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, 1999
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.)
101 Gateway Centre Parkway
Richmond, Virginia 23235-5153
(Address of principal executive offices) (Zip Code)
(804) 267-8000
(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
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The aggregate market value of voting stock held by non-affiliates of
the registrant on March 17, 2000 was approximately $149,192,000. 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 17, 2000 was 13,403,141.
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. [ ]
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive proxy statement for the 2000 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. (the "Company") is a holding company
organized under the laws of the Commonwealth of Virginia on June 24, 1991. The
Company, through its subsidiaries, is engaged in the business of issuing title
insurance policies and performing other real estate-related services for both
residential and commercial real estate transactions. 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.
The Company has its principal executive offices at 101 Gateway Centre
Parkway, Richmond, Virginia 23235-5153. Its telephone number is (804) 267-8000.
Unless the context otherwise requires, the Company, as used herein, refers to
the Company and each of its subsidiaries.
Overview of the Company's Operations
Title Insurance. The Company issues title insurance policies through
its various title underwriting subsidiaries. The Company's three principal title
underwriting subsidiaries are Commonwealth Land Title Insurance Company
("Commonwealth"), Lawyers Title Insurance Corporation ("Lawyers Title") and
Transnation Title Insurance Company ("Transnation"). The Company also owns 11
other title insurance underwriters, including Commonwealth Land Title Insurance
Company of New Jersey, Oregon Title Insurance Company, Title Insurance Company
of America and Industrial Valley Title Insurance Company. The collective
operations of these subsidiaries cover the entire United States (with the
exception of Iowa, which does not recognize title insurance), certain
territories of the United States and Canada.
In connection with the issuance of title insurance policies, the
Company performs title search and examination services and also offers closing
protection letters to lenders and owners who purchase title insurance. The
Company also furnishes certificates of title and abstracts of title in some
states.
Escrow and Closing Services. In addition to the issuance of title
insurance policies, the Company provides escrow and closing services to a
broad-based customer group that includes lenders, developers, real estate
agents, attorneys and home buyers and sellers. In California and a number of
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 premiums paid for title insurance policies.
Ancillary Services. The Company offers a full range of residential real
estate services to the national and regional mortgage lending community through
its LandAmerica OneStop operation. The services of LandAmerica OneStop include
the coordination of title insurance orders, credit reporting, flood
certification, property appraisal and valuation, centralized closing and escrow
services, real estate tax services, document preparation and property
inspections. These services are available to national and regional mortgage
lenders through a single point of contact with the Company and are provided by
subsidiaries of the Company or through joint ventures or strategic alliances
with third parties.
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The Company also is a provider of certain specialized services
associated with real estate transactions through Commonwealth Relocation
Services, Inc. ("Commonwealth Relocation") and through the Company's exchange
company subsidiaries. Commonwealth Relocation offers national employee
relocation services. LandAmerica Exchange Company and The National 1031 Exchange
Corporation facilitate 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.
Technology Subsidiaries. The title insurance industry has become
increasingly automated. The Company has two wholly owned subsidiaries devoted to
computer automation of various aspects of the title insurance business. Elliptus
Technologies, Inc. ("Elliptus") develops and markets title production and escrow
software that automates policy issuance, escrow and closing documentation and
support functions. Datatrace Information Services Company, Inc. provides
automated title plant services. In addition, the Company has one subsidiary, Day
One, Inc., which develops and markets property valuation software to the
appraisal industry.
Principal Title Underwriting Subsidiaries
Commonwealth. 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.
Lawyers Title. Lawyers Title, a Virginia corporation, has been engaged
primarily in the title insurance business since 1925. Lawyers Title conducts
business 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.
Transnation. Transnation, an Arizona corporation, is the successor to
Transamerica Title Insurance Company, which commenced business on March 26,
1910. Transnation is licensed by the insurance departments of 40 states and the
District of Columbia.
Title Insurance and Underwriting
Title Insurance. Title insurance policies are insured statements of the
condition of title to real property. Such 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. Title insurance is generally
accepted as the most efficient means of determining title to, and priority of
interests in, real estate in nearly all parts of the United States. 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.
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
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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, 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.
Underwriting. The Company issues title insurance policies on the basis
of a title report, which is prepared pursuant to underwriting guidelines
prescribed by the Company, 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 the Company. 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 designated
supervising office. The Company's contracts with independent agents require that
the agent seek prior approval of the Company in order to commit the Company to
assume a risk over a stated dollar limit.
The Company owns a number of title plants and in some areas leases or
participates with other title insurance companies or agents in the cooperative
operation 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, the Company continually updates its
records by regularly adding current information from the public records and
other sources. In this way, the Company 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.
Direct and Agency Operations
The Company issues title insurance policies through its direct
operations (which include branch offices of its title insurers and wholly owned
subsidiary agencies of the Company) or through independent title insurance
agents. Where the policy is issued through its direct operations, the search is
performed by or at the direction of the Company, and the premium is collected
and retained by the Company. Where the policy is issued through an independent
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 Company 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. The Company is
obligated to pay title claims in accordance with the terms of its policies,
regardless of whether it issues policies through direct operations or
independent agents. In the fiscal year ended December 31, 1999, approximately
42.7% of total title insurance revenues were derived from direct operations and
57.3% came from independent agents.
The premium for title insurance is due in full when the real estate
transaction is closed. Title insurance premium revenues from direct operations
are recognized by the Company upon the closing of the transaction, whereas
premium revenues from agency operations are recognized by the Company upon
receipt of such premiums. Premiums from independent agents are typically
remitted to the Company an average of 90 days after the closing of the real
estate transaction.
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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, the Company's underwriting
subsidiaries represent and defend the interests of their insureds, and provide
on the Company's consolidated 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 the
Company in the ordinary course of its business has been subject from time to
time to these types of claims, the Company's losses to date on such claims have
not been significant in number or material in dollar amount to the Company's
financial condition.
Liabilities for estimated losses and loss adjustment expenses represent
the estimated ultimate net cost of all reported and unreported losses incurred
through December 31, 1999. 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. Independent actuaries review the adequacy of reserves on an
interim basis and certify as to their adequacy on an annual basis. The reserve
estimates are continually reviewed and adjusted as the Company's loss experience
develops or new information becomes known. Any adjustments to loss reserve
estimates are included as a current operating expense. The provision for policy
and contract claims as a percentage of operating revenues for 1999 was 4.9%, for
1998 was 5.2%, and for 1997 was 5.4%. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations - Results of Operations."
The Company 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.
Standard & Poors Corporation ("S&P") has assigned a financial strength
rating of "A" to the title insurance operations of the Company. According to
S&P, an insurer rated "A" has strong financial security characteristics, but is
somewhat more likely to be affected by adverse business conditions than are
insurers with higher ratings. S&P assigns a ratings outlook along with its
letter ratings to indicate its expectations of trends that relate to the
financial strength rating for the rated company. The ratings outlook assigned by
S&P may be either "positive," "stable" or "negative." According to S&P, the
ratings outlook for the Company is "negative." A "negative" outlook means that
S&P may consider a downgrade of the Company's financial strength rating in the
future. Duff & Phelps Credit Rating Co. ("Duff & Phelps") has assigned an "A+"
rating to the claims-paying ability of the Company. According to Duff & Phelps,
an "A+" rating is assigned to those companies which have a high claims-paying
ability, protection factors are average and there is an expectation of
variability in risk over time due to economic and/or
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underwriting conditions. Duff & Phelps also assigns a ratings outlook along with
its letter ratings to indicate its expectations of trends that relate to the
claims-paying ability rating for the rated company. The ratings outlook assigned
by Duff & Phelps may be either "positive," "stable" or "negative." According to
Duff & Phelps, the ratings outlook for the Company is "stable." The S&P and Duff
& Phelps ratings are not designed for the protection of investors and do not
constitute recommendations to buy, sell or hold any security.
The Company places a high priority on maintaining effective quality
assurance and claims administration programs. The Company's quality assurance
program focuses on quality control, claims prevention and product risk
assessment for its 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, the
Company has implemented due diligence requirements in connection with the
appointment of new agents, adopted procedures for renewing existing agents and
established an Agency Audit Program. The Company continues to refine its systems
for maintaining effective quality assurance and claims administration programs.
Reinsurance and Coinsurance
The Company 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. The Company may reinsure from among its own title insurance
subsidiaries or may reinsure with unaffiliated reinsurers. As a general rule,
when the Company purchases reinsurance on a particular risk from unaffiliated
reinsurers, it will generally retain a primary risk of $5.0 million and may
participate with such reinsurers on liability amounts above the primary level on
a secondary level. Reinsurance is generally purchased from unaffiliated
reinsurers if the risk is greater than $150.0 million.
The Company assumes reinsurance from unaffiliated 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. The Company has entered into numerous reinsurance agreements with
other title insurance underwriters on specific transactions. The Company's
exposure on all reinsurance assumed is reduced due to retention of a substantial
amount of primary risk by the ceding company. 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 the Company has assumed. The Company provides loss reserves on assumed
reinsurance business on a basis consistent with reserves for direct business.
The Company utilizes coinsurance to enable it to provide coverage in
amounts greater than it would be willing or able to undertake individually. In
coinsurance transactions, each individual underwriting company issues a separate
policy and assumes a fraction of the overall total risk. Each coinsurer is
liable only for the particular fraction of the risk it assumes.
The Company 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 the Company's
business as a whole.
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Two of the Company's subsidiaries, Commonwealth and Transnation,
maintain excess-of-loss catastrophe reinsurance from Capital Title Reinsurance
Co. These policies cover losses of up to $40.0 million in excess of $10.0
million for single properties and up to $40.0 million in excess of $20.0 million
for multisite transactions.
Title Insurance Revenues
The table below sets forth, for the years ended December 31, 1999 and
1998, the approximate dollars and percentages of the Company's revenues on a pro
forma and historic basis for the ten states representing the largest percentages
of such revenues and for all other states combined:
Revenues by State
(Dollars in thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------------------------------------------------------
1999 1998 (1) 1997 (1)
------------------------- ------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
Texas $ 275,271 13.8% $ 272,577 14.1% $ 209,382 14.1%
California 222,319 11.1% 224,062 11.6% 163,314 11.0%
Florida 168,808 8.4% 149,220 7.7% 121,569 8.2%
Pennsylvania 138,028 6.9% 118,819 6.1% 87,329 5.9%
Michigan 111,992 5.6% 107,954 5.6% 78,918 5.3%
New York 113,510 5.7% 105,135 5.4% 95,903 6.5%
New Jersey 76,897 3.8% 65,765 3.4% 51,131 3.4%
Washington 63,448 3.2% 65,332 3.4% 50,229 3.4%
Arizona 60,914 3.1% 61,112 3.2% 28,988 2.0%
Colorado 58,806 2.9% 58,348 3.0% 39,451 2.7%
Other 642,464 32.1% 623,041 32.1% 468,158 31.5%
------------ ---------- ------------- ---------- ------------ ----------
Total title revenues 1,932,457 96.6% 1,851,365 95.6% 1,394,372 94.0%
Non-title revenues 67,557 3.4% 87,301 4.4% 92,155 6.0%
------------ ---------- ------------- ---------- ------------ ----------
Total revenues $2,000,014 100.0% $1,938,666 100.0% $1,486,527 100.0%
============ ========== ============= ========== ============ ==========
</TABLE>
______________________
(1) On February 27, 1998, the Company acquired all of the issued and
outstanding shares of capital stock of Commonwealth and Transnation. The amounts
included in the table for 1998 and 1997 are presented on a pro forma basis
assuming that the acquisition occurred at the beginning of 1998 and 1997,
respectively.
Sales and Marketing
The Title Insurance Market. For sales and marketing purposes, the
Company generally views residential real estate activities and commercial real
estate activities as two distinct sources of title insurance business.
Residential real estate business results from the construction, sale, resale and
refinancing of residential properties, while commercial real estate business
results from similar activities with respect to properties with a business or
commercial use. The Company has emphasized the development of its residential
real estate business during the 1990's, 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 the Company
derived from commercial versus residential real estate activities, approximately
80% of such revenues in 1999 resulted from policies providing coverage of $1.0
million or less
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(which tend to be residential) and approximately 20% of such revenues resulted
from policies providing coverage in excess of $1.0 million.
Residential Transactions. The Company's primary source of residential
business is from the local real estate community, such as attorneys, real estate
brokers and developers, financial institutions, mortgage brokers and independent
escrow agents. Maintenance and expansion of these referral sources is integral
to the Company's marketing strategy for local residential business. Although
most of the Company's residential business arises from these local
relationships, large national and regional residential mortgage originators
continue to expand their role in the residential real estate market. These
lenders are attracted to title insurance providers who can offer a single source
for title insurance and a broad array of services related to residential real
estate transactions. The Company has responded to this developing trend in the
market by establishing LandAmerica OneStop as a single, convenient point of
contact through which national and regional mortgage lenders can place orders
for title insurance and other services related to real estate transactions. See
"Overview of the Company's Operations - Ancillary Services."
In 1999, the Company expanded its national affiliated agency
relationships which include builders, realtors, lenders and vendor managers.
There has been increased interest from lenders in forming new agency
relationships since the passage of the Gramm-Leach-Bliley Act (Financial
Services Modernization Act). In addition, each of the Company's principal
underwriting subsidiaries has developed brand name recognition in particular
markets. Using a multiple brand strategy in which each of these subsidiaries
markets and sells under its own name, the Company seeks to capitalize on
long-standing customer relationships and referral sources and to target
different market segments with different brand names.
Commercial Transactions. The Company is one of the leading providers of
title insurance for commercial transactions. The Company's National Commercial
Services ("NCS") division specializes in the sale and servicing of title
insurance for complex commercial and multi-property transactions. The Company
has NCS offices in 20 strategic metropolitan areas in the United States. Each of
these NCS offices markets title insurance products and services to large
commercial customers located in its sales territory and acts as a single point
of contact for the customer's title insurance needs throughout the country. The
Company also markets title insurance for commercial transactions through local
direct operations and independent agents.
In addition, the Company is one of the most strongly capitalized title
insurers in the industry, with an aggregate statutory surplus of $377.3 million
as of December 31, 1999. The financial strength of the Company is an important
factor in marketing the Company's commercial title business capabilities,
enabling it to underwrite larger title policies and retain higher levels of risk
without purchasing reinsurance from a third party. The Company's capital
position supports a rating of "A" from Standard & Poors (financial strength) and
a rating of "A+" from Duff & Phelps (claims-paying ability). These ratings are
important in competing for commercial title insurance business.
Customers
As of December 31, 1999, no single independent agent was responsible
for more than 5% of the title insurance revenues of any of the Company's
principal underwriting subsidiaries. In addition, the Company 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 the Company.
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Competition
The title insurance business is very competitive. Competition for
residential title business is based primarily on service and, to a lesser
extent, price. Service quality is based upon a number of factors, including
technological capabilities (resulting in a readily accessible, efficient and
reliable product) and the ability to respond quickly to customers. With respect
to national and regional mortgage lenders, service quality includes a large
distribution network and the ability to deliver a broad array of real estate
services quickly, efficiently and through a single point of contact. Competition
for commercial title business is based primarily on price, service, expertise in
complex transactions and the size and financial strength of the insurer. Title
insurance underwriters also compete for agents on the basis of service and
commission levels.
The Company is one of the largest title insurance underwriters in the
United States based on title premium revenues. Its principal competitors are
other major title insurance underwriters and their agency networks. The
Company's principal competitors during 1999 were Chicago Title Insurance
Company, First American Title Insurance Company, 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 six companies account for
approximately 91.3% 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. The Company
has underwriting limits that are comparable to its competitors. 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. In addition, the Company may spread the risk of a
large underwriting liability over its three principal title underwriting
subsidiaries. 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.
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 the Company's title
insurance subsidiaries may make. These state authorities also regulate insurance
rates, forms of policies, claims handling procedures and the form and content of
required annual statements, and have the power to audit and examine the
financial and other records of these companies. Some states require title
insurers to own or lease title plants. A substantial portion of the assets of
the Company's title underwriting subsidiaries consists of their portfolios of
investment securities. Each of these subsidiaries is required by the laws of its
state of domicile to maintain assets of a statutorily defined quality and
amount. See "Investment Policies" below. 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. Generally, all of the title
underwriters that meet certain financial thresholds are required to engage
independent auditors to audit their statutory basis financial statements which,
along with the auditor's report, must be filed with the state insurance
regulators.
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The National Association of Insurance Commissioners (the "NAIC") 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. A number of states have adopted legislation similar to some of the
provisions contained in the NAIC model legislation. The Company cannot predict
whether all or any portion of the proposed legislation or any similar
legislation will be adopted in any other states. Also, the NAIC has adopted an
instruction requiring an annual certification of reserve adequacy by a qualified
actuary. Because all of the states in which the Company's title insurance
subsidiaries are domiciled require adherence to NAIC filing procedures, each
such subsidiary, unless it qualifies for an exemption, must file an actuarial
opinion with respect to the adequacy of its reserves.
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.
Investment Policies
The Company earns investment income from its portfolio of
fixed-maturity debt securities issued principally by corporations and United
States, state and local jurisdictions, as well as by United States government
agencies. Substantially all of this portfolio is located in the Company's title
underwriting subsidiaries. At December 31, 1999, approximately 99% of the
Company's investment portfolio consisted of investment grade securities. The
Company's portfolio is managed to comply with the various state regulatory
requirements while maximizing net after-tax yield. The Company generally does
not invest in common stock issued by unaffiliated entities. The investment
portfolio is managed by professional investment advisors under guidelines which
govern the types of permissible investments, investment quality, maturity and
duration, and concentration of issuer. These guidelines, and the Company's
investment strategies, are established and periodically re-examined by the
Pension and Portfolio Committee of the Company's Board of Directors. This
Committee also reviews the performance of the investment advisors on a quarterly
basis. See Note 2 to the Consolidated Financial Statements.
Cyclicality and Seasonality
The title insurance business is closely related to the overall level of
residential and commercial real estate activity, which is generally affected by
the relative strength or weakness of the United States economy. In addition,
title insurance volumes fluctuate based on the effect of changes in interest
rates on the level of real estate activity. Economic downturns, or periods of
increasing interest rates, usually have an adverse impact on real estate
activity and therefore premium and fee revenues.
Historically, residential real estate activity has been generally
slower in the winter, when fewer families move, buy or sell homes, with
increased volumes in the spring and summer. Residential refinancing activity is
generally more uniform throughout the seasons, subject to interest rate
stability. The Company typically reports its lowest revenues in the first
quarter, with revenues increasing into the second quarter and through the third
quarter. The fourth quarter customarily may be as strong as the third quarter,
depending on the level of activity in the commercial real estate market.
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<PAGE>
In 1998, the typical seasonality of the title insurance business was
somewhat tempered by the high level of refinancing activity throughout the year.
Refinancing activity remained strong during the first quarter of 1999 but began
to decline in the second quarter and throughout the remainder of 1999 due to
market factors, including a rise in home mortgage interest rates.
Employees
As of December 31, 1999, the Company had 8,304 full time and 454 part
time employees. The Company's relationship with its employees is good. Except
for 13 employees in Pittsburgh, Pennsylvania, no employees of the Company are
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.
The Company, through its subsidiaries, sometimes acts as a temporary
title holder to real estate under a nominee holding agreement and sometimes
participates in holding agreements involving tax-deferred exchanges. The
Company'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 the Company might acquire title to real
estate, it will generally require that an appropriate environmental assessment
be made to evaluate and avoid any potential liability.
Business Strategy
In February 1998, the Company significantly expanded its operations by
acquiring Commonwealth and Transnation from Reliance Group Holdings, Inc. With
the acquisition, the Company became one of the largest title insurers in the
United States. The Company's long term objective is to strengthen its position
as a premier, low cost national provider of title insurance, information and
closing services for transactions involving the transfer and financing of real
estate. To accomplish this objective, the Company is pursuing various business
strategies designed to enhance growth and maximize profitability throughout the
real estate cycle.
Expand Distribution Capabilities. The Company seeks to increase its
share of the title insurance market by expanding and enhancing its distribution
channels through the hiring and retention of experienced industry professionals
with strong local relationships, the opening of new direct offices in markets
with the potential for significant transaction volume, appointing new agents and
selectively acquiring or engaging in joint ventures with title insurance
companies and agencies in order to strengthen the Company's presence in
particularly attractive markets. The Company also seeks to increase its share of
title insurance revenues through its multiple brand strategy of marketing
locally through its various title underwriting subsidiaries, which should enable
the Company to capitalize on brand identification, establish more direct offices
and agencies in designated markets and maintain and expand customer
relationships and referral sources. In the case of the acquisition of agencies
or small to medium-size underwriters, the Company reviews the agency's or
underwriter's profitability, location, growth potential in its existing market,
claims experience and, in the case of an underwriter, the adequacy of its
reserves.
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Provide Efficient, High Quality Services. Because the Company believes
that service quality is an important factor in competing for title insurance
business, the Company seeks to provide high quality market driven services in a
cost efficient manner. In this regard, the Company's strategy includes the
utilization of technology to further automate the title production process and
the delivery of related services. Through Elliptus, the Company has begun to
roll out Title Quest 2000, an internet-based title production and closing
software system. The Company's strategy also includes the increased development
and marketing of multiple products and services to large national and regional
mortgage lenders through the LandAmerica OneStop operation. See the description
of LandAmerica OneStop under "Overview of the Company's Operations - Ancillary
Services."
Increase Commercial Title Business. To enhance its position as a
leading provider of title insurance in commercial transactions, the Company
seeks to use its increased financial strength and claims-paying ability
resulting from the acquisition of Commonwealth and Transnation to underwrite
larger commercial policies and attract a greater share of the commercial title
business.
Improve Margins and Manage Costs. The Company expects to maintain its
focus on improving the Company's margins through revenue growth and management
of operating costs, including cost reductions through consolidation of back
office operations and the use of temporary or part-time employees to reduce the
Company's personnel costs, thereby enhancing the Company's responsiveness to
changes in levels of real estate activity.
ITEM 2. PROPERTIES
The Company owns an office building and adjacent real estate in
Richmond, Virginia which it uses for its corporate headquarters. This property
consists of approximately 128,000 square feet of office space and a parking
deck. The Company's title insurance subsidiaries conduct their business
operations primarily in leased office space. As of December 31, 1999, the
Company had numerous leases for its branch offices and subsidiaries throughout
the states in which it operates. In addition, it owns several other 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 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") in connection with the acquisition of Commonwealth and Transnation. The
Consent Order required, and the Company completed, the divestiture of certain
title plants in 12 localities named in the Consent
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<PAGE>
Order. Seven of such localities were in Florida, three were in Michigan, and one
each was in Washington, D.C. and St. Louis, Missouri. Pursuant to the terms of
the Consent Order, the Company may not 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 its properties are maintained in good
operating condition and are suitable and adequate for its purposes.
ITEM 3. LEGAL PROCEEDINGS
General
The Company and its subsidiaries are involved in certain litigation
arising in the ordinary 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.
Litigation Not in the Ordinary Course of Business
Norwest Suit
Commonwealth and certain of its current or former employees are
defendants in a suit filed on November 3, 1998 by Norwest Mortgage, Inc. and
Norwest Funding, Inc. (together, "Norwest") in the Superior Court for the County
of Los Angeles, California (Case No. VC028084) (the "Norwest Suit"). Norwest
seeks to recover from defendants claimed losses in excess of $40 million plus
punitive damages and attorneys' fees. The complaint alleges that Norwest
suffered such losses as the result of a fraudulent mortgage loan scheme related
to loans originated by Allstate Mortgage Company ("Allstate"), a California
mortgage broker. It further alleges that approximately 254 fraudulent loans were
purchased by Norwest Funding, Inc. in 1996 and 1997 under a 1994 Purchase
Agreement between Norwest Funding and Allstate. Norwest contends that
Commonwealth issued title insurance policies and performed certain related
sub-escrow functions on a number of these loans. Commonwealth did not close any
of the transactions. The complaint asserts that by virtue of their alleged
knowledge of certain information and their alleged acts and omissions in the
title insurance transactions, certain of Commonwealth's employees conspired with
and aided and abetted Allstate and others in defrauding Norwest in the mortgage
loan scheme. The complaint further alleges that Commonwealth negligently
misrepresented the genuiness of the loan transactions and the absence of facts
adverse to Norwest and other purchasers, that Commonwealth and the individual
defendants were negligent in the performance of Commonwealth's sub-escrow
function and as a title insurer and that Commonwealth breached an alleged
fiduciary duty to Norwest.
On April 6, 1999, the court entered an order consolidating the Norwest
Suit with the case of Norwest Mortgage, Inc., et al. v. Allstate Mortgage Co.,
Inc., pending in the same court (Case No. VC025404).
On March 12, 1999, the court entered an order in favor of Commonwealth
sustaining without leave to amend Commonwealth's demurrer to Norwest's cause of
action for breach of fiduciary duty. On June 15, 1999, the court entered an
order in favor of Commonwealth sustaining without leave to amend Commonwealth's
and the other defendants' demurrers to Norwest's causes of action for negligent
misrepresentation and negligence.
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Commonwealth is continuing to investigate the plaintiffs' factual
allegations as to the remaining causes of action. Management is unable at this
time to make a meaningful estimate of the amount or range of loss that could
result from an unfavorable outcome on the remaining causes of action or
determine the amount of any potential offsetting recoveries that may be
available. Commonwealth intends to vigorously defend the remaining causes of
action and any attempt to shift to it mortgage lending business risks or
responsibilities outside the scope of the title insurance policy.
Baker Suit and State of California Suit
On November 10, 1999, Thelma Baker, Yolanda Altares, Andrew Linda,
Angela Gamburg, Harriette Unger, Dorothy Fanucchi and Kenneth Hirsch
(collectively, the "Plaintiffs") filed a putative class action suit (the "Baker
Suit") in the San Francisco Superior Court (Case No. 307827) against seventeen
named defendants, including LandAmerica Financial Group, Inc. and its
subsidiary, Commonwealth Land Title Company (collectively, the "LandAmerica
Defendants"). Also included as defendants are four other major title insurance
companies doing business in California, along with four major banks.
The complaint in the Baker Suit describes five plaintiff classes with
separate claims against the named defendants. With respect to the LandAmerica
Defendants, Ms. Fanucchi purports to represent a plaintiff class defined in the
complaint as "[a]ll persons or entities who, from 1980 to the present, incident
to purchase, sale or refinancing of real property located in California,
deposited funds in escrow accounts controlled by the LandAmerica Defendants and
were not paid interest on their funds and/or were charged fees for services not
rendered."
Plaintiffs allege in the complaint that the LandAmerica Defendants
unlawfully (i) charged fees to customers for services that they did not provide,
services they never intended to provide, and/or services for which they could
not legally retain the fees; (ii) swept or converted funds in escrow accounts
based upon contrived charges without returning the funds to the depositor prior
to the time the funds escheated or should have escheated to the State of
California pursuant to the Unclaimed Property Law; and (iii) participated in
schemes and conspiracies with the banks named in the lawsuit to receive
interest, or the functional equivalent of interest, earned on customer escrow
funds.
Based on the foregoing alleged conduct, Plaintiffs assert causes of
action "on behalf of the general public" against the LandAmerica Defendants for
violation of: (i) California's Unfair Business Practices Act, California
Business & Professions Code ss.ss. 17200, et seq.; and (ii) California's
Deceptive, False and Misleading Advertising Act, California Business &
Professions Code ss.ss. 17500, et seq. Ms. Fanucchi and the class she purports
to represent assert two additional purported class action claims against the
LandAmerica Defendants for: (i) violation of California's Consumers Legal
Remedies Act, California Civil Code ss.ss. 1750, et seq.; and (ii) breach of
fiduciary duty. Plaintiffs seek injunctive relief, restitution of improperly
collected charges and interest, damages according to proof, punitive damages,
costs and expenses in bringing the suit, attorneys' fees and pre-and-post
judgment interest.
The Baker Suit includes some but not all of the allegations contained
in a defendant class action suit filed on May 19, 1999 in the Sacramento
Superior Court by the People of the State of California, the Controller of the
State of California and the Insurance Commissioner of the State of California
against Fidelity National Title Insurance Company and others (Case No.
99AS02793) (the "State of California Suit"). While the subsidiaries of
LandAmerica Financial Group, Inc. that do business in California (the
"California Subsidiaries") were not named in the suit, they fall within the
putative defendant class definition. The State of California Suit alleges that
the defendants (i) failed to escheat unclaimed property to the Controller of the
State of California on a timely basis, (ii) charged California home buyers and
other escrow customers
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<PAGE>
fees for services which were never performed, or which cost less than the amount
charged; and (iii) devised and carried out schemes with financial institutions
to receive interest, or monies in lieu of interest, on escrow funds deposited by
defendants with financial institutions in demand deposits.
The LandAmerica Defendants intend to vigorously defend the Baker Suit.
Although not parties to the State of California Suit, the California
Subsidiaries are cooperating with the Controller's Office in the conduct of
unclaimed property audits, and with the Department of Insurance in a limited
examination with respect to banking relationships. Both suits are still in their
initial stages, and at this time no estimate of the amount or range of loss that
could result from an unfavorable outcome can be made.
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 1999.
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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 17, 2000, 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.
Name Age Office and Experience
---- --- ---------------------
Charles H. Foster, Jr. 57 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. In addition, since June 1, 1999,
Mr. Foster has served as Chairman and
Chief Executive Officer of Commonwealth
and Transnation.
Janet A. Alpert 53 President of the Company since January
1993. Ms. Alpert also serves as
President of Lawyers Title, a position
she has held for more than five years.
In addition, since March 1, 1998, Ms.
Alpert has served as President of
Commonwealth and Transnation. Ms. Alpert
also served as Chief Operating Officer
of the Company and Lawyers Title from
January 1993 to February 27, 1998.
