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. )
Filed by the Registrant
[X]
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Filed by a Party other than
the Registrant [ ]
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Check the appropriate
box:
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[ ]
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Preliminary Proxy
Statement
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Soliciting Material Under Rule
14a-12
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Confidential, For Use of
the
Commission Only (as permitted
by Rule 14a-6(e)(2))
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[X]
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Definitive Proxy
Statement
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[ ]
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Definitive Additional
Materials
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Investors
Title Company
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(Name of Registrant as
Specified In Its Charter)
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(Name
of Person(s) Filing Proxy Statement, if Other Than the
Registrant)
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Payment of Filing Fee (Check
the appropriate box):
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[X]
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No fee required.
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[
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Fee computed on
table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
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Title of each class of
securities to which transaction applies:
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Aggregate number of securities to
which transaction applies:
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Per unit price or other underlying
value of transaction computed pursuant to Exchange Act Rule 0-11 (set
forth the amount on which the filing fee is calculated and state how it
was determined):
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Proposed maximum aggregate value
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Fee paid previously
with preliminary materials:
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Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its
filing.
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Amount previously
paid:
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Form, Schedule or Registration
Statement No.:
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Filing Party:
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Date Filed:
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121 North Columbia Street,
Chapel Hill, North Carolina 27514
(919)
968-2200
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April 14, 2014
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 Wednesday, May 21, 2014 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 2014, followed by
discussion and voting on the matters set forth in the accompanying Notice of
Annual Meeting and Proxy Statement.
Whether or not you plan to attend the
meeting, I urge you to review the Proxy Statement and vote as soon as possible
to ensure that your shares are represented at the meeting. The Proxy Statement
explains more about proxy voting, so please read it carefully.
Cordially,
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J. Allen Fine
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Chief Executive
Officer
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121 North Columbia Street,
Chapel Hill, North Carolina 27514
(919) 968-2200
NOTICE OF ANNUAL
MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 21,
2014
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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 21,
2014 at 11:00 a.m. EDT, for the following purposes:
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(1)
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To elect the three directors nominated
by the Board of Directors for three-year terms or until their successors
are elected and qualified;
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(2)
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To ratify the appointment of Dixon
Hughes Goodman LLP as the Companys independent registered public
accounting firm for 2014; and
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(3)
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To consider any other business that may
properly come before the meeting.
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Shareholders of record
of Common Stock of the Company at the close of business on April 2, 2014 are
entitled to notice of and to vote at the meeting and any adjournments or
postponements thereof.
By Order of the Board of
Directors:
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W. Morris Fine
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Secretary
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April 14,
2014
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IMPORTANT Please vote by
Internet or mail as soon as possible so your shares will be voted
promptly, even if you plan to attend the meeting in person. Additional
information about voting is included in the accompanying Proxy Statement
and on your proxy card.
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TABLE OF CONTENTS
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Page
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GENERAL INFORMATION
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1
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Proxy
Solicitation by the Board of Directors
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1
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Submitting and
Revoking a Proxy
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1
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Voting
Securities
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2
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Annual Report to
Shareholders
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2
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Important Notice
Regarding the Availability of Proxy Materials for the Annual
Meeting
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Of Shareholders to be Held on May 21, 2014
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2
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Section 16(a)
Beneficial Ownership Reporting Compliance
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2
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General
Information
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2
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CORPORATE GOVERNANCE
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2
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Code of
Business Conduct and Ethics
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2
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Shareholder
Communications with Directors
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3
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Independent Directors
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3
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Executive
Sessions
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3
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Compensation Committee Interlocks and Insider Participation
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Board of Directors
and Committees
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3
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Board
Leadership Structure
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The Boards Role in
Risk Oversight
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COMPENSATION OF DIRECTORS
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STOCK OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS
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AND
MANAGEMENT
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PROPOSALS REQUIRING YOUR VOTE
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11
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Proposal 1 -
Election of Directors
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Information
Regarding Nominees for Election as Directors
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Information
Regarding Directors Continuing in Office
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12
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Proposal 2 -
Ratification of Appointment of Independent Registered
Public
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Accounting
Firm
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Audit
and Non-Audit Fees
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Audit
and Non-Audit Services Pre-Approval Policy
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AUDIT COMMITTEE REPORT
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COMPENSATION COMMITTEE REPORT
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EXECUTIVE COMPENSATION
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CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
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SHAREHOLDER PROPOSALS FOR 2015 ANNUAL
MEETING
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31
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PROXY STATEMENT
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ANNUAL
MEETING OF SHAREHOLDERS OF
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INVESTORS TITLE
COMPANY
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To Be Held on May 21,
2014
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This Proxy
Statement is furnished in connection with the solicitation by the Board of
Directors of Investors Title Company (the 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 21, 2014 at 11:00 a.m. EDT,
and at all adjournments or postponements thereof. Shareholders of record at the
close of business on April 2, 2014 are entitled to notice of and to vote at the
meeting and any adjournments or postponements thereof.
GENERAL INFORMATION
Proxy Solicitation by the Board of Directors
. The solicitation of proxies is made on behalf of the
Companys 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 2013 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, whether by mail or by Internet
voting, the persons named as proxy holders will vote the shares represented by
your proxy in accordance with your instructions. If you are a shareholder of
record and submit a proxy but do not fill out the voting instructions, the
persons named as proxy holders will vote your shares in the manner recommended
by the Board of Directors on all matters presented in this proxy statement. 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.
You may vote your shares by any of the following methods:
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By Internet.
You may vote by proxy via the Internet by following the instructions on
the proxy card provided.
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By mail.
You may vote by proxy by signing and returning the proxy card
provided.
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In person.
Stockholders of record and beneficial stockholders with shares held in
street name may vote in person at the meeting. If you hold shares in street
name, you must also obtain a legal proxy from your broker to vote in person at
the meeting.
If you vote by Internet, please have your proxy card available. The
control number appearing on your card is necessary to process your vote. An
Internet vote authorizes the named proxy holders in the same manner as if you
marked, signed and returned a proxy card by mail. 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
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meeting. If you plan to attend the meeting
and you require directions, please call the Company at 919-968-2200. 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, 2014, the Company had
a total of 2,328,507 shares of Common Stock outstanding, its only class of
issued and outstanding capital stock. Of these shares, 2,036,831 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 2013 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 Companys shareholders on or about April 14,
2014.
Important Notice Regarding the Availability of Proxy Materials
for the Annual Meeting of Shareholders to be Held on May 21,
2014
. The Notice of Annual Meeting and
Proxy Statement and the Companys 2013 Annual Report (the Proxy Materials) are
available on the Companys website at
http://www.invtitle.com/investors-proxy-materials
and at
www.proxyvote.com
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 Companys
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, 2013, 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.
General Information
. A
copy of the Companys 2013 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 Companys 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 Companys business.
The Code of Business Conduct and Ethics is posted in the Corporate
Governance area of the Investor Relations section of the Companys website at
www.invtitle.com
. The Company intends to disclose future substantive amendments to or
waivers from the Code of Business Conduct and Ethics on its website within two
business days after such amendment or waiver.
2
Shareholder Communications with
Directors
Shareholders can
communicate with members of the Companys 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.
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
Companys Board of Directors Independence Standards: David L. Francis, Richard
M. Hutson II, R. Horace Johnson, H. Joe King, Jr., James R. Morton, and James H.
Speed, Jr. The Board of Directors Independence Standards can be found on the
Companys website at
www.invtitle.com/investors-independence-standards
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Executive Sessions
Executive sessions that include only the independent members of the Board
of Directors are held periodically.
Compensation Committee Interlocks and
Insider Participation
Richard M. Hutson II, James R. Morton and James H. Speed, Jr. served on
the compensation committee in the fiscal year ended December 31, 2013. None of
the directors who served on the compensation committee in fiscal year 2013
served as one of our employees in fiscal 2013 or has ever served as one of our
officers. During fiscal year 2013, none of our executive officers served as a
director or member of the compensation committee (or other committee performing
similar functions) of any other entity of which an executive officer served on
our board of directors or compensation committee.
