<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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 [_] Confidential, For Use of the
[X] Definitive Proxy Statement Commission Only (as permitted
[_] Definitive Additional Materials by Rule 14a-6(e)(2))
[_] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
First Alliance Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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:
<PAGE>
[FIRST ALLIANCE
CORPORATION LOGO HERE]
________________________________________________________________________________
NOTICE OF 1999 ANNUAL MEETING OF STOCKHOLDERS
To be Held Tuesday, April 27, 1999
12:00 Noon
TO THE STOCKHOLDERS:
The 1999 Annual Meeting of Stockholders of First Alliance Corporation
(the "Corporation") will be held at the corporate headquarters of the
Corporation at 17305 Von Karman Avenue, Irvine, California on Tuesday, April 27,
1999, at 12:00 Noon PST, for the purpose of:
1. Electing two directors of the Corporation to hold office for three year
terms; and
2. Transacting such other business as may properly come before the meeting
and any adjournments thereof.
Stockholders of record at the close of business on March 12, 1999 are
entitled to notice of, and to vote at, the meeting and any adjournment thereof.
A list of such stockholders will be available at the time and place of the
meeting and, during the ten days prior to the meeting, at the office of the
Secretary of the Corporation, 17305 Von Karman Avenue, Irvine, California.
By Order of the Board of Directors
Susan E. Linder
Secretary
Irvine, California
March 12, 1999
<PAGE>
FIRST ALLIANCE CORPORATION
17305 VON KARMAN AVENUE
IRVINE, CALIFORNIA 92614
---------------------
PROXY STATEMENT
---------------------
ANNUAL MEETING OF STOCKHOLDERS
APRIL 27, 1999
This proxy statement is furnished in connection with the solicitation
by the Board of Directors of First Alliance Corporation (together with its
subsidiaries, the "Corporation") of proxies to be voted at the Annual Meeting of
Stockholders to be held on April 27, 1999 (the "Annual Meeting") and at any and
all adjournments thereof. Proxies are revocable at any time prior to exercise by
written notice to the Secretary of the Corporation or upon request if the
stockholder is present at the Annual Meeting and chooses to vote in person. If a
proxy is properly signed and not revoked, the shares it represents will be voted
in accordance with the instructions of the stockholder. If no specific
instructions are given, the shares represented by the proxy will be voted in
favor of the proposals set forth in the Notice attached hereto.
The Corporation has a policy that provides for the confidentiality of
stockholder proxies, ballots and vote tabulations, subject to certain
exceptions. The policy also provides for the tabulation of the vote by an
independent third party.
This proxy statement, the proxy and the Corporation's 1998 Annual
Report were first mailed to stockholders on March 19, 1999.
VOTING RIGHTS
Stockholders of record at the close of business on March 12, 1999 are
entitled to notice of and to vote at the Annual Meeting. On that date the
Corporation had outstanding 18,139,488 shares of Class A common stock, $.01 par
value (the "Class A Common Stock"), each such share being entitled to one vote.
Figures set forth in this proxy statement for Class A Common Stock have been
adjusted by subtracting therefrom shares held by the Corporation as treasury
stock as of the date with respect to which such figures are provided. A proxy
given by any stockholder participating in the Corporation's 401(k) Plan will
govern the voting of all full shares held for such stockholder's account under
that plan.
A majority of the shares entitled to vote, represented in person or by
proxy, constitutes a quorum. If a quorum is present, a plurality vote of the
shares of the common stock of the Corporation present in person or by proxy at
the meeting and entitled to vote is required for the election of directors under
Proposal 1. Abstentions are considered shares present and entitled to
<PAGE>
vote and therefore have the same legal effect as a vote against a matter
presented at the meeting. Any shares as to which a broker or nominee does not
have discretionary voting authority under applicable NASDAQ rules will be
considered as shares not entitled to vote and will therefore not be considered
in the tabulation of the votes. Brian Chisick, Chairman of the Board, President
and Chief Executive Officer and a director of the Corporation, and Sarah
Chisick, Vice President and a director of the Corporation, are the beneficial
owners of 11,596,117 outstanding shares of Class A Common Stock, constituting
approximately 64% of the outstanding voting power of the Corporation. Mr. and
Mrs. Chisick intend to vote such shares for the nominees for election as
directors named in Proposal 1.
PROPOSAL 1
ELECTION OF DIRECTORS
INFORMATION CONCERNING THE NOMINEES AND CURRENT DIRECTORS
The Corporation's Certificate of Incorporation provides that the
members of the Board of Directors shall be divided into three classes with
approximately one third of the directors to stand for election each year for
three-year terms. The total number of directors comprising the Corporation's
Board of Directors is currently set pursuant to the Corporation's bylaws at
seven. Of this number, three members of the Board of Directors have terms
expiring and two are nominees for election at the 1999 Annual Meeting of
Stockholders. One seat is vacant and will remain open until filled, and such
director shall hold office and be of the same class as the director he succeeds.
Of the aforementioned members, two have terms expiring at the 2000 Annual
Meeting of Stockholders and two have terms expiring at the 2001 Annual Meeting
of Stockholders.
