<PAGE>
WESTAR FINANCIAL SERVICES INCORPORATED
PROXY STATEMENT
2000 ANNUAL MEETING OF STOCKHOLDERS
MONDAY, SEPTEMBER 25, 2000
This proxy statement is furnished to the stockholders of Westar
Financial Services Incorporated in connection with the solicitation of
proxies for use at the Annual Meeting of Stockholders on September 25, 2000,
and all adjournments thereof, for the purposes set forth in the accompanying
Notice of Annual Meeting of Stockholders. This proxy statement and the
enclosed form of proxy are first being mailed to stockholders on or about
August 25, 2000.
WHETHER OR NOT YOU EXPECT TO BE PERSONALLY PRESENT AT THE
MEETING, PLEASE FILL IN, SIGN, DATE AND RETURN
THE ENCLOSED FORM OF PROXY.
Any person giving such proxy has the right to revoke it at any time
before it is voted by giving notice to the Secretary of the Company. All
shares represented by duly executed proxies in the accompanying form will be
voted unless proxies are revoked prior to the voting thereof.
The close of business on August 16, 2000 has been fixed as the record
date for the determination of stockholders entitled to vote at the Annual
Meeting of Stockholders. As of the record date, there were outstanding and
entitled to vote at such meeting 2,348,120 shares of common stock. The
holders of common stock will be entitled to one vote for each share of common
stock held of record on the record date.
A copy of the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 2000 accompanies this proxy statement.
The solicitation of this proxy is made by the Board of Directors of the
Company. The solicitation will be made by mail and the expense thereof will
be paid by the Company. The Company has retained Allen Nelson & Co. to assist
in the solicitation of proxies at an estimated cost of $1,500.
In addition, solicitation of proxies may be made by telephone by
directors, officers or regular employees of the Company.
VOTE REQUIRED
The election of the Company's directors requires a plurality of the
votes represented in person or by proxy at the annual meeting, and the other
proposal described in the accompanying Notice to Stockholders and any other
business that may properly come before the Annual Meeting require that the
votes cast in favor exceed the votes cast against the proposal.
EFFECT OF AN ABSTENTION AND BROKER NON-VOTES
A stockholder who abstains from voting on any or all proposals will be
included in the number of stockholders present at the Annual Meeting for the
purpose of determining the presence of a quorum. Abstentions will not be
counted either in favor of or against the election of the nominees or any
other proposal. Under the rules of the National Association of Securities
Dealers, brokers holding stock for the accounts of their clients who have not
been given specific voting instructions as to a matter by their clients may
vote their clients' proxies in their own discretion.
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INFORMATION ABOUT THE BOARD OF DIRECTORS AND
COMMITTEES OF THE BOARD
NOMINEES AND CONTINUING DIRECTORS
The Board of Directors is divided into three classes, with the terms of
office of each class ending on successive years. Two directors of the Company
are to be elected for term ending in 2003, at the Annual Meeting, or until
their respective successors have been elected and qualified. Certain
information with respect to the nominees for election as directors proposed
by the Company and the other directors whose terms of office as directors
will continue after the Annual Meeting is set forth below. Should any one or
more of the nominees be unable or unwilling to serve (which is not expected),
the proxies (except proxies marked to the contrary) will be voted for such
other person or persons as the Board of Directors may recommend.
NOMINEES FOR TERMS UNTIL 2003
R. W. Christensen, Jr., age 51, is the President and Chairman of the
Board of Directors of the Company. Prior to 1978 he held positions as a
financial analyst with Olympia Brewing Company, Assistant to the President of
Pacific Hide & Fur, a natural resources and steel distribution firm, and as
Corporate Pilot with Buttrey Food Stores. Mr. Christensen served as Vice
Chairman (1989-1990) and a member of the Board of Directors (1987-1990) of
Heritage Federal Savings & Loan Association. He was President and director of
PacWest Financial Corporation, a privately held investment firm. Mr.
Christensen is President and a member of the Board of Directors of Mud Bay
Holdings, Ltd., a privately held investment company. Mr. Christensen has
previously served as an officer, director and President of the National
Vehicle Leasing Association (1981-1988) in which capacities he presented
dozens of articles and scores of speeches on the state and future of the
automobile leasing industry, subjects in which he is regarded as expert. He
was awarded the industry's most prestigious recognition, the Clemens-Pender
Award, in 1988. He has served as director of Washington Independent
Bankshares (1982). Mr. Christensen serves as the court-appointed Trustee of
CASR Trust, a multi-year, multi-million dollar fund established by the
bankruptcy court for the benefit of the creditors of All Seasons Resorts. He
graduated from the College of Great Falls (B.A. with Honors, Management and
Economics) and received an MBA from the University of Puget Sound. He serves
as a Director (since 1978) and as Chairman (since 1995).
David C. Soward, age 43, is a Director of the Company. Since 1992 he has
been the Senior Vice President of & Capital Partners, Inc., the General
Partner of & Capital Partners, LP, a venture capital company based in San
Francisco. He was previously a Senior Manager with KPMG Peat Marwick, San
Francisco (1987-1992). Mr. Soward graduated from Portland State University
(BS, Accounting) and is a Certified Public Accountant. Mr. Soward is a member
of the Compensation Committee. He has served on the Board of Directors of the
Company since 1995.
