SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
(Amendment No. )
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Filed by a Party other than the Registrant [ ]
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[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for use of the Commission only (as permitted by Rule
14a-6(e)(2)
Western National Corporation
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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<PAGE>
WESTERN NATIONAL CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Our Shareholders:
You are invited to attend the Annual Meeting of the Shareholders of
Western National Corporation on Wednesday, May 14, 1997. The meeting will be
held at The Ritz Carlton Hotel, 1919 Briar Oaks Lane, Houston, Texas, at 9:00
a.m. CDT.
The meeting will be held for the following purposes:
- to elect eight Directors;
- to approve the issuance of 7,254,464 shares of Common Stock upon
conversion of outstanding shares of Series A Participating Convertible
Preferred Stock;
- to ratify the appointment of Coopers & Lybrand, L.L.P., as independent
auditors for 1997; and
- to transact any other business that may properly come before the meeting
or any adjournment thereof.
YOUR VOTE IS IMPORTANT. Since many shareholders cannot attend the
meeting in person, the Board of Directors solicits proxies to enable each
shareholder to vote on the issues to be decided at the meeting.
PLEASE RETURN THE ENCLOSED PROXY. We urge you to complete and return
your proxy as promptly as possible - even if you are planning to attend the
meeting. Prior to any vote taken at the meeting, you may change your proxy or
vote in person.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF DIRECTOR
NOMINEES, FOR THE ISSUANCE OF COMMON STOCK, AND FOR THE RATIFICATION OF
AUDITORS.
We hope you will be represented at the meeting, either in person or by
proxy. Thank you for your continued support.
For the Board of Directors,
/S/ DWIGHT L. CRAMER /S/ MICHAEL J. POULOS
----------------------- ------------------------
Dwight L. Cramer Michael J. Poulos
Corporate Secretary Chairman, President and
Chief Executive Officer
March 31, 1997
1997 PROXY STATEMENT
<PAGE>
1997 PROXY STATEMENT
GENERAL INFORMATION 1
THE BOARD OF DIRECTORS 1
ELECTION OF DIRECTORS (ITEM 1) 2
COMPENSATION OF EXECUTIVE OFFICERS 5
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS 17
SECURITY OWNERSHIP OF MANAGEMENT 18
SECTION 16(A) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE 19
ISSUANCE OF COMMON STOCK (ITEM 2) 19
CERTAIN RELATIONSHIPS AND TRANSACTIONS 20
INDEPENDENT AUDITORS (ITEM 3) 22
OTHER BUSINESS 22
PROXY SOLICITATION 23
VOTING OF WESTERNSAVE PLAN HOLDINGS 23
COPIES OF THIS PROXY STATEMENT AND THE COMPANY'S ANNUAL REPORT AND FORM 10-K
(EXCLUDING EXHIBITS) ARE AVAILABLE TO SHAREHOLDERS AT NO CHARGE ON REQUEST
DIRECTED TO:
WESTERN NATIONAL CORPORATION
ATTN: INVESTOR RELATIONS
5555 SAN FELIPE, SUITE 900
HOUSTON, TEXAS 77056
TELEPHONE: (800) 501-7848
(713) 888-7800
FAX: (713) 888-7893
COPIES OF EXHIBITS TO THE 10-K ARE AVAILABLE UPON THE PAYMENT OF COSTS OF
COPYING AND MAILING THE SAME.
<PAGE>
GENERAL INFORMATION
The accompanying proxy is solicited by the Board of Directors of Western
National Corporation (the "Company") for use at the Company's Annual Meeting
of Shareholders on Wednesday, May 14, 1997 (the "Annual Meeting"). The 1996
Annual Report to Shareholders is being mailed to shareholders together with
this proxy statement and the proxy beginning March 31, 1997.
Shares represented by proxies that are properly executed and returned
with choices specified will be voted accordingly at the Annual Meeting or any
adjournment thereof. If a proxy is signed without choices specified, those
shares will be voted for the election of the Director nominees named herein,
for the issuance of 7,254,464 shares of Common Stock upon conversion of the
outstanding shares of Series A Participating Convertible Preferred
Stock, for the ratification of the appointment of the independent auditors
for 1997, and in the discretion of the persons named as holders of the
shareholders' proxies with respect to any other matter to come properly
before the Annual Meeting.
A shareholder may revoke a proxy at any time before it is voted by
submitting a subsequently dated proxy or by notice in writing to the Secretary
of the Company delivered prior to the Annual Meeting. In addition,
shareholders who attend the meeting may vote by ballot at the meeting, thereby
canceling any previously given proxy.
VOTING INFORMATION. The record date was March 31, 1997, and only
shareholders of record at the close of business on that date are entitled to
vote at the Annual Meeting. Each share of the Company's common stock (the
"Common Stock") is entitled to one vote. As of March 20, 1997, there were
62,509,412 shares of Common Stock outstanding.
QUORUM. The Bylaws of the Company require, for a quorum, the presence at
the Annual Meeting in person or by proxy of the holders of a majority of the
shares of capital stock of the Company entitled to vote.
IN ORDER TO ENSURE THAT A QUORUM WILL BE PRESENT, EACH SHAREHOLDER IS
REQUESTED TO SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD.
THE BOARD OF DIRECTORS
In accordance with Delaware law, the business and affairs of the Company
are managed under the direction of its Board of Directors. The Board of
Directors acts as a nominating committee. Shareholders may recommend or
propose nominees as described below in "Other Business - Shareholder Proposals
or Nominations." However, no such shareholder nominations or proposals have
been received for consideration at the Annual Meeting.
During 1996, the Board of Directors held five meetings, and each director
attended at least 75% of the aggregate number of meetings of the Board of
Directors and of Committees on which he served.
AUDIT COMMITTEE. The Audit Committee recommends to the Board of
Directors the independent auditors to be engaged by the Company and confers
with the Company's independent auditors regarding their review of the annual
financial statements, their findings, and their recommendations. The Committee
also reviews the scope of the audit to be performed for the following year and
reviews with the independent auditors the accounting principles and policies
of the Company. The Audit Committee is comprised of Messrs. Keeble
(Chairman), Baker, and Hermance. The Audit Committee held two meetings in
1996.
COMPENSATION COMMITTEE. The Compensation Committee reviews the
contribution that key officers and employees make to the Company's performance
and determines the salary and other compensation of these individuals. The
Committee determines the Company's matching contribution under the WesternSave
Plan and the Western National Supplemental Plan and administers the 1993 Stock
and Incentive Plan, as amended (the "1993 Plan"). The Compensation Committee
is comprised of
<PAGE>
Messrs. Hermance (Chairman), Buckwalter, and Keeble. The
Compensation Committee held four meetings in 1996.
EXECUTIVE COMMITTEE. The Executive Committee is authorized to exercise
the authority of the Board of Directors between regular meetings of the Board,
except where action of the full board is required by law. The Executive
Committee is comprised of Messrs. Poulos (Chairman), Scott, and Richards. The
Executive Committee held no meetings in 1996.
COMPENSATION OF DIRECTORS. Each non-employee member of the Board of Directors
receives an annual retainer of $25,000, plus a fee of $1,500 for attendance in
person at each meeting of the Board or a Committee thereof or $750 for
telephonic participation. Committee chairmen receive an additional $3,000
annual retainer. Each non-employee Director receives a non-discretionary
grant of a stock option covering 3,000 shares on the date of the Company's
annual meeting. Non-employee Directors who were serving at the time of the
Company's initial public offering received a stock option covering 25,000
shares. Subsequently elected non-employee Directors receive a
non-discretionary grant covering 12,500 shares at the time of their election.
No such fees or retainers or non-discretionary stock option grants are paid or
awarded to any Director who is an employee of the Company.
ELECTION OF DIRECTORS
(Item 1 on proxy card)
The Company's Certificate of Incorporation provides for the election of a
Board of Directors for a one-year term at each annual meeting. The number of
Directors is established by resolution of the Board of Directors. By
resolution, the number of Directors of the Company has been fixed at eight as
of the 1997 Annual Meeting. Accordingly, a slate of eight Director nominees,
consisting of the individuals set forth below, has been nominated for a
one-year term ending at the next annual meeting, when their successors assume
office. Although management of the Company has no reason to believe that any
of the nominees will be unable to serve, if that situation should
arise prior to the Annual Meeting, no replacement(s) will be named, and
the number of Directors to be elected will be reduced accordingly.
BIOGRAPHICAL. Of the Director nominees, three -- Messrs. Poulos, Graf, and
Scott -- are employees of the Company. Mr. Poulos, a founding Director of the
Company, assumed his office in October 1993. Mr. Graf is standing for
election for the first time, and Mr. Scott became a Director when he joined
the Company in conjunction with the Company's initial public offering in
February 1994.
Pursuant to the terms of an agreement between American General
Corporation ("American General") and the Company (the "Shareholder's
Agreement"), American General is obligated to vote its 24,947,500 shares of
Common Stock, representing approximately 40% of the outstanding Common Stock
entitled to vote at the Annual Meeting, at its option, either (i) for the
election as Directors of the nominees proposed above; or (ii) pro rata in such
election in accordance with the votes cast by the remaining shareholders.
American General has not indicated to the Company how it intends to vote at
the Annual Meeting. See "Certain Relationships and Transactions" below for a
complete description of the terms of the Shareholder's Agreement.
Under Delaware law, the election of Directors requires only a plurality
vote. Therefore, the eight candidates who receive the highest number of votes
will be elected, even if they receive less than a majority of the votes
present at the meeting. Abstentions and broker non-votes will have no effect
on the outcome of the election of Directors. Each of the Director nominees
is, or upon election will become, a Continuing Director, as such term is
defined in the Company's Certificate of Incorporation.
On succeeding pages, information is presented about each Director nominee
including name, age, principal occupation during the past five years, certain
other directorships and the period during which the Director has served on the
Board.
MANAGEMENT RECOMMENDS A VOTE FOR THE ELECTION OF EACH DIRECTOR NOMINEE
NAMED BELOW.
