Fill and Sign the Articles of Incorporation Multiple Classes This Form Shows

ITEM 2 -PROPOSAL TO AMEND THE RESTATED ARTICLES OF INCORPORATION TO CREATE A SECOND CLASS OF COMMON STOCK TO BE DESIGNATED "CLASS B COMMON," TO INCREASE AUTHORIZED CAPITAL TO INCLUDE 12,000,000 SHARES OF THE CLASS B COMMON, TO REDESIGNATE THE CURRENTLY EXISTING COMMON SHARES AS "CLASS A COMMON" AND TO ESTABLISH THE RIGHTS, POWERS AND LIMITATIONS OF THE CLASS A COMMON AND THE CLASS B COMMON GeneralThe Board of Directors is proposing the creation of a new class of common stock entitled "Class B Common." In connection therewith, the Board of Directors is proposing to rename the outstanding class of common stock the "Class A Common" and to increase the authorized capital of the Corporation to consist of the currently authorized 12,000,000 shares of common stock which will be designated as "Class A Common" and an additional 12,000,000 shares which will be designated as "Class B Common." At the Annual Meeting, shareholders will consider and vote upon a proposal to amend Article Six of the Corporation's Restated Articles of Incorporation (the "Proposed Amendment") to effect the foregoing changes. The changes implemented by the Proposed Amendment were approved by the Board at its February 22, 1989, meeting subject to shareholder and regulatory approval, and the Board believes the changes are in the best interests of the shareholders. A copy of the Proposed Amendment is attached hereto as Appendix A. The new Class B Common will be equal in all respects to the Class A Common except as to voting rights and stock splits or pro rata stock dividends of like shares declared on outstanding shares. In the case of voting rights, Class A Common will be entitled to one vote per share while Class B Common will be entitled to 1/10th of a vote per share, on all matters presented to shareholders (except as otherwise required by California law). In the case of stock splits, or pro rata stock dividends of like shares declared on outstanding shares, Class A Common will receive Class A Common and Class B Common will receive Class B Common. The purpose of the Proposed Amendment is to provide an alternative equity financing vehicle that would minimize the dilutive effect on the voting rights of the outstanding Common. The Class B Common may be used in connection with stock dividends, acquisitions, convertible debt, public and private offerings, employee incentive programs and such other uses as are permissible under the Corporation's Restated Articles of Incorporation, Bylaws and governing law, although no specific plans for such uses now exist. The Board of Directors may also decide to declare a stock dividend immediately after the Annual Meeting, in order to establish a trading market for the Class B Common; however, no decisions have yet been made in this regard. It should be noted, however, that the use of the Class B Common may limit the Corporation's ability to subsequently issue Class A Common and take certain other corporate action as a result of existing federal and state securities regulations which are discussed further below. See "Certain Regulatory Matters." Description of the Class A Common and the Class B Common The rights, powers and limitations of the Class A Common and the Class B Common are set forth in full in the Proposed Amendment attached hereto as Appendix A. The following summary should be read in conjunction with, and is qualified in its entirety by reference to, the Proposed Amendment. 1. Voting Each share of the existing Common will be renamed Class A Common, and will continue to entitle the holder thereof to one Vote on all matters on which the holders of Class A Common are entitled to vote. Each share of the Class B Common will entitle the holder thereof to 1/10th of one vote on all matters on which the holders of Class B Common are entitled to vote. Except as otherwise provided by California law, the Class A Common and the Class B Common will vote together as a single class on all matters submitted to the shareholders. Pursuant to California law, the holders of each class will vote separately as a class with respect to amendments to the Corporation's Restated Articles of Incorporation that alter or change the powers, preferences or special rights of their respective classes of stock so as to affect them adversely, or increase or decrease the number of authorized shares of their respective classes. 2. Dividends and other Distributions (Including Distributions Upon Liquidation) Subject to California law, holders of the Class A Common and Class B Common will be entitled to share equally in any dividends of the Corporation, when and as declared by the Board of Directors, out of assets legally available therefor. In the event of a stock split, or a pro rata stock dividend of like shares declared on outstanding shares, the holders of Class A Common will receive Class A Common shares and the holders of Class B Common will receive Class B Common shares. The holders of Class A Common and Class B Common will have equal rights per share upon the liquidation, dissolution or winding up of the affairs of the Corporation. 3. Conversion Feature If at any time while there are shares of Class A Common and Class B Common issued and outstanding, it shall be determined by the Board of Directors, in its sole discretion, that legislation or regulations are enacted or any judicial or administrative determination is made which would prohibit the listing, quotation or trading of the Corporation's Class A Common or Class B Common on the New York Stock Exchange ("NYSE"), the American Stock Exchange ("AMEX") or the National Association of Securities Dealers Automatic Quotation System ("NASDAQ"), or would otherwise have a material adverse effect on the Corporation, in any such case due to the Corporation having more than one class of common shares outstanding, then the Board of Directors may by resolution convert all outstanding shares of Class B Common into Class A Common on a share-for-share basis. In the event the conversion feature is utilized, no shareholder approval will be necessary to effect the conversion of the Class B Common to Class A Common. Furthermore, the Board is not required to give prior notice of any conversion and the failure or inability to give prior notice of the conversion will not limit the Board's ability to effect the conversion. 