business day after such
default relating to more than 10% of the Firm Securities or Option Securities
you do not arrange for the purchase of such Firm Securities or Option
Securities, then the Company shall be entitled to a further period of one
business day within which to procure another party or parties satisfactory to
you to purchase said Firm Securities or Option Securities on such terms. In the
event that neither you nor the Company arrange for the purchase of the Firm
Securities or Option Securities to which a default relates as provided in this
Section 6, this Agreement may be terminated by you or the Company without
liability on the part of the Company (except as provided in Section 3.15 and
Section 5.1 hereof) or the several Underwriters but nothing herein shall relieve
a defaulting Underwriter of its liability, if any, to the other several
Underwriters and to the Company for damages occasioned by its default hereunder.
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6.3 POSTPONEMENT OF CLOSING DATE. In the event that the Firm Securities
or Option Securities to which the default relates are to be purchased by the
non-defaulting Underwriters, or are to be purchased by another party or parties
as aforesaid, you or the Company shall have the right to postpone the Closing
Date or Option Closing Date for a reasonable period, but not in any event
exceeding five business days, in order to effect whatever changes may thereby be
made necessary in the Registration Statement or the Prospectus or in any other
documents and arrangements, and the Company agrees to file promptly any
amendment to the Registration Statement or the Prospectus which in the opinion
of counsel for the Underwriters may thereby be made necessary. The term
"Underwriter" as used in this Agreement shall include any party substituted
under this Section 6 with like effect as if it had originally been a party to
this Agreement with respect to such Securities.
7. ADDITIONAL COVENANTS.
7.1 BOARD DESIGNEE. For a period of five years from the Effective Date,
the Company will recommend and use its best efforts to elect two designees of
GKN as members of the Company's Board of Directors. Such designees shall
receive no more or less compensation than is paid to other non-management
directors of the Company. If GKN does not exercise its option to designate at
least one member of the Company's Board of Directors, GKN shall nevertheless
have the right to send a representative (who need not be the same individual
from meeting to meeting) to observe each meeting of the Board of Directors,
subject to such individual(s) executing a suitable confidentiality agreement.
Such person(s), whether a member of the Board or a representative, shall be
entitled to receive reimbursement for all reasonable costs incurred in attending
such meetings, including, but not limited to, food, lodging and transportation.
The Company agrees to give GKN written notice of each such meeting and to
provide GKN with an agenda and minutes of the meeting no later than it gives
such notice and provides such items to the other directors.
7.2 PRESS RELEASES. The Company will not issue a press release or engage
in any other publicity until 25 days after the Effective Date without GKN's
prior written consent.
7.3 FORM S-8 OR ANY SIMILAR FORM. The Company shall not file a
Registration Statement on Form S-8 (or any similar or successor form) for the
registration of shares of Common Stock underlying stock options for a period of
one year from the Effective Date without GKN's written consent.
7.4 COMPENSATION AND OTHER ARRANGEMENTS. The Company hereby agrees that
for a period of three years from the Effective Date, all compensation and other
arrangements between the Company and its officers, directors and affiliates
shall be approved by the Compensation Committee of the Company's Board of
Directors, a majority of the members of which shall have no affiliation or other
relationship with the Company other than as directors.
8. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. Except as the context
otherwise requires, all representations, warranties and agreements contained in
this Agreement shall be deemed to be representations, warranties and agreements
at the Closing Dates and such representations, warranties and agreements of the
Underwriters and Company, including the indemnity agreements contained in
Section 5 hereof, shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of any Underwriter, the Company or any
controlling person, and shall survive termination of this Agreement or the
issuance and delivery of the Securities to the several Underwriters until the
earlier of the expiration of any applicable statute
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of limitations and the seventh anniversary of the later of the Closing Date or
the Option Closing Date, if any, at which time the representations, warranties
and agreements shall terminate and be of no further force and effect.
9. EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION THEREOF.
9.1 EFFECTIVE DATE. This Agreement shall become effective on the
Effective Date at the time that the Registration Statement is declared
effective.
