Stock Purchase Plan

During the three-year period ended December 31, 2014, our eligible employees could voluntarily participate in employee stock purchase plans (“ESPPs”) sponsored by us and our subsidiaries. Pursuant to the ESPPs, employees may contribute an amount between 3% and 15% of their base salary and certain commissions. We contribute varying amounts as specified in the ESPPs.

We contributed $18 million, $17 million, and $14 million to the ESPPs in the years ended December 31, 2014, 2013, and 2012, respectively, in accordance with the employer’s matching contribution.

401(k) Profit Sharing Plan

During the three-year period ended December 31, 2014, we have offered our employees the opportunity to participate in our 401(k) profit sharing plans (the “401(k) Plan”), qualified voluntary contributory savings plans which are available to substantially all of our employees. Eligible employees may contribute up to 40% of their pretax annual compensation, up to the amount allowed pursuant to the Internal Revenue Code. Beginning in 2012, we initiated an employer match on the 401(k) Plan whereby we matched $0.25 on each $1.00 contributed up to the first 6% of eligible earnings contributed to the 401(k) Plan. Effective April 1, 2013, we increased the employer match from $0.25 to $0.375 on each $1.00 contributed up to the first 6% of eligible earnings contributed to the 401 (k) Plan. On June 30, 2014, we completed the recapitalization of Old FNF common stock into two tracking stocks, FNF Group common stock and FNFV Group common stock. Participants in the FNF 401(k) Plan received one share of FNF Group Common Stock and 0.3333 of a share of FNFV Group Common Stock for each share of Old FNF common stock that they held at the close of business on June 30, 2014. The employer match for the years ended December 31, 2014, 2013 and 2012 was $25 million, $17 million and $11 million, respectively, that was credited to the FNF Stock Fund in the FNF 401(k) Plan, through July 1, 2014. Subsequent to July 1, 2014, the employer match will be credited based on the participants individual investment elections.

Stock Option Plans

In 2005, we established the FNT 2005 Omnibus Incentive Plan (the “Omnibus Plan”) authorizing the issuance of up to 8 million shares of common stock, subject to the terms of the Omnibus Plan. On October 23, 2006, the shareholders of FNF approved an amendment to increase the number of shares available for issuance under the Omnibus Plan by 16 million shares. The increase was in part to provide capacity for options and restricted stock to be issued to replace Old FNF options and restricted stock. On May 29, 2008, May 25, 2011 and May 22, 2013, the shareholders of FNF approved an amendment to increase the number of shares for issuance under the Omnibus Plan by 11 million shares and 6 million shares and 6 million shares, respectively. The primary purpose of the increase was to assure that we had adequate means to provide equity incentive compensation to our employees on a going-forward basis. The Omnibus Plan provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units and performance shares, performance units, other cash and stock-based awards and dividend equivalents. As of December 31, 2014, there were 1,770,781 shares of restricted stock and 9,393,211 stock options outstanding under this plan. Awards granted are approved by the Compensation Committee of the Board of Directors. Options vest over a 3 year period, and the exercise price for options granted equals the market price of the underlying stock on the grant date. Stock option grants vest according to certain time based and operating performance criteria.

On June 30, 2014, we completed the recapitalization of FNF common stock into two tracking stocks, FNF Group common stock and FNFV Group common stock. Each share of the previously outstanding FNF Class A common stock ("Old FNF common stock") was converted into one share of FNF Group common stock, which now trades on the New York Stock Exchange under the current trading symbol "FNF," and 0.3333 of a share of FNFV Group common stock. All participants in the stock option and restricted stock plans at the time of the recapitalization were granted a one-time grant of additional FNF Group options and restricted shares. The grant was made in order for each participant to maintain their current intrinsic value in the plan. This one-time grant did not result in any additional compensation for the employees participating in the plan. Awards granted are determined and approved by the Compensation Committee of the Board of Directors.

FNF Group stock option transactions under the Omnibus Plan for 2012, 2013, and 2014 are as follows:



	Options		Weighted Average Exercise Price		Exercisable
Balance, December 31, 2011	20,632,021		$	13.79	18,704,618
Granted	769,693		22.59
Exercised	(12,358,474	)	12.49
Canceled	(76,166	)	22.69
Balance, December 31, 2012	8,967,074		$	16.27	8,147,381
Granted	3,712,416		27.90
Exercised	(3,267,937	)	18.28
Canceled	(52,813	)	22.59
Balance, December 31, 2013	9,358,740		$	20.15	5,180,504
Granted	1,112,133		29.80
Options granted for FNFV recapitalization	1,346,302		17.86
Exercised	(2,418,713	)	15.80
Canceled	(5,251	)	23.85
Balance, December 31, 2014	9,393,211		$	19.43	5,173,802

