1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
WESTCORP
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] Fee not required.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------------------
(3) Filing Party:
----------------------------------------------------------------------
(4) Date Filed:
----------------------------------------------------------------------
2
Westcorp Logo
23 PASTEUR
IRVINE, CALIFORNIA 92618
March 28, 2000
Dear Shareholder:
Your are encouraged to join us for Westcorp's Annual Meeting of
Shareholders to be held at 10:00 a.m. on Tuesday, May 23, 2000, at our Corporate
Headquarters here in Irvine, California. The Board of Directors and management
will be reviewing a very successful 1999 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,
/s/ ERNEST S. RADY
Ernest S. Rady
Chairman of the Board and
Chief Executive Officer
3
Westcorp Logo
23 PASTEUR
IRVINE, CALIFORNIA 92618
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 23, 2000
To the Shareholders of Westcorp:
The Annual Meeting of Shareholders of Westcorp, a California corporation,
will be held at the Corporate Headquarters, 23 Pasteur, Irvine, California, on
Tuesday, May 23, 2000, at 10:00 a.m., for the following purposes:
1. To elect three Directors for terms expiring in 2002.
2. To ratify the appointment of Ernst & Young LLP as the independent public
accountants for Westcorp for fiscal 2000.
3. To transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
The Board of Directors has selected March 27, 2000, as the Record Date (the
"Record Date") for the Annual Meeting. Those holders of record of Westcorp's
Common Stock at the close of business on that date are entitled to notice of and
to vote at the Annual Meeting and any adjournment thereof.
All shareholders are requested to complete, date and sign the enclosed
proxy card promptly and return it in the accompanying postage prepaid
self-addressed envelope, whether or not they expect to attend the Annual
Meeting, in order to assure that their shares will be represented.
Since mail delays occur, it is important that the proxy card be mailed well
in advance of the Annual Meeting. Any shareholder giving a proxy has the right
to revoke it at any time before it is voted. If you receive more than one proxy
card because your shares are registered in different names or at different
addresses, each proxy card should be signed and returned to ensure that all your
shares will be properly voted.
By Order of the Board of Directors
Guy Du Bose
Secretary
IMPORTANT
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE,
DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE.
FOR BANKS, BROKERAGE HOUSES AND NOMINEE HOLDERS, REQUESTS FOR ADDITIONAL
COPIES OF WESTCORP'S PROXY MATERIALS SHOULD BE ADDRESSED TO GUY DU BOSE, ESQ.,
WESTCORP, 23 PASTEUR, IRVINE, CALIFORNIA 92618.
4
Westcorp Logo
23 PASTEUR
IRVINE, CALIFORNIA 92618
------------------------
PROXY STATEMENT
APPROXIMATE DATE PROXY MATERIAL FIRST SENT TO SHAREHOLDERS:
MARCH 31, 2000
This Proxy Statement constitutes the Proxy Statement of Westcorp, a
California corporation, in connection with the solicitation of proxies by the
Board of Directors of Westcorp for use at the Annual Meeting of Shareholders to
be held on May 23, 2000, and any adjournments thereof (the "Meeting").
MEETING DATE AND LOCATION
The Meeting to consider the business described below will be held on May
23, 2000, 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 II Directors of Westcorp to serve until 2002, and (ii) ratify the
appointment of Ernst & Young LLP as Westcorp's independent public accountants
for fiscal 2000.
RECORD DATE; SHAREHOLDERS ENTITLED TO VOTE
The close of business on March 27, 2000, is the Record Date for
determination of the shareholders of Westcorp entitled to notice of and to vote
at the Meeting. As of the Record Date there will be 26,597,344 shares of
Westcorp's Common Stock outstanding, $1.00 par value, subject to such additional
shares as may be exercised pursuant to stock options. 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
Westcorp's 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 Monday, March 20, 2000, Westcorp Common Stock had a market price of
$13.1875 per share. The Common Stock of Westcorp is traded on the New York Stock
Exchange.
SOLICITATION AND REVOCATION OF PROXIES
A form of proxy is being furnished by Westcorp to each shareholder, and, in
each case, is solicited on behalf of the Board of Directors of Westcorp 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 Westcorp.
5
Proxies duly executed and returned by shareholders and received by Westcorp
before the Meeting will be voted FOR the election of Class II Directors
specified herein and FOR the ratification of the appointment of Ernst & Young
LLP as Westcorp's independent public accountants for fiscal 2000, unless a
contrary choice is specified in the proxy. Where a specification is indicated as
provided on the proxy card, the shares represented by the proxy will be voted
and cast in accordance with the specification made. As to other matters, if any,
to be voted upon, the person designated as proxy will take such actions as he or
she, in his or her discretion, may deem advisable. The persons named as proxy
and alternate were selected by the Board of Directors of Westcorp. 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 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 Westcorp prior
to the Meeting, or (c) attendance at the Meeting and voting in person.
