10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(X)	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
(   )	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarter Ended March 31, 2002

Commission File Number 0-24961

AMERICAN NATIONAL FINANCIAL, INC.

(Exact name of registrant as specified in its charter)

California (State or other jurisdiction of incorporation or organization)	33-0731548 (I.R.S. Employer Identification Number)
1111 E. Katella Avenue, Suite 220, Orange, California (Address of principal executive offices)	92867 (Zip Code)

(714) 289-4300

(Registrant’s telephone number, including area code)

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 the number of shares outstanding of each of the issuer’s classes of Common Stock, as of the latest practicable date.

Common stock, no par value, 7,141,955 shares as of May 3, 2002

TABLE OF CONTENTS

SIGNATURES
Part I: FINANCIAL INFORMATION
	Item 1. Condensed Consolidated Financial Statements
		CONDENSED CONSOLIDATED BALANCE SHEETS
		CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
		CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
		CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
		CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
		Notes to Condensed Consolidated Financial Statements
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3. Quantitative and Qualitative Market Risk Disclosures
Part II: OTHER INFORMATION
	Item 1.
	Item 6. Exhibits and Reports on Form 8-K.
EXHIBIT 10.21
EXHIBIT 10.22
EXHIBIT 10.23

FORM 10-Q
QUARTERLY REPORT
Quarter Ended March 31, 2002
TABLE OF CONTENTS

				Page Number
Part I:  FINANCIAL INFORMATION
	Item 1.	Condensed Consolidated Financial Statements
		A.	Condensed Consolidated Balance Sheets as of March 31, 2002 and December 31, 2001		3
		B.	Condensed Consolidated Statements of Earnings for the three-month periods ended March 31, 2002 and 2001		4
		C.	Condensed Consolidated Statements of Comprehensive Earnings for the three-month periods ended March 31, 2002 and 2001		5
		D.	Condensed Consolidated Statement of Shareholders’ Equity for the three-month period ended March 31, 2002		6
		E.	Condensed Consolidated Statements of Cash Flows for the three-month periods ended March 31, 2002 and 2001		7
		F.	Notes to Condensed Consolidated Financial Statements		8
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations			9
	Item 3.	Quantitative and Qualitative Market Risk Disclosures			13
Part II:  OTHER INFORMATION
	Item 1.	Legal Proceedings			13
	Items 2, 3, 4, and 5 of Part II have been omitted because they are not applicable with respect to the current reporting period.
	Item 6.	Exhibits and Reports on Form 8-K			13

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

AMERICAN NATIONAL FINANCIAL, INC.
(Registrant)

By: /s/   Carl A. Strunk Carl A. Strunk
Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer) and Director Date:  May 9, 2002

2

Part I:  FINANCIAL INFORMATION

     Item 1.  Condensed Consolidated Financial Statements

AMERICAN NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
ASSETS

			March 31,			December 31,
			2002			2001
			(Unaudited)
Current assets:
Cash and cash equivalents			$	12,726			9,400
Short-term investments, at cost, which approximates fair market value				615			618
Accrued investment interest				373			383
Trade receivables, net of allowance for doubtful accounts of $2,011 in 2002 and 2001				3,579			3,803
Notes receivables — related party, net				1,720			1,812
Deferred tax asset				4,725			3,737
Prepaid expenses and other current assets				1,642			507
		Total current assets		25,380			20,260
Investment securities available for sale, at fair market value				24,869			24,721
Property and equipment, net				7,976			7,614
Title plants				4,062			2,699
Deposits with the Insurance Commissioners				133			133
Intangibles, net of accumulated amortization of $2,022 in 2002 and 2001				11,226			11,226
		Total assets	$	73,646		$	66,653
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and other accrued expenses			$	14,533		$	15,092
Customer advances				4,582			4,802
Current portion of long-term debt				569			566
Current portion of obligations under capital leases with affiliates				105			102
Current portion of obligations under capital leases with non-affiliates				171			146
Reserve for claim losses				2,903			2,730
Income tax payable				4,838			—
Due to affiliate				2,283			2,712
	Total current liabilities			29,984			26,150
Long-term debt				2,548			2,962
Obligations under capital leases with affiliates				694			722
Obligations under capital leases with non-affiliates				911			906
	Total liabilities			34,137			30,740
Shareholders’ equity:
Preferred stock, no par value; authorized 5,000,000 shares; issued and outstanding, none				—			—
Common stock, no par value; authorized, 50,000,000 shares; issued and outstanding, 7,128,004 in 2002 and 7,095,769 in 2001				—			—
Additional paid in capital				21,031			20,905
Retained earnings				18,661			13,741
Accumulated other comprehensive income (loss)				(183	)		1,267
	Total shareholders’ equity			39,509			35,913
	Total liabilities and shareholders’ equity		$	73,646		$	66,653

See accompanying notes to condensed consolidated financial statements

3

AMERICAN NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars in thousands, except per share data)

		Three months ended
		March 31,
		2002		2001
		(Unaudited)
Revenue:
Net title service revenue — related party		$	24,130	$	14,928
Escrow fees			9,688		6,841
Underwriting premiums			3,367		1,519
Ancillary service fees			4,963		3,896
Gain on sale/exchange of equity security			2,390		1,000
Investment revenue			375		286
	Total revenues		44,913		28,470
Expense:
Personnel costs			22,638		15,887
Other operating expenses includes $168,000 and $935,000 with affiliate for the three-month periods ended March 31, 2002 and 2001, respectively			10,139		7,002
Title plant rent and maintenance			1,942		1,751
	Total expenses		34,719		24,640
Earnings before income taxes			10,194		3,830
Income taxes			4,383		1,570
Net earnings		$	5,811	$	2,260
Basic earnings per share		$	.82	$	.28
Weighted average shares outstanding, basic basis			7,101,575		8,204,275
Diluted earnings per share		$	.72	$	.26
Weighted average shares outstanding, diluted basis			8,025,828		8,620,160
Cash dividends per share, actual		$	.125	$	.10
Cash dividends per share after giving retroactive effect to 10% stock dividend		$	.125	$	.09

See accompanying notes to condensed consolidated financial statements

4

AMERICAN NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
(In thousands)

		Three months ended
		March 31,
		2002			2001
		(Unaudited)
Net earnings		$	5,811		$	2,260
Other comprehensive earnings (loss)
	Unrealized gains (losses) on investment, net(1)		(88	)		570
	Reclassification adjustment for (gains) losses in net earnings(2)		(1,362	)		(244	)
Other comprehensive earnings (loss)			(1,450	)		326
Comprehensive earnings		$	4,361		$	2,586

(1)	Net of income taxes (benefit) of ($61) and $336 for the three-months ended March 31, 2002 and 2001, respectively.
(2)	Net of income taxes (benefit) of ($1,027) and ($192) for the three-months ended March 31, 2002 and 2001, respectively.

See accompanying notes to condensed consolidated financial statements

5

AMERICAN NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands, except per share data)

											Accumulated
		Common Stock				Additional					Other			Total
						Paid In		Retained			Comprehensive			Shareholders'
		Shares		Amount		Capital		Earnings			(Loss) Earnings			Equity
Balance, December 31, 2001			7,095,769	$	—	$	20,905	$	13,741		$	1,267		$	35,913
	Exercise of stock options, including associated tax benefit		32,235		—		126		—			—			126
	Unrealized loss on investment securities available for sale		—		—		—		—			(1,450	)		(1,450	)
	Dividend ($0.125 per share)		—		—		—		(891	)		—			(891	)
	Net earnings		—		—		—		5,811			—			5,811
Balance, March 31, 2002			7,128,004	$	—	$	21,031	$	18,661		$	(183	)	$	39,509

See accompanying notes to condensed consolidated financial statements

6

AMERICAN NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

				Three months ended
				March 31,
				2002			2001
Cash flows from operating activities:
Net earnings				$	5,811		$	2,260
	Adjustments to reconcile net earnings to cash provided by operating activities:
	Depreciation and amortization				570			686
	Gain on sale/exchange of investments				(2,390	)		(1,000	)
	Loss on sale of property and equipment				2			10
	Changes in:
		Accounts receivables, net			224			(595	)
		Interest receivable			10			(30	)
		Tax benefit associated with the exercise of stock options			22			—
		Prepaid expenses and other assets			(1,134	)		(57	)
		Income taxes receivable (payable) and deferred income taxes			3,850			1,500
		Accounts payable and other accrued expenses			(563	)		404
		Net increase in reserve for claim losses			173			60
		Provision for losses on notes receivable			74			—
		Due to affiliates			(429	)		(93	)
		Customer advances			(220	)		668
			Net cash provided by operating activities		6,000			3,813
Cash flow from investing activities:
	Proceeds from sale of investment securities				1,596			1,792
	Proceeds from short term investments				3			—
	Collections of notes receivable				31			184
	Additions to property and equipment				(934	)		(861	)
	Additions to notes receivable				(13	)		(131	)
	Purchase of investment securities available for sale				(805	)		—
	Purchase of short term investments				—			(100	)
	Purchase of title plants				(1,363	)		—
			Net cash provided by (used in) investing activities		(1,485	)		884
Cash flows from financing activities:
	Repayment of long-term debt				(411	)		(408	)
	Payments of capital lease obligations				(61	)		(61	)
	Exercise of stock options				104			—
	Additions to capital lease obligations				66			—
	Proceeds from issuance of common stock				—			247
	Dividends paid				(887	)		(753	)
	Purchase of treasury stock				—			(983	)
			Net cash used in financing activities		(1,189	)		(1,958	)
Increase in cash and cash equivalents					3,326			2,739
Cash and cash equivalents at the beginning of year					9,400			9,450
Cash and cash equivalents at end of year				$	12,726		$	12,189
Supplemental disclosure of cash flow information:
	Cash paid during the year:
		Interest		$	80		$	118
		Income taxes			—			286
	Non-cash investing activities:
		Dividend declared and unpaid		$	885		$	744

See accompanying notes to condensed consolidated financial statements

7

Notes to Condensed Consolidated Financial Statements

Note A — Basis of Financial Statements

The financial information included in this report includes the accounts of American National Financial, Inc. and its subsidiaries (collectively, the “Company”) and has been prepared in accordance with accounting principals generally accepted in the United States of America and the instructions to Form 10-Q and Article 10 of Regulation S-X. All adjustments, consisting of normal recurring accruals considered necessary for a fair presentation have been included. This report should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2001.

Certain reclassifications have been made to the 2001 Consolidated Financial Statements to conform to classifications used in 2002.

Note B — Cash Dividend

On March 13, 2002, our Board of Directors declared a quarterly cash dividend of $.125 per share, paid on April 8, 2002, to stockholders of record on March 25, 2002.

Note C — Department of Insurance

In June 2001, auditors from the State of California Department of Insurance commenced a market conduct examination of American Title Company (“ATC”). Similar examinations have been or are being conducted at virtually all companies in the title insurance business. The examination is not yet completed. We are unable to determine if an unfavorable outcome is either probable or remote, however, management does not believe that any outcome will have a material effect on our financial statements.

NOTE D — Earnings Per Share

The Company presents “basic” earnings per share representing net earnings divided by the weighted average shares outstanding (excluding all common stock equivalents), and “diluted” earnings per share, representing the dilutive effect of all common stock equivalents. The following table illustrates the computation of basic and diluted earnings per share.

	Three months ended
	March 31,
	2002		2001
	(In thousands, except
	per share data)
Net earnings, basic and diluted basis	$	5,811	$	2,260
Weighted average shares outstanding during the period, basic basis		7,102		8,204
Plus: Common stock equivalent shares assumed from conversion of options		924		416
Weighted average shares outstanding during the period, diluted basis		8,026		8,620
Basic earnings per share	$	.82	$	.28
Diluted earnings per share	$	.72	$	.26

8

NOTE E — Share and Per Share Restatement

On May 24, 2001, our Board of Directors declared a 10% stock dividend to shareholders of record as of June 7, 2001, payable on June 21, 2001. The fair value of the additional shares of common stock issued in connection with the stock dividend was credited to additional paid in capital and a like amount was charged to retained earnings.

All data with respect to earnings per share, dividends per share and share information, including price per share where applicable, in the Condensed Consolidated Financial Statements has been retroactively adjusted to reflect the stock dividend.

NOTE F — Recent Accounting Pronouncement

In July 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 141, “Business Combinations” (“SFAS No. 141”) and Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”). SFAS No. 141 requires that all business combinations be accounted for under the purchase method. The statement further requires separate recognition of intangible assets that meet one of two criteria. The statement applies to all business combinations initiated after June 30, 2001.

SFAS No. 142 requires an intangible asset that is acquired to be initially recognized and measured based on its fair value. The statement also provides that goodwill should not be amortized, but shall be tested for impairment annually, or more frequently if circumstances indicate potential impairment, through a comparison of fair value to its carrying amount. Existing goodwill was amortized through December 31, 2001, after which time amortization ceased. We performed a transitional goodwill impairment test in accordance with SFAS No. 142 and there was no impairment of goodwill. Excluding amortization expense of $140,000, net earnings, basic earnings per share and diluted earnings per share would have been $2.4 million, $0.29, $0.28, respectfully, for the three months ended March 31, 2001.

In October 2001, the Financial Accounting Standard Board issued Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment of Long-Lived Assets” (“SFAS No. 144”) which address financial accounting and reporting for the impairment or disposal of long-lived assets. While SFAS No. 144 supercedes Statement of Financial Accounting Standards No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,” it retains many of the fundamental provisions of that statement. SFAS No. 144 does not have a material impact on our financial statement or results of operations.

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Factors That May Affect Operating Results

The information contained in this report on Form 10-Q that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements regarding the Company’s expectations, hopes, intentions or strategies regarding the future.

Forward-looking statements included in this document are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements. It is important to note that our actual results could differ materially from those in such forward-looking statements. The reader should consult the risk factors listed from time to time and other information disclosed in our reports on Forms 10-K and filings under the Securities Act of 1933, as amended.

The following discussion provides information to help understand and assess significant changes and trends related to our financial condition and results of operations. You should read this discussion and analysis in conjunction with the consolidated financial statements and the notes thereto.

9

Overview

Our revenues include net title service revenue, escrow fees, underwriting premiums, ancillary service fees, gain on sale/exchange of equities securities and investment income. Our operations generate escrow fees from holding and disbursing funds and documents in connection with the closing of real estate transactions. Escrow fees generally fluctuate in a pattern consistent with the fluctuation in net title service revenue. We also provide title insurance services through direct operations and through independent title insurance agents utilizing our underwriter, National Title Insurance of New York, Inc. (“National”). Our ancillary services complement title and escrow services. In addition, many of our real estate related services are counter-cyclical to our title insurance and escrow services.

Net title service revenue and escrow fee revenues are recognized as income at the time the underlying real estate transaction closes. Expenses directly related to the title and escrow process are recognized as they are incurred, throughout the duration of the transaction. As a result, our recognition of revenue lags approximately 45-90 days behind the recognition of the corresponding expenses. Other fees and revenue are generally recognized as income at the time the underlying transaction closes; however, certain other fees and revenue are recognized as income over the period during which the service is provided. These factors may result in fluctuations in gross margins. Net title service revenues consist of gross title insurance premiums less an 11% underwriting fees paid to the underwriter.

Investment income consists of revenues received from our investment portfolio in addition to the gain and or exchange of equities securities.

While the number of orders that are closed affects our revenue, personnel costs are the largest component of our expenses. Since personnel costs are relatively fixed over the short term, in a rapidly declining market, reductions in the number of orders can adversely affect margins. Gross margins are also affected by the relative numbers of orders that relate to refinancing transactions as compared to those relating to real estate sale transactions.

The average fee per file and corresponding gross margins are higher for real estate sale and resale transactions than refinance transactions for three principal reasons: (i) a larger percentage of sale and resale orders close as compared to refinance orders, (ii) typically two policies are issued in a resale transaction (one each to the buyer and lender) whereas only one is issued in a refinance transaction, (iii) the base rate charged on sale and resale transactions is typically higher than that charged on refinance transactions. Title insurance premiums are calculated with regard to the purchase price of the property or the amount of the related mortgage, average fees per file will also increase during periods in which real estate prices and corresponding mortgage loans are increasing.

Results of Operations

Revenue

The following table presents information regarding the components of our revenue:

		Three months ended
		March 31,
		2002		2001
		(Dollars in thousands other than orders and fee per file)
Gross title premiums		$	30,469	$	18,297
Net title service revenue-related party		$	24,130	$	14,928
Escrow fees			9,688		6,841
Underwriting premiums			3,367		1,519
Ancillary service fees			4,963		3,896
Gain on sale/exchange of equities securities			2,390		1,000
Investment income			375		286
	Total revenue	$	44,913	$	28,470
Orders closed			37,400		26,200
Average fee per file		$	1,164	$	1,017

10

Total Revenue. Total revenue increased 57.8% to $44.9 million from $28.5 million in comparable 2001 period. This is primarily the result of our strength in our title, escrow and ancillary services, which were positively impacted by favorable market conditions, especially the favorable real estate market caused in part by reduced interest rates and increased money supply.

