(2) | Audit-related fees consisted of fees related to compliance with regulatory and statutory filings. |
(2)
(3) | Tax fees consisted primarily of tax compliance services. |
Audit and Non-Audit Services Pre-Approval Policy
The Audit Committee has adopted an Audit and Non-Audit Services Pre-Approval Policy for pre-approving all audit and permissible non-audit services provided by the independent registered public accounting firm.
Each year, the Audit Committee pre-approves independent registered public accounting firm services and associated fee ranges within the categories of Audit Services, Audit-Related Services, Tax Services and Other Services.
Throughout the year, circumstances may arise that require the engagement of the independent registered public accounting firm for additional services that were not contemplated by the existing pre-approval categories. In that case, the Audit and Non-Audit Services Pre-Approval Policy requires specific approval by the Audit Committee of such services before engaging the independent registered public accounting firm. To ensure the prompt handling of such matters, the Audit Committee has granted pre-approval authority to its Chair.Chairman. The ChairChairman reports any pre-approval decisions made at the next Audit Committee meeting.
During 20142017 and 2013,2016, none of the services provided to the Company by the independent registered public accounting firm under the categories Audit-Related Services Tax Services and OtherTax Services described above were approved by the Audit Committee after such services were rendered pursuant to the de minimis exception established under SEC regulations.
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 firm’sfirms’ 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, 2014.2017. The Audit Committee discussed with the independent registered public accounting firm those matters required to be discussed by Auditing Standard No. 16, “Communication1301, “Communications with Audit Committees”,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, 2014,2017, for filing with the Securities and Exchange Commission.SEC.
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, 2014.2017.
Submitted by the Compensation Committee of the Board of Directors.
Richard M. Hutson II, Chairman
James R. Morton
James H. Speed, Jr.
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“Elements of Executive Compensation”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 stockholdershareholder 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. shareholders.
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 stockholdershareholder 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 stockholdershareholder 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 stockholdersshareholders 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 stockholdershareholder 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;shareholders; |
● | · | 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 theNasdaq listing standards, of The NASDAQ Stock Market LLC, 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.shareholders. 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 stockholdersshareholders held in May 2013,2016, shareholders overwhelmingly approved the Company’s executive compensation with approximately 97%98% of the votes cast on the say-on-pay proposal at the meeting were voted in favor of the proposal.favor. The Compensation Committee believes this vote affirms the stockholders’shareholders’ 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:
● | · | annual incentive bonuses; |
● | · | long-term equity incentive awards; |
● | · | a nonqualified supplemental retirement benefit plan; |
● | · | a nonqualified deferred compensation plan; |
● | · | benefits under employment agreements; |
● | · | potential payments and benefits upon change of control; and |
● | · | benefits and perquisites. |
Base Salaries. Base salaries represent a usual and expected component of executive compensation, and are paid to provide executives with a fixed level of compensation. In setting base salaries for the executive officers, the Compensation Committee considered the following factors:
● | · | the responsibilities and critical leadership role of the executives; |
● | · | the experience and individual performance of the executives, and their contribution to the Company’s strategic initiatives; |
● | · | the Company’s financial performance, judged in light of external market factors; |
● | · | the Company’s stock price performance, in absolute terms and relative to its peers and the market as a whole; |
● | · | the Compensation Committee’s evaluation of market demand for executives with similar capability and experience; |
● | · | the Compensation Committee’s desire to strike an appropriate balance between the fixed elements of compensation and the variable performance-based elements; and |
● | · | obligations under employment agreements. |
Salary levels are typicallygenerally considered annually as part of the Company’s performance review process, or upon a promotion or other change in job responsibility. For 2014,fiscal 2017, each of the named executive officers received an increase in base salary, reflected as a percentage of 2013fiscal 2016 base salary, as follows: J. Allen Fine – 3.6%11.6%; James A. Fine, Jr. – 3.8%11.6%; W. Morris Fine – 3.8%11.6%. These increases were provided primarily as costto each of living increases. the named executive officers in recognition of their leadership in the Company’s outstanding performance.
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 each of J. Allen Fine, decreased from $500,000 for 2013 to $300,000 for 2014, and each of the annual incentive bonuses for James A. Fine, Jr. and W. Morris Fine decreased from $575,000remained $750,000 for 2013 to $350,000 for 2014. The incentive bonuses paid tofiscal 2017, which was the same amount in fiscal 2016. This reflects the Committee’s continued recognition of the performance of the named executive officers for 2013 were increased significantly over historical levels in recognition ofand their contribution toward the Company attaining record revenues net income and earnings per share in 2013,2017, along with a return on equity of 12.12%15.44%, profit margin of 11.65%15.90% and operating margin of 17.06%18.73%. The Committee reduced the incentive bonuses for 2014 to amounts more consistent with historical bonus levels.
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,shareholders, 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 2009 Plan. However, the Compensation Committee does regularly evaluate the stock ownership of key employees, including the named executive officers, 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 Committee considers the degree of each potential recipient’s ability to influence the attainment of the Company’s goals and encourages individuals who receive theseAll equity awards will retain a substantial portion of the shares awarded to them to foster a mutuality of interests with our stockholders.