VOTING SECURITIES
As of the Record Date there will be 26,597,344 shares of Westcorp's Common
Stock outstanding, subject to such additional shares as may be issued upon
exercise of stock options. Only shareholders of record on the books of Westcorp
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, Judith M. Bardwick, Stanley E.
Foster and Ernest S. Rady are nominated for election as Class II Directors, each
Director to serve until 2002 and until their successor is elected and qualified.
Dr. Bardwick has been a Director since 1994, Mr. Foster since 1992 and Mr. Rady
since 1982. The person named as proxy and their alternate in the accompanying
proxy have advised Westcorp 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, Judith M. Bardwick, Stanley E. Foster
and Ernest S. Rady.
---------------------------------------------------------------------------
DIRECTOR
NAME OF DIRECTOR AGE SINCE WESTCORP
- -----------------------------------------------------------------------------------------
Judith M. Bardwick**................ 67 1994 Director
Robert T. Barnum*................... 54 1998 Director
Stanley E. Foster**................. 72 1992 Director
Ernest S. Rady**.................... 62 1982 Chairman of the Board of Directors
Howard C. Reese*.................... 68 1996 Director
Charles E. Scribner*................ 62 1998 Director
---------------------------------------------------------------------------
* Class I Director, to serve until 2001.
** Class II Director, to serve until 2002.
2
6
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.; Arborvita LLC; and Hot Topic, Inc. 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, 1999. He is also 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 ("Bank"), a subsidiary of Westcorp. He also
serves as Chairman of the Board of WFS Financial Inc ("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 continues to serve in a consulting
capacity. He began his career in consumer finance with Household Finance
Corporation in 1953 where he managed several branch offices in southern
California. In 1963, he joined Fireside Thrift Company as a manager. He
progressed through the ranks as Supervisor, Assistant Vice President and
Regional Director, and ultimately to Operations Vice President in charge of 73
branch offices within the state of California.
CHARLES E. SCRIBNER was with Bank of America 34 years, retiring in May,
1994. From 1979 to 1983 he was Regional Senior Vice President in charge of the
Orange County/Los Angeles coastal region, responsible for loan deposits and
general operations of 150 branches in the region. From 1984 to 1986 he was
Senior Vice President and General Manager of the northern Asian operation for
Bank of America headquartered in Tokyo, and later became Area Manager of
southern Asia for Bank of America from 1986 through 1989. He was in charge of
all banking activities in eight countries and was headquartered in Singapore.
From 1990 to 1994 he served as Bank of America's Executive Vice President and
General Manager of the southern California Commercial Banking wholesale
activities. Mr. Scribner presently serves on the board of Western Insurance
Holdings and
3
7
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
Westcorp has a standing Audit Committee, consisting at present of Robert T.
Barnum, Stanley E. Foster (Chairman) and Charles E. Scribner. The functions of
the Audit Committee are to make recommendations to the Board with respect to the
engagement of Westcorp's independent public accountants; to review the
effectiveness of Westcorp's systems of internal controls; and to review, upon
the request of management, professional services to be provided to Westcorp by
outside auditors. Westcorp has contracted with its outside auditors to perform
expanded audit procedures previously performed by an internal audit department.
The Audit Committee held four meetings in 1999.
Westcorp has 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 (hereinafter referred to as "associates") paid by Westcorp 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 1999.
The Executive Committee has the powers of the Board of Directors except as
precluded by law and Westcorp's bylaws. The Executive Committee was comprised of
Messrs. Barnum, Rady and Scribner during 1999. While the Executive Committee did
not meet formally during 1999, 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 ten meetings during
1999. All directors have attended at least 80% of the meetings of the Board of
Directors.
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 Westcorp as its
auditors at the direction of the Board of Directors of Westcorp. One or more
representatives of Ernst & Young LLP are expected to be present at the Meeting
and will have an opportunity to make a statement if they desire to do so and to
be available to respond to appropriate questions.
This matter is not required to be submitted for shareholder approval, and
although shareholder approval is not binding, the Board of Directors has elected
to seek ratification of the appointment of
4
8
Ernst & Young LLP by the affirmative vote of a majority of the shares
represented and voted at the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A FOR VOTE ON PROPOSAL 2.
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
The following information is provided with respect to the executive
officers of Westcorp who are not directors. Some officers providing services to
Westcorp are employed by related companies of Westcorp, and provide those
services at fair market value to Westcorp, while also serving as officers of
Westcorp.
