<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement ( ) Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Investors Title Company
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) No fee required
( ) 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:
5) Total fee paid:
( ) Fee paid previously with preliminary materials.
( ) 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.:
3) Filing Party:
4) Date Filed:
<PAGE>
(Logo) (register mark) Investors Title Company
121 North Columbia Street, Chapel Hill, North Carolina 27514
(919) 968-2200
April 7, 1997
Dear Shareholders:
You are cordially invited to attend the Annual Meeting of
Shareholders to be held in the Investors Title Building, 121 North
Columbia Street, Chapel Hill, North Carolina on Tuesday, May 13, 1997,
at 11:00 A.M.
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 1997, followed by discussion and voting on the matters
set forth in the accompanying Notice of Annual Meeting and Proxy
Statement.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" ALL OF
THE PROPOSALS.
I URGE YOU TO REVIEW THE PROXY STATEMENT, SIGN AND DATE YOUR PROXY,
AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
If you attend the meeting, you may, of course, choose to revoke your
proxy and personally cast your vote.
Cordially,
/s/ J. Allen Fine
J. Allen Fine
President
<PAGE>
(Logo) (register mark) Investors Title Company
121 North Columbia Street, Chapel Hill, North Carolina 27514
(919) 968-2200
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 13, 1997
The Annual Meeting of the Shareholders of Investors Title Company
will be held at 121 North Columbia Street, Chapel Hill, North Carolina,
on Tuesday, May 13, 1997 at 11:00 A.M. E.D.T., for the following
purposes:
(1) To elect three directors for three-year terms or until their
successors are elected and qualified.
(2) To consider and act upon a proposal to approve the 1997 Stock
Option and Restricted Stock Plan.
(3) To consider and act upon a proposal to ratify the selection of
Deloitte & Touche LLP, Certified Public Accountants, by the
Board of Directors, to audit the books and accounts of the
Company for the calendar year ending December 31, 1997.
(4) To consider any other business that may properly come before the
meeting.
The stock transfer books of the Company will not be closed but only
shareholders of record of Common Stock of the Company at the close of
business on March 28, 1997 are entitled to notice of and to vote at the
meeting.
By Order of the Board of Directors:
/s/ L. Dawn Martin
L. Dawn Martin
Vice President and Assistant Secretary
IMPORTANT - YOUR PROXY IS ENCLOSED. WHETHER OR NOT YOU EXPECT TO BE PRESENT AT
THE MEETING, PLEASE SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT IN THE
POSTAGE-PAID ENVELOPE PROVIDED FOR THAT PURPOSE. IT WILL ASSIST THE COMPANY IN
KEEPING DOWN THE EXPENSES OF THE MEETING IF ALL SHAREHOLDERS WILL RETURN THEIR
SIGNED PROXIES PROMPTLY. YOU MAY NEVERTHELESS VOTE IN PERSON IF YOU DO ATTEND
THE MEETING.
<PAGE>
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 13, 1997
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 121 North Columbia Street, Chapel
Hill, North Carolina, on May 13, 1997 at 11:00 A.M. E.D.T., and at all
adjournments thereof. Shareholders of record at the close of business on March
28, 1997 are entitled to notice of and to vote at the meeting or any adjournment
thereof.
PROXY SOLICITATION BY THE BOARD OF DIRECTORS. The solicitation of proxies
will be by mail and is made on behalf of the Board of Directors and the cost of
solicitation of proxies will be borne by the Company. Where requested, the
Company will authorize banks, brokerage houses and other custodians, nominees
and fiduciaries to forward copies of the proxy material to the beneficial owners
of shares or to request authority for the execution of the proxies and will
reimburse the banks, brokerage houses and other custodians, nominees and
fiduciaries for their out-of-pocket expenses incurred in connection therewith.
REVOCABILITY OF PROXY. 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.
VOTING SECURITIES. On March 28, 1997, the Company had a total of 2,855,744
shares of Common Stock outstanding, its only class of issued and outstanding
capital stock. Of these shares, 2,766,739 shares are entitled to one vote per
share and 89,005 shares are held by a subsidiary of the Company and, by State
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 1996 including financial statements and auditors' opinion, along
with this Proxy Statement and proxy form, are being first mailed to the
Company's shareholders on or about April 7, 1997.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
During the year ended December 31, 1996, 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 Corporation's Board of Directors has a Compensation Committee, a
Nominating Committee and an Audit Committee.
In 1996, the Compensation Committee was composed of James R. Morton, Lillard
H. Mount and A. Scott Parker, Jr. The Committee is responsible for recommending
to the Board of Directors the compensation and benefits to be paid to officers
of the Company. The Compensation Committee met twice during 1996.
