<PAGE>
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
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
FIRSTFED FINANCIAL CORP.
- - --------------------------------------------------------------------------------
(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] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
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Notes:
<PAGE>
FIRSTFED FINANCIAL CORP.
401 WILSHIRE BOULEVARD
SANTA MONICA, CALIFORNIA 90401-1490
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
APRIL 26, 1995
NOTICE IS HEREBY GIVEN that an annual meeting of stockholders (the "Annual
Meeting") of FirstFed Financial Corp. ("FFC" or the "Company") will be held in
the Starlight Room of the Miramar-Sheraton Hotel at 101 Wilshire Blvd., Santa
Monica, California 90401 on April 26, 1995 at 10:00 A.M., local time, for the
following purposes:
(1) To elect three Directors to hold office for a three-year term and
until their successors are duly elected and qualified.
(2) To approve the Company's 1994 Stock Option and Stock Appreciation
Rights Plan (the "1994 Stock Plan").
(3) To ratify the appointment of KPMG Peat Marwick LLP as independent
public auditors of the Company for 1995.
(4) To transact such other business as may properly be brought before the
Annual Meeting or any adjournment or adjournments thereof.
Only stockholders of record at the close of business on March 7, 1995 are
entitled to notice of and to vote at the Annual Meeting or any adjournment or
adjournments thereof.
IMPORTANT: If your shares are held in the name of a brokerage firm or
nominee, only that holder can execute a proxy on your behalf. To ensure that
your shares are voted, we urge you to telephone the individual responsible for
your account today and obtain instructions on how to direct him or her to
execute a proxy.
If you receive more than one proxy in separate mailings, it is an indication
that your shares are registered differently in more than one account. All proxy
cards received by you should be signed and mailed to ensure that all of your
shares are voted.
Ann E. Lederer
Secretary
Santa Monica, California
March 20, 1995
IT IS REQUESTED THAT YOU PROMPTLY MARK, DATE AND SIGN THE ENCLOSED PROXY AND
RETURN IT IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL
MEETING. THE PROXY MAY BE WITHDRAWN AT ANY TIME BEFORE IT IS VOTED AT THE
MEETING, OR STOCKHOLDERS MAY VOTE IN PERSON AS DESCRIBED IN THE ACCOMPANYING
PROXY STATEMENT.
<PAGE>
FIRSTFED FINANCIAL CORP.
401 WILSHIRE BOULEVARD
SANTA MONICA, CALIFORNIA 90401-1490
----------------
PROXY STATEMENT
----------------
INFORMATION RELATING TO VOTING AT THE ANNUAL MEETING
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of FirstFed Financial Corp. ["FFC", and
collectively with its subsidiary, First Federal Bank of California ("Bank"),
the "Company"] for use at the Annual Meeting of Stockholders to be held on
April 26, 1995, and at any adjournment thereof. The approximate date of mailing
of this Proxy Statement is March 20, 1995.
The Board of Directors of the Company has selected March 7, 1995 as the
record date for the Annual Meeting. Only those stockholders of record at the
close of business on that date will be entitled to notice of and to vote at the
Annual Meeting. The Company had a total of 10,598,972 shares of common stock
("Company Stock") outstanding at that date. Stockholders will be entitled to
one vote for each share of Company Stock held by them of record at the close of
business on the record date on any matter that may be presented for
consideration and action by the stockholders at the Annual Meeting.
All valid proxies received in response to this solicitation will be voted in
accordance with the instructions indicated thereon by the stockholders giving
such proxies. If no contrary instructions are given, proxies received will be
voted in favor of the election of the three director nominees named in this
Proxy Statement and in favor of the other proposals described herein. Proxies
solicited hereby may be voted for adjournment of the Annual Meeting (whether or
not a quorum is present for the transaction of business) in order to permit
further solicitation of proxies if the Board of Directors of the Company
determines that such adjournment would be advisable in order to obtain
sufficient votes for approval of the matters to be voted upon at the Annual
Meeting.
The Board of Directors does not know of any other business to be presented
for action at the Annual Meeting. If any other business is properly presented
at the Annual Meeting and may properly be voted upon, the proxies solicited
hereby will be voted on such matters in accordance with the best judgment of
the proxy holders named in such proxies. A stockholder's proxy may be revoked
at any time before it is voted at the Annual Meeting by giving written notice
of such revocation to the Secretary of the Company (which notice may be given
by the filing of a duly executed proxy bearing a later date) or by attending
the Annual Meeting and voting in person.
The costs of this proxy solicitation will be paid by the Company. The Company
has retained Kissel-Blake, Inc. to assist in the solicitation of proxies for a
fee of $7,500 and reimbursement of certain expenses. To the extent necessary,
proxies may also be solicited by personnel of the Company in person, by
telephone, or through other forms of communications. Company personnel who
participate in this solicitation will not receive any additional compensation
for such solicitation. The Company will request record holders of shares
beneficially owned by others to forward this Proxy Statement and related
materials to the beneficial owners of such shares and will reimburse such
record holders for their reasonable expenses incurred in doing so.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The information set forth below is based upon filings as of March 10, 1995
made by the listed entities with the Securities and Exchange Commission
("SEC"). Except as set forth below, no person is known to the Company to own
beneficially more than 5% of the outstanding shares of Company Stock:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS BENEFICIAL PERCENT
OF BENEFICIAL OWNER OWNERSHIP OF CLASS
------------------- ---------- --------
<S> <C> <C>
Bankers Trust New York Corporation, Bankers Trust
Company, BT Australia Limited and BT Funds
Management Ltd...................................... 713,321(1) 6.73%
280 Park Avenue
New York, NY 10017
First Federal Bank of California Employee Stock
Ownership Plan and Trust............................ 875,398(2) 8.26%
401 Wilshire Boulevard
Santa Monica, CA 90401
J. P. Morgan & Co. Incorporated..................... 1,041,600(4) 9.83%
60 Wall Street
New York, New York 10260
</TABLE>
- - --------
(1) According to their filing on Schedule 13G with the SEC dated February 13,
1995, Bankers Trust Company has sole voting power over 63,800 of these
shares, BT Funds Management Ltd. has sole voting power over 10,000 of these
shares, and BT Funds Management Ltd. has shared voting power over 622,400
of these shares. According to the filing, Bankers Trust New York Company is
a parent holding company and Bankers Trust Company is its subsidiary bank.
BT Funds Management Ltd. is also a subsidiary of Bankers Trust New York
Company.
(2) According to its filing on Schedule 13G with the SEC dated February 8,
1995, the First Federal Bank of California Employee Stock Ownership Plan
and Trust holds sole voting power over 177,718 of these shares, shared
voting power over 650,674 of these shares, and sole dispositive power over
all 875,398 of these shares. Such Plan's filing indicates that the shares
"were acquired in the ordinary course of business and were not acquired for
the purpose of and do not have the effect of changing or influencing the
control of the issuer of such securities and were not acquired in
connection with or as a participant in any transaction having such purpose
or effect."
(3) According to its filing on Schedule 13G with the SEC dated December 31,
1993, J.P. Morgan & Co. Incorporated holds sole voting power over 775,300
of these shares and sole dispositive power over all 1,041,600 of Morgan
Guaranty Trust Company of New York, a bank, and J.P. Morgan Investment
Management Inc., an investment advisor of these shares. According to its
filing, J.P. Morgan & Co. Incorporated is its parent holding company.
2
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of February 20, 1995, information
concerning the beneficial ownership of shares of Company Stock by each
Director, the Company's Chief Executive Officer and the four other most highly
compensated named executive officers of the Company during the fiscal year
ended December 31, 1994, and all Directors and executive officers of the
Company as a group. Unless otherwise indicated, each person listed has sole
investment and voting power with respect to the shares indicated.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENTAGE
NAME OF BENEFICIAL OWNER OWNERSHIP(1)(2)(3) OF CLASS
------------------------ ------------------ ----------
<S> <C> <C>
Samuel J. Crawford, Jr........................ 65,528 *
Megan Davidson................................ 1,650 *
James P. Giraldin............................. 8,490 *
Martin B. Gottlieb............................ 28,504 *
Christopher M. Harding........................ 4,838 *
Babette E. Heimbuch........................... 197,130 1.86%
James L. Hesburgh............................. 35,975 *
June Lockhart................................. 9,737 *
William S. Mortensen.......................... 245,933 2.32%
Charles F. Smith.............................. 25,000 *
Steven L. Soboroff............................ 875 *
John R. Woodhull.............................. 6,000 *
All Directors and Executive Officers as a
Group (13 persons)........................... 646,926(1)(2)(3) 6.11%
</TABLE>
- - --------
* Less than 1%.
(1) The number of shares shown for each person includes shares, if any, held
beneficially or of record by the person's spouse; voting and investment
power of the shares indicated may also be shared by spouses.
(2) Includes, with respect to Mr. Giraldin, Mr. Gottlieb, Ms. Heimbuch, Mr.
Mortensen, and all Directors and executive officers as a group, shares held
through the First Federal Bank of California Employee Stock Ownership Plan
and Trust. Also includes, with respect to all executive officers, shares of
restricted stock held in trust for such persons while the restrictions
apply.
(3) Includes, with respect to Ms. Heimbuch, 85,938 shares of Company Stock
subject to options granted under the Bank's 1983 Stock Option Plan which
are exercisable within 60 days of February 20, 1995. No other Director or
executive officer holds options which are exercisable within such date. The
percentage of outstanding shares owned by Ms. Heimbuch was computed based
upon the number of shares which would have been outstanding if such options
had been exercised.
3
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
The Certificate of Incorporation of the Company provides that the Board of
Directors shall consist of not less than seven and not more than fifteen
Directors unless a greater number is fixed by the Board of Directors, that the
Directors shall be divided into three staggered classes as nearly equal in
number as possible, that each class of Directors shall be elected for a term of
three years and that one class of Directors shall be elected annually. The
class of Directors scheduled to be elected at the Annual Meeting is composed of
three Directors who will be elected to serve a three year term until the annual
meeting of stockholders in 1998 or until their successors are duly elected and
qualified. The nominees receiving the highest number of votes, up to the number
of Directors to be elected, are elected.
Set forth below are the names of the persons nominated by the Board of
Directors for election as Directors at the Annual Meeting, as well as all other
Directors, together with their ages, principal occupations and business
experience during the last five years, present directorships and the year each
first became a Director of the Bank and of the Company. All of the nominees are
presently Directors. If any nominees should be unable to serve as a Director,
the person or persons voting the proxies solicited hereby will select another
nominee in his or her place. The Company has no reason to believe that any of
the nominees will be unable or unwilling to serve if elected.
<TABLE>
<CAPTION>
FIRST(1)
POSITION HELD BECAME TERM TO
NOMINEES FOR ELECTION AGE WITH COMPANY DIRECTOR EXPIRE
- - --------------------- --- ------------- -------- --------
<S> <C> <C> <C> <C>
Babette E. Heimbuch 47 Director, President & 1986 1998(2)
Chief Operating Officer
William S. Mortensen 62 Director, Chairman of 1961 1998(2)
the Board & Chief
Executive Officer
John R. Woodhull 61 Director 1988 1998(2)
<CAPTION>
TERM
CONTINUING DIRECTORS EXPIRING
- - -------------------- --------
<S> <C> <C> <C> <C>
Samuel J. Crawford, Jr. 69 Director 1955 1996
Christopher M. Harding 42 Director 1984 1997
James L. Hesburgh 61 Director 1975 1997
June Lockhart 69 Director 1980 1996
Charles F. Smith 62 Director 1989 1996
Steven L. Soboroff 46 Director 1991 1997
</TABLE>
- - --------
(1) The date given is the date such Director became a director of First Federal
Bank of California. Each Director (other than Messrs. Smith, Soboroff and
Woodhull) has been a Director of the Company since its organization.
(2) Term of service if re-elected as a Director of the Company at the Annual
Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR NOMINEES
BABETTE E. HEIMBUCH, WILLIAM S. MORTENSEN, AND JOHN R. WOODHULL.
William S. Mortensen joined the Bank in 1955 and was appointed a member of
the Board of Directors in 1961. He was named President of the Bank in 1969,
Chairman of the Board of Directors of the Bank in 1982 and continues to serve
as Chairman of the Board today. He was named Chairman of the Board of FFC in
1987. In addition, he is a past president of the National Council of Savings
Institutions and the California League of Savings Institutions and is currently
a director of the Federal Home Loan Bank of San Francisco.
4
<PAGE>
Samuel J. Crawford, Jr. is retired from the practice of law in Southern
California. He has served as a Director of the Bank for more than thirty years,
and a Director of FFC since 1987.
Christopher M. Harding is a managing partner of the law firm of Lawrence &
Harding. He is active in numerous local civic groups and has served on the
Board of Directors of Santa Monica Area Chamber of Commerce since 1982. He has
served as a Director of the Bank since 1984, and of FFC since 1987.
Babette E. Heimbuch was previously employed by the accounting firm of KPMG
Peat Marwick serving as the Audit Manager assigned to the Bank. Ms. Heimbuch
joined the Bank as Senior Vice President, Chief Financial Officer in 1982. She
was elected Executive Vice President in 1985, and was elected a Director of the
Bank in March, 1986. In 1987 she was elected Senior Executive Vice President of
the Bank and of FFC and a Director of FFC. Ms. Heimbuch was named President and
Chief Operating Officer of the Bank and FFC in 1989. Ms. Heimbuch is a director
of Sunrise Medical Inc. and Santa Monica Hospital.