9.2 TERMINATION. You shall have the right to terminate this Agreement at
any time prior to any Closing Date, (i) if any domestic or international event
or act or occurrence has materially disrupted, or in your opinion will in the
immediate future materially disrupt, general securities markets in the United
States; or (ii) if trading on the New York Stock Exchange, the American Stock
Exchange, The Boston Stock Exchange, Nasdaq, or otherwise in the
over-the-counter market shall have been suspended, or minimum or maximum prices
for trading shall have been fixed, or maximum ranges for prices for securities
shall have been fixed, or maximum ranges for prices for securities shall have
been required on the over-the-counter market by the NASD or by order of the
Commission or any other government authority having jurisdiction, or (iii) if
the United States or Italy shall have become involved in a war or major
hostilities, or (iv) if a banking moratorium has been declared by a New York
State or federal authority, or (v) if a moratorium on foreign exchange trading
has been declared which materially adversely impacts the United States
securities market, or (vi) if the Company shall have sustained a material loss
by fire, flood, accident, hurricane, earthquake, theft, sabotage or other
calamity or malicious act which, whether or not such loss shall have been
insured, will, in your opinion, make it inadvisable to proceed with the delivery
of the Securities, or (vii) if Albino Condivi or Mario Tozzi-Condivi shall no
longer serve the Company in their respective present capacities, or (viii) if
the Company has breached any of its representations, warranties or obligations
hereunder, or (ix) if the Underwriter shall have become aware after the date
hereof of such a material adverse change in the condition (financial or
otherwise), business, or prospects of the Company, or such adverse material
change in general market conditions as in the Representative's judgment would
make it impracticable to proceed with the offering, sale and/or delivery of the
Securities or to enforce contracts made by the Representative's for the sale of
the Securities.
9.3 NOTICE. If you elect to prevent this Agreement from becoming
effective or to terminate this Agreement as provided in this Section 9, the
Company shall be notified on the same day as such election is made by you by
telephone or telecopy, confirmed by letter.
9.4 EXPENSES. In the event that this Agreement shall not be carried out
for any reason whatsoever, within the time specified herein or any extensions
thereof pursuant to the terms herein, the obligations of the Company to pay the
expenses related to the transactions contemplated herein shall be governed by
Section 3.14 hereof.
9.5 INDEMNIFICATION. Notwithstanding any contrary provision contained in
this Agreement, any election hereunder or any termination of this Agreement, and
whether or not this Agreement is otherwise carried out, the provisions of
Section 5 shall not be in any way affected by, such election or termination or
failure to carry out the terms of this Agreement or any part hereof.
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10. MISCELLANEOUS.
10.1 NOTICES. All communications hereunder, except as herein otherwise
specifically provided, shall be in writing and shall be mailed, delivered or
telecopied and confirmed
If to the Representative:
GKN Securities Corp.
61 Broadway
New York, New York 10006
Attention: David M. Nussbaum, Chairman
Copy to:
Graubard Mollen & Miller
600 Third Avenue
New York, New York 10016
Attention: David Alan Miller, Esq.
If to the Company:
Trident Rowan Group, Inc.
2 Worlds Fair Drive
Franklin Township
Somerset, New Jersey 08873
Attention: Howard E. Chase,
President, Chief Executive Officer
Copy to:
Morrison Cohen Singer & Weinstein, L.L.P.
750 Lexington Avenue
New York, New York, 10022
Attention: David Lerner, Esq.
10.2 HEADINGS. The headings contained herein are for the sole purpose of
convenience of reference, and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Agreement.
10.3 AMENDMENT. This Agreement may only be amended by a written instrument
executed by each of the parties hereto.
10.4 ENTIRE AGREEMENT. This Agreement (together with the other agreements
and documents being delivered pursuant to or in connection with this Agreement)
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof, and supersedes all prior agreements and understandings of
the parties, oral and written, with respect to the subject matter hereof.
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10.5 BINDING EFFECT. This Agreement shall inure solely to the benefit of
and shall be binding upon, the Representative, the Underwriters, the Company and
the controlling persons, directors and officers referred to in Section 5 hereof,
and their respective successors, legal Representative and assigns, and no other
person shall have or be construed to have any legal or equitable right, remedy
or claim under or in respect of or by virtue of this Agreement or any provisions
herein contained.
10.6 GOVERNING LAW; JURISDICTION. This Agreement shall be governed by and
construed and enforced in accordance with the law of the State of New York,
without giving effect to conflicts of law. The Company hereby agrees that any
action, proceeding or claim against it arising out of, relating in any way to
this Agreement shall be brought and enforced in the courts of the State of New
York or the United States District Court for the Southern District of New York,
and irrevocably submits to such jurisdiction, which jurisdiction shall be
exclusive. The Company hereby waives any objection to such exclusive
jurisdiction and that such courts represent an inconvenient forum. Any such
process or summons to be served upon the Company may be served by transmitting a
copy thereof by registered or certified mail, return receipt requested, postage
prepaid, addressed to it at the address set forth in Section 10.1 hereof. Such
mailing shall be deemed personal service and shall be legal and binding upon the
Company in any action, proceeding or claim. The Company agrees that the
prevailing party(ies) in any such action shall be entitled to recover from the
other party(ies) all of its reasonable attorneys' fees and expenses relating to
such action or proceeding and/or incurred in connection with the preparation
therefor.
