<PAGE>
================================================================================
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
THE FIRST AMERICAN FINANCIAL CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
[LOGO OF THE FIRST AMERICAN FINANCIAL CORPORATION]
HOME OFFICE: 114 East Fifth Street, Santa Ana, CA 92701-4642 (714) 558-3211
MAILING ADDRESS: Post Office Box 267, Santa Ana, CA 92702-0267
TO THE SHAREHOLDERS OF
THE FIRST AMERICAN FINANCIAL CORPORATION
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of The First
American Financial Corporation, a California corporation (the "Corporation"),
will be held on April 24, 1997, at 2:00 p.m., at the main office of First
American Title Insurance Company, 114 East Fifth Street, Santa Ana,
California, for the following purposes:
(1) Electing a board of directors to serve for the ensuing year;
(2) Approving The First American Financial Corporation 1997 Directors'
Stock Plan; and
(3) Transacting such other business as may come before the meeting or
any adjournments thereof.
Only shareholders of record at the close of business on March 6, 1997, are
entitled to notice of and to vote at the meeting.
It is hoped that you will be present at the meeting; however, please sign,
date, indicate your vote on, and return promptly, the enclosed proxy card in
the accompanying envelope, addressed to the Corporation's Transfer Agent,
First American Trust Company, Attention: Trust Operations, Post Office Box
267, Santa Ana, California 92702-9975, which will accept and tabulate the
proxies. If you attend the meeting, you may, of course, personally vote your
shares. You also have the right to revoke a proxy at any time before it is
exercised.
/s/ MARK R ARNESEN
----------------------------
Mark R Arnesen, Secretary
Santa Ana, California
March 27, 1997
<PAGE>
[LOGO OF THE FIRST AMERICAN FINANCIAL CORPORATION]
HOME OFFICE: 114 E. Fifth Street, Santa Ana, CA 92701-4642 (714) 558-3211
MAILING ADDRESS: P.O. Box 267, Santa Ana, CA 92702-0267
PROXY STATEMENT
SOLICITATION OF PROXIES BY THE BOARD OF DIRECTORS
Proxies of the holders of Common shares of The First American Financial
Corporation, a California corporation (the "Corporation"), are solicited by
its Board of Directors for use at the Annual Meeting of Shareholders to be
held on April 24, 1997, and at any adjournments thereof. The enclosed proxy
card represents the shares that you are eligible to vote at the meeting.
Shares represented by a properly executed and returned proxy will be voted at
the meeting in accordance with the directions noted thereon or, if no
directions are indicated, they will be voted in favor of the proposals in the
notice set forth herein. A shareholder giving a proxy has the power to revoke
it by attending the meeting and electing to vote in person, or by filing with
the Secretary, prior to the meeting, a written revocation or a duly executed
proxy bearing a later date. The approximate date on which this proxy statement
and the enclosed proxy card were first sent to shareholders of the Corporation
is March 31, 1997.
Shareholders of record at the close of business on March 6, 1997 (the
"Record Date"), are eligible to vote at the meeting. The only outstanding
class of stock of the Corporation is its $1 par value Common. Each shareholder
is entitled to one vote per share of Common stock held as of the Record Date.
With respect to the election of directors, voting may be cumulative as
described below. As of the Record Date, there were 11,496,131 shares of Common
stock outstanding and entitled to vote.
VOTING PROCEDURES
In the event any shareholder entitled to vote for the election of directors
gives notice at the meeting prior to voting of a decision to cumulate votes
for a candidate or candidates and the name(s) of such candidate(s) has (have)
been placed in nomination prior to voting, every shareholder may cumulate
votes and (i) give one candidate the number of votes equal to the number of
directors to be elected (which is 16) multiplied by the number of shares held
by such shareholder, or (ii) distribute such number of votes among as many
candidates as such shareholder shall choose. Regardless of whether the voting
for directors is cumulative, those candidates receiving the highest number of
votes, up to the number of directors to be elected, shall be elected directors
of the Corporation. As indicated on the enclosed proxy card, a proxy confers
upon the appointees discretionary authority to cumulate and distribute, as the
appointees shall choose, the aggregate cumulative votes in respect of the
shares represented among those nominees as to which the shareholder has not
withheld authority. In accordance with California law and the Articles and
Bylaws of the Corporation, abstentions and broker nonvotes (discussed below)
neither have the effect of votes in opposition to, nor in favor of, the
election of a director.
Votes at the Annual Meeting of Shareholders will be tabulated by the
inspector(s) of election, who shall be appointed by the Chairman of the
meeting and who shall not be candidates for election to the Board of
Directors. Questions as to the qualifications of the voters, validity of
proxies or other matters pertaining to the vote shall be decided by the
inspector(s), subject to any ruling by the Chairman. The inspector(s) of
election will treat Common shares represented by a properly signed and
returned proxy as present at the Annual Meeting of
1
<PAGE>
Shareholders for the purpose of determining a quorum, without regard to
whether the proxy is marked as casting a vote or withholding a vote. The
inspector(s) of election will treat Common shares represented by "broker
nonvotes" (i.e., Common shares held in record name by brokers or nominees as
to which (i) instructions have not been received from the beneficial owners or
other persons entitled to vote, (ii) the broker or nominee does not have
discretionary voting power under applicable Securities and Exchange Commission
rules or the instrument under which it serves in such capacity, and (iii) the
record holder has indicated on the proxy card or otherwise notified the
Corporation that such record holder does not have authority to vote on that
matter) as present for the purpose of determining a quorum.
The affirmative vote of the holders of a majority of the shares present at
the meeting is required for the adoption of The First American Financial
Corporation 1997 Directors' Stock Plan (the "Plan"), a copy of which is
included as Exhibit "A" to this proxy statement. The proposal for approval of
the Plan is set forth below in Item 2 of this proxy statement. Abstentions and
broker nonvotes with regard to that item will have the same effect as votes
cast against the adoption of the Plan.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information with respect to the only persons
known to the Corporation to be beneficial owners of 5% or more of its voting
securities, based upon information received from such persons as of the Record
Date. For purposes of this Proxy Statement, beneficial ownership of securities
is defined in accordance with the rules of the Securities and Exchange
Commission and in general means the power to vote or dispose of securities,
regardless of any economic interest therein.
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED
-----------------------
NAMES AND ADDRESSES NUMBER OF
OF SHAREHOLDERS SHARES PERCENT
------------------- ------------ -------
<S> <C> <C>
EQSF Advisers, Inc. 615,000(1) 5.3%
737 Third Avenue
New York, New York
Kennedy Enterprises, L.P. 736,844(2)(3) 6.4%
Parker S. Kennedy
114 East Fifth Street
Santa Ana, California
Sanwa Bank California, 1,535,160(4) 13.4%
Trustee of the Corporation's
Employee Stock Ownership Trust
601 South Figueroa Street
Los Angeles, California
</TABLE>
(1) As of December 31, 1996, sole voting and dispositive power with respect to
the number of shares set forth in the table, based on statements contained
in Schedule 13G filed jointly by EQSF Advisers, Inc., and Martin J.
Whitman with the Securities and Exchange Commission. That Schedule 13G
states that the shares were acquired in the ordinary course of business on
behalf of Third Avenue Value Fund, Inc., and that the shares are not held
with the purpose or effect of changing or influencing control of the
Corporation.
(2) Parker S. Kennedy, President of the Corporation, has sole voting and
dispositive power with respect to the number of shares set forth in the
table, except as to 1,698 of such shares, which are allocated to Mr.
Kennedy's account and held by the trustees of the Corporation's Employee
Profit Sharing and Stock
2
<PAGE>
Ownership Plan. Of the other shares set forth in the table, 1,100 are owned
by Mr. Kennedy directly and 734,046 are held by Kennedy Enterprises, L.P.,
a California limited partnership, of which Mr. Kennedy is the sole general
partner (the "Partnership"). The limited partnership agreement pursuant to
which the Partnership was formed provides that the General Partner has all
powers of a general partner as provided in the California Uniform Limited
Partnership Act, provided that the General Partner is not permitted to
cause the partnership to sell, exchange or hypothecate any of its shares of
stock of the Corporation without the prior written consent of all of the
limited partners. Mr. Kennedy's father, D. P. Kennedy, is one of the
limited partners as well as an executive officer of the Corporation.
(3) In addition to the shares set forth in the table, 90,270 shares are held
by the trustee of the Corporation's Pension Trust, as part of the
diversified investment fund of the trust. Parker S. Kennedy, Mark R
Arnesen and Thomas A. Klemens, who also are executive officers of the
Corporation, serve on a committee composed of five members, a majority of
which may, under the terms of the trust agreement governing the trust, and
subject to the fiduciary requirements of the Employee Retirement Income
Security Act of 1974, direct the disposition of the securities held by the
trustee. An additional 204,000 shares are held by a wholly owned
subsidiary of the Corporation whose twenty-one member board of directors
has the power to direct the disposition of such shares. The subsidiary's
board members include Parker S. Kennedy, D. P. Kennedy, Thomas A. Klemens
and all of the persons who are directors of the Corporation. An additional
9,828 shares are held by a nonprofit corporation whose five-member board
of directors, which includes Parker S. Kennedy, D. P. Kennedy and Thomas
A. Klemens, has the power to direct the disposition of such shares.
(4) Pursuant to the Corporation's Employee Profit Sharing and Stock Ownership
Plan, the trustee is required to vote the shares as directed by employees.
