<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
Section 240.14a-11(c) or Section 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] Fee not required.
[ ] $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:
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(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.
<PAGE> 2
[ ] 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.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 3
WESTCORP LOGO
23 PASTEUR ROAD
IRVINE, CALIFORNIA 92618
March 25, 1998
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, 1998, 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 1998. A
formal Notice of Annual Meeting of Shareholders, Westcorp's 1998 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> 4
WESTCORP LOGO
23 PASTEUR ROAD
IRVINE, CALIFORNIA 92618
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 30, 1998
To the Shareholders of Westcorp:
The Annual Meeting of Shareholders of Westcorp, a California corporation
("the Company") will be held at the Corporate Headquarters, 23 Pasteur Road,
Irvine, California, on Thursday, April 30, 1998, at 10:00 a.m., for the
following purposes:
1. To elect three Directors for terms expiring in 2000.
2. To ratify the appointment of Ernst & Young as the independent
accountants for Westcorp for fiscal 1998.
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 10, 1998, 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 92618.
<PAGE> 5
WESTCORP LOGO
23 PASTEUR ROAD
IRVINE, CALIFORNIA 92618
------------------------
PROXY STATEMENT
APPROXIMATE DATE PROXY MATERIAL FIRST SENT TO SHAREHOLDERS:
MARCH 30, 1998
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, 1998, and any
adjournments thereof (the "Meeting").
MEETING DATE AND LOCATION
The Meeting to consider the business described below will be held on April
30, 1998, at 10:00 a.m., at the Corporate Headquarters, 23 Pasteur Road, Irvine,
California 92618.
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 2000,
and (ii) ratify the appointment of the Company's independent public accountants
for fiscal 1998.
RECORD DATE; SHAREHOLDERS ENTITLED TO VOTE
The close of business on March 10, 1998, 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 26,290,134
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 Tuesday, March 10, 1998, Westcorp Common Stock had a market price of
$19.25 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
<PAGE> 6
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 1998, 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 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 26,290,134
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 2000 and until his or her successor is elected and
qualified. Nominee Rady has been a Director since 1974, Nominee Foster, since
1978, and Nominee Bardwick, since 1994. 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**............... 60 1974 Chairman of the Board of Directors
Stanley E. Foster**............ 70 1978 Director
William J. Crawford*........... 77 1993 Director
Judith M. Bardwick**........... 65 1994 Director
Howard C. Reese*............... 66 1996 Director
Andrey R. Kosovych*............ 48 1997 Director
Charles E. Scribner*........... 60 1998 Director
</TABLE>
- ---------------
* Class I Director, to serve until 1999.
** Class II Director, nominee for term expiring in 2000.
The following information is submitted concerning each of the Directors:
ERNEST S. RADY has served as Chairman of the Board, President and CEO of
Westcorp since 1982. He has also been Chairman of the Board of Western Financial
Bank (the "Bank") since 1992; a Director since 1982; and is President and Chief
Executive Officer. He also served as Chairman of the Board of Western
2
<PAGE> 7
Thrift and Loan Association, a predecessor of the Bank, from 1972, and is
Chairman of the Board of WFS Financial Inc ("WFS"). 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 development; and distributing.
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
Hang Ten International, and is a director of Postal Annex Plus, Accucom 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. Mr. Crawford is retiring from the Board on April 30, 1998.
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 skills.
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, In Praise of Good Business, was published in 1998. She is
the author of four other books; in addition, she has published more than 70
articles on a wide range of topics during her distinguished career. Dr. 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. (now WFS Financial
Inc). He retired as President and CEO in 1996, and is employed in a consulting
capacity. 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.
ANDREY R. KOSOVYCH is Vice Chairman, having served as the Company's
investment banker since 1985. He is also a director on the Boards of the Bank
and WFS Financial as Vice Chairman. Previously, Mr. Kosovych was a Managing
Director, Investment Banking, and head of the Asset Finance Group at Donaldson,
Lufkin & Jenrette Securities Corporation since February, 1990. Prior to that, he
founded and led the asset backed effort at Drexel Burnham Lambert Inc., having
progressed from Vice President to Managing Director from 1984 to 1990; he also
served as Vice President, Investment Banking, at LePercq, de Neuflize & Co. Inc.
from 1983 to 1984. Mr. Kosovych began his professional career as an attorney,
working at Dewey, Ballantine, Bushby, Palmer & Wood from 1974 to 1983. During
his tenure as an investment banker, Mr. Kosovych managed almost $9 billion of
financings for the Westcorp family of companies, including the Company's and WFS
Financial's initial public offerings, the Bank's subordinated debt offerings and
numerous auto loan securitizations, and acted as financial advisor on a variety
of strategic issues.
