Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Westar Financial Services, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
(WESTAR LETTERHEAD/LOGO)
Notice Of Annual Meeting Of Stockholders
To Be Held September 27, 1999
Cavanaughs at Capitol Lake
2300 Evergreen Park Drive
Olympia, Washington
September 27, 1999
9:00 a.m., Pacific Time
NOTICE IS HEREBY GIVEN that an annual meeting of stockholders of Westar
Financial Services Incorporated will be held for the following purposes:
1. To elect two directors for a three-year term and until their
successors are elected and qualified;
2. To transact such other business as may properly come before
the meeting or any adjournment thereof.
The Board of Directors of Westar has fixed August 24, 1999 as the record date
for the determination of stockholders entitled to notice of and to vote at the
Annual Meeting. Only those stockholders of record as of the close of business on
that date will be entitled to vote at the Annual Meeting or at any such
adjournment.
By Order of the Board of Directors
Charles S. Seel
SECRETARY
August 16, 1999
Olympia, Washington
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. IT IS IMPORTANT THAT
YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER YOU OWN. EVEN IF YOU PLAN TO
BE PRESENT, YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY
PROMPTLY IN THE ENVELOPE PROVIDED. IF YOU ATTEND THIS MEETING, YOU MAY VOTE
EITHER IN PERSON OR BY YOUR PROXY. ANY PROXY GIVEN MAY BE REVOKED BY YOU IN
WRITING OR IN PERSON AT ANY TIME PRIOR TO THE EXERCISE THEREOF.
WESTAR FINANCIAL SERVICES INCORPORATED
PROXY STATEMENT
1999 ANNUAL MEETING OF STOCKHOLDERS
MONDAY, SEPTEMBER 27, 1999
This proxy statement is furnished to the stockholders of Westar
Financial Services Incorporated, formerly known as Republic Leasing
Incorporated, in connection with the solicitation of proxies for use at the
Annual Meeting of Stockholders on September 27, 1999, and all adjournments
thereof, for the purposes set forth in the accompanying Notice of Annual Meeting
of Stockholders. This proxy statement and the enclosed form of proxy are first
being mailed to stockholders on or about August 26, 1999.
WHETHER OR NOT YOU EXPECT TO BE PERSONALLY PRESENT AT THE
MEETING, PLEASE FILL IN, SIGN, DATE AND RETURN THE ENCLOSED FORM OF PROXY.
Any person giving such proxy has the right to revoke it at any time
before it is voted by giving notice to the Secretary of the Company. All shares
represented by duly executed proxies in the accompanying form will be voted
unless proxies are revoked prior to the voting thereof.
The close of business on August 24, 1999 has been fixed as the record
date for the determination of stockholders entitled to vote at the Annual
Meeting of Stockholders. As of the record date, there were outstanding and
entitled to vote at such meeting 2,222,300 shares of common stock. The holders
of common stock will be entitled to one vote for each share of common stock held
of record on the record date.
A copy of the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1999 accompanies this proxy statement.
The solicitation of this proxy is made by the Board of Directors of the
Company. The solicitation will be made by mail and the expense thereof will be
paid by the Company. The Company has retained American Securities Transfer and
Trust to assist in the solicitation of proxies at an estimated cost of $1,400.
In addition, solicitation of proxies may be made by telephone by
directors, officers or regular employees of the Company.
VOTE REQUIRED
The election of the Company's directors requires a plurality of the
votes represented in person or by proxy at the annual meeting, and the other
proposal described in the accompanying Notice to Stockholders and any other
business that may properly come before the Annual Meeting require that the votes
cast in favor exceed the votes cast against the proposal.
EFFECT OF AN ABSTENTION AND BROKER NON-VOTES
A stockholder who abstains from voting on any or all proposals will be
included in the number of stockholders present at the Annual Meeting for the
purpose of determining the presence of a quorum. Abstentions will not be counted
either in favor of or against the election of the nominees or any other
proposal. Under the rules of the National Association of Securities Dealers,
brokers holding stock for the accounts of their clients who have not been given
specific voting instructions as to a matter by their clients may vote their
clients' proxies in their own discretion.
INFORMATION ABOUT THE BOARD OF DIRECTORS AND
COMMITTEES OF THE BOARD
NOMINEES AND CONTINUING DIRECTORS
The Board of Directors is divided into three classes, with the terms of
office of each class ending on successive years. Two directors of the Company
are to be elected for term ending in 2002, at the Annual Meeting, or until their
respective successors have been elected and qualified. Certain information with
respect to the nominees for election as directors proposed by the Company and
the other directors whose terms of office as directors will continue after the
Annual Meeting is set forth below. Should any one or more of the nominees be
unable or unwilling to serve (which is not expected), the proxies (except
proxies marked to the contrary) will be voted for such other person or persons
as the Board of Directors may recommend.
NOMINEES FOR TERMS UNTIL 2002
Joel I. Davis, age 65, is the Assistant Secretary and a director of the
Company. He is President of MasterForms, Inc. (since 1983), and President of
Davis Construction and Development Corporation. He has been engaged as a home
builder and land developer in various capacities for more than twenty-five
years. Mr. Davis is an officer and member of the Board of Directors of Mud Bay
Holdings, Ltd., a privately held investment company. Mr. Davis graduated from
St. Martin's College (B.A., Accounting). Mr. Davis is a member of the Audit
Committee. He has served on the Board of Directors of Westar Financial Services
Incorporated and predecessor corporations since 1978.
