<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (NO FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
COMMISSION FILE NO. 1-9396
FIDELITY NATIONAL FINANCIAL, INC.
(Exact name of registrant as specified in its charter)
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<TABLE>
<S> <C> <C>
DELAWARE 86-0498599
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
17911 VON KARMAN AVENUE 92614 (714) 622-5000
IRVINE, CALIFORNIA (ZIP CODE) (REGISTRANT'S TELEPHONE NUMBER,
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) INCLUDING AREA CODE)
</TABLE>
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
Common Stock, $.0001 par value New York Stock Exchange
Liquid Yield Option Notes, due 2009, New York Stock Exchange
zero coupon, convertible subordinated
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K, or any amendment to
this Form 10-K. [ ]
As of March 26, 1998, 22,736,836 shares of Common Stock ($.0001 par value)
were outstanding, and the aggregate market value of the shares of the Common
Stock held by non-affiliates of the registrant was $672,838,000. The aggregate
market value was computed with reference to the closing price on the New York
Stock Exchange on such date.
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PART III
ITEM 10. DIRECTORS AND THE EXECUTIVE OFFICERS OF THE REGISTRANT
The names of the director nominees, all directors, and all executive officers,
and certain information about them, are set forth below:
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE PRINCIPAL OCCUPATION SINCE
<S> <C> <C>
William P. Foley, II 53 Chairman of the Board and Chief Executive 1984
Officer
Patrick F. Stone 50 Chief Operating Officer N/A
Frank P. Willey 44 Director and President 1986
William A. Imparato 51 Director 1986
Donald M. Koll 65 Director 1995
Daniel D. (Ron) Lane 63 Director 1989
General William Lyon 75 Director 1998
Stephen C. Mahood 56 Director 1994
J. Thomas Talbot 62 Director 1990
Cary H. Thompson 41 Director 1992
William W. Wehner 56 Director and Executive Vice President- 1998
Financial Companies
Allen D. Meadows 44 Executive Vice President, Chief Financial N/A
Officer and Treasurer
Carl A. Strunk 60 Executive Vice President - Finance N/A
Andrew F. Puzder 47 Executive Vice President N/A
M'Liss Jones Kane 45 Senior Vice President, General Counsel N/A
and Corporate Secretary
Edward J. Dewey 52 Senior Vice President - Chief of Staff N/A
Raymond R. Quirk 51 Vice President N/A
Gary R. Nelson 50 Vice President N/A
</TABLE>
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WILLIAM P. FOLEY, II
Mr. Foley is the Chairman of the Board and Chief Executive Officer of the
Company and has been since its formation in 1984. Mr. Foley was President of the
Company from its formation in 1984 until December 31, 1994. He is Chairman of
the Board and Chief Executive Officer of Fidelity National Title Insurance
Company and has been since April 1981. Mr. Foley is also currently serving as
Chairman of the Board and Chief Executive Officer of CKE Restaurants, Inc., as
Chairman of the Board of Rally's Hamburgers, Inc.; Checkers Drive-In
Restaurants, Inc., GB Foods Corporation, and Star Buffet, Inc. Additionally, he
is a member of the Board of Directors of Data Works Corporation and Micro
General Corporation.
PATRICK F. STONE
Mr. Stone was elected Chief Operating Officer of the Company on March 25,
1997. From May 1995 through March 1997 he was an Executive Vice President of the
Company and President of Fidelity National Title Insurance Company and the four
other underwriters of the Company. From February 1989 to May 1995 he was
President of Fidelity National Title Company of Oregon.
FRANK P. WILLEY
Mr. Willey is President and a director of the Company. He served as an
Executive Vice President and General Counsel of the Company from its formation
until December 31, 1994, and is currently serving as an Executive Vice President
and was General Counsel of Fidelity National Title Insurance Company from 1984
to January 1995. He has served in various capacities with subsidiaries and
affiliates of the Company since joining it in 1984. Mr. Willey is also a
director of CKE Restaurants, Inc., GB Foods Corporation, Southern Pacific
Funding Corporation and Ugly Duckling Holding, Inc.
WILLIAM A. IMPARATO
Mr. Imparato has been a director of the Company since December 1986. From
June 1990 to December 1993, Mr. Imparato was President of the Company's
wholly-owned real estate subsidiary Manchester Development Corporation
("Manchester"). Since July 1980, he has been a partner in Park West Development
Company, a real estate development firm headquartered in Phoenix, Arizona.
DONALD M. KOLL
Mr. Koll has been a director of the Company since March 28, 1995. Mr. Koll
is Chairman of the Board and Chief Executive Officer of The Koll Company and has
been since its formation on March 26, 1962. Mr. Koll is also a director of Koll
Real Estate Group, Inc.
DANIEL D. (RON) LANE
Mr. Lane has been a director of the Company since September 1989. Since
February 1983, he has been a principal, Chairman and Chief Executive Officer of
Lane/Kuhn Pacific, Inc., a corporation that consists of several community
development and home-building partnerships, all of which are headquartered in
Newport Beach, California. Mr. Lane has also served as a director of Hawaiian
Airlines, Inc. since January 1990, as a director of Resort Income Investors,
Inc. since September 1990 and as Chairman of the Board and Chief Executive
Officer of Pro Shot Golf, Inc. since August 1994. He is Vice Chairman of the
Board of Directors of CKE Restaurants, Inc.
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<PAGE> 4
GENERAL WILLIAM LYON
Mr. Lyon is the Chairman of the Board, President and Chief Executive
Officer of William Lyon Homes, Inc. and affiliate companies which are
headquartered in Newport Beach, California. In 1989, General Lyon formed
Air/Lyon, Inc. which includes Elsinore Service Corp. and Martin Aviation located
at John Wayne Airport. He has been Chairman of the Board of The William Lyon
Company since June, 1985.
STEPHEN C. MAHOOD
Mr. Mahood is a lawyer and a private investor. He was associated with
SEDCO, Inc., a large offshore oil well drilling contractor, from 1966 until it
was acquired by Schlumberger, Ltd. in 1985, at which time he was President of
SEDCO Energy Corporation, an Executive Vice President and director of SEDCO,
Inc. and a director of the International Association of Drilling Contractors.
Mr. Mahood served as a Trustee of the Teachers' Retirement System of Texas from
1987-1993. Mr. Mahood currently serves as a director of Maxor National Pharmacy
Services Corporation.
J. THOMAS TALBOT
Mr. Talbot has been a director of the Company since December 1990. He was
formerly Chairman of the Board and Chief Executive Officer of HAL, Inc. and its
subsidiaries Hawaiian Airlines and West Maui Airport, and served in various
executive capacities with those companies until June 1991. Between August 1992
and March 1994, Mr. Talbot was Chairman and Chief Executive Officer of Alliance
Bancorp, which was being liquidated. Mr. Talbot has been a general partner of
Shaw & Talbot, a real estate investment and development company, since 1975. He
was Chairman of Jet America Airlines from 1981 to 1987, when it merged with
Alaska Air Group. Mr. Talbot is currently serving as a director of the Hallwood
Group, Showbiz Pizza Time, Inc., Koll Real Estate Group, Hemmeter Enterprises,
Inc. and the Baldwin Company.
CARY H. THOMPSON
Mr. Thompson has been a director of the Company since July 1992. Mr.
Thompson is currently Chief Operating Officer and a director of Aames Financial
Corporation. Mr. Thompson was a managing director of Nat West Markets from May
of 1994 through March of 1995. Mr. Thompson was Senior Vice President and
managed the West Coast Financial Institutions Group for Oppenheimer & Co., Inc.,
an investment banking firm from 1989 to May 1994. Prior to that time, he was a
partner with the law firm of Manatt, Phelps, Rothenberg and Phillips.
