<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 2000 ANNUAL MEETING OF STOCKHOLDERS
To be Held Thursday, April 27, 2000
12:00 Noon
TO OUR STOCKHOLDERS:
The 2000 Annual Meeting of Stockholders (the "Annual Meeting") of First
Alliance Corporation, a Delaware corporation (the "Corporation") will be held at
the Corporation's corporate headquarters at 17305 Von Karman Avenue, Irvine,
California on Thursday, April 27, 2000, at 12:00 Noon local time, for the
following purposes:
1. To elect three directors of the Corporation to hold office for three
year terms expiring at the 2003 Annual Meeting of stockholders or
until their respective successors are elected and qualified;
2. To approve a second amendment to the Corporation's Certificate of
Incorporation that would eliminate the Class B Common Stock and
reconstitute the common stock (i.e., the Class A Common Stock of the
Corporation) to "Common Stock;"
3. To amend the Corporation's 1996 Stock Incentive Plan to increase the
number of shares available for issuance under the plan by an aggregate
of 1,000,000 shares to 3,125,000;
4. To ratify the appointment of Deloitte & Touche LLP as the independent
accountants for the Corporation for the year ending December 31, 2000;
and
5. To transact such other business as may properly come before the
meeting and any adjournments or postponements thereof.
The foregoing items of business, including the nominees for directors,
are more fully described in the Proxy Statement which is attached and made part
of this Notice.
The Board of Directors has fixed the close of business on March 14,
2000 as the record date for determining the stockholders entitled to notice of
and to vote at the Annual Meeting and any adjournment or postponements 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 14, 2000
<PAGE>
YOUR VOTE IS IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE MARK, SIGN AND DATE
THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENVELOPE PROVIDED, WHICH REQUIRES
NO POSTAGE IF MAILED IN THE UNITED STATES.
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<PAGE>
FIRST ALLIANCE CORPORATION
17305 VON KARMAN AVENUE
IRVINE, CALIFORNIA 92614
_______________________
PROXY STATEMENT
_______________________
ANNUAL MEETING OF STOCKHOLDERS
APRIL 27, 2000
GENERAL
This Proxy Statement and accompanying Proxy Card are being furnished to
the stockholders in connection with the solicitation by the Board of Directors
(the "Board") of First Alliance Corporation, a Delaware corporation (together
with its subsidiaries, the "Corporation"), of proxies in the enclosed form to be
voted at the Annual Meeting of Stockholders (the "Annual Meeting") to be held on
April 27, 2000 and at any and all postponements or adjournments thereof.
Any Proxy given pursuant to this solicitation may be revoked by the
person giving it at any time prior to its use and exercise by written notice to
the Secretary of the Corporation (Susan Linder) 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 such stockholder. If no specific
instructions are given or the proxy is not returned to the Corporation, 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 enclosed Proxy Card and the Corporation's
Annual Report on Form 10-K for the year ended December 31, 1999 were first
mailed to stockholders entitled to vote at the Annual Meeting on or about March
21, 2000.
VOTING RIGHTS
Only stockholders of record at the close of business on March 14, 2000
(the "Record Date") are entitled to receive notice of and to vote at the Annual
Meeting. On the Record Date the Corporation had outstanding approximately
17,864,788 shares of Class A Common Stock, $.01 par value (the "Class A Common
Stock"), each such share being entitled to one vote held of record by
approximately 1200 stockholders. 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. For information regarding holders of
more than 5% of the outstanding common stock, see "Beneficial Ownership."
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<PAGE>
The Annual Meeting will be held if a quorum is present. 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 Class A
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, and
a majority vote of the shares of the Class A Common Stock for the amendment to
the Certificate of Incorporation under Proposal 2, for the amendment to the 1996
Stock Incentive Plan under Proposal 3, and for ratification of the appointment
of Deloitte & Touche as the designated independent accountants under Proposal 4.
Abstentions are considered shares present and entitled to 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.
As of March 14, 2000, the Record Date, Brian Chisick, Chairman of the
Board and Chief Executive Officer and a director of the Corporation, and his
spouse, Sarah Chisick, a director of the Corporation, are the beneficial owners
of 12,471,067 outstanding shares of Class A Common Stock, constituting
approximately 69.8% of the outstanding voting power of the Corporation. Brian
and Sarah Chisick intend to vote such shares for the nominees for election as
directors named in Proposal 1, for the amendment to the Certificate of
Incorporation set forth in Proposal 2, for the amendment to the 1996 Stock
Incentive Plan set forth in Proposal 3, and for ratification of the appointment
of the designated independent accountants under Proposal 4.
Votes cast by proxy or in person at the Annual Meeting will be
tabulated by the Company's transfer agent, American Stock Transfer and Trust
Company, which will act as Inspector of Elections. The Inspector of Elections
will also determine whether or not a quorum is present. The Inspector of
Elections will treat abstentions as shares that are present and entitled to vote
for purposes of determining the presence of a quorum but as not voting for
purposes of determining the approval of any matter submitted to the stockholders
for a vote.
The shares represented by the proxies received, properly marked, dated,
signed and not revoked will be voted at the Annual Meeting. Where such proxies
specify a choice with respect to any matter to be acted upon, the shares will be
voted in accordance with the specifications made. Any proxy in the enclosed form
which is returned but is not marked will be voted FOR election of each of the
three nominees named below, FOR amending the Corporation's Certificate of
Incorporation, FOR amendment of the Corporation's 1996 Stock Incentive Plan (the
"Stock Incentive Plan") to increase the shares available for issuance
thereunder, and FOR ratification of the appointment of the designated
independent accountants.
The Corporation will pay the cost of this solicitation, which will be
made primarily by mail. Proxies may also be solicited in person, or by
telephone, facsimile or similar means, by directors, officers or employees of
the Corporation without additional compensation. Original solicitation of
proxies by mail may be supplemented by additional mailings, telephone, telegram
or personal solicitation by directors, officers or employees of the Corporation
or its representatives. No additional compensation will be paid for any such
services.
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MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
PROPOSAL NO. 1
ELECTION OF DIRECTORS
At the Annual Meeting, the stockholders will elect three directors to
serve until the 2003 Annual Meeting or until their respective successors are
elected and qualified. All of the nominees are currently serving as directors of
the Corporation.
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. Each
class is comprised of approximately one third of the current Board of Directors.
The term of each director is three years. Each class of director stands for
election for staggered terms of three years. The total number of directors
comprising the Corporation's Board of Directors is currently set pursuant to the
Corporation's bylaws at eight. Of this number, three members of the Board of
Directors have terms expiring in April 2000 and three are nominees for election
at the 2000 Annual Meeting of Stockholders. Of the aforementioned members, two
have terms expiring at the 2001 Annual Meeting of Stockholders and three have
terms expiring at the 2002 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 three nominees named below
as directors of the Corporation to hold office until the 2003 Annual Meeting of
Stockholders and until their respective successors are elected and qualified.
Each nominee has indicated a willingness to be named as such and to serve as a
director if elected. The Board of Directors expects all nominees named below to
be available for election. Should any one of the nominees not be a candidate at
the time of the Annual Meeting, the enclosed Proxy will be voted in favor of the
other nominees with respect to whom a stockholder has not withheld a vote on
such Proxy and for such substitute nominee(s) (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 in accordance with the Bylaws of the
Corporation. As of this date, the Board has no reason to believe that any of the
persons named below will be unable or unwilling to serve as a nominee or as a
director if elected. The three nominees have been recommended by the Board of
Directors for three-year terms expiring at the 2003 Annual Meeting of
Stockholders.
Certain information concerning each of the three nominees including
their ages as of March 1, 2000, is set forth below and based, in part, on
information furnished by the nominees.
