SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED
IN PROXY STATEMENT
SCHEDULE 14A
INFORMATION
Proxy Statement
Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant
[x]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Soliciting Material Under Rule
[_] Confidential, For Use of the 14a-12
Commission Only (as permitted
by Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[_] Definitive Additional Materials
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Soliciting Material Under Rule
[_] Confidential, For Use of the 14a-12
Commission Only (as permitted
by Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[_] Definitive Additional Materials
Investors Title Company
------------------------------------------------------------------------------------------------------------------------------------------------------
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(Name of Registrant as
Specified In Its Charter)
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Filing Proxy Statement, if Other Than the Registrant)
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[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
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121 North Columbia Street, Chapel Hill, North Carolina 27514
(919) 968-2200
April 13, 2010
Dear Shareholders:
You are cordially invited to attend the Annual Meeting of Shareholders of
Investors Title Company to be held at The Siena Hotel, 1505 East Franklin
Street, Chapel Hill, North Carolina on Wednesday, May 19, 2010 at 11:00 a.m.
EDT.
The Annual Meeting will begin with a review of the activities of the
Company for the past year and a report on current operations during the first
quarter of 2010, followed by discussion and voting on the matters set forth in
the accompanying Notice of Annual Meeting and Proxy Statement.
The Board of Directors of the Company
unanimously recommends that you vote FOR the election of the directors nominated
to serve until the Annual Meeting of Shareholders in 2013 and for the
ratification of the appointment of Dixon Hughes PLLC as the Company’s
independent registered public accounting firm for 2010.
I urge you to review the Proxy
Statement, sign and date the enclosed proxy card, and return it promptly in the
enclosed postage-paid envelope.
| Cordially, |
 |
|
J. Allen
Fine
|
|
Chief Executive
Officer
|
121 North Columbia Street, Chapel Hill, North Carolina 27514
(919) 968-2200
|
NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS
TO BE HELD ON MAY 19, 2010 |
The Annual Meeting of the Shareholders of Investors Title Company will be
held at The Siena Hotel, 1505 East Franklin Street, Chapel Hill, North Carolina,
on Wednesday, May 19, 2010 at 11:00 a.m. EDT, for the following
purposes:
| (1) | To elect three directors for three-year terms or until their successors are elected and qualified; | ||
| (2) | To ratify the appointment of Dixon Hughes PLLC as the Company’s independent registered public accounting firm for 2010; and | ||
| (3) | To consider any other business that may properly come before the meeting. | ||
Shareholders of record of Common Stock of
the Company at the close of business on April 2, 2010 are entitled to notice of
and to vote at the meeting and any adjournments thereof.
| By Order of the Board of Directors: |
 |
|
W. Morris
Fine
|
| Secretary |
| April 13, 2010 |
|
IMPORTANT - Your proxy card is enclosed.
You can vote your shares by completing and returning your proxy card in
the enclosed postage-paid envelope. Whether or not you expect to be
present at the meeting, please review the Proxy Statement and promptly
vote in order to assist the Company in keeping down the expenses of the
meeting. You can revoke your proxy at any time prior to its exercise at
the meeting by following the instructions in the accompanying Proxy
Statement.
|
TABLE OF CONTENTS
| Page | ||
| GENERAL INFORMATION | 1 | |
| Proxy Solicitation by the Board of Directors | 1 | |
| Submitting and Revoking a Proxy | 1 | |
| Voting Securities | 1 | |
| Annual Report to Shareholders | 1 | |
| Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting | ||
| Of Shareholders to be Held on May 19, 2010 | 2 | |
| Section 16(a) Beneficial Ownership Reporting Compliance | 2 | |
| General Information | 2 | |
| CORPORATE GOVERNANCE | 2 | |
| Code of Business Conduct and Ethics | 2 | |
| Shareholder Communications with Directors | 2 | |
| Independent Directors | 3 | |
| Executive Sessions | 3 | |
| Board of Directors and Committees | 3 | |
| Board Leadership Structure | 5 | |
| The Board’s Role in Risk Oversight | 5 | |
| COMPENSATION OF DIRECTORS | 6 | |
| STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS | ||
| AND MANAGEMENT | 8 | |
| PROPOSALS REQUIRING YOUR VOTE | 10 | |
| Proposal 1 - Election of Directors | 10 | |
| Information Regarding Nominees for Election as Directors | 11 | |
| Information Regarding Directors Continuing in Office | 11 | |
| Proposal 2 - | Ratification of Appointment of Independent Registered Public | |
| Accounting Firm | 13 | |
| Audit and Non-Audit Fees | 14 | |
| Audit and Non-Audit Services Pre-Approval Policy | 14 | |
| AUDIT COMMITTEE REPORT | 14 | |
| EXECUTIVE COMPENSATION | 16 | |
| CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS | 23 | |
| SHAREHOLDER PROPOSALS FOR 2011 ANNUAL MEETING | 23 | |
|
PROXY
STATEMENT
|
|
ANNUAL MEETING OF SHAREHOLDERS
OF
INVESTORS TITLE COMPANY To Be Held on May 19, 2010 |
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Investors Title Company of proxies to be voted at the
Annual Shareholders’ Meeting to be held at The Siena Hotel, 1505 East Franklin
Street, Chapel Hill, North Carolina, on May 19, 2010 at 11:00 a.m. EDT, and at
all adjournments thereof. Shareholders of record at the close of business on
April 2, 2010 are entitled to notice of and to vote at the meeting and any
adjournments thereof.
GENERAL INFORMATION
Proxy Solicitation by the Board of
Directors. The
solicitation of proxies is made on behalf of the Company’s Board of Directors
and will be made either by mail or, as described below, by electronic delivery.
The cost of solicitation of proxies will be borne by the Company. Copies of
proxy materials and the Annual Report for 2009 will be provided to brokers,
dealers, banks and voting trustees or their nominees for the purpose of
soliciting proxies from the beneficial owners, and the Company will reimburse
these record holders for their out-of-pocket expenses.
Submitting and Revoking a
Proxy. If you complete and
submit your proxy, the persons named as proxies will vote the shares represented
by your proxy in accordance with your instructions. If you submit a proxy card
but do not fill out the voting instructions on the proxy card, the persons named
as proxies will vote the shares represented by your proxy FOR the election of
the director nominees set forth herein and FOR the
ratification of the appointment of Dixon Hughes PLLC as the Company’s
independent registered public accounting firm. In addition, if other matters are
properly presented for voting at the meeting, the persons named as proxies will
vote on such matters in accordance with their best judgment. The Company has not
received notice of other matters that may be properly presented for voting at
the meeting.
To ensure that your vote is recorded
properly, please vote your shares as soon as possible, even if you plan to
attend the meeting in person. Each proxy executed and returned by a shareholder
may be revoked at any time thereafter except as to any matter or matters upon
which, prior to such revocation, a vote shall have been cast pursuant to the
authority conferred by such proxy. Shareholders with shares registered directly
in their names may revoke their proxy by (1) sending written notice of
revocation to the Corporate Secretary, P.O. Box 2687, Chapel Hill, North
Carolina 27515-2687, (2) submitting a subsequent proxy or (3) voting in person
at the meeting. Attendance at the meeting will not by itself revoke a proxy. A
shareholder wishing to change his or her vote who holds shares through a bank,
brokerage firm or other nominee must contact the record holder.
Voting Securities. On April 2, 2010, the Company had a total of
2,577,162 shares of Common Stock outstanding, its only class of issued and
outstanding capital stock. Of these shares, 2,285,486 shares are entitled to one
vote per share and 291,676 shares are held by a subsidiary of the Company and,
pursuant to North Carolina law, are not entitled to vote. A majority of the
shares entitled to vote at the meeting, represented at the meeting in person or
by proxy, will constitute a quorum.
Annual Report to
Shareholders. An Annual
Report of the Company for the calendar year 2009 including financial statements
and the independent registered public accounting firms’ opinions, along with the
Notice of Annual Meeting, Proxy Statement and proxy card, are being first mailed
to the Company’s shareholders on or about April 13, 2010.
1
Important Notice Regarding the
Availability of Proxy Materials for the Annual Meeting of Shareholders to be
Held on May 19, 2010. The
Notice of Annual Meeting and Proxy Statement and the Company’s 2009 Annual
Report (the “Proxy Materials”) are available on the Company’s website at
www.invtitle.com/investor-rel/proxy-materials as well as online to certain
shareholders that have arranged through their broker to receive the Proxy
Materials electronically. Shareholders that hold their shares in a brokerage
account may have the opportunity to receive future Proxy Materials
electronically. Please contact your broker for information regarding the
availability of this service.
