<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the
[X] Definitive Proxy Statement Commission Only (as Permitted by
Rule 14a-6(e)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
THE FIRST AMERICAN FINANCIAL CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing fee for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
[LOGO OF THE FIRST AMERICAN FINANCIAL CORPORATION APPEARS HERE]
The First American Financial Corporation
Home Office: 1 First American Way, Santa Ana, CA 92707-5913 . 714-800-3000
April 10, 2000
Dear Fellow Shareholder:
You are cordially invited to attend our Annual Meeting of Shareholders at
2:00 p.m., Pacific Time, on Thursday, May 11, 2000, at the executive offices of
The First American Financial Corporation, located at 1 First American Way,
Santa Ana, California. Please note that we have moved our executive offices
since last year's Annual Meeting. We have included a map and directions to our
executive offices on the inside back cover of the proxy statement.
With this letter, we are including the notice for the Annual Meeting, the
proxy statement, the proxy card and our 1999 annual report. This year we have
taken the opportunity to write the proxy statement in jargon-free "plain
English." We hope you find its simplified format helpful and we welcome your
comments.
This year we have also made arrangements for you to vote your proxy over the
Internet or by telephone, as well as by mail with the traditional proxy card.
See the proxy card for instructions on these new methods of voting.
Your vote is important. Whether or not you plan on attending the Annual
Meeting on May 11, we hope you will vote as soon as possible.
Thank you for your ongoing support of and continued interest in The First
American Financial Corporation.
D. P. Kennedy
/s/ D. P. KENNEDY
Chairman of the Board
<PAGE>
[LOGO OF THE FIRST AMERICAN FINANCIAL CORPORATION APPEARS HERE]
The First American Financial Corporation
Home Office: 1 First American Way, Santa Ana, CA 92707-5913 . 714-800-3000
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be Held on May 11, 2000
----------------
The Annual Meeting of Shareholders of The First American Financial
Corporation, a California corporation, will be held at 2:00 p.m., Pacific Time,
on Thursday, May 11, 2000, at the executive offices of The First American
Financial Corporation, located at 1 First American Way, Santa Ana, California,
for the following purposes:
1. To elect 13 persons to serve on our board of directors for the next
year.
2. To amend our articles of incorporation to change the name of our company
to "The First American Corporation."
3. To transact such other business as may properly come before the meeting
or any adjournments thereof.
Only shareholders of record at the close of business on March 27, 2000, are
entitled to notice of the meeting and an opportunity to vote.
It is hoped that you will be present at the meeting to vote in person.
However, if you are unable to attend the meeting and vote in person, please
submit a proxy as soon as possible so that your shares can be voted at the
meeting in accordance with your instructions. You may submit your proxy (1)
over the Internet, (2) by telephone, or (3) by mail. For specific instructions,
please refer to the questions and answers commencing on page 2 of the proxy
statement and the instructions on the proxy card.
/s/ MARK R ARNESEN
Mark R Arnesen,
Secretary
Santa Ana, California
April 10, 2000
<PAGE>
[LOGO OF THE FIRST AMERICAN FINANCIAL CORPORATION APPEARS HERE]
The First American Financial Corporation
Home Office: 1 First American Way, Santa Ana, CA 92707-5913 . 714-800-3000
----------------
PROXY STATEMENT
Solicitation of Proxies by the Board of Directors
----------------
Our board of directors is soliciting proxies from holders of our common
shares for use at the annual meeting of our shareholders to be held on May 11,
2000, at 2:00 p.m., Pacific Time. The meeting will be held at the executive
offices of The First American Financial Corporation, located at 1 First
American Way, Santa Ana, California. Since we have recently moved our offices,
we have included a map and directions to our executive offices on the inside
back cover of the proxy statement for your convenience.
The approximate date on which this proxy statement and the enclosed proxy
card, notice of annual meeting, chairman's letter and 1999 annual report were
first mailed to our shareholders is April 13, 2000.
You will notice that this proxy statement has been written in a different
style than in years past. The Securities and Exchange Commission requires
portions of certain documents to be written in "plain English." The "plain
English" rules set forth guidelines for preparing written documents without
using confusing legal and technical language. Although the SEC rules do not
require proxy statements to be written in "plain English," we have decided to
write parts of our proxy statement that way. We want you to have access to
information about us in a direct and understandable way. We feel there is no
need to sort through complex legal language that adds little to an
understanding of who we are and where we are headed.
In furtherance of this goal, the remainder of this proxy statement has been
divided into three sections. You should read all three sections.
I. Questions and answers: This section provides answers to a number of
frequently asked questions.
II. Proposals to be voted on: This section provides information relating to
the proposals to be voted on at the shareholders' meeting.
III. Required information: This section contains information that is
required by law to be included in this proxy statement and which has
not been included in Sections I or II.
<PAGE>
I. QUESTIONS AND ANSWERS
Why have I been sent these proxy materials?
Our board of directors has sent you this proxy statement and the
accompanying proxy card to ask for your vote, as a shareholder of First
American, on certain matters that will be voted on at the annual meeting.
What matters will be voted on at the meeting?
. the election of 13 individuals to serve as directors of our company for
the next year;
. the amendment of our articles of incorporation to change our name to
"The First American Corporation;" and
. any other business properly raised at the meeting.
At the time this proxy statement was printed, our board of directors did not
know of any other matters to be voted on at the annual meeting.
Who may attend the annual meeting?
All shareholders of First American.
Who is entitled to vote?
Shareholders of record as of the close of business on March 27, 2000, the
record date, or those with a valid proxy from a bank, brokerage firm or similar
organization that held our shares on the record date.
Who is a shareholder of record?
A shareholder of record is a person or entity whose name appears as an owner
of one or more shares of our common stock on the records of our transfer agent
as of its close of business on the record date.
How many shares are entitled to vote at the meeting?
As of the record date, 62,950,988 of our common shares, par value $1.00 per
share, were issued, outstanding and entitled to vote at the meeting.
How many votes do I have?
Each common share is entitled to one vote. However, if cumulative voting
applies for the election of directors, you will be entitled to cast more than
one vote for each nominee.
How many votes are needed to elect each director?
Those candidates receiving the highest number of affirmative votes, up to
the number of directors to be elected, will be elected directors.
2
<PAGE>
How many votes are needed to approve the name change?
In order to change our company name, our articles of incorporation must be
amended. Approval of more than 50% of our issued and outstanding common shares
is required to amend our articles, regardless of how many shares actually
attend the meeting in person or by proxy.
What does it mean to cumulate a vote?
In elections for directors, California law provides that a shareholder, or
his or her proxy, may cumulate votes. That is, each shareholder has a number of
votes equal to the number of shares owned, multiplied by 13 (the number of
directors to be elected), and the shareholder may cumulate such votes for a
single candidate, or distribute such votes among as many candidates as he or
she deems appropriate. However, a shareholder may cumulate votes only for a
candidate or candidates whose names have been properly placed in nomination
prior to the voting, and only if the shareholder has given notice at the
meeting, prior to the voting, of his or her intention to cumulate votes for the
candidates in nomination. Unless you give different instructions, your proxy
gives discretionary authority to the appointees to vote your shares
cumulatively. Cumulative voting does not apply to any proposal other than the
election of directors.
Who are the board nominees?
The 13 nominees are:
<TABLE>
<S> <C> <C> <C>
George L. Argyros James L. Doti Parker S. Kennedy Virginia M. Ueberroth
Gary J. Beban Lewis W. Douglas, Jr. Frank E. O'Bryan
J. David Chatham Paul B. Fay, Jr. Roslyn B. Payne
Hon. William G. Davis D. P. Kennedy D. Van Skilling
</TABLE>
All of the nominees are current board members. See pages 8 through 10 for
biographical information regarding the nominees.
How do I vote?
You can vote on matters that properly come before the meeting in one of four
ways:
You may vote by mail.
You do this by signing and dating the proxy card and mailing it in the
enclosed, prepaid and addressed envelope within the required time. If you mark
your voting instructions on the proxy card, your shares will be voted as you
instruct.
You may vote by telephone.
You do this by following the instructions accompanying the proxy card. If
you vote your proxy by telephone, you do not have to mail in your proxy card.
Some shareholders may not be able to vote their proxy by telephone.