Net Title Service Revenue — related party. Net title service revenue increased $9.2 million, or 61.6% to $24.1 million from $14.9 million for the comparable 2001 period. The increase in net title service revenue in 2002 was indicative of the favorable market conditions existing in that period. The average fee per file increased to $1,164 compared with $1,017 in comparable 2001 period. The fee per file fluctuation is consistent in the percentage mix of title orders closing in a sale and resale market to the previous refinance lower fee per file business. The time lag between orders opened and orders closed can vary from 45 to 90 days. Although orders opened in the three-months ended March 31, 2002 were lower than the comparable 2001 period, the orders closed in the comparable periods were higher due to market conditions and refinance activity. Gross title premiums were $30.5 million and $18.3 million for the three-months ended March 31, 2002 and 2001, respectively.

The following table depicts title and escrow orders opened and closed for the first quarter of 2002 and 2001.

	Orders		Orders
Quarter	Opened		Closed
January 2002		15,300		12,600
February 2002		14,100		11,900
March 2002		14,300		12,900
January 2001		19,100		6,900
February 2001		20,000		8,200
March 2001		20,400		11,100

Escrow Fees. Revenues from escrow fees increased $2.9 million or 41.6% to $9.7 million in 2002 from $6.8 million in the comparable 2001 period. Escrow fees are primarily related to title insurance activity generated by our direct operations. The increase in 2002, is primarily the result of the current market conditions relating to resale and refinance activity largely fueled by relatively consistent interest rates.

Underwriting Premiums. Revenues from underwriting premiums increased $1.9 million, or 121.7% to $3.4 million from $1.5 million for the comparable 2001 period. In 2002 the increase in underwriting premiums was indicative to the expansion of our underwriter through direct subsidiaries and agency relationships.

Ancillary Service Fees. Ancillary service fees increased $1.1 million, or 27.4% to $5.0 million from $3.9 million in the comparable 2001 period. The steady increase in ancillary service fees is primarily the result of increases in revenue from our exchange intermediary services, documents research services, notary signing services, property management and appraisal services. Our real estate related services are counter-cyclical to our title insurance and escrow services. Our strategy is to strengthen the ancillary service businesses through acquisitions and we continue to evaluate opportunities to expand our ancillary subsidiaries through our core title and escrow business and our national presence.

Gain On Sale/Exchange of Equities Securities. Gain on sale/exchange of equities securities in the period ended March 31, 2002 arose from our receiving 322,318 shares of CKE Restaurant’s (“CKE”) common stock for the remaining 656,453 shares of Santa Barbara Restaurant Groups, Inc. (“SBRG”) which we owned. SBRG and CKE concluded a merger in March 2002. The CKE stock price on the closing date was $9.45 per share. In accordance with APB Opinion 29, Accounting for Nonmonetary Transactions, even though the shares received were not sold, a realized gain of $2.4 million was required to be recorded. The $1.0 million gain in 2001 is the result of a sale of a large block of SBRG common stock at the then current market price.

11

Investment Income. Investment income is primarily a function of security markets, interest rates and the amount of cash available for investment. Investment income increased $89,000 or 31.1% to $375,000, compared with $286,000 for the comparable 2001 period. Although average invested assets increased slightly in 2002 compared to 2001, the yield increased primarily due to a shift in our fixed income portfolio to higher yielding instruments in 2002 as compared to investments in interest bearing accounts and certificates of deposit in 2001.

Expenses

The following table presents the components of the our expenses:

		March 31,
		2002		2001
		(Dollars in thousands)
Personnel costs		$	22,638	$	15,887
Other operating expenses			10,139		7,002
Title plant rent and maintenance			1,942		1,751
	Total expenses	$	34,719	$	24,640

Our principal costs include personnel costs, other operating expenses and title plant rent and maintenance. Personnel costs include both base salaries and commission expense paid to employees and are the most significant operating expense incurred. These expenses fluctuate with the level or orders opened and closed and the mix of revenue.

Other operating expenses consist of facilities expenses, postage and courier services, computer services, professional services, advertising expense, general insurance, trade and note receivable allowances, depreciation expense and interest expense.

Title plant rent and maintenance costs consist of payments to access title plants and the costs of updating these plants. Title plant rent and maintenance costs include daily update expenses that are dependent on the volume of real estate transaction activity and a rental charge that is based on actual usage.

Personnel Costs. Personnel costs totaled $22.6 million and $15.9 million for the three-months ended March 31, 2002 and 2001, respectively. Personnel costs, as a percentage of total revenue, exclusive of investment income and gain on sale/exchange of equities securities, decreased to 53.7% for the three months ended March 31, 2002 compared with 58.4% for the corresponding period in 2001. The decrease in personnel expenses is the result of our ability to handle increased refinance activity without a significant increase in staffing. We continue to take significant measures to maintain appropriate personnel levels and costs relative to the volume and mix of business and revenues. We continue to monitor the prevailing market conditions and will attempt to respond as necessary.

Other Operating Expenses. Other operating expenses totaled $10.1 million and $7.0 million three-months ended March 31, 2002 and 2001, respectively. Other operating expenses, as a percentage of total revenue, exclusive of investment income and gain on sale/exchange of equities securities, decreased to 24.1% for the three months ended March 31, 2002 compared with 25.8% for the corresponding period in 2001. The decrease percentage in other operating expenses is attributable to our aggressive cost control programs in order to maintain operating expenses consistent with levels of revenues; however, certain fixed costs are incurred regardless of revenue levels, resulting in fluctuations year over year. In addition, expenses paid to affiliates declined due to the implementation of our own benefit programs. We continuously review and evaluate operating expenses relative to existing and projected market conditions.

Title Plant Rent and Maintenance Expense. Title plant and maintenance expenses totaled $1.9 million and $1.8 million three months ended March 31, 2002 and 2001, respectively. Title plant and maintenance expenses, as a percentage of total revenue, exclusive of investment income and gain on sale/exchange of equities securities, decreased to 4.6% for the three months ended March 31, 2002, compared with 6.4% for the corresponding 2001 period. The percentage decrease for the three-month ended March 31, 2002 in plant expense is primarily a result of various contract negotiations within several counties in California, Arizona and Nevada. The agreements negotiated during 2001 resulted in significant cost reductions for us.

12

Income Taxes. Income taxes for the three months ended March 31, 2002 and 2001, as a percentage of earnings, were 43.0% and 41.0%, respectively. The fluctuations with income taxes as a percentage of earnings, is attributable to the effect of state income taxes on our wholly-owned underwritten title company and our ancillary service companies; the change in the amount and the characteristics of net income, operating income versus investment income; and the tax treatment of certain items.

Liquidity and Capital Resources

Cash Flows. Our current cash requirements include debt service, debt relating to capital leases, personnel and other operating expenses, taxes and dividends on common stock. We believe that all anticipated cash requirements for current operations will be met from internally generated funds and through cash received from our subsidiaries. Our cash requirements include expenses relating to the development and expansion of National’s business. We presently have in place much of the infrastructure (principally consisting of personnel) that will be used for this development.

Two significant sources of our funds are dividends and distributions from our subsidiaries. As a holding company, we receive cash from our subsidiaries in the form of dividends and as reimbursement for operating and other administrative expenses we incur. These reimbursements are executed within the guidelines of various management agreements among us and our subsidiaries. Our insurance subsidiary is restricted by state regulations in their ability to pay dividends and make distributions. Our underwritten title company and our ancillary companies collect premiums and fees and pay underwriting fees and operating expenses. These companies are restricted only to the extent of maintaining minimum levels of working capital and net worth, but are not restricted by state regulations or banking authorities in their ability to pay dividends and make distributions.

Purchases. In February 2002 we entered into an agreement with Clark County Title Services, Inc. to gain access to the Clark County a Nevada title plant, at a purchase price of $1.3 million paid in cash.

Item 3. Quantitative and Qualitative Market Risk Disclosures

     There have been no material changes in the market risk described in our annual report on Form 10-K for the year ended December 31, 2001.

Part II:  OTHER INFORMATION

Item 1. In the ordinary course of business, we are involved in various pending and threatened litigation matters related to our operations, some of which include claims for punitive or exemplary damages. We believe that no actions depart from customary litigation incidental to our business and that the resolution of all such litigation will not have a material adverse effect on the Company.

Item 6. Exhibits and Reports on Form 8-K.

     (a)  Exhibits:

10.21	Employment Agreement by and between American National Financial, Inc. and Michael C. Lowther, as of January 1, 2002.
10.22	Employment Agreement by and between American National Financial, Inc. and Wayne D. Diaz, as of January 1, 2002.
10.23	Employment Agreement by and between American National Financial, Inc. and Barbara A. Ferguson, as of January 1, 2002.

     (b)  Reports on Form 8-K:

     None.

