As filed with the Securities and Exchange Commission on October 16, 1997
Registration No. 333-35945
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
PRE-EFFECTIVE AMENDMENT
NO. 1 TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
THE FIRST AMERICAN FINANCIAL CORPORATION
(Exact Name of registrant as specified in its charter)
CALIFORNIA 6361 95-1068610
(State or other (Primary standard (I.R.S. Employer
jurisdiction of industrial Identification No.)
incorporation classification
or organization) code number)
114 EAST FIFTH STREET
SANTA ANA, CALIFORNIA 92701-4642
(Address of principal executive offices)
<PAGE>
FIRST AMERICAN CAPITAL TRUST I
(Exact Name of registrant as specified in its charter)
DELAWARE 6719 33-0771544
(State or other (Primary standard (I.R.S. Employer
jurisdiction of industrial Identification No.)
incorporation classification
or organization) code number)
<PAGE>
114 EAST FIFTH STREET
SANTA ANA, CALIFORNIA 92701-4642
(Address of principal executive offices)
MARK R ARNESEN, ESQ. (Copy to)
SECRETARY NEIL W. RUST, ESQ.
THE FIRST AMERICAN FINANCIAL CORPORATION WHITE & CASE
FIRST AMERICAN CAPITAL TRUST I 633 WEST FIFTH STREET
114 East Fifth Street LOS ANGELES, CALIFORNIA 90071
Santa Ana, California 92701 (213) 620-7700
(714) 558-3211
(Name, address and telephone
number of agent for service)
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [ ]
<PAGE>
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF SECURITIES TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED(1) PER UNIT OFFERING PRICE FEE
<S> <C> <C> <C> <C>
8.50% Junior Subordinated $100,000,000 $1,000 $100,000,000 N/A
Debentures Due April 15,
2012 of The First American
Financial Corporation(2)
8.50% Capital Securities 100,000 $1,000 $100,000,000 $30,303
(Liquidation Amount $1,000
per Capital Security) of
First American Capital
Trust I(3)
Guarantee of The First N/A N/A N/A N/A
American Financial
Corporation(4)
Total $100,000,000(5) $1,000 $100,000,000(5) $30,303(6)
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(f) under the Securities Act of 1933.
(2) The 8.50% Junior Subordinated Debentures Due April 15, 2012 of The First
American Financial Corporation (the "Junior Subordinated Debentures")
were originally purchased by First American Capital Trust I with the
proceeds of the 8.50% Capital Securities (Liquidation Amount $1,000 per
Capital Security) of the Trust (the "Capital Securities"). No separate
consideration will be received for the Junior Subordinated Debentures
distributed upon any liquidation of First American Capital Trust I.
(3) This Registration Statement is deemed to cover the Junior Subordinated
Debentures, the rights of the holders of the Junior Subordinated
Debentures under the Indenture (as defined herein), the rights of the
holders of the Capital Securities of First American Capital Trust I under
the Declaration (as defined herein) and the rights of the holders of the
Capital Securities under the Guarantee.
(4) No separate consideration will be received for the Guarantee of The First
American Financial Corporation.
(5) Such amount represents the aggregate liquidation amount of Capital
Securities to be issued and exchanged hereunder and the aggregate
principal amount of Junior Subordinated Debentures that may be
distributed upon liquidation of First American Capital Trust I.
(6) Previously paid.
<PAGE>
CROSS REFERENCE SHEET PURSUANT TO ITEM 501(B) OF REGULATION S-K
SHOWING LOCATION IN PROSPECTUS OF ITEMS OF FORM S-4
<TABLE>
<S> <C>
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus. . . Outside Front Cover Page; Inside Front Cover
Page; Facing Page
2. Inside Front and Outside Back Cover Pages
of Prospectus. . . . . . . . . . . . . . . Available Information; Incorporation of
Certain Information by Reference; Table of
Contents; Inside Front Cover Page
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information . . . . . . Summary; Risk Factors; Consolidated Ratio of
Earnings to Fixed Charges; The Trust; The
First American Financial Corporation
4. Terms of the Transaction . . . . . . . . . Outside Front Cover Page; Summary; Use of
Proceeds; Accounting Treatment;
Capitalization; The Exchange Offer;
Description of New Securities; Relationship
Among the New Capital Securities, the New
Junior Subordinated Debentures and the New
Guarantee; Description of Old Securities;
Certain U.S. Federal Income Tax
Consequences; Book-Entry Issuance; Benefit
Plan Considerations; Plan of Distribution;
Incorporation of Certain Information by
Reference
5. Pro Forma Financial Information . . . . . . Incorporation of Certain Information by
Reference
6. Material Contacts with the Company Being
Acquired . . . . . . . . . . . . . . . . . . Not Applicable
7. Additional Information Required for
Reoffering by Persons and Parties Deemed
to be Underwriters . . . . . . . . . . . . . Not Applicable
8. Interests of Named Experts and Counsel . . . Not Applicable
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities . . . . . . . . . . . . . . . . Not Applicable
B. INFORMATION ABOUT THE REGISTRANTS
Available Information; Incorporation of
10. Information with Respect to S-3 Certain Information by Reference; The First
Registrants . . . . . . . . . . . . . . . . American Financial Corporation
<PAGE>
11. Incorporation of Certain Information by Incorporation of Certain Information by
Reference . . . . . . . . . . . . . . . . . Reference
12. Information with Respect to S-2 or S-3
Registrants . . . . . . . . . . . . . . . . Not Applicable
13. Incorporation of Certain Information by
Reference . . . . . . . . . . . . . . . . . Not Applicable
14. Information with Respect to Registrants
Other Than S-2 or S-3 Registrants . . . . . Not Applicable
C. INFORMATION ABOUT THE COMPANY BEING
ACQUIRED
15. Information with Respect to S-3
Companies . . . . . . . . . . . . . . . . . Not Applicable
16. Information with Respect to S-2 or S-3
Companies . . . . . . . . . . . . . . . . . Not Applicable
17. Information with Respect to Companies
Other Than S-2 or S-3 Companies . . . . . . Available Information; The Trusts
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or
Authorizations are to be Solicited . . . . . Not Applicable
19. Information if Proxies, Consents or
Authorizations are not to be Solicited or Incorporation of Certain Information by
in an Exchange Offer . . . . . . . . . . . . Reference
</TABLE>
<PAGE>
PROSPECTUS
$100,000,000
FIRST AMERICAN CAPITAL TRUST I
Offer to exchange its 8.50% Capital
Securities (Liquidation Amount $1,000
per Capital Security), which have been
registered under the Securities Act of
1933, for any and all of its outstanding
8.50% Capital Securities (Liquidation
Amount $1,000 per Capital Security)
fully and unconditionally guaranteed,
to the extent described herein, by
THE FIRST AMERICAN FINANCIAL CORPORATION
The Exchange Offer and Withdrawal Rights will expire at 5:00 p.m.,
New York City time, on November 17, 1997, unless extended.
First American Capital Trust I, a Delaware statutory business trust (the
"Trust"), hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus (as the same may be amended or supplemented from time
to time, the "Prospectus") and in the accompanying Letter of Transmittal (the
"Letter of Transmittal"; together with the Prospectus, the "Exchange Offer"),
to exchange up to $100,000,000 liquidation amount of its 8.50% Capital
Securities (Liquidation Amount $1,000 per Security) (the "New Capital
Securities"), which have been registered under the Securities Act of 1933, as
amended (the "Securities Act"), for a like liquidation amount of its
outstanding 8.50% Capital Securities (Liquidation Amount $1,000 per Security)
(the "Old Capital Securities"), of which $100,000,000 aggregate liquidation
amount is outstanding. Pursuant to the Exchange Offer, The First American
Financial Corporation, a California corporation (the "Company"), is also
exchanging its guarantee of the payment of Distributions (as defined herein)
and payments on liquidation or redemption of the Old Capital Securities (the
"Old Guarantee") for a like guarantee of the New Capital Securities (the "New
Guarantee") and all of its 8.50% Junior Subordinated Debentures Due April 15,
2012 (the "Old Junior Subordinated Debentures"), of which $103,093,000
aggregate principal amount is outstanding, for a like aggregate principal
amount of its 8.50% Junior Subordinated Debentures Due April 15, 2012 (the
"New Junior Subordinated Debentures"), which New Guarantee and New Junior
Subordinated Debentures also have been registered under the Securities Act.
The Old Capital Securities, the Old Guarantee and the Old Junior Subordinated
Debentures are collectively referred to herein as the "Old Securities," and
the New Capital Securities, the New Guarantee and the New Junior Subordinated
Debentures are collectively referred to herein as the "New Securities."
The terms of the New Securities are identical in all material respects to
the respective terms of the Old Securities, except that (i) the New Securities
have been registered under the Securities Act and therefore will not be
subject to certain of the restrictions on transfer applicable to the Old
<PAGE>
Securities, (ii) the New Capital Securities will not provide for any increase
in the rate at which Distributions (as defined herein) accumulate thereon and
(iii) the New Junior Subordinated Debentures will not provide for any increase
in the interest rate thereon. See "Description of New Securities" and
"Description of Old Securities." The New Securities are being offered for
exchange in order to satisfy certain obligations of the Company and the Trust
under the Registration Rights Agreement, dated as of April 22, 1997 (the
"Registration Rights Agreement"), among the Company, the Trust and the Initial
Purchasers (as defined herein) of the Old Capital Securities. In the event
that the Exchange Offer is consummated, any Old Capital Securities which
remain outstanding after consummation of the Exchange Offer and the New
Capital Securities issued in the Exchange Offer will vote together as a single
class for purposes of determining whether holders of the requisite percentage
in outstanding liquidation amount thereof have taken certain actions or
exercised certain rights under the Declaration (as defined herein).
SEE "RISK FACTORS" BEGINNING ON PAGE 23 HEREOF FOR CERTAIN INFORMATION
RELEVANT TO HOLDERS OF OLD CAPITAL SECURITIES THAT ARE CONSIDERING TENDERING
THEIR OLD CAPITAL SECURITIES IN THE EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE 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 October 16, 1997.
As used herein and as the context may require, unless expressly stated
otherwise, (i) "Capital Securities" includes the Old Capital Securities and
the New Capital Securities, (ii) "Junior Subordinated Debentures" includes the
Old Junior Subordinated Debentures and the New Junior Subordinated Debentures
and (iii) "Guarantee" includes the Old Guarantee and the New Guarantee.
The New Capital Securities and the Old Capital Securities (collectively,
the "Capital Securities") represent preferred undivided beneficial interests
in the assets of the Trust. The Company is the owner of all of the common
undivided beneficial interests in the assets of the Trust (the "Common
Securities" and, collectively with the Capital Securities, the "Trust
Securities"). The Trust exists for the sole purpose of issuing the Trust
Securities, purchasing and holding the Junior Subordinated Debentures and
engaging in only those activities necessary or incidental thereto. The Junior
Subordinated Debentures will mature on April 15, 2012 (the "Stated Maturity").
The Capital Securities will have a preference under certain circumstances with
respect to cash distributions and amounts payable on liquidation, redemption
or otherwise over the Common Securities. See "Description of New Securities--
Description of New Capital Securities--Subordination of Common Securities."
<PAGE>
The New Capital Securities will be issued pursuant to, and entitled to
the benefits of, the Declaration (as defined below) governing the Old Capital
Securities. The New Junior Debentures will be issued pursuant to, and
entitled to the benefits of, the Indenture (as defined below) governing the
Old Debentures.
Except as described herein, the New Capital Securities will be
represented by global New Capital Securities to be deposited with a custodian
for and registered in the name of a nominee for The Depository Trust Company
("DTC"). Beneficial interests in the global New Capital Securities will be
shown on, and transfers thereof will be effected only through, the records
maintained by DTC and its direct and indirect participants. Beneficial
interests in such New Capital Securities will trade in DTC's Same-Day Funds
Settlement System and secondary market trading activity in such interests will
therefore settle in immediately available funds. The New Capital Securities
will be issued, and may be held or transferred, only in blocks having a
Liquidation Amount of not less than $100,000 (100 New Capital Securities).
Accordingly, each holder must own at least 100 New Capital Securities. See
"Description of New Securities--Description of New Capital Securities--
Restrictions on Transfer."
Holders of the New Capital Securities will be entitled to receive
preferential cumulative cash distributions ("Distributions") accumulating from
the most recent distribution date on the Old Capital Securities surrendered in
exchange for New Capital Securities or, if no distributions have been paid on
such Old Capital Securities, from April 22, 1997. Such Distributions will be
payable semi-annually in arrears on April 15 and October 15 of each year,
commencing on the first such date following the date of original issuance of
the New Capital Securities, at the annual rate of 8.50% of the Liquidation
Amount of $1,000 per New Capital Security. The Distribution rate and the
Distribution payment dates and other payment dates for the New Capital
Securities will correspond to the interest rate and interest payment dates and
other payment dates on the Junior Subordinated Debentures.
Subject to certain exceptions, as described herein, the Company has the
right to defer payment of interest on the Junior Subordinated Debentures at
any time or from time to time for a period not exceeding 10 consecutive
semi-annual periods with respect to each deferral period (each, an "Extension
Period"), provided that no Extension Period may extend beyond the Stated
Maturity of the Junior Subordinated Debentures. Upon the termination of any
such Extension Period and the payment of all interest then accrued and unpaid
(together with interest thereon at the rate of 8.50%, compounded semi-annually
to the extent permitted by applicable law), the Company may elect to begin a
new Extension Period subject to the requirements set forth herein. If interest
payments on the Junior Subordinated Debentures are so deferred, Distributions
on the Capital Securities will also be deferred and the Company may not, and
may not permit any subsidiary of the Company to, (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, the Company's capital stock, (ii) make
any payment of principal, interest or premium, if any, on or repay, repurchase
or redeem any debt securities that rank pari passu with or junior to the
Junior Subordinated Debentures or (iii) make any guarantee payments with
respect to any guarantee by the Company of the debt securities of any
subsidiary of the Company if such guarantee ranks pari passu with or junior to
<PAGE>
the Junior Subordinated Debentures (other than (a) dividends or distributions
in common stock of the Company or warrants, options or other rights where the
Company's common stock is issuable upon the exercise thereof, (b) payments
under the Guarantee, (c) any declaration of a dividend in connection with the
implementation of a stockholders' rights plan, or the issuance of stock under
any such plan in the future, or the redemption or repurchase of any such
rights pursuant thereto, (d) as a result of an exchange or conversion (x) of
any class or series of the Company's capital stock (or any capital stock of a
subsidiary of the Company) for any class or series of the Company's capital
stock or (y) of any class or series of the Company's indebtedness for any
class or series of the Company's capital stock, (e) the purchase of fractional
interests in shares of the Company's capital stock pursuant to the conversion
or exchange provisions of such capital stock or the security being converted
or exchanged, and (f) purchases of common stock related to the issuance of
common stock or rights under any employment agreement, benefit plan or similar
agreement for the directors, officers, employees and consultants of the
Company and its subsidiaries related to the issuance of common stock or rights
under a dividend reinvestment and stock purchase plan or related to the
issuance of common stock (or securities convertible into or exchangeable for
common stock) as consideration in an acquisition transaction that was entered
into prior to the commencement of such Extension Period). During an Extension
Period, interest on the Junior Subordinated Debentures will continue to accrue
(and the amount of Distributions to which holders of the Capital Securities
are entitled will accumulate) at the rate of 8.50% per annum, compounded
semi-annually to the extent permitted by applicable law, and holders of the
Capital Securities will be required to recognize income (in the form of
original issue discount) for United States federal income tax purposes prior
to receipt of cash related to such income. See "Risk Factors--Options to Defer
Interest Payments; Tax Consequences; Market Consequences", "Description of New
Securities--Description of New Junior Subordinated Debentures--Option to Defer
Interest Payments" and "Certain United States Federal Income Tax
Consequences--Interest Income and Original Issue Discount."
The Junior Subordinated Debentures are unsecured and subordinate to all
Senior Indebtedness (as defined herein) of the Company and will be
structurally subordinated to all liabilities and obligations of the Company's
subsidiaries. As of June 30, 1997, approximately $13.2 million aggregate
amount of Senior Indebtedness was outstanding, and the Company's subsidiaries
had approximately $609.8 million of liabilities and other obligations. The
terms of the Junior Subordinated Debentures place no limitation on the amount
of Senior Indebtedness that may be incurred by the Company or on the amount of
liabilities and obligations of the Company's subsidiaries. See "Description of
New Securities--Description of New Junior Subordinated
Debentures--Subordination."
The Company has, through the Guarantee, the Declaration, the Junior
Subordinated Debentures and the Indenture (each as defined herein), taken
together, fully, irrevocably and unconditionally guaranteed all of the Trust's
obligations under the Capital Securities. See "Relationship Among the New
Capital Securities, the New Junior Subordinated Debentures and the New
Guarantee" and "Description of New Securities--Description of New Guarantee."
The Guarantee guarantees the payment of Distributions and payments on
liquidation of the Trust or redemption or maturity of the Capital Securities,
but in each case only to the extent of funds held by the Trust. See
<PAGE>
"Description of New Guarantee." If the Company does not make interest
payments on the Junior Subordinated Debentures held by the Trust, the Trust
will have insufficient funds to pay Distributions on the Capital Securities.
The Guarantee does not cover payment of Distributions when the Trust has
insufficient funds to pay such Distributions. See "Risk Factors--Enforcement
of Certain Rights by Holders of Capital Securities" and "--Rights under the
New Guarantee." The obligations of the Company under the Guarantee are
subordinate and junior in right of payment to all Senior Indebtedness of the
Company and will be structurally subordinated to all liabilities and
obligations of the Company's subsidiaries.
The Capital Securities are subject to mandatory redemption upon the
repayment of Junior Subordinated Debentures at maturity or their earlier
redemption. The Junior Subordinated Debentures are redeemable prior to
maturity at the option of the Company at any time, in whole but not in part,
in certain circumstances as described under "Description of New Securities--
Description of New Junior Subordinated Debentures--Special Event Redemption"
at a redemption price equal to the principal amount of, plus accrued and
unpaid interest on, the Junior Subordinated Debentures. See "Description of
New Securities--Description of New Capital Securities--Redemption."
The Company has the right at any time to terminate the Trust and cause
the Junior Subordinated Debentures to be distributed to the holders of the
Capital Securities and the Common Securities in liquidation of the Trust. In
the event of any such termination of the Trust, after satisfaction of the
claims of creditors of the Trust, if any, as required by applicable law, the
holders of the Capital Securities will be entitled to receive a Liquidation
Amount of $1,000 per Capital Security plus accumulated and unpaid
Distributions thereon to the date of payment, which may be in the form of a
distribution of such amount of Junior Subordinated Debentures in exchange
therefor, subject to certain exceptions. See "Description of New Securities--
Description of New Capital Securities--Liquidation Distribution Upon
Dissolution."
The Trust and the Company are making the Exchange Offer of the New
Capital Securities, the New Junior Subordinated Debentures and the New
Guarantee in reliance on the position of the staff of the Division of
Corporation Finance of the Securities and Exchange Commission (the
"Commission") as set forth in certain interpretive letters addressed to third
parties in other transactions. However, neither the Company nor the Trust has
sought its own interpretive letter, and there can be no assurance that the
staff of the Division of Corporation Finance of the Commission would make a
similar determination with respect to the Exchange Offer as it has in such
interpretive letters to third parties. Based on these interpretations by the
staff of the Division of Corporation Finance, and subject to the two
immediately following sentences, the Trust and the Company each believes that
New Capital Securities issued pursuant to the Exchange Offer in exchange for
Old Capital Securities may be offered for resale, resold and otherwise
transferred by a holder thereof (other than a holder who is a broker-dealer)
without further compliance with the registration and prospectus delivery
requirements of the Securities Act, provided that such New Capital Securities
are acquired in the ordinary course of such holder's business and that such
holder is not participating, and has no arrangement or understanding with any
person to participate, in a distribution (within the meaning of the Securities
<PAGE>
Act) of such New Capital Securities. However, any holder of Old Capital
Securities who is an "affiliate" of the Company or the Trust within the
meaning of Rule 405 under the Securities Act (an "Affiliate") or who intends
to participate in the Exchange Offer for the purpose of distributing New
Capital Securities, or any broker-dealer who purchased Old Capital Securities
from the Trust to resell pursuant to Rule 144A under the Securities Act ("Rule
144A") or any other available exemption under the Securities Act, (i) will not
be able to rely on the interpretations of the staff of the Division of
Corporation Finance of the Commission set forth in the above-mentioned
interpretive letters, (ii) will not be entitled to tender such Old Capital
Securities in the Exchange Offer and (iii) must comply with the registration
and prospectus delivery requirements of the Securities Act in connection with
any sale or other transfer of such Old Capital Securities unless such sale is
made pursuant to an exemption from such requirements. In addition, as
described below, if any broker-dealer (a "Participating Broker-Dealer") holds
Old Capital Securities acquired for its own account as a result of
market-making or other trading activities and exchanges such Old Capital
Securities for New Capital Securities, then such Participating Broker-Dealer
must deliver a prospectus meeting the requirements of the Securities Act in
connection with any resales of such New Capital Securities.
Each holder of Old Capital Securities who wishes to exchange Old Capital
Securities for New Capital Securities in the Exchange Offer will be required
to represent that (i) it is not an Affiliate, (ii) any New Capital Securities
to be received by it are being acquired in the ordinary course of its
business, (iii) it has no arrangement or understanding with any person to
participate in a distribution (within the meaning of the Securities Act) of
such New Capital Securities, and (iv) if such holder is not a broker-dealer,
such holder is not engaged in, and does not intend to engage in, a
distribution (within the meaning of the Securities Act) of such New Capital
Securities. The Letter of Transmittal contains the foregoing representations.
In addition, the Company may require such holder, as a condition to such
holder's eligibility to participate in the Exchange Offer, to furnish to the
Company (or an agent thereof) in writing information as to the number of
"beneficial owners" (within the meaning of Rule 13d-3 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) on behalf of whom such
holder holds the Old Capital Securities to be exchanged in the Exchange Offer.
Each Participating Broker-Dealer that receives New Capital Securities for its
own account pursuant to the Exchange Offer will be deemed to have acknowledged
by execution of the Letter of Transmittal or delivery of an Agent's Message
(as defined herein) that it acquired the Old Capital Securities for its own
account as the result of market-making activities or other trading activities
and must agree that it will deliver a prospectus meeting the requirements of
the Securities Act in connection with any resale of such New Capital
Securities. The Letter of Transmittal states that by so acknowledging and by
delivery of a prospectus, a Participating Broker-Dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
Based on the position taken by the staff of the Division of Corporation
Finance of the Commission in the interpretive letters referred to above, the
Company believes that Participating Broker-Dealers may fulfill their
prospectus delivery requirements with respect to the New Capital Securities
received upon exchange of such Old Capital Securities (other than Old Capital
Securities that represent an unsold allotment from the original sale of Old
Capital Securities) with a prospectus meeting the requirements of the
<PAGE>
Securities Act, which may be the prospectus prepared for an exchange offer so
long as it contains a description of the plan of distribution with respect to
the resale of such New Capital Securities. Accordingly, this Prospectus may
be used by a Participating Broker-Dealer during the period referred to below
in connection with resales of New Capital Securities received in exchange for
Old Capital Securities where such Old Capital Securities were acquired by such
Participating Broker-Dealer for its own account as a result of market-making
or other trading activities. Subject to certain provisions set forth in the
Registration Rights Agreement, the Company and the Trust have agreed that this
Prospectus may be used by a Participating Broker-Dealer in connection with
resales of such New Capital Securities for a period of 180 days after the
Expiration Date (as defined herein) or, if earlier, when all such Capital
Securities have been disposed of by such Participating Broker-Dealer. See
"Plan of Distribution." Any person, including any Participating
Broker-Dealer, who is an Affiliate may not rely on such interpretive letters
and must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction. See "Exchange
Offer--Resales of New Capital Securities."
In that regard, each Participating Broker-Dealer who surrenders Old
Capital Securities pursuant to the Exchange Offer will be deemed to have
agreed, by execution of the Letter of Transmittal or delivery of an Agent's
Message (as defined herein) that, upon receipt of notice from the Company or
the Trust of the occurrence of any event or the discovery of any fact which
makes any statement contained or incorporated by reference in this Prospectus
untrue in any material respect or which causes this Prospectus to omit to
state a material fact necessary in order to make the statements contained or
incorporated by reference herein, in the light of the circumstances under
which they were made, not misleading, or of the occurrence of certain other
events specified in the Registration Rights Agreement, such Participating
Broker-Dealer will suspend the sale of New Securities pursuant to this
Prospectus until the Company or the Trust has amended or supplemented this
Prospectus to correct such misstatement or omission and has furnished copies
of this Prospectus as so amended or supplemented to such Participating
Broker-Dealer, or the Company or the Trust has given notice that the sale of
New Securities may be resumed, as the case may be.
Prior to the Exchange Offer, there has been only a limited secondary
market and no public market for the Old Capital Securities. The New Capital
Securities will be a new issue of securities for which there currently is no
market. There can be no assurance as to the development or liquidity of any
market for the New Capital Securities. The Company and the Trust currently do
not intend to apply for a listing of the New Capital Securities on any
securities exchange or for quotation through the National Association of
Securities Dealers Automated Quotation System or any other system.
Any Old Capital Securities not tendered and accepted in the Exchange
Offer will remain outstanding and will be entitled to the same rights and will
be subject to the same limitations applicable thereto under the Amended and
Restated Declaration of Trust, dated as of April 22, 1997 (as amended and
supplemented from time to time, the "Declaration"), among the Company,
Wilmington Trust Company, as property and Delaware trustee, and the regular
trustees named therein (except for those rights that terminate upon
consummation of the Exchange Offer). Following the consummation of the
<PAGE>
Exchange Offer, the holders of the Old Capital Securities will continue to be
subject to all of the existing restrictions upon transfer thereof and neither
the Company nor the Trust will have any further obligation to such holders
(other than under certain limited circumstances) to provide for registration
under the Securities Act of the Old Capital Securities held by them. To the
extent that Old Capital Securities are tendered and accepted in the Exchange
Offer, a holder's ability to sell untendered Old Capital Securities could be
adversely affected. See "Risk Factors--Consequences of a Failure to Exchange
Old Capital Securities."
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. HOLDERS OF OLD CAPITAL SECURITIES ARE URGED TO READ THIS
PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING
WHETHER TO TENDER THEIR OLD CAPITAL SECURITIES PURSUANT TO THE EXCHANGE OFFER.
Old Capital Securities may be tendered for exchange on or prior to 5:00
p.m., New York City time, on November 17, 1997 (such time on such date being
hereinafter called, the "Expiration Date"), unless the Exchange Offer is
extended by the Company and the Trust (in which case, the term "Expiration
Date" will mean the latest date and time to which the Exchange Offer is
extended). Tenders of Old Capital Securities may be withdrawn at any time on
or prior to the Expiration Date. The Exchange Offer is not conditioned upon
any minimum of Old Capital Securities being tendered for exchange. However,
the Exchange Offer is subject to certain events and conditions, which may be
waived by the Company (in its sole discretion), and to the terms and
provisions of the Registration Rights Agreement. Old Capital Securities may
be tendered in whole or in any part having a Liquidation Amount of not less
than $100,000 (100 Old Capital Securities) or any integral multiple of $1,000
in excess thereof. The Company has agreed to pay all expenses of the Exchange
Offer, except as otherwise specified herein. See "The Exchange Offer--Fees
and Expenses." Each New Capital Security will pay cumulative Distributions
from the most recent distribution date on the Old Capital Securities
surrendered in exchange for such New Capital Securities or, if no
distributions have been paid on such Old Capital Securities, from April 22,
1997. Holders of the Old Capital Securities whose Old Capital Securities are
accepted for exchange will not receive accumulated distributions on such Old
Capital Securities for any period from and after the last distribution date on
such Old Capital Securities prior to the original issue date of the New
Capital Securities or, if no such distributions have been paid, will not
receive any accumulated distributions on such Old Capital Securities, and will
be deemed to have waived the right to receive any distributions on such Old
Capital Securities accumulated from and after such distribution date or, if no
such distributions have been paid or duly provided for, from and after April
22, 1997. This Prospectus, together with the Letter of Transmittal, is being
sent to all registered holders of the Old Capital Securities as of October 16,
1997.
Neither the Company nor the Trust will receive any proceeds from the
issuance of the New Capital Securities offered hereby. No dealer-manager is
being used in connection with this Exchange Offer. See "Use of Proceeds" and
"Plan of Distribution."
THE NEW CAPITAL SECURITIES WILL BE ISSUED, AND MAY BE HELD OR
TRANSFERRED, ONLY IN BLOCKS HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN
<PAGE>
$100,000. ANY TRANSFER, SALE OR OTHER DISPOSITION OF NEW CAPITAL SECURITIES
IN A BLOCK HAVING A LIQUIDATION AMOUNT OF LESS THAN $100,000, OR RESULTING IN
A HOLDER'S HOLDING NEW CAPITAL SECURITIES IN A BLOCK HAVING A LIQUIDATION
AMOUNT OF LESS THAN $100,000 SHALL BE DEEMED TO BE VOID AND BE OF NO LEGAL
EFFECT WHATSOEVER, ANY SUCH TRANSFEREE SHALL BE DEEMED NOT TO BE THE HOLDER OF
SUCH NEW CAPITAL SECURITIES FOR ANY PURPOSE, INCLUDING BUT NOT LIMITED TO THE
RECEIPT OF DISTRIBUTIONS ON SUCH NEW CAPITAL SECURITIES, AND SUCH TRANSFEREE
SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN SUCH NEW CAPITAL SECURITIES.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON
REQUEST FROM MARK R ARNESEN, VICE PRESIDENT AND SECRETARY, THE FIRST AMERICAN
FINANCIAL CORPORATION, 114 EAST FIFTH STREET, SANTA ANA, CALIFORNIA
92701-4642, TELEPHONE NUMBER: (714) 558-3211. IN ORDER TO ENSURE TIMELY
DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY NOVEMBER 10, 1997.
NO EMPLOYEE BENEFIT OR OTHER PLAN OR INDIVIDUAL RETIREMENT ACCOUNT
SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS
AMENDED, OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED
(EACH, A "PLAN"), NO ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY
REASON OF ANY PLAN'S INVESTMENT IN THE ENTITY (A "PLAN ASSET ENTITY"), AND NO
PERSON INVESTING "PLAN ASSETS" OF ANY PLAN MAY ACQUIRE OR HOLD THE NEW CAPITAL
SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH PURCHASE OR HOLDING IS COVERED
BY THE EXEMPTIVE RELIEF PROVIDED BY U.S. DEPARTMENT OF LABOR PROHIBITED
TRANSACTION CLASS EXEMPTION ("PTCE") 96-23, 95-60, 91-38, 90-1 OR 84-14 OR
ANOTHER APPLICABLE EXEMPTION WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY
PURCHASER OR HOLDER OF THE NEW CAPITAL SECURITIES OR ANY INTEREST THEREIN WILL
BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT EITHER
(A) THE PURCHASER AND HOLDER IS NOT A PLAN OR A PLAN ASSET ENTITY AND IS NOT
PURCHASING SUCH SECURITIES ON BEHALF OF OR WITH "PLAN ASSETS" OF ANY PLAN OR
(B) THE PURCHASE AND HOLDING OF THE NEW CAPITAL SECURITIES IS COVERED BY THE
EXEMPTIVE RELIEF PROVIDED BY PTCE 96-23, 95-60, 91-38, 90-1 OR 84-14 OR
ANOTHER APPLICABLE EXEMPTION WITH RESPECT TO SUCH PURCHASE OR HOLDING. SEE
"BENEFIT PLAN CONSIDERATIONS."
NOTICE TO NEW HAMPSHIRE INVESTORS
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED
STATUTES WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS
EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE
CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT ANY DOCUMENT FILED UNDER
CHAPTER 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR
THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A
TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE
MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON,
SECURITY, OR TRANSACTION. IT IS UNLAWFUL TO MAKE OR CAUSE TO BE MADE TO ANY
PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION INCONSISTENT WITH
THE PROVISIONS OF THIS PARAGRAPH.
FOR NORTH CAROLINA RESIDENTS ONLY
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
COMMISSIONER OF INSURANCE FOR THE STATE OF NORTH CAROLINA, NOR HAS THE
<PAGE>
COMMISSIONER OF INSURANCE RULED UPON THE ACCURACY OR THE ADEQUACY OF THIS
DOCUMENT.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports and other information with the
Commission. Reports, proxy statements and other information filed by the
Company with the Commission pursuant to the informational requirements of the
Exchange Act may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the following Regional Offices of the Commission: Chicago
Regional Office, Suite 1400, Citicorp Center, 500 West Madison Street,
Chicago, Illinois 60661; and New York Regional Office, Seven World Trade
Center, Suite 1300, New York, New York 10048. Copies of such material can be
obtained at prescribed rates from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission
also maintains a Web site (http://www.sec.gov) that contains reports, proxy
statements and other information regarding the Company. In addition, such
materials can be inspected at the office of the New York Stock Exchange, on
which certain securities of the Company are listed. This Prospectus does not
contain all the information set forth in the registration statement of which
this Prospectus forms a part (the "Registration Statement"), which the Company
and the Trust have filed with the Commission under the Securities Act, and to
which reference is hereby made, certain parts of which are omitted in
accordance with the rules and regulations of the Commission.
No separate financial statements of the Trust have been included or
incorporated by reference herein. The Company and the Trust do not believe
such financial statements would be material to holders of the Capital
Securities because (i) all of the voting securities of the Trust are owned,
directly or indirectly, by the Company, a reporting company under the Exchange
Act, (ii) the Trust has no independent operations but exists for the sole
purpose of issuing securities representing undivided beneficial interests in
its assets and investing the proceeds thereof in Junior Subordinated
Debentures issued by the Company, and (iii) the obligations of the Trust under
the Capital Securities are guaranteed by the Company to the extent described
herein. See "Relationship Among the New Capital Securities, the New Junior
Subordinated Debentures and the New Guarantee."
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Company and the Trust hereby incorporate by reference in this
Prospectus the following documents: (i) the Company's Annual Report on Form
10-K for the year ended December 31, 1996, filed by the Company with the
Commission pursuant to Section 13 of the Exchange Act; (ii) the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1997, filed by
the Company with the Commission pursuant to Section 13 of the Exchange Act;
and (iii) the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1997, filed by the Company with the Commission pursuant to Section 13
of the Exchange Act.
Each document filed by the Company with the Commission pursuant to
<PAGE>
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date
of this Prospectus and prior to the termination of the Exchange Offer made by
this Prospectus shall be deemed to be incorporated herein by reference and to
be a part hereof from the date of filing such document. Any statement
contained herein, or in a document all or a portion of which is 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.
SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere in or incorporated by
reference in this Prospectus. Holders of Old Capital Securities are urged to
read this Prospectus and such incorporated information and financial
statements in their entirety before tendering their Old Capital Securities in
the Exchange Offer.
THE TRUST
First American Capital Trust I (the "Trust") is a statutory business
trust created under the Delaware Business Trust Act, as amended (the "Trust
Act"), pursuant to a declaration of trust (as amended and restated, the
"Declaration") and the filing of a certificate of trust with the Secretary of
State of the State of Delaware. The Company has acquired and directly owns
Common Securities in an aggregate Liquidation Amount equal to 3% of the total
capital of the Trust. The Trust used all the proceeds derived from the
issuance of the Old Capital Securities and the Common Securities to purchase
the Old Junior Subordinated Debentures. Following the consummation of the
Exchange Offering, the assets of the Trust will consist solely of the New
Junior Subordinated Debentures. The Trust exists for the exclusive purpose of
(i) issuing the Trust Securities representing undivided beneficial ownership
interests in the assets of the Trust, (ii) investing the gross proceeds of the
Trust Securities in and holding the Junior Subordinated Debentures, and (iii)
engaging in only those other activities necessary or incidental thereto.
Accordingly, the Junior Subordinated Debentures will be the sole assets of the
Trust and payments made thereunder will be the sole revenue of the Trust. See
"The Trust."
THE COMPANY
The First American Financial Corporation ("First American" or the
"Company") was organized in 1894 as Orange County Title Company, succeeding to
the business of two title abstract companies founded in 1889 and operating in
Southern California. In 1924, the Company commenced issuing title insurance
policies. In 1986, the Company began a diversification program by acquiring
and developing financial service businesses closely related to the real estate
transfer and closing process. The Company is a California corporation with
executive offices located in Santa Ana, California.
<PAGE>
The Company believes it is the leading provider of real estate-related
financial and information services to real property buyers and mortgage
lenders in the United States. The Company's products and services include
title insurance; real estate tax monitoring; mortgage credit reporting;
mortgage loan servicing systems; property information; flood zone
determination; home warranty services; appraisal services and mortgage
document preparation. The Company also provides trust and limited banking
services. The title insurance and real estate information segments operate
through networks of offices nationwide. The Company, through its
subsidiaries, transacts its title insurance business through a network of more
than 300 branch offices and over 4,000 independent agents. The Company also
offers its title services in Australia, the Bahamas Islands, Bermuda, Canada,
Guam, Mexico, Puerto Rico, the U.S. Virgin Islands and the United Kingdom.
Home warranty services are available in certain counties of Arizona,
California, Nevada, North Carolina, South Carolina, Texas and Washington. The
trust, banking and thrift businesses operate in Southern California only. See
"The First American Financial Corporation."
THE EXCHANGE OFFER
Up to $100,000,000 aggregate Liquidation Amount of New Capital Securities
are being offered in exchange for a like aggregate Liquidation Amount of Old
Capital Securities. Old Capital Securities may be tendered for exchange in
whole or in part in a Liquidation Amount of $100,000 (100 Old Capital
Securities) or any integral multiple of $1,000 in excess thereof, provided
that if any Old Capital Securities are tendered for exchange in part, the
untendered Liquidation Amount must be $100,000 or any integral multiple of
$1,000 in excess thereof. The Company and the Trust are making the Exchange
Offer in order to satisfy certain of their obligations under the Registration
Rights Agreement, dated as of April 22, 1997 (the "Registration Rights
Agreement"), among the Company, the Trust and the Initial Purchasers (as
defined herein) of the Old Capital Securities. See "The Exchange
Offer--Procedures for Tendering Old Capital Securities."
EXPIRATION DATE
The Expiration Date of the Exchange Offer will be 5:00 p.m., New York
City time, on November 17, 1997, unless the Exchange Offer is extended by the
Company and the Trust (such time on such date, the "Expiration Date"). See
"The Exchange Offer--Expiration Date; Extensions; Amendments."
CONDITIONS TO EXCHANGE OFFER
The Exchange Offer is subject to certain conditions, which may be waived
by the Company in its sole discretion. The Exchange Offer is not conditioned
upon any minimum Liquidation Amount of Old Capital Securities being tendered.
See "The Exchange Offer--Conditions to Exchange Offer." The Company reserves
the right in its sole discretion, subject to applicable law, at any time and
from time to time, (i) to delay the acceptance of the Old Capital Securities
for exchange, (ii) to terminate the Exchange Offer if certain specified
conditions have not been satisfied, (iii) to extend the Expiration Date of the
Exchange Offer and retain all Old Capital Securities tendered pursuant to the
Exchange Offer, subject, however, to the right of holders of Old Capital
Securities to withdraw their tendered Old Capital Securities, or (iv) to waive
<PAGE>
any condition or otherwise amend the terms of the Exchange Offer in any
respect. See "The Exchange Offer--Extensions; Amendments."
WITHDRAWAL RIGHTS
Tenders of Old Capital Securities may be withdrawn at any time on or
prior to the Expiration Date by delivering a written notice of such withdrawal
to Wilmington Trust Company, as exchange agent (the "Exchange Agent"), in
conformity with certain procedures set forth under "The Exchange
Offer--Withdrawal Rights."
PROCEDURES FOR TENDERING OLD CAPITAL SECURITIES
Tendering holders of Old Capital Securities must complete and sign a
Letter of Transmittal in accordance with the instructions contained therein
and forward the same by mail, facsimile or hand delivery, together with any
other required documents, to the Exchange Agent, either with the Old Capital
Securities to be tendered or in compliance with the specified procedures for
guaranteed delivery of Old Capital Securities. Certain brokers, dealers,
commercial banks, trust companies and other nominees may also effect tenders
by book-entry transfer, including an Agent's Message in lieu of the Letter of
Transmittal. Holders of Old Capital Securities registered in the name of a
broker, dealer, commercial bank, trust company or other nominee are urged to
contact such person promptly if they wish to tender Old Capital Securities
pursuant to the Exchange Offer. See "The Exchange Offer--Procedures for
Tendering Old Capital Securities." Letters of Transmittal and certificates
representing Old Capital Securities should not be sent to the Company or the
Trust. Such documents should be sent only to the Exchange Agent. Questions
regarding how to tender and requests for information should be directed to the
Exchange Agent. See "The Exchange Offer--Exchange Agent."