Unless instructions to the contrary are given, all proxies received by
the Corporation will be voted for the election of the two nominees named below
as directors of the Corporation to hold office until the 2002 Annual Meeting of
Stockholders and until their respective successors are elected and qualified.
Both of the nominees have indicated a willingness to be named as such and to
serve as directors if elected. Should either nominee not be a candidate at the
time of the 1999 Annual Meeting, the enclosed Proxy will be voted in favor of
the other nominee with respect to whom a stockholder has not withheld a vote on
such Proxy and for such substitute nominee (if any) as shall be designated by
the proxies named in the enclosed Proxy, or the number of directors may be
reduced by the Board of Directors. Both nominees have been recommended by the
Board of Directors for three-year terms expiring at the 2002 Annual Meeting of
Stockholders.
Certain information concerning each of the two nominees for directors
is set forth below.
2
<PAGE>
NOMINEES FOR DIRECTORS FOR THREE-YEAR TERMS EXPIRING IN 2002
MERRILL BUTLER Director since 1996 Age 74
Mr. Butler has been a director of the Board of the Corporation since its
formation in 1996, and has also served on the Compensation Committee since 1996.
Since 1983 Mr. Butler has served as President of Merrill Butler, Inc., a
corporation formed to consult with savings and loan associations on real estate
matters. During 1995 Mr. Butler also served on the Volunteer Executive Team
organized to advise Orange County, California after the County had declared
bankruptcy. Mr. Butler was also a co-creator of the Butler Popejoy Group, a
general partnership which from 1992 to 1994 capitalized home builders with
equity funds to develop entry level housing projects. Mr. Butler is a past
director of numerous organizations, including the Federal National Mortgage
Association (Fannie Mae), Financial Corporation of America, American Savings and
Loan, The Commodore Corporation, Far Western Bank, National Association of Home
Builders, and the Building Industry Association of Southern California.
ALBERT L. LORD Director since 1996 Age 54
Mr. Lord has been a director of the Board of the Corporation since its
formation in 1996. Since 1997 Mr. Lord has been the Chief Executive Officer and
Vice Chairman of the Student Loan Marketing Association (Sallie Mae). Since 1994
Mr. Lord has also been the President of LCL, Ltd., a financial consulting and
equity investment management company. From 1981 to 1994 Mr. Lord held several
executive positions including Chief Operating Officer and Executive Vice
President for Sallie Mae. Mr. Lord is a director of the Student Loan Marketing
Association.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE NOMINEES LISTED
ABOVE.
3
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
The following is a list of the current executive officers and directors
and the nominees for election to the Board of Directors of the Corporation.
<TABLE>
<CAPTION>
NAME POSITIONS WITH THE CORPORATION CLASS
- ---------------------------- -------------------------------------------------------- ----------
<S> <C> <C>
Brian Chisick (1) (2) Chairman of the Board, President, Chief Executive
Officer, current Director II
Sarah Chisick (1) Vice President, current Director II
Merrill Butler (1) (2) Director, Nominee for reelection III
Vacant (2) (3) Director III
Albert L. Lord (3) Director, Nominee for reelection III
Francisco Nebot (4) Executive Vice President, Chief Financial Officer and I
Director
Jeffrey W. Smith (1) (3) Executive Vice President, Chief Operating Officer and I
Director
Wendy Rianda Vice President, General Counsel and Director of
Compliance
</TABLE>
- ----------
(1) Member of the Stock Incentive Committee
(2) Member of the Compensation Committee
(3) Member of the Audit Committee
(4) Mr. Nebot filled the vacancy of Mark Mason
The age, present position with the Corporation, and principal occupation
during the past five years of each Director and executive officer named above is
set forth below, except Mr. Butler and Mr. Lord, for whom such information is
provided above.
BRIAN CHISICK Director since 1996 Age 59
Mr. Chisick has been Chairman of the Board, Chief Executive Officer and
President of the Corporation since its formation in 1996, and has held the same
offices at First Alliance Mortgage Company, a subsidiary of First Alliance
Corporation, since its founding in 1971. Mr. Chisick has held a real estate
broker's license since 1971.
4
<PAGE>
SARAH CHISICK Director since 1996 Age 58
Mrs. Chisick has been Vice President and a director of the Corporation
since its formation in 1996, and has held the same offices at First Alliance
Mortgage Company since its founding in 1971. Her duties have in the past
included projects in the loan servicing, foreclosure, marketing and investment
departments. She is not currently involved in the day-to-day operations of the
Company. Mrs. Chisick is married to Mr. Brian Chisick.
FRANCISCO NEBOT Director since 1998 Age 41
Mr. Nebot has been Executive Vice President and Chief Financial Officer
of the Corporation since July 1998. From 1995 to July 1998, Mr. Nebot served as
Vice President of Finance and Chief Accounting officer for AMRESCO Residential
Credit Corporation. Mr. Nebot also served as Senior Vice President and Chief
Financial Officer for ITT Residential Servicing Corporation/Federal Bank from
1994 to 1995. From 1986 to 1993, Mr. Nebot served as Executive Vice President
and Chief Financial Officer with Shearson Lehman Mortgage Corporation. His
present term as a director expires in 2000.