- --------------------------------------------------------------------------------
OFFICER
NAME POSITION AGE SINCE*
- ------------------------------------------------------------------------------------------------------
Richard G. Banes............... Vice President and Director of Audit Services 42 1999
Guy Du Bose.................... Vice President, General Counsel and Secretary 45 1992
Kevin R. Farrenkopf............ Senior Vice President of the Bank 38 1987
Donna J. Lesch................. Senior Vice President and Director of Human 40 1998
Performance
Dawn M. Martin................. Senior Vice President and Chief Information Officer 40 1997
Mark Olson..................... Vice President and Controller 36 1994
J. Keith Palmer................ Vice President and Treasurer 39 1993
Joy Schaefer................... President and Chief Operating Officer of Westcorp; 40 1990
Chief Executive Officer and Vice Chairman of WFS
Richard W. Stephan............. Senior Vice President and Chief Technology Officer 61 1994
James E. Tecca................. President of the Bank 56 1996
Lee A. Whatcott................ Executive Vice President and Chief Financial Officer 40 1988
Thomas Wolfe................... Senior Vice President of Westcorp; President and Chief 40 1998
Operating Officer of WFS
- --------------------------------------------------------------------------------
* 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 Westcorp in May 1999 and serves as Vice President,
Director of Audit Services, of Westcorp; Senior Vice President, Director of
Audit Services, of Western Financial Bank and WFS Financial. 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.
5
9
KEVIN R. FARRENKOPF has served as Senior Vice President of the Retail
Banking Division of the Bank since October, 1995, after serving as Divisional
Vice President for Retail Banking since 1994. Previously, Mr. Farrenkopf served
as Regional Vice President in 1993, Vice President in 1990 and Branch Manager in
1987, which is also the year he was hired. He has 17 years experience in the
industry, the first four spent at Norwest Financial, Inc.
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, a subsidiary of the Bank. 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.
MARK OLSON has served as Westcorp's Controller since 1998 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.
RICHARD W. STEPHAN has served as a Westcorp Senior Vice President since
1996 and Chief Technology Officer since 1999, after serving as Chief Information
Officer from 1996 to 1999. He is also Executive Vice President and Chief
Technology Officer of the Bank and WFS. Mr. Stephan has over 25 years of
experience in the information technology field with the last 20 years in the
financial institution services industry. Prior to his association with Westcorp,
Mr. Stephan was an Executive Vice President of FiServ, Inc., a major provider of
information services to the banking industry and he was a partner with the
company now known as Ernst and Young LLP, where he managed the consulting
practice for the Western Region, served as the Senior Technology Partner for the
firm for the banking industry and was a member of the planning committee for the
firm-wide banking
6
10
practice. Mr. Stephan is a member of the Chief Information Officer National
Association and is a Certified Systems Professional.
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.
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.
7
11
COMPENSATION OF EXECUTIVE OFFICERS
The following table discloses compensation received for the three fiscal
years ended December 31, 1999, by Westcorp's Chairman of the Board and Chief
Executive Officer, and the next four most highly compensated executive officers
in 1999.
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................. 1999 $275,000 $250,000 $ 77,361 30,000 0 0 $60,765(5)
Chairman of the Board of 1998 420,000 0 209,135 48,419(6) 21,198(7) 0 21,999
Directors and Chief Executive 1997 420,000 0 0 50,000 0 0 33,875
Officer
Joy Schaefer................... 1999 315,000 225,000 20,684 25,000 0 0 46,454(8)
President and Chief Operating 1998 315,000 75,000 70,616 21,145(6) 16,958(7) 0 9,117
Officer of Westcorp; Chief 1997 268,740 80,622 152,109 15,000 35,000 0 24,540
Executive Officer and Vice
Chairman of the Board of WFS;
and Chief Operating Officer
and Senior Executive Vice
President of the Bank
Thomas Wolfe................... 1999 256,727 195,000 4,256 20,000 0 0 36,207(9)
Senior Vice President of 1998 136,410 88,772 0 0 15,467(7) 0 0
Westcorp; President and 1997 N/A N/A N/A N/A N/A N/A N/A
Chief Operating Officer of
WFS; and Executive Vice
President of the Bank
Lee A. Whatcott................ 1999 225,000 115,000 28,135 12,000 0 0 38,514(10)
Executive Vice President and 1998 200,000 56,100 0 14,772(6) 5,870(7) 0 10,165
Chief Financial Officer of 1997 175,000 58,275 0 11,000 11,000 0 21,586
Westcorp; Senior Executive
Vice President and Chief
Financial Officer of the Bank
and WFS
James E. Tecca................. 1999 166,500 85,000 0 12,000 0 0 33,144(11)
President of the Bank 1998 156,000 43,680 0 8,734(6) 0 0 863
1997 156,000 15,600 0 7,500 0 0 12,577
- --------------------------------------------------------------------------------
(1) The compensation of Ms. Schaefer, Messrs. Wolfe and Whatcott was paid by
WFS. Mr. Tecca's compensation was paid by the Bank. The compensation for Mr.