Charles S. Seel, age 51, is the Secretary of the Company, a director
and Chairman of the Audit Committee. He is President and Chief Operating Officer
of Summit Management Company, a holding company for Spectrum Glass and Vanguard
Properties. He previously served in positions as Executive Vice President,
Treasurer and Controller (1977). Mr. Seel is the Secretary and a member of the
Board of Directors of Mud Bay Holdings, Ltd., a privately held investment
company. He is a Certified Public Accountant and a member of the Washington
Society of CPAs and the American Institute of CPAs. Mr. Seel graduated from
Montana State University (B.A., Accounting). He has served on the Board of
Directors of Westar Financial Services Incorporated and predecessor corporations
since 1978.
TO CONTINUE IN OFFICE UNTIL 2001
Robert L. Lovely, age 62, is a director and Chairman of the
Compensation Committee of
the Company. He is President of the Lovely Corp., a business development and
management firm. He is also Executive Vice President and Director of Travel
Automation Systems Corp. He is a director of AVT Corp. (since 1983). Mr. Lovely
is a director of Mud Bay Holdings, Ltd., a privately held investment company.
Mr. Lovely graduated from Washington State University (B.A., Mathematics) and
received an MBA from Pacific Lutheran University. He has served on the Board of
Directors of the Company and predecessor corporations since 1978.
Michael A. Price, age 53, was elected to the Board of Directors in June
1998 and was named to the Compensation Committee. He is the founder of T & W
Financial Corporation (NASDAQ:TWFC) and has been Chairman of the Board and Chief
Executive Officer of T & W Financial Corporation and its predecessors since its
formation in 1976. Mr. Price was founder, Chairman (1991-1996) and Director of
Northwest Community Bank until its merger with First Community Bank. Prior to
1976, Mr. Price was a Vice President of International Finance, an independent
leasing company. Mr. Price was one of the founders, and is a past director, of
the United Association of Equipment Lessors ("UAEL"), a national association of
leasing companies.
TO CONTINUE IN OFFICE UNTIL 2000
R. W. Christensen, Jr., age 51, is the President and Chairman of the
Board of Directors of the Company. Prior to 1978 he held positions as a
financial analyst with Olympia Brewing Company, Assistant to the President of
Pacific Hide & Fur, a natural resources and steel distribution firm, and as
Corporate Pilot with Buttrey Food Stores. Mr. Christensen served as Vice
Chairman (1989-1990) and a member of the Board of Directors (1987-1990) of
Heritage Federal Savings & Loan Association. He was President and director of
PacWest Financial Corporation, a privately held investment firm. Mr. Christensen
is President and a member of the Board of Directors of Mud Bay Holdings, Ltd., a
privately held investment company. Mr. Christensen has previously served as an
officer, director and President of the National Vehicle Leasing Association
(1981-1988) in which capacities he presented dozens of articles and scores of
speeches on the state and future of the automobile leasing industry, subjects in
which he is regarded as expert. He was awarded the industry's most prestigious
recognition, the Clemens-Pender Award, in 1988. He has served as director of
Washington Independent Bankshares (1982). Mr. Christensen serves as the
court-appointed Trustee of CASR Trust, a multi-year, multi-million dollar fund
established by the bankruptcy court for the benefit of the creditors of All
Seasons Resorts. He graduated from the College of Great Falls (B.A. with Honors,
Management and Economics) and received an MBA from the University of Puget
Sound. He serves as a Director (since 1978) and as Chairman (since 1995).
David C. Soward, age 42, is a Director of the Company. Since 1992 he
has been the Senior Vice President of & Capital Partners, Inc., the General
Partner of & Capital Partners, LP, a venture capital company based in San
Francisco. He was previously a Senior Manager with KPMG Peat Marwick, San
Francisco (1987-1992). Mr. Soward graduated from Portland State University (BS,
Accounting) and is a Certified Public Accountant. Mr. Soward is a member of the
Compensation Committee. He has served on the Board of Directors of the Company
since 1995.
OTHER EXECUTIVE OFFICERS OF THE COMPANY
Robert E. Kanatzar, Jr., age 45, is the Vice President-Risk Management,
with responsibilities for the design and implementation of its risk/reward
criteria, strategies, policies
and procedures; the supervision of Lease Production Officers; the development of
credit and collection policies and procedures; and, the supervision of personnel
engaged in risk, credit or collection activities (1997). Prior to joining the
Company he was Senior Vice President of Credit Policy and Risk Management for
NationsCredit Corporation, with a $10 billion consumer portfolio, a part of the
Financial Services Group of NationsBank Corporation (1996). Previously, he
served as Vice President-Manager of Risk Management for Bank One Credit Company
and managed its $10 billion consumer portfolio (1992). Mr. Kanatzar has served
in areas of similar and increasing responsibilities with Texas Commerce Bank,
Citicorp Acceptance Company and Citicorp Mortgage Inc. He graduated from the
University of Kansas and received an MBA from the University of Kansas Graduate
School of Business.
Warren Kornfeld, age 37, is the Senior Vice President-Finance with
responsibility for the design and implementation of Westar's financial
management strategies, policies and procedures and external financial
relationships (1998). Prior to joining the Company Mr. Kornfeld was Vice
President of the Industrial Bank of Japan, Ltd. in New York, responsible for
heading their term asset-backed efforts (1994). Mr. Kornfeld was the co-founder
and partner of Bickford & Partners, Inc., a New York-based investment banking
firm specializing in securitizations and asset-backed securities markets (1991).
Previously, he headed the securitization consulting group of Trepp & Company,
Inc., a New York investment firm (1983). Mr. Kornfeld received his B.S. in
Economics with a dual concentration in Finance and Decision Sciences from the
University of Pennsylvania.
