<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, 1999
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)
<TABLE>
<CAPTION>
DELAWARE
<S> <C> <C>
86-0498599
STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
17911 VON KARMAN AVENUE, SUITE 300 92614 (949) 622-4333
IRVINE, CALIFORNIA (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER,
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) INCLUDING AREA CODE)
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
Common Stock, $.0001 par value New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K, or any
amendment to this Form 10-K.
As of April 10, 2000, 66,934,696 shares of Common Stock ($.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 $897,638,000. 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 55 Chairman of the Board and Chief Executive Officer 1984
Frank P. Willey 46 Vice Chairman of the Board 1986
John J. Burns, Jr. 68 Director 2000
John F. Farrell, Jr. 62 Director 2000
Philip G. Heasley 50 Director 2000
William A. Imparato 53 Director 1986
Donald M. Koll 67 Director 1995
Daniel D. (Ron) Lane 65 Director 1989
General William Lyon 77 Director 1998
J. Thomas Talbot 64 Director 1990
Cary H. Thompson 43 Director 1992
Richard P. Toft 63 Director 2000
Patrick F. Stone 52 President and Chief Operating Officer N/A
Alan L. Stinson 54 Executive Vice President, Chief Financial Officer N/A
Andrew F. Puzder 49 Executive Vice President, Legal N/A
Peter T. Sadowski 45 Executive Vice President, General Counsel N/A
Raymond R. Quirk 53 Executive Vice President N/A
Ronald R. Maudsley 48 Executive Vice President N/A
Ernest D. Smith 49 Executive Vice President N/A
William Massey 54 Executive Vice President N/A
</TABLE>
2
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<TABLE>
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DIRECTOR
NAME AGE PRINCIPAL OCCUPATION SINCE
---- --- -------------------- --------
<S> <C> <C> <C>
Christopher Abbinante 49 Executive Vice President N/A
Brent B. Bickett 35 Senior Vice President, Financial Operations N/A
Edward J. Dewey 54 Senior Vice President N/A
M'Liss Jones Kane 47 Senior Vice President, Corporate Counsel N/A
and Corporate Secretary
Gary R. Nelson 52 Senior Vice President N/A
H. Lee Kolodny 32 Senior Vice President, Corporate Counsel N/A
Hon Chan 40 Senior Vice President, Assistant General Counsel N/A
Patrick Farrenga 32 Vice President, Treasurer N/A
</TABLE>
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 of CKE Restaurants, Inc.,
American National Financial, Inc., Rally's Hamburgers, Inc., Checkers Drive-In
Restaurants, Inc. and Santa Barbara Restaurant Group, Inc. Additionally, he is
Co-Chairman of the Board of Directors of Micro General Corporation, and a
director of Fresh Foods, Inc. and Miravant Medical Technologies, Inc.
FRANK P. WILLEY
Mr. Willey is Vice Chairman of the Company. He served as President and
a director of the Company from January 1, 1995 through March 20, 2000. 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., and Ugly Duckling Holding, Inc.
JOHN JOSEPH BURNS, JR.
Mr. Burns is the Chief Executive Officer and a Director of Alleghany
Corporation and has been since 1992. From 1977 to 1992, he was President and a
Director of Alleghany Corporation. He is a director of World Minerals, Inc.,
Underwriters Reinsurance Co. and Burlington Northern Santa Fe Corporation..
JOHN F. FARRELL, JR.
Mr Farrell is Chairman of Automatic Service Company and has been since
1997. From 1985 through 1994 he was Chairman and Chief Executive Officer of
North American Mortgage Company. Mr. Farrell was Chairman of Integrated
Acquisition Corporation from 1984 through 1989. He was a partner with
Oppenheimer and Company from 1972 through 1984.
PHILIP G. HEASLEY
Mr. Heasley is President and Chief Operating Officer of U.S. Bancorp
and has been since July 1999. From 1994 to 1990 he served as Vice Chairman of
U.S. Bancorp. From 1990 to 1994 he was Executive Vice President of U.S. Bancorp
(formerly First Bank). From 1978 to 1990 he was Senior Vice President of U.S.
Bancorp (formerly First Bank). From 1978 through 1987 he held various positions
at Citicorp including President and Chief Operating Officer.
3
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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 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 included 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.
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 Inc. 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 a Senior Managing Director with Bear Stearns & Co., Inc.,
Chief Operating Officer an da 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. from 1989 to May 1994.
Prior to that time, he was a partner with the law firm of Manatt, Phelps,
Rothenberg and Phillips.
