UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a)
of
the Securities Exchange Act of 1934
Filed
by the Registrant ☒
Filed
by a Party other than the Registrant ☐
Check
the appropriate box:
☐
Preliminary Proxy Statement
☐
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
☒
Definitive Proxy Statement
☐
Definitive Additional Materials
☐
Soliciting Material Pursuant to § 240.14a-12
INVESTORS
TITLE COMPANY
(Name
of Registrant as Specified in Its Charter)
(Name
of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
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☐
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title
of each class of securities to which transaction applies:
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(2)
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Aggregate
number of securities to which transaction applies:
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(3)
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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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(4)
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Proposed
maximum aggregate value of transaction:
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☐
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Fee
paid previously with preliminary materials.
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☐
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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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(1)
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Amount
Previously Paid:
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(2)
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Form,
Schedule or Registration Statement No.:
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121
North Columbia Street, Chapel Hill, North Carolina 27514
(919)
968-2200
April
13, 2017
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 17, 2017 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 2017, 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.
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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 17, 2017
The
Annual Meeting of Shareholders of Investors Title Company will be held at The Siena Hotel, 1505 East Franklin Street, Chapel Hill,
North Carolina, on Wednesday, May 17, 2017 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 Company’s independent registered
public accounting firm for 2017; 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 3, 2017 are entitled to notice of and to vote at the
meeting and any adjournments or postponements thereof.
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By Order of the Board of Directors:
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W. Morris Fine
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Secretary
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April 13, 2017
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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.
TABLE
OF CONTENTS
PROXY
STATEMENT
ANNUAL
MEETING OF SHAREHOLDERS OF
INVESTORS
TITLE COMPANY
To
Be Held on May 17, 2017
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 Meeting of Shareholders to be held at The Siena Hotel, 1505 East Franklin Street, Chapel
Hill, North Carolina, on May 17, 2017 at 11:00 a.m. EDT, and at all adjournments or postponements thereof. Shareholders of record
at the close of business on April 3, 2017 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 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 Company’s 2016 Annual Report 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.
Annual
Report to Shareholders
. A copy of the Company’s 2016 Annual Report including financial statements and the independent
registered public accounting firms’ opinions, along with the Notice of Annual Meeting, Proxy Statement and proxy card, are
being first mailed to the Company’s shareholders on or about April 13, 2017.
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:
●
By Internet.
You may vote by proxy via the Internet by following the instructions on the proxy card provided.
●
By mail.
You may vote by proxy by signing and returning the proxy card provided.
●
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 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 3, 2017, the Company had a total of 2,177,764 shares of Common Stock outstanding, its only class of issued
and outstanding capital stock. Of these shares, 1,886,088 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.
Important
Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be Held on May 17, 2017
. The
Notice of Annual Meeting and Proxy Statement and the Company’s 2016 Annual Report (the “Proxy Materials”) are
available on the Company’s website at
http://www.invtitle.com/investors-proxy-materials
and at
www.proxyvote.com
.
Shareholders that have arranged through their broker to receive the Proxy Materials electronically may also receive them online.
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, as amended (the “Exchange
Act”), 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 (the “SEC”) with respect to beneficial ownership
of the Company’s securities. Based solely upon a review of copies of the filings that the Company received with respect
to the fiscal year ended December 31, 2016, 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 during fiscal 2016.
General
Information
. A copy of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 as filed
with the SEC, including copies of the exhibits to the Form 10-K, can be obtained without charge by contacting Investor Relations
at investorrelations@invtitle.com or P.O. Box 2687, Chapel Hill, North Carolina
27515-2687.
CORPORATE
GOVERNANCE
Code
of Business Conduct and Ethics
The
Company has a Code of Business Conduct and Ethics that is applicable to all of the Company’s employees, officers and directors,
including its Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer. This Code addresses a variety of
issues, including conflicts of interest, the protection of confidential information, insider trading, and employment practices.
It also requires strict compliance with all laws, rules and regulations governing the conduct of the Company’s business.
The
Code of Business Conduct and Ethics is posted in the Corporate Governance area of the Investor Relations section of the Company’s
website at
www.invtitle.com
. The Company intends to disclose future 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.
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 and nominees for director are independent directors within the
meaning of the applicable listing standards of The NASDAQ Stock Market LLC (“NASDAQ”) and the Company’s Board
of Directors Independence Standards: 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 Company’s website at
www.invtitle.com/investors-independence-standards
.
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,
2016. None of the directors who served on the Compensation Committee in fiscal 2016 served as one of our employees in fiscal 2016
or has ever served as one of our officers. During fiscal 2016, 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 fiscal year ended December 31, 2016, 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 2016 Annual Meeting.
The
Company’s Board of Directors has a standing Audit Committee, Compensation Committee, and Nominating Committee.
The
Audit Committee.
During fiscal 2016, the Audit Committee was composed of Mr. Francis, Mr. Johnson and Mr. King. The Audit
Committee met ten times during fiscal 2016.
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, potential conflicts of interest, and periodically consults with the independent registered public
accounting firm on matters relating to internal financial controls and procedures. The Committee is responsible for establishing
and administering complaint procedures related to accounting and auditing matters.
The
Audit Committee operates under a written charter adopted by the Board of Directors, a copy of which is posted on the Company’s
website at
www.invtitle.com/investors-committees
. 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 fiscal
2016.
The
Compensation Committee
.
During fiscal 2016, the Compensation Committee was composed of Mr. Hutson, Mr. Morton and Mr.
Speed. The Compensation Committee met two times during fiscal 2016. The Board of Directors has determined that each member of
the Compensation Committee is “independent” as defined under applicable NASDAQ listing standards.
The
Compensation Committee operates under a written charter that can be found on the Company’s website at
www.invtitle.com/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 Company’s executive officers and approves recommendations
regarding equity awards for all of the Company’s 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 Company’s executive officers.
The
Company’s Chief Executive Officer annually reviews the performance of each of the other executive officers with respect
to achievement of the Company’s objectives. Based on those reviews, the Chief Executive Officer makes recommendations with
respect to compensation to the Compensation Committee. The Compensation 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
Compensation Committee’s review of the Chief Executive Officer’s compensation is subject to separate procedures. The
Compensation 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 bonus award. Consistent with the
requirements of applicable NASDAQ listing standards, the Chief Executive Officer is excused from meetings of the Compensation
Committee during voting deliberations regarding his compensation.