3
<PAGE>
You may vote on the Internet.
You do this by following the instructions accompanying the proxy card. If
you vote your proxy on the Internet, you do not have to mail in your proxy
card. Some shareholders may not be able to vote their proxy on the Internet.
You may vote in person at the meeting.
You can vote in person at the meeting. However, if you hold your shares in
street name (in the name of a bank, broker or some other nominee), you must
request and receive a legal proxy from the record owner prior to the meeting in
order to vote at the meeting.
What happens if I sign and return my proxy card, but don't mark my votes?
D. P. Kennedy, Parker S. Kennedy or Mark R Arnesen, our chairman, president
and secretary, respectively, will vote your shares in their discretion as
proxies.
Can I revoke my proxy?
You have the power to revoke your proxy at any time before the polls close
at the meeting. You may do this by:
. signing and returning another proxy with a later date;
. submitting written notice of your revocation to our secretary at our
mailing address on the cover page of this proxy statement;
. voting your proxy by telephone or on the Internet (only your latest
proxy is counted); or
. voting in person at the meeting.
What happens if my shares are held under the name of a brokerage firm?
If your shares are held in street name, your brokerage firm, under certain
circumstances, may vote your shares. Brokerage firms have authority under New
York Stock Exchange rules to vote customers' unvoted shares on certain
"routine" matters, including the election of directors and change of name. If
you do not vote your proxy, your brokerage firm may either:
. vote your shares on routine matters; or
. leave your shares unvoted.
We encourage you to provide instructions to your brokerage firm by voting
your proxy. This ensures that your shares will be voted at the meeting. You may
have granted to your stockbroker discretionary voting authority over your
account. Your stockbroker may be able to vote your shares depending on the
terms of the agreement you have with your stockbroker.
Who will count the vote?
An employee of First American will serve as the inspector of elections and
count the votes.
4
<PAGE>
What does it mean if I get more than one proxy card?
It means that you have multiple accounts at the transfer agent and/or with
stockbrokers. Please sign and return all proxy cards to ensure that all your
shares are voted.
What constitutes a "quorum?"
A "quorum" refers to the number of shares that must be represented at a
meeting in order to lawfully conduct business. A majority of the outstanding
common shares entitled to vote at the annual meeting, present in person or
represented by proxy, will constitute a quorum at the meeting. Abstentions and
broker nonvotes will be counted for the purpose of determining the presence or
absence of a quorum for the transaction of business, but will not otherwise
affect proposals voted upon. Without a quorum, no business may be transacted at
the annual meeting. However, whether or not a quorum exists, a majority of the
voting power of those present at the annual meeting may adjourn the annual
meeting to another date, time and place.
What is a "broker nonvote" and how is it treated?
A "broker nonvote" occurs with respect to a proposal to be voted on if a
broker or other nominee does not have the discretionary authority to vote
shares and has not received voting instructions from the beneficial owners with
respect to such proposal. Broker nonvotes are treated as present for purposes
of establishing the presence or absence of a quorum, but will not otherwise
affect the outcome of the votes on proposals acted upon at the meeting.
What percentage of stock do the directors and executive officers own?
Together, they owned approximately 8.75% of our common shares as of the
record date. See pages 12 through 14 for more details.
When are shareholder proposals for our next annual meeting due in order to be
included in the proxy statement?
We will consider proposals submitted by shareholders for inclusion in the
proxy statement for the annual meeting to be held in 2001 if they are received
no later than December 14, 2000. See page 27 for more details.
Who is paying the cost of preparing, assembling and mailing the notice of the
annual meeting of shareholders, proxy statement and form of proxy, and the
solicitation of the proxies?
First American. We will also pay brokers and other nominees for the expenses
of forwarding solicitation materials to their principals.
Who may solicit proxies?
In addition to this proxy statement, our directors, officers and other
regular employees may solicit proxies. None of them will receive any additional
compensation for such solicitation. Morrow & Company, Inc., 445 Park Avenue,
New York, New York 10022, has been engaged by the company to solicit proxies at
an estimated cost of $6,000 plus reimbursement of reasonable expenses.
5
<PAGE>
How will solicitors contact me?
People soliciting proxies may contact you in person, by mail, by telephone,
by e-mail or by facsimile.
Does the board of directors have any recommendations with respect to the listed
proposals?
The board of directors recommends that you vote "FOR" the slate of director
candidates proposed in this proxy statement and "FOR" the proposal to change
the name of our company to "The First American Corporation."
Who are the largest principal shareholders outside of management?
The following table lists as of the record date the persons or groups of
shareholders who are known to us to be the beneficial owners of 5% or more of
our common shares. The information regarding beneficial owners of 5% or more of
our common shares was gathered by us from the filings made by such owners with
the SEC. Shares that may be acquired within 60 days are treated as outstanding
for purposes of determining the amount and percentage beneficially owned. This
table does not include shares beneficially owned by our directors and officers
and entities controlled by them. See the table headed "Security Ownership of
Management" on pages 12 through 14 for that information.
<TABLE>
<CAPTION>
Amount and Nature of
Names of Beneficial Owners Beneficial Ownership Percent of Class
-------------------------- -------------------- ----------------
<S> <C> <C>
First American Trust FSB, as trustee
of certain of the company's benefit
plans............................... 8,839,574(1) 14.04%
Gilder Gagnon Howe & Co. LLC......... 4,015,896(2) 6.38%
EQSF Advisers, Inc. and M. J. Whitman
Advisers, Inc. ..................... 4,415,365(3) 7.02%
</TABLE>
- --------
(1) Of the shares set forth in the table, 5,759,222 are held by First American
Trust, our wholly owned subsidiary, as trustee pursuant to our Employee
Profit Sharing and Stock Ownership Plan, and 2,674,137 are held by the
trust company as trustee pursuant to our 401(k) Savings Plan. Both plans
require the trustee to vote the shares as directed by employee account
holders or, in the absence of such direction, as directed by the committee
responsible for administering the plans. The committee is composed of eight
members, including Parker S. Kennedy, Mark R Arnesen, Thomas A. Klemens and
John W. Long, who are all executive officers of our company. The committee
does not have the power to dispose of the shares. The trustee does not have
discretion to vote shares as to which no direction is received.
Accordingly, shares for which no direction is received from the holder of
such shares or the committee are not voted.
In addition, 406,215 shares are held by the trust company as trustee of
First American's Pension Trust as part of the diversified investment fund of
that trust. Parker S. Kennedy, Mark R Arnesen, Thomas A. Klemens and John W.
Long, executive officers of First American, serve on an eight-member
committee, a majority of which may, under the terms of the trust agreement
governing the trust, and subject to applicable law, direct the disposition
of the securities held by the trustee. The trust company is located at 421
North Main Street, Santa Ana, California 92701.
(2) Information on the number of shares and voting and investment power is
based on statements contained in the amendment to Schedule 13G filed with
the SEC on February 14, 2000, by Gilder Gagnon Howe &
6
<PAGE>
Co. LLC, a securities broker-dealer registered with the SEC that acquired
the shares in the ordinary course of its business. The amended Schedule 13G
indicates that this broker-dealer has sole power to vote 27,111 of the
reported common shares and shares the power to dispose of all of the
reported shares. Of the shares reported, 3,928,152 are held for the
accounts of customers, 60,633 shares are held for the accounts of members
of the broker-dealer and their families, and 27,111 shares are held for the
account of the profit-sharing plan of the broker-dealer. The broker-dealer
is located at 1775 Broadway, 26th Floor, New York, New York 10019.
(3) Voting and investment power and the number of shares set forth in the
table are based entirely on statements contained in the amendment to
Schedule 13G filed jointly by EQSF Advisors, Inc., M. J. Whitman Advisors,
Inc., and Martin J. Whitman with the SEC on February 14, 2000. The amended
Schedule 13G indicates that the shares were acquired in the ordinary
course of business and are held (a) by EQSF on behalf of Third Avenue
Value Fund, an investment company registered with the SEC, with respect to
3,145,000 of the reported shares, (b) by EQSF on behalf of various other
registered investment companies with respect to an aggregate of 359,800 of
the reported shares and (c) by MJWA on behalf of various clients for whom
MJWA acts as investment advisor with respect to an aggregate of 910,565 of
the reported shares. Martin J. Whitman disclaims ownership of the reported
shares and is included in the amended Schedule 13G as a beneficial owner
by virtue of his position as the chief executive officer and controlling
person of EQSF and MJWA. The principal business address of EQSF, MJWA and
Mr. Whitman is 767 Third Avenue, New York, New York, 10017.
