<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 Section 240.14a-12
- --------------------------------------------------------------------------------
(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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/ / 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.
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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 FEBRUARY 2, 2000
---------------------
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 Marriott Residence Inn, Corporate Boardroom, 8005 NE Parkway
Drive, Vancouver, Washington 98662, on Wednesday, February 2, 2000, 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 ratify the selection of PricewaterhouseCoopers LLP as auditors of the
Company for fiscal 2000; and
3. 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 24, 1999,
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 January 10, 2000.
<TABLE>
<CAPTION>
<S> <C>
By Order of the Board of Directors
C. Dean McLain
CHAIRMAN OF THE BOARD
Vancouver, Washington
January 10, 2000
</TABLE>
<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 2000 Annual Meeting of Stockholders (the "Annual Meeting")
to be held at 1:30 p.m., Pacific Standard Time, on Wednesday, February 2, 2000,
or any adjournments thereof, at The Marriott Residence Inn, Corporate Boardroom,
8005 NE Parkway 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 January 10, 2000, 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 return a duly executed proxy but do not provide any
instructions, we will vote your shares: (a) for the nominees listed on page 2;
(b) for the appointment of PricewaterhouseCoopers LLP as the Company's
independent auditors for fiscal 2000; and (c) 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............................................ 46 1993
Robert M. Rubin........................................... 59 1992
Harold Chapman, Jr........................................ 38 1995
Merrill A. McPeak......................................... 63 1998
</TABLE>
ROBERT M. RUBIN. Mr. Rubin has been the Chairman and Chief Executive
Officer of American United Global, Inc. ("AUGI"), the Company's majority
shareholder, since October 1990. Mr. Rubin served as the Chairman of the Board
of Directors of the Company from November 20, 1992 to August 1, 1998. Mr. Rubin
holds a greater than 10% interest in and is Chairman of the Board of Stylesite
Marketing, Inc., and serves on the board of directors of and holds a greater
than 10% interest in IDF International Inc., Help at Home, Inc., and Med-Emerge
International, Inc. Mr. Rubin is Chairman of the Board of ERD Waste
Technology, Inc. ("ERD"), a diversified waste management public company
specializing in the management and disposal of municipal solid waste,
industrial, and commercial non-harzardous waste and harzardous waste. ERD has
filed of Chapter 11 bankruptcy reorganization.
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 ("Case").
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 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., Centerspan
Communications Corp. (formerly known as Thrustmaster, Inc.), and ECC
International Corp., where he serves as Chairman of the Board.
If a quorum of shareholders is present at the meeting, the four nominees for
director who receive the greatest numbers of votes cast at the meeting will be
elected directors. We will treat abstentions and broker non-votes as present but
not voting.
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 November 12, 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>
NUMBER OF SHARES PERCENTAGE OF
NAME BENEFICIALLY OWNED OUTSTANDING SHARES
- ---- ------------------ ------------------
<S> <C> <C>
Robert M. Rubin............................. 603,400(1) 18.3%
C. Dean McLain.............................. 925,329(2)(3) 28.0%
Mark J. Wright.............................. 98,500(4) 3.0%
Merrill McPeak.............................. 10,000(5) *
Harold Chapman.............................. 15,000(5) *
All directors and executive officers as a
group (5 persons)......................... 1,652,229(1)-(5) 50.0%
</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
ownership of an aggregate of 1,807,798 voting shares of the Company's
principal stockholder, AUGI, including 1,025,000 shares held by the Rubin
Family Irrevocable Stock Trust to which Mr. Rubin disclaims beneficial
ownership and including exercisable options to acquire 560,000 shares of
AUGI common stock, as well as direct beneficial ownership of Common Stock
through his ownership of exercisable options to acquire 300,000 shares of
Common Stock. Mr. Rubin's beneficial ownership of AUGI voting stock
represents 15.2 percent of AUGI voting stock as of November 12, 1999.
(2) Represents Mr. McLain's indirect ownership in the Company through his
ownership of options to purchase 300,000 shares of AUGI common stock, as
well as direct beneficial ownership of Common Stock through his ownership of
exercisable options to acquire 875,000 shares of Common Stock. Mr. McLain's
beneficial ownership of AUGI common stock represents 2.5 percent of AUGI
voting stock as of November 12, 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 Common Stock through
his ownership of exercisable options to acquire 98,500 shares of Common
Stock.
(5) Represents exercisable options to purchase shares of the Common Stock issued
under the terms of the Stock Option Plan for Nonemployee Directors (the
"Formula Plan").