CHARLES E. SCRIBNER was with Bank of America 34 years, retiring in May,
1994. From 1979 to 1983 he was Regional Senior Vice President in charge of the
Orange County/Los Angeles coastal region, responsible for loan deposits and
general operations of 150 branches in the region. From 1984 to 1986 he was
Senior Vice President and General Manager of the northern Asian operation for
Bank of America headquartered in Tokyo, and later became Area Manager of
southern Asia for Bank of America from 1986 through 1989. He was in charge of
all banking activities in eight countries and was headquartered in Singapore.
From 1990 to 1994 he served as Bank of America's Executive Vice President and
General Manager of the southern California
3
<PAGE> 8
Commercial Banking wholesale activities. Mr. Scribner presently serves on the
board of Western Insurance Holdings and is a Trustee of Scripps Health.
COMMITTEES OF THE BOARD
The Company has a standing Audit Committee, consisting of Stanley E. Foster
(Chairman), Charles E. Scribner and Howard C. Reese. 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 four meetings in 1997.
The Company has a standing Compensation Committee whose current members are
Howard C. Reese (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 2 meetings during 1997.
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, Reese, and Crawford. The Executive Committee met 4 times in
1997.
MEETINGS OF THE BOARD
The Board of Directors of the Company held a total of 4 meetings during
1997. 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 $4,500 per Board Meeting attended and $1,000 for each
committee meeting, which is not held in conjunction with a Board Meeting,
attended. Directors who are also Officers of the Company or any of its
subsidiaries are not compensated for their services as Directors.
4
<PAGE> 9
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
The following information is provided with respect to the Executive
Officers of the Company who are not Directors.
<TABLE>
<CAPTION>
OFFICER
NAME POSITION AGE SINCE
---- -------- --- -------
<S> <C> <C> <C>
Joy Schaefer......... Senior Executive Vice President, Chief 38 1990
Operating Officer; Vice Chairman of the
Board, President, Chief Executive Officer
and Chief Operating Officer of WFS
Harriet Burns Executive Vice President, Secretary and 55 1990
Feller............. General Counsel
Lee A. Whatcott...... Senior Vice President, Chief Financial 38 1988
Officer
Richard W. Stephan... Senior Vice President, Chief Information 59 1994
Officer
J. Keith Palmer...... Vice President, Treasurer and Senior Vice 37 1993
President, Chief Financial Officer and
Treasurer of the Bank
Mark K. Olson........ Vice President 34 1995
Anne M. FitzGerald... Vice President, Director of Human 38 1995
Resources
James R. Dowlan...... Vice Chairman of the Board and Senior 60 1984
Executive Vice President of WFS Financial
Inc
Robert E. Adams...... Executive Vice President of the Bank 47 1993
Michael A. Johnson... Executive Vice President of the Bank 41 1996
James E. Tecca....... Executive Vice President of the Bank 54 1996
Ralph C. Boulware.... Senior Vice President of WFS 55 1996
Kevin R. Senior Vice President of the Bank 36 1987
Farrenkopf.........
Hilton S. Hewitt..... Senior Vice President of WFS 41 1997
Erin M. Mendez....... Senior Vice President & Chief Information 39 1997
Officer of the Bank
Jeffrey D. Pratt..... Senior Vice President of the Bank 38 1996
C. William Thaxton... Senior Vice President of WFS 50 1997
</TABLE>
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 President, Chief Executive Officer, Chief Operating
Officer and Vice Chairman of the Board of Directors of WFS Financial. She 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, from
1985 to 1988.
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 various professional
associations. Ms. Feller is an active member of the California Bar Association
and was admitted to the bar in Connecticut, where she practiced prior to 1975.
5
<PAGE> 10
LEE A. WHATCOTT is Senior Vice President and Chief Financial Officer of the
Company; he also serves as Executive Vice President and Chief Financial Officer
of WFS and as Executive Vice President of the Bank, since 1996, after serving as
Senior Vice President and Chief Financial Officer of the Bank since 1994. Mr.
Whatcott joined the Company 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. Mr.
