As filed with the Securities and Exchange Commission on April 8, 1998
Registration No. 333-45459
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)
<TABLE>
<S> <C> <C>
CALIFORNIA 6361 95-1068610
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation of Organization) Classification Code No.) Identification No.)
</TABLE>
114 EAST FIFTH STREET
SANTA ANA, CALIFORNIA 92701-4642
(800) 854-3643
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
MARK R ARNESEN, ESQ. (Copy to)
SECRETARY NEIL W. RUST, ESQ.
THE FIRST AMERICAN FINANCIAL CORPORATION WHITE & CASE LLP
114 EAST FIFTH STREET 633 WEST FIFTH STREET
SANTA ANA, CALIFORNIA 92701 LOS ANGELES, CALIFORNIA 90071
(714) 558-3211 (213) 620-7700
(Name, Address, Including Zip Code, and Telephone
Number, Including Area Code, of Agent For Service)
Approximate date of commencement of proposed sale to the public: as
soon as practicable after this Registration Statement becomes effective.
If 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. (__)
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. (_) Registration No.
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. (_) Registration No.
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
===================================================================================================================================
Proposed Proposed
Amount Maximum Maximum Amount of
Title of Each Class of Securities To Be Aggregate Price Aggregate Registration
To Be Registered Registered Per Unit(1) Offering Price(1) Fee(1)
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stock, $1.00 par value 262,152 shares $64.188 $16,827,013 $4,964(2)
===================================================================================================================================
<FN>
(1) ESTIMATED SOLELY FOR THE PURPOSE OF CALCULATING THE REGISTRATION FEE IN
ACCORDANCE WITH RULES 457(C) AND (F)(1) UNDER THE SECURITIES ACT OF
1933, BASED ON THE AVERAGE OF THE HIGH AND LOW PRICES OF THE COMMON
STOCK REGISTERED ON THE NEW YORK STOCK EXCHANGE AS OF APRIL 3, 1998.
(2) A SUM OF $37,791 WAS PREVIOUSLY PAID AT THE INITIAL FILING.
</FN>
</TABLE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED APRIL 8, 1998.
PROSPECTUS
262,152 COMMON SHARES
THE FIRST AMERICAN FINANCIAL CORPORATION
OFFER BY FIRST AMERICAN TITLE INSURANCE COMPANY TO EXCHANGE COMMON
SHARES OF THE FIRST AMERICAN FINANCIAL CORPORATION FOR EACH COMMON
SHARE OF FIRST AMERICAN HOME BUYERS PROTECTION CORPORATION AND EACH
COMMON SHARE OF FIRST AMERICAN TITLE GUARANTY HOLDING COMPANY NOT
CURRENTLY OWNED BY FIRST AMERICAN TITLE INSURANCE COMPANY
First American Title Insurance Company, a California corporation
("FATICO"), a wholly-owned subsidiary of The First American Financial
Corporation, a California corporation (the "Company") hereby offers to exchange
with each shareholder of FATICO's subsidiary, First American Home Buyers
Protection Corporation ("Home Buyers"), for each properly tendered share of
common stock, $1.00 par value of Home Buyers (a "Home Buyers Share"), a number
of the Company's Common shares, $1.00 par value (the "Shares"), equal to the
quotient of $36.69 times the number of Home Buyers Shares tendered by such
shareholder, minus the value of such shareholder's debt to FATICO to be retired
pursuant to the transaction (See "Selling Shareholders"), plus accrued interest
thereon, divided by the closing market price on the New York Stock Exchange of
the Shares on the trading date immediately prior to the commencement of the Home
Buyers Exchange Offer, upon the terms and subject to the conditions set forth
herein and in the related Letter of Transmittal (the "Home Buyers Letter of
Transmittal"), which together constitute the "Home Buyers Exchange Offer." The
Home Buyers Exchange Offer will commence on the date on which this Prospectus
and the Home Buyers Letter of Transmittal are mailed to the holders of Home
Buyers Shares. See "The Exchange Offers -- Terms of the Exchange Offers."
Furthermore, FATICO hereby offers to exchange with each shareholder of
its subsidiary, First American Title Guaranty Holding Company ("Title
Guaranty"), for each properly tendered share of common stock of Title Guaranty
(a "Title Guaranty Share"; and the Home Buyers Shares and Title Guaranty Shares,
collectively, the "Subsidiary Shares"), a number of Shares equal to the quotient
of $2,231.10 times the number of Title Guaranty Shares tendered by such
shareholder, divided by the closing market price on the New York Stock Exchange
of the Shares on the
<PAGE>
(outside cover page continued)
trading date immediately prior to the commencement of the Title Guaranty
Exchange Offer, upon the terms and subject to the conditions set forth herein
and in the related Letter of Transmittal (the "Title Guaranty Letter of
Transmittal"), which together constitute the "Title Guaranty Exchange Offer"
(the Home Buyers Exchange Offer and the Title Guaranty Exchange Offer,
collectively, the "Exchange Offers"). The Title Guaranty Exchange Offer will
commence on the date on which this Prospectus and the Title Guaranty Letter of
Transmittal are mailed to holders of Title Guaranty Shares. See "The Exchange
Offers."
Any shareholder desiring to accept one or both Exchange Offers (a
shareholder who so accepts, a "Participant") should follow the procedures set
forth in "The Exchange Offers -- Procedures for Tendering Shares."
The Company will not receive any proceeds from the Exchange Offers.
The Company has agreed to bear certain expenses of the Exchange Offers. No
underwriter is being used in connection with the Exchange Offers.
Shares issued pursuant to this Prospectus may be reoffered pursuant
hereto by the holders thereof (the "Selling Shareholders") from time to time in
transactions on the open market, in negotiated transactions, through the writing
of options on such Shares or through a combination of such methods of sale, at
negotiated prices, fixed prices which may be changed, market prices prevailing
at the time of sale or prices relating to such prevailing market prices.
See "Selling Shareholders."
THE SHARES ARE TRADED ON THE NEW YORK STOCK EXCHANGE UNDER THE SYMBOL
"FAF." ON APRIL 3, 1998, THE CLOSING PRICE OF THE SHARES ON THE NEW YORK STOCK
EXCHANGE WAS $64.188 PER SHARE.
SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR CERTAIN INFORMATION THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
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 [__________] , 1998.
<PAGE>
(inside cover page)
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company with the Commission can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington,
D.C. 20549; and at the following Regional Offices of the Commission: New York
Regional Office, Seven World Trade Center, 13th Floor, Suite 1300, New York, New
York 10048; and Chicago Regional Office, Citicorp Center, 500 West Madison
Street, 14th Floor, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
material can be obtained at prescribed rates from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C.
20549. The Commission also maintains a site on the World Wide Web
(http://www.sec.gov) that contains reports, proxy statements and other
information regarding the Company. In addition, such reports, proxy statements
and other information can also be inspected at the offices of the New York Stock
Exchange, Inc., 20 Broad Street, New York, New York 10005, on which the Shares
listed.
This Prospectus constitutes part of a Registration Statement on Form
S-4 (the "Registration Statement") filed by the Company with the Commission
under the Securities Act. In accordance with the rules and regulations of the
Commission, this Prospectus does not contain all of the information contained in
the Registration Statement and the exhibits and schedules thereto. For further
information concerning the Company and the Shares offered hereby, reference is
hereby made to the Registration Statement and the exhibits and schedules filed
therewith which may be obtained at the Commission's offices whose addresses are
listed above. The Registration Statement has been filed electronically and may
be obtained at the Commission's Web site listed above. Any statements contained
herein concerning the provisions of any document are not necessarily complete,
and, in each instance, reference is made to the copy of such document filed as
an exhibit to the Registration Statement or otherwise filed with the Commission.
Each such statement is qualified in its entirety by such reference.
INCORPORATION OF DOCUMENTS BY REFERENCE
The documents listed in (1), (2), (3), (4), (5), (6), (7) and (8)
below are incorporated by reference in this Prospectus, and all documents filed
by the Company with the Commission pursuant to Sections 13(a), 13(c), 14 and
15(d) of the Exchange Act, subsequent to the date of this Prospectus and prior
to the termination of any offering of securities made by this Prospectus, shall
be deemed to be incorporated by reference in this Prospectus and to be part
hereof from the date of filing of such documents. 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. (inside cover page continued)
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
(1) The Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997.
(2) The Company's Report on Form 8-K dated January 23, 1998.
(3) The Company's Report on Form 8-K dated January 27, 1998.
(4) The Company's Report on Form 8-K dated March 18, 1998.
(5) The Company's Report on Form 8-K dated March 31, 1998.
(6) The Company's Report on Form 8-K dated April 7, 1998.
(7) The description of the Shares contained in the Company's
Registration Statement on Form 8-A registering its Common
shares, par value $1.00 per share, under Section 12(b) of the
Exchange Act, dated November 23, 1993.
(8) The description of certain Rights to Purchase Series A Junior
Participating Preferred Shares which may be transferred with
the Company's Common shares, which description is contained in
the Company's Registration Statement on Form 8-A, under
Section 12(b) of the Exchange Act, dated November 7, 1997.
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 [__________], 1998.
FORWARD-LOOKING STATEMENTS
Except for historical information contained in this Prospectus and in
the documents incorporated in this Prospectus by reference, the matters
discussed herein and therein contain forward-looking statements that involve
risks and uncertainties that could cause actual results to differ materially
from those suggested in the forward-looking statements, including, without
limitation, the effect of economic conditions, interest rates, market demand,
competition and other risks detailed herein and in the Company's other filings
with the Commission.
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,which should be read in its
entirety. See "Risk Factors" for a description of certain factors that should be
considered in connection with an investment in the Shares.
THE COMPANY
The First American Financial Corporation (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 Orange County, 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.
The Company, through its subsidiaries, is engaged in the business of
providing real estate-related financial and information services to real
property buyers and mortgage lenders. The Company's products and services
include title insurance, tax monitoring, credit reporting, property data
services, flood certification, field inspection services, appraisal services,
mortgage loan servicing systems, mortgage document preparation and home warranty
services. The Company also provides investment, trust and thrift services.
Although industry-wide data for 1997 is not currently available, the Company
believes that FATICO was the largest title insurer in the United States, based
on premiums written, and its wholly owned subsidiary, First American Real Estate
Information Services, Inc., was the nation's largest provider of flood zone
determinations, based on the number of flood zone determinations issued, the
nation's largest mortgage credit reporting service, based on the number of
credit reports issued, and the nation's second largest provider of tax
monitoring services, based on the number of loans under service. The Company
also believes that its majority owned subsidiary, First American Home Buyers
Protection Corporation, was one of the largest providers of home warranties in
the United States, based on the number of home protection contracts under
service. The title insurance and real estate information segments operate
through networks of offices nationwide. The Company, through FATICO and its
subsidiaries, transacts the business of title insurance 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 Bahama 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, Utah and Washington. The trust,
banking and thrift businesses operate in Southern California only.
See "The First American Financial Corporation."
THE EXCHANGE OFFERS
Terms of the Home Buyers
Exchange Offer FATICO is offering, upon the terms and
subject to the conditions of the Home
Buyers Exchange Offer, to exchange with
each shareholder of Home Buyers, for each
properly tendered Home Buyers Share, a
number of Shares equal to the quotient of
$36.69 times the number of Home Buyers
Shares tendered by such shareholder, minus
the value of such shareholder's debt to
FATICO to be retired pursuant to the Home
Buyers Exchange Offer (See "Selling
Shareholders"), plus accrued interest
thereon, divided by the closing market
price on the New York Stock Exchange of the
Shares on the trading date immediately
prior to commencement of the Home Buyers
Exchange Offer. See "The Exchange Offers --
Terms of the Exchange Offers."
Terms of the Title Guaranty
Exchange Offer FATICO is offering, upon the terms and
subject to the conditions of the Title
Guaranty Exchange Offer, to exchange with
each shareholder of Title Guaranty, for
each properly tendered Title Guaranty
Share, a number of Shares equal to the
quotient of $2,231.10 times the number of
Title Guaranty Shares tendered by such
shareholder, divided by the closing market
price on the New York Stock Exchange of the
Shares on the trading date immediately
prior to the commencement of the Title
Guaranty Exchange Offer. See "The Exchange
Offers -- Terms of the Exchange Offers."
Purpose of the
Exchange Offers The purpose of the Exchange Offers is for
FATICO to increase its ownership interests
in Home Buyers and Title Guaranty.
Legality The Exchange Offers are conditioned upon
their legality and compliance with the
rules of the Commission. See "The Exchange
Offers -- Legality."
Expiration Date The Expiration Date of the Exchange Offers
will be 5:00 p.m., Pacific Standard Time,
on [__________], 1998, unless one or both
of the Exchange Offers are extended by
FATICO. See "The Exchange Offers --
Expiration Date; Extensions; Amendments."
Procedures for Tendering Shares Each shareholder wishing to accept one or
both Exchange Offers must complete, sign
and date the relevant 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, with the Subsidiary Shares
to be exchanged. See "The Exchange Offer --
Procedures for Tendering Shares." Letters
of Transmittal and certificates
representing Subsidiary Shares should not
be sent to FATICO. 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."
