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EXHIBIT 1
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS FEES
Mr. Maher is the only director who is an employee of Great Western. See
"-- Employment Agreements" below for a description of Mr. Maher's employment
contract. Directors, other than Mr. Maher, are paid an annual retainer of
$25,000 for Board service to both Great Western and GWB and combined attendance
fees totalling $1,800 for each Great Western and GWB Board meeting attended.
Chairpersons of committees receive an attendance fee of $1,500 for presiding
over their committee meetings, vice chairs receive an attendance fee of $1,250
and committee members receive an attendance fee of $1,000. Additionally, each
chairperson of a committee receives an annual fee of $3,000, vice chairs receive
an annual fee of $1,500 and the secretary of the Audit and Finance Committee
receives an annual fee of $2,000. Directors are also offered insurance coverage
similar to that provided under the Company's health and dental plans and are
provided with travel and accident insurance coverage for travel to and from
Board and committee meetings at no cost to them. Mr. Maher is not paid any fees
or additional remuneration for his service as a member of the Board or any
committee, but he is eligible to receive benefits under the Directors'
Retirement Plan, described below. The amounts referred to above do not include
the economic benefit of preferential loans under the Company's Home Loan Program
described on pages 32 and 33.
CONSULTING AGREEMENT WITH MR. MONTGOMERY
Mr. Montgomery's consulting agreement with Great Western (the "Consulting
Agreement"), effective December 29, 1995 for an initial term of five years (the
"Consulting Period"), contemplates that Mr. Montgomery serve as Chairman of the
Board of Great Western through December 31, 1997, and thereafter upon election
by the Board (but he shall continue in any case to serve as a director of Great
Western and GWB during the Consulting Period). Pursuant to the terms of the
Consulting Agreement, during the Consulting Period, Mr. Montgomery will devote
substantial time and attention as required, but no less than half time (if and
to the extent requested), to promoting the business affairs and interests of
Great Western and its affiliates. In addition to his compensation as a director
(including non-employee director stock options under the Company's stock
incentive plans, and benefits under the Director's Retirement Plan described
below), Mr. Montgomery receives an annual consulting fee of $485,000. He is not
entitled to receive awards under any bonus plan or incentive plan for employees
of Great Western during the Consulting Period. The Consulting Agreement extends
Mr. Montgomery's outstanding $500,000 personal, unsecured loan maturity to
December 31, 1999 or, under certain circumstances, to the end of the Consulting
Period.
In connection with his retirement as Chief Executive of Great Western and
GWB, the Company granted to Mr. Montgomery a stock option (the "Special Option")
to purchase 300,000 Common Shares, which will generally become exercisable at
the rate of 25% per year commencing April 26, 1996, and, once exercisable, the
Special Option may be exercised at any time thereafter until the first to occur
of (i) April 24, 2005, (ii) termination for cause (as defined in the Consulting
Agreement), (iii) termination of the Consulting Agreement, or if it is deemed
terminated in accordance with its terms, two years after the Consulting
Agreement would have otherwise terminated (until the assumed date of
termination, the Special Option will continue to vest as provided therein), or
(iv) two years after a termination of all services (including services as a
Director) for any other reason (except that the Special Option will be
exercisable only to the extent exercisable on the date of a termination by
reason of death or disability (as defined in the Consulting Agreement) or a
termination of such services by Mr. Montgomery (other than a termination to
which clause (iii) applies)). During the term of the Consulting Agreement,
awards of restricted stock granted to Mr. Montgomery while he was an employee of
Great Western and GWB will continue to vest in accordance with the terms of the
related restricted stock award agreement and generally will vest in full on
December 31, 2000 if Mr. Montgomery has continued to provide services to Great
Western in accordance with the terms of the Consulting Agreement.
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Mr. Montgomery's payments under the Company's Supplemental Executive
Retirement Plan commenced on January 1, 1996, without any offset for benefits
payable under the Retirement Plan, which generally will not be payable until he
ceases to perform services for Great Western and GWB. The Consulting Agreement
provides that, in the event of his death, Mr. Montgomery's beneficiaries would
be entitled to a payment equal to 250% of Mr. Montgomery's then current annual
consulting fee, reduced by the amount of Company-provided life insurance
proceeds. Mr. Montgomery's beneficiaries would also be entitled to receive
continued payment of 50% of his then current annual consulting fee for a period
of 10 years, also reduced by life insurance proceeds. In addition, Mr.
Montgomery's family would be entitled to continuation of certain insurance
benefits for two years. Upon termination of the Consulting Agreement due to
disability, Mr. Montgomery would continue to receive, until the disability ends,
but no later than age 65, 50% of his then current annual consulting fee, less
benefits payable under the Company's long-term disability plan. He would also be
entitled to continuation of certain other benefits. In the event of a
termination without cause, or if Mr. Montgomery voluntarily terminates the
Consulting Agreement following a material breach by the Company, he will receive
his consulting fees at the current rate for what would have been the remainder
of the term of the Consulting Agreement absent such termination, and the Special
Option and awards of restricted stock previously granted to Mr. Montgomery would
continue to vest during the same period. In the event of a voluntary termination
of Mr. Montgomery's service following a material breach by the Company after a
Change in Control (as defined in the Consulting Agreement), all restricted
shares and that portion of the Special Option which is then unvested shall
immediately vest. In no event will payments to Mr. Montgomery which are
contingent upon a Change in Control under applicable tax rules ("parachute
payments") exceed limits specified by the Internal Revenue Code of 1986, as
amended (the "Code"), that currently approximate three times the average of his
compensation for the prior five years (the "Section 280G Limit").
Notwithstanding the foregoing, if the value of such aggregate entitlement
constituting parachute payments is less than the Section 280G Limit for any
reason (including that some or all of such entitlement does not constitute a
parachute payment), Mr. Montgomery is entitled to receive the Section 280G
Limit. A Change in Control occurs under the Consulting Agreement when anyone
acquires ownership of 25% or more of the Company's outstanding voting stock and
the directors of the Company immediately before such acquisition cease to
constitute five-sixths of the Board of Directors of the Company or any
successor. Under the terms of the Merger Agreement, consummation of the
Washington Mutual Merger will constitute a Change in Control for purposes of the
Consulting Agreement.
DIRECTORS' RETIREMENT PLAN
The Great Western Directors' Retirement Plan, as amended to date
("Directors' Retirement Plan"), provides retirement benefits to directors. Upon
termination of service on the Board, each eligible director is entitled to an
annual retirement benefit equal to the sum of the annual retainer paid to
members of the Board plus twelve times the monthly meeting fee, both as in
effect at the time of the director's termination. Benefits are payable for a
period equal to the number of years that the eligible director served as a
director. Such benefits will be provided to the surviving spouse or other
designated beneficiary following the death of an eligible director.
