As filed with the Securities and Exchange Commission on July 28, 1998
Registration No. 333-53681
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
POST-EFFECTIVE AMENDMENT
NO. 1 TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
THE FIRST AMERICAN FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
<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: From
time to time after the effective date of this Registration Statement as the
Registrant shall determine.
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>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- --------------------------------- -------------------------- -------------------------- ------------------------ -------------------
PROPOSED PROPOSED
TITLE OF EACH CLASS OF AMOUNT MAXIMUM MAXIMUM AMOUNT OF
SECURITIES TO BE AGGREGATE PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED(1) PER UNIT(2) OFFERING PRICE(2) FEE(2)(3)
- --------------------------------- -------------------------- -------------------------- ------------------------ -------------------
<S> <C> <C> <C> <C>
Common stock, $1.00 par value 3,000,000 shares $26.15625 $78,468,750 $23,148.28
- --------------------------------- -------------------------- -------------------------- ------------------------ -------------------
</TABLE>
(1) Reflects the Registrant's 3-for-1 stock split effected July 17, 1998.
(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rules 457(c) 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 May 20, 1998, as adjusted to reflect the
Registrant's 3-for-1 stock split effected July 17, 1998.
(3) Previously paid.
<PAGE>
PROSPECTUS
3,000,000 COMMON SHARES
THE FIRST AMERICAN FINANCIAL CORPORATION
This prospectus (this "Prospectus") relates to the offering from time
to time by The First American Financial Corporation (the "Company"), a
California corporation, of up to 3,000,000 aggregate amount of its Common
shares, $1.00 par value (the "Shares"), upon terms to be determined at the time
of each such offering.
The Shares are to be offered directly by the Company in connection
with the acquisition from time to time of the assets of, or ownership interests
in, certain entities engaged in the same or similar lines of business as the
Company or any of its subsidiaries. The consideration for such acquisitions will
consist of Shares, cash, notes or other evidences of indebtedness, guarantees,
assumption of liabilities, tangible or intangible property, or a combination
thereof, as determined from time to time by negotiations between the Company and
the owners or controlling persons of the assets or ownership interests to be
acquired.
The Company contemplates that the specific terms of an acquisition
will be determined by negotiations between the Company and the owners or
controlling persons of the assets or ownership interests to be acquired. Factors
taken into account in selecting an acquisition include, among other relevant
factors, the quality and reputation of the business to be acquired, the assets,
liabilities, results of operations and cash flows of the business, the quality
of its management and employees, its earnings potential, the geographic
locations of the business and the current market value of the Shares. The
Company anticipates that Shares issued in any such acquisition will be valued at
a price reasonably related to the market value of the Shares, either at the time
the terms of the acquisitions are tentatively agreed upon, or at or about the
time of closing, or during the period or periods prior to the delivery of the
Shares.
<PAGE>
(cover page continued)
The Company does not expect that underwriting discounts or commissions
will be paid, except that finders fees may be paid to persons from time to time
in connection with specific acquisitions. Any person receiving such fees may be
deemed an "underwriter" within the meaning of the Securities Act of 1933 (the
"Securities Act").
Shares issued pursuant to this Prospectus, and any applicable
supplement to this Prospectus (a "Supplement") or post-effective amendment (a
"Post-Effective Amendment") 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 prices. See "Selling Shareholders."
THE SHARES ARE TRADED ON THE NEW YORK STOCK EXCHANGE UNDER THE SYMBOL
"FAF." ON JULY 22, 1998, THE CLOSING PRICE OF THE SHARES ON THE NEW YORK STOCK
EXCHANGE WAS $37.875
SEE "RISK FACTORS" BEGINNING ON PAGE 1 FOR CERTAIN INFORMATION THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS BEFORE MAKING AN INVESTMENT IN THE
SHARES.
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 JULY 28, 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
are 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), (8), (9)
and (10) 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.
<PAGE>
(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 Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 1998.
(3) The Company's Report on Form 8-K dated January 23, 1998.
(4) The Company's Report on Form 8-K dated January 27, 1998.
(5) The Company's Report on Form 8-K dated March 18, 1998.
(6) The Company's Report on Form 8-K dated March 31, 1998.
(7) The Company's Report on Form 8-K dated April 7, 1998.
(8) The Company's Report on Form 8-K dated June 26, 1998.
(9) 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 19, 1993.
(10) 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 WITHOUT
CHARGE TO ANY PERSON TO WHOM THIS PROSPECTUS IS DELIVERED UPON FIVE BUSINESS
DAYS' WRITTEN OR ORAL REQUEST OF 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.
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.
<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 SHARE 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.
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.
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 informational 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
informational 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.