RESALES OF NEW CAPITAL SECURITIES
The Trust and the Company are making the Exchange Offer in reliance on
the position of the staff of the Division of Corporation Finance of the
Commission as set forth in certain interpretive letters addressed to third
parties in other transactions. However, neither the Company nor the Trust has
sought its own interpretive letter, and there can be no assurance that the
staff of the Division of Corporation Finance of the Commission would make a
similar determination with respect to the Exchange Offer as it has in such
interpretive letters to third parties. Based on these interpretations by the
staff of the Division of Corporation Finance, and subject to the two
immediately following sentences, the Trust and the Company each believes that
New Capital Securities issued pursuant to this Exchange Offer in exchange for
Old Capital Securities may be offered for resale, resold and otherwise
transferred by a holder thereof (other than a holder who is a broker-dealer)
without further compliance with the registration and prospectus delivery
requirements of the Securities Act, provided that such New Capital Securities
are acquired in the ordinary course of such holder's business and that such
holder is not participating, and has no arrangement or understanding with any
person to participate, in a distribution (within the meaning of the Securities
Act) of such New Capital Securities. However, any holder of Old Capital
Securities who is an Affiliate or who intends to participate in the Exchange
Offer for the purpose of distributing New Capital Securities, or any
<PAGE>
broker-dealer who purchased Old Capital Securities from the Trust to resell
pursuant to Rule 144A or any other available exemption under the Securities
Act, (i) will not be able to rely on the interpretations of the staff of the
Division of Corporation Finance of the Commission set forth in the above-
mentioned interpretive letters, (ii) will not be entitled to tender such Old
Capital Securities in the Exchange Offer and (iii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any sale or other transfer of such Old Capital Securities
unless such sale is made pursuant to an exemption from such requirements. In
addition, as described below, any Participating Broker-Dealer must deliver a
prospectus meeting the requirements of the Securities Act in connection with
any resales of such New Capital Securities.
Each holder of Old Capital Securities who wishes to exchange Old Capital
Securities for New Capital Securities in the Exchange Offer will be required
to represent that (i) it is not an Affiliate, (ii) any New Capital Securities
to be received by it are being acquired in the ordinary course of its
business, (iii) it has no arrangement or understanding with any person to
participate in a distribution (within the meaning of the Securities Act) of
such New Capital Securities, and (iv) if such holder is not a broker-dealer,
such holder is not engaged in, and does not intend to engage in, a
distribution (within the meaning of the Securities Act) of such New Capital
Securities. The Letter of Transmittal contains the foregoing representations.
In addition, the Company may require such holder, as a condition to such
holder's eligibility to participate in the Exchange Offer, to furnish to the
Company (or an agent thereof) in writing information as to the number of
"beneficial owners" (within the meaning of Rule 13d-3 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) on behalf of whom such
holder holds the Old Capital Securities to be exchanged in the Exchange Offer.
Each Participating Broker-Dealer that receives New Capital Securities for its
own account pursuant to the Exchange Offer will be deemed to have acknowledged
by execution of the Letter of Transmittal or delivery of an Agent's Message
(as defined herein) that it acquired the Old Capital Securities for its own
account as the result of market-making activities or other trading activities
and must agree that it will deliver a prospectus meeting the requirements of
the Securities Act in connection with any resale of such New Capital
Securities. The Letter of Transmittal states that by so acknowledging and by
delivery of a prospectus, a Participating Broker-Dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
Based on the position taken by the staff of the Division of Corporation
Finance of the Commission in the interpretive letters referred to above, the
Company believes that Participating Broker-Dealers may fulfill their
prospectus delivery requirements with respect to the New Capital Securities
received upon exchange of such Old Capital Securities (other than Old Capital
Securities that represent an unsold allotment from the original sale of Old
Capital Securities) with a prospectus meeting the requirements of the
Securities Act, which may be the prospectus prepared for an exchange offer so
long as it contains a description of the plan of distribution with respect to
the resale of such New Capital Securities. Accordingly, this Prospectus may
be used by a Participating Broker-Dealer during the period referred to below
in connection with resales of New Capital Securities received in exchange for
Old Capital Securities where such Old Capital Securities were acquired by such
Participating Broker-Dealer for its own account as a result of market-making
or other trading activities. Subject to certain provisions set forth in the
<PAGE>
Registration Rights Agreement, the Company and the Trust have agreed that this
Prospectus may be used by a Participating Broker-Dealer in connection with
resales of such New Capital Securities for a period of 180 days after the
Expiration Date (as defined herein) or, if earlier, when all such Capital
Securities have been disposed of by such Participating Broker-Dealer. See
"Plan of Distribution." Any person, including any Participating Broker-Dealer,
who is an Affiliate may not rely on such interpretive letters and must comply
with the registration and prospectus delivery requirements of the Securities
Act in connection with any resale transaction. See "The Exchange
Offer--Resales of New Capital Securities."
EXCHANGE AGENT
The Exchange Agent is Wilmington Trust Company. The addresses and
telephone and facsimile numbers of the Exchange Agent are set forth under "The
Exchange Offer--Exchange Agent" and in the Letter of Transmittal.
THE NEW SECURITIES
New Capital Securities Up to $100,000,000 aggregate Liquidation Amount of
8.50% Capital Securities (Liquidation Amount $1,000
per Capital Security) evidencing preferred undivided
beneficial interests in the assets of the Trust. The
holders thereof will be entitled to a preference in
certain circumstances with respect to Distributions
and amounts payable on redemption, liquidation or
otherwise over the Common Securities. The New
Capital Securities will be issued and the Old Capital
Securities were issued under the Declaration. The New
Capital Securities and any Old Capital Securities
which remain outstanding after consummation of the
Exchange Offer will constitute a single series of
Capital Securities under the Declaration and,
accordingly, will vote together as a single class for
purposes of determining whether holders of the
requisite percentage in outstanding liquidation
amount thereof have taken certain actions or
exercised certain rights under the Declaration. The
terms of the New Capital Securities are identical in
all material respects to the respective terms of the
Old Capital Securities, except that the New Capital
Securities have been registered under the Securities
Act and therefore will not be subject to certain of
the restrictions on transfer applicable to the Old
Capital Securities and the New Capital Securities
will not provide for any increase in the rate at
which Distributions will accumulate thereon. See
"The Exchange Offer--Purpose and Effect of the
Exchange Offer," "Description of New Securities" and
"Description of Old Securities."
Distributions Holders of the New Capital Securities will be
entitled to receive cumulative cash Distributions at
an annual rate of 8.50% of the Liquidation Amount of
<PAGE>
$1,000 per New Capital Security, accumulating from
the most recent distribution date on the Old Capital
Securities surrendered in exchange for such New
Capital Securities or, if no distributions have been
paid on such Old Capital Securities, from April 22,
1997. Such Distributions will be payable
semi-annually in arrears on April 15 and October 15
of each year commencing on October 15, 1997.
Distributions will be computed on the basis of a
360-day year consisting of twelve 30-day periods.
Holders of the Old Capital Securities whose Old
Capital Securities are accepted for exchange will not
receive accumulated distributions on such Old Capital
Securities for any period from and after the last
distribution date on such Old Capital Securities
prior to the original issue date of the New Capital
Securities or, if no such distributions have been
paid, will not receive any accumulated distributions
on such Old Capital Securities. Such holders will be
deemed to have waived the right to receive any
distributions on such Old Capital Securities
accumulated from and after such distribution date or,
if no such distributions have been paid or duly
provided for, from and after April 22, 1997. The
Distribution rate and the Distribution and other
payment dates for the New Capital Securities will
correspond to the interest rate and interest and
other payment dates on the New Junior Subordinated
Debentures. See "Description of New
Securities--Description of New Capital Securities."
New Junior
Subordinated Debentures The New Junior Subordinated Debentures will be
identical in all material respects to the Old Junior
Subordinated Debentures, except that the New Junior
Subordinated Debentures have been registered under
the Securities Act and therefore will not be subject
to certain of the restrictions on transfer applicable
to the Old Junior Subordinated Debentures and the New
Junior Subordinated Debentures will not provide for
any increase in the rate at which interest will
accrue thereon. The Junior Subordinated Debentures
will mature on April 15, 2012. The Junior
Subordinated Debentures will rank subordinate and
junior in right of payment to all Senior Indebtedness
of the Company. In addition, the Company's
obligations under the Junior Subordinated Debentures
will be structurally subordinated to all existing and
future liabilities and obligations of its
subsidiaries. See "Risk Factors--Ranking of
Subordinate Obligations Under the Guarantee and the
Junior Subordinated Debentures," "Risk
Factors--Status of Company as Holding Company" and
"Description of New Securities--Description of New
<PAGE>
Junior Subordinated Debentures--Subordination."
Right to Defer Interest Subject to certain exceptions, the Company has the
right to defer payment of interest on the Junior
Subordinated Debentures by extending the interest
payment period on the Junior Subordinated Debentures,
from time to time, for up to 10 consecutive
semi-annual periods (an "Extension Period"). If
interest payments on the Junior Subordinated
Debentures are so deferred, Distributions on the New
Capital Securities will also be deferred for an
equivalent period and the Company may not, and may
not permit any subsidiary of the Company to, (i)
declare or pay any dividends or distributions on, or
redeem, purchase, acquire, or make a liquidation
payment with respect to, the Company's capital stock,
(ii) make any payment of principal, interest or
premium, if any, on or repay, repurchase or redeem
any debt securities that rank pari passu with or
junior to the Junior Subordinated Debentures or (iii)
make any guarantee payments with respect to any
guarantee by the Company of the debt securities of
any subsidiary of the Company if such guarantee ranks
pari passu with or junior to the Junior Subordinated
Debentures (other than (a) dividends or distributions
in common stock of the Company or warrants, options
or other rights where the Company's common stock is
issuable upon the exercise thereof, (b) payments
under the Guarantee, (c) any declaration of a
dividend in connection with the implementation of a
stockholders' rights plan, or the issuance of stock
under any such plan in the future, or the redemption
or repurchase of any such rights pursuant thereto,
(d) as a result of an exchange or conversion (x) of
any class or series of the Company's capital stock
(or any capital stock of a subsidiary of the Company)
for any class or series of the Company's capital
stock or (y) of any class or series of the Company's
indebtedness for any class or series of the Company's
capital stock, (e) the purchase of fractional
interests in shares of the Company's capital stock
pursuant to the conversion or exchange provisions of
such capital stock or the security being converted or
exchanged, and (f) purchases of common stock related
to the issuance of common stock or rights under any
employment agreement, benefit plan or similar
agreement for the directors, officers, employees, and
consultants of the Company and its subsidiaries,
related to the issuance of common stock or rights
under a dividend reinvestment and stock purchase plan
or related to the issuance of common stock (or
securities convertible into or exchangeable for
common stock) as consideration in an acquisition
transaction that was entered into prior to the
<PAGE>
commencement of such Extension Period). During an
Extension Period, interest on the Junior Subordinated
Debentures will continue to accrue (and the amount of
Distributions to which holders of the New Capital
Securities are entitled will accumulate) at the rate
of 8.50% per annum, compounded semi-annually, to the
extent permitted by applicable law, and holders of
the New Capital Securities will be required to
recognize income (in the form of original issue
discount) for United States federal income tax
purposes prior to receipt of the cash related to such
income. See "Risk Factors--Option to Defer Interest
Payments; Tax Consequences; Market Consequences,"
"Description of New Securities-- Description of New
Junior Subordinated Debentures-- Option to Defer
Interest Payments" and "Certain United States Federal
Income Tax Consequences--Interest Income and Original
Issue Discount."
New Guarantee The Company has, through the Guarantee, the
Declaration, the Junior Subordinated Debentures and
the Indenture, taken together, fully, irrevocably and
unconditionally guaranteed all of the Trust's
obligations under the New Capital Securities. The
New Guarantee is identical in all material respects
to the Old Guarantee, except that the New Guarantee
has been registered under the Securities Act. The
Guarantee guarantees the payment of Distributions and
payments on liquidation of the Trust or redemption or
maturity of the New Capital Securities, but in each
case only to the extent of funds held by the Trust,
as described herein. If the Company does not make
interest payments on the Junior Subordinated
Debentures held by the Trust, the Trust will have
insufficient funds to pay Distributions on the New
Capital Securities. The Guarantee does not cover
payment of Distributions when the Trust has
insufficient funds to pay such Distributions. See
"Description of New Securities--Description of New
Guarantee" and "Relationship Among the New Capital
Securities, the New Junior Subordinated Debentures
and the New Guarantee." The obligations of the
Company under the Guarantee are subordinate and
junior in right of payment to all Senior Indebtedness
of the Company and will be structurally subordinated
to all liabilities and obligations of the Company's
subsidiaries. See "Risk Factors--Ranking of
Subordinated Obligations Under the New Guarantee and
the New Junior Subordinated Debentures" and
"Description of New Securities--Description of New
Guarantee."
Redemption The New Capital Securities are subject to mandatory
redemption upon the repayment of Junior Subordinated
<PAGE>
Debentures at maturity or their earlier redemption.
The Junior Subordinated Debentures are redeemable
prior to maturity at the option of the Company at any
time, in whole but not in part, upon the occurrence
of a Special Event (as defined herein) at a
redemption price equal to the principal amount of,
plus accrued and unpaid interest on, the Junior
Subordinated Debentures. See "Description of New
Securities--Description of New Capital
Securities--Redemption" and "Description of New
Securities--Description of New Junior Subordinated
Debentures--Special Event Redemption."
Liquidation of the Trust The Company has the right at any time to terminate
the Trust and cause the Junior Subordinated
Debentures to be distributed to the holders of the
Capital Securities and the Common Securities in
liquidation of the Trust. In the event of the
termination of the Trust, after satisfaction of the
claims of creditors of the Trust, if any, as provided
by applicable law, the holders of the Capital
Securities will be entitled to receive a Liquidation
Amount of $1,000 per Capital Security plus
accumulated and unpaid Distributions thereon to the
date of payment, which may be in the form of a
distribution of such amount in Junior Subordinated
Debentures. See "Description of New
Securities--Description of New Capital Securities--
Liquidation Distribution Upon Dissolution."
Transfer The New Capital Securities will be issued, and may be
transferred, only in blocks having an aggregate
Liquidation Amount of not less than $100,000 (100 New
Capital Securities). Any transfer, sale or other
disposition of New Capital Securities in a block
having an aggregate Liquidation Amount of less than
$100,000, or resulting in a holder's holding New
Capital Securities in a block having a Liquidation
Amount of less than $100,000, shall be deemed to be
void and of no legal effect whatsoever. See
"Description of New Securities--Description of New
Capital Securities-- Restrictions on Transfer."
Use of Proceeds Neither the Company nor the Trust will receive any
proceeds from the issuance of the New Securities
offered hereby. See "Use of Proceeds."
Ratings It is expected that the New Capital Securities will
be rated BBB- by Standard & Poor's Ratings Services
("S&P") and baa3 by Moody's Investors Service, Inc.
("Moody's"). A security rating is not a
recommendation to buy, sell or hold securities and
may be subject to revision or withdrawal or
suspension at any time by the assigning rating
<PAGE>
organization.
ERISA Considerations Holders of Old Capital Securities must carefully
consider the restrictions on purchase set forth under
"Benefit Plan Considerations" before tendering such
Old Capital Securities for exchange in the Exchange
Offer.
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
The summary below should be read in connection with the financial
information included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1996, the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1997 and the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30,1997, each of which is incorporated by reference
herein.
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
1992 1993 1994 1995 1996
INCOME STATEMENT DATA: (Dollars in thousands, except per share data)
REVENUES
<S> <C> <C> <C> <C> <C>
Operating revenues $1,102,385 $1,379,781 $1,356,946 $1,227,185 $1,571,168
Investment and other
income 13,082 18,645 19,447 23,031 26,398
1,115,467 1,398,426 1,376,393 1,250,216 1,597,566
Expenses:
Salaries and other
personnel costs 339,229 397,902 423,328 431,984 531,250
Premiums retained by
agents 378,547 504,375 533,598 413,444 516,593
Other operating
expenses 188,361 222,934 232,532 260,611 327,744
Provision for title
losses and other
claims 98,214 125,588 110,230 90,387 86,487
Depreciation and
amortization 15,114 16,333 19,796 18,002 22,207
Interest 6,038 4,419 6,267 6,242 4,796
Minority interest 4,893 5,267 2,944 2,132 2,624
1,030,396 1,276,818 1,328,695 1,222,802 1,491,701
Income before premium
and income taxes 85,071 121,608 47,698 27,414 105,865
Premium taxes 13,613 17,617 15,453 13,627 16,676
Income before income 71,458 103,991 32,245 13,787 89,189
taxes
Income taxes 28,200 41,900 13,300 6,200 35,600
Income before
cumulative effect of
a change in accounting
for income taxes 43,258 62,091 18,945 7,587 53,589
Cumulative effect of a
change in accounting
for income taxes -- 4,200 -- -- --
Net income $ 43,258 $ 66,291 $ 18,945 $ 7,587 $ 53,589
PER SHARE DATA:<F1>
Income before
cumulative effect of a
change in accounting
for income taxes $ 4.55 $ 5.47 $ 1.66 $ 0.67 $ 4.68
<PAGE>
Cumulative effect of a
change in accounting
for income taxes -- 0.37 -- -- --
Net income per share $ 4.55 $ 5.84 $ 1.66 $ 0.67 $ 4.68
Six Months Ended
June 30,
1996 1997
INCOME STATEMENT DATA:
REVENUES
<S> <C> <C>
Operating revenues $745,757 $819,872
Investment and other
income 14,993 13,379
760,750 833,251
Expenses:
Salaries and other
personnel costs 252,982 298,599
Premiums retained by
agents 238,090 251,155
Other operating expenses 157,475 180,668
Provision for title losses
and other claims 42,463 41,049
Depreciation and
amortization 10,007 13,122
Interest 2,510 3,660
Minority interest 1,484 1,294
705,011 789,547
Income before premium and
income taxes 55,739 43,704
Premium taxes 7,930 8,722
Income before income taxes 47,809 34,982
Income taxes 19,800 13,600
Income before cumulative
effect of a change in
accounting for income taxes 28,009 21,382
Cumulative effect of a change
in accounting for income
taxes -- --
Net income $ 28,009 $ 21,382
PER SHARE DATA:<F1>
Income before cumulative
effect of a change in
accounting for income taxes $ 2.45 $ 1.85
Cumulative effect of a change
in accounting for income
<PAGE>
taxes -- --
Net income per share $ 2.45 $ 1.85
December 31,
1992 1993 1994 1995 1996
BALANCE SHEET DATA: (Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Cash and invested assets $ 308,083 $ 359,127 $ 368,999 $ 340,089 $ 364,620
Total assets $ 691,279 $ 786,448 $ 828,649 $ 873,778 $ 979,794
Notes and contracts $ 81,981 $ 85,022 $ 89,600 $ 77,206 $ 71,257
payable
Total stockholders' equity $ 216,842 $ 283,718 $ 292,110 $ 302,767 $ 352,465
OTHER DATA:
Loss ratio 8.9% 9.1% 8.1% 7.4% 5.5%
Ratio of debt to total
capitalization<F2> 25.3% 21.5% 22.1% 19.1% 16.0%
Ratio of earnings
to fixed charges 12.8 24.5 6.1 3.2 19.6
Cash dividends per share $ 0.41 $ 0.51 $ 0.60 $ 0.60 $ 0.69
June 30,
1996 1997
BALANCE SHEET DATA:
<S> <C> <C>
Cash and invested assets $ 349,827 $376,345
Total assets $ 930,596 $1,095,445
Notes and contracts $ 72,402 $39,846
payable
Total stockholders' equity $325,269 $370,594
OTHER DATA:
Loss ratio 5.7% 5.1%
Ratio of debt to total
capitalization<F2> 17.2% 7.8%
Ratio of earnings
to fixed charges 20.0 10.6
Cash dividends per share $ 0.33 $ 0.36
<FN>
<F1> Based upon the weighted average number of common shares outstanding.
<F2> Capitalization includes minority interests and junior subordinated deferrable interest debentures.
</TABLE>
<PAGE>
RISK FACTORS
Prospective purchasers of the New Capital Securities should carefully
review the information contained elsewhere in and incorporated by reference in
this Prospectus and should particularly consider the following matters.
Because holders of New Capital Securities may receive Junior Subordinated
Debentures on termination of the Trust, prospective purchasers of New Capital
Securities are also making an investment decision with regard to the Junior
Subordinated Debentures and should carefully review all the information
regarding the Junior Subordinated Debentures contained herein. See
"Description of New Securities--Description of New Capital
Securities--Liquidation Distribution Upon Dissolution" and "Description of New
Securities--Description of New Junior Subordinated Debentures." To the extent
any of the information contained or incorporated by reference in this
Prospectus constitutes a "forward-looking statement" as defined in Section
21E(i)(1) of the Exchange Act, the risk factors set forth below are cautionary
statements identifying important factors that could cause actual results to
differ materially from those in the forward-looking statement.
RANKING OF SUBORDINATED OBLIGATIONS UNDER THE GUARANTEE AND THE JUNIOR
SUBORDINATED DEBENTURES
The obligations of the Company under the Guarantee and under the Junior
Subordinated Debentures are unsecured and rank subordinate and junior in right
of payment to all Senior Indebtedness of the Company. At June 30, 1997, the
Senior Indebtedness of the Company aggregated approximately $13.2 million.
Neither the Indenture, the Guarantee nor the Declaration places any limitation
on the amount of secured or unsecured Senior Indebtedness that may be incurred
by the Company. See "Description of New Securities--Description of New
Guarantee--Status of the New Guarantee" and "Description of New Securities--
Description of New Junior Subordinated Debentures--Subordination."
STATUS OF COMPANY AS HOLDING COMPANY
As a holding company, the ability of the Company to make payments of
interest and principal on the Junior Subordinated Debentures will be dependent
primarily upon the receipt of dividends and other distributions from its
subsidiaries. First American Title Insurance Company ("FATICO"), which is the
Company's principal subsidiary, is subject to regulatory restrictions on its
ability to pay dividends or make other payments to the Company. In 1997, the
maximum amount of dividends, loans and advances available to the Company from
FATICO is $49.7 million. In addition, the right of the Company to participate
in any distribution of assets of any subsidiary, including FATICO, upon such
subsidiary's liquidation or reorganization or otherwise, will be subject to
the prior claims of creditors of that subsidiary, except to the extent that
any claims of the Company as a creditor of such subsidiary may be recognized
as such. Accordingly, the New Capital Securities will effectively be
subordinated to all existing and future liabilities and obligations of the
Company's subsidiaries, and holders of the New Capital Securities should look
only to the assets of the Company for payments on the New Capital Securities.
As of June 30, 1997, the Company's subsidiaries had liabilities and
obligations of approximately $609.8 million. See "The First American Financial
Corporation."
<PAGE>
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF NEW CAPITAL SECURITIES
If a Trust Enforcement Event (as defined herein) occurs and is
continuing, then the holders of Capital Securities would rely on the
enforcement by the Property Trustee (as defined herein) of its rights as a
holder of the Junior Subordinated Debentures against the Company. The holders
of a majority in aggregate Liquidation Amount of the Capital Securities will
have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Property Trustee or to direct the
exercise of any trust or power conferred upon the Property Trustee under the
Declaration, including the right to direct the Property Trustee to exercise
the remedies available to it as a holder of the Junior Subordinated
Debentures. If the Property Trustee fails to enforce its rights with respect
to the Junior Subordinated Debentures held by the Trust, any record holder of
New Capital Securities may institute legal proceedings directly against the
Company to enforce the Property Trustee's rights under such Junior
Subordinated Debentures without first instituting any legal proceedings
against the Property Trustee or any other person or entity.
If the Company were to default on its obligation to pay amounts payable
under the Junior Subordinated Debentures, the Trust would lack funds for the
payment of Distributions or amounts payable on redemption of the New Capital
Securities or otherwise, and, in such event, holders of the New Capital
Securities would not be able to rely upon the Guarantee for payment of such
amounts. However, in the event the Company failed to pay interest on or
principal of the Junior Subordinated Debentures on any payment date on which
such payment is due and payable, then a holder of New Capital Securities may
(after lapse of any applicable cure period) directly institute a proceeding
against the Company under the Indenture for enforcement of payment to such
holder of the interest on or principal of Junior Subordinated Debentures
having a principal amount equal to the aggregate Liquidation Amount of the New
Capital Securities of such holder (a "Direct Action"). In connection with
such Direct Action, the Company will have a right of set-off under the
Indenture to the extent of any payment made by the Company to such holder of
New Capital Securities in such Direct Action. Except as set forth herein,
holders of New Capital Securities will not be able to exercise directly any
other remedy available to the holders of Junior Subordinated Debentures or
assert directly any other rights in respect of the Junior Subordinated
Debentures. See "Description of New Securities--Description of New Capital
Securities-- Trust Enforcement Events," "Description of New Securities--
Description of New Junior Subordinated Debentures--Indenture Events of
Default" and "--Enforcement of Certain Rights by Holders of Capital
Securities" and "Description of New Securities--Description of New Guarantee."
The Declaration provides that each holder of New Capital Securities by
acceptance thereof agrees to the provisions of the Guarantee and the
Indenture.
OPTION TO DEFER INTEREST PAYMENTS; TAX CONSEQUENCES; MARKET CONSEQUENCES
So long as no event of default under the Indenture has occurred and is
continuing, the Company has the right under the Indenture to defer the payment
of interest on the Junior Subordinated Debentures at any time or from time to
time for a period not exceeding 10 consecutive semi-annual periods, provided
that no Extension Period may extend beyond the Stated Maturity of the Junior
<PAGE>
Subordinated Debentures. As a consequence of any such deferral, semi-annual
Distributions on the New Capital Securities by the Trust will be deferred
during any such Extension Period but would continue to accumulate at the rate
of 8.50% per annum, compounded (to the extent permitted by applicable law)
semi-annually during any such Extension Period. During any such Extension
Period, the Company may not, and may not permit any subsidiary of the Company
to, (i) declare or pay any dividends or distributions on, or redeem, purchase,
acquire, or make a liquidation payment with respect to, any of the Company's
capital stock, (ii) make any payment of principal, interest or premium, if
any, on or repay, repurchase or redeem any debt securities of the Company that
rank pari passu with or junior to the Junior Subordinated Debentures or (iii)
make any guarantee payments with respect to any guarantee by the Company of
the debt securities of any subsidiary of the Company if such guarantee ranks
pari passu with or junior to the Junior Subordinated Debentures (other than
(a) dividends or distributions in common stock of the Company and warrants,
options or other rights where the Company's common stock is issuable upon the
exercise thereof, (b) payments under the Guarantee, (c) any declaration of a
dividend in connection with the implementation of a stockholders' rights plan,
or the issuance of stock under any such plan in the future, or the redemption
or repurchase of any such rights pursuant thereto, (d) as a result of an
exchange or conversion (x) of any class or series of the Company's capital
stock (or any capital stock of a subsidiary of the Company) for any class or
series of the Company's capital stock or (y) of any class or series of the
Company's indebtedness for any class or series of the Company's capital stock,
(e) the purchase of fractional interests in shares of the Company's capital
stock pursuant to the conversion or exchange provisions of such capital stock
or the security being converted or exchanged, and (f) purchases of common
stock related to the issuance of common stock or rights under any employment
agreement, benefit plan or similar agreement for the directors, officers,
employees and consultants of the Company and its subsidiaries, related to the
issuance of common stock or rights under a dividend reinvestment and stock
purchase plan or related to the issuance of common stock (or securities
convertible into or exchangeable for common stock) as consideration in an
acquisition transaction that was entered into prior to the commencement of
such Extension Period). Prior to the termination of any such Extension
Period, the Company may further extend the Extension Period, provided that no
Extension Period may exceed 10 consecutive semi-annual periods or extend
beyond the Stated Maturity of the Junior Subordinated Debentures. Upon the
termination of any Extension Period and the payment of all amounts then due on
any Interest Payment Date, the Company may elect to begin a new Extension
Period subject to the above requirements. See "Description of New Securities-
- -Description of New Capital Securities--Distributions" and "Description of New
Securities--Description of New Junior Subordinated Debentures--Option to Defer
Interest Payments."
Should the Company defer payment of interest on the Junior Subordinated
Debentures, a holder of New Capital Securities will be required to recognize
income (in the form of original issue discount) for United States federal
income tax purposes in respect of its pro rata share of the Junior
Subordinated Debentures held by the Trust. As a result, a holder of New
Capital Securities will include such interest income in gross income for
United States federal income tax purposes in advance of the receipt of cash
attributable to such interest income, and will not receive the cash related to
such income from the Trust if the holder disposes of the New Capital
<PAGE>
Securities prior to the record date for the payment of Distributions with
respect to such Extension Period. See "Certain United States Federal Income
Tax Consequences--Interest Income and Original Issue Discount" and "--Sales of
New Capital Securities."
The Company has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the Junior
Subordinated Debentures. However, should the Company elect to exercise such
right in the future, the market price of the New Capital Securities is likely
to be adversely affected. A holder that disposes of its New Capital
Securities during an Extension Period, therefore, might not receive the same
return on its investment as a holder that continues to hold its New Capital
Securities. In addition, as a result of the Company's right to defer interest
payments, the market price of the New Capital Securities (which represent
undivided beneficial interests in the Junior Subordinated Debentures) may be
more volatile than the market prices of other similar securities where the
issuer does not have such right to defer interest payments.
SPECIAL EVENT REDEMPTION
Upon the occurrence of a Special Event (as defined below), the Company
has the right, if certain conditions are met, to redeem the Junior
Subordinated Debentures in whole (but not in part) within 90 days following
the occurrence of such Special Event and thereby causing a mandatory
redemption of the New Capital Securities. See "Description of New Securities-
- -Description of New Junior Subordinated Debentures--Special Event Redemption".
A "Special Event" means a Tax Event or an Investment Company Event. A
"Tax Event" means the receipt by the Company of an opinion of counsel
experienced in such matters to the effect that as a result of any amendment
to, or change (including any announced proposed change) in, the laws (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof or therein, or as a result of any official
administrative pronouncement or judicial decision interpreting or applying
such laws or regulations, which amendment or change is effective or which
proposed change, pronouncement or decision is announced on or after April 22,
1997, there is more than an insubstantial risk that (i) the Trust is, or will
be within 90 days of the date of such opinion, subject to United States
federal income tax with respect to income received or accrued on the Junior
Subordinated Debentures, (ii) interest payable by the Company on the Junior
Subordinated Debentures is not, or within 90 days of the date of such opinion,
will not be, deductible by the Company, in whole or in part, for United States
federal income tax purposes or (iii) the Trust is, or will be within 90 days
of the date of the opinion, subject to more than a de minimis amount of other
taxes, duties or other governmental charges.
"Investment Company Event" means the receipt by the Trust of an opinion
of counsel, rendered by a law firm having a recognized national securities
practice, to the effect that, as a result of the occurrence of a change in law
or regulation or a change in interpretation or application of law or
regulation by any legislative body, court, governmental agency or regulatory
authority ( a "Change in 1940 Act Law"), the Trust is or will be considered an
"investment company" that is required to be registered under the Investment
Company Act of 1940, as amended (the "Investment Company Act"), which Change
<PAGE>
in 1940 Act Law becomes effective on or after April 22, 1997.
LIQUIDATION DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES
Upon liquidation of the Trust, the Junior Subordinated Debentures may be
distributed to the holders of the Capital Securities and Common Securities in
exchange therefor. Under current United States federal income tax law and
interpretations thereof, a distribution by the Trust of the Junior
Subordinated Debentures pursuant to a liquidation of the Trust should not be a
taxable event to the Trust or to holders of the New Capital Securities, and
should result in a holder of the New Capital Securities receiving directly
such holder's pro rata share of the Junior Subordinated Debentures (previously
held indirectly through the Trust). If, however, the liquidation of the Trust
were to occur because the Trust is subject to United States federal income tax
with respect to income accrued or received on the Junior Subordinated
Debentures as a result of the occurrence of a Special Event or otherwise, the
distribution of Junior Subordinated Debentures to holders of the New Capital
Securities by the Trust would be a taxable event to the Trust and each holder,
and U.S. Holders (as defined in "Certain United States Federal Tax
Consequences") of the New Capital Securities would recognize gain or loss as
if they had exchanged their New Capital Securities for the Junior Subordinated
Debentures they received upon the liquidation of the Trust. See "Certain
United States Federal Income Tax Consequences--Distribution of Junior
Subordinated Debentures or Cash Upon Liquidation of the Trust."
There can be no assurance as to the market prices for New Capital
Securities or Junior Subordinated Debentures that may be distributed in
exchange for New Capital Securities if a liquidation of the Trust occurs.
Accordingly, the New Capital Securities or the Junior Subordinated Debentures
that a holder of New Capital Securities may receive on liquidation of the
Trust, may trade at a discount to the price that the investor paid to purchase
the New Capital Securities offered hereby.
LIMITED VOTING RIGHTS
Holders of New Capital Securities generally will have limited voting
rights relating only to the modification of the New Capital Securities and
certain other matters described herein. Holders of New Capital Securities
will not be entitled to vote to appoint, remove or replace any of the Trustees
(as defined below), which voting rights are vested exclusively in the holder
of the Common Securities. The Trustees and the Company may amend the
Declaration without the consent of holders of New Capital Securities to ensure
that the Trust, (i) will be classified as a grantor trust for United States
federal income tax purposes or (ii) will not be required to register as an
"investment company" under the Investment Company Act unless, in either case,
such action materially and adversely affects the interests of such holders.
See "Description of New Securities--Description of New Capital
Securities--Voting Rights; Amendment of the Declaration."
RIGHTS UNDER THE GUARANTEE
The Guarantee guarantees to the holders of the New Capital Securities the
following payments or distributions (without duplication), to the extent not
paid by or made by or on behalf of the Trust: (i) any accumulated and unpaid
<PAGE>
distributions required to be paid on the New Capital Securities, to the extent
that the Trust has funds on hand available therefor at such time, (ii) the
redemption price, including all accrued and unpaid distributions to the date
of the redemption, with respect to any New Capital Securities called for
redemption by the Trust, to the extent that the Trust has funds on hand
available therefor at such time, and (iii) upon a voluntary or involuntary
dissolution, winding up or liquidation of the Trust (unless the Junior
Subordinated Debentures are distributed to holders of the New Capital
Securities in exchange therefor), the lesser of (a) the aggregate of the
Liquidation Amount and all accumulated and unpaid Distributions to the date of
payment and (b) the amount of assets of the Trust remaining available for
distribution to holders of the New Capital Securities after satisfaction of
the liabilities to creditors of the Trust as required by applicable law.
Wilmington Trust Company will act as the guarantee trustee (the "Guarantee
Trustee") and will hold the Guarantee for the benefit of the holders of the
New Capital Securities. Wilmington Trust Company will also act as Debenture
Trustee for the Junior Subordinated Debentures and as Property Trustee and
Delaware Trustee (as defined below) under the Declaration.
The Guarantee is subordinate to all Senior Indebtedness. See
"Description of New Securities--Description of the New Guarantee--Status of
New Guarantee."
The holders of not less than a majority in aggregate Liquidation Amount
of the New Capital Securities have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Guarantee
Trustee in respect of the Guarantee or to direct the exercise of any trust
power conferred upon the Guarantee Trustee under the Guarantee. Any holder of
the New Capital Securities may institute a legal proceeding directly against
the Company to enforce its rights under the Guarantee without first
instituting a legal proceeding directly against the Trust, the Guarantee
Trustee or any other person or entity. If the Company were to default on its
obligation to pay amounts payable under the Junior Subordinated Debentures,
the Trust would lack funds for the payment of distributions or amounts payable
on redemption of the New Capital Securities or otherwise, and, in such event,
holders of the New Capital Securities would not be able to rely upon the
Guarantee for payment of such amounts. Instead, if an event of default under
the Indenture shall have occurred and be continuing and such event is
attributable to the failure of the Company to pay interest or premium, if any,
on or principal of the Junior Subordinated Debentures on the applicable
payment date, then a holder of New Capital Securities may institute a Direct
Action against the Company pursuant to the terms of the Indenture for
enforcement of payment to such holder of the principal of or interest or
premium, if any, on Junior Subordinated Debentures having a principal amount
equal to the aggregate Liquidation Amount of the New Capital Securities of
such holder.
CONSEQUENCES OF A FAILURE TO EXCHANGE OLD CAPITAL SECURITIES
The Old Capital Securities have not been registered under the Securities
Act or any state securities laws and therefore may not be offered, sold or
otherwise transferred except in compliance with the registration requirements
of the Securities Act and any other applicable securities laws, or pursuant to
an exemption therefrom or in a transaction not subject thereto, and in each
<PAGE>
case in compliance with certain other conditions and restrictions. Old
Capital Securities that remain outstanding after consummation of the Exchange
Offer will continue to bear a legend reflecting such restrictions on transfer.
In addition, upon consummation of the Exchange Offer, holders of Old Capital
Securities that remain outstanding will not be entitled to any rights to have
such Old Capital Securities registered under the Securities Act or to any
similar rights under the Registration Rights Agreement (subject to certain
limited exceptions). The Company and the Trust do not intend to register
under the Securities Act any Old Capital Securities that remain outstanding
after consummation of the Exchange Offer (subject to such limited exceptions,
if applicable).
To the extent that Old Capital Securities are tendered and accepted in
the Exchange Offer, a holder's ability to sell untendered Old Capital
Securities could be adversely affected. To the extent that Old Capital
Securities are tendered and accepted in connection with the Exchange Offer,
any trading market in the Old Capital Securities that remain outstanding after
the Exchange Offer could be adversely affected.
The Old Capital Securities provide, among other things, that, if the
Exchange Offer is not consummated by December 2, 1997 (a "Registration
Default"), the Company will pay additional interest ("Additional Interest") in
respect of the Old Junior Subordinated Debentures and corresponding additional
Distributions ("Additional Distributions") will become payable on the Old
Capital Securities, with respect to the first 30-day period immediately
following the occurrence of such Registration Default, in an amount equal to
0.25% per week per $1,000 Liquidation Amount of Old Capital Securities. The
amount of Additional Interest (and corresponding Additional Distributions)
will increase by an additional 0.25% per week per $1,000 Liquidation Amount of
Old Capital Securities with respect to each subsequent 30-day period until
such Registration Default has been cured, up to a maximum amount of Additional
Interest (and corresponding Additional Distributions) of 0.50% per week per
$1,000 Liquidation Amount of Old Capital Securities. Upon consummation of the
Exchange Offer, holders of Old Capital Securities will not be entitled to any
Additional Distributions or any further registration rights under the
Registration Rights Agreement, except under limited circumstances. See
"Description of Old Securities." The New Capital Securities will not be
entitled to any such increase in the Distribution rate thereon.
ABSENCE OF PUBLIC MARKET
The Old Capital Securities have not been registered under the Securities
Act and will be subject to restrictions on transferability to the extent that
they are not exchanged for the New Capital Securities. Although the New
Capital Securities will generally be permitted to be resold or otherwise
transferred by the holders (so long as the holders are not Affiliates) without
compliance with the registration requirements under the Securities Act, they
will constitute a new issue of securities with no established trading market.
The Old Capital Securities and the New Capital Securities may be transferred
by the holders thereof only in blocks having a Liquidation Amount of not less
than $100,000 (100 Old Capital Securities or New Capital Securities, as the
case may be). See "Description of New Securities-- Description of New Capital
Securities--Restrictions on Transfer" and "Description of Old Securities."
The Company and the Trust were advised by Chase Securities Inc. and UBS
<PAGE>
Securities LLC (collectively, the "Initial Purchasers") in connection with the
offering of the Old Capital Securities that the Initial Purchasers intended to
make a market in the Old Capital Securities. However, the Initial Purchasers
are not obligated to make a market in the Old Capital Securities or the New
Capital Securities, and any market-making activity with respect to the Old
Capital Securities or the New Capital Securities may be discontinued at any
time without notice. In addition, such market-making activity will be subject
to the limits imposed by the Securities Act and the Exchange Act and may be
limited during the Exchange Offer. Accordingly, no assurance can be given
that an active public or other market will develop for the Old Capital
Securities or the New Capital Securities or as to the liquidity of or the
trading market for the Old Capital Securities or the New Capital Securities.
