Investors Title (ITIC) DEF 14ADefinitive proxy

You are cordially invited to attend the Annual Meeting of Shareholders (the “Annual Meeting”) of Investors Title Company (the “Company”) to be held at The Siena Hotel, 1505 East Franklin Street, Chapel Hill, North Carolina on Wednesday, May 19, 2021 at 11:00 a.m. EDT.

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 2021, followed by discussion and voting on the matters set forth in the accompanying Notice of Annual Meeting and Proxy Statement.

Whether or not you plan to attend the meeting, I urge you to review the Proxy Statement and vote as soon as possible to ensure that your shares are represented at the meeting. The Proxy Statement explains more about proxy voting, so please read it carefully.

Shareholders of record of common stock of the Company at the close of business on April 1, 2021 are entitled to notice of and to vote at the meeting and any adjournments or postponements thereof.

This Proxy Statement is furnished in connection with the solicitation by the Board of Directors of Investors Title Company (the “Company”) of proxies to be voted at the Annual Meeting of Shareholders (the “Annual Meeting”) to be held at The Siena Hotel, 1505 East Franklin Street, Chapel Hill, North Carolina, on May 19, 2021 at 11:00 a.m. EDT, and at all adjournments or postponements thereof. Shareholders of record at the close of business on April 1, 2021 are entitled to notice of and to vote at the meeting and any adjournments or postponements thereof.

To ensure that your vote is recorded properly, please vote your shares as soon as possible, even if you plan to attend the meeting in person.

If you vote by Internet or by telephone, please have your proxy card available. The control number appearing on your card is necessary to process your vote. An Internet or telephone vote authorizes the named proxy holders in the same manner as if you marked, signed and returned a proxy card by mail. 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. Shareholders with shares registered directly in their names may revoke their proxy by (1) sending written notice of revocation to the Corporate Secretary, P.O. Box 2687, Chapel Hill, North Carolina 27515-2687, (2) submitting a subsequent proxy or (3) voting in person at the meeting. If you plan to attend the meeting and

The Company has a Code of Business Conduct and Ethics that is applicable to all of the Company’s employees, officers and directors, including its Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer. This Code addresses a variety of issues, including conflicts of interest, the protection of confidential information, insider trading and employment practices. It also requires strict compliance with all laws, rules and regulations governing the conduct of the Company’s business.

The Code of Business Conduct and Ethics is posted in the Corporate Governance area of the Investor Relations section of the Company’s website at www.invtitle.com. The Company intends to disclose future substantive amendments to or waivers from the Code of Business Conduct and Ethics on its website within two business days after such amendment or waiver.

Shareholders can communicate with members of the Company’s Board of Directors in one of two ways. Shareholders may mail correspondence to the attention of the Corporate Secretary, P.O. Box 2687, Chapel Hill, North Carolina 27515-2687. Any correspondence sent via mail should clearly indicate that it is a communication intended for the Board of Directors. Shareholders may also use electronic mail to contact the Board of Directors at boardofdirectors@invtitle.com. The Corporate Secretary regularly monitors this email account. Any communication that is intended for a particular Board member or committee should clearly state the intended recipient.

The Corporate Secretary will review all communications sent to the Board of Directors via mail and email and will forward all communications concerning Company or Board matters to the Board members within five business days of receipt. If a communication is directed to a particular Board member or committee, it will be passed on only to that member or the members of that committee. Otherwise, relevant communications will be forwarded to all Board members.

The Board of Directors has determined that the following directors and nominees for director are independent directors within the meaning of the applicable listing standards of The Nasdaq Stock Market LLC (“Nasdaq”) and the Company’s Board of Directors Independence Standards: Tammy F. Coley, David L. Francis, Richard M. Hutson II, James R. Morton, Elton C. Parker, Jr. and James H. Speed, Jr. The Board of Directors Independence Standards can be found on the Company’s website at www.invtitle.com/investors-independence-standards.

Executive sessions that include only the independent members of the Board of Directors are held periodically.

During the fiscal year ended December 31, 2020, the Board of Directors held four meetings. All incumbent directors and nominees attended 75% or more of the aggregate number of meetings of the Board of Directors and committees of the Board on which they served. The Company expects each of its directors to attend the Annual Meeting unless an emergency prevents them from attending. All of the Board members were present at the 2020 Annual Meeting.