Rady was paid by Westcorp. Compensation for officers that are officers of
more than one company are allocated as part of a management agreement based
upon time spent.
(2) 1997 and 1998 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 contribution to
EDP4 in 1997 and 1998 (described below), 401(k) and ESOP. A contribution of
$6,974,554 was funded for 1999 to the Savings Plan (401(k) and ESOP) which
benefits other associates in addition to those named in the Table. The Plan
is described below.
(5) Includes $10,313 in accrued above-market earnings on deferred compensation,
$19,508 employer contribution to 401(k)/ESOP Plan and $30,944 partial
reimbursement of taxes incurred on the exercise of non-qualified stock
options.
(6) Stock options for shares of Westcorp, the parent company, were awarded in
1998 pursuant to a stock repricing program and exercisable in the future.
8
12
(7) Stock options for shares of WFS were awarded in 1998 pursuant to a stock
repricing program and exercisable in the future.
(8) Includes $34,224 in accrued above-market earnings on deferred compensation
plus $12,230 employer contribution to 401(k)/ESOP Plan.
(9) Includes $26,181 in accrued above-market earnings on deferred compensation
plus $10,026 employer contribution to 401(k)/ESOP Plan.
(10) Includes $25,266 in accrued above-market earnings on deferred compensation
plus $13,248 employer contribution to 401(k)/ESOP Plan.
(11) Includes $17,421 in accrued above-market earnings on deferred compensation
plus $15,723 employer contribution to 401(k)/ESOP Plan.
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on Westcorp option grants to the
Named Executive Officers in fiscal 1999. There were no WFS option grants in
fiscal 1999.
- --------------------------------------------------------------------------------
POTENTIAL REALIZED
VALUE AT ASSUMED
PERCENTAGE OF ANNUAL RATES OF
TOTAL OPTIONS EXERCISE OR STOCK APPRECIATION
WESTCORP GRANTED TO BASE PRICE FOR OPTION TERM
OPTIONS ASSOCIATES IN (PER SHARE) EXPIRATION -------------------
NAME GRANTED(1) FISCAL 1999 ($) DATE 5%($) 10%($)
- ---------------------------------------------------------------------------------------------------------
Ernest S. Rady.............. 30,000 11% 12.67 04/27/06 154,739 360,607
Joy Schaefer................ 25,000 9% 12.67 04/27/06 128,949 300,506
James E. Tecca.............. 12,000 4% 12.67 04/27/06 61,896 144,243
Lee A. Whatcott............. 12,000 4% 12.67 04/27/06 61,896 144,243
Thomas Wolfe................ 20,000 7% 12.67 04/27/06 103,159 240,405
- --------------------------------------------------------------------------------
(1) Options were each granted at the market price of the stock at the date of
the grant.
9
13
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 1999 for the Named
Executive Officers.
- --------------------------------------------------------------------------------
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
WESTCORP ("W") WESTCORP ("W")
OPTIONS/ OPTIONS/WFS
NUMBER OF WESTCORP WFS ("WF") ("WF")
SHARES ACQUIRED ON OPTIONS OPTIONS
EXERCISE ("W") AT 12/31/99(#) AT 12/31/99($)
NUMBER OF WFS VALUE EXERCISABLE ("E")/ EXERCISABLE ("E")/
SHARES ACQUIRED ON REALIZED UNEXERCISABLE UNEXERCISABLE
NAME EXERCISE ("WF") ($)(1) ("U") ("U")
- -------------------------------------------------------------------------------------------------------
Ernest S. Rady 9,096(W) 77,361(W) 19,460 E(W) 36,974 E(W)
0(WF) 0(WF) 58,959 U(W) 109,922 U(W)
15,898 E(WF) 225,633 E(WF)
5,300 U(WF) 75,220 U(WF)
Joy Schaefer 2,756(W) 20,684(W) 19,203 E(W) 38,334 E(W)
0(WF) 0(WF) 35,342 U(W) 65,400 U(W)
22,056 E(WF) 313,030 E(WF)
13,580 U(WF) 192,734 U(WF)
James E. Tecca 0(W) 0(W) 5,286 E(W) 10,043 E(W)
0(WF) 0(WF) 15,448 U(W) 28,511 U(W)
0 E(WF) 0 E(WF)
0 U(WF) 0 U(WF)
Lee A. Whatcott 3,308(W) 28,135(W) 13,425 E(W) 26,432 E(W)
0(WF) 0(WF) 17,547 U(W) 32,500 U(W)
2,935 E(WF) 41,655 E(WF)
2,935 U(WF) 41,655 U(WF)
Thomas Wolfe 0(W) 0(W) 0 E(W) 0 E(W)
300(WF) 4,256(WF) 20,000 U(W) 36,600 U(W)
3,641 E(WF) 51,675 E(WF)
11,826 U(WF) 167,840 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, 1999 ($14.50) and the
closing price on NASDAQ of WFS Common Stock on December 31, 1999 ($21.125).
