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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________
FORM S-8
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
FIRST ALLIANCE CORPORATION
(Exact name of Registrant as Specified in Its Charter)
DELAWARE 33-0721183
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
17305 VON KARMAN AVENUE, IRVINE, CA 92614-6203
(Address of Principal Executive Offices)
1996 STOCK INCENTIVE PLAN
(Full Title of the Plan)
EDWIN C. SUMMERS
17305 VON KARMAN AVENUE, IRVINE, CALIFORNIA 92614-6203
(Name and Address of Agent For Service)
(714) 224-8500
Telephone Number, Including Area Code, of Agent For Service
CALCULATION OF REGISTRATION FEE
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Proposed Maximum Proposed Maximum
Title of Securities to Amount To Be Offering Price Per Aggregate Offering Amount of
be Registered Registered Share Price Registration Fee
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<S> <C> <C> <C> <C>
FIRST ALLIANCE CORPORATION
$.01 par value Class A 636,565 (1) $17.00(2) $13,600,139(3) $ 4,121.25
Common Stock 113,435 (4) $26.25(5) $ 2,977,669 $ 902.32
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750,000 $ 5,023.57
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(1) Includes 107,500 shares of $.01 par value Class B Common Stock issued as
restricted stock pursuant to the terms of an Employment Agreement with an
executive officer of Registrant, which stock is convertible into Class A
Common Stock on a share for share basis.
(2) In accordance with Rule 457(h), each share has been valued at the price at
which the option relating to it may be exercised. Does not include
restricted Class B Common Stock described in note (1) above.
(3) Includes 107,500 shares of Class B Common Stock described in note (1) above,
and 192,882 shares of Class A Common Stock issuable pursuant to options
issued to individuals who may be considered affiliates of the registrant.
Pursuant to Rule 457(c), the offering price is based upon the average of the
high and low prices on November 21, 1996, as reported in the consolidated
reporting system.
(4) Shares underlying options available under the Plan but which have not been
granted.
(5) These shares are to be offered at prices not presently determinable.
Pursuant to Rule 457(c), the offering price is based upon the average of the
high and low prices on November 21, 1996, as reported in the consolidated
reporting system.
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EXPLANATORY NOTE
The material which follows constitutes a reoffer prospectus, prepared
in accordance with the requirements of Part I of Form S-3, in accordance with
General Instruction C to Form S-8, to be used in connection with resales of
securities acquired under the 1996 Stock Incentive Plan by persons who may be
considered affiliates of First Alliance Corporation, as defined in Rule 405
under the Securities Act of 1933, as amended.
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FIRST ALLIANCE CORPORATION
CROSS REFERENCE SHEET
Pursuant to Item 501(b) of Regulation S-K
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<CAPTION>
Form S-3 Item Number and Caption Location in Prospectus
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<S> <C>
1. Forepart of the Registration
Statement and Outside Front
Cover Page of Prospectus Front Cover
2. Inside Front and Outside Back
Cover Pages of Prospectus Inside Front Cover Pages
3. Summary Information, Risk
Factors and Ratio of Earnings
to Fixed Charges The Company; Special
Considerations
4. Use of Proceeds Not Applicable
5. Determination of Offering Price Not Applicable
6. Dilution Not Applicable
7. Selling Security Holders Selling Stockholders
8. Plan of Distribution Plan of Distribution
9. Description of Securities
to be Registered Not Applicable
10. Interest of Named Experts
and Counsel Legal Opinion
11. Material Changes Not Applicable
12. Incorporation of Certain
Information by Reference Incorporation of Certain
Information by Reference
13. Disclosure of Commission
Position on Indemnification
for Securities Act Liabilities Statement on Indemnification
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PROSPECTUS
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750,000 Shares
FIRST ALLIANCE CORPORATION
CLASS A COMMON STOCK
(PAR VALUE $.01 PER SHARE)
This Prospectus relates to 750,000 shares of the Class A Common Stock,
par value $.01 per share (the "Common Stock"), of First Alliance Corporation
(the "Company") which may in the future be issued pursuant to awards granted to
date and to be granted under the Company's 1996 Stock Incentive Plan (the
"Plan") to, and which may be offered for resale from time to time by, certain
employees and non-employee directors of the Company and its subsidiaries named
herein (the "Selling Stockholders").
The Company will not receive any of the proceeds from the sale of the
Common Stock offered hereby (hereinafter, the "Securities"). The Company will
pay all of the expenses associated with the registration of the Securities and
this Prospectus. The Selling Shareholders will pay the other costs, if any,
associated with any sale of the Securities.
The Common Stock is quoted on the NASDAQ National Market System under
the symbol "FACO." On November 21, 1996, the last reported sale price per share
of the Common Stock, as quoted on the NASDAQ National Market System, was $26.50.
_____________________
SEE "SPECIAL CONSIDERATIONS" CONTAINED IN THE FOREPART OF THIS PROSPECTUS FOR A
DISCUSSION OF CERTAIN RISK FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE
PURCHASERS OF THE COMMON STOCK.
_____________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE
_____________________
The date of this Prospectus is November 27, 1996
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TABLE OF CONTENTS
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Page
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Available Information.............................. 2
Incorporation of Certain Information by Reference.. 2
The Company........................................ 3
Special Considerations............................. 3
Selling Stockholders............................... 12
Use of Proceeds.................................... 13
Plan of Distribution............................... 13
Legal Matters...................................... 13
Experts............................................ 13
Statement on Indemnification....................... 14
</TABLE>
AVAILABLE INFORMATION
The Company has filed a registration statement on Form S-8 (the
"Registration Statement") with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Securities
Act"), covering the Securities offered by this Prospectus. This prospectus
omits certain information and exhibits included in the Registration Statement,
copies of which may be obtained upon payment of a fee prescribed by the
Commission or may be examined free of charge at the principal office of the
Commission in Washington, D.C.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Commission, Commission File No. 0-28706. Such reports, proxy statements and
other information filed with the Commission by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the
Commission located at 500 West Madison Street, Room 1400, Chicago, Illinois
60606 and at 7 World Trade Center, Suite 1300, New York, New York 10048. Copies
of such material can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, Washington, D.C. 20549, at prescribed rates.
The Commission also maintains a web site that contains reports, proxy and
information statements and other information regarding Registrants that file
electronically with the Commission, including the Company, and the address is
http://www.SEC.GOV.
The Company's Common Stock is quoted on the NASDAQ National Market
System under the symbol "FACO."
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents previously filed by the Company with the
Commission are by this reference incorporated in and made a part of this
Prospectus: (i) the registration statement on form S-1 filed by the Company
with respect to the initial public offering of its Common Stock, including all
amendments and supplements thereto (the "IPO Registration Statement"),
Commission File No. 333-3633; (ii) the quarterly reports on form 10-Q filed by
the Company for the quarterly periods ended June 30 and September 30, 1996; and
(iii) all documents filed by the
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Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after
the date of this Prospectus and prior to the filing of a post-effective
amendment which indicates that all securities offered hereby have been sold or
which deregisters all securities then remaining unsold. Any statement contained
in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
Copies of all documents which are incorporated herein by reference
(not including the exhibits to such documents, unless such exhibits are
specifically incorporated by reference into such documents or into this
Prospectus) will be provided without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon a written or oral
request to First Alliance Corporation, Attention: Corporate Secretary, 17305
Von Karman Avenue, Irvine, California 92614-6203, telephone number (714) 224-
8500.
THE COMPANY
First Alliance Corporation is a holding company, the only operations
of which are to provide management for its wholly owned subsidiaries. The term
"Company" as used in this Prospectus includes First Alliance Corporation and its
subsidiaries, unless the context otherwise requires. The assets and operations
of the Company consist substantially of First Alliance Mortgage Company, which
was founded in 1971 and incorporated in California in 1975. The Company has
been actively involved in the mortgage lending business since its founding. The
Company maintains its principal office at 17305 Von Karman Avenue, Irvine,
California 92614-6203. The Company's telephone number is (714) 224-8500.
SPECIAL CONSIDERATIONS
Prospective investors should consider carefully the following factors:
DECLINE OF COLLATERAL VALUE MAY ADVERSELY AFFECT LOAN-TO-VALUE RATIOS
The Company's business may be adversely affected by declining real estate
values. Any material decline in real estate values reduces the ability of
borrowers to use home equity to support borrowings and increases the loan-to-
value ratios of loans previously made by the Company, thereby weakening
collateral coverage and increasing the possibility of a loss in the event of a
borrower default. Further, delinquencies, foreclosures and losses generally
increase during economic slowdowns or recessions. Because of the Company's
focus on borrowers who are unable to obtain mortgage financing from conventional
mortgage sources, the actual rates of delinquencies, foreclosures and losses on
such loans could be higher under adverse economic conditions than those
currently experienced in the mortgage lending industry in general. Any
sustained period of such increased delinquencies, foreclosures or losses could
adversely affect the Company's results of operations and financial condition.