Theodore L. Chandler, Jr. 47 Senior Executive Vice President of the
Company since January 31, 2000. Mr.
Chandler also serves as Senior Executive
Vice President of Lawyers Title,
Commonwealth and Transnation, positions
he has held since February 23, 2000. Mr.
Chandler was a member of the law firm of
Williams, Mullen, Clark & Dobbins until
January 31, 2000, a position he held for
more than five years.
G. William Evans 45 Executive Vice President and Chief
Financial Officer of the Company since
September 15, 1999. Mr. Evans also
serves as Executive Vice President and
Chief Financial Officer of Lawyers
Title, Commonwealth and Transnation,
positions he has held since September
15, 1999. Mr. Evans served as Executive
Vice President - Information Technology
of the Company from February 27, 1998 to
September 15, 1999. He served as Vice
President and Treasurer of the Company
from October 1991 to February 1998. He
also served as Senior Vice President,
Chief Financial Officer and Treasurer of
Lawyers Title from October 1991 to
February 1998.
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<PAGE>
Name Age Office and Experience
---- --- ---------------------
John M. Carter 44 Executive Vice President - Law and
Employee Relations of the Company since
February 27, 1998. Mr. Carter also
serves as Executive Vice President - Law
and Employee Relations of Commonwealth,
Lawyers Title and Transnation, positions
he has held since March 1, 1998. He
served as Assistant Secretary of the
Company from February 1995 to February
1998. He also served as Senior Vice
President - Law and Employee Relations
of Lawyers Title from April 1997 to
February 1998. Mr. Carter served as Vice
President, General Corporate Counsel and
Secretary of Lawyers Title from 1994 to
April 1997.
Jeffrey D. Vaughan 41 Executive Vice President - Real Estate
Services Group of the Company since
September 1, 1998. Mr. Vaughan also
serves as Executive Vice President of
Lawyers Title, Commonwealth and
Transnation, positions he has held since
April 15, 1999. Mr. Vaughan served as
Executive Vice President - Director of
National Commercial Services of the
Company from April 1, 1998 to September
1, 1998, and served as Executive Vice
President - Commercial and National
Residential Operations of Lawyers Title
from April 1, 1997 to April 1, 1998.
From 1991 to 1997, he was Senior Vice
President - National Division Manager of
Lawyers Title. Mr. Vaughan also serves
as President of LandAmerica OneStop, a
position he has held since September 1,
1998.
Jeffrey C. Selby 54 Executive Vice President - Director of
National Commercial Services and Manager
of National Agents and Affiliates of the
Company since February 17, 1999. Mr.
Selby has also served as Executive Vice
President of Lawyers Title since
February 17, 1999, and as Executive Vice
President of Commonwealth and
Transnation since March 25, 1999. Mr.
Selby served as Senior Vice President -
Manager of National Agents and
Affiliates of the Company from March 1,
1998 to February 17, 1999. He also
served as Senior Vice President -
National Accounts Manager of
Commonwealth from May 1996 to March 1,
1998 and as Senior Vice President -
Regional Manager of Commonwealth from
1993 to May 1996.
Russell W. Jordan, III 59 Senior Vice President, General Counsel
and Secretary of the Company since
February 27, 1998. Mr. Jordan also
serves as Senior Vice President and
General Counsel of Lawyers Title, a
position he has held for more than five
years. In addition, since March 1, 1998,
Mr. Jordan has served as Senior Vice
President and General Counsel of
Commonwealth and Transnation. Mr. Jordan
served as Secretary and General Counsel
of the Company from October 1991 to
February 1998.
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Name Age Office and Experience
---- --- ---------------------
John R. Blanchard 51 Senior Vice President - Corporate
Controller of the Company since February
27, 1998. Mr. Blanchard also serves as
Senior Vice President and Corporate
Controller of Commonwealth, Lawyers
Title and Transnation, positions he has
held since March 1, 1998. He served as
Controller of the Company from February
1992 to February 1998. He also served as
Senior Vice President and Controller of
Lawyers Title from October 1991 to
February 1998.
Christopher L. Rosati 40 Senior Vice President - Operations
Controller of the Company since February
27, 1998. Mr. Rosati also serves as
Senior Vice President and Operations
Controller of Commonwealth, Lawyers
Title and Transnation, positions he has
held since March 1, 1998. He served as
Vice President and Controller of
Commonwealth and Transnation from March
1996 to February 1998. Mr. Rosati also
served as Vice President and Assistant
Controller of Commonwealth and
Transnation from 1992 to March 1996.
H. Randolph Farmer 61 Senior Vice President - Corporate
Communications of the Company since
February 27, 1998. Mr. Farmer also
serves as Senior Vice President -
Corporate Communications of
Commonwealth, Lawyers Title and
Transnation, positions he has held since
March 1, 1998. He served as Senior Vice
President - Communications and
Advertising of Lawyers Title from April
1, 1991 to February 27, 1998.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
Market Price and Dividends
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, 1998
First quarter $46.56 $31.00 $0.05
Second quarter 59.63 44.00 0.05
Third quarter 65.00 48.00 0.05
Fourth quarter 61.75 44.00 0.05
Year Ended December 31, 1999
First quarter $58.94 $28.50 $0.05
Second quarter 33.56 27.13 0.05
Third quarter 30.50 19.13 0.05
Fourth quarter 21.75 15.56 0.05
As of March 17, 2000, there were approximately 2,202 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,
approximately $58.7 million of the net assets of the Company's consolidated
subsidiaries are available for dividends, loans or advances to the Company
during 2000.
In addition to the minimum statutory surplus requirements described
above, these 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. The following table summarizes the
insurance regulations that restrict the amount of dividends that Commonwealth,
Lawyers Title and Transnation can distribute to the Company in any 12-month
period without prior regulatory approval:
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<TABLE>
<CAPTION>
Regulatory Financial
Subsidiary Agency Regulatory Limitation Limitation(1)
---------- ------ --------------------- -------------
<S> <C> <C> <C>
Commonwealth Pennsylvania Payment of dividends or distributions $33.5 million
Department of may not exceed the greater of:
Insurance
(1) 10% of such insurer's surplus
as of the preceding year end,
or
(2) the net income of such insurer
for such preceding year.
Lawyers Title Virginia Payment of dividends or distributions $18.1 million
Bureau of is limited to the lesser of:
Insurance
(1) 10% of such insurer's surplus
as of the preceding December
31, or
(2) the net income, not including
realized capital gains, of such
insurer for the preceding
calendar year.
Transnation Arizona Payment of dividends or distributions $7.1 million
Department is limited to the lesser of:
of Insurance
(1) 10% of such insurer's surplus
as of the preceding December
31, or
(2) such insurer's net investment
income for the preceding
calendar year.
</TABLE>
__________________
(1) Based on statutory financial results for the year ended December 31,
1999.
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, as amended, 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, 1999, approximately $21.5 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.
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ITEM 6. SELECTED FINANCIAL DATA
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.
<TABLE>
<CAPTION>
For the year ended
December 31: 1999 1998 1997 1996 1995
---- ---- ---- ---- ----
(In thousands of dollars, except per common share amounts)
<S> <C> <C> <C> <C> <C>
Revenues............... $2,048,013 $1,848,870 $639,099 $594,182 $482,832
Net income............. 54,317 93,028 26,157 36,519 17,051
Net income per
common share........... 3.21 6.13 2.93 4.11 1.92
Net income per
common share
assuming dilution...... 2.79 5.05 2.84 4.01 1.89
Dividends per
common share........... 0.20 0.20 0.20 0.20 0.18
At December 31:
Total assets........... 1,657,921 1,692,358 554,693 520,968 475,843
Shareholders'
equity................. 730,703 771,189 292,404 262,168 238,385
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
On February 27, 1998, the Company acquired all of the issued and
outstanding shares of capital stock of Commonwealth and Transnation from
Reliance Insurance Company, a subsidiary of Reliance Group Holdings, Inc. The
assets and liabilities of Commonwealth and Transnation have been revalued to
their respective fair market values as of that date. The financial statements of
the Company reflect the combined operations of the Company, including
Commonwealth and Transnation, from the closing date of the acquisition.
Overview
The following discussion includes, in addition to actual results of
operations, information on pro forma results of operations that assumes the
Commonwealth and Transnation acquisition was effective for the entire years of
1998 and 1997. 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 1997 to 1999, the Company benefited from the execution of
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three distinct aspects of its business strategy. In addition to the Commonwealth
and Transnation acquisition, operations were expanded through the acquisition of
title insurance agents, expenses were tightly monitored and controlled, and
claims experience improved due to quality control efforts and an improved claims
environment. During 1998, the Company also benefited from the acquisition of
Commonwealth and Transnation and the strong national real estate economy.
Revenues
The Company's operating revenues, consisting of premiums, title search,
escrow and other fees, are dependent on overall levels of real estate and
mortgage refinance activity, which are influenced by a number of factors
including interest rates and the general state of the economy. In addition, the
Company's revenues are affected by the Company's sales and marketing efforts and
its strategic decisions based on the rate structure and claims environment in
particular markets.
Premiums and 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 averaging 90 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
portion of the Company's revenues attributable to agents.
In addition to the premiums and related fees, the Company earns
investment income from its investment portfolio of primarily fixed-maturity
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.
Factors Affecting Profit Margins and Pre-Tax Profits
The Company's profit margins are affected by several factors, including
the volume of real estate and mortgage refinance 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. Cancellations
affect profitability because costs incurred both in opening and in processing
orders typically are not offset by fees. Commercial transactions tend to be more
profitable than residential transactions.
The Company's principal expense is commissions paid to independent
agents. The Company regularly reviews the profitability of its agents, 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,
which is the sum of salaries and employee benefits, agency commissions and other
expenses (exclusive of interest, goodwill and assimilation costs) expressed as a
percentage of operating revenues.
Claims
Generally, title insurance claim rates are lower than other types of
insurance because title insurance policies insure against prior events affecting
the quality of real estate titles, rather than
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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
occurs for more than 20 years after the policy is issued. Management uses
actuarial techniques to estimate future claims by analyzing past claim payment
patterns. Independent actuaries review the adequacy of reserves on an interim
basis and certify as to their adequacy on an annual basis. Management has
continued to emphasize and strengthen claims prevention and product quality
programs.
Seasonality
Historically, residential real estate activity has been generally
slower in the winter, when fewer families move, buy or sell homes, with
increased volumes in the spring and summer. Residential refinancing activity is
generally more uniform throughout the seasons but is highly subject to changes
in interest rates. The Company typically reports its lowest revenues in the
first quarter, with revenues increasing into the second quarter and through the
third quarter. The fourth quarter customarily may be as strong as the third
quarter, depending on the level of activity in the commercial real estate
market.
In 1998, the typical seasonality of the title insurance business was
influenced by changes in the levels of refinancing activity. For additional
information, see "Item 1 - Business - Cyclicality and Seasonality."
Contingencies
For a discussion of pending legal proceedings for the periods covered
by this discussion of the Company's financial condition and results of
operation, see "Item 3 - Legal Proceedings."
Results of Operations
Comparison of Years Ended December 31, 1999,
December 31, 1998 and December 31, 1997
Net Income
The Company reported net income of $54.3 million or $2.79 per share on
a diluted basis for 1999 compared to $93.0 million or $5.05 per share on a
diluted basis in 1998 and $26.2 million or $2.84 per share on a diluted basis in
1997. Exclusive of assimilation costs associated with the Commonwealth and
Transnation acquisition, net income was $100.5 million or $5.46 per share on a
diluted basis in 1998. Net operating income (which excludes realized investment
gains and losses) was $55.3 million, $91.2 million and $26.3 million for the
years ended 1999, 1998 and 1997, respectively.
On a pro forma basis and excluding assimilation costs net income would
have been $105.7 million or $5.22 per share on a diluted basis in 1998, and
$55.8 million or $2.79 per share on a diluted basis in 1997. On a pro forma
basis, and excluding assimilation costs, net operating income was $103.7 million
and $54.9 million for the years ended 1998 and 1997, respectively.
Operating Revenues
Operating revenues reported for 1999 were $2.00 billion compared to
$1.80 billion in 1998 and $622.8 million in 1997. On a pro forma basis,
operating revenues in 1998 were $1.94 billion compared to $1.49 billion in 1997.
In addition to the inclusion of Commonwealth and Transnation revenues in 1998,
the increase in 1998 was the result of increased volumes in residential and
commercial resale and refinancing transactions, reflecting the favorable
interest
-23-
<PAGE>
rate environment and the general health of the national real estate markets.
During 1999 order volume in direct company offices decreased to 833,600 from
1,041,500 in 1998 as a result of the effect on the residential mortgage markets
of three interest rate increases initiated by the Federal Reserve in 1999. The
resulting decrease in direct revenues was offset by an increase in agency
revenues, principally the result of the timing effects of the industry's typical
time lag in business reported through independent agents.
Investment Income
The Company reported pre-tax investment income of $48.0 million, $49.3
million and $16.3 million in 1999, 1998 and 1997, respectively. Excluding
capital gains and losses, investment income was $49.6 million, $46.5 million and
$16.6 million in 1999, 1998 and 1997, respectively. The improvement in 1999 and
1998 was principally due to the addition of earnings from the investments
acquired in the Commonwealth and Transnation transaction.
Expenses
Operating Expenses. The Company's expense ratio was 92.2% in 1999
compared to 87.6% in 1998 and 90.1% in 1997. The expense ratio improved in 1998
compared to 1997 reflecting increased operating leverage resulting from the
growth in revenues, and the continuing focus on expense management. The increase
in the expense ratio in 1999 compared to 1998 resulted from an increase in the
amount of agency commissions as the mix of revenues shifted from direct
operations to independent agents.
Assimilation Costs. Assimilation costs on a pre-tax basis of
approximately $11.5 million were incurred in 1998 in connection with the
acquisition of Commonwealth and Transnation. No such costs were incurred in 1999
or 1997.
Salaries and Employee Benefits. Personnel-related expenses are a
significant portion of total operating expenses in the title insurance industry.
These expenses require intensive management through changing real estate cycles.
As a percentage of gross title revenues, salary and related expenses were 28.1%,
29.3% and 32.2% in 1999, 1998 and 1997, respectively. In response to the lower
level of orders received in direct operations, staffing levels had been
decreased to 8,500 by December 1999 from a peak level of 10,700 in December
1998.
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 77.8% in 1999, 77.6% in 1998 and 75.0% in 1997.
General, Administrative and Other Expenses. The most significant
components of other expenses are outside costs of title production, rent for
office space, communications, travel and taxes levied by states on premiums.
Provision for Policy and Contract Claims. The Company's claims
experience has shown improvement in recent years. The loss ratio (the provision
for policy and contract claims as a percentage of operating revenues) was 4.9%,
5.2% and 5.4% in 1999, 1998 and 1997, respectively. Claims paid as a percentage
of operating revenues were 3.2%, 2.8% and 4.4% in 1999, 1998 and 1997,
respectively.
-24-
<PAGE>
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 1999, 1998 and 1997 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, 1999 the Company had recorded gross deferred tax assets
of $112.9 million related primarily to policy and contract claims and employee
benefit plans. A valuation allowance is provided for deferred tax assets if it
is more likely than not these items will either expire before the Company is
able to realize their benefit, or that future deductibility is uncertain.
At December 31, 1999, the Company recorded a valuation allowance of
$11.5 million related to the $11.5 million deferred tax asset created by the
unrealized losses associated with the Company's investment portfolio. No
valuation allowance was recorded at December 31, 1998.
The Company reassesses the realization of deferred assets quarterly
and, if necessary, adjusts its valuation allowance accordingly.
Liquidity and Capital Resources
Cash provided by operating activities for the years ended December 31,
1999, 1998 and 1997 was $97.6 million, $165.1 million and $18.8 million,
respectively. As of December 31, 1999, the Company held cash and invested cash
of $163.9 million and fixed-maturity securities of $735.1 million.
In 1999, the Board of Directors approved plans to repurchase 2.0
million of the Company's issued and outstanding common shares. By December 31,
1999, the Company had repurchased 1.7 million of such shares at a cost of $43.4
million. The additional authorized repurchases were completed in the first
quarter of 2000. Repurchases were funded from available corporate funds.
Upon closing the acquisition of Commonwealth and Transnation on
February 27, 1998, the Company incurred debt of $207.5 million under a credit
facility and issued 2.2 million shares of 7% Series B Cumulative Convertible
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 cash flow from operations. 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 interest expense, amortization of intangibles and amortization
of tax reserve discount. In view of the historical ability of the Company to
generate strong, positive cash flows, and the strong cash position and
relatively conservative capitalization structure of the Company, management
believes that the Company will have sufficient liquidity and adequate capital
resources to meet both its short- and long-term capital needs. In addition, the
Company has $30.0 million available under the credit facility which was unused
at December 31, 1999.
Year 2000 Issues
In prior years, the Company discussed the nature and progress of its
efforts to assure mission critical systems would function properly to and beyond
the Year 2000. In late 1999, the Company completed its remediation and testing
of systems. As a result of those planning and implementation efforts, the
Company experienced no significant disruptions in mission critical information
technology and non-information technology systems and believes those systems
successfully responded to the Year 2000 date change. The Company expensed
approximately
-25-
<PAGE>
$8.3 million during 1999 and $4.8 million during 1998 in connection with
remediating its systems. The Company is not aware of any material problems
resulting from Year 2000 issues, either with its products, its mission critical
internal systems, or the products and services of third parties whose services
are critical to the operation of the Company. The Company will continue to
monitor its mission critical computer applications and those of its mission
critical suppliers and vendors throughout the year 2000 to ensure that any
latent Year 2000 matters that may arise are addressed promptly.
Interest Rate Risk
The following table provides information about the Company's financial
instruments that are sensitive to changes in interest rates. For investment
securities, the table presents principal cash flows and related weighted-average
interest rates by expected maturity dates. Actual cash flows could differ from
the expected amounts.
Interest Rate Sensitivity
Principal Amount by Expected Maturity
Average Interest Rate
---------------------
(dollars in thousands)
<TABLE>
<CAPTION>
2005 and Fair
2000 2001 2002 2003 2004 after Total Value
---- ---- ---- ---- ---- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Taxable available-for-sale
securities:
Book value $9,733 $45,838 $41,660 $46,221 $23,928 $321,992 $489,372 $469,161
Average yield 7.5% 6.2% 6.2% 6.2% 7.0% 7.4% 7.0%
Non-taxable available-for-
sale securities:
Book value 572 3,327 7,533 11,874 18,881 174,651 216,838 209,008
Average yield 6.8% 3.9% 4.4% 4.1% 4.8% 4.8% 4.7%
Preferred stock:
Book value - - - - - 58,538 58,538 56,915
Average yield - - - - - 8.0% 8.0%
</TABLE>
The Company also has long-term debt of $207.5 million bearing interest
at 6.42% at December 31, 1999. A 0.25% change in the interest rate would affect
income before income taxes by approximately $0.5 million annually.
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,
-26-
<PAGE>
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) real estate activity
levels have historically been cyclical and are influenced by such factors as
interest rates and the condition of the overall economy; (iii) the value of the
Company's investment portfolio is subject to fluctuation based on similar
factors; (iv) the title insurance industry may be exposed to substantial claims
by large classes of claimants and (v) 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 information required by this Item is set forth under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Interest Rate Risk" in Item 7 of 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.
-27-
<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 2000 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 2000 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 2000 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 2000 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.
-28-
<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
-------------------
None.
(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.
-29-
<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 24, 2000 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 24, 2000
- -------------------------------------------- Officer and Director
Charles H. Foster, Jr. (Principal Executive Officer)
/s/ Janet A. Alpert President and Director March 24, 2000
- --------------------------------------------
Janet A. Alpert
/s/ Theodore L. Chandler, Jr. Senior Executive Vice President and March 24, 2000
- -------------------------------------------- Director
Theodore L. Chandler, Jr.
/s/ G. William Evans Executive Vice President and March 24, 2000
- -------------------------------------------- Chief Financial Officer
G. William Evans (Principal Financial Officer)
/s/ John R. Blanchard Senior Vice President - Corporate March 24, 2000
- -------------------------------------------- Controller
John R. Blanchard (Principal Accounting Officer)
/s/ Herbert Wender Director March 24, 2000
- --------------------------------------------
Herbert Wender
-30-
<PAGE>
Signature Title Date
--------- ----- ----
/s/ Michael Dinkins Director March 24, 2000
- --------------------------------------------
Michael Dinkins
/s/ James Ermer Director March 24, 2000
- --------------------------------------------
James Ermer
/s/ John P. McCann Director March 24, 2000
- --------------------------------------------
John P. McCann
/s/ Robert F. Norfleet, Jr. Director March 24, 2000
- --------------------------------------------
Robert F. Norfleet, Jr.
/s/ Eugene P. Trani Director March 24, 2000
- --------------------------------------------
Eugene P. Trani
/s/ Marshall B. Wishnack Director March 24, 2000
- --------------------------------------------
Marshall B. Wishnack
/s/ Lowell C. Freiberg Director March 24, 2000
- --------------------------------------------
Lowell C. Freiberg
/s/ George E. Bello Director March 24, 2000
- --------------------------------------------
George E. Bello
/s/ Howard E. Steinberg Director March 24, 2000
- --------------------------------------------
Howard E. Steinberg
</TABLE>
-31-
<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, 1999
LANDAMERICA FINANCIAL GROUP, INC.
RICHMOND, VIRGINIA
-32-
<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, 1999 and 1998.....................F-2
Consolidated Statements of Operations,
Years Ended December 31, 1999, 1998 and 1997..............................F-4
Consolidated Statements of Cash Flows,
Years Ended December 31, 1999, 1998 and 1997..............................F-5
Consolidated Statements of Changes in Shareholders'
Equity, Years Ended December 31, 1999, 1998
and 1997..................................................................F-6
Notes to Consolidated Financial Statements,
December 31, 1999, 1998 and 1997..........................................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-33
Schedule II Condensed Financial Information of
Registrant ..........................................F-34
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.
-33-
<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. and subsidiaries as of December 31, 1999 and 1998, 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,
1999. 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 auditing standards generally accepted
in the United States. 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 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, 1999, and 1998, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States. 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.
/s/ ERNST & YOUNG LLP
Richmond, Virginia
February 22, 2000
F-1
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
- --------------------------------------------------
CONSOLIDATED BALANCE SHEETS, DECEMBER 31
- ----------------------------------------
(In thousands of dollars)
<TABLE>
<CAPTION>
ASSETS 1999 1998
- ------ ---- ----
<S> <C> <C>
INVESTMENTS (Note 2):
Fixed maturities available-for-sale - at fair value
(amortized cost: 1999 - $764,748; 1998 -
$756,608) $ 735,084 $ 774,856
Equity securities - at fair value (cost: 1999 - $3,278;
1998 - $3,426) 1,807 4,204
Mortgage loans (less allowance for doubtful
accounts: 1999 - $138; 1998 - $155) 7,124 11,613
Invested cash 109,045 104,792
------------- -------------
Total investments 853,060 895,465
CASH 54,939 69,235
NOTES AND ACCOUNTS RECEIVABLE:
Notes (less allowance for doubtful accounts: 1999
- $2,026; 1998 - $2,054) 12,701 7,340
Premiums (less allowance for doubtful accounts:
1999 - $9,525; 1998 - $8,179) 35,542 61,203
Income tax recoverable 4,256 -
------------- -------------
Total notes and accounts receivable 52,499 68,543
PROPERTY AND EQUIPMENT - at cost (less
accumulated depreciation and amortization: 1999 -
$81,907; 1998 - $86,767) 72,661 76,420
TITLE PLANTS 93,608 95,358
GOODWILL (less accumulated amortization: 1999 -
$33,208; 1998 - $24,630) 347,158 348,595
DEFERRED INCOME TAXES (Note 7) 80,980 80,557
OTHER ASSETS 103,016 58,185
------------- -------------
Total assets $ 1,657,921 $ 1,692,358
============= =============
</TABLE>
F-2
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
- --------------------------------------------------
CONSOLIDATED BALANCE SHEETS, DECEMBER 31
- ----------------------------------------
(In thousands of dollars)
<TABLE>
<CAPTION>
LIABILITIES 1999 1998
- ----------- ---- ----
<S> <C> <C>
POLICY AND CONTRACT CLAIMS (Note 3) $ 554,450 $ 521,894
ACCOUNTS PAYABLE AND ACCRUED EXPENSES 150,408 181,452
FEDERAL INCOME TAXES - 841
NOTES PAYABLE (Note 11) 207,653 207,792
OTHER 14,707 9,190
-------------- --------------
Total liabilities 927,218 921,169
-------------- --------------
COMMITMENTS AND CONTINGENCIES
(Notes 10 and 12)
SHAREHOLDERS' EQUITY (Notes 5 and 6)
- --------------------
Preferred stock, no par value, authorized 5,000,000 shares,
no shares of Series A Junior Participating Preferred
Stock issued or outstanding; 2,200,000 shares of 7%
Series B Cumulative Convertible Preferred Stock issued
and outstanding in 1999 and 1998 175,700 175,700
Common stock, no par value, 45,000,000 shares authorized,
shares issued and outstanding: 1999 - 13,680,421; 1998
- 15,294,572 342,138 382,828
Accumulated other comprehensive (loss) income (31,135) 12,367
Retained earnings 244,000 200,294
-------------- --------------
Total Shareholders' Equity 730,703 771,189
-------------- --------------
Total Liabilities and Shareholders' Equity $ 1,657,921 $ 1,692,358
============== ==============
</TABLE>
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)
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
REVENUES
Title and other operating revenues:
Direct operations $ 853,989 $ 880,689 $ 331,544
Agency operations 1,146,025 918,845 291,237
------------- ------------- -----------
2,000,014 1,799,534 622,781
Investment income (Note 2) 49,578 46,519 16,554
(Loss) gain on sales of investments (1,579) 2,817 (236)
------------- ------------- -----------
2,048,013 1,848,870 639,099
EXPENSES (Notes 3, 9, 10 and 11)
Salaries and employee benefits 561,744 527,827 200,488
Agents' commissions 891,928 712,933 218,358
Provision for policy and contract claims 97,014 93,563 33,749
Assimilation costs - 11,517 -
Interest expense 12,068 10,659 461
General, administrative and other 400,389 346,069 145,574
------------- ------------- -----------
1,963,143 1,702,568 598,630
------------- ------------- -----------
INCOME BEFORE INCOME TAXES 84,870 146,302 40,469
INCOME TAX EXPENSE (BENEFIT) (Note 7)
Current 24,317 54,715 15,316
Deferred 6,236 (1,441) (1,004)
------------- ------------- -----------
30,553 53,274 14,312
------------- ------------- -----------
NET INCOME 54,317 93,028 26,157
DIVIDENDS - PREFERRED STOCK (7,700) (6,502) -
------------- ------------- -----------
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $ 46,617 $ 86,526 $ 26,157
============= ============= ===========
NET INCOME PER COMMON SHARE $ 3.21 $ 6.13 $ 2.93
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING 14,532 14,120 8,924
NET INCOME PER COMMON SHARE ASSUMING DILUTION $ 2.79 $ 5.05 $ 2.84
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING ASSUMING DILUTION 19,503 18,421 9,224
</TABLE>
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>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 54,317 $ 93,028 $ 26,157
Depreciation and amortization 35,463 25,757 10,527
Amortization of bond premium 1,773 960 507
Realized investment losses (gains) 1,579 (2,817) 236
Deferred income tax 6,236 (1,441) (1,004)
Change in assets and liabilities, net of businesses
acquired:
Notes receivable (5,361) (1,429) 746
Premiums receivable 25,661 (222) (8,656)
Income taxes receivable/payable (5,097) 553 (8,113)
Policy and contract claims 32,556 43,305 6,192
Accounts payable and accrued expenses (31,044) 5,395 711
Cash surrender value of life insurance (7,158) (1,889) (9,877)
Other (11,326) 3,905 1,394
---------- ---------- ----------
Net cash provided by operating activities 97,599 165,105 18,820
---------- ---------- ----------
Cash flows from investing activities:
Purchase of property and equipment, net (62,711) (47,796) (8,892)
Proceeds from sale-leaseback of furniture and equipment
(Note 10) 24,932 - -
Purchase of business, net of cash acquired (11,570) (1 (126,346) -
Cost of investments acquired:
Fixed maturities - available-for-sale (553,945) (250,189) (96,634)
Equity securities - (1,506) -
Mortgage loans - (1,026) -
Proceeds from investment sales or maturities:
Fixed maturities - available-for-sale 542,453 144,407 60,884
Equity securities 150 - 43
Mortgage loans 4,489 - 32
---------- ---------- ----------
Net cash used in investing activities (56,202) (282,456) (44,567)
----------- ---------- ----------
Cash flows from financing activities:
Proceeds from the exercise of options 2,712 81,833 -
Cost of common shares repurchased (43,402) - -
Repayment of cash surrender value loan - (1,517) -
Dividends paid (10,611) (9,536) (1,785)
Proceeds from issuance of notes payable - 207,500 1,958
Payments on notes payable (139) (56,951) -
---------- ---------- ----------
Net cash (used in) provided by financing activities (51,440) 221,329 173
---------- ---------- ----------
Net (decrease) increase in cash and invested cash (10,043) 103,978 (25,574)
Cash and invested cash at beginning of year 174,027 70,049 95,623
---------- ---------- ----------
Cash and invested cash at end of year $ 163,984 $ 174,027 $ 70,049
========== ========== ==========
</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, 1999, 1998 AND 1997
- --------------------------------------------
(In thousands of dollars except per common share amounts)
<TABLE>
<CAPTION>
Accumulated
Other Total
Preferred Stock Common Stock Comprehensive Retained Shareholders'
Shares Amounts Shares Amounts Income Earnings Equity
------ ------- ------ ------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance - December 31, 1996 - $ - 8,889,791 $167,044 $2,694 $92,430 $262,168
Comprehensive income
Net income - - - - - 26,157 26,157
Other comprehensive income, net of tax $2,608
Net unrealized gains on securities - - - - 4,842 - 4,842
--------
Comprehensive income 30,999
--------
Stock options and incentive plans - - 74,842 1,022 - - 1,022
Common dividends ($0.20/share) - - - - - (1,785) (1,785)
------- --------- --------- -------- ------- -------- --------
Balance - December 31, 1997 - - 8,964,633 168,066 7,536 116,802 292,404
Comprehensive income
Net income - - - - - 93,028 93,028
Other comprehensive income, net of tax $2,601
Net unrealized gains on securities - - - - 4,831 - 4,831
--------
Comprehensive income 97,859
--------
Common and preferred stock issued 2,200,000 175,700 6,093,546 208,797 - - 384,497
Stock options and incentive plans - - 236,393 5,965 - - 5,965
Preferred dividends (7%) - - - - - (6,502) (6,502)
Common dividends ($0.20/share) - - - - - (3,034) (3,034)
--------- --------- ---------- -------- ------- -------- --------
Balance - December 31, 1998 2,200,000 175,700 15,294,572 382,828 12,367 200,294 771,189
Comprehensive income
Net income - - - - - 54,317 54,317
Other comprehensive income, net of tax $6,659
Net unrealized losses on securities (Note 5) - - - - (43,502) - (43,502)
--------
Comprehensive income 10,815
--------
Common stock retired - - (1,712,700) (43,402) - - (43,402)
Stock options and incentive plans - - 98,549 2,712 - - 2,712
Preferred dividends (7%) - - - - - (7,700) (7,700)
Common dividends ($0.20/share) - - - - - (2,911) (2,911)
--------- --------- ---------- -------- -------- -------- --------
Balance - December 31, 1999 2,200,000 $ 175,700 13,680,421 $342,138 $(31,135) $244,000 $730,703
========= ========= ========== ======== ======== ======== ========
</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, 1999, 1998 AND 1997
- --------------------------------------------
(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. (the "Company") and its wholly owned subsidiaries
have been prepared in conformity with accounting principles generally
accepted in the United States 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. The Company'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 40%
of consolidated title revenues generated in the states of Texas,
Florida, California and Pennsylvania. The Company manages its business
and reports its financial information as one segment.