DIRECTOR STOCK OPTION PROGRAM
Upon adoption of the 1988 Stock Option and Incentive Plan, as amended to
date (the "1988 Stock Plan"), each non-employee director was granted
automatically, subject to stockholder approval of such Plan, a nonqualified
option under the 1988 Stock Plan's Non-Employee Director Program to purchase
2,500 Common Shares at the then fair market value of such shares. Each
non-employee who thereafter becomes a director is also automatically granted
such an option upon becoming a Director. Annually, each non-employee director
automatically is granted an option (an "Annual Option") to purchase 2,500 Common
Shares. No non-employee director may receive options to purchase more than 2,500
shares in any calendar year. The purchase price per Common Share covered by each
Annual Option, payable in cash and/or shares, is the fair market value of the
Common Shares on the date the option is granted. Annual Options become
exercisable in 50% installments on the first and second anniversary of their
grant, and, unless earlier terminated, terminate
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ten years after they are granted. The exercise prices of Annual Options granted
in 1995, 1996 and 1997 were $16.00, $26.125, and $28.75, respectively.
If a non-employee director's services as a Board member are terminated as a
result of death, disability or retirement after age 72, Annual Options will
become immediately exercisable in full and will remain exercisable for a period
of two years or until the expiration of the stated term of the option, whichever
period is shorter. If a non-employee director's services are terminated for any
other reason, any then exercisable portion of an Annual Option will be
exercisable for a period of three months or the balance of the option's term,
whichever period is shorter.
The 1988 Stock Plan provides for full vesting and exercisability of the
Annual Options in the event of a Change in Control of the Company. The term
"Change in Control" is defined in the 1988 Stock Plan as it is defined in Mr.
Maher's employment agreement (described on pages 21 and 22 of this Proxy
Statement). Under the terms of the Merger Agreement, consummation of the
Washington Mutual Merger will constitute a Change in Control for purposes of the
1988 Stock Plan.
EXECUTIVE OFFICERS
The following table and accompanying notes show for John F. Maher, Chief
Executive Officer, and the four next highest paid executive officers of the
Company as of December 31, 1996 (the "named Executive Officers"), the aggregate
indicated compensation paid by the Company and its subsidiaries to such persons
during the three fiscal years then ending.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION
--------------------------------------- ----------------------------
AWARDS PAYOUTS
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(A) (B) (C) (D) (E) (F) (G) (H)
OTHER
ANNUAL SECURITIES ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION UNDERLYING LTIP COMPENSATION
POSITION YEAR ($)(1) ($)(1) ($)(2) OPTIONS/SARS PAYOUTS($)(3) ($)(4)
- --------------------- ---- -------- -------- ------------ ------------ ------------- ------------
John F. Maher........ 1996 780,000 369,720 196,380 375,000 3,396,094 33,594
President and Chief 1995 650,000 303,225 165,505 0 -- 27,780
Executive Officer 1994 650,000 295,750 239,966 150,000 -- 27,638
Michael M. Pappas.... 1996 437,500 157,500 63,072 120,000 1,455,469 17,500
Vice Chairman and 1995 420,000 163,850 -- 0 -- 16,800
President, Consumer 1994 410,000 176,988 832 70,000 -- 16,400
Finance Division
A. William
Schenck III........ 1996 416,000 131,456 61,950 150,000 423,475 14,800
Vice Chairman 1995 399,996 153,500 45,178 0 -- 0
Carl F. Geuther...... 1996 385,000 121,660 89,022 130,000 1,164,375 15,400
Vice Chairman and 1995 372,000 129,018 70,035 0 -- 14,900
Chief Financial 1994 360,000 131,040 81,316 70,000 -- 14,400
Officer
J. Lance Erikson..... 1996 300,000 94,800 42,301 90,000 582,188 12,000
Executive Vice 1995 285,000 106,362 50,835 0 -- 11,400
President,
Secretary 1994 275,000 100,100 55,464 40,000 -- 11,000
and General Counsel
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(1) Amounts shown include cash compensation earned and received by executive
officers as well as amounts earned but deferred at the election of those
officers.
(2) Amounts shown include, when applicable, that portion of interest earned on
deferred compensation accounts above 120% of the applicable federal rate,
country club dues, personal use of corporate aircraft, the estimated
economic benefit of preferential loans made under the Home Loan Program
shown in the table on page 27 and described further at pages 32 and 33, and
the incremental cost to the Company of (a) Company provided automobiles; (b)
tax and financial planning advice by third parties; and
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(c) insurance which provides reimbursement for health and dental costs in
excess of the amount payable under the Company's group health and dental
plans. Perquisites in excess of 25% of the total perquisites reported in
column (e) for 1996 include the following: Mr. Maher: economic benefit of
personal use of aircraft -- $46,665; Mr. Pappas: economic benefit of company
automobiles -- $17,931, excess medical and dental coverage -- $19,189,
economic benefit of preferential loans -- $25,952; Mr. Schenck: economic
benefit of preferential loans -- $42,888; Mr. Geuther: economic benefit of
excess medical and dental coverage -- $28,661, economic benefit of
preferential loans -- $35,044; Mr. Erikson: economic benefit of preferential
loans -- $23,726.
(3) Mr. Schenck was awarded a total of 21,544 shares of performance-based
restricted stock in 1995. Such restricted shares generally vest in three to
ten years; vesting may be accelerated upon the occurrence of certain events,
including the achievement of performance goals, and all such restricted
shares vest immediately upon the occurrence of a Change in Control (as
described under the caption "EMPLOYEE BENEFIT PLANS -- Restricted Stock").
On January 23, 1996, shares of restricted stock held by the named Executive
Officers, valued at the then current market value of $23.375 per share,
vested as follows: Mr. Maher, 87,500 shares, valued at $2,045,313; Mr.