WILLIAM W. WEHNER
Mr. Wehner has been the Chairman of the Board of Granite Financial, Inc.
since its formation in June, 1996. Mr. Wehner co-founded and was the managing
member of Granite Financial, LLC, Granite Financial, Inc.'s predecessor , from
1995 to 1996. From 1989 through 1994, Mr. Wehner served in several capacities
with the Concord group of companies. In 1990, Mr. Wehner formed and was the
senior executive officer of First Concord Acceptance Corporation, an equipment
leasing company and an affiliate of the Concord group of companies. Mr. Wehner
is a Certified Lease Professional and is a member of the Equipment Leasing
Association (ELA) of which he is a past director, member of the executive
committee, and ethics committee. Mr. Wehner is also a member of the United
Association of Equipment Lessors.
ALLEN D. MEADOWS
Mr. Meadows joined the Company in September, 1997 as an Executive Vice
President and Chief Financial Officer of the Company. Prior to his employment
with the Company, Mr. Meadows was Senior Vice President - Corporate Development
of Great Western Bank from 1984 to 1997.
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<PAGE> 5
CARL A. STRUNK
Mr. Strunk joined Fidelity National Title Insurance Company in February
1992 as an Executive Vice President. He was named an Executive Vice President
and Chief Financial Officer of the Company in March 1992 and served in this
capacity until September 15, 1997. In September, 1997 he became Executive Vice
President - Finance of the Company. Prior to his employment with the Company,
Mr. Strunk was President of Land Resources Corporation from 1986 to 1991. Mr.
Strunk is a certified public accountant. Mr. Strunk was elected Executive Vice
President and Chief Financial Officer of CKE Restaurants, Inc. on February 6,
1997. Mr. Strunk currently serves as a director of Micro General Corporation.
ANDREW F. PUZDER
Mr. Puzder joined Fidelity January 1, 1995 as Executive Vice President and
General Counsel of the Company and served in this capacity until September 15,
1997. Since September 15, 1997 he has been an Executive Vice President of the
Company. From March 1994 through December 1994, he was a partner at the law firm
of Stradling, Yocca, Carlson & Rauth. Prior to that he was a partner at Lewis,
D' Amato, Brisbois & Bisgaard, a law firm, from September 1991 through March
1994, and he was a partner of the Stoler Partnership from February 1984 through
September 1991. Mr. Puzder was elected Executive Vice President and General
Counsel of CKE Restaurants, Inc. on February 6, 1997. Mr. Puzder serves as Chief
Executive Officer and a director of GB Foods Corporation. He is also a Director
of Rally's Hamburgers, Inc. and Javelin, Inc.
M'LISS JONES KANE
Ms. Kane joined Fidelity in March, 1995 as a Senior Vice President and
Corporate Counsel of the Company and became Corporate Secretary in April 1995
serving in these capacities until September 15, 1997. Since September 15, 1997
she has been Senior Vice President, General Counsel, and Corporate Secretary of
the Company. Prior to that she was with the ICN Pharmaceuticals, Inc. group of
companies from March of 1990 as Vice President, General Counsel and Secretary of
ICN Biomedicals, Inc. and subsequently became Vice President, General Counsel
and Secretary of SPI Pharmaceuticals, Inc.
EDWARD J. DEWEY
Edward J. Dewey became Senior Vice President, Chief of Staff, Office of the
Chairman of the Company on December 9, 1997. Mr. Dewey is Senior Vice President,
Chief of Staff, Office of the Chairman of CKE Restaurants, Inc. Prior to that
from May 1993 to November 1997 he was a Vice President with Fidelity National
Title Insurance Company. From 1967 through 1993, Mr. Dewey was in the U.S. Army
leaving the service with the rank of Colonel.
RAYMOND R. QUIRK
Mr. Quirk has been a Vice President of the Company since June 1993, and has
been an Executive Vice President and a Regional Manager of Fidelity National
Title Insurance Company since August 1991. Mr. Quirk has been employed by
Fidelity National Title Insurance Company in other management positions since
November 1987.
GARY R. NELSON
Mr. Nelson has been a Vice President of the Company since September 26,
1994. From August 1993 to September 1994 he was Chief Financial Officer of World
Title Company. From May 1991 to July 1993 Mr. Nelson was Senior Vice President
of Mergers and Acquisitions of the Company. From January 1988 to May 1991 he was
a Vice President, Chief Financial Officer and Treasurer of the Company. Mr.
Nelson is a certified public accountant.
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<PAGE> 6
COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Rules adopted by the Securities and Exchange Commission ("SEC")
under Section 16(a) of the Exchange Act require the Company's officers and
directors, and persons who own more than 10% of the issued and outstanding
shares of the Company's common stock, to file reports of their ownership, and
changes in ownership, of such securities with the SEC on SEC Forms 3, 4 or 5, as
appropriate. Officers, directors and greater-than-ten-percent stockholders are
required by the SEC's regulations to furnish the Company with copies of all
forms they file pursuant to Section 16(a).
Based solely upon a review of Forms 3, 4 and 5 and amendments
thereto furnished to the Company during its most recent fiscal year end, and any
written representations provided to it, the Company is advised that all filings
were timely and correctly made.
ITEM 11. EXECUTIVE COMPENSATION
The following Summary Compensation Table shows compensation paid by the
Company for services rendered during fiscal years 1997, 1996 and 1995 for the
Company's Chief Executive Officer and the four most highly compensated current
executive officers whose salary and bonus exceeded $100,000 in 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM
---------------------------------------------------------- COMPENSATION
OTHER ------------
ANNUAL AWARDS- ALL OTHER
NAME AND PRINCIPAL BONUS COMPENSATION OPTIONS(#) COMPENSATION
POSITION YEAR SALARY($) ($)(1)(2) (3) (1)(4)(5) ($)(6)
------------------ ---- --------- --------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
William P. Foley, II, 1997 $600,000. $968,482. $ 88,215. $187,000. $35,986.
Chairman of the Board 1996 600,000. 507,943. 122,596. 188,100. 28,859.
and Chief Executive Officer 1995 394,008. 430,000. 135,914. 188,760. 29,343.
Patrick F. Stone, 1997 318,750. 281,504. -- 40,004. 22,500.
Chief Operating Officer (7) 1996 300,000. 124,165. -- 38,316. 12,250.
1995 226,950. 222,160. -- 2,420. 6,248.
Frank P. Willey, 1997 250,000. 318,338. -- 44,000. 16,563.
President 1996 250,000. 150,000. -- 52,800. 14,250.
1995 200,000. 120,000. -- 50,820. 14,577.
Carl A. Strunk, 1997 172,500. 159,169. -- 22,000. 2,438.
Executive Vice President- 1996 240,000. 110,000. -- 26,400. --
Finance 1995 200,000. 110,000. -- 29,040. --
Andrew F. Puzder 1997 172,500. 159,169. -- 49,500. 8,580.
Executive Vice President 1996 240,000. 75,000. -- 49,500. 4,860.
Assistant Secretary
</TABLE>
(1) Consists of cash bonuses in the years paid or deferred to reduce the
exercise price of stock options granted to the above-noted key employees to
less than fair market value of the common stock at the date of grant,
pursuant to the Company's 1991 Stock Option Plan. Bonuses were awarded
during the year following the fiscal year to which the bonuses relate,
based on an evaluation by the Compensation Committee of the Board of
Directors. The amount of deferred bonuses included in this column for 1996,
1995 and 1994, the most recent three years for which the options were
granted, are as follows: (i) Mr. Foley: $100,000, -- 1996 bonus; $105,000,
-- 1995 bonus; $30,000, -- 1994 bonus;(ii) Mr. Stone: $159,175, -- 1996
bonus; $24,165, - 1995 bonus; $10,000, -- 1994 bonus; (iii) Mr. Willey:
$40,000, - 1995
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<PAGE> 7
bonus; $10,000, -- 1994 bonus; (iv) Mr. Strunk: $20,000, - 1995 bonus;
$20,000, -- 1994 bonus.
(2) Not included in the table are the bonuses received in 1998 for the 1997
fiscal year by the executive officers named in the table, based on formulas
in their employment agreements as follows: William P. Foley, II, $1,381,000
of which $138,000 he deferred for 27,615 Company stock options: Patrick F.