In 1996, the Nominating Committee was composed of J. Allen Fine, James R.
Morton, and Lillard H. Mount. A slate of nominees for directors to present to
the shareholders is recommended by the Nominating Committee and determined by at
least a majority vote of those directors whose terms do not expire during the
year in which the election of directors will be made. The Committee will
consider nominees recommended by the shareholders. Any shareholder wishing to
make a recommendation regarding a nominee for election at the 1998 Annual
Meeting should submit such recommendation to the Assistant Secretary, Investors
Title Company, P.O. Drawer 2687, Chapel Hill, North Carolina 27515-2687, no
later than December 8, 1997. The Nominating Committee met one time during 1996.
In 1996, the Audit Committee was composed of David L. Francis, William J.
Kennedy III and H. Joe King, Jr. The Committee recommends to the Board of
Directors the independent public accountants to be engaged by the Company,
reviews the overall scope of the annual audit proposed by the independent public
accountants, reviews internal audit procedures on various aspects of corporate
operations and periodically consults with the independent public accountants on
matters relating to internal financial controls and procedures. The Audit
Committee met twice during 1996.
DIRECTORS' COMPENSATION
Directors who are not employees of the Company receive an annual retainer
for Board services of $3,000 and an attendance fee of $750 for each Directors'
meeting attended in addition to actual travel expenses related to the meetings.
Directors do not receive fees for committee meetings attended unless the
committee meeting is held on a day other than the
1
<PAGE>
regularly scheduled board meeting date. The fee for such a committee meeting is
$250. Directors who are employees of the Company are paid no fees or other
remuneration for service on the Board or on any Board committee.
EXECUTIVE COMPENSATION
THE COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The fundamental philosophy of Investors Title Company's compensation program
is to provide competitive compensation opportunities for all employees based on
the individual's personal performance, experience and contribution to the growth
of the Company. In addition, it is the Company's goal to provide compensation
opportunities that are comparable to those offered by other businesses in the
area, thus allowing the Corporation to attract and retain experienced corporate
officers and key employees with outstanding ability and to motivate them to
perform to their fullest extent. The Company's compensation package is
competitive with other employers' compensation benefits of comparable size in
its area of operation.
In evaluating the performance and establishing the incentive compensation of
the Chief Executive Officer and other senior management, the Committee has
reviewed management's effectiveness in increasing premiums written over the past
three years, and its success in maximizing its sales efforts by expanding
operations in other market areas.
In reviewing management performance and compensation, the Committee also has
taken into account management's consistent commitment to the long-term success
of the Company through new innovations and intra-Company restructuring.
Based upon the evaluation of these factors, the Committee believes that the
senior management of the Company is dedicated to achieving long-term growth and
that the compensation approved by the Committee has contributed to achieving
this end.
Compensation for each of the named executive officers, as well as other
senior executives, consists of a base salary, a cash and/or stock bonus,
incentive stock options and a contribution under a Simplified Employee Pension
Plan. The Committee considers the total compensation of each of the named
executive officers and other senior executives in establishing each element of
compensation.
Each year, the President reviews with the Committee the proposed annual
salaries, and the Committee recommends any modifications it deems appropriate.
Salaries are recommended by the Chief Executive Officer based on industry
standards, national surveys, individual contribution and performance. The
Committee also fixes the base salary of the Chief Executive Officer based on the
same criteria and the Committee's assessment of his past performance and
expectations as to future leadership of the Company's business.
Stock and cash bonuses awarded to the named executive officers and other
senior executives are based on their performance throughout the year.
In determining the Chief Executive Officer's bonus award for 1996, the
Committee considered, in addition to the factors discussed above pertaining to
expanded markets and innovations, the Company's performance as reflected by the
fact that revenues were at their highest since the Company's incorporation, and
performance of the Corporation's competitors, as well as more subjective
criteria.
Periodically, the Committee considers the need to issue stock options, which
are designed to link the concerns of the executives with those of the
stockholders. Stock option grants provide an incentive that focuses the
executive's attention on managing the Company from the perspective of an owner
with an equity stake in the business. The Committee believes that past grants
have successfully focused the Company's senior management on building
profitability and shareholder value. The Chief Executive Officer is eligible to
participate in the same executive compensation plans available to other senior
executives.