Section 16(a) Beneficial Ownership
Reporting Compliance.
Section 16(a) of the Securities Exchange Act of 1934 requires directors,
executive officers and all persons who beneficially own more than 10% of the
Company’s securities to file reports with the Securities and Exchange Commission
with respect to beneficial ownership of Company securities. Based solely upon a
review of copies of the filings that the Company received with respect to the
fiscal year ended December 31, 2009, or written representations from certain
reporting persons, the Company believes that all reporting persons filed all
reports required by Section 16(a) in a timely manner, except David L. Francis,
Richard M. Hutson, II, Horace R. Johnson, Joe H. King, Jr., James A. Morton and
A. Scott Parker III each filed one late report covering one transaction
occurring in May 2009.
General
Information. A copy of the
Company’s 2009 Annual Report on Form 10-K filed with the Securities and Exchange
Commission, or copies of the exhibits to the Form 10-K, can be obtained without
charge by contacting Investor Relations at investorrelations@invtitle.com or
P.O. Box 2687, Chapel Hill, North Carolina 27515-2687.
CORPORATE GOVERNANCE
Code of Business Conduct and
Ethics
The Company has a Code of Business
Conduct and Ethics that is applicable to all of the Company’s employees,
officers and directors, including its Chief Executive Officer, Chief Financial
Officer and Chief Accounting Officer. This Code addresses a variety of issues,
including conflicts of interest, the protection of confidential information,
insider trading, and employment practices. It also requires strict compliance
with all laws, rules and regulations governing the conduct of the Company’s
business.
The Code of Business Conduct and Ethics
is posted in the Corporate Governance area of the Investor Relations section of
the Company’s website at www.invtitle.com. The Company intends to disclose
future amendments to or waivers from the Code of Business Conduct and Ethics on
its website within two business days after such amendment or waiver.
Shareholder Communications with Directors
Shareholders can communicate with members
of the Company’s Board of Directors in one of two ways. Shareholders may mail
correspondence to the attention of the Corporate Secretary, P.O. Box 2687,
Chapel Hill, North Carolina 27515-2687. Any correspondence sent via mail should
clearly indicate that it is a communication intended for the Board of Directors.
Shareholders may also use electronic mail to contact the Board of Directors at
boardofdirectors@invtitle.com. The Corporate Secretary regularly monitors this
email account. Any communication that is intended for a particular Board member
or committee should clearly state the intended recipient.
The Corporate Secretary will review all
communications sent to the Board of Directors via mail and email and will
forward all communications concerning Company or Board matters to the Board
members within five business days of receipt. If a communication is directed to
a particular Board member or committee, it will be passed on only to that member
or the members of that committee. Otherwise, relevant communications will be
forwarded to all Board members.
2
Independent Directors
The Board of Directors has determined that the following directors and
nominees for director are independent directors within the meaning of the
applicable listing standards of The NASDAQ Stock Market LLC (“NASDAQ”) and the
Company’s Board of Directors Independence Standards: Mr. David L. Francis, Mr.
Richard M. Hutson II, Mr. R. Horace Johnson, Mr. H. Joe King, Jr., Mr. James R.
Morton and Mr. A. Scott Parker III and Mr. James H. Speed, Jr. The Board of
Directors Independence Standards can be found on the Company’s website at
www.invtitle.com/investor-rel/corp-gov/committees.
Executive Sessions
Executive sessions that include only the
independent members of the Board of Directors are held
periodically.
Board of Directors and
Committees
During the year ended December 31, 2009,
the Board of Directors held four meetings. All incumbent directors and nominees
attended 75% or more of the aggregate number of meetings of the Board of
Directors and committees of the Board on which they served. The Company expects
each of its directors to attend the Annual Meeting of Shareholders unless an
emergency prevents them from attending. All of the Board members were present at
the 2009 Annual Meeting.
The Company’s Board of Directors has a
standing Audit Committee, Compensation Committee, and Nominating
Committee.
The Audit
Committee. In 2009
the Audit Committee was composed of Mr. Francis, Mr. Johnson and Mr. King. The
Audit Committee met thirteen times in 2009.
The Audit Committee is directly
responsible for overseeing the Company’s accounting and financial reporting
processes and appointing, retaining, compensating and overseeing the Company’s
independent registered public accounting firm and reviewing the scope of the
annual audit proposed by the independent registered public accounting firm. In
addition, the Committee reviews and approves related party transactions and
periodically consults with the independent registered public accounting firm on
matters relating to internal financial controls and procedures. The Committee is
responsible for establishing and administering complaint procedures related to
accounting and auditing matters.
The Audit Committee operates under a
written charter adopted by the Board of Directors, a copy of which is posted on
the Company’s website at www.invtitle.com/investor-rel/corp-gov/committees. The
Committee reviews and assesses the adequacy of the charter on an annual
basis.
The Board of Directors has determined
that each member of the Company's Audit Committee is “independent” as defined under applicable
NASDAQ listing standards and SEC rules. The Board of Directors has also
determined that all of the current Audit Committee members—Mr. Francis, Mr.
Johnson and Mr. King—are “audit committee financial experts” as defined under
applicable SEC rules. See “Audit Committee Report” below for the formal report of the Audit Committee for
2009.
The Compensation Committee. In 2009, the Compensation
Committee was composed of Mr. Hutson, Mr. Morton and Mr. Parker. The
Compensation Committee met once in 2009. The Board of Directors has determined
that each member of the Compensation Committee is “independent” as defined under
applicable NASDAQ listing standards.
The Compensation Committee operates under
a written charter that can be found on the Company’s website at
www.invtitle.com/investor-rel/corp-gov/committees. The Compensation Committee
reviews and assesses the adequacy of the charter on an annual
basis.
3
The Compensation Committee makes all compensation decisions for the named
executive officers and approves recommendations regarding equity awards for all
of the Company’s elected officers. Decisions regarding non-equity compensation
of all other officers and employees are made by the Company’s named executive
officers.
The Chief Executive Officer annually
reviews the performance of each of the other named executive officers with
respect to achievement of established performance standards and attainment of
the Company’s objectives. Based on those reviews, the Chief Executive Officer
makes recommendations with respect to compensation to the Committee. The
Committee then can exercise its discretion in modifying any recommended
adjustments or awards to the other named executive officers based upon its
evaluation of their performance as well as other aspects of our compensation
philosophy.
The Committee’s review of the Chief
Executive Officer’s compensation is subject to separate procedures. The
Committee evaluates the Chief Executive Officer’s performance, reviews the
Committee’s evaluation with him, and based on that evaluation and review,
determines the amount of salary adjustment and incentive award. Consistent with the requirements of the
listing standards of The NASDAQ Stock Market LLC, the Chief Executive Officer is
excused from meetings of the Committee during voting deliberations regarding his
compensation.
The Committee does not currently retain
executive compensation consultants.
The Nominating Committee.
In 2009, the Nominating Committee was composed of Mr. Francis, Mr.
Hutson and Mr. Johnson. The Nominating Committee met two times in
2009.
The Nominating Committee operates under a
written charter that can be found on the Company’s website at
www.invtitle.com/investor-rel/corp-gov/committees. The Nominating Committee
reviews and assesses the adequacy of the charter on an annual
basis.
The Board of Directors has determined
that each member of the Company’s Nominating Committee is “independent” as
defined under applicable NASDAQ listing standards.
The Nominating Committee is responsible
for identifying, evaluating and recommending to the Board of Directors
candidates for election to the Board of Directors as well as appropriate members
for the Audit and Compensation Committees. A slate of nominees for director to
present to the shareholders is recommended to the Board of Directors by the
Nominating Committee and determined by at least a majority vote of the members
of the Board of Directors whose terms do not expire during the year in which the
election of directors will occur.
The Nominating Committee considers a
variety of factors before recommending a new director nominee or the continued
service of existing Board members. At a minimum, the Nominating Committee
believes that a director nominee must demonstrate character and integrity, have
an inquiring mind, possess substantial experience at a strategy or policy
setting level, demonstrate an ability to work effectively with others, possess
either high-level managerial experience in a relatively complex organization or
experience dealing with complex problems, have sufficient time to devote to the
affairs of the Company and be free from conflicts of interest with the Company
and its subsidiaries.