Acceptance of the Subsidiary
Shares and Delivery of
the Shares Subject to the satisfaction or waiver of
the conditions to the Exchange Offers,
FATICO will accept for exchange any and all
Subsidiary Shares which are properly
tendered in the Exchange Offers prior to
the Expiration Date. The Shares issued
pursuant to the Exchange Offers will be
delivered at the earliest practicable date
following the proper tender of the
Subsidiary Shares. See "The Exchange
Offers."
No Fractional Shares No fractional Shares will be distributed
pursuant to the Exchange Offers.
Participants who would otherwise be
entitled to receive a fractional Share will
be paid in cash in lieu of such fractional
share. See "The Exchange Offers -- Terms of
the Exchange Offers."
Certain United States Federal
Income Tax Consequences
of the Exchange Offers For a discussion of certain federal income
tax consequences of the Exchange Offers,
see "Tax Matters."
Exchange Agent First American Trust Company is serving as
the exchange agent (the "Exchange Agent")
for the Exchange Offers. Its telephone
number is (800) 854-3643.
Withdrawal Rights Subject to the conditions set forth herein,
tenders of the Subsidiary Shares may be
withdrawn at any time on or prior to the
Expiration Date. See "The Exchange Offers
-- Withdrawal Rights."
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
The following table sets forth summary historical consolidated
financial and other data for the Company for the five years ended December 31,
1997. The summary is qualified in its entirety by reference to the financial
statements and other information contained in the Company's Annual Report on
Form 10-K for the year ended December 31, 1997, incorporated by reference
herein.
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<CAPTION>
December 31,
------------------------------------------------------------------------------------------------
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
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(Dollars in thousands, except per share data)
INCOME STATEMENT DATA:
Revenues:
Operating revenues $1,379,781 $1,356,946 $1,227,185 $1,571,168 $1,860,205
Investment and other
income 18,645 19,447 23,031 26,398 27,256
---------- ---------- ---------- ---------- ---------
1,398,426 1,376,393 1,250,216 1,597,566 1,887,461
---------- ---------- ---------- ---------- ---------
Expenses:
Salaries and other
personnel costs 397,902 423,328 431,984 531,250 647,750
Premiums retained by
agents 504,375 533,598 413,444 516,593 563,137
Other operating expenses 222,934 232,532 257,823 322,709 411,319
Provision for title losses
and other claims 125,588 110,230 90,387 86,487 90,323
Depreciation and
amortization 16,333 19,796 20,790 27,242 38,149
Interest 4,419 6,267 6,242 4,796 9,994
Minority interest 5,267 2,944 2,132 2,624 3,676
---------- ----------- ----------- --------- ---------
1,276,818 1,328,695 1,222,802 1,491,701 1,764,348
---------- ----------- ----------- --------- ---------
Income before premium and
income taxes 121,608 47,698 27,414 105,865 123,113
Premium taxes 17,617 15,453 13,627 16,676 16,904
--------- --------- --------- --------- --------
Income before income taxes 103,991 32,245 13,787 89,189 106,209
Income taxes 41,900 13,300 6,200 35,600 41,500
--------- --------- --------- --------- --------
Income before cumulative
effect of a change in
accounting for income taxes 62,091 18,945 7,587 53,589 64,709
Cumulative effect of a change
in accounting for income 4,200 -- -- -- --
taxes ---------- ---------- ----------- ---------- ---------
Net income $66,291 $18,945 $7,587 $53,589 $64,709
======= ======= ====== ======= =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
December 31,
---------------------------------------------------------------------------------------------------
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
EARNINGS PER SHARE:*
Basic $3.89 $1.10 $.44 $3.12 $3.73
Diluted $3.89 $1.10 $.44 $3.09 $3.64
BALANCE SHEET DATA:
Cash and invested assets $359,127 $368,999 $340,089 $364,620 $411,014
Total assets $786,448 $828,649 $873,778 $979,794 $1,168,144
Notes and contracts $85,022 $89,600 $77,206 $71,257 $41,973
payable
Guaranteed preferred -- -- -- -- $100,000
beneficial interests in the
Company's junior
subordinated deferrable
interest debentures
Total stockholders' equity $283,718 $292,110 $302,767 $352,465 $411,412
OTHER DATA:
Loss ratio 9.1% 8.1% 7.4% 5.5% 4.9%
Ratio of debt to total
capitalization** 21.5% 22.1% 19.1% 16.0% 7.3%
Ratio of earnings to fixed 24.5 6.1 3.2 19.6 11.6
charges
Cash dividends per share .34 .40 .40 .46 .51
- - ---------------------------------
<FN>
* Based upon the weighted average number of common shares outstanding.
** Capitalization includes minority interests, the Company's junior
subordinated deferrable interest debentures and the Company's senior
debentures.
</FN>
</TABLE>
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus,
investors should consider carefully the following risk factors before making an
investment in the Shares. 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. See "Forward-Looking Statements."
VOLATILITY OF STOCK PRICE
The market price of the Shares could be subject to significant
fluctuations in response to variations in financial results or announcements of
material events by the Company or its competitors. Regulatory changes,
developments in the real estate services industry or changes in general
conditions in the economy or the financial markets could also adversely affect
the market price of the Shares.
CYCLICAL NATURE OF REAL ESTATE MARKET
Substantially all of the Company's title insurance, tax monitoring,
credit reporting, flood zone determination and property information business
results from resales and refinancings of real estate, including residential and
commercial properties, and from the construction and sale of new properties. The
Company's home warranty business results from residential resales and does not
benefit from refinancings or commercial transactions. 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.
RISKS ASSOCIATED WITH ACQUISITION STRATEGY
As a key component of its growth strategy, the Company has pursued and
is pursuing acquisitions in the real estate-related financial services industry.
Certain risks are inherent in an acquisition strategy, such as increasing
leverage and debt service requirements and combining disparate company cultures
and facilities, which could adversely affect the Company's financial position
and operating results. The success of any completed acquisition will depend in
part on the Company's ability to integrate effectively the acquired businesses
into the Company. This process may involve unforeseen difficulties and may
require a disproportionate amount of management's attention and the Company's
financial and other resources. No assurance can be given that additional
suitable acquisition candidates will be identified, financed and purchased on
acceptable terms, or that recent acquisitions or future acquisitions, if
completed, will be successful.
THE SHAREHOLDER RIGHTS PLAN
On October 23, 1997, the Board of Directors of the Company authorized
the implementation of the Shareholder Rights Plan (the "Plan") which is
implemented through the Rights Agreement between the Company and the Wilmington
Trust Company as Rights Agent. The Plan may make a change in control of the
Company more difficult to effect, even if a change in control is in the
shareholders' best interest.
DEPENDENCE ON KEY PERSONNEL
The success of the Company is dependent upon the continued services of
the Company's senior management, particularly its President, Parker S. Kennedy,
its Chairman and Director, D.P. Kennedy, and its Executive Vice President and
Chief Financial Officer, Thomas A. Klemens. The loss of the services of any of
these individuals could have a material adverse effect on the Company's
financial position and results of operations. The Company's success also depends
on its ability to attract and retain other highly qualified managerial
personnel.
YEAR 2000 COSTS
Currently, many computer systems and software products are coded to
accept only two digit entries in the date code field. These date code fields
will need to accept four digit entries to distinguish 21st century dates from
20th century dates. As a result, many companies' software and computer systems
may need to be upgraded or replaced in order to comply with such "Year 2000"
requirements. The Company and third parties with which the Company does business
rely on numerous computer programs in their day to day operations. The Company
is evaluating the Year 2000 issue as it relates to the Company's internal
computer systems and third party computer systems with which the Company
interacts. The Company expects to incur internal staff costs as well as
consulting and other expenses related to these issues; these costs will be
expensed as incurred. In addition, the appropriate course of action may include
replacement or an upgrade of certain systems or equipment at a substantial cost
to the Company. There can be no assurance that the Year 2000 issues will be
resolved in 1998 or 1999. The Company may incur significant costs in resolving
its Year 2000 issues. If not resolved, this issue could have a significant
adverse impact on the Company's operations.
GOVERNMENT REGULATION
The title insurance industry is subject to extensive governmental
regulation. Applicable laws and their interpretation vary from state to state
and are enforced with broad discretion. There can be no assurance that any
review of the Company's operations and business relationships by courts or other
regulatory authorities will not result in determinations that could adversely
affect the Company or that the regulatory environment will not change to
restrict the Company's existing or future operations.
CAPITALIZATION
The following table sets forth the capitalization of the Company and
its subsidiaries, on a consolidated basis, as of December 31, 1997, as adjusted
to give effect to the offering of the Company's senior debentures which was
completed on April 7, 1998, and as adjusted to give effect the offering of
Shares pursuant to the Exchange Offers.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
ACTUAL AS ADJUSTED
------ -----------
(IN THOUSANDS)
<S> <C> <C>
NOTES AND CONTRACTS PAYABLE...................................... $41,973 $36,653
------- -------
SENIOR DEBENTURES*............................................... -- 100,000
-------
MINORITY INTERESTS............................................... 25,214 14,124
------
GUARANTEED PREFERRED BENEFICIAL INTERESTS IN
THE COMPANY'S JUNIOR SUBORDINATED
DEFERRABLE INTEREST DEBENTURES................................ 100,000 100,000
------- -------
SHAREHOLDERS' EQUITY
Common Shares............................................... 61,327 78,154
Retained Earnings........................................... 344,645 344,645
Net Unrealized Gain on Securities........................... 5,440 5,440
-------- -------
Total Shareholders' Equity............................. 411,412 428,239
------- -------
TOTAL CAPITALIZATION............................................. $578,599 $679,016
======== ========
<FN>
* The senior debentures issued and sold on April 7, 1998. The Company has filed a
registration statement on Form S-3 in connection with the issuance and sale of the senior
debentures. See "The First American Financial Corporation -- Recent Developments."
</FN>
</TABLE>
THE FIRST AMERICAN FINANCIAL CORPORATION
OVERVIEW
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 Orange County, 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 whose executive offices are located at 114 East Fifth Street, Santa
Ana, California 92701-4642, and its telephone number is (714) 558-3211.
The Company, through its subsidiaries, is engaged in the business of
providing real estate-related financial and information services to real
property buyers and mortgage lenders. The Company's products and services
include title insurance, tax monitoring, credit reporting, property data
services, flood certification, field inspection services, appraisal services,
mortgage loan servicing systems, mortgage document preparation and home warranty
services. The Company also provides investment, trust and thrift services.
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.
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 issued when a title is transferred.
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.
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 1997, the Company's title insurance
operations generated $1.46 billion in operating revenues.
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, in each case, the largest mortgage
credit reporting company and the largest flood zone determination company, in
the United States.
In general, 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 $45.3 million in pre-tax
profits in 1997 and $331.4 million in operating revenues. Approximately 29% of
the Company's pre-tax profits in 1997 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 mortgage
lenders as to the status of tax payments on real property securing their loans.
The Company's real estate information services also include mortgage and other
credit reporting services, flood zone determinations, mortgage loan servicing
systems, property data services, field inspection services, 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 approximately 12 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 credit
reporting entity, is believed by the Company to be the largest provider of these
services in the United States and processes over 600,000 credit reports per
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 25% of CREDCO's 1997 revenues were from
non-real estate related sources.
The Company is the leading provider of flood zone determinations.
Flood reporting services consist of a broad range of information required by
regulatory agencies regarding properties in relation to flood zones. This
business currently processes over 400,000 flood determinations per month.
The property/field services business consists of processing single
family home inspections, conducting field interviews with delinquent mortgagors,
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. 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 ("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 Strategic
Mortgage Services, Inc., a Delaware Corporation ("SMS"), other than SMS' flood
zone determination 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 the Company believes is
largest mortgage document preparation firm.
On January 1, 1998, the Company and its real estate information
service subsidiaries (other than Excelis Inc.) (the "Real Estate Information
Subsidiaries") consummated a joint venture with Experian Information Solutions,
Inc. ("Experian"), pursuant to which First American Real Estate Solutions LLC
("FARES") was established. Under the joint venture, the Real Estate Information
Subsidiaries contributed substantially all of their assets and liabilities to
FARES in exchange for an 80% ownership interest and Experian transferred
substantially all of the assets and liabilities of its Real Estate Solutions
division ("RES") to FARES in exchange for a 20% ownership interest. The Company
believes that RES is 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. As a result of this
joint venture, the Company believes that FARES is the nation's largest and most
diverse provider of information technology and decision support solutions for
the mortgage and real estate industries. See the Company's Report on Form 8-K
dated January 27, 1998, which is incorporated by reference herein.
HOME WARRANTY
The Company currently owns 79% of its home warranty business First
American Home Buyers Protection Corporation ("Home Buyers"), with the remaining
balance owned by current and former management of this subsidiary. Pursuant to
the Home Buyers Exchange Offer, the Company hopes to acquire an additional 10.6%
ownership interest in Home Buyers. 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 currently operates in certain counties of
Arizona, California, Nevada, North Carolina, South Carolina, Texas, Utah and
Washington. The Company's home warranty business is one of the largest in the
United States based on contracts under service, with $46.9 million in operating
revenues in 1997.