In establishing the grants of stock options to the named executive officers
and other senior executives, the Chief Executive Officer reviewed with the
Committee the proposed option awards. Executive officers other than senior
executives also participate in the Company's compensation program. The award to
the Chief Executive Officer was based, among other things, on a review of
competitive compensation data, data from selected peer companies, information on
his total compensation and historical information, as well as the Committee's
perception of his past and expected future contributions to the Company's
achievement of its long-term performance goals.
Submitted by: James R. Morton Lillard H. Mount A. Scott Parker,
Jr.
Dated March 10, 1997
2
<PAGE>
SUMMARY COMPENSATION TABLE
Shown below is information concerning the annual compensation for services
in all capacities to the Company for the fiscal years ended December 31, 1996,
1995 and 1994, of those persons who were, at December 31, 1996 (i) the Chief
Executive Officer and (ii) the senior executive officers, other than the CEO,
who earned more than $100,000 in salary and bonus during 1996 (the "Named
Executive Officers").
<TABLE>
<CAPTION>
Long Term Compensation
Awards Payouts
Annual Compensation Restricted Securities
Name and Other Annual Stock Underlying LTIP All Other
Principal Salary Bonus Compensation Awards Options/ Payouts Compensation
Position Year ($) ($) ($) ($) SARs (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
J. Allen Fine 1996 $205,871 $124,405 -- -- -- -- $ 98,529(1)
President 1995 200,850 88,000 -- -- 5,000 -- 95,475
1994 194,225 84,000 -- -- 15,000 -- 17,692
Carl E. Wallace, 1996 98,521 15,494 -- -- -- -- 15,249(2)
Jr. 1995 96,118 15,625 -- -- -- -- 14,759
Vice President 1994 92,978 17,650 -- -- 5,000 -- 14,911
Secretary
</TABLE>
(1) Total represents $15,000 Company contribution to Simplified Employee Pension
Plan, along with $3,173 Company-paid life insurance premiums, and $80,356 in
payments for accrued but unused vacation time.
(2) Total represents $11,876 Company contribution to Simplified Employee Pension
Plan, along with $1,989 Company-paid health insurance premiums, and $1,384
Company-paid life insurance premiums.
The following table shows stock options exercised by the Named Executive
Officers during 1996, including the aggregate value of gains on the date of
exercise (the "Value Realized"). In addition, this table includes the number of
shares covered by both exercisable and unexercisable stock options as of
December 31, 1996. Also reported are the values for "in-the-money" options which
represent the positive spread between the exercise price of any such existing
stock options and the year-end price of the Common Stock.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
Number of
Securities Value of (1)
Underlying Unexercised
Unexercised In-the-Money
Shares Options at Options at
Acquired Value FY-End (#) FY-End ($)
on Realized Exercisable/ Exercisable/
Name Exercise (#) ($) Unexercisable Unexercisable
<S> <C> <C> <C> <C>
J. Allen Fine 4,000 $ 22,525 3,000/ $ 21,750/
13,000 101,250
Carl E. Wallace, Jr. 0 0 2,000/ 14,500/
3,000 21,750
</TABLE>
(1) The closing price of the Common Stock on December 31, 1996, the last day of
1996 on which the Company's Common Stock traded, was $15.75.
3
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total return among the Company's
Common Stock, a broad equity market index (the NASDAQ Market Index) and a peer
group index for the last five years. The peer group index (selected on the basis
of SIC Codes for publicly-traded title insurance companies) consists of
Alleghany Corporation, Fidelity National Financial, First American Financial
Corporation, Investors Title Company, Lawyers Title Corporation, and Stewart
Information Services Corporation.
(Performance Graph appears here with the following plot points)
1992 1993 1994 1995 1996
Investors Title Co. (Customer to fill in numbers)
NASDAQ Market Index
Peer Group Index
ASSUMES $100 INVESTED ON DEC. 31, 1991
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 31, 1996
EXECUTIVE EMPLOYMENT AGREEMENT
On February 9, 1984, Investors Title Insurance Company entered into an
employment agreement with J. Allen Fine, which provides, among other things, for
a salary to be fixed by the Board of Directors but in no event to be less than
$88,000 per annum. The agreement also provides for a term of five years
renewable annually until such time as Mr. Fine reaches age 70.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
For the year ended December 31, 1996, James R. Morton, Lillard H. Mount, and
A. Scott Parker, Jr. served on the Compensation Committee. Mr. Mount, who serves
as General Counsel to the Company, is a part-time employee of the Company.
4
<PAGE>
OWNERSHIP OF STOCK BY EXECUTIVE OFFICERS AND
CERTAIN BENEFICIAL OWNERS
The following table indicates the persons known to the Company to be the
owners of more than five percent (5%) of the Company's Common Stock as of March
28, 1997.
