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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K/A
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
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Commission File Number: 0-24961
AMERICAN NATIONAL FINANCIAL, INC.
(Exact name of Registrant as specified in its charter)
California 33-0731548
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(State of Incorporation) (I.R.S. Employer
Identification No.)
1111 E. Katella Avenue, Suite 220, Orange, California 92867
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(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (714) 289-4300
Securities registered pursuant to Section 12(b) of the Act: None.
Securities to be registered pursuant to Section 12(g) of the Act:
Name of each exchange
Title of each class on which registered
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Common Stock, no par value NASDAQ National Market
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 a 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. [X]
As of March 13, 2001, 7,507,507 shares of common stock (no par value) were
outstanding, and the aggregate market value of the shares of the common stock
held by non-affiliates of the registrant was $17,319,894. The aggregate market
value was computed with reference to the closing price on the NASDAQ National
Market on such date.
DOCUMENTS INCORPORATED BY REFERENCE.
None.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
The names of the directors, director nominees and all executive officers of
American National Financial, Inc. (the "Company"), and certain information about
them, are set forth below:
Name Occupation Age Director Since
---- ---------- --- --------------
Michael C. Lowther Chairman of the Board and 59 1996
Chief Executive Officer
American National Financial, Inc.
Orange, California
William P. Foley, II Chairman of the Board and 56 1997
Chief Executive Officer
Fidelity National Financial, Inc.
Irvine, California
Wayne D. Diaz President 53 1996
American National Financial, Inc.
Orange, California
Dennis R. Duffy Executive Vice President 58 1996
American National Financial, Inc.
Orange, California
Carl A. Strunk Executive Vice President and 63 1999
Chief Financial Officer
American National Financial, Inc.
Orange, California
Barbara A. Ferguson Executive Vice President 44 1997
American National Financial, Inc.
Orange, California
Bruce Elieff Principal 44 1998
Sun Cal Companies
Anaheim, California
Matthew K. Fong Of Counsel 47 1998
Sheppard, Mullin, Richter & Hampton
Los Angeles, California
Bruce L. Nelson Chairman of the Board 52 N/A
Roundtree Capital Corporation
Santa Barbara, California
MICHAEL C. LOWTHER
Mr. Lowther is Chairman of the Board of the Company and has been since
March 2000. He has been Chief Executive Officer and a director of the Company
since 1996. For approximately 15 years prior to joining American Title Company,
Mr. Lowther served as Chairman of the Board and Chief Executive Officer of World
Title Company, which he co-founded in 1980.
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WILLIAM P. FOLEY, II
Mr. Foley is a director of the Company. He joined the Company as its
Chairman of the Board in June 1997 and served in that capacity through March
2000. Mr. Foley is the Chairman of the Board and Chief Executive Officer of
Fidelity National Financial, Inc. and has been since its formation in 1984. Mr.
Foley was President of Fidelity National Financial, Inc. from its formation in
1984 until December 31, 1994. Mr. Foley is currently serving as Chairman of the
Board of CKE Restaurants, Inc., Checkers Drive-In Restaurants, Inc. and Santa
Barbara Restaurant Group, Inc. 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.
WAYNE D. DIAZ
Mr. Diaz has been President and a director of the Company since its
formation. During the five years prior to joining the Company, Mr. Diaz held the
position of Executive Vice President of Fidelity National Title Insurance
Company.
DENNIS R. DUFFY
Mr. Duffy has held his position of Executive Vice President and director of
the Company since 1996. Prior to 1996, he was owner of an underwritten title
company and held various management positions with both Title Insurance and
Trust Company (TICOR) and SAFECO.
CARL A. STRUNK
Mr. Strunk joined the Company as its Executive Vice President and Chief
Financial Officer in August 1998 and was elected a director in 1999. Mr. Strunk
is Executive Vice President, Finance, of CKE Restaurants, Inc. and was its Chief
Financial Officer from February 1997 through April 2001. He served as Executive
Vice President and Chief Financial Officer of Fidelity National Financial, Inc.
from March 1992 to September 1997, and thereafter served as Executive Vice
President, Finance, until March 1998. Mr. Strunk is also a member of the Board
of Directors of Micro General Corporation.