If an active public market does not develop, the market price and liquidity of
the Old Capital Securities or the New Capital Securities may be adversely
affected.
If a public trading market develops for the New Capital Securities,
future trading prices of such securities will depend on many factors,
including, among other things, prevailing interest rates, results of
operations and the market for similar securities. Depending on prevailing
interest rates, the market for similar securities and other factors, including
the financial condition of the Company, the New Capital Securities may trade
at a discount.
Notwithstanding the registration of the New Capital Securities in the
Exchange Offer, holders who are Affiliates may publicly offer for sale or
resell the New Capital Securities only in compliance with provisions of Rule
144 under the Securities Act.
Each Participating Broker-Dealer that receives New Capital Securities for
its own account must acknowledge that it will deliver a prospectus in
connection with any resale of such New Capital Securities. See "Plan of
Distribution."
EXCHANGE OFFER PROCEDURES
Delivery of the New Capital Securities in exchange for Old Capital
Securities pursuant to the Exchange Offer will be made only after a timely
receipt by the Exchange Agent of such Old Capital Securities, a properly
completed and duly executed Letter of Transmittal or Agent's Message in lieu
thereof and all other required documents. Therefore, holders of the Old
Capital Securities desiring to tender such Old Capital Securities in exchange
for New Capital Securities should allow sufficient time to ensure timely
delivery. None of the Company, the Trust or the Exchange Agent is under any
duty to give notification of defects or irregularities with respect to the
tenders of Old Capital Securities for exchange.
USE OF PROCEEDS
Neither the Company nor the Trust will receive any proceeds from the
issuance of the New Capital Securities. In consideration for delivering the
New Capital Securities in exchange for Old Capital Securities as described in
this Prospectus, the Company will receive Old Capital Securities in like
Liquidation Amount. The Old Capital Securities surrendered in exchange for
<PAGE>
the New Capital Securities and the Old Junior Subordinated Debentures
surrendered in exchange for a like principal amount of Junior Subordinated
Debentures will be retired and cancelled.
The net proceeds to the Trust from the offering of the Old Capital
Securities was approximately $100,000,000. All of the proceeds from the sale
of Old Capital Securities were invested by the Trust in the Old Junior
Subordinated Debentures. The Company has used approximately $92.7 million of
the proceeds from the sale of the Old Junior Subordinated Debentures as
follows: (i) approximately $27.7 million was used to repay all amounts
outstanding under the variable rate indebtedness portion of the Credit
Facility (as defined herein); (ii) approximately $25.0 million was used in
connection with acquisitions by the Company, including the acquisition of
Strategic Mortgage Services, Inc. (and its subsidiaries) (see "The First
American Financial Corporation--Real Estate Information Services"); and (iii)
approximately $40.0 million was used to repay intercompany debt with the
Company's subsidiary, First American Title Insurance Company. The remaining
$7.3 million of proceeds is expected to be used by the Company for general
corporate purposes, which may include the repayment of amounts outstanding
under the fixed rate indebtedness portion of the Credit Facility, the
repayment of sale/leaseback obligations, the financing of the construction of
a new corporate facility, investments in or extensions of credit to its
subsidiaries and the financing of further acquisitions. The Company's
borrowings under its bank credit agreement (the "Credit Facility") consist of
$6,560,000 of fixed rate indebtedness bearing an interest rate of 9.38% per
annum and maturing in April 1999; and, immediately prior to repayment,
$27,690,000 of variable rate indebtedness bearing an interest rate at the
higher of The Chase Manhattan Bank's prime lending rate or the federal funds
rate plus 50 basis points.
CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
The Company's consolidated ratio of earnings to fixed charges for each of
the periods indicated are set forth below:
<TABLE>
<CAPTION> Six Months
Ended June 30, Year Ended December 31
1997 1996 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings to
Fixed Charges (actual) . . . 10.6 20.0 19.6 3.2 6.1 24.5 12.8
(proforma) . . . . . 6.5 9.1 8.5 1.8
</TABLE>
For purposes of computing the ratio of earnings to fixed charges,
earnings represent net income plus applicable income taxes and fixed charges.
Fixed charges represent interest expense. Proforma fixed charges include
interest on Junior Subordinated Debentures and excludes variable rate
indebtedness interest under the Credit Facility.
ACCOUNTING TREATMENT
<PAGE>
For financial reporting purposes, the Trust will be treated as a
subsidiary of the Company and, accordingly, the accounts of the Trust will be
included in the consolidated financial statements of the Company. The Capital
Securities will be presented in the consolidated balance sheet of the Company
as a separate line item directly above stockholders' equity under the caption
"Guaranteed Preferred Beneficial Interests in Company's Junior Subordinated
Deferrable Interest Debentures" and appropriate disclosures about the Capital
Securities, the Junior Subordinated Debentures and the Guarantee will be
included in the notes to the consolidated financial statements. For financial
reporting purposes, the Company will record Distributions payable on the
Capital Securities as an expense in the consolidated statements of income.
CAPITALIZATION
The issuance of the New Capital Securities in the Exchange Offer will
have no effect on the capitalization of the Company as of June 30, 1997.
THE TRUST
The Trust is a statutory business trust created under the Trust Act,
pursuant to a declaration of trust and the filing of a certificate of trust
with the Secretary of State of the State of Delaware. The Company has
acquired and directly owns Common Securities in an aggregate Liquidation
Amount equal to 3% of the total capital of the Trust. The Trust used all of
the proceeds derived from the issuance of the Old Capital Securities and the
Common Securities to purchase the Old Junior Subordinated Debentures.
Following the consummation of the Exchange Offer, the assets of the Trust will
consist solely of the New Junior Subordinated Debentures. The Trust exists
for the exclusive purposes of (i) issuing the Trust Securities representing
undivided beneficial ownership interests in the assets of the Trust, (ii)
investing the gross proceeds of the Trust Securities in and holding the Junior
Subordinated Debentures, and (iii) engaging in only those other activities
necessary or incidental thereto.
Pursuant to the Declaration, there will initially be four Trustees (the
"Trustees") for the Trust. Two of the Trustees (the "Regular Trustees") will
be individuals who are employees or officers of or who are affiliated with the
Company. The third trustee will be a financial institution that is
unaffiliated with the Company (the "Property Trustee"). The fourth trustee
will be an entity that maintains its principal place of business in the State
of Delaware (the "Delaware Trustee"). Initially, Wilmington Trust Company
will act as Property Trustee and as Delaware Trustee until, in each case,
removed or replaced by the holder of the Common Securities.
The Property Trustee will hold title to the Junior Subordinated
Debentures for the benefit of the holders of the Trust Securities, and the
Property Trustee will have the power to exercise all rights, powers and
privileges with respect to the Junior Subordinated Debentures under the
Indenture (as defined herein) as the holder of the Junior Subordinated
Debentures. In addition, the Property Trustee will maintain exclusive control
of a segregated non-interest bearing bank account (the "Property Account") to
hold all payments made in respect of the Junior Subordinated Debentures for
the benefit of the holders of the Trust Securities. The Guarantee Trustee
will hold the Guarantee for the benefit of the holders of the Capital
<PAGE>
Securities. The Company, as the holder of all the Common Securities, will
have the right to appoint, remove or replace any of the Trustees and to
increase or decrease the number of Trustees, provided that the number of
Trustees shall be at least three; provided further that at least one Trustee
shall be a Delaware Trustee, at least one Trustee shall be the Property
Trustee and at least one Trustee shall be a Regular Trustee.
The Company will pay all fees and expenses related to the organization
and operations of the Trust (including any taxes, duties, assessments or
governmental charges of whatever nature (other than withholding taxes) imposed
by the United States or any other domestic taxing authority upon the Trust)
and the offering of the New Capital Securities and be responsible for all
debts and obligations of the Trust (other than with respect to the Trust
Securities). See "The Exchange Offer--Fees and Expenses."
The Common Securities will rank pari passu, and payments will be made
thereon pro rata, with the Capital Securities (including the New Capital
Securities), except that upon the occurrence and during the continuation of an
Event of Default under the Indenture arising as a result of any failure by the
Company to pay any amounts in respect of the Junior Subordinated Debentures
when due, the rights of the holders of the Common Securities to payment in
respect of Distributions and payments upon liquidation, redemption or
otherwise will be subordinated to the rights of the holders of the Capital
Securities. See "Description of New Securities--Description of New Capital
Securities--Subordination of Common Securities."
For so long as the Capital Securities remain outstanding, the Company
will covenant (i) to maintain 100% ownership of the Common Securities, (ii) to
cause the Trust to remain a statutory business trust and not to voluntarily
dissolve, wind-up, liquidate or be terminated, except as permitted by the
Declaration, (iii) to use its commercially reasonable efforts to ensure that
the Trust will not be an "investment company" for purposes of the Investment
Company Act, and (iv) to take no action that would be reasonably likely to
cause the Trust to be classified as an association or a publicly traded
partnership taxable as a corporation for United States federal income tax
purposes.
The rights of the holders of the New Capital Securities, including
economic rights, rights to information and voting rights, are set forth in the
Declaration and the Trust Act. See "Description of New Securities--Description
of New Capital Securities."
The location of the principal executive office of the Trust is c/o The
First American Financial Corporation, 114 East Fifth Street, Santa Ana,
California 92701-4642, and its telephone number is (714) 558-3211.
THE FIRST AMERICAN FINANCIAL CORPORATION
OVERVIEW
The Company, through its subsidiaries, is engaged in the business of
providing real estate-related financial and information services, including
title insurance, real estate tax monitoring, mortgage credit reporting, flood
zone determination, mortgage loan servicing systems, property information,
<PAGE>
home warranty services, appraisal services and mortgage document preparation
to real property buyers and mortgage lenders. The Company also provides trust
and limited banking services.
The location of the principal executive office of the Company is 114 East
Fifth Street, Santa Ana, California 92701-4642, and its telephone number is
(714) 558-3211.
Resales and refinancings of residential properties constitute the major
source of the Company's revenues. Real estate activity is cyclical in nature
and is affected greatly by the cost and availability of long term mortgage
funds. Real estate activity and, in turn, the Company's revenue base, can be
adversely affected during periods of high interest rates and/or limited money
supply. However, this adverse effect is mitigated in part by the continuing
diversification of the Company's operations into areas outside of its
traditional title insurance business. Through growth and acquisitions, the
Company believes it has become the United States' largest provider of real
estate-related financial and information services. The Company has assembled
an array of companies which, together, provide comprehensive services to the
mortgage industry, commercial and residential real estate developers, home
buyers and other customers.
In addition to expanding its title insurance business, during the 1980's,
the Company began expanding into other real estate-related financial and
information services. The Company intends to continue its present acquisition
policy in order to strengthen its position in existing markets as well as
expanding into new markets both nationally and internationally. See "Recent
Developments" below.
BUSINESS SEGMENTS
TITLE INSURANCE
Title insurance policies are insured statements of the condition of title
to real property, showing priority of ownership as indicated by public
records, as well as outstanding liens, encumbrances and other matters of
record, and certain other matters not of public record. Policies are issued
based on a title report prepared after a search of public records, maps, and
documents and are typically requested when a title is transferred.
Unlike other types of insurance policies, title insurance policies do not
insure against future risk. Before issuing title policies, title insurers
seek to limit their risk of loss by accurately performing title searches and
examinations. The major expenses of a title company relate to such searches
and examinations, the preparation of preliminary reports or commitments and
the maintenance of title plants, and not from claim losses as in the case of
property and casualty insurers. See "--Recent Developments."
The Company, through FATICO and its other subsidiaries, transacts its
title insurance business through a network of more than 300 branch offices and
more than 4,000 independent agents. In 1996, the Company's title insurance
operations generated $1.29 billion in revenues.
Based on industry statistics showing gross title fees in the major areas
<PAGE>
in which the Company operates, in 1995 the Company had the largest or second
largest share of the title insurance market in 33 states and in the District
of Columbia. In addition, the Company's market share grew from 9.6% in 1982,
when it became a national company, to 20.4% in 1995. Industry statistics for
1996 are not currently available. The Company's goal is to maintain its
leadership position as a provider of title insurance and to capitalize on its
opportunity for continued growth nationally and internationally.
REAL ESTATE INFORMATION SERVICES
In recent years management has developed a strategy to be a "one-stop"
real estate information service company. To this end, in 1991 the Company
acquired what was believed to be the second largest tax service company, and
in 1995 acquired what were believed to be the largest mortgage credit
reporting company and the largest flood zone determination certification
company in each case, in the U.S. The Company acquired Strategic Mortgage
Services, Inc. in May, 1997 ("SMS"). SMS operates in lines of business
similar to those of the Company. The acquisition of SMS has strengthened the
Company's appraisal and credit reporting services, and has added a new line of
business, mortgage document preparation. With these and other acquisitions,
the Company believes that it is well positioned to expand market share of its
core businesses by aggressive cross-marketing and bundled pricing. The
Company's real estate information service products generate higher margins
than its title insurance products.
The majority of pre-tax profits generated by the Company from non-title
business is derived from the real estate services business, which generated
$52.6 million in pre-tax profits in 1996 and $247.8 million in revenues.
Approximately 40% of the Company's pre-tax profits in 1996 were derived from
its real estate information services businesses. These businesses are not
regulated and hence not constrained by dividend statutes enforceable by the
states in which the Company operates its title business or by constraints
imposed by California on the Company's trust and banking business.
First American Real Estate Information Services, Inc. ("FAREIS") has
grown from its tax service origins into a diversified mortgage services
company. FAREIS and its subsidiaries now serve mortgage originators, mortgage
servicers, title companies, real estate attorneys, consumers as well as
non-lending entities. The business was initially established in 1987 to
advise real property mortgage lenders as to the status of tax payments on real
property securing their loans. The Company's real estate information services
also includes mortgage and other credit reporting services, flood zone
determinations, mortgage loan servicing systems, property inspections,
appraisal services and mortgage document preparation.
The tax service business includes both real estate tax reporting as well
as tax outsourcing and tax certification. The Company's tax service business
reports on 11 million properties annually and is believed to be the second
largest provider of tax services to the real estate market. The Company works
with over 22,000 taxing authorities nationwide.
First American CREDCO, Inc. ("CREDCO"), the Company's mortgage reporting
entity, is believed by the Company to be the largest provider of these
services in the United States and processes over 500,000 credit reports per
<PAGE>
month. CREDCO provides residential mortgage credit reports, prequalifying
reports, merged credit data, resident screening services, business reports,
credit scoring tools and personal credit reports. CREDCO has recently
branched into the consumer lending and risk scoring areas, providing credit
reporting and information management services to automobile dealers, consumers
and home equity lenders nationwide. Approximately 20% of CREDCO's 1996
revenues were from non-real estate related sources.
The Company is the leading provider of flood zone determinations. Flood
compliance services consist of a broad range of information required by
regulatory agencies regarding properties in flood zones. This business
currently processes over 350,000 flood certifications per month.
The property/field services business consists of processing single family
home inspections and conducting field interviews with delinquent mortgagors
and monitoring the condition of properties and assuring timely property
preservation. The Company's acquisition in December 1996 of Ward Associates
places the Company among the leaders in this business.
The appraisal services business utilizes leading technology to provide
national mortgage lenders with property-relative value assessments. With the
acquisition of SMS the appraisal services business operates throughout the
United States. Electronic appraisals are supplemented with qualified local
appraisers.
In April 1996, the Company acquired the Excelis Mortgage Loan Servicing
System (MLS) ("Excelis MLS"), now known as Excelis, Inc. Excelis MLS is the
only commercially available real-time on-line servicing system that has been
developed since 1990 to meet increasingly sophisticated market demands. The
software employs rules-based technology which enables the user to customize
the system to fit its individual servicing criteria and policies.
In May 1997, the Company purchased all of the operations of SMS, other
than SMS' flood zone certification business. SMS is a leading provider of
real estate information services to the U.S. mortgage and title insurance
industries. The acquired businesses include SMS' credit division, which the
Company believes is the third largest provider of U.S. mortgage credit
information; SMS' property appraisal division, which the Company believes is
the second largest provider of U.S. appraisal services; SMS' title division,
which provides title and closing services throughout the United States,
servicing primarily second mortgage originators; SMS' settlement services
business, which provides title plant systems and accounting services, as well
as escrow closing software, to the title industry; and a controlling interest
in what is believed by the Company to be the largest mortgage document
preparation firm.
HOME WARRANTY
The Company currently owns 79% of its home warranty business, with the
remaining balance owned by management of this subsidiary. The home warranty
business issues one-year warranties which protect homeowners against defects
in household systems and appliances such as plumbing, water heaters, and
furnaces. The warranties issued are for household systems and appliances
only, not for the homes themselves. The Company's home warranty business
<PAGE>
currently operates in certain counties of Arizona, California, Nevada, North
Carolina, South Carolina, Texas and Washington. The Company believes its home
warranty business is the second largest in the United States based on
contracts under service. First American has realized a 35% growth rate in the
last two years in its home warranty business, generating $41.9 million in
revenues in 1996.
TRUST & THRIFT
Since 1960, the Company has conducted a general trust business in
California. In 1985, the Company formed a banking subsidiary into which its
subsidiary trust operation was merged. As of December 31, 1996, the trust
operations were administering fiduciary and custodial assets having a market
value in excess of $1 billion.
During 1988, the Company, through a majority owned subsidiary, acquired
an industrial loan corporation (the "Thrift") that accepts thrift deposits and
uses deposited funds to originate and purchase loans secured by commercial
properties in Southern California. The loans made by the Thrift currently
range in amount from $12,000 to $1,000,000 with an average loan balance of
$247,000. Loans are made only on a secured basis, at loan-to-value
percentages no greater than 75%. The Thrift specializes in making commercial
real estate loans and financing commercial equipment leases. In excess of 91%
of the Thrift's loans are made on a variable rate basis. The average yield on
the Thrift's loan portfolio as of December 31, 1996, was 11%. The Thrift's
average loan is 60 months in duration. Current deposits total $51.3 million
and the loan portfolio totals $54.3 million.
RECENT DEVELOPMENTS
In September 1997, the Company announced that it had reached agreement
with Experian Information Solutions, Inc. ("Experian") to form a joint
venture. This joint venture transaction has been approved by the board of
directors of the Company and Experian, but remains subject to satisfactory
documentation, satisfactory due diligence and receipt of required consents and
approvals.
The purpose of the joint venture is to combine FAREIS with Experian's
Real Estate Solution's division ("RES"). The joint venture vehicle will be
80% owned by the Company and 20% owned by Experian, subject to certain put and
call arrangements.
RES is believed to be the nation's foremost supplier of core real estate
data, providing, among other things, property valuation information, title
information, tax information and imaged title documents.
The Company believes that the joint venture will create the nation's
largest and most diverse provider of information technology and decision
support solutions for the mortgage and real estate industries.
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
<PAGE>
In connection with the sale of the Old Capital Securities, the Company
and the Trust entered into the Registration Rights Agreement with Chase
Securities Inc. and UBS Securities LLC (collectively, the "Initial
Purchasers"), pursuant to which the Company agreed to file and to use its
reasonable best efforts to cause to be declared effective by the Commission a
registration statement with respect to the exchange of the Old Capital
Securities for capital securities of the Trust with terms substantially
identical to the terms of the Old Capital Securities. A copy of the
Registration Rights Agreement has been filed as an exhibit to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1997.
The Exchange Offer is being made to satisfy the contractual obligations
of the Company and the Trust under the Registration Rights Agreement. The
form and terms of the New Capital Securities are the same as the form and
terms of the Old Capital Securities, except that the New Capital Securities
(i) have been registered under the Securities Act and therefore will not be
subject to certain of the restrictions on transfer applicable to the Old
Capital Securities and (ii) will not provide for any increase in the
Distribution rate thereon. In that regard, the Old Capital Securities
provide, among other things, that, if the Exchange Offer is not consummated by
December 1, 1997 (a "Registration Default"), the Company will pay additional
interest ("Additional Interest") in respect of the Old Junior Subordinated
Debentures and corresponding additional Distributions ("Additional
Distributions") will become payable on the Old Capital Securities, with
respect to the first 30-day period immediately following the occurrence of
such Registration Default, in an amount equal to 0.25% per week per $1,000
Liquidation Amount of Old Capital Securities. The amount of Additional
Interest (and corresponding Additional Distributions) will increase by an
additional 0.25% per week per $1,000 Liquidation Amount of Old Capital
Securities with respect to each subsequent 30-day period until such
Registration Default has been cured, up to a maximum amount of Additional
Interest (and corresponding Additional Distributions) of 0.50% per week per
$1,000 Liquidation Amount of Old Capital Securities. Upon consummation of the
Exchange Offer, holders of Old Capital Securities will not be entitled to any
Additional Distributions or any further registration rights under the
Registration Rights Agreement, except under limited circumstances. See "Risk
Factors--Consequences of a Failure to Exchange Old Capital Securities" and
"Description of Old Securities."
The Exchange Offer is not being made to, nor will the Company accept
tenders for exchange from, holders of Old Capital Securities in any
jurisdiction in which the Exchange Offer or the acceptance thereof would not
be in compliance with the securities or blue sky laws of such jurisdiction.
Unless the context requires otherwise, the term "holder" with respect to
the Exchange Offer means any person in whose name the Old Capital Securities
are registered on the books of the Trust or any other person who has obtained
a properly completed bond power from the registered holder, or any person
whose Old Capital Securities are held of record by DTC who desires to deliver
such Old Capital Securities by book-entry transfer at DTC.
Pursuant to the Exchange Offer, the Company will exchange as soon as
practicable after the date hereof, the Old Guarantee for the New Guarantee and
all of the Old Junior Subordinated Debentures, of which $103,093,000 aggregate
<PAGE>
principal amount is outstanding, for a like aggregate principal amount of the
New Junior Subordinated Debentures. The New Guarantee and New Junior
Subordinated Debentures have been registered under the Securities Act.
TERMS OF EXCHANGE
The Company hereby offers, upon the terms and subject to the conditions
set forth in this Prospectus and in the accompanying Letter of Transmittal, to
exchange up to $100,000,000 aggregate Liquidation Amount of New Capital
Securities for a like aggregate Liquidation Amount of Old Capital Securities
properly tendered on or prior to the Expiration Date and not properly
withdrawn in accordance with the procedures described below. The Company will
deliver, promptly after the Expiration Date, an aggregate Liquidation Amount
of up to $100,000,000 of New Capital Securities in exchange for a like
Liquidation Amount of outstanding Old Capital Securities tendered and accepted
in connection with the Exchange Offer. Holders may tender their Old Capital
Securities in whole or in part in a Liquidation Amount of not less than
$100,000 or any integral multiple of $1,000 in excess thereof provided that if
any Old Capital Securities are tendered in exchange for part, the untendered
Liquidation Amount must be $100,000 or any integral multiple of $1,000 in
excess thereof.
The Exchange Offer is not conditioned upon any minimum Liquidation Amount
of Old Capital Securities being tendered. As of the date of this Prospectus,
Old Capital Securities having an aggregate Liquidation Amount of $100,000,000
are outstanding.
Holders of Old Capital Securities do not have any appraisal or
dissenters' rights in connection with the Exchange Offer. Old Capital
Securities that are not tendered, or are tendered but not accepted, in
connection with the Exchange Offer will remain outstanding and will remain
entitled to the benefits of the Declaration, but will not be entitled to any
further registration rights under the Registration Rights Agreement, except
under limited circumstances. See "Risk Factors--Consequences of a Failure to
Exchange Old Capital Securities" and "Description of Old Securities."
If any tendered Old Capital Securities are not accepted for exchange
because of an invalid tender, the occurrence of certain other events set forth
herein or otherwise, certificates for any such unaccepted Old Capital
Securities will be returned, without expense, to the tendering holder thereof
promptly after the Expiration Date.
Holders who tender Old Capital Securities in connection with the Exchange
Offer will not be required to pay brokerage commissions or fees or, subject to
the instructions in the Letter of Transmittal, transfer taxes with respect to
the exchange of Old Capital Securities in connection with the Exchange Offer.
The Company will pay all charges and expenses, other than certain applicable
taxes described below, in connection with the Exchange Offer. See "--Fees and
Expenses."
NEITHER THE BOARD OF DIRECTORS NOR ANY OFFICER OR EMPLOYEE OF THE COMPANY
NOR ANY TRUSTEE OF THE TRUST OR THE TRUST MAKES ANY RECOMMENDATION TO HOLDERS
OF OLD CAPITAL SECURITIES AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING
ALL OR ANY PORTION OF THEIR OLD CAPITAL SECURITIES PURSUANT TO THE EXCHANGE
<PAGE>
OFFER. IN ADDITION, NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH
RECOMMENDATION. HOLDERS OF OLD CAPITAL SECURITIES MUST MAKE THEIR OWN
DECISIONS WHETHER TO TENDER PURSUANT TO THE EXCHANGE OFFER AND, IF SO, THE
AGGREGATE AMOUNT OF OLD CAPITAL SECURITIES TO TENDER AFTER READING THIS
PROSPECTUS AND THE LETTER OF TRANSMITTAL AND CONSULTING WITH THEIR ADVISERS,
IF ANY, BASED ON THEIR OWN FINANCIAL POSITION AND REQUIREMENTS.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" means 5:00 p.m., New York City time, on
November 17, 1997, unless the Exchange Offer is extended by the Company (in
which case the term "Expiration Date" will mean the latest date and time to
which the Exchange offer is extended).
The Company expressly reserves the right in its sole discretion, subject
to applicable law, at any time and from time to time, (i) to delay the
acceptance of the Old Capital Securities for exchange, (ii) to terminate the
Exchange Offer (whether or not any Old Capital Securities have theretofore
been accepted for exchange) if the Company determines, in its sole discretion,
that any of the events or conditions referred to under "--Conditions to the
Exchange Offer" have occurred or exist or have not been satisfied, (iii) to
extend the Expiration Date of the Exchange Offer and retain all Old Capital
Securities tendered pursuant to the Exchange Offer, subject, however, to the
right of holders of Old Capital Securities to withdraw their tendered Old
Capital Securities as described under "--Withdrawal Rights," and (iv) to waive
any condition or otherwise amend the terms of the Exchange Offer in any
respect. If the Exchange Offer is amended in a manner determined by the
Company to constitute a material change, or if the Company waives a material
condition of the Exchange Offer, the Company will promptly disclose such
amendment by means of an amended or supplemented Prospectus that will be
distributed to the registered holders of the Old Capital Securities, and the
Company will extend the Exchange Offer to the extent required by Rule 14e-1
under the Exchange Act.
Any such delay in acceptance, extension, termination or amendment will be
followed promptly by oral or written notice thereof to the Exchange Agent and
by a public announcement thereof, and such announcement in the case of an
extension will be made no later than 9:00 a.m., New York City time, on the
next business day after the previously scheduled Expiration Date. Without
limiting the manner in which the Company may choose to make any public
announcement and subject to applicable law, the Company will have no
obligation to publish, advertise or otherwise communicate any such public
announcement other than by issuing a release to an appropriate news agency.
ACCEPTANCE FOR EXCHANGE AND DELIVERY OF NEW CAPITAL SECURITIES
Upon the terms and subject to the conditions of the Exchange Offer, the
Company will exchange, and will deliver to the Exchange Agent, New Capital
Securities for Old Capital Securities validly tendered and not withdrawn
(pursuant to the withdrawal rights described under "--Withdrawal Rights")
promptly after the Expiration Date.
In all cases, delivery of New Capital Securities in exchange for Old
Capital Securities tendered and accepted for exchange pursuant to the Exchange
<PAGE>
Offer will be made only after timely receipt by the Exchange Agent of (i) Old
Capital Securities or a book-entry confirmation of a book-entry transfer of
Old Capital Securities into the Exchange Agent's account at DTC, including an
Agent's Message if the tendering holder has not delivered a Letter of
Transmittal, (ii) the Letter of Transmittal (or a facsimile thereof), properly
completed and duly executed, with any required signature guarantees or (in the
case of a book-entry transfer) an Agent's Message in lieu of the Letter of
Transmittal, and (iii) any other documents required by the Letter of
Transmittal.
The term "book-entry confirmation" means a timely confirmation of a book-
entry transfer of Old Capital Securities into the Exchange Agent's account at
DTC. The term "Agent's Message" means a message, transmitted by DTC to and
received by the Exchange Agent and forming a part of a book-entry
confirmation, which states that DTC has received an express acknowledgement
from the tendering participant, which acknowledgement states that such
participant has received and agrees to be bound by the Letter of Transmittal
and that the Company may enforce such Letter of Transmittal against such
participant.
Subject to the terms and conditions of the Exchange Offer, the Company
will be deemed to have accepted for exchange, and thereby exchanged, Old
Capital Securities validly tendered and not withdrawn as, if and when the
Trust gives oral or written notice to the Exchange Agent of the Company's
acceptance of such Old Capital Securities for exchange pursuant to the
Exchange Offer. The Exchange Agent will act as agent for the Company for the
purpose of receiving tenders of Old Capital Securities, Letters of Transmittal
and related documents, and as agent for tendering holders for the purpose of
receiving Old Capital Securities, Letters of Transmittal and related documents
and transmitting New Capital Securities to validly tendering holders. Such
exchange will be made promptly after the Expiration Date. If for any reason
whatsoever, acceptance for exchange or the exchange of any Old Capital
Securities tendered pursuant to the Exchange Offer is delayed (whether before
or after the Company's acceptance for exchange of Old Capital Securities) or
the Company extends the Exchange Offer or is unable to accept for exchange or
exchange Old Capital Securities tendered pursuant to the Exchange Offer, then,
without prejudice to the Company's rights set forth herein, the Exchange Agent
may, nevertheless, on behalf of the Company and subject to Rule 14e-1(c) under
the Exchange Act, retain tendered Old Capital Securities and such Old Capital
Securities may not be withdrawn except to the extent tendering holders are
entitled to withdrawal rights as described under "--Withdrawal Rights."
Pursuant to the Letter of Transmittal or Agent's Message in lieu thereof,
a holder of Old Capital Securities will warrant and agree in the Letter of
Transmittal that it has full power and authority to tender, exchange, sell,
assign and transfer Old Capital Securities, that the Company will acquire
good, marketable and unencumbered title to the tendered Old Capital
Securities, free and clear of all liens, restrictions, charges and
encumbrances, and the Old Capital Securities tendered for exchange are not
subject to any adverse claims or proxies. The holder also will warrant and
agree that it will, upon request, execute and deliver any additional documents
deemed by the Company, the Trust or the Exchange Agent to be necessary or
desirable to complete the exchange, sale, assignment, and transfer of the Old
Capital Securities tendered pursuant to the Exchange Offer.
<PAGE>
PROCEDURES FOR TENDERING OLD CAPITAL SECURITIES
VALID TENDER
Except as set forth below, in order for Old Capital Securities to be
validly tendered pursuant to the Exchange Offer, a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, or (in the case of a book-entry tender) an Agent's
Message in lieu of the Letter of Transmittal, and any other required
documents, must be received by the Exchange Agent at its address set forth
under "--Exchange Agent," and either (i) tendered Old Capital Securities must
be received by the Exchange Agent, or (ii) such Old Capital Securities must be
tendered pursuant to the procedures for book-entry transfer set forth below
and a book-entry confirmation, including an Agent's Message if the tendering
holder has not delivered a Letter of Transmittal, must be received by the
Exchange Agent, in each case on or prior to the Expiration Date, or (iii) the
guaranteed delivery procedures set forth below must be complied with.
If less than all of the Old Capital Securities are tendered, a tendering
holder should fill in the amount of Old Capital Securities being tendered in
the appropriate box on the Letter of Transmittal and the untendered
Liquidation Amount must be $100,000 or any integral of $1,000 in excess
thereof. The entire amount of Old Capital Securities delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise
indicated.
THE METHOD OF DELIVERY OF CERTIFICATES, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS, IS AT THE OPTION AND SOLE RISK OF THE TENDERING
HOLDER, AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL, RETURN RECEIPT
REQUESTED, PROPERLY INSURED, OR AN OVERNIGHT DELIVERY SERVICE IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
BOOK-ENTRY TRANSFER
The Exchange Agent will establish an account with respect to the Old
Capital Securities at DTC for purposes of the Exchange Offer within two
business days after the date of this Prospectus. Any financial institution
that is a participant in DTC's book-entry transfer facility system may make a
book-entry delivery of the Old Capital Securities by causing DTC to transfer
such Old Capital Securities into the Exchange Agent's account at DTC in
accordance with DTC's procedures for transfers. However, although delivery of
Old Capital Securities may be effected through book-entry transfer into the
Exchange Agent's account at DTC, the Letter of Transmittal (or a facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, or an Agent's Message in lieu of the Letter of Transmittal, and
any other required documents, must in any case be delivered to and received by
the Exchange Agent at its address set forth under "--Exchange Agent" on or
prior to the Expiration Date, or the guaranteed delivery procedure set forth
below must be complied with.
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
<PAGE>
SIGNATURE GUARANTEES
Certificates for the Old Capital Securities need not be endorsed and
signature guarantees on the Letter of Transmittal are unnecessary unless (i) a
certificate for the Old Capital Securities is registered in a name other than
that of the person surrendering the certificate or (ii) such registered holder
completes the box entitled "Special Issuance Instructions" or "Special
Delivery Instructions" in the Letter of Transmittal. In the case of (i) or
(ii) above, such certificates for Old Capital Securities must be duly endorsed
or accompanied by a properly executed bond power, with the endorsement or
signature on the bond power and on the Letter of Transmittal guaranteed by a
firm or other entity identified in Rule 17Ad-15 under the Exchange Act as an
"eligible guarantor institution," including (as such terms are defined
therein): (i) a bank; (ii) a broker, dealer, municipal securities broker or
dealer or government securities broker or dealer; (iii) a credit union; (iv) a
national securities exchange, registered securities association or clearing
agency; or (v) a savings association that is a participant in a securities
transfer association (an "Eligible Institution"), unless surrendered on behalf
of such Eligible Institution. See Instruction 1 to the Letter of Transmittal.
GUARANTEED DELIVERY
If a holder desires to tender Old Capital Securities pursuant to the
Exchange Offer and the certificates for such Old Capital Securities are not
immediately available or time will not permit all required documents to reach
the Exchange Agent on or before the Expiration Date, or the procedures for
book-entry transfer cannot be completed on a timely basis, such Old Capital
Securities may nevertheless be tendered, provided that all of the following
guaranteed delivery procedures are complied with:
(i) such tenders are made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form accompanying the Letter of
Transmittal, is received by the Exchange Agent, as provided below, on or
prior to the Expiration Date; and
(iii) the certificates (or a book-entry confirmation) representing
all tendered Old Capital Securities, in proper form for transfer,
together with a properly completed and duly executed Letter of
Transmittal (or a facsimile thereof or Agent's Message in lieu thereof),
with any required signature guarantees and any other documents required
by the Letter of Transmittal, are received by the Exchange Agent within
three New York Stock Exchange, Inc. trading days after the date of
execution of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand, or
transmitted by facsimile or mail to the Exchange Agent and must include a
guarantee by an Eligible Institution in the form set forth in such notice.
Notwithstanding any other provision hereof, the delivery of New Capital
Securities in exchange for Old Capital Securities tendered and accepted for
exchange pursuant to the Exchange Offer will in all cases be made only after
timely receipt by the Exchange Agent of Old Capital Securities, or of a book-
<PAGE>
entry confirmation with respect to such Old Capital Securities, and a properly
completed and duly executed Letter of Transmittal (or a facsimile thereof or
Agent's Message in lieu thereof), together with any required signature
guarantees and any other documents required by the Letter of Transmittal.
Accordingly, the delivery of New Capital Securities might not be made to all
tendering holders at the same time, and will depend upon when Old Capital
Securities, book-entry confirmation with respect to Old Capital Securities and
other required documents are received by the Exchange Agent.
The Company's acceptance for exchange of Old Capital Securities tendered
pursuant to any of the procedures described above will constitute a binding
agreement between the tendering holder and the Company upon the terms and
subject to the conditions of the Exchange Offer.
DETERMINATION OF VALIDITY
All questions as to the form of documents, validity, eligibility
(including time of receipt) and acceptance for exchange of any tendered Old
Capital Securities will be determined by the Company, in its sole discretion,
whose determination will be final and binding on all parties. The Company
reserves the absolute right, in its sole discretion, to reject any and all
tenders it determines not to be in proper form or the acceptance of which, or
exchange for, may, in the view of counsel to the Company, be unlawful. The
Company also reserves the absolute right, subject to applicable law, to waive
any of the conditions of the Exchange Offer as set forth under "--Conditions
to the Exchange Offer" or any condition or irregularity in any tender of Old
Capital Securities of any particular holder whether or not similar conditions
or irregularities are waived in the case of other holders.
The Company's interpretation of the terms and conditions of the Exchange
Offer (including the Letter of Transmittal and the instructions thereto) will
be final and binding. No tender of Old Capital Securities will be deemed to
have been validly made until all irregularities with respect to such tender
have been cured or waived. Neither the Company, the Trust or the Exchange
Agent, nor any affiliates or assigns of the Company, the Trust or the Exchange
Agent, nor any other person shall be under any duty to give any notification
of any irregularities in tenders or incur any liability for failure to give
any such notification.
If any Letter of Transmittal, endorsement, bond power, power of attorney
or any other document required by the Letter of Transmittal is signed by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and unless waived by the Company,
proper evidence satisfactory to the Company, in its sole discretion, of such
person's authority to so act must be submitted.
A beneficial owner of Old Capital Securities that are held by or
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee or custodian is urged to contact such entity promptly if such
beneficial holder wishes to participate in the Exchange Offer.
RESALES OF NEW CAPITAL SECURITIES
<PAGE>
The Company and the Trust are making the Exchange Offer for the Old
Capital Securities, the Old Junior Subordinated Debentures and the Old
Guarantee in reliance on the position of the staff of the Division of
Corporation Finance of the Commission as set forth in certain interpretive
letters addressed to third parties in other transactions. However, neither
the Company nor the Trust sought its own interpretive letter, and there can be
no assurance that the staff of the Division of Corporation Finance of the
Commission would make a similar determination with respect to the Exchange
Offer as it has in such interpretive letters to third parties. Based on these
interpretations by the staff of the Division of Corporation Finance, and
subject to the two immediately following sentences, the Company and the Trust
each believes that New Capital Securities issued pursuant to this Exchange
Offer in exchange for Old Capital Securities may be offered for resale, resold
and otherwise transferred by a holder thereof (other than a holder who is a
broker-dealer) without further compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that such New Capital
Securities are acquired in the ordinary course of such holder's business and
that such holder is not participating, and has no arrangement or understanding
with any person to participate, in a distribution (within the meaning of the
Securities Act) of such New Capital Securities. However, any holder of Old
Capital Securities who is an Affiliate or who intends to participate in the
Exchange Offer for the purpose of distributing New Capital Securities, or any
broker-dealer who purchased Old Capital Securities from the Trust to resell
pursuant to Rule 144A or any other available exemption under the Securities
Act, (i) will not be able to rely on the interpretations of the staff of the
Division of Corporation Finance of the Commission set forth in the
above-mentioned interpretive letters, (ii) will not be permitted or entitled
to tender such Old Capital Securities in the Exchange Offer, and (iii) must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any sale or other transfer of such Old
Capital Securities unless such sale is made pursuant to an exemption from such
requirements. In addition, as described below, Participating Broker-Dealers
must deliver a prospectus meeting the requirements of the Securities Act in
connection with any resales of New Capital securities.
Each holder of Old Capital Securities who wishes to exchange Old Capital
Securities for New Capital Securities in the Exchange Offer will be required
to represent that (i) it is not an Affiliate, (ii) any New Capital Securities
to be received by it are being acquired in the ordinary course of its
business, (iii) it has no arrangement or understanding with any person to
participate in a distribution (within the meaning of the Securities Act) of
such New Capital Securities, and (iv) if such holder is not a broker-dealer,
such holder is not engaged in, and does not intend to engage in, a
distribution (within the meaning of the Securities Act) of such New Capital
Securities. The Letter of Transmittal contains the foregoing representations.