The
Compensation 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 Compensation Committee is guided by the
objectives of our compensation program, the Compensation Committee’s own judgment and other information that it considers
relevant. Based on the cyclical nature of the Company’s business, the Compensation 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 fiscal 2016.
Decisions regarding the compensation of the Company’s directors are made by the Board of Directors, as described under
“Compensation
of Directors”
below.
The
Nominating Committee.
During fiscal 2016, the Nominating Committee was composed of Mr. Morton, Mr. Hutson and Mr. Johnson.
The Nominating Committee met two times during fiscal 2016.
The
Nominating Committee operates under a written charter that can be found on the Company’s 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 Company’s Nominating Committee is “independent” as
defined under applicable NASDAQ listing standards.
The
Nominating Committee is responsible for identifying, evaluating and recommending to the Board of Directors candidates for election
to the Board of Directors as well as appropriate members for the Audit and Compensation Committees. The slate of director nominees
to be presented to 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 an
existing Board member. 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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1.
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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 candidate’s 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 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
meets such independence standards. The Committee also requires that all members of the Audit Committee be financially literate
pursuant to applicable NASDAQ listing standards and that at least one member of the Audit Committee be an “audit committee
financial expert” as defined under SEC rules. Therefore, the Nominating Committee considers whether a potential director
nominee meets these criteria when evaluating his or her qualifications. The Nominating Committee does not have a formal policy
regarding diversity, but diversity is one of the various factors the Nominating Committee may consider when considering director
candidates.
It
is the policy of the Nominating Committee to consider all director candidates recommended by shareholders, provided that such
recommendations are made in accordance with the procedures outlined below. The Nominating Committee evaluates such candidates
in accordance with the same criteria it uses to evaluate all other director candidates.
Any
shareholder that wishes to recommend a director candidate to be considered for the 2018 Annual Meeting of Shareholders should
send his or her recommendation to the attention of the Corporate Secretary, Investors Title Company, P.O. Box 2687, Chapel Hill,
North Carolina 27515-2687, no later than December 14, 2017. 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.
The
Company’s 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 year’s 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 Chief Executive Officer 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 Chief Executive Officer.
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 Chief Executive Officer
based on our circumstances.
The
Board has determined that it is appropriate for Mr. Fine to serve as both Chairman and Chief Executive Officer (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 of the Board
of Directors and the independent directors, approving information, meeting agendas and schedules for the Board of Directors, and
calling meetings of the independent directors.
The
Board’s Role in Risk Oversight
Management
is responsible for managing the risks that the Company faces. The Board of Directors is responsible for overseeing management’s
approach to risk management. Management identifies material risks facing the Company on an ongoing basis and discusses those risks
and the management of those risks with the Board of Directors or its committees, as appropriate. While the Board of Directors
has ultimate responsibility for overseeing management’s approach to risk management, various committees of the Board assist
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. Non-employee directors
also 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 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 18, 2016, the date of the Company’s 2016 Annual Meeting of Shareholders, each non-employee director was granted 750
stock appreciation rights (“SARs”) under the Company’s 2009 Stock Appreciation Rights Plan with an exercise
price of $93.87. Upon exercise of each SAR, a director is entitled to receive an amount (payable in shares of the Company’s
Common Stock) equal to the difference between the closing price of the Company’s Common Stock on the business day immediately
preceding the date of exercise and the exercise price. The number of shares paid on exercise is determined by dividing this amount
by the closing price of the Company’s Common Stock on the business day immediately preceding the date of exercise. These
SARs vest and become exercisable in four quarterly installments beginning June 30, 2016 and will expire on May 18, 2023.
The
Board of Directors makes all decisions regarding the compensation of the members of the Board of Directors. The Chief Executive
Officer makes periodic recommendations regarding director compensation, and the Board of Directors may exercise its discretion
in modifying any recommended compensation adjustments or awards to the directors. The Board of Directors does not use a compensation
consultant for determining or recommending the amount or form of director compensation. The following table shows the compensation
earned by each non-employee director for fiscal 2016:
2016
Director Compensation
Name
(1)
|
Fees
Earned
or Paid
In Cash ($)
|
Stock
Awards
($)
(2)
|
Option
Awards
($)
(3)
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Total
($)
|
David
L. Francis
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22,000
|
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22,017
|
44,017
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Richard
M. Hutson II
|
17,500
|
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22,017
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39,517
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R.
Horace Johnson
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22,000
|
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22,017
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44,017
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H.
Joe King, Jr.
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23,000
|
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22,017
|
45,017
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James
R. Morton
|
17,500
|
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22,017
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39,517
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James
H. Speed, Jr
|
17,500
|
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22,017
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39,517
|
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(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.
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(2)
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The Company did not grant any stock awards during fiscal 2016. There were no stock awards outstanding at December 31, 2016
held by the directors.
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(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 Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016. The aggregate
number of SARs outstanding at December 31, 2016 held by directors was as follows:
|
Name
|
Outstanding
SARs at Fiscal
Year End
|
David
L. Francis
|
4,250
|
Richard
M. Hutson II
|
4,250
|
R.
Horace Johnson
|
4,250
|
H.
Joe King, Jr.
|
4,250
|
James
R. Morton
|
3,250
|
James
H. Speed, Jr.
|
4,250
|
The Company did not grant any options
in fiscal 2016. The aggregate number of option awards outstanding at December 31, 2016 held by directors was as follows:
Name
|
Outstanding
Option
Awards at
Fiscal Year
End
|
David
L. Francis
|
0
|
Richard
M. Hutson II
|
0
|
R.
Horace Johnson
|
0
|
H.
