<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
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
</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:
- --------------------------------------------------------------------------------
(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:
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<PAGE> 2
Westcorp Logo
23 PASTEUR ROAD
IRVINE, CALIFORNIA 92618
March 29, 1999
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 27, 1999, 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, (ii) to approve the adoption of the
Amended and Restated 1991 Stock Option Plan and (iii) to ratify the appointment
of Ernst & Young LLP, as the independent accountants for the Company for fiscal
1999. 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 and
Chief Executive Officer
<PAGE> 3
Westcorp Logo
23 PASTEUR ROAD
IRVINE, CALIFORNIA 92618
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 27, 1999
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 27, 1999, at 10:00 a.m., for the following
purposes:
1. To elect four Directors for terms expiring in 2001.
2. To approve the adoption of the Amended and Restated 1991 Stock Option
Plan.
3. To ratify the appointment of Ernst & Young LLP as the independent
accountants for Westcorp for fiscal 1999.
4. To transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
The Board of Directors has selected March 8, 1999, 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
Guy Du Bose
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 GUY DU BOSE,
ESQ., WESTCORP, 23 PASTEUR ROAD, IRVINE, CALIFORNIA 92618.
<PAGE> 4
Westcorp Logo
23 PASTEUR ROAD
IRVINE, CALIFORNIA 92618
------------------------
PROXY STATEMENT
APPROXIMATE DATE PROXY MATERIAL FIRST SENT TO SHAREHOLDERS:
MARCH 31, 1999
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 27, 1999, and any
adjournments thereof (the "Meeting").
MEETING DATE AND LOCATION
The Meeting to consider the business described below will be held on April
27, 1999, 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 proposals to (i)
elect Class I Directors of the Company to serve until 2001, (ii) approve the
adoption of the Amended and Restated 1991 Stock Option Plan, and (iii) ratify
the appointment of Ernst & Young LLP as the Company's independent public
accountants for fiscal 1999.
RECORD DATE; SHAREHOLDERS ENTITLED TO VOTE
The close of business on March 8, 1999, 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 26,475,090
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 appointment of Ernst & Young LLP as the
Company's independent accountants is not required to be submitted for
shareholder approval and although shareholder approval is not binding, the Board
of Directors has elected to seek ratification by the affirmative vote of a
majority of the shares of Common Stock represented and voting at the Meeting.
MARKET VALUE OF STOCK
As of Monday, March 8, 1999, Westcorp Common Stock had a market price of
$7.75 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> 5
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 I Directors
specified herein, FOR the approval of the adoption of the Amended and Restated
1991 Stock Option Plan, and FOR the ratification of the appointment of Ernst &
Young LLP as the Company's independent accountants for fiscal 1999, 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 or
she, in his or her 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 26,475,090
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.
AMENDED AND RESTATED 1991 STOCK OPTION PLAN PROPOSAL
The following discussion summarizes certain aspects of the proposed Amended
and Restated Westcorp 1991 Stock Option Plan.
GENERAL
Pursuant to the 1991 Stock Option Plan, employees of Westcorp and its
subsidiaries and directors of Westcorp are eligible to be granted options under
the 1991 Stock Option Plan. However, the 1991 Stock Option Plan does not permit
options to be granted to directors of any of Westcorp's subsidiaries if such
directors are not also employees of Westcorp or one of its subsidiaries. Further
details about the 1991 Stock Option Plan are discussed in
"Compensation -- Certain Benefits -- 1991 Stock Option Plan."
PROPOSED AMENDMENT
At the Annual Meeting, it will be proposed that the Company's shareholders
approve the amendment and restatement of the 1991 Stock Option Plan to permit
stock options to be granted under the 1991 Stock Option Plan to persons who are
directors of either of the Company's two principal subsidiaries, Western
Financial Bank (the "Bank") and WFS Financial Inc ("WFS"), but who are not also
employees of the Company or any subsidiary of the Company. Pursuant to the 1991
Stock Option Plan and applicable law, such directors would only be eligible to
receive "non-qualified options." In all other respects, the grant of options to
such directors and the terms of those options would be subject to the same
provisions currently applicable under the 1991 Stock Option Plan to similar
options granted to directors of the Company who are not also employees.
The Board of Directors of the Company, in adopting the proposed amendment
and restatement, determined that in light of the significant contributions the
Bank and WFS make to the performance of the Company that the best interests of
the Company and its shareholders will be served by permitting directors of those
entities who are not also employees to participate in the Company's success. The
Board of Directors of the Company believes that the 1991 Stock Option Plan, as
amended and restated, will enhance the ability of the Company to attract and
maintain qualified directors for the Bank and WFS upon whose judgment,
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<PAGE> 6
initiative and efforts the Company is largely dependent for the successful
conduct of its business. It is anticipated that the acquisition of proprietary
interests in the Company will provide those directors with a further incentive
to continue as directors of the Bank or WFS and to increase their efforts to
maximize the success of those subsidiaries.
The proposed amendment and restatement does not increase the number of
shares of the Company devoted to the 1991 Stock Option Plan, but only increases
the scope of persons eligible to receive options under the 1991 Stock Option
Plan. The amendment and restatement of the 1991 Stock Option Plan does not,
therefor, have any dilutive effect upon the shareholders of the Company. The
Company's Board of Directors will be requesting an affirmative vote by its
shareholders on this proposal.
ELECTION OF DIRECTORS
At the Annual Meeting, four nominees, Howard C. Reese, Charles E. Scribner,
Robert T. Barnum and Roy A. Henderson are nominated for election as Class I
Directors, each Director to serve until 2001 and until his successor is elected
and qualified. Nominee Reese has been a Director since 1996, nominees Scribner,
Barnum and Henderson, since 1998. 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, Howard C. Reese, Charles E. Scribner,
Robert T. Barnum and Roy A. Henderson.