In addition, the Company may require such holder, as a condition to such
holder's eligibility to participate in the Exchange Offer, to furnish to the
Company (or an agent thereof) in writing information as to the number of
"beneficial owners" (within the meaning of Rule 13d-3 under the Exchange Act)
on behalf of whom such holder holds the Old Capital Securities to be exchanged
in the Exchange Offer. Each Participating Broker-Dealer will be deemed to
have acknowledged by execution of the Letter of Transmittal or delivery of an
Agent's Message that it acquired the Old Capital Securities for its own
account as the result of market-making activities or other trading activities
<PAGE>
and must agree that it will deliver a prospectus meeting the requirements of
the Securities Act in connection with any resale of such New Capital
Securities. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a Participating Broker-Dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
Based on the position taken by the staff of the Division of Corporation
Finance of the Commission in the interpretive letters referred to above, the
Company believes that Participating Broker-Dealers may fulfill their
prospectus delivery requirements with respect to the New Capital Securities
received upon exchange of such Old Capital Securities (other than Old Capital
Securities that represent an unsold allotment from the original sale of the
Old Capital Securities) with a prospectus meeting the requirements of the
Securities Act, which may be the prospectus prepared for an exchange offer so
long as it contains a description of the plan of distribution with respect to
the resale of such New Capital Securities. Accordingly, this Prospectus may
be used by a Participating Broker-Dealer during the period referred to below
in connection with resales of New Capital Securities received in exchange for
Old Capital Securities where such Old Capital Securities were acquired by such
Participating Broker-Dealer for its own account as a result of market-making
or other trading activities. Subject to certain provisions set forth in the
Registration Rights Agreement, the Company and the Trust have agreed that this
Prospectus may be used by a Participating Broker-Dealer in connection with
resales of such New Capital Securities for a period ending 180 days after the
Expiration Date or, if earlier, when all such New Capital Securities have been
disposed of by such Participating Broker-Dealer. See "Plan of Distribution."
Any person, including any Participating Broker-Dealer, who is an Affiliate may
not rely on such interpretive letters and must comply with the registration
and prospectus delivery requirements of the Securities Act in connection with
any resale transaction.
In that regard, each Participating Broker-Dealer who surrenders Old
Capital Securities pursuant to the Exchange Offer will be deemed to have
agreed, by execution of the Letter of Transmittal or delivery of an Agent's
Message in lieu thereof, that, upon receipt of notice from the Company or the
Trust of the occurrence of any event or the discovery of any fact that makes
any statement contained or incorporated by reference in this Prospectus untrue
in any material respect or that causes this Prospectus to omit to state a
material fact necessary in order to make the statements contained or
incorporated by reference herein, in light of the circumstances under which
they were made, not misleading or of the occurrence of certain other events
specified in the Registration Rights Agreement, such Participating Broker-
Dealer will suspend the sale of New Securities pursuant to this Prospectus
until the Company or the Trust has amended or supplemented this Prospectus to
correct such misstatement or omission and has furnished copies of this
Prospectus, as so amended or supplemented, to such Participating
Broker-Dealer, or the Company or the Trust has given notice that the sale of
the New Securities may be resumed, as the case may be.
WITHDRAWAL RIGHTS
Except as otherwise provided herein, tenders of Old Capital Securities
may be withdrawn at any time on or prior to the Expiration Date.
In order for a withdrawal to be effective a written, telegraphic, telex
<PAGE>
or facsimile transmission of such notice of withdrawal must be timely received
by the Exchange Agent at its address set forth under "--Exchange Agent" on or
prior to the Expiration Date. Any such notice of withdrawal must specify the
name of the person who tendered the Old Capital Securities to be withdrawn,
the aggregate Liquidation Amount of Old Capital Securities to be withdrawn,
and (if certificates for such Old Capital Securities have been tendered) the
name of the registered holder of the Old Capital Securities as set forth on
the Old Capital Securities, if different from that of the person who tendered
such Old Capital Securities. If Old Capital Securities have been delivered or
otherwise identified to the Exchange Agent, then prior to the physical release
of such Old Capital Securities, the tendering holder must submit the
certificate numbers shown on the particular Old Capital Securities to be
withdrawn and the signature on the notice of withdrawal must be guaranteed by
an Eligible Institution, except in the case of Old Capital Securities tendered
for the account of an Eligible Institution. If Old Capital Securities have
been tendered pursuant to the procedures for book-entry transfer set forth in
"--Procedures for Tendering Old Capital Securities," the notice of withdrawal
must specify the name and number of the account at DTC to be credited with the
withdrawal of Old Capital Securities, in which case a notice of withdrawal
will be effective if delivered to the Exchange Agent by written, telegraphic,
telex or facsimile transmission. Withdrawals of tenders of Old Capital
Securities may not be rescinded. Old Capital Securities properly withdrawn
will not be deemed validly tendered for purposes of the Exchange Offer, but
may be retendered at any subsequent time on or prior to the Expiration Date by
following any of the procedures described above under "--Procedures for
Tendering Old Capital Securities."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Company, in its
sole discretion, whose determination shall be final and binding on all
parties. Neither the Company, the Trust or the Exchange Agent, any affiliates
or assigns of the Company, the Trust or the Exchange Agent, nor any other
person shall be under any duty to give any notification of any irregularities
in any notice of withdrawal or incur any liability for failure to give any
such notification. Any Old Capital Securities that have been tendered but
which are withdrawn will be returned to the holder thereof promptly after
withdrawal.
DISTRIBUTIONS ON THE NEW CAPITAL SECURITIES AND OLD CAPITAL SECURITIES
Holders of Old Capital Securities whose Old Capital Securities are
accepted for exchange will not receive accumulated distributions on such Old
Capital Securities for any period from and after the last distribution date
with respect to such Old Capital Securities prior to the original issue date
of the New Capital Securities or, if no such distributions have been made,
will not receive any accumulated distributions on such Old Capital Securities,
and will be deemed to have waived the right to receive any distributions on
such Old Capital Securities accumulated from and after such distribution date
or, if no such distributions have been made, from and after April 22, 1997.
CONDITIONS TO EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, or any
extension of the Exchange Offer, the Company will not be required to accept
<PAGE>
for exchange, or to exchange, any Old Capital Securities for any New Capital
Securities, and, as described below, may terminate the Exchange Offer (whether
or not any Old Capital Securities have theretofore been accepted for exchange)
or may waive any conditions to or amend the Exchange Offer, if any of the
following conditions has occurred or exists or has not been satisfied:
(a) there occurs a change in the existing interpretations by the
staff of the Commission that permit the New Capital Securities issued
pursuant to the Exchange Offer in exchange for Old Capital Securities to
be offered for resale, resold and otherwise transferred by holders
thereof (other than holders that are broker-dealers or Affiliates)
without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such New Capital
Securities are acquired in the ordinary course of such holders' business
and such holders have no arrangement or understanding with any person to
participate in the distributions of such New Capital Securities;
(b) any action or proceeding has been instituted or threatened in
any court or by or before any governmental agency or body with respect to
the Exchange Offer which, in the Company's judgment, would reasonably be
expected to impair the ability of the Company to proceed with the
Exchange Offer;
(c) any law, statute, rule or regulation has been adopted or
enacted which, in the Company's judgment, would reasonably be expected to
impair the ability of the Company to proceed with the Exchange Offer;
(d) trading on the New York Stock Exchange, Inc. or generally in
the United states over-the-counter market has been suspended by order of
the Commission or any other governmental authority which, in the
Company's judgment, would reasonably be expected to impair the ability of
the Company to proceed with the Exchange Offer;
(e) a stop order has been issued by the Commission or any state
securities authority suspending the effectiveness of the Registration
Statement or proceedings have been initiated or, to the knowledge of the
Company, threatened for that purpose; any governmental approval has not
been obtained, which approval the Company, in its sole discretion, deemed
necessary for the consummation of the Exchange Offer as contemplated
hereby;
(f) any change, or any development involving a prospective change,
in the business or financial affairs of the Trust or the Company or any
of the Company's subsidiaries has occurred which, in the judgment of the
Company might materially impair the ability of the Company to proceed
with the Exchange Offer; or
(g) the Company or the Trust has received an opinion of counsel
experienced in such matters to the effect that, as a result of the
consummation of the Exchange Offer, there is more than an insubstantial
risk that (a) the Trust would be subject to United States federal income
tax with respect to income received or accrued on the Junior Subordinated
Debentures, (b) interest payable by the Company on the Junior Subordi-
nated Debentures would not be deductible by the Company, in whole or in
<PAGE>
part, for United States federal income tax purposes, or (c) the Trust
would be subject to more than a de minimis amount of other taxes, duties
or other governmental charges.
If the Company determines in its sole discretion that any of the
foregoing events or conditions has occurred or exists or has not been
satisfied, the Company may, subject to applicable law, terminate the Exchange
Offer (whether or not any Old Capital Securities have theretofore been
accepted for exchange) or may waive any such condition or otherwise amend the
terms of the Exchange Offer in any respect. If such waiver or amendment
constitutes a material change to the Exchange Offer, the Company will promptly
disclose such waiver by means of an amended or supplemented Prospectus that
will be distributed to the registered holders of the Old Capital Securities,
and the Company will extend the Exchange Offer to the extent required by Rule
14e-1 under the Exchange Act.
EXCHANGE AGENT
Wilmington Trust Company has been appointed as Exchange Agent for the
Exchange Offer. Delivery of the Letters of Transmittal and any other required
documents, questions, requests for assistance, and requests for additional
copies of this Prospectus or of the Letter of Transmittal should be directed
to the Exchange Agent as follows:
By Mail/Overnight Delivery: By Hand:
Wilmington Trust Company Wilmington Trust Company
c/o Harris Trust Company c/o Harris Trust Company
of New York of New York
77 Water Street, 4th Floor 77 Water Street, 4th Floor
New York, New York 10005 New York, New York 10005
Attention: Reginald Alois Attention: Reginald Alois
Telephone: (212) 706-7615
Facsimile: (212) 480-8214
Delivery to any place other than the above address or facsimile number
will not constitute a valid delivery.
FEES AND EXPENSES
The Company has agreed to pay the Exchange Agent reasonable and customary
fees for its services and will reimburse it for its reasonable out-of-pocket
expenses in connection therewith. The Company will also pay brokerage houses
and other custodians, nominees and fiduciaries the reasonable out-of-pocket
expenses incurred by them in forwarding copies of this Prospectus and related
documents to the beneficial owners of Old Capital Securities, and in handling
or tendering for their customers.
Holders who tender their Old Capital Securities for exchange will not be
obligated to pay any transfer taxes in connection therewith. If, however, New
Capital Securities are to be delivered to, or are to be issued in the name of,
any person other than the registered holder of the Old Capital Securities
tendered, or if a transfer tax is imposed for any reason other than the
exchange of Old Capital Securities in connection with the Exchange Offer, then
<PAGE>
the amount of any such transfer taxes (whether imposed on the registered
holder or any other persons) will be payable by the tendering holder. If
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes
will he billed directly to such tendering holder.
Neither the Company nor the Trust will make any payment to brokers,
dealers or others soliciting acceptances of the Exchange Offer.
DESCRIPTION OF NEW SECURITIES
References to "Capital Securities" means the New Capital Securities
issued pursuant to the Exchange Offer and the Old Capital Securities not
exchanged in the Exchange Offer.
DESCRIPTION OF NEW CAPITAL SECURITIES
Pursuant to the terms of the Declaration, the Regular Trustees caused the
Trust to issue the Old Capital Securities and will cause the Trust to issue
the New Capital Securities. The Capital Securities represent undivided
beneficial ownership interests in the assets of the Trust and the holders
thereof will be entitled to a preference in certain circumstances with respect
to Distributions and amounts payable on redemption or liquidation over the
Common Securities, as well as other benefits as described in the Declaration.
This summary of certain provisions of the New Capital Securities and the
Declaration does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all the provisions of the
Declaration. Wherever particular defined terms of the Declaration (as
supplemented or amended from time to time) are referred to herein, the
definitions of such defined terms are incorporated herein by reference.
GENERAL
Up to $100,000,000 aggregate Liquidation Amount of New Capital Securities
may be issued in connection with the consummation of the Exchange Offer. The
New Capital Securities will rank pari passu, and payments will be made thereon
from the assets of the Trust pro rata, with the Old Capital Securities that
are not exchanged in the Exchange Offer. The Capital Securities will rank
pari passu, and payments will be made thereon pro rata, with the Common
Securities except as described under "--Subordination of Common Securities."
Legal title to the Junior Subordinated Debentures will be held by the Property
Trustee in trust for the benefit of the holders of the New Capital Securities.
The Guarantee executed by the Company for the benefit of the holders of the
Capital Securities will be a guarantee on a subordinated basis but will not
guarantee payment of Distributions or amounts payable on redemption or
liquidation of the New Capital Securities when the Trust does not have
sufficient funds available to make such payments. See "Description of New
Securities--Description of New Guarantee." The Company's obligations under the
Guarantee, taken together with its obligations under the Declaration, the
Junior Subordinated Debentures and the Indenture, including its obligation to
pay all costs, expenses and liabilities of the Trust (other than with respect
to the Common Securities and the New Capital Securities), constitute a full
and unconditional guarantee of all of the Trust's obligations under the New
Capital Securities.
<PAGE>
The Declaration provides that the holders of New Capital Securities have
no preemptive rights or rights to subscribe for any additional Trust
Securities.
DISTRIBUTIONS
Distributions on each New Capital Security will be payable at the annual
rate of 8.50% of the Liquidation Amount of $1,000, payable semi-annually in
arrears on April 15 and October 15 of each year. Distributions will
accumulate from the most recent distribution date on the Old Capital
Securities surrendered in exchange for New Capital Securities or, if no
distributions have been paid on such Old Capital Securities, from April 22,
1997. The amount of Distributions payable for any period will be computed on
the basis of a 360-day year of twelve 30-day months. In the event that any
date on which Distributions are payable on the New Capital Securities is not a
Business Day (as defined herein), then payment of the Distributions payable on
such date will be made on the next succeeding day that is a Business Day (and
without any additional Distributions or other payment in respect of any such
delay), except that, if such Business Day is in the next succeeding calendar
year, such payment shall be made on the immediately preceding Business Day, in
each case, with the same force and effect as if made on the date such payment
was originally payable (each date on which Distributions are payable in
accordance with the foregoing, a "Distribution Date"). A "Business Day" shall
mean any day other than a Saturday or a Sunday, or a day on which banking
institutions in The City of New York are authorized or required by law or
executive order to remain closed or a day on which the corporate trust office
of the Property Trustee or the Indenture Trustee (as defined herein) is closed
for business.
Distributions on the New Capital Securities will be paid on the
Distribution Dates payable to the extent that the Trust has funds available
for the payment of such Distributions. The revenue of the Trust available for
distribution to holders of its Capital Securities (including the New Capital
Securities) will be limited to payments under the Junior Subordinated
Debentures. See "Description of New Securities--Description of New Junior
Subordinated Debentures." If the Company does not make interest payments on
the Junior Subordinated Debentures, the Property Trustee will not have funds
available to pay Distributions on the Capital Securities (including the New
Capital Securities).
So long as no Indenture Event of Default (as defined herein) has occurred
and is continuing, the Company will have the right under the Indenture to
defer the payment of interest on the Junior Subordinated Debentures at any
time or from time to time for a period not exceeding 10 consecutive
semi-annual periods (each, an "Extension Period"), provided that no Extension
Period may extend beyond the Stated Maturity of the Junior Subordinated
Debentures. As a consequence of any such extension, semi-annual Distributions
on the New Capital Securities will be deferred by the Trust during any such
Extension Period. Distributions to which holders of the New Capital
Securities are entitled will accumulate and compound semi-annually at the rate
per annum of 8.50% thereof from the relevant payment date for such
Distributions to the date of payment. The term "Distributions" as used herein
shall include any such compounded amounts unless the context otherwise
requires. During any such Extension Period, the Company may not, and may not
<PAGE>
permit any subsidiary of the Company to, (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire, or make a liquidation payment
with respect to, any of the Company's capital stock, (ii) make any payment of
principal, interest or premium, if any, on or repay, repurchase or redeem any
debt securities of the Company that rank pari passu with or junior to the
Junior Subordinated Debentures or (iii) make any guarantee payments with
respect to any guarantee by the Company of the debt securities of any
subsidiary of the Company if such guarantee ranks pari passu with or junior in
interest to the Junior Subordinated Debentures (other than (a) dividends or
distributions in common stock of the Company or warrants, options or other
rights where the Company's common stock is issuable upon the exercise thereof,
(b) payments under the Guarantee, (c) any declaration of a dividend in
connection with the implementation of a stockholders' rights plan, or the
issuance of stock under any such plan in the future, or the redemption or
repurchase of any such rights pursuant thereto, (d) as a result of an exchange
or conversion (x) of any class or series of the Company's capital stock (or
any capital stock of a subsidiary of the Company) for any class or series of
the Company's capital stock or (y) of any class or series of the Company's
indebtedness for any class or series of the Company's capital stock, (e) the
purchase of fractional interests in shares of the Company's capital stock
pursuant to the conversion or exchange provisions of such capital stock or the
security being converted or exchanged and (f) purchases of common stock
related to the issuance of common stock or rights under any employment
agreement, benefit plan or similar agreement for the directors, officers,
employees and consultants of the Company and its subsidiaries, related to the
issuance of common stock or rights under a dividend reinvestment and stock
purchase plan or related to the issuance of common stock (or securities
convertible into or exchangeable for common stock) as consideration in an
acquisition transaction that was entered into prior to the commencement of
such Extension Period). Prior to the termination of any such Extension
Period, the Company may further extend the Extension Period, provided that no
Extension Period may exceed 10 consecutive semi-annual periods or extend
beyond the Stated Maturity of the Junior Subordinated Debentures. Upon the
termination of any such Extension Period and the payment of all amounts then
due on any Interest Payment Date, the Company may elect to begin a new
Extension Period subject to the foregoing requirements. See "Description of
New Securities--Description of New Junior Subordinated Debentures--Option to
Defer Interest Payments."
The Company has no current intention of exercising its right to defer
payments of interest by extending the interest payment period of the Junior
Subordinated Debentures.
Distributions on the New Capital Securities (other than Distributions on
a Redemption Date) will be payable to the holders thereof as they appear on
the register of the Trust on the relevant record dates, which shall be the
first day of the month of the relevant Distribution Date. Distributions
payable on any New Capital Securities that are not punctually paid on any
Distribution Date will cease to be payable to the person in whose name such
New Capital Securities are registered on the relevant record date, and such
defaulted Distribution will instead be payable to the person in whose name
such New Capital Securities are registered on the special record date or other
specified date determined in accordance with the Declaration.
<PAGE>
REDEMPTION
Upon the repayment or redemption of the Junior Subordinated Debentures,
whether at Stated Maturity or upon earlier redemption as provided in the
Indenture, the proceeds from such repayment or redemption shall be applied by
the Property Trustee to redeem a Like Amount (as defined herein) of the New
Capital Securities, upon not less than 30 nor more than 60 days notice prior
to the date fixed for repayment or redemption, at a redemption price, with
respect to the New Capital Securities (the "Redemption Price"), equal to the
aggregate Liquidation Amount of such New Capital Securities plus accumulated
and unpaid Distributions thereon to the date of redemption (the "Redemption
Date").
The Junior Subordinated Debentures are redeemable prior to maturity at
the option of the Company in whole (but not in part) at any time within 90
days following the occurrence of a Special Event. See "Description of New
Securities--Description of the Junior Subordinated Debentures--Special Event
Redemption." The proceeds of any such redemption will be used by the Trust to
redeem Trust Securities. The Redemption Price shall be equal to 100% of the
Liquidation Amount plus accrued and unpaid Distributions thereon to the
Redemption Date.
REDEMPTION PROCEDURES
New Capital Securities redeemed on a Redemption Date shall be redeemed at
the Redemption Price with the proceeds from the contemporaneous redemption of
the Junior Subordinated Debentures. Redemptions of the New Capital Securities
shall be made and the Redemption Price shall be payable on the Redemption Date
only to the extent that the Trust has sufficient funds available for the
payment of the Redemption Price. See also "--Subordination of Common
Securities."
Notice of any redemption will be mailed at least 30 days but not more
than 60 days before the Redemption Date to each holder of New Capital
Securities to be redeemed at its registered address. If the Trust gives a
notice of redemption in respect of the New Capital Securities, then, by 12:00
noon, New York City time, on the Redemption Date, with respect to New Capital
Securities held in global form, to the extent funds are available, the
Property Trustee will deposit irrevocably with The Depository Trust Company
("DTC") or its nominee funds sufficient to pay the Redemption Price and will
give DTC irrevocable instructions and authority to pay the Redemption Price to
the holders of the New Capital Securities. See "Book-Entry Issuance." If any
New Capital Securities are held in certificated form, the Trust, to the extent
funds are available, will irrevocably deposit with the paying agent for such
New Capital Securities funds sufficient to pay the Redemption Price and will
give the paying agent irrevocable instructions and authority to pay the
Redemption Price to the holders thereof upon surrender of their certificates
evidencing the New Capital Securities. Notwithstanding the foregoing,
Distributions payable on or prior to the Redemption Date for any New Capital
Security called for redemption shall be payable to the holders of such New
Capital Security on the relevant record dates for the related Distribution
Dates. If notice of redemption shall have been given and funds deposited as
required, then upon the date of such deposit, all rights of the holders of
such New Capital Securities so called for redemption will cease, except the
<PAGE>
right of the holders of such New Capital Securities to receive the Redemption
Price, but without interest on such Redemption Price, and such New Capital
Securities will cease to be outstanding. In the event that any date fixed for
redemption of New Capital Securities is not a Business Day, then payment of
the Redemption Price payable on such date will be made on the next succeeding
day which is a Business Day (and without any interest or other payment in
respect of any such delay), except that, if such Business Day falls in the
next calendar year, such payment will be made on the immediately preceding
Business Day, in each case with the same force and effect as if made on the
date such payment was originally payable. In the event that payment of the
Redemption Price in respect of New Capital Securities called for redemption is
improperly withheld or refused and not paid either by the Trust or by the
Company pursuant to the Guarantee as described under "Description of New
Securities--Description of New Guarantee," Distributions on such New Capital
Securities will continue to accrue at the then applicable rate, from the
Redemption Date originally established by the Trust for the New Capital
Securities to the date such Redemption Price is actually paid, in which case
the actual payment date will be the date fixed for redemption for purposes of
calculating the Redemption Price.
Subject to applicable law (including, without limitation, United States
federal securities law), the Company or its subsidiaries may at any time and
from time to time purchase outstanding New Capital Securities by tender, in
the open market or by private agreement.
The Trust may not redeem the outstanding New Capital Securities unless
all accrued and unpaid Distributions have been paid on all New Capital
Securities for all semi-annual Distribution periods terminating on or prior to
the date of redemption. If all of the New Capital Securities are in
book-entry form, they will be redeemed as described below under "Book-Entry
Issuance."
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
The Company has the right at any time to terminate the Trust and cause
the Junior Subordinated Debentures to be distributed to the holders of the
Capital Securities and the Common Securities in exchange therefor upon
liquidation of the Trust. In the event of any such termination of the Trust,
after satisfaction of the claims of creditors of the Trust, if any, as
required by applicable law, the holders of the New Capital Securities will be
entitled to receive a Liquidation Amount of $1,000 per New Capital Security
plus accumulated and unpaid Distributions thereon to the date of payment,
which may be in the form of a distribution of such amount of Junior
Subordinated Debentures in exchange therefor, subject to certain exceptions.
See "Certain United States Federal Income Tax Consequences--Distribution of
Junior Subordinated Debentures or Cash Upon Liquidation of the Trust."
Junior Subordinated Debentures may be distributed to holders in exchange
for the New Capital Securities and in liquidation of the Trust. Under current
law, such a distribution should be non-taxable, and should result in the
holder receiving directly its pro rata share of the Junior Subordinated
Debentures previously held indirectly through the Trust, with a holding period
and aggregate tax basis equal to the holding period and aggregate tax basis
such holder had in its Old Capital Securities before such distribution. If,
<PAGE>
however, the liquidation of the Trust were to occur because the Trust is
subject to United States federal income tax with respect to income accrued or
received on the Junior Subordinated Debentures, the distribution of the Junior
Subordinated Debentures to holders would be a taxable event to the Trust and
to each holder and a U.S. Holder would recognize gain or loss as if the holder
had exchanged its New Capital Securities for the Junior Subordinated
Debentures it received upon liquidation of the Trust. A U.S. Holder would
accrue interest in respect of the Junior Subordinated Debentures received from
the Trust in the manner described under "Certain United States Federal Income
Tax Consequences--Interest Income and Original Issue Discount."
If the Company elects to liquidate the Trust and thereby cause the Junior
Subordinated Debentures to be distributed to holders of the New Capital
Securities in exchange therefor, the Company shall continue to have the right
to redeem the Junior Subordinated Debentures upon the occurrence of a Special
Event, as described under "Description of New Securities--Description of New
Junior Subordinated Debentures--Special Event Redemption."
Pursuant to the Declaration, the Trust shall automatically dissolve upon
expiration of its term and shall dissolve on the first to occur of: (i)
certain events of bankruptcy, dissolution or liquidation of the Company; (ii)
the distribution of the Junior Subordinated Debentures to the holders of the
Capital Securities and Common Securities; (iii) the repayment of all of the
Capital Securities in connection with the maturity or redemption of all of the
Junior Subordinated Debentures; and (iv) the entry by a court of competent
jurisdiction of an order for the dissolution of the Trust.
If an early dissolution occurs as described in clause (i), (ii) or (iv)
above, the Trust shall be liquidated by the Regular Trustees as expeditiously
as such Trustees determine to be possible by distributing, after satisfaction
of liabilities to creditors of the Trust as provided by applicable law, to the
holders of the Capital Securities and Common Securities their pro rata
interest in the Junior Subordinated Debentures, unless such Distribution is
determined by the Property Trustee not to be practicable, in which event such
holders will be entitled to receive out of the assets of the Trust available
for distribution to holders, after satisfaction of liabilities to creditors of
the Trust as provided by applicable law, an amount equal to the aggregate of
the Liquidation Amount of the Trust Securities plus accrued and unpaid
Distributions thereon to the date of payment (such amount being the
"Liquidation Distribution"). If such Liquidation Distribution can be paid
only in part because the Trust has insufficient assets available to pay in
full the aggregate Liquidation Distribution, then the amounts payable directly
by the Trust on the Capital Securities shall be paid on a pro rata basis. The
holder(s) of the Common Securities will be entitled to receive Liquidation
Distributions upon any such liquidation pro rata with the holders of the
Capital Securities, except that if an Indenture Event of Default has occurred
and is continuing, the Capital Securities shall have a priority over the
Common Securities.
"Like Amount" means (i) with respect to a redemption of Trust Securities,
Trust Securities having a Liquidation Amount equal to the principal amount of
Junior Subordinated Debentures to be contemporaneously redeemed in accordance
with the Indenture, allocated to the Common Securities and to the Capital
Securities based upon the relative Liquidation Amounts of such securities and
<PAGE>
the proceeds of which will be used to pay the Redemption Price of such Trust
Securities and (ii) with respect to a distribution of Junior Subordinated
Debentures to holders of Trust Securities in connection with a dissolution or
liquidation of the Trust, Junior Subordinated Debentures having a principal
amount equal to the Liquidation Amount of the Trust Securities of the holders
to whom such Junior Subordinated Debentures are distributed. "Liquidation
Amount" means the stated amount of $1,000 per Capital Security and Common
Security.
If the Company elects not to redeem the Junior Subordinated Debentures
prior to maturity and the Trust is not liquidated and the Junior Subordinated
Debentures are not distributed to holders of the Trust Securities, the New
Capital Securities will remain outstanding until the repayment of the Junior
Subordinated Debentures at the Stated Maturity.
After the liquidation date is fixed for any Liquidation Distribution of
Junior Subordinated Debentures to holders of the Capital Securities (i) the
Capital Securities will no longer be deemed to be outstanding, (ii) DTC or its
nominee, as a record holder of Capital Securities in global form, will receive
a registered global certificate or certificates representing the Junior
Subordinated Debentures to be delivered upon such Distribution and (iii) any
certificates representing Capital Securities held in certificated form will be
deemed to represent Junior Subordinated Debentures having a principal amount
equal to the Liquidation Amount of such Capital Securities, and bearing
accrued and unpaid interest in an amount equal to the accrued and unpaid
Distributions on such Capital Securities until such certificates are presented
for cancellation whereupon the Company will issue to such holder, and the
Indenture Trustee will authenticate, a certificate representing such Junior
Subordinated Debentures.
TRUST ENFORCEMENT EVENTS
An Indenture Event of Default constitutes a Trust Enforcement Event under
the Declaration with respect to the Trust Securities; provided, however,
pursuant to the Declaration, the holder of the Common Securities will be
deemed to have waived any Trust Enforcement Event with respect to the Common
Securities until all Trust Enforcement Events with respect to the Capital
Securities have been cured, waived or otherwise eliminated. Until such Trust
Enforcement Event with respect to the Capital Securities has been so cured,
waived or otherwise eliminated, the Property Trustee will be deemed to be
acting solely on behalf of the holders of the Capital Securities and only the
holders of the Capital Securities will have the right to direct the Property
Trustee with respect to certain matters under the Declaration, and therefore
the Indenture. The New Capital Securities and any Old Capital Securities
which remain outstanding after consummation of the Exchange Offer will
constitute a single series of Capital Securities under the Declaration and,
accordingly, will vote together as a single class for purposes of determining
whether holders of the requisite percentage in outstanding liquidation amount
thereof have taken certain actions or exercised certain rights under the
Declaration.
Upon the occurrence of a Trust Enforcement Event, the Indenture Trustee
(as defined herein) or the Property Trustee as the holder of the requisite
aggregate principal amount of Junior Subordinated Debentures will have the
<PAGE>
right under the Indenture to declare the principal of and interest on the
Junior Subordinated Debentures to be immediately due and payable. Each of the
Company and the Trust is required to file annually with the Property Trustee
an officer's certificate as to its compliance with all conditions and
covenants under the Declaration.
If the Property Trustee fails to enforce its rights with respect to the
Junior Subordinated Debentures held by the Trust, any record holder of Capital
Securities (including New Capital Securities) may institute a Direct Action
against the Company to enforce the Property Trustee's rights under the Junior
Subordinated Debentures without first instituting any legal proceedings
against such Property Trustee or any other person or entity. In addition, if
a Trust Enforcement Event has occurred and is continuing and such event is
attributable to the failure of the Company to pay interest, principal or other
required payments on the Junior Subordinated Debentures issued to the Trust on
the date such interest, principal or other payment is otherwise due and
payable, then a record holder of Capital Securities may, on or after the
respective due dates specified in the Junior Subordinated Debentures (and
after the expiration of any applicable cure period), institute a proceeding
directly against the Company under the Indenture for enforcement of payment on
Junior Subordinated Debentures having a principal amount equal to the
aggregate Liquidation Amount of the Capital Securities held by such holder.
In connection with such Direct Action, the Company will have a right of
set-off under the Indenture to the extent of any payment made by the Company
to such record holder of Capital Securities in such Direct Action.
SUBORDINATION OF COMMON SECURITIES
Payment of Distributions on, and the Redemption Price of, the Capital
Securities and the Common Securities, as applicable, shall be made pro rata
based on the Liquidation Amount of such Capital Securities and Common
Securities; provided, however, that if on any Distribution Date or Redemption
Date or date of payment with respect to a Liquidation Distribution an
Indenture Event of Default (as defined herein) shall have occurred and be
continuing, no payment of any Distribution on, or Redemption Price of, any of
the Common Securities, and no other payment on account of the redemption,
liquidation or other acquisition of such Common Securities, shall be made
unless payment in full in cash of all accumulated and unpaid Distributions on
all of the outstanding Capital Securities for all Distribution periods
terminating on or prior thereto, or in the case of payment of the Redemption
Price the full amount of such Redemption Price on all of the outstanding
Capital Securities then called for redemption, shall have been made or
provided for, and all funds available to the Property Trustee shall first be
applied to the payment in full in cash of all Distributions on, or Redemption
Price of, the Capital Securities then due and payable.
VOTING RIGHTS; AMENDMENT OF THE DECLARATION
Except as provided below and under "Description of New Securities--
Description of New Guarantee--Amendments and Assignment" and as otherwise
required by law and the Declaration, the holders of the New Capital Securities
will have no voting rights.
So long as any Junior Subordinated Debentures are held by the Property
<PAGE>
Trustee, the Trustees shall not (i) direct the time, method and place of
conducting any proceeding for any remedy available to the Indenture Trustee or
executing any trust or power conferred on the Property Trustee with respect to
such Junior Subordinated Debentures, (ii) waive any past default that is
waivable under the Indenture, (iii) exercise any right to rescind or annul a
declaration that the principal of all the Junior Subordinated Debentures shall
be due and payable, or (iv) consent to any amendment, modification or
termination of the Indenture or such Junior Subordinated Debentures, where
such consent shall be required, without, in each case, obtaining the prior
approval of the holders of a majority in aggregate Liquidation Amount of all
outstanding Capital Securities; provided, however, that where a consent under
the Indenture would require the consent of each holder of Junior Subordinated
Debentures affected thereby, no such consent shall be given by the Property
Trustee without the prior consent of each holder of Capital Securities. The
Trustees shall not revoke any action previously authorized or approved by a
vote of the holders of the Capital Securities except pursuant to a subsequent
vote of the holders of the Capital Securities. The Property Trustee shall
notify each holder of record of the Capital Securities of any notice of
default which it receives with respect to the Junior Subordinated Debentures.
In addition to obtaining the foregoing approvals of the holders of the Capital
Securities, prior to taking any of the foregoing actions, the Trustees shall
receive an opinion of counsel experienced in such matters to the effect that
the Trust will not be classified as other than a grantor trust for United
States federal income tax purposes on account of such action.
The Declaration may be amended from time to time by the Company and the
Regular Trustees (and in certain circumstances the Property Trustee and the
Delaware Trustee), without the consent of the holders of the Capital
Securities, (i) to cure any ambiguity, correct or supplement any provisions in
the Declaration that may be inconsistent with any other provision, or to make
any other provisions with respect to matters or questions arising under the
Declaration that shall not be inconsistent with the other provisions of the
Declaration or (ii) to modify, eliminate or add to any provisions of the
Declaration to such extent as shall be necessary to ensure that the Trust will
be classified as a grantor trust for United States federal income tax purposes
at all times that any Capital Securities and Common Securities are outstanding
or to ensure that the Trust will not be required to register as an "investment
company" under the Investment Company Act; provided, however, that any such
action under clause (i) or (ii) above shall not adversely affect in any
material respect the interests of any holder of Capital Securities or Common
Securities, and any amendments of the Declaration shall become effective when
notice thereof is given to the holders of Capital Securities and Common
Securities. The Declaration may be amended by the Company and the Regular
Trustees with (i) the consent of holders representing not less than a majority
(based upon Liquidation Amounts) of the outstanding Capital Securities and
Common Securities and (ii) receipt by the Regular Trustees of an opinion of
counsel to the effect that such amendment or the exercise of any power granted
to the Regular Trustees in accordance with such amendment will not cause the
Trust to be taxable as a corporation for United States federal income tax
purposes or the Trust's exemption from status as an "investment company" under
the Investment Company Act; provided, further that without the consent of each
holder of Capital Securities and Common Securities affected thereby, the
Declaration may not be amended to (i) change the amount or timing of any
Distribution on the Capital Securities and Common Securities or otherwise
<PAGE>
adversely affect the amount of any Distribution required to be made in respect
of the Capital Securities and Common Securities as of a specified date or (ii)
restrict the right of a holder of Capital Securities or Common Securities to
institute suit for the enforcement of any such payment on or after such date.
Any required approval of holders of Capital Securities may be given at a
meeting of holders of Capital Securities convened for such purpose or pursuant
to written consent. The Regular Trustees will cause a notice of any meeting
at which holders of Capital Securities are entitled to vote, or of any matter
upon which action by written consent of such holders is to be taken, to be
given to each holder of record of Capital Securities in the manner set forth
in the Declaration. The New Capital Securities and any Old Capital Securities
which remain outstanding after consummation of the Exchange Offer will
constitute a single series of Capital Securities under the Declaration and,
accordingly, will vote together as a single class for purposes of determining
whether holders of the requisite percentage in outstanding liquidation amount
thereof have taken certain actions or exercised certain rights under the
Declaration.
No vote or consent of the holders of Capital Securities will be required
for the Trust to redeem and cancel its Capital Securities in accordance with
the Declaration.
Notwithstanding that holders of Capital Securities are entitled to vote
or consent under any of the circumstances described above, any of the Capital
Securities that are owned by the Company or any affiliate of the Company
(including the Regular Trustees) shall, for purposes of such vote or consent,
be treated as if they were not outstanding.
EXPENSES AND TAXES
Under the terms of the Indenture, the Company, as borrower, has agreed to
pay all debts and other obligations (other than with respect to the Trust
Securities) and all costs and expenses of the Trust (including costs and
expenses relating to the organization of the Trust, the fees and expenses of
the Trustees and the costs and expenses relating to the operation of the
Trust) and to pay any and all taxes and all costs and expenses with respect
thereto (other than United States withholding taxes) to which the Trust might
become subject.
RESTRICTIONS ON TRANSFER
The New Capital Securities will be issued, and may be transferred, only
in blocks having an aggregate Liquidation Amount of not less than $100,000
(100 New Capital Securities). Any attempted transfer, sale or other
disposition of New Capital Securities in a block having an aggregate
Liquidation Amount of less than $100,000 shall be deemed to be void and of no
legal effect whatsoever. Any such transferee shall be deemed not to be a
holder of such New Capital Securities for any purpose, including but not
limited to the receipt of Distributions on such New Capital Securities, and
such transferee shall be deemed to have no interest whatsoever in such New
Capital Securities.
REGISTRAR AND TRANSFER AGENT
<PAGE>
The Property Trustee will act as registrar and transfer agent for the New
Capital Securities.
Registration of transfers of New Capital Securities will be effected
without charge by or on behalf of the Trust, but upon payment of any tax or
other governmental charges that may be imposed in connection with any transfer
or exchange. The Trust will not be required (i) to register or cause to be
registered the transfer or exchange of the New Capital Securities during a
period beginning at the opening of business 15 days before the day of the
mailing of the relevant notice of redemption and ending at the close of
business on the day of mailing of such notice of redemption or (ii) to
register or cause to be registered the transfer or exchange of any New Capital
Securities so selected for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, other than during the occurrence and continuance of
a Trust Enforcement Event, undertakes to perform only such duties as are
specifically set forth in the Declaration and, after such Trust Enforcement
Event, must exercise the same degree of care and skill as a prudent person
would exercise or use in the conduct of his or her own affairs. Subject to
this provision, the Property Trustee is under no obligation to exercise any of
the powers vested in it by the Declaration at the request of any holder of
Capital Securities unless it is offered reasonable indemnity against the
costs, expenses and liabilities that might be incurred thereby. If no Trust
Enforcement Event has occurred and is continuing and the Property Trustee is
required to decide between alternative causes of action, construe ambiguous
provisions in the Declaration or is unsure of the application of any provision
of the Declaration, and the matter is not one on which holders of Capital
Securities are entitled under the Declaration to vote, then the Property
Trustee may, but shall be under no duty to, take such action as is directed by
the Company and, if not so directed, shall take such action as it deems
advisable and in the best interests of the holders of the Capital Securities
and the Common Securities and will have no liability except for its own bad
faith, negligence or willful misconduct.