TRUST AND THRIFT
Since 1960, the Company has conducted a general trust business in
Southern California. In 1985, the Company formed a banking subsidiary into which
its subsidiary trust operation was merged. As of December 31, 1997, the trust
operations were administering fiduciary and custodial assets having a market
value in excess of $1.3 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 $20,000 to $1,105,000, with an average loan
balance of $270,500. 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 93% 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, 1997, was 11%. The Thrift's average
loan is 60 months in duration. Current deposits total $62.5 million and the loan
portfolio totals $65.5 million.
RECENT DEVELOPMENTS
On March 18, 1998, the Company announced a definitive agreement to
acquire Contour Software, the largest supplier of mortgage origination software
to the mortgage loan industry. See also the Company's Report on Form 8-K dated
March 18, 1998 and incorporated by reference herein.
On March 31, 1998, the Company announced a definitive agreement to
acquire by merger Data Tree Corporation, a supplier of database management and
document imaging systems to county recorders, governmental agencies and the
title industry. See also the Company's Report on Form 8-K dated March 31, 1998
and incorporated by reference herein.
On April 7, 1998, the Company announced the issuance of $100,000,000
aggregate principal amount of its 7.55% senior debentures due 2028. The terms of
the senior debentures are defined under an indenture dated as of April 7, 1998
between the Company and The Wilmington Trust Company, as trustee. See also the
Company's Report on Form 8-K dated April 7, 1998.
THE EXCHANGE OFFERS
TERMS OF THE EXCHANGE OFFERS
FATICO hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and in the Home Buyers Letter of Transmittal, to
exchange with each shareholder of Home Buyers, for each properly tendered Home
Buyers Share, a number of Shares equal to the quotient of $36.69 times the
number of Home Buyers Shares tendered by such shareholder, minus the value of
such shareholder's debt to FATICO to be retired pursuant to the Home Buyers
Exchange Offer (See "Selling Shareholders"), divided by the closing market price
on the New York Stock Exchange of the Shares on the trading date immediately
prior to the commencement of the Home Buyers Exchange Offer. The Home Buyers
Exchange Offer will commence on the date which this Prospectus and the Home
Buyers Letter of Transmittal is mailed to the holders of Home Buyers Shares.
Furthermore, FATICO hereby offers, upon the terms and subject to the
conditions set forth in this Prospectus and in the Title Guaranty Letter of
Transmittal, to exchange with each shareholder of Title Guaranty, for each
properly tendered Title Guaranty Share, a number of Shares equal to the quotient
of $2,231.10 times the number of Title Guaranty Shares tendered by such
shareholder, divided by the closing market price on the New York Stock Exchange
of the Shares on the trading date immediately prior to the commencement of the
Title Guaranty Exchange Offer. The Title Guaranty Exchange Offer will commence
on the date which this Prospectus and the Title Guaranty Letter of Transmittal
are mailed to the holders of Title Guaranty Shares.
Only whole Shares will be issued pursuant to the Exchange Offers. In
lieu of fractional Shares to which Participant would otherwise be entitled, such
Participant will be paid in cash based on the closing price on the NYSE of the
Shares on the Expiration Date and no certificate or scrip representing a
fractional Share will be issued.
PURPOSE OF THE EXCHANGE OFFERS
The purpose of the Exchange Offers is for FATICO to increase its
ownership interest in Home Buyers and Title Guaranty.
LEGALITY
Notwithstanding any other term of the Exchange Offers, FATICO shall
not be required to accept for exchange, or exchange Shares for, any Subsidiary
Shares, and may terminate either or both of the Exchange Offers before the
acceptance of such Subsidiary Shares, if either or both of the Exchange Offers
violates an applicable law, rule or regulation or an applicable interpretation
of the staff of the Commission (a "Violation"). If FATICO determines in its sole
discretion that a Violation has occurred, FATICO may, with respect to the
effected Exchange Offer(s), (i) refuse to accept any Subsidiary Shares and
return all tendered Subsidiary Shares to the tendering Participants or (ii)
extend the Exchange Offer(s) and retain all Subsidiary Shares tendered prior to
the applicable Expiration Date.
Completion of the Exchange Offers is not conditioned on any minimum or
maximum level of participation by the holders of Subsidiary Shares.
EXPIRATION DATE; EXTENSION; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., Pacific Standard
Time, on [__________], 1998 unless FATICO, in its sole discretion, extends one
or both of the Exchange Offers, in which case, for the purposes of the Exchange
Offer so extended, the term "Expiration Date" shall mean the latest date and
time to which such Exchange Offer is extended.
In order to extend an Exchange Offer, FATICO will notify the Exchange
Agent of any extension by oral or written notice and mail to the registered
holders of Subsidiary Shares an announcement thereof, each prior to 9:00 a.m.,
Pacific Standard Time, on the next business date after the previously scheduled
Expiration Date.
FATICO reserves the right, in its sole discretion, (i) to delay
accepting any Subsidiary Shares, (ii) to extend one or both of the Exchange
Offers or (iii) where a Violation has occurred, to terminate the Exchange
Offer(s) effected thereby, by giving oral or written notice of such delay,
extension or termination to the Exchange Agent. Any such delay in acceptance,
extension or termination will be followed as promptly as practicable by oral or
written notice thereof to the registered holders of the Subsidiary Shares
affected thereby. If one or both of the Exchange Offers is amended in a manner
determined by FATICO to constitute a material change, FATICO will promptly
disclose such amendment by means of a prospectus supplement that will be
distributed to the registered holders of Subsidiary Shares affected by such
amendment, and FATICO will extend the Exchange Offer so amended for a period of
five to ten business days, depending upon the significance of the amendment,
applicable securities laws, and the manner of disclosure to the registered
holders of Subsidiary Shares affected by the amendment, if the amended Exchange
Offer would otherwise expire during such five to ten business day period.
PROCEDURES FOR TENDERING SUBSIDIARY SHARES
Only a registered holder of Subsidiary Shares may tender such
Subsidiary Shares pursuant to the Exchange Offers. To tender Subsidiary Shares
in the Exchange Offers, a Participant must complete, sign and date the relevant
Letter of Transmittal, or facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile to the Exchange Agent at
the address set forth below under "-- Exchange Agent" for receipt prior to the
Expiration Date. In addition, certificates for such Subsidiary Shares must be
received by the Exchange Agent along with the Letter of Transmittal. The tender
by a Participant will constitute an agreement between such Participant and
FATICO in accordance with the terms and subject to the conditions set forth
herein and in the relevant Letter of Transmittal. FATICO shall be deemed to have
accepted validly tendered Subsidiary Shares when, as and if FATICO has given
oral or written notice thereof to the Exchange Agent. The Exchange Agent will
act as agent for the Participants for the purposes of receiving Shares from
FATICO.
THE METHOD OF DELIVERY OF SUBSIDIARY SHARES AND THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK
OF THE PARTICIPANT. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT
PARTICIPANTS USE AN OVERNIGHT OR HAND DELIVERY SERVICE, PROPERLY INSURED. IN ALL
CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE
AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR SUBSIDIARY SHARES
SHOULD BE SENT TO FATICO. PARTICIPANTS MAY REQUEST THEIR RESPECTIVE BROKERS,
DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE
TRANSACTIONS FOR SUCH PARTICIPANTS.
Any beneficial owner(s) of the Subsidiary Shares whose Subsidiary
Shares are registered in the name of a broker, dealer, commercial bank, trust
company or other nominee and who wishes to tender should contact the registered
holder promptly and instruct such registered holder to tender on such beneficial
owner's behalf. If such beneficial owner wishes to tender on such owner's own
behalf, such owner must, prior to completing and executing the Letter of
Transmittal and delivering such owner's Subsidiary Shares, either make
appropriate arrangements to register ownership of the Subsidiary Shares in such
owner's name or obtain a properly completed stock power from the registered
holder. The transfer of registered ownership may take time.
Signatures on a Letter of Transmittal must be guaranteed by an
Eligible Institution (as defined below) unless the Subsidiary Shares tendered
pursuant thereto are tendered (i) by a registered holder who has not completed
the box entitled "Special Delivery Instructions" on the Letter of Transmittal or
(ii) for the account of an Eligible Institution (as defined below). In the event
that signatures on a Letter of Transmittal are required to be guaranteed, such
guarantee must be made by a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the United
States or an "eligible guarantor institution" within the meaning of Rule 17Ad-15
under the Exchange Act which is a member of one of the recognized signature
guarantee programs identified in the Letter of Transmittal (an "Eligible
Institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any Subsidiary Shares listed therein, such Subsidiary
Shares must be endorsed or accompanied by a properly completed stock power,
signed by such registered holder as such registered holder's name appears on
such Subsidiary Shares.
If the Letter of Transmittal or any Subsidiary Shares or stock 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 unless waived by
FATICO, evidence satisfactory to FATICO of their authority to so act must be
submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of tendered Subsidiary Shares will be determined by
FATICO in its sole discretion, which determination will be final and binding.
FATICO reserves the absolute right to reject any and all Subsidiary Shares not
properly tendered or any Subsidiary Shares FATICO's acceptance of which would,
in the opinion of counsel for FATICO, be unlawful. FATICO also reserves the
right to waive any defects, irregularities or conditions of tender as to
particular Subsidiary Shares. FATICO's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Subsidiary Shares must
be cured within such time as FATICO shall determine. Although FATICO intends to
notify holders, of defects or irregularities with respect to tenders of
Subsidiary Shares, neither FATICO, the Exchange Agent nor any other person shall
incur any liability for failure to give such notification. Tenders of Subsidiary
Shares will not be deemed to have been made until such defects or irregularities
have been cured or waived.
While FATICO has no present plan to acquire any Subsidiary Shares
which are not tendered in the Exchange Offer, FATICO reserves the right in its
sole discretion to purchase or make offers for any Subsidiary Shares that remain
outstanding subsequent to the Expiration Date or, to the extent permitted by
applicable law, purchase Subsidiary Shares in privately negotiated transactions
or otherwise. The terms of any such purchases or offers could differ from the
terms of the Exchange Offer.
RETURN OF SUBSIDIARY SHARES
If any tendered Subsidiary Shares are not accepted for any reason set
forth in the terms and conditions of the Exchange Offers, such tendered
Subsidiary Shares will be returned without expense to the tendering holder
thereof as promptly as practicable.
WITHDRAWAL RIGHTS
Tenders of Subsidiary Shares may be withdrawn at any time prior to the
Expiration Date.
In order for a withdrawal to be effective, a written 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
Subsidiary Shares to be withdrawn, the number of Subsidiary Shares to be
withdrawn, and (if certificates for such Subsidiary Shares have been tendered)
the name of the registered holder of the Subsidiary Shares as set forth on the
Subsidiary Shares, if different from that of the person who tendered such
Subsidiary Shares. If Subsidiary Shares have been delivered or otherwise
identified to the Exchange Agent, then prior to the physical release of such
Subsidiary Shares, the tendering holder must submit the certificate numbers
shown on the particular Subsidiary Shares to be withdrawn and the signature on
the notice of withdrawal must be guaranteed by an Eligible Institution.
Withdrawals of tenders of Subsidiary Shares may not be rescinded. Subsidiary
Shares properly withdrawn will not be deemed validly tendered for purposes of
the Exchange Offers, 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 Subsidiary Shares."
All questions as to the validity, form and eligibility (including time
of receipt) of withdrawal notices will be determined by FATICO, in its sole
discretion, whose determination shall be final and binding on all parties.
Neither FATICO or the Exchange Agent, any affiliates or assigns of FATICO 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 Subsidiary Shares that
have been tendered but which are withdrawn will be returned to the holder
thereof promptly after withdrawal.
ACCEPTANCE OF SUBSIDIARY SHARES AND DELIVERY OF SHARES
The Shares issued pursuant to the Exchange Offers will be delivered on
the earliest practicable date following the Expiration Date, assuming all
conditions to the Exchange Offers have been satisfied.
EXCHANGE AGENT
First American Trust Company has been appointed as Exchange Agent for
the Exchange Offers. Questions and requests for assistance, requests for
additional copies of this Prospectus or of the relevant Letter of Transmittal
should be directed to the Exchange Agent addressed as follows:
First American Trust Company
421 North Main Street
Santa Ana, California 92701-4642
Attention: Trust Operations
Telephone: (800) 854-3643
Facsimile: (714) 972-1368
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by FATICO. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone or in person by officers and regular
employees of FATICO and its affiliates.
The cash expenses to be incurred in connection with the Exchange Offer
will be paid by FATICO and are estimated in the aggregate to be approximately
$80,000. Such expenses include registration fees, fees and expenses of the
Exchange Agent, accounting and legal fees and printing costs, among others.
FATICO will pay all transfer taxes, if any, not based on income,
applicable to the exchange of Subsidiary Shares pursuant to the Exchange Offers.
If, however, a transfer tax is imposed for any reason other than the exchange of
the Subsidiary Shares pursuant to the Exchange Offers, then 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 be billed directly to such
tendering holder.
