This document is important and requires your immediate attention. If you are in doubt as to how to deal with it, you should consult your investment dealer, broker, lawyer or other professional advisor. This document does not constitute an offer or a solicitation to, nor will deposits be accepted from or on behalf of, any person in any jurisdiction in which such offer or solicitation is unlawful. The Offers have not been approved by any securities regulatory authority nor has any securities regulatory authority passed upon the fairness or merits of the Offers, or upon the adequacy of the information contained in this document. Any representation to the contrary is an offence. January 21, 2011 DESJARDINS FINANCIAL CORPORATION INC. (a member of the Desjardins Financial Group) OFFERS TO PURCHASE all of the issued and outstanding Common Shares and all of the issued and outstanding First Preferred Shares, Series Three and all of the issued and outstanding First Preferred Shares, Series Four of WESTERN FINANCIAL GROUP INC. on the basis of $4.15 in cash for each Common Share and $100 in cash for each First Preferred Share, Series Three and $100 in cash for each First Preferred Share, Series Four Desjardins Financial Corporation Inc. (the Offeror ) hereby offers (the Offers ) to purchase, upon the terms and subject to the conditions described herein: (i) at a price of $4.15 in cash per share, all of the issued and outstanding common shares, together with the associated rights (the SRP Rights ) outstanding under the Shareholders Rights Plan (such common shares together with the SRP Rights, the Common Shares ) of Western Financial Group Inc. ( Western ), including the Common Shares that may become issued and outstanding after the date of the Offers and prior to the Expiry Time (as defined below) upon the exercise or conversion, as the case may be, of Convertible Securities (as defined herein) (the Common Share Offer ), (ii) at a price of $100 in cash per share, all of the issued and outstanding First Preferred Shares, Series 3 (the Series 3 Shares ) of Western (the Series 3 Share Offer ), and (iii) at a price of $100 in cash per share, all of the issued and outstanding First Preferred Shares, Series 4 (the Series 4 Shares and, together with the Common Shares and the Series 3 Shares, the Shares ) of Western (the Series 4 Share Offer ). The board of directors of Western, following consultation with its financial and legal advisors, has unanimously determined that the Common Share Offer is in the best interest of Western and the holders of Common Shares (the Common Shareholders ) and, accordingly, has unanimously recommended that Common Shareholders ACCEPT the Common Share Offer and TENDER their Common Shares to the Common Share Offer. The Common Shares, the Series 3 Shares and the Series 4 Shares are listed and posted for trading on the Toronto Stock Exchange (the TSX ) under the symbols WES, WES.PR.A and WES.PR.B, respectively. The Offers represent a premium of approximately 69% to the closing price of the Common Shares on December 23, 2010, being the last trading day prior to the announcement of the Offeror s intention to make the Common Share Offer, which was $2.45, a premium of approximately 22% to the closing price of the Series 3 Shares on December 23, 2010, which was $81.75, and a premium of approximately 23% to the closing price of the Series 4 Shares on December 23, 2010, which was $81.50. The Offers also represent a premium of approximately 68%, 22% and 22% respectively over the volume-weighted average trading prices of the Common Shares, the Series 3 Shares and the Series 4 Shares on the TSX for the 20 trading days prior to December 23, 2010.
As of the date hereof, the Offeror and its Affiliates (as defined herein) do not beneficially own, directly or indirectly, nor do they exercise direction over, or have the right to acquire any Common Shares or Convertible Securities. The Offeror and Western have entered into a support agreement (the Support Agreement ) dated December 23, 2010 pursuant to which the Offeror has agreed to make the Common Share Offer and Western has agreed to support and recommend the Common Share Offer, all subject to the terms and conditions described therein. See Section 5 of the Circular, Agreement Relating to the Offers. THE OFFERS WILL BE OPEN FOR ACCEPTANCE UNTIL 5:00 P.M. (MONTRÉAL TIME) ON FEBRUARY 28, 2011, UNLESS THE OFFERS ARE EXTENDED (THE EXPIRY TIME ) OR WITHDRAWN BY THE OFFEROR. The Offers are subject to certain conditions described under Conditions of the Offers in Section 4 of the Offers including, without limitation, that at the Expiry Time: (i) there shall have been validly deposited under the Common Share Offer and not withdrawn at the Expiry Time, such number of Common Shares which, together with any Common Shares beneficially owned or over which control or direction is exercised by the Offeror and its Affiliates and joint actors, represents in the aggregate at least 66 2 3% of the aggregate of the outstanding Common Shares and the Common Shares issuable upon (A) the conversion of all the issued and outstanding First Preferred Shares, Series Two of Western (the Series 2 Shares ), (B) the conversion of all the issued and outstanding First Preferred Shares, Series Five of Western (the Series 5 Shares ), (C) the conversion of all the $16,710,000 aggregate principal amount of convertible unsecured subordinated debentures due June 30, 2014 of Western (the Convertible Debentures ), and (D) the exercise of outstanding in-the money Options (as defined herein) for Common Shares of Western (such entitlements for Common Shares collectively referred to as the In-the-Money Convertible Securities ), (ii) all outstanding Options shall have been exercised, terminated or otherwise cancelled, (iii) all Appropriate Regulatory Approvals (as defined herein) shall have been obtained on terms and conditions satisfactory to the Offeror, acting reasonably, and (iv) the sale of Western s interest in Jennings Capital Inc. shall have been completed. In addition to the foregoing, with