Shares as to which no directions are received are not voted.
ITEM 1. ELECTION OF DIRECTORS
The directors of the Corporation are elected annually. The Board of
Directors nominates persons to stand for election as directors. Unless
otherwise specified, each proxy that is duly executed and returned will be
voted in favor of the election of the following persons, if they are then
available and willing to serve. If any of the nominees should be unable or
decline to serve at the time of the meeting, the discretionary authority
provided in each duly executed proxy will be exercised to vote for a
substitute or substitutes. The Board of Directors has no reason to believe
that any substitute will be required. All nominees are at present directors of
the Corporation.
The following schedule sets forth the nominees and certain information
concerning each of them:
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE PRINCIPAL OCCUPATION SINCE
- ------------------------------------------------------------------------
<C> <C> <S> <C>
George L. Argyros 60 Chairman and Chief Executive Officer 1988
Arnel and Affiliates
Diversified Investment Company
Gary J. Beban 50 President and Senior Operating Officer 1996
CB Commercial Real Estate Group, Inc.
Commercial Real Estate Brokerage
J. David Chatham 46 President and Chief Executive Officer 1989
Chatham Holdings Corporation
Real Estate Development and Associated
Industries
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE PRINCIPAL OCCUPATION SINCE
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
William G. Davis 67 Counsel 1992
Tory Tory DesLauriers & Binnington
Director
Canadian Imperial Bank of Commerce
Premier of Province of Ontario (Canada) (1971--1985)
James L. Doti 50 President and Professor of Economics 1993
Chapman University
Lewis W. Douglas, Jr. 72 Oil Exploration 1971(1)
Paul B. Fay, Jr. 78 President 1967
The Fay Improvement Company
Financial Consulting and Business Ventures
Dale F. Frey 64 Private Investor (1997 to date) 1997
Chairman and President
General Electric Investment Corporation
Investments (1984-1997)
D. P. Kennedy 78 Chairman of the Board 1956
The First American Financial Corporation (1993 to date)
President of the Corporation (1963-1993)
Parker S. Kennedy 49 President 1987(2)
The First American Financial Corporation (1993 to date)
Executive Vice President of the Corporation (1986-1993)
President, First American Title Insurance Company,
a subsidiary of the Corporation
Robert B. McLain 77 President 1981
McLain Development Co.
Real Estate Development and Property Management
Anthony R. Moiso 57 President and Chief Executive Officer 1990
Rancho Mission Viejo
Ranching and Real Estate Development
R. J. Munzer 79 Private Investor (1984 to date) 1962
Chairman of the Board
Petrolane Incorporated
Oil Field Services, Liquified Petroleum Gas
Distribution and Automotive Services (1971-1984)
Frank O'Bryan 63 Chairman of the Board 1994
Spring Mountain Group
Escrow and Savings and Loan Holding Company
Roslyn B. Payne 50 President 1988
Jackson Street Partners, Ltd.
Real Estate Venture Capital and Investments
Virginia Ueberroth 57 President 1988
Ueberroth Family Foundation
</TABLE>
4
<PAGE>
(1) Mr. Douglas also was a director of the Corporation during the period 1961-
1967.
(2) Parker S. Kennedy is D. P. Kennedy's son.
Certain nominees serve as directors of other publicly held companies as
follows: Mr. Argyros--The Newhall Land and Farming Company, Apria Healthcare
Group Inc. and U.S. Computer Services; Mr. Beban--CB Commercial Real Estate
Services Group, Inc.; Mr. Davis--The Seagram Company Ltd., Magna International
Inc. and Inter-City Products Corporation; Dr. Doti--Fleetwood Enterprises,
Inc., Remedy Temp, Inc., and Standard Pacific Corp.; Mr. Fay--Vestaur
Securities Inc.; Mr. Frey--Rhone-Poulenc Rorer Inc., USF&G Corporation,
Praxair, Inc., Doubletree Hotels Corporation and The Beacon Companies; and Mr.
O'Bryan -- AFP Imaging Corporation.
The Board of Directors held six meetings during 1996. Directors who attended
less than 75% of the aggregate of such meetings and meetings of committees of
which they are members are Messrs. Davis and Munzer.
The Board of Directors has an Audit Committee, the members of which are
Messrs. Chatham, Doti, Fay, McLain, Moiso and O'Bryan, and Mrs. Ueberroth. The
functions performed by the Committee include selecting the Corporation's
independent auditor, directing and supervising investigations into matters
within the scope of its duties, reviewing with the independent auditor the
plan and results of its audit, reviewing internal auditing procedures and
results, and determining the nature of other services to be performed by, and
fees to be paid to, the independent auditor. During 1996, the Audit Committee
met twice.
The Board of Directors also has a Compensation Committee, the members of
which are Messrs. Chatham, Davis, Douglas, Fay and Munzer. This Committee
establishes compensation rates and procedures with respect to senior
management of the Corporation and its subsidiaries, including bonus awards.
During 1996, the Compensation Committee met once.
5
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information received by the Corporation as of
the Record Date with respect to beneficial ownership of the Corporation's
Common shares by current directors, nominees for director, executive officers
and by all directors and executive officers as a group.
<TABLE>
<CAPTION>
COMMON SHARES
BENEFICIALLY OWNED (1)
NUMBER PERCENT OF
OF SHARES OUTSTANDING,
NAME SHARES IF GREATER THAN 1%
---------------------------------------------------------------------------
<S> <C> <C>
DIRECTORS
George L. Argyros 26,160(2) --
Gary J. Beban -- --
J. David Chatham 1,000 --
William G. Davis 100 --
James L. Doti 1,100 --
Lewis W. Douglas, Jr. 2,548 --
Paul B. Fay, Jr. 15,180 --
Dale F. Frey -- --
D. P. Kennedy 3,297(3)(4)(5) --
Parker S. Kennedy 736,844(3)(4)(5)(6) 6.4%
Robert B. McLain 7,140 --
Anthony R. Moiso 2,140 --
R. J. Munzer 8,728(7) --
Frank O'Bryan 1,000 --
Roslyn B. Payne(8) 3,508 --
Virginia Ueberroth 12,140 --
EXECUTIVE OFFICERS WHO ARE NOT
DIRECTORS
Mark R Arnesen 5,488(6) --
Craig I. DeRoy 3,069 --
Thomas A. Klemens 15,492(4)(5)(6) --
All Directors and Executive
Officers as a Group (19 persons) 844,934 7.3%
</TABLE>
(1) Sole voting and dispositive power unless otherwise indicated. The shares
set forth in the table include the following shares allocated to the
following individuals' accounts in, and held by the trustees of, the
Corporation's Employee Profit Sharing and Stock Ownership Plan: 1,922
shares for D. P. Kennedy; 1,698 shares for Parker S. Kennedy; 1,134 shares
for Mark R Arnesen; 27 shares for Craig I. DeRoy and 513 shares for Thomas
A. Klemens. These individuals do not currently have dispositive power with
respect to these shares.
(2) In addition to the shares set forth in the table, 164,665 shares are held
by a nonprofit corporation whose four-member board of directors, which
includes George L. Argyros and his wife, has the power to direct the
voting and the disposition of such shares.
(3) Of the shares set forth in the table, 1,100 are owned by Parker S. Kennedy
directly and 734,046 are held by Kennedy Enterprises, L.P., a California
limited partnership, of which Mr. Kennedy is the sole general partner (the
"Partnership"). The limited partnership agreement pursuant to which the
Partnership was formed provides that the General Partner has all powers of
a general partner as provided in the California Uniform Limited
Partnership Act, provided that the General Partner is not permitted to
cause the partnership to sell, exchange or hypothecate any of its shares
of stock of the Corporation without the prior written consent of all of
the limited partners. Mr. Kennedy's father, D. P. Kennedy, is one of the
limited partners.
6
<PAGE>
(4) In addition to the shares set forth in the table, 204,000 shares are held
by a wholly owned subsidiary of the Corporation whose 21-member board of
directors, which includes D. P. Kennedy, Parker S. Kennedy and Thomas A.
Klemens, has the power to direct the disposition of such shares.
(5) In addition to the shares set forth in the table, 9,828 shares are held by
a nonprofit corporation whose five- member board of directors, which
includes D. P. Kennedy, Parker S. Kennedy and Thomas A. Klemens, has the
power to direct the disposition of such shares.
(6) In addition to the shares set forth in the table, 90,270 shares are held
by the trustee of the Corporation's Pension Trust, as part of the
diversified investment fund of the trust. Parker S. Kennedy, Mark R
Arnesen and Thomas A. Klemens serve on a committee composed of five
members, a majority of which may, under the terms of the trust agreement
governing the trust, and subject to the fiduciary requirements of the
Employee Retirement Income Security Act of 1974, direct the disposition of
the securities held by the trustee.