Other factors the Nominating Committee
considers when evaluating a potential director nominee are:
| 1. | Whether the candidate would assist in achieving a diverse mix of Board members; | ||
| 2. | The extent of the candidate’s business experience, technical expertise, and specialized skills or experience; | ||
| 3. | Whether the candidate, by virtue of particular experience relevant to the Company's current or future business, will add specific value as a Board member; and | ||
| 4. | Any other factors related to the ability and willingness of a candidate to serve, or an incumbent director to continue his or her service to, the Company. | ||
4
The Nominating Committee believes that a majority of the members of the
Company’s Board of Directors should be independent as defined under applicable
NASDAQ listing standards and, as a result, it also considers whether a potential
director nominee is independent under such standards. The Committee also
requires that all members of the Audit Committee be financially literate
pursuant to applicable NASDAQ listing standards and that at least one member of
the Audit Committee be an “audit committee financial expert” as defined under
SEC rules. Therefore, the Nominating Committee considers whether a potential
director nominee meets these criteria when evaluating his or her qualifications.
The Nominating Committee does not have a formal policy regarding diversity, but
diversity is one of the various factors the Nominating Committee may consider
when considering director candidates.
It is the policy of the Nominating
Committee to consider all director candidates recommended by shareholders,
provided that such recommendations are made in accordance with the procedures
outlined below. The Nominating Committee evaluates such candidates in accordance
with the same criteria it uses to evaluate all other director
candidates.
Any shareholder that wishes to recommend
a director candidate to be considered for the 2011 Annual Meeting of
Shareholders should send his or her recommendation to the attention of the
Corporate Secretary, Investors Title Company, P.O. Box 2687, Chapel Hill, North
Carolina 27515-2687, no later than December 14, 2010. The candidate’s name, age,
business address, residential address, principal occupation, qualifications and
the number of shares of Common Stock beneficially owned by the candidate must be
provided with the recommendation. The shareholder must also provide a signed
consent of the candidate to serve, if elected, as a director of the Company, and
shall include all other information that would be required under the rules of
the SEC in the proxy statement soliciting proxies for election of the director
candidate.
Board Leadership Structure
J. Allen Fine serves as both the Chairman
of the Board of Directors and the CEO of Investors Title Company, and Richard M.
Hutson II serves as the Lead Independent Director.
The Board of Directors does not have a
general policy regarding the separation of the roles of Chairman and CEO. Our
bylaws permit these positions to be held by the same person, and the Board of
Directors believes that it is in the best interests of the Company to retain
flexibility in determining whether to separate or combine the roles of Chairman
and CEO based on our circumstances.
The Board has determined that it is
appropriate for Mr. Fine to serve as both Chairman and CEO (1) in recognition of
his status as the founder of the Company and (2) because it provides an
efficient structure that permits us to present a unified vision to our
constituencies.
The Board of Directors has elected Mr.
Hutson to serve as its Lead Independent Director. The duties of the Lead
Independent Director include presiding at the executive sessions of the
independent directors, serving as liaison between the chairman and the
independent directors, approving information, meeting agendas and schedules for
the board of directors, and calling meetings of the independent
directors.
The Board’s Role in Risk Oversight
Management is responsible for managing
the risks that Investors Title Company faces. The Board of Directors is
responsible for overseeing management’s approach to risk management. Management
identifies material risks facing Investors Title Company on an ongoing basis and
discusses those risks and the management of those risks with the Board of
Directors or its committees, as appropriate. While the Board of Directors has
ultimate responsibility for overseeing management’s approach to risk management,
various committees of the Board assist it in fulfilling that responsibility. In
particular, the Audit Committee assists the board in its oversight of risk
management in the areas of financial reporting, internal controls and compliance
with regulatory requirements.
5
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company receive an annual retainer
for Board services of $3,000 and an attendance fee of $1,500 for each meeting of
the Board of Directors attended, in addition to actual travel expenses related
to the meetings. Directors receive a $500 fee for participating in a committee
meeting provided that the committee meeting is held on a day other than the
regularly scheduled board meeting date. The Audit Committee Chairperson receives
an additional annual retainer of $500. Directors who are employees of the
Company are paid no fees or other remuneration for service on the Board or on
any Board committee.
On May 20, 2009, the date of the Company’s 2009 Annual Meeting of
Shareholders, each non-employee director was granted 500 Stock Appreciation
Rights (“SARs”) under the Company’s 2001 Stock Option and Restricted Stock Plan
with an exercise price of $32.00. Upon exercise of each SAR, a director is
entitled to receive an amount (payable in shares of the Company’s common stock)
equal to the difference between the closing price of the Company’s common stock
on the business day immediately preceding the date of exercise and the exercise
price. The number of shares paid on exercise is determined by dividing this
amount by the closing price of the Company’s common stock on the business day
immediately preceding the date of exercise. These SARs vest in four quarterly
installments and became exercisable, to the extent vested, as of June 30, 2009
and will expire on May 20, 2016.
The Board of Directors makes all decisions regarding the compensation of
the members of the Board of Directors. The Chief Executive Officer makes
periodic recommendations regarding director compensation, and the Board of
Directors may exercise its discretion in modifying any recommended compensation
adjustments or awards to the directors.
2009 Director Compensation
| Fees | ||||
| Earned | ||||
| or Paid | Stock | Option | ||
| In Cash | Awards | Awards | Total | |
| Name (1) | ($) | ($)(2) | ($)(3) | ($) |
| David L. Francis | 11,000 | 5,588 | - | 16,588 |
| Richard M. Hutson II | 9,500 | 5,588 | - | 15,088 |
| R. Horace Johnson | 11,000 | 5,588 | - | 16,588 |
| H. Joe King, Jr. | 11,500 | 5,588 | - | 17,088 |
| James R. Morton | 9,500 | 5,588 | - | 15,088 |
| A. Scott Parker III | 9,500 | 5,588 | - | 15,088 |
| (1) | J. Allen Fine, Chief Executive Officer and Chairman of the Board, James A. Fine, Jr., President, Chief Financial Officer and Treasurer, and W. Morris Fine, Executive Vice President and Secretary, are not included in this table as they are employees of the Company and do not receive additional compensation for their services as directors. The compensation received by Messrs. Fine, Fine, Jr. and Fine as employees of the Company is shown in the Summary Compensation Table on page 16. | |
| (2) | The amounts shown in this column indicate the grant date fair value of SARs computed in accordance with FASB ASC Topic 718. The SARs comprise all outstanding awards of stock held by the directors. For additional information regarding the assumptions made in calculating these amounts, see Note 7 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year | |
6
| ended December 31, 2009. The aggregate number of SARs outstanding at December 31, 2009 held by directors was as follows: |
| Outstanding | |
| Stock | |
| Awards at | |
| Fiscal Year | |
| Name | End |
| David L. Francis | 2,000 |
| Richard M. Hutson II | 1,000 |
| R. Horace Johnson | 2,000 |
| H. Joe King, Jr. | 2,000 |
| James R. Morton | 2,000 |
| A. Scott Parker III | 2,000 |
| (3) | The Company did not grant any options in 2009. The aggregate number of option awards outstanding at December 31, 2009 held by directors was as follows: |
| Outstanding | |
| Option | |
| Awards at | |
| Fiscal Year | |
| Name | End |
| David L. Francis | 2,500 |
| Richard M. Hutson II | 0 |
| R. Horace Johnson | 500 |
| H. Joe King, Jr. | 3,000 |
| James R. Morton | 500 |
| A. Scott Parker III | 2,500 |
7
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table indicates the persons known to the Company to be the
beneficial owners of more than five percent (5%) of the Company’s outstanding
Common Stock as of April 2, 2010.
