SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
[X] Filed by the Registrant
[_] Filed by a Party other than the Registrant
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
INVESTORS TITLE COMPANY
-----------------------
(Name of Registrant as Specified In Its Charter)
Not Applicable
--------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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(3) Per unit price or other underlying value of transaction computed
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[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
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previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
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[LOGO](R) Investors Title Company
121 North Columbia Street, Chapel Hill, North Carolina 27514
(919) 968-2200
--------------------------------------------------------------------------------
April 15, 2002
Dear Shareholders:
You are cordially invited to attend the Annual Meeting of Shareholders to
be held in the Investors Title Building, 121 North Columbia Street, Chapel Hill,
North Carolina on Wednesday, May 15, 2002, at 11:00 A.M.
The Annual Meeting will begin with a review of the activities of the
Company for the past year and a report on current operations during the first
quarter of 2002, followed by discussion and voting on the matters set forth in
the accompanying Notice of Annual Meeting and Proxy Statement.
The Board of Directors unanimously recommends that you vote "FOR" all of
the proposals.
I urge you to review the Proxy Statement, sign and date your proxy, and
return it promptly in the enclosed postage-paid envelope.
If you attend the meeting, you may, of course, choose to revoke your proxy
and personally cast your vote.
Cordially,
/s/ J. Allen Fine
J. Allen Fine
Chief Executive Officer
[LOGO](R) Investors Title Company
121 North Columbia Street, Chapel Hill, North Carolina 27514
(919) 968-2200
--------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 15, 2002
--------------------------------------------------------------------------------
The Annual Meeting of the Shareholders of Investors Title Company will be
held at 121 North Columbia Street, Chapel Hill, North Carolina, on Wednesday,
May 15, 2002 at 11:00 A.M. E.D.T., for the following purposes:
(1) To elect three directors for three-year terms or until their
successors are elected and qualified.
(2) To consider and act upon a proposal to amend the Articles of
Incorporation to limit director liability.
(3) To consider and act upon a proposal to amend the Articles of
Incorporation to increase the Company's authorized capital stock.
(4) To consider any other business that may properly come before the
meeting.
Shareholders of record of Common Stock of the Company at the close of
business on March 25, 2002 are entitled to vote at the meeting and any
adjournments thereof.
By Order of the Board of Directors:
/s/ L. Dawn Martin
L. Dawn Martin
Vice President and Assistant Secretary
--------------------------------------------------------------------------------
IMPORTANT - Your proxy is enclosed. Whether or not you expect to be present at
the meeting, please sign and date the enclosed proxy and return it in the
postage-paid envelope provided for that purpose. It will assist the Company in
keeping down the expenses of the meeting if all shareholders return their signed
proxies promptly. You may nevertheless vote in person if you do attend the
meeting.
PROXY STATEMENT
--------------------------------------------------------------------------------
Annual Meeting of Shareholders
To Be Held on May 15, 2002
--------------------------------------------------------------------------------
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Investors Title Company of proxies to be voted at the
Annual Shareholders' Meeting to be held at 121 North Columbia Street, Chapel
Hill, North Carolina, on May 15, 2002 at 11:00 A.M. E.D.T., and at all
adjournments thereof. Shareholders of record at the close of business on March
25, 2002 are entitled to notice of and to vote at the meeting and any
adjournments thereof.
Proxy Solicitation by the Board of Directors. The solicitation of proxies
will be by mail and is made on behalf of the Board of Directors. The cost of
solicitation of proxies will be borne by the Company. Copies of proxy material
and of the Annual Report for 2001 will be provided to brokers, dealers, banks
and voting trustees or their nominees for the purpose of soliciting proxies from
the beneficial owners, and the Company will reimburse these record holders for
their out-of-pocket expenses.
Revocability of Proxy. Each proxy executed and returned by a shareholder
may be revoked at any time thereafter except as to any matter or matters upon
which, prior to such revocation, a vote shall have been cast pursuant to the
authority conferred by such proxy.
Voting Securities. On March 25, 2002, the Company had a total of 2,855,744
shares of Common Stock outstanding, its only class of issued and outstanding
capital stock. Of these shares, 2,516,612 shares are entitled to one vote per
share and 339,132 shares are held by a subsidiary of the Company and, by State
law, are not entitled to vote. A majority of the shares entitled to vote at the
meeting, represented at the meeting in person or by proxy, will constitute a
quorum.
Annual Report to Shareholders. An Annual Report of the Company for the
calendar year 2001 including financial statements and auditors' opinion, along
with this Proxy Statement and proxy card, are being first mailed to the
Company's shareholders on or about April 15, 2002.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
During the year ended December 31, 2001, the Board of Directors held four
meetings. All incumbent directors and nominees, with the exception of Loren B.
Harrell, Jr., attended 75% or more of the aggregate number of meetings of the
Board of Directors and committees of the Board on which they served.
The Corporation's Board of Directors has a Compensation Committee, a
Nominating Committee and an Audit Committee.
In 2001, the Compensation Committee was composed of James R. Morton,
Lillard H. Mount and A. Scott Parker III. This Committee, which also serves as
the Option Committee administering the Company's stock option plans, reviews
salaries, bonuses and other compensation of all officers of the Corporation. The
Compensation Committee met once in 2001.
