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SCHEDULE 14C
(RULE 14C-101)
Information Statement Pursuant to Section 14(c) of the Securities Exchange Act
of 1934
Check the appropriate box:
[X] Preliminary Information Statement
[_] Definitive Information Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule
14c-5(d)(2))
WESTERN POWER & EQUIPMENT CORP.
(Name of Registrant As Specified In Its Charter)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which the transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
____________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials
[_] check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount previously paid:___________________________________________
(2) Form, Schedule or Registration Statement No.:_____________________
(3) Filing Party:_____________________________________________________
(4) Date Filed:_______________________________________________________
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WESTERN POWER & EQUIPMENT CORP.
PRELIMINARY INFORMATION STATEMENT
PURSUANT TO SECTION 14 OF THE SECURITIES EXCHANGE ACT OF 1934,
AS AMENDED, AND REGULATION 14C AND SCHEDULE 14C THEREUNDER
WE ARE NOT ASKING YOU FOR A PROXY
AND YOU ARE REQUESTED NOT TO SEND US A PROXY
INTRODUCTION
This Information Statement has been filed with the Securities and Exchange
Commission and is being mailed or otherwise furnished to the registered
stockholders of Western Power & Equipment Corp., a Delaware corporation (the
"Company") in connection with the prior approval by the board of directors of
the Company, and the receipt by the board of approval by written consent of the
holders of a majority of the Company's outstanding shares of common stock, of a
resolution to approve the Stock Purchase and Exchange Agreement dated May 6,
2003, as amended (the "Agreement") between the Company, the Company's
wholly-owned subsidiary, Western Power & Equipment Corp., an Oregon corporation
("Western Sub") and CDKnet.com, Inc.("CDK"). The Company will, pursuant to the
Agreement, exchange all shares of the capital stock of Western Sub for 9.4
million shares of CDK's common stock, subject to adjustment as described below.
The Agreement is annexed to this Information Statement as Exhibit A.
The stockholders of CDK previously approved a one-for-fifty reverse split of
CDK's outstanding common stock which is not effective. The reverse split will be
effective immediately prior to the closing of the transactions contemplated by
the Agreement. References to numbers of shares of CDK common stock, including
the 9.4 million shares which will be exchange for the capital stock of Western
Sub, give effect to the reverse split.
The Company has obtained all necessary corporate approvals in connection with
the foregoing actions and your consent is not required and is not being
solicited in connection with the approval of the foregoing action. Section 228
of the Delaware General Corporation Law and the By-laws of the Company provide
that any action required or permitted to be taken at a meeting of the
stockholders may be taken without a meeting if stockholders holding at least a
majority of the voting power sign a written consent approving the action. On May
___, 2003, stockholders of the Company that own 5,761,424 shares of the
Company's common stock, which constitutes 61.3% of the outstanding shares
entitled to vote, executed written consents to approve the Agreement.
We are sending this Information Statement to the Company's stockholders of
record who owned common stock of the Company as of ________, 2003 (the "Record
Date"). As of the Record Date, the Company had 9,400,000 shares of common stock
issued and outstanding, and each share of Common Stock is entitled to one vote.
The actions will not become effective until: (i) 21 days from the date this
Information Statement is first mailed to stockholders, or (ii) such later date
as approved by the board of directors, in its sole discretion.
This Information Statement is dated May __, 2003 and is first being mailed to
stockholders on or about May _, 2003.
All expenses incurred in connection with the preparation and mailing
of this Information Statement will be borne by the Company. This Information
Statement is prepared and distributed by the Company.
THIS IS NOT A NOTICE OF A MEETING OF STOCKHOLDERS AND NO STOCKHOLDERS'
MEETING WILL BE HELD TO CONSIDER ANY MATTER DESCRIBED HEREIN.
