<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
WFS FINANCIAL INC
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
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<PAGE> 2
WFS FINANCIAL INC LOGO
23 PASTEUR ROAD
IRVINE, CALIFORNIA 92618
March 25, 1998
TO OUR SHAREHOLDERS
You are cordially invited to attend the Annual Meeting of Shareholders of
WFS Financial Inc (the "Company") to be held at 10:00 a.m. on April 29, 1998, at
the Corporate Headquarters in Irvine, California. The Board of Directors and
management hope that you will be able to attend the Annual Meeting in person.
At the Annual Meeting, holders of the Company's Common Stock will be asked
to vote (i) for the election of Directors, (ii) to ratify the appointment of
Ernst & Young as the independent accountants for the Company for fiscal 1998 and
(iii) to approve the adoption of the Amended and Restated 1996 Stock Option
Plan. A formal Notice of Annual Meeting of Shareholders, WFS' 1997 Annual
Report, the Company's Proxy Statement and a proxy card for the Annual Meeting
accompany this letter.
To assure that your shares will be represented, we ask that you read the
enclosed materials and complete, sign, date and return the proxy card as soon as
possible. Your vote, regardless of the number of shares you own, is important.
We urge you to indicate your approval by voting FOR the matters indicated
in the Notice and ask that you vote promptly. If you attend the Annual Meeting,
you may vote in person if you desire, even if you have previously mailed your
proxy card.
On behalf of the Board of Directors, we thank you for your cooperation and
continuing support.
Sincerely,
Ernest S. Rady
Chairman of the Board
<PAGE> 3
WFS FINANCIAL INC LOGO
23 PASTEUR ROAD
IRVINE, CALIFORNIA 92618
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 29, 1998
To the Shareholders of WFS Financial Inc:
The Annual Meeting of Shareholders of WFS Financial Inc, a California
corporation ("the Company"), will be held at the Corporate Headquarters, 23
Pasteur Road, Irvine, California, on Wednesday, April 29, 1998, at 10:00 a.m.,
for the following purposes:
1. To elect three Directors for terms expiring in 2000.
2. To ratify the appointment of Ernst & Young as the independent
accountants for the Company for fiscal 1998.
3. To approve the adoption of the Amended and Restated WFS 1996 Stock
Option Plan.
4. To transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
The Board of Directors has selected March 10, 1998, as the record date (the
"Record Date") for the Annual Meeting. Those holders of record of the Company's
Common Stock at the close of business on that date are entitled to notice of and
to vote at the Annual Meeting and any adjournment thereof.
All shareholders are requested to complete, date and sign the enclosed
proxy card promptly and return it in the accompanying postage prepaid
self-addressed envelope, whether or not they expect to attend the Annual
Meeting, in order to assure that their shares will be represented.
Since mail delays occur, it is important that the proxy card be mailed well
in advance of the Annual Meeting. Any shareholder giving a proxy has the right
to revoke it at any time before it is voted. If you receive more than one proxy
card because your shares are registered in different names or at different
addresses, each proxy card should be signed and returned to ensure that all your
shares will be properly voted.
By Order of the Board of Directors
Harriet Burns Feller
Secretary
IMPORTANT
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE,
DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE.
FOR BANKS, BROKERAGE HOUSES AND NOMINEE HOLDERS, REQUESTS FOR ADDITIONAL
COPIES OF THE COMPANY'S PROXY MATERIALS SHOULD BE ADDRESSED TO HARRIET BURNS
FELLER, ESQ., WESTCORP, 23 PASTEUR ROAD, IRVINE, CALIFORNIA 92618.
<PAGE> 4
WFS FINANCIAL INC LOGO
23 PASTEUR ROAD
IRVINE, CALIFORNIA 92618
PROXY STATEMENT
APPROXIMATE DATE PROXY MATERIAL FIRST SENT TO SHAREHOLDERS: MARCH 30, 1998
This Proxy Statement constitutes the Proxy Statement of WFS Financial Inc,
a California corporation, (the "Company" or "WFS"), in connection with the
solicitation of proxies by the Board of Directors of the Company for use at the
Annual Meeting of Shareholders of the Company to be held on April 29, 1998, and
any adjournments thereof (the "Meeting").
MEETING DATE AND LOCATION
The Meeting to consider the business described below will be held on April
29, 1998, at 10:00 a.m., at the Corporate Headquarters, 23 Pasteur Road, Irvine,
California 92618.
PURPOSES
At the Meeting, the shareholders will consider and vote on approval of
proposals to (i) elect Class II Directors of the Company to serve until 2000,
(ii) ratify the appointment of the Company's independent public accountants for
fiscal 1998, and (iii) to approve the adoption of the WFS Amended and Restated
1996 Stock Option Plan.
RECORD DATE; SHAREHOLDERS ENTITLED TO VOTE
The close of business on March 10, 1998, is the Record Date (the "Record
Date") for determination of the shareholders of the Company entitled to notice
of and to vote at the Meeting. On that date there were approximately 25,708,611
shares of the Company's Common Stock, no par value ("Common Stock"), outstanding
and no shares of any other class of stock outstanding.
VOTE REQUIRED
Each share of the Common Stock outstanding on the Record Date will be
entitled to one vote with respect to approval of the various proposals submitted
to the shareholders. Ratification of the Company's selection of its independent
accountants is not required to be submitted for shareholder approval and
although shareholder approval is not binding, the Board of Directors has elected
to seek ratification by the affirmative vote of a majority of the shares of
Common Stock represented and voting at the Meeting.
MARKET VALUE OF STOCK
As of Tuesday, March 10, 1998, WFS Financial Inc Common Stock had a market
price of $12.625 per share. The Common Stock of WFS Financial Inc is traded on
NASDAQ.
SOLICITATION AND REVOCATION OF PROXIES
A form of proxy is being furnished herewith by the Company to each
shareholder, and, in each case, is solicited on behalf of the Board of Directors
of the Company for use at the Meeting for the purposes stated in the Notice of
Annual Meeting of Shareholders preceding this Proxy Statement. The entire cost
of soliciting these proxies will be borne by the Company.
Proxies duly executed and returned by shareholders and received by the
Company before the Meeting will be voted FOR the election of Class II Directors
specified herein; FOR the approval of the adoption of the Amended and Restated
WFS 1996 Stock Option Plan and FOR the ratification of the selection of Ernst &
Young as the Company's independent accountants for fiscal 1998, unless a
contrary choice is specified in the
<PAGE> 5
proxy. Where a specification is indicated as provided on the proxy card, the
shares represented by the proxy will be voted and cast in accordance with the
specification made. As to other matters, if any, to be voted upon, the person
designated as proxy will take such actions as he, in his discretion, may deem
advisable. The persons named as proxy and alternate were selected by the Board
of Directors of the Company. They are Officers and Directors of the Company.
Your execution of the enclosed proxy will not affect your right as a
shareholder to attend the Meeting and to vote in person. Any shareholder giving
a proxy has a right to revoke it at any time by either (a) a later dated proxy,
(b) a written revocation sent to and received by the Secretary of the Company
prior to the Meeting, or (c) attendance at the Meeting and voting in person.
VOTING SECURITIES
The Company has outstanding Common Stock, of which approximately 25,708,611
shares were outstanding as of the Record Date. Only shareholders of record on
the books of the Company at the close of business on the Record Date will be
entitled to vote at the Meeting. Each share of the Common Stock is entitled to
one vote.
AMENDED AND RESTATED WFS 1996 STOCK OPTION PLAN PROPOSAL
The following discussion summarizes certain aspects of the proposed Amended
and Restated WFS 1996 Stock Option Plan (the "Amended WFS Plan").
GENERAL
The Amended WFS Plan was preliminarily reviewed and approved for placement
as an agenda item for the 1998 Annual Shareholders Meeting at a regular meeting
of the WFS Board of Directors held on January 28, 1998. The Board unanimously
approved and adopted the Amended WFS Plan at a meeting duly held on October 28,
1997. The Board of Directors believes that the best interests of the Company and
its shareholders will be served by the adoption of the Amended WFS Plan in that
it will enhance the ability of the Company and its subsidiaries to attract
qualified employees and Directors upon whose judgment, initiative and efforts
the Company is largely dependent for the successful conduct of its businesses.
It is anticipated that the acquisition of proprietary interests in the Company
will provide Optionees with a further incentive for continuing employment with
the Company and increasing their efforts on its behalf.
TERMS OF THE PLAN
It is proposed that the Company make effective the Amended WFS Plan
immediately upon its adoption by shareholders subject only to necessary
regulatory filings. The proposed Amended WFS Plan will provide an additional
550,000 shares increasing the total to 1,100,000 shares of WFS Common Stock
subject to option grants during the life of the Plan. The expiration date of the
Amended WFS Plan will be in June, 2006. In 1997 a total of 317,500 options to
purchase shares available under the Amended WFS Plan were granted, with vesting
subject to shareholder approval.
The Amended WFS Plan will provide "incentive stock options" as defined by
Internal Revenue Code Section 422 to eligible employees of the Company. Options
may be granted under the Amended WFS Plan to Directors who are not also
employees of the Company but they are not "incentive stock options," but rather
"non-qualified options." These "non-qualified options" may be granted to
employees as well. This feature of the Amended WFS Plan gives the Company
maximum flexibility to deal with individual circumstances, where, for a number
of reasons, an employee may prefer to be granted "non-qualified options."
