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Exhibit 2.4
Dan O'Rourke
Smith & Southwell, P.S.
960 Paulsen Building
Spokane, Washington 99204
(509) 624-0159
Attorneys for Wespac Investors Trust III
IN THE UNITED STATES BANKRUPTCY COURT
IN AND FOR THE EASTERN DISTRICT OF WASHINGTON
IN RE ... Section NO. 94-00228-K11
Section IN PROCEEDINGS FOR A
WESPAC INVESTORS TRUST III Section REORGANIZATION UNDER
Section CHAPTER 11
Debtor Section
FIRST MODIFICATION TO
PLAN OF REORGANIZATION (AS MODIFIED)
TO THE HONORABLE JOHN M. KLOBUCHER, UNITED STATES BANKRUPTCY JUDGE:
COMES NOW Wespac Investors Trust III, the Debtor in this case, and
pursuant to Section 1127(b) of the Bankruptcy Code, submits this First
Modification to Plan of Reorganization (as modified) confirmed by Order
confirming Plan of Reorganization dated May 15, 1996, and entered May 20, 1996
(the "Confirmed Plan") to modify such confirmed Plan before substantial
consummation to provide for a procedure to re-domesticate the Debtor from
California to Nevada and to incorporate the Debtor, which procedure was
inadvertently omitted in the filed plan document.
The material submitted by this First Modification does not adversely
change the treatment of the claim of any party and cannot adversely affect the
claim of any party who voted for the Confirmed Plan and such Confirmed Plan, as
so modified, will continue to meet the requirements of Section 1122 and 1123 of
the Bankruptcy Code. Pursuant to Section 1127(b) of the Bankruptcy Code, the
proponent of a plan or the reorganized debtor may modify such plan at any time
after confirmation of such plan and before substantial consummation of such
plan, but may not modify such plan so that
FIRST MODIFICATION TO PLAN - PAGE 1
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such plan as modified fails to meet the requirements of Sections 1122 and 1123
of the Bankruptcy Code.
The Debtor proposes to modify the Confirmed Plan as follows:
1. Section 4 on page 6 of the Confirmed Plan shall be amended by
adding to the end of the existing language thereof a new subpart d. to read
hereafter as follows:
"d. Incorporation Procedure. By virtue of the past
eight years of almost continuous reorganization and
recapitalization proceedings involving Wespac, the equity
interests of Wespac resulting from the confirmation of the Plan
need the opportunity for a fresh start in a more normal
corporate atmosphere with some opportunity to obtain or have
available regular financing arrangements. Following
confirmation of the Plan and determination of the ultimate
expected recipients of the New Common Stock, but before actual
issuance of certificates representing such New Common Stock,
the identified new shareholders, including Nevada Sea, Medical
Resource and the holders of Allowed Interests of shareholders
of Old Common Stock described in subparts a. and b. of this
paragraph 4.6 (collectively referred to as the 'New
Shareholders'), Wespac shall propose to such New Shareholders
to convert the Trust from a California business trust into a
Nevada corporation through the 'Incorporation Procedure'
described below. Such proposal shall be submitted to only the
New Shareholders through an information statement in the form
annexed hereto as Exhibit '1' and incorporated herein, seeking
a vote by written ballot or proxy FOR or AGAINST the
Incorporation Procedure. If the New Shareholders approve such
Incorporation Procedure by the affirmative vote of at least a
majority in interest of the holders of the New Common Stock to
be issued, the Incorporation Procedure will be deemed to be
approved and shall be implemented as a part of the Execution of
Plan pursuant to Section 5 of the Plan. The Incorporation
Procedure consists of the following principal components:
"(i) Because no explicit statutory authority
permits a California business trust to become a
Nevada corporation directly or to merge directly with
and into a Nevada corporation, the Incorporation
Procedure will be accomplished by incorporating the
Trust in California (the 'California Corporation') by
a transfer of all of the assets of Wespac to,
together with assumption of all outstanding
liabilities of Wespac (including
FIRST MODIFICATION TO PLAN - PAGE 2
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all responsibilities under the Plan) by, the
California Corporation and subsequently merging the
California Corporation (as a successor to Wespac)
with and into its wholly-owned Nevada subsidiary
corporation (the 'Merger'). The Board of Trustees
will cause the Nevada corporation to be organized in
Nevada to facilitate the Incorporation Procedure.
Prior to the Merger, the Nevada corporation will have
no significant business assets or liabilities of any
consequence and no operating history.
"(ii) Paragraph 12.3 of the First Amended
and Restated Declaration of Trust, dated November 10,
1983 (the 'Declaration of Trust'), makes provision
for transfer to a successor upon a vote of a majority
of the trustees, after receiving the affirmative vote
of a majority of the shares outstanding at any
meeting, the notice for which included a statement of
such proposed amendment, or by an instrument or
instruments in writing signed by the holders of not
less than a majority of such shares consenting
thereto without a meeting, to 'sell, convey and
transfer the Trust property to any such corporation,
association, trust or organization in exchange for
shares or securities or beneficial interests therein
and the assumption by such transferee of the
liabilities of the Trust.'
"(iii) Simultaneously with the creation of
the California Corporation, a merger agreement
between the California Corporation and the Nevada
corporation will provide for the merger of the
California Corporation with and into the Nevada
corporation so that the California Corporation would
cease to exist and the Nevada corporation would be
the surviving corporation, the Nevada corporation
would issue one share of its common stock, par value
$0.01 per share, in exchange for each share of the
California Corporation stock (which is the successor
to the New Common Stock), and all shares of the
Nevada corporation held by the California Corporation
would be cancelled. The effect shall be that the New
Shareholders of the California Corporation (which
were to be the holders of the New Common Stock of
Wespac) will become the stockholders of the Nevada
corporation without any change in percentage
ownership, the California Corporation and Wespac as a
trust would cease to exist, and the Nevada
corporation would
FIRST MODIFICATION TO PLAN - PAGE 3
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succeed to all of the rights and properties and be
subject to all of the obligations and liabilities of
Wespac including performance under the Plan.
"(iv) Finally, to effectuate the conversion
of Wespac to a Nevada corporation, Articles of Merger
will have to be filed with the Secretaries of State
of Nevada and California to effect the Merger.
"(v) Under Section 1103 of the California
Corporation Code, approval of shares under Sections
152 and 1201 which constitute a majority of the
outstanding shares (i.e. at least 50% of the New
Common Stock to be issued) is required to approve the
Incorporation Procedure. No dissenters' rights of
appraisal would be available under Section 1400 of
the California Corporation Code by virtue of this
proceeding and the implementation of the
Incorporation Procedure through the Plan.
"(vi) At the time of final consummation of
the Plan, the New Shareholders would receive
certificates representing shares of common stock, par
value $0.01 per share, of the Nevada corporation.
2. Section 5 on pages 7 and 8 of the Confirmed Plan shall be
amended by deleting the last sentence of the last paragraph on page 7 which
carries over to page 8, and replacing such language with the sentence set forth
below (old language is lined through):
(deleted language) Wespac shall call an organizational meeting
of shareholders and trustees within six months of the effective date
of the Plan to elect trustees, directors and officers, who will
thereafter serve for a period of one (1) year or until their
successors are duly qualified and elected.
(replacement language) Through the Incorporation Procedure, if
the new Shareholders approve such Incorporation Procedure, the
directors named in the Articles of Incorporation of the Nevada
corporation will serve as the directors of the resulting entity until
the first annual meeting of shareholders to be held in accordance with
the
FIRST MODIFICATION TO PLAN - PAGE 4
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requirements of the law. In the event the Incorporation Procedure is
not approved by the new Shareholders, Wespac shall call an annual
meeting of shareholders to be scheduled at such time as designated by
the trustees during 1997 as may be appropriate following Wespac
obtaining audited financial statements for the fiscal year ending
December 31, 1996, and becoming current with SEC reporting
requirements.
Except to the extent amended by the foregoing provisions, the
original text of the Confirmed Plan as previously filed remains unchanged.
DATED: October, 22 1996.
Respectfully submitted,TRUST III
WESPAC INVESTORS TRUST III
By /s/ F. TERRY SHUMATE
----------------------------------
F. Terry Shumate, Trustee
FIRST MODIFICATION TO PLAN - PAGE 5
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EXHIBIT 1
IN THE UNITED STATES BANKRUPTCY COURT
IN AND FOR THE EASTERN DISTRICT OF WASHINGTON
IN RE ... ) NO. 94-00228-K11
) IN PROCEEDINGS FOR A
WESPAC INVESTORS TRUST III ) REORGANIZATION UNDER
) CHAPTER 11
Debtor )
INFORMATION STATEMENT
TO: ALL EQUITY SECURITY HOLDERS OF
WESPAC INVESTORS TRUST III
PLEASE TAKE NOTICE that a vote of the Equity Security Holders of
Wespac Investors Trust III, a California business trust ("Wespac" or the
"Trust") will be conducted by written ballot to be delivered prior to 12:00
noon (Spokane, Washington time), on November 29, 1996, at TranSecurities
International, Inc., 2510 North Pines, Suite 202, Spokane, Washington 99206,
on a unified proposal to change the name of, and convert the Trust from a
California business trust into a Nevada corporation through the "Incorporation
Procedure" described in this Information Statement.