James L. Hesburgh is President of James L. Hesburgh International, Inc. and
Battley USA, Inc. Mr. Hesburgh is also a director of Fremont Funding, Inc.,
Sinto American, Inc. and Toastmaster, Inc. He serves as a Trustee of St. John's
Hospital and Health Center Foundation in Santa Monica, California. He has
served in senior management capacities with several major United States
corporations and specializes in international marketing and consulting. Mr.
Hesburgh has served as a Director of the Bank since 1975, and a Director of FFC
since 1987.
June Lockhart is an internationally known, award winning motion picture,
television and stage actress. For the past thirty years she has been a
spokesperson for the City of Hope and for the American Cancer Society. She is
currently an associate member of the Radio and Television News Directors
Association. Ms. Lockhart is the chair of the International Advisory Board for
The National Association of Radio Talk Show Hosts. She has been a spokesperson
for International Hearing Dog, Inc. for over twenty years. Ms. Lockhart has
been a speaker for the Federal Reserve Bank. Ms. Lockhart has served as a
Director of First Federal since 1980, and of FFC since 1987.
Charles F. Smith is president of Charles F. Smith & Company, Inc. He serves
as a Director of Trans Ocean, Ltd., Logicon, Inc. and Fremont Funding, Inc., as
Chairman of the Marymount High School Board of Trustees, and is a Trustee of
St. John's Hospital and Health Center Foundation. Mr. Smith became a Director
of the Bank and FFC in 1989.
Steven L. Soboroff is an investor, real estate representative for retailers
and Managing Partner of Soboroff Partners. He is President of Big Brothers of
Greater Los Angeles and President of the Recreation and Parks Commission for
the City of Los Angeles. Mr. Soboroff became a Director of the Bank and FFC in
1991.
John R. Woodhull is President, Chief Executive Officer, and Chairman of the
Board of Logicon, Inc., and serves on the boards of Adams Business Forms,
Sunrise Medical, Inc. and the Los Angeles Metropolitan YMCA. Mr. Woodhull
became a Director of the Bank and FFC in 1988.
Directors' Fees. Directors of the Bank, including Directors who are officers
of the Bank, receive annual directors' fees of $13,200, and Directors who are
not officers of the Bank also receive $1,250 for each regular meeting of the
Board attended. Members of the Executive Committee of the Board who are not
officers of the Bank receive $1,000 per month. Directors, excluding the Legal-
Audit Committee Chair, who are Chairs of Board Committees receive $400 per
quarter. The Legal-Audit Committee Chair currently receives an annual retainer
of $10,620. Other members of the Legal-Audit Committee receive $600 per month.
Directors of FFC receive no compensation.
Committees of the Board of Directors. The Company has standing Legal-Audit,
Executive Fair Lending/Community Reinvestment Act ("CRA"), Compensation and
Executive Committees. The Legal-Audit Committee currently consists of Messrs.
Crawford (Chair), Smith and Woodhull, all of whom are non-employee directors.
The Committee reviews litigation and reports on various legal, accounting and
auditing matters, including the selection of the Company's independent
auditors, the scope of audit procedures, the
5
<PAGE>
nature of services performed by the independent auditors, the performance of
the Company's independent and internal auditors, its accounting practices, and
monitors the Company's legal and regulatory compliance programs. During the
year ended December 31, 1994, the Legal-Audit Committee held four meetings.
The Executive Fair Lending/CRA Committee held four meetings in 1994. Its
responsibilities include monitoring the Bank's Community Reinvestment Act
activities and ensuring that the Bank complies with all directives from its
Board of Directors. Members of the Committee are Bank Director June Lockhart
(Chair) and Officers Martin Gottlieb, Elaine Akouris, Shannon Millard, Diana
Wright (CRA Officer), Nancy Elander, Doug Stearns, Craig Smith, Ann Lederer,
Kendon Studebaker, Robert Satnick, Hector Valiente and Megan Davidson.
The Compensation Committee, which held eight meetings in 1994, currently
consists of Directors Hesburgh (Chair), Soboroff and Harding, all of whom are
non-employee directors. This Committee administers the Company's salary and
other compensation programs. See "EXECUTIVE COMPENSATION--Report of Board
Compensation Committee."
The Executive Committee met three times in 1994 and is comprised of Chairman
Mortensen and Directors Crawford, Hesburgh, Smith and Woodhull.
FFC does not have a standing nominating committee of the Board of Directors
(or another committee performing similar functions). The Bylaws of FFC provide
that only persons nominated in accordance with the procedures set forth therein
shall be eligible for election as Directors. Shareholder nominations must be
made pursuant to written notice received by FFC not less than 60 days nor more
than 90 days prior to the scheduled date of the Annual Meeting. Such notice
must state the nominee's name, age and address (business and residence), the
nominee's principal occupation or employment, and the class and number of
shares of Company Stock beneficially owned by the nominee on the date of the
notice. The required notice must also disclose certain information relating to
the nominee which would be required to be disclosed in a proxy statement and in
certain other filings under the federal securities laws. In addition, the
shareholder making the nomination must disclose his or her name and address as
they appear on FFC's books, the name and principal business or residence
address of any other record or beneficial stockholders known by the nominating
shareholder to support such nominee, and the class and number of shares of
Company Stock beneficially owned by the nominating shareholder and any such
supporting stockholders on the date of the notice.
Meetings of the Board of Directors. During 1994 there were twelve regular
meetings of the Board of Directors of the Bank and FFC. Each Director attended
at least 80% of the aggregate number of such meetings and of the meetings of
the Committee on which he or she served during the period during which he or
she held a position on the Board.
Information Relating to Executive Officers. Set forth below are the names and
ages of the executive officers of the Company, other than Mr. Mortensen and Ms.
Heimbuch (see "ELECTION OF DIRECTORS"), together with the positions held by
these persons.
<TABLE>
<CAPTION>
NAME AGE TITLE
---- --- -----
<S> <C> <C>
Megan Davidson.................. 34 Executive Vice President/Chief Loan Officer
James P. Giraldin............... 42 Executive Vice President/Chief Financial
Officer
Martin B. Gottlieb.............. 54 Executive Vice President/Marketing and
Savings Administration
Shannon Millard................. 32 Executive Vice President/Chief Credit
Officer
</TABLE>
Megan Davidson joined the Company in 1993 as Senior Vice President, Secondary
Marketing. In 1994 she was promoted to Executive Vice President, Chief Lending
Officer. Previously, Ms. Davidson was employed by Western Federal Savings for
ten years, most recently as Senior Vice President.
6
<PAGE>
James P. Giraldin joined the Company in May of 1992 as Executive Vice
President/Chief Financial Officer. Prior to joining FFC, Mr. Giraldin was Chief
Executive Officer of Irvine City Bank for 5 years. He previously served as
Chief Financial Officer for two other savings and loan associations and was a
certified public accountant with KPMG Peat Marwick.
Martin B. Gottlieb joined the Company in 1980 as Vice President of Business
Development and Market Research. He was elected to the position of Senior Vice
President in 1982 and to his current position of Executive Vice
President/Marketing and Savings Administration in 1987. He was appointed
Executive Vice President of FFC in 1987.
Shannon A. Millard joined the Company in 1992. In July, 1994 she was promoted
to her current position of Executive Vice President/Chief Credit Officer. Ms.
Millard was formerly with the Bank of California for six years, most recently
as the Vice President in charge of Real Estate Services. Prior to that, Ms.
Millard was with Sumitomo Bank.
EXECUTIVE COMPENSATION
The following SUMMARY COMPENSATION TABLE includes compensation for the years
ended December 31, 1994, 1993 and 1992 for services in all capacities awarded
to, earned by, or paid to the Company's Chief Executive Officer and the four
other named executive officers of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
---------------------------- --------------------- -------
SECURITIES
OTHER RESTRICTED UNDERLYING ALL OTHER
NAME & ANNUAL STOCK OPTIONS/ LTIP COMPEN-
PRINCIPAL SALARY BONUS COMPEN- AWARD SAR'S PAYOUTS SATION
POSITION YEAR $ $ SATION ($)(2) (#) ($) ($)(4)
--------- ---- ------- ------- ------- ---------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William S. Mortensen ... 1994 329,280 -0- (1) -0- -0- -0- 1,907
Chief Executive Officer 1993 322,800 -0- (1) 77,969 -0- -0- 2,929
1992 312,000 138,500 (1) 43,246 -0- -0- 28,762
Babette E. Heimbuch .... 1994 230,100 -0- (1) -0- -0- -0- 1,907
President 1993 225,540 -0- (1) 54,835 -0- -0- 2,629
1992 217,140 97,500 (1) 31,740 -0- -0- 20,418
James P. Giraldin ...... 1994 177,240 -0- (1) 41,662 10,000(3) -0- 1,907
Chief Financial Officer 1993 173,760 75,000 (1) -0- -0- -0- 2,629
1992 100,000 45,000 (1) 20,948 11,250 -0- -0-
Martin B. Gottlieb ..... 1994 157,680 -0- (1) -0- -0- -0- 1,907
Executive V.P.
Marketing/Savings 1993 154,560 -0- (1) 38,035 -0- -0- 2,629
1992 149,340 -0- (1) 20,948 -0- -0- 14,043
Megan Davidson ......... 1994 153,750 -0- (1) 20,831 6,666(3) -0- -0-
Chief Loan Officer
</TABLE>
- - --------
(1) Perquisites to each officer did not exceed the lesser of $50,000 or 10% of
the total salary and bonus for such officer.
(2) Based on the price at December 30, 1994 of $12.625 per share. The aggregate
restricted stock holdings at December 31, 1994 for the named executive
officers consisted of approximately 40,081 shares worth $506,020 at the
then current market value, without giving effect to the diminution of value
attributable to the restrictions on such stock. The value of all restricted
stock awards at the end of the last fiscal year based upon a stock price of
$12.625 per share as of December 30, 1994 is $192,417, $140,162, $58,327,
$94,283 and $20,831 for Mr. Mortensen, Ms. Heimbuch, Mr. Giraldin, Mr.
Gottlieb and Ms. Davidson, respectively. The number of restricted stock
awards held by Mr. Mortensen, Ms. Heimbuch,Mr. Giraldin, Mr. Gottlieb and
Ms. Davidson at the end of the last fiscal year is 15,241, 11,102, 4,620,
7,468 and 1,650, respectively. No restricted stock award vests in under
four years from the date of grant. Dividends will be paid on the restricted
stock if and when paid on the Company Stock. Stock dividends shall be
subject to all of the restrictions applicable to the restricted stock.
7
<PAGE>
(3) Options granted pursuant to the 1994 Stock Plan, subject to stockholder
approval. (See Proposal 2 herein).
(4) Employee Stock Ownership Plan contributions.
PENSION PLAN TABLE
BENEFITS AT AGE 65:
<TABLE>
<CAPTION>
YEARS OF PARTICIPATION
FINAL FIVE YEAR ----------------------------------
AVERAGE SALARY 20 25 30 35 40
- - --------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
$ 50,000..................................... 15,083 18,853 22,624 26,394 26,394
100,000..................................... 33,083 41,353 49,624 57,894 57,894
150,000..................................... 51,083 63,853 76,624 89,394 89,394
200,000..................................... 51,083 63,853 76,624 89,394 89,394
250,000..................................... 51,083 63,853 76,624 89,394 89,394
300,000..................................... 51,083 63,853 76,624 89,394 89,394
350,000..................................... 51,083 63,853 76,624 89,394 89,394
400,000..................................... 51,083 63,853 76,624 89,394 89,394
450,000..................................... 51,083 63,853 76,624 89,394 89,394
500,000..................................... 51,083 63,853 76,624 89,394 89,394
</TABLE>
Pension Plan. The Bank has a non-contributory defined benefit pension plan
(the "Pension Plan").
The foregoing table shows the estimated annual benefits upon retirement to
participants in specified remuneration and years of service classifications.
The amounts shown are subject to the maximum benefit limitations set forth in
the Internal Revenue Code. The pension benefits shown are based upon
retirement at age 65 and the payment of a single life annuity to the
participants. Social security payments reduce the amounts to be paid
thereunder.
The maximum annual benefit currently permitted under the Pension Plan is
$120,000 (single life). Benefits shown are payable for life with 10 years
payments guaranteed.
Estimated credited years of service for each of the individuals named in the
Summary Compensation Table are: Mr. Mortensen--40 years, Ms. Heimbuch--13
years, Mr. Gottlieb--14 years, Mr. Giraldin--2 years and Ms. Davidson--0
years. Each of their "covered compensation" (the maximum amount permitted to
be used for calculating benefits pursuant to the Internal Revenue Code) under
the Pension Plan was $150,000.
