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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 5, 2000
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
WESTCORP
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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CALIFORNIA 6035 51-0308535
(STATE OR OTHER JURISDICTION OF PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
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23 PASTEUR
IRVINE, CALIFORNIA 92618-3816
(949) 727-1002
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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JOY SCHAEFER
PRESIDENT
WESTCORP
23 PASTEUR
IRVINE, CALIFORNIA 92618-3816
(949) 727-1002
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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COPIES TO:
ANDREW E. KATZ, ESQ.
MITCHELL, SILBERBERG & KNUPP LLP
11377 WEST OLYMPIC BOULEVARD
LOS ANGELES, CALIFORNIA 90064-1683
(310) 312-2000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this registration statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED PER SHARE OFFERING PRICE REGISTRATION FEE(1)
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Common Stock, $1.00 par
value........................ 5,319,469 Shares $12.00 $63,833,628 $16,582
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Subscription Warrants.......... 26,597,343 Warrants (2) (2) None
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(1) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933, as amended, based
on the estimated offering price.
(2) No separate consideration will be received for the subscription warrants.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT
AN OFFER TO SELL THESE SECURITIES, AND IT IS NOT SOLICITING AN OFFER TO BUY
THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT
PERMITTED.
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PRELIMINARY PROSPECTUS
DATED AS OF MAY 5, 2000
SUBJECT TO COMPLETION
5,319,469 SHARES
[WESTCORP LOGO]
COMMON STOCK
ISSUABLE UPON EXERCISE OF SUBSCRIPTION RIGHTS
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We are offering to our existing shareholders the right to purchase
5,319,469 shares of common stock in this rights offering. Our common stock
trades on the New York Stock Exchange under the symbol "WES."
- You will receive one right for each share of our common stock which you
own on the record day of May 25, 2000. For each 5.0 rights which you
exercise, you will be able to purchase one share of our common stock at a
price of $12.00 per share. This is your "Basic Subscription Right."
- If you fully exercise your Basic Subscription Right, you may elect to
purchase additional shares of common stock to the extent available on a
pro rata basis with other stockholders making that election. This is your
"Oversubscription Right."
- We will not issue fractional rights or fractional shares, and we will not
pay cash in place of rights or fractional shares. These rights are
transferable and are expected to trade on the New York Stock Exchange
under the symbol "WES Rt". If the number of rights which you own on the
record date would result, when exercised, in your receipt of fractional
shares, the number of shares which you will be able to purchase will be
rounded down to the next whole number. You may seek to transfer any
rights which you own which are not sufficient to purchase a whole share
of common stock.
- The rights are exercisable beginning on the date of this prospectus and
continuing until 5:00 p.m., Eastern Daylight Time, on June 15, 2000,
which date and time are the "expiration date," unless we extend this
offering. If you want to participate in this rights offering, you must
submit your subscription documents to us before the expiration date, in
the manner described in this prospectus.
- Subscriptions are irrevocable once we receive them, unless we amend this
offering.
- Stockholders who do not participate in this rights offering will continue
to own the same number of shares of our common stock, but will own a
smaller percentage of the total number of shares outstanding to the
extent that other stockholders participate in this rights offering.
- Ernest S. Rady, our Chairman, is the beneficial owner of approximately
66% of our common stock. Mr. Rady has informed us that he will exercise
his Basic Subscription Right and that he expects to also exercise his
Oversubscription Right.
- In addition, we are making a contribution of up to $5.0 million to our
Employee Stock Ownership and Salary Savings Plan to enable the Plan and
its participants to exercise their subscription rights.
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Per Share Total
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Offering price: $12.000 $63,833,628
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THIS INVESTMENT INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 12 TO READ
ABOUT RISKS THAT YOU SHOULD CONSIDER CAREFULLY BEFORE BUYING SHARES OF OUR
COMMON STOCK.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR
DEPOSITS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY
OTHER GOVERNMENTAL AUTHORITY OR AGENCY.
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THE DATE OF THIS PROSPECTUS IS MAY , 2000.
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TABLE OF CONTENTS
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Prospectus Summary.................. 1
Westcorp.......................... 1
Our Company.................... 1
Automobile Lending
Operations................ 1
Bank Operations.............. 2
The History of Westcorp........ 3
Market and Competition......... 4
Our Business Strategy.......... 5
Our Address.................... 6
The Offering...................... 7
Summary Financial Data............ 10
Risk Factors........................ 12
Risks Related to the Offering..... 12
Risks Related to Us............... 13
Risks Related to Factors Outside
Our Control.................... 17
Use of Proceeds..................... 20
Dividend Policy..................... 20
The Offering........................ 20
The Rights..................... 20
Basic Subscription Right....... 21
Oversubscription Right......... 21
Subscription Price............. 22
Expiration Time and Date....... 22
Principal Stockholders......... 22
Subscription Procedures........ 22
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Subscription Payments.......... 24
Notice of Guaranteed
Delivery..................... 24
No Revocation.................. 25
Method of Transferring
Rights....................... 25
Procedures for DTC
Participants................. 26
Subscription Agent............. 26
Determination of the
Subscription Price........... 26
Foreign Stockholders;
Stockholders with APO or FPO
Addresses.................... 26
Regulatory Limitation.......... 27
Withdrawal of this Offering.... 27
Issuance of the Common Stock... 27
No Board Recommendation........ 27
No Effect on Stock Options or
Bonus Interests.............. 27
Shares of Common Stock Outstanding
After the Offering................ 27
Certain Federal Income Tax
Consequences...................... 28
Legal Matters....................... 29
Experts............................. 29
Forward-Looking Statements.......... 29
Where You Can Find More
Information....................... 30
Incorporation by Reference.......... 30
Material Changes.................... 31
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PROSPECTUS SUMMARY
This summary highlights certain information found in greater detail
elsewhere in this prospectus. In addition to this summary, we urge you to read
the entire prospectus carefully, especially the risks of investing in our common
stock discussed under "Risk Factors," before deciding to invest in shares of our
common stock.
WESTCORP
OUR COMPANY
Westcorp is a diversified financial services holding company that provides
automobile lending services through its second tier subsidiary, WFS Financial
Inc ("WFS") and provides retail and commercial banking services through its
wholly owned subsidiary, Western Financial Bank (the "Bank"). The Bank currently
owns 82% of the capital stock of WFS.
AUTOMOBILE LENDING OPERATIONS
We are one of the nation's largest independent automobile finance companies
with 27 years of experience in the automobile finance industry. We originate,
service and securitize new and used automobile installment contracts, which are
generated through our relationships with over 8,500 franchised and independent
automobile dealers in 43 states. We originated $3.3 billion of automobile
contracts during 1999 and serviced a portfolio of $5.4 billion of automobile
contracts at December 31, 1999.
We provide service to dealers through our nationwide network of business
development representatives. Our business development representatives provide
dealers with a single contact to whom they can sell most of their automobile
contracts. Unlike many of our competitors, we offer programs for both prime and
non-prime borrowers. Approximately 70% of our contract originations are with
borrowers who have strong credit histories, otherwise known as prime borrowers,
and approximately 30% or our contracts are with borrowers who have overcome past
credit difficulties, otherwise known as non-prime borrowers. We do not offer
programs for borrowers who are currently experiencing or recently have
experienced credit difficulties, otherwise known as sub-prime borrowers.
We underwrite contracts through a credit approval process that is supported
and controlled by a centralized, automated front-end system. This system
incorporates proprietary credit scoring models and industry credit scoring
models and tools, which enhance our credit analysts' abilities to tailor each
contract's pricing and structure to maximize risk-adjusted returns. Our
underwriters earn incentives based on the profitability rather than the volume
of the contracts that they purchase.
We structure our business to minimize operating costs while providing high
quality service to our dealers. Those aspects of our business that require a
local market presence are performed on a decentralized basis in our 45 offices.
All other operations are centralized.
We fund our purchases of contracts with deposits raised at the Bank which
are insured by the Federal Deposit Insurance Corporation ("FDIC"). We securitize
the contracts we have purchased on a regular basis. Since 1985, we have
securitized over $15 billion of automobile contracts in 47 public offerings of
asset-backed securities, making us the fourth largest issuer of such securities
in the nation. We anticipate that we will continue to securitize contracts in
transactions recorded as either secured financings or as sales. We believe that
the relationship maintained between WFS and the Bank provides us a competitive
advantage relative to other independent automobile finance companies
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by providing a significant source of liquidity at a low cost and by allowing us
the ability to enter the automobile asset-backed securities market on an
opportunistic basis.
To improve our long-term profitability, we restructured our automobile
lending operations in 1998. As a result, we incurred a net loss of $14.7 million
in 1998 due to higher credit losses and a $15.0 million charge related to the
restructuring. The higher credit losses were due to purchasing a higher
percentage of non-prime contracts during 1996 and 1997, as well as servicing
disruptions created by our restructuring. As part of this restructuring, we
merged our prime and non-prime operations and offices, changed our purchasing
strategy to emphasize prime contracts, eliminated unprofitable dealer
relationships, implemented new underwriting and servicing technology, closed 96
underperforming offices and reduced our number of employees ("associates") by
approximately 20%.
As a result of this restructuring, we have:
- returned to profitability, realizing record net income of $52.6 million
in 1999;
- increased operating cash flows from automobile lending operations from
$13.6 million in 1997, to $16.4 million in 1998 and to $110 million in
1999;
- increased automobile contract originations from $2.3 billion in 1997, to
$2.7 billion in 1998 and to $3.3 billion in 1999;
- increased prime contract originations from 54% in 1997, to 68% in 1998
and to 69% in 1999;
- improved the percentage of applications funded to applications received
from 13% for the first quarter of 1998 to 19% for the fourth quarter of
1999;
- lowered automobile lending operating expenses as a percentage of average
serviced contracts from 5.0% in 1997, to 4.1% in 1998 and to 3.6% in
1999; and
- reduced automobile net chargeoffs as a percentage of average serviced
contracts from 3.0% in 1997 and 3.4% in 1998 to 2.1% in 1999.
BANK OPERATIONS
The Bank's primary focus is to generate diverse, low-cost funds to provide
the liquidity needed to fund automobile contracts. We have the ability to raise
significant amounts of liquidity by attracting both short-term and long-term
deposits from the general public, commercial enterprises and institutions by
offering a variety of accounts and rates. These funds are generated through our
retail and commercial banking divisions. We may also raise funds by obtaining
advances from the Federal Home Loan Bank ("FHLB"), selling securities under
agreements to repurchase and utilizing other borrowings.
Our retail banking division serves the needs of individuals and small
businesses by offering a broad range of products, such as demand deposit
accounts, money market accounts, certificates of deposits and other investment
services through 25 retail branches located throughout California. Our
commercial banking division focuses on small and medium-sized businesses in
southern California, offering loans, lines of credit and trade finance services,
as well as account analysis, cash management and other commercial depository
services in order to attract low-cost commercial deposits. We also employ the
liquidity generated by the retail and commercial banking divisions by investing
in mortgage-backed securities ("MBS") to generate additional net interest
margin, to manage interest rate risk, to provide another source of liquidity
through repurchase agreements, to support community reinvestment and housing
finance and to meet regulatory requirements.
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During 1998 and into 1999, we determined that our mortgage banking
activities no longer met our long-term profit goals and strategic objectives. As
a result, we closed our prime mortgage lending operations and sold $28.9 million
in mortgage servicing rights in the fourth quarter of 1998 and incurred a $3.0
million restructuring charge. During the third quarter of 1999, we completed the
sale of our sub-prime mortgage lending operations and sold the remaining $1.0
billion of mortgage servicing rights that we held. During the fourth quarter of
1999, we closed our loan servicing department and entered into an agreement to
sell the rights to service our remaining owned portfolio, thereby completing our
mortgage banking exit strategy. At December 31, 1999, we owned $598 million in
single-family and multi-family mortgage loans that were originated through
previous mortgage lending activities.
THE HISTORY OF WESTCORP
Western Thrift & Loan Association, a California-licensed thrift and loan
association was founded in 1972. In 1973, Western Thrift Financial Corporation
was formed as the holding company for Western Thrift & Loan Association. Western
Thrift Financial Corporation later changed its name to Westcorp. In 1982,
Westcorp acquired Evergreen Savings and Loan Association, a California-licensed
savings and loan association, which became a wholly owned subsidiary of
Westcorp. The activities of Western Thrift & Loan Association and Evergreen
Savings and Loan Association were merged together in 1982, and Evergreen Savings
and Loan Association's name was changed ultimately to Western Financial Bank.
Western Thrift & Loan Association was involved in automobile finance
activities from its incorporation until its merger with Evergreen Savings and
Loan Association. At such time, the automobile finance activities of Western
Thrift & Loan Association were continued by the Bank. In 1988, Westcorp
Financial Services, Inc. was incorporated as a wholly owned consumer finance
subsidiary of the Bank to provide non-prime automobile finance services, a
market not serviced by the Bank's automobile finance division.
In 1995, the Bank transferred its automobile finance division to Westcorp
Financial Services and changed its name to WFS Financial Inc. In connection with
that acquisition, the Bank transferred to WFS all assets relating to its
automobile finance division, including the contracts held on balance sheet and
all interests of the Bank in the excess spread payable from outstanding
securitization transactions. The Bank also transferred all of the outstanding
stock of WFS Financial Auto Loans, Inc., ("WFAL"), and WFS Financial Auto Loans
2, Inc., ("WFAL2"), the securitization entities of the Bank, thereby making
these companies subsidiaries of WFS. In 1995, WFS sold approximately 20% of its
shares in a public offering.
On February 15, 2000, WFS completed a follow-on offering of 2,350,000
shares of common stock at a price of $15.00 per share. On March 14, 2000,
underwriters for the follow-on offering exercised their over allotment option to
purchase 300,000 additional shares bringing total net proceeds raised by WFS to
approximately $37.9 million. The Bank purchased 1,000,000 shares of the total
2,650,000 shares issued by WFS. The primary purpose of the offering was to
provide WFS with additional capital to fund growth, to increase the amount of
contracts which can be acquired and held prior to sale in the asset-backed
securities market, and to provide working capital for general corporate
purposes. After the follow-on offering, the Bank owns approximately 82% of WFS'
shares.
The Bank is subject to examination and comprehensive regulation by the
Office of Thrift Supervision ("OTS") and the Federal Deposit Insurance
Corporation ("FDIC"). It is further subject to certain regulations of the Board
of Governors of the Federal Reserve System which governs reserves required to be
maintained against deposits and other matters. The Bank is also a member of the
FHLB of San Francisco, one of twelve regional banks for federally insured
savings and loan
3
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associations and banks comprising the FHLB System. The FHLB System is under the
supervision of the Federal Housing Finance Board. WFS and certain other
subsidiaries of the Bank are further regulated in part by various departments or
commissions of the states in which they do business. Federal statutes and
regulations primarily define the types of loans that the Bank and its subsidiary
may originate.
MARKET AND COMPETITION
We believe that the automobile finance industry is the second largest
consumer finance industry in the United States with over $635 billion of loan
and lease originations during 1999. The industry is generally segmented
according to the type of car sold, new versus used, and the credit
characteristics of the borrower, prime, non-prime or sub-prime. Based upon
industry data, we believe that during 1999, prime, non-prime and sub-prime loan
originations in the United States were $341 billion, $105 billion and $86
billion, respectively. The U.S. captive automobile finance companies, General
Motors Acceptance Corporation, Ford Motor Credit Company and Chrysler Credit
Corporation account for up to approximately 30% of the automobile finance
market. We believe that the balance of the market is highly fragmented and that
no other market participant has greater than a 1% market share. Other market
participants include the captive automobile finance companies of other
manufacturers, banks, credit unions, independent automobile finance companies
and other financial institutions.
Our dealer servicing and underwriting capabilities enable us to compete
effectively in the automobile finance market. Our ability to compete
successfully depends largely upon our strong personal relationships with dealers
and their willingness to offer to us those contracts that meet our underwriting
criteria. Our relationship is fostered by the promptness with which we process
and fund contracts as well as the flexibility and scope of the programs we
offer. We purchase the full spectrum of prime and non-prime contracts secured by
both new and used vehicles.
The competition for contracts available within the prime and non-prime
credit quality contract spectrum is more intense when the rate of automobile
sales declines. Although we have experienced consistent growth for many years,
we can give no assurance that we will continue to do so. Several of our
competitors have greater financial resources than we have and may have a
significantly lower cost of funds. Many of these competitors also have
longstanding relationships with automobile dealers and may offer dealers or
their customers other forms of financing or services not provided by us. The
finance company that provides floor planning for the dealer's inventory is also
ordinarily one of the dealer's primary sources of financings for automobile
sales. We do not currently provide financing on dealers' inventories. We must
also compete with dealer interest rate subsidy programs offered by the captive
automobile finance companies. However, frequently those programs are limited to
certain models or to certain loan terms which may not be attractive to many new
automobile purchasers. Also, these programs are rarely offered on used vehicles.
Competition in the retail banking business comes primarily from commercial
banks, credit unions, savings and loan associations, mutual funds, and from the
corporate and government securities markets. Many of the nation's largest
savings and loan associations and other depository institutions are
headquartered or have branches in California. We compete for deposits primarily
on the basis of interest rates paid and the quality of service provided to our
customers. We do not rely on any individual, group or entity for a material
portion of our deposits.
Competition in the commercial banking business comes primarily from other
commercial banks that maintain a presence in Southern California. In general,
many commercial banks are more sizable institutions with larger lending
capacities and depository services. We have differentiated ourselves by
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providing high quality service, local relationship management, prompt credit
decisions, and competitive rates on both loans and depository products.
OUR BUSINESS STRATEGY
Our business objective is to maximize long-term profitability by
efficiently purchasing and servicing prime and non-prime credit quality
automobile contracts that generate strong and consistent risk-adjusted returns.
We believe we will be able to achieve this objective by employing our business
strategies:
- produce measured growth in automobile contract originations;
- leverage technology to improve our business;
- effectively price automobile contracts relative to risk; and
- utilize the diverse funding sources of the Bank.
PRODUCE MEASURED GROWTH IN AUTOMOBILE CONTRACT ORIGINATIONS
Over the past five years, we have experienced a compounded annual growth
rate in automobile contract purchases in excess of 26%.
We provide a high degree of personalized service to our dealership base by
marketing, underwriting and purchasing contracts on a local level. Our focus is
to provide each dealer superior service by providing a single source of contact
to meet the dealer's prime and non-prime financing needs. We believe that the
level of our service surpasses that of our competitors by making our business
development representatives available any time a dealer is open, making prompt
credit decisions, negotiating credit decisions within available programs by
providing structural alternatives and funding promptly.
Growth of originations will be primarily through increased dealer
penetration. We intend to increase contract purchases from our current dealer
base as well as develop new dealer relationships. Prior to 1995, we originated
contracts in seven, primarily western states. Subsequently, we increased our
geographic penetration to 36 additional states. Although our presence is well
established throughout the country, we believe that we still have opportunities
to build market share, especially in those states which we entered since 1994.
In addition, we have improved our dealer education and delivery systems in order
to increase the ratio of contracts purchased to the amount of applications
reviewed from a dealer, thereby improving the efficiency of our dealer
relationships. We are also seeking to increase contract purchases through new
dealer programs targeting high volume, multiple location dealers. These programs
focus on creating relationships with dealers to achieve higher contract
originations and improved efficiencies. We also originate loans directly from
consumers on a limited basis. Additionally, we continue to explore other
distribution channels including the Internet and are piloting different
dealer-centric approaches to determine the most effective Internet strategies.
LEVERAGE TECHNOLOGY TO IMPROVE OUR BUSINESS
We are focused on leveraging technology to improve all aspects of our
business. Over the past three years, we have implemented technology and
streamlined operations to improve credit quality, enhance and manage growth and
improve operating efficiency. We plan to realize additional benefits with
ongoing investments in the future.
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Key technological initiatives implemented to date include our:
- new automated front-end origination system which calculates borrower
ratios, maintains lending parameters and approval limits, accepts
electronic applications and directs applications to the appropriate
credit analyst, all of which have reduced the cost of receiving,
underwriting and funding automobile contracts;
- custom designed proprietary scoring models that rank in order the risk of
loss occurring on a particular automobile contract;
- new collection system platform utilizing new hardware and software to
improve our ability to queue according to the level of risk, monitor
collector performance and track delinquent automobile accounts;
- centralized and upgraded borrower services department which includes
remittance processing, interactive voice response technology and direct
debit services; and
- centralized imaging system that provides for the electronic retention and
retrieval of account records.
We are currently developing behavioral scoring models to enhance both the
efficiency and effectiveness of our collection processes. We are also developing
a second generation data warehouse to enhance our ability to maximize our
profitability by dealer, and we are developing an on-line, Internet-based credit
application to further enhance our growth.
EFFECTIVELY PRICE AUTOMOBILE CONTRACTS RELATIVE TO RISK
Quality underwriting and servicing are essential to effectively assess and
price for risk and to maximize risk-adjusted returns. We rely on a combination
of credit scoring models, system controlled underwriting policies and the
judgment of our trained credit analysts to make risk-based credit decisions. We
use credit scoring to differentiate applicants and to rank order credit risk in
terms of expected default probability. Based upon this statistical assessment of
credit risk, the underwriter is able to appropriately tailor contract pricing
and structure.
To achieve the return anticipated at origination, we have developed a
disciplined servicing process for the early identification and cure of
delinquent contracts and for loss mitigation. In addition, we provide credit and
profitability incentives to our associates to make decisions consistent with our
underwriting policies by offering bonuses based both on individual and
office-wide performance.
UTILIZE THE DIVERSE FUNDING SOURCES OF THE BANK
The Bank provides diverse, low-cost funds through its retail and commercial
banking divisions as well as its ability to obtain advances from the FHLB, sell
securities under agreements to repurchase and to utilize other borrowing
sources. These significant and diverse sources of funds provide liquidity at a
low cost to fund our automobile contract purchases and allow us to
opportunistically enter the automobile asset-backed securities market.
OUR ADDRESS
Our principal executive office and mailing address is 23 Pasteur, Irvine,
California 92618-3816, and our telephone number is (949) 727-1002. Our website
address is http://www.westcorpinc.com. The information contained in our website
does not constitute part of this prospectus.
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THE OFFERING
The Offering............... We are offering to sell 5,319,469 shares of our
common stock upon the exercise of subscription
rights.
Record Date................ May 25, 2000.
Subscription price......... $12.00 per share.
Basic Subscription Right... We are granting each person who was a record holder
of our common stock on the Record Date one right
for each share of common stock held on that date.
To exercise the Basic Subscription Right, you must
deliver 5.0 rights for each share of common stock
you subscribe for. There is no minimum amount of
shares you must purchase using your Basic
Subscription Rights, but you may not purchase
fractional shares. You will receive a Subscription
Warrant evidencing your subscription rights.
When determining the number of shares we will
issue, divide the number of subscription rights you
own, whether distributed to you by us or otherwise
acquired by you, by 5.0 and round down to the
nearest whole number. For example, if you own 118
subscription rights, you may subscribe for 23
shares (118 subscription rights / 5.0 = 23.6,
rounded down to 23 shares, the nearest whole
number).
Oversubscription Right..... If you fully exercise your Basic Subscription
Rights by subscribing for the maximum number of
whole shares you may purchase based upon the number
of Basic Subscription Rights you own, and other
shareholders do not fully exercise their Basic
Subscription Rights, you may elect to purchase
additional shares of common stock. We cannot assure
you that any additional shares of common stock will
be available for purchase. Any amounts tendered by
you not used to purchase additional shares will be
promptly refunded to you, without interest.
If shares of common stock are available for
purchase pursuant to the Oversubscription Rights,
but the number of shares is not sufficient to
satisfy in full all oversubscriptions received by
us, the number of shares available will be
allocated on a pro rata basis based upon the number
of Basic Subscription Rights exercised by each
person seeking to oversubscribe as of the
Expiration Date of the offering.
Expiration Date............ The rights will expire on June 15, 2000 at 5:00
p.m., Eastern Daylight Time, unless we decide, in
our sole discretion, to extend the Expiration Date.
Termination................ We may cancel the Offering at any time, in which
case we will return your subscription payment to
you, without interest.
Exercising your rights..... Your rights will be evidenced by a Subscription
Warrant which will be distributed to stockholders
of record on the Record Date. You may exercise your
rights by properly completing and signing the
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<PAGE> 11
Subscription Warrant and returning it, with full
payment for the shares you are subscribing for, to
the Subscription Agent by the Expiration Date. You
may elect to exercise your Basic Subscription
Rights in whole or in part, and if you exercise
your Basic Subscription Rights in full, your
Oversubscription Rights. See "The Rights
Offering--Subscription Payments" for details about
delivery and payment. Rights not exercised by the
Expiration Date will be null and void after the
Expiration Date.
You will receive all shares you subscribe for
pursuant to your Basic Subscription Rights. If your
oversubscription is not completely filled, we will
send you a check for all shares we were unable to
allocate to you. No interest will be paid on
returned subscription funds.
YOUR SUBSCRIPTION IS IRREVOCABLE AFTER YOU SUBMIT
THE SUBSCRIPTION DOCUMENTS.
Transferability of
rights..................... Your subscription rights are transferable and we
expect that they will trade on the New York Stock
Exchange under the symbol "WES Rt" until the close
of business on the last trading day prior to the
Expiration Date. You may request that the
Subscription Agent attempt to sell your rights for
you. The Subscription Agent must receive your
Subscription Warrant by 11:00 a.m., Eastern
Daylight time, on the third trading day before the
Expiration Date if you are seeking to sell your
rights. We can give you no assurance that the
Subscription Agent will be able to sell your rights
or the price at which they will be sold.
Subscription procedures.... You may exercise your Basic Subscription Rights
and, if you elect to do so as well, your
Oversubscription Rights by properly completing and
signing the Subscription Warrant which accompanies
this prospectus. You must then return the completed
and signed Subscription Warrant with full payment
for the total number of shares you are subscribing
for to ChaseMellon Shareholder Services, our
Subscription Agent. Your payment may be by bank
certified check, cashier's check or wire transfer.
Subscription Agent......... ChaseMellon Shareholder Services, L.L.C.
85 Challenger Road
Ridgefield Park, New Jersey
Attention: Reorganization Department
Information Agent.......... ChaseMellon Shareholder Services, L.L.C.
44 Wall Street
New York, New York 10005
Stock certificates......... Certificates representing shares of common stock
will be delivered to subscribers with respect to
the exercise of Basic Subscription Rights within
two business days after the Expiration Date. We
will deliver certificates representing shares of
common stock allocated with respect to the exercise
of Oversubscription Rights within ten business days
following the Expiration Date.
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<PAGE> 12
Federal income tax
consequences............. Your receipt or exercise of subscription rights
should not be treated as a taxable event for United
States federal income tax purposes. The purchase or
sale of subscription rights may result in a taxable
gain or loss. Please see "Certain Federal Income
Tax Consequences."
Questions.................. If you have any questions about the rights
offering, including questions about subscription
procedures and requests for additional copies of
this prospectus or other documents, please contact
the Information Agent, ChaseMellon Shareholder
Services, at (888) 232-7873.
Risk Factors............... An investment in shares of our common stock
involves a high degree of risk. Please see "Risk
Factors."
Use of proceeds............ The net proceeds of the offering will be used by us
for general corporate purposes and in particular to
finance our growth in automobile contracts
purchased.
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<PAGE> 13
SUMMARY FINANCIAL DATA
The following table presents summary audited financial data for the years
ended December 31, 1999, 1998, 1997, 1996 and 1995. Since the information in
this table is only a summary and does not provide all of the information
contained in our financial statements, including the related notes, you should
read "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our Consolidated Financial Statements incorporated herein by
reference.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------
1999 1998 1997 1996 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED SUMMARY OF OPERATIONS
Interest income.................. $ 297,616 $ 272,142 $ 270,532 $ 242,388 $ 222,093
Interest expense................. 152,285 161,331 161,070 139,194 139,279
----------- ----------- ----------- ----------- -----------
Net interest income......... 145,331 110,811 109,462 103,194 82,814
Provision for credit losses...... 38,400 18,960 12,851 13,571 11,470
----------- ----------- ----------- ----------- -----------
Net interest income after
provision for credit
losses.................... 106,931 91,851 96,611 89,623 71,344
Noninterest income............... 210,006 133,438 222,853 187,964 107,951
Noninterest expense(1)........... 218,461 253,532 246,269 210,346 117,724
----------- ----------- ----------- ----------- -----------
Income (loss) before income taxes
and extraordinary item......... 98,476 (28,243) 73,195 67,241 61,571
Income tax (benefit)............. 41,460 (11,330) 31,287 28,095 25,235
----------- ----------- ----------- ----------- -----------
Income (loss) before minority
interest....................... 57,016 (16,913) 41,908 39,146 36,336
Minority interest in earnings
(loss) of subsidiaries......... 6,522 (2,216) 5,120 7,349 2,908
----------- ----------- ----------- ----------- -----------
Income (loss) before
extraordinary item............. 50,494 (14,697) 36,788 31,797 33,428
Extraordinary gain from early
extinguishment of debt (net of
income tax of $1,546).......... 2,132
----------- ----------- ----------- ----------- -----------
Net income (loss)................ $ 52,626 $ (14,697) $ 36,788 $ 31,797 $ 33,428
=========== =========== =========== =========== ===========
OTHER SELECTED FINANCIAL DATA
Book value per share(2).......... $ 13.26 $ 12.43 $ 13.27 $ 12.23 $ 11.54
Weighted average number of shares
and common share
equivalents--diluted........... 26,505,128 26,305,117 26,351,144 26,199,537 25,917,018
Income (loss) before
extraordinary item............. $ 1.91 $ (0.56) $ 1.40 $ 1.21 $ 1.29
Extraordinary item............... 0.08
----------- ----------- ----------- ----------- -----------
Net income (loss) per share--
diluted(2)..................... $ 1.99 $ (0.56) $ 1.40 $ 1.21 $ 1.29
=========== =========== =========== =========== ===========
Dividends per share(2)........... $ 0.20 $ 0.25 $ 0.40 $ 0.39 $ 0.34
Dividend payout ratio............ 12.6% N/A 28.6% 32.2% 26.4%
</TABLE>
- ------------------------------
(1) Includes $18.0 million in restructuring charges in 1998.
(2) Reflects 5% stock dividends in 1995 and 1996.
10
<PAGE> 14
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1999 1998 1997 1996 1995
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED SUMMARY OF FINANCIAL CONDITION
Assets:
Cash and other assets............... $ 722,496 $ 734,213 $ 707,362 $ 515,161 $ 331,604
Loans:
Consumer(1)...................... 1,516,395 932,962 294,101 290,501 343,027
Mortgage(2)...................... 598,088 1,006,937 1,536,942 1,433,050 1,404,190
Commercial(2).................... 67,141 52,934 37,375 7,661
Mortgage-backed securities.......... 1,431,376 980,044 941,448 849,548 852,552
Investments and time deposits....... 163,278 125,730 248,815 239,124 291,564
---------- ---------- ---------- ---------- ----------
Total assets................... $4,498,774 $3,832,820 $3,766,043 $3,335,045 $3,222,937
========== ========== ========== ========== ==========
Liabilities:
Deposits............................ $2,212,309 $2,178,735 $2,000,896 $1,873,942 $1,753,475
FHLB advances and other
borrowings....................... 960,005 440,924 563,922 569,357 655,100
Amounts held on behalf of trustee... 687,274 528,092 488,653 393,449 341,693
Other liabilities................... 59,140 94,311 95,088 47,058 48,605
---------- ---------- ---------- ---------- ----------
Total liabilities.............. 3,918,728 3,242,062 3,148,559 2,883,806 2,798,873
Subordinated debentures............. 199,298 239,856 239,195 104,917 104,360
Minority interest in equity of
subsidiaries..................... 28,030 21,857 29,538 28,392 21,965
Shareholders' equity................ 352,718 329,045 348,751 317,930 297,739
---------- ---------- ---------- ---------- ----------
Total liabilities and
shareholders' equity........ $4,498,774 $3,832,820 $3,766,043 $3,335,045 $3,222,937
========== ========== ========== ========== ==========
OTHER SELECTED FINANCIAL DATA
Average assets........................ $3,952,360 $3,859,202 $3,682,781 $3,233,713 $2,837,292
Return on average assets.............. 1.33% (0.38)% 1.00% 0.98% 1.18%
Average shareholders' equity.......... $ 341,179 $ 329,250 $ 329,250 $ 308,305 $ 213,311
Return on average shareholders'
equity.............................. 15.42% (4.46)% 11.17% 10.31% 13.51%
Equity to assets ratio................ 7.84% 8.58% 9.26% 9.53% 9.24%
Originations:
Consumer loans................... $3,355,732 $2,680,341 $2,337,359 $2,157,556 $1,556,296
Mortgage loans................... 276,936 2,754,398 2,331,506 1,259,716 491,274
Commercial loans................. 237,316 124,259 71,399 8,632
---------- ---------- ---------- ---------- ----------
Total originations............. $3,869,984 $5,558,998 $4,740,264 $3,425,904 $2,047,570
========== ========== ========== ========== ==========
Interest rate spread.................. 3.61% 2.89% 2.65% 2.86% 2.44%
</TABLE>
- ------------------------------
(1) Net of unearned discounts.