All stock appreciation rights are made in the form of SARs under the Investors Title Company 2009 Stock Appreciation Right Plan, which stockholdersshareholders approved on May 20, 2009. Stock appreciation rightsSARs 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 eachthe 2009 Plan. No new stock appreciation rightsSARs were madegranted to the executive officers in 2014.2017. Under the 2009 plan, 236,500Plan, 223,000 additional SARs units are available for issuance, and theythese 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 ownedwholly-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 2014.2017 for any of the named executive officers. Each participant’snamed executive officer’s account balance was zero at December 31, 2014.2017.
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 20142017 for the named executive officers and each participant’snamed executive officer’s account balance was zero at December 31, 2014.2017.
Benefits Under Employment Agreements. ITIC has entered into employment agreements with the named 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 ofin Control” below.
Potential Payments and Benefits Upon Change ofin Control. Under thetheir employment agreements, with the executive officers they are entitled to certain severance payments if they terminate employment because of a change ofin control, as well as a salary increase of 100% if a change in control does not result in termination of employment.
The arrangements were established because:
● | · | it is in the best interest of the Company and its stockholdersshareholders to assure that the Company will have the continued dedication of the Company’s executive officers notwithstanding the possibility, threat or occurrence of a change in control; and |
● | · | it is imperative to diminish the inevitable distraction to such executive officers by virtue of the personal uncertainties and risks created by a pending of threatened change in control. |
For detailed information regarding severance benefits payable in connection with a termination because of a change in control, see “- Potential Payments Upon Termination or Change in Control” below.
Benefits and Perquisites. The Company provides all eligible employees, including the named executive officers, with a benefit program that the 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 2014fiscal 2017 included group health, dental, vision and life insurance, as well as short and long term disability insurance. Other benefits offered during 2014fiscal 2017 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 percent3% of compensation for each eligible employee. The Company may make additional contributions under the profit share provisions of the plan. For the 20142017 plan year, the Company contributed an additional 1%3% of compensation for eligible employees under the profit share provisions of the plan.plan, an increase from the 1% contributed for the 2016 plan year. The named executive officers 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 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 ofChange in 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.
Length-of-Service Awards. The Company awards each eligible employee including each of the named executive officers an additional cash bonus at the end of each five-year period he or she is employed with the Company or its subsidiaries. For fiscal 2017, J. Allen Fine, James A. Fine, Jr. and W. Morris Fine were each eligible for such a length-of-service award for the completion of his 45th, 30th and 25th year of service with the Company, respectively.
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“covered employees” in excess of $1.0 million. SpecialFor taxable years ending December 31, 2017 and earlier, this limitation did not apply to compensation that was considered “performance-based compensation” under the rules apply for "performance-based" compensation, including the pre-approval of performance goals applicable to that compensation.Section 162(m).
AllThe exemption from Section 162(m)'s deduction limitation for "performance-based compensation" has been repealed by recent legislation, effective for taxable years beginning after December 31, 2017, such that compensation paid to our covered employees in excess of $1.0 million will not be deductible unless it qualifies for transition relief applicable to certain arrangements in place as of November 2, 2017 (the scope of which is uncertain under the named executive officers in 2014legislation). In addition, beginning with taxable years beginning after December 31, 2017, "covered employees" generally was intendedexpanded to be fully deductibleinclude the Company's chief financial officer; also, each individual who is a covered employee for any taxable year beginning after December 31, 2016 will remain a covered employee for all future years. The Committee continues to evaluate the purposes ofchanges to Section 162(m). However, and their significance to our compensation programs; however, to maintain flexibility in compensating executive officers in a manner designed to promote varying corporate goals, the Compensation Committee has not adopted a policy that all compensation must be deductible for Federal income tax purposes.
Accounting for Stock-Based Compensation. theThe Company accounts for stock-based payments in accordance with the requirements of FASB Accounting Standards Codification (ASC)ASC Topic 718, Stock Compensation (formerly, FASB Statement 123R).Compensation.
Summary Compensation Table
The table below summarizes the total compensation for each of the named executive officers for each of the fiscal years ended December 31, 2014,2017, December 31, 2013,2016 and December 31, 2012.2015, respectively.
