SCHEDULE 14A INFORMATION
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:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
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)
1) Title of each class of securities to which transaction applies:
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pursuant to Exchange Act Rule 0-11: Set forth the amount on which the
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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:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
WESTERN POWER & EQUIPMENT CORP.
4601 NE 77TH AVENUE, SUITE 200
VANCOUVER, WASHINGTON 98662
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JANUARY 20, 1999
You are invited to attend the Annual Meeting of Stockholders (the "Annual
Meeting") of Western Power & Equipment Corp. (the "Company"). The Annual Meeting
will be held at The Heathman Lodge, Sacajawea Room, 7801 NE Greenwood Drive,
Vancouver, Washington 98662, on Wednesday, January 20, 1999, at 1:30 p.m.,
Pacific Standard Time, for the following purposes:
1. To elect four (4) directors to hold office until the next Annual
Meeting;
2. To change the Company's state of incorporation from Delaware to Oregon
by merging the Company into a new Oregon corporation, also named
"Western Power & Equipment Corp.";
3. To ratify the selection of PricewaterhouseCoopers LLP as auditors of
the Company for fiscal 1999; and
4. To conduct any other business that you or other shareholders have
properly raised before, or during an adjournment of, the Annual
Meeting.
Only shareholders of record at the close of business on December 11, 1998,
will be able to vote at the Annual Meeting. Shareholders present in person or
through a proxy may periodically adjourn the Annual Meeting.
<PAGE>
Your vote is important. Whether or not you plan to attend the Annual
Meeting please sign, date, and return your proxy card to us in the return
envelope as soon as possible. If you attend the Annual Meeting and prefer to
vote in person, you will be able to do so.
The approximate mailing date for proxy materials is December 18, 1998.
By Order of the Board of Directors
C. Dean McLain
Chairman of the Board
Vancouver, Washington
December 18, 1998
<PAGE>
WESTERN POWER & EQUIPMENT CORP.
4601 NE 77TH AVENUE, SUITE 200
VANCOUVER, WASHINGTON 98662
-----------------------------------
PROXY STATEMENT
-----------------------------------
GENERAL INFORMATION CONCERNING SOLICITATION
The Board of Directors of Western Power & Equipment Corp. (the "Company"),
solicits your proxy in the form enclosed with this proxy statement. The proxy
will be used at the 1999 Annual Meeting of Stockholders (the "Annual Meeting")
to be held at 1:30 p.m., Pacific Standard Time, on Wednesday, January 20, 1999,
or any adjournments thereof, at The Heathman Lodge, Sacajawea Room, 7801 NE
Greenwood Drive, Vancouver, Washington 98662. Shares cannot be voted at the
Annual Meeting unless their owner is present in person or represented by proxy.
We are mailing this statement and the enclosed proxy form to you on or about
December 18, 1998, accompanied by a copy of the Annual Report of the Company.
If you have properly completed your proxy and have not revoked it prior to
the Annual Meeting, we will vote your shares according to your instructions on
the proxy. If you do not provide any instructions, we will vote your shares: (a)
for the nominees listed on page 2; (b) for the approval of the reincorporation
merger described beginning on page 16; (c) for the appointment of
PricewaterhouseCoopers LLP as the Company's independent auditors for fiscal
1999; and (d) in accordance with the recommendations of the Company's management
on other business that properly comes before the Annual Meeting or matters
incident to the conduct of the Annual Meeting. You may revoke the proxy by
notifying Mark J. Wright, the Secretary of the Company, in writing prior to our
exercise of the proxy at the Annual Meeting or any adjourned meeting. If you
decide to attend the Annual Meeting after returning your proxy, you may still
revoke it by notifying us in writing of your desire to vote personally. If we
receive a proxy after a vote is taken at the Annual Meeting, it will not revoke
a proxy received prior to the Annual Meeting. On the other hand, if we receive a
subsequently dated proxy from you before the vote occurs, it will revoke any
proxy that you sent us earlier.
<PAGE>
PROPOSAL 1: ELECTION OF DIRECTORS
We Recommend a Vote "For" All Nominees
The Board of Directors currently consists of four directors. At the Annual
Meeting all four of the current directors have been nominated for reelection. If
elected, the directors will hold office until the next Annual Meeting of
Stockholders. The name, age, year that each nominee first became a director, and
a brief background of each nominee is set forth below.
Name Age Director Since
---- --- --------------
C. Dean McLain 45 1993
Robert M. Rubin 58 1992
Harold Chapman, Jr. 37 1995
Merrill A. McPeak 62 1998
ROBERT M. RUBIN. Mr. Rubin has been the Chief Executive Officer of American
United Global, Inc. ("AUGI"), the Company's majority shareholder, since October
1990, and also served as Chairman of AUGI from October 1990 until January 1996.
Mr. Rubin served as the Chairman of the Board of Directors of the Company from
November 20, 1992 to August 1, 1998. Mr. Rubin is Chairman of the Board 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. ERD Waste
Technology has filed for Chapter 11 bankruptcy reorganization. Mr. Rubin also
serves as Chairman of IDF International Inc. and as a director of Help at Home,
Inc. and Medimerge, Inc.
C. DEAN MCLAIN. Mr. McLain has served as President, Chief Executive
Officer, and a director of the Company since March 7, 1993. Mr. McLain was
elected Chairman of the Board of Directors effective August 1, 1998. 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. Prior to joining the Company, Mr. McLain served as Manager of
Privatization of Case Corporation.
HAROLD CHAPMAN, JR. Mr. Chapman is a partner in and general manager of
Crown Power and Equipment Co., a multi-line equipment distributor based in
Columbia, Missouri.
2
<PAGE>
Prior to joining Crown Power and Equipment in 1992, Mr. Chapman was in retail
management with Case Corporation ("Case") for 10 years.
MERRILL A. MCPEAK. Mr. McPeak joined the Company's Board of Directors in
June 1998. He has been the President of McPeak and Associates, an international
aerospace consulting firm, since January 1995. General McPeak spent 37 years in
the United States Air Force, and was Chief of Staff from October 1990 to October
1994, when he retired. He also is a member of the Boards of Directors of
Tektronix, Inc., Praegitzer Industries, Inc., TWA, Inc., Thrustmaster, Inc., and
ECC International Corp., where he serves as Chairman of the Board.