In 2001, the Nominating Committee was composed of W. Morris Fine, Loren B.
Harrell, Jr., H. Joe King, Jr. and William J. Kennedy III. A slate of nominees
for director to present to the shareholders is recommended by the Nominating
Committee and determined by at least a majority vote of those directors whose
terms do not expire during the year in which the election of directors will be
made. The Committee will consider nominees recommended by the shareholders. Any
shareholder wishing to make a recommendation regarding a nominee for election at
the 2003 Annual Meeting should submit his or her recommendation to the Assistant
Secretary, Investors Title Company, P.O. Drawer 2687, Chapel Hill, North
Carolina 27515-2687, no later than December 17, 2002. The Nominating Committee
met once in 2001.
In 2001, the Audit Committee was composed of David L. Francis, Loren B.
Harrell, Jr., William J. Kennedy III and H. Joe King, Jr. The Committee
recommends to the Board of Directors the independent public accountants to be
engaged by the Company, reviews the overall scope of the annual audit proposed
by the independent public accountants, reviews internal audit procedures on
various aspects of corporate operations, and periodically consults with the
independent public accountants on matters relating to internal financial
controls and procedures. The Audit Committee met twice in 2001.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors is comprised of the four
directors named below. Each member of the Audit Committee is an independent
director as defined by Nasdaq's independent director and audit committee listing
standards. The Audit Committee has adopted a written charter which has been
approved by the Board of Directors. In accordance with its written charter, the
Audit Committee assists the Board in fulfilling its responsibility for oversight
of the quality and integrity of the accounting, auditing and financial reporting
practices of the Company.
1
In connection with the audit process for 2001, the Audit Committee obtained
from the independent auditors a formal written statement describing all
relationships between the auditors and the Company that might bear on the
auditors' independence consistent with Independence Standards Board Standard No.
1, "Independence Discussions with Audit Committees," discussed with the auditors
any relationships that may have an impact on their objectivity and independence
and satisfied itself as to the auditors' independence. The Audit Committee also
discussed with management and the independent auditors the quality and adequacy
of the Company's internal controls. The Audit Committee reviewed with the
independent auditors their audit plans, audit scope and identification of audit
risks.
The Audit Committee discussed and reviewed with the independent auditors
all communications required by generally accepted auditing standards, including
those described in Statement on Auditing Standards No. 61, as amended,
"Communication with Audit Committees" and, with and without management present,
discussed and reviewed the results of the independent auditors' examination of
the financial statements.
The Audit Committee discussed and reviewed the audited financial statements
of the Company as of and for the year ended December 31, 2001, with management
and the independent auditors. Management has the responsibility for the
preparation of the Company's financial statements and the independent auditors
have the responsibility for the examination of those statements.
Based on the above-mentioned review and discussions with management and the
independent auditors, the Audit Committee recommended to the Board that the
Company's audited financial statements be included in its Annual Report on Form
10-K for the year ended December 31, 2001, for filing with the Securities and
Exchange Commission.
Submitted by the Audit Committee of the Board of Directors:
William J. Kennedy III, Chairman Loren B. Harrell, Jr.
David L. Francis H. Joe King, Jr.
March 21, 2002
DIRECTORS' COMPENSATION
Directors who are not employees of the Company receive an annual retainer
for Board services of $3,000 and an attendance fee of $1,000 for each meeting of
the Board of Directors attended in addition to actual travel expenses related to
the meetings. Directors do not receive fees for committee meetings attended
unless the committee meeting is held on a day other than the regularly scheduled
board meeting date. The fee for such a committee meeting is $250. Directors who
are employees of the Company are paid no fees or other remuneration for service
on the Board or on any Board committee. Each non-employee director of the
Company was granted a Nonqualified Stock Option, exercisable for 500 shares at
$14.75 per share on May 16, 2001. These options were immediately exercisable and
will expire on May 16, 2011.
EXECUTIVE COMPENSATION
The Compensation Committee Report on Executive Compensation
The fundamental philosophy of Investors Title Company's compensation
program is to provide competitive compensation opportunities for all employees
based on the individual's personal performance, experience and contribution to
the growth of the Company. In addition, it is the Company's goal to provide
compensation opportunities that are comparable to those offered by other
businesses in the area, thus allowing the Company to attract and retain
experienced corporate officers and key employees with outstanding ability and to
motivate them to perform to their fullest extent. The Company's compensation
package is competitive with the compensation benefits of other employers of
comparable size in its area of operation.
In evaluating the performance and establishing the incentive compensation
of the Chief Executive Officer and other members of senior management, the
Compensation Committee has reviewed management's success in maximizing its sales
efforts by expanding operations in other market areas.
In reviewing management performance and compensation, the Compensation
Committee also has taken into account management's consistent commitment to the
long-term success of the Company through new innovations and intra-Company
restructuring.
Based upon the evaluation of these factors, the Compensation Committee
believes that the senior management of the Company continues to be dedicated to
achieving long-term growth and that the compensation approved by the
Compensation Committee has contributed to achieving this end.