Name and Principal Position | Year | Salary ($) | Bonus ($)(1) | All Other Compensation ($)(2) | Total ($) |
J. Allen Fine Chief Executive Officer and Chairman of the Board | 20142017
20132016
20122015
| 340,000405,250
328,333367,166
318,167353,250
| 300,000755,400(3)
500,000750,000
250,000450,000
| 41,58260,095
30,14444,135
24,56438,085
| 681,5821,220,745
858,4771,161,301
592,731841,335
|
| | | | | |
James A. Fine, Jr. President, Chief Financial Officer and Treasurer | 20142017
20132016
20122015
| 288,250343,933
277,917311,600
268,500299,667
| 350,000753,600(3)
575,000750,000
325,000450,000
| 48,53757,610
37,75844,134
31,20540,365
| 686,7871,155,143
890,6751,105,734
624,705790,032
|
| | | | | |
W. Morris Fine Executive Vice President & Secretary | 20142017
20132016
20122015
| 288,250343,933
277,917311,600
268,500299,667
| 350,000753,000(3)
575,000750,000
325,000450,000
| 53,01060,489
39,67545,657
30,89046,044
| 691,2601,157,422
892,5921,107,257
624,390795,711
|
| (1) | Reflects cash bonuses earned in the applicable year. |
| (2) | Amounts set forth as “All"All Other Compensation”Compensation" for 2014fiscal 2017 consists of the following: |
Name | 401(k) Contributions ($) | Supplemental Retirement Cash Payment ($) | Life and Health Insurance ($) | Personal Use of Company Vehicle ($) | Total ($) |
J. Allen Fine | 10,800 | 36,320 | 6,398 | 6,577 | 60,095 |
James A. Fine, Jr. | 10,800 | 33,778 | 10,179 | 2,853 | 57,610 |
W. Morris Fine | 10,800 | 33,778 | 10,179 | 5,732 | 60,489 |
Name | 401(k) Contributions ($) | Supplemental Retirement Cash Payment ($) | Life and Health Insurance ($) | Personal Use of Company Vehicle ($) | Total ($) |
J. Allen Fine | 10,400 | 23,729 | 720 | 6,733 | 41,582 |
James A. Fine, Jr. | 10,400 | 24,700 | 9,074 | 4,363 | 48,537 |
W. Morris Fine | 10,400 | 24,700 | 9,074 | 8,836 | 53,010 |
| (3) | Amounts include a length-of-service award as follows: |
Name | Service Award ($) |
J. Allen Fine | 5,400 |
James A. Fine, Jr. | 3,600 |
W. Morris Fine | 3,000 |
Employment Agreements
Employment Agreements
Each of the named executive officers is party to an employment agreement with the Company, which was amended and restated effective as January 1, 2009. Under the employment agreements, each of J. Allen Fine, James A. Fine, Jr., and W. Morris Fine are entitled to a minimum base salary of $303,360, $255,560, and $255,560, respectively.salary. Under these agreements, Messrs. Fine, Fine, Jr., and Fine participate in the Company’sCompany'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. TheThese agreements also prohibit Messrs. Fine, Fine, Jr., and Fine from engaging in certain activities involving competition with the Company for a two yeartwo-year period following termination of employment. Each employment agreement has a five yearfive-year rolling term beginning January 1, 2009, unless terminated earlier in accordance with itits terms.
Grants of Plan-Based Awards in 20142017
There were no grants of plan based awards to the named executive officers in the fiscal year ended December 31, 2014.2017.
Outstanding Equity Awards at 20142017 Fiscal Year-End
There were no outstanding equity awards to the named executive officers as of December 31, 2014.2017.
20142017 Option Exercises and Stock Vested
There werewas no exercisesexercise of options or stock appreciation rightsSARs or vesting of shares of stockCommon Stock held by the named executive officers in 2014.fiscal 2017.
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. TheAs shown in the table below, shows there was no activity in these plans during 2014.fiscal 2017.
Name | Executive Contributions in Last FY | Employer Contributions in Last FY ($)(1) | Aggregate Earnings in Last FY ($) (2) | Aggregate Withdrawals/ Distributions in Last FY ($) | Aggregate Balance at Last FYE ($)(3) | Executive Contributions in Last FY ($) | Employer Contributions in Last FY ($) | Aggregate Earnings in Last FY ($) | Aggregate Withdrawals/ Distributions in Last FY ($) | Aggregate Balance at Last FYE ($) |
J. Allen Fine (Deferred Compensation Plan) | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
J. Allen Fine (Supplemental Retirement Plan) | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
James A. Fine, Jr. (Deferred Compensation Plan) | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
James A. Fine, Jr. (Supplemental Retirement Plan) | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
W. Morris Fine (Deferred Compensation Plan) | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
W. Morris Fine (Supplemental Retirement Plan) | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
Potential Payments Upon Termination or Change ofin Control
Under the employment agreements in effect on December 31, 2014,2017, 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’sFine's employment agreement, if his employment is terminated due to death, disability or retirement (following his 70th birthday), he is entitled to receive the following:
| ● · | except in the case of death, a lump sum payment of three times the then currenthis then-current salary, but in no event less than $910,000; |
| ● · | except in the case of death, a lump sum payment of three times the average of the bonus compensation paid to him in the three prior fiscal years, but in no event less than $1,055,000; |
| ● · | accrued benefits under the Nonqualified Supplemental Retirement Benefit Plan and Nonqualified Deferred Compensation Plan; |