Board of Directors and Committees
During the year ended December 31, 2013, 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 2013 Annual Meeting.
The Companys Board of Directors has a standing Audit Committee,
Compensation Committee, and Nominating Committee.
The Audit Committee.
In 2013, the Audit Committee was
composed of Mr. Francis, Mr. Johnson and Mr. King. The Audit Committee met
thirteen times in 2013.
The Audit Committee is directly responsible for overseeing the Companys
accounting and financial reporting processes and appointing, retaining,
compensating and overseeing the Companys independent registered
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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 Companys website at
www.invtitle.com/investors-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 membersMr. Francis, Mr.
Johnson and Mr. Kingare audit committee financial experts as defined under
applicable SEC rules. See
Audit Committee
Report
below for the formal report of the
Audit Committee for 2013.
The Compensation
Committee
.
In 2013, the Compensation Committee was
composed of Mr. Hutson, Mr. Morton and Mr. Speed. The Compensation Committee met
three
times
in 2013. 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 Companys website at
www.invtitle.com/investors-committees
. The Compensation Committee reviews and assesses the adequacy
of the charter on an annual basis.
The Compensation Committee makes all compensation decisions for the
Companys executive officers and approves recommendations regarding equity
awards for all of the Companys elected officers. The Compensation Committee may
not delegate these responsibilities. Decisions regarding non-equity compensation
of all other officers and employees are made by the Companys executive
officers.
The Chief Executive Officer annually reviews the performance of each of
the other executive officers with respect to achievement of the Companys
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 executive officers based upon its evaluation of their
performance as well as other aspects of our compensation objectives.
The Committees review of the Chief Executive Officers compensation is
subject to separate procedures. The Committee evaluates the Chief Executive
Officers performance, reviews the Committees evaluation with him, and based on
that evaluation and review, determines the amount of salary adjustment and bonus
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 or use an executive compensation
consultant for determining or recommending the amount or form of executive
officer compensation. In making compensation decisions, the Committee is guided
by the objectives of our compensation program, the Committees own judgment and
other information that it considers relevant. Based on the cyclical nature of
the Companys business, the Committee believes that compensation of the
executive officers should not be based on fixed formulas and that the prudent
use of discretion in determining compensation is generally in the best interest
of the Company and its shareholders.
See
Compensation Committee
Report
below for the formal report of the
Compensation Committee for 2013. Decisions regarding the compensation of the
Board of Directors are made by the Board of Directors, as described under
Compensation of Directors
below.
4
The Nominating Committee.
In 2013, the Nominating Committee was composed of Mr. Hutson,
Mr. King and Mr. Morton. The Nominating Committee met two
times in 2013.
The Nominating Committee operates under a written charter that can be
found on the Companys website at
www.invtitle.com/investors-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 Companys
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:
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Whether the candidate
would assist in achieving a diverse mix of Board members, including a
diversity of viewpoints, backgrounds, experiences or other
demographics;
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2.
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The extent of the
candidates business experience, technical expertise, and specialized
skills or experience;
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3.
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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
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4.
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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.
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The Nominating
Committee believes that a majority of the members of the Companys 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.
5
Any shareholder
that wishes to recommend a director candidate to be considered for the 2015
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 15, 2014. The
candidates 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.
The Companys Bylaws provide that nominations for election to the Board
of Directors may be made at any annual meeting by any shareholder of record
entitled to vote on such election. Such nominations must be submitted in writing
to our Corporate Secretary at our principal office not later than the close of
business on the 90th day nor earlier than the close of business on the 120th day
prior to the first anniversary of the preceding years annual meeting, and in
accordance with the procedures specified in our Bylaws. The Company or the
presiding officer at the annual meeting of shareholders may refuse to accept the
nomination of any person that is not submitted in compliance with such
procedures.
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 Boards Role in Risk Oversight
Management is responsible for managing the risks that Investors Title
Company faces. The Board of Directors is responsible for overseeing managements
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 managements 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 and internal controls.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company receive an annual retainer
for Board services of $5,000 and an attendance fee of $2,500 for each meeting of
the Board of Directors attended, in addition to actual travel expenses related
to the meetings. Directors receive a $750 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
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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 15, 2013,
the date of the Companys 2013 Annual Meeting of Shareholders, each non-employee
director was granted 500 stock appreciation rights (SARs) under the Companys
2009 Stock Appreciation Rights Plan with an exercise price of $71.59. Upon
exercise of each SAR, a director is entitled to receive an amount (payable in
shares of the Companys common stock) equal to the difference between the
closing price of the Companys common stock on the business day immediately
preceding the date of exercise and the exercise price. The number of shares paid
on exercise is determined by dividing this amount by the closing price of the
Companys common stock on the business day immediately preceding the date of
exercise. These SARs vest and become exercisable in four quarterly installments
beginning June 30, 2013 and will expire on May 15, 2020.
The Board of Directors makes all decisions regarding the compensation of
the members of the Board of Directors. The Chief Executive Officer makes
periodic recommendations regarding director compensation, and the Board of
Directors may exercise its discretion in modifying any recommended compensation
adjustments or awards to the directors. The Board of Directors does not use a
compensation consultant for determining or recommending the amount or form of
director compensation. The following table shows the compensation earned by each
non-employee director for 2013:
2013 Director Compensation
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Fees
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Earned
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or Paid
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Stock
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Option
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In Cash
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Awards
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Awards
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Total
|
Name
(1)
|
($)
|
($)
(2)
|
($)
(3)
|
($)
|
David L. Francis
|
19,750
|
-
|
12,685
|
32,435
|
Richard M. Hutson II
|
15,500
|
-
|
12,685
|
28,185
|
R. Horace Johnson
|
19,750
|
-
|
12,685
|
32,435
|
H. Joe King, Jr.
|
20,250
|
-
|
12,685
|
32,935
|
James R. Morton
|
15,500
|
-
|
12,685
|
28,185
|
James H. Speed, Jr
|
15,500
|
-
|
12,685
|
28,185
|
(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 22.
|
|
(2)
|
|
The Company did not grant any
stock awards in 2013. There were no stock awards outstanding at December
31, 2013 held by the directors.
|
|
(3)
|
|
The amounts shown in this column
indicate the grant date fair value of SARs computed in accordance with
FASB ASC Topic 718. For additional information regarding the assumptions
made in calculating these amounts, see Note 7 to the consolidated
financial statements included in the Companys Annual Report on Form 10-K
for the year ended December 31, 2013. The aggregate number of SARs
outstanding at December 31, 2013 held by directors was as follows:
|
7
|
Outstanding
|
|
SARs at
|
|
Fiscal
Year
|
Name
|
End
|
David L. Francis
|
3,375
|
Richard M. Hutson II
|
2,875
|
R. Horace Johnson
|
3,375
|
H. Joe King, Jr.
|
3,375
|
James R. Morton
|
875
|
James H. Speed, Jr.
|
1,875
|
The Company did not grant any options in 2013. The aggregate number of
option awards outstanding at December 31, 2013 held by directors was as
follows:
|
Outstanding
|
|
Option
|
|
Awards
at
|
|
Fiscal
Year
|
Name
|
End
|
David L. Francis
|
1,000
|
Richard M. Hutson II
|
0
|
R. Horace Johnson
|
500
|
H. Joe King, Jr.
|
1,000
|
James R. Morton
|
0
|
James H. Speed, Jr.
|
0
|
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 Companys outstanding Common Stock as of
April 2, 2014. Unless otherwise indicated, all persons named as beneficial
owners of Common Stock have sole voting power and sole investment power with
respect to shares indicated.
Name and
Address of
|
|
Amount and Nature
|
|
Percent
|
Beneficial
Owner
|
|
|
of Beneficial Ownership
|
|
of Class
(1)
|
Markel Corporation
|
|
|
216,350
|
(2)
|
|
|
10.6%
|
4521 Highwoods Parkway,
Glen Allen, Virginia 23060
|
|
|
|
|
|
|
|
|
J.