JEFFREY W. SMITH Director since 1996 Age 37
Mr. Smith has been Executive Vice President and Chief Operating Officer
of the Corporation since September 1996, and has held the same office at First
Alliance Mortgage Company since November 1995. From 1981 to 1995 Mr. Smith held
various positions at FAMCO, including Assistant Director of Marketing, Director
of Marketing and Vice President of Sales and Marketing. His present term as a
Director expires in 2000.
WENDY RIANDA Officer since 1998 Age 40
Ms. Rianda has been Vice President, General Counsel and Director of
Compliance of the Corporation since September 1998. From 1996 to September 1998,
Ms. Rianda served as Senior Legal Counsel and Director of Compliance of AMRESCO
Residential Mortgage Corporation. From August 1994 to October 1995, Ms. Rianda
served as Litigation Attorney of The Walker Law Firm in Newport Beach,
California.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
During the fiscal year ended December 31, 1998, the Board of Directors
held five meetings and acted by consent four times. Each eligible Director
attended at least 80% of the meetings of the Board and all of the meetings of
the committees of which he or she was a member, except Mr. Chisick, who attended
60% of the Board meetings and 50% of the committee meetings of which he is a
member.
The Board of Directors has created and delegated certain authority to its
Audit Committee, Compensation Committee and Stock Incentive Committee. The
Corporation does not have a Nominating Committee.
Mr. Lord (Chairman) and Mr. Smith are members of the Audit Committee of
the Board of Directors. One seat is currently vacant. The Audit Committee, among
other things, makes recommendations to the Board concerning the engagement of
independent accountants, monitors and reviews the quality and activities of the
Corporation's audit function, monitors the adequacy of the Corporation's
internal operating controls, and reviews the significant accounting policies of
the Company. The Audit Committee met four times during 1998.
5
<PAGE>
Mr. Butler (Chairman) and Mr. Chisick are members of the Compensation
Committee of the Board of Directors. One seat is currently vacant. Mr. Butler is
an independent, non-employee director of the Corporation. The Compensation
Committee, among other things, reviews salaries, benefits and other
compensation, excluding stock based compensation, of directors, officers and
other employees of the Corporation, and makes recommendations to the Board. The
Compensation Committee met four times during 1998.
Mr. Chisick (Chairman), Mrs. Chisick and Jeffrey Smith are members of the
Stock Incentive Committee. The Stock Incentive Committee is authorized to make
stock based compensation grants under the Corporation's 1996 Stock Incentive
Plan. The Stock Incentive Committee met four times during 1998.
6
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
EXECUTIVE COMPENSATION
Set forth below is information concerning the annual and long-term
compensation for services in all capacities for the Corporation during 1998 and
the preceding two fiscal years of those persons who were, as of December 31,
1998, (i) the Chief Executive Officer (ii) each executive officer, and (iii)
officers otherwise among the four most highly compensated (the "Named
Officers"), other than the Chief Executive Officer. Share amounts have been
adjusted to reflect the October 31, 1997 three-for-two stock dividend.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION -----------------------
---------------------------------- SECURITIES
UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY ($)(1) BONUS ($)(1) OPTIONS (2)
- ------------------------------------------ ----------- ------------------ --------------- -----------------------
<S> <C> <C> <C> <C>
Brian Chisick 1998 395,000 -- 154,085
Chairman and Chief Executive Officer 1997 395,000 -- --
1996 376,796 -- --
Francisco Nebot 1998 90,128 120,000 77,042
Executive Vice President and Chief 1997 -- -- --
Financial Officer 1996 -- -- --
Jeffrey W. Smith 1998 240,000 120,000 38,527
Executive Vice President and Chief 1997 240,000 1,150,000 9,677
Operating Officer 1996 198,065 50,000 82,500
Edwin C. Summers (3) 1998 101,397 -- --
Vice President, General Counsel and 1997 173,162 47,687 2,108
Secretary 1996 69,669 7,500 8,823
Randall K. McPhillips (4) 1998 135,689 -- --
Executive Vice President, Marketing/ 1997 240,000 1,183,205 7,741
Telemarketing 1996 239,784 122,083 82,500
</TABLE>
- ----------
(1) Amounts shown include amounts earned but deferred at the election of
executive officers under the Corporation's 401(k) Plan (the "401(k) Plan"),
a qualified defined contribution plan under Section 401(k) of the Internal
Revenue Code of 1986, as amended.
(2) Includes grants made under the Corporation's 1996 Stock Incentive Plan.
(3) Mr. Summers resigned his position as of June 30, 1998.
(4) Mr. McPhillips resigned his position as of June 15, 1998. Mr. McPhillips
was an officer of First Alliance Mortgage Company.