| ● · | accelerated vesting in full of all his stock options;options held by him; |
| ● · | continued participation in the Company’sCompany's health insurance plans by him and his wife at no expense until his death or, if later, his wife’swife's death; and |
| ● · | continued participation in the Company’sCompany's health insurance plans by his dependent children at no expense until any such children are no longer dependent. |
Under Mr. Fine’sFine's employment agreement, if his employment is terminated by the Company other than for “cause”"cause" or by him due to the Company’s materially breaching theCompany's material breach under his employment agreement (“i.e.(i.e., good reason”"good reason"), he is entitled to receive the following:
| ● · | a lump sum payment of five times the then currenthis then-current salary, but in no event less than $1,516,800 $1,516,800; |
| ● · | 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$1,758,335; |
| ● · | accrued benefits under the Nonqualified Supplemental Retirement Benefit Plan and Nonqualified Deferred Compensation Plan; |
| ● · | accelerated vesting in full of all his stock options;options held by him; and |
| ● · | continued health insurance coverage as described above. |
Under Mr. Fine’sFine's employment agreement, if he terminates his employment because of a “change"change in control,”" he is entitled to receive the following:
| ● · | a lump sum payment equal to 2.99 times his then currentthen-current base salary, but in no event less than $907,046; |
| ● · | a lump sum payment equal to 2.99 times histhe average bonus compensation paid to him during the preceding three fiscal years, but in no event less than $1,051,484; |
| ● · | accrued benefits under the Nonqualified Supplemental Retirement Benefit Plan and Nonqualified Deferred Compensation Plan; |
| ● · | accelerated vesting in full of all his stock options;options held by him; and |
| ● · | continued health insurance coverage as described above. |
IfIn 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"excess parachute payment”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"an excess parachute payment.”
Under Mr. Fine’sFine's employment agreement, if his employment is terminated by the Company for “cause,”"cause," he is entitled to receive the following:
| ● · | an amount equal to that amount he would have received as salary had he remained an employee until the later of the date of his termination and the date that was 30 days after notice of his termination; and |
| ● · | accrued benefits under the Nonqualified Supplemental Retirement Benefit Plan and Nonqualified Deferred Compensation Plan. |
Under Mr. Fine’sFine's employment agreement, “cause”"cause" is defined as:
| ● · | the executive’sexecutive's conviction of, or plea of guilty or nolo contendere to, any crime involving dishonesty or moral turpitude; |
| ● · | the commission by the executive of a fraud against the Company for which he is convicted; |
| ● · | gross negligence or willful misconduct by the executive with respect to the Company which causes material detriment to the Company; |
| ● · | the falsification or manipulation of any records of the Company; |
| ● · | repudiation of the agreement by the executive or executive’sthe executive's abandonment of employment with the Company; |
| ● · | breach by the executive of his confidentiality, non-competition or non-solicitation obligations under the agreement; or |
| ● · | 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. |
Under Mr. Fine’sFine's employment agreement, a “change"change in control”control" will occur if:
| ● · | any person or group acting in concert, other than the executive or his affiliates or immediate family members, is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company’sCompany's outstanding shares entitled to vote for the election of directors; |
| ● · | the directors serving at the time the agreement was entered into or any successor to any such director (and any additional director) who after such time (i) was nominated or selected by a majority of the directors serving at the time of his or her nomination or selection and (ii) who is not an “affiliate”"affiliate" or “associate”"associate" (as defined in Regulation 12B under the Securities Exchange Act of 1934)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’sCompany's outstanding shares entitled to vote for the election of directors, cease for any reason to constitute at least a majority of the Company’sCompany's Board of Directors; |
| ●· | a sale of more than 50% of the Company’sCompany's assets (measured in terms of monetary value) is consummated; or |
| ● · | any merger, consolidation or like business combination or reorganization of the Company is consummated that results in the occurrence of any event described above. |
J. Allen Fine is also party to a Death Benefit Plan Agreement with the Company. The Death Benefit Plan Agreement provides that in the event of his death while employed by the Company, a lump sum amount equal to three (3) times the sum of his currentthen-current base salary, but in no event to be less than $910,000, plus the average of his bonus compensation for the past three (3)fiscal years, but in no event to be less than $1,055,000, be paid within 60 days of his death to a beneficiary designated by Mr. Fine.
