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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
WESTCORP
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] Fee not required.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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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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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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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
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
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(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[WESTCORP LOGO]
23 PASTEUR
IRVINE, CALIFORNIA 92618
March 30, 2001
Dear Shareholder:
Your are encouraged to join us for Westcorp's Annual Meeting of Shareholders
to be held at 10:00 a.m. on Thursday, May 3, 2001, at our Corporate Headquarters
here in Irvine, California. The Board of Directors and management will be
reviewing a very successful 2000 and presenting strategies for Westcorp's
continued success. You will have the opportunity to express your views and ask
questions.
The business items to be acted on during the meeting are listed in the
Notice of Annual Meeting and are described more fully in the Proxy Statement.
The Board of Directors has considered the proposals and recommends that you vote
FOR them.
Whether or not you plan to attend, we ask that you read the enclosed
materials and complete, sign, date and return the proxy card in the enclosed
envelope as soon as possible. Your vote, regardless of the number of shares you
own, is important. If you attend the Annual Meeting, you may vote in person if
you desire, even if you have previously mailed your proxy card.
We look forward to seeing you at the meeting. On behalf of the Board of
Directors of Westcorp, I want to thank you for your continued support and
confidence.
Sincerely,
Ernest S. Rady
Chairman of the Board and
Chief Executive Officer
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[WESTCORP LOGO]
23 PASTEUR
IRVINE, CALIFORNIA 92618
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 3, 2001
To the Shareholders of Westcorp:
The Annual Meeting of Shareholders of Westcorp, a California corporation,
will be held at our Corporate Headquarters, 23 Pasteur, Irvine, California, on
Thursday, May 3, 2001, at 10:00 a.m., for the following purposes:
1. To elect three Directors for terms expiring in 2003.
2. To ratify the appointment of Ernst & Young LLP as the independent
public accountants for fiscal year 2001.
3. To approve the adoption of the 2001 Stock Option Plan.
4. To amend the Articles of Incorporation to increase the quantity of
authorized Common Stock from 45,000,000 shares to 65,000,000 shares.
5. To transact such other business as may properly come before the Annual
Meeting.
The Board of Directors has selected March 6, 2001, as the Record Date (the
"Record Date") for the Annual Meeting. Those holders of record of our 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 given a proxy has the right to
revoke it at any time before it is voted. If you receive more than one proxy
card because your shares are registered in different names or at different
addresses, each proxy card should be signed and returned to ensure that all your
shares will be properly voted.
By Order of the Board of Directors
Guy Du Bose
Secretary
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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 OUR PROXY MATERIALS SHOULD BE ADDRESSED TO GUY DU BOSE, ESQ.,
WESTCORP, 23 PASTEUR, IRVINE, CALIFORNIA 92618.
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[WESTCORP LOGO]
23 PASTEUR
IRVINE, CALIFORNIA 92618
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PROXY STATEMENT
APPROXIMATE DATE PROXY MATERIAL FIRST SENT TO SHAREHOLDERS:
APRIL 4, 2001
This Proxy Statement constitutes the Proxy Statement of Westcorp, a
California corporation, in connection with the solicitation of proxies by our
Board of Directors for use at our Annual Meeting of Shareholders, otherwise
known as the Meeting, to be held on May 3, 2001.
MEETING DATE AND LOCATION
The Meeting to consider the business described below will be held on May 3,
2001, at 10:00 a.m., at the Corporate Headquarters, 23 Pasteur, Irvine,
California 92618.
PURPOSES
At the Meeting, the shareholders will consider and vote on proposals to (i)
elect Class I Directors of Westcorp to serve until 2003, (ii) ratify the
appointment of Ernst & Young LLP as our independent public accountants for
fiscal year 2001, (iii) approve the adoption of the 2001 Stock Option Plan and
(iv) amend the Articles of Incorporation to increase the quantity of authorized
Common Stock from 45,000,000 shares to 65,000,000 shares.
RECORD DATE; SHAREHOLDERS ENTITLED TO VOTE
The close of business on March 6, 2001, is the Record Date for determination
of our shareholders entitled to notice of and to vote at the Meeting. As of the
Record Date there were 31,961,379 shares of our Common Stock outstanding, $1.00
par value. No shares of any other class of stock are outstanding.
VOTE REQUIRED
Each share of the Common Stock outstanding on the Record Date will be
entitled to one vote with respect to approval of the various proposals submitted
to the shareholders. Ratification of the appointment of Ernst & Young LLP as our
independent public 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 March____, 2001, our Common Stock had a market price of $________ per
share. Our Common Stock is traded on the New York Stock Exchange.
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SOLICITATION AND REVOCATION OF PROXIES
A form of proxy is being furnished by us to each shareholder, and, in each
case, is solicited on behalf of the Board of Directors 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 us.
Proxies duly executed and returned by shareholders and received by us before
the Meeting will be voted FOR the election of Class I Directors specified in
this proxy, FOR the ratification of the appointment of Ernst & Young LLP as our
independent public accountants for fiscal 2001, FOR the adoption of the 2001
Stock Option Plan, and FOR amendment of the Articles of Incorporation to
increase the quantity of authorized Common Stock from 45,000,000 shares to
65,000,000 shares, unless a contrary choice is specified in the proxy. Where a
specification is indicated as provided on the proxy card, the shares represented
by the proxy will be voted and cast in accordance with the specification made.
As to other matters, if any, to be voted upon, the person designated as proxy
will take such actions as he or she, in his or her discretion, may deem
advisable. The persons named as proxy and alternate were selected by our Board
of Directors. Mr. Rady is an Officer and Director of Westcorp and Ms. Schaefer
is an Officer.
Your execution of the enclosed proxy will not affect your right as a
shareholder to attend the Meeting and to vote in person. Any shareholder given 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 our Secretary prior to the
Meeting, or (c) attendance at the Meeting and voting in person.
VOTING SECURITIES
As of the Record Date there were 31,961,379 shares of our Common Stock
outstanding. Only shareholders of record 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.
PROPOSAL 1
ELECTION OF DIRECTORS
At the Annual Meeting, three nominees, Robert T. Barnum, Howard C. Reese and
Charles E. Scribner are nominated for election as Class I Directors, each
Director to serve until 2003 and until their successor is elected and qualified.
Mr. Barnum has been a Director since 1998, Mr. Reese since 1996, and Mr.
Scribner since 1998. The person named as proxy and their alternate in the
accompanying proxy have advised us 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 their
alternate in their discretion will vote for substitute nominees of the Board,
unless otherwise instructed.
THE BOARD OF DIRECTORS RECOMMENDS A FOR VOTE ON PROPOSAL 1.
The following information is submitted concerning the Directors of
Westcorp, including nominees for election, Robert T. Barnum, Howard C. Reese and
Charles E. Scribner.
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DIRECTOR
NAME OF DIRECTOR AGE SINCE WESTCORP
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Judith M. Bardwick**.......................... 68 1994 Director
Robert T. Barnum*............................. 55 1998 Director
Stanley E. Foster**........................... 73 1992 Director
Ernest S. Rady**.............................. 63 1982 Chairman of the Board of Directors
Howard C. Reese*.............................. 69 1996 Director
Charles E. Scribner*.......................... 63 1998 Director
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* Class I Director, to serve until 2003.
** Class II Director, to serve until 2002.
The following information is submitted concerning each of the Directors:
JUDITH M. BARDWICK, PH.D., is President and founder of Bardwick and
Associates, a management consulting firm. In addition to her many academic
achievements, Dr. Bardwick has been an active business consultant for more than
two decades. Dr. Bardwick earned a B.S. degree from Purdue University and an
M.S. from Cornell. She received her Ph.D. from the University of Michigan and
subsequently became a Full Professor and Associate Dean of the College of
Literature, Science and the Arts at that university. Dr. Bardwick has devoted
herself to consulting and business-related research and writing, concentrating
on issues relating to improving organizational efficiency and management skills.
She has been a clinical Professor of Psychiatry at the University of California
at San Diego since 1984 and has worked as a psychological therapist. Her most
recent business book, In Praise of Good Business, was published in 1998. She is
the author of three other books; in addition, she has published more than 70
articles on a wide range of topics during her distinguished career. Dr. Bardwick
has been a director of Westcorp since 1994.
ROBERT T. BARNUM has been a private investor and advisor to several private
equity funds for the past three years. From 1989 until the company's sale in
1997, Mr. Barnum was the CFO, then the COO of American Savings. American Savings
was a $20 billion California thrift that was owned by the Robert M. Bass group.
