<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to
</TABLE>
TITAN MOTORCYCLE CO. OF AMERICA
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rule 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
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<PAGE> 2
TITAN MOTORCYCLE CO. OF AMERICA
2222 WEST PEORIA AVENUE
PHOENIX, ARIZONA 85029
TELEPHONE (602) 861-6977
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 26, 2000
To the Stockholders of Titan Motorcycle Co. of America:
The annual meeting of the holders of the common stock of Titan Motorcycle
Co. of America will be held at 9:00 a.m. local time on Wednesday, July 26, 2000
at the Camelback Inn; 5402 East Lincoln Drive; Scottsdale, Arizona, for the
following purposes:
- To elect a Board of Directors of five members to serve until the year
2001 Annual Meeting of Stockholders, or until their successors are duly
elected and qualified;
- To ratify the appointment by the Board of Directors of
PricewaterhouseCoopers LLP, independent certified public accounts, as the
independent auditors for the year ending December 30, 2000;
- To authorize the issuance of shares of the Company's common stock to
preferred stockholders upon the exercise of conversion rights; and
- To transact such other business as may properly come before the meeting,
or any adjournment thereof.
The Board of Directors has fixed June 15, 2000 as the record date for the
Annual Meeting with respect to this solicitation. Only stockholders of record at
the close of business on that date will be entitled to notice of and to vote at
the Annual Meeting, or any adjournment thereof.
The Company's Annual Report to stockholders is enclosed with this Notice
and Proxy Statement.
By Order of the Board of Directors
/s/ Francis S. Keery, CEO
Frank Keery, CEO
Phoenix, Arizona
June 20, 2000
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE SIGN, DATE AND
RETURN THE ENCLOSED PROXY FORM IN THE ENCLOSED ENVELOPE. A PROXY MAY BE REVOKED
BY A STOCKHOLDER ANY TIME PRIOR TO ITS USE, AS SPECIFIED IN THE PROXY STATEMENT.
<PAGE> 3
TITAN MOTORCYCLE CO. OF AMERICA
2222 WEST PEORIA AVENUE
PHOENIX, ARIZONA 85029
TELEPHONE (602) 861-6977
PROXY STATEMENT
This Proxy Statement is furnished to the stockholders of TITAN MOTORCYCLE
CO. OF AMERICA, a Nevada corporation ("Titan" or the "Company"), in connection
with the solicitation of proxies by the Board of Directors for use at the Annual
Meeting of Stockholders of the Company to be held at 9:00 a.m. local time on
Wednesday, June 26 , 2000, and any adjournment thereof. The Meeting of
Stockholders will take place at the Camelback Inn; 5402 East Lincoln Drive;
Scottsdale, Arizona. A copy of the Notice of meeting accompanies this Proxy
Statement. It is anticipated that the mailing of this Proxy Statement will
commence on June 26, 2000.
Only stockholders of record at the close of business on June 15, 2000, the
record date for the meeting, will be entitled to notice of and to vote at the
meeting. On the record date, the Company had 17,501,187 outstanding shares of
Common Stock, which are the only securities of the Company entitled to vote at
the stockholders' meeting, each share being entitled to one vote.
Directors of the Company will be elected by a plurality vote of the
outstanding shares of Common Stock present and entitled to vote at the meeting.
The affirmative vote of the stockholders of at least a majority of the
outstanding shares of Common Stock present and entitled to vote at the meeting
is required for the confirmation of the appointment of auditors for the current
fiscal year. The affirmative vote of the stockholders of at least a majority of
the outstanding shares of Common Stock of the Company is required for the
approval of the issuance of shares of the Company's common stock to preferred
stockholders upon the exercise of conversion rights.
Stockholders who execute proxies may revoke them by giving written notice
to the secretary of the Company at any time before such proxies are voted.
Attendance at the meeting shall not have the effect of revoking a proxy unless
the stockholder so attending (1) shall, in writing, notify the secretary of the
meeting at any time prior to the voting of the proxy, or (2) shall vote in
person at the meeting.
The Board of Directors does not know of any matter that is expected to be
presented for consideration at the meeting other than the election of directors,
the confirmation of the appointment of auditors for the current fiscal year, and
the approval of the issuance of common stock to preferred stockholders upon the
exercise of conversion rights. However, if other matters properly come before
the meeting, the persons named in the accompanying proxy intend to vote thereon
in accordance with their judgment.
All proxies received pursuant to this solicitation will be voted except as
to matters where authority to vote is specifically withheld and, where a choice
is specified as to the proposal, they will be voted in accordance with such
specification. If no instructions are given, the persons named in the proxy
solicited by the Board of Directors of Titan intend to vote:
- for the election of the named directors;
- for the confirmation of the appointment of independent public accountants
for fiscal year 2000, ending December 30, 2000; and
- for the approval of the issuance of shares of the Company's common stock
to preferred stockholders upon the exercise of conversion rights.
