<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2)
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
STEWART INFORMATION SERVICES CORPORATION
(Name of Registrant as Specified in its Charter)
STEWART INFORMATION SERVICES CORPORATION
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
1) Title of each class of securities to which transaction
applies: N/A
2) Aggregate number of securities to which transaction applies:
N/A
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined): N/A
4) Proposed maximum aggregate value of transaction: N/A
5) Fee paid previously with preliminary materials: N/A
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: N/A
2) Form, Schedule or Registration Statement No.: N/A
3) Filing Party: N/A
4) Date Filed: N/A
5) Total fee paid: N/A
<PAGE> 2
STEWART INFORMATION SERVICES CORPORATION
1980 POST OAK BOULEVARD
HOUSTON, TEXAS 77056
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 25, 1997
Notice is hereby given that the Annual Meeting of the Stockholders of
Stewart Information Services Corporation, a Delaware corporation (the
"Company"), will be held on Friday, April 25, 1997, at 9:00 A.M. in the
Independence Room on the eleventh floor of the Company's offices, 1980 Post Oak
Boulevard, Houston, Texas, for the following purposes:
(1) To elect directors of the Company to hold office until the next
Annual Meeting of Stockholders or until their respective successors are
duly elected and qualified.
(2) To consider and act upon a proposal to adopt the Company's 1997
Stock Plan for Region Managers.
(3) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The holders of record of Common Stock and Class B Common Stock of the
Company at the close of business on February 28, 1997 will be entitled to vote
at the meeting.
By Order of the Board of Directors,
Max Crisp
Secretary
March 26, 1997
IMPORTANT
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. EVEN IF YOU
PLAN TO BE PRESENT, YOU ARE URGED TO SIGN, DATE AND MAIL THE ENCLOSED PROXY
PROMPTLY. IF YOU ATTEND THE MEETING YOU CAN VOTE EITHER IN PERSON OR BY YOUR
PROXY.
<PAGE> 3
STEWART INFORMATION SERVICES CORPORATION
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 25, 1997
This Proxy Statement is furnished to the stockholders of Stewart
Information Services Corporation (the "Company"), 1980 Post Oak Boulevard,
Houston, Texas 77056 (Tel. No. 713/625-8100), in connection with the
solicitation by the Board of Directors of the Company of proxies to be used at
the annual meeting of stockholders to be held on Friday, April 25, 1997, at
9:00 A.M. in the Independence Room on the eleventh floor of the Company's
offices, 1980 Post Oak Boulevard, Houston, Texas, and any adjournment thereof.
Proxies in the form enclosed, properly executed by stockholders and
received in time for the meeting, will be voted as specified therein. If a
stockholder does not specify otherwise, the shares represented by his or her
proxy will be voted for the nominees listed therein. The giving of a proxy
does not preclude the right to vote in person should the person giving the
proxy so desire, and the proxy may be revoked at any time before it is
exercised by written notice delivered to the Company at or prior to the
meeting. This Proxy Statement is being mailed on or about March 26, 1997 to
stockholders of record at the close of business on February 28, 1997 (the
"Record Date").
At the close of business on the Record Date, there were outstanding and
entitled to vote 6,279,337 shares of Common Stock and 525,006 shares of Class B
Common Stock, and only the holders of record on such date shall be entitled to
vote at the meeting. As long as 300,000 or more shares of Class B Common Stock
are issued and outstanding, at each election of directors the Common Stock and
Class B Common Stock are voted as separate classes. Shares of the Company's
Class B Common Stock are convertible on a one-for-one basis into shares of the
Company's Common Stock.