SERP TABLE*
BENEFITS AT AGE 60:
<TABLE>
<CAPTION>
FINAL FIVE YEAR YEARS OF SERVICE
AVERAGE SALARY ---------------------------------------
AND BONUS 20 25 30 35 40
- - --------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$150,000................................ 55,656 69,118 60,080 51,042 49,235
200,000................................ 85,656 106,618 97,580 88,542 86,735
250,000................................ 115,656 144,118 135,080 126,042 124,235
300,000................................ 145,656 181,618 172,580 163,542 161,735
350,000................................ 175,656 219,118 210,080 201,042 199,235
400,000................................ 205,656 256,618 247,580 238,542 236,735
450,000................................ 235,656 294,118 285,080 276,042 274,235
500,000................................ 265,656 331,618 322,580 313,542 311,735
</TABLE>
- - --------
* The amounts under the SERP are in addition to the Pension Plan benefits.
Social security payments do not reduce the amounts to be paid under the
SERP.
8
<PAGE>
Supplemental Executive Retirement Plan. The Bank has adopted a Supplemental
Executive Retirement Plan ("SERP") covering the Chairman of the Board and
President. The foregoing table shows the estimated annual benefits payable upon
retirement at age 60 to participants in the SERP for the indicated levels of
average compensation and various periods of service, assuming no future changes
in such plan and based upon the current formula.
Stock Option and Stock Appreciation Rights Plan. Until August 18, 1993,
options to purchase shares of the Company's common stock were granted under the
First Federal 1983 Stock Option and Stock Appreciation Rights Plan, as amended
in 1987 ("1983 Stock Plan"). The 1983 Plan expired by its terms in 1993 and has
been replaced by the 1994 Stock Plan. See Proposed No. 2: "Proposal to Approve
1994 Stock Option and Stock Appreciation Rights Plan."
No options were granted under the 1983 Plan during 1994. The following table
contains information concerning the grant of stock options during 1994 under
the 1994 Stock Plan to the named executive officers (subject to stockholder
approval at the Annual Meeting):
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
RATES OF STOCK PRICE
APPRECIATION(1) FOR
INDIVIDUAL GRANTS OPTION TERM
- - ---------------------------------------------- ----------------------------
(A) (B) (C) (D) (E) (F) (G)
NUMBER OF % OF
SECURITIES OPTIONS/
UNDERLYING SARS
OPTIONS/ GRANTED TO EXERCISE
SARS EMPLOYEES OR BASE
GRANTED IN FISCAL PRICE EXPIRATION
NAME (#) YEAR ($/SH) DATE 5% ($) 10% ($)
---- ---------- ---------- -------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
James P. Giraldin....... 10,000 9.4 11.25 12-19-2004 70,751(2) 179,296(2)
Megan Davidson.......... 6,666 6.2 16.875 06-17-2004 70,744(2) 179,278(2)
</TABLE>
- - --------
(1) There is no assurance provided to any executive officer or any other holder
of the Company's Securities that the actual stock price appreciation over
the ten-year option term will be at the assumed five percent and ten
percent levels or at any other defined level. These rates are the assumed
compounded appreciation rates required by the SEC over a ten year term.
Unless the market price of the Company Stock does in fact appreciate over
the option terms, no value will be realized from the option grants made to
the named executive officers.
(2) Regulations of the SEC require that the potential realizable dollar value
be calculated based on the product of (a) the difference between (i) the
product of the per-share market price at the time of the grant and the sum
of 1 plus the (assumed) adjusted stock price appreciation rate, and (ii)
the per-share exercise price; and (b) the number of securities underlying
the grant at year-end.
9
<PAGE>
The following table sets forth information concerning each exercise of stock
options by the CEO and named executive officers during the year ended December
31, 1994.
AGGREGATED OPTIONS/SAR EXERCISES IN 1994 AND DECEMBER 31, 1994 OPTION/SAR
VALUES.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SAR'S AT
DECEMBER 31, 1994 (#) DECEMBER 31, 1994 ($)
---------------------- ---------------------
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($)(1) UNEXERCISABLE UNEXERCISABLE
---- --------------- --------------- ---------------------- ---------------------
<S> <C> <C> <C> <C>
William S. Mortensen.... 41,360 $422,161 -0-/-0- -0-/-0-
Babette E. Heimbuch..... -0- -0- 85,938/-0- $136,212/-0-
James P. Giraldin....... -0- -0- -0-/21,250(2) -0-/13,750
Martin B. Gottlieb...... -0- -0- -0-/-0- -0-/-0-
Megan Davidson.......... -0- -0- -0-/12,398(3) -0-/-0-
</TABLE>
- - --------
(1) Based on market value of underlying securities at year-end.
(2) Includes 10,000 shares subject to stockholder approval under the 1994 Stock
Plan.
(3) All shares subject to stockholder approval under the 1994 Stock Plan.
Certain Relationships and Related Transactions. The Bank offered mortgage
loans and consumer loans to Company Directors and officers (Vice President and
above) until the end of 1989 (at which time the Bank stopped offering such
loans, except loans on savings accounts and overdraft lines of credit, to
Company Directors and officers). These loans were made in the ordinary course
of business and, in the judgment of management, did not involve more than the
normal risk of collectability. To qualify under the Employee Loan Benefit
Program ("ELBP"), all real estate and home equity credit line loans were
required to be secured by the employee's primary residence. Employee real
estate loan benefits required one year of full-time employment with the
Company.
All ELBP loans were made on substantially the same terms as those prevailing
at the time for comparable transactions with non-affiliated persons, except for
the interest rates and loan fees charged thereon.
ELBP real estate loans were written as adjustable mortgage loans ("AML's"),
and are modified while the person is employed by the Company to a rate
approximately equal to (but not less than) the Bank's cost of funds during the
month prior to the loan approval for the first three months of the loan.
Thereafter, the interest rate adjusts monthly to a rate equal to the Federal
Home Loan Bank's Eleventh District Cost of Funds. Fees were charged for
appraisal, credit report, title policy and document costs only. All
preferential rates are subject to increase upon termination of the individual's
employment with the Company.
The following table sets forth amounts in excess of $60,000 in the aggregate
receivable from Directors and executive officers as of December 31, 1994.
LOANS TO DIRECTORS & EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
HIGHEST BALANCE UNPAID
OUTSTANDING BALANCE INTEREST RATE
NAME TYPE OF LOAN DURING 1994 ($) AT 12/31/94 ($) AT 12/31/94 YEAR MADE
---- ------------ --------------- --------------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Christopher J. Harding.. 1st TD 299,505 272,125 4.039 1985
2nd TD 34,736 32,431 4.039 1987
Babette E. Heimbuch..... 1st TD 414,034 390,514 4.039 1988
William S. Mortensen.... 1st TD 122,667 91,232 4.039 1989
John Woodhull........... 1st TD 396,043 370,294 4.039 1989
</TABLE>
Termination of Employment and Change of Control Arrangements. The Company has
no employment contracts with any of the named executive officers, including Mr.
Mortensen.
10
<PAGE>
The Restricted Stock Bonus Plan described in the Report of the Compensation
Committee below and the 1983 and 1994 Stock Plans provide for accelerated
vesting of rights in the event of certain change of control events.
REPORT OF THE COMPENSATION COMMITTEE
OF
FIRSTFED FINANCIAL CORP.
Decisions on compensation of the Company's executives are made by a three-
member Compensation Committee composed entirely of non-employee directors. Set
forth below is the report submitted by Messrs. Hesburgh (Chair), Harding and
Soboroff addressing the Company's compensation policies for 1994 as they
affected Mr. Mortensen (the Company's Chief Executive Officer) and the
Company's other executive officers.
The Members of the Compensation Committee have the responsibility to oversee
the Company's various compensation plans, including its annual bonus plan,
restricted stock plan, Employee Stock Ownership Plan ("ESOP"), and annual
salary review. The Committee reviews compensation levels of all members of
management, including executive officers, evaluates their performance, and
considers officer succession and related matters. The Committee reviews with
the Board all aspects of compensation for officers at the level of vice
president or above, as well as reviewing bonus compensation for assistant vice
presidents.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No person who served as a member of the Compensation Committee was an
employee of the Company or any of its subsidiaries, was formerly an officer of
the Company or any of its subsidiaries, or had any relationship with the
Company or its subsidiaries requiring disclosure, except as specifically
described in this Proxy Statement.
COMPENSATION PHILOSOPHY
The Compensation Committee's executive compensation philosophy is to provide
competitive levels of compensation, tie compensation levels and individual
compensation to the Company's operating performance, and assist the Company in
attracting and retaining talented management.
The principal elements of the Company's executive compensation are base
salary, annual bonus, stock options and restricted stock awards. Each of these
elements are discussed below. In reviewing and making recommendations as to
overall levels of compensation, the Compensation Committee also takes into
account deferred and non-cash benefits, including pension benefits, insurance
and other benefits. Compensation has been and will continue to be structured so
as to be tax deductible.
BASE SALARY
Executive officer base salaries are initially determined, but not
established, by reference to the competitive marketplace for executive talent
for the responsibilities of the particular position. The Company's Human
Resources Department participates in, obtains information from, and analyzes
the results of a salary and benefits survey conducted annually by the
California League of Savings Institutions ("Cal League"). The Cal League survey
is considered an effective tool to initiate the Compensation Committee review
process since it utilizes information obtained from other savings institutions
in California. The Company has utilized the Cal League survey annually for over
twenty years. The Compensation Committee reviews the results of the annual
survey to ensure that the Company's salary grades and benefits are comparable
to those provided by its peers. The Committee's goal generally is to be within
the 75th percentile of what it has determined to be the appropriate peer group
as reported on the Cal League survey.
11
<PAGE>
Additionally, in 1994, the Company participated in the SNL Executive
Compensation Review of 1994 ("SNL Review") in order to analyze more closely the
compensation of executive officers.
Annual salary adjustments are determined by evaluating the performance of the
Company generally and the performance of each executive officer. General annual
salary adjustments to base salary for executive officers in 1994 were 4
percent, representing a cost of living increase.
ANNUAL BONUSES
A substantial portion of the annual compensation of each officer is based
upon the performance of the Company, as well as the individual contribution of
the officer to the Company's performance. While corporate performance measures
such as net income, earnings per common share, return on stockholders equity
and return on average total assets are considered, the Committee does not apply
a specific quantitative formula in making compensation decisions. Non-financial
performance measures also may be included, such as improvements in product
quality, efficiency, customer relations, and employee relations. No particular
weight is given to one factor over another among these performance measures.
For 1994, the most important qualitative factor was the Committee's assessment
of management's ability to respond to the problems presented due to the poor
condition of Southern California's real estate market and the effect of the
Northridge earthquake. In the past, bonuses have typically ranged from 0
percent of base salary to 50 percent awarded for outstanding accomplishments
during the year. Thus, for years in which the Company's net earnings are
significant, a large portion of an executive officer's compensation may be
determined by the Compensation Committee at the end of each year based upon the
officer's contribution to the Company's performance during the year. For
purposes of establishing the annual bonus pool, the Company's performance is
measured against earnings goals established prior to the commencement of each
fiscal year by the Board. The maximum bonus pool typically has been equivalent
to seven percent of year-end net profit before federal income tax. Based upon
information available at the time the Compensation Committee made its year-end
determination as to annual bonuses, in 1994, for the second time since 1981, no
net earnings were anticipated due to the continuing effect of the recession in
Southern California, the related decline in the real estate market and the
effect of the Northridge earthquake. While the Committee felt the Company's
executive officers and certain other officers had made truly outstanding
achievements in meeting the challenges of the year, the Committee did not find
it appropriate to award any discretionary cash bonuses for 1994 due to the
unavailability of net earnings. Bonuses were paid pursuant to commitments for
first year bonuses made to certain officers who joined the Bank in 1994, and
pursuant to various Bank-wide performance based incentive plans.
STOCK OPTIONS AND RESTRICTED STOCK
The Compensation Committee believes that stock ownership by management and
employees and performance-based compensation arrangements in the form of
Company Stock are beneficial in ensuring that management's interest in the
Company's performance corresponds to those of the Company's shareholders. It
also believes that stock ownership helps attract and retain key executives. The
Company awards stock options and restricted stock grants in furtherance of this
philosophy.
Awards of stock options typically are made upon employment or promotion of
officers at the level of vice president and above. The awards are based upon a
standardized dollar value at each participating level of responsibility and
reflect the Compensation Committee's determination of the appropriate incentive
for the responsibilities of that particular officer level. Other stock option
awards may be made to officers of the Company from time to time. A stock option
award of 10,000 shares (subject to stockholder approval of the 1994 Stock Plan)
was made to Mr. Giraldin for his extraordinary efforts during 1994. No other
bonus stock option awards were made during 1994.
In addition to stock options, as indicated above, restricted stock grants are
made by the Compensation Committee as part of the Company's bonus program.
Restricted stock grants may be made to officers at the
12
<PAGE>
level of assistant vice president and above. Three executive officers and two
other officers were awarded year-end restricted stock awards, totalling 9,900
shares of restricted stock.
CHIEF EXECUTIVE OFFICER COMPENSATION
Chief Executive Officer William S. Mortensen's base salary for 1995 was
increased by $1,100 per month or 4 percent. The Committee noted Mr. Mortensen's
ability and dedication to excellent financial performance of the Company during
his twenty-five years of continuous leadership as Chief Executive Officer. The
Committee also noted Mr. Mortensen's leadership contributions toward the
Company's accomplishments during 1994. The Committee considered the fact that
despite the very difficult economic environment and catastrophic events that
continued throughout 1994, capital levels were enhanced in 1994 and well
exceeded the regulatory requirements, core operating earnings continued to be
strong, and important structural changes had been made to better position the
Company for the future. However, as noted above, no executive officers were
awarded cash bonuses in 1994 due to the lack of net earnings.