(2) Net of undisbursed loan proceeds.
11
<PAGE> 15
RISK FACTORS
This offering involves a high degree of risk. You should carefully consider
the risks described below and the other information in this prospectus before
deciding to invest in shares of our common stock. Our business, operating
results and financial condition could be adversely affected by any of the
following risks. The trading price of our common stock could decline due to any
of these risks, and you could lose all or part of your investment. You should
also refer to the other information set forth in this prospectus, including our
consolidated financial statements and the related notes incorporated herein by
reference.
This prospectus also contains forward-looking statements that involve risks
and uncertainties. These statements relate to our future plans, objectives,
expectations and intentions, and the assumptions underlying or relating to any
of these statements. These statements may be identified by the use of words such
as "expects," "anticipates," "intends," and "plans" and similar expressions. Our
actual results could differ materially from those discussed in these statements.
Factors that could contribute to such differences include, but are not limited
to, those discussed below and elsewhere in this prospectus.
RISK RELATED TO THE OFFERING
IF YOU DO NOT EXERCISE YOUR FULL BASIC SUBSCRIPTION RIGHTS, YOUR PERCENTAGE
OWNERSHIP AND VOTING RIGHTS OF WESTCORP WILL DECREASE.
If you choose not to exercise your Basic Subscription Rights in full, your
relative ownership interest in Westcorp will be diluted to the extent others
exercise their subscription rights. Your voting rights and percentage interest
in any of Westcorp's net earnings may also be diluted if you do not exercise
your rights. We are unable to determine the number of shares, if any, that will
be sold in the offering.
THE OFFERING PRICE WAS DETERMINED BY OUR BOARD OF DIRECTORS AND BEARS NO
RELATIONSHIP TO THE VALUE OF OUR ASSETS, FINANCIAL CONDITION OR OTHER
ESTABLISHED CRITERIA FOR VALUE. OUR COMMON STOCK MAY TRADE AT PRICES ABOVE OR
BELOW THIS PRICE.
Our Board of Directors determined the offering price after considering a
number of factors including:
- current market price of our stock;
- book value of our stock;
- past operations;
- cash flows;
- earnings;
- our overall financial condition; and
- our future prospects.
The Board of Directors did not assign weighting to any one factor in
setting the offering price. After the date of this prospectus, our common stock
may trade at prices above or below the offering price.
12
<PAGE> 16
YOU MAY NOT REVOKE YOUR SUBSCRIPTION EXERCISE AND COULD BE COMMITTED TO BUY
SHARES ABOVE THE PREVAILING MARKET PRICE.
The public trading market price of our common stock may decline before the
subscription rights expire. If you exercise your subscription rights and,
afterwards, the public trading market price of our common stock decreases below
$12.00, then you will have committed to buy shares of common stock at a price
above the prevailing market price. Once you have exercised you subscription
rights, you may not revoke your exercise unless we amend the offering. Moreover,
you may be unable to sell your shares of common stock at a price equal to or
greater than the offering price.
BECAUSE WE MAY TERMINATE THE OFFERING AT ANY TIME, YOUR PARTICIPATION IN THE
OFFERING IS NOT ASSURED.
Once you exercise your subscription rights, you may not revoke the exercise
for any reason unless we amend the offering. We may terminate the offering at
any time. If we decide to terminate the offering, we will not have any
obligation with respect to the subscription rights except to return, without
interest, any subscription payments.
RISKS RELATED TO US
THE OWNERSHIP OF OUR COMMON STOCK IS CONCENTRATED, WHICH MAY RESULT IN CONFLICTS
OF INTEREST AND ACTIONS THAT ARE NOT IN THE BEST INTERESTS OF OTHER
STOCKHOLDERS.
Ernest S. Rady is the founder, the Chairman of the Board of Directors and
the Chief Executive Officer of Westcorp. Mr. Rady is also the Chairman of the
Board of Directors of the Bank and WFS. Mr. Rady is the beneficial owner of
approximately 66% of the outstanding shares of common stock of Westcorp and will
be able to exercise significant control over our company. In addition, Mr. Rady
has advised us that he intends to exercise the Basic Subscription Rights
controlled by him in full and will also oversubscribe. The exact number of
shares he and the entities he controls will be able to purchase pursuant to
Oversubscription Rights cannot be determined at this time.
Accordingly, the common stock ownership of Mr. Rady will enable him to
elect all of our directors and effectively control the vote on all matters
submitted to a vote of our stockholders, including mergers, sales of all or
substantially all of our assets and "going private" transactions. Because of the
significant block of common stock controlled by Mr. Rady, decisions may be made
that, while in the best interest of Mr. Rady, may not be in the best interest of
other stockholders.
THE AVAILABILITY OF OUR FINANCING SOURCES MAY DEPEND ON FACTORS OUTSIDE OF OUR
CONTROL.
We depend on a significant amount of financing to operate our business. We
employ a business strategy to utilize diverse funding sources to fund our
operations. These sources include raising both short-term and long-term deposits
from the general public, commercial enterprise and institution by offering a
variety of accounts and rates through our retail and commercial banking
operations. In addition, we raise funds though the collection of principal and
interest from loans, automobile asset-backed securities, commercial paper,
advances from the FHLB, repurchase agreements, subordinated debentures and other
borrowings. The sources used vary depending on such factors as rates paid,
maturities, and the impact on capital. In addition, the Bank, as a member of the
FHLB, is required to maintain a specified ratio of cash, short-term United
States government and other qualifying securities to net withdrawable accounts
and borrowings payable in a year or less. The required liquidity ratio is
currently 4%.
13
<PAGE> 17
The availability of these financing sources may depend on factors outside
of our control, including regulatory issues such as the capital requirements of
the Bank, debt ratings, competition, a market for automobile asset-backed
securities and our ability to receive financings from other financial
institutions. If we were unable to raise the necessary financing to run our
business, we would have to curtail our loan origination activities, which would
have a material adverse effect on our financial position, liquidity and results
of operations.
WE MAY NOT BE ABLE TO GENERATE SUFFICIENT OPERATING CASH FLOWS TO RUN OUR
BUSINESS.
Our business requires substantial operating cash flows. Operating cash
requirements include amounts paid to dealers for acquisition of automobile
contracts, expenses incurred in connection with the securitization of automobile
contracts, capital expenditures for new technologies and ongoing operating
costs. Our primary source of operating cash comes from the excess cash flows
received from securitization trusts and loans held on the balance sheet. The
timing and amount of excess cash flow from loans varies based on a number of
factors, including but not limited to:
- the rates of loan delinquencies, defaults and net losses;
- how quickly and at what price repossessed vehicles can be resold or real
estate can be foreclosed and sold;
- ages of the loans in the portfolio; and
- levels of voluntary prepayments.
Any adverse change in these factors could reduce or eliminate excess cash flows
to us. Although we currently have positive operating cash flows, we cannot
assure you that we will continue to generate positive cash flows in the future
which could have a material adverse effect on our financial position, liquidity
and results of operations.
CHANGES IN OUR SECURITIZATION PROGRAM COULD ADVERSELY AFFECT OUR LIQUIDITY AND
EARNINGS.
Our business depends on our ability to aggregate and sell automobile
contracts in the form of publicly offered asset-backed securities. These sales
generate cash proceeds that allow us to repay amounts borrowed and to purchase
additional contracts. In addition, the sale of contracts to a securitization
trust in preparation for securitization, may create an accounting gain on sale
that forms a material part of our reported earnings for each quarter. Changes in
our asset-backed securities program could materially adversely affect our
earnings or ability to purchase and resell automobile contracts on a timely
basis. Such changes could include a:
- change in the securitization structure which results in gain on sale not
being recognized;
- delay in the completion of a planned securitization;
- negative market perception of us; and
- failure of the contracts we intend to sell to conform to insurance
company and rating agency requirements.
If we are unable to use a securitization program, we may have to curtail
our automobile contract purchasing activities, which would have a material
adverse effect on our financial position, liquidity and results of operations
and may cause our market price to drop.
14
<PAGE> 18
WE DEPEND ON OUR CREDIT ENHANCEMENTS TO MAINTAIN FAVORABLE INTEREST RATES AND
CASH REQUIREMENTS FOR OUR AUTOMOBILE ASSET-BACKED SECURITIZATION TRANSACTIONS.
To date, all of our automobile asset-backed securitization transactions
have used credit enhancement in the form of financial guaranty insurance
policies issued by Financial Security Assurance Inc. ("FSA"). These insurance
policies are currently one of the most effective and least capital intensive
forms of credit enhancement. We use this credit enhancement to achieve "AAA/
Aaa" ratings on our securitizations, which reduces the overall costs of a
transaction relative to alternative forms of financing available to us. FSA is
not required to insure our securitizations and we cannot assure you that it will
continue to do so or that our future securitizations will be similarly rated.
Likewise, we are not required to use financial guaranty insurance policies
issued by FSA or any other form of credit enhancement in connection with our
securitizations. A downgrading of FSA's credit rating, FSA's withdrawal of
credit enhancement or the lack of availability of reinsurance or other
alternative credit enhancements could result in higher interest costs for our
future securitizations and/or larger initial cash deposit requirements if we are
unable to obtain similar policies on similar terms. These events could have a
material adverse effect on our financial position, liquidity and results of
operations.
IF WE LOSE OUR REINVESTMENT CONTRACT RELATIONSHIP OR IF OUR REINVESTMENT
CONTRACTS ARE NO LONGER DEEMED ELIGIBLE INVESTMENTS, WE MAY NOT BE ABLE TO
OBTAIN COMPARABLE FINANCING.
We have access to the cash flows of the automobile contracts sold to the
securitization trust in each of the outstanding securitization transactions,
including the cash held in each spread account, through a series of agreements
into which, the Bank, WFS, and WFAL2, and other parties have entered. We are
permitted to use that cash as we determine, including in the ordinary business
activities of originating contracts.
In each securitization transaction, the securitization agreements require
that all cash flows of the relevant trust and the associated spread accounts be
invested in an eligible investment. The Bank and WFAL2 have entered into a
reinvestment contract in connection with each securitization transaction, which
is deemed to be an eligible investment under the relevant securitization
agreements.
A limited portion of the funds invested in reinvestment contracts may be
used by WFAL2 and the balance may be used by the Bank. The Bank makes its
portion of the invested funds available to WFS through a reinvestment contract.
Under the reinvestment contract with WFS and the Bank, WFS receives access to
all of the cash available to the Bank under each trust reinvestment contract.
WFS is obligated to repay to the Bank an amount equal to the cash it used, when
needed by the Bank, to meet its obligations under the individual trust
reinvestment contracts. With the portion of the cash available to WFAL2 under
the individual trust reinvestment contracts, WFAL2 purchases contracts from WFS
according to the terms of sale and servicing agreements entered into with WFS.
If the reinvestment contracts were no longer deemed an eligible investment,
which determination could be made by either of the securitization rating
agencies or FSA in their sole discretion, we would no longer have the ability to
use this cash in the ordinary course of business and would need to obtain
alternative financing, which may only be available on less attractive terms. If
we were unable to obtain additional financing, we may have to curtail our
contract purchasing activities, which would also have a material adverse effect
on our financial position, liquidity and results of operations.
PREPAYMENTS AND LOSSES MAY HAVE A MATERIAL EFFECT ON THE VALUE OF OUR RETAINED
INTEREST IN SECURITIZED ASSETS.
We may sell automobile contracts to a grantor or owner trust in a manner
which requires that we account for the transaction as a sale. This gain on sale
is not an actual amount of cash received,
15
<PAGE> 19
but rather an asset which represents the expected future earnings we will
receive based upon the amount of interest we expect to receive from our
borrowers less the interest we expect to pay our investors in the
securitization. The benefit of this difference is then reduced by the servicing
and guarantor fees we must pay as well as the prepayment and credit losses
expected to occur on the contracts in the trust. We make assumptions about
prepayment rates and credit losses based upon our historical experience and
other factors. The resulting gain on sale asset is called retained interest in
securitized assets, or RISA. The RISA is amortized on a monthly basis over the
life of the securitization. We reevaluate the assumptions we use to calculate
the RISA every quarter. We adjust those assumptions and the RISA to the extent
our actual experience with the performance of the contracts in a securitization
trusts deviates from the experience we initially anticipated. If actual
prepayment and credit loss rates are higher than the assumptions we initially
used, we must write-down the value of the RISA. If the write-down is large
enough, it will have a material adverse effect on our earnings and capital.
A LOSS OF CONTRACTUAL SERVICING RIGHTS COULD HAVE A MATERIAL EFFECT ON OUR
BUSINESS.
As servicer of all our securitized automobile contracts, we are entitled to
receive contractual servicing fees. Contractual servicing fees are earned at
rates ranging from 1.0% to 1.25% per annum on the outstanding balance of
contracts securitized. FSA, as guarantor, can terminate our right to act as
servicer upon the occurrence of events defined in the pooling and servicing
agreements for securitized contracts such as our bankruptcy or material breach
of warranties or covenants. Any loss of such servicing rights could have a
material adverse effect on our financial position, liquidity and results of
operations.
WE EXPECT OUR OPERATING RESULTS TO CONTINUE TO FLUCTUATE WHICH MAY ADVERSELY
IMPACT OUR BUSINESS AND OUR STOCKHOLDERS.
Our results of operations have fluctuated in the past and are expected to
fluctuate in the future principally as a result of the timing, size, pricing and
structure of our automobile asset-backed securitization transactions. Other
factors that could affect our quarterly earnings include but are not limited to:
- variations in the volume of loans originated, which historically tends to
be lower in the first and fourth quarters of the year;
- interest rate spreads;
- the effectiveness of our hedging strategies;
- credit losses, which historically tend to be higher in the first and
fourth quarters of the year;
- operating costs; and
- whether a automobile asset-backed securitization transaction is treated
as a sale or a financing.
FAILURE TO IMPLEMENT OUR BUSINESS STRATEGY COULD ADVERSELY AFFECT OUR
OPERATIONS.
Our financial position and results of operations depend on our ability to
execute our business strategy, which includes the following key elements:
- producing measured growth in contract originations;
- leveraging technology to improve our business;
16
<PAGE> 20
- effectively pricing contracts relative to risk; and
- utilize the diverse funding sources of the Bank.
Our failure or inability to execute any element of our business strategy could
materially adversely affect our financial position, liquidity and results of
operations.
WE HAVE BROAD DISCRETION IN HOW WE USE THE PROCEEDS FROM THIS OFFERING AND MAY
USE THEM IN WAYS WITH WHICH YOU DISAGREE.
We have not allocated specific amounts of the net proceeds to any
particular growth plans. Accordingly, our management will have significant
flexibility in applying the net proceeds of this offering. The failure of
management to use such funds effectively could have a material adverse effect on
our financial position, liquidity and results of operations.
RISKS RELATED TO FACTORS OUTSIDE OUR CONTROL
INTEREST RATE FLUCTUATIONS CAN HARM OUR PROFITABILITY.
Our profitability is largely determined by the difference between the
effective rate of interest earned on loans and MBS purchased by us and the
interest paid on our deposits and other funding sources as well as the interest
rate paid on notes and certificates issued in automobile asset-backed
securitization transactions. Several factors affect our ability to manage
interest rate risk. Our interest bearing assets may have different maturity and
repricing characteristics than our interest bearing liabilities. To protect
against changes in interest rates, we utilize various financial instruments to
hedge our portfolios. We cannot assure you, however, that our hedging strategy
will consistently or completely offset adverse changes in interest rates or that
we will not sustain losses on hedging transactions. In addition, in a rising
interest rate environment we may not be able to increase rates charged to our
borrowers fast enough to compensate for an increase in the interest rates we
pay.
ECONOMIC SLOWDOWNS OR RECESSIONS MAY AFFECT OUR BUSINESS.
Periods of economic slowdown or recession, whether general, regional or
industry-related, may increase the default probability on our loan portfolios.
These periods may also be accompanied by decreased demand for the products we
offer and could reduce business for us. Decreased consumer demand for our loan
products may also contributes to a decline in the value of assets securing such
products, which weakens collateral coverage and increases the possibility of
losses in the event of a default. We cannot assure you that we could remain
profitable under any such conditions or that such conditions will not result in
such severe reductions in the cash flows available to us to permit us to remain
current on our current financings.
ADVERSE CHANGES IN USED CAR PRICES MAY HARM OUR BUSINESS.
Significant increases in the inventory of used automobiles may depress the
prices at which we can sell our inventory of repossessed vehicles or may delay
sales. Factors that may affect the level of used car inventory include consumer
preferences, leasing programs offered by captive finance companies and
seasonality. In addition, average used car prices have fluctuated in the past,
and any softening in the future of the used car market could cause our recovery
rate on repossessed vehicles to decline below current levels. Lower recovery
rates would increase the level of credit losses incurred by us that would, in
turn, lower the amount of cash flows received.
17
<PAGE> 21
WE MAY BE UNABLE TO SUCCESSFULLY COMPETE IN OUR INDUSTRY.
The auto finance business is highly competitive. We compete with captive
auto finance companies owned by major automobile manufacturers, banks, credit
unions, savings associations and independent consumer finance companies that
conduct business in the geographic regions in which we operate. Many of these
competitors have greater financial and marketing resources than us.
Additionally, on occasion the captive finance companies provide financing on
terms significantly more favorable to auto purchasers than we can offer. For
example, the captive finance companies can offer special low interest loan
programs as incentives to purchasers of selected models of automobiles
manufactured by their respective parent manufacturers.
Many of our competitors also have long standing relationships with
automobile dealers and may offer dealers or their customers other forms of
financing, including dealer floor plan financing and leasing, which we do not
provide. Providers of automobile financing have traditionally competed on the
basis of interest rate charged, the quality of credit accepted, the flexibility
of loan terms offered and the quality of service provided to dealers and
customers. In seeking to establish ourself as one of the principal financing
sources of the dealers we serve, we compete predominately on the basis of our
high level of dealer service and strong dealer relationships and by offering
flexible loan terms.
Competition in the retail banking business comes primarily from commercial
banks, credit unions, savings and loan associations, mutual funds, and corporate
and government securities. Many of the nation's largest savings and loan
associations and other depository institutions are headquartered or have
branches in California. We compete for deposits primarily on the basis of
interest rates paid and the quality of service provided to our customers. We do
not rely on any individual, group or entity for a material portion of our
deposits.
Competition in the commercial banking business comes primarily from other
commercial banks that maintain a presence in southern California. In general,
many commercial banks are more sizable institutions with larger lending
capacities and depository services. We have differentiated ourselves by
providing high quality service, local relationship management, prompt credit
decisions, and competitive rates on both loans and depository products. We
cannot assure you that we will be able to compete successfully in these markets
or against these competitors.
LEGAL AND REGULATORY REQUIREMENTS MAY RESTRICT OUR ABILITY TO DO BUSINESS.
The Bank is subject to inspection and regulation by the Office of Thrift
Supervision, the primary federal banking agency responsible for the supervision
and regulation of the Bank. The most significant impact of such regulation and
supervision is that absent approval by the OTS, we are precluded from holding,
on balance sheet, consumer loans, including contracts, in an aggregate principal
balance in excess of 30% of the total consolidated assets of the Bank. The
limitation is increased to 35% of the Bank's consolidated assets if all of the
consumer loans in excess of the 30% limit are obtained by us or the Bank and its
other subsidiaries directly from consumers. Our securitization activities,
however, enable us to remove contracts that are securitized from the Bank's
balance sheet for regulatory purposes. As a result, those securitized contracts
are not included in the calculation of the percentage of the Bank's consolidated
assets subject to either the 30% or 35% limitation on consumer loans.
We are also subject to numerous federal and state consumer protection laws
and regulations, which, among other things may affect:
- the interest rates, fees and other charges which we may impose;
- the terms and conditions of the loans;
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<PAGE> 22
- the disclosures which must be made to obligors; and
- the collection, repossession and foreclosure rights with respect to
delinquent obligors.
The extent and nature of such laws and regulations vary from state to
state. We believe that we are in compliance in all material respects with all
such applicable laws. Prospective changes in such laws or the enactment of new
laws may have an adverse effect on our business or the results of our
operations.
ADVERSE OUTCOMES OF LITIGATION AGAINST US COULD HAVE A MATERIAL EFFECT UPON OUR
BUSINESS, FINANCIAL CONDITION OR RESULTS OF OPERATIONS.
We are involved in and will likely continue to be a party to litigation. As
a result of the consumer-oriented nature of the industry in which we operate and
uncertainties with respect to the application of various laws and regulations in
some circumstances, industry participants are named from time to time as
defendants in litigation, including class action suits, involving alleged
violations of federal and state consumer lending or other similar laws and
regulations. A significant judgment against us in connection with any litigation
could have a material adverse effect on our financial condition and results of
operations. In addition, a decision that a material number of contracts
purchased by us involved violations of applicable lending laws by automobile
dealers could materially adversely affect our financial condition and results of
operations.
WE EXPECT OUR STOCK PRICE TO CONTINUE TO FLUCTUATE.
The market price of our common stock has fluctuated in the past and is
likely to fluctuate in the future. In addition, the securities markets have
experienced significant price and volume fluctuations and the market prices of
the securities of finance-related companies including automobile finance
companies, have been especially volatile. Such fluctuations can result from:
- quarterly variations in operating results;
- changes in analysts' estimates;
- short-selling of our common stock;
- events affecting other companies that investors deem to be comparable to
us;
- fluctuations in interest rates;
- factors which have the effect of increasing, or which investors believe
may have the effect of increasing, our cost of funds; or
- general economic trends and conditions.
Investors may be unable to resell their shares of our common stock at or
above the offering price. In the past, companies that have experienced
volatility in the market price of their stock have been subject to securities
class action litigation.
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<PAGE> 23
USE OF PROCEEDS
We expect to receive net proceeds from the sale of 5,319,469 shares of
common stock offered by us pursuant to this rights offering of approximately
$63.6 million, assuming that all shares offered are purchased, after deducting
the estimated underwriting discounts and commissions and estimated offering
expenses payable by us based upon the offering price of $12.00 per share. The
purpose of the offering is to provide us with additional capital for general
corporate purposes and in particular to fund our growth, including increasing
the amount of automobile contracts we can acquire and hold prior to a sale or
financing transaction in the asset-backed securities market.
DIVIDEND POLICY
We paid cash dividends of $0.20, $0.25 and $0.40 per share for the years
ended December 31, 1999, 1998 and 1997, respectively. On December 17, 1999, we
declared a cash dividend of $0.05 per share for shareholders of record as of
January 14, 2000, which dividend was paid on January 28, 2000. On February 15,
2000, we declared a cash dividend of $0.05 per share for shareholders of record
as of April 27, 2000, with a payable date of May 11, 2000. On May 2, 2000, we
declared a cash dividend of $0.10 per share for shareholders of record as of
July 3, 2000, with a payable date of July 17, 2000. We cannot assure you that
our dividend policy will not change in the future.
THE OFFERING
THE RIGHTS
We are offering our stockholders the right to subscribe for and purchase
5,319,469 shares of common stock at $12.00 per share. Only those stockholders
who own common stock on the Record Date will receive subscription rights
directly from us to purchase stock in the rights offering. The subscription
rights are transferable and any person who acquires subscription rights before
the Expiration Date may exercise these subscription rights. You are a record
holder for this purpose only if your name is registered as a stockholder with
our transfer agent, ChaseMellon Shareholder Services, L.L.C., as of the Record
Date.
We are distributing to each person who was a record holder of our common
stock on the Record Date one right for each share of common stock held on that
date. You must deliver 5.0 rights for each share of common stock for which you
subscribe. There is no minimum amount of shares you must purchase using your
Basic Subscription Rights, but you may not purchase fractional shares. We are
distributing a Subscription Warrant evidencing your subscription rights with
this prospectus to stockholders of record as of the Record Date. If you execute
a Subscription Warrant you agree that your exercise of the rights will be on the
terms and subject to the conditions specified in this prospectus.
When determining the number of shares we will issue to you, divide the
number of subscription rights you own, whether distributed to you by us or
otherwise acquired by you, by 5.0 and round down to the nearest whole number.
For example, if you own 118 subscription rights, you may subscribe for 23 shares
(118 subscription rights / 5.0 = 23.6, rounded down to 23 shares, the nearest
whole number). We will not pay cash for or issue fractional rights. You may not
divide a Subscription Warrant in such a way as to permit you to receive a
greater number of rights than you are otherwise entitled to receive. However, a
depository, bank, trust company or securities broker or dealer holding shares of
our common stock for more than one beneficial owner on the Record Date, may,
upon proper showing to the Subscription Agent, exchange its Subscription Warrant
to obtain
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<PAGE> 24
several Subscription Warrants for the number of rights to which all such
beneficial owners in the aggregate would have been entitled had each beneficial
owner been a holder of record on the Record Date.
BASIC SUBSCRIPTION RIGHT
You may subscribe to purchase one share of our common stock for every 5.0
rights you hold. You may combine rights you have received from us as a
stockholder on the Record Date with rights you have acquired from other
stockholders, but you must have at least 5.0 rights for each share of our common
stock for which you are subscribing.
OVERSUBSCRIPTION RIGHT
If you fully exercise your Basic Subscription Right with respect to all the
rights you hold, you may subscribe for additional shares of our common stock.
This Oversubscription Right will be available to the extent that other rights
holders do not exercise their Basic Subscription Right in full. If you wish to
exercise your Oversubscription Right, you must specify the maximum number of
additional shares you want to purchase, and you must submit the full
subscription price for those shares to the Subscription Agent. If you wish to
exercise your Oversubscription Right, you must do so at the same time you fully
exercise your Basic Subscription Right.
If we receive subscriptions, including oversubscriptions, for more than the
5,319,469 shares offered hereby, then we will allocate the available shares as
follows:
- first, subscribing rights holders who exercise their Basic Subscription
Rights, in whole or in part, will receive the shares to which they have
subscribed, and
- second, subscribing rights holders who exercise their Oversubscription
Rights, will receive shares in proportion to the number of shares each
such holder has purchased pursuant to their Basic Subscription Rights,
subject to the elimination of fractional shares. If you are not allocated
the full amount of shares that you subscribed for pursuant to your
Oversubscription Right, you will receive a refund (without interest) of
the subscription price that you delivered for those shares of our common
stock that are not allocated to you. The Subscription Agent will mail
refunds after the expiration of the offering.
For purposes of determining whether you have exercised your Basic
Subscription Right in full, only Basic Subscription Rights held by you in the
same capacity will be considered. For example, if you hold shares of our common
stock as an individual and you exercise your Basic Subscription Right in full
with respect to those shares, you may exercise your Oversubscription Right with
respect to those shares, even if you do not exercise your Basic Subscription
Right with respect to shares held jointly with your spouse or shares in a
retirement account.
In order to exercise the Oversubscription Right, banks, brokers and other
nominee rights holders who exercise the Oversubscription Right on behalf of
beneficial owners must certify to the Subscription Agent and to us with respect
to each beneficial owner:
(1) the number of shares held on the Record Date;
(2) the number of rights exercised pursuant to the Basic Subscription
Right;
(3) that the holder has exercised its Basic Subscription Right in
full; and
(4) the number of shares subscribed for pursuant to the
Oversubscription Right.
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<PAGE> 25
SUBSCRIPTION PRICE
The subscription price is $12.00 per share, payable in cash.
EXPIRATION TIME AND DATE
This offering will expire at 5:00 p.m., Eastern Daylight Time, on June 15,
2000, unless we extend the offering. After the expiration of the offering, all
unexercised rights will be null and void. We will notify you of any extension of
the expiration by issuing a press release. We will not be obligated to honor any
purported exercise of rights which the Subscription Agent received after the
expiration of the offering, regardless of when you sent the documents relating
to that exercise, unless you used the guaranteed delivery procedures described
below.
PRINCIPAL STOCKHOLDERS
As of May 4, 2000, Ernest S. Rady, our Chairman, beneficially owned
approximately 66% of the outstanding common stock, and will thus receive rights
to subscribe for 17,724,513 shares in this offering. Mr. Rady has informed us
that he will exercise his Basic Subscription Right and that he expects to also
exercise his Oversubscription Right, although Mr. Rady has not committed to
oversubscribe for all shares not otherwise subscribed for by other stockholders.
Depending upon the number of shares purchased by others, upon the completion of
this offering Mr. Rady will beneficially own not less than 66 percent of our
outstanding common stock.
As of May 4, 2000, our Employee Stock Ownership and Salary Savings Plan
(the "Plan") was the record owner of 1,396,967 shares of our Common Stock. Our
Board of Directors has determined to make a contribution to the Plan of up to
$5.0 million to enable the Plan and its participants to exercise their
subscription rights.
SUBSCRIPTION PROCEDURES
In order to exercise rights, you must:
(1) complete and sign your Subscription Warrant (with any signatures
guaranteed if required, as described below); and
(2) deliver the completed and signed Subscription Warrant, together
with payment in full of the subscription price for each share for which you
subscribe (See "--Subscription Payments") to the Subscription Agent before
the expiration of the offering, unless delivery of the Subscription Warrant
is effected pursuant to the guaranteed delivery procedures described below.
If you do not indicate the number of shares to be subscribed for on your
Subscription Warrant or guarantee notice (as applicable), or if you indicate a
number of shares that does not agree with the aggregate subscription price
payment you delivered, you will be deemed to have subscribed for the maximum
number of whole shares that may be subscribed for, under both the Basic
Subscription Right and the Oversubscription Right for the aggregate purchase
price you delivered.
If you subscribe for fewer than all of the shares represented by your
Subscription Warrant you will generally be able to:
(1) direct the Subscription Agent to attempt to sell your remaining
rights; or
(2) receive from the Subscription Agent a new Subscription Warrant
representing your unused rights. See "--Method of Transferring Rights"
below.
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<PAGE> 26
Your signature on each Subscription Warrant you deliver must be guaranteed
by a bank, broker, dealer, credit union, national securities exchange,
registered securities association, clearing agency or savings association,
unless:
(1) the shares to be issued are to be issued to the registered holder
of the rights, as indicated on the Subscription Warrant; or
(2) the Subscription Warrant is submitted for the account of a member
firm of a registered national securities exchange, a member of the National
Association of Securities Dealers, Inc., or a commercial bank or trust
company having an office or correspondent in the United States exercising
for your account.