Mr. Barnum was a director of National Re until its sale to General Re in 1996
and of Harborside Healthcare until its recapitalization in 1997. He is currently
a director of Center Trust Retail Properties (a publicly held REIT); Berkshire
Mortgage Finance, a privately held commercial mortgage bank; and Mr. Barnum is
also a director and Chairman of the Board of Korea First Bank.
Mr. Barnum has been a director of Westcorp since 1998.
STANLEY E. FOSTER has been President and Chief Executive Officer of Foster
Investment Corporation and its predecessor, Ratner Corporation, a real estate
and venture capital investment company headquartered in San Diego, California,
since 1954. Mr. Foster also serves as a director Postal Annex Plus, Inc.;
Accucom, Inc.; Cartronics, Inc.; and Arborvita LLC. Mr. Foster has been a
director of Westcorp since 1992.
ERNEST S. RADY has served as Chairman of the Board and Chief Executive
Officer of Westcorp since 1982. He also served as President from 1982 to March
23, 2000. He has been Chairman of the Board, since 1992, a director since 1982,
and Chief Executive Officer from 1994 to early 1996 and again, from 1998 to
present, of Western Financial Bank, otherwise known as the Bank, a subsidiary of
Westcorp. He also serves as Chairman of the Board of WFS Financial Inc,
otherwise known as WFS, a second tier subsidiary of Westcorp. Mr. Rady is a
principal shareholder, manager and consultant to a group of companies engaged in
real estate management and development; property and casualty insurance; oil and
gas exploration and development; and beverage distribution.
HOWARD C. REESE joined Westcorp in 1987 as President and Chief Executive
Officer of its subsidiary Westcorp Financial Services, Inc. (now WFS). He
retired as President and CEO in 1996, and now serves as a director. He began his
career in consumer finance with Household Finance Corporation in 1953 where he
managed several branch offices in southern California. In 1963, he joined
Fireside Thrift Company as a manager. He progressed through the ranks as
Supervisor, Assistant Vice President and Regional Director, and ultimately to
Operations Vice President in charge of 73 branch offices within the state of
California.
CHARLES E. SCRIBNER was with Bank of America 34 years, retiring in May,
1994. From 1979 to 1983 he was Regional Senior Vice President in charge of the
Orange County/Los Angeles coastal region, responsible for loan deposits and
general operations of 150 branches in the region. From 1984 to 1986 he was
Senior Vice President and General Manager of the northern Asian operation for
Bank of America headquartered in Tokyo, and later became Area Manager of
southern Asia for Bank of America from 1986 through 1989. He was in charge of
all banking activities in eight countries and was headquartered in Singapore.
From 1990 to 1994 he served as Bank of America's Executive Vice President and
General Manager of the southern California Commercial Banking wholesale
activities. Mr. Scribner presently serves on the board of Western Insurance
Holdings and is an advisor of Sutten Capital Management. Except for the noted
directorships, Mr. Scribner has been retired since May, 1994. Mr. Scribner
joined Westcorp's board of directors in January, 1998.
COMMITTEES OF THE BOARD
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We have a standing Audit Committee composed of independent directors Stanley
E. Foster (Chairman), Robert T. Barnum and Charles E. Scribner. Information
regarding the functions performed by the Audit Committee, its membership, and
the number of meetings held during the fiscal year, is set forth in the Report
of the Audit Committee, and the Audit Committee Charter included in this annual
proxy statement.
We have a standing Compensation Committee whose current members are Judith
M. Bardwick, Robert T. Barnum and Charles E. Scribner (Chairman). The
Compensation Committee reviews and approves recommendations for annual salaries
of employees, otherwise known as associates, paid by us and reviews and sets the
levels of compensation of senior management, as well as establishing policies
applicable to, performance related to, and basis for compensation. The
Compensation Committee held two meetings during 2000.
The Executive Committee has the powers of the Board of Directors except as
precluded by law and by our bylaws. The Executive Committee was comprised of
Messrs. Barnum, Rady and Scribner during 2000. While the Executive Committee did
not meet formally during 2000, they discussed business matters on an as needed
basis by telephone throughout the year.
MEETINGS OF THE BOARD
The Board of Directors of Westcorp held a total of six meetings during 2000.
All directors have attended at least 75% of the meetings of the Board of
Directors, except Mr. Barnum who attended 67% of the meetings.
COMPENSATION OF DIRECTORS
Each director who is not also an officer of Westcorp or any of its
subsidiaries received $4,500 per quarterly Board meeting and $2,250 for
non-quarterly Board meetings attended, and $1,000 for each committee meeting
which is not held in conjunction with a Board meeting. Directors who are also
officers of Westcorp or any of its subsidiaries are not compensated for their
services as directors, and directors who attend a Westcorp or WFS board meeting
on the same day are compensated for only one of the two meetings.
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Upon recommendation of the Audit Committee, the international accounting
firm of Ernst & Young LLP, certified public accountants, serves us as our
auditors at the direction of our Board of Directors. This matter is not required
to be submitted for shareholder approval, and although shareholder approval is
not binding, the Board of Directors has elected to seek ratification of the
appointment of Ernst & Young LLP by the affirmative vote of a majority of the
shares represented and voted at the Meeting. Independent auditor fees for the
last fiscal year were: annual audit $220,000; audit related services $649,000;
all other nonaudit services $215,000; and financial information systems design
and implementation fees: none.
One or more representatives of Ernst & Young LLP are expected to be present
at the Meeting and will have an opportunity to make a statement if they desire
to do so and to be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A FOR VOTE ON PROPOSAL 2.
PROPOSAL NO. 3
APPROVAL OF WESTCORP 2001 STOCK OPTION PLAN
At the annual meeting, you will be asked to vote to approve the Westcorp
2001 Stock Option Plan. The Board of Directors believes that it is important to
have stock options available to attract and retain qualified associates and
directors. We recommend that you vote for the plan.
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Vote Required. If a majority of the shares of common stock entitled to vote
at the meeting are voted for the Westcorp 2001 Stock Option Plan, the Plan will
be approved.
Summary of the Plan. Here is a summary of the significant terms of the Plan
approved by the Board of Directors on February 13, 2001. The term "Company"
includes subsidiary and affiliated companies.
Total Number of Shares Covered 3,000,000 (subject to adjustment in the
event of certain changes in the
Company's capital structure). Shares
with respect to which options are issued
but expire or terminate unexercised will
again be available for grant under the
Plan.
Administration The Board of Directors or the
Compensation Committee of the Board (the
"Committee").
Eligible Persons Our directors, officers and other key
associates, and those of our affiliates
and subsidiaries.
Exercise Price Generally the closing price of our
common stock on the date we grant the
option, but it could be lower.
Exercise Price Adjustment The Plan will automatically adjust
unexercised option rights to the extent
they are effected by a change in
capitalization (other than a rights
offering).
Permitted Grants Incentive Stock Options ("ISOs") under
Internal Revenue Code Section 422 or
Non-Qualified Stock Options ("NSOs").
Term of Options Generally 7 years, but it could be
shorter.
Vesting of Options Options will generally vest over a
four-year period, with 25% of the
options becoming exercisable on each
anniversary of the date the option was
granted, however the Committee can alter
this vesting schedule. Upon certain
changes of control, including our sale
or merger, vesting of options may be
accelerated.
Exercise of Options The holder of an option can choose to
pay the exercise price of the option in
cash, with our previously owned common
stock (valued at the closing price of
the common stock on the exercise date)
or, under the Committee's rules, by a
cashless exercise. In a cashless
exercise, the option-holder irrevocably
instructs his or her stockbroker to sell
the shares to be acquired upon exercise
of the option and pay the exercise price
to us.
Termination of Options Options generally terminate 3 months
after termination of employment. This
period is shortened in the case of "for
cause" termination and lengthened in the
case of death or disability.
Transferability Options are not transferable except by
will or by intestate succession or, in
the case of NSOs only, to certain estate
planning trusts or to immediate family
members or pursuant to a qualified
domestic relations order.
Term of Plan The Plan will expire on February 13,
2011, unless we terminate it earlier.
Amendments to Plan The Board of Directors may amend the
Plan, provided that no amendment will
change the rights or obligations with
respect to outstanding stock options
without the consent of the optionee.