4. Other The Class A Common does not, and the Class B Common will not, carry any preemptive rights enabling a holder to subscribe for or receive shares of stock of the Corporation of any class or any other securities convertible into shares of stock of the Corporation. Certain Regulatory Matters As of March 17, 1989, 4,939,704 shares of Common were issued and outstanding. The Common shares of the Corporation are authorized for inclusion and quotation in the NASDAQ system as administered by the National Association of Securities Dealers, Inc. ("NASD"). The Securities and Exchange Commission ("SEC") recently adopted Rule 19c-4 (the "Rule") under the Securities Exchange Act of 1934. The Rule prohibits, among other things, the common stock of a company from remaining authorized for quotation on the NASDAQ system if such company issues securities or takes other corporate action that would have the effect of nullifying, restricting or disparately reducing the per share voting rights of existing common shareholders of the company.As a result, the Rule may, unless amended, repealed, or invalidated, effectively limit the abilit y of the Corporation to issue additional shares of Class A Common, or take certain other action, after the Class B Common is issued. For example, the Rule proscribes the use of a dual class capital structure to effect a coercive exchange offer, as well as a two-step transaction by which insiders obtain control of the issuer without purchasing a proportionate percentage of the issuer's equity. In the event that a subsequent issuance of Class A Common, or an activity which may be proscribed, is proposed, the Board of Directors will consider whether the proposed issuance or activity violates the Rule or any interpretations of the Rule then in effect. The Corporation may seek assurances from the NASD regarding the effect of the Rule on any subsequent issuances of Class A Common or any activity which may be proscribed by the Rule. The Board of Directors does not currently intend to issue any additional shares of Class A Common, or take any proscribed action, if such issuance or action would cause shares of the Corporation's Class A Common or Class B Common no longer to be eligible for listing or trading on any of the NYSE, the AMEX or the NASDAQ system. No subsequent shareholder approval is required to issue up to the authorized number of shares of Class A Common or Class B Common, nor is it anticipated that shareholder approval will be sought in the event the Board of Directors decides to issue additional shares of Class A Common or Class B Common, unless such approval is otherwise required by law. The Corporation has been advised by the staff of the NASD that the NASD will not take any action to delist the shares of common stock of the Corporation from the NASDAQ system because of the authorization and both initial and subsequent issuances of the Class B Common. The staff of the NASD has, however, indicated that once the Class B Common is issued subsequent issuances of Class A Common might under certain circumstances violate the Rule, and thus must be considered on a case by case basis taking into account the then prevailing facts to determine if the proposed issuance violates the Rule. Furthermore, until recently, California securities laws (California Corporate Securities Law of 1968, as amended (the "Code")) have required issuer and non-issuer transactions to be qualified unless the securities involved were listed on the NYSE, AMEX or the Pacific Stock Exchange, or some other exemption from qualification was available. It has been the policy of the California Department of Corporations to deny qualification for common stock with diminished voting rights. Effective January 1, 1989, Section 25100(o) of the Code was amended to extend the exemption to issuer and non-issuer transactions for securities designated as national market securities, and listed on a certified interdealer quotation system. Application ha s been made by the NASD to have the NASDAQ system, in which the Corporation's existing Common is traded, certified by the California Commissioner of Corporations and thus to qualify for the exemption. It is not anticipated that the Class B Common will be issued (if at all) until such time as the NASDAQ system ha s been certified and the exemption from qualification is available for the Corporation's Class B Common. Certain Other Considerations 1. General The Board of Directors believes that value to all shareholders would be enhanced by the creation of an alternative equity financing vehicle for use in connection with possible acquisitions, dividends, convertible debt issuances, employee incentive programs and public and private offerings. Although it has no specific plans at this time, the Board of Directors believes that the Class B Common is an effective vehicle wi th which to pursue such goals while at the same time minimizing the dilutive effect on the voting rights of existing Common shares. For example, the Class B Common may be preferable to issuing preferred stock or incurring debt, either of which would require fixed payments in the form of dividends or interest and principal thus limiting the Corporation's ability to conserve cash. As a result, the Board of Directors believes that the Proposed Amendment is an effective means to create such an equity vehicle and to enhance values for all of the Corporation's shareholders and has determined to submit the Proposed Amendment to shareholders for their consideration at the Annual Meeting. 