In determining whether a proposal is approved, an abstention would have the
effect of a vote against the applicable proposal. On the other hand, broker
non-votes are not considered shares entitled to vote on the applicable proposal
and are not included in determining whether such proposal is approved. A broker
non-vote occurs when the nominee of a beneficial owner with the power to vote on
at least one matter does not vote on another matter because the nominee does not
have discretionary voting power and has not received
<PAGE> 4
instructions from the beneficial owner with respect to such matter. Accordingly,
broker non-votes have no effect on the outcome of a vote on the applicable
proposal.
CORPORATE MATTERS
The Company will bear the cost of the meeting and the cost of soliciting
proxies, including the cost of mailing the proxy material. In addition to
solicitation by mail, directors, officers and regular employees of the Company
(who will not be specifically compensated for such services) may solicit proxies
by telephone or otherwise. Arrangements will be made with brokerage houses and
other custodians, nominees, and fiduciaries to forward proxies and proxy
material to their principals, and the Company will reimburse them for their
expenses.
ELECTION OF DIRECTORS
(PROPOSAL NO .1)
At the meeting, five (5) directors are to be elected, each to hold office
until the next annual meeting and until a respective successor has been elected
and qualified. If any nominee listed in the table below should become
unavailable for any reason, which the management does not anticipate, the proxy
will be voted for any substitute nominee or nominees who may be selected by the
management prior to or at the meeting, or, if no substitute is selected by the
management prior to or at the meeting, for a motion to reduce the membership of
the Board to the number of nominees available. The information contained in this
Proxy Statement concerning the nominees and their security holdings has been
furnished by them to the Company.
<TABLE>
<CAPTION>
PERIOD OF SERVICE
NAME AGE POSITIONS HELD AS DIRECTORS
---- --- -------------- -----------------
<S> <C> <C> <C>
Francis S. Keery.................. 57 Chairman of the Board and CEO Since December 1994
Patrick Keery..................... 31 President and Director Since December 1994
Barbara S. Keery.................. 56 Vice President, Secretary and Since December 1994
Director
Harry H. Birkenruth............... 69 Director Since August 1998
H.B. Tony Turner.................. 62 Director Since August 1998
</TABLE>
FRANK (FRANCIS S.) KEERY -- CHAIRMAN AND CEO
Frank Keery, age 57, currently resides with his wife, Barbara Keery, in
Phoenix, Arizona.
Mr. Keery received a B.S. degree in Electrical Engineering from the
University of Detroit in 1966 and an MBA degree from Western New England
University in 1969.
Subsequent to completion of his formal education, Mr. Keery has held
various management and administrative positions. For 17 years Mr. Keery worked
with Rogers Corporation, a NYSE listed corporation, involved in the manufacture
and marketing of specialty materials, components and systems to the automotive
and electronics markets internationally. In this capacity he served variously as
an executive in charge of new division startups, manufacturing, management,
operation "turnarounds", and international sales from approximately 1969 to
1986. Most of these assignments carried full profit and loss responsibilities of
independent units.
From 1986 to 1994, Mr. Keery was primarily employed in multiple positions
as an outside and in-house business consultant. In 1989 to 1991 he was the CEO
for Swanson Manufacturing, Inc.
For the three-year period ending in August 1994, Frank Keery was CEO of the
Company Store, a privately held mail order company with annual sales of
approximately Eighty Million Dollars.
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From August 1994 to the present, Mr. Keery has been chairman of Paragon
Custom Cycles, which later became Titan Motorcycle of America. In this capacity
he has used his management and marketing experience as the chairman of the board
and CEO.
PATRICK KEERY -- PRESIDENT/DIRECTOR
Patrick Keery, age 31, resides in Scottsdale, Arizona. He is the son of
Frank and Barbara Keery, who also serve as directors of the Company.
Mr. Keery has been President of Titan since inception, and owned and
operated its predecessor entity, Paragon Custom Cycles. Mr. Keery brings unique
skills in the assembly, design and engineering of custom built motorcycles.
Mr. Keery is a 1992 graduate of Arizona State University where he obtained
a B.S. degree in finance.
Since 1993, Mr. Keery operated and was the owner and manager of Paragon
Custom Cycles doing custom design, assembly and rebuilding of large displacement
motorcycles until he became the President of the reorganized Company in December
of 1995.
During the period of 1992 to 1993, Mr. Keery worked as a financial analyst
for the George S. May International Co., a consulting firm specializing in
providing services to small to medium capital companies.
Mr. Keery is heavily involved in developing the Company's dealer network
and overseeing the sales and marketing efforts. He continues to play a lead role
in motorcycle styling and product development.
BARBARA KEERY -- VICE PRESIDENT/SECRETARY/DIRECTOR
Barbara Keery, age 56, currently resides with her husband, Frank Keery, in
Phoenix, Arizona.
Barbara S. Keery received her Masters Degree in Business Education from the
University of Connecticut in 1970 and her Bachelors Degree in Business Education
from the State University of New York at Albany. From 1964 through 1969 she
taught high school business administration courses in South Windsor, Connecticut
and Oak Park, Michigan. As a licensed real estate agent, she served on the
chairman's board of Russ Lyon Realty and was a member of the Scottsdale Million
Dollar Club in 1987 and 1988.
From its inception in 1995, Mrs. Keery has served as the corporate
secretary and Vice-President for the Company. In 1997, a new product line was
created for exclusive Titan clothing and accessories which is administered by
Mrs. Keery.
