SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
|X| Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 [Fee Required]
For the fiscal year ended December 31, 1996 or
|_| Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934. [No Fee Required]
For the transition period from _________________ to ________________.
Commission File Number 0-2642
TRIDENT ROWAN GROUP, INC.
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(Exact name of registrant as specified in its charter)
Maryland 52-0466460
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(State of other jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
Two Worlds Fair Drive, Somerset, New Jersey 08873
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (908) 868-9000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $2.50 per share
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes: |X| No: |_|
Indicate by a check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant, computed by reference to the average of bid and asked price of the
stock as of March 28, 1997, was $15,174,352.
The number of shares of common stock, $2.50 par value, outstanding as of April
9, 1997 was 3,902,540.
DOCUMENTS INCORPORATED BY REFERENCE:
None.
Page 1 of Pages __
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PART I
Item 1. BUSINESS
Overview
The Company owns Moto Guzzi, S.p.A. 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
business ("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 through its Temporary
Integrated Management S.p.A. ("T.I.M.") subsidiary.
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(R)". Moto Guzzi motorcycles vary in engine
displacement from 350cc to 1,100cc, although the subsidiary has determined to
focus its future sales and development efforts on its larger motorcycles, having
engines of 750cc or greater.
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
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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.
In 1996, at the request of CEMB, an Italian company which is a client
of T.I.M., T.I.M. provided management services with respect to Hofmann
Maschinenbau GmbH, a Germany company engaged in manufacturing and selling wheel
mounting and balancing machines for the automotive industry. As a result of the
engagement, the Company is negotiating the purchase of a minority interest in a
company to be formed with CEMB to acquire the operating assets of Hofmann
Maschinenbau GmbH.
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.
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. Engagements are typically of a duration of 12 to 24 months.
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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 begin with an analysis phase and continue with a
business plan implementation and review phase.
Among the management projects on which T.I.M. is currently engaged are
the following:
o A flexible plastic packaging company with sales of Lit.
150,000 million ($98,039,000). A T.I.M. manager is acting as
President and Chief Executive Officer of this company to
strengthen its marketing division and guide the company to a
possible public offering.
o An Italian publicly-held carpentry tool manufacturer with
production facilities in Italy and France. T.I.M. has been
engaged to manage operational restructuring.
o 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). T.I.M. has
been engaged to carry out a major financial and operational
restructuring.
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 proceeds of a recent
private offering of securities of Moto Guzzi Corp., a subsidiary of the Company,
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:
All Large
Motorcycles Motorcycles
----------- -----------
Honda...................................... 27.8% 19.2%
Yamaha..................................... 16.1% 13.8%
Aprilia.................................... 10.0% -
Suzuki..................................... 9.7% 6.8%
BMW........................................ 7.6% 19.6%
Kawasaki................................... 7.6% 10.2%
Ducati..................................... 4.6% 8.7%
Harley Davidson............................ 4.1% 15.7%
Cagiva..................................... 3.7% -
Moto Guzzi................................. 3.0% 3.2%
Triumph.................................... - 2.1%
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Manufacturing. Moto Guzzi today manufactures a high priced line of
motorcycles, and distributes spare parts, under the trademark "Moto Guzzi(R)."
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, 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
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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 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
whose production is planned to commence in 1997. These on-going programs
currently relate to developing more powerful two-cylinder air-cooled engines
with
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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 March 1996,
Moto Guzzi increased prices of its various models 5% 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 Motorad GmbH
("A+G"), a German corporation, the majority of the shares of which is owned by
Aprilia S.p.A., another Italian manufacturer of motorcycles with small
displacement engines. A+G distributed the motorcycles of both Moto Guzzi and
Aprilia in the German market in 1996, but was replaced in 1997 by MGI GmbH.
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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
Year Ended December 31
----------------------
Geographic Areas 1996 1995 1994
- ---------------- ---- ---- ----
Italy................................................. 37% 35% 38%
Europe (other than Italy)............................. 43% 49% 51%
United States......................................... 7% 6% 5%
Elsewhere............................................. 13% 10% 6%
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 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.
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(R)" and the
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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. Resolution of the national metal workers union
contract will result in a one-time payment to workers of Lit. 900,000 ($588) in
respect of periods prior to the date of the new agreement. An increase in Moto
Guzzi's use of outsourced components reduced overtime hours to 7.7% of total
hours in 1996 compared to 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).
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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 meters factory in Torino 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, however, 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 increased costs from
changing prices on 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 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., where it distributes through exclusive agents,
(which represents approximately 5% of net sales) 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.
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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 cancelable 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
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
12
<PAGE>
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 which it has been disposing of 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 March 1997, the Company agreed to sell 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 requiring substantial
amortization payments. In addition to assuming all of the mortgage indebtedness,
the purchaser agreed to pay to the Company approximately Lit. 6,508 million, of
which Lit. 2,428 million is to be paid in April 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, in cash or 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.
13
<PAGE>
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 ($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.
14
<PAGE>
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.
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.
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 the Company's 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 make up to Lit. 15,000 million ($9,804,000) in purchases 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 ($25,782,000) reported
in the balance sheet to effect the Finprogetti Acquisition reflects Lit. 38,223
million (Lit. 16,400 per share; $10.00 per share at then-prevailing rates)
assigned to the 2,330,660 shares issued (including the shares owned by the
Finprogetti
- ----------
* Unless otherwise indicated U.S. Dollar translations for historical
events are expressed at the approximate exchange rate at December 31,
1996 of Lit. 1,530 per U.S. Dollar and do not represent historical
values of such events in U.S. Dollars at then-prevailing exchange
rates.
15
<PAGE>
Affiliate Shareholders) plus costs of Lit. 1,224 million incurred in connection
with the acquisition. The acquisition has been accounted for by the purchase
method. Accordingly, the purchase price has been allocated to the assets
purchased and the liabilities assumed based on the fair values at the date of
the acquisition. The purchase price was allocated as follows:
US$'000 Lire m.
------- -------
Cash...................................................... $5,362 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 39,447
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 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 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.
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)
16
<PAGE>
The Company 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 was 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 is 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 of the Company, 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 preferred and common shares 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 and common shares 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
17
<PAGE>
Plan of Merger (the "Merger Agreement") with The Carey Winston Company ("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 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
liquidated damages to the Company and has agreed with the Company jointly to
explore certain European real estate management and related business
opportunities.
Transfer of Controlling Interest to Tamarix. Finprogetti, the largest
shareholder of the Company, has agreed to sell to Tamarix Investors LDC., a
Cayman Islands limited duration company ("Tamarix"), 1,000,000 shares of 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 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, by
the closing of a currently pending proposed underwritten public offering of
securities of the Company (the "Offering"), 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 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, (b) issue to Centaurus Management LDC., a Cayman Islands
limited duration company and 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 the Offering, exercisable for a three-year
period, (c) register the shares of the Company purchased 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 three Tamarix
nominees and an additional three independent directors who are experienced in
business matters and otherwise reasonably acceptable to Tamarix. As financial
advisor, Tamarix will, among other things, identify potential investment or
acquisition opportunities for the Company, and sources of capital for the
Company and its Portfolio Companies.
18
<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.]
Item 2. 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.
19
<PAGE>
(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.
(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.
Item 3. 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.
Item 4. Submission of Matters of Vote of Security Holders
None.
20
<PAGE>
Item 5. Market for Registrant's Common Equity and Related Shareholder Matters
Since September 24, 1994, the Common Stock has traded on the Nasdaq
SmallCap. The reported prices represent inter-dealer prices, which do not
include retail mark-ups, mark-downs, or any commission to the broker-dealer, and
may not necessarily represent actual transactions.
Bid Prices
----------
High Bid Low Bid
-------- -------
1995
1st Quarter........................................... 9 1/2 7 3/4
2nd Quarter........................................... 9 5/8 8 1/2
3rd Quarter........................................... 9 3/4 9 3/8
4th Quarter........................................... 10 1/2 9 1/2
1996
1st Quarter........................................... 11 10 1/4
2nd Quarter........................................... 10 3/4 9 5/8
3rd Quarter........................................... 10 5/8 9 7/8
4th Quarter........................................... 10 1/4 8
1997
1st Quarter........................................... 9 3/8 7 1/2
2nd Quarter through April 8, 1997..................... 8 1/4 7 3/8
As of April 10, 1997, there were 1,259 holders of record of the
Company's common stock.
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. Under an agreement
with Tamarix, the approval of the Tamarix-designated directors is required as a
condition of paying dividends.
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<PAGE>
Item 6. Selected Financial Data
The selected consolidated financial data set forth below for the fiscal
years ended December 31, 1996, 1995, 1994, 1993 and 1992 have been derived from
the Company's audited financial statements. 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 Form 10-K.
<TABLE>
<CAPTION>
Year ended Years ended December 31
December 31 ------------------------------------------------------------------------
1996 1996 1995 1994 1993 1992
--------------------------------------------------------------------------------------
US$000(1) (Millions of Italian Lire - except for per share amounts)
(except per
share data)
<S> <C> <C> <C> <C> <C> <C>
Net Sales.............................. $ 63,272 Lit. 96,806 72,253 51,994 41,919 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 16,468 18,098 5,004 5,738 71,949(3)
Cash dividends paid per
common share........................ Dividends have not been paid in the past.
</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 for 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.
Item 7. Management's Discussion and Analysis of Financial Conditions and Results
of Operations
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
22
<PAGE>
disposition of the real estate portfolio will be achieved with the agreed 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 canceled. 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, 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".
In January 1997, the Company complete 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.'s management engagements frequently involve
"turn around" plans which, in turn, involve financial restructurings, often with
the need for new capital as well as
23
<PAGE>
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>
Year Ended Year Ended
December 31, 1996 December 31, 1995
Lire m. Lire m.
<S> <C> <C> <C> <C>
Net sales.................................................... 96,806 100.0% 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..................................................... (15,001) (15.5%) (6,980) (9.7%)
============ ===========
</TABLE>
Net sales
Year ended December 31
1996 1995
---- ----
Lire m. Lire m.
Motorcycles 77,620 64,671
Steel Tubes 17,313 5,836
Corporate and Other 3,517 2,458
Intersegment eliminations (1,644) (712)
-------- -------
96,806 72,253
======== =======
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.
24
<PAGE>
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 principally derives from increased volumes. Units
sold by Moto Guzzi S.p.A., the Italian manufacturing operation, increased from
5,198 in 1995 to 6,050 in 1996 (excluding sales of Benelli inventory in 1995).
Sales of the largest units, those with engine displacement greater than 750cc,
increased only by 6% in 1996 over 1995. Sales of those 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 fiscal 1996 increased 19.0% over fiscal 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
quarter. Volume growth has been achieved by entering 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 abandon production of smaller "Moto Guzzi" and "Benelli"
models which had negatively impacted 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 sharp raw material decreases in
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 autumn, as described below.
Unit Production
-----------------------------
1996 Change 1995
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
======= ========
25
<PAGE>
The growth in production in the first quarter was primarily due to
relatively large improvements in January 1996, which in 1995, and prior years,
had been curtailed to allow for inventory taking and production planning.
Production delays occurred in August due to late delivery of parts by suppliers.
In September, Moto Guzzi commenced production of its new Centauro model which
temporarily slowed production rate. In November 1996, Moto Guzzi unit output was
again limited due to production problems 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 was adversely impacted by inflationary
increases in raw material prices and wages and increased costs for purchases of
components which had previously been manufactured in-house. Aluminum prices,
which had been a significant factor in raw material cost increases in 1995, were
stable in 1996, with a decrease in the second half of the year, which helped to
offset price rises of other components. 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 6 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 Carey Winston.
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.
26
<PAGE>
Operating Loss
Year ended Year ended
1996 1995
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)
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.
Rental income. The increase reflects the inclusion of the operations
acquired from Finprogetti for a full year against inclusion for 6 months in
1995, plus a small increase in rentals for inflationary adjustments.
Reserves against 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 in
Sardinia had decreased in 1996 and changes in rules and practices by local and
regional government relating to construction permits and environmental
authorizations increased uncertainties in respect of development potential. Also
in the third quarter, the Company recorded reserves of Lit. 450 million
($294,000) for extraordinary maintenance in respect of its Cologne, Italy
property. Further reserves of Lit. 1,230 million ($804,000) were recorded in the
fourth quarter to reflect the terms of an agreement to sell the property made in
March 1997.
Other income, net. Other income in 1996 primarily consists of gains of
sales of assets for Lit. 1,211 million ($792,000) (1995 - Lit. 321 million), 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, MD. 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 6 months in 1995
and in respect of increased interest expense on advances from banks
27
<PAGE>
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 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.
Fiscal Year Ended December 31, 1995
Compared to Fiscal Year Ended December 31, 1994
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1995 December 31, 1994
Lire m. Lire m.
<S> <C> <C> <C> <C>
Net sales.................................................... 72,253 100.0% 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......................................................... (6,980) (9.7%) (3,277) (6.3%)
============ ============
</TABLE>
Net Sales
Year Ended December 31
1995 1996
Lire m. Lire m.
------- -------
Motorcycles..................... 64,671 48,849
Steel tubing.................... 5,836 -
Hotel operations................ - 1,073
Corporate and other............. 2,458 2,305
Intersegment eliminations....... (712) (233)
------------------------- ---------------------
72,253 51,994
28
<PAGE>
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 million ($701,000) 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 higher 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 were negatively impacted by 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
29
<PAGE>
levels (aggregating 9.6% of all production hours in 1995 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
Year Ended Year Ended
December 31, 1995 December 31, 1994
----------------- -----------------
Lire m. Lire m.
Motorcycles.......................... (45) (632)
Steel tubing......................... 235 -
Real estate.......................... (92) -
Hotel operations..................... - (164)
Corporate and other.................. (6,809) (5,034)
Intersegment eliminations............ 94 750
----------------- -----------------
(6,617) (5,080)
30
<PAGE>
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.
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.
31
<PAGE>
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 and was able to reduce inventories 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 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 the end of 1996 as a result of raw
material prices decreases and rigid control 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
32
<PAGE>
closed in 1996. 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 Moto Guzzi. This expenditure was
financed from short-term bank borrowings in anticipation of the receipt of
capital from the Moto Guzzi Financing, described below. A further Lit. 1,573
million ($1,028,000) of capital expenditure at Moto Guzzi was 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) 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.
The Company acquired Lit. 577 million ($377,000) of cash in acquiring
Moto America Inc., effective January 1, 1996 and consummated by the issue of the
Company's stock with a fair 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 an agreed 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 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.
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. Advances from banks for finance
activities decreased in line with the reduction of 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
33
<PAGE>
production shortfalls, such as occurred at Moto Guzzi in the Autumn of 1996,
have the effect of reducing the Company's ability to draw down on the
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
informally agreed and 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
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.
Share repurchases. 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 the first anniversary of the
notes. Principal and interest are due on the second anniversary. The Company
also paid Lit. 650 million ($425,000) to Finprogetti to repurchase shares. These
repurchases resulted from the assumption by Finprogetti of certain liabilities
arising out of a claim asserted against the Company.
Long-term debt. Principal repayments of long-term debt in 1996 are
represented by Lit. 4,834 million ($3,159,000) in respect 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 ($294,000), in respect of an
80% advance of government grants for research and development performed in prior
years. The Company also obtained a loan of US$ 240,000 (Lit.370 million) to
finance the purchase of premises for its U.S. Moto Guzzi distributor.