2. Anti-Takeover Effects of the Class B CommonThe creation of the Class B Common is not intended to have an anti-takeover effect. The Proposed Amendment is not being recommended in response to any specific effort of which the Corporation is aware to obtain control of the Corporation. The Corporation is not aware of any existing or planned effort on the part of any person to accumulate significant amounts of its Common shares, or to acquire control of the Corporation by means of a merger, tender offer, proxy solicitation in opposition to management or otherwise. It may be possible to argue, however, that there are residual anti-takeover effects. For example, if the Corporation were to use the Class B Common in connection with a future acquisition, the stock conveyed would have I/ 10th of the vote than would otherwise be the case if Class A Common were used. This in turn would reduce the concentrated voting power conveyed with the block of stock, and thus reduce the attractiveness of such block of stock to a potential suitor. It is thus possible that the Proposed Amendment might have an anti-takeover effect. It should be noted that subsequent approval of shareholders will not be required to authorize the issuance of authorized Class A Common or Class B Common shares in connection with an acquisition, although depending on the circumstances California law may require shareholder approval of a proposed merger or acquisition. The Corporation's Restated Articles of Incorporation and Bylaws do not contain provisions whose purpose is to prevent or hamper a takeover attempt (commonly referred to as "shark repellents"). In addition, the Corporation does not have a shareholders rights plan (commonly referred to as a "poison pill") in effect. The Board of Directors may at some later date consider the adoption of shark repellents, a poison pill, or both; however, no plans currently exist for such action.- In the event such action is contemplated in the future, the Board of Directors will consider the impact of such action under the Rule and may seek assurances from the NASD regarding the effects of such action on the continued quotation of the Corporation's Class A Common and Class B Common on the NASDAQ system. 3. Dilutive Effect. As noted above, the purpose for creating the Class B Common is to provide the Corporation with an alternative equity financing vehicle which minimizes the dilutive effect on t he voting rights of the existing shareholders. As with any issuance of equity, however, some dilution will result when the Class B Common is issued. An issuance of equity causes dilution of both the economic interest that each outstanding share represents and the voting power of each outstanding share. Because the Class B Common is entitled to share equally with the Class A Common with respect to all economic benefits, issuances of the Class B Common will have the same dilutive effect on the economic interest of each outstanding share of Class A and Class B Common as subsequent issuances of the existing Common would have on currently outstanding Common. However, because the Class B Common will be entitled to only 1/10th of a vote per share, the dilutive effect on the voting power of each outstanding share of Class A and Class B Common will be only 1/10th as great as subsequent issuances of existing Common would be. Subsequent issuances of Class A Common will have the same dilutive effect on the economic interests of both outstanding Class A Common and Class B Common as subsequent issuances of existing Common would have on currently outstanding Common, but will dilute the voting power of the outstanding Class A and Class B Common ten times as much as an issuance of Class B Common would. Effective Date and CertificatesIf approved by the shareholders, the Proposed Amendment will be filed promptly after the Annual Meeting with the California Secretary of State. The Proposed Amendment will be effective immediately upon acceptance of the filing by the California Secretary of State. The Board would then be free to issue the Class B Common without any further action on the part of the shareholders. But see "Certain Regulatory Matters." Promptly after the Proposed Amendment is effective, the Corporation will distribute, to each shareholder of record as of the effective date, a sticker to be placed on existing share certificates which contains a st atement setting forth the office or agency from which shareholders may obtain, upon request and without charge, a statement of the rights, preferences, privileges and restrictions granted to or imposed on each class of shares authorized to be issued. There is no requirement that existing share certificates be surrendered so long as the shareholder places a sticker on each of his or her certificates. Alternatively, shareholders may, if they wish, surrender their existing certificates in exchange for Class A Common certificates. In addition, Class A Common certificates will be issued upon surrender of existing certificates in connection with stock transfers or the surrender of existing share certificates for reissuance otherwise. Vote Required Adoption of the Proposed Amendment requires the affirmative vote of the holders of more than one-half of the outstanding shares of the Corporation's Common. Recommendation of the Board FOR THE REASONS SET FORTH ABOVE, THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEM 2. APPENDIX A CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION OF THE FIRST AMERICAN FINANCIAL CORPORATION J. H. DERLOSHON and WILLIAM G. ZAENGLEIN, JR. certify that: 1. They are the vice president and the secretary, respectively, of THE FIRST AMERICAN FINANCIAL CORPORATION, a California corporation. 