<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
/X/ Definitive Proxy Statement (as permitted by Rule 14a-6(e)(2))
/ / 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
WESTCORP LOGO
23 PASTEUR ROAD
IRVINE, CALIFORNIA 92718
April 1, 1996
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 April 30, 1996, 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 1996. A
formal Notice of Annual Meeting of Shareholders, Westcorp's 1995 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
WESTCORP LOGO
23 PASTEUR ROAD
IRVINE, CALIFORNIA 92718
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 30, 1996
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, April 30, 1996, at 10:00 a.m., for the following
purposes:
1. To elect three directors for terms expiring in 1998.
2. To ratify the appointment of Ernst & Young as the independent
accountants for Westcorp for fiscal 1996.
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 1, 1996, 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
WESTCORP LOGO
23 PASTEUR ROAD
IRVINE, CALIFORNIA 92718
PROXY STATEMENT
APPROXIMATE DATE PROXY MATERIAL FIRST SENT TO SHAREHOLDERS: APRIL 5, 1996
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 April 30, 1996, and any
adjournments thereof (the "Meeting").
MEETING DATE AND LOCATION
The Meeting to consider the business described below will be held on April
30, 1996, 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 1998,
and (ii) ratify the appointment of the Company's independent public accountants
for fiscal 1996.
RECORD DATE; SHAREHOLDERS ENTITLED TO VOTE
The close of business on March 1, 1996, 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 24,574,349
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 1, 1996, Westcorp common stock had a market price of
$18.125 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.
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 1996, 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.
<PAGE> 5
The persons named as proxy and alternate were selected by the Board of Directors
of the Company. Mr. Rady is an officer and director of the Company and Ms.
Schaefer is an officer.
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 24,574,349
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, three nominees, Ernest S. Rady, Stanley E. Foster
and Judith M. Bardwick are nominated for election as Class II Directors, each
director to serve until 1998 and until his or her successor is elected and
qualified. Nominee Rady has been a director since 1974, Nominee Bardwick, since
1994, and Nominee Foster, since 1978. At its January, 1996, meeting, the Board
set the number of directors at seven, electing Howard C. Reese to serve as a
Class I director. The person named as proxy, and his alternate, in the
accompanying proxy have advised the Company of their intention to vote shares
covered by proxies received 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 or his alternate in his or her 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, Ernest S. Rady, Stanley E. Foster and
Judith M. Bardwick.
<TABLE>
<CAPTION>
DIRECTOR
NAME OF DIRECTOR AGE SINCE WESTCORP
--------------------------------------- --- -------- -----------------------------------
<S> <C> <C> <C>
Ernest S. Rady**....................... 58 1974 Chairman of the Board of Directors
Robert W. Jenkins***................... 74 1974 Vice Chairman, Director
Alan L. Milligan*...................... 66 1992 Director
Stanley E. Foster**.................... 68 1978 Director
William J. Crawford*................... 66 1993 Director
Judith M. Bardwick**................... 63 1994 Director
Howard C. Reese*....................... 64 1996 Director
</TABLE>
- ---------------
* Class I Director, to serve until 1997
** Class II Director, nominee for term expiring in 1998
*** Class II Director
The following information is submitted concerning each of the directors:
Ernest S. Rady has served as Chairman of the Board of the Company since
1982; as a director since 1974; and is also President and Chief Executive
Officer. He is also Chairman of the Board of Western Financial Savings Bank,
F.S.B. (the "Bank") and Chairman of the Board and Chief Executive Officer of WFS
Financial Inc ("WFS"). 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; oil and
gas exploration, and production; 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 Board of Directors of the
Company. He also served as the President of the Bank from 1982 to 1984, and has
served as a director and as Chairman of the Bank from 1982
2
<PAGE> 6
to 1992. 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 Bank
while serving as Executive Vice President of the Morris Plan Company of
California from 1961 to 1973.