respect to each of the Series 3 Share Offer and the Series 4 Share Offer, there shall have been deposited under each of such offer and not withdrawn at the Expiry Time, such number of Series 3 Shares or Series 4 Shares, as the case may be, which, together with any Series 3 Shares or Series 4 Shares beneficially owned or over which control is exercised by the Offeror and its Affiliates and joint actors, represent in the aggregate at least 66 2 3% of the Series 3 Shares or Series 4 Shares, as the case may be. Subject to applicable law, the Offeror reserves the right to withdraw the Offers and to not take-up and pay for or extend the period of time during which the Offers are open, and postpone taking up and paying for, any Shares (as defined herein) deposited under the Offers, unless each of the conditions of the Offers are satisfied or waived at or before the Expiry Time. The Offers are made only for the Common Shares, Series 3 Shares and Series 4 Shares and are not made for any In-the-Money Convertible Securities. Any holder of the In-the-Money Convertible Securities who wishes to participate in the Common Share Offer must exercise or convert the In-the-Money Convertible Securities to obtain certificates representing Common Shares, and deposit those Common Shares in accordance with the Common Share Offer. See Section 1 of the Offers, The Offers and Section 3 of the Offers, Manner of Acceptance. If the Offeror takes up and pays for a sufficient number of Shares deposited under the Offers, the Offeror currently intends to acquire any Shares that are not deposited by way of a Compulsory Acquisition or Subsequent Acquisition Transaction. Shareholders (as defined herein) who wish to accept an Offer and tender their Shares must properly complete and execute the accompanying Letter of Transmittal (printed on yellow paper) and holders of In-the-Money Convertible Securities who wish to conditionally exercise the conversion rights attached to such securities, accept the Common Share Offer and tender the Underlying Common Shares must properly complete and execute the accompanying Letter of Transmittal (printed on blue paper) and, in each case, tender it or a manually signed facsimile thereof, together with the certificate(s) representing their Shares or In-the-Money Convertible Securities, as the case may be, and all other documents required by the relevant Letter of Transmittal at or prior to the Expiry Time, at any one of the offices of the Depositary (as defined below) in accordance with the instructions in the Letter of Transmittal or request their broker, investment dealer, commercial bank, trust company or other nominee to effect the transaction on their behalf. Alternatively, Shareholders and holders of In-the-Money Convertible Securities may accept the Offers by: (i) following the procedures for book-entry transfer described in Section 3 of the Offers, Manner of Acceptance Acceptance by Book-Entry Transfer ; or (ii) following the procedures for guaranteed delivery described in Section 3 of the Offers, Manner of Acceptance Procedure for Guaranteed Delivery, using the accompanying Notice of Guaranteed Delivery (printed on green paper or a manually signed facsimile thereof, where the certificate(s) representing the Shares are not immediately available, or if the certificate(s) and all of the required documents cannot be provided to the Depositary before the Expiry Time. Holders
whose Shares or the In-the-Money Convertible Securities, as the case may be, are registered in the name of a nominee should consult their broker, investment dealer, commercial bank, trust company or other nominee for assistance in tendering their Shares or Common Shares underlying their In-the-Money Convertible Securities. Shareholders and holders of In-the-Money Convertible Securities will not be required to pay any fee or commission if they accept an Offer by tendering their Shares or Common Shares underlying their In-the-Money Convertible Securities directly with the Depositary. The Offeror has retained Desjardins Securities Inc. to serve as dealer manager (the Dealer Manager ) for the Offers in Canada. The Dealer Manager may form a soliciting dealer group comprised of members of The Investment Industry Regulatory Organization of Canada and members of Canadian stock exchanges to solicit acceptances of the Offers. In that event, the Offeror will pay typical soliciting dealer fees in connection with the tender of Shares. Depositing Shareholders (as defined herein) will not be obligated to pay any fee or commission if they accept an Offer by using the services of the Dealer Manager or transmitting their Shares directly to Computershare Investor Services Inc. ( Computershare or the Depositary ). Questions and requests for assistance may be directed to the Depositary or Georgeson Shareholder Communications Canada Inc. (the Information Agent ) for the Offers. Contact details for such persons may be found below and on the back page of this document. Additional copies of this document and related materials may be obtained without charge on request from the Depositary or the Information Agent at their respective offices specified below and on the back page of this document. Copies of this document and related materials may also be found on SEDAR at www.sedar.com. No person has been authorized to give any information or make any representation other than those contained in this document, and, if given or made, that information or representation must not be relied upon as having been authorized by the Offeror. This document does not constitute an offer or a solicitation to any person in any jurisdiction in which such offer or solicitation is unlawful. The Offers are not being made to, nor will tenders be accepted from or on behalf of, Shareholders in any jurisdiction in which the making or acceptance of the Offers would not be in compliance with the laws of such jurisdiction. However, the Offeror may, in its sole discretion, take such action as it may deem necessary to extend the Offers to Shareholders in any such jurisdiction.
