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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) June 19, 1996
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First Equity Properties, Inc.
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(Exact name of registrant as specified in its charter)
California 0-11777 95-6799846
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(State or other (Commission (IRS Employer
jurisdiction of File Identification
incorporation) No.) Number)
10670 N. Central Expressway, Suite 501, Dallas, Texas 75231
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (214) 750-5800
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Wespac Investors Trust III
1661 Lincoln Blvd., Suite 400
Santa Monica, California 90404
Telephone (213) 392-4331
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(Former name or former address, if changed since last report)
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Item 1. CHANGES IN CONTROL OF REGISTRANT.
Greenbriar Corporation (formerly Medical Resource Company of America)
asserted a creditor claim against Wespac Investors Trust III ("Wespac" or the
"Trust") in excess of $1,085,000 in the "Bankruptcy Proceeding" described below
which Wespac disputed. Wespac and Greenbriar Corporation agreed to compromise
the creditor's claim by granting to Greenbriar Corporation an Allowed Unsecured
Claim for the sum of $800,000 which was to be paid through the issuance of "New
Common Stock" pursuant to the "Confirmed Plan" described in Item 3 below, which
New Common Stock to be issued to Greenbriar Corporation was to constitute 50%
of all issued and outstanding New Common Stock in addition to the claim
pursuant to the "Zimco" arrangements described below.
Greenbriar Corporation also claimed ownership of 5,724,692 shares of
"Old Common Stock" (the "USREA Stock") which Greenbriar Corporation acquired in
May 1995 pursuant to a Stock Purchase Agreement with S. A. Zimco Management,
PLC ("Zimco") and John T. Hall, an individual. Wespac had objected to the
Proof of Interest filed by Zimco in the Bankruptcy Proceeding with respect to
such shares and sought a judicial determination of the true ownership of such
shares in certain litigation which was ultimately settled. Pursuant to the
Confirmed Plan, Greenbriar Corporation was to reduce its claim to shares
acquired from Zimco so that such shares would total no more than 25% of the
Allowed Interest in Old Common Stock with Wespac dismissing its objection to
the Proof of Interest and recognizing Proof of Interest filed February 1996 by
Greenbriar Corporation and Nevada Sea Investments, Inc. ("Nevada Sea") as it
related to the 5,724,692 shares originally acquired by Greenbriar Corporation
from Zimco for which the holder thereof was to be entitled to receive 25% of
the issued and outstanding New Common Stock pursuant to the Confirmed Plan.
By agreement effective May 12, 1995, Greenbriar Corporation granted an
option to Nevada Sea to purchase a judgment from the California Court (the
"Judgment") against Wespac and all of Greenbriar Corporation's claim against
Wespac in the Bankruptcy Proceeding, which option was in lieu of any other
agreement among the parties written or verbal, relating to Wespac (the
"Original Option"). As a result of the various negotiations among creditors in
the Bankruptcy Proceeding, for the benefit of all future creditors and
shareholders of Wespac, Greenbriar Corporation and Nevada Sea rescinded ab
initio, as of the time of its original issuance the Original Option; Greenbriar
Corporation retained the consideration paid for the Original Option; and at the
time of execution of a Letter Agreement dated May 31, 1996, Greenbriar
Corporation conveyed to Nevada Sea an undivided 50% interest in and to the
Judgment and the Claim which resulted in an undivided interest of 25% out of an
aggregate of 50% of the "New Common Stock" of Wespac on a "when issued" basis.
As a part of such arrangement, Greenbriar Corporation covenanted and agreed
that
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it would not, without the prior written consent of Nevada Sea, sell or dispose
of any of the 25% of total Wespac Shares which Greenbriar Corporation was to
receive under the Confirmed Plan.
