<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / 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 240.14a-11(c) or 240.14a-12
Western Power & Equipment Corp.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
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:
------------------------------------------------------------------------
/ / 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.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
WESTERN POWER & EQUIPMENT CORP.
4601 NE 77TH AVENUE, SUITE 200
VANCOUVER, WASHINGTON 98662
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 4, 1996
To the Stockholders of
WESTERN POWER & EQUIPMENT CORP.:
NOTICE IS HEREBY GIVEN that the Annual Meeting (the "Annual Meeting") of
Stockholders of Western Power & Equipment Corp. (the "Company" or the
"Corporation") will be held at The Benson Hotel, Cambridge Suite, 309 S.W.
Broadway, Portland, Oregon 97205, on Wednesday, December 4, 1996, at 1:30 p.m.
local time for the following purposes:
1. To elect four (4) directors to hold office until the next Annual
Meeting;
2. To ratify the selection of Price Waterhouse as auditors of the
Company for the Fiscal Year ending July 31, 1997;
3. To authorize and ratify an increase of the number of shares of
common stock of the Company, $.01 par value (the "Common Stock") underlying and
available for the granting of options under the Company's 1995 Employee Stock
Option Plan (the "Employee Plan"), from 850,000 shares of Common Stock to
1,500,000 shares of Common Stock;
4. To authorize and ratify the Company's 1995 Stock Option Plan For
Non-Employee Directors (the "Directors Plan"), which Directors Plan contains
50,000 shares of Common Stock underlying and available for the granting of
options under such plan;
5. To transact such business as may properly come before the meeting
or any adjournment or adjournments thereof.
The Board of Directors has fixed October 18, 1996 as the record date for
the determination of shareholders entitled to notice of and to vote at the
meeting or any adjournment thereof. The stock transfer books of the Company
will not be closed, but only shareholders of record at the close of business on
October 18, 1996 will be entitled to vote at the meeting or any adjournment or
adjournments thereof. The approximate mailing date for proxy materials
will be November 16, 1996.
By Order of the Board of Directors
Robert M. Rubin
CHAIRMAN OF THE BOARD
WHETHER OR NOT YOU PLAN TO ATTEND, PLEASE COMPLETE, SIGN AND
RETURN YOUR PROXY CARD PROMPTLY IN THE ENCLOSED STAMPED
ENVELOPE PROVIDED FOR YOUR USE.
<PAGE>
WESTERN POWER & EQUIPMENT CORP.
4601 NE 77TH AVENUE, SUITE 200
VANCOUVER, WASHINGTON 98662
-----------------------------------
PROXY STATEMENT
-----------------------------------
GENERAL INFORMATION CONCERNING SOLICITATION
This proxy statement is furnished in connection with the solicitation of
proxies by and on behalf of the Board of Directors of Western Power & Equipment
Corp. (hereinafter referred to as the "Company" or the "Corporation"), for its
Annual Meeting of Stockholders (the "Meeting") to be held at 1:30 P.M. on
Wednesday, December 4, 1996, or any adjournments thereof, at The Benson Hotel,
Cambridge Suite, 309 S.W. Broadway, Portland, Oregon 97205. Shares cannot be
voted at the meeting unless their owner is present in person or represented by
proxy. Copies of this proxy statement and the accompanying form of proxy shall
be mailed to the shareholders of the Company on or about November 16, 1996,
accompanied by a copy of the Annual Report of the Company containing financial
statements as of and for the Fiscal Years ended July 31, 1996, 1995, and 1994,
together with other information respecting the Company.
If a proxy is properly executed and returned, the shares represented
thereby will be voted in accordance with the specifications made, or if no
specification is made the shares will be voted to approve each proposition and
to elect each nominee for director identified on the proxy. Any shareholder
giving a proxy has the power to revoke it at any time before it is voted by
filing with the Secretary of the Company a notice in writing revoking it. A
proxy may also be revoked by any shareholder present at the Meeting who
expresses a desire in writing to revoke a previously delivered proxy and to vote
his or her shares in person. The mere presence at the Meeting of the person
appointing a proxy does not revoke the appointment. In order to revoke a
properly executed and returned proxy, the Company must receive a duly executed
written revocation of that proxy before it is voted. A proxy received after a
vote is taken at the Meeting will not revoke a proxy received prior to the
Meeting; and a subsequently dated proxy received prior to the vote will revoke a
previously dated proxy.
All expenses in connection with the solicitation of proxies, including the
cost of preparing, handling, printing and mailing the Notice of Annual Meeting,
Proxies and Proxy Statements will be borne by the Company. Directors, officers
and regular employees of the Company, who will receive no additional
compensation therefor, may solicit proxies by telephone or personal call, the
cost of which will be nominal and will be borne by the Company. In addition,
the Company will reimburse brokerage houses and other institutions and
fiduciaries for their expenses in forwarding proxies and proxy soliciting
material to their principals.
As of November 1, American United Global, Inc., the parent of the Company
which holds 2,000,000 shares of Company common stock. Such holdings give it the
right to cast 2,000,000 of the votes represented by shares of the voting stock
of the Company, in the aggregate constituting approximately 56.6% of the total
votes represented by shares entitled to vote at the Meeting.
<PAGE>
American United Global, Inc. has indicated its intention to vote in favor of all
nominees for director and all other matters to be submitted for consideration at
the Meeting.
(The remainder of this page has been intentionally left blank)
2
<PAGE>
DIRECTORS, NOMINEES FOR DIRECTOR
AND EXECUTIVE OFFICERS OF THE COMPANY
THE FOLLOWING TABLE SETS FORTH INFORMATION WITH RESPECT TO DIRECTORS, NOMINEES
FOR DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES OF THE COMPANY AS OF
NOVEMBER 1, 1995. THERE ARE NO PENDING LEGAL PROCEEDINGS TO WHICH ANY DIRECTOR
OR EXECUTIVE OFFICER OF THE COMPANY IS A PARTY ADVERSE TO THE COMPANY.
NAME AGE POSITION
---- --- --------
Robert M. Rubin 56 Chairman of the Board of Directors;
Nominee for Director
C. Dean McLain 43 President, Chief Executive Officer
and Director; Nominee for Director
Thomas D. Berkompas 35 Vice President - Finance, Chief
Financial Officer and Secretary
Harold Chapman, Jr. 35 Director; Nominee for Director
James H. Penland 67 Director; Nominee for Director
Set forth below is a brief background of the executive officers and directors of
the Company, based on information supplied by them.
ROBERT M. RUBIN. Mr. Rubin has served as the Chairman of the Board of Directors
of the Company since November 20, 1992. Between November 20, 1992 and March 7,
1993, Mr. Rubin served as Chief Executive Officer of the Company. In addition,
between October 1990 and January 1, 1994, Mr. Rubin served as Chairman and Chief
Executive Officer of American United Global, Inc. ("AUGI"). From January 19,
1996 through the present, Mr. Rubin has again served as Chief Executive Officer
of AUGI. Mr. Rubin was the founder, President, Chief Executive Officer and a
Director of Superior Care, Inc. ("SCI") from its inception in 1976 until May
1986. Mr. Rubin continued as a director of SCI (now known as Olsten Corporation
("Olsten")) until the latter part of 1987. Olsten, a New York Stock Exchange
listed company, is engaged in providing home care and institutional staffing
services and health care management services. Mr. Rubin is Chairman of the
Board, Chief Executive Officer and a stockholder of ERD Waste Technology, Inc.,
a diversified waste management public company specializing in the management and
disposal of municipal solid waste, industrial and commercial non-hazardous waste
and hazardous waste. Mr. Rubin is a former
3
<PAGE>
director and Vice Chairman, and currently a minority stockholder, of American
Complex Care, Incorporated, a public company formerly engaged in providing
on-site health care services, including intra-dermal infusion therapies. In
April 1995, American Complex Care, Incorporated's operating subsidiaries made
assignments of their assets for the benefit of creditors without resort to
bankruptcy proceedings. Mr. Rubin is also Chairman of the Board and a minority
stockholder of Universal Self Care, Inc., a public company engaged in the sale
of products used by diabetics. Mr. Rubin is also a director and a minority
stockholder of Response USA, Inc., a public company engaged in the sale and
distribution of personal emergency response systems; Diplomat Corporation, a
public company engaged in the manufacture and distribution of baby products;
Help at Home, Inc., a public company which provides home health care personnel;
Arzan International (1991) Ltd.; and Kay Kotts Associates, Inc., a public
company engaged in providing tax preparation and assistance service.
C. DEAN MCLAIN. Mr. McLain has served as President, Chief Executive Officer and
a director of the Company since March 7, 1993. From March 1, 1993 through June
13, 1995, Mr. McLain served as Executive Vice President of AUGI. Mr. McLain has
served on the Board of Directors of AUGI since March 7, 1994. From 1989 to
1993, Mr. McLain served as Manager of privatization of Case Corporation. From
1985 to 1989, Mr. McLain served as General Manager of Lake State Equipment, a
distributor of John Deere construction equipment. Mr. McLain was awarded a B.S.
degree in Business and Economics and a Master of Business Administration degree
by West Texas State University.
THOMAS D. BERKOMPAS. Mr. Berkompas joined the Company in June 1993 as Vice
President, Finance and Chief Financial Officer. From July 1983 to June 1993, he
was employed at Price Waterhouse, LLP, where he worked with established and
emerging growth companies and attained the level of Senior Audit Manager. Mr.