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
As a condition precedent to CDK's obligations under the Agreement, Western Sub
has agreed to enter into employment agreements with each of C. Dean McLain, the
Company's President, Mark Wright, the Company's Chief Financial Officer and
Robert M. Rubin, the Company's Chairman. Mr. McLain's employment agreement
provides that he will be paid $397,800 per year and the term of the agreement is
for a period of seven years. Mr. Wright's employment agreement provides that he
will be paid $178,500 per year and the term of the agreement is for a period of
four years. Mr. Rubin's employment agreement provides that he will be paid
$200,000 per year and the term of the agreement is for a period of five years.
Other than the above no director, executive officer, nominee for election as a
director, associate of any director, executive officer or nominee or any other
person has any substantial interest, direct or indirect, by security holdings or
otherwise, resulting from the actions set forth herein, which is not shared by
all other stockholders pro-rata, and in accordance with their respective
interests.
CERTAIN QUESTIONS AND ANSWERS
Q: WHAT AM I BEING ASKED TO APPROVE?
A: You are not being asked to approve anything. This Information Statement is
being provided to you solely for your information. Stockholders holding a
majority of the outstanding voting common stock of the Company have already
agreed to approve the Agreement between the Company and CDK with respect to the
sale of the Company's wholly-owned subsidiary Western Sub.
Q: WHY HAS THE BOARD OF DIRECTORS AGREED TO APPROVE THESE ACTIONS?
A: All of these actions are necessary to accomplish the terms of the
Agreement.
Q: WHAT ARE THE BASIC TERMS OF THE TRANSACTION WITH CDK?
A: The Company will sell all of its shares of common stock of Western Sub to
CDK in exchange for 9,400,000 shares of common stock of CDK, subject to
adjustment described below. You will retain all of your present stockholdings in
the Company and are not required to do anything.
Q: WILL I RECOGNIZE A GAIN OR LOSS IN CONNECTION WITH THE TRANSACTION WITH
CDK?
A: No.
Q: DO I HAVE APPRAISAL RIGHTS?
A: No. You are not entitled to appraisal rights under Delaware Law.
Q: ARE THERE ANY CONDITIONS TO THE TRANSACTIONS WITH CDK?
A: Yes. There are several conditions, listed under the section entitled "Sale
of Western Sub".
Q: WHAT BUSINESS IS CONDUCTED BY CDK?
A: CDK, incorporated in the state of Delaware, does not currently have an
existing business and upon completion of the sale of Western Sub to CDK, CDK's
only business will be that of Western Sub.
Q: ARE THERE RISKS INVOLVED IN THE TRANSACTION WITH CDK?
A: Yes. After the transaction is completed, our success will be totally
dependent on the success of CDK. CDK will have control over Western Sub and all
of its operations, and therefore the management of CDK will affect the value of
CDK's common stock, which will be the Company's only asset upon completion of
the sale of Western
Sub. There are no assurances that CDK will be able to operate profitably after
the closing of the transaction (which we refer to as the "Closing").
Q: WHEN DO YOU EXPECT TO COMPLETE THE TRANSACTION WITH CDK?
A: The Transaction will be consummated and become effective no sooner than 21
days after this Information Statement has been delivered to our shareholders.
The Company and CDK anticipate that the Transaction will be completed as soon as
possible after all of the conditions to the Transaction contained in the
Agreement are satisfied, or where permissible, waived, or such later time as
mutually.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of the date hereof, with
respect to the beneficial ownership of the common stock by each beneficial owner
of more than 5% of the outstanding shares thereof, by: (i) any holder of more
than five percent (5%) of the outstanding shares; (ii) the Company's officers
and directors; and (iii) the Company's officers and directors as a group. As of
the date hereof the Company had 9,400,000 shares of its common stock
outstanding. Pursuant to the rules and regulations of the Securities and
Exchange Commission, shares of common stock that an individual or group has a
right to acquire within 60 days pursuant to the exercise of options or warrants
are deemed to be outstanding for the purposes of computing the percentage
ownership of such individual or group, but are not deemed to be outstanding for
the purposes of computing the percentage ownership of any other person shown in
the table.