13 EX-10.21 3 a81424ex10-21.txt EXHIBIT 10.21 Exhibit 10.21 EMPLOYMENT AGREEMENT This employment agreement (the "Agreement") is effective as of January 1, 2002 (the "Effective Date"), by and between AMERICAN NATIONAL FINANCIAL, INC., a California corporation (the "Company"), and MICHAEL C. LOWTHER(the "Employee"). In consideration of the mutual covenants and agreements set forth herein, the parties agree as follows: 1. Employment and Duties. Subject to the terms and conditions of this Agreement, the Company employs the Employee to serve in an executive and managerial capacity as Chief Executive Officer and Chairman of the Board of Directors of the Company, and the Employee accepts such employment and agrees to perform such reasonable responsibilities and duties commensurate with the aforesaid positions as set forth in the Articles of Incorporation and the Bylaws of the Company. Any change in such titles or delegation of duties inconsistent with such titles shall be deemed a Termination Without Cause under Section 7(b) of this Agreement. 2. Term. The term of this Agreement shall commence on the Effective Date and shall continue for a period of four (4) years ending December 31, 2005, subject to prior termination as set forth in Section 7, below (the "Term"). The Term may be extended at any time upon mutual agreement of the parties. 3. Salary. During the Term, the Company shall pay the Employee a minimum base annual salary, before deducting all applicable withholdings, of $360,000 per year, payable at the times and in the manner dictated by the Company's standard payroll policies. Such minimum base annual salary may be periodically reviewed and increased (but not decreased) at the discretion of the Compensation Committee of the Board of Directors to reflect, among other matters, cost of living increases and performance results. 4. Other Compensation and Fringe Benefits. In addition to any executive bonus, pension, deferred compensation and stock option plans which the Company may from time to time make available to the employee upon mutual agreement, the Employee shall be entitled to the following: (a) The standard Company benefits enjoyed by the Company's other top executives. (b) Payment by the Company of the Employee's initiation and membership dues in all social and/or recreational clubs as deemed necessary and appropriate by the Employee to maintain various business relationships on behalf of the Company; provided, however, that the Company shall not be obligated to pay for any of the Employee's personal purchases and expenses at such club. Page 1 (c) Provision by the Company during the Term and any extensions thereof to the Employee and his dependents of medical and other insurance coverage under the Company's Executive Medical Plan. (d) Provision by the Company of supplemental disability insurance sufficient to provide two-thirds of the Employee's pre-disability minimum base annual salary. (e) Employee shall be entitled to receive an annual incentive bonus for each calendar year included in this Agreement based on the Company's performance during the preceding year as determined by the Compensation Committee of the Board of Directors. The annual bonus shall be paid no later than March 15th of the following year and is fully vested at the end of each year in the event of a non-renewal of this Agreement by the Company. Subject to Section 7 below, the annual bonus shall be pro-rated for any partial employment year. The Company shall deduct from all compensation payable under this Agreement to the Employee any taxes or withholdings the Company is required to deduct pursuant to state and federal laws or by mutual agreement between the parties 5. Vacation. For and during each year of the Term and any extensions thereof, the Employee shall be entitled to reasonable paid vacation periods consistent with his positions with the Company. In addition, the Employee shall be entitled to such holidays consistent with the Company's standard policies or as the Company's Board of Directors may approve. 6. Expense Reimbursement. In addition to the compensation and benefits provided herein, the Company shall, upon receipt of appropriate documentation, reimburse the Employee each month for his reasonable travel, lodging, entertainment, promotion and other ordinary and necessary business expenses. 7. Termination. (a) For Cause. The Company may terminate this Agreement immediately for cause upon written notice to the Employee, in which event the Company shall be obligated to pay the Employee that portion of the minimum base annual salary due him through the date of termination. Cause shall be limited to (i) the persistent failure to perform duties consistent with a commercially reasonable standard of care; (ii) the willful neglect of duties; (iii) criminal or other illegal activities involving dishonesty; or (iv) a material breach of this Agreement; provided that in the event the Company shall desire to terminate this Agreement pursuant to subsection (iv), above, it shall first provide the Employee with notice of and a reasonable opportunity (the time for which shall not exceed 30 days), if possible, to cure the material breach. Page 2 (b) Without Cause. Either party may terminate this Agreement immediately without cause by giving written notice to the other. If the Company terminates under this Section 7(b), then it shall pay to the Employee an amount equal to the product of (i) the Employee's minimum annual base salary in effect as of the date of termination, plus the greater of either (x) the total annual bonus paid, payable, or which would have been payable to the Employee under this Agreement (had it been in effect) for 2001 and payable in 2002 or (y) the highest bonus paid for any year during which this Agreement was in effect ("Base Year Bonus"), times (ii) the number of years (including partial years) remaining in the Term or the number 3 (three), whichever is greater. The Company shall make such payment in a lump sum on or before the fifth day following the date of termination, or as otherwise directed by the Employee. In addition, all options granted to the Employee which had not vested as of the date of termination hereunder shall vest immediately and the Company shall maintain in full force and effect for the continued benefit of the Employee for the number of years (including partial years) remaining in the Term, or 3 years, whichever is greater, all employee benefit plans and programs in which the Employee was entitled to participate immediately prior to the date of termination, provided that the Employee's continued participation is possible under the general terms and provisions of such plans and programs. In the event that the Employee's participation in any such plan or program is prohibited, the Company shall, at its expense, arrange to provide the Employee with benefits substantially similar to those which the Employee would otherwise have been entitled to receive under such plans and programs for which discontinued participation is prohibited. If the Employee terminates under this Section 7(b), then the Company shall be obligated to pay the Employee the minimum annual base salary due him through the date of termination. (c) Disability. If the Employee fails to perform his duties hereunder on account of illness or other incapacity for a period of nine consecutive months, then the Company shall have the right upon written notice to the Employee to terminate this Agreement without further obligation by paying the Employee the minimum base annual salary, without offset, for the remainder of the Term in a lump sum or as otherwise directed by the Employee. (d) Death. If the Employee dies during the Term, then this Agreement shall terminate immediately and the Employee's legal representatives shall be entitled to receive the minimum annual base salary for the remainder of the Term in a lump sum or as otherwise directed by the Employee's legal representative. (e) Mitigation. The Employee shall not be required to mitigate the amount of any payment provided for in this Section 7 by seeking other employment or otherwise, nor shall any compensation or other payments received by Page 3 the Employee after the date of termination reduce any payments due under this Section 7. (f) Effect of Termination. Termination for any reason or for no reason shall not constitute a waiver of the Company's rights under this Agreement nor a release of the Employee from any obligation hereunder except his obligation to perform his day-to-day duties as an employee. 8. Severance Payment. (a) The Employee may terminate his employment hereunder for "Good Reason," which for purposes of this Agreement shall mean a "change in control of the Company." A "change in control of the Company," for purposes of this Agreement, shall be deemed to have occurred if (i) there shall be consummated (x) any consolidation or merger of the Company other than a consolidation or merger of the Company in which the holders of the Company's Common Stock immediately prior to the merger own more than 50% of the voting securities of the surviving corporation immediately after the merger, or (y) any sale, lease exchange or other transfer (in one transaction or a series of related transactions) of all, of substantially all, of the assets of the Company, or (ii) the stockholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company, or (iii) any "person" (such as that term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act")), other than the Company or any "person" who, on the date hereof, is a director or officer of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities, or (iv) during any period of two (2) consecutive years during the Term or any extensions thereof, individuals, who, at the beginning of such period, constitute the Board of Directors, cease for any reason to constitute at least a majority thereof, unless the election of each director who was not a director at the beginning of such period has been approved in advance by directors representing at least two-thirds of the directors then in office who were directors at the beginning of the period. (b) If the Employee terminates his employment for Good Reason, or, if after a change in control of the Company, the Company shall terminate the Employee's employment in breach of this Agreement or pursuant to Section 7(b), then: (i) The Company shall pay the Employee his minimum base annual salary due him through the date of termination. (ii) In lieu of any further salary and bonus payments or other payments due to the Employee for periods subsequent to the date of Page 4 termination, the Company shall pay, as severance to the Employee, an amount equal to the product of (A) the Employee's minimum base annual salary in effect as of the date of termination plus the Base Year Bonus, multiplied by (B) the number of years (including partial years) remaining in the Term or the number 3 (three), whichever is greater. (iii) All options granted to the Employee which had not vested as of the date of termination hereunder shall vest immediately; and (iv) The Company shall maintain in full force and effect, for the continued benefit of the Employee for the number of years (including partial years) remaining in the Term, all employee benefit plans and programs in which the Employee was entitled to participate immediately prior to the date of termination, provided that the Employee's continued participation is possible under the general terms and provisions of such plans and programs. In the event that the Employee's participation in any such plan or program is prohibited, the Company shall, at its expense, arrange to provide the Employee with benefits substantially similar to those which the Employee would otherwise have been entitled to receive under such plans and programs from which his continued participation is prohibited. (c) For purposes of this Section 8 and Section 7 hereof, the Employee shall not be required to mitigate the amount of any payment provided for in Sections 7 and 8 by seeking other employment or otherwise, nor shall any compensation or other payments received by the Employee after the date of termination reduce any payments due under such Sections. 9. Indemnification for Taxes. The Company shall indemnify Employee for any and all taxes, penalties, additions to tax and interest on tax deficiencies of any kind (collectively, "Taxes") with respect to any and all payments and benefits provided by this Agreement or other agreements with Employee which are subject (if at all) to the excise tax (Excess Tax") pursuant to Section 4999 of the Internal Revenue Code of 1986, as amended. This indemnification shall extend to any and all Taxes with respect to any and all reimbursements hereunder such that, on a net-after-tax basis, Employee is in the same position that Employee would have been in if no payments made by Company to Employee had been subject to the Excise Tax (and, therefore, no indemnification payments hereunder had been necessary). 10. Non-Delegation of Employee's Rights. The obligations, rights and benefits of the Employee hereunder are personal and may not be delegated, assigned or transferred in any manner whatsoever, nor are such obligations, rights or benefits subject to involuntary alienation, assignment or transfer. Page 5 11. Confidential Information. The Employee acknowledges that in his capacity as an employee of the Company he will occupy a position of trust and confidence and he further acknowledges that he will have access to and learn substantial information about the Company and its operations that is confidential or not generally known in the industry including, without limitation, information that relates to purchasing, sales, customers, marketing, and the Company's financial position and financing arrangements. The Employee agrees that all such information is proprietary or confidential, or constitutes trade secrets and is the sole property of the Company. The Employee will keep confidential, and will not reproduce, copy or disclose to any other person or firm, any such information or any documents or information relating to the Company's methods, processes, customers, accounts, analyses, systems, charts, programs, procedures, correspondence or records, or any other documents used or owned by the Company, nor will the Employee advise, discuss with or in any way assist any other person, firm or entity in obtaining or learning about any of the items described in this Section 11. Accordingly, the Employee agrees that during the Term and at all times thereafter he will not disclose, or permit or encourage anyone else to disclose, any such information, nor will he utilize any such information, either along or with others, outside the scope of his duties and responsibilities with the Company. 12. Non-Competition During Employment Term. The Employee agrees that, during the term and any extensions thereof, he will devote substantially all his business time and effort, and give undivided loyalty, to the Company. He will not engage in any way whatsoever, directly or indirectly, in any business that is competitive with the Company or its affiliates, nor solicit, or in any other manner work for or assist any business which is competitive with the Company or its affiliates. In addition, during the Term and any extensions thereof, the Employee will undertake no planning for or organization of any business activity competitive with the work he performs as an employee of the Company, and the Employee will not combine or conspire with any other employee of the Company or any other person for the purpose of organizing any such competitive business activity. 13. Non-Competition After Employment Term. The parties acknowledge that as an executive officer of the Company the Employee will acquire substantial knowledge and information concerning the business of the Company as a result of his employment. The parties further acknowledge that the scope of business in which the Company is engaged as of the Effective Date is national and very competitive and one in which few companies can successfully compete. Competition by an executive officer such as the Employee in that business after this Agreement is terminated would severely injure the Company. Accordingly, for a period of one year after this Agreement is terminated or the Employee leaves the employment of the Company for any reason whatsoever, except as otherwise stated herein below, the Employee agrees (i) not to become an employee, consultant, advisor, principal, partner or substantial shareholder of any firm or business that in any way competes with the Company in any of its presently-existing or then-existing products and markets; and (ii) not to solicit any person or business that was at the time of such termination and remains a customer or prospective customer, or an employee of the Company. Notwithstanding any of the foregoing provisions to the Page 6 contrary, the Employee shall not be subject to the restrictions set forth in this Section 13 under the following circumstances: (a) If the Employee's employment with the Company is terminated by the Company without cause; (b) If the Employee's employment with the Company is terminated as a result of the Company's unwillingness to extend the Term of this Agreement; or, (c) If the Employee leaves the employment of the Company for Good Reason pursuant to Section 8, above. 14. Return of Company Documents. Upon termination of this Agreement, Employee shall return immediately to the Company all records and documents of or pertaining to the Company and shall not make or retain any copy or extract of any such record or document. 15. Other Employment and Location. Anything to the contrary hereinabove notwithstanding, Company acknowledges that Employee may serve as a Director and/or Chairman of the Board of certain other companies and will direct a reasonable portion of his time to fulfilling his duties in such capacities. Company acknowledges that Employee serving as a Director and/or Chairman of the Board of other companies shall not constitute a violation of this Agreement or any provision hereof including but not limited to Sections 11, 12 and 13, so long as Employee dedicates a reasonable amount of his time to his duties hereunder. The Employee shall not be required to move from [Orange County], California, to perform his duties hereunder during the Term without his written consent. 16. Improvements and Inventions. Any and all improvements or inventions, which the Employee may make or participate in during the period of his employment, shall be the sole and exclusive property of the Company. The Employee will, whenever requested by the Company, execute and deliver any and all documents which the Company shall deem appropriate in order to apply for and obtain patents for improvements or inventions or in order to assign and convey to the Company the sole and exclusive right, title and interest in and to such improvements, inventions, patents or applications. 17. Actions. The parties agree and acknowledge that the rights conveyed by this Agreement are of a unique and special nature and that the Company will not have an adequate remedy at law in the event of a failure by the Employee to abide by its terms and conditions nor will money damages adequately compensate for such injury. It is, therefore, agreed between the parties that, in the event of a breach by the Employee of any of his obligations contained in this Agreement, the Company shall have the right, among other rights, to damages sustained thereby and to obtain an injunction or decree of specific performance from any court of competent jurisdiction to restrain or compel the Employee to perform as agreed herein. The Employee agrees that this Section 17 shall Page 7 survive the termination of his employment and he shall be bound by its terms at all times subsequent to the termination of his employment for so long a period as Company continues to conduct the same business or businesses as conducted during the Term or any extensions thereof. Nothing herein contained shall in any way limit or exclude any other right granted by law or equity to the Company. 18. Amendment. This Agreement contains, and its terms constitute, the entire agreement of the parties, and it may be amended only by a written document signed by both parties to this Agreement. 19. Governing Law. California law shall govern the construction and enforcement of this Agreement and the parties agree that any litigation pertaining to this Agreement shall be adjudicated in courts located in California. This Agreement supercedes and replaces any prior agreements or understandings between the parties with respect to the subject matter hereof. 20. Attorneys' Fees. If any party finds it necessary to employ legal counsel or to bring an action at law or other proceedings against the other party to enforce any of the terms hereof, the party prevailing in any such action or other proceeding shall be paid by the other party its reasonable attorneys' fees as well as court costs, all as determined by the court and not a jury. 21. Severability. If any section, subsection or provision hereof is found for any reason whatsoever, to be invalid or inoperative, that section, subsection or provision shall be deemed severable and shall not affect the force and validity of any other provision of this Agreement. If any covenant herein is determined by a court to be overly broad thereby making the covenant unenforceable, the parties agree and it is their desire that such court shall substitute a reasonable judicially enforceable limitation in place of the offensive part of the covenant and that as so modified the covenant shall be as fully enforceable as if set forth herein by the parties themselves in the modified form. The covenants of the Employee in this Agreement shall each be construed as an agreement independent of any other provision in this Agreement, and the existence of any claim or cause of action of the Employee against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of the covenants in this Agreement. 22. Notices. Any notice, request, or instruction to be given hereunder shall be in writing and shall be deemed given when personally delivered or three (3) days after being sent by United States Certified Mail, postage prepaid, with Return Receipt Requested, to the parties at their respective addresses set forth below: To the Company: American National Financial, Inc. 1111 East Katella Avenue, Suite 220 Orange, California 92867 Attention: Wayne Diaz, President Page 8 To the Employee: Michael C. Lowther 4 Carmel Woods Laguna Niguel, California 92677 23. Waiver of Breach. The Waiver by any party of any provisions of this Agreement shall not operate or be construed as a waiver of any prior or subsequent breach by the other party. IN WITNESS WHEREOF the parties have executed this Agreement to be effective as of the date first set forth above. AMERICAN NATIONAL FINANCIAL, INC. By: ________________________________ Wayne Diaz Its: President MICHAEL C. LOWTHER ______________________________________ Page 9 EX-10.22 4 a81424ex10-22.txt EXHIBIT 10.22 Exhibit 10.22 EMPLOYMENT AGREEMENT This employment agreement (the "Agreement") is effective as of January 1, 2002 (the "Effective Date"), by and between AMERICAN NATIONAL FINANCIAL, INC., a California corporation (the "Company"), and WAYNE D. DIAZ (the "Employee"). In consideration of the mutual covenants and agreements set forth herein, the parties agree as follows: 1. Employment and Duties. Subject to the terms and conditions of this Agreement, the Company employs the Employee to serve in an executive and managerial capacity as President of the Company, and the Employee accepts such employment and agrees to perform such reasonable responsibilities and duties commensurate with the aforesaid positions as set forth in the Articles of Incorporation and the Bylaws of the Company. Any change in such titles or delegation of duties inconsistent with such titles shall be deemed a Termination Without Cause under Section 7(b) of this Agreement. 2. Term. The term of this Agreement shall commence on the Effective Date and shall continue for a period of four (4) years ending December 31, 2005, subject to prior termination as set forth in Section 7, below (the "Term"). The Term may be extended at any time upon mutual agreement of the parties. 3. Salary. During the Term, the Company shall pay the Employee a minimum base annual salary, before deducting all applicable with holdings, of $360,000 per year, payable at the times and in the manner dictated by the Company's standard payroll policies. Such minimum base annual salary may be periodically reviewed and increased (but not decreased) at the discretion of the Compensation Committee of the Board of Directors to reflect, among other matters, cost of living increases and performance results. 4. Other Compensation and Fringe Benefits. In addition to any executive bonus, pension, deferred compensation and stock option plans which the Company may from time to time make available to the employee upon mutual agreement, the Employee shall be entitled to the following: (a) The standard Company benefits enjoyed by the Company's other top executives. (b) Payment by the Company of the Employee's initiation and membership dues in all social and/or recreational clubs as deemed necessary and appropriate by the Employee to maintain various business relationships on behalf of the Company; provided, however, that the Company shall not be obligated to pay for any of the Employee's personal purchases and expenses at such club. Page 1 (c) Provision by the Company during the Term and any extensions thereof to the Employee and his dependents of medical and other insurance coverage under the Company's Executive Medical Plan. (d) Provision by the Company of supplemental disability insurance sufficient to provide two-thirds of the Employee's pre-disability minimum base annual salary. (e) Employee shall be entitled to receive an annual incentive bonus for each calendar year included in this Agreement based on the Company's performance during the preceding year as determined by the Compensation Committee of the Board of Directors. The annual bonus shall be paid no later than March 15th of the following year and is fully vested at the end of each year in the event of a non-renewal of this Agreement by the Company. Subject to Section 7 below, the annual bonus shall be pro-rated for any partial employment year. The Company shall deduct from all compensation payable under this Agreement to the Employee any taxes or with holdings the Company is required to deduct pursuant to state and federal laws or by mutual agreement between the parties 5. Vacation. For and during each year of the Term and any extensions thereof, the Employee shall be entitled to reasonable paid vacation periods consistent with his positions with the Company. In addition, the Employee shall be entitled to such holidays consistent with the Company's standard policies or as the Company's Board of Directors may approve. 6. Expense Reimbursement. In addition to the compensation and benefits provided herein, the Company shall, upon receipt of appropriate documentation, reimburse the Employee each month for his reasonable travel, lodging, entertainment, promotion and other ordinary and necessary business expenses. 7. Termination. (a) For Cause. The Company may terminate this Agreement immediately for cause upon written notice to the Employee, in which event the Company shall be obligated to pay the Employee that portion of the minimum base annual salary due him through the date of termination. Cause shall be limited to (i) the persistent failure to perform duties consistent with a commercially reasonable standard of care; (ii) the willful neglect of duties; (iii) criminal or other illegal activities involving dishonesty; or (iv) a material breach of this Agreement; provided that in the event the Company shall desire to terminate this Agreement pursuant to subsection (iv), above, it shall first provide the Employee with notice of and a reasonable opportunity (the time for which shall not exceed 30 days), if possible, to cure the material breach. Page 2 (b) Without Cause. Either party may terminate this Agreement immediately without cause by giving written notice to the other. If the Company terminates under this Section 7(b), then it shall pay to the Employee an amount equal to the product of (i) the Employee's minimum annual base salary in effect as of the date of termination, plus the greater of either (x) the total annual bonus paid, payable, or which would have been payable to the Employee under this Agreement (had it been in effect) for 2001 and payable in 2002 or (y) the highest bonus paid for any year during which this Agreement was in effect ("Base Year Bonus"), times (ii) the number of years (including partial years) remaining in the Term or the number 3 (three), whichever is greater. The Company shall make such payment in a lump sum on or before the fifth day following the date of termination, or as otherwise directed by the Employee. In addition, all options granted to the Employee which had not vested as of the date of termination hereunder shall vest immediately and the Company shall maintain in full force and effect for the continued benefit of the Employee for the number of years (including partial years) remaining in the Term, or 3 years, whichever is greater, all employee benefit plans and programs in which the Employee was entitled to participate immediately prior to the date of termination, provided that the Employee's continued participation is possible under the general terms and provisions of such plans and programs. In the event that the Employee's participation in any such plan or program is prohibited, the Company shall, at its expense, arrange to provide the Employee with benefits substantially similar to those which the Employee would otherwise have been entitled to receive under such plans and programs for which his continued participation is prohibited. If the Employee terminates under this Section 7(b), then the Company shall be obligated to pay the Employee the minimum annual base salary due him through the date of termination. (c) Disability. If the Employee fails to perform his duties hereunder on account of illness or other incapacity for a period of nine consecutive months, then the Company shall have the right upon written notice to the Employee to terminate this Agreement without further obligation by paying the Employee the minimum base annual salary, without offset, for the remainder of the Term in a lump sum or as otherwise directed by the Employee. (d) Death. If the Employee dies during the Term, then this Agreement shall terminate immediately and the Employee's legal representatives shall be entitled to receive the minimum annual base salary for the remainder of the Term in a lump sum or as otherwise directed by the Employee's legal representative. (e) Mitigation. The Employee shall not be required to mitigate the amount of any payment provided for in this Section 7 by seeking other employment or otherwise, nor shall any compensation or other payments received by Page 3 the Employee after the date of termination reduce any payments due under this Section 7. (f) Effect of Termination. Termination for any reason or for no reason shall not constitute a waiver of the Company's rights under this Agreement nor a release of the Employee from any obligation hereunder except his obligation to perform his day-to-day duties as an employee. 8. Severance Payment. (a) The Employee may terminate his employment hereunder for "Good Reason," which for purposes of this Agreement shall mean a "change in control of the Company." A "change in control of the Company," for purposes of this Agreement, shall be deemed to have occurred if (i) there shall be consummated (x) any consolidation or merger of the Company other than a consolidation or merger of the Company in which the holders of the Company's Common Stock immediately prior to the merger own more than 50% of the voting securities of the surviving corporation immediately after the merger, or (y) any sale, lease exchange or other transfer (in one transaction or a series of related transactions) of all, of substantially all, of the assets of the Company, or (ii) the stockholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company, or (iii) any "person" (such as that term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act")), other than the Company or any "person" who, on the date hereof, is a director or officer of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities, or (iv) during any period of two (2) consecutive years during the Term or any extensions thereof, individuals, who, at the beginning of such period, constitute the Board of Directors, cease for any reason to constitute at least a majority thereof, unless the election of each director who was not a director at the beginning of such period has been approved in advance by directors representing at least two-thirds of the directors then in office who were directors at the beginning of the period. (b) If the Employee terminates his employment for Good Reason, or, if after a change in control of the Company, the Company shall terminate the Employee's employment in breach of this Agreement or pursuant to Section 7(b), then: (i) The Company shall pay the Employee his minimum base annual salary due him through the date of termination. (ii) In lieu of any further salary and bonus payments or other payments due to the Employee for periods subsequent to the date Page 4 of termination, the Company shall pay, as severance to the Employee, an amount equal to the product of (A) the Employee's minimum base annual salary in effect as of the date of termination plus the Base Year Bonus, multiplied by (B) the number of years (including partial years) remaining in the Term or the number 3 (three), whichever is greater. (iii) All options granted to the Employee which had not vested as of the date of termination hereunder shall vest immediately; and (iv) The Company shall maintain in full force and effect, for the continued benefit of the Employee for the number of years (including partial years) remaining in the Term, all employee benefit plans and programs in which the Employee was entitled to participate immediately prior to the date of termination, provided that the Employee's continued participation is possible under the general terms and provisions of such plans and programs. In the event that the Employee's participation in any such plan or program is prohibited, the Company shall, at its expense, arrange to provide the Employee with benefits substantially similar to those which the Employee would otherwise have been entitled to receive under such plans and programs from which his continued participation is prohibited. (c) For purposes of this Section 8 and Section 7 hereof, the Employee shall not be required to mitigate the amount of any payment provided for in Sections 7 and 8 by seeking other employment or otherwise, nor shall any compensation or other payments received by the Employee after the date of termination reduce any payments due under such Sections. 