RICHARD PAUL TOFT
Mr. Toft is currently the Non-Executive Chairman of Alleghany Asset
Management, Inc. and has been since April 1, 2000. He was Chairman and Chief
Executive Officer of Alleghany Asset Management, Inc. from October of 1995
through April 1, 2000. He served as a Senior Vice President of Alleghany
Corporation from March 30, 1990 through October 1995 and in various capacities
at Chicago Title Corporation from February 1981 through March 20, 2000, most
recently serving as Chairman of the Board. From 1972 through May of 1981 he
served as Vice President and Treasurer of Lincoln National Corporation. Mr. Toft
is also a director of Peoples Energy Corporation of Chicago.
4
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PATRICK F. STONE
Mr. Stone was elected President of the Company effective March 20,
2000. He 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 four
other underwriters of the Company. From February 1989 to May 1995 he was
President of Fidelity National Title Company of Oregon. He is Co-Chairman of the
Board of Micro General Corporation.
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.
ANDREW F. PUZDER
Mr. Puzder is Executive Vice President, Legal of the Company and has
been since March, 2000, and has served in various capacitites including
Executive Vice President and General Counsel since 1995. He has been Executive
Vice President, General Counsel and Secretary of CKE Restaurants, Inc. since
February 1997. Mr. Puzder also serves as Chief Executive Officer of SBRG, where
he has been since August 1997. From March 1994 to December 1994, he was a
partner with the law firm of Stradling , Yocca, Carlson & Rauth. Prior to that,
he was a partner with the law firm of Lewis, D=Amato, Brisbois & Bisgard, from
September 1991 through March 1994, and he was a partner of the Stolar
Partnership from February 1984 through September 1991. Mr. Puzder is a member of
the Board of Directors of SBRG, Pierre Foods, Aspeon, Inc. and Checkers.
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.
RAYMOND R. QUIRK
Mr. Quirk has been an Executive Vice President of the Company since
March 20, 2000. He 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 has been an Executive Vice President of the Company since
March 20, 2000. He was a Vice President of the Company from June 17, 1998 to
March 20, 2000. 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 has been an Executive Vice President of the Company since
March 20, 2000. He was a Vice President of the Company from June 17, 1998 to
March 20, 2000. 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.
5
<PAGE> 6
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., serving since 1997 as a Managing Director of the
Firm's real estate, gaming, lodging and leisure group.
WILLIAM MASSEY
Mr. Massey has been Executive Vice President of the company since March
20, 2000. He has held various positions at the Trust and Underwriters Subsidiary
level since April 12, 1989.
CHRISTOPHER ABBINANTE
Mr. Abbinante has been Executive Vice President of the Company since
March 20, 2000. He was the Senior Vice President of the Company since March 20,
2000. He was the Senior Vice President and Manager of the Eastern Division of
Chicago Title from April 25, 1989 to March 20, 2000, and has held various
executive positions at Chicago=s Trust and Underwriter Subsidiaries since July
1, 1991.
EDWARD DEWEY
Mr. Dewey is Senior Vice President of the Company and has been since
March 20, 2000. He has served in various capacities and Fidelity National Title
Insurance Company including Banking Administration and Executive Officer to the
Chairman of the Board from May 1993 to March 20, 2000.
M'LISS JONES KANE
Ms. Kane has been Senior Vice President, Corporate Counsel and
Corporate Secretary since March 17, 1999. From September 15, 1997 to March 17,
1999 she was Senior Vice President, General Counsel and Corporate Secretary of
the Company. She 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. 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.
GARY R. NELSON
Mr. Nelson has been a Senior Vice President of the Company since March
20, 2000. He was a Vice President of the Company from September 26, 1994 to
March 20, 2000. 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.
HON CHAN
Mr. Chan has been Senior Vice President, Regulatory Counsel of the
Company since April 1, 2000. He has been a staff attorney at the California
Department of Insurance for the past 15 years. He was Senior Staff Counsel in
the Corporatate affairs Bureau from January 1992 to January 1999 when he became
Senior Staff Counsel in the Conservation and Liquidation Bureau of the Legal
Division.
H. LEE KOLODNY
Mr. Kolodny has been Senior Vice President, Corporate Counsel since
February 2000. From October 1994 to February 2000, Mr. Kolodny was an associate
with Stradling, Yocca, Carlson & Rauth.