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NOMINEES FOR DIRECTORS FOR THREE-YEAR TERMS EXPIRING IN 2003
PRINCIPAL OCCUPATIONS AND
NOMINEE AGE DIRECTORSHIPS
- --------------------------------------------------------------------------------
Francisco Nebot 42 President, Chief Financial Officer
and Member of the Board (SINCE JULY
1998)
Member: Stock Incentive Committee
(SINCE APRIL 1999)
Daniel K. Perl 50 Director (SINCE MARCH 2000)
Member: Audit Committee (SINCE
MARCH 2000)
Jeffrey Smith 38 Executive Vice President, Chief
Operating Officer and Member of the
Board (SINCE JULY 1996)
Member: Audit Committee (SINCE JULY
1996); Compensation Committee
(SINCE JULY 1998); and Stock
Incentive Committee (SINCE JULY
1998).
BACKGROUND OF NOMINEES FOR DIRECTOR
FRANCISCO NEBOT
Mr. Nebot has been a Director of the Board since July 1998 and was
appointed President and Chief Financial Officer of the Corporation as of
February 2, 2000. Mr. Nebot serves as Executive Vice President and Chief
Financial Officer of Coast Security Mortgage, Inc. From July 1998 until his
appointment as President, Mr. Nebot served as Executive Vice President and Chief
Financial Officer of the Corporation and Mr. Nebot also serves on the Stock
Incentive Committee since April 1999. Mr. Nebot served as Vice President of
Finance and Chief Accounting Officer for AMRESCO Residential Credit Corporation
from September 1995 to July 1998. Mr. Nebot held the position of Senior Vice
President and Chief Financial Officer at ITT Residential Servicing
Corporation/Federal Bank from January 1994 to September 1995. From January 1986
to January 1994, he served as Executive Vice President and Chief Financial
Officer for Shearson Lehman Mortgage Corporation. Mr. Nebot holds a Bachelor's
degree in Business Administration, with an emphasis in finance and accounting,
from the University of Barcelona, Spain. Mr. Nebot owns 2,000 shares of the
Corporation's Class A Common Stock.
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DANIEL L. PERL
Mr. Perl was appointed a Director of the Board and served on the Audit
Committee since March 1, 2000. In January 2000 Mr. Perl co-founded Denovia
Corporation, a software company that designs and markets business solutions for
the facilitation of E-Commerce via the Internet and serves as its Chairman and
Chief Executive Officer. Since its formation in 1987, Mr. Perl is Chairman and
Chief Executive Officer of Navieve Financial Corporation, a closely held
consulting business for banks, savings and loan associations, as well as
mortgage banks on the origination and disposition of assets. From January 1994
to July 1999, Mr. Perl served as Chairman, Chief Executive Officer and President
of Life Bank and Chief Executive Officer and President of Life Financial
Corporation, a federally chartered bank located in Riverside, California. From
June 1992 to December 1993, Mr. Perl served as Senior Vice President of WCP
Trading Corporation, an investment bank specializing in trading of high yield
bonds. From February 1991 to June 1992 Mr. Perl served as Senior Vice President
and Chief Credit Officer of City Thrift & Loan Association located in Los
Angeles, California. Mr. Perl holds a Bachelor degree in Arts and History from
the University of California Los Angeles.
JEFFREY SMITH
Mr. Smith has been a Director of the Board and Executive Vice President
and Chief Operating Officer of the Corporation since its formation in 1996 and
has held the same office at First Alliance Mortgage Company since November 1995.
Mr. Smith also served on the Audit Committee since its formation in 1996, and
served on the Compensation Committee and the Stock Incentive Committee since
July 1998. From 1981 to 1995 Mr. Smith held various positions at First Alliance
Mortgage Company, including Assistant Director of Marketing, Director of
Marketing and Vice President of Sales and Marketing.
RECOMMENDATION OF THE BOARD
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE NOMINEES LISTED ABOVE.
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PROPOSAL NO. 2
AMENDMENT NO. 2 TO THE CERTIFICATE OF INCORPORATION
The Board believes that the best interests of the Corporation and its
stockholders will be served by amending and restating Article IV of the
Company's Certificate of Incorporation (the "Certificate of Incorporation") to
eliminate the current two classes of common stock of the Corporation and
reconstitute such classes into one class of common stock.
The Certificate of Incorporation currently provides that the
Corporation has Class A and Class B Common Stock. As there is no Class B Common
Stock outstanding, the Board believes that it will be in the best interests of
the Corporation and its shareholders to eliminate the Class B Common Stock. As a
result, the Board recommends that the Certificate of Incorporation be amended,
in the form attached hereto as APPENDIX A, to effectively delete the Class B
stock and reconstitute all stock into one class denoted as the Common Stock of
the Corporation.
Approval of the foregoing amendment to the Certificate of Incorporation
will require the affirmative vote of holders of a majority of the outstanding
common stock of the Corporation.
RECOMMENDATION OF THE BOARD
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE SECOND AMENDMENT TO
THE CORPORATION'S CERTIFICATE OF INCORPORATION TO ELIMINATE TWO CLASSES OF
COMMON STOCK AND RECONSTITUTING THE STOCK INTO ONE CLASS DESIGNATED "COMMON
STOCK."
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PROPOSAL NO. 3
AMENDMENT NO. 2 TO THE
1996 STOCK INCENTIVE PLAN
At the Annual Meeting, the Corporation's stockholders are being asked
to approve an amendment to the Corporation's 1996 Stock Incentive Plan (the
"Stock Incentive Plan") to increase the number of shares of common stock
reserved for issuance under the Stock Incentive Plan by 1,000,000 shares to an
aggregate of 3,125,000 shares.
On April 27, 1999, the Board of Directors unanimously adopted, subject
to shareholder approval, a second amendment (the "Increased Share Amendment") to
the Stock Incentive Plan to increase the number of shares of the Corporation
reserved for issuance thereunder from 2,125,000 to 3,125,000. The Board adopted
the Increased Share Amendment to ensure that the Corporation could continue to
grant stock options to employees and certain others at levels determined
reasonable and appropriate by the Board and the Stock Incentive Committee.
Approval of the Amendment to the Stock Incentive Plan requires the
affirmative vote of a majority of the shares of the Corporation, represented in
person or by proxy at the Annual Meeting, of Class A Common Stock. A copy of the
proposed Increased Share Amendment to the Stock Incentive Plan is set forth in
APPENDIX B to this Proxy Statement.
The Stock Incentive Plan provides for (i) grants of options to purchase
a specified number of shares of Class A Common Stock ("Options"), (ii) awards of
restricted shares of Class A Common Stock, and (iii) performance awards. Under
the Stock Incentive Plan, the total number of shares of the Corporation
available to be granted prior to the proposed Increased Share Amendment was
2,125,000 shares of Class A Common Stock. As of March 14, 2000, Options and
awards of restricted stock covering an aggregate of 2,207,177 shares of the
Corporation's Class A Common Stock had been granted under the Stock Incentive
Plan, as amended by the Board of Directors, and 917,823 remained available for
future grants under the Stock Incentive Plan, as amended.
The Stock Incentive Plan is administered by the Stock Incentive
Committee. The Stock Incentive Committee is authorized to (i) select from among
the eligible participants (which may include directors or officers of the
Corporation) the individuals to whom Options, grants of restricted stock, and
performance awards are to be granted, and (ii) to determine the number of shares
to be subject thereto and the terms and conditions thereof. The Stock Incentive
Committee is also authorized to adopt, amend and rescind the rules relating to
the administration of the Stock Incentive Plan. Should certain extraordinary
events occur, the Compensation Committee may make such adjustments, as such
committee determines appropriate, in (i) the aggregate number and kind of shares
reserved for issuance, (ii) the number of shares and kind covered by outstanding
awards, and (iii) the exercise prices specified therein. EXCEPT FOR GRANTS THAT
ARE APPROVED BY A MAJORITY OF THE DISINTERESTED MEMBERS OF THE COMPENSATION
COMMITTEE, NO MEMBER OF THE STOCK INCENTIVE COMMITTEE WILL BE ELIGIBLE TO
PARTICIPATE IN THE STOCK INCENTIVE PLAN.