Unless required by applicable laws,
regulations or rules, shareholder
approval will not be required to amend
the Plan.
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Federal Income Tax Consequences to Option-Holders. The Plan is not qualified
under Internal Revenue Code Section 401(a) nor is it subject to the Employee
Retirement Income Security Act of 1974. All options granted to non-employee
directors will be NSOs. All others will generally be ISOs, provided that they
meet the requirements of the Internal Revenue Code. ISOs could subsequently
become NSOs.
Non-Statutory Options
An option-holder will generally not recognize any taxable income when the
option is granted. But when the option is exercised, the option-holder will
recognize ordinary income for tax purposes measured by the excess of the then
fair market value of the shares over the exercise price. The income recognized
by an option-holder who is also our associate may be subject to tax withholding
by us by payment of cash or out of the current earnings paid to the
option-holder, or, at the discretion of the Committee, by the delivery of our
previously-owned shares by the withholding of sufficient shares from those
delivered upon exercise. When shares are resold by the option-holder, any
difference between the sale price and the exercise price, to the extent not
recognized as ordinary income as provided above, will be treated as capital gain
or loss. We will be entitled to a deduction in the same amount as the ordinary
income recognized by the option-holder.
Incentive Stock Options
An optionee recognizes no taxable income upon the grant of an ISO. If the
option-holder holds the shares purchased upon exercise of an ISO for at least
two years from the date the ISO is granted, and for at least one year from the
date the ISO is exercised, any gain realized on the sale of the shares received
upon exercise of the ISO is taxed as long-term capital gain. However, the
difference between the fair market value of the common stock on the date of
exercise and the exercise price of the ISO will be treated by the option-holder
as an item of tax preference in the year of exercise for purposes of the
alternative minimum tax. If an option-holder disposes of the shares before the
expiration of either of the two special holding periods noted above, the
disposition is a "disqualifying disposition." In this event, the option-holder
will be required, at the time of the disposition of the common stock, to treat
the lesser of the gain realized or the difference between the exercise price and
the fair market value of the common stock at the date of exercise as ordinary
income and the excess, if any, as capital gain.
We will not be entitled to any deduction for federal income tax purposes as
the result of the grant or exercise of an ISO, regardless of whether or not the
exercise of the ISO results in liability to the option-holder for alternative
minimum tax. However, if an optionee has ordinary income taxable as compensation
as a result of a disqualifying disposition, we will be entitled to deduct an
equivalent amount.
This is only a summary of the federal income tax consequences of the grant
and exercise of options under the Plan. It is not a complete statement of all
tax consequences. In particular, we have not discussed the income tax laws of
any municipality, state, or foreign country where an optionee resides.
PROPOSAL 4
AMEND THE ARTICLES OF INCORPORATION TO INCREASE THE AUTHORIZED COMMON STOCK OF
WESTCORP FROM 45,000,000 SHARES TO 65,000,000 SHARES
We are seeking shareholder approval to an amendment of our Articles of
Incorporation to increase the number of authorized shares by 20,000,000 shares.
Our Articles of Incorporation currently authorize us to issue 45,000,000 shares
of Common Stock. As of the Record Date, 31,961,379 shares have been issued to
our shareholders and approximately 969,000 shares have been reserved for
issuance to our associates and directors upon the grant and exercise of options.
An additional 3,000,000 shares will be reserved for issuance upon the approval
by the shareholders of our 2001 Stock Option Plan. In addition, we have filed a
registration statement to offer up to 3,991,633 shares of our Common Stock to
our shareholders in a rights offering. As a result, the number of authorized
shares that are neither issued nor reserved for issuance is approximately 5,
077,988 shares.
We believe that it is beneficial to have a substantial number of our shares
authorized which are not reserved for specific purposes in order to provide us
with the maximum degree of flexibility in our future activities. These
activities could include further sales of Common Stock in registered offerings,
using stock in connection with executive or associate incentive
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plans or in connection with the acquisition of other businesses. If the our
Articles of Incorporation do not provide sufficient authorized stock, we may not
be able to act as quickly as necessary to complete the activity for which the
issuance of stock might be necessary. It is for this reason that it is quite
common for companies to have authorized share amounts substantially in excess of
the number of shares currently outstanding or reserved for specific purposes.
Accordingly, in order to permit us to have the maximum flexibility possible, we
are seeking to amend our Articles of Incorporation to increase the number of
authorized shares by 20,000,000 shares.
THE BOARD OF DIRECTORS RECOMMENDS A FOR VOTE ON PROPOSAL 4.
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
The following information is provided with respect to executive officers who
are not directors. Some officers providing services to us are employed by
related companies, and provide those services at fair market value to us, while
also serving as officers of Westcorp.
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OFFICER
NAME POSITION AGE SINCE *
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Richard G. Banes............Vice.President, Director of Audit Services 43 1999
Guy Du Bose.................Vice.President, General Counsel and Secretary 46 1992
Nicholas Geber..............Vice.President, Director of New Media of Westcorp 36 2000
Donna J. Lesch..............Senior Vice President, Director of Human Performance 41 1998
Dawn M. Martin..............Senior Vice President, Chief Information Officer 41 1997
Cathy Mungon................Senior Vice President, Director of Operations of WFS 50 1985
Mark Olson..................Vice.President, Controller 37 1994
J. Keith Palmer.............Vice.President, Treasurer 40 1993
Joy Schaefer................President, Chief Operating Officer of Westcorp; Chief 41 1990
Executive Officer, Vice Chairman of WFS
James E. Tecca..............President of the Bank 57 1996
Ron Terry...................Senior Vice President, Chief Credit Officer of WFS 34 2000
Lee A. Whatcott.............Executive Vice President, Chief Financial Officer 41 1988
Thomas Wolfe................Senior Vice President of Westcorp; President, Chief 41 1998
Operating Officer of WFS
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* Officer of Westcorp, WFS or the Bank.
The following is a brief account of the business experience of each
executive officer who is not a director.
RICHARD G. BANES joined us in May 1999 and serves as Vice President,
Director of Audit Services, of Westcorp; Senior Vice President, Director of
Audit Services, of the Bank and WFS. Mr. Banes received his B.S. degree in
Accounting from Arizona State University. He is a licensed Certified Public
Accountant in the state of California and is a member of the American Institute
of Certified Public Accountants and the Institute of Internal Auditors. Prior to
joining Westcorp, Mr. Banes was the Director of Management Audit from 1996 to
1999 for Avco Financial Services, a worldwide sub-prime consumer finance and
auto lending company. From 1993 to 1996 he was Audit Director for First
Interstate Bank, a major U.S. bank that was acquired in 1996 by Wells Fargo
Bank. Prior to First Interstate, Mr. Banes was a financial services audit
professional at Ernst & Young LLP.
GUY DU BOSE has served as General Counsel and Secretary for us since 1999
and as Vice President since 1996. He started as Vice President and Legal Counsel
of the Bank in November, 1992. He became Senior Vice President of the Bank in
1997 and General Counsel and Secretary of the Bank in 1999. Prior to his
association with Westcorp, Mr. Du Bose was Chief Operating Officer and General
Counsel of Guardian Federal Savings, Senior Vice President and General Counsel
of Mercury Federal Savings and Loan Association, and Corporate Counsel of
Southern California Savings. Mr. Du Bose is an active member of the California
State Bar Association and a member of various professional associations.
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NICHOLAS GEBER is Vice President and Director of New Media for Westcorp and
Senior Vice President and Director of New Media for WFS since 2000. Prior to
joining Westcorp, Mr. Geber was Director of E-Commerce for First Alliance
Corporation, a sub-prime mortgage lender, from 1998 to 2000. He also served as
Director of Client Services for Quicknet ICG., Inc., a company involved in the
development of websites, from 1997 to 1998. From 1995 to 1997 Mr. Geber was an
E-Business consultant. Mr. Geber received his B.A. from the University of
California, Los Angeles.
DONNA J. LESCH serves as Senior Vice President, Director of Human
Performance. The Human Performance team is responsible for payroll, compensation
and benefit programs, associate relations, career development programs, the
development and delivery of training, documentation/forms, corporate
communications and supports associates in project management. Ms. Lesch has over
20 years experience in the training, management and organizational development
arena. In 1995 she joined WFS. Previous to joining WFS, from 1990 to 1995, she
managed training functions at American Savings Bank and before that, at
Executrain. She graduated from the University of Washington with a B.A. in
Psychology/Education.