If you hold shares of our common stock for the account of others, you
should contact the respective beneficial owners of those shares as soon as
possible to receive their investment decision and to obtain instructions and
certifications with respect to their rights. If you are so instructed by a
beneficial owner, you should complete the appropriate Subscription Warrant and,
should the beneficial holder wish to exercise the Oversubscription Right, the
related nominee holder certification, a form of which is included in the
instructions distributed with the Subscription Warrants. You should submit these
to the Subscription Agent with the proper payment.
If you are a beneficial owner whose shares of our common stock are held for
your account by another, you should give your instructions regarding your
investment decision as to the rights attached to those shares to that holder.
You should carefully read the instructions accompanying the Subscription
Warrant and follow them closely. You should send your Subscription Warrant, with
any payment, to the Subscription Agent. Do not send your Subscription Warrants
to us.
The method of delivery of the Subscription Warrant and the payment of the
subscription price to the Subscription Agent is at your election and risk. If
you send your Subscription Warrant and payments by mail, they should be sent by
registered mail, properly insured. You should also allow sufficient time to
ensure delivery to the Subscription Agent and clearance of payment prior to the
expiration time.
We will determine all questions concerning the timeliness, validity, form
and eligibility of any exercise of rights, which determinations will be final
and binding. In our sole discretion, we may waive any defect or irregularity, or
permit a defect or irregularity to be corrected, or reject the purported
exercise of any right because of any defect or irregularity. Neither the
Subscription Agent nor we are under any duty to notify you of any such defect or
irregularity, and will not be held liable for any failure to notify you of any
such defect or irregularity. We also reserve the right to reject any exercise if
it is not in accordance with the terms of this offering, not in proper form or
if it could be deemed unlawful or materially burdensome. See "--Regulatory
Limitation" below.
You should direct any questions or requests for assistance concerning the
method of exercising rights, or requests for additional copies of this
prospectus supplement and the accompanying prospectus, the instructions or the
notice of guaranteed delivery, to ChaseMellon Shareholder Services, L.L.C., at
450 W. 33rd Street, 14th Floor, New York, New York 10001 (telephone: banks and
brokers (212) 273-8193, collect; all others (888) 867-5964).
If you do not exercise your rights prior to 5:00 p.m. Eastern Daylight Time
on the Expiration Date, they will expire and be null and void.
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<PAGE> 27
SUBSCRIPTION PAYMENTS
You must pay for all shares you subscribe for by:
(1) check or bank draft drawn upon a United States bank, or postal,
telegraphic or express money order, payable to ChaseMellon Shareholder
Services, L.L.C. as Subscription Agent; or
(2) by wire transfer of funds to the account which the Subscription
Agent maintains for this purpose at the Chase Manhattan Bank, New York, NY,
ABA No. 021-000-21, Attention: ChaseMellon Shareholder Services, Reorg. A/C
323-133703 WESTCORP, Attn: Evelyn O'Connor, telephone number (201)
296-4515.
The subscription price will be considered received by the Subscription
Agent only upon:
(1) clearance of an uncertified check;
(2) receipt by the Subscription Agent of a certified or cashier's
check or bank draft drawn upon a United States bank or of a postal,
telegraphic or express money order; or
(3) receipt of funds wired to the Subscription Agent's account
designated above.
Funds paid by uncertified personal check may take several business days to
clear. Accordingly, if you wish to pay the subscription price by uncertified
personal check, you should make payment sufficiently in advance of the
expiration date to ensure its receipt and clearance by that time. To avoid
disappointment caused by a failure of your subscription due to your payment not
clearing prior to the Expiration Date, we urge you to consider payment by means
of certified or cashier's check, money order or wire transfer of funds.
NOTICE OF GUARANTEED DELIVERY
If you wish to exercise rights, but you will not be able to get your
Subscription Warrant to the Subscription Agent prior to the expiration of the
offering, you may nevertheless exercise the rights if:
(1) before the expiration of the offering, the Subscription Agent
receives:
(a) payment for each share you subscribe for pursuant to your Basic
Subscription Right and, if applicable, your Oversubscription Right and
(b) a guarantee notice from a member firm of a registered national
securities exchange or a member of the National Association of
Securities Dealers, Inc. or from a commercial bank or trust company
having an office or correspondent in the United States, guaranteeing the
delivery to the Subscription Agent of the Subscription Warrant
evidencing the rights to be exercised within three NYSE trading days
following the date of that notice; and
(2) within this three NYSE trading day period, the Subscription Agent
receives the properly completed Subscription Warrant with any signatures
guaranteed as required.
You may deliver the guarantee notice referred to above to the Subscription
Agent in the same manner as you would deliver Subscription Warrant. Eligible
institutions may deliver the notice of guaranteed delivery by telegram or
facsimile transmission (telecopier no. (201) 296-4293). To confirm facsimile
deliveries, please call (201) 496-4860. You should refer to the form titled
"Notice of Guaranteed Delivery," which is provided with the "Instructions as to
Use of Subscription Warrants" distributed with the Subscription Warrant for the
information and representations required in the guarantee notice.
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NO REVOCATION
Once you have exercised your Basic Subscription Right and, if you so elect,
your Oversubscription Right, you may not revoke that exercise.
METHOD OF TRANSFERRING RIGHTS
We anticipate that the rights will trade on the NYSE under the symbol "WES
Rt" and may be purchased and sold through usual investment channels until the
close of business on the last trading day prior to the Expiration Date.
You may transfer all of the rights evidenced by a single Subscription
Warrant by endorsing the Subscription Warrant for transfer in accordance with
the accompanying instructions. You may transfer a portion of the rights
evidenced by a single Subscription Warrant, but not fractional rights, by
delivering to the Subscription Agent a Subscription Warrant properly endorsed
for transfer, with instructions to register that portion of the rights indicated
in the name of the transferee and to issue to it a new Subscription Warrant
evidencing the transferred rights. In that event, a new Subscription Warrant
evidencing the balance of the rights will be issued to you or, if you so
instruct, to an additional transferee, or will be sold by the Subscription Agent
in the manner described below upon your instructions.
You may also sell any of the rights evidenced by a Subscription Warrant
through the Subscription Agent by delivering to it the Subscription Warrant
properly executed for sale by the Subscription Agent. If you wish to have the
Subscription Agent sell only a portion of the rights evidenced by a single
Subscription Warrant, you should instruct the Subscription Agent regarding the
action to be taken with respect to the rights that you do not want to be sold.
The Subscription Agent must receive your order to sell rights at or prior to
11:00 a.m., Eastern Daylight time, on the third trading day before the
Expiration Date. Promptly following the Expiration Date, the Subscription Agent
will send you a check for the net proceeds from the sale of any rights sold on
your behalf. If the Subscription Agent is able to sell any rights, the sale
price will be the weighted average sale price of all rights sold by the
Subscription Agent, less expenses. The Subscription Agent's obligation to
execute orders is subject to its ability to find buyers, and if it cannot fill
all sale orders, sale proceeds will be prorated based on the number of rights
each holder has asked the Subscription Agent to sell. If any of your rights
cannot be sold by the Subscription Agent by 5:00 p.m., Eastern Daylight time, on
the third trading day before the Expiration Date, they will be returned to you
promptly by mail.
You should take into account that transfers, particularly those requiring
the issuance of new Subscription Warrants, can take several business days.
Neither we nor the Subscription Agent will have any liability if Subscription
Warrants or any other required documents are not received in time for exercise
or sale prior to the Expiration Date.
You will be issued a new Subscription Warrant upon the partial exercise or
sale of rights only if the Subscription Agent receives a properly endorsed
Subscription Warrant before 5:00 p.m., Eastern Daylight time, on the third
trading day before the Expiration Date. Unless you make other arrangements with
the Subscription Agent, a new Subscription Warrant issued after 5:00 p.m.,
Eastern Daylight time, on the fifth business day before the expiration of the
offering will be held for pick-up at the Subscription Agent's hand delivery
address. You assume all risk associated with the delivery of newly issued
Subscription Warrants.
You are responsible for all commissions, fees and other expenses, including
brokerage commissions and transfer taxes, incurred in connection with the
purchase, sale or exercise of rights.
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PROCEDURES FOR DTC PARTICIPANTS
We anticipate that the rights will be eligible for transfer, and the
exercise of the Basic Subscription Right (but not the Oversubscription Right)
may be effected through the facilities of The Depository Trust Company ("DTC").
If you are a DTC participant and wish to exercise your Oversubscription Right
with regard to rights held of record by DTC, you must execute and deliver to the
Subscription Agent, prior to the Expiration Date and in addition to the other
required deliveries, a "DTC Participant Oversubscription Exercise Form." You may
obtain a copy of this form from the Subscription Agent.
SUBSCRIPTION AGENT
The Subscription Agent is ChaseMellon Shareholder Services, L.L.C. The
Subscription Agent's address, to which you must make any required deliveries,
is:
<TABLE>
<S> <C> <C>
If by mail: If by hand: If by overnight courier:
ChaseMellon ChaseMellon ChaseMellon
Shareholder Services, Shareholder Services, L.L.C. Shareholder Services, L.L.C.
L.L.C. 120 Broadway, 13th Floor 85 Challenger Road-
Post Office Box 3301 New York, NY 10271 Mail Drop-Reorg
South Hackensack, NJ 07606 Attn: Reorganization Ridgefield Park, NJ 07660
Attn: Reorganization Department Attn: Reorganization Department
Department
</TABLE>
Facsimiles to the Subscription Agent should be sent to (201) 296-4293. If
you send a facsimile to the Subscription Agent, you should confirm that your
facsimile has been received by contacting the Subscription Agent. The telephone
number to confirm receipt of facsimiles is (201) 496-4860.
We will pay the fees and expense of the Subscription Agent (except for fees
and expenses relating to the sale of rights by the Subscription Agent), and have
agreed to indemnify the Subscription Agent against certain liabilities that it
may incur in connection with this offering.
DETERMINATION OF THE SUBSCRIPTION PRICE
Our Board of Directors determined the subscription price on May 2, 2000.
The subscription price represents a discount of $2.125 from the closing market
price of a share of the common stock on the date the price was determined. The
last reported sales price of the common stock on the NYSE on May 2, 2000 was
$14.125 per share. In setting the subscription price, the Board of Directors
considered, among other things, the factors set forth above under "Risks Related
to the Offering--The offering price was determined by our Board of Directors and
bears no relationship to the value of our assets, financial condition, or other
established criteria for value." Our common stock may trade at prices above or
below this price.
FOREIGN STOCKHOLDERS; STOCKHOLDERS WITH APO OR FPO ADDRESSES
If you are a holder of record and your address is outside the United
States, or if you have an APO or FPO address, a Subscription Warrant will not be
mailed to you, but rather will be held by the Subscription Agent for your
account. To exercise the rights, you must notify the Subscription Agent prior to
11:00 a.m., Eastern Daylight time, on the second trading day before the
Expiration Date, at which time, if no contrary instructions have been received,
the Subscription Agent will try to sell the rights. If your rights can be sold,
the Subscription Agent will send you a check for the proceeds (based on the
weighted average price of all rights sold by the Subscription Agent and less
expenses) by mail. If the Subscription Agent does not know your address or
cannot contact you, it
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<PAGE> 30
will hold the proceeds from sale of your rights in a non-interest bearing
account. Any amount remaining unclaimed on the second anniversary of the date of
this prospectus will be turned over to us.
REGULATORY LIMITATION
We will not be required to issue shares pursuant to this offering to anyone
who, in our opinion, would be required to obtain prior clearance or approval
from any state or federal regulatory authorities to own or control such shares
if such clearance or approval has not been obtained at the expiration of this
offering.
WITHDRAWAL OF THIS OFFERING
We reserve the right to withdraw this offering for any reason and at any
time prior to 5:00 p.m. Pacific Daylight Time on the Expiration Date, in which
event we will cause all funds received to be returned without interest.
ISSUANCE OF THE COMMON STOCK
The Subscription Agent will issue to you certificates representing shares
purchased in this offering as soon as practicable after the Expiration Date. The
Subscription Agent will retain all funds delivered to it in payment of the
subscription price until such certificates are issued. If you are allocated less
than all the shares for which you subscribed, the Subscription Agent will return
excess funds to you, without interest, as soon as practicable after the
Expiration Date. You will have no rights as a stockholder with respect to shares
subscribed for until the certificates are issued.
NO BOARD RECOMMENDATION
In making any investment decision to exercise or transfer rights, you must
consider your own best interests. None of the members of the Board of Directors
makes any recommendation as to whether you should exercise or transfer your
rights.
NO EFFECT ON STOCK OPTIONS OR BONUS INTERESTS
No adjustments will be made in connection with the rights offering to any
options or bonus interests issued by us under our stock incentive plans or our
senior management bonus plan or to the number of shares reserved for issuance
under any of our stock incentive plans.
SHARES OF COMMON STOCK OUTSTANDING AFTER THE OFFERING
Assuming we issue all of the 5,319,469 shares of common stock being offered
by this prospectus, we will then have approximately 31,916,812 shares of common
stock issued and outstanding. This would represent a 20.00% increase in the
number of outstanding shares of our common stock. If you are an existing
stockholder and you do not exercise your subscription rights, the percentage of
common stock that you hold will be significantly decreased after the offering.
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<PAGE> 31
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
This section discusses certain federal income tax consequences of the
rights offering to:
- beneficial owners of common stock upon distribution of the rights,
- holders of rights upon the exercise of rights, and
- holders of rights upon the disposition of the rights.
This discussion is based on the Internal Revenue Code of 1986, as amended, the
Treasury regulations thereunder, judicial authority, and current administrative
rulings and practice, all of which are subject to change.
This discussion is limited to U.S. taxpayers who hold our common stock and
will hold the rights and any shares acquired upon the exercise of rights as
capital assets. This discussion does not include any tax consequences under
state, local and foreign law. You should consult with your own tax advisor
concerning you own tax situation or special tax considerations that may apply to
you, including without limitation foreign, state and local laws that may apply.
No Gain on Receipt of Rights. As an owner of common stock you will not
recognize taxable income as a result of our distribution of the rights to you.
Basis and Holding Period of Rights. Your tax basis in the rights
distributed to you by us will be zero, unless (1) you sell or exercise the
rights, and (2) either:
- the fair market value of the rights on the date of distribution is 15% or
more of the fair market value on that date of our common stock your
already own, in which case you will be required to allocate a portion of
your basis in the shares of our common stock you already own to the
rights we are distributing to you, based upon the relative fair market
value of the rights and common stock on the date of distribution, or
- you elect under Section 307 of the Internal Revenue Code of 1986, as
amended, to allocate a portion of your basis in the shares of our common
stock you already own to the rights we are distributing to you, based
upon the relative fair market value of the rights and common stock on the
date of distribution.
Your holding period with respect to the rights we are distributing to you
will include your holding period for the common stock with respect to which the
rights were distributed.
Exercise of Rights. You will not recognize any gain or loss upon the
exercise of rights. Your basis in the shares you acquire through your exercise
of the rights will be equal to the sum of the subscription price you pay for
such shares and your basis in those rights (if any). The holding period for the
shares you acquire through your exercise of the rights will begin on the day
following the date of acquisition. Upon a subsequent sale of those shares you
will recognize capital gain or loss equal to the difference between the amount
you receive upon that sale and your basis in those shares. The capital gain or
loss you recognize will be long-term or short-term, depending on whether the
shares have been held for more than one year.
Sale of Rights. If you sell the rights you will recognize capital gain or
loss equal to the difference between the sale proceeds and the basis (if any) in
the rights sold. The capital gain or loss you recognize will be long-term or
short term depending on whether your holding period for the rights is more than
one year.
28
<PAGE> 32
Expiration of Rights. If the rights we are distributing to you as a holder
of our common stock expire unexercised, you will not recognize any gain or loss,
and no adjustment will be made to the basis of the common stock you own.
Purchasers of Rights. If you acquire rights by purchase, your tax basis in
such rights will be equal to the purchase price paid for those rights, and your
holding period for such rights will commence on the day following the date of
their purchase. If you purchased rights and they expire unexercised, you will
recognize a loss equal to your tax basis in the rights. Any loss recognized on
the expiration of the rights acquired by purchase will be a capital loss if the
common stock would be a capital asset in your hands.
Backup Withholding. If you sell rights and receive payments, you may be
subject to backup withholding at the rate of 31% on the payments received,
unless (1) you are a corporation or are otherwise exempt and demonstrate the
basis for the exemption if so required, or (2) provide a correct taxpayer
identification number and certify under penalties of perjury that your taxpayer
identification number is correct and that you are not subject to backup
withholding. Any amount withheld under these rules will be credited against your
federal income tax liability.
LEGAL MATTERS
Certain legal matters with respect to the authorization and issuance of the
common stock offered hereby will be passed upon for us by Mitchell, Silberberg &
Knupp LLP, Los Angeles, California.
EXPERTS
The Consolidated Financial Statements of Westcorp and Subsidiaries at
December 31, 1999 and 1998 and for each of the three years in the period ending
December 31, 1999 incorporated herein by reference in this prospectus have been
incorporated in reliance on the report of Ernst & Young LLP, independent
auditors given upon the authority of that firm as experts in accounting and
auditing.
FORWARD-LOOKING STATEMENTS
Included in the Prospectus Summary and elsewhere in this prospectus are
several "forward-looking statements." Forward-looking statements are those which
use words such as "believe," "expect," "anticipate," "intend," "plan," "may,"
"will," "should," "estimate," "continue," or other comparable expressions. These
words indicate future events and trends. Forward-looking statements are our
current views with respect to future events and financial performance. These
forward-looking statements are subject to many risks and uncertainties that
could cause actual results to differ significantly from historical results or
from those anticipated by us. The most significant risks and uncertainties we
face are:
- the level of chargeoffs, as an increase in the level of chargeoffs will
decrease our earnings;
- the ability to originate new loans in a sufficient amount to reach our
needs, as a decrease in the amount of loans we originate will decrease
our earnings;
- a decrease in the difference between the average interest rate we receive
on the loans we originate and the rate of interest we must pay to fund
our cost of originating those loans, as a decrease will reduce our
earnings;
- the continued availability of sources of funding for our operations, as a
reduction in the availability of funding will reduce our ability to
originate loans;
29
<PAGE> 33
- the level of operating costs, as an increase in those costs will reduce
our net earnings;
- a change in general economic conditions; and
- while we will perform the acts necessary to cause certain events to
occur, final performance is subject to the affirmative acts of
independent third parties over whom we have no control.
There are other risks and uncertainties we face, including the effect of
changes in general economic conditions and the effect of new laws, regulations
and court decisions and those described under the caption "Risk Factors." You
are cautioned not to place undue reliance on our forward-looking statements. We
undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-3 under the
Securities Act of 1933 with respect to the common stock offered hereby. This
prospectus, which constitutes part of the registration statement, does not
contain all of the information set forth in the registration statement and the
exhibits and schedules relating to the registration statement. You may read and
copy any document we file at the SEC's public reference room at 450 Fifth
Street, N.W., Washington D.C. 20549. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference room. Our SEC filings are also
available to the public from the SEC's website at http://www.sec.gov.
INCORPORATION BY REFERENCE
The following documents, all of which were previously filed with the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934 are hereby incorporated by reference in this prospectus:
- our Annual Report on Form 10-K for the year ended December 31, 1999;
- our definitive Proxy Statement for our annual meeting to be held on May
23, 2000; and
- our Quarterly Report on Form 10-Q for the quarter ended March 31, 2000.
All other reports and documents filed by us after the date of this
prospectus pursuant to Sections 13(a), 14 and 15(d) of the Securities Exchange
Act of 1934 prior to the termination of the offering of the common stock covered
by this prospectus are also incorporated by reference in this prospectus and are
considered to be part of this prospectus from the date those documents are
filed.
If any statement contained in a document incorporated by reference herein
conflicts with or is modified by a statement contained in this prospectus or in
any other subsequently filed document that is incorporated by reference into
this prospectus, the statement made at the latest point in time should control.
Any previous statements that have been subsequently altered should therefore not
be considered to be a part of this prospectus. We will provide a copy of any or
all of the documents referred to above that have been or may be incorporated by
reference in this prospectus to any person to whom a copy of this prospectus has
been delivered free of charge upon request. Exhibits to such documents will not
be provided unless the exhibits are specifically incorporated by reference into
the information that the prospectus incorporates. Written requests for copies of
any documents incorporated by reference should be directed to Guy Du Bose, Esq.,
General Counsel, Westcorp, 23 Pasteur Road, Irvine, California 92618 (telephone
949-727-1002).
30
<PAGE> 34
MATERIAL CHANGES
There have been no material changes in our affairs which have occurred
since the filing of our Form 10-K which have not been fully disclosed in a
subsequently filed Form 10-Q.
31
<PAGE> 35
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[WESTCORP LOGO]
5,319,469 SHARES
COMMON STOCK
-------------------------
PROSPECTUS
-------------------------
MAY , 2000
- --------------------------------------------------------------------------------
You may rely on the information contained in this prospectus. Westcorp has not
authorized anyone to provide prospective investors with different or additional
information. This prospectus is not an offer to sell nor is it seeking an offer
to buy these securities in any jurisdiction where the offer or sale is not
permitted. The information contained in this prospectus is correct only as of
the date of this prospectus, regardless of the time of the delivery of this
prospectus or any sale of these securities.
- --------------------------------------------------------------------------------
<PAGE> 36
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
Registration Fee............................................ $ 16,852
Printing, Engraving and Mailing............................. 75,000
Legal Fees.................................................. 50,000
Fees of Registrar and Transfer Agent........................ 25,000
Fees of Subscription Agent.................................. 25,000
Miscellaneous Fees.......................................... 8,148
--------
Total..................................................... $200,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 204 of the California General Corporation Law permits a corporation
to eliminate or limit a director's personal liability to the corporation for
breach of the director's duties to the corporation or its stockholders with
certain exceptions.
The exceptions include intentional misconduct or knowing misconduct, acts
or omissions not done in good faith, transactions from which a director derived
an improper personal benefit, reckless acts, acts or omissions showing an
unexcused pattern of inattention, transactions between the corporation and a
director or between corporations having interrelated directors and improper
distributions, loans and guarantees. Section 204 does not apply to officers in
their capacities as such, even if they are also directors.
Section 317 of the California General Corporation Law authorizes a
corporation, in its discretion, to indemnify its directors, officers, employees
and other agents in terms broad enough to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses)
imposed. The Articles of Incorporation and Bylaws of Westcorp provide for
indemnification of agents to the fullest extent permitted by law.
Section 317 further permits a corporation to purchase and maintain
insurance on behalf of its agents. Westcorp currently maintains officers' and
directors' liability insurance for its officers and directors and for the
officers and directors of its subsidiaries with policy limits of $20,000,000.
The coverage is composed of a primary insurance policy with limits of $10
million and an excess insurance policy with limits of $10 million. The aggregate
deductible is $500,000.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
<C> <S>
3.1 Certificate of Incorporation(1)
3.2 Bylaws(1)
4 Specimen Westcorp Common Stock Certificate
4.1 Indenture dated as of June 17, 1993 issued by Western
Financial Bank, formerly Western Financial Savings Bank,
F.S.B., with respect to $125,000,000 in aggregate principal
amount of 8.5% Subordinated Capital Debentures due 2003(2)
4.2 Indenture dated as of June 25, 1998 issued by Western
Financial Bank, formerly Western Financial Savings Bank,
F.S.B., with respect to $150,000,000 in aggregate principal
amount of 8.875% Subordinated Capital Debentures due 2007(3)
4.3 Form of Subscription Warrant
</TABLE>
II-1
<PAGE> 37
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
<C> <S>
5 Opinion of Mitchell, Silberberg & Knupp LLP with respect to
legality
10.1 Westcorp Incentive Stock Option Plan(5)
10.2 Westcorp, Inc. Employee Stock Ownership and Salary Savings
Plan(6)
10.3 Westcorp 1991 Stock Option Plan(7)
10.4 1985 Executive Deferral Plan(8)
10.5 1988 Executive Deferral Plan II(8)
10.6 1992 Executive Deferral Plan III(8)
10.7 Transfer Agreement between WFS Financial Inc. and Western
Financial Bank, F.S.B., dated May 1, 1995(8)
10.8 Promissory Note of WFS Financial Inc. in favor of Western
Financial Bank, F.S.B., dated May 1, 1995(8)
10.9 Revolving Line of Credit Agreement between WFS Financial
Inc. and Western Financial Bank, dated June 15, 1999(4)
10.9.1 Amendment No. 1, dated as of August 1, 1999, to the
Revolving Line of Credit Agreement between WFS Financial
Inc. and Western Financial Bank(4)
10.10 Tax Sharing Agreement between WFS Financial Inc. and Western
Financial Banks, F.S.B., dated January 1, 1994(8)
10.11 Master Reinvestment Contract between WFS Financial Inc. and
Western Financial Bank, F.S.B., dated May 1, 1995(8)
10.12 Amendment No. 1, dated as of June 1, 1995, to the Restated
Master Reinvestment Reimbursement Agreement(9)
10.13 Amended and Restated Master Collateral Assignment Agreement,
dated as of November 1, 1998(9)
10.14 Form of WFS Financial Inc. Dealer Agreement(10)
10.15 Form of WFS Financial Inc. Loan Application(10)
10.16 Westcorp Employee Stock Ownership and Salary Savings
Plan(11)
10.16.1 Amendment No. 1, dated as of December 1998, to Westcorp
Employee Stock Ownership and Salary Savings Plan(4)
10.16.2 Amendment No. 2, dated as of January 1, 1999, to Westcorp
Employee Stock Ownership and Salary Savings Plan(4)
10.16.3 Amendment No. 3, dated as of June 1, 1999, to Westcorp
Employee Stock Ownership and Salary Savings Plan(4)
10.17 Amended and Restated WFS 1996 Incentive Stock Option Plan,
dated January 1, 1997(12)
10.18 Promissory Note of WFS Financial Inc. in favor of Western
Financial Bank, F.S.B., dated August 1, 1997(9)
10.18.1 Amendment No. 1, dated February 23, 1999, to the Promissory
Note of WFS Financial Inc. in favor of Western Financial
Bank(9)
10.18.2 Amendment No. 2, dated July 30, 1999, to the Promissory Note
of WFS Financial Inc. in favor of Western Financial Bank(4)
10.19 Investment Agreement between WFS Financial Inc. and Western
Financial Bank, F.S.B., dated January 1, 1996(9)
10.20 Management Services Agreement between WFS Financial Inc. and
Western Financial Bank, F.S.B., dated January 1, 1997(9)
10.21 Employment Agreement(13)(14)(15)
10.22 Third Amended and Restated Master Collateral Assignment
Agreement
23.1 Consent of Ernst & Young LLP
23.2 Consent of Mitchell, Silberberg & Knupp LLP (included in
Exhibit 5)
24 Power of Attorney (on page II-5)
</TABLE>
II-2
<PAGE> 38
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
<C> <S>
99.1 Form of Subscription Agreement between Westcorp and
ChaseMellon Shareholder Services, L.L.C.
99.2 Form of Information Agent Agreement between Westcorp and
ChaseMellon Shareholder Services, L.L.C.
99.3 Form of Instructions as to use of the Subscription Warrant
99.4 Form of Notice of Guaranteed Delivery
99.5 Form of Letter to Stockholders of Record
99.6 Form of Letter from Brokers or Other Nominees to Beneficial
Owners of Common Stock
99.7 Form of Instructions by Beneficial Owners to Brokers or
Other Nominees
99.8 Form of Press Announcement of Filing Registration Statement
99.9 Form of letter to Dealers and Other Nominees
</TABLE>
- -------------------------
(1) Exhibits previously filed with Westcorp Registration Statement on Form S-4
(File No. 33-34286), filed April 11, 1990, incorporated herein by reference
under Exhibit Numbers indicated.
(2) Exhibit previously filed with Western Financial Bank, formerly Western
Financial Savings Bank, F.S.B., Offering Circular with the OTS, dated June
17, 1993 (will be provided to the SEC upon request).
(3) Exhibit previously filed with Western Financial bank, formerly Western
Financial Savings Bank, F.S.B., Offering Circular with the OTS, dated July
25, 1998 (will be provided to the SEC upon request).
(4) Exhibits previously filed with WFS Registration Statement on Form S-2 (File
No. 333-91277) filed November 19, 1999 and subsequently amended on January
20, 2000 incorporated by reference under Exhibit Number indicated.
(5) Exhibits previously filed with Westcorp Registration Statement on Form S-1
(File No. 33-4295), filed May 2, 1986 incorporated herein by reference
under Exhibit Number indicated.
(6) Exhibits previously filed with Westcorp Registration Statement on Form S-4
(File No. 33-34286), filed April 11, 1990 incorporated herein by reference
under Exhibit Number indicated.
(7) Exhibits previously filed with Westcorp Registration Statement on Form S-8
(File No. 33-43898), filed December 11, 1991 incorporated herein by
reference under Exhibit Number indicated.
(8) Exhibits previously filed with WFS Financial Inc Registration Statement on
Form S-1 (File No. 33-93068), filed August 8, 1995 incorporated herein by
reference under Exhibit Number indicated.
(9) Exhibits previously filed with Annual Report on Form 10-K of WFS Financial
Inc for the year ended December 31, 1998 (File No. 33-93068) as filed on or
about March 31, 1999.
(10) Amendment No. 1, dated as of July 14, 1995 to the WFS Financial Inc
Registration Statement on Form S-1 (File No. 33-93068) incorporated herein
by reference under Exhibit Number indicated.
(11) Exhibits previously filed with Westcorp Registration Statement on Form S-8
(File No. 333-11039), filed August 29, 1996 incorporated herein by
reference under Exhibit Number indicated.
(12) Exhibit previously filed with WFS Registration Statement on Form S-8 (File
No. 33-7485), filed July 3, 1996 incorporated by reference under the
Exhibit Number indicated. Amendment No. 1 dated as of November 13, 1997
filed with the WFS Registration Statement on Form S-8 (File no. 333-40121)
incorporated herein by reference under Exhibit Number indicated.
(13) Employment Agreement dated February 27, 1998 between the registrant and Joy
Schaefer (will be provided to the SEC upon request).
(14) Employment Agreement dated February 27, 1998 between the registrant,
Westcorp and Lee A. Whatcott (will be provided to the SEC upon request).
(15) Employment Agreement, dated November, 1998 between the registrant and Mark
Olson (will be provided to the SEC upon request).
II-3
<PAGE> 39
ITEM 17. UNDERTAKINGS.
The undersigned hereby undertakes as follows:
(i) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(ii) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(iii) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
(iv) For purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to
section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(v) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement to include
any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change
to such information in the registration statement
(vi) That, for purposes of determining any liability under the
Securities Act of 1933, each post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed the
initial bona fide offering thereof.
(vii) To remove from registration by means of a post-effective
amendment any of the securities being registered hereby which remain unsold
at the termination of the offering.
(viii) To supplement the prospectus, after expiration of the
subscription period, to set forth the results of the subscription offer,
the transactions, if any, of the underwriters during the subscription
period, the amount of unsubscribed securities to be purchased by the
underwriters, if any, and the terms of any subsequent reoffering thereof.
If any public offering of the securities is to be made by the underwriters
on terms differing from those set forth on the cover of the prospectus, a
post-effective amendment will be filed to set forth the terms of that
offering.
II-4
<PAGE> 40
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that is has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Irvine, State of California, on May 4, 2000.