As of the date of this Prospectus, the Company, through its
subsidiary, First American Title Insurance Company, 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 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 includes mortgage and other
credit reporting services, flood zone determinations, mortgage loan servicing
systems, property inspections, appraisal services and mortgage document
preparation.
The tax service business includes both real estate tax reporting as
well as tax outsourcing and tax certification. The Company's tax service
business reports on approximately 11 million properties annually and is believed
to be the second largest provider of tax services to the real estate market. The
Company works with over 22,000 taxing authorities nationwide.
First American CREDCO, Inc. ("CREDCO"), the Company's mortgage 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. ("SMS"), other than SMS's 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's credit division, which the Company believes is the third largest provider
of U.S. mortgage credit information; SMS's property appraisal division, which
the Company believes is the second largest provider of U.S. appraisal services;
SMS's title division, which provides title and closing services throughout the
United States, servicing primarily second mortgage originators; SMS's settlement
services business, which provides title plant systems and accounting services,
as well as escrow closing software, to the title industry; and a controlling
interest in what is believed by the Company to be the largest mortgage document
preparation firm.
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.
On April 16, 1998, the Company acquired Contour Software, the largest
supplier of mortgage origination software to the mortgage loan industry.
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 a
pending exchange offer, the Company likely will 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 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.
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 and for the quarterly periods ended March 31, 1997 and 1998. 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 and Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998, incorporated by reference herein.
[The rest of this page has been intentionally left blank.]
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31, Three Months Ended
March 31,
1993 1994 1995 1996 1997 1997 1998
---- ---- ---- ---- ---- ---- ----
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Operating revenues $1,379,781 $1,356,946 $1,227,185 $1,571,168 $1,860,205 $376,425 $561,614
Investment and other
income $18,645 $19,447 $23,031 26,398 27,256 $6,452 43,435
----------- ------------- ------------- ------------ ------------ ----------- ----------
$1,398,426 $1,376,393 $1,250,216 $1,597,566 $1,887,461 $382,877 $605,049
Expenses:
Salaries and other
personnel costs $397,902 $423,328 $431,984 $531,250 $647,750 $140,787 $199,122
Premiums retained by
agents $504,375 $533,598 $413,444 $516,593 $563,137 $122,193 $140,045
Other operating
expenses $222,934 $232,532 $257,823 $322,709 $411,319 $82,347 $135,000
Provision for title losses
and other claims $125,588 $110,230 $90,387 $86,487 $90,323 $18,592 $27,328
Depreciation and
amortization $16,333 $19,796 $20,790 $27,242 $38,149 $8,598 $13,706
Interest $4,419 $6,267 $6,242 $4,796 $9,994 $1,122 $3,576
Minority interest $5,267 2,944 $2,132 $2,624 $3,676 $311 $7,753
------------ ------------- ------------ ------------ ------------ ----------- ---------
$1,276,818 $1,328,695 $1,222,802 $1,491,701 $1,764,348 $373,950 $526,530
Income before premium
and income taxes $121,608 $47,698 $27,414 $105,865 $123,113 $8,927 $78,519
Premium taxes $17,617 $15,453 $13,627 $16,676 $16,904 $4,161 $4,154
--------- ------- ------- --------- ---------- ------ ---------
Income before income
taxes $103,991 $32.245 $13.787 $89.189 $106.209 $4.766 $74.365
Income taxes $41,900 $13,300 $6,200 $35,600 $41,500 $1,900 $29,400
--------- ------- ------ ------- ------- ------ -------
Income before cumulative
effect of a change in
accounting for income
taxes $62,091 $18,945 $7,587 $53,589 $64,709 $2,866 $44,965
Cumulative effect of a
change in accounting for
income taxes $4,200 -- -- -- -- -- --
--------- ------- ------ ------- ------- ------ -------
Net income $66,291 $18,945 $7,587 $53,589 $64,709 $2,866 $44,965
EARNINGS PER SHARE
DATA:*
Basic(1)(3) $1.30 $0.37 $0.15 $1.04 $1.24 $0.06 $0.86
Diluted(1)(3) $1.30 $0.37 $0.15 $1.03 $1.21 $0.05 $0.83
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31, Three Months Ended
March 31,
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and invested assets $359,127 $368,999 $340,089 $364,620 $411,014 $435,948
Total assets $786,448 $828,649 $873,7788 $979,794 $1,168,144 $1,298,955
Notes and contracts payable $85,022 $89,600 $77,206 $71,257 $41,973 $39,149
Guaranteed preferred
beneficial interests in the
Company's junior
subordinated deferrable
interested debentures -- -- -- -- $100,000 $100,000
Total stockholders' equity $283,718 $292,110 $302,767 $352,465 $411,412 $463,349
OTHER DATA:
Loss ratio 9.1% 8.1% 7.4% 5.5% 4.9% 4.9%
Ratio of debt to total
capitalization(2) 21.5% 22.1% 19.1% 16.0% 7.3% 5.9%
Cash dividends per share(3) $0.11 $0.13 $0.13 $0.15 $0.17 $0.05
</TABLE>
- -----------------------
(1) Based upon the weighted average number of common shares outstanding.