<TABLE>
<CAPTION>
Title of Name and Address of Amount and Nature Percent
Class Beneficial Owner of Beneficial Ownership of Class
<S> <C> <C> <C>
Common Markel Corporation 245,900(1) 8.9%
Stock 4551 Cox Road
Glen Allen, Virginia 23060
J. Allen Fine 229,269(2) 8.3%
112 Carolina Forest
Chapel Hill, North Carolina 27516
</TABLE>
(1) Ownership as of December 31, 1996 as reported to the Company on a
Schedule 13G. According to the Schedule 13G, Markel Gayner Asset
Management Corporation, a wholly-owned subsidiary of Markel Corporation,
may also be deemed to beneficially own the shares referenced above.
(2) This includes 7,000 shares of Common Stock that Mr. Fine has the right
to purchase under presently exercisable stock options granted to him by
the Company, which shares may be deemed to be beneficially owned by him.
The table below sets forth the shares of the Company's Common Stock
beneficially owned by each director, nominee for director, the Chief Executive
Officer and the named most highly compensated executive officers, and by all
directors and executive officers as a group.
<TABLE>
<CAPTION>
Title of Name of Amount and Nature Percent
Class Beneficial Owner of Beneficial Ownership of Class
<S> <C> <C> <C>
Common J. Allen Fine 229,269(1) 8.3%
Stock Carl E. Wallace, Jr. 91,252(2) 3.3
A. Scott Parker, Jr. 81,856 3.0
David L. Francis 53,166 1.9
James A. Fine, Jr. 44,063(3) 1.6
H. Joe King, Jr. 17,776(4) *
James R. Morton 16,250 *
William J. Kennedy III 2,000 *
Lillard H. Mount 1,880 *
Richard W. McEnally 1,043 *
Loren B. Harrell, Jr. 0 *
All Executive Officers and 597,080(5) 21.4%
Directors as a Group (14 persons)
*Represents less than 1%.
</TABLE>
(1) This total includes 7,000 shares of Common Stock that Mr. Fine has the right
to purchase under presently exercisable stock options granted to him by the
Company, which shares may be deemed to be beneficially owned by him.
(2) This total includes 3,000 shares of Common Stock that Mr. Wallace has the
right to purchase under presently exercisable stock options granted to him
by the Company, which shares may be deemed to be beneficially owned by him.
Additionally, this total includes shares beneficially owned as follows:
3,124 shares as Custodian for John Wallace, son; 1,562 shares as Custodian
for William A. Wallace, son; 1,562 shares as Custodian for Brian E. Wallace,
son; 2,305 shares as Joint Tenants with Diana Wallace, wife; and 86 shares
of Diana Wallace, wife.
(3) This total includes 6,200 shares of Common Stock that Mr. Fine has the right
to purchase under presently exercisable stock options granted to him by the
Company, which shares may be deemed to be beneficially owned by him.
Additionally, this total includes shares beneficially owned as follows: 76
shares by wife, Leslie A. Fine.
(4) This total includes shares beneficially owned as follows: 700 shares by
wife, Patsy T. King.
(5) This total includes 26,525 shares of Common Stock that all officers and
directors, as a group, have the right to purchase under presently
exercisable stock options granted to the officer or director by the Company,
which shares may be deemed to be beneficially owned by them.
5
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based on a review of the reports of changes in beneficial ownership of
Company Common Stock and written representations furnished to the Company, the
Company believes that its officers, directors and holders of at least 10% of its
Common Stock filed on a timely basis the reports required to be filed under
Section 16(a) of the Securities Exchange Act of 1934 during the year ended
December 31, 1996. The Company is not aware of any holders of more than 10% of
its Common Stock.
ITEM 1
ELECTION OF DIRECTORS
The Company's Board of Directors is composed of nine members divided into
three classes with staggered terms of three years for each class.
James R. Morton and Lillard H. Mount are nominated for re-election to serve
for a three-year period or until their respective successors have been elected
and qualified. James A. Fine, Jr. has been nominated to serve for a three-year
period or until his successor has been elected and qualified. The nominees will
be elected if they receive a plurality of the votes cast for their election.
Broker nonvotes will not affect the election results if a quorum is present. If
any of the nominees should withdraw or otherwise become unavailable for reasons
not presently known, shares represented by proxies may be voted for other
persons in their place in accordance with the best judgments of the persons
named in the Proxy. THE BOARD RECOMMENDS A VOTE "FOR' THE ELECTION OF THE
NOMINEES FOR DIRECTORS.
Information regarding nominees for election as directors and directors
continuing in office is set forth below:
<TABLE>
<CAPTION>
Served as Term
Principal Director to
Name Occupation (1) Age Since Expire
<S> <C> <C> <C> <C>
BOARD NOMINEES:
James A. Fine, Jr. Vice President 35 -- 2000
Investors Title Company
James R. Morton President 59 1985 2000
TransCarolina Corporation
Lillard H. Mount General Counsel 83 1977 2000
Investors Title Company
DIRECTORS CONTINUING IN OFFICE:
J. Allen Fine Chairman & President 62 1973 1998
Investors Title Company
David L. Francis President 64 1982 1998
Marsh Associates
A. Scott Parker, Jr. Retired 88 1983 1998
Private Investments
Loren B. Harrell, Jr. President 48 1996 1999
SoftPro Corporation
H. Joe King, Jr. President 64 1983 1999
Home Federal Savings
& Loan Association
William J. Kennedy III Retired 74 1987 1999
Private Investments
</TABLE>
(1) All nominees and directors have held these positions for at least five
years, unless otherwise specifically noted below.
6
<PAGE>
BIOGRAPHICAL INFORMATION
Additional information regarding nominees for election as director and directors
continuing in office is set forth below.
BOARD NOMINEES:
James A. Fine, Jr. is Vice President of Investors Title Company, Executive Vice
President and Chief Financial Officer of Investors Title Insurance Company and
Northeast Investors Title Insurance Company, and President of Investors Title
Exchange Corporation and South Carolina Document Preparation Company.
Additionally, Mr. Fine serves as Chairman of the Board of South Carolina
Document Preparation Company. Mr. Fine is the son of J. Allen Fine, President
and Chairman of the Board of the Company, and brother of W. Morris Fine, Vice
President and Treasurer of the Company.
James R. Morton was president of J.R. Morton Associates from 1968 until he
retired in 1988. He is currently President of TransCarolina Corporation.
Lillard H. Mount has served as General Counsel to Investors Title Company and
its subsidiaries since their incorporation, and as a Director of Investors Title
Company since 1977.
DIRECTORS CONTINUING IN OFFICE:
J. Allen Fine was the principal organizer of Investors Title Insurance Company
and has been Chairman of the Board of that Company, Investors Title Company, and
Northeast Investors Title 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 President of
Investors Title Company and President and Chief Executive Officer of Northeast
Investors Title Insurance Company. Mr. Fine also serves as Chairman of the Board
of Investors Title Exchange Corporation. Mr. Fine is the father of James A.
Fine, Jr., Vice President of the Company and nominee for the Board of Directors
of the Company, and W. Morris Fine, Vice President and Treasurer of the Company.
David L. Francis is President of Marsh Associates Inc., a mortgage banking and
property management company, and has held this position since 1963. He serves on
the Charlotte, North Carolina City Board of Directors of First Union National
Bank, a publicly-held company, and First Landmark Company, a Charlotte real
estate and property management firm.
A. Scott Parker, Jr. was President of Perpetual Savings & Loan Association until
he retired in 1979.
Loren B. Harrell, Jr. organized SoftPro Corporation in 1984 and has been
President of that company since its inception. SoftPro specializes in the
research and development of software utilized by law firms, title companies and
lending institutions as well as small businesses and estate administrators.
H. Joe King, Jr. is President and Chairman of the Board of Home Federal Savings
& Loan Association in Charlotte, North Carolina and its parent company, HFNC
Financial Corporation, a public company. He has been employed by that Company
since 1962. He serves on the Board of Savers Life Insurance Company, a
publicly-held company.
William J. Kennedy III retired as President and Chief Executive Officer of North
Carolina Mutual Life Insurance Company in 1990, where he had been employed since
1950.
ITEM 2
PROPOSAL TO APPROVE THE 1997 STOCK OPTION
AND RESTRICTED STOCK PLAN
On March 10, 1997, the Board of Directors of the Company adopted, subject to
shareholder approval, the 1997 Stock Option and Restricted Stock Plan (the
"Plan"). The Plan is intended to induce those persons who are in a position to
contribute materially to the success of the Company to remain with the Company,
to offer them rewards in recognition of their contributions to the Company's
progress and to offer them incentives to continue to promote its best interests.
Under the Plan, the Company may grant incentive stock options, nonqualified
stock options or restricted stock awards. For purposes of the Plan, the term
"Company" includes Investors Title Company and its subsidiaries.
DESCRIPTION OF THE PLAN
GENERAL. The Plan provides that up to 250,000 shares of the Company's common
stock, no par value (the "Common Stock"), will be available for the grant of
incentive stock options, nonqualified stock options and restricted stock awards.