Allen Fine
|
|
|
196,475
|
(3)
|
|
|
9.6%
|
121 N. Columbia Street,
Chapel Hill, North Carolina 27514
|
|
|
|
|
|
|
|
|
James A. Fine, Jr.
|
|
|
179,295
|
(4)
|
|
|
8.8%
|
121 N. Columbia Street,
Chapel Hill, North Carolina 27514
|
|
|
|
|
|
|
|
|
W.
Morris Fine
|
|
|
178,809
|
(5)
|
|
|
8.8%
|
121 N. Columbia Street,
Chapel Hill, North Carolina 27514
|
|
|
|
|
|
|
|
|
Dimensional Fund Advisors LP
|
|
|
150,891
|
(6)
|
|
|
7.4%
|
Palisades West, Building
One, 6300 Bee Cave Road,
|
|
|
|
|
|
|
|
Austin, Texas
78746
|
|
|
|
|
|
|
|
8
(1)
|
|
The percentages are
calculated based on 2,036,831 shares outstanding as of April 2, 2014 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. 8 to Schedule
13G filed with the SEC on January 3, 2014. Of these shares, Markel
Corporation has sole voting and investment power with respect to 213,300
shares and shared investment power with respect to 3,050
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.
|
|
(4)
|
|
This includes 95,000
shares held by a limited partnership of which Mr. Fine is a general
partner and shares joint voting and investment power over such shares with
W. Morris Fine, and such shares are also reflected in W. Morris Fines
beneficially owned shares. Additionally, this includes 515 shares held by
Mr. Fines wife and 2,329 shares held by other family
members.
|
|
(5)
|
|
This includes 95,000
shares held by a limited partnership of which Mr. Fine is a general
partner and shares joint voting and investment 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 470 shares
held by Mr. Fines wife and 3,582 shares held by other family
members.
|
|
(6)
|
|
The information
included in the above table is based solely on Amendment No. 4 to Schedule
13G filed by Dimensional Fund Advisors LP with the SEC on February 10,
2014. The Schedule 13G/A states as follows: Dimensional Fund Advisors LP,
an investment adviser registered under Section 203 of the Investment
Advisors Act of 1940, furnishes investment advice to four investment
companies registered under the Investment Company Act of 1940, and serves
as investment manager to certain other commingled group trusts and
separate accounts (such investment companies, trusts and accounts,
collectively referred to as the Funds). In certain cases, subsidiaries
of Dimensional Fund Advisors LP may act as an adviser or sub-adviser to
certain Funds. In its role as investment advisor, sub-adviser and/or
manager, neither Dimensional Fund Advisors LP or its subsidiaries
(collectively, Dimensional) possess voting and/or investment power over
the securities of the Issuer that are owned by the Funds, and may be
deemed to be the beneficial owner of the shares of the Issuer held by the
Funds. However, all securities reported in this schedule are owned by the
Funds. Dimensional disclaims beneficial ownership of such securities. In
addition, the filing of this Schedule 13G shall not be construed as an
admission that the reporting person or any of its affiliates is the
beneficial owner of any securities covered by this Schedule 13G for any
other purposes than Section 13(d) of the Securities Exchange Act of
1934.
|
9
The table
below sets forth the shares of the Companys Common Stock beneficially owned as
of April 2, 2014 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. Unless otherwise indicated, all persons named as
beneficial owners of Common Stock have sole voting power and sole investment
power with respect to shares indicated.
Name
of
|
|
Amount and Nature
|
|
Percent
|
Beneficial
Owner
|
|
|
of Beneficial Ownership
|
|
of Class
(1)
|
J.
Allen Fine
|
|
|
196,475
|
(2)
|
|
|
9.6%
|
James A. Fine,
Jr.
|
|
|
179,295
|
(3)
|
|
|
8.8%
|
W.
Morris Fine
|
|
|
178,809
|
(4)
|
|
|
8.8%
|
H. Joe King, Jr.
|
|
|
23,539
|
(5)
|
|
|
1.2%
|
James R. Morton
|
|
|
13,543
|
(6)
|
|
|
*
|
R. Horace
Johnson
|
|
|
4,785
|
(7)
|
|
|
*
|
Richard M. Hutson II
|
|
|
4,146
|
(8)
|
|
|
*
|
David L. Francis
|
|
|
7,689
|
(9)
|
|
|
*
|
James H. Speed, Jr.
|
|
|
2,000
|
(10)
|
|
|
*
|
All Directors, Nominees
for Director, and
|
|
|
|
|
Executive Officers as a
Group
|
|
|
|
|
|
|
|
(9 persons)
|
|
|
515,281
|
(11)
|
|
|
25.3%
|
*Represents less than 1%
(1)
|
|
The percentages are calculated
based on 2,036,831 shares outstanding as of April 2, 2014, 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.
|
|
(3)
|
|
This includes 95,000 shares held
by a limited partnership of which Mr. Fine is a general partner and shares
joint voting and investment power over such shares with W. Morris Fine,
and such shares are also reflected in W. Morris Fines beneficially owned
shares. Additionally, this includes 515 shares held by Mr. Fines wife and
2,329 shares held by other family members.
|
|
(4)
|
|
This includes 95,000 shares held
by a limited partnership of which Mr. Fine is a general partner and shares
joint voting and investment 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 470 shares held by
Mr. Fines wife and 3,582 shares held by other family
members.
|
|
(5)
|
|
This total includes 4,500 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, 2014 as well as 1,000 shares
held by his wife.
|
|
(6)
|
|
This total includes 1,000 shares
of Common Stock that Mr. Morton has the right to purchase under stock
appreciation rights that are presently exercisable or are exercisable
within 60 days of April 2, 2014.
|
|
(7)
|
|
This total includes 3,500 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, 2014.
|
|
(8)
|
|
This total includes 3,000 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, 2014.
|
10
(9)
|
|
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,
2014.
|
|
(10)
|
|
This total includes
2,000 shares of Common Stock that Mr. Speed has the right to purchase
under stock appreciation rights that are presently exercisable or
exercisable within 60 days of April 2, 2014.
|
|
(11)
|
|
For purposes of
calculating this total, the 95,000 shares of Common Stock owned jointly by
James A. Fine, Jr. and W. Morris Fine are only counted once. This total
includes 18,500 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,
2014.
|
PROPOSALS REQUIRING YOUR VOTE
Proposal 1 - Election of Directors
The Companys
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 W. Morris Fine,
Richard M. Hutson II and R. Horace Johnson for election to serve for a
three-year period or until their respective successors have been elected and
qualified.
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
2017.
The following provides
information about each director nominee and continuing director, including
information about each nominees and directors 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.
Information Regarding Nominees for
Election as Directors
|
|
|
Served as
|
|
Term
|
|
|
|
Director
|
|
to
|
Name
|
|
Age
|
|
Since
|
|
Expire
|
W.
Morris Fine
|
47
|
|
1999
|
|
2017
|
Richard M. Hutson
II
|
73
|
|
2008
|
|
2017
|
R.
Horace Johnson
|
69
|
|
2005
|
|
2017
|
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 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, as a
member of the operating committee of the Carolinas practice for five years, and
as managing partner of the Raleigh office for 17 years until his retirement.
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: The Council for
Entrepreneurial Development, Coral Bay Club and Sphinx 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.
Information Regarding Directors
Continuing in Office
|
|
|
Served as
|
|
Term
|
|
|
|
Director
|
|
to
|
Name
|
|
Age
|
|
Since
|
|
Expire
|
James A. Fine, Jr.
|
52
|
|
1997
|
|
2015
|
H. Joe King, Jr.
|
81
|
|
1983
|
|
2015
|
James R. Morton
|
76
|
|
1985
|
|
2015
|
J. Allen Fine
|
79
|
|
1973
|
|
2016
|
David L. Francis
|
81
|
|
1982
|
|
2016
|
James H. Speed,
Jr.
|
60
|
|
2010
|
|
2016
|
12
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 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 and TransCarolina Corporation. Mr. Morton has extensive experience in
strategic planning, business administration and investments.
