<PAGE> 1
SCHEDULE 14A INFORMATION
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:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
WESTCORP
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $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 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / 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:
(4) Date Filed:
<PAGE> 2
[LOGO]
23 PASTEUR ROAD
IRVINE, CALIFORNIA 92718
April 28, 1995
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 23, 1995, 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 1995. A
formal Notice of Annual Meeting of Shareholders, Westcorp's 1994 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, President
and Chief Executive Officer
<PAGE> 3
[LOGO]
23 PASTEUR ROAD
IRVINE, CALIFORNIA 92718
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 23, 1995
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 Tuesday, May 23, 1995, at 10:00 a.m., for the following
purposes:
1. To elect two directors for a term expiring in 1997.
2. To ratify the appointment of Ernst & Young as the independent
accountants for Westcorp for fiscal 1995.
3. To transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
The Board of Directors has selected March 31, 1995, 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 28, 1995
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 23, 1995, and any adjournments
thereof (the "Meeting").
MEETING DATE AND LOCATION
The Meeting to consider the business described below will be held on May
23, 1995, 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 I directors of the Company to serve until 1997, and
(ii) ratify the appointment of the Company's independent public accountants for
fiscal 1995.
RECORD DATE; SHAREHOLDERS ENTITLED TO VOTE
The close of business on March 31, 1995, 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 23,148,286
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 Friday, March 31, 1995, Westcorp had a market price of $11.00 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 I directors
specified herein, and FOR the ratification of the selection of Ernst & Young as
the Company's independent accountants for fiscal 1995, 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 23,148,286
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, two nominees, Alan L. Milligan and William J.
Crawford are nominated for election as Class I Directors, each director to serve
until 1997 and until his successor is elected and qualified. Nominee Milligan
has been a director since 1993, and Nominee Crawford, since 1992. At its
December, 1994, meeting, the Board reduced the number of directors from seven to
six, electing not to fill the vacancy created by the resignation of Stephen W.
Prough. 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 directors of the
Company, including nominees for election, William J. Crawford and Alan L.
Milligan:
<TABLE>
<CAPTION>
DIRECTOR WESTERN FINANCIAL SAVINGS
NAME OF DIRECTOR AGE SINCE BANK
- ---------------------------- ---- -------- -------------------------
<S> <C> <C> <C>
Ernest S. Rady**............ 57 1974 Chairman of the Board,
Director, President, CEO
Robert W. Jenkins**......... 73 1974 Vice Chairman, Director
Alan L. Milligan*........... 65 1993 Director
Stanley E. Foster**......... 67 1992 Director
William J. Crawford*........ 65 1992 Director
Judith M. Bardwick**........ 62 1994 Director
</TABLE>
- ---------------
* Class I Director, nominee for a term expiring in 1997.
** Class II Director, to serve until 1996.
The following information is submitted concerning each of the directors:
Ernest S. Rady has served as Chairman of the Board of the Company since
1974 and is also President and Chief Executive Officer. He has also served as
Chairman of the Board of Western Financial Savings Bank, F.S.B. (the "Bank")
since 1992; as a director since 1982; and as President and Chief Executive
Officer since
2
<PAGE> 6
June 1994. He 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. Mr. Rady first became associated with other
members of the management of the Bank in 1968 while serving on the Board of
Directors of the Morris Plan Company of California.
Robert W. Jenkins is Vice Chairman of the Company. He previously served as
President of the Company from 1974 to 1986, and as a director of the Company
from 1974. He has also served as the President of the Bank from 1974 to 1984,
and has served as a director of the Bank from 1974, and as Chairman of the Bank
since 1982. He resigned as Chairman of the Bank in 1992 but 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 46
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. Mr. Jenkins first became associated with other members of the
management of the Company while serving as Executive Vice President of the
Morris Plan Company of California from 1961 to 1973.
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 was elected as a director of the Company in August,
1993. He joined the Board of the Bank in 1992. 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 has been a director of the Company since 1993. He was with
the Bank and its predecessors from 1973 until his retirement 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. Dr. Bardwick has devoted
herself to consulting and businessrelated 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. Ms. Bardwick has been a director of the
Company since 1994.
Mr. Stephen W. Prough resigned from the Board on June 14, 1994.
