UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
INFORMATION
REQUIRED IN PROXY STATEMENT
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934 (Amendment No. )
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by
the Registrant
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Filed
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a Party other than the Registrant
o
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appropriate box:
o
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for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
x
Definitive
Proxy Statement
o
Definitive Additional Materials
o
Soliciting Material Pursuant to Rule 14a-12
Investors
Title Company
(Name
of
Registrant as Specified in Its Charter)
(Name
of
Person(s) Filing Proxy Statement, if other than the Registrant)
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of each class of securities to which transaction applies: N/A
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(3)
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121
North
Columbia Street, Chapel Hill, North Carolina 27514
(919)
968-2200
April
16,
2008
Dear
Shareholders:
You
are
cordially invited to attend the Annual Meeting of Shareholders of Investors
Title Company to be held at The Siena Hotel, 1505 East Franklin Street, Chapel
Hill, North Carolina on Wednesday, May 21, 2008 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 2008,
followed by discussion and voting on the matters set forth in the accompanying
Notice of Annual Meeting and Proxy Statement.
The
Board of Directors of the Company unanimously recommends that you vote FOR
the
election of the directors nominated to serve until the Annual Meeting of
Shareholders in 2011.
I
urge
you to review the Proxy Statement, sign and date the enclosed proxy card, and
return it promptly in the enclosed postage-paid envelope.
Cordially,
J.
Allen
Fine
Chief
Executive Officer
121
North
Columbia Street, Chapel Hill, North Carolina 27514
(919)
968-2200
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
TO
BE HELD ON MAY 21, 2008
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, 2008 at 11:00 a.m. EDT, for the following
purposes:
(1) To
elect three directors for three-year terms or until their successors are elected
and qualified; and
(2) To
consider any other business that may properly come before the
meeting.
Shareholders
of record of Common Stock of the Company at the close of business on April
3,
2008 are entitled to notice of and to vote at the meeting and any adjournments
thereof.
By
Order
of the Board of Directors:
W.
Morris
Fine
Secretary
IMPORTANT
- Your proxy card is enclosed. You can vote your shares by completing and
returning your proxy card in the enclosed postage-paid envelope. Whether or
not
you expect to be present at the meeting, please review the Proxy Statement
and
promptly vote in order to assist the Company in keeping down the expenses of
the
meeting. You can revoke your proxy at any time prior to its exercise at the
meeting by following the instructions in the accompanying Proxy
Statement.
TABLE
OF CONTENTS
|
Page
|
GENERAL
INFORMATION
|
1
|
Proxy
Solicitation by the Board of Directors
|
1
|
Submitting
and Revoking a Proxy
|
1
|
Voting
Securities
|
1
|
Annual
Report to Shareholders
|
1
|
Electronic
Delivery of Proxy Materials
|
2
|
Section
16(a) Beneficial Ownership Reporting Compliance
|
2
|
General
Information
|
2
|
CORPORATE
GOVERNANCE
|
2
|
Code
of Business Conduct and Ethics
|
2
|
Shareholder
Communications with Directors
|
2
|
Independent
Directors
|
3
|
Executive
Sessions
|
3
|
Compensation
Committee Interlocks and Insider Participation
|
3
|
Board
of Directors and Committees
|
3
|
COMPENSATION
OF DIRECTORS
|
5
|
STOCK
OWNERSHIP OF CERTAIN BENEFICAL OWNERS
|
|
AND
MANAGEMENT
|
7
|
PROPOSAL
REQUIRING YOUR VOTE
|
9
|
Election
of Directors
|
9
|
Information
Regarding Nominees for Election as Directors
|
9
|
Information
Regarding Directors Continuing in Office
|
10
|
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
|
12
|
Audit
and Non-Audit Fees
|
12
|
Audit
and Non-Audit Services Pre-Approval Policy
|
12
|
AUDIT
COMMITTEE REPORT
|
13
|
COMPENSATION
COMMITTEE REPORT
|
14
|
EXECUTIVE
COMPENSATION
|
14
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
|
28
|
SHAREHOLDER
PROPOSALS FOR 2009 ANNUAL MEETING
|
28
|
PROXY
STATEMENT
ANNUAL
MEETING OF SHAREHOLDERS OF
INVESTORS
TITLE COMPANY
To
Be Held on May 21, 2008
This
Proxy
Statement is furnished in connection with the solicitation by the Board of
Directors of Investors Title Company of proxies to be voted at the Annual
Shareholders’ Meeting to be held at The Siena Hotel, 1505 East Franklin Street,
Chapel Hill, North Carolina, on May 21, 2008 at 11:00 a.m. EDT, and at all
adjournments thereof. Shareholders of record at the close of business on April
3, 2008 are entitled to notice of and to vote at the meeting and any
adjournments thereof.
GENERAL
INFORMATION
Proxy
Solicitation by the Board of Directors
.
The
solicitation of proxies is made on behalf of the Company’s Board of Directors
and will be made either by mail or, as described below, by electronic delivery.
The cost of solicitation of proxies will be borne by the Company. Copies of
proxy materials and the Annual Report for 2007 will be provided to brokers,
dealers, banks and voting trustees or their nominees for the purpose of
soliciting proxies from the beneficial owners, and the Company will reimburse
these record holders for their out-of-pocket expenses.
Submitting
and Revoking a Proxy
.
If you
complete and submit your proxy, the persons named as proxies will vote the
shares represented by your proxy in accordance with your instructions. If you
submit a proxy card but do not fill out the voting instructions on the proxy
card, the persons named as proxies will vote the shares represented by your
proxy
FOR
the
election of the director nominees set forth herein. In addition, if other
matters are properly presented for voting at the meeting, the persons named
as
proxies will vote on such matters in accordance with their best judgment. The
Company has not received notice of other matters that may be properly presented
for voting at the meeting.
To
ensure
that your vote is recorded properly, please vote your shares as soon as
possible, even if you plan to attend the meeting in person.
Each
proxy executed and returned by a shareholder may be revoked at any time
thereafter except as to any matter or matters upon which, prior to such
revocation, a vote shall have been cast pursuant to the authority conferred
by
such proxy. Shareholders with shares registered directly in their names may
revoke their proxy by (1) sending written notice of revocation to the Corporate
Secretary, P.O. Box 2687, Chapel Hill, North Carolina 27515-2687, (2) submitting
a subsequent proxy or (3) voting in person at the meeting. Attendance at the
meeting will not by itself revoke a proxy. A shareholder wishing to change
his
or her vote who holds shares through a bank, brokerage firm or other nominee
must contact the record holder.
Voting
Securities
.
On
April 3, 2008, the Company had a total of 2,706,696 shares of Common Stock
outstanding, its only class of issued and outstanding capital stock. Of these
shares, 2,415,020 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 2007 including financial
statements and the independent registered public accounting firms’ opinions,
along with the Notice of Annual Meeting, Proxy Statement and proxy card, are
being first mailed to the Company’s shareholders on or about April 16,
2008.
Electronic
Delivery of Proxy Materials
.
The
Notice of Annual Meeting and Proxy Statement and the Company’s 2007 Annual
Report (the “Proxy Materials”) are available online to certain shareholders that
have arranged through their broker to receive the Proxy Materials
electronically. Shareholders that hold their shares in a brokerage account
may
have the opportunity to receive future Proxy Materials electronically. Please
contact your broker for information regarding the availability of this
service.
Section
16(a) Beneficial Ownership Reporting Compliance
.
Section
16(a) of the Securities Exchange Act of 1934 requires directors, executive
officers and all persons who beneficially own more than 10% of the Company’s
securities to file reports with the Securities and Exchange Commission with
respect to beneficial ownership of Company securities. Based solely upon a
review of copies of the filings that the Company received with respect to the
fiscal year ended December 31, 2007, 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 Company’s 2007 Annual Report and Form 10-K filed with the Securities and
Exchange Commission, excluding exhibits, can be obtained without charge by
contacting Investor Relations at
investorrelations@invtitle.com
or P.O.
Box 2687, Chapel Hill, North Carolina 27515-2687.
CORPORATE
GOVERNANCE
Code
of Business Conduct and Ethics
The
Company has a Code of Business Conduct and Ethics that is applicable to all
of
the Company’s employees, officers and directors, including its Chief Executive
Officer, Chief Financial Officer and Chief Accounting Officer. This Code
addresses a variety of issues, including conflicts of interest, the protection
of confidential information, insider trading, and employment practices. It
also
requires strict compliance with all laws, rules and regulations governing the
conduct of the Company’s business.
The
Code
of Business Conduct and Ethics is posted in the Corporate Governance area of
the
Investor Relations section of the Company’s website at www.invtitle.com. The
Company intends to disclose future amendments to or waivers from the Code of
Business Conduct and Ethics on its website within two business days after such
amendment or waiver.