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table, which was prepared on the basis of information
furnished by the persons described, shows ownership of the Company's common
stock (the "Common Stock") as of October 16, 1998 by the Chief Executive
Officer, by each of the other executive officers, by each of the directors, and
by the executive officers and directors as a group.
<TABLE>
<CAPTION>
Percentage
of
Number of Shares Outstanding
Name Beneficially Owned Shares
---- ------------------ -----------
<S> <C> <C>
Robert M. Rubin 530,716(1) 16.1%
C. Dean McLain 842,178(2)(3) 25.5%
Mark J. Wright 98,500(4) 3.0%
Merrill McPeak 5,000(5) *
Harold Chapman 10,000(5) *
All directors and executive
officers as a group (5 persons) 1,486,394(1)(2)(3)(4)(5) 45.0%
- ---------------------
* Less than 1 percent of the Company's outstanding shares of Common Stock.
</TABLE>
(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,
3
<PAGE>
as well as direct beneficial ownership of Common Stock through his
ownership of exercisable options to acquire 225,000 shares of Common Stock.
Mr. Rubin's beneficial ownership of AUGI voting stock represents 15.3
percent of AUGI voting stock as at October 16, 1998.
(2) Represents Mr. McLain's indirect ownership in the Company through his
beneficial ownership of an aggregate of 12,000 shares of AUGI voting stock
and options to purchase an additional 234,000 shares of AUGI common stock,
as well as direct beneficial ownership of Common Stock through his
ownership of exercisable options to acquire 800,000 shares of Common Stock.
Mr. McLain's beneficial ownership of AUGI common stock represents 2.1
percent of AUGI voting stock as at October 16, 1998.
(3) Does not include certain stock options which are issuable to Mr. McLain
each year in the amount of 25,000 shares, based upon the Company achieving
certain pre-tax income levels for fiscal years 1998 through 2007,
inclusive. See "Employment and Incentive Compensation Agreements."
(4) Represents Mr. Wright's direct beneficial ownership of Common Stock through
his ownership of exercisable options to acquire 98,500 shares of Common
Stock.
(5) Represents exercisable options to purchase shares of the Common Stock
issued under the terms of the Stock Option Plan for Nonemployee Directors
(the "Formula Plan").
Certain Relationships and Related Transactions
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 Chairman of the Company's Board of
Directors since August 1998, as well as its President and CEO, and Robert M.
Rubin, the Company's Chairman of the Board of Directors before Mr. McLain, and
still one of its directors. At the same time that it acquired the Sacramento
Operation real property and improvements, MRR leased such real property and
improvements to the Company under a 20-year commercial lease agreement dated
March 1, 1996 with the Company paying an initial annual rate of $168,000. Under
the lease, the annual rate increases to $192,000 after five years and is subject
to fair market adjustments at the end of ten years. In addition to base rent,
the Company is also 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.
Effective January 17, 1997, the Company acquired substantially all of the
operating assets of Sahlberg Equipment, Inc. ("Sahlberg"), a four-store
distributor of equipment lines that are
4
<PAGE>
not in competition with Case. On June 1, 1997, the real property and
improvements used in connection with the Sahlberg operation located in Kent,
Washington, were purchased by McLain-Rubin Realty Company II, LLC ("MRR II"), a
Delaware limited liability company, the owners of which are Messrs. C. Dean
McLain and Robert M. Rubin. Simultaneously, MRR II leased such real property and
improvements to the Company under the terms of a 20-year commercial lease
agreement dated June 1, 1997 with the Company paying an initial annual rate of
$205,000. The lease's annual rate is scheduled to increase to $231,000 after
five years and is subject to additional adjustments at the end of ten and
fifteen years. In addition to the 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.
Effective December 11, 1997, the Company acquired substantially all of the
operating assets used by Case in connection with its business of servicing and
distributing Case agricultural equipment at a facility located in Yuba City,
California (the "Yuba City Operation"). The real property and improvements used
in connection with the Yuba City Operation, and upon which it is located, were
sold by Case for $450,000 to the McLain-Rubin Realty Company III, LLC ("MRR
III"), a Delaware limited liability company, the owners of which are Messrs. C.
Dean McLain and Robert M. Rubin. MRR III leased the real property and
improvements to the Company under the terms of a 20-year commercial lease
agreement dated December 11, 1997 with the Company paying an initial annual rate
of $54,000. The annual rate will increase to $59,400 after five years and is
subject to additional adjustments at the end of ten and fifteen years. The
Company is also 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.
5
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
Report of the Compensation Committee on Executive Compensation
The Compensation Committee of the Board of Directors (the "Committee") is
currently composed of two non-employee directors. The Committee reviews the
compensation of the Company's officers and key employees and the granting of
stock options under the Company's stock option plans and makes recommendations
to the Board of Directors for action on these matters. During the fiscal year
ended July 31, 1998, the Company's Board of Directors decided all compensation
matters relating to the Company's executive officers.
The key objectives of the Company's executive compensation policies are to
attract and retain key executives who are important to the long-term success of
the Company and to provide incentives for these executives to achieve high
levels of job performance and enhancement of shareholder value. The Company
seeks to achieve these objectives by paying its executives a competitive level
of base compensation for companies of similar size and industry and by providing
its executives an opportunity for further reward for outstanding performance in
both the short term and the long term. The Company has entered into an
employment agreement with Mr. McLain that covers a multiple year term. (see
"Chief Executive Officer Compensation," below). The compensation of Mr. Wright
is decided on an annual basis. Mr. Rubin was previously compensated under an
employment contract (see "Employment and Incentive Compensation Agreements,"
below) but ceased to be an executive officer of the Company on July 31, 1998.
Executive Officer Compensation. The Company's executive officer
compensation program is comprised of three elements: base salary, annual cash
bonus and long-term incentive compensation in the form of stock option grants.
Salary. The Committee and the Board of Directors established base salaries
for the Company's executive officers, including the salary established in Mr.