| Name and Address of | Amount and Nature | Percent | |||
| Beneficial Owner | of Beneficial Ownership | of Class (1) | |||
| Markel Corporation | 228,850 (2) | 10.01% | |||
| 4521 Highwoods Parkway, Glen Allen, Virginia 23060 | |||||
| J. Allen Fine | 221,475 (3) | 9.6% | |||
| 121 N. Columbia Street, Chapel Hill, North Carolina 27514 | |||||
| W. Morris Fine | 189,481 (4) | 8.3% | |||
| 121 N. Columbia Street, Chapel Hill, North Carolina 27514 | |||||
| James A. Fine, Jr. | 188,833 (5) | 8.2% | |||
| 121 N. Columbia Street, Chapel Hill, North Carolina 27514 | |||||
| Dimensional Fund Advisors LP | 130,958 (6) | 5.7% | |||
| Palisades West, Building One, 6300 Bee Cave Road, Austin, Texas 78746 | |||||
| The London Company | 114,839 (7) | 5.0% | |||
| 1801 Bayberry Court, Suite 301, Richmond, Virginia 23226 | |||||
| (1) | The percentages are calculated based on 2,285,486 shares outstanding as of April 2, 2010, which excludes 291,676 shares held by a wholly-owned subsidiary of the Company. The shares held by the subsidiary are not entitled to vote at the Annual Shareholders’ Meeting. | |
| (2) | The information included in the above table is based solely on Amendment No. 6 to Schedule 13G filed with the SEC on November 5, 2009. Of these shares, Markel Corporation has sole voting and investment power with respect to 213,300 shares and shared investment power with respect to 15,550 shares. | |
| (3) | This includes 151,099 shares held by a limited liability company of which Mr. Fine is the manager and possesses sole voting and investment power with respect to such shares. Additionally, this includes 25,000 stock appreciation rights that are presently exercisable or are exercisable within 60 days of April 2, 2010. | |
| (4) | This includes 95,000 shares held by a limited partnership of which Mr. Fine is a general partner and shares joint voting power over such shares with James A. Fine, Jr., and such shares are also reflected in James A. Fine, Jr.’s beneficially owned shares. Additionally, this includes 4,052 shares held by family members and 10,417 stock appreciation rights that are presently exercisable or are exercisable within 60 days of April 2, 2010. | |
| (5) | This includes 95,000 shares held by a limited partnership of which Mr. Fine is a general partner and shares joint voting power over such shares with W. Morris Fine, and such shares are also reflected in W. Morris Fine’s beneficially owned shares. Additionally, this includes 1,965 shares held by family members and 10,417 stock appreciation rights that are presently exercisable or are exercisable within 60 days of April 2, 2010. | |
| (6) | The information included in the above table is based solely on Amendment No. 1 to Schedule 13G filed with the SEC on February 8, 2010. Dimensional Fund Advisors LP has sole voting and investment power over these shares. | |
8
| (7) | The information included in the above table is based solely on Schedule 13G filed with the SEC on June 17, 2009. The London Company has sole voting and investment power over these shares. |
The table below sets forth the shares of the Company’s Common Stock
beneficially owned as of April 2, 2010 by each director and nominee for
director, the executive officers named in the Summary Compensation Table, and
all directors and executive officers as a group.
| Name of | Amount and Nature | Percent | ||||
| Beneficial Owner | of Beneficial Ownership | of Class (1) | ||||
| J. Allen Fine | 221,475 | (2) | 9.6% | |||
| W. Morris Fine | 189,481 | (3) | 8.3% | |||
| James A. Fine, Jr. | 188,833 | (4) | 8.2% | |||
| David L. Francis | 50,166 | (5) | 2.2% | |||
| H. Joe King, Jr. | 22,474 | (6) | 1.0% | |||
| A. Scott Parker III | 13,960 | (7) | * | |||
| James R. Morton | 13,415 | (8) | * | |||
| R. Horace Johnson | 3,200 | (9) | * | |||
| Richard M. Hutson II | 2,117 | (10) | * | |||
| James H. Speed, Jr. | 0 | * | ||||
| All Directors, Nominees for Director, and | ||||||
| Executive Officers as a Group | ||||||
| (10 persons) | 705,121 | (11) | 29.98% | |||
*Represents less than 1%
| (1) | The percentages are calculated based on 2,285,486 shares outstanding as of April 2, 2010, which excludes 291,676 outstanding shares held by a subsidiary of the Company. The shares held by the subsidiary are not entitled to vote at the Annual Shareholders’ Meeting. | |
| (2) | This includes 151,099 shares held by a limited liability company of which Mr. Fine is the manager and possesses sole voting and investment power with respect to such shares. Additionally, this includes 25,000 stock appreciation rights that are presently exercisable or are exercisable within 60 days of April 2, 2010. | |
| (3) | This includes 95,000 shares held by a limited partnership of which Mr. Fine is a general partner and shares joint voting power over such shares with James A. Fine, Jr., and such shares are also reflected in James A. Fine, Jr.’s beneficially owned shares. Additionally, this includes 4,052 shares held by family members and 10,417 stock appreciation rights that are presently exercisable or are exercisable within 60 days of April 2, 2010. | |
| (4) | This includes 95,000 shares held by a limited partnership of which Mr. Fine is a general partner and shares joint voting power over such shares with W. Morris Fine, and such shares are also reflected in W. Morris Fine’s beneficially owned shares. Additionally, this includes 1,965 shares held by family members and 10,417 stock appreciation rights that are presently exercisable or are exercisable within 60 days of April 2, 2010. | |
| (5) | This total includes 4,500 shares of Common Stock that Mr. Francis has the right to purchase under stock options and stock appreciation rights that are presently exercisable or are exercisable within 60 days of April 2, 2010. | |
| (6) | This total includes 5,000 shares of Common Stock that Mr. King has the right to purchase under stock options and stock appreciation rights that are presently exercisable or are exercisable within 60 days of April 2, 2010 as well as 1,000 shares held by his wife. | |
9
| (7) | This total includes 4,500 shares of Common Stock that Mr. Parker has the right to purchase under stock options and stock appreciation rights that are presently exercisable or are exercisable within 60 days of April 2, 2010 as well as 3,266 shares held by his wife. | |
| (8) | This total includes 2,500 shares of Common Stock that Mr. Morton has the right to purchase under stock options and stock appreciation rights that are presently exercisable or are exercisable within 60 days of April 2, 2010. | |
| (9) | This total includes 2,500 shares of Common Stock that Mr. Johnson has the right to purchase under stock options and stock appreciation rights that are presently exercisable or are exercisable within 60 days of April 2, 2010. | |
| (10) | This total includes 1,000 shares of Common Stock that Mr. Hutson has the right to purchase under stock appreciation rights that are presently exercisable or exercisable within 60 days of April 2, 2010. | |
| (11) | This total includes 65,834 shares of Common Stock that all directors, nominees for director and executive officers as a group, have the right to purchase under stock options and stock appreciation rights that are presently exercisable or are exercisable within 60 days of April 2, 2010. | |
PROPOSALS REQUIRING YOUR
VOTE
Proposal 1 - Election of
Directors
The Company’s Board of Directors is composed of 9 members divided into
three classes with staggered terms of three years for each class. Based on the
recommendations of the Nominating Committee, the Board of Directors has
nominated J. Allen Fine, David L. Francis and James H. Speed, Jr. for election
to serve for a three-year period or until their respective successors have been
elected and qualified. Mr. Speed is a nominee for his first term as a member of
the Board of Directors. He was recommended to the Nominating Committee by our
Chief Executive Officer. A. Scott Parker III will not stand for re-election to
the Board of Directors when his term expires at the 2010 Annual Meeting of
Shareholders.
The nominees will be elected if they
receive a plurality of the votes cast for their election. Broker non-votes and
abstentions will be counted for purposes of establishing a quorum, but will not
be counted in the election of directors and therefore will not affect the
election results if a quorum is present. It is the intention of the persons
named as proxies in the accompanying proxy card to vote all shares represented
by proxy for the three nominees listed below, unless the authority to vote is
withheld. If any of the nominees should withdraw or otherwise become unavailable
for reasons not presently known, the shares represented by proxy will be voted
for three nominees including such substitutions as shall be designated by the
Board of Directors. The shares represented by proxy in no event will be voted
for more than three persons.
The Board unanimously recommends that
you vote “FOR” the election of the directors nominated to serve until the Annual
Meeting of Shareholders in 2013.
The following paragraphs provide
information about each director, nominee and continuing director, including
information about each nominee’s and director’s business background and other
experience, qualifications, attributes or skills that lead to the conclusion
that the nominee or director should serve on the board of
directors.
10
Information Regarding Nominees for Election as
Directors
| Served as | Term | ||||||
| Director | to | ||||||
| Name | Age | Since | Expire | ||||
| J. Allen Fine | 75 | 1973 | 2013 | ||||
| David L. Francis | 77 | 1982 | 2013 | ||||
| James H. Speed, Jr. | 56 | - | 2013 | ||||
J. Allen
Fine was the principal
organizer of Investors Title Insurance Company and has been Chairman of the
Board of the Company, Investors Title Insurance Company, and Northeast Investors
Title Insurance Company since their incorporation. Mr. Fine served as President
of Investors Title Insurance Company until February 1997, when he was named
Chief Executive Officer. Additionally, Mr. Fine serves as Chief Executive
Officer of the Company and National Investors Title Insurance Company, and
Chairman of the Board of Investors Title Exchange Corporation, Investors Capital
Management Company and Investors Trust Company. Investors Title Insurance
Company, National Investors Title Insurance Company, Investors Title Exchange
Corporation, Investors Capital Management Company and Investors Trust Company
are all wholly owned subsidiaries of the Company. Mr. Fine is the father of
James A. Fine, Jr., President, Chief Financial Officer and Treasurer of the
Company, and W. Morris Fine, Executive Vice President and Secretary of the
Company. During the past five years, Mr. Fine has served on the boards of
directors of Investors Title Company, Investors Title Insurance Company,
National Investors Title Insurance Company, Investors Title Exchange
Corporation, Investors Title Accommodation Corporation, Investors Capital
Management Company, and Investors Trust Company. Mr. Fine is the founder of the
Company and has extensive title insurance industry, operations and marketing
experience as well as a strong executive background in real estate, strategic
planning and business administration.