Berkompas is a certified public accountant and received his B.A. degree in
Business Economics from Calvin College.
JAMES H. PENLAND. Until his retirement in 1993, Mr. Penland had spent
forty-four years in the construction and agricultural equipment business. He
was associated with International Harvester Corporation for approximately 36
years, and for the eight years prior to his retirement was associated in various
managerial capacities with Case Corporation. He joined the Company's Board of
Directors in March 1995.
HAROLD CHAPMAN, JR. Mr. Chapman joined the Company's Board of Directors in July
1995. Mr. Chapman is a partner in and general manager of Crown Power and
Equipment Co., a multi-line equipment distributor based in Columbia, Missouri.
Prior to joining Crown Power and Equipment in 1992, Mr. Chapman was in retail
management with Case Corporation for 10 years.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
4
<PAGE>
To the knowledge of the Company, no officers, directors, beneficial owners of
more than 10 percent of any class of equity securities of the Company registered
pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or any other person subject to Section 16 of the Exchange Act
with respect to the Company, failed to file on a timely basis reports required
by Section 16(a) of the Exchange Act during the most recent fiscal year, which
ended July 31, 1996.
EXECUTIVE COMPENSATION
The following table sets forth the amount of all compensation paid by the
Company for services rendered during each of the three fiscal years of the
Company ended July 31, 1996, 1995 and 1994 to each of the Company's most highly
compensated executive officers and key employees whose total compensation
exceeded $100,000, and to all executive officers and key employees of the
Company as a group.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
- ---------------------------------------------------------------------------------------------------------------------------------
Annual Compensation Awards Payouts
----------------------------------------------------------------------------------
Other All Other
Annual Restricted Compen-
Name and Principal Compen- Stock Options/ LTIP sation
Position Year Salary Bonus sation Awards SARs(#) Payouts
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert M. Rubin 1996 $150,000 $50,000 $ 0 $ 0 0 150,000 $ 0 $ 0
Chairman and Director(1) 1995 $ 75,000 $25,000 $ 0 0 0 $ 0 $ 0
1994 $ 62,500 $34,800 $ 0 $ 0 0 $ 0 $ 0
C. Dean McLain 1996 $250,000 $84,868 $ 0 $ 0 300,000* $ 0 $ 0
Executive Vice President 1995 $170,709 $75,000 $ 0 $ 0 150,000 $ 0 $ 0
and Director; President 1994 $144,835 $30,000 $ 0 $ 0 0 $ 0 $ 0
and CEO of Western(2)
</TABLE>
___________________
* Reflects the repricing of options to acquire 150,000 shares and the original
issuance of options to acquire 150,000 shares.
(1) The foregoing annual compensation amounts represent 50% of the
$125,000 in annual cash salary paid to Mr. Rubin by AUGI and its
subsidiaries, including the Company, in fiscal 1994 and 50% of the
$150,000 in annual cash salary paid to Mr. Rubin by AUGI and its
subsidiaries, including the Company, in fiscal 1995, and 50% of the
$50,000 and $69,600 annual bonuses payable to Mr. Rubin under the
terms of his employment agreement with AUGI during fiscal 1995 and
1994, respectively. The Company entered into a separate employment
agreement with Mr. Rubin, effective June 14, 1995 and expiring July
31, 1998, pursuant to which Mr. Rubin is paid a base salary of
$150,000 plus an annual bonus. See "Compensation Committee Interlocks
and Insider Participation" and "Employment and Incentive Compensation
Agreements" below.
(2) Mr. McLain joined the Company in March 1993, when he became its Chief
Executive Officer. On March 1, 1993, July 31, 1994 and July 31,
1995, Mr. McLain was permitted to and did purchase from AUGI 8,000,
6,000 and 6,000 shares of AUGI's common stock, respectively, at a
price of $.01 per share. On March 1, 1993, on August 1, 1994 and on
August 1, 1995, the closing prices for a share of AUGI's common stock
as reported by NASDAQ was $5.75, $4.0625 and $4.875, respectively. In
addition, $38,095 was paid by AUGI to Mr. McLain during fiscal 1993
pursuant to the terms of his employment agreement dated February 12,
1993, as reimbursement for certain expenses that he incurred in
connection with his move to Washington State, and the sale of his
former residence, in order to permit his assuming his employment
duties. Effective as of August 1, 1995, Mr. McLain's employment
agreement with the Company was terminated and he entered into an
amended employment agreement expiring July 31, 2005. The base salary
under this employment agreement commences at $250,000 for fiscal 1996,
and rises to $300,000 for fiscal 2000. His employment agreement also
5
<PAGE>
calls for Incentive Bonuses under certain circumstances. See "Compensation
Committee Interlocks and Insider Participation" and "Employment and
Incentive Compensation Agreements" below.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors (the "Compensation
Committee") was established in March 1995 and currently consists of Harold
Chapman and James Penland. Mr. Penland has been a member of the Compensation
Committee since its inception; Mr. Chapman was made a member of the Compensation
Committee in September 1995. Mr. Rubin, an earlier member of the Compensation
Committee, resigned during fiscal 1996. During the last fiscal year, other than
Messrs. Rubin and McLain, who are officers and directors of the Company, no
officers or employees of the Company participated in compensation decisions
relating to executive officers of the Company. All compensation decisions for
the Company were made by the full Board of Directors. Mr. Rubin's annual
compensation identified in the Summary Compensation Table was provided for under
his employment agreement with AUGI and his subsequent separate employment
agreement with the Company which was entered into effective June 14, 1995 and
which was approved by a vote of the Company's Board of Directors. Mr. McLain's
annual compensation is provided for under his employment contract with the
Company which was entered into as of August 1, 1995, and his amended and
restated employment agreement that was effective August 1, 1995. Both
agreements were approved by the Company's Board of Directors. See "Employment
and Incentive Compensation Agreements" below.
Other than participation in the Company's "Non-Management Directors Stock
Option Plan" (see, "Non-Management Directors Stock Option Plan," below) no
director of the Company receives any directors fees for attendance at Board
meetings, other than Messrs. Penland and Chapman who each receive a fee of $500
per meeting. All directors are entitled to receive reimbursement for actual
expenses of such attendance.
The Company's Audit Committee of the Board of Directors consists of C. Dean
McLain, Harold Chapman and James Penland. No executive officers or directors of
any other publicly held companies serve on the Company's Compensation Committee,
other than Robert M. Rubin, who is a director and member of the compensation
committee of AUGI, and Dean McLain, who is a director of AUGI.
COMPENSATION POLICY AND OTHER COMPENSATION
During the fiscal year ended July 31, 1996, the Company's Board of
Directors decided all compensation matters relating to the Company's executive
officers.
The Board of Directors of the Company has decided that the best way to
attract and retain highly capable employees on a basis that will encourage them
to perform at increasing levels of effectiveness, and to use their best efforts
to promote the growth and profitability of the Company and its subsidiaries, is
to enter into employment agreements with its senior executive officers. Messrs.
Rubin and McLain are each under contract with the Company. This has enabled the
Board to concentrate on the negotiation of particular employment contracts
rather than on the formulation of more general compensation policies for all
management and other personnel. The Company believes that its compensation
levels as to all of its employees are comparable to, if not generally lower
than, industry standards. See "Employment and Incentive Compensation
Agreements".
In setting levels of compensation under such employment contracts, and in
approving management's compensation of all other Company employees, the Board of
Directors has evaluated the Company's overall performance, the contribution of
particular individuals to Company performance and industry compensation
standards.
The Company has adopted a policy of compensating non-employee Directors at
the rate of $500 per meeting (plus reasonable out-of-pocket expenses in a manner
consistent with past practice) for
6
<PAGE>
attendance at meetings of the Company's Board of Directors, as well as with
participation in the Company's Non-management Directors Stock Option Plan." At
this time, Harold Chapman, Jr. and James Penland are the only directors eligible
to be compensated pursuant to this policy.
HAROLD CHAPMAN, JR. ROBERT M. RUBIN C. DEAN MCLAIN
JAMES PENLAND
EMPLOYMENT AND INCENTIVE COMPENSATION AGREEMENTS
Upon completion of the Company's 1995 initial public offering (the
"Offering"), the Company entered into a separate employment agreement with Mr.
Rubin, effective as of June 13, 1995 and expiring July 31, 1998. Pursuant to
such agreement, Mr. Rubin will serve as Chairman of the Board of the Company and
shall receive an annual base salary of $150,000, payable at the rate of $12,500
per month from the effective date of such agreement. In addition to his base
annual salary, Mr. Rubin shall be entitled to receive an annual bonus equal to
$50,000 per annum, payable only in the event that the "consolidated pre-tax
income" of the Company (as defined) shall be in excess of $3,000,000 for the
fiscal year ending July 31, 1996, $3,500,000 for the fiscal year ending July 31,
1997, and $4,000,000 for the fiscal year ending July 31, 1998, respectively.
Under the terms of his employment agreement with the Company, Mr. Rubin is only
obligated to devote a portion of his business and professional time to the
Company (estimated at approximately 20%). The term "consolidated pre-tax
income" is defined as consolidated net income of the Company and any
subsidiaries of the Company subsequently created or acquired, before income
taxes and gains or losses from disposition or purchases of assets or other
extraordinary items. Mr. Rubin received a $50,000 bonus for the Company's 1996
fiscal year under the terms of his employment agreement. In March 1996, Mr.