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 they will be entitled to two years'
compensation, based upon the average of their salary and bonus for the three
calendar years preceding the triggering event. Both employment agreements may be
terminated by the employer at any time for cause.
10
14
CERTAIN BENEFITS
EXECUTIVE DEFERRAL PLANS
Effective August 1, 1985, Westcorp established an Executive Deferral Plan
("EDP") for certain senior executives of Westcorp and its subsidiaries as
determined by the Board of Directors. A participant in the EDP may defer a
portion of their compensation from a minimum of $2,000 a year to a maximum of
75% of their gross annual salary. The employer matches contributions up to 5% of
a participant's annual salary, excluding bonus. After the seventh year of
participation, there is a mandatory lump sum distribution to the participant of
the first four years' deferrals with interest thereon at Moody's Investors
Service Seasoned Corporate Bond Rate (the "Moody's Rate") plus 3%. Upon
retirement following not less than 10 years participation in the EDP and the
attainment of at least age 65, a participant's account will yield a compound
interest rate equal to the Moody's Rate plus 8%. A participant's account balance
is (i) the employer's contribution and (ii) deferrals for the fifth and
subsequent years of participation. Retirement benefits are paid out over a
15-year period.
Benefits owing under the EDP are paid by the employer through borrowings
against or proceeds from insurance policies on the lives of the participants
purchased by the employer.
Effective September 1, 1988, Westcorp established a second Executive
Deferral Plan ("EDP2") for certain participating executives as determined by its
Board of Directors. A participant in EDP2 may defer a portion of compensation
from a minimum of $2,000 a year to a maximum of 5% of base annual salary,
excluding bonus. The employer matches contributions up to 5% of a participant's
base annual salary, excluding bonus. Interest is credited to a participant's
account at Moody's Rate plus 5%.
Benefits provided by EDP2 are paid by the employer through borrowings
against or proceeds from insurance policies on the lives of the participants
purchased by the employer.
Effective May 1, 1992, Westcorp established a third Executive Deferral Plan
("EDP3") for certain participating executives as determined by its Board of
Directors. A participant may defer a portion of compensation from a minimum of
$2,000 a year to a maximum of 10% of base annual salary. There is no employer
match in EDP3, unlike EDP1 and EDP2. Interest is credited to a participant's
account at the Moody's Rate. Participant's first year's contribution plus
interest will be distributed beginning in the sixth year. Participant's second
year's contribution plus interest will be distributed in year seven and so on.
If a participant terminates employment, he receives all deferrals plus interest.
Effective September 1, 1995, Westcorp established a fourth Executive
Deferral Plan ("EDP4") for certain participating executives as determined by the
Board of Directors. A participant in EDP4 may defer a portion of compensation
from a minimum of $2,000 per year to a maximum of 10% of base annual salary.
There may be an employer match in EDP4 at the discretion of the Board of
Directors.
Additionally, associates required to take distribution from earlier EDP
plans, may elect, under EDP3 and EDP4, to defer an additional amount up to the
distribution they are required to take. This additional deferral is not eligible
for any employer matching provisions.
All deferrals are eligible for interest payments and interest is credited
to a participant's account at the Moody's Rate. Participant's distributions are
intended to occur upon retirement following not less than 5 years of
participation in the EDP and the attainment of at least age 65, or upon
termination of employment. Participants receiving distributions can elect to
receive them paid out over five, ten or fifteen years or in a lump sum option.
The Plan was amended in 1997 to allow greater flexibility in changing retirement
elections in the year prior to planned retirement.
11
15
STOCK OPTION PLANS
1991 STOCK OPTION PLAN. The Westcorp stock option plan was adopted by the
Board of Directors of Westcorp in April, 1991, and approved by its shareholders
in May, 1991, (the "1991 Stock Option Plan"). As amended in 1999, associates and
directors of Westcorp, the Bank and WFS, and associates of its other
subsidiaries are eligible to participate under the 1991 Stock Option Plan. The
1991 Stock Option Plan is administered by the Westcorp Compensation Committee
and, in such capacity, the committee selects 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.
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 the outstanding Common Stock of
Westcorp, may not be granted "incentive stock options" with a term greater than
5 years. Options may be terminated earlier, however, in the event of the death
or disability of the optionee or the optionee ceasing to perform services for
Westcorp or its subsidiaries as provided in the 1991 Stock Option Plan. The
options are also subject to all of the other terms and conditions of the written
stock option agreement between the optionee and Westcorp. In 1999, a total of
259,500 options were granted.