This Information Statement is being submitted to the Equity Security
Holders of the Trust in accordance with the requirements of the First
Modification to Plan of Reorganization (as modified) approved by Order of the
Court entered October 29, 1996, pursuant to Section 1127(b) of the Bankruptcy
Code.
The principal components of the Incorporation Procedure are:
(i) because no explicit statutory authority permits a
California business trust to become a Nevada corporation directly or
to merge directly with and into a Nevada corporation, the
Incorporation Procedure is to be accomplished by incorporating the
Trust in California (the "California Corporation") by transfer of all
of the assets of Wespac to, together with the assumption of all
outstanding liabilities of Wespac (including all responsibilities
under the "Confirmed Plan" [as defined below]) by, the California
Corporation and the Shares of the Trust to be outstanding under the
Confirmed Plan are deemed to be the shares of common stock of the
California Corporation held by the Equity Security Holders of Wespac
on a one-for-one basis;
(ii) subsequent to creation of the California Corporation as
a successor to Wespac, a merger agreement will be entered into between
the California Corporation and a newly-formed Nevada corporation to
provide for the merger of the California Corporation with and into the
Nevada corporation so that the California Corporation would cease to
exist and the Nevada corporation would be the surviving corporation,
with the Nevada corporation issuing one share of its common stock, par
value $0.01 per share, in exchange for each share of the California
Corporation's stock (which is the successor to the Wespac shares of
beneficial interest and represented by the certificates) and all
shares of the Nevada corporation held by the California Corporation
would be cancelled;
(iii) the Board of Trustees will cause the Nevada corporation
to be organized in Nevada to facilitate the Incorporation Procedure as
a wholly-owned subsidiary of the California Corporation, and prior to
such merger, the Nevada corporation will have no significant business
assets or liabilities of any consequence and no operating history;
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(iv) finally, to effectuate the conversion of Wespac to a
Nevada corporation, Articles of Merger of the California Corporation
with and into the Nevada corporation will have to be filed with the
Secretaries of State of Nevada and California to effect the merger.
The effect shall be that the Equity Security Holders of Wespac pursuant to
Section 4 of the Confirmed Plan will become the stockholders of the Nevada
corporation without any change in percentage ownership, the California
Corporation and Wespac, as a trust, would cease to exist, the Nevada
corporation would succeed to all of the rights and properties and be subject to
all of the obligations and liabilities of Wespac, including performance under
the Confirmed Plan and the shares of common stock of the Nevada corporation
will be distributed to the Equity Security Holders of Wespac on a one-for-one
basis.
If the Equity Security Holders of Wespac approve the proposed
Incorporation Procedure, each of the current Trustees of the Trust would serve
as a director of the Nevada corporation until such person's initial term
expires under the Nevada corporation's Articles of Incorporation or until a
successor is elected. The Nevada corporation would succeed to and assume, by
operation of law, all rights and obligations of the Trust.
Only Equity Security Holders of Wespac of record at the close of
business on Thursday, October 31, 1996, will be entitled to vote on the
Incorporation Procedure. No meeting of such Equity Security Holders is to be
held, such vote is to be conducted by written ballot delivered prior to the
specified time at the address specified below and on such ballot.
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Regardless of any other matter which involved Wespac in the past, each
Equity Security Holder receiving this Information Statement is encouraged to
promptly date, mark, sign and mail the enclosed ballot card to the transfer
agent for the Trust, TranSecurities International, Inc., 2510 North Pines,
Suite 202, Spokane, Washington 99206.
GENERAL INFORMATION
Wespac is a California business trust originally formed August 22,
1983. The original trustees apparently intended that the Trust was to be
self-liquidating, with the net proceeds derived from sales of existing
properties of the Trust (less certain reserves), if any, paid out to
shareholders rather than re-invested in other properties. During January 1988,
four of the elected trustees resigned pursuant to an agreement with US 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, the Trust 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 Court on August
21, 1992.
The current Chapter 11 case was filed on January 27, 1994, and styled
In re Wespac Investors Trust III, Case No. 94-00228-K11, in the United States
Bankruptcy Court in and for the Eastern District of Washington (the "Bankruptcy
Proceeding"), to seek a restructuring of the assets and liabilities of Wespac,
primarily 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 past eight years, Wespac has been (i) the subject of
reorganization proceedings in the 1988 Reorganization, (ii) a party to various
items of litigation and one judgment, (iii) required to continuously reorganize
and sort out its affairs, (iv) subject of the Bankruptcy Proceeding, and (v)
confused with other entities bearing the same or similar names, including
Wespac Investors Trust II, a California real estate investment trust formed at
approximately the same time as the Trust and which has been the subject of
bankruptcy proceedings in the Central District of California. In addition, a
number of individuals who formally controlled significant portions of the
equity interest of the Trust or were officers or trustees of the Trust have
been the subject of litigation relating to and involving the Trust or such
individuals' activities with respect to the Trust.
The Board of Trustees reviewed the operational and governance history
of the Trust, its reputation, its prospects upon the eve of issuance of a Final
Decree with respect to the Confirmed Plan and emergence from the Bankruptcy
Proceeding, and has concluded that it would be appropriate to give the Trust a
fresh start by changing the name of the Trust and causing re-domestication and
incorporation of the Trust under the laws of the State of Nevada to move
forward as a regular corporation. Accordingly, the Board of Trustees is
recommending to the Equity Security Holders of the Trust pursuant to the
Confirmed Plan (the "Shareholders") implementation of the Incorporation
Procedure.
INTERESTS OF EQUITY SECURITY HOLDERS (SHAREHOLDERS)
Pursuant to the Confirmed Plan, Class 6 consisted of Allowed Interests
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
the Trust 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 Wespac Investors Trust II ("Trust II"), it was
determined that the Allowed Interests of such holders were equivalent to
2,643,498 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 Zemco to equal 25% of the Allowed Interests (a total of 2,635,331
Shares of Beneficial Interest) and Nevada Sea was deemed to exercise its option
to receive such Shares of Beneficial Interest. In addition, in the compromise
of its 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 and aggregate of 50% of the new
Shares of Beneficial Interest of the Trust to be issued, on a "when issued"
basis, to Nevada Sea in consideration of cancellation of certain indebtedness.
As a result, as of the Record Date, there were deemed to be 10,573,992 Shares
of Beneficial Interest, no par value, of the Trust available for issuance to
Shareholders, of which 2,635,331 Shares are issuable to the public
shareholders, 2,643,498 Shares are issuable to Greenbriar Corporation (an
aggregate of 25% of such Shares) and 5,286,996 Shares of Beneficial Interest
are issuable to Nevada Sea (an aggregate of 50% of such Shares).
In order to insure that the correct number of Shares are issued to
Greenbriar Corporation and Nevada Sea, the Trust, Nevada Sea and Greenbriar
Corporation have 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 determined for whatever reason 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 the Trust pursuant to the Confirmed Plan when such Shares
are issued, the Trust has agreed to either issue additional Shares or Nevada
Sea and/or Greenbriar Corporation are to return to the Trust for cancellation
such number of Shares as will make the percentages work out to the required
percentages pursuant to the Confirmed Plan.
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SHAREHOLDERS ENTITLED TO VOTE
Following confirmation of the Plan, a determination was been made of
expected recipients of the new Shares of Beneficial Interest of the Trust to be
issued, who are deemed to be the holders of record of such Shares of Beneficial
Interest, no par value, of the Trust as of the close of business on October 31,
1996 (the "Record Date"), who are entitled to vote upon approval of the
Incorporation Procedure. At the Record Date, there were deemed to be
10,573,992 Shares of Beneficial Interest, no par value, of the Trust available
for issuance to such Shareholders. Each holder is entitled to one vote for
each share deemed held on the Record Date. As of such date, Nevada Sea
Investments, Inc., a Nevada corporation ("Nevada Sea"), held of record 50% of
such Shares and Greenbriar Corporation (formerly Medical Resource Companies of
America) held of record 25% of such Shares. Nevada Sea and Greenbriar
Corporation have each advised the Trustees that they intend to vote all Shares
in favor of approval of the Incorporation Procedure.
VOTING
When the enclosed ballot is properly executed and returned, the shares
represented thereby will be voted in accordance with the instructions noted
thereon. Any abstentions will be included in vote totals and, as such, will
have the same effect on the proposal as a negative vote. Broker non-votes, if
any, will not be included in vote totals and, as such, will have no effect on
the proposal. In the absence of any other instruction, the shares represented
by properly executed and submitted ballot will be voted in favor of the
Incorporation Procedure.