Westcorp
By: /s/ ERNEST S. RADY
------------------------------------
Ernest S. Rady
Chairman of the Board
Chief Executive Officer
POWER OF ATTORNEY
We, the undersigned directors and officers of Westcorp, do hereby
constitute and appoint each of Joy Schaefer, Lee A. Whatcott and Guy Du Bose or
any of them acting alone, our true and lawful attorney-in-fact and agent, each
with full power to sign for us or any of us in our names and in any and all
capacities, any and all amendments (including post-effective amendments) to this
registration statement, or any related registration statements that is to be
effective upon filing pursuant to Rule 426(b) under the Securities Act of 1933,
as amended, and to file the same, with all exhibits thereto and other documents
required in connection therewith, and any of them with full power to do any and
all acts and things in our names and in any and all capacities, which such
attorneys-in-fact and agents, or any of them, may deem necessary or advisable to
enable Westcorp to comply with the Securities Act of 1933, as amended, and any
rules, regulations, and requirements of the Securities and Exchange Commission,
in connection with this Registration Statement, and we hereby do ratify and
confirm all that the such attorneys-in-fact and agents, or either of them, shall
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<C> <C> <S>
/s/ ERNEST S. RADY Chairman of the Board May 4, 2000
- -----------------------------------------------------
Ernest S. Rady
/s/ JUDITH M. BARDWICK Director May 4, 2000
- -----------------------------------------------------
Judith M. Bardwick
/s/ ROBERT T. BARNUM Director May 4, 2000
- -----------------------------------------------------
Robert T. Barnum
Director May , 2000
- -----------------------------------------------------
Stanley E. Foster
</TABLE>
II-5
<PAGE> 41
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<C> <C> <S>
/s/ HOWARD C. REESE Director May 4, 2000
- -----------------------------------------------------
Howard C. Reese
Director May , 2000
- -----------------------------------------------------
Charles E. Scribner
/s/ LEE A. WHATCOTT Executive Vice President May 4, 2000
- ----------------------------------------------------- (Principal Financial and
Lee A. Whatcott Accounting Officer) and Chief
Financial Officer
</TABLE>
II-6
<PAGE> 42
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBIT PAGE
- ------- ---------------------- ------------
<S> <C> <C>
3.1 Certificate of Incorporation(1)
3.2 Bylaws(1)
4 Specimen Westcorp Common Stock Certificate
4.1 Indenture dated as of June 17, 1993 issued by Western
Financial Bank, formerly Western Financial Savings Bank,
F.S.B., with respect to $125,000,000 in aggregate principal
amount of 8.5% Subordinated Capital Debentures due 2003(2)
4.2 Indenture dated as of June 25, 1998 issued by Western
Financial Bank, formerly Western Financial Savings Bank,
F.S.B., with respect to $150,000,000 in aggregate principal
amount of 8.875% Subordinated Capital Debentures due 2007(3)
4.3 Form of Subscription Warrant
5 Opinion of Mitchell, Silberberg & Knupp LLP with respect to
legality
10.1 Westcorp Incentive Stock Option Plan(5)
10.2 Westcorp, Inc. Employee Stock Ownership and Salary Savings
Plan(6)
10.3 Westcorp 1991 Stock Option Plan(7)
10.4 1985 Executive Deferral Plan(8)
10.5 1988 Executive Deferral Plan II(8)
10.6 1992 Executive Deferral Plan III(8)
10.7 Transfer Agreement between WFS Financial Inc. and Western
Financial Bank, F.S.B., dated May 1, 1995(8)
10.8 Promissory Note of WFS Financial Inc. in favor of Western
Financial Bank, F.S.B., dated May 1, 1995(8)
10.9 Revolving Line of Credit Agreement between WFS Financial
Inc. and Western Financial Bank, dated June 15, 1999(4)
10.9.1 Amendment No. 1, dated as of August 1, 1999, to the
Revolving Line of Credit Agreement between WFS Financial
Inc. and Western Financial Bank(4)
10.10 Tax Sharing Agreement between WFS Financial Inc. and Western
Financial Banks, F.S.B., dated January 1, 1994(8)
10.11 Master Reinvestment Contract between WFS Financial Inc. and
Western Financial Bank, F.S.B., dated May 1, 1995(8)
10.12 Amendment No. 1, dated as of June 1, 1995, to the Restated
Master Reinvestment Reimbursement Agreement(9)
10.13 Amended and Restated Master Collateral Assignment Agreement,
dated as of November 1, 1998(9)
10.14 Form of WFS Financial Inc. Dealer Agreement(10)
10.15 Form of WFS Financial Inc. Loan Application(10)
10.16 Westcorp Employee Stock Ownership and Salary Savings
Plan(11)
10.16.1 Amendment No. 1, dated as of December 1998, to Westcorp
Employee Stock Ownership and Salary Savings Plan(4)
10.16.2 Amendment No. 2, dated as of January 1, 1999, to Westcorp
Employee Stock Ownership and Salary Savings Plan(4)
10.16.3 Amendment No. 3, dated as of June 1, 1999, to Westcorp
Employee Stock Ownership and Salary Savings Plan(4)
</TABLE>
<PAGE> 43
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBIT PAGE
- ------- ---------------------- ------------
<S> <C> <C>
10.17 Amended and Restated WFS 1996 Incentive Stock Option Plan,
dated January 1, 1997(12)
10.18 Promissory Note of WFS Financial Inc. in favor of Western
Financial Bank, F.S.B., dated August 1, 1997(9)
10.18.1 Amendment No. 1, dated February 23, 1999, to the Promissory
Note of WFS Financial Inc. in favor of Western Financial
Bank(9)
10.18.2 Amendment No. 2, dated July 30, 1999, to the Promissory Note
of WFS Financial Inc. in favor of Western Financial Bank(4)
10.19 Investment Agreement between WFS Financial Inc. and Western
Financial Bank, F.S.B., dated January 1, 1996(9)
10.20 Management Services Agreement between WFS Financial Inc. and
Western Financial Bank, F.S.B., dated January 1, 1997(9)
10.21 Employment Agreement(13)(14)(15)
10.22 Third Amended and Restated Master Collateral Assignment
Agreement
23.1 Consent of Ernst & Young LLP
23.2 Consent of Mitchell, Silberberg & Knupp LLP (included in
Exhibit 5)
24 Power of Attorney (on page II-5)
99.1 Form of Subscription Agreement between Westcorp and
ChaseMellon Shareholder Services, L.L.C.
99.2 Form of Information Agent Agreement between Westcorp and
ChaseMellon Shareholder Services, L.L.C.
99.3 Form of Instructions as to use of the Subscription Warrant
99.4 Form of Notice of Guaranteed Delivery
99.5 Form of Letter to Stockholders of Record
99.6 Form of Letter from Brokers or Other Nominees to Beneficial
Owners of Common Stock
99.7 Form of Instructions by Beneficial Owners to Brokers or
Other Nominees
99.8 Form of Press Announcement of Filing Registration Statement
99.9 Form of letter to Dealers and Other Nominees
</TABLE>
<PAGE> 1
EXHIBIT 4
COMMON STOCK COMMON STOCK
NUMBER INCORPORATED UNDER THE LAWS SHARES
NY OF THE STATE OF CALIFORNIA
THIS CERTIFICATE IS TRANSFERABLE SEE REVERSE FOR CERTAIN DEFINITIONS
IN NEW YORK, NY AND AND A STATEMENT AS TO THE RIGHTS,
RIDGEFIELD PARK, NJ PREFERENCES, PRIVILEGES AND
RESTRICTIONS OF SHARES
CUSIP 957907 10 8
WESTCORP
THIS CERTIFIES THAT
IS THE RECORD HOLDER OF
FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK, $1.00 PAR VALUE, OF
Westcorp transferable on the books of the Corporation in person or by duly
authorized attorney on surrender of the certificate properly endorsed. This
certificate shall not be valid until countersigned and registered by the
Transfer Agent and Registrar.
Witness the facsimile seal of the Corporation and the signatures of its
duly authorized officers.
Dated:
COUNTERSIGNED AND REGISTERED: [WESTCORP /s/ ERNEST RADY
CHASEMELLON SHAREHOLDER SERVICES, L.L.C. SEAL] -----------------
TRANSFER AGENT AND REGISTRAR Chairman
By
AUTHORIZED SIGNATURE
<PAGE> 1
Exhibit 4.3
FORM OF SUBSCRIPTION WARRANT
WESTCORP
SUBSCRIPTION WARRANT FOR RIGHTS OFFERING
FOR HOLDERS OF RECORD ON MAY 25, 2000
- ---------------------------- ----------------------------
SUBSCRIPTION WARRANT NUMBER CUSIP NUMBER
- ---------------------------- ------------------- ----------------------------
SHARES ELIGIBLE TO SUBSCRIBE RIGHTS RECORD DATE SHARES
Westcorp (the "Company") is conducting a rights offering (the "Rights
Offering") which entitles the holders of shares of the Company's common stock
(the "Common Stock"), as of the close of business on May 25, 2000 (the "Record
Date") to receive one transferable right (each, a "Right") for each share of
Common Stock held of record on the Record Date. Holders of Rights are entitled
to subscribe for and purchase one share of Common Stock for every 5.0 Rights
(the "Basic Subscription Right") at a subscription price of $12.00 per share. If
any shares of Common Stock are not purchased by holders of Rights pursuant to
the Basic Subscription Right (the "Excess Shares"), any holder purchasing all of
the shares of Common Stock available to that holder may purchase an additional
number of the Excess Shares, if so specified in the subscription documents,
subject to proration. No fractional shares or cash in lieu thereof will be
issued or paid. Set forth above is the number of shares of Common Stock held by
such holder, and the number of whole shares to which each holder is entitled to
subscribe pursuant to the Basic Subscription Right (rounded down, if applicable,
to the nearest whole share).
For a more complete description of the terms and conditions of the
Rights Offering, please refer to the Prospectus dated May __, 2000 (the
"Prospectus"), which is incorporated herein by reference. Copies of the
Prospectus are available upon request from ChaseMellon Shareholder Services,
L.L.C. (toll free (888) 224-2745).
This Subscription Warrant (or a Notice of Guaranteed Delivery) must be
received by ChaseMellon Shareholder Services, L.L.C. together with payment in
full of the subscription price by 5:00 p.m. New York City time, on June 15, 1999
(unless extended in the sole discretion of the Company) (as it may be extended,
the "Expiration Date"). Any Rights not exercised prior to the Expiration Date
will be null and void. Any subscription for shares of Common Stock in the Rights
Offering made hereby is irrevocable.
The Rights represented by this Subscription Warrant may be exercised
by duly completing Form 1; may be transferred, assigned, exercised or sold
through a bank or broker by duly completing Form 2; and may be sold through
ChaseMellon Shareholder Services, L.L.C. by duly completing Form 3. Each of
these forms is set forth on the reverse hereof. Rights holders are
<PAGE> 2
advised to review the Prospectus and instructions, copies of which are available
from ChaseMellon Shareholder Services, L.L.C., before exercising or selling
their Rights.
SUBSCRIPTION PRICE: $12.00 PER SHARE
The registered owner whose name is inscribed hereon, or its assigns,
is entitled to subscribe for shares of Common Stock of the Company upon the
terms and subject to the conditions set forth in the Prospectus and the
instructions relating to the use hereof.
The Subscription Warrant is transferable, and may be combined or
divided at the office of ChaseMellon Shareholder Services, L.L.C. If the number
of transferred Rights would otherwise allow the purchase of a fractional share,
the number of shares which may be purchased must be rounded down to the nearest
whole share (or any lesser number of whole shares) that may be purchased with
that number of Rights.
Rights holders should be aware that if they choose to exercise or
transfer only part of their Rights, they may not receive a new Subscription
Warrant in sufficient time to exercise the remaining Rights evidenced thereby.
FORM 1 (on reverse of Subscription Warrant)
EXERCISE AND SUBSCRIPTION: The undersigned hereby irrevocably exercises one or
more Rights to subscribe for shares of Common Stock as indicated below, on the
terms and subject to the conditions specified in the Prospectus, receipt of
which is hereby acknowledged.
(a) Number of whole shares subscribed for pursuant to the Basic Subscription
Right ____ X $_____ = $_____ payment. (5.0 Rights needed to subscribe for one
share.)
(b) Number of whole shares subscribed for pursuant to the Oversubscription Right
____ X $_____ = $_____ payment.
(c) Total Subscription (sum of payment amounts on lines (a) and (b)) = $________
payment.*
METHOD OF PAYMENT (CHECK AND COMPLETE APPROPRIATE BOX(ES)):
[ ] Check, bank draft, or U.S. postal money order payable to "ChaseMellon
Shareholder Services, L.L.C., as Subscription Agent" or
[ ] Wire transfer directed to The Chase Manhattan Bank, New York, NY, ABA
No. 021000021-Attention: ChaseMellon Shareholder Services Reorg. Account
___________-(Westcorp).
(d) If the Rights being exercised pursuant to the Basic Subscription Right do
not constitute all
<PAGE> 3
of the Rights represented by the Subscription Warrants (check only one):
[ ] Deliver to the undersigned a new Subscription Warrant evidencing the
remaining Rights to which the undersigned is entitled.
[ ] Deliver a new Subscription Warrant in accordance with the undersigned's
Form 2 instructions (which include any required signature guarantees).
[ ] Sell the remaining unexercised Rights in accordance with the
undersigned's Form 3 instructions.
[ ] Do not deliver any new Subscription Warrants to me.
(e) [ ] Check here if Rights are being exercised pursuant to the Notice of
Guaranteed Delivery delivered to the Subscription Agent prior to the date hereof
and complete the following:
Name(s) of Registered Holder(s) ____________________________________
Window Ticket Number (if any) ______________________________________
Date of Execution of Notice of Guaranteed Delivery _________________
Name of Institution Which Guaranteed Delivery ______________________
* If the aggregate Subscription Price enclosed or transmitted is insufficient to
purchase the total number of shares included in lines (a) and (b), or if the
number of shares being subscribed for is not specified, the Rights holder
exercising this Subscription Warrant shall be deemed to have subscribed for the
maximum amount of shares that could be subscribed for upon payment of such
amount. If the number of shares to be subscribed for pursuant to the
Oversubscription Right is not specified and the amount enclosed or transmitted
exceeds in aggregate the Subscription Price for all shares represented by this
Subscription Warrant (the "Subscription Excess"), the Rights holder exercising
this Subscription Warrant shall be deemed to have exercised the Oversubscription
Right to purchase, to the extent available, that number of whole shares of
Common Stock equal to the quotient obtained by dividing the Subscription Excess
by the Subscription Price, subject to proration as described in the Prospectus.
To the extent any portion of the aggregate Subscription Price enclosed or
transmitted remains after the foregoing procedures, such funds shall be mailed
to the subscriber without interest or deduction as soon as practicable.
Subscriber's Signature __________________ Telephone No. (___)________________
FORM 2 (on reverse of Subscription Warrant)
<PAGE> 4
TO TRANSFER YOUR SUBSCRIPTION WARRANT OR SOME OR ALL OF YOUR RIGHTS, OR TO
EXERCISE OR SELL RIGHTS THROUGH YOUR BANK OR BROKER: For value received, Rights
represented by this Subscription Warrant are hereby assigned to (please print in
full name and address and Taxpayer Identification Number or Social Security
Number of transferee):
Name: _______________________________________________________________
Address: ____________________________________________________________
_____________________________________________________________________
Signature(s) of Transferee(s)
Signatures Guaranteed by: ___________________________________________
Proceeds from the sale of Rights may be subject to withholding of U.S. taxes
unless the Seller's certified U.S. taxpayer identification number (or
certificate regarding foreign status) is on file with the Subscription Agent and
the seller is not otherwise subject to U.S. backup withholding.
FORM 3 (on reverse of Subscription Warrant)
TO SELL SOME OR ALL OF YOUR UNEXERCISED RIGHTS THROUGH THE
SUBSCRIPTION AGENT:
The undersigned hereby authorizes the Subscription Agent to sell _______________
Rights represented by this Subscription Warrant but not exercised hereby and to
deliver to the undersigned a check for the proceeds, if any, from the sale
thereof, less any applicable brokerage commissions, taxes or other direct
expenses of sale. The Subscription Agent's obligation to execute orders is
subject to its ability to find buyers for the Rights.
______________________________________________________________
Subscriber's Signature
In order to sell Rights through the Subscription Agent, you must complete and
sign the substitute Form W-9 as provided in Section 8 of the instructions.
FORM 4 (on reverse of Subscription Warrant)
DELIVERY INSTRUCTIONS: Address for mailing of stock or new Subscription Warrant
or any cash payment in accordance with the Prospectus, if different from the
address shown on the face of this Subscription Warrant:
Name: _________________________________________________________________
Address: ______________________________________________________________
<PAGE> 1
EXHIBIT 5
LAW OFFICES
MITCHELL SILBERBERG & KNUPP LLP
A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS
TRIDENT CENTER
11377 WEST OLYMPIC BOULEVARD
LOS ANGELES, CALIFORNIA 90064-1683
(310) 312-2000
FAX: (310) 312-3100
ANDREW E. KATZ FILE NO: 27426-29
PARTNER DOC NO:
CORPORATE DEPARTMENT E-MAIL ADDRESS: [email protected]
TELEPHONE: 310-312-3738
FAX: 310-312-3785
MAY 4, 2000
VIA EDGAR
Securities and Exchange Commission
450 5th Street, N.W.
Judiciary Plaza
Washington, DC 20549
Re: WESTCORP
Registration Statement Filed on Form S-3
Dear Ladies and Gentlemen:
We are counsel for Westcorp (the "Company") in connection with
the proposed offering of 5,319,469 shares of Common Stock of the Company (the
"Securities") which are to be registered for sale, pursuant to the accompanying
Form S-3 Registration Statement, upon the exercise of transferable subscription
warrants also being registered pursuant to that Registration Statement (the
"Subscription Rights").
In our capacity as counsel for the Company and for purposes of
this opinion, we have made those examinations and investigations of the legal
and factual matters we deemed advisable, and have examined the originals, or
copies identified to our satisfaction as being true copies of the originals, of
the certificates, documents, corporate records, and other instruments which we,
in our judgment, have considered necessary or appropriate to enable us to render
the opinion expressed below. We have relied, without independent investigation
or confirmation, upon certificates provided by public officials and officers of
the Company as to certain factual matters. In the course of our examinations and
investigations, we have assumed the genuineness of all signatures on original
documents, and the due execution and delivery of all documents requiring due
execution and delivery for the effectiveness thereof.
Based upon and subject to the foregoing and in reliance
thereon, and subject to the assumptions, exceptions and qualifications set forth
herein, it is our opinion that:
The Securities have been duly authorized, and when executed
and delivered to and paid for by the holders exercising Subscription Rights
<PAGE> 2
MITCHELL SILBERBERG & KNUPP LLP
Securities and Exchange Commission
May 4, 2000
Page 2
will be legally issued, fully paid and non-assessable.
We consent to the filing of this opinion with, and to the
reference to our firm under the caption "Legal Matters" in the Registration
Statement. In giving our consent, we do not hereby admit that we come within the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933, as amended, or the rules and regulations thereunder. This opinion
is given as of the date hereof and we assume no obligation to advise you of
changes that may hereafter be brought to our attention.
Very truly yours,
MITCHELL SILBERBERG & KNUPP LLP
<PAGE> 1
EXHIBIT 10.22
THIRD
AMENDED AND RESTATED
MASTER COLLATERAL ASSIGNMENT AGREEMENT
THIS THIRD AMENDED AND RESTATED MASTER COLLATERAL ASSIGNMENT
AGREEMENT dated as of March 1, 2000 (the "Agreement"), which amends and restates
the Master Collateral Assignment Agreement dated as of September 30, 1993, as
amended and restated as of June 1, 1995 (the "Original Agreement"), as amended
and restated as of November 1, 1998 (the "Second Amended and Restated
Agreement") is by and among WESTERN FINANCIAL BANK, a federally-chartered
savings association formerly known as Western Financial Savings Bank, F.S.B.
(including its successors and assigns, the "Bank"), WFS FINANCIAL AUTO LOANS,
INC., a California corporation formerly known as Western Financial Auto Loans,
Inc. ("WFAL"), WFS RECEIVABLES CORPORATION, a California corporation ("WFSRC"
and collectively with WFAL, the "Depositors" and individually, each a
"Depositor"), WFS FINANCIAL AUTO LOANS 2, INC., a California corporation
formerly known as Western Financial Auto Loans 2, Inc. ("WFAL 2"), FINANCIAL
SECURITY ASSURANCE INC., a New York stock insurance company (including its
successors and assigns, "Financial Security"), BANKERS TRUST COMPANY, a New York
banking corporation, in its capacities as Trustee and Collateral Agent (each as
defined herein) and BANKERS TRUST COMPANY OF CALIFORNIA, N.A., in its capacity
as Master Collateral Agent (as defined herein). Capitalized terms used without
definition have the meanings set forth in Article I hereof.
R E C I T A L S
The Bank (i) is, the obligor under certain reinvestment contracts
(as amended from time to time, the "Bank Reinvestment Contracts") and may in the
future be an obligor together with WFAL 2 under certain reinvestment contracts
(as amended from time to time, the "Joint Reinvestment Contracts", and, with the
Bank Reinvestment Contracts, the "Reinvestment Contracts") all as referenced in
the Trust Agreements (as defined in Section 1.01 hereof), pursuant to which
Trusts (as defined in Section 1.01 hereof) have been or will be formed, in favor
of Bankers Trust Company, in its capacity as each of the trustees (collectively,
the "Trustee") under the Trust Agreements and/or in its capacity as each of the
collateral agents (acting for the benefit of Financial Security) referenced in
the Trust Agreements (collectively, together with any collateral agent appointed
by Financial Security thereunder or under the Master RIC Reimbursement
Agreement, the "Collateral Agent"), and (ii) was formerly the obligor under
certain spread account agreements with Financial Security, the Trustee and the
Collateral Agent ("Spread Account Agreements") relating to the Trusts insofar as
the Bank was obligated thereunder to repay moneys deposited in its general
ledger accounts when due.
WFAL 2 is and may in the future be the obligor under Joint
Reinvestment Contracts.
1
<PAGE> 2
In transactions in which certificates insured by Financial
Security were issued under the Trust Agreements dated as of a date prior to
January 1, 1993, WFAL 2 pledged, pursuant to the related Spread Account
Agreements, to the Collateral Agent for the benefit of Financial Security all
its right, title and interest in and to the Spread Accounts (as defined in the
relevant Agreements) (together with the Spread Accounts referred to in the next
succeeding paragraph, the "Spread Accounts") and all investments and moneys
therein from time to time and all proceeds thereof (collectively, the related
"Spread Amounts").
In certain transactions in which certificates insured by
Financial Security were issued under the pooling and servicing agreements dated
as of a date on or after January 1, 1993, the Depositor or WFAL 2 pledged
pursuant to the Trust Agreements, to the Trustee, as collateral agent, all their
right, title and interest in and to the Spread Accounts (as defined in the
relevant pooling and servicing agreements) and all investments and moneys
therein from time to time and related Spread Amounts in order to secure their
respective obligations under such pooling and servicing agreements and related
Spread Account Agreements.
All securities issued in transactions referenced in the foregoing
two paragraphs in which WFAL 2 was a depositor have been fully paid and
discharged, and all obligations of the Bank and the Depositor in respect of
Spread Account Agreements referenced in clause (ii) of the first Recital hereof
have been fully performed and discharged.
To the extent provided in the Reinvestment Contracts, the Bank
and/or WFAL 2, as applicable, will receive funds credited to (i) in the
Collection Accounts, the Note Distribution Accounts and the Certificate
Distribution Accounts, (ii) in the Spread Accounts and (iii) in the Holding
Accounts for investment in Reinvestment Accounts.
The parties hereto desire to amend and restate the Second Amended
and Restated Agreement to reflect (i) the addition of WFSRC as a Depositor under
one or more future Trust Agreements.
Except as specifically amended by this Agreement the Original
Agreement shall continue in full force and effect in accordance with its
existing terms. Any reference to this Agreement prior to the date hereof shall
refer to the Original Agreement.
A G R E E M E N T S
In consideration of the premises, the mutual agreements contained
herein and the reduction of Financial Security's premium for the Policies, and
for other consideration, the parties hereto agree as follows:
2
<PAGE> 3
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. The following terms shall have the following
respective meanings:
"Aggregate Collateral Value" means, as of any date of
determination, (i) the aggregate outstanding principal amount of all items of
Collateral pledged to the Master Collateral Agent pursuant to Section 2.01
hereof, discounted as set forth on Schedule A hereto less (ii) the collection
discount determined in Section II.B. of the relevant Monthly Statement.
"Aggregate Commingled Account Balance" means, as of any date of
determination, the aggregate amounts as determined in Section I of the relevant
Monthly Statement.
"Authorized Officer" means, (i) with respect to the Bank and WFAL
2, the President, the Chief Financial Officer, Treasurer or any Vice President,
(ii) with respect to Financial Security, the Chairman of the Board, the
President, the Executive Vice President or any Managing Director, (iii) with
respect to the Master Collateral Agent, any Vice President, Assistant Vice
President or Trust Officer, (iv) with respect to the Collateral Agent or
Trustee, any Vice President or Trust Officer.
"Business Day" means any day that is not (a) a Saturday or Sunday
or (b) a day on which banking institutions in the City of New York or in the
State of California are authorized or obligated by law or executive order to be
closed.
"Clearing Corporation" shall mean a "clearing corporation" (as
defined in Section 8-102(a)(5) of the UCC) with which the Master Collateral
Agent maintains an account and which is used by the Master Collateral Agent to
hold Securities and Securities Entitlement.
"Collateral" has the meaning specified in Section 2.01(c) hereof.
"Collateral Account" has the meaning specified in Section 3.01
hereof.
"Collateral Schedule" has the meaning specified in Section 7.01
hereof.
"Contract" means any retail installment sales contract and
security agreement, or installment loan agreement and security agreement, which
have been executed by an obligor and pursuant to which such obligor purchased or
financed a motor vehicle, not inconsistent with the criteria set forth on
Schedule A hereto.
"Controlling Party" means Financial Security so long as no
Financial Security Insolvency shall have occurred and no Insurer Default shall
have occurred and be continuing, and, at any other time, the Trustee.
3
<PAGE> 4
"Default" means (i) any failure by the Bank or WFAL 2 to Deliver
Collateral as and when required hereunder, (ii) any other material breach by the
Bank or WFAL 2 of its obligations hereunder and failure to cure such breach
within two (2) Business Days after receipt of notice thereof from the
Controlling Party or (iii) any default by the Bank, WFAL 2, WFS or the Depositor
under any Existing Agreement to which it is a party.
"Delivery" means, with respect to Collateral, the accomplishment
of the following:
(i) all "instruments" and "certificated securities" (as such
terms are defined in the UCC)("Possessory Collateral") shall be in bearer form
or registered in the name of the Master Collateral Agent or its nominee or duly
indorsed to the Master Collateral Agent or in blank, and in no case will any
Collateral be registered in the name of the Bank or WFAL 2, payable to the order
of the Bank or WFAL 2 or specially indorsed to the Bank or WFAL 2 (except to the
extent the foregoing have been further specially indorsed by the Bank or WFAL 2
to the Master Collateral Agent or its nominee or in blank);
(ii) all Security Entitlements in certificated Securities
included in the Collateral and held by or for a Clearing Corporation shall be
(A) held by the Clearing Corporation (or its custodian and/or nominee) as
specified in clause (i) above, (B) evidenced by a written or electronic advice
of the book-entry registration of such Securities Entitlement in an account of
the Master Collateral Agent (or its nominee) as such Clearing Corporation
maintained in accordance with the rules of such Clearing Corporation (a
"Clearing Corporation Account"), and (C) the corresponding Security Entitlement
shall be evidenced by written records of the Master Collateral Agent as being
credited to the Collateral Account; and
(iii) as to all Uncertificated Securities included in the
Collateral the Master Collateral Agent shall have received evidence that (A) it
or its nominee is the registered owner on the books of the issuer thereof or (B)
a Clearing Corporation or its nominee is so registered and the corresponding
Security Entitlement is evidenced by written records of the Master Collateral
Agent as being credited to the Collateral Account.
"Depositor" or "Depositors" means (i) WFS Financial Auto Loans,
Inc., in its capacity as depositor under relevant Trust Agreements, and its
successors and assigns in such capacity, and (ii) WFS Receivables Corporation,
in its capacity as depositor under relevant Trust Agreements, and its successors
and assigns in such capacity.
"Eligible Account" means (i) a segregated trust account in the
corporate trust department that is maintained with a depository institution or
trust company the commercial paper or other short-term debt obligations of which
have credit ratings from S&P at least equal to "A-1" and from Moody's equal to
"P-1", which account is fully insured up to applicable limits by the Federal
Deposit Insurance Corporation or (ii) a general ledger account or deposit
account (a) that is maintained at a depository institution or trust company
satisfying the criteria specified in clause (i) above or (b) that otherwise is
maintained at a depository institution acceptable to Financial Security as
evidenced by a letter to such effect from Financial Security to the Master
Collateral Agent.
4
<PAGE> 5
"Entitlement Order" shall mean a notification communicated in
accordance with this Agreement by the Controlling Party to the Master Collateral
Agent directing transfer, redemption or other action with respect to a Financial
Asset credited to a Custody Account hereunder.
"Existing Agreements" means the Trust Agreements and any related
Policy, insurance, indemnity and pledge agreement, sub-servicing agreement,
indemnification agreement, Reinvestment Contract and Spread Account Agreement
relating to a Trust to which the Bank, WFS or WFAL is a party.
"Federal Agency Security" means any mortgage-backed security
issued by the Federal National Mortgage Association or the Federal Home Loan
Mortgage Corporation or guaranteed by the Government National Mortgage
Association.
"Financial Asset" shall mean Collateral which is a security or an
obligation of a Person or a share, participation, or other interest in a Person
or in property or an enterprise of a Person which is, or is of a type, dealt in
or traded on financial markets, or which is recognized in any area in which it
is issued or dealt in as a medium for investment. As the context requires,
references to "Financial Asset" herein shall mean the Financial Asset itself or
the means by which the interest of a Person holding an interest therein is
evidenced, including a Security Certificate or Uncertificated Security or a
Security Entitlement.
"FSA Notice" has the meaning set forth in Section 3.05 hereof.
"Insurer Default" has the meaning set forth in the latest
Indenture referenced in the relevant Trust Agreement.
"Insurer Insolvency" has the meaning set forth in the latest
Indenture referenced in the relevant Trust Agreement.
"Lien" means, as applied to the property or assets (or the
income, proceeds, products, rents or profits therefrom) of any Person, in each
case whether the same is consensual or nonconsensual or arises by contract,
operation of law, legal process or otherwise: (a) any mortgage, lien, pledge,
attachment, charge, lease, conditional sale or other title retention agreement,
or other security interest or encumbrance of any kind; or (b) any arrangement,
express or implied, under which such property or assets (and/or such income,
proceeds, products, rents or profits) are transferred, sequestered or otherwise
identified for the purpose of subjecting or making available the same for
payment of debt or performance of any other obligation in priority to the
payment of the general, unsecured creditors of such Person.
"Master Collateral Agent" means, initially, Bankers Trust Company
of California, N.A., including its successors and assigns, in its capacity as
collateral agent on behalf of the Trustee, the Collateral Agent and Financial
Security, or any successor which shall have become the Master Collateral Agent
pursuant to Section 4.05 hereof, and thereafter "Master Collateral Agent" shall
mean such successor.
5
<PAGE> 6
"Master RIC Reimbursement Agreement" means, the Amended and
Restated Master RIC Reimbursement Agreement dated as of the date hereof among
the Bank, WFAL 2 and Financial Security.
"Master Secured Obligations" means, on any date, (i) the
respective obligations of the Bank and, WFAL 2 set forth in Sections 2.01(a) and
2.01(b) hereof, and (ii) all costs, expenses, attorney's fees and disbursements
and other amounts expended or incurred by the Trustee, the Master Collateral
Agent, or Financial Security in connection with the protection or preservation
of any Collateral and the enforcement of the rights and remedies of the Trustee,
the Master Collateral Agent or Financial Security under this Agreement.
"Monthly Statement" means the Monthly Collateral Statement of the
Bank and WFAL 2 in the form of Schedule B hereto Delivered pursuant to Section
3.02(b) hereof.
"Mortgage Loan" means any single-family or multi-family mortgage
loan, representing a first or second lien on residential mortgaged property, not
inconsistent with the criteria set forth on Schedule A hereto.