Shareholder
Communications with Directors
Shareholders
can communicate with members of the Company’s Board of Directors in one of two
ways. Shareholders may mail correspondence to the attention of the Corporate
Secretary, P.O. Box 2687, Chapel Hill, North Carolina 27515-2687. Any
correspondence sent via mail should clearly indicate that it is a communication
intended for the Board of Directors. Shareholders may also use electronic mail
to contact the Board of Directors at boardofdirectors@invtitle.com. The
Corporate Secretary regularly monitors this email account. Any communication
that is intended for a particular Board member or committee should clearly
state
the intended recipient.
The
Corporate Secretary will review all communications sent to the Board of
Directors via mail and email and will forward all communications concerning
Company or Board matters to the Board members within five business days of
receipt. If a communication is directed to a particular Board member or
committee, it will be passed on only to that member or the members of that
committee. Otherwise, relevant communications will be forwarded to all Board
members.
Independent
Directors
The
Board
of Directors has determined that the following directors are independent
directors within the meaning of the applicable listing standards of The NASDAQ
Stock Market LLC (“NASDAQ”) and the Company’s Board of Directors Independence
Standards: Mr. David L. Francis, Mr. Loren B. Harrell, Jr., Mr. R. Horace
Johnson, Mr. H. Joe King, Jr., Mr. James R. Morton and Mr. A. Scott Parker
III.
The Board of Directors Independence Standards can be found in the Investor
Relations section of the Company’s website at www.invtitle.com under the heading
“Corporate Governance.”
Executive
Sessions
Executive
sessions that include only the independent members of the Board of Directors
are
held periodically.
Compensation
Committee Interlocks and Insider Participation
In
2007,
Mr. Harrell, Mr. Morton and Mr. Parker served as the members of the Compensation
Committee. None of these directors have ever been officers or employees of
the
Company or any of its subsidiaries. During 2007, none of the executive officers
of the Company served on the compensation committee (or equivalent), or the
board of directors, of another entity whose executive officer(s) served on
the
Board of Directors of the Company or its Compensation Committee.
Board
of Directors and Committees
During
the year ended December 31, 2007, 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 2007 Annual Meeting.
The
Company’s Board of Directors has a standing Audit Committee, Compensation
Committee, and Nominating Committee.
The
Audit Committee.
In 2007
the Audit Committee was composed of Mr. Francis, Mr. Johnson and Mr. King.
The
Audit Committee met eleven times in 2007.
The
Audit
Committee is directly responsible for overseeing the Company’s accounting and
financial reporting processes and appointing, retaining, compensating and
overseeing the Company’s independent registered public accounting firm and
reviewing the scope of the annual audit proposed by the independent registered
public accounting firm. In addition, the Committee reviews and approves related
party transactions and periodically consults with the independent registered
public accounting firm on matters relating to internal financial controls and
procedures. The Committee is responsible for establishing and administering
complaint procedures related to accounting and auditing matters.
The
Audit
Committee operates under a written charter adopted by the Board of Directors,
a
copy of which is posted under the Committee heading of the Corporate Governance
area of the Investor Relations section of the Company’s website at
www.invtitle.com
.
The
Audit Committee reviews and assesses the adequacy of the charter on an annual
basis.
The
Board
of Directors has determined that each member of the Company's Audit Committee
is
“independent” as defined under applicable NASDAQ listing standards and SEC
rules. The Board of Directors has also determined that all of the current Audit
Committee members—Mr. Francis, Mr. Johnson and Mr. King—are “audit committee
financial experts” as defined under applicable SEC rules. See “
Audit
Committee Report
”
below
for the formal report of the Audit Committee for 2007.
The
Compensation Committee
.
In
2007,
the Compensation Committee was composed of Mr. Harrell, Mr. Morton and Mr.
Parker. The Compensation Committee met two times in 2007. 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 under
the Committee heading of the Corporate Governance area of the Investor Relations
section of the Company’s website at www.invtitle.com.
The
Compensation Committee determines, or recommends to the Board of Directors
for
determination and for payment by the Company’s wholly owned subsidiary,
Investors Title Insurance Company, salaries, bonuses and other compensation
of
executive officers. The Committee also serves as the Option Committee of the
Board of Directors, which reviews, approves and administers the Company’s stock
option plans. For additional information regarding the Company’s processes and
procedures for the consideration and determination of director and executive
officer compensation, see “
Compensation
of Directors”
and
“Executive
Compensation – Compensation Discussion and Analysis – Determining
Executive Compensation
”
below.
See
“
Compensation
Committee Report”
below
for
the formal report of the Compensation Committee for 2007.
The
Nominating Committee.
In 2007,
the Nominating Committee was composed of Mr. Harrell, Mr. King and Mr. Morton.
The Nominating Committee met two times in 2007.
The
Nominating Committee operates under a written charter that can be found under
the Committee heading of the Corporate Governance area of the Investor Relations
section of the Company’s website at www.invtitle.com.
The
Board
of Directors has determined that each member of the Company’s Nominating
Committee is “independent” as defined under applicable NASDAQ listing
standards.
The
Nominating Committee is responsible for identifying, evaluating and recommending
to the Board of Directors candidates for election to the Board of Directors
as
well as appointing members to the Audit and Compensation Committees. A slate
of
nominees for director to present to the shareholders is recommended to the
Board
of Directors by the Nominating Committee and determined by at least a majority
vote of the members of the Board of Directors whose terms do not expire during
the year in which the election of directors will occur.
The
Nominating Committee considers a variety of factors before recommending a new
director nominee or the continued service of existing Board members. At a
minimum, the Nominating Committee believes that a director nominee must
demonstrate character and integrity, have an inquiring mind, possess substantial
experience at a strategy or policy setting level, demonstrate an ability to
work
effectively
with others, possess either high-level managerial experience in a relatively
complex organization or experience dealing with complex problems, have
sufficient time to devote to the affairs of the Company and be free from
conflicts of interest with the Company and its subsidiaries.
Other
factors the Nominating Committee considers when evaluating a potential director
nominee are:
|
1.
|
Whether
the candidate would assist in achieving a diverse mix of Board
members;
|
|
2.
|
The
extent of the candidate’s business experience, technical expertise, and
specialized skills or experience;
|
|
3.
|
Whether
the candidate, by virtue of particular experience relevant to the
Company's current or future business, will add specific value as
a Board
member; and
|
|
4.
|
Any
other factors related to the ability and willingness of a candidate
to
serve, or an incumbent director to continue his or her service to,
the
Company.
|
The
Nominating Committee believes that a majority of the members of the Company’s
Board of Directors should be independent as defined under applicable NASDAQ
listing standards and, as a result, it also considers whether a potential
director nominee is independent under such standards. The Committee also
requires that all members of the Audit Committee be financially literate
pursuant to applicable NASDAQ listing standards and that at least one member
of
the Audit Committee be an “audit committee financial expert” as defined under
SEC rules. Therefore, the Nominating Committee considers whether a potential
director nominee meets these criteria when evaluating his or her
qualifications.
It
is the
policy of the Nominating Committee to consider all director candidates
recommended by shareholders, provided that such recommendations are made in
accordance with the procedures outlined below. The Nominating Committee
evaluates such candidates in accordance with the same criteria it uses to
evaluate all other director candidates.
Any
shareholder that wishes to recommend a director candidate to be considered
for
the 2009 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 17, 2008.
The candidate’s name, age, business address, residential address, principal
occupation, qualifications and the number of shares of Common Stock beneficially
owned by the candidate must be provided with the recommendation. The shareholder
must also provide a signed consent of the candidate to serve, if elected, as
a
director of the Company, and shall include all other information that would
be
required under the rules of the SEC in the proxy statement soliciting proxies
for election of the director candidate.
COMPENSATION
OF DIRECTORS
Directors
who are not employees of the Company receive an annual retainer for Board
services of $3,000 and an attendance fee of $1,500 for each meeting of the
Board
of Directors attended, in addition to actual travel expenses related to the
meetings. Directors receive a $500 fee for participating in a committee meeting
provided that the committee meeting is held on a day other than the regularly
scheduled board meeting date. The Audit Committee Chairperson receives an
additional annual retainer of $500. Directors who are employees of the Company
are paid no fees or other remuneration for service on the Board or on any Board
committee.
On
May
16, 2007, the date of the Company’s 2007 Annual Meeting of Shareholders, each
non-employee director was granted 500 Stock Appreciation Rights (“SARs”) under
the Company’s 2001 Stock Option and Restricted Stock Plan with an exercise price
of $49.04. Upon exercise of each SAR, a director is entitled to receive an
amount (payable in shares of the Company’s common stock) equal to the difference
between the closing price of the Company’s common stock on the business day
immediately preceding the date of exercise and the exercise price. The number
of
shares paid on exercise is determined by dividing this amount by the closing
price of the Company’s common stock on the business day immediately preceding
the date of exercise. These SARs vested in four quarterly installments and
became exercisable, to the extent vested, as of June 30, 2007. These SARs will
expire on May 16, 2014.