7
<PAGE>
II. PROPOSALS
Proposal 1
Election Of Directors
Our bylaws require that directors be elected annually and that the number of
directors be not less than nine nor more than 17. By resolution, the board has
fixed the number of directors at 13. The 13 persons named below are nominated
for election as directors to serve until the next annual meeting or as soon
thereafter as their successors are duly elected and qualified.
Votes by the company's proxy holders will be cast in such a way as to effect
the election of all nominees listed below or as many as possible under the
rules of cumulative voting. Unless otherwise specified by you in your proxy
card, the proxies solicited by our board will be voted "FOR" the election of
these nominees. If any nominee should become unable or unwilling to serve as a
director, the proxies will be voted for such substitute nominee(s) as shall be
designated by the board. The board presently has no knowledge that any of the
nominees will be unable or unwilling to serve.
The following list provides information with respect to each person
nominated and recommended to be elected by the current board. See the section
"Security Ownership of Management" beginning on page 12 for information
pertaining to stock ownership of the nominees. Except for Parker S. Kennedy,
who is D. P. Kennedy's son, there are no family relationships among any of the
nominees for director or any of the executive officers of the company. There
are no arrangements or understandings between any nominee and any other person
pursuant to which any nominee was or is to be selected as a director. All of
the nominees currently are directors of the company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING NOMINEES:
<TABLE>
<CAPTION>
Principal Occupation(s)
Since 1995 (arranged by title, Director Directorships Held in
Name Age company & industry) Since Other Public Companies
- ---------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C>
George L. Argyros 63 Chairman and Chief Executive Officer 1988 Doskocil Manufacturing
Arnel & Affiliates Company, Inc., DST
diversified investment company Systems, Inc., The
Newhall Land and Farming
Company and Rockwell
International
Corporation
Gary J. Beban 53 Senior Executive Managing Director 1996 CB Richard Ellis
CB Richard Ellis, Inc. Services, Inc.
commercial real estate services
J. David Chatham 49 President and Chief Executive Officer 1989 None
Chatham Holdings Corporation
real estate development and
associated industries
Hon. William G. Davis(1) 70 Counsel 1992 Algoma Steel, Inc.,
Torys (a law firm) Corel Corporation, Magna
legal services Entertainment Corp. and
Magna International Inc.
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Principal Occupation(s) Since 1995 Director Directorships Held in
Name Age (arranged by title, company & industry) Since Other Public Companies
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
James L. Doti 53 President and Donald Bren Distinguished 1993 Fleetwood Enterprises,
Professor of Business and Economics Inc., Remedy Temp, Inc.
Chapman University and Standard Pacific
education Corp.
Lewis W. Douglas, Jr. 75 Chairman 1971(2) None
Stanley Energy, Inc.
oil exploration
Paul B. Fay, Jr. 81 President 1967 Vestaur Securities Inc.
The Fay Improvement Company
financial consulting and business
ventures
D. P. Kennedy 81 Chairman of the Board 1956 None
The First American Financial Corporation
title insurance and services, real
estate information and services and
consumer information and services
Parker S. Kennedy 52 President 1987 None
The First American Financial Corporation
title insurance and services, real
estate information and services and
consumer information and services
Chairman of the Board (1999 to present)
President (1989-1999)
First American Title Insurance Company,
a subsidiary of our company
title insurance and services
Frank E. O'Bryan 66 Chairman of the Board (1997 to present) 1994 None
WMC Mortgage Corporation
mortgage lending
Chairman of the Board (1985-1997)
Spring Mountain Group
escrow and savings and loan holding
company
Roslyn B. Payne 53 President 1988 None
Jackson Street Partners, Ltd.
real estate venture capital and
investments
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Principal Occupation(s)
Since 1995 (arranged by title, Director Directorships Held in
Name Age company & industry) Since Other Public Companies
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
D. Van Skilling 66 Private Investor (1999 to present) 1998 Lamson & Sessions Co.
Chairman Emeritus (1999 to
present) Chairman and Chief
Executive Officer (1996 to
1999)
Experian Information
Solutions, Inc.
information services and solutions
for direct marketing and credit
industries
Executive Vice President
(1989-1996)
TRW Inc.
diversified automotive, aerospace
and information services
Virginia M. Ueberroth 60 President 1988 None
Ueberroth Family Foundation
philanthropy
</TABLE>
- --------
(1) Mr. Davis was the Premier of the Province of Ontario (Canada) from 1971 to
1985.
(2) Mr. Douglas also was a director of the company during the period 1961-1967.
10
<PAGE>
Proposal 2
Amendment of the Articles of Incorporation
to Change the Name of Our Company
The board of directors is asking you to approve an amendment to our
company's articles of incorporation to change the name of the company to "The
First American Corporation." The directors believe it is desirable to delete
the word "Financial" because our company's business has expanded over the years
to include a broad array of nonfinancial services. The proposed amendment will
not alter or modify the rights, privileges or restrictions of our common shares
in any way. Unless otherwise specified by you in your proxy card, the proxies
solicited by our board will be voted "FOR" the amendment of the articles of
incorporation to effect the name change.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 2.
11
<PAGE>
III. REQUIRED INFORMATION
Security Ownership of Management
The following table sets forth as of the record date the total number of our
common shares beneficially owned and the percentage of the outstanding shares
so owned by:
. each director (and each nominee for director);
. each named executive officer; and
. all directors and executive officers as a group.
Unless otherwise indicated in the notes following the table, the
shareholders listed in the table are the beneficial owners of the listed shares
with sole voting and investment power (or, in the case of individual
shareholders, shared power with such individual's spouse) over the shares
listed. Shares subject to rights exercisable within 60 days after the record
date are treated as outstanding when determining the amount and percentage
beneficially owned by a person or entity.
<TABLE>
<CAPTION>
Number of Percent if
Shareholders(1) common shares greater than 1%
--------------- ------------- ---------------
<S> <C> <C>
Directors
George L. Argyros(2) 1,099,361 1.73%
Gary J. Beban 20,971 --
J. David Chatham 28,319 --
Hon. William G. Davis 20,700 --
James L. Doti 25,350 --
Lewis W. Douglas, Jr. 34,543 --
Paul B. Fay, Jr. 91,490 --
D. P. Kennedy(3) 77,640 --
Parker S. Kennedy(3)(4) 3,443,461 5.41%
Frank E. O'Bryan 30,359 --
Roslyn B. Payne 72,252 --
D. Van Skilling(5) 18,802 --
Virginia M. Ueberroth(6) 91,795 --
Named executive officers who are not
directors
Thomas A. Klemens(4) 139,858 --
Craig I. DeRoy 80,169 --
Gary L. Kermott 79,101 --
John W. Long(4) 118,857 --
All directors, all named executive officers
and other executive officers as a group
(19 persons) 5,568,765 8.75%
</TABLE>
--------
12
<PAGE>
(1) Of the shares set forth in the table, the following shares are allocated to
the individual accounts of the following individuals under the company's
employee stock ownership plan ("ESOP"):
<TABLE>
<CAPTION>
Individual Shares
---------- ------
<S> <C>
D. P. Kennedy 5,078
Parker S. Kennedy 8,112
Thomas A. Klemens 2,450
Craig I. DeRoy 131
Gary L. Kermott 3,409
John W. Long 887
</TABLE>
These individuals can direct the ESOP trustee to vote their ESOP shares.
These individuals do not have dispositive power over their ESOP shares.
First American Trust FSB, a wholly owned subsidiary of the company, is the
trustee of the ESOP.