BARBARA A. FERGUSON
Ms. Ferguson joined the Company in August 1997 as Executive Vice President
and a director. For approximately 12 years prior to joining American National
Financial, Inc., Ms. Ferguson served as Senior Vice President of Fidelity
National Title Insurance Company.
BRUCE ELIEFF
Mr. Elieff was elected to the Company's Board of Directors in August 1998.
Mr. Elieff is a principal of Sun Cal Companies, a real estate development firm
located in Southern California. He has held this position since 1977.
MATTHEW K. FONG
Mr. Fong was elected to the Company's Board of Directors in November 1998.
In January 1999, Mr. Fong joined the law firm of Sheppard, Mullin, Richter &
Hampton LLP. From 1995 to 1998, Mr. Fong served as the State Treasurer of the
State of California. From 1991 to 1995, Mr. Fong served as Vice Chairman of the
California State Board of Equalization.
BRUCE L. NELSON
Mr. Nelson is currently the Chairman of the Board of Roundtree Capital
Corporation, a private investment company he founded in 1990. From 1980 to 1990,
Mr. Nelson served as Vice President and Treasurer with Rockefeller Group, Inc.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 of the Exchange Act of 1934, as amended, requires the Company's
executive officers and directors to file reports of their ownership, and changes
in ownership, of such securities with the SEC. Executive officers and directors
are required by the SEC's regulations to furnish the Company with copies of all
forms they file pursuant to Section 16 and the Company is required to report in
this Proxy Statement any failure of its directors and executive officers to file
by the relevant due date any of these reports during fiscal year 2000. Based
solely upon a review of the copies of the reports received by it, the Company
believes that all such filing requirements were satisfied except that Mr. Diaz
filed one late report for a transaction in 2000.
ITEM 11. EXECUTIVE COMPENSATION
The following Summary Compensation Table shows compensation paid by the
Company and its subsidiaries to the named executive officers of the Company for
all services in all capacities during the years indicated.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
LONG TERM COMPENSATION
-------------------------
RESTRICTED SECURITIES ALL OTHER
SALARY BONUS OTHER ANNUAL STOCK UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($)(1) ($)(2) COMPENSATION AWARDS OPTIONS(#)(3) ($)(4)
------------------------------ ---- -------- -------- ------------ ---------- ------------- ------------
Michael C. Lowther............ 2000 $270,516 $200,000 - - 171,667 $4,605
Chairman of the Board 1999 267,454 185,000 - - 27,640 530
and Chief Executive Officer 1998 256,667 275,000 - - - -
Wayne D. Diaz................. 2000 270,516 200,000 - - 171,667 4,427
President 1999 267,454 185,000 - - 27,640 319
1998 256,667 275,000 - - - -
Dennis R. Duffy............... 2000 161,038 125,000 - - 141,667 1,597
Executive Vice President 1999 166,901 125,000 - - 10,000 530
1998 162,958 160,000 - - - -
Barbara A. Ferguson........... 2000 170,500 125,000 - - 141,667 1,757
Executive Vice President 1999 167,450 125,000 - - 10,000 -
1998 170,000 160,000 - - - -
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(1) Amounts shown for the indicated fiscal year include amounts deferred at the
election of the named executive officer pursuant to the Company's 401(k)
plan.
(2) 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. Amounts shown for the indicated fiscal year include
cash bonus amounts earned in the indicated fiscal year and deferred at the
election of the named executive officer and utilized to reduce the exercise
price of stock options granted to such officer in the subsequent fiscal
year pursuant to the 1999 Stock Option Plan. Bonus amounts applied to
reduce the exercise price of stock option grants awarded and included in
this column for 2000 and 1999, the only years in which this Plan has been
in effect, are as follows: (i) Mr. Lowther: $100,000 - 2000 bonus, $92,500
- 1999 bonus; (ii) Mr. Diaz: $100,000 - 2000 bonus, $92,500 - 1999 bonus;
(iii) Mr. Duffy: $12,500 - 2000 bonus, $62,500 - 1999 bonus; and (iv) Ms.
Ferguson $41,663 - 2000 bonus, $62,500 - 1999 bonus.