NUMBER OF SHARES PERCENTAGE OF
OF COMMON STOCK OUTSTANDING COMMON
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED (1) STOCK BENEFICIALLY OWNED
- ------------------------------------ ---------------------- ------------------------
C. Dean McLain (2)(7)(8) 2,769,419 33.0%
Robert M. Rubin (3)(4)(8) 2,769,419 33.0%
Rubin Family Irrevocable Stock Trust(4) 600,000 6.4%
Mark J. Wright(5) 100,000 *
Steven Moscowitz -0- -0-
Michael Metter(6) -0- -0-
American United Global, Inc. (AUGI) 1,222,586 13.0%
2489 152nd Avenue NE
Richmond, WA 98052
JSC LLC(7) 588,000 6.2%
38207 NE Gerber Rd.
Yacolt, WA 98675]
All Executive Officers and Directors as a
Group (5 persons)(2)-(7) 6,638,838 63.2%
* less than one percent
(1) Unless otherwise indicated, the Company believes that all persons named in
the table have sole voting and investment power with respect to all shares of
Common Stock beneficially owned by them. A person is deemed to be the beneficial
owner of securities which may be acquired by such person within 60 days from the
date on which beneficial ownership is to be determined, upon the exercise of
options, warrants or convertible securities. Each beneficial owner's percentage
ownership is determined by assuming that options, warrants and convertible
securities that are held by such person (but not those held by any other person)
and which are exercisable within such 60 day period, have been exercised.
(2) Includes Mr. McLain's direct beneficial ownership of exercisable options
to acquire 500,000 shares of Company Common Stock. Excludes Mr. McLain's
indirect ownership in the Company through his beneficial ownership of options to
purchase 162,000 shares of AUGI common stock. Mr. McLain's beneficial ownership
of AUGI common stock represents 8.1 percent of AUGI voting stock as of April 24,
2003.
(3) Includes Mr. Rubin's direct beneficial ownership of exercisable options to
acquire 500,000 shares of Company Common Stock. Excludes Mr. Rubin's indirect
ownership in the Company through his beneficial
ownership to purchase 33,600 shares of AUGI common stock. Mr. Rubin's beneficial
ownership of AUGI common stock represents 77.8 percent of AUGI voting stock as
of April 24, 2003.
(4) Mr. Rubin, a grantor of the Rubin Family Irrevocable Stock Trust (the
"Trust"), does not have sole of shared voting or dispositive power over the
shares of Company common stock held by the Trust, and disclaims any beneficial
ownership of the shares of Company common stock held by the Trust.
(5) Includes options to purchase 100,000 shares of Company common stock.
(6) Excludes Mr. Metter's indirect ownership in the Company through his
beneficial ownership of 110,000 shares of AUGI common stock.
(7) A trust in which Mr. McLain is a grantor owns a portion of JSC LLC. Mr.
McLain does not have sole or shared power to dispose of or vote any of the
shares of Company common stock held by JSC LLC.
(8) On May 1, 2003, Mr. McLain and Mr. Rubin agreed to convert the principal
amount of a loan made to the Company in the amount of $147,000 into an aggregate
of 5,538,838 shares of the Company's common stock. In connection therewith Mr.
McLain received 2,769,419 shares of the Company's common stock and Mr. Rubin
received 2,769,419 shares of the Company's common stock.