TO CONTINUE IN OFFICE UNTIL 2002
Joel I. Davis, age 66, is the Assistant Secretary and a director of the
Company. He is President of MasterForms, Inc. (since 1983), and President of
Davis Construction and Development Corporation. He has been engaged as a home
builder and land developer in various capacities for more than twenty-five
years. Mr. Davis is an officer and member of the Board of Directors of Mud
Bay Holdings, Ltd., a privately held investment company. Mr. Davis graduated
from St. Martin's College (B.A., Accounting). Mr. Davis is a member of the
Audit Committee. He has served on the Board of Directors of Westar Financial
Services Incorporated and predecessor corporations since 1978.
Charles S. Seel, age 52, is the Secretary of the Company, a director and
Chairman of the Audit Committee. He is President and Chief Operating Officer
of Summit Management Company, a holding company for Spectrum Glass and
Vanguard Properties. He previously served in positions
2
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as Executive Vice President, Treasurer and Controller (1977). Mr. Seel is the
Secretary and a member of the Board of Directors of Mud Bay Holdings, Ltd., a
privately held investment company. He is a Certified Public Accountant and a
member of the Washington Society of CPAs and the American Institute of CPAs.
Mr. Seel graduated from Montana State University (B.A., Accounting). He has
served on the Board of Directors of Westar Financial Services Incorporated
and predecessor corporations since 1978.
TO CONTINUE IN OFFICE UNTIL 2001
Robert L. Lovely, age 61, is a director and Chairman of the Compensation
Committee of the Company. He is President of the Lovely Corp., a business
development and management firm. He is also Executive Vice President and
Director of Travel Automation Systems Corp. He is a director of AVT Corp.
(since 1983). Mr. Lovely is a director of Mud Bay Holdings, Ltd., a
privately held investment company. Mr. Lovely graduated from Washington State
University (B.A., Mathematics) and received an MBA from Pacific Lutheran
University. He has served on the Board of Directors of the Company and
predecessor corporations since 1978.
Michael A. Price, age 52, was elected to the Board of Directors in June
1998 and was named to the Compensation Committee. He is the founder of T & W
Financial Corporation (NASDAQ:TWFC) and has been Chairman of the Board and
Chief Executive Officer of T & W Financial Corporation and its predecessors
(1976-2000). Mr. Price was founder, Chairman (1991-1996) and Director of
Northwest Community Bank until its merger with First Community Bank. Prior to
1976, Mr. Price was a Vice President of International Finance, an independent
leasing company. Mr. Price was one of the founders, and is a past director,
of the United Association of Equipment Lessors ("UAEL"), a national
association of leasing companies.
OTHER EXECUTIVE OFFICERS OF THE COMPANY
Robert E. Kanatzar, Jr., age 48, is the Senior Vice President-Risk
Management, with responsibilities for the design and implementation of its
risk/reward criteria, strategies, policies and procedures; the supervision of
Lease Production Officers; the development of credit and collection policies
and procedures; and, the supervision of personnel engaged in risk, credit or
collection activities (1997). Prior to joining the Company he was Senior Vice
President of Credit Policy and Risk Management for NationsCredit Corporation,
with a $10 billion consumer portfolio, a part of the Financial Services Group
of NationsBank Corporation (1996). Previously, he served as Vice
President-Manager of Risk Management for Bank One Credit Company and managed
its $10 billion consumer portfolio (1992). Mr. Kanatzar has served in areas
of similar and increasing responsibilities with Texas Commerce Bank, Citicorp
Acceptance Company and Citicorp Mortgage Inc. He graduated from the
University of Kansas and received an MBA from the University of Kansas
Graduate School of Business.
Scott G. Cavanaugh, age 34, is Vice President-Collections with
responsibilities for collections, asset disposal, re-marketing and recovery
activities (1999). Prior to joining the Company he was Vice President &
Collection Manager for Seafirst Bank (Bank of America) was responsible for a
$6.5 billion dollar consumer portfolio, including a $2.7 billion auto dealer
segment (1995-1999). Previously, he served in areas of similar
responsibilities with Ford Motor Credit Company (1988-1995). Mr. Cavanaugh
received his B.A. in international economics from George Washington
University.
Vicki Christensen, age 51, is Vice President-Information Systems. Prior
to joining the Company in 1998, Ms. Christensen spent 17 years in
progressively more responsible positions in the information management
industry. She was a member of the Information Technology Team at Abitibi
Consolidated, where she supervised LAN/WAN and IBM AS400 activities. She was
Information Systems Manager for Kitsap Federal Credit Union and implemented
an AS400 conversion at Rainier Mortgage, a division of Rainier Bank. Ms.
Christensen is not related to Westar's CEO.
3
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Cindy A. Kay, age 35, is Vice President & Controller with primary
responsibility for accounting and internal finance functions (1996). Prior to
joining the Company, she was a Partner in Kay and Company, CPA's,
responsible for financial management consulting, taxation and audit
engagements (since 1990) Prior to joining Kay and Company, CPA's she began
her career with Coopers and Lybrand in Tucson, Arizona. Ms. Kay is a
Certified Public Accountant and is a member of the Washington Society of
CPA's and the American Institute of CPA's. Ms. Kay received her B.A. in
Accounting from Saint Martins College.