(2) Capitalization includes minority interests and junior subordinated
deferrable interest debentures.
(3) Adjusted to reflect the Company's 3-for-1 stock split effected
July 17, 1998.
<PAGE>
SELLING SHAREHOLDERS
Shares issued pursuant to this Prospectus, and any applicable
Supplement or Post-Effective Amendment, may be reoffered pursuant hereto by 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. The Selling Shareholders may
effect such transactions by selling the Shares to or through broker-dealers, and
such broker-dealers may receive compensation in the form of discounts,
concessions or commissions from the Selling Shareholders, the purchasers of
shares for whom such broker-dealer may act as agent or to whom they may sell as
principal or both. The Company will not receive any part of the proceeds from
the resale by the Selling Shareholders of any Shares pursuant hereto. 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.
The identity of the Selling Shareholders, the number of Shares to be
sold by the Selling Shareholders and the price per Share will be determined at
the time of the consummation of the particular transaction. Specific information
regarding the transaction, the identity of the Selling Shareholders and the
number of Shares to be resold may be provided at the time of such transaction by
means of a Supplement or a Post-Effective Amendment hereto, as applicable.
The Selling Shareholders and any broker-dealers who act in connection
with the sale of such Shares hereunder may be deemed to be an "underwriter"
within the meaning of Section 2(11) of the Securities Act, and any commissions
received by them and profit on any resale of such Shares as principal may be
deemed to be underwriting discounts and commissions under the Securities Act.
The Company intends to make available public information concerning itself in
compliance with the Securities Act and the regulations thereunder, and
accordingly, Rule 144 or Rule 145 under the Securities Act may be available for
use by holders of Shares to effect transfers of such securities, subject to
compliance with the remaining provisions of such rules.
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 included in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
***
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATION NOT CONTAINED Prospectus
OR INCORPORATED BY REFERENCE IN
THIS PROSPECTUS OR AN APPLICABLE
SUPPLEMENT OR POST EFFECTIVE
AMENDMENT, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR 3,000,000 Common Shares
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.
THE FIRST AMERICAN
__________________________ FINANCIAL CORPORATION
TABLE OF CONTENTS
Available Information......................(i)
Incorporation of Documents by Reference....(i)
Forward-Looking Statements................(ii)
Risk Factors.................................1
The First American Financial Corporation.....2
Selling Shareholders.........................9
Legal Matters................................9
Experts......................................9 Dated July 28, 1998
<PAGE>
II-6
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. "
The Registrant's Deferred Compensation Plan provides that, "To the
extent permitted by applicable state law, the Company shall indemnify and save
harmless the Committee and each member thereof, the Board of Directors and any
delegate of the Committee who is an employee of the Company against any and all
expenses, liabilities and claims, including legal fees to defend against such
liabilities and claims arising out of their discharge in good faith of
responsibilities under or incident to the Plan, other than expenses and
liabilities arising out of willful misconduct. This indemnity shall not preclude
such further indemnities as may be available under insurance purchased by the
Company or provided by the Company under any bylaw, agreement or otherwise, as
such indemnities are permitted under state law. "
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 it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
3.1 The Restated Articles of Incorporation of The First American Financial
Corporation dated July 14, 1998.
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 3.1).
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.
ITEM 23. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during the period in which offers or sales are being
made, a post-effective amendment to this Registration Statement;
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the Registration
Statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(4) 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.
(5) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus
will contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in addition to
the information called for by the other items of the applicable form.
(6) That every prospectus: (i) that is filed pursuant to paragraph (5)
immediately preceding, or (ii) that purports to meet the requirements of Section
10(a)(3) of the Securities Act of 1933 and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(7) 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.
(8) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the registration statement when it became
effective.
* * *
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Post-Effective Amendment No. 1 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
city of Santa Ana, state of California, on July 28, 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
Post-Effective Amendment No. 1 to the Registration Statement has been signed
below by the following persons in the capacities and on the dates indicated.
Date: July 28, 1998 By:/s/ D. P. Kennedy
-----------------
D. P. Kennedy, Chairman and Director
Date: July 28, 1998 By:/s/ Parker S. Kennedy
---------------------
Parker S. Kennedy, President and Director
Date: July 28, 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
Post-Effective Amendment No. 1 to the Registration Statement has been signed
below by the following persons in the capacities and on the dates indicated.