Alan L. Milligan has been a director of the Company since 1992 and was an
officer of 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 1989 through
March, 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 Bank, he
was with Morris Plan for 16 years.
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 Postal Annex Plus, Trakmobile and Hot Topic, Inc. Mr. Foster has
been a director of the Company since 1978.
William J. Crawford joined the Board of the Company and 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 1990. Mr. Crawford has
successfully operated several savings and loan associations over a period of 35
years.
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 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. Ms. Bardwick
has been a director of the Company since 1994.
Howard C. Reese joined the Company in 1987 as President and Chief Executive
Officer of its subsidiary Westcorp Financial Services, Inc. (renamed WFS
Financial 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.
COMMITTEES OF THE BOARD
The Company has a standing Audit Committee, consisting of Stanley E. Foster
(Chairman), Alan Milligan and Robert W. Jenkins. 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. 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 Director of
Safety and Soundness who reports to the Audit Committee. The Audit Committee
held six meetings in 1995.
3
<PAGE> 7
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 salaries
of employees paid 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 Compensation Committee
held 4 meetings during 1995.
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 7 times in
1995.
MEETINGS OF THE BOARD
The Board of Directors of the Company held a total of 6 meetings during
1995. 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 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.
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
The following information is provided with respect to the executive
officers of the Company who are not directors; effective January, 1996,
employees providing administrative services to the Bank were transferred to
Westcorp, the parent of the Bank, and provide those services at fair market
values to the Bank, while remaining officers of the Bank. In January, 1996, Mr.
Donald Kasle joined the Bank as President and Chief Executive Officer. He was
elected Director of the Bank at its January, 1996, meeting.
<TABLE>
<CAPTION>
OFFICER
NAME POSITION AGE SINCE
- ----------------------------------- --------------------------------- --- -------
<S> <C> <C> <C>
Joy Schaefer....................... Senior Executive Vice President, 36 1990
Chief Operating Officer
Harriet Burns Feller............... Executive Vice President, 53 1990
Secretary and General Counsel
Lee A. Whatcott.................... Senior Vice President, Chief 36 1988
Financial Officer
Richard W. Stephan................. Senior Vice President, Chief 57 1994
Information Officer
J. Keith Palmer.................... Vice President, Treasurer 35 1993
Mark K. Olson...................... Vice President, Controller 32 1995
Anne FitzGerald.................... Vice President, Director of Human 36 1995
Resources
Donald H. Kasle.................... Director, President, CEO of the 52 1996
Bank
Robert E. Adams.................... Executive Vice President of the 45 1993
Bank
Terrance P. Mungon................. Executive Vice President of the 49 1979
Bank
Gary L. Plooster................... Senior Vice President of the Bank 44 1995
Kevin Farrenkopf................... Senior Vice President of the Bank 34 1987
James R. Dowlan.................... Vice Chairman of the Board and 58 1984
Senior Executive Vice President
of WFS Financial Inc.
W. Lee Thyer....................... Senior Executive Vice President 53 1988
of WFS Financial Inc.
</TABLE>
4
<PAGE> 8
The following is a brief account of the business experience of each
executive officer who is not a director.
Joy Schaefer is Senior Executive Vice President and Chief Operating Officer
of the Company and is Vice-Chairman of the Board of Directors, President and
Chief Operating Officer of WFS. She has served first 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 Chief Operating Officer in December, 1994. Ms. Schaefer joined the
Bank on January 1, 1990, as Assistant Vice President and Assistant Treasurer.
Prior to her association with the Bank, she was an Audit Manager in the
financial institutions group for Ernst & 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 from
1985 to 1988. She is a member of the Financial Managers Society and the American
Institute of Certified Public Accountants.
Harriet Burns Feller is Executive Vice President, Secretary and General
Counsel of the Company; the Bank and WFS. She started as Vice President and
General Counsel of the Bank in May, 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.