7
<PAGE>
STOCK OPTION GRANTS IN 1998
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO PER SHARE APPRECIATION
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION FOR OPTION TERM
NAME GRANTED (1) FISCAL YEAR PRICE ($) DATE 5% 10%
- ----------------------- ------------------ ---------------- ------------- --------------- --------------------------
<S> <C> <C> <C> <C> <C> <C>
Brian Chisick 100,000 19.04% $13.06 01/26/08 $821,336 $2,081,428
54,085 10.30% $4.43 12/03/08 $150,936 $382,502
Francisco Nebot 50,000 9.52% $7.50 07/06/08 $235,835 $597,653
27,042 5.15% $4.43 12/03/08 $75,466 $191,247
Jeffrey W. Smith 11,485 2.19% $13.06 01/26/08 $94,330 $239,052
27,042 5.14% $4.43 12/03/08 $75,466 $191,247
Edwin C. Summers 2,503 0.48% $13.06 01/26/08 $20,558 $52,098
Randall K. McPhillips 9,187 1.75% $13.06 01/26/08 $75,456 $191,221
</TABLE>
- ----------
(1) Options become exercisable in four annual installments commencing six months
from the date of grant. No stock appreciation rights have been granted.
The total number of options outstanding (vested and unvested) as of
February 5, 1999 for the named individuals as a group and for all employees as a
group represents approximately 2.0% and 5.1%, respectively, of the Corporation's
outstanding Class A Common Stock as of that date.
AGGREGATED OPTION EXERCISES IN 1998; OPTIONS OUTSTANDING AND VALUES AT DECEMBER
31, 1998
Share amounts in the table below have been adjusted to reflect the
October 31, 1997 three-for-two stock dividend.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
NUMBER OF UNDERLYING OPTIONS IN THE MONEY OPTIONS
SHARES AT DECEMBER 31, 1998 AT DECEMBER 31, 1998 (1)
ACQUIRED VALUE NOT NOT
NAME ON EXERCISE REALIZED ($) EXERCISABLE EXERCISABLE EXERCISABLE ($) EXERCISABLE ($)
- -------------------- --------------- ------------- -------------- -------------- ----------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Brian Chisick -- -- 25,000 129,085 -- --
Francisco Nebot -- -- -- 77,042 -- --
Jeffrey W. Smith -- -- 46,540 84,164 -- --
Edwin C. Summers -- -- -- -- -- --
Randall K. McPhillips -- -- -- -- -- --
</TABLE>
- ----------
(1) The value of unexercised options is based on the average of the high and
low prices of Class A Common Stock on December 31, 1998 ($3.593), less the
exercise price of the option multiplied by the number of options
outstanding.
8
<PAGE>
COMPENSATION OF DIRECTORS
Directors who are not employees of the Corporation or its subsidiaries
receive an annual retainer of $15,000 and a fee of $1,000 for each board or
committee meeting attended, and are reimbursed for reasonable expenses incurred
in connection with attendance at board of directors' meetings or committee
meetings. A meeting fee of $500 is paid to non-employee directors for telephonic
meetings of 30 minutes or less. Committee chairs also receive an annual retainer
of $1,500. Directors who are employees of the Corporation or its subsidiaries do
not receive fees for their services as directors.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Committee has furnished the following report on executive
compensation.
OVERALL POLICY
The Corporation's executive compensation program is designed to be linked
closely to the executive's success in meeting specified performance goals and to
appreciation in the Corporation's stock price. The overall objectives are to
attract and retain the best executive talent, to motivate these executives to
achieve goals that will advance the Corporation's business strategies, to link
executive and stockholder interests through equity based plans, and to provide a
compensation package that recognizes individual contributions as well as overall
business results.
For 1998 the Committee, which consists of two non-employee directors (one
vacant) and Mr. Chisick, conducted a review of the compensation of each of the
Corporation's executive officers, taking into account the detailed performance
reviews and recommendations of Mr. Chisick (except with respect to Mr. Chisick's
own performance).
The key elements of the Corporation's executive compensation program
consist of base salary and an annual bonus including stock options. The
Committee's policies with respect to these elements, including the basis for the
compensation paid and awarded to Mr. Chisick, the Corporation's Chairman and
Chief Executive Officer, are discussed below. In addition, while the elements of
compensation described below are considered separately, the Committee takes into
account the full compensation package afforded by the Corporation to the
individual. In the case of Mr. Chisick, such compensation and benefits are
specified in an employment contract entered into between said individual and the
Corporation prior to the formation of the Committee. See "Chisick Agreement" on
page 13 below.
BASE SALARIES
In reviewing base salaries for new executive officers, the Committee will
evaluate the responsibilities of the position to be held and the experience of
the individual, and will also refer to the competitive marketplace for executive
talent, including a comparison to base salaries for comparable positions at
other companies. Two executive officers joined the Corporation in 1998.
Francisco Nebot, Executive Vice President and Chief Financial Officer, joined
the Corporation in July, and Wendy Rianda, Vice President, General Counsel and
Director of Compliance, joined the Corporation in September.
9
<PAGE>
Annual salary adjustments are not usually part of the Corporation's
executive compensation program, consistent with the Corporation's historical
practice of rewarding superior performance through annual bonus incentives.
With respect to Mr. Chisick's base salary in 1998, while in the
Committee's view a meaningful increase in Mr. Chisick's base salary was
warranted and would have been consistent with the Corporation's approach to
annual salary adjustments for other executive officers, Mr. Chisick declined to
accept any increase. Accordingly, no increase was made in Mr. Chisick's base
salary for 1998.
