UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------------------
FORM 10-K/A
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended July 31, 1999 Commission File Number 0-26230
WESTERN POWER & EQUIPMENT CORP.
(Exact name of Registrant as specified in its charter)
DELAWARE 91-1688446
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
4601 NE 77TH AVE, SUITE 200, VANCOUVER, WA 98662
- ------------------------------------------ -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (360) 253-2346
--------------
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
-----------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulations S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to the Form 10-K. [X]
As of October 16, 1999: (a) 3,303,162 shares of Common Stock, $.001 par
value, of the registrant (the "Common Stock") were outstanding; (b) 927,662
shares of Common Stock were held by non-affiliates ; and (c) the aggregate
market value of the Common Stock held by non-affiliates was $2,158,036 based on
the closing sale price of $1.656 per share on October 15, 1999.
Documents incorporated by reference: None
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------
Certain information required by this item concerning executive officers is
set forth in Part I of this Report under "ITEM 4A.-- EXECUTIVE OFFICERS OF THE
REGISTRANT."
Directors
The following table sets forth the name and age of each of the Company's
directors, as well as the length of time which each director, elected on annual
basis, has served.
Name Age Director Since
---- --- --------------
C. Dean McLain 46 1993
Robert M. Rubin 59 1992
Harold Chapman, Jr. 38 1995
Merrill A. McPeak 63 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. Through 1993
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
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<PAGE>
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.
ITEM 11. EXECUTIVE COMPENSATION
----------------------
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, 1999, 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, previously compensated under an
employment contract (see "Employment and Incentive Compensation Agreements,"
below), entered into a consulting agreement with the Company on August 1, 1998
after he 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.
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<PAGE>
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 is derived under the performance formula set
forth in his employment contract described under "Employment and Incentive
Compensation Agreements" below. Mr. McLain received no bonus for fiscal 1999
under the term of his employment contract. 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 in increments over a period of
years established at the time of grant.
Chief Executive Officer Compensation. In January 1998 the Company 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
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<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 1999 $150,000 $ 0 $ 0 0 $ 0
Consultant; former Chairman(1) 1998 150,000 0 0 100,000 0
1997 150,000 0 0 50,000 0
C. Dean McLain 1999 $300,425 $ 0 $ 7,281 0 $ 22,596
President, CEO, Chairman of the 1998 280,000 68,935 40,000 425,000 22,596
Board(2) 1997 268,587 18,658 0 150,000 0
Mark J. Wright 1999 $132,588 $ 20,000 $ 4,680 0 $ 7,778
Vice President of Finance and CFO(3) 1998 98,958 15,000 0 98,500 0
1997 36,346 5,000 0 0 0
(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. See "Employment and Incentive Compensation Agreements" below. 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 commenced 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.
</TABLE>
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<PAGE>
Option Grants in Last Fiscal Year
The following table provides information regarding individual grants of
stock options to each executive officer in fiscal 1999.
<TABLE>
<CAPTION>
Potential Realizable
Individual Grants Value at Assumed
- ----------------------------------------------------------------------------------- Annual Rates of Stock
% of Total Options Price Appreciation for
Granted to Exercise Option Term
Options Employees in Fiscal of Base Expiration ---------------------------
Name Granted Year Price Date 5% 10%
- --------------- ------- ------------------- -------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
C. Dean McLain -0- 0% N/A N/A N/A N/A
Robert M. Rubin -0- 0% N/A N/A N/A N/A
Mark J. Wright -0- 0% N/A N/A N/A N/A
</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 1999 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 In-the-Money Options at
Shares Fiscal 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- 875,000 / -0- N/A
Robert M. Rubin -0- -0- 300,000 / -0- N/A
Mark J. Wright -0- -0- 98,500 / -0- N/A
</TABLE>
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<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 line chart depicting performance omitted.]
<TABLE>
<CAPTION>
'6/14/95 Jul-95 Jul-96 Jul-97 Jul-98 Jul-99
<S> <C> <C> <C> <C> <C> <C>
Western Power & Equipment 100 98 66 71 86 37
NASDAQ Stock Market - US 100 116 127 187 220 313
S&P Machinery (Diversified) 100 110 112 182 150 176
</TABLE>
COMPARISON OF 49 MONTH CUMULATIVE TOTAL RETURN*
Among Western Power & Equipment Corp., The Nasdaq Stock Market-US Index
and the S & P Machinery (Diversified Index)
* 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 $37 at July 31, 1999 as compared to
$313 in a comparable NASDAQ Broad market investment, and as compared to $176 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.
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<PAGE>
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 plus bonuses if certain conditions were met. 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 plus all authorized business expenses.
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 did not receive a bonus
for the Company's 1999 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.
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<PAGE>
Under the terms of his current employment agreement, in any year that Mr.
McLain receives the maximum bonus, he is 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 $40,000 per year.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee consists of Mssrs. Chapman and McPeak. There are
no interlocking relationships, as described by the Securities and Exchange
Commission, between the Compensation Committee members. Mr. McLain, the Chairman
of the Board of Directors since August 1998, as well as its President and CEO,
and Mr. Rubin, the Chairman of the Board of Directors before Mr. McLain, and
currently a director and consultant for the Company, participated in all
discussions and decisions regarding salaries and incentive compensation for all
employees and consultants to the Company, except that they were each excluded
from discussions regarding their own salary.
Ten-Year Option Repricings
The following table provides information concerning the repricing of
certain of the Company's stock options on December 28, 1995.
