<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 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] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
FIRSTFED FINANCIAL CORP.
401 WILSHIRE BOULEVARD
SANTA MONICA, CALIFORNIA 90401-1490
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
APRIL 21, 1999
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 21, 1999 at 11:00 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 an amendment to the Restated Certificate of
Incorporation to increase the number of common shares authorized for
issuance to 100,000,000.
(3) To ratify the appointment of KPMG Peat Marwick LLP as independent
public auditors of the Company for 1999.
(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 5, 1999 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
Corporate Secretary
Santa Monica, California
March 17, 1999
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> 3
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 21,
1999, and at any adjournment thereof. The approximate date of mailing of this
Proxy Statement is March 17, 1999.
The Board of Directors of the Company has selected March 5, 1999 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 21,033,097 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.
Abstentions and broker non-votes are counted for purposes of determining whether
a quorum of stockholders is present at the Annual Meetings but are not
considered as having voted for purposes of determining the outcome of a vote.
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 communication. 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> 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The information set forth below is based upon filings as of March 2, 1999
made by the listed entity 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 Common Stock:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP OF CLASS
------------------------------------ ---------- --------
<S> <C> <C>
J.P. Morgan & Co. Inc. ................................ 1,136,000(1) 5.3%
60 Wall Street
New York, NY 10260
</TABLE>
- ---------------
(1) According to its filing on Schedule 13G filed with the SEC dated February
22, 1999, J.P. Morgan & Co. Inc. ("J.P. Morgan") has sole voting power over
975,200 of these shares, has no shared voting power over any of these
shares, and has sole dispositive power over all 1,136,000 shares reported.
According to the filing, J.P. Morgan is the parent holding company of Morgan
Guaranty Trust Company of New York, a bank, J.P. Morgan Investment
Management, Inc., a registered investment advisor, and J.P. Morgan Florida
Federal Savings Bank, a registered investment advisor.
2
<PAGE> 5
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of February 12, 1999, 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, 1998, 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>
James P. Giraldin................................... 70,358 *
Douglas Goddard..................................... 2,844 *
Scott Gray.......................................... 2,021 *
Christopher M. Harding.............................. 10,498 *
Babette E. Heimbuch................................. 403,595 1.96%
James L. Hesburgh................................... 71,586 *
Shannon Millard..................................... 15,353 *
William S. Mortensen................................ 237,376 1.15%
William G. Ouchi.................................... 23,000 *
William P. Rutledge................................. 16,000 *
Charles F. Smith.................................... 62,000 *
Steven L. Soboroff.................................. 5,750 *
John R. Woodhull.................................... 27,000 *
All Directors and Executive Officers as a Group
(14 persons)...................................... 946,101 4.59%
</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 the named executive officers 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, 5,520 shares of Company Stock
subject to options granted under the Bank's 1994 Stock Option Plan which are
exercisable within 60 days of February 12, 1999. Includes with respect to
Mr. Giraldin, 23,605 shares of Company Stock subject to options granted
under the Bank's 1994 Stock Option Plan which are exercisable within 60 days
of February 12, 1999. Includes, with respect to Ms. Millard, 7,567 shares of
Company Stock subject to options granted under the Bank's 1994 Stock Option
Plan which are exercisable within 60 days of February 12, 1999. Includes,
with respect to all nonemployee directors (a group consisting of all
directors except Ms. Heimbuch), 80,000 shares subject to options granted
under the 1997 Nonemployee Directors Stock Incentive Plan which are
exercisable within 60 days of February 12, 1999. No other Director or
executive officer holds options which are exercisable within such date. The
percentage of outstanding shares owned by holders of stock options was
computed based upon the number of shares which would have been outstanding
if such options had been exercised.
3
<PAGE> 6
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 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 2002 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
POSITION HELD BECAME TERM TO
NOMINEES FOR ELECTION AGE WITH COMPANY DIRECTOR(1) EXPIRE(2)
--------------------- --- ------------- ----------- ---------
<S> <C> <C> <C> <C>
William G. Ouchi 55 Director 1995 2002
William P. Rutledge 57 Director 1995 2002
Charles F. Smith 66 Director 1989 2002
</TABLE>
<TABLE>
<CAPTION>
TERM
CONTINUING DIRECTORS EXPIRING
-------------------- ---------
<S> <C> <C> <C> <C>
Christopher M. Harding 46 Director 1984 2000
Babette E. Heimbuch 51 Director, President and 1986 2001
Chief Executive Officer
James L. Hesburgh 65 Director 1975 2000
William S. Mortensen 66 Director, Chairman of the Board 1961 2001
Steven L. Soboroff 50 Director 1991 2000
John R. Woodhull 65 Director 1988 2001
</TABLE>
- ---------------
(1) The date given is the earlier of the date such Director became a director of
First Federal Bank of California or a Director of the Company.