Compensation for each of the named executive officers, as well as other
senior executives, consists of a base salary, a cash and/or stock bonus,
incentive stock options and a contribution under a Simplified Employee Pension
Plan. The Compensation Committee considers the total compensation of each of the
named executive officers and other senior executives in establishing each
element of compensation.
2
Each year, the Chief Executive Officer makes salary recommendations. He
then reviews with the Compensation Committee the proposed annual salaries, and
the Committee recommends any modifications it deems appropriate based on
industry standards, national surveys, individual contribution and performance.
The Compensation Committee also fixes the base salary of the Chief Executive
Officer based on the same criteria and the Committee's assessment of his past
performance and expectations as to future leadership of the Company's business.
Stock and cash bonuses awarded to the executive officers named in the
Summary Compensation Table appearing below and other senior executives are based
on their performance throughout the year.
In determining the Chief Executive Officer's bonus award for 2001, the
Compensation Committee considered, in addition to the factors discussed above
pertaining to expanded markets and innovations, the performance of the Company's
competitors, as well as more subjective criteria.
Periodically, the Compensation Committee considers issuing stock options,
which are designed to link the concerns of the executives with those of the
shareholders. Stock option grants provide an incentive that focuses the
executive's attention on managing the Company from the perspective of an owner
with an equity stake in the business. The Compensation Committee believes that
past grants have successfully focused the Company's senior management on
building profitability and shareholder value. The Chief Executive Officer is
eligible to participate in the same executive compensation plans available to
other senior executives.
In establishing grants of stock options, the Chief Executive Officer
reviews with the Compensation Committee the proposed option awards. Options may
be granted to key employees, officers and directors of the Company.
Submitted by the Compensation Committee of the Board of Directors:
James R. Morton Lillard H. Mount A. Scott Parker III
February 11, 2002
Summary Compensation Table
Shown below is information concerning the annual compensation for services
in all capacities to the Company for the fiscal years ended December 31, 2001,
2000, and 1999, of those persons who were, at December 31, 2001 (i) the Chief
Executive Officer and (ii) the senior executive officers, other than the CEO,
who earned more than $100,000 in salary and bonus during 2001.
Long Term Compensation
------------------------
Awards
------------------------
Annual Compensation Securities
Name and ---------------------- Underlying All Other
Principal Salary Bonus Options/ Compensation
Position Year ($) ($) SARs (#) ($)
-------------------------------------------------------------------------------------------------------
J. Allen Fine 2001 238,662 100,000 50,000 14,601(1)
Chief Executive 2000 231,276 99,438 -- 17,653
Officer 1999 224,510 124,438 -- 17,950
James A. Fine, Jr. 2001 188,375 35,000 50,000 19,146(2)
President 2000 179,613 25,008 -- 21,834
1999 172,167 30,015 -- 20,954
W. Morris Fine 2001 188,375 35,000 50,000 19,146(3)
Executive Vice 2000 178,813 25,008 -- 21,854
President 1999 171,917 32,015 -- 34,368
-------------------------------------------------------------------------------------------------------
(1) Total represents $13,600 Company contribution to Simplified Employee Pension
Plan, along with $1,001 Company-paid life insurance premiums.
(2) Total represents $13,600 Company contribution to Simplified Employee Pension
Plan, along with $1,349 Company-paid life insurance premiums, and $4,197
Company-paid health insurance premiums.
(3) Total represents $13,600 Company contribution to Simplified Employee Pension
Plan, along with $1,349 Company-paid life insurance premiums, and $4,197
Company-paid health insurance premiums.
3
Stock Options
There were no options granted to the named executive officers during the
fiscal year ended December 31, 2001.
None of the named executive officers in the Summary Compensation Table
exercised options during the fiscal year ended December 31, 2001. The following
table shows the number of shares covered by both exercisable and unexercisable
stock options outstanding as of December 31, 2001. Also reported are the values
for "in-the-money" options which represent the positive spread between the
exercise price of any such existing stock options and the year-end price of the
Common Stock.
Fiscal Year-End Option Values
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Shares Value Options at FY-End (#) at FY-End ($)(1)
Acquired on Realized
Name Exercise (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable
------------- ------------ -------- ------------------------- -------------------------
J. Allen Fine 0 $0 19,000 / $ 41,880 /
39,000 108,020
James A. Fine, Jr. 0 0 23,000 / 55,200 /
37,000 94,680
W. Morris Fine 0 0 23,000 / 55,200 /
37,000 94,680
(1) The closing price of the Common Stock on December 31, 2001, the last day of
2001 on which the Company's Common Stock traded, was $15.44.
PERFORMANCE GRAPH
The following graph compares the cumulative total return among the
Company's Common Stock, a broad equity market index (the NASDAQ Market Index)
and a peer group index for the last five years. The peer group index (selected
on the basis of SIC Codes for publicly-traded title insurance companies)
consists of Fidelity National Financial, Inc., First American Corporation,
LandAmerica Financial Group, Inc., and Stewart Information Services Corporation.