TERMINATION OF OPTIONS
The Amended WFS Plan provides the following termination provisions relative
to options. Options which remain unexercised under the Plan terminate on the
date fixed for termination. If prior to the termination
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<PAGE> 6
date, an Optionee ceases employment with WFS for any reason, the Options
previously granted to that Optionee terminate. However, there are certain
exceptions. In the event employment is terminated for any reason other than for
violation of duty, the Optionee may, at any time within a period of three (3)
months after ceasing to be employed with WFS, exercise the option to the extent
that option was exercisable on the date of employment termination. There are
various other provisions relating to termination of options granted under the
Amended WFS Plan relative to death and disability. These provisions allow for
exercise of vested options for a period up to one year after death or
disability.
10% SHAREHOLDERS
The Amended WFS Plan provides that incentive stock options that are granted
to employees who are holders of 10% or more of the shares of the Company may
only be granted for up to five (5) years from the date of grant and the exercise
price for such options must be at least 110% of the fair market value of a share
of the Company on the date of grant, as required by the Internal Revenue Code.
ACCELERATION OF EXERCISE UNDER SPECIAL CIRCUMSTANCES
The Amended WFS Plan provides the Compensation Committee of the Board of
Directors the authority, upon the occurrence of special circumstances, to
accelerate the exercisability of the options under the Amended WFS Plan. The
Amended WFS Plan also contains a provision that entitles an option holder to
purchase, in whole or in part, the full number of shares under the option in the
event of an acquisition of more than 50% of the issued and outstanding shares of
the Company or other substantial sale of assets or change of control of the
Company.
ELECTION OF DIRECTORS
At the Annual Meeting, three nominees, Bernard E. Fipp, Stanley E. Foster
and Duane A. Nelles are nominated for election as Class II Directors, each
Director to serve until 2000 and until his or her successor is elected and
qualified. Nominees Fipp and Nelles have been Directors since 1995; on March 10,
1998, Mr. Foster was elected a Director to fill a vacancy and has been a
Director of Western Financial Bank (the "Bank") since 1992 and of Westcorp since
1978. The person named as proxy, and his alternate, in the accompanying proxy
have advised the Company of their intention to vote shares covered by proxies
received in favor of the election of the nominees named above, each of whom have
consented to be named and have indicated their intent to serve if elected. If
any nominee becomes unavailable for any reason, the proxy or his alternate in
his or her discretion will vote for substitute nominees of the Board, unless
otherwise instructed.
The following information is submitted concerning the Directors of the
Company, including nominees for election, Bernard E. Fipp, Stanley E. Foster and
Duane A. Nelles.
<TABLE>
<CAPTION>
DIRECTOR
NAME OF DIRECTOR AGE SINCE POSITION
- ------------------------------- --- -------- ---------------------------------
<S> <C> <C> <C>
Ernest S. Rady* 60 1995 Chairman of the Board, Director
Howard C. Reese* 66 1995 Vice Chairman, Director
Joy Schaefer* 38 1995 Vice Chairman, Director,
President, Chief Executive
Officer
James R. Dowlan* 60 1995 Vice Chairman, Director, Senior
Executive Vice President
Andrey R. Kosovych* 48 1997 Director
Bernard E. Fipp** 57 1995 Director
Duane A. Nelles** 54 1995 Director
Stanley E. Foster** 70 1998 Director
</TABLE>
- ---------------
* Class I Director, to serve until 1999.
** Class II Director, nominee for term expiring in 2000.
3
<PAGE> 7
The following information is submitted concerning each of the Directors:
ERNEST S. RADY is Chairman of the Board of WFS Financial. He has also
served as Chairman of the Board of the Bank since 1992; as a Director since
1982; and as President and Chief Executive Officer from June, 1994 to January,
1996. He also served as Chairman of the Board of Western Thrift and Loan
Association, a predecessor of the Bank, from 1972. He is also Chairman of the
Board, President and CEO of Westcorp, the parent company of the Bank. Mr. Rady
is a principal shareholder, manager and consultant to a group of companies
engaged in real estate management and development; property and casualty
insurance; oil and gas exploration and development; and distributing.
HOWARD C. REESE, a Director, joined WFS in 1987 as President and Chief
Executive Officer of Westcorp Financial Services, Inc. (now WFS Financial Inc).
He retired as President and CEO in 1996, and is employed by WFS in a consulting
capacity. He began his career in consumer finance with Household Finance
Corporation in 1953 where he managed several branch offices in Southern
California. In 1963, he joined Fireside Thrift Company as a manager. He
progressed through the ranks as Supervisor, Assistant Vice President and
Regional Director, and ultimately to Operations Vice President in charge of 73
branch offices within the State of California.
JOY SCHAEFER is President, Chief Executive Officer, Chief Operating Officer
and Vice Chairman of the Board of Directors of WFS Financial. She served first
as Senior Vice President, Chief Financial Officer and Treasurer of the Bank
since March, 1992, and was elected Executive Vice President in January, 1994 and
Senior Executive Vice President and Chief Operating Officer in December, 1994.
She was elected President of WFS Financial in February, 1996 and Chief Executive
Officer in December, 1997. Ms. Schaefer joined the Bank on January 1, 1990, as
Assistant Vice President and Assistant Treasurer. Prior to her association with
the Bank, she was an Audit Manager in the financial institutions group for Ernst
& Whinney in the Long Beach, California and Springfield, Illinois offices. Ms.
Schaefer also held various positions with Liberty National Bank in Oklahoma
City, Oklahoma from 1985 to 1988.
JAMES R. DOWLAN has served as Vice Chairman and Senior Executive Vice
President of WFS from 1995. He started as Senior Vice President of the Bank from
1984 and then as Executive Vice President of the Bank from 1989 until the Auto
Finance Division of the Bank was combined into WFS in 1995. He is Chairman of
the Board of Western Financial Insurance Agency, Inc., and President of
Westhrift Life Insurance Company, subsidiaries of the Bank; and President and
CEO of WFS Financial Auto Loans, Inc., and WFS Financial Auto Loans 2, Inc.,
subsidiaries of WFS. Prior to his association with the Bank, Mr. Dowlan was Vice
President, Loan Administration of Union Bank where he held several positions
since 1973, the last position being Vice President. He served for several years
on the National Advisory Board, American Bankers Association and the Consumer
Lending Committee of the California Bankers Association. He is currently a
member of the Consumer Bankers Association.
BERNARD E. FIPP has been a Director of the Company since 1995. Mr. Fipp
graduated from the University of Oregon and served five years as a carrier-based
naval aviator/officer and two years as a commercial pilot for United Airlines
before beginning his business career. Mr. Fipp has been active in commercial
real estate development, general contracting, real estate acquisition and
marketing since 1976. Investments in automobile dealerships in 1988 brought him
into the retail automobile industry where he acted as president of Ritchey-Fipp
Chevrolet for six years and served as president of the San Diego County
Chevrolet Dealer's Association and Chairman of the San Diego County New Car
Dealer's Association. Mr. Fipp is president of Fipp Investments LLC, real estate
acquisition and development company.
DUANE A. NELLES has been a Director of the Company since 1995. Mr. Nelles
has been in the private, personal investment business since 1987. Prior to 1987,
Mr. Nelles was a partner in the international accounting firm which is now known
as Coopers & Lybrand L.L.P., which he joined in 1968 after receiving his M.B.A.
degree from the University of Michigan. Since 1988, Mr. Nelles has been a member
of the board of directors of QUALCOMM, Inc., a world leader in digital wireless
communications.
ANDREY R. KOSOVYCH became Vice Chairman in 1997, having served as the
Company's and Westcorp's investment banker since 1985. He is also a Director on
the Boards of the Bank and Westcorp as
4
<PAGE> 8
Vice Chairman. Previously, Mr. Kosovych was a Managing Director, Investment
Banking, and head of the Asset Finance Group at Donaldson, Lufkin & Jenrette
Securities Corporation since February, 1990. Prior to that, he founded and led
the asset backed effort at Drexel Burnham Lambert Inc., having progressed from
Vice President to Managing Director from 1984 to 1990; he also served as Vice
President, Investment Banking, at LePercq, de Neuflize & Co. Inc. from 1983 to
1984. Mr. Kosovych began his professional career as an attorney, working at
Dewey, Ballantine, Bushby, Palmer & Wood from 1974 to 1983. During his tenure as
an investment banker, Mr. Kosovych managed almost $9 billion of financings for
the Westcorp family of companies, including the Company's and Westcorp's initial
public offerings, the Bank's subordinated debt offerings and numerous auto loan
securitizations, and acted as financial advisor on a variety of strategic
issues.
STANLEY E. FOSTER was elected to the Board of WFS Financial Inc in 1998 and
has been a Director of the Bank since 1992 and of Westcorp since 1978. Mr.
Foster has been President and Chief Executive Officer of Foster Investment
Corporation and its predecessor Ratner Corporation, an apparel manufacturing and
investment company headquartered in San Diego, California, since 1954. Mr.
Foster also serves as the Chairman of Hang Ten International, and is a director
of Postal Annex Plus, Accucom and Hot Topic, Inc.