NEITHER THE BOARD OF DIRECTORS NOR ANY OFFICER OR EMPLOYEE OF FATICO
OR THE COMPANY MAKES ANY RECOMMENDATION TO HOLDERS OF SUBSIDIARY SHARES AS TO
WHETHER TO TENDER OR REFRAIN FROM TENDERING ALL OR ANY PORTION OF THEIR
SUBSIDIARY SHARES PURSUANT TO THE EXCHANGE OFFERS. IN ADDITION, NO ONE HAS BEEN
AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION. HOLDERS OF SUBSIDIARY SHARES MUST
MAKE THEIR OWN DECISIONS WHETHER TO TENDER PURSUANT TO THE EXCHANGE OFFERS AND,
IF SO, THE AGGREGATE AMOUNT OF SUBSIDIARY SHARES TO TENDER AFTER READING THIS
PROSPECTUS AND THE RELEVANT LETTER OF TRANSMITTAL AND CONSULTING WITH THEIR
ADVISERS, IF ANY, BASED ON THEIR OWN FINANCIAL POSITION AND REQUIREMENTS.
USE OF PROCEEDS
Neither FATICO nor the Company will receive any of the proceeds from
the resale by the Selling Shareholders of any Shares pursuant hereto. All
proceeds from the sale of the Shares offered hereby will be for the account of
the Selling Shareholders. The Company will bear all expenses (other than selling
discounts and commissions and fees and expenses of the Selling Shareholders) in
connection with the registration of the Shares being reoffered by the Selling
Shareholders.
SELLING SHAREHOLDERS
Assuming that each minority shareholder of Home Buyers and Title
Guaranty exchanges their Home Buyers Shares and Title Guaranty Shares,
respectively, for Shares, the following table sets forth the name of each
Selling Shareholder, the amount of Shares that each Selling Shareholder owned
prior to the date of this Prospectus, as of such date, the amount of Shares to
be offered for the account of each Selling Shareholder pursuant to this
Prospectus and the amount of the Shares to be owned by each Selling Shareholder
after the completion of the offering.
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================-
NUMBER OF
SHARES TO BE SHARES OWNED OF RECORD
SHARES OWNED OF RECORD OFFERED FOR AFTER COMPLETION OF THE
PRIOR TO THE OFFERING THE SELLING OFFERING
SHAREHOLDER'S
NAME OF SELLING SHAREHOLDER ACCOUNT
(HOME BUYERS)
-------------------------------------- --------------------------------------
NUMBER PERCENTAGE NUMBER PERCENTAGE
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Philip Branson 1,900 * 35,555<F1> 37,455 *
- - ------------------------------------------------------------------------------------------------------------------------------------
Martin Wool 375 * 29,647<F2> 30,022 *
- - ------------------------------------------------------------------------------------------------------------------------------------
Gene Merlo 0 * 6,618<F3> 6,618 *
- - ------------------------------------------------------------------------------------------------------------------------------------
Daniel Langston 106 * 3,888<F4> 3,994 *
- - ------------------------------------------------------------------------------------------------------------------------------------
Lawrence Newland 0 * 35,851<F5> 35,851 *
- - ------------------------------------------------------------------------------------------------------------------------------------
Preston Hawkins 0 * 1,143 1,143 *
- - ------------------------------------------------------------------------------------------------------------------------------------
Witnessing Ministries of Christ 0 * 1,168 1,168 *
- - ------------------------------------------------------------------------------------------------------------------------------------
Fuller Theological Seminary 0 * 389 389 *
====================================================================================================================================
- - ------------------------------------------
<FN>
* Less than one percent.
1 Adjusted for the retirement of $48,632,32 of debt owed to FATICO, plus
interest accrued thereon, to be retired pursuant to the Home Buyers
Exchange. Mr. Branson is the Chief Executive Officer and Chairman of the
Board for Home Buyers. Mr. Branson is also a director of FATICO.
2 Adjusted for the retirement of $41,465.00 of debt owed to FATICO, plus
interest accrued thereon, to be retired pursuant to the Home Buyers
Exchange. Mr. Wool is the President, Chief Financial Officer and a member
of the board of directors of Home Buyers.
3 Adjusted for the retirement of $9,271.31 of debt owed to FATICO, plus
interest accrued thereon, to be retired pursuant to the Home Buyers
Exchange. Mr. Merlo is a consultant for Home Buyers. Mr. Merlo previously
served as a member of the board of directors and Senior Vice President for
Home Buyers.
4 Adjusted for the retirement of $5,439.32 of debt owed to FATICO, plus
interest accrued thereon, to be retired pursuant to the Home Buyers
Exchange. Mr. Langston is a Senior Vice President and a member of the board
of directors of Home Buyers.
5 Adjusted for the retirement of $50,183.94 of debt owed to FATICO, plus
interest accrued thereon, to be retired pursuant to the Home Buyers
Exchange.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
NUMBER OF
SHARES TO BE SHARES OWNED OF RECORD
SHARES OWNED OF RECORD OFFERED FOR AFTER COMPLETION OF THE
PRIOR TO THE OFFERING THE SELLING OFFERING
SHAREHOLDER'S
NAME OF SELLING SHAREHOLDER ACCOUNT
(TITLE GUARANTY)
---------------------------------- --------------------------------------
NUMBER PERCENTAGE NUMBER PERCENTAGE
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Richard Pauletich 300 * 13,903<F6> 14,203 *
- - ------------------------------------------------------------------------------------------------------------------------------------
Richard Pauletich, Trustee of the 0 * 6,951 6,951 *
Pauletich 1994 Charitable Remainder
Unitrust
- - ------------------------------------------------------------------------------------------------------------------------------------
Mel Nielsen, Trustee of the Melvin 0 * 20,855<F7> 20,855 *
Nielsen and Helen Nielsen Revocable
Trust
- - ------------------------------------------------------------------------------------------------------------------------------------
Mark Sachau 0 * 20,855<F8> 20,855 *
- - ------------------------------------------------------------------------------------------------------------------------------------
Richard Valenti 0 * 16,510<F9> 16,510 *
- - ------------------------------------------------------------------------------------------------------------------------------------
Dana Parry, Trustee of the Jon 0 * 16,510<F10> 16,510 *
Reynolds and Ann Reynolds
Charitable Remainder Unitrust
- - ------------------------------------------------------------------------------------------------------------------------------------
Lisle Payne and Roslyn Payne, 5,728 * 16,510<F11> 22,238 *
Trustees of the Lisle Payne and
Roslyn Payne Family Trust
- - ------------------------------------------------------------------------------------------------------------------------------------
Peter Bedford, Trustee of the 0 * 16,510<F12> 16,510 *
Grindstone Trust
- - ------------------------------------------------------------------------------------------------------------------------------------
Anthony Varni 0 * 16,510<F13> 16,510 *
- - ------------------------------------------------------------------------------------------------------------------------------------
Dennis O'Brien 312 * 1,216<F14> 1,528 *
- - ------------------------------------------------------------------------------------------------------------------------------------
Steven Bramble 0 * 868<F15> 868 *
- - ------------------------------------------------------------------------------------------------------------------------------------
William Morrish 0 * 695<F16> 695 *
====================================================================================================================================
- - ------------------------------------------
<FN>
* Less than one percent.
6 Mr. Pauletich is the Chairman of the board of directors and Chief
Executive Officer of both Title Guaranty and its subsidiary, First
American Title Guaranty Company. Mr. Pauletich also serves on the
boards of other subsidiaries of Title Guaranty. In addition, Mr.
Pauletich is a Regional Vice President and State Manager for FATICO.
7 Mr. Nielsen is a Vice President of First American Title Guaranty
Company, a subsidiary of Title Guaranty.
8 Mr. Sachau is President and Chief Operations Officer of First American
Title Guaranty Company, a subsidiary of Title Guaranty. Mr. Sachau is
also President of First Guaranty Exchange Company, a subsidiary of
Title Guaranty.
9 Mr. Valenti is a Vice President of First American Title Guaranty, a
subsidiary of Title Guaranty.
10 Jon Reynolds is a member of the board of directors, and the
compensation committee thereof, of Title Guaranty.
11 Rosalyn Payne is a member of the board of directors of the Company, a
member of the finance and long range planning committees thereof, and a
member of the boards of directors of Title Guaranty and FATICO.
12 Peter Bedford is a member of the board of directors of Title Guaranty.
13 Mr. Varni is a member of the board of directors, and the audit
committee thereof, of Title Guaranty.
14 Mr. O'Brien is a member of the board of directors, and the audit
committee thereof, of Title Guaranty.
15 Mr. Bramble is the Chief Financial Officer of both Title Guaranty and
its subsidiary, First American Title Guaranty Company. Mr. Bramble also
serves on the boards of directors of certain subsidiaries of Title
Guaranty.
16 Mr. Morrish is retired and formerly was the Chairman of the Board of
both Title Guaranty and its subsidiary, First American Title Guaranty
Company.
</FN>
</TABLE>
<PAGE>
PLAN OF DISTRIBUTION
The Shares covered by this Prospectus may be offered and sold from
time to time by the Selling Shareholders. The Selling Shareholders will act
independently of the Company in making decisions with respect to the timing,
manner and size of each sale. The Selling Shareholders may sell the Shares being
offered hereby on the New York Stock Exchange, or otherwise, at prices and under
terms then prevailing or at prices related to the then current market price, at
varying prices or at negotiated prices. The Shares may be sold, without
limitation, by one or more of the following means of distribution: (a) a block
trade in which the broker-dealer so engaged will attempt to sell Shares as
agent, but may position and resell a portion of the block as principal to
facilitate the transaction; (b) purchases by a broker-dealer as principal and
resale by such broker-dealer for its own account pursuant to this Prospectus;
(c) a distribution in accordance with the rules of the New York Stock Exchange;
(d) ordinary brokerage transactions and transactions in which the broker
solicits purchasers; and (e) in privately negotiated transactions. To the extent
required, this Prospectus may be amended and supplemented from time to time to
describe a specific plan of distribution.
In connection with distributions of the Shares or otherwise, the
Selling Shareholders may enter into hedging transactions with broker-dealers or
other financial institutions. In connection with such transactions,
broker-dealers or other financial institutions may engage in short sales of the
Shares in the course of hedging the positions they assume with Selling
Shareholders. The Selling Shareholders may also sell the Shares short and
deliver the Shares offered hereby to close out such short positions. The Selling
Shareholders may also enter into option or other transactions with
broker-dealers or other financial institutions which require the delivery to
such broker-dealer or other financial institution of Shares offered hereby,
which Shares such broker-dealer or other financial institution may resell
pursuant to this Prospectus (as supplemented or amended to reflect such
transaction). The Selling Shareholders may also pledge Shares to a broker-dealer
or other financial institution, and, upon a default, such broker-dealer or other
financial institution, may effect sales of the pledged Shares pursuant to this
Prospectus (as supplemented or amended to reflect such transaction). In
addition, any Shares that qualify for sale pursuant to Rule 144 may, at the
option of the holder thereof, be sold under Rule 144 rather than pursuant to
this Prospectus.
Any broker-dealer participating in such transactions as agent may
receive commissions from the Selling Shareholder and/or purchasers of the Shares
offered hereby (and, if it acts as agent for the purchaser of such Shares, from
such purchaser). Usual and customary brokerage fees will be paid by the Selling
Shareholder. Broker-dealers may agree with the Selling Shareholder to sell a
specified number of Shares at a stipulated price per Share, and, to the extent
such a broker-dealer is unable to do so acting as agent for the Selling
Shareholder, to purchase as principal any unsold Shares at the price required to
fulfill the broker-dealer commitment to the Selling Shareholder. Broker-dealers
who acquire Shares as principal may thereafter resell such Shares from time to
time in transactions (which may involve cross and block transactions and which
may involve sales to and through other broker-dealers, including transactions of
the nature described above) in the market, in negotiated transactions or
otherwise at market prices prevailing at the time of sale or at negotiated
prices, and in connection with such resales may pay to, or receive from the
purchasers of such Shares commissions computed as described above.
In order to comply with the securities laws of certain states, if
applicable, the Shares will be sold in such jurisdictions only though registered
or licensed brokers or dealers. In addition, in certain states the Shares may
not be sold unless they have been registered or qualified for sale in the
applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
The Company has advised the Selling Shareholders that the
anti-manipulation rules of Regulation M under the Exchange Act may apply to
sales of Shares in the market and to the activities of the Selling Shareholders
and their affiliates. In addition, the Company will make copies of this
Prospectus available to the Selling Shareholders and has informed them of the
need for delivery of copies of this Prospectus to purchasers at or prior to the
time of any sale of the Shares offered hereby. The Selling Shareholders may
indemnify any broker-dealer that participates in transactions involving the sale
of the Shares against certain liabilities, including liabilities arising under
the Securities Act.
At the time a particular offer of Shares is made, if required, a
Prospectus Supplement will be distributed that will set forth the number of
Shares being offered and the terms of the offering, including the name of any
underwriter, dealer or agent, the purchase price paid by any underwriter, any
discount, commission and other item constituting compensation, any discount,
commission or concession allowed or reallowed or paid to any dealer, and the
proposed selling price to the public.
The Company has agreed with the Selling Shareholders to keep the
Registration Statement of which this Prospectus constitutes a part effective
until the first to occur of (i) May 8, 1998 and (ii) such time as none of the
Selling Shareholders holds any Shares received in the Exchange Offers. The
Company intends to deregister any of the Shares not sold by the Selling
Shareholders by such date.
COMPARISON OF COMPANY SHAREHOLDERS' RIGHTS AND
HOME BUYERS SHAREHOLDERS' RIGHTS
The Company and Home Buyers are both organized under the laws of the
State of California. Any differences, therefore, between the rights of
shareholders of the Company and the rights of shareholders of Home Buyers arise
solely from differences between the respective articles of incorporation and
bylaws of the two corporations.