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
Commonwealth Land Title Insurance Company, Lawyers Title Insurance
Corporation and Transnation Title Insurance Company.
Investments
-----------
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.
F-7
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
- --------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
- --------------------------------------------
(In thousands of dollars except per common share amounts)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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.
For the mortgage-backed bond portion of the fixed maturity securities
portfolio, the Company recognizes income using a constant effective
yield based on anticipated prepayments and the estimated economic life
of the securities. When actual prepayments differ significantly from
anticipated prepayments, the effective yield is recalculated to reflect
actual payments to date and anticipated future payments. The net
investment in the security is adjusted to the amount that would have
existed had the new effective yield been applied since the acquisition
of the security. That adjustment is included in net investment income.
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
-----------------
The Company assesses the recoverability of unamortized identifiable
intangibles, including goodwill, by determining whether the
amortization of the intangible balance over its estimated life can be
recovered through the undiscounted projected future cash flows of the
acquired businesses. The amount of goodwill impairment, if any, is
measured based on projected discounted future operating cash flows
using a discount rate reflecting the Company's average cost of funds.
The assessment of the recoverability of intangibles will be impacted if
estimated future operating cash flows are not achieved.
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.
F-8
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
- --------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
- --------------------------------------------
(In thousands of dollars except per common share amounts)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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.
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, 1999. 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. Title insurance
reserve estimates are subject to a significant degree of inherent
variability due to the effects of external factors such as general
economic conditions. Although management believes that the reserve for
policy and contract claims is reasonable, it is possible that the
Company's actual incurred policy and contract claims will not conform
to the assumptions inherent in the determination of these reserves.
Accordingly, the ultimate settlement of policy and contract claims may
vary significantly from the estimates included in the Company's
financial statements. 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 $1,462 and $1,769 at December
31, 1999 and 1998, 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.
F-9
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
- --------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
- --------------------------------------------
(In thousands of dollars except per common share amounts)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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 proceeds from sales transactions until a qualifying
acquisition occurs, thereby assisting its customers in deferring the
recognition of taxable income. At December 31, 1999 and 1998, the
Company was holding $383,804 and $468,663, 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.
Fair Values of Financial Instruments
------------------------------------
The carrying amounts reported in the balance sheet for cash and
invested cash, short-term investments, premiums receivable, preferred
stock and certain other assets approximate those assets' fair values.
Fair values for investment securities are based on quoted market
prices. The carrying amount reported in the balance sheet for notes
payable approximates fair value since the interest rate on the notes
payable is variable. 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 1998 and 1997 amounts have been reclassified to conform to the
1999 presentation.
2. INVESTMENTS
The amortized cost and estimated fair value of investments in fixed
maturities at December 31, 1999, and 1998 were as follows:
F-10
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
- --------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
- --------------------------------------------
(In thousands of dollars except per common share amounts)
2. INVESTMENTS (Continued)
<TABLE>
<CAPTION>
1999
------------------------------------------------------------------------
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 $ 96,220 $ 402 $ 3,250 $ 93,372
Obligations of states
and political
subdivisions 227,704 460 8,451 219,713
Fixed maturities issued
by foreign
governments 5,136 511 693 4,954
Public utilities 95,506 2,932 9,141 89,297
Corporate securities 207,174 1,723 9,196 199,701
Mortgage backed
securities 74,469 189 3,527 71,131
Preferred stock 58,539 3,638 5,261 56,916
--------- --------- ---------- ----------
Fixed maturities
available-for-sale $ 764,748 $ 9,855 $ 39,519 $ 735,084
========= ========= ========== ==========
</TABLE>
F-11
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
- --------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
- --------------------------------------------
(In thousands of dollars except per common share amounts)
2. INVESTMENTS (Continued)
<TABLE>
<CAPTION>
1998
------------------------------------------------------------------------
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 $ 100,137 $ 6,013 $ 22 $ 106,128
Obligations of states
and political
subdivisions 132,772 4,584 18 137,338
Fixed maturities issued
by foreign
governments 13,027 264 - 13,291
Public utilities 206,217 6,168 189 212,196
Corporate securities 177,211 5,683 1,058 181,836
Mortgage backed securities 63,251 359 - 63,610
Preferred stock 63,993 - 3,536 60,457
--------- --------- ------- ----------
Fixed maturities
available-for-sale $ 756,608 $ 23,071 $ 4,823 $ 774,856
========= ========= ======= ==========
</TABLE>
The amortized cost and estimated fair value of fixed-maturity
securities at December 31, 1999 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>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
- --------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
- --------------------------------------------
(In thousands of dollars except per common share amounts)
2. INVESTMENTS (Continued)
<TABLE>
<CAPTION>
Amortized Estimated Fair
Cost Value
---- -----
<S> <C> <C>
Due in one year or less $ 10,305 $ 10,049
Due after one year through five years 199,263 195,977
Due after five years through ten years 232,939 223,209
Due after ten years 248,563 234,718
Mortgage backed securities 73,678 71,131
------------- -------------
$ 764,748 $ 735,084
============= =============
</TABLE>
Earnings on investments and net realized gains (losses) for the three
years ended December 31, follow:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Fixed maturities $ 45,507 $ 41,519 $ 15,572
Equity securities 25 21 2
Invested cash and other short-term
investments 5,334 6,252 1,503
Mortgage loans 356 477 18
Net realized (losses) gains (1,579) 2,817 (236)
--------- --------- ---------
Total investment income 49,643 51,086 16,859
Investment expenses (1,644) (1,750) (541)
--------- --------- ---------
Net investment income $ 47,999 $ 49,336 $ 16,318
========= ========= =========
</TABLE>
Realized and unrealized (losses) gains 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, 1999, 1998 AND 1997
- --------------------------------------------
(In thousands of dollars except per common share amounts)
2. INVESTMENTS (Continued)
<TABLE>
<CAPTION>
Change in
Realized Unrealized
-------- ----------
<S> <C> <C>
1999
Fixed maturities $ (1,497) $ (47,912)
Equity securities (82) (2,249)
---------- -----------
$ (1,579) $ (50,161)
========== ===========
1998
Fixed maturities $ 2,817 $ 7,431
Equity securities - 1
---------- -----------
$ 2,817 $ 7,432
========== ===========
1997
Fixed maturities $ 127 $ 7,468
Equity securities (363) (18)
- ---------- -----------
$ (236) $ 7,450
========== ===========
</TABLE>
Gross unrealized gains and (losses) relating to investments in equity
securities were $862 and $(2,332) at December 31, 1999.
Proceeds from sales of investments in fixed maturities, net of calls or
maturities during 1999, 1998 and 1997 were $522,212, $76,054 and
$58,360, respectively. Gross gains of $2,646, $2,865 and $265 in 1999,
1998 and 1997, respectively, and gross losses of $4,321, $48 and $138
in 1999, 1998 and 1997, respectively, were realized on those sales.
Proceeds from sales of investments in equity securities during 1999,
1998 and 1997 were $285, $0 and $43, respectively. Gross gains of $0,
$0 and $47 in 1999, 1998 and 1997, respectively, and gross losses of
$82, $0 and $410 in 1999, 1998 and 1997, respectively, were realized on
those sales.
3. 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, 1999, 1998 and 1997.
F-14
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
- --------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
- --------------------------------------------
(In thousands of dollars except per common share amounts)
3. POLICY AND CONTRACT CLAIMS (Continued)
Activity in the liability for unpaid claims and claim adjustment
expenses is summarized as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Balance at January 1 $ 521,894 $ 202,477 $ 196,285
Acquired reserves from acquisition
of subsidiaries - 276,112 -
Incurred related to:
Current year 105,163 114,833 38,301
Prior years (8,149) (21,270) (4,552)
------------ ------------ -----------
Total incurred 97,014 93,563 33,749
------------ ------------ -----------
Paid related to:
Current year 8,959 4,155 3,216
Prior year 55,499 46,103 24,341
------------ ------------ -----------
Total Paid 64,458 50,258 27,557
------------ ------------ -----------
Balance at December 31 $ 554,450 $ 521,894 $ 202,477
============ ============ ===========
</TABLE>
The favorable development on prior year loss reserves during 1997, 1998
and 1999 was attributable to lower than expected payment levels on
recent issue years which included a high proportion of refinance
business.
4. 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.
The Company has not paid or recovered any reinsured losses during the
three years ended December 31, 1999. 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.
F-15
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
- --------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
- --------------------------------------------
(In thousands of dollars except per common share amounts)
5. SHAREHOLDERS' EQUITY
Rights Agreement
----------------
The Company has issued one preferred share purchase right (a "Right")
for each outstanding share of Common Stock. Each Right entitles the
holder to purchase, upon certain triggering events, shares of the
Company's Series A Junior Participating Preferred Stock ("Junior
Preferred Stock") or Common Stock or other securities, as set forth in
the Rights Agreement between the Company and State Street Bank and
Trust Company, the parent company of the Company's transfer agent.
Generally, the Rights will become exercisable if a person or group
acquires or announces a tender offer for 20% or more of the outstanding
shares of 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
described above, each Right will entitle the holder, other than such
acquiring person or group, to purchase one one-hundredth of a share of
Junior Preferred Stock at an exercise price of $85, subject to certain
adjustments. The Junior Preferred Stock has dividend, liquidation and
voting rights that are intended to equate the value of one
one-hundredth interest in a share of Junior Preferred Stock with the
value of one share of Common Stock. As an alternative to purchasing
shares of Junior Preferred Stock, 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, at the then
current exercise price of the Right, shares of Common Stock having a
total market value of twice the exercise price. In addition, the
Company's Board of Directors may exchange each Right for one share of
Common Stock. 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, at the then current exercise
price of the Right, 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
F-16
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
- --------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
- --------------------------------------------
(In thousands of dollars except per common share amounts)
5. SHAREHOLDERS' EQUITY (Continued)
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 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 on the first business day
following the annual meeting of shareholders. Up to 60,000 shares of
Common Stock may be issued under the Directors' Plan, and as of May 21,
1997, the Company had granted options covering all 60,000 shares.
Subsequent stock option grants to non-employee directors are made under
the Incentive Plan. Beginning on June 17, 1998, annual stock option
grants to non-employee directors who are not affiliated with Reliance
Insurance Company were increased from 1,500 to 2,000 shares of Common
Stock.
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 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, 1999,
there were options to purchase 71,914 shares 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 1999: risk-free interest
rate of 5.14%, dividend yield of 0.48%, volatility factor of the
expected market price of the Company's Common Stock of .352 and a
weighted-average expected life of the options of approximately 5 years.
F-17
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
- --------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
- --------------------------------------------
(In thousands of dollars except per common share amounts)
5. SHAREHOLDERS' EQUITY (Continued)
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.
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:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Pro forma net income $ 53,244 $ 92,258 $ 25,700
Pro forma net income available to
common shareholders 45,544 85,756 25,700
Pro forma net income per common share 3.13 6.07 2.88
Pro forma net income per common share
assuming dilution 2.73 5.01 2.79
</TABLE>
A summary of the Company's stock option activity and related
information for the years ended December 31 follows:
F-18
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
- --------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
- --------------------------------------------
(In thousands of dollars except per common share amounts)
5. SHAREHOLDERS' EQUITY (Continued)
<TABLE>
<CAPTION>
Weighted Weighted
Number Average Average
of Shares Exercise Price Fair Value
--------- -------------- ----------
<S> <C> <C> <C>
Options outstanding, December 31,
1996 (380,231 exercisable) 691,726 $ 13
Granted 117,000 21 $ 7.45
Exercised 57,342 11
Forfeited 2,000 20
Options outstanding, December 31,
1997 (452,534 exercisable) 749,384 $ 15
Granted 88,000 45 $15.51
Exercised 146,408 13
Forfeited 9,789 26
Options outstanding, December 31,
1998 (458,762 exercisable) 681,187 $ 19
Granted 199,000 43 $25.27
Exercised 99,069 11
Forfeited 18,000 44
Options outstanding, December 31,
1999 (474,368 exercisable) 763,118 $ 25
</TABLE>
The following table summarizes information about stock options
outstanding at December 31, 1999:
<TABLE>
<CAPTION>
Weighted Weighted Weighted
Range of Number Average Average Number Average
Exercise Outstanding Remaining Exercise Exercisable Exercise
Prices at 12/31/99 Life Price at 12/31/99 Price
------- ----------- ---- ----- ----------- -----
<S> <C> <C> <C> <C> <C>
$ 3 - $12 159,268 2.04 8 159,268 8
$14 - $18 246,000 2.82 18 212,000 18
$19 - $43 172,850 4.66 30 87,100 29
$44 - $44 169,000 6.13 44 - -
$54 - $54 16,000 8.46 54 16,000 54
--------- ----------
$ 3 - $54 763,118 3.93 25 474,368 18
========= ==========
</TABLE>
Savings and Stock Ownership Plan
--------------------------------
The Company has registered 3,100,000 shares of Common Stock for use in
connection with the LandAmerica Financial Group, Inc. Savings and Stock
Ownership Plan. Substantially all of the employees of the Company are
eligible to participate in the Plan.
F-19
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
- --------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
- --------------------------------------------
(In thousands of dollars except per common share amounts)
5. SHAREHOLDERS' EQUITY (Continued)
The Plan Trustee purchases 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. The number of
shares purchased and allocated to employees in 1999, 1998 and 1997 were
313,167, 168,909 and 125,095, respectively, at a cost of $7,579, $8,598
and $3,432, respectively.
Series B Preferred Stock
------------------------
On February 27, 1998, the Company issued 2,200,000 shares of its 7%
Series B Cumulative Convertible Preferred Stock (the "Series B
Preferred Stock") to Reliance Insurance Company ("RIC") in connection
with the acquisition of Commonwealth Land Title Insurance Company and
Transnation Title Insurance Company (the "Acquisition"). The terms of
the Series B Preferred Stock provide for the payment of quarterly
cumulative cash dividends at an annual rate of 7% of the stated value
of $50 per share, or $3.50 per share. At December 31, 1999 and 1998,
there were no Series B Preferred Stock dividends in arrears.
The Series B Preferred Stock is redeemable by the Company at any time
on or after February 27, 2003 at a redemption price equal to the stated
value of $50.00 per share, plus a redemption premium of 4% commencing
on February 27, 2003 that declines by 1% per year over the next five
years until February 27, 2007, at which time the Series B Preferred
Stock may be redeemed at its stated value of $50.00 per share. The
terms of the Series B Preferred Stock contain no sinking fund
provisions and places no limits on the source of funds to be used for
any redemption of the Series B Preferred Stock.
The Series B Preferred Stock generally is convertible at the option of
the holder into shares of Common Stock at a conversion price of $22.80
per share of Common Stock (equivalent to a conversion ratio of
approximately 2.193 shares of Common Stock for each share of Series B
Preferred Stock or 4,824,561 shares of Common Stock in the aggregate),
subject to adjustment as described in the terms of the Series B
Preferred Stock. The Series B Preferred Stock is not convertible into
shares of Common Stock by RIC and its affiliates until such time as RIC
and its affiliates have sold, conveyed or transferred all of the
4,039,473 shares of Common Stock received by RIC from the Company in
connection with the Acquisition. However, RIC and its affiliates shall
not be subject to such restriction in the event, among other things,
that (i) the Company calls for the redemption of the Series B Preferred
Stock held by RIC or (ii) either the Company declares a regular
quarterly dividend on the Common Stock of $.40 or more during any
calendar year, or the Company declares one or more non-regular
dividends on the Common Stock in an aggregate amount of $.50 or more
during any calendar year, or the Company declares dividends on the
Common Stock, whether regular or non-regular, in an aggregate amount of
$1.60 or more during any calendar year. If the Company calls for
redemption less than all of the Series B Preferred Stock held by RIC
and its affiliates, then RIC and its affiliates are entitled to convert
into shares of Common Stock only that number of the Series B Preferred
Stock that have been so called for redemption.
F-20
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
- --------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
- --------------------------------------------
(In thousands of dollars except per common share amounts)
5. SHAREHOLDERS' EQUITY (Continued)
In the event of any voluntary or involuntary dissolution, liquidation,
or winding up of the Company, the holders of shares of Series B
Preferred Stock are entitled to be paid, out of the assets of the
Company available for distribution to its shareholders, before any
payment is made in respect of the Common Stock or any other class of
stock of the Company ranking junior to the Series B Preferred Stock, a
liquidation preference equal to $50.00 per share plus accrued and
unpaid dividends to the date of such payment. If, upon such
dissolution, liquidation or winding up, the amounts payable as the
liquidation preference to holders of Series B Preferred Stock and any
other shares of stock ranking as to such distribution on a parity with
the Series B Preferred Stock cannot be paid in full, the holders of
Series B Preferred Stock and of such other shares will share ratably in
any such distribution of assets in proportion to the liquidation
preference that each holder is entitled to receive.
The holders of Series B Preferred Stock are not entitled to vote at any
meeting of the Company's shareholders, except as required by the
Virginia Stock Corporation Act or as set forth in the terms of the
Series B Preferred Stock. The terms of the Series B Preferred Stock
permit the holders of shares of Series B Preferred Stock to vote for
the election of two additional directors of the Company at an annual or
special meeting of shareholders whenever dividends on the Series B
Preferred Stock are in arrears for six or more quarterly periods,
whether or not consecutive. The holders of Series B Preferred Stock are
entitled to one vote per share on matters subject to a vote by such
holders.
Comprehensive Income
--------------------
The Company has elected to display comprehensive income in the
statements of shareholders' equity, net of reclassification
adjustments. Reclassification adjustments are made to avoid double
counting in comprehensive income items that are displayed as part of
net income for a period that also had been displayed as part of other
comprehensive income in that period or earlier periods.
A summary of unrealized (losses) gains and reclassification
adjustments, net of tax, of available-for-sale securities for the years
ended December 31, 1999, 1998 and 1997 follows:
F-21
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
- --------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
- --------------------------------------------
(In thousands of dollars except per common share amounts)
5. SHAREHOLDERS' EQUITY (Continued)
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Unrealized holding (losses) gains
arising during period $ (26,838) $ 6,237 $ 5,157
Reclassification adjustment
for gains previously
included in other
comprehensive income
(net of tax of $3,020 -
1999; $2,601 - 1998 and
$2,608 - 1997) 5,144 1,406 315
Adjustment for valuation
allowance for deferred tax (11,520) - -
----------- ----------- --------
Net unrealized holding
(losses) gains on
marketable securities $ (43,502) $ 4,831 $ 4,842
=========== =========== ========
</TABLE>
6. STATUTORY FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The accompanying consolidated financial statements have been prepared
in conformity with accounting principles generally accepted in the
United States which differ in some respects from statutory accounting
practices prescribed or permitted in the preparation of financial
statements for submission to insurance regulatory authorities. Combined
statutory equity of the Company's insurance subsidiaries was $377,273
and $385,566 at December 31, 1999 and 1998, respectively. The
difference between statutory equity and equity determined on the basis
of accounting principles generally accepted in the United States 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. Combined statutory net income of the
Company's primary insurance subsidiaries was $69,290, $104,160 and
$19,999 for the years ended December 31, 1999, 1998 and 1997,
respectively.
In a number of states, the Company's insurance subsidiaries are 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 by various statutes in the
state of domicile of the subsidiary insurer. Under such statutory
regulations, net assets of consolidated subsidiaries aggregating
$58,692 is available for dividends, loans or advances to the Company
during the year 2000.
F-22
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
- --------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
- --------------------------------------------
(In thousands of dollars except per common share amounts)
6. STATUTORY FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)
In addition, the credit agreement with Bank of America (see Note 11)
contains certain covenants which would limit future dividend payments
by the Company. Management does not believe, however, that these
restrictions will, in the foreseeable future, adversely affect the
Company's ability to pay cash dividends at the current dividend rate.
7. 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, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Deferred tax assets:
Policy and contract claims $ 77,455 $ 74,572
Pension liability 7,269 8,256
Employee benefit plans 13,021 10,476
Unrealized losses 11,520 -
Other 3,629 3,280
----------- -----------
Total deferred tax assets 112,894 96,584
Valuation allowance for deferred tax assets (11,520) -
----------- -----------
Net deferred tax assets 101,374 96,584
----------- -----------
Deferred tax liabilities:
Title plant basis differences 7,152 5,937
Unrealized gains - 6,659
Other intangible assets 5,633 2,869
Capitalized system development costs 6,320 -
Other 1,289 562
----------- -----------
Total deferred tax liabilities 20,394 16,027
----------- -----------
Net deferred tax asset $ 80,980 $ 80,557
=========== ===========
</TABLE>
A valuation allowance will be established for any portion of a deferred
tax asset that management believes may not be realized. At December 31,
1999, the Company recorded a valuation allowance of $11,520 related to
the $11,520 deferred tax asset created by the unrealized losses
associated with the Company's investment portfolio. No valuation
allowance was recorded at December 31, 1998.
The provision for income tax differs from the amount of income tax
determined by applying the U.S. statutory income tax rate (35%) to
pre-tax income as a result of the following:
F-23
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
- --------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
- --------------------------------------------
(In thousands of dollars except per common share amounts)
7. INCOME TAXES (Continued)
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Tax expense at federal statutory rate $ 29,705 $ 51,206 $ 14,164
Non-taxable interest (3,302) (1,743) (1,638)
Dividend deductions (883) (856) (1)
Company-owned life insurance (612) 290 (574)
Meals and entertainment 2,200 2,121 948
State income taxes, net of federal benefit 655 1,275 898
Other, net 2,790 981 515
--------- --------- --------
Income tax expense $ 30,553 $ 53,274 $ 14,312
========= ========= ========
</TABLE>
Taxes paid were $30,574 in 1999, $48,902 in 1998 and $23,301 in 1997.
8. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share for the years ended December 31:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Numerator:
Net income - numerator for diluted
earnings per share $ 54,317 $ 93,028 $26,157
Less preferred dividends (7,700) (6,502) -
--------- -------- --------
Numerator for basic earnings per share $ 46,617 $ 86,526 $26,157
========= ======== =======
Denominator:
Weighted average shares - denominator
for basic earnings per share 14,532 14,120 8,924
Effect of dilutive securities:
Assumed weighted average conversion of
preferred stock 4,825 4,020 -
Employee stock options 146 281 300
--------- -------- --------
Denominator for diluted earnings per share 19,503 18,421 9,224
Basic earnings per common share $3.21 $6.13 $2.93
===== ===== =====
Diluted earnings per common share $2.79 $5.05 $2.84
===== ===== =====
</TABLE>
F-24
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
- --------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
- --------------------------------------------
(In thousands of dollars except per common share amounts)
9. PENSIONS AND OTHER POSTRETIREMENT BENEFITS
The Company has a noncontributory defined benefit retirement plan that
covers substantially all employees. In addition, the Company sponsors
two postretirement benefit plans that provide postretirement health
care and life insurance benefits to eligible employees.
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
---------------- --------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning
of year $ 233,534 $ 127,249 $ 42,220 $ 26,494
Service cost 7,183 7,603 1,564 1,042
Interest cost 14,062 13,675 2,749 2,508
Plan participants' contributions - - 438 267
Plan amendments (16,217) - - -
Actuarial (gains) losses (21,564) 17,568 (3,949) 5,038
Acquisitions - 74,962 - 9,997
Benefits paid (12,937) (7,523) (2,461) (3,126)
--------- --------- --------- ---------
Benefit obligation at end of
year 204,061 233,534 40,561 42,220
--------- --------- --------- ---------
Change in plan assets:
Fair value of plan assets at
beginning of year 183,604 131,526 2,020 2,252
Actual return on plan assets 22,361 2,886 88 (370)
Acquisitions - 53,329 - -
Company contributions 5,769 3,386 1,757 2,997
Plan participants' contributions - - 438 267
Benefits paid (12,937) (7,523) (2,461) (3,126)
--------- ---------- --------- ---------
Fair value of plan assets at end of
year 198,797 183,604 1,842 2,020
--------- ---------- --------- ---------
Funded status of the plan
(underfunded) (5,264) (49,930) (38,720) (40,200)
Unrecognized net actuarial (gains)
losses (1,556) 27,089 (2,207) 1,708
Unrecognized transition (asset)
obligation (31) (52) 15,256 16,430
Unrecognized prior service cost (14,349) 26 - -
Contribution made between
measurement date and year end 879 - - -
--------- ---------- --------- ---------
Accrued benefit cost $ (20,321) $ (22,867) $ (25,671) $ (22,062)
========= ========== ========= =========
</TABLE>
F-25
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
- --------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
- --------------------------------------------
(In thousands of dollars except per common share amounts)
9. PENSIONS AND OTHER POSTRETIREMENT BENEFITS (Continued)
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
---------------- --------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average assumptions as of
December 31
Discount rate 7.50% 6.75% 7.50% 6.75%
Expected return on plan assets 9.00% 8.50% 6.00% 6.00%
Rate of compensation increase 4.00% 4.00% 4.00% 4.00%
</TABLE>
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
---------------- --------------
1999 1998 1997 1999 1998 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Components of net
periodic pension cost:
Service cost $7,183 $7,603 $3,254 $1,564 $1,042 $ 753
Interest cost 14,062 13,675 8,722 2,749 2,508 1,891
Expected return on
plan assets (15,875) (14,798) (8,936) (121) (135) (196)
Amortization of
unrecognized
transition
obligation or
(asset) (21) (21) (89) 1,174 1,174 1,174
Prior service cost
recognized (1,842) 73 73 - - -
Recognized (gains)
losses 595 61 209 - (256) (167)
------- ------- ------ ------ ------ ------
Net periodic
benefit cost $ 4,102 $ 6,593 $3,233 $5,366 $4,333 $3,455
======= ======= ====== ====== ====== ======
</TABLE>
The assumed health care cost trend rate used to measure the expected
cost of covered health care benefits for one of the Company's plans was
9.0% for 1999, 8.5% for 2000 and is assumed to decrease 0.5% per year
until 2007 and remain level at 5.5% thereafter. For the other Company
plan, the assumed health care cost trend rate was 9.0% for 1999, 8.5%
for 2000 and is assumed to decrease 0.25% per year until 2012 and
remain level at 5.5% thereafter.
Assumed health care cost trend rates have a significant effect on the
amounts reported for the health care plan. A one-percentage-point
change in assumed health care cost trend rates would have the following
effects:
F-26
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
- --------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
- --------------------------------------------
(In thousands of dollars except per common share amounts)
9. PENSIONS AND OTHER POSTRETIREMENT BENEFITS (Continued)
<TABLE>
<CAPTION>
One Percentage One Percentage
Point Increase Point Decrease
-------------- --------------
<S> <C> <C> <C>
Effect on total of service and interest
cost components in 1999 $ 226 $ (205)
Effect on postretirement benefit
obligation as of 1999 $ 2,033 $ (1,837)
</TABLE>
During 1998 the Company had two noncontributory defined benefit
retirement plans. Effective January 1, 1999, the plans were merged and
amended to change the pension benefit formula to a cash balance formula
from the existing benefit calculation based on years of service and
average earnings. Under the amended plan, each participant's account is
credited annually with an amount equal to 2-5% of the participant's
annual compensation based on the participant's age plus years of
credited service. Additionally, each participant's account balance will
be credited with interest based on the 10-year treasury bond rate
published in November preceding the applicable plan year. Those
participants in the plans on December 31, 1998, who meet the
requirements for early retirement on that date, may elect to receive
their retirement benefit under the applicable prior plan or formula.
10. 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, 1999.