Lee A. Whatcott is Senior Vice President and Chief Financial Officer of the
Company and has served as Senior Vice President and Chief Financial Officer of
the Bank since 1994. Lee joined the Bank in 1988 and became Vice President,
Controller in 1992. Prior to joining the Bank, he was employed by what is now
known as Ernst & Young LLP, independent auditors, and an international
accounting firm. Lee is licensed as a Certified Public Accountant in the state
of California and is a member of the American Institute of Certified Public
Accountants.
Richard W. Stephan is Senior Vice President and Chief Information Officer
of the Company and has served as 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 & 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.
J. Keith Palmer is Vice President and Treasurer of the Company and the
Bank. 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 to 1993. From 1986 to
1991, Mr. Palmer served in various capacities with the Office of Thrift
Supervision. Mr. Palmer has worked in the banking industry for 10 years.
Mark K. Olson is Vice President, Controller of the Company and the Bank. He
joined the Bank in 1991 as Accounting Systems Director and has held various
positions since that time. Prior to joining the Bank, Mr. Olson was employed by
what is now known as Ernst & Young LLP, independent auditors and an
international accounting firm. Mark is a licensed Certified Public Accountant in
the state of California and is a member of the American Institute of Certified
Public Accountants.
Anne M. FitzGerald joined the Bank in 1995 as Vice President, Director of
Human Resources. Ms. FitzGerald has over 13 years experience in the Human
Resources field, and spent the last 5 1/2 years
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<PAGE> 9
working for Pepsi Cola, ultimately as Director of Human Resources. Previous
experience includes various Human Resources experiences working for Pier 1
Imports and Texas Instruments. Anne holds her Masters in Labor and Industrial
Relations from Michigan State University and her Masters in Business
Administration from Southern Methodist University.
Donald H. Kasle joined the Bank in January, 1996, as President and Chief
Executive Officer. Mr. Kasle came to the Bank with 30 years experience in
commercial banking. Previously, Mr. Kasle served as Chairman & Chief Executive
Officer, and before that, President & Chief Operating Officer, of Bank One
Dayton N.A., Dayton, Ohio from 1986 to 1995. Mr. Kasle was President and Chief
Executive Officer of Westport Bank of Kansas City from 1985 to 1986. He began
his career with First National Bank of Kansas City as a management trainee in
1966 and remained with First National until 1985. Long active in banker
education and development programs, Mr. Kasle is past member of the American
Bankers Association Leadership Development Council, Founding Chairman of the
ABA's Institute for Certified Bankers and past Chairman of the Advisory Board of
the Stonier Graduate School of Banking. He also served for many years as a
member of the ABA's Education Policy and Development Council. Mr. Kasle is a
Certified Lender -- Business Banking as confirmed by the Institute of Certified
Bankers.
Robert E. Adams has served as Executive Vice President of the Mortgage
Banking Division of the Bank since January, 1994. He served 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.
Terrance P. Mungon is Executive Vice President of the Bank. He is currently
in charge of the Consumer Mortgage Lending Division which specializes in
consumer equity lending in the Western United States. He previously served as
Executive Vice President of the Retail Banking Division. Mr. Mungon also serves
as Chairman of the Board of Westplan Investments which offers annuities and
mutual funds to the Bank's retail customers. Mr. Mungon has been with the Bank
for over 17 years and has 26 years of Consumer Banking experience.
Gary L. Plooster joined the Bank in May, 1995, and serves as Senior Vice
President of National Production and Operations for Wholesale and Retail
Mortgage Banking. Mr. Plooster has over 20 years of Mortgage Banking background
incorporating experience in every aspect of the industry. Prior to joining the
Bank, he served as Managing Director of Residential Lending for Union Federal
Bank. In addition, he started and managed the National Wholesale Lending
Business Division for Shearson Lehman and served as their Executive Vice
President for eight years where he had P&L and return-on-assets accountability.