BOARD COMMITTEES
AUDIT COMMITTEE
WFS has a standing Audit Committee, consisting at present of Mr. Nelles
(Chairman), Mr. Reese and Mr. Foster. The functions of the Audit Committee are
to make recommendations to the Board with respect to the engagement of the
independent public accountants of WFS, to review the effectiveness of WFS'
system of internal controls, and to review, upon the request of management,
professional services to be provided to WFS by outside auditors. WFS has
contracted with its outside auditors to perform expanded audit procedures
previously performed by an internal audit department. These expanded audit
functions are overseen by The Director of Safety and Soundness. The Director of
Rick Management reports to the Audit Committee. The Audit Committee of WFS was
formed in 1995 and met four times in 1997.
COMPENSATION COMMITTEE
WFS has a standing Compensation Committee whose current members are Mr.
Reese (Chairman), Mr. Nelles and Mr. Fipp. The Compensation Committee reviews
and approves recommendations for annual salaries and other compensation of
employees paid by WFS and reviews and sets the levels of compensation of senior
management, as well as establishing policies applicable to, performance related
to, and bases for compensation. The Compensation Committee of WFS was formed in
1995 and held three meetings in 1997.
EXECUTIVE COMMITTEE
WFS has a standing Executive Committee which has the powers of the Board of
Directors, except as precluded by law and the bylaws of WFS. The Executive
Committee is comprised of Messrs. Rady, Reese, Kosovych and Dowlan and Ms.
Schaefer. The Executive Committee of WFS was formed in 1995 and met 16 times in
1997.
MEETINGS OF THE BOARD
The Board of Directors of WFS had a total of 4 meetings during 1997. All
Directors have attended at least 75% of the meetings of the Board of Directors
and committees on which they serve.
COMPENSATION OF DIRECTORS
Each Director who is not also an employee of WFS or any of its subsidiaries
receives $4,500 per Board Meeting attended and $1,000 for each committee
meeting, which is not held in conjunction with a Board Meeting, attended.
Directors who are also employees of WFS or any of its parent or subsidiary
companies are not compensated for their services as Directors.
5
<PAGE> 9
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
The following information is provided with respect to the Executive
Officers of WFS who are not Directors.
<TABLE>
<CAPTION>
OFFICER
NAME POSITION AGE SINCE
---- -------- --- -------
<S> <C> <C> <C>
Lee A. Whatcott Executive Vice President and Chief 38 1992
Financial Officer
Richard Stephan Executive Vice President and Chief 59 1994
Information Officer
Harriet Burns Feller Executive Vice President, Secretary 55 1991
and
General Counsel
Ralph Boulware Senior V.P. 55 1996
Hilton Hewitt Senior V.P., Director of Risk 41 1997
Management
Mark Olson Senior V.P., Controller 34 1995
J. Keith Palmer Senior V.P., Treasurer 37 1995
C. William Thaxton Senior V.P. 50 1997
Anne FitzGerald V.P., Director of Human Resources 38 1995
</TABLE>
LEE A. WHATCOTT has served as Executive Vice President and Chief Financial
Officer since 1996, after serving as Senior Vice President and Chief Financial
Officer since 1995. Mr. Whatcott joined the Bank in 1988 and became Vice
President, Controller in 1992. Prior to joining the Bank, he was employed by
what is now known as Ernst & Young LLP, independent auditors, and an
international accounting firm. Mr. Whatcott is licensed as a Certified Public
Accountant in the state of California and is a member of the American Institute
of Certified Public Accountants.
RICHARD W. STEPHAN has served as Executive Vice President and Chief
Information Officer of WFS since 1996 and of the Bank since 1994. He has served
as the Chief Information Officer since joining the organization in 1994. Mr.
Stephan has over 20 years of experience in the Information Technology field with
the last 15 years in the financial institution services industry. From 1988 to
1994, Mr. Stephan was an Executive President of FiServ, a major provider of
Information Services to the banking industry and he was a partner with Ernst &
Whinney. At Ernst & Whinney he managed the consulting practice for the Western
Region, served as the Senior Technology Partner for the firm for the banking
industry and was a member of the planning committee for the firm-wide banking
practice. Mr. Stephan is a member of the Chief Information Officer National
Association and is a Certified Systems Professional.
HARRIET BURNS FELLER is Executive Vice President, Secretary and General
Counsel. She started as Vice President and General Counsel of the Bank in May,
1990, and was elected General Counsel and Secretary of WFS in 1991. Ms. Feller
was Executive Vice President and General Counsel of Mercury Savings from 1986 to
1990, Vice President and General Counsel of Ponderosa Homes from 1981 to 1986
and Vice President, Corporate Counsel at Ticor Title Insurance, which she joined
as litigation attorney in 1975. Ms. Feller served as Southern California
President of American Corporate Counsel in 1990 and is a member of various
professional associations. Ms. Feller is an active member of the California Bar
Association and was admitted to the bar in Connecticut, where she practiced
prior to 1975.
RALPH BOULWARE is Senior Vice President of WFS Financial. He received a
B.S. degree in Information Systems Management from the University of San
Francisco, and an Executive M.B.A. degree from the University of California at
Los Angeles. His previous experience has included First Interstate Bank and both
domestic and international assignments with Electronic Data Systems (EDS). He
was with ARNI from 1992-1996. Ralph joined WFS Financial in 1996 as Vice
President of Operations in Information Services. In 1997, he was promoted to
Senior Vice President of WFS Financial, as Director of RSC Operations. Among his
areas of responsibilities at WFS Financial are corporate real estate, corporate
support functions, and two regional service centers (located in Dallas, TX, and
Irvine, CA) which provide back office support for auto financing.
6
<PAGE> 10
HILTON HEWITT is a Senior Vice President of WFS and its Director of Risk
Management. Before joining WFS in August of 1997, Mr. Hewitt had a 17 year
career as a federal regulator with both the Federal Home Loan Bank System and
the Office of Thrift Supervision (OTS). Positions held during this time included
Senior Supervisory Agent and Assistant Vice President with the Federal Home Loan
Bank of Seattle and Assistant Regional Director with the OTS. He earned a BA
from the University of Massachusetts and an MBA from Seattle University.
MARK K. OLSON, Senior Vice President, Controller has been with the Company
since December, 1995. He joined the Bank in 1991 as Accounting Systems Director
and has held various positions since that time. Prior to joining the Bank, Mr.
Olson was employed by what is now known as Ernst & Young LLP, independent
auditors, an international accounting firm. Mark is a licensed Certified Public
Accountant in the state of California and is a member of the American Institute
of Certified Public Accountants.
J. KEITH PALMER is Senior Vice President, Treasurer of WFS since 1995, and
is Senior Vice President, Chief Financial Officer and Treasurer of the Bank, as
well as Vice President and Treasurer of Westcorp, its holding company. Prior to
joining the Bank in 1993, Mr. Palmer served as a Capital Markets Examiner with
the Office of Thrift Supervision from 1991 to 1993. From 1986 to 1991, Mr.
Palmer served in various capacities with the Office of Thrift Supervision. Mr.
Palmer has worked in the banking industry for 13 years.
C. WILLIAM THAXTON joined WFS Financial in October, 1997, as Senior Vice
President and Director of Sales and Marketing. Mr. Thaxton's background includes
over 27 years in the automobile indirect finance industry from East to West and
points in between. The last six years were focused in the non-prime auto finance
industry as President of Omni Financial in Memphis (December, 1996-October,
1997), ProCredit in Philadelphia (February-November, 1996) and YES Financial in
Dallas (September, 1994-February, 1996), plus Vice President of Branch
Operations with Franklin Acceptance in Maryland (1993-1994). Mr. Thaxton's prime
auto finance experience included executive positions with Nissan Motor
Acceptance in Torrance and Dallas, Security Pacific Auto Finance in Westlake
Village and Concord, CA, Citicorp in Miami, Columbus and St. Louis, and General
Electric in North Virginia, Atlanta and Miami. Mr. Thaxton's responsibilities
and key leadership roles have included significant production positions in
decentralized, regionalized and centralized environments at all those companies,
Chief Credit Officer for NMAC, Business Development positions at General
Electric and Citicorp, and various other staff and line roles with all
companies.
ANNE M. FITZGERALD serves as Vice President, Director of Human Resources.
She joined the Bank in 1995 as Vice President, Director of Human Resources and
was elected Vice President of the Company in January, 1996. Ms. FitzGerald has
over 15 years experience in the Human Resources field, and spent the last 5 1/2
years, prior to joining Westcorp, working for Pepsi Cola, ultimately as Director
of Human Resources. Previous experience includes various Human Resources
positions working for Pier 1 Imports and Texas Instruments. Ms. FitzGerald holds
her Masters in Labor and Industrial Relations from Michigan State University and
her Masters in Business Administration from Southern Methodist University.
7
<PAGE> 11
EXECUTIVE COMPENSATION
The following table sets forth the names of the persons who were, at
December 31, 1997, the chief Executive Officer of WFS and four most highly
compensated Executive Officers of WFS other than the Chief Executive Officer
(collectively, the "Named Executive Officers"). The Named Executive Officers
received their compensation shown in the following table from WFS or a related
company as noted.