"Opinion of Counsel" means a written opinion of counsel
acceptable, as to form, substance and issuing counsel (which may be counsel to
the Bank and WFAL 2), to the Controlling Party and the Master Collateral Agent.
"Person" means any individual, sole proprietorship, joint stock
company, unincorporated association, joint venture, corporation, partnership,
business or owner trust, government, governmental department or agency or any
other entity whatsoever.
"Policies" means financial guaranty insurance policies in respect
of the Trusts (including, in each case, any endorsements thereto) issued by
Financial Security.
"Securities Intermediary" shall have the meaning set forth in
Section 8-102(a)(14) of the UCC.
"Security" shall mean an obligation of an issuer or a share,
participation, or other interest in an issuer or in property or an enterprise or
an issuer which is represented by a Security Certificate in bearer or registered
form, or an Uncertificated Security, the transfer of which may be registered
upon books maintained for that purpose by or on behalf of the issuer, or which
is one of a class or series or by its terms is divisible into class or series of
shares, participations, interests, or obligations and which is, or is of a type,
dealt in or traded on securities exchanges or securities markets.
"Security Entitlement" shall mean the rights and property
interest of an Entitlement Holder with respect to Financial Assets.
6
<PAGE> 7
"Security Interests" means the Liens on the Collateral granted to
the Master Collateral Agent under this Agreement to secure the Master Secured
Obligations.
"Servicer" means Western Financial Savings Bank, F.S.B.
(including its successors), as servicer under the Servicing Agreement.
"Servicing Agreement" means the Servicing Agreement dated as of
September 30, 1993 between the Servicer and the Master Collateral Agent, with
the Controlling Party as a third party beneficiary thereof, as such agreement
may be amended from time to time in accordance with the terms thereof.
"Termination Date" means the date which is the earlier of (A) the
latest of (i) the date on which all Reinvestment Contracts shall have terminated
and all amounts owing by the Bank, WFAL 2 and each Depositor to the relevant
Trust, Financial Security and the Trustee shall have been paid in full, (ii) the
date on which Financial Security shall have received full payment and
performance by the Bank, WFAL 2 and WFAL pursuant to the Existing Agreements,
(iii) the latest date on which any payment received by Financial Security
pursuant to the Existing Agreements could be avoided in whole or in part as a
preference payment under the United States Bankruptcy Code or any similar
federal or state law relating to insolvency, bankruptcy, rehabilitation,
liquidation or reorganization, or (B) the date on which no amounts in any
accounts under Trust Agreements or Spread Account Agreements are invested in
Reinvestment Contracts or general ledger accounts at the Bank or are otherwise
commingled with funds of the Bank, or (C) any date mutually agreed by the Bank,
WFAL 2 and the Controlling Party.
"Trust Agreements" mean the trust agreements pursuant to which
the Trusts are constituted, as amended from time to time in accordance with
their terms.
"Trusts" means the grantor trusts or business trusts created in
respective automobile installment sale contract securitization transactions
established prior to the date hereof or from time to time hereafter by the Bank
and its affiliates whose certificates of beneficial interest or other securities
have the benefit of Policies.
"Uncertificated Security" shall mean a Security that is not
represented by a certificate.
"Uniform Commercial Code" or "UCC" means the Uniform Commercial
Code as in effect in the State of California or other applicable jurisdiction.
"WFS Sale and Servicing Agreement" means the Sale and Servicing
Agreement dated as of the date hereof between WFS Financial Inc. and WFAL 2.
Section 1.02. Rules of Interpretation. The terms "hereof," "herein" or
"hereunder," unless otherwise modified by more specific reference, shall refer
to this Agreement in its entirety. Unless otherwise indicated in context, the
terms "Article," "Section," "Exhibit" or "Annex" shall refer to an Article or
Section of, or Exhibit or Annex to, this Agreement. The definition of a term
7
<PAGE> 8
shall include the singular, the plural, the past, the present, the future, the
active and the passive forms of such term.
ARTICLE II
THE COLLATERAL
Section 2.01. Security Interests.
(a) In order to secure the full and punctual payment of all
amounts when due by the Bank or WFAL 2 under, and the performance by the Bank
and WFAL 2 of all of their other obligations pursuant to, the Reinvestment
Contracts and the Master RIC Reimbursement Agreement from time to time in
accordance with the terms thereof, the Bank hereby pledges, assigns, transfers
and conveys all of its right, title and interest in and to all of the
securities, property and assets set forth in Section 2.01(c) hereof (the
"Collateral") to the Master Collateral Agent on behalf of, and for the benefit
of, the Trustee, the Collateral Agent and Financial Security. The Security
Interests granted to the Master Collateral Agent, the Trustee, each Depositor,
the Collateral Agent and Financial Security shall be pari passu in all respects.
(b) In order to secure the full and punctual payment of all
amounts when due by WFAL 2 or the Bank under, and the performance by WFAL 2 and
the Bank of all of their other obligations pursuant to, the Reinvestment
Contracts and the Master RIC Reimbursement Agreement from time to time in
accordance with the terms thereof, WFAL 2 hereby pledges, assigns, transfers and
conveys all of its right, title and interest in and to all of the securities,
property and assets set forth in Section 2.01(c) hereof (the "Collateral") to
the Master Collateral Agent on behalf of, and for the benefit of, the Trustee,
the Collateral Agent and Financial Security. The Security Interests granted to
the Master Collateral Agent, the Trustee, each Depositor, the Collateral Agent
and Financial Security shall be pari passu in all respects.
(c) The "Collateral" shall at any time consist of (i) the assets,
property and Financial Assets set forth on the most recent Schedule B hereto and
any other assets, property and Financial Assets, and proceeds thereof, approved
in writing by the Controlling Party (which may be by amendment of Schedule A or
B by mutual agreement of the Bank, WFAL 2 and the Controlling Party), and (ii)
the WFS Sale and Servicing Agreement, including:
(i) the related documentation, and all proceeds, income
and profits thereon, and all interest, principal and other payments and
distributions with respect thereto;
(ii) all rights and remedies for the enforcement of
payment of any principal, interest and proceeds;
(iii) any collateral securing any Collateral including,
without limitation, all rights and remedies of a beneficiary of such
security to foreclose upon,
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repossess and sell the related collateral, or all rights and remedies
assertable against any Person other than the related obligor under a
guaranty, warranty or otherwise in connection with any Collateral;
(iv) insurance proceeds, if any, and any other proceeds
received in connection with the disposition, repossession, foreclosure,
destruction or condemnation of, or impairment of title to, any
Collateral;
(v) any cash, securities or other property received on
account of the Collateral from any liquidation thereof or any adjustment
of debt of the obligors and any portion of the Collateral which may be
distributed in kind in connection with any such liquidation or
adjustment of debt of the obligors;
(vi) the Collateral Account and each other account, if
any, established by or with the Master Collateral Agent hereunder; and
(vii) all distributions, revenues, products,
substitutions, benefits, profits and proceeds, in whatever form, of any
of the foregoing.
(d) Each of the Bank and WFAL 2 agrees that it will not (i) use
any adverse selection method in including Collateral hereunder, and (ii) include
any Collateral which would be charged off in accordance with its normal
accounting practices. If any Collateral Delivered to the Master Collateral Agent
hereunder shall be or become subject to charge off by the Bank or WFAL 2, the
Bank or WFAL 2, as the case may be, will promptly substitute new Collateral
therefor to the extent necessary to satisfy the requirements of Section 3.02
hereof.
(e) In order to effectuate the provisions and purposes of this
Agreement, including to effectuate the collateral assignment to the Master
Collateral Agent, as agent for the Trustee and the Collateral Agent, pursuant to
this Section 2.01, each of the Bank and WFAL 2 hereby Delivers, and in the
future agrees to Deliver, to the Master Collateral Agent, all items of
Collateral pledged by it hereunder in which a security interest must be
perfected by possession, and the Master Collateral Agent hereby agrees to accept
such Collateral on the terms set forth in this Agreement. The Bank and WFAL 2,
and each of them, hereby agree to take all additional steps that may be
necessary or reasonably requested by the Master Collateral Agent or the
Controlling Party from time to time for the perfection, preservation,
protection, maintenance or continuation of such transfers, assignments and
security interests including, but not limited to, the execution, recording,
registering and filing of any appropriate collateral assignments, security
interests and Uniform Commercial Code financing statements and the making of
notations on records or documents of title.
(f) The Security Interests are granted as security only and shall
not (i) transfer or in any way affect or modify, or relieve the Bank or WFAL 2,
or any of them, from any obligation to perform or satisfy, any term, covenant,
condition or agreement to be performed or satisfied by them or any of them under
or in connection with this Agreement, the Servicing Agreement or any Existing
Agreement to which it is a party or (ii) impose any obligation on Financial
Security, the
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Trustee or the Master Collateral Agent to perform or observe any such term,
covenant, condition or agreement or impose any liability on Financial Security,
the Trustee or the Master Collateral Agent for any act or omission on its part
relative thereto or for any breach of any representation or warranty on its part
contained therein or made in connection therewith.
Section 2.02. Priority. The Bank and WFAL 2, and each of them, intend
the Security Interests granted hereunder to be prior to all other Liens in
respect of the Collateral, and the Bank and WFAL 2, and each of them, shall take
all actions necessary to obtain and maintain, in favor of the Master Collateral
Agent, a first lien on and a first priority, perfected security interest in the
Collateral other than in general intangibles and rights under insurance policies
not perfected by the means used to perfect the Security Interest in the items of
Collateral set forth on Schedule A hereto. The Master Collateral Agent shall
have all of the rights, remedies and recourse with respect to the Collateral
afforded a secured party under the Uniform Commercial Code of the State of
California and all other applicable law, in addition to, and not in limitation
of, the other rights, remedies and recourse granted to the Master Collateral
Agent by this Agreement, the Servicing Agreement, any Existing Agreement or any
other law relating to the creation and perfection of liens on, and security
interests in, the Collateral.
Section 2.03. Maintenance of Collateral.
(a) Safekeeping. The Master Collateral Agent agrees to maintain
the Collateral received by it and all records and documents relating thereto at
the office of the Master Collateral Agent or such other address as may be
approved by the Controlling Party. The Master Collateral Agent shall keep or
cause to be kept all Collateral and related documentation in its possession
separate and apart from all other property that it is holding in its possession
and from its own general assets and shall maintain accurate records pertaining
to the Collateral and the Collateral Account in such a manner as shall enable
the Master Collateral Agent and the Controlling Party to verify the accuracy of
such record-keeping. The Master Collateral Agent's books and records shall at
all times show that the Collateral is held by the Master Collateral Agent as
agent for the Trustee and the Collateral Agent and is not the property of the
Master Collateral Agent. The Master Collateral Agent will promptly report to
Financial Security, the Trustee, the Bank and WFAL 2 any failure on its part to
hold the Collateral as provided in this Section 2.03(a) and will promptly take
appropriate action to remedy any such failure.
(b) Access. The Master Collateral Agent shall permit Financial
Security or the Trustee, or their respective duly authorized representatives,
attorneys, auditors or designees, to inspect the Collateral in the possession of
or otherwise under the control of the Master Collateral Agent pursuant hereto at
such reasonable times during normal business hours as Financial Security or the
Trustee may reasonably request with prior written notice. Prior to a Default
such inspection shall be at the expense of Financial Security or the Trustee, as
the case may be, but after a Default such inspection shall be at the expense of
the Bank and WFAL 2.
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(c) Servicing. The Bank and WFAL 2 agree that they shall cause
all Contracts pledged hereunder to be serviced by WFS Financial Inc. pursuant to
the WFS Sale and Servicing Agreement.
(d) Limitations on Investments and Collateral.
(i) Specified Account Funds, Spread Account Funds and
Holding Account Deposited Funds, as such terms are defined in the Reinvestment
Contracts, may be invested in Bank Reinvestment Contracts and WFAL 2
Reinvestment Contracts subject to the aggregate limitations and other provisions
set forth in Schedule A hereto, which may be amended from time to time by a
writing signed only by Financial Security, the Bank and WFAL 2.
(e) Liquidity. In order to ensure that WFAL 2 has sufficient
funds to satisfy its repayment obligations pursuant to Section 4 of each
Reinvestment Contract, the Bank hereby agrees to lend WFAL 2 sufficient
immediately available funds in order to enable WFAL 2 timely to perform its
obligations under each such Sections and any other payments obligations due by
WFAL 2 under any Reinvestment Contract, or otherwise to make available, or cause
to be made available, to WFAL 2 immediately available funds for such purpose.
Section 2.04. General Authority. The Bank and WFAL 2, and each of them,
hereby irrevocably appoint each of the Master Collateral Agent and the
Controlling Party its true and lawful attorney, with full power of substitution,
in the name of the Bank, WFAL 2, the Master Collateral Agent, Financial
Security, the Trustee or otherwise, for the sole use and benefit of the Master
Collateral Agent, the Trustee and Financial Security, but at the expense of the
Bank and WFAL 2, to the extent permitted by law, to exercise, at any time while
a Default has occurred and is continuing, all or any of the following powers
with respect to all or any of the Collateral:
(i) to demand, sue for, collect, receive and give acquittance
for any and all monies due or to become due upon or by virtue
thereof,
(ii) to settle, compromise, compound, prosecute or defend any
action or proceeding with respect thereto,
(iii) to sell, transfer, assign or otherwise deal in or with
the same or the proceeds or avails thereof, as fully and
effectually as if the Master Collateral Agent were the absolute
owner thereof, and
(iv) to extend the time of payment of any or all thereof and
to make any allowance and other adjustments with reference
thereto;
provided that the Controlling Party or the Master Collateral Agent (as the case
may be) shall give the Bank and WFAL 2 such prior notice of the time and place
of sale of any of the Collateral as may be required pursuant to Section 6.01
hereof.
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Section 2.05. Termination of Security Interests. On the Termination
Date, the rights, remedies, powers, duties, authority and obligations conferred
upon the Master Collateral Agent, Financial Security and the Trustee pursuant to
this Agreement in respect of the Collateral shall terminate and be of no further
force and effect and all rights, remedies, powers, duties, authority and
obligations of the Master Collateral Agent, Financial Security and the Trustee
with respect to such Collateral shall be automatically released. In addition,
the Trustee, the Master Collateral Agent and Financial Security agree that, upon
request by the Bank and WFAL 2, they, or any of them, shall execute and Deliver
such instruments as the Bank or WFAL 2 may reasonably request to effectuate such
release, and any such instruments so executed and Delivered shall be fully
binding on the Master Collateral Agent, Financial Security and the Trustee.
ARTICLE III
THE COLLATERAL ACCOUNT
Section 3.01. Establishment. On the date of this Agreement, the Master
Collateral Agent shall establish a segregated, non-interest bearing trust
account, which shall be an Eligible Account under the control (as defined in
Article 8-106 of the UCC) of the Controlling Party, designated "Collateral
Account - Bankers Trust Company of California, N.A., as Master Collateral Agent
for Bankers Trust Company, as Trustee and as Collateral Agent (for the benefit
of Financial Security Assurance Inc.)" (the "Collateral Account"). The
Collateral Account shall be established at a banking office, located in the
State of California, of Bankers Trust Company of California, N.A. or another
depository institution acceptable to the Controlling Party. Funds in the
Collateral Account shall not be commingled with any other funds. The Controlling
Party shall have sole signature authority over the Collateral Account, and no
withdrawals of funds in the Collateral Account shall be made except as specified
in this Agreement.
Section 3.02. Delivery and Release of Collateral.
(a) Concurrently with each Delivery or other pledge of Collateral
hereunder, the Bank and WFAL 2 shall furnish to the Master Collateral Agent, the
Trustee and Financial Security an Opinion of Counsel to the effect that the
Master Collateral Agent has a valid, perfected first priority security interest
in such items of Collateral listed in the relevant Collateral Schedule, and so
Delivered or otherwise pledged hereunder, subject to customary exceptions.
(b) On the tenth (10th) Business Day of each calendar month, the
Bank and WFAL 2 shall Deliver to the Master Collateral Agent, the Trustee and
Financial Security the Monthly Statement, signed by an Authorized Officer each
of the Bank and WFAL 2, certifying the Aggregate Collateral Value of Collateral
Delivered by it to the Master Collateral Agent and held by the Master Collateral
Agent as of the last day of the preceding calendar month and the Aggregate
Commingled Account Balance required to be maintained as of such day. If the
Aggregate Collateral Value so certified is less than the Aggregate Commingled
Account Balance as so certified, either or both of the Bank and WFAL 2 shall,
together with such certificate, Deliver additional Collateral in an amount
necessary to make the Aggregate Collateral Value (after giving effect to such
Delivery) at least equal to the Aggregate Commingled Account Balance.
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(c) The Master Collateral Agent may release items of Collateral
(i) to the Servicer in connection with the Servicer's performance of its duties
pursuant to Section 7.02 hereof and (ii) to the Bank and WFAL 2, in the capacity
of each as a pledgor hereunder, in connection with the substitution of new
Collateral against Delivery by the Bank and/or WFAL 2 to the Master Collateral
Agent of substitute Collateral in an amount necessary to make the Aggregate
Collateral Value (after giving effect to such substitution) at least equal to
the Aggregate Collateral Value prior to such substitution.
(d) On any date on which the Master Collateral Agent shall have
received an FSA Notice to the effect that a Default has occurred and is
continuing, and for as long as stated in such FSA Notice, no Collateral shall be
released to the Bank, WFAL 2 or any other Person, except as specified in
Sections 3.03(d) and/or 6.01 hereof.
(e) Pending its maturity or disposition hereunder, all Collateral
consisting of Possessory Collateral shall be held, pending maturity or
disposition, solely by the Master Collateral Agent; all Collateral consisting of
Security Entitlements shall be continuously maintained by the Master Collateral
Agent, pending maturity or disposition hereunder, through continued book-entry
registration of such Collateral as described in clause (ii) of the definition of
"Delivery"; and all Collateral consisting of Uncertificated Securities shall be
maintained pending its maturity or deposition hereunder, through continued
registration of the ownership of such Security as described in Clause (iii) of
the definition of "Delivery".
(f) All Collateral consisting of chattel paper or general
intangibles (including the WFS Sale and Servicing Agreement) shall be duly
perfected by the filing of financing statements with appropriate filing officer,
as set forth in the Opinion of Counsel required to be delivered pursuant to
subsection (a) above.
Section 3.03. Collateral Account Funds.
(a) Payments on the Collateral received by the Servicer shall be
paid over to the Bank or WFAL 2 as pledgor of such Collateral free of the lien
created by this Agreement until the Servicer shall have received an FSA Notice
specifying that a Default has occurred and is continuing. After receipt of such
an FSA Notice, the Servicer shall transfer to the Master Collateral Agent any
moneys received by it on or in respect of the Collateral for deposit in the
Collateral Account.
(b) Following delivery of an FSA Notice, all payments made to the
Master Collateral Agent on or otherwise received by the Master Collateral Agent
in respect of any Collateral shall be deposited on the date of receipt by the
Master Collateral Agent in the Collateral Account. Any income received by the
Master Collateral Agent with respect to the balance from time to time credited
to the Collateral Account, including any interest or capital gains on
investments, shall be deposited in the Collateral Account. All right, title and
interest in and to the funds on deposit from time to time in the Collateral
Account, together with any investments made pursuant to paragraph (c) below,
shall vest in the Master Collateral Agent, shall constitute part of
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the Collateral hereunder and shall not constitute payment of any Master Secured
Obligations until applied as specified herein.
(c) Amounts, if any, on deposit in the Collateral Account shall
be invested and re-invested from time to time in such investments as shall be
specified by instructions (which may include, subject to the other provisions
hereof, general standing instructions) given to the Master Collateral Agent by
the Controlling Party; provided that if the Master Collateral Agent receives an
FSA Notice, the Master Collateral Agent shall, if instructed by the Controlling
Party, liquidate any such investments and apply or cause to be applied the
proceeds thereof to the payment of the Master Secured Obligations in the manner
specified in Section 3.03(c) hereof. If no such instruction with respect to
investment of any portion of the Collateral Account is received by the Master
Collateral Agent, no investment shall be made of such portion and the Master
Collateral Agent shall not be liable for any resulting absence of income.
(d) On each Business Day specified by the Controlling Party after
delivery of an FSA Notice, the Master Collateral Agent shall withdraw from the
Collateral Account an amount (up to the balance therein) that is sufficient to
pay to Financial Security or the Trustee all amounts constituting Master Secured
Obligations owing to Financial Security or the Trustee, as the case may be (such
payments to be applied to reduce the Master Secured Obligations in such manner
as the Controlling Party shall specify). All amounts or investments, if any,
remaining in the Collateral Account on any date after giving effect to the
distribution required to be made on such date pursuant to this paragraph shall
remain on deposit in the Collateral Account until required or permitted to be
withdrawn therefrom pursuant to the provisions of this Section.
Section 3.04. General Provisions Regarding the Accounts.
(a) Promptly upon the establishment (initially or upon any
relocation) of the Collateral Account hereunder, the Master Collateral Agent
shall advise the Bank, WFAL 2, Financial Security and the Trustee in writing of
the name and address of the depository institution at which such Collateral
Account was established (if not Bankers Trust Company of California, N.A. or any
successor Master Collateral Agent in its commercial banking capacity), the name
of the officer of the depository institution who is responsible for overseeing
the Collateral Account, the Collateral Account number and the individuals whose
names appear on the signature cards for the Collateral Account. The Bank and
WFAL 2 shall cause such depository institution to execute a written agreement,
in form and substance satisfactory to the Controlling Party, waiving, in each
case to the extent permitted under applicable law, (i) any banker's or other
statutory or similar Lien, and (ii) any right of setoff or other similar right
under applicable law with respect to the Collateral Account and agreeing to
notify the Bank, WFAL 2, the Master Collateral Agent, Financial Security and the
Trustee of any charge or claim against or with respect to the Collateral
Account. The Master Collateral Agent shall give the Bank, WFAL 2, Financial
Security and the Trustee at least ten (10) Business Days' prior written notice
of any change in the location of the Collateral Account or in any related
account information. Anything herein to the contrary notwithstanding, unless
otherwise consented to by the Controlling Party in writing, the Master
Collateral Agent shall have no right to change the location of the Collateral
Account.
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(b) If at any time the Collateral Account ceases to be an
Eligible Account, the Master Collateral Agent shall establish, in accordance
with paragraph (a) of this Section, a successor Collateral Account thereto which
shall be an Eligible Account at Bankers Trust Company of California, N.A. or at
another depository institution acceptable to the Controlling Party.
(c) Any investment of funds in the Collateral Account shall be
made in accordance with the provisions of Section 3.02(c) hereof in the name of
the Master Collateral Agent (in its capacity as such). Subject to the other
provisions hereof, the Master Collateral Agent shall have sole control over each
such investment and the income thereon, and any certificate or other instrument
evidencing any such investment, if any, shall be delivered directly to the
Master Collateral Agent, together with each document of transfer, if any,
necessary to transfer title to such investment to the Master Collateral Agent in
a manner which complies with Article II and this Section.
(d) Subject to Section 4.03 hereof, the Master Collateral Agent
shall not be liable by reason of any insufficiency in the Collateral Account
resulting from any loss on any investment included therein except for losses
attributable to the Master Collateral Agent's failure to make payments on
investments as to which the Master Collateral Agent, in its commercial capacity,
is obligated.
Section 3.05. FSA Notices. The Controlling Party may at any time give
notice (an "FSA Notice") to the Master Collateral Agent stating that (i) a
Default has occurred and is continuing or (ii) the Controlling Party has,
pursuant to any Existing Agreement, terminated the status of a Reinvestment
Contract as an eligible investment under a Trust Agreement or other Existing
Agreement.
Section 3.06. Representations by the Bank and WFAL 2. The Bank and WFAL
2 hereby jointly and severally represent and warrant to the other parties
hereto, as of the date hereof and as of the Delivery of any Collateral
hereunder, as follows:
(a) Immediately prior to Delivery or other pledge hereunder of
any item of Collateral, the Bank or WFAL 2 shall have owned such Collateral free
and clear of all liens, adverse claims or rights of others of any nature
whatsoever.
(b) Upon Delivery or other pledge of Collateral hereunder, the
Master Collateral Agent will have a valid perfected first priority security
interest in such Collateral.
ARTICLE IV
THE MASTER COLLATERAL AGENT
Section 4.01. Appointment and Powers. (a) Subject to the terms and
conditions hereof, the Collateral Agent, the Trustee and each Depositor in their
capacities as pledgees hereunder hereby appoint Bankers Trust Company of
California, N.A. as the Master Collateral
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Agent with respect to the Collateral, and Bankers Trust Company of California,
N.A. hereby accepts such appointment and agrees to act as Master Collateral
Agent hereunder. The Collateral Agent, the Trustee and each Depositor in their
capacities as pledgees hereunder hereby authorize the Master Collateral Agent to
take such action on their behalf, and to exercise such rights, remedies, powers
and privileges hereunder as the Controlling Party may direct and as are
specifically authorized to be exercised by the Master Collateral Agent by the
terms hereof, together with such actions, rights, remedies, powers and
privileges as are reasonably incidental thereto. The Master Collateral Agent
shall execute the Servicing Agreement and shall act upon and in compliance with
the written instructions of the Controlling Party delivered pursuant to this
Agreement promptly following receipt of such written instructions.
(b) The Master Collateral Agent is, and shall at all times during
the term of this Agreement be, a Securities Intermediary for Financial Security.
(c) The Master Collateral Agent is eligible to maintain, and does
maintain, and will continue to be eligible to maintain and will maintain, one or
more accounts in its name (or the name of a nominee) with each Clearing
Corporation through which Securities or Security Entitlements constituting
Collateral are held.
Section 4.02. Performance of Duties. The Master Collateral Agent may
perform any of its duties hereunder by or through agents and employees, shall be
entitled to retain counsel and act in reliance upon the written advice of such
counsel concerning all matters pertaining to the agencies hereby created or its
duties hereunder and shall not be liable for actions taken, or omitted to be
taken, in good faith reliance upon the opinion of counsel selected by it. The
duties of the Master Collateral Agent shall be mechanical and administrative in
nature. The Master Collateral Agent shall not have by reason of this Agreement a
fiduciary relationship. Nothing in this Agreement, express or implied, is
intended to or shall be construed as to impose upon the Master Collateral Agent
any obligations in respect of this Agreement except as expressly set forth
herein.
Section 4.03. Limitation on Liability; Indemnification. Neither the
Master Collateral Agent nor any of its directors, officers or employees, shall
be liable for any action taken or omitted to be taken by it or them hereunder,
or in connection herewith, except that the Master Collateral Agent shall be
liable for its own gross negligence or willful misconduct; nor shall the Master
Collateral Agent be responsible for the validity, effectiveness, value,
sufficiency or enforceability against the Bank or WFAL 2 of this Agreement or
any of the Collateral (or any part thereof).
The Bank and WFAL 2 hereby jointly and severally agree to
indemnify and hold the Master Collateral Agent harmless from and against all
damage, liability and expense (including reasonable attorneys' fees) arising out
of or in connection with this Agreement, except to the extent such damage,
liability or expense arises out of the Master Collateral Agent's negligence,
willful misconduct or breach of the obligations imposed hereby on the Master
Collateral Agent.
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Section 4.04. Reliance upon Documents. Subject to the provisions of
Section 4.08 hereof, in the absence of gross negligence or willful misconduct on
its part, the Master Collateral Agent shall be entitled to rely on any
communication, instrument, paper or other document reasonably believed by it to
be genuine and correct and to have been signed or sent by the proper Person and
shall have no liability in acting, or omitting to act, where such action or
omission to act is in reasonable reliance upon any statement or opinion
contained in any such document or instrument.
Section 4.05. Successor Master Collateral Agent. The Master Collateral
Agent acting hereunder at any time may resign by giving not less than ninety
(90) days' prior written notice in writing to the Bank, WFAL 2, the Trustee and
Financial Security. If the Master Collateral Agent is also a Trustee and, as
such, determines that it has a conflicting interest on account of its acting as
Master Collateral Agent, the Master Collateral Agent shall eliminate such
conflicting interest by resigning as Master Collateral Agent hereunder rather
than resigning as such Trustee. The Controlling Party shall appoint a successor
to the Master Collateral Agent upon any such resignation by an instrument of
substitution complying with the requirements of applicable law, or, in the
absence of any such requirements, without formality other than appointment and
designation in writing, a copy of which instrument or writing shall be sent to
the Bank and WFAL 2; provided, however, that the validity of any such
appointment shall not be impaired or affected by any failure to give any such
notice to the Bank and WFAL 2 or by any defect therein. Notwithstanding the
foregoing, prior to the receipt by the Bank and WFAL 2 of an FSA Notice, such
appointment shall be subject to the consent of the Bank and WFAL 2, which
consent shall not be unreasonably withheld. Upon the making and acceptance of
such appointment, the execution and delivery by such successor Master Collateral
Agent of a ratifying instrument pursuant to which such successor Master
Collateral Agent agrees to assume the duties and obligations imposed on the
Master Collateral Agent by the terms of this Agreement, and the delivery to such
successor Master Collateral Agent of the Collateral and related documents then
held by the retiring Master Collateral Agent, such successor Master Collateral
Agent shall thereupon succeed to and become vested with all the estate, rights,
powers, remedies, privileges, immunities, indemnities, duties and obligations
hereby granted to or conferred or imposed upon the Master Collateral Agent named
herein, and one such appointment and designation shall not exhaust the right to
appoint and designate further successor Master Collateral Agents hereunder. No
Master Collateral Agent shall be discharged from its duties or obligations
hereunder until the Collateral and related documents then held by such Master
Collateral Agent shall have been transferred and delivered to the successor
Master Collateral Agent and such retiring Master Collateral Agent shall have
executed and delivered to the successor Master Collateral Agent appropriate
instruments establishing the successor Master Collateral Agent as the record
holder of all liens and security interests in favor of the Trustee and the
Collateral Agent in the Collateral and transferring to such successor Master
Collateral Agent all power given pursuant to this Agreement to act as
attorney-in-fact of the Bank and WFAL 2, and each of them, for purposes of this
Agreement. Each such successor Master Collateral Agent shall provide the Bank,
WFAL 2 and Financial Security with its address, and its telephone and telecopier
numbers, to be used for purposes of Section 7.05 hereof, in a notice complying
with the terms of said Section.
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Section 4.06. Representations and Warranties of Bankers Trust Company of
California, N.A.. Bankers Trust Company of California, N.A. represents and
warrants to the Bank, WFAL 2, the Trustee and Financial Security as follows:
(a) Bankers Trust Company of California, N.A. is a national
banking association, duly organized, validly existing and in good standing.
(b) Bankers Trust Company of California, N.A. has full power,
authority and legal right to execute, deliver and perform this Agreement and the
Servicing Agreement and has taken all necessary action to authorize the
execution, delivery and performance by it of this Agreement and the Servicing
Agreement.
(c) This Agreement and the Servicing Agreement constitute valid
and binding obligations of Bankers Trust Company of California, N.A. in its
capacity as Master Collateral Agent enforceable against it in accordance with
their respective terms.
(d) The execution and delivery by Bankers Trust Company of
California, N.A. of this Agreement and the Servicing Agreement and the
performance by it of its obligations hereunder and thereunder, will not violate
any law, rule or regulation or any agreement, order or decree binding on it or
its properties.
Section 4.07. Waiver of Setoffs. The Master Collateral Agent hereby
expressly waives any and all rights of setoff that the Master Collateral Agent
may otherwise at any time have under applicable law with respect to the
Collateral Account and agrees that amounts in the Collateral Account shall at
all times be held and applied solely in accordance with the provisions of this
Agreement.