<TABLE>
<CAPTION>
DIRECTOR
NAME OF DIRECTOR AGE SINCE WESTCORP
---------------- --- -------- ---------------------------------
<S> <C> <C> <C>
Ernest S. Rady** 61 1982 Chairman of the Board of
Directors
Stanley E. Foster** 71 1992 Director
Judith M. Bardwick** 66 1994 Director
Howard C. Reese* 67 1996 Director
Charles E. Scribner* 61 1998 Director
Robert T. Barnum* 53 1998 Director
Roy A. Henderson* 56 1998 Director
</TABLE>
- ---------------
* Class I Director, to serve until 2001
** Class II Director, to serve until 2000
The following information is submitted concerning each of the Directors:
ERNEST S. RADY has served as Chairman of the Board and Chief Executive
Officer of the Company since 1982. He also served as President from 1982 to
March 23, l999. He has been Chairman of the Board of the Bank since 1992; a
director since 1982; and President and Chief Executive Officer from June, 1994
to January, 1996, and again, from March 23, 1998 to March 23, 1999. He is
currently Chairman of the Board and Chief Executive Officer. He also served as
Chairman of the Board of Western Thrift and Loan Association, a predecessor of
the Bank, from 1972. He is also Chairman of the Board of WFS Financial Inc. 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 beverage distribution.
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, Inc., and is a director of Postal Annex Plus, Inc.;
Accucom, Inc.; Cartronics, Inc.; and Hot Topic, Inc. Mr. Foster has been a
director of the Company since 1992.
3
<PAGE> 7
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 also 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 three 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). He
retired as President and CEO in 1996, and continues to serve 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.
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 Commercial Banking wholesale
activities. Mr. Scribner presently serves on the board of Western Insurance
Holdings and is a trustee of Scripps Health. Except for the noted directorships,
Mr. Scribner has been retired since May, 1994.
ROBERT T. BARNUM has been a private investor and advisor to several private
equity funds for the past two years. From 1989 until the company's sale in 1997,
Mr. Barnum was the CFO, then the COO of American Savings. American Savings was a
$20 billion California thrift that was owned by the Robert M. Bass group. Mr.
Barnum was a director of National Re until its sale to General Re in 1996 and of
Harborside Healthcare until its recapitalization in 1997. He is currently a
director of Center Trust Retail Properties (a publicly held REIT) and Berkshire
Mortgage Finance, a privately held commercial mortgage bank.
ROY A. HENDERSON is an investor and consultant to early stage companies. He
joined the Company's Board of Directors in 1998. Previously, he served from
April, 1996 to September, 1997 as Vice Chairman of Union Bank of California
where he was responsible for trust and investment management, private banking,
mutual funds and investment underwriting. He was Vice Chairman of The Bank of
California from September, 1993 to April, 1996. His responsibilities there
included commercial & retail banking, commercial and residential real estate
lending, trust and investment management, private banking, HighMark mutual funds
and investments. Prior to that, he served as Vice Chairman of Seafirst
Corporation and Seafirst Bank. He then became President and COO of Puget Sound
Bancorp and also of its principal subsidiary, Puget Sound National Bank. Mr.
Henderson currently serves on the boards of The University of Puget Sound and
the Seattle Museum of Flight. He was previously on the board of MasterCard
International.
COMMITTEES OF THE BOARD
The Company has a standing Audit Committee, consisting at present of
Stanley E. Foster (Chairman), Charles E. Scribner and Robert T. Barnum. 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 systems of internal controls; and to
review, upon the request of
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<PAGE> 8
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.
The Audit Committee held five meetings in 1998.
The Company has a standing Compensation Committee whose current members are
Charles E. Scribner (Chairman), Judith M. Bardwick and Robert T. Barnum. 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 basis for compensation. The Compensation Committee
held three meetings during 1998.
The Executive Committee has the powers of the Board of Directors except as
precluded by law and the Company's bylaws. The Executive Committee was comprised
of Messrs. Rady, Henderson and Scribner during 1998.
The Directors of the Company, the Bank and WFS, being cognizant of the
risks associated with Year 2000 computer issues ("Y2K"), recognize the need to
be actively involved in the Company's plans to mitigate exposure to those risks.
Therefore, the joint Bank/WFS Year 2000 Committee, consisting of Stanley E.
Foster, Bernard E. Fipp, Charles E. Scribner, Duane A. Nelles and Ernest S.
Rady, was established and met two times in 1998. The Committee oversees and
monitors the Y2K remediation plans and provides guidance to the Year 2000
project.
MEETINGS OF THE BOARD
The Board of Directors of the Company held a total of eight meetings during
1998. All directors have attended at least 75% of the meetings of the Board of
Directors except Judith M. Bardwick and Stanley E. Foster who both attended
62.5% of the meetings.
COMPENSATION OF DIRECTORS
Each director who is not also an officer of the Company or any of its
subsidiaries received $4,500 per quarterly Board meeting and $2,250 for
non-quarterly Board meetings attended, and $1,000 for each committee meeting
which is not held in conjunction with a Board meeting. Directors who are also
officers of the Company or any of its subsidiaries are not compensated for their
services as directors, and directors who attend a Company or WFS board meeting
on the same day are compensated for only one of the two meetings.
5
<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. Some officers providing services
to the Company are employed by related companies of the Company, and provide
those services at fair market value to the Company, while also serving as
officers of the Company.