<PAGE>
DIRECTOR NOMINEES
DON G. BAKER, 63
Retired as President and Chief Executive Officer, BSG Consulting,
Inc. (computer services consulting organization), 1992-1995
Retired as a Partner of Arthur Andersen & Co. (accounting and
consulting firm) in 1992, after a 37 year career including service
as Practice Director in the Consulting Division and a member of the
Board of Partners. Currently a Consultant to Midtown Luxury Motors,
Inc., Houston. Director since 1995. Member, Audit Committee
ALAN R. BUCKWALTER, III, 50
Vice Chairman, Texas Commerce Bank, N.A.; President, Texas
Commerce Bank - Houston; and Executive Vice President, Chase
Manhattan Corporation
Over 26 years service with Chase Manhattan Corporation and its
predecessor Chemical Banking Corporation in positions of
progressively increasing responsibility
Director since 1995
Member, Compensation Committee
JOHN A. GRAF, 37
Vice Chairman (since 1996) and Chief Marketing Officer of the
Company (since October, 1993)
Held positions of progressively increasing responsibility with
Conseco, Inc. (Western National Life Insurance Company's former
parent) from 1987 to 1993, including Senior Vice President and
Chief Marketing Officer, Western National Life Insurance Company
Trustee, WNL Series Trust (registered investment company)
ROBERT M. HERMANCE, 64
Chairman, B&D Plumbing Supply, Inc. (wholesale plumbing supply),
Houston, since 1993; Treasurer, Westheimer Plumbing & Hardware,
Inc., since 1995
Director, Harbourton Financial Services L.P. (a publicly-traded
mortgage banking limited partnership) since 1995
Retired as a Partner of Ernst & Young (accounting firm) in 1993,
after a 36 year career including service as Managing Partner,
Houston office, 1981-1991
Director since 1994
Chairman, Compensation Committee; Member, Audit Committee
<PAGE>
SYDNEY F. KEEBLE, JR., 68
Retired as Senior Vice President-Mortgage Loans and Real Estate,
American General Life and Accident Insurance Company and Vice
Chairman, Intereal Company, 1988
37 years of service with American General and predecessor companies
Director since 1994
Chairman, Audit Committee; Member, Compensation Committee
MICHAEL J. POULOS, 66
Chairman of the Board, President, and Chief Executive Officer of
the Company since October, 1993
Previously 23 years with American General Corporation, including
President (1981-1991), Vice Chairman (1991-1993), and Director
(1980-1993) Director since 1993
Chairman, Executive Committee
ALAN RICHARDS, 67
Management consultant since 1987
Chairman, Ibis Capital, LLC (reverse mortgage specialist) since 1995
Retired as Chairman and Chief Executive Officer, E.F. Hutton Life
Insurance Company and E.F. Hutton Insurance Group (1978-1986)
Vice Chairman, PIMCO Funds: Multi-Manager Series and Trustee,
Pacific Select Fund (registered investment companies)
Director since 1994
Member, Executive Committee
RICHARD W. SCOTT, 43
Vice Chairman (since 1996), General Counsel, and Chief Investment
Officer of the Company (since 1994)
Partner, Vinson & Elkins, L.L.P. (law firm), 1984-1994, in the
corporate finance and securities area
Trustee, WNL Series Trust (registered investment company)
Director since 1994
Member, Executive Committee
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
REPORT OF THE COMPENSATION COMMITTEE.
The Compensation Committee (the "Committee") pursues an approach to
executive compensation intended to best serve the long-term interest of the
shareholders, maximize the incentive effectiveness of compensation policy and
decisions, and promote objective executive performance evaluation. Because a
given year's results are seldom the immediate or sole consequence of executive
actions taken in that year, the Committee pursues a compensation policy that
recognizes efforts, results, and responsibilities over a longer-time horizon.
COMPENSATION POLICY. In administering compensation policy, the Committee
establishes Executive Officer base salaries and variable compensation,
consisting of cash bonuses and various types of longer-term incentives
available under the 1993 Plan. The Committee's decision-making process
encompasses three underlying principles: (i) compensation should be adequate
to attract and retain qualified employees, (ii) compensation paid to such
employees should be based on their individual duties and responsibilities and
their relative contribution to overall results, and (iii) compensation should
reflect remuneration levels for comparable positions inside and outside the
organization. Although the Committee reviews the Company's compensation
policies every year in connection with its overall review of executive
compensation, it did not materially revise or alter those policies this year,
as it concluded that the results of the existing polices have been very
satisfactory.
Annually, the Committee reviews the individual contribution and
performance of each of the key Executive Officers and any prior incentive
awards granted. In addition, the Committee reviews overall corporate
performance, including the Company's performance as measured by benchmarks,
such as operating earnings per share, and operating return on shareholders'
equity, as well as other accomplishments. For each year the results of the
Company are then compared to those of a group of peer companies that compete
in the Company's primary lines of business, selected with the assistance of an
independent executive compensation consultant. Currently there are 11
companies in this comparison group, principally life insurance companies. In
addition, the Committee takes into consideration the applicable provisions of
the employment agreements between the Company and Messrs. Poulos, Graf,
McGimsey, and Scott, which were entered into at the time of their employment.
In setting 1996 variable compensation awards and 1997 base salaries for
senior Executive Officers, the Committee took particular note of the
following: profitability and other accomplishments compared to peer companies
and industry norms, sales results, product and marketing innovations, asset
quality, asset growth, investment performance, operating earnings per share,
shareholders' equity, and the level of general expenses. In making such
analysis, the Committee generally excluded the effects on operating earnings
and shareholders' equity resulting from SFAS 115 and the realization of gains
or losses in the investment portfolio.
In any given year, the relative weight assigned to any of the foregoing
factors and considerations may vary. In addition, the relative weight of
these factors may also differ among the assessment of individual Executive
Officers within any particular year. Other than as required by the Company's
employment agreement with its Chief Executive Officer, the Committee has not
adhered to a formula-driven approach in setting compensation.
Section 162(m) of the Internal Revenue Code, enacted in 1993, generally
disallows a tax deduction to publicly-owned companies for compensation over $1
million paid to certain highly compensated Executive Officers. The Company
believes that it has met the conditions required to preserve the deductibility
of such executive compensation in the past, and will generally endeavor to do
so in the future. However, in specific situations, the Company intends to
appropriately reward individual performance regardless of tax deductibility.
<PAGE>
COMPENSATION FOR THE CHAIRMAN, PRESIDENT, AND CHIEF EXECUTIVE OFFICER. In
response to Mr. Poulos' request, the Committee has never made any additional
compensation award to him beyond the minimum amounts called for in his
employment agreement with the Company. Mr. Poulos' request has been respected
in spite of the fact that in its review of his performance, the Committee
determined that he had exceeded expectations throughout his tenure. The
Committee expressly recognized his achievements in building a very capable
management team and positioning the Company for future success.
Accordingly, Mr. Poulos' annual base compensation has remained unchanged
since he joined the Company on October 1, 1993. With respect to long-term
incentive awards, Mr. Poulos has not received any stock options, restricted
stock, or any other award, other than the original grant of stock options made
to him in February 1994 in accordance with the terms of his employment
agreement.
The terms of his employment agreement were the product of arms-length
negotiation between Mr. Poulos, prior to becoming an employee of the Company,
and the previous owner of the Company. Under the terms of his agreement, Mr.
Poulos receives annual base compensation of $750,000 and is entitled to
receive a minimum bonus of $750,000 in 1997 for calendar year 1996. Payment
of Mr. Poulos' bonus in any year has been subject to the Company attaining a
Performance Goal for that year, based on a target return on average
shareholders' equity. In reliance upon a review by an independent accounting
firm of relevant financial data on February 11, 1997, the Committee certified
to the Board of Directors the Company's attainment of the 1996 Performance
Goal. Accordingly, Mr. Poulos was awarded a 1996 bonus of $750,000, the
amount specified by his agreement.
Initially, Mr. Poulos' employment agreement contained no Performance
Goal. However, he agreed to an amendment imposing a Performance Goal
requirement to preserve the deductibility to the Company for federal tax
purposes of his compensation in excess of $1 million. The Performance Goal
required attainment of a minimum of 10% pre-tax operating return on average
shareholders' equity. Utilization of a pre-tax operating return measure was
intended (i) to eliminate the effects of realized gains and losses, which to a
great degree lie within management's discretion or reflect tax or portfolio
management issues unrelated to fundamental performance, and (ii) to eliminate
the impact of SFAS 115 on shareholders' equity, which causes the reported
level of shareholders' equity to fluctuate widely based on changes in market
interest rates that are beyond management control and, in the opinion of the
Committee, not relevant to an assessment of management performance. For 1996,
the pre-tax operating return on average shareholders' equity was 20%. Mr.
Poulos' existing employment contract does not contain any provision requiring
a minimum bonus for years after 1996. Nor does it include any requirement
imposing a related minimum Performance Goal.
OTHER SENIOR EXECUTIVES. Base Salaries. Base salaries of Executive Officers
are reviewed individually on an annual basis to determine if they should be
increased, decreased, or left unchanged, as part of the Compensation
Committee's annual review of the salaries of the ten highest salaried
employees. In determining the salaries of Executive Officers, the Committee
reviews the factors described under "Compensation Policy" above, the terms of
applicable employment agreements, and the overall progress of the Company.
Cash Bonuses. Employees who are in a position to make a significant impact on
the growth and profitability of the Company are eligible for consideration of
an annual cash bonus. During the first quarter of each year, the Committee
reviews recommendations for bonuses for eligible employees. After reviewing
the factors described under "Compensation Policy" above, the Committee acts on
those recommendations. In February 1997, the Committee approved bonuses for
performance in 1996.
Including the bonus granted to Mr. Poulos, approximately 18% of the
employees received bonuses totaling $2.5 million, or 1.6% of the Company's
1996 pre-tax operating earnings.
<PAGE>
Long-Term Incentive Awards. Incentive compensation is intended to promote
long-term growth and profitability, since the Company's business is long-term
in nature. Awards under the Company's 1993 Plan provide participants the
opportunity to acquire stock in the Company and thereby further align their
personal interests with the interests of other long-term shareholders and
enable the Company to match long-term compensation with long-term
contribution. In determining these awards, the Committee follows the process
and principles enunciated in the "Compensation Policy" described above.
The 1993 Plan makes available for issuance 5,000,000 shares of Common
Stock and will expire on December 31, 2003. Long-term incentive awards may
include stock options, stock appreciation rights, restricted stock awards,
performance awards, and incentive awards.
In February 1997, approximately 15% of the Company's employees received
options covering 252,500 shares of Common Stock. Additionally 47,000 shares of
restricted stock were awarded to certain of these employees. As noted above,
no such awards were made to Mr. Poulos.
OTHER MATTERS. The Committee is comprised of three independent non-employee
Directors. It has retained KPMG Peat Marwick, as independent compensation
consultant, to assist in establishing and overseeing compensation policy. The
Committee has consulted with such firm in connection with its annual reviews
of executive compensation in each year, commencing for 1994.
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS:
ROBERT M. HERMANCE, CHAIRMAN
ALAN R. BUCKWALTER III
SYDNEY F. KEEBLE, JR.