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PATRICK FARENGA
Mr. Farenga has been Vice President, Treasurer of the Company since
April 26, 2000. He has held various positions at Chicago Title from July 1996 to
April 25, 2000, including Manager, Treasury Analysis, and Assistant Vice
President and business Unit Controller, Real Estate Services. Mr. Farenga 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 1999, 1998 and 1997 for the
Company's Chief Executive Officer and the four most highly compensated current
executive officers whose salary and bonus exceeded $100,000 in 1999.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
<TABLE>
<CAPTION>
LONG TERM
OTHER COMPENSATION
ANNUAL AWARDS- ALL OTHER
NAME AND PRINCIPAL BONUS COMPENSATION OPTIONS($) COMPENSATION
POSITION YEAR SALARY($) ($)(1) (2) (1)(3)(4) ($)(5)
- ------------------ ---- --------- ------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
William P. Foley, II 1999 $600,000 $ 392,940 $187,139 $ 98,235 $46,870
Chairman of the Board 1998 600,000 1,954,281 119,827 195,376 13,682
and Chief Executive Officer 1997 600,000 1,380,754 88,215 187,000 35,986
Patrick F. Stone, 1999 390,629 187,470 -- 19,647 24,375
President and Chief Operating 1998 325,000 586,284 -- 53,113 --
Officer 1997 318,750 408,226 -- 40,004 22,500
Raymond R. Quirk 1999 268,750 197,176 6,000 49,294 10,000
Executive Vice President 1998 -- -- -- -- --
1997 -- -- -- -- --
Ronald R. Maudsley, 1999 268,750 193,176 6,000 177,458 15,000
Executive Vice President 1998 212,500 286,142 6,000 263,828 13,875
1997 190,000 193,675 6,000 193,675 --
Ernest D. Smith, 1999 268,750 192,176 6,000 118,306 15,000
Executive Vice President 1998 212,500 293,142 6,000 116,571 11,250
1997 212,500 195,675 6,000 119,675 13,875
</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 1999, 1998 and
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<PAGE> 8
1997, the most recent three years for which the options were granted,
are as follows: (i) Mr. Foley: $98,235 - 1999 bonus; $195,428 - 1998
bonus and $138,075 - 1997 bonus; (ii) Mr. Stone: $19,647 - 1999 bonus;
$58,628 - 1998 bonus and $41,423 - 1997 bonus; (iii) Mr. Quirk: $19,647
- 1999 bonus; no bonus deferred 1998 and $48,919 - 1997; (iv) Mr.
Maudsley: $177,458 - 1999 bonus; $263,828 - 1998 bonus; and $193,675 -
1997 bonus; (v) Mr. Smith: $118,306 - 1999 bonus; $116,571 - 1998 bonus
and $195,675 - 1997 bonus.
(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. Except for Mr. Foley, 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 1999; $9,000 in
1998 and $9,000 in 1997 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 -- $ 87,139 in 1999, $110,826.95 in 1998 and
$79,215 in 1997.
(3) The number of options granted per year in this column for 1999, 1998
and 1997, the three-year period in which the options were granted, are
as follows: (i) Mr. Foley: 1999 grant - 150,000 options granted under
the 1998 Stock Option Plan and 39,086 options granted under the 1991
Stock Option Plan; 1998 grant - 165,000 options granted under the 1993
stock option plan and 30,376 options granted under the 1991 stock
option plan; and 1997 grant - 165,000 options granted under the 1987
Stock Option Plan and 22,000 options granted under the 1991 Stock
Option Plan; (ii) Mr. Stone: 1999 grant - 60,000 options granted under
the 1998 Stock Option Plan and 11,726 options granted under the 1991
Stock Option Plan; 1998 grant - 44,000 options granted under the 1993
Stock Option Plan and 9,113 options granted under the 1991 Stock Option
Plan; and 1997 grant - 33,000 options granted under the 1987 Stock
Option Plan and 7,004 options granted under the 1991 Stock Option Plan;
(iii) Mr. Quirk: 1999 grant - 10,000 options granted under the 1998
Stock Option Plan; 1998 grant - 110,000 options granted under the 1993
Stock Option Plan and 10,762 options granted under the 1991 Stock
Option Plan; and 1997 grant - 18,150 options granted under the 1987
Stock Option Plan; (iv) Mr. Maudsley: 1999 grant - 10,000 options
granted under the 1998 Stock Option Plan and 52, 766 options granted
under the 1991 Stock Option Plan; 1998 grant - 110,000 options granted
under the 1993 Stock Option Plan and 43,608 options granted under the
1991 Stock Option Plan; and 1997 grant - 18,150 options granted under
the 1987 Stock Option Plan and 15,125 options granted under the 1991
Stock Option Plan; (v) Mr. Smith: 1999 grant - 10,000 options granted
under the 1998 Stock Option Plan and 23,314 options granted under the
1991 Stock Option Plan; 1998 grant - 110,000 options granted under the
1993 Stock Option Plan and 43,048 options granted under the 1991 Stock
Option Plan; and 1997 grant - 18,150 options granted under the 1991
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
2000 for fiscal year 1999 to the named executives, which are not
included in the table, are as follows: under the 1991 Stock Option Plan
(i) Mr. Foley -- 19,647 shares; (ii) Mr. Stone -- 3,929 shares; (iii)
Mr. Quirk B 9,859 shares; (iv) Mr. Maudsley B 35,492 shares; and (v)
Mr. Smith B 23,661 shares; and under the 1998 Stock Option Plan (i) Mr.