The holders of Common Stock, voting as a class, are entitled to elect five
of the nine directors of the Company. Each share of Common Stock is entitled,
at the option of the person voting such share, either to cast one vote per
share for each of the five directors to be elected by the holders of the Common
Stock or to vote cumulatively by casting five votes per share, which may be
distributed in any manner among any number of the nominees. The enclosed form
of proxy provides a means for stockholders to vote for all of the nominees
listed therein, to withhold authority to vote for one or more of such nominees
or to withhold authority to vote for all of such nominees. If authority to
vote for four or fewer of the nominees is withheld, and if there are nominees
other than management nominees for the directorships to be filled by the
holders of the Common Stock, then the persons named in the enclosed proxy may
vote cumulatively by dividing the number of votes represented by the proxy
equally among the nominees for which authority to vote is not withheld. If
there are no nominees for the five positions to be elected by the holders of
Common Stock other than the management nominees set forth herein, it is the
intention of the persons named in the enclosed proxy to allocate the votes
represented by the proxy evenly among the management nominees. If there should
be any additional nominees for such positions, then the persons named in the
enclosed proxy will vote cumulatively to elect as many as possible of the
management nominees. If it is not possible to elect each of the five
management nominees, then the persons named in the enclosed proxy will have
discretion as to which of such nominees may be elected.
Unless a holder of Common Stock who withholds authority votes in person at
the meeting or votes by means of another proxy, the withholding of authority
will have no effect upon the election of those directors for whom authority to
vote is withheld because the Company's by-laws provide that directors are
elected by a plurality of the votes cast. Under applicable Delaware law, a
broker non-vote will have no effect on the outcome of the election of
directors. The shares held by each stockholder who signs and returns the
enclosed form of proxy will be counted for purposes of determining the presence
of a quorum at the meeting.
The holders of Class B Common Stock, voting as a class, are entitled to
elect the remaining four of the nine directors of the Company. Each holder of
Class B Common Stock has the right to vote, in person or by proxy, the number
of shares owned by him for the four directors to be elected by the holders of
Class B Common Stock and for whose election he has a right to vote.
<PAGE> 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of the Record Date with
respect to persons known to the Company to be the beneficial owners of more
than 5% of either class of the Company's voting shares:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER TITLE OF CLASS BENEFICIAL OWNERSHIP CLASS
- ------------------------------------- -------------------- -------------------- -----
<S> <C> <C> <C>
Malcolm S. Morris Class B Common Stock 262,503 50.0
3992 Inverness
Houston, Texas 77019
Stewart Morris, Jr. Class B Common Stock 262,503 50.0
#8 West Rivercrest
Houston, Texas 77042
FMR Corp. Common Stock 543,900(1) 8.7
82 Devonshire Street
Boston, Massachusetts 02109
Ryback Management Corporation Common Stock 511,850(2) 8.2
7711 Carondelet Ave., Ste. 700
St. Louis, Missouri 63105
Third Avenue Value Fund Common Stock 445,800(3) 7.1
767 Third Avenue
New York, New York 10017
Brookhaven Capital Management Co., Ltd Common Stock 412,223(4) 6.6
3000 Sandhill Road, Suite 130
Menlo Park, California 94025
</TABLE>
- -----------------
(1) With respect to all such shares, FMR Corp. has no voting power and sole
investment power. Information with respect to the ownership of such
stockholder was obtained from its report on Schedule 13G filed February
13, 1997.
(2) Ryback Management Corporation has sole voting and investment power with
respect to 500,000 of such shares and shared voting and investment power
with respect to 11,850 of such shares. Information with respect to the
ownership of such stockholder was obtained from its report on Schedule 13G
filed January 29, 1997.
(3) With respect to all such shares, Third Avenue Value Fund has sole voting
and investment power. Information with respect to the ownership of such
stockholder was obtained from its report on Schedule 13G filed February
13, 1997.
(4) Brookhaven Capital Management Co., Ltd has sole voting and investment
power with respect to 9,000 of such shares and shared voting and
investment power with respect to 403,223 of such shares. Information with
respect to the ownership of such stockholder was obtained from its report
on Schedule 13D dated December 21, 1994.
The holders of the Class B Common Stock have entered into an agreement
intended to maintain an equal ownership of shares of Common Stock and Class B
Common Stock by Carloss Morris and Malcolm S. Morris, collectively, and by
Stewart Morris and Stewart Morris, Jr., collectively. Such agreement also
provides for rights of first refusal with respect to Class B Common Stock among
themselves in the event of the death, voluntary or involuntary disposition of
the shares of Class B Common Stock and upon certain other specified conditions.
In addition, the agreement provides that the parties will not sell their Class
B Common Stock or convert their Class B Common Stock into Common Stock prior to
January 2005.