The shares set forth in the table include for the following individuals
the following shares which those individuals have the right to acquire
within 60 days of March 27, 2000, the record date for this meeting:
<TABLE>
<CAPTION>
Individual Shares
---------- -------
<S> <C>
George L. Argyros 20,250
Gary J. Beban 17,250
J. David Chatham 13,500
Hon. William G. Davis 20,250
James L. Doti 20,250
Lewis W. Douglas, Jr. 20,250
Paul B. Fay, Jr. 20,250
D. P. Kennedy 66,000
Parker S. Kennedy 102,000
Frank E. O'Bryan 20,250
Roslyn B. Payne 20,250
D. Van Skilling 13,500
Virginia M. Ueberroth 20,250
Thomas A. Klemens 84,000
Craig I. DeRoy 59,000
Gary L. Kermott 52,500
John W. Long 34,500
</TABLE>
(2) Includes 43,600 shares held by Mr. Argyros as the trustee, with investment
power over such securities, of three trusts for the benefit of his family
members. In addition, 735,291 shares are held by a nonprofit corporation
whose four-member board of directors includes George L Argyros and his
wife, which board directs the voting and disposition of such shares and
18,800 shares are held by another nonprofit corporation with a similar
board having similar voting and dispositive power. Mr. Argyros is a
director, C.E.O. and shareholder of two companies that hold an aggregate of
59,700 shares.
(3) Of the shares credited to Parker S. Kennedy, president of First American,
10,000 shares are owned directly and 3,323,349 shares are held by Kennedy
Enterprises, L.P., a California limited partnership of which Parker S.
Kennedy is the sole general partner and D. P. Kennedy, Parker S. Kennedy's
father, is one of the
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<PAGE>
limited partners. The limited partnership agreement pursuant to which the
partnership was formed provides that the general partner has all powers of
a general partner as provided in the California Uniform Limited Partnership
Act, provided that the general partner is not permitted to cause the
partnership to sell, exchange or hypothecate any of its shares of stock of
First American without the prior written consent of all of the limited
partners. Of the shares held by the partnership, 457,277 are allocated to
the capital accounts of Parker S. Kennedy and 2,045,600 are allocated to
the capital account of D. P. Kennedy. The balance of the shares held by the
partnership is allocated to the capital accounts of the other limited
partners, who are family members of the Kennedys. Except to the extent of
his voting power over the shares allocated to the capital accounts of the
limited partners, Parker S. Kennedy disclaims beneficial ownership of all
shares held by the partnership other than those allocated to his own
capital accounts.
(4) In addition to the shares set forth in the table, 406,215 are held in
trust under our pension plan as part of the diversified investment of the
trust's assets. Parker S. Kennedy, Thomas A. Klemens, John W. Long and
Mark R Arnesen, executive officers of the company, serve on a committee of
eight persons, the majority of which may direct the disposition of the
securities held as trust assets.
(5) Includes 1,100 shares held by a nonprofit corporation for which Mr.
Skilling serves as a director and officer. In his capacity as an officer,
Mr. Skilling has the power, acting alone, to direct the voting and
disposition of the shares.
(6) The shares set forth in the table include 5,000 shares held by a nonprofit
corporation whose six-member board of directors is composed of Mrs.
Ueberroth and her husband and children. In her capacity as an officer of
that corporation, Mrs. Ueberroth has the power, as do certain other
officers, to direct the voting and disposition of the shares.
Board and Committee Meetings
Our board of directors held seven meetings during 1999. Each director
attended 75% or more of the meetings of the board and the board committees on
which the director served, if any, except Messrs. O'Bryan and Skilling. From
time to time, our board may act by unanimous written consent as permitted by
the laws of the State of California.
Our board of directors has an audit committee. The members of the audit
committee are Messrs. Chatham (chairman), Doti, Fay, O'Bryan, and Mrs.
Ueberroth. The functions performed by this committee include selecting our
independent auditor, directing and supervising investigations into matters
within the scope of its duties, overseeing the company's "year 2000 readiness"
program, reviewing with the independent auditor the plan and results of its
audit, reviewing internal auditing procedures and results, and determining the
nature of other services to be performed by, and fees to be paid to, the
independent auditor. During 1999, our audit committee met seven times.
Our board of directors also has a compensation committee. The members of
the compensation committee are Messrs. Beban, Chatham, Davis, Doti, Douglas
(chairman) and Fay. This committee establishes compensation rates and
procedures with respect to our senior management and the senior management of
our subsidiaries, including bonus awards. During 1999, our compensation
committee met four times.
Transactions with Management and Others
On July 30, 1999, First American purchased one nonvoting unit of membership
interest (0.46%) in Lone Cypress Company, LLC. The purchase price of $2.0
million was established in a private offering
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<PAGE>
memorandum covering up to 200 such units that was circulated to potential
investors in connection with the LLC's financing of its acquisition of the
Pebble Beach Company. The Pebble Beach Company owns four golf courses, two
hotels, a spa, the "17-Mile Drive" and other real property in Northern
California. The voting members of the LLC include the Ueberroth Family Trust,
of which Virginia M. Ueberroth, a director of our company, and her husband,
Peter V. Ueberroth, are trustees and primary beneficiaries. Mr. Ueberroth is a
director and co-chairman of the board of the LLC. The purchase was approved by
our board of directors, with Mrs. Ueberroth abstaining from the vote.
Executive Officers
The following provides information regarding our executive officers.
<TABLE>
<CAPTION>
Name Position Held Age
---- ------------- ---
<S> <C> <C>
D. P. Kennedy Chairman 81
Parker S. Kennedy President 52
Thomas A. Klemens Executive Vice President, Chief Financial Officer 49
Craig I. DeRoy Executive Vice President, General Counsel 47
Gary L. Kermott Executive Vice President 46
John W. Long Executive Vice President 44
Curt A. Caspersen Executive Vice President 41
Mark R Arnesen Vice President, Secretary, Corporate Counsel 47
</TABLE>
All officers of the company are appointed annually by the board of
directors subsequent to its election.
. D. P. Kennedy has been our chairman since 1993, and served as our
president from 1963 to 1993. He also serves as the vice chairman and
director of First American Title Insurance Company, a subsidiary of the
company.
. Parker S. Kennedy, who is D. P. Kennedy's son, has been our president
since 1993, and served as our executive vice president from 1986 to
1993. He has been employed by our subsidiary, First American Title
Insurance Company, since 1977 and became a vice president of that
company in 1979. During 1983, he was appointed executive vice president
of First American Title Insurance Company, and in 1989 was appointed its
president. He now serves as its chairman, a position to which he was
appointed in 1999.
. Thomas A. Klemens has been our executive vice president and chief
financial officer since 1996, served as our vice president, chief
financial officer from 1993 to 1996, and served as our principal
accounting officer from 1992 to 1993. First American Title Insurance
Company has employed Mr. Klemens as vice president since 1985, as
controller from 1985 to 1993 and as chief financial officer from 1993 to
1998.
. Craig I. DeRoy has been our executive vice president and general counsel
since 1996, and served as our vice president, general counsel from 1993
to 1996. He also serves as vice president of First American Title
Insurance Company, a position he has held since 1993. From 1993 to 1998,
he also served as general counsel of First American Title Insurance
Company.
. Gary L. Kermott has been executive vice president of our company since
1999 and president of First American Title Insurance Company since 1999,
and was its executive vice president from 1996 to 1999 and its chief
operating officer from 1997 until becoming president. He has been with
our company or a subsidiary in various capacities since 1983.
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<PAGE>
. John W. Long has been executive vice president of our company since 1999
and president of First American Real Estate Information Services, Inc.,
a subsidiary of our company, since 1993. He served as executive vice
president of that subsidiary from 1991 to 1993.
. Curt A. Caspersen was named executive vice president of our company this
year. He has been executive vice president of First American Real Estate
Information Services, Inc., since 1996 and vice president of First
American Title Insurance Company since 1993.
. Mark R Arnesen has been vice president, secretary and corporate counsel
of our company and of First American Title Insurance Company since 1992.
He has been vice president of First American Title Insurance Company
since 1989, and has served that company in various capacities since
1979.