Section 4.08. Control by the Controlling Party. The Master Collateral
Agent shall comply with notices and instructions given by the Bank or WFAL 2
only if expressly contemplated hereby or if accompanied by the written consent
of the Controlling Party, except that if any Default shall have occurred and be
continuing, the Master Collateral Agent shall act upon and comply with notices
and instructions given by the Controlling Party alone in the place and stead of
the Bank or WFAL 2. In the absence of any written communication by the
Controlling Party to the Master Collateral Agent to the effect that a Default
has occurred and is continuing, the Master Collateral Agent may assume that no
Default has occurred and is continuing. The Master Collateral Agent shall have
no duty to verify whether or not a Default has occurred or is continuing or the
facts stated in any FSA Notice. Any written communication by the Controlling
Party to the Master Collateral Agent specifying the amount of any obligations
owing to Financial Security or the Trustee shall be conclusive evidence of such
amount, notwithstanding any notice to the contrary received by the Master
Collateral Agent from the Bank, WFAL 2 or any other Person.
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ARTICLE V
COVENANTS OF THE BANK AND WFAL 2
Section 5.01. Preservation of Collateral. Subject to the rights, powers
and authorities granted to the Master Collateral Agent, Financial Security, and
the Trustee in this Agreement, the Bank and WFAL 2 shall take such action as is
necessary and proper with respect to the Collateral in order to preserve,
maintain and service such Collateral and to cause (subject to the rights of the
Controlling Party) the Master Collateral Agent to perform its obligations with
respect to such Collateral as provided herein. The Bank and WFAL 2, and each of
them, will do, execute, acknowledge and deliver, or cause to be done, executed,
acknowledged and delivered, such instruments of transfer or take such other
steps or actions as may be necessary, or required by the Controlling Party, to
perfect the Security Interests granted hereunder in (a) prior to delivery of an
FSA Notice to the Master Collateral Agent, the items of Collateral referenced in
Schedule A hereto and (b) after delivery of an FSA Notice to the Master
Collateral Agent, all Collateral, to ensure that such Security Interests rank
prior to all other Liens and to preserve the priority of such Security Interests
and the validity and enforceability thereof. Upon any Delivery or substitution
of Collateral, the Bank and/or WFAL 2, as pledgor, shall be obligated to create
for the benefit of the Master Collateral Agent a valid first Lien on, and valid
and perfected, first priority security interest in, (a) prior to delivery of an
FSA Notice to the Master Collateral Agent, the items of Collateral referenced in
Schedule A hereto and (b) after delivery of an FSA Notice to the Master
Collateral Agent, all Collateral so delivered and to deliver such Collateral to
the Master Collateral Agent, free and clear of any other Lien, together with
satisfactory assurances thereof, and to pay any reasonable costs incurred by the
Controlling Party or the Master Collateral Agent (including its agents) or
otherwise in connection with such Delivery.
Section 5.02. Opinions as to Collateral. On the date of delivery of the
Monthly Statement following each January and July, commencing with such date
following January 1999, the Bank and WFAL 2 shall, at their own cost and
expense, furnish to Financial Security, the Trustee and the Master Collateral
Agent an Opinion of Counsel either stating that, in the opinion of such counsel,
(a) such actions have been taken as are necessary under California law to
perfect, maintain and protect the lien and security interest of the Master
Collateral Agent with respect to the items of Collateral set forth on Schedule A
that have been granted to the Master Collateral Agent as of the last Business
Day of the relevant January or July under California law (and other applicable
law) against all creditors of and purchasers from the Bank or WFAL 2, as the
case may be, and reciting the details of such action, or (b) no action is
necessary to maintain such perfected lien and security interest. Such Opinion of
Counsel shall describe each execution and filing of any documents and
instruments and such other actions as will, in the opinion of such counsel, be
required to perfect, maintain and protect the lien and security interest of the
Master Collateral Agent, on behalf of the Trustee and the Collateral Agent with
respect to such Collateral under California law (and other applicable law)
against all creditors of and purchasers from the Bank or WFAL 2, as the case may
be, for a period, specified in such Opinion, continuing until a date not earlier
than eighteen months from the date of such Opinion.
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<PAGE> 20
Section 5.03. Notices. In the event the Bank or WFAL 2 acquires
knowledge of the occurrence and continuance of any Default, the Bank or WFAL 2,
as the case may be, shall promptly give notice thereof to the Master Collateral
Agent, the Trustee and Financial Security.
Section 5.04. Waiver of Stay or Extension Laws; Marshalling of Assets.
The Bank and WFAL 2 covenant, to the fullest extent permitted by applicable law,
that they, and each of them, will not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any appraisement,
valuation, stay, extension or redemption law wherever enacted, now or at any
time hereafter in force, in order to prevent or hinder the enforcement of this
Agreement or any sale of the Collateral or any part thereof in accordance with
this Agreement or the possession thereof by any purchaser at any sale, pursuant
to and in accordance with Section 6.01 hereof; and the Bank and WFAL 2, to the
fullest extent permitted by applicable law, for themselves and all who may claim
under them, or any of them, hereby waive the benefit of all such laws, and
covenant that they will not hinder, delay or impede the execution of any power
herein granted to the Master Collateral Agent, but will suffer and permit the
execution of every such power as though no such law had been enacted. The Bank
and WFAL 2, for themselves and all who may claim under them, waive, to the
fullest extent permitted by applicable law, all right to have the Collateral
marshalled upon any foreclosure or other disposition thereof.
Section 5.05. Noninterference, etc.. The Bank and WFAL 2 shall not take
any action, or fail to take any action, if such action or failure to take action
will interfere with the enforcement of any rights under this Agreement, the
Servicing Agreement or the Existing Agreements.
Section 5.06. Changes. Neither the Bank nor WFAL 2 shall change its name
unless it shall have given Financial Security, the Trustee and the Master
Collateral Agent at least sixty (60) days' prior written notice thereof. The
Bank or WFAL 2, as the case may be, shall give Financial Security, the Trustee
and the Master Collateral Agent at least sixty (60) days' prior written notice
of any relocation of its principal executive office. If the Bank or WFAL 2
relocates (i) its principal executive office or principal place of business from
that set forth in Section 8.05 hereof or (ii) the locations where it keeps or
holds any Collateral or any records relating thereto from that set forth in
Section 8.05 hereof, the Bank or WFAL 2, as the case may be, shall give prior
notice thereof to Financial Security, the Trustee and the Master Collateral
Agent.
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<PAGE> 21
ARTICLE VI
REMEDIES UPON DEFAULT
Section 6.01. Rights and Remedies Upon Default.
(a) In addition to and not in limitation of the rights otherwise
provided to the Controlling Party pursuant to this Agreement, to the fullest
extent permitted by applicable law, if a Default has occurred and is continuing,
the Controlling Party in its discretion may, or may direct the Master Collateral
Agent to, exercise the following rights, privileges and remedies:
(i) Collection of the Collateral. The Master Collateral Agent
shall have the right to collect all proceeds of the Collateral, to pay all
expenses of such collection, including the reasonable expenses and compensation
of the Master Collateral Agent, its agents and attorneys, and to apply the
remainder of the moneys so received as provided herein.
(ii) Sale of Collateral. The Master Collateral Agent may sell,
or cause to be sold, the Collateral or any part thereof or interest therein, at
public auction to the highest bidder for cash or at private sale or auction with
or without demand, advertisement or notice of the date, time or place of sale or
any adjournment thereof, upon such terms as the Controlling Party may approve,
and upon such sale the Master Collateral Agent shall make and deliver to the
purchaser or purchasers an appropriate instrument or instruments of transfer.
The Master Collateral Agent is hereby irrevocably appointed the true and lawful
attorney of the Bank and WFAL 2, and each of them, in its name and stead, to
make all necessary transfers of property thus sold; and for that purpose it may
execute all necessary instruments of transfer, and may substitute one or more
Persons with like power, the Bank and WFAL 2, and each of them, hereby ratifying
and confirming all that its said attorney, or such substitute or substitutes,
shall lawfully do by virtue hereof. Nevertheless, if so requested by the Master
Collateral Agent or any purchaser of the Collateral or any part thereof, the
Bank and WFAL 2, and each of them, shall ratify and confirm any such sale or
transfer by executing and delivering to the Master Collateral Agent or such
purchaser all proper instruments of transfer and releases as may be designated
in any such request. The Master Collateral Agent may proceed at law or in equity
to foreclose the lien of this Agreement against all or any part of the
Collateral and to have the same sold under the judgment or decree of a court
having jurisdiction or as otherwise may be required or permitted by law. Upon
any such sale, whether made under the power of sale hereby given or by virtue of
judicial proceedings, the Controlling Party may bid for and purchase the
Collateral or any part thereof and, upon compliance with the terms of such sale,
may hold, retain, possess or dispose of such property in its or their own
absolute right without accountability. Upon any sale, whether made under the
power of sale hereby given or by virtue of judicial proceedings, a receipt of
the Master Collateral Agent, or of the officer making such sale under judicial
proceedings, shall be a sufficient discharge to the purchaser or purchasers at
such sale for its or their purchase money, and such purchaser or purchasers
shall not be obliged to see to the application thereof. Any such sale, whether
under the power of sale hereby given or by virtue of judicial proceedings, shall
bind the Master Collateral Agent, the Bank and WFAL 2, shall operate to divest
all right, title and interest whatsoever, either at law or in equity, of each of
them in and to the property sold, and shall be a perpetual bar, both at law and
in equity,
21
<PAGE> 22
against each of them and their successors and assigns, and against any and all
Persons claiming through or under them.
(iii) Other Actions. The Master Collateral Agent shall have the
right to cause any other action permitted at law or in equity to be initiated
and prosecuted to enforce this Agreement and any rights granted by virtue of the
pledge of the Collateral hereunder.
(b) In the event that the Bank or WFAL 2 shall default in the
performance or observance of any covenant or agreement contained herein, the
Master Collateral Agent shall have the right to take any action or initiate any
proceeding at law or equity available to it to enforce the terms of this
Agreement.
Section 6.02. Restoration of Rights and Remedies. If the Master
Collateral Agent has instituted any proceeding to enforce any right or remedy
under this Agreement, and such proceeding has been discontinued or abandoned for
any reason, or has been determined adversely to such Master Collateral Agent,
then and in every such case the Bank, WFAL 2 and the Master Collateral Agent
shall, subject to any determination in such proceeding, be restored severally
and respectively to their former positions hereunder, and thereafter all rights
and remedies of the Controlling Party shall continue as though no such
proceeding had been instituted.
Section 6.03. No Remedy Exclusive. No right or remedy herein conferred
upon or reserved to the Master Collateral Agent or the Controlling Party is
intended to be exclusive of any other right or remedy, and every right or remedy
shall, to the extent permitted by law, be cumulative and in addition to every
other right and remedy given hereunder or now or hereafter existing at law, in
equity or otherwise, and each and every right, power and remedy whether
specifically herein given or otherwise existing may be exercised from time to
time and as often and in such order as may be deemed expedient by the
Controlling Party, and the exercise of or the beginning of the exercise of any
right or power or remedy shall not be construed to be a waiver of the right to
exercise at the same time or thereafter any other right, power or remedy.
ARTICLE VII
CUSTODY
Section 7.01. Collateral Schedule; Collateral Files. On each date on
which the Bank and/or WFAL 2 pledge items of Collateral to the Master Collateral
Agent hereunder (each such date, a "Pledge Date"), the Bank and WFAL 2 shall
deliver to the Master Collateral Agent, the Trustee and Financial Security a
schedule of Collateral (each, a "Collateral Schedule") which, as to each item of
Collateral, sets forth, to the extent applicable, the obligor's name, the loan
or other identifying number, the interest rate, the original principal balance,
the outstanding principal balance, the origination or issue date, the scheduled
monthly principal and interest payment and the maturity date.
22
<PAGE> 23
On each Pledge Date, the Bank and WFAL 2 shall deliver to the
Master Collateral Agent the following documents with respect to each Mortgage
Loan pledged on such date to the Master Collateral Agent:
a. Original mortgage note endorsed or assigned without
recourse to Bankers Trust Company of California, N.A., as
Master Collateral Agent;
b. Original recorded mortgage or deed of trust or certified
copy thereof; and
c. Original assignment, in recordable form, of mortgage or
deed of trust (which may be a blanket assignment for all
Mortgage Loans) to Bankers Trust Company of California,
N.A., as Master Collateral Agent.
The Bank and WFAL 2 jointly and severally represent, warrant and
covenant to the Master Collateral Agent, the Trustee and Financial Security
that, with respect to each Mortgage Loan pledged to the Master Collateral Agent
hereunder, the Bank or WFAL 2 has (i) originals of all assumption and
modification agreements related thereto, (ii) evidence of homeowners insurance
on the related mortgaged property, and (iii) a title insurance policy.
Upon receipt by the Bank and WFAL 2 of an FSA Notice stating that
a Default has occurred and is continuing, the Bank and WFAL 2 shall deliver to
the Master Collateral Agent all documents and instruments specified in the
immediately preceding paragraph and such other documents and instruments with
respect to each Mortgage Loan, Contract, Federal Agency Security or other item
of Collateral pledged hereunder to the Master Collateral Agent in which a
security interest may be perfected by possession.
The documents and instruments delivered in respect of each
Mortgage Loan, Contract, Federal Agency Security or other item of Collateral are
herein referred to as the "Collateral File". The Master Collateral Agent shall
segregate and maintain continuous custody of all documents constituting each
Collateral File in secure and fireproof facilities within the State of
California in accordance with customary standards for such custody.
Section 7.02. Release of Documents to Servicer. In the event that a
specific document relating to an item of Collateral is required to be obtained
by the Servicer because such Collateral has been paid in full and is to be
released by the Servicer to the related obligor or to facilitate enforcement and
collection procedures with respect to such Collateral, the Servicer shall be
entitled to obtain such document by submitting to the Master Collateral Agent
(with copies to the Trustee and Financial Security) a written request therefor,
indicating and confirming that it will hold such document in trust for the
benefit of the Master Collateral Agent until such time as it is released to the
related obligor upon full payment or is otherwise returned to the Master
Collateral Agent. Upon its receipt of an FSA Notice stating that a Default has
occurred and is continuing, the Master Collateral Agent shall not release such
document to the Servicer until it has received the written authorization from
the Controlling Party.
23
<PAGE> 24
Section 7.03. Insurance. The Master Collateral Agent shall, at its own
expense, maintain at all times during the existence of this Agreement and keep
in full force and effect (a) fidelity insurance, (b) theft of documents
insurance and (c) forgery insurance. All such insurance shall be in amounts,
with standard coverage and subject to deductibles, as are customary for
insurance typically maintained by institutions which act as custodian in similar
transactions.
Section 7.04. Master Collateral Agent's Interest in Collateral. By
execution of this Agreement, the Master Collateral Agent warrants and covenants
that it currently does not hold, and during the existence of this Agreement will
not hold, any adverse interest, by way of security or otherwise, in any
Collateral and hereby waives and releases any such interest which it may have or
acquire in the future. The Master Collateral Agent expressly waives (i) any lien
which might arise in connection with unpaid fees or any lien which might arise
in connection with any other claims against any party hereto and (ii) any
possessory lien, claim or right of set-off with respect to any Collateral.
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Further Assurances. Each of the Bank, WFAL 2 and the
Master Collateral Agent shall take such action and deliver such instruments, in
addition to the actions and instruments specifically provided for herein, as may
be reasonably requested or required by the Controlling Party to effectuate the
purpose or provisions of this Agreement or to confirm or perfect any transaction
described or contemplated herein. The parties hereto will make any changes
required by the Office of Thrift Supervision if mutually agreed by the parties
hereto and if there is no such mutual agreement, the Bank, WFAL 2 and the
Controlling Party agree to terminate this Agreement.
Section 8.02. Waiver. Any waiver by any party of any provision of this
Agreement or any right, remedy or option hereunder shall only prevent and stop
such party from thereafter enforcing such provision, right, remedy or option if
such waiver is given in writing and only as to the specific instance and for the
specific purpose for which such waiver was given. The failure or refusal of any
party hereto to insist in any one or more instances, or in a course of dealing,
upon the strict performance of any of the terms or provisions of this Agreement
by any party hereto or the partial exercise of any right, remedy or option
hereunder shall not be construed as a waiver or relinquishment of any such term
or provision, but the same shall continue in full force and effect.
Section 8.03. Amendments. This Agreement may be amended, changed,
modified, altered or terminated only by written instrument or written
instruments signed by each of the parties hereto; provided that the consent of
the Master Collateral Agent shall not be withheld or delayed with respect to any
amendment that does not adversely affect the Master Collateral Agent and,
provided further that Schedule A hereto may be amended or replaced as set forth
in
24
<PAGE> 25
Section 2.03 (d) hereof. The Original Agreement, as amended and restated hereby,
shall remain in full force and effect.
Section 8.04. Severability. In the event that any provision of this
Agreement or the application thereof to any party hereto or to any circumstance
or in any jurisdiction governing this Agreement shall, to any extent, be invalid
or unenforceable under any applicable statute, regulation or rule of law, then
such provision shall be deemed inoperative to the extent that it is invalid or
unenforceable and the remainder of this Agreement, and the application of any
such invalid or unenforceable provision to the parties, jurisdictions or
circumstances other than to whom or to which it is held invalid or
unenforceable, shall not be affected thereby nor shall the same affect the
validity or enforceability of any other provision of this Agreement. The parties
hereto further agree that the holding by any court of competent jurisdiction
that any remedy pursued by the Master Collateral Agent or by the Controlling
Party hereunder is unavailable or unenforceable shall not affect in any way the
ability of the Master Collateral Agent or the Controlling Party to pursue any
other remedy available to it.
Section 8.05. Notices. All notices, demands, certificates, requests and
communications hereunder ("notices") shall be in writing and shall be effective
(a) upon receipt when sent through the U.S. mails, registered or certified mail,
return receipt requested, postage prepaid, with such receipt to be effective the
date of delivery indicated on the return receipt, or (b) one Business Day after
delivery to an overnight courier, or (c) on the date personally delivered to an
Authorized Officer of the party to which sent, or (d) on the date transmitted by
legible telecopier transmission with a confirmation of receipt, in all cases
addressed to the recipient as follows:
(i) If to the Bank or the Bank as Servicer:
Western Financial Bank
16485 Laguna Canyon Road
Irvine, California 92618
Attention: Joy Schaefer
Telecopier No.: (949) 727-2306
(ii) If to WFAL:
WFS Financial Auto Loans, Inc.
23 Pasteur
Irvine, California 92618
Attention: Guy DuBose, Esq.
Telecopier No.: (949) 753-3085
25
<PAGE> 26
(iii) If to WFSRC:
WFS Receivables Corporation
6655 West Sahara Avenue
Las Vegas, Nevada 89102
Attention: David A. Guay
Telecopier No.: 702-247-4602
(iv) If to WFAL 2:
WFS Financial Auto Loans 2, Inc.
23 Pasteur
Irvine, California 92618
Attention: Guy DuBose, Esq.
Telecopier No.: (949) 753-3085
(v) If to WFS as Servicer:
WFS Financial Inc.
23 Pasteur
Irvine, California 92618
Attention: Joy Schaefer
Telecopier No.: (949) 727-2306
(vi) If to Financial Security:
Financial Security Assurance Inc.
350 Park Avenue - 13th Floor
New York, New York 10022
Attention: Surveillance Department
Telecopier No. (212) 755-5165
(212) 688-3101
(vii) If to the Trustee or the Collateral Agent:
Bankers Trust Company
Four Albany Street, 10th Floor
New York, New York 10006
Attention: Corporate Trust and Agency Group/
Western Financial Master Collateral
Telecopier No.: (212) 250-6533
26
<PAGE> 27
(viii) If to the Master Collateral Agent:
Bankers Trust Company of California, N.A.
3 Park Plaza, 16th Floor
Irvine, California 92714
Telecopier No.: (949) 253-7577
Attention: Western Financial Collateral
Assignment
A copy of each notice given hereunder to any party hereto shall also be given to
(without duplication) the Controlling Party and the Master Collateral Agent.
Each party hereto may, by notice given in accordance herewith to each of the
other parties hereto, designate any further or different address to which
subsequent notices shall be sent.
Section 8.06. Term of this Agreement. This Agreement shall take effect
on the date hereof and shall continue in effect until the Termination Date. On
the Termination Date, this Agreement shall terminate, all obligations of the
parties hereunder shall cease and terminate and the Collateral, if any, held
hereunder and not to be used or applied in discharge of any obligations of the
Bank or WFAL 2 in respect of the Master Secured Obligations or otherwise under
this Agreement, shall be released to and in favor of the Bank or WFAL 2, as
pledgor as the case may be.
Section 8.07. Assignments; Third-Party Rights; Reinsurance.
(a) This Agreement shall be a continuing obligation of the Bank
and WFAL 2 and shall (i) be binding upon the Bank and WFAL 2 and their
respective successors and assigns, and (ii) inure to the benefit of and be
enforceable by Financial Security, the Trustee and the Master Collateral Agent,
and by their respective successors and assigns. Neither the Bank nor WFAL 2 may
assign this Agreement or delegate any of its duties hereunder, without the prior
written consent of the Controlling Party. Any assignment made in violation of
this Agreement shall be null and void.
(b) Financial Security shall have the right to give
participations in its rights under this Agreement and to enter into contracts of
reinsurance with respect to any Policy issued in connection with any of the
Trusts upon such terms and conditions as Financial Security may in its
discretion determine; provided, however, that no such participation or
reinsurance agreement or arrangement shall relieve Financial Security of its
obligations hereunder or under any such Policy.
(c) In addition, Financial Security shall be entitled to assign
or pledge to any bank or other lender providing liquidity or credit with respect
to any Trust or the obligations of Financial Security in connection therewith
any rights of Financial Security under this Agreement, the Servicing Agreement
or the Existing Agreements or with respect to any real or personal property or
other interests pledged to Financial Security, or in which Financial Security
has a security interest, in connection with any Trust.
27
<PAGE> 28
(d) Except as provided herein with respect to participants and,
nothing in this Agreement shall confer any right, remedy or claim, express or
implied, upon any Person, any owner or other holder of any security or other
investment covered by any Policy, other than Financial Security, against the
Bank or WFAL 2, and all the terms, covenants, conditions, promises and
agreements contained herein shall be for the sole and exclusive benefit of the
parties hereto and their successors and permitted assigns.
Section 8.08. Consent of the Controlling Party. In the event that the
Controlling Party's consent is required under the terms hereof, it is understood
and agreed that, except as otherwise provided expressly herein, the
determination whether to grant or withhold such consent shall be made solely by
the Controlling Party in its sole discretion.
Section 8.09. Trial by Jury Waived. EACH OF THE PARTIES HERETO WAIVES,
TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION ARISING DIRECTLY OR INDIRECTLY OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT, THE SERVICING AGREEMENT, ANY OF THE EXISTING
AGREEMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREUNDER OR THEREUNDER. EACH
OF THE PARTIES HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF
ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND
(B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THIS WAIVER.
Section 8.10. Counterparts. This Agreement may be executed in two or
more counterparts by the parties hereto, and each such counterpart shall be
considered an original and all such counterparts shall constitute one and the
same instrument.
Section 8.11. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED, IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA.
xxviii
<PAGE> 29
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the date set forth on the first page hereof.
WESTERN FINANCIAL BANK
By:
-----------------------------------------
Name:
Title:
WFS FINANCIAL AUTO LOANS, INC.
By:
-----------------------------------------
Name:
Title:
WFS FINANCIAL AUTO LOANS 2, INC.
By:
-----------------------------------------
Name:
Title:
WFS RECEIVABLES CORPORATION
By:
-----------------------------------------
Name:
Title:
FINANCIAL SECURITY ASSURANCE INC.
By:
-----------------------------------------
Name:
Title:
BANKERS TRUST COMPANY, as Trustee
and Collateral Agent
By:
-----------------------------------------
Name:
Title:
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
as Master Collateral Agent
By:
-----------------------------------------
Name:
Title:
xxix
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement on Form S-3 and related Prospectus of Westcorp for the
registration of 5,319,469 shares of its common stock and to the incorporation
by reference therein of our report dated January 18, 2000, with respect to the
consolidated financial statements of Westcorp included in its Annual Report
(Form 10-K) for the year ended December 31, 1999, filed with the Securities and
Exchange Commission.
/s/ ERNST & YOUNG LLP
Los Angles, California
May 4, 2000
<PAGE> 1
Exhibit 99.1
FORM OF SUBSCRIPTION AGENT AGREEMENT BETWEEN WESTCORP
AND CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
[LETTERHEAD OF WESTCORP]
[Date May __, 2000]
ChaseMellon Shareholder Services, LLC
85 Challenger Road
Ridgefield Park, New Jersey 07660
Attention: Reorganization Department
Gentlemen:
Westcorp, a California corporation (the "Company") is making an offer
to issue (the "Subscription Offer") to the holders of record of its outstanding
shares of Common Stock par value $1.00 per share (the "Common Stock"), at the
close of business on May 25, 2000 (the "Record Date"), the right to subscribe
for and purchase (each a "Right") shares of Common Stock (the "Additional Common
Stock") at a purchase price of $12.00 per share of Additional Common Stock (the
"Subscription Price"), payable by cashier's or certified check or other
acceptable methods as may be specified in the Registration Statement referenced
below, upon the terms and conditions set forth herein. The term "Subscribed"
shall mean submitted for purchase from the Company by a stockholder in
accordance with the terms of the Subscription Offer, and the term "Subscription"
shall mean any such submission. The Subscription Offer will expire at 5:00 p.m.
New York City Time, on June 15, 2000 (the "Expiration Time"), unless the Company
shall have extended the period of time for which the Subscription Offer is open,
in which event the term "Expiration Time" shall mean the latest time and date at
which the Subscription Offer, as so extended by the Company from time to time,
shall expire.
This Subscription Agent Agreement ("Agreement") will define the
activities and related compensation which ChaseMellon Shareholder Services LLC
("ChaseMellon") will provide to the Company in conjunction with the Subscription
Offer.
The Company filed a Registration Statement relating to the Additional
Common Stock with the Securities and Exchange Commission under the Securities
Act of 1933, as amended, on May 5, 2000. Said Registration Statement was
declared effective on May __, 2000. The terms of the Additional Common Stock are
more fully described in the Prospectus forming part of the Registration
Statement as it was declared effective, and the accompanying Letter of
Instruction. Copies of the Prospectus, the Letter of Instruction and the Notice
of Guaranteed Delivery are annexed hereto as Exhibit 1, Exhibit 2 and Exhibit 3,
respectively. All terms used and not defined herein shall have the same meaning
as in the Prospectus. Promptly after the Record Date,
<PAGE> 2
the Company will provide ChaseMellon with a list of holders of Common Stock as
of the Record Date (the "Record Stockholders List").
The Rights are evidenced by transferable subscription warrants (the
"Warrants"), a copy of the form of which is annexed hereto as Exhibit 4. The
Warrants entitle the holders to subscribe, upon payment of the Subscription
Price, for shares of Additional Common Stock at the rate of One (1) share for
each 5.0 Rights evidenced by a Warrant (the "Basic Subscription Right"). No
fractional shares will be issued. In the event that fractional shares would be
calculated as a result of the exchange ratio above, the number of shares of
Additional Common Stock to be purchased will be rounded down to the nearest full
share and the fractional share amount shall be cancelled. Rights are freely
transferable among their holders and ChaseMellon will not make any distinction
between Rights issued directly to subscribing shareholders and those Rights
which have been validly and lawfully acquired by the subscribing shareholder
from another.
Further, the Subscription Offer provides that subscribing
shareholders, and only those subscribing shareholders who exercise their Rights
in full, may exercise an Oversubscription Right as more fully described in the
Registration Statement. ChaseMellon shall, after the initial allocation of
Additional Common Stock to those shareholders exercising their Basic
Subscription Right, allocate any remaining shares (and only to the extent
possible) to those shareholders who exercise the Oversubscription Right on a
pro-rata basis to their Basic Subscription, as more fully described in the
Registration Statement.
The Company hereby appoints ChaseMellon as Subscription Agent (the
"Subscription Agent") for the Subscription Offer and agrees with ChaseMellon as
follows:
1) As Subscription Agent, ChaseMellon is authorized and directed to:
(A) Issue the Warrants in accordance with this Agreement in the names
of the holders of the Common Stock of record on the Record Date, keep such
records as are necessary for the purpose of recording such issuance, and furnish
a copy of such records to the Company. The Warrants may be signed on behalf of
the Subscription Agent by the manual or facsimile signature of a Vice President
or Assistant Vice President of the Subscription Agent, or by the manual
signature of any of its other authorized officers.
(B) Promptly after ChaseMellon receives the Record Stockholders List:
(a) mail or cause to be mailed, by first class mail, to each holder of
Common Stock of record on the Record Date whose address of record is
within the United States and Canada, (i) a Warrant evidencing the
Rights to which such stockholder is entitled under the Subscription
Offer, (ii) a copy of the Prospectus, (iii) a Letter of Instruction,
(iv) a Notice of Guaranteed Delivery and (v) a return envelope
addressed to the Subscription Agent; and
<PAGE> 3
(b) mail or cause to be mailed, by air mail, to each holder of Common
Stock of record on the Record Date whose address of record is outside
the United States and Canada, or is an A.P.O. or F.P.O. address (i) a
copy of the Prospectus, (ii) a Notice of Guaranteed Delivery and (iii)
a Letter of Instruction (different from the Letter of Instruction sent
to stockholders whose address of record is within the United States
and Canada). ChaseMellon shall refrain from mailing Warrants issuable
to any holder of Common Stock of record on the Record Date whose
address of record is outside the United States and Canada, or is an
A.P.O. or F.P.O. address, and hold such Warrants for the account of
such stockholder subject to such stockholder making satisfactory
arrangements with the Subscription Agent for the exercise or other
disposition of the Rights evidenced thereby, and follow the
instructions of such stockholder for the exercise, sale or other
disposition of such Rights if such instructions are received at or
before 11:00 a.m., New York City Time, on June 13, 2000.
(C) Mail or deliver a copy of the Prospectus (i) to each assignee or
transferee of Warrants upon ChaseMellon's receiving appropriate documents to
register the assignment or transfer thereof and (ii) with certificates for
shares of Additional Common Stock when such are issued to persons other than the
registered holder of the Warrant.
(D) Accept Subscriptions upon the due exercise (including payment of
the Subscription Price) on or prior to the Expiration Time of Rights in
accordance with the terms of the Warrants and the Prospectus.
(E) Subject to the next sentence, accept Subscriptions from
stockholders whose Warrants are alleged to have been lost, stolen or destroyed
upon receipt by ChaseMellon of an affidavit of theft, loss or destruction and a
bond of indemnity in form and substance satisfactory to ChaseMellon accompanied
by payment of the Subscription Price for the total number of shares of
Additional Common Stock Subscribed for. Upon receipt of such affidavit and bond
of indemnity and compliance with any other applicable requirements, stop orders
shall be placed on said Warrants and ChaseMellon shall withhold delivery of the
shares of Additional Common Stock Subscribed for until after the Warrants have
expired and it has been determined that the Rights evidenced by the Warrants
have not otherwise been purported to have been exercised or otherwise
surrendered.
(F) Accept Subscriptions, without further authorization or direction
from the Company, without procuring supporting legal papers or other proof of
authority to sign (including without limitation proof of appointment of a
fiduciary or other person acting in a representative capacity), and without
signatures of co-fiduciaries, co-representatives or any other person:
(a) if the Warrant is registered in the name of a fiduciary and is
executed by and the Additional Common Stock is to be issued in the
name of such fiduciary;
(b) if the Warrant is registered in the name of joint tenants and is
executed by one of the joint tenants, provided the certificate
representing the Additional Common Stock is issued in the names of,
and is to be delivered to, such joint tenants;
<PAGE> 4
(c) if the Warrant is registered in the name of a corporation and is
executed by a person in a manner which appears or purports to be done
in the capacity of an officer, or agent thereof, provided the
Additional Common Stock is to be issued in the name of such
corporation; or
(d) if the Warrant is registered in the name of an individual and is
executed by a person purporting to act as such individual's executor,
administrator or personal representative, provided, the Additional
Common Stock is to be registered in the name of the subscriber as
executor or administrator of the estate of the deceased registered
holder and there is no evidence indicating the subscriber is not the
duly authorized representative that he purports to be.