2
<PAGE> 5
The following table sets forth information as of the Record Date with
respect to each class of the Company's voting shares beneficially owned by
executive officers, directors and nominees for director of the Company and by
all officers, directors and nominees for director of the Company as a group:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
NAME TITLE OF CLASS BENEFICIAL OWNERSHIP(1) CLASS
- ----------------------- -------------------- ----------------------- -----
<S> <C> <C> <C>
Carloss Morris Common Stock 71,650 1.1
Stewart Morris Common Stock 64,278 1.0
Malcolm S. Morris Common Stock 78,000(2) 1.2
Class B Common Stock 262,503 50.0
Stewart Morris, Jr. Common Stock 48,000(3) (4)
Class B Common Stock 262,503 50.0
Max Crisp Common Stock 10,500(5) (4)
C. M. Hudspeth Common Stock 26,775(6) (4)
Nita B. Hanks Common Stock 183 (4)
Paul W. Hobby Common Stock 375 (4)
Dr. E. Douglas Hodo Common Stock 375 (4)
Dr. W. Arthur Porter Common Stock 375 (4)
Lloyd Bentsen, III Common Stock 1,875 (4)
All officers and directors Common Stock 302,386 4.8
as a group (11 persons) Class B Common Stock 525,006 100.0
</TABLE>
- -------------
(1) Unless otherwise indicated, the beneficial owner has sole voting and
investment power.
(2) Consists of 78,000 shares subject to stock options (see "Executive
Compensation--Option Grants and Exercises" at page 7).
(3) Consists of 48,000 shares subject to stock options (see "Executive
Compensation--Option Grants and Exercises" at page 7).
(4) Less than 1%.
(5) Includes 9,000 shares subject to stock options (see "Executive
Compensation--Option Grants and Exercises" at page 7).
(6) Includes 1,275 shares as to which C. M. Hudspeth has sole voting and
investment power and 25,500 shares owned by C. M. Hudspeth's wife and as
to which he has no voting and no investment power.
3
<PAGE> 6
ELECTION OF DIRECTORS
At the meeting, nine directors (constituting the entire Board of Directors)
are to be elected. The holders of Common Stock are entitled to elect five
directors, and the holders of Class B Common Stock are entitled to elect four
directors. All directors of the Company hold office until the next annual
meeting of stockholders or until their respective successors are elected and
qualify. All officers of the Company hold office until the regular meeting of
directors following the annual meeting of stockholders or until their
respective successors are elected and qualify.
During 1996, the Board of Directors held five meetings and executed two
consents in lieu of meetings. No director attended fewer than 80% of such
meetings. The Board of Directors has an Executive Committee, an Audit
Committee and a Compensation Committee. The Company has no nominating
committee of the Board of Directors.
The Executive Committee may exercise all of the powers of the Directors,
except those specifically reserved to the Board of Directors by law, and is
comprised of Carloss Morris, Stewart Morris, Max Crisp and C. M. Hudspeth.
During 1996, the Executive Committee held five meetings at which all members
were present and executed 27 consents in lieu of meetings.
It is the duty of the Audit Committee to (i) review, with the Company's
independent auditors, the scope of the annual audit, (ii) review the
independent auditors' management letter and (iii) meet with the Company's
internal auditors. The Audit Committee is comprised of C. M. Hudspeth, Dr. E.
Douglas Hodo and Lloyd Bentsen III. During 1996, the Audit Committee held two
meetings at which all members were present.
See "Executive Compensation--Compensation Committee" at page 10 for
information with respect to the Company's Compensation Committee.
COMMON STOCK
The following persons have been nominated to fill the five positions to be
elected by the holders of Common Stock. Each was elected by the holders of the
Common Stock at the annual meeting of stockholders held in 1996. It is the
intention of the persons named in the proxy for the holders of Common Stock to
vote the proxies for the election of the nominees named below, unless otherwise
specified. The management of the Company does not contemplate that any of such
nominees will become unavailable for any reason, but if that should occur
before the meeting, proxies will be voted for another nominee, or other
nominees, to be selected by the Board of Directors of the Company.