ANNUAL BONUS; STOCK OPTIONS
The Corporation's executive officers, other than Mr. Chisick, are
eligible for an annual bonus under the Corporation's Incentive Bonus Plan. The
bonus generally consists of equal amounts paid in cash and stock option grants,
and is based principally upon achievement of individual and corporate
performance objectives established at the beginning of each year, as determined
by Mr. Chisick and approved by the Committee. The total amount of the bonus
award can range from zero to 100% of base salary and, in the case of
extraordinary achievement, up to 200% of the executive's base salary.
Individual objectives generally relate to achieving targeted goals in the
areas of growth in sales, reduction in costs and improved operating efficiencies
for operating units. Non-operating executives' objectives are more closely
related to identification and realization of opportunities for reducing costs
and increasing productivity for staff functions, and in adding to stockholder
value through improved liquidity of the Corporation's stock and greater
recognition of its worth. Each of the specified performance measures is weighted
according to the executive's responsibilities for achieving them, and progress
toward the goals of each is assessed by Mr. Chisick and reported to and
considered by the Committee.
Consistent with the Corporation's compensation plan for all employees,
the Corporation grants to its executive officers stock options with an aggregate
exercise price equal to a recipient's annual cash bonus. Options become
exercisable in four annual installments commencing six months from the date of
the grant, and have a term of ten years. This approach is designed to promote
the creation of stockholder value over the long term, since the full benefit of
the compensation package cannot be realized unless stock price appreciation
occurs over a number of years. The number of options is determined by dividing
the amount of the award by the fair market value of the Corporation's Class A
Common Stock on the date of the award. The fair market value of this stock is
calculated as the arithmetic average of the high and low prices at which it
traded on the date of the award. The product of the option exercise price and
the number of shares with respect to which options are granted is thus equal to
the amount of the total annual cash bonus award.
The Committee determined, based upon Mr. Chisick's decision to decline
any cash bonus payment, to award him an option to purchase 54,085 shares of the
Corporation's Class A Common stock at an exercise price of $4.43 per share. The
exercise price is equal to the fair market value of such stock on December 4,
1998, the date of the grant, calculated according to the procedure described
above.
10
<PAGE>
CONCLUSION
Through the program described above, a significant portion of the
Corporation's executive compensation is linked directly to individual and
Corporation performance. In 1998, approximately 20% of the Corporation's
compensation of the executives listed on page 7 consisted of these
performance-based variable elements. The Committee intends to continue the
policy of linking executive compensation to the attainment of stated annual
goals, recognizing that the ups and downs of the business cycle from time to
time may result in an imbalance for a particular period.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
There are no "interlocks" (as defined by the Securities and Exchange
Commission) with respect to any member of the Compensation Committee of the
Board of Directors of the Corporation (the "Committee"). Mr. Chisick, a member
of the Compensation Committee, is also the President and Chief Executive Officer
of the Corporation, and has certain relationships requiring disclosure under
Item 404 of Regulation S-K, each of which is described below under "Certain
Transactions."
Compensation Committee:
Merrill Butler, Chairman
Brian Chisick
(One seat vacant)
11
<PAGE>
PERFORMANCE GRAPH
The graph below compares the Corporation's cumulative stockholder return
on its Class A Common Stock with the cumulative total return, assuming
reinvestment of dividends, of the NASDAQ - Total U.S. Index, the SNL Specialty
Lender Index, and the SNL Home Equity Lenders Index since July 26, 1996, the
date on which trading in the Corporation's Class A Common Stock began.
[TOTAL RETURN PERFORMANCE GRAPH HERE]
<TABLE>
<CAPTION>
PERIOD ENDING
---------------------------------------------------------------------------
INDEX 7/26/96 12/31/96 6/30/97 12/31/97 6/30/98 12/31/98
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
First Alliance Corporation 100.00 177.95 172.06 162.14 61.77 33.09
NASDAQ - Total US 100.00 119.36 133.58 146.44 176.31 205.86
SNL Specialty Lender Index 100.00 125.27 149.86 176.81 212.53 221.65
SNL Home Equity Lenders Index 100.00 110.03 106.20 68.53 64.66 16.25
</TABLE>
NOTE: In the prior year, the Company used the SNL Specialty Lender Index for the
comparison used in the Total Return Performance graph. In the current year,
however, the Company also included the SNL Home Equity Lenders Index, as this
index provides a more accurate comparison of the performance of the Company's
other peers in the industry.
12
<PAGE>
EMPLOYMENT AGREEMENTS
CHISICK AGREEMENT. The Corporation entered into an employment agreement
with Mr. Chisick dated July 1, 1996 providing for an initial term of three
years, subject to automatic three-year renewal unless either party provides
notice of an intention not to renew. Under this Agreement, Mr. Chisick will
receive an annual salary of $395,000, subject to annual increases (but not
decreases) and bonuses as may be determined by the Board of Directors, as well
as certain other benefits including medical, insurance, death and disability
benefits, use of an automobile and reimbursement of employment related expenses.