Whatcott 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 also serves as Executive Vice President and Chief Information
Officer of WFS. Before joining the organization in 1994, Mr. Stephan had over 20
years of experience in the Information Technology field with the last 15 years
in the financial institution services industry. From 1988 to 1994, 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. 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 Senior
Vice President, Chief Financial Officer and Treasurer of the Bank. He has also
served as Senior Vice President and Treasurer of WFS since 1995. 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 13 years.
MARK K. OLSON is Vice President of the Company and Senior Vice President
and Controller of WFS. He joined the Company in 1991 as Accounting Systems
Director and has held various positions since that time. Prior to joining the
Company, Mr. Olson was employed by what is now known as Ernst & Young LLP,
independent auditors, an international accounting firm. Mr. Olson 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 serves as Vice President, Director of Human Resources
for the Company, the Bank and WFS. She joined the Company in 1995. Ms.
FitzGerald has over 15 years experience in the Human Resources field, and spent
the last 5 1/2 years, prior to joining Westcorp, working for Pepsi Cola,
ultimately as Director of Human Resources. Previous experience includes various
Human Resources positions working for Pier 1 Imports and Texas Instruments. Ms.
FitzGerald holds her Masters in Labor and Industrial Relations from Michigan
State University and her Masters in Business Administration from Southern
Methodist University.
JAMES R. DOWLAN has served as Vice Chairman and Senior Executive Vice
President of WFS from 1995. He served first as Senior Vice President of the Bank
from 1984 and then as Executive Vice President of the Bank from 1989 until the
Auto Finance Division of the Bank was combined into WFS in 1995. He is Chairman
of the Board of Western Financial Insurance Agency, Inc., and President of
Westhrift Life Insurance Company, subsidiaries of the Bank; and President and
CEO of WFS Financial Auto Loans, Inc., and WFS Financial Auto Loans 2, Inc.,
subsidiaries of WFS. Prior to his association with the Bank, Mr. Dowlan was Vice
President, Loan Administration of Union Bank where he held several positions
since 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.
ROBERT E. ADAMS has served as Executive Vice President of the Western
Financial Mortgage 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.
6
<PAGE> 11
MICHAEL A. JOHNSON has served as Executive Vice President, Administration
and Marketing, of the Bank since August, 1996. He recently assumed the
additional responsibility of managing Bank operations. Mr. Johnson joined the
Bank after 17 years with First Interstate Bank of California/Wells Fargo Bank
where he began in 1980 and served in a variety of capacities including Marketing
Director, District Manager, Corporate Lending Center Manager and Personal
Banking Segment Manager. Mr. Johnson is a graduate of the University of
California at Los Angeles with a B.A. in Psychology.
JAMES E. TECCA is Executive Vice President of the Bank, serving since
April, 1996. Mr. Tecca is in charge of the Commercial Banking Group specializing
in relationship banking for middle market and private banking clients. Mr. Tecca
has over 30 years of banking experience in California, specializing in corporate
and retail banking. Prior to joining the Bank, he was Senior Vice President with
Bank of America for 20 years. In addition, from 1992 to 1996, Mr. Tecca was
Chief Operating Officer with Bay View Federal Bank in San Francisco and
President and Chief Executive Officer of Girard Savings Bank in San Diego.
RALPH C. BOULWARE is Senior Vice President of WFS Financial. He received a
B.S. degree in Information Systems Management from the University of San
Francisco, and an Executive M.B.A. degree from the University of California at
Los Angeles. His previous experience has included First Interstate Bank and both
domestic and international assignments with Electronic Data Systems (EDS). He
was with ARNI from 1992-1996. Mr. Boulware joined WFS Financial in 1996 as Vice
President of Operations in Information Services. In 1997, he was promoted to
Senior Vice President of WFS Financial, as Director of RSC Operations. Among his
areas of responsibilities at WFS Financial are corporate real estate, corporate
support functions, and two regional service centers (located in Dallas, TX, and
Irvine, CA) which provide back office support for auto financing.
KEVIN R. FARRENKOPF has served as Senior Vice President of the Retail
Banking Division of the Bank since October, 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 15 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.
HILTON S. HEWITT is a Senior Vice President of WFS and its Director of Risk
Management. Before joining WFS in August of 1997, Mr. Hewitt had a 17 year
career as a federal regulator with both the Federal Home Loan Bank System and
the Office of Thrift Supervision (OTS). Positions held during this time included
Senior Supervisory Agent and Assistant Vice President with the Federal Home Loan
Bank of Seattle and Assistant Regional Director with the OTS. He earned a B.A.
from the University of Massachusetts and an M.B.A. from Seattle University.
