<PAGE>
[LOGO] 9200 Oakdale Avenue
Great Western Financial Corporation Chatsworth, California 91311
JAMES F. MONTGOMERY
Chairman and Chief Executive
March 24, 1994
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders which
will be held on Tuesday, April 26, 1994, at 11:00 a.m. in Chatsworth,
California.
The enclosed notice and proxy statement contain details concerning the
business to come before the Meeting. You will note that the Board of Directors
of the Company recommends a vote "FOR" approval of the Great Western Financial
Corporation Annual Incentive Compensation Plan for Executive Officers and "FOR"
the election of four directors. Please complete, sign and return your proxy card
in the enclosed envelope at your earliest convenience to assure that your shares
will be represented and voted at the Meeting even if you cannot attend.
[SIG]
James F. Montgomery
<PAGE>
[LOGO]
Great Western Financial Corporation
9200 Oakdale Avenue, Chatsworth, California 91311
-----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 26, 1994
-----------------
The annual meeting of shareholders of Great Western Financial Corporation
(the "Company" or "GWFC") will be held in the Company's Employee Center at 19809
Prairie Street, Chatsworth, California 91311, on Tuesday, April 26, 1994, at
11:00 a.m., to consider and vote on the following matters described in this
Notice and Proxy Statement:
(1) Approval of the Great Western Financial Corporation Annual Incentive
Compensation Plan for Executive Officers;
(2) The election of four members to the Board of Directors for a term of
three years; and
(3) Such other matters as may properly come before the meeting or any
adjournment or adjournments thereof.
Enclosed is a Proxy Statement describing the matters to be voted upon at the
annual meeting. Please read it carefully and then sign, complete and return your
Proxy as promptly as possible. If you receive more than one Proxy because your
shares are registered in different names or addresses, each such Proxy should be
signed and returned to assure that all your shares will be voted.
J. LANCE ERIKSON,
SECRETARY
March 24, 1994
YOU ARE URGED TO COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT
PROMPTLY. THANK YOU.
REQUESTS FOR ADDITIONAL COPIES OF THE PROXY MATERIAL SHOULD BE ADDRESSED TO
GEORGESON & COMPANY INC., WALL STREET PLAZA, NEW YORK, NEW YORK 10005. TELEPHONE
(800) 223-2064.
<PAGE>
[LOGO]
Great Western Financial Corporation
9200 Oakdale Avenue, Chatsworth, California 91311
-------------------
PROXY STATEMENT
FOR ANNUAL MEETING APRIL 26, 1994
-------------------
GENERAL INFORMATION
The Board of Directors has fixed Monday, February 28, 1994, at the close of
business, as the record date for the determination of shareholders entitled to
notice of and to vote at the meeting. Only holders of record of shares of common
stock at the close of business on that date are entitled to vote. The stock
transfer books will not be closed.
THE ENCLOSED PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE
COMPANY IN CONNECTION WITH THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON
APRIL 26, 1994. THE PROXY, WHEN PROPERLY EXECUTED AND RETURNED, WILL BE VOTED IN
THE MANNER DIRECTED THEREIN. IF NO DIRECTION IS MADE, THE PROXY WILL BE VOTED
FOR APPROVAL OF THE GREAT WESTERN FINANCIAL CORPORATION ANNUAL INCENTIVE
COMPENSATION PLAN FOR EXECUTIVE OFFICERS AND FOR THE NOMINEES OF THE BOARD.
Anyone giving a Proxy may revoke it at any time before it is exercised by
delivering written notice of such revocation to the Secretary of the Company
before the annual meeting or by voting by ballot at the annual meeting. The cost
of soliciting proxies will be borne by the Company. Solicitation will be made
primarily by mail, but regular employees of the Company, without additional
remuneration, may solicit proxies by telephone, telegram and personal
interviews. In addition, Georgeson & Company Inc. has been engaged by the
Company to assist in the solicitation of proxies. The expected fee of such proxy
solicitor is $10,000 plus expenses. The proxy materials are being mailed to
shareholders of record beginning on or about March 24, 1994.
The Annual Report of the Company, including certified consolidated
statements of financial condition of the Company for the years ended December
31, 1993 and 1992 and certified consolidated statements of operations and cash
flows for each of the three years in the period ended December 31, 1993,
accompanies this Proxy Statement.
The common stock currently constitutes the only class of securities of the
Company authorized to vote. As of the close of business on February 28, 1994,
there were 132,965,734 shares of common stock outstanding. Each share is
entitled to one vote. Under the Company's Certificate of Incorporation and
applicable law, a shareholder is not entitled to cumulate his or her votes in
the election of directors.
Votes cast by proxy or in person at the annual meeting will be counted by
the persons appointed by the Company to act as election inspectors for the
meeting. The election inspectors will treat shares represented by proxies that
reflect abstentions as shares that are present and entitled to vote for purposes
of determining the presence of a quorum, the election of directors or the
outcome of certain other matters. Abstentions, however, do not constitute a vote
"for" or "against" any matter and thus will be disregarded in the calculation of
"votes cast" on the Great Western Financial Corporation Annual Incentive
Compensation Plan for Executive Officers.
1
<PAGE>
The election inspectors will treat shares referred to as "broker non-votes"
(i.e., shares held by brokers or nominees as to which instructions have not been
received from the beneficial owners or persons entitled to vote that the broker
or nominee does not have discretionary power to vote on a particular matter) as
shares that are present and entitled to vote for purposes of determining the
presence of a quorum. However, for purposes of determining the outcome of any
matter as to which the broker has physically indicated on the proxy that it does
not have discretionary authority to vote, those shares will be treated as not
present and not entitled to vote with respect to that matter (even though those
shares are considered entitled to vote for quorum purposes and may be entitled
to vote on other matters).
Any unmarked proxies, including those submitted by brokers or nominees, will
be voted as indicated in the accompanying proxy card and as summarized elsewhere
in this Proxy Statement.
GREAT WESTERN FINANCIAL CORPORATION
ANNUAL INCENTIVE COMPENSATION PLAN
FOR EXECUTIVE OFFICERS
Shareholders will be asked at the Annual Meeting to approve the Great
Western Financial Corporation Annual Incentive Compensation Plan for Executive
Officers (the "Plan") under which members of the Executive Management Committee
(which is presently comprised of the Chairman and Chief Executive, the President
and Chief Operating Officer, the President of the Consumer Finance Division and
five executive vice presidents) will participate. The Plan is subject to
shareholder approval in an effort to assure the deductibility to the Company of
certain cash compensation that may be paid under the Plan for services rendered
in 1994 and subsequent years to such executive officers, as more fully described
below. The Plan has been approved by the Compensation Committee of the Board of
Directors (the "Committee"). The Committee each year will establish target
levels of earnings per share (and for the President of the Consumer Finance
Division of the Company, in addition, the target level of earnings before taxes
for that Division) upon which actual payments under the Plan will be based.
Under recent tax legislation ("Section 162(m)") and proposed implementing
Treasury regulations (the "Proposed Tax Rules"), compensation to certain
executive officers named in the Summary Compensation Table (the "named executive
officers") in excess of one million dollars in any one year will not be
deductible for federal income tax purposes unless such compensation is
performance-based (as defined in the Proposed Tax Rules) or is otherwise exempt
from such limits on deductibility. The applicable conditions of the
performance-based compensation exemption include, among others, a requirement
that the shareholders approve at least the material terms of the Plan, which
include the eligible class of participants, the performance goal or goals
contemplated by the Plan and the maximum amount payable thereunder.
The performance goal for the executive officers, other than the President of
the Consumer Finance Division, will be a targeted earnings per share as
established on an annual basis by the Committee. For the President of the
Consumer Finance Division, the performance goal will be based upon the
attainment of the earnings per share target applicable to the other executive
officers and the attainment of an earnings before taxes goal for the Consumer
Finance Division established annually by the Committee. The target goals will be
established annually by the Committee on or before the deadline established
under the applicable federal income tax rules. Targeted levels of incentive
compensation are 40% of adjusted base salary paid to the Company's executive
vice presidents and the President of the Consumer Finance Division, 50% of
adjusted base salary paid to the chief operating officer, and 60% of adjusted
base salary paid to the chief executive officer. (The current base salaries for
the named executive officers are shown under "Employment Agreements" on pages 13
and 14.)
Under the Plan, participants may receive a percentage of their respective
targeted level of incentive compensation ranging from 0% to 200% depending upon
the degree of attainment of the targeted earnings for each respective Plan year.
The maximum payable under the Plan for exceeding the targeted goals will be 200%
(175% in 1994) of such targeted levels of incentive compensation. Based on 1994
base salaries, the maximum payable to any one named executive officer for 1994
would be $997,500 and the maximum amount payable to all the executive officers
would be $3,029,250. Assuming the Plan remains in effect and that all
2
<PAGE>
targets are substantially exceeded, the maximum aggregate amount payable under
the Plan over its five year term to any executive officer would be $6,817,314
($1,254,000 for 1995, $1,379,400 for 1996, 1,517,340 for 1997 and $1,669,074 for
1998) and the maximum aggregate amount payable to all executives will depend
upon the number of persons who are or remain eligible to participate in the
Plan, their aggregate base salaries for purposes of the Plan (and respective
base salary factors), and the degree of attainment of applicable targets.
The Plan is not exclusive and does not limit the authority of the Board or
the Committee with respect to to other compensation. If the Plan is not approved
by the shareholders, bonuses under the Plan will not be paid, but the Committee
may pay bonuses on other bases otherwise consistent with the Committee's
compensation policy.
The formula-driven maximum awards may be reduced by the Committee in its
discretion under certain circumstances, but the Plan provides that the maximum
awards as a percentage of base salaries of the named executive officers may not
be increased. The term of the Plan is five years and eight persons are currently
eligible to and will participate in the Plan for 1994.
Appropriate adjustments to the performance goals based upon objective
criteria may be made in the case of significant acquisitions or dispositions by
the Company or the Consumer Finance Division or certain other events during the
applicable year. In addition, pro rata payments under the Plan may be made in
the event of termination of employment during any year for any reason, except
for cause, provided that the performance goals for the year of termination and
certain minimum service requirements are satisfied. Upon a reorganization or
fundamental change which the Corporation does not survive, a prorated,
discounted early payout may be made. The Committee must certify the actual
payout amount to any named executive officer and the achievement of the
applicable performance goals (on an annualized basis in the case of any early
payout) prior to any such payout.
A copy of the Plan is available on request directed to Shareholder
Relations, Great Western Financial Corporation, 9200 Oakdale Avenue, Chatsworth,
California 91311, or by telephone request to (818) 775-3742. The Committee
believes and has determined that the applicable targets are confidential
commercial or business information, the disclosure of which would adversely
affect the Company or mislead the public.
No benefits would have been payable had the Plan been in effect for 1993
because targets were established with reference to the 1994 Plan year. (Bonuses
actually paid to named executive officers for 1993 under the then existing bonus
program are set forth in the summary compensation table at pages 12 and 13.)
Attainment of the targets is uncertain and, as mentioned above, the Committee
has retained discretion to reduce the awards to any or all executive officers.
The Committee may not amend the Plan to increase the maximum amount payable
to any participating executive officers and in certain other respects without
shareholder approval, if the change would materially adversely affect the
deductibility of payments under the Plan for federal income tax purposes. The
Committee may amend the Plan in other respects and as to other persons, or adopt
other incentive plans, without shareholder approval. Such changes or other plans
could increase the compensation costs to the Company. The Committee or the Board
may terminate the Plan at any time and, because of the Committee's discretion,
such termination could affect benefits under the Plan, subject to any applicable
entitlements under any employment agreement. The Committee may terminate the
Plan at any time but may not in so doing adversely affect any participant's
vested rights under the Plan.
VOTE REQUIRED
Approval of the Plan requires the affirmative vote of the majority of the
voting shares (i.e., those shares voting for and against the Plan). THE BOARD OF
DIRECTORS (WITH MESSRS. MONTGOMERY AND MAHER ABSTAINING) RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" APPROVAL OF THE PLAN. DULY EXECUTED PROXIES NOT
OTHERWISE MARKED WILL BE VOTED IN FAVOR OF THE PLAN. Messrs. Montgomery and
Maher will be participants in the Plan and, thus, will be eligible to receive
compensation under the Plan if it is approved by shareholders. Accordingly, they
have abstained from the foregoing recommendation.
3
<PAGE>
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes, Class I, Class II and
Class III. Generally, each director (other than those directors elected to fill
vacancies on the Board) serves for a term ending on the date of the third annual
meeting following the annual meeting at which such director is elected and until
his or her successor is elected and qualified. The term of office for each of
the Class III and Class I directors ends on the date of the annual meetings in
1995 and 1996 and the election and qualification of their respective successors
occurs on the same dates.
Four (4) directors of Class II are to be elected at the 1994 annual meeting,
each to hold office until the annual meeting in 1997, and until their respective
successors are elected and qualified. Proxies cannot be voted for a greater
number of persons than the number of nominees named. If any of the nominees
below is unable to serve or for good cause will not serve, it is expected that
the proxies will be voted for such other person or persons as the Nominating
Committee of the Board of Directors may recommend, and the proxy confers
discretionary authority to do so.
Election of each of the nominees will require the affirmative vote of a
majority (assuming the presence of a quorum) of the shares of the Company's
common stock entitled to vote and present in person or represented by proxy at
the meeting. Proxies solicited by the Board will be voted for each of the
nominees listed below unless the shareholder otherwise specifies in the proxy.
4
<PAGE>
The following table sets forth certain information concerning the directors
of the Company and the nominees for election as director, each of whom is
presently a director and has served continuously since first elected; the class
in which each director or nominee serves or will serve; and the number of shares
of the Company's common stock beneficially owned, directly or indirectly, by
each of them at February 28, 1994.
