<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, 1998
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)
DELAWARE 86-0498599
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
17911 VON KARMAN AVENUE 92614 (949) 622-5000
IRVINE, CALIFORNIA (ZIP CODE) (REGISTRANT'S TELEPHONE NUMBER,
(ADDRESS OF PRINCIPAL INCLUDING AREA CODE)
EXECUTIVE OFFICES)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
Common Stock, $.0001 par value New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K, or any
amendment to this Form 10-K.
As of April 6, 1999, 30,778,750 shares of Common Stock ($.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 $398,529,000. 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> <C>
William P. Foley, II 54 Chairman of the Board and Chief Executive 1984
Officer
Patrick F. Stone 51 Chief Operating Officer N/A
Frank P. Willey 45 Director and President 1986
William A. Imparato 52 Director 1986
Donald M. Koll 66 Director 1995
Daniel D. (Ron) Lane 64 Director 1989
General William Lyon 76 Director 1998
J. Thomas Talbot 63 Director 1990
Cary H. Thompson 42 Director 1992
Alan L. Stinson 53 Executive Vice President - Financial Operations N/A
Allen D. Meadows 45 Executive Vice President, Chief Financial N/A
Officer and Treasurer
Peter T. Sadowski 44 Executive Vice President, General Counsel N/A
Brent B. Bickett 34 Senior Vice President, Financial Operations N/A
M'Liss Jones Kane 46 Senior Vice President, Corporate Counsel and N/A
Corporate Secretary
Raymond R. Quirk 52 Vice President N/A
Ronald R. Maudsley 47 Vice President N/A
Ernest D. Smith 48 Vice President N/A
Gary R. Nelson 51 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. 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 American National Financial,
Inc., Rally's Hamburgers, Inc., Checkers Drive-In Restaurants, Inc. and Santa
Barbara Restaurant Group, Inc. Additionally, he is a member of the Board of
Directors of Micro General Corporation, Fresh Foods, Inc. and Miravant Medical
Technologies, Inc.
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. He is
Chairman of the Board of Micro General Corporation.
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. 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., Santa Barbara Restaurant Group,
Inc., 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.
GENERAL WILLIAM LYON
General Lyon is the Chairman of the Board, President and Chief
Executive Officer of William Lyon Homes, Inc. and affiliated 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.
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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.
ALAN L. STINSON
Mr. Stinson joined the Company in October, 1998 as Executive Vice
President - Financial Operations of the Company. Prior to his employment with
the Company, Mr. Stinson was Executive Vice President and Chief Financial
Officer of Alamo Title Holding Company. From 1968 to 1994, Mr. Stinson was
employed by Deloitte & Touche, LLP. He was a partner with Deloitte & Touche, LLP
from 1980 to 1994.
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.
PETER T. SADOWSKI
Mr. Sadowski joined the Company on January 4, 1999 as Executive Vice
President and General Counsel. Prior to joining the Company, Mr. Sadowski was a
partner with Goldberg, Katz, Sadowski & Stansen, PC, a law firm located in St.
Louis, Missouri. Before joining the above firm in 1996, Mr. Sadowski was a
partner with the Stolar Partnership, a law firm located in St. Louis, Missouri.
BRENT B. BICKETT
Mr. Bickett was appointed Senior Vice President, Corporate Finance
of the Company in January 1999. He also serves as the Senior Vice President,
Corporate Finance for Santa Barbara Restaurant Group, Inc. From August 1990
until January 1999, Mr. Bickett was a member of the Investment Banking Division
of Bear, Stearns & Co., Inc., a leading national investment banking firm,
serving since 1997 as a Managing Director of the Firm's real estate, gaming,
lodging and leisure group.
M'LISS JONES KANE
Ms. Kane joined the Company 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. From September
15, 1997 to March 17, 1999 she was Senior Vice President, General Counsel and
Corporate Secretary of the Company. Since March 17, 1999 she has been Senior
Vice President, Corporate Counsel and Corporate Secretary.
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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.
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.
RONALD R. MAUDSLEY
Mr. Maudsley is a Vice President of the Company and has been since
June 17, 1998. Mr. Maudsley serves as Regional Manager for all agency operations
nationwide. Mr. Maudsley joined Fidelity National Title Insurance Company in
1988 as an Executive Vice President.