COMMITTEES OF THE BOARD
The Company has a standing Audit Committee, consisting at present of
Stanley E. Foster (Chairman), Alan Milligan and Robert W. Jenkins. The functions
of the Audit Committee are to make recommendations
3
<PAGE> 7
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 Company has contracted with its outside
auditors to perform expanded audit procedures previously performed by an
internal audit department. These expanded audit functions are overseen by the
Bank's Director of Safety and Soundness and a special Internal Controls Task
Force. The Director of Safety and Soundness reports to the Audit Committee. The
Audit Committee held six meetings in 1994.
The Company has a standing Compensation Committee whose current members are
Robert W. Jenkins (Chairman), Judith M. Bardwick, and Stanley E. Foster. The
Compensation Committee reviews and approves recommendations for annual
compensation of employees paid by the Company and Bank as well as stock options
granted by the Company and reviews and sets the levels of compensation of senior
management, as well as establishing policies applicable to, performance related
to, and bases for compensation. The Committee held four meetings during 1994.
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 Crawford. The Executive Committee met once in
1994.
MEETINGS OF THE BOARD
The Board of Directors of the Company held a total of six meetings during
1994. 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 attended, which is not held in conjunction with a Board
meeting. Directors who are also officers of the Company or any of its
subsidiaries are not compensated for their services as directors.
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>
OFFICER NAME BANK POSITION AGE SINCE
- ------------------ ------------------------------------------------------------- --- -----
<S> <C> <C> <C>
Joy Schaefer Vice President and Chief Operating Officer 35 1990
Robert E. Adams Vice President 44 1993
James R. Dowlan Vice President 57 1984
Harriet Burns
Feller Vice President, Secretary and General Counsel 52 1990
Richard W. Stephan Vice President, Chief Information Officer 56 1994
Terrance P. Mungon Vice President 48 1979
Lee A. Whatcott Assistant Vice President, Chief Financial Officer, Controller 35 1988
J. Keith Palmer Assistant Vice President, Treasurer 34 1993
Peggy L. Michel Vice President 67 1972
Howard C. Reese President of Westcorp Financial Services, Inc. 63 1987
</TABLE>
The following is a brief account of the business experience of each
executive officer who is not a director.
Joy Schaefer has served as Vice President and Chief Operating Officer since
December, 1994, after having served as Vice President, Chief Financial Officer
and Treasurer of the Company since March, 1992. She also served as Senior Vice
President, Chief Financial Officer and Treasurer of the Bank since March, 1992,
and was elected Executive Vice President in January, 1994, and Senior Executive
Vice President and
4
<PAGE> 8
Chief Operating Officer of the Bank in December, 1994. Ms. Schaefer joined the
Company and the Bank on January 1, 1990, as Assistant Vice President and
Assistant Treasurer. 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. Schaefer 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.
Robert E. Adams has served as Vice President of the Company since 1993 and
Executive Vice President of the Bank's Mortgage Banking Division since January,
1994, after serving as Senior Vice President since starting with the Bank in
April, 1993. Mr. Adams has in excess of twenty 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 from 1984. At
the Bank, Mr. Dowlan served first as Senior Vice President 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 Bank, Mr. Dowlan was Vice President,
Loan Administration of Union Bank where he held several positions from 1973, the
last position being Vice President. 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.
Harriet Burns Feller is Vice President, Secretary and General Counsel of
the Company. She has also has served 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 from December, 1990. Ms. Feller was Executive Vice
President and General Counsel of Mercury Savings from 1986-1990, Vice President
and General Counsel of Ponderosa Homes from 1981-1986 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.
Richard W. Stephan has served as a Vice President of the Company and a
Senior Vice President of the Bank since 1994. He has served as the Chief
Information Officer of the Bank since joining the organization in 1994. Mr.
Stephan has over 20 years of experience in the Information Technology field with
the last 15 years in the financial institution services industry. Prior to his
association with the Bank, Mr. Stephan was an Executive President of FiServ, a
major provider of Information Services to the banking industry and he was a
partner with Ernst and Whinney. At Ernst and Whinney he managed the consulting
practice for the Western Region, served as the Senior Technology Partner for the
firm for the banking industry and was a member of the planning committee for the
firm wide banking practice. Mr. Stephan is a member of the Chief Information
Officer National Association and is a Certified Systems Professional.