(G) Accept applications to transfer Warrants and to act therein as a
Transfer Agent for this limited purpose, without further authorization or
direction from the Company, without procuring supporting legal papers or other
proof of authority to sign (including without limitation proof of appointment of
a fiduciary or other person acting in a representative capacity), and without
signatures of co-fiduciaries, co-representatives or any other person:
(a) if the Warrant is registered in the name of a fiduciary and is
executed by and the Additional Common Stock is to be issued in the
name of such fiduciary;
(b) if the Warrant is registered in the name of joint tenants and is
executed by one of the joint tenants, provided the certificate
representing the Additional Common Stock is issued in the names of,
and is to be delivered to, such joint tenants;
(c) if the Warrant is registered in the name of a corporation and is
executed by a person in a manner which appears or purports to be done
in the capacity of an officer, or agent thereof, provided the
Additional Common Stock is to be issued in the name of such
corporation; or
(d) if the Warrant is registered in the name of an individual and is
executed by a person purporting to act as such individual's executor,
administrator or personal representative, provided, the Additional
Common Stock is to be registered in the name of the subscriber as
executor or administrator of the estate of the deceased registered
holder and there is no evidence indicating the subscriber is not the
duly authorized representative that he purports to be.
(H) Accept Subscriptions not accompanied by Warrants if submitted by a
firm having membership in the New York Stock Exchange or another national
securities exchange or by a commercial bank or trust company having an office in
the United States together with the Notice of Guaranteed Delivery and
accompanied by proper payment for the total number of shares of Additional
Common Stock Subscribed for.
(I) Accept Subscriptions even though unaccompanied by Warrants, under
the circumstances and in compliance with the terms and conditions set forth in
the Prospectus under
<PAGE> 5
the heading "The Offering--Notice of Guaranteed Delivery Form."
(J) Refer to the Company for specific instructions as to acceptance or
rejection, Subscriptions received after the Expiration Time, Subscriptions not
authorized to be accepted pursuant to this Paragraph 1, and Subscriptions
otherwise failing to comply with the requirements of the Prospectus and the
terms and conditions of the Warrants.
(K) Upon acceptance of a Subscription:
(a) hold all monies received in a special account for the benefit of
the Company. Promptly following the Expiration Time ChaseMellon shall
distribute to the Company the funds in such account and issue
certificates for shares of Additional Common Stock issuable with
respect to Subscriptions which have been accepted.
(b) advise the Company daily by telecopy and confirm by letter to Mark
Olson, Vice President and Controller (the "Company Representative"),
with a copy to Guy Du Bose, Esq., General Counsel, (by telecopy) as to
the total number of shares of Additional Common Stock Subscribed for,
total number of Rights sold, total number of Rights partially
Subscribed for and the amount of funds received, with cumulative
totals for each; and in addition advise the Company Representative, by
telephone to Mark Olson at (949) 727-1624 , confirmed by telecopy, of
the amount of funds received identified in accordance with (a) above,
deposited, available or transferred in accordance with (a) above, with
cumulative totals; and
(c) as promptly as possible but in any event on or before 3:30 p.m.,
New York City Time, on the first full business day following the
Expiration Time, advise the Company Representative in accordance with
(b) above of the number of shares Subscribed for, the number of
Subscription guarantees received and the number of shares of
Additional Common Stock unsubscribed for.
(L) Upon completion of the Subscription Offer, ChaseMellon shall
requisition certificates from the Transfer Agent for the Common Stock for shares
of Additional Common Stock Subscribed for.
2) (A) The Warrants shall be issued in registered form only. The
Company shall appoint and have in office at all times a Registrar for the
Warrants, satisfactory to ChaseMellon, which shall keep books and records of the
registration and transfers and exchanges of Warrants (such books and records are
hereinafter called the "Warrant Register"). The Company shall promptly notify
the Transfer Agent and Registrar of the exercise of any Warrants. The Company
shall promptly notify ChaseMellon of any change in the Registrar of the
Warrants.
(B) All Warrants issued upon any registration of transfer or
exchange of Warrants shall be the valid obligations of the Company, evidencing
the same obligations, and entitled to the same benefits under this Agreement, as
the Warrants surrendered for such registration of transfer or exchange.
<PAGE> 6
(C) Any Warrant when duly endorsed in blank shall be deemed
negotiable, and when a Warrant shall have been so endorsed the holder thereof
may be treated by the Company, ChaseMellon and all other persons dealing
therewith as the absolute owner thereof for any purpose and as the person
entitled to exercise the rights represented thereby, any notice to the contrary
notwithstanding, but until such transfer is registered in the Warrant Register,
the Company and ChaseMellon may treat the registered holder thereof as the owner
for all purposes.
3) ChaseMellon will follow its regular procedures to attempt to
reconcile any discrepancies between the number of shares of Additional Common
Stock that any Warrant may indicate are to be issued to a stockholder and the
number that the Record Stockholders List indicates may be issued to such
stockholder. In any instance where ChaseMellon cannot reconcile such
discrepancies by following such procedures, ChaseMellon will consult with the
Company for instructions as to the number of shares of Additional Common Stock,
if any, ChaseMellon is authorized to issue. In the absence of such instructions,
ChaseMellon is authorized not to issue any shares of Additional Common Stock to
such stockholder.
4) ChaseMellon will examine the Warrants received by it as
Subscription Agent to ascertain whether they appear to ChaseMellon to have been
completed and executed in accordance with the applicable Letter of Instruction.
In the event ChaseMellon determine that any Warrant does not appear to it to
have been properly completed or executed, or where the Warrants do not appear to
ChaseMellon to be in proper form for Subscription, or any other irregularity in
connection with the Subscription appears to ChaseMellon to exist, it will
follow, where possible, its regular procedures to attempt to cause such
irregularity to be corrected. ChaseMellon is not authorized to waive any
irregularity in connection with the Subscription, unless it shall have received
from the Company the Warrant which was delivered, duly dated and signed by an
authorized officer of the Company, indicating that any irregularity in such
Warrant has been cured or waived and that such Warrant has been accepted by the
Company. If any such irregularity is neither corrected nor waived, ChaseMellon
will return to the subscribing stockholder (at ChaseMellon's option by either
first class mail under a blanket surety bond or insurance protecting ChaseMellon
and the Company from losses or liabilities arising out of the non-receipt or
nondelivery of Warrants or by registered mail insured separately for the value
of such Warrants) to such stockholder's address as set forth in the Subscription
any Warrants surrendered in connection therewith and any other documents
received with such Warrants, and a letter of notice to be furnished by the
Company explaining the reasons for the return of the Warrants and other
documents.
5) Each document received by ChaseMellon relating to its duties
hereunder shall be dated and time stamped when received.
6) (A) For so long as this Agreement shall be in effect, the Company
will reserve for issuance and keep available free from preemptive rights a
sufficient number of shares of Additional Common Stock to permit the exercise in
full of all Rights issued pursuant to the Subscription Offer. Subject to the
terms and conditions of this Agreement, ChaseMellon will request the Transfer
Agent for the Common Stock to issue certificates evidencing the appropriate
number of shares of Additional Common Stock as required from time to time in
order to
<PAGE> 7
effectuate the Subscriptions.
(B) The Company shall take any and all action, including without
limitation obtaining the authorization, consent, lack of objection, registration
or approval of any governmental authority, or the taking of any other action
under the laws of the United States of America or any political subdivision
thereof, to insure that all shares of Additional Common Stock issuable upon the
exercise of the Warrants at the time of delivery of the certificates therefor
(subject to payment of the Subscription Price) will be duly and validly issued
and fully paid and nonassessable shares of Common Stock, free from all
preemptive rights and taxes, liens, charges and security interests created by or
imposed upon the Company with respect thereto.
(C) The Company shall from time to time take all action necessary
or appropriate to obtain and keep effective all registrations, permits, consents
and approvals of the Securities and Exchange Commission and any other
governmental agency or authority and make such filings under Federal and state
laws which may be necessary or appropriate in connection with the issuance,
sale, transfer and delivery of Warrants or Additional Common Stock issued upon
exercise of Warrants.
7) If certificates representing shares of Additional Common Stock are
to be delivered by ChaseMellon to a person other than the person in whose name a
surrendered Warrant is registered, ChaseMellon will issue no certificate for
Additional Common Stock until the Warrant so surrendered has been properly
endorsed (or otherwise put in proper form for transfer) and the person
requesting such exchange has paid any transfer or other taxes or governmental
charges required by reason of the issuance of a certificate for Additional
Common Stock in a name other than that of the registered holder of the Warrant
surrendered, or has established to ChaseMellon's satisfaction that any such tax
or charge either has been paid or is not payable.
8) Should any issue arise regarding federal income tax reporting or
withholding, ChaseMellon will take such action as the Company instructs
ChaseMellon in writing.
9) The Company may terminate this Agreement at any time by so
notifying ChaseMellon in writing. ChaseMellon may terminate this Agreement upon
30 days' prior notice to the Company. Upon any such termination, ChaseMellon
shall be relieved and discharged of any further responsibilities with respect to
its duties hereunder. Upon payment of all outstanding ChaseMellon fees and
expenses, ChaseMellon will forward to the Company or its designee promptly any
Warrant or other document relating to ChaseMellon's duties hereunder that
ChaseMellon may receive after its appointment has so terminated. Sections 11,
12, and 14 of this Agreement shall survive any termination of this Agreement.
10) As agent for the Company hereunder ChaseMellon:
(a) shall have no duties or obligations other than those specifically
set forth herein or as may subsequently be agreed to in writing by
ChaseMellon and the Company;
(b) shall have no obligation to issue any shares of Additional Common
Stock unless the
<PAGE> 8
Company shall have provided a sufficient number of certificates for
such Additional Common Stock;
(c) shall be regarded as making no representations and having no
responsibilities as to the validity, sufficiency, value, or
genuineness of any Warrants surrendered to ChaseMellon hereunder or
shares of Additional Common Stock issued in exchange therefor, and
will not be required to or be responsible for and will make no
representations as to, the validity, sufficiency, value or genuineness
of the Subscription Offer;
(d) shall not be obligated to take any legal action hereunder; if,
however, ChaseMellon determines to take any legal action hereunder,
and where the taking of such action might, in its reasonable judgment,
subject or expose ChaseMellon to any expense or liability it shall not
be required to act unless ChaseMellon shall have been furnished with
an indemnity satisfactory to it;
(e) may rely on and shall be fully authorized and protected in acting
or failing to act upon any certificate, instrument, opinion, notice,
letter, telegram, telex, facsimile transmission or other document or
security delivered to ChaseMellon and reasonably believed by it to be
genuine and to have been signed by the proper party or parties;
(f) shall not be liable or responsible for any recital or statement
contained in the Prospectus or any other documents relating thereto;
(g) shall not be liable or responsible for any failure on the part of
the Company to comply with any of its covenants and obligations
relating to the Subscription Offer, including without limitation
obligations under applicable securities laws;
(h) may rely on and shall be fully authorized and protected in acting
or failing to act upon the written, telephonic or oral instructions
with respect to any matter relating to ChaseMellon acting as
Subscription Agent covered by this Agreement (or supplementing or
qualifying any such actions) of officers of the Company;
(i) may consult with counsel satisfactory to ChaseMellon, including
Guy Du Bose, Esq., general counsel of the Company, and the advice of
such counsel shall be full and complete authorization and protection
in respect of any action taken, suffered, or omitted by ChaseMellon
hereunder in good faith and in accordance with the advice of such
counsel;
(j) may perform any of ChaseMellon's duties hereunder either directly
or by or through agents or attorneys and ChaseMellon shall not be
liable or responsible for any misconduct or negligence on the part of
any agent or attorney appointed and supervise with reasonable care by
ChaseMellon hereunder; and
(k) are not authorized, and shall have no obligation, to pay any
brokers, dealers, or
<PAGE> 9
soliciting fees to any person.
11) In the event any question or dispute arises with respect to the
proper interpretation of the Subscription Offer or ChaseMellon's duties
hereunder or the rights of the Company or of any stockholders surrendering
Warrants pursuant to the Subscription Offer, ChaseMellon shall not be required
to act and shall not be held liable or responsible for its refusal to act until
the question or dispute has been judicially settled (and, if appropriate,
ChaseMellon may file a suit in interpleader or for a declaratory judgment for
such purpose) by final judgment rendered by a court of competent jurisdiction,
binding on all parties interested in the matter which is no longer subject to
review or appeal, or settled by a written document in form and substance
satisfactory to ChaseMellon and executed by the Company and each such
stockholder and party. In addition, ChaseMellon may require for such purpose,
but shall not be obligated to require, the execution of such written settlement
by all the stockholders and all other parties that may have an interest in the
settlement.
12) Any instructions given to ChaseMellon orally from the Company, as
permitted by any provision of this Agreement, shall be confirmed in writing by a
duly authorized representative of the Company as soon as practicable.
ChaseMellon shall not be liable or responsible and shall be fully authorized and
protected for acting, or failing to act, in accordance with any oral
instructions from the Company which do not conform with the written confirmation
received in accordance with this Section.
13) Whether or not any Warrants are surrendered to ChaseMellon, for
its services as Subscription Agent hereunder, the Company shall pay to
ChaseMellon compensation in accordance with the fee schedule attached as Exhibit
A hereto, together with reimbursement for out-of-pocket expenses, including
reasonable fees and disbursements of counsel.
14) The Company covenants to indemnify and hold ChaseMellon and its
officers, directors, employees, agents, contractors, subsidiaries and affiliates
harmless from and against any loss, liability, damage or expense (including
without limitation any loss, liability, damage or expense incurred for accepting
Warrants tendered without a signature guarantee and the fees and expenses of
counsel) incurred (a) without gross negligence or bad faith or (b) as a result
of ChaseMellon's acting or failing to act upon the Company's instructions,
arising out of or in connection with the Subscription Offer, this Agreement or
the administration of ChaseMellon's duties hereunder, including without
limitation the costs and expenses of defending and appealing against any action,
proceeding, suit or claim in the premises. ChaseMellon shall promptly notify the
Company of any action, proceeding, suit or claim by letter or telex or facsimile
transmission confirmed by letter. The Company shall be entitled to participate
at its own expense in the defense of any such action, proceeding, suit or claim.
Anything in this agreement to the contrary notwithstanding, in no event shall
ChaseMellon be liable for special, indirect or consequential loss or damages of
any kind whatsoever (including but not limited to lost profits), even if
ChaseMellon have been advised of the likelihood of such loss or damage and
regardless of the form of action. Any liability of ChaseMellon's will be limited
to the amount of fees paid by the Company hereunder.
<PAGE> 10
15) If any provision of this Agreement shall be held illegal, invalid,
or unenforceable by any court, this Agreement shall be construed and enforced as
if such provision had not been contained herein and shall be deemed an Agreement
among us to the full extent permitted by applicable law.
16) The Company represents and warrants that (a) it is duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation, (b) the making and consummation of the
Subscription Offer and the execution, delivery and performance of all
transactions contemplated thereby (including without limitation this Agreement)
have been duly authorized by all necessary corporate action and will not result
in a breach of or constitute a default under the certificate of incorporation or
bylaws of the Company or any indenture, agreement or instrument to which it is a
party or is bound, (c) this Agreement has been duly executed and delivered by
the Company and constitutes the legal, valid, binding and enforceable obligation
of it, (d) the Subscription Offer will comply in all material respects with all
applicable requirements of law and (e) to the best of its knowledge, there is no
litigation pending or threatened as of the date hereof in connection with the
Subscription Offer.
17) In the event that any claim of inconsistency between this
Agreement and the terms of the Subscription Offer arise, as they may from time
to time be amended, the terms of the Subscription Offer shall control, except
with respect to the duties, liabilities and rights, including compensation and
indemnification of ChaseMellon as Subscription Agent, which shall be controlled
by the terms of this Agreement.
18) Set forth in Exhibit B hereto is a list of the names and specimen
signatures of the persons authorized to act for the Company under this
Agreement. The Secretary of the Company shall, from time to time, certify to
ChaseMellon the names and signatures of any other persons authorized to act for
the Company under this Agreement.
19) Except as expressly set forth elsewhere in this Agreement, all
notices, instructions and communications under this Agreement shall be in
writing, shall be effective upon receipt and shall be addressed, if to the
Company, to Westcorp, 23 Pasteur, Irvine, California 92618-3816, Attention: Mark
Olson, or, if to the Subscription Agent, to ChaseMellon Shareholder Services
LLC, 450 West 33rd Street, New York, New York 10001, Attention: Reorganization
Department, or to such other address as a party hereto shall notify the other
parties.
20) This Agreement shall be governed by and construed in accordance
with the laws of the State of New York, without giving effect to conflict of
laws rules or principles, and shall inure to the benefit of and be binding upon
the successors and assigns of the parties hereto; provided that this Agreement
may not be assigned by any party without the prior written consent of all other
parties.
21) No provision of this Agreement may be amended, modified or waived,
except in a written document signed by both parties.
Please acknowledge receipt of this letter and confirm ChaseMellon's
agreement concerning
<PAGE> 11
ChaseMellon's appointment as Subscription Agent and Transfer Agent, and the
arrangements herein provided, by signing and returning the enclosed copy hereof,
whereupon this Agreement and ChaseMellon's acceptance of the terms and
conditions herein provided shall constitute a binding Agreement between the
parties hereto.
Very truly yours,
WESTCORP
By:
-------------------------------------
Name:
Title:
Accepted as of the date first written above:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.,
AS SUBSCRIPTION AGENT AND TRANSFER AGENT
By:
-------------------------------------
Name:
Title:
<PAGE> 12
EXHIBIT "1"
The Registration Statement shall be incorporated herein.
EXHIBIT "2"
The Letter of Instruction shall be incorporated herein.
EXHIBIT "3"
The Notice of Guaranteed Delivery shall be incorporated herein.
EXHIBIT "4"
The Form of Warrant shall be incorporated herein.
<PAGE> 13
EXHIBIT "A"
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
Schedule of Fees as Subscription Agent
For Westcorp
<TABLE>
<S> <C>
I. Set Up and Administrative Fee $
II. Processing Basic subscriptions, each $
III. Transferring warrants, subscription certificates,
split-ups, reissuing new certificates, round-ups, each $
IV. Issuing subscription certificates to record date
holders, each, and follow-up mailings $
V. Processing oversubscriptions, including proration and
refunds, each $
VI. Sale of Rights for holders, each $
VII. Subscriptions requiring additional handling (window
items, defective presentations, correspondence items,
legal items, and items not providing a taxpayer
identification number), each $
VIII. Processing Guarantee of Delivery items, each $
IX. Handling Soliciting Dealer payments, By Appraisal
X. Special Services By Appraisal
XI. Out-of-pocket Expenses (including but not limited to Additional
postage, stationery, telephones, overnight couriers,
messengers, overtime, dinners, transportation,
shipping and trucking)
</TABLE>
A minimum aggregate fee of $ shall apply, inclusive of fees above which
are paid on a utilization basis.
<PAGE> 14
EXHIBIT "B"
[Letterhead of Westcorp]
<TABLE>
<CAPTION>
Name Position Specimen Signatures
---- -------- -------------------
<S> <C> <C>
</TABLE>
<PAGE> 1
EXHIBIT 99.2
[LETTERHEAD OF CHASEMELLON]
May 4, 2000
Westcorp
23 Pasteur Road
Irvine, CA 92618
To Whom It May Concern:
This letter of agreement sets forth the terms and conditions by which
ChaseMellon Shareholder Services ("we", "our", "us") shall provide to Westcorp,
("you", "your") our information agent services (the "services") with respect to
your proposed Rights Offering.
Services
- --------
(i) Establishing contacts with brokers, dealers, banks and other
nominees on your behalf.
(ii) Determining the material requirements.
(iii) Assistance with drafting and reviewing documents.
(iv) Facilitate the distribution of materials to the beneficial and
registered owners of Westcorp's common stock and to other interested
parties.
(v) Contact institutional holders and provide Westcorp with
intelligence on their potential response to the offering.
(vi) Establishing a toll-free, dedicated telephone line to answer any
shareholder inquiries.
(vii) Status reporting to management.
(viii) Payment of all broker forwarding invoices, subject to collection
from you of monies for this purpose.
Fee for Services
- ----------------
The fee for acting as information agent is $7,500.00, plus all reasonable
out-of-pocket expense incurred by us, including, without limitation,
documentation preparation, telephone, Bank Broker listings, and postage costs.
Such fees shall be payable upon the execution of this agreement. Invoices for
out-of-pocket expenses shall be rendered monthly as incurred and shall be
payable upon receipt. Our services shall commence upon receipt of a signed copy
of this contract and expire thirty days after the expiration of the Rights
Offering on June 30, 1999, whichever is sooner
<PAGE> 2
Responsibility
- --------------
You shall indemnify and hold us, our directors, officers, employees, agents
harmless from and against any and all claims, liabilities, losses, damages
and/or expenses, including reasonable attorneys' fees, which any of them shall
or may incur or sustain in connection with the performance of the services of
this agreement, except to the extent caused directly by our negligence or
willful misconduct. This indemnification obligation shall survive the
termination of this Agreement.
Anything in this agreement to the contrary notwithstanding, in no event shall
we be liable for special indirect or consequential loss or damage of any kind
whatsoever, even if we have been advised of the likelihood of such loss or
damage and regardless of the form of action.
Miscellaneous
- -------------
This agreement shall be made in, governed by, and construed in accordance with
the laws of the State of New York, without regard to principles of conflicts of
law.
All information shall be sent to your address as above written or such other
address as you may advise us in writing, or orally confirmed in writing.
This agreement represents the entire understanding of the parties with respect
to the subject matter hereof, superseded any and all prior understanding, oral
or written, relating hereto and may not be charged orally. Any waiver or change
of any of the provisions hereof must be in writing and signed by the parties
hereto. The failure of either party hereto at any time to require performance
by the other party of any provision hereof shall not affect the right of such
party to require performance at any time thereafter.
If the foregoing terms and conditions are acceptable to you, please sign and
return to us the counterpart of this letter of agreement.
Very truly yours,
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
By:
----------------------------------------
Title: Vice President
------------ -----------
Date: 5/4/2000
---------------- -----------
ACCEPTED
WESTCORP
By:
-------------------
Title:
----------------
Date:
-----------------
<PAGE> 1
Exhibit 99.3
FORM OF INSTRUCTIONS AS TO USE OF SUBSCRIPTION WARRANTS
INSTRUCTIONS AS TO USE OF WESTCORP
SUBSCRIPTION WARRANTS
CONSULT CHASEMELLON SHAREHOLDER SERVICES, L.L.C., YOUR BANK OR BROKER WITH
ANY QUESTIONS
The following instructions relate to a rights offering (the "Rights
Offering") by Westcorp, a California corporation (the "Company"), to the holders
of its Common Stock (the "Common Stock"), as described in the Company's
Prospectus dated May __, 2000 (the "Prospectus"). Holders of record of shares of
the Common Stock at the close of business on May 25, 2000 (the "Record Date")
are receiving one (1) transferable subscription right (collectively, the
"Rights") for each share of the Common Stock held on the Record Date.
Holders of Rights are entitled to purchase one (1) share of Common Stock
for every 5.0 Rights granted (the "Basic Subscription Right"), upon payment of
$12.00 in cash per share of Common Stock purchased (the "Subscription Price").
In this Rights Offering, the Company is distributing an aggregate of 26,597,343
Rights exercisable to purchase an aggregate of 5,319,469 shares of Common Stock
(the "Shares").
In addition, subject to the proration described below, each holder of
Rights who fully exercises the Basic Subscription Right also has the right to
subscribe at the Subscription Price for additional Shares (the "Oversubscription
Right"). Shares will be available for purchase pursuant to the Oversubscription
Right only to the extent that all the Shares are not subscribed for through the
exercise of the Basic Subscription Right by the Expiration Date. If the Shares
so available (the "Excess Shares") are not sufficient to satisfy all
subscriptions pursuant to the Oversubscription Right, the available Excess
Shares will be allocated pro rata among holders of the Rights exercising the
Oversubscription Right, in proportion to the number of Shares each such holder
has purchased pursuant to his or her respective Basic Subscription Right;
provided, however, that if such pro rata allocation results in any holder being
allocated a greater number of Excess Shares than such holder subscribed for
pursuant to the exercise of such holder's Oversubscription Right, then such
holder will be allocated only such number of Excess Shares as such holder
subscribed for and the remaining Excess Shares will be allocated among all other
holders exercising Oversubscription Rights. See discussion set forth under "The
Rights Offering" in the Prospectus.
No fractional shares or cash in lieu thereof will be issued or paid. The
number of shares which may be purchased by the exercise of Rights distributed to
record holders by the Company or Rights which have been transferred must be
rounded down to the nearest whole number in order to avoid issuing fractional
shares.
The Rights will expire at 5:00 p.m., New York City time, on June 15, 2000,
unless extended (the "Expiration Date"). The Rights are eligible for trading on
the New York Stock Exchange
<PAGE> 2
under the symbol "WES Rt".
The number of Rights to which you are entitled is printed on the face of
your Subscription Warrant. You should indicate your wishes with regard to the
exercise or sale of your Rights by completing the appropriate form or forms on
your Subscription Warrant and returning the certificate to ChaseMellon
Shareholder Services, L.L.C. in the envelope provided.
In order to exercise Rights, on or before 5:00 p.m., New York City time, on
the Expiration Date, ChaseMellon Shareholder Services, L.L.C. must have received
from you (1) your Subscription Warrant, or you must have timely complied with
the guaranteed delivery requirements for your Subscription Warrants, and (2)
payment of the full Subscription Price, including final clearance of any checks.
You may not revoke any exercise of a Right.
1. SUBSCRIPTION PRIVILEGE.
To exercise Rights, complete Form 1 on the reverse of the Subscription
Warrant and send your properly completed and executed Subscription Warrant,
together with payment in full of the Subscription Price for each share of Common
Stock subscribed for pursuant to the Basic Subscription Right and the
Oversubscription Right, to the Subscription Agent. Payment of the Subscription
Price must be made in U.S. dollars for the full number of Shares being
subscribed for by (a) check or bank draft drawn upon a U.S. bank or U.S. postal
money order payable to ChaseMellon Shareholder Services, L.L.C., as Subscription
Agent, or (b) wire transfer of same day funds to the account maintained by the
Subscription Agent for such purpose at The Chase Manhattan Bank, New York, NY,
ABA No. 021 000 021, Attention: ChaseMellon Shareholder Services Reorg. Account:
__________ (Westcorp).
The Subscription Price will be deemed to have been received by
ChaseMellon Shareholder Services, L.L.C. only upon (i) the clearance of any
uncertified check, (ii) the receipt by ChaseMellon Shareholder Services, L.L.C.
of any certified check or bank draft drawn upon a U.S. bank or any U.S. postal
money order, or (iii) the receipt of good funds in ChaseMellon Shareholder
Services, L.L.C.'s account designated above. If you are paying by uncertified
personal check, please note that the funds paid thereby may take at least five
business days to clear. Accordingly, holders of the Rights who wish to pay the
Subscription Price by means of uncertified personal check are urged to make
payment sufficiently in advance of the Expiration Date to ensure that such
payment is received and clears by such date and are urged to consider payment by
means of certified or cashier's check, U.S. postal money order or wire transfer
of funds.
Alternatively, you may cause a written guarantee substantially in the
form of Exhibit A to these instructions (the "Notice of Guaranteed Delivery") to
be received by the Subscription Agent at or prior to the Expiration Date
together with payment in full of the applicable Subscription Price. A Notice of
Guaranteed Delivery must be properly signed and completed by both (i) the holder
of a Subscription Warrant, and (ii) a commercial bank, trust company, securities
broker or dealer, credit union, savings association or other eligible guarantor
institution which is a member of or a participant in a signature guarantee
program acceptable to the
<PAGE> 3
Subscription Agent (each of the foregoing being an "Eligible Institution"). Such
Notice of Guaranteed Delivery must state your name, the number of Rights
represented by your Subscription Warrant, the number of Rights being exercised
pursuant to the Basic Subscription Right, and the number of Shares of Common
Stock, if any, being subscribed for pursuant to the Oversubscription Right, and
must guarantee the delivery to ChaseMellon Shareholder Services, L.L.C. of your
properly completed and executed Subscription Warrants within three New York
Stock Exchange trading days following the date of the Notice of Guaranteed
Delivery. If this procedure is followed, your Subscription Warrant must be
received by ChaseMellon Shareholder Services, L.L.C. within three New York Stock
Exchange trading days of the Notice of Guaranteed Delivery. Additional copies of
the Notice of Guaranteed Delivery may be obtained upon request from ChaseMellon
Shareholder Services, L.L.C., at the address, or by calling the telephone
number, indicated below.
You may also sell or transfer your Subscription Warrant, or request
your broker or bank to exercise your Subscription Warrant on your behalf, in
accordance with the procedures specified in instruction 3 below.
Banks, brokers or other nominee holders of the Rights who exercise the
Rights and the Oversubscription Right on behalf of beneficial owners of Rights
will be required to certify to the Subscription Agent and the Company, in
connection with the exercise of the Oversubscription Right, as to the aggregate
number of Rights that have been exercised, and the number of Shares that are
being subscribed for pursuant to the Oversubscription Right, by each beneficial
owner of Rights on whose behalf such nominee holder is acting. If more Shares of
Common Stock are subscribed for pursuant to the Oversubscription Right than are
available for sale, such Shares will be allocated, as described above, among
persons exercising the Oversubscription Right in proportion to such persons'
exercise of Rights pursuant to the Basic Subscription Right.
The address and telecopier numbers of the Subscription Agent are as
follows:
<TABLE>
<S> <C> <C>
By Mail: Facsimile Transmission By Hand:
(eligible institutions only):
ChaseMellon Shareholder Services, ChaseMellon Shareholder Services,
L.L.C. L.L.C.
Post Office Box 3301 (201) 296-4293 120 Broadway, 13th Floor
South Hackensack, NJ 07606 New York, NY 10271
Attn: Reorganization Department Attn: Reorganization Department
</TABLE>
To confirm receipt of facsimile only:
(201) 296-4860
<PAGE> 4
If by Overnight Courier:
ChaseMellon Shareholder Services, L.L.C.
85 Challenger Road--Mail Drop--Reorg
Ridgefield Park, NJ 07660
Attn: Reorganization Department
The address, telephone and telecopier numbers of ChaseMellon
Shareholder Services, L.L.C., for inquiries, information or requests for
additional documentation is as follows:
450 W. 33rd Street, 14th Floor
New York, NY 10001
(212) 273-8070
(banks and brokers call collect)
CALL TOLL-FREE
(888) 224-2745
If you exercise less than all of the Rights evidenced by your
Subscription Warrant by so indicating in Form 1 of your Subscription Warrant,
ChaseMellon Shareholder Services, L.L.C. will issue to you a new Subscription
Warrant evidencing the unexercised Rights. However, if you choose to have a new
Subscription Warrant sent to you, you may not receive the new Subscription
Warrant in sufficient time to permit you to sell or exercise the Rights
evidenced thereby. If you have not indicated the number of Rights being
exercised, or if you have not forwarded full payment of the Subscription Price
for the number of Shares to be purchased according to the number of Rights that
you have indicated are being exercised, you will be deemed to have exercised the
Basic Subscription Right with respect to the maximum number of Rights which may
be exercised for the Subscription Price payment delivered by you; and, to the
extent that the Subscription Price payment delivered by you exceeds the product
of the Subscription Price multiplied by the number of Rights evidenced by the
Subscription Warrants delivered by you (such excess being the "Subscription
Excess"), you will be deemed to have exercised your Oversubscription Right to
purchase, to the extent available, that number of whole Shares equal to the
quotient obtained by dividing the Subscription Excess by the Subscription Price.