Rubin received options to acquire 150,000 shares of Common Stock, exercisable at
$4.50 per share and vesting 50% on each of the first and second anniversaries of
the date of grant.
Effective as of August 1, 1995, Mr. McLain's employment agreement with AUGI
was terminated and he entered into an amended employment agreement with the
Company, expiring July 31, 2005. Pursuant to such agreement, Mr. McLain serves
as President and Chief Executive Officer of the Company and will receive an
annual base salary, payable monthly, of $250,000 through the end of fiscal 1996,
$265,000 per annum in fiscal 1997, $280,000 per annum in fiscal 1998, $290,000
per annum in fiscal 1999, and $300,000 per annum in fiscal 2000. For each of
the fiscal years ending 2001, 2002, 2003, 2004 and 2005, inclusive, Mr. McLain's
base salary shall be determined by the Compensation Committee and ratified by
the full Board of Directors. Such base salary in each of the five fiscal years
from 2001 through 2005 shall not be less than the annual base salary in effect
in the immediately preceding fiscal year, plus a cost of living adjustment. In
addition, Mr. McLain will be entitled to receive bonus payments in each of the
five fiscal years ending 1996 through 2000, inclusive, equal to 5% of the
consolidated pre-tax income in excess of $1,750,000 in each such fiscal year
(the "Incentive Bonus"); provided, that the maximum amount of the Incentive
Bonus payable by the Company to Mr. McLain shall not exceed $150,000 in any such
fiscal year, without regard to the amount by which the Company's consolidated
pre-tax income shall exceed $1,750,000 in any of such fiscal years. Mr. McLain
received a $84,868 bonus for the Company's 1996 fiscal year under the terms of
his employment agreement. For each of the fiscal years ending 2001 through
2005, Mr. McLain's Incentive Bonus shall be determined by the Compensation
Committee and ratified by the full Board of Directors. The maximum annual
Incentive Bonus which Mr. McLain shall be entitled to receive during each of the
fiscal years ending 2001 through 2005 shall not be less than $150,000. As used
in Mr. McLain's employment agreement, the term "consolidated pre-tax income" is
defined as consolidated net income of the Company and any subsidiaries of the
Company subsequently created or acquired, before the Incentive Bonus, income
taxes and gains or losses from disposition or purchases of assets or other
extraordinary items.
7
<PAGE>
Under the terms of his amended employment agreement, Mr. McLain received
options to acquire 150,000 shares of Company common stock, exercisable at $6.50
per share, awarded to him under the Company's 1995 Stock Option Plan. Such
exercise price was the closing sale price of the Company's common stock on
August 1, 1995 as reported by NASDAQ. On December 28, 1995, all 300,000 options
previously granted to Mr. McLain under the Plan were repriced, such that all of
his existing options were terminated and he was granted 300,000 new options
under the Plan exercisable at $4.50 per share. All of such options vested in
full in July 1996. See, "Repricing of Stock Options."
Under the terms of his employment agreement, Mr. McLain is also entitled to
receive options to purchase 75,000 additional shares of Company Common Stock
under the Plan with respect to the Company's fiscal year ending July 31, 1998,
at the market price per share of Common Stock on July 31, 1998, in the event
that the accumulated consolidated pre-tax income of the Company for the three
consecutive fiscal years ending 1996, 1997 and 1998 shall equal or exceed
$9,000,000. Mr. McLain shall also be entitled to receive options to purchase
50,000 additional shares of Company Common Stock under the Plan with respect to
the Company's fiscal year ending July 31, 2000 in the event that the accumulated
consolidated pre-tax income of the Company for the two consecutive fiscal years
ending 1999 and 2000 shall equal or exceed $7,000,000.
In the event that the Company does not meet the accumulated consolidated
pre-tax income levels described above, Mr. McLain shall still be entitled to
receive options to purchase 125,000 shares under the Plan (minus any options
granted with respect to the fiscal years ending in 1998 and 2000), exercisable
at the market price per share on July 31, 2000, should the accumulated
consolidated pre-tax income of the Company for the five fiscal years ending 1996
through 2000 equal or exceed $16,000,000. In the event such additional
incentive stock options become available to him, Mr. McLain may exercise such
options beginning August 1, 1996 and ending July 31, 2005. Mr. McLain's
employment agreement also provides for fringe benefits as are customary for
senior executive officers in the industry in which the Company operates,
including medical coverage, excess life insurance benefits, and use of an
automobile supplied by the Company in addition to a $500 per month auto
allowance, the aggregate value of which is estimated at approximately $20,000
per year.
STOCK OPTIONS
OPTION GRANTS IN FISCAL YEAR 1996
The following table identifies individual grants of stock options made during
the last completed fiscal year to the executive officers named in the Summary
Compensation Table:
REALIZABLE
VALUE AT
ASSUMED ANNUAL
RATES OF STOCK
PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
- --------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g)
% OF TOTAL
OPTIONS/ OPTIONS/SARS EXERCISE
SARs GRANTED TO OF BASE
GRANTED EMPLOYEES IN PRICE EXPIRATION
NAME (#) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
---- ------- ------------ -------- ---------- ------- --------
C. Dean McLain 300,000 60% $4.50 12/05 $849,008 $2,151,552
Robert M.Rubin 150,000 30% $4.50 3/06 $424,504 $1,075,776
8
<PAGE>
The following table provides information concerning the exercise of stock
options during the last completed fiscal year by each executive officer named in
the Summary Compensation Table, and the fiscal year-end value of unexercised
options held by each such person.
AGGREGATED OPTION/SAR EXERCISED
IN LAST FISCAL YEAR AND FISCAL
YEAR-END OPTION/SAR VALUES
- --------------------------------------------------------------------------------
(a) (b) (c) (d) (e)
NUMBER OF VALUE OF
UNEXERCISED UNEXERCISED IN-
OPTIONS/SARS THE-MONEY
SHARES VALUE AT FISCAL OPTIONS/SARS
ACQUIRED ON REALIZED YEAR-END AT FISCAL YEAR-END
NAME EXERCISE (#) ($) (#) ($)
---- ------------ ----- ------------ ------------------
EXERCISABLE/ EXERCISABLE/
UNEXERCISABLE UNEXERCISABLE
C. Dean McLain -0- -0- 300,000/0 $862,500/0
Robert M. Rubin -0- -0- 0/150,000 0/$431,250
- ------------------------------------------
NON-MANAGEMENT DIRECTORS STOCK OPTION PLAN
On December 28, 1995, the Company adopted a Non-Management Directors Stock
Option Plan for the purpose of compensating all of the Company's outside
directors for their annual service on the Company's Board of Directors (the
"Formula Plan"). Under the terms of the Formula Plan, the Company automatically
grants to each non-management director five-year options to acquire 2,500 shares
of the Company's Common Stock on February 1, 1996 and on each succeeding August
1 upon which the non-management director is a member of the Company's Board of
Directors. Options granted under the Formula Plan are exercisable at the market
price of a share of Company Common Stock on the date of option grant. The
Formula Plan terminates on December 31, 2000, and a maximum of 50,000 shares of
Company Common Stock are available for the granting of options under the plan.
The Formula Plan was adopted by the Board and is subject to stockholder
approval, without which the Formula Plan itself and the options granted
thereunder are not effective. The Company intends to present the Formula Plan
for stockholder approval at the Company's 1996 Annual Stockholders Meeting. See,
"IV. AUTHORIZATION AND RATIFICATION OF THE 1995 STOCK OPTION PLAN FOR
NON-EMPLOYEE DIRECTORS," below.
9
<PAGE>
REPRICING OF STOCK OPTIONS
TEN-YEAR OPTION
REPRICINGS
-----------------------------------
<TABLE>
<CAPTION>
LENGTH OF
NUMBER OF ORIGINAL
SECURITIES MARKET PRICE EXERCISE OPTION TERM
UNDERLYING OF STOCK AT PRICE AT REMAINING AT
OPTIONS/SARS TIME OF TIME OF DATE OF
REPRICED OR REPRICING OF REPRICING NEW EXERCISE REPRICING OF
AMENDED AMENDMENT OR AMENDMENT PRICE AMENDMENT
NAME DATE (#) ($) ($) ($) ($)
(a) (b) (c) (d) (e) (f) (g)
<S> <C> <C> <C> <C> <C> <C>
C. Dean McLain 12/28/95 150,000 $4.50 $6.50 $4.50 9.5 years
common
shares
C. Dean McLain 12/28/95 150,000 $4.50 $6.50 $4.50 4.5 years
common
shares
</TABLE>
On December 28, 1995, all outstanding options to acquire 350,000 shares of
Company Common Stock granted under the Company's 1995 Stock Option Plan were
priced. Options to acquire 200,000 shares of Common Stock (150,000 options to
Mr. McLain) were originally granted under the Plan in March 1995 at an exercise
price of $8.00 per share, prior to consummation of the Offering. In May 1995,
all of such options were repriced to provide for an exercise price of $6.50 per
share, the anticipated public offering price of the shares to be sold in the
Offering. In December 1995, the full Board of Directors acted to reprice all
outstanding options granted under the Plan, which were exercisable at $6.50 per
share to acquire an aggregate of 350,000 shares of Common Stock. All such
repriced options were granted at an exercise price of $4.50 per share, the fair
market value of a share of the Common Stock on the date of repricing.