HARRY H. BIRKENRUTH -- DIRECTOR
Harry H. Birkenruth, age 69, resides with his wife in Storrs, Connecticut.
Mr. Birkenruth graduated with high honors from the City College of New York
in 1953. In 1957 he graduated with distinction from the Harvard Graduate School
of Business Administration. In 1960 Mr. Birkenruth joined Rogers Corporation and
became its Chief Financial Officer in 1967 and served as its Senior Vice
President Polymer Products in 1986. Rogers Corporation manufactures specialty
materials, primarily for wireless communications and computer applications, with
its principal place of business in Rogers, Connecticut.
Beginning in 1990, Mr. Birkenruth served as Executive Vice President of
Rogers Corporation and in April 1992 became its President and Chief Executive
Officer until March 31, 1997, when he became Chairman of the Board of Directors
of the company. On June 30, 1998, Mr. Birkenruth retired as Chairman of Rogers
Corporation and continues to serve as a director and consultant to the company.
For the past two years, Mr. Birkenruth has also served as the Vice Chairman
of the Board of Directors of Instrument Manufacturing Company, a company
specializing in electrical cable diagnostic instruments.
Mr. Birkenruth serves on the Advisory Board of the Institute of Material
Sciences at the University of Connecticut and has previously served as a member
of the Executive Committee and Board of Directors of the
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<PAGE> 6
Connecticut Business and Industry Association; a member of the Board of
Overseers of the University of Connecticut's School of Business; as a Trustee of
the Connecticut Policy and Economic Counsel; and has served several terms as a
member of the Board of Trustees and as an incorporator of the Windham Community
Memorial Hospital.
H. B. TONY TURNER
Tony Turner, age 62, resides in Paradise Valley, Arizona.
Mr. Turner graduated in 1958 with a Bachelors degree from Duke University.
In 1962 he graduated from the Harvard Graduate School of Business
Administration.
Subsequent to his graduation from graduate school, Mr. Turner has engaged
in a broad variety of work experiences including as Chairman, President and CEO
of Ardshield, Inc., a leveraged buy-out and investment banking firm (1980-1992);
Executive Vice President and Director of Investment Banking for Shearson Haden
Stone (1978-1980); Vice President in the leveraged buy-out department of
Oppenheimer & Co. (1976-1978); Vice President Finance and Chief Administrative
Officer of N-REN Corp., a privately held fertilizer company; Assistant Secretary
for Administration of the U.S. Department of Commerce (1973-1975); First Vice
President and Director of Mitchum, Jones & Templeton, a regional investment
banking company (1967-1973); Treasurer and Director of Corporate Planning of
Star-Kist Foods, Inc., a subsidiary of H.J. Heinz (1964-1967); and Controller of
a financial corporation of Arizona where he served as the Chief Accounting
Officer of a financial holding company.
OTHER OFFICERS OF THE CORPORATION
ROBERT P. LOBBAN -- CHIEF FINANCIAL OFFICER
Mr. Robert P. Lobban, age 45, currently resides in Gilbert, Arizona with
his wife Susan.
Mr. Lobban holds a Masters of Business Administration Degree (M.B.A.) from
Harvard Graduate School of Business which he obtained in 1981. Mr. Lobban
earlier obtained a B.S. degree in Industrial Engineering from Northeastern
University in 1977. He graduated first in his class and was a Magna Cum Laude
graduate.
During the period of his formal education, Mr. Lobban obtained considerable
practical experience in working in full-time positions as an engineer, analyst
and supervisor with such companies as Digital Equipment Corporation, Texas
Instruments, New England Medical Center Hospitals and the Phillips Manufacturing
Company. From 1981 through 1982, he worked as a Controller with the Fiberloys
Division of the Rogers Corporation. From 1982 to 1984 he was the Controller for
the Flexible Interconnections Division of Rogers Corporation in Chandler,
Arizona and was promoted to Administrative Manager with that division from 1984
through 1987. From 1987 through 1988 he worked for Pacific Biosystems, Inc., a
start-up company involved in the medical equipment industry as its Vice
President and Chief Financial Officer.
In 1988, he joined Gemini Consulting as a Consultant and was promoted
through several positions to the level of Principal. In these positions, Mr.
Lobban was responsible for leading large teams in multi-million dollar projects
to improve the financial performance of over 30 companies, most in the Fortune
500. Gemini Consulting of Morristown, New Jersey is an international business
consulting firm. In 1995, he joined the George Group of Dallas, Texas as a
Director and then Vice-President, where he was responsible for managing multiple
client engagements in turnaround/major improvement situations.
During 1997 he became associated full-time with the Company and provides
valuable service as its Chief Financial Officer supervising general accounting,
finance, investor relations, information systems, and human resources as well as
its procurement and materials management functions. He is also charged with
leading the Company's cost reduction efforts.
4
<PAGE> 7
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
(PROPOSAL NO. 2)
A proposal will be presented at the meeting to approve the appointment of
PricewaterhouseCoopers, LLP as the Company's independent public accountants. A
representative of this accounting firm is expected to be present at the annual
meeting to respond to questions and to make a statement, if he desires to do so.