Date: July 28, 1998 By:/s/ George L. Argyros *
----------------------------------------
George L. Argyros, Director
Date: July 28, 1998 By:/s/ Gary J. Beban *
----------------------------------------
Gary J. Beban, Director
Date: July 28, 1998 By:/s/ J. David Chatham *
----------------------------------------
J. David Chatham, Director
Date: July 28, 1998 By:/s/ William G. Davis *
----------------------------------------
Willliam G. Davis, Director
Date: July 28, 1998 By:/s/ James L. Doti *
----------------------------------------
James L. Doti, Director
Date: July 28, 1998 By:/s/ Lewis W. Douglas, Jr. *
----------------------------------------
Lewis W. Douglas, Jr., Director
Date: July 28, 1998 By:/s/ Paul B. Fay, Jr. *
----------------------------------------
Paul B. Fay, Jr., Director
Date: July 28, 1998 By:/s/ Dale F. Frey *
----------------------------------------
Dale F. Frey, Jr., Director
Date: July 28, 1998 By:/s/ Anthony R. Moiso *
----------------------------------------
Anthony R. Moiso, Director
Date: July 28, 1998 By:/s/ Rudolph J. Munzer *
----------------------------------------
Rudolph J. Munzer, Director
Date: July 28, 1998 By:/s/ Frank O'Bryan *
----------------------------------------
Frank O'Bryan, Director
Date: July 28, 1998 By:/s/ Roslyn B. Payne *
----------------------------------------
Roslyn B. Payne, Director
Date: July 28, 1998 By:/s/ D. Van Skilling *
----------------------------------------
D. Van Skilling, Director
Date: July 28, 1998 By:/s/ Virginia Ueberroth *
----------------------------------------
Virginia Ueberroth, Director
*By:/s/ Mark R Arnesen
Mark R Arnesen
Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
3.1 The Restated Articles of Incorporation of The First American Financial
Corporation dated July 14, 1998.
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 3.1).
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.*
* Previously filed.
EXHIBIT 3.1
RESTATED ARTICLES OF INCORPORATION
OF
THE FIRST AMERICAN FINANCIAL CORPORATION
The undersigned certifies that:
A. He is a Vice President and Secretary of The First American
Financial Corporation, a California corporation (the "Company").
B. The entire text of the articles of incorporation of said Company as
amended to date is amended and restated as follows:
FIRST: That the name of said Corporation shall be The First American
Financial Corporation.
SECOND: The purpose of the Corporation is to engage in any lawful act
or activity for which a corporation may be organized under the General
Corporation Law of California other than the banking business, the trust
company business or the practice of a profession permitted to be
incorporated by the California Corporations Code.
THIRD: That the place where the principal business of said Corporation
is to be transacted is Santa Ana, Orange County, State of California.
FOURTH: This Corporation shall have perpetual existence.
FIFTH: The number of directors of this Corporation shall be no less
than nine (9) nor more than seventeen (17).
SIXTH: This Corporation is authorized to issue two classes of shares,
to be designated Common and Preferred respectively. The number of Common
shares authorized to be issued is 108,000,000. The aggregate par value of
such Common shares is $108,000,000 and the par value of each such share is
$1.00. Each Common share shall have one vote per share. Each $1.00 par
value Common share outstanding immediately preceding the effective date of
these Restated Articles of Incorporation is split up and converted into
three (3), $1.00 par value Common shares. The number of Preferred shares
authorized to be issued is 500,000. The aggregate par value of such
Preferred shares is $500,000 and the par value of each such share is $1.00.
The Board of Directors may fix by resolution the rights, preferences,
privileges and restrictions of any wholly unissued class or series of
shares other than the Common shares, and the series designation and number
of shares to constitute any series (which number may thereafter in the same
manner be increased or decreased), and a certificate of determination shall
then be filed with the California Secretary of State.
Pursuant to the authority vested in the Board of Directors of this
Corporation in accordance with the provisions of this Article Sixth of
these Restated Articles of Incorporation, the Board of Directors has
created a series of preferred shares of the Corporation, the amount,
designation, rights, preferences and privileges of which are as follows:
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series A Junior Participating Preferred Shares" and the
number of shares constituting such series shall initially be one
thousand (1,000), $1.00 par value, such number of shares to be subject
to increase or decrease by action of the Board of Directors as
evidenced by a certificate of determination.
Section 2. Dividends and Distributions.