VOTE REQUIRED FOR APPROVAL
Pursuant to paragraph 12.3 of the Declaration of Trust, approval of
the Incorporation Procedure requires the affirmative vote of a majority of the
shares deemed outstanding and entitled to vote thereon. Such provision also
requires the vote of a majority of the Trustees to transfer to a successor
after receiving the affirmative vote of a majority of the shares deemed
outstanding. The Trustees have unanimously recommended the Incorporation
Procedure and intend to vote in favor of implementation thereof, assuming
receipt of approval from a majority of the shares deemed outstanding by a vote
in favor of the Incorporation Procedure.
REVOCATION OF BALLOT
A ballot is enclosed herewith. Any Shareholder who executes and
delivers the ballot may revoke the authority granted thereunder at any time
prior to the scheduled expiration time for receipt of such ballots by giving
written notice of such revocation to the Board of Trustees of the Trust or by
executing and delivering a ballot bearing a later date.
PROPOSED INCORPORATION PROCEDURE
GENERAL
To provide the Trust with an enhanced opportunity for long-term
planning, flexibility and long-term growth, the Board of Trustees has approved,
and recommends adoption by the Shareholders of, a proposal that the Trust be
transformed from a California business trust into a Nevada corporation that
would have perpetual duration. The alternatives considered by the Board of
Trustees included (i) continuing as a finite life business trust, holding its
properties until the Trust's termination; (ii) liquidating the assets of the
Trust; and (iii) the Incorporation Procedure. Based on the Trustees' knowledge
of the general economic and financial conditions to which the Trust and its
assets are subject, the Board of Trustees adopted the Incorporation Procedure
as the option most likely to ultimately maximize returns to Shareholders.
Because no explicit statutory authority permits a California business
trust to become a Nevada corporation directly or to merge directly with and
into a Nevada corporation, the Incorporation Procedure would be accomplished by
incorporating the Trust in California, and merging the California Corporation
(as successor to the Trust) with and into a wholly-owned Nevada subsidiary
corporation (the "Merger"). The Board of trustees will cause the Nevada
corporation to be organized in Nevada to facilitate the Incorporation
Procedure. Prior to the Merger, the Nevada corporation will have no
significant business assets or liabilities of any consequence and no operating
history. The name of the resulting entity will be First Equity Properties,
Inc. which is to be the name of the Nevada corporation at the time of its
incorporation.
The Merger will be accomplished pursuant to the terms of the proposed
agreement and plan of merger (the "Agreement and Plan of Merger"). As a result
of the Merger, (i) the California Corporation would cease to exist as a
separate entity, (ii) the Nevada corporation, by operation of law, would
succeed to all the rights and properties, and be subject to all the obligations
and liabilities of the Trust incorporated as the California Corporation
including those under the Confirmed Plan, (iii) each of the current Trustees of
the Trust would continue to serve as a director of the Nevada corporation until
his initial term expires under the Nevada corporation's Articles of
Incorporation or until a successor is elected and (iv) existing Shareholders
would automatically become stockholders of the Nevada corporation by the deemed
simultaneous exchange of all shares of the California Corporation (the
successor to the Trust) for newly issued Nevada Common Stock on a basis of a
one-for-one exchange (the "One-for-One Exchange"). The issuance of Nevada
Common Stock via the One-for-One Exchange will not affect the proportionate
security holdings of any Shareholder of the Trust, either individually or in a
group.
Shareholders will not be required to surrender any of their
certificates held representing shares of beneficial interest no par value of
the Trust (an "Old Share") in exchange for Nevada Common Stock certificates.
If the Shareholders approve the Incorporation Procedure and
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if it is implemented, Shareholders will receive a certificate representing the
number of shares of Nevada Common Stock to which they are entitled from
TranSecurities International, Inc. in Spokane, Washington (the transfer agent
for the Trust and the Nevada corporation).
SHAREHOLDERS OF THE TRUST WILL NOT HAVE ANY DISSENTERS'
RIGHTS OF APPRAISAL WITH RESPECT TO THE INCORPORATION PROCEDURE
Although the Trust has not applied to the Internal Revenue Service for
a ruling (because of the cost and time involved) to confirm that the
Incorporation Procedure will qualify as a reorganization under Section
368(a)(1)(F) of the Internal Revenue Code of 1986, as amended (the "Code"),
management has been advised that the Incorporation Procedure will qualify as a
reorganization under the Code and that the Nevada corporation will be treated
as the same taxpayer as the Trust for federal income tax purposes. The result
is that the conversion of the Trust into the Nevada corporation will be
irrelevant for federal income tax purposes, have no effect upon any loss
carryforward of the Trust and no gain or loss will be recognized by the Trust
as a result of such transaction. Since the Trust has not qualified as a "real
estate investment trust" for several years, and is subject to treatment as a
corporation for federal tax purposes, the Incorporation Procedure will have no
effect upon that status.
The discussion of the principal terms of the Merger contained herein
is qualified in its entirety by reference to the Agreement and Plan of Merger.
THE PROPOSED INCORPORATION PROCEDURE IS A SINGLE UNIFIED PROPOSAL TO BE
APPROVED OR REJECTED BY SHAREHOLDERS IN ITS ENTIRETY. If Shareholders do not
approve the Incorporation Procedure, the Trust would not incorporate in
California, the formation of the Nevada corporation as a wholly-owned
subsidiary of the Trust will not occur, and the Merger with the Nevada
corporation and the attendant One-for-One Exchange will not occur. Rather, the
Trust would continue to operate as an unincorporated California business trust,
subject to the provisions set forth in the First Amended and Restated
Declaration of Trust dated November 10, 1983 (the "Declaration of Trust").
PRINCIPAL REASONS FOR THE INCORPORATION PROCEDURE
The members of the Board of Trustees believe the Trust needs a fresh
start with a new name and that the Incorporation Procedure will afford the
Nevada corporation (i) the opportunity for enhanced long-range planning,
flexibility and long-term growth as a perpetual-life corporation as opposed to
the more limited alternatives of a business trust, (ii) certain acquisition
safeguards not available to the Trust, which safeguards are designed to (a)
discourage unsolicited, non-negotiated takeover attempts that can be unfair to
stockholders, pressure management and disrupt the operational continuity,
long-range planning and long-term growth of the business of the Nevada
corporation as successor to the Trust and (b) encourage persons who may wish to
make a bona fide offer to acquire the Nevada corporation to negotiate with the
Board of Directors in good faith and to submit a proposal that is fair and
equitable to the Nevada corporation and all its stockholders and (iii) greater
legal certainty in matters of corporate governance and indemnification as a
corporation as opposed to a business trust and hence greater predictability in
the conduct of its business as a corporation under Nevada law. Because no
substantial body of law has developed concerning the legal status, rights,
obligations and liabilities of business trusts and their trustees and
shareholders, there is a degree of uncertainty as to the legal principles
applicable to business trusts under the laws of the various states, including
California, the jurisdiction of organization of the Trust. By contrast, the
status, rights, obligations and liabilities of the stockholders, officers and
directors of a corporation are governed not only by a corporation's charter
documents, but also by comprehensive statutes and a body of case law
interpreting those statutes and their application to a corporation and its
charter documents. The Board of Trustees believes that the Articles of
Incorporation of the Nevada corporation, coupled with the existence of a
growing body of Nevada corporate law, would allow the Nevada corporation to
plan the legal aspects of its future activities with more certainty and
predictability than currently exists with respect to the Declaration of Trust
and the less well-defined provisions of law currently applicable to the
operations of a business trust.
Consummation of the Incorporation Procedure is contingent upon
Shareholder approval of the Incorporation Procedure. Pursuant to the
California General Corporation Law, the affirmative vote of the holders of a
majority of the outstanding Shares will be required to approve the
Incorporation Procedure. In addition, Section 12.3 of the Declaration of Trust
requires a vote of a majority of the Trustees and of the Shareholders to
approve the Incorporation Procedure. The Trustees have unanimously approved
the Incorporation Procedure.
The Board of Trustees may, in its discretion and without further
approval by Shareholders, abandon the proposed Incorporation Procedure, in
whole or in part, at any time before the Merger is effective if any event
occurs that, in the Board's opinion, makes consummation of any part of the
Incorporation Procedure inadvisable. The Trustees anticipate consummating the
Incorporation Procedure as promptly as practicable after approval by the
Shareholders.
GREATER LEGAL CERTAINTY
The Trustees urge Shareholders to adopt the Incorporation Procedure
because it will convert the Trust from a California business trust to the more
legally certain and predictable form of a Nevada corporation. For the purpose
of carrying on a business enterprise, the business trust is an adaptation of
the traditional common law trust. Business trusts are entities created by
agreement or under a governing document, such as the Declaration of Trust, for
which there is no prescribed form. Accordingly, the powers, rights and
obligations of the Trustees and Shareholders of the Trust are determined to a
large extent by contractual interpretation, rather than by reference to powers
or privileges under any statute.