SUMMARY COMPENSATION TABLE
Compensation described in this table is compensation paid by WFS unless
otherwise noted:
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
----------------------------------
WESTCORP WFS
ANNUAL COMPENSATION(1) STOCK STOCK AWARDS
------------------------------------- OPTIONS(4) OPTIONS(5) SARS(6) ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(2) OTHER(3) (SHARES) (SHARES) (SHARES) COMPENSATION(7)
- --------------------------- ---- -------- -------- -------- ---------- ---------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ernest S. Rady............ 1997 $420,000 $ 0 $ 0 50,000 0 N/A $ 33,875(8)
Chairman of the 1996 400,000 116,000 551,121 20,000 55,000 0 48,372
Board of Directors 1995 369,984 148,100 181,703 0 N/A 50,000 30,010
Joy Schaefer.............. 1997 268,740 80,622 152,109 15,000 35,000 N/A 24,540(9)
President, Chief 1996 225,000 65,250 189,446 15,000 44,000 0 35,047
Executive Officer, 1995 185,000 61,065 0 8,400 N/A 40,000 16,611
Chief Operating Officer
and a Vice Chairman of
the Board of Directors
Andrey R. Kosovych........ 1997 225,000 112,500 0 50,000 0 N/A 0
Vice Chairman, Director 1996 N/A N/A N/A N/A N/A N/A N/A
1995 N/A N/A N/A N/A N/A N/A N/A
Lee A. Whatcott........... 1997 175,000 58,275 0 11,000 11,000 N/A 21,586(10)
Executive Vice President 1996 149,790 43,440 22,900 10,000 0 0 30,248
and Chief Financial
Officer 1995 104,133 34,676 0 4,200 0 0 6,684
James R. Dowlan........... 1997 242,500 0 0 0 0 N/A 29,640(11)
Vice Chairman, Senior 1996 210,900 61,161 132,000 12,000 44,000 0 36,855
Executive Vice President 1995 197,100 65,634 343,217 0 0 40,000 24,328
</TABLE>
- ---------------
(1) The compensation of Ms. Schaefer and Mr. Dowlan was paid by WFS Financial
Inc. The compensation for Mr. Rady and Mr. Whatcott was paid by Westcorp.
The compensation for Mr. Kosovych was paid by WestFin Securities
Corporation, a subsidiary of Westcorp.
(2) 1995 and 1996 Bonus restated for comparison using bonus earned in the year
indicated and payable the following year.
(3) Includes the spread between market price and exercise price on Westcorp
options exercised, plus, for 1996, the $3.00 per share spread between
market price and exercise price of WFS SARs exercised in 1996.
(4) Stock options for shares of Westcorp, the parent company, awarded in the
year indicated and exercisable in the future.
(5) Stock options for shares of WFS awarded in the year indicated and
exercisable in the future, and, in 1997, subject to shareholder approval of
the Amended and Restated 1996 Stock Option Plan (the "WFS Plan"). Awards in
1996 were also conditioned upon the recipient's exercise of all his/her
SARs.
(6) SARs awarded by WFS pursuant to the SAR Plan for employees, employees who
are directors and the independent directors. All SARs were exercised in
1996, and the SAR Plan discontinued.
(7) Includes above market preferential interest accrued on salary deferral by
executive under deferred compensation plans, plus Company contribution to
EDP4 (described below), 401(k) and ESOP. A contribution of $2.42 million
was funded for 1997 to the Savings Plan (401(k) and ESOP) which benefits
other employees in addition to those named in the Table. The Plan is
described below.
(8) Includes $11,855 in accrued above-market earnings on deferred compensation
plus $9,392 employer contribution to 401(k)/ESOP Plan plus $12,597 employer
contribution to EDP4.
8
<PAGE> 12
(9) Includes $1,727 in accrued above-market earnings on deferred compensation
plus $9,376 employer contribution to 401(k)/ESOP Plan plus $13,437 employer
contribution to EDP4.
(10) Includes $3,454 in accrued above-market earnings on deferred compensation
plus $9,381 employer contribution to 401(k)/ESOP Plan plus $8,750 employer
contribution to EDP4.
(11) Includes $8,626 in accrued above-market earnings on deferred compensation
plus $9,392 employer contribution to 401(k)/ESOP Plan plus $11,622 employer
contribution to EDP4.
CERTAIN BENEFITS
The Company adopted the WFS 1996 Stock Option Plan on June 28, 1996, and
amended it on October 28, 1997, subject to stockholder approval. This Plan
benefits employees and Directors in addition to those included in the Summary
Compensation Table. WFS employees are also participants in the benefit plans
provided by the Company's ultimate parent, Westcorp, whose Common Stock is
listed for trading on the New York Stock Exchange under the trading symbol
"WES". The description of various benefit plans which follows under the caption
"Compensation Pursuant to Bank and Westcorp Plans" relate to such Westcorp
plans.
OPTION GRANTS
The following table shows grants of stock options by Westcorp and by WFS to
the Named Executive Officers during 1997 in respect of shares of Westcorp's and
WFS' Common Stock, respectively.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table provides information on option grants in fiscal 1997 to
the Named Executive Officers.
<TABLE>
<CAPTION>
POTENTIAL REALIZED
WESTCORP PERCENTAGE VALUE AT ASSUMED
OPTIONS OF TOTAL ANNUAL RATES OF
("W") OPTIONS EXERCISE OR STOCK APPRECIATION
WFS OPTIONS GRANTED TO BASE PRICE FOR OPTION TERM
("WF") EMPLOYEES IN (PER SHARE) EXPIRATION ------------------
NAME GRANTED(1) FISCAL 1997 ($) DATE 5%($) 10%($)
---- -------------- ------------ ----------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Ernest S. Rady........... 50,000(W) 14.56% $18.69 10/29/2004 380,434 886,576
0(WF) .00% N/A N/A N/A N/A
Joy Schaefer............. 15,000(W) 4.37% 18.69 10/29/2004 114,130 265,972
35,000(WF) 11.25% 13.00 10/28/2004 185,230 431,666
Andrey R. Kosovych....... 50,000(W) 14.56% 16.50 03/18/2002 227,931 503,670
0(WF) .00% N/A N/A N/A N/A
Lee A. Whatcott.......... 11,000(W) 3.20% 18.69 10/29/2004 83,695 195,045
11,000(WF) 3.54% 13.00 10/28/2004 58,215 135,666
James R. Dowlan.......... 0(W) .00% N/A N/A N/A N/A
0(WF) .00% N/A N/A N/A N/A
</TABLE>
- ---------------
(1) Westcorp and WFS options were each granted at the market price of the stock
at the date of the grant.
9
<PAGE> 13
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table summarizes pertinent information concerning the
exercise of Westcorp and WFS stock options during 1997 by each of the Named
Executive Officers and the fiscal year-end value of unexercised options in
respect of Westcorp's and WFS's Common Stock.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED
NUMBER OF WESTCORP WESTCORP OPTIONS VALUE OF UNEXERCISED
SHARES ACQUIRED ON ("W")/WFS OPTIONS IN-THE-MONEY
EXERCISE ("W")(1) ("WF") AT OPTIONS
NUMBER OF WFS VALUE 12/31/97(#) AT 12/31/97($)
SHARES ACQUIRED REALIZED EXERCISABLE("E")/ EXERCISABLE/
NAME (WF) ON EXERCISE(2) ($)(3) UNEXERCISABLE("U")(4) UNEXERCISABLE(2)(4)
---- ------------------- ------------ ----------------------- --------------------
<S> <C> <C> <C> <C>
Ernest S. Rady.......... 0(W) 0(W) 41,796E(W) $ 359,791E(W)
0(WF) 0(WF) 77,266U(W) 126,337U(W)
13,750E(WF) 0E(WF)
41,250U(WF) 0U(WF)
Joy Schaefer............ 11,576(W) $ 152,109(W) 22,326E(W) 160,654E(W)
0(WF) 0(WF) 33,206U(W) 55,587U(W)
11,000E(WF) 0E(WF)
68,000U(WF) 0U(WF)
Andrey R. Kosovych...... 0(W) 0(W) 0E(W) 0E(W)
0(WF) 0(WF) 50,000U(W) 55,500U(W)
0E(WF) 0E(WF)
0U(WF) 0U(WF)
Lee A. Whatcott......... 0(W) 0(W) 7,079E(W) 37,567E(W)
0(WF) 0(WF) 21,429U(W) 23,071U(W)
0E(WF) 0E(WF)
11,000U(WF) 0U(WF)
James R. Dowlan......... 0(W) 0(W) 9,560E(W) 61,457 E(W)
0(WF) 0(WF) 11,591U(W) 27,275U(W)
11,000E(WF) 0E(WF)
33,000U(WF) 0U(WF)
</TABLE>
- ---------------
(1) Westcorp Options.
(2) WFS Options
(3) Value of exercise of Options based on the closing price on the New York
Stock Exchange of Westcorp Common Stock on December 31, 1997 ($16.875) and
the closing price on NASDAQ of WFS Common Stock on December 31, 1997
($11.25).
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
Westcorp executed employment contracts in 1987 with Mr. Dowlan who is
currently a Director and a Named Executive Officer of the Company and Mr. Reese,
who is currently a consultant and Director of the Company, certain provisions of
which are triggered by a change in control. Under the agreements, Messrs. Dowlan
and Reese are guaranteed salary for a period of 24 months from the initiation of
change of control proceedings based on the average of the preceding three years'
salary and bonus. The Company reserves the right to terminate the agreements for
cause, which includes fraud or other misconduct of the employees.
10
<PAGE> 14
Westcorp executed a letter employment agreement with Mr. Kosovych in March,
1997. While employment is "at will" and subject to certain other terms, the
agreement provides for him to receive six months of continued compensation,
subject to certain terms, if his employment is terminated before the completion
of one year. The agreement also provides for Westcorp stock option grants,
pursuant to the 1991 Westcorp Stock Option Plan, of options relating to 50,000
shares to Mr. Kosovych.