(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 WILLIAM
G. OUCHI, WILLIAM P. RUTLEDGE AND CHARLES F. SMITH
4
<PAGE> 7
William S. Mortensen joined the Bank in 1955, was named President of the
Bank in 1969 and Chairman of the Board of Directors of the Bank in 1982, and
retired as Chief Executive Officer effective January 1, 1997. He continues to
serve as Chairman of the Board today. Mr. Mortensen also serves on the Board of
Directors of the Los Angeles Metropolitan YMCA and the Welk Group. Mr. Mortensen
is also on the boards of Teach for America, Pepperdine University and the St.
John's Health Center Foundation.
Christopher M. Harding is a managing partner of the law firm of Lawrence &
Harding. He is active in numerous local civic groups, including the Santa Monica
Chamber of Commerce, YWCA, Santa Monica Boys & Girls Club and the Santa Monica
Youth Athletic Foundation. 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 LLP 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 appointed Executive Vice President in 1985, and was elected a Director of
the Bank in March, 1986. In 1987 she was appointed Senior Executive Vice
President of the Bank and of FFC and was elected a Director of FFC. Ms. Heimbuch
was named President and Chief Operating Officer of the Bank and FFC in 1989. In
January 1997, Ms. Heimbuch was named Chief Executive Officer of the Bank and
FFC. Ms. Heimbuch serves on the Board of Directors of the Western League of
Savings Institutions, the Federal Home Loan Bank of San Francisco, America's
Community Bankers and on the Thrift Institutions Advisory Council of the Federal
Reserve Board. Ms. Heimbuch is on the Board of Advisors for the Santa
Monica-UCLA Medical Center.
James L. Hesburgh is President and Chief Executive Officer of James L.
Hesburgh International, Inc. and Battley USA, Inc. Mr. Hesburgh is also a
director of Alyn Corporation, Fremont Funding, Inc., Roberts Sinto Corporation,
Sinto America, Inc., and USCS International, Inc. He serves as a Trustee
Emeritus of St. John's 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.
William G. Ouchi is the Sanford and Betty Sigoloff Professor in Corporate
Renewal for the John E. Anderson Graduate School of Management at the University
of California, Los Angeles. In 1993 Dr. Ouchi was appointed to serve as special
policy advisor to Los Angeles Mayor Richard J. Riordan, and from 1994 to 1995
was Mayor Riordan's Chief of Staff. Dr. Ouchi has written numerous books and
articles on business management and organization. Dr. Ouchi serves on the boards
of Williams College, KCET Public Television, LEARA and the Commission on
Presidential Debates. He is also a member of the Consumer Advisory Committee of
the U.S. Securities and Exchange Commission and of the Real Estate Advisory
Committee of the Trust Company of the West. Dr. Ouchi serves on the Boards of
Directors of Allegheny-Teledyne, Incorporated and Sempra Energy.
William P. Rutledge was, until his resignation in February 1997, President
and Chief Executive Officer of Allegheny-Teledyne, Incorporated.
Allegheny-Teledyne, Incorporated was formed in August 1996 in a strategic
combination of Pittsburgh-based Allegheny Ludlum Corporation and Los
Angeles-based Teledyne Inc. He joined Teledyne in 1986. Mr. Rutledge serves on
the boards of AECOM, Computer Sciences Corporation, Lafayette College, George
Washington University, and KCET Public Television and is a Trustee of St. John's
Health Center Foundation.
Charles F. Smith is president of Charles F. Smith & Company, Inc. He serves
as a Director of Trans Ocean Distribution Ltd., Sizzler International, Inc. and
Fremont Funding, Inc., and as a Trustee of Marymount High School, and of St.
John's 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 Chairman of Big Brothers of
Greater Los Angeles, President of the Recreation and Parks Commission for the
City of Los Angeles and the Senior Adviser to the Mayor of Los Angeles. Mr.
Soboroff became a Director of the Bank and FFC in 1991.
5
<PAGE> 8
John R. Woodhull was President and Chief Executive Officer of Logicon, Inc.
from 1959 to 1998. He serves on the boards of Adams Business Forms, Sunrise
Medical, Inc., the Los Angeles Metropolitan YMCA and The National Defense
Industrial Association. 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 $15,000, and Directors
who are not officers of the Bank also receive $1,250 for each regular meeting of
the Board attended. The Chairman of the Board receives an additional fee of
$25,000 per year plus reimbursement of related expenses of up to approximately
$46,000 per year. 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 separate 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.
Smith (Chair), Ouchi 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 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, 1998, the
Legal-Audit Committee held four meetings.