Foley -- 150,000 shares; (ii) Mr. Stone -- 75,000 shares; (iii) Mr.
Quirk -- 30,000 shares; (iv) Mr. Maudsley -- 30,000 shares, and (v) Mr.
Smith -- 30,000 shares.
(5) Includes Company cash contributions to the Employee Stock Purchase Plan
on behalf of the individuals named in the Summary Compensation Table.
All Other Compensation for Mr. Foley also includes imputed income of
$1,687 for 1999; $1,466 for 1998; and $1,157 for 1997 respectively,
from a joint life split dollar insurance policy.
OFFICER AND DIRECTOR LOANS
The Board of Directors adopted an Employee and a Director Stock
Purchase Loan Program. The Employee Plan authorized an aggregate amount of
$7,900,000 be authorized to make loans to key employees to purchase shares of
the Company's Common Stock through open market purchases or in privately
negotiated transactions. The Director Plan authorized an aggregate amount of
$750,000 to make loans to outside directors to purchase shares of the Company=s
Common Stock through open market purchases or in privately negotiated
transactions. The loans are at an interest rate of 5% for a term of five years
immediately callable in the event of termination of employment or resignations a
director, as the case may be.
At December 31, 1999, the following named executives who participated
in the Employee Plan had the following outstanding balances: William P. Foley,
II -$3,000,000; Alan L. Stinson - $200,000; Frank P. Willey - $350,000; Patrick
F. Stone- $500,000; Andrew F. Puzder - $250,000; Randall Quirk - $ 300,889;
Peter Sadowski - $50,000; Ronald R. Maudsley - $ 350,000; and Ernest D. Smith -
$350,000.
At December 31, 1999, the following directors who participated in the
Director Plan had the following outstanding balances: William A. Imparato - $
150,000; Donald M. Koll - $ 150,000; Ronald Lane - $ 150,000; General William
Lyon - $ 150,000; and J. Thomas Talbot - $ 150,000.
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OPTION GRANTS
The following table provides information as to options to purchase
common stock granted to the named individuals during 1999 pursuant to the
Company's 1998 and 1991 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>
1998 STOCK OPTION PLAN
William P. Foley, II 150,000 8.6% $14.625 $14.625 03/22/09 $1,379,637 $3,496,272
Patrick F. Stone 60,000 3.45% 14.625 14.625 03/22/09 551,855 1,398,509
Raymond R. Quirk 10,000 0.58% 14.625 14.625 03/22/09 91,975 223,084
Ronald R. Maudsley 10,000 (2) 14.625 14.625 03/22/09 91,975 223,084
Ernest D. Smith 10,000 (2) 14.625 14.625 03/22/09 91,975 223,084
1991 STOCK OPTION PLAN
William P. Foley, II 39,086 2.3% $14.625 $9.275 03/22/11 $615,163 $1,268,412
Patrick F. Stone 11,726 (2) 14.625 9.275 03/22/11 184,552 380,530
Ronald R. Maudsley 52,766 3.04% 14.625 9.275 03/22/11
Ernest D. Smith 23,314 1.34% 14.625 9.275 03/22/11 366,932 756,582
TOTAL -- 1998 AND 1991 STOCK OPTION PLANS
William P. Foley, II 189,086 10.9% $14.625 $9.275- 03/22/09- $1,994,800 $4,764,684
14.625 03/22/11
4.1% 736,407 1,779,039
Patrick F. Stone 71,726 14.625 9.275- 03/22/09-
14.625 03/22/11 91,975 223,084
Raymond R. Quirk 10,000 (2) 14.625 14.625 03/22/11 548,170 1,460,055
Ronald R. Maudsley 62,766 3.63% 14.625 9.275- 03/22/99- 640,146 1,663,140
14.625 03/22/11
Ernest D. Smith 33,314 1.9% 14.625 9.275- 03/22/99- 458,908 989,666
14.625 03/22/11
</TABLE>
(2) Represents less than 1%
(1) The options granted in 1999 under the 1991 Stock Option Plan were
granted at an exercise price of $14.625 to key employees of the Company
who applied deferred bonuses expensed in 1998 (see (1) of Summary
Compensation Table) to the exercise price, thereby reducing such price
to $9.275 per share if exercised within the first year of grant. The
exercise price of these options decreases approximately $0.35 per year
through March 22, 2004, and $0.22 per share from March 23, 2005,
through March 23, 2010, at which time the exercise price will be
$6.525. The options granted in 1999 under the 1998 Stock Option Plan
were granted at an exercise price of $14.625.