Joe King, Jr.
|
0
|
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 Company’s outstanding Common Stock
as of April 3, 2017. 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.
|
|
Amount and Nature
|
|
|
|
Name and Address of
Beneficial Owner
|
|
of Beneficial Ownership
|
|
Percent
of Class
(1)
|
|
|
|
|
|
|
Markel Corporation
|
213,300
(2)
|
|
11.31%
|
|
4521 Highwoods Parkway, Glen Allen, Virginia 23060
|
|
|
|
|
|
|
|
|
|
J. Allen Fine
|
196,475
(3)
|
|
10.42%
|
|
121 N. Columbia Street, Chapel Hill, North Carolina 27514
|
|
|
|
|
|
|
|
|
|
James A. Fine, Jr.
|
179,478
(4)
|
|
9.52%
|
|
121 N. Columbia Street, Chapel Hill, North Carolina 27514
|
|
|
|
|
|
|
|
|
|
W. Morris Fine
|
178,809
(5)
|
|
9.48%
|
|
121 N. Columbia Street, Chapel Hill, North Carolina 27514
|
|
|
|
|
|
|
|
|
|
Dimensional Fund Advisors LP
|
153,828
(6)
|
|
8.16%
|
|
Building One, 6300 Bee Cave Road,
|
|
|
|
|
Austin, Texas 78746
|
|
|
|
|
|
|
|
|
|
Groveland Capital LLC
|
|
|
|
|
Groveland Master Fund Ltd.
|
|
|
|
|
Nicholas J. Swenson
|
|
|
|
|
Seth Barkett
|
|
|
|
|
5000 West 36
th
Street, Suite 130, Minneapolis, Minnesota 55416
|
|
|
|
|
Air T, Inc.
|
|
|
|
|
3524 Airport Road, Maiden, North Carolina, 28650
|
|
|
|
|
GrizzlyRock Capital, LLC
|
|
|
|
|
GrizzlyRock GP, LLC
|
|
|
|
|
GrizzlyRock Value Partners, LP
|
|
|
|
|
Kyle Mowery
|
|
|
|
|
191 N. Wacker Drive, Suite 1500, Chicago, Illinois, 60606
|
|
|
|
|
Vivaldi Asset Management, LLC
|
|
|
|
|
Vivaldi Holdings, LLC
|
|
|
|
|
225 W. Wacker Drive, Suite 2100, Chicago, Illinois, 60606
|
111,568
(7)
|
|
5.92%
|
|
|
|
|
|
|
BlackRock, Inc.
|
106,545
(8)
|
|
5.65%
|
|
(1)
|
The percentages are calculated based on 1,886,088 shares outstanding as of April 3, 2017 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 Meeting of
Shareholders.
|
|
(2)
|
The information included in the above table is based solely on Amendment No. 10 to Schedule 13G filed with the SEC on February
10, 2017.
|
|
(3)
|
This includes 151,099 shares held by a limited liability company of which J. Allen 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 James A. Fine, Jr. is a general partner and shares joint
voting and investment power over such shares with W. Morris Fine. Such shares are also reflected in W. Morris Fine’s beneficially-owned
shares. Additionally, this includes 515 shares held by Mr. Fine’s wife and 2,512 shares held by other family members.
|
|
(5)
|
This includes 95,000 shares held by a limited partnership of which W. Morris Fine is a general partner and shares joint voting
and investment power over such shares with James A. Fine, Jr. Such shares are also reflected in James A. Fine, Jr.’s beneficially-owned
shares. Additionally, this includes 470 shares held by Mr. Fine’s wife and 3,582 shares held by other family members.
|
|
(6)
|
The information included in the above table is based solely on Amendment
No. 6 to Schedule 13G filed by Dimensional Fund Advisors LP with the SEC on February 9, 2017. 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 or sub-advisor to certain other commingled funds, 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 advisor or sub-adviser to certain Funds. In its role as investment advisor, sub-adviser and/or manager, Dimensional
Fund Advisors LP or its subsidiaries (collectively, “Dimensional”) may 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.”
|
|
(7)
|
The information included in the above table is based solely on a Schedule 13D filed with the SEC on October 7, 2015 by Groveland
Capital LLC, Groveland Master Fund Ltd. and Nicholas J. Swenson (collectively, the “Groveland Group”); GrizzlyRock
Capital, LLC, GrizzlyRock GP, LLC, GrizzlyRock Value Partners, LP and Kyle Mowery (collectively, the “GrizzlyRock Group”);
Vivaldi Asset Management, LLC and Vivaldi Holdings, LLC (collectively, the “Vivaldi Group”), Air T, Inc. and Seth
Barkett.
|
|
(8)
|
The information included in the above table is based solely on the Schedule 13G filed with the SEC on January 30, 2017. The
reporting person has sole voting power over 105,321 shares and full dispositive over 106,545 shares.
|
The table below sets forth the shares of
the Company’s Common Stock beneficially owned as of April 3, 2017 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)
|
|
10.42%
|
James A. Fine, Jr.
|
179,478
(3)
|
|
9.52%
|
W. Morris Fine
|
178,809
(4)
|
|
9.48%
|
H. Joe King, Jr.
|
24,554
(5)
|
|
1.30%
|
James R. Morton
|
15,793
(6)
|
|
*
|
David L. Francis
|
8,964
(7)
|
|
*
|
R. Horace Johnson
|
6,430
(8)
|
|
*
|
Richard M. Hutson II
|
5,778
(9)
|
|
*
|
James H. Speed, Jr.
|
4,126
(10)
|
|
*
|
All Directors, Nominees
for Director, and Executive Officers as a Group (9 persons)
|
525,407
(11)
|
|
27.54%
|
*Represents less than 1%
|
(1)
|
The percentages are calculated based on 1,886,088 shares outstanding as of April 3, 2017, 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 J. Allen 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 James A. Fine, Jr. is a general partner and shares joint
voting and investment power over such shares with W. Morris Fine. Such shares are also reflected in W. Morris Fine’s beneficially-owned
shares. Additionally, this includes 515 shares held by Mr. Fine’s wife and 2,512 shares held by other family members.
|
|
(4)
|
This includes 95,000 shares held by a limited partnership of which W. Morris Fine is a general partner and shares joint voting
and investment power over such shares with James A. Fine, Jr. Such shares are also reflected in James A. Fine, Jr.’s beneficially-owned
shares. Additionally, this includes 470 shares held by Mr. Fine’s wife and 3,582 shares held by other family members.