THE DEPOSITARY FOR THE OFFERS IS: By Facsimile Transmission 1-905-771-4082 By Mail P.O. Box 7021 31 Adelaide Street East Toronto, ON M5C 3H2 By Registered Mail, Hand or by Courier 100 University Avenue 9th Floor Toronto, ON M5J 2Y1 Attention: Corporate Actions Toll Free (North America): 1-800-564-6253 Overseas: 1-514-982-7555 E-Mail: corporateactions@computershare.com ANY QUESTIONS OR REQUESTS FOR ASSISTANCE MAY BE DIRECTED TO OUR INFORMATION AGENT: Address: 100 University Avenue 11th Floor, South Tower Toronto, Ontario M5J 2Y1 Toll Free (North America): 1-866-725-6575 Collect (Overseas): 1-781-575-2168 E-Mail: askus@georgeson.com
NOTICE TO SHAREHOLDERS IN THE UNITED STATES THE OFFERS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION (THE SEC ) OR ANY STATE SECURITIES REGULATORYAUTHORITY, NOR HAS THE SEC OR ANY SUCH STATE SECURITIES AUTHORITY PASSED UPON THE ACCURACY OR ADEQUACY OF THE OFFERS OR THE CIRCULAR. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENCE. The Offers are made for the securities of a Canadian issuer. The Offers are subject to applicable disclosure requirements in Canada. Shareholders in the United States should be aware that such requirements are different from those in the United States. The enforcement by Shareholders of civil liabilities under United States federal securities laws may be affected adversely by the fact that each of Western and the Offeror are incorporated or otherwise established and located outside the United States, that all of their respective officers and directors are non-residents of the United States, that all of the experts named in the Circular are non-residents of the United States, and that all or a substantial portion of the assets of Western and the Offeror and the persons referred to above are located outside the United States. Shareholders may not be able to sue Western or the Offeror, or their respective officers or directors, as applicable, in a foreign court for violations of United States federal securities law. It may be difficult to compel the Offeror and its affiliates to subject themselves to a United States court s jurisdiction or to enforce a U.S. court s judgment. Shareholders should be aware that the Offeror or its affiliates, directly or indirectly, may bid for or make purchases of Shares or Convertible Securities, during the period of the Offers, as permitted by applicable Canadian Laws or provincial Laws or regulations. See Section 12 of the Offers, Market Purchases. This document does not address any United States federal income tax consequences of the Offers to Shareholders in the United States. Shareholders in the United States should be aware that a disposition of Shares may have tax consequences both in the United States and in Canada, which may not be described herein. Accordingly, Shareholders in the United States should consult their own tax advisors with respect to their particular circumstances and tax considerations applicable to them in connection with the Offers. NOTICE TO HOLDERS OF IN-THE-MONEY CONVERTIBLE SECURITIES No offer is made for In-the-Money Convertible Securities or other rights to acquire Common Shares (except for the Series 3 Share Offer and the Series 4 Share Offer). Any holder of In-the-Money Convertible Securities or other rights to acquire Common Shares who wishes to accept the Common Share Offer must exercise or convert such In-the-Money Convertible Securities or other rights to obtain Common Shares and deposit certificates representing the Common Shares issued upon such exercise or conversion, as the case may be, under the Common Share Offer. Any such exercise must be sufficiently in advance of the Expiry Time to assure the holders of In-the-Money Convertible Securities or other rights to acquire Common Shares that they will have Common Share certificate(s) available for deposit before the Expiry Time or in sufficient time to comply with the procedures referred to in Section 3 of the Offers, Manner of Acceptance Procedure for Guaranteed Delivery. Alternatively, holders of In-the-Money Convertible Securities can utilize the procedures referred to in Section 3 of the Offers Manner of Acceptance in order to exercise their conversion right pursuant to such Convertible Securities conditional upon completion of the Common Share Offer and deposit the underlying Common Shares to the Common Share Offer. Holders of In-the-Money Convertible Securities or any other rights to acquire Common Shares should consult their own tax advisors for advice with respect to the actual or potential tax consequences to them in connection with a decision they may make to exercise or convert, or not to exercise or convert, their In-the-Money Convertible Securities or other rights to acquire Common Shares prior to the Expiry Time or thereafter. Generally, the conversion of Series 2 Shares, Series 5 Shares and Convertible Debentures into Common Shares under their respective terms by a holder thereof will be deemed not to be a disposition of such Series 2 Shares, Series 5 Shares and Convertible Debentures, as applicable, for the purposes of the Tax Act and accordingly, such holder will not realize a capital gain or capital loss on such conversion. Generally, the cost to a holder of the Common Shares acquired on such conversion will be equal to the adjusted cost base of the Series 2 Shares, Series 5 Shares and Convertible Debentures, as applicable, to such holder immediately before the conversion. The holder s adjusted cost base of the Common Shares so acquired will be determined by averaging the cost i
of such Common Shares with the adjusted cost base to the holder of all Common Shares owned by such holder immediately prior to the conversion. Subject to the receipt of all required government authorizations and approvals, the Board of Directors will make such necessary amendments to the Option Plan (as defined herein) and take all such steps as may be necessary or desirable (including obtaining waivers and consents) to allow any person holding Options, that may do so under Securities Laws (as defined herein), to exercise their unvested Options on an accelerated vesting basis solely for the purpose of tendering under the Common Share Offer all Common Shares issued upon such exercise prior to the Expiry Time, provided that any such amendment shall provide that if a holder fails to exercise the Options held prior to the Expiry Time, such Options shall expire and be of no further force and effect and the holders thereof shall have no further claim in respect thereof. Subject to the foregoing, Western has agreed under the Support Agreement to give notice promptly following the mailing of the Common Share Offer and Circular to all persons holding Options of: (i) the