The Company’s Board of Directors has a standing Audit Committee, Compensation Committee and Nominating Committee.

The Audit Committee operates under a written charter adopted by the Board of Directors, a copy of which is posted on the Company’s website at www.invtitle.com/investors-committees. The Audit Committee reviews and assesses the adequacy of the charter on an annual basis.

The Board of Directors has determined that each member of the Company’s Audit Committee is “independent” as defined under applicable Nasdaq listing standards and SEC rules, including the special independence requirements applicable to Audit Committee members. The Board of Directors has also determined that all of the current Audit Committee members—Ms. Coley, Mr. Francis, and Mr. Parker—are “audit committee financial experts” as defined under applicable SEC rules. Mr. Speed also qualified as an “audit committee financial expert” during his service. See “Audit Committee Report” below for the formal report of the Audit Committee for fiscal 2020.

The Compensation Committee operates under a written charter that can be found on the Company’s website at www.invtitle.com/investors-committees. The Compensation Committee reviews and assesses the adequacy of the charter on an annual basis.

The Compensation Committee makes all compensation decisions for the Company’s executive officers and approves recommendations regarding equity awards for all of the Company’s elected officers. The Compensation Committee may not delegate these responsibilities. Decisions regarding non-equity compensation of all other officers and employees are made by the Company’s executive officers.

The Company’s Chief Executive Officer annually reviews the performance of each of the other executive officers with respect to achievement of the Company’s objectives. Based on those reviews, the Chief Executive Officer makes recommendations with respect to compensation to the Compensation Committee. The Compensation Committee then can exercise its discretion in modifying any recommended adjustments or awards to those executive officers based upon its evaluation of their performance as well as other aspects of our compensation objectives.

The Compensation Committee’s review of the Chief Executive Officer’s compensation is subject to separate procedures. The Compensation Committee evaluates the Chief Executive Officer’s performance, reviews the Compensation Committee’s evaluation with him and, based on that evaluation and review, determines the amount of his salary adjustment and bonus award. Consistent with the requirements of applicable Nasdaq listing standards, the Chief Executive Officer is excused from meetings of the Compensation Committee during voting deliberations regarding his compensation.

The Compensation Committee does not currently retain or use an executive compensation consultant for determining or recommending the amount or form of executive officer compensation. In making compensation decisions, the Compensation Committee is guided by the objectives of our compensation program, the Compensation Committee’s own judgment and other information that it considers relevant. Based on the cyclical nature of the Company’s business, the Compensation Committee believes that compensation of the executive officers should not be based on fixed formulas and that the prudent use of discretion in determining compensation is generally in the best interest of the Company and its shareholders.

Decisions regarding the compensation of the Company’s directors are made by the Board of Directors, as described under “Compensation of Directors” below.

The Nominating Committee operates under a written charter that can be found on the Company’s website at www.invtitle.com/investors-committees. The Nominating Committee reviews and assesses the adequacy of the charter on an annual basis.

The Board of Directors has determined that each member of the Company’s Nominating Committee is “independent” as defined under applicable Nasdaq listing standards.

The Nominating Committee is responsible for identifying, evaluating and recommending to the Board of Directors candidates for election to the Board of Directors as well as appropriate members for the Audit and Compensation Committees. The slate of director nominees to be presented to shareholders is recommended to the Board of Directors by the Nominating Committee and determined by at least a majority vote of the members of the Board of Directors whose terms do not expire during the year in which the election of directors will occur.

In recommending proposed nominees to the full Board, the Nominating Committee is charged with building and maintaining a Board that has an appropriate mix of talent and experience to achieve the Company’s business objectives. In particular, the Nominating Committee considers all aspects of a candidate’s qualifications in the context of the needs of the Company at that point in time with a view to creating a Board with a diversity of experience and perspective.

At a minimum, the Nominating Committee believes that a director nominee must demonstrate character and integrity, have an inquiring mind, possess substantial experience at a strategy or policy-setting level, demonstrate an ability to work effectively with others, possess either high-level managerial experience in a relatively complex organization or experience dealing with complex problems, have sufficient time to devote to the affairs of the Company and, in the case of independent director positions, be free from conflicts of interest with the Company and its subsidiaries.

While the Nominating Committee does not have a formal policy regarding diversity, the Nominating Committee believes that diversity is an important attribute and strives to nominate candidates with a mix of backgrounds, experiences, perspectives and skills so that, as a group the Board will possess an appropriate level of talent, skill and experience to fulfill the duties and responsibilities of the Board of Directors.