BOARD OF DIRECTORS AND COMMITTEES
There were twelve meetings of the Board of Directors during the fiscal
year ended March 31, 2000. All of the directors attended every meeting of the
Board and committees on which they served except for two members, one missed
one meeting the other missed two. All directors are compensated for
attendance at Board meetings at $300 per meeting. Additionally, outside
directors are paid $1,000 per quarter in consideration for their availability
to the Company. The Company incurred $35,300 and $35,223 in directors'
compensation during the fiscal years ended March 31, 2000 and 1999,
respectively.
The members of the Board of Directors are elected to various committees.
The standing committees of the Board are the Audit and Compensation
Committees.
The functions of the Audit Committee are to recommend appointment of the
firm of independent accountants to perform the annual audit; and, review and
approve the scope of the independent accountants' work. The Committee met two
times in the fiscal year ended March 31, 2000. The members of the Committee
during the past fiscal year were Charles Seel and Joel Davis. Mr. Seel served
as Chairman.
The functions of the Compensation Committee are to review and approve
the salaries of all executive officers of the Company; and, review and
approve all additional compensation plans. The Committee met four times in
the fiscal year ended March 31, 2000. The members of the Committee during the
past fiscal year were R.L. Lovely, Chairman; David Soward and Michael A.
Price.
4
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
<TABLE>
<CAPTION>
Stock
Beneficially Class Nature of Percentage
Owned on Of Beneficial of
June 30, 2000 Stock Ownership Class(1)
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PLMC, L.L.C. 753,701(2) COMMON Sole Voting and 20.40%(2)
P.O. Box 6104 Disposition
Federal Way, WA 98063
-----------------------------------------------------------------------------------------------------------------------
& Capital Partners, LP 528,184(3) COMMON Sole Voting and 13.75%(3)
600 California, Suite 1850 Disposition
San Francisco, CA 94108 1,250 SERIES 4 PREFERRED Sole Disposition 100.00%
-----------------------------------------------------------------------------------------------------------------------
Mud Bay Holdings, Ltd. 368,894(8) COMMON Sole Voting and 15.71%
P.O. Box 919 Disposition
Olympia, WA 98507
-----------------------------------------------------------------------------------------------------------------------
R. W. Christensen, Jr. 753,701(2) COMMON Shared Voting and
Chairman, President 368,894(8) COMMON Disposition
and Director 317,450(4)(5) COMMON Shared Voting and
P.O. Box 919 ---------- Disposition
Olympia, WA 98507 1,440,045 Sole voting and 43.71%(5)
Disposition
-----------------------------------------------------------------------------------------------------------------------
Joel I. Davis 36,160(4) COMMON Sole Voting and
Assistant Secretary 368,894(8) COMMON Disposition
and Director ---------- Shared Voting and
392,554 Disposition 16.63%(6)
-----------------------------------------------------------------------------------------------------------------------
Robert L. Lovely 41,660(4) COMMON Sole Voting and
Director 368,894(8) COMMON Disposition
---------- Shared Voting and
410,554 Disposition 17.41%(7)
-----------------------------------------------------------------------------------------------------------------------
Charles S. Seel 54,660(4) COMMON Sole Voting and
Secretary 368,894(8) COMMON Disposition
and Director ---------- Shared Voting and
423,554 Disposition 17.85%(10)
-----------------------------------------------------------------------------------------------------------------------
David Soward 23,660(4) COMMON Sole Voting and
Director 508,126(9) COMMON Disposition
---------- Shared Voting and
553,094 Disposition 19.23%(11)
1,250(9) SERIES 4 PREFERRED Non-Voting 100.00%
-----------------------------------------------------------------------------------------------------------------------
Michael A. Price 753,701(2) COMMON Shared Voting and
Director 254,080(4) Disposition
----------
1,007,781 32.15%(12)
-----------------------------------------------------------------------------------------------------------------------
Robert Kanatzar 20,000(4) COMMON Sole Voting and **
Sr.VP.-Risk Management Disposition
-----------------------------------------------------------------------------------------------------------------------
Scott Cavanaugh 2,000(4) COMMON Sole Voting and **
VP-Collections Disposition
-----------------------------------------------------------------------------------------------------------------------
Vicki Christensen 800(4) COMMON Sole Voting and **
VP-IS Disposition
-----------------------------------------------------------------------------------------------------------------------
Cindy Kay 5,167(4) COMMON Sole Voting and **
VP & Controller Disposition
-----------------------------------------------------------------------------------------------------------------------
All Directors and Officers as a 2,406,416 COMMON 61.24%(13)
Group (10 persons)
</TABLE>
** DENOTES LESS THAN 1%
(1) Except as otherwise indicated, Stock Beneficially Owned and Percentage
of Class are based upon 2,348,120 shares of common stock outstanding as
of June 30, 2000. Under Rule 13d-3(d)(1), any securities not
outstanding which are subject to options, warrants, rights or
conversion privileges shall be deemed to be outstanding for purposes of
computing the percentage of outstanding securities owned by such
person, but not deemed outstanding for computing percentage ownership
by any other person.
(2) PLMC, L.L.C. holds a Convertible Subordinated Note can be converted
into 753,701 shares of the Common Stock. Mr. Christensen and Mr. Price,
directors of Westar, are principals in PLMC, L.L.C. The holdings of
PLMC, LLC are attributed to both Mr. Christensen and Mr. Price under
Rule 13d-3.
(3) & Capital Partners, LP has the right to convert its Series 4 B
Preferred Shares into 10% of the outstanding Common Stock on a
fully-diluted basis. It also holds warrants for 3.75% of the
outstanding Common Stock on a fully-diluted basis. The holdings are
based upon 3,841,339 common shares
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outstanding. Mr. Soward is the Senior Vice President of & Capital
Partners, Inc., the general partner of & Capital Partners, LP.