Unlike a corporation, many basic legal issues affecting a business
trust are not determined by a body of statutory law, but must be spelled out in
the declaration of trust. Subject to overriding principles of common law, the
declaration of trust serves as a substitute for a
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corporate statute. Thus, management and shareholders of business trusts must
look to the trust instrument or common law to determine questions which would
usually be answered by a corporation statute if that form were selected. On
the other hand, state corporation statutes generally provide detailed and
comprehensive rules concerning corporate organization, the composition,
election, and duties of boards of directors and corporate officers, the form
and issuance of equity shares (including voting, dividend, and merger rights),
rules of meetings, mergers, reorganizations, dissolutions, and derivative
actions. Moreover, many matters not detailed in the statutes are usually
covered by a well developed body of case law.
Although the business trust form is regarded as legal and valid in
California, the jurisdiction of organization of the Trust, no substantial body
of law has developed concerning the legal status, rights, obligations and
liabilities of business trusts and their trustees and shareholders, and there
is a degree of uncertainty as to the legal principles applicable to business
trusts under the laws of California. For example, although the trustees of a
business trust are clearly fiduciaries owing a duty as such to the trust and
its shareholders, it might be asserted that their fiduciary duties are governed
by principles of law and equity applicable to traditional common law trusts,
rather than by the standards of care, loyalty and business judgment applied to
the directors of a corporation and by the standards defined in the governing
trust documents.
By contrast, the status, rights, obligations and liabilities of the
stockholders, officers and directors of a corporation are governed not only by
a corporation's charter documents, but also by comprehensive statutes and a
body of case law interpreting those statutes and their application to a
corporation and its charter documents. The existence of a more well-defined
body of law allows a corporation to plan the legal aspects of its future
activities with more certainty and predictability than currently exists with
respect to the Declaration of Trust and the less well-defined provisions of law
currently applicable to the operations of a business trust. Additionally,
state law governing qualification of an out-of-state business entity to
transact business is generally clearer for corporations than for business
trusts. Furthermore, corporations are far more numerous than business trusts
and are more familiar to investors or persons doing or proposing to do business
with a company.
Nevada has been selected as the proposed new governing jurisdiction
because, among other reasons, the Trustees believe that the Nevada Revised
Statutes ("NRS") set forth modern statutes that will meet the business needs of
the Trust once the Incorporation Procedure is effected. The NRS is regarded as
an extensive and modern corporate statute. In adopting the NRS, the
legislature in Nevada has demonstrated an ability and willingness to act
quickly and effectively to meet businesses' changing needs. For many years,
Nevada has followed a policy of encouraging incorporation in that state and, in
furtherance of that policy, has adopted comprehensive, modern, flexible
corporate statutes (very similar to those in effect in Delaware) that are
periodically updated and reviewed to meet changing business needs. The Trust's
Board of Trustees believes that the Incorporation Procedure will allow the
Nevada corporation to plan the continuing legal aspects of its future
activities with more certainty and predictability than presently exists with
respect to the Declaration of Trust and the less-well defined provisions of law
currently applicable to the operations of a business trust. This certainty and
predictability could be beneficial in attracting and retaining qualified
management for the Nevada corporation, in part because Nevada corporate law
provides, among other things, for a greater degree (and greater clarity) in
indemnification of directors and officers than is found with respect to
California business trusts. Incorporating in Nevada will also enable the Trust
to avoid significant annual franchise taxes assessed in certain other states of
incorporation. Further, the Nevada corporation, as a corporation incorporated
in Nevada, will not be required to pay annual franchise or income taxes. The
only annual corporate fee in Nevada which the Nevada corporation will be
required to pay is an $85 filing fee.
REPLACEMENT OF THE FIXED-LIFE TRUST WITH A PERPETUAL-LIFE CORPORATION
The Trustees urge Shareholders to adopt the Incorporation Procedure
because, among other things, it will replace the limited duration Trust with a
perpetual-life corporation that the Board of Trustees believes will have more
flexibility in holding and liquidating investments to enhance long-range
planning and long-term growth. Corporations may provide for perpetual
existence, while even non-liquidating business trusts generally have only
limited duration.
Section 12.2 of the Declaration of Trust provides that the Trust shall
continue until the expiration of twenty years after the death of the last
survivor among the initial four Trustees. Such individuals, assuming regular
mortality, could live up to another forty years or more, but no assurance can
be made that such assumption is correct. While it can conceivably be argued
that the Trust's finite term may be another 40 to 60 years (which might be
viewed by some as equivalent to perpetual existence), that termination may
occur sooner. The Trust may also be terminated by the vote or consent of
holders of a majority of all outstanding Shares. In contrast, the Nevada
corporation provides for perpetual duration, unless it is terminated by its
Board of Directors acting with stockholder consent. The finite life provisions
make it more difficult for the Trust to obtain bank credit by potentially
impairing a lender's position. Consequently, the Trust might be required in
the future to maintain much greater cash reserves if the finite life provision
is continued. The Trust will have to expend funds to maintain its properties
regardless of whether the Incorporation Procedure is adopted. Although the
amount of such expenditures might be less in the short term and is expected to
be greater over the long term if the Incorporation Procedure is adopted, it is
anticipated that the Trust may, in time, have greater access to bank credit to
the extent that its assets are not encumbered to finance future renovations and
improvements.
THE ONE-FOR-ONE EXCHANGE OF SHARES
As part of the Merger, existing Shareholders of the Trust resulting
from the Plan would automatically become stockholders of the Nevada corporation
by the deemed exchange of all shares of the California corporation for newly
issued Nevada Common Stock on the basis of the One-for-One Exchange. Each
share of Nevada Common Stock would have $0.01 par value, unlike each existing
Share of the Trust, which has no par value. The One-for-One Exchange would
result in issuance by the Nevada corporation of a number of shares of Nevada
Common Stock equal to the number of Shares of the Trust deemed to be
outstanding under the Confirmed Plan immediately before commencement of the
Incorporation Procedure. The One-for-One Exchange will not affect any
Shareholder's proportionate equity interest in the Trust. Upon
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consummation of the Incorporation Procedure, each outstanding share of Nevada
Common Stock shall be entitled to one vote at each meeting of stockholders, as
is the case with each currently outstanding Share of the Trust. Prices for the
Nevada corporation Common Stock will ultimately be determined in the
marketplace and may be influenced by many factors, including investor
perception of the changes effected through the Incorporation Procedure.
Assuming the proposed Incorporation Procedure is approved, Shareholders will be
furnished with certificates representing Nevada Common Stock and will not be
required to surrender certificates representing old shares.
COMPARISON OF PRINCIPAL DIFFERENCES BETWEEN THE TRUST AND THE NEVADA
CORPORATION.
If the proposed Incorporation Procedure is approved and consummated,
the business of the Trust will be conducted by the Nevada corporation rather
than by a business trust organized under the laws of the State of California.
The rights and powers of the Trust and its Shareholders and Trustees currently
are governed primarily by the Declaration of Trust and the Bylaws and, to a
lesser extent, by California business trust law, while those of the Nevada
corporation and its stockholders and directors would be governed by Articles of
Incorporation and Bylaws and by Nevada corporate law. Set forth below is a
comparison of principal differences between those respective rights and powers.
Although the Trustees believe that the following discussion sets forth the
material differences between the rights of Shareholders of the Trust and
stockholders of the Nevada corporation, the comparison does not purport to be a
complete statement of all differences and is qualified in its entirety by
reference to the proposed Articles of Incorporation and Bylaws of the Nevada
corporation and the Declaration of Trust and the Trustees' Regulations. The
full text of the Nevada corporation's Articles of Incorporation and Bylaws as
well as a copy of the Agreement and Plan of Merger are available to
Shareholders upon written request at no charge to Wespac Investors Trust III,
10670 North Central Expressway, Suite 501, Dallas, Texas 75231, Attention:
Secretary.
MANAGEMENT AFTER INCORPORATION PROCEDURE
CONSTITUENCY OF THE BOARD. The current Board of Trustees consists of
three members. The proposed Articles of Incorporation of the Nevada
corporation sets the number of initial directors at three. The exact number of
directors may be fixed or changed by the affirmative vote of a majority of the
entire Board of Directors, from time to time, within the limits set by the
Articles of Incorporation. By comparison, the Declaration of Trust provides
that the number of Trustees shall be no less than three nor more than fifteen
as determined by the vote of the Shareholders of the Trust or the Trustees.
Notwithstanding any limitation on the maximum number of directors in the
Articles of Incorporation, whenever the Nevada corporation issues preferred
stock and gives its holders the right to elect a director at an annual or
special meeting of stockholders, then the election, term of office, filling of
vacancies and other features of such directorships shall be governed by the
terms of the Articles of Incorporation or the resolution(s) adopted by the
Board of Directors applicable thereto. Any vacancy on the Board of Directors
of the Nevada corporation will be filled by a vote of the majority of the
directors then in office or by a sole remaining director. Any director elected
to fill a vacancy not resulting from an increase in the number of directors
shall have the same remaining term as that of his predecessor. The Declaration
of Trust provides for filling Board of Trustees vacancies by the remaining
Trustees or by the vote or consent of a majority of the outstanding shares
entitled to vote thereon.