The Board of Directors effected the repricing in May 1995 in order to
permit option holders to receive options at the anticipated public offering
price for the shares, which Offering was consummated at $6.50 per share
subsequent to the original granting at $8.00 per share. The Board of Directors
effected the subsequent December 1995 repricing, which lowered the exercise
price of the outstanding options from $6.50 per share to $4.50 per share (the
then current market price for the Common Stock), in order to provide option
holders a true incentive for continuing performance on behalf of the Company.
ROBERT M. RUBIN C. DEAN MCLAIN HAROLD CHAPMAN, JR.
JAMES PENLAND
10
<PAGE>
LIMITATION OF DIRECTORS' AND OFFICERS' LIABILITY AND INDEMNIFICATION
The Company has included in its Certificate of Incorporation and/or By-laws
provisions to (i) eliminate the personal liability of its directors and officers
for monetary damages resulting from breaches of their fiduciary duty (provided
that such provisions do not eliminate liability for breaches of the duty of
loyalty, acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, violations under Section 174 of the
Delaware Law, or for any transaction from which the director and/or officer
derived an improper personal benefit), and (ii) indemnify its directors and
officers to the fullest extent permitted by the Delaware Law, including
circumstances in which indemnification is otherwise discretionary. The Company
believes that these provisions are necessary to attract and retain qualified
persons as directors and officers.
The Company intends to enter into separate but identical indemnity
agreements (the "Indemnity Agreements") with each director and executive officer
of the Company (the "Indemnitees"). The Indemnity Agreements will provide that
the Company will indemnify each Indemnitee against any amounts that he becomes
legally obligated to pay in connection with any claim against him based upon any
act, omission, neglect or breach of duty that he may commit, omit or suffer
while acting in his capacity as a director and/or officer of the Company;
provided, that such claim: (i) is not based upon the Indemnitee's gaining any
personal profit or advantage to which he is not legally entitled; (ii) is not
for an accounting of profits made from the purchase or sale by the Indemnitee of
securities of the Company within the meaning of Section 16(b) of the Securities
Exchange Act of 1934, as amended, or similar provisions of any state law; and
(iii) is not based upon the Indemnitee's knowingly fraudulent, deliberately
dishonest or willful misconduct. The Indemnity Agreements also provide that all
costs and expenses incurred by the Indemnitee in defending or investigating such
claim shall be paid by the Company in advance of the final disposition thereof,
unless the Company, independent legal counsel, the stockholders of the Company
or a court of competent jurisdiction determines that: (x) the Indemnitee did not
act in good faith and in a manner that he reasonably believed to be in or not
opposed to the best interests of the Company; (y) in the case of any criminal
action or proceeding, the Indemnitee had reasonable cause to believe his conduct
was unlawful; or (z) the Indemnitee intentionally breached his duty to the
Company or its stockholders. Each Indemnitee has undertaken to repay the
Company for any costs or expenses so advanced if it shall ultimately be
determined by a court of competent jurisdiction in a final, nonappealable
adjudication that he is not entitled to indemnification under an Indemnity
Agreement.
11
<PAGE>
PERFORMANCE GRAPH
The following performance graph compares the monthly percentage change in
the Company's cumulative total stockholder return on its common stock since June
14, 1995 as compared to the Nasdaq National Market as a whole and as compared to
the S&P Machinery (Diversified) Index.
COMPARISON OF 1 MONTH CUMULATIVE RETURN*
Among Western Power & Equipment Corp., The Nasdaq Stock Market-US Index
and the S&P Machinery (Diversified) Index
FISCAL YEAR ENDING
------------------
COMPANY 6/14/95 1995 1996
------- ------- ---- ----
Western Power & Equipment Corp. 100 98 66
Nasdaq Stock Market-US 100 116 127
S&P Machinery (Diversified) 100 110 112
* Assumes $100 invested on June 14, 1995 in the Company's Common Stock or on May
31, 1995 in the S&P Index, including reinvestment of dividends. Fiscal year
ending July 31.
As shown in the above performance graph, a $100 investment in the Company
made on the effective date of the Company's initial public offering was worth
$66 at July 31, 1996, as compared to $127 in a comparable NASDAQ Broad Market
investment, and as compared to $112 in a comparable S&P Machinery (Diversified)
Index investment. The corporations comprising the S&P Machinery (Diversified)
Index are as follows: Briggs & Stratton, Caterpillar, Cooper Industries, Deere &
Co., Harnischfeger, Ingersoll Rand, NACCO Industries (class A), Timken and
Varity.
SECURITY OWNERSHIP OF MANAGEMENT
AND PRINCIPAL SHAREHOLDERS
The following table sets forth certain information as of October 21, 1996
with respect to the beneficial ownership of the Common Stock of the Company by
each beneficial owner of more than 5% of the outstanding shares of the Common
Stock of the Company, each director and nominee for director and all officers
and directors of the Company as a group. Unless otherwise indicated, the owners
have sole voting and investment power with respect to their respective shares.
PERCENTAGE
OF
NUMBER OF SHARES OF COMMON OUTSTANDING
NAME AND ADDRESS OF STOCK OF THE COMPANY COMMON
BENEFICIAL OWNER BENEFICIALLY OWNED STOCK OWNED
---------------- ------------------ -----------
American United
Global, Inc.
25 Highland Blvd.
Dix Hills, NY 11746 2,000,000 56.6%
Robert M. Rubin
6060 Kings Gate Circle
Del Ray Beach, FL 33484 430,000(1)(3) 12.2%
12
<PAGE>
C. Dean McLain
4601 N.E. 77th Avenue
Suite 200
Vancouver, WA 98662 513,806(2)(3) 12.2%
James Penland
50 Hillcrest Drive
Weaverville, NC 28787 5,000(4) *
Harold Chapman
4614 Highway 763 North
Columbia, Missouri 65202 5,000(4) *
All directors and executive
officers as a group
(5 persons) 1,003,806(1)(2)(3)(4)(5) 25.8%
- -----------------------
* Less than 1%
(1) Represents Mr. Rubin's indirect ownership in the Company through his
beneficial ownership of an aggregate of 1,775,798 voting shares of American
United Global, Inc., the Company's principal stockholder ("AUGI"),
including options to purchase an additional 80,000 shares of AUGI common
stock. Mr. Rubin's beneficial ownership of AUGI voting stock represents
21.5% of AUGI voting stock as at October 20, 1996.
(2) Represents Mr. McLain's indirect ownership in the Company through his
beneficial ownership of an aggregate of 20,000 shares of AUGI voting stock
and options to purchase an additional 357,750 shares of AUGI common stock,
as well as direct beneficial ownership of Company Common Stock through his
ownership of exercisable options to acquire 300,000 shares of Company
Common Stock. Mr. McLain's beneficial ownership of AUGI common stock
represents 4.4% of AUGI voting stock as at October 20, 1995.
(3) Does not include options to purchase 150,000 shares of the Company's Common
Stock granted to Mr. McLain in August 1996 which may be exercised at $4.375
per share, 50% commencing on August 1, 1997 and 50% commencing on August 1,
1998, so long as Mr. McLain shall be employed on a full-time basis with the
Company on each occasion such options are exercised. Also does not include
certain incentive stock options which are issuable to Mr. McLain in the
maximum amount of 125,000 shares, based upon the Company achieving certain
pre-tax income levels after the fiscal years ending 1998 (75,000 shares)
and 2000 (50,000 shares). See "MANAGEMENT - Employment and Incentive
Compensation Agreements."
Does not include options to purchase 150,000 shares of the Company's Common
Stock granted to Mr. Rubin on March 5, 1996 which may be exercised at $4.50
per share, 33.3% commencing on March 5, 1997, and 33.3% on each succeeding
March 5 until all are vested. Also does not include options to purchase
50,000 shares granted to Mr. Rubin on August 1, 1996 which may be exercised
at $4.375 per share, 50% commencing on August 1, 1997 and 50% commencing on
August 1, 1998.
(4) Includes options to purchase 5,000 shares of the Company's Common Stock
issued to each of Messrs. Chapman and Penland under the terms of the
Formula Plan for outside directors.
(5) Includes options to purchase 50,000 shares granted to Thomas Berkompas in
December 1995 which may be exercised at $4.50 per share. Does not include
options to purchase 30,000 shares granted to Mr. Berkompas, exercisable at
$4.375 per share, 50% commencing on August 1, 1997 and 50% commencing on
August 1, 1998, so long as Mr. Berkompas shall continue to be employed by
the Company on a full-time basis.
CERTAIN TRANSACTIONS
See "EXECUTIVE COMPENSATION - COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION."
To assist American United Global, Inc. ("AUGI"), the Company's principal
stockholder, in capitalizing the Company and to provide it with ongoing working
capital, in November 1992 Robert M. Rubin advanced to AUGI the sum of $1,375,000
as a subordinated loan, which was funded together with
13
<PAGE>
related subordinated loans aggregating $525,000 made to AUGI by Lawrence E.