2000 $ 40,562
2001 31,025
2002 22,828
2003 16,608
2004 8,268
Thereafter 2,730
-----------
$ 122,021
===========
Rent expense was $53,489, $53,255 and $23,961 for the years ended
December 31, 1999, 1998 and 1997, respectively.
F-27
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
- --------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
- --------------------------------------------
(In thousands of dollars except per common share amounts)
10. LEASE COMMITMENTS (Continued)
In December 1999, the Company entered into three sale-leaseback
transactions, totaling $24,932 whereby the Company sold and leased back
assets classified as furniture and equipment. These assets were leased
back from the purchasers over periods of 7 and 8 years. The resulting
leases are being accounted for as operating leases and the resulting
gain of $895 is being amortized over the life of the lease. The leases
require the Company to pay customary operating and repair expenses and
to observe certain covenants. The leases contain renewal options at
lease termination and purchase options at amounts approximating fair
market value at lease termination.
Future scheduled minimum lease payments under the non-cancelable
operating leases as of December 31, 1999 are as follows:
2000 $ 3,728
2001 3,728
2002 3,728
2003 3,728
2004 3,728
Thereafter 10,614
---------
Total minimum lease payments $ 29,254
=========
11. 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 $237,500, was established.
The credit facility is a four-year senior unsecured revolving credit
facility which will terminate with all outstanding amounts being due
and payable November 7, 2003, unless extended as provided in the credit
agreement. At December 31, 1999, the amount due under the credit
agreement was $207,500.
Interest accrues on the outstanding principal balance of the loans, at
the Company's option, based upon (i) IBOR (reserve adjusted) for
thirty, sixty, ninety or one hundred and eighty days plus a margin
determined by the Company's debt to capitalization ratio, or (ii) Bank
of America's Base Rate as defined in the credit agreement. In the event
of any default, interest on the outstanding principal balance of the
loans will accrue at a rate equal to Bank of America's Base Rate plus
two percent (2.0%) per annum.
Interest paid was $11,955, $10,285 and $461, in 1999, 1998 and 1997,
respectively.
F-28
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
- --------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
- --------------------------------------------
(In thousands of dollars except per common share amounts)
12. PENDING LEGAL PROCEEDINGS
Norwest Suit
Commonwealth Land Title Insurance Company ("Commonwealth") and certain
of its current or former employees are defendants in a suit filed by
Norwest Mortgage, Inc. and Norwest Funding, Inc. (together, "Norwest")
in the Superior Court for the County of Los Angeles, California. The
plaintiffs seek to recover damages in excess of $40,000, plus punitive
damages and attorneys fees. The Norwest suit is based on allegations of
a common factual pattern underlying a mortgage loan fraud scheme
allegedly perpetrated in 1996 and 1997 against the plaintiffs by
Allstate Mortgage Company and various individuals. The complaint also
alleges that the defendants were involved in the fraud scheme.
Commonwealth is continuing to investigate the plaintiff's factual
allegations. Management is unable at this time to make a meaningful
estimate of the amount or range of loss that could result from an
unfavorable outcome of the suit or determine the amount of any
potential offsetting recoveries that may be available. Commonwealth
intends to vigorously defend the suit and any attempt to shift to it
mortgage lending business risks or responsibilities outside the scope
of the title insurance policy.
Baker Suit and State of California Suit
The Company and its subsidiary Commonwealth Land Title Company
(collectively, the "LandAmerica Defendants") are defendants in a
plaintiff class action suit filed in the San Francisco, California
Superior Court by Thelma Baker and others (the "Baker Suit"). Also
included as defendants are four other major title insurance companies
doing business in California, along with four major banks. The
plaintiffs allege that the LandAmerica Defendants unlawfully (i)
charged fees to customers for services that they did not provide,
services they never intended to provide, and/or services for which they
could not legally retain the fees; (ii) swept or converted funds in
escrow accounts based upon contrived charges without returning the
funds to the depositor prior to the time the funds escheated or should
have escheated to the State of California pursuant to the Unclaimed
Property Law; and (iii) participated in schemes and conspiracies with
the banks named in the lawsuit to receive interest, or the functional
equivalent of interest, earned on customer escrow funds. Plaintiffs
seek injunctive relief, restitution of improperly collected charges and
interest, damages according to proof, punitive damages, costs and
expenses in bringing the suit, attorneys' fees and pre-and
post-judgment interest.
The Baker Suit includes some but not all of the allegations contained
in a defendant class action suit filed in the Sacramento, California
Superior Court by the People of the State of California, the Controller
of the State of California and the Insurance Commissioner of the State
of California against Fidelity National Title Insurance Company and
others (the "State of California Suit"). While the Company's
subsidiaries that do business in California (collectively, the
"California Subsidiaries") were not named in the suit, they
F-29
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
- --------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
- --------------------------------------------
(In thousands of dollars except per common share amounts)
12. PENDING LEGAL PROCEEDINGS (Continued)
fall within the putative defendant class definition. The State of
California Suit alleges that the defendants (i) failed to escheat
unclaimed property to the Controller of the State of California on a
timely basis, (ii) charged California home buyers and other escrow
customers fees for services which were never performed, or which cost
less than the amount charged; and (iii) devised and carried out schemes
with financial institutions to receive interest, or monies in lieu of
interest, on escrow funds deposited by defendants with financial
institutions in demand deposits.
The LandAmerica Defendants intend to vigorously defend the Baker Suit.
Although not parties to the State of California Suit, the California
Subsidiaries are cooperating with the Controller's Office in the
conduct of unclaimed property audits, and with the Department of
Insurance in a limited examination with respect to banking
relationships. Both suits are still in their initial stages, and at
this time no estimate of the amount or range of loss that could result
from an unfavorable outcome can be made.
13. ACQUISITIONS
On February 27, 1998, the Company acquired all of the issued and
outstanding shares of capital stock of Commonwealth Land Title
Insurance Company and Transnation Title Insurance Company
("Commonwealth and Transnation") from Reliance Insurance Company, a
subsidiary of Reliance Group Holdings, Inc. (the "Acquisition"). 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). The Acquisition has been accounted for by the Company using
the "purchase" method of accounting. The assets and liabilities of
Commonwealth and Transnation have been substantially revalued to their
respective fair market values. The financial statements of the Company
reflect the combined operations of the Company and Commonwealth and
Transnation from the closing date of the Acquisition.
Pursuant to EITF 94-3, the Company has recorded assimilation costs of
approximately $11,500 related to exit and termination costs incurred in
connection with the acquisition of Commonwealth and Transnation. Costs
incurred to exit certain leases and to dispose of certain title plants
comprised $9,400 of this amount. The remaining $2,100 primarily relates
to the termination of employees for which employee severance benefits
have been accrued. Exit and termination costs of Commonwealth and
Transnation leases and employees necessary to assimilate the operations
of Commonwealth and Transnation with the Company have been capitalized
as part of the purchase price.
Assimilation costs paid through December 31, 1999 were $11,000.
F-30
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
- --------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
- --------------------------------------------
(In thousands of dollars except per common share amounts)
13. ACQUISITIONS (Continued)
The following unaudited pro forma results of operations of the Company
give effect to the acquisition of Commonwealth and Transnation as
though the transaction had occurred on January 1, 1997. These operating
results exclude the effect of assimilation charges.
<TABLE>
<CAPTION>
Years Ended
December 31,
1998 1997
---- ----
<S> <C> <C>
Gross revenues $ 1,993,583 $ 1,535,431
Operating revenues 1,938,666 1,486,527
Investment income 54,917 48,904
Expenses 1,057,933 851,202
Net income 105,720 55,802
Less preferred dividends (7,700) (7,700)
-------------- --------------
Net income available to common
shareholders $ 98,020 $ 48,102
Net income per common share $6.48 $3.21
Net income per common share
assuming dilution $5.22 $2.79
Weighted average number of
common shares 15,128 14,976
Weighted average number of
common shares assuming dilution 20,234 19,995
</TABLE>
F-31
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
- --------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
- --------------------------------------------
(In thousands of dollars except per common share amounts)
14. UNAUDITED QUARTERLY FINANCIAL DATA
Selected quarterly financial information follows:
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
<S> <C> <C> <C> <C>
1999
Premiums, title search,
escrow and other $ 478,161 $ 532,384 $ 501,813 $ 487,656
Net investment income 11,742 11,761 11,985 12,511
Income before income taxes 23,585 27,170 14,149 19,966
Net income 14,870 17,131 9,213 13,103
Net income per common share $0.85 $1.01 $0.51 $0.81
Net income per common
share - assuming
dilution $0.73 $0.86 $0.48 $0.70
1998
Premiums, title search,
escrow and other $ 249,579 $ 492,686 $ 498,987 $ 558,282
Net investment income 7,409 12,947 16,262 12,718
Income before income taxes 7,250 44,246 48,483 46,323
Net income 4,752 28,731 30,639 28,906
Net income per common share $0.36 $1.78 $1.89 $1.78
Net income per common
share - assuming
dilution $0.35 $1.42 $1.51 $1.42
</TABLE>
In the first quarter of 1998, the Company acquired all of the issued
and outstanding shares of capital stock of Commonwealth and Transnation
(see Note 13).
F-32
<PAGE>
Schedule I
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
SUMMARY OF INVESTMENTS
DECEMBER 31, 1999
(In thousands of dollars)
<TABLE>
<CAPTION>
Column A Column B Column C Column D
-------- -------- -------- --------
Amount at
which
shown in
Fair the balance
Type of investment Cost Value sheet
---- ----- -----
<S> <C> <C> <C>
Fixed maturities:
Available-for-sale:
Bonds:
United States Government
and government agencies
and authorities $ 96,220 $ 93,372 $ 93,372
States, municipalities and
political subdivisions 227,704 219,713 219,713
Foreign Government 5,136 4,954 4,954
Public Utilities 95,506 89,297 89,297
All other corporate bonds 207,174 199,701 199,701
Mortgage-backed securities 74,469 71,131 71,131
Preferred stock 58,539 56,916 56,916
------------- ------------- -------------
Total fixed maturities $ 764,748 $ 735,084 $ 735,084
============= ============= =============
Equity securities:
Common stocks:
Industrial, miscellaneous and
all other $ 3,278 $ 1,807 $ 1,807
------------- ------------- -------------
Total equity securities $ 3,278 $ 1,807 $ 1,807
============= ============= =============
Mortgage loans on real estate $ 7,124 XXX $ 7,124
============= === =============
Deposits with banks:
Invested cash $ 109,045 XXX $ 109,045
============= === =============
Total investments $ 884,195 XXX $ 853,060
============= === =============
</TABLE>
F-33
<PAGE>
Schedule II
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
PARENT COMPANY BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
(In thousands of dollars)
<TABLE>
<CAPTION>
1999 1998
---- ----
ASSETS
<S> <C> <C>
Cash $ 29,102 $ 37,137
Stock of subsidiaries at equity 896,973 935,573
Notes receivable from affiliates 775 775
Notes receivable other 4,604 -
Income tax recoverable 1,154 8,229
Due from affiliates 11,338 -
Other assets 15,539 1,872
--------------- -------------
Total assets $ 959,485 $ 983,586
=============== =============
LIABILITIES
Due to subsidiaries $ - $ 3,764
Note payable 207,500 207,500
Other liabilities 21,282 1,133
--------------- -------------
Total liabilities 228,782 212,397
SHAREHOLDERS' EQUITY
Preferred stock, no par value, authorized 5,000,000 shares,
no shares of Series A Junior Participating Preferred
Stock issued or outstanding; 2,200,000 shares of 7%
Series B Cumulative Convertible Preferred Stock issued
and outstanding in 1999 and 1998 175,700 175,700
Common stock, no par value, 45,000,000 shares authorized,
shares issued and outstanding: 1999 - 13,680,421; 1998
- 15,294,572 342,138 382,828
Accumulated other comprehensive income (31,135) 12,367
Retained earnings 244,000 200,294
--------------- -------------
Total shareholders' equity 730,703 771,189
--------------- -------------
$ 959,485 $ 983,586
=============== =============
</TABLE>
F-34
<PAGE>
Schedule II
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
PARENT COMPANY STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(In thousands of dollars)
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
REVENUES
<S> <C> <C> <C>
Dividends received from consolidated
subsidiaries $ 55,300 43,239 3,387
Management fee from consolidated
subsidiaries 5,125 1,111 1,793
Other income 3,001 1,678 -
---------- ---------- ----------
63,426 46,028 5,180
EXPENSES
Interest expense 12,155 10,593 179
Administrative expenses 5,951 8,311 1,614
---------- ---------- ----------
18,106 18,904 1,793
INCOME BEFORE EQUITY IN
UNDISTRIBUTED INCOME OF
SUBSIDIARIES 45,320 27,124 3,387
FEDERAL INCOME TAX BENEFIT (3,492) (5,694) -
EQUITY IN UNDISTRIBUTED
INCOME OF CONSOLIDATED
5,505 60,210 22,770
SUBSIDIARIES ---------- ---------- ----------
NET INCOME $ 54,317 $ 93,028 $ 26,157
========== ========== ==========
</TABLE>
F-35
<PAGE>
Schedule II
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
PARENT COMPANY STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(In thousands of dollars)
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 54,317 $ 93,028 $ 26,157
Undistributed net income of subsidiaries (5,505) (60,210) (22,770)
Receivables from subsidiaries (15,102) 3,530 (3,944)
Income taxes - (8,229) -
Accounts payable - 1,635 2,129
Other 9,556 4,455 (1,600)
--------- --------- ---------
Net cash provided by (used in) operating
activities 43,266 34,209 (28)
--------- --------- ---------
Cash flows from investing activities:
Additional investment in subsidiaries - (273,034) (1,022)
--------- ---------- ---------
Net cash used in investing activities - (273,034) (1,022)
--------- ---------- ---------
Cash flows from financing activities:
Common shares (retired) issued (40,690) 81,833 -
Proceeds from note payable - 203,500 3,000
Dividends paid (10,611) (9,536) (1,785)
--------- --------- ---------
Net cash (used in) provided by financing
activities (51,301) 275,797 1,215
--------- --------- ---------
Net (decrease) increase in cash (8,035) 36,972 165
Cash at beginning of year 37,137 165 -
--------- --------- ---------
Cash at end of year $ 29,102 $ 37,137 $ 165
========= ========= =========
</TABLE>
F-36
<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.
Expenses - Upon completion of the Acquisition in 1998, the parent company began
incurring interest expense on the $207,500 debt associated with that
transaction.
F-37
<PAGE>
ITEM 14(a)(3)
INDEX TO EXHIBITS
Exhibit Number
and Applicable
Section of Item 601 of
Regulation S-K Document
- -------------- --------
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 Second Amendment to Amended and Restated Rights Agreement,
dated as of June 1, 1999, between the Registrant, Wachovia
Bank, N.A., as Rights Agent, and State Street Bank and Trust
Company, as Successor Rights Agent, incorporated by reference
to Exhibit 4.1 of the Registrant's Current Report on Form 8-K,
dated June 1, 1999, File No. 1-13990.
4.4 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.
4.5 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 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.
10.2 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.
<PAGE>
ITEM 14(a)(3)
INDEX TO EXHIBITS
Exhibit Number
and Applicable
Section of Item 601 of
Regulation S-K Document
- -------------- --------
10.3 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.
10.4 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.
10.5 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.
10.6 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.
10.7 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.
10.8 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.
10.9 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.
10.10 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.
10.11 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.
10.12 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.
<PAGE>
ITEM 14(a)(3)
INDEX TO EXHIBITS
Exhibit Number
and Applicable
Section of Item 601 of
Regulation S-K Document
- -------------- --------
10.13 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.
10.14 LandAmerica Financial Group, Inc. Benefit Restoration Plan, as
amended and restated effective July 1, 1999.*
10.15 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.
10.16 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.
10.17 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.
10.18 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.
10.19 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,
incorporated by reference to Exhibit 10.24 of the Registrant's
Form 10-K for the year ended December 31, 1997, File No.
1-13990.
10.20 Form of LandAmerica Financial Group, Inc. 1998 Restricted Stock
Agreement, with Schedule of Grantees and number of shares
granted, incorporated by reference to Exhibit 10.25 of the
Registrant's Form 10-K for the year ended December 31, 1997,
File No. 1-13990.
10.21 Voting and Standstill Agreement, dated February 27, 1998, by
and among the Registrant, Reliance Group Holdings, Inc. and
Reliance Insurance Company, incorporated by reference to
Exhibit 10.26 of the Registrant's Form 10-K for the year ended
December 31, 1997, File No. 1-13990.
<PAGE>
ITEM 14(a)(3)
INDEX TO EXHIBITS
Exhibit Number
and Applicable
Section of Item 601 of
Regulation S-K Document
- -------------- --------
10.22 Registration Rights Agreement, dated February 27, 1998, by and
among the Registrant and Reliance Insurance Company,
incorporated by reference to Exhibit 10.27 of the Registrant's
Form 10-K for the year ended December 31, 1997, File No.
1-13990.
10.23 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.
10.24 Agreement Containing Consent Order, dated February 6, 1998, by
and between the Registrant and the Federal Trade Commission,
incorporated by reference to Exhibit 10.29 of the Registrant's
Form 10-K for the year ended December 31, 1997, File No.
1-13990.
10.25 Employment Agreement, dated March 1, 1998, between the
Registrant and Charles H. Foster, Jr., incorporated by
reference to Exhibit 10.3 of the Registrant's Form 10-Q for the
quarter ended June 30, 1998, File No. 1-13990.
10.26 Form of LandAmerica Financial Group, Inc. Employee
Non-Qualified Stock Option Agreement, dated February 16, 1999,
with Schedule of Optionees and Options Awarded, incorporated by
reference to Exhibit 10.29 of the Registrant's Form 10-K for
the year ended December 31, 1998, File No. 1-13990.
10.27 LandAmerica Financial Group, Inc. Outside Directors Deferral
Plan, as amended and restated December 1, 1998 and February 17,
1999, incorporated by reference to Exhibit 10.30 of the
Registrant's Form 10-K for the year ended December 31, 1998,
File No. 1-13990.
10.28 LandAmerica Financial Group, Inc. Executive Voluntary Deferral
Plan, as amended and restated December 30, 1998, incorporated
by reference to Exhibit 10.31 of the Registrant's Form 10-K for
the year ended December 31, 1998, File No. 1-13990.
10.29 Form of LandAmerica Financial Group, Inc. Change of Control
Employment Agreement, with Schedule of Officers and Multiplier,
incorporated by reference to Exhibit 10.32 of the Registrant's
Form 10-K for the year ended December 31, 1998, File No.
1-13990.
10.30 LandAmerica Financial Group, Inc. 1991 Stock Incentive Plan, as
amended May 16, 1995, May 21, 1996, November 1, 1996, June 16,
1998, May 18, 1999 and February 23, 2000.*
<PAGE>
ITEM 14(a)(3)
INDEX TO EXHIBITS
Exhibit Number
and Applicable
Section of Item 601 of
Regulation S-K Document
- -------------- --------
10.31 Non-Qualified Stock Option Agreement, dated January 31, 2000,
between the Registrant and Theodore L. Chandler, Jr.*
10.32 Restricted Stock Agreement, dated January 31, 2000, between the
Registrant and Theodore L. Chandler, Jr.*
10.33 Employment Agreement, dated January 31, 2000, between the
Registrant and Theodore L. Chandler, Jr.*
10.34 Change of Control Employment Agreement, dated January 31, 2000,
between the Registrant and Theodore L. Chandler, Jr.*
10.35 Form of LandAmerica Financial Group, Inc. Employee
Non-Qualified Stock Option Agreement, dated February 23, 2000,
with Schedule of Optionees and Options Awarded.*
10.36 First Amendment of Credit Agreement, dated February 19, 1998,
by and among the Registrant, Bank of America National Trust and
Savings Association and the financial institutions named
therein.*
10.37 Second Amendment to Credit Agreement, dated December 22, 1999,
by and among the Registrant, Bank of America, N.A. and the
financial institutions named therein.*
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 10.14
LANDAMERICA FINANCIAL GROUP, INC.
BENEFIT RESTORATION PLAN
Amended and Restated
Effective
July 1, 1999
<PAGE>
TABLE OF CONTENTS
PURPOSE........................................................................1
ARTICLE I DEFINITIONS..............................................2
1.01. Accrued Benefit..........................................2
1.02. Actuarial Equivalent.....................................2
1.03. Affiliate................................................2
1.04. Board....................................................2
1.05. Change of Control........................................2
1.06. Cash Balance Plan........................................4
1.07. Committee................................................4
1.08. Compensation.............................................4
1.09. Compensation Credit......................................4
1.10. Control Change Date......................................4
1.11. Corporation..............................................4
1.12. Deferred Retirement Date.................................4
1.13. Designated Beneficiary...................................4
1.14. Disability or Disabled...................................4
1.15. Disability Retirement Date...............................4
1.16 Eligible Employee........................................4
1.17. Normal Retirement Date...................................5
1.18. Participant..............................................5
1.19. Plan.....................................................5
1.20. Replacement Benefit......................................5
1.21. Retirement and Retire....................................5
1.22. Severance and Severed....................................5
1.23. Year of Service..........................................5
ARTICLE II PARTICIPATION............................................6
ARTICLE III BENEFITS.................................................7
3.01. Normal Retirement........................................7
3.02. Deferred Retirement......................................7
3.03. Disability...............................................7
3.04. Death....................................................7
3.05. Severance................................................8
3.06. Alternative Forms of Distribution........................8
3.07. Preserved Accrued Benefit................................8
<PAGE>
ARTICLE IV VESTING..................................................9
4.01. Right to Benefits........................................9
4.02. Forfeitures..............................................9
4.03. Change of Control........................................9
ARTICLE V TERMINATION, AMENDMENT OR MODIFICATION
OF PLAN.................................................11
5.01. Right to Terminate or Amend.............................11
5.02. Manner of Giving Notice.................................11
5.03. Discharge of Obligation.................................11
ARTICLE VI ADMINISTRATION OF THE PLAN..............................12
6.01. Plan Administration.....................................12
6.02. Reports and Records.....................................12
6.03. Claims..................................................12
ARTICLE VII GENERAL...........................................................13
7.01. Plan Creates No Separate Rights.........................13
7.02. Funding.................................................13
7.03. Restriction on Alienation of Benefits...................13
7.04 Plan Binding............................................14
7.05. Interpretation of Plan..................................14
7.06. Construction............................................14
<PAGE>
PURPOSE
-------
The Compensation Committee of the Board of Directors of Lawyers Title
Insurance Corporation adopted in 1995 an unfunded non-qualified non-elective
deferred compensation plan pursuant to which certain designated employees of the
Corporation who are members of a select group of management or highly
compensated employees, as determined by the Compensation Committee, will receive
retirement benefits at the time of or during their retirement years. Effective
July 1, 1999, the Plan was amended and restated to coordinate with changes to
the Corporation's qualified Cash Balance Plan.
The Compensation Committee believes that the continuation of the Plan
will assist it in attracting and retaining those employees, whose judgment,
abilities and experience will contribute to the Corporation's continued success.
-1-
<PAGE>
ARTICLE I
DEFINITIONS
Unless otherwise provided, defined terms herein shall have the same
meaning as such terms have in the Cash Balance Plan.
1.01. Accrued Benefit means, with respect to the Cash Balance Plan, the term as
defined in the Cash Balance Plan. "Accrued Benefit" for this Plan shall mean the
Accrued Benefit under the Cash Balance Plan determined by using the definitions
of "Compensation" and "Compensation Credit" found in this Plan.
1.02. Actuarial Equivalent means a benefit of equivalent current value to the
benefit that would otherwise have been provided on the basis of the following
assumptions:
(i) No mortality
(ii) The annual interest rate on 30-year U.S. Treasury Securities
in effect for the month of November of the calendar year
preceding the applicable Plan Year.
1.03. Affiliate means any entity that is a member of a controlled group of
corporations, as defined in Code section 1563(a), determined without regard to
Code sections 1563(a)(4) and 1563(e)(3), of which the Corporation is a member
according to Code section 414(b), and which has, with the approval of the Board,
adopted the Plan by action of its board.
1.04. Board means the Board of Directors of LandAmerica Financial Group, Inc.
1.05. Change of Control. For the purpose of this Agreement, a "Change of
Control" shall mean:
(a) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 20% or more of either (i) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (ii) the combined voting
power of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this subsection (a), the
following acquisitions shall not constitute a Change of Control: (i) any
acquisition directly from the Company, (ii) any acquisition by the Company,
(iii) any acquisition by any employee benefit plan (or related trust) sponsored
or maintained by the Company or any corporation controlled by the Company or
(iv) any acquisition by any corporation pursuant to a transaction which complies
with clauses (i), (ii) and (iii) of subsection (c) of this Section 1.05; or
-2-
<PAGE>
(b) Individuals who, as of the date hereof, constitute
the Board (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director 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 the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board; or
(c) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of the
assets of the Company (a "Business Combination"), in each case, unless,
following such Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 50% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Business Combination (including,
without limitation a corporation which as a result of such transaction owns the
Company or all or substantially all of the Company's assets either directly or
through one or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the case may
be, (ii) no Person (excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of the Company or
such corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 20% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such Business
Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership existed
prior to the Business Combination and (iii) at least a majority of the members
of the board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing for such
Business Combination; or
(d) Approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.
Notwithstanding the foregoing, for purposes of subsection (a) of this
Section 1.05, a Change of Control shall not be deemed to have taken place if, as
a result of an acquisition by the Company which reduces the Outstanding Company
Common Stock or the Outstanding Company Voting Securities, the beneficial
ownership of a Person increases to 20% or more of the Outstanding Company Common
Stock or the Outstanding Company Voting Securities; provided, however, that if a
Person shall become the beneficial owner of 20% or more of the Outstanding
Company Common Stock or the Outstanding Company Voting Securities by reason of
share purchases by the Company and, after such share purchases by the Company,
such Person
-3-
<PAGE>
becomes the beneficial owner of any additional shares of the Outstanding Company
Common Stock or the Outstanding Company Voting Stock, for purposes of subsection
(a) of this Section 1.05, a Change of Control shall be deemed to have taken
place.
1.06. "Cash Balance Plan" means the LandAmerica Cash Balance Plan.
1.07. Committee means the Compensation Committee of the Board.
1.08. Compensation means "Compensation" as defined in the Cash Balance Plan
but shall also include income deferred and exclude amounts paid pursuant to the
Corporation's Executive Voluntary Deferral Plan. "Compensation" also shall be
determined without regard to any limitation on compensation or benefits imposed
under Code Sections 401(a)(17) and 415.
1.09. Compensation Credit means "Compensation Credit" as defined in the Cash
Balance Plan but shall be calculated without regard to any limitation on
compensation to be considered which is imposed by Code Section 401(a)(17).
1.10. Control Change Date means the date on which a Change of Control occurs.
If a Change of Control occurs as a result of a series of transactions, the
Control Change Date is the date of the last of such transactions.
1.11. Corporation means LandAmerica Financial Group, Inc.
1.12 Deferred Retirement Date means the first day of any month subsequent to
a Participant's Normal Retirement Date on which a Participant Retires.
1.13. Designated Beneficiary means the person, persons, entity, entities or
the estate of a Participant which is designated by the Participant or
beneficiary to receive any benefits that may become payable under the Plan as a
result of a Participant's death.
1.14. Disability or Disabled means Total and Permanent Disability as
determined in accordance with the provisions of the Cash Balance Plan.
1.15. Disability Retirement Date means the first day of the month following
the termination of employment of a Participant who is Disabled.
1.16. Eligible Employee means an individual employed by the Corporation or an
Affiliate who is a member of a select group of management or highly compensated
employees of the Corporation and its Affiliates as designated by the Committee.
1.17. Normal Retirement Date means the first day of the month coincident with
or next following the date a Participant attains age sixty-five (65).
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1.18. Participant means an Eligible Employee who is designated to participate
in the Plan in accordance with Article II. Former Participant means a
Participant who has severed from the Corporation with an accrued vested benefit
under the Plan.
1.19. Plan means the LandAmerica Financial Group, Inc. Benefit Restoration
Plan, as amended and restated effective July 1, 1999.
1.20. Replacement Benefit means the benefit determined as provided in Article
III hereof.
1.21. Retirement and Retire means a Participant's severance from employment
with the Corporation or an Affiliate on his Normal or Deferred Retirement Date.
1.22. Severance and Severed mean termination of employment with the
Corporation other than on account of Retirement, death or Disability.
1.23. Year of Service means twelve (12) consecutive months of employment with
the Corporation as defined and determined under the Cash Balance Plan.
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ARTICLE II
PARTICIPATION
An Eligible Employee shall become a Participant in the Plan effective
as of the date he is designated a Participant by the Compensation Committee. An
Eligible Employee who becomes a Participant or Former Participant hereunder
shall continue to participate in the Plan as long as he is entitled to future
benefits or is currently receiving benefits.
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ARTICLE III
BENEFITS
3.01. Normal Retirement. A Participant, upon Retirement on his Normal
Retirement Date, shall be entitled to receive a retirement benefit ("Replacement
Benefit") determined as follows: (i) the Participant's Accrued Benefit under
this Plan minus (ii) his Accrued Benefit under the Cash Balance Plan. The
Replacement Benefit shall be converted to Actuarial Equivalent installment
payments and shall be paid monthly for a period of fifteen (15) years beginning
as of the Participant's Normal Retirement Date.
3.02. Deferred Retirement. A Participant who continues in the employ of the
Corporation or an Affiliate beyond his Normal Retirement Date may elect to
retire on the first day of any month thereafter. A Participant retiring on a
Deferred Retirement Date shall be entitled to the Replacement Benefit calculated
as provided in Section 3.01 as of the Participant's Deferred Retirement Date
without adjustment for the delayed beginning date of payments. The Replacement
Benefit shall be converted to Actuarial Equivalent installment payments and
shall be paid monthly for a period of fifteen (15) years beginning as of the
Participant's Deferred Retirement Date.