In the aggregate, 3,150,000 shares of Westcorp Common Stock may be the
subject of options granted under the 1991 Stock Option Plan. However, the number
of shares subject to options granted under such plan (and the exercise prices
for the options) are subject to adjustment in the event of any change in the
outstanding shares of Westcorp as a result of stock dividends, stock splits or
conversions of shares. If any option expires or terminates without having been
exercised in full, the unpurchased shares become available again for purposes of
future incentive and non-qualified stock options to be granted under the 1991
Stock Option Plan.
WFS STOCK OPTION PLAN
In 1996, WFS adopted the WFS 1996 Stock Option Plan ("WFS Plan"). In the
aggregate, 550,000 shares of Common Stock were the subject of options which may
be granted pursuant to the WFS Plan. In 1997, the WFS Plan was amended to
increase WFS shares subject to the WFS Plan to 1,100,000. Certain options
granted under the WFS Plan are intended to qualify as "incentive stock options"
within the meaning of the Code with other options to be "non-qualified" options;
options may also be granted under the WFS Plan that are not intended to qualify
as "incentive" stock options. Options may be granted under the WFS Plan to
associates and directors of WFS. Options may be granted under the WFS Plan to
any WFS optionee who, in the opinion of the Compensation Committee, is or gives
promise of becoming of exceptional importance to WFS because of experience and
ability. The Compensation Committee has the discretion to determine the amounts
and times of exercise of options. In 1999, there were no options granted.
WESTCORP EMPLOYEE STOCK OWNERSHIP AND SALARY SAVINGS PLAN
The Westcorp Employee Stock Ownership Plan (the "Original ESOP") was
adopted originally in 1975. The Original ESOP was restated in 1985, and a
determination letter was issued by the Internal Revenue Service in 1986 stating
that the Original ESOP was a qualified plan under Section 401(a) of the Code.
The first amendment to the restated plan was adopted in 1986. Westcorp's
Employee Salary Savings Plan (the "Savings Plan") was adopted originally in
1982. It subsequently was amended and restated in 1985. The Internal Revenue
Service determined that the Savings Plan was a qualified plan under Section
401(a) of the Code and met the requirements of Section 401(k) of the Code. The
first amendment to the restated Savings Plan was adopted in 1986. Effective
January 1, 1990, the Savings Plan and the Original ESOP were consolidated into
the
12
16
Westcorp Employee Stock Ownership and Salary Savings Plan (the "Plan"). The Plan
was restated in 1997 and the first amendment to the restated Plan was in 1998.
Three additional amendments were adopted in 1999. The Westcorp Salary Savings
Plan allows the employee to make tax-deferred contributions into this Plan. The
Employee Stock Ownership Plan ("ESOP") is an employer discretionary plan that
makes contributions to the employee account in the Plan based on profitability
of the Company.
The Plan is administered by a Committee which is appointed by the Board of
Directors and consists of at least three members. All of our associates and
associates of our subsidiaries are eligible to participate in the Plan after
satisfaction of minimum service and age requirements. Each year Westcorp may, in
its discretion, make an ESOP contribution to the 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 Westcorp makes an ESOP contribution, it is allocated
to each participant's ESOP Contribution Account (as defined in the Plan) in the
same proportion as that participant's "units" bear to the total number of
"units" credited to all participants for that year. Eligible associates may also
elect to contribute from 1.0% to 10.0% of their earnings to a Salary Savings
Contribution Account (as defined in the Plan). Each year Westcorp makes a
matching employer contribution which is allocated to the Matching Contribution
Account (as defined in the Plan) for each participant that makes a Salary
Savings contribution for such year. When Westcorp makes a matching employer
contribution, it is allocated to the Matching Contribution Account in the same
proportion that each associate's contribution of up to 6.0% of earnings bears to
the total of all contributions of up to 6.0% of earnings. Westcorp's annual
contribution to a participant's ESOP Contribution Account and Matching Employer
Contribution Account, and a participant's contribution to such participant's
Salary Savings Contribution Account, may not exceed in the aggregate the lesser
of 25.0% of such participant's annual compensation or one-fourth of the dollar
limitation established under Section 415(b)(1)(A) of the Code.
Westcorp's contributions to a participant's ESOP Contribution Account are
invested in Westcorp common stock or approved investments at the direction of
the Plan administrator. Each participant who has completed ten years of service
and has attained the age of 55 may also direct the Plan administrator to
diversify the investments allocated to such participant's ESOP Contribution
Account. A participant's contributions to his or her Salary Savings Contribution
Account are invested by the Plan administrator in fixed income, stock or other
permitted investment alternatives selected by the participant. The Plan
administrator selects the investment alternatives for the amount contributed by
the employer to the Matching Employer Contribution Account. Interest, earnings,
dividends, gains and losses are allocated to each participant's ESOP
Contribution Account, Salary Savings Contribution Account and Matching Employer
Contribution Account, as the case may be, in the proportion such account bears
to the total accounts of all participants in that investment alternative. Shares
of Westcorp common stock allocated to any of a participant's accounts are voted
in accordance with the proxy of such participant. Each participant is also
entitled to direct the Plan administrator regarding the exercise of rights,
other than voting rights, arising in connection with shares of Westcorp common
stock allocated to such participant's accounts.