<TABLE>
<CAPTION>
SHARES
OWNED
YEAR BENEFICIALLY
FIRST AT FEB. 28,
NAME AGE PRINCIPAL OCCUPATION CLASS ELECTED 1994(1)
- -------------------------------- --- ------------------------------------------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
DIRECTORS TO BE ELECTED AT THE
1994 ANNUAL MEETING
John V. Giovenco 57 Consultant II 1985 33,750(2)
Firmin A. Gryp 66 Retired, formerly Executive Vice President, II 1982 96,144(2)(3)
GWFC
James F. Montgomery 59 Chairman and Chief Executive, GWFC II 1975 711,163(4)
Alberta E. Siegel 63 Professor of Psychology, Stanford II 1976 17,500(2)
University School of Medicine
OTHER DIRECTORS OF THE COMPANY
David Alexander 61 President Emeritus and Trustees' Professor, I 1973 15,175(2)
Pomona College
H. Frederick Christie 60 Consultant I 1984 18,750(2)
Stephen E. Frank 52 President and Chief Operating Officer, III 1993 2,000
Florida Power & Light Company
Enrique Hernandez, Jr. 38 President, Inter-Con Security Systems, Inc. III 1993 500
(a worldwide provider of security and
facility support services)
John F. Maher 50 President and Chief Operating Officer, GWFC III 1976 542,025(5)
Charles D. Miller 66 Chairman and Chief Executive Officer, Avery I 1981 21,450(2)
Dennison Corporation (a manufacturer of
self-adhesive materials and office
products)
Willis B. Wood, Jr. 59 Chairman and Chief Executive Officer, III 1990 9,250(6)
Pacific Enterprises (the holding company of
Southern California Gas Company)
<FN>
- ---------
(1) Certain directors share with their spouses voting and investment powers
with respect to these shares. The percentage of shares beneficially owned
by any director does not exceed one percent of the Company's common stock.
(2) Includes 13,750 shares subject to options granted to this Director under
the 1988 Stock Option and Incentive Plan (the "1988 Incentive Plan") which
are exercisable within 60 days of the record date.
(3) Includes 112 shares held by the trustee under the Employee
Savings-Incentive Plan.
(4) Includes 375,000 shares subject to options exercisable within 60 days of
the record date and 945 shares held by the Trustee under the Employee
Savings-Incentive Plan.
(5) Includes 274,500 shares subject to options exercisable within 60 days of
the record date and 25 shares held by the Trustee under the Employee
Savings-Incentive Plan.
(6) Includes 8,750 shares subject to options granted to this Director under the
1988 Incentive Plan which are exercisable within 60 days of the record
date.
</TABLE>
5
<PAGE>
Dr. Alexander is President Emeritus and Trustees' Professor of Pomona
College and served as President of Pomona College from 1969 to 1991. He is also
American Secretary of the Rhodes Scholarship Trust, a Trustee of the Teachers
Insurance and Annuity Association, a Trustee of the Seaver Institute, a Trustee
for the Woodrow Wilson National Fellowship Foundation, Overseer of the
Huntington Library, Art Collections and Gardens and Director of the Children's
Hospital Los Angeles. A graduate of Rhodes College, he served as its President
from 1965 to 1969. Dr. Alexander received his doctorate from Oxford University.
Dr. Alexander also served as a Director of the Los Angeles Area Chamber of
Commerce and as a Director of KCET, Community Television of Southern California.
Mr. Christie is a consultant specializing in strategic and financial
planning. He retired in 1990 as President and Chief Executive Officer of The
Mission Group, the non-utility subsidiaries of SCEcorp. Prior to that he served
as President of Southern California Edison Company, having joined that company
as a financial analyst in 1957. A graduate and post-graduate of the University
of Southern California, Mr. Christie is a director or trustee of seventeen
mutual funds(1) under the Capital Research and Management Company and a director
of AECOM Technology Corporation, Nichols Institute, International House of
Pancakes, Inc., Ultramar Corporation and Ducommun Incorporated. He is a member
of the Board of Trustees of Occidental College, President of the Board of
Trustees of the Natural History Museum of Los Angeles County, and a member of
the Board of Councilors for the School of Public Administration at the
University of Southern California.
Mr. Frank is President and Chief Operating Officer of Florida Power & Light
Company, the principal subsidiary of the FPL Group. He was formerly Executive
Vice President and Chief Financial Officer of TRW, Inc. Mr. Frank was also Vice
President and Controller of GTE Corporation. He is a director of FPL Group, the
Arkwright Mutual Insurance Company, the Southeast Electric Exchange, the Florida
Chamber of Commerce, and the Business and Industry Political Action Committee
and a trustee of the University of Miami. Mr Frank is a graduate of Dartmouth
College and the University of Michigan Business School.
Mr. Giovenco is a consultant and former President and director of ITT
Sheraton Corporation which he joined in 1993. Previously he was an officer of
Hilton Hotels Corporation serving in various capacities since 1972, including
serving as the President of the Hilton Gaming Division from 1986 to 1993. He was
formerly a partner at Pannel Kerr Forster, Certified Public Accountants. Mr.
Giovenco is a graduate of Loyola University in Chicago, Illinois. He serves on
the Board of Trustees of the University of Nevada, Las Vegas Foundation and is
the former Chairman of the Nevada Resort Association.
Mr. Gryp retired from his position as Executive Vice President of GWFC and
its principal subsidiary, Great Western Bank, a Federal Savings Bank ("GWB"), in
1987. He began his savings and loan career at Salinas Valley Savings-Loan
Association in 1950. He was named Executive Vice President and Managing Officer
of that association in 1952, a position he held until the association merged
with Palo Alto Savings and Loan Association (later known as Northern California
Savings, a Federal Savings and Loan Association ("NCS")) in 1969. Mr. Gryp was
President, Managing Officer and a Director of NCS after that merger. He has
served as President and a Director of the California League of Savings
Institutions.
Mr. Hernandez has been President of Inter-Con Security Systems, Inc., a
worldwide provider of security and facility support services, since 1986, having
previously served as Executive Vice President and Vice President and Assistant
General Counsel. He is also a co-founder and principal partner of Interspan
Communications. Mr. Hernandez is a member of the Los Angeles Police Commission,
Vice Chairman and
- ---------
(1) American Funds Tax-Exempt Series, American Funds Income Series, American
High-Income Trust, American Mutual Funds, Inc., American Variable Insurance
Series, Bond Fund of America, Inc., Capital Income Builder, Inc., Capital
World Bond Fund, Inc., Capital World Growth and Income Fund, Inc., Cash
Management Trust of America, Intermediate Bond Fund of America, Limited Term
Tax-Exempt Bond Fund of America, New Economy Fund, Tax-Exempt Bond Fund of
America, Small Cap World Fund, Inc., Tax-Exempt Money Fund of America, and
U.S. Treasury Money Fund of America.
6
<PAGE>
Director of the Childrens Hospital of Los Angeles, Trustee of Pomona College,
Director of the Los Angeles Philharmonic Association, and Overseer of the
Huntington Library, Art Collections and Gardens. He is a graduate of Harvard
University and the Harvard Law School.
Mr. Maher was elected President and Chief Operating Officer of GWFC and GWB
in 1986. Previously, he was a Managing Director of Lehman Brothers Kuhn Loeb
Incorporated, an investment banking firm, and its successor, having joined that
firm in 1979. He served as Executive Vice President, Finance of GWFC from 1973
until 1976. In 1976, he resigned to renew his association with Blyth Eastman
Dillon & Co. Inc., an investment banking firm, serving as an Executive Vice
President, Director and member of the Executive Committee of that firm until
1979. Mr. Maher is a director of Baker Hughes Incorporated, a diversified
provider of products and services to the petroleum and continuous process
industries. A graduate of Menlo College and the Wharton School of Finance and
Commerce, University of Pennsylvania, he is a director and past president of Big
Brothers of Greater Los Angeles, a member of the California Business Roundtable,
a member of the National Board of Trustees of the Boys and Girls Clubs of
America and Overseer of the Huntington Library, Art Collections and Gardens.
Mr. Charles D. Miller is Chairman and Chief Executive Officer of Avery
Dennison Corporation, a manufacturer of self-adhesive materials, tapes and
office products. He has served in that capacity since 1983, having joined that
firm in 1964 and served as its Chief Operating Officer from 1975 to 1977 and as
President and Chief Executive Officer from 1977 to 1983. A graduate of Johns
Hopkins University, he also serves as a director of SCEcorp, Pacific Mutual Life
Insurance Company, Nationwide Health Properties, Inc. and Avery Dennison
Corporation. He is a trustee of Occidental College and Johns Hopkins University.
Mr. Montgomery was elected a director and President of the Company in 1975,
Chief Executive Officer in 1979 and Chairman of the Board of Directors in 1981.
He was the Chief Operating Officer from 1975 to 1979. Mr. Montgomery presently
serves as the Chairman of the Board and Chief Executive of the Company. He
commenced his savings and loan career in 1960 with GWFC. Before rejoining GWFC,
he was a Director and President of United Financial Corporation and its
subsidiary, Citizens Savings and Loan Association, having served those companies
from 1964 to 1975. A graduate of the University of California at Los Angeles, he
is a past Director of the California League of Savings Institutions, and is
currently a Director of the Federal Home Loan Bank of San Francisco, the Federal
Home Loan Mortgage Corporation and a Trustee of the UCLA Foundation. He is also
a member of the Executive Committee of the Savings & Community Bankers of
America, a Director of the Local Initiatives Support Corporation, and a Trustee
of the Neighborhood Housing Services of America.
Dr. Siegel is Professor of Psychology, Stanford University School of
Medicine, where she has served on the faculty since 1963. A graduate of Stanford
University, she is past President of the Stanford Faculty Club. She has held
numerous consulting and advisory positions with federal agencies in the fields
of science and health. She is past Editor of the Journal CHILD DEVELOPMENT,
published by the Society for Research in Child Development, and is co-Editor of
its book CHILD DEVELOPMENT RESEARCH AND SOCIAL POLICY. She is past President of
the Division on Developmental Psychology of the American Psychological
Association. She is also past President of the Board of the Senior Coordinating
Council of Palo Alto, and serves on the Professional Advisory Committees of the
Peninsula Children's Center and the Children's Health Council, both of Palo
Alto. She is a Trustee of the Menninger Foundation, Topeka, Kansas, and also a
member of its Board of Directors for the Menninger Clinic. She is a Governor of
Stanford Associates, and is President of the Board of the Children's Television
Resource and Education Center, San Francisco, and Vice President of the Board of
the Stanford Historical Society.
Mr. Wood is Chairman, Chief Executive Officer and a Director of Pacific
Enterprises, the holding company of Southern California Gas Company of which he
is Presiding Director. Mr. Wood served in various operating and staff positions,
including as an executive officer, of Pacific Enterprises subsidiaries since
1960 and was named President of Pacific Enterprises in 1989, Chief Executive
Officer in 1991 and Chairman in 1992. A graduate of the University of Tulsa, he
is a trustee of Harvey Mudd College, California
7
<PAGE>
Hospital Medical Center Foundation, and the Southwest Museum, a director of the
California Chamber of Commerce and the Automobile Club of Southern California,
and a member of the California Business Roundtable.
BOARD COMMITTEES
The Company has standing Audit, Compensation, Finance and Nominating
Committees of the Board of Directors. Except for James F. Montgomery and John F.
Maher, who serve on the Finance and Nominating Committees, the directors serving
on these committees are not executive officers or employees of the Company.
The Audit Committee assists in selecting the independent accountants, in
designating services they are to perform and in maintaining effective
communications with the accountants. It reviews the scope and results of the
audit and non-audit functions and also reviews the effectiveness of internal
controls, internal auditing, the accounting, data processing and reporting
functions, as well as the personnel performing such duties.
The Compensation Committee reviews and makes recommendations to the Board of
Directors on the levels of compensation of the directors and senior management,
the provisions of employment contracts, and the adoption of, or major amendments
to, basic employment benefit and executive compensation plans. The Compensation
Committee also has complete administrative authority under the Company's stock
option and stock incentive plans (including the power to grant and determine the
terms of share awards under the 1988 Stock Option and Incentive Plan) and will
have authority to administer the proposed Great Western Financial Corporation
Annual Incentive Compensation Plan for Executive Officers.
The Finance Committee reviews the asset and liability structure of the
Company and considers its funding and capital needs. It receives reports on the
progress of investment activities, including the investment of assets under the
Savings and Retirement Plans described below, and reviews strategies that have
been developed to meet changing economic and market conditions. The Finance
Committee also considers and makes recommendations to the Board of Directors
with respect to the payment of dividends.
The Nominating Committee recommends to the Board of Directors nominees for
election or reelection as directors at the annual meeting of shareholders. While
the Nominating Committee normally is able to identify from its own resources an
ample number of qualified candidates, it will consider shareholder suggestions
of persons to be considered as nominees to fill future vacancies on the Board.
Such suggestions must be sent in writing to the Secretary at the Company's
address and must be accompanied by detailed biographical and occupational data
on the prospective nominee, along with a written consent of the prospective
nominee to consideration of his or her name by the Committee. The Committee will
consider the age of the prospective nominee and whether he or she possesses
integrity and moral responsibility, sound business judgment, good health, a
breadth of business or other experience, leadership in the nominee's field of
endeavor, an appreciation of the role of a publicly held corporation in society,
a willingness to represent the interests of all shareholders rather than the
special interests of a particular group, and qualities which facilitate an
independent, consultive and deliberative Board. Also, there must be no legal
impediment to the nominee serving as a director. However, the selection of
nominees of the Board is solely within the discretion of the Board of Directors.
The Company's By-laws include additional requirements regarding nominations of
persons at a shareholders' meeting other than by the Board of Directors. See
"Annual Meeting Advance Notice Requirements."