vesting of all unvested Options; and (ii) the termination of all non-exercised Options as of 5:00 p.m. (Montréal time) on the Expiry Time, in each case conditional upon the Offeror taking up and paying for Common Shares under the Common Share Offer. Western has agreed under the Support Agreement to use its commercially reasonable efforts to facilitate all persons holding in-the-money Options to exercise all of their Options and to deposit all Common Shares issued upon such exercise to the Common Share Offer or amend or modify the Option Plan to provide for the cashless exercise or surrender of vested and non-exercised Options in lieu of the exercise thereof. CURRENCY All references to $ or C$ mean Canadian dollars. FORWARD LOOKING STATEMENTS Certain statements in the Offers and accompanying Circular under Background to the Offers, Offeror s Reasons to Accept the Offers, Purpose of the Offer and Plans for Western, Effect of the Offers on Market and Listing, Effect of the Offers on Outstanding Indebtedness and Acquisition of Shares Not Deposited Under the Offers, in addition to certain statements contained elsewhere in the Offers and Circular, are forward-looking statements and are prospective in nature. Forward-looking statements are not based on historical facts, but rather on current expectations and projections about future events, and are therefore subject to risks and uncertainties which could cause actual results to differ materially from the future results expressed or implied by the forward-looking statements. These statements generally can be identified by the use of forward-looking words such as may, should, will, could, except, intend, estimate, plan, anticipate, expect, believe, or continue or the negative thereof or similar variations. Such statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations. Important factors that could cause actual results to differ materially from the Offeror s expectations include, among other things, changing and prolonged financial and economic uncertainty; regulatory and legal developments; competition, industry trends and availability of capital resources; changes in interest rates; credit quality; liquidity; movement in credit spreads; changes in accounting standards and policies; and changes in tax laws. Such forward-looking statements should, therefore, be construed in light of such factors and the Offeror is under no obligation and expressly disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable Law. ii
TABLE OF CONTENTS NOTICE TO SHAREHOLDERS IN THE UNITED STATES.... i NOTICE TO HOLDERS OF IN-THE-MONEY CONVERTIBLE SECURITIES... i CURRENCY... ii FORWARD LOOKING STATEMENTS... ii SUMMARY... 1 THE OFFERS... 5 1. THE OFFERS.... 5 2. TIME FOR ACCEPTANCE... 5 3. MANNER OF ACCEPTANCE... 5 4. CONDITIONS OF THE OFFERS... 10 5. EXTENSION AND VARIATION OF THE OFFERS... 12 6. TAKE UP AND PAYMENT FOR DEPOSITED SHARES... 12 7. RETURN OF DEPOSITED SHARES... 13 8. RIGHT TO WITHDRAW DEPOSITED SHARES..... 14 9. NOTICE AND DELIVERY.... 15 10. CHANGES IN CAPITALIZATION... 15 11. SHARES NOT DEPOSITED UNDER THE OFFERS.... 16 12. MARKET PURCHASES.... 16 13. OTHER TERMS OF THE OFFERS.... 16 CIRCULAR... 18 1. THE OFFEROR... 18 2. WESTERN... 18 3. BACKGROUND TO THE OFFERS... 20 4. OFFEROR S REASONS TO ACCEPT THE OFFERS... 21 5. AGREEMENT RELATING TO THE OFFERS... 22 6. PURPOSE OF THE OFFERS AND PLANS FOR WESTERN... 31 7. SOURCE OF OFFERED CONSIDERATION.... 32 8. BENEFICIAL OWNERSHIP OF AND TRADING IN SECURITIES... 32 9. EFFECT OF THE OFFERS ON MARKET AND LISTING... 32 10. EFFECT OF THE OFFERS ON OUTSTANDING INDEBTEDNESS... 33 11. COMMITMENTS TO ACQUIRE SECURITIES OF WESTERN... 33 12. ARRANGEMENTS, AGREEMENTS OR UNDERSTANDINGS, OTHER BENEFITS TO INSIDERS, AFFILIATES AND ASSOCIATES... 33 13. MATERIAL CHANGES AND OTHER INFORMATION... 34 14. REGULATORY MATTERS... 34 15. ACQUISITION OF SHARES NOT DEPOSITED UNDER THE OFFERS... 35 16. CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS... 38 17. BUSINESS RELATIONS... 40 18. DEPOSITARY AND INFORMATION AGENT... 40 19. DEALER MANAGER AND SOLICITING DEALER GROUP... 40 20. BENEFITS FROM THE OFFERS... 41 21. LEGAL MATTERS... 41 22. OFFEREES STATUTORY RIGHTS... 41 23. DIRECTORS APPROVAL... 41 GLOSSARY... 42 CONSENT OF MCCARTHY TÉTRAULT LLP... 48 APPROVAL AND CERTIFICATE OF THE OFFEROR... 49 iii
SUMMARY The following is a summary only and is qualified in its entirety by the detailed provisions contained in the Offers and Circular. You should read the Offers and Circular in their entirety. Certain capitalized and other terms used in this summary are defined in the Glossary. The Offers The Offeror hereby offers to purchase, upon the terms and subject to the conditions of the Offers, (i) all of the issued and outstanding Common Shares (including associated SRP Rights and any Common Shares which may become issued and outstanding after the date of the Offer and prior to the Expiry Time upon the exercise or conversion, as the case may be, of Convertible Securities) for consideration per Common Share of $4.15, (ii) all of the issued and outstanding Series 3 Shares for a consideration per Series 3 Share of $100, and (iii) all of the issued and outstanding Series 4 Shares for a consideration per Series 4 Share of $100. See Section 1 of the Offers, The Offers. The Offers represent a premium of approximately 69% to the closing price of the Common Shares on December 23, 2010, being the last trading day prior to the announcement of the Offeror s intention to make the Common Share Offer, which was $2.45, a premium of approximately 22% to the closing price of the Series 3 Shares on December 23, 2010, which was $81.75, and a premium of approximately 23% to the closing price of the Series 4 Shares on December 23, 2010, which was $81.50. The Offers also represent a premium of approximately 68%, 22% and 22% respectively over the volume-weighted average trading prices of the Common Shares, the Series 3 Shares and the Series 4 Shares on the TSX for the 20 trading days prior to December 23, 2010. The Offeror The Offeror is a member of the Desjardins Financial Group and a wholly-owned indirect subsidiary of the Fédération des caisses Desjardins du Québec. The Desjardins Financial Group is the leading cooperative financial group in Canada and the sixth largest in the world, with assets of over $175 billion. Drawing on the strength of its caisse network in Québec and Ontario, and its subsidiaries across Canada, it offers a full range of financial products and services to its 5.8 million members and clients. Desjardins specializes in wealth management and life and health insurance, property and casualty insurance, personal services, business and institutional services. The Offeror is incorporated