ERIN M. MENDEZ is Senior Vice President and Chief Information Officer of
the Bank. Before joining the Company in 1997, Ms. Mendez had over 19 years of
banking experience of which over 13 of these years was in the Operations and
Technology Information fields. Prior to her association with the Company, Ms.
Mendez was Senior Vice President and Director of Information Systems and Retail
Operations with American Savings Bank, where, from 1977-1977, she has managed
major project implementations, including system conversions and outsourcing
arrangements, and directed the technology and operations of the retail bank
consisting of 160 distributed branches and 11 support organizations. Ms. Mendez
has a B.S. in Business Administration.
JEFFREY D. PRATT serves as Senior Vice President and Director of Safety and
Soundness for the Bank. Mr. Pratt joined the Bank in 1987 and during his tenure
has managed the Internal Asset Review Department and served as Real Estate
Analyst and appraiser for the Bank's portfolios. Prior to joining the Bank, Mr.
Pratt was the sole proprietor of a real estate appraisal and consulting
business.
C. WILLIAM THAXTON joined WFS Financial in October, 1997, as Senior Vice
President and Director of Sales and Marketing. Mr. Thaxton's background includes
over 27 years in the automobile indirect finance industry from East to West and
points in between. The last six years were focused in the non-prime auto finance
industry as President of Omni Financial in Memphis (December, 1996-October,
1997), ProCredit in Philadelphia (February, 1996-November, 1996)and YES
Financial in Dallas (September, 1994-Febru-
7
<PAGE> 12
ary, 1996), plus Vice President of Branch Operations with Franklin Acceptance in
Maryland (1993-1994). Mr. Thaxton's prime auto finance experience included
executive positions with Nissan Motor Acceptance in Torrance and Dallas,
Security Pacific Auto Finance in Westlake Village and Concord, CA, Citicorp in
Miami, Columbus and St. Louis, and General Electric in North Virginia, Atlanta
and Miami. Mr. Thaxton's responsibilities and key leadership roles have included
significant production positions in decentralized, regionalized and centralized
environments at all those companies, Chief Credit Officer for NMAC, Business
Development positions at General Electric and Citicorp, and various other staff
and line roles with all companies.
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, 1997.
SUMMARY COMPENSATION TABLE
Compensation described in this table is compensation paid by the Company
including its subsidiaries:
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------------------
WESTCORP WFS
ANNUAL COMPENSATION(1) STOCK STOCK AWARDS
------------------------------------- OPTIONS(4) OPTIONS(5) SARS(6) ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(2) OTHER(3) (SHARES) (SHARES) (SHARES) COMPENSATION(7)
- --------------------------- ---- -------- -------- -------- ---------- ---------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ernest S. Rady............ 1997 $420,000 $ 0 $ 0 50,000 0 N/A $33,875(8)
Chairman of the Board 1996 400,000 116,000 551,121 20,000 55,000 0 48,372
of Directors 1995 369,984 148,100 181,703 0 N/A 50,000 30,010
Joy Schaefer.............. 1997 268,740 80,622 152,109 15,000 35,000 N/A 24,540(9)
Senior Executive Vice 1996 225,000 65,250 189,446 15,000 44,000 0 35,047
President and Chief 1995 185,000 61,065 0 8,400 N/A 40,000 16,611
Operating Officer of the
Company; President, Chief
Executive Officer, Chief
Operating Officer and a
Vice Chairman of the
Board of Directors of WFS
Andrey R. Kosovych........ 1997 225,000 112,500 0 50,000 0 N/A 0
Vice Chairman, Director 1996 N/A N/A N/A N/A N/A N/A N/A
1995 N/A N/A N/A N/A N/A N/A N/A
Donald H. Kasle........... 1997 315,000 0 0 25,000 0 0 26,250(10)
Senior Executive Vice 1996 283,077 94,264 0 57,750 0 0 18,000
President and Chief 1995 N/A N/A N/A N/A N/A N/A N/A
Administrative Officer of
the Company and
President, Chief
Executive Officer and
Director of the Bank
Lee A. Whatcott........... 1997 175,000 58,275 0 11,000 11,000 N/A 21,586(11)
Senior Vice President; 1996 149,790 43,440 22,900 10,000 0 0 30,248
and Chief Financial 1995 104,133 34,676 0 4,200 0 0 6,684
Officer;
Executive Vice President
and Chief Financial
Officer of WFS
</TABLE>
- ---------------
(1) The compensation of Ms. Schaefer was paid by WFS Financial Inc. The
compensation for Mr. Rady and Mr. Whatcott was paid by Westcorp. The
compensation for Mr. Kosovych was paid by WestFin Securities Corporation, a
subsidiary of the Company. The compensation for Mr. Kasle, who left the
Bank and the Company on March 23, 1998, was paid by the Bank.