The Nominating Committee believes that a majority of the members of the Company’s Board of Directors should be “independent” as defined under applicable Nasdaq listing standards and, as a result, it also considers whether a potential director nominee meets such independence standards. The Committee also requires that all members of the Audit Committee be financially literate pursuant to applicable Nasdaq listing standards and that at least one member of the Audit Committee be an “audit committee financial expert” as defined under SEC rules. Therefore, the Nominating Committee considers whether a potential director nominee meets these criteria when evaluating his or her qualifications.

It is the policy of the Nominating Committee to consider all director candidates recommended by shareholders, provided that such recommendations are made in accordance with the procedures outlined below. The Nominating Committee evaluates such candidates in accordance with the same criteria it uses to evaluate all other director candidates.

The Company’s Bylaws provide that nominations for election to the Board of Directors may be made at any annual meeting by any shareholder of record entitled to vote on such election. Such nominations must be submitted in writing to our Corporate Secretary at our principal office not later than the close of business on the 90th day nor earlier than the close of business on the 120th day prior to the first anniversary of the preceding year’s annual meeting, and in accordance with the procedures specified in our Bylaws. The Company or the presiding officer at the annual meeting of shareholders may refuse to accept the nomination of any person that is not submitted in compliance with such procedures.

J. Allen Fine serves as both the Chairman of the Board of Directors and the Chief Executive Officer of Investors Title Company, and Richard M. Hutson II serves as the Lead Independent Director.

The Board of Directors does not have a general policy regarding the separation of the roles of Chairman and Chief Executive Officer. Our bylaws permit these positions to be held by the same person, and the Board of Directors believes that it is in the best interests of the Company to retain flexibility in determining whether to separate or combine the roles of Chairman and Chief Executive Officer based on our circumstances.

The Board has determined that it is appropriate for Mr. Fine to serve as both Chairman and Chief Executive Officer (1) in recognition of his status as the founder of the Company and (2) because it provides an efficient structure that permits us to present a unified vision to our constituencies.

The Board of Directors has elected Mr. Hutson to serve as its Lead Independent Director. The duties of the Lead Independent Director include presiding at the executive sessions of the independent directors, serving as liaison between the Chairman of the Board of Directors and the independent directors, approving information, meeting agendas and schedules for the Board of Directors and calling meetings of the independent directors.

Management is responsible for managing the risks that the Company faces. The Board of Directors is responsible for overseeing management’s approach to risk management. Management identifies material risks facing the Company on an ongoing basis and discusses those risks and the management of those risks with the Board of Directors or its committees, as appropriate. While the Board of Directors has ultimate responsibility for overseeing management’s approach to risk management, various committees of the Board assist in fulfilling that responsibility. In particular, the Audit Committee assists the Board in its oversight of risk management in the areas of financial reporting and internal controls.

Under the Company’s Insider Trading and Tipping Policy (the “Policy”), all “Insiders” (as defined in the Policy to include officers, directors and employees of the Company and its direct and indirect subsidiaries) are prohibited from entering into hedging or monetization transactions or similar arrangements with respect to the Company’s securities, including the purchase or sale of “puts” or “calls” or other derivative instruments. Additionally, under the Policy, Insiders may not hold Company securities in a margin account or pledge Company securities as collateral for a loan.

Directors who are not employees of the Company receive an annual retainer for Board services of $7,500 and an attendance fee of $2,500 for each meeting of the Board of Directors attended, in addition to actual travel expenses related to the meetings. Non-employee directors also receive a $750 fee for participating in a committee meeting, provided that the committee meeting is held on a day other than the regularly scheduled Board meeting date. The Audit Committee Chairperson receives an additional annual retainer of $500. Directors who are employees of the Company are paid no fees or other remuneration for service on the Board or on any Board committee.

On May 20, 2020, the date of the Company’s 2020 Annual Meeting of Shareholders, each non-employee director was granted 750 stock appreciation rights (“SARs”) under the Company’s 2019 Stock Appreciation Rights Plan (the “2019 Plan”) with an exercise price of $122.80. Upon exercise of each SAR, a director is entitled to receive an amount (payable in shares of Common Stock) equal to the difference between the closing price of Common Stock on the business day immediately preceding the date of exercise and the exercise price. The number of shares paid on exercise is determined by dividing this amount by the closing price of Common Stock on the business day immediately preceding the date of exercise. These SARs vest and become exercisable in four quarterly installments beginning June 30, 2020 and will expire on May 20, 2027.