ERNEST D. SMITH
Mr. Smith is a Vice President of the Company and has been since June
17, 1998. He is currently responsible for the seven divisions encompassing
FlexNet (bundled services): Fidelity National Lender Division; Fidelity National
Credit Services; Fidelity National Flood, Inc.; Fidelity National Tax Services;
Nationwide Document and Recording; Fidelity National Foreclosure Services
(Trustee Sales Guarantee, Agency Sales and Posting); and Fidelity National
Appraisal. Mr. Smith serves as Regional Manager for all Title and Escrow
Operations in Southern California. Mr. Smith joined Fidelity National Title
Insurance Company in 1987 as President of its San Francisco Division.
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.
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 1998, 1997 and 1996 for the
Company's Chief Executive Officer and the four most highly compensated current
executive officers whose salary and bonus exceeded $100,000 in 1998.
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<PAGE> 6
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------------------------ LONG TERM
OTHER COMPENSATION
ANNUAL AWARDS- ALL OTHER
NAME AND PRINCIPAL BONUS COMPENSATION OPTIONS(#) COMPENSATION
POSITION YEAR SALARY($) ($)(1) (2) (1)(3)(4) ($)(5)
-------- ---- --------- ------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
William P. Foley, II 1998 $ 600,000 $1,954,281 $ 119,827 195,376 $ 13,682
Chairman of the Board 1997 600,000 1,380,754 88,215 187,000 35,986
and Chief Executive 1996 600,000 1,061,125 122,596 188,100 28,859
Officer
Patrick F. Stone, 1998 $ 325,000 $ 586,284 $ - 53,113 $ -
Chief Operating Officer 1997 318,750 408,226 - 40,004 22,500
1996 300,000 313,338 - 38,316 12,250
Frank P. Willey, 1998 $ 250,000 $ 586,284 $ - 60,339 $ 28,180
President 1997 250,000 414,226 - 44,000 16,563
1996 250,000 318,338 - 52,800 14,250
Alan L. Stinson, 1998 $ 745,900 $ 87,943 $ - 47,711 $ -
Executive Vice 1997 - - - - -
President - Financial 1996 - - - - -
Operations
Raymond R. Quirk, 1998 $ 212,500 $ 293,142 $ - 120,762 $ 15,250
Vice President 1997 - 195,675 - - -
1996 - 125,000 - - -
</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
1998, 1997 and 1996, the most recent three years for which the options
were granted, are as follows: (i) Mr. Foley: $195,428 - 1998 bonus;
$138,075 - 1997 bonus and $100,000 - 1996 bonus; (ii) Mr. Stone: $58,628 -
1998 bonus; $41,423 - 1997 bonus and $31,834 - 1996 bonus; (iii) Mr.
Willey: no bonus deferred - 1998; $124,268 - 1997 bonus; no bonus deferred
- 1996; (iv) Mr. Stinson: no bonus deferred - 1998; (v) Mr. Quirk: no
bonus deferred - 1998; $ 48,919 - 1997 bonus and no bonus deferred - 1996.
(2) 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
1998 for the named executive officer. Other Annual Compensation for Mr.
Foley included the cost of (i) a Company provided automobile -- $9,000 in
1998, $9,000 in 1997 and $9,000 in 1996 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 -- $110,826.95 in 1998, $79,215 in 1997,
and $113,596 in 1996.