<TABLE>
<CAPTION>
OFFICER
NAME POSITION AGE SINCE
---- -------- --- -------
<S> <C> <C> <C>
Joy Schaefer President and Chief Operating Officer 39 1990
of the Company; Vice Chairman of the
Board of Directors and Chief Executive
Officer of WFS
Lee A. Whatcott Senior Vice President, Chief Financial 39 1988
Officer
Richard W. Stephan Senior Vice President, Chief 60 1994
Information Officer
Thomas Wolfe Senior Vice President 39 1998
J. Keith Palmer Vice President and Treasurer 38 1993
Mark Olson Vice President and Controller 35 1994
Guy Du Bose Vice President, General Counsel and 44 1992
Secretary
Anne M. FitzGerald Vice President, Director of Human 39 1995
Resources
Ralph Boulware Vice President 55 1996
James E. Tecca President of the Bank 55 1996
Kevin R. Farrenkopf Senior Vice President of the Bank 37 1987
Jeffrey D. Pratt Senior Vice President of the Bank 39 1991
Ron Wilsie Senior Vice President of the Bank 47 1997
</TABLE>
The following is a brief account of the business experience of each
executive officer who is not a director.
JOY SCHAEFER is President and Chief Operating Officer of the Company. Ms.
Schaefer is also Chief Executive Officer and a Vice Chairman of the Board of
Directors of WFS. 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 Chief Operating Officer and Senior Executive
Vice President 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 a Manager in the financial institutions group
of the company now known as Ernst & Young LLP, in the Long Beach, California and
Springfield, Illinois offices, and with Illinois National Bank in Springfield,
Illinois. Ms. Schaefer also held various positions with Liberty National Bank in
Oklahoma City, Oklahoma, from 1985 to 1988.
LEE A. WHATCOTT has served as Senior Vice President and Chief Financial
Officer of the Company since 1995; he also serves as Executive Vice President
and Chief Financial Officer of the Bank and WFS. Mr. Whatcott joined the Company
in 1988 and became Vice President, Controller in 1992. Prior to joining the
Company, he was employed by what is now known as Ernst & Young LLP, independent
auditors, and an international accounting firm. He 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 has served as Senior Vice President and Chief
Information Officer of the Company since 1996. He is also Executive Vice
President of WFS, and Executive Vice President and Chief Information Officer of
the Bank. Mr. Stephan has over 25 years of experience in the information
technology field with the last 20 years in the financial institution services
industry. Prior to his association with the Company, Mr. Stephan was an
Executive Vice President of FiServ, Inc., a major provider of information
services to the banking industry and he was a partner with the company now known
as Ernst and Young LLP, where he managed the consulting practice for the Western
Region, served as the Senior Technology Partner
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<PAGE> 10
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.
THOMAS WOLFE is Senior Vice President of the Company and is also President
and Chief Operating Officer of WFS since March of 1999. Mr. Wolfe began his
career with WFS as Executive Vice President and National Production Manager in
April, 1998. Prior to joining WFS, he held the position of National Production
Manager at Key Auto Finance, where he oversaw the production of the indirect
auto finance business which included prime, sub-prime, leasing and commercial
lending. Mr. Wolfe has been in the auto finance and consumer credit industry
since 1982. He previously held positions with Citibank and General Motors
Acceptance Corporation. He graduated from Oregon State University in 1981 with a
degree in finance.
J. KEITH PALMER is Vice President and Treasurer of the Company; Senior Vice
President 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 14 years.
MARK OLSON is Vice President and Controller of the Company; Senior Vice
President and Controller of WFS and the Bank. He joined the Company in 1991 as
Accounting Systems Director and has held various positions since that time
including: Loan Accounting Manager from 1992 - 93, Director of Accounting and
Operations from 1993 - 94, Assistant Controller from 1994 - 95, and he has been
Controller since 1995. Prior to joining the Company, Mr. Olson was employed by
what is now known as Ernst & Young LLP, independent auditors and 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.
GUY DU BOSE is Vice President, General Counsel and Secretary of the
Company; and Senior Vice President, General Counsel and Secretary of the Bank
and WFS. He started as Vice President and Legal Counsel of the Bank in November,
1992. Prior to his association with the Company, Mr. Du Bose was Chief Operating
Officer and General Counsel of Guardian Federal Savings, Senior Vice President
and General Counsel of Mercury Federal Savings and Loan Association and
Corporate Counsel of Southern California Savings. He earned a B.A. from USC, a
J.D. from Whittier College and LL.M. from Cambridge University. Mr. Du Bose is
an active member of the California State Bar Association and a member of various
professional associations.
ANNE M. FITZGERALD joined the Company in 1995 and serves as Vice President,
Director of Human Resources of the Company and the Bank; and Senior Vice
President, Director of Human Resources, of WFS. Ms. FitzGerald has over 15 years
experience in the Human Resources field, and spent 5 1/2 years, prior to joining
Westcorp, working for Pepsi Cola, ultimately as Director of Human Resources for
the southern California business unit. 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.
RALPH BOULWARE is Vice President of the Company and Senior Vice President
of the Bank and WFS. 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, Inc. from 1992 - 1996. Mr.
Boulware joined WFS in 1996 as Vice President of Operations in Information
Services. In 1997, he was promoted to Senior Vice President of WFS, as Director
of Regional Service Center Operations. Among his areas of responsibilities at
WFS are corporate real estate, corporate support functions, and two regional
business centers (located in Dallas, TX, and Irvine, CA) which provide back
office support for auto financing. In 1998, the Bank promoted him to Senior Vice
President.
JAMES E. TECCA is President of the Bank, serving since March, 1999, after
serving as Executive Vice President since April, 1996, in charge of the
Commercial Banking Group. Mr. Tecca has over 30 years of
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<PAGE> 11
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, 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.
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 is currently a director of WestFin
Securities Corporation, a subsidiary of the Bank. He has 16 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.