10.7 EXECUTION IN COUNTERPARTS. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which shall be deemed to be an original, but all of which taken together
shall constitute one and the same agreement, and shall become effective when one
or more counterparts has been signed by each of the parties hereto and delivered
to each of the other parties hereto.
10.8 WAIVER, ETC. The failure of any of the parties hereto to at any time
enforce any of the provisions of this Agreement shall not be deemed or construed
to be a waiver of any such provision, nor to in any way effect the validity of
this Agreement or any provision hereof or the right of any of the parties hereto
to thereafter enforce each and every provision of this Agreement. No waiver of
any breach, non-compliance or non-fulfillment of any of the provisions of this
Agreement shall be effective unless set forth in a written instrument executed
by the party or parties against whom or which enforcement of such waiver is
sought; and no waiver of any such breach, non-compliance or non-fulfillment
shall be construed or deemed to be a waiver of any other or subsequent breach,
non-compliance or non-fulfillment.
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If the foregoing correctly sets forth the understanding between the
Representative and the Company, please so indicate in the space provided below
for that purpose, whereupon this letter shall constitute a binding agreement
between us.
Very truly yours,
Trident Rowan Group, Inc.
By:
------------------------------------
Name: Howard Chase
Title: President, Chief Executive Officer
Accepted as of the date first
above written.
New York, New York
GKN Securities Corp.
By:
-----------------------------
Name: Deborah S. Novick
Title: Senior Vice President
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SCHEDULE I
TRIDENT ROWAN GROUP, INC.
1,250,000 SHARES OF COMMON STOCK
1,250,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
UNDERWRITER NUMBER OF FIRM SECURITIES
TO BE PURCHASED
COMMON STOCK WARRANTS
------------ --------
GKN Securities Corp.
------------ --------------
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Exhibit 10.24
TAMARIX CAPITAL CORPORATION
444 Madison Avenue
38th Floor
New York, New York 10022
Tel: (212) 644-4441
Fax: (212) 644-5757
March 7, 1997
Trident Rowan Group
2 Worlds Fair Drive
Somerset, NJ 08873
Attention: Mr. Howard Chase
Dear Sirs:
This letter shall constitute our understanding and agreement with respect
to the retention of Tamarix Capital Corporation ("Tamarix") as financial advisor
to Trident Rowan Group ("TRG"). The term Client shall include TRG and its
subsidiaries.
1. Client hereby retains Tamarix to assist it in various financial
matters including restructuring Client's existing activities, seeking
new business ventures, raising capital, etc. This retention is
subject to and shall commence on the first day of the month next
following the date of the closing of the purchase of 1,000,000 TRG
shares by an affiliate of Tamarix from Finprogetti S.p.A. planned for
this month of April, 1997, (the "Commencement Date") and shall
continue for a period of three years thereafter, after which it can
be renewed for successive one-year periods with the approval of both
Tamarix and TRG. If TRG shall require Tamarix, such retention shall
end on the date of the acquisition.
2. In consideration of the advisory services to be rendered by Tamarix,
Client agrees to (a) pay Tamarix $200,000 per year, payable in
increments of $50,000 at the beginning of each quarter, the first
payment being on the Commencement Date; and (b) reimburse Tamarix
for all out-of-pocket expenses incurred in rendering services
hereunder, upon the presentation by Tamarix of an itemized
statement of such expenses.
3. For the purpose of disclosure prior to any transaction being
consummated by Tamarix or any of its affiliates and TRG, TRG hereby
acknowledges that prior to the date hereof TRG and Tamarix have held
discussions regarding (a) the potential acquisition of Tamarix by TRG
and (b) the acquisition by TRG of an international real estate holding
company currently being organized by Tamarix.
4. This agreement, shall be governed by, and interpreted and enforced in
accordance with, the laws of the State of New York applicable to
instruments made and to be performed entirely within such State.
<PAGE>
TAMARIX CAPITAL CORPORATION
5. This agreement may be modified only in writing signed by both parties
to be charged hereunder.