<PAGE>
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth compensation
information for the Company's Chief Executive Officer and each of the four
other most highly compensated Executive Officers of the Company (the five
being herein referred to as the "Named Executive Officers") for services
performed in 1996, 1995, and 1994.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS1
Restricted
Other Annual Securities Stock All Other
Compensation Underlying Awards7 Compensation
Name and Principal Position Year Salary($) Bonus($) ($) Options(#)2 ($) ($)3
- ----------------------------- ---- --------- --------- ------------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Michael J. Poulos, Chairman, 1996 750,000 750,000 --- --- --- 40,815
President & CEO 1995 750,000 750,000 --- --- --- 28,584
1994 750,000 750,000 --- 1,250,000 --- 3,702
Richard W. Scott, 1996 300,000 250,000 --- 15,000 379,000 14,459
Vice Chairman, General 1995 290,000 190,000 --- 10,000 144,750 16,766
Counsel, and Chief 1994 253,141 220,0004 --- 150,000 --- 10,285
Investment Officer
John A. Graf, Vice 1996 275,000 250,000 --- 15,000 379,000 18,480
Chairman and Chief 1995 250,000 190,000 --- 10,000 144,750 15,172
Marketing Officer 1994 225,000 150,000 82,8055 125,000 --- 10,269
Arthur R. McGimsey, 1996 230,000 125,000 --- 15,000 204,000 18,537
Executive Vice President and 1995 220,000 110,000 --- 10,000 144,750 15,965
Chief Financial Officer 1994 220,000 95,000 --- 125,000 10,464
Michael J. Akers, Senior Vice 1996 200,000 150,000 --- 15,000 204,000 16,134
President and Chief Actuary 1995 175,000 110,000 --- 18,000 108,562 13,371
1994 146,250 78,000 22,4506 25,000 --- 3,099
---- --------- --------- ------------- ----------- ----------- ------------
<FN>
1 PLAN AWARDS. The information in this column represents long-term
compensation awards granted in 1996, 1995, and 1994, pursuant to the 1993
Plan. Upon a change of control, the 1993 Plan provides that all outstanding
awards shall immediately vest and (if applicable) become exercisable.
2 OPTIONS. These amounts include both incentive stock options and
non-qualified stock options.
3 ALL OTHER COMPENSATION. These amounts include the Company's contribution to
the WesternSave Plan, the Supplemental Plan (together with the WesternSave
Plan, the "Employee Benefit Plans"), the taxable value of Company-provided
term life insurance ("Excess Life") and car allowances provided to certain
Named Executive Officers. Mr. Scott received car allowance payments totaling
$1800 in 1996 and $7200 in 1995 and 1994. A car allowance in the amount of
$7200 was provided to Mr. Akers in 1996 and 1995 and to each of Messrs. Graf
and McGimsey in 1996, 1995, and 1994. The Company's contributions to the
Employee Benefit Plans for 1996, 1995, and 1994, respectively, for each of the
Named Executive Officers were as follows: $29,475, $22,500, and $3,000 for
Mr. Poulos; $11,741, $8,644, and $3,000 for Mr. Scott; $10,686, $7,406, and
$3,000 for Mr. Graf; $8,990, $6,600, and $3,000 for Mr. McGimsey; and $7,738,
$5,175, and $2,925 for Mr. Akers. The Supplemental Plan was not adopted until
1995. The Company does not maintain a defined benefit pension plan. The
Excess Life taxable values for 1996, 1995, and 1994, respectively, were as
follows: $11,340, $6,084, and $702 for Mr. Poulos; $918, $922, and $85 for
Mr. Scott; $594, $566, and $69 for Mr. Graf; $2,347, $2,165, and $264 for Mr.
McGimsey; and $1,196, $996, and $174 for Mr. Akers.
4 BONUS. This amount includes a $50,000 bonus received by Mr. Scott in
February 1994, upon commencement of employment with the Company.
5 RELOCATION EXPENSES. In connection with the relocation of Mr. Graf to
Houston, Texas from Carmel, Indiana, the Company provided Mr. Graf with
relocation assistance. Moving expenses and tax gross-ups with respect to such
expenses totaled $75,605.
6 RELOCATION EXPENSES. In connection with the relocation of Mr. Akers to
Houston, Texas from Carmel, Indiana, the Company provided Mr. Akers with
relocation assistance. Moving expenses and tax gross-ups with respect to such
expenses totaled $22,450. (Notes continue on following page)
<PAGE>
7 RESTRICTED STOCK AWARDS. These amounts represent the value of the restricted
stock on the date of grant. At December 31, 1996, Messrs. Scott, Graf,
McGimsey, and Akers held an aggregate of 34,000, 34,000, 24,000, and 21,000
shares, respectively, with a value (based on the year-end per share closing
price of the Common Stock on the New York Stock Exchange of $19.25) of
$654,500, $654,500, $462,000, and $404,250, respectively. Mr. Poulos holds no
restricted stock. Dividends are paid to holders with respect to restricted
stock at the same rate as is paid on all other Common Stock.
</TABLE>
The following table contains information concerning the grant of stock
options during 1996 to the Named Executive Officers under the 1993 Plan.
<TABLE>
<CAPTION>
STOCK OPTIONS GRANTED IN 1996
Potential Realizable Value
at Assumed Annual Rates
of Stock Price
Individual Stock Option Grants Appreciation for Option
Term1
% of Total
Options Options Granted At 5% per At 10% per
Granted to Employees in Exercise Expiration annum annum
Name (#)2 1996 Price ($/Sh) Date ($) ($)
<S> <C> <C> <C> <C> <C> <C>
M. J. Poulos -0- -0-
R. W. Scott 15,000 7.7 17.00 2-7-06 160,350 406,350
J. A. Graf 15,000 7.7 17.00 2-7-06 160,350 406,350
A. R. McGimsey 15,000 7.7 17.00 2-7-06 160,350 406,350
M. J. Akers 15,000 7.7 17.00 2-7-06 160,350 406,350
- -------------- ------- --------------- ------------ ---------- ---------- -----------
<FN>
1 POTENTIAL REALIZABLE VALUE. These values are disclosed in response to SEC
rules that require such disclosure for illustration only. The values
disclosed are not intended to be, and should not be, interpreted as
projections of the future price of the Company's stock. To lend perspective
to these illustrative values, if the Company's stock price increased 5 percent
per year for 10 years from January 1, 1996 (disregarding dividends and
assuming for purpose of the calculation a constant number of shares
outstanding), the total increase in value of all shares outstanding would be
approximately $745 million; and if the stock price increased 10 percent per
year over such period, the increase in value would be approximately $1.89
billion.
2 CHANGE OF CONTROL. Upon a Change of Control, the 1993 Plan provides that all
outstanding awards shall immediately vest and (if applicable) become
exercisable.
</TABLE>
<PAGE>
OTHER MATTERS RELATIVE TO LONG-TERM INCENTIVE COMPENSATION
No Named Executive Officer exercised options during 1996. The following
table sets forth the value (based on the year-end per share closing price of
the Common Stock on the New York Stock Exchange of $19 1/4) of the unexercised
options at December 31, 1996:
<TABLE>
<CAPTION>
1996 OPTION VALUES
Number of Securities Dollar value of
underlying options at unexercised in-the-money
12/31/96 options at 12/31/96
Name Exercisable/Unexercisable Exercisable/Unexercisable
<S> <C> <C>
M. J. Poulos 625,000 / 625,000 $4,531,250 / $4,531,250
R. W. Scott 62,000 / 113,000 449,375 / 743,750
J. A. Graf 52,000 / 98,000 376,875 / 635,000
A. R. McGimsey 52,000 / 98,000 376,875 / 635,000
M. J. Akers 13,600 / 44,400 98,000 / 244,500
- -------------------- ---------------------------- --------------------------
</TABLE>
<PAGE>
The following graph shows the Company's total return on Common Stock compared
to the Dow Jones Life Insurance Index and the Standard & Poor's 500 Composite
Stock Price Index for the period beginning February 8, 1994 (the date
of the Company's initial public offering).
<TABLE>
<CAPTION>
COMPARISON OF CUMULATIVE TOTAL SHAREHOLDER RETURN
Feb '94 Dec '94 Dec '95 Dec '96
<S> <C> <C> <C> <C>
Western National Corporation Common Stock $ 100.00 $ 108.27 $ 137.38 $ 179.27
Standard & Poor's 500 Index 100.00 97.99 134.82 168.95
Dow Jones Life Insurance Index 100.00 91.73 127.67 165.77
- ----------------------------------------- -------- -------- -------- --------
</TABLE>
<PAGE>
EMPLOYMENT AGREEMENTS. Mr. Poulos entered into an employment agreement with
Conseco, the previous parent of the Company, which runs through December 31,
1998, pursuant to which he serves as Chairman, President, and Chief Executive
Officer of the Company. The Company has now assumed all of Conseco's
obligations thereunder and Conseco has no further obligations. The employment
agreement, as amended, provides that Mr. Poulos will receive a base salary of
$750,000 per year and that he was eligible to receive a performance-based
bonus for 1994, 1995, and 1996 of a minimum of $750,000 annually, provided the
return (before taxes, extraordinary items, realized and trading gains and
losses, and the cumulative effect of any change in accounting principles) on
average shareholders' equity (excluding the effects of the application of SFAS
115 to the determination of shareholders' equity) of the Company and its
consolidated subsidiaries was in excess of ten percent for such years. For
1997 and subsequent years, Mr. Poulos' contract does not establish a minimum
bonus or performance requirement. Mr. Poulos' base salary and other
compensation may be increased at the discretion of the Company's Board of
Directors.
Pursuant to his employment agreement, the Company granted Mr. Poulos
ten-year options under the 1993 Plan to purchase 1,250,000 shares of the
Common Stock at an exercise price equal to $12 per share, which was the
initial public offering price per share in the Common Stock offering.
Twenty-five percent of such options become exercisable on each of the first
four anniversaries of the date of grant. In addition, Mr. Poulos purchased
100,000 shares of Common Stock from Conseco, pursuant to his employment
agreement, at the initial public offering price per share, less underwriting
discount and commission, or a net price of $11.365 per share. To finance this
purchase, the Company made a five-year non-recourse loan to Mr. Poulos for the
full purchase price, secured by the Common Stock purchased. This loan bears
interest at the prime rate announced from time to time by Bankers Trust
Company of New York, payable in one installment at maturity. At December 31,
1996, the interest rate on the loan was 8.25% per annum. Interest accrued for
1996 aggregated $94,259. Mr. Poulos also purchased 50,000 shares of Common
Stock from Conseco at $11.365 per share for cash. The Company has the right
of first refusal with respect to any sale of Common Stock by Mr. Poulos during
the term of his employment agreement.
The Company has also entered into employment agreements with Mr.