David L. Francis retired in 1997 as the President of Marsh
Mortgage Company, a mortgage banking firm, and Marsh Associates, Inc., a
property management company, where he had been employed since 1963. During the
past five years, Mr. Francis has served on the boards of directors of Investors
Title Company and First Landmark, a Charlotte real estate and property
management firm, and on the Board of Trustees of High Point University. Mr.
Francis has extensive experience in mortgage lending, real estate and property
management.
James H. Speed, Jr.
is President and
Chief Executive Officer of North Carolina Mutual Life Insurance Company (“NC
Mutual”), the oldest and largest insurance company in America with roots in the
African-American community. Mr. Speed joined NC Mutual as Senior Vice President
and Chief Financial Officer in 2002 and was named President-Elect in 2003.
During the past five years, Mr. Speed has served on the Board of Directors of
North Carolina Mutual Life Insurance Company, Mechanics & Farmers Bank, the
Federal Reserve Bank of Richmond – Charlotte Branch, North Carolina Chamber of
Commerce, Nottingham Investment Trust, North Carolina Central University School
of Business, United Way of the Greater Triangle, UNC Healthcare Systems,
Communities in Schools of North Carolina and Central Children’s Home of North
Carolina. He has a strong executive background and extensive experience in
finance, public accounting and insurance.
Information Regarding Directors Continuing in
Office
| Served as | Term | ||||||
| Director | to | ||||||
| Name | Age | Since | Expire | ||||
| W. Morris Fine | 43 | 1999 | 2011 | ||||
| Richard M. Hutson II | 69 | 2008 | 2011 | ||||
| R. Horace Johnson | 65 | 2005 | 2011 | ||||
| James A. Fine, Jr. | 47 | 1997 | 2012 | ||||
| H. Joe King, Jr. | 77 | 1983 | 2012 | ||||
| James R. Morton | 72 | 1985 | 2012 | ||||
11
W. Morris
Fine is Executive Vice
President and Secretary of the Company, President and Chief Operating Officer of
Investors Title Insurance Company and National Investors Title Insurance
Company, President and Chairman of the Board of Investors Title Management
Services, Inc., Vice President of Investors Title Exchange Corporation and
Investors Title Accommodation Corporation, and Chief Financial Officer and
Treasurer of Investors Trust Company and Investors Capital Management Company.
Investors Title Insurance Company, National Investors Title Insurance Company,
Investors Title Management Services, Inc., Investors Title Exchange Corporation,
Investors Title Accommodation Corporation, Investors Capital Management Company
and Investors Trust Company are all wholly owned subsidiaries of the Company.
Mr. Fine is the son of J. Allen Fine, Chief Executive Officer and Chairman of
the Board of the Company, and brother of James A. Fine, Jr., President, Chief
Financial Officer and Treasurer of the Company. During the past five years, Mr.
Fine has served on the boards of directors of Investors Title Company, Investors
Title Insurance Company, National Investors Title Insurance Company, Investors
Title Exchange Corporation, Investors Title Accommodation Corporation, Investors
Title Management Services, Investors Trust Company and Investors Capital
Management Company. Mr. Fine has extensive title insurance industry, operations
and marketing experience in addition to a background in public accounting and
executive level management and strategic planning experience.
Richard M. Hutson II
is a practicing attorney
and, since 2006, has been the principal of Hutson Law Office, P.A., the
successor firm to Hutson, Hughes and Powell. P.A. in Durham, North Carolina. Mr.
Hutson has been engaged in the practice of law since 1965 and served as a
principal of Hutson, Hughes and Powell P.A. from 1993 to 2006. Additionally, he
has served in leadership roles of local and national professional and civic
organizations. Mr. Hutson is a past Chairman of the Durham Chamber of Commerce,
and during the past five years, has served on the Board of Directors of
Investors Title Company (since 2008) and on the Board of Directors of LC
Industries, a non-profit organization and the largest employer of visually
handicapped persons in the United States, where he is presently Chairman of the
Board. Mr. Hutson has assisted the Company in various matters beginning with its
formation in 1972 and has extensive experience in corporate and business law as
well as corporate restructuring and governance matters.
R. Horace Johnson retired in 2004 as managing partner of the
Raleigh, North Carolina office of Ernst and Young, a public accounting firm,
where he had been employed since 1967. During this period, Mr. Johnson served in
many firm leadership roles including serving as the managing partner for the
North Carolina practice for three years and on the operating committee of the
Carolinas practice for five years. He also maintained an active client service
role during the 25 years he served as partner. During the past five years, Mr.
Johnson has served on the Boards of Directors of Investors Title Company,
TrustAtlantic Financial Corporation, a corporation formed to serve as a bank
holding company, and on the Board of Directors of Wilmington Pharmaceuticals,
LLC, a pharmaceutical development company. He also serves on the Board of the
following non-profit corporations: North Carolina Citizens for Business and
Industry, the Council for Entrepreneurial Development, and Coral Bay Club. Mr.
Johnson also serves as a Member/Manager of Lucky 6, LLC, a private equity
investment company. Mr. Johnson has extensive experience in public accounting,
management and strategic planning.
James A. Fine, Jr. is President, Chief Financial Officer and
Treasurer of the Company, Executive Vice President, Chief Financial Officer and
Treasurer of Investors Title Insurance Company, Executive Vice President and
Chief Financial Officer of National Investors Title Insurance Company, Executive
Vice President of Investors Title Management Services, Inc., President of
Investors Title Exchange Corporation and Investors Title Accommodation
Corporation, and Chief Executive Officer of Investors Trust Company and
Investors Capital Management Company. Investors Title Insurance Company,
National Investors Title Insurance Company, Investors Title Management Services,
Inc., Investors Title Exchange Corporation, Investors Title Accommodation
Corporation, Investors Capital Management Company and Investors Trust Company
are all wholly owned subsidiaries of the Company. Mr. Fine is the son of J.
Allen Fine, Chief Executive Officer and Chairman of the Board of the Company,
and brother of W. Morris Fine, Executive Vice President and Secretary of the
Company. During the past five years, Mr. Fine has served on the board of
directors of Investors Title Company, Investors Title Insurance Company,
National Investors Title Insurance Company, Investors Title Exchange
Corporation, Investors Title Accommodation Corporation (Chairman), Investors
Title Management Services, Investors Trust Company and Investors Capital
Management Company. Mr. Fine has extensive title insurance industry, operations
and marketing
12
experience in addition
to a background in investment strategy and executive level management and
strategic planning experience.
H. Joe King,
Jr. retired as President
and Chairman of the Board of Home Federal Savings & Loan Association in
Charlotte, North Carolina and its parent company, HFNC Financial Corporation, in
1998, where he had been employed since 1962. During the past five years, Mr.
King has served on the board of directors of Investors Title Company and on the
board of trustees of Wingate University. Mr. King has extensive experience in
banking, finance and mortgage lending.
James R. Morton was President of J. R. Morton Associates from
1968 until he retired in 1988. He is currently President of TransCarolina
Corporation, a real estate investment company. He has been employed by
TransCarolina since 1995. During the past five years, Mr. Morton has served on
the board of directors of Investors Title Company. Mr. Morton has extensive
experience in strategic planning, business administration and
investments.
Proposal 2 – Ratification of Appointment of
Independent Registered Public Accounting Firm
The Audit Committee has selected Dixon
Hughes PLLC as our independent registered public accounting firm for the fiscal
year ended December 31, 2010. Dixon Hughes PLLC has served as the Company’s
independent registered public accounting firm since 2004. Its representatives
are expected to attend the 2010 Annual Meeting of Shareholders and to be
available to respond to appropriate questions. They will have the opportunity to
make a statement if they wish to do so.