Terrance P. Mungon is Vice President of the Company and Executive Vice
President of the Bank after serving as Senior Vice President of the Bank for the
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.
Lee A. Whatcott is Assistant Vice President, Chief Financial Officer and
Controller of the Company. He joined the Company and the Bank in 1988 as Manager
of Financial Reporting and has served as Vice President, Controller of the Bank
since 1992. Mr. Whatcott was elected Senior Vice President, Chief Financial
Officer in December, 1994. Prior to joining the Bank, he was employed by Ernst &
Whinney, an international accounting firm. Lee is licensed as a CPA in the state
of California and is a member of the American Institute of Certified Public
Accountants, the Financial Managers' Society of CPAs.
5
<PAGE> 9
J. Keith Palmer is Assistant Vice President and Treasurer of the Company.
He has also served as Assistant Vice President and Treasurer of the Bank since
March, 1993, and then as Vice President and Treasurer since December, 1994.
Prior to joining the Bank in 1993, Mr. Palmer served as a Capital Markets
Examiner with the Office of Thrift Supervision from 1991 -- 1993. Mr. Palmer has
worked in the banking industry for 10 years.
Peggy L. Michel is Vice President and Assistant Secretary of the Company.
She has also served as Vice President and Manager of Human Resources for the
Bank since 1972. Prior to her association with the Bank, 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.
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.
6
<PAGE> 10
COMPENSATION OF EXECUTIVE OFFICERS
The following table discloses compensation received by the Company's former
and present Chief Executive Officer and the next four most highly compensated
executive officers for the three fiscal years ended December 31, 1994.
SUMMARY COMPENSATION TABLE
The following table discloses compensation received by the Company's
present and former Chief Executive officers and the four remaining most highly
compensated executive officers for the three fiscal years ended December 31,
1994.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
--------------
ANNUAL COMPENSATION(1) AWARDS STOCK ALL OTHER
--------------------------- OTHER OPTIONS(3) COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($)(2) (SHARES) (4)(5)($)
- ----------------------------- ---- --------- -------- ------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Ernest S. Rady 1994 330,000 132,000 16,009 44,500 22,579(11)
President, Chief Executive 1993 300,000 100,000 5,785 37,800(6) 25,503
Officer and Director 1992 283,250 50,000 0 0 44,544
James R. Dowlan 1994 175,000 58,000 8,423 9,400 17,833(12)
Vice President 1993 156,250 52,000 7,350 21,000(6) 27,810
1992 137,500 45,828 6,050 26,250 24,287
Howard C. Reese 1994 175,000 58,275 4,883 8,300 16,263(13)
President and Chief 1993 154,094 51,360 7,350 31,000(7) 22,409
Executive
Officer of Westcorp 1992 137,500 45,787 5,500 26,250 13,106
Financial Services, Inc.
Joy Schaefer 1994 150,000 50,000 0 10,000 11,532(14)
Vice President, Chief 1993 125,000 37,500 9,700 15,725 8,398
Operating Officer 1992 99,458 35,000 5,100 4,725
Robert E. Adams 1994 150,000 10,000 0 0 25,307(15)
Vice President 1993 105,000 34,965 4,150 21,000 14,739
1992
Stephen W. Prough 1994 192,544 0 118,563 (10) 479,935(9)
Former President, 1993 300,000 100,000 5,785 37,800(6) 44,608
C.E.O., Director(8) 1992 283,250 50,000 4,850 53,550 47,668
</TABLE>
- ---------------
(1) The compensation of Mr. Reese is paid by Westcorp Financial Services, Inc.
The compensation for Mr. Rady is paid partly by the Bank and partly by
Westcorp. The compensation for Mr. Prough, Mr. Dowlan, Mr. Adams and Ms.
Schaefer was paid by the Bank.
(2) Includes the spread between market price and exercise price on options
exercised.
(3) Stock options for shares of Westcorp awarded in year indicated and
exercisable in the future.
(4) Includes above market preferential interest return on salary deferral by
executive under deferred compensation plans, plus Bank contribution to
401(k) and ESOP.
(5) A contribution of $1.2 million was funded in 1994 by the Bank to the
Savings Plan (401(k) and ESOP) which benefits other employees in addition
to those named in the Table. The Plan is described below.