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CREDIT IMPAIRED BORROWERS MAY RESULT IN INCREASED DELINQUENCY RATES
The Company focuses its marketing efforts on borrowers who may be unable to
obtain mortgage financing from conventional mortgage sources. Loans made to
such borrowers may entail a higher risk of delinquency and higher losses than
loans made to borrowers who utilize conventional mortgage sources. As of
June 30, 1996 and December 31, 1995, total delinquent loans as a percentage of
the Company's Servicing Portfolio were 5.3% and 5.8%, respectively, as compared
to 4.35% and 4.5% for the portfolios of the mortgage banking industry as a whole
according to the Mortgage Bankers Association. While the Company employs
underwriting criteria and collection methods to mitigate the higher risks
inherent in loans made to these borrowers, no assurance can be given that such
criteria or methods will afford adequate protection against such risks. In the
event that pools of loans sold and serviced by the Company experience higher
delinquencies, foreclosures or losses than anticipated, the Company's results of
operations or financial condition could be adversely affected.
IMPACT OF REGULATION AND LEGISLATION
The Company's business is subject to extensive regulation, supervision and
licensing by Federal, state and local governmental authorities and is subject to
various laws, regulations and judicial and administrative decisions imposing
requirements and restrictions on part or all of its operations. The Company's
consumer lending activities are subject to the Truth-in-Lending Act (including
the Home Ownership and Equity Protection Act of 1994), the Fair Housing Act, the
Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Real Estate
Settlement Procedures Act ("RESPA"), the Home Mortgage Disclosure Act and the
Fair Debt Collection Practices Act and regulations promulgated thereunder, as
well as other Federal and state statutes and regulations affecting the Company's
activities. The Company is also subject to the rules and regulations of, and
examinations by, state regulatory authorities with respect to originating,
processing, underwriting, selling, securitizing and servicing loans. These
rules and regulations, among other things, (i) impose licensing obligations on
the Company, (ii) establish eligibility criteria for mortgage loans, (iii)
prohibit discrimination, (iv) provide for inspections and appraisals of
properties, (v) require credit reports on loan applicants, (vi) regulate
assessment, collection, foreclosure and claims handling, investment and interest
payments on escrow balances and payment features, (vii) mandate certain
disclosures and notices to borrowers and (viii) in some cases, fix maximum
interest rates, fees and mortgage loan amounts. Failure to comply with these
requirements can lead to termination or suspension of the Company's servicing
rights without compensation to the Company, demands for indemnifications or
mortgage loan repurchases, certain rights of rescission for mortgage loans,
class action lawsuits and administrative enforcement actions.
Recent Federal legislation, the Riegle Community Development and Regulatory
Improvement Act (the "Riegle Act"), has focused additional regulation on
mortgage loans having relatively higher origination fees and interest rates,
such as those made by the Company, and the Company expects its business to be
the focus of additional Federal and state legislation, regulation and possible
enforcement in the future.
The Company's placement of insurance covering improvements on real property
that secures the Company's loan to a borrower is subject to state and federal
statutes and regulations
4
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applicable to "force placed" insurance. The Company receives a fee in connection
with its placement of such insurance in California, which activity is not
required to be licensed. Historically the Company also received a fee in
connection with the placement of such insurance outside California. While the
Company does not believe, based on the advice of regulatory counsel, that it was
required to be licensed in connection with such activity, a state insurance
regulator or a court could take a different interpretation. The rules and
regulations governing force placed insurance impose certain disclosure and
notice requirements on the Company prior to effecting such insurance coverage,
impose limitations on the Company's ability to accept or reject insurance
coverage offered by a borrower and impose restrictions on the fees and costs
which the Company may charge the borrower with respect to such insurance. The
Company's sale of credit life insurance and credit disability insurance in the
state of California is subject to statutes and regulations in that state
applicable to insurance producers. Failure to comply with any of the foregoing
state and federal requirements could lead to imposition of civil penalties on
the Company, class action lawsuits and administrative enforcement actions.
The laws and regulations described above are subject to legislative,
administrative and judicial interpretation, and certain of these laws and
regulations have been infrequently interpreted or only recently enacted.
Infrequent interpretations of these laws and regulations or an insignificant
number of interpretations of recently enacted regulations can result in
ambiguity with respect to permitted conduct under these laws and regulations.
Any ambiguity under the regulations to which the Company is subject may lead to
regulatory investigations or enforcement actions and private causes of action,
such as class action lawsuits, with respect to the Company's compliance with the
applicable laws and regulations. As a mortgage lender, the Company has been,
and expects to continue to be, subject to regulatory enforcement actions and
private causes of action from time to time with respect to its compliance with
applicable laws and regulations.
Although the Company utilizes systems and procedures to facilitate
compliance with these legal requirements and believes that it is in compliance
in all material respects with applicable Federal, state and local laws, rules
and regulations, there can be no assurance that more restrictive laws, rules and
regulations will not be adopted in the future, or that existing laws and
regulations will not be interpreted in a more restrictive manner, that could
make compliance more difficult or expensive.
ELIMINATION OF DEDUCTIBILITY OF MORTGAGE INTEREST COULD ADVERSELY AFFECT RESULTS
OF OPERATIONS
Members of Congress, government officials and political candidates have
from time to time suggested the elimination of the mortgage interest deduction
for Federal income tax purposes, either entirely or in part, based on borrower
income, type of loan or principal amount. Because many of the Company's loans
are made to borrowers for the purpose of consolidating consumer debt or
financing other consumer needs, the competitive advantages of tax deductible
interest, when compared with alternative sources of financing, could be
eliminated or seriously impaired by such government action. Accordingly, the
reduction or elimination of these tax benefits could have a material adverse
effect on the demand for loans of the kind offered by the Company.
5
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RISK OF LITIGATION
In the ordinary course of its business, the Company is subject to claims
made against it by borrowers and investors who have purchased loans from the
Company arising from, among other things, losses that are claimed to have been
incurred as a result of alleged breaches of fiduciary obligations,
misrepresentations, errors and omissions of employees, officers and agents of
the Company (including its appraisers), incomplete documentation and failures by
the Company to comply with various laws and regulations applicable to its
business. The Company believes that liability with respect to any currently
asserted claims or legal actions is not likely to be material to the Company's
consolidated results of operations or financial condition; however, any claims
asserted in the future may result in legal expenses or liabilities that could
have a material adverse effect on the Company's results of operations and
financial condition and could distract members of management from the operations
of the Company.
FLUCTUATIONS IN INTEREST RATES MAY ADVERSELY AFFECT PROFITABILITY
The profitability of the Company is likely to be adversely affected during
any period of rapid changes in interest rates. A substantial and sustained
increase in interest rates could adversely affect the spread between the rate of
interest received by the Company on its loans and the interest rates payable
under warehouse financing facilities during the warehousing period or the pass-
through rate for regular interests issued in securitizations. Such rate
increases could also affect the ability of the Company to originate and purchase
loans. A significant decline in interest rates could decrease the size of the
Company's servicing portfolio by increasing the level of loan prepayments.
The Company has implemented a hedging program designed to provide a level
of protection against the impact of rapid changes in interest rates on the value
of fixed rate loans from the time the Company commits to fund or purchase such
loans to the date of their securitization or sale. The Company does not hedge
the interest rate risk associated withholding adjustable rate mortgages pending
their sale or securitization due to the decreased significance of such risk
because the pass-through rates for regular interests related to the Company's
adjustable rate mortgage pools are also adjustable although not necessarily in
the same period.
An effective hedging strategy is complex and no hedging strategy can
completely insulate the Company from interest rate risks. The nature and timing
of hedging transactions may impact the effectiveness of hedging strategies.
Poorly designed strategies or improperly executed transactions may increase
rather than mitigate risk. In addition, hedging involves transaction and other
costs, and such costs could increase as the period covered by the hedging
protection increases or in periods of rising and fluctuating interest rates.
Therefore, the Company may be prevented from effectively hedging its interest
rate risks, which could have a material adverse effect on the Company's results
of operations and financial condition.
DEPENDENCE ON SECURITIZATIONS AND IMPACT ON QUARTERLY OPERATING RESULTS
Gain on sale of loans generated by the Company's securitizations represents
a significant portion of the Company's revenues and net income. Furthermore,
the Company relies significantly on securitizations to generate cash proceeds
for repayment of its warehouse financing facilities and enable the Company to
originate and purchase additional loans. Several factors affect the Company's
ability to complete securitizations, including conditions in the securities
markets generally, conditions in the asset-backed securities markets
specifically, the credit quality of the Company's servicing portfolio and the
Company's ability to obtain credit
6
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enhancement. Any substantial reductions in the size or availability of the
securitization market for the Company's loans could have a material adverse
effect on the Company's results of operations and financial condition.