The Board of Directors makes all decisions regarding the compensation of the members of the Board of Directors. The Chief Executive Officer makes periodic recommendations regarding director compensation, and the Board of Directors may exercise its discretion in modifying any recommended compensation adjustments or awards to the directors. The Board of Directors does not use a compensation consultant for determining or recommending the amount or form of director compensation. The following table shows the compensation earned by each non-employee director for fiscal 2020:

The following table indicates the persons known to the Company to be the beneficial owners of more than five percent (5%) of the Company’s outstanding Common Stock as of April 1, 2021. Unless otherwise indicated, all persons named as beneficial owners of Common Stock have sole voting power and sole investment power with respect to shares indicated.

The table below sets forth the shares of Common Stock beneficially owned as of April 1, 2021 by each director and nominee for director, the executive officers named in the Summary Compensation Table, and all directors and executive officers as a group. Unless otherwise indicated, all persons named as beneficial owners of Common Stock have sole voting power and sole investment power with respect to shares indicated, and the address of each of the individuals below is c/o 121 N. Columbia Street, Chapel Hill, North Carolina 27514.

The Company’s Board of Directors is composed of nine members divided into three classes with staggered three-year terms for each class. Based on the recommendations of the Nominating Committee, the Board of Directors has nominated James A. Fine, Jr., James R. Morton and Elton C. Parker, Jr. for 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 non-votes and abstentions will be counted for purposes of establishing a quorum, but will not be counted in the election of directors and therefore will not affect the election results if a quorum is present. It is the intention of the persons named as proxies in the accompanying proxy card to vote all shares represented by proxy for the three nominees listed below, unless the authority to vote is withheld. If any of the nominees should withdraw or otherwise become unavailable for reasons not presently known, the shares represented by proxy will be voted for three nominees including such substitutions as shall be designated by the Board of Directors. The shares represented by proxy in no event will be voted for more than three persons.

Effective with the 2020 Annual Meeting of Shareholders, the Board has adopted a Director Resignation Policy providing that an incumbent director nominee standing for election in an uncontested election of directors at an Annual Meeting of Shareholders who receives a number of withhold votes greater than 50% of the votes cast with respect to that nominee’s election will offer his or her resignation to the Board. The resignation will be effective if and when it is accepted by the Board. As soon as practicable after the Board reaches a decision, the Company will publicly disclose the action taken by the Board regarding the director’s tendered resignation.

The following provides information about each director nominee and continuing director, including information about each nominee’s and director’s business background and other experience, qualifications, attributes or skills that led to the conclusion that the nominee or director should serve on the Board of Directors.

Mr. Fine was selected and qualified to serve on the Board of Directors because he has extensive title insurance industry, operations and marketing experience in addition to a background in investment strategy and executive level management and strategic planning experience.

Mr. Morton was selected and qualified to serve on the Board of Directors because he has extensive experience in strategic planning, business administration and investments.

Mr. Parker, a Certified Public Accountant, was selected and qualified to serve on the Board of Directors because he has extensive experience in public accounting, particularly with respect to insurance companies, management and strategic planning.

Mr. Fine was selected and qualified to serve on the Board of Directors because he is the founder of the Company and has extensive title insurance industry, operations and marketing experience as well as a strong executive background in real estate, strategic planning and business administration.

Mr. Francis was selected and qualified to serve on the Board of Directors because he has extensive experience in mortgage lending, real estate and property management.

Mr. Speed was selected and qualified to serve on the Board of Directors because he has a strong executive background and extensive experience in finance, public accounting and insurance.

Ms. Coley was selected and qualified to serve on the Board of Directors because she has strong experience in executive leadership, operational management and public accounting.

Mr. Fine was selected and qualified to serve on the Board of Directors because he has extensive title insurance industry, operations and marketing experience in addition to a background in public accounting and executive level management and strategic planning experience.

Mr. Hutson was selected and qualified to serve on the Board of Directors because he has extensive experience in corporate and business law, corporate restructuring and governance matters, as well as in depth knowledge of the Company’s business as he has assisted the Company in various matters beginning with its formation in 1972.