He will also be available to respond to appropriate questions regarding the
financial statements of the Company.
THE BOARD RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
Effective December 28, 1998 the registrant dismissed Jones, Jensen &
Company (herein referred to as the "former accountants") as the independent
accountants who are engaged to audit the registrant's financial statements. This
decision to change accountants was not based upon any disagreement with the
former accountants.
The former accountants' report on the financial statements of the
registrant for either of the past two years has not contained an adverse opinion
or a disclaimer of opinion, and was not qualified or modified as to uncertainty,
audit scope, or accounting principles.
During the registrant's two most recent fiscal years, and any subsequent
interim period preceding the dismissal of the former accountants, there have
been no disagreements with the former accountants on any matter of accounting
principles or practices, or financial statement disclosure, which disagreements,
if not resolved to the satisfaction of the former accountants, would have caused
them to make references to the subject matter of the disagreements in connection
with their report.
Further, during the registrant's two most recent fiscal years, and any
subsequent interim period preceding the dismissal of the former accountants, the
former accountants have not advised the registrant (a) that the internal
controls necessary for the registrant to develop reliable financial statements
do not exist; (b) that information has come to the accountants' attention that
has led them to no longer be able to rely on management's representations, or
that has made them unwilling to be associated with the financial statements
prepared by management; (c) or the need to expand significantly the scope of
their audit; (d) that information has come to the former accountants' attention
that, if further investigated, may materially impact the fairness or reliability
of either a previously issued audit report or the underlying financial
statements issued or to be issued covering the fiscal period subsequent to the
date of the most recent financial statements covered by an audit report
(including information that may prevent them from rendering an unqualified audit
report on those financial statements), or cause them to be unwilling to rely on
management's representations or be associated with the registrant's financial
statements; or (e) that information has come to the former accountants'
attention that they have concluded materially impacts the fairness or
reliability of either, (i) a previously issued audit report or the underlying
financial statements, or (ii) the financial statements issued or to be issued
covering the fiscal periods subsequent to the date of the most recent financial
statements covered by an audit report (including information that, unless
resolved to the former accountants' satisfaction, would prevent them from
rendering an unqualified audit report on those financial statements).
The registrant engaged as its new independent accountants, the firm of
PricewaterhouseCoopers, LLP. The effective date of the engagement of
PricewaterhouseCoopers, LLP was December 22, 1998.
APPROVAL OF THE ISSUANCE OF SHARES OF THE COMPANY'S COMMON STOCK TO PREFERRED
STOCKHOLDERS UPON THE EXERCISE OF CONVERSION RIGHTS.
(PROPOSAL NO. 3)
Titan is seeking shareholder approval of the issuance of an unlimited
number of shares of common stock upon conversion of Titan's Series A, Series B
and Series C Convertible Preferred Stock to comply with NASDAQ rules. The shares
of common stock would be issued at the election of the owners of the preferred
stock under the conversion rights granted to the preferred stockholders.
On September 17, 1999, Titan entered into a Subscription Agreement for the
sale of shares of its newly-designated Series A Convertible Preferred Stock, and
issued warrants for the purchase of up to an aggregate of
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<PAGE> 8
372,967 shares of Titan's common stock. In exchange for the Series A Preferred
Stock and related warrants, Titan received $4,000,000 in cash. On March 7, 2000,
Titan entered into a Subscription Agreement for the sale of shares of its
newly-designated Series B Convertible Preferred Stock, and issued warrants for
the purchase of up to an aggregate of 250,000 shares of Titan's common stock. In
exchange for the Series B Preferred Stock and related warrants, Titan received
$2,000,000 in cash. On June 20, 2000, Titan entered into a Securities Purchase
Agreement for the sale of shares of its newly-designated Series C Convertible
Preferred Stock, and issued warrants for the purchase of up to an aggregate of
1,642,106 shares of Titan's common stock. In exchange for the Series C Preferred
Stock and related warrants, Titan received $1,300,000 in cash with an option to
place an additional $1,000,000 under the same terms at the discretion of Titan.
The rights of the owners of the preferred stock are described in the
Certificates of Designations for each series, or in the amendments and
restatements thereof (the "Certificates"). These Certificates include a
description of the right of the preferred stockholders to convert their
preferred stock into common stock of the Company. Under certain circumstances,
the preferred stock may be converted into common stock at less than the market
value of the common stock. The warrants issued in connection with the preferred
stock are not exercisable at a discount to the market price on the date they
were issued.
NASDAQ SmallCap Market rules require that Titan obtain shareholder approval
prior to the issuance for less than the greater of book or market value of a
number of shares of the Company's common stock equal to, or exceeding, twenty
percent of the number of shares of the Company's common stock outstanding prior
to the issuance of the preferred stock. Because the Company may, under certain
circumstances, be required to issue more than twenty percent of such number of
outstanding shares of the Company's common stock at a discount to market price
under the terms of the Certificates, the Board of Directors seeks the approval
of the Company's shareholders of this proposal.
The members of the Board of Directors of Titan unanimously approved the
terms of the Certificates, and of the Series A, Series B and Series C Preferred
Stock transactions.