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<PAGE> 13
(2) 1995 and 1996 Bonus restated for comparison using bonus earned in the year
indicated and payable the following year.
(3) Includes the spread between market price and exercise price on Westcorp
options exercised.
(4) Stock options for shares of Westcorp awarded in the year indicated and
exercisable in the future.
(5) Stock options for shares of WFS awarded in the year indicated and
exercisable in the future, and, in 1997, subject to shareholder approval of
the Amended and Restated 1996 Stock Option Plan (the "WFS Plan").
(6) SARs awarded by WFS pursuant to the SAR Plan for employees, employees who
are directors and the independent directors. All SARs were exercised in
1996, and the SAR Plan discontinued.
(7) Includes above market preferential interest accrued on salary deferral by
executive under deferred compensation plans, plus Company contribution to
EDP4 (described below), 401(k) and ESOP. A contribution of $2.42 million
was funded for 1997 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.
(8) Includes $11,855 in accrued above-market earnings on deferred compensation
plus $9,422 employer contribution to 401(k)/ESOP Plan plus $12,597 employer
contribution to EDP4.
(9) Includes $1,727 in accrued above-market earnings on deferred compensation
plus $9,376 employer contribution to 401(k)/ESOP Plan plus $13,437 employer
contribution to EDP4.
(10) Includes $1,166 in accrued above-market earnings on deferred compensation
plus $9,335 employer contribution to 401(k)/ESOP Plan plus $15,750 employer
contribution to EDP4.
(11) Includes $3,454 in accrued above-market earnings on deferred compensation
plus $9,381 employer contribution to 401(k)/ESOP Plan plus $8,750 employer
contribution to EDP4.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table provides information on option grants in fiscal 1997 to
the Named Executive Officers.
<TABLE>
<CAPTION>
POTENTIAL REALIZED
VALUE AT ASSUMED
WESTCORP PERCENTAGE OF ANNUAL RATES OF
OPTIONS("W") TOTAL OPTIONS EXERCISE OR STOCK APPRECIATION
WFS OPTIONS GRANTED TO BASE PRICE FOR OPTION TERM
("WF") EMPLOYEES IN (PER SHARE) EXPIRATION -------------------
NAME GRANTED(1) FISCAL 1997 ($) DATE 5%($) 10%($)
---- -------------- -------------- ------------ ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Ernest S. Rady............. 50,000(W) 14.56% $18.69 10/29/2004 380,434 886,576
0(WF) .00% N/A N/A N/A N/A
Joy Schaefer............... 15,000(W) 4.37% 18.69 10/29/2004 114,130 265,972
35,000(WF) 11.25% 13.00 10/28/2004 185,230 431,666
Andrey R. Kosovych......... 50,000(W) 14.56% 16.50 03/18/2002 227,931 503,670
0(WF) .00% N/A N/A N/A N/A
Donald H. Kasle............ 25,000(W) 7.28% 18.69 10/29/2004 190,217 443,288
0(WF) .00% N/A N/A N/A N/A
Lee A. Whatcott............ 11,000(W) 3.20% 18.69 10/28/2004 83,695 195,045
11,000(WF) 3.54% 13.00 10/29/2004 58,215 135,666
</TABLE>
- ---------------
(1) Westcorp and WFS options were each granted at the market price of the stock
at the date of the grant.