The Executive Fair Lending-CRA Committee held three meetings in 1998. Its
responsibilities include monitoring the Bank's Community Reinvestment Act
activities and ensuring that the Bank complies with all directives from the
Board of Directors. Members of the Committee are Former Bank Director June
Lockhart (Chair) and Officers Diana Wright (CRA Officer), Shannon Millard, Craig
Smith, Ann Lederer, Nancy Elander, Kendon Studebaker, Daniel Eliot, Scott Gray,
Laura Cox, Julie Delgado, Jill Rodenberg and Jose Budet.
The Compensation Committee, which held seven meetings in 1998, currently
consists of Directors Hesburgh (Chair), Harding and Soboroff, 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 four times in 1998 and is presently comprised
of Chairman Mortensen and Directors Heimbuch, 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 1998 there were twelve regular
meetings of the Board of Directors of the Bank and FFC. Each Director attended
at least 75% 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.
6
<PAGE> 9
Information Relating to Executive Officers. Set forth below are the names
and ages of the current executive officers of the Company, other than Ms.
Heimbuch (see "ELECTION OF DIRECTORS"), together with the positions held by
these persons.
<TABLE>
<CAPTION>
NAME AGE TITLE
---- --- -----
<S> <C> <C>
James P. Giraldin......... 46 Senior Executive Vice President/Chief Operating
Officer
Daniel R. Eliot........... 42 Executive Vice President/Community and Business
Banking
Douglas Goddard........... 46 Executive Vice President/Chief Financial
Officer
Scott Gray................ 54 Executive Vice President/Chief Lending Officer
Shannon Millard........... 36 Executive Vice President/Chief Credit Officer
</TABLE>
James P. Giraldin joined the Company in 1992 as Executive Vice
President/Chief Financial Officer. Prior to joining FFC, Mr. Giraldin was Chief
Executive Officer of Irvine City Bank for five 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. Mr. Giraldin was appointed
Chief Operating Officer and Senior Executive Vice President of the Bank and FFC
in 1997. Mr. Giraldin serves on the Executive Committee of the Santa Monica
Chamber of Commerce.
Daniel R. Eliot joined the Company in September, 1997. Mr. Eliot formerly
was Senior Vice President with California United Bank. He has also held
positions with Security Pacific Bank and Wells Fargo Bank, and has over fifteen
years of experience in commercial banking.
Douglas Goddard joined the Company in April, 1997. Previously, Mr. Goddard
served as Controller of California United Bank. He has held positions at
Security Pacific Bank, Community Bank, and KPMG Peat Marwick.
Scott Gray joined the Company in May, 1997. Formerly, Mr. Gray was the
Regional Vice President/Director of Comerica Bank's California mortgage lending
operations. His previous experience also includes a position as Senior Vice
President with Frontline Mortgage Corp.
Shannon Millard joined the Company in 1992. In 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. Ms. Millard currently serves on the board of the Santa
Monica YWCA.
7
<PAGE> 10
EXECUTIVE COMPENSATION
The following SUMMARY COMPENSATION TABLE includes compensation for the
years ended December 31, 1998, 1997 and 1996 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
RESTRICTED UNDERLYING
OTHER STOCK OPTIONS/ LTIP ALL OTHER
SALARY BONUS ANNUAL AWARD SAR's PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR $ $ COMPENSATION ($)(2) (#)* ($) ($)(3)
--------------------------- ---- ------- ------- ------------ ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Babette E. Heimbuch................ 1998 377,400 188,700 (1) -0- 19,200 -0- 17,801
President and Chief 1997 363,000 166,980 (1) -0- 27,600 -0- 18,471
Executive Officer 1996 263,340 110,000 (1) -0- -0- -0- 4,730
James P. Giraldin.................. 1998 266,040 119,718 (1) 24,843(4) 12,100 -0- 17,801
Chief Operating Officer 1997 254,040 105,173 (1) 19,698(4) 17,400 -0- 14,352
1996 202,800 80,000 (1) -0- 20,250 -0- 4,730
Douglas Goddard(5)................. 1998 149,760 52,416 (1) -0- 6,400 -0- 14,228
Chief Financial Officer 1997 100,430 34,776 (1) -0- -0- -0- -0-
Scott Gray(5)...................... 1998 131,760 56,007 (1) -0- 6,400 -0- 15,642
Residential Lending 1997 59,883 20,000 (1) -0- -0- -0- -0-
Shannon Millard.................... 1998 187,200 65,520 (1) -0- 6,400 -0- 17,801
Chief Credit Officer 1997 178,500 60,476 (1) -0- 9,400 -0- 11,497
1996 169,980 70,000 (1) -0- 10,188 -0- 4,730
</TABLE>
- ---------------
* Figures adjusted for two-for-one stock split declared June 25, 1998.