<TABLE>
<CAPTION>
NOMINEE, AGE AND POSITION WITH THE COMPANY DIRECTOR SINCE
- ------------------------------------------ ----------------
<S> <C>
Nita B. Hanks, 43, Director . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1990
Dr. E. Douglas Hodo, 62, Director . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1988
Paul W. Hobby, 36, Director . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1989
Max Crisp, 62, Vice President-Finance, Secretary, Treasurer and Director . . . . . . . . . 1970
C. M. Hudspeth, 77, Director . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1976
</TABLE>
Mrs. Hanks has been a Senior Vice President of Stewart Title Guaranty
Company ("Guaranty"), a subsidiary of the Company, since May 1990 and a Vice
President of Guaranty since 1981.
Dr. Hodo served as Dean of the College of Business at the University of
Texas-San Antonio from September 1972 to May 1987. Dr. Hodo is currently
serving as President of Houston Baptist University and has served in such
capacity since June 1, 1987. Dr. Hodo is also a director of the United
Services Group of funds.
Mr. Hobby practiced law with the firm of Fulbright & Jaworski L.L.P. from
1986 until October 1989. Mr. Hobby served as an Assistant U.S. Attorney,
Houston, Texas, from November 1989 to May 1992. He was on leave from such
position during the first six months of 1991, during which time he served as
Chief of Staff of the Lieutenant Governor of Texas. Since May 1992 Mr. Hobby
has served as Vice President of H & C
4
<PAGE> 7
Communications. Mr. Hobby has also served since 1995 as Chairman of Columbine
JDS Systems, Inc., a media software company.
Mr. Crisp has served as Vice President-Finance of the Company since 1970,
as Treasurer since 1971 and as Secretary since 1973.
Mr. Hudspeth has been of counsel to the law firm of DeLange & Hudspeth,
L.L.P., Houston, Texas, for more than the past five years. Mr. Hudspeth is a
Trustee Emeritus of Rice University, Houston, Texas.
CLASS B COMMON STOCK
The following persons have been nominated to fill the four positions to be
elected by the holders of Class B Common Stock. Each was elected by the
holders of the Class B Common Stock at the annual meeting of stockholders held
in 1996. It is the intention of the persons named in the proxy for the holders
of Class B Common Stock to vote the proxies for the election of the nominees
named below, unless otherwise specified. The management of the Company does
not contemplate that any of such nominees will become unavailable for any
reason, but if that should occur before the meeting, proxies will be voted for
another nominee, or other nominees, to be selected by the Board of Directors of
the Company.
<TABLE>
<CAPTION>
NOMINEE, AGE AND POSITION WITH THE COMPANY DIRECTOR SINCE
- ------------------------------------------ --------------
<S> <C>
Carloss Morris, 81, Co-Chief Executive Officer and Chairman of the Board of Directors . . . 1970
Stewart Morris, 77, Co-Chief Executive Officer, President and Director . . . . . . . . . . 1970
Dr. W. Arthur Porter, 55, Director . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1993
Lloyd Bentsen, III, 52, Director . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1995
</TABLE>
Carloss Morris and Stewart Morris have served as Co-Chief Executive
Officers of the Company since 1975.
Carloss Morris and Stewart Morris are brothers. Stewart Morris, Jr., an
officer of the Company, is the son of Stewart Morris and a nephew of Carloss
Morris. Malcolm S. Morris, an officer of the Company, is the son of Carloss
Morris and a nephew of Stewart Morris.
Dr. Porter has served as President and Chief Executive Officer of Houston
Advanced Research Center, a non-profit research consortium, for more than the
past five years. He also has served as an Adjunct Professor of Electrical
Engineering at Rice University since 1989. Dr. Porter is also a director of
Electro Scientific Industries, Inc., Portland, Oregon.
Mr. Bentsen served as an Advisory Director of the Company from 1992 until
his election to the Board of Directors in 1995. Mr. Bentsen is a general
partner and co-founder of Triad Ventures, a group of venture capital funds with
over $50 million of capital that seeks to invest in Texas-based emerging growth
companies. Prior to founding his venture capital firm in 1979, Mr. Bentsen
spent ten years with Rotan Mosle, Inc., a regional investment banking firm, as
a member of the corporate finance department. Mr. Bentsen is a graduate of
Princeton University and holds an MBA from Stanford University.