The total number of shares that may be issued to any one participant pursuant to
options granted under the Plan may not exceed an aggregate of 50,000 shares of
Common Stock. The Plan has a ten year term and, unless sooner terminated as
provided in the Plan, will terminate on March 9, 2007.
7
<PAGE>
The number and class of shares available under the Plan and the purchase
price per share will be adjusted appropriately in the event of stock splits and
combinations, share dividends and similar changes in the capitalization of the
Company.
The Plan will be administered by a compensation committee (the "Committee")
appointed by the Board of Directors of the Company. The Committee will be
comprised of at least two members of the Board of Directors, none of whom shall
be a current employee of the Company, a former employee of the Company that
receives compensation for prior services rendered during the taxable year, an
individual receiving direct or indirect remuneration from the Company, within
the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code"), and any regulations promulgated thereunder, in any capacity other
than as a director, or a former or current officer of the Company.
Awards may be granted under the Plan only to key employees (including
statutory employees within the meaning of Section 3121(d)(3) of the Code),
officers or directors of the Company. The Committee will determine those persons
who will receive incentive stock options, nonqualified stock options and
restricted stock awards under the Plan.
The Plan provides that the Board of Directors may terminate, amend or revise
the terms of the Plan at any time, except that no amendment or revision shall
(i) increase the maximum aggregate number of shares subject to the Plan, except
as permitted by the Plan in order to make appropriate adjustments for stock
splits, share dividends or similar changes in the Common Stock; (ii) change the
minimum purchase price for shares subject to options granted under the Plan;
(iii) extend the maximum duration of ten years established under the Plan for
any option or for a restricted stock award; or (iv) permit the granting of an
option or a restricted stock award to anyone other than eligible recipients
under the terms of the Plan.
The Plan provides that restricted stock awarded under the Plan may not be
transferred in any manner prior to lapse of the restrictions and conditions
imposed on such stock at the time of the award. Incentive stock options and
nonqualified stock options granted under the Plan that have not been exercised
may not be transferred except by will or the applicable laws of descent and
distribution.
With respect to nonqualified stock options or restricted stock awards, the
Committee is authorized under the terms of the Plan, in its discretion, to make
loans or payments to optionees or restricted stock award recipients for the
purpose of assisting such persons with payment of personal income taxes incurred
upon exercise of nonqualified stock options or the lapse of restrictions to
which restricted stock is subject. (See "Federal Income Tax Consequences"
below.)
If the Company becomes a party to any merger or consolidation in which it is
not the surviving entity or pursuant to which the shareholders of the Company
exchange their Common Stock, or if the Company dissolves or liquidates or sells
all or substantially all of its assets, all incentive stock options and
nonqualified stock options outstanding under the Plan will, unless otherwise
provided in the applicable option agreement, terminate on the effective date of
such merger, consolidation, dissolution, liquidation or sale. However, prior to
such effective date, the Committee may, in its discretion, make any or all
outstanding options immediately exercisable, and may, with respect to Options
that are terminated, (i) authorize a payment to any optionee that approximates
the economic benefit that he would realize if his option were exercised
immediately before such effective date, (ii) authorize a payment in such other
amount as it deems appropriate to compensate any optionee for the termination of
his Option, or (iii) arrange for the granting of a substitute Option to any
optionee. The Committee also may, in its discretion, cause any or all restricted
stock awards that are still subject to any restrictions and conditions to become
immediately vested in full on the effective date of any such transaction, unless
otherwise provided in the applicable agreement evidencing such restricted stock
award.
Any shares of Common Stock that are subject to incentive stock options or
nonqualified stock options granted under the Plan and that are not issued, and
any shares of Common Stock that are issued pursuant to restricted stock awards
under the Plan and that are subsequently forfeited, may again be the subject of
grants or awards under the Plan.
NONQUALIFIED STOCK OPTIONS. The Plan permits the granting of nonqualified
stock options to such key employees (including statutory employees within the
meaning of Section 3121(d)(3) of the Code), officers or directors of the Company
as the Committee shall select from time to time in its discretion.
The price of shares subject to nonqualified stock options granted under the
Plan will be determined by the Committee at the time of grant of the option, but
may not be less than 100% of the fair market value of the Common Stock at the
time of the grant. The Committee will determine at the time of grant the dates
on which nonqualified stock options will become exercisable and may accelerate
the scheduled exercise date of an option if deemed appropriate. No nonqualified
stock option may expire later than ten years from the date of grant.