Cindy A. Kay, age 34, is Controller with primary responsibility for
accounting and internal finance functions (1997). Prior to joining the Company,
she was a Partner in Kay and Company, CPA's, responsible for financial
management consulting, taxation and audit engagements (since 1990). Prior to
joining Kay and Company, CPA's she began her career with Coopers and Lybrand in
Tucson, Arizona. Ms. Kay is a Certified Public Accountant and is a member of the
Washington Society of CPA's and the American Institute of CPA's. Ms. Kay
received her B.A. in Accounting from Saint Martins College.
Scott G. Cavanaugh, age 33, is Vice President-Collections with
responsibilities for collections, asset disposal, re-marketing and recovery
activities (1999). Prior to joining the Company he was Vice President &
Collection Manager for Seafirst Bank/Bank of America (1995-1999). Previously, he
served in areas of similar responsibilities with Ford Motor Credit Company
(1988-1995). Mr. Cavanaugh received his B.A. in international economics from
George Washington University.
BOARD OF DIRECTORS AND COMMITTEES
There were ten meetings of the Board of Directors during the fiscal
year ended March 31, 1999. All of the directors attended every meeting of the
Board and committees on which they served except for three members who each
missed one meeting. All directors are compensated for attendance at Board
meetings at $300 per meeting. Additionally, outside directors are paid $1,000
per quarter in consideration for their availability to the Company. The Company
incurred $35,223 and $25,000 in directors' compensation during the fiscal years
ended March 31, 1999 and 1998, respectively.
The members of the Board of Directors are elected to various
committees. The standing committees of the Board are the Audit and Compensation
Committees.
The functions of the Audit Committee are to recommend appointment of
the firm of independent accountants to perform the annual audit; and, review and
approve the scope of the independent accountants' work. The Committee met three
times in the fiscal year ended March 31, 1999 and again immediately following
the fiscal year end. The members of the Committee during the past fiscal year
were Charles Seel and Joel Davis. Mr. Seel served as Chairman.
The functions of the Compensation Committee are to review and approve
the salaries of all executive officers of the Company; and, review and approve
all additional compensation plans. The Committee met once in the fiscal year
ended March 31, 1999. The members of the Committee during the past fiscal year
were R. L. Lovely, Chairman; David Soward and Michael A. Price.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Stock
Beneficially Class Nature of Percentage
Owned on Of Beneficial of
June 30, 1999 Stock Ownership Class(1)
--------------------------------- ------------------ ---------------------- ----------------------------- -------------
PLMC, L.L.C. 753,701 (2) COMMON Sole Voting and Disposition 20.40%(2)
P.O. Box 6104
Federal Way, WA 98063
--------------------------------- ------------------ ---------------------- ----------------------------- -------------
& Capital Partners, LP 508,126 (3) COMMON Sole Voting and Disposition 13.75%(3)
600 California, Suite 1850 1,250 SERIES 4 PREFERRED Sole Disposition 100.00%
San Francisco, CA 94108
--------------------------------- ------------------ ---------------------- ----------------------------- -------------
Mud Bay Holdings, Ltd. 368,894 (8) COMMON Sole Voting and Disposition 16.60%
P.O. Box 919
Olympia, WA 98507
--------------------------------- ------------------ ---------------------- ----------------------------- -------------
R. W. Christensen, Jr. 753,701 (2) COMMON Shared Voting and 41.81%(5)
Chairman, President 368,894 (8) COMMON Disposition
and Director 155,050 (4)(5) COMMON Shared Voting and
P.O. Box 919 ---------- Disposition
Olympia, WA 98507 1,277,645 Sole voting and Disposition
--------------------------------- ------------------ ---------------------- ----------------------------- -------------
Joel I. Davis 20,000 COMMON Sole Voting and Disposition
Assistant Secretary 368,894 (8) COMMON Shared Voting and
and Director ---------- Disposition 17.50%(7)
388,894
--------------------------------- ------------------ ---------------------- ----------------------------- -------------
Robert L. Lovely 28,000 COMMON Sole Voting and Disposition
Director 368,894 (8) COMMON Shared Voting and
---------- Disposition 17.86%(7)
396,894
--------------------------------- ------------------ ---------------------- ----------------------------- -------------
Charles S. Seel 29,000 COMMON Sole Voting and Disposition
Secretary 368,894 (8) COMMON Shared Voting and
and Director ---------- Disposition 17.90%(7)
397,894
--------------------------------- ------------------ ---------------------- ----------------------------- -------------
David Soward 20,000 COMMON Sole Voting and Disposition
Director 508,126 (9) COMMON Shared Voting and
---------- Disposition 23.82%(10)
528,126
1,250 (9) SERIES 4 PREFERRED Non-Voting 100.00%
--------------------------------- ------------------ ---------------------- ----------------------------- -------------
Michael A. Price 753,701 (2) COMMON Shared Voting and
Director 219,800 (4) Disposition
----------
973,501 43.42%(11)
--------------------------------- ------------------ ---------------------- ----------------------------- -------------
Robert Kanatzar 17,000 (4) COMMON Sole Voting and Disposition **
Sr.VP.-Risk Management
--------------------------------- ------------------ ---------------------- ----------------------------- -------------
--------------------------------- ------------------ ---------------------- ----------------------------- -------------
Warren Kornfeld 33,334 (4) COMMON Sole Voting and Disposition 01.48%(12)
Sr. VP-Finance
--------------------------------- ------------------ ---------------------- ----------------------------- -------------
All Directors and Officers as a 2,152,905 COMMON 59.24%(13)
Group (8 persons)
** DENOTES LESS THAN 1%
(1) Except as otherwise indicated, Stock Beneficially Owned and Percentage
of Class are based upon 2,222,300 shares of common stock outstanding as
of June 30, 1999. Under Rule 13d-3(d)(1), any securities not
outstanding which are subject to options, warrants, rights or
conversion privileges shall be deemed to be outstanding for purposes of
computing the percentage of outstanding securities owned by such
person, but not deemed outstanding for computing percentage ownership
by any other person.