SALE OF WESTERN SUB
General
- -------
The Company has entered into the Agreement, which sets forth the
terms and conditions of a sale of all of its shares of common stock in Western
Sub, its wholly-owned subsidiary, to CDK. Pursuant to the Agreement, CDK will
issue 9.4 million shares of its common stock to the Company in exchange for
1,000 shares of common stock of Western Sub, which constitutes all of the issued
and outstanding shares of Western Sub (the "Transaction"). The 9.4 million
shares of CDK common stock, assuming a one-for-fifty reverse split approved by
all necessary corporate action of CDK which is expected to be effective
immediately preceding the closing of the Transaction, will constitute ___% of
the outstanding voting securities of CDK. It is currently anticipated that the
consummation of the Transaction will occur no sooner than twenty-one (21) days
after the date this Information Statement is first mailed to the Company's
stockholders of record on May __, 2003.
CDK, incorporated in the state of Delaware, intends to continue to
operate the business of Western Sub and to raise additional funds in the form of
debt, equity or a combination thereof, in order to have sufficient capital to
grow its business. There can be no assurance that CDK will be successful in its
efforts to raise capital, or that such capital will be available to CDK on terms
which would be beneficial to its business or the business of Western Sub. CDK's
common stock currently trades on the OTC Bulletin Board under the symbol "CDKX"
and its closing price on May 1, 2003 was $0.02. CDK has not declared any cash
dividends on its common equity for the previous two fiscal years. There is
nothing restricting CDK from issuing dividends. CDK currently has no employees
outside of management. The principal executive offices of CDK are located at
_________________, and its telephone number is ________________.
Consent Required
- ----------------
Approval of the Agreement requires the consent of the holders of a
majority of the outstanding shares of our common stock entitled to vote at a
meeting of stockholders. A majority of the outstanding shares of our common
stock as of the Record Date has given its consent to approve the Agreement and
the transactions contemplated thereby and accordingly, the requisite stockholder
approval was obtained by the execution of the written consent in favor of the
Agreement.
Reasons for Approval
- --------------------
The Board of Directors has given careful consideration to the
Transaction, the existing business operations of CDK and Western Sub, the future
potential and plans of CDK, the interest of our stockholders, and the risks of
the Transaction to our existing stockholders. Based on the foregoing
considerations, the Board of Directors, together with the holders of a majority
of the outstanding shares of our common stock, believe the transactions
contemplated by the Agreement are fair and in the best interests of the Company
and its stockholders.
Fairness Opinion
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The Board of Directors has received a fairness opinion from Vertical
Capital Partners, Inc., New York, New York, to the effect that the terms of the
Agreement and the Transaction are fair to the Company's stockholders from a
financial point of view. A copy of the opinion is annexed hereto as Exhibit B.
Terms of the Agreement
- ----------------------
The following describes the material terms of the Agreement. This
summary is qualified in its entirety by reference to the full text of the
Agreement, which is attached hereto as Exhibit A and such Agreement is
incorporated into this Information Statement by reference. You are urged to read
the entire Agreement.
Completion of the Transaction
- -----------------------------
The Transaction will be consummated and become effective no sooner
than twenty-one (21) days after this Information Statement has been delivered to
our shareholders. The Company and CDK anticipate that the Transaction will be
completed as soon as possible after all of the conditions to the Transaction
contained in the Agreement are satisfied, or where permissible, waived, or such
later time as mutually agreed.
Representations and Warranties
- ------------------------------
Representations of the Company
------------------------------
The Agreement contains representations and warranties of the Company
regarding, among other matters:
* the corporate organization and existence of the Company,
including that it has been duly organized, is validly existing
and in good standing with the corporate power and authority to
own, operate and lease its assets, to perform its obligations
under certain material agreements and to carry on its
businesses as currently conducted and to carry out the
transactions contemplated by the Agreement;
* the corporate power and authority of the Company to execute and
deliver the Agreement and related documents and to consummate
the other contemplated transactions;
* the adoption by the Company's board of directors of a
resolution adopting the Agreement and the Transaction;
* the filing and accuracy of the Company's tax returns, the lack
of pending or threatened proceedings, deficiencies or audits
with respect to taxes, and certain related tax matters;
* the stockholder consent required to approve the Agreement and
the Transaction.