McLain's employment agreement, after taking into account individual experience,
job responsibility and individual performance during the prior year. These
factors are not assigned a specific weight in establishing individual base
salaries. The Committee also considered the Company's executive officers'
salaries relative to salary information for executives in similar industries and
similarly sized companies.
Cash Bonuses. The purpose of the cash bonus component of the compensation
program is to provide a direct financial incentive in the form of cash bonuses
to executives.
6
<PAGE>
Mr. McLain's bonus was derived under the performance formula set forth in his
employment contract described under "Employment and Incentive Compensation
Agreements" below. Mr. McLain's bonus for fiscal 1998 under this formula is set
forth in the summary compensation table. Mr. Wright's bonus was determined by
the chief executive officer on a merit basis after evaluating his performance.
Stock Options. Stock options are the primary vehicle for rewarding
long-term achievement of Company goals. The objectives of the program are to
align employee and shareholder long-term interests by creating a strong and
direct link between compensation and increases in share value. Under the
Company's 1995 Employee Stock Option Plan, the Board of Directors or the
Compensation Committee may grant options to purchase Common Stock of the Company
to key employees of the Company. Messrs. McLain and Wright currently participate
in the 1995 Employee Stock Option Plan. The number of options granted to Mr.
McLain are determined under the terms of his employment agreement. The number of
options granted to Mr. Wright are determined by the Compensation Committee on a
discretionary basis. The options generally vest on a schedule established at the
time of the grant, generally ranging from zero to three years.
Chief Executive Officer Compensation. In January 1998 the Company has
entered into an amended employment agreement with its chief executive officer,
Mr. McLain, to ensure the retention of his services and to encourage him to
perform at increasing levels of effectiveness and to use his best efforts to
promote the growth and profitability of the Company. This approach enabled the
Board to concentrate on the negotiation of a particular employment contract with
salary, incentive bonus and stock option components that reflect a longer term
view of the Company's prospects and goals. See "Employment and Incentive
Compensation Agreements" for a complete description of the employment agreement
and the compensation and benefits provided thereunder.
Harold Chapman, Jr.
Merrill A. McPeak
7
<PAGE>
Compensation Committee Interlocks and Insider Participation
The Compensation Committee consists of Messrs. Chapman and McPeak. There
are no interlocking relationships, as described by the Securities and Exchange
Commission, between the Compensation Committee members. Mr. McLain, the Chairman
of the Board of Directors since August 1998, as well as its President and CEO,
and Mr. Rubin, the Chairman of the Board of Directors before Mr. McLain, and
currently a director and consultant for the Company, participated in all
discussions and decisions regarding salaries and incentive compensation for all
employees and consultants to the Company, except that they were each excluded
from discussions regarding their own salary.
Ten-Year Option Repricings
The following table provides information concerning the repricing of
certain of the Company's stock options on December 28, 1995.
<TABLE>
<CAPTION>
Number of
Securities New
Underlying Market Price of Exercise Price at Exercise Length of Original
Options Stock at Time of Time of Price Option Term Remaining
Name Date Repriced Repricing Repricing ($) at Date of Repricing
- ------------------ ------------ ------------- ------------------ ----------------- ----------- ------------------------
<S> <C> <C> <C> <C> <C> <C>
C. Dean McLain 12/28/1995 150,000 $4.50 $8.001 $4.50 10 years
C. Dean McLain 12/28/1995 150,000 $4.50 $6.00 $4.50 10 years
</TABLE>
(1) These options were repriced to the then-market price of $6.50 in May
1995, canceled on August 1, 1995 and reissued at an exercise price of $6.00 on
that date. These options were then repriced to $4.50 on December 28, 1995.
8
<PAGE>
Summary Compensation Table
The following table sets forth the amount of all compensation paid during
each of the last three fiscal years to the Chief Executive Officer and to each
of the Company's other executive officers for services in all capacities to the
Company.
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
----------------------------------------------- ------------
Other Annual Number of All Other
Name and Principal Position Year Salary Bonus Compensation Options Compensation
- --------------------------- ---- ------ ----- ------------ --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Robert M. Rubin 1998 $ 150,000 $ 0 $ 0 100,000 $ 0
Consultant; former Chairman(1) 1997 150,000 0 0 50,000 0
1996 150,000 50,000 0 150,000 0
C. Dean McLain 1998 $280,000 $ 68,935 $ 40,000 425,000 $22,596
President, CEO, Chairman of the 1997 268,587 18,658 N/A 150,000 0
Board(2) 1996 250,000 84,868 N/A 300,000 0
Mark J. Wright 1998 $ 98,958 $ 15,000 $ 0 98,500 $ 0
Vice President of Finance and CFO(3) 1997 36,346 5,000 0 0 0
1996 N/A N/A N/A N/A 0
</TABLE>
(1) The Company's employment agreement with Mr. Rubin, pursuant to which Mr.
Rubin was paid a base salary of $150,000 plus an annual bonus, expired July
31, 1998. Mr. Rubin resigned as Chairman effective August 1, 1998. The
Company entered into a new consulting agreement with Mr. Rubin, effective
August 1, 1998 and expiring August 1, 2000, pursuant to which Mr. Rubin is
paid a salary of $150,000 plus all authorized business expenses. See
"Employment and Incentive Compensation Agreements" below.
(2) Mr. McLain joined the Company in March 1993, when he became its Chief
Executive Officer. On July 31, 1995, Mr. McLain was permitted to and did
purchase from AUGI 6,000 shares of AUGI's common stock at a price of $.01
per share. On August 1, 1995, the closing price for a share of AUGI's
common stock as reported by NASDAQ was $4.875. 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 calls for Incentive Bonuses under certain circumstances. See
"Employment and Incentive Compensation Agreements" below. Mr. McLain became
Chairman effective August 1, 1998.
(3) Mr. Wright joined the Company in February 1997. Therefore, fiscal 1997
figures are partial year compensation figures.