THE BOARD RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
As of the date of this Proxy Statement, Titan has 3,973 shares of Series A
Convertible Preferred Stock authorized, issued and outstanding. The Series A
Convertible Preferred Stock is currently convertible by the holder at any time
into shares of Titan's common stock at a fixed conversion price of $2.6812,
which represents the average market price of Titan's common stock for the ten
days prior to the issuance of the Series A Convertible Preferred Stock on
September 17, 1999, the date Titan sold the Series A Convertible Preferred
Stock. Commencing September 17, 2000, the conversion price is to be adjusted
every six months to be the lesser of (a) 130% of the prior conversion price or
(b) 90% of the average market price for the ten days prior to such adjustment
date. The conversion price is subject to further adjustment under certain other
circumstances, including Titan's inability to provide the Series A Convertible
Preferred stockholders with common stock certificates on a timely basis after
receiving notice of their conversion, or Titan's failure to pay any applicable
redemption price when due.
Titan also has 2,000 shares of Series B Convertible Preferred Stock
authorized, issued and outstanding. The Series B Convertible Preferred Stock was
issued to the same two institutional investors that purchased the Series A
Convertible Preferred Stock. The Series B Convertible Preferred Stock is
currently convertible at any time into shares of Titan's common stock at a fixed
conversion price of $1.75. Commencing March 7, 2001, the conversion price is to
be adjusted every six months to be the lesser of (a) the prior conversion price
or (b) the average market price for the ten days prior to such adjustment date.
The conversion price is subject to further adjustment under certain other
circumstances, including Titan's inability to provide the Series B Convertible
preferred stockholders with common stock certificates on a timely basis after
receiving notice of their conversion, or Titan's failure to pay any applicable
redemption price when due.
As of the date of this Proxy Statement, Titan also has 2,300 shares of
Series C Convertible Preferred Stock authorized, and 1,300 issued and
outstanding. The Series C Convertible Preferred Stock is currently convertible
by the holder at any time into shares of Titan's common stock at a fixed
conversion price of $0.95. Commencing December 20, 2000, the conversion price is
to be adjusted every three months to be the lesser of (a) the prior conversion
price, or (b) 80% of the three lowest closing bid prices over the ten
consecutive
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trading days prior to such adjustment date. The conversion price is subject to
further adjustment under certain other circumstances, including Titan's
inability to provide the Series C Convertible Preferred stockholders with common
stock certificates on a timely basis after receiving notice of their conversion,
or Titan's failure to pay any applicable redemption price when due.
For each series of preferred stock, a reduction of the conversion price
results in an increase in the number of shares into which the preferred stock
may be converted.
Assuming this Proposal No. 3 is approved by shareholders and all 5,973
outstanding shares of the Series A and B Preferred Stock are converted after
March 7, 2001 at the lowest applicable price and all of the possible 2,300
outstanding shares of the Series C Preferred Stock are converted after December
20, 2000, at the lowest applicable price, and all related warrants are converted
when the market price equals or exceeds the strike price, the following table
sets forth the number of common shares which may be issued and the aggregate
percentage of the outstanding shares represented thereby (after giving effect to
such additional shares) at different market price levels:
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
MARKET PRICE COMMON SHARES OUTSTANDING SHARES
------------ ------------- ------------------
<S> <C> <C>
$1.00 9,612,411 35.45
$1.50 7,020,316 28.63
$2.00 8,515,152 32.73
$2.50 8,073,708 31.57
</TABLE>
Accordingly, approval of this Proposal No. 3 could result in substantial
dilution to existing shareholders, if the preferred stock is converted after the
fixed conversion prices expire at a time when market prices are lower. Under the
terms of the Certificates, if this Proposal is not approved by shareholders and
Titan is unable to issue all common shares due upon conversion of the preferred
stock by reason of the Nasdaq limitation, Titan may be required to redeem such
unconvertible shares of preferred stock for cash.
Applicable law does not require the approval by the Company's stockholders
of the terms of the Subscription Agreements or the issuance of common stock to
the owners of the preferred stock under the Certificates. Nevertheless, NASDAQ
rules require all NASDAQ SmallCap Market-listed companies to obtain shareholder
approval to issue common stock, or securities convertible to common stock, that
equals or exceeds twenty percent of its outstanding common stock (or twenty
percent or more of the voting power in the company), prior to the issuance
transaction for consideration less than the greater of book or market value of
the shares. Under the Certificates, the shares of common stock to be issued
pursuant to a conversion of the preferred stock may be issued at a discount to
the market price at the time of the exercise of the conversion rights.
As of the date of this Proxy Statement, Titan had 17,501,187 shares of
common stock issued and outstanding. Consequently, under NASDAQ rules, Titan may
not issue, at a discount, more than an aggregate of 3,436,237 shares, or twenty
percent of the Company's outstanding common stock, unless it first obtains
shareholder approval of the issuance. Because a full conversion of the preferred
stock could result in the issuance of more than 3,500,237 shares, the Board of
Directors seeks shareholder approval of the issuance of sufficient shares to
satisfy all preferred stock conversion rights.
