SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NO. 1-13990
LANDAMERICA FINANCIAL GROUP, INC.
(Exact name of registrant as specified in its charter)
Virginia 54-1589611
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
6630 West Broad Street
Richmond, Virginia 23230
(Address of principal executive offices) (Zip Code)
(804) 281-6700
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Securities Name of Exchange on Which Registered
Common Stock, no par value New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
7% Series B Cumulative Convertible Preferred Stock
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes _X_ No ___
The aggregate market value of voting stock held by non-affiliates of
the registrant on March 16, 1998 was approximately $482,696,000. Executive
officers and directors of the registrant and beneficial owners of more than 10%
of the Common Stock are considered affiliates for purposes of this calculation
but should not necessarily be deemed affiliates for any other purpose.
The number of shares of Common Stock, without par value, outstanding on
March 16, 1998, was 15,044,593.
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K. [ X ]
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive proxy statement for the 1998 Annual Meeting
of Shareholders (to be filed) are incorporated by reference into Part III
hereof.
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PART I
ITEM 1. BUSINESS
The Company
LandAmerica Financial Group, Inc. (formerly Lawyers Title Corporation)
(the "Company") is a holding company organized under the laws of the
Commonwealth of Virginia on June 24, 1991. The Company's principal subsidiary
during 1997, Lawyers Title Insurance Corporation ("Lawyers Title"), has been
engaged since 1925 primarily in the title insurance business through its network
of branches, service offices, subsidiaries and agencies. On February 27, 1998,
the Company acquired all of the issued and outstanding capital stock of
Commonwealth Land Title Insurance Company and Transnation Title Insurance
Company ("Commonwealth/Transnation"). See "Recent Acquisition" and "Business of
Commonwealth/Transnation" below. As a holding company, the Company has greater
flexibility in conducting certain operations, especially with regard to capital
transactions, while the operating title insurance subsidiaries remain subject to
regulation by the various states. See "Regulation" below.
Lawyers Title
Lawyers Title was founded in 1925 in Richmond, Virginia. It soon
expanded into other southeast states and by 1934 had become the largest title
insurance company in the South, with over 3,000 approved attorneys and agents.
Branches and agents were added gradually in other states, and the post-World War
II years promoted substantial growth of Lawyers Title. The business continued to
expand nationally and into U.S. possessions and Canada. By the early 1960s,
Lawyers Title's operations covered the entire country (with the exception of
Iowa, which does not recognize title insurance).
In the 1970s, Lawyers Title purchased two title underwriters, Mid-South
Title Insurance Corporation ("Mid-South Title"), headquartered in Memphis,
Tennessee, and Land Title Insurance Company ("Land Title"), headquartered in
California. In the 1980s, Lawyers Title combined its California operations,
improving its service and operations in the state which provides the single
largest source of premium revenue for the title insurance industry. California
World Financial Corporation and its wholly owned subsidiary, California - World
Title Company, merged into an entity then known as Continental Land Title
Company, which ultimately became a subsidiary of Lawyers Title, with operations
in California, Oregon and Arizona. In 1997, the name was changed from
"Continental Lawyers Title Company" to "Lawyers Title Company."
In 1994, Lawyers Title purchased two additional title underwriters,
Oregon Title Insurance Company ("Oregon Title"), headquartered in Portland,
Oregon, and Title Insurance Company of America ("TICA"), headquartered in
Dallas, Texas. Effective December 1, 1995, TICA was merged into Mid-South Title,
whose name was changed to Title Insurance Company of America (hereinafter "TICA"
refers to such surviving corporation).
Lawyers Title has its National Headquarters offices at 6630 West Broad
Street, Richmond, Virginia 23230. Its telephone number is (804) 281-6700. Unless
the context otherwise requires, Lawyers Title, as used herein, refers to Lawyers
Title and each of its branches, service offices, subsidiaries and agencies.
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General
Lawyers Title is engaged in the business of providing title insurance
and related services. In addition to writing title insurance, in some states
Lawyers Title furnishes certificates of title and abstracts of title. As an
incident to the issuance of title insurance, Lawyers Title also offers a closing
protection letter to lenders and owners who purchase title insurance, and in
some areas it also serves as an escrow agent in closing real estate
transactions.
Most title insurance policies sold by Lawyers Title and its
subsidiaries are underwritten by Lawyers Title; however, title insurance
policies are also underwritten by Oregon Title in Oregon, and TICA is licensed
and qualified to underwrite policies in Texas, Tennessee, Florida, Ohio,
Georgia, Louisiana, Alabama, Arkansas, Virginia, Michigan, Illinois, Colorado,
New Mexico, Indiana, Maryland, District of Columbia and Kentucky. Land Title
only reissues policies it has previously issued. Policies previously issued by
Mid-South Title remain in effect in Tennessee, Mississippi, Arkansas, Alabama,
Florida, Georgia and Louisiana.
Lawyers Title's business is conducted in 49 states and in the District
of Columbia, the territories of Puerto Rico and the U.S. Virgin Islands, the
Bahamas and a number of Canadian provinces. Geographical coverage is provided by
Lawyers Title's nationwide network of 14 National Division offices and
approximately 260 branch and closing/escrow offices. In addition, Lawyers Title
has approximately 3,800 independent agents and 36,000 approved attorneys.
Title insurance policies are written through and issued by branch
offices of Lawyers Title and its underwriting subsidiaries, by title insurance
agents or by some combination thereof. Agencies may be either independently
owned or subsidiaries of Lawyers Title. In the western states, Lawyers Title
operates primarily through independent agents and subsidiaries (Lawyers Title
Company, American Title Group, Inc., Lawyers Title of Arizona, Inc. and Oregon
Title), while its eastern operations are conducted through branch offices,
agents and approved attorneys. In the fiscal year ended December 31, 1997,
approximately 53.2% of total title insurance revenues were derived from direct
operations (company branches and wholly owned subsidiary agencies) and 46.8%
came from independent agents. As of December 31, 1997, no single independent
agent was the source of more than 5% of the title insurance revenues of Lawyers
Title.
Lawyers Title and its subsidiaries also provide escrow services to
customers in various areas of the country. Primarily in the western states, it
is a general practice, incident to the issuance of title insurance policies, to
hold funds and documents in escrow for delivery in real estate transactions upon
fulfillment of the conditions to such delivery. In the mid-western states,
Florida and some eastern cities, it is customary for the title company to close
the transaction and disburse the sale or loan proceeds. Fees for such escrow and
closing services are generally separate and distinct from the title insurance
premiums.
Lawyers Title has two wholly owned subsidiaries devoted to computer
automation of various aspects of the title insurance business, including on-line
title plants, policy issuance and closing documentation and support functions.
These are Datatrace Information Services Company, Inc. and Elliptus Software
Solutions, Inc. Another subsidiary, Lawyers Title Exchange Company, facilitates
tax-free property exchanges pursuant to Section 1031 of the Internal Revenue
Code by holding the sale proceeds from one transaction until a second
acquisition occurs, thereby assisting customers in deferring the recognition of
taxable income.
In 1996, Lawyers Title formed a new subsidiary, Lawyers Title Services
Company, Inc. ("LTSC") to coordinate residential real estate transactions for
national lenders and to provide other real estate related products and services
(such as appraisals, tax services, flood certification, surveys, and document
preparation) through a single source. LTSC is currently qualified in 22
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states. Also in 1996, Lawyers Title, through a newly formed subsidiary, Global
Corporate Services, Inc. acquired a 50% ownership interest in Argonaut
Relocation Services, LLC ("Argonaut") a Michigan limited liability company.
Argonaut, which employs approximately 120 individuals, offers a full line of
employee relocation services to companies moving employees anywhere in the
world.
Title Insurance
In general, title insurance policies indemnify the insured from losses
resulting from certain outstanding liens, encumbrances and other defects in
title to real property that appear as matters of public record, and from certain
other matters not of public record. Many of the principal customers of title
insurance companies buy insurance for the accuracy and reliability of the title
search as well as for the indemnity features of the policy. The beneficiaries of
title insurance policies are generally owners or buyers of real property or
parties who make loans on the security of real property. An owner's policy
protects the named insured against title defects, liens and encumbrances
existing as of the date of the policy and not specifically excluded or excepted
from its provisions, while a lender's policy, in addition to the foregoing,
insures against the invalidity of the lien of the insured mortgage and insures
the priority of the lien as stated in the title policy.
Lawyers Title issues title insurance policies on the basis of a title
report, which is prepared pursuant to underwriting guidelines prescribed in
manuals published by Lawyers Title, after a search of the public records, maps
and documents to ascertain the existence of easements, restrictions, rights of
way, conditions, encumbrances, liens or other matters affecting the title to, or
use of, real property. In certain instances, a visual inspection of the property
is also made. Title examinations may be made by branch employees, agency
personnel or approved attorneys, whose reports are utilized by or rendered to a
branch or agent and are the basis for the issuance of policies by such branch or
agent.
In the case of difficult or unusual legal or underwriting issues
involving potential title risks, the branch office or agent is instructed to
consult with a supervising Lawyers Title office. Contracts with agencies require
that the agent seek prior approval of Lawyers Title in order to commit Lawyers
Title to assume a risk over a stated dollar limit. Pursuant to agency
agreements, Lawyers Title assumes all of the risks to the insured, in the
absence of certain types of misconduct by the agent, in return for a portion of
the premium received.
Lawyers Title owns a number of title plants and in some areas leases or
participates with other title insurance companies or agents in the cooperative
operating of such plants. Title plants are compilations of copies of public
records, maps and documents that are indexed to specific properties in an area,
and they serve to facilitate the preparation of title reports. In many of the
larger markets, the title plant and search procedures have been automated. To
maintain the value of the title plants, Lawyers Title continually updates its
records by regularly adding current information from the public records and
other sources. In this way, Lawyers Title maintains the ability to produce
quickly and at a reduced expense a statement of the instruments which constitute
the chain of title to a particular property.
The premium for title insurance is due in full when the title
transaction is closed, and the policy amount is usually based upon the purchase
price of the property or the amount of the loan secured by the property. While
most other forms of insurance provide for the assumption of risk of loss arising
out of unforeseen future events, title insurance serves to protect the
policyholder from the risk of loss from events that predate the issuance of the
policy. This distinction underlies the low claims loss experience of title
insurers as compared to other insurance underwriters. Losses generally result
either from judgment errors or mistakes made in the title search and examination
process or the escrow process or from hidden defects such as fraud,
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forgery, incapacity or missing heirs. Operating expenses, on the other hand, are
higher for title insurance companies than for other companies in the insurance
industry. Most title insurers incur considerable costs relating to the personnel
required to process forms, search titles, collect information on specific
properties and prepare title insurance commitments and policies.
A title policy can be issued directly by a title insurer or indirectly
on behalf of a title insurer through agents which are not themselves licensed as
insurers. Where the policy is issued by a title insurer, the search is performed
by or at the direction of the title insurer, and the premium is collected and
retained by the title insurer. Where the policy is issued through an agent, the
agent generally performs the search (in some areas searches are performed by
approved attorneys), examines the title, collects the premium and retains a
portion of the premium. The remainder of the premium is remitted to the title
insurer as compensation for bearing the risk of loss in the event a claim is
made under the policy. The percentage of the premium retained by an agent varies
from region to region and is sometimes regulated by the states. A title insurer
is obligated to pay title claims in accordance with the terms of its policies,
regardless of whether it issued its policy directly or indirectly through an
agent.
Insured Risk on Policies in Force
The amount of the insured risk or "face amount" of insurance under a
title insurance policy is generally equal to either the purchase price of the
property or the amount of the loan secured by the property. The insurer is also
responsible for the cost of defending the insured title against covered claims.
The insurer's actual exposure at any time is significantly less than the total
face amount of policies in force because the risk on an owner's policy is often
reduced over time as a result of subsequent transfers of the property and the
reissuance of title insurance by other title insurance underwriters, and the
coverage of a lender's policy is reduced and eventually terminated as a result
of payment of the mortgage loan. Because of these factors, the total contingent
liability of a title underwriter on outstanding policies cannot be precisely
ascertained.
In the ordinary course of business, Lawyers Title and its underwriting
subsidiaries represent and defend the interests of their insureds, and provide
on the Company books for estimated losses and loss adjustment expenses. Title
insurers are sometimes subject to unusual claims (such as claims of Indian
tribes to land formerly inhabited by them) and to claims arising outside the
insurance contract, such as for alleged negligence in search, examination or
closing, alleged improper claims handling and alleged bad faith. The damages
alleged in such claims arising outside the insurance contract may often exceed
the stated liability limits of the policies involved. While Lawyers Title in the
ordinary course of its business has been subject from time to time to these
types of claims, Lawyers Title's losses to date on such claims have not been
significant in number or material in dollar amount to the Company's financial
condition. In recent years, Lawyers Title has also experienced several large
claims resulting from agent escrow defalcations, and as a result of experience
in those cases, has put in place more stringent agent qualification and audit
procedures.
Liabilities for estimated losses and loss adjustment expenses represent
the estimated ultimate net cost of all reported and unreported losses incurred
through December 31, 1997. The reserves for unpaid losses and loss adjustment
expenses are estimated using individual case-basis valuations and statistical
analyses. Those estimates are subject to the effects of trends in loss severity
and frequency. Although considerable variability is inherent in such estimates,
management believes that the reserves for losses and loss adjustment expenses
are adequate. The estimates are continually reviewed and adjusted as necessary
as experience develops or new information becomes known; such adjustments are
included in current operations. The provision for policy and contract claims as
a percentage of operating revenues for 1997 was 5.4%, for 1996 was 5.2%, and for
1995 was 5.2%. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Results of Operations."
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Lawyers Title generally pays losses in cash; however, it sometimes
settles claims by purchasing the interest of the insured in the real property or
the interest of the claimant adverse to the insured. Assets acquired in this
manner are carried at the lower of cost or estimated realizable value, net of
any indebtedness thereon.
Lawyers Title places a high priority on maintaining effective quality
assurance and claims administration programs. Lawyers Title's quality assurance
program focuses on quality control, claims prevention and product risk
assessment in its branches, subsidiaries and independent agencies. The claims
administration program focuses on improving liability analysis, prompt, fair and
effective handling of claims, prompt evaluation of settlement or litigation with
first and third-party claimants and appropriate use of ADR (Alternative Dispute
Resolution) in claims processing. In addition, to reduce the incidence of agency
defalcations, Lawyers Title has strengthened its procedures for renewing
existing agents, has expanded its due diligence requirements in acquiring new
agents and has intensified its Agency Audit Program. The Company continues to
refine its systems for maintaining effective quality assurance and claims
administration programs.
Reinsurance and Coinsurance
Lawyers Title distributes large title insurance risks through the
mechanisms of reinsurance and coinsurance. In reinsurance agreements, the
reinsurer accepts that part of the risk which the primary insurer (the "ceding
company" or "ceder") decides not to retain, in consideration for a portion of
the premium. A number of factors may enter into a company's decision to
reinsure, including retention limits imposed by state law, customer demands and
the risk retention philosophy of the company. The ceder, however, remains liable
to the insured for the total risk, whether or not the reinsurer meets its
obligation. As a general rule, when Lawyers Title purchases reinsurance on a
particular risk it will retain a primary risk of $5.0 million and may
participate with reinsurers on liability amounts above the primary level on a
secondary level. In the absence of specific approval by management, reinsurance
generally is purchased if the risk is greater than $35.0 million.
Lawyers Title also assumes reinsurance from other title insurance
underwriters pursuant to a standard reinsurance agreement concerning specific
title insurance risks for properties on which it assumes a portion of the
liability. Lawyers Title has entered into numerous reinsurance agreements with
other title insurance underwriters on specific transactions. Lawyers Title's
exposure on all reinsurance assumed is reduced due to retention by the ceding
company of a substantial primary risk level. In addition, exposure under these
agreements generally ceases upon a transfer of the insured properties and, with
respect to insured loans, is decreased by reductions in mortgage loan balances.
Because of this, the actual exposure is much less than the total reinsurance
which Lawyers Title has assumed. Lawyers Title provides loss reserves on assumed
reinsurance business on a basis consistent with reserves for direct business.
Lawyers Title also utilizes coinsurance to enable it to provide
coverage in amounts greater than it would be willing or able to undertake
individually. Under coinsurance transactions, each individual underwriting
company issues its individual policy and assumes a fraction of the overall total
risk. There is liability for each participating company for the particular
fraction of the risk it assumes.
Lawyers Title enters into reinsurance and coinsurance arrangements with
most of the larger participants in the title insurance market and such
arrangements are not materially concentrated with any single title insurance
company. Revenues and claims from reinsurance are not material to Lawyers
Title's business as a whole.
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Title Insurance Premium Revenues
In the years ended December 31, 1997, 1996 and 1995, premiums from the
issuance of title policies represented 78.9%, 76.8% and 79.9%, respectively, of
the Company's consolidated revenues.
The table below sets forth, for the years ended December 31, 1997, 1996
and 1995, the approximate dollars and percentages of the Company's title
insurance premium revenues for the ten states representing the largest
percentages of such revenues and for all other states combined:
Lawyers Title
Title Insurance Premiums by State
(Dollars in thousands)
Years Ended December 31,
1997 1996 1995
-------------------- -------------------- -------------------
Amount % Amount % Amount %
Texas ........ $111,252 22.1 $ 98,762 21.6 $ 82,604 21.4
Florida ...... 38,163 7.6 33,340 7.3 26,852 7.0
California ... 36,438 7.2 32,148 7.0 28,530 7.4
Pennsylvania . 36,034 7.2 30,223 6.6 29,468 7.6
New York ..... 26,810 5.3 24,318 5.3 17,396 4.5
Michigan ..... 25,342 5.0 23,067 5.1 20,625 5.3
Virginia ..... 21,486 4.3 20,613 4.5 19,968 5.2
Ohio ......... 19,356 3.8 18,130 4.0 14,503 3.8
New Jersey ... 16,844 3.3 15,391 3.4 14,123 3.7
Massachusetts. 13,802 2.7 13,356 2.9 11,187 2.9
All Others ... 158,497 31.5 147,029 32.3 120,615 31.2
------- ---- ------- ---- ------- ----
Totals .. $504,024 100.0 $456,377 100.0 $385,871 100.0
======== ===== ======== ===== ======== =====
Sales and Marketing
Although Lawyers Title enhances its business development through
general advertising, it believes its primary source of business is from the real
estate community, such as attorneys, real estate brokers and developers,
financial institutions, mortgage brokers and independent escrow agents. Lawyers
Title's business results from construction and sale of new housing, resales and
refinancings of residential real estate and from commercial real estate
activity. In the 1990s Lawyers Title has placed a renewed emphasis on
residential real estate activity while maintaining a leadership position in
insuring commercial real estate transactions. Although precise data are not
available to compare the percentage of total premium revenues of Lawyers Title
derived from commercial versus residential real estate activities, approximately
80% of such revenues in 1997 resulted from policies providing coverage of $1.0
million or less (which tend to be residential) and approximately 20% of such
revenues resulted from policies providing coverage in excess of $1.0 million.
Regional differences exist in Lawyers Title's sales and marketing
emphasis. In eastern metropolitan areas, for instance, Lawyers Title has
emphasized the marketing of title insurance for commercial real estate
transactions. In the western states, primarily California, the principal source
of business has been resales and refinancings of residential real estate and
construction and sales of new housing.
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To increase profits and improve margins, Lawyers Title is expanding its
direct operations in markets with projected growth, attractive title insurance
rates and favorable claims experience. Since 1992, Lawyers Title has acquired
title operations in Texas, North Carolina, Oregon, Florida, Virginia, Maryland,
District of Columbia, Ohio, Maine, Michigan, New Mexico, New Jersey,
Pennsylvania and Wisconsin. In addition, within the last four years Lawyers
Title has added closing/escrow offices and sales representatives in many
markets.
Lawyers Title has gained a favorable reputation for its National
Division offices which specialize in the sale and servicing of title insurance
for complex commercial and multi-property transactions. Lawyers Title has 14
such offices located in strategic metropolitan areas throughout the country.
Each of these National Division offices markets title insurance products and
services to large commercial customers in its areas and serves the customer's
title insurance needs throughout the country.
LTSC, located at Lawyers Title's National Headquarters, also services
national lenders which seek to obtain title insurance products and services as
well as a variety of other real estate related products and services such as
appraisals, tax services, flood certifications, surveys and document preparation
through a single source. LTSC is able to offer lenders one stop shopping for
such products and services based on the internal capabilities of Lawyers Title
and strategic alliances with other providers.
Customers
Lawyers Title is not dependent upon any single customer or any single
group of customers. The loss of any one customer would not have a material
adverse effect on Lawyers Title.
Competition
The title insurance business is very competitive. Competition is based
primarily on price, service and expertise. The size and financial strength of
the insurer are also important factors, particularly for larger commercial
customers. Title insurance underwriters also compete for agents on the basis of
service and commission levels.
Lawyers Title is one of the largest title insurance underwriters in the
United States based on gross title revenues. Its principal competitors are other
major title insurance underwriters and their agency networks. In 1997, these
included Chicago Title Insurance Company, First American Title Insurance
Company, Commonwealth/Transnation (acquired by the Company on February 27,
1998), Stewart Title Guaranty Company, Old Republic National Title Insurance
Company and Fidelity National Title Insurance Company. Of the more than one
hundred title insurance underwriting companies licensed in the United States,
the top seven companies account for approximately 89% of the title insurance
market.
The Company's title insurance subsidiaries are subject to regulation by
the insurance authorities of the states in which they do business. See
"Regulation." Within this regulatory framework, the Company competes with
respect to premium rates, coverage, risk evaluation, service and business
development.
State regulatory authorities impose underwriting limits on title
insurers based primarily on levels of available capital and surplus. While such
limits may theoretically hinder the Company's title insurance subsidiaries'
assumption of a particular large underwriting liability, in practice the Company
has established its own internal risk limits at levels substantially lower than
those allowed by state law. Therefore, statutory capital-based risk limits are
not considered by the Company to be a significant factor in the amount or size
of underwriting it may undertake.
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Regulation
The title insurance business is regulated by state regulatory
authorities who possess broad powers relating to the granting and revoking of
licenses, and the type and amount of investments which Lawyers Title and its
insurance subsidiaries may make. These state authorities also regulate insurance
rates, forms of policies and the form and content of required annual statements,
and have the power to audit and examine the financial records of these
companies. Under state laws, certain levels of capital and surplus must be
maintained and certain amounts of portfolio securities must be segregated or
deposited with appropriate state officials. State regulatory policies also
restrict the amount of dividends which insurance companies may pay without prior
regulatory approval.
The National Association of Insurance Commissioners has adopted model
legislation which if enacted would regulate title insurers and agents nationally
and change certain statutory reporting requirements. The proposed legislation
also would require title insurers to audit agents periodically and require
licensed agents to maintain professional liability insurance. The Company cannot
predict whether the proposed legislation or any provision thereof will be
adopted in Virginia or any other state. In 1996, Virginia enacted legislation
requiring an annual certification of reserve adequacy by a qualified actuary to
comply with the new statutory reporting requirements.
A substantial portion of the assets of Lawyers Title and its
underwriting subsidiaries consists of their portfolios of investment securities.
As a title insurance company domiciled in Virginia, Lawyers Title is required by
state statute to maintain assets of a statutorily defined quality in an amount
equal to its total liabilities determined on a statutory basis plus 50% of
statutory equity. For statutory purposes, the insurer's total liabilities
include a statutory premium reserve, reserves established for losses in the
course of settlement ("case reserves") and other liabilities related to
operations.
The statutorily required assets are maintained by Lawyers Title in
investment-grade corporate securities and United States, state and local
obligations. In addition to these investments, Lawyers Title maintains
portfolios of cash and cash-equivalents. The investment portfolios are managed
by professional investment advisors whose work is reviewed by the Pension and
Portfolio Committee of the Company's Board of Directors.
Land Title, TICA and Oregon Title, domiciled in California, Tennessee
and Oregon, respectively, are similarly required to maintain certain levels and
qualities of assets.
Many state insurance regulatory laws intended primarily for the
protection of policyholders contain provisions that require advance approval by
state agencies of any change in control of an insurance company or insurance
holding company that is domiciled (or, in some cases, doing business) in that
state. Under such current laws, any future transaction that would constitute a
change in control of the Company would generally require approval by the state
insurance departments of Virginia, California, Tennessee, Texas, Ohio, Oregon,
Pennsylvania, Arizona, New Jersey, New York, Florida, Alabama and Maryland. Such
requirement could have the effect of delaying or preventing certain transactions
affecting the control of the Company or the ownership of the Company's Common
Stock, including transactions that could be advantageous to the shareholders of
the Company.
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Investment Policies
The Company earns investment income from its portfolio of securities.
Historically, as a general policy, Lawyers Title limited its investments in
equity securities to approximately 50% of its statutory surplus. In 1996, the
Company changed its strategy for insurance company portfolios by shifting away
from investments in equity securities and into fixed-maturity securities. The
Company believes that the effect on future operations will be to replace the
lower dividend yields and variable capital gains experience of the equity
securities with the more steady and predictable stream of interest income from
fixed-maturity securities. The fixed-maturity portfolio consists of investment
grade securities and is designed to comply with the various state regulatory
requirements while maximizing yield. The Company regularly re-examines its
portfolio strategies in light of changing earnings or tax situations. See Note 3
to the Consolidated Financial Statements and the General section of Management's
Discussion and Analysis for the major categories of investments, contractual
maturities and income received.
Seasonality, Backlog and Cyclicality
The title insurance business is closely related to overall levels of
real estate activity. Historically, real estate activity has been generally
slower in the winter months with volumes showing significant improvements in the
spring and summer months. The percentage of title orders closed to title orders
opened is typically lower in the first six months than at year end because of
this seasonal variance. In addition, the title insurance business is cyclical
due to the effect of interest rate fluctuations on the level of real estate
activity. Periods of high interest rates adversely affect real estate activity
and therefore premium revenues.
Employees
As of December 31, 1997, the Company had 4,027 employees. The Company's
relationship with its employees is good. No employees are currently covered by
any collective bargaining agreements, and the Company is not aware of any union
organizing activity relating to its employees.
Environmental Matters
Recent title insurance policies specifically exclude any liability for
environmental risks or contamination. Older policies, while not specifically
addressing environmental risks, are not considered to provide any coverage for
such matters, and the Company does not expect any significant expenses related
to environmental claims.
Lawyers Title sometimes acts as a temporary title holder to real estate
under a nominee holding agreement and Lawyers Title, through its subsidiaries,
sometimes participates in holding agreements involving tax-deferred exchanges.
Lawyers Title's customers in such situations generally are financially strong
entities from whom it secures indemnification for potential environmental and
other claims. In other situations where Lawyers Title might acquire title to
real estate, it will generally require that an appropriate environmental
assessment be made to evaluate and avoid any potential liability.
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Recent Acquisition
The strategic focus of the Company has been on growth through carefully
selected acquisitions. Prior to 1997, the Company's acquisitions consisted
primarily of small to medium-size title insurance agencies and underwriters.
On August 20, 1997, the Company agreed to acquire all of the issued and
outstanding capital stock of Commonwealth Land Title Insurance Company
("Commonwealth") and Transnation Title Insurance Company ("Transnation")
(collectively, the "Acquisition") pursuant to a Stock Purchase Agreement, dated
August 20, 1997, by and among the Company, Lawyers Title, Reliance Group
Holdings, Inc. ("Reliance") and Reliance Insurance Company ("RIC"), as amended
and restated by an Amended and Restated Stock Purchase Agreement, dated December
11, 1997, among such parties (the "Stock Purchase Agreement"). Commonwealth and
Transnation together comprise the third largest title insurance operation in the
United States based upon total premiums and fees in 1996. As a result of the
Acquisition, Commonwealth and Transnation each became wholly owned subsidiaries
of the Company.
The purchase price paid by the Company in connection with the
Acquisition consisted of (i) approximately $200.7 million in cash funded by a
Revolving Credit Agreement, dated November 7, 1997, between the Company and Bank
of America National Trust and Savings Association, individually and as
Administrative Agent for a syndicate of 11 other financial institutions, (ii)
the issuance to RIC of 4,039,473 shares of the Company's Common Stock, (iii) the
issuance to RIC of 2,200,000 shares of the Company's 7% Series B Cumulative
Convertible Preferred Stock (the "Series B Preferred Stock"), which is initially
convertible into 4,824,561 shares of Common Stock, and (iv) $65.9 million in
cash, representing the net proceeds from the sale of 1,750,000 shares of Common
Stock offered to the public by the Company. The various components of the
purchase price were determined by arms-length negotiations between the parties.
Based upon a value for the 4,039,473 shares of Common Stock of $175.0 million
and an estimated value for the 2,200,000 shares of Series B Preferred Stock of
$224.8 million, the aggregate purchase price paid by the Company to RIC at the
closing of the Acquisition was approximately $666.4 million.
The Company also changed its name from "Lawyers Title Corporation" to
"LandAmerica Financial Group, Inc." effective as of February 27, 1998. The
change in name for the Company is intended to signify, among other things, an
expansion of the products and services beyond traditional title insurance to be
developed and offered by the combined company following the Acquisition. LTIC,
Commonwealth and Transnation will continue to operate under their current names
for the foreseeable future.
In connection with the consummation of the Acquisition, the Company
amended its Articles of Incorporation to establish the Series B Preferred Stock.
The provisions of the Series B Preferred Stock provide, among other things,
that, in the event of certain defaults related primarily to the Company's
combined ratio as it compares to comparable title insurance companies and the
Company's claims-paying ability ratings, the size of the Company's Board of
Directors will be increased by three directors and RIC will be entitled to
designate three additional directors to fill the newly created seats. In
addition, in the event of certain defaults related primarily to dividend
payments on the shares of Series B Preferred Stock, the size of the Company's
Board of Directors will be increased by three directors and RIC will be entitled
to designate three additional directors to fill the newly created seats.
Furthermore, if the Company defaults on any of its material debt obligations in
excess of $15.0 million or the Company fails to pay the stated dividend on the
Series B Preferred Stock on three occasions, whether or not consecutive, the
Company must increase the size of the Board of Directors to allow additional
directors to be designated by RIC such that the total number of directors
designated by RIC will constitute a majority of the Board of Directors.
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In addition, the Company, RIC and Reliance entered into a Voting and
Standstill Agreement dated February 27, 1998. The Voting and Standstill
Agreement, among other things, (i) provides for the designation by RIC of three
directors to be nominated and recommended for election to the Company's Board of
Directors, (ii) prohibits RIC and Reliance and their affiliates from acquiring
any additional shares of Common Stock or Series B Preferred Stock (except as
permitted under the Voting and Standstill Agreement), (iii) requires that RIC
and Reliance and their affiliates vote their shares of Common Stock in a certain
manner depending upon the matter that is subject to a vote of the Company's
shareholders, (iv) requires the sale of the 4,039,473 shares of Common Stock
acquired by RIC within 6 1/2 years after the effective date of the resale
registration statement for such shares (subject to extension as provided in the
Voting and Standstill Agreement), (v) requires RIC, with respect to the
2,200,000 shares of Series B Preferred Stock received by RIC in the Acquisition
and any shares of Common Stock received upon conversion of such shares of Series
B Preferred Stock, to sell so many of the shares of Series B Preferred Stock or
shares of Common Stock received upon conversion thereof held by it or its
affiliates as is necessary to reduce the RIC Ownership Percentage (as defined
below) to less than 20% of the Adjusted Outstanding Shares (as defined below) by
not later than 8 1/2 years after the effective date of the registration
statement for such shares (subject to extension as provided in the Voting and
Standstill Agreement), (vi) restricts the ability of RIC and its affiliates to
convert the shares of Series B Preferred Stock then held by them until all of
the 4,039,473 shares of Common Stock (and certain additional shares that may be
issued with respect to such shares) have been sold to persons that are not, at
the time of the sale, conveyance or transfer, an affiliate of RIC, provided that
such restriction shall not apply upon the occurrence of certain specified events
set forth in the Voting and Standstill Agreement, and (vii) prohibits the
knowing transfer of any of the Acquisition Shares to any person or group if, as
a result of such transfer, such person or group would have beneficial ownership
of Common Stock representing in the aggregate more than 9.9% of the issued and
outstanding shares of Common Stock (subject to exceptions set forth in the
Voting and Standstill Agreement). On February 27, 1998, the Company increased
the size of the Board of Directors from 10 to 14 and elected Herbert Wender,
Robert M. Steinberg, Lowell C. Freiberg and George E. Bello as directors of the
Company.
"RIC Ownership Percentage" means, at any time, the percentage of the
Adjusted Outstanding Shares that is beneficially owned in the aggregate by RIC
and its affiliates. "Adjusted Outstanding Shares" means, at any time and with
respect to the determination of the RIC Ownership Percentage as it relates to
RIC and its affiliates, the total number of shares of Common Stock then issued
and outstanding together with the total number of shares of Common Stock not
then issued and outstanding that would be outstanding if (x) all then existing
shares of Series B Preferred Stock had been converted and (y) all then existing
warrants and options exercisable into shares of Common Stock had been exercised
(other than underwriters' over-allotment options and stock options granted under
benefit plans of the Company or any of its affiliates), but excluding any rights
that may be exercisable under the Company's shareholder rights plan. As of
February 27, 1998, the 4,039,473 shares of Common Stock acquired by RIC at the
closing of the Acquisition represented approximately 26.8% of the issued and
outstanding shares of Common Stock as of that date, the RIC Ownership Percentage
was 44.6%, the Adjusted Outstanding Shares was 19,869,154 and the total number
of shares of Common Stock issued and outstanding was 15,044,593.
Finally, the Company and RIC entered into a Registration Rights
Agreement on February 27, 1998. Pursuant to the Registration Rights Agreement,
the Company filed two registration statements with the Securities and Exchange
Commission (the "Commission") to register, under the Securities Act of 1933, as
amended, the resale of (i) the 4,039,473 shares of the Company's Common Stock
issued to RIC in the Acquisition, (ii) the 2,200,000 shares of the Series B
Preferred Stock issued to RIC in the Acquisition and (iii) the 4,824,561 shares
of Common Stock that RIC may acquire upon conversion of the Series B Preferred
Stock. Such registration
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statements became effective on February 27, 1998. The Registration Rights
Agreement requires the Company to use its best efforts to maintain the
effectiveness of such registration statements for specified time periods.
A copy of the Series B Preferred Stock designation was included as an
exhibit to the Company's Form 8-A registration statement filed with the
Commission on February 27, 1998. Copies of the Voting and Standstill Agreement
and the Registration Rights Agreement are filed herewith as exhibits to this
Annual Report on Form 10-K.
The Company continually assesses the growth potential for its business
in its existing markets as well as those markets in which it is not currently
participating. The Company expects that it will continue to evaluate
acquisitions of small to medium-size title insurance agencies and underwriters.
Through acquisitions of independent agencies with a track record of
profitability and the prospect of growth in the future, the Company can expand
revenues while increasing its profit margins and control over the acquired
agencies. In assessing the acquisition of an underwriter, the Company reviews,
among other factors, the underwriter's profitability, location, growth potential
in its existing market, claims experience and adequacy of its reserves.
Business of Commonwealth/Transnation
General. Commonwealth was founded as a title insurance company in 1876
and was incorporated in the Commonwealth of Pennsylvania on April 1, 1944.
Commonwealth is licensed by the insurance departments of 49 states, the District
of Columbia, Puerto Rico and the U.S. Virgin Islands. Transnation was
incorporated as an insurance company in the State of Arizona on September 15,
1992. Transnation is the successor by merger to Transamerica Title Insurance
Company, a California corporation incorporated on March 26, 1910. The current
name of the corporation was adopted on September 20, 1995. Transnation is
licensed by the insurance departments of 40 states and the District of Columbia.
Commonwealth and Transnation, and their respective subsidiaries and
divisions, provide a complete range of title and closing services through an
extensive network of more than 4,000 policy-issuing locations nationwide,
including branch offices, independent agents, and approved attorneys. The
National Title Services division of Commonwealth/Transnation provides
specialized title services for large and multi-state commercial transactions. In
addition to its nationwide title insurance operations, Commonwealth/Transnation
offers a full range of residential real estate services to the national mortgage
lending community through its Commonwealth OneStop(R) network. Commonwealth
OneStop(R) provides (i) appraisal management services through the CLT Appraisal
Services, Inc. subsidiary, (ii) title insurance services through the National
Residential Title Services division, (iii) employee relocation and property
disposition services through Commonwealth Relocation Services, Inc., (iv)
appraisal information systems through the Day One, Inc. subsidiary and (v)
additional services through independent service providers.
National Title Services Division. The National Title Services division
of Commonwealth/Transnation, with thirteen (13) offices located in major
metropolitan areas nationwide, delivers complete customized title insurance
packages for large commercial, multi-site and interstate real estate
transactions. The division consists of numerous title insurance and real estate
professionals that comprise an entire network of national branch offices and
agents. Expertise on the local level provides the division with a full
understanding of varying real estate customs and requirements.
Commonwealth OneStop(R). Through the Commonwealth OneStop(R) operation,
based in Wayne, Pennsylvania, Commonwealth/Transnation provides national and
regional lenders with a full range of residential closing services. Lenders can
obtain all of the services necessary to
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complete residential real estate transactions through a single point of contact.
Such services are easily accessible through Electronic Data Interchange ("EDI"),
by facsimile or through COSMOS - Commonwealth/Transnation's electronic mail
ordering system. COSMOS offers lenders that have not yet converted to the EDI
standard an opportunity to place their orders electronically. The key services
on the Commonwealth OneStop(R) network are appraisal management services through
CLT Appraisal Services, Inc. and title insurance services through the National
Residential Title Services division.
CLT Appraisal Services, Inc. CLT Appraisal Services, Inc. provides the
mortgage lending industry with appraisal services through state-of-the-art
technology. A nationwide network of independent licensed or certified fee
appraisers provides unbiased, third-party opinions from experienced
professionals with knowledge of their local markets. Through a customized
computer interface, telephone or facsimile, branch offices can communicate with
the national processing center in Wayne, Pennsylvania, which handles all aspects
of the process from order placement to status reporting and delivery. Appraisers
are screened before being admitted to the network, and they must meet certain
standards in education, training, licensing and experience.