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 National
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.
13
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, M&F Bancorp, Inc., Mechanics & Farmers
Bank, the Federal Reserve Bank of Richmond Charlotte Branch, Hillman Capital
Management Investment Trust, New Providence Investment Trust, Nottingham
Investment Trust II, Starboard Investment Trust, Tilson Investment Trust,
Centaur Mutual Funds, WST Investment Trust, Brown Capital Management Funds, AAA
Carolinas, North Carolina Central University School of Business, UNC Healthcare
Systems, Communities in Schools of North Carolina and Central Childrens Home of
North Carolina. He has a strong executive background and extensive experience in
finance, public accounting and insurance.
Proposal 2 Ratification of
Appointment of Independent Registered Public Accounting Firm
The Audit Committee selected Dixon Hughes Goodman LLP as our independent
registered public accounting firm for the fiscal year ended December 31, 2014.
Dixon Hughes Goodman LLP served as our independent registered public accounting
firm for the fiscal year ended December 31, 2013, and its representatives are
expected to attend the 2014 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 Goodman LLP.
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 on the proposal. Abstentions and broker non-votes
will not be counted as votes cast for the purpose of ratifying the selection of
Dixon Hughes Goodman LLP.
The Board unanimously recommends that you vote FOR the proposal
to ratify the appointment of Dixon Hughes Goodman LLP as the Companys
independent registered public accounting firm for 2014.
Audit and Non-Audit Fees
Aggregate fees for professional services rendered by our independent
registered public accounting firm, Dixon Hughes Goodman LLP, for the years ended
December 31, 2013 and 2012 are set forth below:
|
2013
|
|
2012
|
Audit Fees (1)
|
$
|
277,000
|
|
$
|
275,000
|
Audit-Related Fees (2)
|
|
17,000
|
|
|
0
|
Tax Fees (3)
|
|
64,485
|
|
|
53,100
|
All Other Fees
|
|
0
|
|
|
0
|
Total Fees
|
$
|
358,485
|
|
$
|
328,100
|
|
(1)
|
|
In 2013 and 2012,
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.
|
14
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 2013 and 2012, 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 firms communications with the Audit
Committee concerning 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, 2013. The Audit Committee discussed
with the independent registered public accounting firm those matters required to
be discussed by Auditing Standard No. 16, Communication with Audit Committees,
as adopted by the Public Company Accounting Oversight Board (United States). 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, 2013, 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
15
COMPENSATION COMMITTEE REPORT
T
he Compensation Committee has reviewed and discussed the
Compensation Discussion and Analysis with management and, based on such review
and discussions, recommended to the board of directors that the Compensation
Discussion and Analysis be included in this Proxy Statement and our Annual
Report on Form 10-K for the year ended December 31, 2013.
Submitted by the Compensation Committee of the Board of Directors.
Richard M.
Hutson II, Chairman
James R. Morton
James H.
Speed, Jr.
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
The Committee is responsible for setting the compensation of the named
executive officers listed in the Summary Compensation Table. The ensuing
discussion and analysis of the material elements of the Companys executive
compensation program focuses on the following:
-
the philosophy and objectives of the compensation
program, including the results and behaviors the program is designed to
reward;
-
the process used to determine executive
compensation;
-
the role of shareholder say-on-pay
votes;
-
each element of compensation (see Elements of
Executive Compensation section below);
-
the reasons why the Committee chooses to pay each
element;
-
how the Committee determines the amount of each
element; and
-
how each element and the Committees decisions
regarding that element fit into the Committees stated objectives and affect
the Committees decisions regarding other elements.
Philosophy and Objectives of the
Executive Compensation Program
The Committee believes that the ultimate objective of an effective
executive compensation program is to reward the accretion of stockholder value
over the long term. In keeping with this philosophy, the Committee has designed
the Companys executive compensation program to reward the achievement of the
Companys objectives, and to align the interests of executives with those of
stockholders.
Retention of talented executives with the skills, experience, and vision
to lead the Company is integral to the Companys success. However, given the
Companys history as a family-managed company, the Committees philosophy tends
to focus on fairness, executive performance, and long-term
commitment.
To support the over-arching objective of the accretion of stockholder
value, a significant focus of the executive compensation program is to reward
the attainment of short-term and long-term Company objectives, and to provide
the proper motivation for the executive officers to strive to achieve those
objectives. The Committee believes that to align the interests of executives and
stockholders, the executive compensation package must include both cash and
equity compensation.
16
While the
Committee does review stock performance in making its compensation decisions, it
places relatively low emphasis on short-term stock performance as a measurement
of Company and executive performance. The Committee feels this is appropriate
since short-term movements in stock price are subject to factors unrelated to
performance and beyond the control of executive officers, including factors
affecting the securities markets generally. The Companys management strives to
build stockholder value by meeting customer needs, building cash flow and return
on assets, promoting operational excellence and strategic innovation, and
improving the Companys financial performance, including improvements in
revenues, net income, and other financial performance metrics. The pursuit of
such short-term and long-term objectives is not always consistent with producing
short-term stock price increases, but the Committee believes that taking a
broader view will demand performance that is more likely to maximize return to
the stockholders over time. The Committee believes that there are many ways in
which its executive officers and other executives contribute to building a
successful company. While the Companys financial statements and stock price
should eventually reflect the results of those efforts, many long-term strategic
decisions made in pursuing the growth and development of the Company may have
little visible impact on stock price in the short term.
Finally, the Committees philosophy considers the cyclical nature of the
Companys business, which is strongly influenced by factors external to the
Company, such as prevailing mortgage interest rates, wage growth and employment
rates, and overall economic activity in the markets the Company serves. Because
these factors are beyond the control of the executive officers, the Committee
does not attempt to soley link annual operating results with annual
compensation. Instead, the Committee focuses on the accretion of stockholder
value over time, among other measures, in evaluating the performance of the
executive officers and in designing the executive compensation program.
In summary, the Companys executive compensation program is designed to
support five objectives:
-
aligning executives interests with those of
stockholders;
-
promoting and rewarding the fulfillment of annual
and long-term objectives;
-
promoting and rewarding long-term
commitment;
-
maintaining internal compensation equity;
and
-
competing for talent in order to retain executives
with the skills and attributes the Company needs.
Determining Executive
Compensation
The Committee makes all compensation decisions for the named executive
officers and approves recommendations regarding equity awards for all of the
Companys elected officers. Decisions regarding non-equity compensation of all
other officers and employees are made by the Companys named executive officers.
The Chief Executive Officer annually reviews the performance of each of
the other named executive officers in connection with the Companys attainment
of its 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 the Committees compensation
philosophy.
The Committees review of the Chief Executive Officers compensation is
subject to separate procedures. The Committee evaluates the Chief Executive
Officers performance, reviews the Committees 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.
17
In making
compensation decisions, the Committee is guided by its executive compensation
philosophy, its own judgment, and other sources of information that it considers
relevant. In addition, the Committee annually reviews tally sheets showing each
executive officers compensation history with respect to each element of
compensation for a period of five years. The Committee does not currently retain
or use an executive compensation consultant for determining or recommending the
amount or terms of executive compensation.
Based upon the cyclical nature of the Companys business, the Committee
believes that compensation of the executive officers cannot be based upon fixed
formulas and that the prudent use of discretion in determining compensation will
generally be in the best interests of the Company and its stockholders.
Accordingly, in the exercise of its discretion, the Committee approves and
determines compensation, and may approve changes in compensation that it
considers to be appropriate to award performance or otherwise to provide
incentives toward fulfilling the philosophy and objectives of our executive
compensation program.
Role of Shareholder Say-on-Pay
Votes
We provide our shareholders with the opportunity to cast an advisory vote
on executive compensation (a say-on-pay proposal) every three years. At the
Companys annual meeting of stockholders held in May 2013, approximately 97% of
the votes cast on the say-on-pay proposal at the meeting were voted in favor of
the proposal. The Committee believes this vote affirms the stockholders support
of the Companys approach to executive compensation and did not make specific
changes to our executive compensation program in response to the vote. The
Committee will also continue to consider the outcome of the Companys say-on-pay
votes when making future compensation decisions for the named executive
officers.
