<PAGE> 1
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
WESTCORP
- --------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------
Set forth the amount on which the filing fee is calculated and state
how it was determined.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------
3) Filing Party:
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4) Date Filed:
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<PAGE> 2
[LOGO]
23 PASTEUR ROAD
IRVINE, CALIFORNIA 92718
April 26, 1994
TO OUR SHAREHOLDERS
You are cordially invited to attend the Annual Meeting of Shareholders of
Westcorp (the "Company") to be held at 10:00 a.m. on May 26, 1994, at the
Corporate Headquarters in Irvine, California. The Board of Directors and
management hope that you will be able to attend the annual meeting in person.
At the Annual Meeting, holders of the Company's common stock will be asked
to vote (i) for the election of directors, and (ii) to ratify the appointment of
Ernst & Young as the independent accountants for the Company for fiscal 1994. A
formal Notice of Annual Meeting of Shareholders, Westcorp's 1993 Annual Report,
the Company's Proxy Statement and a proxy card for the annual meeting accompany
this letter.
To assure that your shares will be represented, we ask that you read the
enclosed materials and complete, sign, date and return the proxy card as soon as
possible. Your vote, regardless of the number of shares you own, is important.
We urge you to indicate your approval by voting FOR the matters indicated
in the Notice and ask that you vote promptly. If you attend the Annual Meeting,
you may vote in person if you desire, even if you have previously mailed your
proxy card.
On behalf of the Board of Directors, we thank you for your cooperation and
continuing support.
Sincerely,
Ernest S. Rady
Chairman of the Board and
Chief Executive Officer
Stephen W. Prough
President and
Chief Operating Officer
<PAGE> 3
[LOGO]
23 PASTEUR ROAD
IRVINE, CALIFORNIA 92718
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 26, 1994
To the Shareholders of Westcorp
The Annual Meeting of Shareholders of Westcorp, a California corporation
("the Company") will be held at the Corporate Headquarters, 23 Pasteur Road,
Irvine, California, on Thursday, May 26, 1994, at 10:00 a.m., for the following
purposes:
1. To elect four directors for a term expiring in 1996.
2. To ratify the appointment of Ernst & Young as the independent
accountants for Westcorp for fiscal 1994.
3. To transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
The Board of Directors has selected April 11, 1994, as the record date (the
"Record Date") for the Annual Meeting. Those holders of record of the Company's
common stock at the close of business on that date are entitled to notice of and
to vote at the Annual Meeting and any adjournment thereof.
All shareholders are requested to complete, date and sign the enclosed
proxy card promptly and return it in the accompanying postage prepaid
self-addressed envelope, whether or not they expect to attend the Annual
Meeting, in order to assure that their shares will be represented.
Since mail delays occur, it is important that the proxy card be mailed well
in advance of the Annual Meeting. Any shareholder giving a proxy has the right
to revoke it at any time before it is voted. If you receive more than one proxy
card because your shares are registered in different names or at different
addresses, each proxy card should be signed and returned to ensure that all your
shares will be properly voted.
By Order of the Board of Directors
Harriet Burns Feller
Secretary
IMPORTANT
Whether or not you expect to attend the Annual Meeting, please complete,
date and sign the enclosed proxy card and return it promptly in the enclosed
envelope.
For banks, brokerage houses and nominee holders, requests for additional
copies of the Company's proxy materials should be addressed to Harriet Burns
Feller, Esq., Westcorp, 23 Pasteur Road, Irvine, California 92718.
<PAGE> 4
[LOGO]
23 PASTEUR ROAD
IRVINE, CALIFORNIA 92718
PROXY STATEMENT
APPROXIMATE DATE PROXY MATERIAL FIRST SENT TO SHAREHOLDERS: APRIL 26, 1994
This Proxy Statement constitutes the Proxy Statement of Westcorp, a
California corporation (the "Company"), in connection with the solicitation of
proxies by the Board of Directors of the Company for use at the Annual Meeting
of Shareholders of the Company to be held on May 26, 1994, and any adjournments
thereof (the "Meeting").
MEETING DATE AND LOCATION
The Meeting to consider the business described below will be held on May
26, 1994, at 10:00 a.m., at the Corporate Headquarters, 23 Pasteur Road, Irvine,
California 92718.
PURPOSES
At the Meeting, the shareholders will consider and vote on approval of
proposals to (i) elect Class II directors of the Company to serve until 1996,
and (ii) ratify the appointment of the Company's independent public accountants
for fiscal 1994.
RECORD DATE; SHAREHOLDERS ENTITLED TO VOTE
The close of business on April 11, 1994, is the record date (the "Record
Date") for determination of the shareholders of the Company entitled to notice
of and to vote at the Meeting. On that date there were approximately 21,909,843
shares of the Company's common stock, $1.00 par value ("Common Stock"),
outstanding and no shares of any other class of stock outstanding.
VOTE REQUIRED
Each share of the Common Stock outstanding on the Record Date will be
entitled to one vote with respect to approval of the various proposals submitted
to the shareholders. Ratification of the Company's selection of its independent
accountants is not required to be submitted for shareholder approval and
although shareholder approval is not binding, the Board of Directors has elected
to seek ratification by the affirmative vote of a majority of the shares of
Common Stock represented and voting at the Meeting.
MARKET VALUE OF STOCK
As of Monday, April 11, 1994, Westcorp had a market price of $9.00 per
share. The common stock of Westcorp is traded on the New York Stock Exchange.
SOLICITATION AND REVOCATION OF PROXIES
A form of proxy is being furnished herewith by the Company to each
shareholder, and, in each case, is solicited on behalf of the Board of Directors
of the Company for use at the Meeting for the purposes stated in the Notice of
Annual Meeting of Shareholders preceding this Proxy Statement. The entire cost
of soliciting these proxies will be borne by the Company.
<PAGE> 5
Proxies duly executed and returned by shareholders and received by the
Company before the Meeting will be voted FOR the election of Class II directors
specified herein, and FOR the ratification of the selection of Ernst & Young as
the Company's independent accountants for fiscal 1994, unless a contrary choice
is specified in the proxy. Where a specification is indicated as provided on the
proxy card, the shares represented by the proxy will be voted and cast in
accordance with the specification made. As to other matters, if any, to be voted
upon, the person designated as proxy will take such actions as he, in his
discretion, may deem advisable. The person named as proxy was selected by the
Board of Directors of the Company. He is an officer and director of the Company.
Your execution of the enclosed proxy will not affect your right as a
shareholder to attend the Meeting and to vote in person. Any shareholder giving
a proxy has a right to revoke it at any time by either (a) a later dated proxy,
(b) a written revocation sent to and received by the Secretary of the Company
prior to the Meeting, or (c) attendance at the Meeting and voting in person.
VOTING SECURITIES
The Company has outstanding Common Stock, of which approximately 21,909,843
shares were outstanding as of the Record Date. Only shareholders of record on
the books of the Company at the close of business on the Record Date will be
entitled to vote at the Meeting. Each share of the Common Stock is entitled to
one vote.
ELECTION OF DIRECTORS
At the Annual Meeting, four nominees, Ernest S. Rady, Robert W. Jenkins,
Stanley E. Foster and Judith M. Bardwick are nominated for election as Class II
Directors, each director to serve until 1996 and until his or her successor is
elected and qualified. Nominees Rady, Jenkins and Foster were elected at the
1992 annual meeting of shareholders. Ms. Bardwick has not previously served as a
director of the Company. The person named as proxy in the accompanying proxy has
advised the Company of his intention to vote shares covered by proxies received
by him in favor of the election of the nominees named above, each of whom have
consented to be named and have indicated their intent to serve if elected. If
any nominee becomes unavailable for any reason, the proxy in his discretion will
vote for substitute nominees of the Board, unless otherwise instructed.