COMPARE 5-YEAR CUMULATIVE TOTAL RETURN AMONG
INVESTORS TITLE COMPANY,
PEER GROUP INDEX AND NASDAQ MARKET INDEX
[GRAPH]
INVESTORS TITLE COMPANY PEER GROUP INDEX NASDAQ MARKET INDEX
ASSUMES $100 INVESTED ON JAN. 1, 1996
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 31, 2001
4
EXECUTIVE EMPLOYMENT AGREEMENTS
On February 9, 1984, Investors Title Insurance Company, a wholly owned
subsidiary of the Company, entered into an employment agreement with J. Allen
Fine, which provides, among other things, for a salary to be fixed by the Board
of Directors, which shall not be less than $88,000 per annum. The agreement was
for an initial term of five years, renewable annually thereafter until such time
as Mr. Fine reaches age 70. The employment agreement provides that if the
Company terminates his employment, with or without cause, for any reason other
than death or disability, prior to Mr. Fine reaching age 70, he will be paid his
monthly salary for a period of 60 months commencing on the first of the month
following such termination. Investors Title Insurance Company also entered into
employment agreements with James A. Fine, Jr. and W. Morris Fine dated December
21, 1995. These employment agreements, which are substantially identical,
provide that the employee shall not compete with the Company in the State of
North Carolina for a period of two years following voluntary termination of
employment. The agreements also provide that termination following certain
events, such as a change in control of the Company, a diminution of the
employee's duties and responsibilities, an increase in travel or a requirement
that the employee render services outside the Chapel Hill area, would not be
deemed a voluntary termination.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is comprised of James R. Morton, Lillard H.
Mount and A. Scott Parker III. None of these directors are officers or employees
of the Company or any of its subsidiaries.
OWNERSHIP OF STOCK BY EXECUTIVE OFFICERS AND
CERTAIN BENEFICIAL OWNERS
The following table indicates the persons known to the Company to be the
owners of more than five percent (5%) of the Company's Common Stock as of March
25, 2002.
Name and Address of Amount and Nature Percent
Beneficial Owner of Beneficial Ownership of Class
----------------------------------------------------- ------------------------- -----------
Markel Corporation 239,150(1) 9.5%
4521 Highwoods Parkway, Glen Allen, Virginia 23060
J. Allen Fine 271,558(2) 10.70%
112 Carolina Forest, Chapel Hill, North Carolina 27516
(1) Ownership as of December 31, 2001 as reported to the Company on a Schedule
13G dated February 7, 2002. According to the Schedule 13G, certain
subsidiaries of Markel Corporation, as well as other investors advised by
Markel Gayner Asset Management Corporation, have the right to receive or
the power to direct the receipt of dividends from, or the proceeds from the
sale of, the Company's Common Stock. Each such holder, with the exception
of Essex Insurance Company, a subsidiary of Markel, which beneficially owns
152,600 shares of the Company's Common Stock, holds an interest in less
than 5% of the Company's outstanding Common Stock.
(2) This includes 22,000 shares of Common Stock that Mr. Fine has the right to
purchase under stock options that are presently exercisable or are
exercisable within 60 days of March 25, 2002. Additionally, this includes
95,000 shares held by a limited partnership, of which Mr. Fine is a general
partner, and 151,099 shares held by a limited liability company, of which
Mr. Fine is the manager. Mr. Fine possesses sole voting and investment
power with respect to the shares held by the limited liability company.
The table below sets forth the shares of the Company's Common Stock
beneficially owned by each director, nominee for director, the executive
officers named in the Summary Compensation Table, and by all directors and
executive officers as a group.
Name of Amount and Nature Percent
Beneficial Owner of Beneficial Ownership of Class
------------------------------------- ------------------------- ----------
J. Allen Fine 271,558(1) 10.70%
A. Scott Parker III 79,791(2) 3.16%
W. Morris Fine 73,325(3) 2.90%
James A. Fine, Jr. 71,623(4) 2.81%
David L. Francis 55,666(5) 2.20%
James R. Morton 21,065(5) *
H. Joe King, Jr. 20,276(6) *
William J. Kennedy III 4,500(5) *
Lillard H. Mount 3,380(7) *
Loren B. Harrell, Jr. 2,500(5) *
All Executive Officers and
Directors as a Group (12 persons) 615,519(8) 23.67%
*Represents less than 1%
5
(1) This includes 22,000 shares of Common Stock that Mr. Fine has the right to
purchase under stock options that are presently exercisable or are
exercisable within 60 days of March 25, 2002. Additionally, this includes
95,000 shares held by a limited partnership, of which Mr. Fine is a general
partner, and 151,099 shares held by a limited liability company, of which
Mr. Fine is the manager. Mr. Fine possesses sole voting and investment power
with respect to the shares held by the limited liability company.
(2) This total includes 2,000 shares of Common Stock that Mr. Parker has the
right to purchase under stock options that are presently exercisable or are
exercisable within 60 days of March 25, 2002. Additionally, this total
includes shares beneficially owned as follows: 100 shares as custodian for
A. Scott Parker IV, son; and 3,276 shares held by wife, Millicent M. Parker.
(3) This total includes 26,000 shares of Common Stock that Mr. Fine has the
right to purchase under stock options that are presently exercisable or are
exercisable within 60 days of March 25, 2002. Additionally, this total
includes shares beneficially owned as follows: 3,577 shares as Custodian for
Louisa M. Fine, daughter; 5 shares as Custodian for A. Lundy Fine, daughter;
and 470 shares held by wife, Nancy J. Fine.