The level of Mr. Mortensen's aggregate salary for 1994 was comparable to the
Company's performance ranking in relation to the peer groups (based on
geographic location, asset size and levels of Return on Average Assets) shown
in the League Survey and SNL Review. The other benefits received by Mr.
Mortensen are as set forth in the Summary Compensation Table.
Compensation Committee:
James L. Hesburgh (Chair)
Christopher M. Harding
Steven L. Soboroff
13
<PAGE>
PERFORMANCE GRAPH
The SEC has adopted a requirement that companies include in their proxy
statements a line graph presentation comparing cumulative five-year shareholder
returns with two other specified indices. The Board of Directors has selected
published indices consisting of the New York Stock Exchange Market Index and
the Industry Group 541--Savings and Loan Index. These indices are prepared and
published by The New York Stock Exchange and Media General Financial Services
respectively, which are not affiliated with the Company.
COMPARE 5-YEAR CUMULATIVE TOTAL RETURN
AMONG FIRSTFED FINANCIAL CORP.,
NYSE MARKET INDEX AND PEER GROUP INDEX
[GRAPH H FROM PRINTER]
<TABLE>
<CAPTION>
Measurement Period First Fed NYSE
(Fiscal Year Covered) Financial Market Index Peer Group
- - ------------------- ---------- ------------ ----------
<S> <C> <C> <C>
Measurement Pt- 1989 $100 $100 $100
FYE 1990 $ 77.98 $ 95.92 $ 69.39
FYE 1991 $133.18 $124.12 $112.08
FYE 1992 $114.58 $129.96 $148.79
FYE 1993 $ 95.24 $147.56 $184.50
FYE 1994 $ 75.15 $144.69 $176.72
</TABLE>
It should be noted that this graph represents historical stock price
performance and is not necessarily indicative of any future stock price
performance.
THE FOREGOING REPORT OF THE BOARD COMPENSATION COMMITTEE AND THE PERFORMANCE
GRAPH THAT APPEARS IMMEDIATELY AFTER SUCH REPORT SHALL NOT BE DEEMED TO BE
SOLICITING MATERIAL OR TO BE FILED WITH THE SEC OR INCORPORATED BY REFERENCE IN
ANY DOCUMENT SO FILED.
14
<PAGE>
PROPOSAL 2
PROPOSAL TO APPROVE 1994 STOCK OPTION AND
STOCK APPRECIATION RIGHTS PLAN
The Board of Directors of FirstFed Financial Corp. has adopted, subject to
stockholder approval, the 1994 Stock Option and Stock Appreciation Rights Plan
(the "1994 Stock Plan"). Under the 1994 Stock Plan, options to purchase up to
1,500,000 shares of FirstFed Financial Corp. Common Stock (the "Company Stock")
may be granted to full-time employees, including officers of the Bank or its
subsidiaries.
The 1994 Stock Plan replaces the now expired 1983 Stock Plan. Its terms are
materially the same as these of the 1983 Stock Plan. The 1983 Stock Plan
provided for the issuance of 1,571,484 shares (adjusted for stock splits). A
total of approximately 300,000 shares were available at the time the 1983 Stock
Plan expired.
The Board of Directors continues to believe that the prudent use of stock
option and other related incentive programs is a significant factor in the
Bank's ability to attract and retain key personnel.
SUMMARY OF 1994 STOCK PLAN
The following summary of certain provisions of the 1994 Stock Plan is
qualified in its entirety by reference to the text of the 1994 Stock Plan.
Copies of the actual Plan documents may be obtained by any stockholder upon
written request to the Secretary of the Company at the Corporate Offices in
Santa Monica, California.
The 1994 Stock Plan is intended to encourage stock ownership by selected
officers and employees of the Bank and its subsidiaries, thereby increasing
their proprietary interest in the success of the Company and its subsidiaries
and encouraging them to remain in the employ of the Bank or a subsidiary.
The 1994 Stock Plan permits the Bank to grant to employees of the Bank and
its subsidiaries incentive stock options, as defined in Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code") or nonstatutory options.
Stock appreciation rights granted under the 1994 Stock Plan may, at the
discretion of the Board of Directors, enable the recipient on exercise to
receive payment, in stock or cash (as determined by the Board of Directors), of
increases in the market value or per share book value of the Company Stock from
the date of grant (referred to as "base price" and "base book value"
respectively) to the date of exercise. Stock appreciation rights may be granted
in tandem with options (in which event exercise of one will extinguish the
other) or separately. The 1994 Stock Plan does not limit the number of stock
appreciation rights that can be granted. All options granted under the Stock
Plan must have exercise prices at least equal to the fair market value of the
Company Stock at the date of grant. All stock appreciation rights granted under
the 1994 Stock Plan must have base prices or base book values at least equal to
the fair market value or book value of the Company Stock at the date of grant.
The 1994 Stock Plan is administered by the Compensation Committee of the
Board of Directors. This Committee consists of "disinterested persons", as
defined in Section 2(e) of the 1994 Stock Plan. Subject to the restrictions of
the 1994 Stock Plan, the Compensation Committee has the authority (i) to
determine the time or times at which, and the employees to whom, options and
stock appreciation rights are granted; (ii) to determine the number of shares
subject to each option, the option price, and the duration of each option
granted under the 1994 Stock Plan; (iii) to construe and interpret the 1994
Stock Plan and to prescribe, amend and rescind rules and regulations relating
to it; and (iv) to make all other determinations which the Board of Directors
shall deem necessary or advisable for the administration of the 1994 Stock
Plan.
All regular full-time employees of the Bank or its subsidiaries are eligible
to participate in the 1994 Stock Plan. It is not possible to predict the number
or identity of future participants in the 1994 Stock Plan, or, except as set
forth in the 1994 Stock Plan, to describe the provisions that may be included
in specific grants.
15
<PAGE>
No employee is eligible to receive or exercise any options which, if
exercised, would result in that employee holding beneficially or of record in
excess of 5% of the outstanding shares of Company Stock. Furthermore, the
Compensation Committee has limited the amount that may be granted in any
calendar year to 100,000. With the purpose of satisfying the requirements of
Section 162(m) of the Code, this limitation was approved to qualify options and
SARs as "performance-based compensation" under the Code, thereby avoiding
certain potential limitations on deductibility for tax purposes of certain
executive compensation. In the absence of the limits on grants to a particular
employee, the Company would risk losing tax deductions for certain compensation
paid to executive officers. The Code provides that as long as a limit is
provided, there are no tax consequences of the amount of the limit.
Accordingly, the Board is recommending a high limit in order to avoid unduly
restricting the Company's flexibility in compensation decisions for the future.
The Board does not anticipate that the limit will alter its approach to
executive compensation decisions for the future in a manner which would result
in any increase in option awards above what they otherwise would have been.
Options or stock appreciation rights to be granted under the 1994 Stock Plan
are granted in recognition of the recipient's past, present and expected future
contributions to the management of the Bank. No monetary consideration is
provided by the recipient with respect to the grant of options or stock
appreciation rights.
No option or stock appreciation rights granted under the 1994 Stock Plan will
be transferable, except to his or her heirs or legal representatives, in the
event of a recipient's death, or pursuant to a "qualified domestic relations
order," as defined in the Code (a "QDRO"). Options or stock appreciation rights
may be exercised by the recipient either (a) the period in which he or she is
an employee or (b) within sixty days after termination of his or her employment
for any reason other than death, permanent disability, or normal retirement. In
the event of a recipient's death or a transfer pursuant to a QDRO, his or her
options or stock appreciation rights may be exercised by the permitted
transferee at any time prior to expiration of the option or stock appreciation
rights, but in any event not later than one year after the date of his or her
death. In the event of a recipient's permanent disability or normal retirement,
the option or stock appreciation right may be exercised by the recipient for
the balance of its stated term. Termination of the 1994 Stock Plan will not
affect rights under any options or stock appreciation rights granted but not
exercised as of the date of termination.
Options and stock appreciation rights granted under the 1994 Stock Plan will
expire no later than ten years from the date of grant. Shares not purchased
under options which are terminated prior to exercise shall again be available
for purposes of the 1994 Stock Plan.
An aggregate of 1,500,000 shares of Company Stock has been reserved for
purposes of the 1994 Stock Plan. Under the 1994 Stock Plan, no more than one
and one-half percent of the outstanding shares available for grant may be
granted in any one calendar year, except that if less than one and one-half
percent are granted in one year, any remaining shares may be carried over into
the subsequent year. Options to purchase an aggregate of 106,104 shares of
Company Stock have been granted under the 1994 Stock Plan, subject to the
approval of the 1994 Stock Plan by stockholders at the Annual Meeting. None of
these grants were made to executive officers of the Bank during 1994, except
that Mr. Giraldin received an option to purchase 10,000 shares at $11.25 per
share as a year-end bonus, Ms. Millard received an option to purchase 6,666
shares at $11.25 per share upon her promotion to the position of Executive Vice
President and Ms. Davidson received an option to purchase 6,666 shares at
$16.875 per share upon her promotion to Executive Vice President. No stock
appreciation rights have been granted to date.
The Company Stock to be offered under the 1994 Stock Plan shall be authorized
and unissued shares. The 1994 Stock Plan provides for adjustment of the
aggregate number of shares, and of the number of shares at the time subject to
any outstanding option or options, in the event a stock dividend is paid or in
the event the shares of Company Stock are changed into or exchanged for a
different number or kind of shares or other securities.
16
<PAGE>
Under the 1994 Stock Plan, the option price per share for incentive options
or nonstatutory options to purchase shares shall be determined by the
Compensation Committee, but may not be less than the fair market value of the
Company Stock on the date the option is granted. Under the 1994 Stock Plan the
fair market value of a share of Company Stock is defined as the average of the
closing sales prices as quoted on the New York Stock Exchange for the five
trading days prior to the date of grant.
The Board of Directors may not, without further stockholder approval, (a)
increase the total number of shares subject to the 1994 Stock Plan; (b) change
the manner of determining the option price, base price or base book value of
options or stock appreciation rights set forth in the 1994 Stock Plan; (c)
extend the period during which options or stock appreciation rights may be
granted or exercised; or (d) permit the granting of an option or stock
appreciation right to anyone other than persons eligible to participate in the
1994 Stock Plan.
TERMINATING EVENTS
Under the Option Agreements entered into pursuant to the 1994 Stock Plan, any
option granted thereby, to the extent theretofore not fully exercisable, shall
immediately become fully exercisable upon certain change of control events,
including the acquisition of 25% of the outstanding voting stock of FirstFed
Financial Corp. or, at any time during any period of two consecutive years, a
change in the majority of the individuals constituting the Board of Directors
of FFC, unless the nomination for election of each Director who was not a
Director at the beginning of the period is approved by a vote of at least 75%
of the Directors still in office who were Directors at the beginning of the
period. In addition, pursuant to the terms of the 1994 Stock Plan, upon
consummation of certain business combination transactions, or the acquisition
of 50% or more of FFC's outstanding shares in connection with a tender offer,
the holder of an outstanding option shall be entitled to surrender such option
in exchange for an amount in cash for each share of stock subject thereto equal
to the difference between the fair market value of any shares then subject to
the option and the exercise price of the option unless provision has been made
for the continuation of the 1994 Stock Plan and outstanding options granted
thereunder by the Board of Directors as constituted prior to the consummation
of such transaction. Upon the consummation of any such business combination or
tender offer, holders of stock options and stock appreciation rights would also
be entitled to fully exercise such options and rights whether or not such
options or stock appreciation rights would otherwise be vested under the terms
of the original grant.
FEDERAL INCOME TAX CONSEQUENCES
Based upon the present provisions of the Code and regulations thereunder, the
Federal income tax consequences of the grant and exercise of stock options
under the 1994 Stock Plan and the subsequent disposition of stock acquired
thereby will be as described below. The 1994 Stock Plan is not subject to the
qualification requirements of Section 401(a) of the Code.
Incentive Stock Options. An optionee will not be taxed upon the grant of an
incentive stock option and if an optionee holds shares of Company Stock
acquired upon the exercise of an incentive stock option for more than one year
after exercise and two years after the date of the grant of the option, (a) the
optionee will not be taxed at the time the option is granted or exercised, (b)
the difference between the option price and the amount realized upon
disposition of the shares will constitute a long-term capital gain or a long-
term capital loss, as the case may be, and (c) the Bank will not be allowed a
business expense deduction for granting the option or issuing shares pursuant
to the exercise thereof. In order for the exercise of an incentive stock option
to qualify for the foregoing treatment, the optionee generally must be an
employee of FFC or a subsidiary thereof from the date of grant of the option
through the date three months before the date of exercise, except in the case
of death or disability, where special rules apply. If after the exercise of an
incentive stock option the optionee fails to observe either of the holding
periods described above, any gain (or loss) realized will be taxable as
ordinary income (or loss) to the extent of the lesser of (a) the difference
between the fair market value of the shares at the date of exercise and the
exercise price, or (b) the difference between the amount realized on sale or
disposition of the shares and the exercise price. Any excess of the amount
realized over such lesser amount will be treated as a capital gain (or loss),
long-term or short-term, depending on the length of time the stock was held
after the option was exercised. FFC will be entitled to a business expense
deduction equal to the amount of ordinary income upon which the optionee is
taxed. To the extent the optionee is subject to the alternative minimum tax
provisions of the Code which became effective on January 1, 1983,
17
<PAGE>
the amount by which the fair market value of the shares at the time the
incentive stock option is exercised exceeds the option price will be an item of
tax preference which must be included when making the alternative minimum tax
calculation for the tax year in which the incentive stock option is exercised.