6. Each party shall pay its own expenses in connection with the
negotiation and execution of this agreement. Tamarix and Client shall
at all times keep the terms of the Engagement Agreement confidential.
* * *
If the foregoing correctly sets forth our agreement, please confirm this by
signing and returning to us the duplicate copy of this letter.
We appreciate this opportunity to be of service and are looking forward to
working with you on this matter.
Very truly yours,
TAMARIX CAPITAL CORPORATION
/s/ Mark S. Hauser
___________________________
Mark S. Hauser
Agreed and Accepted
as of the Effective Date
TRIDENT ROWAN GROUP
/s/ Howard E. Chase
By:_____________________
Howard E. Chase
<PAGE>
TAMARIX CAPITAL CORPORATION
EXHIBIT A
STANDARD TERMS AND CONDITIONS
1. Client shall promptly provide Tamarix Capital Corporation with all
relevant information about Client and the transaction (to the extent available
to Client in the case of parties other than the Client) that shall be reasonably
requested or required by Tamarix Capital Corporation which information shall be
accurate in all material respects at the time furnished. Upon the termination
of this agreement, or at any time that Client may request all memoranda, notes,
records , reports and other documents and records relating to Client's business,
which Tamarix may then possess or have under its control, shall be promptly
returned to Client.
2. Tamarix capital Corporation shall keep all information obtained from
Client strictly confidential except: (a) for information which is otherwise
publicly available or previously known to Tamarix Capital Corporation, or was
obtained by Tamarix Capital Corporation independently of Client and without
breach of Tamarix Capital Corporation's agreement with Client; (b) Tamarix
Capital Corporation may disclose such information to its employees and
attorneys, and to financial institutions and others designated in writing by
Client; and (c) pursuant to any order of a court of competent jurisdiction or
other government body.
3. Client recognizes that in order for Tamarix Capital Corporation to
perform properly its obligations in a professional manner, it is necessary that
Tamarix Capital Corporation be informed of and, to the extent practicable,
participate in all meetings and discussions between Client and any Investor
third party relating to the matters covered by the terms of Tamarix Capital
Corporation's engagement.
4. Client agrees that any report or opinion, oral or written, delivered
to it by Tamarix Capital Corporation is prepared solely for is confidential use
and shall not be reproduced, summarized, or referred to in any public document
or given or otherwise divulged to any other person other than Client's
attorneys, accountants and/or financial institutions, without Tamarix Capital
Corporation's prior written consent, except as may be required by applicable law
or regulation.
5. Any success fee payable by Client to Tamarix Capital Corporation shall
be paid upon the closing of the particular transaction contemplated by this
Engagement Agreement.
<PAGE>
TAMARIX CAPITAL CORPORATION
Exhibit A
Page 2
6. No fee payable to Tamarix Capital Corporation pursuant to any other
agreement with Client or payable by Client to any other financial advisor or
lender shall reduce or otherwise affect any fee payable by Client to Tamarix
Capital Corporation accept as described in Paragraph 3. of this agreement.
7. Client and Tamarix both represents and warrants that: (a) each has
full right, power, and authority to enter into this agreement and to perform all
of its obligations hereunder; (b) this Engagement Agreement has been duly
authorized and executed and constitutes a valid and binding agreement of Client
and Tamarix enforceable in accordance with its terms; and (c) the execution and
delivery of this Engagement Agreement and the consummation of the transactions
contemplated hereby does not conflict with or result in a breach of (i) Client's
or Tamarix's certificate of incorporation or by-laws or (ii) any agreement to
which Client or Tamarix is a party or by which any of its property or assets is
bound.
8. Nothing contained in this Engagement Agreement shall be construed to
place Tamarix Capital and client in the relationship of partners of joint
venturers. Neither Tamarix Capital Corporation nor Client shall represent
itself as the agent or legal representative of the other for any purpose
whatsoever nor shall either have the power to obligate or bind the other in any
manner whatsoever. Tamarix Capital Corporation in performing its services
hereunder, shall at all times be an independent contractor.
9. This Engagement Agreement has been and is made solely for the benefit
of Tamarix Capital Corporation and Client and each of the persons, agents,
employees, officers, directors and controlling persons referred to in Exhibit B
and their respective heirs, executors, personal representatives, successors and
assigns, and nothing contained in this Engagement Agreement shall confer any
rights upon, nor shall this agreement be construed to create any rights in, any
person who is not a party to such agreement other than as set forth in this
paragraph.