JEFFREY D. PRATT has served as Senior Vice President and Director of Risk
Management for the Bank since June, 1995. Mr. Pratt joined the Company in 1987
and during his tenure has managed the Safety & Soundness Division, the Internal
Asset Review Department and served as Real Estate Analyst and appraiser for the
Bank's portfolios. Mr. Pratt will receive his M.B.A. from the University of
California, Irvine, in June, 1999. Prior to joining the Bank, Mr. Pratt was the
sole proprietor of a real estate appraisal and consulting business.
RON WILSIE is Senior Vice President in charge of the Mortgage Banking
Division of the Bank, serving since November, 1997. Mr. Wilsie has been involved
in the mortgage banking industry since 1975. Prior to joining the Bank, Mr.
Wilsie spent six years as Executive Vice President of Colonial Bancorp, a
mortgage banking company in Newport Beach, California. From 1986 - 1991 he
served as the Division President for mortgage banking at United California
Savings Bank in Santa Ana, California. Mr. Wilsie earned his B.A. and M.B.A. at
Michigan State University in East Lansing, Michigan.
COMPENSATION OF EXECUTIVE OFFICERS
The following table discloses compensation received for the three fiscal
years ended December 31, 1998, by the Company's Chairman of the Board, President
and Chief Executive Officer, and the next four most highly compensated executive
officers in 1998 (the "Named Executive Officers").
8
<PAGE> 12
SUMMARY COMPENSATION TABLE
Compensation described in this table is compensation paid by the Company
unless otherwise noted:
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------------------
WESTCORP WFS
ANNUAL COMPENSATION (1) STOCK STOCK
------------------------------ OPTIONS(4) OPTIONS(5) AWARDS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(2) OTHER(3) (SHARES) (SHARES) (SHARES) COMPENSATION(6)
--------------------------- ---- -------- -------- -------- ---------- ---------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ernest S. Rady 1998 $420,000 $ 0 209,135 48,419 21,198 0 $ 21,999(8)
Chairman of the Board of 1997 420,000 0 0 50,000 0 0 33,875
Directors, President and 1996 400,000 116,000 551,121 20,000 55,000 0 48,372
Chief Executive Officer (7)
Joy Schaefer 1998 315,000 75,000 70,616 21,145 16,958 0 9,117(9)
Chief Operating Officer and 1997 268,740 80,622 152,109 15,000 35,000 0 24,540
Senior Executive Vice 1996 225,000 65,250 189,446 15,000 44,000 0 35,047
President of the Company and
the Bank; President, Chief
Executive Officer, Chief
Operating Officer and a
Vice Chairman of the Board
of WFS(7)
Lee A. Whatcott 1998 200,000 56,100 0 14,772 5,870 0 10,165(10)
Senior Vice President and 1997 175,000 58,275 0 11,000 11,000 0 21,586
Chief Financial Officer of 1996 149,790 43,440 22,900 10,000 0 0 30,248
the Company; Executive Vice
President and Chief Financial
Officer of WFS and the Bank
Richard W. Stephan 1998 189,000 43,376 0 8,397 0 0 7,312(11)
Senior Vice President, Chief 1997 180,000 36,000 0 7,000 0 0 19,462
Information Officer of the 1996 168,500 42,125 0 5,000 0 0 29,757
Company and the Bank; and
Executive Vice President of
WFS
James R. Dowlan 1998 230,247 0 0 8,827 16,958 0 181,571(12)
Vice Chairman of the Board of 1997 242,500 0 0 0 0 0 29,640
Directors of WFS 1996 210,900 61,161 0 12,000 44,000 0 36,855
</TABLE>
- ---------------
(1) The compensation of Ms. Schaefer, Mr. Stephan and Mr. Dowlan was paid by
WFS. The compensation for Mr. Rady and Mr. Whatcott was paid by Westcorp.
(2) 1996 and 1997 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, plus, for 1996, the $3.00 per share spread between
market price and exercise price of WFS SARs exercised in 1996.
(4) Stock options for shares of Westcorp, the parent company, were awarded in
the year indicated pursuant to a stock repricing program and exercisable in
the future.
(5) Stock options for shares of WFS were awarded in the year indicated pursuant
to a stock repricing program and exercisable in the future. Awards in 1996
were conditioned upon the recipient's exercise of all his/her SARs.
(6) Includes above market preferential interest accrued on salary deferral by
executive under deferred compensation plans, plus Company contribution to
EDP4 in 1996 and 1997 (described below), 401(k) and ESOP. A contribution of
$759,313 was funded for 1998 to the Consolidated Plan (401(k) and ESOP)
which benefits other employees in addition to those named in the Table. The
Consolidated Plan is described below.
(7) Effective March 23, 1999, Mr. Rady is Chairman of the Board of Directors
and Chief Executive Officer. Effective March 23, 1999, Ms. Schaefer is
President and Chief Operating Officer of the Company; Chief Operating
Officer and Senior Executive Vice President of the Bank; Chief Executive
Officer and a Vice Chairman of the Board of Directors of WFS.
9
<PAGE> 13
(8) Includes $16,949 in accrued above-market earnings on deferred compensation
plus $5,050 employer contribution to 401(k)/ESOP Plan.
(9) Includes $4,067 in accrued above-market earnings on deferred compensation
plus $5,050 employer contribution to 401(k)/ESOP Plan.
(10) Includes $5,115 in accrued above-market earnings on deferred compensation
plus $5,050 employer contribution to 401(k)/ESOP Plan.
(11) Includes $2,262 in accrued above-market earnings on deferred compensation
plus $5,050 employer contribution to 401(k)/ESOP Plan.
(12) Includes $11,246 in accrued above-market earnings on deferred compensation,
$5,050 employer contribution to the 401(k)/ESOP Plan and $165,275 for a one
time realignment incentive payment.