Pappas, 37,500 shares, valued at $876,563; Mr. Geuther, 30,000 shares,
valued at $701,250; and Mr. Erikson, 15,000 shares, valued at $350,625. On
February 1, 1996, 10,772 shares of restricted stock held by Mr. Schenck
vested, valued at $257,182 (based on the then current market value of
$23.875 per share). On December 9, 1996, shares of restricted stock held by
the named Executive Officers, valued at the then current market value of
$30.875 per share, vested as follows: Mr. Maher, 43,750 shares, valued at
$1,350,781; Mr. Pappas, 18,750 shares, valued at $578,906; Mr. Schenck,
5,386 shares, valued at $166,293; Mr. Geuther, 15,000 shares, valued at
$463,125; and Mr. Erikson, 7,500 shares, valued at $231,563. At year-end
1996, the named Executive Officers held shares of restricted stock, valued
at the then current market value of $29.00 per share, as follows: Mr. Maher,
43,750 shares, valued at $1,268,750; Mr. Pappas, 18,750 shares, valued at
$543,750; Mr. Schenck, 5,386 shares, valued at $156,194; Mr. Geuther, 15,000
shares, valued at $435,000; and Mr. Erikson, 7,500 shares, valued at
$217,500. Dividends are paid on restricted stock at the same rate payable to
common stockholders and are not reflected in the amount reported.
(4) The amounts shown in this column for 1996 consist of the following
respective amounts: (a) Mr. Maher: Employee Savings Incentive Plan and
related supplemental matches -- $31,200; Split Dollar Term Insurance
Premium -- $2,394; (b) Mr. Pappas: Employee Savings Incentive Plan and
related supplemental matches -- $17,500; (c) Mr. Schenck: Employee Savings
Incentive Plan and related supplemental matches -- $14,800; (d) Mr. Geuther:
Employee Savings Incentive Plan and related supplemental matches -- $14,476;
deferred compensation plan matches and makeups -- $924; (e) Mr. Erikson:
Employee Savings Incentive Plan and related supplemental matches -- $12,000.
EMPLOYMENT AGREEMENTS
Mr. Maher's employment agreement with Great Western, as amended to date,
provides for a rolling three-year term and provides for various benefits,
including a current annual salary of $860,000 which is subject to periodic
review and increase, but not decrease. The agreement provides for various
payments to Mr. Maher or his beneficiaries in the event of his death,
disability, or termination without "Cause" (as defined in the agreement),
including a death benefit payment to his beneficiaries equal to 250% of his then
current salary, reduced by the amount of company-provided life insurance
proceeds. Mr. Maher's beneficiaries would also be entitled to receive continued
payment of 50% of his then current salary until the time when he would have been
age 65 but in no event for a period less than ten years, as well as continuation
of certain insurance benefits for two years. Upon termination due to disability,
Mr. Maher would continue to receive, until death or his 65th birthday, whichever
occurs first, 50% of the sum of his current salary plus his average bonus over
the prior three years, less benefits payable under the Company's long-term
disability plan, and continuation of certain other benefits. In the event of a
termination without Cause, Mr. Maher would receive his current salary for the
remaining term of the agreement and a full or partial bonus payment for the year
of termination, without offset for subsequent employment. He would also be
entitled to continuation of certain other benefits for the same period, and a
pro-rata payment of long-term incentive benefits. In the event of a qualifying
termination following a Change in Control (or during the pendency of a Potential
Change in Control or during
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the 6-month period thereafter), Mr. Maher is entitled to a lump-sum severance
payment equal to three times the sum of his salary and target bonus; payment of
a pro-rata target bonus to the date of termination (if termination occurs in the
same year in which a Change in Control occurs, such payment will be offset by
amounts received under the Annual Incentive Compensation Plan for Executive
Officers in connection with such Change in Control); continuation of
welfare-type benefits for three years; immediate vesting of restricted shares
and stock options (where such qualifying termination occurs during the pendency
of a Potential Change in Control or during the 6-month period thereafter); and
credit for years of service and years of age equal to the remaining term of his
agreement for purposes of calculating his benefits under the Supplemental
Executive Retirement Plan. For purposes of Mr. Maher's employment agreement: (i)
a "Change in Control" is defined generally as (a) a change in the majority of
the Board, subject to certain exceptions; (b) any Person (as defined in the
agreement) becoming the beneficial owner of 25% or more of either the
outstanding Common Shares or the combined voting power of the Company's then
outstanding securities; (c) consummation of the sale of all or substantially all
of the assets of the Company; (d) consummation of a merger or consolidation of
the Company other than one immediately following which the Company's
stockholders continue to hold at least 75% of the combined voting power of the
voting securities of the Company or the surviving corporation or any parent
thereof (provided, that if a February 20, 1997 amendment to Mr. Maher's
agreement which raised the threshold percentage to 75% would prevent a
transaction intended to qualify as a "pooling of interests" from so qualifying,
such threshold percentage will be 60%); or (e) stockholder approval of the
liquidation or dissolution of the Company; and (ii) a "Potential Change in
Control" generally occurs upon (a) any Person becoming the beneficial owner of
15% or more of either the outstanding Common Shares or the combined voting power
of the Company's then outstanding securities; (b) the execution by the Company
of an agreement, or the public announcement by the Company or any Person of an
intention to take (or to consider taking) actions the consummation of which
would result in a Change in Control; (c) the filing with the FDIC or the Office
of Thrift Supervision of an application for Change in Control; or (d) the
Board's adoption of a resolution to the effect that a Potential Change in
Control has occurred. Mr. Maher's agreement provides that he may elect to
terminate his employment, without a material breach by the Company, and receive
the benefits described above during the period commencing no earlier than
eighteen months following a Change in Control and ending no later than the
second anniversary of such Change in Control; provided, that the eighteen-month
minimum period will not apply if, at any time during the first year following
such Change in Control, more than 50% of the non-employee members of the Board
as of the date immediately preceding the Change in Control are no longer members
of the Board; and provided further, that, if Mr. Maher elects to so terminate
his agreement, cash benefits which would become payable will be reduced by 25%.
In addition, the Company will pay any additional amount necessary to make Mr.
Maher whole with respect to any excise tax that may be assessed under Section
4999 of the Code, in respect of payments made to Mr. Maher under his employment
agreement and any other Great Western plan, agreement or arrangement in which
Mr. Maher participates. If all of the payments and benefits to which Mr. Maher
may become entitled in connection with a Change in Control are in the aggregate
less than the maximum amount he is entitled to receive without incurring a
liability under Section 4999 of the Code for any reason (including that some or
all of such entitlements do not constitute parachute payments), then he will be
entitled to receive such maximum amount. In the event of a good-faith dispute
regarding interpretation of the terms or enforcement of the provisions of his
employment agreement, Mr. Maher is entitled to recover reasonable attorney's
fees. Under the terms of the Merger Agreement, consummation of the Washington
Mutual Merger will constitute a Change in Control for purposes of Mr. Maher's
employment agreement.