9. Indemnification for Taxes. The Company shall indemnify Employee for any and all taxes, penalties, additions to tax and interest on tax deficiencies of any kind (collectively, "Taxes") with respect to any and all payments and benefits provided by this Agreement or other agreements with Employee which are subject (if at all) to the excise tax (Excess Tax") pursuant to Section 4999 of the Internal Revenue Code of 1986, as amended. This indemnification shall extend to any and all Taxes with respect to any and all reimbursements hereunder such that, on a net-after-tax basis, Employee is in the same position that Employee would have been in if no payments made by Company to Employee had been subject to the Excise Tax (and, therefore, no indemnification payments hereunder had been necessary). 10. Non-Delegation of Employee's Rights. The obligations, rights and benefits of the Employee hereunder are personal and may not be delegated, assigned or transferred in any manner whatsoever, nor are such obligations, rights or benefits subject to involuntary alienation, assignment or transfer. Page 5 11. Confidential Information. The Employee acknowledges that in his capacity as an employee of the Company he will occupy a position of trust and confidence and he further acknowledges that he will have access to and learn substantial information about the Company and its operations that is confidential or not generally known in the industry including, without limitation, information that relates to purchasing, sales, customers, marketing, and the Company's financial position and financing arrangements. The Employee agrees that all such information is proprietary or confidential, or constitutes trade secrets and is the sole property of the Company. The Employee will keep confidential, and will not reproduce, copy or disclose to any other person or firm, any such information or any documents or information relating to the Company's methods, processes, customers, accounts, analyses, systems, charts, programs, procedures, correspondence or records, or any other documents used or owned by the Company, nor will the Employee advise, discuss with or in any way assist any other person, firm or entity in obtaining or learning about any of the items described in this Section 11. Accordingly, the Employee agrees that during the Term and at all times thereafter he will not disclose, or permit or encourage anyone else to disclose, any such information, nor will he utilize any such information, either along or with others, outside the scope of his duties and responsibilities with the Company. 12. Non-Competition During Employment Term. The Employee agrees that, during the term and any extensions thereof, he will devote substantially all his business time and effort, and give undivided loyalty, to the Company. He will not engage in any way whatsoever, directly or indirectly, in any business that is competitive with the Company or its affiliates, nor solicit, or in any other manner work for or assist any business which is competitive with the Company or its affiliates. In addition, during the Term and any extensions thereof, the Employee will undertake no planning for or organization of any business activity competitive with the work he performs as an employee of the Company, and the Employee will not combine or conspire with any other employee of the Company or any other person for the purpose of organizing any such competitive business activity. 13. Non-Competition After Employment Term. The parties acknowledge that as an executive officer of the Company the Employee will acquire substantial knowledge and information concerning the business of the Company as a result of his employment. The parties further acknowledge that the scope of business in which the Company is engaged as of the Effective Date is national and very competitive and one in which few companies can successfully compete. Competition by an executive officer such as the Employee in that business after this Agreement is terminated would severely injure the Company. Accordingly, for a period of one year after this Agreement is terminated or the Employee leaves the employment of the Company for any reason whatsoever, except as otherwise stated herein below, the Employee agrees (i) not to become an employee, consultant, advisor, principal, partner or substantial shareholder of any firm or business that in any way competes with the Company in any of its presently-existing or then-existing products and markets; and (ii) not to solicit any person or business that was at the time of such termination and remains a customer or prospective customer, or an employee of the Company. Notwithstanding any of the foregoing provisions to the Page 6 contrary, the Employee shall not be subject to the restrictions set forth in this Section 13 under the following circumstances: (a) If the Employee's employment with the Company is terminated by the Company without cause; (b) If the Employee's employment with the Company is terminated as a result of the Company's unwillingness to extend the Term of this Agreement; or, (c) If the Employee leaves the employment of the Company for Good Reason pursuant to Section 8, above. 14. Return of Company Documents. Upon termination of this Agreement, Employee shall return immediately to the Company all records and documents of or pertaining to the Company and shall not make or retain any copy or extract of any such record or document. 15. Other Employment and Location. Anything to the contrary hereinabove notwithstanding, Company acknowledges that Employee may serve as a Director and/or Chairman of the Board of certain other companies and will direct a reasonable portion of his time to fulfilling his duties in such capacities. Company acknowledges that Employee serving as a Director and/or Chairman of the Board of other companies shall not constitute a violation of this Agreement or any provision hereof including but not limited to Sections 11, 12 and 13, so long as Employee dedicates a reasonable amount of his time to his duties hereunder. The Employee shall not be required to move from [Orange County], California, to perform his duties hereunder during the Term without his written consent. 16. Improvements and Inventions. Any and all improvements or inventions, which the Employee may make or participate in during the period of his employment, shall be the sole and exclusive property of the Company. The Employee will, whenever requested by the Company, execute and deliver any and all documents which the Company shall deem appropriate in order to apply for and obtain patents for improvements or inventions or in order to assign and convey to the Company the sole and exclusive right, title and interest in and to such improvements, inventions, patents or applications. 17. Actions. The parties agree and acknowledge that the rights conveyed by this Agreement are of a unique and special nature and that the Company will not have an adequate remedy at law in the event of a failure by the Employee to abide by its terms and conditions nor will money damages adequately compensate for such injury. It is, therefore, agreed between the parties that, in the event of a breach by the Employee of any of his obligations contained in this Agreement, the Company shall have the right, among other rights, to damages sustained thereby and to obtain an injunction or decree of specific performance from any court of competent jurisdiction to restrain or compel the Employee to perform as agreed herein. The Employee agrees that this Section 17 shall Page 7 survive the termination of his employment and he shall be bound by its terms at all times subsequent to the termination of his employment for so long a period as Company continues to conduct the same business or businesses as conducted during the Term or any extensions thereof. Nothing herein contained shall in any way limit or exclude any other right granted by law or equity to the Company. 18. Amendment. This Agreement contains, and its terms constitute, the entire agreement of the parties, and it may be amended only by a written document signed by both parties to this Agreement. 19. Governing Law. California law shall govern the construction and enforcement of this Agreement and the parties agree that any litigation pertaining to this Agreement shall be adjudicated in courts located in California. This Agreement supercedes and replaces any prior agreements or understandings between the parties with respect to the subject matter hereof. 20. Attorneys' Fees. If any party finds it necessary to employ legal counsel or to bring an action at law or other proceedings against the other party to enforce any of the terms hereof, the party prevailing in any such action or other proceeding shall be paid by the other party its reasonable attorneys' fees as well as court costs, all as determined by the court and not a jury. 21. Severability. If any section, subsection or provision hereof is found for any reason whatsoever, to be invalid or inoperative, that section, subsection or provision shall be deemed severable and shall not affect the force and validity of any other provision of this Agreement. If any covenant herein is determined by a court to be overly broad thereby making the covenant unenforceable, the parties agree and it is their desire that such court shall substitute a reasonable judicially enforceable limitation in place of the offensive part of the covenant and that as so modified the covenant shall be as fully enforceable as if set forth herein by the parties themselves in the modified form. The covenants of the Employee in this Agreement shall each be construed as an agreement independent of any other provision in this Agreement, and the existence of any claim or cause of action of the Employee against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of the covenants in this Agreement. 22. Notices. Any notice, request, or instruction to be given hereunder shall be in writing and shall be deemed given when personally delivered or three (3) days after being sent by United States Certified Mail, postage prepaid, with Return Receipt Requested, to the parties at their respective addresses set forth below: To the Company: American National Financial, Inc. 1111 East Katella Avenue, Suite 220 Orange, California 92867 Attention: Michael C. Lowther Chief Executive Officer Page 8 To the Employee: Wayne D. Diaz 604 Marinella Aisle Irvine, CA 92606 23. Waiver of Breach. The Waiver by any party of any provisions of this Agreement shall not operate or be construed as a waiver of any prior or subsequent breach by the other party. IN WITNESS WHEREOF the parties have executed this Agreement to be effective as of the date first set forth above. AMERICAN NATIONAL FINANCIAL, INC. By: ________________________________ Michael C. Lowther Its: Chief Executive Officer WAYNE D. DIAZ ______________________________________ Page 9 EX-10.23 5 a81424ex10-23.txt EXHIBIT 10.23 EXHIBIT 10.23 EMPLOYMENT AGREEMENT This employment agreement (the "Agreement") is effective as of January 1, 2002 (the "Effective Date"), by and between AMERICAN NATIONAL FINANCIAL, INC., a California corporation (the "Company"), and BARBARA A. FERGUSON (the "Employee"). In consideration of the mutual covenants and agreements set forth herein, the parties agree as follows: 1. Employment and Duties. Subject to the terms and conditions of this Agreement, the Company employs the Employee to serve in an executive and managerial capacity as Executive Vice President of the Company, and the Employee accepts such employment and agrees to perform such reasonable responsibilities and duties commensurate with the aforesaid positions as set forth in the Articles of Incorporation and the Bylaws of the Company. Any change in such titles or delegation of duties inconsistent with such titles shall be deemed a Termination Without Cause under Section 7(b) of this Agreement. 2. Term. The term of this Agreement shall commence on the Effective Date and shall continue for a period of four (4) years ending December 31, 2005, subject to prior termination as set forth in Section 7, below (the "Term"). The Term may be extended at any time upon mutual agreement of the parties. 3. Salary. During the Term, the Company shall pay the Employee a minimum base annual salary, before deducting all applicable withholdings, of $240,000 per year, payable at the times and in the manner dictated by the Company's standard payroll policies. Such minimum base annual salary may be periodically reviewed and increased (but not decreased) at the discretion of the Compensation Committee of the Board of Directors to reflect, among other matters, cost of living increases and performance results. 4. Other Compensation and Fringe Benefits. In addition to any executive bonus, pension, deferred compensation and stock option plans which the Company may from time to time make available to the employee upon mutual agreement, the Employee shall be entitled to the following: (a) The standard Company benefits enjoyed by the Company's other top executives. (b) Payment by the Company of the Employee's initiation and membership dues in all social and/or recreational clubs as deemed necessary and appropriate by the Employee to maintain various business relationships on behalf of the Company; provided, however, that the Company shall not be obligated to pay for any of the Employee's personal purchases and expenses at such club. Page 1 (c) Provision by the Company during the Term and any extensions thereof to the Employee and her dependents of medical and other insurance coverage under the Company's Executive Medical Plan. (d) Provision by the Company of supplemental disability insurance sufficient to provide two-thirds of the Employee's pre-disability minimum base annual salary. (e) Employee shall be entitled to receive an annual incentive bonus for each calendar year included in this Agreement based on the Company's performance during the preceding year as determined by the Compensation Committee of the Board of Directors. The annual bonus shall be paid no later than March 15th of the following year and is fully vested at the end of each year in the event of a non-renewal of this Agreement by the Company. Subject to Section 7 below, the annual bonus shall be pro-rated for any partial employment year. The Company shall deduct from all compensation payable under this Agreement to the Employee any taxes or withholdings the Company is required to deduct pursuant to state and federal laws or by mutual agreement between the parties 5. Vacation. For and during each year of the Term and any extensions thereof, the Employee shall be entitled to reasonable paid vacation periods consistent with her position with the Company. In addition, the Employee shall be entitled to such holidays consistent with the Company's standard policies or as the Company's Board of Directors may approve. 6. Expense Reimbursement. In addition to the compensation and benefits provided herein, the Company shall, upon receipt of appropriate documentation, reimburse the Employee each month for her reasonable travel, lodging, entertainment, promotion and other ordinary and necessary business expenses. 7. Termination. (a) For Cause. The Company may terminate this Agreement immediately for cause upon written notice to the Employee, in which event the Company shall be obligated to pay the Employee that portion of the minimum base annual salary due her through the date of termination. Cause shall be limited to (i) the persistent failure to perform duties consistent with a commercially reasonable standard of care; (ii) the willful neglect of duties; (iii) criminal or other illegal activities involving dishonesty; or (iv) a material breach of this Agreement; provided that in the event the Company shall desire to terminate this Agreement pursuant to subsection (iv), above, it shall first provide the Employee with notice of and a reasonable opportunity (the time for which shall not exceed 30 days), if possible, to cure the material breach. Page 2 (b) Without Cause. Either party may terminate this Agreement immediately without cause by giving written notice to the other. If the Company terminates under this Section 7(b), then it shall pay to the Employee an amount equal to the product of (i) the Employee's minimum annual base salary in effect as of the date of termination, plus the greater of either (x) the total annual bonus paid, payable, or which would have been payable to the Employee under this Agreement (had it been in effect) for 2001 and payable in 2002 or (y) the highest bonus paid for any year during which this Agreement was in effect ("Base Year Bonus"), times (ii) the number of years (including partial years) remaining in the Term or the number 3 (three), whichever is greater. The Company shall make such payment in a lump sum on or before the fifth day following the date of termination, or as otherwise directed by the Employee. In addition, all options granted to the Employee which had not vested as of the date of termination hereunder shall vest immediately and the Company shall maintain in full force and effect for the continued benefit of the Employee for the number of years (including partial years) remaining in the Term, or 3 years, whichever is greater, all employee benefit plans and programs in which the Employee was entitled to participate immediately prior to the date of termination, provided that the Employee's continued participation is possible under the general terms and provisions of such plans and programs. In the event that the Employee's participation in any such plan or program is prohibited, the Company shall, at its expense, arrange to provide the Employee with benefits substantially similar to those which the Employee would otherwise have been entitled to receive under suc h plans and programs for which his continued participation is prohibited. If the Employee terminates under this Section 7(b), then the Company shall be obligated to pay the Employee the minimum annual base salary due her through the date of termination. (c) Disability. If the Employee fails to perform her duties hereunder on account of illness or other incapacity for a period of nine consecutive months, then the Company shall have the right upon written notice to the Employee to terminate this Agreement without further obligation by paying the Employee the minimum base annual salary, without offset, for the remainder of the Term in a lump sum or as otherwise directed by the Employee. (d) Death. If the Employee dies during the Term, then this Agreement shall terminate immediately and the Employee's legal representatives shall be entitled to receive the minimum annual base salary for the remainder of the Term in a lump sum or as otherwise directed by the Employee's legal representative. (e) Mitigation. The Employee shall not be required to mitigate the amount of any payment provided for in this Section 7 by seeking other employment or otherwise, nor shall any compensation or other payments received by Page 3 the Employee after the date of termination reduce any payments due under this Section 7. (f) Effect of Termination. Termination for any reason or for no reason shall not constitute a waiver of the Company's rights under this Agreement nor a release of the Employee from any obligation hereunder except his obligation to perform her day-to-day duties as an employee. 8. Severance Payment. (a) The Employee may terminate her employment hereunder for "Good Reason," which for purposes of this Agreement shall mean a "change in control of the Company." A "change in control of the Company," for purposes of this Agreement, shall be deemed to have occurred if (i) there shall be consummated (x) any consolidation or merger of the Company other than a consolidation or merger of the Company in which the holders of the Company's Common Stock immediately prior to the merger own more than 50% of the voting securities of the surviving corporation immediately after the merger, or (y) any sale, lease exchange or other transfer (in one transaction or a series of related transactions) of all, of substantially all, of the assets of the Company, or (ii) the stockholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company, or (iii) any "person" (such as that term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act")), other than the Company or any "person" who, on the date hereof, is a director or officer of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities, or (iv) during any period of two (2) consecutive years during the Term or any extensions thereof, individuals, who, at the beginning of such period, constitute the Board of Directors, cease for any reason to constitute at least a majority thereof, unless the election of each director who was not a director at the beginning of such period has been approved in advance by directors representing at least two-thirds of the directors then in office who were directors at the beginning of the period. (b) If the Employee terminates her employment for Good Reason, or, if after a change in control of the Company, the Company shall terminate the Employee's employment in breach of this Agreement or pursuant to Section 7(b), then: (i) The Company shall pay the Employee her minimum base annual salary due her through the date of termination. (ii) In lieu of any further salary and bonus payments or other payments due to the Employee for periods subsequent to the date Page 4 of termination, the Company shall pay, as severance to the Employee, an amount equal to the product of (A) the Employee's minimum base annual salary in effect as of the date of termination plus the Base Year Bonus, multiplied by (B) the number of years (including partial years) remaining in the Term or the number 3 (three), whichever is greater. (iii) All options granted to the Employee which had not vested as of the date of termination hereunder shall vest immediately; and (iv) The Company shall maintain in full force and effect, for the continued benefit of the Employee for the number of years (including partial years) remaining in the Term, all employee benefit plans and programs in which the Employee was entitled to participate immediately prior to the date of termination, provided that the Employee's continued participation is possible under the general terms and provisions of such plans and programs. In the event that the Employee's participation in any such plan or program is prohibited, the Company shall, at its expense, arrange to provide the Employee with benefits substantially similar to those which the Employee would otherwise have been entitled to receive under such plans and programs from which her continued participation is prohibited. (c) For purposes of this Section 8 and Section 7 hereof, the Employee shall not be required to mitigate the amount of any payment provided for in Sections 7 and 8 by seeking other employment or otherwise, nor shall any compensation or other payments received by the Employee after the date of termination reduce any payments due under such Sections. 9. Indemnification for Taxes. The Company shall indemnify Employee for any and all taxes, penalties, additions to tax and interest on tax deficiencies of any kind (collectively, "Taxes") with respect to any and all payments and benefits provided by this Agreement or other agreements with Employee which are subject (if at all) to the excise tax (Excess Tax") pursuant to Section 4999 of the Internal Revenue Code of 1986, as amended. This indemnification shall extend to any and all Taxes with respect to any and all reimbursements hereunder such that, on a net-after-tax basis, Employee is in the same position that Employee would have been in if no payments made by Company to Employee had been subject to the Excise Tax (and, therefore, no indemnification payments hereunder had been necessary). 10. Non-Delegation of Employee's Rights. The obligations, rights and benefits of the Employee hereunder are personal and may not be delegated, assigned or transferred in any manner whatsoever, nor are such obligations, rights or benefits subject to involuntary alienation, assignment or transfer. Page 5 11. Confidential Information. The Employee acknowledges that in her capacity as an employee of the Company she will occupy a position of trust and confidence and she further acknowledges that she will have access to and learn substantial information about the Company and its operations that is confidential or not generally known in the industry including, without limitation, information that relates to purchasing, sales, customers, marketing, and the Company's financial position and financing arrangements. The Employee agrees that all such information is proprietary or confidential, or constitutes trade secrets and is the sole property of the Company. The Employee will keep confidential, and will not reproduce, copy or disclose to any other person or firm, any such information or any documents or information relating to the Company's methods, processes, customers, accounts, analyses, systems, charts, programs, procedures, correspondence or records, or any other documents used or owned by the Company, nor will the Employee advise, discuss with or in any way assist any other person, firm or entity in obtaining or learning about any of the items described in this Section 11. Accordingly, the Employee agrees that during the Term and at all times thereafter she will not disclose, or permit or encourage anyone else to disclose, any such information, nor will she utilize any such information, either along or with others, outside the scope of her duties and responsibilities with the Company. 12. Non-Competition During Employment Term. The Employee agrees that, during the term and any extensions thereof, she will devote substantially all her business time and effort, and give undivided loyalty, to the Company. She will not engage in any way whatsoever, directly or indirectly, in any business that is competitive with the Company or its affiliates, nor solicit, or in any other manner work for or assist any business which is competitive with the Company or its affiliates. In addition, during the Term and any extensions thereof, the Employee will undertake no planning for or organization of any business activity competitive with the work she performs as an employee of the Company, and the Employee will not combine or conspire with any other employee of the Company or any other person for the purpose of organizing any such competitive business activity. 13. Non-Competition After Employment Term. The parties acknowledge that as an executive officer of the Company the Employee will acquire substantial knowledge and information concerning the business of the Company as a result of her employment. The parties further acknowledge that the scope of business in which the Company is engaged as of the Effective Date is national and very competitive and one in which few companies can successfully compete. Competition by an executive officer such as the Employee in that business after this Agreement is terminated would severely injure the Company. Accordingly, for a period of one year after this Agreement is terminated or the Employee leaves the employment of the Company for any reason whatsoever, except as otherwise stated herein below, the Employee agrees (i) not to become an employee, consultant, advisor, principal, partner or substantial shareholder of any firm or business that in any way competes with the Company in any of its presently-existing or then- existing products and markets; and (ii) not to solicit any person or business that was at the time of such termination and remains a customer or prospective customer, or an employee of the Company. Notwithstanding any of the foregoing provisions to the Page 6 contrary, the Employee shall not be subject to the restrictions set forth in this Section 13 under the following circumstances: (a) If the Employee's employment with the Company is terminated by the Company without cause; (b) If the Employee's employment with the Company is terminated as a result of the Company's unwillingness to extend the Term of this Agreement; or, (c) If the Employee leaves the employment of the Company for Good Reason pursuant to Section 8, above. 14. Return of Company Documents. Upon termination of this Agreement, Employee shall return immediately to the Company all records and documents of or pertaining to the Company and shall not make or retain any copy or extract of any such record or document. 15. Other Employment and Location. Anything to the contrary hereinabove notwithstanding, Company acknowledges that Employee may serve as a Director and/or Chairman of the Board of certain other companies and will direct a reasonable portion of her time to fulfilling her duties in such capacities. Company acknowledges that Employee serving as a Director and/or Chairman of the Board of other companies shall not constitute a violation of this Agreement or any provision hereof including but not limited to Sections 11, 12 and 13, so long as Employee dedicates a reasonable amount of her time to her duties hereunder. The Employee shall not be required to move from [Orange County], California, to perform her duties hereunder during the Term without his written consent. 16. Improvements and Inventions. Any and all improvements or inventions, which the Employee may make or participate in during the period of his employment, shall be the sole and exclusive property of the Company. The Employee will, whenever requested by the Company, execute and deliver any and all documents which the Company shall deem appropriate in order to apply for and obtain patents for improvements or inventions or in order to assign and convey to the Company the sole and exclusive right, title and interest in and to such improvements, inventions, patents or applications. 17. Actions. The parties agree and acknowledge that the rights conveyed by this Agreement are of a unique and special nature and that the Company will not have an adequate remedy at law in the event of a failure by the Employee to abide by its terms and conditions nor will money damages adequately compensate for such injury. It is, therefore, agreed between the parties that, in the event of a breach by the Employee of any of his obligations contained in this Agreement, the Company shall have the right, among other rights, to damages sustained thereby and to obtain an injunction or decree of specific performance from any court of competent jurisdiction to restrain or compel the Employee to perform as agreed herein. The Employee agrees that this Section 17 shall Page 7 survive the termination of her employment and she shall be bound by its terms at all times subsequent to the termination of her employment for so long a period as Company continues to conduct the same business or businesses as conducted during the Term or any extensions thereof. Nothing herein contained shall in any way limit or exclude any other right granted by law or equity to the Company. 18. Amendment. This Agreement contains, and its terms constitute, the entire agreement of the parties, and it may be amended only by a written document signed by both parties to this Agreement. 19. Governing Law. California law shall govern the construction and enforcement of this Agreement and the parties agree that any litigation pertaining to this Agreement shall be adjudicated in courts located in California. This Agreement supercedes and replaces any prior agreements or understandings between the parties with respect to the subject matter hereof. 20. Attorneys' Fees. If any party finds it necessary to employ legal counsel or to bring an action at law or other proceedings against the other party to enforce any of the terms hereof, the party prevailing in any such action or other proceeding shall be paid by the other party its reasonable attorneys' fees as well as court costs, all as determined by the court and not a jury. 21. Severability. If any section, subsection or provision hereof is found for any reason whatsoever, to be invalid or inoperative, that section, subsection or provision shall be deemed severable and shall not affect the force and validity of any other provision of this Agreement. If any covenant herein is determined by a court to be overly broad thereby making the covenant unenforceable, the parties agree and it is their desire that such court shall substitute a reasonable judicially enforceable limitation in place of the offensive part of the covenant and that as so modified the covenant shall be as fully enforceable as if set forth herein by the parties themselves in the modified form. The covenants of the Employee in this Agreement shall each be construed as an agreement independent of any other provision in this Agreement, and the existence of any claim or cause of action of the Employee against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of the covenants in this Agreement. 22. Notices. Any notice, request, or instruction to be given hereunder shall be in writing and shall be deemed given when personally delivered or three (3) days after being sent by United States Certified Mail, postage prepaid, with Return Receipt Requested, to the parties at their respective addresses set forth below: To the Company: American National Financial, Inc. 1111 East Katella Avenue, Suite 220 Orange, California 92867 Attention: Michael C. Lowther Chief Executive Officer Page 8 To the Employee: Barbara A. Ferguson 2611 Seaview Avenue Corona del Mar, California 92625 23. Waiver of Breach. The Waiver by any party of any provisions of this Agreement shall not operate or be construed as a waiver of any prior or subsequent breach by the other party. IN WITNESS WHEREOF the parties have executed this Agreement to be effective as of the date first set forth above. AMERICAN NATIONAL FINANCIAL, INC. By: ----------------------------------- Michael C. Lowther Its: Chief Executive Officer BARBARA A. FERGUSON -------------------------------------- Page 9 -----END PRIVACY-ENHANCED MESSAGE-----