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Non-qualified Options granted to the employee directors, officers and
employees provide for, among other things, the right to purchase shares of Class
A Common Stock at a specified price which may be less than fair market value on
the date of grant, and usually will become exercisable in installments after the
date of such grant. To employee directors, officers and employees and
consultants for any reasonable term non-qualified Options may be granted by the
Stock Incentive Committee.
Incentive Options are designed to comply with the provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), and are subject to
restrictions contained in the Code, including a requirement that exercise prices
be equal to at least 100% of the fair market value of the underlying shares of
Class A Common Stock on the date of such grant and a ten-year restriction on the
length of the Option term, but may be subsequently modified to disqualify them
from treatment as Incentive Stock Options. Under the Stock Incentive Plan and
the Code, non-employee directors are not permitted to receive Incentive Stock
Options.
RECOMMENDATION OF THE BOARD
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" AMENDMENT NO. 2 OF THE
COMPANY'S 1996 STOCK INCENTIVE PLAN AS DESCRIBED ABOVE.
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PROPOSAL NO. 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Effective October 28, 1999, Deloitte & Touche LLP was engaged as the
Corporation's independent accountants and have been appointed by the Board to
continue as the Corporation's independent accountants for the fiscal year ending
December 31, 2000. In the event that ratification of this selection of
accountants is not approved by a majority of the shares of Common Stock voting
at the Annual Meeting in person or by proxy, management will review its future
selection of accountants.
A representative of Deloitte & Touche LLP is expected to be at the
Annual Meeting. This representative will have an opportunity to make a statement
and will be available to respond to appropriate questions.
RECOMMENDATION OF THE BOARD
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE CORPORATION'S INDEPENDENT
ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2000.
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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 POSITION(S) WITH THE CORPORATION CLASS(a)
- ------------------------------- ------------------------------------------------------- ----------
<S> <C> <C>
Brian Chisick (1)(2) Chairman of the Board, Chief Executive
Officer, and Director II
Sarah Chisick Director II
Merrill Butler (2)(3) Director III
Donald H. Kasle (1)(2)(3) Director III
Daniel K. Stevenson (2)(3) Director III
Francisco Nebot (1) President, Chief Financial Officer and I
Director, NOMINEE FOR REELECTION
Daniel L. Perl (3) Director, NOMINEE FOR REELECTION I
Jeffrey Smith (1)(2)(3) Executive Vice President, Chief Operating Officer and
Director, NOMINEE FOR REELECTION I
Jerry Hager Vice President and General Counsel
Faez Kaabi Vice President and Controller
</TABLE>
- ------------
(1) Member of the Stock Incentive Committee
(2) Member of the Compensation Committee
(3) Member of the Audit Committee
- ------------
(a) Class I term expires 2000 Annual Meeting of Stockholders
Class II term expires 2001 Annual Meeting of Stockholders
Class III term expires 2002 Annual Meeting of Stockholders
12
<PAGE>
BACKGROUND OF DIRECTORS
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. Nebot, Mr. Perl and Mr. Smith, for whom such
information is provided above under "Nominees for Directors for Three-Year Terms
Expiring in 2003."
BRIAN CHISICK Director since 1996 Age 60
Mr. Chisick has been Chairman of the Board and Chief Executive Officer
of the Corporation and its subsidiaries since February 2000. From June 1996 to
February 2000 Mr. Chisick served as Chairman, Chief Executive Officer and
President of the Corporation and its subsidiaries. From 1971 to June 1996 he
served as Chairman of the Board, Chief Executive Officer and President of First
Alliance Mortgage Company, a subsidiary of First Alliance Corporation. Mr.
Chisick also serves on the Compensation and Stock Incentive Committees. He is a
past Vice President of the Mortgage Bankers Institute, a statewide trade
association of over 120 mortgage brokers. Mr. Chisick also served as a member of
the legislative committee of the Mortgage Brokers Institute. Mr. Chisick has
held a real estate broker's license since 1971. The aggregate amount of shares
Mr. Chisick owns is 12,471,067 of which 8,434,837 shares he has sole voting
power and 4,036,230 shares of which he has shared voting power with Sarah
Chisick of the Corporation's Class A Common Stock.
SARAH CHISICK Director since 1996 Age 59
Mrs. Chisick has been a director of the Corporation since its formation
in 1996. From 1971 to November 1999 Mrs. Chisick was a Vice President of First
Alliance Mortgage Company. Her duties have in the past included projects in the
loan servicing, foreclosure, marketing and investment departments. Mrs. Chisick
is not active in the business operations of the Corporation. Mrs. Chisick is
married to Mr. Brian Chisick. The aggregate amount of shares Mrs. Chisick owns
is 4,036,230 shares with shared voting power with Brian Chisick of the
Corporation's Class A Common Stock.
MERRILL BUTLER Director since 1996 Age 75
Mr. Butler has been a director of the Board of the Corporation since
its formation in 1996, and has served on the Compensation Committee since 1996
and the Audit Committee since 1999. 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 and which engages in small
residential construction projects. 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 that 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.
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<PAGE>
DONALD H. KASLE Director since 1999 Age 56
Mr. Kasle has been a director of the Corporation since May 1999, serves
on the Stock Incentive Committee as its Chairman and also serves on the Audit
and Compensation Committees. Mr. Kasle is currently Managing Partner and Chief
Executive Officer of Alldas Partners, LLC, an investment banking and consulting
company. He has over 32 years experience in executive management, commercial
lending and capital formation. He is also Chairman of QOMLINQ, as well as
serving on the Boards of Directors of Commercial Capital Bancorp & Commercial
Capital Bank of Irvine, California, and ColumbusNewport of Arlington, Virginia.
Mr. Kasle co-founded the merchant banking firm, Newport Capital Partners, the
predecessor company of ColumbusNewport. Formerly Mr. Kasle was the President and
Chief Executive Officer of Western Financial Bank, a $3.5 billion institution
located in Irvine, California. Prior to being at Western Financial, he was
Chairman and CEO of Bank One, Dayton (Ohio), a $3.5 billion affiliate of Banc
One Corporation. During Mr. Kasle's nine-year tenure, Bank One, Dayton, achieved
record earnings every year and was named the top large bank affiliate within
Banc One Corporation three years in a row. Mr. Kasle was the founding Chairman
of the Institute of Certified Bankers of the American Bankers Association and
past Chairman of the Board of the Stonier Graduate of Banking. In 1993, Stonier
honored him with its Distinguished Alumni Award. He was also a former board
member of America's Community Bankers and previously taught Banking/Commercial
Lending at 10 national banking schools. He has served on the boards of numerous
charitable and philanthropic organizations, including the Miami University
(Ohio) Board of Trustees and Chairman of the Miami University School of Business
Administration Advisory Council. Mr. Kasle is a graduate of Miami University
(Ohio) and the Stonier Graduate School of Banking at Rutgers University. Mr.
Kasle owns 10,000 shares of the Corporation's Class A Common Stock.
DANIEL K. STEVENSON Director since 1999 Age 67
Mr. Stevenson has been a director of the Corporation since April 1999,
serves on the Audit Committee as its Chairman, and on the Compensation
Committee. Mr. Stevenson is Chairman of Management Action Programs, Inc., whose
principal activities consist of conducting personal growth and effectiveness
programs for chief executive officers and managers as well as productivity and
profit improvement programs for companies ("MAP"). Since joining MAP in 1977,
Mr. Stevenson has served in various other capacities, including President, Chief
Executive Officer and Senior Consultant. Prior to his employment at MAP, Mr.
Stevenson was President of Noland Paper Company and National Sales Manager for
Nationwide Papers, Inc. of Chicago, Illinois.