FNF Group restricted stock transactions under the Omnibus Plan in 2012, 2013, and 2014 are as follows:




	Shares		Weighted Average Grant Date Fair Value
Balance, December 31, 2011	3,012,656		$	14.78
Granted	1,332,222		22.59
Canceled	(17,840	)	14.78
Vested	(1,402,300	)	14.55
Balance, December 31, 2012	2,924,738		$	18.46
Granted	650,728		27.90
Canceled	(8,116	)	17.44
Vested	(1,654,278	)	17.30
Balance, December 31, 2013	1,913,072		$	22.68
Granted	785,705		29.80
Restricted shares granted for FNFV recapitalization	363,392		28.46
Canceled	(4,656	)	21.29
Vested	(1,286,732	)	17.33
Balance, December 31, 2014	1,770,781		$	25.08

FNFV restricted stock transactions under the Omnibus Plan in 2014 are as follows:




	Shares	Weighted Average Grant Date Fair Value
Balance, December 31, 2013	—	$	—
Granted	1,233,333	14.69
Canceled	—	—
Vested	—	—
Balance, December 31, 2014	1,233,333	$	14.69

The following table summarizes information related to stock options outstanding and exercisable as of December 31, 2014:



	Options Outstanding						Options Exercisable
		Weighted						Weighted
		Average	Weighted					Average	Weighted
		Remaining	Average					Remaining	Average
Range of	Number of	Contractual	Exercise		Intrinsic		Number of	Contractual	Exercise		Intrinsic
Exercise Prices	Options	Life	Price		Value		Options	Life	Price		Value
					(In millions)						(In millions)
$0.00 — $6.16	1,315,499	1.83	$	6.16	$	37	1,315,499	1.83	$	6.16	$	37
$6.17 — $11.85	1,370,947	0.85	11.85		31		1,370,947	0.85	11.85		31
$11.86 — $12.22	539,131	1.90	12.22		12		539,131	1.90	12.22		12
$12.23 — $15.76	38,133	1.86	15.21		1		38,133	1.86	15.21		1
$15.77 — $19.62	796,722	4.73	19.57		12		534,395	4.67	19.54		8
$19.63 — $24.24	4,220,646	5.89	24.24		43		1,375,697	5.89	24.24		14
$24.25 — $29.80	1,112,133	6.85	29.80		5		—	—	—		—
	9,393,211				$	141	5,173,802				$	103

We account for stock-based compensation plans in accordance with GAAP on share-based payments, which requires that compensation cost relating to share-based payments be recognized in the consolidated financial statements based on the fair value of each award. Using the fair value method of accounting, compensation cost is measured based on the fair value of the award at the grant date and recognized over the service period. Net earnings attributable to FNF Shareholders reflects stock-based compensation expense amounts of $51 million for the year ended December 31, 2014 and $35 million for the year ended December 31, 2013, and $27 million for the year ended December 31, 2012, which are included in personnel costs in the reported financial results of each period.

The risk free interest rates used in the calculation of compensation cost on stock options are the rates that correspond to the weighted average expected life of an option. The volatility was estimated based on the historical volatility of FNF’s stock price over a term equal to the weighted average expected life of the options. For options granted in the years ended December 31, 2014, 2013, and 2012, we used risk free interest rates of 1.5%, 1.1%, and 0.6%, respectively; volatility factors for the expected market price of the common stock of 24%, 26%, and 50%, respectively; expected dividend yields of 2.6%, 2.6%, and 2.8%, respectively; and weighted average expected lives of 4.6 years, 4.4 years, and 4.6 years, respectively. The weighted average fair value of each option granted in the years ended December 31, 2014, 2013, and 2012, were $4.81, $4.67, and $7.58, respectively.

At December 31, 2014, the total unrecognized compensation cost related to non-vested stock option grants and restricted stock grants is $75 million, which is expected to be recognized in pre-tax income over a weighted average period of 1.68 years.

Profits Interests Plan

During the year ended December 31, 2014, there were 11 million profits interests outstanding in each of BKFS and ServiceLink, which were issued to certain members of management, directors, and certain employees, which vest over 3 years, with 50% vesting after the second year and 50% vesting after the third year. The terms of the profits interest grants provide for the grantees to participate in any incremental value of BKFS and ServiceLink in excess of its fair value at the date of grant in proportion to the Class A member unit holders participation in the same. The fair values of BKFS and ServiceLink at the date of grant is otherwise known as the hurdle amount. Profits interests granted are determined and approved by the Compensation Committee of the Board of Directors. Once vested, Class B units are not subject to expiration. The Class B units may be settled under various scenarios. According to the terms of the Profits Interest Plan (or the “Plan”) and depending on the scenario, the Class B units may be settled in shares of FNF Group common stock or cash at our election.