The following summary sets forth certain material differences between
the rights of Company shareholders and the rights of Home Buyers shareholders
and is qualified in its entirety by reference to the Company's Restated Articles
of Incorporation (the "Articles"), the Company's Bylaws (the "Bylaws"), Home
Buyers' Articles of Incorporation (the "Home Buyers' Articles") and Home Buyers'
Bylaws (the "Home Buyers Bylaws").
AUTHORIZED AND ISSUED CAPITAL STOCK
The authorized capital stock of the Company currently consists of
36,000,000 Shares and 500,000 Preferred shares, $1.00 par value (the "Preferred
Shares") of which 1,000 of such shares have been designated Series A Junior
Participating Preferred Shares (the "Series A Preferred Shares"). As of March 5,
1998, 17,850,189 Shares were issued and outstanding and no Preferred Shares were
issued and outstanding. The authorized capital stock of Home Buyers currently
consists of 5,000,000 Home Buyers Shares. As of December 31, 1997, 1,947,700
Home Buyers Shares were issued and outstanding.
VOTING RIGHTS
Each Share entitles its holder to one vote on all matters submitted to a
vote of the Company's shareholders. Each Series A Preferred Share would entitle
its holder to 100,000 votes on all matters submitted to a vote of the Company's
shareholders. Each Home Buyers Share entitles its holder to one vote on all
matters submitted to a vote of Home Buyers' shareholders. FATICO owns
approximately 79% of the issued and outstanding Home Buyers Shares and
effectively controls the voting of the shareholders of Home Buyers.
PREEMPTIVE RIGHTS; CUMULATIVE VOTING
Neither the Articles nor the Home Buyers Articles grants any
preemptive rights to shareholders. Subject to certain conditions, both the
Bylaws and the Home Buyers Bylaws provide for cumulative voting during the
election of directors.
ACTION BY WRITTEN CONSENT OF SHAREHOLDERS
Subject to identical limitations, both the Bylaws and the Home Buyers
Bylaws provide that actions which may be taken at an annual or special meeting
of shareholders may be taken without such meeting and without prior notice, if a
consent in writing setting forth the action so taken is signed by the holders of
outstanding shares having not less than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted.
SPECIAL MEETINGS OF SHAREHOLDERS
Both the Bylaws and the Home Buyer Bylaws state that a special meeting
of the shareholders may be called at any time by the board of directors, the
chairman of the board, the president, or by one or more shareholders holding
shares in the aggregate entitled to cast not less than 10% of the votes at that
meeting.
QUORUM AND VOTING REQUIREMENTS FOR SHAREHOLDER MEETINGS
Both the Bylaws and the Home Buyer Bylaws state that a majority of the
shares entitled to vote at a meeting shall constitute a quorum for the
transaction of business at such meeting. If a quorum is present, the affirmative
vote of the majority of shares represented at the meeting and entitled to vote
on any matter (other than the election of directors) is required to take action,
unless the vote of a greater number or voting by classes is required by
California General Corporation Law. Directors are elected by a plurality of
shares entitled to vote at the meeting subject to cumulative voting described
above.
BOARD OF DIRECTORS
The Company board of directors currently consists of 16 directors who
serve for one-year terms. The number of directors on the Company board of
directs is subject to change by action of the Company's board of directors or by
the Company's shareholders, but cannot be less than nine (9) nor more than
seventeen (17). The Home Buyers board of directors consists of 5 directors who
serve for one-year terms. The number of directors on the Home Buyers board of
directors is subject to change by action of the Home Buyers board of directors
or by Home Buyers' shareholders but cannot be less than five (5) nor more than
nine (9).
VACANCIES
Subject to identical conditions, both the Bylaws and the Home Buyers
Bylaws provide that vacancies in the board of directors may be filled by a
majority of the remaining directors, though less than a quorum, or by a sole
remaining director.
LIMITATION ON DIRECTORS' LIABILITY
The Articles provide that the liability of directors of the Company
for monetary damages be eliminated to the fullest extent permissible under law.
The Home Buyers Articles provide that the liability of directors for monetary
damages be eliminated to the fullest extent permissible under California law.
REMOVAL OF DIRECTORS
Neither the Articles nor the Bylaws contain provisions relating to the
removal of directors. Neither the Home Buyers Articles nor the Home Buyers
Bylaws contain provisions relating to the removal of directors. Therefore, under
the California General Corporation Law, a director of a corporation may be
removed from office at any time with or without cause.
INDEMNIFICATION
The Bylaws provide that (i) the Company indemnify its Officers and
Directors to the fullest extent permitted by law, including those circumstances
in which indemnification would otherwise be discretionary; (ii) the Company 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 Company
may not retroactively amend the indemnification provisions in the Bylaws 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.
Indemnification of Agents of the corporation who are not its Officers
and Directors shall be in accordance with the provisions of Section 317 of the
Corporations Code of California.
The corporation may enter into indemnification agreements with its
Directors, Officers and other Agents upon such terms and conditions as are
deemed to be in the best interests of the corporation by its board of directors.
The other provisions of the Bylaws to the contrary notwithstanding,
the Company is not obligated:
(a) to indemnify or advance expenses to an Officer, Director or
Agent with respect to proceedings or claims initiated or brought
voluntarily by such Officer, Director or Agent and not by way of
defense, except with respect to proceedings brought to establish or
enforce a right to indemnification under an indemnification agreement
or any statute or law or otherwise as required under Section 317 of
the Corporations Code of California, but such indemnification or
advancement of expenses may be provided by the corporation in specific
cases if the board of directors has approved the bringing of such
suit;
(b) to indemnify an Officer, Director or Agent for any expenses
incurred with respect to any proceeding instituted by such Officer,
Director or Agent to enforce or interpret provisions of an indemnity
agreement or this Section of the Bylaws, if a court of competent
jurisdiction determines that each of the material assertions made by
the Officer, Director or Agent in such proceeding was not made in good
faith or was frivolous;
(c) to indemnify an Officer, Director or Agent for expenses or
liabilities of any type whatsoever (including, but not limited to,
judgments, fines, ERISA excise taxes or penalties, and amounts paid in
settlement) which have been paid or satisfied by an insurance carrier
under a policy of officers' and directors' liability insurance
maintained by the corporation; provided that the corporation shall be
obligated to remit to the Officer, Director or Agent any insurance
proceeds received in respect of expenses or liabilities previously
paid or satisfied by such Officer, Director or Agent;
(d) to indemnify an Officer, Director or Agent for expenses,
judgments, fines or penalties sustained, or for an accounting of
profits made from, the purchase and sale by such Officer, Director or
Agent of securities of the corporation in violation of the provisions
of Section 16(b) of the Securities Exchange Act of 1934, as amended,
the rules and regulations promulgated thereunder, any amendments
thereto or any similar provisions of any federal, state or local
statutory law; or
(e) in the event a court of competent jurisdiction finally
determines that such indemnification is unlawful.
The term "Officer" as used in this Section of the Bylaws is defined as
each person who is, or was, appointed to the office of Chairman of the Board,
President, Vice President, Secretary, Assistant Secretary, Chief Financial
Officer Treasurer, Assistant Treasurer, and such other office of the corporation
as the board shall designate from time to time. The term "Director" as used in
this Section of the Bylaws is defined as any person who is, or was, appointed to
serve on the board of directors either by the shareholders or the remaining
board members. The term "Agent" as used in this Section of the Bylaws is defined
as having the same meaning as that set forth in Section 317(a) of the
Corporations Code of California, except that it shall not include Officers and
Directors.
The Home Buyers Bylaws provide that Home Buyers shall, to the maximum
extent permitted by the California General Corporation Law, indemnify each of
its directors and officers against expenses, judgments, fines, settlements and
other amounts actually and reasonably incurred in connection with any proceeding
arising by reason of the fact any such person is or was a director or officer of
Home Buyers and shall advance to such director or officer expenses incurred in
defending any such proceeding to the maximum extent permitted by such law. For
the purposes of the article pertaining to indemnification, the Home Buyers
Bylaws include in the definitions of "director" and "officer" of Home Buyers any
person who is or was a director or officer of Home Buyers, or is or was serving
at the request of Home Buyers as a director or officer of a corporation which
was a predecessor corporation of Home Buyers or of another enterprise at the
request of such predecessor corporation. The board of directors of Home Buyers
may in its discretion provide by resolution for such indemnification of, or
advance of expenses to, other agents of the corporation, and likewise may refuse
to provide for such indemnification or advance of expenses except to the extent
such indemnification is mandatory under the California General Corporation Law.
AMENDMENTS TO ARTICLES OF INCORPORATION OR BYLAWS
Neither the Articles nor the Home Buyers Articles specifies the
approvals necessary to amend the Articles and the Home Buyers Articles,
respectively. Therefore, under the California General Corporation Law, any
amendment to the Articles or the Home Buyers Articles must be approved by a
majority of the outstanding Shares or Home Buyers Shares, respectively. Both the
Bylaws and the Home Buyers Bylaws provide for adoption of new bylaws, and for
their respective amendment or repeal by the vote or written consent of holders
of a majority of the outstanding shares entitled to vote; provided, however,
that the authorized number of directors may be changed only by an amendment to
the relevant articles of incorporation. Both the Bylaws and the Home Buyers
Bylaws provide for adoption of new bylaws, and for their respective amendment or
appeal by the board of directors, provided, however, that the board of directors
may adopt a bylaw or amendment thereof changing the authorized number of
directors only for the purpose of fixing the exact number of directors within
the limits specified in the relevant articles or bylaws.
RIGHTS TO PURCHASE PREFERRED STOCK
Each Share has attached to it a right which, subject to the terms and
conditions of the Rights Agreement (the "Rights Agreement") between the Company
and Wilmington Trust Company, dated October 23, 1997, entitles the holder to
purchase a fraction of a Preferred Share upon the occurrence of certain events
which are defined in the Rights Agreement. As of the date of this Prospectus,
such rights are not exerciseable. See the description of Rights to Purchase
Series A Junior Participating Preferred Shares contained in the Company's
Registration Statement on Form 8-A, dated November 7, 1997, and incorporated by
reference herein.
COMPARISON OF COMPANY SHAREHOLDERS' RIGHTS AND
TITLE GUARANTY SHAREHOLDERS' RIGHTS
The Company and Title Guaranty are both organized under the laws of
the State of California. Any differences, therefore, between the rights of
shareholders of the Company and the rights of shareholders of Title Guaranty
arise solely from differences between the respective articles of incorporation
and bylaws of the two corporations.
The following summary sets forth certain material differences between
the rights of Company shareholders and the rights of Title Guaranty shareholders
and is qualified in its entirety by reference to the Company's Restated Articles
of Incorporation (the "Articles"), the Company's Bylaws (the "Bylaws"), Title
Guaranty's Articles of Incorporation (the "Title Guaranty's Articles") and Title
Guaranty's Bylaws (the "Title Guaranty Bylaws").
AUTHORIZED AND ISSUED CAPITAL STOCK
The authorized capital stock of the Company currently consists of
36,000,000 Shares and 500,000 Preferred Shares, of which 1,000 have been
designated Series A Preferred Shares. As of March 5, 1998, 17,850,189 Shares
were issued and outstanding and no Preferred Shares were issued and outstanding.
The authorized capital stock of Title Guaranty currently consists of 1,000,000
Title Guaranty Shares. As of December 31, 1997, 21,308 Title Guaranty Shares
were issued and outstanding.
VOTING RIGHTS
Each Share entitles its holder to one vote on all matters submitted to
a vote of the Company's shareholders. Each Preferred Share would entitle its
holder to 100,000 votes on all matters submitted to a vote of the Company's
shareholders. Each Title Guaranty Share entitles its holder to one vote on all
matters submitted to a vote of Title Guaranty's shareholders. FATICO owns over
80% of the issued and outstanding Title Guaranty Shares and effectively controls
the voting of the shareholders of Title Guaranty.
PREEMPTIVE RIGHTS; CUMULATIVE VOTING
Neither the Articles nor the Title Guaranty Articles grants any
preemptive rights to shareholders. Subject to certain conditions, both the
Bylaws and the Home Buyers Bylaws provide for cumulative voting during the
election of directors.
ACTION BY WRITTEN CONSENT OF SHAREHOLDERS
Subject to substantially similar limitations, both the Bylaws and the
Title Guaranty Bylaws provide that actions which may be taken at an annual or
special meeting of shareholders may be taken without such meeting and without
prior notice, if a consent in writing setting forth the action so taken is
signed by the holders of outstanding shares having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted.
SPECIAL MEETINGS OF SHAREHOLDERS
The Bylaws state that a special meeting of the shareholders may be
called at any time by the board of directors, the chairman of the board, the
president, or by one or more shareholders holding shares in the aggregate
entitled to cast not less than 10% of the votes at that meeting.
The Title Guaranty Bylaws state that a special meeting of the
shareholders may be called at any time by the board of directors, the chairman
of the board, the president, the vice president, or by one or more shareholders
holding Shares in the aggregate entitle to cast not less than 10% of the votes
at that meeting.