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Effective February 17, 1996, the Company acquired substantially all of the
operating assets used by Case in connection with its business of servicing and
distributing Case construction equipment at a facility located in Sacramento,
California (the "Sacramento Operation"). The real property and improvements used
in connection with the Sacramento Operation, and upon which the Sacramento
Operation is located, were sold by Case for $1,500,000 to the McLain-Rubin
Realty Company, LLC ("MRR"), a Delaware limited liability company, the owners of
which are Messrs. C. Dean McLain, the Chairman of the Company's Board of
Directors since August 1998, as well as its President and CEO, and Robert M.
Rubin, the Company's Chairman of the Board of Directors before Mr. McLain, and
still one of its directors. At the same time that it acquired the Sacramento
Operation real property and improvements, MRR leased
3
<PAGE>
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. (the "Sahlberg Operation"), 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.
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, 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.
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. The amount of Mr. McLain's bonus is determined according to the
performance formula set forth in his employment contract described under
"Employment and Incentive Compensation Agreements" below. Mr. McLain did not
receive a bonus for the Company's 1999 fiscal year. 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 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
6
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Messrs. Chapman and McPeak. There are
no interlocking relationships, as described by the Securities and Exchange
Commission, between the Compensation Committee members. Mr. McLain, the Chairman
of the Board of Directors since August 1998, as well as its President and CEO,
and Mr. Rubin, the Chairman of the Board of Directors before Mr. McLain, and
currently a director and consultant for the Company, participated in all
discussions and decisions regarding salaries and incentive compensation for all
employees and consultants to the Company, except that they were each excluded
from discussions regarding their own salary.
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>
ANNUAL COMPENSATION LONG-TERM
---------------------------------- COMPENSATION AWARDS
OTHER ANNUAL ------------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION NUMBER OF OPTIONS COMPENSATION
- --------------------------- -------- -------- -------- ------------ ------------------- ------------
<S> <C> <C> <C> <C> <C> <C>
C. Dean McLain ............ 1999 $300,425 $ 0 $ 7,281 0 $22,596
President, CEO, Chairman 1998 280,000 68,935 40,000 425,000 22,596
of the Board(1) 1997 268,587 18,658 0 150,000 0
Robert M. Rubin ........... 1999 $150,000 $ 0 $ 0 0 $ 0
Consultant; former 1998 150,000 0 0 100,000 0
Chairman(2) 1997 150,000 0 0 50,000 0
Mark J. Wright ............ 1999 $132,588 $20,000 $ 4,680 0 $ 7,778
Vice President of Finance 1998 98,958 15,000 0 98,500 0
and CFO(3) 1997 36,346 5,000 0 0 0
</TABLE>
- ------------------------
(1) 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.
(2) 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.
(3) Mr. Wright joined the Company in February 1997. Therefore, fiscal 1997
figures are partial year compensation figures.
OPTION GRANTS IN LAST FISCAL YEAR
There were no option grants to executive officers in fiscal 1999.
7
<PAGE>
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 SHARES OF COMMON STOCK
UNDERLYING UNEXERCISED OPTIONS VALUE OF UNEXERCISED IN-THE-MONEY
SHARES AT FISCAL YEAR-END OPTIONS AT 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>
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 and the S&P Machinery
(Diversified) Index.
COMPARISON OF 49 MONTH CUMULATIVE TOTAL RETURN*
<TABLE>
<CAPTION>
WESTERN POWER NASDAQ STOCK S&P MACHINERY
& EQUIPMENT MARKET (DIVERSIFIED)
<S> <C> <C> <C>
'6/14/95 100 100 100
Jul-95 98 116 110
Jul-96 66 127 112
Jul-97 71 187 182
Jul-98 86 220 150
Jul-99 37 313 176
</TABLE>
AMONG WESTERN POWER & EQUIPMENT CORP., THE NASDAQ STOCK MARKET
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 Nasdaq Stock Market 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 $37 at July 31, 1999 as compared to $313 in
the Nasdaq Stock Market, 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: Case Corporation, Caterpillar, Inc.,
Cincinnati Milicron, Cooper Industries, Deere & Co., Dover Corporation,
Harnischfeger, Ingersoll Rand Corporation, NACCO Industries, Inc. (class A), and
Timken.
8
<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. 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 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.
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.
9
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The Company's outstanding voting securities at the close of business on
December 21, 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. Only shareholders of record at the close
of business on December 24, 1999, 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, 1999, AUGI, the principal shareholder of the Company,
holds 2,000,000 shares of the Common Stock. This means that AUGI has the right
to cast approximately 60.6 percent of the total shares entitled to vote at the
Annual Meeting. AUGI has indicated its intention to vote in favor of all of our
proposals.