(6) Stock options (originally awarded in 1991) repriced in 1993.
(7) Includes 21,000 stock options (originally awarded in 1991) repriced in
1993.
(8) Mr. Prough resigned on June 14, 1994.
(9) Amount withdrawn from Plan after resignation ($326,247) plus amount
withdrawn from three Executive Deferral Plans ($153,688), which include
employee contributions as well as employer contributions.
(10) Mr. Prough's unexercised options expired at the end of three months
following his resignation.
7
<PAGE> 11
(11) Includes $11,060 in accrued above-market earnings on deferred compensation
plus $11,519 employer contribution to 401(k)/ESOP Plan
(12) Includes $6,365 in accrued above-market earnings on deferred compensation
plus $11,468 employer contribution to 401(k)/ESOP Plan
(13) Includes $4,804 in accrued above-market earnings on deferred compensation
plus $11,459 employer contribution to 401(k)/ESOP Plan
(14) Includes $239 in accrued above-market earnings on deferred compensation
plus $11,293 employer contribution to 401(k)/ESOP Plan
(15) Includes $10,307 employer contribution to 401(k)/ESOP Plan plus $15,000
moving incentive.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table provides information on option grants in fiscal 1994 to
the named executive officers.
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
PERCENTAGE OF RATES OF STOCK
TOTAL OPTIONS APPRECIATION FOR
GRANTED TO EXERCISE OR OPTION TERM
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -------------------
NAME GRANTED FISCAL 1994 (PER SHARE)($) DATE 5%($) 10%($)
- ------------------------ ------- ------------- -------------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Ernest S. Rady.......... 11,500 4.24% 10.38 6/1/99 32,890 72,910
33,000 12.7% 8.13 12/15/99 73,920 164,010
Howard C. Reese......... 3,300 1.22% 11.38 6/8/99 10,362 22,935
5,000 1.84% 8.13 12/15/99 11,200 24,850
James R. Dowlan......... 4,400 1.62% 11.38 6/8/99 13,816 30,580
5,000 1.84% 8.13 11,200 24,850
Joy Schaefer............ 10,000 3.69% 8.13 12/15/99 22,400 49,700
</TABLE>
- ---------------
(1) The Company did not grant any SAR's in 1994.
(2) Options were granted at the market price of the stock at the date of the
grant.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
SHARES VALUE OPTIONS/SAR'S AT IN-THE-MONEY OPTIONS/SAR'S
ACQUIRED ON REALIZED 12/31/94(#) AT 12/31/94($)
NAME EXERCISE(#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(2)
- --------------------- ----------- -------- ------------------------- ----------------------------
<S> <C> <C> <C> <C>
Ernest S. Rady....... 11,550 11,088 66,812E 37,561E
47,808U 21,689U
Stephen W. Prough.... 78,278 28,974 -0-E -0-E
-0-U -0-U
Howard C. Reese...... 3,150 3,749 38,870E 10,584E
12,903U 3,870U
James R. Dowlan...... 4,410 6,836 33,340E 11,440E
10,723U 4,083U
Joy Schaefer......... -0- N/A 9,555E 3,851E
21,446U 6,562U
Robert E. Adams...... -0- N/A 6,825E -0-E
14,175U -0-U
</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, 1994 ($8.69)
8
<PAGE> 12
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. 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 is 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.
If a participant terminates employment for reasons other than death,
disability, or retirement prior to making four years of deferrals, he receives
all deferrals, the employer's contributions, and interest thereon. 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.
9
<PAGE> 13
If a participant terminates employment for reasons other than death,
disability, or retirement prior to making four years of deferrals, he receives
his deferrals and interest thereon. 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 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, Westcorp 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 5% 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 Seasoned Corporate Bond rate. Participant's first year's
contribution plus interest will be distributed beginning in the sixth year.
Participant's second year's contribution plus interest will 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 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
the 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
10
<PAGE> 14
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 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 Bank 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 Bank 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 Bank 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 Bank 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 Bank'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 Bank'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
11
<PAGE> 15
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 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 Bank funded a $1.2 million contribution to the Consolidated Plan for
1994.
REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE
The Compensation Committee serves jointly as the Compensation Committee of
the Company's and of the Bank's Board of Directors, since the members are
identical, and because, except for Mr. Rady, all of the employees are employed
by the Bank and its subsidiaries. The primary separate function of the Company's
Compensation Committee , in addition to determining the compensation of the
Chief Executive Officer, is the administration of the Stock Option Plans, as
described above. Therefore, in order to present a meaningful report to the
Company's shareholders, the 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. Each member of the Compensation
Committee is a non-employee director. Mr. Jenkins retired from the Bank in 1990.
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 and key employees furthers that
goal and fosters decision-making by its key employees with the Company's long
term safety and soundness in mind.
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
12
<PAGE> 16
outstanding abilities and to motivate them to perform to the full extent of
their abilities. 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 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. Management goals were
established at the beginning of 1994 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 the Chief Executive Officer's compensation for 1994, 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 the Chief Executive Officer
would be paid. The Committee analyzed his performance in comparison to specific
management objectives established at the beginning of the year. In addition, the
Compensation Committee evaluated how the Company as a whole performed, as
measured against its peers in California. Peer compensation information was
obtained from the SNL Executive Compensation Review for the western United
States. Peer information for the Company's performance was compiled by
Montgomery Securities. 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 real estate portfolio.
The Compensation Committee considered the factors stated above in arriving
at the award of 1994 bonus compensation for the Chief Executive Officer as shown
in the Summary Compensation Table. The bonus compensation for 1994 reflects the
achievement of management objectives, including the improving financial
performance; a major restructuring of the Company's business units resulting in
improved efficiencies and productivity; the improved regulatory evaluations; and
expansion of consumer lending operations into seven new states. The Committee
established 1995 management objectives for the CEO.
STOCK OPTION GRANTS
Westcorp, the holding company, 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
13
<PAGE> 17
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. Grants were made in 1994 to
some executives as shown in the Tables, and to other key employees.
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 unless certain conditions are met. 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 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
14
<PAGE> 18
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, 1989, and ending
December 31, 1994.
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
<TABLE>
<CAPTION>
MEASUREMENT PERIOD WESTCORP INC. INDUSTRY IN-
(FISCAL YEAR COVERED) CA DEX BROAD MARKET
<S> <C> <C> <C>
1989 100 100 100
1990 71.82 79.62 96.88
1991 172.15 124.13 126.42
1992 97.44 130.71 136.08
1993 131.20 137.06 149.80
1994 131.16 119.18 151.78
</TABLE>
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,
President and C.E.O. of the Bank and Chairman of the Board and Chief Executive
Officer of Westcorp. The basic annual rent is adjusted annually and includes a
portion of direct operating expenses. The Walnut Creek leases expire at various
times through 1998; the Encino lease terms expire at various times through 1998.
The Bank paid approximately $406,000 in rent to ICW in 1994. The Bank leases
office space to ICW in Orange, Sacramento and Fresno California for which it
received rent of approximately $86,000 in 1994.
The Bank leases from Carmel Country Plaza, an affiliate of Ernest Rady, 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 1994 totaled $200,000. 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 1994 pursuant to this lease which expires in 1996 was
approximately $72,000.
15
<PAGE> 19
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 1994, the
Bank paid approximately $397,000 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 Company 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 Company.
SECURITY OWNERSHIP OF MANAGEMENT, DIRECTORS AND NOMINEE
The following table sets forth, as of December 31, 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 DECEMBER 31, 1994 CLASS(1)
- ------------------------ ------------------------------------- ----------------- ----------
<S> <C> <C> <C>
Ernest S. Rady Chairman of the Board, President, 14,417,726(2) 62.28
Chief Executive Officer, and Director
Robert W. Jenkins Vice Chairman, Director 351,975(3) 1.52
Stephen W. Prough Former President, Chief Operating 17,264(4) --(8)
Officer, Director
Alan L. Milligan Director 93,344(5) 0.40
Stanley E. Foster Director 139,706(6) 0.60
William J. Crawford Director 2,205(7) --(8)
Judith M. Bardwick Director -- --
Robert E. Adams Vice President 8097(9) (8)
James R. Dowlan Vice President 60,391(10) 0.26
Joy Schaefer Vice President, Chief Operating 10,032(11) --(8)
Officer
Howard C. Reese President, and Chief Executive 65,736(12) 0.21
Officer of Westcorp Financial
Services, Inc.