EX-10.21

                                                                   Exhibit 10.21


                              EMPLOYMENT AGREEMENT


      This employment agreement (the "Agreement") is effective as of January 1,
2002 (the "Effective Date"), by and between AMERICAN NATIONAL FINANCIAL, INC., a
California corporation (the "Company"), and MICHAEL C. LOWTHER(the "Employee").
In consideration of the mutual covenants and agreements set forth herein, the
parties agree as follows:

      1. Employment and Duties. Subject to the terms and conditions of this
Agreement, the Company employs the Employee to serve in an executive and
managerial capacity as Chief Executive Officer and Chairman of the Board of
Directors of the Company, and the Employee accepts such employment and agrees to
perform such reasonable responsibilities and duties commensurate with the
aforesaid positions as set forth in the Articles of Incorporation and the Bylaws
of the Company. Any change in such titles or delegation of duties inconsistent
with such titles shall be deemed a Termination Without Cause under Section 7(b)
of this Agreement.

      2. Term. The term of this Agreement shall commence on the Effective Date
and shall continue for a period of four (4) years ending December 31, 2005,
subject to prior termination as set forth in Section 7, below (the "Term"). The
Term may be extended at any time upon mutual agreement of the parties.

      3. Salary. During the Term, the Company shall pay the Employee a minimum
base annual salary, before deducting all applicable withholdings, of $360,000
per year, payable at the times and in the manner dictated by the Company's
standard payroll policies. Such minimum base annual salary may be periodically
reviewed and increased (but not decreased) at the discretion of the Compensation
Committee of the Board of Directors to reflect, among other matters, cost of
living increases and performance results.

      4. Other Compensation and Fringe Benefits. In addition to any executive
bonus, pension, deferred compensation and stock option plans which the Company
may from time to time make available to the employee upon mutual agreement, the
Employee shall be entitled to the following:

      (a)   The standard Company benefits enjoyed by the Company's other top
            executives.

      (b)   Payment by the Company of the Employee's initiation and membership
            dues in all social and/or recreational clubs as deemed necessary and
            appropriate by the Employee to maintain various business
            relationships on behalf of the Company; provided, however, that the
            Company shall not be obligated to pay for any of the Employee's
            personal purchases and expenses at such club.


                                     Page 1

      (c)   Provision by the Company during the Term and any extensions thereof
            to the Employee and his dependents of medical and other insurance
            coverage under the Company's Executive Medical Plan.

      (d)   Provision by the Company of supplemental disability insurance
            sufficient to provide two-thirds of the Employee's pre-disability
            minimum base annual salary.

      (e)   Employee shall be entitled to receive an annual incentive bonus for
            each calendar year included in this Agreement based on the Company's
            performance during the preceding year as determined by the
            Compensation Committee of the Board of Directors. The annual bonus
            shall be paid no later than March 15th of the following year and is
            fully vested at the end of each year in the event of a non-renewal
            of this Agreement by the Company. Subject to Section 7 below, the
            annual bonus shall be pro-rated for any partial employment year.

      The Company shall deduct from all compensation payable under this
Agreement to the Employee any taxes or withholdings the Company is required to
deduct pursuant to state and federal laws or by mutual agreement between the
parties

      5. Vacation. For and during each year of the Term and any extensions
thereof, the Employee shall be entitled to reasonable paid vacation periods
consistent with his positions with the Company. In addition, the Employee shall
be entitled to such holidays consistent with the Company's standard policies or
as the Company's Board of Directors may approve.

      6. Expense Reimbursement. In addition to the compensation and benefits
provided herein, the Company shall, upon receipt of appropriate documentation,
reimburse the Employee each month for his reasonable travel, lodging,
entertainment, promotion and other ordinary and necessary business expenses.

      7.    Termination.

      (a)   For Cause. The Company may terminate this Agreement immediately for
            cause upon written notice to the Employee, in which event the
            Company shall be obligated to pay the Employee that portion of the
            minimum base annual salary due him through the date of termination.
            Cause shall be limited to (i) the persistent failure to perform
            duties consistent with a commercially reasonable standard of care;
            (ii) the willful neglect of duties; (iii) criminal or other illegal
            activities involving dishonesty; or (iv) a material breach of this
            Agreement; provided that in the event the Company shall desire to
            terminate this Agreement pursuant to subsection (iv), above, it
            shall first provide the Employee with notice of and a reasonable
            opportunity (the time for which shall not exceed 30 days), if
            possible, to cure the material breach.


                                     Page 2

      (b)   Without Cause. Either party may terminate this Agreement immediately
            without cause by giving written notice to the other. If the Company
            terminates under this Section 7(b), then it shall pay to the
            Employee an amount equal to the product of (i) the Employee's
            minimum annual base salary in effect as of the date of termination,
            plus the greater of either (x) the total annual bonus paid, payable,
            or which would have been payable to the Employee under this
            Agreement (had it been in effect) for 2001 and payable in 2002 or
            (y) the highest bonus paid for any year during which this Agreement
            was in effect ("Base Year Bonus"), times (ii) the number of years
            (including partial years) remaining in the Term or the number 3
            (three), whichever is greater. The Company shall make such payment
            in a lump sum on or before the fifth day following the date of
            termination, or as otherwise directed by the Employee. In addition,
            all options granted to the Employee which had not vested as of the
            date of termination hereunder shall vest immediately and the Company
            shall maintain in full force and effect for the continued benefit of
            the Employee for the number of years (including partial years)
            remaining in the Term, or 3 years, whichever is greater, all
            employee benefit plans and programs in which the Employee was
            entitled to participate immediately prior to the date of
            termination, provided that the Employee's continued participation is
            possible under the general terms and provisions of such plans and
            programs. In the event that the Employee's participation in any such
            plan or program is prohibited, the Company shall, at its expense,
            arrange to provide the Employee with benefits substantially similar
            to those which the Employee would otherwise have been entitled to
            receive under such plans and programs for which discontinued
            participation is prohibited. If the Employee terminates under this
            Section 7(b), then the Company shall be obligated to pay the
            Employee the minimum annual base salary due him through the date of
            termination.

      (c)   Disability. If the Employee fails to perform his duties hereunder on
            account of illness or other incapacity for a period of nine
            consecutive months, then the Company shall have the right upon
            written notice to the Employee to terminate this Agreement without
            further obligation by paying the Employee the minimum base annual
            salary, without offset, for the remainder of the Term in a lump sum
            or as otherwise directed by the Employee.

      (d)   Death. If the Employee dies during the Term, then this Agreement
            shall terminate immediately and the Employee's legal representatives
            shall be entitled to receive the minimum annual base salary for the
            remainder of the Term in a lump sum or as otherwise directed by the
            Employee's legal representative.