(2) PLMC, L.L.C. holds a Convertible Subordinated Note can be converted
into $753,701 shares of the Common Stock. Mr. Christensen and Mr.
Price, directors of Westar, are principals in PLMC, L.L.C. The holdings
of PLMC, LLC are attributed to both Mr. Christensen and Mr. Price under
Rule 13d-3.
(3) & Capital Partners, LP has the right to convert its Series 4 B
Preferred Shares into 10% of the outstanding Common Stock on a
fully-diluted basis. It also holds warrants for 3.75% of the
outstanding Common Stock on a fully-diluted basis. The holdings are
based upon 3,695,461 common shares outstanding. Mr. Soward is the
Senior Vice President of & Capital Partners, Inc., the general partner
of & Capital Partners, LP.
(4) Includes shares options and/or conversion rights which may be exercised
within 60 days.
(5) Based upon 3,056,001 common shares outstanding.
(6) Includes the interest of Summit Capital Resources, Ltd. of which Mr.
Christensen is the sole director and officer. The interest is
attributed to Mr. Christensen under Rule 13d-3.
(7) Based upon 2,222,300 common shares outstanding.
(8) The interest of Mud Bay Holdings, Ltd. of which Messrs. Christensen,
Davis, Lovely and Seel are directors collectively holding dispositive
power. All four individuals are attributed all of the holdings of Mud
Bay Holdings, Ltd. under Rule 13d-3.
(9) Includes the interest of & Capital Partners, LP, under Rule 13d-3.
(10) Based upon 2,730,426 common shares outstanding.
(11) Based upon 2,996,001 common shares outstanding.
(12) Based upon 2,255,634 common shares outstanding.
(13) Based upon 3,634,461 common shares outstanding.
EXECUTIVE COMPENSATION
Summary Compensation for Past Three Fiscal Years
Ending March 31, 1999
Name Annual Compensation
And Fiscal Long-Term All Other
Principal Year Compensation Compensation
Position(1)
--------------------------------------- ------------------------------------- --------------------------------- -----------------
Other
Salary Bonus Annual Awards Payouts
Compensa-
tion(1)
--------------------------------------- ------------------------------------- --------------------------------- -----------------
Restricted LTIP
Stock Options Payouts
Awards
--------------------------------------- ------------------------------------- --------------------------------- -----------------
R.W. Christensen, Jr. 3/31/99 $173,482 $0 150,000
President and Chairman 3/31/98 $150,000 $0
3/31/97 $142,500 $0
--------------------------------------- ------------------------------------- --------------------------------- -----------------
Robert Kanatzar(3) 3/31/99 $217,500
Senior V.P.-Risk 3/31/98 $172,500 $60,000(3) 37,000
Management
--------------------------------------- ------------------------------------- --------------------------------- -----------------
(1) All other executive officers of the Company received less than $100,000
annually in total compensation during the years ended March 31, 1999,
1998 and 1997.
(2) Westar has concluded that the individual and aggregate amounts of
personal benefits provided, which are not reflected in the above table,
did not exceed the lesser of $50,000 or 10% of the total annual salary
and bonus reported above for each of the named persons.
(3) Robert E. Kanatzar, Jr. Westar hired Robert E. Kanatzar, Jr. in August
1997, as Senior Vice President-Risk Management at a salary of $172,500
per year. Westar provided a loan of $60,000 to Mr. Kanatzar with the
understanding that the loan would be forgiven at his 17th month of
employment. The loan has been forgiven and treated as a bonus. Pursuant
to the employment arrangement, Mr. Kanatzar's base compensation was
increased to $217,500 beginning in August, 1998.
Mr. Kanatzar was awarded stock options for 37,000 shares of common
stock exercisable at $5-$11, and vesting from 19972001 and exercisable
within twenty-four months of grant. During his first two years of
employment, Mr. Kanatzar is entitled to a severance payment of $60,000
if he is terminated without cause.
(4) Warren Kornfeld. Westar hired Mr. Kornfeld in July 1998, as Senior Vice
President-Finance at a salary of $225,000. The employment arrangement
provided for an increase in the salary of $75,000 per year upon the
occurrence of certain events which have occurred. If Mr. Kornfeld is
terminated without cause before July 17, 2001, Westar shall pay him the
product of (1) the difference between 36 and the number of full months
he worked, and (2) $7,500.
Mr. Kornfeld was awarded stock options for 133,334 shares of common
stock at $4 per share, vesting over four years. If, before July 17,
2001, Mr. Kornfeld leaves Westar or is terminated for cause, or if
within one year of leaving he competes with Westar or divulges
confidential information, Mr. Kornfeld must pay Westar any gains, net
of taxes, he received on account of stock options under certain
conditions.
OPTIONS GRANTED IN FISCAL 1999
The following table sets forth certain information with respect to
stock options granted to the Named Executives during the year ended March 31,
1999.