Great Western has employment agreements with the other named Executive
Officers (and with Jaynie M. Studenmund and Ray W. Sims, the other executive
officers of Great Western that are not named Executive Officers), which have
initial terms of three years and provide for rolling two-year terms at the end
of the first contract year unless earlier terminated. The base annual salaries
for Messrs. Pappas, Schenck, Geuther, Erikson and Sims and Ms. Studenmund under
their employment agreements are $450,000, $450,000, $400,000, $315,000, $340,000
and $350,000, respectively, subject to periodic review and increase, but not
subject to decrease unless done in conjunction with a pro-rata salary reduction
applicable to all Great Western officers.
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The employment agreements, as amended to date, provide for various benefits
to each other executive officer or such officer's beneficiaries in the event of
death, disability, or termination without "Cause" (as defined in the agreements)
and in the event of a qualifying termination following a Change in Control or
during the pendency of a Potential Change in Control (or during the 6-month
period thereafter). In the event of the executive officer's death, his or her
beneficiaries would be entitled to payment of the executive officer's salary and
continuation of certain insurance benefits for one year. Upon termination due to
disability, the executive officer would receive 50% of the sum of his or her
current salary plus average bonus over the prior three years, less benefits
under the Company's long term disability plan, until the disability ends, but
not later than age 65 or for a period greater than ten years. In all other
respects, the terms of these agreements are substantially similar to those
contained in Mr. Maher's employment agreement, except that the agreements do not
provide the right to terminate the agreements without a material breach by the
Company during the period commencing eighteen months following a Change in
Control and ending twenty-four months following such Change in Control. Under
the terms of the Merger Agreement, consummation of the Washington Mutual Merger
will constitute a Change in Control for purposes of these employment agreements.
In December 1996, the Board adopted amendments to the employment agreements
with the executive officers which, among other things, revised the definition of
a Change in Control and provided for severance and other benefits to become
payable upon a qualifying termination of employment during the pendency of a
Potential Change in Control or during the 6-month period thereafter. In February
1997, the Board adopted an amendment to these agreements which further revised
the definition of a Change in Control, with the proviso that if such revision
would prevent a transaction intended to qualify as a pooling of interests from
so qualifying, such amendment would have no force and effect. The definition of
a Change in Control, as amended, and the provision of certain benefits as
described above, are as set forth in the description of Mr. Maher's employment
agreement.
The following Report of the Compensation Committee and the Performance
Graph included in this Proxy Statement shall not be deemed to be incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934, except to the extent the Company specifically incorporates
this Report or the Performance Graph by reference therein, and shall not be
deemed soliciting material or otherwise deemed filed under either of such Acts.
REPORT OF THE COMPENSATION COMMITTEE
Since 1989, the Company has retained the services of Strategic Compensation
Associates ("SCA"), a nationally known consulting firm specializing in executive
compensation issues, to assist the Compensation Committee (the "Committee") in
connection with the performance of its various responsibilities. SCA advises the
Committee with respect to the reasonableness and appropriateness of compensation
for the Company's Executive Officers. In doing so, the firm prepares and reviews
with the Compensation Committee various materials reflecting the compensation
practices of a peer group consisting primarily of major regional commercial
banks and other factors which SCA and the Compensation Committee consider
relevant.
In determining the compensation levels for all executive officers, it has
been the policy and practice of the Committee to consider the advice of SCA, the
contributions of individual executive officers, the performance and prospects of
the Company over time, and the desirability of attracting and retaining a highly
capable and experienced executive management group. All of the executive
officers have employment agreements with the Company as described on pages 21
and 22.
It is the Company's policy to place an increasingly significant percentage
of total executive compensation "at risk," principally through the award of
annual cash bonuses based on performance. Consistent with this policy, annual
salary increases are limited, resulting in total compensation for executive
officers as a group, excluding bonuses, at approximately the 50th percentile for
companies included in the compensation analysis. The executive officers have an
opportunity to significantly increase their compensation through bonuses and
stock option awards if performance targets set by the Committee are achieved.
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As the chief executive officer, Mr. Maher's compensation and related
benefits are based principally on his rights under an employment agreement with
the Company. For 1996, the Compensation Committee set Mr. Maher's salary, target
bonus opportunity and total direct pay, which includes the economic value of
stock option awards based on the Black-Scholes Option Pricing Model, in relation
to compensation levels for chief executive officers in the peer group. Over
time, the Committee believes it appropriate to provide total direct pay to the
chief executive officer at a level between the 60th and 75th percentile for
chief executive officers in the peer group. Because of Mr. Maher's recent
promotion to this position, however, he was compensated substantially below the
target level for 1996. Mr. Maher's cash compensation for 1996 was also directly
related to the Company's earnings per share because, as described in the
succeeding paragraph, his cash bonus opportunity under the Company's Annual
Incentive Compensation Plan for Executive Officers (the "Annual Plan") is
dependent upon the attainment of earnings per share targets established by the
Compensation Committee.
Under the terms of the Annual Plan approved by stockholders in 1994, a
substantial part of an executive's cash compensation is contingent upon the
achievement of the Company's performance goals set by the Compensation
Committee. The performance goal for the executive officers, other than the
President of the Consumer Finance Division, is a targeted earnings per share as
established on an annual basis by the Compensation Committee. For the President
of the Consumer Finance Division, the performance goal is based upon the
attainment of an earnings before taxes goal for the Consumer Finance Division
established annually by the Committee and the attainment of the earnings per
share target applicable to the other executive officers. The target goals are
established annually by the Compensation Committee on or before the applicable
deadline under the federal income tax rules. In fiscal year 1996, targeted
levels of incentive compensation were 40% of adjusted base salary for the
Company's Vice Chairmen, Executive Vice Presidents and the President of the
Consumer Finance Division, and 60% of adjusted base salary for the Chief
Executive. Depending upon the degree of attainment of the performance goals, the
executive's compensation is supplemented by fiscal year-end cash bonus payments
equal to as little as 0% or as much as 200% of the executive officer's
respective targeted level of incentive compensation. For 1996, the Committee
approved an earnings per share goal and, based on the Company's reported
earnings per share of $2.09, after adjustment in accordance with the Plan
provisions to account for non-recurring events, the executive officers, other
than the President of the Consumer Finance Division, were entitled to receive
79% of their respective targeted levels of incentive compensation. The 1996
earnings before taxes goal for the Consumer Finance Division was $102.2 million,
and $98.7 million was reported. Based upon the Company's reported earnings per
share and the reported earnings before taxes of the Consumer Finance Division,
the President of the Consumer Finance Division received 90% of his targeted
level of incentive compensation. Based on the competitive compensation analysis
provided by SCA, the Company believes that the level of the Company's aggregate
salary and bonus compensation and total compensation in 1996 for the executive
officers as a group was at approximately the 40th percentile for companies
included in the compensation analysis.
