SCHEDULE
14A
(Rule
14a-101)
INFORMATION
REQUIRED IN PROXY STATEMENT
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934 (Amendment No. )
Filed
by the Registrant o
Filed
by a Party other than the Registrant o
Check
the appropriate box:
|
o Preliminary
Proxy Statement
|
o Soliciting
Material Under Rule 14a-12
|
o Confidential,
For Use of the
Commission
Only (as permitted by
Rule
14a-6(e)(2))
|
x Definitive
Proxy Statement
|
|
o Definitive
Additional Materials
|
|
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):
|
o
|
|
Fee
computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
|
|
(1)
|
|
Title
of each class of securities to which transaction applies:
|
|
(2)
|
|
Aggregate
number of securities to which transaction applies:
|
|
(3)
|
|
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):
|
|
(4)
|
|
Proposed
maximum aggregate value of transaction:
|
o
|
|
Fee
paid previously with preliminary
materials:
|
o
|
|
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.
|
|
(1)
|
|
Amount
Previously Paid:
|
|
(2)
|
|
Form,
Schedule or Registration Statement No.:
|
121
North
Columbia Street, Chapel Hill, North Carolina 27514
(919)
968-2200
April
13,
2006
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, 2006 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
2006,
followed by discussion and voting on the matters set forth in the accompanying
Notice of Annual Meeting and Proxy Statement.
The
Board of Directors of the Company unanimously recommends that you vote FOR
the
election of the directors nominated to serve until the Annual Meeting of
Shareholders in 2009.
I
urge
you to review the Proxy Statement, sign and date the enclosed proxy card,
and
return it promptly in the enclosed postage-paid envelope.
Cordially,
J.
Allen
Fine
Chief
Executive Officer
121
North
Columbia Street, Chapel Hill, North Carolina 27514
(919)
968-2200
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
TO
BE HELD ON MAY 17, 2006
The
Annual Meeting of the Shareholders of Investors Title Company will be held
at
The Siena Hotel, 1505 East Franklin Street, Chapel Hill, North Carolina,
on
Wednesday, May 17, 2006 at 11:00 a.m. EDT, for the following
purposes:
|
(1) |
To
elect three directors for three-year terms or until their successors
are
elected and qualified;
and
|
|
(2) |
To
consider any other business that may properly come before the
meeting.
|
Shareholders
of record of Common Stock of the Company at the close of business on April
3,
2006 are entitled to notice of and to vote at the meeting and any adjournments
thereof.
By
Order
of the Board of Directors:
W.
Morris
Fine
Secretary
IMPORTANT
- Your proxy card is enclosed. You can vote your shares by completing and
returning your proxy card in the enclosed postage-paid envelope. Whether
or not
you expect to be present at the meeting, please review the Proxy Statement
and
promptly vote in order to assist the Company in keeping down the expenses
of the
meeting. You can revoke your proxy at any time prior to its exercise at the
meeting by following the instructions in the accompanying Proxy
Statement.
TABLE
OF CONTENTS
|
|
|
Page |
|
PROXY
STATEMENT
|
|
|
1
|
|
Proxy
Solicitation by the Board of Directors
|
|
|
1
|
|
Submitting
and Revoking a Proxy
|
|
|
1
|
|
Voting
Securities
|
|
|
1
|
|
Annual
Report to Shareholders
|
|
|
1
|
|
Electronic
Delivery of Proxy Materials
|
|
|
2
|
|
Section
16(a) Beneficial Ownership Reporting Compliance
|
|
|
2
|
|
General
Information
|
|
|
2
|
|
CORPORATE
GOVERNANCE
|
|
|
2
|
|
Code
of Business Conduct and Ethics
|
|
|
2
|
|
Shareholder
Communications with Directors
|
|
|
2
|
|
Independent
Directors
|
|
|
3
|
|
Executive
Sessions
|
|
|
3
|
|
Compensation
Committee Interlocks and Insider Participation
|
|
|
3
|
|
Board
of Directors and Committees
|
|
|
3
|
|
Compensation
of Directors
|
|
|
5
|
|
Stock
Ownership of Executive Officers and Certain Beneficial
Owners
|
|
|
6
|
|
PROPOSALS
REQUIRING YOUR VOTE
|
|
|
8
|
|
Election
of Directors
|
|
|
8
|
|
Information
Regarding Nominees for Election as Directors
|
|
|
8
|
|
Information
Regarding Directors Continuing in Office
|
|
|
9
|
|
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
|
|
|
10
|
|
Independent
Auditor Audit and Non-Audit Fees
|
|
|
11
|
|
Audit
and Non-Audit Services Pre-Approval Policy
|
|
|
11
|
|
Audit
Committee Report
|
|
|
12
|
|
EXECUTIVE
COMPENSATION
|
|
|
13
|
|
Summary
Compensation Table
|
|
|
13
|
|
Executive
Employment Agreements
|
|
|
13
|
|
Non-Qualified
Supplemental Retirement Benefit Plan
|
|
|
15
|
|
Non-Qualified
Deferred Compensation Plan
|
|
|
15
|
|
Stock
Option Grants in 2005
|
|
|
16
|
|
Aggregated
Option Exercises in 2005 and Year-End Option Values
|
|
|
16
|
|
COMPENSATION
COMMITTEE REPORT
|
|
|
16
|
|
Overview
of Compensation Philosophy
|
|
|
16
|
|
Evaluation
of Executive Performance
|
|
|
17
|
|
Total
Compensation
|
|
|
17
|
|
Salaries
and Bonuses
|
|
|
17
|
|
Stock
Options
|
|
|
17
|
|
Non-Qualified
Supplemental Retirement Benefit Plan
|
|
|
17
|
|
Non-Qualified
Deferred Compensation Plan
|
|
|
18
|
|
Compensation
for the Chairman and Chief Executive Officer
|
|
|
18
|
|
STOCK
PRICE PERFORMANCE GRAPH
|
|
|
19
|
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
|
|
|
20
|
|
SHAREHOLDER
PROPOSALS FOR 2007 ANNUAL MEETING
|
|
|
20
|
|
EXHIBIT
A: AUDIT COMMITTEE CHARTER
|
|
|
A-1
|
|
PROXY
STATEMENT
ANNUAL
MEETING OF SHAREHOLDERS OF
INVESTORS
TITLE COMPANY
To
Be Held on May 17, 2006
This
Proxy Statement is furnished in connection with the solicitation by the Board
of
Directors of Investors Title Company of proxies to be voted at the Annual
Shareholders’ Meeting to be held at The Siena Hotel, 1505 East Franklin Street,
Chapel Hill, North Carolina, on May 17, 2006 at 11:00 a.m. EDT, and at all
adjournments thereof. Shareholders of record at the close of business on April
3, 2006 are entitled to notice of and to vote at the meeting and any
adjournments thereof.
Proxy
Solicitation by the Board of Directors.
The
solicitation of proxies is made on behalf of the Company’s Board of Directors
and will be made either by mail or, as described below, by electronic delivery.
The cost of solicitation of proxies will be borne by the Company. Copies of
proxy materials and the Annual Report for 2005 will be provided to brokers,
dealers, banks and voting trustees or their nominees for the purpose of
soliciting proxies from the beneficial owners, and the Company will reimburse
these record holders for their out-of-pocket expenses.
Submitting
and Revoking a Proxy.
If you
complete and submit your proxy, the persons named as proxies will vote the
shares represented by your proxy in accordance with your instructions. If you
submit a proxy card but do not fill out the voting instructions on the proxy
card, the persons named as proxies will vote the shares represented by your
proxy FOR
the
election of the director nominees set forth herein. In addition, if other
matters are properly presented for voting at the meeting, the persons named
as
proxies will vote on such matters in accordance with their best judgment. The
Company has not received notice of other matters that may be properly presented
for voting at the meeting.
To
ensure
that your vote is recorded properly, please vote your shares as soon as
possible, even if you plan to attend the meeting in person. Each
proxy executed and returned by a shareholder may be revoked at any time
thereafter except as to any matter or matters upon which, prior to such
revocation, a vote shall have been cast pursuant to the authority conferred
by
such proxy. Shareholders with shares registered directly in their names may
revoke their proxy by (1) sending written notice of revocation to the Corporate
Secretary, P.O. Box 2687, Chapel Hill, North Carolina 27515-2687, (2) submitting
a subsequent proxy or (3) voting in person at the meeting. Attendance at the
meeting will not by itself revoke a proxy. A shareholder wishing to change
his
or her vote who holds shares through a bank, brokerage firm or other nominee
must contact the record holder.