8
<PAGE>
The Board of Directors met 11 times in 1993 and the aggregate number of
meetings of the Board and of the Audit, Compensation, Finance and Nominating
Committees totaled 21. The members of these committees and the number of
meetings held during 1993 were:
<TABLE>
<S> <C> <C> <C>
AUDIT COMMITTEE COMPENSATION COMMITTEE FINANCE COMMITTEE NOMINATING COMMITTEE
(4 meetings) (2 meetings) (3 meetings) (1 meeting)
John V. Giovenco, Charles D. Miller, H. Frederick Christie James F. Montgomery,
Chairman Chairman Chairman Chairman
David Alexander, H. Frederick Christie John V. Giovenco Alberta E. Siegel,
Vice Chairman John V. Giovenco Firmin A. Gryp Vice Chairperson
and Secretary Firmin A. Gryp John F. Maher David Alexander
H. Frederick Christie Willis B. Wood, Jr. Charles D. Miller H. Frederick Christie
Stephen E. Frank James F. Montgomery John V. Giovenco
Firmin A. Gryp Willis B. Wood, Jr. John F. Maher
Enrique Hernandez, Jr. Charles D. Miller
Charles D. Miller
Alberta E. Siegel
Willis B. Wood, Jr.
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Firmin A. Gryp, a member of the Compensation Committee during 1993, was
formerly an officer of the Company and its subsidiaries. Mr. Gryp retired from
those positions in 1987. Mr. Gryp receives annual benefits of $160,000 under the
Company's Retirement Plan and under a supplemental retirement arrangement.
The following tabulation shows as to the members of the Compensation
Committee (i) the largest aggregate amount of indebtedness to the Company in
excess of $60,000 outstanding from January 1, 1993 to February 28, 1994, (ii)
the nature of the indebtedness, (iii) the amount of such indebtedness
outstanding at February 28, 1994, and (iv) the annual rate of interest charged
on such indebtedness.
<TABLE>
<CAPTION>
INDEBTEDNESS
LARGEST OUTSTANDING AT
NAME OF COMPENSATION AGGREGATE NATURE OF FEBRUARY 28, INTEREST
COMMITTEE MEMBER INDEBTEDNESS INDEBTEDNESS(1) 1994 RATE(2)
- ---------------------------- ------------ -------------- ---------------- -----------
<S> <C> <C> <C> <C>
H. Frederick Christie $ 861,127 Residential $ 813,674 3.77%
300,000 Residential 294,641 3.77
John V. Giovenco 683,499 Residential 662,320 7.00
580,083 Residential 555,298 3.77
Charles D. Miller 1,129,575 Residential 1,100,000 3.77
Willis B. Wood, Jr. 757,687 Residential 737,862 3.77
<FN>
- ---------
(1) Loans secured by the same residence are aggregated.
(2) Interest on these loans are generally at monthly adjustable rates equal to
the Company's cost of funds plus .25%. This rate was approximately 2.35% to
2.57% below that on similar loans to the public during 1993.
</TABLE>
The residential loans described above were made pursuant to the Company's
Employee Home Loan Programs and such loans are secured by trust deeds or
mortgages on the respective residences of the members of the Compensation
Committee. See "Employee Benefit Plans."
9
<PAGE>
EXECUTIVE OFFICERS
The following table sets forth the names, ages and positions of the
executive officers of the Company, the date each became an officer of either the
Company or GWB, and the number of shares of the Company's common stock
beneficially owned, directly or indirectly, by each of them at February 28,
1994. Executive officers are elected annually, have employment agreements as
described below and, except for Mr. Pappas, hold the same positions with GWB as
they hold with GWFC.
<TABLE>
<CAPTION>
SHARES
OWNED
BENEFICIALLY
AT
OFFICER FEBRUARY 28,
NAME AGE POSITION SINCE 1994(1)
- -------------------------- --- ------------------------------------------------------ ----------- --------------
<S> <C> <C> <C> <C>
James F. Montgomery 59 Chairman of the Board and Chief Executive 1975 711,163(2)
John F. Maher 50 President and Chief Operating Officer 1986 542,025(3)
Eugene A. Crane 56 Executive Vice President 1962 222,012(4)
Curtis J. Crivelli 51 Executive Vice President 1987 170,250(5)
J. Lance Erikson 50 Executive Vice President, Secretary and General
Counsel 1982 107,149(6)
Carl F. Geuther 48 Executive Vice President and Chief Financial Officer 1986 201,000(7)
Joe M. Jackson 55 Executive Vice President 1979 171,667(8)
Michael M. Pappas 60 President, Consumer Finance Division 1986 240,000(9)
<FN>
- ---------
(1) Certain executive officers share with their spouses voting and investment
powers with respect to these shares. The percentages of shares beneficially
owned by any executive officer does not exceed one percent of the Company's
common stock so owned.
(2) Includes 375,000 shares subject to options exercisable within 60 days of
the record date and 945 shares held by the Trustee under the Employee
Savings-Incentive Plan.
(3) Includes 274,500 shares subject to options exercisable within 60 days of
the record date and 25 shares held by the Trustee under the Employee
Savings-Incentive Plan.
(4) Includes 130,500 shares subject to options exercisable within 60 days of
the record date and 937 shares held by the Trustee under the Employee
Savings-Incentive Plan.
(5) Includes 107,750 shares subject to options exercisable within 60 days of
the record date.
(6) Includes 76,250 shares subject to options exercisable within 60 days of the
record date and 112 shares held by the Trustee under the Employee
Savings-Incentive Plan.
(7) Includes 141,000 shares subject to options exercisable within 60 days of
the record date.
(8) Includes 91,375 shares subject to options exercisable within 60 days of the
record date and 112 shares held by the Trustee under the Employee
Savings-Incentive Plan.
(9) Includes 165,000 shares subject to options exercisable within 60 days of
the record date.
</TABLE>
Biographical information concerning Messrs. Montgomery and Maher is given
under the caption "Election of Directors".
Mr. Crane has been with GWFC or GWB for 32 years. He is in charge of the
Real Estate Services Division.
Mr. Crivelli has been with GWFC or GWB for a total of 17 years and,
consecutively, for the last 6 years. He is in charge of the Retail Banking
Division.
Mr. Erikson has been with GWFC and NCS, which was acquired by the Company in
1982, for 25 years. He is in charge of the Company's Legal Division.
10
<PAGE>
Mr. Geuther is Chief Financial Officer. He previously was the chief
financial officer of the Company's subsidiary, Aristar, Inc. ("Aristar") and has
been with GWFC and Aristar for 19 years.
Mr. Jackson has been with GWFC or GWB for 15 years. He is in charge of the
Administrative Services and Data Processing Division.
Mr. Pappas is President of the Consumer Finance Division which was acquired
as part of the Aristar acquisition in 1983. Mr. Pappas was made President of the
consumer finance division of Aristar in 1976 and he has been with GWFC and
Aristar for 39 years.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS FEES
Mr. Montgomery and Mr. Maher are the only Directors who are employees of
GWFC. See "Executive Officers" below for a description of their employment
contracts. Directors, other than Messrs. Montgomery and Maher, are paid an
annual retainer of $25,000 for Board service to GWFC and to GWB and a combined
attendance fee of $1,800 for each GWFC and GWB Board meeting attended. Directors
attending any committee meeting, whether or not they are members of such
committee, receive an attendance fee of $1,000 for each meeting attended;
chairpersons of committees, however, receive an attendance fee of $1,500 for
presiding over their committee meetings. Additionally, each chairperson of a
committee receives an annual fee of $3,000 and the Secretary of the Audit
Committee receives an annual fee of $2,000. Directors are also offered insurance
coverage similar to that provided under the Company's health and dental plans
and are provided with travel and accident insurance coverage for travel to and
from Board and committee meetings at no cost to them. Messrs. Montgomery and
Maher are not paid any fees or additional remuneration for services as members
of the Board or any committee, but they are eligible to receive benefits under
the Directors Retirement Plan which is discussed below. The amounts referred to
above do not include the economic benefit of preferential loans under the
Company's Home Loan Program shown at pages 9 and 19 and incorporated herein by
this reference.
DIRECTORS' RETIREMENT PLAN
The Great Western Directors' Retirement Plan ("Directors' Retirement Plan")
provides retirement benefits to directors. Each eligible director is entitled to
an annual retirement benefit upon termination of service on the Board of
Directors equal to the sum of the annual retainer paid to members of the Board
of Directors plus twelve times the monthly meeting fee, both as in effect at the
time of the director's termination. Benefits are payable for a period equal to
the number of years that the eligible director served as a director. Benefits
are also provided to the surviving spouses of eligible directors or other
designated beneficiaries upon the deaths of the directors prior to the receipt
of the above benefits.
DIRECTOR STOCK OPTION PROGRAM
Upon adoption of the 1988 Incentive Plan, each non-employee director was
granted automatically, subject to shareholder approval of the Plan, a
nonqualified option under the Non-Employee Director Program to purchase 2,500
shares of the Company's common stock at the then fair market value of such
shares. Each non-employee who thereafter becomes a director is also
automatically granted such an option upon becoming a director. Annually, each
non-employee director automatically is granted an option to purchase 2,500
shares of the Company's common stock. No non-employee director may receive such
options to purchase more than 2,500 shares in any calendar year. The purchase
price per share of common stock covered by each such option, payable in cash
and/or shares, is the fair market value of the Common Stock on the date the
option is granted. The options are exercisable in 50% installments on the first
and second anniversary of their grant, and, unless earlier terminated, terminate
ten years after they are granted. The exercise prices of annual options granted
in 1992, 1993, and 1994 were $18.00, $16.375, and $20.25, respectively.
In the event a non-employee director's services as a Board member are
terminated as a result of death, disability or retirement after age 72, options
will become immediately exercisable in full for a period of two years or until
the expiration of the stated term of the option, whichever period is shorter. In
the event a
11
<PAGE>
non-employee director's services are terminated for any other reason, any then
exercisable portion of an option will be exercisable for a period of three
months or the balance of the option's term, whichever period is shorter.
The Plan provides for full vesting and acceleration of exercise dates of the
options in the event of a change of control of the Company. A change of control
occurs under the Plan when 50% or more of the common stock of the Company is
acquired by any entity or group, or if there is a dissolution or liquidation of
the Company or reorganization, merger or consolidation as a result of which the
Company is not the surviving corporation, or if there is a sale of substantially
all of the assets of the Company as an entirety to another entity.
To date, the Board of Directors has not taken action to place into effect
another feature of the Plan which would permit non-employee directors to elect
to receive nonqualified stock options in lieu of fixed annual retainer (but not
meeting) fees. This feature would permit a non-employee director to defer
compensation by converting the fixed annual retainer into discounted stock
options of equal value at the time of grant.
EXECUTIVE OFFICERS
The following table and accompanying notes show for the Chief Executive
Officer and the five next highest paid Executive Officers of the Company as of
December 31, 1993, the aggregate indicated compensation paid by the Company and
its subsidiaries to such persons during 1993 and, to the extent required by
applicable rules, the preceding two fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-------------------------------------------
AWARDS
ANNUAL COMPENSATION --------------------------
----------------------------------- PAYOUTS
(E) (F) (G) ---------------
OTHER RESTRICTED SECURITIES
(A) (C) (D) ANNUAL STOCK UNDERLYING (H)
NAME AND (B) SALARY BONUS COMPENSATION AWARD(S) OPTIONS/ LTIP
PRINCIPAL POSITION YEAR ($)(1) ($)(1) ($)(2)(5) ($)(3) SARS(#) PAYOUTS($)
- ---------------------------- --------- --------- --------- ------------- ------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
James F. Montgomery 1993 950,000 142,500 184,880 -- 23,750 --
Chairman and 1992 950,000 427,500 183,778 3,259,375 -- --
Chief Executive 1991 950,000 712,500 -- -- 117,500 --
John F. Maher 1993 650,000 81,250 218,169 -- 13,542 --
President and 1992 650,000 260,000 196,346 3,259,375 -- --
Chief Operating Officer 1991 650,000 406,250 -- -- 80,000 --
Michael M. Pappas 1993 410,000 164,000 278 -- -- --
President, Consumer 1992 375,000 150,000 -- 1,396,875 -- --
Finance Division 1991 350,000 175,000 -- -- 40,000 --
Eugene A. Crane 1993 380,000 38,000 38,559 -- 6,333 --
Executive Vice President 1992 355,000 120,700 26,685 1,117,500 -- --
1991 335,000 160,000 -- -- 30,000 --
Curtis J. Crivelli 1993 360,000 36,000 55,897 -- 6,000 --
Executive Vice President 1992 340,000 115,600 65,999 1,117,500 -- --
1991 320,000 150,000 -- -- 30,000 --
Carl F. Geuther 1993 360,000 36,000 86,954 -- 6,000 --
Executive Vice President 1992 340,000 115,600 93,327 1,117,500 -- --
and Chief Financial Officer 1991 315,000 150,000 -- -- 25,000 --
<CAPTION>
(I)
(A) ALL OTHER
NAME AND COMPENSATION
PRINCIPAL POSITION ($)(4)(5)
- ---------------------------- ---------------
<S> <C>
James F. Montgomery 31,286
Chairman and 49,675
Chief Executive --
John F. Maher 21,406
President and 33,989
Chief Operating Officer --
Michael M. Pappas 13,502
President, Consumer 19,608
Finance Division --
Eugene A. Crane 12,515
Executive Vice President 18,563
--
Curtis J. Crivelli 11,856
Executive Vice President 17,779
--
Carl F. Geuther 11,856
Executive Vice President 17,779
and Chief Financial Officer --
<FN>
- -------------
(1) Amounts shown include cash compensation earned and received by executive
officers as well as amounts earned but deferred at the election of those
officers.