9
<PAGE> 10
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table summarizes information regarding exercises of stock
options by the named individuals during 1999 and unexercised options held by
them as of December 31, 1999. The Company did not reprice any existing options
during the last completed fiscal year.
AGGREGATED STOCK OPTION EXERCISES
IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
UNEXERCISED UNEXERCISED
OPTIONS AT IN-THE-MONEY
FY-END OPTIONS AT FY-END
SHARES ACQUIRED VALUE REALIZED (#) EXERCISABLE ($) EXERCISABLE/
NAME EXERCISE (#) ($) UNEXERCISABLE(1)(2) UNEXERCISABLE(1)(2)
---- --------------- -------------- ------------------- -------------------
<S> <C> <C> <C> <C>
William P. Foley, II 0 $ -- 1,475,145/150,000 $7,420,619/0
Patrick F. Stone 34,188 119,658 159,760/25,812 692,799/0
Raymond R. Quirk 0 -- 116,082/92,500 548,056/0
Ronald R. Maudsley 0 -- 80,266/82,500 13,191/0
Ernest D. Smith 0 -- 93,832/92,500 118,901/0
</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, $14.375 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 150,000 shares at $14.625 per share under
the 1998 Plan; 165,000 shares at $24.2618 per share under the 1993
plan; options to purchase 39,086 shares at $9.275 per share, options to
purchase 8,784 shares at $2.6296 per share, options to purchase 30,746
shares at $5.1226 per share, options to purchase 46,119 shares at
$6.4203 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
10
<PAGE> 11
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 60,000 shares at $14.625; options to
purchase 44,000 shares at $24.2618 per share under the 1993 Stock
Option Plan; options to purchase 11,726 shares at $9.275 per share,
3,929 shares at $6.75 per share, and 6,432 shares at $5.1091 per share,
options to purchase 2,928 shares at $2.6296 per share, options to
purchase 41,557 shares at $6.4203 per share, options to purchase 9,113
shares at $19.3981 per share, options to purchase 7,704 shares at
$5.4339 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. Quirk - options to purchase 10,000 shares at
$14.625 per share under the 1998 Stock Option Plan, 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
$5.1226 per share, options to purchase 10,980 shares at $6.4203 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; (iv) Mr. Maudsley - options to
purchase 10,000 shares at $14.625 per share under the 1998 Stock Option
Plan; options to purchase 110,000 options at $24.2618 under the 1993
Stock Option Plan; options to purchase 42,608 options at $19.3981 and
options to purchase 52,766 shares at $9.275 per share under the 1991
Stock option plan; and (v) Mr. Smith - options to purchase 10,000
options at $14.625 under the 1998 Stock Option Plan; options to
purchase 110,000 options at $24.2618 under the 1993 Stock Option Plan;
options to purchase 43,048 options at $19.3981, options to purchase
23,314 shares at $9.275 per share under the 1991 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 $14.375 per share and the option grant price.
EMPLOYMENT AGREEMENTS
The Company entered into a five-year employment agreement (the
"Agreement") with its Chairman and Chief Executive Officer, Mr. Foley, effective
March 20, 2000, replacing an agreement due to expire March 31, 2001. His minimum
annual base salary is $950,000. The Agreement includes other compensation and
executive fringe benefits, including an annual merit bonus calculated based on
the Company's return on equity before extraordinary items. There is a change in
control provision 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, (iii) immediate vesting
of all options not vested at the date of termination, (iv) maintenance of all
benefit plans and programs for Mr. Foley for the greater of 3 years or the
number of years (including partial years) remaining in the Agreement. 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 Agreement. Upon Mr. Foley's death, his estate will receive a
payment in the amount of the minimum annual base salary for the remainder of the
Agreement. 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 his minimum annual base salary, without offset for the
remainder of the Agreement.