Stone, $414,000 of which he deferred $41,000 for 8,285 Company stock
options; Frank P. Willey, $414,000 of which $124,000 he deferred for 24,854
Company stock options, Carl A. Strunk, $138,000 and Andrew F. Puzder,
$138,000.
(3) Certain incidental perquisites or other personal benefits for executive
officers of the Company (not otherwise disclosed in this Proxy Statement)
may result from expenses incurred by the Company or its subsidiaries in the
interest of attracting and retaining qualified personnel. The incremental
cost to the Company and its subsidiaries of providing such incidental
perquisites or other personal benefits for executive officers named in the
Summary Compensation Table, did not exceed the lesser of $50,000 or 10% of
the total annual salary and bonus reported in fiscal 1997 for the named
executive officer. Other Annual Compensation for Mr. Foley included the
cost of (i) a Company provided automobile -- $9,000 in 1997, $9,000 in 1996
and $9,000 in 1995 and (ii) tax and financial planning advice provided by
third parties to Mr. Foley and Folco Development Corporation and personal
use of Company assets by Mr. Foley and Folco Development Corporation --
$79,215 in 1997, $113,596 in 1996, and $126,914 in 1995.
(4) The number of options granted per year in this column for 1997, 1996 and
1995, the three-year period in which the options were granted, are as
follows: (i) Mr. Foley: 1997 grant - 165,000 options granted under the 1987
Stock Option Plan and 22,000 options granted under the 1991 Stock Option
Plan;1996 grant -- 165,000 options granted under the 1987 Stock Option Plan
and 23,100 stock options granted under the 1991 Stock Option Plan; and 1995
grant -- 181,500 options granted under the 1987 Stock Option Plan and 7,260
options granted under the 1991 Stock Option Plan; (ii) Mr. Stone: 1997
grant - 33,000 options granted under the 1987 Stock Option Plan and 7,004
options granted under the 1991 Stock Option Plan;1996 grant - 33,000
options granted under the 1987 Stock Option Plan and 5,316 stock options
granted under the 1991 Stock Option Plan; and 1995 grant -- 2,420 options
granted under the 1991 Stock Option Plan; (iii) Mr. Willey: 1997 grant -
44,000 options granted under the 1987 Stock Option Plan; 1996 grant --
44,000 options granted under the 1987 Stock Option Plan and 8,800 stock
options granted under the 1991 Stock Option plan; and 1995 grant -- 48,400
options granted under the 1987 Stock Option Plan and 2,420 options granted
under the 1991 Stock Option Plan; (iv) Mr. Strunk: 1997 grant - 22,000
options granted under the 1987 Stock Option Plan; 1996 grant -- 22,000
options granted under the 1987 Stock Option Plan and 4,400 stock options
granted under the 1991 Stock Option Plan; and 1995 grant -- 24,200 options
granted under the 1987 Stock Option Plan and 4,840 options under the 1991
Stock Option Plan; (v) Mr. Puzder: 1997 grant - 22,000 options granted
under the 1987 Stock Option Plan, 7,908 options granted under the 1993
Stock Option Plan and 19,592 options granted under the 1993 Stock Option
Plan; 1996 grant -- 22,000 options granted under the 1987 Stock Option Plan
and 27,500 stock options granted under the 1991 Stock Option plan; and 1995
grant -- 60,500 options granted under the 1993 Stock Option Plan.
(5) The Company does not have any long-term incentive plans or compensation
plans pursuant to which stock appreciation rights or restricted stock is
awarded to officers or directors. The number of options granted in 1998 for
fiscal year 1997 to the named executives, not included in the table, are as
follows: under the 1991 Stock Option Plan (i) Mr. Foley -- 27,615 shares;
(ii) Mr. Stone -- 8,285 shares; (iii) Mr. Willey --24,854 and under the
1993 Stock Option Plan (i) Mr. Foley -- 150,000 shares; (ii) Mr. Stone --
40,000 shares; (iii) Mr. Willey -- 30,000 shares; (iv) Mr. Strunk -- 15,000
shares; (v) Mr. Puzder -- 45,000 shares.
(6) Includes Company cash contributions to the Employee Stock Purchase Plan on
behalf of the individuals named in the Summary Compensation Table, except
for Mr. Foley. All Other Compensation for Mr. Foley also includes imputed
income of $1,157 for 1997, $1,081 for 1996, and $725 for 1995 and $1,426
for 1994 respectively, from a joint life split dollar insurance policy.
(7) Mr. Stone was not an officer of the Company prior to May 1995.
Certain executive officers received loans from subsidiaries of the Company
in amounts in excess of $60,000 after January 1, 1997, as follows: Frank P.
Willey, loan amount $200,000 at an interest rate of 10% per annum, largest
aggregate amount outstanding at any time during the period $167,986, which
was paid in full on December 10, 1997; Patrick F. Stone, loan amount
$150,000 at an interest rate of prime per annum, largest aggregate amount
outstanding at any time during the period $150,000, as of March 31, 1998.
Mr. Stone also had a loan in the amount of $50,000 at an interest rate of
10% per annum, largest aggregate amount outstanding at any time during the
period, $25,000 which was paid in full on April 30, 1997.
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OPTION GRANTS
The following table provides information as to options to purchase common
stock granted to the named individuals during 1997 pursuant to the Company's
1993, 1991 and 1987 Stock Option Plans. The Company does not currently grant
stock appreciation rights to officers or directors.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERCENT POTENTIAL
OF TOTAL REALIZABLE VALUE
NUMBER OF OPTIONS AT ASSUMED
SECURITIES GRANTED TO MARKET ANNUAL RATES OF
UNDERLYING EMPLOYEES PRICE AT EXERCISE OR STOCK PRICE
OPTIONS IN FISCAL DATE OF BASE PRICE(1) EXPIRATION APPRECIATION FOR
NAME GRANTED(#) YEAR GRANT ($/SH) DATE OPTION TERM
---- ---------- ---------- -------- ------------- ---------- ----------------
5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C> <C>
1993 STOCK OPTION PLAN
Andrew F. Puzder 27,500 100.0% $11.023 $12.6450 04/17/08 $163,622. $494,524.
1991 STOCK OPTION PLAN
William P. Foley,II 22,000 12.0% $11.4770 $6.6140 03/12/08 286,342. 574,886.
Patrick F. Stone 7,004 3.9% 11.4770 6.6140 03/12/08 91,157. 183,015.
Frank P. Willey -- -- -- -- -- -- --
Carl A. Strunk -- -- -- -- -- -- --
Andrew F. Puzder -- -- -- -- -- -- --
1987 STOCK OPTION PLAN
William P. Foley, II 165,000 28.0% $11.4770 $11.4770 03/05/97 1,190,528. 3,016,795.
Patrick F. Stone 33,000 5.6% 11.4770 11.4770 03/05/97 238,105. 609,359.
Frank P. Willey 44,000 7.5% 11.4770 11.4770 03/05/07 317,474. 804,478.
Carl A. Strunk 22,000 3.7% 11.4770 11.4770 03/05/97 158,737. 402,239.
Andrew F. Puzder 22,000 3.7% 11.4770 11.4770 03/05/07 158,737. 402,239.
TOTAL -- 1993, 1991 AND 1987 STOCK OPTION PLANS
William P. Foley, II 187,000 23.4% $11.4770 $ 6.6140- 03/12/08- 1,476,871. 3,591,682.
11.4770 03/05/07
Patrick F. Stone 40,004 5.0% $11.4770 $ 6.6140- 03/12/08-- 329,262. 786,374.
11.4770 03/05/07
Frank P. Willey 44,000 5.5% $11.4770 $11.4770 03/05/97 317,474. 804,478.
Carl A. Strunk 22,000 6.3% $11.3640- $ 6.8182- 05/13/08- 220,111. 533,163.