In March 1997, the Company signed an agreement for the disposal of 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) is due before December
31, 1997. See "Business -- Commercial Real Estate Development."
Future Liquidity Needs
The net proceeds of the Moto Guzzi Financing will not be sufficient to
complete the planned rehabilitation and expansion program at Moto Guzzi at the
rate proposed 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 Motor Guzzi
Corp. securities on or before June 30, 1998 to provide additional capital that
the Company expects will
34
<PAGE>
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 Immobiliare Broseta S.r.l., as described
above, although the timing of such realization is uncertain. In the absence of
said realization, available cash and forecast cash flows from the sale of
Cologne pursuant to the March 1997 agreement therefor, and the repayment of
advances by Carey Winston, are not expected to be sufficient to meet all of the
Company's planned cash needs in 1997 without significant reduction of planned
activities and cutbacks in the Moto Guzzi rehabilitation program. If capital is
not available when needed, the Company may also have to decline opportunities
for future investments.
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 of such subsidiaries. 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, and agreed to repurchase the remaining 73,110 shares
at a present value of Lit. 1,330 million ($869,000) in June 1997, December 1997
and June 1998.
The obligation to repurchase 776,530 shares on June 30, 1998 is
denominated in U.S. Dollars. The Company has deposited lire denominated
investments amounting to Lit. 13,511 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.
On April 8, 1997, in connection with the Tamarix/Finprogetti
Acquisition Agreement and the Inducement Agreement, the Company engaged Tamarix
Capital Corporation, an affiliate of Tamarix, for a three year period as a
financial adviser regarding future merchant banking opportunities at a
consulting rate of $200,000 per year, payable in quarterly installments,
together with reimbursement for reasonable expenses.
35
<PAGE>
TRIDENT ROWAN GROUP, INC.
Annual Report on Form 10-K
Item 8 and Item 14(a)(1) and (2)
Consolidated Financial Statements As of
December 31, 1996 and 1995
Together with
Report of Independent Public Accountants
36
<PAGE>
TRIDENT ROWAN GROUP, INC.
INDEX TO FINANCIAL STATEMENTS
Page
----
Report of Independent Public Accountants............................... F-2
Report of Independent Auditors......................................... F-3
Consolidated Balance Sheets - Assets................................... F-4
Consolidated Balance Sheets - Liabilities and Shareholders' Equity..... F-5
Consolidated Statements of Operations.................................. F-6
Consolidated Statements of Changes in Shareholders' Equity............. F-7
Consolidated Statements of Cash Flows.................................. F-8
Notes to Consolidated Financial Statements............................. F-10
37 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 and the schedule referred to below are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements and schedule 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.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule appearing on page 73 of the
Form 10-K is presented for the purpose of complying with the Securities and
Exchange Commission's rules and is not a required 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 relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
March 26, 1997
Roseland, New Jersey
38 F-2
<PAGE>
Report of Independent Auditors
Shareholders and Board of Directors
De Tomaso Industries, Inc.
We have audited the consolidated balance sheets 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 the years then
ended, all expressed in Italian Lire. Our audits also included the financial
statement schedule for the years ended December 31, 1995 and 1994 appearing on
page 73 of the Form 10-K. These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedules 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 and related schedules are free of material misstatement. An audit
incudes 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 and 1994 in conformity with
accounting principles generally accepted in the United States of America. Also,
in our opinion, the related financial schedules for the years ended December 31,
1995 and 1994, when considered in relation to the basic consolidated financial
statements for those years taken as a whole, present fairly in all material
respects the information set forth therein.
RECONTA ERNST & YOUNG
April 3, 1996
Milan, Italy
39 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.
ASSETS
<S> <C> <C> <C> <C>
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
40 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 - 776,530) 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, shares 1,544,099 (1995 - 703,774)........ (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
41 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>
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
42 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 Accretion
Preferred Common paid-in Accumulated Treasury translation expense,
stock stock capital deficit stock adjustment net
----- ----- ------- ------- ----- ---------- ---
<S> <C> <C> <C> <C> <C> <C> <C>
January 1, 1994.............Lit.m 1,453 2,988 47,543 (5,669) -- (434) --
Net Loss ................... -- -- -- (3,277) -- -- --
Translation adjustment ..... -- -- -- -- -- 553 --
------- ------- ------- ------- ------- ------- -------
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 ....... -- -- -- -- 186
Issuance of shares ......... -- 3,431 35,396 -- -- -- --
------- ------- ------- ------- ------- ------- -------
December 31, 1995...........Lit.m -- 6,744 71,332 (15,926) (11,826) 711 186
Net loss ................... -- -- -- (15,001) -- -- --
Translation adjustment ..... -- -- -- -- -- 1,143 --
Issuance of shares ......... -- 44 427 -- -- -- --
Change of par value to
$0.01 per share ........... -- (6,717) 6,717 -- -- -- --
Repurchase of shares ....... -- -- 607 -- (15,585) -- 43
Reclassify shares subject to
repurchase ................ -- (2) (1,938) -- -- -- --
Accretion expense, net of
exchange movements ....... -- -- -- -- -- -- (129)
------- ------- ------- ------- ------- ------- -------
December 31, 1996...........Lit.m -- 69 77,145 (30,927) (27,411) 1,854 100
======= ======= ======= ======= ======= ======= =======
December 31, 1996...........$'000 -- 45 50,442 (20,213) (17,916) 1,212 65
======= ======= ======= ======= ======= ======= =======
</TABLE>
TOTAL Shares
SHAREHOLDERS' subject to
EQUITY Repurchase
------ ----------
January 1, 1994.............Lit.m 45,881 --
Net Loss ................... (3,277) --
Translation adjustment ..... 553 --
------- -------
December 31, 1994...........Lit.m 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)
Issuance of shares ......... 38,827 --
------- -------
December 31, 1995...........Lit.m 51,221 12,549
Net loss ................... (15,001) --
Translation adjustment ..... 1,143 --
Issuance of shares ......... 471 --
Change of par value to
$0.01 per share ........... -- --
Repurchase of shares ....... (14,935) (650)
Reclassify shares subject to
repurchase ................ (1,940) 1,940
Accretion expense, net of
exchange movements ....... (129) 129
------- -------
December 31, 1996...........Lit.m 20,830 13,968
======= =======
December 31, 1996...........$'000 13,615 9,129
======= =======
43 F-7
<PAGE>
Trident Rowan Group, Inc. and Subsidiaries
(De Tomaso Industries, Inc. through August 22, 1996)
Consolidated Statements of Cash Flows
December 31, 1996
<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 equiv
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
44 F-8
<PAGE>
Trident Rowan Group, Inc. and Subsidiaries
(De Tomaso Industries, Inc. through August 22, 1996)
Consolidated Statements of Cash Flows
December 31, 1996
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
45 F-9
<PAGE>
Trident Rowan Group, Inc. and Subsidiaries
(De Tomaso Industries, Inc. through August 22, 1996)
Notes to 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
46 F-10
<PAGE>
Trident Rowan Group, Inc. and Subsidiaries
(De Tomaso Industries, Inc. through August 22, 1996)
Notes to Consolidated Financial Statements
December 31, 1996
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
the change in exchange rates from year to year have been reported separately as
a component of shareholders' equity.
Foreign currency transactions
Transactions, receivables and payables denominated in currencies other than the
functional currency are recorded at the exchange rate in effect on the
transaction date. Such receivables and payables are adjusted to current exchange
rates as of the date paid or the balance sheet date, whichever is earlier. Gains
and losses are included in "other income, net" in the statements of operations.
Cash equivalents
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
Revenue recognition
Revenues from sale of products are recorded upon shipment, which is when title
passes.
Research and development
The Company'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
47 F-11
<PAGE>
Trident Rowan Group, Inc. and Subsidiaries
(De Tomaso Industries, Inc. through August 22, 1996)
Notes to Consolidated Financial Statements
December 31, 1996
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
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.
48 F-12
<PAGE>
Trident Rowan Group, Inc. and Subsidiaries
(De Tomaso Industries, Inc. through August 22, 1996)
Notes to Consolidated Financial Statements
December 31, 1996
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
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.
49 F-13
<PAGE>
Trident Rowan Group, Inc. and Subsidiaries
(De Tomaso Industries, Inc. through August 22, 1996)
Notes to Consolidated Financial Statements
December 31, 1996
3. NET LOSS PER COMMON SHARE (CONTINUED)
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 of January 1, 1996 and January 1,
1995, would have been as follows.
1996 1996 1995
U.S.$'000 Lire m. Lire m.
Net Loss............... $ (10,364) Lit. (15,855) Lit. (7,505)
====== ====== =====
Net loss per share..... $ (2.77) Lit. (4,238) Lit. (2,508)
====== ====== =====
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
50 F-14
<PAGE>
Trident Rowan Group, Inc. and Subsidiaries
(De Tomaso Industries, Inc. through August 22, 1996)
Notes to Consolidated Financial Statements
December 31, 1996
4. REPURCHASE OF SHARES AND SHARES SUBJECT TO REPURCHASE (CONTINUED)
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.
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:
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)
51 F-15
<PAGE>
Trident Rowan Group, Inc. and Subsidiaries
(De Tomaso Industries, Inc. through August 22, 1996)
Notes to Consolidated Financial Statements
December 31, 1996
4. REPURCHASE OF SHARES AND SHARES SUBJECT TO REPURCHASE (CONTINUED)
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), the then 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 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.
52 F-16
<PAGE>
Trident Rowan Group, Inc. and Subsidiaries
(De Tomaso Industries, Inc. through August 22, 1996)
Notes to Consolidated Financial Statements
December 31, 1996
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 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.
53 F-17
<PAGE>
Trident Rowan Group, Inc. and Subsidiaries
(De Tomaso Industries, Inc. through August 22, 1996)
Notes to Consolidated Financial Statements
December 31, 1996
5. ACQUISITIONS AND DISPOSALS (CONTINUED)
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 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. 248,673 of the shares issued were initially placed
in escrow and were released in February 1997 following legal transfer to the
Company of the tax receivable included in the assets acquired.
54 F-18
<PAGE>
Trident Rowan Group, Inc. and Subsidiaries
(De Tomaso Industries, Inc. through August 22, 1996)
Notes to Consolidated Financial Statements
December 31, 1996
5. ACQUISITIONS AND DISPOSALS (CONTINUED)
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 $10.00 per share represented the fair value of the shares issued,
approximating the trading price of the Company's shares at the date of the
acquisition and supported by the Company's estimate of the fair values of assets
and liabilities acquired. The acquisition was accounted for by the purchase
method. Accordingly, the purchase price was allocated to the assets purchased
and the liabilities assumed based on the fair values at the date of the
acquisition, as follows:
US$'000(1) Lire m.
Cash................................... 5,166 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 39,447
======= =======
(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 fiscal year 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.
55 F-19
<PAGE>
Trident Rowan Group, Inc. and Subsidiaries
(De Tomaso Industries, Inc. through August 22, 1996)
Notes to Consolidated Financial Statements
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:
1995 1994
Lire. m. Lire m.
Net sales 82,403 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 (1,369) (1,499)
------- -------
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 ($1,634,000) against the property. The land has
been reclassified from "real estate held for sale" to "land for development" as
management believes it probable that the Company will own the land until
authorizations are obtained from the proper authorities.
56 F-20
<PAGE>
Trident Rowan Group, Inc. and Subsidiaries
(De Tomaso Industries, Inc. through August 22, 1996)
Notes to Consolidated Financial Statements
December 31, 1996
7. REAL ESTATE HELD FOR SALE
1996 1996 1995
US$'000 Lire m. Lire m.
Building held for sale 9,869 15,100 16,276
Real estate under development:
Buildings -- -- 8,842
Industrial areas -- -- 3,109
--------- --------- ---------
9,869 15,100 28,227
========= ========= =========
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 ($328,000) for maintenance work that the Company expects will be
required prior to the sale of the building.
8. MARKETABLE AND OTHER SECURITIES
1996 1996 1995
US$'000 Lire m. Lire m.
Italian government backed floating rate note, 2004 5,832 8,923 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 15,004 17,176
===== ====== ======
All marketable and other securities are held-to-maturity. Lit. 14,511 million
($9,484,000) of such amounts are deposited as collateral for the Company's share
repurchase commitment -- see Note 4.
57 F-21
<PAGE>
Trident Rowan Group, Inc. and Subsidiaries
(De Tomaso Industries, Inc. through August 22, 1996)
Notes to Consolidated Financial Statements
December 31, 1996
9. OTHER ASSETS
1996 1996 1995
US$'000 Lire m. Lire m.
Concession rights, net of amortization of
Lit. 151.................................... 2,973 4,549 4,641
Tax receivables............................... 5,938 9,085 14,546
Other......................................... 145 221 428
----- ------ ------
9,056 13,855 19,615
===== ====== ======
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 ($28,750,000). The line of
credit arrangements do not have termination dates and are periodically reviewed.
The average interest rate on advances from banks was approximately 11.75% and
12.75% at December 31, 1996 and 1995, respectively. Advances from banks for
finance activities relate to residual factoring and leasing activities of a
company acquired in the Finprogetti acquisition and are partly secured by
guarantees given by Finprogetti S.p.A. The average interest rate on these
borrowings was approximately 13% and 12.75% as at December 31, 1996 and 1995,
respectively.
11. ACCRUED EXPENSES AND OTHER PAYABLES
1996 1996 1995
US$'000 Lire m. Lire m.
Salaries, wages and related items........ 2,695 4,123 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 11,414 9,092
===== ====== =====
58 F-22
<PAGE>
Trident Rowan Group, Inc. and Subsidiaries
(De Tomaso Industries, Inc. through August 22, 1996)
Notes to Consolidated Financial Statements
December 31, 1996
12. LONG-TERM DEBT
Long term debt from real estate activities: 1996 1996 1995
US$'000 Lire m. Lire m.
Mortgage note payable, secured by land and buildings,
interest rate 11.95%, payable in semi-annual
installments, final installment due in 1998........... 3,530 5,400 9,000
Mortgage note payable, secured by land, buildings,
concession rights and lien on rents, interest rate
11.95%, payable in semi-annual installments, final
installment due in 1998............................... 2,818 4,312 5,546
Advances in respect of mortgage loan granted but
not yet drawn down.................................... -- -- 4,716
------- ------- ------
6,348 9,712 19,262
Less current portion.................................. (3,267) (4,998) (9,550)
------- ------- ------
3,081 4,714 9,712
======= ======= ======
All of the above long-term debt was acquired in 1995 as part of the Finprogetti
transaction -- see Note 5. The loan advance of Lit. 4,716 million as at December
31, 1995 was eliminated in the second quarter of 1996 on disposal of the related
property -- see Note 5.
All of the debt at December 31, 1996, after principal repayments of Lit. 333
million in 1997, will be eliminated as a consequence of the 1997 sale of the
property and assumption of such debt by the purchaser -- see Note 22.
59 F-23
<PAGE>
Trident Rowan Group, Inc. and Subsidiaries
(De Tomaso Industries, Inc. through August 22, 1996)
Notes to Consolidated Financial Statements
December 31, 1996
12. LONG-TERM DEBT (CONTINUED)
<TABLE>
<CAPTION>
Other long term debt: 1996 1996 1995
US$'000 Lire m. Lire m.