Representations of Western Sub
------------------------------
The Agreement contains representations and warranties of Western Sub
regarding, among other matters:
* the corporate organization and existence of Western Sub,
including that it has been duly organized, is validly existing
and in good standing with the corporate power and authority to
own, operate and lease its assets, to perform its obligations
under certain material agreements and to carry on its
businesses as currently conducted;
* the filing and accuracy of Western Sub's tax returns, the lack
of pending or threatened proceedings, deficiencies or audits
with respect to taxes, and certain related tax matters;
* the absence of material claims, actions, suits, proceedings and
specified judgments, decrees and injunctions.
Representations of CDK
----------------------
The Agreement contains representations and warranties of CDK
regarding, among other matters:
* the corporate organization and existence of CDK, including that
it has been duly organized, is validly existing and in good
standing with the corporate power and authority to own, operate
and lease its assets, to perform its obligations under certain
material agreements and to carry on its businesses as currently
conducted and to carry out the transactions contemplated by the
Agreement;
* the capitalization of CDK, including the number of shares of
capital stock authorized, the number of shares and rights to
acquire shares outstanding, and the number of shares reserved
for issuance;
* CDK has filed in a timely manner all documents that CDK was
required to file under the Securities Exchange Act of 1934, as
amended, during the 12 months preceding the date of this
Agreement;
* the absence of material misstatements or omissions in the
information provided by CDK in its filings with the SEC and the
accuracy and compliance of CDK financial statements contained
therein.
* the absence of material claims, actions, suits, proceedings and
specified judgments, decrees and injunctions.
Conduct of Western Sub's Business Before the Completion of the Transaction
- --------------------------------------------------------------------------
The Agreement contemplates that, until the effective time of the
Transaction (the "Effective Time"), Western Sub will operate its business in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted, to pay the debts and taxes when due, pay or perform other
obligations when due, and, to the extent consistent with such business, use its
commercially reasonable efforts consistent with past practice and policies to
preserve intact Western Sub's present business organization, keep available the
services of its present officers and key employees and preserve its
relationships with customers, suppliers, distributors, licensors, licensees, and
others having business dealings with it, all with the goal of preserving
unimpaired Western Sub's goodwill and ongoing business.
Conduct of CDK Before Completion of the Transaction
- ---------------------------------------------------
The Agreement contemplates that, until the Effective Time, CDK will
carry on its business in the usual, regular and ordinary course in substantially
the same manner as heretofore conducted, to pay its debts and taxes when due, to
pay or perform other obligations when due, and, to the extent consistent with
such business, use its commercially reasonable efforts consistent with past
practice and policies to preserve intact the present business organizations, all
with the goal of minimizing any liabilities.
Reasonable Efforts to Complete the Transaction
- ----------------------------------------------
The Company and CDK are required to use reasonable efforts to make
all filings required and to use reasonable efforts to take all further actions
necessary or desirable to effect the transactions contemplated by the Agreement.
Conditions to the Transaction
- -----------------------------
The obligations of the Company and CDK to complete the Transaction
are subject to the satisfaction or waiver of the following conditions, among
others, all as more fully described in the Agreement:
Conditions to Obligations of the Company
- ----------------------------------------
The obligations of the Company to consummate the Transaction shall
be subject to the satisfaction, at or prior to the Effective Time, of each of
the following conditions, any of which may be waived, in writing, exclusively by
the Company:
Representations and Warranties True as of the Closing Date. The
representations and warranties of CDK contained in the Agreement or
in any list, certificate or document delivered by CDK to the Company
pursuant to the provisions hereof shall have been true in all
material respects on the date hereof and shall be true in all
material respects on the date of the Closing (the "Closing Date")
with the same effect as though such representations and warranties
were made as of such date.
Compliance with this Agreement. CDK shall have performed and
complied in all material respects with all agreements and conditions
required by this Agreement to be performed or complied with by it
prior to or at the Closing.