<PAGE>
TAMARIX CAPITAL CORPORATION
EXHIBIT B
INDEMNIFICATION
Client agrees that it shall indemnify and hold harmless, Tamarix Capital
Corporation, its stockholders, directors, officers, employees, agent, affiliates
and controlling persons within the meaning of Section 20 of the Securities
Exchange Act of 1934 and Section 15 of the Securities Act of 1933, each as
amended (any and all of whom are referred to as an "Indemnified Party"), from
and against any and all losses, claims, damages or liabilities, joint and
several, and all actions in respect thereof (including but not limited to, all
legal or other expenses reasonably incurred by an Indemnified Party in
connection with the preparation for or defense of any claim, action or
proceeding, whether or not resulting in any liability), sustained or incurred by
an Indemnified Party in connection with the preparation for or defense of any
claim, action or proceeding, whether or not resulting in any liability)
sustained or incurred by an Indemnified Party: (a) arising out of, or in
connection with, any untrue statement or alleged untrue statement of a material
fact contained in any of the financial or other information furnished to Tamarix
Capital Corporation by or on behalf of Client or the omission (or alleged
omission) therefrom of a material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading; or (b)
with respect to, caused by, or otherwise arising out of any transaction
contemplated by this Engagement Agreement or Tamarix Capital Corporation's
performing the services contemplated hereunder; provided, however, Client will
not be liable under clause (b) hereof to the extent that any Loss, claim, damage
or liability is found in a final judgment by a court of competent jurisdiction
to have resulted from Tamarix Capital Corporation's gross negligence or bad
faith in performing such services.
If the indemnification provided for herein is conclusively determined (by
an entry of final judgment by a court of competent jurisdiction and the
expiration of the time or denial of the right to appeal) to be unenforceable by
an Indemnified Party hereunder in respect to any losses, claims, damages or
liabilities referred to therein, then Client, in lieu of indemnifying such
Indemnified Party, Indemnified Party shall contribute any amounts paid or
payable by such Indemnified Party in such proportion as is appropriate and
equitable under all circumstances taking into account the relative benefits
received and the relative fault of each such party; provided, however, in no
event shall Tamarix Capital Corporation and/or any Indemnified Party be required
to contribute an amount in excess of net compensation received by Tamarix
Capital Corporation and/or such Indemnified Party pursuant to this Engagement
Agreement.
The foregoing indemnification and contribution provisions are not in lieu
of, but in addition to, any rights which any Indemnified Party may have
hereunder or otherwise.
<PAGE>
TAMARIX CAPITAL CORPORATION
Each of the parties hereto agrees to notify the other promptly of the
assertion against it or to its knowledge any other person or any claim or the
commencement of any action or proceeding relating to any activity contemplated
by this Engagement Agreement; provided, however, the failure to so notify the
other party shall not alter any parties' rights or obligations under this
Engagement Agreement.
<PAGE>
TAMARIX CAPITAL CORPORATION
EXHIBIT C
JURISDICTION
Client hereby irrevocably: (a) submits to the jurisdiction of any court of
the State of New York or any federal court sitting in the State of New York for
the purposes of any suit, action or other proceeding arising our of the
agreement between Client and Tamarix Capital Corporation which is brought by or
against the Client by Tamarix Capital Corporation; (b) agrees that all claims in
respect of any suit, action or proceeding may be heard and determined in any
such court; and (c) to the extent that Client has acquired, or hereafter may
acquire, any immunity from jurisdiction of any such court or from any legal
process therein, waives, to the fullest extent permitted by law, such immunity.
Client hereby waives, and Client agrees not to assert in any such suit,
action or proceeding, in each case, to the fullest extent permitted by
applicable law, any claim that: (a) Client is not personally subject to the
jurisdiction of any such court; (b) Client is immune from any legal process
(whether through service or notice, attachment prior to judgment, attachment in
the aid of execution, execution or otherwise) with respect to it or its
property; (c) any such suit, action or proceeding is brought in an inconvenient
forum; (d) the venue of any such suit, action or proceeding is improper; or (e)
this agreement may not be enforced in or by any such suit.
Any process against Client in, or in connection with, any suit, action or
proceeding filed in the United States District Court for the Southern District
of New York or any other court of the State of New York, arising out of or
relating to this Engagement Agreement or any transaction or agreement
contemplated hereby may be served on Client personally, or by air mail (with the
same effect as though served upon Client personally) addressed to Client, at the
address set forth in the agreement between Client and Tamarix Capital
Corporation. Any process served on Client by mailing shall be deemed to have
been served on the tenth business day after deposit of such process in the
United States mail.