JERRY HAGER Officer since 1999 Age 42
Mr. Hager has been Vice President and General Counsel of the
Corporation since June 1999. From 1994 to June 1999, Mr. Hager served as Senior
Counsel at the law offices of Buchalter, Nemer, Fields & Younger in Los Angeles,
California. From 1989 to 1994, Mr. Hager served as Senior Counsel at the law
offices of Smith & Smith in Los Angeles, California. Mr. Hager received his
Juris Doctor in 1982 from Pepperdine University School of Law, Malibu,
California, and holds a Bachelor's degree in Political Science with a Minor in
Geography from California State University, Northridge, California. Mr. Hager is
an Adjunct Professor of Law, Pepperdine University School of Law, Malibu,
California, and is a member of the American Bar Association, Consumer Financial
Services Subcommittee, The Orange County Bar Association, Financial Lawyers
Conference, the Bankruptcy Forum, Aircraft Owners & Pilots Association, and
Experimental Aircraft Association.
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<PAGE>
FAEZ KAABI Officer since 1998 Age 32
Mr. Kaabi has been Vice President and Controller for the Corporation
since October 1998. Since 1996, Mr. Kaabi has held various managerial positions
with the Corporation's operating company, First Alliance Mortgage Company. Prior
to joining First Alliance Mortgage Company, Mr. Kaabi was employed by Deloitte &
Touche LLP as a senior auditor. In 1990, Mr. Kaabi received his Bachelor's
degree in Accounting from California State University, Fullerton, California. He
received his C.P.A. in 1993. Mr. Kaabi owns 550 shares of the Corporation's
Class A Common Stock.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
During the fiscal year ended December 31, 1999 (the "Last Fiscal
Year"), the Board of Directors (the "Board") held four meetings and acted by
consent six times. Each of the incumbent directors attended at least 75% of the
aggregate of all meetings of the Board and of the committees, if any, upon which
such director served.
The Board has three standing committees: the Audit Committee, the
Compensation Committee, and the Stock Incentive Committee.
The Board has created and delegated certain authority to its Audit
Committee, Compensation Committee and Stock Incentive Committee. The Corporation
does not have a Nominating Committee.
The committees of the Board and the number of meetings held by each
such committee during 1999 were:
NUMBER OF MEETINGS
COMMITTEE NAME HELD DURING 1999
-------------- ----------------
Audit Committee Four
Compensation Committee Four
Stock Incentive Committee Four
AUDIT COMMITTEE
The Audit Committee consists of five directors, four of which are
independent, non-employee directors of the Corporation.
The Audit Committee members are:
Daniel K. Stevenson, Chairman
Merrill Butler
Donald H. Kasle
Daniel L. Perl (AS OF MARCH 1, 2000)
Jeffrey Smith
15
<PAGE>
The Audit Committee, among other things, reviews with management, the
Corporation's independent public accountants, and its internal auditors upon
completion of each audit, the annual financial statements of the Corporation,
the independent accountants report thereon and the other relevant financial
information to be included in the Corporation's Annual Report on Form 10-K and
its Annual Report to stockholders, and reports to and 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 Corporation.
The Audit Committee adopted its Charter on October 21, 1996. A copy of
the Audit Committee Charter is set forth in APPENDIX C to the Proxy Statement.
The Audit Committee is satisfied that it met its responsibilities during 1999 in
compliance with its Charter.
The Audit Committee conferred with the Corporation's auditors, Deloitte
& Touche LLP, at its January 2000 meeting and reviewed the new requirements for
Audit Committees adopted by the Securities and Exchange Commission ("SEC")
effective December 14, 1999. The Corporation must satisfy such requirements by
June 14, 2001. The Audit Committee and the Board of the Corporation support the
Audit Committee's compliance with the new committee structure and membership
requirements set by the SEC.
COMPENSATION COMMITTEE
The Compensation Committee consists of five directors, three of which
are independent, non-employee directors of the Corporation. The Compensation
Committee members are:
Merrill Butler, Chairman
Brian Chisick
Donald H. Kasle
Jeffrey Smith
Daniel K. Stevenson
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 with respect to the foregoing.
16
<PAGE>
STOCK INCENTIVE COMMITTEE
The Stock Incentive Committee consists of four directors, one of which
is an independent, non-employee director of the Corporation. The Stock Incentive
Committee members are:
Donald H. Kasle, Chairman
Brian Chisick
Francisco Nebot
Jeffrey Smith
The Stock Incentive Committee is authorized to make stock based
compensation grants under the Corporation's 1996 Stock Incentive Plan.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
EXECUTIVE COMPENSATION
Set forth in the Summary Compensation Table below is certain
compensation information concerning the annual and long-term compensation for
services in all capacities for the Corporation during 1999 and the preceding two
fiscal years of those persons who were, as of December 31, 1999, (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. Executive Officers are those officers considered
Corporate Officers of the Corporation. Share amounts have been adjusted to
reflect the October 31, 1997 three-for-two stock dividend.
17
<PAGE>
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
---------------------------------- ---------------------------
SECURITIES UNDERLYING
SALARY (1) BONUS (1) OPTIONS (2)
NAME AND PRINCIPAL POSITION YEAR ($) ($) (#)
- ----------------------------------------- ------------- ------------------ --------------- ---------------------------
<S> <C> <C> <C> <C>
Brian Chisick 1999 395,000 -- 200,000
CHAIRMAN AND CHIEF EXECUTIVE OFFICER 1998 395,000 -- 154,085
1997 395,000 -- --
Francisco Nebot (3) 1999 236,666 150,000 110,000
PRESIDENT AND CHIEF FINANCIAL OFFICER 1998 90,128 120,000 77,042
(BEGINNING IN FEBRUARY 2000, MR. 1997 -- -- --
NEBOT BEGAN SERVING AS PRESIDENT.)
Jeffrey W. Smith 1999 240,000 100,000 143,662
EXECUTIVE VICE PRESIDENT AND CHIEF 1998 240,000 120,000 38,527
OPERATING OFFICER 1997 240,000 1,150,000 9,677
Jerry Hager (4) 1999 73,157 50,000 30,000
VICE PRESIDENT, GENERAL COUNSEL 1998 -- -- --
1997 -- -- --
Faez Kaabi (5) 1999 109,330 15,000 29,768
VICE PRESIDENT, CONTROLLER 1998 78,900 17,500 3,944
1997 -- -- --
Mark Chisick (6) 1999 105,000 -- --
PRESIDENT, COAST SECURITY MORTGAGE, 1998 -- -- --
INC. 1997 -- -- --
Edwin C. Summers (7) 1999 -- -- --
VICE PRESIDENT, GENERAL COUNSEL AND 1998 101,397 -- --
SECRETARY 1997 173,162 47,687 2,108
</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 Code. The
cost of perquisites is not disclosed for any executive officer named in the
table because the disclosure threshold (the lower of $50,000 or 10% of
salary plus bonus) was not reached.
(2) Includes grants made under the Corporation's 1996 Stock Incentive Plan.
(3) Beginning in February 2000, Mr. Nebot began serving as President.
(4) Mr. Hager was employed by the Corporation in June, 1999.
(5) Mr. Kaabi was appointed Vice President and Controller of the Corporation in
October, 1998.
(6) Mark Chisick is President of Coast Security Mortgage, Inc. ("Coast"), a
wholly owned subsidary of the Corporation. Coast was acquired in July 1999.
Mark Chisick is the son of Brian Chisick, Chairman and Chief Executive
Officer of the Corporation.
(7) Mr. Summers resigned his position as of June 30, 1998. His successor, Ms.
Wendy P. Rianda, was employed from September 1998 to April 1999.