National Residential Title Services Division. In connection with
technological advancements that allow real estate transactions to close quickly,
the National Residential Title Services division provides lenders with a single
point of contact for a full range of residential title services. The service of
this division extends to Commonwealth/Transnation's entire network of more than
4,000 policy-issuing locations nationwide, including branch offices, independent
agents and approved attorneys. National Residential Title Services provides
lenders with the convenience of one-stop shopping and the flexibility of setting
up procedures that meet with their individual requirements.
Commonwealth Relocation Services, Inc. Commonwealth Relocation
Services, Inc. ("CRS") is a full-service national relocation management company.
CRS provides complete, diversified services that seek to keep relocation
activities and costs under control. Founded in 1967, CRS is one of the oldest
firms in the relocation business.
Day One, Inc. Day One, Inc. is a supplier of software for the appraisal
and property inspection industry.
The National 1031 Exchange Corporation. The National 1031 Exchange
Corporation serves as an independent, third party advisor to facilitate
tax-deferred real property exchanges under Section 1031 of the Code.
ITEM 2. PROPERTIES
The Company conducts its business operations primarily in leased office
space. Lawyers Title leases approximately 83,300 square feet of office space for
its corporate headquarters in Richmond, Virginia. This lease expires on
September 30, 2000. At December 31, 1997, the Company has numerous other leases
for its branch offices and subsidiaries throughout the states in which it
operates. In addition, it owns several properties which in aggregate are not
material to its business taken as a whole.
The Company's title plants constitute a principal asset. Such plants
comprise copies of public records, maps, documents, previous reports and
policies which are indexed to specific properties in an area. The plants are
generally located at the office which serves a particular locality. They enable
title personnel to examine title matters relating to a specific parcel of real
property as reflected in the title plant, and eliminate or reduce the need for a
separate search of
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the public records. They contain material dating back a number of years and are
kept current on a daily or other frequent basis by the addition of copies of
documents filed of record which affect real property. The Company maintains
title plants covering many of the areas in which it operates, although certain
offices utilize jointly owned and maintained plants. The Company capitalizes
only the initial cost of title plants. The cost of maintaining such plants is
charged to expense as incurred.
The title plants and title examination procedures have been automated
and computerized to a large extent in many areas. To protect against casualty
loss, the Company's offices maintain duplicate files and backups of all title
plants.
On February 23, 1998, the Company entered into an Agreement Containing
Consent Order (the "Consent Order") with the Federal Trade Commission (the
"FTC"). The Consent Order requires that the Company divest, within six months
from the date of the Consent Order, either the rights, title and interest held
by the Company prior to consummation of the Acquisition or the rights, title and
interest held by Reliance prior to consummation of the Acquisition of all title
plants serving each of 12 localities named in the Consent Order. Seven of such
localities are in Florida, three are in Michigan, and one each is in Washington,
D.C., and St. Louis, Missouri. The Consent Order further requires that the
Company divest all user or access agreements pertaining to each divested title
plant. In addition, the Company cannot acquire, without prior notice to the FTC,
any interest in a title plant in any of the named localities for a period of 10
years following the date of the Consent Order. The Company believes that the
divestitures will not result in a material loss nor will such divestitures have
a material effect on future operations due to the Company's access to other
title plants in these markets.
The Company believes that its properties are maintained in good
operating condition and are suitable and adequate for its purposes at current
sales levels.
ITEM 3. LEGAL PROCEEDINGS
The Company and its subsidiaries are involved in certain litigation
arising in the course of their businesses, some of which involve claims of
substantial amounts. Although the ultimate outcome of these matters cannot be
ascertained at this time, and the results of legal proceedings cannot be
predicted with certainty, the Company believes, based on current knowledge, that
the resolution of these matters will not have a material adverse effect on the
Company's financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of 1997.
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EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below are the persons who serve as executive officers of the
registrant, their ages and positions as of March 16, 1998, and their business
experience during the prior five years. There are no family relationships
between any of such persons and any director, executive officer, or person
nominated to become a director or executive officer.
<TABLE>
<CAPTION>
Name Age Office and Experience
---- --- ---------------------
<S> <C> <C>
Charles H. Foster, Jr. 55 Chairman and Chief Executive Officer of the Company since
October 1991. Mr. Foster also serves as Chairman and Chief
Executive Officer of Lawyers Title, a position he has held for
more than five years.
Herbert Wender 60 Vice - Chairman and Chief Operating Officer of the Company since
February 27, 1998. Mr. Wender also serves as Chairman and
Chief Executive Officer of Commonwealth and Transnation,
positions he has held for more than five years.
Janet A. Alpert 51 President of the Company since January 1993. Ms. Alpert served
as Chief Operating Officer of the Company from January 1993 to
February 1998. She also serves as President and Chief
Operating Officer of Lawyers Title, a position she has held
for more than five years.
Jeffrey A. Tischler 41 Executive Vice President, Chief Financial Officer and
Treasurer of the Company since February 27, 1998. Mr. Tischler
also serves as Executive Vice President, Chief Financial
Officer and Administrative Officer of Commonwealth and
Transnation, positions he has held since May 1997. Mr.
Tischler served as Senior Vice President and Chief Financial
Officer of Commonwealth and Transnation from January 1994 to
April 1997, and as Vice President - Financial Planning and
Analysis of Reliance Group Holdings, Inc. from September 1993
to January 1994.
John M. Carter 42 Executive Vice President - Law and Employee Relations of the
Company since February 27, 1998. Mr. Carter served as Assistant
Secretary of the Company from February 1995 to February 1998.
He also serves as Senior Vice President - Law and Employee
Relations of Lawyers Title, a position he has held since April
1997. Mr. Carter served as Vice President, General Corporate
Counsel and Secretary of Lawyers Title from 1994 to April
1997, and as Vice President, Corporate Counsel and Secretary
of Lawyers Title from 1992 to 1994.
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Name Age Office and Experience
---- --- ---------------------
George William Evans 43 Executive Vice President - Information Technology of the Company
since February 27, 1998. Mr. Evans served as Vice President
and Treasurer of the Company from October 1991 to February
1998. He also serves as Senior Vice President, Chief
Financial Officer and Treasurer of Lawyers Title, a position
he has held for more than five years.
Russell W. Jordan, III 57 Senior Vice President, General Counsel and Secretary of the
Company since February 27, 1998. Mr. Jordan served as
Secretary and General Counsel of the Company from October 1991
to February 1998. He also serves as Senior Vice President and
General Counsel of Lawyers Title, a position he has held for
more than five years.
John R. Blanchard 49 Senior Vice President - Corporate Controller of the Company
since February 27, 1998. Mr. Blanchard served as Controller of
the Company from February 1992 to February 1998. He also serves
as Senior Vice President - Controller of Lawyers Title, a
position he has held for more than five years.
Christopher L. Rosati 38 Senior Vice President - Operations Controller of the Company
since February 27, 1998. Mr. Rosati also serves as Vice
President and Controller of Commonwealth and Transnation,
positions he has held since March 1996. Mr. Rosati served as
Vice President and Assistant Controller of Commonwealth and
Transnation from 1992 to March 1996.
H. Randolph Farmer 59 Senior Vice President - Corporate Communications of the
Company since February 27, 1998. Mr. Farmer also serves as
Senior Vice President - Communications and Advertising of
Lawyers Title, a position he has held for more than five years.
</TABLE>
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
Effective March 2, 1998, the Common Stock of the Company began trading
on the New York Stock Exchange ("NYSE") under the symbol "LFG." From October
1995 through February 1998, the Common Stock traded on the NYSE under the symbol
"LTI."
The following table sets forth the reported high and low sales prices
per share of the Common Stock on the NYSE Composite Tape, based on published
financial sources, and the dividends per share declared on the Common Stock for
the calendar quarter indicated.
Market Price Dividends
------------ ---------
High Low
---- ---
Year Ended December 31, 1996
First quarter $19.13 $16.63 $0.05
Second quarter 19.88 16.00 0.05
Third quarter 22.38 17.38 0.05
Fourth quarter 21.75 17.63 0.05
Year Ended December 31, 1997
First quarter $23.75 $19.00 $0.05
Second quarter 21.13 16.75 0.05
Third quarter 33.69 18.00 0.05
Fourth quarter 33.38 29.13 0.05
As of March 16, 1998, there were approximately 2,472 shareholders of
record of the Company's Common Stock.
The Company's current dividend policy anticipates the payment of
quarterly dividends in the future. The declaration and payment of dividends to
holders of Common Stock will be in the discretion of the Board of Directors,
will be subject to contractual restrictions contained in a Company loan
agreement, as described below, and will be dependent upon the future earnings,
financial condition and capital requirements of the Company and other factors.
Because the Company is a holding company, its ability to pay dividends
will depend largely on the earnings of, and cash flow available from, its
subsidiaries. In a number of states, certain of the Company's insurance
subsidiaries are subject to regulations that require minimum amounts of
statutory surplus. Under these and other such statutory regulations, the net
assets of the Company's consolidated subsidiaries at December 31, 1997
aggregating approximately $276.0 million were not available for dividends, loans
or advances to the Company at that date.
Certain of the Company's insurance subsidiaries are also subject to
state regulations that require that the payment of any extraordinary dividends
receive prior approval of the insurance regulators of such states. Specifically,
the insurance regulations of Virginia restrict the amount of dividends that
Lawyers Title can distribute to the Company in any twelve month period without
prior approval. Under Virginia law, payment of dividends or distributions by a
domestic insurer in any twelve month period without the prior approval of the
Virginia Bureau of Insurance is limited to the lesser of: (i) 10% of such
insurer's surplus as of the preceding December 31; or (ii) the net income, not
including realized capital gains, of such insurer for the preceding calendar
year. Accordingly, based on statutory financial results for the year ended
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December 31, 1997, the payment of dividends by Lawyers Title to the Company over
any twelve month period that ends in calendar year 1998 is limited to $16.4
million without prior approval. Based on the amounts that had been distributed
in the preceding twelve month period, as of December 31, 1997, approximately
$14.1 million was available for the payment of dividends by Lawyers Title
pursuant to the insurance regulations of Virginia.
In a number of states, Commonwealth and Transnation are subject to
regulations that require minimum amounts of statutory surplus. Under these and
other such statutory regulations, the net assets of Commonwealth and Transnation
on a combined basis at December 31, 1997 aggregating approximately $242.5
million were not available for dividends, loans or advances.
Commonwealth and Transnation are subject also to state regulations that
require that the payment of any extraordinary dividends receive prior approval
of the insurance regulators of such states. Specifically, the insurance
regulations of Arizona and Pennsylvania restrict the amount of dividends that
Transnation and Commonwealth, respectively, can distribute to the Company in any
twelve month period without prior approval. Under Arizona law, payment of
dividends or distributions by a domestic insurer in any twelve month period
without prior approval of the Arizona Department of Insurance is limited to the
lesser of : (i) 10% of such insurer's surplus as of the preceding December 31;
or (ii) such insurer's net investment income for the preceding calendar year.
Under Pennsylvania law, payment of dividends or distributions by a domestic
insurer in any twelve month period without the prior approval of the
Pennsylvania Department of Insurance may not exceed the greater of: (i) 10% of
such insurer's surplus as of the preceding year end; or (ii) the net income of
such insurer for such preceding year. Accordingly, based on statutory financial
results for the year ended December 31, 1997, payment of dividends by
Commonwealth and Transnation to the Company over any twelve month period that
ends in calendar year 1998 is limited to an aggregate amount of $39.4 million
without prior approval. Based on the amounts that had been distributed in the
preceding twelve month period, as of December 31, 1997, no additional amounts
were currently available for the payment of dividends by Commonwealth or
Transnation without prior regulatory approval.
In addition to regulatory restrictions, the Company's ability to
declare dividends is subject to restrictions under a Revolving Credit Agreement,
dated as of November 7, 1997, between the Company and Bank of America National
Trust and Savings Association, which generally limits the aggregate amount of
all cash dividends and stock repurchases by the Company to 25% of its cumulative
consolidated net income arising after December 31, 1996. As of December 31,
1997, approximately $6.5 million was available for the payment of dividends by
the Company under the Revolving Credit Agreement. Management does not believe
that the restrictions contained in the Revolving Credit Agreement will, in the
foreseeable future, adversely affect the Company's ability to pay cash dividends
at the current dividend rate.
ITEM 6. SELECTED FINANCIAL DATA
On February 25, 1993, the Company's Board of Directors declared a
three-for-two split of its Common Stock to all shareholders of record on April
15, 1993. Accordingly, all common share, per common share and stock option data
have been restated to reflect the stock split.
The information set forth in the following table should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements and Notes
thereto.
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<TABLE>
<CAPTION>
For the year ended
December 31: 1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(In thousands of dollars, except per common share amounts)
<S> <C> <C> <C> <C> <C>
Revenues............... $639,099 $594,182 $482,832 $501,200 $504,109
Net income............. 26,157 36,519 17,051 6,814 28,965
Net income per
common share........... 2.93 4.11 1.92 0.80 4.31
Net income per
common share
assuming dilution...... 2.84 4.01 1.89 0.79 4.22
Dividends per
common share........... 0.20 0.20 0.18 0.12 .06
At December 31:
Total assets........... 554,693 520,968 475,843 453,259 438,140
Shareholders'
equity................. 292,404 262,168 238,385 203,323 201,161
</TABLE>
The earnings per share amounts prior to 1997 have been restated as
required to comply with Statement of Financial Accounting Standards No. 128,
Earnings Per Share. For further discussion of earnings per share and the impact
of Statement No. 128, see the Notes to the Consolidated Financial Statements
beginning on page F-7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
Overview
The Company reported improved operating earnings in 1997 and 1996. The
Company's primary business is the insurance of titles to real property, which is
greatly influenced by the real estate economy. During the three year period from
1995 to 1997, the Company benefited from the execution of three distinct
portions of its business strategy. Operations were expanded through the
acquisition of title insurance agents and underwriters, expenses were tightly
monitored and controlled, and claims experience improved due to quality control
efforts and an improved claims environment.
Revenues
The Company's operating revenues are dependent on overall levels of
real estate activity, which are influenced by a number of factors including
interest rates, access to capital, housing starts, housing resales and the
general state of the economy. In addition, the Company's revenues are affected
by the Company's sales and marketing efforts, its acquisition program and its
strategic decisions based on the rate structure and claims environment in
particular markets.
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Premiums and related fees are determined both by competition and by
state regulation. Operating revenues from direct title operations are recognized
at the time real estate transactions close, which is generally 60 to 90 days
after the opening of a title order. Operating revenues from agents are
recognized when the issuance of a policy is reported to the Company by an agent.
Although agents generally report the issuance of policies on a monthly basis,
heightened levels of real estate activity may slow this reporting process. This
typically results in delays of 30 to 60 days from the closing of real estate
transactions until the recognition of revenues from agents. As a result, there
can be a significant lag between changes in general real estate activity and
their impact on the Company's revenues.
In addition to the premiums and related fees, the Company earns
investment income from its portfolio of fixed-maturity and equity securities.
Investment income includes dividends and interest as well as realized capital
gains or losses on the portfolio. The Company regularly reexamines its portfolio
strategies in light of changing earnings or tax situations. In the fourth
quarter of 1996 the Company shifted its investment strategy, eliminating its
investment in equity securities and beginning to move the majority of its
investment portfolio into fixed-maturity securities. The repositioning of the
portfolio eliminated the exposure of the regulated surplus of the Company's
insurance subsidiaries to market fluctuations inherent in equity portfolios.
Additionally, the commensurate increase in fixed-maturity securities increased
the level of more stable, predictable interest income earned.
Factors Affecting Profit Margins and Pre-Tax Profits
The Company's profit margins are affected by several factors, including
the volume of real estate activity, policy amount and the nature of real estate
transactions. Volume is an important determinant of profitability because the
Company, like any other title insurance company, has a significant level of
fixed costs arising from personnel, occupancy costs and maintenance of title
plants. Because premiums are based on the face amount of the policy, larger
policies generate higher premiums although expenses of issuance do not
necessarily increase in proportion to policy size. Profit margins are lower on
refinancings than on sales due to premium discounts and higher cancellation
rates generally experienced on refinancings. Cancellations affect profitability
because costs incurred both in opening and in processing orders typically are
not offset by fees.
The Company's principal variable expense is commissions paid to
independent agents. The Company regularly reviews the profitability of its
agency revenues, adjusting commission levels or cancelling certain agents where
profitability objectives are not being met and expanding operations where
acceptable levels of profitability are available. The Company continually
monitors its expense ratio (net of interest and goodwill), which is the sum of
salaries and employee benefits, agency commissions and other expenses expressed
as a percentage of operating revenues.
Claims
Generally, title insurance claim rates are lower than for other types
of insurance because title insurance policies insure against prior events
affecting the quality of real estate titles, rather than against unforeseen, and
therefore less predictable, future events. A provision is made for estimated
future claim payments at the time revenue is recognized. Both the Company's
experience and industry data indicate that claims activity continues through 20
years after the policy is issued. Management uses actuarial techniques to
estimate future claims by analyzing past claim payment patterns. Management has
continued to emphasize and strengthen claims prevention and product quality
programs.
-21-
<PAGE>
In the fourth quarter of 1996 the Company made a change from reporting
policy and contract claims on a discounted to an undiscounted basis. This change
was made to conform with industry practice and because it is considered
preferable by rating agencies and investment analysts. The effect of the change
for 1996 was to increase the provision for policy and contract claims by $76.0
million and decrease net income by $49.0 million and net income per share by
$5.51 and net income per share assuming dilution by $5.38.
In addition, during the fourth quarter of 1996 the Company changed its
estimate of the ultimate net cost of all reported and unreported losses incurred
through September 30, 1996 to reflect favorable experience. Under the Company's
reserving methodology, the provision for losses on policies issued in each year
is based on historical experience determined over a period of years. As a
result, the very high incidence of losses on policies issued in the 1980's had
the effect of pushing up the rate at which losses were provided in the 1990's.
The early 1990's were also affected by a high volume of residential refinance
business which time has proven is experiencing a lower incidence of losses. The
Company began to see favorable development indications on the 1991-1994 policy
years as those years began to develop some meaningful experience, i.e., 3-4
years. However, because title losses are paid over a long period of time and
experience has shown that significant losses can be reported and paid more than
20 years out, the Company chose to proceed cautiously with respect to projecting
its favorable experience over these early years to the projected ultimate losses
for the subject policy years. The Company monitored development of these years
very closely through 1995 and the first three quarters of 1996 and, while
indications continued to be favorable for the 1991-1994 policy years, the
Company as of September 30, 1996 did not believe that the limited development of
those years was sufficient to justify a significant reduction in the projected
ultimate losses for those years.
In the fourth quarter of 1996, in connection with the performance of
initial due diligence procedures related to the negotiation of the acquisition
of Commonwealth and Transnation, the Company had the opportunity to see how the
experience of these two major title underwriters compared to its own experience.
The information gained from this experience along with extensive actuarial
studies of the Company's book of business resulted in a determination that the
projected ultimate losses for certain policy year business should be reduced to
give greater weight to the favorable development on those years through December
31, 1996. The effect of the change in estimate was to decrease the provision for
policy and contract claims by $78.0 million and increase net income by $50.7
million and net income per share by $5.70 and net income per share assuming
dilution by $5.57.
Both the change in reserve estimate and the change from discounting to
not discounting reserves were contemplated by the Company as a result of the
shift in the business that now reflects a higher amount of refinance
transactions and an increase in frequency of housing resales.
Because the change in accounting principle to no longer discount policy
and contract claims is inseparable from the change in estimate, both have been
accounted for as a change in estimate. Accordingly, the net effect of the two
changes, a decrease of $2.0 million in the provision for policy and contract
claims, has been included in operations for the fourth quarter of 1996. The
above changes were both made to conform with general industry practice. The
changes are included in the provision for policy and contract claims, and no
prior amounts have been restated.
Other Expenses
The most significant components of other expenses are rent for office
space, outside costs of title production, travel, communications and taxes
levied by states on premiums.
-22-
<PAGE>
Seasonality
Historically, real estate activity has been generally slower in the
winter months with volumes showing significant improvements in the spring and
summer months. The percentage of title orders closed to title orders opened is
typically lower in the first six months than at year end because of this
seasonal variance. See "Business - Seasonality, Backlog and Cyclicality." In
recent years low levels of mortgage interest rates have caused fluctuations in
real estate activity levels outside of the usual, seasonal pattern. The Company
cannot predict whether or when the historical seasonal pattern of real estate
activity will resume.
Contingencies
See "Item 3 - Legal Proceedings" for a discussion of pending legal
proceedings.
Results of Operations
Comparison of Years Ended December 31, 1997,
December 31, 1996 and December 31, 1995
Net Income
Net income was $26.2 million in 1997, $36.5 million in 1996 and $17.1
million in 1995. The 1996 net income increase was attributable in part to
capital gains resulting from a shift in the Company's investment portfolio from
equities to fixed income securities, as discussed under "Investment Income"
below. Net operating income (which excludes realized investment gains) was $26.3
million, $21.3 million, and $15.1 million in the fiscal years ended December 31,
1997, 1996 and 1995, respectively. The 1997 and 1996 increases reflected
improved results from operations.
Operating Revenues
Operating revenues improved 11.7% to $622.8 million in 1997, compared
to $557.8 million in 1996. This 1996 level was a 19.3% increase over the 1995
amount.
The 1997 and 1996 results benefited from a favorable economic
environment. The monthly average mortgage rate was 7.6% and 7.8% in 1997 and
1996, respectively, and this favorable economic environment led to increased
levels of housing starts and housing resales in 1997 and 1996 compared to 1995.
Business volumes for direct and agency business improved approximately 18% from
670,000 transactions in 1995 to 790,000 in 1996 and improved approximately 8%
from 790,000 to 855,000 in 1997.
The volume of orders for title insurance opened in the Company's direct
operations increased 4.6% in 1997 and 14.2% in 1996 compared to the previous
years.
Investment Income
Investment income decreased significantly to $16.3 million in 1997,
compared to $36.4 million in 1996 after increasing from $15.5 million in 1995 to
$36.4 million in 1996. The high level of investment income in 1996 was due
primarily to capital gains of $23.4 million. Excluding these gains, the
remaining components of investment income (dividends and interest) amounted to
$17.1 million, $14.2 million and $14.0 million in 1997, 1996 and 1995,
respectively.
-23-
<PAGE>
In the fourth quarter of 1996, the Company changed its investment
strategy, selling a majority of its equity portfolio and beginning to move the
proceeds into fixed-maturity securities. This sale resulted in capital gains of
$17.4 million.
Expenses
Salaries and Employee Benefits. Personnel related expenses are a
significant portion of total operating expenses in the title insurance industry.
These expenses require management through the often rapidly changing conditions
in the real estate economy. Salaries and employee benefits increased 8.8% in
1997 compared to 1996. This increase was largely tied to higher business
volumes, which necessitated increased staffing levels to meet customer service
demands, incentive increases and normal merit raises. The expense ratio improved
in 1997 to 90.4% from 91.0% in 1996. Salaries and employee benefits increased
18.2% in 1996 over 1995, and the 1996 expense ratio decreased to 91.0% from
92.5% in 1995. In the fourth quarter of 1994, in response to a severe fall in
order counts, a special staff and salary reduction program was implemented that
lasted through the second quarter of 1995. On a same store basis, the Company
reduced its overall headcount by approximately 24% from its peak level.
Additionally, the Company effected salary reductions of up to 10% for a period
of approximately six months. Operating revenue net of agents' commissions
improved on a per employee basis to $105,000 in 1997 from $99,000 in 1996 and
$87,000 in 1995.
Agents' Commissions. Commissions paid to title insurance agents are the
largest single expense incurred by the Company. The commission rate varies by
geographic area in which the commission was earned. Commissions as a percentage
of agency revenue were 75.0%, 74.2% and 73.9% in 1997, 1996 and 1995,
respectively.
General, Administrative and Other Expenses. The most significant
components of other expenses are rent for office space, outside costs of title
production, travel, communications and taxes levied by states on premiums.
Portions of these expenses vary with the volume of business transacted by the
Company.
Provision for Policy and Contract Claims. The Company's claims
experience has shown improvement in recent years. The loss ratio was 5.4%, 5.2%
and 5.2% in 1997, 1996 and 1995, respectively. As previously discussed, the
Company changed its method of reporting policy and contract claims in the fourth
quarter of 1996. Claims paid as a percentage of operating revenues were 4.4%,
4.8% and 6.5% in 1997, 1996 and 1995, respectively.
Income Taxes
The Company pays U.S. federal and state income taxes based on laws in
the jurisdictions in which it operates. The effective tax rates reflected in the
income statement for 1997, 1996 and 1995 differ from the U.S. federal statutory
rate principally due to non-taxable interest, dividend deductions, travel and
entertainment and company-owned life insurance.
At December 31, 1997 the Company had recorded gross deferred tax assets
of $32.1 million related primarily to policy and contract claims and employee
benefit plans. Substantially all of this deferred tax asset balance could be
realized in the future through the reversal of existing temporary taxable
differences. Accordingly, it is more likely than not that the income tax
benefits will be realized for all of the temporary deductible differences
existing at December 31, 1997.
The Company reassesses the realization of deferred assets quarterly
and, if necessary, adjusts its valuation allowance accordingly.
-24-
<PAGE>
Liquidity and Capital Resources
Cash provided by operating activities was $18.8 million, $33.2 million
and $18.3 million for the fiscal years ended December 31, 1997, 1996 and 1995,
respectively. In addition to $70.0 million of cash and invested cash on hand and
$261.1 million of fixed-maturity securities at December 31, 1997, the Company
had no long-term debt and maintained a $237.5 million working credit facility,
of which $4.0 million was used at December 31, 1997.
Historically, the Company has not maintained significant levels of
debt. Upon closing the Acquisition (as described in Note 16 of the Notes to
Consolidated Financial Statements), the Company incurred debt of $200.7 million
under the credit facility and issued 2.2 million shares of Series B Preferred
Stock. The Company estimates that servicing the debt and preferred stock will
require approximately $20.0 million per year, which management expects to be
funded largely from increased cash flow from operations resulting from the
Acquisition. Additionally, management believes that these cash requirements will
be partially offset by approximately $15.0 million of federal income tax
benefits related to the tax deductibility of both interest expense, amortization
of intangibles and amortization of tax reserve discount. In view of the
historical ability of the Company and Commonwealth/Transnation to generate
strong, positive cash flows, and the projected strong cash position and
relatively conservative capitalization structure of the Company following
consummation of the Acquisition, the Company believes that the Company will have
sufficient liquidity and adequate capital resources to meet both its short- and
long-term capital needs. Further, the Company expects to maintain approximately
$30.0 million in unused credit facilities.
Emerging Issues
Many existing computer programs use only two digits to identify a year
in the date field. These programs were designed and developed without
considering the impact of the upcoming change in the century. If not corrected,
many computer applications could fail or create erroneous results by or in the
year 2000. The potential costs and uncertainties to companies in addressing this
issue (the "Year 2000 issue") will depend on a number of factors, including
their software and hardware and the nature of their industries. Companies must
also coordinate with other entities with which they electronically interact,
both domestically and globally, including suppliers, customers, creditors,
borrowers and financial service organizations.
The Company has closely examined the Year 2000 issue and the potential
costs and consequences to the Company in addressing this issue. As part of its
business and growth strategy, the Company is currently investing in new
information technology, including the replacement of multiple independent
personal computer systems throughout its direct operations with an upgraded
centralized system, that is "Year 2000" compliant. The software for such new
centralized system is being developed by Elliptus Software Solutions, Inc., a
Lawyers Title subsidiary that develops and markets title and escrow production
software. As development of such software is nearly complete, management
believes that the remaining software development costs will not be material.
Management estimates that the Company's investment in hardware for the project
will total approximately $12.5 million over the next eighteen months. The
Company is also communicating with third parties with which it does business to
coordinate further action with respect to the Year 2000 issue. As a result,
management believes that, with the replacement of certain computer systems as
described above, the Year 2000 issue is not expected to have a material impact
on the Company's operations and that the cost of the Company's addressing the
Year 2000 issue is not a material event or uncertainty that would cause its
reported financial information not to be necessarily indicative of future
operating results or financial condition.
-25-
<PAGE>
Forward-Looking and Cautionary Statements
Certain information contained in this Annual Report on Form 10-K
includes "forward-looking statements" within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act. Among other things, these
statements relate to the financial condition, results of operation and business
of the Company. In addition, the Company and its representatives may from time
to time make written or oral forward-looking statements, including statements
contained in other filings with the Securities and Exchange Commission and in
its reports to shareholders. These forward-looking statements are generally
identified by phrases such as "the Company expects," "the Company believes" or
words of similar import. These forward-looking statements involve certain risks
and uncertainties and other factors that may cause the actual results,
performance or achievements to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Further, any such statement is specifically qualified in its
entirety by the following cautionary statements.
In connection with the title insurance industry in general, factors
that may cause actual results to differ materially from those contemplated by
such forward-looking statements include the following: (i) the costs of
producing title evidence are relatively high, whereas premium revenues are
subject to regulatory and competitive restraints; (ii) the amount of title
insurance business available is influenced by housing starts, housing resales
and commercial real estate transactions; (iii) real estate activity levels have
historically been cyclical and are influenced by such factors as interest rates
and the condition of the overall economy; (iv) the value of the Company's
investment portfolio is subject to fluctuation based on similar factors; (v) the
title insurance industry may be exposed to substantial claims by large classes
of claimants; and (vi) the industry is regulated by state laws that require the
maintenance of minimum levels of capital and surplus and that restrict the
amount of dividends that may be paid by the Company's insurance subsidiaries
without prior regulatory approval.
The Company cautions that the foregoing list of important factors is
not exclusive. The Company does not undertake to update any forward-looking
statement that may be made from time to time by or on behalf of the Company.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's market capitalization on January 28, 1997 was less than
$2.5 billion and therefore, pursuant to General Instruction 1 to Item 305 of
Regulation S-K, the information otherwise required by this Item has not been
included in this report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this Item is submitted in a separate section of this
report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There have been no changes in the Company's independent accountants and
no disagreements on accounting and financial disclosure that are required to be
reported hereunder.
-26-
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Except as to certain information regarding executive officers included
in Part I, the definitive proxy statement for the 1998 Annual Meeting of
Shareholders to be filed within 120 days after the end of the last fiscal year
is incorporated herein by reference for the information required by this item.
ITEM 11. EXECUTIVE COMPENSATION
The definitive proxy statement for the 1998 Annual Meeting of the
Shareholders to be filed within 120 days after the end of the last fiscal year
is incorporated herein by reference for the information required by this item.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The definitive proxy statement for the 1998 Annual meeting of
Shareholders to be filed within 120 days after the end of the last fiscal year
is incorporated herein by reference for the information required by this item.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The definitive proxy statement for the 1998 Annual Meeting of
Shareholders to be filed within 120 days after the end of the last fiscal year
is incorporated herein by reference for the information required by this item.
-27-
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) (1), (2) and (3). The response to this portion of Item 14 is
submitted as a separate section of this report.
(b) Reports on Form 8-K
Item 5
On November 20, 1997, the Registrant filed a Current Report on
Form 8-K, dated November 17, 1997, reporting under Item 5 that
the Company had entered into a Revolving Credit Agreement,
dated November 7, 1997, with Bank of America National Trust
and Savings Association, individually and as Administrative
Agent for a syndicate of 11 other financial institutions, in
an aggregate principal amount of up to $237.5 million, to
finance the cash portion of the purchase price relating to the
acquisition of Commonwealth and Transnation and for general
corporate purposes.
On December 23, 1997, the Registrant filed a Current Report on
Form 8-K, dated December 23, 1997, reporting under Item 5 that
the Company had entered into an Amended and Restated Stock
Purchase Agreement, dated December 11, 1997, with Lawyers
Title, Reliance and RIC, and that in connection therewith the
Company also had entered into a First Amendment to Amended and
Restated Rights Agreement, dated December 11, 1997, with
Wachovia Bank, N.A., as Rights Agent.
(c) Exhibits - The response to this portion of Item 14 is
submitted as a separate section of this report.
(d) Financial Statement Schedules - The response to this portion
of Item 14 is submitted as a separate section of this report.
-28-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
LANDAMERICA FINANCIAL GROUP, INC.
By: /s/ Charles H. Foster, Jr.
------------------------------------
Charles H. Foster, Jr.
March 27, 1998 Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Charles H. Foster, Jr. Chairman and Chief Executive March 27, 1998
- ------------------------------------------- Officer and Director
Charles H. Foster, Jr. (Principal Executive Officer)
/s/ Herbert Wender Vice-Chairman and Chief Operating Officer March 27, 1998
- ------------------------------------------- and Director
Herbert Wender
/s/ Janet A. Alpert President and Director March 27, 1998
- -------------------------------------------
Janet A. Alpert
/s/ Jeffrey A. Tischler Executive Vice President and Chief March 27, 1998
- ------------------------------------------- Financial Officer
Jeffrey A. Tischler (Principal Financial Officer)
/s/ John R. Blanchard Senior Vice President - Corporate March 27, 1998
- ------------------------------------------- Controller
John R. Blanchard (Principal Accounting Officer)
/s/ Theodore L. Chandler, Jr. Director March 27, 1998
- -------------------------------------------
Theodore L. Chandler, Jr.
-29-
<PAGE>
/s/ Michael Dinkins Director March 27, 1998
- -------------------------------------------
Michael Dinkins
/s/ James Ermer Director March 27, 1998
- -------------------------------------------
James Ermer
/s/ John P. McCann Director March 27, 1998
- -------------------------------------------
John P. McCann
/s/ John Garnett Nelson Director March 27, 1998
- -------------------------------------------
John Garnett Nelson
/s/ Robert F. Norfleet, Jr. Director March 27, 1998
- -------------------------------------------
Robert F. Norfleet, Jr.
/s/ Eugene P. Trani Director March 27, 1998
- -------------------------------------------
Eugene P. Trani
/s/ Marshall B. Wishnack Director March 27, 1998
- -------------------------------------------
Marshall B. Wishnack
/s/ Robert M. Steinberg Director March 27, 1998
- -------------------------------------------
Robert M. Steinberg
/s/ Lowell C. Freiberg Director March 27, 1998
- -------------------------------------------
Lowell C. Freiberg
/s/ George E. Bello Director March 27, 1998
- -------------------------------------------
George E. Bello
</TABLE>
-30-
<PAGE>
ANNUAL REPORT ON FORM 10-K
ITEM 8, ITEMS 14 (a)(1), (2) AND (3), (c) AND (d)
INDEX OF FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
FINANCIAL STATEMENT SCHEDULES
CERTAIN EXHIBITS
YEAR ENDED DECEMBER 31, 1997
LANDAMERICA FINANCIAL GROUP, INC.
RICHMOND, VIRGINIA
-31-
<PAGE>
FORM 10-K ITEM 14 (a)(1), (2) AND (3)
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements of LandAmerica Financial Group,
Inc. and subsidiaries are included in Item 8:
Page
----
Report of Independent Auditors...............................................F-1
Consolidated Balance Sheets, December 31, 1997 and 1996......................F-2
Consolidated Statements of Operations,
Years Ended December 31, 1997, 1996 and 1995...............................F-4
Consolidated Statements of Cash Flows,
Years Ended December 31, 1997, 1996 and 1995...............................F-5
Consolidated Statements of Changes in Shareholders'
Equity, Years Ended December 31, 1997, 1996
and 1995...................................................................F-6
Notes to Consolidated Financial Statements,
December 31, 1997, 1996 and 1995...........................................F-7
The following consolidated financial statement schedules of LandAmerica
Financial Group, Inc. and subsidiaries are included in Item 14(d):
Schedule I Summary of Investments......................F-29
Schedule II Condensed Financial Information of
Registrant ...............................F-30
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable and therefore, have been omitted.
-32-
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
LandAmerica Financial Group, Inc.
We have audited the accompanying consolidated balance sheets of LandAmerica
Financial Group, Inc. (formerly Lawyers Title Corporation) and subsidiaries as
of December 31, 1997, and 1996, and the related consolidated statements of
operations, changes in shareholders' equity, and cash flows for each of the
three years in the period ended December 31, 1997. Our audits also included the
financial statement schedules listed in the Index at Item 14(a). These financial
statements and schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
LandAmerica Financial Group, Inc. and subsidiaries at December 31, 1997, and
1996, and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 1997, in conformity
with generally accepted accounting principles. Also, in our opinion, the related
financial statement schedules, when considered in relation to the basic
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.
As discussed in Note 2 to the financial statements, in 1996 the Company changed
its method of accounting for policy and contract claims.