The Company's revenues and net income have fluctuated in the past and are
expected to fluctuate in the future principally as a result of the timing and
size of its securitizations. Several factors affecting the Company's business
can cause significant variations in its quarterly results of operations. In
particular, variations in the volume of the Company's loan originations and
purchases, the differences between the Company's cost of funds and the average
interest rates of originated or purchased loans, the effectiveness of the
Company's hedging strategies, the pass-through rate for regular interests issued
in securitizations, and the timing and size of securitizations can result in
significant increases or decreases in the Company's revenues from quarter to
quarter. A delay in closing a securitization during a particular quarter would
postpone recognition of gain on sale of loans. In addition, unanticipated
delays in closing a securitization could also increase the Company's exposure to
interest rate fluctuations by increasing the warehousing period for its loans.
If the Company were unable to profitably securitize a sufficient number of its
loans in a particular reporting period, the Company's revenues for such period
would decline and would result in lower net income and possibly a net loss for
such period, and could have a material adverse effect on the Company's results
of operations and financial condition.
LOSS OF HISTORICAL LOAN ORIGINATION FEES COULD ADVERSELY AFFECT RESULTS OF
OPERATIONS
The Company has historically generated positive cash flow due, in large
part, to its customary loan origination fees. Net loan origination fees
constituted 53.6%, 43.1%, 61.9% and 51.6% of the Company's total revenues for
the nine months ended September 30, 1996 and for the years 1995, 1994 and 1993,
respectively. Weighted average loan origination and processing fees as a
percentage of gross loans originated in the retail branches for those periods
were 14.9%, 15.3%, 15.6% and 17.8%, respectively. Any reduction in the amount
of the Company's loan origination fees, whether by reason of regulation,
competition or otherwise, will negatively impact the Company's cash flow and
could have a material adverse effect on the Company's results of operations and
financial condition.
LOSS OF FUNDING SOURCES COULD ADVERSELY AFFECT RESULTS OF OPERATIONS
The Company funds substantially all of the loans which it originates or
purchases through borrowings under the warehouse financing facility and
internally generated funds. These borrowings are in turn repaid with the
proceeds received by the Company from selling such loans through loan sales or
securitizations. Any failure to renew or obtain adequate funding under the
warehouse financing facilities or other borrowings, or any substantial reduction
in the size of or pricing in the markets for the Company's loans, could have a
material adverse effect on the Company's results of operations and financial
condition. To the extent that the Company is not successful in maintaining or
replacing existing financing, it would have to curtail its loan production
activities or sell loans earlier than is optimal, thereby having a material
adverse effect on the Company's results of operations and financial condition.
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IMPAIRMENT OF VALUE OF RESIDUAL INTERESTS AND MORTGAGE SERVICING RIGHTS
The Company records gains on sale of loans through securitization based in
part on the fair value of the residual interests received in the REMIC Trust by
the Company and on the fair value of retained mortgage servicing rights related
to such loans. The fair values of such residual interests and retained mortgage
servicing rights are in turn based in part on market interest rates and
projected loan prepayment and credit loss rates. Increases in interest rates or
higher than anticipated rates of loan prepayments or credit losses of these or
similar securities may require the Company to write down the value of such
residual interests and mortgage servicing rights and result in a material
adverse impact on the Company's results of operations and financial condition.
The Company is not aware of an active market for the residual interests. No
assurance can be given that the residual interests could in fact be sold at
their carrying value, if at all.
LOSS OF CREDIT ENHANCEMENT COULD RESULT IN INCREASED INTEREST COSTS
In order to gain access on favorable terms to the public securitization
market, the Company has relied on credit enhancement to achieve a "AAA/Aaa"
rating for the regular interests in its securitizations. The credit enhancement
has generally been in the form of an insurance policy issued by the certificate
insurer insuring the repayment of regular interests in each of the REMIC Trusts
sponsored by the Company. The certificate insurer is not required to insure
future securitizations nor is the Company restricted in its ability to obtain
credit enhancement from providers other than the certificate insurer or to use
other forms of credit enhancement. There can be no assurance that the Company
will be able to obtain credit enhancement in any form from the certificate
insurer or any other provider of credit enhancement on acceptable terms or that
future securitizations will be similarly rated. A downgrading of regular
interests already outstanding or of the certificate insurer's credit rating or
its withdrawal of credit enhancement could result in higher interest costs for
future securitizations. Such events could have a material adverse effect on the
Company's results of operations and financial condition.
STRONG OR INCREASED COMPETITION COULD ADVERSELY AFFECT RESULTS OF OPERATIONS
Competition in the mortgage financing business is intense. The mortgage
financing market is highly fragmented and has been serviced by mortgage brokers,
mortgage banking companies, commercial banks, credit unions, thrift
institutions, and finance companies. Many of these competitors have greater
financial resources and may have significantly lower costs of funds than the
Company. Even after the Company has made a loan to a borrower, the Company's
competitors may seek to refinance the Company's loan in order to take additional
cash out of the property or reduce payments. Furthermore, the profitability of
the Company and other similar lenders is attracting additional competitors into
this market, with the possible effect of reducing the Company's ability to
charge its customary origination fees and interest rates. In addition, as the
Company expands into new geographic markets, it will face competition from
lenders with established positions in these locations. There can be no
assurance that the Company will be able to continue to compete successfully in
the markets it serves. Such an event could have a material adverse effect on
the Company's results of operations and financial condition.
CONCENTRATION OF OPERATIONS IN CALIFORNIA
Approximately 71.5% of the dollar volume of the servicing portfolio at, and
approximately 42.6% of the dollar volume of loans originated or purchased by the
Company
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during the nine months ended, September 30, 1996 were secured by properties
located in California. Although the Company is expanding its retail branch
network outside California, the Company's servicing portfolio and loan
originations and purchases are likely to remain concentrated in California for
the foreseeable future. Consequently, the Company's results of operations and
financial condition are dependent upon general trends in the California economy
and its residential real estate market. The California economy has experienced a
slowdown or recession over the last several years that has been accompanied by a
sustained decline in the California real estate market. Residential real estate
market declines may adversely affect the values of the properties securing loans
such that the principal balances of such loans, together with any primary
financing on the mortgaged properties, will equal or exceed the value of the
mortgaged properties. In addition, California historically has been vulnerable
to certain natural disaster risks, such as earthquakes and erosion-caused
mudslides, which are not typically covered by the standard hazard insurance
policies maintained by borrowers. Uninsured disasters may adversely impact
borrowers' ability to repay loans made by the Company. The existence of adverse
economic conditions or the occurrence of such natural disasters in California
could have a material adverse effect on the Company's results of operations and
financial condition.
ABILITY OF THE COMPANY TO IMPLEMENT ITS GROWTH STRATEGY
The Company's growth strategy is dependent upon its ability to increase its
loan origination volume through the growth of its retail branch network while
maintaining its customary origination fees, interest rate spreads and
underwriting criteria with respect to such increased loan origination and
purchase volume. Implementation of this strategy, which includes nationwide and
international geographic expansion, will depend in large part on the Company's
ability to: (i) expand its retail branch network in markets with a sufficient
concentration of borrowers meeting the Company's underwriting criteria; (ii)
obtain adequate financing on favorable terms to fund its growth strategy; (iii)
profitably securitize its loans in the secondary market on a regular basis; (iv)
hire, train and retain skilled employees; and (v) continue to expand in the face
of increasing competition from other mortgage lenders. The Company's failure
with respect to any or all of these factors could impair its ability to
successfully implement its growth strategy which could have a material adverse
effect on the Company's results of operations and financial condition.
LOAN DELINQUENCIES AND DEFAULTS MAY REDUCE VALUE OF RESIDUAL INTERESTS
After a loan has been originated or purchased by the Company, the loan is
held as part of the servicing portfolio and is subject to sale or
securitization. During the period a loan is so held, the Company is at risk for
loan delinquencies and defaults. Following the sale of the loan on a servicing
released basis, the Company's loan delinquency and default risk with respect to
such loan is limited to those circumstances in which it is required to
repurchase such loan due to a breach of a representation or warranty in
connection with the loan sale. On securitized loans, the Company also has this
risk of loan delinquency or default to the extent that losses are paid out of
reserve accounts or by reducing the over-collateralization to the extent that
funds are available. Such losses may result in a reduction in the value of the
residual interests held by the Company and could have a material adverse effect
on the Company's results of operations and financial condition.