QUORUM AND VOTING REQUIREMENTS FOR SHAREHOLDER MEETINGS
The Bylaws state that a majority of the shares entitled to vote at a
meeting shall constitute a quorum for the transaction of business at such
meeting. If a quorum is present, the affirmative vote of the majority of shares
represented at the meeting and entitled to vote on any matter (other than the
election of directors) is required to take action, unless the vote of a greater
number or voting by classes is required by California General Corporation Law.
Company directors are elected by a plurality of shares entitled to vote at the
meeting subject to cumulative voting described above.
The Title Guaranty Bylaws state that the presence in person or by
proxy of the persons entitled to vote a majority of the voting shares at any
meeting constitutes a quorum for the transaction of business. Shares shall not
be counted to make up a quorum for a meeting if the voting of them at the
meeting has been enjoined or for any reason they cannot be lawfully voted at the
meeting. The Title Guaranty Bylaws are silent as to what number of shares is
required to take action and thus Section 602 of the California General
Corporation Law applies, which Section provides that the affirmative vote of a
majority of the shares represented and voting at a duly held meeting at which a
quorum is present shall be the act of the shareholders. Directors are elected by
a plurality of shares entitled to vote at the meeting subject to cumulative
voting described above.
BOARD OF DIRECTORS
The Company board of directors currently consists of 16 directors who
serve for one-year terms. The number of directors on the Company board of
directs is subject to change by action of the Company's board of directors or by
the Company's shareholders, but cannot be less than nine (9) nor more than
seventeen (17). The Title Guaranty Bylaws provide that the number of directors
on the Title Guaranty board of directors shall be not less than 8 but not more
than 15, with the exact number of directors to be fixed, within those limits, by
the board of directors. Title Guaranty currently has 15 directors.
VACANCIES
Subject to identical conditions, both the Bylaws and the Title
Guaranty Bylaws provide that vacancies in the board of directors may be filled
by a majority of the remaining directors, though less than a quorum, or by a
sole remaining director.
LIMITATION ON DIRECTORS' LIABILITY
The Articles provide that the liability of directors of the Company
for monetary damages be eliminated to the fullest extent permissible under law.
The Title Guaranty Articles provide that the liability of directors for monetary
damages be eliminated to the fullest extent permissible under California law.
REMOVAL OF DIRECTORS
Neither the Articles nor the Bylaws contain provisions relating to the
removal of directors. Therefore, under the California General Corporation Law, a
Company director of a corporation may be removed from office at any time with or
without cause.
The Title Guaranty Bylaws provide that directors may be removed by a
vote of the shareholders holding a majority of the outstanding shares entitled
to vote at an election of directors. Unless the entire Title Guaranty board of
directors is removed, an individual director shall not be removed if the votes
cast against removal, or not consenting in writing, would be sufficient to elect
such director if voted cumulatively at an election at which the same total
number of votes were cast (or, if such actions is taken by written consent, all
shares entitled to vote were voted) and the entire number of directors
authorized at the time of the directors' most recent election were being
elected.
INDEMNIFICATION
The Bylaws provide that (i) the Company indemnify its Officers and
Directors to the fullest extent permitted by law, including those circumstances
in which indemnification would otherwise be discretionary; (ii) the Company 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 Company
may not retroactively amend the indemnification provisions in the Bylaws 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.
Indemnification of Agents of the corporation who are not its Officers
and Directors shall be in accordance with the provisions of Section 317 of the
Corporations Code of California.
The corporation may enter into indemnification agreements with its
Directors, Officers and other Agents upon such terms and conditions as are
deemed to be in the best interests of the corporation by its board of directors.
The other provisions of the Bylaws to the contrary notwithstanding,
the Company is not obligated:
(a) to indemnify or advance expenses to an Officer, Director
or Agent with respect to proceedings or claims initiated or brought
voluntarily by such Officer, Director or Agent and not by way of
defense, except with respect to proceedings brought to establish or
enforce a right to indemnification under an indemnification agreement
or any statute or law or otherwise as required under Section 317 of the
Corporations Code of California, but such indemnification or
advancement of expenses may be provided by the corporation in specific
cases if the board of directors has approved the bringing of such suit;
(b) to indemnify an Officer, Director or Agent for any
expenses incurred with respect to any proceeding instituted by such
Officer, Director or Agent to enforce or interpret provisions of an
indemnity agreement or this Section of the Bylaws, if a court of
competent jurisdiction determines that each of the material assertions
made by the Officer, Director or Agent in such proceeding was not made
in good faith or was frivolous;
(c) to indemnify an Officer, Director or Agent for expenses
or liabilities of any type whatsoever (including, but not limited to,
judgments, fines, ERISA excise taxes or penalties, and amounts paid in
settlement) which have been paid or satisfied by an insurance carrier
under a policy of officers' and directors' liability insurance
maintained by the corporation; provided that the corporation shall be
obligated to remit to the Officer, Director or Agent any insurance
proceeds received in respect of expenses or liabilities previously paid
or satisfied by such Officer, Director or Agent;
(d) to indemnify an Officer, Director or Agent for expenses,
judgments, fines or penalties sustained, or for an accounting of
profits made from, the purchase and sale by such Officer, Director or
Agent of securities of the corporation in violation of the provisions
of Section 16(b) of the Securities Exchange Act of 1934, as amended,
the rules and regulations promulgated thereunder, any amendments
thereto or any similar provisions of any federal, state or local
statutory law; or
(e) in the event a court of competent jurisdiction finally
determines that such indemnification is unlawful.
The term "Officer" as used in this Section of the Bylaws is defined as
each person who is, or was, appointed to the office of Chairman of the Board,
President, Vice President, Secretary, Assistant Secretary, Chief Financial
Officer Treasurer, Assistant Treasurer, and such other office of the corporation
as the board shall designate from time to time. The term "Director" as used in
this Section of the Bylaws is defined as any person who is, or was, appointed to
serve on the board of directors either by the shareholders or the remaining
board members. The term "Agent" as used in this Section of the Bylaws is defined
as having the same meaning as that set forth in Section 317(a) of the
Corporations Code of California, except that it shall not include Officers and
Directors.
The Title Guaranty Bylaws provide that Title Guaranty shall, to the
maximum extent permitted by the California General Corporation Law, indemnify
each of its agents against expenses, judgments, fines, settlements and other
amounts actually and reasonably incurred in connection with any proceeding
arising by reason of the fact any such person is or was an agent of Title
Guaranty. For the purposes of the article pertaining to indemnification, the
Title Guaranty Bylaws, the term "agent" includes any person who is or was a
director, officer, employee, or other agent of Title Guaranty, or is or was
serving at the request of Title Guaranty as a director or officer of a
corporation, partnership, joint venture, trust, or other enterprise, or agent of
a corporation which was a predecessor corporation of Title Guaranty or of
another enterprise at the request of such predecessor corporation.
AMENDMENTS TO ARTICLES OF INCORPORATION OR BYLAWS
Neither the Articles nor the Title Guaranty Articles specifies the
approvals necessary to amend the Articles and the Title Guaranty Articles,
respectively. Therefore, under the California General Corporation Law, any
amendment to the Articles or the Title Guaranty Articles must be approved by a
majority of the outstanding Shares or Title Guaranty Shares, respectively.
Both the Bylaws and the Title Guaranty Bylaws provide for adoption of
new bylaws, and for their respective amendment or repeal by the vote or written
consent of holders of a majority of the outstanding shares entitled to vote;
provided, however, that the Company's Bylaws provides that the authorized number
of directors may be changed only by an amendment to the relevant articles of
incorporation. Both the Bylaws and the Title Guaranty Bylaws provide for
adoption of new bylaws, and for their respective amendment or appeal by the
board of directors, provided, however, that the board of directors may adopt a
bylaw or amendment thereof changing the authorized number of directors only for
the purpose of fixing the exact number of directors within the limits specified
in the relevant articles or bylaws.
RIGHTS TO PURCHASE PREFERRED STOCK
Each Share has attached to it a right which, subject to the terms and
conditions of the Rights Agreement between the Company and Wilmington Trust
Company, dated October 23, 1997, entitles the holder to purchase a fraction of a
Preferred Share upon the occurrence of certain events which are defined in the
Rights Agreement. As of the date of this Prospectus, such rights are not
exerciseable. See the description of Rights to Purchase Series A Junior
Participating Preferred Shares contained in the Company's Registration Statement
on Form 8-A, dated November 7, 1997, and incorporated by reference herein.
TAX MATTERS
The following is a general discussion of certain U.S. federal income tax
consequences of the Exchange Offers. Except as specifically noted, this
discussion applies only to U.S. Holders (as defined herein). Further, this
discussion applies only to U.S. Holders that hold Subsidiary Shares as capital
assets and does not address aspects of U.S. federal income tax law that may be
applicable to shareholders that are subject to special tax rules, including,
without limitation, insurance companies, tax-exempt organizations, financial
institutions, dealers or traders in securities or currencies, persons who
received stock in a subsidiary of the Company pursuant to an employee stock
option or rights plan or otherwise as compensation, persons who hold Subsidiary
Shares as a position in a "straddle" or as part of a "hedging," or "conversion"
transaction for U.S. federal income tax purposes, persons that have a
"functional currency" other than the U.S. dollar and Non-U.S. Holders (as
defined herein). This summary does not address state, local or foreign tax
consequences that may be applicable. Consequently, each Participant should
consult such Participant's own tax advisor as to the specific tax consequences
of the Exchange Offers to such Participant.
This summary is based on the Internal Revenue Code of 1986, as amended
to the date hereof (the "Code"), administrative pronouncements, judicial
decisions and existing and proposed U.S. Treasury Regulations, in each case as
currently in effect and available on the date hereof, changes to any of which
subsequent to the date of this Prospectus may affect the tax consequences
described herein (possibly retroactively). Moreover, no rulings have been or
will be sought from the Internal Revenue Service (the "IRS") with respect to the
transaction described herein. Accordingly there can be no assurance that the IRS
will not challenge the transaction described herein or that a court will not
sustain such challenge.
For purposes of this discussion, a "U.S. Holder" means a holder of
Subsidiary Shares that for U.S. federal income tax purposes is (i) a citizen or
resident of the United States, (ii) a partnership or corporation organized in or
under the laws of the United States or any state thereof (including the District
of Columbia), (iii) an estate the income of which is subject to U.S. federal
income taxation regardless of its source, or (iv) a trust if (x) a court within
the United States is able to exercise primary supervision over the
administration of the trust and (y) one or more United States persons have the
authority to control all substantial decisions of the trust. Notwithstanding the
preceding sentence, to the extent provided in U.S. Treasury Regulations, certain
trusts in existence on August 20, 1996, and treated as U.S. persons prior to
such date, that elect to continue to be treated as U.S. persons will also be
treated as U.S. Holders. A Non-U.S. Holder is a holder of Subsidiary Shares that
is not a U.S. Holder.
THE HOME BUYERS EXCHANGE OFFER
The Home Buyers Exchange Offer will constitute a taxable transaction for
U.S. federal income tax purposes and a U.S. Holder participating therein will
recognize gain or loss for U.S. federal income tax purposes in an amount equal
to the difference, if any, between the total of the amount of cash received and
the fair market value of Shares received pursuant to the Home Buyers Exchange
Offer, and such U.S. Holder's adjusted tax basis in its Subsidiary Shares. Any
such gain or loss will be 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 its
Subsidiary Shares exceeds one year and will be further reduced if its Subsidiary
Shares were held for more than eighteen months.
THE TITLE GUARANTY EXCHANGE OFFER
FATICO believes that the Title Guaranty Exchange offer should qualify as a
stock-for-stock reorganization for U.S. federal income tax purposes pursuant to
Section 368(a)(1)(B) of the Code. However, due to prior acquisitions by FATICO
of Title Guaranty Shares, the IRS might assert that the Title Guaranty Exchange
is a taxable transaction. IF THE TITLE GUARANTY EXCHANGE OFFER DOES NOT QUALIFY
AS A REORGANIZATION FOR U.S. FEDERAL INCOME TAX PURPOSES, THE TITLE GUARANTY
EXCHANGE OFFER WILL BE A TAXABLE TRANSACTION AND PARTICIPANTS THEREIN WILL
RECEIVE THE SAME TAX TREATMENT AS PARTICIPANTS IN THE HOME BUYERS EXCHANGE
OFFER, WHICH TREATMENT IS DISCUSSED IN THE PRECEDING PARAGRAPH. If the Title
Guaranty Exchange Offer qualifies as a reorganization for U.S. federal income
tax purposes:
(i) no gain or loss will be recognized by a U.S. Holder upon the
exchange pursuant to the Title Guaranty Exchange Offer of such Subsidiary Shares
solely for Shares, except with respect to the receipt of cash in lieu of
fractional Shares;
(ii) the aggregate adjusted tax basis of Shares received pursuant to
the Title Guaranty Exchange Offer by a U.S. Holder (including fractional Shares
deemed received and redeemed as described below) will be the same as the
aggregate adjusted tax basis of the Subsidiary Shares exchanged therefore,
increased by gain recognized by the U.S. Holder and reduced by the amount of
cash and the fair market value of any other property received by the U.S. Holder
in the Title Guaranty Exchange Offer;
(iii) the holding period of Shares received pursuant to the Title
Guaranty Exchange Offer by a U.S. Holder (including fractional Shares deemed
received and redeemed as described below) will include the holding period of the
Subsidiary Shares exchanged therefore; and
(iv) a U.S. Holder who receives cash in lieu of fractional Shares will
be treated as having received such fractional Shares and then as having received
such cash in redemption of such fractional Shares. Under Section 302 of the
Code, provided such fractional Shares would have constituted a capital asset in
the hands of such holder and provided such deemed redemption is "substantially
disproportionate" with respect to such holder or is "not essentially equivalent
to a dividend" after giving effect to the constructive ownership rules of the
Code, such U.S. Holder will generally recognize capital gain or loss equal to
the difference between the amount of cash received and the holder's adjusted tax
basis in such fractional Shares.