Kevin R. Farrenkopf has served as Senior Vice President of the Retail
Banking Division of the Bank since October of 1995, after serving as Divisional
Vice President for Retail Banking since 1994. Previously, Mr. Farrenkopf served
as Regional Vice President in 1993, Vice President in 1990 and Branch Manager in
1987, which is also the year he was hired. He has 13 years experience in the
industry, the first four spent at Norwest Financial, Inc. He is a member of the
Western League of Savings Institutions, serving on the Retail Banking Committee.
James R. Dowlan has served 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 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.
W. Lee Thyer is the Senior Executive Vice President of WFS in charge of the
Branch Division. Mr. Thyer joined WFS in 1988. Prior thereto, Mr. Thyer held
various positions at Fireside Thrift and Loan Association where he worked for 22
years from 1966 to 1988. In addition, Mr. Thyer serves on the Westcorp
6
<PAGE> 10
ESOP/401K committee and on the board of the California Financial Services
Association/Independent Section.
ITEM 11 -- EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS
The following table discloses compensation received by the Chief Executive
Officer and the next four most highly compensated executive officers for the
three fiscal years ended December 31, 1995.
SUMMARY COMPENSATION TABLE
Compensation described in this table is compensation paid by the Company
including its subsidiaries:
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
---------------------
ANNUAL COMPENSATION(1) STOCK ALL OTHER
NAME AND PRINCIPAL -------------------------------------- OPTIONS(3) COMPENSATION
POSITION YEAR SALARY($) BONUS($) OTHER($)(2) (SHARES) SARS(4) ($)(5)
- -------------------------- ---- ------- ------- ----------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Ernest S. Rady............ 1995 369,984 148,000 181,703 0 50,000 30,010(8)
Chairman of the Board 1994 330,000 132,000 16,009 44,500 0 22,579
of Directors, President 1993 300,000 100,000 5,785 37,800(6) 0 25,503
and
Chief Executive Officer
Howard C. Reese........... 1995 201,080 66,960 445,978 0 46,667 22,251(9)
Vice Chairman of the 1994 175,000 58,275 4,883 8,300 0 16,263
Board of Directors (also 1993 154,094 51,360 7,350 31,000(7) 0 22,409
President and Chief
Operating Officer during
1995) of WFS
James R. Dowlan........... 1995 197,100 65,634 343,217 0 40,000 24,328(10)
Vice Chairman of the 1994 175,000 58,000 8,423 9,400 0 17,833
Board of Directors and 1993 156,250 52,000 7,350 21,000(6) 0 27,810
Senior Executive Vice
President of WFS
Joy Schaefer.............. 1995 185,000 61,605 0 8,000 40,000 16,611(11)
Senior Executive Vice 1994 150,000 50,000 0 10,000 0 11,532
President and Chief 1993 125,000 37,500 9,700 15,275 0 8,398
Operating Officer of the
Company and the Bank,
and President, Chief
Operating Officer and a
Vice-Chairman of the
Board of Directors of
WFS
Richard W. Stephan........ 1995 157,500 31,500 0 4,000 0 12,710(12)
Senior Vice President 1994 150,000 10,000 0 0 0 0
and
Chief Information 1993 0 0 0 0 0 0
Officer
</TABLE>
- ---------------
(1) The compensation of Mr. Reese was paid by WFS Financial Inc. The
compensation for Mr. Rady was paid by Westcorp. Mr. Dowlan's compensation
was paid partly by the Bank and partly by WFS Financial Inc. Ms. Schaefer's
and Mr. Stephan's compensation were paid by the Bank.
(2) Includes the spread between market price and exercise price on options
exercised.
7
<PAGE> 11
(3) Stock options for shares of Westcorp, the parent company, awarded in the
year indicated and exercisable in the future. Original number granted
(shown in chart) will increase as a result of subsequent stock dividend(s).