Pursuant to the Confirmed Plan, Class 6 consisted of the Allowed
Interest of Shareholders in "Old Common Stock" all of which was cancelled on
the Effective Date of the Confirmed Plan with one share of beneficial interest
of Wespac deemed to be exchanged for each share of Allowed Interest (other than
Greenbriar Corporation and Nevada Sea), which former "public shareholders" were
then to hold in the aggregate 25% of the new Shares of Beneficial Interest. As
a result of the Confirmed Plan, as modified by the "Modification" described
below, as of November 29, 1996 there were deemed to be 10,570,944 Shares of
Beneficial Interest, no par value, of Wespac available for issuance to
shareholders, of which 2,642,736 Shares were issuable to public shareholders
(an aggregate of 25% of such shares), 2,642,736 Shares were issuable to
Greenbriar Corporation (an aggregate of 25% of such shares), and 5,285,472
Shares were issuable to Nevada Sea (an aggregate of 50% of such Shares).
Accordingly, although no shares of beneficial interest of Wespac were actually
issued at that time pursuant to the Confirmed Plan, as of at least November 29,
1996, by virtue of Nevada Sea holding the right to receive an aggregate of 50%
of the shares of beneficial interest of Wespac, an effective change in control
of the issuer occurred.
On June 19, 1996, two individuals who are also officers of Nevada Sea or
one of its affiliates were elected as two of the members of the Board of
Trustees of Wespac to fill vacancies created by prior resignations and to
ensure that at least three members of the Board of Trustees would exist; such
individuals were also elected as the officers of Wespac and are as follows:
NAME OFFICE
Karl L. Blaha President
F. Terry Shumate Vice President, Secretary
and Treasurer
In connection with and pursuant to the "Incorporation Procedure" described in
Items 3 and 5 below, the three individuals who were the members of the Board of
Trustees of Wespac are at all times from and after June 19, 1996 (Karl L.
Blaha, Georgie Liebelt and F. Terry Shumate) and the two individuals named
above who have been the officers of Wespac, became the corresponding members of
the Board of Directors and officers of the California Corporation, as successor
to Wespac and of First Equity Properties, Inc., the surviving corporation to
the "Merger" described below. By virtue of the one-for-one exchange of shares
of beneficial interest for ultimate Common Stock, par value $0.01 per share of
First Equity Properties, Inc., each shareholder of Wespac now holds a
proportionate interest in First Equity Properties, Inc., with the
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result being that Nevada Sea owns and holds 50% of the outstanding Shares,
Greenbriar Corporation presently owns 25% of the outstanding Shares (but has
covenanted with Nevada Sea that it would not sell or dispose of such interest
without the consent of Nevada Sea) and the "public shareholders" own and hold
an undivided 25% interest of the Shares of First Equity Properties, Inc.
Item 3. BANKRUPTCY RECEIVERSHIP.
Wespac, a California real estate investment trust which had its
principal executive offices located at 1661 Lincoln Boulevard, Suite 400, Santa
Monica, California 90404 at December 31, 1987 and subsequently during 1994
until June 19, 1996 at West 4301 Sunset Highway, Spokane, Washington 99204, was
originally formed August 22, 1993. Its last filing with the Securities and
Exchange Commission was the filing of a Form 10-K for the fiscal year ended
December 31, 1987 (the "1987 10-K"). During January 1988, four of the elected
Trustees resigned pursuant to an agreement with U.S. Real Estate Advisors, Inc.
("USREA"), a privately held California corporation, and four new trustees were
elected, all of whom were officers of USREA. Also, during January 1988 Wespac
entered into certain financing arrangements with USREA and on April 13, 1988
the Trustees who were also officers of USREA caused Wespac to file for
protection under Chapter 11 of the United States Bankruptcy Code (the "1988
Reorganization") which resulted in a plan of reorganization approved and
confirmed by the Court on March 29, 1989 with certain amendments. The 1988
Reorganization was closed by the Bankruptcy Court on August 21, 1992.
Wespac acted as a Debtor-in-Possession in the 1988 reorganization which
concluded in the Third Amended Plan of Reorganization dated January 24, 1989
(the "1989 Plan"), confirmation of which served to re-vest all assets of the
Estate of Wespac, free and clear of all liabilities except those payable under
the 1989 Plan. As provided for by that 1989 Plan, USREA exercised its warrants
by purportedly forgiving $715,586.50 which Wespac allegedly owed under an
Amended Financing Agreement. Wespac then liquidated all real estate assets
except a shopping center in Ogden, Utah (later sold) and three hotels located
in Spokane, Washington consisted of The Quality Inn-Spokane House, The Quality
Inn-Valley, and The Comfort Inn-North (all collectively the "Spokane
Properties"). The 1988 Reorganization was closed by the Court on August 21,
1992.