Directors and Officers
as a Group (15 persons) 14,882,134(13) 64.29
</TABLE>
- ---------------
(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 December 31, 1994. All shares are common stock.
(2) Includes beneficial ownership of 69,459 shares which may be acquired within
60 days of December 31, 1994, pursuant to stock options awarded under Stock
Option Plans plus vested ESOP shares as of December 31, 1994.
(3) Includes beneficial ownership of 4,631 shares which may be acquired within
60 days of December 31, 1994, pursuant to stock options awarded under Stock
Option Plans.
(4) Includes beneficial ownership of vested ESOP shares as of December 31,
1994.
16
<PAGE> 20
(5) Includes beneficial ownership of 2,205 shares which may be acquired within
60 days of December 31, 1994, pursuant to stock options awarded under Stock
Option Plans.
(6) Includes beneficial ownership of 2,690 shares which may be acquired within
60 days of December 31, 1994, pursuant to stock options awarded under Stock
Option Plans.
(7) Includes beneficial ownership of 2,205 shares which may be acquired within
60 days of December 31, 1994, pursuant to stock options awarded under Stock
Option Plans.
(8) Less than 0.1%.
(9) Includes beneficial ownership of 7,166 shares which may be acquired within
60 days of December 31, 1994, pursuant to stock options awarded under Stock
Option Plans plus vested ESOP shares as of December 31, 1994.
(10) Includes beneficial ownership of 33,340 shares which may be acquired within
60 days of December 31, 1994, pursuant to stock options awarded under Stock
Option Plans plus vested ESOP shares as of December 31, 1994.
(11) Includes beneficial ownership of 10,032 shares which may be acquired within
60 days of December 31, 1994, pursuant to stock options awarded under Stock
Option Plans plus vested ESOP shares as of December 31, 1994.
(12) Includes beneficial ownership of 39,765 shares which may be acquired within
60 days of December 31, 1994, pursuant to stock options awarded under Stock
Option Plans plus vested ESOP shares as of December 31, 1994.
(13) Includes 187,386 shares subject to options which are exercisable within 60
days of December 31, 1994.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
WHO ARE NOT MANAGEMENT
As of April 20, 1995, 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.
SHAREHOLDER PROPOSALS FOR THE 1996 ANNUAL MEETING
Shareholders who wish to present proposals for action at the 1996 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, 1996.
17
<PAGE> 21
ANNUAL REPORT TO SHAREHOLDERS
The Annual Report to Shareholders of the Company for the year ended
December 31, 1994, 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 persons named in the enclosed proxy
will have the discretionary authority to vote all proxies received with respect
to such matters in accordance with their judgments.
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 28, 1995
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 APPRECIATION.
18
<PAGE> 22
REVOCABLE PROXY
WESTCORP
23 Pasteur Road
Irvine, California 92718
The undersigned hereby appoints Ernest S. Rady 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 March 31, 1995, at the annual Meeting of the Shareholders of
WESTCORP, to be held May 23, 1995, 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 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.
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
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE> 23
Please mark
/X/ your votes
as this
------------
COMMON
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF THE SHAREHOLDERS OF WESTCORP ON MAY 23, 1995.
1) ELECTION OF DIRECTORS
William J. Crawford and Alan L. Milligan to serve as Class I Directors of
the Company.
FOR WITHHOLD AUTHORITY
All nominees listed (except to vote for ALL
as marked to the contrary). nominees listed
[ ] [ ]
INSTRUCTION: To withhold authority to vote for any individual nominee, print
that nominee's name on the line provided below.
- --------------------------------------------------------------------------------
2) RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG AS THE INDEPENDENT AUDITORS
OF THE COMPANY FOR FISCAL YEAR 1995.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
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 DO NOT expect to attend the Meeting.
[ ] [ ]
Date: , 1995
-------------------------------
Signature:
--------------------------------
Name
Signature:
--------------------------------
Name
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.
Proxy continued from reverse
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
REVERSE SIDE
YOUR VOTE IS IMPORTANT TO THE COMPANY
PLEASE SIGN AND RETURN YOUR PROXY BY
TEARING OFF THE PORTION OF THIS SHEET
AND RETURNING IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE