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TERMINATION OF SERVICING RIGHTS MAY ADVERSELY AFFECT RESULTS OF OPERATIONS
At September 30, 1996, approximately 89.9% of the dollar volume of the
Company's servicing portfolio consisted of loans securitized by the Company and
sold to REMIC Trusts. The Company's form of pooling and servicing agreement for
each of these REMIC Trusts provides that the certificate insurer insuring the
senior interests in the related REMIC Trust may terminate the Company's
servicing rights under particular circumstances. With respect to six of the
Company's securitizations (with loan balances of $222.4 million at September 30,
1996), the certificate insurer may terminate the servicing rights of the Company
if, among other things, the number of loans in the REMIC Trust that are
delinquent 91 days or more (including foreclosures and REO properties) exceeds
10.0% of the total number of loans in the REMIC Trust for four consecutive
months.
With respect to the Company's five most recent securitizations, the
certificate insurer may terminate the servicing rights of the Company if, among
other things, (i) the three month average of the quotient of the principal
balance of all loans that are delinquent 91 days or more (including foreclosures
and REO properties) divided by the pool principal balance for the related period
exceeds 7.0%; (ii) the annual cumulative realized losses for any year exceed
2.0% of the average pool principal balance for the same year; or (iii) with
respect to the two transactions completed in 1995, if within the first five
years of the REMIC Trust, the cumulative losses exceed 5.75% of the original
principal balance of the REMIC Trust or if cumulative losses after year five
exceed 8.63% of the original principal balance of the REMIC Trust. The
Company's first two securitizations in 1996 include language that modifies the
cumulative loss figures to 6.63% within the first five years and 9.94% after
year five, and its most recent securitization modifies the cumulative loss
figures to 5.0% within the first five years and 7.0% after year five.
At September 30, 1996, none of the REMIC Trusts exceeded the foregoing
delinquency or loss calculations. There can be no assurance that delinquency
and loss rates with respect to the Company's securitized loans will not exceed
these rates in the future or, if exceeded, that the servicing rights would not
be terminated. Any termination of servicing rights could have a material
adverse effect on the Company's results of operations and financial condition.
ANTI-TAKEOVER EFFECT OF CAPITAL STRUCTURE; VOTING CONTROL OF COMPANY
The Company has two classes of authorized Common Stock, Class A Common
Stock, which is offered hereby, and Class B Common Stock. While the holder of
each share of Class A Common Stock is entitled to one vote per share, the holder
of each share of Class B Common Stock is entitled to four votes per share. The
Class A Common Stock and the Class B Common Stock generally vote together as a
single class. Brian Chisick and his wife, Sarah Chisick, and the grantor trusts
for which they have the beneficial voting interests (collectively, the "Chisick
Family") are the beneficial owners of substantially all of the outstanding Class
B Common Stock. The Chisick Family holds approximately 90.6% of the aggregate
voting power of the Company, which allows it to control all actions to be taken
by the stockholders, including the election of all directors to the Board of
Directors. The Board of Directors is expected to be comprised entirely of
designees of the Chisick Family. This voting control may have the effect of
discouraging offers to acquire the Company because the consummation of any such
acquisition would require the consent of the Chisick Family. In addition, the
Board of Directors is authorized to issue shares of preferred stock from time to
time with such rights and preferences as the Board may determine. Such
preferred stock could be issued in the future with terms and conditions that
could further discourage offers to acquire the Company.
10
<PAGE>
ANTI-TAKEOVER EFFECT OF DELAWARE LAW
The Company is a Delaware corporation and is subject to the anti-takeover
provisions of Section 203 of the Delaware General Corporation Law. In general,
Section 203 prevents an "interested stockholder" (defined generally as a person
owning 15% or more of the Company's outstanding voting stock) from engaging in a
"business combination" with the Company for three years following the date that
person became an interested stockholder unless the business combination is
approved in a prescribed manner. This statute could make it more difficult for
a third party to acquire control of the Company.
DEPENDENCE ON KEY PERSONNEL
The Company's growth and development to date have been largely dependent
upon the services of Brian Chisick, Chief Executive Officer and President of the
Company. Although the Company has been able to hire and retain other qualified
and experienced management personnel, the loss of Brian Chisick's services for
any reason could have a material adverse effect on the Company. The Company has
entered into an employment agreement with Brian Chisick. The Company does not
carry "key man" life insurance on the life of Brian Chisick.
ENVIRONMENTAL LIABILITIES
In the course of its business, the Company has acquired, and may acquire in
the future, properties securing loans that are in default. There is a risk that
hazardous substances or waste, contaminants, pollutants or sources thereof could
be discovered on such properties after acquisition by the Company. In such
event, the Company may be required by law to remove such substances from the
affected properties at its sole cost and expense. There can be no assurance
that (i) the cost of such removal would not substantially exceed the value of
the affected properties or the loans secured by the properties, (ii) the Company
would have adequate remedies against the prior owner or other responsible
parties or (iii) the Company would not find it difficult or impossible to sell
the affected properties either prior to or following such removal.
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to July 26, 1996, there was no public market for the Class A Common
Stock. The trading price of the Class A Common Stock could be subject to wide
fluctuations in response to quarterly variations in changes in financial
estimates by securities analysts and other events or facts. These broad market
fluctuations may adversely affect the market price of the Class A Common Stock.
RESTRICTIONS ON FUTURE SALES BY STOCKHOLDERS; EFFECT ON SHARE PRICE OF SHARES
AVAILABLE FOR FUTURE SALE
Shares of Class B Common Stock are not being offered hereby. The Chisick
Family is the record and beneficial holder of substantially all of the
outstanding shares of Class B Common Stock and are subject to certain lock-up
restrictions with respect to its ability to sell or otherwise dispose of any of
its shares of Class B Common Stock (which shares, upon transfer by the Chisick
Family to unrelated parties, convert to Class A Common Stock) without the prior
written consent of the Representative. When such lock-up restrictions lapse on
January 25, 1997, such shares of Class B Common Stock may be sold in the public
market or otherwise disposed of,
11
<PAGE>
subject to compliance with applicable securities laws. The Company's Certificate
of Incorporation authorizes the issuance of 25,000,000 shares of Class A Common
Stock and 15,000,000 shares of Class B Common Stock. As of the date of this
Prospectus there were outstanding 4,025,000 shares of Class A Common Stock and
10,750,000 shares of Class B Common Stock. Sales of a substantial number of
shares of Class B Common Stock, or the perception that such sales could occur,
could adversely affect prevailing market prices for the Class A Common Stock.
NO CASH DIVIDENDS
The Company intends to retain its earnings, if any, for use in its business
and does not anticipate declaring or paying any cash dividends in the
foreseeable future.
SELLING STOCKHOLDERS
The following table sets forth the name and relationship to the Company of
each Selling Stockholder and the number of shares of Common Stock each Selling
Stockholder (1) owned of record as of November 21, 1996, (2) has acquired
through the Plan pursuant to the exercise of stock options or otherwise, (3) may
acquire pursuant to the exercise of stock options previously granted under the
Plan (whether or not they are presently exercisable), all of which shares may be
sold pursuant to this Prospectus, and (4) will own after the completion of this
offering, assuming all shares offered are sold.
<TABLE>
<CAPTION>
Shares Shares Underlying Shares to be Owned
Shares of Common Previously Options Granted After Exercise
Stock Owned of Acquired Under the of All Options
Name and Relationship to Record as of Through Plan But Not and Sales of All
First Alliance Corporation November 21, 1996(1) the Plan Yet Exercised Shares Offered (2)
- ---------------------------- -------------------- -------------- ------------------- ------------------
<S> <C> <C> <C> <C>
Merrill Butler, Director None None 37,500 (3)
-----
George Gibbs, Jr., Director 100 None 37,500 (3)
-----
Albert L. Lord, Director None None 37,500 (3)
-----
Mark K. Mason 1,900 107,500 19,500 (3)
Director, -----
Executive Vice President,
Chief Financial Officer
Jeffrey W. Smith 1,000 None 55,000 (3)
Director, -----
Executive Vice President,
Chief Operating Officer
Edwin C. Summers 500 None 5,882 (3)
Vice President, -----
General Counsel & Secretary
----- --------- -------- -----
3,500 107,500 192,882 3,500
</TABLE>
(1) Includes shares underlying Options which are exercisable within 60 days
from November 21, 1996.
(2) Assumes that all shares of Common Stock offered are sold, that no
additional Common Stock will be purchased, and that no additional Common
Stock will be sold.
(3) Less than 1% of the outstanding Common Stock.
12
<PAGE>
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale by the
Selling Stockholders of the Securities offered hereby.
PLAN OF DISTRIBUTION
Sale of the Common Stock offered hereby may be made on the NASDAQ National
Market System or the over-the-counter market or otherwise at prices and on terms
then prevailing or at prices related to the then current market price, or in
negotiated transactions. In addition, any securities covered by this Prospectus
which qualify for sale pursuant to Rule 144 may be sold under Rule 144 rather
than pursuant to this Prospectus. All expenses of registration incurred in
connection with this offering are being borne by the Company, but all selling
and other expenses incurred by the Selling Shareholder will be borne by such
shareholder.