PAYMENT AND PAYING AGENCY
Payments in respect of the Global Capital Securities (as defined herein)
shall be made to DTC, which shall credit the relevant accounts at DTC on the
applicable Distribution Dates or, if the New Capital Securities are held in
certificated form, such payments shall be made by check mailed to the address
of the holder entitled thereto as such address shall appear on the register
maintained by the Property Trustee. The paying agent (the "Paying Agent")
shall initially be the Property Trustee and any co-paying agent chosen by the
Property Trustee and acceptable to the Regular Trustees and the Company. The
Paying Agent shall be permitted to resign as Paying Agent upon 30 days'
written notice to the Property Trustee and the Company. In the event that the
Property Trustee shall no longer be the Paying Agent, the Regular Trustees
shall appoint a successor (which shall be a bank or trust company acceptable
to the Regular Trustees and the Company) to act as Paying Agent.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE TRUST
<PAGE>
The Trust may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other person, except as
described below. The Trust may, at the request of the Company, with the
consent of the Regular Trustees and without the consent of the holders of the
Capital Securities and the Common Securities, the Delaware Trustee or the
Property Trustee, merge with or into, consolidate, amalgamate, be replaced by
or convey, transfer or lease its properties and assets substantially as an
entirety to a trust organized as such under the laws of any State; provided
that (i) such successor entity (if not the Trust) either (a) expressly assumes
all of the obligations of the Trust with respect to the Capital Securities or
(b) substitutes for the Capital Securities other securities having
substantially the same terms as the Capital Securities (the "Successor
Securities") so long as the Successor Securities rank the same as the Capital
Securities rank in priority with respect to Distributions and payments upon
liquidation, redemption and otherwise, (ii) if the Trust is not the successor
entity, the Company expressly appoints a trustee of such successor entity
possessing the same powers and duties as the Property Trustee as the holder of
the Junior Subordinated Debentures, (iii) such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not cause the
Capital Securities (including any Successor Securities) to be downgraded by
any nationally recognized statistical rating organization, (iv) such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease does
not adversely affect the rights, preferences and privileges of the holders of
the Capital Securities (including any Successor Securities) in any material
respect, (v) such successor entity has a purpose identical to that of the
Trust, (vi) prior to such merger, consolidation, amalgamation, replacement,
conveyance, transfer, or lease, the Company has received an opinion from
counsel to the Company experienced in such matters to the effect that (a) such
merger, consolidation, amalgamation, replacement, conveyance, transfer or
lease does not adversely affect the rights, preferences and privileges of the
holders of the Capital Securities (including any Successor Securities) in any
material respect and (b) following such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, (1) neither the Trust nor such
successor entity will be required to register as an investment company under
the Investment Company Act and (2) the Trust or the successor entity will
continue to be classified as a grantor trust for United States federal income
tax purposes, (vii) the Company or any permitted successor or assignee owns
all of the Common Securities of such successor entity and guarantees the
obligations of such successor entity under the Successor Securities at least
to the extent provided by the Guarantee, and (viii) such successor entity (if
not the Trust) expressly assumes all of the obligations of the Trust with
respect to the Trustees. Notwithstanding the foregoing, the Trust shall not,
except with the consent of holders of 100% in aggregate Liquidation Amount of
the Capital Securities, consolidate, amalgamate, merge with or into, be
replaced by or convey, transfer or lease its properties and assets
substantially as an entirety to any other entity or permit any other entity to
consolidate, amalgamate, merge with or into, or replace it if such
consolidation, amalgamation, merger, replacement, conveyance, transfer or
lease would cause the Trust or the successor entity to be classified as other
than a grantor trust for United States federal income tax purposes.
MERGER OR CONSOLIDATION OF TRUSTEES
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Any corporation into which the Property Trustee, the Delaware Trustee or
any Regular Trustee that is not a natural person may be merged or converted or
with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which such Trustee shall be a party, or
any corporation succeeding to all or substantially all the corporate trust
business of such Trustee, shall be the successor of such Trustee under the
Declaration, provided such corporation shall be otherwise qualified and
eligible.
MISCELLANEOUS
The Regular Trustees are authorized and directed to conduct the affairs
of and to operate the Trust in such a way that the Trust will not be deemed to
be an "investment company" required to be registered under the Investment
Company Act or classified as other than a grantor trust for United States
federal income tax purposes and so that the Junior Subordinated Debentures
will be treated as indebtedness of the Company for United States federal
income tax purposes. In this connection, the Company and the Regular Trustees
are authorized to take any action, not inconsistent with applicable law, the
Certificate of Trust or the Declaration, that the Company and the Regular
Trustees determine in their discretion to be necessary or desirable for such
purposes, as long as such action does not materially and adversely affect the
interests of the holders of the New Capital Securities.
The Trust may not borrow money, issue debt, mortgage nor pledge any of
its assets.
DESCRIPTION OF NEW JUNIOR SUBORDINATED DEBENTURES
The Junior Subordinated Debentures are to be issued under the Junior
Subordinated Indenture, dated as of April 22, 1997 (the "Indenture"), between
the Company and Wilmington Trust Company, as trustee (the "Indenture
Trustee"). This summary of certain terms and provisions of the Junior
Subordinated Debentures and the Indenture does not purport to be complete and
is subject to, and is qualified in its entirety by reference to, the
Indenture.
GENERAL
Concurrently with the issuance of the Old Capital Securities, the Trust
invested the proceeds thereof and the consideration paid by the Company for
the Common Securities in the Old Junior Subordinated Debentures issued by the
Company. The Company will exchange the Old Junior Subordinated Debentures for
the New Junior Subordinated Debentures as soon as practicable after the date
hereof. No Old Junior Subordinated Debentures will remain outstanding after
such exchange.
The Junior Subordinated Debentures will be in the principal amount equal
to the aggregate Liquidation Amount of the Capital Securities and the Common
Securities. The Junior Subordinated Debentures will bear interest at the
annual rate of 8.50% of the principal amount thereof, payable semi-annually in
arrears on April 15 and October 15 of each year (each, an "Interest Payment
Date"), commencing October 15, 1997, to the person in whose name each Junior
Subordinated Debenture is registered, subject to certain exceptions, at the
<PAGE>
close of business on the first day of the month of the relevant Interest
Payment Date. It is anticipated that, until the liquidation, if any, of the
Trust, each Junior Subordinated Debenture will be held in the name of the
Property Trustee in trust for the benefit of the holders of the Capital
Securities and the Common Securities. The amount of interest payable for any
period will be computed on the basis of a 360-day year of twelve 30-day
months. In the event that any date on which interest is payable on the Junior
Subordinated Debentures is not a Business Day, then payment of the interest
payable on such date will be made on the next succeeding day that is a
Business Day (and without any interest or other payment in respect of any such
delay), except that if such Business Day is in the next succeeding calendar
year, such payment shall be made on the immediately preceding Business Day, in
each case, with the same force and effect as if made on the date such payment
was originally payable. Accrued interest that is not paid on the applicable
Interest Payment Date will bear additional interest on the amount thereof (to
the extent permitted by law) at the rate per annum of 8.50% thereof,
compounded semi-annually. The term "interest" as used herein shall include
semi-annual interest payments and interest on semi-annual interest payments
not paid on the applicable Interest Payment Date, as applicable.
The Junior Subordinated Debentures will mature on April 15, 2012 (such
date, the "Stated Maturity").
The Junior Subordinated Debentures will be unsecured and will rank junior
and be subordinate in right of payment to all Senior Indebtedness (as defined
below) of the Company. The Indenture does not limit the incurrence or
issuance of other secured or unsecured debt of the Company, whether under the
Indenture, any other existing indenture or any other indenture that the
Company may enter into in the future or otherwise. See "--Subordination."
The general provisions of the Indenture do not afford holders of the
Junior Subordinated Debentures protection in the event of a highly leveraged
or other transaction involving the Company that may adversely affect holders
of the Junior Subordinated Debentures.
OPTION TO DEFER INTEREST PAYMENTS
So long as no Indenture Event of Default has occurred and is continuing,
the Company has the right under the Indenture to defer the payment of interest
at any time or from time to time for a period not exceeding 10 consecutive
semi-annual periods with respect to each Extension Period, provided that no
Extension Period may extend beyond the Stated Maturity of the Junior
Subordinated Debentures. At the end of such Extension Period, the Company
must pay all interest then accrued and unpaid (together with interest thereon
at the annual rate of 8.50%, compounded semi-annually to the extent permitted
by applicable law). During an Extension Period, interest will continue to
accrue and holders of Junior Subordinated Debentures will be required to
recognize income (in the form of original issue discount) for United States
federal income tax purposes prior to receipt of cash related to such income.
See "Certain United States Federal Income Tax Consequences--Interest Income
and Original Issue Discount."
During any such Extension Period, the Company may not, and may not permit
any subsidiary of the Company to, (i) declare or pay any dividends or
<PAGE>
distributions on, or redeem, purchase, acquire, or make a liquidation payment
with respect to, any of the Company's capital stock, (ii) make any payment of
principal, interest or premium, if any, on or repay, repurchase or redeem any
debt securities of the Company that rank pari passu with or junior in interest
to the Junior Subordinated Debentures or (iii) make any guarantee payments
with respect to any guarantee by the Company of the debt securities of any
subsidiary of the Company if such guarantee ranks pari passu with or junior in
interest to the Junior Subordinated Debentures (other than (a) dividends or
distributions in common stock of the Company or warrants, options or other
rights where the Company's common stock is issuable upon the exercise thereof,
(b) payments under the Guarantee, (c) any declaration of a dividend in
connection with the implementation of a stockholders' rights plan, or the
issuance of stock under any such plan in the future, or the redemption or
repurchase of any such rights pursuant thereto, (d) as a result of an exchange
or conversion (x) of any class or series of the Company's capital stock (or
any capital stock of a subsidiary of the Company) for any class or series of
the Company's capital stock or (y) of any class or series of the Company's
indebtedness for any class or series of the Company's capital stock, (e) the
purchase of fractional interests in shares of the Company's capital stock
pursuant to the conversion or exchange provisions of such capital stock or the
security being converted or exchanged, and (f) purchases of common stock
related to the issuance of common stock or rights under any employment
agreement, benefit plan or similar agreement for the directors, officers,
employees or consultants of the Company and its subsidiaries, related to the
issuance of common stock or rights under a dividend reinvestment and stock
purchase plan or related to the issuance of common stock (or securities
convertible into or exchangeable for common stock) as consideration in an
acquisition transaction that was entered into prior to the commencement of
such Extension Period). Prior to the termination of any such Extension
Period, the Company may further extend the Extension Period, provided that no
Extension Period may exceed 10 consecutive semi-annual periods or extend
beyond the Stated Maturity of the Junior Subordinated Debentures. Upon the
termination of any such Extension Period and the payment of all amounts then
due on any Interest Payment Date, the Company may elect to begin a new
Extension Period subject to the above requirements. No interest shall be due
and payable during an Extension Period, except at the end thereof. The
Company must give the Property Trustee, the Regular Trustees and the Indenture
Trustee notice of its election of such Extension Period not less than one
Business Day prior to the record date with respect to the interest payment.
The Property Trustee shall give notice of the Company's election to begin a
new Extension Period to the holders of the Capital Securities.
SPECIAL EVENT REDEMPTION
If a Special Event occurs and, if the Junior Subordinated Debentures are
held by the Trust, in the opinion of counsel to the Company experienced in
such matters, there would in all cases, after effecting the termination of the
Trust and the distribution of the Junior Subordinated Debentures to the
holders of the Capital Securities and Common Securities in exchange therefor,
be more than an insubstantial risk that a Special Event would continue to
exist, then the Company shall have the right to redeem the Junior Subordinated
Debentures, in whole but not in part, at any time within 90 days following the
occurrence of the Special Event at a redemption price for the Junior
Subordinated Debentures equal to 100% of the principal amount thereof plus
<PAGE>
accrued and unpaid interest to the Redemption Date.
If the Junior Subordinated Debentures are redeemed, the Trust must redeem
Trust Securities, on a pro rata basis, having an aggregate Liquidation Amount
equal to the aggregate principal amount of Junior Subordinated Debentures so
redeemed. See "Description of New Securities--Description of New Capital
Securities--Redemption."
Notice of any redemption will be mailed at least 30 days but not more
than 60 days before the redemption date to each holder of Junior Subordinated
Debentures at its registered address. Unless the Company defaults in payment
of the redemption price, on and after the redemption date interest shall cease
to accrue on such Junior Subordinated Debentures.
CERTAIN COVENANTS OF THE COMPANY
The Company will covenant in the Indenture that if and so long as the
Trust is the holder of all Junior Subordinated Debentures, the Company, as
borrower, will pay to the Trust all fees and expenses related to the Trust and
the offering of the Capital Securities and will pay, directly or indirectly,
all ongoing costs, expenses and liabilities of the Trust (including any taxes,
duties, assessments or governmental charges of whatever nature (other than
United States withholding taxes) imposed by the United States or any domestic
taxing authority upon the Trust) but excluding obligations under the Trust
Securities.
The Company will not, and will not permit any of its subsidiaries to, (i)
declare or pay any dividends or distributions on, or redeem, purchase,
acquire, or make a liquidation payment with respect to, any of the Company's
capital stock, (ii) make any payment of principal, interest or premium, if
any, on or repay or repurchase or redeem any debt securities of the Company
that rank pari passu with or junior in interest to the Junior Subordinated
Debentures or (iii) make any guarantee payments with respect to any guarantee
by the Company of the debt securities of any subsidiary of the Company if such
guarantee ranks pari passu with or junior in interest to the Junior
Subordinated Debentures (other than (a) dividends or distributions in common
stock of the Company or warrants, options or other rights where the Company's
common stock is issuable upon the exercise thereof, (b) payments under the
Guarantee, (c) any declaration of a dividend in connection with the
implementation of a stockholders' rights plans, or the issuance of stock under
any such plan in the future, or the redemption or repurchase of any such
rights pursuant thereto, (d) as a result of an exchange or conversion (x) of
any class or series of the Company's capital stock (or any capital stock of a
subsidiary of the Company) for any class or series of the Company's capital
stock or (y) of any class or series of the Company's indebtedness for any
class or series of the Company's capital stock, (e) the purchase of fractional
interests in shares of the Company's capital stock pursuant to the conversion
or exchange provisions of such capital stock or the security being converted
or exchanged, and (f) purchases of common stock related to the issuance of
common stock or rights under any employment agreement, benefit plan or similar
agreement for the directors, officers, employees or consultants of the Company
and its subsidiaries, related to the issuance of common stock or rights under
a dividend reinvestment and stock purchase plan or related to the issuance of
common stock (or securities convertible into or exchangeable for common stock)
<PAGE>
as consideration in an acquisition transaction that was entered into prior to
the commencement of such Extension Period) if at such time (x) there shall
have occurred any event of which the Company has actual knowledge that (I)
with the giving of notice or the lapse of time, or both, would constitute an
Indenture Event of Default with respect to Junior Subordinated Debentures and
(II) in respect of which the Company shall not have taken reasonable steps to
cure, (y) the Company shall be in default with respect to its payment of any
obligations under the Guarantee or (z) the Company shall have given notice of
its election of an Extension Period as provided in the Indenture and shall not
have rescinded such notice, and such Extension Period, or any extension
thereof, shall be continuing.
SUBORDINATION
In the Indenture, the Company has covenanted and agreed that any Junior
Subordinated Debentures issued thereunder will be subordinated and junior in
right of payment to all Senior Indebtedness to the extent provided in the
Indenture. During the pendency of any receivership, liquidation,
reorganization, arrangement, adjustment, composition, bankruptcy, insolvency
or similar proceedings relative to the Company, the holders of Senior
Indebtedness will first be entitled to receive payment in full of principal of
and premium, if any, and interest, if any, on such Senior Indebtedness before
the holders of Junior Subordinated Debentures or the Property Trustee on
behalf of the holders of Capital Securities will be entitled to receive or
retain any payment in respect of the principal of or interest on the Junior
Subordinated Debentures.
In the event of the acceleration of the maturity of any Junior
Subordinated Debentures, the holders of all Senior Indebtedness outstanding at
the time of such acceleration will first be entitled to receive payment in
full of all amounts then due thereon (including any amounts due upon
acceleration) before the holders of Junior Subordinated Debentures will be
entitled to receive or retain any payment in respect of the principal of or
interest on the Junior Subordinated Debentures.
No payments on account of principal of or interest in respect of the
Junior Subordinated Debentures may be made if there shall have occurred and be
continuing a default in any payment with respect to Senior Indebtedness, or an
event of default with respect to any Senior Indebtedness resulting in the
acceleration of the maturity thereof, or if any judicial proceeding shall be
pending with respect to any such default.
"Senior Indebtedness" means with respect to any person, whether recourse
is to all or a portion of the assets of such person and whether or not
contingent, (i) every obligation of such person for money borrowed; (ii) every
obligation of such person evidenced by bonds, debentures, notes or other
similar instruments, including obligations incurred in connection with the
acquisition of property, assets or businesses; (iii) every reimbursement
obligation of such person with respect to letters of credit, bankers'
acceptances or similar facilities issued for the account of such person; (iv)
every obligation of such person issued or assumed as the deferred purchase
price of property or services (but excluding trade accounts payable or accrued
liabilities arising in the ordinary course of business); (v) every capital
lease obligation of such person; (vi) every obligation of such person for
<PAGE>
claims (as defined in Section 101(4) of the United States Bankruptcy Code of
1978, as amended) in respect of derivative products such as interest rate,
foreign exchange rate and commodity forward contracts, options, swaps and
similar arrangements; and (vii) every obligation of the type referred to in
clauses (i) through (vi) of another person and all dividends of another person
the payment of which, in either case, such person has guaranteed or is
responsible or liable for, directly or indirectly, as obligor or otherwise;
provided that "Senior Indebtedness" shall not include (a) any obligations of
the Company which, by their terms, are expressly stated to rank pari passu in
right of payment with, or to not be superior in right of payment to, the
Junior Subordinated Debentures, (b) any obligations of the Company which when
incurred and without respect to any election under Section 1111(b) of the
United States Bankruptcy Code of 1978, as amended, was without recourse to the
Company, (c) any indebtedness of the Company to any of its subsidiaries, (d)
any indebtedness of the Company to a person who is an employee of the Company
incurred (i) as the deferred purchase price of property acquired by the
Company and (ii) at the time of such acquisition, such person was not an
employee of the Company, or (e) any indebtedness in respect of debt securities
issued to any trust, or a trustee of such trust, partnership or other entity
affiliated with the Company that is a financing entity of the Company in
connection with the issuance of such financing entity of securities that are
similar to the Capital Securities.
The Indenture places no limitation on the amount of additional Senior
Indebtedness that may be incurred by the Company or any indebtedness or other
liabilities that may be incurred by the Company's subsidiaries. As of June
30, 1997, Senior Indebtedness of the Company aggregated approximately $13.2
million, and the Company's subsidiaries had liabilities and other obligations
of approximately $609.8 million to which the Junior Subordinated Debentures
would be effectively subordinated.
INDENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events with respect to the Junior Subordinated Debentures that has occurred
and is continuing constitutes an "Indenture Event of Default" with respect to
the Junior Subordinated Debentures:
(i) failure for 30 days to pay any interest on the Junior
Subordinated Debentures when due (subject to the deferral of any due date
in the case of an Extension Period); or
(ii) failure to pay any principal on the Junior Subordinated
Debentures when due whether at maturity, upon redemption by declaration
or otherwise; or
(iii) failure to observe or perform in any material respect any other
covenant contained in the Indenture for 90 days after written notice to
the Company from the Indenture Trustee or the holders of at least 25% in
aggregate outstanding principal amount of outstanding Junior Subordinated
Debentures; or
(iv) certain events in bankruptcy, insolvency or reorganization of
the Company.
<PAGE>
The holders of a majority in aggregate outstanding principal amount of
Junior Subordinated Debentures have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Indenture
Trustee. The Indenture Trustee or the holders of not less than 25% in
aggregate outstanding principal amount of Junior Subordinated Debentures may
declare the principal due and payable immediately upon an Indenture Event of
Default, and, should the Indenture Trustee or such holders of such Junior
Subordinated Debentures fail to make such declaration, the holders of at least
25% in aggregate Liquidation Amount of the Capital Securities shall have such
right. The holders of a majority in aggregate outstanding principal amount of
Junior Subordinated Debentures may annul such declaration and waive the
default if the default (other than the non-payment of the principal of Junior
Subordinated Debentures which has become due solely by such acceleration) has
been cured and a sum sufficient to pay all matured installments of interest
and principal due otherwise than by acceleration has been deposited with the
Indenture Trustee, and should the holders of such Junior Subordinated
Debentures fail to annul such declaration and waive such default, the holders
of a majority in aggregate Liquidation Amount of the Capital Securities shall
have such right.
The holders of a majority in aggregate outstanding principal amount of
the Junior Subordinated Debentures may, on behalf of the holders of all the
Junior Subordinated Debentures, waive any past default, except a default in
the payment of principal or interest (unless such default has been cured and a
sum sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the Indenture Trustee)
or a default in respect of a covenant or provision which under the Indenture
cannot be modified or amended without the consent of the holder of each
outstanding Junior Subordinated Debenture, and should the holders of such
Junior Subordinated Debentures fail to waive such default, the holders of a
majority in aggregate Liquidation Amount of the Capital Securities shall have
such right. The Company is required to file annually with the Indenture
Trustee a certificate as to whether or not the Company is in compliance with
all the conditions and covenants applicable to it under the Indenture.
In case an Indenture Event of Default shall occur and be continuing, the
Property Trustee will have the right to declare the principal of and the
interest on such Junior Subordinated Debentures and any other amounts payable
under the Indenture to be forthwith due and payable and to enforce its other
rights as a creditor with respect to such Junior Subordinated Debentures.
As a holding company, the ability of the Company to make payments of
interest and principal on the Junior Subordinated Debentures will be dependent
primarily upon the receipt of dividends and other distributions from its
subsidiaries. FATICO, which is the Company's principal subsidiary, is subject
to regulatory restrictions on its ability to pay dividends or make other
payments to the Company. In 1997, the maximum amount of dividends, loans and
advances available to the Company from FATICO is $49.7 million. In addition,
the right of the Company to participate in any distribution of assets of any
subsidiary, including FATICO, upon such subsidiary's liquidation or
reorganization or otherwise, will be subject to the prior claims of creditors
of that subsidiary, except to the extent that any claims of the Company as a
creditor of such subsidiary may be recognized as such. Accordingly, the
Capital Securities will effectively be subordinated to all existing and future
<PAGE>
liabilities and obligations of the Company's subsidiaries, and holders of the
Capital Securities should look only to the assets of the Company for payments
on the Capital Securities. As of June 30, 1997, the Company's subsidiaries
had other liabilities and obligations of approximately $609.8 million.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF CAPITAL SECURITIES
If an Indenture Event of Default has occurred and is continuing and such
event is attributable to the failure of the Company to pay interest or
principal on the Junior Subordinated Debentures on the date such interest or
principal is otherwise due and payable (and after the expiration of any
applicable cure period), a holder of Capital Securities (including New Capital
Securities) may institute a Direct Action for payment. The Company may not
amend the Indenture to remove the foregoing right to bring a Direct Action
without the prior written consent of the holders of all of the Capital
Securities. The Company shall have the right under the Indenture to set-off
any payment made by the Company to such holder in any Direct Action. The
holders of Capital Securities will not be able to exercise directly any other
remedy available to the holders of the Junior Subordinated Debentures.
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Indenture provides that the Company shall not consolidate with or
merge into any other Person or convey, transfer or lease its properties and
assets substantially as an entirety to any Person, unless (i) the successor
Person is organized under the laws of the United States or any state or the
District of Columbia, and such successor Person expressly assumes the
Company's obligations on the Junior Subordinated Debentures issued under the
Indenture; (ii) immediately after giving effect thereto, no Indenture Event of
Default, and no event which, after notice or lapse of time or both, would
become an Indenture Event of Default, shall have happened and be continuing;
(iii) if at the time any Capital Securities are outstanding, such transaction
is permitted under the Declaration and Guarantee and does not give rise to any
breach or violation of the Declaration or Guarantee; (iv) any such lease shall
provide that it will remain in effect so long as any Junior Subordinated
Debentures are outstanding; and (v) certain other conditions as prescribed in
the Indenture are met.
MODIFICATION OF INDENTURE
From time to time the Company and the Indenture Trustee may, without the
consent of the holders of the Junior Subordinated Debentures, amend, waive or
supplement the Indenture for specified purposes, including, among other
things, curing ambiguities, defects or inconsistencies (provided that any such
action does not materially and adversely affect the interest of the holders of
Junior Subordinated Debentures or any outstanding Capital Securities) and
qualifying, or maintaining the qualification of, the Indenture under the Trust
Indenture Act of 1939, as amended, if any. The Indenture contains provisions
permitting the Company and the Indenture Trustee, with the consent of the
holders of not less than a majority in principal amount of outstanding Junior
Subordinated Debentures affected, to modify the Indenture in a manner
affecting the rights of the holders of such Junior Subordinated Debentures;
provided that no such modification may, without the consent of the holder of
each outstanding Junior Subordinated Debentures so affected, (i) change the
<PAGE>
stated maturity of Junior Subordinated Debentures or reduce the principal
amount thereof, or reduce the rate or extend the time of payment of interest
thereon (except such extension as is contemplated hereby) or (ii) reduce the
percentage of principal amount of Junior Subordinated Debentures the holders
of which are required to consent to any such modification of the Indenture,
provided that, so long as any Capital Securities remain outstanding, no such
modification may be made that adversely affects the holders of such Capital
Securities in any material respect, and no termination of the Indenture may
occur, and no waiver of any Indenture Event of Default or compliance with any
covenant under the Indenture may be effective, without the prior consent of
the holders of at least a majority of the aggregate Liquidation Amount of the
outstanding Capital Securities unless and until the principal of the Junior
Subordinated Debentures and all accrued and unpaid interest thereon have been
paid in full and certain other conditions are satisfied.
DEFEASANCE AND DISCHARGE
The Indenture provides that the Company, at the Company's option: (a)
will be discharged from any and all obligations in respect of the Junior
Subordinated Debentures (except for certain obligations to register the
transfer or exchange of Junior Subordinated Debentures, replace stolen, lost
or mutilated Junior Subordinated Debentures, maintain paying agencies and hold
moneys for payment in trust) or (b) need not comply with certain restrictive
covenants of the Indenture (including that described in the second paragraph
under "Certain Covenants of the Company"), in each case if the Company
deposits, in trust with the Indenture Trustee, money or U.S. government
obligations which through the payment of interest thereon and principal
thereof in accordance with their terms will provide money, in an amount
sufficient to pay all the principal of, and interest and premium, if any, on
the Junior Subordinated Debentures on the dates such payments are due in
accordance with the terms of such Junior Subordinated Debentures. To exercise
any such option, the Company is required to deliver to the Indenture Trustee
an opinion of counsel to the effect that the deposit and related defeasance
would not cause the holders of the Junior Subordinated Debentures to recognize
income, gain or loss for United States federal income tax purposes and, in the
case of a discharge pursuant to clause (a), such opinion shall be accompanied
by a private letter ruling to the effect received by the Company from the
United States Internal Revenue Service or revenue ruling pertaining to a
comparable form of transaction to such effect published by the United States
Internal Revenue Service.
DISTRIBUTIONS OF JUNIOR SUBORDINATED DEBENTURES; BOOK-ENTRY ISSUANCE
Under certain circumstances involving the termination of the Trust,
Junior Subordinated Debentures may be distributed to the holders of the
Capital Securities in liquidation of the Trust after satisfaction of
liabilities to creditors of the Trust as provided by applicable law. If
distributed to holders of Capital Securities in liquidation, the Junior
Subordinated Debentures will initially be issued in the form of global
securities and certificated securities. DTC, or any successor depositary,
will act as depositary for such global securities. It is anticipated that the
depositary arrangements for such global securities would be substantially
identical to those in effect for the Capital Securities. For a description of
global securities and certificated securities, see "Book-Entry Issuance."
<PAGE>
There can be no assurance as to the market price of any Junior
Subordinated Debentures that may be distributed to the holders of Capital
Securities.
PAYMENT AND PAYING AGENTS
The Company initially will act as paying agent with respect to the Junior
Subordinated Debentures except that, if the Junior Subordinated Debentures are
distributed to the holders of the Capital Securities in liquidation of such
holders' interests in the Trust, the Indenture Trustee will act as the Paying
Agent. The Company at any time may designate additional Paying Agents or
rescind the designation of any Paying Agent or approve a change in the office
through which any Paying Agent acts, except that the Company will be required
to maintain a Paying Agent at the place of payment.
Any moneys deposited with the Indenture Trustee or any Paying Agent, or
then held by the Company in trust, for the payment of the principal of or
interest on any Junior Subordinated Debentures and remaining unclaimed for two
years after such principal or interest has become due and payable shall, at
the request of the Company, be repaid to the Company and the holder of such
Junior Subordinated Debentures shall thereafter look, as a general unsecured
creditor, only to the Company for payment thereof.
GOVERNING LAW
The Indenture and the Old Junior Subordinated Debentures are, and the New
Junior Subordinated Debentures will be, governed by and construed in
accordance with the laws of the State of New York.
INFORMATION CONCERNING THE INDENTURE TRUSTEE
The Indenture Trustee shall have and be subject to all the duties and
responsibilities specified with respect to an indenture trustee under the
Trust Indenture Act. Subject to such provisions, the Indenture Trustee is
under no obligation to exercise any of the powers vested in it by the
Indenture at the request of any holder of Junior Subordinated Debentures,
unless offered reasonable indemnity by such holder against the costs, expenses
and liabilities which might be incurred thereby. The Indenture Trustee is not
required to expend or risk its own funds or otherwise incur personal financial
liability in the performance of its duties if the Indenture Trustee reasonably
believes that repayment or adequate indemnity is not reasonably assured to it.
DESCRIPTION OF GUARANTEE
The Old Guarantee was executed and delivered by the Company concurrently
with the issuance by the Trust of the Old Capital Securities for the benefit
of the holders from time to time of such Capital Securities. As soon as
practicable after the date hereof, the Old Guarantee will be exchanged by the
Company for the New Guarantee. Wilmington Trust Company will act as guarantee
trustee ("Guarantee Trustee") under the New Guarantee. This summary of
certain provisions of the Guarantee does not purport to be complete and is
subject to, and qualified in its entirety by reference to, all of the
provisions of the Guarantee, including the definitions therein of certain
terms. The Guarantee Trustee will hold the Guarantee for the benefit of the
<PAGE>
holders of the Trust Securities.
GENERAL
The Company has irrevocably and unconditionally agreed (and under the New
Guarantee will irrevocably and unconditionally agree) to pay in full on a
subordinated basis, to the extent set forth herein, the Guarantee Payments (as
defined below) to the holders of the Trust Securities, as and when due,
regardless of any defense, right of set-off or counterclaim that the Trust may
have or assert other than the defense of payment. The following payments with
respect to the Trust Securities, to the extent not paid by or on behalf of the
Trust (the "Guarantee Payments"), will be subject to the Guarantee: (i) any
accumulated and unpaid Distributions required to be paid on the Trust
Securities, to the extent that the Trust has sufficient funds available
therefor at the time, (ii) the redemption price with respect to any Trust
Securities called for redemption, to the extent that the Trust has sufficient
funds available therefor at such time, or (iii) upon a voluntary or
involuntary dissolution, winding up or liquidation of the Trust (unless the
Junior Subordinated Debentures are distributed to holders of the Trust
Securities), the lesser of (a) the aggregate Liquidation Amount of the Trust
Securities and all accrued and unpaid Distributions thereon to the date of
payment and (b) the amount of assets of the Trust remaining available for
distribution to holders of Trust Securities. The Company's obligation to make
a Guarantee Payment may be satisfied by direct payment of the required amounts
by the Company to the holders of the applicable Trust Securities or by causing
the Trust to pay such amounts to such holders.
The Guarantee will be an irrevocable guarantee on a subordinated basis of
the Trust's obligations under the Trust Securities, but will apply only to the
extent that the Trust has sufficient funds available to make such payments.
If the Company does not make interest payments on the Junior Subordinated
Debentures held by the Trust, the Trust will not be able to pay Distributions
on the Trust Securities and will not have funds legally available therefor.
The Guarantee will rank subordinate and junior in right of payment to all
Senior Indebtedness of the Company. See "--Status of the Guarantee." The
Guarantee does not limit the incurrence or issuance of other secured or
unsecured debt of the Company, whether under the Indenture, any other existing
indenture or any other indenture that the Company may enter into in the future
or otherwise.
The Company has, through the Guarantee, the Declaration, the Junior
Subordinated Debentures and the Indenture, taken together, fully and
unconditionally guaranteed all of the Trust's obligations under the Capital
Securities. No single document standing alone or operating in conjunction
with fewer than all of the other documents constitutes such guarantee. It is
only the combined operation of these documents that has the effect of
providing a full and unconditional guarantee of the Trust's obligations under
the Capital Securities. See "Relationship Among the New Capital Securities,
the New Junior Subordinated Debentures and the New Guarantee--General."
STATUS OF THE GUARANTEE
The Guarantee will constitute an unsecured obligation of the Company and
<PAGE>
will rank subordinate and junior in right of payment to all Senior
Indebtedness of the Company. The Guarantee does not place a limitation on the
amount of additional Senior Indebtedness that may be incurred by the Company.
The Guarantee will constitute a guarantee of payment and not of
collection (i.e., the guaranteed party may institute a legal proceeding
directly against the Guarantor to enforce its rights under the Guarantee
without first instituting a legal proceeding against any other person or
entity). The Guarantee will be held for the benefit of the holders of the
Trust Securities. The Guarantee will not be discharged except by payment of
the Guarantee Payments in full to the extent not paid by the Trust or upon
Distribution of the Junior Subordinated Debentures to the holders of the
Capital Securities in exchange for all of the Trust Securities.
The obligations of the Company under the Guarantee will be structurally
subordinated to all liabilities and obligations of the Company's subsidiaries.
See "Risk Factors--Status of Company as Holding Company."
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not materially and adversely
affect the rights of holders of the Trust Securities (in which case no vote
will be required), the Guarantee may not be amended without the prior approval
of the holders of not less than a majority of the aggregate Liquidation Amount
of the outstanding Trust Securities. The manner of obtaining any such
approval will be as set forth under "Description of New Securities--
Description of New Capital Securities--Voting Rights; Amendment of the
Declaration." All guarantees and agreements contained in the Guarantee shall
bind the successors, assigns, receivers, trustees and representatives of the
Company and shall inure to the benefit of the registered holders of the Trust
Securities then outstanding.
EVENTS OF DEFAULT
An event of default under the Guarantee will occur upon the failure of
the Company to perform any of its payment or other obligations thereunder.
The holders of a majority in aggregate Liquidation Amount of the Trust
Securities have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Guarantee Trustee in respect of
the Guarantee or to direct the exercise of any trust or power conferred upon
the Guarantee Trustee under the Guarantee.
Any holder of the Trust Securities may institute a legal proceeding
directly against the Company to enforce its rights under the Guarantee without
first instituting a legal proceeding against the Trust, the Guarantee Trustee
or any other person or entity.
The Company, as guarantor, is required to file annually with the
Guarantee Trustee a certificate as to whether or not the Company is in
compliance with all the conditions and covenants applicable to it under the
Guarantee.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
<PAGE>
The Guarantee Trustee, other than during the occurrence and continuance
of a default by the Company in performance of the Guarantee, undertakes to
perform only such duties as are specifically set forth in the Guarantee and,
after default with respect to the Guarantee, must exercise the same degree of
care and skill as a prudent person would exercise or use in the conduct of his
or her own affairs. Subject to this provision, the Guarantee Trustee is under
no obligation to exercise any of the powers vested in it by the Guarantee at
the request of any holder of any Trust Security unless it is offered
reasonable indemnity against the costs, expenses and liabilities that might be
incurred thereby.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate and be of no further force and effect upon
full payment of the redemption price of all of the Trust Securities, upon full
payment of the amounts payable upon liquidation of the Trust or upon
Distribution of Junior Subordinated Debentures to the holders of the Trust
Securities in exchange for all of the Trust Securities. The Guarantee will
continue to be effective or will be reinstated, as the case may be, if at any
time any holder of the Trust Securities must restore payment of any sums paid
under the Trust Securities or the Guarantee.
GOVERNING LAW
The New Guarantee will be governed by and construed in accordance with
the laws of the State of New York.
RELATIONSHIP AMONG THE NEW CAPITAL SECURITIES,
THE NEW JUNIOR SUBORDINATED DEBENTURES
AND THE NEW GUARANTEE
Payments of Distributions and other amounts due on the Trust Securities
(to the extent the Trust has funds available for the payment of such
Distributions) are irrevocably guaranteed by the Company as and to the extent
set forth under "Description of New Securities--Description of New Guarantee."
If and to the extent that the Company does not make payments under the Junior
Subordinated Debentures when such payments are due and payable, the Trust will
not pay Distributions or other amounts due on the Trust Securities. The
Guarantee does not cover payment of Distributions when the Trust does not have
sufficient funds to pay such Distributions. In such event, a holder of
Capital Securities (including New Capital Securities) may institute a legal
proceeding directly against the Company under the Indenture to enforce payment
of such Distributions to such holder after the respective due dates. Taken
together, the Company's obligations under the Junior Subordinated Debentures,
the Indenture, the Declaration and the Guarantee provide, in the aggregate, a
full and unconditional guarantee of payments of distributions and other
amounts due on the Capital Securities. No single document standing alone or
operating in conjunction with fewer than all of the other documents
constitutes such guarantee. It is only the combined operation of these
documents that has the effect of providing a full and unconditional guarantee
of the Trust's obligations under the Capital Securities. The obligations of
the Company under the Guarantee and the Junior Subordinated Debentures are
subordinate and junior in right of payment to all Senior Indebtedness of the
Company.
<PAGE>
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on
the Junior Subordinated Debentures, such payments will be sufficient to cover
Distributions and other payments due on the Capital Securities, primarily
because (i) the aggregate principal amount of the Junior Subordinated
Debentures will be equal to the sum of the aggregate stated Liquidation Amount
of the Capital Securities and the Common Securities; (ii) the interest rate
and interest and other payment dates on the Junior Subordinated Debentures
will match the Distribution rate and Distribution and other payment dates for
the related Capital Securities; (iii) the Company will pay for all and any
costs, expenses and liabilities of the Trust except the Trust's obligations
under the Trust Securities; and (iv) the Declaration further provides that the
Trust will not engage in any activity that is not consistent with the limited
purposes of the Trust.
Notwithstanding anything to the contrary in the Indenture, the Company
has the right to set-off any payment it is otherwise required to make
thereunder with and to the extent the Company has theretofore made, or is
concurrently on the date of such payment making, a related payment under the
Guarantee.
ENFORCEMENT RIGHTS OF HOLDERS OF CAPITAL SECURITIES
A holder of Trust Securities may institute a legal proceeding directly
against the Company to enforce its rights under the Guarantee without first
instituting a legal proceeding against the Guarantee Trustee, the Trust or any
other person or entity.
A default or event of default under any Senior Indebtedness of the
Company will not constitute a default or Indenture Event of Default. In
addition, in the event of payment defaults under, or acceleration of, Senior
Indebtedness of the Company, the subordination provisions of the Indenture
provide that no payments may be made in respect of the Junior Subordinated
Debentures until such Senior Indebtedness has been paid in full or any payment
default thereunder has been cured or waived. Failure to make required
payments on the Junior Subordinated Debentures would constitute an Indenture
Event of Default under the Indenture.
LIMITED PURPOSE OF TRUST
The Capital Securities evidence a beneficial interest in the Trust, and
the Trust exists for the sole purpose of issuing the Capital Securities and
the Common Securities and investing the proceeds thereof in Junior
Subordinated Debentures. A principal difference between the rights of a
holder of Capital Securities and a holder of Junior Subordinated Debentures is
that a holder of Junior Subordinated Debentures is entitled to receive from
the Company the principal amount of and interest accrued on Junior
Subordinated Debentures held, while a holder of Capital Securities is entitled
to receive Distributions from the Trust (or from the Company under the
Guarantee) if and to the extent the Trust has funds available for the payment
of such Distributions.
RIGHTS UPON TERMINATION
<PAGE>
Upon any voluntary or involuntary termination, winding-up or liquidation
of the Trust involving the liquidation of the Junior Subordinated Debentures,
the holders of the Capital Securities will be entitled to receive, out of
assets held by the Trust, the Liquidation Distribution in cash. See
"Description of New Securities--Description of New Capital
Securities--Liquidation Distribution Upon Dissolution." Upon any voluntary or
involuntary liquidation or bankruptcy of the Company, the Property Trustee, as
holder of the Junior Subordinated Debentures, would be a subordinated creditor
of the Company, subordinated in right of payment to all Senior Indebtedness,
but entitled to receive payment in full of principal and interest before any
stockholders of the Company receive payments or distributions. Since the
Company is the guarantor under the Guarantee and has agreed to pay for all
costs, expenses and liabilities of the Trust (other than the Trust's
obligations to the holders of the Capital Securities), the position of a
holder of Capital Securities and a holder of the Junior Subordinated
Debentures relative to other creditors and to stockholders of the Company in
the event of liquidation or bankruptcy of the Company would be substantially
the same.