In addition, employment agreements dated February 27, 1998, between Ms.
Schaefer and WFS, and Mr. Whatcott and Westcorp and WFS, contain change of
control provisions under which Ms. Schaefer and Mr. Whatcott may be entitled to
two years' compensation based on the average of the preceding three years'
salary and bonus. WFS and/or Westcorp, as the case may be, reserves the right to
terminate the agreements for cause.
COMPENSATION PURSUANT TO BANK AND WESTCORP BENEFIT PLANS
During 1997, the Company's Executive Officers participated in various
benefit plans maintained by the Bank and Westcorp, as described in further
detail below. WFS does not currently maintain any benefit plans independent of
those discussed below as maintained by the Bank and Westcorp, except for the
Amended WFS Plan, described above.
EXECUTIVE DEFERRAL PLANS
Certain senior Executives of WFS are eligible to participate in Westcorp's
1985 Executive Deferral Plan (the "1985 EDP"). A participant in the 1985 EDP may
defer up to 75% of his or her gross annual salary and the participant's employer
will match contributions up to 5% of the gross annual salary. After the seventh
year of participation, the participant receives a lump sum distribution in the
amount of the first four years' deferrals plus interest thereon. Through the
lump sum distribution in year 7, interest on the deferred compensation and
matching contributions in the 1985 EDP accrues at the Moody's Investor Service
Seasoned Corporate Bond Rate ("Moody's Rate") plus 3%. Upon ten years
participation in the 1985 EDP or retirement at the age of 65 or later, a
participant's account yields a higher compound interest rate. Upon retirement at
the later of reaching age 65 or 10 years in the 1985 EDP, interest accrues at
the Moody's Rate plus 8%. The 1985 EDP also stipulates that benefits of the 1985
EDP may become 100% vested for all participants at the option of management if
there is a hostile takeover or non-negotiated takeover, or acquisition of
Westcorp by another company.
Certain senior Executives of WFS are also eligible to participate in
Westcorp's 1988 Executive Deferral Plan (the "1988 EDP"). A participant in the
1988 EDP may defer up to 5% of his or her base annual salary and the
participant's employer will match contributions up to 5% of the base annual
salary. Upon ten years participation in the 1988 EDP or retirement at the age of
65 or later, the participant is paid a monthly amount based on amounts deferred
less certain amounts paid by the employer prior to such the tenth year of
participation. Interest on deferred amounts and matching contributions accrues
at the Moody's Rate plus 3%. The 1988 EDP also stipulates that benefits may
become 100% vested for all participants at the option of management if there is
a hostile takeover or non-negotiated takeover or acquisition of Westcorp by
another Company.
Certain senior Executives of WFS are also eligible to participate in
Westcorp's 1992 Executive Deferral Plan (the "1992 EDP"). The 1992 EDP is
similar to the 1985 and 1988 EDPs, except that participants can defer between 5%
and 10% of his or her base annual salary but the employer makes no contributions
in the 1992 EDP. Distributions to participants in the 1992 EDP upon termination,
retirement and change in control of Westcorp differ from the terms of the 1985
and 1988 EDPs as follows: Upon termination of a participant's employment, his or
her termination benefits are paid in a lump sum within 90 days. The amount of
termination benefits depends on the number of years that the participant has
participated in the 1992 EDP. If less than 2 years, the participant receives his
or her account balance plus interest at the applicable interest rate minus 1%.
If such participation is more than 2 years and less than 4 years, the
participant receives his or her account balance plus interest at the applicable
interest rate. If such participation is more than 4 years, then the participant
receives his or her account balance plus interest at the applicable interest
rate plus 1%.
11
<PAGE> 15
If a participant retires, the participant can elect to receive a lump sum
of their account balance or equal monthly payments over a 5, 10 or 15 year
period.
In the event of a change in control a participant receives his or her
distributions as if there was a termination. Change in control is defined as any
person becoming the beneficial owner of 50% or more of Westcorp's voting stock;
or during any 2 consecutive year period, individuals who at the beginning of
such period constitute the Westcorp Board of Directors cease for any reason to
constitute at least a majority thereof, unless the election or the nomination
for election by Westcorp's shareholders of each new Director was approved by a
vote of at least three-quarters of the Directors still in office who were
Directors at the beginning of the period; or Westcorp is liquidated or
consummates a merger or consolidation in which it is not the survivor; or
substantially all of Westcorp's and its subsidiaries' assets, in the aggregate,
are sold or otherwise transferred to parties which are not within the control
group in which Westcorp is a member.
The applicable interest rate payable on deferred compensation is the
Moody's Rate.
Effective September 1, 1995, Westcorp established a fourth Executive
Deferral Plan ("EDP4") for certain participating Executives as determined by the
Board of Directors. A participant in EDP4 may defer a portion of compensation
from a minimum of $2,000 per year to a maximum of 10% of base annual salary.
There is an employer match in EDP4 based upon business results and at the
discretion of the Board of Directors.
Additionally, employees required to take distribution from earlier EDP
plans, may elect to defer an additional amount up to the distribution they are
required to take. This additional deferral is not eligible for any Company
matching provisions. All deferrals are eligible for interest payments and
interest is credited to a participant's account at the Moody's Seasoned
Corporate Bond Rate. Participant's distributions are intended to occur only at
retirement age of 65, or 5 years of participation in EDP4, whichever is later,
or at termination. Participants receiving distributions can elect to receive
them paid out over five, ten or fifteen years or in a lump sum option. The Plan
was amended in 1997 to allow greater flexibility in changing retirement
elections in the year prior to planned retirement.
WESTCORP STOCK OPTION PLAN
1991 Stock Option Plan. The 1991 Stock Option Plan covers 3,150,000 shares
of Westcorp Common Stock. Options granted under the 1991 Stock Option Plan may
be either "incentive" or "non-qualified" options. Employees of Westcorp, as well
as employees of WFS, and Directors of Westcorp, some of whom are also Directors
of WFS, may participate in the 1991 Stock Option Plan. Options granted under the
1991 Stock Option Plan have five year terms, unless sooner terminated by reason
of cessation of employment or permanent or total disability.
CONSOLIDATED PLAN
In 1990, Westcorp consolidated its Employee Stock Ownership and Salary
Savings Plan and its Employee Stock Ownership Plan into the Westcorp Employee
Stock Ownership and Salary Savings Plan (the "Consolidated Plan"). The
Consolidated Plan is administered by an Administration Committee appointed by
the board of Directors of Westcorp. All employees of WFS and its subsidiaries,
other than employees covered under certain collective bargaining agreements, are
eligible to participate in the Consolidated Plan after satisfaction of minimum
service and age requirements. Each year the Bank may, in its discretion, make an
ESOP contribution to the Consolidated Plan. Each participant is credited with
one "unit" for each $100 in earnings paid to such participant by the employer in
that year, and an additional "unit" for each full year of service to the
employer. If the Bank makes an ESOP contribution, it is allocated to each
participant's ESOP account maintained under the Consolidated Plan (the "ESOP
Contribution Account") in the same proportion as such participant's "units" bear
to the total number of "units" credited to all participants for that year.
Eligible employees may also elect to contribute from 1.0% to 10.0% of their
earnings to an account (the "Salary Savings Contribution Account"). Each year
the employer may, in its discretion, make a matching employer contribution which
is allocated to an account (the "Matching Contribution Account") for each
participant that makes a salary savings contribution for such year. If the Bank
makes a matching employer
12
<PAGE> 16
contribution, it is allocated to the matching contribution account in the same
proportion that each such contribution of up to 6.0% of a participant's earnings
bears to the total of all such contributions of up to 6.0% of participants'
earnings. The Bank's annual contribution to a participant's ESOP Contribution
Account and Matching Contribution Account, and a participant's contribution to
such participant's Salary Savings Contribution Account, may not exceed in the
aggregate the lesser of 25.0% of such participant's annual compensation or
one-fourth of the dollar limitation established under Section 415(b)(1)(A) of
the Code.
The contributions of WFS or the Bank to a participant's ESOP Contribution
Account are invested in Westcorp Common Stock or approved investments at the
direction of the plan administrator. Each participant who has completed ten
years of service and has attained the age of 55 may also direct the plan
administrator to diversify the investments allocated to such participant's ESOP
Contribution Account. A participant's contributions to his or her Salary Savings
Contribution Account are invested by the plan administrator in fixed income,
stock or other permitted investment alternatives selected by the participant.
The plan administrator selects the investment alternatives for the amount
contributed by the employer to the Matching Contribution Account. Interest,
earnings, dividends, gains and losses are allocated to each participant's ESOP
Contribution Account, Salary Savings Contribution Account and Matching
Contribution Account, as the case may be, in the proportion such account bears
to the total accounts of all participants in that investment alternative. Shares
of Westcorp Common Stock allocated to any of a participant's accounts are voted
in accordance with the proxy of such participant. Each participant is also
entitled to direct the plan administrator regarding the exercise of rights,
other than voting rights, arising in connection with shares of Westcorp Common
Stock allocated to such participant's accounts.
Participants have a 100% non-forfeitable interest in the value of their
Salary Savings Contribution Account at all times. The participant's interest in
his or her ESOP Contribution Account and Employer Matching Contribution Account
becomes 20.0% vested after the completion of three calendar years of service. An
additional 20.0% becomes vested each following year, until the participant
completes 7 years of service and the participant's interests become fully
vested. A participant is entitled to receive all benefits under the Consolidated
Plan, whether or not vested, upon death, permanent disability, or retirement at
age 65. Upon termination of employment for any other reason, participants will
receive the full amount of their Salary Savings Contribution Account and the
vested portions of their ESOP Contribution Account and Matching Contribution
Account.