(4) Includes shares options and/or conversion rights which may be exercised
within 60 days.
(5) Based upon 3,294,321 common shares outstanding.
(6) Based upon 2,360,620 common shares outstanding
(7) Based upon 2,358,120 common shares outstanding.
(8) The interest of Mud Bay Holdings, Ltd. of which Messrs. Christensen,
Davis, Lovely and Seel are directors collectively holding dispositive
power. All four individuals are attributed all of the holdings of Mud
Bay Holdings, Ltd. under Rule 13d-3.
(9) Includes the interest of & Capital Partners, LP, under Rule 13d-3.
(10) Based upon 2,373,120 common shares outstanding.
(11) Based upon 2,876,304 common shares outstanding.
(12) Based upon 3,134,321 common shares outstanding.
(13) Based upon 3,929,305 common shares outstanding.
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EXECUTIVE COMPENSATION
Summary Compensation for Past Three Fiscal Years
Ending March 31, 2000
<TABLE>
<CAPTION>
Name Annual Compensation
And Fiscal Long-Term All Other
Principal Year Compensation Compen-
Position(1) sation
----------------------------- -------- --------------------------------------- -------------------------------------- ---------
Other Annual
Salary Bonus Compensa- Awards Payouts
tion(1)
----------------------------- -------- ------------- ----------- ------------- --------------------- ---------------- ---------
Restricted LTIP
Stock Options Payouts
Awards
----------------------------- -------- ------------- ----------- ------------- ---------- ---------- ---------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
R.W. Christensen, Jr. 3/31/00 $200,000 $0 162,500
President and Chairman 3/31/99 $173,482 $0 150,000
3/31/98 $150,000 $0
----------------------------- -------- ------------- ----------- ------------- ---------- ---------- ---------------- ---------
Robert Kanatzar(3) 3/31/00 $240,000 30,000
Senior VP--Risk Management 3/31/99 $217,500
3/31/98 $172,500 $60,000(3) 37,000
----------------------------- -------- ------------- ----------- ------------- ---------- ---------- ---------------- ---------
Scott Cavanaugh(5) 3/31/00 $110,000 10,000
VP--Collections
----------------------------- -------- ------------- ----------- ------------- ---------- ---------- ---------------- ---------
Warren Kornfeld(4) 3/31/99 $160,839
Senior VP--Finance
----------------------------- -------- ------------- ----------- ------------- ---------- ---------- ---------------- ---------
Thomas M. Foley 3/31/98 $125,000 $0
VP--Finance
----------------------------- -------- ------------- ----------- ------------- ---------- ---------- ---------------- ---------
Cathy Carlson 3/31/98 $115,000 $0
VP--Operations
</TABLE>
(1) All other executive officers of the Company received less than $100,000
annually in total compensation during the years ended March 31, 2000,
1999 and 1998.
(2) Westar has concluded that the individual and aggregate amounts of
personal benefits provided, which are not reflected in the above table,
did not exceed the lesser of $50,000 or 10% of the total annual salary
and bonus reported above for each of the named persons.
(3) Westar hired Robert E. Kanatzar, Jr. in August 1997, as Senior Vice
President-Risk Management at a salary of $180,000 per year. Westar
provided a loan of $60,000 to Mr. Kanatzar with the understanding that
the loan would be forgiven at his 17th month of employment. The loan
has been forgiven and treated as a bonus. Pursuant to the employment
arrangement, Mr. Kanatzar's base compensation was increased to $240,000
beginning in August, 1998. Mr. Kanatzar was awarded stock options for
37,000 shares of common stock exercisable at $5-$11, and vesting from
1997-2001 and exercisable within twenty-four months of grant. During
his first two years of employment, Mr. Kanatzar was entitled to a
severance payment of $60,000 if he is terminated without cause.
(4) Westar hired Mr. Kornfeld in July 1998, as Senior Vice
President-Finance at a salary of $225,000. The employment arrangement
provided for an increase in the salary of $75,000 per year upon the
occurrence of certain events, which occurred. Mr. Kornfeld and the
Company terminated his employment in Mr. Kornfeld was awarded stock
options for 133,334 shares of common stock at $4 per share, vesting
over four years, which expired upon his termination.
(5) Mr. Cavanaugh was awarded stock options for 10,000 shares of common
stock exercisable at $5.00, vesting from 2000-2004.
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OPTIONS GRANTED IN FISCAL 2000
The following table sets forth certain information with respect to
stock options granted to the Named Executives during the year ended March 31,
2000.
<TABLE>
<CAPTION>
Potential Realizable Value
Individual Grants at Assumed Annual Rates of
Stock Price Appreciation for
Option Term
Percent of
Options Total Options Exercise Expiration
Name Granted Granted to Base Price Date 5% 10%
Executives in
Fiscal Year
--------------------------- ------------ ---------------- -------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
R.W. Christensen, Jr. 162,500(1) 100% $6.00(1) March 23, $5.71(3) $7.21(3)
2005(2)
Robert Kanatzer 30,000(4) 100% $5.00(4) Varies(5) $6.54(6) $8.25(6)
Scott Cavanaugh 10,000(7) 100% $5.00(7) Varies(8) $6.38(9) $8.05(9)
</TABLE>
(1) Options exercisable 162,500 @ $6 per share vesting on March 23, 2000.