(3) The number of securities underlying options has been adjusted to reflect
all dividends.
(4) Amounts shown for fiscal 2000 consist of the following: (i) Mr. Lowther:
Company paid life insurance premiums -- $1,354, Company contribution to
Employee Stock Purchase Plan -- $3,251; (ii) Mr. Diaz: Company paid life
insurance premiums -- $1,176, Company contribution to Employee Stock
Purchase Plan -- $3,251; (iii) Mr. Duffy: Company paid life insurance
premiums -- $708, Company contribution to Employee Stock Purchase Plan --
$889; and (iv) Ms. Ferguson: Company paid life insurance premiums -- $90,
Company contribution to Employee Stock Purchase Plan -- $1,667.
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OFFICER AND DIRECTOR LOANS
The Board of Directors adopted an Employee Stock Purchase Loan Plan
("Employee Plan") and the Non-Employee Director Stock Purchase Loan Program
("Director Program"). The Employee Plan authorized an aggregate amount of $1.7
million 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 Program authorized an aggregate amount of $300,000 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 6 1/4% per annum for a term of five years immediately
callable in the event of termination of employment or resignation as a director,
as the case may be.
During fiscal year 2000, each of the following named executive officers
participated in the Employee Plan Program, and the highest aggregate
indebtedness to the Company for each participant was as follows: Mr. Lowther -
$259,157; Mr. Diaz - $259,157; Mr. Duffy - $259,157; and Ms. Ferguson -
$259,157.
During fiscal year 2000, each of the following named directors participated
in the Director Program, and the highest aggregate indebtedness to the Company
for each participant was as follows: Mr. Foley - $466,482; Mr. Strunk -
$259,157; and Mr. Fong - $103,663.
OPTION GRANTS
The following table provides information as to options to purchase Common
Stock granted to the named individuals during 2000 pursuant to the Company's
1998 Stock Incentive Plan and 1999 Stock Option Plan.
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF PERCENTAGE OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM(3)
OPTION EMPLOYEES IN BASE PRICE EXPIRATION -------------------------
NAME GRANTS(#) FISCAL YEAR ($/SHARE) DATE 5%($) 10%($)
---- ---------- ------------- ----------- ---------- -------- --------
Michael C. Lowther 50,000 $3.00(1) 3/13/10 $94,500 $238,500
61,667 $1.50(2) 3/14/10 58,275 147,076
60,000 $2.69(1) 10/4/10 101,606 256,435
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171,667 10.8%
Wayne D. Diaz 50,000 $3.00(1) 3/13/10 $94,500 $238,500
61,667 $1.50(2) 3/14/10 58,275 147,076
60,000 $2.69(1) 10/4/10 101,606 256,435
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171,667 10.8%
Dennis R. Duffy 50,000 $3.00(1) 3/13/10 $94,500 $238,500
41,667 $1.50(2) 3/14/10 39,375 99,376
50,000 $2.69(1) 10/4/10 84,672 213,696
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141,667 8.9%
Barbara A. Ferguson 50,000 $3.00(1) 3/13/10 $94,500 $238,500
41,667 $1.50(2) 3/14/10 39,375 99,376
50,000 $2.69(1) 10/4/10 84,672 213,696
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141,667 8.9%
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(1) The fair market value of the Company's Common Stock on the date of grant.
(2) The options granted under the 1999 Stock Option Plan were granted to key
employees of the Company at an exercise price of $3.00, the fair market
value of the Company's Common Stock on the date of grant. The executive
officer applied his/her deferred bonus amount to reduce the exercise price
to $1.50 per share. (See note (2) of Summary Compensation Table.) Unless
exercised sooner, the exercise price of these options will decrease
approximately $0.05 per year through 2010, at which time the exercise price
will be $0.95.
(3) These are assumed rates of appreciation and are not intended to forecast
future appreciation of the Company's Common Stock.
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OPTION EXERCISES AND FISCAL YEAR-END VALUES
There were no stock option exercises by the named individuals in 2000. The
Company did not reprice any existing options during the last completed fiscal
year.