Kaplan (until August, 1995 a director of the Company and who became a director
of AUGI in March 1993) and his business associates. The proceeds of such loans,
aggregating $1,900,000, were used by AUGI to provide part of the initial equity
capital for the Company at the time of its 1992 acquisition of 7 Case
Corporation ("Case") retail stores. Such loans were evidenced by AUGI notes
payable on August 15, 1994 and bearing interest, payable monthly, at the
Citibank, N.A. prime rate, plus 1%. All such loans were fully subject and
subordinated to all bank and other related secured indebtedness of AUGI and its
subsidiaries, including the Company.
On November 19, 1992, in consideration of his personal guaranty of a
portion of a loan to AUGI by its commercial lender and his $1,375,000 loan to
AUGI, the proceeds of both of which financings were used to capitalize the
Company, Mr. Rubin received, for $1,250, an aggregate of 125,000 shares of AUGI
Common Stock. Mr. Rubin agreed that, except in connection with a merger or sale
of AUGI as a whole, he will not sell or otherwise transfer any of the 125,000
shares for a minimum of four years from their date of issuance. The closing
price of AUGI's Common Stock on the NASDAQ National Market System was $4.94 per
share on November 19, 1992.
On consummation of an AUGI public offering of its securities in February
1994, Mr. Rubin exchanged 1,200,000 shares of AUGI Preferred Stock (which he
purchased for $1,200,000) and his $1,375,000 AUGI note due August 15, 1994, for
the AUGI Stockholder Note, evidenced by a 9.56% $2,575,000 AUGI unsecured note,
payable monthly as to interest and due as to principal on November 30, 1995.
Such AUGI Stockholder Note is fully subject and subordinated to all indebtedness
for money borrowed by AUGI and its direct and indirect subsidiaries, including
Company indebtedness to all institutional lenders and to Case. $1,375,000 of
the underlying obligation evidenced by the AUGI Stockholder Note was assumed by
the Company effective as at July 31, 1993. The Company applied $1,375,000 of
the net proceeds of its 1995 initial public offering (the "Offering") to prepay
a like amount of the AUGI Stockholder Note to Mr. Rubin.
Upon completion of AUGI's February 1994 public offering, the $525,000 of
AUGI indebtedness owed to Lawrence E. Kaplan (a member of the AUGI Board of
Directors at that time and a former member of the Company's Board of Directors)
and his business associates was retired. Mr. Kaplan had lent $131,250 of such
$525,000 amount.
Effective February 17, 1996, the Company acquired substantially all of the
operating assets used by Case in connection with its business of servicing and
distributing Case construction equipment at a facility located in Sacramento,
California (the "Sacramento Operation"). The real property and improvements
used in connection with the Sacramento Operation, and upon which the Sacramento
Operation is located, were sold by Case for $1,500,000 to the McLain-Rubin
Realty Company, LLC ("MRR"), a Delaware limited liability company, the owners of
which are Messrs. C. Dean McLain, the President and a director of the Company,
and Robert M. Rubin, the Chairman and a director of the Company. Simultaneous
with its acquisition of the Sacramento Operation real property and improvements,
MRR leased such real property and improvements to the Company under the terms of
a 20 year commercial lease agreement dated March 1, 1996 with the Company paying
an initial annual rate of $168. Under the lease, such annual rate increases to
$192 after five years and is subject to fair market adjustments at the end of
ten years. In addition to base rent, the Company is responsible for the payment
of all related taxes and other assessments, utilities, insurance and repairs
(both structural and regular maintenance) with respect to the leased real
property during the term of the lease.
Upon completion of the Offering, the Company entered into a management
agreement with AUGI expiring July 31, 1996, renewable on a year-to-year basis
thereafter by mutual agreement, pursuant to which AUGI provides the Company with
certain general and administrative services, including tax planning,
administering of the annual audit of the Company's financial statements,
assistance in the preparation of annual reports, and periodic reports required
to be filed by the Company with the Securities and Exchange Commission under the
Securities Exchange Act of 1934, including proxy statements, Form
14
<PAGE>
10-K Annual Reports, Form 10-Q Interim Financial Reports, and Form 8-K Reports,
maintenance of the Company's continued listing on NASDAQ or other national
exchange, financial public relations and other miscellaneous administrative
services. Under the terms of such management agreement, the Company pays to
AUGI the sum of $10,000 per month, subject to increase or decrease (as the case
may be) on a fiscal quarterly basis, commencing October 31, 1995, to reflect
actual expenses accrued or anticipated to be paid by AUGI in the next succeeding
fiscal quarter. The agreement was terminated effective January 1, 1996 after
the principal operations of AUGI were sold and the general and administrative
services supplied by AUGI to the Company were discontinued.
(The remainder of this page has been intentionally left blank)
15
<PAGE>
ACTION TO BE TAKEN UNDER THE PROXY
Unless otherwise directed by the grantor of the proxy, the persons acting
under the accompanying proxy will vote the shares represented thereby: (a) for
the election of the persons named in the next succeeding table as nominees for
directors of the Company; (b) for the proposal to ratify the appointment of
Price Waterhouse as the Company's auditors for the current Fiscal Year; (c) for
the proposal to authorize and ratify the increase in the number of shares of
Common Stock available for the grant of options under the 1995 Employee Stock
Option Plan; (d) for the proposal to authorize and ratify the 1995 Non-employee
Director Stock Option Plan; and (e) in connection with the transaction of such
other business that may be brought before the Meeting, in accordance with the
judgment of the person or persons voting the proxy.
I. ELECTION OF DIRECTORS
NOMINEES
At the Meeting four directors are to be elected, each to hold office until
the next Annual Meeting of Stockholders or until his successor shall be elected
and shall qualify. The names of the nominees for election as directors, all of
whom are now serving as directors of the Company, and certain information
furnished to the Company by such nominees with respect to them, as of April 1,
1996, are set forth below. Unless authority to vote for one or more nominees is
withheld, it is intended that shares represented by proxies in the accompanying
form will be voted for the election of the following nominees. With respect to
any such nominee who may become unable or unwilling to accept nomination or
election, it is intended that the proxies will be voted for the election in his
stead of such person as the Board of Directors may recommend, but the Board does
not know of any reason why any nominee will be unable or unwilling to serve if
elected.
PRINCIPAL
OCCUPATION
DIRECTOR DURING LAST
NAME AGE SINCE FIVE YEARS
- ---- --- -------- -----------
Robert M. Rubin 56 1992 *
C. Dean McLain 43 1993 *
Harold Chapman, Jr. 35 1995 *
James Penland 67 1995 *
- -------------------------
* See "DIRECTORS, NOMINEES FOR DIRECTOR AND EXECUTIVE OFFICERS OF THE
COMPANY" on pages 3 and 4.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT SHAREHOLDERS VOTE IN
FAVOR OF ALL THE NOMINEES FOR DIRECTOR.
COMMITTEES AND MEETINGS OF THE BOARD
At present the Board of Directors has two committees, the Compensation
Committee and the Audit Committee. The Compensation Committee consists of Harold
Chapman, Jr. and James Penland. The function of the Compensation Committee
includes responsibility for reviewing the compensation for all of the
Corporation's employees and the granting of stock options under the Company's
employee stock option plans that may exist and be in effect from time to time.
The Audit Committee consists of C. Dean McLain, Harold Chapman, Jr. and James
Penland. The function of the Audit Committee includes the review of the
Company's financing arrangements and a review of its internal financial
controls. During the Fiscal Year ended July 31, 1996, the Board of Directors
met 4 times, including actions taken by unanimous written consent of the
directors. The Compensation Committee met jointly with the full Board
16
<PAGE>
of Directors once, and separately once, during the fiscal year ended July 31,
1996. The Audit Committee met once during the Fiscal Year ended July 31, 1996.
All of the nominated directors who served as directors during the Fiscal Year
ended July 31, 1996 attended 100% of the meetings of the Board held during
periods of their tenure during such year, other than Mr. Penland who failed to
attend 50% of such meetings and Mr. Rubin who failed to attend 25% of such
meetings. No employee director of the Company receives any directors fees for
attendance at Board meetings; Messrs. Chapman and Penland each receives $500 per
meeting attended. All directors receive reimbursement for actual expenses
related to such attendance. Upon ratification of the 1995 Non-employee Director
Stock Option Plan, Messrs. Chapman and Penland will also be entitled to receive
options to acquire shares of Company Common Stock during periods in which they
serve on the Company's Board of Directors.
II. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS FOR THE FISCAL YEAR
ENDING JULY 31, 1996
At the Meeting a vote will be taken on a proposal to ratify the appointment
by the Board of Directors of Price Waterhouse independent certified public
accountants, as the independent auditors of the Company for the Fiscal Year
ending July 31, 1996. Price Waterhouse has no interest in or any relationship
with the Company except as its auditors.
MANAGEMENT BELIEVES THE APPOINTMENT TO BE IN THE BEST INTEREST OF THE
COMPANY AND RECOMMENDS THAT IT BE RATIFIED.
A representative of Price Waterhouse will be present at the Annual Meeting
of Stockholders of the Company and will be given an opportunity to make a
statement to the shareholders if he so desires. The representative will be
available to respond to questions from shareholders.