(7) In addition to the shares set forth in the table, 8,000 shares are held by
a nonprofit corporation whose five- member board of directors is composed
of R.J. Munzer and his wife and children. In his capacity as an officer of
that corporation, Mr. Munzer has the power, as do certain other officers,
any of whom may act alone, to direct the voting and the disposition of
such shares.
(8) In addition to the shares set forth in the table, Roslyn B. Payne owns 475
shares of common stock of First American Title Guaranty Holding Company,
which is a second-tier subsidiary of the Corporation. These shares
represent 2.2% of the total number of such shares that are issued and
outstanding.
EXECUTIVE COMPENSATION
The following tables set forth certain compensation awarded to, earned by,
or paid to the executive officers of the Corporation who were serving as such
at the end of, or who retired during, the Corporation's last completed fiscal
year, which ended December 31, 1996 (the "named executive officers"), for all
services rendered in all capacities to the Corporation and its subsidiaries
during the years covered in the tables:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------ ------------
OTHER
ANNUAL SECURITIES ALL OTHER
COMPENSA- UNDERLYING COMPENSA-
NAME AND PRINCIPAL SALARY(1) BONUS(2) TION (3) OPTIONS (# TION(4)
POSITION YEAR ($) ($) ($) OF SHARES) ($)
- ------------------ ---- --------- -------- --------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
D. P. Kennedy 1996 301,300(5) 118,250 -- 20,000 128,659(6)
Chairman 1995 299,780(5) -0- -- -- 125,088(6)
1994 337,880(5) -0- -- -- 155,799(6)
Parker S. Kennedy 1996 376,100(7) 192,075 -- 25,000 598
President 1995 325,860 -0- -- -- 598
1994 331,930(7) -0- -- -- 1,797
Thomas A. Klemens 1996 196,120(8) 188,250 -- 20,000 598
Executive Vice
President, 1995 173,825(8) 80,625 -- -- 598
Chief Financial Officer 1994 170,110(8) 77,625 -- -- 959
Craig I. DeRoy 1996 190,920 180,600 -- 20,000 454
Executive Vice
President, 1995 168,825 70,500 -- -- 454
General Counsel 1994 166,470 48,219 -- -- 10,670(9)
Mark R Arnesen 1996 118,920 38,388 -- 5,000 454
Vice President,
Secretary, 1995 109,680 25,969 -- -- 454
Corporate Counsel 1994 108,340 25,288 -- -- 1,327
</TABLE>
7
<PAGE>
(1) Includes, in addition to regular salary, which is paid monthly, a fee of
$150 for each meeting of the Board of Directors attended by the named
executive officer during the years covered in the table.
(2) Consists of cash bonuses and the dollar value of noncash (stock) bonuses.
Officers of the Corporation, its subsidiaries and lower-tier subsidiaries
are eligible for such bonuses, which are awarded during the year following
the fiscal year to which the bonus relates, based on an evaluation by the
Compensation Committee of the Board of Directors of the performance of the
individual and the Corporation during the preceding fiscal year. For
services rendered during 1996, 1995 and 1994, respectively, 288, 237 and
205 individuals were awarded cash and/or stock bonuses. During the three
years covered in the table, an average of 55,468 shares of stock has been
awarded annually to all participants in the Corporation's Stock Bonus
Plan. With respect to services rendered during 1996, Parker S. Kennedy
received an award of 1,100 Common shares having a fair market value of
$42,075 on the date of the award, D.P. Kennedy and Thomas A. Klemens each
received awards of 1,000 such shares having a fair market value of $38,250
on the date of the awards, Craig I. DeRoy received 800 such shares having
a fair market value of $30,600, and Mark R Arnesen received 350 such
shares having a fair market value of $13,388. During 1996, neither D. P.
Kennedy nor Parker S. Kennedy received bonus awards, Thomas A. Klemens
received an award of 1,000 Common shares having a fair market value of
$25,625 on the date of the award, Craig I. DeRoy received an award of 800
such shares having a fair market value of $20,500, and Mark R Arnesen
received an award of 350 such shares having a fair market value of $8,969
with respect to services rendered during 1995. During 1995, Thomas A.
Klemens received an award of 1,000 Common shares having a fair market
value of $17,625 on the date of such award, Craig I. DeRoy received 750
such shares having a fair market value of $13,219, and Mark R Arnesen
received 300 such shares having a fair market value of $5,288 with respect
to services rendered during 1994.
(3) Certain incidental perquisites or other personal benefits for executive
officers of the Corporation (not otherwise disclosed in this Proxy
Statement) may result from expenses incurred by the Corporation or its
subsidiaries in the interest of attracting and retaining qualified
personnel. The incremental cost to the Corporation and its subsidiaries of
providing such incidental perquisites or other personal benefits for any
executive officer named in the Summary Compensation Table did not, for any
fiscal year covered, exceed the lesser of $50,000 or 10% of the total of
annual salary and bonus reported for such year for the named executive
officer. In accordance with the rules of the Securities and Exchange
Commission governing disclosure of executive compensation, the amounts of
such perquisites or other personal benefits are not included in the table.
(4) Consists of the net increase in the value of the named executive officer's
accounts in the Corporation's Employee Profit Sharing and Stock Ownership
Plan (the "Profit Sharing Plan") occurring between December 31 of the
covered fiscal year and December 31 of the prior fiscal year attributable
to contributions made by the Corporation to that plan during the covered
fiscal year, the matching contributions made by the Corporation to such
officer's account in the Corporation's 401(k) Savings Plan during the
covered fiscal year, plus the dollar value of insurance premiums paid by,
or on behalf of, the Corporation during the covered fiscal year with
respect to term life insurance for the benefit of such officer.
(5) The compensation shown in the "Salary" column of the table includes fees
totaling $400, $1,700 and $200, which were earned by D. P. Kennedy for
services he rendered as a director of subsidiaries of the Corporation
during 1996, 1995 and 1994, respectively.
(6) The amounts shown in the last column of the Summary Compensation Table
include, for each fiscal year covered, the distributions made to D. P.
Kennedy from the Corporation's Pension Plan, which are required under
provisions of the Internal Revenue Code of 1986, as amended (the "Code").
See "Pension Plan" below. The compensation shown also includes cash and
the value of stock, aggregating $28,031, $24,802 and $52,541, distributed
to D. P. Kennedy during 1996, 1995 and 1994, respectively, from his
accounts in
8
<PAGE>
the Corporation's Profit Sharing Plan attributable to contributions made by
the Corporation and its participating subsidiaries in years prior to those
covered in the table and earnings on the contributions. The distributions
were required to be made under provisions of the Code.
(7) The compensation shown in the "Salary" column of the table includes fees
totaling $200 and $200, which were earned by Parker S. Kennedy for services
he rendered as a director of subsidiaries of the Corporation during 1996
and 1994, respectively. Mr. Kennedy did not earn such fees during 1995.
(8) The compensation shown in the "Salary" column of the table includes fees
totaling $5,200, $5,000 and $7,000, which were earned by Mr. Klemens for
services he rendered as a director of subsidiaries of the Corporation
during 1996, 1995 and 1994, respectively.
(9) The compensation shown for Mr. DeRoy in the last column of the Summary
Compensation Table includes the amounts paid to Corporate Risk Management,
Inc., the principal shareholder and chief executive officer of which is Mr.
DeRoy, for consulting services Mr. DeRoy rendered to the Corporation's
subsidiary, First American Title Insurance Company, after he became an
officer of the Corporation.
OPTION GRANTS TABLE
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ASSUMED ANNUAL
RATES OF STOCK
PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
-------------------------------------------------------------------- -----------------
% OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO
UNDERLYING EMPLOYEES EXERCISE OR
OPTIONS GRANTED IN FISCAL BASE PRICE EXPIRATION
NAME (# OF SHARES) (1) YEAR ($/SH) (2) DATE 5% ($) 10% ($)
- ---- ----------------- ---------- ----------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
D.P. Kennedy 20,000 2.99% 25.625 4/24/06 322,300 816,800
Parker S. Kennedy 25,000 3.73% 25.625 4/24/06 402,875 1,021,000
Thomas A. Klemens 20,000 2.99% 25.625 4/24/06 322,300 816,800
Craig I. DeRoy 20,000 2.99% 25.625 4/24/06 322,300 816,800
Mark R Arnesen 5,000 0.75% 25.625 4/24/06 80,575 204,200
</TABLE>
(1) Each of the options disclosed in the table is exercisable in 20% annual
increments commencing April 24, 1997, the first anniversary date of the
grant.
(2) Section 4.2 of the plan pursuant to which the options disclosed in the
table were awarded allows the Compensation Committee discretion to exchange
outstanding options for new, lower-priced options, provided that the lower
exercise price is not less than the "fair market value," as defined in the
plan, of the shares at the time such new options are granted.
9
<PAGE>
PENSION PLAN
ANNUAL PENSION BENEFITS
<TABLE>
<CAPTION>
REMUNERATION
(FINAL AVERAGE
PAY *) YEARS OF BENEFIT SERVICE
-------------- --------------------------------------------------
5 10 20 30 40 50
<S> <C> <C> <C> <C> <C> <C>
$ 75,000 $ 4,163 $ 8,700 $17,775 $ 26,850 $ 35,925 $ 45,000
100,000 5,600 11,700 23,900 36,100 48,300 60,500
125,000 7,038 14,700 30,025 45,350 60,675 76,000
150,000 8,475 17,700 36,150 54,600 73,050 91,500
175,000 9,913 20,700 42,275 63,850 85,425 107,000
200,000 11,350 23,700 48,400 73,100 97,800 122,500
225,000 12,788 26,700 54,525 82,350 110,175 138,000
250,000 14,225 29,700 60,650 91,600 122,550 153,500
275,000 or more 15,663 32,700 66,775 100,850 134,925 169,000
</TABLE>
------------
* Final Average Pay is defined as the highest consecutive five-year average
salary during the last ten years of employment.
The above table sets forth estimated annual benefits (assuming such benefits
will be paid in the form of a life annuity) at various compensation levels and
years of service under the Corporation's qualified Pension Plan. Subject to
certain conditions of age and tenure, all regular employees of the Corporation
and participating subsidiaries are eligible to join the Pension Plan. In order
to participate, during plan years ending on or prior to December 31, 1994, an
employee was required to contribute 1 1/2% of pay (salary, plus cash bonuses,
commissions and other pay) to the plan. As a result of amendments to the
Pension Plan that were adopted in 1994, during plan years commencing after
December 31, 1994, an employee is not required to contribute to the plan in
order to participate. A participant generally vests in his accrued benefit
attributable to the Corporation's contributions upon the completion of three
years of service or, if earlier, the attainment of normal retirement age while
an employee. Normal retirement age is defined under the plan as the later of
the employee's attainment of age 65 or his third anniversary of participation
in the plan. Upon retirement at normal retirement age, an employee receives
full monthly benefits which are equal to (when calculated as a life annuity):
(i) for years of credited service with the company as of December 31, 1994, 1%
of the first $1,000 and 1 1/4% of remaining final average pay (i.e., the
average of the monthly "pay," as defined above, during the five highest paid
consecutive calendar years out of the last ten years prior to retirement)
times the number of years of credited service as of December 31, 1994; and
(ii) with respect to a participant's credited service for plan years
subsequent to December 31, 1994, 3/4% of the first $1,000 and 1% of the
remaining final average pay times the number of years of credited service
subsequent to December 31, 1994. An employee receives reduced benefits upon
retirement prior to age 65 with at least three years of service, and an
employee cannot begin receiving monthly benefits under the plan prior to
attaining age 55. The plan is funded by the Corporation based on actuarial
determinations of the amount required to provide the stated benefits. The
table is based on retirement at age 65 or later, with contributions having
been made by the employee in each year of credited service prior to 1995. The
benefits are not subject to deduction for Social Security payments or any
other offsets. Currently, D. P. Kennedy, Parker S. Kennedy, Thomas A. Klemens,
Craig I. DeRoy and Mark R Arnesen have 48, 20, 11, 3 and 11 years,
respectively, of credited service.
The compensation levels shown in the Pension Plan table are less than those
set forth in the Summary Compensation Table because the Internal Revenue Code
of 1986, as amended (the "Code"), limits the maximum amount of pay that may be
considered in determining benefits under the tax-qualified Pension Plan, and
the
10
<PAGE>
Corporation's Pension Restoration Plan, which is described below, does not
make up for these limits for pay exceeding $275,000. As established by the Tax
Reform Act of 1986, the limit on pay that could be recognized by tax-qualified
retirement plans was $200,000 in 1989 and was adjusted for inflation for each
year through 1993, when the limit was $235,840. The Omnibus Budget
Reconciliation Act of 1993 decreased this limit to $150,000 for plan years
beginning in 1994. The $150,000 limit will also be adjusted for inflation for
years after 1994, but only in increments of $10,000. Effective January 1,
1997, the limit was increased to $160,000. The highest final average pay that
could be considered in determining benefits accruing under the Pension Plan
before 1994 is $219,224 and the highest final average pay that can currently
be considered in determining benefits accruing after 1993 is $152,000.
During 1996, the Corporation adopted an unfunded, nonqualified plan designed
to make up for the benefit accruals that are restricted by the indexed
$150,000 pay limit (the "Pension Restoration Plan"). However, in order to
limit its expense, the Pension Restoration Plan does not make up benefit
accruals on compensation exceeding $275,000. The Pension Restoration Plan also
makes up for benefits that cannot be paid from the Pension Plan because of
limitations imposed by Code Section 415 and related regulations. Vesting of
benefits payable to an employee under the Pension Restoration Plan occurs at
the same time that vesting occurs for that employee in his or her Pension Plan
benefits. The Pension Restoration Plan is effective as of January 1, 1994, but
only covers employees who were participants in the Pension Plan on that date,
which, as noted above, is the date as of which the pay limit for the Pension
Plan was reduced from $235,840 to $150,000.
Pursuant to the provisions of the Code, during 1996, 1995 and 1994,
respectively, mandatory distributions totaling $98,348, $98,006 and $97,930
were made to D. P. Kennedy from the Pension Plan. As stated in note (6) of the
Summary Compensation Table set forth above, these amounts are included in the
last column of such table.
SUPPLEMENTAL BENEFIT PLAN
The Corporation maintains an Executive Supplemental Benefit Plan (the
"Executive Plan") which it believes will assist it in attracting and retaining
highly qualified individuals for upper management positions. The Executive
Plan provides retirement benefits for, and pre-retirement death benefits with
respect to, certain key management personnel selected by the Board of
Directors. Under the Executive Plan, upon retirement at normal retirement date
(the later of age 65 or, unless waived by the Board of Directors, completion
of 10 years of service), a participant receives a joint life and 50% survivor
annuity benefit equal to 35% of "final average compensation." "Final average
compensation" is the average annual compensation, composed of base salary,
plus cash and stock bonuses, for those three calendar years of the preceding
10 years of employment in which it is the highest. The benefit is reduced by
5% for each year prior to normal retirement date in which retirement occurs
and, until age 70, increased by 5% (compounded in order to approximate the
annuitized value of the benefit had retirement occurred at age 65) for each
year after such date in which retirement occurs (the "annuitized benefit").
With respect to such postponed retirement, the Executive Plan takes into
account covered compensation received until age 70, so that the retirement
benefit of an executive who retires after normal retirement date is determined
as the greater of the annuitized benefit or the benefit calculated using final
average compensation (as defined above) until age 70.
To be eligible to receive benefits under the Executive Plan, a participant
must be at least age 55, have been employed by the Corporation or a subsidiary
for at least 10 years and, unless waived by the Board of Directors, covered by
the Executive Plan for at least five years. A pre-retirement death benefit is
provided consisting of 10 annual payments, each of which equals 50% of final
average compensation. Vesting of rights under the Executive Plan is
accelerated in the event of a "change in control" (as defined in the plan) of
the Corporation.
11
<PAGE>
Currently 40 employees, including D. P. Kennedy, Parker S. Kennedy, Thomas
A. Klemens, Craig I. DeRoy and Mark R Arnesen, have been selected to
participate in the Executive Plan. The annual benefit payable under the
Executive Plan to D. P. Kennedy in the event of his retirement is $108,936.
The estimated annual benefits payable under the Executive Plan to Parker S.
Kennedy, Thomas A. Klemens, Craig I. DeRoy and Mark R Arnesen upon retirement
at normal retirement age, assuming compound annual increases of 5.0% in the
relevant portions of compensation shown above in the Summary Compensation
Table, are $291,733, $221,334, $212,487 and $136,812, respectively.
The plan is unfunded. The Corporation purchases insurance, of which it is
the owner and beneficiary, on the lives of the plan participants. This
insurance is designed to recover, over the life of the plan, costs incurred by
the Corporation with respect to it.
DIRECTORS' COMPENSATION
Each director who is not an employee of the Corporation or its subsidiaries
receives annual compensation of $20,000, a fee of $1,000 for attending each
meeting of the Board of Directors, and $500 for attending each committee
meeting. Each director who is such an employee receives a fee of $150 for
attending each meeting of the Board. Directors are reimbursed for their
expenses incurred in attending meetings of the Board and its committees. As a
further incentive to increase the profits and growth of the Corporation, the
Board of Directors has proposed, in Item 2 below, a directors' stock
compensation plan for shareholder approval.
Pursuant to Item 402(a)(9) of Regulation S-K of the Securities and Exchange
Commission under the Securities Exchange Act of 1934 (the "Exchange Act"), the
following Report of the Compensation Committee on Executive Compensation and
the Comparative Cumulative Total Return to Shareholders graph shall not be
deemed to be incorporated by reference into any previous filing by the
Corporation under either the Securities Act of 1933 (the "Securities Act") or
the Exchange Act that incorporates future Securities Act or Exchange Act
filings in whole or in part by reference.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
COMPENSATION POLICY
The Corporation's compensation program, which has been endorsed by the
Compensation Committee, is designed to enhance shareholder value by providing
that a large part of the executive compensation be related to the performance
of the Corporation as well as to the contribution of each individual officer.
The Corporation's policy is further designed to develop and administer
programs that will (i) attract and retain key executives critical to the long-
term success of the Corporation, (ii) provide median compensation levels that
are competitive with those of the Corporation's competitors, (iii) motivate
executives to enhance long-term shareholder value in the Corporation, and (iv)
integrate the Corporation's compensation programs with its annual planning and
measurement processes. The annual bonus programs include a cash bonus program
as well as stock option and stock bonus plans designed to encourage and create
ownership and retention of the Corporation's shares by the key employees.
RESPONSIBILITIES OF THE COMPENSATION COMMITTEE
The Compensation Committee was established in 1979, and is composed of five
independent directors, none of whom is a former or current officer or employee
of the Corporation or any of its subsidiaries. The Committee reviews and
approves the base salaries, as well as the annual bonus programs, incentive
plans and executive
12
<PAGE>
benefit plans. The Committee as needed engages compensation and benefits-
consulting firms to assist the Committee in the performance of its duties. In
1996, Compensation Resource Group, Inc. ("CRG"), provided advice to the
Committee concerning the reasonableness of compensation paid to executive
officers and analyzed the Corporation's compensation and benefit programs. In
addition, CRG provided information on general compensation trends of related
companies. For the purpose of this analysis, CRG used the group of companies
whose returns to shareholders compose the peer group index shown in the
performance graph below. CRG also reviewed published compensation surveys for
comparative results against the Corporation's compensation level. The
consultants have reviewed the compensation of the Corporation's executive
officers for 1996, and have reported that compensation for all executive
officers is reasonable in view of the Corporation's performance and industry
compensation levels. Measures used for determining the appropriate level of
compensation for executive officers include competitive position (national
market share), profit, profit retention (ratio of profits to revenue), and
ability to select and develop executive replacement personnel.
CEO COMPENSATION
During October 1994, Parker S. Kennedy voluntarily reduced his annual base
salary from $375,000 to $324,960 in response to the then rapidly deteriorating
real estate economy. For the year 1996, the Compensation Committee restored
Mr. Kennedy's base salary to its previous level of $375,000. The restored
salary level approximated 82% of the median salary for chief executive
officers in the group of comparable companies. When determining the
appropriate salary level, the Committee also considered the Corporation's
improved performance during the last half of the year 1995, as compared with
the first half of that year, as measured by the above criteria, and the fact
that Mr. Kennedy had voluntarily reduced his base salary, which had not been
increased since 1994.
Reflecting the Committee's commitment to relating a portion of each of the
executive officers' compensation to the annual results of the Corporation,
Parker S. Kennedy received a cash bonus of $150,000, representing 40% of his
1996 base salary, to reward his leadership for the year 1996. Mr. Kennedy also
was awarded 1,100 shares of the Corporation's Common stock for his performance
during 1996.
COMPENSATION COMMITTEE
Lewis W. Douglas, Jr., Chairman
J. David Chatham
The Hon. William G. Davis
Paul B. Fay, Jr.
R. J. Munzer
13
<PAGE>
COMPARATIVE CUMULATIVE TOTAL RETURN TO SHAREHOLDERS
Since December 3, 1993, the Corporation's Common shares have been listed and
trading on the New York Stock Exchange under the trading symbol "FAF."
Previously, such shares were traded on the national over-the-counter market
and were designated and quoted on the National Association of Securities
Dealers Automated Quotations National Market System ("NASDAQ-NMS") under the
trading symbol "FAMR." The following graph compares the yearly percentage
change in the cumulative total shareholder return on the Corporation's Common
shares, assuming reinvestment of dividends, with the corresponding changes in
the cumulative total returns of the Standard & Poor's 500 Composite Stock
Price Index, the Standard & Poor's Financial Index and a peer group index
consisting of the following six companies: Alleghany Corp., Fidelity National
Financial, Inc., Lawyers Title Corp., Old Republic International Corp.,
Reliance Group Holdings, Inc., and Stewart Information Services Corp., in each
case assuming reinvestment of dividends. The cumulative total shareholder
return of the peer group of companies has been included in the graph to
provide a comparison with other publicly held companies having subsidiaries
that transact the business of title insurance on a nationwide basis.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
AMONG THE FIRST AMERICAN FINANCIAL CORPORATION**, S&P 500
COMPOSITE INDEX**, S & P FINANCIAL INDEX** AND CUSTOM PEER GROUP**
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE> THE FIRST
<CAPTION> AMERICAN CUSTOM S & P S & P 500
Measurement Period FINANCIAL PEER FINANCIAL COMPOSITE
(Fiscal Year Covered) CORP. GROUP INDEX INDEX
- --------------------- ---------- ------ --------- ---------
<S> <C> <C> <C> <C>
FYE 12/31/91 $100 $100 $100 $100
FYE 12/31/92 $215 $139 $128 $108
FYE 12/31/93 $292 $160 $142 $118
FYE 12/30/94 $148 $137 $133 $120
FYE 12/29/95 $235 $217 $199 $165
FYE 12/31/96 $369 $238 $262 $203
</TABLE>
* Adjusted for reinvestment of dividends. Stock price performance shown is not
indicative of future price performance.
** As calculated by Bloomberg Financial Services, to include the reinvestment of
dividends.
14
<PAGE>
EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NAME POSITION HELD AGE
---- ------------- ---
<C> <S> <C>
D. P. Kennedy Chairman 78
Parker S. Kennedy President 49
Thomas A. Klemens Executive Vice President, 46
Chief Financial Officer
Craig I. DeRoy Executive Vice President, 44
General Counsel
Mark R Arnesen Vice President, Secretary, 44
Corporate Counsel
</TABLE>
All officers of the Corporation are appointed annually by the Board of
Directors subsequent to its election.
D. P. Kennedy has been Chairman of the Corporation since 1993, and served as
its President from 1963 to 1993. Parker S. Kennedy, who is D. P. Kennedy's
son, has been President of the Corporation since 1993, and served as its
Executive Vice President from 1986 to 1993. He has been employed by the
Corporation's subsidiary, First American Title Insurance Company ("First
American"), since 1977 and became a Vice President of that company in 1979.
During 1983, he was appointed its Executive Vice President, and in 1989 was
appointed its President. Thomas A. Klemens has been Executive Vice President,
Chief Financial Officer of the Corporation since 1996, served as its Vice
President, Chief Financial Officer from 1993 to 1996, and served as its
principal accounting officer from 1992 to 1993. Mr. Klemens has been employed
by First American as Vice President, Chief Financial Officer since 1993, and
served as its Vice President, Controller from 1985 to 1993. Craig I. DeRoy has
been Executive Vice President, General Counsel of the Corporation since 1996,
and served as its Vice President, General Counsel from 1993 to 1996. Mr. DeRoy
has been employed by First American as Vice President, General Counsel since
1993. Mr. DeRoy is the principal shareholder and chief executive officer of
Corporate Risk Management, Inc., an environmental and regulatory consulting
firm whose business constituted his principal occupation from 1992 until his
employment by the Corporation and First American in 1993. From 1990 to 1992,
Mr. DeRoy served as Executive Vice President and chief operating officer of
First Environmental Review Insurance Company, where he helped pioneer a new
form of property insurance coverage for environmental risks. Mark R Arnesen
has been Vice President, Secretary and Corporate Counsel of the Corporation
and First American since 1992, has been employed by First American since 1979,
and has been a Vice President of the latter company since 1989.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Rules adopted by the Securities and Exchange Commission ("SEC") under
Section 16(a) of the Securities Exchange Act of 1934 require the Corporation's
officers and directors, and persons who own more than ten percent of the
issued and outstanding Common shares of the Corporation, to file reports of
their ownership, and changes in ownership, of such securities with the SEC on
SEC Forms 3, 4 or 5, as appropriate. Officers, directors and greater-than-ten-
percent shareholders are required by the SEC's regulations to furnish the
Corporation with copies of all forms they file pursuant to Section 16(a).
15
<PAGE>
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that they were not
required to file a Form 5 to report previously unreported ownership or changes
in ownership, the Corporation believes that, during its fiscal year ending
December 31, 1996, its officers, directors and greater-than-ten-percent
beneficial owners complied with all filing requirements under Section 16(a),
except that President and Director Parker S. Kennedy was late in filing a
year-end report on Form 5 covering three gifts of Common shares made to him
and members of his immediate family during the month of December.
ITEM 2. PROPOSAL TO APPROVE THE CORPORATION'S 1997 DIRECTORS' STOCK PLAN
GENERAL
The Board of Directors (the "Board") of The First American Financial
Corporation (the "Corporation") has adopted The First American Financial
Corporation 1997 Directors' Stock Plan (the "Plan") because the Board believes
that the Plan will further assist the Corporation in attracting and retaining
the services of experienced and highly qualified persons to serve as directors
of the Corporation and to create a proprietary interest of such directors in
the Corporation's continued success. The Plan features both a stock option
component and a stock in lieu of cash component. The principal features of the
Plan are summarized below, but the summary is qualified in its entirety by
reference to the full text of the Plan, a copy of which is included as Exhibit
"A" of this proxy statement.