Voting
Securities.
On
April 3, 2006, the Company had a total of 2,843,476 shares of Common Stock
outstanding, its only class of issued and outstanding capital stock. Of these
shares, 2,547,415 shares are entitled to one vote per share and 296,061 shares
are held by a subsidiary of the Company and, pursuant to North Carolina law,
are
not entitled to vote. A majority of the shares entitled to vote at the meeting,
represented at the meeting in person or by proxy, will constitute a
quorum.
Annual
Report to Shareholders.
An
Annual Report of the Company for the calendar year 2005 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,
2006.
Electronic
Delivery of Proxy Materials.
The
Notice of Annual Meeting and Proxy Statement and the Company’s 2005 Annual
Report (the “Proxy Materials”) are available online to certain shareholders that
have arranged through their broker to receive the Proxy Materials
electronically. Shareholders that hold their shares in a brokerage account
may
have the opportunity to receive future Proxy Materials electronically. Please
contact your broker for information regarding the availability of this
service.
Section
16(a) Beneficial Ownership Reporting Compliance.
Section
16(a) of the Securities Exchange Act of 1934 requires directors, executive
officers and all persons who beneficially own more than 10% of the Company’s
securities to file reports with the Securities and Exchange Commission with
respect to beneficial ownership of Company securities. Based solely upon a
review of copies of the filings that the Company received with respect to the
fiscal year ended December 31, 2005, or written representations from certain
reporting persons, the Company believes that all reporting persons filed all
reports required by Section 16(a) in a timely manner, except that J. Allen
Fine,
Chief Executive Officer of the Company, inadvertently filed a Form 4 covering
the exercise of stock options nine days late on May 20, 2005.
General
Information.
A copy
of the Company’s 2005 Annual Report and Form 10-K filed with the Securities and
Exchange Commission, excluding exhibits, can be obtained without charge by
contacting Investor Relations at [email protected]
or P.O.
Box 2687, Chapel Hill, North Carolina 27515-2687.
CORPORATE
GOVERNANCE
Code
of Business Conduct and Ethics
The
Company has a Code of Business Conduct and Ethics that is applicable to all
of
the Company’s employees, officers and directors, including its Chief Executive
Officer, Chief Financial Officer and Chief Accounting Officer. This Code
addresses a variety of issues, including conflicts of interest, the protection
of confidential information, insider trading, and employment practices. It
also
requires strict compliance with all laws, rules and regulations governing the
conduct of the Company’s business.
The
Code
of Business Conduct and Ethics is posted in the Corporate Governance area of
the
Investor Relations section of the Company’s website at www.invtitle.com. The
Company intends to disclose future amendments to or waivers from the Code of
Business Conduct and Ethics on its website within two business days after such
amendment or waiver.
Shareholder
Communications with Directors
Shareholders
can communicate with members of the Company’s Board of Directors in one of two
ways. Shareholders may mail correspondence to the attention of the Corporate
Secretary, P.O. Box 2687, Chapel Hill, North Carolina 27515-2687. Any
correspondence sent via mail should clearly indicate that it is a communication
intended for the Board of Directors. Shareholders may also use electronic mail
to contact the Board of Directors at [email protected]. The
Corporate Secretary regularly monitors this email account. Any communication
that is intended for a particular Board member or committee should clearly
state
the intended recipient.
The
Corporate Secretary will review all communications sent to the Board of
Directors via mail and email and will forward all communications concerning
Company or Board matters to the Board members within five business days of
receipt. If a communication is directed to a particular Board member or
committee, it will be passed on only to that member or the members of that
committee; otherwise, relevant communications will be forwarded to all Board
members.
Independent
Directors
The
Board
of Directors has determined that the following directors are independent
directors within the meaning of the applicable listing standards of The NASDAQ
Stock Market (“NASDAQ”) and the Company’s Board of Director Independence
Standards: Mr. Francis, Mr. Harrell, Mr. Johnson, Mr. King, Mr. Morton and
Mr.
Parker. The Board of Director Independence Standards can be found on the
Investor Relations section of the Company’s website at www.invtitle.com under
the heading “Corporate Governance.”
Executive
Sessions
Executive
sessions that include only the independent members of the Board of Directors
are
held regularly.
Compensation
Committee Interlocks and Insider Participation
In
2005,
James R. Morton, Loren B. Harrell, Jr. and A. Scott Parker III served as the
members of the Compensation Committee. None of these directors have ever been
officers or employees of the Company or any of its subsidiaries. During 2005,
none of the executive officers of the Company served on the compensation
committee (or equivalent), or the board of directors, of another entity whose
executive officer(s) served on the Board of Directors of the Company or its
Compensation Committee.
Board
of Directors and Committees
During
the year ended December 31, 2005, 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 2005 Annual Meeting.
The
Company’s Board of Directors has a standing Audit Committee, Compensation
Committee, and Nominating Committee.
The
Audit Committee.
In
2005, the Audit Committee was composed of David L. Francis, R. Horace Johnson
and H. Joe King, Jr. William J. Kennedy III, who did not stand for re-election
at the 2005 Annual Meeting of Shareholders, was a member of the Audit Committee
from January 1, 2005 to May 18, 2005. The Audit Committee met eight times in
2005.
The
Audit
Committee is directly responsible for hiring, dismissing, 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 all
related party transactions and periodically consults with the independent
registered public accounting firm on matters relating to internal financial
controls and procedures. Finally, 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 attached hereto as Exhibit A. The written charter of the Audit
Committee can also be found under the Committee heading of the Corporate
Governance area of the Investor Relations section of the Company’s website at
www.invtitle.com.
The
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. The formal report of
the Audit Committee for 2005 follows under the caption “Audit Committee Report.”
The
Compensation Committee.
In
2005, the Compensation Committee was composed of James R. Morton, Loren B.
Harrell, Jr. and A. Scott Parker III. The Compensation Committee met two times
in 2005.
The
Compensation Committee determines, or recommends to the Board of Directors
for
determination, salaries, bonuses and other compensation of all executive
officers of the Company. The Committee also serves as the Option Committee
of
the Board of Directors, which reviews, approves and administers the Company’s
stock option plans.
The
Compensation Committee operates under a written charter that can be found under
the Committee heading of the Corporate Governance area of the Investor Relations
section of the Company’s website at www.invtitle.com.
The
Board
of Directors has determined that each member of the Company’s Compensation
Committee is “independent” as defined under applicable NASDAQ listing standards.
The formal report of the Compensation Committee for 2005 follows under the
caption “Compensation Committee Report.”
The
Nominating Committee.
In
2005, the Nominating Committee was composed of David L. Francis, H. Joe King,
Jr. and James R. Morton. The Nominating Committee met once in 2005.
The
Nominating Committee operates under a written charter that can be found under
the Committee heading of the Corporate Governance area of the Investor Relations
section of the Company’s website at www.invtitle.com.
The
Board
of Directors has determined that each member of the Company’s Nominating
Committee is “independent” as defined under applicable NASDAQ listing
standards.
The
Nominating Committee is responsible for identifying, evaluating and recommending
to the Board of Directors candidates for election to the Board of Directors.
A
slate of nominees for director to present to the shareholders is recommended
to
the Board of Directors by the Nominating Committee and determined by at least
a
majority vote of the members of the Board of Directors whose terms do not expire
during the year in which the election of directors will occur.
The
Nominating Committee considers a variety of factors before recommending a new
director nominee or the continued service of existing Board members. At a
minimum, the Nominating Committee
believes that a director nominee must demonstrate character and integrity,
have
an inquiring mind, possess substantial experience at a strategy or policy
setting level, demonstrate an ability to work effectively
with others, possess either high-level managerial experience in a relatively
complex organization or experience dealing with complex problems, have
sufficient time to devote to the affairs of the Company and be free from
conflicts of interest with the Company and its subsidiaries.