<S> <C> <C> <C>
Mortgage note payable, secured by substantially all
fixed assets of motorcycle operations. Interest 10.08%,
payable in semi-annual installments through 2001 ........ 1,658 2,536 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$, interest 8%,
payable on October 23, 1998 ............................. 1,863 2,851 --
Mortgage note secured by property of Moto America
Inc., interest 8.25%, payable monthly through 2011 ...... 239 365 --
Finance leases .......................................... 988 1,512 --
Sundry notes payable .................................... 31 48 25
------- ------- -------
9,166 14,024 10,252
Less current portion .................................... (1,484) (2,270) (1,866)
------- ------- -------
7,682 11,754 8,386
======= ======= =======
</TABLE>
Maturities of long-term debt as of December 31, 1996:
Real Estate Loans (1) Other Loans
US$'000 Lire m. US$'000 Lire m.
1997 ...................... 3,267 4,998 1,484 2,270
1998 ...................... 2,213 3,386 3,425 5,241
1999 ...................... 868 1,328 1,643 2,514
2000 ...................... -- -- 1,278 1,955
2001 ...................... -- -- 575 881
Subsequent to 2001 ........ -- -- 761 1,163
----- ----- ----- ------
6,348 9,712 9,166 14,024
===== ===== ====== ======
(1) This debt will be eliminated on sale of the property -- see Note 22.
60 F-24
<PAGE>
Trident Rowan Group, Inc. and Subsidiaries
(De Tomaso Industries, Inc. through August 22, 1996)
Notes to Consolidated Financial Statements
December 31, 1996
13. OTHER INCOME
1996 1996 1995 1994
US$'000 Lire m. Lire m. Lire m.
Currency exchange loss ....... (554) (848) (443) (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 1,452 513 990
====== ====== ==== ======
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:
1996 1996 1995 1994
US$'000 Lire m. Lire m. Lire m.
United States ......... (4,307) (6,589) (5,942) (413)
Italy ................. (4,862) (7,438) (168) (2,015)
------- ------- ------ ------
(9,169) (14,027) (6,110) (2,428)
======= ======= ====== ======
The provision for income taxes consisted of the following:
1996 1996 1995 1994
US$'000 Lire m. Lire m. Lire m.
Current:
United States ........... 14 22 -- --
Italy ................... 375 573 420 39
--- --- --- ---
389 595 420 39
=== === === ===
Deferred: ................... -- -- -- --
=== === === ===
--- --- --- ---
Total ....................... 389 595 420 39
=== === === ===
61 F-25
<PAGE>
Trident Rowan Group, Inc. and Subsidiaries
(De Tomaso Industries, Inc. through August 22, 1996)
Notes to Consolidated Financial Statements
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:
1996 1996 1995
US$'000 Lire m. Lire m.
Short-term reserves ................. 447 683 4,234
Carrying value of fixed assets ...... 2,000 3,060 3,212
Net operating loss carryforwards .... 9,320 14,259 12,710
Other ............................... 536 821 191
------- ------- -------
12,303 18,823 20,347
Valuation allowance ................. (12,303) (18,823) (20,347)
------- ------- -------
Net deferred tax assets ............. -- -- --
======= ======= =======
The effective provision for income taxes varied from the income tax credit
calculated at the statutory U.S. federal income tax rate as follows:
<TABLE>
<CAPTION>
1996 1996 1995 1994
US$'000 Lire m. Lire m. Lire m.
<S> <C> <C> <C> <C>
Computed tax credit at U.S. federal rate .. (3,209) (4,910) (2,138) (850)
Losses and reversals of short-term reserves 4,003 6,125 3,181 889
for which valuation allowance provided
Utilization of tax losses ................. (942) (1,441) (780) --
Elimination of intercompany profits ....... 213 326 496 --
Non-deductible expenses and other ......... 324 495 (339) --
------ ------ ------ ------
389 595 420 39
====== ====== ====== ======
</TABLE>
For U.S. federal income tax purposes, the Company has net operating loss
carryforwards of approximately US$ 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.
62 F-26
<PAGE>
Trident Rowan Group, Inc. and Subsidiaries
(De Tomaso Industries, Inc. through August 22, 1996)
Notes to Consolidated Financial Statements
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:
1996 1996
US$'000 Lire m.
1997 ............................ 1,990 3,045
1998 ............................ 8,750 13,388
1999 ............................ 2,110 3,228
2000 ............................ 307 469
2001 ............................ 918 1,404
------ ------
14,075 21,534
====== ======
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:
Currently exercisable .............................. 232,500
1997 ............................................... 232,500
1998 ............................................... 232,500
1999 ............................................... 142,500
2000 ............................................... 142,500
-------
982,500
=======
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 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.
63 F-27
<PAGE>
Trident Rowan Group, Inc. and Subsidiaries
(De Tomaso Industries, Inc. through August 22, 1996)
Notes to Consolidated Financial Statements
December 31, 1996
15. STOCK OPTIONS (CONTINUED)
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%.
The following is a summary of transactions pertaining to the Plans:
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
----------------- -----------------
Weighted Weighted
Average Average
Shares Exercise Shares Exercise
(000's) Price (000's) Price
------ ------ ------ ------
<S> <C> <C> <C> <C>
Outstanding, January 1 ................ 960 $12.26 0 $ 0
Granted ............................... 43 12.26 960 12.26
Exercised ............................. 0 0 0 0
Forfeited ............................. 0 0 0 0
------ ------ ------ ------
Outstanding, December 31 .............. 1,003 $12.26 960 $12.26
------ ------ ------ ------
Options exercisable, December 31 ...... 233 $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:
Stock Options Stock Options
Outstanding Exercisable
----------------------------------- -------------
Weighted
Weighted Average Weighted
Average Remaining Average
Shares Exercise Contractual Shares Exercise
Exercise Price (000's) Price Life (000's) Price
- -------------- ------- -------- ------------- ------- -------------
$12.26 1,003 $12.26 3.77 years 233 $12.26
64 F-28
<PAGE>
Trident Rowan Group, Inc. and Subsidiaries
(De Tomaso Industries, Inc. through August 22, 1996)
Notes to Consolidated Financial Statements
December 31, 1996
16. RELATED PARTY TRANSACTIONS
Receivables from related parties and affiliates consists of the
following:
1996 1996 1995
US$'000 Lire m. Lire m.
A+G Motorad GmbH .......................... -- -- 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 4,708 --
===== ===== =====
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 the Company.
Sales to A+G Motorad GmbH, consisting primarily of motorcycles and parts were
Lit. 7,660 million ($4,823,000) in 1995 and Lit. 4,736 million in 1994.
Amounts due to related parties and affiliates consists of the following:
1996 1996 1995
US$'000 Lire m. Lire m.
Finprogetti S.p.A. and affiliates .......... -- -- 345
Domer S.r.l. and subsidiaries .............. -- -- 155
Other ...................................... -- -- 9
------- ------- -------
-- -- 509
======= ======= =======
Amounts due to Finprogetti S.p.A. and affiliates at December 31, 1995 represent
balances arising from a group value added tax system 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.
65 F-29
<PAGE>
Trident Rowan Group, Inc. and Subsidiaries
(De Tomaso Industries, Inc. through August 22, 1996)
Notes to Consolidated Financial Statements
December 31, 1996
16. RELATED PARTY TRANSACTIONS (CONTINUED)
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
Carlo 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.
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:
1996 1995 1994
Italy ............................... 37% 35% 38%
Europe other than Italy ............. 43% 49% 51%
United States ....................... 7% 6% 5%
Elsewhere ........................... 13% 10% 6%
66 F-30
<PAGE>
Trident Rowan Group, Inc. and Subsidiaries
(De Tomaso Industries, Inc. through August 22, 1996)
Notes to Consolidated Financial Statements
December 31, 1996
17. EXPORT SALES AND GEOGRAPHIC INFORMATION (CONTINUED)
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 ($3,791,000) in 1996. Prior to 1996, Moto America
Inc. was an unaffiliated company. Sales prices are accounted for on a basis
comparable to those for non affiliated customers.
Identifiable assets
As of December 31, 1996 all material operating subsidiaries of the Company were
located in Italy. The Company has assets in the United States consisting of
offices which deal with regulatory matters and its importer of Moto Guzzi
motorcycles. Identifiable assets in the United States are not significant to the
Company.
18. INDUSTRY SEGMENT ANALYSIS
The following tables shows net sales, operating profit and identifiable assets
for the Company's industry segments:
1996 1996 1995 1994
Net sales US$'000 Lire m. Lire m. Lire m.
Motorcycles and spare parts .... 60,122 91,986 72,854 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 1,483 770 --
======= ======= ======= =======
67 F-31
<PAGE>
Trident Rowan Group, Inc. and Subsidiaries
(De Tomaso Industries, Inc. through August 22, 1996)
Notes to Consolidated Financial Statements
December 31, 1996
18. INDUSTRY SEGMENT ANALYSIS (CONTINUED)
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.
<TABLE>
<CAPTION>
1996 1996 1995 1994
Operating profit/(loss) US$'000 Lire m. Lire m. Lire m.
<S> <C> <C> <C> <C>
Motorcycles ................................ 312 478 (45) (632)
Steel tubing ............................... (252) (385) 235 --
Real estate ................................ 540 826 (92) --
------- ------- ------- -------
Operating profit ........................... 600 919 98 (632)
Corporate expenses, less other income ...... (5,444) (8,329) (6,652) (4,368)
Reserves for value of real estate properties (2,732) (4,180) -- --
Interest, net .............................. (1,841) (2,816) (6) 1,662
Income taxes ............................... (389) (595) (420) (39)
------- ------- ------- -------
Net loss ................................... (9,806) (15,001) (6,980) (3,277)
======= ======= ======= =======
</TABLE>
Operating profit/(loss) is total revenues less operating expenses, excluding
interest, corporate expenses and other income/(expense).
Capital expenditure and depreciation expense
Capital expenditure and depreciation expense relate primarily to the Company's
motorcycle segment in 1996, 1995 and 1994.
1996 1996 1995 1994
Identifiable assets US$'000 Lire m. Lire m. Lire m.
Motorcycles ............ 48,190 73,731 58,656 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
------- ------- ------- -------
102,297 156,512 182,830 118,681
======= ======= ======= =======
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.
68 F-32
<PAGE>
Trident Rowan Group, Inc. and Subsidiaries
(De Tomaso Industries, Inc. through August 22, 1996)
Notes to Consolidated Financial Statements
December 31, 1996
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.
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.
69 F-33
<PAGE>
Trident Rowan Group, Inc. and Subsidiaries
(De Tomaso Industries, Inc. through August 22, 1996)
Notes to Consolidated Financial Statements
December 31, 1996
21. FINANCIAL INSTRUMENTS (CONTINUED)
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 granted the purchaser an option to
settle the final installment in cash of Lit. 2,040 million or by way
70 F-34
<PAGE>
Trident Rowan Group, Inc. and Subsidiaries
(De Tomaso Industries, Inc. through August 22, 1996)
Notes to Consolidated Financial Statements
December 31, 1996
22. Subsequent Events (Continued)
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 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, Ltd.,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.
71 F-35
<PAGE>
Trident Rowan Group, Inc. and Subsidiaries
(De Tomaso Industries, Inc. through August 22, 1996)
Notes to Consolidated Financial Statements
December 31, 1996
22. SUBSEQUENT EVENTS (CONTINUED)
In addition, Finprogetti is required to deliver the resignations from the
Company's Board of Directors of five persons who had been nominated at the
request of Finprogetti. 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 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.
72 F-36
<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 Deductions end of
Description of period expenses accounts. Describe period
Describe
- ------------------------------------------------------------------------------------------------------------------------------------
In millions of Italian Lire
---------------------------
Year ended December 31, 1996
----------------------------
<S> <C> <C> <C> <C> <C>
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 $1.000 : Lit.
1,530
73 F-37
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
The following information concerns the directors, officers, key
employees of and consultants to the Company.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Francesco Pugno Vanoni*......................... 67 Chairman of the Board and member of the Executive
Committee
Mario Tozzi-Condivi............................. 71 Vice Chairman, Director and member of the Executive
Committee
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
Carlo Previtali................................. 52 Secretary and Treasurer
Giovanni Avallone*.............................. 54 Director and member of the Executive Committee
Roberto Corradi*................................ 59 Director
Santiago De Tomaso.............................. 40 Director
Carlo Garavaglia*............................... 52 Director
Maria Luisa Ruzzon*............................. 49 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(o)
</TABLE>
- ----------
* Upon the consummation of the Tamarix/Finprogetti Acquisition, these
directors have agreed to resign from their positions with the Company.
(See "Business-Recent-Transfer of Controlling Interest to Tamarix")
** Upon consummation of the Tamarix/Finprogetti Acquisition, these persons
will be appointed to the Board of Directors.
o Upon consummation of the Tamarix/Finprogetti Acquisition, Mr. Spier
will be appointed Chairman of the Board.
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
74
<PAGE>
European manufacturer of vehicle washing equipment and systems and air
compressors, which are sold internationally.
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.
Howard E. Chase has served as Director of the Company since 1971, as
Secretary of the Company and Company counsel from 1971 until September 1995 and
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 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.
Carlo Previtali is 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.
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
75
<PAGE>
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.
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.
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 Trident's Financiere S.r.l. since December 1990; and Director of Finprogetti
S.p.A. from September 1993 until June 1996.
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 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.
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 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.
76
<PAGE>
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 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 at 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
electronic contract manufacturer, Global One Distribution and Merchandising,
Inc., a trend merchandising company, Integrated Technologies of Israel, Ltd., a
joint venture of an investment group and Israel Aircraft Industries, and of
Direct Language Communications, Inc., a multilingual communication serves
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 reinsurance.
Louis Perlman, is a citizen of Holland, and U.S. resident. He 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 of 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.
Each of Finprogetti, Mario Tozzi-Condivi, Albino Collini and Howard E.
Chase had agreed, in connection with this 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
77
<PAGE>
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 or 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 reconstruction 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, as
of December 31, 1996, consisted of the following: Howard E. Chase, Carlo
Garavaglia and Carlo Previtali. 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.