On January 27, 1994, Wespac again instituted a Chapter 11 bankruptcy
proceeding styled In re: Wespac Investors Trust III, Case No. 94-00228-K11,
pending in the United States Bankruptcy Court for the Eastern District of
Washington (the "Bankruptcy Proceeding"), to seek a restructuring of the assets
and
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liabilities of Wespac, in response to certain litigation that resulted in at
least one judgment. A plan of reorganization dated March 22, 1996 (as
modified) was confirmed by Order Confirming Plan of Reorganization dated May
15, 1996, entered May 20, 1996 (the "Confirmed Plan"). During the process of
consummation of the Confirmed Plan, and on the eve of issuance of the final
decree with respect to the Confirmed Plan, and emergence from the Bankruptcy
Proceeding, the Board of Trustees of Wespac by motion filed October 29, 1996
sought a modification of the Confirmed Plan which resulted in the entry of an
Order from the Court approving the First Modification to Plan of Reorganization
(as modified) (the "Modification").
Pursuant to the Confirmed Plan, Class 6 consisted of the Allowed
Interest of former public shareholders in "Old Common Stock," all of which was
cancelled on the Effective Date of the Confirmed Plan (June 15, 1996) with one
share of beneficial interest of Wespac deemed to be exchanged for each share of
Allowed Interest, other than Greenbriar Corporation who were then to hold in
the aggregate 25% of the New Shares of Beneficial Interest. After objections
to proofs of interest demonstrating an interest in another entity, it was
determined that the Allowed Interest of such holders were equivalent to
2,642,236 Shares of Beneficial Interest.
Also, pursuant to the Confirmed Plan, upon the Effective Date,
Greenbriar Corporation reduced its claim to the so-called "USREA Shares"
acquired from Zimco to equal 25% of the Allowed Interest (a total of 2,642,736
Shares of Beneficial Interest) and Nevada Sea Investment, Inc. ("Nevada Sea")
was deemed to exercise an option to receive all such Shares of Beneficial
Interest. In addition, in the compromise of the Wespac Creditors' Claim,
Greenbriar Corporation was to receive, pursuant to the Confirmed Plan, 50% of
the issued and outstanding Shares of Beneficial Interest, but prior to the
Effective Date of the Confirmed Plan, by agreement, Greenbriar Corporation
entered into an arrangement pursuant to which Greenbriar Corporation conveyed
to Nevada Sea an undivided 50% in and to the creditors' claim resulting in an
undivided 25% out of an aggregate of 50% of New Shares of Beneficial Interest
of Wespac to be issued, on a "when issued" basis, to Nevada Sea in
consideration of cancellation of certain indebtedness. As a result, prior to
the implementation of the procedures set forth in the Modification and as of
November 29, 1996, there were deemed to be 10,570,944 Shares of Beneficial
Interest, no par value of Wespac, available for issuance to Shareholders, of
which 2,642,736 Shares were issuable to public shareholders (an aggregate of
25% of such Shares), 2,642,736 Shares were issuable to Greenbriar Corporation
(an aggregate of 25% of such Shares) and 5,285,472 Shares of Beneficial
Interest were issuable to Nevada Sea (an aggregate of 50% of such Shares).
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In order to ensure that the correct number of Shares are issued to
Greenbriar Corporation and Nevada Sea, Wespac and Nevada Sea entered into that
certain Share Settlement Agreement dated as of May 31, 1996 (the "Share
Settlement Agreement") pursuant to which, in the event it is ultimately
determined for whatever reason that either too many or too few Shares have been
issued to Nevada Sea and/or Greenbriar Corporation so that either or both hold
in excess of or less than the required number of issued and outstanding Shares
of Wespac pursuant to the Confirmed Plan and such Shares are issued, Wespac
agreed to either issue additional Shares or Nevada Sea (and/or Greenbriar
Corporation) are to return to Wespac for cancellation such number of Shares as
will make the percentages work out to the required percentages pursuant to the
Confirmed Plan.