DAWN M. MARTIN has been Senior Vice President and Chief Information Officer
of Westcorp since 1999. Ms. Martin joined the Bank's subsidiary, WFS, in April,
1997 as Senior Vice President, Manager of Network Computing. Prior to joining
the Company, Ms. Martin was Senior Vice President and System Integration Officer
at American Savings Bank where she was employed from 1984 to 1997. Ms. Martin
has more than 20 years of experience in Information Technology within the
financial services industry.
CATHY MUNGON has been Senior Vice President and Director of Operations for
Westcorp's subsidiary, WFS, since 1999. Ms. Mungon's career with the Bank began
in 1981 when she became a member of the Systems/Training Department. She was
promoted to Assistant Vice President of the Bank in 1985. In 1992 she was
promoted to Vice President of Systems/Training and Operations. In 1995 she
transferred to WFS as Vice President of Business Systems Support and Operations.
Prior to joining the Company, Ms. Mungon was a training manager for Morris Plan
and, previous to Morris Plan, Nationwide Finance. Ms. Mungon has 28 years of
consumer finance experience.
MARK OLSON has served as Westcorp's Controller since 1995 and as Vice
President since 1997. He also serves as Senior Vice President and Controller of
the Bank and WFS. He joined the Bank in 1991 as Accounting Systems Director.
Prior to joining the Bank, Mr. Olson was employed by what is now known as Ernst
& Young LLP. Mr. Olson is a licensed Certified Public Accountant in California
and is a member of the American Institute of Certified Public Accountants.
J. KEITH PALMER is Vice President and Treasurer of Westcorp and Senior Vice
President and Treasurer of the Bank. He has also served as Senior Vice President
and Treasurer of WFS since 1995. Prior to joining the Bank in 1993, Mr. Palmer
served as a Capital Markets Examiner with the Office of Thrift Supervision from
1991 to 1993. From 1986 to 1991, Mr. Palmer served in various capacities with
the Office of Thrift Supervision. Mr. Palmer has worked in the banking industry
for 15 years.
JOY SCHAEFER is President and Chief Operating Officer of Westcorp, and is
Chief Executive Officer and Vice Chairman of the Board of Directors of WFS. She
served first as Senior Vice President, Chief Financial Officer and Treasurer of
the Bank since March, 1992, and was elected Executive Vice President in January,
1994 and Chief Operating Officer and Senior Executive Vice President in
December, 1994. Ms. Schaefer joined the Bank on January 1, 1990, as Assistant
Vice President and Assistant Treasurer. Prior to her association with the Bank,
she was a Manager in the financial institutions group of the company now known
as Ernst & Young LLP, in the Long Beach, California and Springfield, Illinois
offices, and with Illinois National Bank in Springfield, Illinois. Ms. Schaefer
also held various positions with Liberty National Bank in Oklahoma City,
Oklahoma, from 1985 to 1988.
JAMES E. TECCA is President of the Bank, serving since March, 1999, after
serving as Executive Vice President since April, 1996 in charge of the
Commercial Banking Group. Mr. Tecca has over 30 years of banking experience in
California, specializing in corporate and retail banking. Prior to joining the
Bank, he was Senior Vice President with Bank of America for 20 years. In
addition, Mr. Tecca was Chief Operating Officer with Bay View Federal Bank in
San Francisco and President and Chief Executive Officer of Girard Savings Bank
in San Diego.
RON TERRY is Senior Vice President and Chief Credit Officer of Westcorp's
subsidiary, WFS. He joined WFS in November, 2000 with over 10 years of
experience in financial services consulting, scorecard development and
automotive risk management. Prior to WFS, Mr. Terry worked for Equifax, from
1999 to 2000, as an Automotive Finance Consultant developing marketing and risk
management strategies. Mr. Terry was Credit Risk Manager at Mitsubishi Motors
Credit of
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America from 1997 to 1999 and, previous to Mitsubishi, Mr. Terry was with
Experian for six years managing the development of generic and custom
scorecards. He received his bachelor's degree in Construction Engineering and
Management and master's degree in Finance.
LEE A. WHATCOTT has served as Executive Vice President since 1999 and as
Chief Financial Officer since 1995. He also serves as Senior Executive Vice
President and Chief Financial Officer of the Bank and WFS. Mr. Whatcott joined
the Bank in 1988 and was named Vice President and Controller in 1992, Senior
Vice President in 1995, Executive Vice President in 1996 and Senior Executive
Vice President in 1999. Prior to joining the Bank, he was employed by what is
now known as Ernst & Young LLP, an international accounting firm. He is licensed
as a Certified Public Accountant in the state of California and is a member of
the American Institute of Certified Public Accountants.
THOMAS WOLFE is Senior Vice President of Westcorp and is also President and
Chief Operating Officer of WFS since March, 1999. Mr. Wolfe began his career
with WFS as Executive Vice President and National Production Manager in April,
1998. Prior to joining WFS, he held the position of National Production Manager
at Key Auto Finance, where he oversaw the production of the indirect auto
finance business which included prime, sub-prime, leasing and commercial
lending. Mr. Wolfe has been in the auto finance and consumer credit industry
since 1982. He previously held positions with Citibank and General Motors
Acceptance Corporation. He graduated from Oregon State University in 1981 with a
degree in finance.
COMPENSATION OF EXECUTIVE OFFICERS
The following table discloses compensation received for the three fiscal
years ended December 31, 2000, by Westcorp's Chairman of the Board and Chief
Executive Officer, and the next four most highly compensated executive officers
in 2000 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
- -------------------------------------------------------------------------------
LONG-TERM COMPENSATION
------------------------------------
WESTCORP WFS
ANNUAL COMPENSATION (1) STOCK STOCK
-------------------------------- OPTIONS OPTIONS AWARDS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(2) OTHER(3) (SHARES) (SHARES) (SHARES) COMPENSATION(4)
- --------------------------- ---- -------- ---------- ---------- ------------ ------------ ---------- ---------------
Ernest S. Rady................... 2000 $300,000 $242,500 0 40,000 0 0 $77,408 (5)
Chairman of the Board of 1999 275,000 250,000 $ 77,361 30,000 0 0 60,765
Directors and Chief Executive 1998 420,000 0 209,135 48,419 (6) 21,198 (7) 0 21,999
Officer
Joy Schaefer..................... 2000 344,160 242,500 0 30,000 0 0 57,754 (8)
Chief Operating Officer and 1999 315,000 225,000 20,684 25,000 0 0 46,454
Senior Executive Vice President 1998 315,000 75,000 70,616 21,145 (6) 16,958 (7) 0 9,117
of the Bank; Chief Executive
Officer and a Vice Chairman of
the Board of WFS
Thomas Wolfe..................... 2000 295,020 225,000 0 25,000 0 0 32,592 (9)
Executive Vice President of the 1999 256,727 195,000 4,256 20,000 0 0 36,207
Bank; President and Chief 1998 136,410 88,772 0 0 15,467 (7) 0 0
Operating Officer of WFS
Lee A. Whatcott.................. 2000 263,333 125,000 0 20,000 0 0 42,955 (10)
Senior Executive Vice President 1999 225,000 115,000 28,135 12,000 0 0 38,515
and Chief Financial Officer of 1998 200,000 56,100 0 14,772 (6) 5,870 (7) 0 10,165
the Bank and WFS
Dawn Martin...................... 2000 194,167 70,000 0 10,000 0 0 17,052 (11)
Senior Vice President and 1999 161,833 55,000 0 5,000 0 0 17,370
Chief Information Officer 1998 146,000 29,784 0 0 0 0 145
- -------------------------------------------------------------------------------
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(1) The compensation for Ernest Rady was paid by us. The compensation of Joy
Schaefer, Thomas Wolfe, Lee Whatcott and Dawn Martin was paid by WFS.
Compensation for officers that are officers of more than one company are
allocated as part of a management agreement based upon time spent.
(2) 1998 and 1999 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 or
WFS Financial options exercised.
(4) Includes above market preferential interest accrued on salary deferral by
executive under deferred compensation plans, plus Company contributions to
EDP IV in 1998 and 1999, and EDP V in 2000 (described below), 401(k) and
ESOP. Westcorp funded $6,186,031 in ESOP contributions for 2000 and a
$1,816,010 401(k) Salary Savings matching contribution for 2000 which
benefits other associates in addition to those named in the Table. The
Plan is described below.