|
|
(5)
|
This total includes 3,750 shares of Common Stock that Mr. King has the right to purchase under stock appreciation rights that
are presently exercisable or are exercisable within 60 days of April 3, 2017.
|
|
(6)
|
This total includes 3,250 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 3, 2017.
|
|
(7)
|
This total includes 3,750 shares of Common Stock that Mr. Francis has the right to purchase under stock appreciation rights
that are presently exercisable or are exercisable within 60 days of April 3, 2017.
|
|
(8)
|
This total includes 3,750 shares of Common Stock that Mr. Johnson has the right to purchase under stock appreciation rights
that are presently exercisable or are exercisable within 60 days of April 3, 2017.
|
|
(9)
|
This total includes 3,750 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 3, 2017.
|
|
(10)
|
This total includes 3,750 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 3, 2017.
|
|
(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 22,000 shares of Common Stock that all directors, nominees for director and executive
officers as a group have the right to purchase under stock appreciation rights that are presently exercisable or are exercisable
within 60 days of April 3, 2017.
|
PROPOSALS REQUIRING YOUR VOTE
Proposal 1 - Election of Directors
The Company’s Board of Directors is
composed of 9 members divided into three classes with staggered three-year terms 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 three directors nominated to serve until the Annual Meeting of Shareholders in 2020.
The following provides information about
each director nominee and continuing director, including information about each nominee’s and director’s business background
and other experience, qualifications, attributes or skills that lead to the conclusion that the nominee or director should serve
on the Board of Directors.
Information Regarding Nominees for Election as Directors
|
|
|
Served as
|
|
Term
|
|
|
|
Director
|
|
to
|
Name
|
|
Age
|
|
Since
|
|
Expire
|
W. Morris Fine
|
50
|
|
1999
|
|
2020
|
Richard M. Hutson II
|
76
|
|
2008
|
|
2020
|
R. Horace Johnson
|
72
|
|
2005
|
|
2020
|
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 Board of Directors of Investors Title 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 and during the past five years, has served on the Board of Directors of Investors Title Company. 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 LLC, 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 Board of Directors of Investors Title 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.
|
55
|
|
1997
|
|
2018
|
H. Joe King, Jr.
|
84
|
|
1983
|
|
2018
|
James R. Morton
|
79
|
|
1985
|
|
2018
|
J. Allen Fine
|
82
|
|
1973
|
|
2019
|
David L. Francis
|
84
|
|
1982
|
|
2019
|
James H. Speed, Jr.
|
63
|
|
2010
|
|
2019
|
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. 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. Mr. King has extensive experience in banking, finance,
investments and mortgage lending.
James R.
Morton
was President of J. R. Morton Associates from 1968 until his retirement in 1988. He is currently President of TransCarolina
Corporation, a real estate investment company, where he has been employed since 1995. During the past five years, Mr. Morton has
served on the Board of Directors of Investors Title Company. Mr. Morton has extensive experience in strategic planning, business
administration and investments.
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 Board of Directors of Investors Title 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 Board
of Directors of Investors Title Company. Mr. Francis has extensive experience in mortgage lending, real estate and property management.
James H.
Speed, Jr.
served as President and Chief Executive Officer of North Carolina Mutual Life Insurance Company, the oldest and
largest insurance company in America with roots in the African-American community, until his retirement in December 2015. During
the past five years, Mr. Speed, a Certified Public Accountant, has served on the Boards of Directors of Investors Title Company,
Brown Capital Management Funds, Centaur Mutual Funds, Chesapeake Investment Trust, Hillman Capital Management Investment Trust,
M&F Bancorp, Inc., Starboard Investment Trust, and WST Investment Trust. 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 ending
December 31, 2017. Dixon Hughes Goodman LLP served as our independent registered public accounting firm for the fiscal year ended
December 31, 2016, and its representatives are expected to attend the 2017 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 Company’s independent registered public accounting firm for fiscal 2017.
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, 2016 and December 31, 2015 are set forth below.
|
|
2016
|
|
|
2015
|
|
Audit Fees
(1)
|
|
$
|
353,500
|
|
|
$
|
318,000
|
|
Audit-Related Fees
(2)
|
|
|
—
|
|
|
|
2,500
|
|
Tax Fees
(3)
|
|
|
76,500
|
|
|
|
89,150
|
|
All Other Fees
|
|
|
—
|
|
|
|
—
|
|
Total Fees
|
|
$
|
430,000
|
|
|
$
|
409,650
|
|
|
(1)
|
In
2016 and 2015, 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 Chairman. The
Chairman reports any pre-approval decisions made at the next Audit Committee meeting.
During
2016 and 2015, none of the services provided to the Company by the independent registered public accounting firm under the categories
Audit-Related Services and Tax Services described above were approved by the Audit Committee after such services were rendered
pursuant to the de minimis exception established under SEC regulations.
AUDIT
COMMITTEE REPORT
The
Audit Committee is directly responsible for overseeing the accounting and financial reporting processes of the Company and appointing,
retaining, compensating and overseeing the work of the independent registered public accounting firm. Management is responsible
for the financial reporting process, including the system of internal controls, and for the preparation of consolidated financial
statements in accordance with generally accepted accounting principles. The independent registered public accounting firm is responsible
for auditing those financial statements and expressing an opinion as to their conformity with accounting principles generally
accepted in the United States of America.
The
independent registered public accounting firm provided the Audit Committee with the written disclosures and the letter required
by applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting
firm’s communications with the Audit Committee concerning 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, 2016. The Audit Committee discussed with the independent registered public
accounting firm those matters required to be discussed by Auditing Standard No. 1301, “Communications 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 fiscal year ended December 31, 2016, 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 has reviewed and discussed the Compensation Discussion and Analysis included below 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 fiscal year ended December 31, 2016.
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
Compensation 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 Company’s 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 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
Compensation 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 Compensation Committee has designed the Company’s
executive compensation program to reward the achievement of the Company’s 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 Company’s success.
However, given the Company’s history as a family-managed company, the Compensation Committee’s 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.