3.03. Disability. A Participant who becomes Disabled prior to Retirement or
Severance shall be entitled to receive a Replacement Benefit determined as
provided in Section 3.01 as of his Disability Retirement Date. The Replacement
Benefit shall be converted to Actuarial Equivalent installment payments and
shall be paid monthly for a period of fifteen (15) years beginning as of the
Disability Retirement Date.
3.04. Death.
(a) If a Participant dies prior to Retirement or Severance, his
Designated Beneficiary shall be entitled to receive a Replacement Benefit
determined as provided in Section 3.01 as of the Participant's date of death.
The Replacement Benefit shall be payable in a lump sum within sixty (60) days
following receipt of notice of such Participant's death.
(b) If a Participant dies after Retirement but before he has
received all of the payments to which he would be entitled under Sections 3.01,
3.02, 3.03 or 3.04 of this Article, then his Designated Beneficiary shall be
entitled to receive a single lump sum in lieu of installments. The value of such
lump sum shall be the Actuarial Equivalent of future payments to which the
Participant otherwise would have been entitled. A Designated Beneficiary, after
being substituted for a deceased Participant, may designate in writing a
secondary beneficiary to receive any plan benefits that remain (from the
original term of benefits for the Participant) if the Designated Beneficiary
should die
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before all benefits have been paid. If no such designation of a secondary
beneficiary has been made, upon the death of a Designated Beneficiary, any
remaining benefits payable under the Plan shall be paid to the Designated
Beneficiary's estate.
(c) If a Former Participant dies before payments have commenced as
of his Normal Retirement Date, then his Designated Beneficiary shall be entitled
to receive the Participant's Replacement Benefit as provided in Section 3.01
payable in a lump sum within sixty (60) days following receipt of notice of such
Former Participant's death.
3.05. Severance. A Participant who is vested in accordance with Article IV
shall, upon Severance, be entitled to a deferred Replacement Benefit determined
as follows: (i) the Participant's Accrued Benefit under this Plan minus his
Accrued Benefit under the Cash Balance Plan payable beginning as of the date
that would have been his Normal Retirement Date. The Replacement Benefit shall
be converted to Actuarial Equivalent installment payments and shall be paid
monthly for a period of fifteen (15) years beginning as of the Participant's
Normal Retirement Date.
3.06. Alternative Forms of Distribution.
(a) By election in writing, delivered to the Compensation
Committee, or its designee, at least one year prior to Retirement, Disability or
Severance, a Participant may irrevocably elect to receive his benefits in a
single lump sum payment in lieu of installments.
(b) Subject to the Compensation Committee's complete and absolute
discretion, the Actuarial Equivalent of the benefits otherwise payable hereunder
may be paid over periods of fewer than fifteen (15) years.
3.07. Preserved Accrued Benefit. Certain Participants and Former Participants
shall have a minimum Accrued Benefit, which shall be the greater of the Accrued
Benefit calculated under the Plan or the amount set forth on Schedule A.
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ARTICLE IV
VESTING
4.01. Right to Benefits. Except as provided in Sections 4.02 and 4.03, a
Participant's right to receive benefits under Sections 3.01, 3.02, 3.03, and
3.06 becomes vested and non-forfeitable upon the earlier of (i) his Normal
Retirement Date, (ii) attainment of age fifty-five (55) and the completion of
five (5) Years of Service with the Corporation or an Affiliate, (iii) death or
(iv) Disability.
4.02. Forfeitures.
(a) A Participant forfeits all benefits from the Plan if the Board
determines that his separation from service for any reason is based on willful
misconduct, fraud, dishonesty, conviction of or pleading guilty to a felony, or
embezzlement from the Corporation or an Affiliate.
(b) A Participant forfeits all benefits from the Plan if, after
his separation of service for any reason after having attained age 55 but before
age 65, the Participant (i) directly or indirectly, engages in or becomes
interested in (as owner, partner, shareholder, employee, director, officer,
consultant or otherwise), whether with or without compensation, any business
which is in competition with any of the lines of business actually being
conducted by the Corporation during the term that the Participant was employed
by the Corporation or on the date of his separation from service or (ii)
actively induces other employees of the Corporation or Affiliate to terminate
their employment with the Corporation or Affiliate in favor of promised or
prospective employment with or on behalf of Participant or Participant's
post-termination employer, or (iii) uses or disseminates for his own or
another's gain privileged or proprietary information, trade secrets,
confidential commercial information, confidential research information, or
confidential development information gained by Participant during his employment
relationship with the Corporation or an Affiliate.
4.03. Change of Control. Notwithstanding Section 4.01 or 4.02, in the event
the employment of a Participant who is in the employ of the Corporation on a
Control Change Date is terminated (for reasons other than willful misconduct,
fraud, dishonesty, conviction of or pleading guilty to a felony, or embezzlement
from the Corporation or an Affiliate), he shall be fully vested in the benefit
he has accrued under Article III as of his termination of employment following a
Change of Control. Payment of such benefits shall begin as of the date his
employment is terminated.
Upon a Change of Control, the Corporation shall establish if one has
not already been established, and fully fund, within thirty (30) days of the
Control Change Date, a
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grantor trust, as described in Section 7.02(c), for the purpose of segregating
assets to assure benefit payments under the Plan.
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ARTICLE V
TERMINATION, AMENDMENT OR MODIFICATION OF PLAN
5.01. Right to Terminate or Amend. Except as otherwise specifically provided,
the Board of Directors reserves, prior to a Change of Control the right to
terminate, amend or modify this Plan, wholly or partially, at any time and from
time to time. Any such termination, amendment or change may not affect or alter
the benefits paid or obligations to any Participant who died, became Disabled or
Retired before the termination, amendment, or change or whose Accrued Benefits
has vested in accordance with Article IV. Any such amendment, modification or
termination of the Plan shall be effected by resolution of the Board and shall
be communicated by notice in writing to Participants within sixty (60) days of
its effective date.
5.02. Manner of Giving Notice. Any notice which shall be or may be given
under the Plan shall be in writing and shall be mailed by United States mail,
postage prepaid. If notice is to be given to the Corporation, such notice shall
be addressed to it at P.O. Box 27567, Richmond, Virginia 23261, addressed to the
attention of the Corporate Secretary. If notice is to be given to a Participant,
such notice shall be addressed to the Participant's last known address.
5.03. Discharge of Obligation. Except as provided in Section 5.01, upon the
termination of this Plan by the Board, the Plan shall no longer be of any
further force or effect, and, except as provided in Section 5.01, neither the
Corporation nor any Participant shall have any further obligation or right under
this Plan.
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ARTICLE VI
ADMINISTRATION OF THE PLAN
6.01. Plan Administration.
(a) The Plan shall be administered by the Compensation Committee
of the Board. Subject to the provisions of the Plan, the Committee may adopt
such rules and regulations as may be necessary to carry out the purposes hereof.
The Committee's interpretation and construction of any provision of the Plan
shall be final and conclusive.
(b) In addition to the powers hereinabove specified, the
Compensation Committee shall have the power to compute and certify the amount
and kind of benefits from time to time payable to Participants and Beneficiaries
under the Plan, and to authorize all disbursements for such purposes.
6.02. Reports and Records. To enable the Compensation Committee to perform
its functions, the Corporation and any participating Affiliate shall supply full
and timely information to the Committee on all matters relating to the
compensation of all Participants, their retirement, death or other cause for
termination of employment, and such other pertinent facts as the Committee may
require.
6.03. Claims. The benefit claims review procedure set forth in the Cash
Balance Plan, as amended from time to time, is incorporated herein by reference
and made applicable to the Plan.
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ARTICLE VII
GENERAL
7.01. Plan Creates No Separate Rights. The Plan does not in any way limit the
right of the Corporation or any participating Affiliate at any time and for any
reason to terminate the employment of a Participant in its employ. In no event
shall the Plan, by its terms or by implication, constitute an employment
contract of any nature whatsoever between the Corporation and a Participant.
7.02. Funding.
(a) All Plan Participants and Designated 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 and for purposes of Title I of the
Employee Retirement Income Security Act of 1974, as amended.
(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) Except upon a Change of Control, 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 the Corporation's obligations hereunder 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.
7.03 Restriction on Alienation of Benefits. No right or benefit under the
Plan shall be subject to anticipation, alienation, sale, assignment, pledge,
encumbrance or charge, and any attempt to do so shall be void. No right or
benefit hereunder shall in any manner be liable for or subject to the debts,
contracts, liabilities, or torts of the person entitled to such benefit. If any
Participant or Beneficiary under the Plan should become bankrupt or attempt to
anticipate, alienate, sell, assign, pledge, encumber or charge any right to a
benefit hereunder, then such right or benefit, in the discretion of the Board,
shall cease and terminate, and, in such event, the Board may hold or apply the
same or any part thereof for the benefit of such Participant or Beneficiary, his
or her spouse, children, or
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<PAGE>
other dependents, or any of them, in such manner and in such portion as the
Board may deem proper.
7.04. Plan Binding. The Plan shall be binding upon the Corporation, any
participating Affiliate and successors and assigns, and, subject to the powers
set forth in Article V, upon a Participant, his Beneficiaries, or any of their
assigns, heirs, executors and administrators.
7.05. Interpretation of Plan. To the extent not preempted by federal law, the
Plan shall be governed and construed under the laws of the State of Virginia
(other than its choice of law rules) as in effect from time to time.
7.06. Construction. Masculine pronouns wherever used shall include feminine
pronouns and the use of the singular shall include the plural.
The Corporation has adopted this Plan pursuant to action taken by the
Board. With the approval of the Board, any Affiliate may adopt this Plan by
action of its board of directors.
As evidence of its adoption of the Plan, LandAmerica Financial Group,
Inc. has caused this document to be signed by its duly authorized officer, this
14th day of September, effective July 1, 1999.
LANDAMERICA FINANCIAL GROUP, INC.
By: /s/
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SCHEDULE A
PRESERVED ACCRUED BENEFIT
================================================================================
This Schedule A sets forth the minimum annual Accrued Benefit as defined in
Section 3.07 for the Participants listed below. The benefit is payable for a
period of fifteen (15) years, beginning as of the participant's Normal
Retirement Date.
Participant Annual Amount
----------- -------------
Jan Alpert $82,551.96
Kenneth Astheimer 40,381.92
John Blanchard 1,784.52
John Carter 6,484.56
William Evans 23,136.72
Charles Foster 115,154.16
Russ Jordan 13,305.36
Robert Palmer 1,035.72
Hugh Reams 1,336.20
Jeffrey Vaughan 31,033.32
Exhibit 10.30
LANDAMERICA FINANCIAL GROUP, INC.
1991 STOCK INCENTIVE PLAN
(asamended May 16, 1995, May 21, 1996, November 1, 1996,
June 16, 1998, May 18, 1999 and February 23, 2000)
Article I
DEFINITIONS
1.01 Affiliate means any "subsidiary" or "parent corporation"
(within the meaning of Section 424 of the Code) of the Company.
1.02 Agreement means a written agreement (including any amendment
or supplement thereto) between the Company and a Participant specifying the
terms and conditions of a Grant or an Award issued to such Participant.
1.03 Award means an award of Common Stock, Restricted Stock and/or
Phantom Stock.
1.04 Board means the Board of Directors of the Company.
1.05 Change of Control means:
(i) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a
"Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 20% or more of either (a) the then outstanding shares
of Common Stock of the Company (the "Outstanding Company Common Stock") or (b)
the combined voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that for purposes
of this subsection (i), the following acquisitions shall not constitute a Change
of Control: (a) any acquisition directly from the Company; (b) any acquisition
by the Company; (c) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation controlled by
the Company; or (d) any acquisition by any corporation pursuant to a transaction
which complies with clauses (a), (b) and (c) of subsection (iii) of this Section
1.05; or
(ii) Individuals who, as of the Effective Date, constitute
the Board (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the Effective Date whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or
<PAGE>
threatened election contest with respect to the election or removal of directors
or other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board; or
(iii) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of the
assets of the Company (a "Business Combination"), in each case, unless,
following such Business Combination, (a) all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 50% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Business Combination (including,
without limitation a corporation which as a result of such transaction owns the
Company or all or substantially all of the Company's assets either directly or
through one or more Subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the case may
be, (b) no Person (excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of the Company or
such corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 20% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such Business
Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership existed
prior to the Business Combination and (c) at least a majority of the members of
the board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing for such
Business Combination; or
(iv) Approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.
Notwithstanding the foregoing, for purposes of subsection (i)
of this Section 1.05, a Change of Control shall not be deemed to have taken
place if, as a result of an acquisition by the Company which reduces the
Outstanding Company Common Stock or the Outstanding Company Voting Securities,
the beneficial ownership of a Person increases to 20% or more of the Outstanding
Company Common Stock or the Outstanding Company Voting Securities; provided,
however, that if a Person shall become the beneficial owner of 20% or more of
the Outstanding Company Common Stock or the Outstanding Company Voting
Securities by reason of share purchases by the Company and, after such share
purchases by the Company, such Person becomes the beneficial owner of any
additional shares of the Outstanding Company Common Stock or the Outstanding
Company Voting Stock, for purposes of subsection (i) of this Section 1.05, a
Change of Control shall be deemed to have taken place.
1.06 Change of Control Date is the date on which an event described
in (i) through (iv) of Section 1.05 occurs.
1.07 Code means the Internal Revenue Code of 1986, and any
amendments thereto.
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1.08 Commission means the Securities and Exchange Commission or any
successor agency.
1.09 Committee means the Compensation Committee of the Board.
1.10 Common Stock means the Common Stock of the Company.
1.11 Company means LandAmerica Financial Group, Inc.
1.12 Exchange Act means the Securities Exchange Act of 1934, as
amended from time to time, and any successor thereto.
1.13 Fair Market Value means, on any given date, the closing price
of a share of Common Stock as reported on the New York Stock Exchange composite
tape on such day or, if the Common Stock was not traded on the New York Stock
Exchange on such day, then on the next preceding day that the Common Stock was
traded on such exchange, all as reported by such source as the Committee may
select.
1.14 Grant means the grant of an Option and/or an SAR.
1.15 Incentive Stock Option means an Option that is intended to
qualify as an "incentive stock option" under Section 422 of the Code.
1.16 Initial Value means, with respect to an SAR, the Fair Market
Value of one share of Common Stock on the date of grant, as set forth in the
Agreement.
1.17 Non-Qualified Stock Option means an option other than an
Incentive Stock Option.
1.18 Option means a stock option that entitles the holder to
purchase from the Company a stated number of shares of Common Stock at the price
set forth in an Agreement.
1.19 Option Price means the price per share for Common Stock
purchased on the exercise of an Option as provided in Article VI.
1.20 Participant means an officer, director or key employee of the
Company or of a Subsidiary who satisfies the requirements of Article IV and is
selected by the Committee to receive a Grant or an Award.
1.21 Phantom Stock means a bookkeeping entry on behalf of a
Participant by which his account is credited (but not funded) as though Common
Stock had been transferred to such account.
1.22 Plan means the LandAmerica Financial Group, Inc. 1991 Stock
Incentive Plan, as amended.
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1.23 Restricted Stock means shares of Common Stock awarded to a
Participant under Article IX. Shares of Common Stock shall cease to be
Restricted Stock when, in accordance with the terms of the applicable Agreement,
they become transferable and free of substantial risks of forfeiture.
1.24 Rule 16b-3 means Rule 16b-3, as promulgated by the Commission
under Section 16(b) of the Exchange Act, as amended from time to time.
1.25 SAR means a stock appreciation right granted pursuant to this
Plan that entitles the holder to receive, with respect to each share of Common
Stock encompassed by the exercise of such SAR, the lesser of (a) the excess of
the Fair Market Value at the time of exercise over the Initial Value of the SAR
or (b) the Initial Value of the SAR; provided, that any limited stock
appreciation right granted by the Committee and exercisable upon a Change of
Control shall entitle the holder to receive, with respect to each share of
Common Stock encompassed by the exercise of such SAR, the higher of (x) the
highest sales price of a share of Common Stock as reported on the New York Stock
Exchange composite tape during the 60-day period prior to and including the
Change of Control Date, or (y) the highest price per share paid in a Change of
Control transaction, except that in the case of SARs related to Incentive Stock
Options, such price shall be based only on the Fair Market Value of the Common
Stock on the date that the Incentive Stock Option is exercised.
1.26 Securities Broker means the registered securities broker
acceptable to the Company who agrees to effect the cashless exercise of an
Option pursuant to Section 8.05 hereof.
1.27 Subsidiary means any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if each of the
corporations in the chain (other than the last corporation) owns stock
possessing at least 50 percent of the total combined voting power of all classes
of stock in one of the other corporations in such chain.
Article II
PURPOSES
The Plan is intended to assist the Company in recruiting and retaining
officers, directors and key employees with ability and initiative by enabling
such persons who contribute significantly to the Company or an Affiliate to
participate in its future success and to associate their interests with those of
the Company and its shareholders. The Plan is intended to permit the award of
Common Stock, Restricted Stock, and Phantom Stock, and the issuance of Options
qualifying as Incentive Stock Options or Non-Qualified Stock Options as
designated by the Committee at time of grant, and SARs. No Option that is
intended to be an Incentive Stock Option however, shall be invalid for failure
to qualify as an Incentive Stock Option under Section 422 of the Code but shall
be treated as a Non-Qualified Stock Option.
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<PAGE>
Article III
ADMINISTRATION
The Plan shall be administered by the Committee, which shall be
composed of two or more directors of the Company. The Committee shall have
authority to issue Grants and Awards upon such terms (not inconsistent with the
provisions of this Plan) as the Committee may consider appropriate. The terms of
such Grants and Awards may include conditions (in addition to those contained in
this Plan) on (i) the exercisability of all or part of an Option or SAR and (ii)
the transferability or forfeitability of Restricted Stock or Phantom Stock. In
addition, the Committee shall have complete authority to interpret all
provisions of this Plan; to prescribe the form of Agreements; to adopt, amend,
and rescind rules and regulations pertaining to the administration of the Plan;
and to make all other determinations necessary or advisable for the
administration of this Plan. To fulfill the purposes of the Plan without
amending the Plan, the Committee may also modify any Grants or Awards issued to
Participants who are nonresident aliens or employed outside of the United States
to recognize differences in local law, tax policy or custom.
The express grant in the Plan of any specific power to the Committee
shall not be construed as limiting any power or authority of the Committee. Any
decision made, or action taken, by the Committee or in connection with the
administration of this Plan shall be final and conclusive. All expenses of
administering this Plan shall be borne by the Company.
Article IV
ELIGIBILITY
4.01 General. Any officer, director or employee of the Company or
of any Subsidiary (including any corporation that becomes a Subsidiary after the
adoption of this Plan) who, in the judgment of the Committee, has contributed
significantly or can be expected to contribute significantly to the profits or
growth of the Company or a Subsidiary may receive one or more Awards or Grants,
or any combination or type thereof. Employee and non-employee directors of the
Company are eligible to participate in this Plan.
4.02 Grants and Awards. The Committee will designate individuals to
whom Grants and/or Awards are to be issued and will specify the number of shares
of Common Stock subject to each such Grant or Award. An Option may be granted
alone or in addition to other Grants and/or Awards under the Plan. The Committee
shall have the authority to grant any Participant Incentive Stock Options,
Non-Qualified Stock Options or both types of Options (in each case with or
without a related SAR); provided, however, that Incentive Stock Options may be
granted only to employees of the Company and its subsidiaries (within the
meaning of Section 424(f) of the Code). An SAR may be granted with or without a
related Option. All Grants or Awards issued under this Plan shall be evidenced
by Agreements which shall be subject to applicable provisions of this Plan and
to such other provisions as the Committee may determine. No Participant may be
granted Options that are Incentive Stock Options, or related SARs (under all
Incentive Stock Option Plans of the Company and Affiliates) which are first
exercisable in any
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calendar year for stock having an aggregate Fair Market Value (determined as of
the date an Option is granted) exceeding $100,000. No Participant may receive
Grants or Awards under the Plan with respect to more than 200,000 shares of
Common Stock during any one year period, which for purposes of this Plan shall
mean the calendar year.
4.03 Designation of Option as an Incentive Stock Option or
Non-Qualified Stock Option. The Committee will designate at the time an Option
is granted whether the Option is to be treated as an Incentive Stock Option or a
Non-Qualified Stock Option. In the absence, however, of any such designation,
such Option shall be treated as an Incentive Stock Option.
4.04 Qualification of Incentive Stock Option under Section 422 of
the Code. Anything in the Plan to the contrary notwithstanding, no term of the
Plan relating to Incentive Stock Options shall be interpreted, amended or
altered nor shall any discretion or authority granted under the Plan be
exercised so as to disqualify the Plan under Section 422 of the Code or, without
the consent of the optionee affected, to disqualify any Incentive Stock Option
under such Section 422.
Article V
STOCK SUBJECT TO PLAN
5.01 Maximum Number of Shares to be Awarded. Upon the exercise of
any Option (or tandem SAR), the award of Common Stock or Restricted Stock, or
the payment of an Award of Phantom Stock, the Company may deliver to the
Participant authorized but previously unissued shares of Common Stock or
previously issued shares of Common Stock reacquired by the Company. The maximum
aggregate number of shares of Common Stock available under the Plan for Grants
and Awards made prior to January 1, 1996, shall be 615,000. Commencing January
1, 1996, the maximum number of shares of Common Stock available under the Plan
for Grants and Awards made in each calendar year shall be one and one-half
percent (1.5%) of the shares of Common Stock outstanding as of the first
business day of each calendar year. The shares of Common Stock available for
Grants and Awards under the Plan in 1996 and in each year thereafter shall be
increased by the number of shares of Common Stock available for Grants and
Awards under the Plan in previous years but not covered by Grants and Awards
under the Plan in prior years, plus any shares of Common Stock as to which
Grants and Awards under the Plan have terminated or been forfeited. In no event
shall more than 500,000 shares of Common Stock be cumulatively available for
Grants of Incentive Stock Options under the Plan. Subject to the foregoing
limitations, the maximum number of shares of Common Stock available for Grants
and Awards under the Plan is subject to adjustment as provided in Article XI. If
an Option is terminated, in whole or in part, for any reason other than its
exercise, the number of shares of Common Stock allocated to the Option or
portion thereof may be reallocated to other Option, SAR, Common Stock,
Restricted Stock or Phantom Stock Grants or Awards to be made under this Plan.
Any shares of Restricted Stock that are forfeited may be reallocated to other
Grants or Awards to be made under this Plan.
5.02 Independent SARs. Upon the exercise of an SAR granted
independently of an Option, the Company may deliver to the Participant
authorized but previously unissued Common
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Stock, cash, or a combination thereof as provided in Section 8.03. The maximum
aggregate number of shares of Common Stock that may be issued pursuant to SARs
that are granted independently of Options is subject to the provisions of
Section 5.01 hereof.
Article VI
OPTION PRICE
The price per share for Common Stock purchased on the exercise of an
Option shall be fixed by the Committee, but shall not be less than the Fair
Market Value on the date of grant.
Article VII
EXERCISE OF OPTIONS
7.01 Maximum Option or SAR Period. The period in which an Option or
SAR may be exercised shall be determined by the Committee on the date of grant;
provided, however that an Incentive Stock Option or related SAR shall not be
exercisable after the expiration of 10 years from the date the Incentive Stock
Option was granted.
7.02 Transferability of Options and SARs. Non-Qualified Stock
Options and SARs may be transferable by a Participant and exercisable by a
person other than a Participant, but only to the extent specifically provided in
an Option or SAR Agreement. Incentive Stock Options, by their terms, shall not
be transferable except by will or by the laws of descent and distribution and
shall be exercisable, during the Participant's lifetime, only by the
Participant. No right or interest of a Participant in any Option or SAR shall be
liable for, or subject to, any lien, obligation or liability of such
Participant.
7.03 Employee Status. For purposes of determining the applicability
of Section 422 of the Code (relating to Incentive Stock Options), or in the
event that the terms of any Grant provide that it may be exercised only during
employment or within a specified period of time after termination of employment,
the Committee may decide to what extent leaves of absence for governmental or
military service, illness, temporary disability, or other reasons shall not be
deemed interruptions of continuous employment.
Article VIII
METHOD OF EXERCISE
8.01 Exercise. Subject to the provisions of Articles VII and XII,
an Option or SAR may be exercised in whole at any time or in part from time to
time at such times and in compliance with such requirements as the Committee
shall determine; provided, however, that an SAR that is related to an Option may
be exercised only to the extent that the related Option is exercisable and when
the Fair Market Value exceeds the Option Price of the related Option. An Option
or SAR granted under this Plan may be exercised with respect to any number of
whole shares less than the full number for which the Option or SAR could be
exercised. Such partial
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<PAGE>
exercise of an Option or SAR shall not affect the right to exercise the Option
or SAR from time to time in accordance with this Plan with respect to remaining
shares subject to the Option or related SAR. The exercise of an Option shall
result in the termination of the SAR to the extent of the number of shares with
respect to which the Option is exercised.
8.02 Payment. Unless otherwise provided by the Agreement, payment
of the Option Price shall be made in cash. If the Agreement provides, payment of
all or part of the Option Price (and any applicable withholding taxes) may be
made by the Participant surrendering shares of Common Stock to the Company or by
the Company withholding shares of Common Stock from the Participant upon
exercise, provided the shares surrendered or withheld have a Fair Market Value
(determined as of the day preceding the date of exercise) that is not less than
such price or part thereof and any such withholding taxes. In addition, the
Committee may establish such payment or other terms as it may deem to be
appropriate and consistent with these purposes.
8.03 Determination of Payment of Cash and/or Common Stock Upon
Exercise of SAR. At the Committee's discretion, the amount payable as a result
of the exercise of an SAR may be settled in cash, Common Stock, or a combination
of cash and Common Stock. No fractional shares shall be delivered upon the
exercise of an SAR but a cash payment will be made in lieu thereof.
8.04 Shareholder Rights. No participant shall have any rights as a
shareholder with respect to shares subject to his Option or SAR until the date
he exercises such Option or SAR.
8.05 Cashless Exercise. To the extent permitted under the
applicable laws and regulations, at the request of the Participant and with the
consent of the Committee, the Company agrees to cooperate in a "cashless
exercise" of the Option. The cashless exercise shall be effected by the
Participant delivering to the Securities Broker instructions to exercise all or
part of the Option, including instructions to sell a sufficient number of shares
of Common Stock to cover the costs and expenses associated therewith. The
Committee may permit a Participant to elect to pay any applicable withholding
taxes by requesting that the Company withhold the number of shares of Common
Stock equivalent at current market value to the withholding taxes due.
8.06 Cashing Out of Option. The Committee may elect to cash out all
or part of the portion of any Option to be exercised by paying the optionee an
amount, in cash or Common Stock, equal to the excess of the Fair Market Value of
the Common Stock that is the subject of the portion of the Option to be
exercised over the option price times the number of shares of Common Stock
subject to the portion of the Option to be exercised on the effective date of
such cash out.
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Article IX
COMMON STOCK AND RESTRICTED STOCK
9.01 Award. In accordance with the provisions of Article IV, the
Committee will designate persons to whom an award of Common Stock and/or
Restricted Stock is to be made and will specify the number of shares of Common
Stock covered by such award or awards.
9.02 Vesting. In the case of Restricted Stock, on the date of the
award, the Committee may prescribe that the Participant's rights in the
Restricted Stock shall be forfeitable or otherwise restricted for a period of
time set forth in the Agreement and/or until certain financial performance
objectives are satisfied as determined by the Committee in its sole discretion.
Subject to the provisions of Article XII hereof, the Committee may award Common
Stock to a Participant which is not forfeitable and is free of any restrictions
on transferability.
9.03 Shareholder Rights. Prior to their forfeiture in accordance
with the terms of the Agreement and while the shares are Restricted Stock, a
Participant will have all rights of a shareholder with respect to Restricted
Stock, including the right to receive dividends, warrants and rights and vote
the shares; provided, however, that (i) a Participant 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 Participant will deliver to the Company a stock
power, endorsed in blank, with respect to each award of Restricted Stock.
Article X
PHANTOM STOCK
10.01 Award. Pursuant to this Plan or an Agreement establishing
additional terms and conditions, the Committee may designate employees to whom
Awards of Phantom Stock may be made and will specify the number of shares of
Common Stock covered by the Award.
10.02 Vesting. The Committee may prescribe such terms and conditions
under which a Participant's right to receive payment for Phantom Stock shall
become vested.
10.03 Shareholder Rights. A Participant for whom Phantom Stock has
been credited generally shall have none of the rights of a shareholder with
respect to such Phantom Stock. However, a plan or Agreement for the use of
Phantom Stock may provide for the crediting of a Participant's Phantom Stock
account with cash or stock dividends declared with respect to Common Stock
represented by such Phantom Stock.
10.04 Payment. At the Committee's discretion, the amount payable to
a Participant for Phantom Stock credited to his account shall be made in cash,
Common Stock or a combination of both.
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<PAGE>
10.05 Nontransferability. Unless otherwise provided by the Committee
in an Agreement, any Phantom Stock awarded under this Plan shall be
nontransferable except by will or the laws of descent and distribution.
Article XI
ADJUSTMENT UPON CHANGE IN COMMON STOCK
Should the Company effect one or more (x) stock dividends, stock
split-ups, subdivisions or consolidations of shares or other similar changes in
capitalization; (y) spin-offs, spin-outs, split-ups, split-offs, or other such
distribution of assets to shareholders; or (z) direct or indirect assumptions
and/or conversions of outstanding Options due to an acquisition of the Company,
then the maximum number of shares as to which Grants and Awards may be issued
under this Plan shall be proportionately adjusted and their terms shall be
adjusted as the Committee shall determine to be equitably required. Any
determination made under this Article XI by the Committee shall be final and
conclusive.
The issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, for cash or property
or for labor or services, either upon direct sale or upon the exercise of rights
or warrants to subscribe therefor, or upon conversion of shares or obligations
of the Company convertible into such shares or other securities, shall not
affect, and no adjustment by reason thereof shall be made with respect to any
Grant or Award.
Article XII
COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES
No Grant shall be exercisable, no Common Stock shall be issued, no
certificates for shares of Common Stock shall be delivered, and no payment shall
be made under this Plan except in compliance with all applicable Federal and
state laws and regulations (including, without limitation, withholding tax
requirements) and the rules of all domestic stock exchanges on which the
Company's shares may be listed or NASDAQ. The Company may rely on an opinion of
its counsel as to such compliance. Any share certificate issued to evidence
Common Stock for which a Grant is exercised or an Award is issued may bear such
legends and statements as the Committee may deem advisable to assure compliance
with Federal and state laws and regulations. No Grant shall be exercisable, no
Common Stock shall be issued, no certificate for shares shall be delivered, and
no payment shall be made under this Plan until the Company has obtained such
consent or approval as the Committee may deem advisable from regulatory bodies
having jurisdiction over such matters.
Article XIII
GENERAL PROVISIONS
13.01 Effect on Employment. Neither the adoption of this Plan, its
operation, nor any documents describing or referring to this Plan (or any part
thereof) shall confer upon any
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employee any right to continue in the employ of the Company or a Subsidiary or
in any way affect any right and power of the Company or a Subsidiary to
terminate the employment of any employee at any time with or without assigning a
reason therefor.
13.02 Unfunded Plan. The Plan, insofar as it provides for a Grant or
an award of Phantom Stock, is not required to be funded, and the Company shall
not be required to segregate any assets that may at any time be represented by a
Grant or an Award of Phantom Stock under this Plan.
13.03 Change of Control. Notwithstanding any other provision of the
Plan to the contrary, in the event of a Change of Control:
(a) Any outstanding Option, SAR (including any limited SAR) or Phantom
Stock which is not presently exercisable and vested as of a Change of Control
Date shall become fully exercisable and vested to the full extent of the
original grant upon such Change of Control Date.
(b) The restrictions applicable to any outstanding Restricted Stock
shall lapse, and such Restricted Stock shall become free of all restrictions and
become fully vested, nonforfeitable and transferable to the full extent of the
original grant. The Committee may also provide in an Agreement that a
Participant may elect, by written notice to the Company within 60 days after a
Change of Control Date, to receive, in exchange for shares that were Restricted
Stock immediately before the Change of Control Date, a cash payment equal to the
Fair Market Value of the shares surrendered on the last business day the Common
Stock is traded on the New York Stock Exchange prior to receipt by the Company
of such written notice.
13.04 Rules of Construction. Headings are given to the articles and
sections of this Plan for ease of reference. The reference to any statute,
regulation, or other provision of law shall be construed to refer to any
amendment to or successor of such provision of law.
13.05 Amendment. The Board may amend or terminate this Plan from
time to time; provided, however, that no amendment may become effective until
shareholder approval is obtained if the amendment (i) materially increases the
aggregate number of shares that may be issued pursuant to Options and Common
Stock and Restricted Stock awards, (ii) materially increases the benefits to
Participants under the Plan, or (iii) materially changes the requirements as to
eligibility for participation in the Plan. No amendment shall, without a
Participant's consent, adversely affect any rights of such Participant under any
Grant or Award outstanding at the time such amendment is made except such an
amendment made to cause the Plan or a Grant or Award to qualify for the Rule
16b-3 exemption.
13.06 Duration of Plan. No Grant or Award may be issued under this
Plan before November 1, 1991, or after October 31, 2000. Grants and Awards
issued on or after November 1, 1991, but on or before October 31, 2000, shall
remain valid in accordance with their terms.
13.07 Effective Date. This Plan was initially approved by the Board
of Directors and shareholders of the Company effective as of October 1, 1991.
Amendments to the Plan were approved by the Board of Directors and shareholders
of the Company effective as of May 16,
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1995, by the Board of Directors of the Company effective as of May 21, 1996, by
the Executive Committee on behalf of the Board effective as of November 1, 1996,
by the Board of Directors of the Company effective as of June 16, 1998, by the
Board of Directors and shareholders of the Company effective as of May 18, 1999
and by the Board of Directors of the Company effective as of February 23, 2000.
Page 12
Exhibit 10.31
LANDAMERICA FINANCIAL GROUP, INC.
EMPLOYEE
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT dated as of the 31st day of January, 2000, between
LandAmerica Financial Group, Inc., a Virginia corporation (the "Company"), and
Theodore L. Chandler, Jr. ("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 January 31st, 2000, 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 40,000 shares of the common stock of the Company (the "Common
Stock") at the option price of $17.8125 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 January 31, 2007.
(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
<PAGE>
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 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,
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<PAGE>
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 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
3
<PAGE>
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 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.
4
<PAGE>
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 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.
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<PAGE>
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.
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.
LANDAMERICA FINANCIAL GROUP, INC. OPTIONEE
By: /s/ Charles H. Foster, Jr. /s/ Theodore L. Chandler, Jr.
-------------------------- ------------------------------
Title: Chairman and Chief Executive Officer Theodore L. Chandler, Jr.
Exhibit 10.32
LANDAMERICA FINANCIAL GROUP, INC.
2000 RESTRICTED STOCK AGREEMENT
THIS RESTRICTED STOCK AGREEMENT, dated as of this 31st day of January,
2000, between LandAmerica Financial Group, Inc., a Virginia corporation ("the
Company") and Theodore L. Chandler, Jr. (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 10,000 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
---- ------------
January 31, 2001 25%
January 31, 2002 50%
January 31, 2003 75%
January 31, 2004 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."
<PAGE>
(b) Certificates Issued. The stock certificates
evidencing the Restricted 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.
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<PAGE>
(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 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,
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<PAGE>
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
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,
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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 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.
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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.
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: /s/ Charles H. Foster, Jr.
-------------------------- /s/ Theodore L. Chandler, Jr.
Charles H. Foster, Jr. ------------------------------
Title: Chairman and Chief Executive Officer Theodore L. Chandler, Jr.
6
Exhibit 10.33
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and entered into as of the 31st day
of January, 2000, by and between LandAmerica Financial Group, Inc., a Virginia
corporation (the "Company"), and Theodore L. Chandler, Jr. (the "Executive").
WITNESSETH:
WHEREAS, the Board of Directors of the Company (the "Board"), has
determined that it is in the best interests of the Company and its shareholders
to maintain the services of the Executive for the benefit of the Company and to
encourage the Executive's full attention and dedication to the Company and to
provide the Executive with compensation and benefits arrangements which ensure
that the compensation and benefits expectations of the Executive will be
satisfied and which are competitive with those of other corporations.
NOW, THEREFORE, in consideration of the mutual promises and agreements
set forth in this Agreement, the Company and the Executive agree as follows:
1. Certain Definitions.
(a) The term "affiliated companies" shall include any company
controlled by, controlling or under common control with the Company.
(b) Every capitalized term used herein, but not otherwise
defined herein, shall have the meaning ascribed to such term in the Stock
Purchase Agreement, as amended, dated August 20, 1997 by and among Lawyers Title
Corporation, Lawyers Title Insurance Corporation, Reliance Insurance Company and
Reliance Group Holdings, Inc.
2. Employment Period. The Company hereby agrees to continue the
Executive in its employ, and the Executive hereby agrees to remain in the employ
of the Company, in accordance with the terms and provisions of this Agreement,
for the period commencing on January 31, 2000 and ending on the second
anniversary thereof (the "Employment Period"), unless this Agreement is earlier
terminated pursuant to Section 9 below.
3. Terms of Employment. (a) Position and Duties. During the Employment
Period, and excluding any periods of vacation and leave to which the Executive
is entitled, the Executive agrees to devote reasonable attention and time during
normal business hours to the business and affairs of the Company and, to the
extent necessary to discharge the responsibilities assigned to the Executive
hereunder, to use the Executive's reasonable best efforts to perform faithfully
and efficiently such responsibilities. During the Employment Period it shall not
be a violation of this Agreement for the Executive to (A) serve on corporate,
civic, charitable, title insurance industry association or professional
association boards or committees, (B) deliver lectures, fulfill speaking
engagements or teach at educational institutions and (C) manage personal
investments, so
<PAGE>
long as such activities do not significantly interfere with the performance of
the Executive's responsibilities as an employee of the Company in accordance
with this Agreement.
(b) Compensation.
(i) Base Salary. During the Employment Period, the
Executive shall receive an annual base salary of Three Hundred Thousand Dollars
($300,000.00) (the "Annual Base Salary"), which shall be paid in equal
installments on a semi-monthly basis. The Annual Base Salary shall be reviewed
at least annually and may be increased at any time and from time to time, but in
no event shall the Annual Base Salary be reduced. The Annual Base Salary shall
not be reduced after any such increase and the term Annual Base Salary as
utilized in this Agreement shall refer to the Annual Base Salary as so
increased.
(ii) Annual Bonus. In addition to the Annual Base
Salary, the Executive shall be entitled to an annual bonus (the "Annual Bonus")
as established by the Compensation Committee of the Board (the "Compensation
Committee"). Each such Annual Bonus shall be paid no later than the end of the
third month of the fiscal year next following the fiscal year for which the
Annual Bonus is awarded, unless the Executive shall elect to defer the receipt
of such Annual Bonus pursuant to a Company deferral plan. The Executive's first
such payment shall be in 2001 for 2000 performance. In the event that this
Agreement is terminated prior to the close of the Employment Period pursuant to
either Section 4 or 9 below, the Compensation Committee, in its sole discretion
following a review of all relevant factors, may award the Executive a pro-rata
portion of the Annual Bonus measured to the date of termination for any partial
year completed, or the entire Annual Bonus if Executive terminates as of the
close of the fiscal year.
(iii) Annual Stock Options and Restricted Stock
Awards. The Board of Directors has awarded 40,000 stock options and 10,000
shares of restricted Company stock both effective as of January 31, 2000. The
Executive may receive annual stock options and restricted stock awards as
provided at the discretion of the Compensation Committee.
(iv) Incentive, Savings and Retirement Plans. During
the Employment Period, the Executive shall be entitled to participate in all
incentive (including, without limitation, stock incentive), savings and
retirement plans, practices, policies and programs applicable generally to other
peer executives of the Company and its affiliated companies. For all purposes of
this Agreement, the term "peer executives" means the most senior executives of
the Company, with particular reference to the President of the Company.
(v) Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's family, as the case may be, shall
be eligible for participation in and shall receive all benefits under welfare
benefit plans, practices,
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policies and programs provided by the Company and its affiliated companies
(including, without limitation, medical, prescription, dental, disability,
salary continuance, employee life, group life, accidental death and travel
accident insurance plans and programs) to the extent applicable generally to
other peer executives of the Company and its affiliated companies.
(vi) Supplemental Pension Plan. During the Employment
Period, the Executive shall be entitled to participate in the Company's 1999
Benefit Restoration Plan, as such plan may be amended from time to time, to the
extent applicable generally to other peer executives of the Company and its
affiliated companies.
(vii) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for all reasonable
employment expenses incurred by the Executive in accordance with the policies in
effect generally at any time with respect to other peer executives of the
Company and its affiliated companies.
(viii) Fringe Benefits. During the Employment Period,
the Executive shall be entitled to fringe benefits in accordance with the plans,
practices, programs and policies of the Company and its affiliated companies in
effect generally at any time with respect to other peer executives of the
Company and its affiliated companies.
(ix) Office and Support Staff. During the Employment
Period, the Executive shall be entitled to an office or offices of a size and
with furnishings and other appointments, and to personal secretarial and other
assistance as provided generally at any time to other peer executives of the
Company and its affiliated companies.
(x) Deferred Compensation. During the Employment
Period, the Executive shall be entitled to deferred compensation benefits in
accordance with the plans, practices, programs and policies of the Company and
its affiliated companies in effect generally at any time with respect to other
peer executives of the Company and its affiliated companies.
(xi) Vacation. During the Employment Period, the
Executive shall be entitled to a minimum of four weeks paid vacation in
accordance with the plans, policies, programs and practices of the Company and
its affiliated companies as in effect generally at any time with respect to
other peer executives of the Company and its affiliated companies.
(xii) Financial, Tax and Estate Planning Allowance.
During the Employment Period, the Executive shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred by the Executive for the
purpose of personal financial, tax and estate planning, up to a maximum amount
of Seven Thousand Five Hundred Dollars ($7,500.00) for fiscal year 2000, and
Five Thousand Dollars ($5,000.00) per fiscal year thereafter, in accordance with
the policies in effect generally at any time with respect to other peer
executives of the Company and its affiliated companies.
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<PAGE>
4. Termination of Employment.
(a) Death or Disability. The Executive's employment shall
terminate automatically upon the Executive's death during the Employment Period.
If the Company determines in good faith that the Disability of the Executive, as
defined in the Company's long-term disability plan, has occurred during the
Employment Period, it may give to the Executive written notice in accordance
with Section 10 (b) of its intention to terminate the Executive's employment. In
such event, the Executive's employment with the Company shall terminate
effective on the 30th day after receipt of such notice by the Executive (the
"Disability Effective Date"), provided that, within the thirty (30) days after
such receipt, the Executive shall not have returned to full-time performance of
the Executive's duties.
(b) Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes of this
Agreement, "Cause" shall mean (i) a material breach by the Executive of the
Executive's obligations under Section 3(a) (other than as a result of incapacity
due to physical or mental illness) which is demonstrably willful and deliberate
on the Executive's part, which is committed in bad faith or without reasonable
belief that such breach is in the best interests of the Company and which is not
remedied in a reasonable period of time after receipt of written notice from the
Company specifying such breach or (ii) the conviction of the Executive of a
felony involving moral turpitude.
(c) Good Reason. The Executive's employment may be terminated
during the Employment Period by the Executive for Good Reason. For purposes of
this Agreement, "Good Reason" shall mean:
(i) the assignment to the Executive of any duties
inconsistent generally with the Executive's position (including status, offices,
titles and reporting requirements), authority, duties or responsibilities as
contemplated by Section 3(a) or any other action by the Company which results in
a diminution in such position, authority, duties or responsibilities, excluding
for this purpose an isolated, insubstantial and inadvertent action not taken in
bad faith and which is remedied by the Company promptly after receipt of notice
thereof given by the Executive.
(ii) any failure by the Company to comply with any of
the provisions of Section 3(b), other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by the Executive;
(iii) any purported termination by the Company of the
Executive's employment otherwise than as expressly permitted by this Agreement;
or
(iv) any failure by the Company to comply with and
satisfy Section 8(c), provided that such successor has received at least ten
days prior written notice from
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<PAGE>
the Company or the Executive of the requirements of Section 8(c).
For purposes of this Section 4(c), any good faith determination of "Good Reason"
made by the Executive shall be conclusive.
(d) Notice of Termination. Any termination by the Company for
Cause, or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 10(b).
For purposes of this Agreement, a "Notice of Termination" means a written notice
which (i) indicates the specific termination provision in this Agreement relied
upon, (ii) to the extent applicable, sets forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated and (iii) if the Date of Termination
(as defined below) is other than the date of receipt of such notice, specifies
the termination date (which date shall be not more than fifteen (15) days after
the giving of such notice). The failure by the executive or the Company to set
forth in the Notice of Termination any fact or circumstance which contributes to
a showing of good Reason or Cause shall not waive any right of the Executive or
the Company hereunder or preclude the Executive or the Company from asserting
such fact or circumstance in enforcing the Executive's or the Company's rights
hereunder.
(e) Date of Termination. "Date of Termination" means (i) if
the Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company notifies the
Executive of such termination and (iii) if the Executive's employment is
terminated by reason of death or Disability, the Date of Termination shall be
the date of death of the Executive or the Disability Effective Date, as the case
may be.
5. Obligations of the Company upon Termination.
(a) Good Reason; Other than for Cause or Disability. If,
during the Employment Period, the Company shall terminate the Executive's
employment other than for Cause or Disability or the Executive shall terminate
employment for Good Reason:
(i) All stock options and restricted stock held by
the Executive on the Date of Termination shall vest and be immediately
exercisable.
(ii) This Agreement shall terminate and the Executive
shall receive, until the end of the initial employment term, (i) his Annual Base
Salary; plus (ii) one-half (1/2) of the sum of the highest Annual Bonus paid for
any two (2) fiscal years in the five (5) fiscal years immediately preceding that
year in which the Date of Termination occurs; provided, however, that until
Executive has completed two (2) fiscal years with the Company, the Annual Bonus
for termination benefits shall be stipulated at $300,000.
(b) Disability. If the Executive's employment is terminated by
reason of
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the Executive's Disability during the Employment Period, this Agreement shall
terminate and the Executive shall receive, until the end of the initial
employment term, (i) his Annual Base Salary; plus (ii) one-half (1/2) of the sum
of the highest Annual Bonus paid for any two (2) fiscal years in the five (5)
fiscal years immediately preceding that year in which the Date of Termination
occurs.
(c) Cause, Other than for Good Reason or Death. If the
Executive terminates employment during the Employment Period, excluding a
termination for Good Reason, or if the Executive's employment shall be
terminated for Cause or by reason of the Executive's death during the Employment
Period, this Agreement shall terminate without further obligations to the
Executive other than the obligation to pay to the Executive his Annual Base
Salary through the Date of Termination plus the amount of any compensation
previously deferred by the Executive and vested on the Date of Termination.
6. Nonexclusivity of Rights. Except as provided in Section 5, nothing
in this Agreement shall prevent or limit the Executive's continuing or future
participation in any plan, program, policy or practice provided by the Company
or any of its affiliated companies and for which the Executive may qualify nor
shall anything herein limit or otherwise affect such rights as the Executive may
have under any contract or agreement with the Company or any of its affiliated
companies. Amounts which are vested benefits or which the Executive is otherwise
entitled to receive under any plan, policy, practice or program of or any
contract or agreement with the Company or any of its affiliated companies at or
subsequent to the Date of Termination shall be payable in accordance with such
plan, policy, practice or program or contract or agreement except as explicitly
modified by this Agreement.
7. Restrictive Covenants.
(a) Confidential Information. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its affiliated
companies, and their respective businesses, which shall have been obtained by
the Executive during the Executive's employment by the Company or any of its
affiliated companies and which shall not be or become public knowledge (other
than by acts by the Executive or representatives of the Executive in violation
of this Agreement). After termination of the Executive's employment with the
Company, the Executive shall not, without the prior written consent of the
Company or except as may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge or data to anyone other
than the Company and those designated by it.
(b) Ownership of Information. The Executive acknowledges and
agrees that all memoranda, notes, reports, records and other documents made or
compiled by the Executive, or made available to the Executive during the term of
his employment concerning the business of the Company or any of its affiliated
companies, shall be the Company's property and shall be delivered to the Company
upon the termination of the
6
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Executive's employment hereunder or at any other time upon request by the Board.
(c) Non-Competition. The Executive agrees that, for so long as
he is employed by the Company and for one (1) year at, or the termination of the
Executive's employment with the Company, he will not, without the prior written
consent of the Company, directly or indirectly, engage in or have an interest in
(as owner, partner, shareholder, employee, director, officer, consultant or
otherwise), with or without compensation, any business which is in competition
with the lines of business actually being conducted by the Company during the
term of employment or on the date that the employment terminates. Nothing
herein, however, will prohibit the Executive from acquiring or holding not more
than five percent (5%) of any class of publicly traded securities of any such
business, provided that such securities entitle the Executive to no more than
five percent (5%) of the total outstanding votes entitled to be cast by
security-holders of such business in matters in which such security-holders are
entitled to vote.
(d) Non-Interference.
(i) The Executive agrees and covenants that, for a
period of one (1) year after the Date of Termination of this Agreement, the
Executive shall not, without the prior written approval of the Board, Interfere
directly or indirectly in any way with the Company or any of its affiliated
companies.
(ii) For purposes of this Agreement, "Interfere"
shall mean, to solicit, entice, persuade, induce, influence or attempt to
influence, directly or indirectly, clients or Prospective Clients, employees,
agents or independent contractors of the Company or any of its affiliated
companies to restrict, reduce, sever or otherwise alter their relationship with
the Company or any of its affiliated companies.
(iii) For purposes of this Agreement, "Prospective
Clients" shall mean persons or entities identified by the Company as prospective
clients of the Company or any of its affiliated companies within twelve (12)
months of the Date of Termination and with whom the Company or such affiliated
companies have had contact.
(e) Severability and Reduction in Scope of Provisions. The
covenants and agreements of the Executive contained in paragraphs (a) through
(d) above are separate and distinct covenants and agreements of the Executive
and if any part of any such paragraph is void, invalid or unenforceable, such
paragraph shall be severed from this Agreement and shall not affect or impair
any other paragraph or the balance of this Agreement, and this Agreement with
the void, invalid or unenforceable paragraph stricken herefrom shall remain in
full force and effect. Further, the periods and scope of the restrictions set
forth in any such paragraph or subparagraph shall be reduced by the minimum
amount necessary to reform such paragraph or subparagraph to the maximum level
of enforcement permitted to the Company by the law governing this Agreement, if
such reform is permitted.
(f) Remedy for Breach. The Executive acknowledges that the
Company
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and its affiliated companies or any one of them will be irrevocably damaged if
all of the provisions of this Section 7 are not specifically enforced.
Accordingly, the Executive agrees that, in addition to any other relief to which
the Company may be entitled, any one of the Company or its affiliated companies
will be entitled to seek and obtain injunctive relief from a court of competent
jurisdiction for the purpose of restraining the Executive from any actual or
threatened breach of this Section 7.
(g) Validity of Covenant. The Executive agrees that the
covenants contained in this Section 7 are reasonably necessary to protect the
legitimate interests of the Company and its affiliated companies, are reasonable
with respect to time and territory, and do not interfere with the interests of
the public. The Executive further agrees that the descriptions of the covenants
contained in this Section 7 are sufficiently accurate and definite to inform the
Executive of the scope of the covenants. Finally, the Executive agrees that the
consideration provided for in this Agreement is full, fair and adequate to
support the Executive's obligations hereunder.
8. Successors.
(a) This Agreement is personal to the Executive and without
the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
9. Termination of Agreement upon a Change of Control. Upon any Change
of Control, as that term is defined in that certain Change of Control Employment
Agreement, of even date herewith, between the Company and the Executive, the
Change of Control Employment Agreement shall become effective, and shall apply
to the extent its terms are more advantageous to the Executive.
10. Miscellaneous.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Virginia, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and
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shall have no force or effect. This Agreement may not be amended or modified
otherwise than by a written agreement executed by the parties hereto or their
respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive to: If to the Company to:
- ----------------------- ---------------------
Theodore L. Chandler, Jr. LandAmerica Financial Group, Inc.
3650 Landsdowne Road 101 Gateway Centre Parkway
Midlothian, Virginia 23113 Richmond, Virginia 23235
Attention: Russell W. Jordan, III, Esquire
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) The Company may withhold from any amounts payable under
this Agreement such Federal, state or local taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon
strict compliance with any provision hereof or any other provision of this
Agreement or the failure to assert any right the Executive or the Company may
have hereunder, including, without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to Section 4(c)(i)-(iv), shall not
be deemed to be a waiver of such provision or right or any other provision or
right of this Agreement.
(f) In the event of a dispute with respect to any term of this
Agreement, either party may elect, by delivering written notice to the other
stating the nature of the dispute, to have such dispute settled by arbitration.
Within ten (10) days of the delivery of the written notice electing arbitration
both parties shall appoint an arbitrator and within ten (10) days thereafter the
two arbitrators shall select a third. If a party does not appoint an arbitrator
within the ten-day period, such party shall forfeit the right to do so and the
matter shall be settled by the sole appointed arbitrator. The arbitrator(s)
shall follow the
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rules of arbitration established by the American Arbitration Association and
shall render a decision within ten (10) days of the heating which shall occur no
later than twenty (20) days after the arbitrator(s) is/are appointed. The
decision of a majority of the arbitrators, or of the sole arbitrator, as the
case may be, shall be binding upon the respective parties to the arbitration
hearing, their heirs, legal representatives, assigns and successors. Each party
shall pay the fees and expenses of their chosen arbitrator, and shall pay
one-half of the fees and expenses of the third arbitrator. If only one
arbitrator is appointed each Party shall pay one-half of his or her fees and
expenses. Judgment upon any award rendered by the arbitrator(s) may be entered
in any court of competent jurisdiction.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board, the Company has caused these
presents to be executed in its name on its behalf, all as of the day and year
first above written.
LANDAMERICA FINANCIAL EXECUTIVE
GROUP, INC.
By: /s/ Charles H. Foster, Jr. By: /s/ Theodore L. Chandler, Jr.
-------------------------- -----------------------------
Charles H. Foster, Jr., Theodore L. Chandler, Jr.
Chief Executive Officer
10
Exhibit 10.34
CHANGE OF CONTROL EMPLOYMENT AGREEMENT
--------------------------------------
AGREEMENT by and between LandAmerica Financial Group, Inc., a Virginia
corporation (the "Company"), and Theodore L. Chandler, Jr. (the "Executive"),
dated as of the 31st day of January, 2000.
The Board of Directors of the Company (the "Board"), has determined
that it is in the best interests of the Company and its shareholders to assure
that the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined below) of the Company. The Board believes it is imperative to diminish
the inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control and
to encourage the Executive's full attention and dedication to the Company
currently and in the event of any threatened or pending Change of Control, and
to provide the Executive with compensation and benefits arrangements upon a
Change of Control which ensure that the compensation and benefits expectations
of the Executive will be satisfied and which are competitive with those of other
corporations. Therefore, in order to accomplish these objectives, the Board has
caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions.
(a) The "Effective Date" shall mean the first date during
the Change of Control Period (as defined in Section 1(b)) on which a Change of
Control (as defined in Section 2) occurs. Anything in this Agreement to the
contrary notwithstanding, if a Change of Control occurs and if the Executive's
employment with the Company is terminated prior to the date on which the Change
of Control occurs, and if it is reasonably demonstrated by the Executive that
such termination of employment (i) was at the request of a third party who has
taken steps reasonably calculated to effect a Change of Control or (ii)
otherwise arose in connection with or anticipation of a Change of Control, then
for all purposes of this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination of employment.
(b) The "Change of Control Period" shall mean the period
commencing on the date hereof and ending on the third anniversary of the date
hereof; provided, however, that commencing on the date one year after the date
hereof, and on each annual anniversary of such date (such date and each annual
anniversary thereof shall be hereinafter referred to as the "Renewal Date"),
unless previously terminated, the Change of Control Period shall be
automatically extended so as to terminate three years from such Renewal Date,
unless at least 60 days prior to the Renewal Date the Company shall give notice
to the Executive that the Change of Control Period shall not be so extended.
(c) "Subsidiary" shall mean any corporation that is
directly, or indirectly though one or more intermediaries, controlled by the
Company.
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2. Change of Control. For the purpose of this Agreement, a
"Change of Control" shall mean:
(a) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 20% or more of either (i) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (ii) the combined voting
power of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this subsection (a), the
following acquisitions shall not constitute a Change of Control: (i) any
acquisition directly from the Company, (ii) any acquisition by the Company,
(iii) any acquisition by any employee benefit plan (or related trust) sponsored
or maintained by the Company or any corporation controlled by the Company or
(iv) any acquisition by any corporation pursuant to a transaction which complies
with clauses (i), (ii) and (iii) of subsection (c) of this Section 2; or
(b) Individuals who, as of the date hereof, constitute
the Board (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director 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 the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board; or
(c) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of the
assets of the Company (a "Business Combination"), in each case, unless,
following such Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 50% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Business Combination (including,
without limitation a corporation which as a result of such transaction owns the
Company or all or substantially all of the Company's assets either directly or
through one or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the case may
be, (ii) no Person (excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of the Company or
such corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 20% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such Business
Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such
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ownership existed prior to the Business Combination and (iii) at least a
majority of the members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent Board at the time
of the execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(d) Approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.
Notwithstanding the foregoing, for purposes of subsection (a) of this
Section 2, a Change of Control shall not be deemed to have taken place if, as a
result of an acquisition by the Company which reduces the Outstanding Company
Common Stock or the Outstanding Company Voting Securities, the beneficial
ownership of a Person increases to 20% or more of the Outstanding Company Common
Stock or the Outstanding Company Voting Securities; provided, however, that if a
Person shall become the beneficial owner of 20% or more of the Outstanding
Company Common Stock or the Outstanding Company Voting Securities by reason of
share purchases by the Company and, after such share purchases by the Company,
such Person becomes the beneficial owner of any additional shares of the
Outstanding Company Common Stock or the Outstanding Company Voting Stock, for
purposes of subsection (a) of this Section 2, a Change of Control shall be
deemed to have taken place.
3. Employment Period. If the Executive is employed by the Company
and/or a Subsidiary on the Effective Date, the Company hereby agrees to continue
to employ and to cause such Subsidiary to continue to employ the Executive, and
the Executive hereby agrees to remain in the employ of the Company and/or such
Subsidiary, subject to the terms and conditions of this Agreement, for the
period commencing on the Effective Date and ending on the third anniversary of
such date (the "Employment Period"). For purposes of this Agreement, unless
expressly limited to LandAmerica Financial Group, Inc., "Company" hereinafter
shall mean each of LandAmerica Financial Group, Inc. and/or any of its
Subsidiaries or affiliated companies that employ the Executive. As used in this
Agreement, the term "affiliated companies" shall include any company controlled
by, controlling or under common control with the Company.
4. Terms of Employment.
(a) Position and Duties.