Only non-employee directors of the Corporation may participate in the Plan.
If approved by shareholders, the Plan will become effective on April 24, 1997,
and will terminate on April 24, 2007.
The aggregate number of Common shares of the Corporation that may be issued
under the Plan is 400,000. If there is a stock split, stock dividend,
recapitalization, or other relevant change affecting the Corporation's Common
shares, appropriate adjustments will be made by the Compensation Committee of
the Board (the "Committee") in the number of shares that may be issued in the
future and in the numbers of shares and option exercise prices under all
outstanding grants made before such event. If shares under a grant are not
issued, those shares will again be available for inclusion in future grants.
STOCK COMPENSATION
Stock Options
Under the Plan, the Committee may, if it so determines, grant options to
non-employee directors, provided that, (a) if any grant of options is so made,
such options shall (i) be granted to all individuals who are non-employee
directors at the time of such grant and (ii) contain identical terms
(including, without limitation, the number of Common shares that may be
purchased pursuant thereto), and (b) the number of Common shares that may be
purchased pursuant to options granted to any non-employee director under the
Plan shall not exceed 1,500 shares during any 12-consecutive-month period.
The term of each option will be fixed by the Committee but may not exceed 10
years from the date of grant. The Committee shall determine the time or times
when each option may be exercised. The exercise price of options granted under
the Plan will be no less than the fair market value of the Common shares on
the date of each grant. The fair market value of the Corporation's Common
shares on March 24, 1997, was $40.625 per share. To exercise an option, an
optionee may pay the exercise price in cash or, if permitted by the Committee,
by delivering previously acquired Common shares of the Corporation or a
combination of such shares and cash.
16
<PAGE>
The number of optionees may vary from year-to-year, as the number of non-
employee directors serving on the Board varies. At this time no options have
been granted under the Plan, nor has the Committee specified the number of
options to be granted in the immediate future; therefore, it is not possible
at this time to determine the benefits that may be provided under the Plan to
the Corporation's non-employee directors.
In the event of termination of directorship by reason of long-term
disability or death, any option held by an optionee may thereafter be
exercised in full for a period of one year or, if shorter, the remainder of
the term of such option. In the event of an optionee's termination of
employment by reason of "retirement" (as defined in the Plan), any option held
by him will be exercisable, to the extent exercisable at the date of
termination, for a period of 90 days or, if shorter, the remainder of the term
of such option. In the event of a director's termination of employment for any
reason other than retirement, disability or death, any option held by him will
be exercisable, to the extent exercisable at the date of termination, for a
period of five days or, if shorter, the remainder of the term of such option.
The Plan provides that, in the event of a "change in control" (as defined in
the Plan), each outstanding option shall immediately become fully exercisable
and may be exercised for a period of one year thereafter or, if shorter, the
remainder of the term of such option.
Options awarded under the Plan are not transferable except by will or the
laws of descent and distribution and may be exercised only by the optionee
during his lifetime. The Board may terminate or suspend the Plan at any time,
but such termination or suspension will not affect any stock options then
outstanding under the Plan. Unless earlier terminated by action of the Board,
the Plan will continue in effect until April 24, 2007, but options granted
prior to that date will continue in effect until they expire in accordance
with their terms. The Board may also amend the Plan in any respect. However,
amendments to the Plan will be submitted to the shareholders for their
approval to the extent required by applicable law or regulation or the rules
of any exchange or market or system on which Common shares of the Corporation
are listed, traded or quoted. The Committee may amend the term of any option
theretofore granted, retroactively or prospectively, but no such amendment
will adversely affect the option without the holder's consent.
Stock in Lieu of Cash Compensation
Under the Plan, the Committee may prescribe rules and regulations that
permit non-employee directors to elect to receive Common shares of the
Corporation in lieu of cash compensation payable for their services as
directors. If the Plan had been effective during fiscal year 1996, and all 12
of the non-employee directors serving on the Board at the beginning of that
year had elected to receive all their compensation for serving as directors
during fiscal year 1996 in Common shares of the Corporation, at a time when
their fair market value was $40.625 per share, such directors as a group would
have received approximately 3,988 Common shares of the Corporation with an
aggregate value of $162,000. (During fiscal year 1996, each non-employee
director received a retainer of $8,000 for his services as a director, a fee
of $650 for attending each Board meeting and a fee of $400 for attending
committee meetings, and typically attended six Board meetings and four
committee meetings during that year.)
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of certain principal United States federal
income tax consequences to the Corporation and participants in the Plan in
connection with stock options granted to Plan participants and compensation
paid to participants in Common shares under the Plan, based on federal income
tax laws currently in effect. This summary is not intended to cover all tax
consequences that may apply to all Plan participants or to the Corporation,
such as those under applicable state, local or foreign tax laws or gift,
estate or inheritance tax laws.
17
<PAGE>
Options granted under the Plan will not qualify as "incentive stock options"
under the Internal Revenue Code of 1986, as amended (the "Code"). A
participant will not recognize income upon the grant of an option under the
Plan, and the Corporation will not be entitled to a tax deduction at such
time. A participant will generally recognize ordinary income upon the exercise
of an option, in which event the Corporation will receive a tax deduction
equal to the amount of income recognized by such participant, provided that
any applicable tax reporting requirements are satisfied. The amount of such
ordinary income and deduction is generally the excess of the fair market value
on the exercise date of the Common shares acquired over the aggregate exercise
price paid. Any ordinary income recognized by a participant upon the exercise
of an option will increase his tax basis in the shares received. Upon a
subsequent sale or exchange of such shares, the participant will recognize
capital gain or loss to the extent of the difference between the selling price
of such shares and his tax basis in such shares. Such gain or loss will be
long-term or short-term capital gain or loss, depending on the participant's
holding period for such shares.
The payment of compensation in Common shares is generally immediately
taxable as ordinary income to the recipient and deductible by the Corporation.
FOR THE REASONS SET FORTH IN ITEM 2 ABOVE, THE BOARD OF DIRECTORS
RECOMMENDS A VOTE "FOR" THE PROPOSAL FOR APPROVAL OF THE 1997
DIRECTORS' STOCK PLAN.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
The firm of Price Waterhouse LLP has been selected by the Audit Committee of
the Board of Directors as independent accountants to audit the books and
accounts of the Corporation and its subsidiaries for the year ending December
31, 1997. This firm has served as independent accountants for the Corporation
since 1954.
A representative of Price Waterhouse will be present at the Annual Meeting
of Shareholders with an opportunity to make any desired statement and to
answer any appropriate questions by the shareholders.
SHAREHOLDER PROPOSALS
In order that a proposal by a shareholder be included in the proxy statement
and proxy for the next Annual Meeting of Shareholders of the Corporation, such
proposal must be received no later than December 2, 1997, assuming that the
date of such meeting is not advanced by more than 30 calendar days, or delayed
by more than 90 calendar days, from the date of the current annual meeting. In
such event, the Corporation will provide notice of the date by which such
proposals must be received in order to be included.
GENERAL INFORMATION
THE CORPORATION WILL, UPON THE WRITTEN REQUEST OF ANY PERSON WHO IS A
BENEFICIAL OWNER OF ITS SHARES ON THE RECORD DATE FOR THE FORTHCOMING ANNUAL
MEETING, FURNISH WITHOUT CHARGE A COPY OF ITS ANNUAL REPORT TO THE SECURITIES
AND EXCHANGE COMMISSION ON FORM 10-K FOR THE YEAR 1996 AND WILL FURNISH, AT A
CHARGE OF $10, A COPY OF THE EXHIBITS THERETO. SUCH REQUEST SHOULD CONTAIN A
REPRESENTATION THAT THE PERSON REQUESTING THIS MATERIAL WAS A BENEFICIAL OWNER
OF THE CORPORATION'S SHARES ON THE RECORD DATE AND BE SENT TO THE SECRETARY AT
THE CORPORATION'S ADDRESS INDICATED ON THE FIRST PAGE OF THIS PROXY STATEMENT.
The costs of soliciting proxies will be borne by the Corporation. In
addition to solicitation by mail, officers and regular employees of the
Corporation's subsidiaries may solicit proxies personally, by telephone or
facsimile. Morrow & Company, Inc., 909 Third Avenue, New York, New York 10022,
has been engaged to solicit proxies in such manner at an estimated cost of
$4,500 plus reimbursement of reasonable expenses.
18
<PAGE>
The Board of Directors is not aware of any matters to come before the
meeting other than those set forth on the notice accompanying this Proxy
Statement, and the report of the President. If any other matters come before
the meeting, the holders of the proxies will vote thereon in their discretion.
By Order of the Board of Directors
Mark R Arnesen
Secretary
Santa Ana, California
March 27, 1997
19
<PAGE>
EXHIBIT "A"
THE FIRST AMERICAN FINANCIAL CORPORATION
1997 DIRECTORS' STOCK PLAN
SECTION 1
PURPOSE
The purpose of The First American Financial Corporation 1997 Directors'
Stock Plan (the "Plan") is to maintain the ability of The First American
Financial Corporation (the "Company") to attract and retain the services of
experienced and highly qualified individuals to serve as directors of the
Company and to create a proprietary interest of such directors in the
Company's continued success.