In 1997, Westcorp made a $2.426 million contribution to the Consolidated
Plan.
REPORT OF THE COMPENSATION COMMITTEE
The Company applies a consistent philosophy to compensation for all
employees, including senior management. This philosophy is based on the premise
that the achievements of the Company result from the coordinated efforts of all
individuals working toward common objectives.
COMPENSATION PHILOSOPHY
Under the supervision of the Compensation Committee of the Board of
Directors, the Company has developed and implemented compensation policies,
plans and programs which seek to enhance the profitability of the Company, and
thus shareholder value, by aligning closely the financial interests of the
Company's senior managers with those of its shareholder. The Compensation
Committee endorses the belief that stock ownership by management and the
granting of stock options to senior Executives and key employees furthers that
goal and fosters decision-making by its key employees with the Company's
long-term safety and soundness in mind.
The compensation plans and programs are structured to integrate pay with
the Company's annual and long-term performance goals. The plans and programs are
designed to recognize initiative and achievement and to assist the Company in
attracting and retaining qualified Executives. In furtherance of these goals,
annual base salaries are generally set at or below competitive levels so that
the Company relies to a large degree on annual incentive compensation to attract
and retain corporate Officers and other key employees with
13
<PAGE> 17
outstanding abilities and to motivate them to perform to the full extent of
their abilities. For the longer term, incentive stock options may be awarded by
the Company's ultimate parent, Westcorp, the stock of which is traded on the New
York Stock Exchange or by WFS Financial, the stock of which is traded on NASDAQ.
Incentive compensation is variable and closely tied to corporate, business unit
and individual performance in a manner that encourages a sharp and continuing
focus on building profitability and shareholder value. As a result of the
increased emphasis on tying Executive compensation to corporate performance, in
any particular year the total compensation of the Company's Executives may be
more or less than the Executives of the Company's competitors, depending upon
the Company's or the individual business unit's performance.
In evaluating the performance and setting the incentive compensation of the
Chief Executive Officer and other senior Executives, the Compensation Committee
takes into account their consistent commitment to long-term success of the
Company through conservative management of certain business units and aggressive
management of other business units as dictated by existing and anticipated
market conditions. Certainly the Compensation Committee expects and rewards
recognition by the Chief Executive Officer and senior Executives of both adverse
and advantageous market conditions for each of the Company's major divisions.
At the beginning of each year, performance goals to determine annual
incentive compensation are established for each business unit and for each
Executive. Financial goals include overall profitability, loan volume growth,
operating earnings, loan delinquency levels and return on equity and return on
assets, cost controls and productivity. The most weight is given to
profitability as it relates to established goals. Management goals were
established at the beginning of 1997 for those Executives and managers who do
not manage business units with direct financial goals. These goals were tailored
to the particular functions required to be performed. After the close of each
fiscal year, generally in January, performance against these goals and
objectives is measured on both a predetermined arithmetic method and, to a
certain extent, on subjective evaluation, in light of market conditions for the
particular business unit. The results of these evaluations are then considered
by the Compensation Committee when determining the amounts to be awarded (which
appear as "Bonus" in the Summary Compensation Table).
Certain business units of the Company performed in accordance with or in
excess of budget, and the senior Executives of those businesses received full
performance bonuses, while business units which did not meet performance goals
resulted in lesser or no bonuses for their respective managers.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
Ernest Rady served as Chairman and CEO through November 2, 1997. Mr. Rady
continued through the year as Chairman and was succeeded in the CEO capacity by
Joy Schaefer, who assumed those responsibilities in addition to the Vice
Chairman, President and COO responsibilities.
In determining the CEO compensation for 1997, the Compensation Committee
discussed and considered all of the factors discussed above. In addition,
targeted versus actual operating performance of the Company overall and various
subjective performance criteria were utilized to determine base salary levels,
targeted annual bonus and awards of stock option grants. In addition, the
Compensation Committee evaluated peer compensation from a variety of surveys as
well as information for the Company's size and location. Peer information for
the Company's performance was obtained from Montgomery Securities as well as
other sources including an analysis of annual proxy reports of like size and
situated companies.
The Compensation Committee considered the factors stated above in
determining that no 1997 bonus award would be made to Mr. Rady. The Compensation
Committee considered Ms. Schaefer's efforts toward the Company's progress in
automation, centralization, process improvement and organizational design as
well as performance during the last quarter of the year to determine her 1997
bonus award. The Committee established 1998 management objectives for the CEO
and other key members of the Executive team.
STOCK OPTION GRANTS
Westcorp, the holding company, uses stock options as long-term incentives
and expects that it will continue to use this compensation alternative in the
future. In 1991, Westcorp adopted, and the shareholders
14
<PAGE> 18
approved, a new stock option plan that made 3,150,000 shares of Common Stock of
Westcorp available for just such purposes and is described above. The Westcorp
Compensation Committee grants incentive stock options to employees of the
Company and its subsidiaries and views such grants less as compensation and more
as an incentive mechanism. Limited grants were made in 1997 to some Executives
as shown in the Summary Compensation Table, and to other key employees, which
are in the appropriate tables.
WFS established a similar stock option plan in 1996. An amendment to the
Plan is described above under the caption "Amended and Restated WFS 1996 Stock
Option Plan Proposal." A Registration Statement on Form S-8 was filed with the
Securities and Exchange Commission on November 13, 1997, to reflect an increase
to 1,100,000 in the number of shares subject to the Plan.
OTHER COMPENSATION PLANS
Other compensation benefits have from time to time been established for the
benefit of senior Executives and other managers and Officers of the Company,
each of which are discussed in the above materials. The results of these
compensation plans on the most highly compensated Executives are reflected in
the Compensation Table.
POLICY REGARDING COMPLIANCE WITH I.R.C. SEC. 162(M)
Section 162(m) of the Internal Revenue Code, as enacted by the Omnibus
Budget Reconciliation Act of 1993, provides in general that, beginning in 1994,
compensation paid to certain Executives of publicly held corporations will not
be deductible for federal income tax purposes to the extent it exceeds
$1,000,000 per year unless certain conditions are met. It is the present policy
of the Compensation Committee that individual compensation shall not exceed the
deductibility requirements of Internal Revenue Code, Section 162(m) and the
Company intends to take the necessary steps to comply, but also reserves the
right to enter into incentive and other compensation arrangements that do not so
comply when it determines that the benefits to the Company outweigh the cost of
the possible loss of federal income tax deductions.
COMPENSATION COMMITTEE
Howard C. Reese, Chairman
Bernard E. Fipp
Duane A. Nelles
15
<PAGE> 19
STOCK PRICE PERFORMANCE GRAPH
Set forth below is a line graph depicting the yearly percentage change in
the cumulative total shareholder return on the Company's Common Stock against
the cumulative total return of the S & P Small Cap 600 Index and a compiled peer
group (NASDAQ Financial Index) for the period commencing August 8, 1995, (the
date of initial registration of the Company's securities for public sale), for
the Company's stock, and July 31, 1995, for the index, and ending December 31,
1997.
The Stock Price Performance Graph below shall not be deemed incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933 or under the
Securities Exchange Act of 1934, except to the extent Westcorp specifically
incorporated this information by reference, and shall not otherwise be deemed
filed under such Acts.
COMPARISON OF 29 MONTH CUMULATIVE TOTAL RETURN*
AMONG WFS FINANCIAL INC, THE S & P SMALL CAP 600 INDEX
AND THE NASDAQ FINANCIAL INDEX
<TABLE>
<CAPTION>
MEASUREMENT PERIOD S&P SMALLCAP NASDAQ
(FISCAL YEAR COVERED) WFS FINL INC 600 FINANCIAL
<S> <C> <C> <C>
8/9/95 100.00 100.00 100.00
DEC-95 107.44 105.25 116.70
DEC-96 120.45 127.69 149.59
DEC-97 68.18 160.36 229.58
</TABLE>
* $100 invested on 8/09/95 in stock or on 7/31/95 in index -- including
reinvestment of dividends. Fiscal year ending December 31.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH AFFILIATES
SENIOR NOTE
The principal amount due under the Senior Note payable to the Bank is $125
million. The Senior Note provides for principal payments of $25 million per
year, commencing on April 30, 1999 and continuing through its final maturity,
April 30, 2003. Interest payments on the Senior Note are due quarterly, in
arrears, calculated at the rate of 7.25% per annum. The Senior Note is not
secured. Pursuant to the terms of the Senior Note, WFS agreed that until the
Senior Note is paid in full, WFS will not incur any other indebtedness which
16
<PAGE> 20
is senior to the obligations evidenced by the Senior Note except for (i)
indebtedness collateralized or secured under the Line of Credit described below
and (ii) indebtedness for similar types of warehouse lines of credit.
PROMISSORY NOTE
WFS borrowed $50 million from the bank under the terms of the Promissory
Note dated August 1, 1997. The Promissory Note provides for principal payments
in two equal annual installments of $25 million per year, commencing on July 31,
2001. Interest payments on the Promissory Note are due quarterly, in arrears,
calculated at the rate of 9.42% per annum. Pursuant to the terms of the
Promissory Note, WFS may not incur any other indebtedness which is senior to the
obligations evidenced by the Promissory Note except for (i) indebtedness under
the Senior Note (ii) indebtedness collateralized or secured under the Line of
Credit and (iii) indebtedness for similar types of warehouse lines of credit.