under the laws of the Province of Québec and its registered and head office is located at 1 Complexe Desjardins, South Tower, 39 th Floor, Montréal, Québec, H5B 1B2. See Section 1 of the Circular, The Offeror. Western Western is a leading P&C insurance brokerage network and offers complimentary life insurance and banking services in over 90 communities, to more than 550,000 individuals and businesses in Western Canada through its wholly owned network of offices, its affiliated insurance brokers, Western Life Assurance Company, Bank West and Western Financial Insurance Company. Western is incorporated under the laws of the Province of Alberta, its head ofice is located at 1010 24 th Street, S.E., High River, Alberta, T1V 2A6 and its registered office address is 3700, 400 3 rd Avenue S.W., Calgary, Alberta, T2P 4H2. See Section 2 of the Circular, Western. Purpose of the Offers The purpose of the Offers is to enable the Offeror to acquire all outstanding Shares and to complete the transactions described in Section 6 of the Circular, Purpose of the Offers and Plans for Western and Section 15 of the Circular, Acquisition of Shares Not Deposited Under the Offer. Conditions of the Offers The Offers are subject to certain conditions described under Conditions of the Offers in Section 4 of the Offers including, without limitation, that at the Expiry Time: (i) there shall have been validly deposited under the Common Share Offer and not withdrawn at the Expiry Time, such number of Common Shares which, together with any Common Shares beneficially owned or over which control or direction is exercised by the Offeror and its Affiliates and joint actors, represents in the aggregate at least 66 2 3% of the aggregate of the outstanding Common Shares and the Common Shares issuable upon the exercise or conversion, as the case may be, of In-the-Money Convertible Securities, (ii) all outstanding Options shall have been exercised, terminated or otherwise cancelled, (iii) all Appropriate Regulatory Approvals shall have been obtained on terms and conditions satisfactory to the Offeror, acting reasonably, and (iv) the sale of Western s interest in Jennings Capital Inc. shall have been completed. In addition to the foregoing, with respect to each of the 1
Series 3 Share Offer and the Series 4 Share Offer, there shall have been deposited under each of such offer and not withdrawn at the Expiry Time, such number of Series 3 Shares or Series 4 Shares, as the case may be, which, together with any Series 3 Shares or Series 4 Shares beneficially owned or over which control is exercised by the Offeror and its Affiliates and joint actors, represent in the aggregate at least 66 2 3% of the Series 3 Shares or Series 4 Shares, as the case may be. Subject to applicable law, the Offeror reserves the right to withdraw the Offers and to not take-up and pay for or extend the period of time during which the Offers are open, and postpone taking up and paying for, any Shares (as defined herein) deposited under the Offers, unless each of the conditions of the Offers are satisfied or waived at or before the Expiry Time. Time for Acceptance The Offers are open for acceptance until the Expiry Time, being 5:00 p.m. (Montréal time) on February 28, 2011 unless the Offers are withdrawn or extended by the Offeror. The Expiry Time may be extended at the Offeror s sole discretion. See Section 5 of the Offers, Extension and Variation of the Offers. Manner of Acceptance Shareholders who wish to accept an Offer and tender their Shares must properly complete and execute the accompanying Letter of Transmittal (printed on yellow paper) and holders of In-the-Money Convertible Securities who wish to conditionally exercise the conversion rights attached to such securities, accept the Common Share Offer and tender the Underlying Common Shares must properly complete and execute the accompanying Letter of Transmittal (printed on blue paper) and, in each case, tender it or a manually signed facsimile thereof, together with the certificate(s) representing their Shares or In-the-Money Convertible Securities, as the case may be, and all other documents required by the relevant Letter of Transmittal at or prior to the Expiry Time, at any one of the offices of the Depositary (as defined below) in accordance with the instructions in the Letter of Transmittal or request their broker, investment dealer, commercial bank, trust company or other nominee to effect the transaction on their behalf. Alternatively, Shareholders and holders of In-the-Money Convertible Securities may follow the procedure for guaranteed delivery described in Section 3 of the Offers, Manner of Acceptance Procedure for Guaranteed Delivery using the accompanying Notice of Guaranteed Delivery. Holders whose Shares or In-the-Money Convertible Securities, as the case may be, are held in an account with an investment dealer, stockbroker, bank, trust company or other nominee should contact their representative if they wish to accept an Offer. In-the-Money Convertible Securities Holders of In-the-Money Convertible Securities or other rights to acquire Common Shares who wish to accept the Common Share Offer must exercise or convert such In-the-Money Convertible Securities or other rights to obtain Common Shares and deposit certificates representing the Common Shares issued upon such exercise or conversion, as the case may be, under the Common Share Offer. Any such exercise must be sufficiently in advance of the Expiry Time to assure the holders of In-the-Money Convertible Securities or other rights to acquire Common Shares that they will have Common Share certificate(s) available for deposit before the Expiry Time or in sufficient time to comply with the procedures referred to in Section 3 of the Offers to Purchase, Manner of Acceptance. Alternatively, holders of In-the-Money Convertible Securities can utilize the procedures referred to in Section 3 of the Offers Manner of Acceptance in order to exercise their conversion right pursuant to such Convertible Securities conditional upon completion of the Common Share Offer and deposit the underlying Common Shares to the Common Share Offer. Take Up and Payment for Deposited Shares Upon the terms and subject to the conditions of the Offers (including but not limited to the conditions specified in Section 4 of the Offers, Conditions of the Offers ), the Offeror will take up Shares validly tendered to an Offer and not withdrawn pursuant to Section 8 of the Offers Right to Withdraw Deposited Shares, not later than ten (10) calendar days after the Expiry Time and will pay for the Shares taken up as soon as possible, but in any event not later than three (3) Business Days after taking up the Shares. Any Shares tendered to an Offer after the first date on which Shares have been taken up by the Offeror will be taken up and paid for not later than ten (10) days after such tender. See Section 6 of the Offers, Take Up and Payment for Deposited Shares. 2
