As filed with the Securities and Exchange Commission on May 26, 1998
Registration No. 333-45459
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
PRE-EFFECTIVE AMENDMENT
NO. 2 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.
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CALCULATION OF REGISTRATION FEE
===================================================================================================================================
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 Offering Price Fee(1)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stock, $1.00 par value 263,436 shares $63.875 $16,826,975 $1,913(2)
===================================================================================================================================
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(f)(2) under the Securities Act of 1933, based on
the book value of the securities to be received as of December 31, 1997.
(2) A sum of $37,791 was previously paid at the initial filing.
</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.
PROSPECTUS
263,436 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 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 May 20, 1998, the closing price of the Shares on the New York Stock
Exchange was $77.5625 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 May 26, 1998.
(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), (8) and (9)
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. 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 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 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.
(9) 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 June 22, 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, Home Buyers, 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
[already requested] 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 Time, on June 29,
1998, unless one or both of the Exchange
Offers are extended by FATICO. See "The
Exchange Offers--Expiration Date; Extensions;
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.
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------------------------------------------------------
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
(Dollars in thousands, except per share data)
<S> <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
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
========== ========= =========== ========= =========
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
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* 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.
</TABLE>
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<F1>............................................... -- 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>
<F1> 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, 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 (defined below) 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
reasonable 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 (defined below).
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 Time, on June 29,
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
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 or (ii) to extend one or both of the Exchange Offers, by
giving oral or written notice of such delay or extension to the Exchange Agent.
FATICO reserves the right, in the event it determines in its reasonable
discretion that a Violation has occurred, to terminate the Exchange Offer(s)
effected thereby, by giving oral or written notice of such 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.
<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 * 35,729<F1> 37,629 *
- ------------------------------------------------------------------------------------------------------------------------------------
Martin Wool 375 * 29,792<F2> 30,167 *
- ------------------------------------------------------------------------------------------------------------------------------------
Gene Merlo 0 * 6,650<F3> 6,650 *
- ------------------------------------------------------------------------------------------------------------------------------------
Daniel Langston 106 * 3,907<F4> 4,013 *
- ------------------------------------------------------------------------------------------------------------------------------------
Lawrence Newland 0 * 36,027<F5> 36,027 *
- ------------------------------------------------------------------------------------------------------------------------------------
Preston Hawkins 0 * 1,148 1,148 *
- ------------------------------------------------------------------------------------------------------------------------------------
Witnessing Ministries of Christ 0 * 1,174 1,174 *
- ------------------------------------------------------------------------------------------------------------------------------------
Fuller Theological Seminary 0 * 391 391 *
====================================================================================================================================
<FN>
- ------------------------------------------
* Less than one percent.
<F1> 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.
<F2> 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.
<F3> 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.
<F4> 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.
<F5> 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>
<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 P. Pauletich 300 * 13,971<F6> 14,271 *
- -----------------------------------------------------------------------------------------------------------------------------------
Richard P. Pauletich, Trustee of the 0 * 6,985 6,985 *
Pauletich 1994 Charitable Remainder
Unitrust
- ------------------------------------------------------------------------------------------------------------------------------------
Melvin F. Nielsen, Trustee of the Melvin 0 * 20,957<F7> 20,957 *
Nielsen and Helen Nielsen Revocable
Trust
- ------------------------------------------------------------------------------------------------------------------------------------
Mark Sachau 0 * 20,957<F8> 20,957 *
- ------------------------------------------------------------------------------------------------------------------------------------
Richard G. Valenti 0 * 16,591<F9> 16,591 *
- ------------------------------------------------------------------------------------------------------------------------------------
Dana G. Parry, Trustee of the Jon 0 * 16,591<F10> 16,591 *
Q. Reynolds and Ann S. Reynolds
Charitable Remainder Unitrust
- ------------------------------------------------------------------------------------------------------------------------------------
Lisle Payne and Roslyn Payne, 5,728 * 16,591<F11> 22,319 *
Trustees of the Lisle & Roslyn
Payne Family Trust
- ------------------------------------------------------------------------------------------------------------------------------------
Edwin E. Andrews, Trustee of the 0 * 16,591<F12> 16,591 *
Grindstone Trust Dated August 28, 1991
- ------------------------------------------------------------------------------------------------------------------------------------
Anthony Varni, Trustee 0 * 16,591<F13> 16,591 *
- ------------------------------------------------------------------------------------------------------------------------------------
Dennis O'Brien 312 * 1,222<F14> 1,534 *
- ------------------------------------------------------------------------------------------------------------------------------------
Steven K. Bramble 0 * 873<F15> 873 *
- ------------------------------------------------------------------------------------------------------------------------------------
William B. Morrish 0 * 698<F16> 698 *
====================================================================================================================================
</TABLE>
- ------------------------------------------
* Less than one percent.