The following information is submitted concerning the nominees and
directors of the Company:
<TABLE>
<CAPTION>
DIRECTOR
NAME OF DIRECTOR AGE SINCE WESTCORP
---------------------------- --- -------- ------------------------------
<S> <C> <C> <C>
Ernest S. Rady**............ 56 1974 Chairman of the Board, Chief
Executive Officer, Director
Robert W. Jenkins**......... 72 1974 Vice Chairman, Director
Stephen W. Prough*.......... 49 1984 President and Chief Executive
Officer, Director
Alan L. Milligan*........... 64 1993 Director
Stanley E. Foster**......... 66 1992 Director
William J. Crawford*+....... 64 1992 Director
Judith M. Bardwick++........ 61 N/A Nominee
</TABLE>
- ---------------
* Class I Director, to serve until 1995
** Class II Director, nominee for a term expiring in 1996
+ Elected by directors in August, 1993, to fill vacancy created by resignation
of Class I Director David S. Kaufman
++ Nominated to fill Class II seat which will be vacated by the retirement of
Director, General Douglas J. Peacher
2
<PAGE> 6
The following is submitted concerning each of the directors, including the
nominees for election, Ernest S. Rady, Robert W. Jenkins, Stanley E. Foster, and
Judith M. Bardwick.
Ernest S. Rady has served as Chairman of the Board of the Company since
1974, and of Western Financial Savings Bank, F.S.B. (the "Bank"), the principal
subsidiary of the Company, since 1992. He has been a director of the Bank since
1982. Mr. Rady also served as Chairman of the Board of Western Thrift and Loan
Association, a predecessor of the Bank, from 1972. Mr. Rady is a principal
shareholder, manager and consultant to a group of companies engaged in real
estate management and development, property and casualty insurance,
manufacturing and distributing.
Robert W. Jenkins served as the President of the Company from 1974 to 1986,
and has served as a director of the Company and of the Bank from 1974, and as
Chairman of the Bank from 1982 through 1992. He continues to serve as a director
of the Bank. He also served as President and as a director of Western Thrift and
Loan Association, a predecessor of the Bank, from 1972. Mr. Jenkins has been
involved in the financial services industry for the past 47 years. He served as
President of the California Association of Thrift and Loan Companies in 1956 and
1976. He is a past secretary and director of the Thrift Guaranty Corporation of
California, the guaranty fund for California Thrift and Loan Companies.
Stephen W. Prough joined the Company as Vice President and the Bank as
Executive Vice President and director in 1983. Mr. Prough became President and
Chief Executive Officer of the Bank in 1984 and President and Chief Operating
Officer of the Company in 1987. Prior to joining the Bank, Mr. Prough served as
First Vice President of Great American Federal Savings Bank from 1981 to 1983,
as President of Corona Foothill Company from 1980 to 1981, and in various
capacities at San Diego Federal Savings Bank from 1971 to 1980. Mr. Prough is
the past Chairman of the Board of Directors of the California League of Savings
Institutions, a member of the Board of Directors of the Savings and Community
Bankers Association ("SCBA") and serves on the Government Affairs Steering
Committee of SCBA. He is currently serving a three year term as a member of the
Thrift Institution Advisory Council of the Board of Governors of the Federal
Reserve System. He is also a past director of the Conference of Federal Savings
and Loan Associations.
Stanley E. Foster has been President and Chief Executive Officer of Foster
Investment Corporation and its predecessor, Ratner Corporation, an apparel
manufacturing and investment company headquartered in San Diego, California,
since 1954. Mr. Foster also serves as the Chairman of the Board of Directors of
International Licensing Corporation and Hang Ten International, and is a
director of Dickenson Retail Corporation, Postal Annex Plus, Trakmobile and Hot
Topic, Inc. Mr. Foster has been a director of the Company since 1986, and of the
Bank since 1992.
William J. Crawford joined the Board of the Bank in 1992, and was elected
as a director of the Company in August, 1993, to fill the vacancy created by the
resignation of director David S. Kaufman. Prior to his association with the
Bank, Mr. Crawford was the Savings and Loan Commissioner for the State of
California from 1985 until 1991. Mr. Crawford has successfully operated several
savings and loan associations over a period of 35 years.
Alan L. Milligan was appointed to complete the remaining term of Class I
director Bernard E. Fipp who resigned from the Board in January, 1992. Mr.
Milligan has been with the Bank and its predecessors from 1973 until his
retirement from both the Company and the Bank in July, 1990. He was in charge of
the Bank's Dealer Centers and the Collection Management System which handles the
purchase of and collection of all consumer loans and contracts. He served as a
director of the Bank from 1990 through April, 1992, and was re-elected as a
director in 1993. Mr. Milligan is a past director of Thrift Guaranty Corporation
of California, the guaranty fund for California Thrift and Loan Companies. Prior
to his association with the Company, he was with Morris Plan for 16 years. He is
currently a member of the Southern California Auto Dealers Association.
Judith M. Bardwick, Ph.D., is President and founder of Bardwick and
Associates, a management consulting firm. In addition to her many academic
achievements, Dr. Bardwick has been an active business consultant for more than
two decades. Dr. Bardwick earned a B.S. degree from Purdue University and an
M.S. from Cornell. She received her Ph.D. from the University of Michigan and
subsequently became a Full Professor and Associate Dean of the College of
Literature Science and the Arts at that university.
3
<PAGE> 7
Dr. Bardwick has devoted herself to consulting and business-related research and
writing concentrating on issues relating to improving organizational efficiency
and management structure. She is currently a clinical Professor of Psychiatry at
the University of California at San Diego and has worked as a psychological
therapist. Her most recent business book, Danger in the Comfort Zone, was
published in 1991. She is the author of three other books; in addition, she has
published more than 70 articles on a wide range of topics during her
distinguished career.
COMMITTEES OF THE BOARD
The Company has a standing Audit Committee, consisting at present of Robert
W. Jenkins (Chairman), Stanley E. Foster, and Douglas J. Peacher. The functions
of the Audit Committee are to make recommendations to the Board with respect to
the engagement of the Company's independent public accountants; to review the
effectiveness of the Company's system of internal control; and to review, upon
the request of management, professional services to be provided to the Company
by outside auditors and the possible effect on the independence of such
auditors. The Director of Internal Audit reports to the Audit Committee. The
Audit Committee held four meetings in 1993.
The Bank has a standing Compensation Committee whose current members are
Robert W. Jenkins (Chairman), Douglas J. Peacher, and Stanley E. Foster. The
Compensation Committee, which serves concurrently as Compensation Committee for
the Bank, reviews and approves recommendations for annual salaries of employees
paid by the Company and, on behalf of the Board of Directors of the Bank, the
compensation of employees of the Bank and its subsidiaries, and reviews and sets
the levels of compensation of the senior management of the Company and its
subsidiaries, as well as establishing policies applicable to, performance
related to, and bases for compensation. The Committee held four meetings during
1993.
The Executive Committee has the powers of the Board of Directors except as
precluded by law and the Company's bylaws. The Executive Committee is comprised
of Messrs. Rady, Jenkins, and Prough. The Executive Committee did not meet
during 1993.
The Investment Committee makes decisions as to investments by the Company
and the Bank in government agency and treasury securities and corporate bonds.