(4) SARs awarded by WFS pursuant to the Directors SAR Plan which is for
employees who are directors and the independent directors. The SAR Plan is
described below. SARs awarded in 1995 and exercisable, part in 1995 and
part in the future.
(5) Includes above market preferential interest return on salary deferral by
executive under deferred compensation plans, plus Company contribution to
401(k) and ESOP. A contribution of $2.4 million was funded for 1995 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) Includes $13,937 in accrued above-market earnings on deferred compensation
plus $16,073 employer contribution to 401(k)/ESOP Plan.
(9) Includes $6,275 in accrued above-market earnings on deferred compensation
plus $15,976 employer contribution to 401(k)/ESOP Plan.
(10) Includes $8,339 in accrued above-market earnings on deferred compensation
plus $15,989 employer contribution to 401(k)/ESOP Plan.
(11) Includes $645 in accrued above-market earnings on deferred compensation
plus $15,966 employer contribution to 401(k)/ESOP Plan.
(12) Includes $161 in accrued above-market earnings on deferred compensation
plus $12,610 employer contribution to 401(k)/ESOP Plan.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table provides information on option and SAR grants in fiscal
1995 to the Named Executive Officers.
<TABLE>
<CAPTION>
POTENTIAL REALIZED
VALUE AT ASSUMED
ANNUAL RATES OF
PERCENTAGE OF STOCK
TOTAL OPTIONS/SARS APPRECIATION FOR
OPTIONS("O") GRANTED TO EXERCISE OR OPTION TERM
SARS("S") EMPLOYEES IN BASE PRICE EXPIRATION -------------------
NAME GRANTED(1)(2) FISCAL 1995 (PER SHARE)($) DATE 5%($) 10%($)
- -------------------- ------------- ------------------ -------------- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Ernest S. Rady...... 50,000(S) 9.83% $16.50 8/08/2000 227,500 504,075
Howard C. Reese..... 46,667(S) 9.17% 16.50 8/08/2000 212,335 470,403
James R. Dowlan..... 40,000(S) 7.86% 16.50 8/08/2000 182,000 403,200
Joy Schaefer........ 8,000(O) 27.12% 13.00 5/23/2000 28,733 63,493
40,000(S) 7.86% 16.50 8/08/2000 182,000 403,200
Richard W.
Stephan........... 4,000(O) 13.56% 13.00 5/23/2000 14,366 31,746
</TABLE>
- ---------------
(1) SARs were granted by WFS as to WFS stock pursuant to a Plan described below.
All SARs in this table vest in one-third increments with the first third
vesting August 8, 1995; the second third on December 31, 1995; and the last
third on December 31, 1996. Vesting of the second and third one-thirds is
conditioned upon WFS reaching certain after-tax net income goals.
(2) Westcorp options were granted at the market price of the stock at the date
of the grant.
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<PAGE> 12
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS("O")/SARS("S") OPTIONS/SARS
SHARES VALUE AT 12/31/95(#) AT 12/31/95($)
ACQUIRED ON REALIZED EXERCISABLE("E")/ EXERCISABLE/
NAME EXERCISE(#) $ UNEXERCISABLE("U") UNEXERCISABLE(2)(3)
- --------------------- ----------- -------- ---------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C>
Ernest S. Rady....... 41,675 $181,703 42,937 E(O) $473,814 E(O)
0 0 35,045 U(O) 357,610 U(O)
0 0 33,300 E(S) 99,900 E(S)
0 0 16,700 U(S) 50,100 U(S)
Howard C. Reese...... 45,464 445,978 1,312 E(O) 14,117 E(O)
0 0 6,537 U(O) 62,280 U(O)
0 0 31,080 E(S) 93,240 E(S)
0 0 15,587 U(S) 46,761 U(S)
James R. Dowlan...... 35,885 343,217 1,312 E(O) 14,117 E(O)
0 0 7,403 U(O) 68,913 U(O)
0 0 26,640 E(S) 79,920 E(S)
0 0 13,360 U(S) 40,080 U(S)
Joy Schaefer......... 0 0 17,358 E(O) 179,316 E(O)
0 0 23,193 U(O) 199,433 U(O)
0 0 26,640 E(S) 79,920 E(S)
0 0 13,360 U(S) 40,080 U(S)
Richard W. Stephan... 0 0 2,625 E(O) 28,245 E(O)
0 0 11,875 U(O) 106,735 U(O)
0 0 0 0
0 0 0 0
</TABLE>
- ---------------
(1) There were no exercises of SARs in 1995.