One of the terms of the Class B Preferred Stock Subscription Agreement
requires Titan to submit to shareholder vote this proposal to authorize the
issuance of the common stock of the Company. By agreement, this shareholder
approval is to be sought prior to August 15, 2000.
VOTE REQUIRED; BOARD OF DIRECTORS' RECOMMENDATION
The affirmative vote of a majority of the outstanding shares of common
stock of Titan is required to authorize an issuance of all shares which may be
required pursuant to the conversion rights of the Series A, Series B and Series
C Preferred Stock. The Board of Directors recommends that you vote FOR the
approval of the issuance of all shares required pursuant to the conversion
rights in the Certificates. Shares represented
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by the proxies will be voted FOR the proposal unless a vote against the proposal
or an abstention is specifically indicated on the proxy card.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of May 31, 2000, the Company had 17,501,187 shares of common stock
outstanding. The chart below sets forth the ownership, or claimed ownership, of
certain individuals and entities. This chart discloses those persons known by
the Board of Directors to have, or to claim to have, beneficial ownership of
more than 5% of the outstanding shares of the common stock of the Company as of
May 31, 2000; of all directors and executive officers of the Company; and of the
directors and officers of the Company as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT OF CLASS
------------------------------------ ------------------ ----------------
<S> <C> <C>
Francis S. Keery............................................ 3,674,772(1) 20.73%
8973 N. 45th Street
Phoenix, AZ 85028
Patrick Keery............................................... 2,978,549(2) 16.87%
8973 N. 45th Street
Phoenix, AZ 85028
Barbara S. Keery............................................ 3,329,756(3) 19.01%
12460 N. 116th Street
Scottsdale, AZ 85259
Harry H. Birkenruth......................................... 45,000(4) *(6)
81 Ball Hill Road
Storrs, CT 06268
H.B. Tony Turner............................................ 46,200(4) *(6)
6116 East Yucca Road
Paradise Valley, AZ 85253
Robert P. Lobban............................................ 37,000(5) *(6)
1326 E. Treasure Cove Dr.
Gilbert, AZ 85234
Officers and Directors as a group (6 members)............... 10,111,277 56.31%
</TABLE>
---------------
(1) Includes 225,000 shares underlying unexercised employee options.
(2) Includes 150,000 shares underlying unexercised employee options.
(3) Includes 16,650 shares underlying unexercised employee options.
(4) Includes 35,000 shares underlying unexercised options.
(5) Includes 30,000 shares underlying unexercised employee options.
(6) Represents less than one percent.
EXECUTIVE COMPENSATION
The table set forth below contains information about the remuneration
received and accrued during the last three fiscal years from the Company and its
subsidiaries by the CEO of the Company. None of the employees of the Company
have received salary and bonuses of $100,000 or more in any calendar year.
<TABLE>
<CAPTION>
SECURITIES
UNDERLYING
NAME AND OTHER ANNUAL OPTIONS OR
PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) SARS(#)
------------------ ---- ---------- --------- ---------------- ----------
<S> <C> <C> <C> <C> <C>
Frank Keery........................ 1999 92,158 -0- 4,850 50,000
Chairman/CEO 1998 75,577 1,442 7,907 75,000
1997 61,154 1,154 6,942 0
</TABLE>
8
<PAGE> 11
In December 1996, the Board of Directors of the Company adopted the Titan
Motorcycle Co. of America Stock Option and Incentive Plan (the "Plan"). Under
the Plan, Incentive Stock Options ("ISOs"), Non-qualified Stock Options, Stock
Appreciation Rights ("SARs"), Restricted Stock, Dividend Equivalents and
Performance Shares may be awarded to key employees and directors of Titan
Motorcycle Co. of America and its subsidiaries.
A committee consisting of at least two Board members is authorized to
administer the Plan and is authorized to select from among eligible employees
those persons who will receive awards, to select the appropriate form of awards
and to determine the terms and conditions of such awards. After taking into
consideration the March 1997 two-for-one forward split of the stock of the
Company, the aggregate number of shares of stock subject to awards under the
Plan may not exceed 6,000,000.
The committee may make awards of ISOs, Non-qualified Stock Options, SARs,
Restricted Stock, Dividend Equivalents and Performance Shares, or any
combination of the foregoing, to officers and other key employees of the Company
and its subsidiaries. For purposes of the Plan, the "key employees" are those
employees who, in the opinion of the Committee, are mainly responsible for the
continued growth, development and financial success of the Company. The
committee is not required to make awards to every individual who is an officer
or key employee, but it may not make any award to any individual who is not an
officer, director or key employee.
An ISO is a stock option that satisfies certain technical requirements
specified in Section 422 of the Internal Revenue Code (the "Code"). Under the
Code, ISOs may only be granted to employees. In order for an option to qualify
as an ISO, the price specified in the option must equal the fair market value of
the stock at the date of the grant, and the option must lapse no later than 10
years from the date of the grant. As a general rule, the stock subject to ISOs
which are first exercisable by an employee in any calendar year may not have a
value of more than $100,000 as of the date of grant. Certain other requirements
must also be met.
