<PAGE>
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:
/ / 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 Section240.14a-11(c) or
Section240.14a-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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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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.
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 12; (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.
1
<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.
<TABLE>
<CAPTION>
NAME AGE DIRECTOR SINCE
- ------------------------------------------------------------------------- --- ---------------
<S> <C> <C>
C. Dean McLain........................................................... 45 1993
Robert M. Rubin.......................................................... 58 1992
Harold Chapman, Jr....................................................... 37 1995
Merrill A. McPeak........................................................ 62 1998
</TABLE>
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. 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.
2
<PAGE>
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) (5) 45.0%
</TABLE>
- ------------------------
* Less than 1 percent of the Company's outstanding shares of Common Stock.
(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."
(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").
3
<PAGE>
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 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.
4
<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. 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.
5
<PAGE>
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
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>
LENGTH
OF
ORIGINAL
OPTION
NUMBER OF TERM
SECURITIES MARKET PRICE EXERCISE NEW REMAINING
UNDERLYING OF STOCK AT PRICE AT EXERCISE AT DATE
OPTIONS TIME OF TIME OF PRICE OF
NAME DATE REPRICED REPRICING REPRICING ($) REPRICING
- -------------------------- ----------- ----------- ------------ ----------- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
C. Dean McLain............ 10
12/28/1995 150,000 $4.50 $ 8.00(1) $4.50 years
C. Dean McLain............ 10
12/28/1995 150,000 $4.50 $ 6.00 $4.50 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.
6
<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 1997 268,587 18,658 N/A 150,000 0
the 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 1997 36,346 5,000 0 0 0
CFO(3) 1996 N/A N/A N/A N/A N/A
</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.
7
<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
INDIVIDUAL GRANTS ANNUAL RATES OF
------------------------------------------------------ STOCK PRICE
% OF TOTAL APPRECIATION FOR
OPTIONS GRANTED OPTION TERM
OPTIONS TO EMPLOYEES IN EXERCISE OF EXPIRATION ------------------------
NAME GRANTED FISCAL YEAR BASE 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>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT
SHARES YEAR-END FISCAL YEAR-END
ACQUIRED ON VALUE ----------------------- -----------------------
NAME EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- --------------------------- ------------- ------------- ----------------------- -----------------------
<S> <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>
8
<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 Stock Market (U.S.) and as compared to the S & P
Machinery (Diversified) Index.
COMPARISON OF 37 MONTH CUMULATIVE TOTAL RETURN*
AMONG WESTERN POWER & EQUIPMENT CORP., THE NASDAQ STOCK MARKET (U.S.)
AND THE S & P MACHINERY (DIVERSIFIED) INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
WESTERN POWER & EQUIPMENT THE NASDAQ STOCK MARKET (U.S.) S&P MACHINERY (DIVERSIFIED) INDEX
<S> <C> <C> <C>
6/14/95 $100 $100 $100
7/95 $98 $116 $110
7/96 $66 $127 $112
7/97 $71 $187 $182
7/98 $86 $220 $150
</TABLE>
- ------------------------
* Assumes $100 invested on June 14, 1995 in the Company's common stock or on
May 31, 1995 in The NASDAQ Stock Market (U.S.) and S&P Machinery
(Diversified) 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
The NASDAQ Stock Market (U.S.), 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: Case Corporation, Caterpillar,
Cincinnati Milicron, Cooper Industries, Deere & Co., Dover Corporation,
Harnischfeger, Ingersoll Rand, NACCO Industries (class A) and Timken.
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
9
<PAGE>
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 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
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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.
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>
NUMBER OF SHARES
OF COMMON STOCK PERCENTAGE OF
OF THE COMPANY OUTSTANDING
NAME AND ADDRESS OF BENEFICIALLY COMMON STOCK
BENEFICIAL OWNER OWNED OWNED
- ------------------------------------------------------------ ----------------- -------------
<S> <C> <C>
American United Global, Inc................................. 2,000,000 60.6%
11634 Patton Road
Downey, CA 90241
D3 Family Funds............................................. 350,000 10.6%
19605 NE 8th Street
Camas, WA 98607
Robert M. Rubin............................................. 530,716(1) 16.1%
6060 Kings Gate Circle
Del Ray Beach, FL 33484
C. Dean McLain.............................................. 842,178(2)(3) 25.5%
4601 NE 77th Avenue
Suite 200
Vancouver, WA 98662
</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.
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.
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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.
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 (the "Company Common Stock") into one share of the
New-WPEC's stock (the "New-WPEC Common 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 reincorporation 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 reincorporating in Oregon, the annual fee payable
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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 before such time
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 will be unchanged as a result of the merger. The merger is
intended to 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.
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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 common stock and 10,000,000 shares of 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 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.
LIABILITY AND INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES. Under
the Articles of Incorporation of New-WPEC, the liability of directors of
New-WPEC is eliminated to the fullest extent permitted by Oregon law. Under
Oregon 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. Under the 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
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<PAGE>
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, officer, employee or agent
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. 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 would have the power to provide indemnification to such person.
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 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. The Bylaws of New-WPEC also provide for
indemnification of officers, directors, employees and agents to the fullest
extent permitted by Oregon law. To the fullest extent permitted by Delaware law,
the Company's Certificate of Incorporation require it to indemnify any director,
officer, employee or agent who is made a party to any proceeding because he or
she was or is a director or officer of the Company against any liability,
including reasonable expenses and legal fees, incurred in the proceeding. In
addition, the Certificate of Incorporation authorizes the Company to maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Company, whether or not the Company would have the power to provide
indemnification to such person. The indemnification provisions also require the
Company to pay reasonable expenses incurred by a director or officer of the
Company in a proceeding in advance of the final disposition of any such
proceeding, provided that the indemnified person undertakes to repay the Company
if it is ultimately determined that such person was not entitled to
indemnification. Delaware 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 rights of
indemnification provided in the Company's Certificate 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. 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. 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
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<PAGE>
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.
STOCKHOLDER AND CREDITOR MEETING. Under the Certificate of Incorporation, if
the Company, or any receiver or trustee of the Company upon its dissolution,
liquidation, or insolvency, and its creditors, shareholders, or any class of
creditors or shareholders propose a compromise or arrangement regarding the
Company's reorganization, then, upon application by one of the aforementioned
parties, a court may order a meeting of the relevant parties to consider the
proposal. If a majority in number of the creditors or class of creditors, or
shareholders or class of shareholders, as the case may be, representing
three-fourths in value of the relevant group, agree to the compromise or
arrangement, then it will be binding upon all of the creditors or shareholders
represented at the meeting, whether or not the individual creditor or
shareholder actually agreed to it. The Articles of Incorporation of New-WPEC do
not contain such a provision because no such procedure exists under Oregon law.
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.
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
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(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 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 an
express election to be covered by the provisions of the law. Oregon law is
similar to Delaware law regarding business combinations with interested
shareholders. 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, however, also contain an express election to be
covered.
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 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.
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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 Common Stock 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
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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. 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
3. PROPOSAL TO RATIFY THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS
INDEPENDENT AUDITORS
/ / FOR / / AGAINST / / ABSTAIN
<PAGE>
<TABLE>
<S> <C>
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.
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