Elements of Executive
Compensation
The principal components of our executive compensation program for the
named executive officers are:
-
base salaries;
-
annual incentive bonuses;
-
long-term equity incentive
awards;
-
a nonqualified supplemental retirement benefit
plan;
-
a nonqualified deferred compensation
plan;
-
benefits under employment
agreements;
-
potential payments and benefits upon change of
control; and
-
benefits and perquisites.
Base Salaries.
Base salaries represent a usual and
expected component of executive compensation, and are paid to provide executives
with a fixed level of compensation. In setting base salaries for the executive
officers, the Committee considered the following factors:
-
the responsibilities and critical leadership role
of the executives;
-
the experience and individual performance of the
executives, and
their contribution to the
Companys strategic initiatives;
-
the Companys financial performance, judged in
light of external market factors;
18
-
the Companys stock price performance, in absolute
terms and relative to its peers and the market as a whole;
-
the Committees evaluation of market demand for
executives with similar capability and experience;
-
the Committees desire to strike an appropriate
balance between the fixed elements of compensation and the variable
performance-based elements; and
-
obligations under employment agreements.
Salary levels are
typically considered annually as part of the Companys performance review
process, or upon a promotion or other change in job responsibility. For 2013,
each of the named executive officers received an increase in base salary,
reflected as a percentage of 2012 base salary, as follows: J. Allen Fine
3.12%; James A. Fine, Jr. 3.52%; W. Morris Fine 3.52%. These increases were
provided primarily as cost of living increases.
Annual Incentive Bonuses.
Discretionary annual incentive bonuses are provided to reward
performance and motivate the executives to achieve the Companys short-term and
long-term objectives. In determining annual incentive bonus amounts, the
Committee seeks to link a substantial portion of each individuals total annual
compensation to the attainment of these objectives. In determining annual
incentive bonus amounts, the Committee considers each executives level of
responsibility and degree of influence on the Companys objectives, as well as
the Committees desire to strike an appropriate balance between the fixed
elements of compensation and the variable performance-based elements. By design,
at-risk pay for the named executive officers is generally a significant
component of the total compensation package, between 55% and 70% of potential
total cash compensation.
Grants of incentive bonuses are based primarily upon the attainment of
the Companys short-term and long-term objectives. The incentive bonus
compensation for any given year is not tied to target amounts by a specific
fixed formula. In determining the incentive bonus amounts, the Committee reviews
the Companys progress toward meeting its objectives, and each executive
officers contribution toward that progress, in the context of award amounts
from prior years, as well as the Committees judgment and use of discretion.
For 2013, annual incentive payments increased $250,000 for J. Allen Fine,
James A. Fine, Jr. and W. Morris Fine over the amounts paid in 2012, reflecting
the Committees recognition of performance of the executive officers and their
contribution toward the Company attaining record revenues, net income and
earnings per share in 2013, along with a return on equity of 12.12%, profit
margin of 11.65% and operating margin of 17.06%.
Long-Term Equity Incentive Awards.
The Committee periodically considers awarding equity-based
incentives to the named executive officers, as well as other officers and
employees, in order to closely link the interests of the program participants
with those of stockholders, reward short-term performance, and encourage
long-term commitment. By delivering value only when the value of the Companys
stock increases, equity-based incentives motivate executives to focus on
managing the Company from the perspective of an owner with an equity stake in
the Company. In the Committees opinion, past equity-based incentive awards were
successful in focusing senior management on building profitability and
shareholder value.
The Committee does not follow the practice of making annual or other
periodic awards to individuals who are determined to be eligible to participate
in the Plan. However, the Committee does regularly evaluate the stock ownership
of key employees and, when it deems it appropriate, makes awards in accordance
with the philosophy outlined above.
Typically, eligible employees are those who are in a position to
significantly influence the achievement of the Companys objectives. Awards
granted to an individual are based upon a number of factors, including the
Companys performance, the individuals performance, and the recipient's
position, salary, and performance. In addition, the Committee considers the
degree of each potential recipients ability to influence the attainment of the
19
Companys goals and encourages individuals
who receive these awards will retain a substantial portion of the shares awarded
to them to foster a mutuality of interests with our stockholders.
All stock
appreciation rights are made under the Investors Title Company 2009 Stock
Appreciation Right Plan, which stockholders approved on May 20, 2009. Stock
appreciation rights generally become exercisable at any time on or after the
first anniversary date of the grant date and no more than 50,000 options may be
granted to one individual under each Plan. No new stock appreciation rights were
made to the executive officers in 2013. Under the 2009 plan, 241,000 additional
units are available for issuance, and they may be issued through March 2,
2019.
Non-Qualified Supplemental
Retirement Benefit Plan.
The
Committee maintains a Non-Qualified Supplemental Retirement Benefit Plan of the
Companys 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. The Company did not make any contributions to the
plan in 2013. Each participants account balance was zero at December 31, 2013.
Non-Qualified Deferred
Compensation Plan.
The 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. The Company did not make
any contributions to the plan in 2013 and each participants account balance was
zero at December 31, 2013.
Benefits Under Employment Agreements.
ITIC has entered into employment
agreements with the executive officers under which they are entitled to certain
compensation and benefits, including severance benefits. These agreements are
intended to provide employment security by specifying minimum base salaries and
benefits. Additionally, under these agreements, the executive officers agree to
certain non-competition and non-solicitation covenants. For additional
information regarding these employment agreements see
Summary Compensation Table Employment
Agreements
below. For detailed information
regarding severance benefits see
Potential
Payments Upon Termination or Change of Control
below.
Potential Payments and
Benefits Upon Change of Control.
Under the employment agreements with the executive officers they are
entitled to certain severance payments if they terminate employment because of a
change of control, as well as a salary increase of 100% if a change in control
does not result in termination of employment.
The arrangements were established because:
-
it is in the best interest of the Company and its
stockholders to assure that the Company will have the continued dedication of
the Companys executive officers notwithstanding the possibility, threat, or
occurrence of a change in control; and
-
it is imperative to diminish the inevitable
distraction to such executive officers by virtue of the personal uncertainties
and risks created by a pending of threatened change in control.
For detailed information regarding severance benefits payable in
connection with a termination because of a change in control see
- Potential Payments Upon Termination or
Change in Control
below.
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 Companys group
insurance program, which during 2013 included group health, dental, vision, life
insurance, as well as short and long term disability insurance. Other benefits
offered during 2013 included flexible spending accounts and a pretax premium
plan, paid sick leave, paid holidays, and paid vacations.
20
Under the
Companys 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
2013 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 frequent 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 Companys policy covering all Company-owned vehicles.
James A. Fine, Jr. and W. Morris Fine are also parties to Death Benefit
Plan Agreements, which provide that, in the event of death, certain amounts
payable under their respective employment agreements will be paid in a lump sum
within 60 days of death to their respective beneficiaries. Under each agreement,
the respective beneficiary would also be paid a lump sum amount equal to
$2,000,000 subject to adjustments as described under
- Potential Payments Upon Termination or change of Control James A.
Fine Jr. and W. Morris Fine
below. The
agreements are provided to minimize the distraction to the executive officers of
personal risks and uncertainties.
As a matter of policy, the Committee does not award personal benefits or
perquisites that are unrelated to the Companys business.
The Committee reviews and approves annually all benefits and perquisites
paid to our executive officers.
Tax and Accounting
Implications
Deductibility of Executive Compensation.
As part of its role, the Committee
reviews and considers the tax deductibility of executive compensation under
Section 162(m) of the Internal Revenue Code of 1986, as amended, which provides
that a public company is generally not entitled to deduct for Federal income tax
purposes non-performance-based compensation paid to any of its executive
officers in excess of $1.0 million. Special rules apply for "performance-based"
compensation, including the pre-approval of performance goals applicable to that
compensation.