The Audit Committee selected Dixon Hughes Goodman LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2021. Dixon Hughes Goodman LLP served as our independent registered public accounting firm for the fiscal year ended December 31, 2020, and its representatives are expected to attend the Annual Meeting and to be available to respond to appropriate questions. They will have the opportunity to make a statement if they wish to do so.

Although shareholder ratification of the appointment of Dixon Hughes Goodman LLP as the Company’s independent registered public accounting firm is not required by law or the Company’s Bylaws, the Audit Committee has determined that, as a matter of corporate governance, the selection of the Company’s independent registered public accounting firm should be submitted to the shareholders for ratification. If the shareholders fail to ratify the selection, the Audit Committee will reconsider its selection of Dixon Hughes Goodman LLP for subsequent fiscal years. Even if the selection is ratified, the Audit Committee in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and its shareholders.

Approval of the ratification of the appointment of the independent registered public accounting firm will require the affirmative vote of a majority of the votes cast on the proposal. Abstentions and broker non-votes will not be counted as votes cast for the purpose of ratifying the selection of Dixon Hughes Goodman LLP.

Aggregate fees for professional services rendered by our independent registered public accounting firm, Dixon Hughes Goodman LLP, for the years ended December 31, 2020 and 2019 are set forth below.

The Audit Committee has adopted an Audit and Non-Audit Services Pre-Approval Policy for pre-approving all audit and permissible non-audit services provided by the independent registered public accounting firm.

Each year, the Audit Committee pre-approves independent registered public accounting firm services and associated fee ranges within the categories of Audit Services, Audit-Related Services, Tax Services and Other Services.

Throughout the year, circumstances may arise that require the engagement of the independent registered public accounting firm for additional services that were not contemplated by the existing pre-approval categories. In that case, the Audit and Non-Audit Services Pre-Approval Policy requires specific approval by the Audit Committee of such services before engaging the independent registered public accounting firm. To ensure the prompt handling of such matters, the Audit Committee has granted pre-approval authority to its Chairman. The Chairman reports any pre-approval decisions made at the next Audit Committee meeting.

During 2020 and 2019, none of the services provided to the Company by the independent registered public accounting firm under the categories Audit-Related Services and Tax Services described above were approved by the Audit Committee after such services were rendered pursuant to the de minimis exception established under SEC regulations.

The Audit Committee is directly responsible for overseeing the accounting and financial reporting processes of the Company and appointing, retaining, compensating and overseeing the work of the independent registered public accounting firm. Management is responsible for the financial reporting process, including the system of internal controls, and for the preparation of consolidated financial statements in accordance with generally accepted accounting principles. The independent registered public accounting firm is responsible for auditing those financial statements and expressing an opinion as to their conformity with accounting principles generally accepted in the United States of America.

The independent registered public accounting firm provided the Audit Committee with the written disclosures and the letter required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence. The Audit Committee discussed with the independent registered public accounting firm any relationships that may have an impact on its objectivity and independence. Finally, the Audit Committee considered whether the independent registered public accounting firm’s performance of services, other than audit services, is compatible with maintaining the independence of the independent registered public accounting firm.

The Audit Committee discussed and reviewed with management and the independent registered public accounting firm the audited financial statements as of and for the year ended December 31, 2020. The Audit Committee discussed with the independent registered public accounting firm those matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (United States), including Auditing Standard No. 1301, “Communications with Audit Committees,” and the SEC. The Audit Committee reviewed with the independent registered public accounting firm its audit plans, audit scope and identification of audit risks.

Based on the reviews and discussion referenced above, the Audit Committee recommended to the Board of Directors that the audited financial statements of the Company be included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2020, for filing with the SEC.

The following narrative discussion compensation arrangements of our named executive officers for fiscal year 2020 should be read together with the compensation tables and related disclosures set forth below.

The Compensation Committee is responsible for setting the compensation of the named executive officers listed in the Summary Compensation Table. The ensuing discussion of the material elements of the Company’s executive compensation program focuses on the following:

The Compensation Committee believes that the ultimate objective of an effective executive compensation program is to reward the accretion of shareholder value over the long term. In keeping with this philosophy, the Compensation Committee has designed the Company’s executive compensation program to reward the achievement of the Company’s objectives and to align the interests of executives with those of shareholders.