AGGREGATED STOCK OPTION EXERCISES
IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES VALUE DECEMBER 31, 2000 DECEMBER 31, 2000
ACQUIRED ON REALIZED ---------------------------- ----------------------------
NAME EXERCISE(#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
Michael C. Lowther......... None N/A 80,094 119,213 $104,094 $39,400
Wayne D. Diaz.............. None N/A 80,094 119,213 $104,094 $39,400
Dennis R. Duffy............ None N/A 48,334 103,333 $70,334 $34,400
Barbara A. Ferguson........ None N/A 48,334 103,333 $70,334 $34,400
EMPLOYMENT AGREEMENTS
The Company entered into a three-year employment agreement with its
Chairman and Chief Executive Officer, Mr. Lowther, effective August 8, 1998.
Following the expiration of the initial term, the employment agreement will
automatically renew for successive one-year terms unless Mr. Lowther or the
Company notifies the other of his or its intent not to renew the agreement.
However, the Company may only decline to renew the agreement if the Company or
any of its subsidiaries does not meet the budgeted expectations for such
entities as determined by the Company's Board of Directors in the exercise of
reasonable discretion. Pursuant to this agreement, Mr. Lowther's annual base
salary is $260,000. The agreement provides for additional incentive compensation
in respect of each fiscal year ending during the term thereof as determined by
the Chairman of the Board and the Board of Directors. The agreement allows the
Company to terminate Mr. Lowther upon written notice without cause, in which
case he will receive (i) 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 2 years, and
(ii) maintenance of all benefit plans and programs for Mr. Lowther for the
greater of 2 years or the number of years (including partial years) remaining in
the agreement. Upon Mr. Lowther's death, his estate will receive a
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payment in the amount of the annual base salary for the remainder of the
agreement and the minimum annual bonus without offset prorated throughout the
date of termination. Upon incapacity or disability for a continuous period of
nine months, the Company may terminate the employment contract with Mr. Lowther
upon payment of an amount equal to his annual base salary, without offset for
the remainder of the agreement. The Company entered into an amendment with Mr.
Lowther to his employment agreement that provides for a change of control
provision. This provision enables Mr. Lowther to terminate his employment
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. Lowther's employment is terminated following a change in control under
certain circumstances then he will 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, and (iii) maintenance of all benefit plans and programs for Mr.
Lowther for the number of years (including partial years) remaining in the
agreement.
The Company entered into a three-year employment agreement with Wayne D.
Diaz effective August 8, 1998. Following the expiration of the initial term, the
employment agreement will automatically renew for successive one-year terms
unless Mr. Diaz or the Company notifies the other of his or its intent not to
renew the agreement. However, the Company may only decline to renew the
agreement if the Company or any of its subsidiaries does not meet the budgeted
expectations for such entities as determined by the Company's Board of Directors
in the exercise of reasonable discretion. Pursuant to this agreement, Mr. Diaz's
annual base salary is $260,000. The agreement provides for additional incentive
compensation in respect of each fiscal year ending during the term thereof as
determined by the Chairman of the Board and the Board of Directors. The
agreement allows the Company to terminate Mr. Diaz upon written notice without
cause, in which case he will receive (i) 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
2 years, and (ii) maintenance of all benefit plans and programs for Mr. Diaz for
the greater of 2 years or the number of years (including partial years)
remaining in the agreement. Upon Mr. Diaz's death, his estate will receive a
payment in the amount of the annual base salary for the remainder of the
agreement and the minimum annual bonus without offset prorated throughout the
date of termination. Upon incapacity or disability for a continuous period of
nine months, the Company may terminate the employment contract with Mr. Diaz
upon payment of an amount equal to his annual base salary, without offset for
the remainder of the agreement. The Company entered into an amendment with Mr.
Diaz to his employment agreement that provides for a change of control
provision. This provision enables Mr. Diaz to terminate his employment 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.
Diaz's employment is terminated following a change in control under certain
circumstances then he will 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, and (iii) maintenance of all benefit plans and programs for Mr. Diaz
for the number of years (including partial years) remaining in the agreement.
The Company entered into a three-year employment agreement with Dennis R.