Item 11. 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 four most highly compensated executive
officers of the Company other than the President whose aggregate annual salary
and bonus exceeded $100,000 for the Company's last year in all the capacities in
which they served with respect the year ended December 31, 1996 ("Named
Executive Officers"):
78
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
-------------------
Year Salary(Lit./$)(1) Bonus(Lit./$)
Name and ---- ----------------- ------------- Other
Principal Annual
Position 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- -0-
($50,000)
Howard E. Chase .................................. 1995 Lit. 155,737,000/ -0- -0-
President and Chief Executive Officer since ($101,789)
October 28, 1995 1996 Lit. 573,750,000/ -0- -0-
($375,000)
Albino Collini(2) ................................ 1995 Lit. 186,700,000/ 50,000,000/ -0-
Executive Vice President since October 28, 1995 ($122,026) ($32,680)
1996 Lit. 382,500,000/ Lit. 76,500,000/ -0-
($250,000) ($50,000)
Mario Tozzi-Condivi(3) ........................... 1995 Lit. 93,414,000/ -0- -0-
Vice Chairman since ($61,055)
October 28, 1995 1996 Lit. 283,050,000/ -0- -0-
($185,000)
Domenico Costa ................................... 1995 Lit. 237,850,000/ -0- -0-
President of T.I.M ($155,458)
1996 Lit. 240,000,000/ -0- -0-
($156,863)
Arnolfo Sacchi ................................... 1994 Lit. 192,000,000/ -0- -0-
Administrative Delegato of Moto Guzzi since 1994 ($125,490)
1995 Lit. 223,519,700/ -0- -0-
($146,092)
1996 Lit. 240,000,000/ -0- -0-
($156,863)
Carlo Previtali .................................. 1996 Lit. 240,000,000/ -0- -0-
Treasurer and Secretary ($156,863)
<CAPTION>
Long-Term Compensation
----------------------
Awards Payouts
------ -------
Name and Restricted
Principal Stock Options/ LTIP
Position Awards($) SARs (Payouts)
- -------- --------- ---- ---------
<S> <C> <C> <C>
Santiago De Tomaso ............................... -0- -0- -0-
President of the Company until October 28, 1995
-0- 30,000 -0-
Howard E. Chase .................................. -0- 300,000 -0-
President and Chief Executive Officer since
October 28, 1995 -0- -0- -0-
Albino Collini(2) ................................ -0- 150,000 -0-
Executive Vice President since October 28, 1995
-0- -0- -0-
Mario Tozzi-Condivi(3) ........................... -0- 200,000 -0-
Vice Chairman since
October 28, 1995 -0- -0- -0-
Domenico Costa ................................... -0- 60,000 -0-
President of T.I.M
-0- -0- -0-
Arnolfo Sacchi ................................... -0- -0- -0-
Administrative Delegato of Moto Guzzi since 1994
-0- -0- -0-
-0- -0-
Carlo Previtali .................................. -0- -0- -0-
Treasurer and Secretary
</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 antedating 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.
79
<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 nonexercisable, 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;
80
<PAGE>
(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 $9.313 per share. Options
to be granted in future years will be exercisable at the reported closing price
of the stock on January 2 of the year of grant. Options are not exercisable
until the later of January 2 of the year succeeding the date of grant or six
months following the date of grant.
The authority to grant options under 1995 Directors Plan will terminate
on the earlier of December 31, 2005 or upon the issuance of the maximum number
of shares of stock reserved for issuance under the plan which is 150,000,
110,000 of which remain available for issuance.
The plan may be amended by the Board of Directors except that
provisions thereof concerning granting of options may not be amended more than
once every six months unless necessary to comply with the Internal Revenue Code
or the Employee Retirement Income Security Act.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
No stock options or SARs were granted in the fiscal year ended December
31, 1996 to any of the Named Executive Officers.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
The following table summarizes the number of exercisable and
unexercisable options held by the Named Executive Officers at the end of 1996.
None of the unexercised options held by the Named Executive Officers at the end
of 1996 were in the money.
81
<PAGE>
<TABLE>
<CAPTION>
Number of Shares
Underlying Unexercised
Options/SARs at
Fiscal Year-End (#)
Shares
Acquired
on Value
Name Exercise(#)(1) Realized($) Exercisable Unexercisable
- ---- -------------- ----------- ----------- -------------
<S> <C> <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
Carlo Previtali............. - - 20,000 40,000
</TABLE>
- -----------
(1) None of the Named Executive Officers exercised any stock options in
1996.
(2) Based on the fair market value per share of the Common Stock of $9.125,
which was the closing price of the Common Stock on the Nasdaq SmallCap
Market on December 31, 1996.
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. 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."
82
<PAGE>
Board Compensation Committee Report on Executive Compensation
The compensation policy implemented by the Company and its subsidiaries
for the compensation of executive officers calls for consideration of the nature
of each executive officer's work and responsibilities, unusual accomplishments
or achievements on the Company's behalf, the time expended in connection with
that executive officer's duties, years of service, and the Company's (or
subsidiary's) financial condition generally. Historically, overall corporate
performance has not been a significant factor in establishing compensation.
However, as a result of the Finprogetti Acquisition and the many changes to the
Company's governing structure, including the creation of an Executive Committee
and Compensation Committee of the Board of Directors, other and additional
factors are likely to be included in compensation policies, including overall
corporate performance, and performance of individual units of the Company.
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) or 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 has agreed
to terminate his employment agreement.
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.
83
<PAGE>
Comparative Stock Performance Graph
The following is a graph comparing the annual percentage change in the
cumulative total shareholder return of the Company's common stock with the
corresponding returns of the published Dow Jones Equity Market Index and Dow
Jones Other Recreational Products Index and the Nasdaq Non-Financial Index
compiled by Research Data Group for the Company's five years ended December 31,
1992 to 1996, inclusive.
<TABLE>
<CAPTION>
Total Return-Data Summary
-------------------------
Cumulative Total Return
-----------------------
Research Data Group TRGI 12/91 12/92 12/93 12/94 12/95 12/96
- ------------------- ---- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Trident Rowan Group, Inc............................ TRGI 100 100 57 264 296 261
DJ EQUITY MARKET.................................... IDOW 100 109 119 120 167 206
DJ OTHER RECREATIONAL PRODUCTS...................... IREQ 100 119 137 144 190 228
NASDAQ NON-FINANCIAL................................ INNF 100 109 126 121 169 206
</TABLE>
Item 12.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information concerning the
beneficial ownership of capital stock of the Company as of April 7, 1997 by (i)
each person who is known by the Company to own beneficially more than 5% of the
Company's Common Stock, (ii) each of the Company's directors, and
director-nominees and Named Executive Officers, and (iii) all directors and
officers as a group. Unless otherwise indicated, each person indicated in the
table has sole voting and investment power with respect to the shares shown.
<TABLE>
<CAPTION>
Number of Shares Percentage
Name and Address of Beneficial Owner** Beneficially Owned Beneficially Owned
- -------------------------------------- ------------------ ------------------
<S> <C> <C>
Finprogetti, S.p.A........................................... 1,708,350(1) 43.8%
Via Fieno 8
Milan, Italy 20123
Tail Trust
c/o Pirunico Trustees (Jersey)(2)......................... 776,530 19.9
Limited Account 282
44 Esplanade House
St. Helier, Jersey
Channel Islands
Howard E. Chase(3)........................................... 70,000 1.8
Albino Collini(4)............................................ 165,972 4.3
</TABLE>
84
<PAGE>
<TABLE>
<CAPTION>
Number of Shares Percentage
---------------- ----------
Name and Address of Beneficial Owner** Beneficially Owned Beneficially Owned
- -------------------------------------- ------------------ ------------------
<S> <C> <C>
Francesco Pugno Vanoni(4).................................... 32,971 *
Mario Tozzi-Condivi(5)....................................... 40,000 *
Santiago De Tomaso(6)........................................ 10,000 *
Domenico Costa(7)............................................ 20,000 *
Arnolfo Sacchi(7)............................................ 20,000 *
Giovanni Avallone............................................ -0-
Roberto Corradi.............................................. -0-
Carlo Garavaglia............................................. -0-
Maria Luisa Ruzzon........................................... -0-
Emanuel Arbib................................................ -0-
Nicola Caiola................................................ -0-
Mark S. Hauser (8)........................................... -0-
Dr. Arno Morenz.............................................. -0-
Louis Perlman................................................ -0-
William Spier (8)............................................ -0-
All officers and directors as a Group........................ 398,943(9) 9.7%
</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 Varoni. Includes 73,110
shares which are subject to repurchase pursuant to an agreement with
the Company. 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 the agreement to sell such shares to Tamarix. Upon
consummation of the Tamarix/Finprogetti Acquisition Agreement, Tamarix
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, and 1,250,000 shares of stock underlying
warrants granted to Centaurus or, after giving effect to the Offering,
45% of all shares deemed outstanding. In such event, Finprogetti will
own less than 2% of the shares outstanding.
(2) 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.
85
<PAGE>
(3) Includes 60,000 shares purchasable upon exercise of options.
(4) Mr. Collini is a former officer of, and Mr. Pugno Vanoni is a former
officer and director and a current shareholder, of Finprogetti, S.p.A.,
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.
(5) Includes 40,000 shares purchasable upon exercise of options.
(6) Includes 10,000 shares purchasable upon exercise of options.
(7) Includes 20,000 shares purchasable upon exercise of options.
(8) Messrs. Hauser and Spier are principals of Tamarix Capital Corporation.
(9) Includes 228,000 shares purchasable upon exercise of options.
Item 13.
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 repurchased 32,330 shares in 1996, and has also
agreed to repurchase an additional 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. Mr. Chase has no pecuniary interest in such fees.
Como Consultants Limited, an Isle of Jersey company which employs Mario
Tozzi-Condivi, a Director of the Company and its Vice-Chairman, was paid an
aggregate of $185,000 in 1996 for consulting services rendered to the Company
and to its former Maserati Automobiles Incorporated subsidiary by Mr. Condivi.
86
<PAGE>
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. Pugno Vanoni all served as directors of Finprogetti
through July 19, 1996.
Mr. Mark Hauser and Mr. William Spier, who will both be 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 will be granted warrants
to purchase 1,250,000 shares of common stock of the Company exercisable for
three years.
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.
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.
87
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K
(a)(1) Contained in Item 8 of this Report.
(2) Contained in Item 8 of this Report.
(3) Contained in paragraph (c) below.
(b) None.
(c) Exhibits.
Exhibit No. Description
- ----------- -----------
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 Mutual Release and Settlement Agreement dated February 12, 1997
3.1 Restated Articles of Incorporation of the Company, as amended.
3.2 Bylaws of the Company.
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 the Company 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 the Company 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 Company 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 Company and
Albino Collini (filed as Exhibit 10(h) to 1995 Annual Report on Form
10-K).
10.9 Agreement dated as of November 1, 1995 between the Company and
Francesco Pugno Vanoni (filed as Exhibit 10(i) to 1995 Annual Report
on Form 10-K).
<PAGE>
Exhibit No. Description
- ----------- -----------
10.12 Agreement dated as of November 1, 1995 between the Company and
Cuomo 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 Company 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 Company 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 Company and
Giovanni Avallone (filed as Exhibit 10(m) to 1995 Annual Report on
Form 10-K).
10.16 Option Agreement between the Company and Howard E. Chase (filed
as Exhibit 10(n) to 1995 Annual Report on Form 10-K).
10.17 Option Agreement between the Company and Albino Collini (filed as
Exhibit 10(o) to 1995 Annual Report on Form 10-K).
10.18 Option Agreement between the Company and Cuomo Consultants,
Limited (filed as Exhibit 10(p) to 1995 Annual Report on Form 10-K).
10.19 Option Agreement between the Company and Domenico Costa (filed as
Exhibit 10(q) to 1995 Annual Report on Form 10-K).
10.20 Option Agreement between the Company and Carlo Previtali (filed
as Exhibit 10(r) to 1995 Annual Report on Form 10-K).
10.21 Option Agreement between the Company and Giovanni Avallone (filed
as Exhibit 10(s) to 1995 Annual Report on Form 10-K).
10.22 Option Agreement between the Company 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.
21. Subsidiaries: The Company's significant subsidiaries, the
jurisdiction of their incorporation and nature of their respective
activities is contained in this Report.
(d) None.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
and Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereupon duly authorized.
April 8, 1997 /s/ Howard E. Chase
--------------------------------------------
Howard E. Chase
President and Chief Executive Officer
April 8, 1997 /s/ Carlo Previtali
-------------------------------------
Carlo Previtali
Secretary/Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacity and on the dates indicated.
April 8, 1997 /s/ Howard E. Chase
-------------------------------------
Howard E. Chase - Director
April 8, 1997 /s/ Carlo Previtali
-------------------------------------
Santiago De Tomaso - Director
April 8, 1997 /s/ Mario Tozzi-Condivi
-------------------------------------
Mario Tozzi-Condivi -
Vice Chairman and Director
April 8, 1997 /s/ Albino Collini
-------------------------------------
Albino Collini -
Chief Operating Officer and Director
April 8, 1997 /s/ Francesco Pugno Vanoni
-------------------------------------
Francesco Pugno Vanoni -
Chairman of the Board and Director
April 8, 1997 /s/ Giovanni Avallone
-------------------------------------
Giovanni Avallone - Director
April 8, 1997 /s/ Roberto Corradi
-------------------------------------
Roberto Corradi - Director
April 8, 1997 /s/ Carlo Garavaglia
-------------------------------------
Carlo Garavaglia - Director
April 8, 1997 /s/ Maria Luisa Ruzzon
-------------------------------------
Maria Luisa Ruzzon - Director
88
MUTUAL RELEASE AND SETTLEMENT AGREEMENT
This Mutual Release and Settlement Agreement (this "Agreement") is made
and entered into this 12th day of February, 1997 by and among The Carey Winston
Company ("CW"), DTI Acquisition Corp. ("Subsidiary") and Trident Rowan Group,
Inc., formerly known as De Tomaso Industries, Inc. ("DTI") (CW, Subsidiary and
DTI are hereinafter collectively referred to as the "Parties"). The purpose of
this Agreement is to memorialize the terms and conditions under which the
Parties have agreed to terminate that certain Agreement and Plan of Merger,
dated as of August 14, 1996 (the "Merger Agreement"), including amendment of the
terms of that certain Promissory Note, dated September 17, 1996, in the
principal amount of $2,000,000, executed by CW in favor of DTI (the "Promissory
Note").
In consideration of the obligations undertaken by CW as set forth in
this Agreement, each of Subsidiary and DTI, for itself and for its respective
successors, assigns and predecessors, hereby releases and forever discharges CW
and all of its direct and indirect employees, agents, representatives,
attorneys, directors, officers, servants, successors, assigns, predecessors,
stockholders, subsidiaries, parents, divisions and affiliates (such persons
having such a relation to any of the Parties being referred to collectively as
their "Representatives"), from, and agrees to indemnify them for and hold them
harmless against, any and all claims, debts, demands, rights, liabilities,
causes of action, losses, damages, costs or expenses (including attorneys' fees)
of whatsoever kind and nature (collectively, "Losses"), directly or indirectly
arising from, resulting from, or relating in any way to the Merger Agreement or
the transactions contemplated thereunder, including, without limitation, any and
all Losses allegedly incurred by either or both of Subsidiary and DTI or any of
their respective Representatives as a result of, among other things, (i) the
breach by CW or any of its Representatives of any provisions of the Merger
Agreement, (ii) the breach of any other duty or obligation allegedly owed to
either or both of Subsidiary and DTI or any of their respective Representatives,
(iii) any alleged act or omission on the part of CW or any of its
Representatives related, directly or indirectly, to the business of Subsidiary
or DTI or the business relationships between or among any of the Parties, or
(iv) any communications made by CW or any of its Representatives to either or
both of Subsidiary and DTI or any of their respective Representatives, from the
beginning of time through the date hereof. In addition, Subsidiary and DTI
hereby release and forever discharge any third party with whom CW has had
conversations or other contacts regarding a possible merger with, or acquisition
of, CW from any and all claims directly or indirectly arising from such
conversations, including, without limitation, claims of tortious interference
with contractual relationship.