The Declaration of Trust requires that a majority of Trustees be
persons who are not affiliates of the Advisor (Section 3.3). Under the
Declaration of Trust, "Affiliate" is defined "as to any person, any other
person who owns beneficially, directly, or indirectly, 5% or more of the
outstanding capital stock, shares or equity interests of such person or of any
other person which controls, is controlled by, or is under common control with,
such person or is an officer, retired officer, director, employee, partner, or
trustee of such person or of any other person which controls, is controlled by,
or is under common control with, such person." Under the Declaration of Trust,
"Person" includes "individuals, corporations, limited partnerships, general
partnerships, joint stock companies or associations, joint ventures,
associations, companies, trusts, banks, trust companies, land trusts, business
trusts, or other entities and governments and agencies and political
subdivisions thereof." By contrast, Article SIXTH of the Articles of
Incorporation does not require that any of the Nevada corporation's directors
be independent of the advisor or any other person. It should be noted,
however, that at present the Trust has no contractual advisor.
THE DIRECTOR REMOVAL PROVISION. Under Article ELEVENTH of the
Articles of Incorporation (the "Director Removal Provision"), each director of
the Board may be removed only by the affirmative vote of the holders of not
less than two-thirds of the outstanding stock of the Nevada corporation then
entitled to vote for the election of such director. By contrast, under the
Declaration of Trust, Trustees may be removed by vote or consent of the holders
of two-thirds of the outstanding Shares entitled to vote thereon, or by
two-thirds of the Trustees.
THE NEVADA CORPORATION'S ADVISOR. Article THIRTEENTH of the Articles
of Incorporation provides that the Board of Directors may authorize advisory
agreements. There is no requirement that the Board of Directors obtain
stockholder approval prior to any renewal or modification of such advisory
agreements (although the Board of Directors intends to continue this practice).
In contrast, the Declaration of Trust currently requires that all advisory
agreements have an initial term of no more than two years and provide for
annual renewal extension thereafter, subject to shareholder approval. The
Declaration of Trust also provides for termination of advisory agreements
without penalty by the Board of Trustees (by majority vote including a majority
of unaffiliated Trustees) upon 60 days' written notice. The Nevada
corporation's Articles of Incorporation leave termination provisions regarding
advisory agreements to the negotiation of the parties. Neither the Nevada
corporation's Articles of Incorporation nor the Declaration of Trust requires
shareholder approval for the selection of the advisor, per se. Transactions of
the Nevada corporation with any advisor or affiliate thereof would be governed
by the NRS and the unified related-party provisions contained in Article
FOURTEENTH of the Articles of Incorporation. Prior to entering certain related
party transactions, except certain specified contracts including an advisory
agreement, the Board of Directors would be required to agree that the
transaction is in the best interest of the corporation and that no other
opportunity exists that is as good as the opportunity presented by such
transaction. Direct contractual agreements for services, such as an advisory
agreement between the Nevada corporation and an advisor, would require the
prior approval of
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a majority of the directors. The Articles of Incorporation impose fewer
explicit restrictions on compensation of the Nevada corporation's advisor than
does the Declaration of Trust. Article THIRTEENTH of the Articles of
Incorporation provides that the compensation payable under an advisory
agreement must be approved as "fair and equitable" by the Board of Directors,
and the Restrictions on Related-Party Transactions Provision also applies to
compensation of the advisor.
LIABILITY OF CERTAIN PERSONS
THE MANAGEMENT LIABILITY PROVISION. The Incorporation Procedure will
enable the Nevada corporation to define the liability of corporate officers and
directors with greater precision. The Board of Trustees believes that limited
liability will help retain and attract the best possible officers and
directors. Currently, each of the Trustees has been offered contractual
indemnification to the fullest extent permitted by the Declaration of Trust or
to the fullest extent not prohibited under applicable law. Under the
Management Liability Provision (Article NINTH of the Articles of
Incorporation), the directors will not have personal liability to the Nevada
corporation or its stockholders for monetary damages for any breach of their
fiduciary duties as directors (including, without limitation, any liability for
gross negligence in the performance of their duties), except (i) for acts or
omissions which involve intentional misconduct, fraud or a knowing violation of
law or (ii) for the payment of dividends in violation of NRS 78.300. By
precluding personal liability for certain breaches of fiduciary duty, including
grossly negligent business decisions in evaluating takeover proposals to
acquire the Nevada corporation, the Management Liability Provision supplements
indemnification rights afforded under the Nevada corporation's Articles of
Incorporation and Bylaws which provide, in substance, that the Nevada
corporation shall indemnify its directors, officers, employees and agents to
the fullest extent permitted by the NRS and other applicable laws.
The Articles of Incorporation provide that the Nevada corporation
"shall indemnify to the fullest extent authorized or permitted by law (as now
or hereafter in effect) . . . to any person made or threatened to be made a
party or witness to any action, suit or proceeding (whether civil or criminal
or otherwise) by reason of the fact that such person is or was a director,
officer, employee or agent of the Nevada corporation . . ." Further, the Bylaws
provide that "[e]ach officer, director or employee . . . shall be indemnified
. . . to the full extent permitted under Chapter 78 of the Nevada Revised
Statutes . . . and other applicable law." Pursuant to the NRS, a corporation
may indemnify persons for expenses related to an action, suit or proceeding,
except an action by or in the right of the corporation, by reason of the fact
that such person is or was a director, officer, employee or agent, if such
person acted in good faith and in a manner which he reasonably believed to be
in or not opposed to the best interests of the corporation, and with respect to
any criminal action or proceeding, if such person had no reasonable cause to
believe his conduct was unlawful. The expenses indemnified against in this
provision include attorneys' fees, judgments, fines and amounts paid in
settlement actually and reasonably incurred in connection with the action, suit
or proceeding. The NRS further provides that a corporation may indemnify
persons for attorneys' fees related to an action, suit or proceeding by or in
the right of the corporation to procure a judgment in its favor by reason of
the fact that such person is or was a director, officer, employee or agent, if
such person acted in good faith and in a manner which he reasonably believed to
be in or not opposed to the best interests of the corporation. The corporation
may also indemnify directors for amounts paid for judgments and settlements in
such a suit, but only if ordered by a court after determining that the person
is "fairly and reasonably" entitled to indemnity.
The Management Liability Provision contained in the Articles of
Incorporation is analogous to Article 5 of the Declaration of Trust. Article
5, however, explicitly exculpates Trustees, officers, employees and agents of
the Trust while the Management Liability Provision explicitly exculpates only
directors. Further, under the Declaration of Trust, a Trustee would not be
indemnified for liability arising from gross negligence or reckless disregard
of duty, whereas a director of the Nevada corporation may be indemnified for
such liability under the Articles of Incorporation.
The Management Liability Provision would not insulate directors of the
Nevada corporation from liability to the Nevada corporation or its stockholders
for (i) acts or omissions which involve intentional misconduct, fraud or a
knowing violation of law or (ii) payment of distributions in violation of NRS
78.300. The limitation of liability applies only to claims by the Nevada
corporation or its stockholders and does not preclude or limit recovery of
damages by others, such as creditors. Furthermore, the limitation of liability
applies prospectively only and would therefore not affect a Trustee's potential
liability for acts or omissions in his capacity as a Trustee prior to the
effective time of the Merger.
As herein described, directors and officers of the Nevada corporation
are indemnified against certain liabilities under provisions of the Articles of
Incorporation and Bylaws. Insofar as indemnification for liabilities arising
under the Securities Act of 1933, as amended (the "Securities Act") may be
permitted to directors, officers or persons controlling the registrant pursuant
to the foregoing provisions, the registrant has been informed that in the
opinion of the Securities and Exchange Commission (the "Commission") such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
In addition, the Management Liability Provision provides, as permitted
by the NRS, that the Nevada corporation may maintain insurance, at its expense,
to protect itself and any director, officer, employee or agent of the Nevada
corporation or another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise against such expense, liability or loss,
whether or not the Nevada corporation would have the power to indemnify such
person against any such expense, liability or loss under the NRS. Section 7.4
of the Trust's Declaration of Trust is analogous to this portion of the
Management Liability Provision. Although the Trust has had the power to
purchase such insurance, to date the Trust has not done so.
The Trustees and officers of the Trust are indemnified under the
Declaration of Trust against judgments, fines, amounts paid on account of and
reasonable expenses (including attorneys' fees) incurred in connection with the
defense of suits or proceedings in which a claim or liability against a person
is asserted by reason of the fact that he is a Trustee or officer of the Trust,
as the case may be. Currently, each of the Trustees of the Trust has been
offered contractual indemnification to the fullest extent permitted by the
Declaration of Trust or to the fullest extent not prohibited under applicable
law.