/s/ ERNST & YOUNG LLP
Richmond, Virginia
March 5, 1998
F-1
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, DECEMBER 31
(In thousands of dollars)
ASSETS 1997 1996
- ------ ---- ----
INVESTMENTS (Note 3):
Fixed maturities available-for-sale
- at fair value (amortized cost:
1997 - $250,295; 1996 - $214,875) $261,112 $218,224
Equity securities - at fair value
(cost: 1997 - $887; 1996 - $930) 1,664 1,725
Mortgage loans (less allowance for
doubtful accounts: 1997 and
1996 - $150) 448 480
Invested cash 34,420 71,626
------ ------
Total investments 297,644 292,055
CASH 35,629 23,997
NOTES AND ACCOUNTS RECEIVABLE:
Notes (less allowance for
doubtful accounts: 1997 - $1,083;
1996 - $1,008) 5,911 6,657
Premiums (less allowance for
doubtful accounts: 1997 - $2,693;
1996 - $2,197) 28,659 20,003
Income tax recoverable 2,392 -
------ ------
Total notes and accounts receivable 36,962 26,660
PROPERTY AND EQUIPMENT - at cost (less
accumulated depreciation and amortiza-
tion: 1997 - $51,775; 1996 - $44,670) 21,896 21,959
TITLE PLANTS 48,984 48,536
GOODWILL (less accumulated amortiza-
tion: 1997 - $14,507; 1996 - $12,393) 57,687 59,669
DEFERRED INCOME TAXES (Note 8) 21,610 23,435
OTHER ASSETS 34,281 24,657
------ ------
$554,693 $520,968
======== ========
F-2
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, DECEMBER 31
(In thousands of dollars)
LIABILITIES 1997 1996
---- ----
POLICY AND CONTRACT CLAIMS
(Notes 2 and 4) $202,477 $196,285
ACCOUNTS PAYABLE AND ACCRUED EXPENSES 47,922 47,211
FEDERAL INCOME TAXES - 5,721
NOTES PAYABLE 6,994 5,036
OTHER 4,896 4,547
-------- --------
Total liabilities 262,289 258,800
-------- --------
COMMITMENTS AND CONTINGENCIES
(Notes 11, 12 and 13)
SHAREHOLDERS' EQUITY (Notes 6 and 7)
Preferred stock, no par value,
authorized 5,000,000 shares, none
issued or outstanding - -
Common stock, no par value, authorized
45,000,000 shares, issued and
outstanding, 8,964,633 in 1997 and
8,889,791 in 1996 168,066 167,044
Unrealized investment gains (less
related deferred income tax
expense of $4,058 in 1997 and
$1,450 in 1996) 7,536 2,694
Retained earnings 116,802 92,430
--------- ----------
Total shareholders' equity 292,404 262,168
--------- ---------
$554,693 $520,968
======== ========
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31
(In thousands of dollars except per common share amounts)
1997 1996 1995
---- ---- ----
REVENUES
Premiums (Note 5) $ 504,024 $ 456,377 $ 385,871
Title search and escrow 118,757 101,381 81,490
Investment income - net
(Note 3) 16,318 36,424 15,471
----------- ----------- ----------
639,099 594,182 482,832
----------- ----------- ----------
EXPENSES (Notes 4, 10 and 11)
Salaries and employee
benefits 200,488 184,274 155,920
Agents' commissions 218,358 192,590 167,031
Provision for policy and
contract claims 33,749 29,211 24,297
General, administrative and
other 146,035 132,567 111,724
----------- ----------- ----------
598,630 538,642 458,972
----------- ----------- ----------
INCOME BEFORE INCOME TAXES 40,469 55,540 23,860
INCOME TAX EXPENSE (BENEFIT)
(Note 8)
Current 15,316 20,320 3,628
Deferred (1,004) (1,299) 3,181
----------- ----------- ----------
14,312 19,021 6,809
----------- ----------- ----------
NET INCOME $ 26,157 $ 36,519 $ 17,051
=========== =========== ==========
NET INCOME PER COMMON SHARE $ 2.93 $ 4.11 $ 1.92
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 8,924,013 8,888,310 8,885,191
NET INCOME PER COMMON SHARE
ASSUMING DILUTION $ 2.84 $ 4.01 $ 1.89
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
ASSUMING DILUTION 9,223,670 9,101,930 9,038,948
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31
(In thousands of dollars)
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 26,157 $ 36,519 $ 17,051
Depreciation & amortization 10,527 9,927 8,108
Amortization of bond premium 507 722 1,087
Realized investment gains (127) (23,430) (2,966)
Deferred income tax (1,004) (1,299) 3,181
Change in assets & liabilities, net
of businesses acquired:
Notes receivable 746 - -
Premiums receivable (8,656) (1,419) (620)
Income taxes receivable/payable (8,113) 6,061 3,810
Policy & contract claims 6,192 2,494 (5,905)
Accounts payable and accrued
expenses 711 5,772 (3,043)
Cash surrender value of life
insurance (9,877) (3,148) (3,231)
Other 1,757 1,013 811
-------- --------- --------
Net cash provided by
operating activities 18,820 33,212 18,283
-------- --------- --------
Cash flows from investing activities:
Purchase of property & equipment, net (8,892) (8,612) (5,369)
Purchase of businesses, net of
cash acquired - (2,320) (8,026)
Cost of investments acquired:
Fixed maturities - available-for-sale (96,634) (115,731) (76,131)
Equity securities - (34,815) (40,103)
Proceeds from investment sales or maturities:
Fixed maturities - available-for-sale 60,884 79,324 75,985
Equity securities 43 100,533 45,975
Other 32 1,443 206
-------- --------- --------
Net cash provided by (used in) investing
activities (44,567) 19,822 (7,463)
-------- --------- --------
Cash flows from financing activities:
Proceeds of cash surrender value loan - 3,891 3,673
Dividends paid (1,785) (1,778) (1,599)
Increase (decrease) in notes payable 1,958 (171) (4,236)
-------- --------- --------
Net cash provided by (used in)
financing activities 173 1,942 (2,162)
-------- --------- --------
Net increase (decrease) in cash and
invested cash (25,574) 54,976 8,658
Cash and invested cash at beginning of year 95,623 40,647 31,989
-------- --------- --------
Cash and invested cash at end of year $ 70,049 $ 95,623 $ 40,647
======== ========= ========
</TABLE>
See Notes to Consolidated Financial Statements
F-5
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(In thousands of dollars)
<TABLE>
<CAPTION>
Receivable
Net from Total
Unrealized Retained Employee Share-
Common Stock Gains Earnings Benefit holders'
Shares Amount (Losses) (Deficit) Plan Equity
------ ------ -------- --------- ---- ------
<S> <C> <C> <C> <C> <C> <C>
BALANCE - December 31, 1994 8,884,511 $166,991 $ (4,898) $ 42,237 $(1,007) $ 203,323
Net Income - - - 17,051 - 17,051
Stock options and incentive plans (Note 6) 1,500 15 - - - 15
Repayment from employee benefit plan - - - - 852 852
Net unrealized gains - - 18,743 - - 18,743
Dividends ($.18/share) - - - (1,599) - (1,599)
Other (20) - - - - -
---------- -------- -------- --------- ------- ---------
BALANCE - December 31, 1995 8,885,991 167,006 13,845 57,689 (155) 238,385
Net Income - - - 36,519 - 36,519
Stock option and incentive plans (Note 6) 3,800 38 - - - 38
Repayment from employee benefit plan - - - - 155 155
Net unrealized losses - - (11,151) - - (11,151)
Dividends ($.20/share) - - - (1,778) - (1,778)
---------- -------- -------- --------- ------- ---------
BALANCE - December 31, 1996 8,889,791 167,044 2,694 92,430 - 262,168
Net Income - - - 26,157 - 26,157
Stock option and incentive plans (Note 6) 74,842 1,022 - - - 1,022
Net unrealized gains - - 4,842 - - 4,842
Dividends ($.20/share) - - - (1,785) - (1,785)
---------- -------- -------- --------- ------- ---------
BALANCE - December 31, 1997 8,964,633 $168,066 $ 7,536 $ 116,802 $ - $ 292,404
========== ======== ======== ========= ======= =========
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
(In thousands of dollars except per common share amounts)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements of LandAmerica
Financial Group, Inc. (formerly Lawyers Title Corporation) (the
"Company") and its wholly owned subsidiaries have been prepared in
conformity with generally accepted accounting principles ("GAAP")
which, as to the insurance company subsidiaries, differ from statutory
accounting practices prescribed or permitted by regulatory authorities.
Organization
The Company is engaged principally in the title insurance business.
Title insurance policies are insured statements of the condition of
title to real property, showing ownership as indicated by public
records, as well as outstanding liens, encumbrances and other matters
of record and certain other matters not of public record. Lawyers
Title's business results from commercial real estate activity, resales
and refinancings of residential real estate and construction and sale
of new housing. The Company conducts its business on a national basis
through a network of branch and agency offices with approximately 44.0%
of consolidated premium revenue generated in the states of Texas,
Florida, California and Pennsylvania.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from
those estimates.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts
and operations, after intercompany eliminations, of LandAmerica
Financial Group, Inc., and its wholly owned subsidiaries, principally
Lawyers Title Insurance Corporation.
Investments
As required by SFAS No. 115, the Company records its fixed-maturity
investments which are classified as available-for-sale at fair value
and reports the change in the unrealized appreciation and depreciation
as a separate component of shareholders' equity. The amortized cost of
fixed-maturity investments classified as available-for-sale is adjusted
for amortization of premiums and accretion of discounts. That
amortization or accretion is included in net investment income.
Realized gains and losses on sales of investments, and declines in
value considered to be other than temporary, are recognized in
operations on the specific identification basis.
F-7
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
(In thousands of dollars except per common share amounts)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Title Plants
Title plants consist of title records relating to a particular region
and are generally stated at cost. Expenses associated with current
maintenance, such as salaries and supplies, are charged to expense in
the year incurred. The costs of acquired title plants and the building
of new title plants, prior to the time that a plant is put into
operation, are capitalized. Properly maintained title plants are not
amortized because there is no indication of diminution in their value.
Goodwill
The excess of cost over fair value of net assets of businesses acquired
(goodwill) is amortized on a straight-line basis over 40 years.
Long-Lived Assets
In accordance with SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of, the
Company reviews identifiable intangibles, including goodwill, for
impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. If indicators
of impairment are present, the Company estimates the future cash flows
expected to be generated from the use of those assets and their
eventual disposal. The Company would recognize an impairment loss if
the future cash flows were less than the carrying amount.
Depreciation
Property and equipment is depreciated principally on the straight-line
method over the useful lives of the various assets, which range from
three to 40 years.
Revenue Recognition
Premiums on title insurance written by the Company's employees are
recognized as revenue when the Company is legally or contractually
entitled to collect the premium. Premiums on insurance written by
agents are generally recognized when reported by the agent and recorded
on a "gross" versus "net" basis. Title search and escrow fees are
recorded as revenue when an order is closed.
F-8
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
(In thousands of dollars except per common share amounts)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Policy and Contract Claims
Liabilities for estimated losses and loss adjustment expenses represent
the estimated ultimate net cost of all reported and unreported losses
incurred through December 31, 1997. The reserves for unpaid losses and
loss adjustment expenses are estimated using individual case-basis
valuations and statistical analyses. Those estimates are subject to the
effects of trends in loss severity and frequency. Although considerable
variability is inherent in such estimates, management believes that the
reserves for losses and loss adjustment expenses are adequate. The
estimates are continually reviewed and adjusted as necessary as
experience develops or new information becomes known; such adjustments
are included in current operations.
Income Taxes
Deferred income taxes reflect the tax consequences on future years of
differences between the tax bases of assets and liabilities and their
financial reporting amounts. Future tax benefits are recognized to the
extent that realization of such benefits are more likely than not.
Escrow and Trust Deposits
As a service to its customers, the Company administers escrow and trust
deposits which amounted to approximately $436,000 and $444,000 at
December 31, 1997 and 1996, respectively, representing undisbursed
amounts received for settlements of mortgage loans and indemnities
against specific title risks. These funds are not considered assets of
the Company and, therefore, are excluded from the accompanying
consolidated balance sheets.
Deferred Land Exchanges
Through several non-insurance subsidiaries the Company facilitates
tax-free property exchanges for customers pursuant to Section 1031 of
the Internal Revenue Code. Acting as a qualified intermediary, the
Company holds the sale proceeds from sales transactions until a
qualifying acquisition occurs, thereby assisting its customers in
deferring the recognition of taxable income. At December 31, 1997 and
1996, the Company was holding $167,000 and $261,000, respectively, of
such proceeds which are not considered assets of the Company and are,
therefore, excluded from the accompanying consolidated balance sheets.
Statement of Cash Flows
For purposes of the statement of cash flows, invested cash is
considered a cash equivalent. Invested cash includes all highly liquid
investments with a maturity of three months or less when purchased.
F-9
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
(In thousands of dollars except per common share amounts)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Earnings per Common Share
In 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings per Share. Statement 128 replaced the calculation of
primary and fully diluted earnings per share with basic and diluted
earnings per share. Unlike primary earnings per share, basic earnings
per share excludes any dilutive effects of options, warrants and
convertible securities. Diluted earnings per share is very similar to
the previously reported fully diluted earnings per share. All earnings
per share amounts for all periods have been presented, and where
appropriate, restated to conform to the Statement 128 requirements.
Fair Values of Financial Instruments
The carrying amounts reported in the balance sheet for invested cash
and short-term investments approximate those assets' fair values. Fair
values for investment securities are based on quoted market prices. The
Company has no other material financial instruments.
Stock Based Compensation
The Company grants stock options for a fixed number of shares to
employees with an exercise price equal to the fair value of the shares
at the date of grant. The Company accounts for stock option grants in
accordance with APB Opinion No. 25, Accounting for Stock Issued to
Employees, and accordingly, recognizes no compensation expense for the
stock option grants.
Reclassifications
Certain 1996 and 1995 amounts have been reclassified to conform to the
1997 presentation.
2. ACCOUNTING CHANGE
In the fourth quarter of 1996 the Company made a change from reporting
policy and contract claims on a discounted to an undiscounted basis.
This change was made to conform with industry practice and because it
is considered preferable by rating agencies and analysts. The effect of
the change for 1996 was to increase the provision for policy and
contract claims by $76 million and decrease net income by $49 million
and net income per share by $5.51 and net income per share assuming
dilution by $5.38.
In addition, during the fourth quarter of 1996 the Company determined
that the trend of favorable loss experience which has emerged over the
past few years could be relied upon and the Company changed its
estimate of the ultimate net cost of all reported and unreported losses
incurred through September 30, 1996 to reflect this favorable
experience. The effect of the change in estimate was to decrease the
provision for policy and contract claims by $78 million and to increase
net income by $50.7 million and net income per share by $5.70 and net
income per share assuming dilution by $5.57.
F-10
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
(In thousands of dollars except per common share amounts)
2. ACCOUNTING CHANGE (Continued)
Because the change in accounting principal to no longer discount policy
and contract claims is inseparable from the change in estimate, both
have been accounted for as a change in estimate. Accordingly, the net
effect of the two changes, a decrease of $2.0 million in the provision
for policy and contract claims, was included in operations for the
fourth quarter of 1996 and no prior amounts have been restated. The
above changes were both made to conform with general industry practice.
3. INVESTMENTS
The amortized cost and estimated fair value of investments in fixed
maturities at December 31, 1997, and 1996 were as follows:
<TABLE>
<CAPTION>
1997
---------------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
U.S. Treasury
securities and
obligations of
U.S. Government
corporations
and agencies $ 55,359 $ 4,241 $ 8 $ 59,592
Obligations of
states and
political
subdivisions 96,493 3,737 7 100,223
Fixed maturities
issued by foreign
governments 347 40 - 387
Public utilities 4,586 95 - 4,681
Corporate
securities 73,814 2,165 38 75,941
Mortgage backed
securities 19,696 598 6 20,288
------ --- - ------
Fixed maturities
available-for-sale $250,295 $10,876 $59 $261,112
======== ======= === ========
</TABLE>
F-11
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
(In thousands of dollars except per common share amounts)
3. INVESTMENTS (Continued)
<TABLE>
<CAPTION>
1996
---------------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
U.S. Treasury
securities and
obligations of
U.S. Government
corporations
and agencies $ 62,206 $1,709 $547 $ 63,368
Obligations of
states and
political
subdivisions 76,203 1,065 143 77,125
Fixed maturities
issued by foreign
governments 345 38 - 383
Public utilities 4,550 24 17 4,557
Corporate
securities 61,195 1,364 147 62,412
Mortgage backed
securities 10,376 79 76 10,379
--------- -------- ------ ----------
Fixed maturities
available-for-sale $214,875 $4,279 $930 $218,224
======== ====== ==== ========
</TABLE>
The amortized cost and estimated fair value of fixed-maturity
securities at December 31, 1997 by contractual maturity, are shown
below. Actual maturities will differ from contractual maturities
because borrowers may have the right to call or prepay obligations.
F-12
<PAGE>
3. INVESTMENTS (Continued)
Estimated
Amortized Fair
Cost Value
---- -----
Due in one year or less $ 5,069 $ 5,071
Due after one year through
five years 72,363 74,058
Due after five years through
ten years 97,130 100,925
Due after ten years 56,037 60,770
Mortgage backed securities 19,696 20,288
-------- --------
$250,295 $261,112
======== ========
Earnings on investments and net realized gains for the three years
ended December 31, follow:
1997 1996 1995
-------- -------- --------
Fixed maturities $ 15,572 $ 12,453 $ 11,283
Equity securities 2 692 916
Invested cash and other
short-term investments 1,503 979 1,587
Mortgage loans 18 88 170
Net realized gains (236) 23,371 2,970
-------- -------- --------
Total investment income 16,859 37,583 16,926
Investment expenses (541) (1,159) (1,455)
-------- -------- --------
Net investment income $ 16,318 $ 36,424 $ 15,471
======== ======== ========
Realized and unrealized gains (losses) representing the change in
difference between fair value and cost (principally amortized cost for
fixed maturities) on fixed maturities and equity securities for the
three years ended December 31, are summarized below:
F-13
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
(In thousands of dollars except per common share amounts)
3. INVESTMENTS (Continued)
Change in
Realized Unrealized
1997
Fixed maturities $ 127 $ 7,468
Equity securities (363) (18)
-------- --------
$ (236) $ 7,450
======== ========
1996
Fixed maturities $ (50) $( 4,739)
Equity securities 23,421 (12,418)
-------- --------
$ 23,371 $(17,157)
======== ========
1995
Fixed maturities $ (120) $ 16,920
Equity securities 3,090 11,916
-------- --------
$ 2,970 $ 28,836
======== ========
Gross unrealized gains and (losses) relating to investments in equity
securities were $830 and $(53) at December 31, 1997.
Proceeds from sales of investments in fixed maturities, net of calls or
maturities during 1997, 1996 and 1995 were $58,360, $67,425 and
$73,339, respectively. Gross gains of $265, $502 and $422 in 1997, 1996
and 1995, respectively, and gross losses of $137, $552 and $542 in
1997, 1996 and 1995, respectively, were realized on those sales.
Proceeds from sales of investments in equity securities during 1997,
1996 and 1995 were $43, $100,533 and $45,975, respectively. Gross gains
of $47, $25,857 and $5,220 in 1997, 1996 and 1995, respectively, and
gross losses of $410, $2,436 and $2,130 in 1997, 1996 and 1995,
respectively, were realized on those sales.
4. POLICY AND CONTRACT CLAIMS
The Company's estimate of net costs to settle reported claims and
claims incurred but not reported has not been discounted at December
31, 1997 and 1996. Such estimates were discounted at a weighted-average
rate of 7.5% at December 31, 1995. The rates used for discounting loss
reserves on 1995 issues were determined at the beginning of that year.
The discount rate established for 1995 issues was 7.5%. If the estimate
had not been discounted at December 31, 1995, reserves would have been
increased by $80,000.
F-14
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
(In thousands of dollars except per common share amounts)
4. POLICY AND CONTRACT CLAIMS (Continued)
Activity in the liability for unpaid claims and claim adjustment
expenses is summarized as follows:
1997 1996 1995
---- ---- ----
Balance at January 1 $196,285 $193,791 $198,906
Incurred related to:
Current year 38,301 28,930 44,322
Prior years (4,552) 281 (20,025)
---------- ---------- ---------
Total incurred 33,749 29,211 24,297
---------- ---------- ---------
Paid related to:
Current year 3,216 1,549 1,797
Prior years 24,341 25,168 28,562
---------- ---------- ---------
Total paid 27,557 26,717 30,359
---------- ---------- ---------
Amounts related to
purchase of
subsidiaries - - 947
---------- ---------- ---------
Balance at December 31 $202,477 $196,285 $193,791
======== ======== ========
Balances at January 1, 1996 and 1995 and the balance at December 31,
1995 are reported on a discounted basis. The balance at January 1, 1997
and the balances at December 31, 1996 and 1997 are reported on an
undiscounted basis. Losses incurred in 1996 include the effects of the
accounting changes discussed in Note 2.
The favorable development on 1994 and prior year loss reserves during
1995 was attributable to successful recovery efforts, development on
previously reserved large claims and lower than expected payment levels
on the 1992 and 1993 issue years which included a high proportion of
refinance business.
5. REINSURANCE
The Company cedes and assumes title policy risks to and from other
insurance companies in order to limit and diversify its risk. The
Company cedes insurance on risks in excess of certain underwriting
limits which provides for recovery of a portion of losses. The Company
remains contingently liable to the extent that reinsuring companies
cannot meet their obligations under reinsurance agreements.
F-15
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
(In thousands of dollars except per common share amounts)
5. REINSURANCE (Continued)
The Company has not paid or recovered any reinsured losses during the
three years ended December 31, 1997. The total amount of premiums for
assumed and ceded risks was less than 1.0% of title premiums in each of
the last three years.
6. SHAREHOLDERS' EQUITY
Rights Agreement
The Company has issued one preferred share purchase right (a "Right"
for each outstanding share of Common Stock. In 1997, in connection with
its acquisition of Commonwealth Land Title Insurance Company and
Transnation Title Insurance Company, the Company amended and restated
its Rights Agreement with Wachovia Bank, N.A. Each Right entitles the
holder to purchase one one-hundredth of a share of Series A Junior
Participating Preferred Stock ("Junior Preferred Stock") at an exercise
price of $85, subject to adjustment. Generally, the Rights will become
exercisable if a person or group acquires or announces a tender offer
for 20% or more of the outstanding Common Stock. Under certain
circumstances, the Board of Directors may reduce this threshold
percentage to not less than 10%. If a person or group acquires the
threshold percentage of Common Stock, each Right will entitle the
holder, other than such acquiring person or group, to buy shares of
Common Stock or Junior Preferred Stock having a total market value of
twice the exercise price. If the Company is acquired in a merger or
other business combination, each Right will entitle the holder, other
than such acquiring person or group, to purchase securities of the
surviving company having a total market value equal to twice the
exercise price of the Rights. The Rights will expire on August 20,
2007, and may be redeemed by the Company at a price of one cent per
Right at any time before they become exercisable. Until the Rights
become exercisable, they are evidenced by the Common Stock certificates
and are transferred with and only with such certificates.
Stock Options
The Company has elected to follow Accounting Principles Board Opinion
No. 25, Accounting for Stock Issued to Employees ("APB 25"), and
related Interpretations in accounting for its employee stock options
because, as discussed below, the alternative fair value accounting
provided under FASB Statement No. 123, Accounting for Stock-Based
Compensation ("Statement 123"), requires use of option valuation models
that were not developed for use in valuing employee stock options.
Under APB 25, because the exercise price of the Company's employee
stock options equals the market price of the underlying stock on the
date of grant, no compensation expense is recognized.
Under the Company's 1991 Stock Incentive Plan, as amended (the
"Incentive Plan"), officers, directors and key employees of the Company
and its subsidiaries may receive grants and/or awards of common stock,
restricted stock, phantom stock, incentive stock options, non-qualified
stock options and stock appreciation rights. As amended in 1995,
commencing January 1, 1996, the maximum number of shares of common
stock available
F-16
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
(In thousands of dollars except per common share amounts)
6. SHAREHOLDERS' EQUITY (Continued)
for grants and awards under the Incentive Plan in each calendar year is
equal to 1.5% of the shares of common stock outstanding as of the first
business day of that year, plus the number of shares available for
grants and awards in prior years but not covered by grants and awards
in those years and any shares of common stock as to which grants and
awards have been terminated or forfeited.
Pursuant to the 1992 Stock Option Plan for Non-Employee Directors (the
"Directors' Plan"), each non-employee director is granted an option to
purchase 1,500 shares of common stock of the Company on the first
business day following the annual meeting of shareholders. Up to 60,000
shares of the Company's common stock may be issued under the Directors'
Plan. At December 31, 1997, the Company had granted options covering
all 60,000 shares of common stock authorized by the Directors' Plan.
All options which have been granted under the Incentive Plan and the
Directors' Plan are non-qualified stock options with an exercise price
equal to the fair market value of a share of the Company's common stock
on the date of grant. Options granted in 1992 under the Incentive Plan
and all options granted under the Directors' Plan expire ten years from
the date of grant. All other options which have been granted under the
Incentive Plan expire seven years from the date of grant. Options
generally vest ratably over a four-year period. At December 31, 1997,
there were 56,702 options available for future grant under the
Incentive Plan.
Pro forma information regarding net income and earnings per share is
required by Statement 123, and has been determined as if the Company
had accounted for its employee stock options under the fair value
method of that Statement. The fair value of these options was estimated
at the date of grant using the Black-Scholes option pricing model with
the following weighted-average assumptions for 1997: risk-free interest
rate of 6.17%, dividend yield of 1.00%, volatility factor of the
expected market price of the Company's common stock of .30 and a
weighted-average expected life of the options of approximately 5 years.
The effects of applying Statement 123 on a pro forma basis for 1997,
1996 and 1995 options are not likely to be representative of the
effects on reported pro forma net income in future years.
The Black-Scholes option valuation method was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, option valuation
models require the input of highly subjective assumptions, including
the expected stock price volatility. Because the Company's employee
stock options have characteristics significantly different from those
of traded options, and because changes in the subjective input
assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a
reliable single measure of the fair value of its employee stock
options.
F-17
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
(In thousands of dollars except per common share amounts)
6. SHAREHOLDERS' EQUITY (Continued)
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The
Company's pro forma information follows (in thousands except for
earnings per share information):
1997 1996 1995
---- ---- ----
Pro forma net income $25,700 $36,187 $16,922
Pro forma earnings
per common share $2.88 $4.07 $1.90
Pro forma diluted
earnings per share $2.79 $3.98 $1.87
A summary of the Company's stock option activity and related
information for the years ended December 31 follows:
Weighted Weighted
Number Average Average
of Shares Exercise Price Fair Value
--------- -------------- ----------
Options outstanding,
December 31, 1994 421,576 $12
Granted 112,000 11 $4.77
Exercised 1,500 10
Forfeited 8,500 22
Options outstanding,
December 31, 1995 523,576 11
(278,651 exercisable)
Granted 178,000 19 7.38
Exercised 3,800 10
Forfeited 6,050 16
Options outstanding,
December 31, 1996 691,726 13
(380,231 exercisable)
Granted 117,000 21 $7.45
Exercised 57,342 11
Forfeited 2,000 20
Options outstanding,
December 31, 1997 749,384 $15
(452,534 exercisable)
F-18
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
(In thousands of dollars except per common share amounts)
6. SHAREHOLDERS' EQUITY (Continued)
The following table summarizes information about stock options
outstanding at December 31, 1997:
Weighted Weighted Weighted
Range of Number Average Average Number Average
Exercise Outstanding Remaining Exercise Exercisable Exercise
Prices at 12/31/97 Life Price at 12/31/97 Price
------ ----------- ---- ----- ----------- -----
$3 to $10 215,234 2.9 $ 7 215,234 $ 7
$11 to $15 116,400 4.5 11 68,750 11
$16 to $22 417,750 4.9 19 168,550 18
------- -------
$3 to $22 749,384 4.3 $15 452,534 $12
======= =======
Savings and Stock Ownership Plan
The Company has registered 1,500,000 shares of common stock for use in
connection with the Lawyers Title Insurance Corporation Savings and
Stock Ownership Plan. Substantially all of the employees of the Company
are eligible to participate in the Plan. On July 1, 1992, the Company
issued 323,400 shares of such stock to the Plan in exchange for a
$2,156 promissory note bearing interest at 8.0%. These shares were used
for matching contributions for plan participants through June of 1996
and were allocated to participants quarterly in the same proportion
that the quarterly principal and interest payments on the note bore to
the total principal and interest payments over the life of the note.
Subsequent to June 1996, the Plan Trustee purchased shares on the open
market to use in matching employee contributions. The level of
contributions to the Plan is discretionary and set by the Board of
Directors annually. In 1996 and 1995, 38,997 and 94,096 shares were
allocated to participants at a cost of $143 and $631, respectively, to
the Company. Additionally, 125,095 and 100,502 shares were purchased at
a cost of $3,432 and $1,851 and allocated to employees in 1997 and
1996, respectively.
7. STATUTORY FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The accompanying consolidated financial statements have been prepared
in conformity with generally accepted accounting principles (GAAP)
which differ in some respects from statutory accounting practices
prescribed or permitted in the preparation of financial statements for
submission to insurance regulatory authorities. Unconsolidated
statutory equity of Lawyers Title was $164,376 and $140,973 at December
31, 1997 and 1996, respectively. The difference between statutory
equity and equity determined on the basis of GAAP is primarily due to
differences between the provision for policy and contract claims
included in the accompanying financial statements and the statutory
unearned premium reserve, which is calculated in accordance with
statutory requirements, and statutory regulations that preclude the
recognition of certain assets including goodwill and deferred income
tax assets. Unconsolidated statutory net income of Lawyers Title was
$19,999, $38,473 and $18,516 for the years ended December 31, 1997,
1996 and 1995, respectively.
F-19
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
(In thousands of dollars except per common share amounts)
7. STATUTORY FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
In a number of states, Lawyers Title is subject to regulations which
require minimum amounts of statutory equity and which require that the
payment of any extraordinary dividends receive prior approval of the
Insurance Commissioners of these states. An extraordinary dividend is
generally defined as one which, when added to other dividends paid in
the preceding twelve months, would exceed the lesser of 10.0% of
statutory equity accounts as of the preceding year end or statutory net
income excluding realized capital gains for the preceding year. Under
such statutory regulations, net assets of consolidated subsidiaries
aggregating $275,966 were not available for dividends, loans or
advances to the Company at December 31, 1997.
8. INCOME TAXES
The Company files a consolidated federal income tax return with its
subsidiaries. Significant components of the Company's deferred tax
assets and liabilities at December 31, 1997 and 1996 are as follows:
1997 1996
---- ----
Deferred tax assets:
Policy and contract claims $23,754 $24,430
Pension liability 712 -
Employee benefit plans 5,983 6,235
Other 1,621 1,499
------- -------
32,070 32,164
------- -------
Deferred tax liabilities:
Pension - 530
Title plant basis differences 4,961 4,961
Unrealized gains 4,058 1,451
Other 1,441 1,787
------- -------
10,460 8,729
------- -------
Net deferred tax asset $21,610 $23,435
======= =======
The Company is required to establish a "valuation allowance" for any
portion of the deferred tax asset that management believes will not be
realized. In the opinion of management, it is more likely than not that
the Company will realize the benefit of the net deferred tax asset,
and, therefore, no such valuation allowance has been established at
December 31, 1997 and 1996.
The provision for income tax differs from the amount of income tax
determined by applying the applicable U.S. statutory income tax rate
(35%) to pre-tax income as a result of the following:
F-20
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
(In thousands of dollars except per common share amounts)
8. INCOME TAXES (Continued)
1997 1996 1995
---- ---- ----
Computed expected expense
at statutory rate $14,164 $19,439 $8,351
Non-taxable interest (1,397) (932) (828)
Dividend deductions (1) (146) (187)
Company-owned life insurance (574) (575) (645)
Travel and entertainment 948 709 421
State income taxes 898 - -
Other 274 526 (303)
------- ------- -------
Income tax expense $14,312 $19,021 $6,809
======= ======= ======
Taxes (recovered) paid were $23,301 in 1997, $14,542 in 1996 and $(252)
in 1995.
9. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share for the years ended December 31:
1997 1996 1995
---- ---- ----
Numerator:
Net income - numerator
for both basic and
diluted earnings
per share $26,157 $36,519 $17,051
======= ======= =======
Denominator:
Weighted average shares -
denominator for basic
earnings per share 8,924 8,888 8,885
Effect of dilutive securities:
Employee stock options 300 214 154
------- ------ -------
Denominator for
diluted earnings
per share 9,224 9,102 9,039
========= ========= =========
Basic earnings per
common share $2.93 $4.11 $1.92
Diluted earnings per
common share $2.84 $4.01 $1.89
F-21
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
(In thousands of dollars except per common share amounts)
10. PENSION PLAN AND POSTRETIREMENT BENEFITS
The Company has a noncontributory defined benefit retirement plan which
covers substantially all employees. Benefits are based on salary and
years of service. The Company's funding policy is to annually
contribute the statutory required minimum. Plan assets include
marketable equity securities, U.S. government and corporate obligations
and cash equivalents. Prior service costs are amortized equally over
the average remaining service period of employees.
The following table sets forth the plan's funded status as of the
September 30 measurement dates:
1997 1996
---- ----
Actuarial present value of
benefit obligations:
Vested $101,603 $ 93,545
Nonvested 8,049 6,743
-------- --------
Total accumulated benefit
obligations $109,652 $100,288
======== ========
Plan assets at fair value $131,526 $112,684
Projected benefit obligations 127,249 115,606
-------- --------
Plan assets in excess of (less
than) projected benefit
obligations 4,277 (2,922)
Unrecognized net asset from
transition (73) (162)
Unrecognized prior service costs 99 172
Unrecognized net (gain) loss (4,293) 6,156
-------- --------
Prepaid pension asset at
December 31 $ 10 $ 3,244
======== ========
The weighted-average discount rate used in determining the actuarial
present value of the projected benefit obligations was 7.5% in 1997 and
7.75% in 1996. The average rate of increase in future compensation
levels used was 4.3% in 1997 and 1996. The expected long-term rate of
return on plan assets was 9.25% for 1997 and 8.75% for 1996 and 1995.
F-22
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
(In thousands of dollars except per common share amounts)
10. PENSION PLAN AND POSTRETIREMENT BENEFITS (Continued)
The components of pension cost include the following:
1997 1996 1995
---- ---- ----
Benefits earned during
the year $ 3,254 $ 3,124 $ 2,795
Interest cost on projected
benefit obligations 8,722 7,834 6,985
Actual return on plan assets (24,684) (13,854) (16,125)
Net amortization and
deferral 15,941 3,684 6,337
-------- --------- ---------
Pension cost $ 3,233 $ 788 $ (8)
======== ========= ==========
The Company sponsors defined benefit life and health care plans that
provide postretirement medical, dental and life insurance benefits to
fulltime employees who have attained age 55 and have ten years of
service after age 40. The plans are contributory, with contributions
adjusted annually, and contain other cost-sharing features such as
deductibles and coinsurance. Currently, the Company does not require
contributions from employees who retired prior to 1991. Medical
benefits are funded as claims are incurred. Contributions are made to a
premium deposit fund with a life insurance company for retired
participants upon reaching age 65.
The following table presents the plan's funded status reconciled with
amounts recognized in the Company's consolidated balance sheet:
F-23
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
(In thousands of dollars except per common share amounts)
10. PENSION PLAN AND POSTRETIREMENT BENEFITS (Continued)
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996
Medical/ Medical/
Dental Life Dental Life
------ ---- ------ ----
<S> <C> <C> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ 12,397 $ 5,428 $ 11,878 $5,414
Fully eligible active
plan participants 2,872 970 2,448 980
Other active plan
participants 3,921 906 3,340 1,079
-------- ------- -------- ------
19,190 7,304 17,666 7,473
Plan assets invested in
a premium deposit fund,
at fair value - 2,252 - 2,244
-------- ------- -------- ------
Accumulated postretirement
benefit obligation in
excess of plan assets 19,190 5,052 17,666 5,229
Unrecognized net (gain)
or loss (5,085) 996 (5,961) 1,582
Unrecognized transition
obligation 15,286 2,317 16,305 2,471
-------- ------- -------- ------
Accrued postretirement
benefit cost $ 8,989 $ 1,739 $ 7,322 $1,176
======== ======= ======== ======
</TABLE>
Net periodic postretirement benefit cost included the following
components:
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996 December 31, 1995
----------------- ----------------- -----------------
Medical/ Medical/ Medical/
Dental Life Dental Life Dental Life
------ ---- ------ ---- ------ ----
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 597 $ 156 $ 532 $ 170 $ 476 $ 168
Interest 1,329 562 1,238 548 1,795 535
Actual return on
plan assets - (196) - (200) - (183)
Amortization of net
(gain) loss (374) 207 (256) 52 - -
Amortization of
transition obliga-
tion over 20 years 1,019 155 1,019 155 1,019 155
------- ----- ------- ----- ------ -----
Net periodic post-
retirement benefit
cost $ 2,571 $ 884 $ 2,533 $ 725 $3,290 $ 675
======= ===== ======= ===== ====== =====
</TABLE>
F-24
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
(In thousands of dollars except per common share amounts)
10. PENSION PLAN AND POSTRETIREMENT BENEFITS (Continued)
The assumed health care cost trend rate used to measure the expected
cost of benefits covered by the plan is 9.5% for 1998 and 9.0% for
1999, and is assumed to decrease approximately 0.5% per year until 2004
and remain level at 6.25% thereafter. The health care cost trend rate
assumption has a significant effect on the amounts reported. For
example, a 1.0% increase in the annual health care cost trend rate
would increase the accumulated postretirement benefit obligation as of
December 31, 1997 and 1996 by $873 and $854, respectively, and the
aggregate of the service and interest cost components of net periodic
postretirement benefit cost for 1997 by $66.
The weighted-average discount rate used to estimate the accumulated
postretirement benefit was 7.5 % at December 31, 1997 and 7.75% at
December 31, 1996. The average rate of increase in future compensation
levels used was 4.3% in 1997 and 1996.
11. LEASE COMMITMENTS
The Company conducts a major portion of its operations from leased
office facilities under operating leases that expire over the next 10
years. Additionally, the Company leases data processing and other
equipment under operating leases expiring over the next five years.
Following is a schedule of future minimum rental payments required
under operating leases that have initial or remaining non-cancelable
lease terms in excess of one year as of December 31, 1997.
1998 $19,380
1999 14,763
2000 8,606
2001 4,238
2002 1,641
2003 and subsequent 820
---------
$49,448
Rent expense was $23,961, $22,551 and $22,649 for the years ended
December 31, 1997, 1996 and 1995, respectively.
F-25
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
(In thousands of dollars except per common share amounts)
12. CREDIT ARRANGEMENTS
On November 7, 1997, the Company entered into a credit agreement with
Bank of America, individually and as administrative agent for a
syndicate of eleven other banks, pursuant to which a credit facility,
in an aggregate principal amount of up to $237.5 million, was available
to finance the acquisition of Commonwealth Land Title Insurance Company
and Transnation Title Insurance Company (see Note 16) and provide up to
$30.0 million for general corporate purposes. At December 31, 1997, the
Company had an aggregate amount of $4.0 million in loans outstanding
under the credit facility.
13. PENDING LEGAL PROCEEDINGS
The Company and its subsidiaries are involved in certain litigation
arising in the course of their businesses, some of which involve claims
of substantial amounts. Although the ultimate results of these matters
cannot be predicted with certainty, management does not currently
expect that the resolution of these matters will have a material
adverse effect on the Company's financial position or results of
operations.
14. ACQUISITIONS
During the year ended December 31, 1996, the Company acquired three
title insurance agencies and an ancillary service business at an
aggregate cost of $7,900 of which $3,000 was paid in cash with the
balance payable in future periods. These acquisitions were not material
to the Company's operations.
F-26
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
(In thousands of dollars except per common share amounts)
15. UNAUDITED QUARTERLY FINANCIAL DATA
Selected quarterly financial information follows:
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
<S> <C> <C> <C> <C>
1997
----
Premiums, title
search, escrow
and other $127,170 $152,018 $160,356 $183,237
Net investment
income 4,136 4,247 4,036 3,899
Income before
income taxes 1,084 12,394 13,041 13,950
Net income 847 8,011 8,441 8,858
Net income per
common share $.10 $.90 $.95 $.99
Net income per
common share -
assuming
dilution $.09 $.88 $.91 $.95
1996
----
Premiums, title
search, escrow
and other $117,469 $143,793 $141,679 $154,817
Net investment
income 5,345 5,500 4,593 20,986
Income before
income taxes 6,717 13,798 9,150 25,875
Net income 4,521 9,044 6,054 16,900
Income per common
share $.51 $1.02 $.68 $1.90
Net income per
common share -
assuming
dilution $.50 $1.00 $.66 $1.85
</TABLE>
In the fourth quarter of 1996 the Company changed its investment
strategy by selling all of its equity portfolio and began to move the
proceeds into fixed-maturity securities. This sale resulted in capital
gains of $17.4 million in the quarter.
The 1996 and first three quarters of 1997 earnings per share amounts
have been restated as required to comply with Statement of Financial
Accounting Standards No. 128, Earnings Per Share.
F-27
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
(In thousands of dollars except per common share amounts)
16. SUBSEQUENT EVENT
On February 27, 1998 the Company acquired all of the outstanding shares
of Commonwealth Land Title Insurance Company and Transnation Title
Insurance Company (Commonwealth/Transnation) from Reliance Insurance
Company, a subsidiary of Reliance Group Holdings, Inc. Together they
represented the third largest title insurance underwriting group in the
United States based on 1996 premium and fee revenue. The shares were
acquired in exchange for 4,039,473 shares of the Company's common stock
(book value, net of offering costs - $130,728); 2,200,000 shares of the
Company's 7% Series B Cumulative Convertible Preferred Stock, which are
the equivalent of 4,824,561 shares of common stock (book value -
$175,700); the net proceeds of an offering of 1,750,000 shares of
common stock ($65,921); and cash financed with bank debt ($200,681).
Estimated integration and capitalized costs are $15,000. The
Acquisition will be accounted for by the Company using the "purchase"
method of accounting. The assets and liabilities of
Commonwealth/Transnation will be revalued to their respective fair
market values. The financial statements of the Company will reflect the
combined operations of the Company and Commonwealth/Transnation from
the closing date of the Acquisition.
The following unaudited pro forma results of operations of the Company
give effect to the acquisition of Commonwealth/ Transnation as though
the transaction had occurred on January 1, 1997.
Gross revenues $1,535,431
Net income 55,803
Less: preferred dividends 7,700
Net income available to common
shareholders 48,103
Net income per common share 3.21
Net income per common share assuming
dilution 2.78
Weighted number of average common shares
outstanding 14,976
Weighted number of average common shares
outstanding assuming dilution 20,100
F-28
<PAGE>
Schedule I
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
SUMMARY OF INVESTMENTS
DECEMBER 31, 1997
(In thousands of dollars)
Column A Column B Column C Column D
-------- -------- -------- --------
Amount at
which shown
Fair in the
Type of investment Cost Value balance sheet
------------------ ---- ----- -------------
Fixed maturities:
Bonds:
Available-for-sale:
United States Government
and government agencies
and authorities $ 55,359 $ 59,592 $ 59,592
States, municipalities
and political sub-
divisions 96,493 100,223 100,223
Foreign Government 347 387 387
Public utilities 4,586 4,681 4,681
All other corporate bonds 73,814 75,941 75,941
Mortgage-backed securities 19,696 20,288 20,288
-------- -------- --------
Total fixed maturities $250,295 $261,112 $261,112
======== ======== ========
Equity securities:
Common stocks:
Banks, trust and insurance
companies $ 47 $ - $ -
Industrial, miscellaneous
and all other 840 1,664 1,664
-------- -------- --------
Total equity securities $ 887 $ 1,664 $ 1,664
======== ======== ========
Mortgage loans on real estate $ 448 XXX $ 448
======== ======== ========
Deposits with banks:
Invested cash $ 34,420 XXX $ 34,420
======== ======== ========
Total investments $286,050 XXX $297,644
======== ======== ========
F-29
<PAGE>
Schedule II
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
PARENT COMPANY BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
(In thousands of dollars)
1997 1996
---- ----
ASSETS
Cash $ 165 $ -
Stock of subsidiaries at equity 291,109 263,456
Notes receivable from affiliate 4,305 -
Other assets 3,359 806
-------- --------
Total assets $298,938 $264,262
======== ========
LIABILITIES
Due to (from) subsidiaries $ 2,129 $ 30
Note payable 4,000 1,000
Other liabilities 405 1,064
-------- --------
Total liabilities 6,534 2,094
SHAREHOLDERS' EQUITY
Preferred stock, no par value,
authorized 5,000,000 shares,
none issued or outstanding - -
Common stock, no par value,
authorized 45,000,000 shares,
issued and outstanding,
8,964,633 in 1997 and
8,889,791 in 1996 168,066 167,044
Unrealized investment gains 7,536 2,694
Retained earnings 116,802 92,430
-------- --------
Total shareholders' equity 292,404 262,168
-------- --------
$298,938 $264,262
======== ========
F-30
<PAGE>
Schedule II
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
PARENT COMPANY STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(In thousands of dollars)
1997 1996 1995
---- ---- ----
REVENUES
Dividends received from
consolidated subsidiaries $ 3,387 $ 2,526 $ 2,610
Management fee from
consolidated subsidiary 1,793 1,153 740
-------- -------- --------
5,180 3,679 3,350
EXPENSES
Administrative expenses 1,793 1,153 740
-------- -------- --------
INCOME BEFORE EQUITY
IN UNDISTRIBUTED INCOME
OF SUBSIDIARIES 3,387 2,526 2,610
EQUITY IN UNDISTRIBUTED
INCOME OF CONSOLIDATED
SUBSIDIARIES 22,770 33,993 14,441
-------- -------- --------
NET INCOME $ 26,157 $ 36,519 $ 17,051
======== ======== ========
F-31
<PAGE>
Schedule II
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
PARENT COMPANY STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(In thousands of dollars)
1997 1996 1995
---- ---- ----
Cash flows from operating activities:
Net income $ 26,157 $ 36,519 $ 17,051
Undistributed net income
of subsidiary (22,473) (33,993) (14,441)
Note receivable from
subsidiary (3,944) - -
Accounts payable 2,129 - -
Other (1,897) 589 -
-------- -------- --------
Net cash provided by (used
in) operating activities (28) 3,115 2,610
-------- -------- --------
Cash flows from investing activities:
Additional investment
in subsidiaries (1,022) (2,358) (994)
-------- -------- --------
Net cash used in investing
activities (1,022) (2,358) (994)
-------- -------- --------
Cash flows from financing activities:
Proceeds from note payable 3,000 1,000 -
Dividends paid (1,785) (1,778) (1,599)
-------- -------- --------
Net cash provided by (used
in) financing activities 1,215 (778) (1,599)
-------- -------- --------
Net increase (decrease) in
cash 165 (21) 17
Cash at beginning of year - 21 4
-------- -------- --------
Cash at end of year $ 165 $ - $ 21
======== ======== ========
F-32
<PAGE>
Schedule II
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
NOTES TO PARENT COMPANY FINANCIAL STATEMENTS
NOTE 1 - ACCOUNTING POLICIES
Basis of presentation - The accompanying parent company financial statements
should be read in conjunction with the Company's Consolidated Financial
Statements.
F-33
<PAGE>
ITEM 14(a)(3)
INDEX TO EXHIBITS
Exhibit Number
and Applicable
Section of Item 601 of
Regulation S-K Document
- -------------- --------
2.1 Amended and Restated Stock Purchase Agreement, dated December
11, 1997, by and among the Registrant, Lawyers Insurance
Corporation, Reliance Insurance Company and Reliance Group
Holdings, Inc., incorporated by reference to Appendix A to the
Registrant's definitive Proxy Statement for its Special
Meeting of Shareholders held on February 27, 1998, filed with
the Commission on January 29, 1998.
3.1 Articles of Incorporation, incorporated by reference to
Exhibit 3A of the Registrant's Form 10 Registration Statement,
as amended, File No. 0-19408.
3.2 Articles of Amendment of the Articles of Incorporation of the
Registrant, incorporated by reference to Exhibit 4.2 of the
Registrant's Form 8-A Registration Statement, filed February
27, 1998, File No. 1-13990.
3.3 Bylaws, incorporated by reference to Exhibit 3B of the
Registrant's Form 10 Registration Statement, as amended, File
No. 0-19408.
4.1 Amended and Restated Rights Agreement, dated as of August 20,
1997, between the Registrant and Wachovia Bank, N.A., as
Rights Agent, which Amended and Restated Rights Agreement
includes an amended Form of Rights Certificate, incorporated
by reference to Exhibit 4.1 of the Registrant's Current Report
on Form 8-K, dated August 20, 1997, File No. 1-13990.
4.2 First Amendment to Amended and Restated Rights Agreement,
dated as of December 11, 1997, between the Registrant and
Wachovia Bank, N.A., as Rights Agent, incorporated by
reference to Exhibit 4.1 of the Registrant's Current Report on
Form 8-K, dated December 11, 1997, File No. 1-13990..
4.3 Form of Common Stock Certificate, incorporated by reference to
Exhibit 4.6 of the Registrant's Form 8-A Registration
Statement, filed February 27, 1998, File No. 1-13990.
4.4 Form of 7% Series B Cumulative Convertible Preferred Stock
certificate, incorporated by reference to Exhibit 4.7 of the
Registrant's Form 8-A Registration Statement, filed February
27, 1998, File No. 1-13990.
10.1 Lawyers Title Corporation 1991 Stock Incentive Plan, as
amended May 16, 1995, May 21, 1996 and November 1, 1996,
incorporated by reference to Exhibit 10.1 of the Registrant's
Form 10-Q for the quarter ended September 30, 1996, File No.
1-13990.
<PAGE>
10.2 Lawyers Title Insurance Corporation Deferred Income Plan,
incorporated by reference to Exhibit 10C of the Registrant's
Form 10 Registration Statement, as amended, File No. 0-19408.
10.3 Lawyers Title Insurance Corporation Benefit Replacement Plan,
incorporated by reference to Exhibit 10M of the Registrant's
Form 10 Registration Statement, as amended, File No. 0-19408.
10.4 Lawyers Title Insurance Corporation Supplemental Pension Plan,
incorporated by reference to Exhibit 10B of the Registrant's
Form 10 Registration Statement, as amended, File No. 0-19408.
10.5 Lawyers Title Corporation 1992 Stock Option Plan for
Non-Employee Directors, as amended May 21, 1996, incorporated
by reference to Exhibit 10.5 of the Registrant's Form 10-Q for
the quarter ended June 30, 1996, File No. 1-13990.
10.6 Distribution and Indemnity Agreement among Universal
Corporation, Lawyers Title Insurance Corporation and Lawyers
Title Corporation, dated as of October 1, 1991, incorporated
by reference to Exhibit 2.1 of the Registrant's Form 10-K for
the year ended December 31, 1991, File No. 0-19408.
10.7 Tax Sharing Agreement among Universal Corporation, Lawyers
Title Insurance Corporation and Lawyers Title Corporation,
dated as of October 1, 1991, incorporated by reference to
Exhibit 10.15 of the Registrant's Form 10-K for the year ended
December 31, 1991, File No. 0-19408.
10.8 Lawyers Title Insurance Corporation Senior Executive Severance
Agreement, incorporated by reference to Exhibit 10G of the
Registrant's Form 10 Registration Statement, as amended, File
No. 0-19408.
10.9 Lawyers Title Corporation Change of Control Employment
Agreement, incorporated by reference to Exhibit 10.12 of the
Registrant's Form 10-K for the year ended December 31, 1994,
File No. 0-19408.
10.10 Lawyers Title Insurance Corporation Change of Control
Employment Agreement, incorporated by reference to Exhibit
10.13 of the Registrant's Form 10-K for the year ended
December 31, 1994, File No. 0-19408.
10.11 Form of Lawyers Title Corporation Non-Qualified Stock Option
Agreement, dated October 29, 1991, with Schedule of Optionees
and amounts of options granted, incorporated by reference to
Exhibit 10.17 of the Registrant's Form 10-K for the year ended
December 31, 1991, File No. 0-19408.
<PAGE>
10.12 Form of Lawyers Title Corporation Employee Non-Qualified Stock
Option Agreement, dated January 8, 1992, with Schedule of
Optionees and amounts of options granted, incorporated by
reference to Exhibit 10.18 of the Registrant's Form 10-K for
the year ended December 31, 1991, File No. 0-19408.
10.13 Form of Lawyers Title Corporation Employee Non-Qualified Stock
Option Agreement, dated January 4, 1993, with Schedule of
Optionees and amounts of options granted, incorporated by
reference to Exhibit 10.21 of the Registrant's Form 10-K for
the year ended December 31, 1992, File No. 0-19408.
10.14 Form of Lawyers Title Corporation Non-Employee Director
Non-Qualified Stock Option Agreement, incorporated by
reference to Exhibit 10.18 of the Registrant's Form 10-K for
the year ended December 31, 1994, File No. 0-19408.
10.15 Lawyers Title Insurance Corporation Regional Manager's
Incentive Program for 1993, incorporated by reference to
Exhibit 10.24 of the Registrant's Form 10-K for the year ended
December 31, 1992, File No. 0-19408.
10.16 Deed of Lease, dated September 29, 1989, between The Life
Insurance Company of Virginia and Lawyers Title Insurance
Corporation, incorporated by reference to Exhibit 10.26 of the
Registrant's Form S-1 Registration Statement, as amended, File
No. 33-70134.
10.17 Form of Lawyers Title Corporation Employee Non-Qualified Stock
Option Agreement, dated January 4, 1994, with schedule of
optionees and amounts of options granted, incorporated by
reference to Exhibit 10.27 of the Registrant's Form 10-K for
the year ended December 31, 1993, File No. 0-19408.
10.18 Form of Lawyers Title Corporation Employee Non-Qualified Stock
Option Agreement, dated January 5, 1995, with schedule of
optionees and amounts of options granted, incorporated by
reference to Exhibit 10.22 of the Registrant's Form 10-K for
the year ended December 31, 1994, File No. 0-19408.
10.19 Lawyers Title Insurance Corporation 1995 Benefit Restoration
Plan, incorporated by reference to Exhibit 10.23 of the
Registrant's Form 10-K for the year ended December 31, 1994,
File No. 0-19408.
10.20 Lawyers Title Corporation Outside Directors Deferral Plan,
incorporated by reference to Exhibit 10.24 of the Registrant's
Form 10-K for the year ended December 31, 1994, File No.
0-19408.
10.21 Form of Lawyers Title Insurance Corporation Split-Dollar Life
Insurance Agreement and Collateral Assignment, incorporated by
reference to Exhibit 10.25 of the Registrant's Form 10-K for
the year ended December 31, 1994, File No. 0-19408.
<PAGE>
10.22 Form of Lawyers Title Corporation Employee Non-Qualified Stock
Option Agreement, dated January 3, 1996, with Schedule of
Optionees and amounts of options granted, incorporated by
reference to Exhibit 10.26 of the Registrant's Form 10-K for
the year ended December 31, 1995, File No. 1-13990.
10.23 Form of Lawyers Title Corporation Employee Non-Qualified Stock
Option Agreement, dated January 7, 1997, with Schedule of
Optionees and amounts of options granted, incorporated by
reference to Exhibit 10.23 of the Registrant's Form 10-K for
the year ended December 31, 1996, File No. 1-13990.
10.24 Form of LandAmerica Financial Group, Inc. Employee
Non-Qualified Stock Option Agreement, dated March 5, 1998,
with Schedule of Optionees and amounts of options granted.*
10.25 Form of LandAmerica Financial Group, Inc. 1998 Restricted
Stock Agreement, with Schedule of Grantees and number of
shares granted.*
10.26 Voting and Standstill Agreement, dated February 27, 1998, by
and among the Registrant, Reliance Group Holdings, Inc. and
Reliance Insurance Company.*
10.27 Registration Rights Agreement, dated February 27, 1998, by and
among the Registrant and Reliance Insurance Company.*
10.28 Revolving Credit Agreement, dated November 7, 1997, between
the Registrant and Bank of America National Trust and Savings
Association, individually and as Administrative Agent for a
syndicate of 11 other financial institutions, incorporated by
reference to Exhibit 99 of the Registrant's Current Report on
Form 8-K, dated November 7, 1997, File No. 1-13990.
10.29 Agreement Containing Consent Order, dated February 6, 1998, by
and between the Registrant and the Federal Trade Commission.*
10.30 LandAmerica Financial Group, Inc. Outside Directors Deferral
Plan.*
11 Statement re: Computation of Earnings Per Share.*
21 Subsidiaries of the Registrant.*
23 Consent of Ernst & Young LLP. *
27 Financial Data Schedule.* (electronic copy only)
* Filed Herewith
Exhibit 10.24
LANDAMERICA FINANCIAL GROUP, INC.
EMPLOYEE
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT dated as of the 5th day of March, 1998, between
LandAmerica Financial Group, Inc., a Virginia corporation (the "Company"), and 1
("Optionee"), is made pursuant and subject to the provisions of the Company's
1991 Stock Incentive Plan (the "Plan"), a copy of which is attached. All terms
used herein that are defined in the Plan shall have the same meaning given them
in the Plan.
1. Grant of Option. Pursuant to the terms of the Plan, the
Company, on March 5, 1998, granted to Optionee, subject to the terms and
conditions of the Plan and subject further to the terms and conditions herein
set forth, the right and option to purchase from the Company all or any part of
an aggregate of 2 shares of the common stock of the Company (the "Common Stock")
at the option price of $43.60 per share. Such option is to be exercisable as
hereinafter provided.
2. Terms and Conditions. This option is subject to the following
terms and conditions:
(a) Expiration Date. The Expiration Date of this option
is March 5, 2005.
(b) Exercise of Option. Except as provided in paragraphs
3, 4, 5 and 6 below, this option shall become exercisable with respect to
twenty-five percent (25%) of the total number of shares covered by this option,
as set forth in paragraph 1 above, for each full 12 month period, up to a total
of four (4) such periods, that the Optionee continues to be employed by the
Company after the date of the granting of this option. Once this option has
become exercisable with respect to a particular number of shares in accordance
with the preceding sentence, it shall continue to be exercisable with respect to
such shares until the earlier of the termination of Optionee's rights hereunder
pursuant to paragraph 3, 4, 5 or 6, or the Expiration Date. A partial
<PAGE>
exercise of this option shall not affect Optionee's right to exercise this
option subsequently with respect to the remaining shares that are exercisable
subject to the conditions of the Plan and this Agreement.
(c) Method of Exercising and Payment for Shares. This
option may be exercised only by written notice delivered to the attention of the
Company's Secretary at the Company's principal office in Richmond, Virginia. The
written notice shall specify the number of shares being acquired pursuant to the
exercise of the option when such option is being exercised in part in accordance
with subparagraph 2(b) hereof. The exercise date shall be the date upon which
such notice is received by the Company. Such notice shall be accompanied by
payment of the option price in full for each share either in cash in United
States Dollars, or by the surrender of shares of Common Stock, or by cash
equivalent acceptable to the Company or any combination thereof having an
aggregate fair market value equal to the option price.
(d) Cashless Exercise. To the extent permitted by
applicable laws and regulations, at the request of the Optionee, the Company
will cooperate in a "cashless exercise" in accordance with Section 8.05 of the
Plan.
(e) Nontransferability. This option is nontransferable
except, in the event of the Optionee's death, by will or by the laws of descent
and distribution subject to the terms hereof. During Optionee's lifetime, this
option may be exercised only by Optionee.
3. Exercise in the Event of Death. This option shall become
exercisable in full in the event that Optionee dies while employed by the
Company or an Affiliate and prior to the Expiration Date of this option. In that
event, this option may be exercised by Optionee's estate, or the person or
persons to whom his rights under this option shall pass by will or the laws of
descent and distribution. Optionee's estate or such persons must exercise this
option, if at all, within two years of the date of Optionee's death or during
the remainder of the period preceding
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<PAGE>
the Expiration Date, whichever is shorter, but in no event may the option be
exercised prior to the expiration of six (6) months from the date of the grant
of the option.
4. Exercise in the Event of Permanent and Total Disability. This
option shall be exercisable in full if Optionee becomes permanently and totally
disabled (within the meaning of Section 22(e)(3) of the Code) while employed by
the Company or an Affiliate and prior to the Expiration Date of this option. In
such event, Optionee must exercise this option, if at all, within two years of
the date on which he terminates employment with the Company due to permanent and
total disability or during the remainder of the period preceding the Expiration
Date, whichever is shorter, but in no event may the option be exercised prior to
the expiration of six (6) months from the date of the grant of the option.
5. Exercise After Retirement or Other Approved Circumstance. In
the event that Optionee retires from employment with the Company or in any other
circumstance approved by the Committee in its sole discretion, this option shall
become exercisable in full but must be exercised by Optionee, if at all, within
two years following his retirement date, in the event of his retirement, or
within the period prescribed by the Committee, in an approved circumstance, or
during the remainder of the period preceding the Expiration Date, whichever is
shorter, but in no event may the option be exercised prior to the expiration of
six (6) months from the date of the grant of the option.
6. Exercise After Termination of Employment. In all events, other
than those events addressed in paragraphs 3, 4 and 5, in which the Optionee
ceases to be employed by the Company or an Affiliate other than for cause, the
Optionee may exercise this option, in whole or in part, with respect to that
number of shares which are exercisable under Paragraph 2 b. above at the time of
the termination of his employment; provided that this option must be exercised,
if at all, within ninety (90) days following the date upon which he ceases to be
employed by the Company or during the remainder of the period preceding the
Expiration Date, whichever is shorter, but in no event may the option be
exercised prior to the expiration of six (6) months from
-3-
<PAGE>
the date of the grant of the option. If Optionee's employment is terminated for
cause, his right to exercise this option shall terminate immediately. For the
purposes of this Agreement, "cause" shall mean conduct that is unprofessional,
unethical, immoral or fraudulent as determined in the sole discretion of the
Compensation Committee.
7. Fractional Shares. Fractional shares shall not be issuable
hereunder, and when any provision hereof may entitle Optionee to a fractional
share such fraction shall be disregarded.
8. No Right to Continued Employment. This option does not confer
upon Optionee any right with respect to continuance of employment by the Company
or an Affiliate, nor shall it interfere in any way with the right of the Company
or an Affiliate to terminate Optionee's employment at any time.
9. Investment Representation. Optionee agrees that, unless such
shares shall previously have been registered under the Securities Act of 1933,
(a) any shares purchased by him hereunder will be purchased for investment and
not with a view to distribution or resale, and (b) until such registration,
certificates representing such shares may bear an appropriate legend to assure
compliance with such Act. This investment representation shall terminate when
such shares have been registered under the Securities Act of 1933.
10. Change in Control or Capital Structure. Subject to any
required action by the shareholders of the Company, the number of shares of
Common Stock covered by this option, and the price per share thereof, shall be
proportionately adjusted and its terms shall be adjusted as the Committee shall
determine to be equitably required for any increase or decrease in the number of
issued and outstanding shares of Common Stock of the Company resulting from any
stock dividend (but only on the Common Stock), stock split, subdivision,
combination, reclassification, recapitalization or general issuance to holders
of Common Stock of rights to purchase Common Stock at substantially below its
then fair market value or any change in the number of such shares outstanding
effected without receipt of cash or property or labor or
-4-
<PAGE>
services by the Company or for any spin-off, spin-out, split-up, split-off or
other distribution of assets to shareholders.
In the event of a Change in Control, the provisions of Section 13.03 of
the Plan shall apply to this option. In the event of a change in the Common
Stock of the Company as presently constituted, which is limited to a change of
all of its authorized shares with par value into the same number of shares with
a different par value or without par value, the shares resulting from any such
change shall be deemed to be the Common Stock within the meaning of the Plan.
The grant of this option pursuant to the Plan shall not affect in any
way the right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to merge or
to consolidate or to dissolve, liquidate or sell, or transfer all or any part of
its business or assets.
11. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the Commonwealth of
Virginia, except to the extent that federal law shall be deemed to apply.
12. Conflicts. In the event of any conflict between the provisions
of the Plan as in effect on the date hereof and the provisions of this
Agreement, the provisions of the Plan shall govern. All references herein to the
Plan shall mean the Plan as in effect on the date hereof.
13. Optionee Bound by Plan. Optionee hereby acknowledges receipt
of a copy of the Plan and agrees to be bound by all the terms and provisions
thereof.
14. Binding Effect. Subject to the limitations stated above and in
the Plan, this Agreement shall be binding upon and insure to the benefit of the
legatees, distributees, and personal representatives of Optionee and the
successors of the Company.
-5-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be signed
by a duly authorized officer, and Optionee has affixed his signature hereto, as
of the date and year first above written.
OPTIONEE: LANDAMERICA FINANCIAL GROUP,
INC.
___________________________ By:__________________________________
((1))
Title:_______________________________
<PAGE>
Award Recipients Options Awarded
- ---------------- ---------------
Foster 10,000
Wender 8,000
Alpert 5,000
Tischler 6,000
Evans 2,000
Carter 2,000
Jordan 2,000
Palmer 2,000
Oeschle 3,000
Risoti 3,000
Blanchard 2,000
Farmer 2,000
Astheimer 2,000
Keith 2,000
Koshork 3,000
Wiegel 3,000
Veltri 3,000
Vaughan 2,000
Rapp 2,000
Selby 2,000
Reams 2,000
Martin 2,000
Mitzner 2,000
Exhibit 10.25
LANDAMERICA FINANCIAL GROUP, INC.
1998 RESTRICTED STOCK AGREEMENT
THIS RESTRICTED STOCK AGREEMENT, dated as of this ___ day of
_______________, 1998, between LandAmerica Financial Group, Inc., a Virginia
corporation ("the Company") and ____________________________________(the
"Officer"), is made pursuant and subject to the provisions of the Company's 1991
Stock Incentive Plan, as amended, which is incorporated herein by reference, and
any future amendments thereto (the "Plan"), a copy of which is attached. All
terms used herein that are defined in the Plan shall have the same meanings
given them in the Plan.
1. Award of Restricted Stock. Pursuant to the terms of the Plan,
the Company on this date awards to the Officer, subject to the terms and
conditions of the Plan and subject further to the terms and conditions herein
set forth ______ shares of Common Stock of the Company (the "Restricted Stock").
2. Terms and Conditions. The award of Restricted Stock hereunder
is subject to the following terms and conditions:
(a) Restricted Period. Except as provided in paragraph 3,
this award of Restricted Stock shall vest, and become nonforfeitable with the
schedule set forth below:
Percent of
Date Award Vested
---- ------------
March 1, 1999 25%
March 1, 2000 50%
March 1, 2001 75%
March 1, 2002 100%
The period from the date hereof until the shares of Restricted Stock
have become 100% vested shall be referred to as the "Restricted Period."
(b) Certificates Issued. The stock certificates
evidencing the Restricted
<PAGE>
Stock shall be registered on the Company's books in the name of the Officer as
of the date hereof. Upon vesting of any part of the shares of Restricted Stock
prior to any event of forfeiture under paragraph 3, by virtue of expiration of a
Restriction Period set forth above or under paragraph 3 of this Agreement, the
Company shall cause a stock certificate, without such restricted stock legend to
be issued covering the requisite number of vested shares of the Company's Common
Stock, registered on the Company's books in the name of the Officer, within
thirty (30) days after such vesting. Upon receipt of such stock certificate(s)
without the restricted stock legend, the Officer is free to hold or dispose of
such certificate, subject to (1) the general conditions and procedures provided
in the Plan and this Agreement and (2) the applicable restrictions and
procedures of the securities laws of the United States of America and the
Commonwealth of Virginia. During each applicable Restriction Period, the shares
of Restricted Stock that are not yet vested are not transferable by the Officer
by means of sale, assignment, exchange, pledge, or otherwise.
(c) Shareholder Rights. Prior to any forfeiture of the
shares of Restricted Stock and while the shares are shares of Restricted Stock,
the Officer shall, subject to the restrictions of the Plan, have all rights of a
shareholder with respect to the shares of Restricted Stock awarded hereunder,
including the right to receive dividends, warrants and rights and vote the
shares; provided, however, that (i) the Officer may not sell, transfer, pledge,
exchange, hypothecate, or otherwise dispose of Restricted Stock, (ii) the
Company shall retain custody of the certificates evidencing shares of Restricted
Stock, and (iii) the Officer will deliver to the Company a stock power, endorsed
in blank, with respect to each award of Restricted Stock.
(d) Reservation of Rights. The Company reserves the right
to retain physical possession and custody of each said stock certificate until
such time as the shares of Restricted Stock are vested (i.e., each applicable
Restriction Period expires). The Company reserves the
2
<PAGE>
right to place a legend on each said stock certificate, restricting the
transferability of such certificate and referring to the terms and conditions
(including forfeiture) provided in this Agreement.
(e) Tax Withholding. The Company shall have the right to
retain and withhold from any award of the Restricted Stock, the amount of taxes
required by any government to be withheld or otherwise deducted and paid with
respect to such award. At its discretion, the Company may require the Officer
receiving shares of Restricted Stock to reimburse the Company for any such taxes
required to be withheld by the Company, and, withhold any distribution in whole
or in part until the Company is so reimbursed. In lieu thereof, the Company
shall have the unrestricted right to withhold, from any other cash amounts due
(or to become due) from the Company to the Officer, an amount equal to such
taxes required to be withheld by the Company to reimburse the Company for any
such taxes (or retain and withhold a number of shares of vested Restricted
Stock, having a market value not less than the amount of such taxes, and cancel
in whole or in part any such shares so withheld, in order to reimburse the
Company for any such taxes).
3. Death; Disability; Retirement; Termination of Employment. The
shares of Restricted Stock not yet vested shall become 100% vested and
transferable in the event that the Officer dies or becomes permanently and total
disabled (within the meaning of Section 22(e)(3) of the Code) while employed by
the Company or an Affiliate during the Restricted Period. In the event that the
Officer retires from employment with the Company during the Restricted Period,
but after age 62 and after the expiration of the initial term of the Executive
Employment Agreement, if any, or in any other circumstance approved by the
Committee in its sole discretion, the shares of Restricted Stock shall become
100% vested and transferable. In all events other than those previously
addressed in this paragraph, if the Officer ceases to be an employee of the
3
<PAGE>
Company or an Affiliate, the Officer shall be vested only as to that percentage
of shares of Restricted Stock which are vested at the time of the termination of
his employment and the Officer shall forfeit the right to the shares of
Restricted Stock which are not yet vested.
4. No Right to Continued Employment. This Agreement does not
confer upon the Officer any right with respect to continuance of employment by
the Company or an Affiliate, nor shall it interfere in any way with the right of
the Company or an Affiliate to terminate his or her employment at any time.
5. Investment Representation. The Officer agrees that unless such
shares previously have been registered under the Securities Act of 1933 (i) the
shares of Restricted Stock awarded to him or her hereunder will be acquired for
investment and not with a view to distribution or resale and (ii) until such
registration, certificates representing such shares may bear an appropriate
legend to assure compliance with such Act. This investment representation shall
terminate when such shares have been registered under the Securities Act of
1933.
6. Change of Control or Capital Structure. Subject to any
required action by the shareholders of the Company, the number of shares of
Restricted Stock covered by this award shall be proportionately adjusted and the
terms of the restrictions on such shares shall be adjusted as the Committee
shall determine to be equitably required for any increase or decrease in the
number of issued and outstanding shares of Common Stock of the Company resulting
from any stock dividend (but only on the Common Stock), stock split,
subdivision, combination, reclassification, recapitalization or general issuance
to the holders of Common Stock of rights to purchase Common Stock at
substantially below its then fair market value or any change in the number of
such shares or services by the Company or for any spin-off, spin-out, split-up,
split-off or other distribution of assets to shareholders.
In the event of a Change of Control, the provisions of Section 13.03 of
the Plan shall apply to this award of Restricted Stock. In the event of a change
in the Common Stock of the Company
4
<PAGE>
as presently constituted, which is limited to a change in all of its authorized
shares without par value into the same number of shares with par value, the
shares resulting from any such change shall be deemed to be the Common Stock
within the meaning of the Plan.
The award of Restricted Stock pursuant to the Plan shall not affect in
any way the right or power of the Company to make adjustments,
reclassifications, reorganizations, or changes of its capital or business
structure or to merge or to consolidate or to dissolve, liquidate or sell, or
transfer all or any part of its business or assets.
7. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the Commonwealth of
Virginia, except to the extent that federal law shall be deemed to apply.
8. Conflicts. In the event of any conflict between the provisions
of the Plan as in effect on the date hereof and the provisions of this
Agreement, the provisions of the Plan shall govern. All references herein to the
Plan shall mean the Plan as in effect on the date hereof.
9. Officer Bound by Plan. The Officer hereby acknowledges receipt
of a copy of the Plan and agrees to be bound by all the terms and provisions
thereof.
10. Binding Effect. Subject to the limitations stated herein and
in the Plan, this Agreement shall be binding upon and inure to the benefit of
the legatees, distributees, and personal representatives of the Officer and the
successors of the Company.
5
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be signed by a
duly authorized officer, and the Officer has affixed his or her signature
hereto.
LANDAMERICA FINANCIAL GROUP, INC. OFFICER
By: ________________________________ ______________________________
Title: ________________________________ Name
______________________________
Signature
6
<PAGE>
Award Recipients Shares of Restricted Stock
- ---------------- --------------------------
Foster 9,000
Wender 7,000
Alpert 5,000
Tischler 4,000
Evans 4,000
Carter 4,000
Jordan 2,000
Palmer 1,000
Oeschle 1,000
Risoti 1,000
Blanchard 1,000
Farmer 1,000
Astheimer 4,000
Keith 4,000
Koshork 4,000
Wiegel 4,000
Veltri 4,000
Vaughan 4,000
Rapp 1,000
Selby 1,000
Exhibit 10.26
VOTING AND STANDSTILL AGREEMENT
THIS VOTING AND STANDSTILL AGREEMENT (the "Agreement"), dated as of
February 27, 1998, is made between LANDAMERICA FINANCIAL GROUP, INC. (formerly
known as Lawyers Title Corporation), a Virginia corporation ("LandAmerica"),
RELIANCE INSURANCE COMPANY, a Pennsylvania corporation ("RIC"), and RELIANCE
GROUP HOLDINGS, INC., a Delaware corporation ("Reliance").
W I T N E S S E T H:
WHEREAS, Lawyers Title Corporation, Lawyers Title Insurance
Corporation, a Virginia corporation, RIC and Reliance entered into a Stock
Purchase Agreement dated August 20, 1997, as amended and restated by an Amended
and Restated Stock Purchase Agreement dated December 11, 1997 (the "Stock
Purchase Agreement"), under which Lawyers Title Corporation agreed to acquire
from RIC all of the issued and outstanding shares of the capital stock of
Commonwealth Land Title Insurance Company, a Pennsylvania corporation
("Commonwealth"), and of Transnation Title Insurance Company, an Arizona
corporation; and
WHEREAS, on February 27, 1998, Lawyers Title Corporation changed its
name to "LandAmerica Financial Group, Inc."; and
WHEREAS, pursuant to the Stock Purchase Agreement, RIC has acquired (i)
4,039,473 shares of LandAmerica's Common Stock, without par value, and (ii)
2,200,000 shares of LandAmerica's 7% Series B Cumulative Convertible Preferred
Stock, without par value, which shares of Series B Preferred Stock are initially
convertible into 4,824,561 shares of Common Stock pursuant to the terms of the
Series B Preferred Stock, and, as a result, beneficially owns as of the date
hereof approximately 44.6% of the issued and outstanding shares of Lawyers
Title's Common Stock on a fully diluted basis; and
WHEREAS, LandAmerica, RIC and Reliance desire to establish in this
Agreement certain conditions of RIC's and Reliance's relationship with
LandAmerica.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and in the Stock Purchase Agreement, LandAmerica, RIC and
Reliance hereby agree as follows:
ARTICLE I
Definitions; Representations and Warranties
Section 1.1. Definitions. Except as otherwise specified herein,
capitalized terms used in this Agreement shall have the respective meanings
assigned to such terms in the Stock Purchase Agreement. For purposes of this
Agreement, the following terms have the following meanings:
<PAGE>
(a) "Adjusted Outstanding Shares" shall mean, at any time and with
respect to the determination of (i) the RIC Ownership Percentage as it relates
to RIC and its Affiliates, (ii) the Standstill Percentage as it relates to RIC
and its Affiliates, and (iii) any other percentage of the beneficial ownership
of Common Stock as it relates to a Person or Group, the total number of shares
of Common Stock then issued and outstanding together with the total number of
shares of Common Stock not then issued and outstanding that would be outstanding
if (x) all then existing shares of Series B Preferred Stock had been converted
and (y) all then existing warrants and options exercisable into shares of Common
Stock had been exercised (other than underwriters' overallotment options and
stock options granted under benefit plans of LandAmerica or any of its
Affiliates), but excluding any rights that may be exercisable under the Rights
Agreement.
(b) "Affiliate" shall have the meaning ascribed to such term in
Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as in effect on the date of this Agreement, and shall include, with
respect to a determination of the Affiliates of RIC, any Affiliate of Reliance.
(c) "Beneficial ownership," "beneficial owner" and "beneficially
own" shall have the meanings ascribed to such terms in Rule 13d-3 under the
Exchange Act as in effect on the date of this Agreement; provided that RIC and
each of its Affiliates and any Person or Group shall be deemed to be the
beneficial owners of any shares of Common Stock that RIC or such Affiliate,
Person and/or Group, as the case may be, has the right to acquire within one
year pursuant to any other agreement, arrangement or understanding or upon the
exercise of conversion or exchange rights, warrants, options or otherwise,
including but not limited to any right to acquire shares of Common Stock through
the conversion of the Series B Preferred Stock.
(d) "Common Stock" shall mean the Common Stock, without par value,
of LandAmerica.
(e) "Continuing Directors" shall mean the members of the Board of
Directors of LandAmerica immediately prior to the Closing Date and any future
members of the Board of Directors nominated by the Board of Directors; provided,
however, that no RIC Director shall constitute a Continuing Director or be
counted in determining the presence of a quorum of Continuing Directors.
(f) "Control" shall mean, with respect to a Person or a Group, (i)
beneficial ownership by such Person or Group of securities that entitle it to
exercise in the aggregate more than fifty percent (50%) of the votes in any
election of directors or other governing body of the entity in question; or (ii)
possession by such Person or Group of the power, directly or indirectly, (x) to
elect a majority of the board of directors (or equivalent governing body) of the
entity in question or (y) in case of a non-corporate entity, to manage or govern
the business, operations or investments of any such non-corporate entity.
(g) "Group" shall have the meaning comprehended by Section
13(d)(3) of the Exchange Act as in effect on the date of this Agreement.
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<PAGE>
(h) "Person" shall have the meaning set forth in Section 3(a)(9)
of the Exchange Act as in effect on the date of this Agreement.
(i) "Registration Rights Agreement" shall mean the Registration
Rights Agreement, dated February 27, 1998, executed by LandAmerica and RIC in
connection with the Stock Purchase Agreement.
(j) "RIC Director" shall mean a member of the Board of Directors
of LandAmerica who was designated by RIC for nomination pursuant to this
Agreement, but shall not include Herbert Wender, the Chief Executive Officer of
Commonwealth.
(k) "RIC Ownership Percentage" shall mean, at any time, the
percentage of the Adjusted Outstanding Shares that is beneficially owned in the
aggregate by RIC and its Affiliates.
(l) "RIC Shares" shall mean collectively (i) the 4,039,473 shares
of Common Stock, (ii) the 2,200,000 shares of Series B Preferred Stock, and
(iii) the shares of Common Stock into which the 2,200,000 shares of Series B
Preferred Stock are convertible pursuant to the terms of the Series B Preferred
Stock designation, that RIC acquired from LandAmerica pursuant to the Stock
Purchase Agreement, and such additional shares of Common Stock that LandAmerica
may issue with respect to such shares pursuant to any stock splits, stock
dividends, recapitalizations, restructurings, reclassifications or similar
transactions.
(m) "Rights Agreement" shall mean the Amended and Restated Rights
Agreement, dated as of August 20, 1997, between LandAmerica and Wachovia Bank,
N.A., as amended by the First Amendment to Amended and Restated Rights
Agreement, dated as of December 11, 1997, between LandAmerica and Wachovia Bank,
N.A., as such may be amended from time to time, or any successor shareholder
rights plan or agreement.
(n) "Series B Preferred Stock" shall mean the 7% Series B
Cumulative Convertible Preferred Stock, without par value, of LandAmerica.
(o) "Standstill Percentage" shall mean, at any time, not more than
44.6% of the Adjusted Outstanding Shares; provided that, in the event that the
RIC Ownership Percentage is less than 44.6%, then the Standstill Percentage
shall be automatically reduced to the RIC Ownership Percentage; provided further
that, following any such reduction in the Standstill Percentage, the Standstill
Percentage shall not thereafter be subject to any increase.
(p) "Transfer" shall mean sell, transfer, assign, pledge,
hypothecate, give away or in any manner dispose of any Common Stock or Series B
Preferred Stock.
Section 1.2. Representations and Warranties of RIC. RIC represents
and warrants to LandAmerica as follows:
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(a) RIC is a corporation duly organized, validly existing and in
good standing under the laws of the Commonwealth of Pennsylvania.
(b) Except for the RIC Shares, neither RIC nor any of its
Affiliates beneficially owns any Common Stock or any options, warrants or rights
of any nature (including conversion and exchange rights) to acquire beneficial
ownership of any Common Stock.
(c) RIC has full legal right, power and authority to enter into
and perform this Agreement, and the execution and delivery of this Agreement by
RIC have been duly authorized by all necessary corporate action on behalf of
RIC. This Agreement is Enforceable against RIC.
(d) The execution, delivery and performance of this Agreement by
RIC does not and will not conflict with or constitute a violation of or default
under the Charter or Bylaws (or comparable documents) of RIC, or any statute,
law, regulation, order or decree applicable to RIC, or any contract, commitment,
agreement, arrangement or restriction of any kind to which RIC is a party or by
which RIC is bound, other than such violations as would not prevent or
materially delay the performance by RIC of its obligations hereunder or
otherwise subject LandAmerica to any claim or liability.
Section 1.3. Representations and Warranties of Reliance. Reliance
represents and warrants to LandAmerica as follows:
(a) Reliance is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware.
(b) Reliance has full legal right, power and authority to enter
into and perform this Agreement, and the execution and delivery of this
Agreement by Reliance have been duly authorized by all necessary corporate
action on behalf of Reliance. This Agreement is Enforceable against Reliance.
(c) The execution, delivery and performance of this Agreement by
Reliance does not and will not conflict with or constitute a violation of or
default under the Charter or Bylaws (or comparable documents) of Reliance, or
any statute, law, regulation, order or decree applicable to Reliance, or any
contract, commitment, agreement, arrangement or restriction of any kind to which
Reliance is a party or by which Reliance is bound, other than such violations as
would not prevent or materially delay the performance by Reliance of its
obligations hereunder or otherwise subject LandAmerica to any claim or
liability.
Section 1.4. Representations and Warranties of LandAmerica.
LandAmerica hereby represents and warrants to RIC and Reliance as follows:
(a) LandAmerica is a corporation duly organized, validly existing
and in good standing under the laws of the Commonwealth of Virginia.
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(b) LandAmerica has full legal right, power and authority to enter
into and perform this Agreement, and the execution and delivery of this
Agreement by LandAmerica have been duly authorized by all necessary corporate
action on behalf of LandAmerica. This Agreement is Enforceable against
LandAmerica.
(c) The execution, delivery and performance of this Agreement by
LandAmerica does not and will not conflict with or constitute a violation of or
default under the Charter or Bylaws of LandAmerica, or any statute, law,
regulation, order or decree applicable to LandAmerica, or any contract,
commitment, agreement, arrangement or restriction of any kind to which
LandAmerica is a party or by which LandAmerica is bound, other than such
violations as would not prevent or materially delay the performance by
LandAmerica of its obligations hereunder or otherwise subject RIC to any claim
or liability.
(d) LandAmerica has taken all actions necessary or appropriate so
that (i) the acquisition by RIC or any Affiliate of RIC of any RIC Shares and
(ii) the Transfer of any RIC Shares permitted by this Agreement will not cause
to be applicable to RIC or any Affiliate of RIC either (x) the Rights Agreement
or (y) any applicable "fair price," "moratorium," "control share acquisition" or
"affiliated transaction" statute, law, rule or regulation in effect on the date
hereof.
ARTICLE II
Board Representation
Section 2.1. Initial Board Representation. On the Closing Date,
LandAmerica will (a) take such action as may be necessary to increase the size
of the Board of Directors (the "Board of Directors") to fourteen (14), (b) upon
receipt from each RIC Director of an executed letter agreement regarding
resignation in the form attached to this Agreement as Exhibit A, fill three (3)
of the vacancies created thereby with RIC Directors in accordance with the
applicable provisions of the Charter and Bylaws of LandAmerica, and (c) fill the
fourth vacancy created thereby with Herbert Wender, the Chief Executive Officer
of Commonwealth, in accordance with the applicable provisions of LandAmerica's
Charter and Bylaws. Of the three (3) initial RIC Directors appointed to the
Board of Directors, LandAmerica will (i) appoint one to Class I (current term
expiring in 1998), one to Class II (current term expiring in 1999) and one to
Class III (current term expiring in 2000) and (ii) subject to the right of RIC
to designate new RIC Directors as substitutes for the initial RIC Directors,
recommend for election at the next annual meeting of LandAmerica's shareholders
following such appointments the initial Class I RIC Director for a three (3)
year term expiring in 2001 and each initial RIC Director in Class II and Class
III for the remainder of the term of his respective Class; provided that, if any
such RIC Director is not elected by the shareholders of LandAmerica, LandAmerica
shall have no further obligations under this Section 2.1 for the applicable
year; and provided further that LandAmerica shall be under no obligation to
appoint or recommend for election any RIC Director to the Board of Directors
unless and until it has received from such RIC Director an executed letter
agreement regarding resignation in the form attached to this Agreement as
Exhibit A. Herbert Wender, the Chief Executive Officer of Commonwealth, shall be
appointed, and recommended for election at the next annual meeting of
LandAmerica's shareholders following such appointment, to Class I.
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Any person designated by RIC to be a RIC Director who is not an executive
officer of either RIC or an Affiliate of RIC shall be acceptable to the
Continuing Directors, and, if found unacceptable by the Continuing Directors for
any reason whatsoever, (i) LandAmerica shall not be obligated to appoint or
recommend for election any such person to the Board of Directors and (ii) RIC
shall be entitled to designate a replacement that is acceptable to the
Continuing Directors.
Section 2.2. Continuing Board Representation.
(a) Until the earlier to occur of (i) the date that the RIC
Ownership Percentage is less than twenty percent (20%) or (ii) the expiration of
the Preferred Shares Sales Period (as defined in Section 4.1 below), LandAmerica
agrees that, except as otherwise agreed to by a majority of the RIC Directors,
LandAmerica will not take or recommend to its shareholders any action that would
cause the Board of Directors to consist of any number of directors other than
fourteen (14) directors divided into two (2) classes of five (5) directors each
and one class of four (4) directors. At the time that the RIC Ownership
Percentage is reduced to less than twenty percent (20%), LandAmerica may take
such action as may be necessary to reduce the Board of Directors to twelve (12)
directors, and at the time that the RIC Ownership Percentage is reduced to less
than fifteen percent (15%), LandAmerica may take such action as may be necessary
to reduce the Board of Directors to eleven (11) directors. Until the earlier to
occur of (i) the date on which there are no RIC Directors serving on the Board
of Directors pursuant to this Agreement or (ii) the expiration of the Preferred
Shares Sales Period (as defined in Section 4.1 below), LandAmerica agrees that
it will not take or recommend to its shareholders any action that would result
in any amendment to LandAmerica's Bylaws in effect on the date hereof that would
impose any qualifications on the eligibility of directors of LandAmerica to
serve on any committee of the Board of Directors, except as may be required by
the then-current rules and regulations of the New York Stock Exchange (the "NYSE
Rules"), the rules and regulations under the Internal Revenue Code of 1986, as
amended, relating to the qualification of employee stock benefit plans and the
deductibility of compensation paid to executive officers, the rules and
regulations under Section 16(b) of the Exchange Act, including Rule 16b-3
thereunder or any successor rule, and LandAmerica's Bylaws; and
(b) Subject to the provisions of Sections 2.2(a) and 2.6 hereof
regarding reductions in the size of the Board of Directors and required
resignations of RIC Directors, LandAmerica will recommend for election, in the
applicable year in which the respective Class term expires, one RIC Director in
Class I, one RIC Director in Class II and one RIC Director in Class III, in each
case as designated by RIC; provided that, if any such RIC Director is not
elected by the shareholders of LandAmerica, LandAmerica shall have no further
obligations under this Section 2.2(b) for the applicable year; and provided
further that LandAmerica shall be under no obligation to recommend any RIC
Director for election to the Board of Directors unless and until it has received
from such RIC Director an executed letter agreement regarding resignation in the
form attached to this Agreement as Exhibit A. Any person designated by RIC to be
a RIC Director who is not an executive officer of either RIC or an Affiliate of
RIC shall be acceptable to the Continuing Directors, and, if found unacceptable
by the Continuing Directors for any reason whatsoever, (i) LandAmerica shall not
be obligated to recommend any such person for election to
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the Board of Directors and (ii) RIC shall be entitled to designate a replacement
that is acceptable to the Continuing Directors.
Section 2.3. Committee Representation. Until the earlier to occur
of (i) the date that the RIC Ownership Percentage is less than twenty percent
(20%) or (ii) the expiration of the Preferred Shares Sales Period (as defined in
Section 4.1 below), to the extent that, and for so long as, but only insofar as
required by applicable law or NYSE rules, any of the RIC Directors is qualified
under the then-current NYSE rules, the rules and regulations under the Internal
Revenue Code of 1986, as amended, relating to the qualification of employee
stock benefit plans and the deductibility of compensation paid to executive
officers, the rules and regulations under Section 16(b) of the Exchange Act,
including Rule 16b-3 thereunder or any successor rule, the Board of Directors
shall designate one of the RIC Directors to serve on each of the committees of
the Board of Directors (whether existing on the date hereof or formed or
constituted after the date hereof) to the same extent, and on the same basis, as
the other members of the Board of Directors; provided that, if the number of RIC
Directors shall be reduced to one director pursuant to Section 2.6 hereof, then
such remaining RIC Director shall be entitled to maintain his or her membership
on any committee on which such RIC Director then may be serving until the
earliest to occur of (i) the expiration of such RIC Director's term as a
director of LandAmerica, (ii) the date that the RIC Ownership Percentage is less
than fifteen percent (15%), or (iii) the expiration of the Preferred Shares
Sales Period (as defined in Section 4.1 below).
Section 2.4. Relationship with RIC Directors. With respect to any
RIC Director serving on the Board of Directors and any committee thereof
pursuant to the provisions of this Article II, LandAmerica shall at all times,
with respect to matters affecting the full Board of Directors or a specific
committee, as the case may be:
(a) Consult with the RIC Director on all business and financial
matters on which Continuing Directors are consulted;
(b) Provide the RIC Director with the same financial and other
information concerning LandAmerica and its Subsidiaries as may be provided to
the Continuing Directors, at the same time as so provided;
(c) Give the RIC Director the same notice of meetings as the
Continuing Directors are given and reasonable time to attend in person or
participate by telephone;
(d) Permit the RIC Director access at all reasonable times to
senior officers of LandAmerica;
(e) Hold meetings of the Board of Directors not less than four
times per year;
(f) Schedule regular meetings of the Board of Directors at least
six months in advance; and
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(g) In all other respects, deal with each RIC Director in the same
manner and on the same terms as it deals with all other directors, including,
without limitation, the Continuing Directors.
Section 2.5. Resignations at the Request of RIC; Vacancies. RIC
shall have the right to request the resignation from the Board of Directors of
any RIC Director pursuant to the terms of Exhibit A. In the event that any RIC
Director for any reason ceases to serve as a member of the Board of Directors
during his or her term of office and at such time RIC would have the right to a
designation hereunder if an election for the resulting vacancy were to be held,
RIC may designate a person to fill such vacancy (a "RIC Director Vacancy");
provided that, if the person so designated is not an executive officer of either
RIC or an Affiliate of RIC, such person shall be acceptable to the Continuing
Directors. Subject to the foregoing and Section 2.2(b) hereof, LandAmerica
agrees to (i) appoint RIC's designee to the Board of Directors to fill the RIC
Director Vacancy and to serve until the next annual meeting of LandAmerica's
shareholders and (ii) recommend RIC's designee for election to the Board of
Directors at the next annual meeting of LandAmerica's shareholders to fill the
remaining term of the class of directors to which such designee was appointed;
provided further that LandAmerica shall be under no obligation to appoint or
recommend for election any such designee to fill a RIC Director Vacancy unless
and until it has received from such designee an executed letter agreement
regarding resignation in the form attached to this Agreement as Exhibit A.
Section 2.6. Required Resignations. On the date when the RIC
Ownership Percentage is less than twenty percent (20%) but more than fifteen
percent (15%) (the "Board Adjustment Date"), RIC shall, within five (5) Business
Days, cause two (2) of the three (3) RIC Directors to resign from the Board of
Directors. The parties agree that the two (2) RIC Directors that will be subject
to resignation pursuant to the preceding sentence shall be those RIC Directors
who have the shortest terms of office then remaining, viz., those RIC Directors
who are members of classes that will stand for election at one of the next two
annual meetings of LandAmerica's shareholders to be held following the Board
Adjustment Date. From and after the Board Adjustment Date, the remaining RIC
Director may complete any unexpired term as a director of LandAmerica; provided
that, upon the earlier to occur of (i) the date that the RIC Ownership
Percentage is less than fifteen percent (15%) or (ii) the expiration of the
Preferred Shares Sales Period (as defined in Section 4.1), RIC shall, within
five (5) Business Days, cause the remaining RIC Director to resign from the
Board of Directors. In the event that the RIC Ownership Percentage is reduced
from over twenty percent (20%) to less than fifteen percent (15%) such that
there is no Board Adjustment Date, RIC shall, within five (5) Business Days,
cause all three (3) of the RIC Directors to resign from the Board of Directors.
In the event of any decrease in the RIC Ownership Percentage to below such
twenty percent (20%) and fifteen percent (15%) thresholds, any subsequent
increase in the RIC Ownership Percentage to or above such twenty percent (20%)
and fifteen percent (15%) thresholds (i) shall not entitle RIC to reinstate,
elect or designate any RIC Directors to the Board of Directors or any committee
thereof, and (ii) with respect to any increase to or above such twenty percent
(20%) threshold, shall constitute a breach of this Agreement. If RIC does not
cause the resignation of the applicable number of RIC Directors within such five
(5) Business Day period, LandAmerica may seek such resignation or, in the
alternative, the Continuing Directors may seek the removal of the RIC Directors
that are
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subject to such resignation. Upon any shareholder vote relating to the removal
of a RIC Director for failure to resign pursuant to this Section 2.6, RIC and
its Affiliates shall (i) attend any meeting either in person or by proxy and
(ii) vote in favor of such removal. At such time as a RIC Director becomes
subject to resignation pursuant to this Section 2.6, LandAmerica may amend its
Bylaws or take such other action as it deems appropriate to reduce the number of
directors constituting the Board of Directors proportionately or fill the
vacancy caused by such resignation(s) with its own nominee in accordance with
the applicable provisions of the Charter and Bylaws of LandAmerica.
Section 2.7. Charter and Bylaws. The obligations of LandAmerica
set forth in this Article II shall be subject to compliance with the applicable
provisions of the Charter and Bylaws of LandAmerica, which in no respect prevent
LandAmerica from fulfilling its obligations under this Agreement. LandAmerica
will make no modifications or amendments to its Charter or Bylaws that would in
any way hinder, impede or otherwise limit RIC's rights under this Article II.
Section 2.8. No Voting Trust. This Agreement does not create or
constitute, and shall not be construed as creating or constituting, a voting
trust agreement under the Virginia Stock Corporation Act or any other applicable
corporation law.
Section 2.9. Notification of Designation. RIC shall notify
LandAmerica in writing not later than March 15th of each year of its designation
of RIC Directors to be nominated for election at the next annual meeting of
LandAmerica's shareholders; provided that, if RIC should fail to so notify
LandAmerica of its RIC Director designee(s) by such date, RIC shall be deemed to
have designated the RIC Director whose term expires at the next annual meeting
of shareholders. RIC shall cause each RIC Director and each RIC Director
designee to provide promptly information that may be required under the Exchange
Act for inclusion in LandAmerica's proxy statement for such annual meeting and
shall cooperate with LandAmerica in verifying any such information, including
but not limited to the prompt completion of any director questionnaires
applicable to the directors generally. The rights of RIC and the RIC Directors
and the obligations of LandAmerica set forth in this Article II with respect to
the appointment or nomination of RIC Directors shall not be subject to
compliance with the notification requirements of Section 2.7 of LandAmerica's
Bylaws. No Affiliate of RIC shall have any right to designate RIC Directors
under this Article II.
Section 2.10. No Duty to Designate; Reduction of Board
Representation. Nothing contained in this Article II shall be construed as
requiring RIC to designate any RIC Directors or as requiring any RIC Director,
once designated and elected, to continue to serve in office if such RIC Director
elects to resign. Until the earlier to occur of (i) the date on which there are
no RIC Directors serving on the Board of Directors pursuant to this Agreement or
(ii) the expiration of the Preferred Shares Sales Period (as defined in Section
4.1 below), in the event of any vacancy created by the death, resignation or
removal of a RIC Director or the failure of RIC to designate a RIC Director,
other than a vacancy created by the resignation or removal of a RIC Director
pursuant to Section 2.6 above, upon the written request of RIC, LandAmerica
shall take such action as may be necessary to reduce the size of the Board of
Directors to a number equal to (x) fourteen (14) (or such lesser number as
exists following one or more previous reductions of the
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size of the Board pursuant to Sections 2.2(a), 2.6 or this Section 2.10) minus
(y) the number of such vacancies, and thereafter, notwithstanding any other
provisions of this Article II, RIC shall have no right to designate any
individual to be a RIC Director to the extent of such reduction.
Section 2.11. Limitation on Nominations by LandAmerica.
LandAmerica agrees that, during the term of this Agreement, it will not, without
the written consent of RIC, appoint or recommend for election to the Board of
Directors (i) any current or former "executive officer" (as defined in Rule 3b-7
under the Exchange Act as in effect on the date of this Agreement) of
LandAmerica or (ii) any other person with a relationship of the kind described
in Item 404(b) of Regulation S-K as in effect on the date of this Agreement, if
the election of such director following such appointment or recommendation would
cause the total number of directors meeting the description set forth in (i) and
(ii) above to increase above the aggregate number of such directors on the date
hereof (after adjustment for Herbert Wender, the Chief Executive Officer of
Commonwealth); provided, however, that no RIC Director shall be included in
determining whether LandAmerica has met the foregoing requirement.
ARTICLE III
Standstill Restrictions; Voting Matters
Section 3.1. Standstill Restrictions.
(a) During the term of this Agreement, Reliance and RIC covenant
and agree that Reliance and RIC shall not, and shall not permit any of their
Affiliates to, either individually or as part of a Group, directly or
indirectly:
(i) exceed the Standstill Percentage (other than as a
result of any stock purchases or repurchases by LandAmerica) or otherwise
acquire (other than acquisitions (x) pursuant to or contemplated by the Stock
Purchase Agreement, including without limitation the conversion of the Series B
Preferred Stock, or (y) resulting from corporate action taken by the Board of
Directors with respect to any pro rata distribution of shares of Common Stock in
connection with any stock split, stock dividend, recapitalization,
reclassification or similar transaction), propose to acquire (or publicly
announce or otherwise disclose an intention to propose to acquire), offer to
acquire, or agree to acquire any Common Stock or Series B Preferred Stock;
provided that this Section 3.1(a)(i) shall not apply to any acquisition (a) of
options, Common Stock, warrants, rights or other securities convertible or
exchangeable into Common Stock granted to any person, including without
limitation RIC Directors, pursuant to any benefit plan of LandAmerica or any of
its Affiliates or the exercise of any such option, warrant or right or
conversion or exchange of any convertible or exchangeable security or (b) upon
the exercise by RIC or its Affiliates of rights pursuant to the Rights Agreement
but only to the extent that such acquisition does not cause an increase in the
RIC Ownership Percentage above that which existed immediately prior to the
rights becoming exercisable and provided that all of the shares of Common Stock
so acquired upon the exercise of the rights shall be subject to all of the terms
of this Agreement;
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(ii) propose (or publicly announce or otherwise disclose
an intention to propose), solicit, offer, seek to effect, negotiate with or
provide any confidential information relating to LandAmerica or its business to
any other Person with respect to, any tender or exchange offer, merger,
consolidation, share exchange, business combination, restructuring,
recapitalization or similar transaction involving LandAmerica (other than (x)
any of the foregoing that may be approved by the Board of Directors or (y) in
connection with any tender or exchange offer in which the Board of Directors has
(a) recommended that its shareholders accept such offer or (b) after ten (10)
business days (as defined in Rule 14d-1 under the Exchange Act as in effect on
the date of this Agreement) from the date of commencement of such offer,
expressed no opinion, remained neutral, was unable to take a position or
otherwise did not oppose or recommend that its shareholders reject such offer);
provided that nothing set forth in this Section 3.1(a)(ii) shall prohibit RIC or
its Affiliates from soliciting, offering, seeking to effect or negotiating with
any Person with respect to Transfers of Common Stock or Series B Preferred Stock
otherwise required or permitted by Article IV of this Agreement; provided
further that in so soliciting, offering, seeking to effect or negotiating,
neither RIC nor its Affiliates shall provide any confidential information
relating to LandAmerica or its business to any Person except as required by
applicable law, including without limitation Section 10(b) of the Exchange Act
and Rule 10b-5 thereunder, but only to the extent that any required disclosure
of such confidential information has been preceded by notice to LandAmerica of
the expected disclosure of such information and the execution of a
confidentiality agreement by RIC (or its Affiliates, as the case may be) and
such Person in the form attached hereto as Exhibit B (such confidentiality
agreement to be promptly forwarded to LandAmerica for its execution, which
execution may be subsequent to the disclosure described in this proviso,
provided that the failure of LandAmerica to so execute such confidentiality
agreement shall in no way be construed to be a failure on the part of RIC (or
its Affiliates, as the case may be) to fulfill its obligations under this
Section 3.1(a)(ii) or to limit or affect the validity of such confidentiality
agreement as between RIC (or its Affiliates, as the case may be) and such
Person);
(iii) make, or in any way participate in, any
"solicitation" of "proxies" to vote (as such terms are defined in Rule 14a-1
under the Exchange Act), solicit any consent or communicate with or seek to
advise or influence any person or entity with respect to the voting of any
Common Stock or become a "participant" in any "election contest" (as such terms
are defined or used in Rule 14a-11 under the Exchange Act) with respect to
LandAmerica; provided that nothing in this Section 3.1(a)(iii) shall apply to
any deemed solicitation of proxies by the RIC Directors that may result from
such RIC Directors' position or status as a director of LandAmerica at the time
of any general solicitation of proxies by the management of LandAmerica;
(iv) form, participate in or join any Person or Group with
respect to any Common Stock or Series B Preferred Stock, or otherwise act in
concert with any third Person for the purpose of (x) acquiring any Common Stock
or Series B Preferred Stock or (y) holding or disposing of Common Stock or
Series B Preferred Stock for any purpose prohibited by this Section 3.1(a);
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(v) except as specifically provided in the Stock Purchase
Agreement or Section 3.2 below, deposit any Common Stock or Series B Preferred
Stock into a voting trust or subject any Common Stock or Series B Preferred
Stock to any arrangement or agreement with respect to the voting thereof;
(vi) initiate, propose or otherwise solicit shareholders
for the approval of any shareholder proposal with respect to LandAmerica as
described in Rule 14a-8 under the Exchange Act, or induce or attempt to induce
any other Person to initiate, propose or otherwise solicit any such shareholder
proposal;
(vii) except as specifically provided in Article II of this
Agreement and in the Series B Preferred Stock designation, seek election to or
seek to place a representative on the Board of Directors, or seek the removal of
any member of the Board of Directors (other than a RIC Director);
(viii) except as specifically provided in the Series B
Preferred Stock designation, call or seek to have called any meeting of the
shareholders of LandAmerica for any purpose;
(ix) except through the RIC Directors, and except as
specifically provided in the Series B Preferred Stock designation, take any
other action to seek to control, disrupt or influence the management or policies
of LandAmerica;
(x) except as specifically provided in the Series B
Preferred Stock designation, demand, request or propose to amend, waive or
terminate the provisions of this Section 3.1(a); or
(xi) agree to do any of the foregoing, or advise, assist,
encourage or persuade any third party to take any action with respect to any of
the foregoing.
(b) Reliance and RIC agree that they will notify LandAmerica
promptly if any inquiries or proposals are received by, any information is
exchanged with respect to, or any negotiations or discussions are initiated or
continued by or with, Reliance, RIC or any of their Affiliates regarding any
matter described in Section 3.1(a) above (excluding the first proviso of Section
3.1(a)(ii) above). RIC and LandAmerica shall mutually agree upon an appropriate
response to be made to any such proposals received by Reliance, RIC or any of
their Affiliates.
(c) Nothing contained in this Article III shall be deemed to
restrict the manner in which the RIC Directors may participate in deliberations
or discussions of the Board of Directors or individual consultations with the
Chairman of the Board or any other members of the Board of Directors, so long as
such actions do not otherwise violate any provision of Section 3.1(a) above.
Section 3.2. Voting Matters.
(a) During the term of this Agreement, Reliance and RIC will take
all such action as may be required so that the Common Stock beneficially owned
and entitled to be voted by
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Reliance, RIC and their Affiliates, as a Group, are voted or caused to be voted
(in person or by proxy):
(i) with respect to the Continuing Director's nominees to
the Board of Directors, in accordance with the recommendation of the Board of
Directors, or a nominating or similar committee of the Board of Directors, if
any such committee exists and makes a recommendation;
(ii) with respect to any "election contest" (as such term
is defined or used in Rule 14a-11 under the Exchange Act as in effect on the
date of this Agreement) initiated by any Person in connection with any tender
offer, in the same proportion as the total votes cast by or on behalf of all
shareholders of LandAmerica (other than Reliance, RIC and their Affiliates) with
respect to such proxy contest;
(iii) with respect to any matters related to share
issuance, mergers, acquisitions and divestitures for which shareholder approval
is sought, in accordance with the independent judgment of Reliance, RIC and
their Affiliates, without regard to any request or recommendation of the Board
of Directors; provided that, if any such transaction is submitted for
shareholder approval by LandAmerica in order to permit LandAmerica to exercise
its call rights under Sections 4.1(a) and 4.1(c) hereof or its redemption rights
under the Series B Preferred Stock designation, then the Common Stock
beneficially owned and entitled to be voted by Reliance, RIC and their
Affiliates, as a Group, shall be voted in accordance with the recommendation of
the Board of Directors; and
(iv) with respect to all matters (other than the election
of RIC Directors) brought before LandAmerica's shareholders for a vote not
otherwise provided for in this Section 3.2(a) or Section 2.6 above, in
accordance with the recommendation of the Board of Directors.
(b) RIC and its Affiliates who beneficially own any of the RIC
Shares shall be present, in person or by proxy, at all duly held meetings of
shareholders of LandAmerica so that the Common Stock held by RIC and its
Affiliates may be counted for the purposes of determining the presence of a
quorum at such meetings.
ARTICLE IV
Transfers of RIC Shares
Section 4.1. Required Sales of RIC Shares.
(a) Subject to compliance by LandAmerica with Section 4.1(e)
below, by the date that is six (6) years and six (6) months after the effective
date of the registration statement for the RIC Common Shares (as defined below)
as provided for in the Registration Rights Agreement (the "Common Shares Exit
Date"), RIC agrees that it will sell, convey or otherwise transfer all of the
4,039,473 shares of Common Stock received by RIC from LandAmerica pursuant to
the Stock Purchase Agreement and such additional shares of Common Stock that
LandAmerica may issue
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with respect to such shares pursuant to any stock splits, stock dividends,
recapitalizations, restructurings, reclassifications or similar transactions or
pursuant to the exercise of any rights under the Rights Agreement (the "RIC
Common Shares") entirely to Persons that are not, at the time of the sale,
conveyance or transfer, an Affiliate of RIC. Such sales, conveyances or
transfers of the RIC Common Shares may occur at any time and from time to time
during the period between the Closing Date and the Common Shares Exit Date (such
period being hereafter referred to as the "Common Shares Sales Period");
provided that, for each Holdback Period and each Discontinuance Period (as those
terms are defined in the Registration Rights Agreement) required by LandAmerica
under the Registration Rights Agreement, the Common Shares Sales Period shall be
extended by the number of days during which the relevant Holdback Period or
Discontinuance Period was in effect. In the event that RIC has not disposed of
all of the RIC Common Shares by the end of the Common Shares Sales Period,
LandAmerica thereafter shall have the absolute right (which shall not be
abridged) from time to time on thirty (30) days' written notice to make one or
more calls to purchase for cash all or a portion of the remaining RIC Common
Shares then held by RIC at a price equal to ninety-five percent (95%) of the
fair market value of the Common Stock at the time of the call(s), with such fair
market value to be calculated based upon the average of the closing prices of
the Common Stock for the ten (10) consecutive trading days preceding the notice
by LandAmerica to RIC of the exercise of its call right.
(b) Subject to Section 4.1(c) and compliance by LandAmerica with
Section 4.1(e) below but in addition to Section 4.1(a) above, if RIC has not
converted any of the 2,200,000 shares of Series B Preferred Stock received by
RIC from LandAmerica on the Closing Date (the "RIC Series B Preferred Shares"),
then by the date that is eight (8) years and six (6) months after the effective
date of the registration statement for the RIC Series B Preferred Shares as
provided for in the Registration Rights Agreement (the "Preferred Shares Exit
Date"), RIC agrees that it will sell, convey or otherwise transfer so many of
the RIC Series B Preferred Shares as are necessary to reduce the RIC Ownership
Percentage to less than twenty percent (20%) of the Adjusted Outstanding Shares;
provided, however, that such sales, conveyances and transfers must be made
entirely to Persons that are not, at the time of the sale, conveyance or
transfer, an Affiliate of RIC. Such sales, conveyances or transfers of the RIC
Series B Preferred Shares may occur at any time and from time to time during the
period between the Closing Date and the Preferred Shares Exit Date (such period
being hereafter referred to as the "Preferred Shares Sales Period"); provided
that for each Holdback Period and each Discontinuance Period (as those terms are
defined in the Registration Rights Agreement) required by LandAmerica under the
Registration Rights Agreement, the Preferred Shares Sales Period shall be
extended by the number of days during which the relevant Holdback Period or
Discontinuance Period was in effect. The provisions of this Section 4.1(b) shall
not in any manner affect (i) the right of LandAmerica to redeem the RIC Series B
Preferred Shares or (ii) subject to Section 4.1(d), the right of RIC to convert
the RIC Series B Preferred Shares into Common Stock, in each case in accordance
with the terms of the Series B Preferred Stock designation set forth in
LandAmerica's Charter.
(c) Subject to Section 4.1(d) and compliance by LandAmerica with
Section 4.1(e) below, if RIC has converted, at any time or from time to time
during the Preferred Shares Sales Period, any of the RIC Series B Preferred
Shares into shares of Common Stock (all such shares of
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Common Stock received upon conversion of the RIC Series B Preferred Shares and
such additional shares of Common Stock that LandAmerica may issue with respect
to such shares pursuant to any stock splits, stock dividends, recapitalizations,
restructurings, reclassifications or similar transactions or pursuant to the
exercise of any rights under the Rights Agreement being hereafter referred to
collectively as the "Converted Shares") in accordance with the terms of the
Series B Preferred Stock designation set forth in LandAmerica's Charter, then
RIC agrees that it will sell, convey or otherwise transfer by the expiration of
the Preferred Shares Sales Period (including any extension permitted under
Section 4.1(b) upon the exercise by LandAmerica of any Holdback Period or
Discontinuance Period) that number of Converted Shares and that number of RIC
Series B Preferred Shares as is necessary to reduce the RIC Ownership Percentage
to less than twenty percent (20%); provided, however, that such sales,
conveyances and transfers of Converted Shares and RIC Series B Preferred Shares
must be made entirely to Persons that are not, at the time of the sale,
conveyance or transfer, an Affiliate of RIC. In the event that RIC has converted
some or all of the RIC Series B Preferred Shares to Common Stock but has not
reduced the RIC Ownership Percentage to below twenty percent (20%) by the
expiration of the Preferred Shares Sales Period, LandAmerica thereafter shall
have the absolute right (which shall not be abridged) from time to time on
thirty (30) days' written notice to make one or more calls to purchase for cash
all or any part of that number of Converted Shares then held by RIC necessary to
reduce the RIC Ownership Percentage to below the twenty percent (20%) threshold
at a price equal to ninety-five percent (95%) of the fair market value of the
Common Stock at the time of the call(s), with such fair market value to be
calculated based upon the average of the closing prices of the Common Stock for
the ten (10) consecutive trading days preceding the notice by LandAmerica to RIC
of the exercise of its call right.
(d) Reliance and RIC agree that, unless (i) LandAmerica should
call for redemption of the RIC Series B Preferred Shares in accordance with the
Series B Preferred Stock designation set forth in LandAmerica's Charter, or (ii)
any one of the following events shall occur: (x) LandAmerica should declare a
regular quarterly dividend on the Common Stock of $.40 or more during any
calendar year, (y) LandAmerica should declare one or more non-regular dividends
on the Common Stock in an aggregate amount of $.50 or more during any calendar
year, or (z) LandAmerica should declare dividends on the Common Stock, whether
regular or non-regular, in an aggregate amount of $1.60 or more during any
calendar year, the RIC Series B Preferred Shares shall not be convertible and
RIC and its Affiliates will refrain from converting, or taking any steps to
convert, any of the RIC Series B Preferred Shares then held by each of them,
respectively, into shares of Common Stock until such time as RIC and its
Affiliates have sold, conveyed or transferred all of the RIC Common Shares
entirely to Persons that are not, at the time of the sale, conveyance or
transfer of the RIC Common Shares, an Affiliate of RIC; provided, however, that
if LandAmerica should call less than all of the RIC Series B Preferred Shares
for redemption pursuant to clause (i) above, then RIC and its Affiliates shall
be entitled to convert into shares of Common Stock only that number of the RIC
Series B Preferred Shares that have been so called for redemption; and provided
further that, in the event the Board of Directors has approved any negotiated
tender or exchange offer with a third party or approved any merger,
consolidation, share exchange, business combination, restructuring,
recapitalization or similar transaction involving LandAmerica in which the
holders of Common Stock are entitled to tender or exchange their holdings of
Common Stock for, or to otherwise receive for their holdings of
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Common Stock, other consideration (whether cash, non-cash or some combination
thereof), LandAmerica agrees that it will, in its sole discretion, either (x)
permit RIC and its Affiliates to convert all of the Series B Preferred Stock
then held by them contingent upon, and effective as of, the closing of such
transaction and without the right of RIC or any of its Affiliates to vote the
shares of Common Stock received upon any such conversion on any matter in
connection with such transaction, or (y) make appropriate provision to provide
to RIC and any of its Affiliates holding Series B Preferred Stock as of the
closing date of such transaction the same kind and amount of consideration
receivable by the holders of the Common Stock in such transaction (the amount of
such consideration to be received by RIC and any of its Affiliates holding
Series B Preferred Stock to be determined by reference to the number of shares
of Common Stock that RIC and its Affiliates would have been entitled to receive
had the Series B Preferred Stock been converted immediately prior to
consummation of such transaction), except that, if LandAmerica elects to comply
with clause (y) of this proviso, RIC and its Affiliates shall not be entitled
thereafter to receive any shares of stock, other securities, cash or property
pursuant to Section 5.4 of the Series B Preferred Stock designation with respect
to such of the Series B Preferred Stock as has received full payment of the
consideration set forth in clause (y) above.