The members of the Investment Committee are Directors Rady and Prough and Joy
Schaefer Fackler, the Chief Financial Officer and Treasurer of the Company and
J. Keith Palmer, Vice President and Assistant Treasurer of the Bank.
MEETINGS OF THE BOARD
The Board of Directors of the Company held a total of four meetings during
1993. All directors have attended at least 75% of the meetings of the Board of
Directors and Committees on which they serve.
COMPENSATION OF DIRECTORS
Each director who is not also an officer of the Company or any of its
subsidiaries receives $2,500 per Board meeting attended, which is not held in
conjunction with a Bank board meeting attended by that director, and $750 for
each committee meeting, which is not held in conjunction with a board meeting,
attended. Directors who are also officers of the Company or any of its
subsidiaries are not compensated for their services as directors.
4
<PAGE> 8
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
The following information is provided with respect to the current executive
officers of the Company who are not directors:
<TABLE>
<CAPTION>
NAME POSITION AGE SINCE
- ----------------------- ------------------------------------- ---- ------
<S> <C> <C> <C>
Joy Schaefer Fackler Vice President, Chief Financial 34 1992
Officer and Treasurer
Robert E. Adams Vice President 43 1993
James R. Dowlan Vice President 56 1984
Harriet Burns Feller Vice President, Secretary and General 51 1993
Counsel
Terrance P. Mungon Vice President 47 1993
Peggy L. Michel Vice President, Assistant Secretary 66 1972
Howard C. Reese President of Westcorp Financial 62 1987
Services, Inc.
</TABLE>
The following is a brief account of the business experience of each
executive officer who is not a director.
Robert E. Adams has served as Vice President of the Company since 1993 and
as Executive Vice President of the Bank's Mortgage Banking Division since
January, 1994. He served as Senior Vice President since starting with the Bank
in April, 1993. Mr. Adams has in excess of 20 years mortgage banking experience
in virtually every phase of production and operations. Prior to joining the
Bank, he was First Vice President of the Retail Division for Countrywide Funding
Corporation, where he oversaw all aspects of operations for its nationwide
branch system.
James R. Dowlan has served as Vice President of the Company and first as
Senior Vice President of the Bank from 1984 and then as Executive Vice President
of the Bank from 1989. He is President of Westplan Insurance Agency, Inc.,
Westhrift Life Insurance Company, Western Financial Auto Loans, Inc., and
Western Financial Auto Loans 2, Inc., all subsidiaries of the Bank. Prior to his
association with the Company and the Bank, Mr. Dowlan was Vice President, Loan
Administration of Union Bank where he held several positions from 1973. He
served for several years on the National Advisory Board, American Bankers
Association and the Consumer Lending Committee of the California Bankers
Association. He is currently a member of the Consumer Bankers Association.
Joy Schaefer Fackler has served as Vice President, Chief Financial Officer
and Treasurer of the Company since March, 1992, after joining the Company in
1990 as Assistant Vice President and Assistant Treasurer. She was elected
Executive Vice President of the Bank in January, 1994, and continues to serve as
the Chief Financial Officer and Treasurer of the Bank, positions which she has
held since March, 1992. Prior to her association with the Company, she was an
Audit Manager in the financial institutions group for Ernst and Whinney in the
Long Beach, California and Springfield, Illinois offices. Ms. Fackler also held
various positions with Liberty National Bank in Oklahoma City, Oklahoma
including Assistant Controller, Commercial Audit Manager and Vice President Loan
Administration. She is a member of the Financial Managers Society and the
American Institute of Certified Public Accountants.
Harriet Burns Feller has served as Vice President of the Company since May,
1990, and as Secretary and General Counsel since August, 1993, and first as Vice
President and General Counsel of the Bank since May, 1990, and then as Senior
Vice President, Secretary and General Counsel of the Bank since December, 1990.
Ms. Feller was Executive Vice President and General Counsel of Mercury Savings
from 1986 to 1990, Vice President and General Counsel of Ponderosa Homes from
1981 to 1986 and Vice President, Corporate Counsel at Ticor Title Insurance,
which she joined as litigation attorney in 1975. Ms. Feller served as Southern
California President of American Corporate Counsel in 1990 and is a member of
the attorney's committee for the California League of Savings Associations. Ms.
Feller is an active member of the California Bar Association and has also passed
the Bar Examinations in New York and Connecticut, where she practiced prior to
1975.
5
<PAGE> 9
Peggy L. Michel has served as Vice President and Manager of Human Resources
for the Company since 1974 and the Bank since 1972. Prior to her association
with the Company, Ms. Michel served in various capacities with the Morris Plan
Company of California from 1954 to 1972. Ms. Michel has served as past President
of Executive Women International of Orange County, California.
Terrance P. Mungon has served as Vice President of the Company since 1993
and as Senior Vice President for the Bank's Retail Banking Division since
August, 1993. Previously, Mr. Mungon served as Vice President of Branch
Operations for the Division, beginning in October, 1988. Mr. Mungon served as
Regional Vice President for the Northern California region for two years. Mr.
Mungon has been with the Bank for over 15 years.
Howard C. Reese joined the Company in 1987 as President and Chief Executive
Officer of Westcorp Financial Services, Inc. He began his career in consumer
finance with Household Finance Corporation in 1953 where he managed several
branch offices in Southern California. In 1963 he joined Fireside Thrift Company
as a manager. He progressed through the ranks as Supervisor, Assistant Vice
President and Regional Director, and ultimately to Operations Vice President in
charge of 73 branch offices within the State of California. He also serves on
the Board of Directors of the California Financial Services Association.
COMPENSATION OF EXECUTIVE OFFICERS
The following table discloses compensation received by the Company's Chief
Executive Officer and the four remaining most highly compensated executive
officers for the three fiscal years ended December 31, 1993.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------
ANNUAL COMPENSATION(1) AWARDS STOCK
NAME AND ------------------------ OPTIONS ALL OTHER(2)(3)
PRINCIPAL POSITION YEAR SALARY($) BONUS($) OTHER($) (SHARES) COMPENSATION($)
- ----------------------------------- ----- ------- ------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Ernest S. Rady 1993 300,000 100,000 5,875 37,800(4) 25,503
Chairman of the Board 1992 283,250 50,000 -0- -0- 44,544
and Chief Executive Officer 1991 257,500 85,747 1,120 53,550 46,065
Stephen W. Prough 1993 300,000 100,000 5,875 37,800(4) 26,217
President, Chief Operating 1992 283,250 50,000 4,850 -0- 47,668
Officer and Director 1991 257,500 85,747 -0- 53,550 48,606
James R. Dowlan 1993 156,250 52,000 7,350 21,000(4) 14,680
Vice President 1992 137,500 45,828 6,050 26,250 24,287
1991 125,000 41,625 5,500 -0- 24,762
Howard C. Reese 1993 154,094 51,360 7,350 31,000(5) 12,308
President and Chief Executive 1992 137,500 45,787 5,500 26,250 13,106
Officer of Westcorp Financial 1991 125,000 41,625 5,500 -0- 14,833
Services, Inc.
Joy Schaefer Fackler 1993 125,000 37,500 6,700 15,725 5,942
Vice President, Chief Financial 1992 99,458 35,000 5,100 4,725 -0-
Officer and Treasurer 1991 70,000 10,500 2,800 -0- -0-
</TABLE>
- ---------------
(1) The compensation of Mr. Rady is paid solely by Westcorp. The compensation of
Mr. Reese is paid solely by Westcorp Financial Services, Inc. The
compensation for Mr. Prough, Mr. Dowlan and Ms. Fackler is paid by the Bank.