Other
factors the Nominating Committee considers when evaluating a potential director
nominee are:
|
1. |
Whether
the candidate would assist in achieving a diverse mix of Board
members;
|
|
2. |
The
extent of the candidate’s business experience, technical expertise, and
specialized skills or experience;
|
|
3.
|
Whether
the candidate, by virtue of particular experience relevant to the
Company's current or future business, will add specific value as
a Board
member; and
|
|
4.
|
Any
other factors related to the ability and willingness of a candidate
to
serve, or an incumbent director to continue his or her service to,
the
Company.
|
The
Nominating Committee believes that a majority of the members of the Company’s
Board of Directors should be independent as defined under applicable NASDAQ
listing standards and, as a result, it also considers whether a potential
director nominee is independent under such standards. The Committee also
requires that all members of the Audit Committee be financially literate
pursuant to applicable NASDAQ listing standards and that at least one member
of
the Audit Committee be an “audit committee financial expert” as defined under
SEC rules. Therefore, the Nominating Committee considers whether a potential
director nominee meets these criteria when evaluating his or her
qualifications.
It
is the
policy of the Nominating Committee to consider all director candidates
recommended by shareholders, provided that such recommendations are made in
accordance with the procedures outlined below. The Nominating Committee
evaluates such candidates in accordance with the same criteria it uses to
evaluate all other director candidates.
Any
shareholder that wishes to recommend a director candidate to be considered
for
the 2007 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, 2006.
The candidate’s name, age, business address, residential address, principal
occupation, qualifications and the number of shares of Common Stock beneficially
owned by the candidate must be provided with the recommendation. The shareholder
must also provide a signed consent of the candidate to serve, if elected, as
a
director of the Company, and shall include all other information that would
be
required under the rules of the SEC in the proxy statement soliciting proxies
for election of the director candidate.
Compensation
of Directors
Directors
who are not employees of the Company receive an annual retainer for Board
services of $3,000 and an attendance fee of $1,500 for each meeting of the
Board
of Directors attended, in addition to actual travel expenses related to the
meetings. Directors receive a $500 fee for participating in a committee meeting
provided that the committee meeting is held on a day other than the regularly
scheduled board meeting date. The Audit Committee Chairperson receives an
additional annual retainer of $500 upon election to that position. Directors
who
are employees of the Company are paid no fees or other remuneration for service
on the Board or on any Board committee. All employees and directors of the
Company receive a 25% discount on services provided by Investors Trust Company,
a wholly-owned subsidiary of the Company that provides investment management
and
trust services. During 2005, Mr. Harrell received a $2,927 discount on such
services.
On
May
18, 2005, each non-employee director of the Company was granted a Nonqualified
Stock Option under the Company’s 2001 Stock Option and Restricted Stock Plan,
exercisable for 500 shares at $36.79 per share. These options were immediately
exercisable and will expire on May 18, 2015.
Stock
Ownership of Executive Officers and Certain Beneficial
Owners
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 Common Stock as of April
3, 2006.
|
|
Amount
and
Nature
|
|
|
|
Name
and Address of Beneficial Owner
|
|
of
Beneficial Ownership
|
|
|
|
Markel
Corporation
|
|
|
230,350
(1
|
)
|
|
8.10
|
%
|
4521
Highwoods Parkway, Glen Allen, Virginia 23060
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J.
Allen Fine
|
|
|
195,675
(2
|
)
|
|
6.88
|
%
|
121
N. Columbia Street, Chapel Hill, North Carolina 27514
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
W.
Morris Fine
|
|
|
178,501
(3
|
)
|
|
6.27
|
%
|
121
N. Columbia Street, Chapel Hill, North Carolina 27514
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James
A. Fine, Jr.
|
|
|
177,848
(4
|
)
|
|
6.25
|
%
|
121
N. Columbia Street, Chapel Hill, North Carolina 27514
|
|
|
|
|
|
|
|
(1)
|
The
information included in the above table is based solely on Amendment
No. 3
to Schedule 13G filed with the SEC on February 10, 2006. This amount
includes 17,050 shares over which Markel Corporation has shared
dispositive power.
|
(2) |
This
includes 1,600 shares of Common Stock that Mr. Fine has the right
to
purchase under stock options that are presently exercisable or are
exercisable within 60 days of April 3, 2006. Additionally, this includes
151,099 shares held by a limited liability company of which Mr. Fine
is
the manager and possesses sole voting and investment power with respect
to
such shares.
|
(3) |
This
includes 2,000 shares of Common Stock that Mr. Fine has the right
to
purchase under stock options that are presently exercisable or are
exercisable within 60 days of April 3, 2006. Additionally, this includes
95,000 shares held by a limited partnership of which Mr. Fine is
a general
partner and shares joint voting power over such shares with James
A. Fine,
Jr., such shares also being reflected in James A. Fine, Jr.’s beneficially
owned shares, and 4,052 shares held by family
members.
|
(4) |
This
includes 2,000 shares of Common Stock that Mr. Fine has the right
to
purchase under stock options that are presently exercisable or are
exercisable within 60 days of April 3, 2006. Additionally, this includes
95,000 shares held by a limited partnership of which Mr. Fine is
a general
partner and shares joint voting power over such shares with W. Morris
Fine, such shares also being reflected in W. Morris Fine’s beneficially
owned shares, and 1,961 shares held by family
members.
|
The
table
below sets forth the shares of the Company’s Common Stock beneficially owned as
of April 3, 2006 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.
|
|
Amount
and
Nature
|
|
|
|
|
|
of
Beneficial Ownership
|
|
|
|
J.
Allen Fine
|
|
|
195,675(1
|
)
|
|
6.88
|
%
|
W.
Morris Fine
|
|
|
178,501(2
|
)
|
|
6.27
|
%
|
James
A. Fine, Jr.
|
|
|
177,848(3
|
)
|
|
6.25
|
%
|
A.
Scott Parker III
|
|
|
80,871(4
|
)
|
|
2.84
|
%
|
David
L. Francis
|
|
|
49,666(5
|
)
|
|
1.74
|
%
|
James
R. Morton
|
|
|
21,415(6
|
)
|
|
*
|
|
H.
Joe King, Jr.
|
|
|
21,976(7
|
)
|
|
*
|
|
Loren
B. Harrell, Jr.
|
|
|
4,500(6
|
)
|
|
*
|
|
R.
Horace Johnson
|
|
|
600(8
|
)
|
|
*
|
|
All
Directors and Executive
|
|
|
|
|
|
|
|
Officers
as a Group (9 persons)
|
|
|
731,052(9
|
)
|
|
25.46
|
%
|
*Represents
less than 1%
(1) |
This
includes 1,600 shares of Common Stock that Mr. Fine has the right
to
purchase under stock options that are presently exercisable or are
exercisable within 60 days of April 3, 2006. Additionally, this includes
151,099 shares held by a limited liability company of which Mr. Fine
is
the manager and possesses sole voting and investment power with respect
to
such shares.
|
(2) |
This
includes 2,000 shares of Common Stock that Mr. Fine has the right
to
purchase under stock options that are presently exercisable or are
exercisable within 60 days of April 3, 2006. Additionally, this includes
95,000 shares held by a limited partnership of which Mr. Fine is
a general
partner and shares joint voting power over such shares with James
A. Fine,
Jr., such shares also being reflected in James A. Fine, Jr.’s beneficially
owned shares, and 4,052 shares held by family
members.
|
(3) |
This
includes 2,000 shares of Common Stock that Mr. Fine has the right
to
purchase under stock options that are presently exercisable or are
exercisable within 60 days of April 3, 2006. Additionally, this includes
95,000 shares held by a limited partnership of which Mr. Fine is
a general
partner and shares joint voting power over such shares with W. Morris
Fine, such shares also being reflected in W. Morris Fine’s beneficially
owned shares, and 1,961 shares held by family
members.
|
(4) |
This
total includes 4,000 shares of Common Stock that Mr. Parker has the
right
to purchase under stock options that are presently exercisable or
are
exercisable within 60 days of April 3, 2006. Additionally,
this total includes 3,266 shares held by his wife.
|
(5) |
This
total includes 4,500 shares of Common Stock that Mr. Francis has
the right
to purchase under stock options that are presently exercisable or
are
exercisable within 60 days of April 3, 2006. This total also includes
1,000 shares held by his wife.
|
(6) |
This
total includes 4,500 shares of Common Stock available for purchase
under
stock options that are presently exercisable or are exercisable within
60
days of April 3, 2006.
|
(7) |
This
total includes 4,500 shares of Common Stock that Mr. King has the
right to
purchase under stock options that are presently exercisable or are
exercisable within 60 days of April 3, 2006. This total also includes
700
shares held by his wife.
|
(8) |
This
total includes 500 shares of Common Stock that Mr. Johnson has the
right
to purchase under stock options that are presently exercisable or
are
exercisable within 60 days of April 3,
2006.
|
(9) |
This
total includes 28,100 shares of Common Stock that all officers and
directors, as a group, have the right to purchase under stock options
that
are presently exercisable or are exercisable within 60 days of April
3,
2006.
|
PROPOSALS
REQUIRING YOUR VOTE
Election
of Directors
The
Company’s Board of Directors is composed of 9 members divided into three classes
with staggered terms of three years for each class. Based on the recommendations
of the Nominating Committee, the Board of Directors has nominated James A.