We are presenting this selection to our
shareholders for ratification at the annual meeting. If the shareholders fail to
ratify the selection, the Audit Committee will reconsider its selection of Dixon
Hughes PLLC.
Vote Required
Approval of the ratification of the
appointment of the independent registered public accounting firm will require
the affirmative vote of a majority of the votes cast at a meeting at which a
majority of the outstanding shares of our common stock entitled to vote are
present in person or by proxy. Abstentions and broker non-votes will not be
counted as votes cast for the purpose of ratifying the selection of Dixon Hughes
PLLC.
The Board unanimously recommends that
you vote “FOR” the proposal to ratify the appointment of Dixon Hughes PLLC as
the Company’s independent registered public accounting firm for
2010.
13
Audit and Non-Audit Fees
Aggregate fees for professional services rendered by our independent
registered public accounting firm, Dixon Hughes PLLC, for the years ended
December 31, 2009 and 2008 are set forth below.
| 2009 | 2008 | |||||
| Audit Fees (1) | $ | 283,500 | $ | 270,000 | ||
| Audit-Related Fees (2) | 5,250 | 7,500 | ||||
| Tax Fees (3) | 64,500 | 56,000 | ||||
| All Other Fees | 0 | 0 | ||||
| Total Fees | $ | 353,250 | $ | 333,500 | ||
| (1) | In 2009 and 2008, audit fees consisted of the audit of the financial statements, reviews of the quarterly financial statements, services rendered in connection with statutory and regulatory filings and services related to internal control over financial reporting. | ||
| (2) | Audit-related fees consisted of fees related to compliance with regulatory and statutory filings. | ||
| (3) | Tax fees consisted primarily of tax compliance services. | ||
Audit and Non-Audit Services Pre-Approval
Policy
The Audit Committee has adopted an Audit
and Non-Audit Services Pre-Approval Policy for pre-approving all audit and
permissible non-audit services provided by the independent registered public
accounting firm.
Each year, the Audit Committee
pre-approves independent registered public accounting firm services and
associated fee ranges within the categories of Audit Services, Audit-Related
Services, Tax Services and Other Services.
Throughout the year, circumstances may
arise that require the engagement of the independent registered public
accounting firm for additional services that were not contemplated by the
existing pre-approval categories. In that case, the Audit and Non-Audit Services
Pre-Approval Policy requires specific approval by the Audit Committee of such
services before engaging the independent registered public accounting firm. To
ensure the prompt handling of such matters, the Audit Committee has granted
pre-approval authority to its Chair. The Chair reports any pre-approval
decisions made at the next Audit Committee meeting.
During 2009 and 2008, none of the
services provided to the Company by the independent registered public accounting
firm under the categories Audit-Related Services, Tax Services and Other
Services described above were approved by the Audit Committee after such
services were rendered pursuant to the de minimis exception established under
SEC regulations.
AUDIT COMMITTEE REPORT
The Audit Committee is directly responsible for overseeing the accounting
and financial reporting processes of the Company and appointing, retaining,
compensating and overseeing the work of the independent registered public
accounting firm. Management is responsible for the financial reporting process,
including the system of internal controls, and for the preparation of
consolidated financial statements in accordance with generally accepted
accounting principles. The independent registered public accounting firm is
responsible for auditing those financial statements and expressing an opinion as
to their conformity with accounting principles generally accepted in the United
States of America.
The independent registered public
accounting firm provided the Audit Committee with the written disclosures and
the letter required by applicable requirements of the Public Company Accounting
Oversight Board regarding the independent registered public accounting firm’s
communications with the Audit Committee concerning
14
independence. The Audit
Committee discussed with the independent registered public accounting firm any
relationships that may have an impact on its objectivity and independence.
Finally, the Audit Committee considered whether the independent registered
public accounting firms’ performance of services, other than audit services, is
compatible with maintaining the independence of the independent registered
public accounting firm.
The Audit Committee discussed and reviewed with management and the
independent registered public accounting firm the audited financial statements
as of and for the year ended December 31, 2009. The Audit Committee discussed
with the independent registered public accounting firm those matters required to
be discussed by Statement on Auditing Standards No. 61. The Audit Committee
reviewed with the independent registered public accounting firm its audit plans,
audit scope and identification of audit risks.
Based on the reviews and discussion
referenced above, the Audit Committee recommended to the Board of Directors that
the audited financial statements of the Company be included in its Annual Report
on Form 10-K for the year ended December 31, 2009, for filing with the
Securities and Exchange Commission.
Submitted by the Audit Committee of
the Board of Directors:
H. Joe King, Jr., Chairman
David L. Francis
R. Horace Johnson
H. Joe King, Jr., Chairman
David L. Francis
R. Horace Johnson
15
EXECUTIVE COMPENSATION
Summary Compensation Table
The table below summarizes the total
compensation for each of the named executive officers for each of the fiscal
years ended December 31, 2009 and December 31, 2008.
| All Other | ||||||
| Salary | Bonus | Stock | Compensation | Total | ||
| Name and Principal Position | Year | ($) | ($) | Awards (1) | ($) (2) | ($) |
| J. Allen Fine | 2009 | 303,360 | 90,000 | 202,030 | 23,027 | 618,417 |
| Chief Executive Officer, Chairman of | 2008 | 302,027 | -0- | -0- | 140,318 | 442,345 |
| the Board | ||||||
| James A. Fine, Jr. | 2009 | 255,560 | 130,000 | 71,435 | 28,387 | 485,382 |
| President, Chief Financial Officer & | 2008 | 254,393 | -0- | -0- | 136,474 | 390,867 |
| Treasurer | ||||||
| W. Morris Fine | 2009 | 255,560 | 130,000 | 71,435 | 28,247 | 485,242 |
| Executive Vice President & Secretary | 2008 | 252,487 | -0- | -0- | 137,153 | 389,640 |
| (1) | The amounts shown in this column indicate the grant date fair value of SARs computed in accordance with FASB ASC Topic 718. The SARs comprise all outstanding awards of stock held by the named executive officers. J. Allen Fine’s SAR grant became fully exercisable in 2009. James A. Fine, Jr. and W. Morris Fine’s SAR grants will become fully exercisable in December 2011. For additional information regarding the assumptions made in calculating these amounts, see Note 7 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009. | ||
| (2) | The amounts set forth in this column for 2009 consisted of the following: | ||
| Supplemental | Deferred | Personal | |||||
| Supplemental | Retirement | Compensation | Life and | Use of | |||
| 401(k) | Retirement | Plan | Plan | Health | Company | ||
| Contributions | Cash Payment | Contributions | Contributions | Insurance | Vehicle | Total | |
| Name | ($) | ($) | ($) | ($) | ($) | ($) | ($) |
| J. Allen Fine | 9,800 | 9,447 | 0 | 0 | 720 | 3,060 | 23,027 |
| James A. Fine, Jr. | 9,800 | 8,020 | 0 | 0 | 8,976 | 1,591 | 28,387 |
| W. Morris Fine | 9,800 | 7,944 | 0 | 0 | 8,976 | 1,527 | 28,247 |
Employment
Agreements
Under the employment agreements in
effect on December 31, 2009, with J. Allen Fine, James A. Fine, Jr., and W.
Morris Fine, they were entitled to minimum base salaries of $303,360, $255,560,
and $255,560, respectively. Under these agreements, which have five year rolling
terms, Messrs. Fine, Fine, Jr., and Fine participate in the Company’s benefits
programs generally provided to other executives, receive 30 days of paid
vacation and unlimited sick leave, and are entitled to reimbursement for
reasonably incurred out-of-pocket business expenses. Additionally, under these
agreements, Messrs. Fine, Fine, Jr., and Fine receive an annual supplemental
retirement cash payment equal to the amount that would have been contributed to
their 401(k) plan accounts if the contributions to the 401(k) plan were not
limited under federal tax laws. The agreements also provide for minimum payments
to each executive officer in the event of (i) disability or retirement, (ii)
termination by the Company
16
without cause, or (iii)
termination by the officer for good reason or due to a change in control. The
agreements also prohibit Messrs. Fine, Fine, Jr., and Fine from engaging in
certain activities involving competition with the Company for a two year period
following termination of employment.
Benefits and
Perquisites
The Company provides all eligible
employees, including the named executive officers, with a benefit program that
the Committee believes is reasonable, competitive, and consistent with the
overall objectives of the compensation program.