11.5910 11.5910 04/10/06
Andrew F. Puzder 49,500 6.2% $11.4770- $11.0230- 04/17/08- 322,359. 896,764.
12.6450 11.4770 03/05/07
</TABLE>
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<PAGE> 9
(1) The options granted in 1997 under the 1991 Stock Option Plan were granted
at an exercise price of $11.4770 to key employees of the Company who
applied deferred bonuses expensed in 1997 (see (1) of Summary Compensation
Table) to the exercise price, thereby reducing such price to $6.6140 per
share if exercised within the first year of grant. The exercise price of
these options decreases approximately 5% per year through March 12, 2002
and $0.30 per share from March 13, 2002 through March 13, 2008, at which
time the exercise price will be $5.25. The options granted in 1997 under
the 1993 and 1987 Stock Option Plans were granted at an exercise price of
$12.045 per share and $11.4770 per share respectively, the market price at
the date of grant. These options became exercisable on April 17, 1997 and
March 6, 1997 respectively.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table summarizes information regarding exercises of stock
options by the named individuals during 1997 and unexercised options held by
them as of December 31, 1997. The Company did not reprice any existing options
during the last completed fiscal year.
AGGREGATED STOCK OPTION EXERCISES
IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
UNEXERCISED UNEXERCISED
OPTIONS AT IN-THE-MONEY
FY-END OPTIONS AT FY-END
SHARES ACQUIRED VALUE REALIZED (#) EXERCISABLE ($) EXERCISABLE/
NAME EXERCISE (#) ($) UNEXERCISABLE(1)(2) UNEXERCISABLE(1)(2)
---- --------------- -------------- ------------------- -------------------
<S> <C> <C> <C> <C>
William P. Foley, II --- --- 1,082,685/165,000 $24,879,128./3,241,920.
Patrick F. Stone 33,000 730,125. 82,970/33,000 2,086,986/648,376.
Frank P. Willey --- --- 245,534/44,000 5,821,725./864,512.
Carl A. Strunk --- --- 134,189/22,000 2,964,265./432,256.
Andrew F. Puzder --- --- 140,590/29,908 3,007,162/578,393.
</TABLE>
- ----------
(1) Number of exercisable shares and corresponding values relate to options
granted under the 1993, 1991 and 1987 Stock Option Plans. The exercise
price varies based upon the exercise price at the time of grant and the
amount of deferred bonus applied by the officer to reduce the exercise
price. See Summary Compensation Table above. The value of unexercised
options at year-end is calculated as the difference between the market
value of the underlying security, $31.125 per share, and the exercise price
of the option at year-end, less the bonus deferral. The exercise prices of
the options at year-end were as follows: (i) Mr. Foley -- options to
purchase 25,410 shares at $5.9090 per share, options to purchase 7,986
shares at $3.1550 per share, options to purchase 27,951 shares at $6.0480
per share, options to purchase 41,927 shares at $7.2880 per share, options
to purchase 57,171 shares at $2.8130 per share, options to purchase 119,790
shares at $.5260 and options to purchase 22,000 shares at $6.6140 under the
1991 Plan, and options to purchase 199,650 shares at $7.6070, options to
purchase 199,650 shares at $10.4250 and options to purchase 199,650 shares
at $11.4580 and options to purchase 181,500 shares at $10.5370 under the
1987 Plan; (ii) Mr. Stone -- options to purchase 5,848 shares at $5.9090
per share, options to purchase 2,662 shares at $3.1550 per share, options
to purchase 14,641 shares at $6.0480, options to purchase 37,780 shares at
$7.2880, 15,035 shares at $2.8130, options to purchase $7,004, shares at
$6.6140 per share under the 1991 Plan; (iii) Mr. Willey -- options to
purchase 9,680 shares at $5.9090 per share, 2,662 shares at $3.1550 per
share, options to purchase 9,317 shares at $6.0480 per share, options to
purchase 12,578 shares at $7.2880 per share, options to purchase 17,153
shares at $2.8130 per share and options to purchase 35,637 shares at $.5260
under the 1991 Plan; and options to purchase 53,240 shares at $7.6070,
options to purchase 22,627 shares at $10,4250, options to purchase 33,941
shares at $11.4580 per share and options to purchase 48,400 shares at
$10.5370 per share under the 1987 Plan; (iv) Mr. Strunk -- options to
purchase 4,480 shares at $5.9090 per share, options to purchase 5,324
shares at $3.1550 per share, options to purchase 9,317 shares at $6.0480
per share; options to purchase 13,976 shares at $7.2880 per share under the
1991 Plan; and options to purchase 26,620 shares at $7.6070 per share,
options to purchase 19,965 shares at $10.4250, options to purchase 29,948
shares at $11.4580, and options to purchase 24,200 shares at $10.5370 per
share under the 1987 Plan; and (v) Mr. Puzder -- options to purchase 66,548
shares at $8.1670 per share under the 1993 Stock Option Plan; and options
to purchase 24,200 shares at $10.5370 per share, and options to purchase
30,250 shares at $10.6600 per share and options to purchase 19,592 shares
at $12.6450 per share.
(2) Number of unexercisable shares and corresponding value relate to options
granted under the Company's 1993, 1991 and 1987 Stock Option Plans. The
value of these unexercisable options represents the difference between the
year-end market value of the underlying security of $31.125 per
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<PAGE> 10
share and the exercise price of the 1993 options at year-end of $11.7255
per share, the 1991 options at year-end of $6.8182 per share and the 1987
options at year-end of $11.5910 per share. These options became
exercisable on April 17, 1997, May 14, 1997 and April 11, 1997
respectively.
EMPLOYMENT AGREEMENTS
The Company entered into a five-year employment agreement (the "Agreement")
with its Chairman and Chief Executive Officer, Mr. Foley, effective April 1,
1991 and amended the agreement on April 1, 1996 and January 1, 1997,
(collectively the "Amendment" to the employment agreement effective on April 1,
1996) for an additional five year period through March 31, 2001. The first
amendment adjusted his minimum annual base salary to $600,000. The Board will
review Mr. Foley's minimum base annual salary in March 1998, and may, in its
sole discretion, increase such minimum base annual salary for the remainder of
the term of the Amendment based upon Mr. Foley's performance during the first
two years of the Amendment. The Agreement and Amendment include other
compensation and executive fringe benefits, including an annual merit bonus
calculated based on the Company's return on equity before extraordinary items, a
$1,000,000 insurance policy payable to the beneficiary of his choice and a joint
life split dollar insurance arrangement under which the Company advances the
premiums and retains the full cash value of the policy. There is a change of
control provision in the Amendment enabling Mr. Foley to terminate this
agreement due to a change in control during the period commencing 60 days and
expiring 365 days after such change in control. In the event of termination of
the agreement for Good Reason (as defined in the agreement as a change in
control) or if Mr. Foley's employment is terminated following a change of
control due to a breach of this Agreement then he shall receive (i) his salary
through the date of termination, (ii) severance pay in an amount equal to his
annual salary in effect as of the date of termination plus the total bonus paid
or payable to him for the most recent calendar year multiplied by the greater
number of years remaining in the term of employment, including partial years, or
3 years of such payment to be made in a lump sum on or before the fifth day
following the date of termination, (iii) maintenance of all benefit plans and
programs for Mr. Foley for the greater number of 3 years or the number of years
(including partial years) remaining in the Amendment. The Company obtained a
covenant from Mr. Foley that he will not compete with the Company or disclose
its trade secrets both during employment or in the event the agreement ends or
Mr. Foley's employment is terminated. The Agreement allows the Company to
terminate Mr. Foley upon written notice without cause with terms specified in
the Amendment. Upon Mr. Foley's death, his estate will receive a payment in the
amount of two years' base salary. Upon incapacity or disability for a continuous
period of nine months, the Company may terminate the employment contract with
Mr. Foley upon payment of an amount equal to two years' base salary.
The Company entered into a one year employment agreement with Patrick F.
