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Exhibit
99.1
CHANGE IN CONTROL
AGREEMENT
EXECUTIVE FORM
This CHANGE IN CONTROL AGREEMENT is
entered into as of the 27th day of February, 2007 (this “
Agreement ”), by and between THE FIRST AMERICAN
CORPORATION, a California corporation (the “ Company
”), and FRANK V. MCMAHON (the “ Executive
”).
W I T N E S S E T H
:
WHEREAS, the Compensation
Committee (the “ Committee ”) of the Board of
Directors (the “Board”) of the Company has determined
that it is in the best interests of the Company, its subsidiaries
and the Company’s shareholders to assure that the Company and
its subsidiaries will have the continued dedication of the
Executive, notwithstanding the possibility, threat or occurrence of
a Change in Control (as defined below) of the Company;
WHEREAS, the Committee
believes it is imperative to diminish the inevitable distraction of
the Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change in Control and to
encourage the Executive’s full attention and dedication to
the Company and its subsidiaries currently and in the event of any
threatened or pending Change in Control, and to provide the
Executive with compensation and benefits arrangements upon a Change
in Control which ensure that the compensation and benefits
expectations of the Executive will be satisfied and which are
competitive with those of other corporations; and
WHEREAS, the Company and the
Executive accordingly desire to enter into this Agreement on the
terms and conditions set forth below;
NOW, THEREFORE, in
consideration of the premises and mutual covenants set forth
herein, it is hereby agreed by and between the parties as
follows:
1. Term of Agreement .
This Agreement shall commence on the date hereof and shall continue
through December 31, 2007 (the “ Original Term
”); provided , however , that on such date and
on each December 31 thereafter, the Original Term of this
Agreement shall automatically be extended for one additional year
(each, an “ Extended Term ”) unless, not later
than the preceding January 1 either party shall have given
notice that such party does not wish to extend the term of this
Agreement beyond the Original Term and any Extended Term; and
provided , further , that if a Change in Control (as
defined in paragraph 3 below) shall have occurred during the
Original Term or any Extended Term of this Agreement, the term of
this Agreement shall continue for a period of thirty-six calendar
months beyond the calendar month in which such Change in Control
occurs (the Original Term, each Extended Term, if any, and such
thirty-six month period, collectively, the “ Term
”).
2. Employment After a
Change in Control . If the Executive is in the employ of the
Company (which for this purpose shall also include any subsidiary
of the Company) on the date of a Change in Control, the Company
hereby agrees to continue the Executive in its employ (and/or, in
the case of any subsidiary of the Company, the employ of such
subsidiary) for the period commencing on the date of the Change in
Control and ending on the last day of the Term
of this Agreement. During the period of
employment described in the foregoing provision of this paragraph 2
(the “ Employment Period ”), the Executive shall
hold such position with the Company (which for this purpose shall
also include any subsidiary of the Company) and exercise such
authority and perform such executive duties as are commensurate
with the Executive’s position, authority and duties
immediately prior to the Change in Control. The Executive agrees
that during the Employment Period the Executive shall devote full
business time exclusively to the executive duties described herein
and perform such duties faithfully and efficiently; provided
, however , that nothing in this Agreement shall prevent the
Executive from voluntarily resigning from employment upon 60
days’ written notice to the Company under circumstances which
do not constitute a Termination (as defined below in paragraph
5).
3. Change in Control .
For purposes of this Agreement, a “ Change in Control
” means the happening of any of the following:
(a) The consummation of a
merger or consolidation of the Company with or into another entity
or any other corporate reorganization, if 50% or more of the
combined voting power of the continuing or surviving entity’s
securities outstanding immediately after such merger, consolidation
or other reorganization is owned by persons who were not
shareholders of the Company immediately prior to such merger,
consolidation or other reorganization.
(b) The sale, transfer or
other disposition of all or substantially all of the
Company’s assets or the complete liquidation or dissolution
of the Company.