(2) Includes employer match of salary deferral by executive under deferred
compensation plans and above market interest thereon, plus interest and
employer contribution to 401(k) and ESOP; 401(k) and ESOP 1993 contributions
are estimates.
(3) A contribution of $1 million was funded in 1993 by the employer to the
Savings Plan (401(k) and ESOP) which benefits other employees in addition to
those named in the Table. The Combined Plan is described below.
6
<PAGE> 10
(4) Stock options (originally awarded in 1991) repriced in 1993.
(5) Includes 21,000 stock options (originally awarded in 1991) repriced in 1993.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table provides information on option grants in fiscal 1993 to
the named executive officers.
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
PERCENTAGE ASSUMED ANNUAL
OF TOTAL RATES
OPTIONS OF STOCK
GRANTED TO EXERCISE APPRECIATION
EMPLOYEES OR BASE FOR OPTION TERM
OPTIONS IN FISCAL PRICE (PER EXPIRATION -------------------
NAME GRANTED 1993(7) SHARE) DATE 5% ($) 10% ($)
---- ------- ---------- ---------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Ernest S. Rady.............. 37,800(3) 18.6% 9.25 7/1/96 55,114 115,734
Stephen W. Prough........... 37,800(4) 18.6% 9.25 7/1/96 55,114 115,734
Howard C. Reese............. 21,000(5) 10.4% 9.25 7/1/96 30,619 64,297
10,000 4.9% 9.25 7/1/96 14,580 30,618
James R. Dowlan............. 21,000(6) 10.4% 9.25 7/1/96 30,619 64,297
Joy Schaefer Fackler........ 10,000 4.9% 9.25 7/1/98 25,556 56,472
5,275 2.6% 10.50 10/7/98 15,303 33,815
</TABLE>
- ---------------
(1) The Company did not grant any SAR's in 1993.
(2) Options were granted at the market price of the stock at the date of the
grant.
(3) Repriced from $11.90 to $9.25 on July 1, 1993 (originally issued 6/18/91).
(4) Repriced from $11.90 to $9.25 on July 1, 1993 (originally issued 6/18/91).
(5) Repriced from $11.90 to $9.25 on July 1, 1993 (originally issued 6/18/91).
(6) Repriced from $11.90 to $9.25 on July 1, 1993 (originally issued 6/18/91).
(7) Includes repriced options.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SAR'S AT OPTIONS/SAR'S AT
ACQUIRED ON 12/31/93 (#) 12/31/93 ($)
EXERCISE VALUE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE (2)
---- ----------- -------------- --------------------- --------------------
<S> <C> <C> <C> <C>
Ernest S. Rady.......... -0- N/A 31,080E 50,981E
46,620U 18,601U
Stephen W. Prough....... -0- N/A 31,080E 50,981E
46,620U 18,636U
Howard C. Reese......... -0- N/A 12,993E 16,264E
30,607U 8,566U
James R. Dowlan......... -0- N/A 11,340E 18,442E
24,360U 8,073U
Joy Schaefer Fackler.... -0- N/A 4,835E 4,016E
15,165U 3,719U
</TABLE>
- ---------------
(1) No SAR's have been granted by the Company.
(2) Based on the closing price on the New York Stock Exchange of Westcorp common
stock on December 31, 1993 ($9.40625)
7
<PAGE> 11
Employment Contracts and Termination of Employment and Change in Control
Arrangements
Westcorp executed in 1987 Employment Contracts with several senior
executives of Westcorp which provisions are triggered by a change in control of
Westcorp. Under the agreements, Messrs. Prough, Dowlan and Reese are guaranteed
employment for a period of 24 months from the initiation of change of control
proceedings at the salary level in effect at initiation of the change of control
process. The Company reserves the right to terminate the agreements for cause,
which includes fraud or other misconduct of the employees.
CERTAIN BENEFITS
Executive Deferral Plans
Effective August 1, 1985, Westcorp established an Executive Deferral plan
("EDP") for certain senior executives of Westcorp and its subsidiaries,
including the Bank, as determined by the Board of Directors. A participant in
the EDP may defer a portion of his compensation from a minimum of $2,000 a year
to a maximum of 75% of his gross annual salary. The employer matches
contributions up to 5% of a participant's annual salary, excluding bonus. After
the seventh year of participation, there was a mandatory lump sum distribution
to the participant of the first four years' deferrals with interest thereon at
Moody's Investors Service Seasoned Corporate Bond Rate (the "Moody's Rate") plus
3%. Upon retirement at the later of age 65 or 10 years of participation in the
EDP, a participant's account will yield a compound interest rate equal to the
Moody's Rate plus 8%. A participant's account balance is (i) the employer's
contribution and (ii) deferrals for the fifth and subsequent years of
participation. Retirement benefits are paid out over a 15-year period.
Interest is credited at Moody's Rate through the first two years of
participation in the EDP, and increases one percent each year through the fifth
year when it equals Moody's Rate plus 3%. If a participant terminates employment
after making four years of deferrals, he receives all his deferrals, the
employer's contributions, interest credited to those amounts (i) at Moody's Rate
plus 3% and (ii) additional interest accruing on his account balance at Moody's
Rate plus 8% (the "Increased Interest"). The right to receive the Increased
Interest becomes 50% vested following five years of participation, with an
additional 10% vesting following each subsequent year, so that the participant
is 100% vested after ten years of participation.
Benefits owing under the EDP are paid by the employer through borrowings
against or proceeds from insurance policies on the lives of the participants
purchased by the employer.
Effective September 1, 1988, Westcorp established a second Executive
Deferral Plan ("EDP2") for certain participating executives as determined by its
Board of Directors. A participant in EDP2 may defer a portion of compensation
from a minimum of $2,000 a year to a maximum of 5% of base annual salary,
excluding bonus. The employer matches contributions up to 5% of a participant's
base annual salary, excluding bonus. Interest is credited to a participant's
account at "Moody's Investors Service Seasoned Corporate Bond Rate" ("Moody's
Rate") plus 5%.
Participants making contributions to the Plan during or before attaining
age 54 will be paid an amount equal to the initial annual deferral amount
(participant deferral plus employer match) on each of the seventh, eighth and
ninth year anniversaries. Each participant's remaining balance will continue to
accumulate at a rate equal to Moody's Rate plus 5% until death, retirement or
other termination of employment, whichever occurs first.
Upon retirement at the later of age 65 or 10 years of participation in
EDP2, the participant will be paid an amount per month over a 15 year period
based on the amounts deferred, credited with interest, minus the payments made
on the seventh, eighth and ninth anniversaries described above.
If the participant dies before retirement, the participant's beneficiary
will receive the existing account balance in a lump sum or over a 15 year period
with the unpaid balance being credited at Moody's Rate. If the participant dies
after retirement, the participant's beneficiary will receive any unpaid
installments due with the unpaid balance being credited at Moody's Rate.
Interest is credited at Moody's Rate through the first two years of
participation in EDP2, and increases, one percent each year through the fourth
year when it equals Moody's Rate plus 3%. The participant will also
8
<PAGE> 12
receive a percentage (10% for each year through the tenth year) of the employer
match and interest thereon at Moody's Rate plus 3%.
A participant leaving employment after completing four years of deferrals
receives his deferrals and interest thereon credited at Moody's Rate plus 3%.
The participant will also receive a percentage (10% for each year through the
tenth year) of the employer match and interest thereon at Moody's Rate plus 3%.