(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 31, 1998 of $17.875 per share. The aggregate
restricted stock holdings at December 31, 1998 for the named executive
officers consisted of approximately 12,473 shares worth $222,954 at the then
current market value, without giving effect to the diminution of value
attributable to the restrictions on such stock. The number of restricted
stock awards held by Ms. Heimbuch, Mr. Giraldin, and Ms. Millard at the end
of the last fiscal year is 4,264, 5,610 and 2,599, respectively. The value
of all restricted stock awards at the end of the last fiscal year based upon
a stock price of $17.875 per share as of December 31, 1998 is $76,219,
$100,278 and $46,457 for Ms. Heimbuch, Mr. Giraldin, and Ms. Millard,
respectively. Except as set forth below, no restricted stock award vests in
under three 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.
(3) Employee Stock Ownership Plan contributions and, for 1998 and 1997,
contributions by the Company under a matching program for the Company's plan
established pursuant to Section 401(k) of the Internal Revenue Code (the
"401(k) Plan," as more fully described below).
(4) On February 25, 1999, Mr. Giraldin was awarded 1,500 shares of restricted
stock which vest over a two year period. The award was made as a bonus for
services rendered during 1998. The amount shown is based on the price of the
Company stock at the date of grant ($16.562 per share). On February 26,
1998, Mr. Giraldin was awarded 500 shares of restricted stock which vest
over a two year period. The award was made as a bonus for services rendered
during 1997. The amount shown is based on the price of the Company Stock at
the date of grant ($39.937 per share).
(5) Messrs. Goddard and Gray joined the Company in 1997.
8
<PAGE> 11
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARs EXERCISE
UNDERLYING GRANTED TO OR BASE
OPTIONS/SARs EMPLOYEES IN PRICE EXPIRATION GRANT DATE
NAME GRANTED(#)(1) FISCAL YEAR ($/SH) DATE PRESENT VALUE($)(2)
---- ------------- ------------ --------- ---------- -------------------
<S> <C> <C> <C> <C> <C>
Babette E. Heimbuch........... 19,200 14.39 17.25 1/28/2008 192,384
James P. Giraldin............. 12,100 8.91 17.25 1/28/2008 121,242
Douglas Goddard............... 6,400 4.71 17.25 1/28/2008 64,128
Scott Gray.................... 6,400 4.71 17.25 1/28/2008 64,128
Shannon Millard............... 6,400 4.71 17.25 1/28/2008 64,128
</TABLE>
- ---------------
(1) Options to purchase Company Stock were granted under the 1994 Stock Plan,
which provides for the granting of options at an exercise price equal to the
fair market value of the Company's common stock on the date of grant. All
options granted become exercisable in installments beginning on the second
anniversary date of the date of grant, and becoming 100% vested on the sixth
anniversary date of the date of grant. The exercise price may be paid by
delivery of already owned shares, subject to certain conditions. All options
were granted for terms of 10 years, subject to earlier termination in
certain events related to termination of employment.
(2) Present value determinations were made using the Black-Scholes option
pricing model. There is no assurance that any value realized by optionees
will be at or near the value estimated by the Black-Scholes model. The
estimated present values under that model are based on a ten year holding
period, and on the following assumptions with respect to volatility and the
risk-free rate, forfeiture percentage and dividend yield. Based upon the
quarterly closing prices of the Company's common stock from December 31,
1987, until the grant date of January 27, 1998, the model uses annualized
volatility of 35.75%. For the risk-rate, the model uses the yield on a
ten-year treasury note on January 30, 1998 of 5.505%. For the forfeiture
percentage, the model uses zero. For the dividend yield, the model uses
zero.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END
OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARs AT OPTIONS/SARs AT
DECEMBER 31, 1998(#) DECEMBER 31, 1998($)
SHARES ACQUIRED VALUE (EXERCISABLE/ (EXERCISABLE/
NAME ON EXERCISE(#) REALIZED($) UNEXERCISABLE) UNEXERCISABLE)(1)
---- --------------- ----------- ---------------------- --------------------
<S> <C> <C> <C> <C>
Babette E. Heimbuch............ -0- -0- 171,875/46,800 1,886,328/205,200
James P. Giraldin.............. -0- -0- 20,125/49,625 238,229/367,591
Douglas Goddard................ -0- -0- -0- / 6,400 -0- / 4,000
Scott Gray..................... -0- -0- -0- / 6,400 -0- / 4,000
Shannon Millard................ -0- -0- 7,567/31,753 79,865/232,222
</TABLE>
- ---------------
(1) In accordance with the SEC's rules, values are calculated by subtracting the
exercise price from the fair market value of the underlying Company Stock.
For purposes of this table, fair market value is based on the market value
at December 31, 1998 ($17.875 per share).