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SHAREHOLDER LIABILITY. Limitations on the potential personal
liability of stockholders for the acts and obligations applicable to the Nevada
corporation under Nevada law are comparable to the limitations under California
law and the Declaration of Trust applicable to Shareholders of the Trust with
respect to the Trust's acts and obligations. Though the Articles of
Incorporation do not expressly limit stockholder liability, pursuant to Article
8, Section 3, of the Nevada constitution and Section 78.225 of the NRS,
stockholders are not personally liable for the payment of a corporation's
debts, except to the extent a stockholder has not paid the consideration for
which that stockholder's shares were authorized to be issued or which was
specified in a written subscription agreement between the corporation and the
stockholder. Similarly, the Declaration of Trust provides that Shareholders
shall not be subject to any personal liability for the acts or obligations of
the Trust and that every written undertaking made by the Trust shall contain a
provision that such undertaking is not binding on any Shareholder personally.
Under Section 23001 of the California Corporations Code, no shareholder of a
real estate investment trust like the Trust shall be personally liable for any
liabilities, debts or obligations of, or claims against, such real estate
investment trust. Section 23002 of the California Corporations Code further
provides that Section 23001 applies to any real estate investment trust under
the laws of California with respect to liabilities, debts, obligations and
claims wherever arising. Under Section 23000 of the California Corporations
Code, the Trust is classified as a "real estate investment trust" for purposes
of the foregoing provisions of California law. Thus, it appears that the
Incorporation Procedure will not materially alter Shareholder liability in
California. It should be noted that the law regarding other states where the
Trust does business might treat Shareholders' liability in a different manner
(i.e., impose liability) if a court in such state were not to apply California
law to such issue.
BUSINESS ACTIVITIES AFTER INCORPORATION PROCEDURE
No significant change in the nature of the Trust's business is
anticipated as a result of the Incorporation Procedure, though the Nevada
corporation will be empowered under the Articles of Incorporation to engage in
a wider range of business activities in the future than those currently
permitted under the Declaration of Trust. Article THIRD of the Articles of
Incorporation states that the Nevada corporation may engage in any lawful
activity. While, unlike the Declaration of Trust, the Articles of
Incorporation neither dictate specific investment policies nor formally
restrict particular activities of the Nevada corporation, it is currently
expected that the investment policies and activities of the Nevada corporation
will be substantially similar to the existing investment policies and
activities of the Trust. Notwithstanding such expectation, the Nevada
corporation may avail itself of the greater flexibility permitted by the
Articles of Incorporation to make certain investments that the Trust is not
authorized to make. No assurance can be given that the Nevada corporation's
investment policies will not change if, in the opinion of the Board of
Directors, circumstances so require, and certain investment policies may be
changed without stockholder approval.
Section 4.3 of the Declaration of Trust prohibits or restricts the
Trust from a number of specified activities, foreign currency, commodities, or
commodity futures contracts, (ii) in contracts for sale of real estate.
Subject to the restrictions in the Declaration of Trust and the restrictions on
related-party transactions discussed below, the Trustees may change the
investment policy of the Trust without Shareholder approval if they determine
that such change would be in the best interest of the Trust. Certain of the
restrictions contained in Section 4.3 were designed to facilitate the Trust's
continuing qualification as a "REIT" under the Code; however, the Trust status
as a REIT terminated several years ago. Nevertheless, the Nevada corporation
would have substantially greater flexibility and fewer restrictions on its
investment policy than the Trust presently has.
THE RESTRICTIONS ON RELATED-PARTY TRANSACTIONS PROVISION. Article
FOURTEENTH of the Articles of Incorporation provides that the Nevada
corporation shall not, directly or indirectly, contract or engage in any
transaction with (i) any director, officer or employee of the Nevada
corporation, (ii) any director, officer or employee of the advisor, (iii) the
advisor or (iv) any affiliate or associate (as such terms are defined in Rule
12b-2 under the Exchange Act, as amended) of the Nevada corporation or any
person identified in the foregoing clauses (i) through (iii) unless (a) the
material facts as to the relationship among or financial interest of the
relevant individuals or persons and as to the contract or transaction are
disclosed to or are known by the Board of Directors or the appropriate
committee thereof and (b) the Board of Directors or committee thereof
determines that such contract or transaction is fair to the Nevada corporation
and simultaneously authorizes or ratifies such contract or transaction by the
affirmative vote of a majority of the independent directors of the Nevada
corporation entitled to vote thereon. Article FOURTEENTH defines an
"independent director" as one who is neither an officer or employee of the
Nevada corporation nor a director, officer or employee of the Nevada
corporation's advisor. Stockholders should note that Article FOURTEENTH does
not supplant Nevada law regarding related-party transactions; rather, Article
FOURTEENTH provides additional protection against the possibility of
related-party transactions unfavorable to the Nevada corporation. Under the
NRS, a contract or transaction between a corporation and one or more of its
directors or officers, or between a corporation and any corporation, firm or
association in which one or more of its directors or officers are directors or
officers or are financially interested, is not void or voidable solely for this
reason, or solely because the director or officer is present at the meeting of
the board of directors or a committee thereof which authorizes or approves the
contract or transaction, because the vote or votes of common or interested
directors are counted for that purpose, provided that one of the four
requirements below is met:
(i) The fact of the common directorship, office or financial
interest is disclosed or known to the board of directors or committee
and noted in the minutes, and the board or committee authorizes,
approves or ratifies the contract or transaction in good faith by a
vote sufficient for the purpose without counting the vote or votes of
the common or interested director or directors.
(ii) The fact of the common directorship, office or financial
interest is disclosed or known to the stockholders, and they approve
or ratify the contract or transaction in good faith by a majority vote
of stockholders holding a majority of voting power. The votes of the
common or interested directors or officers must be counted in any such
vote of stockholders.
(iii) The fact of the common directorship, office or financial
interest is not disclosed or known to the director or officer at the
time the transaction is brought before the board of directors of the
corporation for action.
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(iv) The contract or transaction is fair as to the corporation
at the time it is authorized or approved.
The basic restriction on transactions between the Trust and related
parties contained in the Declaration of Trust is similar to restrictions
contained in the Nevada corporation's Articles of Incorporation and the NRS.
Section 2.17 of the Declaration of Trust provides that, absent fraud and except
as otherwise prohibited by the Declaration of Trust, a contract, act or other
transaction between the Trust and any other person, or in which the Trust is
interested, shall be valid even though one or more of the Trustees or officers
of the Trust (i) are directly or indirectly interested in, or connected with,
or are trustees, partners, directors, officers or related officers of such
other person or (ii) individually or jointly with others, are parties to or
directly or indirectly interested in, or connected with, such contract, act or
transaction. Further, no Trustee or officer shall be under any disability from
or have any liability as a result of entering into any such contract, act or
transaction provided that (a) such interest or connection is disclosed or known
to the Trustees and thereafter the non-interested Trustees vote to authorize
such contract, act or other transaction: (b) such interest or connection is
disclosed or known to the Shareholders and thereafter such contract, act or
transaction is approved by the Shareholders; and (c) such contract, act or
transaction is fair and reasonable to the Trust at the time it is authorized by
the Trustees or by the Shareholders.
The Declaration of Trust also contains specific restrictions on
certain transactions between the Trust and certain other persons. Although the
standards and procedures by which such transactions are permissible under the
Nevada corporation's Articles of Incorporation and Nevada law, on the one hand,
and the Declaration of Trust, on the other, are not dissimilar in the opinion
of the Board of Trustees, the Declaration of Trust absolutely prohibits certain
transactions between the Trust and certain related parties, regardless of the
fairness of the terms of such transactions and whether such transactions are
authorized by a majority of unaffiliated Trustees or approved by the
Shareholders. Because the Nevada corporation's Articles of Incorporation
contains no analogous prohibition, the Incorporation Procedure could
potentially permit the Nevada corporation greater flexibility to engage in a
larger class of transactions with related parties than the more limited class
of transactions between the Trust and certain related parties currently
permitted by the Declaration of Trust. Nevertheless, the Board of Trustees
believes that the restrictions in the Nevada corporation's Articles of
Incorporation and the restrictions mandated by the NRS will offer adequate
protection to ensure the fairness and propriety of transactions between the
Nevada corporation and related parties.
COMPARISON OF THE SECURITIES OF THE NEVADA CORPORATION AND THE TRUST
COMMON EQUITY. The Nevada corporation is authorized by its Articles
of Incorporation to issue up to 40,000,000 shares of Nevada Common Stock. By
contrast, the Trust may issue an unlimited number of Shares, and such Shares
have no par value per share. The par value of the common stock of the Nevada
corporation has been fixed at $0.01 per share because the filing fees
associated with organizing the Nevada corporation are considerably less
expensive than if the Nevada corporation had common stock with no par value.