The executive officers are eligible
to participate in the Company’s group insurance program, which during 2009
included group health, dental, vision, life, short-term disability, and
long-term disability insurance. Other benefits offered during 2009 included
flexible spending accounts and a pretax premium plan, paid sick leave, paid
holidays, and paid vacations.
The Company also offers
participation in a 401(k) Plan. Under the 401(k) plan, the Company makes
contributions amounting to three percent of compensation for each eligible
employee. The Company may make additional contributions under the profit share
provisions of the plan. For the 2009 plan year, the Company contributed an
additional 1% of compensation for eligible employees under the profit share
provisions of the plan.
The Company provides Company-owned
vehicles to certain officers and employees who hold positions requiring travel.
The Company does not prohibit the personal use of Company-owned vehicles, but
the value of any personal use is treated as taxable compensation. Each of the
executive officers is assigned a Company-owned vehicle, and may use the vehicle
for personal use according to the Company’s policy covering all Company-owned
vehicles.
Non-Qualified Supplemental Retirement Benefit
Plan
The Compensation Committee maintains
a Non-Qualified Supplemental Retirement Benefit Plan of the Company’s wholly
owned subsidiary, Investors Title Insurance Company (“ITIC”). This plan is an
unfunded defined contribution plan designed to provide additional retirement
benefits on a tax-deferred basis for select management or highly compensated
employees.
For 2004 through 2008, ITIC made
quarterly hypothetical contributions to each participant’s account under the
plan equal to 22% of his cash compensation each quarter. The plan contemplates
that after 20 quarters of participation, additional contributions to each
participant’s account will be at the Committee’s discretion. The twentieth
quarter for specified contributions ended on December 31, 2008.
Amounts credited to a participant’s
account may be deemed either to earn a specified rate of interest or to be
invested in a security, index, or other investment as determined by the
Committee from time to time. Since the effective date of the plan, the amounts
credited to each participant’s account have been deemed to earn interest at an
annual rate of return, compounded quarterly, based on the then current yield on
the 10-Year U.S. Treasury Note.
Amounts in a participant’s account
(reflecting the hypothetical contributions and any deemed returns) are paid at
the earlier of the participant’s termination of employment or death. Each
participant has the option of electing to be paid either a lump sum amount equal
annual installments spread over a term, of five, ten, fifteen, or twenty years,
or life annuity payments.
The Supplemental Retirement Benefit
Plan was amended in 2009 to provide a special-one time distribution election as
permitted under Section 409A of the Internal Revenue Code. Each of named
executive officers elected to be paid their respective plan balances in full on
January 15, 2009. The Company did not make any contributions to the plan in
2009. Each participant’s account balance was zero at December 31, 2009.
17
Non-Qualified Deferred Compensation
Plan
The Compensation Committee maintains
a Non-Qualified Deferred Compensation Plan of ITIC. This plan is an unfunded
defined contribution plan designed to provide additional retirement benefits on
a tax deferred basis for select management or highly compensated employees. The
Deferred Compensation Plan permits each participant to elect annually to defer
any portion of his cash compensation.
Participant account balances
(reflecting elective compensation deferrals and any deemed returns) are paid at
each participant’s termination of employment in a lump sum.
The Deferred Compensation Plan was
amended in 2009 to provide a special-one time distribution election as permitted
under Section 409A of the Internal Revenue Code. Each of named executive
officers elected to be paid their respective plan balances in full on January
15, 2009. The Company did not make any contributions to the Plan in 2009 and
each participant’s account balance was zero at December 31, 2009.
Outstanding Equity Awards at 2009 Fiscal
Year-End
The following table sets forth
certain information regarding outstanding equity awards at December 31, 2009
with respect to the named executive officers
| Option Awards | |||||
| Number of | Number of | ||||
| Securities | Securities | Equity Incentive Plan | |||
| Underlying | Underlying | Awards: Number of | |||
| Unexercised | Unexercised | Securities Underlying | Option | ||
| Options | Options | Unexercised Unearned | Exercise | Option | |
| (#) | (#) | Options | Price | Expiration | |
| Name | Exercisable | Unexercisable | (#)($) | ($) | Date |
| J. Allen Fine | 25,000 | - | - | $27.97 | 3/2/2016 |
| James A. Fine, Jr. | 8,334 | 16,666 (1) | - | $27.97 | 3/2/2016 |
| W. Morris Fine | 8,334 | 16,666 (1) | - | $27.97 | 3/2/2016 |
| (1) | Amounts represent unvested SARs that vest in quarterly increments beginning March 31, 2009 |
Potential Payments Upon Termination or Change
of Control
Under the employment agreements in effect on December 31, 2009, the
executive officers are entitled to severance payments and benefits under their
employment agreements as described below.
J. Allen Fine. Under Mr. J. Allen
Fine’s employment agreement, if his employment is terminated due to death,
disability or retirement (following his 70th birthday), he is entitled to receive:
- except in the case of death, a lump sum payment of three times the then
current salary, but in no event less than $910,000;
- except in the case of death, a lump sum payment of three times the average
of the bonus compensation paid in the three prior years, but in no event less
than $1,055,000;
- accrued benefits under the Nonqualified Supplemental Retirement Benefit
Plan and Nonqualified Deferred Compensation Plan;
- accelerated vesting in full of all his stock options;
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- continued participation in the
Company’s health insurance plans by him and his wife at no expense until his
death or, if later, his wife’s death; and
- continued participation in the Company’s health insurance plans by his dependent children at no expense until any such children are no longer dependent.
Under Mr. Fine’s employment agreement, if his employment is terminated by
the Company other than for “cause” or by him due to the Company’s materially
breaching the agreement (“i.e., good reason”), he is entitled to receive:
- A lump sum payment of five times
the then current salary, but in no event less than $1,516,800
- A lump sum payment of five times
the average of the bonus compensation paid in the three prior years, but in no
event less than $1,758,335
- accrued benefits under the
Nonqualified Supplemental Retirement Benefit Plan and Nonqualified Deferred
Compensation Plan;
- accelerated vesting in full of all
his stock options; and
- continued health insurance coverage as described above.
Under Mr. Fine’s employment agreement, if he terminates his employment
because of a “change in control,” he is entitled to receive:
- a lump sum payment equal to 2.99
times his then current base salary but in no event less than
$907,046;
- a lump sum payment equal to 2.99
times his average bonus compensation during the preceding three years, but in
no event less than $1,051,484;
- accrued benefits under the
Nonqualified Supplemental Retirement Benefit Plan and Nonqualified Deferred
Compensation Plan;
- accelerated vesting in full of all
his stock options; and
- continued health insurance coverage as described above.
If a change in control does not result in a termination of employment,
Mr. Fine is entitled to a base salary increase of 100%.
If any portion of these payments and benefits, or payments and benefits
under any other plan, agreement or arrangement, would constitute an “excess
parachute payment” for purposes of the Internal Revenue Code, such payments and
benefits payable under the agreement will be reduced until no portion thereof
would fail to be deductible by reason of being “an excess parachute payment.”
Under Mr. Fine’s employment agreement, if his employment is terminated by
the Company for “cause,” he is entitled to receive:
- an amount equal to that amount he
would have received as salary had he remained an employee until the later of
the date of his termination and 30 days after notice of termination;
and
- accrued benefits under the Nonqualified Supplemental Retirement Benefit Plan and Nonqualified Deferred Compensation Plan.
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Under Mr. Fine’s employment
agreement, “cause” is defined as:
- the executive’s conviction of, or
plea of guilty or nolo contendere to, any crime involving dishonesty or moral
turpitude;
- the commission by executive of a
fraud against the Company for which he is convicted;
- gross negligence or willful
misconduct by executive with respect to the Company which causes material
detriment to the Company;
- the falsification or manipulation
of any records of the Company;
- repudiation of the agreement by
executive or executive’s abandonment of employment with the Company;
- breach by executive of his
confidentiality, non-competition or non-solicitation obligations under the
agreement; or
- failure or refusal of executive to perform his duties with the Company or to implement or follow the policies or directions of the Board of Directors within 30 days after a written demand for performance is delivered to executive that specifically identifies the manner in which the Board of Directors believes that executive has not performed his duties or failed to implement or follow the policies or directions of the Board of Directors.