In consideration of the obligations undertaken by Subsidiary and DTI as
set forth in this Agreement, CW, for itself and for its successors, assigns and
predecessors, hereby releases and forever discharges Subsidiary and DTI and all
of their respective Representatives from, and agrees to indemnify them for and
hold them harmless against, any and all Losses, directly or
<PAGE>
indirectly arising from, resulting from, or relating in any way to the Merger
Agreement or the transactions contemplated thereunder, including, without
limitation, any and all Losses allegedly incurred by CW or any of its
Representatives as a result of, among other things, (i) the breach by either or
both of Subsidiary or DTI or any of their respective Representatives of any
provisions of the Merger Agreement, (ii) the breach of any other duty or
obligation allegedly owed to CW or any of its Representatives, (iii) any alleged
act or omission on the part of either or both of Subsidiary and DTI or any of
their respective Representatives related, directly or indirectly, to the
business of CW or the business relationships between or among any of the
Parties, or (iv) any communications made by either or bo of Subsidiary or DTI or
any of their respective Representatives to CW or any of its Representatives,
from the beginning of time through the date hereof.
Each of the Parties agrees and understands that it may have suffered
damages as a result of the matters referred to above that are unknown to it at
present. Each Party acknowledges that the release and other consideration
received by such Party under this Agreement is intended to and does release and
discharge any claims by such Party in regard to such unknown damages, including
effects or consequences thereof, and regardless of mistake or fact of law, and
each Party does hereby waive any rights to assert in the future any such claims.
Notwithstanding anything contained herein to the contrary, none of the
Parties hereto is releasing the others from any obligation expressly arising
under (a) the terms of this Agreement, (b) the Promissory Note, as amended by
the Allonge (as defined in Section 3 hereof, or (c) the Confidentiality
Agreement (as defined in subsection 6.b hereof).
Furthermore, and in consideration of the obligations undertaken in this
Agreement, the Parties also agree as follows:
1. Reimbursement of Expenses. CW hereby agrees to pay to DTI, not later
than close of business February 18, 1997, Two Hundred Thousand Dollars
($200,000), as liquidated damages in lieu of reimbursement for expenses incurred
by DTI in connection with the negotiation and preparation of the Merger
Agreement. In the event of the failure to pay this amount when due, such payment
shall accrue interest at an annual rate of fourteen percent (14%) until paid in
full.
2. Change of Control. In the event that CW experiences a Change of
Control at any time subsequent to the date hereof through May 11, 1998, the
following provisions shall apply:
a. CW shall provide DTI with written notice of such Change of Control
not later an the effective date of such Change of Control.
b. As additional liquidated damages in lieu of any potential claims for
Losses to DTI attributable to the non-consummation of the transactions
contemplated by the Merger Agreement, CW agrees to pay an additional
amount (the "Change of Control Fee") to
2
<PAGE>
DTI as of the effective date of such Change of Control of Five Hundred
Thousand Dollars ($500,000).
c. In the event that CW fails to notify DTI of a Change of Control as
provided for in subsection 2.a. above or fails to pay the Change of
Control Fee when due pursuant to Subsection 2.b. above, the Change of
Control Fee shall accrue interest from and after the effective date of
the Change of Control at an annual rate of fourteen percent (14%) until
such Change of Control Fee is paid by CW in full.
d. For purposes of this Section 2, a "Change of Control" shall mean (i)
a merger or consolidation to which CW is a party with a third party
which results in a transfer of ownership of a majority of the
outstanding shares of voting common stock of CW, (ii) any acquisition
by a third party of a majority of the outstanding shares of voting
common stock of CW, or (iii) a sale of all or substantially all of the
assets of CW to a third party (including for this purpose the sale of
stock of material subsidiaries).
3. Allonge to Promissory Note. On the date hereof, CW and DTI shall
execute, and CW shall deliver to DTI, the Allonge to Promissory Note (the
"Allonge") in the form attached hereto as Exhibit A.
4. Termination of Merger Agreement. Effective immediately upon
execution of this Agreement by each of the Parties, the Merger Agreement, and
all rights and obligations of each of the Parties thereunder, shall terminate
and be of no further force and effect and the sole binding and enforceable
rights and obligations of the Parties to each other shall be those rights and
obligations provided for in this Agreement, the Promissory Note, as amended by
the Allonge, and the Confidentiality Agreement.
5. Press Release. DTI shall promptly issue a press release regarding
the termination of the Merger Agreement and the transactions contemplated
thereunder, which press release shall be in the form attached hereto as Exhibit
B and made a part hereof. Each Party covenants and agrees not to make any
statements to third parties inconsistent with the terms of such press release or
which disparage or otherwise reflect poorly on the other Parties. DTI's press
release shall not be disseminated by DTI to any media located in the
Washington-Baltimore metropolitan areas (except pursuant to national
distribution).
6. Other Provisions.
a. The Parties acknowledge and agree that this Agreement is in
settlement of potential claims for Loss, and is in no way an admission
of liability by any Party with regard to such potential claims,
liability for which is expressly denied.
b. Each of CW and DTI hereby agree that the terms and conditions of the
Mutual Non-Disclosure and Confidentiality Agreement, dated June 12,
1996, between CW and
3
<PAGE>
DTI (the "Confidentiality Agreement") shall survive execution of this
Agreement and shall remain in full force and effect. Furthermore,
except as provided in Section 5 above, the Parties agree that all
communications among the Parties and their respective counsel relating
to this Agreement and the subject matter hereof, the terms and
conditions of this Agreement, and all negotiations relating thereto,
are privileged and confidential and shall not be discussed, commented
upon, referred to or disclosed in any manner to anyone other than the
Parties and their counsel, accountants and other advisors, unless such
disclosure is compelled by a court order or otherwise by law, and shall
not, under any circumstances, be disclosed, mentioned or in any manner
used in any subsequent proceeding between the parties, except for the
purpose of enforcing this Agreement; provided, however, that the
parties may disclose, without further comment, that the business
relationship between CW, on e one hand, and Subsidiary and DTI, on the
other hand, has been voluntarily terminated pursuant to a confidential
agreement among the Parties. Notwithstanding the foregoing, CW may
disclose the terms of this Agreement to any person or entity that is
interested in engaging in a Change of Control transaction with CW and
each of CW and DTI may make such disclosure of the terms of this
Agreement as is required by applicable law. In addition, each Party
shall be entitled to disclose to its employees and contractors the
circumstances surrounding the termination of the Merger Agreement.
c. This Agreement shall be binding upon each Party and its successors,
assigns, and predecessors.
d. Each Party hereby represents and warrants to the other Parties that
it has the authority and is duly authorized to execute, deliver and
perform this Agreement.
e. This Agreement is to be interpreted and governed by the laws of the
State of Maryland.
f. All notices, requests, demands and other communications required or
permitted hereunder shall be in writing and shall be deemed to have
been duly given when delivered if by hand, by express delivery or
facsimile transmission (with a copy by mail) or three business days
after the same is mailed, by certified or registered mail with postage
prepaid:
If to CW, to: The Carey Winston Company
6700 Rockledge Drive, 4th Floor
Bethesda, Maryland 20817
Fax: (301) 656-0112
Attn: Thomas L. Nordlinger,
President and CEO
4
<PAGE>
With copies to: Christopher Sanger, Executive Vice
President and General Counsel
6700 Rockledge Drive, 4th Floor
Bethesda, Maryland 20817
Fax: (301) 656-0112
and
Tucker, Flyer & Lewis
1615 L Street, N.W., Suite 400
Washington, D.C. 20036
Fax: (202) 429-3231
Attn: Michael R. Flyer, Esq.
or to such other person or address as CW shall furnish to DTI in writing.
If to DTI or
Subsidiary, to: Trident Rowan Group, Inc.
Finprogetti S.p.A.
Via Fieno 8
20123 Milano, Italy
Fax: 39-272010136
Attn: Howard E. Chase, President
With a copy to: Morrison Cohen Singer & Weinstein, LLP
750 Lexington Avenue
New York, New York 10022
Fax: (212) 735-8708
Attn: Stephen I. Budow, Esq.
or to such other person or address as DTI shall furnish to CW in writing.
g. If, as a result of a breach of any of the provisions of this
Agreement, legal action shall be commenced, the prevailing party
thereto shall be entitled to recover all costs and expenses from the
other party, including, without limitation, all reasonable attorneys'
fees.
h. This Agreement may be executed simultaneously in one or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
i. In the event of the failure by CW to pay any amount owed to DTI
under Section 1 hereof when due, or any amount owed to DTI under
Section 2 hereof within five (5)
5
<PAGE>
business days after same is due, CW hereby irrevocably authorizes and
appoints DTI as its true and lawful attorney-in-fact, to confess
judgment against CW in the full amount so due in favor of DTI in any
Court of Record in the State of Maryland. CW expressly waives summons
and other process and consents to the immediate execution of said
judgment. The authority herein granted to confess judgment shall not be
exhausted by any exercise thereof but shall continue from time to time
and at all times until full payment of all amounts due hereunder. CW
hereby ratifies and confirms the acts of said attorney-in-fact as fully
as if done by CW itself.
6
<PAGE>
IN WITNESS WHEREOF, the undersigned have entered into this
Agreement, by their respective duly authorized officers, as of the day and year
first above written.
ATTEST: TRIDENT ROWAN GROUP, INC.
F/k/a DeTomaso Industries, Inc.
/s/ Diane Kuhrt By: /s/ Howard E. Chase
- ------------------------------ -------------------------------------------
Howard E. Chase, President
ATTEST: DTI ACQUISITION CORP.
/s/ Diane Kuhrt By: /s/ Howard E. Chase
- ------------------------------ -------------------------------------------
Howard E. Chase, President
ATTEST: THE CAREY WINSTON COMPANY
[Illegible] By: /s/ Thomas L. Nordlinger
- ------------------------------ -------------------------------------------
Thomas L. Nordlinger,
President and Chief Executive Officer
<PAGE>
EXHIBIT A
ALLONGE TO PROMISSORY NOTE
THIS ALLONGE TO PROMISSORY NOTE (this "Allonge") is made and entered
into this 12th day of February, 1997, to be attached to, modify, and be a part
of that certain Promissory Note in the original principal sum of up to Two
Million Dollars ($2,000,000.00) dated February 17, 1996 (the "Note"), made by
THE CAREY WINSTON COMPANY (the "Borrower"), payable to the order of DE TOMASO
INDUSTRIES, INC. (the "Lender"), the terms and conditions of which Promissory
Note are hereby modified and amended as follows:
1. The Note is hereby amended by deleting the reference to "$2,000,000"
in the left-hand corner of the Note and replacing it with "$1,000,000".
2. The first paragraph of the Note is hereby amended by deleting it in
its entirety and inserting in lieu thereof the following:
FOR VALUE RECEIVED, the undersigned, THE CAREY WINSTON COMPANY, a
Delaware corporation having an address at 6700 Rockledge Drive, Suite
400A, Bethesda, Maryland 20817 (the "Borrower"), hereby promises to pay
to the order of TRIDENT ROWAN GROUP, INC., F/k/a DE TOMASO INDUSTRIES,
INC., a Maryland corporation having an address at c/o Finprogetti
S.p.A., Via Fieno 8, 20123 Milano, Italy (the "Lender"), the principal
sum of ONE MILLION AND 00/100 DOLLARS ($1,000,000.00), together with
interest thereon from time to time as provided herein.
The principal sum hereof shall be repaid in the following installments:
(a) Three Hundred Thousand Dollars ($300,000) on or before May 12,
1997;
(b) Three Hundred Fifty Thousand Dollars ($350,000) on or before
October 31, 1997;
(c) Fifty Thousand Dollars ($50,000) on or before December 31, 1997;
and
(d) Three Hundred Thousand Dollars ($300,000) on or before April 1,
1998.
Notwithstanding the foregoing, in the event of a "Change of Control" as
defined in that certain Mutual Release and Settlement Agreement by and
among Borrower, Lender and DTI Acquisition Corp. of even date of this
Allonge, any unpaid principal sum hereof and all accrued and unpaid
interest shall be immediately due and payable in full. In addition, in
the event that Borrower shall receive a bridge loan or similar
financing from a party interested in entering into a Change of Control
transaction with Borrower, Borrower shall
2
<PAGE>
use the first proceeds of such financing (up to the remaining amounts
owed hereunder) as a prepayment of the amounts due hereunder.
3. The second paragraph of the Note is hereby deleted in its entirety.
4. The third paragraph of the Note is hereby amended by deleting the
third sentence in its entirety.
5. The sixth paragraph of the Note is hereby amended by deleting it in
its entirety and substituting in lieu thereof the following:
The occurrence of any of the following events shall constitute an Event
of Default by Borrower hereunder:
1. the Borrower shall default in the payment of the principal
of this Note, when and as the same shall become due and payable,
whether at maturity, by acceleration or otherwise and such default
shall continue for a period of five (5) days after written notice; or
2. the Borrower shall default in the payment of interest on
this Note according to its terms, when and as the same shall become due
and payable and such default shall continue for a period of five (5)
days after written notice; or
3. an involuntary proceeding shall be commenced or an
involuntary petition shall be filed in a court of competent
jurisdiction seeking (a) relief in respect of the Borrower, or of a
substantial part of its property or assets, under any Federal or state
bankruptcy, insolvency, receivership or similar law, (b) the
appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for the Borrower, or for a substantial
part of his property or assets, or (c) the winding up or liquidation of
the Borrower's business; and such proceeding or petition shall continue
undismissed for 60 days, or an order or decree approving or ordering
any of the foregoing shall be entered; or
4. the Borrower shall (a) voluntarily commence any proceeding
or file any petition seeking relief under any Federal or state
bankruptcy, insolvency, receivership or similar law, (b) consent to the
institution of, or fail to contest in a timely and appropriate manner,
any proceeding or the filing of any petition described in paragraph 3
above, (c) apply for or consent to the appointment of a receiver,
trustee, custodian, sequestrator, conservator or similar official for
the Borrower, or for a substantial part of its property or assets, (d)
file an answer admitting the material allegations of a petition filed
against it in any such proceeding, (e) make a general assignment for
the benefit of creditors, (f) become unable, admit in writing its
inability or fail generally to pay its debts as they become due or (g)
take any action for the purpose of effecting any of the foregoing; or
3
<PAGE>
5. the Borrower shall have failed to notify the Lender that a
"Change of Control" has occurred as required pursuant to the terms of
that certain Mutual Release and Settlement Agreement by and among
Borrower, Lender and DTI Acquisition Corp.
of even date of this Allonge.
6. The seventh paragraph of the Note is hereby amended by deleting it
in its entirety and substituting in lieu thereof the following:
Upon the occurrence of an Event of Default the entire unpaid principal
amount of this Note, together with accrued interest and all obligations
of the Borrower hereunder to the Lender, may be declared by the Lender
to be immediately due and payable, provided that upon the occurrence of
an Event of Default described in paragraph number 3 or 4 above, the
outstanding principal of and all accrued interest on this Note shall
automatically become immediately due and payable. Upon the occurrence
of an Event of Default under this Note, and until payment in full of
the amount due hereunder, the rate of interest accruing on the unpaid
principal balance shall be fourteen percent (14%) per annum, from and
after the date of the Event of Default, regardless of whether Lender
elects to accelerate the unpaid principal balance in accordance
herewith.