18
<PAGE>
STOCK OPTION GRANTS IN 1999
The following table is a summary of all stock options granted to the
named Executive Officers during 1999. Individual grants are listed separately
for each named officer. In addition, this table shows the potential gain that
could be realized if the fair market value of the Corporation's stock were to
appreciate at either a 5% or 10% annual rate over the period of the option term.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF POTENTIAL REALIZABLE
SECURITIES TOTAL OPTIONS PER SHARE VALUE AT ASSUMED
UNDERLYING GRANTED TO EXERCISE ANNUAL RATES OF
OPTIONS EMPLOYEES IN OR BASE EXPIRATION STOCK PRICE
NAME GRANTED (1) FISCAL YEAR PRICE DATE 5% 10%
(#) (%) ($) ($) ($)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Brian Chisick 100,000 7.70 3.6250 04/26/09 227,974 577,732
100,000 7.70 2.5000 12/02/09 147,043 382,225
Francisco Nebot 50,000 3.85 3.6250 04/26/09 113,987 288,866
60,000 4.62 2.5000 12/02/09 88,226 229,335
Jeffrey W. Smith 103,662 7.98 3.6250 04/26/09 236,323 598,888
40,000 3.08 2.5000 12/02/09 58,817 152,890
Jerry Hager 10,000 0.77 3.3910 06/06/09 21,320 54,034
20,000 1.54 2.5000 12/02/09 29,409 76,445
Faez Kaabi 3,768 0.29 3.6250 04/26/09 8,590 21,769
20,000 1.54 3.2813 05/23/09 41,271 104,589
6,000 0.46 2.5000 12/02/09 8,823 22,933
</TABLE>
(1) All Options vest incrementally beginning six months from the date of grant
in 25% increments in each year thereafter. No stock appreciation rights
have been granted.
The total number of options outstanding (vested and unvested) as of
December 31, 1999 for the named individuals as a group and for all employees as
a group represents approximately 4.9% and 5.5%, respectively, of the
Corporation's outstanding Class A Common Stock as of that date.
19
<PAGE>
AGGREGATED OPTION EXERCISES IN 1999; OPTIONS OUTSTANDING
AND VALUES AT DECEMBER 31, 1999
The following table shows options that were exercised during 1999 and
the number of shares and the value of grants outstanding as of December 31, 1999
for each named Officer.
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, 1999 AT DECEMBER 31, 1999 (1)
ACQUIRED VALUE ------------------------------ -------------------------------------
NAME ON EXERCISE REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE ($) UNEXERCISABLE ($)
- -------------------- --------------- ------------- -------------- --------------- ----------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Brian Chisick -- -- 88,521 265,564 -- --
Francisco Nebot -- -- 31,760 155,282 -- --
Jeffrey W. Smith -- -- 105,130 169,236 -- --
Jerry Hager -- -- 2,500 27,500 -- --
Faez Kaabi -- -- 9,358 28,122 -- --
</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, 1999 ($1.875), less the
exercise price of the option multiplied by the number of options
outstanding.
COMPENSATION OF DIRECTORS
The non-employee directors of the Corporation or its subsidiaries
receive an annual retainer fee of $15,000 and a fee of $1,000 for each Board
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.
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE CORPORATION'S
FILINGS UNDER THE SECURITIES ACT OF 1933 OR THE EXCHANGE ACT THAT MIGHT
INCORPORATE FUTURE FILINGS, INCLUDING THIS PROXY STATEMENT, IN WHOLE OR IN PART,
THE FOLLOWING REPORT OF THE COMPENSATION COMMITTEE AND THE STOCK PERFORMANCE
GRAPH WHICH FOLLOWS SHALL NOT BE DEEMED TO BE INCORPORATED BY REFERENCE INTO ANY
SUCH FILINGS.
20
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Committee has furnished the following report on executive
compensation.
The Compensation Committee (the "Committee"), composed of a total of
five directors, three of whom are non-employee directors, makes recommendations
to the Board of Directors (the "Board") regarding the administration of
compensation for Executive Officers (the "Executives") and the terms and
conditions of their employment.
OVERALL POLICY
The Committee and the Board believe that the Corporation's executive
compensation program should be designed to be linked closely to the Executive's
success in meeting specified performance goals and to appreciation in the
Corporation's stock price thereby creating value for stockholders. 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 1999 the Committee 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 Compensation Committee did not determine it
necessary to, and did not attempt to, specifically analyze compensation levels
at companies included in the index under the caption "Performance Graph."
The key elements of the Corporation's executive compensation program
consist of a 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 "Brian Chisick
Agreement" on page 25.
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.
21
<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 1999, 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 1999.
ANNUAL BONUS; STOCK OPTIONS
The Corporation's executive officers, other than Messrs. Chisick, Nebot
and Smith, are eligible for an annual bonus under the Corporation's Incentive
Bonus Plan. Stock Option Committee members are not eligible to participate in
the Stock Incentive Plan except for grants that are approved by a majority of
the disinterested members of the Compensation Committee. Bonuses under the
Corporation's Incentive Stock Option Plan generally consist 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
weighed 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.
22
<PAGE>
The Committee determined, based upon Mr. Chisick's decision to decline
any cash bonus payment, to award him an option to purchase 100,000 shares of the
Corporation's Class A Common Stock at an exercise price of $2.50 per share. The
exercise price is equal to 100% of the fair market value of such stock on
December 3, 1999, the date of the grant, calculated according to the procedure
described above.
CONCLUSION
Through the program described above, the Committee believes that these
policies and programs are competitive and result in a significant portion of the
Corporation's executive compensation being linked directly to individual and
Corporation performance. In 1999, approximately 21.4% of the Corporation's
compensation of the executives listed on page 18 consisted of cash bonus awards.
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 currently no "interlocks" (within the meaning of the
Securities and Exchange Commission's Proxy rules) with respect to any member of
the Committee during 1999. "Interlocks" means that it was not the case that an
executive officer of the Corporation served as a director or member of the
Compensation Committee of another entity and as executive officer of the other
entity served as a director or member of the Compensation Committee of the
Corporation. Mr. Chisick, a member of the Compensation Committee, is also the
Chairman 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 under "Certain Transactions."
Compensation Committee:
Merrill Butler, Chairman
Brian Chisick
Donald H. Kasle
Jeffrey Smith
Daniel K. Stevenson
23
<PAGE>
PERFORMANCE GRAPH
The following five-year graph 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
following its registration under Section 12 of the Exchange Act. The stock price
performance on the following graph is not necessarily indicative of future stock
price performance.
[TOTAL RETURN PERFORMANCE GRAPH HERE]
*Assumes $100 invested on July 26, 1996. The chart reflects the October 31, 1997
three-for-two stock dividend.
<TABLE>
<CAPTION>
PERIOD ENDING
-------------------------------------------------------------------
INDEX 7/26/96 12/31/96 12/31/97 12/31/98 12/31/99
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
First Alliance Corporation 100.00 177.95 162.14 33.09 16.54
NASDAQ - Total US 100.00 119.36 146.30 206.15 372.43
SNL Specialty Lender Index 100.00 125.27 176.81 221.65 219.60
SNL Home Equity Lenders Index 100.00 110.03 68.53 16.25 8.03
</TABLE>
NOTE: The Corporation used the SNL Specialty Lender Index for the comparison
used in the Total Return Performance graph and 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.
24
<PAGE>
EMPLOYMENT AGREEMENTS
BRIAN 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.
FRANCISCO NEBOT AGREEMENT. The Corporation has entered into an
employment agreement with Mr. Nebot dated July 7, 1998 providing for an
indefinite employment term. The Corporation or Mr. Nebot may terminate the
employment agreement at any time. Under this Employment Agreement, Mr. Nebot
will 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,
per amendment dated September 8, 1999, the Corporation will compensate Mr. Nebot
in an amount as determined as of the time of the merger, acquisition, outright
sale or transfer of all of the assets of the Corporation or any of its
subsidiaries and Mr. Nebot will be eligible for severance benefits as further
described in the employment agreement.
JEFFREY SMITH AGREEMENT. First Alliance Mortgage Company, a wholly
owned subsidiary of the Corporation, entered into an employment agreement with
Mr. Smith providing for an indefinite employment term which began on December 3,
1986. The Corporation or Mr. Smith may terminate his employment at any time. Per
the amended agreement between the Corporation and Mr. Smith dated September 8,
1999, in the event of a change of control, a merger, acquisition or outright
sale of the Corporation, the Corporation agrees to compensate Mr. Smith in an
amount as determined as of the time of the merger, acquisition, outright sale or
transfer of all of the assets of the Corporation or any of its subsidiaries.