(3) The number of options granted per year in this column for 1998, 1997 and
1996, the three-year period in which the options were granted, are as
follows: (i) Mr. Foley: 1998 grant - 165,000 options granted under the
1993 stock option plan and 30,376 options granted under the 1991 stock
option plan; 1997 grant - 165,000 options granted under the 1987 Stock
Option Plan and 22,000 options granted under the 1991 Stock Option Plan;
and 1996 grant -- 165,000 options granted under the 1987 Stock Option Plan
and 23,100 stock options granted under the 1991 Stock Option Plan; (ii)
Mr. Stone: 1998 grant - 44,000 options granted under the 1993 Stock Option
Plan and 9,113 options granted under the 1991 Stock Option Plan; 1997
grant - 33,000 options granted under the 1987 Stock Option Plan and 7,004
options granted under the 1991 Stock Option Plan, and 1996 grant
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<PAGE> 7
- 33,000 options granted under the 1987 Stock Option Plan and 5,316 stock
options granted under the 1991 Stock Option Plan; (iii) Mr. Willey: 1998
grant - 33,000 options granted under the 1993 Stock Option Plan and 27,339
options granted under the 1991 Stock Option Plan; 1997 grant - 44,000
options granted under the 1987 Stock Option Plan, and 1996 grant -- 44,000
options granted under the 1987 Stock Option Plan and 8,800 stock options
granted under the 1991 Stock Option plan; (iv) Alan L. Stinson: 1998 grant
- 47,771 options granted under the 1998 Stock Option Plan; and (v) Raymond
R. Quirk: 1998 grant - 110,000 options granted under the 1993 Stock Option
Plan and 10,762 options granted under the 1991 Stock Option Plan; 1997
grant - 18,150 options granted under the 1987 Stock Option Plan and 1996
grant - 9,982 options granted under the 1987 Stock Option Plan;
(4) 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 1999
for fiscal year 1998 to the named executives, not included in the table,
are as follows: under the 1991 Stock Option Plan (i) Mr. Foley -- 39,086
shares; and (ii) Mr. Stone -- 11,726 shares; and under the 1998 Stock
Option Plan (i) Mr. Foley -- 150,000 shares; (ii) Mr. Stone -- 60,000
shares; (iii) Mr. Willey -- 30,000 shares; (iv) Mr. Stinson -- 47,711
shares, and (v) Mr. Quirk -- 10,000 shares.
(5) 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 $1,466 for 1998; $1,157 for 1997, and $1,081 for 1996
respectively, from a joint life split dollar insurance policy.
Certain executive officers received loans from subsidiaries of the Company
in amounts in excess of $60,000 after January 1, 1998, as follows: 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
$112,500, as of March 31, 1999.
OPTION GRANTS
The following table provides information as to options to purchase common
stock granted to the named individuals during 1998 pursuant to the Company's
1998, 1993, and 1991 Stock Option Plans. The Company does not currently grant
stock appreciation rights to officers or directors.
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STOCK OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERCENT POTENTIAL
OF TOTAL REALIZABLE VALUE
NUMBER OF OPTIONS AT ASSUMED
SECURITIES GRANTED TO MARKET ANNUAL RATES OF
UNDERLYING EMPLOYEES PRICE AT EXERCISE OR STOCK PRICE
OPTIONS IN FISCAL DATE OF BASE PRICE(1) EXPIRATION APPRECIATION FOR
NAME GRANTED(#) YEAR GRANT ($/SH) DATE OPTION TERM
---- ---------- ---- ----- ------ ---- -------------------
5%($) 10%($)
----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
1998 STOCK OPTION PLAN
Alan L. Stinson 7,871 0.5% $32.0455 $14.4873 04/24/01 $ 173,235 $ 211,162
Alan L. Stinson 9,840 0.6% 32.0455 14.4869 04/25/04 273,294 398,838
Alan L. Stinson 30,000 1.7% 28.6364 28.6364 10/01/08 540,278 1,369,171
1993 STOCK OPTION PLAN
William P. Foley, II 165,000 9.5% $24.2618 $24.2618 01/12/08 2,517,589 6,380,065
Patrick F. Stone 44,000 2.5% 24.2618 24.2618 01/12/08 671,357 1,702,350
Frank P. Willey 33,000 1.9% 24.2618 24.2618 01/12/08 503,517 1,276,013
Raymond R. Quirk 110,000 6.4% 24.2618 24.2618 01/12/08 1,678,392 4,253,376
1991 STOCK OPTION PLAN
William P. Foley,II 30,376 1.8% $24.2618 $19.3981 01/12/10 734,267 1,723,711
Patrick F. Stone 9,113 2.5% 24.2618 19.3981 01/12/10 220,284 517,124
Frank P. Willey 27,339 1.6% 24.2618 19.3981 01/12/10 660,854 1,551,374
Raymond R. Quirk 10,762 0.6% 24.2618 19.3981 01/12/10 260,145 610,698
TOTAL -- 1998, 1993 AND 1991 STOCK OPTION PLANS
William P. Foley, II 195,376 11% $24.2618 $19.3981- 01/12/08- 3,251,856 8,103,776
24.2618 01/12/10
Patrick F. Stone 53,113 3.0% 24.2618 $19.3981- 01/12/08- 891,642 2,218,475
24.2618 01/12/10
Frank P. Willey 60,339 3.5% 24.2618 $19.3981- 01/12/08- 1,164,372 2,827,387