James A. Fine, Jr. and W. Morris Fine. The employment agreements of James A. Fine, Jr. and W. Morris Fine are substantially identical to J. Allen Fine’sFine's employment agreement, except that under their agreements the following apply:
● | · | Messrs. Fine, Jr. and Fine are eligible to receive retirement benefits under their agreements after age 50, rather than age 70; |
● | · | the minimum lump sum salary payment upon termination for disability or retirement shall be no less than $766,680 for each; |
● | · | the minimum lump sum bonus compensation payment upon termination for disability or retirement shall be no less than $1,030,000 for James A. Fine, Jr. and no less than $1,015,000 for W. Morris Fine; |
● | · | the minimum lump sum salary payment for termination without cause or by employee for good reason"good reason" shall be no less than $1,277,800 for each; |
● | · | the minimum lump sum bonus compensation payment for termination without cause or by employee for good reason"good reason" shall be no less than $1,716,665 for James A. Fine, Jr. and no less than $1,691,665 for W. Morris Fine; |
● | · | if James A. Fine, Jr. leaves the Company due to a change"change in control," he will receive a lump sum salary payment in an amount no less than $764,124 and a lump sum bonus payment in an amount no less than $1,026,565; |
● | · | if W. Morris Fine leaves the Company due to a change"change in control," he will receive a lump sum salary payment in an amount no less than $764,124 and a lump sum bonus payment in an amount no less than $1,011,615; and |
● | · | following termination of employment by the Company other than for “cause”"cause" or by the executive due to a material breach by the Company of the agreement (i.e., “good reason”"good reason") or because of a “change"change in control,”" they are entitled to cause the Company to transfer to them any life insurance policies owned by the Company on their lives. |
James A. Fine, Jr. and W. Morris Fine are also each party to a Death Benefit Plan Agreement. Their Death Benefit Plan Agreements provide that in the event of their death while employed by the Company, a lump sum amount equal to three (3) times the sum of their currentthen-current base salary, but in no event to be less than $766,680 for each Executive,executive, plus the average of each Executive’sexecutive's bonus compensation for the past three (3)fiscal years, but in no event to be less than $1,030,000 for James A. Fine, Jr., and no less than $1,015,000 for W. Morris Fine, be paid within 60 days of their individual death to a beneficiary designated by the Executive.executive. Additionally, under each Executive’sexecutive's Death Benefit Plan Agreement, the respective designated beneficiary of each of Messrs. Fine and their designated beneficiariesFine would also be paid a lump sum amount equal to $2,000,000,
● | · | reduced by the following amounts: |
(a) | three times the then currentthen-current base salary but in no event to be less than $766,680 for each executive; |
| (b) | three times the average bonus compensation during the preceding three fiscal years but in no event to be less than $1,030,000 for James A. Fine, Jr. and no less than $1,015,000 for W. Morris Fine; |
| (c) | the cost of continued participation in the Company’sCompany's health insurance plans by the executive’sexecutive's wife until her death; and |
| (d) | the cost of continued participation in the Company’sCompany's health insurance plans by the executive’sexecutive's dependent children until any such children are no longer dependent.dependent; and |
● | · | increased by the amounts accrued on the Company’sCompany's books as of the date of death for the payments described in items (a) through (d) above. |
Conditions to Receipt of Severance Benefits. Under each named executive officer’sofficer's employment agreement, the Company’sCompany's obligations to provide the executive with the severance benefits described above are contingent on:
● | · | The executive’sexecutive's compliance with certain covenants with respect to confidential information; |
● | · | The executive’sexecutive's compliance with a two year non-competition covenant; and |
● | · | The executive’sexecutive's compliance with a two year non-solicitation covenant. |
Estimated Post-Employment Compensation and Benefits. The following tables set forth the estimated post-employment compensation and benefits that would have been payable to each of the named executive officers under his agreements, assuming that each covered circumstance occurred on December 31, 2014.2017.
The following table shows the potential payments upon termination or a change ofin control of the Company for J. Allen Fine, the Company’sCompany's Chief Executive Officer:Officer and Chairman of the Board:
Executive Benefits and Payments Upon Termination | Voluntary Termination ($) | Termination Due to Change in Control ($) | Death ($) | For Cause Termination ($) | Involuntary or Good Reason T ermination ($) | Termination for Retirement (1) or Disability ($) |
Compensation: | | | | | | |
| Base Salary | - | 1,022,580(4) | 1,026,000 (5) | 28,500 (3) | 1,710,000 (6) | 1,026,000 (5) |