A Non-qualified Stock Option is any stock option other than an ISO. These
options are referred to as "non-qualified" because they do not meet the
requirements of, and are not eligible for the favorable tax treatment provided
by Section 422 of the Code. Subject to applicable federal and state securities
laws, non-qualified options can be subject to such terms and conditions as the
committee determines in its discretion. Thus, for example, a Non-qualified Stock
Option could be granted which has an exercise price which is less than the
stock's fair market value on the date of grant.
A Stock Appreciation Right ("SAR") is the right granted to an employee to
receive the appreciation in the value of a share of Company stock over a certain
period of time. Under the Plan, the Company may pay that amount in cash or in
Company stock or in a combination of both. SARs are often issued in conjunction
with a grant of stock options to give the employee the cash necessary to
exercise the option and/or pay the tax attributable to the exercise of the
option (in the case of a Non-qualified Stock Option). Although SARs can be
exercised independently of an option, in such cases, the underlying option
lapses to the extent the SARs are exercised.
The Plan also authorizes the committee to award Restricted Stock to
employees. Under the Restricted Stock feature of the Plan, the employee is
granted a specified number of shares of the Company's stock. However, his
ownership with respect to such stock is subject to certain restrictions, and if
the employee violates any of the restrictions during the period specified by the
Committee, he forfeits his stock. The committee may, in its discretion, impose
any restrictions on an employee's Restricted Stock Award. It may not, however,
require the employee to make any payment for the Restricted Stock.
The Plan authorizes the committee to grant dividend equivalents in
connection with options. Dividend equivalents are rights to receive additional
shares of Company stock at the time of exercise of the option to which such
dividend equivalents apply. Dividend equivalents are always issued in connection
with an option, however, they can be issued at the time the option is granted or
after the option is granted.
Under the Plan, the committee may grant performance share units to an
employee which are to be credited to a performance share account maintained for
the employee. Each performance share unit is deemed to be the equivalent of one
share of Company stock. An award of performance shares does not entitle an
9
<PAGE> 12
employee to any ownership, dividend, voting, or other rights of a shareholder
until distribution is made in the form of shares of stock. No employee may
receive as performance shares units more than 30 percent of the aggregate number
of shares that can be awarded under the Plan.
As of May 31, 2000, the Company has granted ISOs and Non-qualified Stock
Options for an aggregate of 1,285,000 shares of common stock. No grants have
been made of any of the other categories of awards available under the Plan.
Stock options awarded to officers and directors in fiscal year 1999 under
the Plan of the Company are as follows:
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS/SARS DATE EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED(#) AWARDED FISCAL YEAR ($/SH) DATE
---- ------------ -------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C>
Frank Keery.................. 50,000 10/15/99 9.3% $2.125 10/15/09
Patrick Keery................ 30,000 10/15/99 5.6% $2.125 10/15/09
Barbara Keery................ 15,000 10/15/99 2.8% $2.125 10/15/09
Robert Lobban................ 30,000 10/15/99 5.6% $2.125 10/15/09
Harry H. Birkenruth.......... 25,000 10/13/99 4.6% $ 1.80 10/13/09
10,000 10/15/99 1.9% $2.125 10/15/09
H.B. Tony Turner............. 25,000 10/13/99 4.6% $ 1.80 10/13/09
10,000 10/15/99 1.9% $2.125 10/15/09
</TABLE>
The Board of Directors of the Company held four meetings in fiscal year
1999 and two meetings to date in fiscal year 2000. All directors were present at
these meetings.
Each of the members of the Board of Directors of the Company serve for a
one-year term, or until their successors are elected. Mr. Birkenruth and Mr.
Turner have accepted appointments to serve as the only members of the audit and
compensation committees of Titan's Board of Directors. The standing audit and
compensation committees were established in the latter half of the fiscal year
1998, and held no formal meetings in that year. These committees have met twice
each in fiscal year 1999. The compensation committee has been charged with the
responsibility of evaluating and establishing compensation for the management of
the Company. The audit committee has been charged with the responsibility of
communicating with the auditors of the Company, and evaluating the accounting
controls, functions and systems of the Company. The audit committee also
evaluated the corporate opportunities referred to below in the Related
Transactions section of this Proxy Statement.
None of the directors, officers or 5% owners of the stock of the Company is
involved in any significant legal proceedings adverse to the Company.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Each director and executive officer of Titan had a single failure to file a
Form 4 report in fiscal year 1999, which is defined as a known failure to file.
The change in stock ownership necessitating the Form 4 filings occurred as a
consequence of the grant of common stock options in October, 1999. In December,
1999, an individual director acquired 1,200 shares of Titan common stock in a
market transaction and failed to file a Form 4 report regarding the transaction.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Prior to the formation of Titan Motorcycle Co. of America, Patrick Keery
and Frank Keery had been conducting the business of after-market customizations
of Harley Davidson(TM) motorcycles in the Phoenix area. This dealership is owned
by the President and the CEO of the Company, and an independent third party. The
dealership sells the products of the Company under the standard dealership
contract of the Company without any special concessions or contract provisions.