Nonstatutory Options. Under present regulations providing that an option does
not have a readily ascertainable fair market value unless it is freely
transferable and meets certain other conditions, an optionee who is granted a
nonstatutory option will not realize taxable income at the time the option is
granted. Generally, if an optionee exercises the option, he or she will be
taxed in the year of exercise at ordinary income tax rates on an amount equal
to the excess of the fair market value of the shares on the date of exercise
over the option price. FFC will receive a corresponding business expense
deduction. The optionee's basis in the shares so acquired will be equal to the
option price plus the amount of ordinary income upon which he or she is taxed.
Upon subsequent disposition of the shares, he or she will realize capital gain
or loss, long-term or short-term, depending upon the length of time he or she
has held the shares since the option was exercised.
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION UPON
THE OPTIONEE AND THE COMPANY WITH RESPECT TO THE GRANT AND EXERCISE OF OPTIONS
AND STOCK APPRECIATION RIGHTS UNDER THE 1994 STOCK PLAN AND DOES NOT PURPORT TO
BE COMPLETE. REFERENCE SHOULD BE MADE TO APPLICABLE PROVISIONS OF THE CODE. IN
ADDITION, THIS SUMMARY DOES NOT DISCUSS THE INCOME TAX LAWS OF ANY
MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH AN OPTIONEE MAY RESIDE.
GRANTS OF OPTIONS
The following table shows as to certain executive officers of the Bank, and
as to all executive officers as a group and all non-executive officers as a
group, the number of shares subject to options granted during the period of
January 1, 1994 through March 1, 1995 and information with respect to
outstanding options held at March 1, 1995 and the shares to which those options
relate. No options granted under the 1994 Stock Plan were exercised during the
period. All of the options (a) relate to shares of Company Stock, (b) were
granted without tandem stock appreciation rights, (c) correspond to the number
of shares to which they relate, (d) were granted for a term of 10 years, and
(e) were granted under the Incentive Stock Option Program. All grants vest 25%
each on the third, fifth and seventh and ninth anniversaries of the grants.
Market value of the Bank's stock at March 1, 1995 (based on the closing sales
price on the NYSE) was 14 3/8 per share.
Directors of the Bank are not eligible for the grant of options unless they
are also full-time employees of the Bank or one of its subsidiaries.
NEW PLAN BENEFITS
1994 STOCK PLAN
<TABLE>
<CAPTION>
DOLLAR VALUE ($)
AS OF
NAME & POSITION 12-31-94(1) NUMBER OF UNITS
--------------- ---------------- ---------------
<S> <C> <C>
William S. Mortensen........................... 0 0
James P. Giraldin.............................. 13,750 10,000
Babette E. Heimbuch............................ 0 0
Martin B. Gottlieb............................. 0 0
Megan Davidson................................. (28,330) 6,666
All Executive Officers as a Group.............. (96,401) 30,974
Non-Executive Officers Employee Group.......... (138,913) 75,130
</TABLE>
- - --------
(1) Represents the difference between the option price and the market price at
December 31, 1994. Numbers in parentheses reflect out-of-the-money options
18
<PAGE>
VOTE REQUIRED
The affirmative vote of the holders of a majority of the outstanding Company
Stock entitled to vote at the Annual Meeting is require to approve this
Proposal.
THE BOARD OF DIRECTORS BELIEVES THAT THIS PROPOSAL TO APPROVE THE 1994 STOCK
OPTION AND STOCK APPRECIATION RIGHTS PLAN IS IN THE BEST INTEREST OF THE
COMPANY AND ITS STOCKHOLDERS, DEPOSITORS AND THE COMMUNITIES SERVED BY THE
COMPANY AND UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE ADOPTION OF
THIS PROPOSAL.
PROPOSAL 3
Appointment of Independent Auditors. KPMG Peat Marwick LLP has been the
independent public auditors of the Bank for more than twenty-five years and,
upon recommendation of the Legal-Audit Committee, has been appointed by the
Board of Directors as the auditors of the Company for 1995. The stockholders of
the Company are requested to ratify this appointment. A representative of KPMG
Peat Marwick LLP is expected to be present at the Annual Meeting with the
opportunity to make a statement if he or she so desires and to respond to
appropriate questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE APPOINTMENT
OF KPMG PEAT MARWICK LLP AS THE COMPANY'S INDEPENDENT PUBLIC AUDITORS FOR 1995.
COMPLIANCE WITH SECTION 16(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires executive
officers and directors and persons who beneficially own more than ten percent
(10%) of the Company's stock, to file initial reports of ownership and reports
of changes in ownership with the SEC and the New York Stock Exchange. Executive
officers, directors and greater than ten percent (10%) beneficial owners are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on its review of the copies of such forms furnished to the
Company and written representations from the executive officers and directors,
the Company believes that all Section 16(a) filing requirements applicable to
its executive officers, directors and greater than ten percent (10%) beneficial
owners were satisfied.
STOCKHOLDER PROPOSALS
Any stockholder of the Company wishing to have a proposal considered for
inclusion in the Company's 1996 proxy solicitation materials must set forth
such proposal in writing and file it with the Secretary of the Company on or
before November 24, 1995. Stockholder proposals not included in the Company's
1996 proxy solicitation materials must, in order to be considered at the 1996
Annual Meeting, be submitted in writing to the Secretary of the Company by no
earlier than January 19, 1996 nor later than February 21, 1996.
The Board of Directors of the Company will review any stockholder proposals
which are filed as required and will determine whether such proposals meet
applicable criteria for inclusion in its 1996 proxy solicitation materials or
consideration at the 1996 Annual Meeting.
19
<PAGE>
ANNUAL REPORT
The Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1994, including, but not limited to, statements of consolidated financial
condition and related statements of consolidated income, statements of
stockholders' equity and changes in financial position for fiscal years ended
December 31, 1994, 1993 and 1992, prepared in conformity with generally
accepted accounting principles, has been sent to stockholders. A copy of the
Annual Report on Form 10-K for year ended December 31, 1994 may be obtained
without charge by writing to the Secretary at the address indicated in the
following paragraph.
UPON WRITTEN REQUEST OF ANY SHAREHOLDER SOLICITED HEREBY, THE COMPANY WILL
PROVIDE FREE OF CHARGE A COPY OF ITS 1994 ANNUAL REPORT ON FORM 10-K WHICH HAS
BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. REQUESTS SHOULD BE
DIRECTED TO SECRETARY, FIRSTFED FINANCIAL CORP., 401 WILSHIRE BLVD., SANTA
MONICA, CALIFORNIA 90401.
By Order of the Board of Directors
_____________________________________
Ann E. Lederer, Corporate Secretary
20
<PAGE>
REVOCABLE PROXY
FIRSTFED FINANCIAL CORP.
401 Wilshire Boulevard, Santa Monica, California 90401
Proxy for Annual Meeting-April 26, 1995
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints William S. Mortensen, Babette E. Heimbuch and
James P. Giraldin, as proxies, each with the power to appoint his/her
substitute, and hereby authorizes them to represent and to vote as designated on
the reverse all shares of Common Stock of FirstFed Financial Corp. held of
record by the undersigned on March 7, 1995, at the annual meeting of
stockholders to be held on April 26, 1995, or any adjournment thereof.
A vote FOR nominees Heimbuch, Mortensen and Woodhull, and FOR Proposals 2 and 3
is recommended by the Board of Directors.
PLEASE MARK, SIGN, DATE AND MAIL THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
(Continued and to be signed on reverse side.)
- - --------------------------------------------------------------------------------
FIRSTFED FINANCIAL CORP.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [_]
[ ]
1. ELECTION OF DIRECTORS (Year of Expiration of
Nominees' Proposed Terms as Directors: 1998)
Babette E. Heimbuch, William S. Mortensen,
John R. Woodhull
--------------------------------------------
FOR ALL
(Except Nominee(s)
FOR WITHHOLD Written below)
[_] [_] [_]
2. Approval of 1994 Stock Option and Stock
Appreciation Rights Plan.
FOR AGAINST ABSTAIN
[_] [_] [_]
3. Ratification of KPMG Peat Marwick LLP as the
Company's independent public auditors for 1995.
FOR AGAINST ABSTAIN
[_] [_] [_]
4. In their discretion, the proxies are authorized to
vote upon such other business that may properly
come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE DIRECTORS NAMED IN PROPOSAL 1 AND FOR PROPOSALS 2, 3 AND 4.
Dated: , 1995
----------------------
Signature
----------------------------------------------------------
Signature if jointly held
------------------------------------------
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporation name, by president or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
<PAGE>
FIRSTFED FINANCIAL CORP.
1994 STOCK OPTION AND
STOCK APPRECIATION RIGHTS PLAN
<PAGE>
TABLE OF CONTENTS
<TABLE>
<C> <S> <C>
1. Purpose.............................................................. 1
2. Administration....................................................... 2
(a) Authority of Board.............................................. 2
(b) Administration by "Disinterested Persons"....................... 3
(c) Appointment of Committee........................................ 3
(d) Unauthorized Actions............................................ 4
(e) Definition of "Disinterested Person"............................ 5
3. Stock................................................................ 5
4. Eligibility.......................................................... 6
5. Terms of Options..................................................... 7
(a) Terms of Incentive Stock Options................................ 7
(b) Terms of Nonstatutory Stock Options............................. 12
6. Annual Limitation on Grant of Incentive Stock Options................ 14
7. Terms of Stock Appreciation Rights................................... 15
(a) Terms of ISO-SAR's.............................................. 17
(b) Terms of SAR's.................................................. 19
(c) Terms of All Stock Appreciation Rights.......................... 22
(d) Certain Conditions on Exercise of SAR's......................... 23
8. Impact of Exercise of Option or Stock Appreciation Right on
Outstanding Options or Stock Appreciation Rights..................... 24
9. Rights of Optionees.................................................. 24
10. Determination of Fair Market Value................................... 25
11. Retirement of Employee, Termination of Employment, Death of Employee. 25
(a) Retirement of Employee.......................................... 25
(b) Termination of Employment....................................... 26
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
(c) Death of Employee.............................................. 27
12. Adjustment of Shares................................................ 27
(a) Changes in Capitalization...................................... 27
(b) Terminating Events............................................. 28
13. Effectiveness of the Plan........................................... 31
14. Manner of Grant of Options and Stock Appreciation Rights............ 31
15. Compliance with Law and Regulations................................. 32
16. Tax Withholding..................................................... 32
17. Nonexclusivity of the Plan.......................................... 33
18. Amendment........................................................... 34
19. Termination or Suspension........................................... 35
20 Continuation of Employment.......................................... 36
21. Exculpation and Indemnification..................................... 36
</TABLE>
<PAGE>
FIRSTFED FINANCIAL CORP.
------------------------
1994 STOCK OPTION AND
---------------------
STOCK APPRECIATION RIGHTS PLAN
------------------------------
1. Purpose
-------
This Stock Option and Stock Appreciation Rights Plan (the "Plan") is
intended to encourage stock ownership by selected officers and employees of
FirstFed Financial Corp., a Delaware corporation ("FirstFed"), and its
subsidiary corporations including First Federal Bank of California, a federal
savings bank (the "Bank") (collectively, the "Subsidiaries"), as defined in
Section 424 (f) of the Internal Revenue Code of 1986, as amended (the "Code"),
thereby increasing their proprietary interest in the success of FirstFed and the
Subsidiaries, and encouraging them to remain in the employ of FirstFed or a
Subsidiary. Options granted under this Plan may be either Incentive Stock
Options (as defined and provided for in Section 5 (a) of this Plan) or
Nonstatutory Stock Options (as defined and provided for in Section 5 (b) of this
Plan), and stock appreciation rights granted under this Plan may be granted
separately or in tandem with Incentive Stock Options or Nonstatutory Stock
Options, as shall be determined in each specific case by the Board of Directors
of FirstFed (the "Board of Directors") or a duly appointed committee thereof as
hereinafter provided. As used in this Plan, the term "option" shall refer to
either Incentive Stock Options or Nonstatutory Stock Options, or both.
2. Administration
--------------
(a) Authority of Board. Subject to the express provisions of this Plan
------------------
including Section 2(b) hereof, the Board of Directors shall have plenary
authority, in its discretion:
(i) To determine the time or times at which, and the officers and
employees of FirstFed or the Subsidiaries to whom, options and stock
appreciation rights shall be granted under this Plan;
1
<PAGE>
(ii) To determine, as the case may be, the Incentive Stock Option
Price or Nonstatutory Stock Option Price (both as defined herein), of, and
the number of shares of Stock (as defined herein), to be covered by,
options granted under this Plan;
(iii) To determine, as applicable, the Base Price, Current Book
Value, and Base Book Value (all as defined herein) of shares of Stock, and
the number of shares of Stock, to be covered by stock appreciation rights
granted under this Plan;
(iv) To determine the time or times at which each option or stock
appreciation right granted under this Plan may be exercised, including
whether an option or stock appreciation right may be exercised in whole or
in installments;
(v) To interpret this Plan and to prescribe, amend and rescind
rules and regulations relating to it; and
(vi) To make all other determinations which the Board of Directors
shall deem necessary or advisable for the administration of this Plan.