| Bonus | - | 1,051,484(7) | 1,055,000 (8) | - | 1,758,335 (9) | 1,055,000 (8) |
| Supplemental Retirement Plan (10) | - | - | - | - | - | - |
| Supplemental Retirement Benefit (11) | 23,729 | 23,729 | 23,729 | 23,729 | 23,729 | 23,729 |
| | | | | | | |
Benefits and Perquisites: | | | | | | |
| Health Plan (12) | - | 37,929 | 37,929 | - | 37,929 | 37,929 |
Total – J. Allen Fine | 23,729 | 2,135,722 | 2,142,658 | 52,229 | 3,529,993 | 2,142,658 |
Executive Benefits and Payments Upon Termination | | Voluntary Termination ($) | | | Termination Due to Change in Control ($) | | | Death ($) | | | For Cause Termination ($) | | | Involuntary or Good Reason Termination ($) | | | Termination for Retirement (1) or Disability ($) | |
Compensation: | | | | | | | | | | | | | | | | | | |
Base Salary | | | - | | | | 1,233,076 | (4) | | | 1,237,200 | (5) | | | 34,367 | (6) | | | 2,062,000 | (7) | | | 1,237,200 | (5) |
Bonus | | | - | | | | 1,495,000 | (8) | | | 1,500,000 | (9) | | | - | | | | 2,500,000 | (10) | | | 1,500,000 | (9) |
Supplemental Retirement Plan (111) | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
Supplemental Retirement Benefit (12) | | | 36,320 | | | | 36,320 | | | | 36,320 | | | | 36,320 | | | | 36,320 | | | | 36,320 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Benefits and Perquisites: | | | | | | | | | | | | | | | | | | | | | | | | |
Health Plan (13) | | | - | | | | 100,831 | | | | 100,831 | | | | - | | | | 100,831 | | | | 100,831 | |
Total – J. Allen Fine | | | 36,320 | | | | 2,865,227 | | | | 2,874,351 | | | | 70,687 | | | | 4,699,151 | | | | 2,874,351 | |
The following table shows the potential payments upon termination or a change ofin control of the Company for James A. Fine, Jr., the Company’sCompany's President, and Chief Financial Officer:Officer and Treasurer:
Executive Benefits and Payments Upon Termination | | Voluntary Termination ($) | | | Termination Due to Change in Control ($) | | | Death ($) | | | For Cause Termination ($) | | | Involuntary or Good Reason Termination ($) | | | Termination for Retirement (2) or Disability ($) | |
Compensation: | | | | | | | | | | | | | | | | | | |
Base Salary | | | - | | | | 1,046,500 | (4) | | | 1,050,000 | (5) | | | 29,167 | (6) | | | 1,750,000 | (7) | | | 1,050,000 | (5) |
Bonus | | | - | | | | 1,544,833 | (8) | | | 1,550,000 | (9) | | | - | | | | 2,583,333 | (10) | | | 1,550,000 | (9) |
Supplemental Retirement Plan (11) | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
Supplemental Retirement Benefit (12) | | | 33,778 | | | | 33,778 | | | | 33,778 | | | | 33,778 | | | | 33,778 | | | | 33,778 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Benefits and Perquisites: | | | | | | | | | | | | | | | | | | | | | | | | |
Health Plan (13) | | | - | | | | 384,087 | | | | 384,087 | | | | - | | | | 384,087 | | | | 384,087 | |
Death Benefit Plan Agreement (14) | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
Life Insurance (15) | | | - | | | | 337,968 | | | | 337,968 | | | | - | | | | 337,968 | | | | 337,968 | |
Total - James A. Fine, Jr. | | | 33,778 | | | | 3,347,166 | | | | 3,355,833 | | | | 62,945 | | | | 5,089,166 | | | | 3,355,833 | |
Executive Benefits and Payments Upon Termination | Voluntary Termination ($) | Termination Due to Change in Control ($) | Death ($) | For Cause Termination ($) | Involuntary or Good Reason Termination ($) | Termination for Retirement (2) or Disability ($) |
Compensation: | | | | | | |
| Base Salary | - | 867,100 (4) | 870,000 (5) | 24,167 (3) | 1,450,000 (6) | 870,000 (5) |
| Bonus | - | 1,076,400 (7) | 1,080,000 (8) | - | 1,800,000 (9) | 1,080,000 (8) |
| Supplemental Retirement Plan (10) | - | - | - | - | - | - |
| Supplemental Retirement Benefit (11) | 24,700 | 24,700 | 24,700 | 24,700 | 24,700 | 24,700 |
| | | | | | | |
Benefits and Perquisites: | | | | | | |
| Health Plan (12) | - | 371,563 | 371,563 | - | 371,563 | 371,563 |
| Death Benefit Plan s Agreement (13) | - | - | - | - | - | - |
| Life Insurance (14) | - | 248,167 | 248,167 | - | 248,167 | 248,167 |
Total - James A. Fine, Jr. | 24,700 | 2,587,930 | 2,594,430 | 48,867 | 3,894,430 | 2,594,430 |
The following table shows the potential payments upon termination or a change ofin control of the Company for W. Morris Fine, the Company’sCompany's Executive Vice President and Secretary:
Executive Benefits and Payments Upon Termination | | Voluntary Termination ($) | | | Termination Due to Change in Control ($) | | | Death ($) | | | For Cause Termination ($) | | | Involuntary or Good Reason Termination ($) | | | Termination for Retirement(3) or Disability ($) | |
Compensation: | | | | | | | | | | | | | | | | | | |
Base Salary | | | - | | | | 1,046,500 | (4) | | | 1,050,000 | (5) | | | 29,167 | (6) | | | 1,750,000 | (7) | | | 1,050,000 | (5) |
Bonus | | | - | | | | 1,544,833 | (8) | | | 1,550,000 | (9) | | | - | | | | 2,583,333 | (10) | | | 1,550,000 | (9) |
Supplemental Retirement Plan (11) | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
Supplemental Retirement Benefit (12) | | | 33,778 | | | | 33,778 | | | | 33,778 | | | | 33,778 | | | | 33,778 | | | | 33,778 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Benefits and Perquisites: | | | | | | | | | | | | | | | | | | | | | | | | |