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<PAGE>
Executive Compensation
The table below describes the compensation paid, earned and awarded for the
last three years to our chief executive officer and five other most highly
compensated executive officers who were serving at the end of 1999 for all
services rendered to the company and its subsidiaries. We sometimes refer to
these people in this proxy statement as our "named executive officers." All
share amounts have been adjusted to reflect the three-for-two stock split which
occurred on January 15, 1998, and the three-for-one stock split which occurred
on July 17, 1998.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
------------------------------------ ------------
Securities
Other Annual Underlying All Other
Name and Principal Position Year Salary(1) Bonus(2) Compensation(3) Options Compensation(4)
- --------------------------- ---- ----------- -------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
D. P. Kennedy 1999 $301,900(5) $ -0- -- -- $205,090(6)
Chairman 1998 317,300(5) 155,000 -- 30,000 175,794(6)
1997 301,850(5) 148,184 -- -- 147,853(6)
Parker S. Kennedy 1999 430,920(7) -0- -- -- 4,036
President 1998 401,120(7) 457,200 -- 30,000 5,626
1997 401,120(7) 253,966 -- -- 2,998
Thomas A. Klemens 1999 287,720(8) 200,000 -- -- 3,874
Executive Vice President, 1998 262,700(8) 411,326 -- 30,000 5,398
Chief Financial Officer 1997 227,696(8) 226,256 -- -- 2,998
Craig I. DeRoy 1999 280,920 200,000 -- -- 3,874
Executive Vice President, 1998 255,900 411,326 -- 30,000 5,398
General Counsel 1997 220,896 226,256 -- -- 2,998
Gary L. Kermott(9) 1999 251,940(9) 200,000 -- -- 3,874
Executive Vice President 1998 -- -- -- -- --
1997 -- -- -- -- --
John W. Long(10) 1999 237,750 200,000 -- -- 3,772(10)
Executive Vice President 1998 -- -- -- -- --
1997 -- -- -- -- --
</TABLE>
- --------
(1) Includes, in addition to regular salary, a fee of $150 for each meeting of
the board of directors attended by the named executive officer during the
years covered in the table.
(2) Consists of cash bonuses and the dollar value of noncash (stock) bonuses.
Officers of our company and its subsidiaries are eligible for such
bonuses. Bonuses are awarded during the year following the fiscal year to
which the bonus relates. Bonus awards are based on an evaluation by the
compensation committee of the performance of the individual and our
company during the preceding fiscal year. For services rendered during
1999, 1998 and 1997, respectively, 0, 508 and 371 individuals were awarded
stock bonuses. During the years 1998 and 1997, respectively, an aggregate
of 147,341 and 194,610 common shares was awarded annually to all
participants in our stock bonus plan. None of the officers of
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<PAGE>
our company was awarded a stock bonus with respect to services rendered
during 1999. The following table sets forth the cash bonus awards and the
amount and value of the stock bonus awards received by the named executive
officers for services rendered during the three years included in the
summary compensation table above.
<TABLE>
<CAPTION>
Name and Fair Market
Principal Cash Stock Bonus Value of Award on
Position Year Bonus (# of shares) Date of Award
--------- ---- -------- ------------- -----------------
<S> <C> <C> <C> <C>
D. P. Kennedy 1999 $ -0- -0- $ n/a
1998 100,000 2,500 55,000
1997 100,000 3,375 48,184
Parker S. Kennedy 1999 -0- -0- n/a
1998 400,000 2,600 57,200
1997 200,000 3,780 53,966
Thomas A. Klemens 1999 200,000 -0- n/a
1998 360,000 2,333 51,326
1997 180,000 3,240 46,256
Craig I. DeRoy 1999 200,000 -0- n/a
1998 360,000 2,333 51,326
1997 180,000 3,240 46,256
Gary L. Kermott 1999 200,000 -0- n/a
1998 n/a n/a n/a
1997 n/a n/a n/a
John W. Long 1999 200,000 -0- n/a
1998 n/a n/a n/a
1997 n/a n/a n/a
</TABLE>
(3) In the interest of retaining our named executive officers, we and our
subsidiaries may have paid or provided certain incidental perquisites and
other personal benefits to the named executive officers. However, the
expenses incurred by us and our subsidiaries in providing such
perquisites and benefits to the named executive officers did not, for any
fiscal year covered, exceed the lesser of $50,000 or 10% of the total of
annual salary and bonus reported for such year for any of the named
executive officers. In accordance with the rules of the SEC, the amounts
of such perquisites and benefits are not included in the summary
compensation table.
(4) Consists of the matching contributions made to the named executive
officer's account in our 401(k) savings plan during, or with respect to,
the covered fiscal year, plus the dollar value of insurance premiums paid
by, or on behalf of, us during the covered fiscal year with respect to
term life insurance for the benefit of such officer.
(5) The compensation shown in the "Salary" column of the table includes fees
totaling $1,000, $1,400 and $950, which were earned by D. P. Kennedy for
services he rendered as a director of our subsidiaries during 1999, 1998
and 1997, respectively.
(6) The amounts shown in the last column of the summary compensation table
include, for each fiscal year covered, the distributions made to D. P.
Kennedy from our pension plan, which were required to be made under
provisions of the federal tax laws. For further information, please refer
to "Pension Plan" below. The compensation shown also includes cash and
the value of stock, aggregating $95,480, $64,561 and
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<PAGE>
$43,164, distributed to Mr. Kennedy during 1999, 1998 and 1997,
respectively, from his account in our profit sharing plan attributable to
contributions made by us and our participating subsidiaries in years prior
to those covered in the table and earnings on those contributions. These
distributions were required to be made under provisions of the federal tax
laws.
(7) The compensation shown in the "Salary" column of the table includes fees
totaling $200 for each of 1998 and 1997, which were earned by Parker S.
Kennedy for services he rendered as a director of our subsidiaries
during those years. Mr. Kennedy did not earn such fees during 1999.
(8) The compensation shown in the "Salary" column of the table includes fees
totaling $6,800 in each of 1999, 1998 and 1997, which were earned by Mr.
Klemens for services he rendered as a director of our subsidiaries during
those years.
(9) Gary L. Kermott was not an officer of our company prior to being named
Executive Vice President in 1999. The amount shown in the "Salary" column
of the table includes fees totaling $1,000, which were earned by him for
services rendered as a director of our subsidiaries during 1999.
(10) John W. Long was not an officer of our company prior to being named
Executive Vice President in 1999. Mr. Long is the only named executive
officer who participated in our company's deferred compensation plan,
discussed below under the heading "Deferred Compensation Plan," during
the years covered in the table. However, no contributions or payments
were made to that plan by our company for the benefit of Mr. Long in
excess of the market interest rate determined in accordance with the
rules and regulations of the SEC.
Stock Option Exercises
The following table provides information with respect to stock options
exercised and held by each of the executive officers named in the summary
compensation table for fiscal 1999. All share amounts, values and exercise
prices have been adjusted to reflect the three-for-two stock split that
occurred on January 15, 1998, and the three-for-one stock split that occurred
on July 17, 1998.
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values(1)
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-The-Money Options
Shares Fiscal Year-End at Fiscal Year-End(2)
Acquired Value ------------------------- -------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
D. P. Kennedy -- $ -- 42,000 60,000 $242,766 $242,766
Parker S. Kennedy -- -- 73,500 69,000 455,186 303,458
Thomas A. Klemens -- -- 60,000 60,000 364,149 242,766
Craig I . DeRoy -- -- 35,000 60,000 195,562 242,766
Gary L. Kermott -- -- 33,000 51,000 182,075 182,075
John W. Long 22,500 276,885 6,000 69,000 -0- 303,458
</TABLE>
- --------
(1) Each of the options disclosed in the table vests, and can be exercised by
the option holder, in 20% annual increments commencing on the first
anniversary of the date on which the option was granted.
(2) The value of each unexercised option is based on the difference between
the closing price of our common shares on the New York Stock Exchange on
December 31, 1999, which was $12.4375, and the adjusted exercise price of
such option.
19
<PAGE>
Pension Plan
Annual Pension Benefits
<TABLE>
<CAPTION>
Remuneration
(Final Average Pay)(1) Years of Benefit Service
---------------------- -------------------------------------------------
5 10 20 30 40 50
<S> <C> <C> <C> <C> <C> <C>
$100,000 $ 4,850 $10,950 $23,150 $35,350 $ 47,550 $ 59,750
125,000 6,100 13,763 29,088 44,413 59,738 75,063
150,000 7,350 16,575 35,025 53,475 71,925 90,375
175,000 8,600 19,388 40,963 62,538 84,113 105,688
200,000 9,850 22,200 46,900 71,600 96,300 121,000
225,000 11,100 25,013 52,838 80,663 108,488 136,313
250,000 12,350 27,825 58,775 89,725 120,675 151,625
275,000 or more 13,600 30,638 64,713 98,788 132,863 166,938
</TABLE>
- --------
(1) Final average pay is defined as the highest consecutive five-year
average "pay," as defined in the plan, during the last 10 years of
employment.