Retirement Plan. Until August 31, 1996, the Bank had a non-contributory
defined benefit pension plan (the "Pension Plan"). Upon termination of the
Pension Plan, each participant received a distribution in the form of an
actuarially equivalent lump sum.
Effective January 1, 1997, the Company made available to its employees the
opportunity to make tax-deferred contributions to a plan established under
Section 401(k) of the Internal Revenue Code (the "401(k) Plan"). Participants
are permitted to make contributions on a pre-tax basis up to the IRS limitation,
a portion of which is matched by the Bank. For contributions made during 1999,
one-half of an employee's contribution (up to six percent of the employee's
compensation) will be matched.
9
<PAGE> 12
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....................... 112,500 112,500 112,500 112,500 112,500
200,000....................... 150,000 150,000 150,000 150,000 150,000
250,000....................... 187,500 187,500 187,500 187,500 187,500
300,000....................... 225,000 225,000 225,000 225,000 225,000
350,000....................... 262,500 262,500 262,500 262,500 262,500
400,000....................... 300,000 300,000 300,000 300,000 300,000
450,000....................... 337,500 337,500 337,500 337,500 337,500
500,000....................... 375,000 375,000 375,000 375,000 375,000
</TABLE>
- ---------------
* Social security payments do not reduce the amounts to be paid under the SERP.
Benefits under the SERP are reduced by Company-provided benefits under the
401(k) Plan and prior Pension Plan.
Supplemental Executive Retirement Plan. The Bank has adopted a Supplemental
Executive Retirement Plan ("SERP") covering the Chief Executive Officer and
Chief Operating Officer. 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 Stock Plan expired by its terms in 1993
and has been replaced by the 1994 Stock Option and Stock Appreciation Rights
Plan ("1994 Stock Plan"). Other than the option grants described above, no
options were granted to the named executive officers under the 1994 Stock Plan
during 1998.
Nonemployee Directors of the Bnak participate in the 1997 Nonemployee
Directors Stock Incentive Plan (the "Directors Stock Plan"). The Directors Stock
Plan permits the issuance of up to 400,000 shares of Company Stock. Annual
grants of shares are made to nonemployee directors. All shares granted under the
Directors Stock Plan vest on the first anniversary of the grant date.
Certain Relationships and Related Transactions. The Bank offers mortgage
loans to officers and directors, solely for the purchase or refinance of such
officer's or director's principal residence. Loans to officers, directors and
employees are made in the ordinary course of business and, in the judgment of
management, do 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 are required to be secured by the employee's
primary residence. Employee real estate loan benefits require one year of
full-time employment with the Company. All ELBP loans are 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 are written as adjustable mortgage loans ("AMLs"),
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 are charged for
appraisal, credit report, title policy and documents costs only. All
preferential rates are subject to increase upon termination of the individual's
employment with the Company.
10
<PAGE> 13
The following table sets forth amounts in excess of $60,000 in the
aggregate receivable from Directors and executive officers as of December 31,
1998.
LOANS TO DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
HIGHEST BALANCE UNPAID
OUTSTANDING BALANCE INTEREST RATE
NAME TYPE OF LOAN DURING 1998($) AT 12/31/98($) AT 12/31/98 YEAR MADE
---- ------------ --------------- -------------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Christopher M. Harding............ 1st TD 450,000 448,912 4.950% 1998
Babette E. Heimbuch............... 1st TD 364,900 354,483 4.882% 1988
Shannon Millard................... 1st TD 320,000 313,172 4.950% 1998
</TABLE>
Employment Contracts, Termination of Employment and Change of Control
Arrangements. The Company has entered into Change of Control Agreements with
certain of the Bank's management, including each of the named executive
officers. These agreements were entered into in order to retain executives
during financial industry merger and acquisition transactions, provide a change
in control severance arrangement consistent with the peer group and better allow
executives to concentrate on negotiating the best possible transaction and, if
such a transaction occurs, restructuring a merged entity under these
circumstances. If a "change in control" (as defined in the agreements) occurs
within the "change in control period" (as defined in the agreements) the
agreements will become effective. Upon becoming effective, the agreements
provide for employment terms up to three years and for compensation and other
terms of employment at least as favorable as those during the twelve-month
period prior to the effective date. Each of the agreements also provides for
severance payments and other benefits in the event that the officer's employment
is terminated by the Bank other than for death, disability or "cause" (as
defined in the agreements) or by the officer for "good reason" (as defined in
the agreements). The agreements with the named executive officers provide for a
severance payment equal to three times the executive's annual base salary, plus
bonus, plus amounts representing the value of additional retirement and other
benefits which would have accrued if the executive's employment had continued
for three additional years. These agreements also provide for continuation of
other benefits for a period of three years and for the payment, under certain
specified circumstances, of an additional amount to cover the federal excise tax
imposed on some "golden parachute" payments. Other than described above, the
Company has no employment arrangements with any of the named executive officers.