24.2618 01/12/10
Alan L. Stinson 47,711 2.8% $28.6364 - $14.4869- 04/24/01- 986,807 1,979,171
32.0455 28.6364 10/01/08
Raymond R. Quirk 120,762 7.0% $24.2618 $19.3981- 01/12/08- 1,938,538 4,864,075
24.2618 01/12/10
</TABLE>
(1) The options granted in 1998 under the 1991 Stock Option Plan were granted
at an exercise price of $24.2618 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 $19.3981 per
share if exercised within the first year of grant. The exercise price of
these options decreases approximately 5% per year through January 12, 2002
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<PAGE> 9
and $0.30 per share from January 12, 2002 through January 12, 2009 at
which time the exercise price will be $15.3619. The options granted in
1998 under the 1998 Stock Option Plan were granted at an exercise price of
$14.4873, $14.4869 (pursuant to the Company's merger with Alamo Title
Holding Company) and $28.6364, the market price at the date of grant and
these options became exercisable on August 24, 1998 (the $14.4873 and
$14.489 grants) and 10,000 shares became exercisable on October 1, 1998,
10,000 shares will become exercisable on October 1, 1999 and 10,000 shares
will become exercisable on October 1, 2000 (the $28.6364 grant). The
options granted in 1998 under the 1993 Stock Option Plan were granted at
an exercise price of $24.2618 per share, the market price at the date of
grant and these options became exercisable on January 12, 1999.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table summarizes information regarding exercises of stock
options by the named individuals during 1998 and unexercised options held by
them as of December 31, 1998. The Company did not reprice any existing options
during the last completed fiscal year.
AGGREGATED STOCK OPTION EXERCISES
IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
UNEXERCISED UNEXERCISED
OPTIONS AT IN-THE-MONEY
FY-END OPTIONS AT FY-END
SHARES ACQUIRED VALUE REALIZED (#) EXERCISABLE ($) EXERCISABLE/
NAME EXERCISE (#) ($) UNEXERCISABLE(1)(2) UNEXERCISABLE(1)(2)
---- ------------ --- ------------------- -------------------
<S> <C> <C> <C> <C>
William P. Foley, II 131,769 $3,890,058 1,271,059/165,000 $27,557,527/1,029,303
Patrick F. Stone 32,643 919,531 104,035/44,000 2,262,569/274,480
Frank P. Willey 61,326 1,793,043 284,498/33,000 5,903,527/205,860
Raymond R. Quirk - - 88,582/110,000 1,922,382/686,202
Alan L. Stinson - - 27,711/20,000 302,240/37,272
</TABLE>
- ----------
(1) Number of exercisable shares and corresponding values relate to options
granted under the 1998, 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, $30.50 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 165,000 shares at $24.2618 per share under the 1993
plan; options to purchase 27,951 shares at $5.1091 per share, options to
purchase 8,784 shares at $2.8682 per share, options to purchase 30,746
shares at $5.3100 per share, options to purchase 46,119 shares at $6.4882
per share, options to purchase 62,888 shares at $2.5073 per share, options
to purchase 30,376 shares at $19.3981 per share and options to purchase
24,200 shares at $5.7231 per share under the 1991 plan; and options to
purchase 219,615 shares at $6.9155 per share, options to purchase 219,615
shares at $9.4773 per share, and options to purchase 219,615 shares at
$10.4164 per share, options to purchase 199,650 shares at $9.579 per share
and options to purchase 181,500 shares at $10.4336 per share under the
1987 plan; (ii) Mr. Stone - options to purchase 44,000 shares at $24.2618
per share under the 1993 Stock Option Plan; options to purchase 6,432
shares at $5.1091 per share, options to purchase 2,928 shares at $2.8682
per share, options to purchase 41,557 shares at $6.4882 per share, options
to purchase 9,113 shares at $19.3981 per share, options to purchase 7,704
shares at $5.7231 per share under the 1991 Stock Option Plan; and options
to purchase 36,300 shares at $10.4336 per share under the 1987 Stock
Option Plan; (iii) Mr. Willey - options to purchase 33,000 shares at
$24.2618 per share under the 1993 Stock Option Plan; options to purchase
10,648 shares at $5.1091 per share, options to purchase 10,248 shares at
$5.3100 per share, options to purchase 13,835 shares at $6.4882 per share,
and options to purchase 27,339 shares at $19.3981 per share under the 1991
Stock Option Plan; and options to purchase 58,564 shares at $6.9155 per
share, options to purchase 24,889 shares at $9.4773 per share, options to
purchase 37,335 at $10.4164 per share, options to purchase 53,240 shares
at $9.5791 per share and options to purchase 48,400 shares at $10.4336 per
share under the 1987 Stock Option Plan; (iv) Mr. Stinson options to