Withdrawal of Deposited Shares Except as otherwise provided in Section 8 of the Offers, Right to Withdraw Deposited Shares, all deposits of Shares are irrevocable. Acquisitions of Shares not Deposited under the Offers If the Offeror takes up and pays for not less than 90% of the issued and outstanding Shares of any class to which an Offer relates, other than such Shares held on the date of the Offers by or on behalf of the Offeror, the Offeror intends, to the extent possible, to acquire all Shares of that class (including in respect of the Common Share Offer, Common Shares that may be issued as a result of the exercise of the rights under any Convertible Securities) that are held by any Person who did not accept the relevant Offer by Compulsory Acquisition. If the Offeror acquires less than 90% of the Shares of any class under the Offers or the right of Compulsory Acquisition described above is not available for any reason, the Offeror will acquire the remaining Shares pursuant to a Subsequent Acquisition Transaction under which the consideration payable to Shareholders will be equal in amount to and in the same form as that payable under the Offers. See Section 6 of the Circular, Purpose of the Offers and Plans for Western and Section 15 of the Circular, Acquisition of Shares Not Deposited Under the Offers. Recommendation of the Board of Directors The Board of Directors, following consultation with its financial and legal advisors, has unanimously determined that the Common Share Offer is in the best interests of Western and the Common Shareholders and, accordingly, has unanimously recommended that Common Shareholders accept the Common Share Offer. The Board of Directors is not making a recommendation to holders of the Series 3 Shares and the Series 4 Shares as to whether to accept the Series 3 Share Offer and the Series 4 Share Offer. For further information on the deliberations of the Board of Directors and related matters, see the Directors Circular accompanying the Offers. Support Agreement On December 23, 2010, the Offeror agreed to make, and Western agreed to support, the Common Share Offer, subject to the conditions set forth in the Support Agreement. Under the terms of the Support Agreement, Western has, inter alia, agreed to support the Common Share Offer, not to solicit or, except as described therein, agree to any Acquisition Proposal and to make a Termination Payment to the Offeror under certain circumstances. See Section 4 of the Circular, Agreements Related to the Offers. Regulatory Matters The Offeror s obligation to take up and pay for Shares tendered under the Offers is conditional upon all Appropriate Regulatory Approvals having been obtained on terms satisfactory to the Offeror, acting reasonably. See Section 14 of the Circular, Regulatory Matters. These approvals include the approval of the Minister of Finance (Canada) and the Competition Act Approval. Certain Canadian Federal Income Tax Considerations Generally, a Shareholder who holds Shares as capital property and disposes of those Shares pursuant to the Offers will realize a capital gain (or capital loss) equal to the amount by which the proceeds of disposition of the Shares exceed (or are less than) the aggregate of the adjusted cost base to the Shareholder of the Shares and any reasonable costs of disposition. Shareholders are urged to read Section 16 of the Circular, Certain Canadian Federal Income Tax Considerations, and consult their own tax advisors for advice with respect to the tax consequences to them of disposing of Shares pursuant to the Offers or any Compulsory Acquisition or Subsequent Acquisition Transaction. Depositary The Offeror has engaged Computershare Investors Services Inc. to act as the Depositary for the Offers. The Depositary may contact Shareholders by mail, telephone and facsimile and may request banks, brokers, investment dealers and other nominees to forward materials relating to the Offers to beneficial owners of Shares. The Depositary will facilitate book-entry only transfers of Shares tendered under the Offers. The Depositary will receive reasonable and 3
customary compensation from the Offeror for its services in connection with the Offers, will be reimbursed for certain out-of-pocket expenses and will be indemnified against certain liabilities and expenses in connection with the Offers. Dealer Manager, Soliciting Dealer Group and Information Agent The Offeror has retained Desjardins Securities Inc. to serve as dealer manager for the Offers in Canada. The Dealer Manager may form a soliciting dealer group comprised of members of The Investment Industry Regulatory Organization of Canada and members of Canadian stock exchanges to solicit acceptances of the Offers. In that event, the Offeror will pay typical soliciting dealer fees in connection with the tender of Shares. Depositing Shareholders will not be obligated to pay any fee or commission if they accept an Offer by using the services of the Dealer Manager or transmitting their Shares directly to the Depositary. The Offeror has also retained Georgeson Shareholder Communications Canada Inc. to act as Information Agent in connection with the Offers. The Information Agent will receive reasonable and customary compensation from the Offeror for its services in connection with the Offers, will be reimbursed for certain out-of-pocket expenses and will be indemnified against certain liabilities and expenses in connection with the Offers. Questions and requests for assistance may be directed to the Information Agent for the Offers, Georgeson Shareholder Communications Canada Inc., at 1-866-725-6575 toll free in North America, or at 1-781-575-2168 outside of North America, or by e-mail at askus@georgeson.com. 4