Confirmation of the Confirmed Plan (as modified) served to re-vest all
assets of the estate in Wespac free and clear of all liabilities except those
payable pursuant to the Confirmed Plan. Under the Confirmed Plan, Wespac
retained the Spokane Properties and all allowed claims have been provided for
or paid. Following completion of the Incorporation Procedure described below,
Wespac submitted to the Court a Certificate of Substantial Consummation and
requested the entry of a Final Decree on January 24, 1997 to close the
Bankruptcy Proceeding.
The effect of the Modification was to distribute to the shareholders of
Wespac a proposal to convert Wespac from a California business trust into a
Nevada corporation through the "Incorporation Procedure" described therein,
coupled with a change of the name of Wespac. Such proposal was distributed to
the shareholders of Wespac who, by November 29, 1996, approved the proposal by
a vote in excess of 84% in favor. The Incorporation Procedure was in the
process of implementation as of December 16, 1996 which was the date of
certification of the results of the balloting to the Court in the Bankruptcy
Proceeding.
A simplified explanation of the "Incorporation Procedure" is that Wespac
was incorporated in California pursuant to Section 200.5 of the California
Corporation Code under the name Wespac Property Corporation on December 16,
1996 (the "California Corporation") and the California Corporation (as
successor to Wespac) was then merged with and into a wholly-owned Nevada
subsidiary corporation (the "Merger") on December 24, 1996, with the Nevada
Corporation being the survivor to such Merger. The Board of Trustees of Wespac
caused the Nevada Corporation to be organized in Nevada under the name First
Equity Properties, Inc. by the filing on December 19, 1996 of Articles of
Incorporation. Prior to the Merger, such Nevada corporation had no significant
business, assets or liabilities of any consequence and no operating history.
Under Section 200.5 of the California Corporation Code, which governs the
process of incorporating a business trust, following the approval of the
affirmative vote
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of a majority of the outstanding Shares of Beneficial Interest, such existing
trust may then file articles of incorporation with a certificate attached,
signed by certain officers of that trust stating that the incorporation of the
association has been approved by the trustees and the required vote of
shareholders and upon the filing of the articles of incorporation pursuant to
that section, the resulting California Corporation succeeded automatically all
of the rights and properties of Wespac and became subject to all of Wespac's
debts and liabilities in the same manner as if the California Corporation had
itself incurred them. The current three trustees of Wespac constituted the
initial directors of the California Corporation and the Nevada corporation and
all rights of creditors and all liens upon the property of Wespac were
preserved unimpaired. Any action or proceeding pending by or against Wespac
may continue to be prosecuted at judgment, which shall bind the California
Corporation or the California Corporation may be proceeded against or
substituted in its place. Under Section 200.5(e), filing for record in the
office of the county recorder of any county in the State of California in which
any of the real property of any such trust is located and a copy of the
articles of incorporation certified by the Secretary of State is to evidence
record ownership in the California Corporation of all interests of the
association in and to the real property located in that county. Following the
incorporation of Wespac into the California Corporation, the Merger was
accomplished by Articles of Merger and a Plan of Merger filed in the States of
California and Nevada on December 24, 1996. The surviving corporation (in this
instance First Equity Properties, Inc., the Nevada Corporation) automatically,
by operation of law, succeeded to all of the assets, rights, duties,
liabilities and obligations of the California Corporation (as successor to
Wespac) upon the effectiveness of the Merger on December 24, 1996.
Item 5. OTHER EVENTS.
Following a vote of the Shareholders of Wespac in which 84% of the
issuable shares approved the Incorporation Procedure described in Item 3 above
and in the Modification, the Board of Trustees of Wespac caused the articles of
incorporation of Wespac Property Corporation (the California Corporation) to be
filed with the Secretary of State of California on December 16, 1996 and caused
the filing of articles of incorporation of First Equity Properties, Inc. in the
State of Nevada on December 19, 1996. First Equity Properties, Inc. became a
wholly-owned subsidiary of the California Corporation which, pursuant to
Section 200.5 of the California Corporation Code, is the successor to Wespac.