purchase 9,840 shares at $14.4869 per share, options to purchase 7,871
shares at $14.4873 per share and options to purchase 30,000 shares at
$28.6364 per share under the 1998 Stock Option Plan; and (v) Mr. Quirk -
options to purchase 110,000 shares at $24.2618 per share and options to
purchase 21,961 shares at $6.9155 per share under the 1993 Stock Option
Plan; options to purchase 9,427 shares at $2.5073 per share, options to
purchase 7,320 shares at $5.3100 per share, options to purchase 10,980
shares at $6.4882 per share and options to purchase 10,762 shares at
$19.3981 per share under the 1991 Stock Option Plan; and options to
purchase 9,982 shares at $9.5791 per share and options to purchase 18,150
shares at $10.4336 per share under the 1987 Stock Option Plan;
(2) Number of unexercisable shares and corresponding value relate to options
granted under the Company's 1998, 1993 and 1991 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 share and
the 1991 options at year-end of $5.1091 per share and the 1987 options at
year-end of $9.5791 per share.
-9-
<PAGE> 10
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 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 in 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 - 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 in 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 in 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 in control provision in the first amendment enabling
Mr. Willey 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
-10-
<PAGE> 11
if Mr. Willey's employment is terminated following a change in 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. Alan L. Stinson entered into an employment agreement with the Company
effective October 1, 1998, for a term of 3 years which provides for a minimum
annual base salary of $225,000 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 in control provision enabling Mr. Stinson 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. Stinson's employment is terminated following a change in 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.
Stinson for the number of 2 years or the number of years (including partial
years) remaining in the agreement. Other than as provided in the agreement,
employee will not engage in any business competitive with the Company.
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 in 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. Peter T. Sadowski entered into an employment agreement with the
Company effective January 4, 1999, for a term of 2 years which provides for a
minimum annual base salary of $220,000 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 in control provision enabling Mr. Sadowski 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. Sadowski's employment is terminated following a change in 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.
Sadowski for the number of 2 years or the number of years
-11-
<PAGE> 12
(including partial years) remaining in the agreement. Other than as 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 in 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 in 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 in 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 in 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. 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 1998, 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.
-12-
<PAGE> 13
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 1,866,727, as adjusted, 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.
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 seven key employees including Mr. Foley, Mr. Stone,
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<PAGE> 14
Mr. Willey, Mr. Stinson , Mr. Meadows, Mr. Sadowski , Mr. Strunk and Mr.
Puzder. The Compensation Committee then makes recommendations to the entire
Board of Directors for their approval.
In determining base salaries for executives for 1998, 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.
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 1998, the Compensation Committee approved 1998 bonuses for the
executives which were paid in 1999.
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 and
stockholders approved the 1998 Stock Option Plan to replace the 1987 Stock
Option Plan, which expired December 1997. The purpose of all the stock 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 granted options in 1999 for their
performance in 1998 to executive officers as follows: (i) under the 1998 Stock
Option Plan as follows: Mr. Foley, options to purchase 150,000 shares; Mr.