Potential Realizable Value
Individual Grants at Assumed Annual Rates of
Stock Price Appreciation for
Option Term
Percent of
Options Total Options Exercise Base Expiration Date
Name Granted Granted to Price 5% 10%
Executives in
Fiscal Year
-------------------------- ------------ --------------- --------------- -------------- -------------- ---------------
R.W. Christensen, Jr. 150,000(1) 100% $4 - $8(1) October 6, -0-(3) -0-(3)
2003(2)
Warren Kornfeld 133,334(4) 100% $4(4) Varies(5) $4.31(6) $5.44(6)
(1) Options exercisable 30,000 @ $4 per share vesting on October 6, 1999;
30,000 @ $5 per share vesting on October 6, 2000; 30,000 @ $6 per share
vesting on October 6, 2001; 30,000 @ $7 per share vesting on October 6,
2002; and 30,000 @ $8 per share vesting on October 6, 2003.
(2) Options expire if not exercised by October 6, 2003.
(3) Assumes future stock prices of $2.55 and $3.22 at compound rates of
five and ten percent, respectively, for the five years, and are
computed solely for the requirements of the SEC. Westar makes no
representation that its stock will perform similarly or show similar
appreciation.
(4) Options exercisable 33,334 @ $4 per share vesting on July 13, 1998;
33,333 @ $4 per share vesting on July 13, 2000; 33,333 @ $4 per share
vesting on July 13, 2001; and 33,333 @ $4 per share vesting on July 13,
2002.
(5) Options expire 3 years after first exercisable, except the options
exercisable in 2000, 2001 and 2002 expire 120 months after vesting.
(6) Assumes future stock prices of $4.31 and $5.44 at compound rates of
five percent and ten percent, respectively, for five years, and are
computed solely for the requirements of the SEC. Westar makes no
representation that its stock will perform similarly or show similar
appreciation.
AGGREGATE OPTIONS EXERCISED IN FISCAL 1999
AND FISCAL YEAR END OPTION VALUES
The following table sets forth certain information with respect to the
exercise of stock options during fiscal 1998 and outstanding stock options held
by the Named Executives as of March 31, 1999.
Shares Value Number of Unexercised Options Value of Unexercised
Name Acquired Realized at Fiscal Year-End In-the-Money Options at Fiscal
On Exercise Year-End
---------------------- -------------- ----------- -------------------------------- ---------------------------------
Exercisable Unexercisable Exercisable Unexercisable(1)
-------------- ----------------- -------------- ------------------
R.W. Christensen -0- -0- 80,000 150,000(1) -0- -0-
Robert Kanatzar -0- -0- 7,000 30,000(1) -0- -0-
Warren Kornfeld -0- -0- 33,334 99,999(1) -0- -0-
(1) The indicated value is based on $2.00 per share market value of the
Common Stock at March 31, 1999, the day nearest to the fiscal year end
in which a trade took place, minus the exercise price.
INFORMATION ABOUT WESTAR 1994 STOCK OPTION PLAN
In 1996, the Company adopted, and the stockholders approved, the
amendment of the 1994 Stock Option Plan (the "1994 Stock Option Plan") providing
for the granting of options to purchase 600,000 shares to employees, directors
and consultants of the Company and its affiliates. On October 8, 1998, the Board
of Directors approved an increase of 750,000 shares to a total of 1,350,000. The
Company estimates that approximately 40 employees and two consultants, along
with all current directors of the Company, are currently eligible to receive
option grants under the 1994 Stock Option Plan. The Company, by means of the
1994 Stock Option Plan, seeks to retain the services of persons now employed by
or serving as consultants or directors to the Company, to secure and retain the
services of persons capable of filling such positions and to provide incentives
for such persons to exert maximum efforts toward the success of the Company. The
1994 Stock Option Plan provides for the granting of Incentive Stock Options
("ISOs") as that term is used in Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), as well as for the granting of Non-statutory
Stock Options ("NSOs") which do not qualify as incentive stock options under the
Code.
The 1994 Stock Option Plan is administered by the Board of Directors
upon recommendation of its Compensation Committee. The Board or the Committee
determines from
time to time which of the persons eligible under the 1994 Stock Option Plan
shall be granted options, when and how the options shall be granted, whether
such options shall be ISOs or NSOs and the provisions of each of the options
(which need not be identical), subject to the restrictions set forth in the 1994
Stock Option Plan. ISOs may be granted only to employees (including officers) of
the Company and its affiliates while NSOs may be granted to employees (including
officers) and directors of, or consultants to, the Company and its affiliates.
The exercise price of each option shall not be less than one hundred
percent (100%) of the fair market value of the stock subject to the option on
the date the option is granted. The exercise price of any ISO granted to any
optionee owning more than ten percent (10%) of the voting power of all classes
of the Company's stock, shall not be less than one hundred ten percent (110%) of
the fair market value of the stock on the date of the grant of the ISO.
Generally, an option shall terminate three months after termination of the
optionee's employment or relationship as a consultant to, or director of, the
Company or its affiliates, and an option shall not be transferable except by
will or the laws of descent and distribution (although an ISO may also be
transferred pursuant to a qualified domestic relations order as defined by the
Code or Title I of the Employee Retirement Income Security Act, or the rules
thereunder). The market price of the Company's common stock as of the close of
trading on March 31, 1999 on which a trade took place, was $2.00.