While
the Compensation 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 Compensation 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 Company’s 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 Company’s 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 Compensation Committee believes that taking a broader view will demand performance that
is more likely to maximize return to the stockholders over time. The Compensation Committee believes that there are many ways
in which its executive officers and other executives contribute to building a successful company. While the Company’s 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 Compensation Committee’s philosophy considers the cyclical nature of the Company’s 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 Compensation Committee does not attempt to solely link annual operating results with annual compensation. Instead, the Compensation
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 Company’s 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
Compensation Committee makes all compensation decisions for the named executive officers and approves recommendations regarding
equity awards for all of the Company’s elected officers. Decisions regarding non-equity compensation of all other officers
and employees are made by the Company’s named executive officers.
The
Chief Executive Officer annually reviews the performance of each of the other named executive officers in connection with the
Company’s attainment of its objectives. Based on those reviews, the Chief Executive Officer makes recommendations with respect
to compensation to the Compensation Committee. The Compensation 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 Compensation Committee’s compensation philosophy.
The
Compensation Committee’s review of the Chief Executive Officer’s compensation is subject to separate procedures. The
Compensation Committee evaluates the Chief Executive Officer’s performance, reviews the Compensation Committee’s evaluation
with him, and based on that evaluation and review, determines the amount of salary adjustment and incentive award. Consistent
with the applicable requirements of NASDAQ listing standards, the Chief Executive Officer is excused from meetings of the Compensation
Committee during voting deliberations regarding his compensation.
In
making compensation decisions, the Compensation Committee is guided by its executive compensation philosophy, its own judgment,
and other sources of information that it considers relevant. In addition, the Compensation 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 Compensation 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 Company’s business, the Compensation 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 Compensation
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 Company’s annual meeting of stockholders held in May 2016, stockholders overwhelmingly approved
the Company’s executive compensation with approximately 98% of the votes cast in favor. The Compensation Committee believes
this vote affirms the stockholders’ support of the Company’s approach to executive compensation and did not make specific
changes to our executive compensation program in response to the vote. The Compensation Committee will also continue to consider
the outcome of the Company’s 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 generally:
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annual
incentive bonuses;
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long-term
equity incentive awards;
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a
nonqualified supplemental retirement benefit plan;
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a
nonqualified deferred compensation plan;
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benefits
under employment agreements;
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potential
payments and benefits upon change of control; and
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benefits
and perquisites.
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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 Compensation Committee considered
the following factors:
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the
responsibilities and critical leadership role of the executives;
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the
experience and individual performance of the executives, and their contribution to the
Company’s strategic initiatives;
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the
Company’s financial performance, judged in light of external market factors;
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the
Company’s stock price performance, in absolute terms and relative to its peers
and the market as a whole;
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the
Compensation Committee’s evaluation of market demand for executives with similar
capability and experience;
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the
Compensation Committee’s desire to strike an appropriate balance between the fixed
elements of compensation and the variable performance-based elements; and
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obligations
under employment agreements.
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Salary
levels are generally considered annually as part of the Company’s performance review process, or upon a promotion or other
change in job responsibility. For fiscal 2016, each of the named executive officers received an increase in base salary, reflected
as a percentage of fiscal 2015 base salary, as follows: J. Allen Fine – 3.79%; James A. Fine, Jr. –3.83%; W. Morris
Fine – 3.83%. 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 Company’s short-term and long-term objectives. In determining annual incentive bonus amounts, the Compensation
Committee seeks to link a substantial portion of each individual’s total annual compensation to the attainment of these
objectives. In determining annual incentive bonus amounts, the Compensation Committee considers each executive’s level of
responsibility and degree of influence on the Company’s objectives, as well as the Compensation Committee’s 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 Company’s 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 Compensation Committee reviews the Company’s progress toward meeting its objectives, and each executive
officer’s contribution toward that progress, in the context of award amounts from prior years, as well as the Compensation
Committee’s judgment and use of discretion.
The
annual incentive bonus for J. Allen Fine increased from $450,000 for fiscal 2015 to $750,000 for fiscal 2016, and each of the
annual incentive bonuses for James A. Fine, Jr. and W. Morris Fine increased from $450,000 for fiscal 2015 to $750,000 for fiscal
2016 reflecting the Committee’s recognition of performance of the named executive officers and their contribution toward
the Company attaining record revenues in 2016, along with a return on equity of 12.59%, profit margin of 14.10% and operating
margin of 20.31%.
Long-Term
Equity Incentive Awards.
The Compensation 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 Company’s 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 Compensation Committee’s opinion, past equity-based
incentive awards were successful in focusing senior management on building profitability and shareholder value.
The
Compensation 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 Compensation 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 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 Compensation Committee considers the
degree of each potential recipient’s ability to influence the attainment of the Company’s 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
SARs are made under the Investors Title Company 2009 Stock Appreciation Right Plan, which stockholders approved on May 20, 2009.
SARs 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 SARs were granted to the executive officers in 2015. Under the
2009 plan, 227,500 additional SARs units are available for issuance, and these units may be issued through March 2, 2019.
Non-Qualified
Supplemental Retirement Benefit Plan.
The Compensation Committee maintains a Non-Qualified Supplemental Retirement Benefit
Plan of the Company’s wholly owned subsidiary, Investors Title Insurance Company (“ITIC”). This plan is an unfunded
defined contribution plan designed to provide additional retirement benefits on a tax-deferred basis for select management or
highly compensated employees. The Company did not make any contributions to the plan in 2016. Each participant’s account
balance was zero at December 31, 2016.
Non-Qualified
Deferred Compensation Plan.
The Compensation Committee maintains a Non-Qualified Deferred Compensation Plan of ITIC. This
plan is an unfunded defined contribution plan designed to provide additional retirement benefits on a tax deferred basis for select
management or highly compensated employees. The Deferred Compensation Plan permits each participant to elect annually to defer
any portion of his cash compensation. The Company did not make any contributions to the plan in 2016 and each participant’s
account balance was zero at December 31, 2016.
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:
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it
is in the best interest 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
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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.
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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 Compensation Committee believes is reasonable, competitive, and consistent with the overall objectives of the compensation
program.