January 21, 2011 THE OFFERS TO: THE HOLDERS OF COMMON SHARES, FIRST PREFERRED SHARES, SERIES THREE AND FIRST PREFERRED SHARES, SERIES FOUR OF WESTERN FINANCIAL GROUP INC. 1. THE OFFERS The Offeror hereby offers to purchase, upon the terms and subject to the conditions of the Offers, (i) all of the issued and outstanding Common Shares (including associated SRP Rights and any Common Shares which may become issued and outstanding after the date of the Offers and prior to the Expiry Time upon the exercise or conversion, as the case may be, of any Convertible Securities) for consideration per Common Share of $4.15 (the Common Share Consideration ), (ii) all of the issued and outstanding Series 3 Shares for a consideration per Series 3 Share of $100 (the Series 3 Share Consideration ), and (iii) all of the issued and outstanding Series 4 Shares for a consideration per Series 4 Share of $100 (the Series 4 Share Consideration and, together with the Common Share Consideration and the Series 3 Share Consideration, the Offered Consideration ) other than Shares held by the Offeror or its Affiliates. The Offers represent a premium of approximately 69% to the closing price of the Common Shares on December 23, 2010, being the last trading day prior to the announcement of the Offeror s intention to make the Common Share Offer, which was $2.45, a premium of approximately 22% to the closing price of the Series 3 Shares on December 23, 2010, which was $81.75, and a premium of approximately 23% to the closing price of the Series 4 Shares on December 23, 2010, which was $81.50. The Offers also represent a premium of approximately 68%, 22% and 22% respectively over the volume-weighted average trading prices of the Common Shares, the Series 3 Shares and the Series 4 Shares on the TSX for the 20 trading days prior to December 23, 2010. The Offers are made only for Shares and not for any In-the-Money Convertible Securities. Any holder of In-the-Money Convertible Securities or other rights to acquire Common Shares who wishes to accept the Common Share Offer must exercise or convert such In-the-Money Convertible Securities or other rights to obtain Common Shares and deposit certificates representing the Common Shares issued upon such exercise or conversion, as the case may be, under the Common Share Offer. Any such exercise must be sufficiently in advance of the Expiry Time to assure the holders of In-the-Money Convertible Securities or other rights to acquire Common Shares that they will have Common Share certificate(s) available for deposit before the Expiry Time or in sufficient time to comply with the procedures referred to in Section 3 of the Offers, Manner of Acceptance Procedure of Guaranteed Delivery. Alternatively, holders of In-the-Money Convertible Securities can utilize the procedures referred to in Section 3 of the Offers Manner of Acceptance in order to exercise their conversion right pursuant to such Convertible Securities conditional upon completion of the Common Share Offer and deposit the underlying Common Shares to the Common Share Offer. The accompanying Circular, Letter of Transmittal and Notice of Guaranteed Delivery which are incorporated into and form part of the Offers contain important information that should be read carefully before making a decision with respect to the Offers. 2. TIME FOR ACCEPTANCE The Offers are each open for acceptance from the date hereof until the Expiry Time, being 5:00 p.m. (Montréal time) on February 28, 2011 unless any such Offer is withdrawn or extended by the Offeror. The Expiry Time may be extended at the Offeror s sole discretion pursuant to Section 5 of the Offers, Extension and Variation of the Offers. 3. MANNER OF ACCEPTANCE Letter of Transmittal The Offers may be accepted by Shareholders, and the Common Share Offer may be accepted by holders of In-the-Money Convertible Securities who wish to deposit their underlying Common Shares, by depositing the following documents with the Depositary at any one of the offices specified in the Letter of Transmittal no later than the Expiry Time: (a) certificate(s) representing the Shares for which the relevant Offer is accepted, or in the case of In-the-Money Convertible Securities, certificate(s) representing the In-the-Money Convertible Securities for which they wish to deposit their underlying Common Shares to the Common Share Offer; 5
(b) in the case of the Shares, an executed copy of the Letter of Transmittal (printed on yellow paper) and, in the case of the In-the-Money Convertible Securities, an executed copy of the Letter of Transmittal (printed on blue paper) in each case in the form accompanying the Offers, or a manually signed facsimile thereof; and (c) any other relevant documents required by the rules set out in the relevant Letter of Transmittal. Participants in CDS should contact the Depositary with respect to the tender of their Shares under the Offers or the conditional exercise of the conversion rights attached to their In-the-Money Convertible Securities and the tender of the underlying Common Shares to the Common Share Offer. CDS will be issuing instructions to its participants as to (i) the method of tendering such Shares to the Offers, and (ii) the method for conditionally exercising the conversion rights attached to In-the-Money Convertible Securities and tendering the underlying Common Shares to the Common Share Offer. Shareholders and holders of In-the-Money Convertible Securities will not be required to pay any fee or commission if they accept an Offer by tendering their Shares or Common Shares underlying In-the-Money Convertible Securities directly with the Depositary. The Offers will be deemed to be accepted only if the Depositary has actually received these documents at or before the Expiry Time at one of the addresses for the Depositary indicated on the Letter of Transmittal. Shareholders and holders of In-the-Money Convertible Securities who cannot comply on a timely basis with these procedures for deposit of the requisite certificate(s) for Shares or In-the-Money Convertible Securities, as the case may be, may deposit certificate(s) representing Shares or In-the-Money Convertible Securities to the procedure for guaranteed delivery described below. Holders of In-the-Money Convertible Securities or other rights to acquire Common Shares who wish to accept the Common Share Offer must exercise or convert such In-the-Money Convertible Securities or other rights to obtain Common Shares and deposit certificates representing the Common Shares issued upon such exercise or conversion, as the case may be, under the Common Share Offer. Any such exercise must be sufficiently in advance of the Expiry Time to assure the holders of In-the-Money Convertible Securities or other rights to acquire Common Shares that they will have Common Share certificate(s) available for deposit before the Expiry Time or in sufficient time to comply with the procedures referred to in this Section 3 under Procedure for Guaranteed Delivery. Alternatively, holders of In-the-Money Convertible Securities can utilize the procedures referred to in Section 3 of the Offers Manner of Acceptance in order to exercise their conversion right pursuant to such Convertible Securities conditional upon completion of the Common Share Offer and deposit the underlying Common Shares to the Common Share Offer. SRP Rights Unless waived by the Offeror, Common Shareholders are required to deposit one SRP Right for each Common Share