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<PAGE> 14
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
WESTCORP WESTCORP("W")
OPTIONS OPTIONS/
NUMBER OF ("W")WFS WF OPTIONS
WESTCORP OPTIONS ("WF") ("WF")
SHARES AT 12/31/97(#) AT 12/31/97($)
ACQUIRED ON VALUE REALIZED EXERCISABLE("E") EXERCISABLE("E")/
NAME EXERCISE(1) ($) UNEXERCISABLE("U") UNEXERCISABLE("E")(2)
---- ----------- -------------- -------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C>
Ernest S. Rady................ 0(W) 0(W) 41,796 E(W) $359,791 E(W)
77,266 U(W) 126,337 U(W)
13,750 E(WF) 0 E(WF)
41,250 U(WF) 0 U(WF)
Joy Schaefer.................. 11,576(W) $152,109(W) 22,326 E(W) 160,654 E(W)
33,206 U(W) 55,587 U(W)
11,000 E(WF) 0 E(WF)
68,000 U(WF) 0 U(WF)
Andrey R. Kosovych............ 0(W) 0(W) 0 E(W) 0 E(W)
50,000 U(W) 55,500 U(W)
0 E(WF) 0 E(WF)
0 U(WF) 0 U(WF)
Donald H. Kasle............... 0(W) 0(W) 14,437 E(W) 0 E(W)
68,313 U(W) 0 U(W)
0 E(WF) 0 E(WF)
0 U(WF) 0 U(WF)
Lee A. Whatcott............... 0(W) 0(W) 7,079 E(W) 37,567 E(W)
21,429 U(W) 23,071 U(W)
0 E(WF) 0 E(WF)
11,000 U(WF) 0 U(WF)
</TABLE>
- ---------------
(1) Westcorp Options.
(2) Options based on the closing price on the New York Stock Exchange of
Westcorp Common Stock on December 31, 1997 ($16.875) and the closing price
on NASDAQ of WFS Common Stock on December 31, 1997 ($11.25).
Employment Contracts and Termination of Employment and Change in Control
Arrangements
Westcorp executed Employment Contracts in 1987 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 a level based on the average of the preceding three years' salary
and bonus. The Company reserves the right to terminate the agreements for cause,
which includes fraud or other misconduct of the employees.
Westcorp executed a letter employment agreement with Mr. Kosovych in March,
1997. While his employment is "at will" and subject to certain other terms, the
agreement provides for him to receive six months of continued compensation,
subject to certain terms, if his employment is terminated without cause before
the completion of one year. The agreement also provides for Westcorp stock
option grants, pursuant to the 1991 Westcorp Stock Option Plan, of options
relating to 50,000 shares.
In addition, employment agreements dated February 27, 1998, between Ms.
Schaefer and WFS, and Mr. Whatcott and Westcorp and WFS, contain change of
control provisions under which Ms. Schaefer and Mr. Whatcott may be entitled to
two years' compensation based on the average of the preceding three years'
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<PAGE> 15
salary and bonus. WFS and/or Westcorp, as the case may be, reserves the right to
terminate the agreements for cause.
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 Company, 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 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%.
11
<PAGE> 16
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, 1995, 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.
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 5 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. The Plan was amended in 1997
to allow greater flexibility in changing retirement elections in the year prior
to planned retirement.
STOCK OPTION PLAN
1991 Stock Option Plan. The 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"). Employees and
directors of Westcorp and its subsidiaries are eligible to participate under the
1991 Stock Option Plan. Such plan is administered by the Westcorp Compensation
Committee and, in such capacity, the committee selects employees and directors
to whom options are to be granted and the number of shares to be granted based
on established criteria. 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
12
<PAGE> 17
(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.
WFS STOCK OPTION PLAN ("WFS PLAN")
WFS adopted the WFS 1996 Stock Option Plan. In the aggregate, 550,000
shares of Common Stock were the subject of options which may be granted pursuant
to the WFS Plan. In 1997, the WFS Plan was amended, subject to shareholder
approval, to increase WFS shares subject to the Plan to 1,100,000. Certain
options granted under the WFS Plan are intended to qualify as "Incentive Stock
Options" within the meaning of Internal Revenue Code of 1986, as amended,
Section 422; options may also be granted under the WFS Plan that are not
intended to qualify as "Incentive" Stock Options. Options may be granted under
the Plan to employees, directors, and employees who are also directors. Options
may be granted under the WFS Plan to any WFS optionee who, in the option of the
Compensation Committee, is or gives promise of becoming of exceptional
importance to WFS because of experience and ability. The exercise price of
shares subject to granted Incentive Stock Options must be established at a level
not less than the fair market value of the Common Stock on the date of grant, or
not less than 110% of fair market value in the case of an option granted to an
optionee who owns more than 10% of the outstanding Common Stock of WFS. The
Compensation Committee has the discretion to determine the amounts and times of
exercise of options. In 1997, a total of 317,500 options were granted, all
subject to shareholder approval of the Amended and Restated WFS Plan.