(e) In connection with the obligations of RIC under Sections
4.1(a), 4.1(b) and 4.1(c) above, LandAmerica agrees that it will take all
actions and steps necessary, including the filing of all required financial
statements, reports and other documents, in order to (i) maintain the
effectiveness of the registration with the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Securities Act"), of the RIC
Common Shares in accordance with the Registration Rights Agreement until the
earlier of (x) the date on which RIC completes the sale, conveyance or transfer
of all of the RIC Common Shares in accordance with this Agreement or (y) the
expiration of the Common Shares Sales Period, (ii) maintain the effectiveness of
the registration with the Securities and Exchange Commission under the
Securities Act of the RIC Series B Preferred Shares and any shares of Common
Stock issuable upon conversion of the RIC Series B Preferred Shares in
accordance with the Registration Rights Agreement until the earlier of (x) the
date on which RIC completes the sale, conveyance or transfer of all of the RIC
Series B Preferred Shares and/or the Converted Shares in accordance with this
Agreement or (y) the expiration of the Preferred Shares Sales Period, (iii)
comply with all applicable state securities (including insurance securities) or
blue sky laws, and (iv) maintain the listing of the RIC Common Shares on the
NYSE (or such other exchange or trading market as the Common Stock may be listed
from time to time), (v) maintain the listing, on a when-issued basis, of the
Common Stock issuable upon conversion of the RIC Series B Preferred Shares on
the NYSE (or such other exchange or trading market as the Common Stock may be
listed from time to time) and (vi) if applicable, to cause the RIC Series B
Preferred Shares to be originally listed on the NYSE (or such other exchange or
trading market as the Common Stock may be listed from time to time). LandAmerica
will make its senior officers available to RIC at reasonable times to facilitate
the disposition of the RIC Common Shares, the RIC Series B Preferred Shares and
the Converted Shares.
(f) If, prior to the expiration of the Preferred Shares Sales
Period, all of the shares of the Series B Preferred Stock shall have been
redeemed or converted and are no longer outstanding but the RIC Ownership
Percentage is at least twenty percent (20%), then, until the
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earlier of (i) the date by which the RIC Ownership Percentage is less than
twenty percent (20%) or (ii) the expiration of the Common Shares Sales Period,
RIC and its Affiliates shall be entitled to the remedies set forth in Sections
11.3(a) and 11.3(d)(1) of the Series B Preferred Stock designation as if such
Sections had been set forth in full in this Agreement.
(g) LandAmerica will make any Hart-Scott-Rodino filing that may be
required in order for RIC or its Affiliates to convert the RIC Series B
Preferred Shares into Common Stock, and such filing will occur as soon as
practicable but not later than thirty (30) days after RIC or its Affiliates make
any Hart-Scott-Rodino filing with respect to such conversion. Each party agrees
to bear its own costs in connection with such filings.
Section 4.2. Transfer Restrictions. During the term of this
Agreement, RIC shall not, directly or indirectly, knowingly Transfer any of the
RIC Shares to any Person or Group without the prior written consent of
LandAmerica(which consent shall not be unreasonably withheld), if, as a result
of such Transfer, such Person or Group would have beneficial ownership of Common
Stock representing in the aggregate more than 9.9% of the issued and outstanding
shares of Common Stock. Subject to the foregoing limitation, RIC may Transfer
the RIC Shares in the following manner:
(a) to LandAmerica or any Affiliate of LandAmerica;
(b) pursuant to an effective registration statement under the
Securities Act as provided in Section 4.1 above; provided that the rights of RIC
under this Agreement shall not transfer to any transferee(s) of such RIC Shares;
(c) pursuant to Rule 144, Rule 144A, Regulation S or any other
applicable exemption from registration under the Securities Act; provided that
the rights of RIC under this Agreement shall not transfer to any transferee(s)
of such RIC Shares;
(d) pursuant to a pro rata distribution (including any such
distribution pursuant to any liquidation or dissolution of RIC) by RIC to its
shareholders if RIC has no knowledge that any distributee, or any Person that
controls such distributee, will acquire from RIC beneficial ownership of Common
Stock representing more than 9.9% of the issued and outstanding shares of Common
Stock in such distribution (in each case other than any distributee that is an
Affiliate of RIC), provided that the rights of RIC under this Agreement shall
not transfer to any distributee of such RIC Shares (other than any distributee
that is an Affiliate of RIC); provided further that, upon a change in Control of
RIC occurring after the date of this Agreement, RIC shall not distribute any of
the RIC Shares to its Affiliates pursuant to this Section 4.2(d) or otherwise
unless RIC has received the prior written consent of LandAmerica (which may be
withheld in LandAmerica's sole discretion) and obtained an agreement in writing
by the distributee to be bound by the terms and conditions of this Agreement;
and provided further that, in the event that any Affiliate of RIC receives a
distribution of any of the RIC Shares pursuant to this Section 4.2(d), or
otherwise becomes the beneficial owner of any of the RIC Shares, Reliance shall
cause such Affiliate of RIC to comply with all of the provisions of this
Agreement, including without limitation this Section 4.2.
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(e) pursuant to a merger or consolidation of LandAmerica or
pursuant to a plan of liquidation of LandAmerica, which has been approved by the
affirmative vote of a majority of the members of the Board of Directors then in
office; or
(f) pursuant to a tender offer or exchange offer that the Board of
Directors, by action taken by the affirmative vote of a majority of the members
of the Board of Directors then in office, has determined not to oppose.
ARTICLE V
Further Assurances
Each party shall execute and deliver such additional instruments and
other documents and shall take such further actions as may be necessary or
appropriate to effectuate, carry out and comply with all of its respective
obligations under this Agreement. RIC shall deliver to LandAmerica, within
fifteen (15) days following the end of each quarterly period ending March 31,
June 30, September 30 and December 31, a written transaction statement for such
quarter verified by an officer of RIC that (i) identifies the date and amount of
each Transfer of the RIC Shares during such quarter and whether the Transfer was
to an Affiliate of RIC, and (ii) states the number of RIC Shares held,
beneficially and of record, by RIC and its Affiliates as of the last day of the
applicable quarter. If reasonably requested by LandAmerica at any time during
the term of this Agreement, RIC agrees to execute a letter to LandAmerica
confirming the number of RIC Shares held, beneficially and of record, by RIC and
its Affiliates as of the latest practicable date. LandAmerica shall provide to
RIC as soon as practicable after each March 31, June 30, September 30 and
December 31 (but in any event no later than twenty-five (25) days after each
such date), a written statement as to the amount of net income of LandAmerica
and its Subsidiaries for the three-month period ending on each such March 31,
June 30, September 30 and December 31 and RIC shall keep such information
confidential until LandAmerica publicly announces its quarterly financial
results.
ARTICLE VI
Termination
Section 6.1. Termination of Entire Agreement. Unless earlier
terminated by written agreement of the parties hereto, this Agreement shall
terminate on the earlier of (i) the date on which the RIC Ownership Percentage
is less than fifteen percent (15%) or (ii) the expiration of the Preferred
Shares Sales Period (as defined in Section 4.1 above) and the RIC Ownership
Percentage at such time is less than twenty percent (20%); provided, however,
that the provisions of Sections 4.1(a) and 4.1(c) above with respect to
LandAmerica's right to call the RIC Common Shares and the Converted Shares shall
survive any termination of this Agreement. Any termination of this Agreement as
provided herein shall be without prejudice to the rights of any party arising
out of the breach by any other party of any provisions of this Agreement that
occurred prior to the termination.
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ARTICLE VII
Miscellaneous
Section 7.1. Notices. Any notices or other communications
required or permitted hereunder shall be sufficiently given if in writing
(including telecopy or similar teletransmission), addressed as follows:
If to LandAmerica,
to it at: Lawyers Title Insurance Corporation
6630 West Broad Street
Richmond, Virginia 23231
Telecopier: (804) 282-5453
Attention: Russell W. Jordan, III, Esquire
With a copy to: Williams Mullen Christian & Dobbins
1021 East Cary Street, 16th Floor
Richmond, Virginia 23219
Telecopier: (804) 783-6507
Attention: Theodore L. Chandler, Jr., Esquire
If to RIC or Reliance,
to them at: Reliance Insurance Company
55 East 52nd Street
New York, New York 10055
Telecopier: (212) 909-1864
Attention: Robert M. Steinberg
With a copy to: Reliance Group Holdings, Inc.
55 East 52nd Street
New York, New York 10055
Telecopier: (212) 909-1864
Attention: General Counsel
Unless otherwise specified herein, such notices or other communications shall be
deemed received (a) in the case of any notice or communication sent other than
by mail, on the date actually delivered to such address (evidenced, in the case
of delivery by overnight courier, by confirmation of delivery from the overnight
courier service making such delivery, and in the case of a telecopy, by receipt
of a transmission confirmation form or the addressee's confirmation of receipt),
or (b) in the case of any notice or communication sent by mail, three (3)
Business Days after being sent,
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if sent by registered or certified mail, with first-class postage prepaid. Each
of the parties hereto shall be entitled to specify a different address by giving
notice as aforesaid to each of the other parties hereto.
Section 7.2. Amendments, Waivers, Etc. This Agreement may not be
amended, changed, supplemented, waived or otherwise modified or terminated
except by an instrument in writing signed by Reliance, RIC and LandAmerica
following approval thereof by a majority of the Continuing Directors.
Section 7.3. Successors and Assigns. Except as otherwise provided
herein, this Agreement shall be binding upon and shall inure to the benefit of
and be enforceable by the parties and their respective successors and assigns,
including without limitation in the case of any corporate party hereto any
corporate successor by merger or otherwise; provided that no party may assign
this Agreement without the other party's prior written consent.
Section 7.4. Entire Agreement. This Agreement, the Stock Purchase
Agreement, the Series B Preferred Stock designation and the Registration Rights
Agreement embody the entire agreement and understanding among the parties
relating to the subject matter hereof and collectively supersede all prior
agreements and understandings relating to such subject matter. There are no
representations, warranties or covenants by the parties hereto relating to such
subject matter other than those expressly set forth in this Agreement and the
Stock Purchase Agreement.
Section 7.5. Specific Performance. The parties acknowledge that
money damages are not an adequate remedy for violations of this Agreement and
that any party may, in its sole discretion, apply to a court of competent
jurisdiction for specific performance or injunctive or such other relief as such
court may deem just and proper in order to enforce this Agreement or prevent any
violation hereof and, to the extent permitted by applicable law, each party
waives any objection to the imposition of such relief.
Section 7.6. Remedies Cumulative. All rights, powers and remedies
provided under this Agreement or otherwise available in respect hereof at law or
in equity shall be cumulative and not alternative, and the exercise or beginning
of the exercise of any thereof by any party shall not preclude the simultaneous
or later exercise of any other such right, power or remedy by such party.
Section 7.7. No Waiver. The failure of any party hereto to
exercise any right, power or remedy provided under this Agreement or otherwise
available in respect hereof at law or in equity, or to insist upon compliance by
any other party hereto with its obligations hereunder, and any custom or
practice of the parties at variance with the terms hereof, shall not constitute
a waiver by such party of its right to exercise any such or other right, power
or remedy or to demand such compliance.
Section 7.8. No Third Party Beneficiaries. This Agreement is not
intended to be for the benefit of and shall not be enforceable by any Person who
or which is not a party hereto.
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Section 7.9. Consent to Jurisdiction. Each party to this
Agreement, by its execution hereof, (i) hereby irrevocably submits, and agrees
to cause each of its Affiliates to submit, to the jurisdiction of the federal
courts located either in the City of Richmond, Virginia, or in the City of New
York, New York, and in the event that such federal courts shall not have subject
matter jurisdiction over the relevant proceeding, then of the state courts
located either in the City of Richmond, Virginia, or in the City of New York,
New York, for the purpose of any Action arising out of or based upon this
Agreement or relating to the subject matter hereof or the transactions
contemplated hereby, (ii) hereby waives, and agrees to cause each of its
Affiliates to waive, to the extent not prohibited by applicable law, and agrees
not to assert, and agrees not to allow any of its Affiliates to assert, by way
of motion, as a defense or otherwise, in any such Action, any claim that it is
not subject personally to the jurisdiction of the above-named courts, that its
property is exempt or immune from attachment or execution, that any such
proceeding brought in one of the above-named courts is improper, or that this
Agreement or the subject matter hereof may not be enforced in or by such court
and (iii) hereby agrees not to commence or to permit any of its Affiliates to
commence any Action arising out of or based upon this Agreement or relating to
the subject matter hereof other than before one of the above-named courts nor to
make any motion or take any other action seeking or intending to cause the
transfer or removal of any such Action to any court other than one of the
above-named courts whether on the grounds of inconvenient forum or otherwise.
Each party hereby consents to service of process in any such proceeding in any
manner permitted by Virginia or New York law, as the case may be, and agrees
that service of process by registered or certified mail, return receipt
requested, at its address specified pursuant to Section 7.1 above is reasonably
calculated to give actual notice. Notwithstanding anything contained in this
Section 7.9 to the contrary with respect to the parties' forum selection, if an
Action is filed against a party to this Agreement, including its Affiliates, by
a person who or which is not a party to this Agreement, an Affiliate of a party
to this Agreement, or an assignee thereof (a "Third Party Action"), in a forum
other than the federal district court or a state court located in the City of
Richmond, Virginia, or in the City of New York, New York, and such Third Party
Action is based upon, arises from, or implicates rights, obligations or
liabilities existing under this Agreement or acts or omissions pursuant to this
Agreement, then the party to this Agreement, including its Affiliates, joined as
a defendant in such Third Party Action shall have the right to file cross-claims
or third-party claims in the Third Party Action against the other party to this
Agreement, including its Affiliates, and even if not a defendant therein, to
intervene in such Third Party Action with or without also filing cross-claims or
third-party claims against the other party to this Agreement, including its
Affiliates.
Section 7.10. Governing Law. This Agreement shall be governed by
and construed in accordance with the domestic substantive law of the
Commonwealth of Virginia, without giving effect to any choice or conflict of law
provision or rule that would cause the application of the law of any other
jurisdiction.
Section 7.11. Name, Captions. The name assigned to this Agreement
and the section captions used herein are for convenience of reference only and
shall not affect the interpretation or construction hereof.
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Section 7.12. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one instrument. Each counterpart may consist
of a number of copies each signed by less than all, but together signed by all,
the parties hereto.
Section 7.13. Expenses. Each of the parties hereto shall bear their
own expenses incurred in connection with this Agreement and the transactions
contemplated hereby, except that in the event of a dispute concerning the terms
or enforcement of this Agreement, the prevailing party in any such dispute shall
be entitled to reimbursement of reasonable legal fees and disbursements from the
other party or parties to such dispute.
[SIGNATURES ON NEXT PAGE]
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IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have caused this Voting and Standstill Agreement to be executed, as of
the date first above written by their respective officers thereunto duly
authorized.
LANDAMERICA FINANCIAL GROUP, INC.
(formerly known as LAWYERS TITLE CORPORATION)
By: /s/ C. H. Foster, Jr.
-----------------------------------------------
Name: C. H. Foster, Jr.
Title: Chairman and Chief Executive Officer
RELIANCE INSURANCE COMPANY
By: /s/ Lowell C. Freiberg
-----------------------------------------------
Name: Lowell C. Freiberg
Title: Senior Vice President
RELIANCE GROUP HOLDINGS, INC.
By: /s/ George E. Bello
-----------------------------------------------
Name: George E. Bello
Title: Executive Vice President and Controller
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Exhibit A
Form of Resignation Agreement
LandAmerica Financial Group, Inc.
(formerly Lawyers Title Corporation)
6630 West Broad Street
Richmond, Virginia 23230
Reliance Insurance Company
Three Parkway
Philadelphia, Pennsylvania 19102
Ladies and Gentlemen:
I hereby acknowledge that my position on the Board of Directors of
LandAmerica Financial Group, Inc. (formerly Lawyers Title Corporation)
("LandAmerica") is subject to the provisions of a Voting and Standstill
Agreement (the "Agreement"), dated February 27, 1998, between LandAmerica and
Reliance Insurance Company ("RIC") and Reliance Group Holdings, Inc.
Accordingly, I hereby agree to resign immediately from such Board of Directors
under the terms of Article II of the Agreement in the event that RIC requests
such resignation. I understand that, if I do not resign as requested within five
(5) Business Days (as defined in the Agreement), LandAmerica may seek specific
performance of this letter agreement through court proceedings or otherwise may
seek to remove me from office. I agree that any failure to resign upon request
shall be deemed to be "cause" for my removal from the Board of Directors
pursuant to the Charter and Bylaws of LandAmerica.
Date: February 27, 1998
______________________________
Name
Agreed to and Accepted:
LandAmerica Financial Group, Inc.
By:___________________________
Name:
Title:
<PAGE>
Exhibit B
Form of Confidentiality Agreement
________ __, 19__
CONFIDENTIAL
[Name]
[Address]
Re: Confidentiality Agreement
Ladies and Gentlemen:
In connection with our [soliciting, offering, seeking to effect or
negotiating] with you with respect to the [sale, transfer, assignment, pledge,
etc.] of shares of [Common Stock or 7% Series B Cumulative Convertible Preferred
Stock], without par value, of LandAmerica Financial Group, Inc. (the "Company"),
we are prepared to make available to you certain confidential information
relating to the Company and its business (the "Confidential Information"). As a
condition to your being furnished the Confidential Information, you agree to
comply with the terms and conditions of this letter agreement (this
"Agreement").
For the purposes of this Agreement, the term "Representatives" shall
mean your employees, agents and advisors and the directors, officers, employees
and agents of any of your advisors. The term "Third Party" shall be broadly
interpreted to include without limitation any corporation, company, group,
partnership, other entity or individual. The term "Confidential Information"
shall not include information that (i) was or becomes generally available to the
public other than as a result of a disclosure by you or your Representatives, or
(ii) was or becomes available to you on a non-confidential basis from a source
other than the Company or its advisors.
You hereby agree to treat the Confidential Information as confidential
and you shall not, and shall direct your Representatives not to, use in any way
or to disclose, directly or indirectly, the Confidential Information to any
Third Party without the written consent of the Company.
It is understood and agreed that money damages would not be a
sufficient remedy for any breach of this Agreement by you and that the Company
shall be entitled to specific performance and injunctive or other equitable
relief as a remedy for any such breach, and you further agree to waive any
requirement for the securing or posting of any bond in connection with such
remedy.
<PAGE>
Such remedy shall not be deemed to be the exclusive remedy for your breach of
this Agreement, but shall be in addition to all other remedies available at law
or equity to the Company.
If you are in agreement with the foregoing, please so indicate by
signing and returning one copy of this Agreement, whereupon it will constitute
our agreement with respect to the subject matter hereof.
Very truly yours,
[Name]
Officer of [RIC or Affiliate]
CONFIRMED AND AGREED as of
the date first written
above:
[NAME]
By:_________________________________
Name:
Title:
LANDAMERICA FINANCIAL GROUP, INC.
By:_________________________________
Name:
Title:
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Exhibit 10.27
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated as of
February 27, 1998, is made between LANDAMERICA FINANCIAL GROUP, INC. (formerly
known as Lawyers Title Corporation), a Virginia corporation ("LandAmerica"), and
RELIANCE INSURANCE COMPANY, a Pennsylvania corporation ("RIC").
W I T N E S S E T H:
WHEREAS, Lawyers Title Corporation, Lawyers Title Insurance
Corporation, a Virginia corporation, RIC and Reliance Group Holdings, Inc., a
Delaware corporation, entered into a Stock Purchase Agreement dated August 20,
1997, as amended and restated by an Amended and Restated Stock Purchase
Agreement dated December 11, 1997 (the "Stock Purchase Agreement"), under which
Lawyers Title Corporation agreed to acquire from RIC all of the issued and
outstanding shares of the capital stock of Commonwealth Land Title Insurance
Company, a Pennsylvania corporation, and of Transnation Title Insurance Company,
an Arizona corporation; and
WHEREAS, on February 27, 1998, Lawyers Title Corporation changed its
name to "LandAmerica Financial Group, Inc."; and
WHEREAS, pursuant to the Stock Purchase Agreement, RIC has acquired (i)
4,039,473 shares of LandAmerica's Common Stock, without par value, and (ii)
2,200,000 shares of LandAmerica's 7% Series B Cumulative Convertible Preferred
Stock, without par value, which shares of Series B Preferred Stock are initially
convertible into 4,824,561 shares of Common Stock pursuant to the terms of the
Series B Preferred Stock; and
WHEREAS, LandAmerica has agreed to enter into this Agreement to provide
certain registration rights to RIC in order to facilitate the distribution of
such shares of Common Stock and Series B Preferred Stock.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and in the Stock Purchase Agreement, LandAmerica and RIC hereby
agree as follows:
ARTICLE I
Definitions
Except as otherwise specified herein, capitalized terms used in this
Agreement shall have the respective meanings assigned to such terms in the Stock
Purchase Agreement. For purposes of this Agreement, the following terms have the
following meanings:
<PAGE>
(a) "Affiliate" shall have the meaning ascribed to such term in
Rule 12b-2 under the Exchange Act as in effect on the date of this Agreement.
(b) "Blue Sky Filing" shall mean a filing made in connection with
the registration or qualification of the RIC Shares under a particular state's
securities (including without limitation insurance securities) or blue sky laws.
(c) "Common Shares" shall mean the 4,039,473 shares of Common
Stock that RIC acquired from LandAmerica pursuant to the Stock Purchase
Agreement and such additional shares of Common Stock that LandAmerica may issue
with respect to such shares pursuant to any stock splits, stock dividends,
recapitalizations, restructurings, reclassifications or similar transactions.
(d) "Common Stock" shall mean the Common Stock, without par value,
of LandAmerica.
(e) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
(f) "NYSE" shall mean the New York Stock Exchange.
(g) "Person" shall have the meaning set forth in Section 3(a)(9)
of the Exchange Act as in effect on the date of this Agreement.
(h) "Prospectus" shall mean the prospectus included in any
Registration Statement (including a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A under the Securities Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the RIC Shares covered by such Registration
Statement, and all other amendments and supplements to such prospectus,
including post-effective amendments, and all material incorporated by reference
or deemed to be incorporated by reference in any such prospectus.
(i) "Registration Expenses" shall mean any and all out-of-pocket
expenses incident to LandAmerica's performance of or compliance with this
Agreement, including, without limitation, (i) all registration and filing fees
with the SEC and the National Association of Securities Dealers, Inc., (ii) all
fees and expenses of complying with state securities (including without
limitation insurance securities) or blue sky laws, (iii) all printing, messenger
and delivery expenses, (iv) all fees and expenses incurred in connection with
the listing of the RIC Shares on the NYSE, or any other exchange or automated
interdealer quotation system as then applicable, (v) the fees and disbursements
of LandAmerica's counsel and of its independent public accountants, (vi) the
fees and expenses of any special experts retained by LandAmerica in connection
with the requested registration and (vii) out-of-pocket expenses of underwriters
customarily paid by the issuer to the extent provided for in any underwriting
agreement, but excluding (x) any fees or disbursements of counsel to RIC or any
underwriter and (y) all underwriting discounts and commissions, transfer
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<PAGE>
taxes, if any, and documentary stamp taxes, if any, relating to the sale or
disposition of the RIC Shares.
(j) "Registration Statement" shall mean one or more registration
statements of LandAmerica under the Securities Act that cover the resale of any
portion of the RIC Shares pursuant to the terms of this Agreement, including the
related Prospectus, all amendments and supplements to such registration
statement, including pre- and post-effective amendments, all exhibits thereto
and all material incorporated by reference or deemed to be incorporated by
reference in any such registration statement.
(k) "RIC Shares" shall mean collectively (i) the Common Shares,
(ii) the Series B Preferred Shares, and (iii) the shares of Common Stock into
which the Series B Preferred Shares are convertible pursuant to the terms of the
Series B Preferred Stock and such additional shares of Common Stock that
LandAmerica may issue with respect to such shares pursuant to any stock splits,
stock dividends, recapitalizations, restructurings, reclassifications or similar
transactions.
(l) "SEC" shall mean the Securities and Exchange Commission.
(m) "Securities Act" shall mean the Securities Act of 1933, as
amended.
(n) "Series B Preferred Shares" shall mean the 2,200,000 shares of
Series B Preferred Stock that RIC acquired from LandAmerica on the Closing Date.
(o) "Series B Preferred Stock" shall mean the 7% Series B
Cumulative Convertible Preferred Stock, without par value, of LandAmerica.
ARTICLE II
Registration of Securities
Section 2.1. Securities Subject to this Agreement. The securities
entitled to the benefits of this Agreement are the RIC Shares. For the purposes
of this Agreement, one or more of the RIC Shares will no longer be subject to
this Agreement when and to the extent that (i) a Registration Statement covering
such RIC Shares has been declared effective under the Securities Act and such
RIC Shares have been sold pursuant to such effective Registration Statement,
(ii) such RIC Shares are distributed to the public pursuant to Rule 144 under
the Securities Act, (iii) such RIC Shares shall have been otherwise transferred
or disposed of, new certificates therefor not bearing a legend restricting
further transfer or disposition shall have been delivered by LandAmerica and, at
such time, subsequent transfer or disposition of such securities shall not
require registration or qualification of such RIC Shares under the Securities
Act or any similar state law then in force, or (iv) such RIC Shares have ceased
to be outstanding.
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<PAGE>
Section 2.2. Registration Requirements.
(a) Not later than three (3) Business Days following the Closing
Date, LandAmerica shall (i) file one or more Registration Statements with the
SEC to register the resale of the RIC Shares under the Securities Act and (ii)
use its best efforts to cause such Registration Statement(s) to become effective
as soon as practicable after the filing thereof with the SEC. Prior to or on the
Closing Date, LandAmerica shall have listed the Common Shares and, on a when
issued basis, the shares of Common Stock issuable upon conversion of the Series
B Preferred Shares on the NYSE. The parties acknowledge that, as of the Closing
Date, the Series B Preferred Shares are not eligible for listing on the NYSE.
However, LandAmerica will promptly list the Series B Preferred Shares at such
time as the Series B Preferred Shares become eligible for listing under the
rules of the NYSE or of any other exchange or automated interdealer quotation
system on which the Common Stock is then listed or quoted.
(b) LandAmerica shall use its best efforts to:
(i) maintain the effectiveness of any registration
relating to the Common Shares, and the listing of such shares on the NYSE or any
exchange or automated interdealer quotation system on which the Common Stock is
then listed or quoted, for the period from the date of effectiveness of the
Registration Statement relating to such Common Shares to the date that is six
years and six months after such date of effectiveness, subject to extension as
provided in Section 2.2(c) below;
(ii) maintain the effectiveness of any registration
relating to the Series B Preferred Shares, and the listing of such shares on the
NYSE or any exchange or automated interdealer quotation system on which the
Series B Preferred Stock is then listed or quoted, for the period from the date
of effectiveness of the Registration Statement relating to such Series B
Preferred Shares to the date that is eight years and six months after such date
of effectiveness, subject to extension as provided in Section 2.2(c) below; and
(iii) maintain the effectiveness of any registration
relating to the shares of Common Stock into which the Series B Preferred Shares
are convertible, and the listing of such shares, on a when issued basis, on the
NYSE or any exchange or automated interdealer quotation system on which the
Common Stock is then listed or quoted, for the period from the date of
effectiveness of the Registration Statement relating to such shares of Common
Stock to the date which is eight years and six months after such date of
effectiveness, subject to extension as provided in Section 2.2(c) below.
(c) For each Holdback Period required by LandAmerica under Article
III of this Agreement and for each Discontinuance Period (as defined in Section
2.3(m) below), the periods specified in Section 2.2(b) above shall be extended
by the number of days during which the applicable Holdback Period or
Discontinuance Period was in effect.
Section 2.3. Registration Procedures. In order to comply with the
requirements of Section 2.2 above, LandAmerica will:
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<PAGE>
(a) prepare and file with the SEC one or more Registration
Statements covering the RIC Shares on any form or forms for which LandAmerica
then qualifies and that counsel for LandAmerica shall deem appropriate, and
which form shall be available for the sale of the RIC Shares in accordance with
the intended methods of distribution thereof, and use its best efforts to cause
such Registration Statement(s) to become effective;
(b) prepare and file with the SEC pre- and post-effective
amendments to any Registration Statement and such amendments and supplements to
the Prospectus used in connection therewith as may be necessary to maintain the
effectiveness of such registration, or as may be required by the rules,
regulations or instructions applicable to the registration form utilized by
LandAmerica, or by the Securities Act or the rules and regulations thereunder,
necessary to keep such Registration Statement effective, and cause the
Prospectus as so supplemented to be filed pursuant to Rule 424 under the
Securities Act, and otherwise comply with the provisions of the Securities Act
with respect to the disposition of the RIC Shares;
(c) furnish to RIC (or any Affiliate of RIC that owns, either
beneficially or of record, any RIC Shares), and the underwriters if any, such
number of copies of any Registration Statement and each pre- and post-effective
amendment thereto, any Prospectus or Prospectus supplement and each amendment
thereto and such other documents as RIC (or any Affiliate of RIC that owns,
either beneficially or of record, any RIC Shares), and the underwriters if any,
may reasonably request in order to facilitate the transfer or disposition of the
RIC Shares by RIC (or any Affiliate of RIC that owns, either beneficially or of
record, any RIC Shares);
(d) make such Blue Sky Filings to register or qualify the RIC
Shares under such state securities (including without limitation insurance
securities) or blue sky laws of such jurisdictions as RIC (or any Affiliate of
RIC that owns, either beneficially or of record, any RIC Shares), and the
underwriters if any, may reasonably request, and do any and all other acts that
may be reasonably necessary or advisable to enable RIC to consummate the
transfer or disposition in such jurisdictions of the RIC Shares, except that
LandAmerica shall not for any such purpose be required (i) to qualify generally
to do business as a foreign corporation in any jurisdiction where, but for the
requirements of this Section 2.3(d), it would not be obligated to be so
qualified, (ii) to subject itself to taxation in any such jurisdiction, or (iii)
to consent to general service of process in any such jurisdiction;
(e) notify RIC, and the underwriters if any, at any time when a
Prospectus is required to be delivered under the Securities Act while the RIC
Shares are subject to this Agreement, of LandAmerica's becoming aware that a
Prospectus included in a Registration Statement, as then in effect, includes an
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, and prepare and furnish to RIC, and the
underwriters if any, a reasonable number of copies of an amendment to such
Prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such RIC Shares, such Prospectus shall not include an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading;
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<PAGE>
(f) promptly notify RIC, and the underwriters if any,
(1) when any Prospectus or Prospectus supplement or pre-
or post-effective amendment has been filed, and, with respect to any
Registration Statement or post-effective amendment, when such Registration
Statement or post-effective amendment has become effective;
(2) of any request by the SEC or any other applicable
regulatory authority for amendments or supplements to any Registration Statement
or Prospectus or for additional information;
(3) of the issuance by the SEC or any other applicable
regulatory authority of any stop order of which LandAmerica or its counsel is
aware or should be aware suspending the effectiveness of any Registration
Statement or any order preventing the use of a related Prospectus, or the
initiation or any threats of any proceedings for such purpose; and
(4) of the receipt by LandAmerica of any written
notification of the suspension of the registration or qualification of any of
the RIC Shares for sale in any jurisdiction, or the initiation or any threats of
any proceeding for such purpose;
(g) use its best efforts to comply with all applicable rules and
regulations of the SEC, and make available to its shareholders, as soon as
reasonably practicable, an earnings statement that shall satisfy the provisions
of Section 11(a) of the Securities Act, provided that LandAmerica shall be
deemed to have complied with this Section 2.3(g) if it has complied with Rule
158 under the Securities Act;
(h) use its best efforts to provide a transfer agent and registrar
for the RIC Shares covered by any Registration Statement no later than the
effective date of such Registration Statement;
(i) if the RIC Shares are to be sold in an underwritten offering,
enter into a customary underwriting agreement and in connection therewith:
(1) make such representations and warranties to the
underwriters and to RIC and any Affiliate of RIC, to the extent that RIC and
such Affiliate(s) are selling shareholders, in form, substance and scope as are
customarily made by issuers to underwriters and selling shareholders in
comparable underwritten offerings;
(2) obtain opinions of counsel to LandAmerica (in form,
substance and scope reasonably satisfactory to the managing underwriters),
addressed to the underwriters, and covering the matters customarily covered in
opinions requested in comparable underwritten offerings, including, if requested
by RIC or any Affiliate of RIC, a statement to the effect that such opinions may
be relied upon by RIC and such Affiliate(s) of RIC, to the extent that RIC and
such Affiliate(s) are selling shareholders;
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<PAGE>
(3) obtain "cold comfort" letters and bring-downs thereof
from LandAmerica's independent certified public accountants addressed to the
underwriters and RIC, such letters to be in customary form and covering the
matters customarily covered in "cold comfort" letters by independent accountants
in comparable underwritten offerings;
(4) if requested, provide indemnification in accordance
with the provisions and procedures of Article IV of this Agreement to all
parties to be indemnified pursuant to such Article;
(5) deliver such documents and certificates as the
managing underwriters or RIC may reasonably request to evidence compliance with
Section 2.3(f) above and with any customary conditions contained in the
underwriting agreement; and
(6) make its officers and directors reasonably available
for "roadshows."
(j) cooperate with RIC, and the underwriters if any, to facilitate
the timely preparation and delivery of certificates (not bearing any restrictive
legends) representing the securities to be sold under any Registration
Statement, and enable such securities to be in such denominations and registered
in such names as RIC, or the underwriters if any, may request;
(k) if the managing underwriter or underwriters or RIC reasonably
request, incorporate in a Prospectus supplement or post-effective amendment
thereto such information as the managing underwriter or underwriters and RIC
agree should be included therein relating to LandAmerica and its business and
financial condition and the plan of distribution with respect to such RIC
Shares, including, without limitation, information with respect to the number of
RIC Shares being sold to such underwriters, the purchase price being paid
therefor by such underwriters and with respect to any other terms of the
underwritten offering of the RIC Shares to be sold in such offering and make all
required filings of such Prospectus supplement or post-effective amendment as
promptly as practicable upon being notified of the matters to be incorporated in
such Prospectus supplement or post-effective amendment;
(l) provide RIC, any underwriter and any attorney, accountant or
other agent retained by RIC or underwriter (collectively, the "Inspectors") with
(i) the opportunity to participate in the preparation of any Registration
Statement, any Prospectus, and any amendment or supplement thereto and (ii)
reasonable access during normal business hours to appropriate officers of
LandAmerica and its subsidiaries to ask questions and to obtain information that
any such Inspector may reasonably request and make available for inspection all
financial and other records, pertinent corporate documents and properties of any
of LandAmerica and its subsidiaries and affiliates (collectively, the
"Records"), as shall be reasonably necessary to enable them to exercise their
due diligence responsibility; provided, however, that the Records that
LandAmerica determines, in good faith, to be confidential and that it notifies
the Inspectors in writing are confidential shall not be disclosed to any
Inspector unless such Inspector signs or is otherwise bound by a confidentiality
agreement reasonably satisfactory to LandAmerica; and
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<PAGE>
(m) in the event of the issuance of any stop order of which
LandAmerica or its counsel is aware or should be aware suspending the
effectiveness of any Registration Statement or any order suspending or
preventing the use of any related Prospectus or suspending the registration or
qualification of any RIC Shares for sale in any jurisdiction, LandAmerica
promptly will use its best efforts to obtain its withdrawal.
RIC shall furnish to LandAmerica in writing such information regarding
RIC and its Affiliates as is required to be disclosed pursuant to the Securities
Act. RIC agrees to notify LandAmerica promptly of any inaccuracy or change in
information previously furnished by RIC to LandAmerica or of the happening of
any event in either case as a result of which a Registration Statement, a
Prospectus, or any amendment or supplement thereto contains an untrue statement
of a material fact regarding RIC or omits to state a material fact regarding RIC
required to be stated therein or necessary to make the statements therein not
misleading and to furnish promptly to LandAmerica any additional information
required to correct and update any previously furnished information or required
so that such Registration Statement, Prospectus, or amendment or supplement,
shall not contain, with respect to RIC, an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading.
RIC agrees that, upon receipt of any notice from LandAmerica of the
happening of any event of the kind described in Sections 2.3(e) or (m) above,
RIC will forthwith discontinue the transfer or disposition of any RIC Shares
pursuant to the Prospectus relating to the Registration Statement covering such
RIC Shares until RIC's receipt of the copies of the amended or supplemented
Prospectus contemplated by Section 2.3(e) or the withdrawal of any order
contemplated by Section 2.3(m), and, if so directed by LandAmerica, RIC will
deliver to LandAmerica all copies, other than permanent file copies then in
RIC's possession, of the Prospectus covering such RIC Shares at the time of
receipt of such notice. The period during which any discontinuance under this
paragraph is in effect is referred to herein as a "Discontinuance Period."
Section 2.4. Registration Expenses. LandAmerica will pay all
Registration Expenses in connection with all registrations of RIC Shares
pursuant to Section 2.3 above, and RIC shall pay (x) any fees or disbursements
of counsel to RIC or any underwriter and (y) all underwriting discounts and
commissions and transfer taxes, if any, and documentary stamp taxes, if any,
relating to the sale or disposition of the RIC Shares.
Section 2.5. Selection of Underwriters. In connection with any
underwritten offering pursuant to a Registration Statement filed pursuant to
Section 2.3 above, RIC shall have the right to select a lead managing
underwriter or underwriters to administer such offering, which lead managing
underwriter or underwriters shall be reasonably satisfactory to LandAmerica;
provided, however, that LandAmerica shall have the right to select a co-managing
underwriter or underwriters for such offering, which co-managing underwriter or
underwriters shall be reasonably satisfactory to RIC.