NEBOT AGREEMENT. The Corporation has entered into an employment agreement
with Mr. Nebot, providing for an indefinite employment term which began on July
7, 1998. The Corporation or Mr. Nebot may terminate the employment agreement at
any time. Under the terms of the employment agreement, Mr. Nebot is entitled to
receive an annual salary of at least $200,000 per annum, subject to annual
increases (but not decreases) and bonuses, as determined by the Board of
Directors, as well as certain other benefits including medical insurance, death
and disability benefits, use of an automobile and reimbursement of
employment-related expenses. Pursuant to the employment agreement, Mr. Nebot was
granted on July 7, 1998, options to purchase 50,000 shares of Class A Common
Stock under the Corporation's 1996 Stock Incentive Plan. In the event of a
change of control, a merger, acquisition or outright sale of the Corporation,
Mr. Nebot will be eligible for severance benefits as further described in the
employment agreement.
RIANDA AGREEMENT. The Corporation has entered into an employment
agreement with Ms. Rianda, providing for a two-year term, which began on
September 15, 1998. The Corporation may terminate the employment agreement for
cause or without cause. Ms. Rianda may terminate her obligations under the
employment agreement by giving the Corporation thirty days notice in advance.
Under the terms of the employment agreement, Ms. Rianda is entitled to receive
an annual salary of at least $100,000 per annum, subject to annual increases
(but not decreases) and bonuses, as determined by the Board of Directors, as
well as certain other benefits including medical insurance, death and disability
benefits, use of an automobile and reimbursement of employment-related expenses.
Pursuant to the employment agreement, Ms. Rianda was granted on August 27, 1998,
options to purchase 10,000 shares of Class A Common Stock under the
Corporation's 1996 Stock Incentive Plan. In the event of a merger, transfer of
assets or dissolution of the Corporation, the Corporation shall assign to the
surviving or resulting corporation or the transferee of the Corporation's assets
all rights, benefits and obligations of the employment agreement. In addition,
if Ms. Rianda is terminated without cause, she will be eligible for severance
benefits as further described in the employment agreement.
13
<PAGE>
CERTAIN TRANSACTIONS
TRANSACTIONS WITH NATIONSCAPITAL MORTGAGE CORPORATION AND COAST SECURITY
MORTGAGE, INC. The Corporation has established strategic relationships with
certain companies controlled by the sons of Brian and Sarah Chisick, through
which the Corporation purchases loans subject to a right of first refusal.
Pursuant to an agreement between the Corporation and Nationscapital Mortgage
Corporation ("Nationscapital"), the Corporation purchased $13.8 million of loans
from Nationscapital during 1998. Jamie and Brad Chisick are the President and
majority shareholder and the Vice President and minority shareholder,
respectively, of Nationscapital, and the sons of Brian and Sarah Chisick.
Pursuant to an agreement between the Corporation and Coast Security Mortgage,
Inc. ("Coast Security"), the Corporation purchased $36.6 million of loans from
Coast Security during 1998. Mark Chisick and Brad Chisick are the President and
majority shareholder, and the Vice President and a minority shareholder,
respectively, of Coast Security, and the sons of Brian and Sarah Chisick. The
Corporation's purchases of loans originated by Nationscapital and Coast Security
are documented by agreements similar to those entered into with unaffiliated
entities.
From October 31, 1997 through October 31, 1998, Nationscapital had a $10
million repurchase facility agreement with the Corporation. In November 1998,
the repurchase facility agreement expired and was paid in full, and the
Corporation did not renew the repurchase facility agreement.
From October 31, 1997 through October 31, 1998, Coast Security had a $10
million repurchase facility agreement with the Corporation. In November 1998,
the repurchase facility agreement expired and was paid in full, and the
Corporation did not renew the repurchase facility agreement.
UNITED KINGDOM SECURED TERM LOAN FACILITY WITH HAVERSTOCK, L.P., A
CALIFORNIA LIMITED PARTNERSHIP. In 1998, First Alliance Mortgage Company, a
wholly owned subsidiary of the Corporation, entered into a (pound)39 million
secured term loan facility with Haverstock, L.P., a California Limited
Partnership ("Haverstock"). Haverstock is owned by Brian and Sarah Chisick, the
majority stockholders of FACO. The debt under the Haverstock facility is secured
by mortgages held for investment, bears a fixed interest rate of 8.5%, and
matures as the underlying pledged mortgages are liquidated.
CONVERSION OF CLASS B COMMON STOCK TO CLASS A COMMON STOCK. In 1998,
Brian and Sarah Chisick, who controlled all of the outstanding shares of Class B
Common Stock, which carried four votes per share in matters requiring a
stockholder vote, converted all of such shares into the Corporation's Class A
Common Stock, which has one vote per share. Upon March 12, 1999, the record date
for the Annual Meeting, all unissued shares of Class B Common Stock will
automatically convert into shares of Class A Common Stock, each carrying one
vote per share.
SERVICING OF CERTAIN LOANS. The Corporation services mortgage loans for
certain related parties pursuant to written agreements entered into prior to the
IPO, under which no servicing fees are charged. All such agreements entered into
since the IPO provide for servicing fees consistent with the servicing fees
charged to third parties for such services. At December 31, 1998, the
outstanding balances of such loans serviced on behalf of Brian Chisick, Brad
Chisick, Mark Chisick and Jamie Chisick were $2,742,852, $264,489, $83,379 and
$66,574, respectively. Brad, Mark and Jamie Chisick are the sons of Brian and
Sarah Chisick.