(4) This total includes 26,000 shares of Common Stock that Mr. Fine has the
right to purchase under stock options that are presently exercisable or are
exercisable within 60 days of March 25, 2002. Additionally, this total
includes shares beneficially owned as follows: 1,415 shares as Custodian for
S. Benton Fine, son; and 546 shares held by wife, Leslie A. Fine.
(5) This total includes 2,500 shares of Common Stock available for purchase
under stock options that are presently exercisable or are exercisable within
60 days of March 25, 2002.
(6) This total includes 2,500 shares of Common Stock that Mr. King has the right
to purchase under stock options that are presently exercisable or are
exercisable within 60 days of March 25, 2002. Additionally, this total
includes shares beneficially owned as follows: 700 shares held by wife,
Patsy T. King.
(7) This total includes 1,500 shares of Common Stock that Mr. Mount has the
right to purchase under stock options that are presently exercisable or are
exercisable within 60 days of March 25, 2002. Additionally, this total
includes shares beneficially owned as follows: 500 shares held by wife,
Bonnie Mount.
(8) This total includes 83,675 shares of Common Stock that all officers and
directors, as a group, have the right to purchase under stock options that
are presently exercisable or are exercisable within 60 days of March 25,
2002.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based on a review of the reports of changes in beneficial ownership of
Company Common Stock and written representations furnished to the Company, the
Company believes that its officers, directors and holders of at least 10% of its
Common Stock filed on a timely basis the reports required to be filed under
Section 16(a) of the Securities Exchange Act of 1934 during the year ended
December 31, 2001, except that A. Scott Parker III, a Director of the Company,
filed two late Form 4's.
ITEM 1
ELECTION OF DIRECTORS
The Company's Board of Directors is composed of 10 members divided into
three classes with staggered terms of three years for each class.
W. Morris Fine, Loren B. Harrell, Jr., H. Joe King, Jr. and William J.
Kennedy III are nominated for re-election to serve for a three-year period or
until their respective successors have been elected and qualified. The nominees
will be elected if they receive a plurality of the votes cast for their
election. Broker nonvotes will not affect the election results if a quorum is
present. If any of the nominees should withdraw or otherwise become unavailable
for reasons not presently known, shares represented by proxies may be voted for
other persons in their place in accordance with the best judgment of the persons
named in the Proxy.
THE BOARD RECOMMENDS A VOTE "FOR" THE ELECTION OF THE NOMINEES FOR DIRECTORS.
Information regarding the three nominees for election as directors and
directors continuing in office is set forth below:
Served as Term
Director to
Name Age Since Expire
---------------------- --- ----- ------
Board Nominees:
W. Morris Fine 35 1999 2005
Loren B. Harrell, Jr. 53 1996 2005
H. Joe King, Jr. 69 1983 2005
William J. Kennedy III 79 1987 2005
6
Served as Term
Director to
Name Age Since Expire
-------------------------------- ----- ----------- --------
Directors Continuing in Office:
James A. Fine, Jr. 40 1997 2003
James R. Morton 64 1985 2003
Lillard H. Mount 88 1977 2003
J. Allen Fine 67 1973 2004
David L. Francis 69 1982 2004
A. Scott Parker III 58 1998 2004
Biographical Information
Additional information regarding nominees for election as directors and
directors continuing in office is set forth below.
Board Nominees:
W. Morris Fine is Executive Vice President and Secretary of Investors Title
Company, President and Chief Operating Officer of Investors Title Insurance
Company and Northeast Investors Title Insurance Company, President of Investors
Title Management Services and Vice President of Investors Title Exchange
Corporation. Mr. Fine is the son of J. Allen Fine, Chief Executive Officer and
Chairman of the Board of the Company, and brother of James A. Fine, Jr.,
President and Treasurer of the Company.
Loren B. Harrell, Jr. organized SoftPro Corporation in 1984 and has been
President of that Company since its inception. SoftPro specializes in the
research and development of software utilized by law firms, title companies,
title insurance agents and lending institutions.
H. Joe King, Jr. retired as President and Chairman of the Board of Home Federal
Savings & Loan Association in Charlotte, North Carolina and its parent company,
HFNC Financial Corporation in 1998, where he had been employed since 1962.
William J. Kennedy III retired as President and Chief Executive Officer of North
Carolina Mutual Life Insurance Company in 1990, where he had been employed since
1950.
Directors Continuing in Office:
James A. Fine, Jr. is President and Treasurer of Investors Title Company,
Executive Vice President, Chief Financial Officer and Treasurer of Investors
Title Insurance Company, Executive Vice President and Chief Financial Officer of
Northeast Investors Title Insurance Company, Executive Vice President of
Investors Title Management Services and President of Investors Title Exchange
Corporation and Investors Title Accommodation Corporation. Additionally, Mr.
Fine serves as Chairman of the Board of Investors Title Accommodation
Corporation. Mr. Fine is the son of J. Allen Fine, Chief Executive Officer and
Chairman of the Board of the Company, and brother of W. Morris Fine, Executive
Vice President and Secretary of the Company.