      (e)   Mitigation. The Employee shall not be required to mitigate the
            amount of any payment provided for in this Section 7 by seeking
            other employment or otherwise, nor shall any compensation or other
            payments received by


                                     Page 3

            the Employee after the date of termination reduce any payments due
            under this Section 7.

      (f)   Effect of Termination. Termination for any reason or for no reason
            shall not constitute a waiver of the Company's rights under this
            Agreement nor a release of the Employee from any obligation
            hereunder except his obligation to perform his day-to-day duties as
            an employee.

      8.    Severance Payment.

      (a)   The Employee may terminate his employment hereunder for "Good
            Reason," which for purposes of this Agreement shall mean a "change
            in control of the Company." A "change in control of the Company,"
            for purposes of this Agreement, shall be deemed to have occurred if
            (i) there shall be consummated (x) any consolidation or merger of
            the Company other than a consolidation or merger of the Company in
            which the holders of the Company's Common Stock immediately prior to
            the merger own more than 50% of the voting securities of the
            surviving corporation immediately after the merger, or (y) any sale,
            lease exchange or other transfer (in one transaction or a series of
            related transactions) of all, of substantially all, of the assets of
            the Company, or (ii) the stockholders of the Company approve any
            plan or proposal for the liquidation or dissolution of the Company,
            or (iii) any "person" (such as that term is used in Sections 13(d)
            and 14(d) of the Securities Exchange Act of 1934 (the "Exchange
            Act")), other than the Company or any "person" who, on the date
            hereof, is a director or officer of the Company, is or becomes the
            "beneficial owner" (as defined in Rule 13d-3 under the Exchange
            Act), of securities of the Company representing 30% or more of the
            combined voting power of the Company's then outstanding securities,
            or (iv) during any period of two (2) consecutive years during the
            Term or any extensions thereof, individuals, who, at the beginning
            of such period, constitute the Board of Directors, cease for any
            reason to constitute at least a majority thereof, unless the
            election of each director who was not a director at the beginning of
            such period has been approved in advance by directors representing
            at least two-thirds of the directors then in office who were
            directors at the beginning of the period.

      (b)   If the Employee terminates his employment for Good Reason, or, if
            after a change in control of the Company, the Company shall
            terminate the Employee's employment in breach of this Agreement or
            pursuant to Section 7(b), then:

            (i)   The Company shall pay the Employee his minimum base annual
                  salary due him through the date of termination.

            (ii)  In lieu of any further salary and bonus payments or other
                  payments due to the Employee for periods subsequent to the
                  date of


                                     Page 4

                  termination, the Company shall pay, as severance to the
                  Employee, an amount equal to the product of (A) the Employee's
                  minimum base annual salary in effect as of the date of
                  termination plus the Base Year Bonus, multiplied by (B) the
                  number of years (including partial years) remaining in the
                  Term or the number 3 (three), whichever is greater.

            (iii) All options granted to the Employee which had not vested as
                  of the date of termination hereunder shall vest immediately;
                  and

            (iv)  The Company shall maintain in full force and effect, for the
                  continued benefit of the Employee for the number of years
                  (including partial years) remaining in the Term, all employee
                  benefit plans and programs in which the Employee was entitled
                  to participate immediately prior to the date of termination,
                  provided that the Employee's continued participation is
                  possible under the general terms and provisions of such plans
                  and programs. In the event that the Employee's participation
                  in any such plan or program is prohibited, the Company shall,
                  at its expense, arrange to provide the Employee with benefits
                  substantially similar to those which the Employee would
                  otherwise have been entitled to receive under such plans and
                  programs from which his continued participation is prohibited.

      (c)   For purposes of this Section 8 and Section 7 hereof, the Employee
            shall not be required to mitigate the amount of any payment provided
            for in Sections 7 and 8 by seeking other employment or otherwise,
            nor shall any compensation or other payments received by the
            Employee after the date of termination reduce any payments due under
            such Sections.

      9. Indemnification for Taxes. The Company shall indemnify Employee for any
and all taxes, penalties, additions to tax and interest on tax deficiencies of
any kind (collectively, "Taxes") with respect to any and all payments and
benefits provided by this Agreement or other agreements with Employee which are
subject (if at all) to the excise tax (Excess Tax") pursuant to Section 4999 of
the Internal Revenue Code of 1986, as amended. This indemnification shall extend
to any and all Taxes with respect to any and all reimbursements hereunder such
that, on a net-after-tax basis, Employee is in the same position that Employee
would have been in if no payments made by Company to Employee had been subject
to the Excise Tax (and, therefore, no indemnification payments hereunder had
been necessary).

      10. Non-Delegation of Employee's Rights. The obligations, rights and
benefits of the Employee hereunder are personal and may not be delegated,
assigned or transferred in any manner whatsoever, nor are such obligations,
rights or benefits subject to involuntary alienation, assignment or transfer.


                                     Page 5

      11. Confidential Information. The Employee acknowledges that in his
capacity as an employee of the Company he will occupy a position of trust and
confidence and he further acknowledges that he will have access to and learn
substantial information about the Company and its operations that is
confidential or not generally known in the industry including, without
limitation, information that relates to purchasing, sales, customers, marketing,
and the Company's financial position and financing arrangements. The Employee
agrees that all such information is proprietary or confidential, or constitutes
trade secrets and is the sole property of the Company. The Employee will keep
confidential, and will not reproduce, copy or disclose to any other person or
firm, any such information or any documents or information relating to the
Company's methods, processes, customers, accounts, analyses, systems, charts,
programs, procedures, correspondence or records, or any other documents used or
owned by the Company, nor will the Employee advise, discuss with or in any way
assist any other person, firm or entity in obtaining or learning about any of
the items described in this Section 11. Accordingly, the Employee agrees that
during the Term and at all times thereafter he will not disclose, or permit or
encourage anyone else to disclose, any such information, nor will he utilize any
such information, either along or with others, outside the scope of his duties
and responsibilities with the Company.

      12. Non-Competition During Employment Term. The Employee agrees that,
during the term and any extensions thereof, he will devote substantially all his
business time and effort, and give undivided loyalty, to the Company. He will
not engage in any way whatsoever, directly or indirectly, in any business that
is competitive with the Company or its affiliates, nor solicit, or in any other
manner work for or assist any business which is competitive with the Company or
its affiliates. In addition, during the Term and any extensions thereof, the
Employee will undertake no planning for or organization of any business activity
competitive with the work he performs as an employee of the Company, and the
Employee will not combine or conspire with any other employee of the Company or
any other person for the purpose of organizing any such competitive business
activity.

      13. Non-Competition After Employment Term. The parties acknowledge that as
an executive officer of the Company the Employee will acquire substantial
knowledge and information concerning the business of the Company as a result of
his employment. The parties further acknowledge that the scope of business in
which the Company is engaged as of the Effective Date is national and very
competitive and one in which few companies can successfully compete. Competition
by an executive officer such as the Employee in that business after this
Agreement is terminated would severely injure the Company. Accordingly, for a
period of one year after this Agreement is terminated or the Employee leaves the
employment of the Company for any reason whatsoever, except as otherwise stated
herein below, the Employee agrees (i) not to become an employee, consultant,
advisor, principal, partner or substantial shareholder of any firm or business
that in any way competes with the Company in any of its presently-existing or
then-existing products and markets; and (ii) not to solicit any person or
business that was at the time of such termination and remains a customer or
prospective customer, or an employee of the Company. Notwithstanding any of the
foregoing provisions to the


                                     Page 6

contrary, the Employee shall not be subject to the restrictions set forth in
this Section 13 under the following circumstances:

      (a)   If the Employee's employment with the Company is terminated by the
            Company without cause;

      (b)   If the Employee's employment with the Company is terminated as a
            result of the Company's unwillingness to extend the Term of this
            Agreement; or,

      (c)   If the Employee leaves the employment of the Company for Good Reason
            pursuant to Section 8, above.

      14. Return of Company Documents. Upon termination of this Agreement,
Employee shall return immediately to the Company all records and documents of or
pertaining to the Company and shall not make or retain any copy or extract of
any such record or document.


      15. Other Employment and Location. Anything to the contrary hereinabove
notwithstanding, Company acknowledges that Employee may serve as a Director
and/or Chairman of the Board of certain other companies and will direct a
reasonable portion of his time to fulfilling his duties in such capacities.
Company acknowledges that Employee serving as a Director and/or Chairman of the
Board of other companies shall not constitute a violation of this Agreement or
any provision hereof including but not limited to Sections 11, 12 and 13, so
long as Employee dedicates a reasonable amount of his time to his duties
hereunder. The Employee shall not be required to move from [Orange County],
California, to perform his duties hereunder during the Term without his written
consent.

      16. Improvements and Inventions. Any and all improvements or inventions,
which the Employee may make or participate in during the period of his
employment, shall be the sole and exclusive property of the Company. The
Employee will, whenever requested by the Company, execute and deliver any and
all documents which the Company shall deem appropriate in order to apply for and
obtain patents for improvements or inventions or in order to assign and convey
to the Company the sole and exclusive right, title and interest in and to such
improvements, inventions, patents or applications.

      17. Actions. The parties agree and acknowledge that the rights conveyed by
this Agreement are of a unique and special nature and that the Company will not
have an adequate remedy at law in the event of a failure by the Employee to
abide by its terms and conditions nor will money damages adequately compensate
for such injury. It is, therefore, agreed between the parties that, in the event
of a breach by the Employee of any of his obligations contained in this
Agreement, the Company shall have the right, among other rights, to damages
sustained thereby and to obtain an injunction or decree of specific performance
from any court of competent jurisdiction to restrain or compel the Employee to
perform as agreed herein. The Employee agrees that this Section 17 shall


                                     Page 7

survive the termination of his employment and he shall be bound by its terms at
all times subsequent to the termination of his employment for so long a period
as Company continues to conduct the same business or businesses as conducted
during the Term or any extensions thereof. Nothing herein contained shall in any
way limit or exclude any other right granted by law or equity to the Company.

      18. Amendment. This Agreement contains, and its terms constitute, the
entire agreement of the parties, and it may be amended only by a written
document signed by both parties to this Agreement.

      19. Governing Law. California law shall govern the construction and
enforcement of this Agreement and the parties agree that any litigation
pertaining to this Agreement shall be adjudicated in courts located in
California. This Agreement supercedes and replaces any prior agreements or
understandings between the parties with respect to the subject matter hereof.

      20. Attorneys' Fees. If any party finds it necessary to employ legal
counsel or to bring an action at law or other proceedings against the other
party to enforce any of the terms hereof, the party prevailing in any such
action or other proceeding shall be paid by the other party its reasonable
attorneys' fees as well as court costs, all as determined by the court and not a
jury.

      21. Severability. If any section, subsection or provision hereof is found
for any reason whatsoever, to be invalid or inoperative, that section,
subsection or provision shall be deemed severable and shall not affect the force
and validity of any other provision of this Agreement. If any covenant herein is
determined by a court to be overly broad thereby making the covenant
unenforceable, the parties agree and it is their desire that such court shall
substitute a reasonable judicially enforceable limitation in place of the
offensive part of the covenant and that as so modified the covenant shall be as
fully enforceable as if set forth herein by the parties themselves in the
modified form. The covenants of the Employee in this Agreement shall each be
construed as an agreement independent of any other provision in this Agreement,
and the existence of any claim or cause of action of the Employee against the
Company, whether predicated on this Agreement or otherwise, shall not constitute
a defense to the enforcement by the Company of the covenants in this Agreement.

      22. Notices. Any notice, request, or instruction to be given hereunder
shall be in writing and shall be deemed given when personally delivered or three
(3) days after being sent by United States Certified Mail, postage prepaid, with
Return Receipt Requested, to the parties at their respective addresses set forth
below:

            To the Company:   American National Financial, Inc.
                              1111 East Katella Avenue, Suite 220
                              Orange, California  92867
                              Attention:   Wayne Diaz, President


                                     Page 8

            To the Employee:  Michael C. Lowther
                              4 Carmel Woods
                              Laguna Niguel, California  92677


      23. Waiver of Breach. The Waiver by any party of any provisions of this
Agreement shall not operate or be construed as a waiver of any prior or
subsequent breach by the other party.


      IN WITNESS WHEREOF the parties have executed this Agreement to be
effective as of the date first set forth above.


                              AMERICAN NATIONAL FINANCIAL, INC.


                              By:   ________________________________
                                    Wayne Diaz
                              Its:  President



                              MICHAEL C. LOWTHER


                              ______________________________________


                                     Page 9

EX-10.22

                                                                   Exhibit 10.22


                              EMPLOYMENT AGREEMENT


      This employment agreement (the "Agreement") is effective as of January 1,
2002 (the "Effective Date"), by and between AMERICAN NATIONAL FINANCIAL, INC., a
California corporation (the "Company"), and WAYNE D. DIAZ (the "Employee"). In
consideration of the mutual covenants and agreements set forth herein, the
parties agree as follows:

      1. Employment and Duties. Subject to the terms and conditions of this
Agreement, the Company employs the Employee to serve in an executive and
managerial capacity as President of the Company, and the Employee accepts such
employment and agrees to perform such reasonable responsibilities and duties
commensurate with the aforesaid positions as set forth in the Articles of
Incorporation and the Bylaws of the Company. Any change in such titles or
delegation of duties inconsistent with such titles shall be deemed a Termination
Without Cause under Section 7(b) of this Agreement.

      2. Term. The term of this Agreement shall commence on the Effective Date
and shall continue for a period of four (4) years ending December 31, 2005,
subject to prior termination as set forth in Section 7, below (the "Term"). The
Term may be extended at any time upon mutual agreement of the parties.

      3. Salary. During the Term, the Company shall pay the Employee a minimum
base annual salary, before deducting all applicable with holdings, of $360,000
per year, payable at the times and in the manner dictated by the Company's
standard payroll policies. Such minimum base annual salary may be periodically
reviewed and increased (but not decreased) at the discretion of the Compensation
Committee of the Board of Directors to reflect, among other matters, cost of
living increases and performance results.

      4. Other Compensation and Fringe Benefits. In addition to any executive
bonus, pension, deferred compensation and stock option plans which the Company
may from time to time make available to the employee upon mutual agreement, the
Employee shall be entitled to the following:

      (a) The standard Company benefits enjoyed by the Company's other top
executives.

      (b) Payment by the Company of the Employee's initiation and membership
dues in all social and/or recreational clubs as deemed necessary and appropriate
by the Employee to maintain various business relationships on behalf of the
Company; provided, however, that the Company shall not be obligated to pay for
any of the Employee's personal purchases and expenses at such club.


                                     Page 1

      (c) Provision by the Company during the Term and any extensions thereof to
the Employee and his dependents of medical and other insurance coverage under
the Company's Executive Medical Plan.

      (d) Provision by the Company of supplemental disability insurance
sufficient to provide two-thirds of the Employee's pre-disability minimum base
annual salary.

      (e) Employee shall be entitled to receive an annual incentive bonus for
each calendar year included in this Agreement based on the Company's performance
during the preceding year as determined by the Compensation Committee of the
Board of Directors. The annual bonus shall be paid no later than March 15th of
the following year and is fully vested at the end of each year in the event of a
non-renewal of this Agreement by the Company. Subject to Section 7 below, the
annual bonus shall be pro-rated for any partial employment year.

      The Company shall deduct from all compensation payable under this
Agreement to the Employee any taxes or with holdings the Company is required to
deduct pursuant to state and federal laws or by mutual agreement between the
parties

      5. Vacation. For and during each year of the Term and any extensions
thereof, the Employee shall be entitled to reasonable paid vacation periods
consistent with his positions with the Company. In addition, the Employee shall
be entitled to such holidays consistent with the Company's standard policies or
as the Company's Board of Directors may approve.

      6. Expense Reimbursement. In addition to the compensation and benefits
provided herein, the Company shall, upon receipt of appropriate documentation,
reimburse the Employee each month for his reasonable travel, lodging,
entertainment, promotion and other ordinary and necessary business expenses.

      7. Termination.

      (a) For Cause. The Company may terminate this Agreement immediately for
cause upon written notice to the Employee, in which event the Company shall be
obligated to pay the Employee that portion of the minimum base annual salary due
him through the date of termination. Cause shall be limited to (i) the
persistent failure to perform duties consistent with a commercially reasonable
standard of care; (ii) the willful neglect of duties; (iii) criminal or other
illegal activities involving dishonesty; or (iv) a material breach of this
Agreement; provided that in the event the Company shall desire to terminate this
Agreement pursuant to subsection (iv), above, it shall first provide the
Employee with notice of and a reasonable opportunity (the time for which shall
not exceed 30 days), if possible, to cure the material breach.