THE SHARES
Distributions of cash or property (other than Shares, if any, distributed
pro rata to all shareholders of the Company) generally will be includible in
ordinary income by a U.S. Holder in accordance with such U.S. Holder's method of
tax accounting, to the extent such distributions are made from the current or
accumulated earnings and profits of the Company. Such dividends will be eligible
for the dividends received deduction generally allowed to corporate U.S.
Holders. The dividends received deduction is subject to certain limitations,
though, and the benefit of such deduction may be reduced by the corporate
alternate minimum tax. Corporate U.S. Holders should consult their own tax
advisors regarding the availability of, and limitations on, the dividends
received deduction. To the extent, if any, that the amount of any distribution
by the Company exceeds the Company's current and accumulated earnings and
profits, it will be treated first as a tax-free return of the U.S. Holder's tax
basis in the Shares and thereafter as capital gain. Upon the sale, exchange or
redemption of Shares, a U.S. Holder generally will recognize taxable gain or
loss equal to the difference between the amount realized and such holder's
adjusted tax basis. Such gain or loss will be capital gain or loss, provided
that the U.S. Holder holds such Shares as a capital asset. 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 Stock exceeds one year and will be further reduced if such
Shares were held for more than 18 months.
BACKUP WITHHOLDING TAX AND INFORMATION REPORTING REQUIREMENTS
Information reporting will apply to proceeds from the exchange of Home
Buyers Shares for Shares and, if the Title Guaranty Exchange Offer constitutes a
taxable exchange, the exchange of Title Guaranty Shares of Shares paid by a
paying agent within the United States to a holder (other than an "exempt
recipient," including a corporation, a payee that is a Non-U.S. Holder that
provides an appropriate certification and certain other persons). A paying agent
within the United States will be required to withhold 31% of any such payment
within the United States to a holder (other than an "exempt recipient") if such
holder fails to furnish its correct taxpayer identification number and to
certify under penalties of perjury that such holder is not subject to backup
withholding tax by submitting a completed Substitute Form W-9 to the Company or
otherwise fails to comply with such backup withholding requirements.
Accordingly, each holder of Home Buyers Shares should complete, sign and submit
a Substitute Form W-9 in order to avoid the imposition of such backup
withholding.
A 31% backup withholding tax and information reporting requirements apply
to payments of dividends on, and to payments of the proceeds from the sale,
exchange or redemption of securities to non-corporate U.S. Holders. A payor will
be required to withhold 31% of any such payment on a Share to a U.S. Holder
(other than an "exempt recipient") if such holder fails to furnish its correct
taxpayer identification number or otherwise fails to comply with, or establish
an exemption from, such backup withholding requirements.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR
GENERAL INFORMATION PURPOSES ONLY. PARTICIPANTS IN THE EXCHANGE OFFERS ARE URGED
TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF
ONE OR BOTH EXCHANGE OFFER, AS THE CASE MAY BE, TO THEM, INCLUDING THE
APPLICATION AND EFFECT OF THE ALTERNATIVE MINIMUM TAX, STATE, LOCAL AND FOREIGN
TAX LAWS.
LEGAL MATTERS
The validity of the Shares offered hereby will be passed upon for the
Company by White & Case LLP, Los Angeles, California.
EXPERTS
The financial statements incorporated in this Prospectus by reference
to the Annual Report on Form 10-K for the year ended December 31, 1997, 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>
(outside back cover page)
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR THE SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE
SECURITIES TO WHICH IT RELATES, OR ANY OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY SUCH SECURITIES, IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER
OR SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.
TABLE OF CONTENTS
Available Information...................................................(i)
Incorporation of Documents by Reference.................................(i)
Forward-Looking Statements.............................................(ii)
Prospectus Summary........................................................1
Risk Factors..............................................................7
Capitalization............................................................9
The First American Financial Corporation..................................9
The Exchange Offers......................................................13
Use of Proceeds..........................................................18
Selling Shareholders.....................................................19
Plan of Distribution.....................................................22
Comparison of Company Shareholders' Rights
and Home Buyers Shareholders' Rights.....................................23
Comparison of Company Shareholders' Rights
and Title Guaranty Shareholders' Rights..................................27
Tax Matters..............................................................32
Legal Matters............................................................34
Experts..................................................................35
Prospectus
262,152 COMMON SHARES
THE FIRST AMERICAN
FINANCIAL CORPORATION
OFFER BY FIRST AMERICAN TITLE
INSURANCE COMPANY TO EXCHANGE
COMMON SHARES OF THE FIRST
AMERICAN FINANCIAL CORPORATION FOR
EACH COMMON SHARE OF FIRST
AMERICAN HOME BUYERS PROTECTION
CORPORATION AND EACH COMMON SHARE
OF FIRST AMERICAN TITLE GUARANTY
HOLDING COMPANY NOT CURRENTLY
OWNED BY FIRST AMERICAN TITLE
INSURANCE COMPANY
Dated April 8, 1998
<PAGE>
PART II
Information Not Required in Prospectus
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Subject to certain limitations, Section 317 of the California
Corporations Code provides in part that a corporation shall have the 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 Restated Articles of Incorporation of the Registrant 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
Registrant, or anyone claiming on the Registrant'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 Registrant 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 Registrant 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 officers of the Registrant:
Chairman of the Board, President, Vice President, Secretary, Assistant
Secretary, Chief Financial Officer, Treasurer, Assistant Treasurer and such
other officers as the board shall designate from time to time. "Director" of the
Registrant means any person appointed to serve on the Registrant's board of
directors either by its shareholders or by the remaining board members.
Each of the Registrant's 1996 Stock Option Plan and its 1997
Directors' Stock Plan (each individually, the "Plan") provides 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."
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
4.1. Description of the Registrant's capital stock in Article Sixth of the
Restated Articles of Incorporation of the First American Financial
Corporation (contained in Exhibit 3).
4.2. Rights Agreement, incorporated by reference to Exhibit 4 of the
Registrant's Registration Statement on Form 8-A dated November 7, 1997.
5. Opinion of counsel regarding legality.
23.1. Consent of independent accountants.
23.2. Consent of counsel (contained in Exhibit 5).
24. Power of Attorney.
99. Form of Letter of Transmittal and instructions thereto.
ITEM 23. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual report pursuant
to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (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.
(2) 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.
(3) 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.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable. In the event
that a claim of indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by its is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
* * *
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant 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 April 8, 1998.
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: April 8, 1998 By:/s/ D.P. Kennedy
----------------
D.P. Kennedy, Chairman and Director
Date: April 8, 1998 By:/s/ Parker S. Kennedy
---------------------
Parker S. Kennedy, President
and Director
Date: April 8, 1998 By:/s/ Thomas A. Klemens
---------------------
Thomas A. Klemens, Executive Vice
President, Chief Financial
Officer
(Principal Financial and
Accounting Officer)
<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: April 8, 1998 By:/s/ George L. Argyros*
----------------------
George L. Argyros, Director
Date: April 8, 1998 By:/s/ Gary J. Beban*
------------------
Gary J. Beban, Director
Date: April 8, 1998 By:/s/ J. David Chatham*
---------------------
J. David Chatham, Director
Date: April 8, 1998 By:/s/ William G. Davis*
---------------------
William G. Davis, Director
Date: April __, 1998 By:_____________________
James L. Doti, Director
Date: April 8, 1998 By:/s/ Lewis W. Douglas, Jr.*
--------------------------
Lewis W. Douglas, Jr., Director
Date: April 8, 1998 By:/s/ Paul B. Fay, Jr.*
---------------------
Paul B. Fay, Jr., Director
Date: April 8, 1998 By:/s/ Dale F. Frey*
-----------------
Dale F. Frey, Director
Date: April 8, 1998 By:/s/ Anthony R. Moiso*
---------------------
Anthony R. Moiso, Director
Date: April __, 1998 By:_____________________
Rudolph J. Munzer, Director
Date: April 8, 1998 By:/s/ Frank O'Bryan*
------------------
Frank O'Bryan, Director
Date: April 8, 1998 By:/s/ Roslyn B. Payne*
--------------------
Roslyn B. Payne, Director
Date: April __, 1998 By:____________________
D. Van Skilling, Director
Date: April __, 1998 By:____________________
Virginia Ueberroth, Director
*By:/s/ Mark R Arnesen
-----------------------
Mark R Arnesen
Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- - ------ -----------
4.1. Description of the Registrant's capital stock in Article Sixth
of the Restated Articles of Incorporation of the First
American Financial Corporation (contained in Exhibit 3).
4.2. Rights Agreement, incorporated by reference to Exhibit 4 of
the Registrant's Registration Statement on Form 8 -A dated
November 7, 1997.
5. Opinion of counsel regarding legality.
23.1. Consent of independent accountants.
23.2. Consent of counsel (contained in Exhibit 5).
24. Power of Attorney.
99. Form of Letter of Transmittal and instructions thereto.
EXHIBIT 5
[LETTERHEAD OF WHITE & CASE LLP]
April 8, 1998
The First American Financial Corporation
114 East Fifth Street
Santa Ana, CA 92701
Ladies and Gentlemen:
We have acted as counsel to The First American Financial Corporation,
a California corporation (the "Company"), and are familiar with the proceedings
and documents relating to the proposed registration by the Company, through a
Registration Statement on Form S-4 (the "Registration Statement"), to be filed
by the Company with the Securities and Exchange Commission, of 262,152 shares of
Common stock, $1.00 par value, of the Company and an equal number of Rights to
purchase $1.00 par value Series A Junior Participating Preferred Shares
(collectively, the "Shares").
For the purposes of rendering this opinion, we have examined originals
or photostatic copies of certified copies of such corporate records, agreements
and other documents of the Company as we have deemed relevant and necessary as a
basis for the opinion hereinafter set forth.
Based on the foregoing, we are of the opinion that the Shares, when
issued and paid for in accordance with the terms and conditions set forth in the
Registration Statement, will be duly authorized, validly issued, fully paid and
nonassessable.
We consent to the use of this opinion as an exhibit to the
Registration Statement, and we further consent to the use of our name under the
heading "Legal Matters" in the Prospectus which is a part of the Registration
Statement.
Very truly yours,
/s/ White & Case LLP
EXHIBIT 23.1.
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this First Amendment of the Registration Statement on Form
S-4 of The First American Financial Corporation of our report dated February 9,
1998, appearing on page 19 of The First American Financial Corporation's Annual
Report on Form 10-K for the year ended December 31, 1997. We also consent to the
reference to us under the heading "Experts" in such Prospectus.
By: /s/ Price Waterhouse LLP
-------------------------
Price Waterhouse LLP
Costa Mesa, California
April 8, 1998
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned directors of The
First American Financial Corporation, a California corporation (the
"Corporation"), hereby constitute and appoint Parker S. Kennedy and Mark R
Arnesen, and each of them, the true and lawful agents and attorneys-in-fact of
the undersigned, with full power and authority in said agents and
attorneys-in-fact, and in either or both of them, to sign for the undersigned
and in their respective names as directors of the Corporation the Registration
Statement on Form S-4 to be filed with the United States Securities and Exchange
Commission, Washington, D.C., under the Securities Act of 1933, as amended, and
any amendment or amendments to such Registration Statement, relating to the
Common shares, par value $1.00 per share, of the Corporation to be offered
thereunder, and the undersigned ratify and confirm all acts taken by such agents
and attorneys-in-fact, or either or both of them, as herein authorized. This
Power of Attorney may be executed in one or more counterparts.
Date: January 28, 1998 By:/s/ George L. Argyros
---------------------
George L. Argyros, Director
Date: January 28, 1998 By:/s/ Gary J. Beban
-----------------
Gary J. Beban, Director
Date: January 28, 1998 By:/s/ J. David Chatham
--------------------
J. David Chatham, Director
Date: January 28, 1998 By:/s/ William G. Davis
--------------------
William G. Davis, Director
Date: January __, 1998 By:____________________
James L. Doti, Director
Date: January 28, 1998 By:/s/ Lewis W. Douglas, Jr.
-------------------------
Lewis W. Douglas, Jr., Director
Date: January 28, 1998 By:/s/ Paul B. Fay, Jr.