2. Article Six of the articles of incorporation of the Corporation is amended to read in its entirety as follows: SIXTH: This Corporation is authorized to issue two classes of Common shares, to be designated Class A Common and Class B Common, respectively. The number of Class A Common shares authorized to be issued is 12,000,000. The aggregate par value of said Class A Common shares is $12,000,000 and the par value of each such share is $1.00. The number of Class B Common shares authorized to be issued is 12,000,000. The aggregate par value of said Class B Common shares is $12,000,000 and the par value of each such share is $1.00. Upon acceptance by the California Secretary of State of the filing of this amendment (the "Effective Date"), all Common shares (as such are designated prior to the Effective Date), whether such Common shares are issued and outstanding or not, shall be designated Class A Common shares. In addition, this Corporation is authorized to issue a class of Preferred shares. The number of Preferred shares authorized to be issued is 500,000. The aggregate par value of said Preferred shares is $500,000 and the par value of each such share is $1.00. A. Class A Common and Class B Common Shares. The Class A Common and Class B Common shares are identical in all respects, except as follows: (1) Each Class A Common share entitles the holder thereof to one vote on each matter submitted to a shareholders' vote, while each Class B Common share entitles the holder thereof to one-tenth (1 /10) of one vote on each matter submitted to a shareholders' vote. The Class A Common and Class B Common shares shall vote as a single class with respect to all matters, unless otherwise required by the California General Corporate Law. (2) Subject to the limitations prescribed herein, holders of the Class A Common and Class B Common shares shall participate equally in any dividends (payable in cash, stock or property) and stock splits, when and as declared by the board of directors, out of assets of the Corporation legally available therefor; provided, however, that, in the event of a stock split, or a pro rata stock dividend of like shares declared on outstanding shares, the holders of Class A Common shares shall receive Class A Common shares and the holders of Class B Common shares shall receive Class B Common shares. (3) In the event the Corporation is liquidated, dissolved or wound up, whether voluntarily or involuntarily, the holders of the Class A Common shares and Class B Common shares shall participate equally in any distribution. A merger or consolidation of the Corporation with or into any other Corporation or a sale or conveyance of all or any part of the assets of the Corporation (which shall not in fact result in the liquidation of the Corporation and the distribution of assets to shareholders) shall not be deemed to be a voluntary or involuntary liquidation or dissolution or winding up of the Corporation within the meaning of this paragraph.(4) If at any time while there are shares of Class A Common and Class B Common issued and outstanding, it shall be determined by the board of directors, in its sole discretion, that legislation or regulations are enacted or any judicial or administrative determination is made which would prohibit the listing, quotation or trading of the Corporation's Class A Common shares or Class B Common shares on the New York Stock Exchange, the American Stock Exchange or the National Association of Securities Dealers Automated Quotation System, or would otherwise have a material adverse effect on the Corporation, in any such case due to the Corporation having more than one class of common shares outstanding, then the board of directors may by resolution convert all outstanding Class B Common shares into Class A Common shares on a share-for-share basis. To the extent practicable, notice of such conversion of Class B Common shares specifying the date fixed for said conversion shall be mailed, postage prepaid, at least 10 days but not more than 30 days prior to said conversion date to the holders of record of Class A Common shares and Class B Common shares at their respective addresses as the same shall appear on the books of the Corporation; provided, however, that no failure or inability to provide such notice shall limit the authority or ability of the board of directors to convert all outstanding Class B Common shares into Class A Common shares. Immediately prior to the close of business on said conversion date (or, if said conversion date is not a business day, on the next succeeding business day) each outstanding share of Class B Common shares shall thereupon automatically be converted into a share of Class A Common and each certificate theretofore representing shares of Class B Common shall thereupon and thereafter represent a like number of shares of Class A Common. B. Preferred Shares. The Board of Directors may fix by resolution the rights, preferences, privileges and restrictions of any v.,holly unissued class or series of shares other than the Class A Common shares and Class B Common shares, and the series designation and number of shares to constitute any series (which number may thereafter in the same manner be increased or decreased), and a certificate of determination shall then be filed with t he California Secretary of State. 3. The amendment herein set forth has been duly approved by the board of directors. 4. The amendment herein set forth has been duly approved by the required vote of shareholders in accordance with Section 902 of the California General Corporation Law. The Corporation has only one class of shares outstanding, and the total number of outstanding shares entitled to vote on the amendment was 4,939,704. The number of shares voting in favor of the amendment equaled or exceeded the vote required. The percentage vote required for the approval of the amendment herein set forth was more than 50%. The undersigned further declare under penalty of perjury under the laws of the State of California that the matters set forth in this certificate are true and correct of their own knowledge. Dated: April 1989 J. H. Derloshon Vice President William G. Zaenglein, Jr. Secretary The First American Financial Corporation 3/24189