DESCRIPTION OF OLD SECURITIES
The terms of the Old Securities are identical in all material respects to
the New Securities, except that (i) the Old Securities have not been
registered under the Securities Act, are subject to certain restrictions on
transfer and are entitled to certain rights under the Registration Rights
Agreement (which rights will terminate upon consummation of the Exchange
Offer, except under limited circumstances); (ii) the New Capital Securities
will not provide for any increase in the Distribution rate thereon; and (iii)
the New Junior Subordinated Debentures will not provide for any increase in
the interest rate thereon. The Registration Rights Agreement provides that,
if (i) the Registration Statement of which this Prospectus forms a part (the
"Exchange Registration Statement") is not filed with the Commission by
September 19, 1997 (or, in certain limited circumstances, a shelf registration
statement (the "Shelf Registration Statement") with respect to the resale of
the Old Capital Securities is not filed with the Commission by a specified
date), (ii) the Exchange Registration Statement is not declared effective by
October 19, 1997 (or, in certain limited circumstances, the Shelf Registration
Statement is not declared effective by a specified date) (the "Effectiveness
Target Date"), (iii) the Exchange Offer is not consummated within 30 business
days of the Effectiveness Target Date or (iv) if the Exchange Registration
Statement (or, in certain limited circumstances, the Shelf Registration
Statement) is filed and declared effective but thereafter ceases to be
effective or usable in connection with resales of transfer restricted Trust
Securities without being succeeded within 60 days by an additional
registration statement filed and declared effective that cures such failure
(each, a "Registration Default"), then the Company will pay additional
interest ("Additional Interest") in respect of the Old Junior Subordinated
Debentures and corresponding additional Distributions ("Additional
Distributions") will become payable on the Old Capital Securities, with
respect to the first 30-day period immediately following the occurrence of
such Registration Default, in an amount equal to 0.25% per week per $1,000
Liquidation Amount of Old Capital Securities. The amount of Additional
Interest (and corresponding Additional Distributions) will increase by an
additional 0.25% per week per $1,000 Liquidation Amount of Old Capital
<PAGE>
Securities with respect to each subsequent 30-day period until such
Registration Default has been cured, up to a maximum amount of Additional
Interest (and corresponding Additional Distributions) of 0.50% per week per
$1,000 Liquidation Amount of Old Capital Securities. The New Securities are
not, and upon consummation of the Exchange Offer the Old Securities will not
be, entitled to any such Additional Interest or Additional Distributions.
Accordingly, holders of Old Capital Securities should review the information
set forth under "Risk Factors--Consequences of a Failure to Exchange Old
Capital Securities."
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summary describes the principal United States federal
income tax consequences that may be relevant to the purchase, ownership and
disposition of the New Capital Securities. Unless otherwise stated, this
summary only addresses the United States federal income tax consequences to
U.S. Holders (defined below) who exchange Old Capital Securities for New
Capital Securities pursuant to the Exchange Offer and hold New Capital
Securities as capital assets. As used herein, a "U.S. Holder" means a holder
that is for United States income tax purposes (i) a citizen or resident of the
United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or any State thereof
(including the District of Columbia) (including any other partnership treated
as a United States person under any applicable United States Treasury
Regulations, but excluding a partnership that meets the definition contained
in this clause (ii) but is not treated as a United States person under any
such United States Treasury Regulations), (iii) an estate the income of which
is subject to United States federal income taxation regardless of its source,
or (iv) a trust if a court within the United States is able to exercise
primary supervision over the administration of such trust and one or more
United States persons have the authority to control all the substantial
decisions of such trust. Notwithstanding the preceding sentence, to the
extent provided in United States Treasury Regulations, certain trusts in
existence on August 20, 1996, and treated as United States persons prior to
such date, that elect to continue to be treated as United States persons also
will be a U.S. Holder. The tax treatment of a holder may vary depending on
his, her or its particular situation. This summary does not address all the
United States federal income tax consequences that may be relevant to a
particular holder or to holders who may be subject to special tax treatment,
such as banks, thrifts, real estate investment trusts, regulated investment
companies, insurance companies, dealers or traders in securities or
currencies, tax-exempt investors, persons that hold Capital Securities as a
position in a "straddle" or as part of a "hedging," "conversion" or
"integrated" transaction for United States federal income tax purposes,
persons that have a "functional currency" other than the U.S. dollar or to
holders that are not U.S. Holders. In addition, this summary does not include
any description of any alternative minimum tax consequences or the tax laws of
any state, local or foreign government that may be applicable to a holder of
New Capital Securities. This summary is based on the Internal Revenue Code of
1986, as amended (the "Code"), the Treasury regulations promulgated thereunder
and administrative and judicial interpretations thereof, as of the date
hereof, all of which are subject to change, possibly on a retroactive basis.
The authorities on which this summary is based are subject to various
interpretations that are not binding on the Internal Revenue Service ("IRS").
<PAGE>
Moreover, no rulings have been or will be sought from the IRS with respect to
the transactions described herein. Accordingly, there can be no assurance
that the IRS will not challenge the treatment described herein.
PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS WITH
RESPECT TO THE TAX CONSEQUENCES TO THEM OF AN EXCHANGE PURSUANT TO THE
EXCHANGE OFFER AND THE OWNERSHIP AND DISPOSITION OF THE NEW CAPITAL
SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN, AND
OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL OR
OTHER TAX LAWS. FOR A DISCUSSION OF THE POSSIBLE REDEMPTION OF THE NEW
CAPITAL SECURITIES UPON THE OCCURRENCE OF CERTAIN SPECIAL EVENTS. SEE
"DESCRIPTION OF NEW SECURITIES--DESCRIPTION OF NEW CAPITAL
SECURITIES--REDEMPTIONS."
EXCHANGE OFFER
The exchange of Old Capital Securities for New Capital Securities
pursuant to the Exchange Offer should not constitute a material modification
of the terms of the Old Capital Securities and, therefore, such exchange
should not constitute an exchange for United States federal income tax
purposes. Accordingly, such exchange should have no United States income tax
consequences to U.S. Holders of Capital Securities and the holding period of
the New Capital Securities will include the holding period of the Old Capital
Securities and the basis of the New Capital Securities will be the same as the
basis of the Old Capital Securities immediately before the exchange.
CLASSIFICATION OF THE TRUST
In connection with the issuance of the New Capital Securities, under
current law and assuming full compliance with the terms of the Declaration and
other documents, the Trust will not be taxable as a corporation for United
States federal income tax purposes. Accordingly, for United States federal
income tax purposes, each holder of New Capital Securities will be required to
include in its gross income its pro rata share of interest income, including,
original issue discount ("OID"), paid or accrued on the Junior Subordinated
Debentures.
CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBENTURES
The Company, the Trust and the holders of the New Capital Securities (by
acceptance of a beneficial interest in a New Capital Security) will agree to
treat the Junior Subordinated Debentures as indebtedness for all United States
tax purposes.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Except as set forth below, stated interest on the Junior Subordinated
Debentures generally will be taxable to a holder as ordinary income at the
time it is paid or accrued in accordance with such holder's regular method of
tax accounting.
Under Treasury regulations applicable to debt instruments issued on or
after August 13, 1996 (the "Regulations"), a "remote" contingency that stated
interest will not be timely paid will be ignored in determining whether a debt
<PAGE>
instrument is issued with OID. The Company believes that the likelihood of
its exercising its option to defer payments of interest is remote. Based on
the foregoing, the Company believes that the Junior Subordinated Debentures
will not be considered to be issued with OID at the time of their original
issuance and, accordingly, a U.S. Holder should include in gross income such
holder's allocable share of stated interest on the Junior Subordinated
Debentures in accordance with such holder's regular method of tax accounting.
Under the Regulations, if the Company exercised its option to defer any
payment of interest, the Junior Subordinated Debentures would at that time be
treated as having been reissued with OID, and all stated interest on the
Junior Subordinated Debentures would thereafter be treated as OID as long as
the Junior Subordinated Debentures remained outstanding. In such event, all
of a U.S. Holder's interest income with respect to the Junior Subordinated
Debentures would be accounted for as OID on an economic accrual basis
regardless of such holder's method of tax accounting, and actual distributions
of stated interest would not be reported as income. Consequently, a U.S.
Holder would be required to include stated interest on the Junior Subordinated
Debentures in gross income, as OID, even though the Company would not make any
actual cash payments with respect to such interest during an Extension Period.
The Regulations have not been addressed in any rulings or other
interpretations by the IRS, and its is possible that the IRS could take a
position contrary to the interpretation herein.
Because income on the New Capital Securities will constitute interest or
OID, corporate U.S. Holders will not be entitled to a dividends-received
deduction with respect to any income recognized with respect to the New
Capital Securities.
Subsequent use of the term "interest" in this summary includes income in
the form of OID.
DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES OR CASH UPON LIQUIDATION OF THE
TRUST
As described under the caption "Description of New Securities--
Description of New Junior Subordinated Debentures--Distributions of New Junior
Subordinated Debentures; Book-Entry Issuance," New Junior Subordinated
Debentures may be distributed to holders in exchange for the New Capital
Securities and in liquidation of the Trust. Under current law, such a
distribution should be non-taxable, and should result in a U.S. Holder
receiving directly its pro rata share of the New Junior Subordinated
Debentures previously held indirectly through the Trust, with a holding period
and aggregate tax basis equal to the holding period and aggregate tax basis
such holder had in its New Capital Securities before such distribution. If,
however, the liquidation of the Trust were to occur because the Trust is
subject to United States federal income tax with respect to income accrued or
received on the New Junior Subordinated Debentures, the distribution of the
New Junior Subordinated Debentures to holders would be a taxable event to the
Trust and to each holder and a U.S. Holder would recognize gain or loss as if
the holder had exchanged its New Capital Securities for the New Junior
Subordinated Debentures it received upon liquidation of the Trust. A U.S.
Holder would accrue interest in respect of the New Junior Subordinated
<PAGE>
Debentures received from the Trust in the manner described above under
"--Interest Income and Original Issue Discount."
Under certain circumstances described herein (see "Description of New
Securities--Description of New Capital Securities--Redemption"), the Junior
Subordinated Debentures may be redeemed for cash, with the proceeds of such
redemption distributed to holders in redemption of their New Capital
Securities. Under current law, such a redemption would constitute a taxable
disposition of the redeemed New Capital Securities for United States federal
income tax purposes, and a U.S. Holder would recognize gain or loss as if it
sold such redeemed New Capital Securities for cash. See "--Sales of New
Capital Securities."
SALES OF NEW CAPITAL SECURITIES
A U.S. Holder that sells New Capital Securities will recognize gain or
loss equal to the difference between the amount realized by such holder on the
sale of the New Capital Securities (except to the extent that such amount
realized is characterized as a payment in respect of accrued but unpaid
interest on such holder's allocable share of the Junior Subordinated
Debentures that the holder had not included in gross income previously) and
the holder's adjusted tax basis in the New Capital Securities sold. Assuming
that the Company does not exercise its option to defer payment of interest on
the Junior Subordinated Debentures, and the New Capital Securities are not
considered issued with OID, a U.S. Holder's adjusted tax basis in the New
Capital Securities generally will be its initial purchase price. If the
Junior Subordinated Debentures are deemed to be issued with OID as result of
the Company's deferral of any interest payment, or otherwise, a U.S. Holder's
tax basis in the New Capital Securities generally will be its initial purchase
price, increased by OID previously includible in such holder's gross income to
the date of disposition and decreased by distributions or other payments
received on the New Capital Securities since and including the date of the
first Extension Period. Such gain or loss generally will be a capital gain or
loss. In the case of a noncorporate U.S. Holder, the maximum marginal U.S.
federal income tax rate applicable to such gain will be lower than the maximum
marginal U.S. federal income tax rate applicable to ordinary income if such
U.S. Holder's holding period for such New Capital Securities exceeds one year
and will be further reduced if such New Capital Securities were held for more
than 18 months. Subject to certain limited exceptions, capital losses cannot
be applied to offset ordinary income for United States federal income tax
purposes.
Should the Company exercise its option to defer any payment of interest
on the Junior Subordinated Debentures, the New Capital Securities may trade at
a price that does not accurately reflect the value of accrued but unpaid
interest with respect to the underlying Junior Subordinated Debentures. In
the event of such a deferral, a U.S. Holder who disposes of its New Capital
Securities between record dates for payments of distributions thereon will be
required to include in income as ordinary income accrued but unpaid interest
on the Junior Subordinated Debentures to the date of disposition as OID, but
may not receive the cash related thereto. However, such holder will add such
amount to its adjusted tax basis in the New Capital Securities. To the extent
the selling price received by a U.S. Holder in respect of such New Capital
Securities is less than the U.S. Holder's adjusted tax basis in such capital
<PAGE>
securities, such holder will recognize a capital loss. Subject to certain
limited exceptions, capital losses cannot be applied to offset ordinary income
for United States federal income tax purposes.
BACKUP WITHHOLDING TAX AND INFORMATION REPORTING
The amount of interest income paid or accrued on the New Capital
Securities held of record by a U.S. Holder (other than an "exempt recipient",
including a corporation, a payee that is not a U.S. Holder that provides an
appropriate certification and certain other persons) will be reported to the
IRS. Backup withholding at a rate of 31% will apply to payments of interest
to non-exempt U.S. Holders unless the U.S. Holder furnishes its taxpayer
identification number in the manner prescribed in applicable Treasury
regulations, certifies that such number is correct, certifies as to no loss of
exemption from backup withholding and meets certain other conditions.
Payment of the proceeds from the disposition of New Capital Securities to
or through the United States office of a broker is subject to information
reporting and backup withholding unless the U.S. Holder establishes an
exemption from information reporting and backup withholding.
Any amounts withheld from a U.S. Holder under the backup withholding
rules will be allowed as a refund or a credit against such U.S. Holder's
United States federal income tax liability, provided the required information
is furnished to the IRS.
BOOK-ENTRY ISSUANCE
The New Capital Securities initially will be represented by one or more
Capital Securities in registered, global form (collectively, the "Global
Capital Securities"). The Global Capital Securities will be deposited upon
issuance with the Property Trustee as custodian for The Depository Trust
Company ("DTC") and registered in the name of Cede & Co. as DTC's nominee, in
each case for credit to an account of a direct or indirect participant in DTC
as described below.
Except as set forth below, the Global Capital Securities may be
transferred, in whole and not in part, only to another nominee of DTC or to a
successor of DTC or its nominee only in amounts that would not cause a holder
to own less than 100 New Capital Securities. Beneficial interests in the
Global Capital Securities may not be exchanged for New Capital Securities in
certificated form except in the limited circumstances described below. See
"--Exchange of Book-Entry Capital Securities for Certificated Capital
Securities."
Transfer of beneficial interests in the Global Capital Securities will be
subject to the applicable rules and procedures of DTC and its direct or
indirect participants (including, if applicable, those of the Euroclear System
("Euroclear") and CEDEL, S.A. ("CEDEL")), which may change from time to time.
DEPOSITARY PROCEDURES
DTC has advised the Trust and the Company that DTC is a limited-purpose
<PAGE>
trust company organized under the laws of the State of New York, a member of
the Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participating organizations (collectively, the
"Participants") and to facilitate the clearance and settlement of transactions
in those securities between Participants through electronic book-entry changes
in accounts of its Participants. The Participants include securities brokers
and dealers (including the Purchasers), banks, trust companies, clearing
corporations and certain other organizations. Indirect access to DTC's system
is also available to other entities such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly (collectively, the "Indirect
Participants"). Persons who are not Participants may beneficially own
securities held by or on behalf of DTC only through the Participants or the
Indirect Participants. The ownership interest and transfer of ownership
interest of each actual purchaser of each security held by or on behalf of DTC
are recorded on the records of the Participants and Indirect Participants.
DTC has also advised the Trust and the Company that, pursuant to
procedures established by it, (i) upon deposit of the Global Capital
Securities, DTC will credit the accounts of Participants designated by the
Initial Purchasers with portions of the aggregate Liquidation Amount of the
Global Capital Securities and (ii) ownership of such interests in the Global
Capital Securities will be shown on, and the transfer of ownership thereof
will be effected only through, records maintained by DTC (with respect to the
Participants) or by the Participants and the Indirect Participants (with
respect to other owners of beneficial interests in the Global Capital
Securities).
Investors in the Global Capital Securities may hold their interests
therein directly through DTC if they are participants in such system, or
indirectly through organizations (including Euroclear and CEDEL) which are
participants in such system. All interest in a Global Capital Security,
including any held through Euroclear or CEDEL, may be subject to the
procedures and requirements of DTC. Those interests held through Euroclear or
CEDEL may also be subject to the procedures and requirements of such system.
The laws of some states require that certain persons take physical delivery in
certificated form of securities that they own. Consequently, the ability to
transfer beneficial interests in a Global Capital Security to such persons
will be limited to that extent. Because DTC can act only on behalf of
Participants, which in turn act on behalf of Indirect Participants and certain
banks, the ability of a person having beneficial interests in a Global Capital
Security to pledge such interests to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of such
interests, may be affected by the lack of a physical certificate evidencing
such interests. For certain other restrictions on the transferability of the
New Capital Securities, see "--Exchange of Book-Entry New Capital Securities
for Certificated New Capital Securities."
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL CAPITAL
SECURITIES WILL NOT HAVE NEW CAPITAL SECURITIES REGISTERED IN THEIR NAME, WILL
NOT RECEIVED PHYSICAL DELIVERY OF NEW CAPITAL SECURITIES IN CERTIFICATED FORM
AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR HOLDERS THEREOF FOR ANY
<PAGE>
PURPOSE.
The Property Trustee will treat the persons in whose names the New
Capital Securities, including the Global Capital Securities, are registered as
the owners thereof for the purpose of receiving payments and for any and all
other purposes whatsoever. Accordingly, payments in respect of the Global
Capital Security registered in the name DTC or its nominee will be payable by
the Property Trustee to DTC in its capacity as the registered holder. DTC has
advised the Trust and the Company that its current practice, upon receipt of
any payment in respect of securities such as the New Capital Securities, is to
credit the accounts of the relevant Participants with the payment on the
payment date unless DTC has reason to believe it will not receive payment on
such payment date. Payments by the Participants and the Indirect Participants
to the beneficial owners of New Capital Securities will be governed by
standing instructions and customary practices and will be the responsibility
of the Participants or the Indirect Participants and will not be the
responsibility of DTC, the Company, the Property Trustee or the Trust.
Neither the Trust, the Company nor the Property Trustee will be liable for any
delay by DTC or any of its Participants in identifying the beneficial owners
of the New Capital Securities, and the Trust and the Property Trustee may
conclusively rely on and will be protected in relying on instructions from DTC
or its nominee for all purposes. Consequently, neither the Company, the
Trust, the Property Trustee nor any agent thereof has or will have any
responsibility or liability for (i) any aspect of DTC's records or any
Participant's or Indirect Participant's records relating to or payments made
on account of beneficial ownership interests in the Global Capital Securities,
or for maintaining, supervising or reviewing any of DTC's records or any
Participant's or Indirect Participant's records relating to the beneficial
ownership interests in the Global Capital Securities or (ii) any other matter
relating to the actions and practices of DTC or any of its Participants or
Indirect Participants.
Except for trades involving only Euroclear or CEDEL participants,
interests in the Global Capital Securities will trade in DTC's Same-Day Funds
Settlement System and secondary market trading activity in such interests will
therefore settle in immediately available funds, subject in all cases to the
rules and procedures of DTC and its Participants. Transfers between
Participants in DTC will be effected in accordance with DTC's procedures, and
will be settled in same-day funds. Transfers between participants in
Euroclear or CEDEL will be effected in the ordinary course in accordance with
their respective rules and operating procedures.
DTC has advised the Trust and the Company that it will take any action
permitted to be taken by a holder of New Capital Securities only at the
direction of one or more Participants to whose account with DTC interests in
the Global Capital Securities are credited and only in respect of such portion
of the aggregate Liquidation Amount of the New Capital Securities represented
by the Global Capital Securities as to which such Participant or Participants
has or have given such direction. However, if there is a Trust Enforcement
Event, DTC reserves the right to exchange the Global Capital Securities for
legended New Capital Securities in certificated form and to distribute such
New Capital Securities to its Participants.
So long as DTC or its nominee is the registered owner of the Global
<PAGE>
Capital Securities, DTC or such nominee, as the case may be, will be
considered the sole owner or holder of the New Capital Securities represented
by the Global Capital Security for all purposes under the Declaration.
The information in this section concerning DTC and its book-entry systems
has been obtained from sources that the Trust and the Company believe to be
reliable, but neither the Trust nor the Company takes responsibility for the
accuracy thereof.
Although DTC has agreed to the foregoing procedures to facilitate
transfers of interest in the Global Capital Securities among participants in
DTC, it is under no obligation to perform or to continue to perform such
procedures, and such procedures may be discontinued at any time. Neither the
Company, the Trust nor the Property Trustee will have any responsibility for
the performance by DTC or its respective Participants or Indirect Participants
of their respective obligations under the rules and procedures governing their
operations.
EXCHANGE OF BOOK-ENTRY CAPITAL SECURITIES FOR CERTIFICATED CAPITAL SECURITIES
A Global Capital Security is exchangeable for New Capital Securities in
registered certificated form if (i) DTC (x) notifies the Trust that it is
unwilling or unable to continue as Depositary for the Global Capital Security
and the Trust thereupon fails to appoint a successor Depositary or (y) has
ceased to be a clearing agency registered under the Exchange Act, (ii) the
Company in its sole discretion elects to cause the issuance of the New Capital
Securities in certificated form or (iii) there shall have occurred and be
continuing a Trust Enforcement Event or any event which after notice or lapse
of time or both would be a Trust Enforcement Event under the Declaration. In
addition, beneficial interests in a Global Capital Security may be exchanged
for certificated New Capital Securities upon request but only upon at least 20
days' prior written notice given to the Property Trustee by or on behalf of
DTC in accordance with customary procedures. In all cases, certificated New
Capital Securities delivered in exchange for any Global Capital Security or
beneficial interests therein will be registered in the names, and issued in
any authorized denominations, requested by or on behalf of DTC (in accordance
with its customary procedures).
BENEFIT PLAN CONSIDERATIONS
Before authorizing an investment in the New Capital Securities,
fiduciaries of pension, profit sharing or other employee benefit plans subject
to the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
or Section 4975 of the Code ("Plans") should consider, among other matters,
(a) ERISA's fiduciary standards (including its prudence and diversification
requirements), (b) whether such fiduciaries have authority to make such
investment in the New Capital Securities under the applicable Plan (as defined
herein) investment policies and governing instruments, and (c) rules under
ERISA and the Code that prohibit Plans from engaging in "prohibited
transactions."
Section 406 of ERISA and Section 4975 of the Code prohibit Plans,
including individual retirement accounts and Keogh plans subject to Section
4975 of the Code, from, among other things, engaging in certain transactions
<PAGE>
involving "plan assets" with persons who are "parties in interest" under ERISA
or "disqualified persons" under the Code with respect to such Plan. A
violation of these "prohibited transaction" rules may result in an excise tax
or other liabilities under ERISA and/or Section 4975 of the Code for such
persons, unless exemptive relief is available under an applicable statutory or
administrative exemption. Employee benefit plans that are governmental plans
(as defined in Section 3(32) of ERISA), certain church plans (as defined in
Section 3(33) of ERISA) and foreign plans (as described in Section 4(b)(4) of
ERISA) are not subject to the requirements of ERISA or Section 4975 of the
Code but may be subject to similar rules, as discussed below.
The Department of Labor ("DOL") has issued a regulation (29 C.F.R.
Section 2510.3-101) (the "Plan Assets Regulation") concerning the definition
of what constitutes the assets of a Plan. The Plan Assets Regulation provides
that as a general rule, the underlying assets and properties of corporations,
partnerships, trusts and certain other entities in which a Plan acquires an
"equity interest" will be deemed for purposes of ERISA to be assets of the
investing Plan unless certain exceptions apply.
Pursuant to an exception contained in the Plan Assets Regulation, the
assets of the Trust would not be deemed to be "plan assets" of investing Plans
if, immediately after the most recent acquisition of any equity interest in
the Trust, less than 25% of the value of each class of equity interest in the
Trust were held by Plans, other employee benefit plans not subject to ERISA or
Section 4975 of the Code (such as governmental, church and foreign plans) and
entities holding assets deemed to be "plan assets" of any Plan (collectively,
"Benefit Plan Investors"). No assurance can be given that the value of the
New Capital Securities held by Benefit Plan Investors will be less than 25% of
the total value of such New Capital Securities at the completion of the
initial offering or thereafter, and no monitoring or other measures will be
taken with respect to the satisfaction of the conditions to this exception.
All of the Common Securities have been purchased, and will be held directly,
by the Company.
It is also possible that New Capital Securities received as the result of
the Exchange Offer may qualify as "publicly offered securities" under the Plan
Assets Regulation if, in addition to being offered pursuant to any effective
registration statement, they are also "widely held" and "freely transferable"
at the time of the Exchange Offer. Under the Plan Assets Regulation, a class
of securities is "widely held" only if it is a class of securities owned by
100 or more investors independent of the issuer and each other. Although it
is possible that at the time of the Exchange Offer the New Capital Securities
will be "widely held", no assurances can be given that will be true. If the
New Capital Securities are "publicly offered securities" at the time of the
Exchange Offer, the assets of the Trust would not be assets of the investing
Plans.
There can be no assurance that any of the exceptions set forth in the
Plan Assets Regulation will apply to the purchase of New Capital Securities
offered hereby and, as a result, an investing Plan's assets could be
considered to include an undivided interest in the Junior Subordinated
Debentures held by the Trust. In the event that assets of the Trust are
considered assets of an investing Plan, the Trustees, the Company and other
persons, in providing services with respect to the Junior Subordinated
<PAGE>
Debentures, may be considered fiduciaries to such Plan and subject to the
fiduciary responsibility provisions of Title I of ERISA. In addition, certain
transactions involving the Trust and/or the New Capital Securities could be
deemed to constitute direct or indirect prohibited transactions under ERISA
and Section 4975 of the Code with respect to a Plan. For example, if the
Company is a Party in Interest with respect to an investing Plan, extensions
of credit between the Company and the Trust (as represented by the Junior
Subordinated Debentures and the New Guarantee) would likely be prohibited
transactions under Section 406(a)(1)(B) of ERISA and Section 4975(c)(1)(B) of
the Code unless covered by statutory or administrative exemptive relief. In
addition, if the Company were considered to be a fiduciary with respect to the
Trust as a result of certain powers it holds (such as the power to appoint,
remove or replace the Trustees), the optional redemption or acceleration of
the Junior Subordinated Debentures could be considered to be a prohibited
transaction under Section 406(b) of ERISA and Section 4975(c)(1)(E) of the
Code. In order to avoid such prohibited transactions, each investing Plan, by
purchasing the New Capital Securities, will be deemed to have directed the
Trust to invest in the Junior Subordinated Debentures and to have appointed
the Property Trustee.
The DOL has issued five prohibited transaction class exemptions ("PTCEs")
that may provide exemptive relief for direct or indirect prohibited
transactions resulting from the purchase or holding of the New Capital
Securities by a Plan or an entity using "plan assets." Those class exemptions
are PTCE 96-23 (for certain transactions determined by in-house asset
managers), PTCE 91-38 (for certain transactions involving bank collective
investment funds), PTCE 95-60 (for certain transactions involving insurance
company general accounts) PTCE 90-1 (for certain transactions involving
insurance company pooled separate accounts) and PTCE 84-14 (for certain
transactions determined by independent qualified professional asset managers).
Because of ERISA's prohibitions and those of Section 4975 of the Code,
the New Capital Securities may not be purchased or held by any Plan, any
entity whose underlying assets include "plan assets" by reason of any Plan's
investment in the entity (a "Plan Asset Entity") or any person investing "plan
assets" of any Plan, unless such purchase or holding is covered by the
exemptive relief provided by PTCE 96-23, 95-60, 91-38, 90-1 or 84-14 or
another applicable exemption. If a purchaser or holder of the New Capital
Securities that is a Plan or a Plan Asset Entity or investing "plan assets" of
any Plan elects to rely on an exemption other than PTCE 96-23, 95-60, 91-38,
90-1 or 84-14, the Company and the Trust may require a satisfactory opinion of
counsel or other evidence with respect to the availability of such exemption
for such purchase and holding. Any purchaser or holder of the New Capital
Securities or any interest therein will be deemed to have represented by its
purchase and holding thereof that either (a) the purchaser and holder is not a
Plan or a Plan Asset Entity and is not purchasing such securities on behalf of
or with "plan assets" of any Plan or (b) the purchase and holding of the New
Capital Securities is covered by the exemptive relief provided by PTCE 96-23,
95-60, 91-38, 90-1, or 84-14 or another applicable exemption.
Any Plans or other entities whose assets include Plan assets subject to
ERISA or Section 4975 of the Code proposing to acquire New Capital Securities
or New Capital Securities should consult with their own counsel.
<PAGE>
Governmental Plans, as defined in Section 3(32) of ERISA, are not subject
to ERISA, and are also not subject to the prohibited transaction provisions of
Section 4975 of the Code. However, state laws or regulations governing the
investment and management of the assets of such plans may contain fiduciary
and prohibited transaction provisions similar to those under ERISA and the
Code discussed above. Accordingly, fiduciaries of government plans, in
consultation with their advisers, should consider the impact of their
respective state laws on investments in the New Capital Securities, and the
considerations discussed above, to the extent applicable.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Securities for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Securities. This
Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of New Securities received
in exchange for Old Securities where such Old Securities were acquired as a
result of market-making activities or other trading activities. Each of the
Company and the Trust has agreed that, for a period of 180 days after the
Expiration Date, it will make this Prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale. In
addition, for a period of 90 days after the Expiration Date, all dealers
effecting transactions in the Exchange Securities may be required to deliver a
prospectus.
Neither the Company nor the Trust will receive any proceeds from any sale
of New Securities by broker-dealers. New Securities received by
broker-dealers for their own account pursuant to the Exchange Offer may be
sold from time to time in one or more transactions in the over-the-counter
market, in negotiated transactions, through the writing of options on the New
Securities or a combination of such methods of resale, at market prices
prevailing at the time of resale, at prices related to such prevailing market
prices or at negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer or the
purchasers of any such New Securities. Any broker-dealer that resells New
Securities that were received by it for its own account pursuant to the
Exchange Offer and any broker or dealer that participates in a distribution of
such New Securities may be deemed to be an "underwriter" within the meaning of
the Securities Act and any profit on any such resale of New Securities and any
commission or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that, by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 90 days after the Expiration Date the Company and the
Trust will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal. The Company and the Trust have
jointly and severally agreed to pay all expenses incident to the Exchange
Offer (including the expenses of one counsel for the holders of the Old
Securities) other than commissions or concessions of any broker-dealers and
<PAGE>
will indemnify the holders of the Old Securities (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the New
Capital Securities will be passed upon for the Trust by Morris James Hitchens
& Williams, Wilmington, Delaware, as special Delaware counsel to the Trust.
The validity of the New Junior Subordinated Debentures and the New Guarantee
will be passed upon for the Company and the Trust by White & Case, Los
Angeles, California. White & Case will rely as to certain matters of Delaware
law on the opinion of Morris James Hitchens & Williams. Certain United States
federal income taxation matters also will be passed upon for the Company and
the Trust by White & Case as special tax counsel to the Company.
EXPERTS
The financial statements incorporated in this Prospectus by reference to
the Annual Report on Form 10-K for the year ended December 31, 1996, have been
so incorporated in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Available Information . . . . . . . . . . . . . . . . . . . 10
Incorporation of Certain Information by Reference . . . . . 10
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . 23
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . 30
Consolidated Ratio of Earnings to Fixed Charges . . . . . . 31
Accounting Treatment . . . . . . . . . . . . . . . . . . . 31
Capitalization . . . . . . . . . . . . . . . . . . . . . . 32
The Trust . . . . . . . . . . . . . . . . . . . . . . . . . 32
The First American Financial Corporation . . . . . . . . . 33
The Exchange Offer . . . . . . . . . . . . . . . . . . . . 38
Description of New Securities . . . . . . . . . . . . . . . 50
Relationship Among the New Capital Securities, the New
Junior Subordinated Debentures and the New Guarantee . . 75
Description of Old Securities . . . . . . . . . . . . . . . 77
Certain United States Federal Income Tax Consequences . . . 77
Book-Entry Issuance . . . . . . . . . . . . . . . . . . . . 82
Benefit Plan Considerations . . . . . . . . . . . . . . . . 85
Plan of Distribution . . . . . . . . . . . . . . . . . . . 88
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . 89
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . 89
</TABLE>
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING CONTAINED HEREIN, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR THE TRUST. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITY OTHER THAN THE SECURITIES TO WHICH IT RELATES, NOR DOES IT CONSTITUTE
AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY OF THE SECURITIES
OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO
MAKE SUCH AN OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE HEREOF OR, IN THE CASE OF INFORMATION
INCORPORATED HEREIN BY REFERENCE, THE DATE OF FILING WITH THE COMMISSION, OR
THAT THERE HAS NOT BEEN ANY CHANGE IN THE AFFAIRS OF THE COMPANY OR THE TRUST
SINCE THE DATE HEREOF.
<PAGE>
$100,000,000
First American Capital Trust I
Offer to Exchange 8.50% Capital Securities
(Liquidation Amount $1,000 per Capital Security)
Guaranteed by
The First American Financial Corporation
Prospectus
October 16, 1997
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The First American Financial Corporation (the "Company") is a California
corporation.
Subject to certain limitations, Section 317 of the California
Corporations Code provides in part that a corporation shall have power to
indemnify any person who was or is a party or is threatened to be made a party
to any proceeding (other than an action by or in the right of the corporation
to procure a judgment in its favor) by reason of the fact that the person is
or was an agent (which term includes officers and directors) of the
corporation, against expenses, judgments, fines, settlements, and other
amounts actually and reasonably incurred in connection with the proceeding if
that person acted in good faith and in a manner the person reasonably believed
to be in the best interests of the corporation and, in the case of a criminal
proceeding, had no reasonable cause to believe the conduct of the person was
unlawful.
The California indemnification statute, as provided in Section 317 of the
California Corporations Code (noted above), is nonexclusive and allows a
corporation to expand the scope of indemnification provided, whether by
provisions in its Bylaws or by agreement, to the extent authorized in the
corporation's articles.
The Articles of Incorporation of the Company provide that: "The liability
of the directors of the Corporation for monetary damages shall be eliminated
to the fullest extent permissible under California law." The effect of this
provision is to exculpate directors from any liability to the Company, or
anyone claiming on the Company's behalf, for breaches of the directors' duty
of care. However, the provision does not eliminate or limit the liability of
a director for actions taken in his capacity as an officer. In addition, the
provision applies only to monetary damages and is not intended to impair the
rights of parties suing on behalf of the Company to seek equitable remedies
(such as actions to enjoin or rescind a transaction involving a breach of the
directors' duty of care or loyalty).
The Bylaws of the Company provide that, subject to certain
qualifications, "(i) The corporation shall indemnify its Officers and
Directors to the fullest extent permitted by law, including those
circumstances in which indemnification would otherwise be discretionary; (ii)
the corporation is required to advance expenses to its Officers and Directors
as incurred, including expenses relating to obtaining a determination that
such Officers and Directors are entitled to indemnification, provided that
they undertake to repay the amount advanced if it is ultimately determined
that they are not entitled to indemnification; (iii) an Officer or Director
may bring suit against the corporation if a claim for indemnification is not
timely paid; (iv) the corporation may not retroactively amend this Section 1
in a way which is adverse to its Officers and Directors; (v) the provisions of
subsections (i) through (iv) above shall apply to all past and present
Officers and Directors of the corporation." "Officer" includes the following
<PAGE>
officers of the Company: Chairman of the Board, President, Vice President,
Secretary, Assistant Secretary, Treasurer, Assistant Treasurer and such other
officers as the board shall designate from time to time. "Director" of the
Company means any person appointed to serve on the Company's board of
directors either by its shareholders or by the remaining board members.
The Company's 1996 Stock Option Plan and the Company's 1997 Directors'
Stock Plan (each, a "Plan") provide that, subject to certain conditions, "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 [Compensation] Committee, and any other 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."
Under the Amended and Restated Declaration (the "Declaration") of First
American Capital Trust I (the "Trust"), the Company has agreed to indemnify
the (i) Property Trustee, (ii) the Delaware Trustee, (iii) each Affiliate of
the Property Trustee or the Delaware Trustee, and (iv) any officers,
directors, shareholders, members, partners, employees or agents of the
Property Trustee and the Delaware Trustee (each, an "Indemnified Person") for,
and to hold each Indemnified Person harmless against, any and all loss,
liability, damage, claim or expense, including taxes (other than taxes based
on the income of such Indemnified Person) incurred without gross negligence or
bad faith on its part, arising out of or in connection with the acceptance or
administration of the trust or trusts hereunder, including the costs and
expenses (including reasonable legal fees and expenses) of defending itself
against or investigating any claim or liability in connection with the
exercise or performance of any of its powers or duties under the Declaration.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling the
Registrants, however, the Registrants have been informed 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.
ITEM 21. EXHIBITS.
Exhibit Number Description
* 4.1 Junior Subordinated Indenture, dated as of April 22, 1997,
between The First American Financial Corporation and
Wilmington Trust Company, as Indenture Trustee
(incorporated by reference from the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1997).
** 4.2 Form of New 8.50% Junior Subordinated Deferrable Interest
Debenture.
** 4.3 Certificate of Trust of First American Capital Trust I.
** 4.4 Declaration of Trust of First American Capital Trust I,
dated as of April 11, 1997.
<PAGE>
* 4.5 Amended and Restated Declaration of Trust of First
American Capital Trust I, dated as of April 22, 1997
(incorporated by reference from the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1997).
** 4.6 Form of New 8.50% Capital Security (Liquidation Amount
$1,000 per Capital Security).
** 4.7 Form of New Guarantee Agreement.
* 4.8 Registration Rights Agreement, dated as of April 22, 1997,
among The First American Financial Corporation, First
American Capital Trust I, Chase Securities Inc. and UBS
Securities LLC (incorporated by reference from the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1997).
5.1 Opinion of White & Case as to the legality of the New
Junior Subordinated Debentures, the New Guarantee, and as
to certain tax matters.
5.2 Opinion of Morris James Hitchens & Williams as to the
legality of the New Capital Securities.
8.1 Opinion of White & Case as to certain tax matters
(contained in the opinion filed as Exhibit 5.1 to this
Registration Statement).
12.1 Computation of Consolidated Ratio of Earnings to Fixed
Charges.
23.1 Consent of Price Waterhouse LLP.
23.2 Consent of White & Case (contained in the opinion filed as
Exhibit 5.1 to this Registration Statement).
23.3 Consent of Morris James Hitchens & Williams (contained in
the opinion filed as Exhibit 5.2 to this Registration
Statement).
23.4 Consent of White & Case (contained in the opinion filed as
Exhibit 5.1 to this Registration Statement).
** 24 Powers of Attorney.
** 25.1 Form T-1 Statement of Eligibility under the Trust
Indenture Act of 1939 of Wilmington Trust Company to act
as trustee under the Junior Subordinated Indenture.
** 25.2 Form T-1 Statement of Eligibility under the Trust
Indenture Act of 1939 of Wilmington Trust Company to act
as trustee under the Amended and Restated Declaration of
Trust of First American Capital Trust I.
** 25.3 Form T-1 Statement of Eligibility under the Trust
Indenture Act of 1939 of Wilmington Trust Company to act
as trustee under the New Guarantee Agreement.
99.1 Form of Letter of Transmittal and instructions thereto.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Exchange Agency Agreement.
* Incorporated by reference.
** Previously filed.
ITEM 22. UNDERTAKINGS.
(a) Each of the undersigned Registrants hereby undertakes that, for
purposes of determining any liability under the Securities Act of 1933, each
filing of a Registrant's annual report pursuant to Section 13(a) or Section
<PAGE>
15(d) of the Securities Exchange Act of 1934 (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to Section 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.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "Act") may be permitted to directors,
officers and controlling persons of the Registrants pursuant to the foregoing
provisions, or otherwise, the Registrants have 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 of indemnification against such
liabilities (other than the payment by a Registrant of expenses incurred or
paid by a director, officer or controlling person of such 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, each 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 its is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
(c) Each of the undersigned Registrants hereby undertakes to respond to
requests for information that is incorporated by reference into this
prospectus pursuant to Item 4, 10(b), 11, or 13 of this Form, within one
business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of
the registration statement through the date of responding to the request.
(d) Each of the undersigned Registrants hereby undertakes to supply by
means of a post-effective amendment all information concerning a transaction,
and the company being acquired involved therein, that was not the subject of
and included in the registration statement when it became effective.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
undersigned Registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-4 and has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Santa Ana, State of
California, on October 16, 1997.