(2) Options expire if not exercised by October 6, 2003.
(3) Assumes future stock prices of $5.71 and $7.21 at compound rates of
five and ten percent, respectively, for the five years, and are
computed solely for the requirements of the SEC. Westar makes no
representation that its stock will perform similarly or show similar
appreciation.
(4) Options exercisable 30,000 @ $5 per share vesting over 5 years
beginning November 18, 2000.
(5) Options expire if not exercised by November 18, 2009.
(6) Assumes future stock prices of $6.54 and $8.25 at compound rates of
five and ten percent, respectively, for the five years, and are
computed solely for the requirements of the SEC. Westar makes no
representation that its stock will perform similarly or show similar
appreciation.
(7) Options exercisable 10,000 @ $5 per share vesting on June 17, 2004.
(8) Options expire if not exercised by June 17, 2009.
(9) Assumes future stock prices of $6.38 and $8.05 at compound rates of
five percent and ten percent, respectively, for five years, and are
computed solely for the requirements of the SEC. Westar makes no
representation that its stock will perform similarly or show similar
appreciation.
AGGREGATE OPTIONS EXERCISED IN FISCAL 2000
AND FISCAL YEAR END OPTION VALUES
The following table sets forth certain information with respect to the
exercise of stock options during fiscal 1999 and outstanding stock options held
by the Named Executives as of March 31, 2000.
<TABLE>
<CAPTION>
Shares Value Number of Unexercised Options Value of Unexercised
Name Acquired Realized at Fiscal Year-End In-the-Money Options at Fiscal
On Exercise Year-End
------------------------ ------------- ----------- -------------------------------- ---------------------------------
Exercisable Unexercisable Exercisable Unexercisable(1)
--------------- ---------------- -------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
R.W. Christensen -0- -0- 192,500 120,000(1) $22,500 -0-
Robert Kanatzar -0- -0- 20,000 40,000(1) -0- -0-
Scott Cavanaugh -0- -0- 2,000 8,000(1) -0- -0-
</TABLE>
(1) The indicated value is based on $4.50 per share market value of the
Common Stock at March 31, 2000, the day nearest to the fiscal year end
in which a trade took place, minus the exercise price.
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INFORMATION ABOUT WESTAR 1994 STOCK OPTION PLAN
In 1996, the Company adopted, and the stockholders approved, the
amendment of the 1994 Stock Option Plan (the "1994 Stock Option Plan")
providing for the granting of options to purchase 600,000 shares to
employees, directors and consultants of the Company and its affiliates. On
October 8, 1998, the Board of Directors approved an increase of 750,000
shares to a total of 1,350,000. The Company estimates that approximately 45
employees and two consultants, along with all current directors of the
Company, are currently eligible to receive option grants under the 1994 Stock
Option Plan. The Company, by means of the 1994 Stock Option Plan, seeks to
retain the services of persons now employed by or serving as consultants or
directors to the Company, to secure and retain the services of persons
capable of filling such positions and to provide incentives for such persons
to exert maximum efforts toward the success of the Company. The 1994 Stock
Option Plan provides for the granting of Incentive Stock Options ("ISOs") as
that term is used in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), as well as for the granting of Non-statutory Stock
Options ("NSOs") which do not qualify as incentive stock options under the
Code.
The 1994 Stock Option Plan is administered by the Board of Directors
upon recommendation of its Compensation Committee. The Board or the Committee
determines from time to time which of the persons eligible under the 1994
Stock Option Plan shall be granted options, when and how the options shall be
granted, whether such options shall be ISOs or NSOs and the provisions of
each of the options (which need not be identical), subject to the
restrictions set forth in the 1994 Stock Option Plan. ISOs may be granted
only to employees (including officers) of the Company and its affiliates
while NSOs may be granted to employees (including officers) and directors of,
or consultants to, the Company and its affiliates.
The exercise price of each option shall not be less than one hundred
percent (100%) of the fair market value of the stock subject to the option on
the date the option is granted. The exercise price of any ISO granted to any
optionee owning more than ten percent (10%) of the voting power of all
classes of the Company's stock, shall not be less than one hundred ten
percent (110%) of the fair market value of the stock on the date of the grant
of the ISO. Generally, an option shall terminate three months after
termination of the optionee's employment or relationship as a consultant to,
or director of, the Company or its affiliates, and an option shall not be
transferable except by will or the laws of descent and distribution (although
an ISO may also be transferred pursuant to a qualified domestic relations
order as defined by the Code or Title I of the Employee Retirement Income
Security Act, or the rules thereunder). The market price of the Company's
common stock as of the close of trading on March 31, 2000 on which a trade
took place, was $4.50.
The 1994 Stock Option Plan permits options granted to be either
qualified Incentive Stock Options pursuant to the Code or non-qualified stock
options, as the Board may elect. Upon exercise of a non-qualified option, the
optionee will realize ordinary income in an amount equal to the excess of the
fair market value of the shares of common stock received over the exercise
price of such shares. That amount increases the optionee's basis in the stock
acquired pursuant to the exercise price of such shares. That amount increases
the optionee's basis in the stock acquired pursuant to the exercise of the
non-qualified option. Upon a subsequent sale of the stock, the optionee will
generally recognize additional capital gain or loss. The Company generally
will be allowed a federal income tax deduction for the amount recognized as
ordinary income by the optionee upon the exercise of the option.