(i) During the Employment Period, (A) the
Executive's position (including status, offices, titles and reporting
requirements), authority, duties and responsibilities shall be at least
commensurate in all material respects with the most significant of those held,
exercised and assigned at any time during the 120-day period immediately
preceding the Effective Date and (B) the Executive's services shall be performed
at the location where the Executive was employed immediately preceding the
Effective Date or any office or location less than 35 miles from such location.
(ii) During the Employment Period, and excluding
any periods of vacation and sick leave to which the Executive is entitled, the
Executive agrees to devote reasonable attention and time during normal business
hours to the business and affairs of the
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Company and, to the extent necessary to discharge the responsibilities assigned
to the Executive hereunder, to use the Executive's reasonable best efforts to
perform faithfully and efficiently such responsibilities. During the Employment
Period it shall not be a violation of this Agreement for the Executive to (A)
serve on corporate, civic or charitable boards or committees, (B) deliver
lectures, fulfill speaking engagements or teach at educational institutions and
(C) manage personal investments, so long as such activities do not significantly
interfere with the performance of the Executive's responsibilities as an
employee of the Company in accordance with this Agreement. It is expressly
understood and agreed that to the extent that any such activities have been
conducted by the Executive prior to the Effective Date, the continued conduct of
such activities (or the conduct of activities similar in nature and scope
thereto) subsequent to the Effective Date shall not thereafter be deemed to
interfere with the performance of the Executive's responsibilities to the
Company.
(b) Compensation.
(i) Base Salary. During the Employment Period,
the Executive shall receive an annual base salary ("Annual Base Salary"), which
shall be paid at a monthly rate, at least equal to 12 times the highest monthly
base salary paid or payable, including any base salary which has been earned but
deferred, to the Executive by the Company in respect of the 12-month period
immediately preceding the month in which the Effective Date occurs. During the
Employment Period, the Annual Base Salary shall be reviewed no more than 12
months after the last salary increase awarded to the Executive prior to the
Effective Date and thereafter at least annually. Any increase in Annual Base
Salary shall not serve to limit or reduce any other obligation to the Executive
under this Agreement. Annual Base Salary shall not be reduced after any such
increase and the term Annual Base Salary as utilized in this Agreement shall
refer to Annual Base Salary as so increased.
(ii) Annual Bonus. In addition to Annual Base
Salary, the Executive shall be awarded, for each fiscal year ending during the
Employment Period, an annual bonus (the "Annual Bonus") in cash at least equal
to the Executive's highest bonus under annual incentive plans of the Company or
any comparable bonus under any predecessor or successor plan, for the last three
full fiscal years prior to the Effective Date (annualized in the event that the
Executive was not employed by the Company for the whole of such fiscal year)
(the "Recent Annual Bonus"); provided, however, that until Executive has
completed two (2) fiscal years with the Company, the Annual Bonus for all
purposes herein, including specifically paragraph 6, shall be stipulated as
$300,000. Each such Annual Bonus shall be paid no later than the end of the
third month of the fiscal year next following the fiscal year for which the
Annual Bonus is awarded, unless the Executive shall elect to defer the receipt
of such Annual Bonus.
(iii) Incentive, Savings and Retirement Plans.
During the Employment Period, the Executive shall be entitled to participate in
all incentive, savings and retirement plans, practices, policies and programs
applicable generally to other peer executives of the Company, but in no event
shall such plans, practices, policies and programs provide the Executive with
incentive opportunities (measured with respect to both regular and special
incentive opportunities, to the extent, if any, that such distinction is
applicable), savings opportunities and retirement benefit opportunities, in each
case, less favorable, in the aggregate,
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than the most favorable of those provided by the Company and its affiliated
companies for the Executive under such plans, practices, policies and programs
as in effect at any time during the 120-day period immediately preceding the
Effective Date or if more favorable to the Executive, those provided generally
at any time after the Effective Date to other peer executives of the Company.
(iv) Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's family, as the case may be, shall
be eligible for participation in and shall receive all benefits under welfare
benefit plans, practices, policies and programs provided by the Company
(including, without limitation, medical, prescription, dental, disability,
employee life, group life, accidental death and travel accident insurance plans
and programs) to the extent applicable generally to other peer executives of the
Company, but in no event shall such plans, practices, policies and programs
provide the Executive with benefits which are less favorable, in the aggregate,
than the most favorable of such plans, practices, policies and programs in
effect for the Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Executive, those
provided generally at any time after the Effective Date to other peer executives
of the Company.
(v) Expenses. During the Employment Period the
Executive shall be entitled to receive prompt reimbursement for all reasonable
expenses incurred by the Executive in accordance with the most favorable
policies, practices and procedures of the Company in effect for the Executive at
any time during the 120-day period immediately preceding the Effective Date or,
if more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company.
(vi) Fringe Benefits. During the Employment
Period, the Executive shall be entitled to fringe benefits, including, without
limitation, tax and financial planning services, payment of club dues, and, if
applicable, use of an automobile and payment of related expenses, in accordance
with the most favorable plans, practices, programs and policies of the Company
and its affiliated companies in effect for the Executive at any time during
the120-day period immediately preceding the Effective Date or, if more favorable
to the Executive, as in effect generally at any time thereafter with respect to
other peer executives of the Company.
(vii) Office and Support Staff. During the
Employment Period, the Executive shall be entitled to an office or offices of a
size and with furnishings and other appointments, and to exclusive personal
secretarial and other assistance, at least equal to the most favorable of the
foregoing provided to the Executive by the Company and its affiliated companies
at anytime during the 120-day period immediately preceding the Effective Date
or, if more favorable to the Executive, as provided generally at any time
thereafter with respect to other peer executives of the Company.
(viii) Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance with the most
favorable plans, policies, programs and practices of the Company and its
affiliated companies as in effect for the Executive at any time during the
120-day period immediately preceding the Effective Date or, if more favorable to
the
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Executive, as in effect generally at any time thereafter with respect to other
peer executives of the Company.
5. Termination of Employment.
(a) Death or Disability. The Executive's employment shall
terminate automatically upon the Executive's death during the Employment Period.
If the Company determines in good faith that the Disability of the Executive has
occurred during the Employment Period (pursuant to the definition of Disability
set forth below), it may give to the Executive written notice in accordance with
Section 12(b) of this Agreement of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the Company shall
terminate effective on the 30th day after receipt of such notice by the
Executive (the "Disability Effective Date"), provided that, within the 30 days
after such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. For purposes of this Agreement,
"Disability" shall mean that the Executive is unable, by reason of physical or
mental incapacity, to perform his duties to the Company on a full-time basis for
a period longer than 3 consecutive months or more than 6 months in any
consecutive 12-month period. The existence of a Disability shall be determined
by the Board of Directors of the Company, based upon due consideration of the
opinion of the Executive's personal physician or physicians and of the opinion
of any physician or physicians selected by the Board of Directors for these
purposes. If the Executive's personal physician disagrees with the physician
retained by the Company, the Board of Directors will retain an impartial
physician selected by the Executive's personal physician and the Company's
physician and the opinion of the impartial physician shall be binding upon the
Company and the Executive. The Executive shall submit to examination by any
physician or physicians so selected by the Board of Directors, and shall
otherwise cooperate with the Board of Directors in making the determination
contemplated hereunder, such cooperation to include, without limitation,
consenting to the release of information by any such physician(s) to the Board
of Directors.
(b) Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes of this
Agreement, "Cause" shall mean:
(i) the willful and continued failure of the
Executive to perform substantially the Executive's duties with the Company
(other than any such failure resulting from incapacity due to physical or mental
illness), after a written demand for substantial performance is delivered to the
Executive by the Board or the Chief Executive Officer of the Company which
specifically identifies the manner in which the Board or Chief Executive Officer
believes that the Executive has not substantially performed the Executive's
duties, or
(ii) the willful engaging by the Executive in
illegal conduct or gross misconduct which is materially and demonstrably
injurious to the Company.
For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
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adopted by the Board or upon the instructions of the Chief Executive Officer or
a senior officer of the Company or based upon the advice of counsel for the
Company shall be conclusively presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of the Company. The cessation
of employment of the Executive shall not be deemed to be for Cause unless and
until there shall have been delivered to the Executive a copy of a resolution
duly adopted by the affirmative vote of not less than three-quarters of the
entire membership of the Board at a meeting of the Board called and held for
such purpose (after reasonable notice is provided to the Executive and the
Executive is given an opportunity, together with counsel, to be heard before the
Board), finding that, in the good faith opinion of the Board, the Executive is
guilty of the conduct described in subparagraph (i) or (ii) above, and
specifying the particulars thereof in detail.
(c) Good Reason; Window Period. The Executive's
employment may be terminated (i) during the Employment Period by the Executive
for Good Reason or (ii) during the Window Period by Executive without any
reason. For purposes of this Agreement, "Window Period" shall mean the 30-day
period immediately following the first anniversary of the Effective Date. For
purposes of this Agreement, "Good Reason" shall mean:
(i) the assignment to the Executive of any
duties inconsistent in any respect with the Executive's position (including
status, offices, titles and reporting requirements), authority, duties or
responsibilities as contemplated by Section 4(a) of this Agreement, or any other
action by the Company which results in a diminution in such position, authority,
duties or responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the
Executive;
(ii) any failure by the Company to comply with
any of the provisions of Section 4(b) of this Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the
Executive;
(iii) the Company's requiring the Executive to be
based at any office or location other than as provided in Section 4(a)(i)(B)
hereof or the Company's requiring the Executive to travel on Company business to
a substantially greater extent than required immediately prior to the Effective
Date;
(iv) any purported termination by the Company of
the Executive's employment otherwise than as expressly permitted by this
Agreement; or
(v) any failure by the Company to comply with
and satisfy Section 11(c) of this Agreement.
For purposes of this Section 5(c), any good faith determination of "Good Reason"
made by the Executive shall be conclusive.
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(d) Notice of Termination. Any termination by the Company
for Cause, or by the Executive during the Window Period or for Good Reason,
shall be communicated by Notice of Termination to the other party hereto given
in accordance with Section 12(b) of this Agreement. For purposes of this
Agreement, a "Notice of Termination" means a written notice which (i) indicates
the specific termination provision in this Agreement relied upon, (ii) to the
extent applicable, sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated and (iii) if the Date of Termination (as defined
below) is other than the date of receipt of such notice, specifies the
termination date (which date shall be not more than thirty days after the giving
of such notice). The failure by the Executive or the Company to set forth in the
Notice of Termination any fact or circumstance which contributes to a showing of
Good Reason or Cause shall not waive any right of the Executive or the Company,
respectively, hereunder or preclude the Executive or the Company, respectively,
from asserting such fact or circumstance in enforcing the Executive's or the
Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i)
if the Executive's employment is terminated by the Company for Cause, or by the
Executive during the Window Period or for Good Reason, the date of receipt of
the Notice of Termination or any later date specified therein, as the case
maybe, (ii) if the Executive's employment is terminated by the Company other
than for Cause or Disability, the Date of Termination shall be the date on which
the Company notifies the Executive of such termination and (iii) if the
Executive's employment is terminated by reason of death or Disability, the Date
of Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be.
6. Obligations of the Company upon Termination.
(a) During the Window Period. If, during the Employment
Period, the Executive shall terminate employment without any reason during the
Window Period:
(i) the Company shall pay to the Executive in a
lump sum in cash within 30 days after the Date of Termination the sum of (1) the
Executive's Annual Base Salary through the Date of Termination to the extent not
theretofore paid and (2) the product of (x) the higher of (I) the Recent Annual
Bonus and (II) the Annual Bonus paid or payable, including any bonus or portion
thereof which has been earned but deferred (and annualized for any fiscal year
consisting of less than twelve full months or during which the Executive was
employed for less than 12 full months), for the most recently completed fiscal
year during the Employment Period, if any (such higher amount being referred to
as the "Highest Annual Bonus") and (y) a fraction, the numerator of which is the
number of days in the current fiscal year through the Date of Termination, and
the denominator of which is 365, in each case to the extent not theretofore paid
(the sum of the amounts described in clauses (1) and (2) shall be hereinafter
referred to as the "Accrued Obligations"); and
(ii) the amount equal to the sum of (x) the
Executive's Annual Base Salary and (y) the Highest Annual Bonus; and
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(iii) for three years after the Executive's Date
of Termination, or such longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, the Company shall continue
benefits to the Executive and/or the Executive's family at least equal to those
which would have been provided to them in accordance with the plans, programs,
practices and policies described in Section 4(b)(iv) of this Agreement if the
Executive's employment had not been terminated or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies and their families,
provided, however, that if the Executive becomes reemployed with another
employer and is eligible to receive medical or other welfare benefits under
another employer provided plan, the medical and other welfare benefits described
herein shall be secondary to those provided under such other plan during such
applicable period of eligibility. For purposes of determining eligibility (but
not the time of commencement of benefits) of the Executive for retiree benefits
pursuant to such plans, practices, programs and policies, the Executive shall be
considered to have remained employed until 3 years after the Date of Termination
and to have retired on the last day of such period; and
(iv) to the extent not theretofore paid or
provided, the Company shall timely pay or provide to the Executive any other
amounts or benefits required to be paid or provided or which the Executive is
eligible to receive under any plan, program, policy or practice or contract or
agreement of the Company and its affiliated companies (such other amounts and
benefits shall be hereinafter referred to as the "Other Benefits").
(b) Good Reason; Other Than for Cause, Death or
Disability. If, during the Employment Period, the Company shall terminate the
Executive's employment other than for Cause, Death or Disability or the
Executive shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a
lump sum in cash within 30 days after the Date of Termination the aggregate of
the following amounts:
A. the Accrued Obligations; and
B. the amount equal to the product of
(1) three times and (2) the sum of (x) the Executive's Annual Base Salary and
(y) the Highest Annual Bonus; and
C. an amount equal to the excess of
(a) the actuarial equivalent of the benefit under the qualified defined benefit
retirement plan of the Company or any of its affiliated companies (the
"Retirement Plan") (utilizing actuarial assumptions no less favorable to the
Executive than those in effect under the Retirement Plan immediately prior to
the Effective Date), and any excess or supplemental retirement plan of the
Company or any of its affiliated companies in which the Executive participates
(together, the "BRP") which the Executive would receive if the Executive's
employment continued for 3 years after the Date of Termination assuming for this
purpose that all accrued benefits are fully vested, and, assuming that the
Executive's compensation in each of the three years is that required by Section
4(b)(i) and Section 4(b)(ii), over (b) the actuarial equivalent of the
Executive's actual benefit (paid or payable), if any, under the Retirement Plan
and the BRP as of the Date of Termination;
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(ii) for three years after the Executive's Date
of Termination, or such longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, the Company shall continue
benefits to the Executive and/or the Executive's family at least equal to those
which would have been provided to them in accordance with the plans, programs,
practices and policies described in Section 4(b)(iv) of this Agreement if the
Executive's employment had not been terminated or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to other
peer executives of the Company and their families, provided, however, that if
the Executive becomes reemployed with another employer and is eligible to
receive medical or other welfare benefits under another employer provided plan,
the medical and other welfare benefits described herein shall be secondary to
those provided under such other plan during such applicable period of
eligibility. For purposes of determining eligibility (but not the time of
commencement of benefits) of the Executive for retiree benefits pursuant to such
plans, practices, programs and policies, the Executive shall be considered to
have remained employed until 3 years after the Date of Termination and to have
retired on the last day of such period;
(iii) the Company shall, at its sole expense as
incurred, provide the Executive with outplacement services the scope and
provider of which shall be selected by the Executive in his sole discretion; and
(iv) to the extent not theretofore paid or
provided, the Company shall timely pay or provide to the Executive any other
amounts or benefits required to be paid or provided or which the Executive is
eligible to receive under any plan, program, policy or practice or contract or
agreement of the Company and its affiliated companies (such other amounts and
benefits shall be hereinafter referred to as the "Other Benefits").
(c) Death. If the Executive's employment is terminated by
reason of the Executive's death during the Employment Period, this Agreement
shall terminate without further obligations to the Executive's legal
representatives under this Agreement, other than for payment of Accrued
Obligations and the timely payment or provision of Other Benefits. Accrued
Obligations shall be paid to the Executive's estate or beneficiary, as
applicable, in a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of Other Benefits, the term Other Benefits as
utilized in this Section 6(c) shall include, without limitation, and the
Executive's estate and/or beneficiaries shall be entitled to receive, benefits
at least equal to the most favorable benefits provided by the Company to the
estates and beneficiaries of peer executives of the Company under such plans,
programs, practices and policies relating to death benefits, if any, as in
effect with respect to other peer executives and their beneficiaries at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive's estate and/or the Executive's beneficiaries, as in
effect on the date of the Executive's death with respect to other peer
executives of the Company and their beneficiaries.
(d) Disability. If the Executive's employment is
terminated by reason of the Executive's Disability during the Employment Period,
this Agreement shall terminate without further obligations to the Executive,
other than for payment of Accrued Obligations and the timely payment or
provision of Other Benefits. Accrued Obligations shall be paid to the Executive
in a lump sum in cash within 30 days of the Date of Termination. With respect to
the
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provision of Other Benefits, the term Other Benefits as utilized in this Section
6(d) shall include, and the Executive shall be entitled after the Disability
Effective Date to receive, disability and other benefits at least equal to the
most favorable of those generally provided by the Company to disabled executives
and/or their families in accordance with such plans, programs, practices and
policies relating to disability, if any, as in effect generally with respect to
other peer executives and their families at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the Executive
and/or the Executive's family, as in effect at any time thereafter generally
with respect to other peer executives of the Company and their families.
(e) Cause; Other than for Good Reason. If the Executive's
employment shall be terminated for Cause during the Employment Period, this
Agreement shall terminate without further obligations to the Executive other
than the obligation to pay to the Executive (x) his Annual Base Salary through
the Date of Termination, (y) the amount of any compensation previously deferred
by the Executive, and (z) Other Benefits, in each case to the extent theretofore
unpaid. If the Executive voluntarily terminates employment during the Employment
Period, excluding a termination for Good Reason, this Agreement shall terminate
without further obligations to the Executive, other than for Accrued Obligations
and the timely payment or provision of Other Benefits. In such case, all Accrued
Obligations shall be paid to the Executive in a lump sum in cash within 30 days
of the Date of Termination.
7. Non-exclusivity of Rights. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company and for which the Executive
may qualify, nor, subject to Section 12(f), shall anything herein limit or
otherwise affect such rights as the Executive may have under any contract or
agreement with the Company. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan, policy, practice or
program of or any contract or agreement with the Company at or subsequent to the
Date of Termination shall be payable in accordance with such plan, policy,
practice or program or contract or agreement except as explicitly modified by
this Agreement.
8. Full Settlement. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement and such amounts
shall not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses which the Executive may reasonably incur as a result of
any contest (regardless of the outcome thereof) by the Company, the Executive or
others of the validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of performance thereof (including as a result
of any contest by the Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the applicable
Federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code
of 1986, as amended (the "Code").
9. Certain Additional Payments by the Company.
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(a) Anything in this Agreement to the contrary
notwithstanding and except as set forth below, in the event it shall be
determined that any payment or distribution by the Company to or for the benefit
of the Executive (whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise, but determined without
regard to any additional payments required under this Section 9) (a "Payment")
would be subject to the excise tax imposed by Section 4999 of the Code or any
interest or penalties are incurred by the Executive with respect to such excise
tax (such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then the Executive
shall be entitled to receive an additional payment (a "Gross-Up Payment") in an
amount such that after payment by the Executive of all taxes (including any
interest or penalties imposed with respect to such taxes), including, without
limitation, any income taxes (and any interest and penalties imposed with
respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
the Payments. Notwithstanding the foregoing provisions of this Section 9(a), if
it shall be determined that the Executive is entitled to a Gross-Up Payment, but
that the Payments do not exceed 110% of the greatest amount that could be paid
to the Executive such that the receipt of Payments would not give rise to any
Excise Tax (the "Reduced Amount"), then no Gross-Up Payment shall be made to the
Executive and the Payments, in the aggregate, shall be reduced to the Reduced
Amount.
(b) Subject to the provisions of Section 9(c), all
determinations required to be made under this Section 9, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be made
by a nationally recognized certified public accounting firm as may be designated
by the Executive (the "Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Executive within 15 business days of
the receipt of notice from the Executive that there has been a Payment, or such
earlier time as is requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual, entity or group
effecting the Change of Control, the Executive shall appoint another nationally
recognized accounting firm to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting Firm hereunder). All
fees and expenses of the Accounting Firm shall be borne solely by the Company.
Any Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by
the Company to the Executive within 5 days of the receipt of the Accounting
Firm's determination. Any determination by the Accounting Firm shall be binding
upon the Company and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that Gross-Up Payments which
will not have been made by the Company should have been made ("Underpayment"),
consistent with the calculations required to be made hereunder. In the event
that the Company exhausts its remedies pursuant to Section 9(c) and the
Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the Company to or for the
benefit of the Executive.
Page 12
<PAGE>
(c) The Executive shall notify the Company in writing of
any claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than 10 business days after the Executive is
informed in writing of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due). If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive
shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
(ii) take such action in connection with
contesting such claim as the Company shall reasonably request in writing from
time to time, including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in
order effectively to contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claim; provided, however, that the Company shall
bear and pay directly all costs and expenses (including additional interest and
penalties), incurred in connection with such contest and shall indemnify and
hold the Executive harmless, on an after-tax basis, for any Excise Tax or income
tax (including interest and penalties with respect thereto) imposed as a result
of such representation and payment of costs and expenses. Without limitation on
the foregoing provisions of this Section 9(c), the Company shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct the Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and the Executive agrees
to prosecute such contest to a determination before any administrative tribunal,
in a court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided, however, that if the Company directs the
Executive to pay such claim and sue for a refund, the Company shall advance the
amount of such payment to the Executive, on an interest-free basis and shall
indemnify and hold the Executive harmless, on an after-tax basis, from any
Excise Tax or income tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any imputed income with
respect to such advance; and further provided that any extension of the statute
of limitations relating to payment of taxes for the taxable year of the
Executive with respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the Company's control of
the contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
Page 13
<PAGE>
(d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 9(c), the Executive becomes entitled
to receive any refund with respect to such claim, the Executive shall (subject
to the Company's complying with the requirements of Section 9(c)) promptly pay
to the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to Section 9(c), a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.
10. Restrictive Covenants.
(a) Confidential Information. The Executive shall hold in
a fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company, and their respective
businesses, which shall have been obtained by the Executive during the
Executive's employment by the Company and which shall not be or become public
knowledge (other than by acts by the Executive or representatives of the
Executive in violation of this Agreement). After termination of the Executive's
employment with the Company, the Executive shall not, without the prior written
consent of the Company or as may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge or data to anyone other
than the Company and those designated by it.
(b) Nonraiding of Employees. The Executive covenants that
during his employment hereunder and for a period of 2 years immediately
following the date of termination of Executive's employment, but only if said
termination is voluntary or for Cause, he will not solicit, induce or encourage
for the purposes of employing or offering employment to any individuals who, as
of the date of termination of the Executive's employment, are employees of the
Company, nor will he directly or indirectly solicit, induce or encourage any of
the Company's employees to seek employment with any other business, whether or
not the Executive is then affiliated with such business.
In no event shall an asserted violation of the provisions of this Section 10
constitute a basis for deferring or withholding any amounts otherwise payable to
the Executive under this Agreement.
11. Successors.
(a) This Agreement is personal to the Executive and
without the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
Page 14
<PAGE>
(c) The Company will require any successor (whether
director indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place.
12. Miscellaneous.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Virginia without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may not
be amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall
be in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive:
-------------------
Theodore L. Chandler, Jr.
3650 Landsdowne Road
Midlothian, Virginia 23113
If to the Company:
-----------------
LandAmerica Financial Group, Inc.
101 Gateway Centre Parkway
Gateway One
Richmond, Virginia 23235-5153
Attention: Russell W. Jordan, III, Esquire
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) The Company may withhold from any amounts payable
under this Agreement such federal, state, local or foreign taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist
upon strict compliance with any provision of this Agreement or the failure to
assert any right the Executive or the
Page 15
<PAGE>
Company may have hereunder, including, without limitation, the right of the
Executive to terminate employment for Good Reason pursuant to Section
5(c)(i)-(v) of this Agreement, shall not be deemed to be a waiver of such
provision or right or any other provision or right of this Agreement.
(f) The Executive and the Company acknowledge that,
except as may otherwise be provided under any other written agreement between
the Executive and the Company, the employment of the Executive by the Company is
"at will" and, subject to Section 1(a) hereof, prior to the Effective Date, the
Executive's employment and/or this Agreement may be terminated by either the
Executive or the Company at any time prior to the Effective Date, in which case
the Executive shall have no further rights under this Agreement. From and after
the Effective Date, this Agreement shall become effective, and shall replace and
supercede any existing Employment Agreement between the Company and the
Executive, to the extent its terms are more advantageous to the Executive,
except that any covenants contained in any prior agreement between Executive and
the Company restricting Executive's ability to compete with or to solicit the
employees, clients or customers of the Company, or to use or disclose any
Confidential Information (as that term is defined in any such agreement), shall
remain in full force and effect.
(g) If the Executive is a party to any of the following
agreements: the Senior Executive Severance Agreement dated June 24, 1991 with
the Company; the Change of Control Employment Agreement dated November 15, 1994
with the Company; the Change of Control Employment Agreement dated November
15,1994 with Lawyers Title Insurance Corporation, a wholly-owned subsidiary of
the Company; the Change of Control Employment Agreement dated March 1, 1998 with
the Company (each, a "Former Agreement"), then the Executive hereby acknowledges
and agrees that this Agreement is intended to replace and supersede such Former
Agreement and that the Former Agreement is terminated as of the date hereof.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
LANDAMERICA FINANCIAL GROUP, INC.
By: /s/ Charles H. Foster, Jr.
--------------------------
Charles H. Foster, Jr.,
Chairman and Chief Executive Officer
/s/ Theodore L. Chandler, Jr.
-----------------------------
Theodore L. Chandler, Jr.
Page 16
Exhibit 10.35
LANDAMERICA FINANCIAL GROUP, INC.
EMPLOYEE
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT dated as of the 23rd day of February , 2000, between
LandAmerica Financial Group, Inc., a Virginia corporation (the "Company"), and
_____________ (the "Optionee"), is made pursuant and subject to the provisions
of the Company's 1991 Stock Incentive Plan, as amended from time to time (the
"Plan"). All terms used herein that are defined in the Plan shall have the same
meanings given them in the Plan.
1. Grant of Option. Pursuant to the terms of the Plan, the
Company, on February 23, 2000, granted to the 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 _______ shares of the common stock of the Company (the "Common
Stock") at the option price of $19.375 per share. Such option is to be a
Non-Qualified Stock Option ("Option") 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 February 23, 2007.
(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
<PAGE>
sentence, it shall continue to be exercisable with respect to such shares until
the earlier of the termination of the Optionee's rights hereunder pursuant to
paragraph 3, 4, 5 or 6, or the Expiration Date. A partial exercise of this
Option shall not affect the 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) Tax Withholding. Upon the exercise of this Option or
portion thereof, the Company shall have the right to require the Optionee to
reimburse the Company for any taxes required by any government to be withheld or
otherwise deducted and paid with respect to such exercise and not complete the
exercise of the Option until the Company is so reimbursed. At its discretion,
the Company may retain and withhold by means of cashing out a portion of such
Option, any such taxes required to be withheld by the Company. In lieu thereof,
the Company
2
<PAGE>
shall have the unrestricted right to withhold, from any other cash amounts due
(or to become due) from the Company to the Optionee, an amount equal to such
taxes required to be withheld by the Company to reimburse the Company for any
such taxes.
(f) 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 the Optionee's lifetime,
this Option may be exercised only by the Optionee.
3. Exercise in the Event of Death. This Option shall become
exercisable in full in the event that the 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 the 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. The Optionee's estate or such persons must exercise
this Option, if at all, within two years of the date of The Optionee's death 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.
4. Exercise in the Event of Permanent and Total Disability. This
Option shall be exercisable in full if the Optionee becomes permanently and
totally disabled (within the meaning of the Company's Long-Term Disability Plan)
while employed by the Company or an affiliate and prior to the Expiration Date
of this Option. In such event, the Optionee must exercise this Option, if at
all, within two years of the date on which he or she 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.
3
<PAGE>
5. Exercise After Retirement or Other Approved Circumstance. In
the event that the 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 the Optionee, if at
all, within two years following his retirement date, in the event of his or her
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 or her employment; provided that this Option must be
exercised, if at all, within ninety (90) days following the date upon which he
or she 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 the date
of the grant of the Option. If the Optionee's employment is terminated for
cause, his or her 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 the Optionee to a
fractional share such fraction shall be disregarded.
4
<PAGE>
8. No Right to Continued Employment. This Option does not confer
upon the 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 the Optionee's employment at any time.
9. Investment Representation. The Optionee agrees that, unless
such shares shall previously have been registered under the Securities Act of
1933, (a) any shares purchased by him or her 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 of 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 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 Option. In the event of a change in the Common
Stock of the Company as presently
5
<PAGE>
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.
13. Optionee Bound by Plan. The 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 the Optionee and the
successors of the Company.
6
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be signed
by a duly authorized officer, and the Optionee has affixed his or her signature
hereto, as of the date and year first above written.
OPTIONEE: LANDAMERICA FINANCIAL GROUP,
INC.
_________________________ By:_______________________________
[Name]
Title:____________________________
7
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC.