<TABLE>
<CAPTION>
Number of
Securities New
Underlying Market Price of Exercise Price Exercise Length of Original
Options Stock at Time of at Time of Price Option Term Remaining
Name Date Repriced Repricing Repricing ($) at Date of Repricing
- -------------- ---------- ---------- ---------------- -------------- -------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
C. Dean McLain 12/12/1995 150,000 $ 4.50 $ 8.00/1 $ 4.50 10 years
President, Chief
Executive Officer
and Chairman
C. Dean McLain 12/12/1995 150,000 $ 4.50 $ 6.00 $ 4.50 10 years
President, Chief
Executive Officer
and Chairman
- --------------
/1 These options were repriced to $6.50 in May 1995, cancelled on August 1,
1995 and reissued at an exercise price equal to the then-market price of
$6.00 on that date. These options were then repriced to $4.50 on December
28, 1995.
</TABLE>
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<PAGE>
Directors' Compensation
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.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
Security Ownership of Certain Beneficial Owners
The Company's outstanding voting securities at the close of business on
October 16, 1999, 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. The Common Stock does not have cumulative
voting rights.
The following table sets forth certain information as of October 16, 1999
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 375,000 11.4%
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<PAGE>
Robert M. Rubin
6060 Kings Gate Circle
Del Ray Beach, FL 33484 605,716 (1) 18.3%
C. Dean McLain
4601 NE 77th Avenue
Suite 200
Vancouver, WA 98662 917,178 (2)(3) 27.7%
(1) Represents Mr. Rubin's indirect ownership in the Company through his
beneficial ownership of an aggregate of 1,775,798 voting shares of AUGI,
the Company's principal stockholder, including options to purchase an
additional 80,000 shares of AUGI common stock, as well as direct beneficial
ownership of Company Common Stock through his ownership of exercisable
options to acquire 300,000 shares of Company Common Stock. Mr. Rubin's
beneficial ownership of AUGI voting stock represents 15.3 percent of AUGI
voting stock as at October 16, 1999.
(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 Company Common Stock through his
ownership of exercisable options to acquire 875,000 shares of Company
Common Stock. Mr. McLain's beneficial ownership of AUGI common stock
represents 2.1 percent of AUGI voting stock as at October 16, 1999.
(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.
</TABLE>
Security Ownership of Management
The following table, which was prepared on the basis of information
furnished by the persons described, shows ownership of the Common Stock as of
October 16, 1999 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 605,716 (1) 18.3%
C. Dean McLain 917,178 (2)(3) 27.7%
Mark J. Wright 98,500 (4) 3.0%
Merrill McPeak 10,000 (5) *
Harold Chapman 15,000 (5) *
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<PAGE>
All directors and executive
officers as a group (5 persons) 1,646,394 (1)(2)(3)(4)(5) 49.8%
- --------------
* 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 AUGI,
the Company's principal stockholder, including options to purchase an
additional 80,000 shares of AUGI common stock, as well as direct beneficial
ownership of Company Common Stock through his ownership of exercisable
options to acquire 300,000 shares of Company Common Stock. Mr. Rubin's
beneficial ownership of AUGI voting stock represents 15.3 percent of AUGI
voting stock as at October 16, 1999.
(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 Company Common Stock through his
ownership of exercisable options to acquire 875,000 shares of Company
Common Stock. Mr. McLain's beneficial ownership of AUGI common stock
represents 2.1 percent of AUGI voting stock as at October 16, 1999.
(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 Company Common Stock
through his ownership of exercisable options to acquire 98,500 shares of
Company Common Stock.
(5) Represents exercisable options to purchase shares of the Common Stock
issued under the terms of the Formula Plan.
</TABLE>
ITEM 13. 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.
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<PAGE>
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.
In February, 1999, the real property and improvements used in connection
with the Company's Sparks, Nevada operation and upon which such operation is
located, were sold to MRR under the terms of a real property purchase and sale
agreement. The sale price was $2,210,000 in cash at closing. Subsequent to the
closing of the sale, the Company entered into a 20-year commercial lease
agreement with MRR for the Sparks, Nevada facility at an initial rental rate of
$252,000 per year with increases at five, ten, and fifteen years resulting in a
maximum annual rental rate of $374,000. The present value of the minimum lease
payments at the commencement of the lease back transaction aggregated
$3,052,000. The lease is a net lease with payment of insurance, property taxes
and maintenance costs paid by the Company.
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<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Amendment No. 1 to the
Report on Form 10-K to be signed on its behalf by the undersigned thereunto duly
authorized.
WESTERN POWER & EQUIPMENT CORP.
Dated: November 29, 1999
By: C. DEAN MCLAIN
------------------------------------
C. Dean McLain, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
C. DEAN MCLAIN President, Chief November 29, 1999
- ---------------------------------- Executive Officer
C. Dean McLain and Director
MARK J. WRIGHT Vice President of Finance, November 29, 1999
- ---------------------------------- Chief Financial and Principal
Mark J. Wright Accounting Officer,
Treasurer and Secretary
ROBERT M. RUBIN Director November 29, 1999
- ----------------------------------
Robert M. Rubin
HAROLD CHAPMAN, JR. Director November 29, 1999
- ----------------------------------
Harold Chapman, Jr.
MERRILL A. MCPEAK Director November 29, 1999
- ----------------------------------
Merrill A. McPeak
</TABLE>
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