(2) Options based on the closing price on the New York Stock Exchange of
Westcorp common stock on December 29, 1995. ($18.50)
(3) SARs based on the closing price on NASDAQ of WFS common stock on December
29, 1995. ($19.50)
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.
9
<PAGE> 13
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 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.
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 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.
Effective September 1, 1996, Westcorp established a fourth Executive
Deferral Plan ("EDP4") for certain participating executives as determined by the
Board of Directors. A participant in EDP4 may defer a portion of compensation
from a minimum of $2,000 per year to a maximum of 10% of base annual salary.
There is an employer match in EDP4 based upon business results and at the
discretion of the Board of Directors.
10
<PAGE> 14
Additionally, employees required to take distribution from earlier EDP
plans, may elect to defer an additional amount up to the distribution they are
required to take. This additional deferral is not eligible for any Company
matching provisions. All deferrals are eligible for interest payments and
interest is credited to a participant's account at the Moody's Seasoned
Corporate Bond Rate. Participant's distributions are intended to occur only at
retirement age of 65, or 10 years of participation in EDP4, whichever is later,
or at termination. Participants receiving distributions can elect to receive
them paid out over five, ten or fifteen years or in a lump sum option.
Compensation Pursuant to WFS Benefit Plans
In 1995, WFS adopted two SAR plans, the Employee Stock Appreciation Rights
Plan ("Employee SAR Plan") and the Directors Stock Appreciation Rights Plan
("Director SAR Plan")(together the "Plans") whereby WFS Stock Appreciation
Rights ("SARS") may be granted to officers, directors and key employees as
determined by the Board of Directors of WFS; both Plans are separate from
benefit plans maintained by the Bank or Westcorp. The Plans are for the benefit
of certain WFS employees (the Employee SAR Plan) and employees who are also
directors and independent directors (the Directors SAR Plan) and were designed
to provide a method whereby directors, officers and employees of WFS who are
largely responsible for the management, growth and financial success of WFS may
be offered incentives and rewards which encourage them to increase their
interest in the market performance of the common stock of WFS and to remain in
the employ of WFS. Under the Plans, holders of SARs are entitled to surrender
the SARs for cash equal to the excess of the fair market value of the
surrendered SARs over the grant value of such SARs. SARs granted under the Plans
are nontransferable and do no convey an interest in the stock of WFS. The Plans
are administered by a committee of the Board of Directors and utilize and
exercise terms and conditions similar to the Westcorp Stock Option Plans
described below. Holders of SARs under the Plans who are persons subject to the
filing requirements imposed under Section 16(a) of the Securities Exchange Act
of 1934 are subject to certain additional Plan requirements. The Plans do not
permit acceleration on a change of control or sale of WFS. The aggregate number
of shares of WFS common stock to which SARs granted under the Plans relate are
limited to 2,300,000 shares, subject to an anti-dilution provision. During 1995,
508,837 SARs were granted with the price per share ranging from $16.38 to
$16.50. At December 31, 1995, 104,451 SARs were exercisable.
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
11
<PAGE> 15
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 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 Company and its subsidiaries are eligible to
participate in the Consolidated Plan after satisfaction of minimum service and
age requirements. Each year the Company 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 Company 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)
12
<PAGE> 16
for each participant that makes a Salary Savings contribution for such year. If
the Company 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 Company'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 Company'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 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 calendar 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 the 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 $2.4 million contribution to the Consolidated Plan for
1995.