9
<PAGE>
Option Grants in Last Fiscal Year
The following table provides information regarding individual grants of
stock options to each executive officer in fiscal 1998.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation for
Individual Grants Option Term
- ------------------------------------------------------------------------------------------------- ------------------------------
% of Total Options
Granted to Exercise
Options Employees in Fiscal of Base Expiration
Name Granted Year Price Date 5% 10%
- ------------------- ----------- ---------------------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
C. Dean McLain 425,000 62% $4.5625 11/2003 $535,727 $1,183,817
Robert M. Rubin 100,000 15% $4.5625 11/2003 $126,053 $ 278,545
Mark J. Wright 98,500 14% $4.5625 11/2003 $124,163 $ 274,367
</TABLE>
Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
The following table provides information concerning the exercise of stock
options during the fiscal 1998 by each executive officer and the fiscal year-end
value of unexercised options held by that officer.
<TABLE>
<CAPTION>
Shares Number of Unexercised Value of Unexercised In-
Acquired Value Options at Fiscal Year- the-Money Options at
Name on Exercise Realized End Fiscal Year-End
- ------------------- --------------- ------------ ---------------------------- ----------------------------
Exercisable/Unexercisable Exercisable/Unexercisable
---------------------------- ----------------------------
<S> <C> <C> <C> <C> <C>
C. Dean McLain -0- -0- 800,000 / 75,000 $157,500 / $28,125
Robert M. Rubin -0- -0- 225,000 / 75,000 $ 53,125 / $21,875
Mark J. Wright -0- -0- 98,500 / -0- $ 18,469 / $ -0-
</TABLE>
10
<PAGE>
Return to Shareholders Performance Graph
The following line graph compares the yearly 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.
[GRAPHIC OMITTED]
COMPARISON OF 25 MONTH CUMULATIVE TOTAL RETURN*
Among Western Power & Equipment Corp., The Nasdaq Stock Market-US Index
and the S & P Machinery (Diversified Index)
11
<PAGE>
* 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.
A $100 investment in the Company made on the effective date of the
Company's initial public offering was worth $86 at July 31, 1998 as compared to
$220 in a comparable NASDAQ Broad market investment, and as compared to $150 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.
Employment and Incentive Compensation Agreements
Upon completion of the Company's 1995 initial public offering, the Company
entered into an employment agreement with Mr. Rubin, effective as of June 13,
1995, that expired July 31, 1998. Pursuant to this agreement, Mr. Rubin served
as Chairman of the Board of the Company and received an annual base salary of
$150,000. Under the agreement, Mr. Rubin was entitled to receive an annual bonus
in fiscal 1998 of $50,000 if the "consolidated pre-tax income" of the Company
was in excess of $4,000,000 for the fiscal year ending July 31, 1998. Mr. Rubin
did not receive a bonus for fiscal 1998. Effective August 1, 1998, the Company
entered into a new two-year agreement with Mr. Rubin. Under the terms of this
agreement, Mr. Rubin will no longer serve as Chairman, but will provide
consulting services to the Company. He will receive an annual fee of $150,000.
On March 5, 1996, Mr. Rubin received options to acquire 150,000 shares of
Common Stock exercisable at $4.50 per share and vesting 33.3 percent on March 5,
1997 and 33.3 percent on each succeeding March 5 until all are vested. In August
1996, Mr. Rubin received options to acquire 50,000 shares of Common Stock,
exercisable at $4.375 per share and vesting 50 percent on each of the first and
second anniversaries of the date of grant. In November 1997, Mr. Rubin received
options to acquire 100,000 shares of Common Stock, exercisable at $4.5625 per
share which were all vested immediately.
On August 1, 1995, Mr. McLain entered into an amended employment agreement
with the Company that was to expire July 31, 2005. Pursuant to that agreement,
Mr. McLain agreed to serve as President and Chief Executive Officer of the
Company, and was to receive an annual base salary of $250,000 through the end of
fiscal 1996 and $265,000 in fiscal 1997. The Company and Mr. McLain mutually
agreed to terminate the existing agreement and enter into a new 10-year
employment agreement, effective January 1, 1998. The 1998 agreement provides for
an annual base salary, payable monthly, of $280,000 through July 31, 1998 and
$290,000 through December 31, 1998. Under the terms of this new
12
<PAGE>
agreement, Mr. McLain's salary will be increased each January 1st by the average
percentage increase in pay for all employees during the preceding calendar year.
In addition, Mr. McLain is entitled to receive a bonus payment equal to 5
percent of the consolidated pre-tax income in excess of $1,750,000 in each
fiscal year covered under the employment agreement (the "Incentive Bonus"). The
maximum amount of the Incentive Bonus payable under the new agreement shall not
exceed $150,000 in any year through 2002, inclusive, and shall not exceed
$200,000 in fiscal years 2003 through 2007, inclusive. Mr. McLain received a
$68,935 bonus for the Company's 1998 fiscal year under the terms of his
employment agreement. 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.
Under the terms of his current employment agreement, in any year that Mr.
McLain receives the maximum bonus, he is also entitled to receive options to
purchase 25,000 additional shares of the Company's Common Stock at the market
price per share on the date the options are issued that will vest one year from
such date. Mr. McLain's employment agreement also provides for fringe benefits
customary for senior executive officers in the industry in which the Company
operates, including medical coverage, excess life and disability insurance
benefits, and the use of an automobile supplied by the Company in addition to an
$800 per month auto allowance. The aggregate value of all of the fringe benefits
is approximately $40,000 per year.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The Company's outstanding voting securities at the close of business on
December 11, 1998, consisted of 3,303,162 shares of common stock, $.001 par
value (the "Common Stock"), each of which is entitled to one vote on all matters
to be presented at the Annual Meeting. Only shareholders of record at the close
of business on December 11, 1998, are entitled to notice of and to vote at the
Annual Meeting or any adjournment thereof. The Common Stock does not have
cumulative voting rights.
As of December 11, 1998, American United Global, Inc. ("AUGI"), the
principal shareholder of the Company, holds 2,000,000 shares of the Common
Stock. This means that AUGI has the right to cast approximately 60.6 percent of
the total shares entitled to vote at the Annual Meeting. AUGI has indicated its
intention to vote in favor of all of our proposals.
13
<PAGE>
The following table sets forth certain information as of December 11, 1998
with respect to the beneficial ownership of the Common Stock by each beneficial
owner of more than 5 percent of all outstanding shares.