The above table sets forth estimated annual benefits upon retirement
(assuming such benefits will be paid in the form of a life annuity) at various
compensation levels and years of service under our pension plans. Subject to
certain conditions of age and tenure, all regular employees of the company and
participating subsidiaries are eligible to join our qualified pension plan.
In order to participate, during plan years ending on or prior to December
31, 1994, an employee was required to contribute 1 1/2% of pay (i.e., salary,
plus cash bonuses, commissions and other pay) to the plan. As a result of
amendments to the pension plan that were adopted in 1994, during plan years
commencing after December 31, 1994, an employee is not required to contribute
to the plan in order to participate.
A participant generally vests in his accrued benefit attributable to the
company's contributions upon the completion of three years of service or, if
earlier, the attainment of normal retirement age while an employee. Normal
retirement age is defined under the plan as the later of the employee's
attainment of age 65 or his third anniversary of participation in the plan.
Upon retirement at normal retirement age, an employee receives full monthly
benefits which are equal, when calculated as a life annuity:
. for years of credited service with the company and its subsidiaries as
of December 31, 1994, to 1% of the first $1,000 and 1 1/4% of remaining
final average pay (i.e., the average of the monthly "pay," as defined
above, during the five highest paid consecutive calendar years out of
the last 10 years prior to retirement) times the number of years of
credited service as of December 31, 1994; and
. for years of credited service with the company and its subsidiaries
after December 31, 1994, to 3/4% of the first $1,000 and 1% of the
remaining final average pay times the number of years of credited
service subsequent to December 31, 1994.
An employee with at least three years of participation in the plan may elect to
retire after attaining age 55, but prior to age 65, and receive reduced
benefits.
20
<PAGE>
We fund the plan based on actuarial determinations of the amount required to
provide the stated benefits. The table is based on retirement at age 65 or
later, with contributions having been made by the employee in each year of
credited service prior to 1995. The benefits are not subject to deduction for
Social Security payments or any other offsets. Currently, D. P. Kennedy, Parker
S. Kennedy, Thomas A. Klemens, Craig I. DeRoy, Gary L. Kermott and John W. Long
have 51, 23, 14, 6, 17 and 9 years, respectively, of credited service.
The compensation levels shown in the table are less than those set forth in
the summary compensation table because the federal tax law limits the maximum
amount of pay that may be considered in determining benefits under the tax-
qualified pension plan, and our pension restoration plan, which is described
below, does not make up for these limits for pay exceeding $275,000. The limit
on pay that could be recognized by tax-qualified retirement plans was $200,000
in 1989. This amount was adjusted for inflation for each year through 1993,
when the limit was $235,840. In 1993, this limit was decreased to $150,000 for
plan years beginning in 1994. The $150,000 limit has been adjusted for
inflation and was increased to $160,000 as of January 1, 1997, and to $170,000
as of January 1, 2000. The highest final average pay that could be considered
in determining benefits accruing under the pension plan before 1994 is
$219,224, and the highest final average pay that can currently be considered in
determining benefits accruing after 1993 is $160,000.
During 1996, we adopted our pension restoration plan. This plan is an
unfunded, nonqualified plan designed to make up for the benefit accruals that
are restricted by the indexed $150,000 pay limit. However, in order to limit
its expense, the pension restoration plan does not make up for benefit accruals
on compensation exceeding $275,000. The pension restoration plan also makes up
for benefits that cannot be paid from our pension plan because of limitations
imposed by the federal tax laws. Vesting of benefits payable to an employee
under our pension restoration plan occurs at the same time that vesting occurs
for that employee in his or her pension plan benefits. The pension restoration
plan is effective as of January 1, 1994, but only covers employees who were
participants in the pension plan on that date. As noted above, January 1, 1994,
is the date as of which the pay limit for the pension plan was reduced from
$235,840 to $150,000.
Pursuant to the provisions of the federal tax laws, during 1999, 1998 and
1997, respectively, mandatory distributions totaling $105,371, $105,371 and
$101,227 were made to D. P. Kennedy from the pension plan. These amounts are
included in the last column of the summary compensation table.
Supplemental Benefit Plan
We maintain an executive supplemental benefit plan which we believe assists
us in attracting and retaining highly qualified individuals for upper
management positions. The plan provides retirement benefits for, and
preretirement death benefits with respect to, certain key management personnel
selected by our board of directors. Under the plan, upon retirement at normal
retirement date (the later of age 65 or, unless waived by our board of
directors, completion of 10 years of service), a participant receives a joint
life and 50% survivor annuity benefit equal to 35% of "final average
compensation." "Final average compensation" is the average annual compensation,
composed of base salary, plus cash and stock bonuses, for those three calendar
years of the preceding 10 years of employment in which it is the highest.
The benefit is reduced by 5% for each year prior to normal retirement date
in which retirement occurs and, until age 70, increased by 5% (compounded in
order to approximate the annuitized value of the benefit had retirement
occurred at age 65) for each year after such date in which retirement occurs.
With respect to such postponed retirement, the plan takes into account covered
compensation received until age 70, so that the
21
<PAGE>
retirement benefit of an executive who retires after normal retirement date is
determined as the greater of the annuitized benefit or the benefit calculated
using final average compensation until age 70.
To be eligible to receive benefits under the plan, a participant must be at
least age 55, have been one of our employees, or an employee of one of our
subsidiaries, for at least 10 years and, unless waived by our board of
directors, covered by the plan for at least five years. A preretirement death
benefit is provided consisting of 10 annual payments, each of which equals 50%
of final average compensation. Vesting of rights under the plan is accelerated
in the event of a "change in control" (as defined in the plan) of our company.
Currently 47 employees, including D. P. Kennedy, Parker S. Kennedy, Thomas
A. Klemens, Craig I. DeRoy, Gary L. Kermott and John W. Long, have been
selected to participate in the plan. The annual benefit payable under the plan
to D. P. Kennedy in the event of his retirement is $108,936. The estimated
annual benefits payable under the plan to Parker S. Kennedy, Thomas A. Klemens,
Craig I. DeRoy, Gary L Kermott and John W. Long upon retirement at normal
retirement age, assuming compound annual increases of 5.0% in the relevant
portions of compensation shown above in the summary compensation table, are
$469,310, $383,421, $420,677, $418,635 and $578,064, respectively.
The plan is unfunded. We purchase insurance, of which we are the owner and
beneficiary, on the lives of the plan participants. This insurance is designed
to recover, over the life of the plan, our costs incurred with respect to the
plan.
Deferred Compensation Plan
Our deferred compensation plan gives a select group of management and highly
compensated employees the opportunity to elect to defer portions of salary,
commissions and bonuses. A committee appointed by our board is responsible for
administering the plan, which became effective January 1, 1998. We maintain a
deferral account for each participating employee on a fully vested basis for
all deferrals. Participants can choose to receive cash benefits in one lump sum
or in quarterly payments upon termination of employment or death.
Change of Control Arrangements
Our supplemental benefit plans and all of our stock option plans (unless our
board directs otherwise with respect to our 1997 directors stock option plan)
call for accelerated vesting of all benefits and options in the event of a
change in control of the company. In addition, as part of our efforts to retain
key employees, effective November 12, 1999, we entered into agreements with
each of the named executive officers and other designated employees to provide
for certain benefits in the event they are terminated within three years after
a change in control occurs. A "change in control" means any one of the
following:
. a merger or consolidation in which our shareholders end up owning less
than 50% of the voting securities of the surviving entity;
. the sale, transfer or other disposition of all or substantially all of
our assets or the complete liquidation or dissolution of the company;
. a change in the composition of our board over a two-year period without
the consent of a majority of directors in office at the beginning of the
two-year period; or
. the acquisition or accumulation by certain persons of at least 25% of
our voting securities.