III. AUTHORIZATION AND RATIFICATION OF THE INCREASE IN THE NUMBER OF SHARES
OF COMMON STOCK UNDERLYING THE 1995 EMPLOYEE STOCK OPTION PLAN
At the Annual Meeting a vote will be taken on a proposal to approve the
Amendment to the Company's 1995 Employee Stock Option Plan (the "1995 Plan"),
which increases the number of shares of Common Stock underlying stock options
available for grant thereunder from the existing 850,000 shares of Common Stock
to 1,500,000 shares of Common Stock. A COPY OF THE AMENDMENT TO THE 1995 PLAN
IS ANNEXED AS EXHIBIT A. As of November 1, 1996, stock options to purchase
847,000 shares of Common Stock have been granted under the 1995 Plan to the
Company's employees and directors. That number of granted options constitutes
approximately 99.6% of the number of shares currently available for the granting
of options under the 1995 Plan as currently approved by Company stockholders.
The 1995 Plan was authorized and adopted by the stockholders and the
directors of the Company in 1995. The purpose of the 1995 Plan is to provide
additional incentive to the directors, officers, employees and consultants of
the Company who are primarily responsible for the management and growth of the
Company. Each option granted pursuant to the 1995 Plan shall be designated at
the time of grant as either an "incentive stock option" or as a "non-qualified
stock option."
ADMINISTRATION OF THE PLAN. The 1995 Plan is administered by the
Compensation Committee, which determines whom among those eligible will be
granted options, the time or times at which options will be granted, the number
of shares to be subject to options, the durations of options, any conditions to
the exercise of options and the manner in and price at which options may be
exercised. The Compensation Committee is authorized to amend, suspend or
terminate the 1994 Plan, except that it is not authorized without stockholder
approval (except with regard to adjustments resulting from changes in
capitalization) to (i) increase the maximum number of shares that may be issued
pursuant to the exercise
17
<PAGE>
of options granted under the 1995 Plan; (ii) permit the grant of a non-qualified
stock option under the 1995 Plan with an option exercise price less than 85% of
the fair market value of the shares at the time such option is granted; (iii)
change the eligibility requirements for participation in the 1995 Plan; (iv)
extend the term of any option or the period during which any option may be
granted under the 1994 Plan; or (v) decrease an option exercise price (although
an option may be canceled and a new option granted at a lower exercise price).
SHARES SUBJECT TO THE PLAN. The 1995 Plan currently provides that options
may be granted with respect to a total of 850,000 shares of Common Stock,
subject to adjustment upon certain changes in capitalization without receipt of
consideration by the Company. In addition, if the Company is involved in a
merger, consolidation, dissolution or liquidation, the options granted under the
1995 Plan will be adjusted or, under certain conditions, will terminate, subject
to the right of the option holder to exercise his option or a comparable option
substituted at the discretion of the Company prior to such event. If any option
expires or terminates for any reason, without having been exercised in full, the
unpurchased shares subject to such option will be available again for the
purposes of the 1995 Plan.
PARTICIPATION. Any employee, consultant or representative of the Company
is eligible to receive incentive stock options or non-qualified stock options
granted under the 1995 Plan. Non-employee directors may only receive
non-qualified stock options.
OPTION PRICE. The exercise price of each option shall be determined by the
Stock Option Committee. However, the exercise price of each option on the date
the option is granted may not be less than (i) 100% of the fair market value of
the shares of Common Stock covered by an incentive stock option, or (ii) 85% of
the fair market value of the shares of Common Stock covered by a non-qualified
stock option. If an incentive stock option is to be granted to an employee who
owns over 10% of the total combined voting power of all classes of the Company's
stock, then the exercise price may not be less than 110% of the fair market
value of the Common Stock covered by the option of the date the option is
granted.
TERMS OF OPTIONS. The Compensation Committee shall, in its discretion, fix
the term of each option, provided that the maximum term of each option shall be
10 years. Incentive options granted to an employee who owns over 10% of the
total combined voting power of all classes of stock of the Company shall expire
not more than five years after the date of grant. The 1995 Plan will provide
for the earlier expiration of options of a participant in the event of certain
terminations of employment.
RESTRICTIONS ON GRANT AND EXERCISE. An Option may not be transferred other
than by will or the laws of descent and distribution and, during the lifetime of
the option holder, may be exercised solely by him. The aggregate fair market
value (determined at the time the option is granted) of the shares as to which
an employee may first exercise incentive stock options in any one calendar year
may not exceed $100,000. The Compensation Committee may impose other conditions
to exercise as it deems appropriate.
OPTION GRANTS. The Company has granted an aggregate of 847,000 Options
under the 1995 Plan.
TERMINATION. The 1995 Plan, unless sooner terminated by the Board of
Directors or Compensation Committee, will terminate in February 2005.
TAX TREATMENT OF OPTIONS. The Federal income tax treatment of
non-qualified stock options under the 1995 Plan is generally less favorable to
employees than the treatment accorded incentive stock options under the 1995
Plan. The option grantee realizes taxable income, if any, upon his exercise of
a non-qualified stock option, not only upon sale of the shares acquired upon
option exercise as would be the case for incentive stock options granted under
the 1995 Plan. The tax treatment of non-qualified stock options is more
favorable to the Company than the treatment accorded to the Company with respect
to incentive stock options, because the Company is entitled to a tax deduction
with respect to the grant of a
18
<PAGE>
non-qualified stock option. With respect to granting a non-qualified stock
option, the Company would be entitled to a tax deduction and the optionee would
realize taxable income upon being granted a non-qualified stock option, equal to
the difference between the option exercise price and the fair market value of
the underlying stock on the date of grant.
The Company currently has no obligation to grant additional options under
the 1995 Plan to any person, including any members of the Company's management.
As of the close of business on October 29, 1996, the market value of the
shares of Common Stock underlying all options outstanding under the 1995 Plan
was approximately $3,917,375.
As of October 29, 1996, the persons or groups listed below hold outstanding
stock options granted under the 1995 Plan to acquire shares of Common Stock, as
follows:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
C. Dean McLain 450,000 shares
- --------------------------------------------------------------------------------
Robert M. Rubin 200,000 shares
- --------------------------------------------------------------------------------
Thomas D. Berkompas 80,000 shares
- --------------------------------------------------------------------------------
All current executive officers
and directors of the Company
as a group 730,000 shares
- --------------------------------------------------------------------------------
All directors and nominees
for directors as a group 650,000 shares
- --------------------------------------------------------------------------------
All employees who are not
executive officers of the
Company, as a group 107,000 shares
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MANAGEMENT BELIEVES APPROVAL OF THE AMENDMENT OF THE COMPANY'S 1995 STOCK OPTION
PLAN IS IN THE BEST INTEREST OF THE COMPANY AND RECOMMENDS THAT IT BE AUTHORIZED
AND RATIFIED.
IV. AUTHORIZATION AND RATIFICATION OF THE 1995 STOCK OPTION PLAN FOR
NON-EMPLOYEE DIRECTORS
The Company established the 1995 Stock Option Plan for Non-Employee
Directors (the "Directors Plan") on December 28, 1995. A COPY OF THE DIRECTORS
PLAN IS ANNEXED AS EXHIBIT B. The purpose of the Directors Plan is to provide
additional incentive to the non-employee directors of the Company who share a
significant role in and responsibility for guiding management's planning for the
growth of the Company. Under the Directors Plan, which is to be administered by
a committee of the Company's Board of Directors the members of which are not
eligible to participate in the Directors Plan (the "Committee"), each eligible
Non-Employee Director will be granted non-qualified options to acquire 2,500
shares of the Company's Common Stock on February 1, 1996, and on each succeeding
August 1 upon which such Non-Employee Director is an existing member of the
Company's Board of Directors (or the first succeeding business day thereafter on
which the Common Stock is traded on the principal securities exchange on which
it is listed). The exercise price per share of Common Stock for which each
option is exercisable shall be the average of the closing bid and asked prices
of the stock (or the closing sale price of the stock if traded on a national
securities exchange) as generally reported for the principal securities market
on which the Company's Common Stock is listed. Each option granted under the
Plan shall be fully exercisable on the date of option grant. Each option
granted under the Plan shall expire five years from the date of grant, and shall
be subject to earlier termination as hereinafter provided. In the event of
19
<PAGE>
the termination of service on the Board by the holder of any option granted
under the Directors Plan, other than by reason of mandatory retirement,
permanent disability or death, the then outstanding options of such holder shall
be exercisable only to the extent that they were exercisable on the date of such
termination and shall expire three months after such termination, or on their
stated expiration date, whichever occurs first. In the event of termination of
service by reason of mandatory retirement pursuant to Board policy or permanent
disability of the holder of any option, each of such holder's then outstanding
options granted under the Directors Plan will continue to become exercisable in
accordance with the terms set forth above, but the holder shall be entitled to
exercise such options (including any portions that become exercisable after
termination) within three years of such termination, but in no event shall any
affected option be exercisable after its expiration date. In the event of the
death of the holder of any option, each of the then outstanding options of such
holder shall become immediately exercisable in full, and shall be exercisable by
the holder's legal representative at any time within a period of three years
after death, but in no event shall any affected option be exercisable after its
expiration date. However, if the holder dies within two years following
termination of service on the Board by reason of mandatory retirement or
permanent disability, any option granted under the Directors Plan shall be
exercisable only until the earlier of (x) the later of (i) one year after the
holder's death or (ii) two years after such termination, or (y) the expiration
date of the option. The option exercise price shall be paid in cash and the
cash price can be paid with the proceeds of a loan from the Company to the
participant for such purpose or by the surrender of shares of Common Stock of
the Company, valued at their fair market value on the date of exercise, or by
any combination of cash and such shares.