The following table sets forth certain information as of December 11, 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 OUTSTANDING
NAME AND ADDRESS OF OF COMMON STOCK COMMON STOCK
BENEFICIAL OWNER BENEFICIALLY OWNED OWNED
- ---------------- ------------------ -------------
<S> <C> <C>
American United Global, Inc. .................. 2,000,000 60.6%
11634 Patton Road
Downey, CA 90241
D3 Family Funds ............................... 375,500 11.4%
19605 NE 8th Street
Camas, WA 98607
Robert M. Rubin ............................... 603,400(1) 18.3%
6060 Kings Gate Circle
Del Ray Beach, FL 33484
C. Dean McLain ................................ 925,329(2)(3) 28.0%
4601 NE 77th Avenue
Suite 200
Vancouver, WA 98662
</TABLE>
- ------------------------
(1) Represents Mr. Rubin's indirect ownership in the Company through his
ownership of an aggregate of 1,807,798 voting shares of the Company's
principal stockholder, AUGI, including 1,025,000 shares held by the Rubin
Family Irrevocable Stock Trust to which Mr. Rubin disclaims beneficial
ownership and including exercisable options to acquire 560,000 shares of
AUGI common stock, as well as direct beneficial ownership of Common Stock
through his ownership of exercisable options to acquire 300,000 shares of
Common Stock. Mr. Rubin's beneficial ownership of AUGI voting stock
represents 15.2 percent of AUGI voting stock as of November 12, 1999.
(2) Represents Mr. McLain's indirect ownership in the Company through his
ownership of options to purchase 300,000 shares of AUGI common stock, as
well as direct beneficial ownership of Common Stock through his ownership of
exercisable options to acquire 875,000 shares of Common Stock. Mr. McLain's
beneficial ownership of AUGI common stock represents 2.5 percent of AUGI
voting stock as of November 12, 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.
10
<PAGE>
BOARD COMPENSATION, ATTENDANCE, AND COMMITTEES
During the fiscal year ended July 31, 1999, the Board of Directors met four
times, including actions taken by unanimous written consent of the directors. At
present, the Board has two committees, the Compensation Committee and the Audit
Committee. During their periods of tenure, all of the nominated directors who
served as directors during the fiscal year attended, in person or by telephone,
100 percent of the meetings of the Board and the Committees of which they were
members.
The Compensation Committee of the Board of Directors currently consists of
Harold Chapman and Merrill McPeak. 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 1999.
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 1999.
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: RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
FOR THE FISCAL YEAR ENDING JULY 31, 2000
WE RECOMMEND A VOTE "FOR" PROPOSAL 2
PricewaterhouseCoopers LLP audited the Company's financial statements for
the fiscal year ended July 31, 1999, and has been appointed to audit the
Company's financial statements for the fiscal year ending July 31, 2000. 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, 1999, 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.
ANNUAL REPORT
We have included a copy of the Company's 2000 Annual Report with this
statement.
11
<PAGE>
METHOD AND COST OF SOLICITATION
The Company will pay all expenses in connection with the solicitation of
proxies. In addition to soliciting proxies by mail, the Company's directors,
officers, and regular employees may also request the return of proxies in person
or by telephone. They will not receive any extra compensation for this
solicitation.
OTHER BUSINESS/DISCRETIONARY AUTHORITY
We do not intend to present any business for action at the Annual Meeting
other than the business discussed above. We do not know of any matters that
others may present. If any other matter is properly presented at the Annual
Meeting, your submission of a valid proxy means that you intend to vote in
accordance with our recommendations.
For the 2001 Annual Meeting of Shareholders, if notice of a shareholder
proposal to be raised at the meeting is received at the principal executive
offices of the Company after November 28, 2000, proxy voting on that proposal
when and if raised at the annual meeting will be subject to the discretionary
voting authority of the designated proxy holders.
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 September 12, 2000. 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
12
<PAGE>
WESTERN POWER & EQUIPMENT CORP.
PROXY
ANNUAL MEETING OF SHAREHOLDERS
FEBRUARY 2, 2000
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 Marriott Residence Inn, Corporate Boardroom, 8005 NE Parkway Drive
Vancouver, Washington 98662, at 1:30 p.m., Pacific Standard Time, on Wednesday,
February 2, 2000, 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 RATIFY THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS
INDEPENDENT AUDITORS / / FOR / / AGAINST / / ABSTAIN
<PAGE>
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
Proposal.
UNLESS CONTRARY INSTRUCTIONS ARE
GIVEN, THE SHARES WILL BE VOTED FOR
THE NOMINEES, FOR THE PROPOSAL 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: _________________________, 2000
Signature(s) _________________________
Please mark, date, sign and return the
proxy promptly.