The 1994 Stock Option Plan permits options granted to be either
qualified Incentive Stock Options pursuant to the Code or non-qualified stock
options, as the Board may elect. Upon exercise of a non-qualified option, the
optionee will realize ordinary income in an amount equal to the excess of the
fair market value of the shares of common stock received over the exercise price
of such shares. That amount increases the optionee's basis in the stock acquired
pursuant to the exercise price of such shares. That amount increases the
optionee's basis in the stock acquired pursuant to the exercise of the
non-qualified option. Upon a subsequent sale of the stock, the optionee will
generally recognize additional capital gain or loss. The Company generally will
be allowed a federal income tax deduction for the amount recognized as ordinary
income by the optionee upon the exercise of the option.
The Board may at any time, and from time to time, amend the 1994 Stock
Option Plan. However, no amendment shall be effective unless approved by the
stockholders of the Company where such amendment would, among other things,
increase the number of shares reserved for issuance pursuant to options granted
under such plan.
As of March 31, 1999, options representing a total of 767,800(1) shares
have been granted, 105,800 of which had been exercised, the remainder include
185,334 options which were vested and were exercisable, 364,499(1) options which
had not vested yet, and 108,000 options which have expired. These options are
held by twenty one (21) persons, are exercisable at between $2.00 - $11.00 per
share and remain exercisable for three to five years from the date of grant,
subject to certain conditions.
As a group, all employees who are not executive officers received
93,300 options. As a group, executive officers as of March 31, 1999, have
received 520,333(1) options under the 1994 Stock Option Plan. Current directors,
excluding executive officers, have received 100,000 options, as a group.
(1) On October 8, 1998, the Board awarded R. W. Christensen, Jr. options
for 30,000 shares for each of the next five
years exercisable at $4 to $8 per share. . Since the total grant of
150,000 shares exceeded the number of options available under the Plan,
the portion of the award which exceeds the authorized number of option
shares awarded was contingent upon shareholder approval of the
increased number of options. The Shareholders approved the amendment to
the 1994 Stock Option Plan on April 26, 1999.
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE
COMPANY'S PREVIOUS FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR THE EXCHANGE ACT THAT MIGHT INCORPORATE FUTURE FILINGS,
INCLUDING THIS PROXY STATEMENT IN WHOLE OR IN PART, THE FOLLOWING REPORT SHALL
NOT BE INCORPORATED BY REFERENCE INTO ANY SUCH FILINGS.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee reviews and establishes management
compensation, compensation policies and procedures. Following review and
approval by the Committee, all issues pertaining to executive compensation are
submitted to the full Board of Directors for its approval. The Committee also
has responsibility for the grant of awards under Westar's stock option plan.
Executive officer compensation is based on Westar's overall performance
in the past year and an analysis of compensation levels necessary to attract,
maintain and motivate quality personnel. In this way, Westar is able to compete
for and retain talented executives who are critical to our long-term strategies
for success. It also aligns the interest of those executives with the long-term
interests of our stockholders.
Executive compensation consists of three components: cash compensation,
long term incentives in the form of stock options and normal employee fringe
benefits. The three components are intended to provide executives with
incentives to achieve the long-range objectives of Westar and to reward
exceptional performance. Performance is evaluated not only with respect to
Westar's earnings but also with respect to the accomplishment of Westar's
business objectives, the individual's contribution to stockholder value, and
also with respect to comparable industry results and experience. Executive
officers receive all normal employee fringe benefits.
In determining the overall compensation package for the Chief Executive
Officer, the Committee considered each of the factors enumerated in the
preceding paragraphs regarding compensation for executive officers of Westar as
well as the performance achieved by Westar during the past fiscal year.
To motivate extraordinary job performance and to encourage growth in
stockholder value, significant stock options are granted under Westar's stock
option plan to all executives and all other company personnel in order to
encourage substantial contributions toward the overall success of Westar. The
Committee believes that this focuses attention on managing Westar from the
perspective of owners with an equity stake in the business.
Dated this 31st day of March, 1999
THE COMPENSATION COMMITTEE
R. L. Lovely, Chairman
David C. Soward
Michael A. Price
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
R. L. Lovely is a member of the Board of Directors of Mud Bay Holdings,
Ltd., a privately held investment company. R. W. Christensen, Jr. is the
President and a member of the Board of Directors of Mud Bay Holdings, Ltd.
Charles Seel and Joel Davis, directors of the Company, are also officers and
members of the Board of Directors of Mud Bay Holdings, Ltd.
RELATED PARTY TRANSACTIONS
The Company leased office space from a limited partnership in which it
had a 10% interest in the fiscal year. The lease expires in November 2000.
The Company has a subordinated note agreement, effective January 1997,
with Mud Bay Holdings, Ltd. pursuant to which the Company may borrow up to
$750,000. Interest is calculated at the rate of 8%.
The Company has a subordinated note agreement, effective April 15,
1997, with & Capital, Partners, LP, in the amount of $1,500,000. Interest is
calculated at the rate of 9%. The loan is due upon the earlier of (I) December
1, 1999, or (ii) receipt by the company of not less than $5,000,000 from other
financing. The lender was granted warrants to purchase 3.75% of the Company's
stock which is outstanding at the time of exercise at an exercise price of $.01
per share. Mr. Soward is the Senior Vice President of & Capital Partners, Inc.,
the general partner of & Capital Partners, LP.
The Company had a 120-day subordinated note agreement with C. Carlson
in the amount of $100,000. Interest was calculated at the rate of 11%. The note
was paid in full in May 1998.
The Company has a subordinated note agreement, effective January 26,
1998, with & Capital, Partners, LP, in the amount of $500,000. The note is due
on December 1, 1999. Interest is calculated at the rate of 9.5%.
In April 1998, the company entered into an agreement with PLMC, LLC,
which is owned by two directors (R.W. Christensen, Jr. and Michael A. Price) and
other unrelated parties, to borrow $400,000 in subordinated debt. Interest
accrued at 9.5%. The note was repaid in full on May 13, 1998.