(b) Administration by "Disinterested Persons".
-----------------------------------------
The Board of Directors may exercise its discretion in administering this
Plan with respect to the participation of officers and employees of FirstFed or
the Subsidiaries only when each member of such Board and each of the directors
acting in this matter are "disinterested persons" and "outside directors" as
defined in Section 2(e) of this Plan.
(c) Appointment of Committee.
------------------------
The Board of Directors may at any time, or from time to time, appoint a
committee consisting of not less than two (2) members of the Board of Directors,
to which the Board of Directors may delegate any or all of the powers and duties
of the Board of Directors under this Plan, except those relating to (i) the
determination whether the shares of Stock reserved for issuance upon the
exercise of options or stock appreciation rights granted under this Plan shall
be issued shares or unissued shares, (ii) the appointment of any such committee,
and
2
<PAGE>
(iii) the termination or amendment of this Plan; provided that all members of
such committee, at the time they exercise discretion in administering this Plan
with respect to the participation of the officers and employees of FirstFed or
the Subsidiaries, shall be "disinterested persons" and "outside directors," as
defined in Section 2(e) hereof. The Board of Directors may from time to time
appoint members of such committee in substitution for or in addition to members
previously appointed, may fill vacancies in such committee, however caused, and
may discharge such committee. Duly authorized actions of such committee shall
constitute actions of the Board of Directors for the purposes of this Plan and
the administration thereof.
(d) Unauthorized Actions.
--------------------
Notwithstanding anything herein to the contrary, no employee, officer or
director of FirstFed or the Subsidiaries shall as a member of the Board of
Directors or of any committee appointed by the Board of Directors have any vote
with regard to:
(i) The grant of any option or stock appreciation right to himself
or herself;
(ii) With respect to any grants to himself or herself:
(A) The time at which any such option or stock appreciation
right shall be granted;
(B) The number of shares of Stock covered by any such option or
stock appreciation right;
(C) The time or times at which, or the period during which, any
such option or stock appreciation right may be exercised or whether it
may be exercised in whole or in installments;
(D) The provisions of the agreement relating to any such option
or stock appreciation right; and
(E) The Incentive Stock Option Price of Stock subject to an
Incentive Stock Option granted to him or her, the Base Price of a
stock appreciation right in
3
<PAGE>
tandem with such an Incentive Stock Option, the Nonstatutory Stock
Option Price of Stock subject to a Nonstatutory Stock Option granted to
him or her, and the Base Price, Current Book Value, or Base Book Value
of Stock subject to a stock appreciation right in tandem with a
Nonstatutory Stock Option.
(e) Certain Definitions
-------------------
The term "disinterested person" as used herein shall mean a person who is a
"disinterested person" within the meaning of Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended, or any successor rule.
(f) Outside Director
----------------
The term "outside director" shall mean a person who is an "outside director"
within the meaning of regulations proposed under section 162(m) of the Code, as
adopted, or any successor regulations.
(g) Covered Employee
----------------
The term "covered employee" shall mean a person who is a "covered employee"
within the meaning of regulations proposed under section 162(m) of the Code, as
adopted, or any successor regulations.
3. Stock
-----
Except as provided in Section 12 of this Plan, the shares which may be made
subject to, and which may be issued upon exercise of, options or stock
appreciation rights granted under this Plan, shall be limited to an aggregate of
One Million Five Hundred Thousand (1,500,000) shares of common stock, $1.00 par
value, of FirstFed (the "Stock"). The Board or the Committee administering the
Plan pursuant to Section 2(c) hereof may adopt rules governing the annual
limitation on shares which can be granted to any one employee; provided,
however, that the aggregate number of shares of Stock subject to options or
stock appreciation rights granted in any year to any "covered employee" shall
not exceed 100,000. The shares
4
<PAGE>
reserved for issuance pursuant to this Plan may consist either of authorized but
previously unissued shares of Stock, or of issued shares of Stock which have
been reacquired by FirstFed, as determined from time to time by the Board of
Directors.
Subject to the general limitation in the foregoing paragraph, in any
calendar year, no more than one and one-half percent of the total shares
outstanding (the "Annual Maximum") may be granted under this Plan; except that
to the extent that less than the Annual Maximum is granted in a calendar year,
the remaining portion of the Annual Maximum shall be carried forward to the
subsequent calendar year and added to the Annual Maximum available for grant in
such subsequent year.
In the event shares of Stock are issued in connection with the exercise of
any stock appreciation right which had been granted separately from any stock
option in accordance with Section 7(b) of the Plan, the number of shares of
Stock as to which options or stock appreciation rights shall be available for
grant hereunder shall be reduced by the number of shares of Stock so issued.
Except as otherwise provided in Section 8 and Section 12 of this Plan, if
any option or stock appreciation right granted under this Plan expires,
terminates or is cancelled for any reason without having been exercised in full,
the shares of Stock allocable to the unexercised portion of such option or stock
appreciation right may again be made subject to an option or stock appreciation
right granted under this Plan.
4. Eligibility
-----------
Options or stock appreciation rights may be granted under this Plan only to
such regular full-time employees, including officers, of FirstFed or a
Subsidiary as may be selected in the manner provided in Section 2 of this Plan.
A director of FirstFed or a Subsidiary who is not also a regular full-time
employee of FirstFed or one of the Subsidiaries shall not be eligible to receive
any options or stock appreciation rights under this Plan. An employee granted an
option or stock appreciation right under this Plan shall nevertheless remain
eligible to receive
5
<PAGE>
one or more additional options or stock appreciation rights thereafter,
notwithstanding that options or stock appreciation rights previously granted to
such employee remain unexercised in whole or in part.
5. Terms of Options
----------------
This Plan is intended to authorize the Board of Directors, subject to
Section 2(b) hereof, or the Committee, to grant, in its discretion, options that
qualify as incentive stock options pursuant to Section 422 of the Code (such
qualifying options being referred to herein as "Incentive Stock Options") or
options that do not so qualify (such nonqualifying options being referred to
herein as "Nonstatutory Stock Options"). Each option granted under this Plan
shall be evidenced by a written option agreement which shall be executed by a
duly authorized offer on behalf of FirstFed and delivered to the person to whom
granted, as provided in Section 14 of this Plan. Each such option agreement, and
any amendment thereof, shall contain such terms and provisions consistent with
the requirements of this Plan as the Board of Directors, subject to Section 2(b)
hereof, or the Committee, shall in its sole discretion determine. Option
agreements shall specify whether the option granted therein is an Incentive
Stock Option or a Nonstatutory Stock Option, and shall conform to the provisions
of Section 5(a) or 5(b) below, as the case may be.
(a) Terms of Incentive Stock Options.
--------------------------------
Each Incentive Stock Option granted under this Plan shall conform to the
provisions of Section 5(a) (i) through (iii) below. Any option agreement
providing for the grant of an Incentive Stock Option may contain additional
provisions, which are not inconsistent with the following provisions, as the
Board of Directors, subject to Section 2(b) hereof, or the Committee, shall deem
appropriate:
(i) Incentive Stock Option Price.
----------------------------
The purchase price of each of the shares of Stock subject to an Incentive
Stock Option (the "Incentive Stock Option Price") shall be a stated price
6
<PAGE>
which is not less than the fair market value of such share of Stock, determined
in accordance with Section 10 of this Plan as of the date such Incentive Stock
Option is granted; provided, however, that if an employee, at the time an
Incentive Stock Option is granted to him or her, owns stock representing more
than ten percent (10%) of the total combined voting power of all classes of
stock of FirstFed, or of any of the Subsidiaries (or, under Section 424(d) of
the Code, is deemed to own stock representing more than ten percent (10%) of the
total combined voting power of all such classes of stock) then the Incentive
Stock Option Price of each share of Stock subject to such Incentive Stock Option
shall be at least one hundred and ten percent (110%) of the fair market value of
such share of Stock, as determined in the manner stated above.
(ii) Term of Incentive Stock Options.
-------------------------------
Incentive Stock Options granted under this Plan shall be exercisable for
such periods as shall be determined by the Board of Directors, subject to
Section 2(b) hereof, or the Committee, at the time of grant of each such Stock
Option, but in no event shall an Incentive Stock Option be exercisable after the
expiration of ten (10) years from the date of grant; provided, however, that if
any employee, at the time an Incentive Stock Option is granted to him or her,
owns stock representing more than ten percent (10%) of the total combined voting
power of all classes of stock of FirstFed of any of the Subsidiaries (or, under
Section 424(d) of the Code, is deemed to own stock representing more than ten
percent (10%) of the total combined voting power of all such classes of stock,
by reason of the ownership of such classes of stock), the Incentive Stock Option
granted to him or her shall not be exercisable after the expiration of five (5)
years from the date of grant. Each Incentive Stock Option granted under this
Plan shall also be subject to earlier termination as provided in this Plan.
7
<PAGE>
(iii) Exercise of Incentive Stock Options.
-----------------------------------
(A) Subject to the provisions of Section 12 of this Plan,
Incentive Stock Options granted under this Plan may be exercised in
whole or in installments, to such extent, and at such time or times
during the terms thereof, as shall be determined by the Board of
Directors, subject to Section 2(b) hereof, or the Committee, at the
time of grant of each such option.
(B) Incentive Stock Options granted under this Plan shall be
exercisable only by delivery to FirstFed of written notice of
exercise, together with the full Incentive Stock Option Price of the
shares purchased, which may be paid, in whole or in part, in cash or
in shares of Stock. If any portion of the Incentive Stock Option Price
is paid in shares of Stock, such shares shall be valued at their fair
market value, as determined in accordance with Section 10 of this Plan
as of the effective date of exercise of the Incentive Stock Option.
(C) Except as provided to the contrary in Section 8 and Section
11 of this Plan, an Incentive Stock Option granted hereunder shall
remain outstanding and shall be exercisable only so long as the person
to whom such Incentive Stock Option was granted remains an employee of
FirstFed or any of the Subsidiaries.
(D) All Incentive Stock Options granted under this Plan shall be
nontransferable, except by will or the laws of descent and
distribution to his or her heirs or distributees, or pursuant to the
terms of a "qualified domestic relations order" as such term is
defined in the Code, and shall be exercisable during the term of the
Incentive Stock Option only by such employee (or his or her duly
appointed, qualified, and acting personal representative) or such
permitted transferees.
(b) Terms of Nonstatutory Stock Options.
-----------------------------------
Each Nonstatutory Stock Option granted under this Plan shall conform to the
provisions of Section 5(b) (i) through (iii) below. Any option agreement
providing for the
8
<PAGE>
grant of a Nonstatutory Stock Option may contain such additional provisions,
which are not inconsistent with the following provisions, as the Board of
Directors, subject to Section 2(b) hereof, or the Committee, shall deem
appropriate:
(i) Nonstatutory Stock Option Price.
-------------------------------
The purchase price of each of the shares of Stock subject to a
Nonstatutory Stock Option (the "Nonstatutory Stock Option Price")
shall be a stated price which is not less than the fair market value
of such share of Stock, determined in accordance with Section 10 of
this Plan as of the date the Nonstatutory Stock Option is granted.
(ii) Term of Nonstatutory Stock Options.
----------------------------------
Nonstatutory Stock Options granted under this Plan shall be
exercisable for such periods as shall be determined by the Board of
Directors at the time of grant of each such Nonstatutory Stock Option,
but in no event shall a Nonstatutory Stock Option be exercisable after
the expiration of ten (10) years from the date of grant. Each
Nonstatutory Stock Option granted under this Plan shall also be
subject to earlier termination as provided in this Plan.
(iii) Exercise of Nonstatutory Stock Options.
--------------------------------------
(A) Subject to the provisions of Section 12 of this Plan,
Nonstatutory Stock Options granted under this Plan may be exercised in
whole or in installments, to such extent, and at such time or times
during the terms thereof, as shall be determined by the Board of
Directors at the time of grant of each such option.
(B) Nonstatutory Stock Options granted under this Plan shall be
exercisable only by delivery to FirstFed of written notice of
exercise, together with the full Nonstatutory Stock Option Price of
the shares purchased, which may be paid, in whole or in part, in cash
or in shares of Stock. If any portion of the
9
<PAGE>
Nonstatutory Stock Option Price is paid in shares of Stock, such
shares shall be valued at their fair market value, as determined in
accordance with Section 10 of this Plan, as of the effective date of
exercise of the Incentive Stock Option.
(C) Except as provided to the contrary in Section 8 and Section
11 of this Plan, a Nonstatutory Stock Option granted hereunder shall
remain outstanding and shall be exercisable only so long as the person
to whom such Nonstatutory Stock Option was granted remains an employee
of FirstFed or any of the Subsidiaries.
(D) All Nonstatutory Stock Options granted under this Plan shall
be nontransferable, except by will or the laws of descent and
distribution, and shall be exercisable during the lifetime of the
employee to whom granted only by such employee (or his or her duly
appointed, qualified, and acting personal representative).