REPRICING
In 1998, the Compensation Committee determined that it was in the best
long-term interest of Westcorp and its subsidiaries to effectively reprice stock
options which were outstanding in favor of not only the Named Executive Officers
but all outstanding options by issuing new options proportionally reduced in
number to reflect the new share price, based upon the book value of the
Company's stock in exchange for the options outstanding. Pursuant to applicable
rules, the following ten-year option repricing table is presented.
10
<PAGE> 14
TEN-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
LENGTH OF
ORIGINAL OPTION
NUMBER OF MARKET PRICE TERM
SECURITIES OF STOCK AT EXERCISE PRICE REMAINING AT
UNDERLYING TIME OF AT TIME OF DATE OF
OPTIONS REPRICED REPRICING OR REPRICING OR NEW EXERCISE REPRICING OR
NAME DATE OR AMENDED(#) AMENDMENT($) AMENDMENT($) PRICE(1)($) AMENDMENT
---- ------- ---------------- ------------ -------------- ------------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Judith Bardwick 9/16/98 1,500 10.125 17.13 12.60 2 yrs., 10 mos.
Judith Bardwick 9/16/98 3,500 10.125 18.69 12.60 6 yrs., 1 mo.
Ralph Boulware 9/16/98 2,000 10.125 22.75 12.60 3 yrs., 1 mo.
Ralph Boulware 9/16/98 2,000 10.125 18.69 12.60 6 yrs., 1 mo.
James Dowlan 9/16/98 12,000 10.125 17.13 12.60 2 yrs., 10 mos.
James Dowlan 7/01/93 21,000 10.125 11.90 9.25 5 yrs.
Guy Du Bose 9/16/98 2,000 10.125 17.13 12.60 2 yrs., 10 mos.
Guy Du Bose 9/16/98 2,000 10.125 18.69 12.60 6 yrs., 1 mo.
Kevin Farrenkopf 9/16/98 4,000 10.125 17.13 12.60 2 yrs., 10 mos.
Kevin Farrenkopf 9/16/98 7,000 10.125 18.69 12.60 6 yrs., 1 mo.
Anne FitzGerald 9/16/98 3,500 10.125 17.13 12.60 2 yrs., 10 mos.
Anne FitzGerald 9/16/98 2,500 10.125 18.69 12.60 6 yrs., 1 mo.
Stanley Foster 9/16/98 1,500 10.125 17.13 12.60 2 yrs., 10 mos.
Stanley Foster 9/16/98 3,500 10.125 18.69 12.60 6 yrs., 1 mo.
Donna Lesch 9/16/98 1,000 10.125 17.13 12.60 2 yrs., 10 mos.
Mark Olson 9/16/98 3,500 10.125 17.13 12.60 2 yrs., 10 mos.
J. Keith Palmer 9/16/98 2,000 10.125 17.13 12.60 2 yrs., 10 mos.
J. Keith Palmer 9/16/98 10,000 10.125 18.69 12.60 6 yrs., 1 mo.
Jeffrey Pratt 9/16/98 2,300 10.125 17.13 12.60 2 yrs., 10 mos.
Jeffrey Pratt 9/16/98 4,000 10.125 18.69 12.60 6 yrs., 1 mo.
Ernest Rady 9/16/98 20,000 10.125 17.13 12.60 2 yrs., 10 mos.
Ernest Rady 9/16/98 50,000 10.125 18.69 12.60 6 yrs., 1 mo.
Ernest Rady 7/01/93 37,800 10.125 11.90 9.25 5 yrs.
Howard Reese 9/16/98 1,500 10.125 17.13 12.60 2 yrs., 10 mos.
Howard Reese 7/01/93 21,000 10.125 11.90 9.25 5 yrs.
Joy Schaefer 9/16/98 15,000 10.125 17.13 12.60 2 yrs., 10 mos.
Joy Schaefer 9/16/98 15,000 10.125 18.69 12.60 6 yrs., 1 mo.
Richard Stephan 9/16/98 5,000 10.125 17.13 12.60 2 yrs., 10 mos.
Richard Stephan 9/16/98 7,000 10.125 18.69 12.60 6 yrs., 1 mo.
James Tecca 9/16/98 7,500 10.125 18.69 12.60 6 yrs., 1 mo.
James Tecca 9/16/98 5,000 10.125 17.13 12.60 2 yrs., 10 mos.
Lee Whatcott 9/16/98 10,000 10.125 17.13 12.60 2 yrs., 10 mos.
Lee Whatcott 9/16/98 10,508 10.125 18.69 12.60 6 yrs., 1 mo.
Lee Whatcott 9/16/98 492 10.125 18.69 12.60 6 yrs., 1 mo.
Ronald Wilsie 9/16/98 5,000 10.125 18.69 12.60 6 yrs., 1 mo.
</TABLE>
- ---------------
(1) The new exercise price of the options granted on 9/16/98 was based on book
value as of that 9/16/98 date, rather than market value. The number of
options were proportionately reduced based on the new grant at book value.
For purposes of example only, an optionee holding 10,000 options at an
exercise price of $17.13 received 7,356 options at an exercise price of
$12.60.
11
<PAGE> 15
OPTION GRANTS IN LAST FISCAL YEAR
There were no option grants, only repriced grants, in the last fiscal year
for Named Executive Officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table provides information on aggregated option exercises in
the last fiscal year and fiscal year-end option values in 1998 for the Named
Executive Officers.