In May 1998, the Company entered into an agreement to exchange a note
payable for $500,000 for all of Mr. Christensen's Series 3 preferred stock. The
note bears interest at the rate of 10.5% and is paid quarterly. The note is
payable at one-eighth of the principal balance paid quarterly, beginning fourth
quarter of fiscal 1999.
In May 1998, the company issued $4,000,000 in subordinated convertible
note to PLMC, LLC, which is owned by two directors (R.W. Christensen, Jr. and
Michael A. Price) and other unrelated parties. The note is due May 2003 and
bears interest at the rate of 10.5%. The note is convertible into 753,701 shares
of the Common Stock of the Company.
On July 22, 1998, the Company entered into a lease purchase/repurchase
agreement in the amount of $1.6 million with T & W Financial Services, Inc.
Director Michael A. Price is an
officer and director of T & W Financial. The agreement bears interest at 9.5%.
The assets were repurchased on August 12, 1998.
The Company has several sale/leaseback transactions with T & W
Financial Services, Inc. Director Michael A. Price is an officer and director of
T & W Financial. The sale/leasebacks bear interest at an average rate of 9.3%.
Payments are made monthly and the balance as of March 31, 1999 was $184,317
The Company has an account receivable of approximately $155,000 from
All Seasons Resorts. Mr. Christensen, a director and officer of the Company, is
the bankruptcy court-appointed Trustee of CASR Trust, a fund established by the
bankruptcy court for the benefit of the creditors of All Seasons Resorts. The
trustee is in the process of liquidating real estate for the creditors' benefit.
The Company expects to recover its receivable in full.
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and executive officers, and persons who own
more than 10% of the common stock, to file initial reports of ownership (Form 3)
and changes of ownership (Form 4) of Company common stock with the Securities
and Exchange Commission. Minor changes of ownership may be reported once
annually (Form 5). The Company is required to disclose in this proxy statement
any late filings of those reports made by its directors and executive officers
and greater than 10% stockholders during the fiscal year ended March 31, 1999.
Based solely upon the review of the copies of the forms furnished to the Company
and written representations that no such other reports are required, the Company
believes that during the fiscal year all executive officers and directors, and
greater than 10% stockholders timely filed all such required reports.
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE
COMPANY'S PREVIOUS FILINGS UNDER THE SECURITIES ACT OR THE EXCHANGE ACT THAT
MIGHT INCORPORATE FUTURE FILINGS, INCLUDING THIS PROXY STATEMENT IN WHOLE OR IN
PART, THE FOLLOWING STOCKHOLDER RETURN PERFORMANCE PRESENTATION SHALL NOT BE
INCORPORATED BY REFERENCE INTO ANY SUCH FILINGS.
STOCKHOLDER RETURN PERFORMANCE PRESENTATION
Set forth below is a line graph comparing the Company's cumulative
total stockholder return on its common stock with the return of the NASDAQ
Market Index and a peer group* constructed by the Company.
* For comparison purposes, the "Automobile Financial Services Sector" peer
group is composed of Aegis Consumer Funding Group; Consumer Portfolio Services;
CTL Credit, Inc.; Jayhawk Acceptance Corporation; MS Financial, Inc.; Olympic
Financial (Arcadia); Oxford Resources; and, WFS Financial, not all of which
concentrate on producing prime consumer financial instruments. CTL was acquired
by Bayview Bank, Inc. on 6-14-96. OXFD was acquired by Barnett Banks, Inc. on
1-15-97. MSFI was acquired by Search Capital on 8-1-97.
INDEPENDENT PUBLIC ACCOUNTANTS
On March 11, 1999, Westar dismissed the accounting firm of KPMG, LLP
("KPMG") and re-engaged the accounting firm of BDO Seidman LLP ("BDO") as
principal accountants for the year ended March 31, 1999.
During the one fiscal year audited by KPMG and the subsequent interim
period prior to March 11, 1999 there has been one disagreement with KPMG on one
matter of accounting principal, a reportable event and no disagreements on any
practices, financial statement, disclosure, or auditing scope or procedures.
Westar communicated the disagreement and reportable event to the Audit Committee
and the Board of Directors. Westar also authorized KPMG to respond fully to
inquiries of BDO concerning the matter. Westar's Audit Committee directed the
dismissal of KPMG and approved the re-engagement of BDO on March 11, 1999.
Because Westar had not demonstrated a history of profitability at March
31, 1998, KPMG made the judgement that the Company should establish a 100%
valuation allowance for its deferred tax asset. The Company discussed the
disagreement with KPMG on at least two occasion. The Company disagreed with
KPMG's judgement: with KPMG's use of a more restrictive than SEC guidelines for
determination of the need for an allowance; and, with KPMG's decision not to
weigh more heavily recent significant improvements in the Company's volumes,
operating margins and profits. The disagreement has been resolved to KPMG's
satisfaction and a 100% valuation allowance was recorded in for fiscal year
ended March 31, 1998.
In early 1996, a residual value insurance policy by an insurance
company to Westar was replaced with an assurance agreement for the same coverage
by a third party. The replacement agreement guaranteed the residual values for
leases booked in fiscal years 1996, 1997 and 1998. The leases were recorded as
direct financing leases. Prior audits of the related time periods were issued
with an unqualified opinion.