In 1996, the Compensation Committee adopted stock ownership guidelines for
the Company's executive and senior officers requiring certain levels of
ownership of the Common Shares by the end of a five year period, except for
recently hired officers, for whom the period is seven years. The guidelines
provide for ownership of the Company's Common Shares by the Chief Executive in
an amount equal to five times his salary, ownership by the Vice Chairmen and
Executive Vice Presidents in amounts equal to three times their salaries, and
ownership by senior officers in amounts equal to one or two times their
salaries. Recent stock option grants for the Company's executive and senior
officers also provide that so long as may be necessary to comply with stock
ownership guidelines, the officers will retain upon exercise of stock options at
least one-half of the net number of shares received on exercise.
In 1992, following a comprehensive study of long term incentive programs
and recommendations made by SCA, the Compensation Committee approved performance
based restricted stock awards under the Company's 1988 Stock Plan for the
Company's senior and executive officers to provide long-term incentive awards in
amounts comparable to those awarded to executives of the companies included in
the SCA compensation analysis. Shares awarded under the program are subject to
forfeiture in certain circumstances and do not vest for ten years unless vesting
is accelerated by the Company's exceeding the median total
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stockholder return of other major financial institutions over rolling three year
performance cycles. See the description of the restricted stock on pages 29 and
30. In 1996, 75% of the original awards vested based on the Company's
stockholder return.
In addition, the Committee approved year-end stock option grants for the
named Executive Officers under the 1988 Stock Plan. In deciding the number of
Common Shares to award each executive officer, the Committee considered the
officer's performance during 1996, and their individual contribution toward
reaching the Company's goals, their overall level of compensation in comparison
to their peers, both within the Company and among the companies included in the
SCA compensation analysis. The options awarded during the last fiscal year to
each named Executive Officer are set forth in the table on page 28.
To the extent readily determinable and as one of the factors in its
consideration of compensation matters, the Compensation Committee considers the
anticipated tax treatment to the Company and to the executives of various
compensation. Some types of compensation and their deductibility depend upon the
timing of an executive's vesting or exercise of previously granted rights.
Further, interpretations of and changes in the tax laws also affect the
deductibility of compensation. To the extent reasonably practicable and to the
extent it is within the Committee's control, the Compensation Committee intends
to limit executive compensation in ordinary circumstances to that deductible
under Section 162(m) of the Code. In doing so, the Committee may utilize
alternatives (such as deferring compensation) to qualify executive compensation
for deductibility and may rely on grandfathering provisions with respect to
existing contractual commitments.
Compensation Committee of the Board
of Directors, Great Western
Financial Corporation
Willis B. Wood, Jr., Chairman
H. Frederick Christie
Stephen E. Frank
John V. Giovenco
Enrique Hernandez, Jr.
Charles D. Miller
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
LOAN TRANSACTIONS
The following table shows as to certain of the Company's executive officers
and directors: (i) the largest aggregate amount of indebtedness to the Company
in excess of $60,000 outstanding from January 1, 1996 to March 31, 1997; (ii)
the nature of the indebtedness; (iii) the outstanding balance of the
indebtedness on March 31, 1997; and (iv) the annual rate of interest charged on
the indebtedness. Information concerning the indebtedness to the Company by
members of the Compensation Committee of the Board of Directors is given under
the caption "ELECTION OF DIRECTORS -- Compensation Committee Interlocks and
Insider Participation" on page 15.
INDEBTEDNESS
OUTSTANDING
LARGEST AT
NAME OF EXECUTIVE AGGREGATE NATURE OF MARCH 31, INTEREST
OFFICER OR DIRECTOR INDEBTEDNESS($) INDEBTEDNESS(1) 1997($) RATE(%)(2)
- -------------------------------------------- --------------- --------------- ------------ ----------
David Alexander............................. 249,485 Residential 240,829 4.71
J. Lance Erikson............................ 787,500 Residential 782,598 4.81
222,098 Residential 215,340 4.71
Carl F. Geuther............................. 156,154 Residential 150,763 4.71
1,335,074 Residential 1,304,735 4.71
John F. Maher............................... 417,003 Residential 403,012 4.71
751,391 Residential 726,200 4.71
James F. Montgomery......................... 958,390 Residential 0
1,498,197 Residential 1,467,615 4.81
690,000 Residential 683,058 4.81
500,000 Unsecured 500,000 8.50
Michael M. Pappas........................... 900,000 Residential 893,330 4.81
204,347 Residential 198,323 4.71
A. William Schenck III...................... 613,000 Residential 600,502 4.81
1,212,000 Residential 1,188,638 4.81
- ---------------
(1) Loans secured by the same residence are aggregated.
(2) Interest on these loans, except for Mr. Montgomery's prime rate unsecured
loan, is generally at monthly adjustable rates equal to the Company's cost
of funds plus .25%. This rate was approximately 2.22% to 2.42% below that on
similar loans to the public during 1996.
The residential loans described above were made pursuant to the Company's
Home Loan Program described on pages 32 and 33 and are secured by trust deeds or
mortgages on the respective residences of the named Directors and Executive
Officers.
Interest on Mr. Montgomery's unsecured, personal loan is payable annually
and the entire principal amount is payable on December 31, 1999 or, under
certain circumstances, at the end of the Consulting Period on December 31, 2000.
From time to time, directors, executive officers, members of their
immediate families and entities with which such persons are known by Great
Western or GWB to be affiliated or associated may obtain "margin" loans from a
subsidiary of Great Western, obtain secured and unsecured loans from GWB, place
interest bearing deposits with GWB, maintain checking accounts with GWB and
avail themselves of check guarantee and overdraft features allowed on these
accounts, all in accordance with applicable law. The transactions described in
this paragraph are all in the ordinary course of Great Western or GWB's business
and are made on terms substantially the same, including interest rate (which in
the case of all Great Western and GWB employees may, with respect to certain
types of loans, include a slight discount) and collateral, as those
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prevailing at the time for comparable transactions with other unaffiliated
persons and do not involve more than the normal risk of collectibility or
present other unfavorable features.