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<PAGE>
If termination of employment occurs without cause or if the employee
terminates employment for "good cause," we will pay the following benefits in
one lump sum within 10 business days:
. the employee's base salary through and including the date of termination
and any accrued but unpaid bonus;
. a portion of the employee's annual bonus prorated through the date of
termination;
. any compensation previously deferred by the employee (other than
pursuant to a tax-qualified plan) together with any interest and
earnings;
. accrued and unpaid vacation pay;
. unreimbursed business expenses;
. three times the employee's annual salary in effect immediately prior to
the date of termination; and
. three times the greater of the employee's highest annual incentive bonus
(including cash and stock) during the preceding four fiscal years or the
employee's anticipated bonus for the remainder of the year.
We will also continue to pay the health and welfare benefits for the
employee and dependents which were in place immediately prior to the
termination for a 24-month period following the date of termination. All cash
payments will be on an "after-tax basis" so that the employee will receive
benefits without being reduced to pay any excise tax. The change-in-control
agreements have an initial term of three years and will be automatically
extended for additional one-year periods unless our board or the employee with
whom the agreement is entered into gives notice not to extend. In addition, if
the employee terminates employment for any reason during the 30-day period
following the one-year anniversary of the change of control, the employee will
receive all of the benefits described above, except that the multiple of annual
salary and bonus would be reduced from three to two.
Directors' Compensation
Each director who is not one of our employees, or an employee of a
subsidiary, receives annual compensation of $20,000, a fee of $1,000 for
attending each meeting of the board of directors and $500 for attending each
committee meeting. Each director who is an employee receives a fee of $150 for
attending each meeting of the board. Directors are reimbursed for their
expenses incurred in attending meetings of the board and its committees. For
fiscal year 1999, each nonemployee director was awarded an option to purchase
6,750 of our common shares at an exercise price of $17.25 per share. These
options became exercisable on August 31, 1999.
Compensation Committee Interlocks and Insider Participation
During 1999, the compensation committee of our board of directors consisted
of Messrs. Beban, Chatham, Davis, Doti, Douglas and Fay, all of whom are
nonemployee directors. No member of the compensation committee is an executive
officer or director of another entity for whom any of our executive officers
serves as a director or officer.
23
<PAGE>
Pursuant to the SEC's regulations, the following report of the compensation
committee on executive compensation and the comparative cumulative total return
to shareholders graph and accompanying text shall not be deemed to be
incorporated by reference into any of our filings under either the Securities
Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended,
that incorporates future Securities Act or Securities Exchange Act filings in
whole or in part by reference.
Report of the Compensation Committee on Executive Compensation
Compensation Policy
The company's compensation program, which has been endorsed by the
compensation committee, is designed to enhance shareholder value by providing
that a large part of the executive compensation be related to the company's
performance, as well as to the contribution of each individual officer. The
company's policy is further designed to develop and administer programs that
will:
. attract and retain key executives critical to the company's long-term
success;
. provide median compensation levels that are competitive with others in
the company's industry;
. motivate executives to enhance long-term shareholder value; and
. integrate compensation programs with the company's annual planning and
measurement processes.
The annual bonus programs include a cash bonus program, as well as stock
option and stock bonus plans designed to encourage and create ownership and
retention of the company's shares by its key employees.
Responsibilities of the Compensation Committee
The board of directors established the compensation committee in 1979. The
committee consists of six independent directors, none of whom is a former or
current officer or employee of the company or any of its subsidiaries. The
committee reviews and approves the base salaries of the executive officers of
the company, as well as the annual bonus programs, incentive plans and
executive benefit plans. The committee, as needed, engages compensation and
benefits-consulting firms to assist in the performance of its duties. For the
year 1999, the committee analyzed the reasonableness of the compensation paid
to executive officers. In addition, the committee reviewed information on
general compensation trends of related companies. For the purpose of this
analysis, the committee used the group of companies whose returns to
shareholders compose the peer group index shown in the performance graph below.
The committee also reviewed published compensation surveys for comparative
results against our compensation level. It reviewed the compensation of the
company's executive officers for 1999 and believes that the compensation for
all executive officers is reasonable in view of the company's performance and
industry compensation levels. Measures used for determining the appropriate
level of compensation for executive officers include competitive position,
profit, profit retention (ratio of profits to revenue), and ability to select
and develop executive replacement personnel.
CEO Compensation
In December 1998, the committee increased Parker S. Kennedy's base salary
for the year 1999 to $430,020, an increase of 7.5% from its previous level of
$400,020. The committee made no other increases to
24
<PAGE>
Mr. Kennedy's 1999 salary. Mr. Kennedy's base salary for the year 1999 was, in
the opinion of the committee, within the median salary range for chief
executive officers in the group of comparable companies. In determining the
appropriate salary level, the committee considered the company's market share,
the company's earnings relative to its competitors and the benefit the company
derives from the retention of its key employees.
As part of company-wide expense reduction efforts, on December 9, 1999, Mr.
Kennedy voluntarily waived a cash bonus.
Compensation Committee
Lewis W. Douglas, Jr., Chairman
Gary J. Beban
J. David Chatham
Hon. William G. Davis
James L. Doti
Paul B. Fay, Jr.
Comparative Cumulative Total Return To Shareholders
Since December 3, 1993, our common shares have been listed and trading on
the NYSE under the trading symbol "FAF." Previously, our shares were traded on
the national over-the-counter market and were designated and quoted on the
NASDAQ National Market System under the trading symbol "FAMR." The following
graph compares the yearly percentage change in the cumulative total shareholder
return on our common shares, assuming reinvestment of dividends, with the
corresponding changes in the cumulative total returns of the Standard & Poor's
500 Composite Stock Price Index, the Standard & Poor's Financial Index and a
peer group index consisting of the following six companies, in each case
assuming reinvestment of dividends:
. Chicago Title Corp.;
. Fidelity National Financial, Inc.;
. LandAmerica Financial Group, Inc.;
. Old Republic International Corp.;
. Reliance Group Holdings, Inc. (excluding the period following sale of
its title insurance business in 1998 to Lawyers Title Corp., which is
now part of the LandAmerica Financial Group, Inc., companies); and
. Stewart Information Services Corp.
The cumulative total shareholder return of the peer group of companies has
been included in the graph to provide a comparison with other publicly held
companies having subsidiaries that transact the business of title insurance on
a nationwide basis.
25
<PAGE>
Comparison of Five Year Cumulative Total Return*
Among
The First American Financial Corporation,**
S&P 500 Composite Index,** S&P Financial Index** and Custom Peer Group**
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
The First
American Custom S&P S&P 500
Financial Peer Financial Composite
Corporation Group Index Index
<S> <C> <C> <C> <C>
12/30/94 $100 $100 $100 $100
12/29/95 $159 $159 $154 $138
12/31/96 $250 $174 $208 $169
12/31/97 $456 $258 $309 $226
12/31/98 $898 $337 $344 $290
12/31/99 $354 $197 $357 $351
</TABLE>
- --------
* Adjusted for reinvestment of dividends. Stock price performance shown is not
indicative of future price performance.
** As calculated by Bloomberg Financial Services, to include the reinvestment
of dividends.
Section 16(a) Beneficial Ownership Reporting Compliance
Rules adopted by the SEC require our officers and directors, and persons who
own more than 10% of our issued and outstanding common shares, to file reports
of their ownership, and changes in ownership, of our shares with the SEC on
prescribed forms. Officers, directors and greater-than-ten-percent shareholders
are required by the SEC's rules to furnish us with copies of all such forms
they file with the SEC.
Based solely on the review of the copies of the forms received by us, or
written representations from reporting persons that they were not required to
file a Form 5 to report previously unreported ownership or changes in
ownership, we believe that, during our fiscal year ending December 31, 1999,
our officers, our directors and the greater-than-ten-percent beneficial owners
that we know of complied with all such filing requirements, except for two
current directors. George L. Argyros was late in reporting his acquisition of
our common shares in July 1999 as trustee of an irrevocable trust for the
benefit of his parents, the acquisitions of our common shares by a company he
controls during July and October 1999, and the acquisition of our common shares
by him individually in September 1999. D. Van Skilling filed a late report
covering his acquisition of our common shares in November 1999.
26
<PAGE>
Relationship with Independent Accountants
The firm of PricewaterhouseCoopers LLP has been selected by our audit
committee as independent accountants to audit our books and accounts, as well
as those of our subsidiaries, for the year ending December 31, 2000. This firm
has served as our independent accountants since 1954.