Benefits provided by EDP2 are paid by the employer through borrowings
against or proceeds from insurance policies on the lives of the participants
purchased by the employer.
Effective May 1, 1992, the Bank established a third Executive Deferral Plan
("EDP3") for certain participating executives as determined by its Board of
Directors. A participant may defer a portion of compensation from a minimum of
$2,000 a year to a maximum of 10% of base annual salary. There is no employer
match in EDP3, unlike EDP1 and EDP2. Interest is credited to a participant's
account at the Moody's monthly "Seasoned Corporate Bond" rate. Participant's
first year's contribution plus interest may be distributed beginning in the
sixth year. Participant's second year's contribution plus interest may be
distributed in year seven and so on. If a participant terminates employment, he
receives all deferrals plus interest.
Stock Option Plans
1982 Stock Option Plan. Westcorp's incentive stock option plan was adopted
by the Board of Directors of Westcorp and approved by its shareholders in April,
1982, (the "1982 Stock Option Plan") and provides for the granting of options
covering up to 900,000 shares of the Common Stock of Westcorp. The stock options
granted to employees under the 1982 Stock Option Plan are intended to be
"incentive stock options" within the meaning of the Internal Revenue Code of
1986 (the "Code"). Consequently, all options granted under the 1982 Stock Option
Plan are exercisable at a price per share not less than the fair market value
per share of the Common Stock on the date of grant, except that the exercise
price of options may not be less than 110% of the fair market value if the
optionee owns, prior to such grant, directly or indirectly, 10.0% of the
outstanding Common Stock of Westcorp. The Compensation Committee of the Board of
Directors of Westcorp, which is comprised of at least three members designated
by the Board of Directors of Westcorp, serves as the 1982 Stock Option Plan
administrator and in such capacity selects the employees to whom options are to
be granted and the number of shares to be granted based upon an employee's
length of service, the amount of his compensation, and his responsibilities,
duties, and functions. The terms of such options may not exceed five years from
the date of grant. Options may be terminated earlier, however, in the event of
the death or disability of the optionee or the optionee's ceasing to perform
services for Westcorp or its subsidiaries. Optionees are prohibited from
transferring or assigning any options other than due to the death of the
optionee. The 1982 Stock Option Plan expired in April, 1992, although options
granted under such plan will remain exercisable until 1996 unless earlier
terminated pursuant to the terms of such plan.
1991 Stock Option Plan. The other stock option plan of Westcorp was adopted
by the Board of Directors of Westcorp in April, 1991, and approved by its
shareholders in May, 1991, (the "1991 Stock Option Plan" and, together with the
1982 Stock Option Plan, the "Stock Option Plans"). Employees and directors of
Westcorp and its subsidiaries are eligible to participate under the 1991 Stock
Option Plan. Such plan is administered by the Westcorp Compensation Committee
and, in such capacity, the committee selects employees and directors to whom
options are to be granted and the number of shares to be granted based on the
same criteria used to determine awards under the 1982 Stock Option Plan. No
further options may be granted under the 1991 Stock Option Plan after April 15,
2001.
Options granted under the 1991 Stock Option Plan may be either "incentive
stock options" or "non-qualified options" within the meaning of the Code.
However, only non-qualified options may be granted to directors who are not also
employees. The exercise price for options granted under such plan must be
established at a level not less than the fair market value of the Common Stock
on the date of grant, except that the exercise price of incentive stock options
may not be less than 110% of the fair market value if the optionee owns, prior
to such grant, directly or indirectly, 10.0% of the outstanding Common Stock of
Westcorp. The term of such options may not exceed 10 years from the date of
grant. However, optionees who own, prior to a grant, directly or indirectly,
10.0% or more of the outstanding Common Stock of Westcorp, may not be
9
<PAGE> 13
granted "incentive stock options" with a term greater than 5 years. Options may
be terminated earlier, however, in the event of the death or disability of the
optionee or the optionee ceasing to perform services for Westcorp or its
subsidiaries as provided in the 1991 Stock Option Plan. The options are also
subject to all of the other terms and conditions of the written stock option
agreement between the optionee and Westcorp.
In the aggregate 3,150,000 shares of Westcorp Common Stock may be the
subject of options granted under the 1991 Stock Option Plan. However, the number
of shares subject to options granted under such plan (and the exercise prices
for the options) are subject to adjustment in the event of any change in the
outstanding shares of Westcorp as a result of stock dividends, stock splits or
conversions of shares. If any option expires or terminates without having been
exercised in full, the unpurchased shares become available again for purposes of
future incentive and non-qualified stock options to be granted under the 1991
Stock Option Plan.
Consolidated Plan
Westcorp's Stock Purchase and Salary Savings Plan (the "Savings Plan") was
adopted originally in 1982 and subsequently was amended and restated in 1985 to
conform to requirements of the Tax Equity and Fiscal Responsibility Act of 1982,
the Tax Reform Act of 1984 and the Retirement Equity Act of 1984. A
determination letter was issued by the Internal Revenue Service with respect to
such restatement that the Savings Plan was a qualified plan under Section 401(a)
of the Code and met the requirements of Section 401(k) of the Code. The first
amendment to the restated Savings Plan was adopted in 1986. The Westcorp
Employee Stock Ownership Plan (the "ESOP") was adopted originally in 1975 and
known as the Westcorp, Inc. Profit Sharing Plan. The ESOP was restated in 1985,
and a determination letter was issued by the Internal Revenue Service in 1986
stating that the ESOP was a qualified plan under Section 401(a) of the Code. The
first amendment to the restated plan was adopted in 1986. Effective January 1,
1990, the Savings Plan and the ESOP were consolidated in the Westcorp Employee
Stock Ownership and Salary Savings Plan (the "Consolidated Plan").
The Consolidated Plan is administered by an Administration Committee
appointed by the Board of Directors, which committee consists of at least three
members. All employees of the Company and its subsidiaries, other than employees
covered under certain collective bargaining agreements, are eligible to
participate in the Consolidated Plan after satisfaction of minimum service and
age requirements. Each year the Employer may, in its discretion, make an ESOP
contribution to the Consolidated Plan. Each participant is credited with one
"unit" for each $100 in earnings paid to such participant by the Employer in
that year, and an additional "unit" for each full year of service to the
Employer. If the Employer makes an ESOP contribution, it is allocated to each
participant's ESOP Contribution Account (as such term is defined in the
Consolidated Plan) in the same proportion as such participant's "units" bear to
the total number of "units" credited to all participants for that year. Eligible
employees may also elect to contribute from 1.0% to 10.0% of their earnings to a
Salary Savings Contribution Account (as such term is defined in the Consolidated
Plan). Each year the Employer may, in its discretion, make a matching employer
contribution which is allocated to the Matching Contribution Account (as such
term is defined in the Consolidated Plan) for each participant that makes a
Salary Savings contribution for such year. If the Employer makes a matching
employer contribution it is allocated to the matching contribution account in
the same proportion that each such contribution of up to 6.0% of earnings bears
to the total of all such contributions of up to 6.0% of earnings. The Employer's
annual contribution to a participant's ESOP Contribution Account and Matching
Employer Contribution Account, and a participant's contribution to such
participant's Salary Savings Contribution Account, may not exceed in the
aggregate the lesser of 25.0% of such participant's annual compensation or
one-fourth of the dollar limitation established under Section 415(b)(1)(A) of
the Code.