THE FIRST AMERICAN FINANCIAL
CORPORATION
By: /s/ Parker S. Kennedy*
Parker S. Kennedy, President
(Principal Executive Officer)
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Date: October 16, 1997 By: /s/ D. P. Kennedy
D.P. Kennedy, Chairman
and Director
Date: October 16, 1997 By: /s/ Parker S. Kennedy*
Parker S. Kennedy, President
and Director
Date: October 16, 1997 By: /s/ Thomas A. Klemens
Thomas A. Klemens, Executive
Vice President,
Chief Financial Officer
(Principal Financial and
Accounting Officer)
*By /s/ Mark R Arnesen
Mark R. Arnesen
Attorney-in-Fact
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Date: October 16, 1997 By: /s/ George L. Argyros*
George L. Argyros, Director
Date: October 16, 1997 By: /s/ Gary J. Beban*
Gary J. Beban, Director
Date: October 16, 1997 By: /s/ J. David Chatham*
J. David Chatham, Director
Date: October 16, 1997 By: /s/ William G. Davis*
William G. Davis, Director
Date: October 16, 1997 By: /s/ James L. Doti*
James L. Doti, Director
Date: October 16, 1997 By: /s/ Lewis W. Douglas, Jr.*
Lewis W. Douglas, Jr., Director
Date: October 16, 1997 By: /s/ Paul B. Fay, Jr.*
Paul B. Fay, Jr., Director
Date: October 16, 1997 By: /s/ Dale F. Frey*
Dale F. Frey, Director
Date: October 16, 1997 By: /s/ Robert B. Mclain*
Robert B. McLain, Director
Date: October 16, 1997 By: /s/ Anthony R. Moiso*
Anthony R. Moiso, Director
Date: October 16, 1997 By: /s/ R. J. Munzer*
Rudolph J. Munzer, Director
Date: October 16, 1997 By: /s/ Frank E. O'Bryan*
Frank E. O'Bryan, Director
Date: October 16, 1997 By: /s/ Roslyn B. Payne*
Roslyn B. Payne, Director
Date: October 16, 1997 By: /s/ Virginia Ueberroth*
Virginia Ueberroth, Director
*By: /s/ Mark R Arnesen Mark R Arnesen
Attorney-in-Fact
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, the
undersigned Registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-4 and has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized,in the City of Santa Ana, State of
California, on October 16, 1997.
FIRST AMERICAN CAPITAL TRUST I
By: /s/ Parker S. Kennedy*
Parker S. Kennedy,
Regular Trustee
By: /s/ Thomas A. Klemens
Thomas A. Klemens
Regular Trustee
*By /s/ Mark R Arnesen
Mark R. Arnesen
Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
Exhibit Number Description
* 4.1 Junior Subordinated Indenture, dated as of April 22, 1997,
between The First American Financial Corporation and
Wilmington Trust Company, as Indenture Trustee
(incorporated by reference from the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1997).
** 4.2 Form of New 8.50% Junior Subordinated Deferrable Interest
Debenture.
** 4.3 Certificate of Trust of First American Capital Trust I.
** 4.4 Declaration of Trust of First American Capital Trust I,
dated as of April 11, 1997.
* 4.5 Amended and Restated Declaration of Trust of First
American Capital Trust I, dated as of April 22, 1997
(incorporated by reference from the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1997).
** 4.6 Form of New 8.50% Capital Security (Liquidation Amount
$1,000 per Capital Security).
** 4.7 Form of New Guarantee Agreement.
* 4.8 Registration Rights Agreement, dated as of April 22, 1997,
among The First American Financial Corporation, First
American Capital Trust I, Chase Securities Inc. and UBS
Securities LLC (incorporated by reference from the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1997).
5.1 Opinion of White & Case as to the legality of the New
Junior Subordinated Debentures, the New Guarantee, and as
to certain tax matters.
5.2 Opinion of Morris James Hitchens & Williams as to the
legality of the New Capital Securities.
8.1 Opinion of White & Case as to certain tax matters
(contained in the opinion filed as Exhibit 5.1 to this
Registration Statement).
12.1 Computation of Consolidated Ratio of Earnings to Fixed
Charges.
23.1 Consent of Price Waterhouse LLP.
23.2 Consent of White & Case (contained in the opinion filed as
Exhibit 5.1 to this Registration Statement).
23.3 Consent of Morris James Hitchens & Williams (contained in
the opinion filed as Exhibit 5.2 to this Registration
Statement).
23.4 Consent of White & Case (contained in the opinion filed as
Exhibit 5.1 to this Registration Statement).
** 24 Powers of Attorney.
** 25.1 Form T-1 Statement of Eligibility under the Trust
Indenture Act of 1939 of Wilmington Trust Company to act
as trustee under the Junior Subordinated Indenture.
** 25.2 Form T-1 Statement of Eligibility under the Trust
Indenture Act of 1939 of Wilmington Trust Company to act
as trustee under the Amended and Restated Declaration of
Trust of First American Capital Trust I.
** 25.3 Form T-1 Statement of Eligibility under the Trust
<PAGE>
Indenture Act of 1939 of Wilmington Trust Company to act
as trustee under the New Guarantee Agreement.
99.1 Form of Letter of Transmittal and instructions thereto.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Exchange Agency Agreement.
* Incorporated by reference.
** Previously filed.
EXHIBIT 5.1
[Letterhead of White & Case]
October 17, 1997
Wilmington Trust Company,
as Trustee
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Ladies and Gentlemen:
We enclose herewith a copy of our opinion of even date herewith (the
"Opinion"), addressed to each of the Holders of the 100,000 8.50% Capital
Securities (liquidation amount $1,000 per Capital Security) issued by First
American Capital Trust I, a Delaware business trust (the "Issuer"),
representing preferred undivided beneficial ownership interests in the assets
of the Issuer. We hereby authorize you to rely, in your capacity as trustee
under the Junior Subordinated Indenture, dated as of April 22, 1997 (the
"Indenture"), between the First American Financial Corporation (the "Company")
and you, as trustee, upon the opinions contained in paragraphs (a), (b) and
(g) of the Opinion as if the Opinion had been addressed to you.
Unless otherwise defined herein, capitalized terms used herein shall have
the meanings given thereto in the Indenture. The opinion below is delivered
to you pursuant to Section 3.3 of the Indenture.
We have read the Indenture, and particularly Sections 2.1, 3.1 and 3.3
thereof relating to the issuance by the Company of $103,093,000 aggregate
principal amount of its 8.50% Junior Subordinated Deferrable Interest
Debentures (the "Securities") thereunder, and we have examined originals or
copies certified to our satisfaction of such agreements, documents,
certificates and other statements of government officials and officers of the
Company and such other papers as we have deemed relevant and necessary as a
basis for our opinion below. As to certain facts material to our opinion
below, we have relied, to the extent that we deem such reliance proper, upon
certificates and representations of public officials and of officers of the
Company. In rendering such opinion, we have assumed the genuineness of all
signatures (other than those of the Company), the authenticity of all
documents submitted to us as originals and the conformity to authentic
original documents of all documents submitted to us as certified, conformed or
photostatic copies.
<PAGE>
Based upon and subject to the foregoing and the qualifications set forth
below, it is our opinion that:
(a) The form of the Securities has been established pursuant to
Board Resolutions as permitted by Section 2.1 of the Indenture, and such form
conforms with the provisions of the Indenture.
(b) The terms of the Securities have been established pursuant to
Board Resolutions as permitted by Section 3.1 of the Indenture, and such terms
conform with the provisions of the Indenture.
(c) The Securities have been duly authorized, executed, issued and
delivered by the Company and, when the Debentures have been duly authenticated
by you in your capacity as Trustee and paid for by the Issuer, will constitute
legal, valid and binding obligations of the Company, enforceable in accordance
with their terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating
to or affecting creditors' rights and to general equitable principles.
(d) All requirements of applicable New York, California and Federal
law in respect of the execution and delivery by the Company of the Securities,
and all covenants and conditions set forth in the Indenture which are
conditions precedent to the issuance of the Securities, have been complied
with.
The opinion expressed above is limited to the Federal laws of the United
States, the laws of the State of New York and the laws of the State of
California.
This opinion is furnished to you as Trustee and is solely for your
benefit, and may not be relied upon by any other person or for any other
purpose without our prior written consent.
Very truly yours,
JHG:NWR
EXHIBIT 5.2
[Letterhead of Morris, James, Hitchens & Williams]
October 16, 1997
First American Capital Trust I
114 East Fifth Street
Santa Ana, California 92701
Re: First American Capital Trust I
Ladies and Gentlemen:
We have acted as special Delaware counsel for First American Capital
Trust I, a Delaware business trust (the "Trust"), in connection with the
matters set forth herein. This opinion is being furnished to you at your
request.
For purposes of giving the opinions hereinafter set forth, our
examination of documents has been limited to the examination of originals or
copies furnished to us of the following:
(a) The Declaration of Trust of the Trust, dated as of April 11,
1997, between The First American Financial Corporation, a California
corporation (the "Company") and the trustees of the Trust named therein;
(b) The Certificate of Trust of the Trust, as filed in the office
of the Secretary of State of the State of Delaware (the "Secretary of
State") on April 11, 1997 (the "Certificate");
(c) The Amended and Restated Declaration of Trust of the Trust,
dated as of April 22, 1997 (including Exhibits A and B attached thereto)
(the "Declaration"), among the Company, as Sponsor, the trustees of the
Trust named therein (the "Trustees"), and the holders, from time to time,
of undivided beneficial ownership interests in the Trust;
(d) The Pre-effective Amendment No. 1 to Form S-4 Registration
Statement (Registration No. 33-35945)(the "Registration Statement"),
including a prospectus (the "Prospectus"), relating to the 8.50% Capital
Securities (Liquidation Amount $1,000 per Capital Security) of the Trust
representing undivided beneficial ownership interests in the assets of
the Trust (each, a "New Capital Security" and collectively, the "New
Capital Securities"), as proposed to be filed by the Company, the Trust
and others as set forth therein with the Securities and Exchange
<PAGE>
Commission on or about October 16, 1997; and
(e) A Certificate of Good Standing for the Trust, dated October ,
1997, obtained from the Secretary of State.
Unless otherwise defined herein, all capitalized terms used in this
opinion letter shall have the respective meanings provided in the Declaration,
except that reference herein to any document shall mean such document as in
effect on the date hereof.
For the purposes of this opinion letter, we have not reviewed any
documents other than the documents listed in paragraphs (a) through (e) above.
In particular, we have not reviewed any document (other than the documents
listed in paragraphs (a) through (e) above) that is referred to in or
incorporated by reference into the documents reviewed by us. We have assumed
that there exists no provision in any document that we have not reviewed that
is inconsistent with the opinions stated herein. We have conducted no
independent factual investigation of our own but rather have relied solely
upon the foregoing documents, the statements and information set forth therein
and the additional matters recited or assumed herein, all of which we have
assumed to be true, complete and accurate in all material respects.
With respect to all documents examined by us, we have assumed (i) the
authenticity of all documents submitted to us as authentic originals, (ii) the
conformity with the originals of all documents submitted to us as copies or
forms, (iii) the genuineness of all signatures, and (iv) such documents
submitted to us in final or execution form have not been and will not be
altered or amended in any respect material to our opinions as expressed in
this letter and conform in all material respects to the final, executed
originals of such documents.
For purposes of this opinion letter, we have assumed (i) that the
Declaration constitutes the entire agreement among the parties thereto with
respect to the subject matter thereof, including with respect to the creation,
operation, and termination of the Trust, and that the Declaration and the
Certificate are in full force and effect and have not been amended, (ii) that
there are no proceedings, pending or contemplated, for the merger,
consolidation, liquidation, dissolution or termination of the Trust, (iii)
except to the extent provided in paragraph 1 below, the due creation, due
formation or due organization, as the case may be, and valid existence in good
standing of each party to the documents examined by us under the laws of the
jurisdiction governing its creation, formation or organization, (iv) the legal
capacity of each natural person who is a party to the documents examined by
us, (v) that each of the parties to the documents examined by us has the power
and authority to execute and deliver, and to perform its obligations under,
such documents, (vi) that each of the parties to the documents examined by us
has duly authorized, executed and delivered such documents, (vii) the receipt
by each Person to whom a New Capital Security is to be issued by the Trust
(the "New Capital Security Holders") of a New Capital Security Certificate for
such New Capital Security, and the exchange by each New Capital Security
Holder of its validly issued Transfer Restricted Securities accepted for
exchange for the New Capital Securities to be issued to it, in accordance with
the Declaration and the Registration Statement, and (viii) that the New
Capital Securities are issued to the New Capital Security Holders in
<PAGE>
accordance with the Declaration and the Registration Statement. We have not
participated in the preparation of the Registration Statement and assume no
responsibility for its contents.
The opinions in this letter are limited to the laws of the State of
Delaware (excluding the securities laws of the State of Delaware), and we have
not considered and express no opinion on the laws of any other jurisdiction,
including federal laws and rules and regulations relating thereto.
Based upon the foregoing, and subject to the assumptions, qualifications,
limitations and exceptions set forth herein, we are of the opinion that:
1. The Trust has been duly formed and is validly existing in good
standing as a business trust under the Delaware Business Trust Act (12 Del. C.
3801, et seq).
2. The New Capital Securities will represent valid and, subject to the
qualifications set forth in paragraph 3 below, fully paid and nonassessable
undivided beneficial interests in the assets of the Trust.
3. The New Capital Security Holders, as beneficial owners of the Trust,
will be entitled to the same limitation of personal liability extended to
stockholders of private corporations for profit organized under the General
Corporation Law of the State of Delaware. We note that the New Capital
Security Holders may be obligated to make payments as provided in the
Declaration.
We consent to the filing of this opinion letter with the Securities and
Exchange Commission as an exhibit to the Registration Statement. In giving
the foregoing consent, we do not thereby admit that we come within the
category of Persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder. Except as stated above,
without our prior written consent, this opinion letter may not be furnished or
quoted to, or relied upon by, any other Person for any purpose.
Very truly yours,
RLS/MJO:par
EXHIBIT 12.1
COMPUTATION OF
CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
The Company's consolidated ratio of earnings to fixed charges for each of
the periods indicated are calculated as follows:
<TABLE> Six Months
Year Ended December 31, Ended June 30,
<CAPTION>
1992 1993 1994 1995 1996 1996 1997
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
EARNINGS
NET INCOME BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGE $71,458 $103,991 $32,245 $13,787 $89,189 $47,809 $34,982
Add:
Fixed charges interest expense 6,038 4,419 6,267 6,242 4,796 2,510 3,660
Adjusted earnings 77,496 108,410 38,512 20,029 93,985 50,319 38,642
FIXED CHARGES
INTEREST EXPENSE 6,038 4,419 6,267 6,242 4,796 2,510 3,660
CONSOLIDATED RATIO OF EARNINGS TO FIXED
CHARGES (Actual) 12.8 24.5 6.1 3.2 19.6 20.0 10.6
(Proforma) 1.8 8.5 9.1 6.5
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-4 of The First
American Financial Corporation of our report dated February 11, 1997,
appearing on page 21 of The First American Financial Corporation's Annual
Report on Form 10-K for the year ended December 31, 1996. We also consent to
the reference to us under the heading "Experts" in such Prospectus.
/s/ Price Waterhouse LLP
Costa Mesa, California
October 16, 1997
EXHIBIT 99.1
FORM OF LETTER OF TRANSMITTAL
THE FIRST AMERICAN FINANCIAL CORPORATION
OFFER TO EXCHANGE THE
8.50% CAPITAL SECURITIES
(LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY)
OF FIRST AMERICAN CAPITAL TRUST I
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR THE OUTSTANDING
8.50% CAPITAL SECURITIES OF
FIRST AMERICAN CAPITAL TRUST I
(LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY)
PURSUANT TO THE PROSPECTUS
DATED OCTOBER 16, 1997
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
5:00 P.M., NEW YORK CITY TIME,
ON NOVEMBER 17, 1997, UNLESS THE OFFER IS EXTENDED.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
WILMINGTON TRUST COMPANY
BY MAIL/OVERNIGHT DELIVERY: BY HAND:
Wilmington Trust Company Wilmington Trust Company
c/o Harris Trust Company c/o Harris Trust Company
of New York of New York
77 Water Street, 4th Floor 77 Water Street, 4th Floor
New York, New York 10005 New York, New York 10005
Attn: Reginald Alois Attn: Reginald Alois
FACSIMILE TRANSMISSIONS:
(212) 480-8214
TO CONFIRM BY TELEPHONE OR FOR INFORMATION:
(212) 701-7615
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA FACSIMILE TO A
NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS LETTER
OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by holders of Old Capital
<PAGE>
Securities (as defined below) if either (i) Old Capital Securities are to be
forwarded herewith or (ii) tenders of Old Capital Securities are to be made by
book-entry transfer to an account maintained by Wilmington Trust Company (the
"Exchange Agent") at The Depository Trust Company ("DTC") pursuant to the
procedures set forth under "The Exchange Offer--Procedures for Tendering Old
Capital Securities" in the Prospectus and an Agent's Message (as defined
below) is not delivered.
Holders of Old Capital Securities whose certificates (the "Certificates")
for such Old Capital Securities are not immediately available or who cannot
deliver their Certificates and all other required documents to the Exchange
Agent on or prior to the Expiration Date (as defined in the Prospectus) or who
cannot complete the procedures for book-entry transfer on or prior to the
Expiration Date, must tender their Old Capital Securities according to the
guaranteed delivery procedures set forth in "The Exchange Offer--Procedures
for Tendering Old Capital Securities-Guaranteed Delivery" in the Prospectus.
DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE
DELIVERY TO THE EXCHANGE AGENT.
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
<TABLE>
<CAPTION>
DESCRIPTION OF OLD CAPITAL SECURITIES TENDERED
LIQUIDATION
LIQUIDATION AMOUNT OF OLD NUMBER OF
AMOUNT OF OLD CAPITAL SECURITIES BENEFICIAL HOLDERS
NAME AND ADDRESS OF REGISTERED CAPITAL SECURITIES TENDERED FOR WHICH OLD
HOLDER CERTIFICATE TENDERED (IF ALL (IF LESS THAN ALL ARE CAPITAL SECURITIES
(PLEASE FILL IN IF BLANK) NUMBERS<F1> ARE TENDERED) TENDERED)<F2> ARE HELD
<S> <C> <C> <C> <C>
$ $
$ $
$ $
TOTAL AMOUNT TENDERED: $ $
<FN>
<F1> Need not be completed by book-entry holders.
<F2> Old Capital Securities may be tendered in whole or in part in denominations of $100,000 and integral multiples of $1,000 in
excess thereof, provided that if any Old Capital Securities are tendered for exchange in part, the untendered Liquidation
Amount thereof must be $100,000 or any integral multiple of $1,000 in excess thereof. All Old Capital Securities held
shall be deemed tendered unless a lesser number is specified in this column.
</TABLE>
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS (defined in
Instruction 1) ONLY)
( ) CHECK HERE IF TENDERED OLD CAPITAL SECURITIES ARE BEING DELIVERED BY
BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT
WITH DTC AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:
<PAGE>
DTC Account Number:
Transaction Code Number:
( ) CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY
IF TENDERED OLD CAPITAL SECURITIES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name of Registered Holder:
Window Ticket Number (if any):
Date of Execution of Notice of Guaranteed Delivery:
Name of Institution that Guaranteed Delivery:
If Guaranteed Delivery is to be made By Book-Entry Transfer:
Name of Tendering Institution:
DTC Account Number:
Transaction Code Number:
( ) CHECK HERE IF OLD CAPITAL SECURITIES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER AND UNEXCHANGED OR UNTENDERED OLD CAPITAL SECURITIES ARE TO BE
RETURNED BY CREDITING THE DTC ACCOUNT NUMBER SET FORTH ABOVE.
( ) CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE OLD CAPITAL
SECURITIES FOR ITS OWN ACCOUNT AS A RESULT OF MARKET-MAKING OR OTHER
TRADING ACTIVITIES (A "PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE
10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR
SUPPLEMENTS THERETO.
Name:
Address:
Contact Person:
Area Code and Telephone Number:
Ladies and Gentlemen:
The undersigned hereby tenders to First American Capital Trust I, a
statutory business trust created under Delaware law (the "Trust") and The
First American Financial Corporation, a California corporation (the
"Company"), the above-described aggregate Liquidation Amount of the 8.50%
Capital Securities (the "Old Capital Securities") of the Trust in exchange for
a like aggregate Liquidation Amount of the 8.50% Capital Securities (the "New
Capital Securities") of the Trust, which have been registered under the
Securities Act of 1933 (the "Securities Act"), upon the terms and subject to
the conditions set forth in the Prospectus dated October 16, 1997 (as the same
may be amended or supplemented from time to time, the "Prospectus"), receipt
of which is hereby acknowledged, and in this Letter of Transmittal (which,
together with the Prospectus, constitutes the "Exchange Offer").
Subject to and effective upon the acceptance for exchange of all or any
portion of the Old Capital Securities tendered herewith in accordance with the
terms and conditions of the Exchange Offer (including, if the Exchange Offer
is extended or amended, the terms and conditions of any such extension or
amendment), the undersigned hereby sells, assigns and transfers to or upon the
order of the Trust all right, title and interest in and to such Old Capital
Securities as are being tendered herewith. The undersigned hereby irrevocably
constitutes and appoints the Exchange Agent as its agent and attorney-in-fact
(with full knowledge that the Exchange Agent is also acting as agent of the
Company, and the Trust in connection with the Exchange Offer) with respect to
the tendered Old Capital Securities, with full power of substitution (such
<PAGE>
power of attorney being deemed to be an irrevocable power coupled with an
interest), subject only to the right of withdrawal described in the
Prospectus, to (i) deliver Certificates for Old Capital Securities to the
Trust together with all accompanying evidences of transfer and authenticity
to, or upon the order of, the Trust, upon receipt by the Exchange Agent, as
the undersigned's agent, of the New Capital Securities to be issued in
exchange for such Old Capital Securities, (ii) present Certificates for such
Old Capital Securities for transfer, and to transfer the Old Capital
Securities on the books of the Trust, and (iii) receive for the account of the
Trust all benefits and otherwise exercise all rights of beneficial ownership
of such Old Capital Securities, all in accordance with the terms and
conditions of the Exchange Offer.
THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT THE UNDERSIGNED HAS
FULL POWER AND AUTHORITY TO TENDER, EXCHANGE, SELL, ASSIGN AND TRANSFER THE
OLD CAPITAL SECURITIES TENDERED HEREBY AND THAT, WHEN THE SAME ARE ACCEPTED
FOR EXCHANGE, THE TRUST WILL ACQUIRE GOOD, MARKETABLE AND UNENCUMBERED TITLE
THERETO, FREE AND CLEAR OF ALL LIENS, RESTRICTIONS, CHARGES AND ENCUMBRANCES,
AND THAT THE OLD CAPITAL SECURITIES TENDERED HEREBY ARE NOT SUBJECT TO ANY
ADVERSE CLAIMS OR PROXIES. THE UNDERSIGNED WILL, UPON REQUEST, EXECUTE AND
DELIVER ANY ADDITIONAL DOCUMENTS DEEMED BY THE CORPORATION, THE ISSUER TRUST,
THE OLD ISSUER TRUST OR THE EXCHANGE AGENT TO BE NECESSARY OR DESIRABLE TO
COMPLETE THE EXCHANGE, ASSIGNMENT AND TRANSFER OF THE OLD CAPITAL SECURITIES
TENDERED HEREBY, AND THE UNDERSIGNED WILL COMPLY WITH ANY OBLIGATIONS IT MAY
HAVE UNDER THE REGISTRATION RIGHTS AGREEMENT. THE UNDERSIGNED HAS READ AND
AGREES TO ALL OF THE TERMS OF THE EXCHANGE OFFER.
The name and address of the registered holder of the Old Capital
Securities tendered hereby should be printed above, if they are not already
set forth above, as they appear on the Certificates representing such Old
Capital Securities. The Certificate numbers and the Old Capital Securities
that the undersigned wishes to tender should be indicated in the appropriate
boxes above.
If any tendered Old Capital Securities are not exchanged pursuant to the
Exchange Offer for any reason, or if Certificates are submitted for more Old
Capital Securities than are tendered or accepted for exchange, Certificates
for such unexchanged or untendered Old Capital Securities will be returned
(or, in the case of Old Capital Securities tendered by book-entry transfer,
such Old Capital Securities will be credited to an account maintained at DTC),
without expense to the tendering holder, promptly following the expiration or
termination of the Exchange Offer.
The undersigned understands that tenders of Old Capital Securities
pursuant to any one of the procedures described under "The Exchange Offer-
- -Procedures for Tendering Old Capital Securities" in the Prospectus and in the
instructions herein will, upon the Trust's acceptance for exchange of such
tendered Old Capital Securities, constitute a binding agreement between the
undersigned, the Company and the Trust upon the terms and subject to the
conditions of the Exchange Offer. The undersigned recognizes that, under
certain circumstances set forth in the Prospectus, the Company and the Trust
may not be required to accept for exchange any of the Old Capital Securities
tendered hereby.
Unless otherwise indicated herein in the box entitled "Special Issuance
<PAGE>
Instructions" below, the undersigned hereby directs that the New Capital
Securities be issued in the name of the undersigned or, in the case of a
book-entry transfer of Old Capital Securities, that such New Capital
Securities be credited to the account indicated above maintained at DTC. If
applicable, substitute Certificates representing Old Capital Securities not
exchanged or not accepted for exchange will be issued to the undersigned or,
in the case of a book-entry transfer of Old Capital Securities, will be
credited to the account indicated above maintained at DTC. Similarly, unless
otherwise indicated under "Special Delivery Instructions" below, please
deliver New Capital Securities to the undersigned at the address shown below
the undersigned's signature.
BY TENDERING OLD CAPITAL SECURITIES AND EXECUTING THIS LETTER OF
TRANSMITTAL, THE UNDERSIGNED HEREBY REPRESENTS AND AGREES THAT (I) NEITHER THE
UNDERSIGNED NOR ANY BENEFICIAL OWNER IS AN "AFFILIATE" OF THE COMPANY OR THE
TRUST WITHIN THE MEANING OF RULE 405 UNDER THE SECURITIES ACT, (II) ANY NEW
CAPITAL SECURITIES TO BE RECEIVED BY THE UNDERSIGNED ARE BEING ACQUIRED IN THE
ORDINARY COURSE OF ITS BUSINESS, (III) THE UNDERSIGNED HAS NO ARRANGEMENT OR
UNDERSTANDING WITH ANY PERSON TO PARTICIPATE IN A DISTRIBUTION (WITHIN THE
MEANING OF THE SECURITIES ACT) OF NEW CAPITAL SECURITIES TO BE RECEIVED IN THE
EXCHANGE OFFER, AND (IV) IF THE UNDERSIGNED IS NOT A BROKER-DEALER, THE
UNDERSIGNED IS NOT ENGAGED IN, AND DOES NOT INTEND TO ENGAGE IN, A
DISTRIBUTION (WITHIN THE MEANING OF THE SECURITIES ACT) OF SUCH NEW CAPITAL
SECURITIES. BY TENDERING OLD CAPITAL SECURITIES PURSUANT TO THE EXCHANGE
OFFER AND EXECUTING THIS LETTER OF TRANSMITTAL, A HOLDER OF OLD CAPITAL
SECURITIES THAT IS A BROKER-DEALER REPRESENTS AND AGREES, CONSISTENT WITH
CERTAIN INTERPRETIVE LETTERS ISSUED BY THE STAFF OF THE DIVISION OF
CORPORATION FINANCE OF THE SECURITIES AND EXCHANGE COMMISSION TO THIRD
PARTIES, THAT (A) SUCH OLD CAPITAL SECURITIES HELD BY THE BROKER-DEALER ARE
HELD ONLY AS A NOMINEE, OR (B) SUCH OLD CAPITAL SECURITIES WERE ACQUIRED BY
SUCH BROKER-DEALER FOR ITS OWN ACCOUNT AS A RESULT OF MARKET-MAKING ACTIVITIES
OR OTHER TRADING ACTIVITIES AND IT WILL DELIVER A PROSPECTUS (AS AMENDED OR
SUPPLEMENTED FROM TIME TO TIME) MEETING THE REQUIREMENTS OF THE SECURITIES ACT
IN CONNECTION WITH ANY RESALE OF SUCH NEW CAPITAL SECURITIES (PROVIDED THAT,
BY SO ACKNOWLEDGING AND BY DELIVERING A PROSPECTUS, SUCH BROKER-DEALER WILL
NOT BE DEEMED TO ADMIT THAT IT IS AN "UNDERWRITER" WITHIN THE MEANING OF THE
SECURITIES ACT).
THE COMPANY AND THE TRUST HAVE AGREED THAT, SUBJECT TO THE PROVISIONS OF
THE REGISTRATION RIGHTS AGREEMENT, THE PROSPECTUS, AS IT MAY BE AMENDED OR
SUPPLEMENTED FROM TIME TO TIME, MAY BE USED BY A PARTICIPATING BROKER-DEALER
IN CONNECTION WITH RESALES OF NEW CAPITAL SECURITIES RECEIVED IN EXCHANGE FOR
OLD CAPITAL SECURITIES, WHERE SUCH OLD CAPITAL SECURITIES WERE ACQUIRED BY
SUCH PARTICIPATING BROKER-DEALER FOR ITS OWN ACCOUNT AS A RESULT OF
MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES, FOR A PERIOD ENDING 90
DAYS AFTER THE EXPIRATION DATE (SUBJECT TO EXTENSION UNDER CERTAIN LIMITED
CIRCUMSTANCES DESCRIBED IN THE PROSPECTUS) OR, IF EARLIER, WHEN ALL SUCH NEW
CAPITAL SECURITIES HAVE BEEN DISPOSED OF BY SUCH PARTICIPATING BROKER-DEALER.
IN THAT REGARD, EACH PARTICIPATING BROKER-DEALER WHO ACQUIRED OLD CAPITAL
SECURITIES FOR ITS OWN ACCOUNT AS A RESULT OF MARKET-MAKING OR OTHER TRADING
ACTIVITIES, BY TENDERING SUCH OLD CAPITAL SECURITIES AND EXECUTING THIS LETTER
OF TRANSMITTAL, AGREES THAT, UPON RECEIPT OF NOTICE FROM THE COMPANY OR THE
TRUST OF THE OCCURRENCE OF ANY EVENT OR THE DISCOVERY OF ANY FACT THAT MAKES
ANY STATEMENT CONTAINED OR INCORPORATED BY REFERENCE IN THE PROSPECTUS UNTRUE
<PAGE>
IN ANY MATERIAL RESPECT OR THAT CAUSES THE PROSPECTUS TO OMIT TO STATE A
MATERIAL FACT NECESSARY IN ORDER TO MAKE THE STATEMENTS CONTAINED OR
INCORPORATED BY REFERENCE THEREIN, IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH
THEY WERE MADE, NOT MISLEADING OR OF THE OCCURRENCE OF CERTAIN OTHER EVENTS
SPECIFIED IN THE REGISTRATION RIGHTS AGREEMENT, SUCH PARTICIPATING
BROKER-DEALER WILL SUSPEND THE SALE OF NEW CAPITAL SECURITIES PURSUANT TO THE
PROSPECTUS UNTIL THE COMPANY OR THE ISSUER TRUST HAVE AMENDED OR SUPPLEMENTED
THE PROSPECTUS TO CORRECT SUCH MISSTATEMENT OR OMISSION AND HAVE FURNISHED
COPIES OF THE AMENDED OR SUPPLEMENTED PROSPECTUS TO THE PARTICIPATING
BROKER-DEALER OR THE COMPANY OR THE ISSUER TRUST HAS GIVEN NOTICE THAT THE
SALE OF THE NEW CAPITAL SECURITIES MAY BE RESUMED, AS THE CASE MAY BE. IF THE
COMPANY OR THE TRUST GIVES SUCH NOTICE TO SUSPEND THE SALE OF THE NEW CAPITAL
SECURITIES, IT SHALL EXTEND THE 90-DAY PERIOD REFERRED TO ABOVE DURING WHICH
PARTICIPATING BROKER-DEALERS ARE ENTITLED TO USE THE PROSPECTUS IN CONNECTION
WITH THE RESALE OF NEW CAPITAL SECURITIES BY THE NUMBER OF DAYS DURING THE
PERIOD FROM AND INCLUDING THE DATE OF THE GIVING OF SUCH NOTICE TO AND
INCLUDING THE DATE WHEN PARTICIPATING BROKER-DEALERS SHALL HAVE RECEIVED
COPIES OF THE SUPPLEMENTED OR AMENDED PROSPECTUS NECESSARY TO PERMIT RESALES
OF THE NEW CAPITAL SECURITIES OR TO AND INCLUDING THE DATE ON WHICH THE
COMPANY OR THE TRUST HAS GIVEN NOTICE THAT THE SALE OF NEW CAPITAL SECURITIES
MAY BE RESUMED, AS THE CASE MAY BE.
Holders of Old Capital Securities whose Old Capital Securities are
accepted for exchange will not receive accumulated Distributions on such Old
Capital Securities for any period from and after the last Distribution date to
which Distributions have been paid or duly provided for on such Old Capital
Securities prior to the original issue date of the New Capital Securities or,
if no such Distributions have been paid or duly provided for, will not receive
any accumulated Distributions on such Old Capital Securities, and the
undersigned waives the right to receive any distributions on such Old Capital
Securities accumulated from and after such Distribution date or, if no such
Distributions have been paid or duly provided for, to receive any
distributions on such Old Capital Securities.
All authority herein conferred or agreed to be conferred in this Letter
of Transmittal shall survive the death or incapacity of the undersigned and
any obligation of the undersigned hereunder shall be binding upon the heirs,
executors, administrators, personal representatives, trustees in bankruptcy,
legal representatives, successors and assigns of the undersigned. Except as
stated in the Prospectus, this tender is irrevocable.
HOLDERS SIGN HERE
(SEE INSTRUCTIONS 2, 5 AND 6)
(PLEASE COMPLETE SUBSTITUTE FORM W-9 ON PAGE 14)
(NOTE: SIGNATURES MUST BE GUARANTEED
IF REQUIRED BY INSTRUCTION 2)
Must be signed by registered holder exactly as name appears on
Certificates for the Old Capital Securities hereby tendered or on a security
position listing, or by any person authorized to become the registered holder
by endorsements and documents transmitted herewith (including such opinions of
counsel, certifications and other information as may be required by the
Company, the Trust or the Exchange Agent to comply with the restrictions on
transfer applicable to the Old Capital Securities). If signature is by an
<PAGE>
attorney-in-fact, executor, administrator, trustee, guardian, officer of a
corporation or another acting in a fiduciary capacity or representative
capacity, please set forth the signer's full title. See Instruction 5.
- -
- -
(SIGNATURE OF HOLDER)
Date: , 1997
Name:
(PLEASE PRINT)
Capacity (full title):
Address:
(INCLUDE ZIP CODE)
Area Code and Telephone Number:
Tax Identification or Social Security Number:
GUARANTEE OF SIGNATURE
(SEE INSTRUCTIONS 2 AND 5)
- -
(AUTHORIZED SIGNATURE)
Date: , 1997
Name of Firm:
Capacity (full title):
(PLEASE PRINT)
Address:
(INCLUDE ZIP CODE)
Area Code and Telephone Number:
<PAGE>
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6)
To be completed ONLY if the New Capital Securities and/or any Old Capital
Securities that are not tendered are to be issued in the name of someone other
than the registered holder of the Old Capital Securities whose name appears
above.
Issue
( ) New Capital Securities
( ) Old Capital Securities not tendered
to:
Name:
Address:
(INCLUDE ZIP CODE)
Area Code and Telephone Number:
Tax Identification or Social Security Number:
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6)
To be completed ONLY if the New Capital Securities and/or any Old Capital
Securities that are not tendered are to be sent to someone other than the
registered holder of the Old Capital Securities whose name appears above, or
to such registered holder at an address other than that shown above.
Mail
- - New Capital Securities
- - Old Capital Securities not tendered
to:
Name:
Address:
(INCLUDE ZIP CODE)
Area Code and Telephone Number:
Tax Identification or Social Security Number:
INSTRUCTIONS
<PAGE>
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED
DELIVERY PROCEDURES. This Letter of Transmittal is to be completed if either
(a) Certificates are to be forwarded herewith or (b) tenders are to be made
pursuant to the procedures for tender by book-entry transfer set forth under
"The Exchange Offer--Procedures for Tendering Old Capital Securities" in the
Prospectus and an Agent's Message is not delivered. Certificates, or
book-entry confirmation of a book-entry transfer of such Old Capital
Securities into the Exchange Agent's account at DTC, as well as this Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed,
with any required signature guarantees, and any other documents required by
this Letter of Transmittal, must be received by the Exchange Agent at its
address set forth herein on or prior to the Expiration Date. Tenders by
book-entry transfer may also be made by delivering an Agent's Message in lieu
of this Letter of Transmittal. The term "book-entry confirmation" means a
timely confirmation of book-entry transfer of Old Capital Securities into the
Exchange Agent's account at DTC. The term "Agent's Message" means a message,
transmitted by DTC to and received by the Exchange Agent and forming a part of
a book-entry confirmation, which states that DTC has received an express
acknowledgment from the tendering participant, which acknowledgment states
that such participant has received and agrees to be bound by the Letter of
Transmittal (including the representations contained herein) and that the
Trust and the Company may enforce the Letter of Transmittal against such
participant. Old Capital Securities may be tendered in whole or in part in
any Liquidation Amount of $100,000 (100 Old Capital Securities) or any
integral multiple of $1,000 in excess thereof, provided that if any Old
Capital Securities are tendered for exchange in part, the untendered
Liquidation Amount thereof must also be $100,000 (100 Old Capital Securities)
or any integral multiple of $1,000 in excess thereof.
Holders who wish to tender their Old Capital Securities and (i) whose Old
Capital Securities are not immediately available, (ii) who cannot deliver
their Old Capital Securities, this Letter of Transmittal and all other
required documents to the Exchange Agent on or prior to the Expiration Date or
(iii) who cannot complete the procedures for delivery by book-entry transfer
on or prior to the Expiration Date, may tender their Old Capital Securities by
properly completing and duly executing a Notice of Guaranteed Delivery
pursuant to the guaranteed delivery procedures set forth under "The Exchange
Offer--Procedures for Tendering Old Capital Securities" in the Prospectus.
Pursuant to such procedures: (i) such tender must be made by or through an
Eligible Institution (as defined below); (ii) a properly completed and duly
executed Notice of Guaranteed Delivery, substantially in the form made
available by the Company, must be received by the Exchange Agent on or prior
to the Expiration Date; and (iii) the Certificates (or a book-entry
confirmation) representing all tendered Old Capital Securities, in proper form
for transfer, together with the Letter of Transmittal (or a facsimile
thereof), properly completed and duly executed, with any required signature
guarantees and any other documents required by this Letter of Transmittal,
must be received by the Exchange Agent within five New York Stock Exchange
Inc. trading days after the date of execution of such Notice of Guaranteed
Delivery, all as provided in "The Exchange Offer-Procedures for Tendering Old
Capital Securities" in the Prospectus.
<PAGE>
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by facsimile or mail to the Exchange Agent, and must include a guarantee by an
Eligible Institution in the form set forth in such Notice of Guaranteed
Delivery. For Old Capital Securities to be properly tendered pursuant to the
guaranteed delivery procedure, the Exchange Agent must receive a Notice of
Guaranteed Delivery on or prior to the Expiration Date. As used herein,
"Eligible Institution" means a firm or other entity identified in Rule 17Ad-15
under the Exchange Act as "an eligible guarantor institution," including (as
such terms are defined therein) (i) a bank; (ii) a broker, dealer, municipal
securities broker or dealer or government securities broker or dealer; (iii) a
credit union; (iv) a national securities exchange, registered securities
association or clearing agency; or (v) a savings association that is a
participant in a securities transfer association.
THE METHOD OF DELIVERY OF CERTIFICATES, THIS LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING
HOLDER AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, OR OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN
ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY ON OR
PRIOR TO THE EXPIRATION DATE.
Neither the Company nor the Trust will accept any alternative,
conditional or contingent tenders. Each tendering holder, by execution of a
Letter of Transmittal (or a facsimile thereof), waives any fight to receive
any notice of the acceptance of such tender.
2. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of
Transmittal is required if:
(i) this Letter of Transmittal is signed by the registered holder
(which term, for purposes of this document, shall include any participant
in DTC whose name appears on a security position listing as the owner of
the Old Capital Securities) of Old Capital Securities tendered herewith,
unless such holder has completed either the box entitled "Special
Issuance Instructions" or the box entitled "Special Delivery
Instructions" above, or
(ii) such Old Capital Securities are tendered for the account of a
firm that is an Eligible Institution.
In all other cases, an Eligible Institution must guarantee the signature
on this Letter of Transmittal. See Instruction 5.