All compensation paid to the named executive officers in 2013 was
believed to be fully deductible for the purposes of Section 162(m). However, to
maintain flexibility in compensating executive officers in a manner designed to
promote varying corporate goals, the Committee has not adopted a policy that all
compensation must be deductible for Federal income tax purposes.
Accounting for Stock-Based Compensation.
the Company accounts for
stock-based payments in accordance with the requirements of FASB Accounting
Standards Codification (ASC) Topic 718, Stock Compensation (formerly, FASB
Statement 123R).
21
Summary Compensation Table
The table below
summarizes the total compensation for each of the named executive officers for
each of the fiscal years ended December 31, 2013, December 31, 2012, and
December 31, 2011.
|
|
|
|
All Other
|
|
|
|
Salary
|
Bonus
|
Compensation
|
Total
|
Name and Principal
Position
|
Year
|
($)
|
($)(1)
|
($)(2)
|
($)
|
J.
Allen Fine
|
2013
|
328,333
|
500,000
|
23,912
|
852,245
|
Chief Executive Officer and Chairman
|
2012
|
318,167
|
250,000
|
24,138
|
592,305
|
of the Board
|
2011
|
308,060
|
100,000
|
22,907
|
430,967
|
James A. Fine, Jr.
|
2013
|
277,917
|
575,000
|
31,526
|
884,443
|
President, Chief Financial Officer and
|
2012
|
268,500
|
325,000
|
29,821
|
623,321
|
Treasurer
|
2011
|
260,093
|
180,000
|
30,862
|
470,955
|
W.
Morris Fine
|
2013
|
277,917
|
575,000
|
33,535
|
886,452
|
Executive Vice President & Secretary
|
2012
|
268,500
|
325,000
|
29,410
|
622,910
|
|
2011
|
260,093
|
180,000
|
28,370
|
468,463
|
|
(1)
|
|
Reflects cash bonuses earned in the applicable
year.
|
|
|
|
(2)
|
|
Amounts set forth as All Other Compensation for 2013
consists of the following:
|
|
|
|
|
Personal
|
|
|
|
Supplemental
|
Life and
|
Use of
|
|
|
401(k)
|
Retirement
|
Health
|
Company
|
|
|
Contributions
|
Cash Payment
|
Insurance
|
Vehicle
|
Total
|
Name
|
($)
|
($)
|
($)
|
($)
|
($)
|
J. Allen Fine
|
10,000
|
13,221
|
|
720
|
|
6,003
|
23,912
|
James A. Fine, Jr.
|
10,000
|
14,245
|
|
8,324
|
|
4,989
|
31,526
|
W. Morris Fine
|
10,000
|
14,249
|
|
8,324
|
|
6,902
|
33,535
|
Employment
Agreements
Each of the named executive officers is party to an employment agreement
with the Company, which was amended and restated effective as January 1, 2009.
Under the employment agreements, each of J. Allen Fine, James A. Fine, Jr., and
W. Morris Fine, are entitled to a minimum base salary of $303,360, $255,560, and
$255,560, respectively. Under these agreements, Messrs. Fine, Fine, Jr., and
Fine participate in the Companys benefits programs generally provided to other
executives, receive 30 days of paid vacation and unlimited sick leave, and are
entitled to reimbursement for reasonably incurred out-of-pocket business
expenses. Additionally, under these agreements, Messrs. Fine, Fine, Jr., and
Fine receive an annual supplemental retirement cash payment equal to the amount
that would have been contributed to their 401(k) plan accounts if the
contributions to the 401(k) plan were not limited under federal tax laws. The
agreements also provide for minimum payments to each executive officer in the
event of (i) disability or retirement, (ii) termination by the Company without
cause, or (iii) termination by the officer for good reason or due to a change in
control. The agreements also prohibit Messrs. Fine, Fine, Jr., and Fine from
engaging in certain activities involving competition with the Company for a two
year period following termination of employment. Each employment agreement has a
five year rolling term beginning January 1, 2009, unless terminated earlier in
accordance with it terms.
22
Grants of Plan-Based Awards in 2013
There were no
grants of plan based awards to the named executive officers in the fiscal year
ended December 31, 2013.
Outstanding Equity Awards at 2013
Fiscal Year-End
There were no outstanding equity awards to the named executive officers
as of December 31, 2013.
2013 Option Exercises and Stock
Vested
The following table sets forth certain information regarding option
exercises and stock vested during the fiscal year ended December 31,
2013.
|
Option Awards
|
Stock Awards
|
|
Number of
Shares
|
Value
|
Number of
Shares
|
Value
|
|
Acquired
on
|
Realized
on
|
Acquired
on
|
Realized on
|
Name
|
Exercise (#)
|
Exercise ($)(1)
|
Vesting (#)
|
Vesting ($)
|
J. Allen
Fine
|
15,218
|
1,088,000
|
-
|
-
|
James A.
Fine, Jr.
|
15,218
|
1,088,000
|
-
|
-
|
W.
Morris Fine
|
15,218
|
1,088,000
|
-
|
-
|
|
(1)
|
|
The amounts shown in this column reflect the aggregate
dollar amounts realized upon the exercise of stock appreciation rights.
The amounts reflect the market price of our common stock on the date of
exercise.
|
Nonqualified Deferred
Compensation
As discussed
above, under the heading Compensation Discussion and Analysis Elements of
Executive Compensation, the named executive officers are eligible to
participate in a Non-Qualified Supplemental Retirement Benefit Plan and a
Non-Qualified Deferred Compensation Plan. The table below shows there was no
activity in these plans during 2013.
|
|
|
|
Aggregate
|
Aggregate
|
|
Executive
|
Employer
|
Aggregate
|
Withdrawals/
|
Balance
|
|
Contributions
|
Contributions
|
Earnings
|
Distributions
|
at Last
|
|
in Last FY
|
in Last FY
|
in Last FY
|
in Last FY
|
FYE
|
Name
|
($)
|
($)(1)
|
($) (2)
|
($)
|
($)(3)
|
J.
Allen Fine
|
|
|
|
|
|
(Deferred Compensation Plan)
|
0
|
0
|
0
|
0
|
0
|
J.
Allen Fine
|
|
|
|
|
|
(Supplemental Retirement Plan)
|
0
|
0
|
0
|
0
|
0
|
James A. Fine, Jr.
|
|
|
|
|
|
(Deferred Compensation Plan)
|
0
|
0
|
0
|
0
|
0
|
James A. Fine, Jr.
|
|
|
|
|
|
(Supplemental Retirement Plan)
|
0
|
0
|
0
|
0
|
0
|
W.
Morris Fine
|
|
|
|
|
|
(Deferred Compensation Plan)
|
0
|
0
|
0
|
0
|
0
|
W.
Morris Fine
|
|
|
|
|
|
(Supplemental Retirement Plan)
|
0
|
0
|
0
|
0
|
0
|
23
Potential Payments Upon Termination or
Change of Control
Under the
employment agreements in effect on December 31, 2013, the executive officers are
entitled to severance payments and benefits under their employment agreements as
described below.
J. Allen Fine.
Under Mr. J. Allen
Fines employment agreement, if his employment is terminated due to death,
disability or retirement (following his 70
th
birthday), he is
entitled to receive the following:
-
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;
-
continued participation in the Companys health
insurance plans by him and his wife at no expense until his death or, if
later, his wifes death; and
-
continued participation in the Companys health
insurance plans by his dependent children at no expense until any such
children are no longer dependent.
Under Mr. Fines employment agreement, if his employment is terminated by
the Company other than for cause or by him due to the Companys materially
breaching the agreement (i.e., good reason), he is entitled to receive the
following:
-
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. Fines employment agreement, if he terminates his employment
because of a change in control, he is entitled to receive the following:
-
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
24
-
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. Fines employment agreement, if his employment is terminated by
the Company for cause, he is entitled to receive the following:
-
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.
Under Mr. Fines employment agreement, cause is defined as:
-
the executives 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
executives 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. Fines 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 Companys
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
25
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 Companys outstanding shares entitled to vote for the
election of directors, cease for any reason to constitute at least a majority
of the Companys Board of Directors;
-
a sale of more than 50% of the Companys 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.