The
executive officers are eligible to participate in the Company’s group insurance program, which during fiscal 2016 included
group health, dental, vision and life insurance, as well as short and long term disability insurance. Other benefits offered during
fiscal 2016 included flexible spending accounts and a pretax premium plan, paid sick leave, paid holidays, and paid vacations.
Under
the Company’s 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 2016 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
Company’s 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 Compensation Committee does not award personal benefits or perquisites that are unrelated to the Company’s
business.
The
Compensation 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 Compensation Committee reviews and considers the tax deductibility
of executive compensation under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), 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 $1.0 million. Special rules apply for “performance-based” compensation,
including the pre-approval of performance goals applicable to that compensation.
All
compensation paid to the named executive officers in fiscal 2016 was intended to be fully deductible for the purposes of Section
162(m) of the Code. However, to maintain flexibility in compensating executive officers in a manner designed to promote varying
corporate goals, the Compensation Committee has not adopted a policy that all compensation must be deductible for Federal income
tax purposes.
Accounting
for Stock-Based Compensation.
The Company accounts for stock-based payments in accordance with the requirements of FASB
Accounting Standards Codification (ASC) Topic 718, Stock Compensation.
Summary Compensation Table
The table below summarizes the total compensation
for each of the named executive officers for each of the fiscal years ended December 31, 2016, December 31, 2015, and December
31, 2014, respectively.
Name and Principal Position
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Year
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Salary
($)
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Bonus
($)
(1)
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All Other Compensation
($)
(2)
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Total
($)
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J. Allen Fine
Chief Executive Officer and Chairman of the Board
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2016
2015
2014
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367,166
353,250
340,000
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750,000
450,000
300,000
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44,135
38,085
41,582
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1,161,301
841,335
681,582
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James A. Fine, Jr.
President, Chief Financial Officer and Treasurer
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2016
2015
2014
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311,600
299,667
288,250
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750,000
450,000
350,000
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44,134
40,365
48,537
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1,105,734
790,032
686,787
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W. Morris Fine
Executive Vice President & Secretary
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2016
2015
2014
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311,600
299,667
288,250
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750,000
450,000
350,000
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45,657
46,044
53,010
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1,107,257
795,711
691,260
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(1)
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Reflects cash bonuses earned in the applicable year.
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(2)
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Amounts set forth as “All Other Compensation” for fiscal 2016 consist of the following:
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Name
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401(k) Contributions ($)
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Supplemental Retirement Cash Payment ($)
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Life and Health Insurance ($)
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Personal Use of Company Vehicle ($)
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Total ($)
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J. Allen Fine
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10,600
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22,746
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6,121
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4,668
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44,135
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James A. Fine, Jr.
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10,600
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20,519
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9,579
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3,436
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44,134
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W. Morris Fine
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10,600
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20,519
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9,579
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4,959
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45,657
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Employment Agreements
Each of the named executive officers is
party to an employment agreement with the Company, which was amended and restated effective 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 Company’s benefits
programs generally provided to other executives, receive 30 days of paid vacation and unlimited sick leave, and are entitled to
reimbursement for reasonably incurred out-of-pocket business expenses. Additionally, under these agreements, Messrs. Fine, Fine,
Jr., and Fine receive an annual supplemental retirement cash payment equal to the amount that would have been contributed to their
401(k) plan accounts if the contributions to the 401(k) plan were not limited under federal tax laws. The agreements also provide
for minimum payments to each executive officer in the event of (i) disability or retirement, (ii) termination by the Company without
cause, or (iii) termination by the officer for good reason or due to a change in control. These 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 its terms.
Grants of Plan-Based Awards in 2016
There were no grants of plan based awards
to the named executive officers in the fiscal year ended December 31, 2016.
Outstanding Equity Awards at 2016 Fiscal Year-End
There were no outstanding equity awards
to the named executive officers as of December 31, 2016.
2016 Option Exercises and Stock Vested
There was no exercise of options or SARs
or vesting of shares of Common Stock held by the named executive officers in fiscal 2016.
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.
As shown in the table below, there was no activity in these plans during fiscal 2016.
Name
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Executive
Contributions
in Last FY
($)
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Employer
Contributions
in Last FY
($)
(1)
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Aggregate
Earnings
in Last FY
($)
(2)
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Aggregate Withdrawals/
Distributions
in Last FY
($)
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Aggregate Balance
at Last
FYE
($)
(3)
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J. Allen Fine
(Deferred Compensation Plan)
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0
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0
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0
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0
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0
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J. Allen Fine
(Supplemental Retirement Plan)
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0
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0
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0
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0
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0
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James A. Fine, Jr.
(Deferred Compensation Plan)
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0
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0
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0
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0
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0
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James A. Fine, Jr.
(Supplemental Retirement Plan)
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0
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0
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0
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0
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0
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W. Morris Fine
(Deferred Compensation Plan)
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0
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0
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0
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0
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0
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W. Morris Fine
(Supplemental Retirement Plan)
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0
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0
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0
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0
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0
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Potential Payments Upon Termination or Change of Control
Under the employment agreements in effect
on December 31, 2015, the executive officers are entitled to severance payments and benefits under their employment agreements
as described below.
J. Allen Fine.
Under Mr. J.
Allen Fine’s employment agreement, if his employment is terminated due to death, disability or retirement (following his
70
th
birthday), he is entitled to receive the following:
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except in the case of death, a lump sum payment of three times his then-current salary, but in no event less than $910,000;
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except in the case of death, a lump sum payment of three times the average of the bonus compensation paid to him in the three
prior fiscal years, but in no event less than $1,055,000;
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accrued benefits under the Nonqualified Supplemental Retirement Benefit Plan and Nonqualified Deferred Compensation Plan;
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accelerated vesting in full of all stock options held by him;
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continued participation in the Company’s health insurance plans by him and his wife at no expense until his death or,
if later, his wife’s death; and
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continued participation in the Company’s health insurance plans by his dependent children at no expense until any such
children are no longer dependent.