Fine,
Jr., H. Joe King, Jr. and James R. Morton for re-election to serve for a
three-year period or until their respective successors have been elected and
qualified.
The
nominees will be elected if they receive a plurality of the votes cast for
their
election. Broker non-votes and abstentions will be counted for purposes of
establishing a quorum, but will not be counted in the election of directors
and
therefore will not affect the election results if a quorum is present. It is
the
intention of the persons named as proxies in the accompanying proxy card to
vote
all shares represented by proxy for the three nominees listed below, unless
the
authority to vote is withheld. If any of the nominees should withdraw or
otherwise become unavailable for reasons not presently known, the shares
represented by proxy will be voted for three nominees including such
substitutions as shall be designated by the Board of Directors. The shares
represented by proxy in no event will be voted for more than three
persons.
The
Board unanimously recommends that you vote “FOR” the election of the directors
nominated to serve until the Annual Meeting of Shareholders in
2009.
Information
Regarding Nominees for Election as Directors
|
|
|
|
Served
as
|
|
Term
|
|
|
|
|
Director
|
|
to
|
Name
|
|
Age
|
|
Since
|
|
Expire
|
James
A. Fine, Jr.
|
|
43
|
|
1997
|
|
2009
|
H.
Joe King, Jr.
|
|
73
|
|
1983
|
|
2009
|
James
R. Morton
|
|
68
|
|
1985
|
|
2009
|
James
A. Fine, Jr.
is
President, Chief Financial Officer and Treasurer of the Company, Executive
Vice
President, Chief Financial Officer and Treasurer of Investors Title Insurance
Company, Executive Vice President and Chief Financial Officer of Northeast
Investors Title Insurance Company, Executive Vice President of Investors Title
Management Services, Inc., President of Investors Title Exchange Corporation
and
Investors Title Accommodation Corporation, and Chief Executive Officer of
Investors Trust Company and Investors Capital Management Company. Additionally,
Mr. Fine serves as Chairman of the Board of Investors Title Accommodation
Corporation. Investors Title Insurance Company, Northeast Investors Title
Insurance Company, Investors Title Management Services, Inc., Investors Title
Exchange Corporation, Investors Title Accommodation Corporation, Investors
Capital Management Company and Investors Trust Company are all wholly owned
subsidiaries of the Company. Mr. Fine is the son of J. Allen Fine, Chief
Executive Officer and Chairman of the Board of the Company, and brother of
W.
Morris Fine, Executive Vice President and Secretary of the Company.
H.
Joe King, Jr.
retired
as President and Chairman of the Board of Home Federal Savings & Loan
Association in Charlotte, North Carolina and its parent company, HFNC Financial
Corporation, in 1998, where he had been employed since 1962.
James
R. Morton
was
President of J. R. Morton Associates from 1968 until he retired in 1988. He
is
currently President of TransCarolina Corporation.
Information
Regarding Directors Continuing in Office
|
|
|
|
Served
as
|
|
Term
|
|
|
|
|
Director
|
|
to
|
Name
|
|
Age
|
|
Since
|
|
Expire
|
J.
Allen Fine
|
|
71
|
|
1973
|
|
2007
|
David
L. Francis
|
|
73
|
|
1982
|
|
2007
|
A.
Scott Parker III
|
|
62
|
|
1998
|
|
2007
|
W.
Morris Fine
|
|
39
|
|
1999
|
|
2008
|
Loren
B. Harrell, Jr.
|
|
57
|
|
1996
|
|
2008
|
R.
Horace Johnson
|
|
61
|
|
2005
|
|
2008
|
J.
Allen Fine
was the
principal organizer of Investors Title Insurance Company and has been Chairman
of the Board of the Company, Investors Title Insurance Company, and Northeast
Investors Title Insurance Company since their incorporation. Mr. Fine served
as
President of Investors Title Insurance Company until February 1997, when he
was
named Chief Executive Officer. Additionally, Mr. Fine serves as Chief Executive
Officer of the Company and Northeast Investors Title Insurance Company, and
Chairman of the Board of Investors Title Exchange Corporation, Investors Capital
Management Company and Investors Trust Company. Investors Title Insurance
Company, Northeast Investors Title Insurance Company, Investors Title Exchange
Corporation, Investors Title Accommodation Corporation, Investors Capital
Management Company and Investors Trust Company are all wholly owned subsidiaries
of the Company. Mr. Fine is the father of James A. Fine, Jr., President, Chief
Financial Officer and Treasurer of the Company, and W. Morris Fine, Executive
Vice President and Secretary of the Company.
David
L. Francis
retired
in 1997 as the President of Marsh Mortgage Company, a mortgage banking firm,
and
Marsh Associates, Inc., a property management company, where he had been
employed since 1963. He serves on the Board of Directors of First Landmark,
a
Charlotte real estate and property management firm, and is General Partner
of
the Francis Family Limited Partnership.
A.
Scott Parker III
founded
Today’s Home, Inc. in 1975 and has been President of that company since its
incorporation. Today’s Home, Inc. manufactures lamps and wall decor for the
lodging, hospitality and healthcare industries. He is also managing member
of
Parker-Jones-Kemp LLC and Greenham Investments, LLC, developers of furniture
showroom properties to the trade.
W.
Morris Fine
is
Executive Vice President and Secretary of the Company, President and Chief
Operating Officer of Investors Title Insurance Company and Northeast Investors
Title Insurance Company, President and Chairman of the Board of Investors Title
Management Services, Inc., Vice President of Investors Title Exchange
Corporation and Investors Title Accommodation Corporation, and Chief Financial
Officer and Treasurer of Investors Trust Company and Investors Capital
Management Company. Investors Title Insurance Company, Northeast Investors
Title
Insurance Company, Investors Title Management Services, Inc., Investors Title
Exchange Corporation, Investors Title Accommodation Corporation, Investors
Capital Management Company and Investors Trust Company are all wholly owned
subsidiaries of the Company. Mr. Fine is the son of J. Allen Fine, Chief
Executive Officer and Chairman of the Board of the Company, and brother of
James
A. Fine, Jr., President, Chief Financial Officer and Treasurer of the
Company.
Loren
B. Harrell, Jr.
organized SoftPro Corporation in 1984 and served as President and CEO from
1984
until his retirement in 2003. SoftPro Corporation is now a wholly owned
subsidiary of Fidelity National Financial, Inc. SoftPro specializes in the
research and development of software utilized by law firms, title companies,
title insurance agents and lending institutions in the title insurance industry.
R.
Horace Johnson retired
in 2004 as managing partner of the Raleigh, North Carolina office of Ernst
and
Young, a public accounting firm, where he had been employed since 1967. During
this period, Mr. Johnson served in many firm leadership roles including serving
as the managing partner for the North Carolina practice for three years and
on
the operating committee of the Carolinas practice for five years. He also
maintained an active client service role during the 25 years he served as
partner. Mr. Johnson serves on the Board of Advisors of Wilmington
Pharmaceuticals, LLC, a pharmaceutical development company and is member-manager
of Lucky 6, LLC, an early stage investment company. He also serves on the Board
of the following non-profit corporations:
North Carolina Citizens for Business and Industry, NC Museum of History
Associates, Wake Education Partnership and Council for Entrepreneurial
Development.
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
On
September 24, 2004, the Audit Committee of the Board of Directors appointed
Dixon Hughes PLLC as the Company’s independent registered public accounting firm
to audit the consolidated financial statements for 2004 and 2005 and approved
the terms of its engagement. Dixon Hughes PLLC replaced Deloitte & Touche
LLP. Also, effective September 24, 2004, the Committee dismissed Deloitte &
Touche LLP.
In
connection with Deloitte & Touche LLP's audits during the two years ended
December 31, 2002 and 2003, and through the date of the Audit Committee's action
dismissing Deloitte & Touche LLP, there were no disagreements with Deloitte
& Touche LLP on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which, if not resolved
to
Deloitte & Touche LLP's satisfaction, would have caused it to make reference
to the subject matter of the disagreement in connection with its reports on
the
Company’s financial statements. During 2002 and 2003, and through
the
date
of the Audit Committee's action dismissing Deloitte & Touche LLP, there were
no "reportable events" requiring disclosure pursuant to Item 304(a)(1)(v) of
Regulation S-K.
Deloitte
& Touche LLP's audit reports on the Company’s consolidated financial
statements as of and for the years ended December 31, 2002 and 2003 did not
contain an adverse opinion or a disclaimer of opinion, nor were they qualified
or modified as to uncertainty, audit scope or accounting
principles.
During
the fiscal years ended December 31, 2002 and December 31, 2003, and the
subsequent interim period through the date of the Company's appointment of
Dixon
Hughes PLLC on September 24, 2004, neither the Company nor anyone on its behalf
consulted with Dixon Hughes PLLC regarding any of the matters or events set
forth in Item 304 (a)(2)(i) and (ii) of Regulation S-K.
The
Audit
Committee selected Dixon Hughes PLLC as the Company's independent registered
public accounting firm for the fiscal year ended December 31, 2006. Dixon
Hughes PLLC served as the Company’s independent registered public accounting
firm for the fiscal year ended December 31, 2005 and its representatives are
expected to attend the 2006 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.
Independent
Auditor Audit and Non-Audit Fees
Aggregate
fees for professional services rendered by the Company’s principal accounting
firm, Dixon Hughes PLLC, for the years ended December 31, 2005 and 2004 are
set
forth below.
|
|
2005
|
|
2004
|
|
Audit
Fees (1)
|
|
$
|
159,350
|
|
$
|
152,250
|
|
Audit-Related
Fees (2)
|
|
|
6,146
|
|
|
-
|
|
Tax
Fees (3)
|
|
|
29,961
|
|
|
28,200
|
|
All
Other Fees
|
|
|
-
|
|
|
-
|
|
Total
Fees
|
|
$
|
195,457
|
|
$
|
180,450
|
|
(1) |
Audit
fees consisted of the audit of the Company’s financial statements, reviews
of the Company’s quarterly financial statements and services rendered in
connection with statutory and regulatory
filings.
|
(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
Company’s independent registered public accounting firm.
Each
year, the Audit Committee pre-approves independent registered public accounting
firm services and associated fee ranges within the categories of Audit Services,
Audit-Related Services, Tax Services and Other Services.
Throughout
the year, circumstances may arise that require the engagement of the independent
registered public accounting firm for additional services that were not
contemplated by the existing pre-approval categories. In that case, the Audit
and Non-Audit Services Pre-Approval Policy requires specific approval by the
Audit Committee of such services before engaging the independent registered
public accounting firm. To ensure the prompt handling of such matters, the
Audit
Committee has granted pre-approval authority to its Chair. The Chair reports
any
pre-approval decisions made at the next Audit Committee meeting.
During
2005 and 2004, none of the services provided by the Company’s independent
registered public accounting firm under the categories Audit-Related Services,
Tax Services and Other Services described above were approved by the Audit
Committee after such services were rendered pursuant to the de minimis exception
established under SEC regulations.
Audit
Committee Report
The
Audit
Committee is directly responsible for appointing, compensating and overseeing
the work of the Company’s 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
Company’s 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
Company’s independent registered public accounting firm provided the Audit
Committee with the written disclosures and the letter required by Independence
Standards Board Standard No. 1, “Independence Discussions with Audit
Committees,” that describes all relationships between the Company and its
independent registered public accounting firm that might bear on the firm’s
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 firm’s performance of services,
other than audit services, is compatible with maintaining the independence
of
the independent registered public accounting firm.
The
Audit
Committee reviewed and discussed with management and the independent registered
public accounting firm the audited financial statements of the Company as of
and
for the year ended December 31, 2005. The Audit Committee discussed with the
independent registered public accounting firm those matters required to be
discussed by Statement on Auditing Standards No. 61, as amended. 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 discussions referenced above, the Audit Committee recommended
to
the Board of Directors that the Company’s audited financial statements be
included in its Annual Report on Form 10-K for the year ended December 31,
2005,
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
EXECUTIVE
COMPENSATION
Summary
Compensation Table
Shown
below is information concerning the annual compensation for the fiscal years
ended December 31, 2005, December 31, 2004 and December 31, 2003 for the
Company’s Chief Executive Officer and its other executive officers, other than
the CEO, who earned more than $100,000 in salary and bonus during 2005.
|
|
|
|
Annual
Compensation
|
|
|
|
Name
and
|
|
|
|
|
|
|
|
All
Other
|
|
Principal
|
|
|
|
Salary
|
|
Bonus
|
|
Compensation
|
|
Position
|
|
Year
|
|
($)
|
|
($)
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
J.
Allen Fine
|
|
|
2005
|
|
|
265,917
|
|
|
370,000
|
|
|
191,495
|
(1)
|
Chief
Executive
|
|
|
2004
|
|
|
258,250
|
|
|
250,000
|
|
|
164,702
|
|
Officer
|
|
|
2003
|
|
|
250,834
|
|
|
200,000
|
|
|
17,675
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James
A. Fine, Jr.
|
|
|
2005
|
|
|
212,833
|
|
|
355,000
|
|
|
177,543
|
(2)
|
President
and Chief
|
|
|
2004
|
|
|
206,000
|
|
|
250,000
|
|
|
151,425
|
|
Financial
Officer
|
|
|
2003
|
|
|
200,000
|
|
|
200,000
|
|
|
23,079
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
W.
Morris Fine |
|
|
2005
|
|
|
212,833
|
|
|
350,000
|
|
|
176,043
|
(3) |
Executive
Vice |
|
|
2004
|
|
|
206,000
|
|
|
250,000
|
|
|
152,518
|
|
President |
|
|
2003
|
|
|
200,000
|
|
|
200,000
|
|
|
23,079
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Total
represents $16,800 Company contributions to Simplified Employee Pension
Plan, $720 Company-paid life insurance premiums, $139,902 Company
contributions under the Non-Qualified Supplemental Retirement Benefit
Plan, and $34,073 Company contributions under the Non-Qualified Deferred
Compensation Plan.
|
(2) |
Total
represents $16,800 Company contributions to Simplified Employee Pension
Plan, $1,233 Company-paid life insurance premiums, $5,960 Company-paid
health insurance premiums, $124,923 Company contributions under the
Non-Qualified Supplemental Retirement Benefit Plan, and $28,627 Company
contributions under the Non-Qualified Deferred Compensation
Plan.
|
(3) |
Total
represents $16,800 Company contributions to Simplified Employee Pension
Plan, $1,233 Company-paid life insurance premiums, $5,960 Company-paid
health insurance premiums, $123,823 Company contributions under the
Non-Qualified Supplemental Retirement Benefit Plan, and $28,227 Company
contributions under the Non-Qualified Deferred Compensation
Plan.
|
Executive
Employment Agreements
Investors
Title Insurance Company (“ITIC”), a wholly owned subsidiary of the Company,
entered into an employment agreement with J. Allen Fine effective November
2003,
as amended June 2004. The initial term of this agreement is five years and,
on
the first day of each calendar month, the term is extended one additional month
so that at all times the term is five years, unless terminated sooner pursuant
to the agreement. Under the agreement, Mr. Fine is entitled to a base salary
of
not less than $259,500 per year, subject to increase (as determined by the
compensation committee of ITIC’s Board of Directors, subject to the approval of
the Compensation Committee of the Company’s Board of Directors) and may
also
receive discretionary cash bonuses (subject to the approval of the Compensation
Committee of the Company’s Board of Directors). In the event of a change in
control of ITIC or the Company (as defined in the agreement), Mr. Fine’s base
salary in effect at such time will double. Under the agreement, ITIC also agrees
to make quarterly contributions on Mr. Fine's behalf to a Non-Qualified
Supplemental Retirement Benefit Plan in an amount equal to 22% of his base
salary and bonus for the quarter for a minimum of 20 calendar quarters. In
the
event Mr. Fine’s employment terminates before ITIC makes such contributions for
20 quarters, the agreement provides that ITIC will make a lump sum payment
to
Mr. Fine equal to the deficiency. The
agreement also contains provisions relating to protection of the confidential
information of ITIC
and
its parent, subsidiaries and affiliates and
prohibits Mr.