Retention of talented executives with the skills, experience and vision to lead the Company is integral to the Company’s success. However, given the Company’s history as a family-managed company and the substantial equity interest held by our named executive officers, the Compensation Committee’s philosophy tends to focus on fairness, executive performance and long-term commitment.

To support the over-arching objective of the accretion of shareholder value, a significant focus of the executive compensation program is to reward the attainment of short-term and long-term Company objectives and to provide the proper motivation for the executive officers to strive to achieve those objectives.

While the Compensation Committee does review stock performance in making its compensation decisions, it places relatively low emphasis on short-term stock performance as a measurement of Company and executive performance. The Compensation Committee feels this is appropriate since short-term movements in stock price are subject to factors unrelated to performance and beyond the control of executive officers, including factors affecting the securities markets generally. The Company’s management strives to build shareholder value by meeting customer needs, building cash flow and return on assets, promoting operational excellence and strategic innovation and improving the Company’s financial performance, including improvements in revenues, net income and other financial performance metrics. The pursuit of such short-term and long-term objectives is not always consistent with producing short-term stock price increases, but the Compensation Committee believes that taking a broader view will demand performance that is more likely to maximize return to the shareholders over time. The Compensation Committee believes that there are many ways in which its executive officers and other executives contribute to building a successful company. While the Company’s financial statements and stock price should eventually reflect the results of those efforts, many long-term strategic decisions made in pursuing the growth and development of the Company may have little visible impact on stock price in the short term.

Finally, the Compensation Committee’s philosophy considers the cyclical nature of the Company’s business, which is strongly influenced by factors external to the Company, such as prevailing mortgage interest rates, wage growth and employment rates, and overall economic activity in the markets the Company serves. Because these factors are beyond the control of the executive officers, the Compensation Committee does not attempt to solely link annual operating results with annual compensation. Instead, the Compensation Committee focuses on the

The Compensation Committee makes all compensation decisions for the named executive officers and approves recommendations regarding equity awards for all of the Company’s elected officers. Decisions regarding non-equity compensation of all other officers and employees are made by the Company’s named executive officers.

The Chief Executive Officer annually reviews the performance of each of the other named executive officers in connection with the Company’s attainment of its objectives. Based on those reviews, the Chief Executive Officer makes recommendations with respect to compensation to the Compensation Committee. The Compensation Committee then can exercise its discretion in modifying any recommended adjustments or awards to those named executive officers based upon its evaluation of their performance as well as other aspects of the Compensation Committee’s compensation philosophy.

The Compensation Committee’s review of the Chief Executive Officer’s compensation is subject to separate procedures. The Compensation Committee evaluates the Chief Executive Officer’s performance, reviews the Compensation Committee’s evaluation with him and, based on that evaluation and review, determines the amount of salary adjustment and incentive award. Consistent with the applicable requirements of Nasdaq listing standards, the Chief Executive Officer is excused from meetings of the Compensation Committee during voting deliberations regarding his compensation.

In making compensation decisions, the Compensation Committee is guided by its executive compensation philosophy, its own judgment and other sources of information that it considers relevant. In addition, the Compensation Committee annually reviews tally sheets showing each executive officer’s compensation history with respect to each element of compensation for a period of five years. The Compensation Committee does not currently retain or use an executive compensation consultant for determining or recommending the amount or terms of executive compensation.

Based upon the cyclical nature of the Company’s business, the Compensation Committee believes that compensation of the executive officers cannot be based upon fixed formulas and that the prudent use of discretion in determining compensation will generally be in the best interests of the Company and its shareholders. Accordingly, in the exercise of its discretion, the Compensation Committee approves and determines compensation, and may approve changes in compensation that it considers to be appropriate to award performance or otherwise to provide incentives toward fulfilling the philosophy and objectives of our executive compensation program.

Since 2013, we have provided our shareholders with the opportunity to cast an advisory vote on executive compensation (a Say-on-Pay proposal) every three years. At the Company’s annual meeting of shareholders held in May 2019, shareholders overwhelmingly approved the Company’s executive compensation with approximately 99% of the votes cast in favor. The Compensation Committee believes this vote affirms the shareholders’ support of the Company’s approach to executive compensation and did not make specific changes to our executive compensation program in response to the vote. The Compensation Committee will also continue to consider the outcome of the Company’s Say-on-Pay votes when making future compensation decisions for the named executive officers.