The
Board
of Directors makes all decisions regarding the compensation of the members
of
the Board of Directors. The Chief Executive Officer makes periodic
recommendations regarding director compensation, and the Board of Directors
may
exercise its discretion in modifying any recommended compensation adjustments
or
awards to the directors.
2007
Director Compensation
Name
(1)
|
|
Fees
Earned
or Paid
In Cash
($)
|
|
Stock
Awards
($)
(2)
|
|
Option
Awards
($)
(3)
|
|
Total ($)
|
|
David
L. Francis
|
|
|
11,500
|
|
|
6,282
|
|
|
-
|
|
|
17,782
|
|
Loren
B. Harrell, Jr.
|
|
|
9,500
|
|
|
6,282
|
|
|
-
|
|
|
15,782
|
|
R.
Horace Johnson
|
|
|
11,500
|
|
|
6,282
|
|
|
-
|
|
|
17,782
|
|
H.
Joe King, Jr.
|
|
|
12,000
|
|
|
6,282
|
|
|
-
|
|
|
18,282
|
|
James
R. Morton
|
|
|
9,500
|
|
|
6,282
|
|
|
-
|
|
|
15,782
|
|
A.
Scott Parker III
|
|
|
8,000
|
|
|
6,282
|
|
|
-
|
|
|
14,282
|
|
(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 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
20.
|
(2)
|
The
amounts shown in this column indicate the dollar amount of compensation
cost recognized by the Company for financial statement reporting
purposes
in 2007 pursuant to Financial Accounting Standards Board Statement
No.
123, “Share Based Payment (revised 2004)” (“FAS 123R”) for outstanding
SARs, which comprise all outstanding awards of stock held by the
directors, except for purposes of this column the Company has disregarded
any estimates of forfeitures related to service-based vesting conditions.
For additional information regarding the assumptions made in calculating
these amounts, see Note 7 to the consolidated financial statements
included in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2007. For each director, the grant date fair value of
SARs
granted in 2007 computed in accordance with FAS 123R was $7,342.
The
aggregate number of SARs outstanding at December 31, 2007 held by
directors was as follows:
|
Name
|
|
Outstanding
Stock
Awards at
Fiscal Year
End
|
|
David
L. Francis
|
|
|
1,000
|
|
Loren
B. Harrell, Jr.
|
|
|
1,000
|
|
R.
Horace Johnson
|
|
|
1,000
|
|
H.
Joe King, Jr.
|
|
|
1,000
|
|
James
R. Morton
|
|
|
1,000
|
|
A.
Scott Parker III
|
|
|
1,000
|
|
(3)
|
The
Company did not recognize any compensation cost for financial statement
reporting purposes in 2007 pursuant to FAS 123R for option awards
held by
directors. The aggregate number of option awards outstanding at December
31, 2007 held by directors was as
follows:
|
Name
|
|
Outstanding
Option
Awards at
Fiscal Year
End
|
|
David
L. Francis
|
|
|
4,000
|
|
Loren
B. Harrell, Jr.
|
|
|
2,500
|
|
R.
Horace Johnson
|
|
|
500
|
|
H.
Joe King, Jr.
|
|
|
4,000
|
|
James
R. Morton
|
|
|
4,000
|
|
A.
Scott Parker III
|
|
|
4,000
|
|
STOCK
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table indicates the persons known to the Company to be the beneficial
owners of more than five percent (5%) of the Company’s outstanding Common Stock
as of April 3, 2008.
Name
and Address of
|
|
Amount
and Nature
|
|
Percent
|
|
Beneficial
Owner
|
|
of Beneficial Ownership
|
|
of
Class (1)
|
|
|
|
|
|
|
|
Markel
Corporation
|
|
|
230,150
|
(2)
|
|
9.5
|
%
|
4521
Highwoods Parkway, Glen Allen, Virginia 23060
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J.
Allen Fine
|
|
|
196,475
|
(3)
|
|
8.1
|
%
|
121
N. Columbia Street, Chapel Hill, North Carolina 27514
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
W.
Morris Fine
|
|
|
179,064
|
(4)
|
|
7.4
|
%
|
121
N. Columbia Street, Chapel Hill, North Carolina 27514
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James
A. Fine, Jr.
|
|
|
178,416
|
(5)
|
|
7.4
|
%
|
121
N. Columbia Street, Chapel Hill, North Carolina 27514
|
|
|
|
|
|
|
|
(1)
|
The
percentages are calculated based on 2,415,020 shares outstanding
as of
April 3, 2008, 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. 4
to Schedule 13G filed with the SEC on January 25, 2008. Of these
shares,
Markel Corporation has sole voting and investment power with respect
to
213,300 shares and shared investment power with respect to 16,850
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 power over such shares
with
James A. Fine, Jr., such shares also being reflected in James A.
Fine,
Jr.’s beneficially owned shares, and 4,052 shares held by 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 power over such shares
with W.
Morris Fine, such shares also being reflected in W. Morris Fine’s
beneficially owned shares, and 1,965 shares held by family
members.
|
The
table
below sets forth the shares of the Company’s Common Stock beneficially owned as
of April 3, 2008 by each director and nominee for director, the executive
officers named in the Summary Compensation Table, and all directors and
executive officers as a group.
Name
of
|
|
Amount
and Nature
|
|
Percent
|
|
Beneficial
Owner
|
|
of Beneficial Ownership
|
|
of
Class (1)
|
|
J.
Allen Fine
|
|
|
196,475
|
(2)
|
|
8.1
|
%
|
W.
Morris Fine
|
|
|
179,064
|
(3)
|
|
7.4
|
%
|
James
A. Fine, Jr.
|
|
|
178,416
|
(4)
|
|
7.4
|
%
|
A.
Scott Parker III
|
|
|
78,860
|
(5)
|
|
3.3
|
%
|
David
L. Francis
|
|
|
50,166
|
(6)
|
|
2.1
|
%
|
H.
Joe King, Jr.
|
|
|
22,126
|
(7)
|
|
*
|
|
James
R. Morton
|
|
|
12,415
|
(8)
|
|
*
|
|
Loren
B. Harrell, Jr.
|
|
|
3,500
|
(9)
|
|
*
|
|
R.
Horace Johnson
|
|
|
1,900
|
(10)
|
|
*
|
|
Richard
M. Hutson II
|
|
|
1,100
|
|
|
*
|
|
All
Directors and
|
|
|
|
|
|
|
|
Executive
Officers as a Group
|
|
|
|
|
|
|
|
(10
persons)
|
|
|
724,022
|
(11)
|
|
30.0
|
%
|
*Represents
less than 1%
(1)
|
The
percentages are calculated based on 2,415,020 shares outstanding
as of
April 3, 2008, 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 power over such shares
with
James A. Fine, Jr., such shares also being reflected in James A.
Fine,
Jr.’s beneficially owned shares, and 4,052 shares held by 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 power over such shares
with W.
Morris Fine, such shares also being reflected in W. Morris Fine’s
beneficially owned shares, and 1,965 shares held by family
members.
|
(5)
|
This
total includes 5,000 shares of Common Stock that Mr. Parker has the
right
to purchase under stock options and stock appreciation rights that
are
presently exercisable or are exercisable within 60 days of April
3, 2008.
Additionally, this total includes 3,266 shares held by his wife.
|
(6)
|
This
total includes 5,000 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
3, 2008.
This total also includes 1,000 shares held by his
wife.
|
(7)
|
This
total includes 5,000 shares of Common Stock that Mr. King has the
right to
purchase under stock options and stock appreciation rights that are
presently exercisable or are exercisable within 60 days of April
3, 2008.
This total also includes 700 shares held by his wife.
|
(8)
|
This
total includes 1,500 shares of Common Stock that Mr. Morton has the
right
to purchase under stock options and stock appreciation rights that
are
presently exercisable or are exercisable within 60 days of April
3,
2008.
|
(9)
|
This
total includes 3,500 shares of Common Stock that Mr. Harrell has
the right
to purchase under stock options and stock appreciation rights that
are
presently exercisable or are exercisable within 60 days of April
3,
2008.
|
(10)
|
This
total includes 1,500 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
3,
2008.
|
(11)
|
This
total includes 21,500 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 3,
2008.
|
PROPOSAL
REQUIRING YOUR VOTE
Election
of Directors
The
Company’s Board of Directors is composed of 9 members divided into three classes
with staggered terms of three years for each class. Based on the recommendations
of the Nominating Committee, the Board of Directors has nominated 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. Mr. Hutson is a nominee for his first term as a member of the Board
of Directors. He was recommended to the Nominating Committee by our Chief
Executive Officer
.