Unexercised nonqualified stock options will terminate if an optionee ceases
to be employed by the Company, or any parent or subsidiary corporation, for any
reason other than death or disability, except that the applicable stock option
agreement may allow such option to be exercised within a period not to exceed
three months after the date of termination of employment. In the event an
optionee becomes disabled, a nonqualified stock option may be exercised at any
time within three months after the date of termination of employment due to
disability unless a longer or shorter period is provided in the applicable
option agreement. If an optionee dies while employed by the Company, or any
parent or any subsidiary corporation, his nonqualified stock options
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shall expire one year after the date of death, unless a longer or shorter period
of exercise has been specifically provided in the applicable stock option
agreement.
INCENTIVE STOCK OPTIONS. The Plan permits the granting of incentive stock
options ("ISOs") only to key employees of the Company who qualify for the grant
of an ISO under Section 422 of the Code.
The terms and conditions described above for nonqualified stock options also
apply to ISOs granted under the Plan. The following additional terms and
conditions will also be applicable with respect to ISOs: (i) no ISO may be
granted to a person who owns, at the time of grant, stock representing more than
10% of the total voting power of all classes of stock of the Company unless the
option price for the shares subject to such ISO is at least 110% of the fair
market value on the date of grant and such ISO award is exercisable only within
five years after its date of grant; (ii) the total fair market value of shares
subject to ISOs which are exercisable for the first time by an optionee in a
given calendar year may not exceed $100,000, valued as of the date of the ISO's
grant; and (iii) ISOs may not be granted more than ten years after the date of
adoption of the Plan by the Board.
RESTRICTED STOCK. Restricted stock may be issued under the terms of the Plan
to eligible recipients who are selected from time to time by the Committee. Such
restricted stock will be subject to such restrictions and conditions as may be
determined by the Committee at the time of the award. These restrictions and
conditions may include (but are not required to include) restrictions on
transfer of the awarded shares of Common Stock, vesting conditions based on
continued employment with the Company for a specified period of time following
the award or satisfaction of individual or corporate performance criteria, or
satisfaction of other vesting standards. The lapse of restrictions and
conditions with respect to restricted stock may be accelerated at any time by
the Board of Directors or the Committee in its discretion.
Certificates evidencing shares of restricted stock will be held by the
Company and may not be sold or otherwise transferred by a restricted stock award
recipient until the restrictions imposed on the stock have lapsed.
Notwithstanding such restrictions, however, the award recipient will have other
rights associated with ownership of such restricted stock, including the right
to vote such shares and to receive dividends paid thereon. Restricted stock will
be forfeited if an award recipient dies or terminates his employment with the
Company, or any parent or subsidiary corporation, prior to lapse of the
restrictions on the shares, unless otherwise provided in the applicable
restricted stock agreement.
Restrictions and conditions imposed on shares of restricted stock shall
lapse, in whole or in part, as provided in the applicable agreement evidencing
the restricted stock award, but must lapse, if at all, not later than ten years
from the date of the award.
FEDERAL INCOME TAX CONSEQUENCES
INCENTIVE STOCK OPTIONS. ISOs granted under the Plan are intended to qualify
as "incentive stock options" under Section 422 of the Code. The grant of an ISO
generally does not result in taxable income to the optionee at the time of grant
of the option or at the time of exercise. However, for any year in which Common
Stock is purchased upon exercise of an ISO, the difference between the fair
market value of the Common Stock at the time of exercise and its cost to the
optionee will be an item of adjustment for purposes of computation of the
optionee's alternative minimum taxable income under Section 55 of the Code. If
the optionee exercises the ISO and then sells the Common Stock purchased under
the option at a gain, the excess of the sales price of the Common Stock over its
cost to the optionee will be taxable as a long-term capital gain if the sale is
made more than two years from the granting of the option and more than one year
from the transfer of the stock to the optionee. If the sale is made within two
years after the granting of the ISO or within one year after the Common Stock is
transferred to the optionee and if sales proceeds exceed the fair market value
of the Common Stock on the date of exercise, the optionee generally will
recognize ordinary income equal to the fair market value of the Common Stock on
the date of exercise less the option price, and capital gain (long-term or
short-term as the case may be), equal to the amount realized in excess of the
fair market value of the Common Stock on the date of exercise. No tax deduction
generally will be available to the Company as a result of the granting of ISOs,
the exercise of such options, or the sale by optionees of the Common Stock
purchased. However, the Company will be entitled to a deduction in an amount
equal to the ordinary income, if any, recognized by an optionee on the sale of
Common Stock purchased pursuant to the exercise of an ISO.