The Employer's contributions to a participant's ESOP Contribution Account
are invested in Westcorp common stock or approved investments at the direction
of the plan administrator. Each participant who has completed ten years of
service and has attained the age of 55 may also direct the plan administrator to
diversify the investments allocated to such participant's ESOP Contribution
Account. A participant's contributions to his or her Salary Savings Contribution
Account are invested by the plan administrator in fixed income, stock or other
permitted investment alternatives selected by the participant. The plan
administrator
10
<PAGE> 14
selects the investment alternatives for the amount contributed by the Employer
to the Matching Employer Contribution Account. Interest, earnings, dividends,
gains and losses are allocated to each participant's ESOP Contribution Account,
Salary Savings Contribution Account and Matching Employer Contribution Account,
as the case may be, in the proportion such account bears to the total accounts
of all participants in that investment alternative. Shares of Westcorp common
stock allocated to any of a participant's accounts are voted in accordance with
the proxy of such participant. Each participant is also entitled to direct the
plan administrator regarding the exercise of rights, other than voting rights,
arising in connection with shares of Westcorp common stock allocated to such
participant's accounts.
Participants have a 100% non-forfeitable interest in the value of their
Salary Savings Contribution Account at all times. The participant's interest in
his or her ESOP Contribution Account and Employer Matching Contribution Account
becomes 20.0% vested after the completion of three years of service. An
additional 20.0% becomes vested each following year, until the participant
completes 7 years of service and the participant's interests become fully
vested.
A participant is entitled to receive all benefits under the Consolidated
Plan, whether or not vested, upon death, permanent disability, or retirement at
age 65. Upon termination of employment for any other reason, participants will
receive full amount of their Salary Savings Contribution Account and the vested
portions of their ESOP Contribution Account and Matching Employer Contribution
Account.
The Company funded a $1 million contribution to the Consolidated Plan for
1993.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee is made up of three non-employee directors; Mr.
Jenkins retired from the Bank in 1990. The Compensation Committee serves jointly
as the Compensation Committee of the Company and of the Bank's Board of
Directors, since the members are identical, and because all but two of the
Company's employees are employees of the Bank and its subsidiaries. The primary
separate function of the Company's Compensation Committee consists of
administration of the Stock Option Plans, as described above. Therefore, in
order to present a meaningful report to the Company's shareholders, this report
will cover the Bank's Compensation Committee activities as well. As used in this
report, the term "Company" will encompass the Bank and its subsidiaries in
addition to the Company itself.
The Company applies a consistent philosophy to compensation for all
employees, including senior management. This philosophy is based on the premise
that the achievements of the Company result from the coordinated efforts of all
individuals working toward common objectives.
COMPENSATION PHILOSOPHY
Under the supervision of the Compensation Committee of the Board of
Directors, the Company has developed and implemented compensation policies,
plans and programs which seek to enhance the profitability of the Company, and
thus shareholder value, by aligning closely the financial interests of the
Company's senior managers with those of its shareholders. The Compensation
Committee endorses the belief that stock ownership by management and the
granting of stock options to senior executives furthers that goal.
The compensation plans and programs are structured to integrate pay with
the Company's annual and long term performance goals. The plans and programs are
designed to recognize initiative and achievement and to assist the Company in
attracting and retaining qualified executives. In furtherance of these goals,
annual base salaries are generally set at or below competitive levels so that
the Company relies to a large degree on annual incentive compensation to attract
and retain corporate officers and other key employees with outstanding abilities
and to motivate them to perform to the full extent of their abilities, with a
significant portion of an executive officer's compensation at risk. The
relationship of the performance driven bonus to salary is illustrated in the
Summary Compensation Table. For the longer term, incentive stock options are
awarded by the Company. Incentive compensation is variable and closely tied to
corporate, business unit and individual performance in a manner that encourages
a sharp and continuing focus on building profitability and shareholder value. As
a result of the increased emphasis on tying executive compensation to corporate
11
<PAGE> 15
performance, in any particular year the total compensation of the Company's
executives may be paid more or less than the executives of the Company's
competitors, depending upon the Company's or the individual business unit's
performance.
In evaluating the performance and setting the incentive compensation of the
Chief Executive Officer and other senior executives , the Compensation Committee
takes into account their consistent commitment to long term success of the
Company through conservative management of certain business units and aggressive
management of other business units as dictated by existing and anticipated
market conditions. Certainly the Compensation Committee expects and rewards
recognition by the Chief Executive Officer and senior executives of both adverse
and advantageous market conditions for each of the Company's major businesses.
At the beginning of each year, performance goals to determine annual
incentive compensation are established for each business unit and for each
executive. Financial goals include loan volume growth, operating earnings, loan
delinquency levels and return on equity and return on assets, Community
Reinvestment Act results, cost controls and productivity. The most weight is
given to profitability as it relates to established goals. Individual
qualitative, as well as quantitative, goals and objectives are set by the
Committee. Management goals were established at the beginning of 1993 for those
executives and managers who do not manage business units with direct financial
goals. These goals were tailored to the particular functions required to be
performed. At the end of each year, generally in December, performance against
these goals and objectives is measured on both a predetermined arithmetic method
and, to a certain extent, on subjective evaluation, in light of market
conditions for the particular business unit. The results of these evaluations
are then considered by the Compensation Committee when determining the amounts
to be awarded (which appear as "Bonus" in the Summary Compensation Table).
Certain business units of the Company performed in accordance with or in
excess of budget, and the senior executives of those businesses received full
performance bonuses, while business units which did not meet performance goals
resulted in lesser or no bonuses for their respective managers.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
In determining Chief Executive Officer Ernest Rady's compensation for 1993,
the Compensation Committee discussed and considered all of the factors discussed
above. In addition, target versus actual operating performance of the company
overall, and various subjective performance criteria were utilized to determine
the extent to which the targeted annual bonus to Mr. Rady would be paid. The
Committee analyzed his performance in comparison to specific management
objectives established at the beginning of the year, and the resulting
compensation also reflects his position, duties and responsibilities. The
Committee has determined that Mr. Rady has managed the Company well in the 1993
economic and industry environment, and has taken steps to begin geographic
diversification.
In addition, the Compensation Committee evaluated peer compensation
information obtained from the SNL Executive Compensation Review for the western
United States and from Montgomery Securities. Peer information used by the
Compensation Committee differs from that used in the Stock Price Performance
graph. The Committee considered the extent to which Mr. Rady has effectively
represented the Company in the industry and investor communities. Taken into
account was the California economic environment, which put a degree of pressure
on the earning capacity of certain of the Company's businesses, especially in
dealing with the problem assets included in the Bank's real estate portfolio.
The Compensation Committee considered the factors stated above in arriving
at the award of 1993 bonus compensation for Mr. Rady as shown in the Summary
Compensation Table. The bonus compensation for 1993 reflects the achievement of
management objectives, including the improving financial performance; the
retooling of the Company's business units to set the stage for expansion; the
improved regulatory evaluations; and the success of the capital offerings
achieved in 1993. The Committee evaluated Mr. Rady's strategic acumen and
individual performance in achieving Company goals, both financial and
non-financial. The Committee established 1994 management objectives for Mr.
Rady.
12
<PAGE> 16
STOCK OPTION GRANTS
Westcorp uses stock options as long term incentives and expects that it
will continue to use this compensation alternative in the future. In 1991, the
Company adopted, and the shareholders approved, a new stock option plan that
made 3,150,000 shares of common stock of the Company available for just such
purposes and is described above. The Westcorp Compensation Committee grants
incentive stock options to employees of the Company and its subsidiaries and
views such grants less as compensation and more as an incentive mechanism. Such
stock options provide incentive for the creation of shareholder value over the
long term. Grants were made in 1993 to some executives as shown in the Summary
Compensation Table, and the tables disclosing option grants and exercises.