The Restricted Stock Bonus Plan described in the Report of the Compensation
Committee below, the 1983 and 1994 Stock Plans and the Directors Stock Plan
provide for accelerated vesting of rights in the event of certain change of
control events.
11
<PAGE> 14
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 nonemployee directors.
Set forth below is the report submitted by Messrs. Hesburgh (Chair), Harding and
Soboroff addressing the Company's compensation policies for 1998 as they
affected Ms. Heimbuch (the Company's Chief Executive Officer during 1998) 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, stock option program, Employee Stock Ownership Plan
("ESOP"), 401(k) Plan 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 strategic
direction, and assist the Company in attracting and retaining talented
management by providing compensation reasonably comparable to that offered by
the Company's peer group.
The principal elements of the Company's executive compensation are base
salary, annual bonus, annual stock option awards 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 ESOP benefits,
insurance and other benefits. Compensation has been and will continue to be
structured so as to be tax deductible. The Company has established a 401(k) Plan
for employee contributions with some matching employer contributions (see more
detailed discussion above).
In general, the Company's compensation programs have the overall goal of
ensuring that employees' interests are aligned with that of the Company as a
whole. At the senior officer level, this is achieved by rewarding performance
based upon measurable standards which are mutually determined by the officer and
senior management. Additionally, the incentive program for management consists
of a potential combination of cash bonus and stock options.
At each level of management (e.g., executive vice president, senior vice
president, etc.), a formula is established which allocates the cash bonus and
stock option potential awards as percentages of total base salary. The cash
bonus portion ranges from 15% to 50% of base salary, and is awarded based on
achievement of stated goals, with a small discretionary component. The stock
option awards typically vest 20% on the second anniversary date after the grant,
an additional 40% on the fourth anniversary date, and the remaining 40% on the
sixth anniversary date.
12
<PAGE> 15
BASE SALARY
Executive officer base salaries are initially determined, but not
established, by reference to the responsibilities and description of the
position and 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 Western League of
Savings Institutions ("Western League"). The Western 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 Western 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
Western League survey.
Additionally, in 1998, the Company participated in the SNL Executive
Compensation Review of 1998 ("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 1998 ranged
from 2 percent to 5 percent.
ANNUAL BONUSES
A 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 product development,
efficiency, client relations and employee relations. No particular weight is
given to one factor over another among these performance measures. For 1998, the
most significant issue was the successful implementation of a conversion to a
new data processing systems platform, as well as the launch of new strategic
business units including community banking and commercial/industrial lending.
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.
In 1998, the Compensation Committee established a pool of funds based upon
net earnings for the year of approximately $34.6 million, or $1.60 per diluted
share. The Committee attributed these positive results in large part to
management's efforts in increasing net interest income, gains on the sale of
loans, and being well positioned to realize opportunities in the current market.
Accordingly, the Committee awarded cash bonuses for 1998 to management. Named
Executive Officers Babette E. Heimbuch, James P. Giraldin, Douglas Goddard,
Scott Gray and Shannon Millard received cash bonuses of $188,700, $119,718,
$52,416, $56,007, and $65,520, respectively. Bonuses were also paid to other
employees and officers pursuant to parameters established by the Compensation
Committee and management.
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.
13
<PAGE> 16
Awards of stock options typically are made annually to officers at the
level of assistant 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.
In addition to stock options, as indicated above, restricted stock grants
may be made by the Compensation Committee as part of the Company's bonus
program. Restricted stock grants may be made to officers at the level of
assistant vice president and above. In recognition of Mr. Giraldin's
achievements during 1998, in particular the extensive remodel of the
headquarters office and the conversion to a new data processing contract, the
Compensation Committee granted 1,500 shares of Company Stock to Mr. Giraldin
under the Restricted Stock Plan. These shares vest 50 percent one year following
the date of grant, and the remaining 50 percent vests on the second anniversary
of the date of the grant. An assistant vice president also received 300
restricted shares for his work on the conversion. Other than these grants, no
new grants of restricted stock were made to officers during 1998.
CHIEF EXECUTIVE OFFICER COMPENSATION
Ms. Heimbuch was named Chief Executive Officer of the Company and the Bank
effective January 1, 1997. She has served as President since 1989. In reviewing
Ms. Heimbuch's compensation as Chief Executive Officer for 1998, the
Compensation Committee looked at the Company's overall financial health. In
particular, the Committee noted the earnings increase for the year (from $23.1
million in 1997 to $34.6 million in 1998), and the reduction in non-performing
assets. The Committee noted the significant progress made under Ms. Heimbuch's
leadership towards achieving the Company's strategic plans, the completion of a
data processing systems conversion and the leadership role taken by Ms. Heimbuch
in the industry in general. Ms. Heimbuch was awarded a cash bonus of $188,700,
and her base salary for 1998 was increased by approximately four percent.