<F6> 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.
<F7> Mr. Nielsen is a Vice President of First American Title Guaranty
Company, a subsidiary of Title Guaranty.
<F8> 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.
<F9> Mr. Valenti is a Vice President of First American Title Guaranty
Company, a subsidiary of Title Guaranty.
<F10> Jon Q. Reynolds is a member of the board of directors, and the
compensation committee thereof, of Title Guaranty.
<F11> Roslyn 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.
<F12> Peter Bedford, a beneficiary of the trust, is a member of the board of
directors of Title Guaranty.
<F13> Mr. Varni is a member of the board of directors, and the audit
committee thereof, of Title Guaranty.
<F14> Mr. O'Brien is a member of the board of directors, and the audit
committee thereof, of Title Guaranty.
<F15> 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.
<F16> Mr. Morrish is retired and formerly was the Chairman of the Board of
both Title Guaranty and its subsidiary, First American Title Guaranty
Company.
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 15, 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 8 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 10 but not more
than 19, with the exact number of directors to be fixed, within those limits, by
the board of directors. Title Guaranty currently has 16 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 alternative 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 ex exchange, the exchange of Title Guaranty Shares of Share 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 form, 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
263,436 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 May 26, 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."
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."
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, incorporated by reference to Exhibit 3(a) of the
Registrant's report on Form 10-K for the fiscal year ended December
31, 1997.
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 May 26, 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: May 26, 1998 By: /s/ D.P. Kennedy
D.P. Kennedy, Chairman and Director
Date: May 26, 1998 By: /s/ Parker S. Kennedy
Parker S. Kennedy, President and Director
Date: May 26, 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: May 26, 1998 By:/s/ George L. Argyros *
George L. Argyros, Director
Date: May 26, 1998 By:/s/ Gary J. Beban *
Gary J. Beban, Director
Date: May 26, 1998 By:/s/ J. David Chatham *
J. David Chatham, Director
Date: May 26, 1998 By:/s/ William G. Davis *
William G. Davis, Director
Date: May __, 1998 By:
James L. Doti, Director
Date: May 26, 1998 By:/s/ Lewis W. Douglas, Jr. *
Lewis W. Douglas, Jr., Director
Date: May 26, 1998 By:/s/ Paul B. Fay, Jr. *
Paul B. Fay, Jr., Director
Date: May 26, 1998 By:/s/ Dale F. Frey *
Dale F. Frey, Director
Date: May 26, 1998 By:/s/ Anthony R. Moiso *
Anthony R. Moiso, Director
Date: May __, 1998 By:
Rudolph J. Munzer, Director
Date: May 26, 1998 By:/s/ Frank O'Bryan *
Frank O'Bryan, Director
Date: May 26, 1998 By:/s/ Roslyn B. Payne *
Roslyn B. Payne, Director
Date: May __, 1998 By:
D. Van Skilling, Director
Date: May __, 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
Article Sixth of the Restated Articles of Incorporation of
The First American Financial Corporation incorporated by
reference to Exhibit 3(a) of the Registrant's report on Form
10-K for the fiscal year ended December 31, 1997.
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.*
* Previously filed.
EXHIBIT 5
[LETTERHEAD OF WHITE & CASE LLP]
May 26, 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 263, 436 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 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
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
May 26, 1998