10
<PAGE> 13
In early 1998, the CEO and the President of the Company joined with a
third-party investor to purchase the Los Angeles, California and Las Vegas,
Nevada dealerships of the Company. The third-party investor was a principal of
an investment banking firm that has assisted the Company in capital raising
functions and has an outstanding unsecured loan with Titan of approximately $2.8
million. These three individuals have formed a limited liability company known
as BPF, LLC. The Los Angeles and Las Vegas dealerships have required significant
capital infusions, at a time when the Company was unable to invest in any of its
dealerships.
During the second quarter of 1999, BPF, LLC purchased American Biker
Houston of Houston, Texas. This purchase was made after independent directors of
Titan voted to forego such purchase on behalf of the Company. American Biker was
a Titan retail dealer and continues as a dealer for Titan under the new name of
Titan of Houston.
These dealerships are continuing to sell the products of the Company (as
well as other non-Titan products) under the standard dealership contract of the
Company without any special concessions or contract provisions.
In its fiscal year ending January 1, 2000, the above referenced dealerships
accounted for approximately $5 million or 19% of the Company's net sales.
SUBMISSION OF STOCKHOLDER PROPOSALS
Stockholders of the Company wishing to include proposals in the proxy
material in relation to the annual meeting of the Company to be held in the year
2001 must submit the same in writing so as to be received at the executive
office of the Company at 2222 West Peoria Avenue, Phoenix, Arizona 85029, on or
before February 1, 2001. Such proposals should also meet the other requirements
of the rules of the Securities and Exchange Commission relating to stockholders'
proposals.
ADDITIONAL INFORMATION
The Consolidated Financial Statements and schedules thereto are
incorporated by reference into this Proxy Statement. A copy of the above
mentioned information is included in the Annual Report enclosed with this Proxy
Statement. Additional copies are available to stockholders upon written request,
or by means of a telephone call, to the secretary of the Company at the offices
indicated on the first page of this Proxy Statement.
THE STATEMENTS IN THIS PROXY STATEMENT AND ACCOMPANYING MATERIALS ARE FOR
THE INFORMATION OF SHAREHOLDERS OF TITAN MOTORCYCLE CO. OF AMERICA. THIS PROXY
STATEMENT AND ACCOMPANYING MATERIALS ARE NEITHER AN OFFER TO SELL NOR A
SOLICITATION OR OFFER TO BUY ANY SECURITIES. NO ONE SHOULD BUY OR SELL ANY
SECURITY BY REASON OF ANY STATEMENT IN THIS PROXY STATEMENT, OR ANY ACCOMPANYING
MATERIALS.
DATED this 20 day of June, 2000
By Order of the Directors:
/s/ Francis S. Keery, CEO
Frank Keery, CEO
11
<PAGE> 14
TITAN MOTORCYCLE CO. OF AMERICA
2222 WEST PEORIA AVENUE
PHOENIX, ARIZONA 85029
TELEPHONE (602) 861-6977
PROXY
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 26, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder(s) appoint(s) Patrick Keery or Robert P. Lobban,
with power of substitution, to represent and to vote on behalf of the
undersigned, all of the shares of Common Stock of TITAN MOTORCYCLE CO. OF
AMERICA which the undersigned is entitled to vote at the Meeting of the
stockholders, to be held at 9:00 a.m. Local Time, at the Camelback Inn; 5402
East Lincoln Drive; Scottsdale, Arizona and at any adjournment thereof, revoking
all proxies heretofore given with respect to such stock, upon the following
proposals more fully described in the accompanying Proxy Statement, receipt of
which is hereby acknowledged.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR (1), (2) and (3).
1. ELECTION OF DIRECTORS
[ ] For all nominees listed below (except as marked to the contrary below).
[ ] Withhold authority to vote for all nominees listed below:
Francis S. Keery Patrick Keery H.B. Tony Turner
Barbara S. Keery Harry H. Birkenruth
INSTRUCTION: (To withhold authority to vote for any individual nominee, write
the nominee's name on the space provided below).
--------------------------------------------------------------------------------
2. PROPOSAL TO APPROVE THE APPOINTMENT OF PricewaterhouseCoopers LLP as the
independent public accountants of the corporation.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE> 15
3. PROPOSAL TO AUTHORIZE THE ISSUANCE OF SHARES of the Company's common stock to
preferred stockholders upon the exercise of conversion rights.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In his discretion, the proxy is authorized to vote upon such other matters as
may properly come before the meeting.
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned stockholder(s). Where direction is not made, this
proxy will be voted for proposals 1, 2 and 3.
Please sign this proxy exactly as the name appears on your stock
certificate. If shares are held by joint tenants, both should sign. When signing
as attorney, as executor, administrator, trustee, guardian or other capacity,
please give title as such. When signing as a corporation, please sign in full
corporate name by President or other authorized officer. If you sign for a
partnership, please sign the partnership name by an authorized person.
DATED this ____________ day of __________, 2000.
Our records indicate the following:
-------------------------------------
Signature
-------------------------------------
Signature
PLEASE MARK, DATE, SIGN, AND RETURN THE PROXY BALLOT PROMPTLY USING THE ENCLOSED
ENVELOPE.
PLEASE MAKE CORRECTIONS TO THE INFORMATION SHOWN ABOVE.