With respect to conversion, preemptive, dividend and (except to the
extent the Nevada corporation may issue special or preferred stock in the
future) voting rights, the Nevada Common Stock is comparable to the Shares. As
with the Shares, each holder of Nevada Common Stock will be entitled to one
vote for each share on all matters submitted to the stockholders. Similarly,
there is no cumulative voting, redemption right, sinking fund provision or
right of conversion with respect to either the Nevada Common Stock or the
Shares. The holders of the Nevada Common Stock will not have preemptive rights
to acquire additional shares of Nevada Common Stock when issued, as Trust
Shareholders currently have no such preemptive rights. All outstanding shares
of the Nevada corporation issued in the One-for-One Exchange will be fully paid
and nonassessable.
DISTRIBUTIONS. All shares of common stock of the Nevada corporation
will be entitled to share equally in dividends from funds legally available
therefor, when, as and if declared by the Board of Directors of the Nevada
corporation, and upon liquidation or dissolution of the Nevada corporation,
whether voluntary or involuntary, to share equally in the assets of the Nevada
corporation available for distribution to stockholders, subject to any rights
of holders of special stock, as discussed below. Similarly, the Declaration of
Trust provides that Shareholders have no right to any dividend or distribution
unless and until the Trustees declare such dividend or distribution. The
Declaration of Trust imposes an additional requirement not contained in the
Nevada corporation's Articles of Incorporation; the Trustees must furnish the
Shareholders with a statement in writing not later than 60 days after the close
of each fiscal year in which a distribution is made identifying the source of
the funds distributed (Section 11.3). The Trustees currently intend to
continue this practice after the Incorporation Procedure.
The Declaration of Trust provides that cash distributions may be paid
from any source, in the discretion of the Trustees (Section 11.1). In
contrast, under Nevada law, the Nevada corporation may pay dividends from any
source, but only if (i) the Nevada corporation would continue to be able to pay
its debts as they become due in the usual course of business and (ii) the
Nevada corporation's total assets would continue to equal or exceed the sum of
its total liabilities plus the amount that would be needed, if the Nevada
corporation were to be dissolved at the time of distribution, to satisfy the
preferential rights upon dissolution of stockholders whose preferential rights
are superior to those receiving the distribution.
PREFERRED STOCK. Unlike the Declaration of Trust, the Articles of
Incorporation of the Nevada corporation authorize the future issuance of up to
5,000,000 shares of preferred stock by action of the Board of Directors without
stockholder approval, which may be issued in one or more series with such
preferences, qualifications, limitations and rights as shall be determined by
the Board of Directors of the Nevada corporation. Although no preferred stock
has been issued or is being issued as part of the Incorporation Procedure, and
the Board of Directors has no present intention of issuing any special stock,
it is deemed advisable to have such shares available for issuance (i) for
possible use to raise additional equity capital or to make acquisitions, (ii)
as an acquisition safeguard to dilute the stock ownership and voting power of a
person or entity seeking to obtain control of the Nevada corporation by (a)
privately placing such preferred stock with purchasers not hostile to the
Nevada corporation's Board of Directors to oppose an unsolicited takeover bid
or (b) authorizing holders of a series of preferred stock to vote as a class,
either separately or with the holders of the Nevada Common Stock, on any
merger, sale or exchange of assets or any other extraordinary
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corporate transaction involving the Nevada corporation or (c) for such other
uses as the Board of Directors of the Nevada corporation may deem appropriate
from time to time. In contrast, the Trust is not authorized to issue special
or preferred shares.
WARRANTS. The Trust has no outstanding warrants, options or rights
for the purchase of Shares. The Nevada corporation has no outstanding
warrants, options or rights and does not currently anticipate issuing any
warrants, options or rights for the purchase of its capital stock.
NO RESTRICTIONS ON OWNERSHIP AND TRANSFER OF COMMON STOCK. Neither
the Nevada corporation's Articles of Incorporation nor its Bylaws contain any
restriction on the transfer or percentage ownership of shares of the Nevada
Common Stock. The governing documents of the Trust specifically contain
certain restrictions which deal with ownership of the Shares by corporate
Shareholders and others insofar as it affected the continued qualification for
taxation as a REIT under the Code. However, the REIT status was terminated in
the past.
STOCKHOLDER MANAGEMENT RELATIONS
THE CONSENT PROVISION. The Consent Provision (Article EIGHTH of the
Articles of Incorporation) provides that stockholders of the Nevada corporation
may act without a duly called annual or special meeting by written consent
setting forth the action to be taken and signed by stockholders having not less
than the minimum number of votes that would be necessary to authorize or take
action at a meeting at which all shares entitled to vote thereon were present
and voting. Under the NRS, unless otherwise provided in a corporation's
articles of incorporation, any action which is required or permitted to be
taken at an annual or special meeting of stockholders may instead be taken
without a meeting if a written consent setting forth the action to be taken is
signed by stockholders holding at least a majority of the voting power, or of
such greater proportion as is required for such action. Like the Nevada
corporation's Articles of Incorporation, the Declaration of Trust permits
Shareholders of the Trust to approve certain acts by written consent without a
meeting if such consent sets forth the action so taken, but only if it is
signed by holders of all of the Trust's outstanding Shares.
THE STOCKHOLDER MEETING PROVISION. The Stockholder Meeting Provision
(also set forth in Article EIGHTH of the Articles of Incorporation) provides
that subject to the rights of the holders of any series of preferred stock,
special meetings of stockholders may be called only by the Board of Directors,
the Chairman of the Board or the President of the Nevada corporation.
Stockholders of the Nevada corporation may not by themselves call a special
meeting of stockholders. In contrast to the Stockholder Meeting Provision, the
Declaration of Trust permits Shareholders to call special meetings upon the
written request of Shareholders holding not less than 10% of the outstanding
Shares of the Trust entitled to vote at each meeting (Section 9.1).
The Stockholder Meeting Provision could have the effect of inhibiting
stockholder actions that require a meeting of stockholders unless the Board of
Directors, the Chairman thereof or the President of the Nevada corporation
calls such a meeting. Such meetings can impose considerable expenses upon the
Nevada corporation. The Trustees believe that the Board of Directors will be
in the best position to determine those issues which are properly the subject
of a special meeting of stockholders. In the view of the Board of Trustees,
stockholders would have a full opportunity to make proper proposals at duly
convened stockholder meetings and to request that any such proposal be
presented for consideration to other stockholders in the Nevada corporation's
annual proxy statement.
OTHER PROVISIONS REGARDING STOCKHOLDER-MANAGEMENT RELATIONS. The
Nevada corporation's Bylaws provide, among other things, that any stockholder
entitled to vote in the election of directors of the Nevada corporation's Board
of Directors generally may nominate one or more persons for election as
directors at a meeting only if such stockholder gives not fewer than 35, nor
more than 60, days' prior written notice of intent to make such nomination or
nominations to the Secretary of the Nevada corporation (or, if fewer than 45
days' notice or prior public disclosure of the meeting date is given or made to
stockholders, not later than 10 days following such notice or disclosure).
Each such notice must set forth (i) the name and address of the stockholder who
intends to make the nomination and of the person or persons to be nominated;
(ii) the class and number of shares of stock held of record, owned beneficially
and represented by proxy by such stockholder as of the record date for the
meeting and as of the date of such notice; (iii) a representation that the
stockholder intends to appear in person or by proxy at the meeting to nominate
the person or persons specified in the notice; (iv) a description of all
arrangements or understandings between the stockholder and each nominee and any
other person or persons pursuant to which the nomination or nominations are to
be made by the stockholder; (v) such other information regarding each nominee
proposed by such stockholder as would be required to be included in a proxy
statement filed pursuant to the proxy rules of the Commission; and (vi) the
consent of each nominee to serve as a director of the Nevada corporation if so
elected. The Chairman of the meeting may refuse to acknowledge the nomination
of any person not made in compliance with the foregoing procedure, which is
referred to herein as the "Nomination Provision." Neither the Declaration of
Trust nor the Trustees' Bylaws contains any provisions analogous to the
Nomination Provision.
The Nevada corporation's Bylaws also provide that, in addition to any
other applicable requirements, for business not specified in the notice of
meeting or brought by or at the direction of the Board of Directors of the
Nevada corporation to be properly introduced by a stockholder, the stockholder
must give not fewer than 35, nor more 60, days' prior notice to the Secretary
of the Nevada corporation (or if fewer than 45 days' notice or prior public
disclosure of the meeting date is given or made to stockholders, not later than
10 days following such event). This provision (the "Stockholder Proposal
Provision") does not preclude discussion by any stockholder of business
properly brought before any meeting. Each such notice must set forth (i) a
description of each item of business proposed to be brought before the meeting;
(ii) the name and address of the stockholder proposing to bring such item of
business before the meeting; (iii) the class and number of shares of stock held
of record or owned beneficially and represented by proxy by such stockholder as
of the record date for the meeting and as of the date of such
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stockholder meeting notice; and (iv) all other information that would be
required to be included in a proxy statement filed with the Commission.
Neither the Declaration of Trust nor the Trustees' Regulations contains any
provisions analogous to the Stockholder Proposal Provision.