MARK CHISICK AGREEMENT. Coast Security Mortgage, Inc., a wholly owned
subsidary of the Corporation, entered into an employment agreement with Mr.
Chisick providing for an indefinite employment term which began on July 2, 1999.
Mark Chisick and Brian Chisick are related (i.e., Mark Chisick is the son of
Brian Chisick). The Corporation or Mr. Chisick may terminate his employment at
any time. Under this Employment Agreement, Mr. Chisick will receive an annual
salary of at least $210,000 per annum, subject to annual increases (but not
decreases) and bonuses as further described in the employment agreement, as well
as certain other benefits including medical insurance, death and disability
benefits, use of an automobile and reimbursement of employment-related expenses.
25
<PAGE>
CERTAIN TRANSACTIONS
ACQUISITION OF COAST SECURITY MORTGAGE, INC. In July 1999 the
Corporation acquired Coast Security Mortgage, Inc. ("Coast"), a retail mortgage
company that originated approximately $100,000,000 of sub-prime first mortgages
in each of the last two years. Under the terms of the purchase agreement, the
Corporation paid $4 million dollars for Coast. The purchase was finalized
subject to customary indemnification, monetary hold backs and an independent
third party evaluation regarding pricing and terms of the transaction. Prior to
the acquisition, Coast was owned by, among others, Mark Chisick and Brad
Chisick, each of whom are sons of Brian Chisick, Chairman and Chief Executive
Officer of the Corporation.
PAYMENT OF 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 the Corporation. The debt under the Haverstock facility
was secured by mortgages held for investment (which were generated by the
Corporation's affiliate, First Alliance Mortgage Company, which made loans in
the United Kingdom), bore a fixed interest rate of 8.5%, and matured as the
underlying pledged mortgages were liquidated. In July 1999, First Alliance
Mortgage Company sold the portfolio of its United Kingdom loans. The sale of the
portfolio allowed First Alliance Mortgage Company to completely exit its United
Kingdom operations. The proceeds of the sale were used to repay the secured term
loan facility.
EXTENSION OF WAREHOUSE FINANCING FACILITY AGREEMENT WITH LEHMAN
COMMERCIAL PAPER, INC., AND GRANT OF WARRANT. In October 1999, the Company
extended its $150 million warehouse financing facility due to expire in December
1999 to December 2000. As partial consideration for this facility, the
Corporation agreed to grant Lehman Commercial Paper, Inc., (the "Warehouse
Lender"), stock warrants to purchase an aggregate of 4.9% of the outstanding
shares of the Corporation's Class A Common Stock with an effective date of
January 15, 2000. This warehouse financing facility is secured by loans
originated or purchased by the Corporation, and bears interest at a rate ranging
between 1.25% to 1.75% over one-month United States ("US") dollar denominated
London Interbank Offered Rate. Additionally, in December 1999, the Corporation
amended the effective date of the stock warrants granted the Warehouse Lender in
1998, which represents the option to purchase 1% of the outstanding shares of
the Corporation's Class A Common Stock. The effective date was changed from
February 15, 1999 to January 15, 2001.
AFFINITY REAL ESTATE SECURED CREDIT CARD AGREEMENT WITH FIDELITY
FEDERAL BANK. In February 1997 the Corporation entered into an affinity real
estate secured credit card agreement with Fidelity Federal Bank, a Federal
Savings Bank ("Fidelity"). Under the terms of this agreement, Fidelity agreed to
fund the affinity credit card balance and pay the Corporation for its
solicitation services, customer services and collection efforts. The agreement
also provides that following termination of the program by Fidelity, the
Corporation is obligated to purchase the outstanding balance on the credit cards
originated under the program. In June 1999 Fidelity notified the Corporation of
its intent to terminate the program by February 24, 2000. The Corporation is
26
<PAGE>
currently disputing the terms of the obligation to purchase the outstanding
balance of the credit cards and the parties have sought arbitration of the
dispute. Nevertheless, the Corporation is currently pursuing the sale of its
credit card portfolio and has discontinued the issuance of new credit cards.
There is, however, no assurance that the Corporation will be successful in
selling the credit card portfolio, which currently has an available credit line
of approximately $21.5 million and an outstanding balance as of March 1, 2000 of
approximately $16.3 million, or be able to have the appropriate capital or
financing in place to purchase these assets.
BUSINESS RELATIONSHIP WITH MANAGEMENT ACTIONS PROGRAMS, INC. Mr.
Stevenson is Chairman of the Board of M.A.P. and has served as a director of the
Corporation since April 1999. Since May 1981 First Alliance Mortgage Company, a
California corporation ("FAMCO"), has maintained a business consulting
relationship with Management Action Programs, Inc. In 1999 M.A.P. received
approximately $57,870 for consulting services provided to First Alliance
Mortgage Company.
BUSINESS RELATIONSHIP WITH FINANCIAL SERVICES FOR COLUMBUSNEWPORT. Mr.
Kasle has served as a director of the Corporation since May, 1999. Since late
1999 Financial Services for ColumbusNewport ("Financial Services") provides
FAMCO with consulting services. As of March 1, 2000 Financial Services received
approximately $110,400 for services rendered. In 1998 Mr. Kasle Co-Founded
Newport Capital Partners and served as President of Financial Services of its
successor company, ColumbusNewport.
BUSINESS RELATIONSHIP WITH MJB ASSOCIATES, INC. The Corporation's
corporate headquarters are located at 17305 Von Karman Avenue, Irvine,
California 92614-6203 where the Corporation leases approximately 40,000 square
feet from MJB Associates, Inc., a California Limited Partnership ("MJB"). MJB is
owned by Brian and Sarah Chisick, the majority stockholders of the Corporation.
The lease expires on January 31, 2003, and the Corporation has an option to
renew the lease for five years. In 1999 MJB received from the Corporation rental
income of approximately $507,477.
SERVICING OF CERTAIN LOANS. The Corporation services mortgage loans for
certain related parties pursuant to written agreements entered into prior to the
Initial Public Offering in 1996 (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, 1999, the outstanding balances of such loans serviced
on behalf of Brian Chisick, Brad Chisick, Mark Chisick and Jamie Chisick were
$1,848,178, $255,540, $55,017 and $60,356 respectively. Brad, Mark and Jamie
Chisick are the sons of Brian and Sarah Chisick.
The 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 of
the Corporation.
AMENDMENT TO THE CORPORATION'S BYLAWS. In February 2000 the Board of
Directors determined that it was in the best interests of the Corporation and
its stockholders to amend and re-state the bylaws to provide for an increase in
the number of directors from seven to eight. As of March 1, 2000 the total
number of directors comprising the Corporation's Board of Directors is set
pursuant to the Corporation's Bylaws at eight. On March 1, 2000 Daniel L. Perl
agreed to serve as a director until his term expires at the Annual Stockholders
meeting in 2000. Mr. Perl is a nominee for re-election.
27
<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
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 certain information regarding beneficial
ownership of the Corporation's Class A Common Stock as of March 14, 2000 (the
"Record Date"), by (i) each person known by the Corporation to be the beneficial
owner of more than 5% of the outstanding shares of the Corporation's Class A
Common Stock, (ii) each director of the Corporation, and (iii) all directors and
officers named in the SUMMARY COMPENSATION TABLE on page 18 (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.
28
<PAGE>
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP OF
CLASS A COMMON STOCK
--------------------------------------------------
PERCENT OF
CLASS A
NUMBER OF COMMON STOCK
NAME OF BENEFICIAL SHARES (1) OUTSTANDING
OWNER OR GROUP (#) (%)
- ------------------------------------------- --------------------------- ----------------------
<S> <C> <C>
The Capital Group Companies 1,750,000 9.80
CAPITAL GUARDIAN TRUST CO.