Stone, options to purchase 60,000 shares; Mr. Willey, options to purchase 30,000
shares; Mr. Quirk, options to purchase 10,000 shares. Certain officers have
elected to defer a portion of their bonus in stock options under the 1991 Stock
Option Plan as follows: Mr. Foley, options to purchase 39,086 shares; Mr. Stone,
options to purchase 11,726 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. The Company's policy with respect to the deductibility limit of Section
162(m) generally is to preserve the federal income tax deductibility of
compensation paid to executive officers. However, while the tax impact of any
compensation arrangement is an important factor to be considered, the impact is
evaluated in light of the Company's overall compensation philosophy.
Accordingly, the Company has and will continue to authorize the payment of
non-deductible compensation if it deems that it is consistent with its
compensation philosophy and in the best interests of the Company and its
stockholders.
April 23, 1999 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,
1998. This peer group consists of the following companies: Chicago Title
Corporation, First American Financial Corporation, LandAmerica Financial Group,
Inc. 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, 1994, with dividends reinvested
over the periods indicated.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
OF COMPANY, INDUSTRY INDEX AND BROAD MARKET
<TABLE>
<CAPTION>
Dec 93 Dec 94 Dec 95 dec 96 Dec 97 Dec 98
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Fidelity National Financials, Inc. 100.00 41.04 71.88 71.93 165.74 810.17
S&P 500 Index 100.00 101.32 139.40 171.40 128.59 293.91
Peer Group 100.00 85.60 121.75 208.75 208.51 290.75
</TABLE>
ASSUMES $100 INVESTED ON JANUARY 1, 1994
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DECEMBER 31, 1998
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<PAGE> 16
BOARD MEETINGS AND COMMITTEES
The Board of Directors held a total of five formal meetings during the
year ended December 31, 1998. No director attended fewer than 80% of the
aggregate of all meetings of the Board of Directors or any committee in 1998.
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 and Talbot, met one time during 1998.
The Audit Committee meets independently with 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
will be responsible for reviewing and monitoring the performance of non-audit
services by the Company's auditors. The Committee will be 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 1998.
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 1998.
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<PAGE> 17
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
As of March 31, 1999, 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., #300
Irvine, CA 92614 5,024,137(1)(2) 15.7%
Richard H. Pickup
c/o Wedbush Morgan Securities, Inc.
500 Newport Center Drive
Suite 550
Newport Beach, CA 92660 1,756,700 5.7%
Frank P. Willey
17911 Von Karman Ave., #300
Irvine, CA 92614 989,985(2) 3.2%
William A. Imparato
1515 East Missouri Ave., Bldg. A
Phoenix, AZ 85014 38,558(2) *
Donald M. Koll
4343 Von Karman Ave.
Newport Beach, CA 92660 27,486(2) *
Daniel D. (Ron) Lane
14 Corporate Plaza, Suite 150
Newport Beach, CA 92660 115,331(2) *
J. Thomas Talbot
24 Corporate Plaza, Suite 100
Newport Beach, CA 92660 46,187(2) *
Cary H. Thompson
3731 Wilshire Blvd., 10th Flr.
Los Angeles, CA 90010 13,377(2) *
General William Lyon
4490 Von Karman Avenue
Newport Beach, CA 92660 2,750(2) *
Patrick F. Stone
17911 Von Karman Ave., #300
Irvine, CA 92614 166,929(2) *
Alan L. Stinson
17911 Von Karman Avenue, #300
Irvine, California 92614 49,004(2) *
Raymond R. Quirk
17911 Von Karman Avenue, #300
Irvine, CA 92614 216,486(2) *
All directors and officers as a group (18 7,259,899(3) 21.7%
persons)
</TABLE>
- ----------
* Represents less than 1%.
(1) Included in this amount are 1,704,949 shares held by Folco
Development Corporation, of which Mr. Foley and his spouse are
the sole stockholders and 192,049 shares held by Foley Family
Charitable Foundation; Mr. Foley is a "controlling person" of
the Company.