McGimsey, Mr. Graf, and Mr. Scott. Mr. McGimsey is the Executive Vice
President and Chief Financial Officer of the Company; Mr. Graf serves as the
Vice Chairman and Chief Marketing Officer of the Company; and Mr. Scott serves
as the Vice Chairman, General Counsel, and Chief Investment Officer of the
Company.
The employment agreements with Mr. Graf and Mr. McGimsey, if not
previously terminated, will terminate upon Mr. Graf and Mr. McGimsey reaching
the normal retirement age for Executive Officers of the Company as in effect
from time to time. Mr. Scott's employment agreement extends to February 8,
1999, with successive one-year extensions of its expiration date becoming
effective annually, commencing December 31, 1997, unless the Company or Mr.
Scott notifies the other prior to each such December 31 that the agreement is
not to be extended.
The employment agreements provide for Mr. Graf, Mr. McGimsey, and Mr.
Scott to receive minimum base salaries of $225,000, $220,000, and $275,000 per
year, respectively, and to receive an annual bonus, in such amount as may be
determined in good faith by the Board of Directors or the Compensation
Committee, for each year during the agreement term; provided that
Mr. Scott was entitled to receive a bonus of not less than $137,500 for each
of 1994, 1995, and 1996. In addition, Mr. McGimsey received a cash bonus of
$50,000 in 1993 and Mr. Scott received a like amount upon his commencement of
employment with the Company in 1994. The base salaries and bonuses payable
under the employment agreements may be (and from time to time have been)
increased at the discretion of the Company's Board of Directors.
The employment agreements also called for Mr. Graf, Mr. McGimsey, and Mr.
Scott to receive, concurrently with the Company's initial public offering,
ten-year options to purchase 125,000 shares, 125,000 shares, and 150,000
shares, respectively, of
<PAGE>
the Common Stock of the Company, at an exercise price equal to $12 per share,
the price per share in the offering. Twenty percent of such options become
exercisable on each of the first five anniversaries of the date of grant.
Either party to each of the above-described employment agreements may
terminate such agreement at any time for any reason upon written notice to the
other party. In the event of a termination by the Company in certain limited
situations involving misbehavior or failure to serve or a termination by the
employee not constituting a Control Termination (as defined below), the
employee will be entitled to receive only his base salary through the date of
such termination, together with any other accrued and unpaid amounts through
such date.
In the case of any other termination by the Company not constituting a
Control Termination, (i) each of Mr. Poulos and Mr. Scott shall be entitled to
receive his base salary and bonus for the remainder of his agreement term and
all other unpaid amounts previously accrued or awarded, and (ii) each of Mr.
Graf and Mr. McGimsey shall be entitled to receive (a) a lump sum payment in
cash equal to twice his annual base salary in effect immediately prior to
termination, if terminated on or prior to December 31, 1998, or (b) a lump sum
payment in cash equal to 1 1/2 times his annual base salary in effect
immediately prior to such termination, if terminated after December 31, 1998
and on or prior to December 31, 2002, or (c) a lump sum payment in cash equal
to his annual base salary in effect immediately prior to such termination,
if terminated after December 31, 2002. The termination payment provisions
for Mr. Graf and Mr. McGimsey shall not apply to any termination of
such employee's agreement occurring on or after the date on which such
employee reaches the normal retirement age for executives of the Company as
in effect from time to time.
CHANGE OF CONTROL ARRANGEMENTS. "Change of Control" provisions are found in
the employment contracts described above, a severance agreement described
below, the Job Security Plan, and the 1993 Plan.
Employment Agreements. In the case of a Control Termination involving Mr.
Poulos or Mr. Scott, the Company will (i) pay such employee through the
remaining term of the agreement his base salary at the rate payable
immediately prior to such termination, together with the estimated amount of
any bonuses to which he would have been entitled had he remained in the employ
of the Company and a change in control of the Company had not occurred and
(ii) continue to provide him such compensation and benefits under such
incentive compensation, stock option, and other employee benefit arrangements
or their equivalent through the remaining term of the agreement (including
service credits) as if he had remained so employed and such change in control
had not occurred.
In the event of a Control Termination, Mr. Poulos or Mr. Scott, as the
case may be, may elect to receive (in lieu of the payments described above) a
lump sum severance allowance of an amount equivalent to 60 calendar months (in
the case of Mr. Poulos) or 36 calendar months (in the case of Mr. Scott) of
(a) salary at the then current base salary and (b) bonus at the greater of (x)
the monthly rate of bonus payment for the bonus period immediately prior to
such termination, (y) the monthly rate of the estimated amount of bonus for
the period which includes such termination date, or (z) in the case of Mr.
Scott, the monthly rate of the bonus payment for the year ended December 31,
1994. If Mr. Poulos or Mr. Scott, as the case may be, makes such election he
also shall receive (i) retirement or pension benefits under any such plan
maintained by the Company reflecting or equivalent to those he would have
received if he had remained in the employ of the Company and all such plans
had been in effect for 60 calendar months or 36 calendar months, as the case
may be, following his termination, (ii) incentive compensation (including,
without limitation, the right to receive and exercise stock options, stock
appreciation rights, restricted stock and grants thereof and similar incentive
compensation benefits) as if he had remained in the employ of the Company and
all such plans had remained in effect for such 60 calendar months or 36
calendar months, as the case may be, (iii) employee benefits (including,
without limitation, medical and split-dollar life
<PAGE>
insurance) as if he had remained in the employ of the Company and such plans
had remained in effect for such 60 calendar months or 36 calendar months, as
the case may be, or the equivalents of the amounts provided in clauses (i),
(ii), and (iii).
In the event of a Control Termination, Mr. Poulos or Mr. Scott, as the
case may be, also may elect to receive a lump sum payment from the Company in
return for the surrender of all or any portion of his outstanding options
(whether or not then exercisable) and all or any portion of the Common Stock
then owned by him. The purchase price shall be the highest fair market value
of the Common Stock during the six months preceding such election, and there
shall, in the case of Mr. Poulos, be no deduction of the exercise price for
each option so surrendered.
The employment agreements between the Company and Mr. McGimsey and
between the Company and Mr. Graf both provide for payments in the case of a
Control Termination. According to both contracts, in the event of a Control
Termination, the respective executive shall be paid a lump sum severance
allowance equivalent to salary payments for 36 calendar months at the rate of
base salary which he would have been entitled to receive pursuant to his
respective employment agreement, plus an amount equivalent to 36 calendar
months of bonus at the monthly rate of the bonus payment of the last full
calendar year immediately prior to his termination date. In addition, all
non-exercisable outstanding options held by such persons shall become
exercisable at the time of such termination.
To the extent that any payments to Mr. Poulos, Mr. Scott, Mr. Graf, or
Mr. McGimsey in respect to a Control Termination (regardless of whether he
exercises such election) described above constitute an "excess parachute
payment" under Section 280G(b)(1) of the Internal Revenue Code, the amounts
payable will be "grossed up" for any excise tax payable under such section, so
that the amount retained after paying all federal income taxes due with
respect to payments under the employment agreement is the same as such person
would have retained if such section had not been applicable. To the extent
any payment to Mr. Poulos, Mr. Scott, Mr. Graf, or Mr. McGimsey
constitutes an "excess parachute payment", it will not be deductible by the
Company for federal income tax purposes.
A "Control Termination" is (a) a termination by the Company in
anticipation of or following a change in control of the Company or (b) a
termination by Mr. Poulos, Mr. Scott, Mr. Graf, or Mr. McGimsey following such
a change in control upon the occurrence of (i) a significant change in the
nature or scope of his authorities or duties or a reduction of his total
compensation from that provided in the employment agreement or a breach by the
Company of any other provision of the agreement, (ii) a reasonable
determination by him that as a result of a change of circumstances
significantly affecting his position, he is unable to exercise the
authorities, powers, functions, or duties attached to his position and
contemplated by the agreement, (iii) the moving of such person's principal
place of employment outside the standard metropolitan statistical geographic
areas in which such person was located immediately prior to the change in
control, (iv) in the case of Mr. Graf, Mr. Scott, and Mr. McGimsey, any
reduction in benefit or bonus payment levels from those in effect prior to a
change in control, or (v) in the case of Mr. Scott, the Company advising him
within three years following the change in control that the term of his
employment agreement is not to be extended.
A "Change in Control" for purposes of the employment agreements means
generally a change in control of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of Regulation 14A
promulgated under the Securities and Exchange Act of 1934 (the "Exchange Act")
or a successor provision; provided that a change in control shall be
deemed to have occurred (A) when any "person" (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act) is or becomes a "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act) directly or
indirectly of securities of the Company representing 25% or more of the
combined voting power of the securities entitled to vote with respect to the
election of the Company's Board of Directors, or (B) as the result of a tender
offer, merger, consolidation, sale of assets, or election
<PAGE>
contest, or any combination thereof, individuals who were Directors
immediately prior thereto shall not constitute a majority of the Board of
Directors; provided, however, that no change in control shall have
occurred under (A) above when any such "person" becomes with the approval
of the Board of Directors the "beneficial owner" of securities representing
25% or more but less than 50% of the combined voting power of securities
entitled to vote with respect to the election of the Board of Directors, and
in connection therewith represents and continues to represent in a Schedule 13D
or 13G (or successor form) that it has acquired such securities for investment
and not with the purpose or effect of changing or influencing control or in
connection with or as a participant in any transaction having such purpose or
effect (it being understood that designation of an individual to serve as a
director, with the consent of the Board, shall not be deemed to constitute
changing or influencing the control of the Company so long as such individual
does not constitute at any time more than one-third of the total number of
Directors serving on the Board). However, actions taken by American
General in compliance with the Shareholder's Agreement (other than the
acquisition by any person other than American General or its subsidiaries of
25% or more of the Common Stock of the Company), including the acquisition
by American General of up to 79% of the shares of the Common Stock of the
Company from time to time outstanding, and the designation by American
General of not more than two individuals as Directors of the Company,
are not deemed to constitute a change of control within the meaning of
the employment agreements. For a more complete description of the
Shareholder's Agreement, see "Certain Relationships and Transactions."
Severance Agreement. The Company has entered into a severance agreement with
Mr. Akers which provides for a severance payment equal to 24 months of base
salary in the event that his employment is terminated following a Change in
Control, defined consistently with the definition of that term in the
Company's other employment agreements as described above, and having a similar
limitation with respect to actions by American General in compliance with the
Shareholder's Agreement. The agreement with Mr. Akers expires on February 10,
1999.
Job Security Plan. In 1994, the Board of Directors of the Company adopted a
Job Security Program (the "Job Security Plan") for employees. Under the Job
Security Plan, employees whose employment with the Company (or with adopting
subsidiaries of the Company) is terminated other than for cause within two
years following a "Change of Control" will be entitled to certain prescribed
severance benefits, depending on their length of service and level of
compensation. Benefits payable under the Job Security Plan are reduced by any
amounts payable to a terminated employee under any other contractual severance
arrangement, including the severance arrangements in the employment agreements
described above.