The principal components of our executive compensation program for the named executive officers are generally:

Salary levels are generally considered annually as part of the Company’s performance review process, or upon a promotion or other change in job responsibility. For fiscal 2020, each of the named executive officers received an increase in base salary, reflected as a percentage of fiscal 2019 base salary, as follows: J. Allen Fine – 3.40%; James A. Fine, Jr. – 3.47%; and W. Morris Fine – 3.47%. These increases were provided to each of the named executive officers in recognition of his leadership in the Company’s outstanding performance.

Grants of incentive bonuses are based primarily upon the attainment of the Company’s short-term and long-term objectives. The incentive bonus compensation for any given year is not tied to target amounts by a specific fixed formula. In determining the incentive bonus amounts, the Compensation Committee reviews the Company’s progress toward meeting its objectives, and each executive officer’s contribution toward that progress, in the context of award amounts from prior years, as well as the Compensation Committee’s judgment and use of discretion.

The Compensation Committee does not follow the practice of making annual or other periodic awards to individuals who are determined to be eligible to participate in the 2019 Plan, which was approved by shareholders on May 15, 2019. However, the Compensation Committee does regularly evaluate the stock ownership of key employees, including the named executive officers, and, when it deems it appropriate, makes awards in accordance with the philosophy outlined above. Any SARs that may be awarded generally become exercisable at any time on or after the first anniversary date of the grant date. The total number of shares that may be issued to any one participant with respect to SARs granted under the 2019 Plan may not exceed an aggregate of 50,000 shares of Common Stock. No new SARs were granted to the executive officers in 2020.

The named executive officers are eligible to participate in the Company’s group insurance program, which during fiscal 2020 included group health, dental, vision and life insurance, as well as short and long term disability insurance. Other benefits offered during fiscal 2020 included flexible spending accounts and a pretax premium plan, paid sick leave, paid holidays and paid vacations.

Under the Company’s 401(k) plan, the Company makes contributions amounting to 3% of compensation for each eligible employee. The Company may make additional contributions under the profit share provisions of the plan. For the 2020 plan year, the Company contributed an additional 3% of compensation for eligible employees under the profit share provisions of the plan. In 2019, a contribution of 1% of compensation was made to eligible employees under the profit share provisions of the plan. The named executive officers receive an annual supplemental retirement cash payment equal to the amount that would have been contributed to their 401(k) plan accounts if the contributions to the 401(k) plan were not limited under federal tax laws.

The Company provides Company-owned vehicles to certain officers and employees who hold positions requiring frequent travel. The Company does not prohibit the personal use of Company-owned vehicles, but the value of any personal use is treated as taxable compensation. Each of the executive officers is assigned a Company-owned vehicle, and may use the vehicle for personal use according to the Company’s policy covering all Company-owned vehicles.

James A. Fine, Jr. and W. Morris Fine are also parties to Death Benefit Plan Agreements, which provide that, in the event of death, certain amounts payable under their respective employment agreements will be paid in a lump sum within 60 days of death to their respective beneficiaries. Under each agreement, the respective beneficiary would also be paid a lump sum amount equal to $2,000,000 subject to adjustments as described under “— Summary Compensation Table — Employment Agreements — James A. Fine, Jr. and W. Morris Fine” below. The agreements are provided to minimize the distraction to the executive officers of personal risks and uncertainties.

The table below summarizes the total compensation for each of the named executive officers for each of the fiscal years ended December 31, 2020 and December 31, 2019, respectively.

Each of the named executive officers is party to an employment agreement with the Company, which was amended and restated effective January 1, 2009. Under the employment agreements, each of J. Allen Fine, James A. Fine, Jr., and W. Morris Fine are entitled to a minimum base salary and such cash bonuses as the Board may determine in its sole discretion. Under these agreements, Messrs. Fine, Fine, Jr., and Fine participate in the Company’s benefits programs generally provided to other executives, receive 30 days of paid vacation and unlimited sick leave, and are entitled to reimbursement for reasonably incurred out-of-pocket business expenses. Additionally, under these agreements, Messrs. Fine, Fine, Jr. and Fine receive an annual supplemental retirement cash payment equal to the amount that would have been contributed to their 401(k) plan accounts if the contributions to the 401(k) plan were not limited under federal tax laws. The agreements also provide for minimum payments to each executive officer in the event of (i) disability or retirement, (ii) termination by the Company without cause or (iii) termination by the officer for good reason or due to a change in control. These agreements also prohibit Messrs. Fine, Fine, Jr. and Fine from engaging in certain activities involving competition with the Company for a two-year period following termination of employment. Each employment agreement has a five-year rolling term beginning January 1, 2009, unless terminated earlier in accordance with its terms.