Duffy effective August 8, 1998. Following the expiration of the initial term,
the employment agreement will automatically renew for successive one-year terms
unless Mr. Duffy or the Company notifies the other of his or its intent not to
renew the agreement. However, the Company may only decline to renew the
agreement if the Company or any of its subsidiaries does not meet the budgeted
expectations for such entities as determined by the Company's Board of Directors
in the exercise of reasonable discretion. Pursuant to this agreement, Mr.
Duffy's annual base salary is $160,000. The agreement provides for additional
incentive compensation in respect of each fiscal year ending during the term
thereof as determined by the Board of Directors. The agreement allows the
Company to terminate Mr. Duffy upon written notice without cause, in which case
he will receive (i) 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 2 years, and
(ii) maintenance of all benefit plans and programs for Mr. Duffy for the greater
of 2 years or the number of years (including partial years) remaining in the
agreement. Upon Mr. Duffy's death, his estate will receive a
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payment in the amount of the annual base salary for the remainder of the
agreement and the minimum annual bonus without offset prorated throughout the
date of termination. Upon incapacity or disability for a continuous period of
nine months, the Company may terminate the employment contract with Mr. Duffy
upon payment of an amount equal to his annual base salary, without offset for
the remainder of the agreement.
The Company entered into a three-year employment agreement with Barbara
Ferguson effective August 8, 1998. Following the expiration of the initial term,
the employment agreement will automatically renew for successive one-year terms
unless Ms. Ferguson or the Company notifies the other of her or its intent not
to renew the agreement. However, the Company may only decline to renew the
agreement if the Company or any of its subsidiaries does not meet the budgeted
expectations for such entities as determined by the Company's Board of Directors
in the exercise of reasonable discretion. Pursuant to this agreement, Ms.
Ferguson's annual base salary is $160,000. The agreement provides for additional
incentive compensation in respect of each fiscal year ending during the term
thereof as determined by the Board of Directors. The agreement allows the
Company to terminate Ms. Ferguson upon written notice without cause, in which
case she will receive (i) severance pay in an amount equal to her annual salary
in effect as of the date of termination plus the total bonus paid or payable to
her for the most recent calendar year multiplied by the greater number of years
remaining in the term of employment, including partial years, or 2 years, and
(ii) maintenance of all benefit plans and programs for Ms. Ferguson for the
greater of 2 years or the number of years (including partial years) remaining in
the agreement. Upon Ms. Ferguson's death, her estate will receive a payment in
the amount of the annual base salary for the remainder of the agreement and the
minimum annual bonus without offset prorated throughout the date of termination.
Upon incapacity or disability for a continuous period of nine months, the
Company may terminate the employment contract with Ms. Ferguson upon payment of
an amount equal to her annual base salary, without offset for the remainder of
the agreement. The Company entered into an amendment with Ms. Ferguson to her
employment agreement that provides for a change of control provision. This
provision enables Ms. Ferguson to terminate her employment 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 Ms.
Ferguson's employment is terminated following a change in control under certain
circumstances then she will receive (i) her minimum annual base salary through
the date of termination, (ii) severance pay in an amount equal to her annual
salary in effect as of the date of termination plus the total bonus paid or
payable to her 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, and (iii) maintenance of all benefit plans and programs for Ms.
Ferguson for the number of years (including partial years) remaining in the
agreement.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee was formed in 1999. During fiscal 2000, the
Compensation Committee consisted of two independent directors, including Mr.
Elieff and Mr. Fong, and no member of the Compensation Committee was a former or
current officer or employee of the Company or any of its subsidiaries. In
addition, during that year, no executive officer of the Company served (i) as a
member of the compensation committee or board of directors of another entity,
one of whose executive officers served on the Compensation Committee, or (ii) as
a member of the compensation committee of another entity, one of whose executive
officers served on the Board of Directors.
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REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
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 Shareholders; (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. 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, and profit retention and profitability,
all of which combine to enhance Shareholder value.
The Committee approves the employment agreements and salary and bonus
levels for key employees, including Mr. Lowther and Mr. Diaz. The Compensation
Committee then makes recommendations with respect to the compensation to the
entire Board of Directors for its approval.