Loren
B.
Harrell, Jr.
will
not
stand for re-election to the Board of Directors when his term expires at the
2008 Annual Meeting of Shareholders.
The
nominees will be elected if they receive a plurality of the votes cast for
their
election. Broker non-votes and abstentions will be counted for purposes of
establishing a quorum, but will not be counted in the election of directors
and
therefore will not affect the election results if a quorum is present. It is
the
intention of the persons named as proxies in the accompanying proxy card to
vote
all shares represented by proxy for the three nominees listed below, unless
the
authority to vote is withheld. If any of the nominees should withdraw or
otherwise become unavailable for reasons not presently known, the shares
represented by proxy will be voted for three nominees including such
substitutions as shall be designated by the Board of Directors. The shares
represented by proxy in no event will be voted for more than three
persons.
The
Board unanimously recommends that you vote “FOR” the election of the directors
nominated to serve until the Annual Meeting of Shareholders in
2011.
Information
Regarding Nominees for Election as Directors
|
|
|
|
Served
as
|
|
Term
|
|
|
|
|
|
Director
|
|
to
|
|
Name
|
|
Age
|
|
Since
|
|
Expire
|
|
W.
Morris Fine
|
|
41
|
|
1999
|
|
2011
|
|
Richard
M. Hutson II
|
|
67
|
|
-
|
|
2011
|
|
R.
Horace Johnson
|
|
63
|
|
2005
|
|
2011
|
|
W.
Morris Fine
is
Executive Vice President and Secretary of the Company, President and Chief
Operating Officer of Investors Title Insurance Company and Northeast 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, Northeast 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.
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 served as a principal of Hutson, Hughes and Powell
P.A. from 1993 to 2006. Mr. Hutson has been engaged in the practice of law
since
1965 and has assisted the Company in various matters since its formation in
1972. He has experience in representing clients in many areas with an emphasis
in business law and corporate restructuring. 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 presently is
Chairman of the Board of LC Industries, a non-profit organization and the
largest employer of visually handicapped persons in the United
States.
R.
Horace Johnson
retired
in 2004 as managing partner of the Raleigh, North Carolina office of Ernst
and
Young, a public accounting firm, where he had been employed since 1967. During
this period, Mr. Johnson served in many firm leadership roles including serving
as the managing partner for the North Carolina practice for three years and
on
the operating committee of the Carolinas practice for five years. He also
maintained an active client service role during the 25 years he served as
partner. Mr. Johnson serves on the Board of Directors of TrustAtlantic Financial
Corporation, a corporation formed to serve as a bank holding company, and on
the
Board of Advisors of Wilmington Pharmaceuticals, LLC, a pharmaceutical
development company. He also serves on the Board of the following non-profit
corporations: North Carolina Citizens for Business and Industry and the Council
for Entrepreneurial Development.
Information
Regarding Directors Continuing in Office
|
|
|
|
Served
as
|
|
Term
|
|
|
|
|
|
Director
|
|
to
|
|
Name
|
|
Age
|
|
Since
|
|
Expire
|
|
James
A. Fine, Jr.
|
|
45
|
|
1997
|
|
2009
|
|
H.
Joe King, Jr.
|
|
75
|
|
1983
|
|
2009
|
|
James
R. Morton
|
|
70
|
|
1985
|
|
2009
|
|
J.
Allen Fine
|
|
73
|
|
1973
|
|
2010
|
|
David
L. Francis
|
|
75
|
|
1982
|
|
2010
|
|
A.
Scott Parker III
|
|
64
|
|
1998
|
|
2010
|
|
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 Northeast
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. Additionally,
Mr. Fine serves as Chairman of the Board of Investors Title Accommodation
Corporation. Investors Title Insurance Company, Northeast 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.
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.
James
R. Morton
was
President of J. R. Morton Associates from 1968 until he retired in 1988. He
is
currently President of TransCarolina Corporation.
J.
Allen Fine
was the
principal organizer of Investors Title Insurance Company and has been Chairman
of the Board of the Company, Investors Title Insurance Company, and Northeast
Investors Title Insurance Company since their incorporation. Mr. Fine served
as
President of Investors Title Insurance Company until February 1997, when he
was
named Chief Executive Officer. Additionally, Mr. Fine serves as Chief Executive
Officer of the Company and Northeast 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, Northeast Investors Title Insurance Company, 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 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.
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. He serves on the Board of Directors of First Landmark,
a
Charlotte real estate and property management firm.
A.
Scott Parker III
retired
in 2006 from Today’s Home, Inc. after serving as President for 31 years. He
continues to be Managing Member of Parker-Jones-Kemp LLC and Greenham
Investments LLC.
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The
Audit
Committee selected Dixon Hughes PLLC as our independent registered public
accounting firm for the fiscal year ended December 31, 2008.
Dixon
Hughes PLLC served as our independent registered public accounting firm for
the
fiscal year ended December 31, 2007, and its representatives are expected to
attend the 2008 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.
Audit
and Non-Audit Fees
Aggregate
fees for professional services rendered by our independent registered public
accounting firm, Dixon Hughes PLLC, for the years ended December 31, 2007 and
2006 are set forth below.
|
|
2007
|
|
2006
|
|
Audit
Fees (1)
|
|
$
|
269,000
|
|
$
|
269,100
|
|
Audit-Related
Fees (2)
|
|
|
2,500
|
|
|
7,700
|
|
Tax
Fees (3)
|
|
|
34,500
|
|
|
48,629
|
|
All
Other Fees
|
|
|
0
|
|
|
0
|
|
Total
Fees
|
|
$
|
306,000
|
|
$
|
325,429
|
|
|
(1)
|
In
2007 and 2006, audit fees consisted of the audit of the financial
statements, reviews of the quarterly financial statements, services
rendered in connection with statutory and regulatory filings and
services
related to internal control over financial
reporting.
|
|
(2)
|
Audit-related
fees consisted of fees related to compliance with regulatory and
statutory
filings.
|
|
(3)
|
Tax
fees consisted primarily of tax compliance services.
|
Audit
and Non-Audit Services Pre-Approval Policy
The
Audit
Committee has adopted an Audit and Non-Audit Services Pre-Approval Policy for
pre-approving all audit and permissible non-audit services provided by the
independent registered public accounting firm.
Each
year, the Audit Committee pre-approves independent registered public accounting
firm services and associated fee ranges within the categories of Audit Services,
Audit-Related Services, Tax Services and Other Services.
Throughout
the year, circumstances may arise that require the engagement of the independent
registered public accounting firm for additional services that were not
contemplated by the existing pre-approval categories. In that case, the Audit
and Non-Audit Services Pre-Approval Policy requires specific approval by the
Audit Committee of such services before engaging the independent registered
public accounting firm. To ensure the prompt handling of such matters, the
Audit
Committee has granted pre-approval authority to its Chair. The Chair reports
any
pre-approval decisions made at the next Audit Committee meeting.
During
2007 and 2006, 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 Independence Standards Board
Standard No. 1, “Independence Discussions with Audit Committees,” that describes
all relationships between the Company and its independent registered public
accounting firm that might bear on the firms’ 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, 2007. The Audit Committee discussed with the independent
registered public accounting firm those matters required to be discussed by
Statement on Auditing Standards No. 61. The Audit Committee reviewed with the
independent registered public accounting firm its audit plans, audit scope
and
identification of audit risks.
Based
on
the reviews and discussion referenced above, the Audit Committee recommended
to
the Board of Directors that the audited financial statements of the Company
be
included in its Annual Report on Form 10-K for the year ended December 31,
2007,
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
COMPENSATION
COMMITTEE REPORT
The
Compensation Committee (for purposes of this Proxy Statement, the “Committee”)
of the Board has responsibility for establishing an executive compensation
philosophy, implementing a compensation program designed to uphold the
principles of the compensation philosophy, and continually monitoring adherence
to the compensation program. One of the Committee’s most important
responsibilities is continually reviewing the total compensation paid to the
Company’s executives to ensure it is fair, reasonable, and competitive. The
Committee has reviewed and discussed the Compensation Discussion and Analysis
presented below with management, and based on such review and discussions,
the
Committee recommended that the Compensation Discussion and Analysis be included
in this Proxy Statement and the Company’s Annual Report on Form 10-K for the
year ended December 31, 2007.
Submitted
by the Compensation Committee of the Board of Directors:
Loren
B.
Harrell, Jr.
James
R.
Morton
A.