REPORT ON REPRICING OF OPTIONS
The Compensation Committee adjusted the exercise price of stock options
previously granted to four individuals, the CEO and three named executives, as
illustrated in the table below. Options for a total of 117,600 shares of
Westcorp stock were repriced from exercise prices of $11.90 per share to $9.25
per share. The Committee repriced existing options to approximate book value per
share in lieu of granting new options to these executives, with the exception of
Mr. Reese who was also granted new options, as shown in the table relating to
option grants. The Committee used the same criteria for these repricings as it
used for option grants. There have been no previous option repricings in the
last 10 completed fiscal years.
<TABLE>
<CAPTION>
MARKET PRICE
OF STOCK AT LENGTH OF ORIGINAL
NUMBER OF SECURITIES TIME OF EXERCISE PRICE NEW OPTION TERM
UNDERLYING OPTIONS REPRICING OR AT TIME OF EXERCISE REMAINING AT
REPRICED OR AMENDED AMENDMENT REPRICING OR PRICE DATE OF REPRICING
NAME DATE ($) ($) AMENDMENT ($) ($) OR AMENDMENT
- --------------------- ------- --------------------- ------------ -------------- -------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Ernest S. Rady 7/1/93 37,800 9.25 11.90 9.25 3 years
Chairman of the
Board, Chief
Executive Officer,
Director
Stephen W. Prough 7/1/93 37,800 9.25 11.90 9.25 3 years
President and Chief
Operating Officer,
Director
James R. Dowlan 7/1/93 21,000 9.25 11.90 9.25 3 years
Vice President
Howard C. Reese 7/1/93 21,000 9.25 11.90 9.25 3 years
President of
Westcorp Financial
Services, Inc.
</TABLE>
OTHER COMPENSATION PLANS
Other compensation benefits have from time to time been established for the
benefit of senior executives and other mangers and officers of the Company, each
of which are discussed in the above materials. The results of these compensation
plans on the most highly compensated executives are reflected in the
Compensation Table.
POLICY REGARDING COMPLIANCE WITH I.R.C. SEC. 162(M)
Section 162(m) of the Internal Revenue Code, as enacted by the Omnibus
Budget Reconciliation Act of 1993, provides in general that, beginning in 1994,
compensation paid to certain executives of publicly held corporations will not
be deductible for federal income tax purposes to the extent it exceeds
$1,000,000 per year. It is the present policy of the Compensation Committee that
individual compensation shall not exceed the deductibility requirements of
Internal Revenue Code, Section 162 (m) and the Company intends to take
13
<PAGE> 17
the necessary steps to comply, but also reserves the right to enter into
incentive and other compensation arrangements that do not so comply when it
determines that the benefits to the Company outweigh the cost of the possible
loss of federal income tax deductions.
COMPENSATION COMMITTEE
ROBERT W. JENKINS, CHAIRMAN
STANLEY E. FOSTER
DOUGLAS J. PEACHER
STOCK PRICE PERFORMANCE GRAPH
Set forth below is a line graph depicting the yearly percentage change in
the cumulative total shareholder return on the Company's common stock against
the cumulative total return of the S&P 500 Index and a compiled peer group for
the period of five fiscal years commencing December 31, 1988, and ending
December 31, 1993.
The Stock Price Performance Graph below shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act of 1933 or under the
Securities Exchange Act of 1934, except to the extent Westcorp specifically
incorporated this information by reference, and shall not otherwise be deemed
filed under such Acts.
COMPARISON OF FIVE-YEAR CUMULATIVE RETURN
OF WESTCORP AND PEER GROUPS
(GRAPH)
<TABLE>
<CAPTION>
MEASUREMENT PERIOD S&P GROUP S&P 500
(FISCAL YEAR COVERED) WESTCORP INDEX INDEX
<S> <C> <C> <C>
1988 100 100 100
1989 131.64 133.73 131.68
1990 94.55 106.48 127.58
1991 226.62 166.00 166.47
1992 128.27 174.80 179.20
1993 172.71 183.30 197.26
</TABLE>
14
<PAGE> 18
CERTAIN TRANSACTIONS BETWEEN MANAGEMENT
AND THE COMPANY OR ITS SUBSIDIARIES
The Bank leases its Encino and Walnut Creek branch office spaces from
Insurance Company of the West ("ICW"), an affiliate of Mr. Rady, a director of
the Bank and Chairman of the Board and Chief Executive Officer of the Company.
The basic annual rent is adjusted annually and includes a portion of direct
operating expenses. The Walnut Creek leases expire in 1995 and 1998; the Encino
lease terms expire at various times from 1994 through 1988. The Bank paid
$406,518 in rent to ICW in 1993. The Bank leases office space to ICW in Fresno,
Orange, and Sacramento, California for which it received rent of $91,980 in
1993.
The Bank leases from the Ernest S. Rady Trust the office space for its Del
Mar offices. The lease terms expire in 1996 and 2001. The rent paid by the Bank
for the Del Mar leases in 1993 totaled $151,877. The Kearny Mesa Business Center
is landlord to the Bank's Dealer Center location in San Diego. Kearny Mesa
Business Center is an affiliate of Ernest Rady. The total amount paid in 1993
pursuant to this lease was $59,998.
American Assets Inc., which is controlled by Ernest S. Rady, acts as
building managers and rental agents with respect to the properties owned by the
Bank and provides rehabilitation and disposition services to the Bank for
multifamily properties acquired by the Bank through foreclosure. In 1993, the
Bank paid approximately $488,531 in fees to American Assets, Inc., for such
services.
In the opinion of the Company these transactions have been on terms no less
favorable to the Bank than could be obtained from unaffiliated parties. All
future transactions with persons affiliated with the Bank will be on terms no
less favorable than those terms that could have been obtained in transactions
with unaffiliated third parties. Furthermore, any future transactions with
affiliated persons will continue to be approved by a majority of disinterested
directors of the Bank.
SECURITY OWNERSHIP OF MANAGEMENT, DIRECTORS AND NOMINEE
The following table sets forth, as of March 8, 1994, certain security
ownership information as to (a) the person who is beneficial owner of more than
5% of the outstanding shares of the Common Stock, (b) each director and nominee
of the Company, (c) each of the named executive officers and (d) all officers
and directors of the Company as a group. Management knows of no person, other
than the person set forth below, who owns more than 5% of the outstanding shares
of Common Stock.
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
OF WESTCORP
BENEFICIALLY
OWNED AS OF PERCENT OF
NAME OF DIRECTOR POSITION WITH WESTCORP MARCH 8, 1994 CLASS(1)
---------------- ---------------------- ------------- ----------
<S> <C> <C> <C>
Ernest S. Rady Chairman of the Board and Chief 13,719,058(2) 62.18
Executive Officer, Director
Robert W. Jenkins Vice Chairman 318,602(3) 1.45
Stephen W. Prough President and Chief Operating 185,257(4) 0.84
Officer
Alan L. Milligan Director 89,374(5) 0.40
Stanley E. Foster Director 138,446(6) 0.63
William J. Crawford Director 1,000(7) (8)
Judith M. Bardwick Nominee -0- -0-
James R. Dowlan Vice President 56,444(9) 0.26
Joy S. Fackler Vice President, Chief Financial 5,939(10) (8)
Officer and Treasurer
Howard C. Reese President, and Chief Executive 49,884(11) 0.23
Officer of Westcorp Financial
Services, Inc.