CONSOLIDATED PLAN
Westcorp's Employee Stock Ownership 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) 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
13
<PAGE> 18
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.
Westcorp funded a $2.42 million contribution to the Consolidated Plan for
1997.
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, with the exception of Howard Reese.
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,
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
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<PAGE> 19
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 overall profitability, 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 1997 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. After
the close of the fiscal year, generally in early January, 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 1997, 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 is
obtained from a variety of surveys and, in 1997, a thorough review of market
information, for the Company's size and location was undertaken. Peer
information for the Company's performance was compiled by Montgomery Securities.
The Compensation Committee considered the factors stated above in deciding
that no bonus would be awarded for 1997. The Committee established 1998
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 shareholders approved, a 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 of Westcorp and WFS stock options were made in 1997 to
some executives as shown in the Summary Compensation Table, and to other key
employees.
15
<PAGE> 20
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.
COMPENSATION COMMITTEE
Howard C. Reese, Chairman
Stanley E. Foster
Judith M. Bardwick
16
<PAGE> 21
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, 1992, and ending
December 31, 1997.
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 BROAD
(FISCAL YEAR COVERED) CA INDEX MARKET
<S> <C> <C> <C>
1992 100 100 100
1993 134.64 104.86 110.08
1994 134.6 91.18 111.54
1995 280.44 150.32 153.45
1996 355.49 179.9 188.69
1997 280.41 318.65 251.64
</TABLE>
ASSUMES $100 INVESTED ON JANUARY 1, 1993
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DECEMBER 31, 1997
CERTAIN TRANSACTIONS BETWEEN MANAGEMENT
AND THE COMPANY OR ITS SUBSIDIARIES
The Bank leases its Encino and Walnut Creek branch office spaces and WFS
its office space from Insurance Company of the West ("ICW"), an affiliate of Mr.
Rady, Chairman of the Bank and Chairman of the Board, President and Chief
Executive Officer of Westcorp. 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 and the Walnut Creek lease in 2001. The Bank and
WFS paid approximately $312,340 in rent to ICW in 1997. The Bank leases office
space to ICW in Orange, California, for which it received rent of approximately
$61,639 in 1997.
The Bank leases the office space for its Del Mar offices from Carmel
Country Plaza, an affiliate of Mr. Rady. The lease term expires in 2001. The
rent paid by the Bank for the Del Mar lease in 1997 totaled $134,491. The Kearny
Mesa Business Center is landlord to WFS's office location in San Diego. Kearny
Mesa
17
<PAGE> 22
Business Center is an affiliate of Mr. Rady. The total amount paid in 1997
pursuant to this lease, which expires in 2001, was approximately $47,334.
American Assets Inc., which is controlled by Ernest S. Rady, acts as
building managers and rental agents with respect to some properties owned by
Westcorp and provides rehabilitation and disposition services to Westcorp for
multifamily properties acquired by Westcorp through foreclosure. In 1997, the
Bank paid approximately $195,750 in fees to American Assets Inc. for such
services.
Mr. Rady, and entities controlled by him, purchased travel-related services
from Westran, a subsidiary of the Company, in the approximate amount of $38,000.
In the opinion of Westcorp these transactions have been on terms no less
favorable to Westcorp than could be obtained from unaffiliated parties. All
future transactions with persons affiliated with Westcorp 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 Westcorp.
SECURITY OWNERSHIP OF MANAGEMENT, DIRECTORS AND NOMINEES
The following table sets forth, as of December 31, 1997, 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
DECEMBER 31, PERCENT OF
NAME OF DIRECTOR POSITION WITH WESTCORP 1997 CLASS(1)
---------------- ---------------------------------------- ------------ ----------
<S> <C> <C> <C>
Ernest S. Rady................. Chairman of the Board, President, Chief 16,271,368(2) 61.89%
Executive Officer and Director
Stanley E. Foster.............. Director 165,741(3) 0.63%
William J. Crawford............ Director 6,164(4) --(10)
Judith M. Bardwick............. Director 4,509(5) --(10)
Howard C. Reese................ Director 50,393(6) 0.19%
Andrey R. Kosovych............. Director 5,000 --(10)
Charles E. Scribner............ Director 0 N/A
Joy Schaefer................... Senior Executive Vice President, Chief 34,645(7) 0.13%
Operating Officer; Vice Chairman of the
Board of Directors, President and Chief
Operating Officer of WFS
Lee A. Whatcott................ Senior Vice President and Chief 14,466(8) --(10)
Financial Officer; Executive Vice
President and Chief Financial Officer of
WFS
Donald H. Kasle(11)............ Senior Executive Vice President and 16,537(9) --(10)
Chief Administrative Officer; President,
Chief Executive Officer and Director of
the Bank
Directors and Officers as a 16,705,358 63.5%
Group (24 persons)...........