The Promissory Note had interest expense of $2.0 million for 1997.
LINE OF CREDIT
The Line of Credit extended by the Bank permits WFS to draw up to $600
million as needed to be used in its operations. WFS does not pay a commitment
fee for the Line of Credit. The term of the Line of Credit commenced on May 1,
1995 and terminates on December 31, 1999 except that such term may be extended
by WFS for additional periods up to 56 months under certain conditions. When
secured, the Line of Credit carries an interest rate equal to the Federal
composite commercial paper rate plus 10 basis points, with the margin increasing
to 50 basis points to the extent the obligation is not secured. Interest on the
amount outstanding under the Line of Credit is paid monthly, in arrears, and is
calculated on the average amount outstanding that month. The Bank has the right
under the Line of Credit to refuse to permit additional amounts to be drawn on
the Line of Credit if, in the Bank's discretion, the amount sought to be drawn
will not be used to finance the Company's purchase of contracts or other working
capital requirements. At December 31, 1997, no amounts were outstanding on the
Line of Credit. The average amount outstanding during 1997 was $107 million.
SHORT TERM INVESTMENTS-PARENT
WFS also invests its excess cash at the Bank under an Investment Agreement.
The Bank pays WFS an interest rate equal to the Federal composite commercial
paper rate on this excess cash. The weighted average interest rate was 5.78% and
5.53% for 1997 and 1996, respectively. The average balance of the excess cash
was $30.0 million and the interest income earned was $1.7 million during 1997.
At December 31, 1997, WFS held $135 million of excess cash with the Bank under
the Investment Agreement.
WFS REINVESTMENT CONTRACT
The Bank has entered into the WFS Reinvestment Contract ("RIC") pursuant to
which WFS receives all of the cash flows from the trusts of the securitization
transactions undertaken by WFS and the cash in each spread account for such
transactions to further invest as WFS determines, including to use in its
business activities. Under the terms of the RIC, WFS is obligated to pay to the
Bank all sums due from the Bank, when due by the Bank, under the terms of the
various reinvestment contracts to which the Bank is a party as to each
securitization transaction. The Bank is obligated pursuant to an agreement
between the Bank and FSA to provide collateral as a condition of the various
reinvestment contracts of the Bank being deemed eligible investments for the
trusts' cash flows and the spread account funds. As consideration to the Bank
for providing that collateral, WFS pays to the Bank a fee equal to 12.5 basis
points of the amount of collateral pledged by the Bank. During 1997, WFS paid to
the Bank $0.7 million for its use of collateral. Unless earlier terminated, the
term of the RIC is perpetual for so long as the RIC constitutes an eligible
investment as defined in any agreement related to each of the securitization
trusts. During 1997, the average amount outstanding on the RIC was $501 million.
At December 31, 1997, the outstanding balance was $612 million.
17
<PAGE> 21
TAX SHARING AGREEMENT
WFS and its subsidiaries (WFAL, WFAL2 and WFSII) are parties to a tax
sharing agreement with Westcorp, the Bank and other subsidiaries of Westcorp,
pursuant to which a consolidated federal tax return is filed for all of the
parties to the agreement. Under the agreement, the tax due by the group is
allocated to each member based upon the relative percentage of each member's
taxable income to that of all members. Each member pays to Westcorp its
estimated share of that tax liability when otherwise due, but in no event may
the amount paid exceed the amount of tax which would have been due if a member
were to file a separate return. A similar process is used with respect to state
income taxes, for those states which permit the filing of a consolidated or
combined return. Tax liabilities to states which require the filing of separate
tax returns for each company are paid by each company. The term of the tax
sharing agreement commenced on the first day of the consolidated return year
beginning January 1, 1994 and continues in effect until the parties to the tax
sharing agreement agree in writing to terminate it. See "Note K -- Income Taxes"
to WFS' Consolidated Financial Statements.
MANAGEMENT AGREEMENTS
WFS has entered into certain management agreements with the Bank and
Westcorp pursuant to which WFS pays its allocated portion of certain costs and
expenses incurred by the Bank and Westcorp with respect to services or
facilities of the Bank and Westcorp used by WFS or its subsidiaries, including
their principal office facilities, field offices of WFS and overhead and
employee benefits pertaining to Bank and Westcorp employees who also provide
services to WFS or its subsidiaries. Additionally, as part of these management
agreements, the Bank and Westcorp have agreed to reimburse WFS for similar costs
incurred. The management agreements may be terminated by any party upon 5 days
prior written notice without cause, or immediately in the event of the other
party's breach of any covenant, obligation, or duty contained in the applicable
management agreement or for violation of law, ordinance, statute, rule or
regulation governing either party to the applicable management agreement.
The Company has entered into an agreement with Westran Services Corp.
("Westran"), which is a subsidiary of Westcorp, to receive travel related
services. The Company believes that the services rendered by Westran are
reasonable and representative of what such costs would have been had WFS used an
unaffiliated entity for such services. Chairman of the Board, Ernest S. Rady,
and entities controlled by him, purchased travel-related services from Westran
in the approximate amount of $38,000. The Company believes that Westran was paid
a fair value for those services.
TRANSACTIONS WITH MANAGEMENT
WFS leases office space for its Encino, California office from Insurance
Company of the West ("ICW"), an affiliate of Mr. Rady, Chairman of WFS, the Bank
and Westcorp. The basic annual rent is adjusted annually and includes a portion
of direct operating expenses. The Encino lease arrangement expires in 2001. The
Company paid $169,148 in rent to ICW in 1997.
The Kearny Mesa Business Center is landlord to WFS' office in San Diego.
Kearny Mesa Business Center is an affiliate of Mr. Rady. The total amount paid
in 1997 pursuant to this lease, which expires in 2001, was $47,334.
RELATIONSHIP WITH THE BANK AND ITS AFFILIATES
In the opinion of the Company, the transactions described herein under the
caption "Transactions with Affiliates" have been on terms no less favorable to
WFS than could be obtained from unaffiliated parties, notwithstanding that the
transactions were not negotiated at arm's length. However, the transactions were
approved by the entire Boards of Directors of WFS, the Bank and Westcorp,
including all of their respective independent directors. Furthermore, any future
transactions with the Bank or affiliated persons will continue to be approved by
a majority of disinterested directors of the Company. See "Supervision and
Regulation -- Westcorp".
18
<PAGE> 22
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT -- WFS
The following table sets forth, as of December 31, 1997, certain security
ownership information as to (a) the person who is beneficial owner of more than
5% of the outstanding shares of the Common Stock, (b) each Director and nominee
of the Company, (c) each of the Named Executive Officers and (d) all Officers
and Directors of the Company as a group. Management knows of no person in this
group, other than the person set forth below, who owns more than 5% of the
outstanding shares of Common Stock.
<TABLE>
<CAPTION>
SHARES OF COMMON
STOCK OF WFS
BENEFICIALLY
OWNED AS OF
DECEMBER 31, PERCENT OF
NAME OF BENEFICIAL OWNER POSITION WITH WFS 1997(1)(2) CLASS
------------------------ ----------------- ---------------- ----------
<S> <C> <C> <C>
Ernest S. Rady Chairman of the Board and Director 24,750 --(3)
Joy Schaefer Vice Chairman of the Board of Directors, 17,700 --(3)
President, Chief Executive Officer and
Chief Operating Officer
Andrey R. Kosovych Vice Chairman of the Board of Directors 33,100 --(3)
Lee A. Whatcott Executive Vice President and Chief 0 N/A
Financial Officer
James R. Dowlan Vice Chairman of the Board of Directors, 12,000 --(3)
Senior Executive Vice President
Howard C. Reese Vice Chairman of the Board of Directors 12,833 --(3)
Bernard E. Fipp Director 0 N/A
Duane A. Nelles Director 3,300 --(3)
Stanley E. Foster Director 10,000 --(3)
Directors and Executive Officers 114,233 --(3)
as a Group (17 persons)
</TABLE>
- ---------------
(1) As of December 31, 1997, the Bank owns 83.7% of the Common Stock of the
Company and Westcorp owned 100% of the Common Stock of the Bank; therefore,
such indirect ownership of Management, Directors and nominees through their
ownership of Westcorp Common Stock is set forth separately in the chart
below.
(2) Includes present rights to acquire shares pursuant to the exercise of stock
options within 60 days of December 31, 1997.
(3) The percentages are calculated on the basis of the number of shares
outstanding. All shares are Common Stock. The Directors and Officers, as a
group, own less than 0.45%.