James R. Morton was President of J. R. Morton Associates from 1968 until he
retired in 1988. He is currently President of TransCarolina Corporation.
Lillard H. Mount was General Counsel to Investors Title Company and its
subsidiaries from their incorporation until his retirement in 1998.
J. Allen Fine was the principal organizer of Investors Title Insurance Company
and has been Chairman of the Board of that Company, Investors Title Company, and
Northeast Investors Title Insurance Company since their incorporation. Mr. Fine
served as President of Investors Title Insurance Company until February 1997,
when he was named Chief Executive Officer. Additionally, Mr. Fine serves as
Chief Executive Officer of the Company and Northeast Investors Title Insurance
Company, and Chairman of the Board of Investors Title Exchange Corporation. Mr.
Fine is the father of James A. Fine, Jr., President and Treasurer of the
Company, and W. Morris Fine, Executive Vice President and Secretary of the
Company.
David L. Francis retired in 1997 as the President of Marsh Mortgage Company, a
mortgage banking firm and Marsh Associates, Inc., a property management company
where he had been employed since 1963. He serves on the Board of Directors of
First Landmark, a Charlotte real estate and property management firm, and is
General Partner of the Francis Family Limited Partnership.
A. Scott Parker III founded Today's Home, Inc. in 1975 and has been President of
that company since its incorporation. Today's Home, Inc. manufactures lamps and
wall decor for the lodging, hospitality and healthcare industries. He is also
managing member of Parker-Jones-Kemp LLC, a developer of furniture showroom
properties to the trade.
7
SHAREHOLDER PROPOSALS FOR 2003 ANNUAL MEETING
Shareholder proposals to be presented at the 2003 Annual Meeting of
Shareholders must be received by the Company on or before December 17, 2002 to
be considered for inclusion in the Company's proxy materials relating to that
meeting. If a shareholder notifies the Company after March 1, 2003 of an intent
to present a proposal at the Company's 2003 Annual Meeting of Shareholders, the
Company will have the right to exercise its discretionary voting authority with
respect to such proposal without including information regarding such proposal
in its proxy materials.
ITEM 2
PROPOSAL - APPROVAL OF AMENDMENT TO ARTICLES OF
INCORPORATION TO LIMIT DIRECTOR LIABILITY
The Board of Directors proposes that the shareholders approve an amendment
to the Company's Articles of Incorporation, as amended, to limit the liability
of the Company's directors for certain acts as allowed by Section 55-2-02(b)(3)
of the North Carolina General Statutes. The proposed amendment adds the
following provision as new Article XV to the Company's Articles of
Incorporation:
To the fullest extent permitted by the North Carolina Business Corporation
Act as it exists or may hereafter be amended, no person who is serving or
who has served as a director of the corporation shall be personally liable
to the corporation or any of its shareholders for monetary damages for
breach of his or her duty as a director. No amendment or repeal of this
article, nor the addition of any provision to these Articles of
Incorporation inconsistent with this article, shall eliminate or reduce the
protection granted herein with respect to any matter that occurred prior to
such amendment, repeal, or addition.
The North Carolina Business Corporation Act was amended in 1987 to permit a
North Carolina corporation to include a provision in its articles of
incorporation for the purpose of limiting or eliminating the personal liability
of each director of the corporation for monetary damages arising from a claim by
the corporation or a shareholder of the corporation for breach of the director's
duty as a director. Under North Carolina law, however, no such provision may
limit or eliminate directors' liability for monetary damages for
. acts or omissions not made in good faith that the director knew or
believed were in conflict with the best interests of the corporation,
. certain actions with respect to illegal dividends, stock repurchases, or
distributions during liquidation,
. any transaction in which the director derives an improper personal
benefit, or
. acts or omissions occurring before the date the provision is included in
the corporation's articles of incorporation.
The 1987 amendment to the North Carolina Business Corporation Act was
enacted to alleviate concerns regarding the liability of corporate directors,
including the difficulty some corporations were experiencing in attracting and
retaining the most qualified individuals to serve as directors and the
increasingly expensive insurance rates for directors' liability insurance. Upon
the enactment of the amendment in 1987, provisions limiting the liability of
directors were widely incorporated into the articles of incorporation of North
Carolina corporations.
The duties of a director referred to in the proposed amendment mean the
obligations of a director to discharge his or her duties in good faith and with
the diligence and care that an ordinarily prudent person would exercise under
similar circumstances. Without the amendment to the Company's Articles of
Incorporation, a breach of the duty of care by a director, such as by failing to
exercise sufficient care in reaching decisions and otherwise attending to his or
her responsibilities as a director, may give rise to liability for monetary
damages to the Company or its shareholders. The proposed amendment does not
eliminate or place limitations on the directors' duty of care. Rather, it
eliminates monetary damages that may be awarded for breach of that duty.
Nonmonetary damages, such as injunctive relief, remain available to aggrieved
corporations and shareholders.