Under the employment agreements, the executive officers are entitled to severance payments and benefits under their employment agreements as described below.

Under Mr. Fine’s employment agreement, if his employment is terminated by the Company other than for “cause” or by him due to the Company’s material breach under his employment agreement (i.e., “good reason”), he is entitled to receive the following:

Under Mr. Fine’s employment agreement, if he terminates his employment because of a “change in control,” he is entitled to receive the following:

In the event of a change in control that does not result in a termination of employment, Mr. Fine is entitled to a base salary increase of 100%.

If any portion of these payments and benefits, or payments and benefits under any other plan, agreement or arrangement, would constitute an “excess parachute payment” for purposes of the Internal Revenue Code of 1986, as amended, such payments and benefits payable under the agreement will be reduced until no portion thereof would fail to be deductible by reason of being “an excess parachute payment.”

Under Mr. Fine’s employment agreement, if his employment is terminated by the Company for “cause,” he is entitled to receive the following:

J. Allen Fine is party to an Amended and Restated Death Benefit Plan Agreement with the Company. The Death Benefit Plan Agreement provides that in the event of his death while employed by the Company, a lump sum amount equal to three times the sum of his then-current base salary, plus the average of his bonus compensation for the past three fiscal years, be paid within 60 days of his death to the beneficiaries designated by Mr. Fine under this agreement.

James A. Fine, Jr. and W. Morris Fine are also each party to a Death Benefit Plan Agreement. Their Death Benefit Plan Agreements provide that in the event of their death while employed by the Company, a lump sum amount equal to three times the sum of their then-current base salary, but in no event less than $766,680 for each executive, plus the average of each executive’s bonus compensation for the past three fiscal years, but in no event less than $1,030,000 for James A. Fine, Jr., and no less than $1,015,000 for W. Morris Fine, be paid within 60 days of their individual death to a beneficiary designated by the executive. Additionally, under each executive’s Death Benefit Plan Agreement, the respective designated beneficiary of each of Messrs. Fine and Fine would also be paid a lump sum amount equal to $2,000,000,

There were no grants of plan based awards to the named executive officers in the fiscal year ended December 31, 2020.

There was no exercise of options or SARs or vesting of shares of Common Stock held by the named executive officers in fiscal 2020.

The Board of Directors recognizes that related party transactions present a heightened risk of conflicts of interest, or the perception of conflicts of interest, and has adopted a written policy to be followed in connection with all related party transactions involving the Company. Pursuant to the policy, all related party transactions must be approved by either (1) a majority of the disinterested members of the Audit Committee of the Board of Directors or (2) a majority of independent and disinterested members of the Board of Directors. In either case, a related party transaction may not be approved by a single director. For purposes of the policy, the term “related party transaction” is defined as any transaction that is required to be disclosed in the Company’s proxy statements or other filings with the SEC pursuant to Item 404 of Regulation S-K. Loans or guaranties to directors and executive officers are prohibited.

Shareholders who, in accordance with Rule 14a-8 of the Exchange Act, wish to present proposals for inclusion in the proxy materials to be distributed in connection with the 2022 Annual Meeting of Shareholders must submit their proposals so that they are received at the Company’s principal executive offices no later than December 13, 2021. Pursuant to SEC rules, submitting a proposal does not guarantee that it will be included in the proxy materials.

In accordance with the Company’s Bylaws, in order to be properly brought before the 2022 Annual Meeting of Shareholders, a shareholder’s notice of a matter the shareholder wishes to present (other than a matter brought pursuant to Rule 14a-8 of the Exchange Act), or the person or persons the shareholder wishes to nominate as a director, must be delivered to the Corporate Secretary of the Company at its principal executive offices no earlier than the close of business on January 19, 2022 and no later than the close of business on February 18, 2022. To be in proper form, such shareholder’s notice must include the specified information concerning the proposal or nominee as described in the Company’s Bylaws. The Company or the presiding officer at the annual meeting of shareholders may refuse to accept any such proposal that is not in proper form or submitted in compliance with the procedures specified in the Company’s Bylaws.