Scott
Parker III
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 our executive compensation program focuses
on the following:
|
·
|
the
philosophy and objectives of our compensation program, including
the
results and behaviors the program is designed to reward
;
|
|
·
|
the
process used to determine executive
compensation;
|
|
·
|
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 Committee’s decisions regarding that element fit into
the Committee’s stated objectives and affect the Committee’s 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
Company’s executive compensation program to reward the achievement of the
Company’s objectives, and to align the interests of our executives with those of
our stockholders.
Retention
of talented executives with the skills, experience, and vision to lead our
Company is integral to the success of our business. However, given our company’s
history as a family-managed company, the Committee’s philosophy tends to focus
more on fairness, executive performance, and long-term commitment than on
attracting and retaining the Company’s executive officers.
To
support the over-arching objective of the accretion of stockholder value, a
significant focus of our executive compensation program is to reward the
attainment of short-term and long-term Company goals, and to provide the proper
motivation for our executive officers to strive to achieve those goals. We
believe that to align the interests of our executives and our stockholders,
the
executive compensation package must include both cash and equity
compensation.
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. We feel this is appropriate since
short-term movements in our stock price are subject to factors unrelated to
our
performance and beyond the control of our executive officers, including factors
affecting the securities markets generally. The Company’s management strives to
build stockholder value by meeting customer needs, building cash flow and return
on assets, and promoting operational excellence and strategic innovation. The
pursuit of such long-term objectives is not always consistent with producing
short-term results to increase our stock price, but we believe that taking
a
long-term 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 our financial statements and stock price should
eventually reflect the results of those efforts, many long-term strategic
decisions made in pursuing our growth and development may have little visible
impact on our stock price in the short term.
Finally,
the Committee’s philosophy considers the cyclical nature of our 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, we do not attempt to closely 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 our executive officers and in designing the
executive compensation program.
In
summary, our executive compensation program is designed to support five
objectives:
|
·
|
aligning
our executives’ interests with those of our
stockholders;
|
|
·
|
promoting
and rewarding the fulfillment of annual and long-term strategic
objectives;
|
|
·
|
promoting
and rewarding long-term commitment;
|
|
·
|
maintaining
internal compensation equity; and
|
|
·
|
competing
for talent in order to attract and retain executives with the skills
and
attributes we need.
|
Determining
Executive Compensation
The
Committee makes all compensation decisions for the named executive officers
and
approves recommendations regarding equity awards for all of the Company’s
elected officers. Decisions regarding non-equity compensation of all other
officers and employees are made by the Company’s named executive
officers.
The
Chief
Executive Officer annually reviews the performance of each of the other named
executive officers with respect to achievement of established performance
standards and attainment of the Company’s objectives. Based on those reviews,
the Chief Executive Officer makes recommendations with respect to compensation
to the Committee. The Committee then can exercise its discretion in modifying
any recommended adjustments or awards to the other named executive officers
based upon its evaluation of their performance as well as other aspects of
our
compensation philosophy.
The
Committee’s review of the Chief Executive Officer’s compensation is subject to
separate procedures. The Committee evaluates the Chief Executive Officer’s
performance, reviews the Committee’s evaluation with him, and based on that
evaluation and review, determines the amount of salary adjustment and incentive
award. Consistent with the requirements of the listing standards of The Nasdaq
Stock Market LLC, the Chief Executive Officer is excused from meetings of the
Committee during voting deliberations regarding his compensation.
The
Committee is guided by the 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 officer’s
compensation history with respect to each element of compensation for a period
of five years. The Committee does not currently retain executive compensation
consultants.
Based
upon the cyclical nature of our 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 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.
Elements
of Executive Compensation
For
the
fiscal year ended December 31, 2007, the principal components of compensation
for the named executive officers were:
|
·
|
annual
performance-based incentive
compensation;
|
|
·
|
long-term
equity incentive compensation;
|
|
·
|
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
compensation is a usual and expected component of executive compensation, and
is
paid to provide executives with a fixed level of compensation. In setting base
salaries for our executive officers, the Committee considers 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 Company’s strategic
initiatives;
|
|
·
|
the
Company’s financial performance, judged in light of external market
factors;
|
|
·
|
the
Company’s stock price performance, in absolute terms and relative to its
peers and the market as a whole;
|
|
·
|
the
Committee’s evaluation of market demand for executives with similar
capability and experience;
|
|
·
|
the
Committee’s 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 Company’s performance
review process, or upon a promotion or other change in job responsibility.
For
2007, each of the named executive officers received an increase in base salary,
reflected as a percentage of 2006 base salary, as follows: J. Allen Fine –
3.3%; James A. Fine, Jr. – 8.4%; W. Morris Fine – 3.4%. The increases for
J. Allen Fine and W. Morris Fine were provided primarily as cost of living
increases. The increase for James A. Fine, Jr. included a cost of living
increase element, plus an additional 5.0% to reflect additional responsibilities
assumed in connection with his position as President and Chief Financial
Officer
.
Annual
Performance-Based Incentive Compensation.
Incentive compensation is provided to reward performance and motivate the
executives to achieve our short-term and long-term objectives. The Committee
sets target incentive award levels that are designed to link a substantial
portion of each individual’s total annual compensation to the attainment of
performance objectives. In setting target incentive awards, the Committee
considers each executive’s level of responsibility and degree of influence on
our short-term and long term objectives, as well as the Committee’s desire to
strike an appropriate balance between the fixed elements of compensation and
the
variable performance-based elements. The target levels are not tied to
performance objectives by a fixed formula; rather, the Committee exercises
its
discretion in setting target levels and uses prior years as a guide. By design,
targeted at-risk pay for the named executive officers is a significant component
of the total compensation package, between 55% and 65% of potential total cash
compensation.
Grants
of
annual incentive awards are based primarily upon the attainment of performance
objectives. The performance objectives are centered on the Company’s financial
performance, the pursuit of growth and diversification in our business, and
other strategic initiatives. In determining the amount of the annual incentive
awards, the Committee reviews the Company’s progress toward meeting its
objectives, and each executive officer’s contribution toward that progress, as
well as the Committee’s judgment and use of discretion.
For
2007,
annual incentive payments were relatively consistent with amounts paid in 2006,
reflecting the Committee’s judgment that the performance of the executive
officers and their contribution toward the attainment of the Company’s
objectives was consistent with 2006.
Long-Term
Equity Incentive Compensation.
The
Committee periodically considers awarding stock options 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 the stockholders, reward
short-term performance, and encourage long-term commitment. By delivering value
only when the value of the Company’s stock increases, stock option grants
provide an incentive for executives to focus on managing the Company from the
perspective of an owner with an equity stake in the Company. In the Committee’s
opinion, past stock option grants 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 under the Plan in
accordance with the philosophy outlined above.
Typically,
eligible employees are those who are in a position to significantly influence
the achievement of the Company’s objectives. Awards granted to an individual are
based upon a number of factors, including the Company’s performance, the
individual’s performance, and the recipient's position, salary, and performance.
In addition, the Committee considers the degree of each potential recipient’s
ability to influence the attainment of our Company’s goals. We expect that
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
option grants are made under the Investors Title Company 1997 and 2001 Stock
Option and Restricted Stock Plans, which stockholders approved on May 13, 1997
and May 16, 2001, respectively. Stock option grants generally become exercisable
in five or ten equal annual installments beginning on the grant date, and no
more than 50,000 options may be granted to one individual under each Plan.
No
new stock option grants were made to the executive officers in
2007.
Non-Qualified
Supplemental Retirement Benefit Plan.
The
Committee adopted a Non-Qualified Supplemental Retirement Benefit Plan of the
Company’s wholly owned subsidiary, Investors Title Insurance Company (“ITIC”),
in November 2003. 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. It is intended to promote long-term
commitment by enhancing the participants’ post-retirement financial security.
The Committee determines the roster of plan participants on the basis of the
significance of each employee’s ability to influence the Company’s objectives.
Currently, each of the named executive officers participates in this plan.
For
2004
and subsequent years, ITIC makes quarterly hypothetical contributions to each
participant’s account under the plan equal to 22% of his cash compensation each
quarter. After 20 quarters of participation in the plan, additional
contributions to each participant’s account will be at the Committee’s
discretion. If a participant terminates employment before earning contributions
for the full 20 quarters, then a lump sum hypothetical contribution will be
made
to the terminated participant’s account for the remaining quarters, up to the
limit of 20 quarters.
Amounts
credited to a participant’s account may be deemed either to earn a specified
rate of interest or to be invested in a security, index, or other investment
as
determined by the Committee from time to time. Since the effective date of
the
plan, the amounts credited to each participant’s account have been deemed to
earn interest at an annual rate of return, compounded quarterly, based on the
then current yield on the 10-Year U.S. Treasury Note.
Amounts
in a participant’s account (reflecting the hypothetical contributions and any
deemed returns) are paid at the earlier of the participant’s termination of
employment or death. Each participant has the option of electing to be paid
either a lump sum amount equal annual installments spread over a term, of five,
ten, fifteen, or twenty years, or life annuity payments.