14
<PAGE>
First Alliance Corporation's bylaws require that all transactions between
it, on the one hand, and the immediate family of Brian Chisick, or their
affiliates, on the other hand, must be approved by a majority of the independent
directors.
INDEMNITY AGREEMENTS. Prior to the completion of the initial public
offering of its Class A Common Stock in July and August 1996, the Corporation
entered into separate but identical indemnity agreements ("Indemnity
Agreements") with each director and executive officer of the Corporation and
expects to enter into Indemnity Agreements with persons who become directors or
executive officers in the future. The Indemnity Agreements provide that the
Corporation will indemnify the director or officer (the "Indemnitee") against
any expenses or liabilities in connection with any proceeding in which such
Indemnitee may be involved as a party or otherwise, by reason of the fact that
such Indemnitee is or was a director or officer of the Corporation or by reason
of any action taken by or omitted to be taken by such Indemnitee while acting as
an officer or director of the Corporation, provided that such indemnity shall
only apply if (i) the Indemnitee was acting in good faith and in a manner the
Indemnitee reasonably believed to be in the best interest of the Corporation
and, with respect to any criminal action, had no reasonable cause to believe the
Indemnitee's conduct was unlawful, (ii) the claim was not made to recover
profits made by such Indemnitee in violation of Section 16(b) of the Securities
Exchange Act of 1934, as amended, or any successor statute, (iii) the claim was
not initiated by the Indemnitee, or (iv) the claim was not covered by applicable
insurance. Each Indemnitee has undertaken to repay the Corporation for any costs
or expenses paid by the Corporation if it shall ultimately be determined by a
court of competent jurisdiction in a final, nonappealable adjudication that such
Indemnitee is not entitled to indemnification under the Indemnity Agreement. In
addition to the Indemnity Agreements, the Corporation has obtained a policy of
directors and officers liability insurance.
BENEFICIAL OWNERSHIP OF SHARES
Whenever in this proxy statement information is presented as to
"beneficial ownership," please note that such ownership indicates only that the
person shown, directly or indirectly, has or shares with others the power to
vote (or to direct the voting of) or the power to dispose of (or to direct the
disposition of) such shares; he or she may or may not have any economic interest
in the shares. The reporting of information herein does not constitute an
admission that any such person is, for the purpose of Sections 13 or 16 of the
Securities Exchange Act of 1934, as amended, the "beneficial owner" of the
shares shown herein.
The following table sets forth information regarding beneficial ownership
of the Class A Common Stock as of December 31, 1998, by (i) each person known to
be the beneficial owner of more than 5% of the outstanding Class A Common Stock;
(ii) each Director of the Corporation; and (iii) all Directors and officers
named in the SUMMARY COMPENSATION TABLE on page 7 (the "Named Officers"). Share
amounts set forth below reflect the October 31, 1997 three-for-two stock
dividend, and percentage calculations are based upon outstanding shares net of
shares held by the Corporation as treasury stock.
15
<PAGE>
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP OF
CLASS A COMMON STOCK
--------------------------------------
NUMBER OF
NAME SHARES (1) PERCENT
--------------------------------------- ------------------------ -------------
<S> <C> <C>
The Capital Group Companies
Capital Guardian Trust Co. 1,705,000 9.4%
333 South Hope Street
Los Angeles, CA 90071
Brian and Sarah Chisick 11,621,117 (2) 64%
Francisco Nebot 12,500 (4) (3)
Jeffrey W. Smith 67,165 (4) (3)
Albert L. Lord 42,187 (4) (3)
Merrill Butler 23,437 (4) (3)
Edwin C. Summers -- --
Randall K. McPhillips -- --
All Directors, Executive Officers and
Named Officers as a Group
(8 persons) 11,766,406 (5) 65%
</TABLE>
- ----------
(1) Unless otherwise indicated and subject to community property laws where
applicable, each of the stockholders named in this table has sole voting
and investment power with respect to the shares shown as beneficially
owned by him or her. A person is deemed to be the beneficial owner of
securities that can be acquired by such person within 60 days from
December 31, 1998 upon the exercise of options and warrants. Each
beneficial owner's percentage ownership is determined by assuming that
options that are held by such person (but not those held by any other
person) and that are exercisable within 60 days from December 31, 1998
have been exercised.
(2) Includes 25,000 shares with respect to which options are exercisable
within 60 days from December 31, 1998. Includes shares held by The Chisick
Trust No. 1 U/D/T 3-30-96 and The Chisick Trust No. 2 U/D/T 3-30-96, of
which Brian Chisick is the sole trustee, and the Brian and Sarah Chisick
Revocable Trust U/A 3-7-79, of which Brian and Sarah Chisick are the
trustees. Also includes a total of 8,617 shares held by grantor trusts
established for the benefit of three of Mr. and Mrs. Chisick's
grandchildren, of which trusts Mr. Chisick is the sole trustee.
(3) Less than 1%.
(4) Represents shares with respect to which options are exercisable within 60
days from December 31, 1998.