Under Mr. Fine’s employment
agreement, a “change in control” will occur if:
- any person or group acting in
concert, other than the executive or his affiliates or immediate family
members, is or becomes the beneficial owner, directly or indirectly, of
securities of the Company representing 50% or more of the combined voting
power of the Company’s outstanding shares entitled to vote for the election of
directors;
- the directors serving at the time
the agreement was entered into or any successor to any such director (and any
additional director) who after such time (i) was nominated or selected by a
majority of the directors serving at the time of his or her nomination or
selection and (ii) who is not an “affiliate” or “associate” (as defined in
Regulation 12B under the Securities Exchange Act of 1934) of any person who is
the beneficial owner, directly or indirectly, of securities representing 50%
or more of the combined voting power of the Company’s outstanding shares
entitled to vote for the election of directors, cease for any reason to
constitute at least a majority of the Company’s Board of Directors;
- a sale of more than 50% of the
Company’s assets (measured in terms of monetary value) is consummated; or
- any merger, consolidation, or like business combination or reorganization of the Company is consummated that results in the occurrence of any event described above.
J. Allen Fine is also party to a Death Benefit Plan Agreement with the
Company. The Death Benefit Plan Agreement provides that in the event of his
death while employed by the Company, a lump sum amount equal to three (3) times
the sum of his current base salary, but in no event to be less than $910,000,
plus the average of his bonus compensation for the past three (3) years, but in
no event to be less than $1,055,000, be paid within 60 days of his death to a
beneficiary designated by Mr. Fine.
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James A. Fine, Jr. and W. Morris Fine. The employment
agreements of James A. Fine, Jr. and W. Morris Fine are substantially identical
to J. Allen Fine’s employment agreement, except that under their agreements:
- Messrs. Fine, Jr. and Fine are
eligible to receive retirement benefits under their agreements after age 50,
rather than age 70;
- the minimum lump sum salary
payment upon termination for disability or retirement shall be no less than
$766,680 for each;
- the minimum lump sum bonus
compensation payment upon termination for disability or retirement shall be no
less than $1,030,000 for James A. Fine, Jr. and no less than $1,015,000 for W.
Morris Fine;
- the minimum lump sum salary
payment for termination without cause or by employee for good reason shall be
no less than $1,277,800 for each;
- the minimum lump sum bonus
compensation payment for termination without cause or by employee for good
reason shall be no less than $1,716,665 for James A. Fine, Jr. and no less
than $1,691,665 for W. Morris Fine;
- if James A. Fine, Jr. leaves the
Company due to a change in control, he will receive a lump sum salary payment
in an amount no less than $764,124 and a lump sum bonus payment in an amount
no less than $1,026,565;
- if W. Morris Fine leaves the
Company due to a change in control, he will receive a lump sum salary payment
in an amount no less than $764,124 and a lump sum bonus payment in an amount
no less than $1,011,615, and
- following termination of employment by the Company other than for “cause” or by the executive due to a material breach by the Company of the agreement (i.e., “good reason”) or because of a “change in control,” they are entitled to cause the Company to transfer to them any life insurance policies owned by the Company on their lives.
James A. Fine, Jr. and W. Morris Fine are also each party to a Death
Benefit Plan Agreement. Their Death Benefit Plan Agreements provide that in the
event of their death while employed by the Company, a lump sum amount equal to
three (3) times the sum of their current base salary, but in no event to be less
than $766,680 for each Executive, plus the average of each Executive’s bonus
compensation for the past three (3) years, but in no event to be less than
$1,030,000 for James A. Fine, Jr. and no less than $1,015,000 for W. Morris
Fine, be paid within 60 days of their individual death to a beneficiary
designated by the Executive. Additionally, under each Executive’s Death Benefit
Plan Agreement, each of Messrs. Fine and their designated beneficiaries would
also be paid a lump sum amount equal to $2,000,000,
- reduced by the following amounts:
| (a) | three times the then current base salary but in no event to be less than $766,680 for each executive; | ||
| (b) | three times the average bonus compensation during the preceding three years but in no event to be less than $1,030,000 for James A. Fine, Jr. and no less than $1,015,000 for W. Morris Fine | ||
| (c) | the cost of continued participation in the Company’s health insurance plans by the executive’s wife until her death; and | ||
| (d) | the cost of continued participation in the Company’s health insurance plans by the executive’s dependent children until any such children are no longer dependent; and | ||
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- increased by the amounts accrued on the Company’s books as of the date of death for the payments described in items (a) through (d) above.
Conditions to Receipt of Severance Benefits. Under each named
executive officer’s employment agreement, the Company’s obligations to provide
the executive with the severance benefits described above are contingent on:
- The executive’s compliance with
certain covenants with respect to confidential information;
- The executive’s compliance with a
two year non-competition covenant; and
- The executive’s compliance with a two year non-solicitation covenant.
22
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There were no reportable related
person transactions for the year 2009. For fiscal year 2008, there were three
related party transactions required to be disclosed in this Proxy Statement. On
June 23, 2008, the Company purchased 10,000 shares of its common stock from
Betty Dickey, sister of A. Scott Parker III, Director, for $470,100, or $47.01
per share. On August 12, 2008, the Company purchased 65,000 shares of its common
stock from A. Scott Parker III, Director, for $3,087,500 or $47.50 per share. On
September 4, 2008, the Company purchased 31,000 shares of its common stock from
Betty Dickey for $1,364,310 or $44.01 per share. All three transactions were
approved by the Company’s Audit Committee.
SHAREHOLDER PROPOSALS FOR 2011 ANNUAL MEETING
Shareholder proposals to be
presented at the 2011 Annual Meeting of Shareholders must be received by the
Company on or before December 14, 2010 to be considered for inclusion in the
Company’s proxy materials relating to that meeting. If a shareholder notifies
the Company after February 27, 2011 of an intent to present a proposal at the
Company’s 2011 Annual Meeting of Shareholders, the request will be considered
untimely and the persons named as the Company’s proxies will have the right to
exercise their discretionary voting authority with respect to such proposal
without including information regarding the proposal in the proxy materials.
| BY ORDER OF THE BOARD OF DIRECTORS: |
 |
| W. Morris
Fine Secretary |
| April 13, 2010 |
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6 DETACH PROXY CARD HERE 6
| THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” ELECTION OF THE DIRECTOR NOMINEES LISTED BELOW. | |||||||||||||||
| Mark “X” for only one box. Shares will be voted in the manner directed. If no direction is indicated, shares will be voted “FOR” the following director nominees: |
|||||||||||||||
| 1 – J. Allen Fine 2 – David L. Francis 3 – James H. Speed, Jr. |  |
||||||||||||||
| ¨ | FOR all nominees | ¨ | WITHHOLD authority for all nominees |
¨ | Withhold authority to vote for any individual nominee. |
||||||||||
| To withhold authority to vote for any nominee, write number(s) of nominee(s) below. _____________________________________________________________________ |
|||||||||||||||
|
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
“FOR” THE PROPOSAL TO RATIFY THE APPOINTMENT OF DIXON HUGHES PLLC AS THE
COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR
2010.
If no direction is indicated, shares
will be voted “FOR” this proposal.
|
|||||||||||||||
| ¨ | FOR | ¨ | AGAINST | ¨ | ABSTAIN | ||||||||||
| In their discretion, the proxies are authorized to vote in their best judgment with respect to any other business that may properly come before the meeting. | |||||||||||||||
| Dated: | , 2010 | ||||||||||||||
| (Signature) |
|||||||||||||||
| (Signature if held
jointly) |
|||||||||||||||
| SHAREHOLDER |
|||||||||||||||
| NUMBER OF SHARES | |||||||||||||||
| Note: Please sign above exactly as name
appears on this proxy. When shares are held by joint tenants, both should
sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such. If a corporation, please sign in
full corporate name by President or other authorized officer, giving title
as such. If a partnership, please sign in partnership name by authorized
person. |
|||||||||||||||
6 DETACH PROXY CARD HERE 6
 121 North Columbia Street, Chapel Hill,
North Carolina 27514
This Proxy is Solicited on Behalf of the
Board of Directors for the
Annual Meeting of Shareholders on May 19, 2010. The undersigned
hereby appoints J. Allen Fine and W. Morris Fine, and each of them, each
with power of substitution, as lawful proxies, to vote all shares of
common stock of Investors Title Company that the undersigned would be
entitled to vote if personally present at the Annual Shareholders’ Meeting
of Investors Title Company to be held at The Siena Hotel located at 1505
East Franklin Street, Chapel Hill, North Carolina on Wednesday, May 19,
2010 at 11:00 a.m. EDT, and at any adjournment thereof, upon such business
as may properly come before the meeting. Please sign and date on reverse
side and return in the enclosed postage-paid envelope.
PROXY
PLEASE SIGN ON REVERSE SIDE AND RETURN
IN THE ENCLOSED POSTAGE-PAID
ENVELOPE.
|