REPORT OF THE COMPENSATION COMMITTEE
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.
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 shareholder. 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,
13
<PAGE> 17
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. For the
longer term, incentive stock options are awarded by the holding company, the
stock of which is publicly traded. 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 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 1995 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 1995, 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.
The Compensation Committee considered the factors stated above in arriving
at the award of 1995 bonus compensation for the Chief Executive Officer as shown
in the Summary Compensation Table. The bonus compensation for 1995 reflects the
achievement of management objectives, including the improving financial
performance; the restructuring and initial public offering of the WFS Financial
subsidiary, improved efficiencies and productivity; the improved regulatory
evaluations; and expansion of consumer lending operations into new states. The
Committee established 1996 management objectives for the CEO.
14
<PAGE> 18
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 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. Limited grants were made in 1995 to some executives as shown in the
Summary Compensation Table, and to other key employees, which are in the
appropriate tables.
OTHER COMPENSATION PLANS
Other compensation benefits have from time to time been established for the
benefit of senior executives and other managers 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
JUDITH M. BARDWICK
15
<PAGE> 19
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, 1990, and ending
December 31, 1995.
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>
1990 100.00 100.00 100.00
1991 239.69 155.90 130.48
1992 135.67 164.17 140.46
1993 182.67 172.15 154.62
1994 182.62 149.69 156.66
1995 380.48 246.78 215.54
</TABLE>
CERTAIN TRANSACTIONS BETWEEN MANAGEMENT
AND THE COMPANY OR ITS SUBSIDIARIES
The Bank leases its Encino branch office space and WFS its Dealer Center
space 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 and of WFS. Through September, 1995, the Bank also
leased its Walnut Creek branch office space from ICW. The basic annual rent is
adjusted annually and includes a portion of direct operating expenses. The
Encino lease terms expire at various times through 1998. The Bank and WFS paid
approximately $371,000 in rent to ICW in 1995. The Bank leases office space to
ICW in Orange and Sacramento, California, for which it received rent of
approximately $80,000 in 1995.
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 1995 totaled $133,000. The
Kearny Mesa Business Center is landlord to the WFS's Dealer Center location in
San Diego. Kearny Mesa Business Center is an affiliate of Ernest Rady. The total
amount paid in 1995 pursuant to this lease which expires in 1996 was
approximately $55,000.
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
16
<PAGE> 20
Bank for multifamily properties acquired by the Bank through foreclosure. In
1995, the Bank paid approximately $334,000 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 NOMINEES
The following table sets forth, as of December 31, 1995, 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 DEC. 31, 1995 CLASS(1)
- --------------------------------- -------------------------------------- ------------- ----------
<S> <C> <C> <C>
Ernest S. Rady................... Chairman of the Board, President, 15,226,777(2) 61.96%
Chief Executive Officer, and Director
Robert W. Jenkins................ Vice Chairman, Director 170,841 0.69%
Alan L. Milligan................. Director 77,567(3) 0.32%
Stanley E. Foster................ Director 155,151(4) 0.63%
William J. Crawford.............. Director 3,307(5) --(12)
Judith M. Bardwick............... Director 1,312(6) --(12)
Howard C. Reese.................. Director 41,789(7) 0.17%
Joy Schaefer..................... Senior Executive Vice President, Chief 21,880(8) --(12)
Operating Officer
Richard Stephan.................. Senior Vice President, Chief 2,625(9) --(12)
Information Officer
James R. Dowlan.................. Vice Chairman of the Board of 42,874(10) 0.17%
Directors of WFS, Senior Executive
Vice President of WFS
Directors and Officers
as a Group (21 persons)........ 15,825,323(11) 64.40%
</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, 1995. All shares are common stock.
(2) Includes beneficial ownership of 42,937 shares which may be acquired within
60 days of December 31, 1995, pursuant to stock options awarded under Stock
Option Plans plus vested ESOP shares as of December 31, 1995.