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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 material
breach under his employment agreement (“i.e., good reason”), he is entitled to receive the following:
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a lump sum payment of five times his then-current salary, but in no event less than $1,516,800;
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a lump sum payment of five times the average of the bonus compensation paid to him in the three prior fiscal years, but in
no event less than $1,758,335;
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accrued benefits under the Nonqualified Supplemental Retirement Benefit Plan and Nonqualified Deferred Compensation Plan;
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accelerated vesting in full of all stock options held by him; and
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continued health insurance coverage as described above.
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Under Mr. Fine’s employment agreement,
if he terminates his employment because of a “change in control,” he is entitled to receive the following:
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a lump sum payment equal to 2.99 times his then-current base salary, but in no event less than $907,046;
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a lump sum payment equal to 2.99 times the average bonus compensation paid to him during the preceding three fiscal years,
but in no event less than $1,051,484;
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accrued benefits under the Nonqualified Supplemental Retirement Benefit Plan and Nonqualified Deferred Compensation Plan;
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accelerated vesting in full of all stock options held by him; and
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continued health insurance coverage as described above.
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In the event of a change in control that
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 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 the following:
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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 the date that was 30 days after notice of his termination; and
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accrued benefits under the Nonqualified Supplemental Retirement Benefit Plan and Nonqualified Deferred Compensation Plan.
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Under Mr. Fine’s employment agreement,
“cause” is defined as:
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the executive’s conviction of, or plea of guilty or nolo contendere to, any crime involving dishonesty or moral turpitude;
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the commission by the executive of a fraud against the Company for which he is convicted;
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gross negligence or willful misconduct by the executive with respect to the Company which causes material detriment to the
Company;
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the falsification or manipulation of any records of the Company;
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repudiation of the agreement by the executive or the executive’s abandonment of employment with the Company;
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breach by the executive of his confidentiality, non-competition or non-solicitation obligations under the agreement; or
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failure or refusal of the executive to perform his duties with the Company or to implement or to follow the policies or directions
of the Board of Directors within 30 days after a written demand for performance is delivered to the executive that specifically
identifies the manner in which the Board of Directors believes that the executive has not performed his duties or failed to implement
or follow the policies or directions of the Board of Directors.
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Under Mr. Fine’s employment agreement,
a “change in control” will occur if:
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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;
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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
Exchange Act) 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;
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a sale of more than 50% of the Company’s assets (measured in terms of monetary value) is consummated; or
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any merger, consolidation, or like business combination or reorganization of the Company is consummated that results in the
occurrence of any event described above.
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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 times the sum of his then-current base salary, but in no event less than $910,000, plus
the average of his bonus compensation for the past three fiscal years, but in no event 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 Fine’s employment
agreement, except that under their agreements the following apply:
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Messrs. Fine, Jr. and Fine are eligible to receive retirement benefits under their agreements after age 50, rather than age
70;
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the minimum lump sum salary payment upon termination for disability or retirement shall be no less than $766,680 for each;
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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;
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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;
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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;
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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;
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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
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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.
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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 times the sum of their then-current base salary, but in no event
less than $766,680 for each executive, plus the average of each executive’s bonus compensation for the past three fiscal
years, but in no event less than $1,030,000 for James A. Fine, Jr., and no less than $1,015,000 for W. Morris Fine, be paid within
60 days of their individual death to a beneficiary designated by the executive. Additionally, under each executive’s Death
Benefit Plan Agreement, each of Messrs. Fine and their designated beneficiaries would also be paid a lump sum amount equal to $2,000,000,
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reduced by the following amounts:
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(a)
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three times the then-current base salary but in no event less than $766,680 for each executive;
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(b)
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three times the average bonus compensation during the preceding three fiscal years but in no event less than $1,030,000 for
James A. Fine, Jr. and no less than $1,015,000 for W. Morris Fine;
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(c)
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the cost of continued participation in the Company’s health insurance plans by the executive’s wife until her death;
and
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(d)
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the cost of continued participation in the Company’s health insurance plans by the executive’s dependent children
until any such children are no longer dependent; and
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increased by the amounts accrued on the Company’s books as of the date of death for the payments described in items (a)
through (d) above.
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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:
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The executive’s compliance with certain covenants with respect to confidential information;
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The executive’s compliance with a two year non-competition covenant; and
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The executive’s compliance with a two year non-solicitation covenant.
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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, 2016.
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
and Chairman of the Board:
Executive Benefits and Payments Upon Termination
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Voluntary Termination
($)
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Termination Due to Change in Control
($)
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Death
($)
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For Cause Termination
($)
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Involuntary or Good Reason Termination
($)
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Termination for Retirement
(1)
or Disability
($)
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Compensation:
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Base Salary
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—
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1,104,805
(5)
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1,108,500
(6)
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30,792
(4)
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1,847,500
(7)
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1,108,500
(6)
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Bonus
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—
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1,245,833
(8)
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1,250,000
(9)
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—
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2,083,333
(10)
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1,250,000
(9)
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Supplemental Retirement Plan
(10)
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—
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—
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—
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—
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—
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—
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Supplemental Retirement Benefit
(11)
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22,746
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22,746
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22,746
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22,746
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22,746
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22,746
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Benefits and Perquisites:
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Health Plan
(12)
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—
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94,653
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94,653
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—
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94,653
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94,653
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Total – J. Allen Fine
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22,746
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2,468,037
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2,475,899
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53,538
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4,048,232
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2,475,899
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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, Chief Financial
Officer and Treasurer:
Executive Benefits and Payments Upon Termination
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Voluntary Termination
($)
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Termination Due to Change in Control
($)
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Death
($)
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For Cause Termination
($)
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Involuntary or Good Reason Termination
($)
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Termination for Retirement
(2)
or Disability
($)
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Compensation:
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Base Salary
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—
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937,664
(5)
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940,800
(6)
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26,133
(4)
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1,568,000
(7)
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940,800
(6)
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Bonus
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—
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1,370,417
(8)
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1,375,000
(9)
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—
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2,291,667
(10)
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1,375,000
(9)
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Supplemental Retirement Plan
(10)
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—
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—
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—
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—
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—
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—
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Supplemental Retirement Benefit
(11)
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20,519
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20,519
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20,519
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20,519
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20,519
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20,519
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Benefits and Perquisites:
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Health Plan
(12)
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—
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405,709
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405,709
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—
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405,709
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405,709
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Death Benefit Plan Agreement
(13)
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—
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—
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—
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—
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—
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—
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Life Insurance
(14)
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—
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307,284
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307,284
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—
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307,284
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307,284
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Total - James A. Fine, Jr.