<TABLE>
<CAPTION>
Percentage
of
Number of Shares of Common Outstanding
Name and Address of Stock of the Company Common
Beneficial Owner Beneficially Owned Stock Owned
------------------- -------------------------- -----------
<S> <C> <C>
American United
Global, Inc.
11634 Patton Road
Downey, CA 90241 2,000,000 60.6%
D3 Family Funds
19605 NE 8th Street
Camas, WA 98607 350,000 10.6%
Robert M. Rubin
6060 Kings Gate Circle
Del Ray Beach, FL 33484 530,716(1) 16.1%
C. Dean McLain
4601 NE 77th Avenue
Suite 200
Vancouver, WA 98662 842,178(2)(3) 25.5%
</TABLE>
(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, as well as direct beneficial ownership of Common Stock through his
ownership of exercisable options to acquire 225,000 shares of Common Stock.
Mr. Rubin's beneficial ownership of AUGI voting stock represents 15.3
percent of AUGI voting stock as at October 16, 1998.
(2) Represents Mr. McLain's indirect ownership in the Company through his
beneficial ownership of an aggregate of 12,000 shares of AUGI voting stock
and options to purchase an additional 234,000 shares of AUGI common stock,
as well as direct beneficial ownership of Common Stock through his
ownership of exercisable options to acquire 800,000 shares of Common Stock.
Mr. McLain's beneficial ownership of AUGI common stock represents 2.1
percent of AUGI voting stock as at October 16, 1998.
(3) Does not include certain stock options which are issuable to Mr. McLain
each year in the amount of 25,000 shares, based upon the Company achieving
certain pre-tax income levels for fiscal years 1998 through 2007,
inclusive. See "Employment and Incentive Compensation Agreements," above.
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BOARD COMPENSATION, ATTENDANCE, AND COMMITTEES
During the fiscal year ended July 31, 1998, the Board of Directors met six
times, including actions taken by unanimous written consent of the directors. At
present, the Board has two committees, the Compensation Committee and the Audit
Committee. During their periods of tenure, all of the nominated directors who
served as directors during the fiscal year attended, in person or by telephone,
100 percent of the meetings of the Board and the Committees of which they were
members.
The Compensation Committee of the Board of Directors currently consists of
Harold Chapman and Merrill McPeak. Mr. McPeak became a member of the
Compensation Committee in June 1998. The Compensation Committee reviews the
compensation for the Company's key 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. See "Report of the Compensation Committee on Executive
Compensation," above. The Compensation Committee met once during fiscal 1998.
The Audit Committee of the Board of Directors currently consists of C. Dean
McLain, Harold Chapman, Jr. and Merrill A. McPeak. The Audit Committee reviews
the Company's financing arrangements and its internal financial controls, and
meets with management and the Company's independent public accountants, who have
access to the Audit Committee with and without the presence of management
representatives. The Audit Committee met once during fiscal 1998.
All directors are entitled to receive reimbursement for their actual
expenses of attendance of Board and Committee meetings. Messrs. Chapman and
McPeak also receive fees of $5,000 per quarter and participate in the Company's
Stock Option Plan for Non-Employee Directors (the "Formula Plan"). The other
directors do not receive any compensation for their attendance. Under the terms
of the Formula Plan, which will terminate on December 31, 2000, the Company
automatically grants five-year options to acquire 5,000 shares of Common Stock
to each of the non-management directors on every August 1 upon which they are
members of the Board of Directors. Options granted under the Formula Plan are
exercisable at the market price of a share of Common Stock on the date the
option is granted.
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<PAGE>
PROPOSAL 2: CHANGE OF STATE OF INCORPORATION FROM DELAWARE TO
OREGON
We Recommend a Vote "For" Proposal 2
GENERAL
The Board of Directors of the Company has approved a resolution to change
the Company's state of incorporation from Delaware to Oregon. This change would
be accomplished by merging the Company into a newly formed Oregon corporation,
also named Western Power & Equipment Corp. ("New-WPEC") and converting each
share of Company Common Stock into one share of the New-WPEC's stock. New-WPEC
has recently been organized at the direction of the Company to facilitate the
change in state of incorporation. Following the merger, the Company will operate
under its present name, with the same directors, officers and personnel. The
Company does not expect that the merger will have any impact on its operations.
STOCK CERTIFICATES, STOCK OPTIONS AND BENEFITS
After the effective date of the merger, certificates that represent shares
of Company Common Stock will automatically represent the same number of shares
of New-WPEC Common Stock. All New-WPEC Common Stock issued as a result of the
merger will be deemed issued as of the effective date of the merger, and
shareholders of the Company will be entitled to vote the number of shares of
New-WPEC Common Stock into which their shares of Company Common Stock have been
converted. The stock options of the Company, by virtue of the merger, will
become stock options of New-WPEC to purchase the same number of shares of
New-WPEC Common Stock upon consummation of the merger, upon identical terms and
conditions and for an identical price. It is intended that all other employee
benefit plans of the Company and the employment arrangements with executive
officers will be unchanged by the merger.
REASONS FOR THE CHANGE IN STATE OF INCORPORATION
The principal reason for the Reorganization is to change the Company's
domicile in order to avoid the Delaware franchise tax. Currently, the Company's
Delaware franchise tax is approximately $50,000.00 per year with a potential
maximum of $150,000.00. By
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<PAGE>
reincorporating in Oregon, the annual fee payable by New-WPEC would be a maximum
of $30.00, regardless of the number of authorized shares. Additionally, the
Company and its wholly-owned subsidiary, which is also incorporated in Oregon,
conduct significant operations in Oregon. Neither conducts operations in
Delaware.
MARKET FOR STOCK; DIVIDEND POLICY
New-WPEC is a newly formed corporation and there is currently no
established trading market for its securities. No information can be provided as
to historical market prices for New-WPEC Common Stock. The Company's Common
Stock trades in the NASDAQ National Market System under the symbol "WPEC". It is
expected that this would continue unchanged. The merger is not expected to
affect dividend policy.