The
hypothetical Company contributions for 2007, reflecting amounts credited to
the
Non-Qualified Supplemental Retirement Benefit Plan accounts of the executive
officers, are included in the “All Other Compensation” amounts shown in the
Summary Compensation Table below.
Non-Qualified
Deferred Compensation Plan.
The
Committee adopted a Non-Qualified Deferred Compensation Plan of ITIC in June
2004. 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. It is intended to promote long-term commitment
by
enhancing the participants’ post-retirement financial security. The Committee
determines the roster of plan participants on the basis of the significance
of
each employee’s ability to influence the Company’s objectives. Currently, each
of the named executive officers participates.
For
2005
and subsequent years, the Deferred Compensation Plan permits each participant
to
elect annually to defer any portion of his cash compensation. The plan also
provides that on or before December 31
st
of each
year, beginning in 2004, the Company will make a hypothetical contribution
to a
participant’s account under the plan equal to the amount that would have been
contributed to the participant’s Simplified Employee Pension Plan if the
contributions to this plan were not limited under the federal tax
laws.
Participant
account balances (reflecting elective compensation deferrals, the hypothetical
contributions, and any deemed returns) are paid at each participant’s
termination of employment in a lump sum.
The
amounts credited to the Deferred Contribution accounts of the named executive
officers reflecting the Company’s hypothetical contributions are included in the
“All Other Compensation” amounts shown in the Summary Compensation Table
below.
The
hypothetical Company contributions for 2007, reflecting amounts credited to
the
Deferred Compensation Plan accounts of the executive officers, are included
in
the “All Other Compensation” amounts shown in the Summary Compensation Table
below.
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 interests of the Company and its stockholders to assure
that the company will have the continued dedication of the Company’s
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.
Our
executive officers are eligible to participate in our group insurance program,
which during 2007 included group health, dental, vision, life insurance, and
long-term disability insurance. Other benefits offered during 2007 include
a
Simplified Employee Pension Plan, flexible spending accounts and a pretax
premium plan, paid sick leave, paid holidays, and paid vacations.
As
a
matter of policy, the Committee does not award personal benefits or perquisites
that are unrelated to the Company’s 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 $1.0 million. Special rules
apply for "performance-based" compensation, including the pre-approval of
performance goals applicable to that compensation.
All
compensation paid to our named executive officers in 2007, 2006, and 2005,
was
fully deductible for the purposes of Section 162(m). However, to maintain
flexibility in compensating executive officers in a manner designed to promote
varying corporate goals, the Committee has not adopted a policy that all
compensation must be deductible for Federal income tax purposes.
Accounting
for Stock-Based Compensation.
Beginning on January 1, 2006, the Company began accounting for stock-based
payments in accordance with the requirements of FASB Statement 123(R).
Summary
Compensation Table
The
table
below summarizes the total compensation for each of the named executive officers
for each of the fiscal years ended December 31, 2007 and December 31, 2006.
When
setting total compensation for the named executive officers, the Committee
reviews tally sheets which show each executive’s current compensation, including
equity and non-equity based compensation.
Name and Principal Position
|
|
Year
|
|
Salary
($)
|
|
Bonus
($)
|
|
All Other
Compensation
($) (1)
|
|
Total
($)
|
|
J.
Allen Fine
Chief
Executive Officer & Chairman of the Board
|
|
|
2007
2006
|
|
|
282,500
273,700
|
|
|
330,000
345,000
|
|
|
193,175
184,030
|
|
|
805,675
802,730
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James
A. Fine, Jr.
President,
Chief Financial Officer & Treasurer
|
|
|
2007
2006
|
|
|
235,900
219,333
|
|
|
325,000
335,000
|
|
|
182,900
174,285
|
|
|
743,800
728,618
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
W.
Morris Fine
Executive
Vice President & Secretary
|
|
|
2007
2006
|
|
|
226,733
219,333
|
|
|
325,000
320,000
|
|
|
177,005
174,285
|
|
|
728,738
713,618
|
|
|
(1)
|
The
amounts set forth in this column for 2007
consisted of (i) Company contributions to Simplified Employee Pension
Plan, (ii) Company contributions under the Nonqualified Supplemental
Retirement Benefit Plan, (iii) Company contributions under the
Nonqualified Deferred Compensation Plan, and (iv) Company-paid premiums
for life insurance and health insurance, as
follows:
|
Name
|
|
Pension Plan
Contributions
($)
|
|
Supplemental
Retirement
Plan
Contributions
($)
|
|
Deferred
Compensation
Plan
Contributions
($)
|
|
Life and
Health
Insurance
($)
|
|
Total
($)
|
|
J.
Allen Fine
|
|
|
19,508
|
|
|
138,050
|
|
|
34,897
|
|
|
720
|
|
|
193,175
|
|
James
A. Fine, Jr.
|
|
|
19,508
|
|
|
125,598
|
|
|
29,990
|
|
|
7,804
|
|
|
182,900
|
|
W.
Morris Fine
|
|
|
19,508
|
|
|
121,381
|
|
|
28,328
|
|
|
7,788
|
|
|
177,005
|
|
For
further information regarding the Nonqualified Supplemental Retirement Benefit
Plan and Nonqualified Deferred Compensation Plan, see
“-
Nonqualified Deferred Compensation
”
below.
Employment
Agreements
ITIC
is
party to an employment agreement with each of J. Allen Fine, James A. Fine,
Jr.,
and W. Morris Fine under which they are entitled to minimum base salaries of
$259,500, $207,000 and $207,000, respectively. Under these agreements, which
have five year rolling terms, Messrs. Fine, Fine, Jr., and Fine participate
in
the Company’s Nonqualified Supplemental Retirement Benefit Plan, participate in
the benefits programs generally provided to other executives, receive 30 days
of
paid vacation and unlimited sick leave, and are entitled to reimbursement for
reasonably incurred out-of-pocket business expenses. Under these agreements,
Messrs. Fine, Fine, Jr., and Fine would, upon termination, receive as severance
certain payments as described under “–
Potential Payments Upon Termination or Change of Control
”
below.
The agreements also prohibit Messrs. Fine, Fine, Jr., and Fine from engaging
in
certain activities involving competition with the Company for a two year period
following termination of employment.
Outstanding
Equity Awards at Fiscal Year-End
There
were no equity awards outstanding at December 31, 2007.
Option
Exercises and Stock Vested
The
following table sets forth certain information with respect to option exercises
and stock vested during the year ended December 31, 2007 with respect to the
named executive officers.
|
|
Option Awards
|
|
Stock Awards
|
|
Name
|
|
Number of
Shares
Acquired on
Exercise (#)
|
|
Value Realized
on Exercise
($) (1)
|
|
Number of
Shares
Acquired on
Vesting (#)
|
|
Value Realized
on Vesting ($)
|
|
J.
Allen Fine
|
|
|
2,400
|
|
|
23,040
|
|
|
-
|
|
|
-
|
|
James
A. Fine, Jr.
|
|
|
3,000
|
|
|
28,800
|
|
|
-
|
|
|
-
|
|
W.
Morris Fine
|
|
|
3,000
|
|
|
28,800
|
|
|
-
|
|
|
-
|
|
(1)
The
amounts reflected in this column reflect the difference between the market
price
of the shares acquired upon exercise and the exercise price of the
options.
Nonqualified
Deferred Compensation
As
discussed above, under the heading “ - Compensation Discussion and Analysis -
Elements of Executive Compensation,” the named executive officers participate in
a Non-Qualified Supplemental Retirement Benefit Plan and a Non-Qualified
Deferred Compensation Plan. The table below shows the activity in each of these
plans during 2007
.
Name
|
|
Executive
Contributions
in Last FY
($)
|
|
Employer
Contributions
in Last FY
($)(1)
|
|
Aggregate
Earnings
in Last
FY
($)(2)
|
|
Aggregate
Withdrawals/
Distributions
in Last FY
($)
|
|
Aggregate
Balance
at Last
FYE
($)(3)
|
|
J.
Allen Fine
(Deferred
Compensation Plan)
|
|
|
0
|
|
|
34,897
|
|
|
5,383
|
|
|
0
|
|
|
190,958
|
|
J.
Allen Fine
(Supplemental
Retirement Plan)
|
|
|
0
|
|
|
138,050
|
|
|
22,712
|
|
|
0
|
|
|
589,274
|
|
James
A. Fine, Jr.
(Deferred
Compensation Plan)
|
|
|
0
|
|
|
29,990
|
|
|
4,496
|
|
|
0
|
|
|
161,163
|
|
James
A. Fine, Jr.
(Supplemental
Retirement Plan)
|
|
|
0
|
|
|
125,598
|
|
|
20,469
|
|
|
0
|
|
|
530,586
|
|
W.