The Company entered into a three year employment agreement with Patrick
F. Stone effective March 20, 2000. The Agreement provides for a minimum base
salary of $750,000 which may be increased at the discretion of the Compensation
Committee of 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
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 minimum annual base 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,
(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 three-year employment agreement with Frank
P. Willey effective March 20, 2000. The agreement provided for a minimum base
salary of $300,000 which may be increased at the discretion of the Compensation
Committee of the Board
11
<PAGE> 12
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 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 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 minimum
annual base 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, (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.
The Company entered into a three-year employment agreement with Andrew
F. Puzder effective March 20, 2000. The agreement provided for a minimum base
salary of $425,000 which may be increased at the discretion of the Compensation
Committee of 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
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 minimum annual base 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,
(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.
The Company entered into a three-year employment agreement with Raymond
R Quirk effective March 20, 2000. The agreement provided for a minimum base
salary of $400,000 which may be increased at the discretion of the Compensation
Committee of 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
enabling Mr. Quirk 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. Quirk's employment is
terminated following a change in control due to a breach of this Agreement then
he shall receive (i) his minimum annual base 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,
(iii) maintenance of all benefit plans and programs for Mr. Quirk for the number
of 2 years or the number of years (including partial years) remaining in the
Agreement.
The Company entered into a three-year employment agreement with Ernest
D. Smith effective March 20, 2000. The agreement provided for a minimum base
salary of $400,000 which may be increased at the discretion of the Compensation
Committee of 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
enabling Mr. Smith 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. Smith's employment is
terminated following a change in control due to a breach of this Agreement then
he shall receive (i) his minimum annual base 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,
(iii) maintenance of all benefit plans and programs for Mr. Smith for the number
of 2 years or the number of years (including partial years) remaining in the
Agreement.
The Company entered into a three-year employment agreement with Alan L.
Stinson effective March 20, 2000. The agreement provided for a minimum base
salary of $350,000 which may be increased at the discretion of the Compensation
Committee of 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
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 minimum annual base 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
12
<PAGE> 13
the agreement or the number 2, (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.
The Company entered into a two-year employment agreement with Peter T.
Sadowski effective March 20, 2000. The agreement provided for a minimum base
salary of $300,000 which may be increased at the discretion of the Compensation
Committee of 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
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 minimum annual base 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 1,
(iii) maintenance of all benefit plans and programs for Mr. Sadowski for the
number of 1 years or the number of years (including partial years) remaining in
the Agreement.
The Company entered into a two-year employment agreement with Michael
Murphy effective March 20, 2000. The agreement provided for a minimum base
salary of $300,000 which may be increased at the discretion of the Compensation
Committee of 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. Murphy 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. Murphy's employment
is terminated following a change in control due to a breach of this agreement
then he shall receive (i) his minimum annual base 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 1,
(iii) maintenance of all benefit plans and programs for Mr. Murphy for the
number of 1 years or the number of years (including partial years) remaining in
the Agreement.
The Company entered into a one-year employment agreement with Ed Dewey
effective March 20, 2000. The agreement provided for a minimum base salary of
$180,000 which may be increased at the discretion of the Compensation Committee
of 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 enabling Mr
.Dewey 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. Dewey's employment is terminated following a
change in control due to a breach of this Agreement then he shall receive (i)
$150,000 on or before the fifth day following termination.
DIRECTOR COMPENSATION
Directors who are not employees of the Company receive an annual
retainer of $30,000 and $2,500 per Board of Directors meeting attended, plus
reimbursement of reasonable expenses. There is an annual Committee Fee of $5,000
and $1,500 for Committee Meetings attended. The Committee Chairman receives an
annual fee of $7,500. 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 1999, Messrs. Thompson, Talbot and Lane served as members of the
Compensation Committee. The Compensation Committee is currently composed of four
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.
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.
13
<PAGE> 14
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
for key employees including Mr. Foley, Mr. Stone, Mr. Willey, Mr. Puzder, Mr.
Stinson, Mr. Sadowski, Mr. Maudsley, Mr. Smith, and Mr. Dewey, among others. The
Compensation Committee then makes recommendations to the entire Board of
Directors for their approval.
In determining base salaries for executives for 1999, 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 1999, the Compensation Committee approved 1999 bonuses for the
executives which were paid in 2000.