7. The eighth paragraph of the Note is hereby amended by deleting it in
its entirety and substituting in lieu thereof the following:
Upon the occurrence of any one or more Events of Default, the Lender
may proceed to protect and enforce its rights hereunder by suit in
equity, action at law or by other appropriate proceeding, whether for
the specific performance of any covenant or agreement contained in this
Note or in aid of the exercise of any power granted in this Note, or
may proceed to enforce the payment of this Note, or to enforce any
other legal or equitable right of the Lender. No remedy herein
conferred upon the Lender is intended to be exclusive of any other
remedy and each and every such remedy shall be cumulative and shall be
in addition to every other remedy given hereunder or now or hereafter
existing at law or in equity or by statute or otherwise. No course of
dealing between the Borrower and the Lender or any delay on the part of
the Lender in exercising any rights hereunder shall operate as a waiver
of any right. Upon the occurrence of an Event of Default hereunder,
Borrower hereby irrevocably authorizes and appoints Lender as its true
and lawful attorney-in-fact, to confess judgment against Borrower in
the full amount due under this Note in favor of Lender in any Court of
Record in the State of Maryland. Borrower expressly waives summons and
other process and consent to the immediate execution of said judgment.
The authority herein granted to confess judgment shall not be exhausted
by any exercise thereof but shall continue from time to time and at all
times until full payment of all amounts due hereunder. Borrower hereby
ratifies and confirms the acts of said attorney-in-fact as fully as if
done by Borrower itself.
8. The thirteenth paragraph of the Note is hereby deleted in its
entirety.
4
<PAGE>
All other terms and conditions of the Note shall, except as herein or
heretofore modified, remain in full force and effect and all rights, duties,
obligations, and responsibilities of the parties shall be governed and
determined by the Note as the same has been modified by this Allonge.
IN WITNESS WHEREOF the undersigned has executed and delivered
this Allonge as of e date first above written.
THE CAREY WINSTON COMPANY
By:______________________________________
Name: Thomas L. Nordlinger
Title: President and Chief Executive Officer
ACCEPTED AND AGREED TO:
TRIDENT ROWAN GROUP, INC.
f/k/a DE TOMASO INDUSTRIES, INC.
By:_____________________________________
Howard E. Chase, President
5
<PAGE>
EXHIBIT B
Press Release
TRG and The Carey Winston Company ("CW") have decided to terminate the
agreement pursuant to which TRG was to acquire CW. The termination was mutually
agreed to by the parties in accordance with the terms of their agreement.
CW will pay to TRG $1.2 million, representing repayment of a loan
previously made and a payment in respect of expenses incurred, and an additional
sum payable under certain circumstances.
TRG and CW are actively collaborating in the development of real estate
services business opportunities in Europe.
Exhibit 3.1
AMENDMENT TO RESTATED
ARTICLES OF INCORPORATION
of
DE TOMASO INDUSTRIES, INC.
DE TOMASO INDUSTRIES, INC., a Maryland corporation having its
principal office in Red Bank, N.J. (the "Corporation") hereby certifies to
the State Department of Assessments and Taxation of Maryland that:
First: The amended and restated Articles of Incorporation of the
Corporation are hereby amended by striking out Article 1. thereof, and by
inserting in lieu thereof the following:
"1. The name of the Corporation is:
"TRIDENT ROWAN GROUP, INC."
Second: The amended and restated Articles of Incorporation of the
Corporation are hereby amended by striking out Article FOURTH thereof, as
heretofore amended, and by inserting in lieu thereof the following:
"FOURTH: The total number of shares of all classes of stock
which the Corporation shall have the authority to issue is fifty
million (50 million), all of which shall be common stock with a par
value of $.01 per share."
Third: The foregoing amendments to the amended and restated Articles
of Incorporation were approved by unanimous consent of the Board of
Directors. Notice setting forth the foregoing amendments and stating that a
purpose of the meeting of stockholders would be to take action thereon was
given as required by law to all stockholders of the Corporation entitled to
vote thereon. The foregoing amendments were approved by the stockholders at
said meeting by the affirmative vote of at least two-thirds of each class of
stock entitled to vote thereon.
Fourth: (a) The total number of shares of all classes of stock of the
Corporation heretofore authorized, and the number, and par value and voting
rights of the shares of each class were as follows:
Class Number Par Value Votes per share
- ------ ---------- --------- ---------------
Common 10,000,000 $2.50 1
Preferred 2,000,000 $2.50 3
Total 12,000,000
<PAGE>
(b) The total number of shares of all classes of stock of the
Corporation, as amended hereby, and the number, par value and voting rights
of each class, are as follows:
Class Number Par Value Votes per share
- ------ ---------- --------- ----------------
Common 50,000,000 $.01 1
Total 50,000,000
(c) There were no shares of heretofore authorized preferred
stock issued and outstanding on the date of the vote of stockholders or as of
the date of the filing of this amendment.
[balance of page intentionally left blank]
<PAGE>
The undersigned verifies under penalties of perjury that he is the duly
elected and serving president of the above corporation, that the foregoing
statements are true and correct in all material respects, and that they are
the actions taken of the above corporation.
/s/ Howard E. Chase
Dated: August 22, 1996 ---------------------------------
Howard E. Chase
WITNESS:
/s/ Catherine D. Germano
- --------------------------
Catherine D. Germano
Assistant Secretary
<PAGE>
DE TOMASO INDUSTRIES, INC.
ARTICLES OF RESTATEMENT
DE TOMASO INDUSTRIES, having its principal office in Baltimore City,
Maryland (hereinafter called the "Corporation"), hereby certifies to the
State Department of Assessments and Taxation of Maryland, that:
FRIST: The Corporation desires to restate its charter and a majority of
the entire Board of Directors of the Corporation adopted a resolution at a
duly held meeting on October 18, 1973, at which a quorum was present, stating
the desirability of so restating the charter and taking action to so restate
the charter.
SECOND: The following are the provisions of the charter of incorporation
of the Corporation in effect at this date:
"CERTIFICATE OF INCORPORATION
of
DE TOMASO INDUSTRIES, INC.
THIS IS TO CERTIFY, that the subscribers, Wilbur C. Jackson, residing at
4208 Maine Avenue, Baltimore County, John S. Rowan, residing at 308 North
Holliday Street, Baltimore City, and Henry Vogt, residing at 1243 Calvert
Building, Baltimore City, all being of full legal age, and all of whom are
citizens
<PAGE>
of the State of Maryland, do hereby associate themselves with the intention
of forming a corporation under and by virtue of the general laws of the State
of Maryland, authorizing the formation of the corporation.
1. The name of the Corporation is
DE TOMASO INDUSTRIES, INC.
2. The purposes for which, and for any of which, the Corporation is
formed and the business or objects to be carried on and promoted by it are;
- -To manufacture, buy, see, rent, lease, mortgage and generally deal in, all
manner and kind of electrical machinery, electrical devices and equipment,
and parts thereof, of every description, and to patent register and otherwise
protect the same; to apply for, acquire, hold, use, sell, mortgage, license,
assign or otherwise dispose of, letters patent of the United States or any
foreign country, and any and all patent rights, licenses, privileges,
inventions, improvements, processes and trade marks, relating to or useful in
connection with the manufacture of electrical apparatus or any business
carried on by the Corporation to make, enter into, carry out, perform or
otherwise turn to account, contracts of every kind; also, to acquire by
purchase, leases or otherwise, control of, or interest in, other firms,
companies or corporations engaged in the same or other enterprises; also, to
acquire by purchase, lease or otherwise, hold, mortgage, convey, or otherwise,
use or dispose of real and personal property, lands,
<PAGE>
buildings, factories, shops or other structures in any part of the world; and
in general to carry on such operations and enterprises and to do all such
things in connection therewith as may be permitted by the laws of Maryland
and be necessary or convenient in the conduct of the Corporation's business.
To have and maintain offices within and without the States of Maryland and to
do all lawful things which are or may become necessary or expedient for the
advancement of the business of the Corporation; and that the said Corporation
is formed upon the articles, conditions and provisions herein expressed, and
subject in all particulars to the limitations relating to corporations, which
are contained in the general laws of this State.
3. The principal office of said Corporation in this State is 929
North Howard Street, Baltimore, Maryland, c/o Niles, Barton & Wilmer, Esqs.,
and Adgate Duer is the name of the Corporation's resident agent, and his post
office address is 929 North Howard Street, Baltimore, Maryland, c/o Niles,
Barton & Wilmer, Esqs.
4. The total number of shares of all classes of staock which the
Corporation shall have the authority to assume is five million (5,000,000),
of which one million (1,000,000) shares shall be preferred stock of the par
value of Two Dollars and 50 Cents ($2.50) per share (hereinafter called
"Preferred Stock"), and four million (4,000,000) shares shall be common stock
of the par value of Two Dollars and 50 Cents ($2.50) per share (hereinafter
"Common Stock").
<PAGE>
(1) Any unissued or treasury shares of the Preferred Stock may
be issued by the Board of Directors from time to time in one or more series.
All shares of Perferred Stock shall be of equal rank and shall be identical,
except in respect of the particulars that may be fixed by the Board of
Directors as hereinafter provided pursuant to authority which is hereby
expressly vested in the Board of Directors; and each share of a series shall
be identical in all respects with the other shares of such series, except as
to the date from which dividends, if any, thereon shall be cumulative, if
made cumulative. Before any shares of Preferred Stock of any particular
series shall be issued, the Board of Directors shall fix and determine, and
is hereby expressly empowered (without the vote or consent of the holders of
any class or series of stock) to fix and determine, in the manner provided by
law, the following provisions of the shares of such series so far as not
inconsistent with the provisions of the this Article FOURTH applicable to all
series of Preferred Stock:
(a) the distinctive designation of such series and the
number of shares which shall constitute such series, which number may be
increased (except where otherwise provided by the Board of Directors in
creating such series) or decreased (but not below the number of shares
thereof then outstanding) from time to time by like action of the Board
of Directors;
(b) the annual rate of dividends, if any, payable on
shares of such series, the conditions upon which, and the dates when,
such dividends shall be payable and whether such dividends shall be
cumulative or non-cumulative, provided, however, that accruals of
dividends shall not bear interest;
(c) the time or times when, the price or prices at which
and the manner in which shares of such series shall be redeemable;
(d) the obligation, if any, of the Corporation to maintain
a sinking fund for shares of such series;
(e) the amount payable on shares of such series in the
event of any liquidation or dissolution
<PAGE>
which results in a winding-up of the affairs of the Corporation;
(f) the full or limited voting power, if any, of the
shares of such series;
(g) the rights, if any, of the holders of shares of such
series to convert such shares into, or exchange such shares for, shares
of any other class or classes or of any other series of the same or any
other class or classes of stock of the Corporation and the price or
prices or the rates of exchange and the adjustments at which such shares
shall be convertible or exchangeable;
(h) any other preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
participations of shares of such series not fixed and determined in this
Article FOURTH.
(2) In the event of any dissolution or liquidation (whether
voluntary or involuntary) which results in a winding-up of the affairs of the
Corporation, after payment of the debts and other liabilities of the
Corporation, the holders of each series of Preferred Stock shall be entitled
to receive for every share of their holdings of such series, out of the net
assets of the Corporation, an amount in cash for each share equal to the
amount fixed and determined by the Board of Directors in the resolution
providing for the issue of shares of such particular series of Preferred
Stock, before any distribution shall be made to the holders of the Common
Stock. Thereafter, the holders of any particular series of Preferred Stock
may participate in the remaining net assets of the Corporation to the extent,
if any, fixed and determined by the Board of Directors in the resolution
providing for the issue of shares of such particular series of Preferred
Stock. If, upon any dissolution or liquidation (whether voluntary or
involuntary) which results in a winding-up of the Corporation, the assets of
the Corporation, or proceeds thereof, distributable among the holders of the
shares of the Preferred Stock shall be insufficient to pay in full the
preferential amount payable to the holders of such series of Preferred Stock
as aforesaid, then such assets, or the proceeds thereof, shall be distributed
among such holders ratably in accordance with the respective amounts which
would be payable on such shares if all amounts payable thereon (before any
part of such assets or the proceeds thereof could have been distributed to
the holders of the Common Stock) were paid in full. For the purpose of this
Section (2), the voluntary sale, lease,
<PAGE>
exchange or transfer (for cash, shares of stock, securities, or other
consideration) of all or substantially all of its property or assets to, or a
consolidation or merger of the Corporation with, one or more corporations
shall not be deemed to be liquidation, dissolution or winding-up of the
affairs of the Corporation.
(3) In addition to any voting rights which may be stated in
the resolution or resolutions providing for the issue of any series of
Preferred Stock adopted by the Board of Directors, the Preferred Stock shall
have the following voting rights:
(a) So long as any shares of Preferred Stock shall be
outstanding, the Corporation shall not,
(A) without the affirmative vote or written consent
of the holders of at least two-thirds, of the aggregate number
of shares of Preferred Stock at the time outstanding, voting as
a class, regardless of series, by an amendment to the Certificate
of Incorporation, or by merger or consolidation or in any other
manner,
(i) authorize any class of stock ranking either as
to payment of dividends or distribution of assets, prior
to the Preferred Stock, or
(ii) alter or change any other of the preferences,
special rights or powers given to the Preferred Stock at
the time outstanding so as to affect the Preferred Stock
or any series of Preferred Stock adversely provided,
however, that if all series of Preferred Stock at the
time outstanding are not so adversely affected, then only
the affirmative vote or written consent of the holders of
at least two-thirds of the aggregate number of shares of
such series so adversely affected at the time outstanding,
voting or acting as a single class, shall be required, or
(B) without the affirmative vote or written consent of
the holders of at least a majority of the aggregate number of
shares of Preferred Stock at the time outstanding, voting as a
class, regardless of series, by an amendment
<PAGE>
to the Certificate of Incorporation, or by merger or
consolidation or in any other manner,
(i) authorize any increase in the total number of
authorized shares of Preferred Stock; or
(ii) authorize any class of stock ranking on a parity
with the Preferred Stock; provided, however, that nothing in
this paragraph (a) contained shall require such a class
vote or consent (I) in connection with the fixing of any of
the particulars of shares of other series of Preferred Stock
that may be fixed by the Board of Directors as provided in
Section 1 of this Article FOURTH or (II) to amend the By-Laws
of the Corporation in any respect, including any increase or
decrease in the number of directors of the Corporation; and
provided, further, that no such vote or written consent of
the holders Preferred Stock shall be required if, at or prior
to the time when the issuance of any such prior stock is to
be made or when any such change is to take effect, as the
case may be, provision is made for the redemption of all
shares of Preferred Stock at the time outstanding.
(4) (a) Subject to the limitations prescribed in this Article
FOURTH and any further limitations prescribed in accordance therewith, the
holders of the Common Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of the assets of the Corporation
which are by law available therefor, dividends payable either in cash, in
property, or in shares of stock.
(b) No dividends other than dividends payable only in
shares of Common Stock shall be paid on the Common Stock if dividends in full
to which all outstanding shares of the Preferred Stock of all series shall
then be entitled for the then current dividend period and, where such
dividends are cumulative, for all past dividend periods shall not have been
paid or been declared and set apart for payment.
(5) In the event of any dissolution of liquidation (whether
voluntary or involuntary) which results in a wind-up of the affairs of the
Corporation, the holders of the
<PAGE>
Common Stock shall be entitled, after payment or provision for payment of the
debts and other liabilities of the Corporation, and the amounts to which the
holders of the Preferred Stock shall be entitled, to share ratably in the
remaining net assets of the Corporation.
(6) All holders of Common Stock shall (subject to the
provisions of By-Laws of the Corporation, as from time to time amended, with
respect to the closing of the transfer books and the fixing of a record date
for the determination of stockholders entitled to vote) be entitled to one
vote for each share of Common Stock held by them at each meeting of
stockholders.