(c) A change in the
composition of the Board occurring within a two-year period, as a
result of which fewer than a majority of the directors are
Incumbent Directors. “ Incumbent Directors ”
shall mean directors who either (i) are directors of the
Company as of the date of this Agreement, or (ii) are elected,
or nominated for election, to the Board with the affirmative votes
of at least a majority of the Incumbent Directors at the time of
such election or nomination (but shall not include an individual
not otherwise an Incumbent Director whose election or nomination is
in connection with an actual or threatened proxy contest relating
to the election of directors to the Company).
(d) Any transaction as a
result of which any person or group is or becomes the “
beneficial owner ” (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934), directly or indirectly, of
securities of the Company representing at least 25% of the total
voting power of the Company’s then outstanding voting
securities. For purposes of this paragraph, the term “
person ” shall have the same meaning as when used in
sections 13(d) and 14(d) of the Securities Exchange Act of 1934,
but shall exclude (i) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or of a
subsidiary of the Company; (ii) so long as a person does not
thereafter increase such person’s beneficial ownership of the
total voting power represented by the Company’s then
outstanding voting securities, a person whose beneficial ownership
of the total voting power represented by the Company’s then
outstanding voting securities increases to 25% or more as a result
of the acquisition of voting securities of the Company by the
Company which reduces the number of such voting securities then
outstanding; or (iii) so
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long as a person does not
thereafter increase such person’s beneficial ownership of the
total voting power represented by the Company’s then
outstanding voting securities, a person that acquires directly from
the Company securities of the Company representing at least 25% of
the total voting power represented by the Company’s then
outstanding voting securities.
A transaction shall not constitute a
Change in Control if its sole purpose is to change the state of the
Company’s incorporation or to create a holding company that
will be owned in substantially the same proportions by the persons
who held the Company’s securities immediately before such
transaction.
4. Compensation During the
Employment Period . During the Employment Period, the Executive
shall be compensated as follows:
(a) the Executive shall
receive an annual salary which is not less than his or her annual
salary immediately prior to the Employment Period and shall be
eligible to receive an increase in annual salary which is not
materially less favorable to the Executive than increases in salary
granted by the Company for executives with comparable
duties;
(b) the Executive shall be
eligible to participate in short-term and long-term cash-based
incentive compensation plans which, in the aggregate, provide bonus
opportunities which are not materially less favorable to the
Executive than the greater of (i) the opportunities provided
by the Company for executives with comparable duties; and
(ii) the opportunities provided to the Executive under all
such plans in which the Executive was participating prior to the
Employment Period;
(c) the Executive shall be
eligible to participate in stock option, performance awards,
restricted stock and other equity-based incentive compensation
plans on a basis not materially less favorable to the Executive
than that applicable (i) to the Executive immediately prior to
the Employment Period or (ii) to other executives of the
Company with comparable duties; and
(d) the Executive shall be
eligible to receive employee benefits (including, but not limited
to, tax-qualified and nonqualified savings plan benefits, medical
insurance, disability income protection, life insurance coverage
and death benefits) and perquisites (including, without limitation,
a Company vehicle and Company paid or assisted membership dues)
which are not materially less favorable to the Executive than
(i) the employee benefits and perquisites provided by the
Company to executives with comparable duties or (ii) the
employee benefits and perquisites to which the Executive would be
entitled under the Company’s employee benefit plans and
perquisites as in effect immediately prior to the Employment
Period.
5. Termination . For
purposes of this Agreement, the term “ Termination
” shall mean: (a) termination of the employment of the
Executive during the Employment Period by the Company for any
reason other than death, Disability (as defined below) or Cause (as
defined
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below); (b) termination of the
employment of the Executive during the Window Period by the
Executive for any reason whatsoever; or (c) termination of the
employment of the Executive during the Employment Period (other
than during the Window Period) by the Executive for Good Reason (as
defined below).