(2) Amounts shown include, when applicable, that portion of interest earned on
deferred compensation accounts above 120% of the applicable federal rate,
country club dues, personal use of corporate aircraft, the estimated
economic benefit of the preferential loans made generally under the Home
Loan Program shown at page 19, and the incremental cost to the Company of
(a) Company provided automobiles; (b) tax and financial planning advice by
third parties; and (c) insurance which provides
</TABLE>
12
<PAGE>
<TABLE>
<S> <C>
reimbursement for health and dental costs in excess of the amount payable
under the Company's group
health and dental plans. Perquisites in excess of 25% of the total
perquisites reported in column (e) included the following: Mr. Montgomery:
personal use of corporate aircraft--$68,014 in 1992; economic benefit of
preferential loans--$64,022 in 1993 and $51,397 in 1992; Mr. Maher:
economic benefit of preferential loans--$40,307 in 1992; Mr. Crivelli:
economic benefit of preferential loans-- $36,329 in 1993 and $44,658 in
1992; Mr. Geuther: excess medical and dental coverage--$19,952 in 1993 and
$24,530 in 1992; economic benefit of preferential loans--$40,021 in 1993
and $48,686 in 1992. The amounts included in column (e) for Messrs. Pappas
and Crane include that portion of interest earned on deferred compensation
accounts above 120% of the applicable federal rate and do not include the
value of certain perquisites which in the aggregate did not exceed the
lower of $50,000 or 10% of their respective aggregate 1993 and 1992 salary
and bonus compensation.
(3) A total of 605,000 shares of performance based restricted stock were
awarded to the named executive officers in 1992 with vesting occurring in
three to ten years as described at page 22. At year-end 1993, these shares
were worth $12,100,000 at the then current market value (including
$3,500,000 or 175,000 shares each for Messrs. Montgomery and Maher,
$1,500,000 or 75,000 shares for Mr. Pappas, and $1,200,000 or 60,000 shares
each for Messrs. Crane, Crivelli and Geuther) without giving effect to the
diminution of value attributable to the restrictions on such stock.
Dividends are paid on the restricted stock at the same rate payable to
common stockholders.
(4) The amounts shown in this column for 1993 and 1992 consist of the following
respective amounts: (a) Mr. Montgomery: Employee Savings Incentive Plan
matches and forfeitures--$7,767 and $11,967; Supplemental Incentive
Plan--$23,519 and $37,708; deferred compensation plan matches, makeups and
forfeitures--$--0-- and $--0--; (b) Mr. Maher: Employee Savings Incentive
Plan matches and forfeitures--$7,767 and $11,967; Supplemental Incentive
Plan--$13,639 and $15,225; deferred compensation plan matches, makeups and
forfeitures--$--0-- and $6,797; (c) Mr. Pappas: Employee Savings Incentive
Plan matches and forfeitures--$5,063 and $8,170; Supplemental Incentive
Plan-- $8,439 and $11,438; deferred compensation plan matches, makeups and
forfeitures--$--0-- and $--0--; (d) Mr. Crane: Employee Savings Incentive
Plan matches and forfeitures--$7,767 and $11,967; Supplemental Incentive
Plan--$4,748 and $6,596; deferred compensation plan matches, makeups and
forfeitures--$--0-- and $--0--; (e) Mr. Crivelli: Employee Savings
Incentive Plan matches and forfeitures--$7,767 and $11,269; Supplemental
Incentive Plan--$2,903 and $4,555; deferred compensation plan matches,
makeups and forfeitures--$1,186 and $1,955; Mr. Geuther: Employee Savings
Incentive Plan matches and forfeitures--$6,779 and $7,978; Supplemental
Incentive Plan--$5,077 and $7,134; deferred compensation plan matches,
makeups and forfeitures--$--0-- and $2,667.
(5) This information is not required to be disclosed for fiscal years ended
prior to December 15, 1992 and thus is not included in the table for 1991.
</TABLE>
EMPLOYMENT AGREEMENTS
Mr. Montgomery has an employment agreement with GWFC, effective December 19,
1989, which has an initial term of five years and provides for a rolling three
year term at the end of the second contract year and each point thereafter
unless earlier terminated. The agreement provides for various benefits including
a current annual salary of $950,000 which is subject to periodic review and
increase, but not decrease. The agreement provides for various payments to Mr.
Montgomery or his beneficiaries in the event of his death, disability, or
termination without cause and in the event of a change of control of GWFC. In
the event of his death, Mr. Montgomery's beneficiaries would be entitled to a
payment equal to 250 percent of Mr. Montgomery's then current salary reduced by
the proceeds of company-provided life insurance. Mr. Montgomery's beneficiaries
would also be entitled to receive continued payment of 50 percent of his then
current salary until the time when he would have been 65 but in no event for a
period less than 10 years. In addition, Mr. Montgomery's family would be
entitled to continuation of certain insurance benefits for two years. Upon
termination due to disability, Mr. Montgomery would continue to receive, until
the disability ends, but no later than age 65, 50 percent of the sum of his
current salary plus his average bonus over the prior three years, less benefits
payable under the Company's long term disability plan. He would also be
13
<PAGE>
entitled to continuation of certain other benefits. In the event of a
termination without cause, Mr. Montgomery would receive his current salary for
the remaining term of the agreement and a full or partial bonus payment for the
year of termination. He would also be entitled to continuation of certain other
benefits for the same period, an indemnification for additional taxes payable,
and a pro rata payment of long term incentive benefits. The agreement provides
for certain offsets in the event he becomes employed during the remaining term
of the agreement. In the event of a voluntary termination of Mr. Montgomery's
employment or material breach by the Company after a change of control, all
restricted shares and stock options of his which are then unvested may
immediately vest. If Mr. Montgomery voluntarily terminates employment within six
months after a change of control, he is entitled to payments as described above
for a termination without cause, with no offset. However, in no event would
payments which are contingent upon a change of control under applicable tax
rules ("parachute payments") exceed or be less than specified Internal Revenue
Code limits that currently approximate three times the average of his
compensation for the prior five years (the "Section 280G Limits"). In the event
of a material breach by the Company after a change of control, Mr. Montgomery is
entitled to terminate his employment and receive payments as described above for
a termination without cause, with varying offsets in the event of subsequent
employment; any such parachute payments will be subject to but not less than the
maximum permitted by limitations prescribed by the Internal Revenue Code with
respect to payments received by terminating employees which are contingent upon
a change of control. A change of control occurs under the agreement when anyone
acquires ownership of 25 percent or more of the Company's outstanding voting
stock and, in that connection, the persons who were directors of the Company
immediately before such acquisition shall cease to constitute five-sixths of the
Board of Directors of the Company or any successor thereafter.
Mr. Maher has an employment agreement with GWFC, effective December 19,
1989, which has an initial term of five years and provides for a rolling three
year term at the end of the second contract year unless earlier terminated. The
agreement provides for various benefits including a current annual salary of
$650,000 which is subject to periodic review and increase, but not decrease. The
agreement provides for various payments to Mr. Maher or his beneficiaries in the
event of his death, disability, or termination without cause, all in a manner
similar to that described above for Mr. Montgomery. In the event of a
termination of Mr. Maher's employment without cause or material breach by the
Company after a change of control, all restricted shares and stock options of
his which are then unvested may immediately vest. In the event of a material
breach by the Company after a change of control, Mr. Maher is entitled to
terminate his employment and receive various payments similar to those described
above for Mr. Montgomery. Mr. Maher also is entitled to parachute payments (but
not less than the maximum permitted by the 280G Limits contingent upon a change
of control) in the event he voluntarily terminates employment after a change of
control, but he must remain in office for a requisite period of time and give
notice of his intended departure. Change of control is defined as in Mr.
Montgomery's agreement except that the percentage of ownership required is more
than 50 percent rather than 25 percent, unless the Chairman and Chief Executive
Officer of the Company fails to acquiesce in a breach by the Company or decision
by the Company to terminate Mr. Maher's employment without cause following a
change of control, in which case the threshold is 25%.
GWFC has employment agreements with the other executive officers, which have
initial terms of three years and provide for rolling two year terms at the end
of the first contract year unless earlier terminated. The base annual salaries
for Messrs. Pappas, Crane, Crivelli and Geuther under their employment
agreements are their current salaries, i.e. $410,000, $380,000, $360,000 and
$360,000, respectively, subject to periodic review and increase, but not
decrease unless done in conjunction with a pro rata salary reduction applicable
to all of GWFC's officers.
These employment agreements provide for various benefits to each executive
officer or his beneficiaries in the event of his death, disability, or
termination without cause and in the event of termination without cause
following a change of control of GWFC. In the event of the executive officer's
death, his beneficiaries would be entitled to payment of the executive officer's
salary and continuation of certain insurance benefits for one year. Upon
termination due to disability, the executive officer would continue to receive
until the disability ends, but not later than age 65 or for a period greater
than ten years, 50 percent of the sum of his
14
<PAGE>
current salary plus his average bonus over the prior three years, less benefits
under the Company's long term disability plan. He would also be entitled to
continuation of certain other health and welfare benefits. In the event of a
termination without cause, the executive officer would receive his current
salary for the remaining term of the agreement and a full or partial bonus for
the year of termination. He would also be entitled to a continuation of other
benefits for the same period. The agreements provide for certain offsets in the
event such terminated executive officer becomes employed during the remaining
term of the agreement. In the event of a material breach by the Company after a
change of control, each executive officer is entitled to terminate his
employment and receive payments, as described above for a termination without
cause, for a period of three years, with an offset in the event of subsequent
employment. The executive officer may also be entitled to full vesting of
restricted shares or stock options and is entitled to a pro rata payment of long
term incentive benefits on the assumption that performance is "on plan." These
agreements, like those for Messrs. Montgomery and Maher, provide that to the
extent that any such payments constitute parachute payments, they will be
subject to the the 280G Limits and, to the extent they do not reach such
limitations, the executive officers will be entitled to an amount equal to the
maximum amount payable without incurring a liability for payments in excess of
those limits. A change of control is defined as in Mr. Maher's agreement. The
parachute payments are in addition to other payments under the agreements that
do not constitute parachute payments.
15
<PAGE>
THE FOLLOWING REPORT OF THE COMPENSATION COMMITTEE AND THE PERFORMANCE
GRAPHS INCLUDED IN THIS PROXY STATEMENT SHALL NOT BE DEEMED TO BE INCORPORATED
BY REFERENCE BY ANY GENERAL STATEMENT INCORPORATING BY REFERENCE THIS PROXY
STATEMENT INTO ANY FILING UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES
EXCHANGE ACT OF 1934, EXCEPT TO THE EXTENT THE COMPANY SPECIFICALLY INCORPORATES
THIS REPORT OR THE PERFORMANCE GRAPHS BY REFERENCE THEREIN, AND SHALL NOT BE
DEEMED SOLICITING MATERIAL OR OTHERWISE DEEMED FILED UNDER EITHER OF SUCH ACTS.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee administers the Company's various incentive
plans, including its stock option and performance based restricted stock plans
described on pages 20 to 22 of this proxy statement. In addition, the Committee
reviews and recommends to the Board of Directors compensation levels for members
of executive management, evaluates executive management performance, considers
executive management succession and related matters.
Since 1989, the Company has retained the services of Strategic Compensation
Associates ("SCA"), a nationally known consulting firm specializing in executive
compensation issues, to assist the Committee in connection with the performance
of its various responsibilities. SCA advises the Committee with respect to the
reasonableness and appropriateness of compensation for the Company's executive
officers. In doing so, the firm prepares and reviews with the Compensation
Committee survey materials reflecting the compensation practices of major
regional commercial banks and savings associations and other factors which SCA
and the Compensation Committee consider relevant. The companies included in the
survey materials are not limited to those included in the peer group in the
second performance graph on page 18. The Committee believes that, to a certain
degree, corporate performance is subject to economic conditions beyond the
control of management. Accordingly, while the Committee considers such corporate
performance measures as net income, earnings per share, return on equity, return
on assets, net interest margin, loan production, asset quality, fee income, and
the ratio of noninterest expenses to revenue, the Committee has not applied any
specific quantitative formulas or standards in making compensation decisions
and, to that extent, the process it followed was subjective.
In determining the compensation recommendations for all executive officers
which the Compensation Committee makes to the Board of Directors, it has been
the policy and practice of the Committee to consider the advice of SCA, the
contributions of individual executive officers, the performance and prospects of
the Company over time, and the desirability of attracting and retaining a highly
capable and experienced executive management group. All the executive officers
have employment contracts with the Company as described on Pages 13 to 15.
In recent years, it has been the Company's policy to place a greater
percentage of total executive compensation "at risk," principally through the
award of annual cash bonuses. As a result, annual bonus compensation, at target
levels, could amount to approximately 40% of base salary paid to the Company's
executive vice presidents and the President of the Consumer Finance Division,
50% of base salary paid to the chief operating officer, and 60% of base salary
for the chief executive officer. Annual bonus compensation for the Company's
executive officers could increase or decrease significantly based upon
individual contribution and corporate performance levels. Based on the survey
materials provided by SCA, the Company believes that the level of the Company's
aggregate salary and bonus compensation in 1993 ranked below the median for the
companies included in the compensation survey, but above the median for the
Company's primary thrift competitors included in the peer group in the second
performance graph on page 18. The second performance graph is included in this
proxy statement to show the Company's stock performance in relation to its nine
largest publicly traded California competitors at the beginning of the five year
period shown.