The Common Stock may be sold in (a) a block trade in which the broker or
dealer so engaged will attempt to sell the Common Stock as agent but may
position and resell a portion of the block as principal to facilitate the
transaction, (b) transactions in which a broker or dealer acts as principal and
resells the Common Stock for its account pursuant to this Prospectus, (c) an
exchange distribution in accordance with the rules of such exchange, and (d)
ordinary brokerage transactions and transactions in which the broker solicits
purchases. In effecting sales, brokers or dealers engaged by the Selling
Shareholders may arrange for other brokers or dealers to participate. Brokers
or dealers will receive commissions or discounts from Selling Stockholders in
amounts to be negotiated immediately prior to sale. Such brokers or dealers and
any other participating brokers or dealers may be deemed to be "underwriters"
within the meaning of the Securities Act in connection with such sales and any
discounts and commissions received by them and any profit realized by them on
the resale of the Securities may be deemed to be underwriting discounts and
commissions under the Securities Act.
The Company has informed the Selling Stockholders of the need for delivery
of a copy of this Prospectus. There is no assurance that any of the Selling
Stockholders will offer for sale or sell any or all of the Common Stock covered
by this Prospectus.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Edwin C.
Summers, Vice President and General Counsel of the Company.
EXPERTS
The statement of financial condition of First Alliance Corporation as of
June 30, 1996, and the financial statements of First Alliance Mortgage Company
for the years ended December 31, 1993, 1994 and 1995, appearing in the IPO
Registration Statement, have been audited by Deloitte & Touche, LLP independent
auditors, as set forth in their reports thereon included therein and
incorporated herein by reference. Such financial statements are incorporated
herein by reference in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
13
<PAGE>
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE SELLING
STOCKHOLDERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF ANY OFFER TO BUY, COMMON STOCK BY ANYONE IN ANY JURISDICTION IN
WHICH SUCH AN OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSONS
MAKING SUCH OFFER OR SOLICITATION ARE NOT QUALIFIED TO DO SO, OR TO ANY PERSON
TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
STATEMENT ON INDEMNIFICATION
Article VIII of the Certificate of Incorporation of the Company and
Sections 7.1 and 7.2 of the Bylaws of the Company provide that the Company shall
indemnify, to the fullest extent permitted by law, its officers and directors,
and in its discretion may indemnify other persons to the extent permitted by
law. With respect to possible indemnification pursuant to such provisions of
directors, officers and controlling persons of the Company for liabilities
arising under the Securities Act of 1933, the Company is aware that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable.
14
<PAGE>
PART II
INFORMATION REQUIRED IN REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents are incorporated by reference in the
Registration Statement:
(a) The IPO Registration Statement; and
(b) All other reports filed by the Registrant pursuant to sections
13(a) or 15(d) of the Exchange Act since July 25, 1996.
All documents subsequently filed by the Registrant pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the filing of a
post-effective amendment that indicates that all securities offered have been
sold or that deregisters all securities then remaining unsold, shall be deemed
to be incorporated by reference in this Registration Statement and to be part
hereof from the date of filing of such documents.
ITEM 4. DESCRIPTION OF SECURITIES.
Incorporated by reference from pages 61-63 of the IPO Registration
Statement.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Certain legal matters relating to the Plan have been passed upon for
the Registrant by Edwin C. Summers, who is the Vice President, General Counsel
and Secretary of the Registrant. Mr. Summers beneficially owns 500 shares of
Common Stock and holds an additional option under the Plan to acquire 5,882
shares of Common Stock.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Incorporated by reference from Item 14 on pages II-1 through II-3 of
Part II of the IPO Registration Statement.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Issuance of 107,500 shares of Class B Common Stock on June 29, 1996 to Mark
K. Mason, Chief Financial Officer of the Registrant, was made in reliance upon
the private offering exemption provided in Section 4(2) of the Securities Act of
1933.
II-1
<PAGE>
ITEM 8. EXHIBITS.
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<C> <S>
4a Certificate of Incorporation of the Registrant - Incorporated by reference
from Exhibit 3.1 to the IPO Registration Statement
4b Bylaws of the Company - Incorporated by reference from Exhibit 3.2 to the
IPO Registration Statement
4c 1996 Stock Incentive Plan - Incorporated by reference from Exhibit 4.1 to
the IPO Registration Statement
4d Form of Incentive Stock Option Agreement
4e Form of Nonqualified Stock Option Agreement
5 Opinion of Edwin C. Summers
23a Consent of Deloitte & Touche, LLP independent auditors regarding
statements of financial condition of First Alliance Corporation as
of June 30, 1996
23b Consent of Deloitte & Touche, LLP independent auditors regarding
financial statements of First Alliance Mortgage Company for the
years ended December 31, 1993, 1994 and 1995.
23c Consent of Edwin C. Summers - contained in Exhibit 5
</TABLE>
ITEM 9. UNDERTAKINGS
1. The undersigned Registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that paragraphs (a)(i) and (a)(ii) shall not apply if
the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished
to the Commission by the registrant pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-2
<PAGE>
(c) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
2. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
3. Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
SIGNATURES
THE REGISTRANT. Pursuant to the requirements of the Securities Act of
1933, the registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-8 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the city of Irvine, state of California, on this 27th day of
November, 1996.
FIRST ALLIANCE CORPORATION
By
----------------------------------
Brian Chisick
Chairman and Chief Executive Officer
II-3
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Brian
Chisick and Mark K. Mason, and each of them, his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution
for him or her and in his or her name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents or his substitute or their substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ BRIAN CHISICK Chairman of the Board, November 27, 1996
- ---------------------- President, Chief Executive
Brian Chisick Officer, Director
/S/ MARK K. MASON Executive Vice President, November 27, 1996
- ---------------------- Chief Financial Officer,
Mark K. Mason Director
/s/ JEFFREY W. SMITH Executive Vice President, November 27, 1996
- ---------------------- Chief Operating Officer,
Jeffrey W. Smith Director
/s/ SARAH CHISICK
- ---------------------- Vice President, Director November 27, 1996
Sarah Chisick
- ---------------------- Director November ...., 1996
Merrill Butler
- ---------------------- Director November ...., 1996
George Gibbs, Jr.
- ---------------------- Director November ...., 1996
Albert L. Lord
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Sequentially
Number Description Numbered Page
-------- ----------- -------------
<C> <S> <C>
4a Certificate of Incorporation of the Registrant
(Incorporated by reference from Exhibit 3.1 to
Registration Statement on Form S-1, File No.
333-3633, including all amendments thereto,
filed by Registrant with the Securities and
Exchange Commission and effective July 25, 1996
(the "IPO Registration Statement"))
4b Bylaws of the Company - (Incorporated by
reference from Exhibit 3.2 to the IPO
Registration Statement)
4c 1996 Stock Incentive Plan (Incorporated by
reference from Exhibit 4.1 to the IPO
Registration Statement)
4d Form of Incentive Stock Option Agreement
4e Form of Nonqualified Stock Option Agreement
5 Opinion of Edwin C. Summers
23a Consent of Deloitte & Touche, LLP independent auditors regarding
statement of financial condition of First Alliance Corporation as
of June 30, 1996
23b Consent of Deloitte & Touche, LLP, independent auditors, regarding
financial statements of First Alliance Mortgage Company for the
years ended December 31, 1993, 1994 and 1995
</TABLE>
II-5
<PAGE>
EXHIBIT 4D
FIRST ALLIANCE CORPORATION
INCENTIVE STOCK OPTION AGREEMENT
This Incentive Stock Option Agreement ("Option Agreement") is between
First Alliance Corporation, a Delaware corporation (the "Company"), and the
employee named in Section 1 below (the "Optionee").