deposited under the Common Share Offer in order to effect a valid deposit of such Common Share. No additional payment will be made for the SRP Rights and no amount of the consideration to be paid by the Offeror for the deposited Common Shares will be allocated to the SRP Rights. The following procedures must be followed in order to effect the valid deposit of the SRP Rights associated with the deposited Common Shares: (a) if the Separation Time (as defined in the Shareholder Rights Plan) under the Shareholder Rights Plan has not occurred prior to the Expiry Time and Rights Certificates (as defined in the Shareholder Rights Plan) have not been distributed by Western, a deposit of Common Shares will also constitute a deposit of the associated SRP Rights; (b) if the Separation Time occurs before the Expiry Time and Rights Certificates have been distributed by Western prior to the time Common Shares are deposited under the Common Share Offer, Rights Certificates representing SRP Rights equal in number to the number of deposited Common Shares must be delivered with the Letter of Transmittal or, if available, a book-entry confirmation must be received by the Depositary with respect thereto; and (c) if the Separation Time occurs before the Expiry Time and Rights Certificates have not been distributed by the time Common Shares are deposited under the Common Share Offer, or the Rights Certificates have been distributed but not received by the Common Shareholder(s) making the deposit, the Common Shareholder(s) may deposit its SRP Rights before receiving Rights Certificates by using the guaranteed delivery procedure set out in Section 3 of the Offers, Manner of Acceptance Procedure for Guaranteed Delivery. Note that, in any case, a deposit of Common Shares constitutes an agreement by the Common Shareholder(s) making the deposit to deliver Rights Certificates representing SRP Rights equal in number to the number of Common Shares 6
deposited by the Common Shareholder(s) or, if available, a Book-Entry Confirmation, in each case, must be received by the Depositary with respect thereto, on or before the third trading day on the TSX after the date, if any, that Rights Certificates are distributed. The Offeror reserves the right to require, if the Separation Time occurs before the Expiry Time, that the Depositary receive from the Common Shareholder(s) making the deposit, prior to taking up the Common Shares deposited for payment pursuant to the Common Share Offer, Rights Certificates (or, if available, a Book-Entry Confirmation) from the Common Shareholder(s) representing SRP Rights equal in number to the Common Shares deposited by the Common Shareholder(s). Signature Guarantees No signature guarantee is required on the Letter of Transmittal if: (a) the Letter of Transmittal is signed by the registered owner of the Shares or In-the-Money Convertible Securities, as the case may be, exactly as the name of the registered holder appears on the certificate(s) deposited therewith, and the Offered Consideration is to be delivered directly to such registered holder; or (b) Shares or In-the-Money Convertible Securities, as the case may be, are tendered for the account of an Eligible Institution. In all other cases, all signatures on the Letter of Transmittal must be guaranteed by an Eligible Institution. If a certificate representing Shares or In-the-Money Convertible Securities, as the case may be, is registered in the name of a Person other than a signatory of a Letter of Transmittal or if the Offered Consideration is to be delivered to a Person other than the registered owner, the certificate must be endorsed or accompanied by an appropriate power of attorney, in either case, signed exactly as the name of the registered owner appears on the certificate with the signature on the certificate or power of attorney guaranteed by an Eligible Institution. Method of Delivery The method of delivery of Shares or In-the-Money Convertible Securities, as the case may be, the Letter of Transmittal, the Notice of Guaranteed Delivery and all other required documents is at the option and risk of the tendering holder. The Offeror recommends that those documents be delivered by hand to the Depositary and that a receipt be obtained or, if certificate(s) for Shares or In-the-Money Convertible Securities, as the case may be, and the other documents are to be sent by mail, registered mail with return receipt requested, properly insured, is recommended, and it is suggested that the mailing be made sufficiently in advance of the Expiry Time to permit delivery to the Depositary on or prior to such time. Delivery will only be effective upon actual receipt of certificate(s) for such Shares or In-the-Money Convertible Securities, as the case may be, by the Depositary. A holder who wishes to tender Shares or Common Shares underlying In-the-Money Convertible Securities, as the case may be, to an Offer and whose Shares or In-the-Money Convertible Securities are registered in the name of a broker, investment dealer, commercial bank, trust company or other nominee should immediately contact such nominee in order to take the necessary steps to be able to tender such Shares or Common Shares underlying In-the-Money Convertible Securities, as the case may be, to the relevant Offer. Procedure for Guaranteed Delivery If a Shareholder wishes to accept an Offer, or if a holder of In-the-Money Convertible Securities wishes to exercise the conversion rights attached to such securities and tender the underlying Common Shares to the Common Share Offer and either: (i) the certificate(s) representing such holder s Shares or In-the-Money Convertible Securities, as the case may be, are not immediately available; or (ii) such Shareholder cannot deliver the certificate(s) and Letter of Transmittal to the Depositary by the Expiry Time, those Shares or the Common Share underlying the In-the-Money Convertible Securities may nevertheless be tendered to an Offer provided that all of the following conditions are met: (a) such tender is made only at the principal office of the Depositary in Toronto, Ontario, by or through an Eligible Institution; (b) a Notice of Guaranteed Delivery (printed on green paper (or a manually signed facsimile thereof), properly completed and duly executed, including a guarantee to deliver by an Eligible Institution in the form set out in the Notice of Guaranteed Delivery, is received by the Depositary at its principal office in Toronto, Ontario, at or before the Expiry Time; and (c) the certificate(s) representing the Deposited Shares, in proper form for transfer, together with a properly completed and duly signed Letter of Transmittal (or a manually signed facsimile thereof), relating to such 7