(A) Subject to the prior and superior rights of the holders of
any shares of any series of preferred shares ranking prior and
superior to the shares of Series A Junior Participating Preferred
Shares with respect to dividends, the holders of Series A Junior
Participating Preferred Shares shall be entitled to receive, when, as
and if declared by the Board of Directors out of funds legally
available for the purpose, quarterly dividends payable in cash on the
last day of March, June, September and December in each year (each
such date being referred to herein as a "Quarterly Dividend Payment
Date"), commencing on the first Quarterly Dividend Payment Date after
the first issuance of a share or fraction of a share of Series A
Junior Participating Preferred Shares, in an amount per share (rounded
to the nearest cent) equal to the greater of (a) $10.00 or (b) subject
to the provision for adjustment hereinafter set forth, 100,000 times
the aggregate per share amount of all cash dividends, and 100,000
times the aggregate per share amount (payable in kind) of all non-cash
dividends or other distributions other than a dividend payable in
Common Shares or a subdivision of the outstanding Common Shares (by
reclassification or otherwise), declared on the common shares, $1.00
par value, of the Corporation (the "Common Shares") since the
immediately preceding Quarterly Dividend Payment Date, or, with
respect to the first Quarterly Dividend Payment Date, since the first
issuance of any share or fraction of a share of Series A Junior
Participating Preferred Shares. In the event the Corporation shall at
any time after October 23, 1997 (the "Rights Declaration Date") (i)
declare any dividend on Common Shares payable in Common Shares, (ii)
subdivide the outstanding Common Shares, or (iii) combine the
outstanding Common Shares into a smaller number of shares, then in
each such case the amount to which holders of Series A Junior
Participating Preferred Shares were entitled immediately prior to such
event under clause (b) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction the numerator of which is the
number of Common Shares outstanding immediately after such event and
the denominator of which is the number of Common Shares that were
outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on
the Series A Junior Participating Preferred Shares as provided in
paragraph (A) above immediately after it declares a dividend or
distribution on the Common Shares (other than a dividend payable in
Common Shares); provided that, in the event no dividend or
distribution shall have been declared on the Common Shares during the
period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $10.00 per
share on the Series A Junior Participating Preferred Shares shall
nevertheless be payable on such subsequent Quarterly Dividend Payment
Date.
(C) Dividends shall begin to accrue and be cumulative on
outstanding Series A Junior Participating Preferred Shares from the
Quarterly Dividend Payment Date next preceding the date of issue of
such Series A Junior Participating Preferred Shares, unless the date
of issue of such share is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such
shares shall begin to accrue from the date of issue of such shares, or
unless the date of issue is a Quarterly Dividend Payment Date or is a
date after the record date for the determination of holders of Series
A Junior Participating Preferred Shares entitled to receive a
quarterly dividend and before such Quarterly Dividend Payment Date, in
either of which events such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date. Accrued but
unpaid dividends shall not bear interest. Dividends paid on the Series
A Junior Participating Preferred Shares in an amount less than the
total amount of such dividends at the time accrued and payable on such
shares shall be allocated pro rata on a share-by-share basis among all
such shares at the time outstanding. The Board of Directors may fix a
record date for the determination of holders of Series A Junior
Participating Preferred Shares entitled to receive payment of a
dividend or distribution declared thereon, which record date shall be
no more than 30 days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of Series A Junior Participating
Preferred Shares shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set
forth, each Series A Junior Participating Preferred Share shall
entitle the holder thereof to 100,000 votes on all matters submitted
to a vote of the shareholders of the Corporation. In the event the
Corporation shall at any time after the Rights Declaration Date (i)
declare any dividend on Common Shares payable in Common Shares, (ii)
subdivide the outstanding Common Shares, or (iii) combine the
outstanding Common Shares into a smaller number of shares, then in
each such case the number of votes per share to which holders of
Series A Junior Participating Preferred Shares were entitled
immediately prior to such event shall be adjusted by multiplying such
number by a fraction the numerator of which is the number of Common
Shares outstanding immediately after such event and the denominator of
which is the number of Common Shares that were outstanding immediately
prior to such event.
(B) Except as otherwise provided herein or by law, the holders of
Series A Junior Participating Preferred Shares and the holders of
Common Shares shall vote together as one class on all matters
submitted to a vote of shareholders of the Corporation.
(C) (i) If at any time dividends on any Series A Junior
Participating Preferred Shares shall be in arrears in an amount equal
to six (6) quarterly dividends thereon, the occurrence of such
contingency shall mark the beginning of a period (herein called a
"default period") which shall extend until such time when all accrued
and unpaid dividends for all previous quarterly dividend periods and
for the current quarterly dividend period on all Series A Junior
Participating Preferred Shares then outstanding shall have been
declared and paid or set apart for payment. During each default
period, the right to elect two (2) of the Corporation's directors then
authorized pursuant to Article Fifth of the Corporation's Restated
Articles of Incorporation shall become vested in the holders of
preferred shares (including holders of the Series A Junior
Participating Preferred Shares) (collectively, the "Preferred Shares")
with dividends in arrears in an amount equal to (6) quarterly
dividends thereon, voting as a class and irrespective of series.