W I T N E S S E T H:
-------------------
WHEREAS, the Company has adopted the First Alliance Corporation 1996
Stock Incentive Plan (the "Plan") for the purpose of encouraging ownership of
the Class A Common Stock, $.01 par value ("Common Stock"), of the Company by
eligible key employees, directors and independent contractors of the Company and
its subsidiaries, of providing increased incentive for such persons to render
services and to exert maximum effort for the business success of the Company,
and of further strengthening the identification of such persons with the
stockholders; and
WHEREAS, Section 422 of the Internal Revenue Code provides that an
employee shall not be taxed upon the exercise of an option that qualifies as an
incentive stock option, provided that the employee does not dispose of the
shares acquired upon exercise of such option until two years after the option is
granted to the employee and one year after the option is exercised; and
WHEREAS, the Company, acting through the Stock Incentive Committee of
its Board of Directors (the "Committee") and through its stockholders, has
determined that its interests will be advanced by the issuance to Optionee of an
incentive stock option under the Plan;
NOW, THEREFORE, for and in consideration of these premises it is
agreed as follows:
1. Identifying Provisions: As used in this Option Agreement,
----------------------
the following terms shall have the following respective meanings:
(a) Optionee:
---------------------------------------------------------------
(b) Date of Grant:
-------------------------
(c) Number of shares subject to Option Agreement:
-------------------------
(d) Exercise Price per share: $
------------
(e) Expiration Date:
-------------------------------------------------------
2. Option. Subject to the terms and conditions contained herein
------
and to stockholder approval of the Plan, the Company hereby grants to Optionee
the right and option ("Option") to purchase from the Company up to that number
of shares of its Common Stock specified in Section 1(c) of this Option
Agreement, at a price per share equal to the exercise price specified in Section
1(d) of this Option Agreement ("Exercise Price"). This Option is intended to
qualify to the maximum extent possible as an incentive stock option under
Section 422 of the Internal Revenue Code, as amended (the "Code") and therefore
meets the following requirements: (i) the Exercise Price is not less than the
fair market value
<PAGE>
of the Common Stock on the date when the Company completed the corporate action
constituting an offer of stock for sale to the Optionee; (ii) the Option is not
exercisable more than one year after the employee ceases to be employed because
of death or a disability (as defined in Section 22(e)(3) of the Code) or more
than three months after the Optionee otherwise ceases to be an employee of the
Company or its parent or a subsidiary, and (iii) the Optionee does not own stock
possessing more than ten percent of the total combined voting power of all
classes of stock of the Company (or, if the Optionee does own such voting power,
such further conditions required under Code Section 422 have been satisfied).
The Plan has been approved by the Company's stockholders.
3. Option Period. The Option herein granted may not be
-------------
exercised, and is not exercisable, after the expiration date specified in
Section 1(e) of this Option Agreement (the "Expiration Date"). This Option shall
not be exercisable on the Date of Grant specified in Section 1(b) of this Option
Agreement (the "Date of Grant") but, subject to such further terms and
limitations set forth herein, upon the expiration of six months after the Date
of Grant (the "Vesting Date"), and thereafter on each anniversary of the Vesting
Date this Option shall become exercisable to purchase, and shall vest with
respect to, a number of shares of Common Stock (rounded to the nearest whole
share) such that the aggregate number of shares of Common Stock as to which this
Option has become exercisable shall equal the total number of shares subject to
this Option Agreement (as specified in Section 1(c)), multiplied by the
percentage set forth below with respect to the specified anniversary of the
Vesting Date:
<TABLE>
<CAPTION>
Percentage of
Date Option Exercisable
---- ------------------
<S> <C>
Six months after the Date of Grant (the "Vesting Date"): 25%
On the first anniversary of the Vesting Date: 50%
On the second anniversary of the Vesting Date: 75%
On the 100% third anniversary of the Vesting Date: 100%
</TABLE>
4. Procedure for Exercise. The Option herein granted may be
----------------------
exercised by written notice by Optionee to the Secretary of the Company setting
forth the number of shares of Common Stock with respect to which the Option is
to be exercised, and specifying such further information regarding delivery of
such shares as the Secretary of the Company may reasonably request. Payment
shall be by means of (i) cash, cashier's check or bank draft, payable to the
order of the Company, (ii) a commitment from a brokerage firm acceptable to the
Secretary of the Company to pay the aggregate Exercise Price from the proceeds
of a sale of Common Stock issuable upon exercise of the Option, (iii) at the
option of the Optionee, in Common Stock theretofore owned by such Optionee for
at least six months, or (iv) a combination of cash, cashier's check or bank
draft and Common Stock. As promptly as practicable after exercise of this
Option, the Company shall issue or cause to be issued to Optionee the number of
shares of Common Stock with respect to which the Option has been so exercised.
The Option may not be exercised with respect to less than 25 shares.
5. Termination of Employment. If Optionee's employment with the
-------------------------
Company is terminated prior to the Expiration Date for any reason, including
death or disability, the Option shall immediately terminate to the extent it is
not exercisable on the date of Optionee's termination of employment. To the
extent that the Option is exercisable on the date of Optionee's termination of
employment for any reason, including death or disability, the Option may be
exercised at any time on or before the earlier of (i) the close of business on
the ninetieth (90th) day after such date of termination of employment, and (ii)
the Expiration Date.
2
<PAGE>
6. Transferability. This Option shall not be transferable by
---------------
Optionee otherwise than by Optionee's will or by the laws of descent and
distribution. During the lifetime of Optionee, the Option shall be exercisable
only by him. Any heir or legatee of Optionee shall take rights under this
Option subject to the terms and conditions of this Option Agreement. No such
transfer of this Option Agreement to heirs or legatees of Optionee shall be
effective to bind the Company unless the Company shall have been furnished with
written notice thereof and a copy of such evidence as the Committee may deem
necessary to establish the validity of the transfer and the acceptance and
assumption by the transferee or transferees of the obligations of the Optionee
and of the other terms and conditions hereof.
7. No Rights as Stockholder. Optionee shall have no rights as a
------------------------
stockholder with respect to any shares of Common Stock covered by this Option
Agreement until the date of issuance of shares of Common Stock purchased
pursuant to this Option Agreement. Until such time, Optionee shall not be
entitled to dividends or to vote at meetings of the stockholders of the Company.
Except as provided in paragraph 9 hereof, no adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash or securities or other
property) paid or distributions or other rights granted in respect of any share
of Common Stock for which the record date for such payment, distribution or
grant is prior to the date upon which the Optionee shall have been issued share
certificates, as provided hereinabove.
8. Adjustments. If the outstanding shares of Common Stock are
-----------
increased, decreased or exchanged for or converted into cash, property or a
different number or kind of shares or securities, or if cash, property or shares
or securities are distributed in respect of such shares of Common Stock, in
either case as a result of a reorganization, merger, consolidation,
recapitalization, restructuring, reclassification, dividend (other than a
regular, quarterly cash dividend) or other distribution, stock split, reverse
stock split, spin-off or the like, or if substantially all of the property and
assets of the Company are sold, then, unless the terms of such transaction shall
provide otherwise, the Committee shall make appropriate and proportionate
adjustments in the number and type of shares or other securities or cash or
other property that may be acquired pursuant to the Option and the exercise or
settlement price of the Option, to the extent permitted by Sections 162(m) and
422 of the Code, respectively.
9. Compliance With Securities Laws. Upon the acquisition of any
-------------------------------
shares pursuant to the exercise of the Option herein granted, Optionee (or any
person acting under paragraph 6 of this Agreement) shall enter into such written
representations, warranties and agreements as the Company may reasonably request
in order to comply with applicable securities laws or with this Option
Agreement.
10. Compliance With Laws. Notwithstanding any of the other
--------------------
provisions hereof, Optionee agrees not to exercise the Option granted hereby,
and that the Company will not be obligated to issue any shares pursuant to this
Option Agreement, if the exercise of the Option or the issuance of such shares
of Common Stock would constitute a violation by the Optionee or by the Company
of any provision of any law or regulation of any governmental authority. The
certificates representing the shares of Common Stock acquired pursuant to the
exercise of the Option will be stamped or otherwise imprinted with legends in
such form as the Company or its counsel may require with respect to any
applicable restrictions on sale or transfer and the stock transfer records of
the Company will reflect stop-transfer instructions with respect to such shares.
3
<PAGE>
11. Notice of Sale; Withholding of Tax. Optionee shall promptly
----------------------------------
notify the Company of the sale of any stock issued upon the exercise of the
Option if such sale takes place either within one year of the date of such
exercise or within two years of the Date of Grant. If the Company becomes
obligated to withhold an amount on account of any tax imposed as a result of the
exercise of the Option or the disposition of shares of Common Stock acquired by
exercise of this Option, including, without limitation, any federal, state,
local or other income tax, or any F.I.C.A., state disability insurance tax or
other employment tax, the Optionee shall be obligated, as of the first date on
which the Company is so obligated, to pay such amounts to the Company in cash or
check, or other property acceptable to the Secretary of the Company in his sole
discretion; and, if the Optionee fails to make such payment as and when due, the
Company is hereby authorized by the Optionee (i) to withhold from any payments
then or thereafter payable to the Optionee, any such amounts, and (ii) to refuse
to issue or transfer any shares otherwise required to be issued or transferred
pursuant to the terms hereof until all such amounts have been paid. The
Committee may, in its sole discretion, allow the Optionee to pay any such
amounts through the surrender of whole shares of Common Stock or by having the
Company withhold whole shares of Common Stock otherwise issuable upon the
exercise of this Option. Any such shares surrendered or withheld shall be
valued at their market value, determined by such method as the Secretary of the
Company in his sole discretion shall determine, and have a market value, as of
the date on which the amount of tax to be withheld is determined, which is equal
to the sums required to be withheld.