The Board may at any time, and from time to time, amend the 1994 Stock
Option Plan. However, no amendment shall be effective unless approved by the
stockholders of the Company where such amendment would, among other things,
increase the number of shares reserved for issuance pursuant to options
granted under such plan.
As of March 31, 2000, options representing a total of 1,118,200 shares
have been granted, 220,800 of which had been exercised, the remainder include
329,900 options which were vested and were exercisable, 309,000 options which
had not vested yet, and 262,333 options which have expired. These options are
held by twenty-one (21) persons, are
9
<PAGE>
exercisable at between $2.00 - $11.00 per share and remain exercisable for
three to five years from the date of grant, subject to certain conditions.
As a group, all employees who are not executive officers received 25,400
options. As a group, executive officers as of March 31, 2000, have received
402,500 options under the 1994 Stock Option Plan. Current directors,
excluding executive officers, have received 60,000 options, as a group.
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE
COMPANY'S PREVIOUS FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR THE EXCHANGE ACT THAT MIGHT INCORPORATE FUTURE FILINGS,
INCLUDING THIS PROXY STATEMENT IN WHOLE OR IN PART, THE FOLLOWING REPORT
SHALL NOT BE INCORPORATED BY REFERENCE INTO ANY SUCH FILINGS.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee reviews and establishes management
compensation, compensation policies and procedures. Following review and
approval by the Committee, all issues pertaining to executive compensation
are submitted to the full Board of Directors for its approval. The Committee
also has responsibility for the grant of awards under Westar's stock option
plan.
Executive officer compensation is based on Westar's overall performance
in the past year and an analysis of compensation levels necessary to attract,
maintain and motivate quality personnel. In this way, Westar is able to
compete for and retain talented executives who are critical to our long-term
strategies for success. It also aligns the interest of those executives with
the long-term interests of our stockholders.
Executive compensation consists of three components: cash compensation,
long term incentives in the form of stock options and normal employee fringe
benefits. The three components are intended to provide executives with
incentives to achieve the long-range objectives of Westar and to reward
exceptional performance. Performance is evaluated not only with respect to
Westar's earnings but also with respect to the accomplishment of Westar's
business objectives, the individual's contribution to stockholder value, and
also with respect to comparable industry results and experience. Executive
officers receive all normal employee fringe benefits.
In determining the overall compensation package for the Chief Executive
Officer, the Committee considered each of the factors enumerated in the
preceding paragraphs regarding compensation for executive officers of Westar
as well as the performance achieved by Westar during the past fiscal year.
To motivate extraordinary job performance and to encourage growth in
stockholder value, significant stock options are granted under Westar's stock
option plan to all executives and all other company personnel in order to
encourage substantial contributions toward the overall success of Westar. The
Committee believes that this focuses attention on managing Westar from the
perspective of owners with an equity stake in the business.
Dated this 31st day of March, 2000
THE COMPENSATION COMMITTEE
R. L. Lovely, Chairman
David C. Soward
Michael A. Price
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
RELATED PARTY TRANSACTIONS
The Company has a subordinated note agreement, effective January 1997,
with Mud Bay Holdings, Ltd. (directors and officers) pursuant to which the
Company may borrow up to $750,000. Interest is calculated at the rate of 8%.
The Company has a subordinated note agreement, effective April 15, 1997,
with & Capital, Partners, LP (a director), in the amount of $1,500,000.
Interest is calculated at the rate of 9%. The loan is due upon the earlier of
(I) April 30, 2001, or (ii) receipt by the company of not less than
$5,000,000 from other financing. The lender was granted warrants to purchase
3.75% of the Company's stock which is outstanding at the time of exercise at
an exercise price of $.01 per share.
The Company has a subordinated note agreement, effective January 26,
1998, with & Capital, Partners, LP (a director), in the amount of $500,000.
The note is due on April 30, 2001. Interest is calculated at the rate of 9.5%.
In May 1998, the Company entered into an agreement to exchange a note
payable for $500,000 of Summit's preferred stock (a director and officer).
The note bears interest at the rate of 9.25% and is paid quarterly. The note
is payable at one-eighth of the principal balance paid quarterly, beginning
fourth quarter of fiscal 1999.
In May 1998, the company issued $4,000,000 in subordinated convertible
note to PLMC, LLC, which is owned by two directors and other unrelated
parties. The note is due May 2003 and bears interest at the rate of 10.5%.
The note is convertible into 753,701 shares of the Common Stock of the
Company.
The Company has several sale/leaseback transactions with T & W Financial
Services, Inc. (director) The sale/leasebacks bear interest at an average
rate of 9.3%. Subsequently Finova acquired T&W's servicing of the leasebacks.
The Company has an account receivable of approximately $94,250 from All
Seasons Resorts. Mr. Christensen, a director and officer of the Company, is
the bankruptcy court-appointed Trustee of CASR Trust, a fund established by
the bankruptcy court for the benefit of the creditors of All Seasons Resorts.
The trustee is in the process of liquidating real estate for the creditors'
benefit. The Company expects to recover its receivable in full.
In December 1999, the company issued $600,000 in subordinated debt to
Puget Sound Investors, (directors). The note is due April 1, 2001 and bears
interest at the rate of prime plus 1.