RESALE OF SHARES
New-WPEC Common Stock to be issued to shareholders of the Company in
connection with the merger will be freely transferable by those shareholders not
deemed to be "affiliates" of New-WPEC or the Company. Affiliates are generally
defined as persons who control, are controlled by, or are under common control
with New-WPEC or the Company. Shares of New-WPEC Common Stock acquired by a
person who is an affiliate of New-WPEC will be subject to the resale
restrictions of Rule 144 under the Securities Act of 1933, as amended. The
ability of affiliates to resell shares of New-WPEC Common Stock received in the
merger under Rule 144 will be subject to New-WPEC having satisfied its public
company reporting requirements for specified periods prior to the time of sale.
EFFECTIVE DATE
If the holders of a majority of the outstanding shares of the Company
approve the merger, it will become effective when the Oregon Corporation
Division has filed the Articles of Merger and the Secretary of State of Delaware
has issued a Certificate of Merger. The merger may be abandoned by the
affirmative vote of a majority of the Board of Directors of either the Company
or New-WPEC, whether or not the shareholders of the Company or New- WPEC have
cast their votes with regard to the merger.
ACCOUNTING AND TAX EFFECTS
Upon consummation of the merger, the historical financial statements of the
Company will become the historical financial statements of New-WPEC. Total
shareholders' equity
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<PAGE>
will be unchanged as a result of the merger. The merger will qualify as a
tax-free reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code"). As such, the merger will have the
following federal income tax consequences: (1) No gain, loss or income will be
recognized by the Company or New-WPEC; (2) No gain or loss will be recognized by
the holders of Company Common Stock upon the conversion of their Company Common
Stock to New-WPEC Common Stock; (3) The basis of New-WPEC Common Stock received
by the shareholders of the Company in the merger will be the same as the basis
of the Company Common Stock surrendered and exchanged therefor; and (4) the
holding period of New-WPEC Common Stock to be received by the shareholders of
the Company in the merger will include the period during which the Company
Common Stock surrendered in exchange therefor was held, provided such Company
Common Stock was held as a capital asset on the date of the merger. Each holder
of Company Common Stock should consult his or her own independent tax counsel
about the specific federal, state and local tax consequences to such shareholder
of the merger.
NO DISSENTERS' RIGHTS OF APPRAISAL
Shareholders will not have dissenters' rights of appraisal in connection
with the merger.
COMPARISON OF RIGHTS OF SHAREHOLDERS
The rights of holders of the Company Common Stock are presently governed by
Delaware law and the Certificate of Incorporation and Bylaws of the Company.
After the merger, the Company's shareholders will become shareholders of
New-WPEC, an Oregon corporation. Accordingly, their rights will be governed by
Oregon law and the Articles of Incorporation and Bylaws of New-WPEC. The
following discussion is a summary of the material comparisons in the rights of
shareholders of the Company and New-WPEC.
Capital Stock
The Articles of Incorporation of New-WPEC and the Certificate of
Incorporation of the Company each authorizes the issuance of 20,000,000 shares
of Company Common Stock and 10,000,000 shares of Company Preferred Stock without
further shareholder approval.
Voting Rights
Holders of shares of Common Stock of the Company currently have one vote
per share of Common Stock held. Holders of shares of common stock of the
New-WPEC will
18
<PAGE>
also have one vote per share of Common Stock held. Neither the Articles of
Incorporation of New- WPEC nor the Certificate of Incorporation of the Company
provide that shareholders have cumulative voting rights in the election of
directors. As described in further detail below, Oregon law provides for voting
by voting group in connection with certain amendments to the Articles of
Incorporation or the approval of certain mergers.
Payment of Dividends
The ability of the Company to pay dividends on its capital stock is
restricted by Delaware law. Under the Delaware General Corporation Law, a
Delaware corporation may pay dividends out of its surplus or, if there is no
surplus, out of its net profits for the fiscal year in which the dividend is
declared and/or the preceding fiscal year. If the capital of the corporation,
however, has been diminished by depreciation in the value of its property, or by
losses, to an amount that is less than the aggregate amount of the capital
represented by the issued and outstanding stock of all classes having a
preference upon the distribution of assets, the directors of the corporation
cannot declare and pay out of the net profits any dividends on any shares of any
classes of its capital stock until the deficiency in the amount of capital
represented by the issued and outstanding stock of all classes having a
preference upon the distribution of assets has been repaired. The ability of
New-WPEC to pay dividends also is limited by restrictions imposed by the Oregon
Business Corporation Act on Oregon corporations. In general, dividends paid by
an Oregon corporation may be paid only if, after giving effect to the
distribution, (i) the corporation is still able to pay its debts as they become
due in the usual course of business, or (ii) the corporation's total assets are
greater than or equal to the sum of its total liabilities plus the amount that
would be needed, if the corporation were to be dissolved at the time of the
distribution, to satisfy the preferential rights, upon the dissolution, of
shareholders whose preferential rights are superior to those receiving the
distribution.
Directors
The Certificate of Incorporation of the Company provides that the number of
directors shall be not less than three nor more than nine, with the exact number
determined by the Board of Directors. The Articles of Incorporation of New-WPEC
has an equivalent provision. There are currently four directors of the Company
and New-WPEC, and neither corporation has a classified Board of Directors. The
procedures for filling vacancies on the Board of Directors and for removing
directors are also equivalent between the Company and New-WPEC.