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 Fines employment agreement, except
that under their agreements the following apply:
-
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.
26
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 Executives 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 Executives 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 Companys health insurance plans by the executives
wife until her death; and
|
|
|
|
(d)
|
|
the cost of continued
participation in the Companys health insurance plans by the executives
dependent children until any such children are no longer
dependent.
|
-
increased by the amounts accrued on the Companys
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 officers
employment agreement, the Companys obligations to provide the executive with
the severance benefits described above are contingent on:
-
The executives compliance with certain covenants
with respect to confidential information;
-
The executives compliance with a two year
non-competition covenant; and
-
The executives compliance with a two year
non-solicitation covenant.
27
Estimated Post-Employment Compensation and
Benefits
.
The following tables set forth the
estimated post-employment compensation and benefits that would have been payable
to each of the named executive officers under his agreements, assuming that each
covered circumstance occurred on December 31, 2013.
The following table shows the potential payments upon termination or a
change of control of the Company for J. Allen Fine, the Companys Chief
Executive Officer:
Executive Benefits
and
|
|
Termination
|
|
|
Involuntary
or
|
Termination
for
|
Payments Upon
|
Voluntary
|
Due to Change
|
|
For Cause
|
Good Reason
|
Retirement
(1)
|
Termination
|
Termination
|
in Control
|
Death
|
Termination
|
Termination
|
or
Disability
|
Compensation:
|
|
|
|
|
|
|
Base Salary
|
-
|
986,700 (4)
|
990,000 (5)
|
27,500 (3)
|
1,650,000 (6)
|
990,000 (5)
|
Bonus
|
-
|
1,051,484 (7)
|
1,055,000 (8)
|
-
|
1,758,335 (9)
|
1,055,000 (8)
|
Supplemental
|
|
|
|
|
|
|
Retirement Plan
(10)
|
-
|
-
|
-
|
-
|
-
|
-
|
Supplemental
|
|
|
|
|
|
|
Retirement Benefit
(11)
|
13,221
|
13,221
|
13,221
|
13,221
|
13,221
|
13,221
|
|
|
|
|
|
|
|
Benefits and Perquisites:
|
|
|
|
|
|
|
Health
Plan (12)
|
-
|
38,799
|
38,799
|
-
|
38,799
|
38,799
|
Total J. Allen
Fine
|
13,221
|
2,090,204
|
2,097,020
|
40,721
|
3,460,355
|
2,097,020
|
The following
table shows the potential payments upon termination or a change of control of
the Company for James A. Fine, Jr., the Companys President and Chief Financial
Officer:
|
|
Termination
|
|
|
|
|
Executive Benefits and
|
|
Due to
|
|
|
Involuntary or
|
Termination
for
|
Payments Upon
|
Voluntary
|
Change in
|
|
For Cause
|
Good Reason
|
Retirement
(2)
|
Termination
|
Termination
|
Control
|
Death
|
Termination
|
Termination
|
or
Disability
|
Compensation:
|
|
|
|
|
|
|
Base Salary
|
-
|
835,705 (4)
|
838,500 (5)
|
23,292 (3)
|
1,397,500 (6)
|
838,500 (5)
|
Bonus
|
-
|
1,026,565 (7)
|
1,030,000 (8)
|
-
|
1,716,665 (9)
|
1,030,000 (8)
|
Supplemental
|
|
|
|
|
|
|
Retirement Plan
(10)
|
-
|
-
|
-
|
-
|
-
|
-
|
Supplemental
|
|
|
|
|
|
|
Retirement Benefit
(11)
|
14,245
|
14,245
|
14,245
|
14,245
|
14,245
|
14,245
|
|
|
|
|
|
|
|
Benefits and Perquisites:
|
|
|
|
|
|
|
Health Plan
(12)
|
-
|
339,039
|
339,039
|
-
|
339,039
|
339,039
|
Death Benefit
Plan
|
|
|
|
|
|
|
Agreement (13)
|
-
|
-
|
-
|
-
|
-
|
-
|
Life
Insurance (14)
|
-
|
220,446
|
220,446
|
-
|
220,446
|
220,446
|
Total - James A. Fine,
Jr.
|
14,245
|
2,436,000
|
2,442,230
|
37,537
|
3,687,895
|
2,442,230
|
28
The following
table shows the potential payments upon termination or a change of control of
the Company for W. Morris Fine, the Companys Executive Vice President and
Secretary:
|
|
|
|
|
Involuntary
|
Termination
|
|
|
Termination
|
|
|
or Good
|
for
|
Executive Benefits and
|
Voluntary
|
Due to Change
|
|
For Cause
|
Reason
|
Retirement
|
Payments Upon
Termination
|
Termination
|
in Control
|
Death
|
Termination
|
Termination
|
or
Disability
|
Compensation:
|
|
|
|
|
|
|
Base Salary
|
-
|
835,705 (4)
|
838,500 (5)
|
23,292 (3)
|
1,397,500
|
838,500 (5)
|
Bonus
|
-
|
1,011,615 (7)
|
1,015,000 (8)
|
-
|
1,691,665
|
1,015,000 (8)
|
Supplemental Retirement
|
|
|
|
|
|
|
Plan (10)
|
-
|
-
|
-
|
-
|
-
|
-
|
Supplemental Retirement
|
|
|
|
|
|
|
Benefit (11)
|
14,249
|
14,249
|
14,249
|
14,249
|
14,249
|
14,249
|
|
|
|
|
|
|
|
Benefits and Perquisites:
|
|
|
|
|
|
|
Health Plan (12)
|
-
|
339,039
|
339,039
|
-
|
339,039
|
339,039
|
Death Benefit Plan
|
|
|
|
|
|
|
Agreement (13)
|
-
|
-
|
-
|
-
|
-
|
-
|
Life Insurance (14)
|
-
|
141,535
|
141,535
|
-
|
141,535
|
141,535
|
Total W. Morris
Fine
|
14,249
|
2,342,143
|
2,348,323
|
37,541
|
3,583,998
|
2,348,323
|
|
(1)
|
|
J. Allen Fine was
eligible to retire on May 2, 2004.
|
|
|
|
(2)
|
|
James A. Fine, Jr. was
eligible to retire on April 19, 2012.
|
|
|
|
(3)
|
|
Represents 30 days
severance.
|
|
|
|
(4)
|
|
Represents lump sum
severance payment equal to 2.99 times base salary, but in no event less
than $907,046 for J. Allen Fine, $764,124 for James A. Fine, Jr., and
$764,124 for W. Morris Fine.
|
|
|
|
(5)
|
|
Represents lump sum
severance payment equal to 3 times base salary, but in no event less than
$910,000 for J. Allen Fine, $766,680 for James A. Fine, Jr. and $766,680
for W. Morris Fine.
|
|
|
|
(6)
|
|
Represents lump sum
severance payment equal to 5 times base salary, but in no event less than
$1,516,000 for J. Allen Fine, $1,277,800 for James A. Fine, Jr., and
$1,277,800 for W. morris Fine.
|
|
|
|
(7)
|
|
Represents lump sum
severance payment equal to 2.99 times average bonus for past three years,
but in no event less than $1,051,484 for J. Allen Fine, $1,026,565 for
James A. Fine, Jr. and $1,011,615 for W. Morris Fine.
|
|
|
|
(8)
|
|
Represents lump sum
severance payment equal to 3 times average bonus for past three years, but
in no event less than $1,055,000 for J. Allen Fine, $1,030,000 for James
A. Fine, Jr., and $1,015,000 for W. Morris Fine.
|
|
|
|
(9)
|
|
Represents lump sum
severance payment equal to 5 times average bonus for past three years, but
in no event less than $1,758,335 for J. Allen Fine, $1,716,665 for James A.