The primary corporate objectives in 1993 were to reduce the level of
nonperforming loans and assets and to reduce ongoing operating costs by a
significant amount. Nonperforming assets declined to $1.13 billion, or 2.90
percent of total assets at December 31, 1993, from $2.01 billion, or 5.12
percent of total assets at December 31, 1992, principally the result of bulk
sales, auctions and individual sales. In addition, the Company expects to
achieve substantial savings from its administrative cost reduction program
throughout 1994 and more than $100 million of savings in 1995 and beyond. The
Company's net earnings, however, were $62 million, or $.28 per share, compared
with $85 million, or $.53 per share for 1992 and reflect, among other
contributing factors, persistent weakness in the economy, particularly in
California. Accordingly, the Compensation Committee awarded the executive
officers, other than the President of the Company's Consumer Finance Division,
cash bonuses of only 50% of their target bonuses, half of which was paid in
cash, and the other half awarded in the form of market priced stock options
valued in accordance with the Black-Scholes
16
<PAGE>
options pricing model as explained in the footnotes to the table on pages 20 and
21. The Committee believed that awarding bonuses in this manner would more
closely align the interests of the executive officers with those of the
Company's shareholders with respect to the value to be derived from the
attainment of the primary corporate objectives. With respect to salaries, no
increases were granted to the Chairman and Chief Executive or to the President
and Chief Operating Officer for 1993 or 1994 and salary increases were given to
the other executive officers for 1993 only to maintain their target compensation
at approximately the 60th percentile of that paid to executives of the major
banks and savings associations included in the SCA survey.
Mr. Montgomery's compensation and related benefits are based principally on
his rights under his employment agreement with the Company, described on pages
13 and 14 of the proxy statement. His base salary has not been increased since
1990, consistent with the Company's policy of maintaining competitive
compensation practices while placing a greater percentage of total cash
compensation "at risk." Mr. Montgomery's annual bonus for 1993 and his aggregate
compensation for the year are less than his prior year's bonus and aggregate
compensation and reflect the Company's lower earnings in the current business
environment.
In 1992, following a comprehensive study of long term incentive programs and
recommendations made by SCA, the Compensation Committee approved new performance
based restricted stock awards under the Company's 1988 Incentive Plan for the
Company's senior and executive officers to provide long-term incentive awards in
amounts comparable to those awarded to executives of the major banks and savings
associations included in the SCA survey. Shares awarded under the program are
subject to forfeiture in certain circumstances and do not vest for ten years
unless vesting is accelerated by the Company's exceeding the median total
shareholder return of other major financial institutions over rolling three year
performance cycles. See the description of the restricted stock on page 22.
Since the initial grants were intended to encompass a three year grant cycle,
the Committee did not intend to consider additional grants of restricted stock
or stock options to senior or executive officers until 1995, except to reward
promotions or in other unusual circumstances. As explained above, stock options
accounted for half of the bonuses awarded for 1993. Annual stock options
continue to be granted to key officers and employees below the senior officer
level.
To the extent readily determinable and as one of the factors in its
consideration of compensation matters, the Compensation Committee considers the
anticipated tax treatment to the Company and to the executives of various
compensation. Some types of compensation and their deductibility depend upon the
timing of an executive's vesting or exercise of previously granted rights.
Further, interpretations of and changes in the tax laws also affect the
deductibility of compensation. Thus, to the extent reasonably practicable and to
the extent it is within the Committee's control, the Compensation Committee
intends to limit executive compensation to that deductible under Section 162(m)
of the Internal Revenue Code of 1986. In doing so, the Committee may utilize
alternatives (such as deferring compensation) for qualifying executive
compensation for deductibility and may rely on grandfathering provisions with
respect to existing contractual commitments.
If the Great Western Financial Corporation Annual Incentive Compensation
Plan for Executive Officers, as described on pages 2 and 3 of the proxy
statement, is approved by shareholders, compensation paid under the Plan is
expected to be deductible in accordance with Section 162(m) of the Internal
Revenue Code of 1986. A substantial part of executive compensation will then be
contingent upon the Company's attaining the goals set by the Compensation
Committee in accordance with the Plan. Each year in which these goals are
reached, the compensation of the executive officers will be supplemented by
fiscal year-end cash bonus payments under the Plan.
Compensation Committee of the Board
of Directors, Great Western
Financial Corporation
Charles D. Miller, Chairman
H. Frederick Christie
John V. Giovenco
Firmin A. Gryp
Willis B. Wood, Jr.
17
<PAGE>
GREAT WESTERN STOCK PRICE PERFORMANCE
The following graph compares the Company's cumulative shareholder return on
its common stock, including the reinvestment of dividends, with the return on
the Standard & Poor's 500 Stock Index and a peer group of the Standard & Poor's
Financial Index.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN (1)
AMONG GREAT WESTERN FINANCIAL,
S&P 500 INDEX AND S&P FINANCIAL INDEX
<TABLE>
<CAPTION>
1988 1989 1990 1991 1992 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
GWF $100 $122 $ 90 $140 $143 $172
S&P 500 $100 $132 $127 $166 $179 $197
S&P Financial $100 $132 $104 $157 $193 $215
</TABLE>
Assumes $100 invested on December 31, 1988 in the Stock of Great Western
Financial, S&P 500 Index and S&P
Financial Index
Notes: (1) Total Return assumes reinvestment of dividends
(2) The stock price performance shown in this graph is not
necessarily indicative of future stock price performance.
The next graph compares the Company's cumulative shareholder return on its
common stock, including the reinvestment of dividends, with the return of a peer
group consisting of the ten largest publicly traded savings institutions in
California as of December 31, 1988,(1) on a weighted and unweighted basis. The
weighted index is weighted according to each issuer's market capitalization
while the unweighted index is not.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN (2)
AMONG GREAT WESTERN FINANCIAL,
CALIFORNIA S&L GROUP, WEIGHTED AND NOT WEIGHTED (3)
<TABLE>
<CAPTION>
1988 1989 1990 1991 1992 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
GWF $100 $122 $90 $140 $143 $172
CA S&L Grp - Wtd $100 $119 $88 $167 $191 $192
CA S&L Grp - Not Wtd $100 $ 92 $44 $ 64 $ 68 $ 70
</TABLE>
Assumes $100 invested on December 31, 1988 in the Stock of Great Western
Financial,
California S&L Group (Weighted by market Capitalization) and California S&L
Group (Not Weighted)
Notes: (1) H.F. Ahmanson & Company, Great Western Financial Corporation,
CalFed Inc., Glen Fed, Inc., Gibraltar Financial Corporation,
Home Fed Corporation, Golden West Financial Corporation, Coast
Savings Financial, Inc., Columbia Savings and Loan Association,
and Great American Bank, FSB. The CA S&L Group includes the
primary thrift competitors of the Company at the beginning of
the five year period.
(2) Total Return assumes reinvestment of dividends
(3) Weighted by market capitalization
(4) The stock price performance shown in this graph is not
necessarily indicative of future stock price performance.
18
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The following tabulation shows as to the Company's executive officers and
certain of its directors (i) the largest aggregate amount of indebtedness to the
Company in excess of $60,000 outstanding from January 1, 1993 to February 28,
1994, (ii) the nature of the indebtedness, (iii) the amount of such indebtedness
outstanding at February 28, 1994, and (iv) the annual rate of interest charged
on such indebtedness.
<TABLE>
<CAPTION>
INDEBTEDNESS
LARGEST OUTSTANDING AT
NAME OF EXECUTIVE AGGREGATE NATURE OF FEBRUARY 28, INTEREST
OFFICER OR DIRECTOR INDEBTEDNESS INDEBTEDNESS(1) 1994 RATE(2)
- -------------------------------- ------------ -------------- ---------------- -----------
<S> <C> <C> <C> <C>
James F. Montgomery $1,110,897 Residential $ 1,058,541 3.77
1,250,000 Residential 1,246,246 3.77
500,000 Unsecured 500,000 6.00
John F. Maher 463,679 Residential 440,838 3.77
835,126 Residential 794,149 3.77
Eugene A. Crane 17,951 Residential 15,940 7.00
380,602 Residential 341,516 3.77
Curtis J. Crivelli 899,139 Residential 854,983 3.77
554,058 Residential 538,386 3.77
J. Lance Erikson 753,830 Residential 719,322 3.77
249,449 Residential 237,781 3.77
Carl F. Geuther 176,812 Residential 168,137 3.77
1,424,052 Residential 1,381,205 3.77
Joe M. Jackson 540,761 Residential 514,840 3.77
Michael M. Pappas 229,279 Residential 218,388 3.77
600,000 Residential 594,538 3.77
David Alexander 281,865 Residential 268,223 3.77
<FN>
- ---------
(1) Loans secured by the same residence are aggregated.
(2) Interest on these loans, except for Mr. Montgomery's prime rate unsecured
loan, are generally at monthly adjustable rates equal to the Company's cost
of funds plus .25%. This rate was approximately 2.35% to 2.57% below that
on similar loans to the public during 1993.
(3) Information concerning the indebtedness to the Company by members of the
Compensation Committee of the Board of Directors is given under the caption
"Compensation Committee Interlocks and Insider Participation" on page 9.
</TABLE>
The residential loans described above were made pursuant to the Company's
Employee Home Loan Programs and such loans are secured by trust deeds or
mortgages on the respective residences of the named directors and officers. See
"Employee Benefit Plans."
Interest on Mr. Montgomery's unsecured, personal loan is payable annually
and the entire principal amount is payable on the earlier of May 23, 1998 or
twelve months following termination of Mr. Montgomery's employment as an officer
of GWFC.
From time to time, directors, executive officers, members of their immediate
families and entities with which such persons are known by GWFC or GWB to be
affiliated or associated may obtain "margin" loans from a subsidiary of GWFC,
obtain secured loans from GWB, place interest bearing deposits with GWB,
maintain checking accounts with GWB and avail themselves of check guarantee and
overdraft features allowed on these accounts, all in accordance with applicable
law. The transactions described in this paragraph are all in the ordinary course
of GWFC's or GWB's business and are made on terms substantially the same,
including interest rate and collateral, as those prevailing at the time for
comparable transactions with other persons and, with respect to such loans to
such persons, do not involve more than the normal risk of collectibility or
present other unfavorable features.
19
<PAGE>
EMPLOYEE BENEFIT PLANS
The material which follows in this section describes certain provisions made
by the Company and its subsidiaries pursuant to certain stock option, restricted
stock, deferred compensation, employee savings, pension or other incentive
plans, now in effect, that provide for severance, termination or change of
control benefits to employees, including executive officers, other than group
life and accident insurance, group hospitalization and similar group payments
and benefits.
STOCK BENEFIT PLANS
The Company's 1988 Stock Option and Incentive Plan (the "1988 Incentive
Plan") provides for various types of stock incentives, including stock options,
restricted shares, bonus stock and performance shares. The only awards to date
have been stock options and restricted stock (with performance vesting
features). The 1988 Incentive Plan provides for acceleration of the
exercisability of awards and accelerated vesting of awards, unless the
Compensation Committee of the Board of Directors (the "Administrator") otherwise
provides, if 50% or more of the common stock of the Company is acquired by any
entity or group, or if there is a reorganization, merger or consolidation of the
Company as a result of which the Company is not the surviving corporation, or if
there is a sale of substantially all of the assets of the Company to another
entity or in certain other circumstances, including an individual's termination
of employment, as the Administrator may determine. All outstanding options
granted under the predecessor 1979 Incentive and Nonstatutory Stock Option and
Appreciation Plan (the "1979 Option Plan") are now fully vested and exercisable.
OPTIONS
There were no grants of stock options or SARs to Messrs. Montgomery, Maher,
Pappas, Crane, Crivelli or Geuther (the "named executive officers") in 1993.
However, immediately exercisable market priced stock options were granted to
these individuals in 1994 in lieu of cash for approximately one half of the
bonuses that were paid for services in 1993. The cash bonuses and stock options
granted in lieu of cash bonuses are shown in the summary compensation table on
pages 12 and 13 and the stock options granted in lieu of cash bonuses are shown
below:
OPTION GRANTS IN LAST FISCAL YEAR (2)
<TABLE>
<CAPTION>
(B)
NUMBER OF (C)
SECURITIES % OF TOTAL (D) (F)
UNDERLYING GRANTED TO EXERCISE (E) GRANT DATE
(A) OPTIONS EMPLOYEES IN PRICE EXPIRATION PRESENT
NAME GRANTED(#)(1) FISCAL YEAR(2) ($/SHARE)(3) DATE VALUE($)(4)
- ------------------------------------------- ------------- --------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
James F. Montgomery 23,750 3.70 $ 18.625 1-25-04 $ 137,275
John F. Maher 13,542 2.11 $ 18.625 1-25-04 $ 78,273
Michael M. Pappas 0 n/a n/a n/a $ 0
Eugene A. Crane 6,333 .99 $ 18.625 1-25-04 $ 36,605
Curtis J. Crivelli 6,000 .94 $ 18.625 1-25-04 $ 34,680
Carl F. Geuther 6,000 .94 $ 18.625 1-25-04 $ 34,680
<FN>
- ---------
(1) These options are fully vested and immediately exercisable for the number
of shares shown above. The options were granted for a period of 10 years,
subject to earlier termination in certain events related to termination of
employment.
(2) The percentages shown in the table reflect the percent of all options
granted to employees in 1994 for services rendered in 1993 and include
options that are not fully vested and immediately exercisable. The
respective percentages of only fully vested and immediately exercisable
options granted to employees are 15.54% for Mr. Montgomery, 8.86% for Mr.
Maher, 0% for Mr. Pappas, 4.14% for Mr. Crane, 3.92% for Mr. Crivelli and
3.92% for Mr. Geuther.
</TABLE>
20
<PAGE>
<TABLE>
<S> <C>
(3) All stock options were granted at the fair market value on the date of
grant. The exercise price and tax withholding obligations related to
exercise may be paid by delivery of already owned shares, subject to
certain conditions or, to the extent authorized by the Committee, by share
offsets.
(4) Based on the Black-Scholes options pricing model adapted for use in valuing
executive stock options using the following assumptions: the $20 market
price as of December 31, 1993, three year historical average stock price
volatility of .3425, a three year historical average dividend yield of
4.9%, a risk free rate equal to the 52 week average of ten year Treasury
Bonds of 6.5% and an option term of ten years. This valuation method is
hypothetical.