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
WESTCORP('W') WESTCORP('W')
OPTIONS/ OPTIONS/
NUMBER OF WFS('WF') WFS('WF')
WESTCORP OPTIONS OPTIONS
SHARES AT 12/31/98(#) AT 12/31/98($)
ACQUIRED ON VALUE REALIZED EXERCISABLE('E')/ EXERCISABLE('E')/
NAME EXERCISE(1) ($) UNEXERCISABLE('U') UNEXERCISABLE('E')(2)
---- ----------- -------------- ------------------ ---------------------
<S> <C> <C> <C> <C>
Ernest S. Rady............... 39,966(W) 209,135(W) 9,096E(W) 63,104E(W)
48,419U(W) 335,907U(W)
0E(WF) 0E(WF)
21,198U(WF) 132,488U(WF)
Joy Schaefer................. 14,376(W) 70,616(W) 9,056E(W) 62,826E(W)
23,245U(W) 161,262U(W)
0E(WF) 0E(WF)
35,636U(WF) 222,725U(WF)
Lee A. Whatcott.............. 0 0 6,458E(W) 44,802E(W)
15,822U(W) 109,765U(W)
0E(WF) 0E(WF)
5,870U(WF) 36,688U(WF)
Richard W. Stephan........... 0 0 14,175E(W) 98,339E(W)
9,447U(W) 65,539U(W)
0E(WF) 0E(WF)
0U(WF) 0U(WF)
James R. Dowlan.............. 0 0 9,151E(W) 63,485E(W)
8,827U(W) 61,237U(W)
0E(WF) 0E(WF)
16,958U(WF) 105,988U(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, 1998 ($6.9375) and the closing price
on NASDAQ of WFS Common Stock on December 31, 1998 ($6.25).
EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL ARRANGEMENTS
Westcorp executed an employment contract in 1987 with Mr. Dowlan, certain
provisions of which are triggered by a change in control. Under the agreement,
Mr. Dowlan is guaranteed salary for a period of 24 months from the initiation of
change of control proceedings based on the average of the preceding three years'
salary and bonus. Westcorp reserves the right to terminate the agreement for
cause, which includes fraud or other misconduct of the employee.
Ms. Schaefer and Mr. Whatcott are subject to written employment agreements.
Ms. Schaefer's employment agreement is with WFS, while Mr. Whatcott's employment
agreement is with both the Company
12
<PAGE> 16
and WFS. Both agreements were executed as of February 27, 1998 and are similar
as to their terms and conditions. Each agreement establishes an initial base
salary subject to annual review and provides to Ms. Schaefer and Mr. Whatcott
the same basic benefits otherwise offered to those executive officers with whom
no written employment agreement exists. Both employment agreements also provide
that if, as a result of or following a change of control, Ms. Schaefer or Mr.
Whatcott are terminated other than for cause or are required to relocate they
will be entitled to two years' compensation, based upon the average of their
salary and bonus for the three calendar years preceding the triggering event.
Both employment agreements may be terminated by the employer at any time for
cause.
CERTAIN BENEFITS
EXECUTIVE DEFERRAL PLANS
Effective August 1, 1985, the Company established an Executive Deferral
plan ("EDP") for certain senior executives of the Company and its subsidiaries,
including the Bank, as determined by the Board of Directors. A participant in
the EDP may defer a portion of his or her compensation from a minimum of $2,000
a year to a maximum of 75% of his or her 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 following not less than 10 years participation
in the EDP and the attainment of at least age 65, 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.
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, the Company 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%.
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. Participants who make contributions to the Plan
during or before attaining age 54, will receive distributions from the plan
prior to retirement. These payments will be made on the seventh, eighth and
ninth anniversaries of the annual deferral provided the participant has not
died, retired or terminated employment. The amount to be paid on each of the
seventh, eighth and ninth year anniversaries will be equal to the initial annual
deferral amount (participant deferral plus Company match). If a participant
retires from employment with the Company on or after the attainment of age 65 or
ten years of plan participation, a participant's account will yield a compounded
interest rate equal to Moody's plus 5 percent. Account balances of less than
$25,000 will be paid in a lump sum after separation, account balances of more
than $25,000 will be paid over 180 months with the interest on the unpaid
balance credited at Moody's Rate.
Effective May 1, 1992, the Company 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. A participant's first year's contribution plus
interest will be distributed beginning in the sixth year. A 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, the Company 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
13
<PAGE> 17
portion of compensation from a minimum of $2,000 per year to a maximum of 10% of
base annual salary. There may be an employer match in EDP4 at the discretion of
the Board of Directors.
Additionally, employees required to take distribution from earlier EDP
plans, may elect, under EDP3 and EDP4, 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 under EDP4 are eligible for interest payments and interest is
credited to a participant's account at the Moody's Rate. A participant's
distributions are intended to occur upon retirement following not less than 5
years of participation in EDP4 and the attainment of at least age 65, or upon
termination of employment. 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 PLANS
1991 Stock Option Plan. The stock option plan of the Company was adopted by
the Board of Directors of the Company in April, 1991, and approved by its
shareholders in May, 1991, (the "1991 Stock Option Plan"). Employees and
directors of the Company and employees of its subsidiaries are eligible to
participate under the 1991 Stock Option Plan. The 1991 Stock Option 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 Internal
Revenue Code ("the Code") . However, only non-qualified options may be granted
to directors who are not also employees. The term of the 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 the
Company, 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 1998, a total of
355,225 options were granted, of which 37,500 were new grants and 317,725 were
options granted pursuant to a voluntary stock repricing program. Pursuant to
that repricing program during 1998, Westcorp repriced most of the options
outstanding by replacing those options with new options. The 317,725 repriced
options granted is a number that was proportionately reduced from 405,250
options held before the repricing in order to reflect the new exercise price.
All option holders taking part in this repricing program forfeited their
existing options and were issued a reduced number of new options at a reduced
exercise price.