"Change of Control" is defined in the Job Security Plan to include (i)
the acquisition by any one person of 41% or more of the voting stock of the
Company; (ii) certain mergers and similar transactions; (iii) the adoption of
a plan of liquidation of the Company; or (iv) certain changes in the makeup of
the Board of Directors if such changes result from a tender or exchange offer,
a merger or similar transaction, or a contested election. In 1995, the Board
amended the definition of "Change of Control" to permit American General to
exercise its rights under the Shareholder's Agreement without triggering a
Change of Control.
Immediately following adoption of the Job Security Plan by the Company,
Western National Life Insurance Company ("Western National Life") became an
adopting employer of the Job Security Plan. The Job Security Plan
generally provides for a severance payment to qualifying terminated
employees of the greater of one month's salary for each $10,000 of annual base
compensation or three weeks' salary for each year of service, subject to a
minimum of four months and a maximum of two years salary. The Job Security
Plan also provides for the continuation of welfare benefits for the same period
as that used to measure the severance payment and contemplates the vesting of
any unvested Company 401(k) contributions. Provisions in the Job
<PAGE>
Security Plan provide that it cannot be terminated or amended to reduce
benefits or rights to benefits (the "anti-termination provisions"), initially
for a period of twelve months. Currently, the period in which the Board of
Directors cannot alter the anti-termination provisions expires March 1, 1998.
1993 Plan. The 1993 Plan contains a Change of Control provision which differs
from those described above. In the event of a Change of Control (as defined
in the 1993 Plan), all outstanding awards (of whatever type) shall immediately
vest and become exercisable or satisfiable upon the occurrence of a Change of
Control. The Committee, in its discretion, may determine that upon the
occurrence of such a transaction, each award outstanding shall terminate
within a specified number of days after notice to the holder thereof, and such
holder shall receive, with respect to each share of Common Stock subject to
such award, cash in an amount equal to the excess of (i) the higher of (x) the
Fair Market Value (as defined in the 1993 Plan) of such share of Common Stock
immediately prior to the occurrence of such transaction or (y) the value of
the consideration to be received in such transaction for one share of Common
Stock over (ii) the price per share, if applicable, of Common Stock set forth
in such award. If the consideration offered to stockholders of the Company in
any transaction described in this paragraph consists of anything other than
cash, the Committee shall determine the fair cash equivalent of the portion of
the consideration offered which is other than cash. These provisions will not
terminate any right of a holder to further payments pursuant to any agreement
between the Company and such holder following a Change of Control.
A "Change of Control" of the Company is deemed to occur under the 1993
Plan if: (i) any "person", as such term is used in Sections 13(d) and 14(d)(2)
of the Exchange Act, becomes the beneficial owner, directly or indirectly, of
securities of the Company representing 50% or more of the combined voting
power of the Company's outstanding securities then entitled to vote for the
election of Directors; or (ii) during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board of
Directors cease for any reason to constitute at least a majority thereof; or
(iii) the Board of Directors shall approve the sale of all or substantially
all of the assets of the Company; or (iv) the Board of Directors shall approve
any merger, consolidation, issuance of securities, or purchase of assets, the
result of which would be the occurrence of any event described in clause (i)
or (ii) above.
SAVINGS PLANS. The WesternSave Plan, which is qualified under Section 401(k)
of the Internal Revenue Code, allows a participating employee (including Named
Executive Officers) to direct the Company to make, on behalf of such
participant, an elective contribution of up to a maximum of 15% of the
participant's annual compensation, subject to certain limitations set forth in
the Internal Revenue Code. For 1997, the Company will make a matching
contribution to the plan equal to 75% of the employee's contribution, provided
that the Company's match shall apply only to an amount not in excess of 6% of
the participant's base salary. The Western National Corporation Supplemental
Plan is an unfunded, non-qualified plan that provides to certain employees
(including the Named Executive Officers) similar benefits that cannot be
provided by a qualified defined contribution plan due to Internal Revenue
Code provisions. Participants can also defer additional amounts of salary
and bonus under the Supplemental Plan, but there is no employer match for
such additional contributions.
Under each plan, a participant's pre-tax contributions and the Company's
contributions are not taxable to the participant in the year in which the
contributions are made. A participant's contributions are fully vested when
they are made, and the Company contributions vest in equal 20% increments over
a five-year period. Participants direct their contributions to be invested
among different investment funds, while the Company's matching contributions
are in the form of Common Stock.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The Company does not know of any person or concern that owns more than
five percent of the Common Stock, except for those listed below.
<TABLE>
<CAPTION>
Shares Percent
Name & Address of Beneficially of
Beneficial Owner Owned Class
<S> <C> <C>
AGC Life Insurance
Company
American General Center
Nashville, Tennessee 37250 32,201,9641 46.2%
The Prudential Insurance
Company of America
Prudential Plaza
Newark, NJ 01702-3777 4,131,9692 6.6
- -------------------------- ------------ --------
<FN>
1 Includes 7,254,464 shares of Series A Participating Convertible
Preferred Stock, which is treated as a Common Stock equivalent. See "Issuance
of Common Stock (Item 2)". AGC Life Insurance Company and American General
have shared voting and investment power, subject to the limitations in the
Shareholder's Agreement, with respect to all of the shares reported in the
table. AGC Life Insurance Company is a wholly-owned subsidiary of American
General Corporation, 2929 Allen Parkway, Houston, Texas 77006. For a
description of the Shareholder's Agreement between American General and the
Company, see "Certain Relationships and Transactions."
2 Prudential Insurance Company of America ("Prudential") has sole voting
and dispositive power with respect to 62,600 shares and shared voting and
dispositive power with respect to 4,069,369 shares. Prudential holds 13,200
of such shares for the benefit of its general account, and 4,118,769 of such
shares are held for the benefit of its clients by its separate accounts,
externally managed accounts, registered investment companies, subsidiaries
and/or other affiliates. All security ownership information for Prudential is
based on the Schedule 13G filed by Prudential with the Securities and Exchange
Commission in February 1997.
</TABLE>
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The beneficial ownership, as of March 20, 1997, of Common Stock by each
Director and Director nominee, by each of the Named Executive Officers
identified herein under the caption "Summary Compensation Table", and by all
Directors and Executive Officers as a group is set forth below. Beneficial
ownership signifies sole voting and investment power, unless otherwise noted.
Those disclaiming beneficial ownership share voting and investment power with
respect to the securities subject to disclaimer, unless otherwise noted.
Securities subject to such disclaimers are included in the total shares listed
in the left column.
<TABLE>
<CAPTION>
NAME AND SHARES ADDITIONAL RIGHTS AND DISCLAIMERS OF BENEFICIAL OWNERSHIP
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Michael J. Akers All shares are beneficially owned; 31,000 shares are owned directly (all directly owned shares are the
36,015 shares resultof restricted stock awards); 1,500 shares are owned through an IRA account, as to which he has sole
voting and investment power; and 3,515 shares are owned through Employee Benefit Plans. Does not include
23,200 shares that may be acquired within 60 days on exercise of stock options.
- ------------------------------------------------------------------------------------------------------------------------------------
Don G. Baker All shares are beneficially owned. All shares are owned directly. Does not include 2,500 shares that may
1,000 shares be acquired within 60 days on exercise of stock options.
- ------------------------------------------------------------------------------------------------------------------------------------
Alan R. Buckwalter, III All shares are beneficially owned. All shares are owned directly. Does not include 2,500 shares that may
1,000 shares be acquired within 60 days on exercise of stock options.
- ------------------------------------------------------------------------------------------------------------------------------------
John A. Graf All shares are beneficially owned; 51,000 shares are owned directly (46,000 of such directly owned shares
56,466 shares are the result of restricted stock awards); and 5,466 shares are owned through Employee Benefit Plans.
Does not include 82,000 shares that may be acquired within 60 days on exercise of stock options.
- ------------------------------------------------------------------------------------------------------------------------------------
Robert M. Hermance All shares are beneficially owned; 500 shares are owned directly; and 500 shares are owned by a family
1,000 shares member. Does not include 15,600 shares that may be acquired within 60 days on exercise of stock options.
- ------------------------------------------------------------------------------------------------------------------------------------
Sydney F. Keeble, Jr. All shares are beneficially owned; 5,000 shares are owned directly; and 5,000 shares are held in an IRA
10,000 shares account, as to which he has sole voting and investment power. Does not include 15,600 shares that may be
acquired within 60 days on exercise of stock options.
- ------------------------------------------------------------------------------------------------------------------------------------
Arthur R. McGimsey All shares are beneficially owned; 34,500 shares are owned directly (34,000 of such directly owned shares
35,739 shares are the result of restricted stock awards); and 1,239 shares are owned through Employee Benefit Plans.
Does not include 82,000 shares that may be acquired within 60 days on exercise of stock options.
- ------------------------------------------------------------------------------------------------------------------------------------
Michael J. Poulos All shares are beneficially owned; 182,100 shares are owned directly; and 9,849 shares are owned through
191,949 shares Employee Benefit Plans. Does not include 937,500 shares that may be acquired within 60 days on exercise
of stock options. Including such shares, Mr. Poulos beneficially owns approximately 1.8% of the
outstanding shares of the Common Stock.
- ------------------------------------------------------------------------------------------------------------------------------------
Alan Richards All shares are beneficially owned. 1,000 shares are owned directly. Does not include 15,600 shares that
1,000 shares may be acquired within 60 days on exercise of stock options.
- ------------------------------------------------------------------------------------------------------------------------------------
Richard W. Scott All shares are beneficially owned; 47,000 shares are owned directly (46,000 of such directly owned shares
55,483 shares are the result of restricted stock awards); 5,983 shares are owned through Employee Benefit Plans; 2,000
shares are held in an IRA account, of which he has sole voting and investment power; and 500 shares are
held as custodian for a family member, as to which he has sole voting and investment power. Does not
include 97,000 shares that may be acquired within 60 days on exercise of stock options.
- ------------------------------------------------------------------------------------------------------------------------------------
All Directors and Does not include 1,313,800 shares that may be acquired within 60 days on exercise of stock options.
Executive Officers as Including such shares, the group beneficially owns approximately 2.8% of the outstanding shares of the
a Group (12 persons) Common Stock.
440,664 shares1
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
1Includes all officers who were required, as of March 20, 1997, to make
filings pursuant to Section 16(a) of the Securities and Exchange Act of 1934.
</TABLE>
<PAGE>
SECTION 16 (A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Securities and Exchange Commission (the "Commission") requires
certain persons, including the Company's Directors and Executive Officers, to
file reports with the Commission regarding beneficial ownership of certain
equity securities of the Company. During 1996, all such reports were filed in
a timely manner.