Participants have a 100% non-forfeitable interest in the value of their
Salary Savings Contribution Account at all times. The participant's interest in
his or her ESOP Contribution Account and Employer Matching Contribution Account
becomes 20.0% vested after the completion of three Plan years of service. A Plan
year consists of 1,000 hours of service. An additional 20.0% becomes vested each
following Plan 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 Plan, whether
or not vested, upon death, permanent disability, or retirement upon attainment
of at least age 65. Upon termination of employment for any other reason,
participants will receive the full amount of their Salary Savings Contribution
Account and the vested portions of their ESOP Contribution Account and Matching
Employer Contribution Account.
13
17
Westcorp funded a $6,974,554 ESOP Contribution and Salary Savings Matching
Contribution for 1999.
REPORT OF THE COMPENSATION COMMITTEE
Westcorp applies a consistent philosophy to compensation for all
associates, including senior management. This philosophy is based on the premise
that the achievements of Westcorp 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 Westcorp's Compensation
Committee are the same as the members of the Bank's Compensation Committee.
Accordingly, the Compensation Committee generally sits and deliberates
concurrently as the committee for Westcorp and the Bank 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, Westcorp has developed and implemented compensation policies, plans
and programs which seek to enhance the profitability of Westcorp, and thus
shareholder value, by aligning closely the financial interests of Westcorp'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 associates furthers that goal and fosters
decision-making by its key associates with Westcorp's long-term safety and
soundness in mind.
The compensation plans and programs are structured to integrate pay with
Westcorp's annual and long-term performance goals. The plans and programs are
designed to recognize initiative and achievement and to assist Westcorp in
attracting and retaining qualified executives. In furtherance of these goals,
annual base salaries are generally set at competitive levels so that Westcorp
relies 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 the holding company, the stock of
which is publicly traded. Incentive compensation is variable and closely tied to
corporate, business unit and individual performance in a manner that encourages
a sharp and continuing focus on building profitability and shareholder value. As
a result of the increased emphasis on tying executive compensation to corporate
performance, in any particular year the total compensation of Westcorp's
executives may be more or less than the executives of Westcorp's competitors,
depending upon Westcorp'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 Westcorp
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.
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 1999 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.
14
18
COMPENSATION OF CHIEF EXECUTIVE OFFICER
In determining the Chief Executive Officer's compensation for 1999, 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 1999 bonus compensation for Mr. Ernest Rady as shown in
the Summary Compensation table. The bonus compensation for 1999 reflects the
achievement of management objectives, including improved financial performance,
efficiencies and productivity.
The Committee established 2000 management objectives for the CEO.
STOCK OPTION GRANTS
Westcorp, the holding company, uses stock options as long-term incentives
and expects that it will continue to use this compensation alternative in the
future. In 1991, Westcorp adopted, and the shareholders approved, the 1991 Stock
Option Plan that made 3,150,000 shares of common stock of Westcorp available for
such purposes. The 1991 Stock Option Plan is described above. The Westcorp
Compensation Committee grants incentive stock options to associates of Westcorp
and its subsidiaries and views such grants less as compensation and more as an
incentive mechanism. (Certain grants of Westcorp stock options were made in 1999
to some executives as shown in the Summary Compensation Table, and to other key
associates, and will also be disclosed in the Westcorp 10-K and Proxy Statement
for its annual meeting to be held on May 23, 2000.)
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 Westcorp, 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 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 Westcorp outweigh the cost of the
possible loss of federal income tax deductions.
COMPENSATION COMMITTEE
Charles E. Scribner, Chairman
Judith M. Bardwick
Robert T. Barnum
15
19
STOCK PRICE PERFORMANCE GRAPH
Set forth below is a line graph depicting the yearly percentage change in
the cumulative total shareholder return on Westcorp's 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, 1995, and ending December 31, 1999.
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
FEDERAL SAVINGS
WESTCORP INC INSTITUTIONS S&P COMPOSITE
------------ --------------- -------------
1994 100.00 100.00 100.00
1995 208.35 156.90 137.58
1996 264.10 200.64 169.17
1997 208.32 340.12 225.61
1998 87.43 288.98 290.09
1999 186.14 245.88 351.13
ASSUMES $100 INVESTED ON JAN. 01, 1995
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 31, 1999
16
20
SECURITY OWNERSHIP OF MANAGEMENT, DIRECTORS AND NOMINEES
The following table sets forth, as of December 31, 1999, 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 Westcorp, (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.