Nothing in these provisions shall effect any party's right to serve process
in any manner permitted by law or limit its rights to bring a proceeding in the
competent courts of any jurisdiction or jurisdictions or to enforce in any
lawful manner a judgment obtained in one jurisdiction in any other jurisdiction.
<PAGE>
Exhibit 10.25
INDUCEMENT AGREEMENT
This Inducement Agreement dated 8 April 1997 between Tamarix Investors
Ltd. ("Tamarix") and Trident Rowan Group, Inc., a Maryland corporation ("TRG")
(the "Agreement").
WHEREAS, the Parties acknowledge the execution of the 7 March 1997
agreement between Tamarix and Finprogetti S.p.A. ("Finprogetti") to purchase
certain shares of common stock of TRG (the "Finprogetti Purchase Agreement" for
the "TRG Shares"); and
WHEREAS, the Parties acknowledge that Tamarix is also negotiating an
agreement with certain individuals to purchase certain TRG Shares which they own
(the "Individual Shareholders Purchase Agreement"), and
WHEREAS, TRG believes that the active participation of Tamarix will be
instrumental in the growth of its business and that Tamarix will also make
substantial contributions in identifying opportunities in the same or allied
businesses, and
WHEREAS, TRG fully supports the terms of the Finprogetti Purchase Agreement
and the Individual Shareholders Purchase Agreement, and is entering into this
Agreement as a further inducement for Tamarix to enter into and perform under
the Finprogetti Purchase Agreement and the Individual Shareholders Purchase
Agreement and in consideration for Tamarix entering into the Finprogetti
Purchase Agreement, and
WHEREAS, in connection with its pending secondary offering TRG wishes to
induce Tamarix to enter a lock-up agreement required by its underwriters, by
issuing certain warrants to purchase its common stock.
NOW THEREFORE, the Parties hereto, upon the terms and conditions set forth
herein hereby agree as follows:
1. TRG, acting through its Board of Directors, shall take every action
possible to facilitate the closing of the Purchase Agreement ant the performance
hereunder. In particular, he TRG Board shall, at a time and in a manner which
Tamarix and TRG shall agree on or before 10 April 1997,
a. amend the TRG By-Laws, effective on the Closing Date for the
Purchase Agreement,
(i) to limit the size of the TRG Board of Directors to no more
than eleven (11) Directors so long as Finprogetti shall not have
sold to Tamarix all of its 1,635,000 TRG Shares pursuant to the
Purchase Agreement, and to limit the
<PAGE>
size of the TRG Board of Directors to no more than (10)
Directors immediately after Finprogetti shall have sold to
Tamarix all of such TRG Shares pursuant to the Purchase
Agreement;
(ii) to provide that all Directors, including those Directors now
serving on the Boat who shall be elected to serve on the Board as
re-constituted, shall serve for staggered, three-year terms;
(iii) to give Tamarix, so long as it shall own one million or
more TRG Shares, the power to nominate a Director for who shall
be the Chairman of the Board and who shall serve in the 1998
class year, a Director who shall serve in the 1999 class year,
and a director who shall serve in the 2000 class year; to give
Tamarix, so long as it shall own at least 500,000 but not more
than 999,999 TRG Shares, the power to nominate a Director who
shall be the Chairman of the Board and who all serve in the 1999
class year; and to give Tamarix, so long as it shall own at least
300,000 but not more than 499,999 TRG Shares, the power to
nominate a Director who shall serve in the 1998 Class Year;
(iv) to provide for no fewer than three independent Directors,
who shall be persons of good character who are experienced in
business matters and who are reasonably acceptable to Tamarix;
(v) to provide for a five-member Executive Committee of the
Board of Directors, which shall include the Chairman of the Board
of Directors or a Director whom he designates, the Chief
Executive Officer, one Director nominated by Tamarix, one
independent director, and one Director who lives and is employed
in Italy, and which shall have the power to take the following
actions among others: to direct the day-to-day business
activities of the Company which are within budget and operating
guidelines prescribed by the Board of Directors and which are not
matters which require action by the shareholders of the Company;
(vi) to provide that all actions requiring the vote of the
Board of Directors shall be taken by the vote of a majority of
the Directors (for example, by the affirmative vote of six
Directors so long as there shall be eleven Directors), and
(vii) to provide at the By-Laws of TRG as amended shall not be
further amended, in whole or in part, without the written consent
of Tamarix so long as Tamarix shall own at least 7.5% of the
issued and outstanding shares of common stock of TRG.