Health Plan (13) | | | - | | | | 410,809 | | | | 410,809 | | | | - | | | | 410,809 | | | | 410,809 | |
Death Benefit Plan Agreement (14) | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
Life Insurance (15) | | | - | | | | 217,226 | | | | 217,226 | | | | - | | | | 217,226 | | | | 217,226 | |
Total – W. Morris Fine | | | 33,778 | | | | 3,253,146 | | | | 3,261,813 | | | | 62,945 | | | | 4,995,146 | | | | 3,261,813 | |
Executive Benefits and Payments Upon Termination | Voluntary Termination ($) | Termination Due to Change in Control ($) | Death ($) | For Cause Termination ($) | Involuntary or Good Reason Termination ($) | Termination for Retirement or Disability ($) |
Compensation: | | | | | | |
| Base Salary | - | 867,100 (4) | 870,000 (5) | 24,167 (3) | 1,450,000(6) | 870,000 (5) |
| Bonus | - | 1,076,400 (7) | 1,080,000 (8) | - | 1,800,000(9) | 1,080,000 (8) |
| Supplemental Retirement Plan (10) | - | - | - | - | - | - |
| Supplemental Retirement Benefit (11) | 24,700 | 24,700 | 24,700 | 24,700 | 24,700 | 24,700 |
| | | | | | | |
Benefits and Perquisites: | | | | | | |
| Health Plan (12) | - | 362,045 | 362,045 | - | 362,045 | 362,045 |
| Death Benefit Plan Agreement (13) | - | - | - | - | - | - |
| Life Insurance (14) | - | 159,401 | 159,401 | - | 159,401 | 159,401 |
Total – W. Morris Fine | 24,700 | 2,489,646 | 2,496,146 | 48,867 | 3,796,146 | 2,496,146 |
| (1) | J. Allen Fine wasbecame eligible to retire on May 2, 2004. |
| | |
| (2) | James A. Fine, Jr. wasbecame eligible to retire on April 19, 2012. |
| | |
| (3) | RepresentsW. Morris Fine became eligible to retire on July 30, days severance.2016. |
| | |
| (4) | Represents lump sum severance payment equal to 2.99 times base salary, but in no event less than $907,046 for J. Allen Fine, $764,124 for James A. Fine, Jr., and $764,124 for W. Morris Fine. |
| (5) | Represents lump sum severance payment under the Death Benefit Plan Agreement equal to 3three times base salary, but in no event less than $910,000 for J. Allen Fine, $766,680 for James A. Fine, Jr. and $766,680 for W. Morris Fine. |
| | |
| (6) | Represents 30 days severance. |
| (7) | Represents lump sum severance payment equal to 5five 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. |
| | |
| (7)(8) | 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. |
| | |
| (8)(9) | Represents lump sum severance payment under the Death Benefit Plan Agreement equal to 3three 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. |
| | |
| (9)(10) | Represents lump sum severance payment equal to 5five times average bonus for past three fiscal years, but in no event less than$1,758,335than $1,758,335 for J. Allen Fine, $1,716,665 for James A. Fine, Jr., and $1,691,665 for W. Morris Fine. |
| | |
| (10)(11) | Represents accumulated benefit under the Company’sCompany's Nonqualified Supplemental Retirement Benefit Plan plus contribution required to ensure minimum of 20 quarters of Company contributionscontributions. |
| | |
| (11)(12) | Represents the accrued annual supplemental cash retirement benefit under the named executive officers’officers' employment agreements. |
| | |
| (12)(13) | Reflects estimated cost of providing health insurance plan coverage usingutilizing assumptions used for financial reporting purposes. |
| | |
| (13)(14) | Represents additional estimated lump sum amount, if any, that would be payable under the officer’sofficer's Death Benefit Plan Agreement. |
| | |
| (14)(15) | Reflects cash surrender value of life insurance policy, transferable at the executive’sexecutive's request. |
PEO to Median Employee Pay Ratio
Beginning in 2017, SEC rules require companies to disclose the ratio of the total annual compensation of the company's principal executive officer ("PEO") to the median employee's total annual compensation. The 2017 pay ratio for the Company is as follows:
Median annual total compensation of all employees (excluding J. Allen Fine) | | $ | 63,224 | |
Annual total compensation of J. Allen Fine, Chief Executive Officer (the Company's PEO) | | $ | 1,220,745 | |
Ratio of the PEO to median employee compensation | | 19.3 to 1 | |
In determining the median employee, we examined total compensation paid in 2017 (including salary or wages, bonuses paid in 2017, company contributions under our 401(k) plan, and the grant date fair value of equity awards) consistently for all individuals, excluding Mr. Fine, who were employed by our company as of December 31, 2017. We included all of our employees in this process, whether employed on a full-time or part-time basis. We annualized the compensation for full-time employees that were not employed by us for all of 2017. We calculated the median employee's annual total compensation using the same methodology we use for our named executive officers as set forth in the 2017 Summary Compensation Table in this proxy statement. The Company's PEO to median employee pay ratio disclosed above is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K adopted by the SEC. However, due to the flexibility afforded by Item 402(u) in calculating the PEO pay ratio, our PEO pay ratio may not be comparable to the PEO pay ratios presented by other companies.