EMPLOYEE BENEFIT PLANS
The material which follows in this section describes certain provisions
made by the Company and its subsidiaries pursuant to certain stock option,
restricted stock, deferred compensation, employee savings, pension or other
incentive plans now in effect, that provide for severance, termination or Change
in Control benefits to the named Executive Officers, other than group life and
accident insurance, group hospitalization and similar group payments and
benefits.
STOCK BENEFIT PLANS
The 1988 Stock Plan provides for various types of stock incentives,
including stock options, restricted shares, bonus stock and performance shares.
The only awards granted to date under the 1988 Stock Plan have been stock
options and restricted stock (with performance vesting features). With respect
to options granted under the 1988 Stock Plan, the Administrator may, with the
consent of a holder, substitute awards or modify the terms and conditions of any
outstanding award to extend the exercisability and term (subject to the maximum
term limits), reduce the price, accelerate exercisability or vesting or preserve
benefits of the award. The 1988 Stock Plan provides for automatic acceleration
of the exercisability of awards and accelerated vesting of awards upon a Change
in Control or upon a qualifying termination of employment during the pendency of
a Potential Change in Control (or during the six-month period thereafter). Under
the 1988 Stock Plan, the terms "Change in Control" and "Potential Change in
Control" are defined as they are in Mr. Maher's employment agreement. Under the
terms of the Merger Agreement, consummation of the Washington Mutual Merger will
constitute a Change in Control for purposes of the 1988 Stock Plan.
OPTIONS
There were no grants of SARs to the named Executive Officers in 1996 and
the following market priced stock options were granted to the named Executive
Officers in 1996 based in part on performance in 1995 and 1996 (the first number
in each column represents the award for 1995 performance and the second number
represents the award for 1996 performance):
OPTION GRANTS IN LAST FISCAL YEAR
(A) (B) (C) (D) (E) (F)
- ------------------------------- --------------- ------------ -------------- --------------- -----------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING GRANTED TO GRANT DATE
OPTIONS GRANTED EMPLOYEES IN EXERCISE PRICE PRESENT
NAME (#)(1) FISCAL YEAR ($/SHARE)(2) EXPIRATION DATE VALUE($)(3)
- ------------------------------- --------------- ------------ -------------- --------------- -----------
John F. Maher.................. 175,000 4.58 23.375 01/23/06 $ 971,250
200,000 5.23 30.875 12/09/06 $ 1,334,000
Michael M. Pappas.............. 70,000 1.83 23.375 01/23/06 $ 388,500
50,000 1.31 30.875 12/09/06 $ 333,500
A. William Schenck III......... 70,000 1.83 23.375 01/23/06 $ 388,500
80,000 2.09 30.875 12/09/06 $ 533,600
Carl F. Geuther................ 60,000 1.57 23.375 01/23/06 $ 333,000
70,000 1.83 30.875 12/09/06 $ 466,900
J. Lance Erikson............... 40,000 1.05 23.375 01/23/06 $ 222,000
50,000 1.31 30.875 12/09/06 $ 333,500
- ---------------
(1) These options vest and become exercisable in 25% installments on each of the
first four anniversaries of their grant, subject to acceleration in certain
circumstances such as a Change in Control. The options
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have a 10-year term, subject to earlier termination in certain circumstances
related to termination of employment. The instrument setting forth the terms
of the option may provide that the exercise price of the option may be
satisfied by delivery of previously owned shares or by the withholding of
shares having a fair market value at the date of exercise equal to such
exercise price. At the election of the optionee, the Company's tax
withholding obligation with respect to the exercise of the option may also
be satisfied by the withholding of shares having a fair market value at the
date of exercise equal to such obligation.
(2) All stock options were granted at the fair market value on the date of
grant.
(3) The shares were valued based on the Black-Scholes option pricing model
adapted for use in valuing executive stock options using the following
assumptions for the January 23, 1996 grant: the 52 week average stock price
of $19.82, three year historical average stock price volatility of .2288, a
three year historical average dividend yield of 3.63%, a risk-free rate
equal to the 52 week average of ten-year Treasury Bonds of 6.60% and an
option term of 10 years. The shares granted on December 9, 1996, were valued
based on the Black-Scholes option pricing model adapted for use valuing
executive stock options using the following assumptions: the 52 week average
stock price of $24.37, three year historical average stock price volatility
of .2319, a three year historical average dividend yield of 3.69%, a risk
free rate equal to the 52 week average of ten year Treasury Bonds of 6.53%
and an option term of 10 years. The valuation method is hypothetical.
The following table shows for each of the named Executive Officers the
shares acquired on exercise of options during 1996, the difference between the
exercise price and the market value of the underlying shares on the date of
exercise, and (as to outstanding options at December 31, 1996) the number of
unexercised options and the aggregate unrealized appreciation on "in-the-money,"
unexercised options held at such date:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
(A) (B) (C) (D) (E)
- ------------------------------------- --------- -------- -------------------- --------------------
NUMBER OF SECURITIES VALUE OF
SHARES UNDERLYING UNEXERCISED
ACQUIRED UNEXERCISED IN-THE-MONEY
ON OPTIONS AT FY-END OPTIONS AT FY-END
EXERCISE VALUE (#) EXERCISABLE/ EXERCISABLE/
NAME (#) REALIZED UNEXERCISABLE(1) UNEXERCISABLE(2)
- ------------------------------------- --------- -------- -------------------- --------------------
John F. Maher........................ 62,500 $433,241 358,542/450,000 $4,967,373/1,912,500
Michael M. Pappas.................... 50,000 $485,688 155,000/155,000 2,149,375/826,875
A. William Schenck III............... 0 0 32,262/246,786 245,998/1,131,743
Carl F. Geuther...................... 35,000 $252,125 171,000/165,000 2,381,625/770,625
J. Lance Erikson..................... 25,000 $139,767 89,010/110,000 122,604/472,500
- ---------------
(1) The numbers shown in column (d) include all unexercised options held by the
named Executive Officers, 1,482,600 of which were "in the money." None of
the named Executive Officers holds any outstanding SARs.
(2) All values are based solely on the market value of the Common Shares at the
end of 1996, minus the exercise price of "in the money" options.