Stone effective January 1, 1996, which was subsequently amended effective
January 1, 1997, extending the term for a period of 3 years ending December 31,
1999. The amendment also provides for a minimum base salary of $325,000 which
may be increased at the discretion of the Chief Executive Officer and/or the
Board of Directors. Other compensation and executive fringe benefits include an
annual bonus calculated based on the Company's return on equity before
extraordinary items. There is a change of control provision in the first
amendment enabling Mr. Stone to terminate this Agreement due to a change in
control during the period commencing 60 days and expiring 365 days after such
change in control. In the event of termination of the agreement for Good Reason
(defined in the agreement as a change in control) or if Mr. Stone's employment
is terminated following a change of control due to a breach of this agreement
then he shall receive (i) his salary through the date of termination, (ii)
severance pay in an amount equal to his annual salary in effect as of the date
of termination plus the total bonus paid or payable to him for the most recent
calendar year multiplied by the greater of the number of years (including
partial years) remaining in the agreement or the number 2, such payment to be
made in a lump sum on or before the fifth day following the date of termination,
(iii) maintenance of all benefit plans and programs for Mr. Stone for the number
of 2 years or the number of years (including partial years) remaining in the
Agreement.
The Company entered into a one year employment agreement with Frank P.
Willey effective January 1, 1996, which was subsequently amended effective
January 1, 1997, extending the term for a period of 3 years ending December 31,
1999. The agreement provided for a minimum base salary of $250,000 which may be
increased at the discretion of the Chief Executive Officer and/or the Board of
Directors. Other compensation and executive fringe benefits include an annual
bonus calculated based on the Company's return on equity before extraordinary
items. There is a change of control provision in the first amendment enabling
Mr. Willey to terminate this Agreement due
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<PAGE> 11
to a change in control during the period commencing 60 days and expiring 365
days after such change in control. In the event of termination of the agreement
for Good Reason (defined in the Agreement as a change in control) or if Mr.
Willey's employment is terminated following a change of control due to a breach
of this agreement then he shall receive (i) his salary through the date of
termination, (ii) severance pay in an amount equal to his annual salary in
effect as of the date of termination plus the total bonus paid or payable to him
for the most recent calendar year multiplied by the greater of the number of
years (including partial years) remaining in the agreement or the number 2, such
payment to be made in a lump sum on or before the fifth day following the date
of termination, (iii) maintenance of all benefit plans and programs for Mr.
Willey for the number of 2 years or the number of years (including partial
years) remaining in the Agreement.
Mr. Allen D. Meadows entered into an employment agreement with the Company
effective September 15, 1997, for a term of 3 years which provides for a minimum
annual base salary of $200,000 which may be increased at the direction of the
Chief Executive Officer and/or the Compensation Committee of the Board of
Directors. Other compensation and fringe benefits include an annual bonus
calculated based on the Company's return on equity before extraordinary items.
There is a change in control provision enabling Mr. Meadows to terminate this
Agreement due to a change in control during the period commencing 60 days and
expiring 365 days after such change in control In the event of termination of
the agreement for Good reason (defined in the agreement as a change in control)
or if Mr. Meadows' employment is terminated following a change of control due to
a breach of this agreement then he shall receive (i) his salary through the date
of termination, (ii) severance pay in an amount equal to his annual salary in
effect as of the date of termination plus the total bonus paid or payable to him
for the most recent calendar year multiplied by the greater of the number of
years (including partial years) remaining in the Agreement or the number 2, such
payment to be made in a lump sum on programs for Mr. Meadows for the number of 2
years or the number of years (including partial years) remaining in the
agreement. Other than provided in the agreement, employee will not engage in any
business competitive with the Company.
Mr. Carl A. Strunk entered into an employment agreement with the Company
effective April 1, 1997, for a term of 3 years which provides for a minimum
annual base salary of $150,000 which may be increased at the discretion of the
Chief Executive Officer and/or the Compensation Committee of the Board of
Directors. Other compensation and fringe benefits include an annual bonus
calculated based on the Company's return on equity before extraordinary items.
There is a change of control provision in the first amendment enabling Mr.
Strunk to terminate this Agreement due to a change in control during the period
commencing 60 days and expiring 365 days after such change in control. In the
event of termination of the agreement for Good Reason (defined in the agreement
as a change in control) or if Mr. Strunk's employment is terminated following a
change of control due to a breach of this agreement then he shall receive (i)
his salary through the date of termination, (ii) severance pay in an amount
equal to his annual salary in effect as of the date of termination plus the
total bonus paid or payable to him for the most recent calendar year multiplied
by the greater of the number of years (including partial years) remaining in the
agreement or the number 2, such payment to be made in a lump sum on or before
the fifth day following the date of termination, (iii) maintenance of all
benefit plans and programs for Mr. Strunk for the number of 2 years or the
number of years (including partial years) remaining in the agreement. Employee
has the right to be the Chief Financial Officer of CKE Restaurants, Inc., during
the term of this agreement. Other than as provided in the agreement, employee
will not engage in any business competitive with the Company.
Mr. Andrew F. Puzder entered into an employment agreement with the Company
effective April 1, 1997, for a term of 3 years which provides for a minimum
annual base salary of $150,000 which may be increased at the discretion of the
Chief Executive Officer and/or the Compensation Committee of the Board of
Directors. Other compensation and fringe benefits include an annual bonus
calculated based on the Company's return on equity before extraordinary items.
Mr. Puzder is also granted the right to represent Mr. Carl N. Karcher. There is
a change of control provision in the first amendment enabling Mr. Puzder to
terminate this Agreement due to a change in control during the period commencing
60 days and expiring 365 days after such change in control. In the event of
termination of the agreement for Good Reason (defined in the agreement as a
change in control) or if Mr. Puzder's employment is terminated following a
change of control due to a breach of this agreement then he shall receive (i)
his salary through the date of termination, (ii) severance pay in an amount
equal to his annual salary in effect as of the date of termination plus the
total bonus paid or payable to him for the most recent calendar year multiplied
by
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<PAGE> 12
the greater of the number of years (including partial years) remaining in the
Agreement or the number 2, such payment to be made in a lump sum on or before
the fifth day following the date of termination, (iii) maintenance of all
benefit plans and programs for Mr. Puzder for the number of 2 years or the
number of years (including partial years) remaining in the agreement. Employee
has the right to be the General Counsel of CKE Restaurants, Inc., during the
term of this agreement. Other than as provided in the agreement, employee will
not engage in any business competitive with the Company.
DIRECTOR COMPENSATION
Directors who are not employees of the Company receive a $2,500 per quarter
retainer and $2,500 per Board of Directors meeting attended (or $1,250 per
committee meeting attended), plus reimbursement of reasonable expenses.
Directors who are employees of the Company do not receive any compensation for
acting as directors, except for reimbursement of reasonable expenses, if any,
for Board meeting attendance.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1997, Messrs. Thompson, Talbot and Lane served as members of the
Compensation Committee. The Compensation Committee is currently composed of
three independent directors. No member of the Compensation Committee is a former
or current officer or employee of the Company or any of its subsidiaries, and
there are no interlocking directorships.
Mr. Thompson has served as a member of the Compensation Committee since
March 1993. In March 1993, the Company issued and sold its Senior Secured Notes
in the aggregate principal amount of $22.5 million to certain institutional
investors in a private placement. Oppenheimer & Co., Inc. received approximately
$300,000 as a placement fee in connection with this transaction. Mr. Thompson
was employed by Oppenheimer & Co. Inc., until May of 1994.
In April 1993, the Company issued 1,697,025 shares of its common stock in a
public offering in which Oppenheimer & Co., Inc. served as one of three primary
underwriters. Oppenheimer & Co., Inc. received a discount of approximately 5.5%
on the shares it purchased from the Company, which was an underwriting discount
consistent with industry practice.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The following report of the Compensation Committee to the Board of
Directors shall not be deemed to be incorporated by reference into any previous
filing by the Company under either the Securities Act of 1933 ("Securities Act")
or the Securities Exchange Act of 1934 ("Exchange Act") that incorporates future
Securities Act or Exchange Act filings in whole or in part by reference.