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<PAGE> 18
(2) Includes currently exercisable stock options for Mr. Foley of 165,000
shares under the 1993 Stock Option Plan, 231,064 shares under the 1991
Stock Option Plan and 1,039,995 shares under the 1987 Stock Option Plan;
currently exercisable stock options for Mr. Willey of 33,000 shares under
the 1993 Stock Option Plan, 62,070 shares under the 1991 Stock Option Plan
and 222,428 shares under the 1987 Stock Option Plan; includes currently
exercisable stock options for Mr. Imparato of 10,980 shares under the 1993
Stock Option Plan and 20,167 shares under the 1987 Stock Option Plan;
includes currently exercisable stock options for Mr. Koll of 7,320 shares
under the 1993 Stock Option Plan and 20,166 shares under the 1987 Stock
Option Plan; includes currently exercisable stock options for Mr. Lane of
14,640 shares under the 1993 Stock Option Plan and 20,166 shares under the
1987 Stock Option Plan; includes currently exercisable stock options for
General Lyon of 2,750 shares under the 1998 Stock Option Plan; includes
currently exercisable stock options for Mr. Talbot for 14,640 shares under
the 1993 Stock Option Plan and 20,167 shares under the 1987 Stock Option
Plan; currently exercisable stock options for Mr. Thompson of 10,084
shares under the 1987 Stock Option Plan; includes currently exercisable
stock options for Mr. Stone of 44,000 shares under the 1993 Stock Option
Plan, 67,734 shares under the 1991 Stock Option Plan and 36,300 shares
under the 1987 Stock Option Plan; includes currently exercisable stock
options for Mr. Stinson of 27,711 shares under the 1998 Stock Option Plan;
and currently exercisable stock options for Mr. Quirk of 49,461 shares
under the 1993 Stock Option Plan, 38,489 shares under the 1991 Stock
Option Plan and 28,132 shares under the 1987 Stock Option Plan.
(3) This number includes 2,614,891 currently exercisable stock options for all
directors and officers of the Company
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 one 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, certain 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 Company
of California is a tenant in one 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 Company continued to
lease the building from Folco for $28,272 per month, plus taxes, insurance and
other operating costs until the sale of the building in December 1998. This
annual rental rate was at a 30% discount based on its lease with Folco Mission
Valley.
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, 1999, Manchester,
Kensington Development Corporation ("Kensington"), which is 90% owned by
Manchester and 10% by Fidelity National Title Insurance Company of 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.
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<PAGE> 19
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
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 was 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, plus 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, Commerce Bank 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 Commerce Bank from Tustin Retail
(the "Note"). In December 1995, the Federal Deposit Insurance Corporation, which
took control of Commerce Bank, 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. Such property was sold on May 13, 1998.
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, 1998, 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 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.
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<PAGE> 20
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 1998, 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 $21,509.90 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, II
------------------------------------
WILLIAM P. FOLEY, II
CHIEF EXECUTIVE OFFICER
Date: April 29, 1999
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 28, 1999
- ------------------------------ Chief Executive Officer
WILLIAM P. FOLEY, II (Principal Executive Officer)
/s/ PATRICK F. STONE Chief Operating Officer April 28, 1999
- ------------------------------
PATRICK F. STONE
/s/ ALLEN D. MEADOWS Executive Vice President April 28, 1999
- ------------------------------ Chief Financial Officer
ALLEN D. MEADOWS (Principal Financial and
Accounting Officer)
/s/ ALAN L. STINSON Executive Vice President April 28, 1999
- ------------------------------ Financial Operations
ALAN L. STINSON (Chief Accounting Officer)
/s/ FRANK P. WILLEY Director April 28, 1999
- ------------------------------
FRANK P. WILLEY
/s/ DANIEL D. (RON) LANE Director April 28, 1999
- ------------------------------
DANIEL D. (RON) LANE
/s/ J. THOMAS TALBOT Director April 28, 1999
- ------------------------------
J. THOMAS TALBOT
/s/ DONALD M. KOLL Director April 28, 1999
- ------------------------------
DONALD M. KOLL
/s/ WILLIAM A. IMPARATO Director April 28, 1999
- ------------------------------
WILLIAM A. IMPARATO
/s/ CARY H. THOMPSON Director April 28, 1999
- ------------------------------
CARY H. THOMPSON
/s/ GENERAL WILLIAM LYON Director April 28, 1999
- ------------------------------
GENERAL WILLIAM LYON
</TABLE>
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