(7) Anything herein or in any resolution or resolutions of the
Board of Directors providing for the issue of Preferred Stock of any series
contained to the contrary notwithstanding, the rights of the holders of
Preferred Stock and Common Stock of the Corporation in respect of dividends
shall at all times be subject to the power of the Board of Directors from
time to time to set aside such reserves and to make such provision, if any,
for working capital and additions and betterments as said Board shall deem to
be necessary or advisable. Subject to the provisions of this Article FOURTH,
the Board of Directors shall have power from time to time to authorize the
use of the surplus of the Corporation for the purpose of acquiring any of the
capital stock of the Corporation and to authorize the reissue and sale of any
capital stock so acquired.
(8) Subject to the provisions of this Article FOURTH, any
unissued shares of any class of stock of the Corportation, whether now or
hereafter authorized, may be issued from time to time by the Corporation to
shareholders, employees of the Corporation and its subsidiaries, or others in
such manner and amounts and for such character and amount of consideration
(which consideration shall not, however, be less in amount or value that the
aggregate par value of the shares in respect of which such consideration
shall be received) as shall be determined from time to time by the Board of
Directors.
(9) No holder of any share or shares of any class of stock of
the Corporation, whether now or hereafter authorized, shall, as such holder,
have any preemptive or preferential right of subscription to any share or
shares of any class of stock of the Corporation, whether now or hereafter
authorized, or to any obligations convertible into stock of the Corporation,
issued or sold, nor any right of subscription to any thereof other than such,
if any, and for such consideration, and upon such terms and conditions, as the
<PAGE>
Board of Directors, in its discretion from time to time may determine,
pursuant to the authority hereby conferred by the Certificate of
Incorporation, and the Board of Directors may issue stock of the Corporation
or obligations convertible into stock of the Corporation without offering
such issue of stock or obligations either in whole or in part to the
stockholders of the Corporation. Should the Board of Directors as to any
portion of the stock of the Corporation, whether now or hereafter authorized,
or as to any obligations convertible into stock of the Corporation, offer the
same to the stockholders or any class thereof, such offer shall not in any
way constitute a waiver or release of the right of the Board of Directors
subsequently to dispose of other portions of said stock, or other obligations
convertible into stock, without so offering the same to the stockholders.
The acceptance of stock in the Corporation shall be a waiver of any such, or
other, pre-emptive or preferential right of subscription which in the absence
of this provision might otherwise be asserted by stockholders of the
Corporation or any of them.
Pursuant to the authority contained in this Article 4 of the
charter of the Corporation, the Board of Directors has duly classified the
one million (1,000,000) shares of Preferred Stock herein authorized as
Preferred Stock with the following preferences, and other rights, voting
powers, restrictions, limitations as to dividends and qualifications:
(1) Voting. All holders of Preferred Stock shall (subject
to the provisions of the By-Laws of the Corporation, as from time
to time amended, with respect to the closing of the transfer
books and the fixing of a record date for the determination of
stockholders entitled to vote) be entitled to one vote for each
share of Preferred Stock held by them at each meeting of
stockholders.
(2) Dividends. When and if any dividend is paid on the
Common Stock of the Corporation, whether paid in cash, stock or
other property, all holders of Preferred Stock shall be entitled
to receive a dividend, paid in such cash, stock or other property
as is paid on the Common Stock, the amount of each such dividend
paid on each share of Preferred Stock to be equal in value to the
amount of such dividend paid on each share of Common Stock. The
holders of Preferred Stock shall not be entitled to participate
in or to receive any dividends other than as hereinabove
provided.
<PAGE>
(3) Liquidation. In the event of liquidation, dissolution
or winding up of the affairs of the Corporation, whether
voluntary or involuntary, or any reduction in its capital
resulting from any distribution of assets to its shareholders
(a) before any distribution shall be made to the holders of
shares of Common Stock of the Corporation the holders of shares
of Preferred Stock shall be entitled to be paid in cash out of
the assets of the Corporation, whether from capital or from
earnings available from distribution to stockholders, the sum
of Two Dollars and 50 Cents ($2.50) per share of Preferred
Stock; (b) before any further distribution shall be made to
holders of shares of Preferred Stock of the Corporation the
holders of shares of Common Stock shall be entitled to be paid
in cash out of the assets of the Corporation whether from
capital or from earnings available for distribution to its
stockholders the sum of Two Dollars and 50 Cents ($2.50) per
share of Common Stock; (c) the remaining assets of the
Corporation shall be paid over and distributed among the
holders of Preferred Stock and the holders of Common Stock in
such proportions that the amount paid on each share of
Preferred Stock shall be equal in value to the amount paid on
each share of Common Stock.
The purchase or redemption by the Corporation of stock of
any class, in any manner permitted by law, shall not for the
purpose of this paragraph (3) be regarded as a liquidation,
dissolution or winding up of the Corporation or as a reduction
of its capital. Neither the consolidation or merger of the
Corporation with or into any other corporation or corporations,
nor the sale or transfer by the Corporation of all or any part
of its assets shall be deemed to be a liquidation, dissolution
or winding up of the Corporation for the purpose of this
paragraph (3). A dividend or distribution to stockholders from
net profits or surplus earned after the date of any reduction
of capital shall not be deemed to be a distribution resulting
from such reduction in capital.
(4) Stock splits and combinations. In case the
Corporation shall at any time or from time to time subdivide
the outstanding shares of Common Stock of the Corporation into
a greater number of shares, then with respect to each such
subdivision, the outstanding shares of Preferred Stock shall be
subdivided and increased in proportion to the increase
resulting from such subdivision in the number of outstanding
shares of Common Stock; and in case the Corporation shall at
any time or from time to time contract the number of
outstanding shares of Common Stock of the Corporation by
combining the outstanding shares of Common Stock of the
Corporation into a smaller number, then with respect to each
such combination the
<PAGE>
outstanding Preferred Stock shall be combined and decreased in
proportion to the decrease resulting from such combination in
the number of outstanding shares of Common Stock of the
Corporation.
(5) Conversion to Common Stock. When, as and if the
Corporation shall have sufficient authorized but unissued
shares of Common Capital Stock, par value $2.50 per share, to
permit a conversion of all its Preferred Stock into such Common
Stock on the basis of one share of such Common Stock to each
one share of Preferred Stock, such conversion shall be made
forthwith upon the happening of either of the following events:
(i) the tender by the Corporation to the registered
owner of any Preferred Stock of the number of Common Stock
shares required to effect such conversion, which tender
shall be complete upon mailing to the registered owner at
his last known address as it appears on the books of the
Corporation, by registered mail, return receipt requested:
(ii) the tender by a holder of Preferred Stock to the
Corporation of the number of Preferred Stock shares
required to effect such conversion, which tender shall be
complete upon the mailing to the Corporation, attention
Treasurer, at its executive offices by registered mail,
return receipt requested.
5. The number of directors of the Corporation shall be such as shall
be fixed from time to time by, or in the manner provided in the By-Laws, but
in no case shall the number be less than three. Directors shall in all cases
hold office until the annual meeting or until their successors shall be
elected and qualified. The By-Laws from time to time prescribe what number
of directors shall constitute a quorum for the transaction of business, which
number shall in no case be
<PAGE>
less than one-third of the total number of directors, nor less than two
directors. Vacancies in the membership of the Board shall be filled in the
way or ways provided in the By-Laws of the Corporation.
IN WITNESS WHEREOF, we have hereunto set our hands and seals this
twentieth day of February, in the year One thousand nine hundred and
seventeen.
WITNESS: Wilbur C. Jackson (Seal)
J. Leroy Hopkins John S. Rowan (Seal)
Henry Vogt (Seal)
STATE OF MARYLAND )
) to wit:
CITY OF BALTIMORE )
"I HEREBY CERTIFY that on this twentieth day of February, in the
One Thousand nine hundred and seventeen, before me the subscriber, a Notary
Public of the State of Maryland, in and for the City of Baltimore, aforesaid,
personally appeared Wilbur C. Jackson, John S. Rowan and Henry Vogt, the
incorporators named in the aforegoing Certificate of Incorporation, and they
severally acknowledged the aforegoing Certificate to be their act.
"AS WITNESS my hand and Notarial Seal.
xxxxxxxxxxxxxxxxxxxxx
x J. Leroy Hopkins x J. Leroy Hopkins
x Notary Public x
x Baltimore, Md. x Notary Public"
xxxxxxxxxxxxxxxxxxxxx
<PAGE>
THIRD: That the provisions referred to in paragraph SECOND above
are all of the provisions of the corporation's charter in effect at the date
of filing these Articles of Restatement.
FOURTH: That this restatement of the charter of the corporation has
been authorized by a vote of a majority of the entire Board of Directors of
the corporation.
FIFTH: That no amendment of the charter of the corporation is
effected by these Articles of Restatement.
SIXTH: That the names of the six directors of the corporation
presently in office are:
Alejandro de Tomaso
Howard E. Chase
Miguel G. Mendoza
Lars S. Potter, Jr.
A. Bertochi
R. Bussinello
ATTEST: DE TOMASO INDUSTRIES, INC.
/s/ Howard E. Chase By /s/ Alejandro de Tomaso
- -------------------------- --------------------------------
Howard E. Chase, Secretary Alejandro de Tomaso, President
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
I hereby certify that on the 18th day of Otober, 1973, before me,
the subscriber, a Notary Public of the State of New York, in and for the
County of New York, personally appeared Alejandro de Tomaso who stated that
he is the President of de Tomaso Industries Inc., a Maryland corporation and
in the name and behalf of the said corporation ???
<PAGE>
and at the same time personally appeared Howard E. Chase and made oath in the
form of law that he was Secretary of the meeting of the Board of Directors of
said corporation at which the Restatement of the Charter of the corporation
here and above set forth was approved and that the matters and facts set
forth in said Restatement of the Charter are true to the best of his
knowledge, information and belief.
WITNESS my hand and Notarial seal the day and year last above
written.
[illegible]
----------------------------
Notary Public
Exhibit 3.2
ROWAN INDUSTRIES, INC.
BY - LAWS
ARTICLE I. SHAREHOLDERS
SECTION 1. ANNUAL MEETINGS
The annual meeting of the shareholders of the corporation shall be
held at the principal office of the corporation, on the first Tuesday in May
of each year at 11:00 A.M. o'clock (or as soon thereafter and at such other
hour and/or place as may be fixed by the Board of Directors) for the election
of Directors and for the transaction of general business except in any case
required by law or statute. If the first Tuesday in May shall be a legal
holiday, the annual meeting of the shareholders shall be held the first day
following which is not a legal holiday, at the same hour. Such annual
meetings shall be general meetings; i.e., open for the transaction of any
business within the powers of the corporation without special notice of such
business.
SECTION 2. SPECIAL MEETINGS
Except as may otherwise be required by law, special meetings of the
shareholders of the corporation may be called only as hereinafter set forth:
at any time by the President, or by the majority of the whole Board of
Directors, either by vote or in writing, or upon request in writing received
by the Secretary or Assistant Secretary, of the holders of a majority of all
the shares outstanding and entitled to vote. Any such meeting shall be called
and held at the expense of the corporation. Such request by the Directors or
shareholders shall state the purpose of the meeting and notice thereof shall
be given as provided in Section 3 of this Article I. No business other than
that stated in the notice
<PAGE>
of the meeting shall be transacted at any special meeting of the shareholders,
however called. Special meetings of the shareholders shall be held at the
principal office of the corporation, whether within or outside of the State
of Maryland, as named in Section 1 of this Article I, or at any other locations
specified by the President.
SECTION 3. NOTICE OF MEETINGS
Not less than ten (10) days' and not more than ninety (90) days'
written notice of every annual meeting and of every special meeting of the
shareholders shall be given to each holder of stock having voting rights
whose name appears as a holder of record upon the books of the corporation at
the close of business on the date fixed by the Board of Directors for the
determination of shareholders entitled to notice of such meeting in
accordance with the provisions of these By-Laws, and, if no such date shall
have been fixed by the Board for such purpose, then to the holders of record
on the fifth business day prior to the date when such notice shall be given.
Such notices of annual or special meetings shall state the place, day and
hour of such meeting, and, in the case of special meetings, shall also state
the business proposed to be transacted. Such notice shall be given to each
shareholder by leaving the same with him or at his residence or usual place
of business, or by mailing it postage prepaid and addressed to him at his
address as it appears upon the books of the corporation. No notice of the
time, place or purpose of any meeting of shareholders, whether prescribed by
law, by the Charter, or by these By-Laws, need be given to any shareholder
who attends in person, or by proxy, or who waives such notice in writing. No
notice of any meeting, regular or special, need be given to any shareholder
who is not entitled to vote thereat.
<PAGE>
SECTION 4. QUORUM
At any meeting of shareholders the presence, in person or by proxy,
of the holders of a majority of all shares having voting rights at such
meeting shall constitute a quorum for the election of Directors or for the
transaction of other business; but, in the absence of a quorum, the
shareholders entitled to vote who shall be present in person or by proxy at
any meeting (or adjournment thereof) may, by vote of a majority of shares so
present and entitled to vote, adjourn the meeting from time to time, but not
for a period of over thirty (30) days at any one time, by announcement at the
meeting, until a quorum shall attend. At any such adjourned meeting at which
a quorum shall be present, any business may be transacted at the meeting as
originally notified.
SECTION 5. PROXIES
Shareholders may vote either in person or by proxy, but no proxy
which is dated more than two months before the meeting at which it is offered
shall be accepted unless such proxy shall on its face name a longer period
for which it is to remain in force. Every proxy shall be in writing
subscribed by a shareholder or by his duly authorized attorney, and shall be
dated; but need not be sealed, witnessed or acknowledged.
SECTION 6. VOTING
At every meeting of the shareholders, every shareholder of the
corporation shall be entitled to one vote for each share of voting stock
registered in his name on the books of the corporation on the date for the
determination of those entitled to notice of the meeting. Upon demand of
shareholders holding ten percent (10%) of the shares present in person or by
proxy and entitled to vote, the votes other than for Directors shall be by
ballot; and except in cases in which it is by law, by the Charter, or by
these By-Laws otherwise provided, a
<PAGE>
majority of the votes cast shall be sufficient to elect and pass any measure.
SECTION 7. INSPECTORS
Two inspectors shall be appointed by the Chief Executive Officer of
the company, before any meeting. Such inspectors shall be duly sworn and
shall open and close the polls, shall receive and take charge of the proxies
and ballots and decide all questions as to the qualification of voters, the
validity of proxies and the acceptance or rejection of votes. The polls shall
remain open for a period of at least one hour.
SECTION 8. LIST OF SHAREHOLDERS
Prior to each meeting of the shareholders, the Secretary or an Assistant
Secretary shall prepare a full, true and complete list in alphabetical order
of all shareholders entitled to vote at such meeting, indicating the number of
shares held by each, and shall be responsible for the production of such list
at the meeting.
SECTION 9. ORDER OF BUSINESS
At all meetings of shareholders, the order of business shall be as
far as applicable and practicable, as follows:
a) Organization.
b) Proof of notice of meeting or of waivers thereof. The Certificate of
the Secretary of the corporation or the affidavit of any other
person who mailed the notice or caused the same to be mailed or
served, shall be accepted as proof of service of notice by mail or
service.
c) Submission of an alphabetical list of shareholders entitled to vote
thereat.