To the Board of Directors:
GENERAL
The Compensation Committee of the Board of Directors is responsible for
establishing and administering the policies that govern executive compensation
and benefit practices. The Compensation Committee evaluates the performance of
the executive officers and determines their compensation levels, in terms of
salary, annual bonus and related benefits, all subject to Board approval. The
Compensation Committee has access to independent compensation data for use in
assessing levels of compensation for officers of the Company.
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<PAGE> 13
COMPENSATION PHILOSOPHY
The Company's executive compensation programs are designed to (i) provide
levels of compensation that integrate pay and incentive plans with the Company's
strategic goals, so as to align the interests of executive management with the
long-term interests of the stockholders; (ii) motivate Company executives to
achieve the strategic business goals of the Company and to recognize their
individual contributions; and (iii) provide compensation opportunities which are
competitive to those offered by other national title insurance companies and
other middle-market corporations similar in size and performance. Although the
exact identity of the corporations surveyed varies, these generally include
title companies and other corporations equal to or larger than the Company. Most
of the title companies surveyed are included in the Peer Group Index utilized in
the "Performance Graph" set forth below.
Therefore, the Compensation Committee believes that the components of
executive compensation should include base salary, annual cash bonus, stock
option grants and other benefits and should be linked to individual and Company
performance. With regard to the Company's performance, the measures used for
determining appropriate levels of compensation for executive officers include
the Company's national market share, net margin, quality of service, meeting
strategic goals within the current economic climate and industry environment,
scope of responsibilities, expansion by acquisition or otherwise, profit
retention and profitability, all of which combine to enhance stockholder value.
BASE SALARY
The Committee considers Company management proposals concerning salary
adjustments, with the exception of Mr. Foley, its Chairman and Chief Executive
Officer, whose compensation was established under the terms of an employment
agreement entered into in 1991 and amended in 1996 and 1997 with the approval of
the Board of Directors and five key employees including Mr. Stone, Mr. Willey,
Mr. Meadows, Mr. Strunk and Mr. Puzder, all of whom have three year employment
contracts. The Compensation Committee then makes recommendations to the entire
Board of Directors for their approval.
In determining base salaries for executives for 1997, the Compensation
Committee considered the Company's earnings, outside surveys of salary levels of
other title insurance companies and other similar corporations, individual
performance and achievement, areas of responsibility, position tenure and
internal comparability. Salaries of certain executive officers were adjusted in
1997.
ANNUAL CASH BONUSES
Executive officers of the Company are eligible for annual bonuses which may
be paid in the form of cash or as deferred compensation. Given the Company's
performance in 1997, the Compensation Committee approved 1997 bonuses for the
executives which were paid in 1998.
STOCK OPTION GRANTS
As indicated above, an important element of the Company's compensation
philosophy is the desire to align the interests of the executive officers with
the long-term interests of the Company's stockholders. In order to meet this
desire, the Board of Directors adopted a performance-based stock option plan in
1991 for executive officers, key employees and branch managers of the Company
that allows participants to defer a portion of their bonus income in order to
reduce their option exercise price. Additionally, the Company's Board of
Directors and stockholders had previously approved the adoption of the Company's
1987 Stock Option Plan, pursuant to which the Company may grant stock options to
certain key employees and non-employee directors or officers, and in 1994 the
Board of Directors and stockholders approved the 1993 Stock Plan pursuant to
which the Company could grant stock options to certain key employees and
nonemployee directors and officers. In 1998 the Board of Directors approved to
replace the 1987 Stock Option Plan, which expired December 1997, with a new
stock option plan. Said plan will be presented to the stockholders at their
Annual Meeting to be held on June 17, 1998. The purpose of all the stock
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<PAGE> 14
option plans is to attract, retain and award executive officers and directors
and to furnish incentives to these persons to improve operations, increase
profits and positively impact the Company's long-term performance. Consistent
with these objectives, the Compensation Committee has approved the granting of
options in 1998 for their performance in 1997 to executive officers as follows:
(i) under the 1993 Stock Option Plan as follows: Mr. Foley, options to purchase
150,000 shares; Mr. Stone, options to purchase 40,000 shares; Mr. Willey,
options to purchase 30,000 shares; Mr. Strunk, options to purchase 15,000
shares; Mr. Puzder, options to purchase 45,000 shares. Certain officers have
elected to defer a portion of their bonus in stock options under the 1991 Stock
Option Plan Mr. Foley, options to purchase 27,615 shares; Mr. Stone, options to
purchase 8,285 shares; Mr. Willey, options to purchase 24,854 shares.
Corporate Deduction for Compensation. Section 162(m) of the Internal
Revenue Code generally limits to $1.0 million the corporate deduction for
compensation paid to certain executive officers, unless certain requirements are
met. At this time, the Company deduction for officer compensation is not limited
by the provisions of Section 162(m). The Committee intends to monitor
regulations issued pursuant to Section 162(m) and to take such actions with
respect to the executive compensation program as are reasonably necessary to
preserve the corporate tax deduction for executive compensation paid.
April 29, 1998 Compensation Committee:
Daniel D. (Ron) Lane
J. Thomas Talbot
Cary H. Thompson
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<PAGE> 15
PERFORMANCE GRAPH
Set forth below is a graph comparing cumulative total stockholder return on
the Company's common stock against the cumulative total return on the S & P 500
Index and against the cumulative total return of a peer group index comprised of
certain companies for the industry in which the Company competes (SIC code 6361
- -- Title Insurance) for the five-year period ending December 31, 1997. This peer
group consists of the following companies: Alleghany Corporation, Capital
Guaranty Corporation, First American Financial Corporation, Investors Title
Insurance Company, Lawyers Title Corporation and Stewart Information Services
Corp. The peer group comparison has been weighted based on the Company's stock
market capitalization. The graph assumes an initial investment of $100.00 on
January 1, 1993, with dividends reinvested over the periods indicated.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
OF COMPANY, INDUSTRY INDEX AND BROAD MARKET
<TABLE>
<CAPTION>
Fidelity
Measurement Period National S&P 500
(Fiscal Year Covered) Financial Inc Index Peer Group
- --------------------- ------------- ------- ----------
<S> <C> <C> <C>
Dec-93 231.31 110.08 121.30
Dec-94 94.94 111.53 103.84
Dec-95 166.26 153.45 147.58
Dec-96 166.36 188.68 170.73
Dec-97 383.32 251.63 252.92
</TABLE>
ASSUMES $100 INVESTED ON JANUARY 1, 1993
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DECEMBER 31, 1997
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<PAGE> 16
BOARD MEETINGS AND COMMITTEES
The Board of Directors held a total of six formal meetings during the year
ended December 31, 1997. No director attended fewer than 80% of the aggregate of
all meetings of the Board of Directors or any committee in 1997.
The Board presently has an Audit Committee, a Compensation Committee and an
Executive Committee, but does not have a Nominating Committee. The Audit
Committee, which consists of Messrs. Lane, Mahood and Talbot, met one time
during 1997. The Audit Committee meets independently with the internal audit
staff, representatives of the Company's independent auditors and representatives
of senior management. The Audit Committee reviews the general scope of the
Company's annual audit, the fee charged by the independent auditors and other
matters relating to internal control systems. In addition, the Audit Committee
is responsible for reviewing and monitoring the performance of non-audit
services by the Company's auditors. The Committee is also responsible for
recommending the engagement or discharge of the Company's independent auditors.
The Compensation Committee currently consists of Messrs. Lane, Talbot and
Thompson. The Compensation Committee, either alone or in conjunction with other
Board committees, reviews and reports to the Board the salary, fee and benefit
programs designed for senior management, officers and directors with a view to
ensure that the Company is attracting and retaining highly-qualified individuals
through competitive salary, fee and benefit programs and encouraging continued
extraordinary effort through incentive rewards. The Compensation Committee did
not meet during 1997.