As a result of several events, including increased losses resulting from
extraordinary increases in the rate of bankruptcies beyond historical highs and
dislocations following the consolidation and restructuring of the Company's
business lines, as well as the direct effect of the charges taken upon those
restructurings, the market price of the Company's stock has been adversely
affected. The market price of the Company's stock was significantly below the
exercise price of stock options previously granted to Named Executive Officers,
as well as those granted to other employees and to some directors of Westcorp
and its subsidiaries. As such, the essential value of stock options as a device
to incentivize the Named Executive Officers and other option holders and to
induce them to focus on long-term profitability at the expense of short-term
gain was lost. The Compensation Committee also appreciated that the Named
Executive Officers took the significant acts necessary to complete the
restructuring of the Company's business, notwithstanding the immediate and
negative effect that activity would have upon their options. Accordingly, the
Compensation Committee determined that it was in the best long-term interest of
Westcorp and its subsidiaries to effectively reprice the options which were
outstanding in favor of not only the Named Executive Officers but all
outstanding options by issuing new options proportionally reduced in number to
reflect the new share price, based upon the book value of the Company's stock in
exchange for the options outstanding.
14
<PAGE> 18
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 that 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.
WFS STOCK OPTION PLAN
In 1996, WFS adopted the WFS 1996 Stock Option Plan ("WFS Plan"). In the
aggregate, 550,000 shares of WFS Common Stock were the subject of options which
may be granted pursuant to the WFS Plan. In 1997, the WFS Plan was amended 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 the Code with other options to be "non-qualified" options;
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
and directors. Options may be granted under the WFS Plan to any WFS optionee
who, in the opinion of the Compensation Committee, is or gives promise of
becoming of exceptional importance to WFS because of experience and ability. The
Compensation Committee has the discretion to determine the amounts and times of
exercise of options. In 1998, a total of 326,052 options were granted, of which
38,200 were new grants and 287,852 were options granted pursuant to a voluntary
stock repricing program. Pursuant to that repricing program during 1998, WFS
repriced most of the options outstanding by replacing those options with new
options. The 287,852 repriced options granted is a number that was
proportionately reduced from 624,539 options held before the repricing in order
to reflect the new exercise price. All option holders taking part in this
repricing program forfeited their existing options and were issued a reduced
number of new options at a reduced exercise price. The options were repriced in
the same manner as were the options for Westcorp described above.
CONSOLIDATED PLAN
Westcorp's Employee Stock Ownership and Salary Savings Plan (the "Savings
Plan") was adopted originally in 1982. It subsequently was amended and restated
in 1985. The Internal Revenue Service determined 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. 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 defined in the Consolidated Plan) in
the same proportion as that 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 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 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
15
<PAGE> 19
Matching Contribution Account in the same proportion that each employee's
contribution of up to 6.0% of earnings bears to the total of all 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
upon attainment of at least 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 $759,313 contribution to the Consolidated Plan for
1998, which provided for a salary savings matching contribution by Westcorp but
no contribution to the ESOP Contribution Account.
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. The members of the Company's Compensation
Committee are the same as the members of the Bank's Compensation Committee.
Accordingly, the Compensation Committee generally sits and deliberates
concurrently as the committee for the Bank and the Company and considers both
performance with respect to the Company and of Westcorp and its subsidiaries as
a whole in making its compensation determinations.
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
16
<PAGE> 20
that goal and fosters decision-making by its key employees with the Company's
long-term safety and soundness in mind. Peer compensation information is
obtained from a variety of surveys and, in 1998, a thorough review of market
information for the Company's size and location was undertaken. Peer information
for the Company's performance was compiled from a number of sources, including
Watson Wyatt Worldwide.
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 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 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 1998 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).
Most of the business units of the Company performed substantially in
accordance with their established budget. As a result, the senior executives of
those business units received bonuses in an amount slightly less than a full
performance bonus. The senior executives of other business units of the Company
which failed to meet performance goals by wider margins received either
significantly lower or no performance bonuses.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
In determining the Chief Executive Officer's compensation for 1998, 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.
The Compensation Committee considered the factors stated above in deciding
that no bonus would be awarded for 1998. The Committee established 1999
management objectives for the CEO.
17
<PAGE> 21
STOCK OPTION GRANTS
The 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, the 1991 Stock Option Plan that
made 3,150,000 shares of common stock of the Company available for such
purposes. The 1991 Stock Option Plan is described above. The 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. (Certain grants of Westcorp and WFS stock options were made in 1998
to some executives as shown in the Summary Compensation Table, and to other key
employees, and will also be disclosed in the Company's 10-K, and the WFS 10-K
and proxy for their annual meetings to be held on April 27, 1999.)
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
Charles E. Scribner, Chairman
Judith M. Bardwick
Robert T. Barnum
18
<PAGE> 22
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 January 1, 1994, and ending December
31, 1998.
Due to the merger of H. F. Ahmanson & Co. with Washington Mutual, Inc., the
Company elected to change its peer group index from the S & P Industry Group to
one that it felt was a more appropriate measurement. Because of the merger, the
former peer group index would have only included two comparative industry peer
issuers, and the Company is of the opinion that the new peer group, SIC Code
6035 Federal Savings Institutions Index, provides a more appropriate
representative comparison.
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.