Fine
from competing with any such party in the State of North Carolina, or soliciting
the employees of any such party, while employed by ITIC and for a period of
two
years following termination of his employment.
Pursuant
to Mr. Fine’s employment agreement, he receives certain payments and benefits,
described generally below, in the event of the termination of his employment.
If
Mr. Fine’s employment is terminated due to his death, disability or retirement
(following his 70th
birthday), he is entitled to receive, among other things, his then current
base
salary for three years, three times his average bonus compensation during the
preceding three years, accrued benefits under the Non-Qualified Supplemental
Retirement Benefit Plan and Non-Qualified Deferred Compensation Plan,
accelerated vesting in full of all his stock options, continued participation
in
the Company’s health insurance plans by him and his wife at no expense until his
death or, if later, his wife’s death, and continued participation in the
Company’s health insurance plans by his dependent children at no expense until
any such children are no longer dependent.
If
ITIC
terminates Mr. Fine’s employment other than for “cause” (as defined in the
agreement) or if ITIC materially breaches the agreement and Mr. Fine terminates
his employment as a result thereof, Mr. Fine is entitled to receive, among
other
things, his then current base salary for a period of five years, five times
his
average bonus compensation during the preceding three years, accrued benefits
under the Non-Qualified Supplemental Retirement Benefit Plan and Non-Qualified
Deferred Compensation Plan, accelerated vesting in full of all his stock options
and the continued health insurance coverage as described above.
If
Mr.
Fine terminates his employment because of a “change in control” (as defined in
the agreement) of the Company or ITIC, he is entitled to receive, among other
things, payments equal to 2.99 times his then base salary, 2.99 times his
average bonus compensation during the preceding three years, and accrued
benefits under the Non-Qualified Supplemental Retirement Benefit Plan and
Non-Qualified Deferred Compensation Plan, as well as accelerated vesting in
full
of all his stock options and the continued health insurance coverage as
described above. If any portion of these payments and benefits, or payments
and
benefits under any other plan, agreement or arrangement, would constitute an
“excess parachute payment” for purposes of the Internal Revenue Code, such
payments and benefits payable under the agreement will be reduced until no
portion thereof would fail to be deductible by reason of being “an excess
parachute payment.”
ITIC
entered into substantially identical employment agreements with James A. Fine,
Jr. and W. Morris Fine also effective November 2003 and amended June 2004,
except that (1) the minimum base salary for each of James A. Fine, Jr. and
W.
Morris Fine as provided in each of their employment agreements is $207,000
per
year, (2) each of them will be eligible to receive retirement benefits under
their agreements after age 50, rather than age 70, and (3) each of their
agreements provides for the transfer at their option, following a termination
of
employment under certain circumstances, of any life insurance policies owned
by
the Company on their lives.
Non-Qualified
Supplemental Retirement Benefit Plan
The
Company’s Compensation Committee adopted a Non-Qualified Supplemental Retirement
Benefit Plan of the Company’s wholly owned subsidiary, Investors Title Insurance
Company, in November 2003. This plan is an unfunded defined contribution plan
designed to provide additional retirement benefits on a tax deferred basis
for
select management or highly compensated employees. Participants in the plan
are
determined by the Compensation Committee and currently only the executive
officers named in the Summary Compensation Table participate. The rights of
the
participants are those of general, unsecured creditors.
Under
the
Non-Qualified Supplemental Retirement Benefit Plan, beginning in January 2004,
ITIC makes quarterly hypothetical contributions to each participant’s account
under the plan equal to 22% of the participant’s salary and bonus compensation
during the quarter. Once ITIC has contributed this amount for 20 quarters,
additional contributions to a participant’s account will be discretionary. If a
participant terminates employment before ITIC has made contributions for 20
quarters, then a lump sum hypothetical contribution to the terminated
participant’s account equal to the number of quarters less than 20 will be made.
Amounts
credited to a participant’s account may be deemed either to earn a specified
rate of interest or to be invested in a security, index or other investment
as
determined by the Compensation Committee from time to time. Since the effective
date of the plan, the amounts credited to each participant’s account have been
deemed to earn interest at an annual rate of return, compounded quarterly,
based
on the then current yield on the 10-Year U.S. Treasury Note.
Amounts
in a participant’s account (reflecting the hypothetical contributions and any
deemed returns) are paid at the participant’s termination of employment or death
during employment in a lump sum, equal annual installments payable over five,
ten, fifteen or twenty years or life annuity payments, as the participant
elects.
The
amounts credited to the Non-Qualified Supplemental
Retirement Benefit Plan
accounts
of the executive officers named in the Summary Compensation Table reflecting
the
hypothetical Company contributions for 2005 are included in the “All Other
Compensation” figure shown in the Summary Compensation Table above.
Non-Qualified
Deferred Compensation Plan
The
Company’s Compensation Committee adopted a Non-Qualified Deferred Compensation
Plan of the Company’s wholly owned subsidiary, Investors Title Insurance
Company, in June 2004. The plan is an unfunded defined contribution plan
designed to permit select management or highly compensated employees to set
aside additional retirement benefits on a pre-tax basis. Participants in the
plan are determined by the Compensation Committee and currently only the
executive officers named in the Summary Compensation Table participate.
The
rights of the participants are those of general, unsecured creditors.
The
Deferred Compensation Plan permits, for 2005 and subsequent calendar years,
each
participant to annually defer any portion of his salary or bonus and have the
amount deferred credited to the participant’s account under the plan. The plan
also provides that on or before December 31st
of each
year, beginning in 2004, ITIC will make a hypothetical contribution to a
participant’s account under the plan equal to the amount that ITIC would have
contributed to the participant’s Simplified
Employee Pension Plan if ITIC’s contributions to this plan were not limited
under the federal tax laws.
Amounts
credited to a participant’s account under the plan may be deemed invested as the
participant shall from time to time determine in various investments approved
by
ITIC. Since the effective date of the plan, the amounts credited to each
participant’s account have been deemed to earn interest at an annual rate of
return, compounded quarterly, based on the then current yield on the 10-Year
U.S. Treasury Note. Amounts in a participant’s account (reflecting compensation
deferred, ITIC’s hypothetical contributions and any deemed returns) are paid at
the participant’s termination of employment in a lump sum.
The
amounts credited to the Deferred
Contribution
accounts
of the executive officers named in the Summary Compensation Table reflecting
ITIC’s hypothetical contributions are included in the “All Other Compensation”
figure shown in the Summary Compensation Table above.
Stock
Option Grants in 2005
There
were no options granted to the executive officers named in the Summary
Compensation Table during the fiscal year ended December 31, 2005.
Aggregated
Option Exercises in 2005 and Year-End Option Values
The
following table shows stock options exercised by the executive officers named
in
the Summary Compensation Table during 2005, including the aggregate value of
gains on the date of exercise (the “Value Realized”). In addition, this table
shows the number of shares covered by both exercisable and unexercisable stock
options outstanding as of December 31, 2005. Also reported are the values for
“in-the-money” options that represent the positive spread between the exercise
price of any such existing stock options and the year-end price of the Common
Stock.
|
|
|
|
|
|
Number
of Securities
|
|
Value
of Unexercised
|
|
|
|
Shares
|
|
Value
|
|
Underlying
Unexercised
|
|
In-the-Money
Options
|
|
|
|
Acquired
on
|
|
Realized
|
|
Options
at Year-End (#)
|
|
Year-End
($)(1)
|
|
Name
|
|
Exercise
(#)
|
|
($)
|
|
Exercisable/Unexercisable
|
|
Exercisable/Unexercisable
|
|
J.
Allen Fine
|
|
|
42,600
|
|
|
1,049,806
|
|
|
800
/ 1,600
|
|
|
10,416
/ 20,832
|
|
James
A. Fine, Jr.
|
|
|
55,000
|
|
|
1,390,880
|
|
|
1,000
/ 2,000
|
|
|
13,020
/ 26,040
|
|
W.
Morris Fine
|
|
|
55,000
|
|
|
1,390,880
|
|
|
1,000
/ 2,000
|
|
|
13,020
/ 26,040
|
|
(1)
The closing price of the Common Stock on December 30, 2005, the last day of
2005
on which the Company’s Common Stock traded, was $42.17.