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 2000 for their
performance in 1999 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 75,000 shares; Mr. Quirk, options to purchase 30,000
shares; Mr. Maudsley , options to purchase 30,000 shares; and Mr. Smith, options
to purchase 30,000 shares. Certain officers have elected to defer a portion of
their bonus in stock options
14
<PAGE> 15
under the 1991 Stock Option Plan as follows: Mr. Foley, options to purchase
19,647 shares; Mr. Stone, options to purchase 3,929 shares; Mr. Quirk, options
to purchase 9,859 shares; Mr. Maudsley, options to purchase 35,492 shares; and
Mr. Smith options to purchase 23,661 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 11, 2000 Compensation Committee
Daniel D. (Ron) Lane
J. Thomas Talbot
Cary H. Thompson
15
<PAGE> 16
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,
1999. This peer group consists of the following companies: Capital Guarantee
Group, 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,
1995, with dividends reinvested over the periods indicated.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
OF COMPANY, INDUSTRY INDEX AND BROAD MARKET
DEC 94 DEC 95 DEC 96 DEC 97 DEC 98 DEC 99
------ ------ ------ ------ ------ ------
Fidelity National Financial, 100.00 175.13 175.25 403.80 438.96 211.46
Inc.
S&P 500 Index 100.00 137.58 169.17 225.60 290.08 351.12
Peer Group 100.00 160.64 206.97 352.86 683.98 389.60
ASSUMES $100 INVESTED ON JANUARY 1, 1995
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DECEMBER 31, 1999
16
<PAGE> 17
BOARD MEETINGS AND COMMITTEES
The Board of Directors held a total of five formal meetings during the
year ended December 31, 1999. No director attended fewer than 100% of the
aggregate of all meetings of the Board of Directors or any committee in 1999.
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 consisted of Messrs. Lane, Talbot, and Thompson in 1999, met
two times during 1999. 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 1999.
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
1999.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of April 12, 2000, 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.
NAME AND ADDRESS NUMBER OF SHARES PERCENT OF TOTAL
- ---------------- ---------------- ----------------
William P. Foley, II
3916 State Street, Suite 300
Santa Barbara, CA 93105 5,074,330(1)(2) 7.4%
Frank P. Willey
3916 State Street, Suite 300
Santa Barbara, Ca 93105 1,025,996(2) 1.5%
Leucadia National Corporation
315 Park Avenue South
New York, NY 10010 6,522,124(3) 9.7%
John Joseph Burns, Jr.
375 Park Avenue, Suite 3201
New York, NY 10152 54,338(2) *
John F. Farrell, Jr.
445 Park Avenue, 10th Floor
New York, NY 10022 3,740(2) *
Philip G. Heasley
601 Second Avenue South
Minneapolis, MN 55391 7,480(2) *
17
<PAGE> 18
William A. Imparato
2901 N. Central Avenue, Suite 1610
Phoenix, AZ 85012 58,708(2) *
Donald M. Koll
4343 Von Karman Ave.
Newport Beach, CA 92660 52,637(2) *
Daniel D. (Ron) Lane
14 Corporate Plaza, Suite 150
Newport Beach, CA 92660 140,482(2) *
General William Lyon
4490 Von Karman Avenue
Newport Beach, CA 92660 20,067(2) *
J. Thomas Talbot
24 Corporate Plaza, Suite 100
Newport Beach, CA 92660 72,057(2) *
Cary H. Thompson
3731 Wilshire Blvd., 10th Flr.
Los Angeles, CA 90010 25,168(2) *
Patrick F. Stone
17911 Von Karman Ave., #300
Irvine, CA 92614 211,875(2) *
Raymond R. Quirk
3938 State Street, 2nd Floor
Santa Barbara, CA 93015 236,568(2) *
Ronald R. Maudsley
3938 State Street, 2nd Floor
Santa Barbara, CA 93105 149,647(2) *
Ernest D. Smith
3938 State Street, 2nd Floor
Santa Barbara, CA 93105 151,012(2) *
Richard Paul Toft
171 North Clark Street 40,832(2) *
Chicago, IL 60601
All directors and officers (25 7,586,729(4) 10.9%
persons)
- ------------
* 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 224,646 shares held by Foley Family Charitable
Foundation; Mr. Foley is a "controlling person" of the Company.
(2) Includes currently exercisable stock options for Mr. Foley of 150,000
shares under the 1998 Stock Option Plan, 165,000 shares under the 1993
Stock Option Plan, 289,797 shares under the 1991 Stock Option Plan and
1,039,995 shares under the 1987 Stock Option Plan;
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currently exercisable stock options for Mr. Willey of 30,000 shares
under the 1998 Stock Option Plan, 33,000 shares under the 1993 Stock
Option Plan, 64,828 shares under the 1991 Stock Option Plan and 222,428
shares under the 1987 Stock Option Plan; includes 1,623 converted
Chicago options for Mr. Burns at $13.1771 per share, 3,740 converted
Chicago options at $12.59 and 3,740 converted Chicago options at
$10.54; includes 3,740 converted Chicago options at $10.54 for Mr.