Morris Fine
(Deferred
Compensation Plan)
|
|
|
0
|
|
|
28,328
|
|
|
4,476
|
|
|
0
|
|
|
157,400
|
|
W.
Morris Fine
(Supplemental
Retirement Plan)
|
|
|
0
|
|
|
121,381
|
|
|
20,321
|
|
|
0
|
|
|
525,107
|
|
|
(1)
|
Amounts
in this column reflect hypothetical contributions and are included
in the
“All Other Compensation” column of the Summary Compensation Table
above.
|
|
(2)
|
None
of the amounts reflected in this column are reported as above-market
earnings on deferred compensation in the “Change in Pension Value and
Nonqualified Deferred Compensation Earnings” column of the Summary
Compensation Table above.
|
|
(3)
|
Of
the amounts reported in this column, the following amounts have been
reported in the Summary Compensation Tables of the Company’s proxy
statements for previous years: Mr. J. Allen Fine - $54,142 (Deferred
Compensation Plan) and $265,577 (Supplemental Retirement Plan); Mr.
James
A. Fine, Jr. - $44,627 (Deferred Compensation Plan) and $236,298
(Supplemental Retirement Plan); and Mr. W. Morris Fine - $44,227
(Deferred
Compensation Plan) and $235,198 (Supplemental Retirement
Plan).
|
Potential
Payments Upon Termination or Change of Control
The
executive officers are entitled to severance payments and benefits under their
employment agreements, as described above under
“-
Summary Compensation Table - Employment Agreements,”
and
certain other agreements, as described below.
J.
Allen Fine.
Under
Mr.
J. Allen Fine’s employment agreement, if his employment is terminated due to his
death, disability or retirement (following his 70
th
birthday), he is entitled to receive:
|
·
|
his
then current base salary paid monthly for three
years;
|
|
·
|
three
annual payments paid on each of the first, second and third anniversaries
of the termination date equal to his average bonus compensation during
the
preceding three years;
|
|
·
|
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 Company’s health insurance plans by him and his wife
at no expense until his death or, if later, his wife’s death;
and
|
|
·
|
continued
participation in the Company’s health insurance plans by his dependent
children at no expense until any such children are no longer
dependent.
|
Under
Mr.
Fine’s employment agreement, if his employment is terminated by the Company
other than for “cause” or by him due to the Company’s materially breaching the
agreement (“i.e., good reason”), he is entitled to receive:
|
·
|
his
then current base salary paid monthly for five
years;
|
|
·
|
five
annual payments paid on each of the first, second and third anniversaries
of the termination date equal to his average bonus compensation during
the
preceding three years;
|
|
·
|
accrued
benefits under the Nonqualified Supplemental Retirement Benefit Plan
and
Nonqualified Deferred Compensation
Plan;
|
|
·
|
accelerated
vesting in full of all his stock options;
and
|
|
·
|
continued
health insurance coverage as described
above.
|
Under
Mr.
Fine’s employment agreement, if he terminates his employment because of a
“change in control,” he is entitled to receive:
|
·
|
a
lump sum payment equal to 2.99 times his then current base
salary;
|
|
·
|
a
lump sum payment equal to 2.99 times his average bonus compensation
during
the preceding three years;
|
|
·
|
accrued
benefits under the Nonqualified Supplemental Retirement Benefit Plan
and
Nonqualified Deferred Compensation
Plan;
|
|
·
|
accelerated
vesting in full of all his stock options;
and
|
|
·
|
continued
health insurance coverage as described
above.
|
If
a
change in control does not result in a termination of employment, Mr. Fine
is
entitled to a base salary increase of 100%.
If
any
portion of these payments and benefits, or payments and benefits under any
other
plan, agreement or arrangement, would constitute an “excess parachute payment”
for purposes of the Internal Revenue Code, such payments and benefits payable
under the agreement will be reduced until no portion thereof would fail to
be
deductible by reason of being “an excess parachute payment.”
Under
Mr.
Fine’s employment agreement, if his employment is terminated by the Company for
“cause,” he is entitled to receive:
|
·
|
an
amount equal to that amount he would have received as salary had
he
remained an employee until the later of the date of his termination
and 30
days after notice of termination;
and
|
|
·
|
accrued
benefits under the Nonqualified Supplemental Retirement Benefit Plan
and
Nonqualified Deferred Compensation
Plan.
|
Under
Mr.
Fine’s employment agreement, “cause” is defined as:
|
·
|
the
executive’s conviction of, or plea of guilty or nolo contendere to, any
crime involving dishonesty or moral
turpitude;
|
|
·
|
the
commission by executive of a fraud against the Company for which
he is
convicted;
|
|
·
|
gross
negligence or willful misconduct by executive with respect to the
Company
which causes material detriment to the Company;
|
|
·
|
the
falsification or manipulation of any records of the
Company;
|
|
·
|
repudiation
of the agreement by executive or executive’s abandonment of employment
with the Company;
|
|
·
|
breach
by executive of his confidentiality, non-competition or non-solicitation
obligations under the agreement; or
|
|
·
|
failure
or refusal of executive to perform his duties with the Company or
to
implement or follow the policies or directions of the Board of Directors
within 30 days after a written demand for performance is delivered
to
executive that specifically identifies the manner in which the Board
of
Directors believes that executive has not performed his duties or
failed
to implement or follow the policies or directions of the Board of
Directors.
|
Under
Mr.
Fine’s employment agreement, a “change in control” will occur if:
|
·
|
any
person or group acting in concert, other than the executive or his
affiliates or immediate family members, is or becomes the beneficial
owner, directly or indirectly, of securities of the Company representing
50% or more of the combined voting power of the Company’s outstanding
shares entitled to vote for the election of
directors;
|
|
·
|
the
directors serving at the time the agreement was entered into or any
successor to any such director (and any additional director) who
after
such time (i) was nominated or selected by a majority of the directors
serving at the time of his or her nomination or selection and (ii)
who is
not an “affiliate” or “associate” (as defined in Regulation 12B under the
Securities Exchange Act of 1934) of any person who is the beneficial
owner, directly or indirectly, of securities representing 50% or
more of
the combined voting power of the Company’s outstanding shares entitled to
vote for the election of directors, cease for any reason to constitute
at
least a majority of the Company’s Board of
Directors;
|
|
·
|
a
sale of more than 50% of the Company’s assets (measured in terms of
monetary value) is consummated; or
|
|
·
|
any
merger, consolidation, or like business combination or reorganization
of
the Company is consummated that results in the occurrence of any
event
described above.
|
J.
Allen
Fine is also party to a Death Benefit Plan Agreement with the Company.
Notwithstanding the payout provisions of Mr. Fine’s employment agreement, the
Death Benefit Plan Agreement provides that certain amounts payable under Mr.
Fine’s employment agreement in the event of his death will be paid in a lump sum
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 Fine’s employment agreement, except that under their
agreements (1) Messrs. Fine, Jr. and Fine are eligible to receive retirement
benefits under their agreements after age 50, rather than age 70, and (2)
following termination of employment by the Company other than for “cause” or by
the executive due to a material breach by the Company of the agreement (i.e.,
“good reason”) or because of a “change in control,” they are entitled to cause
the Company to transfer to them any life insurance policies owned by the Company
on their lives.
James
A.
Fine, Jr. is also party to a Death Benefit Plan Agreement with the Company.
Notwithstanding the payout provisions of Mr. Fine’s employment agreement,
the
Death
Benefit Plan Agreement provides that certain amounts payable under Mr. Fine’s
employment agreement in the event of his death will be paid in a lump sum within
60 days of his death to a beneficiary designated by him. Under the Death Benefit
Plan Agreement, Mr. Fine’s designated beneficiary would also be paid a lump sum
amount equal to $2,000,000,
|
·
|
reduced
by the following amounts that would be paid under Mr. Fine’s employment
agreement and the Supplement Retirement Plan in the event of his
death:
|
|
(a)
|
the
Company’s contributions to Mr. Fine’s account under the Supplemental
Retirement Plan;
|
|
(b)
|
three
times his then current base salary;
|
|
(c)
|
three
times his average bonus compensation during the preceding three
years;
|
|
(d)
|
the
cost of continued participation in the Company’s health insurance plans by
him and his wife until his death or, if later, his wife’s death;
and
|
|
(e)
|
the
cost of continued participation in the Company’s health insurance plans by
his dependent children until any such children are no longer dependent;
and
|
|
·
|
increased
by the amounts accrued on the Company’s books as of the date of death for
the payments described in items (a) through (e)
above.
|
W.
Morris
Fine is not currently a party to a Death Benefit Plan Agreement; however, the
Company anticipates entering into such an agreement with W. Morris Fine in
2008,
which would be substantially similar to the Death Benefit Plan Agreement with
James A. Fine, Jr.