333 SOUTH HOPE STREET
LOS ANGELES, CA 90071
Brian and Sarah Chisick Trust, 12,559,588 (2) 69.76
DIRECTORS
Francisco Nebot, DIRECTOR, PRESIDENT, 46,260 (4) (3)
AND CHIEF FINANCIAL OFFICER
Jeffrey W. Smith, DIRECTOR, EXECUTIVE 125,755 (5) (3)
VICE PRESIDENT AND CHIEF OPERATING
OFFICER
Merrill Butler, DIRECTOR 46,875 (5) (3)
Donald H. Kasle, DIRECTOR 22,500 (6) (3)
Daniel L. Perl, DIRECTOR 0 (5) (3)
Daniel K. Stevenson, DIRECTOR 12,500 (5) (3)
Jerry Hager, VICE PRESIDENT AND GENERAL
COUNSEL 2,500 (5) (3)
Faez Kaabi, VICE PRESIDENT AND
CONTROLLER 11,131 (7) (3)
Mark Chisick, PRESIDENT, COAST SECURITY 0 (5) (3)
MORTGAGE, INC.
Edwin C. Summers 0 (8) (3)
VICE PRESIDENT, GENERAL COUNSEL AND
SECRETARY
All Directors, Executive Officers and Named 12,827,109 (9) 70.45
Officers as a Group
(10 PERSONS)
</TABLE>
29
<PAGE>
- ------------
(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. Beneficial ownership is determined in accordance with
the rules of the Securities and Exchange Commission (the "SEC"). In
computing the number of shares beneficially owned by a person and the
percentage ownership of that person's shares of Class A Common stock that
can be acquired by such person within 60 days from March 1, 2000 upon the
exercise of options and warrants are deemed outstanding. 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 March 1, 2000 have been exercised.
(2) Includes 88,521 shares with respect to which options are exercisable
within 60 days from March 1, 2000. Includes 1,204,583 shares held by The
Chisick Trust No. 1 U/A/D 3-30-96; includes 1,205,387 shares held by The
Chisick Trust No. 2 U/A/D 3-30-96; includes 3,000,000 shares held by The
Chisick Trust No. 3 U/A/D 4-30-99; and includes 3,000,000 shares held by
The Chisick Trust No. 4 U/A/D 4-30-99 of which Brian Chisick is the sole
trustee, and includes 4,036,230 shares held by 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 24,867 shares held by grantor trusts
established for the benefit of four of Mr. and Mrs. Chisick's
grandchildren, of which trusts Mr. Chisick is the sole trustee.
(3) Less than 1%.
(4) Includes 44,260 shares with respect to which options are exercisable within
60 days from March 1, 2000.
(5) Represents shares with respect to which options are exercisable within 60
days from March 1, 2000.
(6) Includes 12,500 shares with respect to which options are exercisable within
60 days from March 1, 2000.
(7) Includes 10,581 shares with respect to which options are exercisable within
60 days from March 1, 2000.
(8) Mr. Summers resigned his position as of June 30, 1998.
(9) Includes 344,042 shares with respect to which all Directors, Executive
Officers and Named Officers as a group hold options exercisable within 60
days from March 1, 2000.
The Corporation's 401(k) Plan owned a total of 51,649 shares of the
Corporation's Class A Common Stock on December 31, 1999. 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.
30
<PAGE>
GENERAL
OTHER BUSINESS
The Board does not know of any other business that 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 ACCOUNTANTS
The accounting firm of Deloitte & Touche LLP has acted as the
Corporation's independent accountants since its inception in 1996 and has been
recommended by the Audit Committee and selected by the Board of Directors to
serve as the Corporation's independent auditors for the 2000 fiscal year.
Representatives of Deloitte & Touche LLP are expected to be present at
the Annual Meeting to respond to appropriate questions and will have 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 and its
subsidiaries, none of whom will receive any special compensation for such
services which will be performed in addition to their regular duties. 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 2001 proxy
solicitation material must set forth such proposal in writing and such proposal
must be received by the Secretary of the Corporation at 17305 Von Karman Avenue,
Irvine, CA 92614 (Attention: Susan Linder, Secretary) on or before November 30,
2000. 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 2001 proxy solicitation materials. Any eligible stockholder is
one who is the record or beneficial owner of at least 1% or $2,000 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. If the
Corporation is not notified of a stockholder proposal within the time period
described above, then the proxies held by management of the Corporation provide
discretionary authority to vote against such stockholder proposal, even though
such proposal is not discussed in the Proxy.
31
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Corporation's directors and executive officers (and
possibly other persons) who own more than 10% of the Corporation's Class A
Common Stock (collectively, "Reporting Person") to file with the SEC initial
reports of ownership and changes in ownership of the Company's Common Stock.
Reporting Persons are required by SEC regulations to furnish the Corporation
with copies of all Section 16(a) reports they file.
To the Corporation's knowledge, based solely on its review of the
copies of such reports received or written representations from certain
Reporting Persons that no other reports were required during and for calendar
year 1999, and based on the reports they were not required to file any other
reports for 1999, the Corporation believes that during its fiscal year ended
December 31, 1999, all Reporting Persons complied with all applicable filing
requirements.
ANNUAL REPORT
The Corporation's Annual Report on Form 10-K for the fiscal year ended
December 31, 1999 without the exhibits thereto, has been mailed to stockholders
of record at or about the close of business on March 21, 2000. The Corporation
will provide a copy of the exhibits to its Annual Report on Form 10-K for the
fiscal year ended December 31, 1999 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.
The Board knows of no other business that will be presented at the 2000
Annual Meeting. If any other business is properly brought before the Annual
Meeting, proxies in the enclosed form will be voted in respect thereof as the
proxy holders deem advisable in their judgment.
ALL STOCKHOLDERS ARE URGED TO COMPLETE, MARK, SIGN AND PROMPTLY RETURN THE
ACCOMPANYING PROXY CARD IN THE ENCLOSED ENVELOPE.
By Order of the Board of Directors
/s/ Susan Linder, Secretary
----------------------------
Dated: March 14, 2000
Irvine, California
32
<PAGE>
APPENDIX A
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
FIRST ALLIANCE CORPORATION
The undersigned, for the purpose of amending the Certificate of
Incorporation of First Alliance Corporation, a Delaware corporation (the
"Corporation"), does hereby certify that:
The date of filing of the Corporation's original Certificate of
Incorporation with the Secretary of State of the State of Delaware was June 28,
1996.
The Corporation, on January 31, 1999 amended the Certificate of
Incorporation increasing the total number of shares of all classes of stock of
the Corporation from 41 million shares to 76 million shares.
This amendment to the Certificate of Incorporation has been duly
adopted by the Board of Directors and stockholders of the Corporation in
accordance with the provisions of Section 242 of the Delaware General
Corporation Law.
Article IV of the Certificate of Incorporation of the Corporation is
hereby repealed in its entirety and replaced with the following:
ARTICLE IV
AUTHORIZED CAPITAL STOCK
The Corporation is authorized to issue two classes of shares
designated respectively "Common Stock" and "Preferred Stock" and such
stock is referred to herein as Common Stock or Common Shares and
Preferred Stock or Preferred Shares, respectively. The total number of
shares of Common Stock the Corporation is authorized to issue is
75,000,000 and each such share shall have a par value of $.01, and the
total number of shares of Preferred Stock the Corporation is authorized
to issue is 1,000,000 and each such share shall have a par value of
$.01. The Preferred Shares may be issued from time to time in one or
more series. The Board of Directors is authorized to fix the number of
shares of any series of Preferred Shares and to determine the
designation of any such series. The Board of Directors is also
authorized to determine or alter the rights, preferences, privileges
and restrictions granted to or imposed upon any privileges and
restrictions granted to or imposed upon any wholly unissued series of
Preferred Shares and, within the limits and restrictions stated in any
resolution or resolutions of the Board of Directors originally fixing
the number of shares constituting any series, to increase or decrease
(but not below the number of shares of any such series then
outstanding) the number of shares of any series subsequent to the issue
of shares of that series. Any Common Stock previously issued and
entitled "Class A Common Stock" is hereby deemed reconstituted and
shall be referred to as "Common Stock" for all purposes.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Amendment on behalf of the Corporation and does hereby verify and affirm, under
penalty of perjury, that this amendment to the Certificate of Incorporation is
the act and deed of the Corporation and that the facts stated herein are true as
of April 27, 2000.