The Board of Directors strongly believes that the proposed amendment is in
the best interests of the Company and its shareholders. The Board of Directors
does not believe that the elimination of liability for monetary damages as
provided by the proposed amendment would result in the directors of the Company
acting with less concern for the Company or with a lower level of care. It is
the opinion of the Board of Directors that the diligence exercised by the
directors on behalf of the Company stems from the directors' desire to act in
the best interests of the Company, and not from fear of litigation and monetary
damage awards. Shareholders should note, however, that the adoption of the
proposed amendment would limit remedies available to a shareholder dissatisfied
with an act or omission of a director to the extent that the act or omission is
protected by the new Article XV.
The amendment is not being proposed in response to any resignation or
threat of resignation of any director or nominee. The Company is not aware of
any existing or proposed takeover proposal for the Company and the proposed
amendment is not being submitted to the shareholders in anticipation of a
takeover proposal. The Company further is not aware of any pending or threatened
claims that could be covered by the new Article XV.
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Vote Required and Board Recommendation
The affirmative vote of holders of a majority of the shares of Common Stock
entitled to vote at the meeting is required to approve the proposed amendment.
If the shareholders do not approve the amendment, the Company's Articles of
Incorporation, which do not limit or eliminate the liability of directors, will
continue in effect. The Board of Directors recommends a vote "FOR" the proposal
to approve the amendment to the Articles of Incorporation to limit director
liability.
In evaluating this recommendation, shareholders should recognize that the
members of the Board of Directors may benefit personally from the adoption of
the proposed amendment. Accordingly, the interests of the members of the Board
of Directors may conflict with those of the shareholders.
ITEM 3
PROPOSAL - APPROVAL OF AMENDMENT TO ARTICLES OF
INCORPORATION TO INCREASE AUTHORIZED CAPITAL STOCK
The Board of Directors proposes that the shareholders approve an amendment
to the Company's Articles of Incorporation, as amended, to increase the number
of authorized shares of capital stock to 11,000,000 shares, comprised of
10,000,000 shares of Common Stock and 1,000,000 shares of preferred stock. The
amendment would replace Article IV of the Company's Articles of Incorporation
with the following:
The number of shares the corporation is authorized to issue is
11,000,000, consisting of (i) 10,000,000 shares of Common Stock and (ii)
1,000,000 shares of Preferred Stock.
Each outstanding share of Common Stock shall be entitled to one vote
with respect to all matters upon which such Stock is entitled to vote. The
Board of Directors shall determine the preferences, limitations and
relative rights of the Preferred Stock and any series thereof. Each share
of Preferred Stock shall be entitled to vote to the extent provided by the
Board of Directors in the resolution establishing the preferences,
limitations and relative rights of the Preferred Stock.
The amendment has the effect of both increasing the number of authorized
shares of Common Stock from 6,000,000 shares to 10,000,000 shares and
authorizing the issuance of preferred stock.
Common Stock
On March 25, 2002, the Company had 2,855,744 shares of Common Stock
outstanding. On that date, an additional 566,991 shares of Common Stock were
reserved for issuance pursuant to the Company's stock option and restricted
stock plans.
The additional authorized shares of Common Stock would be available for
future issuance by the Company and would give the Company flexibility in its
corporate planning and in responding to future business developments, including
possible financings and acquisition transactions, stock splits or dividends,
issuances under the Company's stock-based plans and other general corporate
purposes. Except for shares needed for stock-based benefit plans, the Company
has no present plans to issue additional shares of Common Stock. The Board
believes that the availability of the shares will allow the Company to act
promptly, and without the delay and expense involved in convening special
shareholder meetings to authorize additional shares, in the event opportunities
requiring the issuance of additional shares of Common Stock arise.
The Board of Directors may issue authorized shares of Common Stock from
time to time without further shareholder approval, except in situations where
shareholder approval is required by state law or the rules of the Nasdaq
National Market. The additional shares of Common Stock, if authorized, would
have the same rights and privileges as the shares of Common Stock presently
outstanding. Shareholders of the Company have no preemptive right to acquire
additional shares of Common Stock.
While the Board of Directors believes it advisable to increase the number
of authorized shares of Common Stock for the reasons stated above, the Board
realizes that the increase in the number of authorized shares could be used for
anti-takeover purposes as the Company could issue additional shares to make more
difficult or discourage an attempt to acquire control of the Company. The
Company is not aware of any effort to accumulate its securities or obtain
control by means of a tender offer, proxy contest or otherwise.
Preferred Stock
The proposed amendment would authorize the Company to issue from time to
time, as determined by the Board of Directors, up to 1,000,000 shares of
preferred stock, without par value. If the proposed amendment is approved, the
Board of Directors would be empowered, without requiring further action or
authorization by the Company's shareholders except as provided in a specific
case by applicable law or rules of the Nasdaq National Market, to authorize the
issuance of shares of preferred stock from time to time in one or more series or
classes, and to fix by resolution the designations, preferences, limitations and
relative rights of each such series or class.
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Each series or class of preferred stock could, as determined by the Board of
Directors at the time of issuance, rank senior to the Company's shares of Common
Stock with respect to dividends and liquidation rights. No preferred stock is
presently authorized by the Company's Articles of Incorporation.