COMPENSATION OF THE CHAIRMAN AND CHIEF EXECUTIVE OFFICER FOR FISCAL 2000
Mr. Lowther's compensation for fiscal 2000 was determined pursuant to the
terms of his employment agreement in effect during that period. His employment
agreement provided him with a base annual salary, which may be reviewed and
increased at the discretion of the Chairman of the Board and/or the Compensation
Committee. Mr. Lowther also received a cash bonus, which was determined by the
Board of Directors based on Mr. Lowther's and the Company's performance during
the preceding year. The Company, through the Board of Directors, has the
discretion to award stock options to Mr. Lowther. Mr. Lowther received stock
options in 2000 totaling 171,667 shares of Common Stock. Of these options,
61,667 shares vested upon date of grant, 50,000 vest in three equal, annual
installments beginning on the first anniversary of the date of grant, and the
remaining 60,000 vest in three equal, annual installments beginning on the first
anniversary of the date of grant.
COMPENSATION OF OTHER EXECUTIVES FOR FISCAL 2000
With respect to the base salaries and incentive compensation awarded to
other executive officers in respect of fiscal 2000, the Compensation Committee
approved these amounts pursuant to the executives' employment agreements and the
executives' performances as directed and approved by the Compensation Committee.
The decision of the Compensation Committee with respect to the base salary for
each such executive officer is subjective and was made after consideration of
the performance of the executive in his/her particular area of responsibility,
the executive's contribution to the Company's overall management team and an
assessment of the future contributions the executive should be able to make to
the Company.
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 Shareholders. The purpose of the
Company's Stock Incentive Plan 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 to executive officers in 2001 for their performance in 2000.
As additional incentive compensation, certain executive officers are
permitted to participate in a program pursuant to which the officer can defer a
portion of his bonus and apply the deferred amount to reduce the exercise price
of stock options granted to him. In subsequent years, the exercise price of the
options is further reduced by a percentage amount determined by the Compensation
Committee. In 2000, Mr. Lowther, Mr. Diaz, Mr. Duffy and Ms. Ferguson
participated in this bonus deferral program.
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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
Shareholders.
The Compensation Committee
Bruce Elieff
Matthew K. Fong
Bruce L. Nelson
PERFORMANCE GRAPH
Set forth below is a graph comparing cumulative total shareholder 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 period beginning on February 12, 1999, the date the
Company went public, and ending December 31, 2000. This peer group consists of
the following companies: Capital Title Group, Inc., First American Financial,
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 February
12, 1999, with any dividends reinvested over the periods indicated.
COMPARISON OF CUMULATIVE TOTAL
RETURN OF COMPANY, INDUSTRY INDEX AND BROAD MARKET
2/12/99 12/31/99 12/31/00
------- -------- --------
American National Financial 100 52.86 61.25
S&P 500 Index 100 120.71 109.72
Peer Group 100 49.79 119.16
ASSUMES $100 INVESTED ON FEBRUARY 12, 1999
ASSUMES DIVIDEND REINVESTED MONTHLY.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership as of April 1, 2001
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, and all directors and executive officers as a group. The information as
to beneficial stock ownership is based on data furnished by the persons
concerning whom such information is given. Unless otherwise indicated, the
addresses of the people listed below are the same as the Company's address.
NUMBER OF NUMBER OF PERCENT
NAME AND ADDRESS SHARES OWNED OPTIONS(1) TOTAL OF TOTAL
---------------- ------------ ---------- --------- --------
Fidelity National Financial, Inc.... 2,099,996 -0- 2,099,996 28.96%
17911 Von Karman Avenue
Irvine, CA 92614
Michael C. Lowther.................. 1,037,135 172,641 1,209,776 16.27%
William P. Foley, II................ 450,256 75,000 525,256 7.16%
Wayne D. Diaz...................... 1,025,334 172,641 1,197,975 16.11%
Dennis R. Duffy.................... 165,986 76,667 242,653 3.31%
Carl A. Strunk..................... 141,862 69,998 211,860 2.89%
Barbara A. Ferguson................ 218,273 96,109 314,382 4.27%
Bruce Elieff....................... -0- 10,000 10,000 *
Matthew K. Fong.................... 37,871 10,000 47,871 *
Bruce Nelson....................... -0- -0- -0- *
All directors and officers
(8 persons)....................... 3,076,717 683,056 3,759,773 47.32%
-------------
* Represents less than 1% of the Company's Common Stock.