12. Resolution of Disputes. As a condition of the grant of the
----------------------
Option hereby and of the ability to exercise the Option, the Optionee and his or
her heirs and successors agree that any dispute or disagreement which may arise
hereunder shall be determined by the Committee in its sole discretion and
judgment, and that any such determination and any interpretation by the
Committee of the terms of this Option Agreement shall be final and shall be
binding and conclusive, for all purposes, upon the Company, the Optionee and his
or her heirs, successors and personal representatives.
13. Notices. Every notice hereunder shall be in writing and shall
-------
conclusively be deemed to be given only if given by personal delivery, by
courier or by registered or certified mail. All notices of the exercise of any
Option hereunder shall be directed to First Alliance Corporation, 17305 Von
Karman Avenue, Irvine, California 92614-6203, Attention: Corporate Secretary.
Any notice given by the Company to Optionee directed to Optionee's address on
file with the Company shall be effective to bind Optionee and any other person
who shall have acquired rights hereunder. The Company shall be under no
obligation whatsoever to advise Optionee of the existence, maturity or
termination of any of Optionee's rights hereunder and Optionee shall be deemed
to have familiarized him- or herself with all matters contained herein and in
the Plan which may affect any of Optionee's rights or privileges hereunder.
14. Construction and Interpretation. Whenever the term "Optionee" is
-------------------------------
used herein under circumstances applicable to any other person or persons to
whom this award, in accordance with the provisions of Section 6 hereof, may be
transferred, the word "Optionee" shall be deemed to include such person or
persons. References to the masculine gender herein also include the feminine
gender for all purposes. This Option Agreement shall be administered,
interpreted and enforced under the laws of the State of Delaware, without regard
to its choice of law provisions.
4
<PAGE>
15. Agreement Subject to Plan. This Option Agreement is subject to
-------------------------
the Plan (including any subsequent amendments thereto). In the event of a
conflict between any term or provision contained herein and a term or provision
of the Plan, the applicable terms and provisions of the Plan will govern and
prevail. All definitions of words and terms contained in the Plan shall be
applicable to this Option Agreement.
16. Employment Relationship. For purposes of this Option Agreement,
-----------------------
an employee shall be considered to be in the employment of the Company as long
as Optionee remains an employee of the Company or any of its subsidiaries. Any
questions as to whether and when there has been a termination of such employment
and the cause of such termination shall be determined by the Committee, and its
determination shall be final. Nothing contained herein shall be construed as
conferring upon the Optionee the right to continue in the employ of the Company,
nor shall anything contained herein be construed or interpreted to limit the
'employment at will' relationship between the Optionee and the Company.
17. Binding Effect. This Option Agreement shall be binding upon and
--------------
inure to the benefit of any successors to the Company.
IN WITNESS WHEREOF, this Option Agreement has been executed as of
_______________, 199__.
FIRST ALLIANCE CORPORATION
By:
--------------------------------
OPTIONEE
-----------------------------------
5
<PAGE>
EXHIBIT 4E
FIRST ALLIANCE CORPORATION
NONQUALIFIED STOCK OPTION AGREEMENT
This Nonqualified Stock Option Agreement ("Option Agreement") is
between First Alliance Corporation, a Delaware corporation (the "Company"), and
the individual named in Section 1 below (the "Optionee").
W I T N E S S E T H:
-------------------
WHEREAS, the Company has adopted the First Alliance Corporation 1996
Stock Incentive Plan (the "Plan") for the purpose of encouraging ownership of
the Class A Common Stock, $.01 par value ("Common Stock"), of the Company by
eligible key employees, directors and independent contractors of the Company,
including any of its subsidiaries, of providing increased incentive for such
persons to render services and to exert maximum effort for the business success
of the Company, and of further strengthening the identification of such persons
with the stockholders; and
WHEREAS, the Company, acting through the Stock Incentive Committee of
its Board of Directors (the "Committee") and through its stockholders, has
determined that its interests will be advanced by the issuance to Optionee of a
nonqualified stock option under the Plan.
NOW, THEREFORE, for and in consideration of these premises it is
agreed as follows:
1. Identifying Provisions: As used in this Option Agreement,
----------------------
the following terms shall have the following respective meanings:
(a) Optionee:
---------------------------------------------------------------
(b) Date of Grant: ("Date of Grant")
-----------------------------
(c) Number of shares subject to Option Agreement:
-----------------
(d) Exercise Price per share: $ ("Exercise Price")
-----------------
(e) Expiration Date: ("Expiration Date")
---------------------------
2. Option. Subject to the terms and conditions contained herein and
------
to stockholder approval of the Plan, the Company hereby grants to Optionee the
right and option ("Option") to purchase from the Company up to that number of
shares of its Common Stock specified in Section 1(c) of this Option Agreement,
at a price per share equal to the Exercise Price specified in Section 1(d) of
this Option Agreement. This Option is not intended to qualify as an incentive
stock option under Section 422 of the Internal Revenue Code, as amended (the
"Code"). The Plan has been approved by the Company's stockholders.
3. Option Period. The Option herein granted may not be exercised,
-------------
and is not exercisable, after the Expiration Date specified in Section 1(e) of
this Option Agreement. This Option shall not be exercisable on the Date of
Grant, but, subject to such further terms and limitations set forth herein, upon
the expiration of six months after the
<PAGE>
Date of Grant (the "Vesting Date"), and thereafter on each anniversary of the
Vesting Date this Option shall become exercisable to purchase, and shall vest
with respect to, a number of shares of Common Stock (rounded to the nearest
whole share) such that the aggregate number of shares of Common Stock as to
which this Option has become exercisable shall equal the total number of shares
subject to this Option Agreement (as specified in Section 1(c)), multiplied by
the percentage set forth below with respect to the specified anniversary of the
Vesting Date:
<TABLE>
<CAPTION>
Percentage of
Date Option Exercisable
---- -------------------
<S> <C>
Six Months after Date of Grant (the "Vesting Date") 25%
On the first anniversary of the Vesting Date: 50%
On the second anniversary of the Vesting Date: 75%
On the third anniversary of the Vesting Date: 100%
</TABLE>
4. Procedure for Exercise. The Option herein granted may be
----------------------
exercised by written notice by Optionee to the Secretary of the Company setting
forth the number of shares of Common Stock with respect to which the Option is
to be exercised, and specifying such further information regarding delivery of
such shares as the Secretary of the Company may reasonably request. Payment
shall be by means of (i) cash, or a cashier's check or bank draft, payable to
the order of the Company, (ii) a commitment from a brokerage firm acceptable to
the Secretary of the Company to pay the aggregate Exercise Price from proceeds
of a sale of Common Stock issuable upon exercise of the Option, (iii) at the
option of the Optionee, in Common Stock theretofore owned by such Optionee for
at least six months, or (iv) a combination of cash, cashier's check or bank
draft and Common Stock. As promptly as practicable after exercise of this
Option, the Company shall issue or cause to be issued to Optionee the number of
shares of Common Stock with respect to which the Option has been so exercised.
The Option may not be exercised with respect to less than 25 shares.
5. Termination of Employment. If Optionee's employment with the
-------------------------
Company is terminated prior to the Expiration Date for any reason, including
death or disability, the Option shall immediately terminate to the extent it is
not exercisable on the date of Optionee's termination of employment. To the
extent that the Option is exercisable on the date of Optionee's termination of
employment for any reason, the Option may be exercised at any time on or before
the earlier of (i) the close of business on the ninetieth (90th) day after such
date of termination of employment, unless termination of employment was by
reason of death or disability, in which case one year after such termination of
employment, and (ii) the Expiration Date.
6. Transferability. This Option shall not be transferable by
---------------
Optionee otherwise than by Optionee's will or by the laws of descent and
distribution, or pursuant to a domestic relations order, as defined in the Code
or in Title I of the Employee Retirement Income Security Act, or the rules
thereunder. Except pursuant to the terms of such a domestic relations order,
during the lifetime of Optionee the Option shall be exercisable only by him.
Any heir or legatee of Optionee shall take rights under this Option subject to
the terms and conditions of this Option Agreement. No such transfer of rights
and obligations under this Option Agreement to heirs or legatees of Optionee, or
other transferees pursuant to a domestic relations order, shall be effective to
bind the Company unless the Company shall have been furnished with written
notice thereof and a copy of such evidence as the Committee may deem necessary
to establish the validity of the transfer
2
<PAGE>
and the acceptance and assumption by the transferee or transferees of the
obligations of the Optionee and of the other terms and conditions hereof.
7. No Rights as Stockholder. Optionee shall have no rights as a
------------------------
stockholder with respect to any shares of Common Stock covered by this Option
Agreement until the date of issuance of shares of Common Stock purchased
pursuant to this Option Agreement. Until such time, Optionee shall not be
entitled to dividends or to vote at meetings of the stockholders of the Company.
Except as provided in paragraph 9 hereof, no adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash or securities or other
property) paid or distributions or other rights granted in respect of any share
of Common Stock for which the record date for such payment, distribution or
grant is prior to the date upon which the Optionee shall have been issued share
certificates, as provided hereinabove.