Farrell; includes for Mr. Heasley 3,740 converted Chicago options at
$12.59 and 3,740 converted Chicago options at $10.54 for Mr. Heasley;
includes currently exercisable stock options for Mr. Imparato of 5,000
shares under the 1998 Stock Option Plan, 10,980 shares under the 1993
Stock Option Plan and 30,250 shares under the 1987 Stock Option Plan;
includes currently exercisable stock options for Mr. Koll of 5,000
shares under the 1998 Stock Option Plan, 7,320 shares under the 1993
Stock Option Plan and 30,250 shares under the 1987 Stock Option Plan;
includes currently exercisable stock options for Mr. Lane of 5,000
shares under the 1998 Stock Option Plan, 14,640 shares under the 1993
Stock Option Plan and 30,250 shares under the 1987 Stock Option Plan;
includes currently exercisable stock options for General Lyon of 10,500
shares under the 1998 Stock Option Plan; includes currently exercisable
stock options for Mr. Talbot for 5,000 shares under the 1998 Stock
Option Plan, 14,640 shares under the 1993 Stock Option Plan and 30,250
shares under the 1987 Stock Option Plan; currently exercisable stock
options for Mr. Thompson of 5,000 under the 1998 Stock Option Plan, and
20,160 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, 83,389 shares under the 1991 Stock Option Plan and
36,300 shares under the 1987 Stock Option Plan; includes currently
exercisable stock options for Mr. Quirk of 76,961shares under the 1993
Stock Option Plan, 48,348 shares under the 1991 Stock Option Plan and
28,132 shares under the 1987 Stock Option Plan; includes currently
exercisable stock options for Mr. Maudsley of 10,000 shares under the
1998 Stock Option Plan, 55,000 shares under the 1993 Stock Option Plan,
and 88,258 shares under the 1991 Stock Option Plan; includes currently
exercisable stock options for Mr. Smith of 10,000 shares under the 1998
Stock Option Plan, 55,000 shares under the 1993 Stock Option Plan, and
89,723 shares under the 1991 Stock Option Plan; includes 3,740
converted chicago options at $12.59 and 3,740 converted Chicago options
at $10.54 for Mr. Toft.
(3) Based on a Schedule 13 D Amendment No. 2 filed by Leucadia National
Corporation.
(4) This number includes 2,754,844 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.
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
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.
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<PAGE> 20
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 28, 2000
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> <C>
/s/ WILLIAM P. FOLEY, II Chairman of the Board and Chief Executive Officer April 28, 2000
- --------------------------------------- (Principal Executive Officer)
WILLIAM P. FOLEY, II
/s/ FRANK P. WILLEY Vice Chairman of the Board April 28, 2000
- ------------------------------------
FRANK P. WILLEY
/s/ PATRICK F. STONE President and Chief Operating Officer April 28, 2000
- ------------------------------------
PATRICK F. STONE
/s/ ALAN L. STINSON Executive Vice President, Chief Financial Officer April 28, 2000
- ----------------------------------- and Treasurer (Principal Financial and Accounting
ALAN L. STINSON Officer)
/s/ JOHN JOSEPH BURNS, JR. Director April 28, 2000
- ---------------------------------------
JOHN JOSEPH BURNS, JR.
/s/ JOHN F. FARRELL, JR. Director April 28, 2000
- -------------------------------------
JOHN F. FARRELL, JR.
/s/ PHILIP G. HEASLEY Director April 28, 2000
- -------------------------------------
PHILIP G. HEASLEY
/s/ WILLIAM A. IMPARATO Director April 28, 2000
- ---------------------------------------
WILLIAM A. IMPARATO
/s/ DONALD M. KOLL Director April 28, 2000
- ------------------------------------
DONALD M. KOLL
/s/ DANIEL D. (RON) LANE Director April 28, 2000
- -----------------------------------------
DANIEL D. (RON) LANE
</TABLE>
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<PAGE> 21
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SIGNATURES TITLE DATE
- ---------- ----- ----
/s/ GENERAL WILLIAM LYON Director April 28, 2000
- ----------------------------------------
GENERAL WILLIAM LYON
/s/ J. THOMAS TALBOT Director April 28, 2000
- --------------------------------------
J. THOMAS TALBOT
/s/ CARY H. THOMPSON Director April 28, 2000
- ---------------------------------------
CARY H. THOMPSON
/s/ RICHARD PAUL TOFT Director April 28, 2000
- ---------------------------------------
RICHARD PAUL TOFT
</TABLE>
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