ISSUANCE OF COMMON STOCK
(Item 2 on proxy card)
On September 17, 1996, the Company sold 7,254,464, shares (the "Preferred
Shares") of Series A Participating Convertible Preferred Stock, par value
$.001 per share (the "Convertible Preferred Stock"), to American General,
pursuant to a Stock Purchase Agreement, dated as of September 13, 1996 (the
"Stock Purchase Agreement"). The Preferred Shares will automatically convert
into Common Stock on a share-for-share basis upon the approval of the
Company's common stockholders of the issuance of the Common Stock. The
aggregate purchase price of the Preferred Shares was $130.0 million, or $17.92
per share. The issue price was based on the average closing price of the
Common Stock on the New York Stock Exchange over the 45-trading-day period
immediately preceding determination of the issue price. In lieu of the
underwriting and other fees incident to a public issuance of equity, the
Company and American General negotiated a discount of $3.9 million (3% of the
aggregate purchase price), so that the Company received net proceeds of
approximately $126 million.
Prior to selling the Preferred Shares, the Company explored financing
alternatives available in the private and public capital markets and
considered the issuance of securities other than the Preferred Shares or the
underlying Common Stock. Although the regulatory capital of Western National
Life, the Company's principal subsidiary, was not constrained at the time
of the sale of the Preferred Shares and management did not anticipate
imminent capital constraints as a result of growing premium volumes, the
Company sought additional capital in the third quarter 1996 to support
1996 levels of premium growth and anticipated future asset growth.
Additionally, the Company sought to strengthen its capitalization to
enhance prospects for favorable rating agency action. The Company concluded
that these objectives could best be achieved through the issuance of parent
company quity, and that a private transaction with American General offered
advantages in terms of transactional timing and certainty.
The Company contributed the net proceeds from the sale of the Preferred
Shares to Western National Life. Following the sale of the Preferred Shares,
Standard & Poor's upgraded Western National Life's claims-paying ability to AA-
from A+, and upgraded the Company's publicly-traded debt securities to A- from
BBB+. Management believes that the capital infusion resulting from the sale
of the Preferred Shares will contribute to the creation of additional
long-term value for all of the Company's shareholders.
In connection with the issuance of the Preferred Shares, the Company's
Board of Directors received from The Robinson-Humphrey Company, Inc.
("Robinson-Humphrey") such investment banking firm's opinion with respect to
the fairness of the transaction, from a financial point of view, to the
Company's public stockholders. In its letter to the Board of Directors,
Robinson-Humphrey opined that, from a financial viewpoint, the terms of the
transaction were fair to the public stockholders of the Company. The full
text of such letter is attached as Annex A to this proxy statement. The
Company paid Robinson-Humphrey a fee in the total amount of $130,000 (plus
expenses), of which $50,000 was paid on receipt of their letter and the
balance in 1997.
The Stock Purchase Agreement requires the Company to submit a proposal
approving the issuance of the underlying shares of Common Stock at the 1997
Annual Meeting with a favorable recommendation by the Company's Board of
Directors. American General has agreed to vote its shares of Common Stock in
favor of the proposal.
<PAGE>
The following description of the Preferred Shares and the Certificate of
Designation (defined below) is qualified in its entirety by reference to the
full text of the Certificate of Designation, attached as Annex B to this proxy
statement.
The Convertible Preferred Stock has the powers, designations, preferences
and relative rights and the qualifications, limitations and restrictions set
forth in the certificate of designation as filed with the Secretary of State
of Delaware on September 16, 1996 (the "Certificate of Designation"). The
Certificate of Designation provides that the Convertible Preferred Stock
shares pro rata on a share-for-share basis with the Common Stock in dividends
and in liquidation, subject to a $.001 per share liquidation preference. No
dividend may be paid on shares of Common Stock unless a corresponding dividend
is paid on shares of Convertible Preferred Stock. Except as otherwise
required by Delaware law, the Convertible Preferred Stock has no voting power.
The Convertible Preferred Stock is not redeemable. The Convertible Preferred
Stock automatically converts with no further action on the part of the Company
or its holder into Common Stock on a share-for-share basis, following approval
of the Company's common stockholders of the issuance of the Common Stock. The
Certificate of Designation also contains certain anti-dilution provisions
relating to conversion.
Since the issuance of the Preferred Shares, the Preferred Shares have
been treated in the Company's financial statement presentations as Common
Stock equivalents. The $.001 liquidation preference was not, and is not
believed to be, material, and was utilized solely to create a non-voting
common stock equivalent that could be issued to an affiliate of the Company
without a shareholder vote at the time of issuance, while remaining in
compliance with the rules of the New York Stock Exchange. The submission to
shareholders at this time of the issuance of the underlying Common Stock upon
conversion of the Preferred Shares is intended to comply with New York Stock
Exchange requirements.
Approval of the issuance of 7,254,464 shares of Common Stock upon the
automatic conversion of the Preferred Shares will require the affirmative vote
of the holders of a majority of the shares of Common Stock present and
entitled to vote at the Annual Meeting. Under applicable Delaware law, an
abstention would have the same legal effect as a vote against this proposal,
and a broker non-vote would not be counted in the calculation of the votes.
Upon conversion, American General's interest in the Company's Common
Stock will increase to approximately 46.2% from 40%.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO ISSUE
7,254,464 SHARES OF COMMON STOCK UPON THE AUTOMATIC CONVERSION OF THE
PREFERRED SHARES.
CERTAIN RELATIONSHIPS AND
TRANSACTIONS
In connection with Conseco's sale of its 40% interest in the Common Stock
of the Company to an American General subsidiary, American General and the
Company entered into a Shareholder's Agreement dated as of December 2, 1994.
The Shareholder's Agreement limits the ability of American General to dispose
of its shares prior to the earlier of January 1, 1999 or the date on which
Michael J. Poulos ceases, as a result of death, disability, or resignation, to
serve as Chief Executive Officer of the Company (such date being herein
referred to in either event as the "Termination Date") without the prior
approval of the Company's Board of Directors. The Shareholder's Agreement
permits, without Board approval, sales by American General only (i) in a
public offering intended to result in widespread distribution; (ii) in a
transaction under Rule 144 under the Securities Act of 1933 (the "Securities
Act") in accordance with the volume limitations set forth therein; (iii) in
privately negotiated block trades (subject to certain additional limitations);
(iv) within the American General holding company structure; or (v) pursuant to
a tender offer or exchange offer (subject to certain qualifications and
exceptions). If American General proposes to effect any sale of shares
pursuant to certain tender offers or exchange offers, the Company shall have
the right to purchase all, but not part, of the shares proposed to be
<PAGE>
tendered by American General. The Shareholder's Agreement also restricts
American General's ability to acquire additional securities of the Company
prior to the Termination Date. However, American General may (i) acquire
securities by way of stock dividends or other distributions payable to holders
of Common Stock of the Company generally and (ii) acquire in any one
twelve-month period a number of shares not in excess of 20% of the total
number of shares of Common Stock outstanding as of the date such determination
is made; provided, that American General shall not at any time, for the
duration of the Shareholder's Agreement, own "beneficially" in excess of 79%
of the total number of shares of Common Stock then outstanding.
Under the Shareholder's Agreement, American General has the right to
designate two Board of Director nominees. The Company agrees to use its best
efforts to cause any such nominees to be elected by the shareholders. Such
right will be reduced to the nomination of one director if American General's
ownership falls below 25%, and is terminated if such ownership falls below
20%. To date, American General has not exercised its option to designate any
Director nominees.
The Shareholder's Agreement requires American General to vote its voting
securities in the election of Directors, at American General's option, either
(i) in favor of the slate of Directors proposed by the Board of Directors of
the Company; or (ii) pro rata in such election in accordance with the votes
cast by the remaining shareholders. However, with respect to Directors
nominated by American General, American General is permitted to vote the
shares in its discretion.
The Shareholder's Agreement also (i) provides that American General may
require the Company to register shares proposed to be sold by it under the
Securities Act, (ii) grants American General piggyback rights for any
registration statements for a public offering filed by the Company, and (iii)
required American General to file an initial 13D representing that the
acquisition of the shares was for "investment purposes" and not for the
purpose of acquiring or influencing control of the Company. The Company
agreed that so long as American General does not, through the sale or other
disposition of its shares, reduce its beneficial ownership of the Company's
Common Stock below 40%, the Company will not adopt a shareholder's rights plan
that would limit or adversely affect the rights of American General.
In connection with the issuance of the Preferred Shares, the
Shareholder's Agreement was amended to provide that the Preferred Shares would
be generally subject to the terms of the Shareholder's Agreement. In
addition, the registration rights set forth in the Shareholder's Agreement
were (i) broadened to cover the Preferred Shares, and (ii) extended for a
one-year period expiring on January 1, 2001.
On September 17, 1996, the Company and American General entered into the
Stock Purchase Agreement in connection with the issuance of the Preferred
Shares. See "Item 2 - Issuance of Common Stock" above.
Western National Life is a party to a modified coinsurance agreement with
American General Life Insurance Company, a subsidiary of American General,
which provides for the parties to jointly market annuity policies in the
structured settlement market and for such policies to be administered by
Western National Life. Under the agreement, American General Life
Insurance Company issues the policies, and 50% of each risk is reinsured
to Western National Life. The parties share expenses and profits under
the arrangement prorata.
The Company is a party to a consulting agreement with Alan Richards, a
Director. Mr. Richards' services include advising the Company on policy
structure and design, commission structures, marketing issues, regulatory
concerns, and other matters. Prior to June 30, 1996, Mr Richards was paid a
monthly retainer, thereafter he was compensated for his services at a daily
rate on a project-by-project basis. The Company paid Mr. Richards a total of
$93,600 under this arrangement in 1996.
<PAGE>
INDEPENDENT AUDITORS
(Item 3 on proxy card)
The Board of Directors of the Company, adopting the recommendation of the
Audit Committee, has appointed the firm of Coopers & Lybrand, L.L.P. as the
Company's independent auditors to audit the accounts of the Company for the
year 1997, subject to ratification of the appointment by the shareholders at
this meeting. One or more representatives of Coopers & Lybrand are expected
to be present at the meeting, where they will be given the opportunity to make
a statement and will be available to respond to appropriate questions.
Coopers & Lybrand served as the Company's independent auditors in 1994, 1995,
and 1996.
If the appointment of Coopers & Lybrand is not ratified by a majority of
the shares of Common Stock present and entitled to vote at the meeting, or if,
prior to the meeting, Coopers & Lybrand declines to act or otherwise becomes
incapable of acting, or its engagement is otherwise discontinued then, in any
such case, the Board of Directors will appoint other independent auditors
whose employment will then be subject to ratification by shareholders at the
Annual Meeting following such appointment.