6. Limitations on Grant of Incentive Stock Options
-----------------------------------------------
Notwithstanding any other provision of this Plan, the aggregate fair
market value (determined in accordance with Section 10 of this Plan as of the
date of the grant of the option) of shares of stock for which incentive stock
options (as defined in Section 422(b) of the Code) may be first exercisable by
any employee during any calendar year under this Plan, together with that of
shares of stock subject to Incentive Stock Options first exercisable (other than
as a result of acceleration pursuant to Section 12(b)) by such employee under
any other plan of FirstFed, its parent corporation, if any, or any of the
Subsidiaries, shall not exceed the sum of One Hundred Thousand Dollars
($100,000).
7. Terms of Stock Appreciation Rights
----------------------------------
Stock appreciation rights granted under this Plan may be granted by
themselves or in tandem with Incentive Stock Options granted under this Plan,
or granted in tandem with Nonstatutory Stock Options granted under this Plan, as
the Board of Directors, subject to
10
<PAGE>
Section 2(b) hereof, or the Committee, shall in its sole discretion determine.
A stock appreciation right granted in tandem with an Incentive Stock Option
shall sometimes be referred to herein as an "ISO-SAR," and the Incentive Stock
Option to which such ISO-SAR is tandem shall sometimes be referred to herein as
the "Underlying Incentive Stock Option." A stock appreciation right granted
separately from an option granted under this Plan or granted in tandem with a
Nonstatutory Stock Option shall sometimes be referred to herein as an "SAR". If
an SAR is granted in tandem with a Nonstatutory Stock Option, the Nonstatutory
Stock Option in tandem with which such SAR has been granted shall sometimes be
referred to as the "Underlying Nonstatutory Stock Option." The term "stock
appreciation right" as used herein shall refer to either ISO-SAR's or SAR's, or
both. Each stock appreciation right granted under this Plan shall be evidenced
by a written stock appreciation right agreement which shall be executed by a
duly authorized officer on behalf of FirstFed and delivered to the person to
whom granted, as provided in Section 14 of this Plan. Each such stock
appreciation right agreement, and any amendment thereof, shall contain such
terms and provisions consistent with the requirements of this Plan as the Board
of Directors, subject to Section 2(b) hereof, or the Committee, shall in its
sole discretion determine. Each stock appreciation right agreement shall
specify whether the stock appreciation right granted therein is an ISO-SAR, in
which case the agreement shall conform to the provisions of Section 7(a) below,
or an SAR, in which case the agreement shall conform to the provisions of
Section 7(b) below, as the case may be. Each stock appreciation right agreement
shall also conform to the provisions of Section 7(c).
(a) Terms of ISO-SAR's.
------------------
Each ISO-SAR granted under this Plan shall conform to the provisions
of this Section 5(a). The stock appreciation right agreement providing for the
grant of an ISO-SAR may contain such additional provisions, not inconsistent
with the following provisions, as the Board of Directors, subject to Section
2(b) hereof, or the Committee, shall deem appropriate:
11
<PAGE>
(i) Base Price. The "Base Price" of each of the shares of Stock
----------
subject to an ISO-SAR granted under the Plan shall be a stated price which
equals the Incentive Stock Option Price of each of the shares of Stock
subject to the Underlying Incentive Stock Option.
(ii) Term of ISO-SAR's. Each ISO-SAR granted under this Plan shall
-----------------
be exercisable for such periods as shall be determined by the Board of
Directors at the time of grant of each such ISO-SAR, provided, however,
that the term of any ISO-SAR must expire on a date not later than the date
on which the term of the Underlying Incentive Stock Option expires. ISO-
SAR's shall also be subject to earlier termination as provided in this
Plan.
(iii) Exercise of ISO-SAR's.
---------------------
(A) An ISO-SAR shall be exercisable at such time or times, and
to the extent that, the Underlying Incentive Stock Option is
exercisable under Section 5(a) (iii) (A) and (E) of this Plan.
(B) Upon exercise of any ISO-SAR in the manner provided in
Section 7(c) (i) below, the holder thereof shall be entitled to
receive cash or shares of Stock, or any combination thereof, as
determined by the Board of Directors at the time of grant of the ISO-
SAR, in an amount equal to the difference, if any, between the Base
Price of each share of Stock as to which the ISO-SAR has been
exercised and the fair market value of such share of Stock, determined
in accordance with Section 10 of this Plan as of the effective date of
the exercise of the ISO-SAR. If, upon exercise of the ISO-SAR, any
payment is made in shares of Stock, such shares shall be valued at
their fair market value as determined in accordance with Section 10 of
this Plan as of the effective date of exercise of the ISO-SAR. Any
payment due hereunder shall be made within sixty (60) days after the
effective date of exercise of the ISO-SAR to which such payment
relates.
12
<PAGE>
(C) Notwithstanding any other provision of this Plan, no ISO-SAR
or portion thereof shall be exercised unless the fair market value of
the shares of Stock subject to such ISO-SAR or portion thereof exceeds
the Base Price of such shares. For these purposes, the fair market
value of shares of Stock shall be determined in accordance with
Section 10 of this Plan as of the effective date of the exercise of
the ISO-SAR.
(b) Terms of SAR's. Each SAR shall conform to the provisions of this
--------------
Section 7(b). The stock appreciation right agreement which provides for the
grant of an SAR may contain such additional provisions, not inconsistent with
the following provisions, as the Board of Directors, subject to Section 2(b)
hereof, or the Committee, shall deem appropriate:
(i) Base Price, Base Book Value, and Current Book Value. The "Base
---------------------------------------------------
Price" of each of the shares of Stock subject to an SAR granted under
the Plan shall be a stated price which equals the Nonstatutory Stock
Option Price of each of the shares of Stock subject to the Underlying
Nonstatutory Stock Option. In addition, the Board of Directors may
provide for a "Base Book Value" for each of the shares of Stock
subject to such SAR which shall be defined as a stated price
determined by dividing the amount shown as stockholders' equity on
FirstFed's monthly financial statement for the month immediately
preceding the grant of such SAR by the number of shares of Stock shown
as issued and outstanding on such financial statement. The "Current
Book Value" of each of the shares of Stock subject to such SAR shall
be a stated price determined by dividing the amount shown as
stockholders' equity on FirstFed's monthly financial statement for the
month immediately preceding the effective date of exercise of such SAR
by the number of shares of Stock shown as issued and outstanding on
such financial statement.
(ii) Term of SAR's. SAR's granted under this Plan shall be
-------------
exercisable for such periods as shall be determined by the Board of
Directors, subject to Section 2(b) hereof, or the Committee, at the
time of grant of each such SAR, provided,
13
<PAGE>
however, that the term of any SAR must expire on a date not later than
the date on which the term of the Underlying Nonstatutory Stock Option
expires. SAR's shall also be subject to earlier termination as
provided in this Plan.
(iii) Exercise of SAR's.
-----------------
(A) An SAR shall be exercisable at such time or times as, and if
the SAR is granted in tandem with a Nonstatutory Stock Option to the
extent that, the Underlying Nonstatutory Stock Option is exercisable
under Section 5 (b) (iii) (A) of this Plan.
(B) Upon exercise of any SAR in the manner provided in Section 7
(c) (i) below, the holder thereof shall be entitled to receive cash or
shares of Stock, or any combination thereof, as determined by the
Board of Directors at the time of grant of the SAR, in an amount equal
to the greater of (1) the difference, if any, between the Base Price
of each share of Stock as to which the SAR has been exercised and the
fair market value of such share of Stock, determined in accordance
with Section 10 of the Plan as of the effective date of the exercise
of the SAR; or (2) if the Board of Directors has provided for a Base
Book Value for the SAR, the difference, if any, between the Base Book
Value of each share of Stock as to which such SAR has been exercised
and the Current Book Value of such share of Stock as of the effective
date of the exercise of the SAR. If, upon exercise of the SAR, any
payment is made in shares of Stock, such shares shall be valued at
their fair market value as determined in accordance with Section 10 of
this Plan as of the effective date of exercise of the SAR. Any payment
due hereunder shall be made within (60) days after the effective date
of exercise of the SAR to which such payment relates.
14
<PAGE>
(c) Terms of All Stock Appreciation Rights.
--------------------------------------
Each stock appreciation right (whether an ISO-SAR or an SAR) granted under
this Plan shall conform to the provisions of this Section 7(c). The stock
appreciation right agreement which provides for the grant of an SAR may contain
such additional provisions, not inconsistent with the following provisions, as
the Board of Directors, subject to Section 2(b) hereof, or the Committee, shall
deem appropriate:
(i) Each stock appreciation right granted under this Plan shall be
exercisable only by delivery to FirstFed of written notice of exercise,
which notice shall state the number of shares with respect to which such
stock appreciation right is being exercised, its date of grant, the Base
Price of such shares, and the effective date of such exercise, which date
shall not be earlier than the date the notice is received by the Board of
Directors, subject to Section 2(b) hereof, or the Committee, or its duly
appointed representative nor later than the date upon which such stock
appreciation right expires. Such written notice of exercise shall also
specify the date of grant of the Underlying Incentive Stock Option or the
Underlying Nonstatutory Stock Option, as the case may be.
In the case of an SAR, such written notice of exercise shall also
specify the Base Book Value, if any, of the shares of Stock with
respect to which such SAR is being exercised.
(ii) Except as provided to the contrary in Section 8 and Section 11
of this Plan, stock appreciation rights granted hereunder shall remain
outstanding and shall be exercisable only so long as the person to
whom such stock appreciation rights are granted remains an employee of
FirstFed.
(iii) Stock appreciation rights granted pursuant to this Plan shall be
nontransferable, except by will or the laws of descent and distribution,
and shall be exercisable during the lifetime of the employee to whom
granted only by such
15
<PAGE>
employee (or his or her duly appointed, qualified, and acting personal
representative).
(iv) No holder of stock appreciation rights shall be deemed to be the
holder of, or to have any of the rights of a holder with respect to,
any shares of Stock subject to such stock appreciation rights.
(d) Certain Conditions on Exercise of SAR's.
---------------------------------------
Notwithstanding any other provision of this Plan, the Board of
Directors, subject to Section 2(b) hereof, or the Committee, may impose such
conditions on the exercise of a stock appreciation right (including, without
limitation, a condition which limits the time of exercise to specified periods)
as may be required to satisfy the requirements of any rule promulgated by the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934 as amended, including Rule 16b-3, or any successor rule.
8. Impact of Exercise of Option or Stock Appreciation Right on
-----------------------------------------------------------
Outstanding Options or Stock Appreciation Rights.
------------------------------------------------
If an employee to whom both an option and a stock appreciation right
in tandem therewith have been granted under this Plan exercises the option, or a
portion thereof, such exercise shall effect a cancellation of the stock
appreciation right in tandem with such option to the extent of the number of
shares of Stock acquired by such employee as a result of the exercise of such
option. If, instead, such employee exercises the stock appreciation right, or a
portion thereof, such exercise shall effect a cancellation of the option in
tandem therewith to the extent of the number of shares of Stock covered by the
stock appreciation right so exercised.
9. Rights of Optionees
-------------------
No holder of an option shall be deemed to be the holder of, or to have
any of the rights of a holder with respect to, any shares of Stock subject to
such option unless and until his or her option shall have been exercised
pursuant to the terms thereof, FirstFed shall have issued and delivered to the
holder of the option the shares of Stock as to which he or she has exercised
16
<PAGE>
his or her option, and his or her name shall have been entered as a stockholder
of record on the books of FirstFed. Thereupon, such person shall have full
voting and other ownership rights with respect to such shares of Stock.
10. Determination of Fair Market Value
----------------------------------
For the purposes of this Plan, the Board of Directors, subject to
Section 2(b) hereof, or the Committee, shall determine the fair market value of
a share of Stock on the basis of such factors as it shall deem appropriate,
provided that (i) if on the date as of which such determination is made
quotations for the Stock are regularly listed on the New York Stock Exchange or
other comparable system, the fair market value of a share of Stock shall be
deemed to equal the mean of the mean of the low bid and high asked prices for
the Stock quoted on such system on each of the five (5) trading days preceding
the date as of which such determination is made, and (ii) if on the date as of
which such determination is made the Stock is admitted to trading on a national
securities exchange or exchanges for which actual sale prices are regularly
reported, the fair market value of a share of Stock shall be determined by the
Board of Directors based upon the closing sale price reported for the Stock on
such exchange or exchanges on each of the five (5) trading days immediately
preceding the date as of which such determination is made.
11. Retirement of Employee, Termination of Employment, Death of Employee
--------------------------------------------------------------------
(a) Retirement of Employee.
----------------------
If an employee to whom an option or stock appreciation right has been
granted under this Plan retires from his or her employment with FirstFed or
any of the Subsidiaries as a result of "Normal Retirement" or as a result
of "Total and Permanent Disability" (both as defined for purposes of
FirstFed's qualified retirement plan as in effect on the date of adoption
of this Plan by the Board of Directors), such option or stock appreciation
right shall continue to be exercisable in whole or in part, to the extent
not theretofore exercised, by the employee to whom granted (or his or her
duly appointed, qualified, and acting personal representative) in the
manner set
17
<PAGE>
forth in Section 5 or Section 7 of this Plan, at any time within the remaining
term of such option or stock appreciation right.