COMPENSATION
COMMITTEE REPORT
The
Compensation Committee of the Board of Directors is responsible for determining,
or recommending to the Board of Directors of the Company, salaries, bonuses
and
other compensation for the Company’s Chief Executive Officer and other executive
officers. The
Compensation Committee operates under a written charter that can be found in
the
Corporate Governance area of the Investor Relations section of the Company’s
website at www.invtitle.com.
Overview
of Compensation Philosophy
The
Company strives to provide an overall competitive compensation package that
allows it to both attract and retain qualified and experienced corporate
officers and key employees while motivating its employees to perform to their
fullest extent. To ensure this environment, the Company considers factors such
as job performance, experience and contribution to the growth of the Company
in
determining an employee’s annual compensation. Investors Title Company’s
compensation package remains competitive with compensation packages offered
by
other employers of comparable size engaged in similar lines of business. All
annual salaries and cash bonuses are paid by a subsidiary of the Company as
the
Company functions as a holding company and has no payroll.
Evaluation
of Executive Performance
In
evaluating the performance and establishing the incentive compensation of the
Chief Executive Officer and other executive officers, the Compensation Committee
has reviewed and taken into account the efforts of those employees to expand
the
Company’s agent base, to grow income from non-title sources, and various
financial profitability measures including the Company’s profit margin and
return on equity.
Total
Compensation
The
major
elements of compensation for each of the Company’s executive officers, including
the Chief Executive Officer, consists of an annual base salary and cash bonus,
stock options, and contributions under a Simplified Employee Pension Plan,
a
Non-Qualified Supplemental Retirement Benefit Plan and a Non-Qualified Deferred
Compensation Plan. In determining the amount of each such element of the
compensation package for these executive officers, the Compensation Committee
takes into consideration the value of each executive’s total compensation.
Salaries
and Bonuses
The
annual salary is paid in recognition of ongoing performance throughout the
year.
Additionally, the executive officers named in the Summary Compensation Table
and
other senior executives of the Company may receive stock and/or cash bonuses
based upon their job performance throughout the year. Each March, the approved
bonus is paid to reward performance in the prior year. The salary, bonus and
other compensation of the executive officers named in the Summary Compensation
Table are shown in the Summary Compensation Table.
Stock
Options
The
Compensation Committee periodically considers issuing stock options to its
employees in order to link the interests and concerns of the Company’s
executives with those of its shareholders. Stock option grants provide an
incentive for executives to focus on managing the Company from the perspective
of an owner with an equity stake in the Company. In the Committee’s opinion,
past stock option grants were successful in focusing senior management on
building profitability and shareholder value. The Chief Executive Officer is
eligible to participate in the same executive compensation plans, including
stock option plans, that are available to the other senior executives.
All
stock
option grants are made under the Investors Title Company 1997 and 2001 Stock
Option and Restricted Stock Plans, which shareholders approved on May 13, 1997
and May 16, 2001, respectively. Stock option grants generally become exercisable
in five or ten equal annual installments beginning on the grant date, and no
more than 50,000 options may be granted to one individual under each Plan.
No
new stock option grants were made to the executive officers named in the Summary
Compensation Table in 2005.
Non-Qualified
Supplemental Retirement Benefit Plan
The
Committee approved a Non-Qualified Supplemental Retirement Benefit Plan
effective November 17, 2003. The purpose of this plan is to provide additional
retirement benefits to a select group of management or highly compensated
employees on a non-qualified, tax-deferred basis. Benefits under this plan
are
paid upon termination of employment. Currently, only executive officers
participate in this plan. For a more detailed description of the plan and the
benefits to the participants, see “Executive
Compensation - Non-Qualified Supplemental Retirement Benefit Plan”
above.
Non-Qualified
Deferred Compensation Plan
The
Committee approved a Non-Qualified Deferred Compensation Plan effective June
1,
2004. The purpose of this Plan is to permit selected members of management
and/or highly compensated employees to set aside additional retirement benefits
on a pre-tax basis. All benefits under this plan are paid to the participants
upon termination of employment. Currently, only executive officers participate
in this plan. For a more detailed description of the plan and the benefits
to
the participants, see “Executive
Compensation - Non-Qualified Deferred Compensation Plan” above.
Compensation
for the Chairman and Chief Executive Officer
The
Committee increased J. Allen Fine’s annual salary from $267,200 to $275,000
effective March 1, 2006, and approved discretionary cash bonuses for Mr. Fine
totaling $370,000 for 2005. The annual salary increase of 2.92% remains
consistent with the majority of management salary adjustments for this time
period. The salary increase and the discretionary cash bonuses awarded for
2005
were given in recognition of his continued leadership efforts which resulted
in
the achievement of a record level of net income for 2005 as well as the benefit
the Company gains from the retention of its founder and Chief Executive Officer.
The Company also credited amounts to Mr. Fine’s accounts under the Non-Qualified
Supplemental Retirement Benefit Plan and the Non-Qualified Deferred Compensation
Plan, in accordance with the terms of each plan. For additional information
regarding the elements of the CEO’s compensation, see “Executive
Compensation.”
Submitted
by the Compensation Committee of the Board of Directors:
Loren
B.
Harrell, Jr.
James
R.
Morton
A.
Scott
Parker III
STOCK
PRICE PERFORMANCE GRAPH
This
section includes a line graph comparing the cumulative total return on the
Company’s Common Stock with the cumulative total return of the NASDAQ Composite
Index and a peer group for the five fiscal years ended December 31, 2005. The
graph and table assume that $100 was invested on December 31, 2000 in each
of
the Company’s Common Stock, the NASDAQ Composite Index and the peer group, and
that all dividends were reinvested.
Comparison
of Five Year Cumulative Total Return for Investors Title Company, NASDAQ
Composite Index and Peer Group
|
Period
Ending
|
Index
|
12/31/00
|
12/31/01
|
12/31/02
|
12/31/03
|
12/31/04
|
12/31/05
|
Investors
Title Company
|
100.00
|
98.82
|
147.10
|
200.58
|
240.42
|
275.20
|
Custom
Peer Group*
|
100.00
|
69.38
|
92.61
|
138.83
|
172.94
|
214.94
|
NASDAQ
Composite
|
100.00
|
79.18
|
54.44
|
82.09
|
89.59
|
91.54
|
*The
Custom Peer Group consists of Fidelity National Financial, Inc., First American
Corporation, LandAmerica Financial
Group,
Inc., and Stewart Information Services Corporation.
SNL Financial LC |
(434)
977-1600
|
© 2006 |
www.snl.com
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
On
January 11, 2005, Investors Title Insurance Company purchased 10,033 shares
of
the Company’s Common Stock from J. Allen Fine for $396,304, or $39.50 per share,
pursuant to the Common Stock purchase plan authorized by the Board of Directors
of ITIC in 2000 (the “Purchase Plan”). J. Allen Fine acquired the shares on
January 11, 2005 for $221,135 through the exercise of non-qualified employee
stock options. Also on January 11, 2005, ITIC purchased 11,938 shares of Common
Stock from each of James A. Fine, Jr. and W. Morris Fine for $471,551, or $39.50
per share, pursuant to the Purchase Plan. Each of James A. Fine, Jr. and W.
Morris Fine acquired the shares on January 11, 2005 for $268,540 by exercising
non-qualified employee stock options.
SHAREHOLDER
PROPOSALS FOR 2007 ANNUAL MEETING
Shareholder
proposals to be presented at the 2007 Annual Meeting of Shareholders must be
received by the Company on or before December 14, 2006 to be considered for
inclusion in the Company’s proxy materials relating to that meeting. If a
shareholder notifies the Company after February 27, 2007 of an intent to present
a proposal at the Company’s 2007 Annual Meeting of Shareholders, the request
will be considered untimely and the persons named as the Company’s proxies will
have the right to exercise their discretionary voting authority with respect
to
such proposal without including information regarding the proposal in the proxy
materials.
BY
ORDER
OF THE BOARD OF DIRECTORS:
W.
Morris
Fine
Secretary
April
13,
2006
EXHIBIT
A
INVESTORS
TITLE COMPANY
AUDIT
COMMITTEE CHARTER
I. Purpose
of Committee.
The
Committee is appointed by the Board of Directors for the primary purposes of:
A. Assisting
the Board in its oversight of the quality and integrity of the Company's
accounting and financial reporting processes and its financial statements,
the
independent auditor's qualifications, independence and performance, and the
qualifications and performance of the Company's internal audit function;
and
B. Preparing
the Audit Committee Report to be included in the Company's proxy statement.