Directors, Officers 14,595,735(12) 66.62
and Nominee as a
Group (14 persons)
</TABLE>
15
<PAGE> 19
- ---------------
(1) The percentages are calculated on the basis of the number of shares
outstanding, plus the number of shares which such person or group has a
present right to acquire pursuant to the exercise of stock options within
60 days of March 8, 1994. All shares are common stock.
(2) Includes beneficial ownership of 68,880 shares which may be acquired within
60 days of March 8, 1994, pursuant to stock options awarded under Stock
Option Plans plus vested ESOP shares as of December 31, 1993.
(3) Includes beneficial ownership of 3,150 shares which may be acquired within
60 days of March 8, 1994, pursuant to stock options awarded under Stock
Option Plans.
(4) Includes beneficial ownership of 68,880 shares which may be acquired within
60 days of March 8, 1994, pursuant to stock options awarded under Stock
Option Plans plus vested ESOP shares as of December 31, 1993.
(5) Includes beneficial ownership of 2,575 shares which may be acquired within
60 days of March 8, 1994, pursuant to stock options awarded under Stock
Option Plans.
(6) Includes beneficial ownership of 2,480 shares which may be acquired within
60 days of March 8, 1994, pursuant to stock options awarded under Stock
Option Plans.
(7) Includes beneficial ownership of 1,000 shares which may be acquired within
60 days of March 8, 1994, pursuant to stock options awarded under Stock
Option Plans.
(8) Less than 0.1%.
(9) Includes beneficial ownership of 32,340 shares which may be acquired within
60 days of March 8, 1994, pursuant to stock options awarded under Stock
Option Plans plus vested ESOP shares as of December 31, 1993.
(10) Includes beneficial ownership of 4,835 shares which may be acquired within
60 days of March 8, 1994, pursuant to stock options awarded under Stock
Option Plans plus vested ESOP shares as of December 31, 1993.
(11) Includes beneficial ownership of 33,993 shares which may be acquired within
60 days of March 8, 1994, pursuant to stock options awarded under Stock
Option Plans plus vested ESOP shares as of December 31, 1993.
(12) Includes 9,722 shares subject to options which are exercisable within 60
days of March 8, 1994.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
WHO ARE NOT MANAGEMENT
As of April 11, 1994, no person or group other than Mr. Rady was known to
the Company to have owned beneficially more than 5% of the outstanding shares of
the Company's common stock.
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
Upon recommendation of the Audit Committee, the international accounting
firm of Ernst & Young, certified public accountants, serves the Company as its
auditors at the direction of the Board of Directors of the Company. One or more
representatives of Ernst & Young are expected to be present at the Meeting and
will have an opportunity to make a statement if they desire to do so and to be
available to respond to appropriate questions.
This matter is not required to be submitted for shareholder approval, and
although shareholder approval is not binding, the Board of Directors has elected
to seek ratification by the affirmative vote of a majority of the shares
represented and voted at the Meeting.
16
<PAGE> 20
SHAREHOLDER PROPOSALS FOR THE 1994 ANNUAL MEETING
Shareholders who wish to present proposals for action at the 1994 Annual
Meeting should submit their proposals in writing an in conformance with the
bylaws to the Secretary of the Company at the address of the Company set forth
on the first page of this Proxy Statement. Proposals must be received by the
Secretary no fewer than 30 days, nor more than 60 days, prior to the date of the
scheduled annual meeting for inclusion in next year's proxy statement and proxy
card. The scheduled date of the annual meeting may be obtained from the
Secretary after January 1, 1995.
ANNUAL REPORT TO SHAREHOLDERS
The Annual Report to Shareholders of the Company for the year ended
December 31, 1993, including audited consolidated financial statements, has been
mailed to the shareholders, but such report is not incorporated in this Proxy
Statement and is not deemed to be a part of the proxy solicitation material.
OTHER MATTERS
The Management of the Company does not know of any other matters which are
to be presented for action at the Meeting. Should any other matters come before
the Meeting or any adjournment thereof, the person named in the enclosed proxy
will have the discretionary authority to vote all proxies received with respect
to such matters in accordance with his judgment.
ANNUAL REPORT ON FORM 10-K
A copy of the Company's Annual Report on Form 10-K, as filed with the
Securities and Exchange Commission (exclusive of Exhibits), will be furnished
without charge to any person from whom the accompanying proxy is solicited upon
written request to Harriet Burns Feller, Esq., Westcorp, 23 Pasteur Road,
Irvine, California 92718. If Exhibit copies are requested, a copying charge of
$.20 per page will be made.
BY ORDER OF THE BOARD OF DIRECTORS
Harriet Burns Feller
Secretary
Irvine, California
April 26, 1994
SHAREHOLDERS ARE URGED TO SPECIFY THEIR CHOICES, DATE, SIGN, AND RETURN THE
ENCLOSED PROXY IN THE ENCLOSED ENVELOPE. PROMPT RESPONSE IS HELPFUL AND YOUR
COOPERATION WILL BE APPRECIATED.
17
<PAGE> 21
REVOCABLE PROXY REVOCABLE PROXY
WESTCORP
23 Pasteur Road
Irvine, California 92716
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF THE SHAREHOLDERS OF WESTCORP ON MAY 26, 1994
The undersigned hereby appoints Stephen W. Prough with the power to appoint his
substitute, as proxy and hereby authorizes him to represent and to vote all of
the shares of common stock held of record by and standing in the name of the
undersigned on April 11, 1994, at the annual Meeting of the Shareholders of
WESTCORP, to be held May 26, 1994, or any adjournment thereof, in accordance
with the instructions below and IN FAVOR OF ANY PROPOSAL AS TO WHICH NO
INSTRUCTION IS INDICATED.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1 and 2.
Proxy continued on reverse
Please mark
[X] your votes
as this
----------
COMMON
1. ELECTION OF DIRECTORS WITHHOLD FOR ALL
NOMINEES: AUTHORITY nominees
Ernest S. Rady, to vote for (except for
Robert W. Jenkins, FOR ALL all nominees the nominees
Stanley E. Foster, and nominees listed written below)
Judith M. Bardwick [ ] [ ] [ ]
INSTRUCTION: To withhold authority to vote
for any individual nominee, print that
nominee's name on the line provided below.
-------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND MAY BE REVOKED
PRIOR TO ITS EXERCISE BY FILING WITH THE SECRETARY OF THE COMPANY AN INSTRUMENT
REVOKING THIS PROXY OR A DULY EXECUTED PROXY BEARING A LATER DATE, OR BY BEING
PRESENT AT THE ANNUAL MEETING AND ELECTING TO VOTE IN PERSON.
FOR AGAINST ABSTAIN
2. RATIFICATION OF THE APPOINTMENT [ ] [ ] [ ]
OF ERNST & YOUNG AS THE
INDEPENDENT AUDITORS OF THE COMPANY
FOR FISCAL YEAR 1994.
3. OTHER BUSINESS. In accordance with the recommendation of the Company's Board
of Directors, the Proxy is authorized to vote upon such other business as
may properly come before the Meeting and any adjournment(s) thereof.
I DO PLAN to attend the Meeting and vote my shares. [ ]
Please date this Proxy and sign your name exactly as it appears on your stock
certificate(s). When shares are held by joint tenants, both should sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
the full title as such. If a corporation, please sign in full corporate name by
President or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
Dated: _______________________________________________________________, 1994
Number of Shares Owned: ____________________________________________________
Signature __________________________________________________________________
Name
Signature __________________________________________________________________
Name