2
<PAGE>
b. elect the following persons as Directors for the following class
years, to fill vacancies on the TRG Board:
FIRST YEAR DIRECTORS - TERM EXPIRES AT THE 1998 SHAREHOLDERS
MEETING
Mr. William Spier - Chairman of the Board (nominated by Tamarix)
Dott. Mario Tozzi-Condivi
Ms. Deborah Schondorf-Novick (an independent Director)
SECOND YEAR DIRECTORS - TERM EXPIRES AT THE 1999 SHAREHOLDERS
MEETING
Mr. Arno Morenz (an independent Director)
A Director nominated by Finprogetti, whose term shall end at such
time as Finprogetti shall sell the remainder of its TRG Shares
to Tamarix under the Purchase Agreement
Mr. Mark Hauser (nominated by Tamarix)
Dott. Albino Collini
THIRD YEAR DIRECTORS - TERM EXPIRES AT THE 2000 SHAREHOLDERS
MEETING
Mr. Howard Chase - Chief Executive Officer
Mr. Emanuel Arbib (nominated by Tamarix)
Mr. Nicola Caiola (an independent Director)
Mr. Louis Perlman (an independent Director)
In exercising its right under Section I.a(iv) of this Agreement,
Tamarix agrees that all of the above persons are of good
character and arc experienced in business matters, and agrees
that Ms. Schondorf-Novick, Mr. Morenz, Mr. Caiola and Mr. Perlman
are independent Directors who are acceptable to serve on the
Board.
c. resolve that it shall not recommend to the shareholders of TRG,
and shall oppose, any amendments to the certificate of
incorporation of TRG without the written consent of Tamarix, so
long as Tamarix shall own at least 7.5% of the issued and
outstanding shares of common stock of TRG;
d. call a meeting of the Shareholders to be held no later than 15
July 1997 and to recommend to the Shareholders that the
certificate of incorporation be amended to implement and ratify
the above actions, to ratify and confirm the election of the
above persons to the above positions and to take such other
actions as Tamarix and TRG shall agree.
2. On or before the Closing Date TRG shall take those actions described
in the Purchase Agreement as its responsibility, including the following:
3
<PAGE>
a. it shall undertake to secure the agreement of Mr. Howard E.
Chase, Dott. Mario Tozzi-Condivi, and Dott Albino Collini to
cancel a one page voting agreement dated July 1995 which they
have entered with Finprogetti;
b. it shall provide or secure the consents necessary under the 17
July 1995 acquisition agreement with Finprogetti to permit
Finprogetti to sell its TRG Shares to Tamarix and to grant its
proxy to Tamarix under the Purchase Agreement;
c. it shall waive any prohibitions in the acquisition agreement
against Finprogetti's sale of the TRG Shares to Tamarix; it shall
terminate the escrow for damages under that agreement, and it
shall release the TRG Shares held in escrow under that agreement
so that they may be pat of the TRG Shares sold to Tamarix;
d. it shall agree with Ing. Francesco Pugno Vannoni to cancel his
employment contract with TRG, and
e. it shall agree with Tamarix Capital Corporation to cancel its
confidentiality agreement with Tamarix Capital Corporation
entered in 1996. Since Tamarix principals will serve on the
Board of Directors of TRG and will be privy to the confidential
information of TRG, securities law restrictions will require them
to keep confidential the information which they will receive as
TRG insiders, so the confidentiality agreement between TRG and
Tamarix Capital Corporation will no longer be appropriate.
3. TRG agrees that from the date of its Agreement it shall not incur any
additional debts except in the ordinary course of its business, or issue
warrants, shares or convertible securities beyond those warrants, shares and
securities which are outstanding on the date hereof or which are the subject of
the SEC registration statement which is now pending, or which TRG has advised
Tamarix that it intends to incur or to issue, prior to the Closing of the
purchase of TRG Shares as provided in the Finprogetti Purchase Agreement.
4. TRG shall insure that all shares of TRG common stock which are the
subject of the Finprogetti Purchase Agreement and the Individual Shareholders
Agreement, as well as all shares of TRG common stock which Tamarix would
purchase by exercise of the warrants referred to in Section 5 below, shall be
registered as part of the pending secondary equity offering of TRG common stock,
but no event later than three months from the Closing of the Purchase Agreement.