</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, 1997. All shares are Common Stock.
18
<PAGE> 23
(2) Includes beneficial ownership of 41,796 shares which may be acquired within
60 days of December 31, 1997, pursuant to stock options awarded under Stock
Option Plans plus ESOP/401K shares as of November 30, 1997. Mr. Rady
disclaims beneficial ownership of 36,015 shares owned by the DHM Trust #2.
(3) Includes beneficial ownership of 5,915 shares which may be acquired within
60 days of December 31, 1997, pursuant to stock options awarded under Stock
Option Plans.
(4) Consists of beneficial ownership of 6,164 shares which may be acquired
within 60 days of December 31, 1997, pursuant to stock options awarded
under Stock Option Plans.
(5) Consists of beneficial ownership of 4,509 shares which may be acquired
within 60 days of December 31, 1997, pursuant to stock options awarded
under Stock Option Plans.
(6) Includes beneficial ownership of 6,328 shares subject to options which are
exercisable within 60 days of December 31, 1997, plus ESOP/401K shares as
of November 30, 1997.
(7) Includes beneficial ownership of 22,326 shares which may be acquired within
60 days of December 31, 1997, pursuant to stock options awarded under Stock
Option Plans plus ESOP/401K shares as of November 30, 1997.
(8) Includes beneficial ownership of 7,079 shares which may be acquired within
60 days of December 31, 1997, pursuant to stock options awarded under Stock
Option Plans, plus ESOP/401K shares as of November 30, 1997.
(9) Includes beneficial ownership of 14,437 shares which may be acquired within
60 days of December 31, 1997, pursuant to stock options awarded under Stock
Option Plans.
(10) Less than 0.1%.
(11) Mr. Kasle left the Company and the Bank on March 23, 1998.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
WHO ARE NOT MANAGEMENT
As of March 25, 1998, 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 1999 ANNUAL MEETING
Shareholders who wish to present proposals for action at the 1999 Annual
Meeting should submit their proposals in writing and 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, 1999.
19
<PAGE> 24
ANNUAL REPORT TO SHAREHOLDERS
The Annual Report to Shareholders of the Company for the year ended
December 31, 1997, 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), 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 92618. 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
March 25, 1998
SHAREHOLDERS ARE URGED TO SPECIFY THEIR CHOICES, DATE, SIGN, AND RETURN THE
ENCLOSED PROXY IN THE ENCLOSED ENVELOPE. PROMPT RESPONSE IS HELPFUL AND YOUR
COOPERATION WILL BE APPRECIATED.
20
<PAGE> 25
REVOCABLE PROXY
WESTCORP
23 Pasteur Road
Irvine, California 92618
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF THE SHAREHOLDERS OF WESTCORP ON APRIL 30, 1998.
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 10, 1998, at the Annual Meeting of
Shareholders of WESTCORP, to be held April 30, 1998, 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)
<PAGE> 26
- ----------------------------------------------------------------------
FOLD AND DETACH HERE
Please mark your votes as indicated in this example. [X]
<TABLE>
<CAPTION>
WITHHOLD WITHHOLD
AUTHORITY AUTHORITY
TO VOTE FOR TO VOTE FOR ANY
FOR ALL NOMINEES INDIVIDUAL
LISTED BELOW NOMINEE
<S> <C> <C> <C>
1. ELECTION OF DIRECTORS
Nominees: Ernest S. Rady, [ ] [ ] [ ]
Stanley E. Foster and
Judith M. Bardwick to serve as
Class II Directors of the Company.
WITHHOLD AUTHORITY to vote for any INDIVIDUAL
nominee. Write name of such nominee below.
FOR AGAINST ABSTAIN
2. RATIFICATION OF THE APPOINTMENT OF ERNST [ ] [ ] [ ]
& YOUNG AS THE INDEPENDENT AUDITORS
OF THE COMPANY FOR FISCAL YEAR 1998.
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.
</TABLE>
I expect to attend the Meeting. [ ]
Number of Shares Owned:
------------------------------
Signature: Signature: Date
-------------- ------------- -----------
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
- ----------------------------------------------------------------------