Ratification of the appointment of Coopers & Lybrand will require the
affirmative vote of the holders of a majority of the shares of Common Stock
present and entitled to vote at the 1997 Annual Meeting. Under applicable
Delaware law, an abstention would have the same legal effect as a vote against
this proposal, and a broker non-vote would not be counted in the calculation
of the votes.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF COOPERS & LYBRAND, L.L.P. AS INDEPENDENT AUDITORS.
OTHER BUSINESS
1997 ANNUAL MEETING. At the date of this proxy statement, the management
of the Company knows of no other matter to be presented for action at the
meeting. However, if any other matters do properly come before the meeting,
it is intended that the persons named on the accompanying proxy will vote on
such matters in accordance with their best judgement.
SHAREHOLDER PROPOSALS AND NOMINATIONS. Shareholders may propose matters
to be presented at shareholders' meetings and, as described below, may
nominate Directors. Formal procedures have been established for those
proposals and nominations.
The Company's Bylaws provide generally that nominations of persons for
election to the Board of Directors may be made by any shareholder entitled to
vote for the election of Directors generally. A shareholder who intends to
nominate a Director nominee must provide written notification to the Corporate
Secretary of the Company at its principal office. The notification must be
provided not fewer than 60 nor more than 90 days prior to any shareholders'
meeting called for the election of Directors or not later than the close of
business on the tenth day following the day on which public announcement of the
date of the meeting is first made by the Company. In addition, to be
effective, the notification must comply with certain other procedures and
provide certain information, all as set forth in the Company's Bylaws. A copy
of these requirements will be provided to any shareholder upon written request
to the Corporate Secretary.
To be included in the proxy materials for presentation at the Company's
1998 annual meeting, shareholder proposals must be received at the Company's
principal offices on or before December 1, 1997.
<PAGE>
PROXY SOLICITATION
In addition to the solicitation of proxies by mail, proxies may also be
solicited by telephone, telegram, facsimile, or personal interview by
employees of the Company, who will not receive additional compensation
therefor. The Company has retained Morrow & Company, Inc. to assist in the
solicitation of proxies at a fee of approximately $5,000, plus expenses. The
Company will pay the cost of soliciting proxies. The Company also will
reimburse brokerage houses and other custodians, nominees, and fiduciaries for
their expenses in sending proxy materials to the beneficial owners of Common
Stock.
VOTING SHARES OF WESTERNSAVE
AND SUPPLEMENTAL PLANS
The terms of the WesternSave Plan and the related trust agreement require
that the trustee vote the shares held in participants' accounts as directed by
the participants. In the event a participant does not provide specific voting
instructions, the trustee must vote the shares in accordance with the
instructions received from a majority of shares for which the trustee did
receive instructions and in accordance with its fiduciary duty. A participant
may use the proxy card to direct the trustee to vote the shares of Common
Stock allocated to that participant's account. The trustee will vote the
shares of the participant whose name and signature appear thereon in the
manner directed therein. Under the terms of the Supplemental Plan and the
related trust agreement, the trustee has the power in its discretion to
exercise all voting rights with respect to the shares and to grant proxies.
By order of the Board of Directors,
/S/ DWIGHT L. CRAMER
- ----------------------
Dwight L. Cramer
Corporate Secretary
March 31, 1997
<PAGE>
ANNEX A
[The Robinson-Humphrey Company, Inc. Letterhead]
September 13, 1996
Board of Directors
Western National Corporation
5555 San Felipe, Suite 900
Houston, Texas 77056
Dear Sirs:
We have been requested by Western National Corporation (the "Company") to
render our opinion with respect to the fairness, from a financial point of
view, to the Company's stockholders of the terms of the proposed sale of
7,254,464 shares of Series A Participating Convertible Preferred Stock
("Preferred Stock") of the Company to American General Corporation (the
"Proposed Financing").
In arriving at our opinion, we reviewed and analyzed: (1) the terms of
the Proposed Financing, (2) publicly available information concerning the
Company which we believe to be relevant to our inquiry, (3) financial and
operating information with respect to the business, operations and prospects
of the Company furnished to us by the Company, (4) a trading history of the
Company's common stock from February 8, 1994 to the present and a comparison
of that trading history with those of other companies which we deemed
relevant, (5) a comparison of the historical financial results and present
financial condition of the Company with those of other companies which we
deemed relevant. In addition, we have had discussions with the management of
the Company concerning its business, operations, assets, present condition and
future prospects and undertook such other studies, analyses and investigations
as we deemed appropriate.
<PAGE>
We have assumed and relied upon the accuracy and completeness of the
financial and other information used by us in arriving at our opinion without
independent verification. In arriving at our opinion, we have not conducted a
physical inspection of the properties and facilities of the Company and have
not made nor obtained any evaluations or appraisals of the assets or
liabilities of the Company. In addition, you have not authorized us to
solicit, and we have not solicited, any indications of interest from any third
party with respect to the Proposed Financing. Our opinion is necessarily
based upon market, economic and other conditions as they exist on, and can be
evaluated as of, the date of this letter.
We have acted as financial advisor to the Company in connection with the
Proposed Transaction and will receive a fee for our services which is
contingent upon the consummation of the Proposed Transaction. In addition,
the Company has agreed to indemnify us for certain liabilities arising out of
the rendering of this opinion. In the ordinary course of our business, we
actively trade in the equity securities of the Company for our own account and
for the accounts of our customers and, accordingly, may at any time hold a
long or short position in such securities.
Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that, from a financial point of view, the terms of the Proposed
Financing is fair to the stockholders of the Company.
Very truly yours,
By: /s/ The Robinson-Humphrey Company, Inc.
- ----------------------------------------------------
THE ROBINSON-HUMPHREY COMPANY, INC.
<PAGE>
ANNEX B
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
AND LIMITATIONS OF THE SERIES A PARTICIPATING
CONVERTIBLE PREFERRED STOCK OF
WESTERN NATIONAL CORPORATION
WESTERN NATIONAL CORPORATION, a corporation organized and existing under
the laws of the State of Delaware (hereinafter referred to as the
"Corporation"), HEREBY CERTIFIES that pursuant to the authority conferred upon
the Board of Directors by Article Fifth of the Certificate of Incorporation of
the Corporation, and pursuant to the provisions of Section 151 of the General
Corporation Law of the State of Delaware, said Board of Directors, by the
unanimous vote of its members, adopted a resolution providing for the issuance
of a series of 7,254,464 shares of Preferred Stock to be designated as Series
A Participating Convertible Preferred Stock, which resolution is as follows:
RESOLVED, that a series of Preferred Stock of the Corporation be and it
hereby is created, such series of Preferred Stock is to be designated as the
Series A Participating Convertible Preferred Stock (hereinafter referred to as
the "Preferred Stock"), to consist of 7,254,464 shares with a par value of
one-thousandth of one dollar ($.001) per share (each share shall be referred
to herein as a "Share"), the preferences, special rights, qualifications,
limitations, restrictions, redemption rights, dividend rights and rights of
dissolution of assets of each share of which shall be as follows:
1. RANKING. The Preferred Stock will rank senior to the Common
-------
Stock, and may rank senior to, on a parity with, or junior to any series of
preferred stock hereafter designated, with respect to dividends and
liquidation rights. All equity securities of the Corporation to which the
Preferred Stock ranks prior with respect to the payment of dividends and upon
liquidation, whether now existing or hereafter created, are collectively
referred to in this Certificate of Designation as the "Junior Stock", all
equity securities of the Corporation with which the Preferred Stock ranks on a
parity with respect to the payment of dividends and upon liquidation, whether
now existing or hereafter created, are collectively referred to in this
Certificate of Designation as "Parity Stock", and all equity securities of the
Corporation to which the Preferred Stock ranks junior, with respect to
dividends or upon liquidation, whether now existing or hereafter created, are
collectively referred to in this Certificate of Designation as the "Senior
Stock".
2. DIVIDENDS. So long as any shares of Preferred Stock shall remain
---------
outstanding, the Corporation shall not (i) declare or pay any dividend or make
any other distribution on its Common Stock (whether payable in cash, in
property or in securities of the Corporation), other than a dividend payable
solely in Common Stock or rights to purchase Common Stock, unless concurrently
therewith the Corporation shall declare or pay a dividend or make a
distribution on each share of Preferred Stock then outstanding equal to the
dividend or distribution per share declared, paid or made on the Common Stock
and, if such dividend or distribution on the Common Stock is declared, paid or
made in property (other than cash) or securities of the Corporation, of
identical property or securities, (ii) declare or pay any dividend or make any
other distribution on the Common Stock payable in shares of Common Stock or
rights to purchase Common Stock, unless concurrently therewith the Corporation
shall declare or pay a dividend or make a distribution on each share of
Preferred Stock then outstanding, in the case of a dividend or distribution
payable in Common Stock, of a number of additional shares of Preferred Stock
equal to the number of shares of Common Stock payable with respect to each
share of Common Stock, or, in the case of a dividend or distribution payable
in rights to purchase Common Stock, of rights to purchase the number of shares
of Preferred Stock equal to the number of shares of Common Stock purchasable
pursuant to the rights payable to the holder of one share of Common Stock and
at the same purchase price and on the same terms and conditions, (iii) split
or otherwise subdivide the Common Stock into a greater number of shares or
combine the Common Stock into a lesser number of shares (whether by stock
split, reverse stock split, reclassification or otherwise) or reclassify the
Common Stock, unless concurrently therewith the Corporation shall subdivide,
combine or reclassify the Preferred Stock so that the number of shares of
Preferred Stock outstanding immediately following such division, combination
or reclassification shall bear the same relationship to the number of shares
of Preferred Stock outstanding immediately prior to such division, combination
or reclassification as the number of shares of Common Stock outstanding
immediately following such division, combination or reclassification bears to
the number of shares of Common Stock outstanding immediately prior to such
division, combination or reclassification and in connection with such
division, combination or reclassification the holders of the Preferred Stock
shall be entitled to receive, in respect of each share thereof, any additional
property or securities of the Corporation receivable by the holders of the
Common Stock upon such division, combination or reclassification in respect of
each share of Common Stock, or (iv) make, or permit any of its subsidiaries or
affiliates to make, any redemption, purchase or other acquisition, directly or
indirectly, of any shares of Common Stock in connection with an offer to all
or substantially all of the holders thereof, unless concurrently therewith the
Corporation shall offer to all holders of Preferred Stock (on the same terms
and conditions as the offer to the holders of the Common Stock) to redeem,
purchase or otherwise acquire a number of shares of Preferred Stock so that,
if such offer were accepted in full, the number of shares of Preferred Stock
outstanding immediately following such redemption, purchase or acquisition
would bear the same relationship to the number of shares of Preferred Stock
outstanding immediately prior thereto as the number of shares of Common Stock
immediately following such redemption, purchase or acquisition of Common Stock
bears to the number of shares of Common Stock outstanding immediately prior
thereto.