19
<PAGE>
Liability and Indemnification of Directors, Officers and Employees
Under the Articles of Incorporation of New-WPEC, the liability of officers
and directors to New-WPEC is eliminated to the fullest extent permitted by
Oregon law. Under Oregon law, the liability of an officer or director cannot be
limited or eliminated if the officer or director engages in any breach of the
duty of loyalty, acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, willful or negligent
misconduct in the unlawful payment of dividends or repurchase of stock, or any
transaction from which the director derives an improper personal benefit. Under
the Restated Certificate of Incorporation of the Company, the liability of
directors to the Company is eliminated to the fullest extent permitted by
Delaware law. Under Delaware law, the liability of a director cannot be limited
or eliminated if the director engages in any breach of the duty of loyalty, acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, willful or negligent misconduct in the unlawful
payment of dividends or repurchase of stock, or any transaction from which the
director derives an improper personal benefit. To the fullest extent permitted
by Oregon law, New-WPEC's Articles of Incorporation require it to indemnify any
director or officer who is made a party to any proceeding because he or she was
or is a director or officer of New-WPEC against any liability, including
reasonable expenses and legal fees, incurred in the proceeding. The New-WPEC
Articles of Incorporation also provide that it may, but is not obligated to,
indemnify its other employees or agents. New- WPEC must indemnify any person who
is or was serving at the written request of New-WPEC as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, to the fullest extent provided by Oregon law. The
indemnification provisions also require New-WPEC to pay reasonable expenses
incurred by a director or officer of New-WPEC in a proceeding in advance of the
final disposition of any such proceeding, provided that the indemnified person
undertakes to repay New-WPEC if it is ultimately determined that such person was
not entitled to indemnification. Oregon law does not permit indemnification in a
proceeding by or in the name of the corporation in which the director is
adjudged liable to the corporation, or in connection with any other proceeding
charging improper personal benefit to the director in which the director is
adjudged liable on the basis that personal benefit was improperly received. The
Bylaws of the Company also provide for indemnification of officers and directors
to the fullest extent permitted by Delaware law. Under Delaware law, a Delaware
corporation may indemnify any officer or director for reasonable expenses
incurred in any legal proceeding if the officer or director acted in good faith
and in a manner that the officer or director reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The rights of indemnification provided in New-WPEC's Articles of
Incorporation are not exclusive of any other rights which may be available under
any insurance or other agreement, by vote of shareholders or disinterested
directors or otherwise. In addition, the Articles of Incorporation authorize
New- WPEC to maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of New-WPEC, whether or not New-WPEC
20
<PAGE>
would have the power to provide indemnification to such person. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers or persons controlling New-WPEC pursuant to the
foregoing provisions, the Company and New-WPEC have been informed that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is therefor
unenforceable.
Special Meetings of Shareholders; Consent Action
Under the Certificate of Incorporation and Bylaws of the Company, a special
meeting of shareholders may be called by the Chairman or Vice-Chairman of the
Board, the President or a majority of the Board of Directors, and may not be
called by the shareholders, except as required by law. Under Oregon law and the
Articles of Incorporation and Bylaws of New- WPEC, special meetings may be
called by the Chairman or Vice-Chairman of the Board, the President or a
majority of the Board of Directors, and must be called upon the demand of the
holders of 10 percent or more of all votes entitled to be cast on an issue
proposed to be considered at the meeting. Delaware law permits shareholders to
take action by written consent in lieu of a meeting if consents are signed by
the holders of outstanding stock having not less than the minimum number of
votes necessary to authorize the action at a meeting at which all the shares
entitled to vote thereon were present and voted. Under Oregon law, action
required or permitted to be taken at a shareholders' meeting may be taken
without a meeting, but only if the action is taken by all the shareholders
entitled to vote on the action.
Amendment of Governing Instruments
Under Delaware law, the Certificate of Incorporation of the Company can be
amended only if the amendment is approved by holders of a majority of the issued
and outstanding shares of stock entitled to vote. The Articles of Incorporation
of New-WPEC also can be amended by the vote of holders of a majority of the
issued and outstanding shares of each voting group of New-WPEC entitled to vote.
The Bylaws of the Company and New-WPEC generally may be amended by either the
Board of Directors or the shareholders by a majority vote. APPROVAL OF THE
MERGER BY THE SHAREHOLDERS OF THE COMPANY WILL BE DEEMED TO BE APPROVAL OF THE
ARTICLES OF INCORPORATION AND THE BYLAWS OF NEW-WPEC BY THE SHAREHOLDERS OF THE
COMPANY.
21
<PAGE>
Mergers, Consolidations and Sales of Assets
Under Delaware law and the Certificate of Incorporation of the Company, a
plan of merger or a direct or indirect sale, lease, exchange or other
disposition of all or substantially all of the property of the Company must be
approved by holders of a majority of the outstanding shares of each class of
stock entitled to vote. Under the Articles of Incorporation of New-WPEC, such
transactions and any share exchange in which shares of New-WPEC stock are
acquired by another corporation must be approved by holders of a majority of the
issued and outstanding shares of each voting group entitled to vote.
Additionally, consistent with Oregon law, the Board of Directors of New-WPEC may
condition its submission of such plan of merger or share exchange or such a sale
or disposition of assets to the shareholders on any basis, including the
requirement of a greater vote than the required vote described above. Oregon law
authorizes the directors of a corporation, in determining what they believe to
be the best interests of the corporation, to give due consideration to the
social, legal and economic effects on employees, customers and suppliers to the
corporation and on the communities and geographical areas in which the
corporation and its subsidiaries operate. Delaware does not have an analogous
statutory provision.
Dissenters' Rights of Appraisal in Mergers
Under both Oregon and Delaware law, a shareholder of a corporation
participating in certain transactions may, under varying circumstances, receive
cash in the amount of the fair value of his shares (as determined by a court),
in lieu of the consideration he would otherwise receive in any such transaction.
Unless a corporation's certificate of incorporation provides otherwise, neither
Delaware nor Oregon law requires such dissenters' rights of appraisal with
respect to (i) a merger or consolidation by a corporation the shares of which
are either listed on a national securities exchange or the Nasdaq National
Market System or (ii) shareholders of a corporation that is party to a merger if
no vote of the shareholders is required.
Anti-takeover Laws
In general, Delaware law prevents an "Interested Shareholder" (defined as a
person with beneficial ownership of 15% or more of a Delaware corporation's
voting stock) from engaging in certain "Business Combinations" (generally,
mergers, consolidations, dispositions of 10% or more of the corporation's
assets, certain stock transfers other than pro rata to shareholders, and certain
financial benefits to the Interested Shareholder) with a Delaware corporation
for three years following the date such person became an Interested Shareholder,
unless certain required approvals of either the board of directors or
shareholders of the
22
<PAGE>
corporation, other than the Interested Shareholder, have been obtained. A
corporation may elect not to be subject to these provisions by a provision of
its original certificate of incorporation or an amendment approved by a majority
vote of shareholders, effective 12 months following approval. The Certificate of
Incorporation of the Company contains such an election out of coverage.