(b) Termination of Employment.
-------------------------
Except as otherwise provided in this Section 11, if the employment of
an employee to whom an option or stock appreciation right has been granted
under this Plan is terminated for any reason, then such option or stock
appreciation right shall, to the extent not theretofore exercised, continue
for a period of sixty (60) days from the date of such termination of
employment to be exercisable to the same extent that it was exercisable on
such date, whereupon it shall terminate and shall not thereafter be
exercisable; provided, however, that in the event of termination of
employment for cause (with respect to which the determination of the Board
of Directors, subject to Section 2(b) hereof, or the Committee, shall be
final and conclusive), any such option or stock appreciation right shall
terminate immediately upon such termination of employment. No option or
stock appreciation right granted under this Plan shall be affected by any
change of duties or position of the person to whom such option or stock
appreciation right was granted or by any temporary leave of absence granted
to such person by FirstFed or any of the Subsidiaries, except that a change
resulting in a less senior position (e.g., Vice President to Assistant Vice
President), vested options shall not be affected but unvested options shall
terminate and no longer be exercisable.
(c) Death of Employee.
-----------------
If an employee to whom an option or stock appreciation right has been
granted under this Plan dies prior to the expiration of the term of such
option or stock appreciation right, such option or stock appreciation right
shall continue to be exercisable in whole or in part, to the extent that
the employee was entitled to do so at the date of his or her death, by the
estate of such employee, or by a person who acquired the right to exercise
such option or stock appreciation
18
<PAGE>
right by bequest or inheritance from such employee, at any time within one
year after the death of such employee, but not after the expiration of the
term of such option or stock appreciation right, in the manner set forth in
Section 5 or Section 7 of this Plan.
12. Adjustment of Shares
--------------------
(a) Changes in Capitalization.
-------------------------
If the outstanding shares of Stock of FirstFed as a whole are
increased, decreased, changed into, or exchanged for, a different number or
kind of shares or securities of FirstFed, whether through merger,
consolidation, reorganization, recapitalization, reclassification, stock
dividend, stock split, spin-off, combination of shares, exchange of shares,
issuance of shares at other than book value, repurchase of shares, change
in corporate structure, or amendment to the charter of FirstFed or
otherwise, an appropriate and proportionate adjustment, as determined by
the Board of Directors, subject to Section 2(b) hereof, or the Committee,
shall be made to the number and kind of shares subject to this Plan, and to
the number, kind, and per share Incentive Stock Option Price or
Nonstatutory Stock Option Price (as the case may be) of shares subject to
unexercised options, and to the Base Price, Base Book Value, and Current
Book Value, as applicable, of shares subject to unexercised stock
appreciation rights, granted prior to any such change. Any such adjustment
to an outstanding option, however, shall be made without a change in the
aggregate price applicable to the shares of Stock subject to the
unexercised portion of the option or stock appreciation right but with a
corresponding adjustment to the Incentive Stock Option Price or
Nonstatutory Stock Option Price, as the case may be, of each share covered
by an option, and in the Base Price, Base Book Value, and Current Book
Value, as applicable, of each share covered by a stock appreciation right.
(b) Terminating Events.
------------------
Upon the effective date of the dissolution or liquidation of FirstFed,
or of a reorganization, merger or consolidation of FirstFed with one or
more other corporations in which FirstFed is not the surviving corporation,
or of the transfer of substantially all of the assets or
19
<PAGE>
shares of FirstFed to another corporation, or, in connection with a tender
offer, the acquisition of fifty percent (50%) or more of FirstFed's
outstanding shares (any such transaction being referred to herein as a
"Terminating Event"), this Plan and any option or stock appreciation right
theretofore granted hereunder shall terminate unless provision is made in
writing in connection with such Terminating Event for the continuance of
this Plan and for the assumption of options and stock appreciation rights
theretofore granted hereunder, or the substitution for such options and
stock appreciation rights of new options and stock appreciation rights
covering the shares of the successor corporation, or a parent or subsidiary
thereof, with such appropriate adjustments as may be determined or approved
by the Board of Directors or the successor to FirstFed to the number and
kind of shares subject to such substituted options and stock appreciation
rights and to the Incentive Stock Option Price or Nonstatutory Stock Option
Price (as the case may be), and to the Base Price, Base Book Value, and
Current Book Value, as applicable, therefor, in which event this Plan and
the options and stock appreciation rights theretofore granted or the new
options and stock appreciation rights substituted therefor, shall continue
in the manner and under the terms so provided. Upon the occurrence of a
Terminating Event in which provision is not made for the continuance of
this Plan and for the assumption of options and stock appreciation rights
theretofore granted or the substitution for such options and stock
appreciation rights of new options and stock appreciation rights covering
the shares of a successor corporation or a parent or subsidiary thereof,
each employee to whom an option or stock appreciation right has been
granted under this Plan (or such employee's estate or a person who acquired
the right to exercise the option or stock appreciation right from such
employee by bequest or inheritance) shall be entitled, prior to the
effective date of any such Terminating Event, (i) to exercise, in whole or
in part, his or her rights under any option or stock appreciation right
granted to him or her notwithstanding that the period during which such
option or stock appreciation right would otherwise be exercisable has not
yet commenced, or (ii) to surrender any such option to FirstFed in exchange
for receipt of such shares of Stock or other securities or cash as the
optionee would
20
<PAGE>
have received had he or she exercised his or her option in full prior to
completion of such Terminating Event. To the extent that an employee,
pursuant to this Section 12(b), has a right to exercise or surrender any
option or stock appreciation right on account of a Terminating Event which
he or she otherwise would not have had at that time, his or her exercise or
surrender of such option or stock appreciation right shall be contingent
upon the consummation of such Terminating Event.
13. Effectiveness of the Plan
-------------------------
By resolution of the Board of Directors, this Plan shall become
effective as of December 19, 1994; provided, however, that (i) the
effectiveness of this Plan shall be subject to the approval of the stockholders
of FirstFed, within twelve (12) months before or after the adoption of this Plan
by the Board of Directors; and (ii) the effectiveness of options and stock
appreciation rights granted under this Plan prior to the date such stockholder
approval is obtained shall also be subject to such stockholder approval.
14. Manner of Grant of Options and Stock Appreciation Rights.
--------------------------------------------------------
Nothing contained in this Plan or in any resolution heretofore or
hereafter adopted by the Board of Directors or any committee thereof or by the
stockholders of FirstFed with respect to this Plan shall constitute the granting
of an option or stock appreciation right under this Plan. The granting of an
option or stock appreciation right under this Plan shall be deemed to occur only
upon the date on which the Board of Directors, subject to Section 2(b) hereof,
or the Committee, or any committee thereof duly appointed as provided in Section
2 of this Plan to which the Board of Directors, subject to Section 2(b) hereof,
or the Committee, shall have delegated power in such regard, shall approve the
grant of such option or stock appreciation right; provided, however, that any
option or stock appreciation right granted under this Plan shall terminate upon
the expiration of thirty (30) days after the date upon which such option or
stock appreciation right was granted unless a written option or stock
appreciation right agreement in a form prescribed by the Board of Directors,
subject to Section 2(b) hereof, or the Committee,
21
<PAGE>
has been duly executed by or on behalf of the employee to whom such option or
stock appreciation right was granted and shall have been delivered to FirstFed
within such thirty (30) day period.
15. Compliance with Law and Regulations
-----------------------------------
The obligation of FirstFed to sell and deliver any shares of Stock
under this Plan shall be subject to all applicable laws, rules and regulations,
and the obtaining of all such approvals by governmental agencies as may be
deemed necessary or appropriate by the Board of Directors, subject to Section
2(b) hereof, or the Committee. Except as otherwise provided in Section 18, the
Board of Directors, subject to Section 2(b) hereof, or the Committee, may make
such changes in the Plan and include such terms in any option agreement as may
be necessary or appropriate, in the opinion of counsel to FirstFed, to comply
with the rules and regulations of any governmental authority or to obtain, for
employees granted Incentive Stock Options or stock appreciation rights in tandem
therewith, the tax benefits under the applicable provisions of the Code and the
regulations thereunder.
16. Tax Withholding
---------------
The employer (whether FirstFed or a subsidiary) of an employee granted
an option or stock appreciation right under this Plan shall have the right to
deduct any amount required by federal or state laws to be withheld (if any) with
respect to the exercise of any option or stock appreciation right (including,
without limitation, any amount required to be withheld in order for the employer
to obtain a tax deduction with respect to the grant of such option or stock
appreciation right) and may condition the issuance of any shares upon such
exercise on the employee satisfying all withholding obligations. In addition,
an employee to whom an Incentive Stock Option is granted shall notify the
employer not later than five (5) days after the sale or other disposition of any
shares of Stock acquired pursuant to the exercise of the Incentive Stock Option,
if such sale or other disposition occurs within two (2) years from the date of
grant of such Incentive Stock Option or within one (1) year from the effective
date of exercise of such Incentive
22
<PAGE>
Stock Option. The employer and such employee shall thereafter promptly arrange
for payment by such employee to the employer, not later than thirty (30) days
after such sale or other disposition, of an amount in cash equal to the amount
of any tax required to be withheld by the employer by any applicable federal or
state laws with respect to such sale or other disposition (including, without
limitation, any amount require to be withheld in order for the employer to
obtain a tax deduction with respect to the grant of such Incentive Stock
Option).
17. Nonexclusivity of the Plan
--------------------------
Neither the adoption of this Plan by the Board of Directors nor the
submission of this Plan to the stockholders of FirstFed for approval shall be
construed as having any impact on existing qualified or nonqualified retirement
or bonus plans of FirstFed, or as creating any limitations on the power of the
Board of Directors to adopt such other incentive arrangements as it may deem
desirable, including, without limitation, the granting of stock options or stock
appreciation rights otherwise than under this Plan, and such arrangements may be
either applicable generally or only in specific cases.
18. Amendment
---------
The Board of Directors at any time, and from time to time, may amend
this Plan, subject to any required regulatory approval and subject to the
limitation that, except as provided in Section 13 hereof, no amendment shall be
effective unless approved by the affirmative votes of the holders of a majority
of the outstanding shares of FirstFed's voting stock within twelve (12) months
after the date of the adoption of such amendment, if such amendment would:
(a) Increase the number of shares of Stock as to which options may be
granted under this Plan;
(b) Change in substance the provisions of Section 2 hereof relating to
administration of this Plan, or of Section 4 hereof relating to eligibility to
participate in this Plan;
(c) Change the method of computing the Incentive Stock Option Price
for shares of Stock subject to Incentive Stock Options or the Base Price for
shares of Stock subject to
23
<PAGE>
ISO-SAR's, the Nonstatutory Stock Option Price for shares of Stock subject to
Nonstatutory Stock Option or the Base Price, Base Book Value, and Current Book
Value for shares of stock subject to SAR's; or
(d) Increase the maximum term of any options or stock appreciation
rights provided for herein.
Except as provided in Section 13 hereof, rights and obligations under
any option or stock appreciation right granted before amendment of this Plan
shall not be altered or impaired by amendment of this Plan, except with the
consent of the employee to whom the option or stock appreciation right was
granted.
19. Termination or Suspension
-------------------------
The Board of Directors at any time may suspend or terminate this Plan.
This Plan, unless sooner terminated, shall terminate on the tenth (10th)
anniversary of its adoption by the Board of Directors or its approval by the
members or the stockholders of FirstFed, whichever is earlier, but such
termination shall not affect any option theretofore granted. No option or stock
appreciation right may be granted under this Plan while this Plan is suspended
or after it is terminated.
No rights or obligations under any option or stock appreciation right
granted while this Plan is in effect shall be altered or impaired by suspension
or termination of this Plan, except with the consent of the person to whom the
option or stock appreciation right was granted. Any option or stock
appreciation right granted under this Plan may be terminated by agreement
between the holder thereof and FirstFed and, in lieu of the terminated option or
stock appreciation right, a new option may be granted with an Incentive Stock
Option Price or a Nonstatutory Stock Option Price, as the case may be, which may
be higher or lower than the Incentive Stock Option Price or a Nonstatutory Stock
Option Price, as the case may be, of the
24
<PAGE>
terminated option and a new stock appreciation right may be granted with a Base
Price or Base Book Value, as applicable, which may be higher or lower than the
Base Price or Base Book Value, as applicable, of the terminated stock
appreciation right.
20. Continuation of Employment
--------------------------
Nothing contained in this Plan (or in any written option agreement)
shall obligate FirstFed or any Subsidiary to continue to employ, for any period,
an employee to whom an option or stock appreciation right has been granted, or
interfere with the right of FirstFed or any Subsidiary to reduce such employee's
compensation.
21. Exculpation and Indemnification
-------------------------------
FirstFed shall indemnify and hold harmless the members of the Board of
Directors, subject to Section 2(b) hereof, or the Committee, and the members, if
any, of the committee duly appointed in accordance with Section 2(c), from and
against any and all liabilities, costs, and expenses incurred by such persons as
a result of any act, or omission to act, in connection with the performance of
such persons' duties, responsibilities, and obligations under this Plan, other
than such liabilities, costs and expenses as may result from the negligence,
gross negligence, bad faith, willful conduct, or criminal acts of such persons.
25