3. INADEQUATE SPACE. If the space provided in the box captioned
"Description of Old Capital Securities Tendered" is inadequate, the
Certificate numbers and/or the Liquidation Amount of Old Capital Securities
and any other required information should be listed on a separate signed
schedule which is attached to this Letter of Transmittal.
4. PARTIAL TENDERS AND WITHDRAWAL RIGHTS. Tenders of Old Capital
Securities will be accepted only in the Liquidation Amount of $100,000 (100
Old Capital Securities) and integral multiples of $1,000 in excess thereof,
provided that if any Old Capital Securities are tendered for exchange in part,
<PAGE>
the untendered Liquidation Amount thereof must also be $100,000 (100 Old
Capital Securities) or any integral multiple of $1,000 in excess thereof. If
less than all the Old Capital Securities evidenced by any Certificate
submitted are to be tendered, fill in the Liquidation Amount of Old Capital
Securities that are to be tendered in the box entitled "Liquidation Amount of
Old Capital Securities Tendered (If Less than All are Tendered)." In such
case, a new Certificate for the remainder of the Old Capital Securities that
were evidenced by the old Certificate will be sent to the holder of the Old
Capital Securities promptly after the Expiration Date unless the appropriate
boxes on this Letter of Transmittal are completed. All Old Capital Securities
represented by Certificates delivered to the Exchange Agent will be deemed to
have been tendered unless otherwise indicated as provided herein.
Except as otherwise provided herein, tenders of Old Capital Securities
may be withdrawn at any time on or prior to the Expiration Date. In order for
a withdrawal to be effective, a written, telegraphic, telex or facsimile
transmission of such notice of withdrawal must be received by the Exchange
Agent at one of its addresses set forth above or in the Prospectus on or prior
to the Expiration Date. Any such notice of withdrawal must specify the name
of the person who tendered the Old Capital Securities to be withdrawn, the
aggregate Liquidation Amount of Old Capital Securities to be withdrawn, and
(if Certificates for Old Capital Securities have been tendered) the name of
the registered holder of the Old Capital Securities as set forth on the
Certificates for the Old Capital Securities, if different from that of the
person who tendered such Old Capital Securities. If Certificates for the Old
Capital Securities have been delivered or otherwise identified to the Exchange
Agent, then prior to the physical release of such Certificates for the Old
Capital Securities, the tendering holder must submit the serial numbers shown
on the particular Certificates for the Old Capital Securities to be withdrawn
and the signature on the notice of withdrawal must be guaranteed by an
Eligible Institution, except in the case of Old Capital Securities tendered
for the account of an Eligible Institution. If Old Capital Securities have
been tendered pursuant to the procedures for book-entry transfer set forth
under "The Exchange Offer-Procedures for Tendering Old Capital Securities,"
the notice of withdrawal must specify the name and number of the account at
DTC to be credited with the withdrawal of Old Capital Securities, in which
case a notice of withdrawal will be effective if delivered to the Exchange
Agent by written, telegraphic, telex or facsimile transmission on or prior to
the Expiration Date. Withdrawals of tenders of Old Capital Securities may not
be rescinded and Old Capital Securities properly withdrawn will not be deemed
validly tendered for purposes of the Exchange Offer, but may be retendered at
any subsequent time on or prior to the Expiration Date by following any of the
procedures described in the Prospectus under "The Exchange Offer Procedures
for Tendering Old Capital Securities."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Company and the
Trust, in their sole discretion, whose determination shall be final and
binding on all parties. The Company and the Trust, any affiliates or assigns
of the Company and the Trust, the Exchange Agent or any other person shall not
be under any duty to give any notification of any irregularities in any notice
of withdrawal or incur any liability for failure to give any such
notification. Any Old Capital Securities that have been tendered but which
are withdrawn on or prior to the Expiration Date will be returned to the
<PAGE>
holder thereof without cost to such holder promptly after withdrawal.
5. SIGNATURES ON LETTER OF TRANSMITTAL, ASSIGNMENTS AND ENDORSEMENTS.
If this Letter of Transmittal is signed by the registered holder of the Old
Capital Securities tendered hereby, the signature must correspond exactly with
the name as written on the face of the Certificates without alteration,
enlargement or any change whatsoever.
If any of the Old Capital Securities tendered hereby are owned of record
by two or more joint owners, all such owners must sign this Letter of
Transmittal.
If any tendered Old Capital Securities are registered in different names
on several Certificates, it will be necessary to complete, sign and submit as
many separate Letters of Transmittal (or facsimiles thereof) as there are
different registrations of Certificates.
If this Letter of Transmittal or any Certificates or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and must submit proper
evidence satisfactory to the Company and the Trust, in their sole discretion,
of such persons' authority to so act.
When this Letter of Transmittal is signed by the registered holder of the
Old Capital Securities listed and transmitted hereby, no endorsement of
Certificates or separate bond powers are required unless New Capital
Securities are to be issued in the name of a person other than the registered
holder. Signatures on such Certificates or bond powers must be guaranteed by
an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder of the Old Capital Securities listed, the Certificates must
be endorsed or accompanied by appropriate bond powers, signed exactly as the
name of the registered holder appears on the Certificates, and also must be
accompanied by such opinions of counsel, certifications and other information
as the Company, the Trust or the Exchange Agent may require in accordance with
the restrictions on transfer applicable to the Old Capital Securities.
Signatures on such Certificates or bond powers must be guaranteed by an
Eligible Institution.
6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If New Capital
Securities are to be issued in the name of a person other than the registered
holder, or if New Capital Securities are to be sent to someone other than the
registered holder or to an address other than that shown above, the
appropriate boxes on this Letter of Transmittal should be completed.
Certificates for Old Capital Securities not exchanged will be returned by mail
or, if tendered by book-entry transfer, by crediting the account indicated
above maintained at DTC unless the appropriate boxes on this Letter of
Transmittal are completed. See Instruction 4.
7. IRREGULARITIES. The Company and the Trust will determine, in their
sole discretion, all questions as to the form of documents, validity,
eligibility (including time of receipt) and acceptance for exchange of any
<PAGE>
tender of Old Capital Securities, which determination shall be final and
binding on all parties. The Company and the Trust reserve the absolute right
to reject any and all tenders determined by them not to be in proper form or
the acceptance of which, or exchange for, may, in the view of counsel to the
Company and the Trust, be unlawful. The Company and the Trust also reserve
the absolute right, subject to applicable law, to waive any of the conditions
of the Exchange Offer set forth in the Prospectus under "The Exchange Offer--
Certain Conditions to the Exchange Offer" or any conditions or irregularity in
any tender of Old Capital Securities of any particular holder whether or not
similar conditions or irregularities are waived in the case of other holders.
The Company's and the Trust's interpretation of the terms and conditions of
the Exchange Offer (including this Letter of Transmittal and the instructions
hereto) will be final and binding. No tender of Old Capital Securities will
be deemed to have been validly made until all irregularities with respect to
such tender have been cured or waived. None of the Company, the Trust or the
Exchange Agent, any affiliates or assigns of the Company, the Trust or the
Exchange Agent, nor any other person shall be under any duty to give
notification of any irregularities in tenders or incur any liability for
failure to give such notification.
8. QUESTIONS, REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions
and requests for assistance may be directed to the Exchange Agent at its
address and telephone number set forth on the front of this Letter of
Transmittal. Additional copies of the Prospectus, the Notice of Guaranteed
Delivery and the Letter of Transmittal may be obtained from the Exchange Agent
or from your broker, dealer, commercial bank, trust company or other nominee.
9. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under U.S. Federal
income tax law, a holder whose tendered Old Capital Securities are accepted
for exchange is required to provide the Exchange Agent with such holder's
correct taxpayer identification number ("TIN") on the Substitute Form W-9
below. If the Exchange Agent is not provided with the correct TIN, the
Internal Revenue Service (the "IRS") may subject the holder or other payee to
a $50 penalty. In addition, payments to such holders or other payees with
respect to Old Capital Securities exchanged pursuant to the Exchange Offer may
be subject to 31 % backup withholding.
The box in Part 3 of the Substitute Form W-9 may be checked if the
tendering holder has not been issued a TIN and has applied for a TIN or
intends to apply for a TIN in the near future. If the box in Part 3 is
checked, the holder or other payee must also complete the Certificate of
Awaiting Taxpayer Identification Number below in order to avoid backup
withholding. Notwithstanding that the box in Part 3 is checked and the
Certificate of Awaiting Taxpayer Identification Number is completed, the
Exchange Agent will withhold 31% of all payments made prior to the time a
properly certified TIN is provided to the Exchange Agent. The Exchange Agent
will retain such amounts withheld during the 60 day period following the date
of the Substitute Form W-9. If the holder furnishes the Exchange Agent with
its TIN within 60 days after the date of the Substitute Form W-9, the amounts
retained during the 60-day period will be remitted to the holder and no
further amounts shall be retained or withheld from payments made to the holder
thereafter. If, however, the holder has not provided the Exchange Agent with
its TIN within such 60-day period, amounts withheld will be remitted to the
IRS as backup withholding. In addition, 31% of all payments made thereafter
<PAGE>
will be withheld and remitted to the IRS until a correct TIN is provided.
The holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the registered owner of
the Old Capital Securities or of the last transferee appearing on the
transfers attached to, or endorsed on, the Old Capital Securities. If the Old
Capital Securities are registered in more than one name or are not in the name
of the actual owner, consult the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for additional guidance
on which number to report.
Certain holders (including, among others, corporations, financial
institutions and certain foreign persons) may not be subject to these backup
withholding and reporting requirements. Such holders should nevertheless
complete the attached Substitute Form W-9 below, and write "exempt" on the
face thereof, to avoid possible erroneous backup withholding. A foreign
person may qualify as an exempt recipient by submitting a properly completed
IRS Form W-8, signed under penalties of perjury, attesting to that holder's
exempt status. Please consult the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 " for additional
guidance on which holders are exempt from backup withholding.
Backup withholding is not an additional U.S. Federal income tax. Rather,
the U.S. Federal income tax liability of a person subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained.
10. LOST, DESTROYED OR STOLEN CERTIFICATES. If any Certificates
representing Old Capital Securities have been lost, destroyed or stolen, the
holder should promptly notify the Exchange Agent. The holder will then be
instructed as to the steps that must be taken in order to replace the
Certificates. This Letter of Transmittal and related documents cannot be
processed until the procedures for replacing lost, destroyed or stolen
Certificates have been followed.
11. SECURITY TRANSFER TAXES. Holders who tender their Old Capital
Securities for exchange will not be obligated to pay any transfer taxes in
connection therewith. If, however, New Capital Securities are to be delivered
to, or are to be issued in the name of, any person other than the registered
holder of the Old Capital Securities tendered, or if a transfer tax is imposed
for any reason other than the exchange of Old Capital Securities in connection
with the Exchange Offer, then the amount of any such transfer tax (whether
imposed on the registered holder or any other persons) will be payable by the
tendering holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with the Letter of Transmittal, the
amount of such transfer taxes will be billed directly to such tendering
holder.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE THEREOF) AND ALL
OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO
THE EXPIRATION DATE.
<PAGE>
<TABLE>
<CAPTION>
PAYER'S NAME: WILMINGTON TRUST COMPANY
<S> <C> <C>
SUBSTITUTE PART 1--PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND CERTIFY SOCIAL SECURITY
FORM W-9 BY SIGNING AND DATING BELOW. NUMBER OR EMPLOYER
DEPARTMENT OF THE TREASURY IDENTIFICATION NUMBER
INTERNAL REVENUE SERVICE
PART 2--CERTIFICATION--UNDER PENALTIES OF PERJURY, I CERTIFY
THAT:
PAYER'S REQUEST FOR
TAXPAYER IDENTIFICATION
(1) THE NUMBER SHOWN ON THIS FORM IS MY CORRECT TAXPAYER
NUMBER (TIN)
IDENTIFICATION NUMBER (OR I AM WAITING FOR A NUMBER TO BE
ISSUED TO ME) AND
(2) I AM NOT SUBJECT TO BACKUP WITHHOLDING EITHER BECAUSE:
(A) I AM EXEMPT FROM BACKUP WITHHOLDING, OR (B) I HAVE
NOT BEEN NOTIFIED BY THE INTERNAL REVENUE SERVICE (THE
"IRS") THAT I AM SUBJECT TO BACKUP WITHHOLDING AS A
RESULT OF A FAILURE TO REPORT ALL INTEREST OR DIVIDENDS,
OR (C) THE IRS HAS NOTIFIED ME THAT I AM NO LONGER
SUBJECT TO BACKUP WITHHOLDING.
CERTIFICATION INSTRUCTIONS--YOU MUST CROSS OUT ITEM (2) ABOVE IF PART 3--
YOU HAVE BEEN NOTIFIED BY THE IRS THAT YOU ARE CURRENTLY SUBJECT
TO BACKUP WITHHOLDING BECAUSE OF UNDERREPORTING INTEREST OR AWAITING TIN ( )
DIVIDENDS ON YOUR TAX RETURN. HOWEVER, IF AFTER BEING NOTIFIED
BY THE IRS THAT YOU ARE SUBJECT TO BACKUP WITHHOLDING, YOU
RECEIVED ANOTHER NOTIFICATION FROM THE IRS THAT YOU ARE NO LONGER
SUBJECT TO BACKUP WITHHOLDING, DO NOT CROSS OUT SUCH ITEM (2).
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY
PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED
TO AVOID BACKUP WITHHOLDING.
SIGNATURE DATE
NAME (PLEASE PRINT)
ADDRESS (PLEASE PRINT)
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO
THE EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED "GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM W-9" FOR ADDITIONAL DETAILS.
</TABLE>
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3
OF SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a Taxpayer Identification
Number has not been issued to me, and either (1) I have mailed or delivered an
application to receive a Taxpayer Identification Number to the appropriate
<PAGE>
Internal Revenue Service Center or Social Security Administration Office or
(2) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a Taxpayer Identification Number by the
time of payment, 31% of all reportable payments made to me will be withheld,
but that such amounts will be refunded to me if I then provide a Taxpayer
Identification Number within sixty (60) days.
Signature Date
Name (Please Print)
Address (Please Print)
EXHIBIT 99.2
FORM OF
NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF
8.50% CAPITAL SECURITIES
(LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY)
OF
FIRST AMERICAN CAPITAL TRUST I
FULLY AND UNCONDITIONALLY GUARANTEED BY
THE FIRST AMERICAN FINANCIAL CORPORATION
This Notice of Guaranteed Delivery, or one substantially equivalent to
this form, must be used to accept the Exchange Offer (as defined below) if (i)
certificates for the 8.50% Capital Securities (liquidation amount $1,000 per
Capital Security) (the "Old Capital Securities") of First American Capital
Trust I, a Delaware statutory business trust, are not immediately available,
(ii) Old Capital Securities, the Letter of Transmittal and all other required
documents cannot be delivered to Wilmington Trust Company (the "Exchange
Agent") on or prior to the Expiration Date (as defined in the Prospectus
referred to below) or (iii) the procedures for delivery by book-entry transfer
cannot be completed on a timely basis. This Notice of Guaranteed Delivery may
be delivered by hand, overnight courier or mail, or transmitted by facsimile
transmission, to the Exchange Agent. See "The Exchange Offer--Procedures for
Tendering Old Capital Securities" in the Prospectus.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
WILMINGTON TRUST COMPANY
BY MAIL/OVERNIGHT DELIVERY/HAND DELIVERY:
Wilmington Trust Company
<PAGE>
c/o Harris Trust Company of New York
77 Water Street, 4th Floor
New York, New York 10005
Attn: Reginald Alois
TO CONFIRM BY TELEPHONE OR FOR INFORMATION:
(212) 701-7615
FACSIMILE TRANSMISSION:
(212) 480-8214
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN
AS SET FORTH ABOVE OR TRANSMISSION OF THIS NOTICE OF GUARANTEED DELIVERY VIA
FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE
SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
Ladies and Gentlemen:
The undersigned hereby tenders to First American Capital Trust I, a
statutory business trust created under the laws of the State of Delaware (the
"Trust"), upon the terms and subject to the conditions set forth in the
Prospectus dated October 16, 1997 (as the same may be amended or supplemented
from time to time, the "Prospectus"), and the related Letter of Transmittal
(which together constitute the "Exchange Offer"), receipt of which is hereby
acknowledged, the aggregate principal amount of Old Capital Securities set
forth below pursuant to the guaranteed delivery procedures set forth in the
Prospectus under the caption "The Exchange Offer--Procedures for Tendering Old
Capital Securities."
Aggregate Liquidation Name(s) of Registered Holder(s):
Amount Tendered:
Certificate No(s). Address(es):
(if available) Area Code and Telephone Number(s):
If Old Capital Securities will be tendered by book-entry transfer, provide the
following information:
Signature(s):
<PAGE>
DTC Account Number:
Date:
THE GUARANTEE ON THE NEXT PAGE MUST BE COMPLETED
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm or other entity identified in Rule 17Ad-15
under the Securities Exchange Act of 1934, as amended, as an "eligible
guarantor institution", including (as such terms are defined therein): (i) a
bank; (ii) a broker, dealer, municipal securities broker, municipal securities
dealer, government securities broker, government securities dealer, (iii) a
credit union; (iv) a national securities exchange, registered securities
association or clearing agency; or (v) a savings association that is a
participant in a securities transfer association recognized program (each of
the foregoing being referred to as an "Eligible Institution"), hereby
guarantees to deliver to the Exchange Agent, at its address set forth above,
either the Old Capital Securities tendered hereby in proper form for transfer,
or confirmation of the book-entry transfer of such Old Capital Securities to
the Exchange Agent's account at The Depository Trust Company ("DTC"), pursuant
to the procedures for book-entry transfer set forth in the Prospectus, in
either case together with one or more properly completed and duly executed
Letters of Transmittal (or a facsimile thereof), or Agent's Message (as
defined in the Prospectus) in lieu thereof, and any other required documents
within five business days after the date of execution of this Notice of
Guaranteed Delivery.
The undersigned acknowledges that it must deliver the Letters of
Transmittal and the Old Capital Securities tendered hereby to the Exchange
Agent within the time period set forth above and that failure to do so could
result in a financial loss to the undersigned.
Name of Firm:
(Authorized Signature):
(Title):
Address:
(Include Zip Code)
Area Code and Telephone Number (___) ___-_____
Date:
NOTE: DO NOT SEND OLD CAPITAL SECURITIES WITH THIS NOTICE OF GUARANTEED
DELIVERY. ACTUAL SURRENDER OF OLD CAPITAL SECURITIES MUST BE MADE
PURSUANT TO, AND BE ACCOMPANIED BY, A PROPERLY COMPLETED AND DULY
EXECUTED LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS.
<PAGE>
EXHIBIT 99.3
FORM OF
EXCHANGE AGENCY AGREEMENT
October 16, 1997
The Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890
Attention: Corporate Trust Administration
Ladies and Gentlemen:
The First American Financial Corporation, a California corporation, as
Depositor (the "Company") and First American Capital Trust I, a trust created
under the laws of the state of Delaware (the "Trust"), hereby appoint
Wilmington Trust Company to act as exchange agent (the "Exchange Agent") in
connection with an exchange offer by the Company and the Trust to exchange up
to $100,000,000 aggregate liquidation amount of the Trust's 8.50% Capital
Securities (Liquidation Amount $1,000 per Capital Security) (the "New
Securities"), which have been registered under the Securities Act of 1933, as
amended (the "Securities Act"), for a like aggregate liquidation amount of the
Trust's outstanding 8.50% Capital Securities (Liquidation Amount $1,000 per
Capital Security) (the "Old Securities"). The terms and conditions of the
exchange offer are set forth in a Prospectus dated October 16, 1997 (as the
same may be amended or supplemented from time to time, the "Prospectus") and
in the related Letter of Transmittal, which together constitute the "Exchange
Offer." The registered holders of the Capital Securities are hereinafter
referred to as the "Holders." Capitalized terms used herein and not defined
shall have the respective meanings assigned thereto in the Prospectus.
The Exchange Offer is expected to be commenced by the Trust on or about
October 16, 1997. The Letter of Transmittal accompanying the Prospectus is to
be used by the holders of the Old Securities to accept the Exchange Offer and
contains instructions with respect to (i) the delivery of certificates for Old
Securities tendered in connection therewith and (ii) the book-entry transfer
of Old Securities to the Exchange Agent's account.
The Exchange Offer shall expire at 5:00 p.m. New York City time, on
November 17, 1997 or on such later date or time to which the Trust may extend
the Exchange Offer from time to time by giving oral (to be confirmed in
writing) or written notice to the Exchange Agent before 9:00 a.m., New York
City time, on the business day following the previously scheduled Expiration
Date.
<PAGE>
The Company and the Trust each expressly reserves the right to amend or
terminate the Exchange Offer, and not to accept for exchange any Old
Securities not theretofore accepted for exchange, based upon any conditions of
the Exchange Offer described in the Prospectus. The Trust will give oral (to
be confirmed in writing) or written notice of any amendment, termination or
nonacceptance of Old Securities to the Exchange Agent promptly after any
amendment, termination or nonacceptance.
On the basis of the representations, warranties and agreements of the
Company, the Trust and the Exchange Agent contained herein and subject to the
terms and conditions hereof, the following sets forth the agreement between
the Company, the Trust and the Exchange Agent for the Exchange Offer:
1. APPOINTMENT AND DUTIES AS EXCHANGE AGENT.
a. The Company and the Trust hereby authorize and appoint the
Wilmington Trust Company to act as Exchange Agent in connection with the
Exchange Offer and Wilmington Trust Company agrees to act as Exchange Agent in
connection with the Exchange Offer. As Exchange Agent, Wilmington Trust
Company will perform only those services as are specifically set forth in the
section of the Prospectus captioned "The Exchange Offer" and as are outlined
herein.
b. The Company and the Trust acknowledge and agree that Wilmington
Trust Company has been retained pursuant to this Agreement to act solely as
Exchange Agent in connection with the Exchange Offer, and in such capacity,
the Exchange Agent shall perform such duties in good faith.
c. The Exchange Agent will establish an account with respect to the
Old Securities at The Depository Trust Company ("DTC") for the purposes of the
Exchange Offer within two business days after the date of the Prospectus, and
any financial institution that is a participant in DTC's system may make
book-entry delivery of the Old Securities by causing DTC to transfer such Old
Securities into the Exchange Agent's account in accordance with DTC's
procedure for such transfer.
d. The Exchange Agent will examine, or request a Regular Trustee of
the Trust or a Designated Officer (as defined below) to examine, each of the
Letters of Transmittal and certificates for Old Securities and any other
documents received by the Exchange Agent from or for Holders of the Old
Securities, and any book-entry confirmations (as defined in the Prospectus)
received by the Exchange Agent with respect to the Old Securities, to
ascertain whether: (i) the Letters of Transmittal and any such other
documents are duly executed and properly completed in accordance with the
instructions set forth therein and that such book-entry confirmations are in
due and proper form and contain the information required to be set forth
therein, (ii) the Old Securities have otherwise been properly tendered, and
(iii) Holders have provided their correct Tax Identification Number or
required certification. Determination of all questions as to validity, form,
eligibility and acceptance for exchange of any Old Securities shall be made by
the Company or the Trust, whose determination shall be final and binding. In
each case where the Letters of Transmittal or any other documents have been
improperly completed or executed or where book-entry confirmations are not in
due and proper form or omit certain information, or any of the certificates
<PAGE>
for Old Securities are not in proper form for transfer or some other
irregularity in connection with the tender of the Old Securities exists, the
Exchange Agent will endeavor to advise the tendering Holders of the
irregularity and to take any other action may be necessary or advisable as to
cause such irregularity to be corrected. Notwithstanding the foregoing, the
Exchange Agent shall not incur any liability for failure to give any such
notification.
e. With the approval of any Regular Trustee of the Trust or any
person designated in writing by the Company (a "Designated Officer") (such
approval, if given orally, to be confirmed in writing) or any other party
designated by any such Regular Trustee or Designated Officer, the Exchange
Agent is authorized to waive any irregularities in connection with any tender
of Old Securities pursuant to the Exchange Offer.
f. Tenders of Old Securities may be made only as set forth in the
Letter of Transmittal and in the section of the Prospectus captioned "The
Exchange Offer" and Old Securities shall be considered properly tendered only
when tendered in accordance with the procedures set forth therein.
Notwithstanding the provisions of this paragraph, Old Securities which any
Regular Trustee or Designated Officer shall approve (such approval, if given
orally, to be confirmed in writing) as having been properly tendered shall be
considered to be properly tendered.
g. The Exchange Agent shall advise the Company and the Trust with
respect to any Old Securities received after 5:00 p.m., New York City time, on
the Expiration Date and accept their instructions with respect to disposition
of such Old Securities.
h. The Exchange Agent shall accept tenders:
(i) in cases where the Old Securities are registered in two or more
names only if signed by all named Holders;
(ii) in cases where the signing person (as indicated on the Letter
of Transmittal) is acting in a fiduciary or a representative capacity
only when proper evidence of such person's authority so to act is
submitted; and
(iii) from persons other than the registered Holder of Old
Securities, provided that customary transfer requirements are
fulfilled.
The Exchange Agent shall accept partial tenders of Old Securities where
so indicated and as permitted in the Letter of Transmittal and deliver
certificates for Old Securities to the transfer agent for split-up and return
any untendered Old Securities or Old Securities which have not been accepted
by the Company and the Trust to the Holder (or such other person as may be
designated in the Letter of Transmittal) as promptly as practicable after
expiration or termination of the Exchange Offer.
i. Upon satisfaction or waiver of all of the conditions to the
Exchange Offer, the Trust will notify the Exchange Agent (such notice if given
orally, to be confirmed in writing) of its acceptance, promptly after the
<PAGE>
Expiration Date, of all Old Securities properly tendered and the Exchange
Agent, on behalf of the Trust, will exchange such Old Securities for New
Securities provided to it by or on behalf of the Trust and cause such Old
Securities to be canceled. Delivery of New Securities will be made on behalf
of the Trust by the Exchange Agent at the rate of $1,000 liquidation amount of
the corresponding series of Old Securities tendered promptly after notice
(such notice if given orally, to be confirmed in writing) of acceptance of
said Old Securities by the Trust; provided, however, that in all cases, Old
Securities tendered pursuant to the Exchange Offer will be exchanged only
after timely receipt by the Exchange Agent of certificates for such Old
Securities (or confirmation of book-entry transfer into the Exchange Agent's
account at DTC), a properly completed and duly executed Letter of Transmittal
(or facsimile thereof) or Agent's Message in lieu thereof), with any required
signature guarantees and any other required documents.
j. Tenders pursuant to the Exchange Offer are irrevocable, except
that, subject to the terms and the conditions set forth in the Prospectus and
the Letter of Transmittal, Old Securities tendered pursuant to the Exchange
Offer may be withdrawn at any time on or prior to the Expiration Date.
k. The Trust shall not be required to exchange any Old Securities
tendered if any of the conditions set forth in the Exchange Offer are not met.
Notice of any decision by the Company and the Trust not to exchange any Old
Securities tendered shall be given by the Company or the Trust orally (and
confirmed in writing) to the Exchange Agent.
l. If, pursuant to the Exchange Offer, the Company and the Trust do
not accept for exchange all or part of the Old Securities tendered because of
an invalid tender, the occurrence of certain other events set forth in the
Prospectus under the caption "The Exchange Offer--Conditions to the Exchange
Offer" or otherwise, the Exchange Agent shall promptly after the expiration or
termination of the Exchange Offer return such certificates for unaccepted Old
Securities (or effect appropriate book-entry transfer), together with any
related required documents and the Letters of Transmittal relating thereto
that are in the Exchange Agent's possession, to the persons who deposited such
certificates.
m. Certificates for reissued Old Securities, unaccepted Old
Securities or New Securities shall be forwarded by (a) first-class certified
mail, return receipt requested under a blanket surety bond obtained by the
Exchange Agent at the expense of the Company protecting the Exchange Agent,
the Company and the Trust from loss or liability arising out of the
non-receipt or non-delivery or such certificates or (b) by registered mail
insured by the Exchange Agent at the expense of the Company separately for the
replacement value of each such certificate.
n. The Exchange Agent is not authorized to pay or offer to pay any
concessions, commissions or solicitation fees to any broker, dealer,
commercial bank, trust company or other persons or to engage or use any person
to solicit tenders.
o. As Exchange Agent, the Wilmington Trust Company:
(i) shall have no duties or obligations other than those
<PAGE>
specifically set forth in the section of the Prospectus captioned "The
Exchange Offer," the Letter of Transmittal or herein or as may be
subsequently agreed to in writing;
(ii) will make no representations and will have no responsibilities
as to the validity, value or genuineness of any of the certificates for
the Old Securities deposited pursuant to the Exchange Offer or any
certificates for the New Securities issued pursuant to the Exchange
Offer, and will not be required to and will make no representation as
to the validity, value or genuineness of the Exchange Offer;
(iii) shall not be obligated to take any action hereunder which
might in the Exchange Agent's reasonable judgment involve any expense
or liability, unless the Exchange Agent shall have been furnished with
indemnity reasonably satisfactory to it;
(iv) may reasonably rely on and shall be protected in acting in
reliance upon any certificate, instrument, opinion, notice, letter,
telegram or other document or security delivered to the Exchange Agent
and reasonably believed by the Exchange Agent to be genuine and to have
been signed by the proper party or parties;
(v) may reasonably act upon any tender, statement, request,
agreement or other instrument whatsoever not only as to its due
execution and validity and effectiveness of its provisions, but also as
to the truth and accuracy of any information contained therein, which
the Exchange Agent believes in good faith to be genuine and to have
been signed or represented by a proper person or persons;
(vi) may rely on and shall be protected in acting upon written or
oral instructions from any Regular Trustee or Designated Officer;
(vii) may consult with its own counsel with respect to any
questions relating to the Exchange Agent's duties and responsibilities
and the advice of such counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted to
be taken by the Exchange Agent hereunder in good faith and in
accordance with the advice or opinion of such counsel;
(viii) shall not advise any person tendering Old Securities pursuant
to the Exchange Offer as to whether to tender or refrain from tendering
all or any portion of its Old Securities or as to the market value,
decline or appreciation in market value of any Old Securities or as to
the market value of the New Securities; and
(ix) The Exchange Agent shall take such action as may from time to
time be requested by the Company or the Trust to furnish copies of the
Prospectus, Letter of Transmittal and the Notice of Guaranteed Delivery
or such other forms as may be approved from time to time by the Company
and the Trust, to all persons requesting such documents and to accept
and comply with telephone requests for information relating to the
procedures for accepting (or withdrawing from) the Exchange Offer. The
Company and the Trust will furnish you with copies of such documents at
your request.
<PAGE>
p. The Exchange Agent shall advise by facsimile transmission or
telephone and promptly thereafter confirm in writing to the Company and the
Trust and such other persons as the Company and the Trust may request, daily
(and more frequently during the week immediately preceding the Expiration Date
and if otherwise requested by the Company), up to and including the Expiration
Date, the aggregate liquidation amount of Old Securities which have been
tendered pursuant to the Exchange Offer and the items received by the Exchange
Agent pursuant to the Exchange Offer and this Agreement, reporting separately
and cumulatively as to items properly received and items improperly received.
In addition, the Exchange Agent will also provide, and cooperate in making
available to the Company and the Trust or any such other persons as requested
from time to time, such other information in its possession as the Company and
the Trust may reasonably request. Such cooperation shall include, without
limitation, the granting by the Exchange Agent to the Company and the Trust,
and such persons as the Company and the Trust may request, of access to those
persons on the Exchange Agent's staff who are responsible for receiving
tenders, in order to ensure that immediately prior to the Expiration Date the
Company and the Trust shall have received information in sufficient detail to
enable the Company and the Trust to decide whether to extend the Exchange
Offer. The Exchange Agent shall prepare a final list of all persons whose
tenders were accepted, the aggregate liquidation amount of Old Securities
tendered and the aggregate liquidation amount of Old Securities accepted and
deliver said list to the Company and the Trust.
q. Letters of Transmittal, book-entry confirmations and Notices of
Guaranteed Delivery received by the Exchange Agent shall be stamped by the
Exchange Agent as to the date and time of receipt thereof and shall be
preserved by the Exchange Agent for a period of time at least equal to the
period of time the Exchange Agent preserves other records pertaining to the
transfer of securities, or one year, whichever is longer, and thereafter shall
be delivered by the Exchange Agent to the Company and the Trust. The Exchange
Agent shall dispose of unused Letters of Transmittal and other surplus
materials by returning them to the Company or the Trust.
r. The Exchange Agent hereby expressly waives any lien, encumbrance
or right of set-off whatsoever that the Exchange Agent may have respect to
funds deposited with it for the payment of transfer taxes by reasons of
amounts, if any, borrowed by the Company or the Trust or any of its or their
subsidiaries or affiliates pursuant to any loan or credit agreement with the
Exchange Agent or for compensation owed to the Exchange Agent hereunder or for
any other matter.
s. The Exchange Agent hereby acknowledges receipt of the Prospectus
and the Letter of Transmittal and the Notice of Guaranteed Delivery and
further acknowledges that it has examined each of them. Any inconsistency
between this Agreement, on the one hand, and the Prospectus and the Letter of
Transmittal and the Notice of Guaranteed Delivery (as they may be amended or
supplemented from time to time), on the other hand, shall be resolved in favor
of the latter three documents, except with respect to the duties, liabilities
and indemnification of the Exchange Agent which shall be controlled by this
Agreement.
2. COMPENSATION. As consideration for its agreement to perform the services
of Exchange Agent hereunder, the Company agrees to pay Wilmington Trust
<PAGE>
Company the amounts set forth on Schedule I attached hereto at the times set
forth therein.
3. INDEMNIFICATION.
a. The Company hereby agrees to indemnify and hold harmless the
Exchange Agent against and from any and all costs, losses, liabilities and
expenses (including reasonable counsel fees and disbursements) arising out of
or in connection with any act, omission, delay or refusal made by the Exchange
Agent in reliance upon any signature, endorsement, assignment, certificate,
order, request, notice, instruction or other instrument or document reasonably
believed by the Exchange Agent to be valid, genuine and sufficient and in
accepting any tender or effecting any transfer of Old Securities reasonably
believed by the Exchange Agent in good faith to be authorized, and in delaying
or refusing in good faith to accept any tenders or effect any transfer of Old
Securities. Anything in this Agreement to the contrary notwithstanding, the
Company shall not be liable for indemnification or otherwise for any loss,
liability, cost or expense to the extent arising out of the Exchange Agent's
bad faith, gross negligence or willful misconduct. In no case shall the
Company be liable under this indemnity with respect to any claim against the
Exchange Agent until the Company has received written notice from the Exchange
Agent of the assertion of a claim against the Exchange Agent or of any other
action commenced against the Exchange Agent, promptly after the Exchange Agent
shall have received any such written assertion or notice of commencement of
action. The Company shall be entitled to participate at its own expense in
the defense of any such claim or other action, and, if the Company so elects,
the Company may assume the defense of any pending or threatened action to
enforce any such claim. In the event that the Company shall assume the
defense of any such suit or threatened action in respect of which
indemnification may be sought hereunder, the Company shall not be liable for
the fees and expenses incurred thereafter of any additional counsel retained
by the Exchange Agent so long as the Exchange Agent consents to the Company's
retention of counsel, which consent may not be unreasonably withheld;
provided, however, that the Company shall not be entitled to assume the
defense of any such action if the named parties to such action include the
Company or the Trust and the Exchange Agent and representation of the parties
by the same legal counsel would, in the written opinion of counsel for the
Exchange Agent, be inappropriate due to actual or potential conflicting
interests among them. It is understood that neither the Company nor the Trust
shall be liable under this paragraph for the fees and disbursements of more
than one legal counsel for the Exchange Agent. In the event that the Company
shall assume the defense of any such suit with counsel reasonably acceptable
to the Exchange Agent, the Company shall not thereafter be liable for the fees
and expenses of any counsel retained by the Exchange Agent.
b. The Exchange Agent agrees that, without the prior written consent
of the Company (which consent shall not be unreasonably withheld), it will not
settle, compromise or consent to the entry of any judgment in any pending or
threatened claim, action or proceeding in respect of which indemnification
could be sought in accordance with the indemnification provision of this
Agreement (whether or not the Exchange Agent, the Company or the Trust or any
of its directors, officers and controlling persons is an actual or potential
party to such claim, action or proceeding), unless such settlement, compromise
or consent includes an unconditional release of the Company and its directors,
<PAGE>
officers and controlling persons, the Trust and its trustees thereof from all
liability arising out of such claim, action or proceeding.
4. TAX INFORMATION
a. The Company and the Trust understand that the Exchange Agent is
required, in certain instances, to withhold 31% with respect to interest paid
on the New Securities and proceeds from the sale, exchange, redemption or
retirement of the New Securities from Holders who have not supplied their
correct Taxpayer Identification Number or required certification. Such funds
will be turned over to the Internal Revenue Service in accordance with
applicable regulations. The Exchange Agent shall notify the Company and the
Trust of any Holder who has failed to supply such Taxpayer Identification
Number or certification.
b. The Exchange Agent shall notify the Trust of the amount of any
transfer taxes payable in respect of the exchange of Old Securities of which
the Exchange Agent has actual knowledge.
5. GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with,the laws of the State of Delaware applicable to contracts
executed in and to be performed in that state without regard to conflicts of
laws principles.
6. NOTICES. Any communication or notice provided for hereunder shall be in
writing and shall be given (and shall be deemed to have been given upon
receipt) by delivery in person, by telecopy, by overnight delivery service or
by registered or certified mail (postage prepaid, return receipt requested) to
the applicable party at the address indicated below:
If to the Company:
The First American Financial Corporation
114 East Fifth Street
Santa Ana, California 92701
Attention: Secretary
Telecopier No.: (714) 836-1841
If to the Trust:
First American Capital Trust I
c/o The First American Financial Corporation
114 East Fifth Street
Santa Ana, California 92701
Attention: Secretary
Telecopier No.: (714) 836-1841
If to the Exchange Agent:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Attention: Corporate Trust Operations
<PAGE>
Telecopier No.: (302) 651-8882
or, as to each party, at such other address as shall be designated by such
party to the other parties hereto in a written notice complying as to delivery
with the terms of this Section.
7. PARTIES IN INTEREST. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto and their successors and assigns
and nothing in this Agreement, express or implied, is intended to or shall
confer upon any other person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement. Without limitation to the
foregoing, the parties hereto expressly agree that no holder of Old Securities
or New Securities shall have any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.
8. COUNTERPARTS; SEVERABILITY. This Agreement may be executed in one or
more counterparts, and each of such counterparts shall together constitute one
and the same agreement. If any term or other provision of this Agreement or
the application thereof is invalid, illegal or incapable of being enforced by
any rule of law, or public policy, all other provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the agreements contained herein is not affected in any
manner adverse to any party. Upon such determination that any term or
provision or the application thereof is invalid, illegal or unenforceable, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the agreements contained herein may be
performed as originally contemplated to the fullest extent possible.
9. CAPTIONS. The descriptive headings contained in this Agreement are
included for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
10. ENTIRE AGREEMENT; AMENDMENT. This Agreement constitutes the entire
understanding of the parties hereto with respect to the subject matter hereof.
This Agreement may not be amended or modified nor may any provision hereof by
waived except in writing signed by each party to be bound thereby.
11. TERMINATION. This Agreement shall terminate upon the earlier of (a) the
90th day following the expiration, withdrawal, or termination of the Exchange
Offer, (b) the close of business on the date of actual receipt of written
notice by the Exchange Agent from the Company and the Trust stating that this
Agreement is terminated, (c) one year following the date of this Agreement, or
(d) the time and date on which this Agreement shall be terminated by mutual
consent of the parties hereto. Notwithstanding the foregoing, Paragraphs 2,
3, and 4 shall survive the termination of this Agreement.
Kindly indicate your acceptance of the foregoing provisions by signing
in the space provided below for that purpose and returning to the Company a
copy of this Agreement so signed, whereupon this Agreement and the Exchange
Agent's acceptance shall constitute a binding agreement among the Exchange
Agent, the Company and the Trust.
<PAGE>
Very truly yours,
THE FIRST AMERICAN FINANCIAL CORPORATION
By:_________________________________
Name: Parker S. Kennedy
Title: President
FIRST AMERICAN CAPITAL TRUST I
By:_________________________________
Name: Parker S. Kennedy
Title: Regular Trustee
By:_________________________________
Name: Thomas A. Klemens
Title: Regular Trustee
Accepted and agreed to as of
the date first written above:
WILMINGTON TRUST COMPANY
By:_________________________________
Authorized Signatory
<PAGE>
SCHEDULE I
Compensation