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<PAGE>
ARTICLE III
Holdback Period
If one or more underwritten public offerings of shares of Common Stock
(other than the Common Shares and the shares of Common Stock into which the
Series B Preferred Shares are convertible) by LandAmerica occur during the
period from the Closing Date to the date which is eight years and six months
after the Closing Date, subject to extension as provided in Section 2.2(c)
above, then, in connection with each such public offering, LandAmerica may
require RIC and its Affiliates to refrain from, and RIC and its Affiliates will
refrain from, selling any of the RIC Shares for a period determined by
LandAmerica but not to exceed ninety (90) days (each such period referred to as
a "Holdback Period") so long as LandAmerica delivers written notice to RIC of
LandAmerica's requirement of a Holdback Period, and the length of such Holdback
Period, no less than five Business Days prior to the inception of the Holdback
Period; provided that LandAmerica may require RIC to refrain from selling any of
the RIC Shares during no more than three such Holdback Periods during the period
from the Closing Date to the date which is eight years and six months after the
Closing Date; and provided further that LandAmerica may require RIC to refrain
from selling any of the RIC Shares during no more than two Holdback Periods in
any one calendar year.
ARTICLE IV
Indemnification; Contribution
Section 4.1. Indemnification by LandAmerica. As long as any RIC
Shares are registered under the Securities Act, LandAmerica will, and hereby
does indemnify and hold harmless, to the fullest extent permitted by law, and,
subject to Section 4.3 below, defend RIC and RIC's officers, directors,
employees, agents, representatives and each other Person, if any, who controls
RIC within the meaning of the Securities Act, against any and all losses,
claims, damages, liabilities and expenses, joint or several, to which they or
any of them may become subject under the Securities Act or any other statute or
common law, including any amount paid in settlement of any litigation, commenced
or threatened, and to reimburse them for any reasonable legal or other expenses
incurred by them in connection with investigating any claims and defending any
actions, insofar as any such losses, claims, damages, liabilities, expenses or
actions arise out of or are based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement or
any pre- or post-effective amendment thereto or in any Blue Sky Filing, or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading or
(ii) any untrue statement or alleged untrue statement of a material fact
contained in the Prospectus or any amendment or supplement thereto, or the
omission or alleged omission to state therein a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading; provided, however, that the indemnification
agreement contained herein shall not (i) apply to such losses, claims, damages,
liabilities, expenses or actions arising out of, or based upon, any such untrue
statement or alleged untrue statement, or any such omission or alleged omission,
if such statement or omission was made in reliance upon
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<PAGE>
and in conformity with information furnished in writing to LandAmerica by RIC
from time to time specifically for use in the Registration Statement, the
Prospectus or any such amendment or supplement thereto or any Blue Sky Filing or
(ii) inure to the benefit of any Person, to the extent that any such loss,
claim, damage, liability, expense or action arises out of such Person's failure
to send or give a copy of the Prospectus, as the same may be then supplemented
or amended, to the Person asserting an untrue statement or alleged untrue
statement, or omission or alleged omission, at or prior to the written
confirmation of the sale of the RIC Shares to such Person if such statement or
omission was corrected in the Prospectus or any amendment or supplement thereto
prior to the written confirmation of the sale. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
RIC or any other Person and shall survive the transfer of such securities by
RIC.
Section 4.2. Indemnification by RIC. RIC will, and hereby does,
indemnify and hold harmless and, subject to Section 4.3 below, defend (in the
same manner and to the same extent as set forth in Section 4.1 above)
LandAmerica and LandAmerica's officers, directors, employees, agents,
representatives and each other Person, if any, who controls LandAmerica within
the meaning of the Securities Act, with respect to any such untrue statement or
alleged untrue statement in, or any such omission or alleged omission from, any
Registration Statement, any Prospectus, or any amendment or supplement thereto,
if such statement or omission was made in reliance upon and in conformity with
information furnished in writing to LandAmerica by RIC from time to time
specifically for use in the Registration Statement, the Prospectus, and any such
amendment or supplement thereto. Such indemnity shall remain in full force and
effect, regardless of any investigation made by or on behalf of LandAmerica or
any such director, officer or any other Person and shall survive the transfer of
such securities by RIC. In no event shall RIC be liable for any amounts pursuant
to this Section 4.2 in excess of the net proceeds (net of all registration
expenses borne by RIC pursuant to Section 2.4 above) received by RIC upon the
resale of any RIC Shares pursuant to any Registration Statement (such amount
referred to as the "RIC Liability Amount").
Section 4.3. Notices of Claims. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in Sections 4.1 and 4.2 above, such indemnified
party will give, if a claim in respect thereof is to be made against an
indemnifying party, written notice to the latter of the commencement of such
action, provided that the failure of any indemnified party to give notice as
provided herein shall not relieve the indemnifying party of its obligations
under this Article IV, except to the extent that the indemnifying party is
actually prejudiced in any material respect by such failure to give notice. In
case any such action is brought against an indemnified party, the indemnifying
party shall be entitled to participate in and, unless in such indemnified
party's reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, to assume the defense
thereof, jointly with any other indemnifying party similarly notified to the
extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and, after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of reasonable investigation. If the
indemnifying party advises an indemnified
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party that it will contest a claim for indemnification hereunder, or fails,
within thirty (30) days of receipt of any indemnification notice to notify, in
writing, such Person of its election to defend, settle or compromise, at its
sole cost and expense, any action, proceeding or claim (or discontinues its
defense at any time after it commences such defense), then the indemnified party
may, at its option, defend, settle or otherwise compromise or pay such action or
claim in each case at the indemnifying party's expense. In any event, unless and
until the indemnifying party elects in writing to assume and does so assume the
defense of any such claim, proceeding or action, the indemnified party's
reasonable costs and expenses arising out of the defense, settlement or
compromise of any such action, claim or proceeding shall be losses subject to
indemnification hereunder. The indemnified party shall cooperate fully with the
indemnifying party in connection with any negotiation or defense of any such
action or claim by the indemnifying party and shall furnish to the indemnifying
party all information reasonably available to the indemnified party that relates
to such action or claim. The indemnifying party shall keep the indemnified party
fully informed at all times as to the status of the defense or any settlement
negotiations with respect thereto. If the indemnifying party elects to defend
any such action or claim, then the indemnified party shall be entitled to
participate in such defense with counsel of its choice at its sole cost and
expense, except that the indemnifying party shall be liable for such reasonable
costs and expenses if, in such indemnified party's reasonable judgment, a
conflict of interest between such indemnified and indemnifying parties may exist
as described above. If the indemnifying party does not assume such defense, the
indemnified party shall keep the indemnifying party informed at all times as to
the status of the defense; provided, however, that the failure to keep the
indemnifying party so informed shall not affect the obligations of the
indemnifying party hereunder. No indemnifying party shall be liable for any
settlement of any action, claim or proceeding effected without its written
consent; provided, however, that the indemnifying party shall not unreasonably
withhold, delay or condition its consent. No indemnifying party shall, without
the consent of the indemnified party, consent to entry of any judgment or enter
into any settlement that does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a general
written release from all liability with respect to such claim or litigation.
Section 4.4. Indemnification Payments. The indemnification
required by this Article IV shall be made by periodic payments of the amount
thereof during the course of the investigation or defense as and when bills are
received or expense, loss, damage or liability is incurred, subject to the
receipt of such documentary support therefor as the indemnifying party may
reasonably request.
Section 4.5. Contribution. If the indemnification provided for in
this Article IV is unavailable to or insufficient to hold harmless a party
otherwise entitled to be indemnified thereunder in respect to any losses,
claims, damages and expenses (or actions, whether commenced or threatened, in
respect thereof) referred to therein, then LandAmerica and RIC shall contribute
to the amount paid or payable by such party as a result of such losses, claims,
damages, liabilities, expenses or actions in such proportion as is appropriate
to reflect the relative fault of LandAmerica and RIC in connection with the
statements or omissions that resulted in such losses, claims, damages,
liabilities, expenses or actions. The relative fault of LandAmerica and RIC
shall be determined by reference to whether the untrue statement or alleged
untrue statement of a
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material fact or the omission or alleged omission to state a material fact
relates to information supplied by LandAmerica or by RIC and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. LandAmerica and RIC agree that it would not
be just and equitable if contributions pursuant to this Section 4.5 were
determined by pro rata allocation or by any other method of allocation that does
not take account of the equitable considerations referred to above in this
Section 4.5. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who is not guilty of such fraudulent
misrepresentation. In no event shall RIC be required to contribute pursuant to
this Section 4.5 any amount in excess of the RIC Liability Amount.
Section 4.6. Other Rights and Liabilities. The indemnity and
contribution agreements contained herein shall be in addition to (i) any cause
of action or similar right of the indemnified party against the indemnifying
party or others and (ii) any liabilities the indemnifying party may be subject
to pursuant to the law.
ARTICLE V
Miscellaneous
Section 5.1. Notices. Any notices or other communications required
or permitted hereunder shall be sufficiently given if in writing (including
telecopy or similar teletransmission), addressed as follows:
If to LandAmerica,
to it at: Lawyers Title Insurance Corporation
6630 West Broad Street
Richmond, Virginia 23231
Telecopier: (804) 282-5453
Attention: Russell W. Jordan, III, Esquire
With a copy to: Williams Mullen Christian & Dobbins
1021 East Cary Street, 16th Floor
Richmond, Virginia 23219
Telecopier: (804) 783-6507
Attention: Theodore L. Chandler, Jr., Esquire
If to RIC or Reliance,
to them at: Reliance Insurance Company
55 East 52nd Street
New York, New York 10055
Telecopier: (212) 909-1864
Attention: Robert M. Steinberg
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With a copy to: Reliance Group Holdings, Inc.
55 East 52nd Street
New York, New York 10055
Telecopier: (212) 909-1864
Attention: General Counsel
Unless otherwise specified herein, such notices or other communications shall be
deemed received (a) in the case of any notice or communication sent other than
by mail, on the date actually delivered to such address (evidenced, in the case
of delivery by overnight courier, by confirmation of delivery from the overnight
courier service making such delivery, and in the case of a telecopy, by receipt
of a transmission confirmation form or the addressee's confirmation of receipt),
or (b) in the case of any notice or communication sent by mail, three Business
Days after being sent, if sent by registered or certified mail, with first-class
postage prepaid. Each of the parties hereto shall be entitled to specify a
different address by giving notice as aforesaid to each of the other parties
hereto.
Section 5.2. Amendments, Waivers, Etc. This Agreement may not be
amended, changed, supplemented, waived or otherwise modified or terminated
except by an instrument in writing signed by RIC and by LandAmerica following
approval thereof by a majority of the Continuing Directors (as such term is
defined in the Voting and Standstill Agreement).
Section 5.3. Successors and Assigns. Except as otherwise provided
herein, this Agreement shall be binding upon and shall inure to the benefit of
and be enforceable by the parties and their respective successors and assigns,
including without limitation in the case of any corporate party hereto any
corporate successor by merger or otherwise; provided that no party may assign
this Agreement without the other party's prior written consent.
Section 5.4. Entire Agreement. This Agreement embodies the entire
agreement and understanding among the parties relating to the subject matter
hereof and supersedes all prior agreements and understandings relating to such
subject matter. There are no representations, warranties or covenants by the
parties hereto relating to such subject matter other than those expressly set
forth in this Agreement and the Stock Purchase Agreement.
Section 5.5. Specific Performance. The parties acknowledge that
money damages are not an adequate remedy for violations of this Agreement and
that any party may, in its sole discretion, apply to a court of competent
jurisdiction for specific performance or injunctive or such other relief as such
court may deem just and proper in order to enforce this Agreement or prevent any
violation hereof and, to the extent permitted by applicable law, each party
waives any objection to the imposition of such relief.
Section 5.6. Remedies Cumulative. All rights, powers and remedies
provided under this Agreement or otherwise available in respect hereof at law or
in equity shall be cumulative and not alternative, and the exercise or beginning
of the exercise of any thereof by any party shall not
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preclude the simultaneous or later exercise of any other such right, power or
remedy by such party.
Section 5.7. No Waiver. The failure of any party hereto to
exercise any right, power or remedy provided under this Agreement or otherwise
available in respect hereof at law or in equity, or to insist upon compliance by
any other party hereto with its obligations hereunder, and any custom or
practice of the parties at variance with the terms hereof, shall not constitute
a waiver by such party of its right to exercise any such or other right, power
or remedy or to demand such compliance.
Section 5.8. No Third Party Beneficiaries. Except as provided in
Article IV above, this Agreement is not intended to be for the benefit of and
shall not be enforceable by any Person who or which is not a party hereto.
Section 5.9. Consent to Jurisdiction. Each party to this
Agreement, by its execution hereof, (i) hereby irrevocably submits, and agrees
to cause each of its Affiliates to submit, to the jurisdiction of the federal
courts located either in the City of Richmond, Virginia, or in the City of New
York, New York, and in the event that such federal courts shall not have subject
matter jurisdiction over the relevant proceeding, then of the state courts
located either in the City of Richmond, Virginia, or in the City of New York,
New York, for the purpose of any Action arising out of or based upon this
Agreement or relating to the subject matter hereof or the transactions
contemplated hereby, (ii) hereby waives, and agrees to cause each of its
Affiliates to waive, to the extent not prohibited by applicable law, and agrees
not to assert, and agrees not to allow any of its Affiliates to assert, by way
of motion, as a defense or otherwise, in any such Action, any claim that it is
not subject personally to the jurisdiction of the above-named courts, that its
property is exempt or immune from attachment or execution, that any such
proceeding brought in one of the above-named courts is improper, or that this
Agreement or the subject matter hereof may not be enforced in or by such court
and (iii) hereby agrees not to commence or to permit any of its Affiliates to
commence any Action arising out of or based upon this Agreement or relating to
the subject matter hereof other than before one of the above-named courts nor to
make any motion or take any other action seeking or intending to cause the
transfer or removal of any such Action to any court other than one of the
above-named courts whether on the grounds of inconvenient forum or otherwise.
Each party hereby consents to service of process in any such proceeding in any
manner permitted by Virginia or New York law, as the case may be, and agrees
that service of process by registered or certified mail, return receipt
requested, at its address specified pursuant to Section 5.1 above is reasonably
calculated to give actual notice. Notwithstanding anything contained in this
Section 5.9 to the contrary with respect to the parties' forum selection, if an
Action is filed against a party to this Agreement, including its Affiliates, by
a person who or which is not a party to this Agreement, an Affiliate of a party
to this Agreement, or an assignee thereof (a "Third Party Action"), in a forum
other than the federal district court or a state court located in the City of
Richmond, Virginia, or in the City of New York, New York, and such Third Party
Action is based upon, arises from, or implicates rights, obligations or
liabilities existing under this Agreement or acts or omissions pursuant to this
Agreement, then the party to this Agreement, including its Affiliates, joined as
a defendant in such Third Party Action shall have the right to file cross-claims
or third-party claims in the Third Party Action against the other party to
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this Agreement, including its Affiliates, and even if not a defendant therein,
to intervene in such Third Party Action with or without also filing cross-claims
or third-party claims against the other party to this Agreement, including its
Affiliates.
Section 5.10. Governing Law. This Agreement shall be governed by
and construed in accordance with the domestic substantive law of the
Commonwealth of Virginia, without giving effect to any choice or conflict of law
provision or rule that would cause the application of the law of any other
jurisdiction.
Section 5.11. Name, Captions. The name assigned to this Agreement
and the section captions used herein are for convenience of reference only and
shall not affect the interpretation or construction hereof.
Section 5.12. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one instrument. Each counterpart may consist
of a number of copies each signed by less than all, but together signed by all,
the parties hereto.
Section 5.13. Expenses. Each of the parties hereto shall bear their
own expenses incurred in connection with this Agreement and the transactions
contemplated hereby, except that in the event of a dispute concerning the terms
or enforcement of this Agreement, the prevailing party in any such dispute shall
be entitled to reimbursement of reasonable legal fees and disbursements from the
other party or parties to such dispute.
[SIGNATURES ON NEXT PAGE]
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IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have caused this Registration Rights Agreement to be executed, as of the
date first above written by their respective officers thereunto duly authorized.
LANDAMERICA FINANCIAL GROUP,
INC.
By: /s/ Charles H. Foster, Jr.
------------------------------------------
Charles H. Foster, Jr.
Chairman and Chief Executive Officer
RELIANCE INSURANCE COMPANY
By: /s/ Lowell C. Freiberg
------------------------------------------
Lowell C. Freiberg
Senior Vice President
Exhibit 10.29
UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION
- ----------------------------
)
In the Matter of )
)
LAWYERS TITLE ) File No. 971-0115
CORPORATION, )
)
a corporation. )
- ---------------------------- )
AGREEMENT CONTAINING CONSENT ORDER
The Federal Trade Commission ("Commission"), having initiated an
investigation of the acquisition by Lawyers Title Corporation ("LTC") of certain
assets of Reliance Group Holdings, Inc. ("Reliance"), and it now appearing that
LTC, hereinafter sometimes referred to as "proposed respondent," is willing to
enter into an agreement containing an order to divest certain assets, and to
cease and desist from making certain acquisitions, and providing for other
relief:
IT IS HEREBY AGREED by and between proposed respondent, by its duly
authorized officers and attorney, and counsel for the Commission that:
1. Proposed respondent LTC is a corporation organized, existing and doing
business under and by virtue of the laws of the Commonwealth of
Virginia with its office and principal place of business located at
6630 West Broad Street, Richmond, Virginia 23230.
2. Proposed respondent admits all the jurisdictional facts set forth in
the draft of complaint here attached.
3. Proposed respondent waives:
a. any further procedural steps;
b. the requirement that the Commission's decision contain a
statement of findings of fact and conclusions of law;
c. all rights to seek judicial review or otherwise to challenge
or contest the validity of the order entered pursuant to this
agreement; and
d. any claim under the Equal Access to Justice Act.
<PAGE>
4. Proposed respondent shall submit, within thirty (30) days of the date
this agreement is signed by proposed respondent and every thirty (30)
days thereafter until this order becomes final, a report pursuant to
Section 2.33 of the Commission; Rules, signed by the proposed
respondent, setting forth in detail the manner in which the proposed
respondent will comply with Paragraphs II. through IV. of the order
when and if entered. Such report will not become part of the public
record unless and until the accompanying agreement and order are
accepted by the Commission for public comment.
5. This agreement shall not become part of the public record of the
proceeding unless and until it is accepted by the Commission. If this
agreement is accepted by the Commission it, together with the draft of
complaint contemplated thereby, will be placed on the public record for
a period of sixty (60) days and information in respect thereto publicly
released. The Commission thereafter may either withdraw its acceptance
of this agreement and so notify the proposed respondent, in which event
it will take such action as it may consider appropriate, or issue and
serve its complaint (in such form as the circumstances may require) and
decision, in disposition of the proceeding.
6. This agreement is for settlement purposes only and does not constitute
an admission by proposed respondent that the law has been violated as
alleged in the draft of complaint here attached, or that the facts as
alleged in the draft complaint, other than jurisdictional facts, are
true.
7. This agreement contemplates that, if it is accepted by the Commission,
and if such acceptance is not subsequently withdrawn by the Commission
pursuant to the provisions of Section 2.34 of the Commission's Rules,
the Commission may, without further notice to the proposed respondent,
(1) issue its complaint corresponding in form and substance with the
draft of complaint here attached and its decision containing the
following order to divest and to cease and desist in disposition of the
proceeding and (2) make information public with respect thereto. When
so entered, the order to cease and desist shall have the same force and
effect and may be altered, modified or set aside in the same manner and
within the same time provided by statute for other orders. The order
shall become final upon service. Delivery by the U.S. Postal Service of
the complaint and decision containing the agreed-to order to proposed
respondent's address as stated in this agreement shall constitute
service. Proposed respondent waives any right it may have to any other
manner of service. The complaint may be used in construing the terms of
the order, and no agreement, understanding, representation, or
interpretation not contained in the order or the agreement may be used
to vary or contradict the terms of the order.
8. By signing this agreement containing consent order, proposed respondent
represents that it can accomplish the full relief contemplated by this
agreement.
9. Proposed respondent has read the proposed complaint and order
contemplated hereby. Proposed respondent understands that once the
order has been issued, it will be required
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to file one or more compliance reports showing that it has fully
complied with the order. Proposed respondent agrees to comply with
Paragraphs II. C. and IV. of the proposed order from the date it signs
this agreement. Proposed respondent further understands that it may be
liable for civil penalties in the amount provided by law for each
violation of the order after it becomes final.
ORDER
I.
IT IS ORDERED that, as used in this order, the following definitions
shall apply:
A. "Respondent" or "LTC" means Lawyers Title Corporation, its
directors, officers, employees, agents, representatives,
predecessors, successors, and assigns; its subsidiaries,
divisions, groups and affiliates controlled by Lawyers
TitleCorporation, and the respective directors, officers,
employees, agents, representatives, successors, and assigns of
each.
B. The term "Reliance Group" means Reliance Group Holdings, Inc.,
its directors, officers, employees, agents, representatives,
predecessors, successors, and assigns; its subsidiaries,
divisions, groups and affiliates controlled by Reliance
GroupHoldings, Inc., and the respective directors, officers,
employees, agents,representatives, successors, and assigns of
each.
C. "Commission" means the Federal Trade Commission.
D. The term "title plant" means a privately owned collection of
records and/or indices regarding the ownership of and
interests in real property. The term includes such collections
that are regularly maintained and updated by obtaining
information or documents from the public records, as well as
such collections ofinformation that are not regularly updated.
E. The "Acquisition" means the acquisition of the title insurance
operations of Reliance Group by LTC, in exchange for the
acquisition by Reliance Group of a minority voting interest in
LTC and other consideration, as described in the Amended and
Restated Stock Purchase Agreement dated as of December 11,
1997.
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II.
IT IS FURTHER ORDERED that:
A. Respondent shall divest, absolutely and in good faith, within
six months from thedate the agreement containing consent order
is signed by respondent, all of its rights, title and interest
in the properties described below:
1 For each of the following counties or other local
jurisdictions, either the rights, title and interest
prior to the Acquisition of LTC or the rights, title
and interest prior to the Acquisition of Reliance
Group in all title plants serving such county or
local jurisdiction:
Washington, District of Columbia
Brevard County, Florida
Broward County, Florida
Clay County, Florida
Indian River County, Florida
Pasco County, Florida
St. Johns County, Florida
St. Lucie County, Florida
Ingham County, Michigan
Oakland County, MichiganWayne County, Michigan
St. Louis City & County, Missouri
2. Respondent shall also divest all user or access
agreements pertaining to each divested title plant.
At the acquirer's option at the time of purchase, and
at a commercially reasonable price, LTC shall
continue to provide computer and other services
previously provided for each divested title plant by
LTC or Reliance Group, for a period up to three years
from the date such title plant is divested, and shall
assist the buyer in transferring the computer and
other services to any other provider of such
services.
B. Respondent shall divest the properties specified in Paragraph
II. A. only to anacquirer or acquirers that receive the prior
approval of the Commission and only in a manner that receives
the prior approval of the Commission. The purpose of the
divestiture is to ensure the continued use of the divested
title plants as ongoing, viable title plants used in the
production and/or sale of title information, and to remedy the
lessening of competition resulting from the Acquisition as
alleged in the Commission's complaint.
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C. Pending divestiture of the properties as specified in
Paragraph II. A., respondent shall take such actions as are
necessary to maintain the viability and marketability of such
properties and to prevent the destruction, removal, wasting,
deterioration, or impairment of any of the properties. LTC
shall comply with the following requirements with respect to
all title plants serving the counties or other local
jurisdictions listed in Paragraph II. A. in which either LTC
or Reliance Group has any rights, title or interest, during
the period prior to the completion of the required divestiture
for each such county or other local jurisdiction:
1. LTC shall cause the title plants to be maintained,
including but not limited to updating the records
and/or indices contained in the title plants, to the
extent and in the manner maintained prior to the
Acquisition.
2. LTC shall cause to be maintained in good faith all
contracts or agreements for access to the title
plants subject to the terms, conditions and
stipulations of those contracts, and will refrain
from taking any action toward terminating those
contracts other than that which would be commercially
reasonable under the terms of such contracts or
agreements.
3. LTC shall cause access to the title plants to
continue to be provided to accessors whose contracts
or agreements for access to the title plants expire
by their terms prior to the completion of the
required divestiture, in good faith on terms,
conditions and stipulations identical to those set
forth in such contracts or agreements.
III.
IT IS FURTHER ORDERED that:
A. If LTC has not divested, absolutely and in good faith and with
the Commission'sprior approval, all of the properties
specified in Paragraph II. A. within six months from the date
the agreement containing consent order is signed by
respondent, the Commission may appoint a trustee to accomplish
the required divestitures. In the event that the Commission or
the Attorney General brings an action pursuant to ss. 5(l) of
the Federal Trade Commission Act, 15 U.S.C.ss.45(l), or any
other statute enforced by the Commission, LTC shall consent to
the appointment of a trustee in such action. Neither the
appointment of a trustee nor a decision not to appoint a
trustee under this Paragraph shall preclude the Commission or
the Attorney General from seeking civil penalties or any other
relief available to it, including a court-appointed trustee,
pursuant toss.5(l) of the Federal Trade Commission Act, or any
other statute enforced by the Commission, for any failure by
the respondent to comply with this order.
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B. If a trustee is appointed by the Commission or a court
pursuant to Paragraph III. A. of this order, respondent shall
consent to the following terms and conditions regarding the
trustee's powers, duties, authority, and responsibilities:
l. The Commission shall select the trustee, subject to
the consent of respondent, which consent shall not be
unreasonably withheld. The trustee shall be a person
with experience and expertise in acquisitions and
divestitures. If respondent has not opposed, in
writing, including the reasons for opposing, the
selection of any proposed trustee within ten (10)days
after notice by the staff of the Commission to
respondent of the identity of any proposed trustee,
respondent shall be deemed to have consented to the
selection of the proposed trustee.
2. Subject to the prior approval of the Commission, the
trustee shall have the exclusive power and authority
to accomplish the divestiture of the properties
specified in Paragraph II. A. that have not been
divested by LTC, including the authority, subject to
the approval of the Commission, with respect to any
of the listed counties or local jurisdictions as to
which divestiture has not been completed by LTC, to
determine whether to divest the rights, title and
interest prior to the Acquisition of LTC or the
rights, title and interest prior to the Acquisition
of Reliance Group in title plants serving such county
or local jurisdiction.
3. Within ten (10) days after appointment of the
trustee, respondent shall execute a trust agreement
that, subject to the prior approval of the Commission
and, in the case of a court-appointed trustee, of the
court, transfers to the trustee all rights and powers
necessary to permit the trustee to accomplish the
divestitures required by this order.
4. The trustee shall have twelve (12) months from the
date the Commission approves the trust agreement
described in Paragraph III. B. 3. to accomplish the
divestitures, which shall be subject to the prior
approval of the Commission. If, however, at the end
of the twelve-month period, the trustee has submitted
a plan of divestiture or believes that divestiture
can be accomplished within a reasonable time, the
divestiture period may beextended by the Commission,
or, in the case of a court-appointed trustee, by the
court; provided, however, the Commission may extend
this period only two (2) times.
5. The trustee shall have full and complete access to
the personnel, books, records and facilities related
to the properties specified in Paragraph II. A. that
have not been divested by LTC, and to any other
relevant information as the trustee may request.
Respondent shall develop such financial or
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other information as such trustee may request and
shall cooperate with the trustee. Respondent shall
take no action to interfere with or impede the
trustee's accomplishment of the divestiture. Any
delays in divestiture caused by respondent shall
extend the trustee's period for divestiture under
this Paragraph in an amount equal to the delay, as
determined by the Commission or, for a
court-appointed trustee, by the court.
6. The trustee shall use his or her best efforts to
negotiate expeditiously the most favorable price and
terms available in each contract that is submitted to
the Commission, subject to respondent's absolute and
unconditional obligation to divest at no minimum
price. The divestiture shall be made in the manner
and to the acquirer or acquirers as set out in
Paragraph II. of this order; provided, however, if
the trustee receives bona fide offers from more than
one acquiring entity, and if the Commission
determines to approve more than one such acquiring
entity, the trustee shall divest to the acquiring
entity or entities selected by respondent from among
those approved by the Commission.
7. The trustee shall serve, without bond or other
security, at the cost and expense of respondent, on
such reasonable and customary terms and conditions as
the Commission or a court may set. The trustee shall
have the authority to employ, at the cost and expense
of respondent, such consultants, accountants,
attorneys, investment bankers, business brokers,
appraisers, and other representatives and assistants
as are necessary to carry out the trustee's duties
and responsibilities. The trustee shall account for
all monies derived from the divestiture and all
expenses incurred. After approval by the Commission
and, in the case of a court-appointed trustee, by the
court, of the account of the trustee, including fees
for his or her services, all remaining monies shall
be paid at the direction of the respondent, and the
trustee's power shall be terminated. The
trustee'scompensation shall be based at least in
significant part on a commission arrangement
contingent on the trustee's completing divestiture of
the properties specified in Paragraph II. A. that
have not been divested by LTC.
8. Respondent shall indemnify the trustee and hold the
trustee harmless against any losses, claims, damages,
liabilities, or expenses arising out of, or in
connection with, the performance of the trustee's
duties, including all reasonable fees of counsel and
other expenses incurred in connection with the
preparation for, or defense of any claim, whether or
not resulting in any liability, except to the extent
that such liabilities, losses, damages, claims, or
expenses result from misfeasance, gross negligence,
willful or wanton acts, or bad faith by the trustee.
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9. If the trustee ceases to act or fails to act
diligently, a substitute trustee shall be appointed
in the same manner as provided in Paragraph III. A.
of this order.
10. The Commission or, in the case of a court-appointed
trustee, the court, may on its own initiative or at
the request of the trustee issue such additional
orders or directions as may be necessary or
appropriate to accomplish the divestiture required by
this order.
11. The trustee shall have no obligation or authority to
operate or maintain the properties specified in
Paragraph II. A. that have not been divested by LTC.
12. The trustee shall report in writing to respondent and
the Commission every sixty (60) days concerning the
trustee's efforts to accomplish divestiture.
IV.
IT IS FURTHER ORDERED that:
A. For a period of ten (10) years from the date this order
becomes final, respondent shall not, without providing advance
written notification to the Commission, directly or
indirectly, through subsidiaries, partnerships, or otherwise:
1. Acquire any stock, share capital, equity or other
interest in any concern, corporate or non-corporate,
that has any direct or indirect ownership interest in
a title plant serving any county or other local
jurisdiction specified in Paragraph II. A., where at
the time of the acquisition the respondent has a
direct or indirect ownership interest in any title
plant serving the same county or local jurisdiction;
or
2. Acquire any assets (other than in the ordinary course
of business) or ownership interest in a title plant
serving any county or other local jurisdiction
specified in Paragraph II. A., where at the time of
the acquisition the respondent has a direct or
indirect ownership interest in any title plant
serving the same county or local jurisdiction.
Notification is not required to be made pursuant to this
Paragraph IV. with respect to any acquisition by respondent of
a copy of title records or other information from a person or
entity which thereafter retains the original information in
its ownership and control, and where competition in the
ordinary course between the parties is not otherwise
restrained.
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B. Notification pursuant to this Paragraph shall be given on the
Notification andReport Form set forth in the Appendix to Part
803 of Title 16 of the Code of Federal Regulations as amended
(hereinafter referred to as "the Notification"), andshall be
prepared and transmitted in accordance with the requirements
of that part, except that no filing fee will be required for
any such notification, notification shall be filed with the
Secretary of the Commission, notification need not be made to
the United States Department of Justice, and notification is
required only of respondent and not of any other party to the
transaction. In addition to the information required to be
supplied on such Notification and Report Form pursuant to the
above-referenced regulation, the respondent shall submit the
following supplemental information in respondent's possession
or reasonably available to respondent:
1. The name of each county or local jurisdiction to
which the terms of Paragraph IV. A. 1. or 2. are
applicable;
2. A description of the title plant assets or interests
that are being acquired; and
3. With respect to each title plant serving each county
or local jurisdiction to which the terms of Paragraph
IV. A. 1. or 2. are applicable (including title
plants in which the respondent has a direct or
indirect ownership interest as well as other title
plants known to the respondent) the names of all
persons or entities who hold any direct or indirect
ownership interest in the title plant and the
percentage interest held by each; the time period
covered by each category of title records contained
in the title plant; whether therespective categories
of title records are regularly being updated; the
indexing system or systems used with respect to each
category of title records; and the names of all
persons, including but not limited to title insurers
or agents, who have access to the title plant.
C. Respondent shall provide the Notification to the Commission at
least thirty daysprior to consummating the transaction
(hereinafter referred to as the "first waitingperiod"). If,
within the first waiting period, representatives of the
Commission make a written request for additional information
or documentary material (within the meaning of 16
C.F.R.ss.803.20), respondent shall not consummate the
transaction until twenty days after submitting such additional
information or documentary material. Early termination of the
waiting periods in this paragraph may be requested and, where
appropriate, granted by letter from the Bureau of Competition.
Provided, however, that prior notification shall not be
required by this paragraph for a transaction for which
notification is required to be made, and has been made,
pursuant to Section 7A of the Clayton Act, 15 U.S.C.ss.18a.
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<PAGE>
V.
IT IS FURTHER ORDERED that:
A. Within thirty (30) days after the date this order becomes
final and every thirty (30) days thereafter until respondent
has fully complied with the provisions of Paragraphs II. and
III. of this order, respondent shall submit to the Commission
a verified written report setting forth in detail the manner
and form in which it intends to comply, is complying, and has
complied with Paragraphs II. and III. of this order.
Respondent shall include in its compliance reports, among
other things that are required from time to time, a full
description of the efforts being made to comply with
Paragraphs II. and III. of the order, including a description
of all substantive contacts or negotiations for the
divestiture and the identity of all parties contacted.
Respondent shall include in its compliance reports copies of
all written communications to and from such parties, all
internal memoranda, and all reports and recommendations
concerning divestiture.
B. One year (1) from the date this order becomes final, annually
for the next nine (9)years on the anniversary of the date this
order becomes final, and at other times as the Commission may
require, respondent shall file a verified written report with
the Commission setting forth in detail the manner and form in
which it has complied and is complying with Paragraph IV. of
this order.
VI.
IT IS FURTHER ORDERED that respondent shall notify the Commission at
leastthirty (30) days prior to any proposed change in the corporate respondent
such as dissolution, assignment, sale resulting in the emergence of a successor
corporation, or the creation or dissolution of subsidiaries or any other change
in the corporation that may affect compliance obligations arising out of the
order.
VII.
IT IS FURTHER ORDERED that, for the purpose of determining or
securingcompliance with this order, upon written request, respondent shall
permit any duly authorized representative of the Commission:
A. Access, during office hours and in the presence of counsel, to
inspect and copy allbooks, ledgers, accounts, correspondence,
memoranda and other records and documents in the possession or
under the control of respondent relating to any matters
contained in this order; and
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<PAGE>
B. Upon five days' notice to respondent and without restraint or
interference from it,to interview officers, directors, or
employees of respondent.
Signed this 6th day of February , 1998.
LAWYERS TITLE CORPORATION, A CORPORATION
By: /s/ Charles H. Foster, Jr.
---------------------------
Chief Executive Officer
/s/ Naila Townes Ahmed
---------------------------
Counsel for Lawyers Title Corporation
FEDERAL TRADE COMMISSION
By: /s/ Patrick J. Roach
---------------------------
Attorney
Bureau of Competition
Approved:
/s/ Michael E. Antalics
- -------------------------
Assistant Director
Bureau of Competition
/s/ Willard K. Tom
- -------------------------
Acting Deputy Director
Bureau of Competition
/s/ Willard K. Tom
- -------------------------
for Director
Bureau of Competition
-11-
Exhibit 10.30
LandAmerica Financial Group, Inc.
Outside Directors Deferral Plan
Effective
April 1, 1998
<PAGE>
ARTICLE I
Definition of Terms
<TABLE>
<CAPTION>
Page
----
<S> <C>
1.1 Accounts....................................................................................... 1
1.2 Administrator.................................................................................. 1
1.3 Affiliate...................................................................................... 1
1.4 Beneficiary.................................................................................... 1
1.5 Benefit Commencement Date...................................................................... 1
1.6 Board.......................................................................................... 1
1.7 Code........................................................................................... 1
1.8 Compensation................................................................................... 2
1.9 Corporation.................................................................................... 2
1.10 Death Benefit.................................................................................. 2
1.11 Deferral Amount................................................................................ 2
1.12 Deferral Benefit............................................................................. 2
1.13 Deferral Contributions......................................................................... 2
1.14 Deferral Year.................................................................................. 2
1.15 Deferral Election.............................................................................. 2
1.16 Deferred Cash Account.......................................................................... 2
1.17 Deferred Stock Unit............................................................................ 2
1.18 Deferred Stock Unit Account.................................................................... 2
1.19 Director....................................................................................... 2
1.20 Effective Date................................................................................. 3
1.21 Eligible Director.............................................................................. 3
1.22 Former Plan.................................................................................... 3
1.23 Participant.................................................................................... 3
1.24 Plan........................................................................................... 3
1.25 Plan Year...................................................................................... 3
1.26 Rate of Return................................................................................. 3
1.27 Short Plan Year................................................................................ 3
ARTICLE II
Eligibility and Participation
2.1 Eligibility.................................................................................... 3
2.2 Notice and Election Regarding Active Participation............................................. 3
2.3 Commencement of Active Participation........................................................... 4
2.4 Length of Participation........................................................................ 4
ARTICLE III
Determination of Deferral Benefits
3.1 Deferral Benefit............................................................................... 4
3.2 Transition Credits............................................................................. 4
3.3 Deferral Election.............................................................................. 4
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<PAGE>
ARTICLE III
Determination of Deferral Benefits
Page
3.4 Subtractions from Deferred Cash Account and Deferred Stock Unit Account........................ 5
3.5 Crediting of Interest to Deferred Cash Account................................................. 5
3.6 Equitable Adjustment in Case of Error or Omission.............................................. 5
3.7 Statement of Benefits.......................................................................... 5
ARTICLE IV
Accounts and Investments
4.1 Accounts....................................................................................... 6
4.2 Deferred Stock Units........................................................................... 6
4.3 Hypothetical Nature of Accounts and Investments................................................ 7
ARTICLE V
Vesting
5.1 Vesting........................................................................................ 7
ARTICLE VI
Death Benefits
6.1 Pre-Benefit Commencement Date Death Benefit.................................................... 7
6.2 Post-Benefit Commencement Date Death Benefit................................................... 7
ARTICLE VII
Payment of Benefits
7.1 Payment of Deferral Benefit.................................................................... 7
7.2 Payment of Death Benefit....................................................................... 8
7.3 Form of Payment of Deferral Benefit............................................................ 8
7.4 Benefit Determination and Payment Procedure.................................................... 8
7.5 Payments to Minors and Incompetents............................................................ 8
7.6 Distribution of Benefit When Distributee Cannot Be Located..................................... 8
ARTICLE VIII
Beneficiary Designation
8.1 Beneficiary Designation........................................................................ 8
ARTICLE IX
Withdrawals
9.1 No Withdrawals Permitted....................................................................... 9
-ii-
<PAGE>
10.1 Funding........................................................................................ 9
ARTICLE XI
Change of Control
11.1 Change of Control.............................................................................. 9
11.2 Effect of Change of Control.................................................................... 10
ARTICLE XII
Plan Administrator
12.1 Appointment of Administrator................................................................... 10
12.2 Duties and Responsibilities of Plan Administrator.............................................. 10
ARTICLE XIII
Amendment or Termination of Plan
13.1 Amendment or Termination of Plan............................................................... 11
ARTICLE XIV
Miscellaneous
14.1 Non-assignability.............................................................................. 11
14.2 Notices and Elections.......................................................................... 11
14.3 Delegation of Authority........................................................................ 11
14.4 Service of Process............................................................................. 11
14.5 Governing Law.................................................................................. 11
14.6 Binding Effect................................................................................. 11
14.7 Severability................................................................................... 11
14.8 Gender and Number.............................................................................. 12
14.9 Titles and Captions............................................................................ 12
</TABLE>
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<PAGE>
LandAmerica Financial Group, Inc.