5. TRG further agrees that upon execution of this Agreement and the
Purchase Agreement, as an inducement for Tamarix to enter into a lockup
agreement required by its underwriters in the pending secondary offering, TRG
shall issue to the Manager of Tamarix warrants
4
<PAGE>
to purchase 1,250,000 shares of common stock of TRG, in form satisfactory to the
Manager, effective on the Closing Date for the Purchase Agreement and
exercisable at any time for three years from the Closing date for the Purchase
Agreement, at the privy of the shares of TRG common stock effective in the
pending secondary equity offering. The transfer of such warrants by the Manager
of Tamarix shall be limited to: the Members of the Manager; the shareholders)
of any Members of the Manager; Tamarix; the Members of Tamarix, and such other
transferees the transfer to whom shall be in accordance with the terms hereof
and with all applicable securities laws. In the event that the registration
statement for the pending secondary offering has not become effective by 30 May
1997, the exercise price for the warrants shall be the average closing sales
price of a share of TRG common stock as reported by NASD Consolidated
Transactions for the 21 business days immediately following 30 May 1997.
6. Should TRG fail to perform any of its obligations provided in Sections
1 - 5 hereunder, TRG agrees to compensate Tamarix for its efforts by paying
Tamarix a fee of U.S. $200,000 and by reimbursing Tamarix for all the expenses
it has incurred to date including reasonable attorney's fees.
7. As and when a chief financial officer for Moto Guzzi Corp. is
appointed prior to the occurrence of the initial public offering of equity
securities of Moto Guzzi Corp., such appointment shall require the consent of
Tamarix, which consent shall not be unreasonably withheld.
8. In the event that a majority of the Board of Directors of Moto Guzzi
Corp. shall be elected by the holders of the convertible preferred shares
currently outstanding, one of the remaining Directors of Moto Guzzi Corp. shall
be a person who was nominated as a Director of TRG by Tamarix.
9. TRG represents that
a. it has disclosed to Tamarix all material facts about its business
operations and financial condition.
b. its Board of Directors has considered the terms of this
Agreement, considers the Agreement to be in the best interests of TRG
and its shareholders, and has approved it, and that no other approvals
are required.
c. it has full legal right, power and authority to execute and
deliver this Agreement and to perform its obligations hereunder,
d. this Agreement has been duly and validly executed and delivered
by TRG,
e. this Agreement will not, with notice or lapse of time or both,
conflict with, violate, or result in a breach of the terms, conditions
or provisions of, or constitute a default under or result in the
creation or imposition of any lien or encumbrance
5
<PAGE>
upon the assets or properties of TRG under, any obligation, agreement,
securities law rule or regulation, order, decree or judgment of any
court or public authority, applicable to TRG or any contracts to which
TRG is a party or by which its assets or properties may be bound or
affected,
f. constitutes the legal, valid and binding obligation of TRG
enforceable against it in accordance with its terms, subject to
bankruptcy, insolvency, moratorium and other laws affecting creditors'
rights generally and to equitable principles whether considered in an
action at law or in equity.
10. This Agreement shall be governed by the internal laws of the State of
New York without regard to provisions relating to conflicts of laws.
11. Any dispute which may arise in relation to this agreement or any
document delivered in connection therewith, or interpretation of them, shall be
remitted to the exclusive jurisdiction of the courts of the United States or New
York State, sitting in the City and County of New York.
12. A condition to the effectiveness of the agreement is that the Closing
of the Finprogetti Purchase Agreement shall take place on or before 25 April
1997.
13. This agreement and the documents referred to in it represent the
entire agreement between the Parties. No amendment, waiver or modification may
be made to this agreement except by a writing signed by the Parties.
WHEREFORE, the undersigned have executed and delivered this Agreement on
the date first above written.
TAMARIX INVESTORS LTD.
By: /S/ Mark S. Hauser
---------------------------------
TRIDENT ROWAN GROUP, INC.
By: /S/ Howard E. Chase
----------------------------------
6
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated April 3, 1996, in the Registration Statement (Form
S-1) and related Prospectus of Trident Rowan Group Inc. dated April 23, 1997
/s/ Reconta Ernst & Young
Milan, Italy
April 23, 1997
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Trident Rowan Group, Inc.:
As independent public accountants, we hereby consent to the use of our
report included in or made a part of this registration statement.
Arthur Andersen LLP
April 23, 1997
Roseland, New Jersey