On December 24, 1996, Articles of Merger of Wespac Property Corporation with
and into First Equity Properties, Inc. were filed with and approved by the
Secretaries of State of Nevada and California. The surviving corporation to
the Merger is First Equity Properties, Inc. which is the ultimate successor-in-
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interest to Wespac. Following completion of such Merger, the Articles of
Incorporation and Bylaws of First Equity Properties, Inc. remain the Articles
of Incorporation and Bylaws of the surviving corporation. The directors and
officers of First Equity Properties, Inc. immediately prior to the effective
time of the Merger remain the directors and officers of the surviving
corporation; such directors were also the members of the Board of Trustees of
Wespac prior to the commencement of the Incorporation Procedure. Pursuant to
the Merger, each share of beneficial interest of Wespac issuable pursuant to
the Confirmed Plan, as modified, has been deemed converted into one validly
issued, fully paid and nonassessable share of First Equity Properties, Inc.
common stock.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits. The following are filed herewith as exhibits or
incorporated by reference as indicated below:
EXHIBIT DESCRIPTION OF
DESIGNATION EXHIBIT
*2.1 Plan of Reorganization (as modified) dated
March 22, 1996
*2.2 First Amended Disclosure Statement (as
modified) dated March 22, 1996
*2.3 Order Confirming Plan of Reorganization
dated May 15, 1996 entered May 20, 1996
*2.4 First Modification to Plan of Reorganization
(as modified) dated October 29, 1996
*2.5 Ex Parte Order Approving Modification to Plan
of Reorganization (as modified) entered
October 29, 1996
*2.6 Certificate of Substantial Consummation dated
January 21, 1997.
*2.7 Final Decree issued by the court on February
11, 1997.
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* Filed herewith.
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EXHIBIT DESCRIPTION OF
DESIGNATION EXHIBIT
*3.1 Articles of Incorporation of Wespac Property
Corporation as filed with and endorsed by the
Secretary of State of California on December
16, 1996.
*3.2 Articles of Incorporation of First Equity
Properties, Inc. filed with and approved by
the Secretary of State of Nevada on December
19, 1996.
*3.3 Bylaws of First Equity Properties, Inc. as
adopted December 20, 1996.
*3.4 Agreement and Plan of Merger of Wespac
Property Corporation and First Equity
Properties, Inc. dated December 23, 1996
*3.5 Articles of Merger of Wespac Property
Corporation into First Equity Properties,
Inc. as filed with and approved by the
Secretary of State of Nevada December 24,
1996
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated February 15th, 1997 FIRST EQUITY PROPERTIES, INC.
(Registrant)
By: /s/ F. TERRY SHUMATE
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F. Terry Shumate,
Vice President, Secretary
and Treasurer
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INDEX TO EXHIBITS
EXHIBIT DESCRIPTION OF
DESIGNATION EXHIBIT
*2.1 Plan of Reorganization (as modified) dated
March 22, 1996
*2.2 First Amended Disclosure Statement (as
modified) dated March 22, 1996
*2.3 Order Confirming Plan of Reorganization
dated May 15, 1996 entered May 20, 1996
*2.4 First Modification to Plan of Reorganization
(as modified) dated October 29, 1996
*2.5 Ex Parte Order Approving Modification to Plan
of Reorganization (as modified) entered
October 29, 1996
*2.6 Certificate of Substantial Consummation dated
January 21, 1997.
*3.1 Articles of Incorporation of Wespac Property
Corporation as filed with and endorsed by the
Secretary of State of California on December
16, 1996.
*3.2 Articles of Incorporation of First Equity
Properties, Inc. filed with and approved by
the Secretary of State of Nevada on December
19, 1996.
*3.3 Bylaws of First Equity Properties, Inc. as
adopted December 20, 1996.
*3.4 Agreement and Plan of Merger of Wespac
Property Corporation and First Equity
Properties, Inc. dated December 23, 1996
*3.5 Articles of Merger of Wespac Property
Corporation into First Equity Properties,
Inc. as filed with and approved by the
Secretary of State of Nevada December 24,
1996
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* Filed herewith.