Outside Directors Deferral Plan
Effective January 1, 1995, the Board of Directors of Lawyers Title
Corporation adopted the Outside Directors Deferral Plan, under which
non-employee directors of Lawyers Title Corporation had the opportunity to defer
receipt of certain compensation until retirement or departure from the Board.
Effective February 27, 1998, Lawyers Title Corporation changed its name to
LandAmerica Financial Group, Inc. (the "Corporation").
The Board of Directors is of the opinion that it is in the best
interests of the Corporation to allow non-employee directors of the Corporation
to continue to have the opportunity to defer receipt of certain compensation
until retirement or departure from the Board provided that the deferred amounts
are aligned with the interests of the Corporation by being tied to the
performance of the Corporation's common stock. Therefore, the Board of Directors
believes it to be in the best interest of the Corporation to amend the Lawyers
Title Corporation Outside Directors Deferral Plan for such purpose.
Pursuant to action taken by the Board of Directors, the following
LandAmerica Financial Group, Inc. Outside Directors Deferral Plan (the "Plan")
is hereby adopted.
ARTICLE I
Definition of Terms
The following words and terms as used in this Plan shall have the
meaning set forth below, unless a different meaning is clearly required by the
context:
1.1 "Account": A bookkeeping account established for a Participant
under Article IV hereof.
1.2 "Administrator": The Compensation Committee of the Board is
the Plan Administrator unless responsibility is delegated as provided for in
Article XII hereof.
1.3 "Affiliate": Any subsidiary, parent, affiliate, or other
related business entity to the Corporation.
1.4 "Beneficiary": The person or persons designated by a
Participant or otherwise entitled pursuant to Section 8.1 to receive benefits
under the Plan attributable to such Participant after the death of such
Participant.
1.5 "Benefit Commencement Date": The date irrevocably elected by
the Participant pursuant to Section 3.3. The Benefit Commencement Date shall be
January 1 following the Participant's having attained age 55, 60 or 65. The same
Benefit Commencement Date shall be required for all Deferral Contributions made
and Deferral Benefits attributable to a Deferral Year. 1.6 "Board": The present
and any succeeding Board of Directors of the Corporation, unless such term is
used with respect to a particular Affiliate and its Directors, in which event it
shall mean the present and any succeeding Board of Directors of that Affiliate.
1.7 "Code": The Internal Revenue Code of 1986, as the same may be
amended from time to time.
<PAGE>
1.8 "Compensation": Fees payable to a Participant for service as a
member of the Board, including (i) annual retainer fee ("Retainer") and (ii)
meeting or committee fees (collectively referred to as "Additional Fees") paid
by the Corporation to an Eligible Director, but excluding any such compensation
deferred from a prior period, expense reimbursement and allowances and benefits
not normally paid in cash to the Participant.
1.9 "Corporation": LandAmerica Financial Group, Inc., or any
successor thereto.
1.10 "Death Benefit": The benefit with respect to a Participant due
a Participant's Beneficiary, determined in accordance with Article VI hereof.
1.11 "Deferral Amount": With respect to each Plan Year, the sum of
the Deferral Contributions of a Participant with respect to his Retainer and/or
his Additional Fees to be paid during the Plan Year.
1.12 "Deferral Benefit": The balance in a Participant's Deferred
Cash Account and Deferred Stock Unit Account.
1.13 "Deferral Contributions": That portion of a Participant's
Compensation which is deferred under the Plan or which has been deferred under
the Former Plan.
1.14 "Deferral Year": The Plan Year with respect to which a
Deferral Contribution is made. For purposes hereof, a Deferral Contribution is
considered made with respect to the Plan Year in which the amount would
otherwise have been paid to the Participant.
1.15 "Deferral Election": An irrevocable election of a Deferral
Amount in writing executed by the Eligible Director or Participant and timely
filed with the Administrator.
1.16 "Deferred Cash Account": An unfunded, bookkeeping account
maintained on the books of the Corporation for a Participant which reflects his
interest in amounts attributable to his Deferred Contributions under the Former
Plan. The Deferred Cash Account of a Participant consists of his Deferral
Contributions made under the Former Plan with respect to Compensation earned
after December 31, 1994 and before April 1, 1998. Separate subdivisions of the
Deferred Cash Account shall continue to be maintained to reflect Deferral
Contributions made and Deferral Benefits attributable with respect to each
Deferral Year and within each Deferral Year, the Deferral Contributions and
Deferral Benefits attributable to Deferral Contributions of Retainer and
Deferral Contributions of Additional Fees.
1.17 "Deferred Stock Unit": A hypothetical share of the
Corporation's common stock.
1.18 "Deferred Stock Unit Account": An unfunded, bookkeeping
account maintained on the books of the Corporation for a Participant which
reflects his interest in amounts attributable to his Deferred Contributions
under the Plan. The Deferred Stock Unit Account of a Participant consists of his
Deferral Contributions made under the Plan with respect to Compensation earned
after April 1, 1998. Separate subdivisions of the Deferred Stock Unit Account
shall be maintained to reflect Deferral Contributions made and Deferral Benefits
attributable with respect to each Deferral Year and within each Deferral Year,
the Deferral Contributions and Deferral Benefits attributable to Deferral
Contributions of Retainer and Deferral Contributions of Additional Fees.
1.19 "Director": An individual who serves as a member of the Board.
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<PAGE>
1.20 "Effective Date": The Effective Date of the Plan is April 1,
1998.
1.21 "Eligible Director": A Director who is not an employee of the
Corporation and who has not reached the age of 65 before the Deferral Year.
1.22 "Former Plan": The Lawyers Title Corporation Outside Directors
Deferral Plan effective January 1, 1995.
1.23 "Participant": An Eligible Director who elects to participate
in the Plan, and further differentiated as follows:
(i) "Active Participant": A Participant who has an
election to make Deferral Contributions to the Plan in effect at the
time in question.
(ii) "Inactive Participant": A Participant who does not
have an election to make Deferral Contributions to the Plan in effect
at the time in question.
1.24 "Plan": This document, as contained herein or duly amended,
which shall be known as the "LandAmerica Financial Group, Inc. Outside Directors
Deferral Plan".
1.25 "Plan Year": The calendar year or any Short Plan Year.
1.26 "Rate of Return": Nine percent (9%) for the 1995 through 1999
Deferral Years, and nine percent (9%) for Deferral Years after 1999 until, if
ever, increased by the Compensation Committee.
1.27 "Short Plan Year": The remaining portion of the calendar year
after the Effective Date of this Plan.
ARTICLE II
Eligibility and Participation
2.1 Eligibility. Each Eligible Director shall be eligible to
participate in the Plan and to defer Compensation hereunder for such Plan Year.
2.2 Notice and Election Regarding Active Participation.
(a) The Administrator shall notify each Eligible Director within a
reasonable period of time prior to the beginning of each Plan Year.
(b) In order to become an Active Participant and to make Deferral
Contributions with respect to a Plan Year, an Eligible Director must file with
the Administrator a Deferral Election, as provided in Section 3.3 which is
effective as of the first day of the Plan Year, such election must be filed by
the date established by the Administrator, which date shall be no later than the
December 31 preceding such Plan Year or the last day before the commencement of
a Short Plan Year, whichever is applicable.
(c) By executing and filing such election with the Administrator,
an Eligible Director consents and agrees to the following:
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<PAGE>
(i) To execute such applications and take such physical
examinations and to supply truthfully and completely such information
as may be requested by any health questionnaire provided by the
Administrator;
(ii) To be bound by all terms and conditions of the Former
Plan, the Plan and all amendments thereto.
2.3 Commencement of Active Participation. An Eligible Director
shall become an Active Participant with respect to a Plan Year only if he is
expected to have Compensation during such Plan Year, and he timely files and has
in effect a Deferral Election for such Plan Year.
2.4 Length of Participation. An individual who is or becomes a
Participant shall be or remain an Active Participant as long as he has a
Deferral Election in effect; and he shall be or remain an Inactive Participant
as long as he is entitled to future benefits under the terms of the Plan and is
not considered an Active Participant.
ARTICLE III
Determination of Deferral
3.1 Deferral Benefit. For purposes hereof, a Participant's
Deferral Benefit shall be the balance in his Deferred Cash Account and his
Deferred Stock Unit Account at the time in question.
3.2 Transition Credits. Each Participant who has a balance
standing to his credit in the Former Plan as of April 1, 1998, shall be
permitted a one-time election, on or before April 1, 1998, to convert all or a
portion of the balance standing to his credit in the Former Plan to Deferred
Stock Units as of April 1, 1998. A Participant who elects to convert all or a
portion of his Deferral Account (as defined in the Former Plan) in the Former
Plan to Deferred Stock Units shall be credited with the number of Deferred Stock
Units determined by dividing the portion of his Deferred Cash Account under the
Former Plan on April 1, 1998 for which such election is made, by the Closing
Price of the common stock of the Corporation on the date of the Participant's
election. If the formula produces a fractional Deferred Stock Unit, then the
fractional Deferred Stock shall be rounded off to the nearest thousandth and
credited to the Participant. Once a Participant has made an election under this
Section 3.2 to convert some or all of his Deferred Cash Account to Deferred
Stock Units of the Corporation, the Corporation's rights and obligations, if
any, with respect to the Deferred Stock Units will be governed by this Plan.
3.3 Deferral Election.
(a) Subject to the restrictions and conditions hereinafter
provided, a Participant may irrevocably elect, as a Deferral Contribution with
respect to a Plan Year, to receive an amount of his Compensation which is
specified by his Deferral Election for such Plan Year in the form of Deferred
Stock Units. Any such election must be filed with the Administrator at the time
required under Section 2.2(b).
(b) The following conditions apply:
(i) The maximum Deferral Contribution of Retainer with
respect to any Participant for a Plan Year shall be one hundred percent
(100%) of his Retainer for such Plan Year and such election shall be
made in whole dollar amounts. A Participant who elects to receive his
Retainer in Deferred Stock Units shall have credited to his Deferred
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<PAGE>
Stock Unit Account as of the first day of each calendar quarter the
number of Deferred Stock Units determined by dividing that portion of
his accrued, deferred Retainer for the quarter (determined by dividing
the amount of such Retainer previously selected by the Participant to
be applied to the purchase of Deferred Stock Units by four) by the
Closing Price as of the first day of such calendar quarter.
(ii) The maximum Deferral Contribution of Additional Fees
with respect to any Participant for a Plan Year shall be one hundred
percent (100%) of his Additional Fees for such Plan Year and such
election shall be made in twenty-five percent (25%) increments. A
Participant who elects to receive his Additional Fees in Deferred Stock
Units shall have credited to his Deferred Stock Unit Account as of the
day on which the Additional Fees are accrued the number of Deferred
Stock Units determined by multiplying his accrued Additional Fees on
said day by the percentage of such Additional Fees previously selected
by the Participant to be applied to the purchase of Deferred Stock
Units, and dividing the product thereof by the Closing Price as of the
day on which the Additional Fees are accrued.
(iii) A Participant who elects to defer one hundred percent
(100%) of his Compensation shall receive additional Deferred Stock
Units equal to twenty percent (20%) of said Participant's Compensation
for the Plan Year. Such Deferred Stock Units shall be credited to the
Participant in addition to the Deferred Stock Units received as a
result of the election to defer the Retainer and Additional Fees in the
manner provided by subsections (i) and (ii) above.
(iv) A separate Deferral Election must be filed for each
Plan Year.
(v) Each Deferral Election shall be made on a form
provided by the Administrator and shall specify the Deferral Amount and
source of deferrals and such additional information as the
Administrator may require. (vi) A Deferral Election must specify the
period of payment. A Participant may elect to receive a lump sum
payment or installment payments over periods of five, ten or fifteen
years beginning after age 55, 60 or 65.
3.4 Subtractions from Deferred Cash Account and Deferred Stock
Unit Account. All distributions from a Participant's Deferred Cash Account and
Deferred Stock Unit Account shall be subtracted when such distributions are
made.
3.5 Crediting of Interest to Deferred Cash Account. There shall be
credited to each Participant's Deferred Cash Account an amount representing
interest on the balance of such account. Under the Former Plan, the interest was
credited as of the first day of the Deferral Year. Under this Plan, interest
shall be credited as earned. Such interest shall be based on the applicable Rate
of Return for the Deferral Year.
3.6 Equitable Adjustment in Case of Error or Omission. If an error
or omission is discovered in the Deferred Cash Account and Deferred Stock Unit
Account of a Participant, the Administrator shall make such equitable adjustment
as the Administrator deems appropriate.
3.7 Statement of Benefits. Within a reasonable time after the end
of the Plan Year and at the date a Participant's Deferral Benefit or Death
Benefit becomes payable under the Plan, the Administrator shall provide to each
Participant (or, if deceased, to his Beneficiary) a statement of the benefit
under the Plan.
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<PAGE>
ARTICLE IV
Accounts and Investments
4.1 Accounts. A separate Account under the Plan shall be
established for each Participant. Such Account shall be (a) credited with the
amounts credited in accordance with Sections 3.2 and 3.3, (b) credited (or
charged, as the case may be) with the investment results determined in
accordance with Sections 4.2 and 4.3, and (c) charged with the amounts paid by
the Plan to or on behalf of the Participant in accordance with Article VII. With
each Participant's Account, separate subaccounts (including, as necessary, a
Deferred Stock Unit Account and a Deferred Cash Account) shall be maintained to
the extent that the Board determines them necessary or useful in the
administration of the Plan.
4.2 Deferred Stock Units. Except as provided below, a
Participant's Deferred Stock Unit Account shall be treated as if it were
invested in Deferred Stock Units that are equivalent in value to the fair market
value of the shares of the Corporation's common stock in accordance with the
following rules:
(a) Before the Benefit Commencement Date, the number of Deferred
Stock Units credited to a Participant's Deferred Stock Unit Account shall be
increased on each date on which a dividend is paid on the Corporation's common
stock. The number of additional Deferred Stock Units credited to a Participant's
Deferred Stock Unit Account as a result of such increase shall be determined by
(i) multiplying the total number of Deferred Stock Units (with fractional
Deferred Stock Units rounded off to the nearest thousandth) credited to the
Participant's Deferred Stock Unit Account immediately before such increase by
the amount of the dividend paid per share of the Corporation's Common Stock on
the dividend payment date, and (ii) dividing the product so determined by the
Closing Price on the dividend payment date.
(b) The dollar value of the Deferred Stock Units credited to a
Participant's Deferred Stock Unit Account on any date shall be determined by
multiplying the number of Deferred Stock Units (including fractional Deferred
Stock Units) credited to the Participant's Deferred Stock Unit Account by the
Closing Price on that date.
(c) In the event of a transaction or event described in this
subsection (c), the number of Deferred Stock Units credited to a Participant's
Deferred Stock Unit Account shall be adjusted in such manner as the Board, in
its sole discretion, deems equitable. A transaction or event is described in
this subsection (c) if (i) it is a dividend (other than regular quarterly
dividends) or other distribution (whether in the form of cash, shares, other
securities, or other property), extraordinary cash dividend, recapitalization,
stock split, reverse stock split, reorganization, merger, consolidation,
split-up, spin-off, repurchase, or exchange of shares or other securities, the
issuance or exercisability of stock purchase rights, the issuance of warrants or
other rights to purchase shares or other securities, or other similar corporate
transaction or event and (ii) the Board determines that such transaction or
event affects the shares of the Corporation's Common Stock, such that an
adjustment pursuant to this paragraph (c) is appropriate to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan.
(d) A Participant who elects to receive distribution of his
Accounts in annual installments will not have his or her Deferred Stock Unit
Account credited with Deferred Stock Units on or after the Benefit Commencement
Date.
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<PAGE>
(e) On the Benefit Commencement Date, the Deferred Stock Unit
Account of a Participant who has elected to receive his Deferral Benefit in
annual installments shall be converted to a Deferred Cash Account which shall
accrue annual interest at the Rate of Return.
4.3 Hypothetical Nature of Accounts and Investments. Each Account
established under this Article IV shall be maintained for bookkeeping purposes
only. Neither the Plan nor any of the Accounts established under the Plan shall
hold any actual funds or assets. The Deferred Stock Units established hereunder
shall be used solely to determine the amounts to be paid hereunder, shall not
represent an equity security of the Corporation, shall not be convertible into
or otherwise entitle a Participant to acquire an equity security of the
Corporation and shall not carry any voting or dividend rights.
ARTICLE V
Vesting
5.1 Vesting. A Participant's Deferred Cash Account and Deferred
Stock Unit Account shall be fully vested and non-forfeitable at all times.
ARTICLE VI
Death Benefits
6.1 Pre-Benefit Commencement Date Death Benefit. In the event that
a Participant dies prior to his Benefit Commencement Date, then the
Participant's Deferred Stock Unit Account shall be converted to a Deferred Cash
Account as of the first of January following the Participant's date of death,
which Deferred Cash Account shall accrue annual interest thereafter at the Rate
of Return to the extent not paid out in a lump sum pursuant to the Participant's
election form. The Beneficiary of such Participant shall be entitled to receive
as a Death Benefit an amount equal to the Deferral Benefit as of the Benefit
Commencement Date that the Participant would have received had the Participant
lived to received the full Deferral Benefit. This Death Benefit shall be paid
pursuant to the Participant's election form except that the payment shall be
made, or begin, on the first of January after the Participant's date of death.
6.2 Post-Benefit Commencement Date Death Benefit. In the event
that a Participant dies after his Benefit Commencement Date, then the
Beneficiary of such participant shall be entitled to receive as a Death Benefit
a continuation of the payment of the Deferral Benefit in the same manner and in
the same amount that the Participant would have received had the Participant
lived to receive the Deferral Benefit.
ARTICLE VII
Payment of Benefits
7.1 Payment of Deferral Benefit. A Participant's Deferral Benefit,
if any, shall become payable to the Participant as of the Benefit Commencement
Date specified in his Deferral Election or as soon thereafter as is
administratively practical. If the Participant has elected to receive the
Deferral Benefit in installments, each of the Participant's annual installment
payments shall be comprised of accrued interest for the year, if any, and that
portion of the Participant's Deferral Benefit equal to the balance in the
Participant's Deferred Cash Account divided by the number of remaining annual
installment payments to be made to the Participant.
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<PAGE>
7.2 Payment of Death Benefit. A Participant's pre-commencement
Death Benefit shall be payable to his Beneficiary as set forth in Article VI. A
Participant's post-commencement Death Benefit shall be paid in installments
payable annually over the period irrevocably elected by the Participant pursuant
to his Deferral Election.
7.3 Form of Payment of Deferral Benefit. A Participant shall be
paid his Deferral Benefit beginning at the Benefit Commencement Date in a lump
sum or in periodic installment payments payable annually over a period of five,
ten, or fifteen years as irrevocably elected by the Participant pursuant to
Section 3.3.
7.4 Benefit Determination and Payment Procedure. The Administrator
shall make all determinations concerning eligibility for benefits under the
Plan, the time or terms of payment, and the form or manner of payment to the
Participant or the Participant's Beneficiary, in the event of the death of the
Participant. The Administrator shall promptly notify the Corporation of each
such determination that benefit payments are due and provide to the Corporation
all other information necessary to allow the Corporation to carry out said
determination, whereupon the Corporation shall pay such benefits in accordance
with the Administrator's determination.
7.5 Payments to Minors and Incompetents. If a Participant or
Beneficiary entitled to receive any benefits hereunder is a minor or is adjudged
to be legally incapable of giving valid receipt and discharge for such benefits,
or is deemed so by the Administrator, benefits will be paid to such person as
the Administrator may designate for the benefit of such Participant or
Beneficiary. Such payments shall be considered a payment to such Participant or
Beneficiary and shall, to the extent made, be deemed a complete discharge of any
liability for such payments under the Plan.
7.6 Distribution of Benefit When Distributee Cannot Be Located.
The Administrator shall make all reasonable attempts to determine the identity
and/or whereabouts of a Participant or a Participant's Beneficiary entitled to
benefits under the Plan, including the mailing by certified mail of a notice to
the last known address shown on the Corporation's or the Administrator's
records. If the Administrator is unable to locate such a person entitled to
benefits hereunder, or if there has been no claim made for such benefits, the
Corporation shall continue to hold the benefit due such person, subject to any
applicable statute of escheats.
ARTICLE VIII
Beneficiary Designation
8.1 Beneficiary Designation.
(a) A Participant may designate a Beneficiary as part of his
Deferral Election. Any Beneficiary designation made hereunder shall be effective
only if properly signed and dated by the Participant and delivered to the
Administrator prior to the time of the Participant's death. Any Beneficiary
designation hereunder shall remain effective until changed or revoked hereunder.
(b) A Beneficiary designation may be changed by the Participant at
any time, or from time to time, by filing a new designation in writing with the
Administrator.
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<PAGE>
(c) If the Participant dies without having designated a
Beneficiary, or if the Beneficiary so designated has predeceased him, then his
estate shall be deemed to be his Beneficiary.
(d) If a Beneficiary of the Participant shall survive the
Participant but shall die before the Participant's entire benefit under the Plan
has been distributed, then the unpaid balance thereof shall be distributed to
any other beneficiary named by the deceased Beneficiary to receive his interest
or, if none, to the estate of the deceased Beneficiary.
ARTICLE IX
Withdrawals
9.1 No Withdrawals Permitted. No withdrawals or other
distributions shall be permitted from the Deferred Cash Account and Deferred
Stock Unit Account except as provided in Article VII.
ARTICLE X
Funding
10.1 Funding.
(a) All Plan Participants and Beneficiaries are general unsecured
creditors of the Corporation with respect to the benefits due hereunder and the
Plan constitutes a mere promise by the Corporation to make benefit payments in
the future. It is the intention of the Corporation that the Plan be considered
unfunded for tax purposes.
(b) The Corporation may, but is not required to, purchase life
insurance in amounts sufficient to provide some or all of the benefits provided
under this Plan or may otherwise segregate assets for such purpose.
(c) The Corporation may, but is not required to, establish a
grantor trust which may be used to hold assets of the Corporation which are
maintained as reserves against the Corporation's unfunded, unsecured obligations
hereunder. Such reserves shall at all times be subject to the claims of the
Corporation's creditors. To the extent such trust or other vehicle is
established, and assets contributed, for the purpose of fulfilling the
Corporation's obligation hereunder, then such obligation of the Corporation
shall be reduced to the extent such assets are utilized to meet its obligations
hereunder. Any such trust and the assets held thereunder are intended to conform
in substance to the terms of the model trust described in Revenue Procedure
92-64.
ARTICLE XI
Change of Control
11.1 Change of Control.
A "Change of Control" shall mean and shall be deemed to have
taken place if: (i) any individual, entity or group (within the meaning of
Sections 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the
"Exchange Act")) becomes the beneficial owner of shares of the Company having 20
percent or more of the total number of votes that may be cast for the election
of directors of the Company, other than (x) as a result of any acquisition
directly from the Company, or (y) as a result of any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company or its
subsidiaries; or (ii) a change in the composition of
-9-
<PAGE>
the Board such that the individuals who, as of the date hereof, constitute the
Board (the Board as of such date shall be hereinafter referred to as the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, for purposes of this Section, that any individual who
becomes a member of the Board subsequent to the date hereof whose election, or
nomination for election by the Company's shareholders, was approved by a vote of
at least a majority of those individuals who are members of the Board and who
were also members of the Incumbent Board (or deemed to be such pursuant to this
proviso) shall be considered as though such individual were a member of the
Incumbent Board; but, provided further, that any such individual whose initial
assumption of office occurs as a result of either an actual or threatened
election contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) or other actual or threatened solicitation
of proxies or consents by or on behalf of a person other than the Board shall
not be so considered as a member of the Incumbent Board.
11.2 Effect of Change of Control.
Notwithstanding any other provision in any other Article of this Plan
to the contrary, (i) the value of all amounts deferred by a Participant which
have not yet been credited to the Participant's Account and (ii) the value of
such Participant's Account shall be paid to such Participant in each case in a
lump-sum cash payment on the occurrence of a Change of Control or as soon
thereafter as practicable, but in no event later than five days after the Change
of Control. The amount of cash credited to each Participant's Account prior to
determining the amount of cash to be paid from the Account shall be determined
by the Board (which, for this purpose, shall be comprised of employee members of
the Board prior to the Change of Control) so as to reflect fairly and equitably
appropriate interest and dividends and circumstances as the Board deems
appropriate, including, without limitation, the recent price of shares of the
Corporation's common stock. For purposes of payments under this Article XI, the
value of a Deferred Stock Unit shall be computed as the greater of (1) the
Closing Price on or nearest the date on which the Change of Control is deemed to
occur, or (2) the highest per share price for shares of the Corporation's common
stock actually paid in connection with the Change of Control.
ARTICLE XII
Plan Administrator
12.1 Appointment of Administrator.
(a) The Compensation Committee may appoint one or more persons to
serve as the Plan Administrator (the "Administrator") for the purpose of
administering the Plan. In the event more than one person is appointed, the
persons shall form a committee for the purpose of functioning as the
Administrator of the Plan. The person or committeemen serving as Administrator
shall serve for indefinite terms at the pleasure of the Compensation Committee,
and may, by thirty (30) days prior written notice to the Compensation Committee,
terminate such appointment.
12.2 Duties and Responsibilities of Plan Administrator.
(a) The Administrator shall maintain and retain necessary records
regarding its administration of the Plan.
(b) The Administrator is empowered to settle claims against the
Plan and to make such equitable adjustments in a Participant's or Beneficiary's
rights or entitlements under the Plan as it deems appropriate in the event an
error or omission is discovered or claimed in the operation or administration of
the Plan.
-10-
<PAGE>
(c) The Administrator may construe the Plan, correct defects,
supply omissions or reconcile inconsistencies to the extent necessary to
effectuate the Plan, and such action shall be conclusive.
ARTICLE XIII
Amendment or Termination of Plan
13.1 Amendment or Termination of the Plan. The Plan may be
terminated or amended at any time by the Board, effective as of any date
specified. Any such action taken by the Board shall be evidenced by a resolution
and shall be communicated to Participants and Beneficiaries prior to the
effective date thereof. No amendment or termination shall decrease a
Participant's Deferral Benefit accrued prior to the effective date of the
amendment or termination. The Board reserves the right to unilaterally shorten
the deferral period of any Participant hereunder in its sole discretion if, in
its sole discretion, it determines that to do so will be fair and equitable to
the Participant.
ARTICLE XIV
Miscellaneous
14.1 Non-assignability. The interests of each Participant under the
Plan are not subject to claims of the Participant's creditors; and neither the
Participant nor his Beneficiary shall have any right to sell, assign, transfer
or otherwise convey the right to receive any payments hereunder or any interest
under the Plan, which payments and interest are expressly declared to be
non-assignable and non-transferable.
14.2 Notices and Elections. All notices required to be given in
writing and all elections required to be made in writing under any provision of
the Plan shall be invalid unless made on such forms as may be provided or
approved by the Administrator and, in the case of a notice or election by a
Participant or Beneficiary, unless executed by the Participant or Beneficiary
giving such notice or making such election. Notices and elections shall be
deemed given or made when received by any member of the committee that serves as
Administrator.
14.3 Delegation of Authority. Whenever the Corporation is permitted
or required to perform any act, such act may be performed by its Chief Executive
Officer or President or other person duly authorized by its Chief Executive
Officer or President or its Board.
14.4 Service of Process. The Administrator shall be the agent for
service of process on the Plan.
14.5 Governing Law. The Plan shall be construed, enforced and
administered in accordance with the laws of the Commonwealth of Virginia.
14.6 Binding Effect. The Plan shall be binding upon and inure to
the benefit of the Corporation, its successors and assigns, and the Participant
and his heirs, executors, administrators and legal representatives.
14.7 Severability. If any provision of the Plan should for any
reason be declared invalid or unenforceable by a court of competent
jurisdiction, the remaining provisions shall nevertheless remain in full force
and effect.
-11-
<PAGE>
14.8 Gender and Number. In the construction of the Plan, the
masculine shall include the feminine or neuter and the singular shall include
the plural and vice-versa in all cases where such meanings would be appropriate.
14.9 Titles and Captions. Titles and captions and headings herein
have been inserted for convenience of reference only and are to be ignored in
any construction of the provisions hereof.
-12-
Exhibit 11
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
Statement Re: Computation of Earnings Per Share
The information required by this Exhibit is contained in Note 9 of the
Consolidated Financial Statements of LandAmerica Financial Group, Inc. and its
subsidiaries as of December 31, 1997 and 1996 and for the three years in the
period ended December 31, 1997 on page F-21 of this report.
Exhibit 21
LIST OF SUBSIDIARIES OF LANDAMERICA FINANCIAL GROUP, INC.
(FORMERLY LAWYERS TITLE CORPORATION)
AS OF FEBRUARY 26, 1998
Subsidiaries State of Incorporation
- ------------ ----------------------
Global Corporate Services, Inc. Michigan
Lawyers Title Environmental Insurance Service Agency, Inc. Virginia
Its Subsidiaries:
LTEISA of Arizona, Inc. Arizona
LTEISA of California, Inc. California
LTEISA of Colorado, Inc. Colorado
LTEISA of Connecticut, Inc. Connecticut
LTEISA of New York, Inc. New York
LTEISA of Ohio, Inc. Ohio
LTEISA of Pennsylvania, Inc. Pennsylvania
LTEISA of Texas, Inc. Texas
Lawyers Title Exchange Company Maryland
Lawyers Title Services Company, Inc. Virginia
Lawyers Title Insurance Corporation Virginia
Its Subsidiaries:
American Title Group, Inc. Texas
Its Subsidiaries:
ATCOD, Inc. d/b/a American Title Company Texas
American Title Company of Austin d/b/a Austin Title Company Texas
Commercial Abstract & Title Co. d/b/a Lawyers Title of
San Antonio, Inc. Texas
Texas Title Company Texas
William H. Tamm, Inc. Texas
Its Subsidiary:
Lawyers Title & Abstract Co. Texas
Atlanta Title Company Georgia
Builders Disbursement Services, Inc. Virginia
Builders Service Division, Inc. Ohio
Building Exchange Company Virginia
Charter Title Company Virginia
Commerce Title Guaranty Co. Tennessee
Continental Diversified Services Company California
Datatrace Information Services Company, Inc. Virginia
Elliptus Software Solutions, Inc. Colorado
First Stable Properties, Inc. Virginia
Florida Southern Abstract & Title Co. Florida
Guarantee Title Co., Inc. Kansas
<PAGE>
Subsidiaries State of Incorporation
- ------------ ----------------------
Lawyers Title Insurance Corporation
Its Subsidiaries (Continued):
Guaranty Abstract & Title Co., Amarillo, TX Texas
Land Title Abstract Co. Michigan
Land Title Dawson Abstract Co. Michigan
Lawyers Abstract Corporation South Carolina
Lawyers Acquisition Company, Inc. Virginia
Lawyers Holding Corporation Virginia
Its Subsidiaries:
Community Title, Inc. Maryland
Cumberland Title Company Maine
Louisville Title Agency of Central Ohio, Inc. Ohio
RGS Title Ltd. Virginia
Universal Title of Baltimore, Inc. Maryland
Lawyers Title Agency, Inc. Virginia
Lawyers Title Company California
Its Subsidiaries:
LTC Exchange Company California
California Land Title Company California
Continental Land Title Company California
Continental Lawyers Company California
Lawyers Title of Arizona, Inc. Arizona
Lawyers Title of Nevada, Inc. Nevada
Lawyers Title of Dallas, Inc. Texas
Lawyers Title Data Corporation Virginia
Lawyers Title of El Paso, Inc. Virginia
Its Subsidiary:
Database Access, Inc. Texas
Lawyers Title Exchange Company - BKC Virginia
Lawyers Title of North Carolina, Inc. Virginia
Lawyers Title of Pueblo, Inc. Colorado
Lawyers Title Realty Services, Inc. Virginia
Monroe County Abstract Co. Michigan
New Mexico Title Company New Mexico
Oregon Title Insurance Company Oregon
Portland Financial Services Corporation Oregon
Real Estate Title Company, Incorporated Maryland
Real Title Company, Inc. Virginia
RealServe Company, Inc. Virginia
Richmond Company, Inc. Michigan
Rio Rancho Title, Inc. New Mexico
<PAGE>
Subsidiaries State of Incorporation
- ------------ ----------------------
Lawyers Title Insurance Corporation
Its Subsidiaries (Continued):
St. Clair County Abstract Co. Michigan
Tamiami Abstract & Title Co. Florida
The Title Guarantee & Trust Company Ohio
Title Investors Group, Inc. Texas
Its Subsidiaries:
Land Title Insurance Company California
Title Insurance Company of America Tennessee
Its Subsidiaries:
Lawyers Title of Columbia, Inc. Tennessee
Mid-South Title Co. of Central Arkansas, Inc. Arkansas
Mid-South Title Corporation Tennessee
Rutherford County Title Insurance Co. Tennessee
Exhibit 23
Consent of Independent Auditors
We consent to the incorporation by reference in the following registration
statements of LandAmerica Financial Group, Inc. (formerly Lawyers Title
Corporation), Forms S-8 Nos. 33-42916, 333-02884, 33-43811, 33-49624 and S-3
Nos. 333-46191 and 333-46211 and in the prospectus related to each, of our
report dated March 5, 1998, with respect to the consolidated financial
statements and schedules of LandAmerica Financial Group, Inc. included in the
Annual Report (Form 10-K) for the year ended December 31, 1997.
/s/ ERNST & YOUNG LLP
Richmond, Virginia
March 23, 1998
<TABLE> <S> <C>
<ARTICLE> 7
<MULTIPLIER> 1000
<S> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996 DEC-31-1995
<PERIOD-END> DEC-31-1997 DEC-31-1996 DEC-31-1995
<DEBT-HELD-FOR-SALE> 261,112 218,224 187,270
<DEBT-CARRYING-VALUE> 0 0 0
<DEBT-MARKET-VALUE> 0 0 0
<EQUITIES> 1,664 1,725 56,540
<MORTGAGE> 448 480 1,015
<REAL-ESTATE> 0 0 0
<TOTAL-INVEST> 297,644 292,055 266,630
<CASH> 35,629 23,997 18,842
<RECOVER-REINSURE> 0 0 0
<DEFERRED-ACQUISITION> 0 0 0
<TOTAL-ASSETS> 554,693 520,968 475,843
<POLICY-LOSSES> 202,477 196,285 193,791
<UNEARNED-PREMIUMS> 0 0 0
<POLICY-OTHER> 0 0 0
<POLICY-HOLDER-FUNDS> 0 0 0
<NOTES-PAYABLE> 6,994 5,036 4,146
0 0 0
0 0 0
<COMMON> 168,066 167,044 167,006
<OTHER-SE> 124,338 95,124 71,379
<TOTAL-LIABILITY-AND-EQUITY> 554,693 520,968 475,843
504,024 456,377 385,871
<INVESTMENT-INCOME> 16,318 36,424 15,471
<INVESTMENT-GAINS> 0 0 0
<OTHER-INCOME> 118,757 101,381 81,490
<BENEFITS> 33,749 29,211 24,297
<UNDERWRITING-AMORTIZATION> 0 0 0
<UNDERWRITING-OTHER> 564,881 509,431 434,675
<INCOME-PRETAX> 40,469 55,540 23,860
<INCOME-TAX> 14,312 19,021 6,809
<INCOME-CONTINUING> 26,157 36,519 17,051
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 26,157 36,519 17,051
<EPS-PRIMARY> 2.93 4.11 <F1> 1.92 <F1>
<EPS-DILUTED> 2.84 4.01 <F1> 1.89 <F1>
<RESERVE-OPEN> 196,285 193,791 198,906
<PROVISION-CURRENT> 38,301 28,930 44,322
<PROVISION-PRIOR> (4,552) 281 (20,025)
<PAYMENTS-CURRENT> 3,216 1,549 1,797
<PAYMENTS-PRIOR> 24,341 25,168 28,562
<RESERVE-CLOSE> 202,477 196,285 193,791
<CUMULATIVE-DEFICIENCY> 0 0 0
<FN>
(1) Earnings per share amounts have been restated pursuant to FAS 128.
</FN>
</TABLE>