19
<PAGE> 23
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT -- WESTCORP
The Bank currently owns 83.7% of the shares of WFS' Common Stock. Under
California law, the Bank will, therefore, be able, acting alone, to elect the
entire Board of Directors of the Company and to control the vote on matters
submitted to a vote of the Company's stockholders, including extraordinary
corporate transactions. The Bank is wholly-owned by Westcorp and Mr. Rady
controls approximately 62% of Westcorp. The following table reflects the
ownership of Westcorp Common Stock as of December 31, 1997, by the Named
Executive Officers and the Directors and Executive Officers of WFS as a group.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
NAME OF BENEFICIAL OWNER POSITION WITH WFS OWNERSHIP OF CLASS(1)
------------------------ ---------------------------------- ---------- -----------
<S> <C> <C> <C>
Ernest S. Rady Chairman of the Board 16,271,368(2) 61.89%
Joy Schaefer Vice Chairman of the Board, 34,645(3) 0.13
President,
Chief Executive Officer, Chief
Operating Officer and Director
Howard C. Reese Vice Chairman of the Board, 50,393(4) 0.19
Director
Andrey R. Kosovych Vice Chairman of the Board of 5,000 --(8)
Directors
Bernard E. Fipp Director 0 N/A
Duane A. Nelles Director 2,205 --(8)
Stanley E. Foster Director 165,741(5) 0.630
Lee A. Whatcott Executive Vice President, Chief 14,466(6) --(8)
Financial Officer
James R. Dowlan Vice Chairman of the Board, Senior 54,521(7) 0.21
Executive Vice President and
Director
All Directors and Executive 16,632,264 63.3
Officers as a group (17 persons)
</TABLE>
- ---------------
(1) The percentages are calculated on the basis of the number of shares
outstanding, plus the number of shares which such person or group has a
present right to acquire pursuant to the exercise of stock options within 60
days of December 31, 1997. All shares are Common Stock.
(2) Includes beneficial ownership of 41,796 shares which may be acquired within
60 days of December 31, 1997, pursuant to stock options awarded under stock
option plans plus vested ESOP/401K shares as of November 30, 1997. Mr. Rady
disclaims beneficial ownership of 36,015 shares owned by the DHM Trust #2.
(3) Includes beneficial ownership of 22,326 shares which may be acquired within
60 days of December 31, 1997, pursuant to stock options awarded under stock
option plans plus vested ESOP/401K shares as of November 30, 1997.
(4) Includes beneficial ownership of 6,328 shares which may be acquired within
60 days of December 31, 1997, pursuant to stock options awarded under stock
option plans plus vested ESOP/401K shares as of November 30, 1997.
(5) Includes beneficial ownership of 5,915 shares which may be acquired within
60 days of December 31, 1997, pursuant to stock options awarded under stock
option plans.
(6) Includes beneficial ownership of 7,079 shares which may be acquired within
60 days of December 31, 1997, pursuant to stock options awarded under stock
option plans plus vested ESOP/401K shares as of November 30, 1997.
(7) Includes beneficial ownership of 9,560 shares which may be acquired within
60 days of December 31, 1997, pursuant to stock options awarded under stock
option plans plus vested ESOP/401K shares as of November 30, 1997.
(8) Less than 0.06%.
20
<PAGE> 24
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities and Exchange Act of 1934 requires the
Company's Directors and Executive Officers, and persons who own more than 10% of
a registered class of the Company's equity securities, to file with the
Securities and Exchange Commission reports of ownership and changes in ownership
of Common Stock and other equity securities of the Company. Officers, Directors
and greater than 10% shareholders are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms they file.
Based solely on review of the copies of such reports furnished to the
Company or written representations that no other reports were required, the
Company believes that, during the 1997 fiscal year, all filing requirements
applicable to its Officers, Directors and greater than 10% beneficial owners
were complied with.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
WHO ARE NOT MANAGEMENT
As of March 23, 1998, no person or group other than the Bank, and,
indirectly, Mr. Rady was known to the Company to have owned beneficially more
than 5% of the outstanding shares of the Company's Common Stock. However, on
January 17, 1998, a Schedule 13G was filed stating that Wellington Management
Company, LLP, (71 State Street, Boston, MA 02109) in its capacity as investment
adviser, may be deemed to beneficially own 1,564,400 shares (6.09%) of the
Company which are held of record by its clients. Those clients have the right to
receive, or the power to direct the receipt of, dividends from, or the proceeds
from the sale of, such securities. No such client is known to have such right or
power with respect to more than 5% of such securities.
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
Upon recommendation of the Audit Committee, the international accounting
firm of Ernst & Young, certified public accountants, serves the Company as its
auditors at the direction of the Board of Directors of the Company. One or more
representatives of Ernst & Young are expected to be present at the Meeting and
will have an opportunity to make a statement if they desire to do so and to be
available to respond to appropriate questions.
This matter is not required to be submitted for shareholder approval, and
although shareholder approval is not binding, the Board of Directors has elected
to seek ratification by the affirmative vote of a majority of the shares
represented and voted at the Meeting.
SHAREHOLDER PROPOSALS FOR THE 1999 ANNUAL MEETING
Shareholders who wish to present proposals for action at the 1999 Annual
Meeting should submit their proposals in writing and in conformance with the
bylaws to the Secretary of the Company at the address of the Company set forth
on the first page of this Proxy Statement. Proposals must be received by the
Secretary no fewer than 30 days, nor more than 60 days, prior to the date of the
scheduled annual meeting for inclusion in next year's Proxy Statement and proxy
card. The scheduled date of the Annual Meeting may be obtained from the
Secretary after January 1, 1999.
ANNUAL REPORT TO SHAREHOLDERS
The Annual Report to Shareholders of the Company for the year ended
December 31, 1997, including audited consolidated financial statements, has been
mailed to the shareholders, but such report is not incorporated in this Proxy
Statement and is not deemed to be a part of the proxy solicitation material.
21
<PAGE> 25
OTHER MATTERS
The Management of the Company does not know of any other matters which are
to be presented for action at the Meeting. Should any other matters come before
the Meeting or any adjournment thereof, the persons named in the enclosed proxy
will have the discretionary authority to vote all proxies received with respect
to such matters in accordance with their judgments.
ANNUAL REPORT ON FORM 10-K
A copy of the Company's Annual Report on Form 10-K, as filed with the
Securities and Exchange Commission (exclusive of Exhibits), is included in the
Annual Report. An additional copy will be furnished without charge to any person
from whom the accompanying proxy is solicited upon written request to Harriet
Burns Feller, Esq., WFS Financial Inc, 23 Pasteur Road, Irvine, California
92618. If Exhibit copies are requested, a copying charge of $.20 per page will
be made.
BY ORDER OF THE BOARD OF DIRECTORS
Harriet Burns Feller
Secretary
Irvine, California
March 25, 1998
SHAREHOLDERS ARE URGED TO SPECIFY THEIR CHOICES, DATE, SIGN, AND RETURN THE
ENCLOSED PROXY IN THE ENCLOSED ENVELOPE. PROMPT RESPONSE IS HELPFUL AND YOUR
COOPERATION WILL BE APPRECIATED.
22
<PAGE> 26
REVOCABLE PROXY
WFS FINANCIAL INC
23 Pasteur Road
Irvine, California 92618
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF THE SHAREHOLDERS OF WFS FINANCIAL INC ON APRIL 29, 1998
The undersigned appoints Ernest S. Rady (and in his absence or inability
to serve, Joy Schaefer as alternate proxy) with the power to appoint his
substitute, as proxy and hereby authorizes him and his alternate to represent
and to vote all of the shares of Common Stock held of record by and standing in
the name of the undersigned on March 10, 1998, at the Annual Meeting of
Shareholders of WFS FINANCIAL INC to be held April 29, 1998, or any adjournment
thereof, in accordance with the instructions below and IN FAVOR OF ANY PROPOSAL
AS TO WHICH NO INSTRUCTION IS INDICATED.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND MAY BE
REVOKED PRIOR TO ITS EXERCISE BY FILING WITH THE SECRETARY OF THE COMPANY AN
INSTRUMENT REVOKING THIS PROXY OR A DULY EXECUTED PROXY BEARING A LATER DATE,
OR BY BEING PRESENT AT THE ANNUAL MEETING AND ELECTING TO VOTE IN PERSON.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1, 2 AND 3.
(PROXY CONTINUED ON REVERSE)
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE> 27
Please mark your
votes as indicated
in this example.
[X]
<TABLE>
<CAPTION>
WITHHOLD WITHHOLD
AUTHORITY AUTHORITY
TO VOTE FOR TO VOTE FOR ANY
FOR ALL NOMINEES INDIVIDUAL
LISTED BELOW NOMINEE
<S> <C> <C> <C>
1. ELECTION OF DIRECTORS
Nominees: Bernard E. Fipp, [ ] [ ] [ ]
Stanley E. Foster and
Duane A. Nelles to serve as
Class II Directors of the Company.
WITHHOLD AUTHORITY to vote for any INDIVIDUAL
nominee. (Write name of such nominee below.)
FOR ALL NOMINEES INDIVIDUAL
2. RATIFICATION OF THE APPOINTMENT OF ERNST [ ] [ ] [ ]
& YOUNG AS THE INDEPENDENT AUDITORS
OF THE COMPANY FOR FISCAL YEAR 1998.
FOR ALL NOMINEES INDIVIDUAL
3. Approve the adoption of the Amended and [ ] [ ] [ ]
Restated WFS 1996 Stock Option Plan.
4. OTHER BUSINESS. In accordance with the recommendation of the Company's
Board of Directors, the Proxy is authorized to vote upon such other
business as may properly come before the Meeting and any adjournments
thereof.
</TABLE>
I expect to attend the Meeting. [ ]
Number of Shares Owned:
Signature(s) Date
-------------------------------- --------------------------
Please date this Proxy and sign your name exactly as it appears on your stock
certificate(s). When shares are held by joint tenants, both should sign. When
signing as attorney, executor, administrator, trustee, or guardian, please give
the full title as such. If a corporation, please sign in full corporate name
by President or other authorized Officer. If a partnership, please sign in
partnership name by authorized person.
FOLD AND DETACH HERE