(3) Includes beneficial ownership of 3,307 shares which may be acquired within
60 days of December 31, 1995, pursuant to stock options awarded under Stock
Option Plans.
(4) Includes beneficial ownership of 4,092 shares which may be acquired within
60 days of December 31, 1995, pursuant to stock options awarded under Stock
Option Plans.
(5) Consists of beneficial ownership of 3,307 shares which may be acquired
within 60 days of December 31, 1995, pursuant to stock options awarded
under Stock Option Plans.
(6) Consists of 1,312 shares subject to options which are exercisable within 60
days of December 31, 1995.
17
<PAGE> 21
(7) Includes beneficial ownership of 1,312 shares which may be acquired within
60 days of December 31, 1995, pursuant to stock options awarded under Stock
Option Plans plus vested ESOP shares as of December 31, 1995.
(8) Includes beneficial ownership of 17,358 shares which may be acquired within
60 days of December 31, 1995, pursuant to stock options awarded under Stock
Option Plans plus vested ESOP shares as of December 31, 1995.
(9) Consists of beneficial ownership of 2,625 shares which may be acquired
within 60 days of December 31, 1995, pursuant to stock options awarded
under Stock Option Plans.
(10) Includes beneficial ownership of 1,312 shares which may be acquired within
60 days of December 31, 1995, pursuant to stock options awarded under Stock
Option Plans plus vested ESOP shares as of December 31, 1995.
(11) Includes 97,277 shares subject to options which are exercisable within 60
days of December 31, 1995.
(12) Less than 0.1%.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
WHO ARE NOT MANAGEMENT
As of April 1, 1996, 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. However, on February 2, 1996, a Schedule 13G was
filed on behalf of Wellington Management Company ("WMC") reflecting beneficial
ownership of greater than 5% of Westcorp common stock for the year ended
December 31, 1995. WMC advises Westcorp that the shares, as to which said
Schedule 13G was filed, are owned by various investment advisory clients of WMC
or its wholly-owned subsidiary which is deemed a beneficial owner of the shares
only by virtue of the direct or indirect investment and/or voting discretion it
possesses pursuant to the provisions of investment advisory agreements with such
clients.
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 1997 ANNUAL MEETING
Shareholders who wish to present proposals for action at the 1997 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, 1997.
ANNUAL REPORT TO SHAREHOLDERS
The Annual Report to Shareholders of the Company for the year ended
December 31, 1995, 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.
18
<PAGE> 22
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), is included in the
Annual Report; an additional copy 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 1, 1996
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.
19
<PAGE> 23
REVOCABLE PROXY
WESTCORP
23 Pasteur Road
Irvine, California 92718
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF THE SHAREHOLDERS OF WESTCORP ON APRIL 30, 1996.
The undersigned appoints Ernest S. Rady (and in his absence or inability to
serve, Joy Schaefer as alternate proxy) with the power to appoint his
substitute, as proxy and hereby authorizes him and his alternate 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 1, 1996, at the annual Meeting of
Shareholders of WESTCORP, to be held April 30, 1996, 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> 24
Please mark
your votes as
indicated in
this example. / X /
1. ELECTION OF DIRECTORS
FOR Ernest S. Rady, Stanley E. Foster and
Judith M. Bardwick to serve as Class II
/ / Directors of the Company.
/ / WITHHOLD AUTHORITY to vote for all nominees listed above.
/ / WITHHOLD AUTHORITY to vote for any INDIVIDUAL nominee.
Write name of such nominee below.
-----------------------------------------------------------
2. RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG AS THE INDEPENDENT
AUDITORS OF THE COMPANY FOR FISCAL YEAR 1996.
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 adjournments
thereof.
I DO DO NOT expect to attend the Meeting.
/ / / /
Date
--------------------------------------
Number of Shares Owned:
-------------------
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.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