(5) Includes $3,225 in accrued above-market earnings on deferred compensation
and $74,183 employer contribution to 401(k)/ESOP Plan.
(6) Stock options for shares of Westcorp were awarded in 1998 pursuant to a
stock repricing program and exercisable in the future.
(7) Stock options for shares of WFS were awarded in 1998 pursuant to a stock
repricing program and exercisable in the future.
(8) Includes $37,926 in accrued above-market earnings on deferred compensation
and $19,828 employer contribution to 401(k)/ESOP Plan.
(9) Includes $24,712 in accrued above-market earnings on deferred compensation
and $7,880 employer contribution to 401(k)/ESOP Plan.
(10) Includes $22,456 in accrued above-market earnings on deferred compensation
and $20,499 employer contribution to 401(k)/ESOP Plan.
(11) Includes $8,536 in accrued above-market earnings on deferred compensation
and $8,516 employer contribution to 401(k)/ESOP Plan.
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OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on our option grants to the Named
Executive Officers in fiscal 2000. There were no WFS option grants in fiscal
2000.
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POTENTIAL REALIZED
VALUE AT ASSUMED
PERCENTAGE OF ANNUAL RATES OF
TOTAL OPTIONS EXERCISE OR STOCK APPRECIATION
WESTCORP GRANTED TO BASE PRICE FOR OPTION TERM
OPTIONS ASSOCIATES IN (PER SHARE) EXPIRATION --------------------
NAME GRANTED (1) FISCAL 2000 ($) DATE 5%($) 10%($)
- ----------------------------------------------------------------------------------------------------------
Ernest S. Rady...... 40,000 11% 13.25 02/22/07 215,763 502,820
Joy Schaefer........ 30,000 8% 13.25 02/22/07 161,822 377,115
Thomas Wolfe........ 25,000 7% 13.25 02/22/07 134,852 314,263
Lee A. Whatcott..... 20,000 6% 13.25 02/22/07 107,882 251,410
Dawn Martin......... 10,000 3% 13.25 02/22/07 53,941 125,705
- -------------------------------------------------------------------------------
(1) Options were each granted at the market price of the stock at the date of
the grant.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table provides information on aggregated option exercises in
the last fiscal year and fiscal year-end option values in 2000 for the Named
Executive Officers.
- -------------------------------------------------------------------------------
NUMBER OF VALUE OF
UNEXERCISED UNEXERCISED
WESTCORP("W") IN-THE-MONEY
NUMBER OF WESTCORP OPTIONS/ WESTCORP("W")
SHARES ACQUIRED ON WFS("WF") OPTIONS/WFS("WF")
EXERCISE ("W") OPTIONS OPTIONS
NUMBER OF WFS VALUE AT 12/31/00(#) AT 12/31/00($)
SHARES ACQUIRED ON REALIZED EXERCISABLE("E")/ EXERCISABLE("E")/
NAME EXERCISE ("WF") ($) (1) UNEXERCISABLE("U") UNEXERCISABLE("U")
- -------------------------------------------------------------------------------------------------------
Ernest S. Rady................. 0 (W) 0 (W) 39,065 E (W) 93,231 E (W)
0 (WF) 0 (WF) 79,354 U (W) 162,875 U (W)
21,198 E (WF) 245,102 E (WF)
0 U (WF) 0 U (WF)
Joy Schaefer................... 0 (W) 0 (W) 22,339 E (W) 53,176 E (W)
0 (WF) 0 (WF) 53,806 U (W) 108,321 U (W)
30,966 E (WF) 358,044 E (WF)
4,670 U (WF) 53,997 U (WF)
Lee A. Whatcott................ 0 (W) 0 (W) 15,918 E (W) 37,993 E (W)
0 (WF) 0 (WF) 30,854 U (W) 60,420 U (W)
4,402 E (WF) 50,898 E (WF)
1,468 U (WF) 16,974 U (WF)
Thomas Wolfe................... 0 (W) 0 (W) 5,000 E (W) 11,650 E (W)
0 (WF) 0 (WF) 40,000 U (W) 249,700 U (W)
7,583 E (WF) 87,678 E (WF)
7,884 U (WF) 91,159 U (WF)
Dawn Martin.................... 0 (W) 0 (W) 3,500 E (W) 2,912 E (W)
0 (WF) 0 (WF) 14,500 U (W) 23,470 U (W)
0 E (WF) 0 E (WF)
0 U (WF) 0 U (WF)
- -------------------------------------------------------------------------------
(1) Value of exercise of options based on the closing price on the New York
Stock Exchange of Westcorp Common Stock on December 31, 2000 ($15.00) and
the closing price on Nasdaq National Market(R) of WFS Common Stock on
December 31, 2000 ($18.50).
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LONG TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
- -------------------------------------------------------------------------------
Number of Performance Or Estimated Future Payouts Under Non-Stock
Shares, Units Other Period Price Based Plans
Name Or Other Until
Rights (#) Maturation Or
Payout Threshold Target Maximum
($ Or #) ($ Or #) ($ Or #)
- ------------------------------------------------------------------------------------------------------------
Ernest S. Rady
Joy Schaefer (1) (2) (3) (3)
Thomas Wolfe (1) (2) (4) (4)
Lee A. Whatcott (1) (2) (5) (5)
Dawn Martin (1) (2) (6) (6)
- -------------------------------------------------------------------------------
(1) The Named Executive Officer entered into an incentive agreement with us
during the year ended December 31, 2000 pursuant to which the executive
officer will be entitled to receive the fixed incentive bonus specified in
the officer's incentive agreement, provided that (a) our tangible net book
value per common share as of December 31, 2004 equals or exceeds $28.08, as
adjusted at the sole discretion of us, and (b) the executive officer
remains continuously employed by us or our subsidiaries through April 30,
2005. Pursuant to the terms of the incentive agreement, a partial payment
of the incentive bonus is to be made if the executive officer's employment
is terminated by us for reasons other than for cause after April 30, 2003.
No incentive bonus will be paid, in whole or in part, if employment is
terminated for cause at any time prior to April 30, 2005 or if the
executive officer resigns, retires, dies or becomes disabled for more than
six months. A reduced incentive bonus will be paid if the executive officer
accumulates approved medical leave(s) of absence totaling less than six
months. In any event, no incentive bonus will be paid under the incentive
agreement until April 30, 2005.
(2) The executive officer will receive no incentive bonus unless the conditions
set forth in Note 1 are met. The minimum amount payable to the executive
officer will be a pro rated amount based upon the number of months elapsed
from January 1, 2000 to the date of termination, divided by 64, if we meet
the tangible net book value per common share target and the executive
officer is terminated other than for cause after April 30, 2003.
(3) Assuming the conditions set forth in Note 1 are met by us and the executive
officer, the amount payable on April 30, 2005 will be $1.1 million.
(4) Assuming the conditions set forth in Note 1 are met by us and the executive
officer, the amount payable on April 30, 2005 will be $1 million.
(5) Assuming the conditions set forth in Note 1 are met by us and the executive
officer, the amount payable on April 30, 2005 will be $405,000.
(6) Assuming the conditions set forth in Note 1 are met by us and the executive
officer, the amount payable on April 30, 2005 will be $300,000.
EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL ARRANGEMENTS
Of the executive officers named in the Summary Compensation Table, only Ms.
Schaefer and Mr. Whatcott are subject to written employment agreements. Ms.
Schaefer's employment agreement is with WFS, while Mr. Whatcott's employment
agreement is with both Westcorp and WFS. Both agreements were executed as of
February 27, 1998 and are similar as to their terms and conditions. Each
agreement establishes an initial base salary subject to annual review and
provides to Ms. Schaefer and Mr. Whatcott the same basic benefits otherwise
offered to those executive officers with whom no written employment agreement
exists. Both employment agreements also provide that if, as a result of or
following a change of control, Ms. Schaefer or Mr. Whatcott are terminated other
than for cause or are required to relocate to another geographical area, they
will be entitled to two years' compensation, based upon the average of their
salary and bonus for
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the three calendar years preceding the triggering event. Both employment
agreements may be terminated by the employer at any time for cause.