Oregon law is similar to Delaware law regarding business combinations with
interested shareholders. In addition, Oregon has an anti-takeover provision that
regulates the process by which a person may acquire control of any Oregon-based
corporation with 100 or more shareholders without obtaining the consent and
cooperation of the board of directors. The law restricts the ability of a
shareholder to vote shares of stock acquired in a transaction that results in
his controlling at least one-fifth, one-third or one-half of the votes entitled
to be cast in the election of directors. With certain exceptions, shares
acquired in such a transaction are not entitled to vote in shareholder actions
except as authorized by a vote of the shareholders. The shares acquired in a
merger or acquisition effected in compliance with Oregon law and in certain
other circumstances are not subject to these restrictions. A corporation may
elect not to be governed by this law by amendment to its articles of
incorporation or bylaws. The Articles of Incorporation of New-WPEC also contains
such an election out of coverage.
The Company is not subject to a "control share statute." As permitted by
the Oregon Control Share Act, the Articles of Incorporation of New-WPEC provides
that New- WPEC will not be subject to the Oregon Control Share Act. The Oregon
Control Share Act restricts the ability of a shareholder of certain Oregon-based
corporations to vote shares of stock acquired in a transaction that causes the
acquiring person to control at least one-fifth, one-third or one-half of the
votes entitled to be cast in the election of directors, unless the corporation's
board of directors or shareholders approve the acquisition in advance or a
majority of the corporation's disinterested shareholders restore the acquiring
person's voting privileges.
PROPOSAL 3: RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
FOR THE FISCAL YEAR ENDING JULY 31, 1999
We Recommend a Vote "For" Proposal 3
PricewaterhouseCoopers LLP audited the Company's financial statements for
the fiscal year ended July 31, 1998, and has been appointed to audit the
Company's financial statements for the fiscal year ending July 31, 1999. The
Board of Directors is submitting this appointment for ratification by the
shareholders. Representatives of
23
<PAGE>
PricewaterhouseCoopers LLP will be at the Annual Meeting, will be given an
opportunity to make a statement if they wish, and will be available to answer
your questions.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 (a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors, as well as persons who own more than
10 percent of the Company's Common Stock, to file initial reports of ownership
and reports of changes in ownership of Common Stock of the Company with the
Securities and Exchange Commission. To the Company's knowledge, based solely on
reports and other information submitted by executive officers and directors, the
Company believes that during the year ended July 31, 1998, each of its executive
officers, directors, and persons who own more than 10 percent of the Company's
Common Stock complied with all applicable Section 16(a) filing requirements.
METHOD AND COST OF SOLICITATION
The Company will pay all expenses in connection with the solicitation of
proxies. In addition to soliciting proxies by mail, the Company's directors,
officers, and regular employees may also request the return of proxies in person
or by telephone. They will not receive any extra compensation for this
solicitation.
OTHER BUSINESS/DISCRETIONARY AUTHORITY
We do not intend to present any business for action at the Annual Meeting
other than the business discussed above. We do not know of any matters that
others may present. If any other matter is properly presented at the Annual
Meeting, your submission of a valid proxy means that you intend to vote in
accordance with our recommendations.
SHAREHOLDER PROPOSALS
If you have a proposal that you wish to be considered for inclusion in next
year's proxy material, we must receive your proposal at our principal executive
office no later than August 20, 1999. Such a proposal should be accompanied by a
written representation that you are a record or beneficial owner of the lesser
of at least 1 percent of the outstanding shares of the Company's Common Stock or
$1,000 in market value of the Company's
24
<PAGE>
common shares and have held such shares for a least one year as required by Rule
14a-8 of the Securities Act of 1934, as amended, and compliance with other
requirements of that rule. Our mailing address is 4601 NE 77th Avenue, Suite
200, Vancouver, Washington 98662.
--------------------------------------
PLEASE SIGN, DATE AND RETURN THE ENCLOSED
PROXY FORM IN THE ENCLOSED RETURN ENVELOPE
25
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WESTERN POWER & EQUIPMENT CORP.
PROXY
ANNUAL MEETING OF SHAREHOLDERS
JANUARY 20, 1999
The undersigned, revoking all prior proxies, hereby appoints C. Dean McLain
and Mark J. Wright, and each of them, as proxies, with full power of
substitution, to vote on behalf of the undersigned at the Annual Meeting of
Stockholders of Western Power & Equipment Corp. (the "Company") to be held at
The Heathman Lodge, Sacajawea Room, 7801 NE Greenwood Drive, Vancouver,
Washington 98662, at 1:30 p.m., Pacific Standard Time, on Wednesday, January 20,
1999, or at any adjournment thereof, all shares of the undersigned in the
Company. The proxies are instructed to vote as follows:
1. ELECTION OF DIRECTORS
[ ] FOR all nominees listed below (except as marked to contrary
below).
[ ] WITHHOLD AUTHORITY to vote for all nominees listed below.
Nominees: C. Dean McLain, Robert M. Rubin, Harold Chapman, Jr. and
Merrill A. McPeak (1-year terms)
To withhold your vote for any individual nominee, strike a
line through the nominee's name in the list above.
2. PROPOSAL TO CHANGE THE COMPANY'S STATE OF
INCORPORATION FROM DELAWARE TO OREGON
FOR [ ] AGAINST [ ] ABSTAIN [ ]
<PAGE>
3. PROPOSAL TO RATIFY THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT AUDITORS
FOR [ ] AGAINST [ ] ABSTAIN [ ]
The shares represented by this proxy will be voted in accordance with the
instructions given.
This proxy is solicited on behalf of the Company's Board of Directors. The
Board of Directors recommends a vote FOR each of the nominees and FOR the
Proposals.
Unless contrary instructions are given, the shares will be voted for the
Nominees, for the Proposals, and on any other business that may properly come
before the Annual Meeting in accordance with the recommendations of management.
Please sign exactly as your name appears on this card. Persons signing as
executor, administrator, trustee, custodian or in any other official or
representative capacity should sign their full title.
Receipt is acknowledged of the notice and proxy statement relating to this
Annual Meeting.
[ ] Please check here if you plan to attend the Annual Meeting in person.
Dated: --------------------, 199- Signature(s) ----------------------------
Please mark, date, sign and return the proxy promptly.
<PAGE>