(ii) During any default period, such voting right of the holders
of Series A Junior Participating Preferred Shares may be exercised
initially at a special meeting called pursuant to subparagraph (iii)
of this Section 3(C) or at any annual meeting of shareholders, and
thereafter at annual meetings of shareholders, provided that such
voting right shall not be exercised unless the holders of ten percent
in number of Preferred Shares outstanding shall be present in person
or by proxy. The absence of a quorum of the holders of Common Shares
shall not affect the exercise by the holders of Preferred Shares of
such voting right. At any meeting at which the holders of Preferred
Shares shall exercise such voting right initially during an existing
default period, they shall have the right, voting as a class, to fill
such vacancies, if any, in the Board of Directors as may then exist up
to two (2) Directors or, if such right is exercised at an annual
meeting, to elect two (2) Directors. If the number of Directors which
may be so elected at any special meeting exceeds the vacancies, if
any, then existing in the Board of Directors, the terms of one (1) or
two (2), as the case may be, of the Directors having served as such
for the least amount of time shall terminate in order to permit the
election by the holders of the Preferred Shares the required number of
Directors. After the holders of the Preferred Shares shall have
exercised their right to elect Directors in any default period and
during the continuance of such period, the number of Directors shall
not be increased or decreased except by vote of the holders of
Preferred Shares as herein provided or pursuant to the rights of any
equity securities ranking senior to or pari passu with Series A Junior
Participating Preferred Shares.
(iii) Unless the holders of Preferred Shares shall, during an
existing default period, have previously exercised their right to
elect Directors, the Board of Directors may order, or any shareholder
or shareholders owning in the aggregate not less than ten percent
(10)% of the total number of Preferred Shares outstanding,
irrespective of series, may request, the calling of a special meeting
of the holders of Preferred Shares, which meeting shall thereupon be
called by the Chairman of the Board, the President or the Secretary of
the Corporation. Notice of such meeting and of any annual meeting at
which holders of Preferred Shares are entitled to vote pursuant to
this paragraph (C)(iii) shall be given to each holder of record of
Preferred Shares by mailing a copy of such notice to him at his last
address as the same appears on the books of the Corporation. Such
meeting shall be called for a time not earlier than 10 days and not
later than 60 days after such order or request, such meeting may be
called on similar notice by any shareholder or shareholders owning in
the aggregate not less than ten percent (10)% of the total number of
Preferred Shares outstanding. Notwithstanding the provisions of this
paragraph (C)(iii), no such special meeting shall be called during the
period within 60 days immediately preceding the date fixed for the
next annual meeting of the shareholders.
(iv) In any default period, the holders of Common Shares, and
other classes of stock of the Corporation if applicable, shall
continue to be entitled to elect the whole number of Directors until
the holders of Preferred Shares shall have exercised their right to
elect two (2) Directors voting as a class, after the exercise of which
right (x) the Directors so elected by the holders of Preferred Shares
shall continue in office until their successors shall have been
elected by such holders or until the expiration of the default period,
and (y) any vacancy in the Board of Directors may (except as provided
in paragraph (C)(ii) of this Section 3) be filled by vote of a
majority of the remaining Directors theretofore elected by the holders
of the class of stock which elected the Director whose office shall
have become vacant. References in this paragraph (C) to Directors
elected by the holders of a particular class of stock shall include
Directors elected by such Directors to fill vacancies as provided in
clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (x) the
right of the holders of Preferred Shares as a class to elect Directors
shall cease and (y) the term of any Directors elected by the holders
of Preferred Shares as a class shall terminate. Any vacancies in the
Board of Directors effected by clause (y) in the preceding sentence
may be filled by a majority of the remaining Directors.
(D) Except as provided in this Section 3, in Section 10, or as
required by law, holders of Series A Junior Participating Preferred
Shares shall have no special voting rights and their consent shall not
be required (except to the extent they are entitled to vote with
holders of Common Shares as set forth herein) for taking any corporate
action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Junior Participating Preferred
Shares as provided in Section 2 are in arrears, thereafter and until
all accrued and unpaid dividends and distributions, whether or not
declared, on Series A Junior Participating Preferred Shares
outstanding shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire for
consideration any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series A Junior Participating Preferred Shares;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (either
as to dividends or upon liquidation, dissolution or winding up)
with the Series A Junior Participating Preferred Shares, except
dividends paid ratably on the Series A Junior Participating
Preferred Shares and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which
the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either as
to dividends or upon liquidation, dissolution or winding up) with
the Series A Junior Participating Preferred Shares, provided that
the Corporation may at any time redeem, purchase or otherwise
acquire shares of any such parity stock in exchange for shares of
any stock of the Corporation ranking junior (either as to
dividends or upon dissolution, liquidation or winding up) to the
Series A Junior Participating Preferred Shares; or
(iv) redeem or purchase or otherwise acquire for
consideration any Series A Junior Participating Preferred Shares,
or any shares of stock ranking on a parity with the Series A
Junior Participating Preferred Shares, except in accordance with
a purchase offer made in writing or by publication (as determined
by the Board of Directors) to all holders of such shares upon
such terms as the Board of Directors, after consideration of the
respective annual dividend rates and other relative rights and
preferences of the respective series and classes, shall determine
in good faith will result in fair and equitable treatment among
the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any
shares of stock of the Corporation unless the Corporation could, under
paragraph (A) of this Section 4, purchase or otherwise acquire such
shares at such time and in such manner.