The proposed amendment would provide the Company with authorized and
unissued shares of preferred stock that the Company may use for any proper
corporate purpose. Such purposes might include, without limitation, issuance as
part or all of the consideration paid by the Company in the acquisition of other
businesses or properties, or issuance in public or private sales to obtain
additional capital for use in the Company's business and operations. The
authorization of preferred stock would enable the Company to act promptly and
without additional expense if appropriate circumstances arise that require the
issuance of preferred stock. There are no transactions presently under review by
the Board of Directors that contemplate the issuance of shares of preferred
stock. The Board of Directors is considering, however, implementing a
shareholder rights plan, pursuant to which holders of shares of Common Stock
would receive rights to acquire a series or class of preferred stock.
The precise effects of the authorization of shares of preferred stock upon
the rights of the holders of the Company's Common Stock cannot be determined
until the Board of Directors establishes the respective preferences, limitations
and relative rights of the holders of each class or series of preferred stock.
However, such effects might include:
. reducing the amount otherwise available for payment of dividends on
Common Stock, to the extent dividends are payable on any issued shares of
preferred stock;
. restricting dividends on Common Stock;
. diluting the voting power of the Common Stock, to the extent that the
shares of preferred stock have voting rights;
. diluting the Common Stock through conversion of shares of preferred stock
into shares of Common Stock at prices determined by the Board of
Directors, which could include conversion at prices below the fair market
value or original issue price of shares of Common Stock; and
. precluding the holders of shares of Common Stock from sharing in the
Company's assets upon liquidation until satisfaction of any liquidation
preference granted to holders of shares of preferred stock.
Although the Board of Directors would authorize the issuance of shares of
preferred stock based on its judgment as to the best interests of the Company
and its shareholders, the issuance of authorized shares of preferred stock could
have the effect of diluting both the voting power and book value per share of
outstanding Common Stock. In addition, the preferred stock could, in certain
circumstances, render more difficult or discourage a merger, tender offer, or
proxy contest and thus potentially have an "anti-takeover" effect, especially if
shares of preferred stock were issued in response to a takeover threat. Further,
issuances of authorized shares of preferred stock can be implemented, and have
been implemented by some companies, with voting or conversion privileges
intended to make acquisition of the Company more difficult or more costly. Such
an issuance could deter the types of transactions that may be proposed or could
discourage or limit the shareholders' participation in certain types of
transactions that might be proposed -- such as a tender offer, whether or not
such transactions were favored by the majority of the shareholders, and could
enhance the ability of officers and directors to retain their positions.
As noted above, the Board of Directors is considering adopting a
shareholder rights plan that would involve the issuance of rights to acquire
preferred stock to holders of Common Stock. Commonly known as "poison pills,"
these plans have a deterrent effect against unfriendly takeovers because they
tend to make an acquisition of a company more expensive for an unfriendly
acquirer. These plans generally are structured to permit the target company's
shareholders, other than the unfriendly acquirer, to purchase additional shares
of stock at a substantial discount. The plans thus generally force potential
acquirers of a target company to negotiate the terms of any acquisition with the
target company's Board of Directors, who have the power to redeem rights issued
under the plan at a nominal price.
Vote Required and Board Recommendation
The affirmative vote of holders of a majority of the shares of Common Stock
entitled to vote at the meeting is required to approve the proposed amendment.
If the shareholders do not approve the amendment, the Company's Articles of
Incorporation, which do not authorize the issuance of any preferred stock, will
continue in effect and the number of authorized shares of Common Stock will not
be increased. The Board of Directors recommends a vote "FOR" the proposal to
approve the amendment to the Articles of Incorporation to increase authorized
common stock.
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INDEPENDENT AUDITORS
Deloitte & Touche LLP served as the independent auditors for the Company
for 2001. The Company plans to solicit bids for the 2002 audit; therefore, the
independent auditors have not been appointed. Representatives of Deloitte &
Touche LLP are expected to attend the 2002 Annual Meeting of Shareholders. They
will have the opportunity to make a statement if they desire to do so and are
expected to be available to respond to appropriate questions.
Audit Fees: The aggregate fees billed by Deloitte & Touche LLP for
professional services rendered for the audit of the Company's annual financial
statements for the fiscal year ended December 31, 2001 and for the reviews of
the financial statements included in the Company's Quarterly Reports on Form
10-Q for that fiscal year were $86,400.
All Other Fees: The aggregate fees billed by Deloitte & Touche LLP for
services rendered to the Company, other than the services described under "Audit
Fees," for the fiscal year ended December 31, 2001 were $44,635. The Audit
Committee does not consider these fees to be inconsistent with the independent
auditors' independence.
OTHER MATTERS TO COME BEFORE THE MEETING
Management does not know of any other matters that may come before the
meeting. However, if any other matters do properly come before the meeting, it
is the intention of the persons named as proxies to vote upon them in accordance
with their best judgment.
GENERAL INFORMATION
A copy of the Company's 2001 Annual Report and Form 10-K filed with the
Securities and Exchange Commission, excluding exhibits, can be obtained without
charge by writing to the Assistant Secretary of the Company, 121 North Columbia
Street, Chapel Hill, North Carolina 27514.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ L. Dawn Martin
L. Dawn Martin
Vice President and Assistant Secretary
April 15, 2002
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