Carloss Morris, Stewart Morris, Malcolm S. Morris and Stewart Morris, Jr.,
acting together, have the power to direct the management and policies of the
Company. Accordingly, they may be deemed to be "control persons" as such term
is used in regulations adopted under the Securities Exchange Act of 1934.
5
<PAGE> 8
EXECUTIVE COMPENSATION
SUMMARY OF COMPENSATION
The following table summarizes compensation information concerning each of
the Company's executive officers for each of the three years ended December 31,
1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION (AWARDS)
---------------------------------------- -------------
STOCK ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION
- -------------------------------- --------- ------------ ----------- ------------- -------------
($) ($) (# shares) ($)
<S> <C> <C> <C> <C> <C>
Carloss Morris 1996 135,000 211,305 -- 28,310(1)
Chairman of the Board and 1995 130,000 160,000 -- 22,824
Co-Chief Executive Officer(2) 1994 130,000 160,000 -- 20,845
Stewart Morris 1996 135,000 211,305 -- 19,470(3)
President and 1995 130,000 160,000 -- 17,966
Co-Chief Executive Officer(4) 1994 130,000 160,000 -- 15,778
Stewart Morris, Jr. 1996 130,000 218,075 10,000 4,416(5)
Senior Executive Vice Presi- 1995 125,000 117,790 8,000 5,245
dent--Assistant President(6) 1994 125,000 144,130 -- 3,418
Malcolm S. Morris 1996 130,000 218,075 10,000 3,951(7)
Senior Executive Vice Presi- 1995 125,000 117,790 8,000 4,427
dent--Assistant Chairman(8) 1994 125,000 144,130 -- 3,828
Max Crisp 1996 140,000 94,460 5,000 7,670(9)
Vice President--Finance(10) 1995 139,900 67,775 4,000 8,374
1994 133,860 64,856 -- 7,882
</TABLE>
- --------------------------
(1) Consists of matching contributions to the Company's 401(k) plan ($1,000),
director's fees ($1,425) and $25,885, representing the portion of
insurance premiums paid by the Company with respect to term life
insurance plus the dollar value of the benefit of the remainder of life
insurance premiums paid by the Company (see"--Insurance" at page 8).
(2) Carloss Morris is also a director of the Company, Chairman of the
Executive Committee of Guaranty and Vice Chairman of the Executive
Committee of Stewart Title Company ("Title"), a subsidiary of the
Company.
(3) Consists of matching contributions to the Company's 401(k) plan ($1,000),
director's fees ($1,425) and $17,045, representing the portion of
insurance premiums paid by the Company with respect to term life
insurance plus the dollar value of the benefit of the remainder of life
insurance premiums paid by the Company (see"--Insurance" at page 8).
(4) Stewart Morris is also a director of the Company, Chairman of the
Executive Committee of Title and Vice Chairman of the Executive Committee
of Guaranty.
(5) Consists of matching contributions to the Company's 401(k) plan ($1,000),
director's fees ($1,750) and $1,666, representing the portion of
insurance premiums paid by the Company with respect to term life
insurance plus the dollar value of the benefit of the remainder of life
insurance premiums paid by the Company.
(6) Stewart Morris, Jr., age 48, is also President and Chief Executive
Officer of Title and Chairman of the Board of Guaranty.
(7) Consists of matching contributions to the Company's 401(k) plan ($1,000),
director's fees ($900) and $2,051, representing the portion of insurance
premiums paid by the Company with respect to term life insurance plus the
dollar value of the benefit of the remainder of life insurance premiums
paid by the Company.
6
<PAGE> 9
(8) Malcolm S. Morris, age 50, is also President and Chief Executive Officer
of Guaranty and Chairman of the Board of Title.
(9) Consists of matching contributions to the Company's 401(k) plan ($1,000),
director's fees ($1,425) and $5,425, representing the portion of
insurance premiums paid by the Company with respect to term life
insurance plus the dollar value of the benefit of the remainder of life
insurance premiums paid by the Company.
(10) Max Crisp is also Secretary, Treasurer and a Director of the Company and
Vice President-Finance of Guaranty and Title.