------------------------------------------------------------------------
SHARES OF COMMON
STOCK OF WESTCORP
BENEFICIALLY OWNED
AS OF PERCENT OF
NAME DECEMBER 31, 1999 CLASS(1)
- ----------------------------------------------------------------------------------
Judith M. Bardwick............................... 2,007(2) --(3)
Robert T. Barnum................................. 15,000 --(3)
Stanley E. Foster................................ 186,833(4) --(3)
Ernest S. Rady................................... 17,752,054(5) 66.7%
Howard C. Reese.................................. 52,596(6) --(3)
Joy Schaefer..................................... 36,156(7) --(3)
Charles E. Scribner.............................. 117,000 --(3)
James E. Tecca................................... 39,345(8) --(3)
Lee A. Whatcott.................................. 28,507(9) --(3)
Thomas Wolfe..................................... 5,223 --(3)
Directors and Officers as a Group (18 persons)... 18,292,619 68.8%
- --------------------------------------------------------------------------------
(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, 1999. All shares are Common Stock.
(2) Consists of beneficial ownership of 2,007 shares which may be acquired
within 60 days of December 31, 1999, pursuant to stock options awarded under
Stock Option Plans.
(3) Less than 5%.
(4) Includes beneficial ownership of 2,007 shares which may be acquired within
60 days of December 31, 1999, pursuant to stock options awarded under Stock
Option Plans.
(5) Includes beneficial ownership of 19,460 shares which may be acquired within
60 days of December 31, 1999, pursuant to stock options awarded under Stock
Option Plans plus ESOP/401K shares as of December 31, 1999. Mr. Rady
disclaims beneficial ownership of 36,013 shares owned by the DHM Trust #2.
(6) Consists of beneficial ownership of 827 shares which may be acquired within
60 days of December 31, 1999, pursuant to stock options awarded under Stock
Option Plans plus ESOP/401K shares as of December 31, 1999.
(7) Includes beneficial ownership of 19,203 shares which may be acquired within
60 days of December 31, 1999, pursuant to stock options awarded under Stock
Option Plans plus ESOP/401K shares as of December 31, 1999.
(8) Includes beneficial ownership of 5,286 shares which may be acquired within
60 days of December 31, 1999, pursuant to stock options awarded under Stock
Option Plans plus ESOP/401K shares as of December 31, 1999.
(9) Includes beneficial ownership of 13,425 shares which may be acquired within
60 days of December 31, 1999, pursuant to stock options awarded under Stock
Option Plans plus ESOP/401K shares as of December 31, 1999.
17
21
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires Westcorp's
executive officers and directors, and persons who own more than ten percent of a
registered class of the Westcorp's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
and the New York Stock Exchange. Officers, directors and greater than ten
percent shareholders are required by regulations of the Securities and Exchange
commission to furnish Westcorp copies of all Section 16(a) forms they file.
Based solely on Westcorp's review of copies of such reports furnished to
Westcorp or written representations that no other reports were required,
Westcorp believes that, during the 1999 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 1999.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
WHO ARE NOT MANAGEMENT
As of March 20, 2000, no person or group other than Mr. Rady was known to
Westcorp to have owned beneficially more than 5% of the outstanding shares of
Westcorp's Common Stock. However, on February 3, 2000, a Schedule 13G was filed
on behalf of Dimensional Fund Advisors Inc. ("DFA") reflecting beneficial
ownership of greater than 5% of Westcorp common stock for the year ended
December 31, 1999. DFA advised Westcorp 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 2001 ANNUAL MEETING
Shareholders who wish to present proposals for action at the 2001 Annual
Meeting should submit their proposals in writing and in conformance with the
bylaws to the Secretary of Westcorp 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, 2001.
ANNUAL REPORT TO SHAREHOLDERS
Westcorp's Annual Report to Shareholders for the year ended December 31,
1999, including audited consolidated financial statements, has been mailed to
the shareholders, but such report is not incorporated in this Proxy Statement
and is not deemed to be a part of the proxy solicitation material.
OTHER MATTERS
The Management of Westcorp 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.
18
22
ANNUAL REPORT ON FORM 10-K
A copy of Westcorp's Annual Report on Form 10-K, as filed with the
Securities and Exchange Commission (exclusive of Exhibits), is included in the
Annual Report; an additional copy will be furnished without charge to any person
from whom the accompanying proxy is solicited upon written request to Guy Du
Bose, Esq., Westcorp, 23 Pasteur, 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 28, 2000
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.
19
23
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 23, 2000.
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 27, 2000, at the Annual Meeting of
Shareholders of WESTCORP, to be held May 23, 2000, 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 and 2.
(Proxy continued on reverse)
24
- --------------------------------------------------------------------------------
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: Judith M. Bardwick, [ ] [ ] [ ]
Stanley E. Foster and
Ernest S. Rady to serve as
Class II 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 2000.
3. 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
- --------------------------------------------------------------------------------