Schedule to Non-Qualified Stock Option Agreement
Optionees Options Awarded
--------- ---------------
Charles H. Foster, Jr. 44,000
Janet A. Alpert 22,000
John M. Carter 9,900
Jeffrey D.Vaughan 9,900
Jeffrey C. Selby 7,700
Russell W. Jordan, III 4,950
John R. Blanchard 3,850
Christopher L. Rosati 3,850
H. Randolph Farmer 3,300
Exhibit 10.36
FIRST AMENDMENT
OF
CREDIT AGREEMENT
THIS FIRST AMENDMENT OF CREDIT AGREEMENT (this "Amendment"), dated as
of February 19, 1998, is by and among LAWYERS TITLE CORPORATION, a Virginia
corporation (the "Company"), the several financial institutions party to this
Amendment (collectively, the "Banks"; individually, a "Bank"), and BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, individually and as
administrative agent for the Banks (the "Agent").
RECITALS:
WHEREAS, the Company, the Agent, and the Banks are parties to that
certain Revolving Credit Agreement dated as of November 7, 1997 (the "Credit
Agreement"); and
WHEREAS, the Company, the Agent, and the Banks desire to amend the
Credit Agreement on the terms and conditions set forth herein;
NOW THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto agree as follows:
SECTION 1. Defined Terms. Unless otherwise defined herein, all
capitalized terms used herein shall have the meanings given them in the Credit
Agreement.
SECTION 2. Amendments to the Credit Agreement. The Credit Agreement
is, as of the Effective Date (as defined below), hereby amended as follows:
(a) Article I of the Credit Agreement is amended by
adding the following definition in appropriate alphabetical order:
""Net Investment Income" means, with respect to any Insurance
Subsidiary at any time, its net investment income for the
applicable period as determined in accordance with SAP
("Operations and Investment Exhibit Statement of Income," page
4, line 9 of the Annual Statement)."
(b) Section 6.01(e) of the Credit Agreement is amended by
deleting the phrase "audited and certified by independent certified public
accountants of recognized national standing" appearing in such subsection in its
entirety and substituting therefor the phrase "certified by the chief financial
officer or other appropriate officer of such Material Insurance Subsidiary
having substantially the same authority and responsibility as the chief
financial officer and copies of the statutory-basis financial statements of each
of the Material Insurance Subsidiaries audited and certified by independent
certified public accountants of recognized national standing, as soon as they
are available."
<PAGE>
(c) Section 7.11(c) is amended in its entirety to read as
follows:
"(c) declare or pay cash dividends to its
stockholders and purchase, redeem or
otherwise acquire shares of its capital
stock or warrants, rights or options to
acquire any such shares for cash in an
aggregate amount for all such dividends,
purchases, redemptions and acquisitions not
in excess of 25% of Net Income of the
Company arising after December 31, 1996 and
computed on a cumulative consolidated basis;
provided, that immediately after giving
effect -------- to such proposed action, no
Default or Event of Default would exist; and
provided further that solely for purposes of
this subsection 7.11(c), there --------
------------------- shall be excluded from
the computation of Net Income the one-time
after-tax charge taken by the Company,
during the fiscal quarter ending March 31,
1998 not in excess of $15,000,000 related
solely to the Stock Acquisition."
(d) The Credit Agreement is further amended by deleting
Exhibit A attached thereto and substituting therefor Exhibit A attached
to this Amendment.
SECTION 3. Conditions Precedent to Effectiveness of Amendment. This
Amendment shall become effective upon the date (the "Effective Date") when the
Company, the Agent and the Required Banks (without respect to whether this
Amendment has been executed by all Banks) shall have executed and delivered this
Amendment.
SECTION 4. Representations and Warranties of Company. The Company
represents and warrants to the Agent and the Banks that:
(a) The representations and warranties contained in the
Credit Agreement are true and correct in all material respects at and
as of the date hereof as though made on and as of the date hereof
(except to the extent specifically made with regard to a particular
date).
(b) No Event of Default or Default has occurred and is
continuing.
(c) The execution, delivery and performance of this
Amendment has been duly authorized by all necessary action on the part
of, and duly executed and delivered by, the Company and this Amendment
is a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except as the
enforcement thereof may be subject to the effect of any applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally and general principles of equity
(regardless of whether such enforcement is sought in a proceeding in
equity or at law).
(d) The execution, delivery and performance of this
Amendment does not conflict with or result in a breach by the Company
of any term of any material contract,
-2-
<PAGE>
loan agreement, indenture or other agreement or instrument to which the
Company is a party or is subject.
SECTION 5. References to and Effect on the Credit Agreement.
(a) On and after the Effective Date each reference in the
Credit Agreement to "this Agreement," "hereunder," "hereof," "herein,"
or words of like import shall mean and be a reference to the Credit
Agreement as amended hereby.
(b) Except as specifically amended above, the Credit
Agreement shall remain in full force and effect and are hereby ratified
and confirmed.
(c) The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein, operate as a
waiver of any right, power or remedy of the Agent or the Banks under
the Credit Agreement.
SECTION 6. Execution in Counterparts. This Amendment may be executed in
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which taken together shall constitute but one and the
same instrument. This Amendment shall be binding upon the respective parties
hereto upon the execution and delivery of this Amendment by the Company, the
Agent, and each Bank. Delivery of an executed counterpart of a signature page of
this Amendment by facsimile transmission shall be effective as delivery of a
manually executed counterpart of this Amendment.
SECTION 7. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND BE
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS
WITHOUT REGARD TO THE INTERNAL CONFLICTS OF LAWS PROVISIONS THEREOF.
SECTION 8. Headings. Section headings in this Amendment are included
herein for convenience of reference only and shall not constitute a part of this
Amendment for any other purposes.
[signature pages follow]
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
LAWYERS TITLE CORPORATION
By: /s/ G. William Evans
-----------------------------------------
Title: Vice President and Treasurer
--------------------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Agent
By: /s/
-----------------------------------------
Title: Senior Vice President
--------------------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as a Bank
By: /s/
-----------------------------------------
Title: Senior Vice President
--------------------------------------
CRESTAR BANK,
as Documentation Agent and a Bank
By: /s/
-----------------------------------------
Title: Vice President
--------------------------------------
BARNETT BANK, N.A., as Co-Agent and a Bank
By: /s/ E. Bradley Jones
-----------------------------------------
Title: Vice President
--------------------------------------
FIRST NATIONAL BANK OF MARYLAND, as
Co-Agent and a Bank
By: /s/ Robert M. Beaver
-----------------------------------------
Title: Vice President
--------------------------------------
-4-
<PAGE>
FLEET NATIONAL BANK, as Co-Agent and a Bank
By: /s/
-----------------------------------------
Title:
--------------------------------------
SUN TRUST BANK, CENTRAL FLORIDA,
NATIONAL ASSOCIATION, as Co-Agent and a Bank
By: /s/
-----------------------------------------
Title: Vice President
--------------------------------------
UNION BANK OF CALIFORNIA, N.A., as Co-Agent
and a Bank
By: /s/ Douglas S. Lambell
-----------------------------------------
Title: Vice President
--------------------------------------
COMERICA BANK, as a Bank
By: /s/
-----------------------------------------
Title: Vice President
--------------------------------------
FIRST UNION NATIONAL BANK, as a Bank
By: /s/
-----------------------------------------
Title:
--------------------------------------
MELLON BANK, N.A., as a Bank
By: /s/
-----------------------------------------
Title: Assistant Vice President
--------------------------------------
NATIONSBANK OF TEXAS, N.A., as a Bank
By: /s/ D. Keith Thompson
-----------------------------------------
Title: Vice President
--------------------------------------
-5-
<PAGE>
PNC BANK, NATIONAL ASSOCIATION, as a Bank
By: /s/
-----------------------------------------
Title: Assistant Vice President
--------------------------------------
-6-
<PAGE>
EXHIBIT A
LAWYERS TITLE CORPORATION
COMPLIANCE CERTIFICATE CALCULATIONS
<TABLE>
<CAPTION>
<S> <C>
7.15 Minimum Statutory Surplus
Lawyers Title Insurance Corporation
- -----------------------------------
(1) Statutory Surplus as Regards Policyholders at September 30, 1997
$_____________
(2) Covenant Requirement [.80 x (1)]
$_____________
(3) Surplus as Regards Policyholders, Current Period
$_____________
Compliance Requirement: (3) must be greater than or equal to (2) ______
[yes/no]
Commonwealth Land Title Insurance Company
(4) Statutory Surplus as Regards Policyholders at September 30, 1997
$_____________
(5) Covenant Requirement [.80 x (4)]
$_____________
(6) Surplus as Regards Policyholders, Current Period
$_____________
Compliance Requirement: (6) must be greater than or equal to (5) ______
[yes/no]
7.16 Debt to Total Capitalization Ratio
(7) Covenant Requirement:
(a) Fiscal Year ending December 31, 1998 40%
(b) Fiscal Year ending December 31, 1999 37.5%
(c) Fiscal Year ending December 31, 2000 35%
(d) Fiscal Year ending December 31, 2001 32%
(e) Any Fiscal Year ending after December 31, 2001 30%
-7-
<PAGE>
(8) Depending on Fiscal Year select appropriate Covenant requirement
from (7) above: _____
(9) Consolidated Debt
$___________
(10) Shareholders' Equity
$___________
(11) Total Capitalization [(9) + (10)]
$___________
(12) Debt to Total Capitalization Ratio [((9) / (11)) x 100]
____________
Compliance Requirement: (8) must be greater than (12) ______
[yes/no]
7.17 Debt Service Coverage Ratio
(13) Covenant Requirement 2.25:1.00
(14) Maximum Dividend Availability from Lawyers Title Insurance
Corporation
[The lesser of 14(b) and 14(c)] $___________
(a) Statutory Capital, as of the end of the most
recent calendar year $___________
(b) 10% of Statutory Capital [14(a) x .10] $___________
(c) Net Income less Capital Gains for rolling four
quarter period just ended $___________
(15) Maximum Dividend Availability from Commonwealth Land
Title Insurance Company
[The greater of 15(b) and 15(c)] $___________
(a) Statutory Capital, as of the end of the most
recent calendar year $___________
(b) 10% of Statutory Capital [15(a) x .10] $___________
(c) Net Income for rolling four quarter period just ended $___________
-8-
<PAGE>
(16) Maximum Dividend Availability from Transnation Title
Insurance Company
[The lesser of 16(b) and 16(c)] $___________
(a) Statutory Capital, as of the end of the most
recent calendar year $___________
(b) 10% of Statutory Capital [16(a) x .10] $___________
(c) Net Investment Income for rolling four quarter period
just ended $___________
(17) Cash Dividends paid by non Insurance Subsidiaries of the
Company during rolling four quarter period just ended $___________
(18) Income before equity in undistributed income of Subsidiaries
(without duplication of 14, 15, or 16, as applicable and 17) for
the rolling four quarter period just ended $___________
(19) Total Interest Expense for rolling four quarter period just ended $___________
(20) Interest Tax Shield [(19) x actual marginal federal income tax rate] $___________
(21) Tax-Deductible Goodwill Amortization for rolling four quarter period
just ended $___________
(22) Goodwill Tax Shield [(21) x actual marginal federal income tax rate] $___________
(23) Cash Flow Available to pay Total Interest Expense [(14) + (15) + (16) +
(17) + (18) + (20) + (22)] $___________
(24) Debt Service Coverage Ratio [(23) / (19)] $___________
Compliance Requirement: (24) must be greater than (13) $___________
</TABLE>
-9-
Exhibit 10.37
SECOND AMENDMENT TO CREDIT AGREEMENT
This Second Amendment to Credit Agreement (this "Amendment") is made as
of December 22, 1999 by and among LandAmerica Financial Group, Inc. (formerly
known as Lawyers Title Corporation) (the "Company"), Bank of America, N.A.,
f/k/a Bank of America National Trust and Savings Association, individually and
as agent (the "Agent"), and the other financial institutions signatory hereto
(the "Banks").
RECITALS:
WHEREAS, the Company, the Agent and the Banks are parties to that
certain Revolving Credit Agreement dated as of November 7, 1997 (as amended by
that certain First Amendment of Credit Agreement dated as of February 19, 1998,
the "Credit Agreement"); and
WHEREAS, the Company, the Agent and the Banks desire to amend the
Credit Agreement on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto agree as follows:
SECTION 1. Defined Terms. Unless otherwise defined herein, all
capitalized terms used herein shall have the meanings given them in the Credit
Agreement.
SECTION 2. Amendments to the Credit Agreement. The Credit Agreement is,
as of the Effective Date (as defined below), hereby amended as follows:
(a) Section 2.05 - Reduction of Commitments. The first
sentence of subsection 2.05(b) of the Credit Agreement is hereby
amended by deleting such sentence in its entirety and replacing it with
the following:
The Commitments shall be automatically and
permanently reduced by (i) an amount equal to 100% of the net
cash proceeds of any Indebtedness incurred by the Company or
its Subsidiaries other than Indebtedness permitted by Section
7.05(a) through (h), such reduction to be effective upon the
receipt thereof by the Company and its Subsidiaries; and (ii)
an amount equal to 75% of the net cash proceeds received by
the Company or its Subsidiaries from any equity issuance
(other than any equity issuance pursuant to the Stock
Acquisition, including any related "green shoe" issuance),
such reduction to be effective in either case upon the receipt
of such net cash proceeds by the Company or its Subsidiaries;
provided, however, the aggregate Commitments of the Banks
shall not be reduced below $150,000,000 pursuant to this
subsection 2.05(b).
(b) Section 5.24 - Year 2000 Representation. Article V of
the Credit Agreement is hereby amended by adding the following new
Section 5.24 immediately following Section 5.23 of the Credit
Agreement:
<PAGE>
5.24 Year 2000 Compliance. The Company has
conducted a comprehensive review and assessment of its
computer applications with respect to the year 2000 problem
(that is, the risk that computer applications may not be able
to properly perform date sensitive functions after December
31, 1999). Based on the foregoing review, assessment and
inquiry, the Company believes the year 2000 problem will not
result in a Material Adverse Effect.
(c) Section 6.01 - Financial Statements. Subsections 6.01(a)
through (d) of the Credit Agreement are hereby amended by deleting such
subsections in their entirety and replacing them with the following:
(a) as soon as available, but not later than 120
days after the end of each fiscal year, a copy of the audited
consolidated balance sheet of the Company and its Subsidiaries
as at the end of such year and the related consolidated
statements of income or operations, shareholders' equity and
cash flows for such year, setting forth in each case in
comparative form the figures for the previous fiscal year, and
accompanied by the opinion of Ernst & Young, L.L.P. or another
nationally-recognized independent public accounting firm
("Independent Auditor") which report shall state that such
consolidated financial statements present fairly the financial
position for the periods indicated in conformity with GAAP
applied on a basis consistent with prior years. Such opinion
shall not be qualified or limited because of a restricted or
limited examination by the Independent Auditor of any material
portion of the Company's or any Subsidiary's records;
(b) as soon as available, but not later than 60
days after the end of each of the first three fiscal quarters
of each fiscal year, a copy of the unaudited consolidated
balance sheet of the Company and its Subsidiaries as of the
end of such quarter and the related consolidated statements of
income, shareholders' equity and cash flows for the period
commencing on the first day and ending on the last day of such
quarter, and certified by a Responsible Officer as fairly
presenting, in accordance with GAAP (subject to ordinary, good
faith year-end audit adjustments), the financial position and
the results of operations of the Company and the Subsidiaries;
(c) as soon as available, but not later than 120
days after the end of each fiscal year, a copy of an unaudited
parent only balance sheet of the Company as at the end of such
year and the related statement of income, shareholders' equity
and cash flows for such year, certified by a Responsible
Officer as having been developed and used in connection with
the preparation of the financial statements referred to in
subsection 6.01(a);
(d) as soon as available, but not later than 60
days after the end of each of the first three fiscal quarters
of each fiscal year, a copy of the unaudited parent only
balance sheet of the Company and the related statements of
income, shareholders' equity and cash flows for such quarter,
all certified by a
-2-
<PAGE>
Responsible Officer as having been developed and used in
connection with the preparation of the financial statements
referred to in subsection 6.01(b);
(d) Section 7.02 - Disposition of Assets. Subsection 7.02(j) of
the Credit Agreement is hereby amended by deleting such subsection in its
entirety and replacing it with the following:
(j) dispositions of tangible property
transferred pursuant to sale-leaseback transactions; provided,
that the fair market value of such property transferred in
calendar year 1999 shall not exceed $25,300,000 and that the
fair market value of such property in any subsequent calendar
year shall not exceed $10,000,000.
(e) Section 7.08 - Contingent Obligations. Subsection 7.08(d) of
the Credit Agreement is hereby amended by deleting such section in its entirety
and replacing it with the following:
7.08 Contingent Obligations. The Company shall
not, and shall not suffer or permit a Subsidiary to, create,
incur, assume or suffer to exist any Contingent Obligation
except:
(a) endorsements for collection or deposit in
the ordinary course of business;
(b) Permitted Swap Obligations;
(c) Contingent Obligations of the Company and
its Subsidiaries existing as of the Execution Date and listed
on Schedule 7.08 hereto;
(d) Contingent Obligations with respect to
Surety Instruments incurred in the ordinary course of
business; and
(e) guaranties by the Company of (i)
sale-leaseback transactions entered into in calendar year 1999
and permitted by Section 7.02(j) and (ii) leases for furniture
and equipment used in the ordinary course of business.
SECTION 3. Conditions Precedent to Effectiveness of Amendment. This
Amendment shall become effective upon the date (the "Effective Date") when the
Company, the Agent and the Banks shall have executed and delivered this
Amendment.
SECTION 4. Representations and Warranties of Company. The Company
represents and warrants to the Agent and the Banks that:
(a) The representations and warranties contained in the
Credit Agreement are true and correct in all material respects at and
as of the date hereof as though made on and as of the date hereof
(except to the extent specifically made with regard to a particular
date).
-3-
<PAGE>
(b) No Event of Default or Default has occurred and is
continuing.
(c) The execution, delivery and performance of this
Amendment has been duly authorized by all necessary action on the part
of, and duly executed and delivered by, the Company and this Amendment
is a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except as the
enforcement thereof may be subject to the effect of any applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally and general principles of equity
(regardless of whether such enforcement is sought in a proceeding in
equity or at law).
(d) The execution, delivery and performance of this
Amendment does not conflict with or result in a breach by the Company
of any term of any material contract, loan agreement, indenture or
other agreement or instrument to which the Company is a party or is
subject.
SECTION 5. References to and Effect on the Credit Agreement.
(a) On and after the Effective Date each reference in the
Credit Agreement to "this Agreement," "hereunder," "hereof," "herein,"
or words of like import shall mean and be a reference to the Credit
Agreement as amended hereby.
(b) Except as specifically amended above, the Credit
Agreement shall remain in full force and effect and are hereby ratified
and confirmed.
(c) The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein, operate as a
waiver of any right, power or remedy of the Agent or the Banks under
the Credit Agreement.
SECTION 6. Execution in Counterparts. This Amendment may be executed in
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which taken together shall constitute but one and the
same instrument. This Amendment shall be binding upon the respective parties
hereto upon the execution and delivery of this Amendment by the Company, the
Agent, and each Bank. Delivery of an executed counterpart of a signature page of
this Amendment by facsimile transmission shall be effective as delivery of a
manually executed counterpart of this Amendment.
SECTION 7. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND BE
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS
WITHOUT REGARD TO THE INTERNAL CONFLICTS OF LAWS PROVISIONS THEREOF.
SECTION 8. Headings. Section headings in this Amendment are included
herein for convenience of reference only and shall not constitute a part of this
Amendment for any other purposes.
[signature pages follow]
-4-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date and year first above written.
LANDAMERICA FINANCIAL GROUP, INC.
(f/k/a/ Lawyers Title Corporation)
By: /s/
--------------------------------------------
Title: Senior Vice President and Treasurer
-----------------------------------------
BANK OF AMERICA, N.A., f/k/a Bank of
America National Trust and Savings Association,
successor by merger to Bank of America, N.A.,
f/k/a NationsBank, N.A., successor by merger to
NationsBank of Texas, N.A., as Agent and as a
Bank
By: /s/ Joan L. D'Amico
--------------------------------------------
Title: Principal
-----------------------------------------
S-1
[TO SECOND AMENMDENT]
<PAGE>
CRESTAR BANK, as Documentation Agent and a Bank
By: /s/
--------------------------------------------
Title: Vice President
-----------------------------------------
S-2
[TO SECOND AMENDMENT]
<PAGE>
ALLFIRST BANK (f/k/a First National Bank Of
Maryland), as Co-Agent and a Bank
By: /s/
--------------------------------------------
Title: Vice President
-----------------------------------------
S-3
[TO SECOND AMENDMENT]
<PAGE>
FLEET NATIONAL BANK, as Co-Agent and a Bank
By: /s/
--------------------------------------------
Title: Assistant Vice President
-----------------------------------------
S-4
[TO SECOND AMENDMENT]
<PAGE>
UNION BANK OF CALIFORNIA, N.A., as
Co-Agent and a Bank
By: /s/ Joe Areabrite
--------------------------------------------
Title: Vice President
-----------------------------------------
S-5
[TO SECOND AMENDMENT]
<PAGE>
COMERICA BANK, as a Bank
By: /s/
--------------------------------------------
Title: Vice President
-----------------------------------------
S-6
[TO SECOND AMENDMENT]
<PAGE>
FIRST UNION NATIONAL BANK, as a Bank
By: /s/ Gail M. Golightly
--------------------------------------------
Title: Senior Vice President
-----------------------------------------
S-7
[TO SECOND AMENDMENT]
<PAGE>
MELLON BANK, N.A., as a Bank
By: /s/ Maria E. Totin
--------------------------------------------
Title: Credit Manager
-----------------------------------------
S-8
[TO SECOND AMENDMENT]
<PAGE>
PNC BANK, NATIONAL ASSOCIATION, as a Bank
By: /s/
--------------------------------------------
Title: Vice President
-----------------------------------------
S-9
[TO SECOND AMENDMENT]
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 8 of the
Consolidated Financial Statements of LandAmerica Financial Group, Inc. and its
subsidiaries as of December 31, 1999 and 1998 and for the three years in the
period ended December 31, 1999 on page F-24 of this report.
Exhibit 21
LIST OF SUBSIDIARIES OF LANDAMERICA FINANCIAL GROUP, INC.
AS OF MARCH 17, 2000
<TABLE>
<CAPTION>
Subsidiaries State of Incorporation
------------ ----------------------
<S> <C>
Commonwealth Land Title Insurance Company Pennsylvania
Its Subsidiaries
----------------
Albuquerque Title Company, Inc. New Mexico
Atlantic Title & Abstract Company Delaware
Its Subsidiary
--------------
ATACO, Inc. Pennsylvania
Citrus Title Company, Inc. Florida
CLTIC-RELO, Inc. Delaware
Commercial Settlements, Inc. District of Columbia
Commonwealth Land Title Company California
Commonwealth Land Title Company of Austin Texas
Commonwealth Land Title Company of Dallas Texas
Commonwealth Land Title Company of El Paso Texas
Commonwealth Land Title Company of Fort Worth Texas
Commonwealth Land Title Company of Houston Texas
Commonwealth Land Title Company of San Antonio Texas
Commonwealth Land Title Company of Washington Washington
Commonwealth Land Title Corporation (Iowa) Iowa
Commonwealth Relocation Services, Inc. Pennsylvania
Commonwealth Title of Arizona Arizona
Congress Abstract Corporation Pennsylvania
Crestview Lawyers Service New Jersey
CRS Financial Services, Inc. Pennsylvania
Day One, Inc. Pennsylvania
District-Realty Title Insurance Corporation Maryland
Edge Rock, Inc. Delaware
Golden State Title Company California
Goliath, Inc. Pennsylvania
Its Subsidiaries
----------------
Goliath One, L.P. Pennsylvania
Goliath Two, L.P. Pennsylvania
Goliath Three, L.P. Pennsylvania
Goliath Four, L.P. Pennsylvania
Goliath Five, L.P. Pennsylvania
Industrial Valley Title Insurance Company Pennsylvania
Its Subsidiary
--------------
Commonwealth Land Title Insurance Company of New Jersey New Jersey
LandAmerica Appraisal Services, Inc. Pennsylvania
Louisville Title Company Kentucky
Osage Corporation Pennsylvania
Partners Title Company Texas
Pikes Peak Title Service, Inc. Colorado
<PAGE>
Subsidiaries State of Incorporation
------------ ----------------------
Plantco, Inc. District of Columbia
Property Services, Inc. Pennsylvania
Rainier Title Company Washington
State Title Insurance Company Pennsylvania
T & T Co. Holding Company Florida
Its Subsidiary
--------------
Title & Trust Company of Florida Florida
The National 1031 Exchange Corporation California
Title Guarantee Company of Rhode Island Rhode Island
Title Insurance Company Alabama
Title Services, Inc. Minnesota
Global Corporate Services, Inc. Michigan
LandAmerica Environmental Insurance Service Agency, Inc. Virginia
Its Subsidiaries:
----------------
LEISA of Arizona, Inc. Arizona
LEISA of California, Inc. California
LTEISA of Colorado, Inc. Colorado
LEISA of Connecticut, Inc. Connecticut
LEISA of New York, Inc. New York
LEISA of Ohio, Inc. Ohio
LEISA of Pennsylvania, Inc. Pennsylvania
LEISA of Texas, Inc. Texas
LandAmerica Exchange Company Maryland
CWLT Roseland Exchange, L.L.C. New Jersey
West End Real Estate Holding Company Virginia
LandAmerica OneStop, 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 Texas
San Antonio, Inc.
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
Building Exchange Company Virginia
Charter Title Company Virginia
Its Subsidiary:
--------------
Charter Title Company - Galveston, L.L.C. Texas
Commerce Title Guaranty Co. Tennessee
Continental Diversified Services Company California
Datatrace Information Services Company Virginia
Elliptus Technologies, Inc. Virginia
First Stable Properties, Inc. Virginia
<PAGE>
Subsidiaries State of Incorporation
------------ ----------------------
Florida Southern Abstract & Title Co. Florida
Guarantee Title Co., Inc. Kansas
Land Title Abstract Co. Michigan
Land Title Dawson Abstract Co. Michigan
LandAm Construction Exchange Company Virginia
Lawyers Abstract Corp. South Carolina
Lawyers Acquisition Company, Inc. Virginia
Lawyers Holding Corporation Virginia
Its Subsidiaries:
----------------
Cumberland Title Company Maine
Louisville Title Agency of Central Ohio, Inc. Ohio
Oakton Title, Inc. Virginia
Lawyers Title Agency, Inc. Virginia
Lawyers Title Company California
Its Subsidiaries:
----------------
California Land Title Company California
Continental Land Title Company California
Continental Lawyers Company California
LTC Exchange Company California
LandAmerica Account Servicing, Inc. Arizona
Lawyers Title of Arizona, Inc. Arizona
Lawyers Title of Nevada, Inc. Nevada
Lawyers Title of El Paso, Inc. Virginia
Its Subsidiary:
--------------
Database Access, Inc. Texas
Lawyers Title of North Carolina, Inc. Virginia
Lawyers Title of Pueblo, Inc. Colorado
Lawyers Title Realty Services, Inc. Virginia
Lorain County Title Company Ohio
Monroe County Abstract Co. Michigan
New Mexico Title Company New Mexico
One Stop Tax Services, Inc. Texas
Oregon Title Insurance Company Oregon
Portland Financial Services Corporation Oregon
Real Estate Title Company, Incorporated Maryland
RealServe Company, Inc. Virginia
Rio Rancho Title, Inc. New Mexico
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:
----------------
Mid-South Title Company of Central Arkansas, Inc. Arkansas
Mid-South Title Corporation Tennessee
Rutherford County Title Insurance Co. Tennessee
Wilson Title Company, Inc. Texas
<PAGE>
Subsidiaries State of Incorporation
------------ ----------------------
Transnation Title Insurance Company Arizona
Its Subsidiaries:
----------------
Transnation Title & Escrow, Inc. Delaware
Transnation Title Insurance Company of New York New York
Title Transfer Services, Inc. Colorado
Xenia Property Company Pennsylvania
</TABLE>
Exhibit 23
Consent of Independent Auditors
We consent to the incorporation by reference in the following registration
statements of LandAmerica Financial Group, Inc., Forms S-8 Nos. 333-89959,
333-89955, 333-59055, 33-49624, 33-43811 and S-3 Nos. 333-46211 and 333-46191
and in the prospectus related to each, of our report dated February 22, 2000,
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, 1999.
/s/ Ernst & Young LLP
Richmond, Virginia
March 23, 2000
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF LANDAMERICA FINANCIAL GROUP, INC. AS OF AND FOR THE YEAR
ENDED DECEMBER 31, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<DEBT-HELD-FOR-SALE> 735,084
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 1,807
<MORTGAGE> 7,124
<REAL-ESTATE> 0
<TOTAL-INVEST> 853,060
<CASH> 54,939
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 0
<TOTAL-ASSETS> 1,657,921
<POLICY-LOSSES> 554,450
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
0
175,700
<COMMON> 342,138
<OTHER-SE> 212,865
<TOTAL-LIABILITY-AND-EQUITY> 1,657,921
1,715,686
<INVESTMENT-INCOME> 47,999
<INVESTMENT-GAINS> 0
<OTHER-INCOME> 284,328
<BENEFITS> 97,014
<UNDERWRITING-AMORTIZATION> 0
<UNDERWRITING-OTHER> 1,866,129
<INCOME-PRETAX> 84,870
<INCOME-TAX> 30,553
<INCOME-CONTINUING> 54,317
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 54,317
<EPS-BASIC> 3.21
<EPS-DILUTED> 2.79
<RESERVE-OPEN> 521,894
<PROVISION-CURRENT> 105,163
<PROVISION-PRIOR> (8,149)
<PAYMENTS-CURRENT> 8,959
<PAYMENTS-PRIOR> 55,499
<RESERVE-CLOSE> 554,450
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