--------------------
Paul B. Fay, Jr., Director
Date: January 28, 1998 By:/s/ Dale F. Frey
----------------
Dale F. Frey, Director
Date: January 28, 1998 By:/s/ Anthony R. Moiso
--------------------
Anthony R. Moiso, Director
Date: January __, 1998 By:____________________
Rudolph J. Munzer, Director
Date: January 28, 1998 By:/s/ Frank O'Bryan
-----------------
Frank O'Bryan, Director
Date: January 28, 1998 By:/s/ Roslyn B. Payne
-------------------
Roslyn B. Payne, Director
Date: January __, 1998 By:___________________
D. Van Skilling, Director
Date: January __, 1998 By:___________________
Virginia Ueberroth, Director
EXHIBIT 99
[FORM OF]
LETTER OF TRANSMITTAL
FIRST AMERICAN TITLE INSURANCE COMPANY
OFFER TO EXCHANGE
COMMON SHARES, $1.00 PAR VALUE
OF THE FIRST AMERICAN FINANCIAL CORPORATION
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR THE OUTSTANDING
COMMON SHARES OF
[FIRST AMERICAN HOME BUYERS PROTECTION CORPORATION]
[FIRST AMERICAN TITLE GUARANTY HOLDING COMPANY]
PURSUANT TO THE PROSPECTUS
DATED [_________], 1998
- - -------------------------------------------------------------------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
5:00 P.M., PACIFIC STANDARD TIME,
ON [__________], 1998, UNLESS THE OFFER IS EXTENDED.
- - -------------------------------------------------------------------------------
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
FIRST AMERICAN TRUST COMPANY
BY MAIL/OVERNIGHT DELIVERY: BY HAND:
First American Trust Company First American Trust Company
421 North Main Street 421 North Main Street
Santa Ana, CA 92701-4642 Santa Ana, CA 92701-4642
Attn: Trust Operations Attn: Trust Operations
FACSIMILE TRANSMISSIONS:
(714) 972-1368
TO CONFIRM BY TELEPHONE OR FOR INFORMATION:
(800) 854-3643
-----------------------
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 common shares
of [First American Home Buyers Protection Corporation] [First American Title
Guaranty Holding Company] (the "Subsidiary Shares") if Subsidiary Shares are to
be forwarded herewith pursuant to the procedures set forth under "The Exchange
Offer -- Procedures for Tendering Subsidiary Shares" in the Prospectus.
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
<PAGE>
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.
<TABLE>
- - -------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF TENDERED SUBSIDIARY SHARES
- - -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
TOTAL NUMBER
OF SUBSIDIARY SHARES
NAME AND ADDRESS OF CERTIFICATE REPRESENTED NUMBER OF
REGISTERED HOLDER NUMBERS BY SHARE SUBSIDIARY SHARES
(PLEASE FILL IN IF BLANK) CERTIFICATE(S) TENDERED*
<S> <C> <C> <C>
-------------------------------------------------------------------------------------
$ $
-------------------------------------------------------------------------------------
$ $
-------------------------------------------------------------------------------------
$ $
- - -------------------------------------------------------------------------------------------------------------------------
TOTAL AMOUNT TENDERED: $ $
- - -------------------------------------------------------------------------------------------------------------------------
<FN>
* Unless otherwise indicated, it will be assumed that all shares
represented by certificates delivered to the Exchange Agent will be
deemed to have been tendered.
</FN>
</TABLE>
Ladies and Gentlemen:
The undersigned hereby tenders to First American Title Insurance Company, a
California corporation ("FATICO"), the above-described common shares of [First
American Home Buyers Protection Corporation] [First American Title Guaranty
Corporation] (the "Subsidiary Shares") upon the terms and subject to the
conditions set forth in the Prospectus dated [_____________], 1998 (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 Subsidiary Shares 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 FATICO all
right, title and interest in and to such tendered Subsidiary Shares. 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 FATICO in connection with the Exchange Offer) with
respect to the tendered Subsidiary Shares, with full power of substitution (such
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 the Subsidiary Shares to FATICO together with
all accompanying evidences of transfer and authenticity to and (ii) receive for
the account of FATICO all benefits and otherwise exercise all rights of
beneficial ownership of such Subsidiary Shares, 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
SUBSIDIARY SHARES TENDERED HEREBY AND THAT, WHEN THE SAME ARE ACCEPTED FOR
EXCHANGE, FATICO WILL ACQUIRE GOOD, MARKETABLE AND UNENCUMBERED TITLE THERETO,
FREE AND CLEAR OF ALL LIENS, RESTRICTIONS, CHARGES AND ENCUMBRANCES, AND THAT
THE SUBSIDIARY SHARES TENDERED HEREBY ARE NOT SUBJECT TO ANY ADVERSE CLAIMS OR
PROXIES. THE UNDERSIGNED WILL, UPON REQUEST, EXECUTE AND DELIVER ANY ADDITIONAL
DOCUMENTS DEEMED BY FATICO OR THE EXCHANGE AGENT TO BE NECESSARY OR DESIRABLE TO
COMPLETE THE EXCHANGE, ASSIGNMENT AND TRANSFER OF SUBSIDIARY SHARES TENDERED
HEREBY. 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 Subsidiary Shares
tendered hereby should be printed above, if they are not already set forth
above, as they appear on the Certificates representing such Subsidiary Shares.
The Certificate numbers and the Subsidiary Shares that the undersigned wishes to
tender should be indicated in the appropriate boxes above.
If any tendered Subsidiary Shares are not exchanged pursuant to the
Exchange Offer for any reason, or if Certificates are submitted for more
Subsidiary Shares than are tendered or accepted for exchange, Certificates for
such unexchanged or untendered Subsidiary Shares will be returned, without
expense to the tendering holder, promptly following the expiration or
termination of the Exchange Offer.
The undersigned understands that tenders of Subsidiary Shares pursuant to
any one of the procedures described under "The Exchange Offers -- Procedures for
Tendering Subsidiary Shares" in the Prospectus and in the instructions herein
will, upon FATICO's acceptance for exchange of such tendered Subsidiary Shares,
constitute a binding agreement between the undersigned and FATICO upon the terms
and subject to the conditions of the Exchange Offer. The undersigned recognizes
that, under certain circumstances set forth in the Prospectus, FATICO may not be
required to accept for exchange any of the Subsidiary Shares tendered hereby.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, the undersigned hereby directs that the Common shares,
$1.00 par value, of the The First American Financial Corporation ("FAFCO
Shares") and any cash payment in lieu of fractional shares, as discussed in the
Prospectus, be issued in the name of the undersigned. If applicable, substitute
Certificates representing Subsidiary Shares not exchanged or not accepted for
exchange will be issued to the undersigned. Similarly, unless otherwise
indicated under "Special Delivery Instructions" below, please deliver FAFCO
Shares and any cash in lieu of fractional shares to the undersigned at the
address shown below the undersigned's signature.
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.
<PAGE>
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 Subsidiary Shares hereby tendered, 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 FATICO or the Exchange Agent to comply with the restrictions on
transfer applicable to the Subsidiary Shares). If signature is by an
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.
o__________________________________________
(SIGNATURE OF HOLDER)
Date:_________________, 1998
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)
o__________________________________________
(AUTHORIZED SIGNATURE)
Date:_______, 1998
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 FAFCO Shares and/or any Subsidiary Shares that are
not tendered are to be issued in the name of someone other than the registered
holder of the Subsidiary Shares whose name appears above.
Issue:
(__) FAFCO Shares
(__) Subsidiary Shares 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 FAFCO Shares and/or any Subsidiary Shares that are
not tendered are to be sent to someone other than the registered holder of the
Subsidiary Shares whose name appears above, or to such registered holder at an
address other than that shown above.
Mail
(__) FAFCO Shares
(__) Subsidiary Shares not tendered
to:
Name:______________________________________________
Address:___________________________________________
___________________________________________________
___________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone Number:____________________
Tax Identification or Social Security Number:______
<PAGE>
INSTRUCTIONS
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 Certificates are to
be forwarded herewith. Certificates 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.
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.
FATICO will not accept any alternative, conditional or contingent tenders.
Each tendering holder, by execution of a Letter of Transmittal (or a facsimile
thereof), waives any right 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 this Letter of Transmittal is signed by the
registered holder of Subsidiary Shares tendered herewith, unless such holder has
completed either the box entitled "Special Issuance Instructions" or the box
entitled "Special Delivery Instructions" above.
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 Tendered Subsidiary Shares" is inadequate, total number of
Subsidiary Shares represented by Certificate and/or the number of Subsidiary
Shares tendered 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. If less than all the Subsidiary
Shares evidenced by any Certificate submitted are to be tendered, fill in the
number of Subsidiary Shares that are to be tendered in the box entitled "Number
of Subsidiary Shares Tendered." In such case, a new Certificate for the
remainder of the Subsidiary Shares that were evidenced by the old Certificate
will be sent to the holder of the Subsidiary Shares promptly after the
Expiration Date unless the appropriate boxes on this Letter of Transmittal are
completed. All Subsidiary Shares 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 Subsidiary Shares may be
withdrawn at any time on or prior to the Expiration Date. In order for a
withdrawal to be effective, a written, telegraphic 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 Subsidiary Shares to be withdrawn, the number of Subsidiary Shares
to be withdrawn, and (if Certificates for Subsidiary Shares have been tendered)
the name of the registered holder of the Subsidiary Shares as set forth on the
Certificates for the Subsidiary Shares, if different from that of the person who
tendered such Subsidiary Shares. If Certificates for the Subsidiary Shares have
been delivered or otherwise identified to the Exchange Agent, then prior to the
physical release of such Certificates for the Subsidiary Shares, the tendering
holder must submit the serial numbers shown on the particular Certificates for
the Subsidiary Shares to be withdrawn and the signature on the notice of
withdrawal must be guaranteed by an Eligible Institution. Withdrawals of tenders
of Subsidiary Shares may not be rescinded and Subsidiary Shares 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 Subsidiary Shares."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by FATICO, in its sole
discretion, whose determination shall be final and binding on all parties. None
of FATICO, any affiliate or assignee of FATICO, the Exchange Agent or 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 Subsidiary Shares that have been tendered but which are
withdrawn on or prior to the Expiration Date will be returned to the 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 Subsidiary
Shares 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 Subsidiary Shares tendered hereby are owned of record by two
or more joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Subsidiary Shares 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 stock 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 FATICO, in its sole discretion, of such persons'
authority to so act.
When this Letter of Transmittal is signed by the registered holder of the
Subsidiary Shares listed and transmitted hereby, no endorsement of Certificates
or separate stock powers are required unless FAFCO Shares are to be issued in
the name of a person other than the registered holder. Signatures on such
Certificates or stock 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 Subsidiary Shares listed, the Certificates must be
endorsed or accompanied by appropriate stock 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 the Company or the Exchange Agent may require in accordance with the
restrictions on transfer applicable to the Subsidiary Shares. Signatures on such
Certificates or stock powers must be guaranteed by an Eligible Institution.
6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If FAFCO Shares are to be
issued in the name of a person other than the registered holder, or if FAFCO
Shares 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 Subsidiary Shares not
exchanged will be returned by mail unless the appropriate boxes on this Letter
of Transmittal are completed. See Instruction 4.
7. IRREGULARITIES. FATICO will determine, in its sole discretion, all
questions as to the form of documents, validity, eligibility (including time of
receipt) and acceptance for exchange of any tender of Subsidiary Shares, which
determination shall be final and binding on all parties. FATICO reserves the
absolute right to reject any and all tenders which it determines to not to be in
proper form or the acceptance of which, or exchange for, may, in the view of
counsel to FATICO, be unlawful. FATICO also reserves the absolute right, subject
to applicable law, to waive any of the conditions of the Exchange Offer set
forth in the Prospectus or any conditions or irregularity in any tender of
Subsidiary Shares of any particular holder whether or not similar conditions or
irregularities are waived in the case of other holders. FATICO'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
Subsidiary Shares will be deemed to have been validly made until all
irregularities with respect to such tender have been cured or waived. None of
FATICO, the Exchange Agent, any affiliates or assigns of FATICO 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 and the Letter of Transmittal may be
obtained from the Exchange Agent.
9. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under U.S. Federal income
tax law, a holder whose tendered Subsidiary Shares 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 Subsidiary Shares
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 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 Subsidiary Shares or of the last transferee appearing on the transfers
attached to, or endorsed on, the Subsidiary Shares. If the Subsidiary Shares 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 Subsidiary Shares 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 Subsidiary Shares for
exchange will not be obligated to pay any transfer taxes in connection
therewith. If, however, FAFCO Shares are to be delivered to, or are to be issued
in the name of, any person other than the registered holder of the Subsidiary
Shares tendered, or if a transfer tax is imposed for any reason other than the
exchange of Subsidiary Shares 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.
<TABLE>
- - -----------------------------------------------------------------------------------------------------------------------------------
PAYER'S NAME: FIRST AMERICAN TRUST COMPANY
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SUBSTITUTE Part 1--PLEASE PROVIDE YOUR TIN IN THE BOX Social security number OR Employer
Form W-9 AT RIGHT AND CERTIFY BY SIGNING AND identification number
Department of the Treasury DATING BELOW.
Internal Revenue Service
Payer's Request for
Taxpayer
Identification
Number (TIN)
---------------------------------------------------------------------------------------------------
Part 2--CERTIFICATION--Under penalties of
perjury, I certify that:
(1) The number shown on this form is my
correct Taxpayer 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 Part 3
item (2) above if you have been notified by Awaiting TIN
the IRS that you are currently subject to
backup withholding because of under reporting
interest or dividends on your tax return.
Awaiting TIN (__) 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.
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
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)_________________________________________________________
- - -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