</TABLE>
The following table shows for each of the named executive officers the
shares acquired on exercise of options during 1993, the difference between the
exercise price and the market value of the underlying shares on date of such
exercise, and (as to outstanding options at December 31, 1993) the number of
unexercised options and the aggregate unrealized appreciation on "in-the-money,"
unexercised options held at such date:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
(D) (E)
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS OPTIONS
AT FY-END (#) AT FY-END ($)(3)
(B) (C) ------------------ ---------------------
(A) SHARES ACQUIRED VALUE REALIZED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) ($) UNEXERCISABLE(1)(2) UNEXERCISABLE
- ------------------------------- --------------- ---------------- ------------------ ---------------------
<S> <C> <C> <C> <C>
James F. Montgomery 50,000 $ 300,625 352,000/111,500 $ 1,545,700/608,000
John F. Maher -- -- 258,500/74,000 $ 1,284,500/396,750
Michael M. Pappas -- -- 157,000/38,000 $ 649,625/202,250
Eugene A. Crane -- -- 124,500/32,000 $ 601,612/176,750
Curtis J. Crivelli -- -- 101,750/32,000 $ 476,688/176,750
Carl F. Geuther -- -- 136,000/29,000 $ 625,000/164,000
<FN>
- ---------
(1) Each of the outstanding options was granted with an exercise price of 100%
of fair market value on the date of grant, for a term (subject to earlier
termination following a termination of employment) of ten years, and is
exercisable no earlier than the first anniversary of the date of grant. The
options outstanding as of December 31, 1993 under the 1988 Incentive Plan
typically vest in equal installments over a term of five years from their
respective dates of grant. The options were granted under the Company's
1988 Incentive Plan or the 1979 Option Plan which includes similar
provisions.
(2) The numbers shown in column (d) are the numbers of unexercised in-the-money
options held by the named officers. The named officers held no unexercised
options which were out-of-the-money. None of the named executive officers
holds any outstanding SARs.
(3) Based on market value of the Company's common stock at the end of 1993
minus the exercise price of "in the money" options.
</TABLE>
The 1988 Incentive Plan permits the payment of the option or award price and
tax withholding at the Administrator's discretion in cash or with shares of the
Company's common stock, valued at their then fair market value, or a combination
of shares and cash. The Board may, without shareholder approval, suspend or
amend the 1988 Incentive Plan at any time, and the Administrator may, with the
consent of a holder, substitute awards or modify the terms and conditions of an
outstanding award, to, among other changes, extend the exercisability and term
(subject to the maximum term limits), reduce the price, accelerate
exercisability or vesting or preserve benefits of the award. But without
shareholder approval, the Board may not materially increase the maximum number
of shares which may be delivered pursuant to awards granted
21
<PAGE>
under the 1988 Incentive Plan, materially increase the benefits accruing to
participants under the 1988 Incentive Plan or materially change the requirements
as to the eligibility to participate in the 1988 Incentive Plan.
RESTRICTED STOCK
In January 1992, the Administrator first authorized awards of performance
based restricted stock under the 1988 Incentive Plan and established the
specific vesting provisions for such awards as described below. If the recipient
remains with the Company, the shares will vest completely 10 years after the
award date. Prior to such time, they are subject to both accelerated vesting and
risk of forfeiture to the Company, in whole or in part, upon certain events. The
vesting will be accelerated if and to the extent that the Company's common stock
performance, as measured by appreciation, dividends and other distributions
("shareholder return"), over three-year performance cycles, representing the
three-year period ending December 31, 1994 and periodically thereafter, exceeds
by specified amounts the shareholder return (subject to certain adjustments) on
common stocks of other designated banks, savings associations or related holding
companies (the "peer group"). If the Company's percentile ranking relative to
the peer group for the applicable three-year period equals or exceeds the 50th
percentile, the remaining performance based restricted shares vest in amounts
ranging from 25% to 100% of the original award. A portion of the award also will
vest in event of the death or disability of the holder following the first
anniversary of the award, at the rate of 20% per year. Vesting of these awards
may be accelerated in certain other circumstances, including a change of control
(subject to certain tax limitations) or retirement. Except as noted above and
except in the case of a discharge without cause following a change of control,
the unvested performance based restricted shares generally will be forfeited
upon a termination of employment, subject to any entitlements under then
effective employment agreements. The performance based restricted shares are
registered to the recipient subject to transfer and forfeiture restrictions, but
are held by the Company until such restrictions lapse. The recipients are
entitled to dividends and have voting rights on these performance based
restricted shares prior to the time the restrictions lapse.
No awards of performance based restricted stock or other long-term incentive
awards were granted to the named executive officers in 1993.
DEFERRED COMPENSATION PLANS
Under the Company's deferred compensation plans, directors and executive
officers are entitled to defer compensation until retirement, death, other
termination of employment, or until specified dates. Participants receive a
fixed rate yield based on the average annual interest rate of ten-year United
States Treasury Notes for the previous ten years. An enhanced yield of up to 125
percent of the fixed rate yield will be payable in the event of death,
retirement after age 55 under certain circumstances, and termination of
employment after plan participation for a specified number of years. The plans
permit participants to make an advance irrevocable election to receive a cash
lump sum payment of their account balance within 45 days after a change of
control. In addition, the plans permit directors and executive officers to elect
within two years after a change of control to withdraw their account balance in
a lump sum with a five percent penalty. If a participant is involuntarily or
constructively terminated as a result of a change of control, the participant
will be entitled to the enhanced yield, subject to limitations prescribed by the
Internal Revenue Code with respect to payments received by terminating employees
following a change of control. A change of control occurs under the plan when
anyone acquires ownership of more than 50 percent of the Company's outstanding
voting stock and, in that connection, the persons who were directors of the
Company immediately before such acquisition cease to constitute five-sixths of
the board of directors of the Company or any successor thereafter. Messrs.
Montgomery's and Maher's employment agreements, however, provide for the
preservation of previously elected deferrals and payment options in the event of
a change of control. The plans provide for Company matching contributions on
deferred compensation similar to those provided under the Employee Savings
Incentive Plan (described below). The plans also provide for pension benefits
based on deferred compensation similar to those provided under the Company's
Retirement Plan (described below).
22
<PAGE>
EMPLOYEE SAVINGS INCENTIVE PLAN
Under the Employee Savings Incentive Plan (the "Savings Plan"), eligible
employees may authorize payroll deductions for contributions which are invested
in fixed income, stock, bond, or balanced funds at the participant's direction.
Employee contributions are matched by the employer company in an amount equal to
50% of such contribution up to a maximum contribution of 6% of the employee's
base salary, including overtime. The Board of Directors may authorize annually
an additional contribution in an amount not to exceed the Company's mandatory
contribution. The aggregate contribution for the named executive officers is
included in the summary compensation table at pages 12 and 13. Matching
contributions vest at the rate of 30% for each of the first two years of
participation in the Savings Plan and the remaining 40% vests in the third year
of participation. Certain participant borrowings against vested benefits are
permitted under the Savings Plan.
SUPPLEMENTAL INCENTIVE PLAN
The Supplemental Incentive Plan (the "Supplemental Plan") supplements
benefits payable to certain officers and employees covered by the Savings Plan
whose benefits would otherwise be reduced under the Savings Plan because of
applicable Internal Revenue Code limitations. Participants in the Savings Plan
participate automatically in the Supplemental Plan to the extent that
contributions and forfeitures to which they would be entitled under the Savings
Plan are reduced under present Internal Revenue Code restrictions. The aggregate
allocation for the named executive officers is included in the compensation
table at pages 12 and 13.
RETIREMENT PLAN
The Retirement Plan is a non-contributory group pension plan providing for
fixed monthly benefits in the event of retirement at a specified age. Benefits
under the Retirement Plan depend on factors such as length of service, average
monthly wage base and certain Social Security benefits. Employees over age 21
are eligible to participate after one year of service. Contributions to the plan
trust are made by the Company on an actuarial basis and in an amount to obtain
the maximum federal income tax deduction. Accrued benefits vest fully after five
years of participation. Forfeitures of non-vested benefits are applied to reduce
the Company's contributions.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The Supplemental Executive Retirement Plan provides a target retirement
benefit at normal retirement (age 60 for Messrs. Montgomery and Maher and age 62
for the other executives) equal to a percentage of average salary and bonus for
certain executives who have completed specified years of service. The
percentages and years of service specified under the plan are 65 percent and 20
years for Messrs. Montgomery and Maher and 60 percent and 25 years for the other
named executive officers. The amounts payable under this plan are reduced by
Social Security benefits and benefits payable under the Company's Retirement
Plan. If a participant is involuntarily or constructively terminated as a result
of a change of control, the participant, if age 55 or older, will be entitled to
full normal retirement benefits with no reduction for early retirement, subject
to limitations prescribed by the Internal Revenue Code with respect to payments
received by terminating employees following a change of control. If the
terminated participant is under age 55, the retirement benefits payable will be
reduced depending on actual years of service and will be payable beginning at
age 55 with no further reduction, subject to limitations prescribed by the
Internal Revenue Code with respect to payments received by terminating employees
following a change of control. A change of control occurs under the plan when
anyone acquires ownership of more than 50 percent of the Company's outstanding
voting stock and, in that connection, the persons who were directors of the
Company immediately before such acquisition cease to constitute five-sixths of
the board of directors of the Company or any successor. The plan will also
provide the participants with retirement benefits that would otherwise exceed
the annual limit on such benefits imposed by the Internal Revenue Code.
PENSION TABLES
The amounts shown in the summary compensation table do not include any
amounts expensed by the Company under the Company's Retirement Plan or the
Supplemental Executive Retirement Plan, both of which are defined benefit plans,
since the amount of the accruals thereunder are not determined on an
23
<PAGE>
individual basis by the actuaries for the plans. The following table illustrates
the total annual retirement benefits which would be provided under the benefit
formula described in the Retirement Plan and Supplemental Executive Retirement
Plan to the named individuals referred to in the compensation table (other than
Messrs. Montgomery and Maher) in various earnings classifications upon normal
retirement in 1993. The benefit formula presently in both plans provides for an
offset of certain Social Security benefits. The amounts shown in the following
table do not reflect this offset.
<TABLE>
<CAPTION>
YEARS OF CREDITED SERVICE
AVERAGE PAY FOR -------------------------------
RETIREMENT PLAN 25 YRS.
PURPOSES 15 YRS. 20 YRS. OR MORE
- ------------------------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
$300,000..................................................... 108,000 144,000 180,000
350,000..................................................... 126,000 168,000 210,000
400,000..................................................... 144,000 192,000 240,000
500,000..................................................... 180,000 240,000 300,000
600,000..................................................... 216,000 288,000 360,000
700,000..................................................... 252,000 336,000 420,000
</TABLE>
The following table illustrates the total annual retirement benefits which
would be provided under both plans to Messrs. Montgomery and Maher.
<TABLE>
<CAPTION>
YEARS OF CREDITED
SERVICE
AVERAGE PAY FOR ---------------------
RETIREMENT PLAN 20 YRS.
PURPOSES 15 YRS. OR MORE
- ------------------------------------------------------------------- --------- ----------
<S> <C> <C>
$ 800,000.......................................................... 390,000 520,000
900,000.......................................................... 438,750 585,000
1,000,000......................................................... 487,500 650,000
1,200,000......................................................... 585,000 780,000
1,400,000......................................................... 682,500 910,000
1,600,000......................................................... 780,000 1,040,000
</TABLE>
The compensation covered by the benefit formula under the combined
retirement plans is salary and bonus compensation (reduced by Social Security
benefits), which is reported for the past three fiscal years in columns (c) and
(d) in the summary compensation table on pages 12 and 13. For 1993, the named
executives received half of their bonus in cash and half in the form of
immediately exercisable market priced stock options. Accordingly, the bonus
compensation covered by the benefit formula under the combined retirement plans
for 1993 is that shown in column (d) of the summary compensation table
multiplied by two.
The following table sets forth certain retirement and benefit information
for certain of the Company's executive officers. The tables above and the table
below do not include the amount of the annual benefit ($46,600 based on present
directors' fees) that will be payable to Messrs. Montgomery and Maher under the
Directors' Retirement Plan.
<TABLE>
<CAPTION>
Current Annual Years of Estimated Annual
Rate of Credited Benefits upon
Name Remuneration Service Retirement (1)
- ----------------------------------------- --------------- ------------- ----------------
<S> <C> <C> <C>
James F. Montgomery...................... $ 1,235,000 22 $ 802,750
John F. Maher............................ 812,500 20 528,125
Michael M. Pappas........................ 574,000 39 344,400
Eugene A. Crane.......................... 456,000 32 273,600
Curtis J. Crivelli....................... 432,000 17 259,200
Carl F. Geuther.......................... 432,000 19 259,200
<FN>
- ---------
(1) The estimated annual benefits assume (i) the Retirement Plan and the
Supplemental Executive Retirement Plan will continue in their present
forms, (ii) the individuals affected will continue in the employ of GWFC
until the applicable retirement date, and (iii) such individuals will
continue to receive salaries and bonuses at the current rate until normal
retirement age.
</TABLE>
24
<PAGE>
UMBRELLA TRUSTS
The Board of Directors of the Company has authorized the establishment of
two separate Umbrella Trusts (the "Trusts") as a security device for some or all
of the participants in the Company's Supplemental Executive Retirement Plan,
Directors' Retirement Plan, supplemental retirement benefit for Mr. Gryp,
Supplemental Incentive Plan, and Directors and Senior Officers Deferred
Compensation Plans (collectively, the "Plans").