A representative of PricewaterhouseCoopers will be present at the meeting.
The representative will have the opportunity to make any desired statement and
to answer any appropriate questions by the shareholders.
Shareholder Proposals
In order for a proposal by you or your fellow shareholders to be included in
the proxy statement and form of proxy solicited by our board of directors for
our next annual meeting of shareholders, the proposal must be received no later
than December 14, 2000. This date assumes that the date of our next annual
meeting will not be advanced or delayed by more than 30 calendar days from the
date of the current annual meeting. If such an event occurs, we will provide
you with notice in our earliest possible quarterly report on Form 10-Q of the
date by which such proposals must be received in order to be included in the
proxy materials.
If you or your fellow shareholders wish to submit a proposal for
consideration at next year's annual meeting without including the same in the
proxy statement and form of proxy solicited by our board of directors, you
should inform our secretary no later than February 27, 2001, of your intention
to do so. If you wait longer, the holders of the proxies solicited by our board
of directors may vote on your proposal(s) at their discretion even if they are
not mentioned in the proxy statement and form of proxy solicited by our board.
Appraisal Rights
You are not entitled to appraisal rights in connection with the approval of
the proposals to be voted upon at the meeting.
General Information
We will, upon the written request of any person who is a beneficial owner of
our common shares on the record date for the annual meeting, furnish without
charge a copy of our annual report filed with the SEC on Form 10-K for the year
1999 and will furnish, at a charge of $10, a copy of the exhibits thereto. Such
request should contain a representation that the person requesting this
material was a beneficial owner of our shares on the record date. Such request
should be sent to the secretary at our address indicated on the first page of
this proxy statement.
The board of directors is not aware of any matters to come before the
meeting other than those set forth on the notice accompanying this proxy
statement. If any other matters come before the meeting, the holders of the
proxies will vote thereon in their discretion.
By Order of the Board of Directors
Mark R Arnesen
Secretary
Santa Ana, California
April 10, 2000
27
<PAGE>
[LOGO OF THE FIRST AMERICAN FINANCIAL CORPORATION APPEARS HERE]
The First American Financial Corporation
1 First American Way, Santa Ana, California 92707
714-800-3000 . 800-854-3643
[MAP DEPICTING LOCATION OF
ANNUAL MEETING
APPEARS HERE]
From San Diego: Take I-5 north, transition to I-405 north to 55 north. Exit
MacArthur Blvd., turn left under freeway to Imperial Prom. Right to First
American Way.
From Los Angeles: Take I-5 south, transition to 55 south. Exit MacArthur Blvd.,
turn right on MacArthur to Imperial Prom. Right to First American Way.
From Riverside: Take 91 west, transition to 55 south. Exit MacArthur Blvd.,
turn right on MacArthur to Imperial Prom. Right to First American Way.
<PAGE>
[LOGO OF THE FIRST AMERICAN FINANCIAL CORPORATION APPEARS HERE]
The First American Financial Corporation
Home Office: 1 First American Way, Santa Ana, CA 92707-5913 . 714-800-3000
<PAGE>
[LOGO OF THE FIRST AMERICAN FINANCIAL CORPORATION]
The First American Financial Corporation
Annual Meeting of Shareholders of The First American Financial Corporation
Thursday, May 11, 2000
2 p.m.
At the home office of
The First American Financial Corporation
1 First American Way, Santa Ana, California 92707
Your Vote Is Important to the Company!
- --------------------------------------------------------------------------------
Using the telephone or Internet, you can vote any time, 24 hours a day.
You can vote in one of three ways:
1. Call toll-free 1-877-482-6133 on a touch-tone telephone and follow the
instructions on the reverse side. There is NO CHARGE to you for this call
2. Vote by Internet at our Internet Address: www.proxyvoting.
com/firstamer
3. Mark, sign and date your proxy card and return it promptly in the
enclosed postpaid envelope
See detailed instructions on the reverse side of this form.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
- --------------------------------------------------------------------------------
The First American Financial Corporation
1 FIRST AMERICAN WAY SANTA ANA, CALIFORNIA 92707 714-800-3000
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of The First American Financial Corporation hereby
appoints D.P. Kennedy, Parker S. Kennedy and Mark R Arnesen, and each of them,
with power to each of substitution, to attend the Annual Meeting of Shareholders
of said corporation to be held May 11, 2000, at 2 p.m. at the home office of
The First American Financial Corporation, 1 First American Way, Santa Ana,
California, and any adjournments or postponements thereof; and to vote the
shares of the undersigned at such meeting with respect to (1)the election of
directors and (2)the approval of the proposed amendment to the Restated Articles
of Incorporation of The First American Financial Corporation changing its name,
as indicated on the reverse side hereof, with all powers which the undersigned
would have if acting in person, including the right in their discretion to
cumulate and distribute the aggregate cumulative votes in respect of such shares
as they choose among those nominees as to whom the undersigned has not withheld
authority; and with discretionary authority to act on such other matters as may
properly come before said meeting or any adjournments or postponements thereof.
THE SHARES REPRESENTED HEREBY SHALL BE VOTED SPECIFICALLY ON THE PROPOSALS
LISTED ON THE REVERSE SIDE HEREOF AS THERE SPECIFIED. WHERE NO SPECIFICATION IS
MADE, SAID SHARES SHALL BE VOTED FOR THE PROPOSALS.
<PAGE>
[LOGO OF THE FIRST AMERICAN FINANCIAL CORPORATION]
The First American Financial Corporation
- -------------------------------------------------------------------------------
Online Access Is Here!
Using the telephone or Internet, you can vote any time, 24 hours a day.
Your telephone or Internet vote authorizes the named proxies to vote your shares
in the same manner as if you marked, signed and returned your proxy card.
To vote your proxy by telephone, follow these instructions:
1. Call toll-free 1-877-482-6133 on a touch-tone telephone
2. Have your proxy card in hand when you call; you will be prompted to enter
your 7-digit Control Number that is located below
3. Follow the simple instructions the Vote Voice provides you
--------------------------------------------------------------------------
Option A: To vote as the Board of Directors recommends on ALL
proposals: Press 1
Option B: If you choose to vote on each item separately: Press 0
--------------------------------------------------------------------------
To vote your proxy online, follow these instructions:
1. Read the enclosed proxy statement and proxy card
2. Go to the Web site www.proxyvoting.com/firstamer
3. Enter the 7-digit Control Number located on your proxy card below
4. Follow the instructions posted at the Web site
To vote by mail, follow these instructions:
1. Mark, sign and date your proxy card
2. Return your proxy card in the postage-paid envelope we've provided or
return it to First American Trust,
Attn: Transfer Department, P.O. Box 267, Santa Ana, CA 92702-9932
- --------------------------------------------------------------------------------
If you vote by phone or Internet,
please do not mail your proxy card.
Thank you for voting.
Control Number
- --------------------------------------------------------------------------------
(Continued from other side)
The Board of Directors recommends a vote FOR items 1 and 2 listed below.
1. Election of Directors FOR [ ] all nominees listed below (except as marked
to the contrary below) WITHHOLD AUTHORITY [ ] for all nominees listed below
(01)George L. Argyros, (02)Gary J. Beban, (03)J. David Chatham, (04)William
G. Davis, (05)James L. Doti, (06)Lewis W. Douglas, Jr., (07)Paul B. Fay,
Jr., (O8)D. P. Kennedy, (09)Parker S. Kennedy, (10)Frank E. O'Bryan,
(11)Roslyn B. Payne, (12)D. Van Skilling and (13)Virginia M. Ueberroth.
(INSTRUCTION: to withhold authority to vote for any individual nominee(s),
write the name(s) of such nominee(s) on the line below.)
__________________________________________________________________________
2. Amendment of Restated Articles of Incorporation to change the name of the
corporation to "The First American Corporation."
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Control Number
____________________________ ___________________ Dated ___________, 2000
Please sign exactly as name appears on stock certificate as shown hereon.
If shares are jointly held, this proxy should be signed by each such joint
owner. Executors, administrators, guardians or others signing in a fiduciary
capacity should state their full title as such. A proxy executed by a
corporation should be signed in its name by its president or any vice president
and attested to by its secretary or an assistant secretary; if otherwise
executed, please furnish proof of authority.