Notwithstanding anything in
this Agreement to the contrary, if (i) the Executive’s
employment is terminated prior to the actual occurrence of a Change
in Control for reasons that would constitute a Termination if they
had occurred following a Change in Control; (ii) the Executive
reasonably demonstrates that such termination (or Good Reason
event) was at the request of a third party who had indicated an
intention or had taken steps reasonably calculated to effect a
Change in Control; and (iii) a Change in Control involving
such third party (or a party competing with such third party to
effectuate a Change in Control) does occur, then for purposes of
this Agreement, the date immediately prior to the date of such
termination of employment or event constituting Good Reason shall
be treated as a Change in Control and such termination shall be
treated as a Termination. For purposes of determining the timing of
payments and benefits to the Executive under this Agreement as a
result of this paragraph, the date of the actual Change in Control
shall be treated as the Executive’s date of
Termination.
Except as provided in the
last sentence of the immediately preceding paragraph, the date of
the Executive’s Termination under this paragraph 5 shall be
the date specified by the Executive or the Company, as the case may
be, in a written notice to the other party complying with the
requirements of paragraph 11 below.
For purposes of this
Agreement, “ Disability ” means such physical or
mental disability or infirmity of the Executive which, in the
opinion of a competent physician, renders the Executive unable to
perform properly his or her duties set forth in paragraph 2 of this
Agreement, and as a result of which, the Executive is unable to
perform such duties for 6 consecutive calendar months or for
shorter periods aggregating 180 business days in any 12 month
period. For purposes of this paragraph a competent physician shall
be a physician mutually agreed upon by the Executive and the Board.
If a mutual agreement cannot be reached, the Executive shall
designate a physician and the Board shall designate a physician and
these two physicians shall select a third physician who shall be
the “competent physician.”
For purposes of this
Agreement, the term “ Cause ” means (i) the
willful and continued failure by the Executive to substantially
perform the Executive’s duties with the Company (which for
purposes of this paragraph shall also include subsidiaries of the
Company) after written notification by the Board, (ii) the
willful engaging by the Executive in conduct which is demonstrably
injurious to the Company, monetarily or otherwise, or
(iii) the engaging by the Executive in egregious misconduct
involving serious moral turpitude. For purposes of this Agreement,
no act, or failure to act, on the Executive’s part shall be
deemed “willful” unless done, or omitted to be done, by
the Executive not in good faith and without reasonable belief that
such action was in the best interest of the Company.
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For purposes of this
Agreement, the term “ Window Period ” means the
period commencing on the first anniversary of the Change in Control
and ending at 5:00 p.m., Los Angeles time, on the thirtieth day
thereafter.
For purposes of this
Agreement, the term “ Good Reason ” means,
without the Executive’s express written consent, the
occurrence after a Change in Control of any of the following
circumstances:
(i) the assignment to the
Executive by the Company of duties which, in the reasonable
determination of the Executive, are a significant adverse
alteration in the nature or status of the Executive’s
position, responsibilities, duties or conditions of employment from
those in effect immediately prior to the occurrence of the Change
in Control; or any other action by the Company that, in the
reasonable determination of the Executive, results in a material
diminution in the Executive’s position, authority, duties or
responsibilities from those in effect immediately prior to the
occurrence of the Change in Control;
(ii) a reduction in the
Executive’s annual base compensation as in effect on the
occurrence of the Change in Control;
(iii) the relocation of the
Company’s offices at which the Executive is principally
employed immediately prior to the Change in Control (the “
Principal Location ”) to a location more than 50 miles
from such location or the Company’s requiring the Executive
to be based anywhere other than the Principal Location, except for
required travel on the Company’s business to an extent
substantially consistent with the Executive’s business travel
obligations prior to the Change in Control;
(iv) the Company’s
failure to pay to the Executive any portion of the
Executive’s compensation or to pay to the Executive any
portion of an installment of deferred compensation under any
deferred compensation program of the Company within ten days of the
date such compensation is due; or
(v) the Company’s
failure to continue in effect any material compensation or benefit
plan or practice in which the Executive is eligible to participate
on the occurrence of the Change in Control, unless an equitable
arrangement (embodied in an ongoing substitute
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