The level of Ms. Heimbuch's aggregate salary for 1998 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 Western League Survey and SNL Review. The other benefits received by Ms.
Heimbuch are set forth in the Summary Compensation Table.
Compensation Committee:
James L. Hesburgh (Chair)
Christopher M. Harding
Steven L. Soboroff
14
<PAGE> 17
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
<TABLE>
<CAPTION>
FIRSTFED FINANCIAL SAVINGS & LOANS NYSE MARKET INDEX
------------------ --------------- -----------------
<S> <C> <C> <C>
'12/31/1993' 100 100 100
'12/30/1994' 78.91 95.79 98.06
'12/29/1995' 88.28 151.72 127.15
'12/31/1996' 137.5 198 153.16
'12/31/1997' 242.19 332.91 201.5
'12/31/1998' 223.44 291.84 239.77
</TABLE>
ASSUMES $100 INVESTED ON JANUARY 01, 1994
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DECEMBER 31, 1998
It should be noted that this graph represents historical stock price
performance and is not necessarily indicative of any future stock price
performance.
THE FOREGOING REPORT OF THE BOARD COMPENSATION COMMITTEE AND THE
PERFORMANCE GRAPH THAT APPEARS IMMEDIATELY AFTER SUCH REPORT SHALL NOT BE DEEMED
TO BE SOLICITING MATERIAL OR TO BE FILED WITH THE SEC OR INCORPORATED BY
REFERENCE IN ANY DOCUMENT SO FILED.
15
<PAGE> 18
PROPOSAL 2
AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES
OF COMMON STOCK FROM 25 MILLION TO 100 MILLION
The Board of Directors has unanimously determined it to be in the best
interests of the Company and its stockholders to amend the Restated Certificate
of Incorporation of the Company to increase the number of shares of common stock
that the Company has the authority to issue to 100,000,000 shares, and directed
that the amendment be submitted to a vote of the stockholders at the Annual
Meeting for approval. If the proposal is adopted, Article FOURTH of the Restated
Certificate of Incorporation will be amended to read as follows:
FOURTH: AUTHORIZED SHARES. The total number of shares of all classes of stock
which the Corporation shall have the authority to issue is one hundred five
million (105,000,000) shares, one cent ($.01) par value, divided into two
classes of which one hundred million (100,000,000) shares shall be Common
Stock ("Common Stock") and five million (5,000,000) shares shall be Preferred
Stock ("Preferred Stock").
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT TO THE
RESTATED CERTIFICATE OF INCORPORATION.
The Restated Certificate of Incorporation of the Company currently
authorizes the issuance of up to thirty million (30,000,000) shares, consisting
of twenty-five million (25,000,000) shares of Common Stock ("Common Stock") and
five million (5,000,000) shares of Preferred Stock ("Preferred Stock"). As of
December 31, 1998, the Company had 21,127,426 shares of Common Stock
outstanding, with approximately 4,540,874 additional shares of Common Stock
reserved for issuance under the stock option plans and restricted stock plan
previously approved by the Company's stockholders (as described in more detail
above). In addition, the Company has reserved 250,000 shares of Preferred Stock
for possible issuance pursuant to the Company's Restated Shareholder Rights
Plan, adopted in June 1998 (the "Rights Plan").
The proposed additional authorized shares of Common Stock could be issued
for any proper corporate purpose in the best interest of the Company and its
stockholders. These purposes could include stock splits (such as the recent
two-for-one stock split declared as of June 25, 1998), stock dividends,
corporate business combinations, funding of business acquisitions, employee
benefit programs and other corporate purposes. The Board may consider such
transactions from time to time, although no assurance can be given as to the
future outcome of such consideration. Due to the number of remaining authorized
but unissued or unreserved shares, the Company has no ability to use its Common
Stock for these purposes under the present terms of the Restated Certificate of
Incorporation. While the Company has no understandings or commitments with
respect to the issuance of the additional shares, it is advisable to have the
authorization to issue such shares in order to provide the Company with the
flexibility to continue its existing stockholder-approved stock option and
restricted stock plans, as well as the ability to move promptly to take
advantage of market conditions and the availability of other favorable
opportunities without the delay and expense involved in calling a special
meeting of stockholders for such purpose.
The authorization of additional shares of Common Stock will not, by itself,
have any effect on the rights of holders of existing Common Stock. Since holders
of Common Stock do not have any preemptive or similar rights to subscribe for or
purchase any additional shares of Common Stock that may be issued by the Company
in the future, future issuances of Common Stock may, depending on the
circumstances, have a dilutive effect on the earnings per share, voting power
and other interest of existing stockholders. The Board does not intend to issue
any Common Stock except on terms and for reasons which the Board deems to be in
the best interests of the Company and its stockholders.