SECTION 2
DEFINITIONS
2.1 Definitions. Whenever used herein, the following terms shall have the
respective meanings set forth below:
(a) "Act" means the Securities Exchange Act of 1934, as amended.
(b) "Board" means the Board of Directors of the Company.
(c) "Change in Control" means the occurrence, following the grant of an
Option, of any of the following events:
(i) the acquisition by any person, entity or group (within the
meaning of Section 13(d)(3) of the Act) as beneficial owner, directly
or indirectly, of securities of the Company representing 25% or more of
the combined voting power of the then outstanding securities of the
Company; or
(ii) a change, during any period of two consecutive years, of a
majority of the Board as constituted at the beginning of such period,
unless the election of each director who was not a director at the
beginning of such period was approved by a vote of at least two-thirds
of the directors then in office who were directors at the beginning of
such period; or
(iii) any other event constituting a change in control required to be
reported in response to Item 6(e) of Schedule 14A of Regulation 14A
under the Act.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means the Compensation Committee of the Board, which
shall consist of two or more members, each of whom shall be Non-Employee
Directors, or any other committee appointed by the Board to administer the
Plan.
(f) "Company" means The First American Financial Corporation, a
California corporation, and any successor thereto.
(g) "Director" means a member of the Board.
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(h) "Disability" means, with respect to any Director, an inability, as
determined by the Board, to perform duties and services as a Director by
reason of a medically determinable physical or mental impairment, supported
by medical evidence, that can be expected to last for a continuous period
of not less than six months.
(i) "Fair Market Value" means, on any date, the average of the bid and
asked for price of a share of Stock as reported on the New York Stock
Exchange ("NYSE") (or on such other recognized market or quotation system
on which shares of the Stock are traded or quoted at the relevant time) on
such date. In the event that there are no Stock transactions reported on
NYSE (or such other market or system) on such date, Fair Market Value shall
mean the closing price on the immediately preceding date on which Stock
transactions were so reported.
(j) "Incentive Stock Option" means an Option that is an Incentive Stock
Option within the requirements of Section 422 of the Code.
(k) "Non-Employee Director" means a Director who is a "Non-Employee
Director" within the meaning of Rule 16b-3 promulgated under the Act.
(l) "Nonstatutory Stock Option" means an Option that is not an Incentive
Stock Option.
(m) "Option" means the right to purchase Stock at a stated price for a
specified period of time.
(n) "Optionee" means a Non-Employee Director to whom one or more Options
has been granted pursuant to the Plan.
(o) "Plan" means The First American Financial Corporation 1997 Directors'
Stock Plan, as in effect from time to time.
(p) "Retirement" means, with respect to any Director, termination of such
Director's directorship at the written election of such Director on or
after the date such Director attains age 65.
(q) "Stock" means the Common shares of the Company, par value $1.00 per
share.
2.2 Gender and Number. Except when otherwise indicated by the context, words
in the masculine gender used in the Plan shall include the feminine gender,
the singular shall include the plural, and the plural shall include the
singular.
SECTION 3
ELIGIBILITY AND PARTICIPATION
Only Non-Employee Directors may participate in the Plan.
SECTION 4
POWERS OF THE COMMITTEE
The Committee shall be responsible for the administration of the Plan. The
Committee, by majority action thereof, is authorized to prescribe, amend, and
rescind rules and regulations relating to the Plan, to provide for conditions
deemed necessary or advisable to protect the interests of the Company, and to
make all other determinations necessary or advisable for the administration
and interpretation of the Plan with a view to carrying out its provisions and
purposes. All determinations, decisions, interpretations and other actions
made or taken by the Committee pursuant to the provisions of the Plan shall be
final, binding and conclusive for all purposes and upon all persons.
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SECTION 5
STOCK OPTIONS
5.1 Grants of Options. The Committee may, if it so determines, grant Options
to Non-Employee Directors, provided that, (a) if any grant of Options is so
made, such Options shall (i) be granted to all individuals who are Non-
Employee Directors at the time of such grant and (ii) contain identical terms
(including, without limitation, the number of shares of Stock that may be
purchased pursuant thereto), and (b) the number of shares of Stock that may be
purchased pursuant to Options granted to any Non-Employee Director under this
Plan shall not exceed 1,500 shares during any twelve consecutive month period.
Notwithstanding any other provision of this Plan, no Option shall be granted
hereunder unless sufficient shares of Stock are available therefor under
Section 7.
5.2 Option Agreement. Each Option shall be a Nonstatutory Stock Option
evidenced by an Option agreement that shall specify the exercise price, the
duration of the Option, the number of shares of Stock to which the Option
pertains, and such other terms and conditions not inconsistent with the Plan
as the Committee shall determine.
5.3 Option Price. Options granted pursuant to the Plan shall have an
exercise price that is not less than the Fair Market Value on the date the
Option is granted.
5.4 Exercise of Options. Each Option shall be subject to the following
restrictions on exercise:
(a) An Option shall not be exercisable, in whole or in part, after the
expiration of 10 years from the date the Option was granted. To the extent
that an Option is not exercised within the ten-year period of
exercisability, it shall expire as to the then unexercised part.
(b) An Option shall not be exercisable with respect to a fractional share
or with respect to the lesser of 100 shares or the full number of shares
then subject to the Option. If a fractional share shall become subject to
an Option by reason of a stock dividend or otherwise, the Optionee shall
not be entitled to exercise the Option with respect to such fractional
share.
(c) Except as provided in Sections 5.5 and 8, an Option shall not be
exercisable in whole or in part unless the Optionee, at the time the
Optionee exercises the Option, is, and has been at all times since the date
of grant of the Option, a Non-Employee Director.
(d) The Committee shall establish procedures governing the exercise of
Options, which shall require that written notice of exercise be given and
that the Option price be paid in full in cash or cash equivalents,
including by personal check, at the time of exercise. The Committee may, in
its discretion, permit a Non-Employee Director to make payment in Stock
already owned by him or her, valued at its Fair Market Value on the date of
exercise, as partial or full payment of the exercise price. As soon as
practicable after receipt of a written exercise notice and full payment of
the exercise price, the Company shall deliver to the Non-Employee Director
a certificate or certificates representing the acquired shares of Stock.
(e) If at any time the Board shall determine, in its discretion, that the
listing, registration or qualification of shares of Stock upon any national
securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body, is necessary or desirable as
a condition of, or in connection with, the sale or purchase of shares of
Stock hereunder, such Option may not be exercised in whole or in part
unless and until such listing, registration, qualification, consent or
approval shall have been effected or obtained, or otherwise provided for,
free of any conditions not acceptable to the Board in the exercise of its
reasonable judgment.
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Notwithstanding the foregoing, no Option shall be exercisable more than 10
years after the date on which it is granted.
5.5 Change in Control. In the event of a Change in Control, unless directed
otherwise by a resolution of the Board adopted prior to and specifically
relating to the occurrence of such Change in Control, each outstanding Option
shall, notwithstanding anything to the contrary contained in this Section 5 or
Section 8, immediately become fully exercisable and may be exercised at any
time prior to the earlier of (a) the expiration of the term of such Option and
(b) the date that is one year following such Change in Control.
SECTION 6
STOCK COMPENSATION
The Committee, by majority action thereof, may prescribe rules and
regulations that permit Non-Employee Directors to elect to receive shares of
Stock in lieu of cash compensation payable to Non-Employee Directors by the
Company for their services as Directors. All determinations, decisions,
interpretations and other actions made or taken by the Committee pursuant to
the provisions of this Section 6 shall be final, binding and conclusive for
all purposes and upon all persons.
SECTION 7
STOCK SUBJECT TO PLAN
7.1 Number. Subject to the provisions of Section 7.3, the aggregate number
of shares of Stock subject to Options awarded under Section 5.1 of the Plan
and issued in lieu of cash compensation under Section 6 of the Plan may not
exceed 400,000 shares. The shares to be delivered under the Plan may consist,
in whole or in part, of treasury Stock or authorized but unissued Stock, not
reserved for any other purpose.
7.2 Canceled, Terminated, or Forfeited Options. Any shares of Stock subject
to an Option which for any reason is canceled, terminated, expires or
otherwise settled without the issuance of any Stock shall again be available
for Options subsequently granted under the Plan.
7.3 Adjustment in Capitalization. In the event of any Stock dividend or
Stock split, recapitalization (including, without limitation, the payment of
an extraordinary dividend), merger, consolidation, combination, spin-off,
distribution of assets to stockholders, exchange of shares, or other similar
corporate change, the aggregate number of shares of Stock available under
Section 7.1 for Options or for compensation in lieu of cash or subject to
outstanding Options, and the respective prices and/or performance criteria
applicable to outstanding Options, may be appropriately adjusted by the
Committee, whose determination shall be conclusive.
SECTION 8
TERMINATION OF SERVICE
8.1 Termination of Service Due to Retirement. In the event an Optionee
ceases to be a Non-Employee Director by reason of Retirement, any Options
granted to such Optionee which are not then exercisable shall be cancelled and
any Options granted to such Optionee which are then exercisable and
outstanding may be exercised at any time prior to the earlier of (a) the
expiration of the term of the Options and (b) the date that is 90 days
following Retirement.