CERTAIN BENEFITS
EXECUTIVE DEFERRAL PLAN V
Effective September 1, 2000, we established a new Executive Deferral Plan
(EDP V) for a select group of management or highly compensated associates of
ours and our subsidiaries as determined by the Board of Directors. The EDP V
Plan is designed to allow participants to defer a portion of their compensation
on a pre-tax basis, and earn tax-deferred interest on these deferrals. A
participant in the EDP V Plan may elect to defer a portion of their compensation
from a minimum of $2,000 a year to a maximum of 50% of their annual base salary
and 100% of any bonus, commission, and incentive. The Plan also provides for an
employer match, at the discretion of the Board of Directors. EDP V provides a
Trust for the security and protection of participant account balances, except in
the case of corporate bankruptcy. In addition, EDP V contains a "change of
control" provision, whereby in the event of a termination of employment within
24 months after a change in control, the termination is treated as a retirement
and retirement distribution elections will then govern the distribution.
Effective August 31, 2000, the former Executive Deferral Plans I through IV
were all terminated and no new deferrals were accepted after that date into
those plans.
STOCK OPTION PLANS
1991 STOCK OPTION PLAN. Our stock option plan was adopted by the Board of
Directors in April, 1991, approved by our shareholders in May, 1991, and amended
with the approval of our shareholders in May, 2000 (the "1991 Stock Option
Plan"). Our associates and directors and associates and directors of our
subsidiaries are eligible to participate under the 1991 Stock Option Plan. The
1991 Stock Option Plan is administered by our Compensation Committee and, in
such capacity, the committee selects associates and directors to whom options
are to be granted and the number of shares to be granted based on established
criteria. No further options may be granted under the 1991 Stock Option Plan
after April 15, 2001, its expiration date. At our May 3, 2001 Annual Meeting our
shareholders will be asked to vote on and adopt a new ten year 2001 Stock Option
Plan to replace the 1991 Stock Option Plan, as described in Proposal 3, above.
Options granted under the 1991 Stock Option Plan may be either "incentive
stock options" or "non-qualified options" within the meaning of the Internal
Revenue Code ("the Code") . However, only non-qualified options may be granted
to directors who are not also associates. The term of the options may not exceed
10 years from the date of grant. However, optionees who own, prior to a grant,
directly or indirectly, 10.0% or more of our outstanding Common Stock, may not
be granted "incentive stock options" with a term greater than 5 years. Options
may be terminated earlier, however, in the event of the death or disability of
the optionee or the optionee ceasing to perform services for Westcorp or its
subsidiaries as provided in the 1991 Stock Option Plan. The options are also
subject to all of the other terms and conditions of the written stock option
agreement between the optionee and us. In 2000, a total of 362,500 options were
granted.
In the aggregate, 3,150,000 shares of our Common Stock may be the subject of
options granted under the 1991 Stock Option Plan. However, the number of shares
subject to options granted under that plan (and the exercise prices for the
options) are subject to adjustment in the event of any change in our outstanding
shares as a result of stock dividends, stock splits or conversions of shares. If
any option expires or terminates without having been exercised in full, the
unpurchased shares become available again for purposes of future incentive and
non-qualified stock options to be granted under the 1991 Stock Option Plan prior
to its expiration date.
WFS STOCK OPTION PLAN. In 1996, WFS adopted the WFS 1996 Stock Option Plan
("WFS Plan"). In the aggregate, 550,000 shares of Common Stock were the subject
of options which may be granted pursuant to the WFS Plan. In 1997, the WFS Plan
was amended to increase the number of WFS shares subject to the plan to
1,100,000. Certain options granted under the WFS Plan are intended to qualify as
"incentive stock options" within the meaning of the Code with other options to
be "non-qualified" options. Options may be granted under the plan to associates
and directors. Options may be granted under the WFS Plan to any WFS optionee
who, in the opinion of the Compensation Committee, is or gives promise of
becoming of exceptional importance to WFS because of experience and ability. The
Compensation Committee
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has the discretion to determine the amounts and times of exercise of options. In
2000, there were no options granted under the WFS Plan.
WESTCORP EMPLOYEE STOCK OWNERSHIP AND SALARY SAVINGS PLAN
WESTCORP EMPLOYEE STOCK OWNERSHIP PLAN (ESOP). The ESOP is a stock savings
plan designed for all eligible associates. The ESOP was designed to provide our
associates and associates of our subsidiaries with stock ownership in Westcorp
to assist in attracting and retaining qualified associates. Each year we may, in
our discretion, make an ESOP contribution to the Plan. The contribution is
designated specifically for each eligible associate and contributions are
allocated to the associate's account based upon years of service and
compensation. We funded $6,186,031 in ESOP contributions for 2000.
WESTCORP SALARY SAVINGS PLAN (401K). The 401(k) Plan is a voluntary
tax-deferred associate retirement savings plan in which our associates and
associates of our subsidiaries may contribute between 1% and 14% of their
pre-tax earnings, subject to annual limits. Under the 401(k) Plan, Westcorp will
match 100% of the first $500 contributed to the 401(k) Plan and then 50% of the
associate's contribution up to a maximum of 6% of their annual compensation.
Contributions are invested according to the associate's fund choices, which
include a variety of fund options and our stock. We funded a $1,816,010 401(k)
Salary Savings matching contribution for 2000.
REPORT OF THE COMPENSATION COMMITTEE
We apply a consistent philosophy to compensation for all associates,
including senior management. This philosophy is based on the premise that our
achievements result from the coordinated efforts of all individuals working
toward common objectives. Each member of the Compensation Committee is a
non-associate director. The members of our Compensation Committee are the same
as the members of the Bank's Compensation Committee. Accordingly, the
Compensation Committee generally sits and deliberates concurrently as the
committee for the Bank and Westcorp and considers the performance of both
companies and their subsidiaries as a whole in making its compensation
determinations.
COMPENSATION PHILOSOPHY
Under the supervision of the Compensation Committee of the Board of
Directors, we have developed and implemented compensation policies, plans and
programs which seek to enhance our profitability, and thus shareholder value, by
aligning closely the financial interests of our senior managers with those of
our shareholders. The Compensation Committee endorses the belief that stock
ownership by management and the granting of stock options to senior executives
and key associates furthers that goal and fosters decision-making by our key
associates with our long-term safety and soundness in mind.
The compensation plans and programs are structured to integrate pay with our
annual and long-term performance goals. The plans and programs are designed to
recognize initiative and achievement and to assist us in attracting and
retaining qualified executives. In furtherance of these goals, annual base
salaries are generally set at competitive levels so that we rely to a large
degree on annual incentive compensation to attract and retain corporate officers
and other key associates with outstanding abilities and to motivate them to
perform to the full extent of their abilities. For the longer term, incentive
stock options are awarded by us, the stock of which is publicly traded.
Incentive compensation is variable and closely tied to corporate, business unit
and individual performance in a manner that encourages a sharp and continuing
focus on building profitability and shareholder value. As a result of the
increased emphasis on tying executive compensation to corporate performance, in
any particular year the total compensation of our executives may be more or less
than the executives of the our competitors, depending upon our 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 our long-term success 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 Westcorp's major businesses.
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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, return on equity, return on assets,
Community Reinvestment Act results, cost controls and productivity. The most
weight is given to profitability as it relates to established goals. Management
goals were established at the beginning of 2000 for those executives and
managers who do not manage production units with direct financial goals. These
goals are tied to the strategic goals of the organization and its overall
profitability.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
In determining the Chief Executive Officer's compensation for 2000, the
Compensation Committee discussed and considered all of the factors discussed
above. The Compensation Committee also considered the factors stated above in
arriving at the award of 2000 bonus compensation for Mr. Ernest Rady as shown in
the Summary Compensation table. The bonus compensation for 2000 reflects the
achievement of management objectives, including improved financial performance,
efficiencies and productivity.
The Committee established 2001 management objectives for the CEO.
STOCK OPTION GRANTS
We use stock options as long-term incentives and expect that we will
continue to use this compensation alternative in the future. In 1991, we
adopted, and the shareholders approved, the 1991 Stock Option Plan that made
3,150,000 shares of Common Stock available for such purposes. The 1991 Stock
Option Plan expires April 15, 2001, and at our May 3, 2001 Annual Meeting
shareholders will be asked to approve and adopt a new ten year 2001 Westcorp
Stock Option Plan which will replace the 1991 Stock Option Plan. Our
Compensation Committee grants incentive stock options to our associates and
associates of our subsidiaries and views such grants less as compensation and
more as an incentive mechanism.
OTHER COMPENSATION PLANS
Other compensation benefits have from time to time been established for the
benefit of our senior executives and other managers and officers and those of
our subsidiaries, 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 and in the Long Term Incentive Plans
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 Westcorp
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 us outweigh the cost of the possible
loss of federal income tax deductions.