In December 1999, the company issued $250,000 in subordinated debt to a
director. The note is due April 1, 2001 and bears interest at the rate of 9%)
In June 2000, the company issued $1,000,000 in subordinated debt to &
Capital Partners, LP (a director). The note is due September 5, 2000 and
bears interest at the rate of 9%.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and executive officers, and persons who own
more than 10% of the common stock, to file initial reports of ownership (Form
3) and changes of ownership (Form 4) of Company common stock with the
Securities and Exchange Commission. Minor changes of ownership may be
reported once annually (Form 5). The Company is required to disclose in this
proxy statement any late filings of those reports made by its directors and
executive officers and greater than 10% stockholders during the fiscal year
ended March 31, 2000. Based solely upon the review of the copies of the forms
furnished to the Company and written representations that no such other
reports are required, the Company believes that during the fiscal year all
executive officers and directors, and greater than 10% stockholders timely
filed all such required reports.
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NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE
COMPANY'S PREVIOUS FILINGS UNDER THE SECURITIES ACT OR THE EXCHANGE ACT THAT
MIGHT INCORPORATE FUTURE FILINGS, INCLUDING THIS PROXY STATEMENT IN WHOLE OR
IN PART, THE FOLLOWING STOCKHOLDER RETURN PERFORMANCE PRESENTATION SHALL NOT
BE INCORPORATED BY REFERENCE INTO ANY SUCH FILINGS.
STOCKHOLDER RETURN PERFORMANCE PRESENTATION
Set forth below is a line graph comparing the Company's cumulative total
stockholder return on its common stock with the return of the NASDAQ Market
Index and a peer group* constructed by the Company.
WESTAR FINANCIAL SERVICES INCORPORATED
TOTAL RETURNS
[GRAPH]
* For comparison purposes, the "Automobile Financial Services Sector" peer group
is composed of Aegis Consumer Funding Group; Consumer Portfolio Services;
Jayhawk Acceptance Corporation; Olympic Financial (Arcadia); and, WFS Financial,
not all of which concentrate on producing prime consumer financial instruments.
INDEPENDENT PUBLIC ACCOUNTANTS
On March 11, 1999, Westar dismissed the accounting firm of KPMG, LLP
("KPMG") and re-engaged the accounting firm of BDO Seidman LLP ("BDO") as
principal accountants for the year ended March 31, 1999.
During the one fiscal year audited by KPMG and the subsequent interim
period prior to March 11, 1999 there has been one disagreement with KPMG on
one matter of accounting principal, a reportable event and no disagreements
on any practices, financial statement, disclosure, or auditing scope or
procedures. Westar communicated the disagreement and
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<PAGE>
reportable event to the Audit Committee and the Board of Directors. Westar
also authorized KPMG to respond fully to inquiries of BDO concerning the
matter. Westar's Audit Committee directed the dismissal of KPMG and approved
the re-engagement of BDO on March 11, 1999.
Because Westar had not demonstrated a history of profitability at March
31, 1998, KPMG made the judgement that the Company should establish a 100%
valuation allowance for its deferred tax asset. The Company discussed the
disagreement with KPMG on at least two occasion. The Company disagreed with
KPMG's judgement: with KPMG's use of a more restrictive than SEC guidelines
for determination of the need for an allowance; and, with KPMG's decision not
to weigh more heavily recent significant improvements in the Company's
volumes, operating margins and profits. The disagreement has been resolved to
KPMG's satisfaction and a 100% valuation allowance was recorded in for fiscal
year ended March 31, 1998.
In early 1996, a residual value insurance policy by an insurance company
to Westar was replaced with an assurance agreement for the same coverage by a
third party. The replacement agreement guaranteed the residual values for
leases booked in fiscal years 1996, 1997 and 1998. The leases were recorded
as direct financing leases. Prior audits of the related time periods were
issued with an unqualified opinion.
During fiscal 1998, KPMG requested copies of the residual value
insurance policy or the assurance agreement. Westar was advised by KPMG that
the lack of original, contemporaneous documentation available to support
management's accounting for leases was a deficiency in internal controls.
Upon receiving written confirmation from the third party the existence and
terms of the assurance agreement, KPMG concurred in the Company's
classification of the leases as direct finance leases. No internal control
memorandum was prepared by KPMG for the Company. The Company communicated the
above to the Audit Committee and the Board of Directors. The matter was
raised in passing by KPMG in a meeting with the Audit Committee. The Company
had authorized KPMG to respond fully to inquiries of BDO concerning the
matter.
Neither BDO nor KPMG recommended any changes to Westar in regards to the
above matter. Westar has adopted an internal control providing for the
preparation of contemporaneous memorandums of oral agreements.
KPMG's report on the consolidated financial statements for the last
fiscal year ended March 31, 1998 contained no adverse opinion or disclaimer
of opinion and was not qualified or modified as to uncertainty, audit scope
or accounting principles.
BDO's report on the consolidated financial statements for the previous
fiscal year ended March 31, 1997 and the current fiscal year ended March 31,
1999 contained no adverse opinion or disclaimer of opinion and was not
qualified or modified as to uncertainty, audit scope or accounting principles.
Westar requested from both BDO and KPMG a letter addressed to the
Securities and Exchange Commission (the "SEC") stating whether they agreed
with the above statements. Both letters were received and were included in
the form 8K filing with the SEC
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PROPOSAL 1
ELECTION OF TWO DIRECTORS
The Board has nominated Mr. R.W. Christensen Jr. and Mr. David Soward to
each serve as a director of the Company for a three-year term ending March
31, 2003 and until the election and qualification of his successor.