Each executive officer of the Company holds office until the regular
meeting of directors following the annual meeting of stockholders or until his
successor is elected and qualifies.
OPTION GRANTS AND EXERCISES
The following table sets forth information concerning individual
grants of stock options made during the year ended December 31, 1996 to each of
its executive officers. All such grants were made on February 26, 1996, under
the terms of the Company's 1995 Stock Option Plan. The Company did not grant
any stock appreciation rights during such year. The hypothetical values on the
date of grant of stock options granted in 1996 shown below are presented
pursuant to the rules of the Securities and Exchange Commission and are
calculated under the modified Black-Scholes Model (the "Model") for pricing
options. This hypothetical value of options trading on the stock markets bears
little relationship to the compensation cost to the Company or potential gain
realized by an optionee. The actual amount, if any, realized upon exercise of
stock options will depend upon the market price of the Company's Common Stock
relative to the exercise price per share of Common Stock issuable under the
stock option at the time the stock options are exercised. There is no
assurance that the hypothetical present values of stock options reflected in
this table actually will be realized.
OPTION GRANTS IN FISCAL YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------------------------
PERCENT OF
TOTAL OPTIONS
GRANTED GRANT DATE
OPTIONS TO EMPLOYEES EXERCISE EXPIRATION PRESENT
NAME GRANTED IN 1996 PRICE DATE VALUE(1)
- ---------------------------- ------------ ------------ --------- ----------- --------
(# shares) (%) ($) ($)
<S> <C> <C> <C> <C> <C>
Carloss Morris . . . . . -- -- -- -- --
Stewart Morris . . . . . -- -- -- -- --
Stewart Morris, Jr. . . . 10,000(2) 26 20.88 Feb. 26, 2006 88,950
Malcolm S. Morris . . . . 10,000(2) 26 20.88 Feb. 26, 2006 88,950
Max Crisp . . . . . . . . 5,000(3) 13 20.88 Feb. 26, 2006 44,475
</TABLE>
_________
(1) The grant date present values are calculated under the Model. The Model is
a mathematical formula used to value stock options and is based on the
stock's historical volatility, dividend rate, option term and risk-free
rate of return. The grant date present value does not reflect any discount
with respect to prohibitions on transfer.
(2) The options become exercisable as follows: 2,080 shares on February 26,
1996, 4,789 shares on January 1, 1997 and 3,131 shares on January 1, 1998.
(3) The options become exercisable as follows: 4,789 shares on February 26,
1996 and 211 shares on January 1, 1997.
7
<PAGE> 10
The following table sets forth information concerning each exercise of
stock options during the year ended December 31, 1996 by each of its executive
officers and the value of unexercised options at December 31, 1996. The
Company has not issued any tandem or freestanding stock appreciation rights.
AGGREGATED OPTION EXERCISES IN 1996 AND OPTION VALUES AT DECEMBER 31, 1996
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT DECEMBER 31, 1996 AT DECEMBER 31, 1996
SHARES ACQUIRED VALUE ---------------------------- ----------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------- --------------- -------- ------------ ------------- ----------- ----------
(# shares) ($) (# shares) (# shares) ($) ($)
<S> <C> <C> <C> <C> <C> <C>
Carloss Morris -- -- -- -- -- --
Stewart Morris -- -- -- -- -- --
Stewart Morris, Jr. -- -- 40,080 7,920 357,502 0
Malcolm S. Morris -- -- 70,080 7,920 705,004 0
Max Crisp -- -- 8,789 211 5,000 0
</TABLE>
COMPENSATION OF DIRECTORS
Directors of the Company, other than employees of the Company, receive an
annual retainer of $7,500 and directors' fees of $2,000 per meeting attended.
Directors of the Company who are employees receive directors' fees of $150 per
meeting. Members of the Audit Committee and members of the Compensation
Committee who are not employees of the Company receive $1,000 per meeting
attended. No additional amounts are paid to members of the Executive Committee
for their services as such. Mr. Hudspeth receives aggregate annual fees of
$36,000 for his services as a director and member of each of the committees of
the Board of Directors. Pursuant to the Stewart Information Services
Corporation 1996 Directors' Stock Plan (the "1996 Plan"), each non-employee
Director receives, in addition to the annual retainer and per meeting fees
described above, an annual award of shares of Common Stock of the Company
valued at $7,500 based on the fair market value of the Common Stock on the date
of the award.