Revolving Credit Facility. Deutsche Financial Services Corporation
("DFSC"), or another lending institution, as lender and as
representative of several institutional lenders shall have funded a
revolving credit facility in an amount not less than $20 million,
which is substantially similar to the credit facility pursuant to an
agreement between Western Sub and DFSC dated June 30, 1999, as last
amended on March 22, 2001.
Fairness Opinion. The Company's Board of Directors shall have
received an opinion from Vertical Capital Partners, Inc., New York,
New York, to the effect that the terms of the Agreement are fair to
the Company's stockholders from a financial point of view.
Balance Sheet. CDK shall have a minimum of $2,000,000 in cash on
its balance sheet on the Closing Date.
Conditions to the Obligations of CDK
- ------------------------------------
The obligations of CDK to consummate the Transaction shall be
subject to the satisfaction, at or prior to the Effective Time, of each of the
following conditions, any of which may be waived, in writing, exclusively by the
CDK:
Representations and Warranties True as of the Closing Date. The
representations and warranties of the Company contained in the
Agreement or in any schedule, certificate or document delivered by
the Company to CDK pursuant to the provisions hereof shall have been
true in all material respects on the date hereof without regard to
any schedule updates furnished by the Company after the date hereof
and shall be true in all material respects on the Closing Date with
the same effect as though such representations and warranties were
made as of such date.
Compliance with this Agreement. Each of the Company and Western Sub
shall have performed and complied in all material respects with all
agreements and conditions required by this Agreement to be performed
or complied with by them prior to or at the Closing.
Material Adverse Changes. The assets or the operations of Western
Sub's business, taken as a whole, shall not have been and shall not
be threatened to be materially, adversely affected in any way as a
result of any event or occurrence (except as a result of general
economic conditions).
Revolving Credit Facility. Deutsche Financial Services Corporation
("DFSC"), or another lending institution, as lender and as
representative of several institutional lenders shall have funded a
revolving credit facility in an amount not less than $20 million,
which is substantially similar to the credit facility pursuant to an
agreement between Western Sub and DFSC dated June 30, 1999, as last
amended on March 22, 2001, in addition to approximately $5 million
inventory financing to be provided by Case.
Change in Business. CDK having no reasonable basis to believe that
either: (i) the net sales of Western Sub's business was less than
$60,000,000 for the nine months ended April 30, 2003; or (ii) the
sum of PP&E being less than $1,000,000 as of April 30, 2003.
Escrow of CDK Common Stock.
- ---------------------------
In connection with this Transaction, 1,000,000 shares of the
9,400,000 shares of CDK common stock being issued to the Company ("Purchase
Price") shall be held in escrow and subject to adjustment as follows:
(i) The number of shares constituting the full Purchase Price
shall be reduced (but not increased) by a whole number
determined by rounding the result of multiplying 1,000,000
by the fraction determined by dividing the difference
between the Adjusted Net Earnings (as defined in the Stock
Purchase and Exchange Agreement attached as Exhibit A of
Western Sub for its fiscal year ending
July 31, 2003 by $1,000,000. For example, if the Adjusted
Net Earnings of Western Sub for Fiscal 2003 is $750,000, the
number of shares by which the Purchase Price shall be
reduced is ($750,000/$1,000,000) x 1,000,000 = 750,000. In
the event the Adjusted Net Earnings of Western Sub is less
than $0, the number of shares to be released under this
clause shall be zero.
(ii) Of the shares held in escrow after consideration of (i)
above, the number of shares constituting the full Purchase
Price shall be further reduced (but not increased) by a
whole number determined by rounding the result of
multiplying 2,000,000 by the fraction determined by dividing
the difference between the Adjusted Net Earnings (defined
below) of Western Sub for its fiscal year ending July 31,
2004 by $2,000,000. For example, if the Net Earnings of
Western Sub for Fiscal 2004 is $1,500,000 the number of
shares by which the Purchase Price shall be reduced is
($1,500,000/$2,000,000) x 2,000,000 = 750,000. In the event
the Adjusted Net Earnings of Western Sub is less than $0,
the number of shares to be released under this clause shall
be zero.