Section 5. Reacquired Shares. Any Series A Junior Participating
Preferred Shares purchased or otherwise acquired by the Corporation in
any manner whatsoever shall be retired and cancelled promptly after
the acquisition thereof. All such shares upon their cancellation
become authorized but unissued Preferred Shares and may be reissued as
part of a new series of Preferred Shares to be created by resolution
or resolutions of the Board of Directors, subject to the conditions
and restrictions on issuance set forth herein.
Section 6. Liquidation, Dissolution or Winding Up.
(A) Upon any liquidation (voluntary or otherwise), dissolution or
winding up of the Corporation, no distribution shall be made to the
holders of shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series A Junior
Participating Preferred Shares unless, prior thereto, the holders of
Series A Junior Participating Preferred Shares shall have received
$100,000 per share, plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the
date of such payment (the "Series A Liquidation Preference").
Following the payment of the full amount of the Series A Liquidation
Preference, no additional distributions shall be made to the holders
of Series A Junior Participating Preferred Shares unless, prior
thereto, the holders of Common Shares shall have received an amount
per share (the "Common Adjustment") equal to the quotient obtained by
dividing (i) the Series A Liquidation Preference by (ii) 100,000 (as
appropriately adjusted as set forth in subparagraph C below to reflect
such events as stock splits, stock dividends and recapitalizations
with respect to the Common Shares) (such number in clause (ii), the
"Adjustment Number"). Following the payment of the full amount of the
Series A Liquidation Preference and the Common Adjustment in respect
of all outstanding Series A Junior Participating Preferred Shares and
Common Shares, respectively, holders of Series A Junior Participating
Preferred Shares and holders of Common Shares shall receive their
ratable and proportionate share of the remaining assets to be
distributed in the ratio of the Adjustment Number to 1 with respect to
such Preferred Shares and Common Shares, on a per share basis,
respectively.
(B) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series A Liquidation
Preference and the liquidation preferences of all other series of
preferred stock, if any, which rank on a parity with the Series A
Junior Participating Preferred Shares, then such remaining assets
shall be distributed ratably to the holders of such parity shares in
proportion to their respective liquidation preferences. In the event,
however, that there are not sufficient assets available to permit
payment in full of the Common Adjustment, then such remaining assets
shall be distributed ratably to the holders of Common Shares.
(C) In the event the Corporation shall at any time after the
Rights Declaration Date (i) declare any dividend on Common Shares
payable in Common Shares, (ii) subdivide the outstanding Common
Shares, or (iii) combine the outstanding Common Shares into a smaller
number of shares, then in each such case the Adjustment Number in
effect immediately prior to such event shall be adjusted by
multiplying such Adjustment Number by a fraction the numerator of
which is the number of Common Shares outstanding immediately after
such event and the denominator of which is the number of Common Shares
that were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction
in which the Common Shares are exchanged for or changed into other
stock or securities, cash and/or any other property, then in any such
case the Series A Junior Participating Preferred Shares shall at the
same time be similarly exchanged or changed in an amount per share
(subject to the provision for adjustment hereinafter set forth) equal
to 100,000 times the aggregate amount of stock, securities, cash
and/or any other property (payable in kind), as the case may be, into
which or for which each Common Share is changed or exchanged. In the
event the Corporation shall at any time after the Rights Declaration
Date (i) declare any dividend on Common Shares payable in Common
Shares, (ii) subdivide the outstanding Common Shares, or (iii) combine
the outstanding Common Shares into a smaller number of shares, then in
each such case the amount set forth in the preceding sentence with
respect to the exchange or change of Series A Junior Participating
Preferred Shares shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of Common Shares
outstanding immediately after such event and the denominator of which
is the number of Common Shares that were outstanding immediately prior
to such event.
Section 8. No Redemption. The Series A Junior Participating Preferred
Shares shall not be redeemable.
Section 9. Ranking. The Series A Junior Participating Preferred Shares
shall rank junior to all other series of the Corporation's Preferred
Shares as to the payment of dividends and the distribution of assets,
unless the terms of any such series shall provide otherwise.