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8.2. Termination of Service Due to Death or Disability. In the event an
Optionee ceases to be a Non-Employee Director by reason of death or
Disability, any Options granted to such Optionee which are then outstanding
may be exercised by the Optionee or the Optionee's designated beneficiary, and
if none is named, in accordance with Section 10.2, at any time prior to the
earlier of (a) the expiration of the term of the Options and (b) the date that
is one year following death or Disability.
8.3 Termination of Service For Other Reasons. In the event an Optionee
ceases to be a Non-Employee Director for any reason other than one described
in Section 8.1 or 8.2, any Options granted to such Optionee which are not
exercisable shall be cancelled, and any Options granted to such Optionee which
are exercisable and outstanding at the date such Optionee ceases to be a Non-
Employee Director shall be exercisable at any time prior to the earlier of (a)
the expiration of the term of such Options and (b) the fifth day following the
date such Optionee ceases to be a Non-Employee Director.
SECTION 9
AMENDMENT, MODIFICATION, AND TERMINATION OF PLAN
The Board may at any time terminate or suspend the Plan, and from time to
time may amend or modify the Plan. No amendment, modification, or termination
of the Plan shall in any manner adversely affect any Option theretofore
granted under the Plan, without the consent of the applicable Optionee.
SECTION 10
MISCELLANEOUS PROVISIONS
10.1 Nontransferability of Options. No Options granted under the Plan may be
sold, transferred, pledged, assigned, or otherwise alienated or hypothecated,
other than by will or by the laws of descent and distribution to an Optionee's
designated beneficiary upon such Optionee's death, provided that the deceased
Optionee's beneficiary or the representative of his estate shall acknowledge
and agree in writing, in a form prescribed by the Committee, to be bound by
the provisions of the Plan as if such beneficiary or the estate were the
Optionee. All rights with respect to Options granted to an Optionee under the
Plan shall be exercisable during his lifetime only by such Optionee.
10.2 Beneficiary Designation. Each Optionee may from time to time name any
beneficiary or beneficiaries (who may be named contingently or successively)
to whom any benefit under the Plan is to be paid or by whom any right under
the Plan is to be exercised in the event of the Optionee's death. Each
designation will revoke all prior designations by the same Optionee, shall be
in a form prescribed by the Committee, and will be effective only when filed
by the Optionee in writing with the Committee during his lifetime. In the
absence of any such designation, benefits remaining unpaid at the Optionee's
death shall be paid to or exercised by the Optionee's surviving spouse, or, if
the Optionee has no surviving spouse, then to or by the Optionee's estate.
10.3 No Guarantee of Directorship. Nothing in the Plan shall interfere with
or limit in any way the right of the Company's stockholders to terminate any
Non-Employee Director's directorship at any time or for any reason, nor confer
upon any Non-Employee Director any right to continue to serve as a Director of
the Company.
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<PAGE>
10.4 Tax Withholding. Any Federal, state, and local taxes required by law to
be withheld with respect to Stock received upon the exercise of an Option
under the Plan or benefits earned and vested under any other compensation
arrangement may, if not remitted by an Optionee, be withheld from Stock
otherwise issuable to such Optionee or from such Optionee's other compensation
for serving as a Director and which is available for withholding. Prior to
issuing Stock or authorizing the issuance of Stock under this Plan, the
Company may require such documents from any taxing authority, or may require
such indemnities or surety bond from any Optionee or beneficiary, as the
Company shall reasonably consider necessary for its protection.
10.5 Indemnification. The Company shall, through the purchase of insurance
or otherwise, indemnify each member of the Board (or board of directors of any
affiliate), each member of the Committee, and any employees to whom any
responsibility with respect to the Plan is allocated or delegated, from and
against any and all claims, losses, damages, and expenses, including
attorneys' fees, and any liability, including any amounts paid in settlement
with the Company's approval, arising from the individual's action or failure
to act, except when the same is judicially determined to be attributable to
the gross negligence or willful misconduct of such person. The right of
indemnity described in the preceding sentence shall be conditioned upon (i)
the timely receipt of notice by the Company of any claim asserted against the
individual, which notice, in the event of a lawsuit, shall be given within ten
days after receipt by the individual of the complaint, and (ii) the receipt by
the Company from the individual of an offer for the Company to participate in
the settlement or defense of such claim.
10.6 No Limitation on Compensation. Nothing in the Plan shall be construed
to limit the right of the Company to establish other plans or to pay
compensation to its Directors in cash, Stock or property, in a manner
differing from that authorized under the Plan.
10.7 Requirements of Law. The granting of Options and the issuance of shares
of Stock shall be subject to all applicable laws, rules, and regulations, and
to such approvals by any governmental agencies or national securities
exchanges as may be required.
10.8 Term of Plan. The Plan shall be effective upon its adoption by the
Board and approval by the shareholders of the Company. The Plan shall continue
in effect, unless sooner terminated pursuant to Section 9, until April 24,
2007.
10.9 Governing Law. The Plan, and all agreements hereunder, shall be
construed in accordance with and governed by the laws of the State of
California.
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[LOGO OF THE FIRST AMERICAN FINANCIAL CORPORATION]
FIRST AMERICAN SQUARE . 114 EAST FIFTH STREET, SANTA ANA, CA 92701-4642
<PAGE>
[LOGO OF FIRST AMERICAN FINANCIAL CORP.]
THE FIRST AMERICAN FINANCIAL CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
OF THE FIRST AMERICAN
FINANCIAL CORPORATION
Thursday, April 24, 1997
2:00 p.m.
At the main office of
First American Title Insurance Company
114 East Fifth Street, Santa Ana, California 92701
YOUR VOTE IS IMPORTANT TO THE COMPANY
Please complete, sign and return your proxy by tearing off the bottom portion of
this sheet and returning it in the enclosed postpaid envelope.
FOLD AND DETACH HERE
- --------------------------------------------------------------------------------
THE FIRST AMERICAN FINANCIAL CORPORATION
FIRST AMERICAN SQUARE . 114 E. FIFTH ST., SANTA ANA, CA 92701 . (714) 558-3211
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of The First American Financial Corporation hereby
appoints D.P. Kennedy, Parker S. Kennedy and Mark R Arnesen, and each of them,
with power to each of substitution, to attend the annual meeting of the
shareholders of said corporation to be held April 24, 1997, at 2:00 P.M. in the
main office of First American Title Insurance Company, 114 East Fifth Street,
Santa Ana, California, and any adjournments thereof; and thereat to vote the
shares of the undersigned with respect to the election of directors and the
approval of The First American Financial Corporation 1997 Directors' Stock Plan,
as indicated on the reverse side hereof, with all powers which the undersigned
would have if acting in person, including the right in their discretion to
cumulate and distribute the aggregate cumulative votes in respect of such shares
as they choose among those nominees as to whom the undersigned has not withheld
authority; and WITH DISCRETIONARY AUTHORITY TO ACT ON SUCH OTHER MATTERS AS MAY
PROPERLY COME BEFORE SAID MEETING OR ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF.
THE SHARES REPRESENTED HEREBY SHALL BE VOTED SPECIFICALLY ON THE PROPOSALS
LISTED ON THE REVERSE SIDE HEREOF AS THERE SPECIFIED. WHERE NO SPECIFICATION
IS MADE, SAID SHARES WILL BE VOTED FOR THE PROPOSALS.
(Continued and to be signed on other side)
<PAGE>
[LOGO OF FIRST AMERICAN FINANCIAL CORP.]
THE FIRST AMERICAN FINANCIAL CORPORATION
- --------------------------------------------------------------------------------
(Continued from other side)
The Board of Directors recommends a vote FOR items 1 and 2 listed below.
1. Election of Directors FOR ___ all nominees listed below (except as marked
to the contrary below) WITHHOLD AUTHORITY ___ for all nominees listed below
George L. Argyros, Gary J. Beban, J. David Chatham, William G. Davis, James
L. Doti, Lewis W. Douglas, Jr., Paul B. Fay, Jr., Dale F. Frey, D.P.
Kennedy, Parker S. Kennedy, Robert B. McLain, Anthony R. Moiso, R.J. Munzer,
Frank O'Bryan, Roslyn B. Payne, and Virginia Ueberroth.
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE(s), WRITE
THE NAME(s) OF SUCH NOMINEE(s) ON THE LINE BELOW.)
- --------------------------------------------------------------------------------
2. Approval of the 1997 Directors' Stock Plan ___ FOR ___ AGAINST ___ ABSTAIN
- ---------------------- ------------------------ Dated................., 1997
Please sign exactly as name appears on stock certificate as shown hereon.
If shares are jointly held, this proxy should be signed by each such joint
owner. Executors, administrators, guardians or others signing in a fiduciary
capacity should state their full title as such. A proxy executed by a
corporation should be signed in its name by its president or any vice president
and attested to by its secretary or an assistant secretary; if otherwise
executed, please furnish proof of authority.
PLEASE SIGN AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED POSTPAID ENVELOPE.