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20,519
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3,041,593
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3,049,312
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46,652
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4,593,179
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3,049,312
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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
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Voluntary Termination
($)
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Termination Due to Change in Control
($)
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Death
($)
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For Cause Termination
($)
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Involuntary or Good Reason Termination
($)
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Termination for Retirement
(3)
or Disability
($)
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Compensation:
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Base Salary
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—
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937,664
(5)
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940,800
(6)
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26,133
(4)
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1,568,000
(7)
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940,800
(6)
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Bonus
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—
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1,370,417
(8)
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1,375,000
(9)
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—
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2,291,667
(10)
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1,375,000
(9)
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Supplemental Retirement Plan
(10)
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—
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—
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—
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—
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—
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—
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Supplemental Retirement Benefit
(11)
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20,519
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20,519
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20,519
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20,519
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20,519
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20,519
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Benefits and Perquisites:
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Health Plan
(12)
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—
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428,130
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428,130
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—
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428,130
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428,130
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Death Benefit Plan Agreement
(13)
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—
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—
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—
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—
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—
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—
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Life Insurance
(14)
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—
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197,413
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197,413
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—
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197,413
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197,413
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Total – W. Morris Fine
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20,519
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2,954,143
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2,961,862
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46,652
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4,505,729
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2,961,862
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(1)
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J. Allen Fine became eligible to retire on May 2, 2004.
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(2)
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James A. Fine, Jr. became eligible to retire on April
19, 2012.
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(3)
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W. Morris Fine became eligible to retire on July 30,
2016.
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(4)
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Represents 30 days severance.
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(5)
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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.
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(6)
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Represents lump sum severance payment under the Death Benefit Plan Agreement 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.
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(7)
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Represents lump sum severance payment equal to 5 times base salary, but in no event less than $1,516,800 for J. Allen Fine,
$1,277,800 for James A. Fine, Jr., and $1,277,800 for W. Morris Fine.
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(8)
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Represents lump sum severance payment equal to 2.99 times average bonus for past three fiscal 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.
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(9)
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Represents lump sum severance payment under the Death Benefit Plan Agreement equal to 3 times average bonus for past three
fiscal 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.
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(10)
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Represents lump sum severance payment equal to 5 times average bonus for past three fiscal 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.
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(11)
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Represents accumulated benefit under the Company’s Nonqualified Supplemental Retirement Benefit Plan plus contribution
required to ensure minimum of 20 quarters of Company contributions.
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(12)
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Represents the accrued annual supplemental cash retirement benefit under the named executive officers’ employment agreements.
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(13)
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Reflects estimated cost of providing health insurance plan coverage utilizing assumptions used for financial reporting purposes.
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(14)
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Represents additional estimated lump sum amount, if any, that would be payable under the officer’s Death Benefit Plan
Agreement.
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(15)
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Reflects cash surrender value of life insurance policy, transferable at the executive’s request.
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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 the 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 (A) 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 Exchange Act; (B) any material “conflict
of interest” transaction with a director, as that term is defined under the North Carolina Business Corporation Act; and
(C) any loan, guaranty or other form of security provided to or for the benefit of any officer (other than an executive officer)
of the Company. Loans or guaranties to directors and executive officers are prohibited.
There were no reportable related person
transactions during fiscal 2016.
SHAREHOLDER PROPOSALS FOR 2018 ANNUAL
MEETING
Shareholders
who, in accordance with Rule 14a-8 of the Exchange Act, wish to present proposals for inclusion in the proxy materials to be distributed
in connection with the 2018 Annual Meeting of Shareholders must submit their proposals so that they are received at the Company’s
principal executive offices no later than December 14, 2017. Pursuant to SEC rules, submitting a proposal does not guarantee that
it will be included in the proxy materials.
In accordance
with the Company’s Bylaws, in order to be properly brought before the 2018 Annual Meeting of Shareholders, a shareholder’s
notice of a matter the shareholder wishes to present (other than a matter brought pursuant to Rule 14a-8 of the Exchange Act),
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 17, 2018 and no later than the close
of business on February 16, 2018. To be in proper form, such shareholder’s notice must include the specified information
concerning the proposal or nominee as described in the Company’s 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 Company’s Bylaws.
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BY ORDER OF THE BOARD OF DIRECTORS:
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W. Morris Fine
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Secretary
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April 13, 2017
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Broadridge Corporate Issuer Solutions
C/O Investors Title Company
PO BOX 1342
Brentwood, NY 11717
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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.
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the costs incurred by our company in mailing proxy
materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or
the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted,
indicate that you agree to receive or access proxy materials electronically in future years.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions 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 call and then follow
the instructions.
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.
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
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KEEP THIS
PORTION FOR YOUR RECORDS
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DETACH AND RETURN THIS PORTION ONLY
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THIS
PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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For
All
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Withhold
All
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For All
Except
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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.
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The Board of Directors recommends you vote FOR
the following:
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☐
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☐
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☐
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1.
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Election of Directors
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Nominees
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01 W. Morris Fine
02 Richard M. Hutson II
03 R. Horace Johnson
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The Board of Directors recommends you vote FOR proposal 2.
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For
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Against
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Abstain
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2
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Proposal to ratify the appointment of Dixon Hughes Goodman LLP as the Company’s independent registered public accounting firm for 2017.
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☐
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☐
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☐
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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.
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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.
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Signature [PLEASE SIGN WITHIN BOX]
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Date
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Signature (Joint Owners)
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Date
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0000327692_1 R1.0.1.15
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
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INVESTORS TITLE COMPANY
Annual Meeting of Shareholders
May 17, 2017 11:00 AM
This proxy is solicited by the Board of Directors
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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 17, 2017 at 11:00 AM, EDT, and any adjournment or postponement
thereof.
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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.
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Continued
and to be signed on reverse side
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0000327692_2 R1.0.1.15
Investors Title (NASDAQ:ITIC)
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