Section 10. Amendment. The Restated Articles of Incorporation of the
Corporation and this Certificate of Determination shall not be
amended, nor shall any other Certificate of Determination be issued or
amended, as the case may be, so as to materially and adversely alter
or change the powers, preferences or special rights of the Series A
Junior Participating Preferred Shares without the affirmative vote of
the holders of two-thirds (2/3) or more of the outstanding Series A
Junior Participating Preferred Shares, voting separately as a class.
Section 11. Fractional Shares. Series A Junior Participating Preferred
Shares may be issued in fractions of a share which shall entitle the
holder, in proportion to such holder's fractional shares, to exercise
voting rights, receive dividends, participate in distributions and to
have the benefit of all other rights of holders of Series A Junior
Participating Preferred Shares.
SEVENTH: That the amount of said capital stock which has been actually
subscribed is one hundred and thirty-five thousand Dollars and the
following are the names of the persons by whom the same has been
subscribed, and the amount subscribed by each of them, to wit:
NAMES OF SUBSCRIBERS NO. OF SHARES AMOUNT
W. S. Bartlett 50 $ 5,000.00
W. S. Bartlett, Trustee 10 1,000.00
Hiram Mabury
by W.S. Bartlett, his agent 100 10,000.00
M. M. Crookshank 30 3,000.00
C. W. Humphreys 20 2,000.00
Thos. McKeever 10 1,000.00
Victor Montgomery 30 3,000.00
Bank of America,
by Geo. H. Stewart, Cash 50 5,000.00
Frank A. Gibson 22 2,200.00
Mrs. Mary E. Fox 75 7,500.00
C. E. DeCamp 30 3,000.00
Fred 'k Stephens 20 2,000.00
C. W. Wilcox 10 1,000.00
Geo. W. Minter 20 2,000.00
C. F. Mansur 5 500.00
Joseph Yoch 20 2,000.00
The First National Bank of
Santa Ana, Cal., by J. A.
Turner, Cash 10 1,000.00
H. J. Blee 5 500.00
J. F. Kendall 5 500.00
H. K. Snow 10 1,000.00
A. Guy Smith 10 1,000.00
Bank of Anaheim, by W. S.
Bartlett, its Pres. 10 1,000.00
James McFadden 30 3,000.00
O. F. Brant 140 14,000.00
F. G. Smythe 10 1,000.00
C. H. Parker 184 18,400.00
Geo. Taylor 10 1,000.00
C. E. Parker 428 42,800.00
A. B. Harris 96 9,600.00
EIGHTH: The Corporation elects to be governed by all of the provisions
of the California General Corporation Law of 1977 not otherwise applicable
to it under Chapter 23 thereof.
NINTH: The liability of the directors of the Corporation for monetary
damages shall be eliminated to the fullest extent permissible under
California law.
Any repeal of modification of the provisions of this Article by the
shareholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such
repeal or modification.
TENTH: The Corporation is authorized to provide indemnification of
agents (as defined in Section 317 of the Corporations Code) for breach of
duty to the Corporation and its shareholders through bylaw provisions or
through agreements with the agents, or both, in excess of the
indemnification otherwise permitted by Section 317 of the Corporations
Code, subject to the limits on such excess indemnification set forth in
Section 204 of the Corporations Code.
Any repeal of modification of the provisions of this Article by the
shareholders of the Corporation shall not adversely affect any right or
protection of a director or other agent of the Corporation existing at the
time of such repeal of modification.
C. The foregoing amendment and restatement of the articles of
incorporation has been duly approved by the board of directors.
D. The Company has only one class of shares outstanding, its $1.00 par
value Common shares. No Preferred shares have been issued. The amendment to
Article Sixth effects only a stock split as such term is defined in Section 188
of the California Corporations Code (the "Code") and is an amendment that may be
adopted with approval by the board of directors alone pursuant to Section 902(c)
of the Code.
<PAGE>
The undersigned declares under penalty of perjury that the statements
set forth in this certificate are true of his own knowledge and that this
declaration was executed at Santa Ana, California on July 14, 1998.
/s/ Mark R Arnesen
----------------------
Name: Mark R Arnesen
Title: Vice President
/s/ Mark R Arnesen
----------------------
Name: Mark R Arnesen
Title: Secretary
EXHIBIT 5
[LETTERHEAD OF WHITE & CASE LLP]
July 28, 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 registration by the Company, through a
Registration Statement on Form S-4, as amended (the "Registration Statement"),
filed by the Company with the Securities and Exchange Commission, of 3,000,000
Common shares, $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 Post-Effective Amendment No. 1 to 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.
/s/ PricewaterhouseCoopers LLP
------------------------------
PricewaterhouseCoopers LLP
Costa Mesa, California
July 28, 1998