                                     Page 2

      (b) Without Cause. Either party may terminate this Agreement immediately
without cause by giving written notice to the other. If the Company terminates
under this Section 7(b), then it shall pay to the Employee an amount equal to
the product of (i) the Employee's minimum annual base salary in effect as of the
date of termination, plus the greater of either (x) the total annual bonus paid,
payable, or which would have been payable to the Employee under this Agreement
(had it been in effect) for 2001 and payable in 2002 or (y) the highest bonus
paid for any year during which this Agreement was in effect ("Base Year Bonus"),
times (ii) the number of years (including partial years) remaining in the Term
or the number 3 (three), whichever is greater. The Company shall make such
payment in a lump sum on or before the fifth day following the date of
termination, or as otherwise directed by the Employee. In addition, all options
granted to the Employee which had not vested as of the date of termination
hereunder shall vest immediately and the Company shall maintain in full force
and effect for the continued benefit of the Employee for the number of years
(including partial years) remaining in the Term, or 3 years, whichever is
greater, all employee benefit plans and programs in which the Employee was
entitled to participate immediately prior to the date of termination, provided
that the Employee's continued participation is possible under the general terms
and provisions of such plans and programs. In the event that the Employee's
participation in any such plan or program is prohibited, the Company shall, at
its expense, arrange to provide the Employee with benefits substantially similar
to those which the Employee would otherwise have been entitled to receive under
such plans and programs for which his continued participation is prohibited. If
the Employee terminates under this Section 7(b), then the Company shall be
obligated to pay the Employee the minimum annual base salary due him through the
date of termination.

      (c) Disability. If the Employee fails to perform his duties hereunder on
account of illness or other incapacity for a period of nine consecutive months,
then the Company shall have the right upon written notice to the Employee to
terminate this Agreement without further obligation by paying the Employee the
minimum base annual salary, without offset, for the remainder of the Term in a
lump sum or as otherwise directed by the Employee.

      (d) Death. If the Employee dies during the Term, then this Agreement shall
terminate immediately and the Employee's legal representatives shall be entitled
to receive the minimum annual base salary for the remainder of the Term in a
lump sum or as otherwise directed by the Employee's legal representative.

      (e) Mitigation. The Employee shall not be required to mitigate the amount
of any payment provided for in this Section 7 by seeking other employment or
otherwise, nor shall any compensation or other payments received by


                                     Page 3

the Employee after the date of termination reduce any payments due under this
Section 7.

      (f) Effect of Termination. Termination for any reason or for no reason
shall not constitute a waiver of the Company's rights under this Agreement nor a
release of the Employee from any obligation hereunder except his obligation to
perform his day-to-day duties as an employee.

      8.    Severance Payment.

      (a) The Employee may terminate his employment hereunder for "Good Reason,"
which for purposes of this Agreement shall mean a "change in control of the
Company." A "change in control of the Company," for purposes of this Agreement,
shall be deemed to have occurred if (i) there shall be consummated (x) any
consolidation or merger of the Company other than a consolidation or merger of
the Company in which the holders of the Company's Common Stock immediately prior
to the merger own more than 50% of the voting securities of the surviving
corporation immediately after the merger, or (y) any sale, lease exchange or
other transfer (in one transaction or a series of related transactions) of all,
of substantially all, of the assets of the Company, or (ii) the stockholders of
the Company approve any plan or proposal for the liquidation or dissolution of
the Company, or (iii) any "person" (such as that term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act")), other
than the Company or any "person" who, on the date hereof, is a director or
officer of the Company, is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), of securities of the Company representing 30% or
more of the combined voting power of the Company's then outstanding securities,
or (iv) during any period of two (2) consecutive years during the Term or any
extensions thereof, individuals, who, at the beginning of such period,
constitute the Board of Directors, cease for any reason to constitute at least a
majority thereof, unless the election of each director who was not a director at
the beginning of such period has been approved in advance by directors
representing at least two-thirds of the directors then in office who were
directors at the beginning of the period.

      (b) If the Employee terminates his employment for Good Reason, or, if
after a change in control of the Company, the Company shall terminate the
Employee's employment in breach of this Agreement or pursuant to Section 7(b),
then:

         (i)   The Company shall pay the Employee his minimum base annual salary
               due him through the date of termination.

         (ii)  In lieu of any further salary and bonus payments or other
               payments due to the Employee for periods subsequent to the date


                                     Page 4

               of termination, the Company shall pay, as severance to the
               Employee, an amount equal to the product of (A) the Employee's
               minimum base annual salary in effect as of the date of
               termination plus the Base Year Bonus, multiplied by (B) the
               number of years (including partial years) remaining in the Term
               or the number 3 (three), whichever is greater.

         (iii) All options granted to the Employee which had not vested as of
               the date of termination hereunder shall vest immediately; and

         (iv)  The Company shall maintain in full force and effect, for the
               continued benefit of the Employee for the number of years
               (including partial years) remaining in the Term, all employee
               benefit plans and programs in which the Employee was entitled to
               participate immediately prior to the date of termination,
               provided that the Employee's continued participation is possible
               under the general terms and provisions of such plans and
               programs. In the event that the Employee's participation in any
               such plan or program is prohibited, the Company shall, at its
               expense, arrange to provide the Employee with benefits
               substantially similar to those which the Employee would otherwise
               have been entitled to receive under such plans and programs from
               which his continued participation is prohibited.

      (c) For purposes of this Section 8 and Section 7 hereof, the Employee
shall not be required to mitigate the amount of any payment provided for in
Sections 7 and 8 by seeking other employment or otherwise, nor shall any
compensation or other payments received by the Employee after the date of
termination reduce any payments due under such Sections.

      9. Indemnification for Taxes. The Company shall indemnify Employee for any
and all taxes, penalties, additions to tax and interest on tax deficiencies of
any kind (collectively, "Taxes") with respect to any and all payments and
benefits provided by this Agreement or other agreements with Employee which are
subject (if at all) to the excise tax (Excess Tax") pursuant to Section 4999 of
the Internal Revenue Code of 1986, as amended. This indemnification shall extend
to any and all Taxes with respect to any and all reimbursements hereunder such
that, on a net-after-tax basis, Employee is in the same position that Employee
would have been in if no payments made by Company to Employee had been subject
to the Excise Tax (and, therefore, no indemnification payments hereunder had
been necessary).

      10. Non-Delegation of Employee's Rights. The obligations, rights and
benefits of the Employee hereunder are personal and may not be delegated,
assigned or transferred in any manner whatsoever, nor are such obligations,
rights or benefits subject to involuntary alienation, assignment or transfer.


                                     Page 5

      11. Confidential Information. The Employee acknowledges that in his
capacity as an employee of the Company he will occupy a position of trust and
confidence and he further acknowledges that he will have access to and learn
substantial information about the Company and its operations that is
confidential or not generally known in the industry including, without
limitation, information that relates to purchasing, sales, customers, marketing,
and the Company's financial position and financing arrangements. The Employee
agrees that all such information is proprietary or confidential, or constitutes
trade secrets and is the sole property of the Company. The Employee will keep
confidential, and will not reproduce, copy or disclose to any other person or
firm, any such information or any documents or information relating to the
Company's methods, processes, customers, accounts, analyses, systems, charts,
programs, procedures, correspondence or records, or any other documents used or
owned by the Company, nor will the Employee advise, discuss with or in any way
assist any other person, firm or entity in obtaining or learning about any of
the items described in this Section 11. Accordingly, the Employee agrees that
during the Term and at all times thereafter he will not disclose, or permit or
encourage anyone else to disclose, any such information, nor will he utilize any
such information, either along or with others, outside the scope of his duties
and responsibilities with the Company.

      12. Non-Competition During Employment Term. The Employee agrees that,
during the term and any extensions thereof, he will devote substantially all his
business time and effort, and give undivided loyalty, to the Company. He will
not engage in any way whatsoever, directly or indirectly, in any business that
is competitive with the Company or its affiliates, nor solicit, or in any other
manner work for or assist any business which is competitive with the Company or
its affiliates. In addition, during the Term and any extensions thereof, the
Employee will undertake no planning for or organization of any business activity
competitive with the work he performs as an employee of the Company, and the
Employee will not combine or conspire with any other employee of the Company or
any other person for the purpose of organizing any such competitive business
activity.

      13. Non-Competition After Employment Term. The parties acknowledge that as
an executive officer of the Company the Employee will acquire substantial
knowledge and information concerning the business of the Company as a result of
his employment. The parties further acknowledge that the scope of business in
which the Company is engaged as of the Effective Date is national and very
competitive and one in which few companies can successfully compete. Competition
by an executive officer such as the Employee in that business after this
Agreement is terminated would severely injure the Company. Accordingly, for a
period of one year after this Agreement is terminated or the Employee leaves the
employment of the Company for any reason whatsoever, except as otherwise stated
herein below, the Employee agrees (i) not to become an employee, consultant,
advisor, principal, partner or substantial shareholder of any firm or business
that in any way competes with the Company in any of its presently-existing or
then-existing products and markets; and (ii) not to solicit any person or
business that was at the time of such termination and remains a customer or
prospective customer, or an employee of the Company. Notwithstanding any of the
foregoing provisions to the


                                     Page 6

contrary, the Employee shall not be subject to the restrictions set forth in
this Section 13 under the following circumstances:

      (a) If the Employee's employment with the Company is terminated by the
Company without cause;

      (b) If the Employee's employment with the Company is terminated as a
result of the Company's unwillingness to extend the Term of this Agreement; or,

      (c) If the Employee leaves the employment of the Company for Good Reason
pursuant to Section 8, above.

      14. Return of Company Documents. Upon termination of this Agreement,
Employee shall return immediately to the Company all records and documents of or
pertaining to the Company and shall not make or retain any copy or extract of
any such record or document.


      15. Other Employment and Location. Anything to the contrary hereinabove
notwithstanding, Company acknowledges that Employee may serve as a Director
and/or Chairman of the Board of certain other companies and will direct a
reasonable portion of his time to fulfilling his duties in such capacities.
Company acknowledges that Employee serving as a Director and/or Chairman of the
Board of other companies shall not constitute a violation of this Agreement or
any provision hereof including but not limited to Sections 11, 12 and 13, so
long as Employee dedicates a reasonable amount of his time to his duties
hereunder. The Employee shall not be required to move from [Orange County],
California, to perform his duties hereunder during the Term without his written
consent.

      16. Improvements and Inventions. Any and all improvements or inventions,
which the Employee may make or participate in during the period of his
employment, shall be the sole and exclusive property of the Company. The
Employee will, whenever requested by the Company, execute and deliver any and
all documents which the Company shall deem appropriate in order to apply for and
obtain patents for improvements or inventions or in order to assign and convey
to the Company the sole and exclusive right, title and interest in and to such
improvements, inventions, patents or applications.

      17. Actions. The parties agree and acknowledge that the rights conveyed by
this Agreement are of a unique and special nature and that the Company will not
have an adequate remedy at law in the event of a failure by the Employee to
abide by its terms and conditions nor will money damages adequately compensate
for such injury. It is, therefore, agreed between the parties that, in the event
of a breach by the Employee of any of his obligations contained in this
Agreement, the Company shall have the right, among other rights, to damages
sustained thereby and to obtain an injunction or decree of specific performance
from any court of competent jurisdiction to restrain or compel the Employee to
perform as agreed herein. The Employee agrees that this Section 17 shall


                                     Page 7

survive the termination of his employment and he shall be bound by its terms at
all times subsequent to the termination of his employment for so long a period
as Company continues to conduct the same business or businesses as conducted
during the Term or any extensions thereof. Nothing herein contained shall in any
way limit or exclude any other right granted by law or equity to the Company.

      18. Amendment. This Agreement contains, and its terms constitute, the
entire agreement of the parties, and it may be amended only by a written
document signed by both parties to this Agreement.

      19. Governing Law. California law shall govern the construction and
enforcement of this Agreement and the parties agree that any litigation
pertaining to this Agreement shall be adjudicated in courts located in
California. This Agreement supercedes and replaces any prior agreements or
understandings between the parties with respect to the subject matter hereof.

      20. Attorneys' Fees. If any party finds it necessary to employ legal
counsel or to bring an action at law or other proceedings against the other
party to enforce any of the terms hereof, the party prevailing in any such
action or other proceeding shall be paid by the other party its reasonable
attorneys' fees as well as court costs, all as determined by the court and not a
jury.

      21. Severability. If any section, subsection or provision hereof is found
for any reason whatsoever, to be invalid or inoperative, that section,
subsection or provision shall be deemed severable and shall not affect the force
and validity of any other provision of this Agreement. If any covenant herein is
determined by a court to be overly broad thereby making the covenant
unenforceable, the parties agree and it is their desire that such court shall
substitute a reasonable judicially enforceable limitation in place of the
offensive part of the covenant and that as so modified the covenant shall be as
fully enforceable as if set forth herein by the parties themselves in the
modified form. The covenants of the Employee in this Agreement shall each be
construed as an agreement independent of any other provision in this Agreement,
and the existence of any claim or cause of action of the Employee against the
Company, whether predicated on this Agreement or otherwise, shall not constitute
a defense to the enforcement by the Company of the covenants in this Agreement.

      22. Notices. Any notice, request, or instruction to be given hereunder
shall be in writing and shall be deemed given when personally delivered or three
(3) days after being sent by United States Certified Mail, postage prepaid, with
Return Receipt Requested, to the parties at their respective addresses set forth
below:

            To the Company:   American National Financial, Inc.
                              1111 East Katella Avenue, Suite 220
                              Orange, California  92867
                              Attention:   Michael C. Lowther
                              Chief Executive Officer


                                     Page 8

            To the Employee:  Wayne D. Diaz
                              604 Marinella Aisle
                              Irvine, CA 92606

      23. Waiver of Breach. The Waiver by any party of any provisions of this
Agreement shall not operate or be construed as a waiver of any prior or
subsequent breach by the other party.


      IN WITNESS WHEREOF the parties have executed this Agreement to be
effective as of the date first set forth above.


                              AMERICAN NATIONAL FINANCIAL, INC.


                              By:   ________________________________
                                    Michael C. Lowther
                              Its:  Chief Executive Officer



                              WAYNE D. DIAZ


                              ______________________________________



                                     Page 9

EX-10.23

                                                                   EXHIBIT 10.23


                              EMPLOYMENT AGREEMENT

         This employment agreement (the "Agreement") is effective as of January
1, 2002 (the "Effective Date"), by and between AMERICAN NATIONAL FINANCIAL,
INC., a California corporation (the "Company"), and BARBARA A. FERGUSON (the
"Employee"). In consideration of the mutual covenants and agreements set forth
herein, the parties agree as follows:

         1. Employment and Duties. Subject to the terms and conditions of this
Agreement, the Company employs the Employee to serve in an executive and
managerial capacity as Executive Vice President of the Company, and the Employee
accepts such employment and agrees to perform such reasonable responsibilities
and duties commensurate with the aforesaid positions as set forth in the
Articles of Incorporation and the Bylaws of the Company. Any change in such
titles or delegation of duties inconsistent with such titles shall be deemed a
Termination Without Cause under Section 7(b) of this Agreement.

         2. Term. The term of this Agreement shall commence on the Effective
Date and shall continue for a period of four (4) years ending December 31, 2005,
subject to prior termination as set forth in Section 7, below (the "Term"). The
Term may be extended at any time upon mutual agreement of the parties.

         3. Salary. During the Term, the Company shall pay the Employee a
minimum base annual salary, before deducting all applicable withholdings, of
$240,000 per year, payable at the times and in the manner dictated by the
Company's standard payroll policies. Such minimum base annual salary may be
periodically reviewed and increased (but not decreased) at the discretion of the
Compensation Committee of the Board of Directors to reflect, among other
matters, cost of living increases and performance results.

         4. Other Compensation and Fringe Benefits. In addition to any executive
bonus, pension, deferred compensation and stock option plans which the Company
may from time to time make available to the employee upon mutual agreement, the
Employee shall be entitled to the following:

         (a)      The standard Company benefits enjoyed by the Company's other
                  top executives.

         (b)      Payment by the Company of the Employee's initiation and
                  membership dues in all social and/or recreational clubs as
                  deemed necessary and appropriate by the Employee to maintain
                  various business relationships on behalf of the Company;
                  provided, however, that the Company shall not be obligated to
                  pay for any of the Employee's personal purchases and expenses
                  at such club.


                                     Page 1

         (c)      Provision by the Company during the Term and any extensions
                  thereof to the Employee and her dependents of medical and
                  other insurance coverage under the Company's Executive Medical
                  Plan.

         (d)      Provision by the Company of supplemental disability insurance
                  sufficient to provide two-thirds of the Employee's
                  pre-disability minimum base annual salary.