(5) Includes 170,289 shares with respect to which all Directors, Executive
Officers and Named Officers as a group hold options exercisable within 60
days from December 31, 1998.
16
<PAGE>
The Corporation's 401(k) Plan owned a total of 41,586 shares of the
Corporation's Class A Common Stock on December 31, 1998. Although the
Corporation is the Administrator of the 401(k) Plan, the 401(k) Plan was
established and is administered to achieve the purposes for which it was created
for the exclusive benefit of its participants, and employees participating in
the 401(k) Plan are entitled to vote all shares allocated to their accounts.
Accordingly, the 401(k) Plan does not constitute a "group" within the meaning of
Section 13(d) of the Securities and Exchange Act of 1934, as amended.
GENERAL
OTHER BUSINESS
The Board does not know of any other business which will be presented for
consideration at the Annual Meeting. If any other business properly comes before
the Annual Meeting or at any adjournment or postponement thereof, the proxy
holders will vote in regard thereto according to their discretion insofar as
such proxies are not limited to the contrary.
INDEPENDENT AUDITORS
The Board of Directors has selected Deloitte & Touche LLP to serve as the
Corporation's independent auditors for the 1999 fiscal year. One or more
representatives of Deloitte & Touche LLP will be present at the Annual Meeting
to respond to appropriate questions and will be given an opportunity to make a
statement if they so desire.
SOLICITATION OF PROXIES
The cost of soliciting proxies will be borne by the Corporation. Proxies
may be solicited by mail, telephone or telegraph, or personally by directors,
officers and regular employees of the Corporation, none of whom will receive any
special compensation for such services. The Corporation will reimburse persons
holding stock in their names or in the names of their nominees for their
reasonable expenses incurred in forwarding proxy material to their principals.
STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Any eligible stockholder (as defined below) of the Corporation wishing to
have a proposal considered for inclusion in the Corporation's 2000 proxy
solicitation material must set forth such proposal in writing and file it with
the Secretary of the Corporation on or before November 12, 1999. The Board will
review any proposals from eligible stockholders which it receives by that date
and will determine whether any such proposals will be included in its 2000 proxy
solicitation materials. Any eligible stockholder is one who is the record or
beneficial owner of at least 1% or $ 1,000 in market value of securities
entitled to be voted on the proposal at that annual meeting and has held such
securities for at least one year and who shall continue to own such securities
through the date on which the annual meeting is held.
17
<PAGE>
ANNUAL REPORT
The Annual Report of the Corporation for the fiscal year ended December
31, 1998, including the Corporation's Annual Report on Form 10-K for the fiscal
year ended December 31, 1998 without the exhibits thereto, has been mailed to
stockholders of record at the close of business on March 12, 1999. The
Corporation will provide a copy of the exhibits to its Annual Report on Form
10-K for the fiscal year ended December 31, 1998 upon the written request of any
beneficial owner of the Corporation's securities as of the record date for the
Annual Meeting and reimbursement of the Corporation's reasonable expenses. Such
request should be addressed to Susan Linder, Secretary, First Alliance
Corporation, 17305 Von Karman Avenue, Irvine, California 92614.
ALL STOCKHOLDERS ARE URGED TO COMPLETE, SIGN AND RETURN THE
ACCOMPANYING PROXY CARD IN THE ENCLOSED ENVELOPE.
Susan Linder
Secretary
Dated: March 12, 1999
18
<PAGE>
FIRST ALLIANCE CORPORATION
17305 VON KARMAN AVENUE
IRVINE, CALIFORNIA 92614
PROXY
SOLICITED BY BOARD OF DIRECTORS
ANNUAL MEETING - APRIL 27, 1999
IRVINE, CALIFORNIA
The undersigned hereby appoints Brian Chisick, Francisco Nebot and Jeffrey Smith
or each or any of them with power of substitution, proxies for the undersigned
to act and vote at the 1999 Annual Meeting of Stockholders of First Alliance
Corporation and at any adjournments thereof as indicated upon the matters
referred to on the reverse side and described in the proxy statement for the
meeting, and, in their discretion, upon any other matters which may properly
come before the meeting.
1. Proposal 1: Election of Directors
-----------
NOMINEES: Merrill Butler and Albert L. Lord
IF NO OTHER INDICATION IS MADE, THE PROXIES SHALL
VOTE FOR THE ELECTION OF THE DIRECTOR NOMINEES.
-----------
SEE REVERSE
SIDE
-----------
(continued and to be signed on other side)
<PAGE>
[X] PLEASE MARK YOUR
VOTES AS IN THIS EXAMPLE
A VOTE FOR ALL NOMINEES IS RECOMMENDED BY THE BOARD OF DIRECTORS
FOR BOTH WITHHELD FROM BOTH
1. Election of Directors: [ ] [ ]
(page 1)
FOR BOTH EXCEPT the following nominee:
______________________________________________
IMPORTANT - PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY IN THE
ENCLOSED ENVELOPE. THANK YOU.
Signature(s) of Stockholder(s) __________________________Date ___________ , 1999
NOTE: If acting as attorney, executor, trustee, or in other
representative capacity, please sign name and title.