Management believes that the proposed nominees for election as director are
willing to serve as such, and it is intended that the person named in the
accompanying form of proxy or their substitute will vote for the election of
the nominees unless specifically instructed to the contrary. However, if
either nominee at the time of the election is unable or unwilling to serve or
is otherwise unavailable for election and as a consequence another nominee is
designated, the person named in the proxy or his substitute shall have
discretion or authority to vote or refrain from voting in accordance with his
judgment with respect to the other nominees.
VOTE REQUIRED
The affirmative vote of a majority of the shares of common stock of the
Company represented (in person or by proxy) and entitled to vote at the
Annual Meeting is required to elect a director.
THE BOARD UNANIMOUSLY RECOMMENDS VOTING "FOR" THE TWO NOMINEES NAMED ABOVE, AND
YOUR PROXY WILL BE SO VOTED UNLESS YOU SPECIFY OTHERWISE.
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board has selected BDO Seidman, LLP as the independent public
accountants of the Company for 2001. Stockholders will be asked to ratify the
selection. The firm of BDO Seidman, LLP as independent public accountants,
has examined the financial statements of the Company for the past two years
and has no relationship with the Company except in its capacity as
independent public accountants. Representatives of the firm are not expected
to be present at the meeting.
VOTE REQUIRED
The affirmative vote of a majority of the shares of common stock of the
Company represented (in person or by proxy) and entitled to vote at the
Annual Meeting is required to elect a director.
THE BOARD UNANIMOUSLY RECOMMENDS VOTING "FOR" THE RATIFICATION OF APPOINTMENT
OF INDEPENDENT PUBLIC ACCOUNTANTS NAMED ABOVE, AND YOUR PROXY WILL BE SO VOTED
UNLESS YOU SPECIFY OTHERWISE.
TRANSACTION OF OTHER BUSINESS
At the date of this Proxy Statement, the only business which the Board
intends to present or knows that others will present at the meeting as set
forth above. If any other matter or matters are properly brought before the
meeting, or any adjournment thereof, it is the intention of the persons named
in the accompanying form of Proxy to vote the Proxy on such matters in
accordance with their best judgment.
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STOCKHOLDER PROPOSALS
Any proposal which a stockholder wishes to have included in the proxy
solicitation materials to be used in connection with the next annual meeting
of stockholders of Westar must be received at the main office of Westar no
later than April 15, 2001. If such proposal is in compliance with all of the
requirements of Rule 14a-8 under the Exchange Act, it will be included in the
proxy statement and set forth on the form of proxy issued for the next annual
meeting of stockholders. It is urged that any such proposals be sent by
certified mail, return receipt requested.
ANNUAL REPORTS
This Proxy Statement includes the information and materials contained
within the 2000 Annual Report to Stockholders of Westar Financial Services
Incorporated. Any document or part thereof not delivered herewith, will be
provided without charge to each person, including any beneficial owner, to
whom the Proxy Statement is delivered, upon written request of such person
directed to Westar Financial Services Incorporated, Shareholder Relations
Department, P.O. Box 919, Olympia, Washington 98507.
March 31, 2000
By Order of the Board of Directors
Charles S. Seel, Secretary
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[LOGO]
SOLICITATION OF PROXIES FOR
WESTAR FINANCIAL SERVICES INCORPORATED
A WASHINGTON CORPORATION
This Proxy is being solicited by Westar Financial Services Incorporated
in connection with the Proxy Statement.
Capitalized terms used but not defined herein have the meanings given to them
in the Proxy Statement.
2000 ANNUAL MEETING
SEPTEMBER 25, 2000
9:00 A.M.
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Richard G. Phillips, Jr., proxy to represent
the undersigned, with full power of substitution, at the 2000 Annual Meeting
of Stockholders of Westar Financial Services Incorporated, to be held at 9:00
a.m. on Monday, September 25, 2000, in the Pine Room, WestCoast Olympia
Hotel, 2300 Evergreen Park Drive, Olympia, Washington and at any and all
adjournments thereof.
1. ELECTION OF DIRECTOR:
<TABLE>
<S><C> WITHHOLD
FOR AUTHORITY
-R.W. CHRISTENSEN, JR. for a 3 year term ending March 31, 2003 _____________ _____________
-DAVID C. SOWARD for a 3 year term ending March 31, 2003 _____________ _____________
2. INDEPENDENT PUBLIC ACCOUNTANTS:
WITHHOLD
FOR AUTHORITY
-BDO SEIDMAN, LLP Ratification of appointment for 2001 _____________ _____________
</TABLE>
3. OTHER MATTERS:
In his discretion, the Proxy is authorized to vote upon such other business that
may properly come before the meeting.
This Proxy, when properly executed, will be voted in the manner directed herein
by the undersigned stockholder. Unless otherwise specified, the shares will be
voted for Proposals 1 and 2.
Note: SIGNATURE(S) SHOULD AGREE WITH NAME(S) ON STOCK CERTIFICATE as printed on
the address label. Executors, administrators, trustees, and other fiduciaries
should so indicate when signing.
________________________________________
________________________________________
Signature of Stockholder(s)
Dated:____________________
Please DATE, SIGN, and RETURN this Proxy
________ I plan to attend the meeting in Olympia, Washington, at 9:00 a.m. on
September 25, 2000.