The Nevada corporation's Bylaws also provide that annual meetings of
stockholders shall be held within the first eight months of the calendar year,
or as soon as practicable thereafter, beginning in 1997. Written or printed
notice of annual and special meetings of stockholders shall be given to
stockholders entitled to vote not less than 10, nor more than 60, days before
the date of such meeting, unless stockholders are to vote upon a proposed
merger, consolidation or disposition of substantially all of the Nevada
corporation's assets, in which case notice shall be given no later than 20, nor
more than 60, days before the date of such meeting. The Declaration of Trust
contains similar provisions except that pursuant to the Declaration of Trust
annual meetings of stockholders are to be held within the first six months
after the end of the preceding fixed year.
A full and correct statement of affairs of the Nevada corporation is
to be prepared annually and submitted at the annual meeting. Such annual
reports will include a balance sheet and a financial statement of operations
for the preceding fiscal year. The Nevada corporation will be subject to the
information requirements of the Exchange Act, as amended, and the balance sheet
and financial statement will be required by such Act to be certified by
independent certified public accountants, although the Bylaws do not impose
such requirement. The Declaration of Trust provides that the Trustees must
mail an annual report not later than 120 days after the close of each fiscal
year. The annual report must include a statement of assets and liabilities and
a statement of income and expenses of the Trust, accompanied by the report of
an independent certified public accountant.
AMENDMENT PROVISIONS
The Bylaw Amendment Provision and the Articles of Incorporation
Amendment Provision (each as defined below) generally require a super-majority
vote for changes in the governing documents of the Nevada corporation submitted
to stockholders. Although those provisions may by themselves have a deterrent
effect on some potential acquisitions of the Nevada corporation, they are
designed primarily to ensure that an acquiror cannot circumvent the acquisition
safeguards contained in the governing documents.
THE BYLAW AMENDMENT PROVISION. Article SEVENTEENTH of the Articles of
Incorporation (the "Bylaw Amendment Provision") expressly authorizes the Nevada
corporation's Board of Directors to make, adopt, alter, amend, change or repeal
the Nevada corporation's Bylaws. The Bylaw Amendment Provision further states
that the stockholders of the Nevada corporation may not make, adopt, alter,
amend, change or repeal the Nevada corporation's Bylaws except upon the
affirmative vote of holders of not less than 66 2/3% of the outstanding stock
of the Nevada corporation entitled to vote thereon. The Trustees are currently
unaware of any controlling judicial precedent under the NRS addressing the
validity of this aspect of the Bylaw Amendment Provision and, therefore, the
matter is not entirely free from doubt. This super-majority voting provision
could enable holders of only 34% of the Nevada Common Stock to prevent other
holders of the Nevada Common Stock who do not approve of certain provisions of
the Bylaws from amending or repealing such provisions. The provision will
prevent a purchaser who acquires a majority of the shares of the Nevada Common
Stock from adopting Bylaws that are not in the best interest of the minority
stockholders or repealing Bylaws that are in such stockholders' interest.
Section 10.8 of the Declaration of Trust vests the power to make, adopt, amend
or repeal Bylaws in the Trustees.
THE ARTICLES OF INCORPORATION AMENDMENT PROVISION. Article
SEVENTEENTH of the Articles of Incorporation (the "Articles of Incorporation
Amendment Provision") requires the affirmative vote of at least 66 2/3% of all
of the Voting Stock to alter, amend or repeal the Bylaw Amendment Provision,
Consent Provision, Stockholder Meeting Provision, Business Combination
Provision, Director Removal Provision, Evaluation Provision and Articles of
Incorporation Amendment Provision, unless a majority of the Nevada
corporation's Board of Directors approves such alteration, amendment or repeal.
In contrast, the Declaration of Trust generally may be amended by
Shareholders holding a majority of the outstanding Shares entitled to vote
thereon, unless the proposed amendment would change certain rights with respect
to any outstanding securities of the Trust, in which case the Declaration of
Trust requires the vote or consent of the holders of two-thirds of the
outstanding Shares entitled to vote thereon.
Although the Declaration of Trust already requires a super-majority
vote for certain proposed amendments, the Articles of Incorporation Amendment
Provision will make it more difficult for stockholders to make changes in the
Articles of Incorporation, including changes designed to enable holders of a
majority of the Nevada Common Stock to obtain control over the Nevada
corporation. However, the Articles of Incorporation Amendment Provision may
help protect minority stockholders from disadvantageous changes supported by
less than a substantial majority of other stockholders.
THE FOREGOING IS ONLY A SUMMARY OF THE SIMILARITIES AND DIFFERENCES
BETWEEN THE NEVADA CORPORATION'S PROPOSED ARTICLES OF INCORPORATION AND BYLAWS,
ON THE ONE HAND, AND THE TRUST'S DECLARATION OF TRUST AND BYLAWS, ON THE OTHER,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE COMPLETE TEXTS OF THOSE
DOCUMENTS.
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INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
The current members of the Board of Trustees of the Trust are Karl L.
Blaha, Georgie Liebelt and F. Terry Shumate. Each of such individuals has been
named as a director of the Nevada corporation in the proposed Articles of
Incorporation. If the Incorporation Procedure is approved by the Shareholders,
such individuals will serve as the directors of the resulting entity until the
first annual meeting of shareholders to be held in accordance with requirements
of the law. In the event the Incorporation Procedure is not approved by the
Shareholders, the Trust will call an annual meeting of shareholders to be
scheduled during 1997 at such time as designated by such Trustees as
appropriate, following Wespac obtaining audited financial statements for the
fiscal year ending December 31, 1996, and becoming current with reporting
requirements of the Commission. The amount of any possible benefit to any such
individual as a result of approval of the Incorporation Procedure is not
directly quantifiable at this time.
SOLICITATION OF VOTES IN FAVOR OF INCORPORATION PROCEDURE
This Information Statement is being furnished to Shareholders to
solicit a vote in favor of the Incorporation Procedure pursuant to an Order of
the Court. The cost of soliciting ballots will be borne by the Trust. In
addition to solicitation of votes by use of the mail, the Trustees may also
solicit votes personally or by mail, telephone, facsimile transmission or
otherwise, but will not receive any compensation for such services.
BY ORDER OF THE COURT
WESPAC INVESTORS TRUST III
By F. TERRY SHUMATE
-------------------------
F. Terry Shumate, Trustee
Spokane, Washington
October 29, 1996.
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INDEX OF DEFINED TERMS
Page
----
1988 Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Agreement and Plan of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Articles of Incorporation Amendment Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Bankruptcy Proceeding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Bylaw Amendment Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
California Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 3
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Confirmed Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Declaration of Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Director Removal Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Independent director . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Nevada Sea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Nomination Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
NRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Old Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
One-for-One Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Stockholder Proposal Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
USREA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Wespac . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
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FORM OF BALLOT
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BALLOT
WESPAC INVESTORS TRUST III
Ballot Reflecting Vote of Shareholder
The undersigned shareholder of WESPAC INVESTORS TRUST II hereby
appoints KARL L. BLAHA and F. TERRY SHUMATE each with full power of
substitution, as attorneys and proxies to vote all of the Shares of the
Beneficial Interest, no par value per share, of WESPAC INVESTORS TRUST III (the
"Trust") which the undersigned is entitled to vote at pursuant to an
information Statement dated October _, 1996 (the "Information Statement")
distributed pursuant to an Order of the Court in the 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") with all powers the undersigned would possess if personally
present, as indicated below, all as set forth in the Information Statement:
1. [ ] FOR [ ] AGAINST [ ] ABSTAIN approval of the Incorporation
Procedure
(continued and to be signed on reverse side)
- --------------------------------------------------------------------------------
(continued from other side)
THIS BALLOT WILL BE VOTED AS DIRECTED BUT IF NO DIRECTION IS INDICATED
IT WILL BE VOTED FOR THE INCORPORATION PROCEDURE.
Please -----------------------------------------
Sign -----------------------------------------
Here -----------------------------------------
Dated: ______________________ 1996
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME
OR NAMES APPEAR HEREON. WHEN THERE IS
MORE THAN ONE OWNER, EACH MUST SIGN.
WHEN SIGNING AS AN AGENT, ATTORNEY,
ADMINISTRATOR, EXECUTOR. GUARDIAN, OR
TRUSTEE, PLEASE INDICATE YOUR TITLE AS
SUCH. IF EXECUTED BY A CORPORATION, THE
BALLOT SHOULD BE SIGNED BY A DULY
AUTHORIZED OFFICER WHO SHOULD INDICATE
HIS TITLE IF A PARTNERSHIP, PLEASE SIGN
IN PARTNERSHIP NAME BY AN AUTHORIZED
PERSON. PLEASE DATE, SIGN AND MAIL THIS
BALLOT CARD TO: TRANSECURITIES
INTERNATIONAL, INC., 2510 NORTH PINES,
SUITE 202, SPOKANE, WASHINGTON 99206.
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