During fiscal 1998, KPMG requested copies of the residual value
insurance policy or the assurance agreement. Westar was advised by KPMG that the
lack of original, contemporaneous documentation available to support
management's accounting for leases was a deficiency in internal controls. Upon
receiving written confirmation from the third party the existence and terms of
the assurance agreement, KPMG concurred in the Company's classification of the
leases as direct finance leases. No internal control memorandum was prepared by
KPMG for the Company. The Company communicated the above to the Audit Committee
and the Board of Directors. The matter was raised in passing by KPMG in a
meeting with the Audit Committee. The Company had authorized KPMG to respond
fully to inquiries of BDO concerning the matter.
Neither BDO nor KPMG recommended any changes to Westar in regards to
the above matter. Westar has adopted an internal control providing for the
preparation of
contemporaneous memorandums of oral agreements.
KPMG's report on the consolidated financial statements for the last
fiscal year ended March 31, 1998 contained no adverse opinion or disclaimer of
opinion and was not qualified or modified as to uncertainty, audit scope or
accounting principles.
BDO's report on the consolidated financial statements for the previous
fiscal year ended March 31, 1997 and the current fiscal year ended March 31,
1999 contained no adverse opinion or disclaimer of opinion and was not qualified
or modified as to uncertainty, audit scope or accounting principles.
Westar requested from both BDO and KPMG a letter addressed to the
Securities and Exchange Commission (the "SEC") stating whether they agreed with
the above statements. Both letters were received and were included in the form
8K filing with the SEC.
PROPOSAL 1
ELECTION OF TWO DIRECTORS
The Board has nominated Mr. Joel I. Davis and Mr. Charles S. Seel to
each serve as a director of the Company for a three-year term ending March 31,
2002 and until the election and qualification of his successor. Management
believes that the proposed nominees for election as director are willing to
serve as such, and it is intended that the person named in the accompanying form
of proxy or their substitute will vote for the election of the nominees unless
specifically instructed to the contrary. However, if either nominee at the time
of the election is unable or unwilling to serve or is otherwise unavailable for
election and as a consequence another nominee is designated, the person named in
the proxy or his substitute shall have discretion or authority to vote or
refrain from voting in accordance with his judgment with respect to the other
nominees.
VOTE REQUIRED
The affirmative vote of a majority of the shares of common stock of the
Company represented (in person or by proxy) and entitled to vote at the Annual
Meeting is required to elect a director.
THE BOARD UNANIMOUSLY RECOMMENDS VOTING "FOR" THE TWO NOMINEES NAMED ABOVE,
AND YOUR PROXY WILL BE SO VOTED UNLESS YOU SPECIFY OTHERWISE.
TRANSACTION OF OTHER BUSINESS
At the date of this Proxy Statement, the only business which the Board
intends to present or knows that others will present at the meeting as set forth
above. If any other matter or matters are properly brought before the meeting,
or any adjournment thereof, it is the intention of the persons named in the
accompanying form of Proxy to vote the Proxy on such matters in accordance with
their best judgment.
STOCKHOLDER PROPOSALS
Any proposal which a stockholder wishes to have included in the proxy
solicitation materials to be used in connection with the next annual meeting of
stockholders of Westar must be received at the main office of Westar no later
than April 7, 2000. If such proposal is in compliance with all of the
requirements of Rule 14a-8 under the Exchange Act, it will be included in the
proxy statement and set forth on the form of proxy issued for the next annual
meeting of stockholders. It is urged that any such proposals be sent by
certified mail, return receipt requested.
ANNUAL REPORTS
This Proxy Statement includes the information and materials contained
within the 1999 Annual Report to Stockholders of Westar Financial Services
Incorporated. Any document or part thereof not delivered herewith, will be
provided without charge to each person, including any beneficial owner, to whom
the Proxy Statement is delivered, upon written request of such person directed
to Westar Financial Services Incorporated, Shareholder Relations Department,
P.O. Box 919, Olympia, Washington 98507.
SOLICITATION OF PROXIES FOR
WESTAR FINANCIAL SERVICES INCORPORATED,
A WASHINGTON CORPORATION
This Proxy is being solicited by Westar Financial Services Incorporated in
connection with the Proxy Statement. Capitalized terms used but not defined
herein have the meanings given to them in the Proxy Statement.
1999 ANNUAL MEETING
SEPTEMBER 27, 1999
9:00 A.M.
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Richard G. Phillips, Jr., proxy to represent the
undersigned, with full power of substitution, at the 1999 Annual Meeting of
Stockholders of Westar Financial Services Incorporated, to be held at 9:00 a.m.
on Monday, September 27, 1999, in the State Room, Cavanaughs at Capitol Lake,
2300 Evergreen Park Drive, Olympia, Washington and at any and all adjournments
thereof.
1. ELECTION OF DIRECTOR:
WITHHOLD
FOR AUTHORITY
(**) JOEL I. DAVIS for a three year term ending March 31, 2002
(**) CHARLES S. SEEL for a three year term ending March 31, 2002
2. OTHER MATTERS:
In his discretion, the Proxy is authorized to vote upon such other business that
may properly come before the meeting.
This Proxy, when properly executed, will be voted in the manner directed herein
by the undersigned stockholder. Unless otherwise specified, the shares will be
voted for Proposal 1.
Note: SIGNATURE(S) SHOULD AGREE WITH NAME(S) ON STOCK CERTIFICATE as printed on
the address label. Executors, administrators, trustees, and other fiduciaries
should so indicate when signing.
----------------------------------
Signature of Stockholder(s)
Dated: _____________________ Please DATE, SIGN, and RETURN this Proxy
Thank You.
______ I plan to attend the meeting in Olympia, Washington, at 9:00 a.m. on
September 27, 1999.
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