Risk Analysis of Compensation Policies and Practices
We have considered our compensation policies and practices for all employees and concluded that any risks arising from our policies and practices are not reasonably likely to have a material adverse effect on Investors Titlethe 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"related party transaction”transaction" is defined as (A) any transaction that is required to be disclosed in the Company’sCompany's proxy statements or other filings with the SEC pursuant to Item 404(a) of Regulation S-K under the Securities Exchange Act of 1934;S-K; (B) any material “conflict"conflict of interest”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 for the year 2014.during fiscal 2017.
SHAREHOLDER PROPOSALS FOR
20162019 ANNUAL MEETING
Shareholders who, in accordance with SEC Rule 14a-8 of the Exchange Act, wish to present proposals for inclusion in the proxy materials to be distributed in connection with the 20162019 Annual Meeting of Shareholders must submit their proposals so that they are received at the Company’sCompany's principal executive offices no later than December 15, 2015.14, 2018. Pursuant to SEC rules, submitting a proposal does not guarantee that it will be included in the proxy materials.
In accordance with the Company’sCompany's Bylaws, in order to be properly brought before the 20162019 Annual Meeting of Shareholders, a shareholder’sshareholder's notice of a matter the shareholder wishes to present (other than a matter brought pursuant to SEC Rule 14a-8)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 21, 201616, 2019 and no later than the close of business on February 20, 2016.15, 2019. To be in proper form, such shareholder’sshareholder's notice must include the specified information concerning the proposal or nominee as described in the Company’sCompany'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’sCompany's Bylaws.
| BY ORDER OF THE BOARD OF DIRECTORS: |
| |
| |
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| W. Morris Fine |
| Secretary |
| April 13, 2018 |
31
BY ORDER OF THE BOARD OF DIRECTORS:
| | | | | | | VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information. Vote by 11:59 P.M. ET on 05/15/2018. 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. Vote by 11 :59 P.M. ET on 05/15/2018. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. | |
| | | Investors Title Company | | | | |
| | | | | | | |
| | | Broadridge Corporate Issuer Solutions C/O Investors Title Company PO BOX 1342 Brentwood, NY 11717 | | | |
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| | | Investor Address Line 1 Investor Address Line 2 Investor Address Line 3 Investor Address Line 4 Investor Address Line 5 John Sample 1234 ANYWHERE STREET ANY CITY, ON A1A 1A1 | | | |
| | | | | | |
| | | | | | | |
| | | CONTROL # | 0000000000000000 | | |
| NAME | | | | | |
| THE COMPANY NAME INC. - COMMON | | SHARES | 123,456,789,012.12345 | |
| THE COMPANY NAME INC. - CLASS A | | | 123,456,789,012.12345 | |
| THE COMPANY NAME INC. - CLASS B | | | 123,456,789,012.12345 | |
| THE COMPANY NAME INC. - CLASS C | | | 123,456,789,012.12345 | |
| THE COMPANY NAME INC. - CLASS D | | | 123,456,789,012.12345 | |
| THE COMPANY NAME INC. - CLASS E | | | 123,456,789,012.12345 | |
| THE COMPANY NAME INC. - CLASS F | | | 123,456,789,012.12345 | |
| THE COMPANY NAME INC. - 401 K | | | 123,456,789,012.12345 | |
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | ☒ |
| KEEP THIS PORTION FOR YOUR RECORDS |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. | DETACH AND RETURN THIS PORTION ONLY |
| For All | Withhold All | For All Except | | 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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| 1. | Election of Directors | | | | | |
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| | Nominees: | | | | | |
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| 01 | James A. Fine Jr | 02 | H. Joe King Jr | 03 | James R. Morton | |
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| The Board of Directors recommends you vote FOR proposal 2: | | For | Against | Abstain |
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| 2. | Proposal to ratify the appointment of Dixon Hughes Goodman LLP as the Company's independent registered public accounting firm for 2018. | | ☐ | ☐ | ☐ |
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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. | | | Investor Address Line 1 | | |
| | | Investor Address Line 2 | | |
| | | Investor Address Line 3 | | |
| | | Investor Address Line 4 | | |
| | | Investor Address Line 5 | | |
| | | John Sample | | |
| | | 1234 ANYWHERE STREET | | |
| | | ANY CITY, ON A1A 1A1 | | |
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| Signature [PLEASE SIGN WITHIN BOX] | Date | JOB # | Signature (Joint Owners) | Date | |
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W. Morris Fine
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 16, 2018 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 (the "Company") that shareholders are entitled to vote at the Annual Meeting of Shareholders of the Company to be held at The Siena Hotel located at 1505 East Franklin Street, Chapel Hill, North Carolina on Wednesday, May 16, 2018 at 11 :00 AM, EDT, and any adjournment or postponement thereof. This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors' recommendations. The proxy holders are also authorized to vote upon all other matters as may properly come before the meeting, or any adjournment or postponement thereof, utilizing their best judgment as described in the proxy statement. Continued and to be signed on reverse side |