The Company also has an Executive Committee consisting of Messrs. Foley,
Willey and Talbot. The Executive Committee may invoke all of the power and
authority of the Board of Directors in the management of the business and the
affairs of the Company, except those powers which, by law, cannot be delegated
by the Board of Directors. The Executive Committee did not meet during 1997.
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<PAGE> 17
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of March 31, 1998, the following table sets forth the beneficial
ownership of the Common Stock of the Company by each director who owns shares,
by the director nominees, all executive officers named in the Summary
Compensation Table, all directors and executive officers as a group and by all
persons known by the Company to be the beneficial owners of more than 5% of the
Company's Common Stock. The information as to beneficial stock ownership is
based on data furnished by the persons concerning whom such information is
given.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED
NAME AND ADDRESS NUMBER OF SHARES PERCENT OF TOTAL
- ---------------- ---------------- ----------------
<S> <C> <C>
William P. Foley, II
17911 Von Karman Ave., #500
Irvine, CA 92714 4,202,594.(1)(2) 16%
Richard H. Pickup
c/o Wedbush Morgan Securities, Inc.
500 Newport Center Drive
Suite 550
Newport Beach, CA 92660 1,597,000. 7%
Frank P. Willey
17911 Von Karman Ave., #500
Irvine, CA 92714 847,473.(2) 4%
William A. Imparato
1515 East Missouri Ave., Bldg. A
Phoenix, AZ 85014 21,341.(2) *
Donald M. Koll
4343 Von Karman Ave.
Newport Beach, CA 92660 15,821.(2) *
Daniel D. (Ron) Lane
14 Corporate Plaza
Newport Beach, CA 92660 95,682.(2) *
Stephen C. Mahood
500 Crescent Ct., #270
Dallas, TX 75201 41,134.(2) *
J. Thomas Talbot
500 Newport Center Dr., #900
Newport Beach, CA 92660 33,477.(2) *
Cary H. Thompson
3731 Wilshire Blvd., 10th Flr.
Los Angeles, CA 90010 25,471.(2) *
Patrick F. Stone
17911 Von Karman Ave., #500
Irvine, CA 92714 131,245.(2) *
Carl A. Strunk
17911 Von Karman Ave., #500
Irvine, CA 92714 176,330.(2) *
Andrew F. Puzder
17911 Von Karman Ave., #300
Irvine, CA 92714 173,967.(2) *
General William Lyon
4490 Von Karman Avenue
Newport Beach, CA 92660 7,500.(2) *
</TABLE>
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<PAGE> 18
<TABLE>
<S> <C> <C>
William W. Wehner
16100 Table Mountain Parkway
Suite A
Golden, CO 80403 364,660 2%
All directors and officers as a group (18 6,365,389 22%
persons)
</TABLE>
- ----------
* Represents less than 1%.
(1) Included in this amount are 1,549,954 shares held by Folco Development
Corporation, of which Mr. Foley and his spouse are the sole stockholders; Mr.
Foley is a "controlling person" of the Company.
(2) Includes currently exercisable stock options for Mr. Foley of 302,235
shares under the 1991 Stock Option Plan and 945,450 shares under the 1987 Stock
Option Plan; currently exercisable stock options for Mr. Willey of 87,327 shares
under the 1991 Stock Option Plan and 202,208 shares under the 1987 Stock Option
Plan; includes currently exercisable stock options for Mr. Imparato of 9,983
shares under the 1993 Stock Option Plan and 9,166 shares under the 1987 stock
option plan; includes currently exercisable stock options for Mr. Koll of 6,655
shares under the 1993 Stock Option Plan and 9,166 shares under the 1987 Stock
Option Plan; currently exercisable stock options for Mr. Lane of 13,311 shares
under the 1993 Stock Option Plan and 9,166 shares under the 1987 Stock Option
Plan; currently exercisable stock options for Mr. Mahood of 9,983 shares under
the 1993 Stock Option Plan; currently exercisable stock options for Mr. Talbot
for 13,311 shares under the 1993 Stock Option Plan and 9,166 shares under the
1987 Stock Option Plan; currently exercisable stock options for Mr. Thompson for
13,311 shares under the 1993 Stock Option Plan and 9,166 shares under the 1987
Stock Option Plan; currently exercisable stock options for Mr. Stone of 82,970
shares under the 1991 Stock Option Plan currently exercisable stock options for
Mr. Strunk of 33,457 shares under the 1991 Stock Option Plan and 122,733 shares
under the 1987 Stock Option Plan; and currently exercisable stock options for
Mr. Puzder of 124,298 shares under the 1993 Stock Option Plan and 9,166 shares
under the 1987 Stock Option Plan.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company previously made investments in real property for investment or
operating purposes, most of which, as described below, were in partnerships
which included one or more officers of the Company. All such transactions were
approved by a majority of the non-interested directors of the Company. The
Company believes these transactions were for terms and at rates no less
favorable to the Company than those which could have been obtained from
unrelated parties. As previously announced, the Company intends to reduce and
divest itself of real estate investments as market conditions permit.
The Company currently leases five of its facilities from partnerships or
other entities in which Manchester, or one or more of its officers have an
interest. These transactions are discussed below with respect to "Investments in
Partnerships" and "Transactions with Management and Others," respectively. The
Company believes that all such leases were on terms no less favorable than those
that could have then been obtained from unrelated parties.
Manchester has interests in, or acts as property manager for, the following
real estate partnerships in which one or more officers of the Company have an
interest. Certain officers of the Company have made contributions to these
partnerships in exchange for partnership interests that cannot be valued until
the dissolution of each individual partnership. Fidelity National Title
Insurance Company is a tenant in certain of the properties owned by the
partnerships discussed below.
INVESTMENTS IN PARTNERSHIPS
Folco Mission Valley Partners Limited Partnership ("Folco Mission Valley")
was formed in 1991 by Folco Development Corporation ("Folco"), a corporation of
which Mr. Foley and his spouse are the sole stockholders, as a 78% general
partner, and Fidelity National Title Insurance Company, as a 22% limited
partner, for the purpose of acquiring from the Resolution Trust Corporation an
office building in San Diego County where Fidelity National Title Insurance
Company was the sole tenant and conducted its San Diego County, California title
operations. Folco's 78% general partnership interest was assigned to Sussex
Holdings, Ltd. ("Sussex"), an affiliate of Folco, in June 1992 and Fidelity
National Title Insurance Company's 22% limited partnership interest was assigned
to Manchester in January 1992. Fidelity National Title Insurance Company
continues to lease the building for $28,272 per month, plus taxes, insurance and
other operating costs. This annual rental rate is a 30% discount based on its
lease with Folco Mission Valley.
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<PAGE> 19
Goodyear Investors II General Partnership ("Goodyear II") was formed in
1986 by Manchester as a 50% partner, Folco as a 32.5% partner, Mr. Willey as a
2% partner, and others, to purchase, for investment, unimproved real property
located in Maricopa County, Arizona. Manchester's interest in Goodyear II was
transferred to the Company in June, 1993. As of March 31, 1996, Manchester,
Kensington Development Corporation ("Kensington"), which is 90% owned by
Manchester and 10% by Fidelity National Title Insurance Company of California
("Fidelity California") and the Company have contributed $1,025,000 to Goodyear
II. Kensington held this interest from 1988 to March 1996. The Company may be
required to make annual contributions of its pro rata share of property taxes
and insurance costs. All general partners have made their required pro rata
capital contributions. The Company and the other general partners received pro
rata capital distributions in March 1995.
Prospect Office Partners Limited Partnership ("Prospect Office Partners")
was formed in 1988 by Manchester as a combined 29.7% general and limited
partner, Mr. Foley as a 30.4% general partner, Mr. Willey as a 6.1% general
partner, and others, to develop an office building in Tustin, California.
Currently Manchester is a 41.62% general partner and a 28.38% limited partner
due to assignments of interests by other general and limited partners. Mr. Foley
and Mr. Willey no longer have any partnership interests in Prospect.