The Trusts provide that upon the occurrence of certain events, the Company
shall contribute to the Trusts various amounts, including the amount by which
the present value of all benefits under the Plans exceeds the value of all trust
assets. These events include: (i) the delivery to the Company by any person of a
statement pursuant to the federal securities laws that such person has acquired
beneficial ownership of more than 20 percent of any class of equity security of
the Company entitled to vote as a class in the election or removal from office
of directors or beneficial ownership of more than 20 percent of the voting power
of any group of classes of equity securities of the Company entitled to vote as
a single class in the election or removal from office of directors; (ii) the
filing of a statement with the Securities and Exchange Commission pursuant to
certain rules under the Securities and Exchange Act of 1934 (the "Exchange Act")
relating to a proposed change of control of the Company; (iii) the delivery to
the Company pursuant to rules under the Exchange Act of a tender offer statement
relating to the equity securities of the Company; (iv) the filing with the
Office of Thrift Supervision of an application for the change of control of the
Company; (v) the termination of any of the Plans or any amendment of the Plans
which would reduce the benefits currently provided for under such Plans; and
(vi) failure by the Company to contribute, under certain circumstances, the full
amount of any insufficiency in trust assets necessary to pay benefits. The
contributions may be returned to the Company if there is no change of control
(which is defined in the same manner as under the Supplemental Executive
Retirement Plan) within one year after the contribution is made. It is
contemplated, however, that the Company will contribute, on a current basis,
sufficient assets to the Trusts to equal the value of benefits which may be
available under the Plans upon a change of control as defined therein.
Under the terms of the Trusts, the Trustee shall hold the trust assets for
the benefit of the participants in the Plans unless the Company is unable to pay
its debts as they become due or the Company is the subject of a pending
proceeding as a debtor under the federal Bankruptcy Code. If either of those
events occurs, the Trustee shall hold the trust assets for the benefit of the
general creditors of the Company, which may include participants in the Plans.
HOME LOAN PROGRAM
The Company has a Home Loan Program permitting secured loans to employees,
officers and directors at adjustable rates beginning at .25% over the Company's
cost of funds. Loans under the Program may be made to finance the borrower's
principal residence and generally must be secured by a first trust deed or
mortgage on such residence. Executive officers and directors may obtain loans
from GWFC in amounts up to ninety percent (one hundred percent prior to July
1992) of the appraised value of their primary and secondary residences. Loans
granted under the Program to executive officers and directors are reviewed and
approved by the Board of Directors. See "Compensation Committee Interlocks and
Insider Participation" and "Certain Relationships and Related Party
Transactions" for information regarding loans to directors and executive
officers of the Company. Executive officers and directors become disqualified
from participation in the Program after certain terminations of employment or
service except those resulting from a change of control (as defined above for
the Supplemental Executive Retirement Plan) or retirement. The Company may
suspend or modify the provisions of this Program, but no suspension or
modification after a change of control may detract from the benefit then
available or increase the otherwise applicable interest rate under existing
loans covered by the Program to directors and executive officers.
PRINCIPAL SHAREHOLDERS
The following table sets forth information as of December 31, 1993 with
respect to the only persons known by the Company to own beneficially more than
5% of the outstanding shares of its Common Stock, based upon reports filed with
the Securities and Exchange Commission, and, as of February 28, 1994, the number
of shares of the Company's Common Stock beneficially owned by its executive
officers and directors
25
<PAGE>
as a group. Each of the persons listed below which has reported that it may be
considered a beneficial owner of more than 5% of the Company's outstanding
shares of Common Stock has certified that, to the best of its knowledge and
belief, the shares were acquired in the ordinary course of business and were not
acquired for the purpose of and do not have the effect of changing or
influencing the control of the Company and were not acquired in connection with
or as a participant in any transaction having such purpose or effect. The number
of shares of the Company's Common Stock beneficially owned by each nominee and
director is set forth in "Election of Directors" and by each executive officer
is set forth in "Executive Officers".
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT OF
TITLE OF CLASS NAME OF BENEFICIAL OWNER OWNERSHIP CLASS
- --------------------------------- --------------------------------------------- --------------- -----------
<S> <C> <C> <C>
Common Stock Wellington Management Company 13,166,653(1) 9.98%
75 State Street
Boston, Massachusetts 02109
Common Stock The Capital Group, Inc. 12,914,030(2) 9.78%
333 South Hope Street
Los Angeles, California 90071
Common Stock The Windsor Funds, Inc. 12,423,471(3) 9.42%
Vanguard Financial Center
Valley Forge, Pennsylvania 19482
Common Stock Sanford C. Bernstein & Co., Inc. 12,153,786(4) 9.20%
One State Street Plaza
New York, New York 10004
Common Stock All Directors and Executive Officers as a 2,579,785(5) 1.94%
Group (17)
<FN>
- ---------
(1) Wellington Management Company ("WMC") has reported that it is an investment
adviser and, as such, is considered beneficial owner in the aggregate of
the shares listed in the table. WMC has declared that it has shared power
to vote 4,902 of the shares and shared dispositive power over all of the
shares shown in the table. The shares shown in the table for The Windsor
Funds, Inc. are also included in the total amount reported in the table for
WMC.
(2) Certain operating subsidiaries of The Capital Group, Inc. exercised
investment discretion over various institutional accounts which held as of
December 31, 1993, 12,914,030 shares of the Company (9.78% of the
outstanding class). Capital Guardian Trust Company, a bank, and one of such
operating companies, exercised investment discretion over 3,393,030 of said
shares. Capital Research and Management Company ("CRMC") and Capital
International, Inc., registered investment advisers, and Capital
International, S.A., another operating subsidiary, had investment
discretion with respect to 9,135,000, 170,000 and 216,000 shares,
respectively, of the above shares. Mr. Christie, a director of the Company,
is a director or trustee of 17 mutual funds advised by CRMC; he disclaims
any beneficial ownership of these shares.
(3) The Windsor Funds, Inc. ("Windsor") has reported that it is an investment
company and, as such, is considered the beneficial owner in the aggregate
of the shares listed in the table. Windsor has declared that it has sole
power to vote or direct to vote and shared power to dispose or to direct
the disposition of the shares shown in the table.
(4) Sanford C. Bernstein & Co., Inc. ("Bernstein") has reported that it is a
broker dealer and investment adviser and, as such, is considered beneficial
owner in the aggregate of the shares listed in the table. Bernstein has
declared that it has sole power to vote 6,966,615 of the shares and sole
dispositive power over all of the shares shown in the table.
(5) The amount in the table includes options to purchase 1,452,625 shares under
employee stock options which are exercisable on or within 60 days after the
record date, and 2,243 shares held in trust under the Savings Plan with
respect to which such persons have the right to direct the vote.
</TABLE>
26
<PAGE>
INDEPENDENT ACCOUNTANTS
Price Waterhouse was selected as the Company's independent accountants for
1993 and for the current year, having served in that capacity since 1964.
It is expected that a representative of Price Waterhouse will be present at
the annual meeting. Such representative will have the opportunity to make a
statement if he or she desires to do so and will be available to respond to
appropriate questions.
SHAREHOLDER PROPOSALS
Shareholders proposals, if any, which may be considered for inclusion in the
Company's proxy materials for the 1995 Annual Meeting must be received by the
Company at its headquarters office not later than November 24, 1994 and must
satisfy the conditions established by the Securities and Exchange Commission for
shareholder proposals to be included in the Company's proxy materials for that
meeting.
ANNUAL MEETING ADVANCE NOTICE REQUIREMENTS
The Company's bylaws presently provide that shareholder nominations of
directors may be made and other business may be brought before the annual
meeting by shareholders only in compliance with certain advance notice and
informational requirements and any other applicable requirements.
The bylaws provide that the annual meeting of shareholders of the Company
shall be held on the fourth Tuesday in April in each year. In order to be
timely, a shareholder's notice of director nominations or of business to be
brought before the annual meeting must be delivered to or mailed and received by
the Secretary of the Company at 9200 Oakdale Avenue, Chatsworth, California
91311 not less than 60 or more than 90 days prior to the meeting.
If the annual meeting is called for a date other than that specified in the
bylaws and less than 75 days prior public disclosure of the date of the meeting
is given, notice by the stockholder to be timely must be delivered to or
received by the Secretary of the Company at the above address not later than the
close of business on the 15th day following the day on which public disclosure
of the date of the meeting is made.
A shareholder's notice of director nominations or of business to be brought
before the annual meeting also must contain certain information required by the
bylaws of the Company. Copies of the Company's bylaws are available upon request
to the Secretary of the Company at the above address.
The present requirements described above do not supersede the requirements
or conditions established by the Securities and Exchange Commission for
shareholder proposals to be included in the Company's proxy materials for a
meeting of shareholders.
OTHER MATTERS
The Board of Directors has no present intention to present to the meeting
for action any matters other than those described above and matters incident to
the conduct of the meeting. If any other business comes before the meeting or
any adjournment thereof (including but not limited to matters of which the Board
of Directors is currently unaware) for which specific authority has not been
solicited from the shareholders, then to the extent permitted by law, including
the rules of the Securities and Exchange Commission, the Proxy grants to the
persons named therein the discretionary authority to vote thereon in accordance
with their best judgment.
A COPY OF THE COMPANY'S FORM 10-K ANNUAL REPORT FOR 1993 TO THE SECURITIES
AND EXCHANGE COMMISSION WILL BE PROVIDED WHEN AVAILABLE WITHOUT CHARGE TO ANY
SHAREHOLDER UPON WRITTEN REQUEST ADDRESSED TO THE COMPANY, ATTENTION: INVESTOR
RELATIONS, 9200 OAKDALE AVENUE, CHATSWORTH, CALIFORNIA 91311.
ALL SHAREHOLDERS ARE URGED TO COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE
ENCLOSED PROXY.
J. LANCE ERIKSON,
SECRETARY
March 24, 1994
27
<PAGE>
[The Following Great Western Financial Corporation Annual
Incentive Compensation Plan for Executive Officers is not part of the
Proxy Statement being sent to Shareholders and is being filed pursuant
to Instruction 3 to Item 10 of Schedule 14A]
GREAT WESTERN FINANCIAL CORPORATION
ANNUAL INCENTIVE COMPENSATION PLAN FOR EXECUTIVE OFFICERS
SECTION 1. DEFINITIONS
Except as otherwise expressly provided, financial terms are used as
defined for purposes of, and shall be determined in accordance with,
generally accepted accounting principles. Other capitalized terms used
herein have the following meanings:
"ADJUSTED EARNINGS PER COMMON SHARE" or "EPS" for any year means
the dollar amount determined by dividing (a) net earnings for such year
before giving effect to accounting changes not known to the Committee at the
time the applicable target was established and after deducting all amounts
paid or accrued, if any, with respect to dividends on preferred stock of the
Corporation for such year, by (b) the weighted average number of common
shares and common share equivalents outstanding during the year, on a fully
diluted basis.
"APPLICABLE FEDERAL RATE" means the applicable federal rate
determined under Section 1274(d) of the Code and Treasury Regulations issued
thereunder.
"APPLICABLE PERFORMANCE FACTOR" means the EPS Factor or the
weighted EPS Factor and SEBIT Factor, as the case may be.
"BASE SALARY FACTOR" means the multiplier described in Section 5.1.
"BENEFICIARY" means the person designated by a Participant to
receive any benefits hereunder in the event of the death of the Participant
during a year or prior to the payment of a Bonus for such year or, in the
absence of a designated beneficiary, such Participant's estate.
"COMPANY" includes the Corporation and its subsidiaries, on a
consolidated basis, unless the context otherwise requires.
"CORPORATION" means Great Western Financial Corporation and shall
include its successors and assigns.
"ELIGIBLE PERSON" means an Executive Officer of the Corporation.
"EPS" means Adjusted Earnings Per Common Share as defined above.
1
<PAGE>
"EPS FACTOR" means the multiple based on performance relative to
targeted EPS for the applicable year, as set forth in or pursuant to Section
7.1.
"EXECUTIVE OFFICER" has the meaning set forth in Rule 3b-7 under
the Securities Exchange Act of 1934 and refers to the individuals confirmed
to be within such definition by the Committee.
"PARTICIPANT" in respect of a Plan year means an Executive Officer
at any time during the year.
"SEBIT" means Segment Earnings Before Income Taxes, as defined
below.
"SEBIT FACTOR" means the multiple based on performance relative to
targeted SEBIT, as set forth in or pursuant to Section 7.2.
"SEGMENT EARNINGS BEFORE INCOME TAXES" or "SEBIT" for any year
means earnings before income taxes of the applicable segment, before giving
effect to accounting changes not known to the Committee at the time the
applicable target was established. The only segment as of the inception of
the Plan is the Consumer Finance Division.
"YEAR" or "PLAN YEAR" means the fiscal year of the Corporation.
SECTION 2. PURPOSE
The purposes of the Plan are (i) to compensate and reward the
Executive Officers of the Corporation on an individual basis with annual cash
bonuses for the achievement of pre-established performance goals and (ii) to
stimulate the efforts of such persons by giving them a direct interest in
such performance. Maximum amounts payable will be based upon the application
of a formula that includes variables relative to base salary levels and the
degree of the attainment of the applicable performance goals.
SECTION 3. TERM
Subject to Section 10, the Plan shall be effective as of January 1,
1994 (the "EFFECTIVE DATE") and shall be in effect with respect to each of
the five years ending December 31, 1998, unless earlier terminated by the
Corporation pursuant to Section 11.
SECTION 4. COVERAGE; ELIGIBLE PERSONS
Each Executive Officer serving as such in any of the positions set
forth in Section 5.1 or any equivalent position at
2
<PAGE>
any time during the applicable year for which a bonus may be granted
hereunder shall be eligible to participate and shall be a Participant in the
Plan, subject to the provisions hereof.
SECTION 5. BASE SALARY FACTOR
5.1. BASE SALARY AND BASE SALARY FACTOR. Subject to the terms
hereof, each Participant's bonus, if any, shall be determined by reference to
the applicable multiplier (the "BASE SALARY FACTOR") of the Participant's
base salary ("BASE SALARY") for his or her position at the beginning of the
applicable year (or, if services commence during the year, in accordance with
the provisions of Section 8.5 and, if the Participant's eligible position
changes during the year, in accordance with the provisions of Section 5.2).