The profits interest holders have an option to put their profits interests to us if no public offering of the corresponding businesses has been consummated after four years from the date of grant. The units may be settled in cash or FNF Group common stock or a combination of both at our election and will be settled at the current fair value at the time we receive notice of the put election. The fair value will be determined by the parties or by a third party appraisal under the terms of the Plan. As the profits interests provide for redemption features not solely within our control, we classify the redemption value outside of permanent equity in redeemable noncontrolling interests. The redemption value is equal to the difference in the per unit fair value of the underlying member units and the hurdle amount, based upon the proportionate required service period rendered to date.

We account for the profits interests granted to employees and directors in accordance with GAAP on share-based payments, which requires that compensation cost relating to share-based payments made to employees and directors be recognized in the consolidated financial statements based on the fair value of each award. Using the fair value method of accounting, compensation cost is measured based on the fair value of the award at the grant date and recognized over the service period. We utilized the Black-Scholes model to calculate the fair value of the profits interests’ awards on the date of grant (“Calculation”).

The hurdle rate as of the date of grant was used to determine the per unit strike price for the Calculation. The risk free interest rates used in the calculation of the fair value of profits interests are the rates that correspond to the weighted average expected life of the profits interests. The volatility was estimated based on the historical volatility of BKFS and ServiceLink peers and of the historical LPS stock price over a term equal to the weighted average expected life of the profits interests. We used a weighted average risk free interest rate of 1.06%, a volatility factor for the expected market price of the member units of 33.3% and a weighted average expected life of 3.5 years with a discount of 22.0% for lack of marketability, resulting in a weighted average fair value of $2.04 per profits interests unit granted. The total redemption value of the outstanding profits interests as of December 31, 2014 was $88 million.

Profits interest expense is included in Personnel costs in the Consolidated Statements of Earnings and Non-controlling interest in the Consolidated Statements of Equity. Net earnings from continuing operations reflect profits interest expense of $14 million for the year ended December 31, 2014. The redemption value of the profits interests granted is reclassified from Non-controlling interest to Redeemable non-controlling interest and was $28 million at December 31, 2014.

As of December 31, 2014, the total unrecognized compensation cost related to non-vested profits interests grants is $30 million which is expected to be recognized in pre-tax income over a weighted average period of 2.08 years.

Pension Plans

In 2000, FNF merged with Chicago Title Corporation ("Chicago Title"). In connection with the merger, we assumed Chicago Title’s noncontributory defined contribution plan and noncontributory defined benefit pension plan (the “Pension Plan”). The Pension Plan covers certain Chicago Title employees. The benefits are based on years of service and the employee’s average monthly compensation in the highest 60 consecutive calendar months during the 120 months ending at retirement or termination. Effective December 31, 2000, the Pension Plan was frozen and there will be no future credit given for years of service or changes in salary. The accumulated benefit obligation is the same as the projected benefit obligation due to the pension plan being frozen as of December 31, 2000. Pursuant to GAAP on employers’ accounting for defined benefit pension and other post retirement plans, the measurement date is December 31.

The net pension asset (liability) included in Prepaid expenses and other assets and Accounts payable and other accrued liabilities as of December 31, 2014, and 2013 was $14 million and $(6) million, respectively. The discount rate used to determine the benefit obligation as of the years ended December 31, 2014 and 2013 was 3.37% and 4.12%, respectively. As of the years ended December 31, 2014 and 2013 the projected benefit obligation was $185 million and $167 million, respectively, and the fair value of plan assets was $171 million and $173 million, respectively. The net periodic expense included in the results of operations relating to these plans was $6 million, $9 million, and $10 million for the years ended December 31, 2014, 2013, and 2012, respectively.

Postretirement and Other Nonqualified Employee Benefit Plans

We assumed certain health care and life insurance benefits for retired Chicago Title employees in connection with the FNF merger with Chicago Title. Beginning on January 1, 2001, these benefits were offered to all employees who met specific eligibility requirements. Additionally, in connection with the acquisition of LandAmerica Financial Group's two principal title insurance underwriters, Commonwealth Land Title Insurance Company and Lawyers Title Insurance Corporation, as well as United Capital Title Insurance Company (collectively, the "LFG Underwriters"), we assumed certain of the LFG Underwriters nonqualified benefit plans, which provide various postretirement benefits to certain executives and retirees. The costs of these benefit plans are accrued during the periods the employees render service. We are both self-insured and fully insured for postretirement health care and life insurance benefit plans, and the plans are not funded. The health care plans provide for insurance benefits after retirement and are generally contributory, with contributions adjusted annually. Postretirement life insurance benefits are primarily contributory, with coverage amounts declining with increases in a retiree’s age. The aggregate benefit obligation for these plans was $20 million at December 31, 2014 and 2013. The net costs relating to these plans were immaterial for the years ended December 31, 2014, 2013, and 2012.