<PAGE>
d) Opening polls.
e) At an annual meeting, or at a meeting called for that purpose,
reading of unapproved minutes of preceding meetings, and action
thereon.
f) Reports of the Officers.
g) At an annual meeting, the election of Directors.
h) Unfinished business.
i) New business.
j) Closing the polls.
k) Adjournment.
ARTICLE II BOARD OF DIRECTORS
SECTION 1. ELECTION AND POWERS
The business and property of the corporation, except as otherwise
provided by statute or by the Charter, or by these By-Laws, shall be
conducted and managed by its Board of Directors. Except as provided in Sec. 8
of this Article, the members of the Board of Directors shall be elected at
the annual meeting of the shareholders by holders of stock present in person
or by proxy at such meeting and entitled to vote thereat. Each Director
elected at any annual meeting shall hold office until his successor shall
have been elected and qualified or until he shall die or resign, or shall
have been removed. The number of Directors may, by vote of a majority of the
entire Board of Directors, be increased to not exceeding nineteen (19) or
decreased to not less than three (3), provided that the tenure of office of
no director shall be affected thereby. The Board of Directors shall keep
minutes of its meetings and a full account of its transactions.
<PAGE>
SECTION 2. FIRST REGULAR MEETING
After each meeting of shareholders at which a Board of Directors
shall have been elected, the Board of Directors so elected shall meet for
the purpose of organization and the transaction of other business, at such
time and place as may be designated by the President.
SECTION 3. ADDITIONAL REGULAR MEETINGS
Regular meetings of the Board of Directors shall be held at such times
as may be fixed by general resolution of the Board, at the principal business
office of the Corporation, or at such other place as shall be specified in the
notice of the meeting.
SECTION 4. SPECIAL MEETINGS
Special meetings of the Board of Directors shall be held whenever and
wherever called by the President or the majority of the Directors.
SECTION 5. NOTICE OF MEETINGS
Subject to the provisions of Section 2 of Article II.
Notice of the place, day and hour of every regular and special meeting
shall be given to each Director, either -
a) By notice in writing mailed to him postage prepaid not later than
the third day before the day set for the meeting and addressed to
him at his last known post office address according to the records
of the corporation; or
b) By notice in writing delivered to him personally or left at his
residence or usual place of business not later than the second day
before the day fixed for the meeting; or
<PAGE>
c) By telegraph or telephone not later than the date set for the
meeting.
No notice of the time, place or purpose of any meeting need be given to
any Director who, in writing, executed and filed with the records of the
meeting either before or after the holding thereof, waives such notice. No
notice of any adjourned meeting of the Board of Directors need be given.
SECTION 6. QUORUM
A majority of the Board of Directors shall be necessary and
sufficient to constitute a quorum for the transaction of business at every
meeting of the Board of Directors; but if at any meeting there be less than a
quorum present, a majority of those present may adjourn the meeting from time
to time, but not for a period of over ten (10) days at any one time, without
notice other than by announcement at the meeting, until a quorum shall
attend. At any such adjourned meeting at which a quorum shall be present, any
business may be transacted which might have been transacted at the meeting as
originally notified.
SECTION 7. REMOVAL
At any meeting of the Shareholders called for the purpose, and at any
meeting of the Board of Directors called for the purpose any Director may, by
the vote of a majority of all the shares of stock outstanding and entitled to
vote, or by a vote of the majority of the members of the Board of Directors,
respectively, be removed from office, with or without cause, and another may be
appointed in the place of the person so removed, to serve for the remainder of
his term.
SECTION 8. VACANCIES
If any Director shall die or resign, or if the shareholders shall remove
any Director without appointing another in his place, a majority of the re-
<PAGE>
maining Directors (although such majority is less than a quorum) may elect
a successor to hold office for the unexpired portion of the term of the
Director whose place shall so become vacant, and until his successor shall
have been duly chosen and qualified. Vacancies in the Board of Directors
created by an increase in the number of Directors may be filled by the vote
of a majority of the entire Board as constituted prior to such increase, and
the Directors so elected by the Board to fill such vacancies shall hold office
until the next succeeding annual meeting of shareholders and thereafter until
their successors shall be elected and qualified.
SECTION 9. COMPENSATION
Directors, as such, shall not receive any stated compensation for
their service, but by resolution of the Board of Directors, a fixed sum and
expenses of attendance, if any, may be allowed for attendance at any regular
or special meeting thereof. Nothing in this Section shall be construed to
preclude a Director from serving the corporation in any other capacity and
receiving compensation therefor.
SECTION 10. COMMITTEES
The Board may appoint such committees, including an executive committee,
with such powers and for such periods, as it shall by resolution provide.
At any meeting of such committees those present, even if not a quorum, may
appoint a member of the Board to act in the place of an absent member.
<PAGE>
ARTICLE III DELEGATIONS OF AUTHORITY
SECTION 1. BUDGETS AND PLANS
Approval of a budget or plan by the Board of Directors of the
Corporation shall constitute the delegation of the necessary authority to
implement or execute such Budget or Plan to the Board of Directors or
managing officers of a subsidiary or division.
SECTION 2. NON-RECURRING EXPENDITURES
The Board of Directors of the corporation reserves to itself the power
to approve any non-recurring (i.e., unbudgeted) expense in excess of $50,000,
except in settlement of litigation.
SECTION 3. COMPENSATION
The Board of Directors of the Corporation reserves to itself the power
to approve all compensations in excess of $30,000. per year, exclusive of fringe
benefits.
ARTICLE IV OFFICERS
SECTION 1. OFFICERS
The Executive Officers of the Corporation shall be elected by the Board
of Directors.
The Executive Officers of the Corporation shall be a President, a
Secretary, a Treasurer and such Executive Vice Presidents as may, in the
opinion of the Board of Directors, be necessary for the proper control and
supervision of the business of the Corporation.
<PAGE>
Each elected officer of the Corporation shall hold his respective
office for a period of one year, or until a Successor shall have been elected
and qualified, or until he shall die, retire, or resign, or shall have been
removed.
The President shall be elected from the membership of the Board of
Directors.
Line and staff officers of the Corporation shall be appointed by the
President with the approval of the Board of Directors to serve for such
periods and with such parameters as shall be prescribed by the Board and such
duties as are described by the President.
The line officers of the Corporation shall be such Vice Presidents as
may, in the opinion of the President and with the approval of the Board, be
necessary for the proper direction and operation or supervision of the various
divisions and subsidiaries of the Corporation. The staff officers of the
Corporation shall be such Assistant Secretaries and Assistant Treasurers as
may be deemed necessary from time to time by the Board.
SECTION 2. PRESIDENT
In general, the President shall be the Chief Executive Officer of the
Corporation. He shall be responsible to the Board of Directors.
Specifically, the Corporation's President shall:
a) Be a member of the Board of Directors, and the Board of Directors of
each subsidiary.
b) Develop and direct his supporting organization and establish the
duties and responsibilities for persons reporting directly to him,
determining their compensation, subject to the limitations set by
the By-Laws.
c) Be responsible for the administration of all corporate policies
defined and established by the Board of Directors and act as
General
<PAGE>
Manager of the Corporation, in charge of corporate operations and
coordinate operations and coordinate the activities of the various
divisions and departments of the Corporation and its subsidiaries.
d) Inform the Directors at each respective meeting of the progress of
the Corporation in all phases of its activities and of the
operations of its subsidiaries.
e) Execute Stockholders' consent, attend meetings and act and vote,
in person or by proxy, at any meetings of stockholders of companies
in which the Corporation may own stock, subject to any directions
of the Board of Directors.
f) Sign and execute, in the name of the Corporation, all authorized
deeds, mortgages, bonds, contracts, leases and other documents and
instruments.
g) Preside at the meetings of stockholders or directors, prepare the
agenda thereof, and direct the Secretary in scheduling meetings of
the Board of Directors or Shareholders, and in recording the
proceedings of such meetings.
h) Be responsible for the formulation of the financial policies of the
Corporation and the relationship with lending institutions.
i) Be responsible for all relations with stockholders and all
communications to stockholders, lending institutions, landlords,
industry and the general public.
SECTION 3. EXECUTIVE VICE PRESIDENT
Each Executive Vice President shall perform all the duties and shall
carry such responsibilities which are incident to the executive office
assigned to him upon election by the Board of Directors and such other duties
and respons-
<PAGE>
ibilities which may be assigned to him by the President. In order of
seniority, the Executive Vice President shall perform the duties of President
in the absence or disability of that officer.
SECTION 4. OFFICERS
Each line or staff officer shall perform all of the duties and carry
such responsibilities which are incident to the administrative office
assigned him by the President, and such other duties and responsibilities
which may, from time to time, be assigned him by the Board of Directors.
SECTION 5. SECRETARY
The Secretary shall keep the Minutes of the meetings of the Shareholders
and the Board of Directors in books provided for that purpose; he shall see
that notices are duly given in accordance with the provisions of the By-Laws
or as required by law; he shall be the custodian of the records and the
corporate seal of the Corporation; he shall see that the corporate seal is
affixed to all documents, the execution of which on behalf of the Corporation
under its seal is duly authorized and when so affixed may attest the same and,
in general, he shall perform all duties ordinarily incident to the office of
the Secretary of the Corporation and such other duties, from time to time, as
may be assigned to him by the President.
SECTION 6. TREASURER
The Treasurer shall have charge of and be responsible for all funds,
securities, receipts and disbursements of the Corporation and shall deposit,
or cause to be deposited, in the name of the Corporation, all moneys or other
valuable effects in such banks, trust companies or other depositories as shall,
from time to time, be selected by the Board of Directors; he shall render to
<PAGE>
the Board of Directors, and the Executive Officers, whenever requested, an
account of the financial condition of the Corporation and, in general, shall
perform all of the duties ordinarily incident to the office of a Treasurer
of a Corporation and such other duties as may be assigned to him by the
President.
SECTION 7. ASSISTANT OFFICERS
The Board of Directors may elect one or more Assistant Secretaries and
one or more Assistant Treasurers. Each such Assistant Secretary and Assistant
Treasurer shall hold office for such period and shall have such authority and
perform such duties as the Board of Directors or the President may prescribe.
SECTION 8. REMOVAL
The Board of Directors shall have the power at any regular or special
meeting, subject to the provisions of these By-Laws, to remove any officer with
or without cause.
SECTION 9. VACANCIES
The Board of Directors at any regular or special meeting shall fill a
vacancy occurring in an elected office for the unexpired portion of the term,
or may authorize the President to fill such vacancy.
ARTICLE V SHARES OF STOCK
SECTION 1. CERTIFICATES
Each shareholder of the Corporation shall be entitled to a stock
certificate or certificates certifying the number and kind of shares owned by
him. Said certificates shall be signed and the Corporate Seal affixed by such
<PAGE>
officer or officers as may be designated, from time to time, by resolution of
the Board of Directors. The use of facsimile signatures and a facsimile seal
will be permitted.
SECTION 2. TRANSFER OF SHARES
Shares of stock shall be transferable only on the books of the
Corporation by the holder thereof in person or by his duly authorized
attorney and on surrender of the certificate or certificates duly endorsed,
except as otherwise required by law. Signatures shall be guaranteed by a
member firm of a national securities exchange or of any exchange on which the
security is listed or by a bank or trust company.
ARTICLE VI OTHER PROVISIONS
SECTION 1. DIVIDENDS
Subject to the applicable provisions of law and of the Charter, the
Board of Directors may, in its discretion, declare what, if any, dividends
shall be paid from the earnings or the retained earnings of the Corporation,
upon any class of stock, the date when such dividends shall be payable, and
the date for the determination of holders of record to whom such dividends
shall be payable.
SECTION 2. NEGOTIABLE INSTRUMENTS AND OTHER EVIDENCES OF INDEBTEDNESS
All checks, drafts or orders for the payment of money, notes and
other evidences of indebtedness, issued in the name of the Corporation, shall
be signed by such officer or officers as may be designated, from time to
time, by resolution of the Board of Directors. No checks shall be signed in
blank.
<PAGE>
SECTION 3. FISCAL YEAR
The fiscal year of the Corporation shall be the calendar year unless
otherwise provided by the Board of Directors.
SECTION 4. SEAL
The seal of the Corporation shall be circular in form, with the name
of the Corporation and "Maryland" inscribed around the outer edge, and in
the center shall be inscribed the word "Incorporated" and the year of
incorporation.
SECTION 5. AMENDMENTS
Except as hereinafter provided, these By-Laws, or any of them or any
additional or amended By-Laws, may be altered or repealed and new By-Laws may
be adopted at any regular meeting of the Board of Directors without notice,
or at any special meeting, the notice of which shall set forth the terms of
the proposed amendment, by the vote of a majority of the entire Board of
Directors. This Section 5, relating to amendments, may, however, be amended
only at a regular meeting of shareholders without notice, or at a special
meeting of shareholders, the notice of which shall set forth the terms of the
proposed amendment, in either case by the vote of a majority of the votes
entitled to be cast in the aggregate by all shareholders present in person or
by proxy at such meeting.
SECTION 6. POWERS OF CERTAIN PERSONS IN THE EVENT OF A NATIONAL DISASTER
The provisions of these By-Laws to the contrary notwithstanding, in
the event of a national disaster, war or other event causing the incapacity
of a majority of the Executive Officers and sufficient Directors of this
Corporation to prevent a quorum, the affairs of the Corporation shall be
directed and
<PAGE>
managed by the following persons in the following order:
a) if any Directors remain available, said Directors may elect other
Directors to fill the vacancies on the Board and the Board as so
constituted may elect officers to fill existing vacancies.
b) If no Directors are available, the ranking officer available is to act
as the Chief Executive Officer of the Corporation and he may fill
officer and director vacancies by appointment.
c) If neither directors nor officers are available, the division managers
or Executive Officers of subsidiaries in the order of their seniority
shall act as the Officers of the Corporation and have their powers.
d) If neither Directors, Corporation Officers, Officers of the
Subsidiaries, are available, Product Line Managers shall act as the
officers in the order of their seniority.
e) In the event none of the persons above are available, foremen and
other employees having seniority with the Corporation shall act as the
officers in the order of their seniority.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from financial
statements dated December 31, 1996 and is qualified in its entirety by reference
to such financial statements. *Dollar amounts are based on conversion rate of
1,530 Lire to the Dollar which prevailed on December 31, 1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> $5,412,418
<SECURITIES> 0
<RECEIVABLES> 21,935,294
<ALLOWANCES> 849,673
<INVENTORY> 21,462,745
<CURRENT-ASSETS> 54,303,268
<PP&E> 23,946,405
<DEPRECIATION> 14,847,059
<TOTAL-ASSETS> 102,295,425
<CURRENT-LIABILITIES> 48,402,614
<BONDS> 10,763,399
0
0
<COMMON> 54,248
<OTHER-SE> 25,410,458
<TOTAL-LIABILITY-AND-EQUITY> 63,271,895
<SALES> 63,271,895
<TOTAL-REVENUES> 63,271,895
<CGS> 55,009,804
<TOTAL-COSTS> 14,775,817
<OTHER-EXPENSES> (813,825)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,289,542
<INCOME-PRETAX> (9,167,974)
<INCOME-TAX> 388,889
<INCOME-CONTINUING> (9,804,575)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,804,575)
<EPS-PRIMARY> (2.14)
<EPS-DILUTED> (2.14)
</TABLE>