Conditions
to Receipt of Severance Benefits.
Under
each named executive officer’s employment agreement, the Company’s obligations
to provide the executive with the severance benefits described above are
contingent on:
|
·
|
The
executive’s compliance with certain covenants with respect to confidential
information;
|
|
·
|
The
executive’s compliance with a two year non-competition covenant;
and
|
|
·
|
The
executive’s compliance with a two year non-solicitation
covenant.
|
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, 2007.
The
following table shows the potential payments upon termination or a change of
control of the Company for J. Allen Fine., the Company’s Chief Executive
Officer:
Executive
Benefits and
Payments
Upon
Termination
|
|
Voluntary
Termination
|
|
Termination
Due
to
Change
in
Control
|
|
Death
|
|
For
Cause
Termination
|
|
Involuntary
or
Good
Reason
Termination
|
|
Termination
for
Retirement
or
Disability(1)
|
|
Compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base
Salary
|
|
|
-
|
|
|
849,160
|
(3)
|
|
852,000
|
|
|
23,542
|
(2)
|
|
1,420,000
|
(5)
|
|
852,000
|
(4)
|
Bonus
|
|
|
-
|
|
|
1,051,483
|
(6)
|
|
1,055,000
|
|
|
-
|
|
|
1,758,333
|
(8)
|
|
1,055,000
|
(7)
|
Supplemental
Retirement Plan (9)
|
|
|
693,060
|
|
|
693,060
|
|
|
693,060
|
|
|
693,060
|
|
|
693,060
|
|
|
693,060
|
|
Deferred
Compensation Plan (10)
|
|
|
190,958
|
|
|
190,958
|
|
|
190,958
|
|
|
190,958
|
|
|
190,598
|
|
|
190,958
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefits
and Perquisites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health
Plan (11)
|
|
|
-
|
|
|
34,622
|
|
|
34,622
|
|
|
-
|
|
|
34,622
|
|
|
34,622
|
|
Total –
J. Allen Fine
|
|
|
884,018
|
|
|
2,819,283
|
|
|
2,825,640
|
|
|
907,560
|
|
|
4,096,613
|
|
|
2,825,640
|
|
The
following table shows the potential payments upon termination or a change of
control of the Company for James A. Fine, Jr., the Company’s President and Chief
Financial Officer:
Executive Benefits and
Payments Upon
Termination
|
|
|
Voluntary
Termination
|
|
|
Termination
Due
to
Change
in
Control
|
|
|
Death
|
|
|
For
Cause
Termination
|
|
|
Involuntary
or
Good
Reason
Termination
|
|
|
Termination
for
Retirement or
Disability
|
|
Compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base
Salary
|
|
|
-
|
|
|
714,610
|
(3)
|
|
717,000
|
|
|
19,644
|
(2)
|
|
1,195,000
|
(5)
|
|
717,000
|
(4)
|
Bonus
|
|
|
-
|
|
|
1,026,567
|
(6)
|
|
1,030,000
|
|
|
-
|
|
|
1,716,667
|
(8)
|
|
1,030,000
|
(7)
|
Supplemental
Retirement Plan (9)
|
|
|
625,296
|
|
|
625,296
|
|
|
625,296
|
|
|
625,296
|
|
|
625,296
|
|
|
625,296
|
|
Deferred
Compensation Plan (10)
|
|
|
161,163
|
|
|
161,163
|
|
|
161,163
|
|
|
161,163
|
|
|
161,163
|
|
|
161,163
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefits
and Perquisites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health
Plan (11)
|
|
|
-
|
|
|
181,842
|
|
|
181,842
|
|
|
-
|
|
|
181,842
|
|
|
181,842
|
|
Death
Benefit Plan Agreement (12)
|
|
|
-
|
|
|
-
|
|
|
983,262
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Life
Insurance (13)
|
|
|
-
|
|
|
38,841
|
|
|
38,841
|
|
|
-
|
|
|
38,841
|
|
|
38,841
|
|
Total
- James A. Fine, Jr.
|
|
|
786,459
|
|
|
2,748,319
|
|
|
3,737,404
|
|
|
806,103
|
|
|
3,918,809
|
|
|
2,754,142
|
|
The
following table shows the potential payments upon termination or a change of
control of the Company for W. Morris Fine, the Company’s Executive Vice
President and Secretary:
Executive Benefits and
Payments Upon
Termination
|
|
Voluntary
Termination
|
|
Termination
Due to
Change in
Control
|
|
Death
|
|
For Cause
Termination
|
|
Involuntary
or Good
Reason
Termination
|
|
Termination
for
Retirement
or Disability
|
|
Compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base
Salary
|
|
|
-
|
|
|
681,720
|
(3)
|
|
684,000
|
|
|
18,894
|
(2)
|
|
1,140,000
|
(5)
|
|
684,000
|
(4)
|
Bonus
|
|
|
-
|
|
|
1,011,617
|
(6)
|
|
1,015,000
|
|
|
|
|
|
1,691,667
|
(8)
|
|
1,015,000
|
(7)
|
Supplemental
Retirement Plan (9)
|
|
|
616,352
|
|
|
616,352
|
|
|
616,352
|
|
|
616,352
|
|
|
616,352
|
|
|
616,352
|
|
Deferred
Compensation Plan (10)
|
|
|
157,400
|
|
|
157,400
|
|
|
157,400
|
|
|
157,400
|
|
|
157,400
|
|
|
157,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefits
and Perquisites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health
Plan (11)
|
|
|
-
|
|
|
115,956
|
|
|
115,956
|
|
|
-
|
|
|
115,956
|
|
|
115,956
|
|
Death
Benefit Plan Agreement (12)
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Life
Insurance (13)
|
|
|
-
|
|
|
15,525
|
|
|
15,525
|
|
|
-
|
|
|
15,525
|
|
|
15,525
|
|
Total –
W. Morris Fine
|
|
|
773,752
|
|
|
2,598,570
|
|
|
2,604,233
|
|
|
792,646
|
|
|
3,736,900
|
|
|
2,604,233
|
|
|
(1)
|
J.
Allen Fine was eligible to retire on May 2,
2004.
|
|
(2)
|
Represents
30 days severance.
|
|
(3)
|
Represents
lump sum severance payment equal to 2.99 times base
salary.
|
|
(4)
|
Represents
three years severance, payable
monthly.
|
|
(5)
|
Represents
five years severance, payable
monthly.
|
|
(6)
|
Represents
lump sum severance payment equal to 2.99 times average bonus for
past
three years.
|
|
(7)
|
Represents
three times average bonus for past three years, payable in three
annual
installments.
|
|
(8)
|
Represents
five times average bonus for past three years, payable in three annual
installments.
|
|
(9)
|
Represents
accumulated benefit under the Company’s Nonqualified Supplemental
Retirement Benefit Plan plus contribution required to ensure minimum
of 20
quarters of Company contributions.
|
|
(10)
|
Represents
accumulated benefit under the Company’s Nonqualified Deferred Compensation
Plan.
|
|
(11)
|
Reflects
estimated cost of providing health insurance plan coverage using
assumptions used for financial reporting
purposes.
|
|
(12)
|
Represents
the estimated lump sum amount that would be payable under the officer’s
Death Benefit Plan Agreement. W. Morris Fine is not currently a party
to a
Death Benefit Plan Agreement, but the Company anticipates entering
into
such an agreement with him in 2008 on terms substantially similar
to the
Death Benefit Plan Agreement with James A. Fine, Jr. If such an agreement
had been in effect for W. Morris Fine in 2007, W. Morris Fine would
have
been entitled to approximately $811,484 in the event of his death
on
December 31, 2007.
|
|
(13)
|
Reflects
cash surrender value of life insurance policy, transferable at the
executive’s request.
|
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 Company’s 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. For fiscal year 2007, there were no related party
transactions that were required to be disclosed in this Proxy
Statement.
SHAREHOLDER
PROPOSALS FOR 2009 ANNUAL MEETING
Shareholder
proposals to be presented at the 2009 Annual Meeting of Shareholders must be
received by the Company on or before December 17, 2008 to be considered for
inclusion in the Company’s proxy materials relating to that meeting. If a
shareholder notifies the Company after March 2, 2009 of an intent to present
a
proposal at the Company’s 2009 Annual Meeting of Shareholders, the request will
be considered untimely and the persons named as the Company’s proxies will have
the right to exercise their discretionary voting authority with respect to
such
proposal without including information regarding the proposal in the proxy
materials.
|
BY
ORDER OF THE BOARD OF DIRECTORS:
|
|
|
|
|
|
|
|
W.
Morris Fine
|
|
Secretary
|
|
|
|
|
|
April
16, 2008
|
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