MANAGEMENT BELIEVES AUTHORIZATION AND APPROVAL OF THE DIRECTORS PLAN OF THE
COMPANY IS IN THE BEST INTEREST OF THE COMPANY AND RECOMMENDS THAT IT BE
AUTHORIZED AND RATIFIED.
OTHER BUSINESS
While management of the Company does not know of any matters which may be
brought before the Meeting other than as set forth in the Notice of Meeting, the
proxy confers discretionary authority with respect to the transaction of any
other business. It is expected that the proxies will be voted in support of
management on any question which may properly be submitted to the meeting.
INCLUSION OF SHAREHOLDER PROPOSALS IN THE COMPANY'S PROXY STATEMENT
If any shareholder desires to put forth a proposal to be voted on at the
1997 Annual Meeting of Stockholders and wishes that proposal to be included in
the Company's Proxy Statement to be delivered to shareholders in connection with
such meeting, that shareholder must cause such proposal to be received by the
Company at its principal executive office no later than July 18, 1997. Any
request for such a proposal, should be accompanied by a written representation
that the person making the request is a record or beneficial owner of the lesser
of at least 1% of the outstanding shares of the Company's Common Stock or $1,000
in market value of the Company's common shares and has held such shares for a
least one year as required by the Proxy Rules of the Securities and Exchange
Commission.
AVAILABILITY OF FORM 10-K
THE COMPANY WILL PROVIDE, WITHOUT CHARGE, TO ANY SHAREHOLDER, UPON WRITTEN
REQUEST OF SUCH SHAREHOLDER, A COPY OF THE ANNUAL REPORT ON FORM 10-K FOR THE
FISCAL YEAR ENDED JULY 31, 1996 AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION.
Any request for a copy of the Form 10-K should include a representation
that the person making the request was the beneficial owner, as of the record
date, of securities entitled to vote at the Annual Meeting of Stockholders. Such
request should be addressed to: Western Power & Equipment Corp., 4601 NE 77th
Avenue, Suite 200, Vancouver, Washington 98662; Attention: Secretary.
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PLEASE SIGN, DATE AND RETURN THE ENCLOSED
PROXY IN THE ENVELOPE PROVIDED FOR SUCH PURPOSE
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EXHIBIT A
AMENDMENT TO
WESTERN POWER & EQUIPMENT CORP.
1995 EMPLOYEE STOCK OPTION PLAN
1. AMENDMENT
Section 5 of the Western Power & Equipment Corp. 1995 Employee Stock Option
Plan (the "Plan") is hereby amended (the "Amendment") to increase the number of
shares of Common Stock of Western Power & Equipment Corp. available for the
grant of options under the Plan from 850,000 shares to 1,500,000 shares by
deleting existing Section 5(a) thereof in its entirety and substituting the
following therefor:
"5. OPTION SHARES
a. The shares subject to Options granted under this Plan shall be shares
of Common Stock and, except as otherwise required or permitted by Subsection
5(b) below, the aggregate number of shares with respect to which Options may be
granted shall not exceed 1,500,000 shares. If an Option expires, terminates or
is otherwise surrendered, in whole or in part, the shares allocable to the
unexercised portion of such Option shall again become available for grants of
Options hereunder. As determined form time to time by the Board of Directors,
the shares available under this Plan for grants of Options may consist either in
whole or in part of authorized but unissued shares of Common Stock or shares of
Common Stock which have been reacquired by the Company or a subsidiary following
original issuance."
2. EFFECTIVE DATE
Upon approval by the holders of a majority of the outstanding shares
of Common Stock of the Company, the Amendment will become effective on the date
upon which such approval is obtained (the "Effective Date").
<PAGE>
3. EFFECT OF AMENDMENT
Except as amended by the specific terms of this Amendment, the
remaining terms and conditions of the Plan shall remain in full force and
effect.
------------------------------
C. Dean McLain, President
Date: October 31, 1996
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EXHIBIT B
WESTERN POWER & EQUIPMENT CORP.
1995 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
1. PURPOSES.
The 1995 Stock Option Plan for Non-Employee Directors (the "Plan") is
established to attract, retain and compensate highly qualified individuals who
are not employees of Western Power & Equipment Corp.(the "Company") for service
as members of the Board of Directors ("Non-Employee Directors") and to provide
them with an ownership Interest in the Company's common stock (the "Common
Stock"). The Plan will be beneficial to the Company and its stockholders by
allowing these Non-Employee Directors to have a personal financial stake in the
Company through an ownership interest in the Company's common stock, in addition
to underscoring their common interest with stockholders in increasing the value
of the Company's stock over the long term.
2. EFFECTIVE DATE.
The Plan shall be effective as of the date it is adopted by the Board of
Directors of the Company, subject to the approval of the Plan by the holders of
at least a majority of the outstanding shares of Company common stock present,
or represented, and entitled to vote at the 1996 Annual Meeting of Stockholders.
Grants of options may be made under the Plan on and after its effective date,
subject to stockholder approval of the Plan as provided above. In the event
such approval is not obtained, any options granted under the Plan shall be null
and void.
<PAGE>
3. ADMINISTRATION OF THE PLAN.
The Plan shall be administered by a committee appointed by the Board of
Directors and consisting of Directors who are not eligible to participate in the
Plan (the "Committee"), or by the full Board of Directors in the event that a
Committee has not been appointed (in the event that a Committee has not been
appointed, any action hereunder to be taken by the Committee shall be taken by
the Board of Directors). Subject to the provisions of the Plan, the Committee
shall be authorized to interpret the Plan, to establish, amend and rescind any
rules and regulations relating to the Plan and to make all other determinations
necessary or advisable for the administration of the Plan; PROVIDED, HOWEVER,
that the Committee shall have no discretion with respect to the eligibility or
Election of Non-Employee Directors to receive options under the Plan, the number
of shares of stock subject to any such options or the Plan, or the purchase
price thereunder; and PROVIDED FURTHER, that the Committee shall not have the
authority to take any action or make any determination that would materially
increase the benefits accruing to participants under the Plan. The Committee's
interpretation of the Plan, and all actions taken and determinations made by the
Committee pursuant to the powers vested in it hereunder, shall be conclusive and
binding upon all parties concerned including the Company, its stockholders and
persons granted options under the Plan. The Chairman of the Board and Chief
Executive Officer of the Company, or any other officer of the Company as
designated by the Committee, shall be authorized to implement the Plan in
accordance with its terms and to take or cause to be taken such actions of a
ministerial nature as shall be necessary to effectuate the intent and purposes
thereof.
4. PARTICIPATION IN THE PLAN.
All active members of the Company's Board of Directors who are not as of
the date of any option grant employees of the Company or any of its subsidiaries
or affiliates shall be eligible to participate in the Plan. Directors emeritus
shall not be eligible to participate.
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5. NON-QUALIFIED STOCK OPTIONS.
Only non-qualified stock options ("Options") may be granted under this
Plan.
6. TERMS, CONDITIONS AND FORM OF OPTIONS.
(a) OPTION GRANT DATES. Options to purchase Two Thousand Five Hundred
(2,500) shares of Common Stock (as adjusted pursuant to Section 8) shall be
automatically granted to each eligible Non-Employee Director on February 1, 1996
and on an annual basis to each eligible Non-Employee Director on each August 1
thereafter (or the first succeeding business day thereafter of which the Common
Stock is traded on the principal securities exchange on which it is listed).
(b) EXERCISE PRICE. The exercise price per share of Common Stock for
which each option is exercisable shall be 100% of the fair market value per
share of Common Stock on the date the Option is granted, which shall be the
average of the closing bid and asked prices of the stock (or the closing sale
price of the stock if traded on a national securities exchange) as generally
reported for the principal securities exchange on which the Company's Common
Stock is listed.
(c) EXERCISABILITY AND TERM OF OPTIONS. Each Option granted under the
Plan shall become fully exercisable on the date of grant. Each Option granted
under the Plan shall expire five years from the date of grant, and shall he
subject to earlier termination as hereinafter provided.
(d) TERMINATION OF SERVICE. In the event of the termination of service on
the Board by the holder of any Option, other than by reason of mandatory
retirement, permanent disability or death as set forth in paragraph (e) hereof,
the then outstanding Options of such holder shall be exercisable only to the
extent that they were exercisable on the date of such termination and shall
expire three months after such termination, or on their stated expiration date,
whichever occurs first.
3
<PAGE>
(e) RETIREMENT, DISABILITY OR DEATH. In the event of termination of
service by reason of mandatory retirement pursuant to Board policy or permanent
disability of the holder of any Option, each of the then outstanding Options of
such holder will continue to become exercisable in accordance with Section 6(c)
above, but the holder shall be entitled to exercise such Options, including any
portions thereof that become exercisable after such termination, within three
years of such termination, but in no event, after the expiration date of the
Option. In the event of the death of the holder of any Option, each of the then
outstanding Options of such holder shall become immediately exercisable in full,
and shall be exercisable by the holder's legal representative at any time within
a period of three years after death, but in no event after the expiration date
of the Option. However, if the holder dies within two years following
termination of service on the Board by reason of mandatory retirement or
permanent disability, such option shall be exercisable only until (x) the later
of (i) one year after the holder's death or (ii) two years after such
termination, or (y) the expiration date of the Option, if earlier.