FIRST ALLIANCE CORPORATION
By: /s/ BRIAN CHISICK
------------------------------------
Chairman and Chief Executive Officer
A-1
<PAGE>
[This page intentionally left blank]
A-2
<PAGE>
APPENDIX B
----------
AMENDMENT NO. 2 TO
FIRST ALLIANCE CORPORATION
1996 STOCK INCENTIVE PLAN
This Amendment No. 2 (the "Amendment") to the First Alliance Corporation 1996
Incentive Stock Plan (the "Plan") is made as of April 27, 1999, subject to the
approval hereof by the stockholders of First Alliance Corporation (the
"Corporation") in the manner prescribed in the Plan and the Bylaws of the
Corporation. Unless indicated otherwise, capitalized terms used and not defined
herein have the meaning set forth in the Plan. All section references are to
sections of the Plan.
The Plan is hereby amended as follows:
1. Section 4 of the Plan is hereby amended to read in its entirety as follows:
"Section 4. STOCK SUBJECT TO PLAN
"(a) Subject to adjustment as provided in Section 7 hereof, at any time,
the aggregate number of Shares issued and issuable pursuant to all Awards
(including all Incentive Stock Options) granted under this Plan shall not
exceed 3,125,000.
"(b) The aggregate number of Shares subject to Awards granted during any
calendar year to any one Eligible Person (including the number of shares
involved in Awards having a value derived from the value of Shares) shall
not exceed 3,125,000; PROVIDED, however, that the limitation set forth in
this Section 4(b) shall not apply if such provision is not required in
order for Awards to qualify as "performance based compensation" under
Section 162(m) of the Code. Further, such aggregate number of shares shall
be subject to adjustment under Section 7 only to the extent that such will
not affect the status of any Award intended to qualify as "performance
based compensation" under Section 162(m) of the Code.
"(c) Subject to adjustment as provided in Section 7 hereof, the aggregate
number of Shares issued and issuable pursuant to all Incentive Stock
Options granted under this Plan shall not exceed 3,125,000; PROVIDED,
however, that such aggregate number of shares shall be subject to
adjustment under Section 7 only to the extent that such adjustment will not
affect the status of any Incentive Stock Option under Section 422 of the
Code. Such maximum number does not include the number of Shares subject to
the unexercised portion of any Incentive Stock Option granted under this
Plan that expires or is terminated.
"(d) The aggregate number of Shares issued under this Plan at any time
shall equal only the number of shares actually issued upon exercise or
settlement of an Award and shall not include Shares, or rights with respect
to Shares, that have been canceled or returned to the Company upon
forfeiture of an Award or in payment or satisfaction of the purchase price,
exercise price or tax withholding obligation of an Award."
B-1
<PAGE>
APPENDIX B
----------
2. Except as amended hereby, the Plan shall remain in full force and effect.
3. The amendment set forth herein shall become effective upon approval by the
holders of a majority of all outstanding shares of Common Stock of this
Corporation entitled to vote thereon.
IN WITNESS WHEREOF, the Corporation has caused this Amendment No. 2 to the First
Alliance Corporation 1996 Stock Incentive Plan to be duly executed by its
authorized representative as of the date first stated above.
FIRST ALLIANCE CORPORATION
By: /s/ BRIAN CHISICK
------------------------------------
Chairman and Chief Executive Officer
B-2
<PAGE>
APPENDIX C
FIRST ALLIANCE CORPORATION
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
CHARTER
-------
Purpose
- -------
The Audit Committee shall with respect to this Corporation and its affiliates
and consolidated subsidiaries (collectively, the "Company") operate
independently of Company management, shall report regularly to the Board and
shall also, among other things:
o Make recommendations to the Board regarding the engagement of independent
public accountants, including the review and approval of the scope of
services and the annual audit plan;
o Monitor and review the quality and activities of the Company's internal
audit function and review and approve the scope of and annual audit plans
for such function;
o Monitor the adequacy of the Company's operating and internal controls;
o Review the significant accounting policies of the Company; and
o Review the Company's compliance with laws and regulations.
Members
- -------
o Number: minimum of three directors, two of whom shall be independent
directors.
Term
- ----
Committee members shall be appointed by the Board of Directors each year at the
Board meeting immediately following the Annual Stockholders Meeting and shall
serve at the pleasure of the Board until their resignation or removal.
Meetings
- --------
Subject to the bylaws of the corporation, frequency and content as determined by
the Chairman of the Committee.
Quorum
- ------
Two members, including the Committee Chairman
<PAGE>
PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR USE AT THE ANNUAL MEETING ON
THURSDAY, APRIL 27, 2000 AT
17305 VON KARMAN AVENUE, IRVINE, CA 92614
The undersigned hereby appoints Merrill Butler, Brian Chisick, Sarah Chisick,
Donald Kasle, Daniel Stevenson or each or any of them with full power of
substitution, as attorneys and proxies for the undersigned to act and vote at
the 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 Annual Meeting to be held
April 27, 2000, and, in their discretion, upon any other matters which may
properly come before the Annual Meeting.
The proxy agents present and acting in person or by their substitutes (or if
only one is present and acting, then that one) may exercise all of the powers
conferred by this Proxy. Discretionary authority is confirmed by this Proxy with
respect to certain matters as described in the Proxy Statement.
1. Proposal 1: Election of Directors
NOMINEES: Francisco Nebot, Daniel L. Perl, and Jeffrey Smith
2. Proposal 2: Amendment No. 2 to the Certificate of Incorporation
3. Proposal 3: Approval of Amendment No. 2 to the 1996 Stock Incentive Plan
4. Proposal 4: Ratification of Appointment of Independent Accountants.
PLEASE SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES.
- -------------------------------------------------------------
IF NO OTHER CHOICE IS MADE, THE PROXIES SHALL VOTE FOR THE ELECTION OF THE
DIRECTOR NOMINEES, AMENDMENT NO. 2 TO THE CERTIFICATE OF INCORPORATION, APPROVAL
OF AMENDMENT NO. 2 TO THE 1996 STOCK INCENTIVE PLAN, AND APPROVAL OF
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS.
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 ALL WITHHELD FROM ALL
1. Election of Directors:
(page 5) [ ] [ ]
FOR ALL EXCEPT the following nominee(s):
- ------------------------
A VOTE FOR PROPOSAL NO. 2, FOR PROPOSAL NO. 3, AND FOR PROPOSAL NO. 4
IS RECOMMENDED BY THE BOARD OF DIRECTORS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
2. Amendment of Certificate of Incorporation (page 8): FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Amendment of 1996 Stock Incentive Plan (page 9): FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. Ratification of Appointment of Independent Accountants FOR AGAINST ABSTAIN
(page 11)
[ ] [ ] [ ]
</TABLE>
IMPORTANT - PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE
ENCLOSED ENVELOPE TO: FIRST ALLIANCE CORPORATION, C/O AMERICAN STOCK TRANSFER
AND TRUST, ATTN: DIANE STRONG, 3RD FLOOR, 6201 15TH AVENUE, BROOKLYN, NY 11219.
THANK YOU.
BY SIGNING THIS PROXY, YOU HEREBY ACKNOWLEDGE RECEIPT OF THE CORPORATION'S 2000
ANNUAL REPORT TO STOCKHOLDERS, NOTICE OF THE CORPORATION'S 2000 ANNUAL MEETING
OF STOCKHOLDERS, AND THE CORPORATION'S PROXY STATEMENT DATED MARCH 14, 2000.
Signature(s) of Stockholder(s)_____________________________ Date_________ , 2000
NOTE: If acting as attorney, executor, trustee, or in an other
representative capacity, please sign name exactly as your name(s) appear(s)
on the Proxy. If held in joint tenancy, all persons must sign. Trustees,
administrators, etc., should include title and authority. Corporations
should provide full name of corporation and title of authorized officer
signing proxy.