Approximately one-half of the building is leased by Fidelity National Title
Insurance Company for its Orange County title operations. Manchester advanced to
the partnership, at an interest rate of 12% per annum, amounts necessary to fund
operating deficits. These advances were assigned to the Company in June 1993.
The lease provides for a monthly rent payment of $30,124. In May 1996, Fidelity
National Title Insurance Company purchased from the FDIC, as receiver of
Guardian Bank, a note secured by a deed of trust with an unpaid principal
balance of $3,413,560 and a first lien deed of trust encumbering the Tustin
office building. Fidelity National Title Insurance Company purchased and
continues to hold the note under which Prospect Office Partners is the maker for
a discounted price of $3,072,204.
Tustin Retail Limited Partnership ("Tustin Retail") was formed in 1988 by
Manchester as a combined 30% general and limited partner, Mr. Foley as a 30.7%
general partner, Mr. Willey as a 4.3% general partner, and others, to develop a
retail center in Tustin, California. Manchester advanced to the partnership, at
an interest rate of 12% per annum, amounts necessary to fund operating deficits.
The outstanding balance of these advances at December 31, 1995, and March 31,
1996, was $736,184. In addition, Tustin Retail is indebted to Manchester in the
amount of $303,500 which is evidenced by a promissory note which provides for
interest at 12% per annum and is secured by a second trust deed on the property.
These advances and loans were assigned to the Company in June 1993. In August
1994, CommerceBank filed a lawsuit (the "Lawsuit") against Tustin Retail (a real
estate partnership), Manchester (a general partner in Tustin Retail) and Messrs.
Foley and Willey (as general partners). The Lawsuit is essentially a judicial
foreclosure under a deed of trust securing a $4,350,000 note dated February 18,
1992, to CommerceBank from Tustin Retail (the "Note"). In December 1995, the
Federal Deposit Insurance Corporation, which took control of CommerceBank,
submitted a bid at the property foreclosure auction and acquired the property
for $2.9 million. The lease for this space provides for a monthly lease payment
of $20,100. On July 3, 1996, following a fair value hearing, the court
determined that the value of the property as of the foreclosure sale was
$4,580,680. Subsequently, the court entered a deficiency judgment against Tustin
Retail and the general partners in the amount of $480,545. In consideration of
Fidelity National Title Insurance Company's payment of the deficiency amount,
Tustin Retail assigned its statutory redemption right to Fidelity National Title
Insurance Company. On November 21, 1996, Fidelity National Title Insurance
Company redeemed the property for the amount of $2,792,470 and assumed control
of the operation of the property from the receiver.
West Woodland Business Associates Limited Partnership ("West Woodland") was
formed in 1989 by Manchester as a 10% general partner, Mr. Foley as a 21.3%
general partner, Folco as a combined 20% general and limited partner, Mr. Willey
as a 2.5% general partner, and others, to develop an office building in
Woodland, California. In September 1991, Manchester sold its interest in the
partnership to Folco. See "Transactions with Management and Others" below.
Folco's interest was subsequently assigned to Sussex. Approximately one-half of
the building is leased by Fidelity California for its Yolo County title
operations. The lease provides for a monthly lease payment of $11,032. In March
1994, the lender on this project agreed to a modification of the credit
agreement substituting Sussex for Manchester and releasing Manchester from these
obligations. As of December 31, 1996, Manchester had not been released from its
general partnership obligation under the West Woodland Credit Agreement. West
Woodland remains indebted under a $940,000 first lien loan encumbering the
office building and
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<PAGE> 20
a $250,000 unsecured loan. West Woodland refinanced both loans with a new
lender, thereby lowering the loans' interest accrual rates and extending the
terms of both loans for five (5) years.
During 1994, the Company paid $2.3 million in order to acquire a 100%
ownership interest in an investment property at 7750 East Broadway, Tucson,
Arizona. The Company sold the property for a sales price of $2.4 million.
Wilmac III Limited Partnership ("Wilmac III") was formed in 1987 to acquire
for investment unimproved real property in Maricopa County, Arizona. In December
1987, Manchester acquired a 24% limited partnership interest in Wilmac III, 30%
of the limited partnership units. Mr. Willey has a 8.2% combined general and
limited partnership interest and Mr. Strunk has a 1.6% limited partnership
interest. The partnership agreement requires all the limited partners to make
pro rata capital contributions to service the debt on the property. Manchester
has invested $696,000 in the partnership. Manchester's interest was assigned to
the Company in June 1993. It is not anticipated that additional capital
contributions will be required of the Company.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
In September 1991, Manchester sold 11 office buildings (the "office
buildings"), its partnership interest in West Woodland and Tucson Partners and
certain notes receivable to Folco for approximately the net book value of these
assets. The Company believes the amount paid approximated the fair market value
of these assets. This transaction resulted in a receivable to Manchester from
Folco evidenced by a promissory note in the original principal amount of
$1,492,000 and secured by subordinate deeds of trust on the office buildings
acquired. The promissory note provides for interest at the rate of 9.5% per
annum, monthly payments of $13,900 and additional payments of 15% of the net
sale proceeds of each office building subject to a subordinate deed of trust. In
June 1992, Folco assigned its interest in these office buildings to Bilcar
Limited Partnership ("Bilcar"), an affiliate of Folco. The unpaid balance of
this promissory note was paid in November 1997.
Prior to the sale, the office buildings were leased to Fidelity National
Title Insurance Company for use in its title operations. All but one of these
office buildings have been sold to unaffiliated third parties in each instance.
During 1997, Fidelity National Title Insurance Company continued to lease one of
the office buildings from Bilcar under lease agreements entered into in 1991 at
the time of the sale and paid Bilcar $51,624 under these lease agreements.
In July 1990, Lake Mortgage Corporation, a wholly-owned subsidiary of the
Company, made a $300,000 secured loan to a relative of Mr. Willey. The loan was
assigned to Fidelity National Title Insurance Company in July 1990. This loan
has been purchased by Mr. Willey for full consideration.
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<PAGE> 21
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
FIDELITY NATIONAL FINANCIAL, INC.
By: /s/ WILLIAM P. FOLEY
----------------------------------
WILLIAM P. FOLEY, II
CHIEF EXECUTIVE OFFICER
Date: April 29, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
<S> <C> <C>
/s/ WILLIAM P. FOLEY, II Chairman of the Board and April 29, 1998
- ----------------------------- Chief Executive Officer
WILLIAM P. FOLEY, II (Principal Executive Officer)
/s/ PATRICK F. STONE
- ----------------------------- Chief Operating Officer April 29, 1998
PATRICK F. STONE
/s/ ALLEN D. MEADOWS
- ----------------------------- Executive Vice President April 29, 1998
ALLEN D. MEADOWS Chief Financial Officer
(Principal Financial and
Accounting Officer)
/s/ FRANK P. WILLEY
- ----------------------------- Director April 29, 1998
FRANK P. WILLEY
/s/ DANIEL D. (RON) LANE
- ----------------------------- Director April 29, 1998
DANIEL D. (RON) LANE
/s/ J. THOMAS TALBOT
- ----------------------------- Director April 29, 1998
J. THOMAS TALBOT
/s/ STEPHEN C. MAHOOD
- ----------------------------- Director April 29, 1998
STEPHEN C. MAHOOD
/s/ DONALD M. KOLL
- ----------------------------- Director April 29, 1998
DONALD M. KOLL
/s/ WILLIAM A. IMPARATO
- ----------------------------- Director April 29, 1998
WILLIAM A. IMPARATO
/s/ CARY H. THOMPSON
- ----------------------------- Director April 29, 1998
CARY H. THOMPSON
/s/ GENERAL WILLIAM LYON
- ----------------------------- Director April 29, 1998
GENERAL WILLIAM LYON
/s/ WILLIAM W. WEHNER
- ----------------------------- Director April 29, 1998
WILLIAM W. WEHNER
</TABLE>
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