(f) PAYMENT. The option price shall be paid in cash (whether or not such
cash is loaned by the Company to the participant for such purpose) or by the
surrender of shares of Common Stock of the Company, valued at their fair market
value on the date of exercise, or by any combination of cash and such shares.
7. SHARES OF STOCK SUBJECT TO THE PLAN.
The shares that may be purchased pursuant to Options under the Plan shall
not exceed an aggregate of 50,000 shares of Company Common Stock (as adjusted
pursuant to Section 8). Any shares subject to an Option grant which for any
reason expires or is terminated unexercised as to such shares shall again be
available for issuance under the Plan.
4
<PAGE>
8. DILUTION AND OTHER ADJUSTMENT.
In the event of any change in the outstanding shares of Company Common
Stock by reason of any stock split, stock dividend, recapitalization, merger,
consolidation, combination or exchange of shares or other similar corporate
change, such equitable adjustment shall be made in the Plan and the grants
thereunder, including the exercise price of outstanding Options, as the
Committee determines are necessary or appropriate, including, if necessary, any
adjustments in the maximum number of shares referred to in Section 7 of the
Plan. Such adjustment shall be conclusive and binding for all purposes of the
Plan.
9. MISCELLANEOUS PROVISIONS.
(a) RIGHTS AS STOCKHOLDER. A participant under the Plan shall have no
rights as a holder of Company Common Stock with respect to Option grants
hereunder, unless and until certificates for shares of such Common Stock are
issued to the participant.
(b) ASSIGNMENT OR TRANSFER. No Options granted under the Plan or any
rights or interests therein shall be assignable or transferable by a participant
except by will or the laws of descent and distribution. During the lifetime of
a participant, Options granted hereunder are exercisable only by, and payable
only to, the participant.
(c) AGREEMENTS. All Options granted under the Plan shall be evidenced by
agreements or certificates in such form and containing such terms and conditions
(not inconsistent with the Plan) as the Committee shall adopt.
(d) COMPLIANCE WITH LEGAL REGULATIONS. During the term of the Plan and
the term of any Options granted under the Plan, the Company shall at all times
reserve and keep available such number
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<PAGE>
of shares as may be issuable under the Plan, and shall seek to obtain from any
regulatory body having jurisdiction, including the Office of the Secretary of
State of the State of Delaware, any requisite authority required in the opinion
of counsel for the Company in order to grant Options to purchase Shares of
Company Common Stock or to issue such stock pursuant thereto. If in the opinion
of counsel for the Company the transfer, issue or sale of any shares of its
stock under the Plan shall not be lawful for any reason, including the inability
of the Company to obtain from any regulatory body having jurisdiction authority
deemed by such counsel to be necessary to such transfer, issuance or sale, the
Company shall not be obligated to transfer, issue or sell any such shares. In
any event, the Company shall not be obligated to transfer, issue or sell any
shares to any participant unless a registration statement which complies with
the provisions of the Securities Act of 1933, as amended (the "Securities Act"),
is in effect at the time with respect to such shares or other appropriate action
has been taken under and pursuant to the terms and provisions of the Securities
Act, or the Company receives evidence satisfactory to the Committee that the
transfer, issuance or sale of such shares, in the absence of an effective
registration statement or other appropriate action, would not constitute a
violation of the terms and provisions of the Securities Act. The Company's
obligation to issue shares upon the exercise of any Option granted under the
Plan shall in any case be subject to the Company being satisfied that the shares
purchased are being purchased for investment and not with a view to the
distribution thereof, if at the time of such exercise a result of such issuance
of shares would otherwise violate the Securities Act in the absence of an
effective registration statement relating to such shares.
(c) COSTS AND EXPENSES. The costs and expenses of administering the Plan
shall be borne by the Company and not charged to any Option or to any
Non-Employee Director receiving an Option.
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<PAGE>
10. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT. The Committee may from time to time amend the Plan in
whole or in part; PROVIDED, that no such action shall adversely affect any
rights or obligations with respect to any Options theretofore granted under the
Plan, AND PROVIDED FURTHER, that the provisions of Sections 4 and 6 hereof may
not he amended more than once every six months, other than to comport with a
change in the Internal Revenue Code or regulations thereunder.
Unless the holders of at least a majority of the outstanding shares of
Company Common Stock present, or represented, and entitled to vote at a meeting
of stockholders shall have first approved thereof, no amendment of the Plan
shall be effective which would (i) increase the maximum number of shares
referred to in Section 7 of the Plan or the number of shares subject to Options
that may be granted pursuant to section 6(a) of the Plan to any one Non-Employee
Director or (ii) extend the maximum period during which Options may be granted
under the Plan.
With the consent of the Non-Employee Director affected, the Committee may
amend outstanding agreements or certificates evidencing Options under the Plan
in a manner not inconsistent with the terms of the Plan.
(b) TERMINATION. The Committee may terminate the Plan (but not any
Options theretofore granted under the Plan) at any time. The Plan (but not any
Options theretofore granted under the Plan) shall in any event terminate on, and
no Options shall be granted after, September 1, 2005.
11. COMPLIANCE WITH SEC REGULATIONS.
It is the Company's intent that the Plan comply in all respects with Rule
16b-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and any related regulations. If any provision of this Plan is later
found not to be in compliance with such Rule and regulations, the provision
shall be deemed null and void. All grants and exercises of Options under this
Plan shall be executed in
7
<PAGE>
accordance with the requirements of Section 16 of the Exchange Act and
regulations promulgated thereunder.
12. GOVERNING LAW.
The validity and construction of the Plan and any agreements entered into
thereunder shall he governed by the laws of the State of Delaware.
8
<PAGE>
WESTERN POWER & EQUIPMENT CORP.
PROXY-ANNUAL MEETING OF SHAREHOLDERS
DECEMBER 4, 1996
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS IN CONNECTION WITH THE
ANNUAL MEETING OF SHAREHOLDERS OF WESTERN POWER & EQUIPMENT CORP. TO BE HELD ON
DECEMBER 4, 1996. THE SHAREHOLDER HAS THE RIGHT TO APPOINT AS HIS PROXY A
PERSON (WHO NEED NOT BE A SHAREHOLDER) OTHER THAN ANY PERSON DESIGNATED BELOW,
BY INSERTING THE NAME OF SUCH OTHER PERSON IN ANOTHER PROPER FORM OF PROXY.
The undersigned, a shareholder of Western Power & Equipment Corp. (the
"Corporation"), hereby revoking any proxy hereinbefore given, does hereby
appoint Robert M. Rubin and C. Dean McLain, or either of them, as his proxy with
full power of substitution, for and in the name of the undersigned to attend the
Annual Meeting of the Stockholders to be held on December 4, 1996 at The Benson
Hotel, Lambridge Suite, 309 S.W. Broadway, Portland, Oregon 97205, at 1:30 p.m.,
local time, and at any adjournments thereof, and to vote upon all matters
specified in the notice of said meeting, as set forth herein, and upon such
other business as may properly come before the meeting, all shares of stock of
said Corporation which the undersigned would be entitled to vote if personally
present at the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS GIVEN, SUCH SHARES
WILL BE VOTED FOR ALL NOMINEES FOR DIRECTOR IDENTIFIED BELOW AND FOR ALL
PROPOSALS.
1. The Election of Directors
Election of the following proposed directors to hold office until the next
Annual Meeting of Stockholders or until their successors shall be elected
and shall qualify: Robert M. Rubin, C. Dean McLain, Harold Chapman, Jr. and
James Penland.
FOR ALL NOMINEES WITHHOLD FOR ALL NOMINEES
(EXCEPT AS MARKED TO THE CONTRARY)
( ) ( )
AUTHORITY TO WITHHOLD A VOTE FOR ANY OF THE ABOVE NAMED INDIVIDUALS SHOULD BE
INDICATED BY LINING THROUGH OR OTHERWISE STRIKING OUT THE NAME OF THE NOMINEE.
2. Ratify the Appointment of Price Waterhouse, LLP as independent auditors for
the Corporation for the fiscal year ending July 31, 1997.
( ) FOR ( ) AGAINST ( ) ABSTAIN
3. Authorize and ratify an increase in the number of shares underlying the
1995 Employee Stock Option Plan, from 850,000 shares of Common Stock
to 1,500,000 shares of Common Stock.
( ) FOR ( ) AGAINST ( ) ABSTAIN
4. Authorize and ratify the 1995 Stock Option Plan for Non-Employee Director.
( ) FOR ( ) AGAINST ( ) ABSTAIN
<PAGE>
5. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
( ) FOR ( ) AGAINST ( ) ABSTAIN
<PAGE>
Dated: , 1996
----------------
----------------------- ---------------------
Signature Print Name
----------------------- ---------------------
Signature, if Jointly Held Print Name
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS HEREIN, if
signing as attorney, executor, administrator, trustee
or guardian, indicate such capacity. All joint tenants
must sign. If a corporation, please sign in full
corporate name by president or other authorized
officer. If a partnership, please sign in partnership
name by authorized person.
The Board of Directors requests that you fill in the
date and sign the Proxy and return it in the enclosed
envelope.
IF THE PROXY IS NOT DATED IN THE ABOVE SPACE, IT IS
DEEMED TO BE DATED ON THE DAY ON WHICH IT WAS MAILED BY
THE CORPORATION.