8. Adjustments. If the outstanding shares of Common Stock are
-----------
increased, decreased or exchanged for or converted into cash, property or a
different number or kind of shares or securities, or if cash, property or shares
or securities are distributed in respect of such shares of Common Stock, in
either case as a result of a reorganization, merger, consolidation,
recapitalization, restructuring, reclassification, dividend (other than a
regular, quarterly cash dividend) or other distribution, stock split, reverse
stock split, spin-off or the like, or if substantially all of the property and
assets of the Company are sold, then, unless the terms of such transaction shall
provide otherwise, the Committee shall make appropriate and proportionate
adjustments in the number and type of shares or other securities or cash or
other property that may be acquired pursuant to the Option and the exercise or
settlement price of the Option to the extent permitted by Section 162(m) of the
Code.
9. Compliance With Securities Laws. Upon the acquisition of any
-------------------------------
shares pursuant to the exercise of the Option herein granted, Optionee (or any
person acting under paragraph 6 of this Agreement) shall enter into such written
representations, warranties and agreements as the Company may reasonably request
in order to comply with applicable securities laws or with this Option
Agreement.
10. Compliance With Laws. Notwithstanding any of the other
--------------------
provisions hereof, Optionee agrees not to exercise the Option granted hereby,
and that the Company will not be obligated to issue any shares pursuant to this
Option Agreement, if the exercise of the Option or the issuance of such shares
of Common Stock would constitute a violation by the Optionee or by the Company
of any provision of any law or regulation of any governmental authority. The
certificates representing the shares of Common Stock acquired pursuant to
exercise of the Option will be stamped or otherwise imprinted with legends in
such form as the Company or its counsel may require with respect to any
applicable restrictions on sale or transfer and the stock transfer records of
the Company will reflect stop-transfer instructions with respect to such shares.
11. Withholding of Tax. If the Company becomes obligated to withhold
------------------
an amount on account of any tax imposed as a result of the exercise of the
Option, including, without limitation, any federal, state, local or other income
tax, or any F.I.C.A., state disability insurance tax or other employment tax,
the Optionee shall be obligated, as of the first date on which the Company is so
obligated, to pay such amounts to the Company in cash or check, or other
property acceptable to the Secretary of the Company in his sole discretion; and,
if the Optionee fails to make such payment as and when due, the Company is
hereby authorized by the Optionee (i) to withhold from any payments then or
thereafter payable to the Optionee, any such amounts, and (ii) to refuse to
3
<PAGE>
issue or transfer any shares otherwise required to be issued or transferred
pursuant to the terms hereof until all such amounts have been paid. The
Committee may, in its sole discretion, allow the Optionee to pay any such
amounts through the surrender of whole shares of Common Stock or by having the
Company withhold whole shares of Common Stock otherwise issuable upon the
exercise of this Option. Any such shares surrendered or withheld shall be
valued at their market value, determined by such method as the Secretary of the
Company in his sole discretion shall determine, and have a market value, as of
the date on which the amount of tax to be withheld is determined, which is equal
to the sums required to be withheld.
12. Resolution of Disputes. As a condition of the grant of the
----------------------
Option hereby and of the ability to exercise the Option, the Optionee and his
heirs and successors agree that any dispute or disagreement which may arise
hereunder shall be determined by the Committee in its sole discretion and
judgment, and that any such determination and any interpretation by the
Committee of the terms of this Option Agreement shall be final and shall be
binding and conclusive, for all purposes, upon the Company, the Optionee and his
or her heirs, successors and personal representatives.
13. Notices. Every notice hereunder shall be in writing and shall
-------
conclusively be deemed to be given only if given by personal delivery, by
courier or by registered or certified mail. All notices of the exercise of any
Option hereunder shall be directed to First Alliance Corporation, 17305 Von
Karman Avenue, Irvine, California 92614-6203, Attention: Corporate Secretary.
Any notice given by the Company to Optionee directed to Optionee's address on
file with the Company shall be effective to bind him and any other person who
shall have acquired rights hereunder. The Company shall be under no obligation
whatsoever to advise Optionee of the existence, maturity or termination of any
of Optionee's rights hereunder and Optionee shall be deemed to have familiarized
him- or herself with all matters contained herein and in the Plan which may
affect any of Optionee's rights or privileges hereunder.
14. Construction and Interpretation. Whenever the term "Optionee" is
-------------------------------
used herein under circumstances applicable to any other person or persons to
whom this award, in accordance with the provisions of paragraph 6 hereof, may be
transferred, the word "Optionee" shall be deemed to include such person or
persons. References to the masculine gender herein also include the feminine
gender for all purposes. This Option Agreement shall be administered,
interpreted and enforced under the laws of the State of Delaware, without regard
to its choice of law provisions.
15. Agreement Subject to Plan. This Option Agreement is subject to
-------------------------
the Plan (including any subsequent amendments thereto). In the event of a
conflict between any term or provision contained herein and a term or provision
of the Plan, the applicable terms and provisions of the Plan will govern and
prevail. All definitions of words and terms contained in the Plan shall be
applicable to this Option Agreement.
16. Employment Relationship. For purposes of this Option Agreement,
-----------------------
an employee shall be considered to be in the employment of the Company as long
as Optionee remains an employee of the Company or any of its subsidiaries or
remains a director of the Company or of any of its subsidiaries. Any questions
as to whether and when there has been a termination of such employment and the
cause of such termination shall be determined by the Committee, and its
determination shall be final. Nothing contained herein shall be construed as
conferring upon the Optionee the right to continue in the employ of the Company,
nor shall anything contained herein be construed or
4
<PAGE>
interpreted to limit the "employment at will" relationship between the Optionee
and the Company.
17. Binding Effect. This Option Agreement shall be binding upon and
--------------
inure to the benefit of any successors to the Company.
IN WITNESS WHEREOF, this Option Agreement has been executed as of
__________, 199__.
FIRST ALLIANCE CORPORATION
By:
---------------------------------
OPTIONEE
------------------------------------
5
<PAGE>
EXHIBIT 5
[LETTERHEAD OF EDWIN C. SUMMERS]
November 27, 1996
First Alliance Corporation
17305 Von Karman Avenue
Irvine, CA 92614-6203
Ladies and Gentlemen:
I have acted as counsel for First Alliance Corporation (the "Company") in
connection with a Registration Statement on Form S-8 to be filed by the Company
under the Securities Act of 1933, as amended (the "Registration Statement") and
the Prospectuses related thereto. The Registration Statement registers certain
shares of the Company's common stock, par value $.01 per share (the "Common
Stock"), to be issued pursuant to the Company's 1996 Stock Incentive Plan (the
"Plan"). In that capacity, I have reviewed the charter and bylaws of the
Company, the Registration Statement, the corporate action taken by the Company
that creates the Plan and provides for the issuance of up to 750,000 shares of
the Common Stock pursuant thereto, and such other materials and matters as I
have deemed necessary to the issuance of this opinion.
Based upon the foregoing, as of the date hereof, and assuming that up to 750,000
shares of the Company's Common Stock to be offered pursuant to the Plan have
been duly and validly reserved for issuance pursuant to the terms of the Plan, I
am of the opinion that upon issuance thereof and delivery of certificates
therefor as contemplated in the Registration Statement, such shares will be
validly issued, fully paid and non-assessable.
This opinion is limited to the laws of the State of California, and I express no
opinion as to matters of law in jurisdictions other than the State of
California. This opinion is solely for the benefit of the addressee hereof and,
without my prior written consent, may not be quoted in whole or in part or
otherwise referred to in any legal opinion, document or other report, and may
not be furnished to any person or entity. I consent to the filing of this
opinion as an exhibit to the Registration Statement and to the reference to me
and my opinion in the Registration Statement and the related Prospectuses. This
opinion is delivered as of the date hereof and I disclaim any responsibility to
update this opinion at any time following the date hereof.
Very truly yours,
Edwin C. Summers
<PAGE>
EXHIBIT 23(a)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
First Alliance Corporation on Form S-8 of our report dated June 30, 1996,
appearing in Form S-1 of First Alliance Corporation dated July 25, 1996.
We also consent to the reference to us under the heading "Experts" in such
Registration Statement.
/s/ DELOITTE & TOUCHE LLP
Costa Mesa, California
November 27, 1996
<PAGE>
EXHIBIT 23(b)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
First Alliance Corporation on Form S-8 of our report on the financial statements
of First Alliance Mortgage Company dated March 18, 1996 (June 24, 1996 as to
Note 2), appearing in Form S-1 of First Alliance Corporation dated July 25,
1996.
We also consent to the reference to us under the heading "Experts" in such
Registration Statement.
/s/ DELOITTE & TOUCHE LLP
Costa Mesa, California
November 27, 1996