RESTRICTED STOCK
In January 1992, the Administrator first authorized awards of
performance-based restricted stock under the 1988 Stock Plan and established the
specific vesting provisions for such awards as described below. If the recipient
remained with the Company, the shares would vest completely 10 years after the
award date. Prior to that, they were subject to both accelerated vesting and
risk of forfeiture to the Company, in whole or in part, upon certain events. The
vesting was and is accelerated if and to the extent that the Company's common
stock performance, as measured by appreciation, dividends and other
distributions ("stockholder return"), over three-year performance cycles,
representing the three-year period ending December 31, 1995 and periodically
thereafter, exceeded and exceeds by specified amounts the stockholder return
(subject to certain adjustments)
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on common stocks of other designated banks, savings associations or related
holding companies (the "Peer Group"). If the Company's percentile ranking
relative to the Peer Group for the applicable three-year period equals or
exceeds the 50th percentile, the remaining performance-based restricted shares
vest in amounts ranging from 25% to 100% of the original award. Seventy-five
percent of the original awards vested in 1996, based on the Company's
stockholder return. The remainder will continue to vest under the terms of the
related agreement and a portion of the remaining award will vest in the event of
death or disability of the holder, at the rate of 20% per year. Vesting of these
awards may be accelerated in certain other circumstances, including upon a
Change in Control, or in the case of a qualifying termination of employment
during the pendency of a Potential Change in Control (or during the six-month
period thereafter) or upon retirement. Except as noted above, the unvested
performance-based restricted shares generally will be forfeited upon a
termination of employment (or, in Mr. Montgomery's case, termination of service
as a consultant and a director). The performance-based restricted shares are
registered to the recipient subject to transfer and forfeiture restrictions, but
are held by the Company until such restrictions lapse. The recipients are
entitled to dividends and have voting rights on these performance-based
restricted shares prior to the time the restrictions lapse. Under the terms of
the Merger Agreement, consummation of the Washington Mutual Merger will
constitute a Change in Control for purposes of the 1988 Stock Plan.
No awards of performance-based restricted stock or other long-term
incentive awards were granted to the named Executive Officers in 1996.
DEFERRED COMPENSATION PLANS
Under the Great Western deferred compensation plans, as amended to date,
participants are entitled to defer compensation until retirement, death, other
termination of employment or service, or until specified dates. Participants
receive a fixed rate yield based on the average annual interest rate of ten-year
United States Treasury Notes for the previous ten years. An enhanced yield of up
to 125% of the fixed rate yield will be payable in the event of death, under
certain circumstances upon retirement after age 55, and upon termination of
employment after plan participation for a specified number of years. The plans
also provide for Company matching contributions on deferred compensation similar
to that provided under the Employee Savings Incentive Plan described below. The
Senior Officers' Deferred Compensation Plan supplements benefits payable to
Executive Officers participating in the Employee Savings Incentive Plan (the
"Savings Plan") to the extent that Savings Plan benefits are reduced under
applicable Code limitations. The deferred compensation plans provide for full
vesting of employer matching contributions upon a Change in Control or upon a
qualifying termination of employment during the pendency of a Potential Change
in Control (or during the six-month period thereafter). (Under the deferred
compensation plans, the terms "Change in Control" and "Potential Change in
Control" are defined as they are in Mr. Maher's employment agreement.) The plans
also permit participants to make an advance irrevocable election to receive a
cash lump sum payment of their account balance within 45 days after a Change in
Control, and to elect within two years after a Change in Control to withdraw
their account balance in a lump sum with a 5% penalty; if a participant's
employment or service has terminated because of Retirement (as defined in the
plans) at the time of such election, such participant is entitled to the
enhanced yield on his or her account. During the pendency of a Potential Change
in Control, and for six months thereafter, and for a period of two years
following a Change in Control, the plans may not be terminated, nor may they be
adversely amended without the consent of two-thirds of the participants. Mr.
Montgomery's Consulting Agreement and Mr. Maher's employment agreement, however,
provide for the preservation of previously elected deferrals and payment options
in the event of a Change in Control. The plans also provide for pension benefits
based on deferred compensation similar to those provided under the Company's
Retirement Plan (described below). Under the terms of the Merger Agreement,
consummation of the Washington Mutual Merger will constitute a Change in Control
for purposes of the deferred compensation plans.
EMPLOYEE SAVINGS INCENTIVE PLAN
Under the Savings Plan, eligible employees may authorize payroll deductions
for contributions which, at the participant's direction, may be invested in
money market, equity, debt, balanced and Company stock
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funds. Under the Savings Plan, employee contributions are matched by the Company
in an amount equal to 50% of such contribution up to a maximum contribution of
6% of the employee's base salary, including overtime. The Board of Directors may
authorize annually an additional contribution in an amount not to exceed the
Company's mandatory contribution. Matching contributions vest at the rate of 30%
for each of the first two years of participation in the Savings Plan and the
remaining 40% vests in the third year of participation. Certain participant
borrowings against vested benefits are permitted under the Savings Plan.
RETIREMENT PLAN
The Retirement Plan is a non-contributory group pension plan providing for
monthly benefits in the event of retirement or, at the election of the
participant, a cash balance at retirement or termination of employment. On
January 1, 1997, the Company converted the Retirement Plan to a cash balance
plan based upon the results of extensive research regarding employee
demographics and competitive practices among the Company's peers. Benefits under
the Retirement Plan depend on factors such as length of service, average monthly
wage base and certain Social Security benefits. Employees over age 21 are
eligible to participate after one year of service. Contributions to the plan
trust are made by the Company on an actuarial basis and in an amount to obtain
the maximum federal income tax deduction. Accrued benefits vest fully after five
years of participation and employees may elect to take the value of their
account as a lump sum payment if they terminate their employment with the
Company. Forfeitures of non-vested benefits are applied to reduce the Company's
contributions.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The Supplemental Executive Retirement Plan, as amended to date (the
"SERP"), provides a target retirement benefit at the participant's Normal
Retirement Date (defined under the SERP as following the later to occur of the
attainment of age 60 or 20 years of service for Mr. Maher and the later to occur
of the attainment of age 62 or 25 years of service for the other named Executive
Officers) equal to a percentage of average salary and bonus (65% for Mr. Maher
and 60% for the other named Executive Officers). The SERP provides that Mr.
Schenck will be credited for service with a previous employer. Under the terms
of the SERP, upon a qualifying termination of employment within the two-year
period following a Change in Control (or during the pendency of a Potential
Change in Control or during the six-month period thereafter), the named
Executive Officers will become entitled to receive retirement benefits with no
reduction for early retirement. (Under the SERP, the terms "Change in Control"
and "Potential Change in Control" are defined as they are in Mr. Maher's
employment agreement.) In addition, the SERP provides that during the pendency
of a Potential Change in Control, and for six months thereafter, and for a
period of two years following a Change in Control, the SERP may not be
terminated, nor may it be adversely amended without the approval of two-thirds
of SERP participants. The SERP also provides the participants with retirement
benefits that would otherwise exceed the annual limit on such benefits imposed
by the Code. Under the terms of the Merger Agreement, consummation of the
Washington Mutual Merger will constitute a Change in Control for purposes of the
SERP.