NONQUALIFIED STOCK OPTIONS. Nonqualified stock options granted under the
Plan are not intended to qualify as ISOs under the Code. The grant of a
nonqualified stock option will not result in taxable income to the optionee or a
deduction to the Company. On the date any such option is exercised, an optionee
generally will be deemed to recognize ordinary income equal to the amount by
which the fair market value of the Common Stock on the exercise date exceeds the
option price, and the Company will generally receive a deduction in the same
amount.
RESTRICTED STOCK. In general, there will be no federal income tax
consequences to either the Company or to the recipient of a restricted stock
award upon the grant of restricted stock until the restrictions lapse and the
restricted stock becomes nonforfeitable. At that time, the award recipient will
recognize taxable income equal to the then fair market value of the Common Stock
and the Company will generally receive a corresponding deduction. However,
restricted stock award recipients may elect, within thirty
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days after the date of grant of a restricted stock award, to recognize ordinary
income equal to the fair market value of the restricted stock on the date of
grant and the Company will be entitled to a corresponding deduction at that
time.
Any discussion herein pertaining to a deduction for the Company is qualified
by application of Section 162(m) of the Code and the regulations thereunder.
Section 162(m) limits to $1,000,000 per year the allowable deduction for
compensation paid to or accrued by the chief executive officer and the four most
highly compensated officers (other than the chief executive officer), except
that such limit does not include "performance-based compensation," as that term
is defined therein. If the Plan is approved by shareholders in the manner
prescribed by applicable regulations, compensation realized upon the exercise of
options will be "performance-based" if the exercise price is at least equal to
the fair market value of the underlying stock on the date of grant. The Plan is
intended to meet the provisions of Section 162(m) such that any deductions
realized from stock option transactions thereunder will not be limited.
Compensation derived from restricted stock awards granted under the Plan may be
deemed "performance-based" if they are designated as such by the Committee and
if the grant thereof is subject to the attainment of certain performance goals
that qualify under the Section 162(m) regulations. Compensation derived from
restricted stock awards that are not "performance-based" will not be deductible
by the Company beyond the prescribed $1,000,000 limit.
PLAN BENEFITS
Because the Plan is a discretionary plan, it is not possible to determine
what Awards the Committee will grant thereunder. See the Section above entitled
"Aggregate Option Exercises in Last Fiscal Year and FY-End Option Values" for a
listing of the outstanding options held by the Named Executive Officers.
VOTE REQUIRED
Section 422 of the Code provides that the Plan must be approved by the
shareholders of the Company in order for incentive stock options granted under
the Plan to receive the favorable tax treatment discussed above. Approval of the
Plan will require a majority of the votes cast at a meeting at which a majority
of the shares of the Company's Common Stock are present in person or by proxy
and entitled to vote.
THE BOARD RECOMMENDS A VOTE "FOR" THE PROPOSAL TO APPROVE THE 1997 STOCK
OPTION AND RESTRICTED STOCK PLAN.
ITEM 3
PROPOSAL TO RATIFY SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected the firm of Deloitte & Touche LLP,
Certified Public Accountants, to audit the books and accounts of the Company for
the year ending December 31, 1997. The selection of this firm is being submitted
for ratification at the Annual Meeting. Deloitte & Touche LLP has acted in this
capacity since the incorporation of the Company. It is not anticipated that the
firm will be represented at the Annual Meeting.
The submission of this matter to the shareholders at the Annual Meeting is
not required by law nor by the Bylaws of the Company. The Board of Directors is,
nevertheless, submitting it to the shareholders to ascertain their views.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the 1998 Annual
Meeting of the Company must be received by the Company no later than December 8,
1997 for inclusion in the Company's Proxy Statement relating to such meeting,
subject to the rules and regulations of the Federal securities laws.
OTHER MATTERS TO COME BEFORE THE MEETING
Management does not know of any other matters which may come before the
meeting. However, if any other matters do properly come before the meeting, it
is the intention of the persons named as proxies to vote upon them in accordance
with their best judgment.
GENERAL INFORMATION
A copy of the Company's 1996 Annual Report and Form 10-K filed with the
Commission, excluding exhibits, can be obtained without charge by writing to the
Assistant Secretary of the Company, 121 North Columbia Street, Chapel Hill,
North Carolina 27514.
BY ORDER OF THE BOARD OF DIRECTORS
(Signature of L. Dawn Martin
appears here)
L. Dawn Martin
Vice President and Assistant
Secretary
April 7, 1997
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(Investors Title Company logo appears here)
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