         (e)      Employee shall be entitled to receive an annual incentive
                  bonus for each calendar year included in this Agreement based
                  on the Company's performance during the preceding year as
                  determined by the Compensation Committee of the Board of
                  Directors. The annual bonus shall be paid no later than March
                  15th of the following year and is fully vested at the end of
                  each year in the event of a non-renewal of this Agreement by
                  the Company. Subject to Section 7 below, the annual bonus
                  shall be pro-rated for any partial employment year.

         The Company shall deduct from all compensation payable under this
Agreement to the Employee any taxes or withholdings the Company is required to
deduct pursuant to state and federal laws or by mutual agreement between the
parties

         5. Vacation. For and during each year of the Term and any extensions
thereof, the Employee shall be entitled to reasonable paid vacation periods
consistent with her position with the Company. In addition, the Employee shall
be entitled to such holidays consistent with the Company's standard policies or
as the Company's Board of Directors may approve.

         6. Expense Reimbursement. In addition to the compensation and benefits
provided herein, the Company shall, upon receipt of appropriate documentation,
reimburse the Employee each month for her reasonable travel, lodging,
entertainment, promotion and other ordinary and necessary business expenses.

         7. Termination.

         (a)      For Cause. The Company may terminate this Agreement
                  immediately for cause upon written notice to the Employee, in
                  which event the Company shall be obligated to pay the Employee
                  that portion of the minimum base annual salary due her through
                  the date of termination. Cause shall be limited to (i) the
                  persistent failure to perform duties consistent with a
                  commercially reasonable standard of care; (ii) the willful
                  neglect of duties; (iii) criminal or other illegal activities
                  involving dishonesty; or (iv) a material breach of this
                  Agreement; provided that in the event the Company shall desire
                  to terminate this Agreement pursuant to subsection (iv),
                  above, it shall first provide the Employee with notice of and
                  a reasonable opportunity (the time for which shall not exceed
                  30 days), if possible, to cure the material breach.


                                     Page 2

         (b)      Without Cause. Either party may terminate this Agreement
                  immediately without cause by giving written notice to the
                  other. If the Company terminates under this Section 7(b), then
                  it shall pay to the Employee an amount equal to the product of
                  (i) the Employee's minimum annual base salary in effect as of
                  the date of termination, plus the greater of either (x) the
                  total annual bonus paid, payable, or which would have been
                  payable to the Employee under this Agreement (had it been in
                  effect) for 2001 and payable in 2002 or (y) the highest bonus
                  paid for any year during which this Agreement was in effect
                  ("Base Year Bonus"), times (ii) the number of years (including
                  partial years) remaining in the Term or the number 3 (three),
                  whichever is greater. The Company shall make such payment in a
                  lump sum on or before the fifth day following the date of
                  termination, or as otherwise directed by the Employee. In
                  addition, all options granted to the Employee which had not
                  vested as of the date of termination hereunder shall vest
                  immediately and the Company shall maintain in full force and
                  effect for the continued benefit of the Employee for the
                  number of years (including partial years) remaining in the
                  Term, or 3 years, whichever is greater, all employee benefit
                  plans and programs in which the Employee was entitled to
                  participate immediately prior to the date of termination,
                  provided that the Employee's continued participation is
                  possible under the general terms and provisions of such plans
                  and programs. In the event that the Employee's participation
                  in any such plan or program is prohibited, the Company shall,
                  at its expense, arrange to provide the Employee with benefits
                  substantially similar to those which the Employee would
                  otherwise have been entitled to receive under suc h plans and
                  programs for which his continued participation is prohibited.
                  If the Employee terminates under this Section 7(b), then the
                  Company shall be obligated to pay the Employee the minimum
                  annual base salary due her through the date of termination.

         (c)      Disability. If the Employee fails to perform her duties
                  hereunder on account of illness or other incapacity for a
                  period of nine consecutive months, then the Company shall have
                  the right upon written notice to the Employee to terminate
                  this Agreement without further obligation by paying the
                  Employee the minimum base annual salary, without offset, for
                  the remainder of the Term in a lump sum or as otherwise
                  directed by the Employee.

         (d)      Death. If the Employee dies during the Term, then this
                  Agreement shall terminate immediately and the Employee's legal
                  representatives shall be entitled to receive the minimum
                  annual base salary for the remainder of the Term in a lump sum
                  or as otherwise directed by the Employee's legal
                  representative.

         (e)      Mitigation. The Employee shall not be required to mitigate the
                  amount of any payment provided for in this Section 7 by
                  seeking other employment or otherwise, nor shall any
                  compensation or other payments received by


                                     Page 3

                  the Employee after the date of termination reduce any payments
                  due under this Section 7.

         (f) Effect of Termination. Termination for any reason or for no reason
         shall not constitute a waiver of the Company's rights under this
         Agreement nor a release of the Employee from any obligation hereunder
         except his obligation to perform her day-to-day duties as an employee.

         8. Severance Payment.

         (a)      The Employee may terminate her employment hereunder for "Good
                  Reason," which for purposes of this Agreement shall mean a
                  "change in control of the Company." A "change in control of
                  the Company," for purposes of this Agreement, shall be deemed
                  to have occurred if (i) there shall be consummated (x) any
                  consolidation or merger of the Company other than a
                  consolidation or merger of the Company in which the holders of
                  the Company's Common Stock immediately prior to the merger own
                  more than 50% of the voting securities of the surviving
                  corporation immediately after the merger, or (y) any sale,
                  lease exchange or other transfer (in one transaction or a
                  series of related transactions) of all, of substantially all,
                  of the assets of the Company, or (ii) the stockholders of the
                  Company approve any plan or proposal for the liquidation or
                  dissolution of the Company, or (iii) any "person" (such as
                  that term is used in Sections 13(d) and 14(d) of the
                  Securities Exchange Act of 1934 (the "Exchange Act")), other
                  than the Company or any "person" who, on the date hereof, is a
                  director or officer of the Company, is or becomes the
                  "beneficial owner" (as defined in Rule 13d-3 under the
                  Exchange Act), of securities of the Company representing 30%
                  or more of the combined voting power of the Company's then
                  outstanding securities, or (iv) during any period of two (2)
                  consecutive years during the Term or any extensions thereof,
                  individuals, who, at the beginning of such period, constitute
                  the Board of Directors, cease for any reason to constitute at
                  least a majority thereof, unless the election of each director
                  who was not a director at the beginning of such period has
                  been approved in advance by directors representing at least
                  two-thirds of the directors then in office who were directors
                  at the beginning of the period.

         (b)      If the Employee terminates her employment for Good Reason, or,
                  if after a change in control of the Company, the Company shall
                  terminate the Employee's employment in breach of this
                  Agreement or pursuant to Section 7(b), then:

                  (i)      The Company shall pay the Employee her minimum base
                           annual salary due her through the date of
                           termination.

                  (ii)     In lieu of any further salary and bonus payments or
                           other payments due to the Employee for periods
                           subsequent to the date


                                     Page 4

                           of termination, the Company shall pay, as severance
                           to the Employee, an amount equal to the product of
                           (A) the Employee's minimum base annual salary in
                           effect as of the date of termination plus the Base
                           Year Bonus, multiplied by (B) the number of years
                           (including partial years) remaining in the Term or
                           the number 3 (three), whichever is greater.

                  (iii)    All options granted to the Employee which had not
                           vested as of the date of termination hereunder shall
                           vest immediately; and

                  (iv)     The Company shall maintain in full force and effect,
                           for the continued benefit of the Employee for the
                           number of years (including partial years) remaining
                           in the Term, all employee benefit plans and programs
                           in which the Employee was entitled to participate
                           immediately prior to the date of termination,
                           provided that the Employee's continued participation
                           is possible under the general terms and provisions of
                           such plans and programs. In the event that the
                           Employee's participation in any such plan or program
                           is prohibited, the Company shall, at its expense,
                           arrange to provide the Employee with benefits
                           substantially similar to those which the Employee
                           would otherwise have been entitled to receive under
                           such plans and programs from which her continued
                           participation is prohibited.

         (c)      For purposes of this Section 8 and Section 7 hereof, the
                  Employee shall not be required to mitigate the amount of any
                  payment provided for in Sections 7 and 8 by seeking other
                  employment or otherwise, nor shall any compensation or other
                  payments received by the Employee after the date of
                  termination reduce any payments due under such Sections.

         9. Indemnification for Taxes. The Company shall indemnify Employee for
any and all taxes, penalties, additions to tax and interest on tax deficiencies
of any kind (collectively, "Taxes") with respect to any and all payments and
benefits provided by this Agreement or other agreements with Employee which are
subject (if at all) to the excise tax (Excess Tax") pursuant to Section 4999 of
the Internal Revenue Code of 1986, as amended. This indemnification shall extend
to any and all Taxes with respect to any and all reimbursements hereunder such
that, on a net-after-tax basis, Employee is in the same position that Employee
would have been in if no payments made by Company to Employee had been subject
to the Excise Tax (and, therefore, no indemnification payments hereunder had
been necessary).

         10. Non-Delegation of Employee's Rights. The obligations, rights and
benefits of the Employee hereunder are personal and may not be delegated,
assigned or transferred in any manner whatsoever, nor are such obligations,
rights or benefits subject to involuntary alienation, assignment or transfer.


                                     Page 5

         11. Confidential Information. The Employee acknowledges that in her
capacity as an employee of the Company she will occupy a position of trust and
confidence and she further acknowledges that she will have access to and learn
substantial information about the Company and its operations that is
confidential or not generally known in the industry including, without
limitation, information that relates to purchasing, sales, customers, marketing,
and the Company's financial position and financing arrangements. The Employee
agrees that all such information is proprietary or confidential, or constitutes
trade secrets and is the sole property of the Company. The Employee will keep
confidential, and will not reproduce, copy or disclose to any other person or
firm, any such information or any documents or information relating to the
Company's methods, processes, customers, accounts, analyses, systems, charts,
programs, procedures, correspondence or records, or any other documents used or
owned by the Company, nor will the Employee advise, discuss with or in any way
assist any other person, firm or entity in obtaining or learning about any of
the items described in this Section 11. Accordingly, the Employee agrees that
during the Term and at all times thereafter she will not disclose, or permit or
encourage anyone else to disclose, any such information, nor will she utilize
any such information, either along or with others, outside the scope of her
duties and responsibilities with the Company.

         12. Non-Competition During Employment Term. The Employee agrees that,
during the term and any extensions thereof, she will devote substantially all
her business time and effort, and give undivided loyalty, to the Company. She
will not engage in any way whatsoever, directly or indirectly, in any business
that is competitive with the Company or its affiliates, nor solicit, or in any
other manner work for or assist any business which is competitive with the
Company or its affiliates. In addition, during the Term and any extensions
thereof, the Employee will undertake no planning for or organization of any
business activity competitive with the work she performs as an employee of the
Company, and the Employee will not combine or conspire with any other employee
of the Company or any other person for the purpose of organizing any such
competitive business activity.

         13. Non-Competition After Employment Term. The parties acknowledge that
as an executive officer of the Company the Employee will acquire substantial
knowledge and information concerning the business of the Company as a result of
her employment. The parties further acknowledge that the scope of business in
which the Company is engaged as of the Effective Date is national and very
competitive and one in which few companies can successfully compete. Competition
by an executive officer such as the Employee in that business after this
Agreement is terminated would severely injure the Company. Accordingly, for a
period of one year after this Agreement is terminated or the Employee leaves the
employment of the Company for any reason whatsoever, except as otherwise stated
herein below, the Employee agrees (i) not to become an employee, consultant,
advisor, principal, partner or substantial shareholder of any firm or business
that in any way competes with the Company in any of its presently-existing or
then- existing products and markets; and (ii) not to solicit any person or
business that was at the time of such termination and remains a customer or
prospective customer, or an employee of the Company. Notwithstanding any of the
foregoing provisions to the


                                     Page 6

contrary, the Employee shall not be subject to the restrictions set forth in
this Section 13 under the following circumstances:

         (a)      If the Employee's employment with the Company is terminated by
                  the Company without cause;

         (b)      If the Employee's employment with the Company is terminated as
                  a result of the Company's unwillingness to extend the Term of
                  this Agreement; or,

         (c)      If the Employee leaves the employment of the Company for Good
                  Reason pursuant to Section 8, above.

         14. Return of Company Documents. Upon termination of this Agreement,
Employee shall return immediately to the Company all records and documents of or
pertaining to the Company and shall not make or retain any copy or extract of
any such record or document.


         15. Other Employment and Location. Anything to the contrary hereinabove
notwithstanding, Company acknowledges that Employee may serve as a Director
and/or Chairman of the Board of certain other companies and will direct a
reasonable portion of her time to fulfilling her duties in such capacities.
Company acknowledges that Employee serving as a Director and/or Chairman of the
Board of other companies shall not constitute a violation of this Agreement or
any provision hereof including but not limited to Sections 11, 12 and 13, so
long as Employee dedicates a reasonable amount of her time to her duties
hereunder. The Employee shall not be required to move from [Orange County],
California, to perform her duties hereunder during the Term without his written
consent.

         16. Improvements and Inventions. Any and all improvements or
inventions, which the Employee may make or participate in during the period of
his employment, shall be the sole and exclusive property of the Company. The
Employee will, whenever requested by the Company, execute and deliver any and
all documents which the Company shall deem appropriate in order to apply for and
obtain patents for improvements or inventions or in order to assign and convey
to the Company the sole and exclusive right, title and interest in and to such
improvements, inventions, patents or applications.

         17. Actions. The parties agree and acknowledge that the rights conveyed
by this Agreement are of a unique and special nature and that the Company will
not have an adequate remedy at law in the event of a failure by the Employee to
abide by its terms and conditions nor will money damages adequately compensate
for such injury. It is, therefore, agreed between the parties that, in the event
of a breach by the Employee of any of his obligations contained in this
Agreement, the Company shall have the right, among other rights, to damages
sustained thereby and to obtain an injunction or decree of specific performance
from any court of competent jurisdiction to restrain or compel the Employee to
perform as agreed herein. The Employee agrees that this Section 17 shall


                                     Page 7

survive the termination of her employment and she shall be bound by its terms at
all times subsequent to the termination of her employment for so long a period
as Company continues to conduct the same business or businesses as conducted
during the Term or any extensions thereof. Nothing herein contained shall in any
way limit or exclude any other right granted by law or equity to the Company.

         18. Amendment. This Agreement contains, and its terms constitute, the
entire agreement of the parties, and it may be amended only by a written
document signed by both parties to this Agreement.

         19. Governing Law. California law shall govern the construction and
enforcement of this Agreement and the parties agree that any litigation
pertaining to this Agreement shall be adjudicated in courts located in
California. This Agreement supercedes and replaces any prior agreements or
understandings between the parties with respect to the subject matter hereof.

         20. Attorneys' Fees. If any party finds it necessary to employ legal
counsel or to bring an action at law or other proceedings against the other
party to enforce any of the terms hereof, the party prevailing in any such
action or other proceeding shall be paid by the other party its reasonable
attorneys' fees as well as court costs, all as determined by the court and not a
jury.

         21. Severability. If any section, subsection or provision hereof is
found for any reason whatsoever, to be invalid or inoperative, that section,
subsection or provision shall be deemed severable and shall not affect the force
and validity of any other provision of this Agreement. If any covenant herein is
determined by a court to be overly broad thereby making the covenant
unenforceable, the parties agree and it is their desire that such court shall
substitute a reasonable judicially enforceable limitation in place of the
offensive part of the covenant and that as so modified the covenant shall be as
fully enforceable as if set forth herein by the parties themselves in the
modified form. The covenants of the Employee in this Agreement shall each be
construed as an agreement independent of any other provision in this Agreement,
and the existence of any claim or cause of action of the Employee against the
Company, whether predicated on this Agreement or otherwise, shall not constitute
a defense to the enforcement by the Company of the covenants in this Agreement.

         22. Notices. Any notice, request, or instruction to be given hereunder
shall be in writing and shall be deemed given when personally delivered or three
(3) days after being sent by United States Certified Mail, postage prepaid, with
Return Receipt Requested, to the parties at their respective addresses set forth
below:

                  To the Company:           American National Financial, Inc.
                                            1111 East Katella Avenue, Suite 220
                                            Orange, California  92867
                                            Attention:   Michael C. Lowther
                                                         Chief Executive Officer


                                     Page 8

                  To the Employee:          Barbara A. Ferguson
                                            2611 Seaview Avenue
                                            Corona del Mar, California 92625

         23. Waiver of Breach. The Waiver by any party of any provisions of this
Agreement shall not operate or be construed as a waiver of any prior or
subsequent breach by the other party.


         IN WITNESS WHEREOF the parties have executed this Agreement to be
effective as of the date first set forth above.


                               AMERICAN NATIONAL FINANCIAL, INC.


                               By:
                                  -----------------------------------
                                        Michael C. Lowther
                               Its:     Chief Executive Officer

                               BARBARA A. FERGUSON

                               --------------------------------------


                                     Page 9