<PAGE>
3. VOTING.
------
a. Except as otherwise required by law, the Preferred Stock shall
have no voting power.
b. On all matters to be voted on by the holders of the Preferred
Stock, such holders shall be entitled to one vote for each share.
4. REDEMPTION. The Preferred Stock shall not be redeemable (except
----------
as contemplated in section 2) and shall not be subject to any sinking fund.
The Corporation shall have the right to purchase Preferred Stock in the
public market or in private purchases at such prices as may from time to time
be available in the public market or in private purchases for such shares and
shall have the right at any time to acquire any Preferred Stock from the owner
of such shares on such terms as may be agreeable to such owner. Preferred
Stock may be acquired by the Corporation from any stockholder pursuant to this
paragraph without offering any other stockholder an equal opportunity to sell
his stock to the Corporation, and no purchase by the Corporation from any
stockholder pursuant to this paragraph shall be deemed to create any right on
the part of any other stockholder to sell any Preferred Stock (or any other
stock) to the Corporation.
<PAGE>
5. CONVERSION.
----------
a. Automatic Conversion. Upon satisfaction of the Conversion
---------------------
Condition, each share of Preferred Stock shall automatically and without any
action on the part of the holder thereof or the Corporation be converted into
one fully paid and nonassessable share of Common Stock. The "Conversion
Condition" shall be (i) the approval of the holders of Common Stock of the
Corporation (by vote or written consent of a resolution providing for such
conversion), such approval to be based on the affirmative vote of those
present and voting (or executing a consent), in person or by proxy (which
resolution may be presented at any annual or special meeting of shareholders,
at which a quorum is present, upon such notice as may be required by law) or
(ii) receipt of a written determination by the New York Stock Exchange that
the rules and regulations of such Exchange do not require shareholder approval
of such issuance.
b. Effectiveness and Effect of Conversion. Conversion shall be
---------------------------------------
deemed to have been effected immediately prior to the close of business on the
date of satisfaction of the Conversion Condition. The person or persons in
whose name or names any certificate or certificates for shares of Common Stock
shall be issuable upon such conversion shall be deemed to have become the
holder or holders of record of the Common Stock represented thereby at such
time and all shares of Preferred Stock so converted shall be deemed to be no
longer outstanding as of such date.
<PAGE>
As promptly as practicable, and in any event within five days, after the
surrender of such shares of Preferred Stock, the Corporation shall issue and
shall deliver to such holder, or on the holder's written order, a certificate
or certificates for the number of full shares of Common Stock issuable upon
the conversion of such Preferred Stock. The issuance of stock certificates
representing shares of Common Stock on conversion of shares of Preferred Stock
shall be made without charge for any tax in respect of the issuance thereof.
The Corporation shall not, however, be required to pay any tax which may be
payable in respect of any registration of transfer involved in the issuance
and delivery of Common Stock in any name other than that of the holder of
record of any Preferred Stock converted, and the Corporation shall not be
required so to issue or deliver any stock certificate unless and until the
person or persons requesting the registration of transfer shall have paid to
the Corporation the amount of such tax or shall have established to the
satisfaction of the Corporation that such tax has been paid.
c. Reservation of Shares. The Corporation shall at all times reserve
----------------------
and keep available out of its authorized Common Stock the full number of
shares of Common Stock of the Corporation deliverable upon the conversion of
all outstanding shares of Preferred Stock.
6. LIQUIDATION. In the event of any voluntary or involuntary
-----------
dissolution, liquidation or winding up of the Corporation (for the purposes of
this subsection 6, a "Liquidation"), before any distribution of assets shall
be made to the holders of any stock of the Corporation ranking junior upon
liquidation, the holder of each share of Preferred Stock then outstanding
shall be entitled to be paid out of the assets of the Corporation available
for distribution to its stockholders, an amount equal to $.001 plus all
dividends (whether or not declared or due) accumulated and unpaid on such
share on the date fixed for the distribution of assets of the Corporation to
the holders of Preferred Stock before any distribution of assets is made to
holders of shares of Junior Stock (for purposes of this subsection 6, the
"liquidation preference"). After payment of the full amount of the
liquidation preference to which the holder of each share of Preferred Stock is
entitled, and after holders of shares of Common Stock have received in the
Liquidation $0.001 per share upon Liquidation, such holder will participate in
any further distributions made to the holders of Common Stock as if such
holder held the number of shares of Common Stock into which such Preferred
Stock is then subject to conversion.
If upon any Liquidation of the Corporation, the assets available for
distribution to the holders of Preferred Stock, and any classes of Parity
Stock and any other classes of stock ranking on a parity upon liquidation with
the Parity Stock issued by the Corporation which shall then be outstanding
(hereinafter in this paragraph called the "Total Amount Available") shall be
insufficient to pay the holders of all outstanding Preferred Stock and all
other such stock the full amounts (including all dividends accumulated and
unpaid) to which they shall be entitled by reason of such Liquidation of the
Corporation, then there shall be paid to the holders of the Preferred Stock
(to be allocated pro
<PAGE>
rata among the Preferred Stock) in connection with such Liquidation of the
Corporation, an aggregate amount equal to the product derived by
multiplying the Total Amount Available times a fraction, the numerator
of which shall be the full amount to which the holders of the Preferred
Stock shall be entitled under the terms of the preceding paragraph by
reason of such Liquidation of the Corporation and the denominator of which
shall be the total amount which would have been distributed by reason of such
Liquidation of the Corporation with respect to the Preferred Stock, the Parity
Stock and all other stock ranking on a parity with the Parity Stock upon
Liquidation then outstanding had the Corporation possessed sufficient assets
to pay the maximum amount which the holders of all such stock would be
entitled to receive in connection with such Liquidation of the Corporation.
The voluntary sale, conveyance, lease, exchange or transfer of all or
substantially all the property or assets of the Corporation (unless in
connection therewith the Liquidation of the Corporation is specifically
approved) or the merger or consolidation of the Corporation into or with any
other corporation, or the merger of any other corporation into the
Corporation, or any purchase or redemption of some or all of the shares of any
class or series of stock of the Corporation, shall not be deemed to be a
Liquidation of the Corporation for the purpose of this subsection 6.
The holder of any Preferred Stock shall not be entitled to receive any
payment owed for such Shares under this subsection 6 until such holder shall
cause to be delivered to the Corporation: (i) the certificate(s) representing
such Preferred Stock and (ii) transfer instrument(s) satisfactory to the
Corporation and sufficient to transfer such Preferred Stock to the Corporation
free of any adverse interest. No interest shall accrue on any payment upon
Liquidation after the due date thereof.
7. STATUS OF REACQUIRED PREFERRED STOCK. Shares issued and
----------------------------------------
reacquired by the Corporation (including shares of Preferred Stock which shall
be deemed to have been reacquired upon conversion into shares of Common Stock)
shall have the status of authorized and unissued shares of preferred stock of
the Corporation undesignated as to series, subject to later issuance in
accordance with the Certificate of Incorporation.
RESOLVED, that, before the Corporation shall issue any shares of the
Preferred Stock, a certificate pursuant to Section 151 of the General
Corporation Law of the State of Delaware shall be made, executed,
acknowledged, filed and recorded in accordance with the provisions of said
Section 151; and the proper officers of the Corporation are hereby authorized
and directed to do all acts and things which may be necessary or proper in
their opinion to carry into effect the purposes and intent of this and the
foregoing resolutions.
<PAGE>
IN WITNESS WHEREOF, said Corporation has caused this Certificate of
Designation to be duly executed by the President and attested to by its
Secretary and has caused its corporate seal to be affixed hereto, this 13th
day of September, 1996.
WESTERN NATIONAL CORPORATION
By:/s/Michael J. Poulos
----------------------
Michael J. Poulos
Chairman of the Board of
Directors, President and
Chief Executive Officer
(Corporate Seal)
ATTEST:
By:/s/Dwight L. Cramer
---------------------
Dwight L. Cramer
Secretary
<PAGE>
1997 PROXY STATEMENT
WESTERN NATIONAL CORPORATION
5555 SAN FELIPE, SUITE 900
HOUSTON, TEXAS 77056
<PAGE>
WESTERN NATIONAL CORPORATION
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 14, 1997.
<PAGE>
The undersigned hereby appoints Michael J. Poulos, Richard W. Scott, and
Dwight L. Cramer, or any one or more of them severally, each with power of
substitution, attorneys and proxies of the undersigned to vote all shares of
Common Stock of Western National Corporation (the "Company") which the
undersigned is entitled to vote at the Annual Meeting of Shareholders to be
held on May 14, 1997, in The Ritz Carlton Hotel, 1919 Briar Oaks Lane,
Houston, Texas, at 9:00 a.m. CDT, and at any adjournment or postponement
thereof.
THE UNDERSIGNED ACKNOWLEDGES THAT THIS PROXY, WHEN PROPERLY EXECUTED,
WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER AND
THAT IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ALL NOMINEES LISTED
IN PROPOSAL 1 AND IN FAVOR OF PROPOSALS 2 AND 3. This proxy may be revoked
at any time prior to the voting of the proxy by the execution and submission
of a revised proxy, by written notice to the Secretary of the Company or by
voting in person at the meeting.
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CONTINUED AND TO BE SIGNED ON REVERSE SIDE
<PAGE>
1.( ) FOR the election (except as indicated below) as directors of Don G.
Baker, Alan R. Buckwalter III, John A. Graf, Robert M. Hermance,
Sydney F. Keeble, Jr., Michael J. Poulos, Alan Richards and Richard W. Scott.
Instruction: To withhold authority to vote for any nominee, write that
nominee's name below:
______________________________________________________________________________
2.Proposal to approve the issuance of 7,254,464 shares of Common Stock upon
conversion of outstanding shares of Series A Participating Convertible
Preferred Stock.
( ) FOR ( ) AGAINST ( ) ABSTAIN
3.Proposal to ratify the appointment by the Board of Directors of the firm of
Coopers & Lybrand, L.L.P. as independent public auditors of the Company for
the calendar year 1997.
( ) FOR ( ) AGAINST ( ) ABSTAIN
4.In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting, or any adjournment or
postponement thereof.
Signature:_____________________________________ Date:____________________
Signature:_____________________________________ Date:____________________
Please sign exactly as your name appears on your stock certificate. When
signing as attorney, executor, administrator, trustee or guardian, please give
your full title. All joint owners should sign.