By having additional shares readily available for issuance, the Board will
be able to act expeditiously without spending the time and incurring the expense
of solicitation proxies and holding special meetings of stockholders. If the
Amendment is approved, the Board may issue additional shares of Common Stock
16
<PAGE> 19
without stockholder approval if the action is permissible under Delaware law and
the rules of the stock exchange on which the Common Stock is listed (currently,
the New York Stock Exchange).
It should be noted that the Amendment may have the effect of deterring or
rendering more difficult attempts by third parties to obtain control of the
Company, if such attempts are not approved by the Board. Although the proposed
Amendment is not intended to be an anti-takeover measure, and the Board is not
aware of any current efforts to accumulate Company Common Stock or obtain
control of the Company, the availability of authorized and unissued Common
Stock, in addition to Preferred Stock, could enhance the Board's ability to
negotiate for better terms on behalf of the Company's stockholders. However, it
could be used to discourage a tender offer or prevent a change in control. The
Company is afforded protection against acquisition attempts not supported by the
Board by provisions in its Restated Certificate of Incorporation, Bylaws, and
the Rights Plan. In connection with this proposal, the Company recommends that
each stockholder consider, among other things, the information set forth in the
Company's 1998 Annual Report to Stockholders, a copy of which is being furnished
to each stockholder together with this proxy statement.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE AMENDMENT OF
THE RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED
SHARES OF COMMON STOCK FROM 25 MILLION TO 100 MILLION. A MAJORITY OF SHARES
OUTSTANDING AND ENTITLED TO VOTE AT THE MEETING IS REQUIRED TO APPROVE THE
PROPOSAL. PROXIES WILL BE VOTED IN FAVOR OF THE PROPOSAL UNLESS STOCKHOLDERS
SPECIFY A CONTRARY CHOICE IN THEIR PROXIES.
17
<PAGE> 20
PROPOSAL 3
Appointment of Independent Auditors. KPMG Peat Marwick LLP has been the
independent public auditor 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 auditor of the Company for 1999. 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 AUDITOR FOR 1999.
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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, except as follows: (i) in December 1998, a Form 5 was
filed to, among other things, correct the number of shares initially reported on
Form 3 as directly owned by Executive Officer Douglas J. Goddard from 400 shares
to 600 shares; and (ii) in December 1998, a Form 5 was filed reporting a
purchase in September 1998 of 300 shares by Executive Officer Daniel Eliot.
STOCKHOLDER PROPOSALS
Any stockholder of the Company wishing to have a proposal considered for
inclusion in the Company's 2000 proxy solicitation materials must set forth such
proposal in writing and file it with the Secretary of the Company on or before
November 24, 1999. Stockholder proposals not included in the Company's 2000
proxy solicitation materials must, in order to be considered at the 2000 Annual
Meeting, be submitted in writing to the Secretary of the Company by no earlier
than January 20, 2000 nor later than February 18, 2000.
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 2000 proxy solicitation materials for
consideration at the 2000 Annual Meeting.
18
<PAGE> 21
ANNUAL REPORT
The Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1998, including, but not limited to, statements of consolidated financial
condition and related consolidated statements of operations, stockholders'
equity and cash flows for fiscal years ended December 31, 1998, 1997 and 1996,
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, 1998 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 1998 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
19
<PAGE> 22
- -------------------------------------------------------------------------------
REVOCABLE PROXY
FIRSTFED FINANCIAL CORP.
401 WILSHIRE BOULEVARD, SANTA MONICA, CALIFORNIA 90401
PROXY FOR ANNUAL MEETING -- APRIL 21, 1999
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 5, 1999, at the annual meeting of
stockholders to be held on April 21, 1999, or any adjournment thereof.
A vote FOR nominees Ouchi, Rutledge and Smith, 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)
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<S> <C>
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FIRSTFED FINANCIAL CORP.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
[ ]
For All
1. ELECTION OF DIRECTORS (Year of Expiration of For Withhold (Except Nominee(s)
Nominees' Proposed Terms as Directors: 2002) All All written below)
William G. Ouchi, William P. Rutledge, [ ] [ ] [ ]
Charles F. Smith
______________________________________________
For Against Abstain
2. Amendment of Certificate of Incorporation to [ ] [ ] [ ]
increase number of authorized common shares.
For Against Abstain
3. Ratification of KPMG Peat Marwick LLP as the [ ] [ ] [ ]
Company's independent public auditors of 1999.
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 PROPOSALS 2, 3 AND 4.
Dated _____________________________, 1999
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's name by authorized person.
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