Fine, Jr., and $1,691,665 for W. Morris Fine.
|
|
|
|
(10)
|
|
Represents accumulated
benefit under the Companys Nonqualified Supplemental Retirement Benefit
Plan plus contribution required to ensure minimum of 20 quarters of
Company contributions
|
|
|
|
(11)
|
|
Represents the accrued
annual supplemental cash retirement benefit under the named executive
officers employment agreements.
|
|
|
|
(12)
|
|
Reflects estimated
cost of providing health insurance plan coverage using assumptions used
for financial reporting purposes.
|
29
(13)
|
|
Represents the estimated lump sum
amount that would be payable under the officers Death Benefit Plan
Agreement.
|
|
(14)
|
|
Reflects cash surrender value of
life insurance policy, transferable at the executives
request.
|
Risk Analysis of Compensation Policies
and Practices
We have
considered our compensation policies and practices for all employees and
concluded that any risks arising from our policies and practices are not
reasonably likely to have a material adverse effect on Investors Title
Company.
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
The Board of Directors recognizes that related party transactions present
a heightened risk of conflicts of interest, or the perception of conflicts of
interest, and has adopted a written policy to be followed in connection with all
related party transactions involving the Company. Pursuant to the policy, all
related party transactions must be approved by either (1) a majority of the
disinterested members of the Audit Committee of the Board of Directors or (2) a
majority of independent and disinterested members of the Board of Directors. In
either case, a related party transaction may not be approved by a single
director. For purposes of the policy, the term related party transaction is
defined as any transaction that is required to be disclosed in the Companys
proxy statements or other filings with the SEC pursuant to Item 404(a) of
Regulation S-K under the Securities Exchange Act of 1934 and any material
conflict of interest transaction with a director, as that term is defined
under the North Carolina Business Corporation Act.
On March 2, 2009, each of the named executive officersJ. Allen Fine,
James A. Fine, Jr. and W. Morris Finereceived a grant of 25,000 stock
appreciation rights (SARs). On March 1, 2013, the Audit Committee approved
repurchases by the Company at market value of up to the number of shares issued
upon exercise of the SARs necessary to cover the minimum withholding tax
obligations resulting from the exercise of the SARs. The Audit Committee also
approved repurchases by the Company at market value of any remaining shares
issued upon exercise of the SARs, subject to a specified maximum purchase price
per share and re-approval by the Audit Committee upon presentation for
repurchase. On May 24, 2013, each of the named executive officers exercised all
of their SARs and the Company repurchased the following shares from the named
executive officers for $71.49 per share to cover minimum withholding tax
obligations: J. Allen Fine--5,735 shares for $409,995; James A. Fine, Jr.--5,888
shares for $420,933; and W. Morris Fine--5,901 shares for $421,862. On November
26, 2013, after re-approval by the Audit Committee, the Company repurchased the
remaining shares issued upon exercise of the SARs for $80.01 per share, as
follows: J. Allen Fine--9,483 shares for $758,735; James A. Fine, Jr.--9,330
shares for $746,493; and W. Morris Fine--9,317 shares for $745,453.
There were no other reportable related person transactions for the year
2013.
30
SHAREHOLDER PROPOSALS FOR 2015 ANNUAL
MEETING
Shareholders who, in accordance with SEC Rule 14a-8,
wish to present proposals for inclusion in the proxy materials to be distributed
in connection with the 2015 Annual Meeting of Shareholders must submit their
proposals so that they are received at the Companys principal executive offices
no later than December 15, 2014. Pursuant to SEC rules, submitting a proposal
does not guarantee that it will be included in the proxy materials.
In accordance with the Companys Bylaws, in order to be properly brought
before the 2015 Annual Meeting of Shareholders, a shareholders notice of a
matter the shareholder wishes to present (other than a matter brought pursuant
to SEC Rule 14a-8), or the person or persons the shareholder wishes to nominate
as a director, must be delivered to the Corporate Secretary of the Company at
its principal executive offices no earlier than the close of business on January
21, 2015 and no later than the close of business on February 20, 2015. To be in
proper form, such shareholders notice must include the specified information
concerning the proposal or nominee as described in the Companys Bylaws. The
Company or the presiding officer at the annual meeting of shareholders may
refuse to accept any such proposal that is not in proper form or submitted in
compliance with the procedures specified in the Companys Bylaws.
|
BY ORDER OF THE BOARD OF DIRECTORS:
|
|
|
|
|
|
|
|
W. Morris
Fine
Secretary
April 14,
2014
|
31
|
Broadridge Corporate
Issuer Solutions
PO BOX 1342
Brentwood, NY
11717
|
VOTE BY INTERNET -
www.proxyvote.com
|
Use the Internet to transmit
your voting instructions and for electronic delivery of information up
until 11:59 P.M. Eastern Time the day before the cut-off date or meeting
date. Have your proxy card in hand when you access the web site and follow
the instructions to obtain your records and to create an electronic voting
instruction form.
|
|
VOTE BY MAIL
|
Mark, sign and date your proxy
card and return it in the postage-paid envelope we have provided or return
it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY
11717.
|
|
|
|
|
|
|
|
|
|
|
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
|
|
|
KEEP THIS PORTION FOR YOUR RECORDS
|
|
|
DETACH AND RETURN THIS PORTION
ONLY
|
|
THIS PROXY CARD IS VALID ONLY WHEN
SIGNED AND DATED.
|
|
|
For
|
Withhold
|
For All
|
|
|
|
All
|
All
|
Except
|
|
The Board of Directors
recommends you vote
FOR the following:
|
|
|
|
|
|
|
|
|
o
|
o
|
o
|
|
1.
|
Election of Directors
|
|
|
Nominees
|
|
|
|
To withhold authority to vote for any individual nominee(s),
mark For All Except and write the number(s) of the nominee(s) on the
line below.
|
|
|
|
|
|
|
01
|
W. Morris Fine
|
|
|
|
|
02
|
Richard M. Hutson II
|
|
|
|
|
03
|
R. Horace Johnson
|
|
|
|
|
The Board of Directors recommends you
vote FOR the following proposal:
|
|
|
For
|
Against
|
Abstain
|
|
|
|
|
|
|
|
|
|
2
|
Proposal to ratify the appointment
of Dixon Hughes Goodman LLP as the Company's independent registered public
accounting firm for 2014.
|
|
|
o
|
o
|
o
|
|
|
|
|
|
|
|
|
|
NOTE:
The proxies are authorized to vote in
accordance with their best judgment on such other business as may properly
come before the meeting or any adjournment or postponement thereof.
|
|
|
|
|
Please sign exactly as your name(s)
appear(s) hereon. When signing as attorney, executor, administrator, or
other fiduciary, please give full title as such. Joint owners should each
sign personally. All holders must sign. If a corporation or partnership,
please sign in full corporate or partnership name, by authorized
officer.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Signature [PLEASE SIGN WITHIN BOX]
|
Date
|
|
|
Signature (Joint Owners)
|
Date
|
|
|
Important Notice Regarding the
Availability of Proxy Materials for the Annual Meeting:
The
Notice & Proxy Statement, and Annual Report to Shareholders is/are
available at www.proxyvote.com.
|
|
|
INVESTORS TITLE COMPANY
Annual Meeting of Shareholders
May 21, 2014 11:00 AM
This proxy is solicited by the Board of
Directors
The shareholder(s) signing
the reverse side hereby appoint(s) J. Allen Fine and W. Morris Fine, or either
of them, as proxies, each with the power to appoint a substitute, and hereby
authorizes them to represent and to vote, as designated on the reverse side of
this ballot, all of the shares of common stock of Investors Title Company that
shareholders are entitled to vote 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 21, 2014 at 11:00
AM, EDT, and any adjournment or postponement thereof.
This proxy, when
properly executed, will be voted in the manner directed herein. If no such
direction is made, this proxy will be voted in accordance with the Board of
Directors' recommendations. The proxy holders are also authorized to vote upon
all other matters as may properly come before the meeting, or any adjournment or
postponement thereof, utilizing their best judgment as described in the proxy
statement.
Continued and
to be signed on reverse side
Investors Title (NASDAQ:ITIC)
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