(1) Represents shares subject to stock options that are exercisable on April 1,
2001 or become exercisable within 60 days of April 1, 2001.
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS INVOLVING FIDELITY NATIONAL FINANCIAL, INC.
Fidelity National Financial, Inc. ("FNFI") is a provider of title insurance
and diversified real estate related services. At December 31, 2000, FNFI owned
2,099,996 shares of the Company's outstanding Common Stock which represented
28.3% of the total Common Stock outstanding as of that date. Mr. Foley, a
director of the Company, serves as the Chairman of the Board and Chief Executive
Officer of FNFI.
The Company and Fidelity National Title Insurance Company ("FNTIC"), a
subsidiary of FNFI, entered into an Issuing Agency Agreement pursuant to which
ATC has agreed that until June 30, 2007 it will act exclusively as an agent for
FNTIC and Chicago Title Insurance Company, a subsidiary of FNFI, with respect to
the procurement of title insurance policies in 14 selected counties in
California and Arizona, subject to certain exceptions. This exclusive
arrangement does not apply to other counties into which the Company may expand
in the future. In addition, under the Issuing Agency Agreement, FNTIC provides
certain administrative services for ATC, including accounting, legal and human
resources services. ATC pays FNTIC a management fee of 1% of gross premiums for
these services. ATC paid FNTIC $529,926 for these services in 2000. This
administrative services arrangement is terminable by ATC upon 90 days notice to
FNTIC.
On January 28, 1998, ATC and FNTIC entered into a sublease pursuant to
which ATC subleased the Company's principal executive office from FNTIC. Such
lease provides for monthly rental payments to FNTIC of $37,000 and expired on
July 11, 2000. The aggregate payments paid under the lease in 2000 were $
215,817.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
The Board of Directors adopted an Employee Stock Purchase Loan Plan
("Employee Plan") and the Non-Employee Director Stock Purchase Loan Program
("Director Program"). The Employee Plan authorized an aggregate amount of $1.7
million 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 Program authorized an aggregate amount of $300,000 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 6 1/4% per annum for a term of five years immediately
callable in the event of termination of employment or resignation as a director,
as the case may be.
During fiscal year 2000, each of the following named executive officers
participated in the Employee Plan Program, and the highest aggregate
indebtedness to the Company for each participant was as follows: Mr. Lowther -
$259,157; Mr. Diaz - $259,157; and Ms. Ferguson - $259,157.
During fiscal year 2000, each of the following named directors participated
in the Director Program, and the highest aggregate indebtedness to the Company
for each participant was as follows: Mr. Foley - $466,482; Mr. Strunk -
$259,157; and Mr. Fong - $103,663.
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SIGNATURES
Pursuant to the requirements of Section 13 and 15(d) of the Securities Act
of 1934, Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
AMERICAN NATIONAL FINANCIAL, INC.
By: /s/ MICHAEL C. LOWTHER
-----------------------------
Michael C. Lowther
Chairman of the Board and
Chief Executive Officer
Date: April 26, 2001
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.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ MICHAEL C. LOWTHER Chief Executive Officer and Director April 26, 2001
----------------------------
Michael C. Lowther
/s/ WAYNE D. DIAZ President and Director April 26, 2001
----------------------------
Wayne D. Diaz
/s/ CARL A. STRUNK Executive Vice President, April 26, 2001
---------------------------- Chief Financial Officer
Carl A. Strunk (Principal Financial and
Accounting Officer)
and Director
/s/ DENNIS R. DUFFY Executive Vice President April 26, 2001
---------------------------- and Director
Dennis R. Duffy
/s/ BARBARA A. FERGUSON Executive Vice President April 26, 2001
---------------------------- and Director
Barbara A. Ferguson
/s/ WILLIAM P. FOLEY, II Director April 26, 2001
----------------------------
William P. Foley, II
/s/ BRUCE ELIEFF Director April 26, 2001
----------------------------
Bruce Elieff
Director April __, 2001
----------------------------
Matthew K. Fong
/s/ BRUCE L. NELSON Director April 26, 2001
----------------------------
Bruce L. Nelson
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