COMPARE 5-YEAR CUMULATIVE TOTAL RETURN
AMONG WESTCORP,
S&P 500 INDEX AND SIC CODE INDEX
LOGO
ASSUMES $100 INVESTED ON JAN. 01, 1994
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 31, 1998
SECURITY OWNERSHIP OF MANAGEMENT, DIRECTORS AND NOMINEES
The following table sets forth, as of December 31, 1998, 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
19
<PAGE> 23
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 POSITION WITH WESTCORP 1998 CLASS(1)
---- ---------------------- ------------ ----------
<S> <C> <C> <C>
Ernest S. Rady Chairman of the Board, President, Chief 17,053,830(3) 64.42%
Executive Officer and Director(2)
Stanley E. Foster Director 186,039(4) 0.70%
Judith M. Bardwick Director 5,513(5) --(6)
Howard C. Reese Director 53,939(7) 0.20%
Charles E. Scribner Director 27,000 0.10%
Robert T. Barnum Director 15,000 --(6)
Roy A. Henderson Director 0
Joy Schaefer Chief Operating Officer and Senior 22,251(8) --(6)
Executive Vice President; President,
Chief Executive Officer, Chief Operating
Officer and a Vice Chairman of the Board
of Directors of WFS(2)
Lee A. Whatcott Senior Vice President and Chief 14,417(9) --(6)
Financial Officer; Executive Vice
President and Chief Financial Officer of
WFS
James R. Dowlan Director, WFS 31,923(10) 0.12%
Richard W. Stephan Senior Vice President and Chief 15,530(11) --(6)
Information Officer
Directors and Officers as a Group
(21 persons) 17,459,662 65.95%
</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, 1998. All shares are Common Stock.
(2) Effective March 23, 1999, Mr. Rady is Chairman of the Board of Directors
and Chief Executive Officer. Effective March 23, 1999, Ms. Schaefer is
President and Chief Operating Officer of the Company; Chief Operating
Officer and Senior Executive Vice President of the Bank; and Chief
Executive Officer and a Vice Chairman of the Board of Directors of WFS.
(3) Includes beneficial ownership of 9,096 shares which may be acquired within
60 days of December 31, 1998, pursuant to stock options awarded under Stock
Option Plans plus ESOP/401K shares as of December 31, 1998. Mr. Rady
disclaims beneficial ownership of 36,013 shares owned by the DHM Trust #2.
(4) Includes beneficial ownership of 1,213 shares which may be acquired within
60 days of December 31, 1998, pursuant to stock options awarded under Stock
Option Plans.
(5) Consists of beneficial ownership of 5,513 shares which may be acquired
within 60 days of December 31, 1998, pursuant to stock options awarded
under Stock Option Plans.
(6) Less than 0.1%.
(7) Includes beneficial ownership of 8,242 shares which may be acquired within
60 days of December 31, 1998, pursuant to stock options awarded under Stock
Option Plans plus ESOP/401K shares as of December 31, 1998.
(8) Includes beneficial ownership of 9,056 shares which may be acquired within
60 days of December 31, 1998, pursuant to stock options awarded under Stock
Option Plans plus ESOP/401K shares as of December 31, 1998.
20
<PAGE> 24
(9) Includes beneficial ownership of 6,458 shares which may be acquired within
60 days of December 31, 1998, pursuant to stock options awarded under Stock
Option Plans plus ESOP/401K shares as of December 31, 1998.
(10) Includes beneficial ownership of 9,151 shares which may be acquired within
60 days of December 31, 1998, pursuant to stock options awarded under Stock
Option Plans, plus ESOP/401K shares as of December 31, 1998.
(11) Includes beneficial ownership of 14,175 shares which may be acquired within
60 days of December 31, 1998, pursuant to stock options awarded under Stock
Option Plans, plus ESOP/401K shares as of December 31, 1998.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
and the New York Stock Exchange. Officers, directors and greater than ten
percent shareholders are required by regulations of the Securities and Exchange
commission to furnish the Company copies of all Section 16(a) forms they file.
Based solely on the Company's review of copies of such reports furnished to
the Company or written representations that no other reports were required, the
Company believes that, during the 1998 fiscal year, all filing requirements
applicable to its officers, directors and greater than 10% beneficial owners
were complied with except James Tecca, Executive Vice President of the Bank,
filed two Form 4's late, and Robert Barnum, a Director of the Company, did not
file a Form 4 on a stock transaction during 1998.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
WHO ARE NOT MANAGEMENT
As of March 29, 1999, 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 APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Upon recommendation of the Audit Committee, the international accounting
firm of Ernst & Young LLP, 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 LLP 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 of the appointment of Ernst & Young LLP by the affirmative
vote of a majority of the shares represented and voted at the Meeting.
SHAREHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING
Shareholders who wish to present proposals for action at the 2000 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, 2000.
21
<PAGE> 25
ANNUAL REPORT TO SHAREHOLDERS
The Annual Report to Shareholders of the Company for the year ended
December 31, 1998, 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 Guy Du
Bose, 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
Guy Du Bose
Secretary
Irvine, California
March 29, 1999
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.
22
<PAGE> 26
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 27, 1999.
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 8, 1999, at the Annual Meeting of
Shareholders of WESTCORP, to be held April 27, 1999, 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, 2 AND 3.
(Proxy continued on reverse)
<PAGE> 27
- --------------------------------------------------------------------------------
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
ALL NOMINEES INDIVIDUAL
FOR LISTED BELOW NOMINEE
<S> <C> <C> <C>
1. ELECTION OF DIRECTORS
Nominees: Howard C. Reese, [ ] [ ] [ ]
Charles E. Scribner,
Robert T. Barnum and
Roy A. Henderson to serve as
Class I Directors of the Company.
WITHHOLD AUTHORITY to vote for any INDIVIDUAL
nominee. Write name of such nominee below.
FOR AGAINST ABSTAIN
2. APPROVE THE ADOPTION OF THE AMENDED AND [ ] [ ] [ ]
RESTATED 1991 STOCK OPTION PLAN.
FOR AGAINST ABSTAIN
3. RATIFICATION OF THE APPOINTMENT OF ERNST & [ ] [ ] [ ]
YOUNG LLP, AS THE INDEPENDENT AUDITORS
OF THE COMPANY FOR FISCAL YEAR 1999.
</TABLE>
4. 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 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
- --------------------------------------------------------------------------------