2. DELIVERY OF COMMON STOCK.
The following deliveries and payments will be made to the address
shown on the face of your Subscription Warrant unless you provide instructions
to the contrary on Form 4.
(a) Basic Subscription Right. As soon as practicable after the
Expiration Date, ChaseMellon Shareholder Services, L.L.C. will mail to each
Rights holder who validly exercises the Basic Subscription Right certificates
representing Shares purchased pursuant to the Basic Subscription Right.
(b) Oversubscription Right. As soon as practicable after the
Expiration Date, ChaseMellon
<PAGE> 5
Shareholder Services, L.L.C. will mail to each Rights holder who validly
exercises the Oversubscription Right the number of Shares allocated to such
Rights holder pursuant to the Oversubscription Right. See "The Offering--Basic
Subscription Right" and "Oversubscription Right" in the Prospectus.
(c) Cash Payments. As soon as practicable after the Expiration Date,
ChaseMellon Shareholder Services, L.L.C. will mail to each Rights holder who
exercises the Oversubscription Right any excess funds, without interest,
received in payment of the Subscription Price for each Share that is subscribed
for by such Rights holder but not allocated to such Rights holder pursuant to
the Oversubscription Right.
3. TO SELL OR TRANSFER RIGHTS.
(a) Sale or Exercise of Rights through a Bank or Broker. To sell or
exercise all the Rights evidenced by a Subscription Warrant through your bank or
broker, so indicate on Form 2 on the reverse of the Subscription Warrant and
deliver your properly completed and executed Subscription Warrant to your bank
or broker. Your Subscription Warrant should be delivered to your bank or broker
in ample time for it to be exercised. If Form 2 is completed without designating
a transferee, ChaseMellon Shareholder Services, L.L.C. may thereafter treat the
bearer of the Subscription Warrant as the absolute owner of all of the Rights
evidenced by such Subscription Warrant for all purposes, and ChaseMellon
Shareholder Services, L.L.C. shall not be affected by any notice to the
contrary. Because your bank or broker cannot issue subscription warrants, if you
wish to sell or exercise less than all of the Rights evidenced by a Subscription
Warrant, either you or your bank or broker must instruct ChaseMellon Shareholder
Services, L.L.C. as to the action to be taken with respect to the Rights not
sold, or you or your bank or broker must first have your Subscription Warrant
divided into Subscription Warrants of appropriate denominations by following the
instructions in instruction 4 of these instructions. The Subscription Warrants
evidencing the number of Rights you intend to sell can then be transferred by
your bank or broker in accordance with the instructions in this instruction
3(a).
(b) Transfer of Rights to a Designated Transferee. To transfer all of
your Rights to a transferee other than a bank or broker, you must complete Form
2 in its entirety, execute the Subscription Warrant and have your signature
guaranteed by an Eligible Institution. A Subscription Warrant that has been
properly transferred in its entirety may be exercised by a new holder without
having a new Subscription Warrant issued. Because only ChaseMellon Shareholder
Services, L.L.C. can issue Subscription Warrants, if you wish to transfer less
than all of the Rights evidenced by your Subscription Warrant to a designated
transferee, you must instruct ChaseMellon Shareholder Services, L.L.C. as to the
action to be taken with respect to the Rights not sold or transferred, or you
must divide your Subscription Warrant into Subscription Warrants of appropriate
smaller denominations by following the instructions in instruction 4 below. The
Subscription Warrant evidencing the number of Rights you intend to transfer can
then be transferred by following the instructions in this instruction 3(b).
(c) Sale of Rights Through the Subscription Agent. To sell all Rights
evidenced by a Subscription Warrant through the Subscription Agent, so indicate
on Form 3 on the reverse of
<PAGE> 6
the Subscription Warrant and deliver your properly completed and exercised
Subscription Warrant to the Subscription Agent. If you wish to sell less than
all of the Rights evidenced by a Subscription Warrant, you must instruct
ChaseMellon Shareholder Services, L.L.C. as to the action to be taken with
respect to the Rights not sold, or you may have your Subscription Warrant
divided into Subscription Warrants of appropriate denominations by following the
instructions in instruction 4 of these instructions. The Subscription Warrant
evidencing the number of Rights you intend to transfer can then be transferred
by following the instructions in this instruction 3(c). Promptly following the
Expiration Date, ChaseMellon Shareholder Services, L.L.C. will send the holder a
check for the net proceeds from the sale of any Rights sold. Orders to sell
Rights must be received by ChaseMellon Shareholder Services, L.L.C. on or before
11:00 a.m., New York City time on June 9, 2000. No assurance can be given that a
market will develop for the Rights or that ChaseMellon Shareholder Services,
L.L.C. will be able to sell any Rights.
4. TO HAVE A SUBSCRIPTION WARRANT DIVIDED INTO SMALLER DENOMINATIONS.
Send your Subscription Warrant, together with complete separate
instructions (including specification of the denominations into which you wish
your Rights to be divided) signed by you, to ChaseMellon Shareholder Services,
L.L.C., allowing a sufficient amount of time for new Subscription Warrants to be
issued and returned so that they can be used prior to the Expiration Date.
Alternatively, you may ask a bank or broker to effect such actions on your
behalf. Your signature must be guaranteed by an Eligible Institution if any of
the new Subscription Warrants are to be issued in a name other than that in
which the old Subscription Warrant was issued.
Subscription Warrants may not be exercised in a manner that would
result in the purchase of a fractional Share, and any instruction to do so will
be rejected and rounded down to the nearest whole Share to the extent of payment
actually received (with a refund to you of any excess payment actually received
for any fractional Share by ChaseMellon Shareholder Services, L.L.C.). As a
result of delays in the mail, the time of the transmittal, the necessary
processing time and other factors, you or your transferee may not receive such
new Subscription Warrants in time to enable you to complete a sale or exercise
the associated Rights by the Expiration Date. Neither the Company nor
ChaseMellon Shareholder Services, L.L.C. will be liable to either a transferor
or transferee for any such delays.
5. EXECUTION.
(a) Execution by Registered Holder. The signature on the Subscription
Warrant must correspond with the name of the registered holder exactly as it
appears on the face of the Subscription Warrant without any alteration or change
whatsoever. Persons who sign the Subscription Warrant in a representative or
other fiduciary capacity must indicate their capacity when signing and, unless
waived by ChaseMellon Shareholder Services, L.L.C. in its sole and absolute
discretion, must present to ChaseMellon Shareholder Services, L.L.C.
satisfactory evidence of their authority to so act.
<PAGE> 7
(b) Execution by Person Other than Registered Holder. If the
Subscription Warrant is executed by a person other than the holder named on the
face of the Subscription Warrant, proper evidence of authority of the person
executing the Subscription Warrant must accompany the same unless, for good
cause, ChaseMellon Shareholder Services, L.L.C. dispenses with proof of
authority.
(c) Signature Guarantees. Your signature must be guaranteed by an
Eligible Institution if you wish to transfer your Rights, as specified in
instruction 3(b) above, to a transferee other than a bank or broker or
ChaseMellon Shareholder Services, L.L.C., or if you specify special payment or
delivery instructions pursuant to Form 4.
6. METHOD OF DELIVERY.
The method of delivery of Subscription Warrants and payment of the
Exercise Price to ChaseMellon Shareholder Services, L.L.C. will be at the
election and risk of the Rights holder, but, if sent by mail, it is recommended
that they be sent by registered mail, properly insured, with return receipt
requested, and that a sufficient number of days be allowed to ensure delivery to
ChaseMellon Shareholder Services, L.L.C. and the clearance of any checks sent in
payment of the Subscription Price prior to 5:00 p.m., New York City time, on the
Expiration Date.
7. SPECIAL PROVISIONS RELATING TO THE DELIVERY OF RIGHTS THROUGH THE DEPOSITORY
TRUST COMPANY.
In the case of holders of Rights that are held of record through The
Depository Trust Company ("DTC"), exercises of the Basic Subscription Right (but
not the Oversubscription Right) may be effected by instructing DTC to transfer
Rights (such Rights being "DTC Exercised Rights") from the DTC account of such
holder to the DTC account of ChaseMellon Shareholder Services, L.L.C., together
with payment of the Subscription Price for each Share of Common Stock subscribed
for pursuant to the Basic Subscription Right. The Oversubscription Right in
respect of DTC Exercised Rights may not be exercised through DTC. The holder of
a DTC Exercised Right may exercise the Oversubscription Right in respect of such
DTC Exercised Right by properly executing and delivering to ChaseMellon
Shareholder Services, L.L.C. at or prior to 5:00 p.m., New York City time on the
Expiration Date, a DTC Participant Oversubscription Exercise Form, in the form
available from ChaseMellon Shareholder Services, L.L.C., together with payment
of the appropriate Subscription Price for the number of Shares for which the
Oversubscription Right is to be exercised.
If a Notice of Guaranteed Delivery relates to Rights with respect to
which exercise of the Basic Subscription Right will be made through DTC and such
Notice of Guaranteed Delivery also relates to the exercise of the
Oversubscription Right, a DTC Participant Oversubscription Exercise Form must
also be received by ChaseMellon Shareholder Services, L.L.C. in respect of such
exercise of the Oversubscription Right on or prior to the Expiration Date.
8. SUBSTITUTE FORM W-9.
<PAGE> 8
Each Rights holder who elects to exercise the Rights and those foreign
stockholders who allow ChaseMellon Shareholder Services, L.L.C. to sell such
foreign holder's Rights should provide ChaseMellon Shareholder Services, L.L.C.
with a correct Taxpayer Identification Number ("TIN") on Substitute Form W-9,
which is included as Exhibit B hereto. Additional copies of the Substitute Form
W-9 may be obtained upon request from ChaseMellon Shareholder Services, L.L.C.
at the address, or by calling the telephone number, indicated above. Failure to
provide the information on the form may subject such holder to 31% federal
income tax withholding with respect to (i) dividends that may be paid by the
Company on Shares purchased upon the exercise of Rights (for those holders
exercising Rights), or (ii) funds to be remitted to Rights holders in respect of
Rights sold by ChaseMellon Shareholder Services, L.L.C. (for those holders
electing to have ChaseMellon Shareholder Services, L.L.C. sell their Rights).
<PAGE> 1
Exhibit 99.4
FORM OF NOTICE OF GUARANTEED DELIVERY
NOTICE OF GUARANTEED DELIVERY
FOR
SUBSCRIPTION WARRANTS
ISSUED BY
WESTCORP
This form, or one substantially equivalent hereto, must be used to
exercise Rights pursuant to the Rights Offering described in the Prospectus
dated May __, 2000 (the "Prospectus") of Westcorp, a California corporation (the
"Company"), if a holder of Rights cannot deliver the Subscription Warrant(s)
evidencing the Rights to ChaseMellon Shareholder Services, L.L.C. at or prior to
5:00 p.m. New York City time on June 15, 2000, unless extended (the "Expiration
Date"). Such form must be delivered by hand or sent by facsimile transmission or
mail to ChaseMellon Shareholder Services, L.L.C., and must be received by
ChaseMellon Shareholder Services, L.L.C. on or prior to the Expiration Date. See
the discussion set forth under "The Rights Offering--Exercise of Rights" in the
Prospectus.
Regardless of the manner of delivery of the Subscription Warrant,
payment of the Subscription Price of $12.00 per share for each share of Common
Stock subscribed for upon exercise of such Rights must be received by
ChaseMellon Shareholder Services, L.L.C. in the manner specified in the
Prospectus at or prior to 5:00 p.m. New York City time on the Expiration Date.
The Subscription Agent is:
ChaseMellon Shareholder Services, L.L.C.
<TABLE>
<S> <C> <C>
By Mail: Facsimile Transmission By Hand:
(eligible institutions only):
ChaseMellon Shareholder Services, ChaseMellon Shareholder Services,
L.L.C. L.L.C.
Post Office Box 3301 (201) 296-4293 120 Broadway, 13th Floor
South Hackensack, NJ 07606 New York, NY 10271
Attn: Reorganization Department Attn: Reorganization Department
</TABLE>
To confirm receipt of facsimile only:
(201) 296-4860
If by Overnight Courier:
ChaseMellon Shareholder Services, L.L.C.
85 Challenger Road--Mail Drop--Reorg
Ridgefield Park, NJ 07660
Attn: Reorganization Department
<PAGE> 2
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES
NOT CONSTITUTE A VALID DELIVERY.
GENTLEMEN:
The undersigned hereby represents that he or she is the holder of
Subscription Warrant(s) representing ____________ Rights and that such
Subscription Warrant(s) cannot be delivered to the Subscription Agent at or
before 5:00 p.m., New York City time on the Expiration Date. Upon the terms and
subject to the conditions set forth in the Prospectus, receipt of which is
hereby acknowledged, the undersigned hereby elects to exercise (i) the Basic
Subscription Right to subscribe for one share of Common Stock per 5.0 Rights
represented by such Subscription Warrant and (ii) the Oversubscription Right
relating to each such Right to subscribe, to the extent that Excess Shares (as
defined in the Instructions as to Use of Westcorp Subscription Warrants) are
available, for an aggregate of up to __________ Excess Shares. The undersigned
understands that payment of the Subscription Price of $12.00 per share for each
share of the Common Stock subscribed for pursuant to the Basic Subscription
Right and Oversubscription Right must be received by the Subscription Agent at
or before 5:00 p.m. New York City time on the Expiration Date. The undersigned
represents that such payment, in the aggregate amount of $ __________, either
(check appropriate box):
[ ] is being delivered to ChaseMellon Shareholder Services, L.L.C.
herewith
or
[ ] has been delivered separately to the ChaseMellon Shareholder
Services, L.L.C.;
and is or was delivered in the manner set forth below (check appropriate box and
complete information relating thereto):
[ ] wire transfer of funds
--name of transferor institution _____________________________________
--date of transfer ___________________________________________________
--confirmation number (if available) _________________________________
[ ] uncertified check (Payment by uncertified check will not be deemed
to have been received by the Subscription Agent until such check has cleared.
Holders paying by such means are urged to make payment sufficiently in advance
of the Expiration Date to ensure that
<PAGE> 3
such payment clears by such date.)
[ ] certified check
[ ] bank draft (cashier's check)
[ ] U.S. postal money order
--name of maker ______________________________________________________
--date of check, draft or money order number _________________________
--bank on which check is drawn or issuer of money order ______________
Signature(s) ___________________________________________________________________
Name(s) ________________________________________________________________________
________________________________________________________________________________
(Please Type or Print)
________________________________________________________________________________
Address(es) ____________________________________________________________________
(Zip Code)
Area Code and Tel. No(s). ______________________________________________________
Subscription Warrant No(s). (if available) _____________________________________
<PAGE> 4
________________________________________________________________________________
GUARANTY OF DELIVERY
(NOT TO BE USED FOR SUBSCRIPTION WARRANT SIGNATURE GUARANTEE)
The undersigned, a member firm of a registered national securities
exchange or member of the National Association of Securities Dealers, Inc.,
commercial bank or trust company having an office or correspondent in the United
States, or other eligible guarantor institution which is a member of or a
participant in a signature guarantee program acceptable to ChaseMellon
Shareholder Services, L.L.C., guarantees that the undersigned will deliver to
ChaseMellon Shareholder Services, L.L.C. the certificates representing the
Rights being exercised hereby, with any required signature guarantees and any
other required documents, all within three New York Stock Exchange trading days
after the date hereof.
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Address)
________________________________________________________________________________
(Area Code and Telephone Number)
Dated: ___________________________________________________________________, 2000
________________________________________________________________________________
(Name of Firm)
________________________________________________________________________________
(Authorized Signature)
The institution which completes this form must communicate the
guarantee to ChaseMellon Shareholder Services, L.L.C. and must deliver the
Subscription Warrant(s) to ChaseMellon Shareholder Services, L.L.C. within the
time period shown herein. Failure to do so could result in a financial loss to
such institution.
<PAGE> 1
Exhibit 99.5
FORM OF LETTER TO STOCKHOLDERS OF RECORD
WESTCORP
5,319,469 COMMON SHARES
INITIALLY OFFERED PURSUANT TO RIGHTS
DISTRIBUTED TO STOCKHOLDERS OF
WESTCORP
Dear Stockholders:
This letter is being distributed to all holders of Common Stock (the
"Common Stock"), of record on May 25, 2000 (the "Record Date"), of Westcorp (the
"Company"), in connection with a distribution of transferable rights ("Rights")
to acquire the Common Stock at a subscription price of $12.00 per share for each
share as described in the Prospectus dated May __, 2000.
Each beneficial owner of shares of the Common Stock is entitled to
receive one Right for each share of Common Stock owned as of the Record Date,
and to purchase one (1) share of Common Stock for every 5.0 Rights held. No
fractional shares or cash in lieu thereof will be issued or paid. The number of
shares which may be purchased pursuant to the exercise of Rights distributed to
record holders by the Company, or which may be purchased pursuant to the
exercise of Rights which have been transferred, must be rounded down to the
nearest whole number (or any lesser number of whole shares) in order to avoid
issuing fractional shares.
Enclosed are copies of the following documents:
1. The Prospectus;
2. The Subscription Warrant;
3. The "Instructions as to Use of Westcorp Subscription Warrant"
(including Guidelines For Certification of Taxpayer Identification Number on
Substitute Form W-9);
4. A Notice of Guaranteed Delivery for Subscription Warrants issued by
Westcorp; and
5. A return envelope addressed to ChaseMellon Shareholder Services,
L.L.C., the Subscription Agent.
Your prompt action is requested. The Rights will expire at 5:00 P.M.,
New York City time, on June 15, 2000, unless extended by the Company (the
"Expiration Date").
<PAGE> 2
To exercise the Rights, a properly completed and executed Subscription
Warrant (or Notice of Guaranteed Delivery) and payment in full for all of the
Rights exercised must be delivered to ChaseMellon Shareholder Services, L.L.C.
as indicated in the Prospectus prior to 5:00 P.M., New York City time, on the
Expiration Date.
Additional copies of the enclosed materials may be obtained from
ChaseMellon Shareholder Services, L.L.C. Its toll-free telephone number is (888)
224-2745.
Very truly yours,
WESTCORP
<PAGE> 1
Exhibit 99.6
FORM OF LETTER FROM BROKERS OR OTHER NOMINEES TO BENEFICIAL
OWNERS
5,319,469 SHARES OF COMMON STOCK INITIALLY OFFERED PURSUANT TO
RIGHTS DISTRIBUTED TO STOCKHOLDERS OF WESTCORP
To Our Clients:
Enclosed for your consideration are a Prospectus, dated May __, 2000,
and the "Instructions as to Use of Westcorp Subscription Warrants" relating to
the offer by Westcorp (the "Company") of shares of Common Stock (the "Common
Stock") of the Company, at a subscription price of $12.00 per share, in cash,
pursuant to transferable subscription rights (the "Rights") initially
distributed to holders of record ("Record Owners") of shares of Common Stock as
of the close of business on May 25, 2000 (the "Record Date").
As described in the Prospectus, you will receive one transferable
Right for each share of Common Stock carried by us in your account as of the
Record Date. You are entitled to subscribe for one (1) share of the Common Stock
for every 5.0 Rights granted to you (the "Basic Subscription Right") at a
subscription price of $12.00 per share (the "Subscription Price"). You will also
have the right (the "Oversubscription Right"), subject to proration, to
subscribe for shares of the Common Stock available after satisfaction of all
subscriptions pursuant to the Basic Subscription Right ("Excess Shares"), at the
Subscription Price. If there are insufficient Excess Shares to satisfy all
exercised Oversubscription Rights, Excess Shares will be allocated pro rata
among all the holders of the Rights exercising Oversubscription Rights, in
proportion to the number of shares each such holder has purchased pursuant to
his or her respective Basic Subscription Right. Your election to exercise the
Oversubscription Right must be made at the time you exercise the Basic
Subscription Right, and you must exercise the Basic Subscription Right in full
in order to exercise the Oversubscription Right.
No fractional shares or cash in lieu thereof will be issued or paid.
The number of shares which may be purchased pursuant to the exercise of Rights
distributed to record holders by the Company, or which may be purchased under
Rights which have been transferred, must be rounded down to the nearest whole
number (or any lesser number of whole shares) in order to avoid issuing
fractional shares. Rights are transferable, and holders that wish to sell their
Rights may do so. The Rights will trade on the New York Stock Exchange (the
"NYSE") up to and including the close of business on the last trading day prior
to the Expiration Date. It is anticipated that the Rights will trade on a "when
issued" basis up to and including the Record Date.
THE MATERIALS ENCLOSED ARE BEING FORWARDED TO YOU AS THE BENEFICIAL
OWNER OF THE SHARES OF COMMON STOCK CARRIED BY US IN YOUR ACCOUNT BUT NOT
REGISTERED IN YOUR NAME. EXERCISES AND SALES OF THE RIGHTS MAY BE MADE BY ONLY
US AS THE RECORD OWNER AND PURSUANT TO YOUR INSTRUCTIONS. Accordingly, we
request instructions as to whether
<PAGE> 2
you wish us to elect to subscribe for any shares of Common Stock, or sell any
Rights, to which you are entitled pursuant to the terms and subject to the
conditions set forth in the enclosed Prospectus and "Instructions as to Use of
Westcorp Subscription Warrants". However, we urge you to read these documents
carefully before instructing us to exercise or sell the Rights.
Your instructions to us should be forwarded as promptly as possible in
order to permit us to exercise or sell Rights on your behalf in accordance with
the provisions of the offering described in the Prospectus. The offering will
expire at 5:00 P.M., New York City time, on June 15, 2000, unless the offering
is extended by the Company. Once you have exercised a Right, such exercise may
not be revoked.
If you wish to have us, on your behalf, exercise the Rights for any
shares of the Common Stock to which you are entitled, or sell such Rights,
please so instruct us by completing, executing and returning to us the
instruction form on the reverse side of this letter.
ANY QUESTIONS OR REQUESTS FOR ASSISTANCE CONCERNING THE OFFERING
SHOULD BE DIRECTED TO CHASEMELLON SHAREHOLDER SERVICES, L.L.C., AT (888)
224-2745.
<PAGE> 1
Exhibit 99.7
INSTRUCTIONS BY BENEFICIAL OWNERS TO BROKERS OR OTHER NOMINEES
(accompanying letter from brokers or other nominees to beneficial owners)
The undersigned acknowledge(s) receipt of your letter and the enclosed
materials referred to therein relating to the offering of shares of Common Stock
(the "Common Stock") of Westcorp (the "Company").
This will instruct you whether to exercise or sell Rights to purchase
the Common Stock distributed with respect to the Company's Common Stock held by
you for the account of the undersigned, pursuant to the terms and subject to the
conditions set forth in the Prospectus and the related "Instructions as to Use
of Westcorp Subscription Warrants".
box 1. [ ] Please do not exercise Rights for shares of the Common Stock.
box 2. [ ] Please exercise Rights for shares of the Common Stock as set forth
below:
NUMBER
OF SUBSCRIPTION
SHARES PRICE PAYMENT
------ ------------- -------
Basic Subscription Right*: _____ X $12.00 = $ ________ (Line 1)
Oversubscription Right: _____ X $12.00 = $ ________ (Line 2)
Total Payment Required = $ ________ (Sum of
Lines 1 and 2; must
equal total of amounts
in boxes 4 and 5 below)
* YOU MAY PURCHASE ONE (1) SHARE FOR EVERY 5.0 RIGHTS YOU HOLD; ANY RESULTING
FRACTIONAL SHARE MUST BE ROUNDED DOWN TO THE NEAREST WHOLE SHARE (OR ANY LESSER
NUMBER OF WHOLE SHARES FOR WHICH YOU ENCLOSE PAYMENT).
box 3. [ ] Please SELL Rights.
box 4. [ ] Payment in the following amount is enclosed: $_______________
<PAGE> 2
box 5. [ ] Please deduct payment from the following account maintained by you
as follows:
______________________________ ______________________________________________
Type of Account Account No.
Amount to be deducted: $ ______________________________________________
Date: __________________, 2000 ______________________________________________
______________________________________________
______________________________________________
Signature(s)
Please type or print name(s) below
______________________________________________
______________________________________________
<PAGE> 1
Exhibit 99.8
FORM OF PRESS ANNOUNCEMENT OF
FILING REGISTRATION STATEMENT
May 4, 2000
Lisa Basconcillo
Investor Relations
Westcorp
Phone: (949) 727-1002
Email: Investor [email protected]
WESTCORP ANNOUNCES RIGHTS OFFERING
Irvine, CA: Wescorp (NYSE:WES), the financial services holding company whose
principal subsidiaries are WFS Financial Inc (Nasdaq: WFSI) and Western
Financial Bank, today announced that it would distribute to holders of record
of its outstanding common stock, at no cost to those holders, subscription
rights to purchase additional shares of common stock at a discount to the
market price. Holders of the common stock will receive one basic subscription
right for each share of common stock held by them as of the close of business
on the record date, which is expected to be on or around May 25, 2000, or such
later date on or after which the Registration Statement as to the subscription
rights and the common stock to be issued upon exercise of the subscription
rights becomes effective. Holders of subscription rights will be entitled to
purchase one share of Westcorp stock for each 5.0 rights which they hold. The
subscription rights are transferable and are expected to trade on the New York
Stock Exchange under the symbol "WES Rt" until 5:00 p.m., Eastern Daylight Time
of the trading day preceding the expiration date. The expiration date is
expected to be on or around June 15, 2000. Stockholders who exercise their
basic subscription rights in full will also have the right to oversubscribe to
purchase additional shares of our common stock at the offering price on a pro
rata basis, to the extent any shares being registered for sale remain available
at the expiration date.
As soon as practicable after the record date, the Company expects to mail to
its stockholders of record a final prospectus for this rights offering
accompanied by a subscription warrant and related instructions for exercising
or selling their rights. The prospectus will contain a description of the
rights offering and other relevant information. If the subscription materials
do not arrive within a reasonable time after the record date, stockholders
should notify the information agent, ChaseMellon Shareholder Services, L.L.C.,
at 44 Wall Street, 7th Floor, New York, NY 10005 or telephone (888) 232-7873.
Banks and brokers may call collect at (917) 320-6270.
<PAGE> 2
Ernest S. Rady, the Chairman of the Board of Directors of Westcorp, has
informed the Company that he will exercise his rights and that he expects to
also exercise his right to oversubscribe. Mr. Rady is the beneficial owner of
approximately 66% of the common stock of Westcorp.
A registration statement relating to the offering of these subscription rights
and the common stock to be issued upon exercise of these rights will be filed
with the Securities and Exchange Commission on May 5, 2000, but has not yet
become effective. These securities may not be sold nor may offers to buy be
accepted prior to the time the Registration Statement becomes effective. This
press release shall not constitute an offer to sell or the solicitation of an
offer to buy nor shall these be any sale of these securities in any state or
jurisdiction in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any state or
jurisdiction.
Westcorp is a financial services holding company whose principal subsidiaries
are WFS Financial Inc and Western Financial Bank. Westcorp is a publicly owned
company whose common stock is traded on the New York Stock Exchange under the
symbol WES. Information about Westcorp can be found at its Web site at
http://westcorpinc.com.
Westcorp, through its subsidiary WFS, is one of the nation's largest
independent automobile finance companies. WFS specializes in originating,
securitizing, and servicing new and used automobile contracts through its
nationwide relationships with automobile dealers. WFS provides financing for
borrowers in the prime and non-prime credit quality sectors. Since 1985, WFS
has securitized $15.6 billion of automobile contracts in 47 transactions making
it the fourth largest issuer in the U.S. WFS currently services $5.7 billion of
automobile contracts. Information about WFS can be found at its Web site at.
Westcorp, through its subsidiary Western Financial Bank, operates 25 retail
bank branches throughout California and provides commercial banking services in
Southern California. Information on the products and services offered by the
Bank can be found at its Web site at http://www.wfb.com.
<PAGE> 3
This news release may contain forward-looking statements. These forward-looking
statements are subject to many risks and uncertainties that could cause actual
results to differ significantly from historical results or from those
anticipated by the company. Risks and uncertainties that may affect the
company's future performance are detailed under the caption "Forward-looking
Statements" in the Business section of the company's annual report on Form 10-K
and quarterly reports on Form 10-Q as filed with the Securities and Exchange
Commission.
<PAGE> 1
EXHIBIT 99.9
FORM OF LETTER TO DEALERS AND OTHER NOMINEES
WESTCORP
5,319,469 SHARES OF COMMON STOCK INITIALLY OFFERED PURSUANT TO RIGHTS
DISTRIBUTED TO STOCKHOLDERS OF WESTCORP
To Securities Dealers, Commercial Banks, Trust Companies and Other Nominees:
This letter is being distributed to securities dealers, commercial banks,
trust companies and other nominees in connection with the offering by Westcorp,
a California corporation (the "Company") of 5,319,469 shares of Common Stock
(the "Common Stock"), of the Company, at a subscription price of $12.00 per
share, pursuant to transferable subscription rights (the "Rights") initially
distributed to holders of record of the Common Stock as of the close of
business on May 25, 2000 (the "Record Date"). The Rights are described in the
Prospectus and evidenced by a Subscription Warrant registered in your name or
the name of your nominee.
Each beneficial owner of shares of the Common Stock registered in your
name or the name of your nominee is entitled to one (1) Right for every one (1)
share of the Common Stock owned by such beneficial owner. Holders of Rights are
entitled to purchase one (1) share of newly issued Common Stock for every 5.0
Rights granted. No fractional shares or cash in lieu thereof will be issued or
paid. The number of shares which may be purchased pursuant to the exercise of
Rights distributed to record holders by the Company, or which may be purchased
pursuant to the exercise of Rights which have been transferred, must be rounded
down to the nearest whole number (or any lesser number of whole shares) in
order to avoid issuing fractional shares.
We are asking you to contact your clients for whom you hold the Common
Stock registered in your name or in the name of your nominee to obtain
instructions with respect to the Rights. Enclosed are copies of the following
documents:
1. The Prospectus;
2 The "Instructions as to Use of Westcorp Subscription Warrant"
(including Guidelines For Certification of Taxpayer Identification Number on
Substitute Form W-9);
3. A form of letter which may be sent to your clients for whose accounts
you hold Common Stock registered in your name or the name of your nominee, with
space provided for obtaining such clients' instructions with regard to the
Rights;
4. A Notice of Guaranteed Delivery for Subscription Warrants issued by
Westcorp; and
<PAGE> 2
5. A return envelope addressed to ChaseMellon Shareholder Services,
L.L.C., the Subscription Agent.
Your prompt action is requested. The Rights will expire at 5:00 P.M.,
Eastern Daylight time, on June 15, 2000, unless extended by the Company (the
"Expiration Date").
To exercise the Rights, a properly completed and executed Subscription
Warrant (unless the guaranteed delivery procedures are complied with) and
payment in full for all Rights exercised must be delivered to ChaseMellon
Shareholder Services, L.L.C. as indicated in the Prospectus prior to 5:00 P.M.,
Eastern Daylight time, on the Expiration Date.
Additional copies of the enclosed materials may be obtained from
ChaseMellon Shareholder Services, L.L.C. Their toll-free telephone number is
(888) 224-2745 or they may be called collect at (212) 273-8070.
Very truly yours,
WESTCORP
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY PERSON
AS AN AGENT OF WESTCORP, THE SUBSCRIPTION AGENT OR ANY OTHER PERSON MAKING OR
DEEMED TO BE MAKING OFFERS OF THE COMMON STOCK ISSUABLE UPON VALID EXERCISE OF
THE RIGHTS, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENTS ON
BEHALF OF ANY OF THEM WITH RESPECT TO THE OFFERING EXCEPT FOR STATEMENTS MADE
IN THE PROSPECTUS.