COMPENSATION COMMITTEE
Charles E. Scribner, Chairman
Judith M. Bardwick
Robert T. Barnum
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REPORT OF THE AUDIT COMMITTEE
The Audit Committee oversees our financial reporting process on behalf of
the Board of Directors. Management has the primary responsibility for the
financial statements and the reporting process including the systems of internal
controls. In fulfilling its oversight responsibilities, the Committee reviewed
the audited financial statements in the Annual Report with management including
a discussion of the quality, not just the acceptability, of the accounting
principles, the reasonableness of significant judgements, and the clarity of
disclosures in the financial statements.
The Committee reviewed with the independent auditors, who are responsible
for expressing an opinion on the conformity of those audited financial
statements with generally accepted accounting principles, their judgments as to
the quality, not just the acceptability, of the Company's accounting principles
and such other matters as are required to be discussed with the Committee under
generally accepted auditing standards. In addition, the Committee has discussed
with the independent auditors the auditors independence from management and the
Company including the matters in the written disclosures required by the
Independence Standards Board and considered the compatibility of nonaudit
services with the auditors' independence.
The Committee discussed with our internal and independent auditors the
overall scope and plans for their respective audits. The Committee meets with
the internal and independent auditors, with and without management present, to
discuss the results of their examinations, their evaluations of our internal
controls, and the overall quality of our financial reporting. The Committee held
four meetings during fiscal year 2000.
In reliance on the reviews and discussions referred to above, the Committee
recommended to the Board of Directors (and the Board has approved) that the
audited financial statements be incorporated by reference in the Annual Report
on Form 10-K for the year ended December 31, 2000 for filing with the Securities
and Exchange Commission. The Committee and the Board have also recommended,
subject to shareholder approval, the selection of our independent auditors.
The Committee developed the Audit Committee Charter outlining the
responsibilities of the Committee as shown in Appendix A.
AUDIT COMMITTEE
Stanley E. Foster, Chairman
Robert T. Barnum
Charles E. Scribner
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STOCK PRICE PERFORMANCE GRAPH
Set forth below is a line graph depicting the yearly percentage change in
the cumulative total shareholder return on our Common Stock against the
cumulative total return of the S & P 500 Index and SIC Code 6035--Federal
Savings Institutions Index for the period of five fiscal years commencing
January 1, 1996, and ending December 31, 2000.
The Stock Price Performance Graph below shall not be deemed incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933 or under the
Securities Exchange Act of 1934, except to the extent Westcorp specifically
incorporated this information by reference, and shall not otherwise be deemed
filed under such Acts.
COMPARE 5-YEAR CUMULATIVE TOTAL RETURN
AMONG WESTCORP,
S&P 500 INDEX AND SIC CODE INDEX
[PERFORMANCE GRAPH]
ASSUMES $100 INVESTED ON JAN. 01, 1996
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 31, 2000
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SECURITY OWNERSHIP OF MANAGEMENT, DIRECTORS AND NOMINEES
The following table sets forth, as of December 31, 2000, 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,
(c) each of the Named Executive Officers and (d) all Officers and Directors of
Westcorp as a group. Management knows of no person, other than the person set
forth below, who owns more than 5% of the outstanding shares of Common Stock.
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SHARES OF COMMON
STOCK OF WESTCORP
BENEFICIALLY OWNED PERCENT OF
NAME AS OF DECEMBER 31, 2000 CLASS(1)
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Judith M. Bardwick 3,623 (2) --(3)
Robert T. Barnum 19,017 (4) --(3)
Stanley E. Foster 188,949 (5) --(3)
Dawn Martin 7,959 (6) --(3)
Ernest S. Rady 21,689,341 (7) 67.9%
Howard C. Reese 53,086 (8) --(3)
Joy Schaefer 46,318 (9) --(3)
Charles E. Scribner 148,575 --(3)
Lee A. Whatcott 40,503 (10) --(3)
Thomas Wolfe 16,497 (11) --(3)
Directors and Officers as a 22,321,812 69.9%
Group (19 persons)
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(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, 2000. All shares are Common Stock.
(2) Consists of beneficial ownership of 3,623 shares which may be acquired
within 60 days of December 31, 2000, pursuant to stock options awarded
under Stock Option Plans.
(3) Less than 5%.
(4) Includes beneficial ownership of 750 shares which may be acquired within 60
days of December 31, 2000, pursuant to stock options awarded under Stock
Option Plans.
(5) Includes beneficial ownership of 4,123 shares which may be acquired within
60 days of December 31, 2000, pursuant to stock options awarded under Stock
Option Plans.
(6) Consists of beneficial ownership of 6,000 shares which may be acquired
within 60 days of December 31, 2000, pursuant to stock options awarded
under Stock Option Plans plus ESOP/401K shares as of December 31, 2000.
(7) Includes beneficial ownership of 49,065 shares which may be acquired within
60 days of December 31, 2000, pursuant to stock options awarded under Stock
Option Plans plus ESOP/401K shares as of December 31, 2000. Mr. Rady
disclaims beneficial ownership of 43,857 shares owned by the DHM Trust #2.
(8) Consists of beneficial ownership of 1,103 shares which may be acquired
within 60 days of December 31, 2000, pursuant to stock options awarded
under Stock Option Plans plus ESOP/401K shares as of December 31, 2000.
(9) Includes beneficial ownership of 29,839 shares which may be acquired within
60 days of December 31, 2000, pursuant to stock options awarded under Stock
Option Plans plus ESOP/401K shares as of December 31, 2000.
(10) Includes beneficial ownership of 20,918 shares which may be acquired within
60 days of December 31, 2000, pursuant to stock options awarded under Stock
Option Plans plus ESOP/401K shares as of December 31, 2000.
(11) Includes beneficial ownership of 10,217 shares which may be acquired within
60 days of December 31, 2000, pursuant to stock options awarded under Stock
Option Plans plus ESOP/401K shares as of December 31, 2000.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our executive
officers and directors, and persons who own more than ten percent of a
registered class of our equity securities, to file reports of ownership and
changes in ownership with the Securities and Exchange Commission and the New
York Stock Exchange. Officers, directors and greater than ten percent
shareholders are required by regulations of the Securities and Exchange
commission to furnish us copies of all Section 16(a) forms they file.
Based solely on our review of copies of such reports furnished to us or
written representations that no other reports were required, we believe that,
during the 2000 fiscal year, all filing requirements applicable to its officers,
directors and greater than 10% beneficial owners were complied with except
Richard Stephan, Senior Vice President, and American Assets filed late Form 4's
on stock transactions during 2000.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
WHO ARE NOT MANAGEMENT
As of March 20, 2001, except as noted in this item, no person or group other
than Mr. Rady was known to us to have owned beneficially more than 5% of the
outstanding shares of our Common Stock. On February 2, 2001, a Schedule 13G was
filed on behalf of Dimensional Fund Advisors Inc. ("DFA") reflecting beneficial
ownership of greater than 6% of our Common Stock for the year ended December 31,
2000. DFA advised us that the shares, as to which said Schedule 13G was filed,
are owned by various investment advisory clients of DFA or its wholly-owned
subsidiary which is deemed a beneficial owner of the shares only by virtue of
the direct or indirect investment and/or voting discretion it possesses pursuant
to the provisions of investment advisory agreements with such clients.
SHAREHOLDER PROPOSALS FOR THE 2002 ANNUAL MEETING
Shareholders who wish to present proposals for action at the 2002 Annual
Meeting should submit their proposals in writing and in conformance with the
bylaws to our Secretary at the address 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, 2002.
ANNUAL REPORT TO SHAREHOLDERS
Our Annual Report to Shareholders for the year ended December 31, 2000,
including audited consolidated financial statements, has been mailed to the
shareholders, but such report is not incorporated in this Proxy Statement and is
not deemed to be a part of the proxy solicitation material.
OTHER MATTERS
Our Management 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, 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 our Annual Report on Form 10-K, as filed with the Securities and
Exchange Commission (exclusive of Exhibits), is included in the Annual Report;
copies of the Annual Report on Form 10-K and other published reports are
available for free to our shareholders by visiting our website at
www.westcorpinc.com. An additional hard copy will be
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furnished without charge to any person from whom the accompanying proxy is
solicited upon written request to Guy Du Bose, Esq., Westcorp, 23 Pasteur,
Irvine, California 92618. If Exhibit copies are requested, a copying charge of
$.20 per page will be made
BY ORDER OF THE BOARD OF DIRECTORS
Guy Du Bose
Secretary
Irvine, California
March 30, 2001
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.