The initial Base Salary of each eligible position shall be his or her Base
Salary as of January 1, 1994 or any later date of appointment to an eligible
position. The Base Salary Factors for the eligible positions as of January
1, 1994 are as follows:
<TABLE>
<S> <C>
Chief Executive Officer .6
Chief Operating Officer .5
All Executive Vice Presidents and the
Consumer Finance Division President .4
</TABLE>
5.2. BASE SALARY ADJUSTMENTS FOR CHANGES IN POSITION. If a
Participant holds more than one eligible position during any year, the
product of the Base Salary and the Base Salary Factor of such Participant for
purposes of the Plan for such year shall be computed by (a) multiplying
(i) the Base Salary Factor (as indicated in or pursuant to Section 5.1 above)
and for each position, by (ii) the applicable Base Salary for each position,
by (iii) a fraction, the numerator of which is the number of days in the year
during which such Participant held such position and the denominator of which
is 365, and (b) taking the sum of the products of such calculation.
SECTION 6. TARGETS AND GOALS; MAXIMUM BONUSES
6.1. PRE-ESTABLISHED TARGETS. For each year commencing with 1994,
the Committee shall determine the applicable EPS and SEBIT targets (including
applicable minimum, "on-plan" and maximum thresholds for determining the
Performance Factors) in advance of any applicable deadline for such action
under Section 162(m) of the Internal Revenue Code (the "CODE") for the
subject year. Prior to such deadline, the Committee also shall confirm or
determine each Participant's Base Salary for such year for purposes of the
Plan, subject to Sections 5 and 9.
6.2. FORMULA FOR DETERMINING MAXIMUM BONUS. Subject to Sections
6.3 and 8, each Participant's maximum Bonus for any year will be the product
of his or her (a) Base Salary, (b) the Base Salary Factor, and (c) the
Applicable Performance Factor or
3
<PAGE>
Factors. For all Participants except the Consumer Finance Division
President, the Applicable Performance Factor will be the EPS Factor. For the
Consumer Finance Division President, the Applicable Performance Factor will
be a weighted average of the EPS Factor and the SEBIT Factor, weighted in
such proportion as the Committee, consistent with Section 9, may determine
for each year in advance of the deadline described in Section 6.1.
6.3 MAXIMUM DOLLAR AMOUNT. Notwithstanding any other provision
hereof, no Person shall receive any Bonus under the Plan in excess of
$997,500 for 1994, $1,254,000 for 1995, $1,379,400 for 1996, $1,517,340 for
1997 and $1,669,074 for 1998.
SECTION 7. PERFORMANCE FACTORS
7.1. EPS FACTOR.
The Adjusted Earnings Per Share (or EPS) Factor for any year shall
be determined in accordance with the following table, where Minimum, Target
and Maximum represent, respectively, the attainment of the minimum, on-plan,
and ceiling targets for the applicable year, established by the Committee
for such purposes:
<TABLE>
<CAPTION>
APPLICABLE
EPS PERFORMANCE EPS FACTOR*
---------------- ----------
<S> <C>
Less than Minimum 0.00
Minimum 0.50
Target 1.00
At or Above Maximum 2.00
<FN>
* Applicable Factors for performance between specified Performance-to-
Target levels above Minimum and below Maximum shall be determined using
linear interpolation (applied to the targets in the manner specified by
the Committee).
</TABLE>
7.2. SEBIT FACTOR.
The Segment Operating Earnings Before Income Taxes (or SEBIT)
Factor for any year shall be determined in accordance with the following
table, where Minimum, Target and Maximum represent, respectively, the
attainment of the minimum, on-plan, and ceiling targets for the applicable
year, established by the Committee for such purposes:
4
<PAGE>
<TABLE>
<CAPTION>
APPLICABLE
SEBIT PERFORMANCE SEBIT FACTOR*
----------------- -------------
<S> <C>
Less than Minimum 0.00
Minimum 0.50
Target 1.00
At or Above Maximum 2.00
<FN>
* Applicable Factors for performance between specified Performance-
to-Target levels above Minimum and below Maximum shall be
determined using linear interpolation (applied to the targets in
the manner specified by the Committee).
</TABLE>
SECTION 8. PAYMENTS
8.1. TIME OF PAYMENT. Bonuses for any year shall be payable as
soon as practicable following the completion of the Company's audit for the
year, but not later than 90 days after year end.
8.2. COMMITTEE CERTIFICATION. As a condition to the right of a
Participant to receive any payment under the Plan, the Committee shall first
be required to certify, by resolution of the Committee or other appropriate
action, that the Bonus has been accurately determined in accordance with the
provisions of the Plan and that the performance goals and any other material
terms were in fact satisfied.
8.3. COMMITTEE DISCRETION TO REDUCE BONUSES. The Committee in its
sole discretion may reduce the amount payable under the formula provisions of
the Plan as applied to the pre-established goals to any one or more
Participants for any year as to which the Committee determines that the level
of achievement of the pre-established performance goals was influenced by any
extraordinary, non-recurring event or other factor extraneous to such
individual Participant's performance, or that the Corporation failed to
achieve other corporate objectives. The Committee may also reduce the
Applicable Performance Factors for any year at the time it sets the specific
performance targets for such year.
8.4. DEFERRAL. The Committee may determine that payment of all or
a portion of any Bonus may be deferred under the Company's Senior Officers'
Deferred Compensation Plan, PROVIDED that the amount of any interest accrued
thereon shall not exceed 120% of the Applicable Federal Rate, compounded
semi-annually.
8.5. PAYMENT FOR PARTIAL PERIODS.
(A) EFFECT OF TERMINATION OF SERVICE. If any Participant
ceases to be an Eligible Person for any reason (other than a termination
for cause) prior to the end of a year during which he or she
participates and such person has
5
<PAGE>
served as an Executive Officer at least three months during such year,
such Participant (or his or her Beneficiary) shall be entitled, subject
to Sections 8.2 and 8.3, to a prorated Bonus computed as follows: the
Bonus that would have been payable for the full year shall be multiplied
by a fraction the numerator of which shall be the number of days in the
fiscal year through the date the Participant ceased to be eligible, and
the denominator of which shall be 365.
(B) MID-YEAR COMMENCEMENT OF SERVICE. Notwithstanding the
provisions of Section 5.1 above, if a Participant's services as an
Executive Officer commence during any year, his or her Base Salary for
purposes of the Plan in that year shall be his or her Base Salary as of
the commencement of services as an Executive Officer multiplied by a
fraction, the numerator of which is the number of days in the year
during which such Participant held such position and the denominator of
which is 365; PROVIDED such person is employed by the Company for at
least three months during the year.
(C) MINIMUM SERVICE LIMITS. If the Participant fails to
meet the applicable minimum service requirements of this Section 8.5
during such year, no bonus shall be paid hereunder.
8.6. OTHER DISCRETION. The Compensation Committee may also define
such other conditions and terms of payment of bonuses as it may deem
desirable in carrying out the purposes of the Plan, PROVIDED, HOWEVER, that
the Committee may not increase the maximum amount payable hereunder to any
individual.
8.7. WITHHOLDING. The Company that employs the Participant shall
have the right to deduct any sums required by federal, state or local tax law
to be withheld with respect to the payment of any Bonus. The Company shall
have no obligation to advise any Participant of the existence of the tax or
the amount which the employer corporation will be so required to withhold.
SECTION 9. ADMINISTRATION AND INTERPRETATION
The Plan shall be administered by the Committee, which shall have
the sole authority to make rules and regulations for the administration of
the Plan and to interpret the Plan. The interpretations and decisions of the
Committee with regard to the Plan shall be final, conclusive and binding.
The Committee may request advice or assistance or employ such persons
(including, without limitation, legal counsel and accountants) as it deems
necessary for the proper administration of the Plan. It is the intent of the
Company that all payments under the Plan qualify as performance-based
compensation under Section 162(m) of the Code and the Plan shall be
interpreted consistent with such intent.
6
<PAGE>
Any provision, application or interpretation of the Plan inconsistent with
this intent to satisfy the standards in Section 162(m) of the Code shall be
disregarded. The Committee shall have no liability for its actions taken or
omitted in good faith.
SECTION 10. STOCKHOLDER APPROVAL
The Plan shall be subject to approval by a majority of the votes
cast by stockholders of the Corporation at the 1994 Annual Meeting of its
stockholders. Such stockholder approval shall be a condition to the right of
a Participant to receive any payment hereunder.
SECTION 11. AMENDMENT OR TERMINATION
The Committee may from time to time amend the Plan in any respect
or terminate the Plan, in whole or in part, provided that (a) no such action
shall retroactively impair or otherwise adversely affect the rights of any
Participant to benefits under the Plan which have vested prior to the date of
such action, and (b) no such amendment, without stockholder approval, shall
materially adversely affect the deductibility under Section 162(m) of the
Code of any bonuses payable hereunder.
SECTION 12. RIGHTS OF PARTICIPANTS AND BENEFICIARIES; NO ASSIGNMENT
12.1. VESTING. No rights hereunder shall vest prior to the
Committee's action under Section 8.2.
12.2. EMPLOYMENT MATTERS. Participation in this Plan shall not be
construed as constituting a commitment, guarantee, agreement or understanding
of any kind that the Company shall continue to employ any individual.
12.3. NO ASSIGNMENT; NO ATTACHMENT; NO PREFERENCE. The Company
shall pay all amounts payable only to the Participant or his or her
Beneficiary for purposes of the Plan. The Company shall not be liable for
the debts, contracts, or engagements of any Participant or his or her
Beneficiaries, and rights to payments under the Plan may not be taken in
execution by attachment or garnishment, or by any other legal or equitable
proceeding while in the hands of the Company; nor shall any Participant or
his or her Beneficiaries have any right to assign, pledge or hypothecate any
benefits or payments hereunder; nor shall any Participant or his or her
Beneficiaries have any claims to any assets of the Company for any payments
hereunder which are senior to the claims of the Company's general creditors.
7
<PAGE>
SECTION 13. ADJUSTMENTS UPON REORGANIZATIONS, RECAPITALIZATIONS OR
CERTAIN OTHER MATERIAL CHANGES.
13.1. FUNDAMENTAL CORPORATE CHANGES
In the event of a merger, consolidation or other reorganization in
which the Company is not the surviving corporation, or upon the sale of
substantially all the property of the Company to an unaffiliated corporation,
or upon the dissolution or liquidation of the Company, payment shall be made,
subject to Section 8.2 (but with the satisfaction of the applicable perfor-
mance level determined on the basis of annualizing the year-to-date results
from the beginning of the applicable year to the end of the month preceding
the date of such event), on a prorated basis to the date of such event in the
manner contemplated by Section 8.5, unless provisions are made for the
continuance of the Plan and the assumption of obligations for bonuses under
the Plan by a successor corporation. The Committee may authorize early
payout in such event, provided that it determines the performance goals have
been so met and the amount of the payment is discounted at the rate of 120%
of the Applicable Federal Rate, compounded semi-annually.
13.2. CHANGES FROM MATERIAL ACQUISITIONS, DISPOSITIONS OR
RECAPITALIZATION; ACCOUNTING CHANGES. In the event of a material acquisition
or disposition of business or assets by the Company, a material
recapitalization, or a material change in accounting principles or practices
during any year that was not anticipated by the Committee in setting the
targets for that year, the Committee, subject to Section 9, may make
adjustments to the targets for such year, applied as of the date of such
event, based solely on objective criteria, so as to neutralize, in the
Committee's best judgement, the effect of the change on the applicable pre-
established targets for such year.
8
<PAGE>
GREAT WESTERN FINANCIAL CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING APRIL 26, 1994
The undersigned hereby constitutes and appoints JAMES F. MONTGOMERY and
JOHN F. MAHER, each with the power to act without the other, attorneys and
proxies of the undersigned, each with the power of substitution, to attend, act
for and vote all shares of common stock of Great Western Financial Corporation
to which the undersigned may be entitled to vote and with all powers which the
undersigned would possess if present at the annual meeting of shareholders of
Great Western Financial Corporation, a Delaware Corporation, to be held in the
Company's Employee Center at 19809 Prairie Street, Chatsworth, California 91311,
on Tuesday, April 26, 1994 at 11:00 A.M., and at any adjournments thereof, with
respect to the proposals listed hereon in the manner indicated.
In their discretion, the proxies are authorized to vote upon such other
business as properly may come before the meeting.
(CONTINUED ON REVERSE SIDE)
PLEASE SIGN AND DATE ON REVERSE SIDE AND RETURN IN
THE ACCOMPANYING ENVELOPE
<PAGE>
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1 AND 2.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2.
APPROVAL OF THE GREAT WESTERN FINANCIAL CORPORATION ANNUAL INCENTIVE
COMPENSATION PLAN FOR EXECUTIVE OFFICERS.
FOR AGAINST ABSTAIN
/ / / / / /
ELECTION OF DIRECTORS
FOR all nominees WITHHOLD AUTHORITY
stated to the right to vote for all nominees
(except as marked stated to the right
to the contrary)
/ / / /
NOMINEES: John V. Giovenco, Firmin A. Gryp, James F. Montgomery and Alberta E.
Siegel
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
- --------------------------------------------------------------------------------
PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. WHEN SHARES ARE HELD BY JOINT
TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR,
TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A CORPORATION PLEASE
SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED OFFICER. IF A
PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY AUTHORIZED PERSON.
"PLEASE MARK INSIDE BLUE BOXES SO THAT DATA PROCESSING EQUIPMENT WILL RECORD
YOUR VOTES"
Dated: , 1994
-------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Signature)
- --------------------------------------------------------------------------------
(Signature if held jointly)
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
-- FOLD AND DETACH HERE --
Admission Ticket
ANNUAL MEETING
OF
GREAT WESTERN FINANCIAL CORPORATION SHAREHOLDERS
TUESDAY APRIL 26, 1994
11:00 A.M.
EMPLOYEE CENTER
19809 PRAIRIE STREET
CHATSWORTH, CA. 91311