II. Duties
and Responsibilities.
The
Committee's primary responsibility is the oversight of the Company’s accounting
and financial reporting processes and the financial statements prepared by
Company management. To carry out this responsibility and others delegated to
it
by the Board, the Committee will:
1. Develop
and maintain an open dialogue with the Board, the Company's independent
auditors, the Company's internal auditors, and the financial and general
managers of the Company;
2. Perform
any other duties that the Committee deems appropriate, or that are requested
by
the Board, consistent with this charter, the Company's By-laws, and applicable
laws and regulations;
3. At
least
annually, review and update this charter, which will be disclosed in the
Company's proxy statement at least once every three years as required by the
SEC's proxy rules;
4. Review
and, if appropriate, approve all related-party transactions pursuant to Company
policy and applicable laws and regulations; and
5. Periodically
report its activities to the Board.
|
B. |
The
Company's Financial Statements and Published
Information.
|
1. At
least
annually, review:
a. Major
issues regarding accounting principles and financial statement presentations,
including significant changes in the Company's selection or application of
accounting principles, as well as the clarity and completeness of the Company's
financial statements;
b. Analyses
prepared by management and/or the independent auditor setting forth significant
financial reporting issues and judgments made in connection with the preparation
of the financial statements; and
c. The
effect of regulatory and accounting initiatives, as well as off-balance sheet
structures, on the financial statements of the Company;
2. Discuss
the annual audited financial statements and quarterly financial statements,
including matters outlined in SAS No. 61, Communications
with Audit Committees,
with
Company management and the Company's independent auditors;
3. Review
the periodic reports of the Company with Company management and the Company's
independent auditor prior to filing of the reports with the SEC;
and
4. Review
the Company's earnings releases, as well as financial information and earnings
guidance provided to analysts and ratings agencies, which review may be
generally of the type of information to be included or presentation to be made
and need not necessarily be advance discussion of each such earnings release
or
instance of earnings guidance.
The
Chair
of the Committee may represent the entire Committee for purposes of reviewing
quarterly financial statements and reports, earnings releases, and financial
information and earnings guidance provided to analysts and ratings agencies
to
the extent permissible under the listing requirements of the Nasdaq Stock Market
and generally accepted auditing standards.
|
C. |
Performance
and Independence of the Company's Independent
Auditors.
|
1. Ensure
receipt by the Committee from the independent auditors of a formal written
statement delineating all relationships between the independent auditors and
the
Company, consistent with Independence Standards Board Standard 1, Independence
Discussions with Audit Committees,
and
engage in a dialogue with the independent accountants with respect to any
disclosed relationships or services that may impact the objectivity and
independence of the independent auditors and take appropriate action to oversee
their independence;
2. Annually
evaluate the independent auditor's qualifications, performance, and
independence; and
3. Periodically
meet separately with independent auditors.
|
D. |
Review
of Services and Audit by Independent
Auditor.
|
1. Appoint,
retain, compensate, evaluate, and terminate the Company's independent auditors,
with sole authority to approve all audit engagement fees and terms, as well
as
all non-audit engagements with the independent auditors (These duties are
non-delegable);
2. At
least
annually, pre-approve all audit and non-audit services to be provided to the
Company by its independent auditors pursuant to the Audit and Non-audit Services
Pre-approval Policy;
3. Review
the scope of the annual audit to be performed by the Company's independent
auditors;
4. Review
with the independent auditor any audit problems or difficulties encountered
in
the course of the audit work, and Company management's responses;
5. Discuss
with Company management and the Company's independent auditors any accounting
adjustments that were noted or proposed by the independent auditors but were
passed (as immaterial or otherwise);
6. Review
the audit report and recommendations submitted by the Company's independent
auditors;
7. Review
the report required by Section 10A(k) of the Securities Exchange Act of 1934
from the independent auditor concerning (i) critical accounting policies and
practices used in the audit, (ii) alternative treatments of financial
information within GAAP that have been discussed with Company management,
ramifications of the use of such alternative disclosure and treatments, and
the
treatment preferred by the independent auditor, and (iii) other material written
communications between the independent auditor and Company
management.
The
Company shall provide funding, as determined by the Committee, for payment
of
compensation to the independent auditors retained by the Committee.
|
E. |
Review
of the Company's Internal Audit
Department.
|
1. Periodically
meet with internal auditors;
2. Review
the annual internal audit plan;
3. Receive
and review summaries and reports from the internal auditor with respect to
its
review of Company operations and the systems of internal controls;
and
4. Review
the activities and structure of the internal audit department.
|
F. |
Controls
within the Company.
|
1. Annually
review significant issues regarding the adequacy of the Company's internal
controls and any changes adopted in light of material control deficiencies;
2. Establish
procedures for the receipt, retention, and treatment of complaints received
by
the Company regarding accounting, internal accounting controls, or auditing
matters, and the confidential, anonymous submission by Company employees of
concerns regarding accounting or auditing matters.
While
the
Audit Committee has the responsibilities and powers set forth in this Charter,
it is not the duty of the Audit Committee to prepare financial statements,
to
plan or conduct audits or to determine that the Company's financial statements
and disclosures are complete and accurate and are in accordance with generally
accepted accounting principles and applicable rules and regulations. These
are
the responsibility of Company management and the Company's independent
auditors.
III. |
Authority
to Retain Experts and Advisors.
The
Committee has the authority to choose, hire, direct, and, if appropriate,
terminate such experts and advisors as it deems necessary in the
performance of its duties. The Company shall provide funding, as
determined by the Committee, for payment of compensation to any experts
or
advisers the Committee retains.
|
IV. |
Audit
Committee Financial Expert.
At
least one member of the Committee must have accounting or related
financial management expertise as determined by the Board in accordance
with applicable listing standards. At least one member of the Committee
must be an "audit committee financial expert" as defined by the Securities
and Exchange Commission. The person with accounting or related financial
management expertise and the "audit committee financial expert" can
be one
and the same.
|
V. |
Other
Charter Provisions.
Information
regarding Committee member qualifications, Committee member appointment
and removal, committee structure and operations, and Committee reporting
to the Board are set forth in the Investors Title Company Board of
Directors Standard Committee Charter Provisions.
|
Investors
Title Company
121
North
Columbia Street, Chapel Hill, North Carolina 27514
PROXY
PLEASE
SIGN ON REVERSE SIDE AND RETURN IN THE ENCLOSED POSTAGE-PAID
ENVELOPE.
This
Proxy is Solicited on Behalf of the Board of Directors for the Annual Meeting
of
Shareholders on May 17, 2006.
The
undersigned hereby appoints J. Allen Fine and W. Morris Fine, and each of
them,
each with power of substitution, as lawful proxies, to vote all shares of
common
stock of Investors Title Company that the undersigned would be entitled to
vote
if personally present at the Annual Shareholders’ Meeting of Investors Title
Company to be held at The Siena Hotel located at 1505 East Franklin Street,
Chapel Hill, North Carolina on Wednesday, May 17, 2006 at 11:00 a.m. EDT,
and at
any adjournment thereof, upon such business as may properly come before the
meeting. Please sign and date on reverse side and return in the enclosed
postage-paid envelope.
SHAREHOLDER
__________________________ NUMBER OF SHARES
____________________
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” ELECTION OF THE DIRECTOR NOMINEES
LISTED BELOW.
Mark
“X”
for only one box. Shares will be voted in the manner directed. If no direction
is indicated, shares will be voted “FOR”
the
following director nominees:
1
-
JAMES
A. FINE, JR. 2
-
H.
JOE KING, JR. 3
-
JAMES
R. MORTON
( )
FOR
all
nominees ( )
WITHHOLD
authority for all nominees
( )
Withhold authority to vote for any individual nominee.
To
withhold authority to vote for any nominee, write number(s) of nominee(s)
below.
In
their discretion, the proxies are authorized to vote in their best judgment
with
respect to any other business that may properly come before the
meeting.
Dated
________________, 2006
(Signature)
____________________________________________
(Signature
if held jointly) _________________________________
Note: |
Please
sign above exactly as name appears on this proxy. When shares are
held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such.
If a
corporation, please sign in full corporate name by President or
other
authorized officer, giving title as such. If a partnership, please
sign in
partnership name by authorized
person.
|