(iii) In no event shall the aggregate amount of the adjustment set
forth in paragraphs (i) and (ii) above exceed 1,000,000
shares.
Termination of the Agreement
- ----------------------------
The Agreement is subject to termination prior to the Effective Time:
* by mutual consent;
* by the Company if it does not obtain the requisite
stockholder approval;
* by either party if, without fault of the terminating party,
the Transaction is not consummated on or before June 27,
2003; and
* by either party if the other party fails to obtain approval
of the Transaction;
Dissenters' Rights of Appraisal
- -------------------------------
There are no dissenters' rights of appraisal applicable to the
Agreement or the closing of the Transaction.
Tax Aspects of the Transaction
- ------------------------------
The proposed Transaction is intended to qualify as a tax-free
reorganization under the Internal Revenue Code of 1986. If the Transaction
qualifies as a tax-free reorganization, no gain or loss will be recognized for
income tax purposes by either party as a result of the Transaction. There will
not be any material tax effects on any party's existing stockholders as a result
of the Transaction. However, neither the Company nor CDK has requested a tax
ruling from the Internal Revenue Service with respect to the Transaction.
Accordingly, no assurance can be given that the Transaction will qualify as a
tax-free reorganization. If the Transaction does not qualify for tax free
treatment, the Company will be deemed to have sold its shares for CDK common
stock and be taxed on the difference between its basis in Western Sub common
stock and the value of the CDK common stock. The Company's stockholders should
have no tax effect since they are not receiving any new shares.
Restricted Nature of Securities.
- --------------------------------
The shares of CDK's common stock to be issued to the Company in
connection with the Transaction will not be registered under the Securities Act
of 1933, as amended (the "Securities Act"), and will be deemed "restricted
securities" as that term is defined in Rule 144 promulgated by the Securities
and Exchange Commission under the Securities Act. Accordingly, such shares will
be issued in reliance on the exemption from such registration requirements
provided by the Securities Act. Such shares will be "restricted securities," and
the certificate will bear legends restricting their subsequent resale in the
absence of registration under the Securities Act or the availability of an
exemption therefrom.
INFORMATION ABOUT THE PARTIES TO THE TRANSACTION
WESTERN POWER & EQUIPMENT CORP.
Incorporated herein by reference is the Company's Form 10-K/A filed
with the Securities and Exchange Commission on November 29, 2002 and the
Company's Form 10-Q filed with the Securities and Exchange Commission on March
17, 2003, which describes the Company's business and financial condition..
CDKNET.COM, INC.
For a detailed description of CDK's business and financial condition
please see CDK's Form 10-KSB for the year ended June 30, 2002 and Form 10-QSB
for the six months ended December 31, 2002, attached hereto as Exhibits C and D,
respectively.
PROFORMA FINANCIAL INFORMATION
Attached hereto as Exhibit E, are the unaudited pro forma financial statements
for the six-months ended January 31, 2003, which give effect to the Transaction
as if the Transaction had occurred on January 31, 2003.
The unaudited pro forma financial statements should be read in conjunction with
the historical financial statements and notes thereto of CDK attached as
Exhibits C and D and with the Company's financial statements that have been
incorporated herein by reference. The pro forma financial information is
presented for illustrative purposes only and is not necessarily indicative of
the future financial position or future results of operations of CDK after
completion of the Transaction.
ADDITIONAL INFORMATION
Additional information concerning the Company, including annual and quarterly
reports for the past twelve months which have been filed with the Securities and
Exchange Commission, may be accessed through the Securities and Exchange
Commission's EDGAR archives at www.sec.gov.
By Order of the Board of Directors
____________________________
Vancouver, Washington
May __, 2003