PENSION TABLES
The amounts shown in the summary compensation table do not include any
amounts expensed by the Company under the Company's Retirement Plan or under the
SERP, both of which are defined benefit plans, since the amount of the accruals
thereunder were not determined on an individual basis by the actuaries for
either of the plans during 1996. The following table illustrates the total
annual retirement benefits which would be provided under the benefit formula
described in the Retirement Plan and SERP to the named Executive Officers (other
than Mr. Maher) in various earnings classifications upon normal retirement in
1996. The benefit formula presently in both plans provides for an offset of
certain Social Security benefits, and
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Mr. Schenck's benefits under the SERP will be offset by benefits payable under
retirement plans of a previous employer. The amounts shown in the following
table do not reflect these offsets.
YEARS OF CREDITED SERVICE
--------------------------------
AVERAGE PAY FOR 15 25 YEARS
RETIREMENT PLAN PURPOSES YEARS 20 YEARS OR MORE
------------------------------------------------------ -------- -------- --------
$350,000.............................................. 126,000 168,000 210,000
$400,000.............................................. 144,000 192,000 240,000
$500,000.............................................. 180,000 240,000 300,000
$600,000.............................................. 216,000 288,000 360,000
$700,000.............................................. 252,000 336,000 420,000
$800,000.............................................. 288,000 384,000 480,000
The following table illustrates the total annual retirement benefits which
would be provided under both plans to Mr. Maher. The table below does not
include the amount of the annual benefit ($46,600 based on present Directors'
fees) that will be payable to Mr. Maher under the Directors' Retirement Plan.
AVERAGE PAY FOR YEARS OF CREDITED SERVICE
RETIREMENT PLAN PURPOSES 20 YEARS OR MORE
-------------------------------------------------------------- -------------------------
$1,400,000.................................................... 910,000
$1,600,000.................................................... 1,040,000
$1,800,000.................................................... 1,170,000
Except as noted in the immediately succeeding sentence, the compensation
covered by the benefit formula under the combined retirement plans is salary and
bonus compensation (reduced by Social Security benefits), which is reported for
the past three fiscal years in columns (c) and (d) in the summary compensation
table on page 20. Mr. Maher's employment agreement provides that, for purposes
of calculating his benefits under the SERP, the following levels of compensation
will be assumed: on any date in 1997, SERP benefits will be based on annual
compensation of $1,462,000; on any date in 1998, SERP benefits will be based on
actual compensation for 1997; on any date in 1999, SERP benefits will be based
on the average actual compensation for 1997 and 1998; and for any date after
1999, SERP benefits will be based on the definition of "average monthly
compensation" set forth in the SERP. The named Executive Officers have the
following number of years of credited service: Mr. Maher, 23 years; Mr. Pappas,
42 years; Mr. Schenck, 28 years; Mr. Geuther, 22 years; and Mr. Erikson, 28
years.
UMBRELLA TRUSTS
The Board has authorized the establishment of two separate Umbrella Trusts
(the "Trusts") as a security arrangement for some or all of the participants in
the Company's SERP, Retirement Restoration Plan, Director's Retirement Plan,
supplemental retirement benefit for Mr. Gryp, the employment agreements with the
executive officers, the consulting agreement with Mr. Montgomery and the
deferred compensation plans (collectively, the "Plans").
The Trusts, as amended to date, provide for the full funding of benefits
provided through the Trusts upon a Potential Change in Control, subject to
return following the expiration of the Potential Change in Control Period
(generally defined in the Trusts as six months following the date on which such
Potential Change in Control ceases to exist, if no Change in Control has
occurred during such period). (Under the Trusts, the terms "Change in Control"
and "Potential Change in Control" are defined as they are in Mr. Maher's
employment agreement.) In addition, the Trusts provide that within 30 days
following the end of each year following a Change in Control, the Company shall
be required to contribute to the Trusts the amount, when added to the assets in
the Trusts, needed to provide the benefits under the Plans. Following a Change
in Control or during the pendency of a Potential Change in Control (and for 6
months thereafter), the amended Trusts may not be adversely amended without the
consent of two-thirds of the participants in the Plans.
Under the terms of the Trusts, the Trustee shall hold the trust assets for
the benefit of the participants in the Plans unless the Company is unable to pay
its debts as they become due or the Company is the subject of a
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pending proceeding as a debtor under the federal Bankruptcy Code. If either of
those events occurs, the Trustee shall hold the trust assets for the benefit of
the general creditors of the Company, which may include participants in the
Plans. For purposes of the Trusts, a Potential Change in Control has occurred.
HOME LOAN PROGRAM
The Company has a Home Loan Program (the "Program") permitting secured
loans to employees, officers and Directors at adjustable rates beginning at .25%
over the Company's cost of funds. Loans under the Program may be made to finance
the employee participant's principal residence and generally must be secured by
a first trust deed or mortgage on such residence. Executive officers and
directors may obtain loans from Great Western for a primary residence in amounts
up to 90% of the first $1,000,000 of appraised value and 80% of the excess
appraised value. Executive officers and directors may also obtain loans for
secondary residences in amounts up to 90% of the first $500,000 in appraised
value, 80% of the next $500,000 in appraised value and 70% of the excess
appraised value. Loans granted under the Program to executive officers and
directors are reviewed and approved by the Board of Directors. See "ELECTION OF
DIRECTORS -- Compensation Committee Interlocks and Insider Participation" and
"CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS" for information regarding
loans to directors and executive officers of the Company. Program participants
are disqualified from further participation after certain terminations of
employment or service, however, the Program, as amended to date, provides all
participants with protection from adverse amendments to the terms of existing
loans or suspension of the Program following a Change in Control, protection
against disqualification from participation following a termination without
cause or a reduction in hours to less than 20 1/2 per week following a Change in
Control, and protection against disqualification from participation following a
termination during the pendency of a Potential Change in Control (or during the
six-month period thereafter). Under the Program, the terms "Change in Control"
and "Potential Change in Control" are defined as they are in Mr. Maher's
employment agreement. Under the terms of the Merger Agreement, consummation of
the Washington Mutual Merger will constitute a Change in Control for purposes of
the Program. The Company does not expect to approve any additional loans under
the Program pending consummation of the Washington Mutual Merger.
[LEFT BLANK INTENTIONALLY]
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