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APPENDIX A
AUDIT COMMITTEE CHARTER
STATEMENT OF POLICY
This charter governs the operations of the Audit Committee. The Committee
shall review and reassess the charter annually and obtain the approval of the
Board of Directors. The Committee shall provide assistance to the Board of
Directors in fulfilling their oversight responsibility to the shareholders,
potential shareholders, the investment community, and others relating to the
Company's financial statements and the financial reporting process, the systems
of internal accounting and financial controls, the internal audit function, the
annual independent audit of the Company's financial statements, and the
compliance programs as established by management and the Board. In so doing, it
is the responsibility of the Committee to maintain free and open communication
between the Committee, independent auditors, the internal auditors and
management of the Company. In discharging its oversight role, the Committee is
empowered to investigate any matter brought to its attention with full access to
all books, records, facilities, and personnel of the Company and the power to
retain outside counsel, or other experts for this purpose.
ORGANIZATION
The Audit Committee shall be appointed by the Board of Directors and shall
comprise of at least three directors, each of whom are independent of management
and the Company. Members of the Committee shall be considered independent if
they have no relationship that may interfere with the exercise of their
independence from management and the Company. All Committee members shall be
financially literate, and at least one member shall have accounting or related
financial management expertise. Members shall be appointed for a one year term
of office. The chairman of the Committee shall be nominated by the Board from
time to time. No member of the Committee may be removed except by the vote of a
majority of the directors of the Company. The Board of Directors shall fill any
vacancies occurring among the members of the Committee.
ATTENDANCE AT MEETINGS
The Audit Committee may invite such other persons (e.g. the CEO, CFO, and
Director of Audit Services) to its meetings, as it deems necessary. The internal
and independent auditors shall be invited to make presentations to the Committee
as appropriate. The Committee shall hold periodic meetings throughout the year.
A quorum for any meeting shall be a majority of the members. Internal audit or
the independent auditors may convene a meeting if they consider it necessary.
The proceedings of all meetings will be minuted by the secretary of the
Committee who will be the Company secretary, or such other person as nominated
by the Board.
RESPONSIBILITIES AND PROCESSES
The primary responsibility of the Audit Committee is to oversee the
Company's financial reporting process on behalf of the Board and report the
results of their activities to the Board. Management is responsible for
preparing the Company's financial statements, and the independent auditors are
responsible for auditing those financial statements. The Committee in carrying
out its responsibilities believes its policies and procedures should remain
flexible, in order to best react to changing conditions and circumstances. The
Committee should take the appropriate actions to set the overall corporate
"tone" for quality financial reporting, sound business risk practices, and
ethical behavior.
The following shall be the principal recurring processes of the Committee
in carrying out its oversight responsibilities. The processes are set forth as a
guide with the understanding that the Committee may supplement them as
appropriate.
o The Committee shall have a clear understanding with management and the
independent auditors that the independent auditors are ultimately
accountable to the Board and the Audit Committee, as representatives of the
Company's shareholders. The Committee shall have the ultimate authority and
responsibility to evaluate and, where appropriate, replace the independent
auditors. The Committee shall discuss with the auditors their independence
from management and the Company and the matters included in the written
disclosures required by the Independence Standards Board. Annually, the
Committee shall review and recommend to the Board the selection of the
Company's independent auditors, subject to shareholders' approval.
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o In the event of the engagement by management or the Board of Directors of
an independent accounting firm to provide non audit services when the same
firm has been retained to provide audit services, the Committee shall
determine whether such non audit services will, in the opinion of the
Committee, adversely affect the independence of the firm in carrying out
its audit assignments.
o The Committee shall review the qualification of internal audit personnel
and concur in the appointment, replacement, reassignment or dismissal of
the Director of Audit Services. The Committee shall determine the
compensation for the firm performing the internal audit functions of the
Company which shall report directly to the Committee. For administrative
purposes, such firm shall report to the director of audit services who, in
turn, reports to the Committee.
o The Committee shall discuss with internal auditors and the independent
auditors the overall scope and plans for their respective audits including
the adequacy of staffing and compensation and ensure no unjustified
restrictions or limitations are made. Also, the Committee shall discuss
with management, the internal auditors, and the independent auditors the
adequacy and effectiveness of the accounting and financial controls,
including the Company's system to monitor and manage business risk, and
compliance programs. Further, the Committee shall meet separately with the
internal auditors and the independent auditors, with and without management
present, to discuss the results of their examinations. The Committee shall
ensure that significant findings and recommendations made by the internal
auditors, external auditors and regulatory agencies are received and
discussed on a timely basis and management responds to the recommendations.
o The Committee shall review the interim financial statements with management
and the independent auditors prior to the filing of the Company's Quarterly
Report on Form 10-Q. Also, the Committee shall discuss the results of the
quarterly review and any other matters required to be communicated to the
Committee by the independent auditors under generally accepted auditing
standards. The chair of the Committee may represent the entire Committee
for the purposes of this review.
o The Committee shall review with management and the independent auditors the
financial statements to be included in the Company's Annual Report on Form
10-K (or the annual report to shareholders if distributed prior to the
filing of Form 10-K), including their judgment about the quality, not just
acceptability, of accounting principles, the reasonableness of significant
judgments, and the clarity of the disclosures in the financial statements.
Also, the Committee shall discuss the results of the annual audit and any
other matters required to be communicated to the Committee by the
independent auditors under generally accepted auditing standards.
o The Committee chair shall regularly update the Board about Committee
activities and make appropriate recommendations. Also, the chair shall
ensure the Board is aware of internal control and regulatory compliance
matters which may significantly impact the financial condition or affairs
of the business.
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REVOCABLE PROXY
WESTCORP
23 PASTEUR
IRVINE, CALIFORNIA 92618
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS FOR THE ANNUAL MEETING OF THE SHAREHOLDERS
OF WESTCORP ON MAY 3, 2001.
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 6, 2001, at the Annual Meeting of
Shareholders of WESTCORP, to be held May 3, 2001, 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 WESTCORP 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, 3, 4 AND 5.
(Proxy continued on reverse)
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FOLD AND DETACH HERE
Please mark your votes as
indicated in this example.
[X]
WITHHOLD WITHHOLD
AUTHORITY AUTHORITY
TO VOTE FOR TO VOTE FOR ANY
ALL NOMINEES INDIVIDUAL
FOR LISTED BELOW NOMINEE
1. ELECTION OF DIRECTORS
Nominees: Robert T. Barnum, [ ] [ ] [ ]
Howard C. Reese and
Charles E. Scribner to serve as
Class I Directors of Westcorp.
WITHHOLD AUTHORITY to vote for any INDIVIDUAL
nominee. Write name of such nominee below.
FOR AGAINST ABSTAIN
2. RATIFICATION OF THE APPOINTMENT OF ERNST & [ ] [ ] [ ]
YOUNG LLP, AS THE INDEPENDENT PUBLIC ACCOUNTANTS
OF WESTCORP FOR FISCAL YEAR 2001.
FOR AGAINST ABSTAIN
3. APPROVE THE ADOPTION OF THE 2001 STOCK OPTION PLAN. [ ] [ ] [ ]
FOR AGAINST ABSTAIN
4. AMEND THE ARTICLES OF INCORPORATION TO INCREASE THE [ ] [ ] [ ]
QUANTITY OF AUTHORIZED COMMON STOCK FROM 45,000,000
SHARES TO 65,000,000 SHARES
5. OTHER BUSINESS. In accordance with the recommendation of Westcorp's Board
of Directors, the Proxy is authorized to vote upon such other business as
may properly come before the Meeting and any adjournments thereof.
I expect to attend the Meeting. [ ]
Number of Shares Owned:
--------------------------------------------------------
Signature: Signature: Date
--------------------- --------------------- ----------
Please date this Proxy and sign your name exactly as it appears on your stock
certificate(s). When shares are held by joint tenants, both should sign. When
signing as attorney, executor, administrator, trustee, or guardian, please give
the full title as such. If a corporation, please sign in full corporate name by
President or other authorized Officer. If a partnership, please sign in
partnership name by authorized person.
FOLD AND DETACH HERE
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