DEFERRED COMPENSATION AGREEMENTS
On March 10, 1986, the Company entered into a Deferred Compensation
Agreement with each of Malcolm S. Morris, Stewart Morris, Jr. and Max Crisp
(individually, a "Beneficiary"). Pursuant to such agreements, a Beneficiary or
his designee is entitled to receive, commencing upon his death or attainment of
the age of 65 years, 15 annual payments in amounts that will, after payment of
federal income taxes thereon, result in a net annual payment of $66,667 to Max
Crisp and $133,333 to each of Malcolm S. Morris and Stewart Morris, Jr. For
purposes of such agreements, each Beneficiary is deemed to be subject to
federal income taxes at the highest marginal rate applicable to individuals.
Such benefits are fully vested and are forfeited only if a Beneficiary's
employment with the Company is terminated by reason of fraud, dishonesty,
embezzlement or theft. Any death or income benefits provided to a Beneficiary
under certain insurance policies currently maintained by the Company will
reduce payments due to such Beneficiary under his Deferred Compensation
Agreement.
INSURANCE
The Company is a party to Life Insurance Coverage Agreements dated December
1, 1993, with Carloss Morris and Stewart Morris under which the Company has
agreed to maintain $1,000,000 of life insurance coverage on the lives of each
of them, with death benefits payable to their designated beneficiaries.
Pursuant to such agreements, the Company has purchased Split Dollar life
insurance policies ("SD Policies") for which the Company pays annual premiums
of $55,776 and $42,000 for the SD Policies on the lives of Carloss Morris and
Stewart Morris, respectively. Premiums under the SD Policies will be returned
to the Company from the proceeds of death benefits under the SD Policies. In
1996, the net death benefits to Carloss Morris and Stewart Morris under the SD
policies were $665,344 and $748,000, respectively, and such benefits will
decline annually by the amount of the premiums paid by the Company. The net
death benefit under each SD Policy will also be affected by annual earnings
under such policy. The Company currently anticipates that (i) the net death
benefit under the SD Policies will decline to
8
<PAGE> 11
approximately $400,000 for Carloss Morris by the year 2000 and $400,000 for
Stewart Morris by the year 2004 and (ii) the SD Policies will require no
further premium payments after the year 1999.
Prior to 1994, the Company established two paid up life insurance policies
having no cash surrender value and providing death benefits of $890,954 and
$769,873 to the beneficiaries of Carloss Morris and Stewart Morris,
respectively. No premiums were paid by the Company under such policies in
1996; however, pursuant to applicable federal income tax regulations, taxable
income attributable to the such policies in 1996 of $40,199 and $34,736 was
incurred by Carloss Morris and Stewart Morris, respectively.
PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the Company's
cumulative total stockholder return on Common Stock with the cumulative total
return of the Russell 2000 Index and the Russell 2000 Financial Services Sector
Index (which includes the Company and its major publicly owned competitors) for
five years ended December 31, 1996. The graph assumes that the value of the
investment in the Company's Common Stock and each index was $100 at December
31, 1991 and that all dividends were reinvested.
9
<PAGE> 12
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG THE COMPANY, RUSSELL 2000 AND RUSSELL 2000 FINANCIAL SERVICES SECTOR
<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------------------------------------------------
1991 1992 1993 1994 1995 1996
--------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Company . . . . . . . . . . . . . . . $ 100.00 $ 151.09 $ 223.25 $ 173.66 $ 245.41 $ 239.66
Russell 2000 . . . . . . . . . . . . 100.00 118.41 140.80 138.24 177.55 206.83
Russell 2000 Financial Services Sector 100.00 148.05 181.98 183.10 254.25 327.56
</TABLE>
COMPENSATION COMMITTEE
Compensation Committee Interlocks and Insider Participation
It is the duty of the Compensation Committee to approve the compensation of
the executive officers. The Compensation Committee is comprised of C. M.
Hudspeth, Paul W. Hobby and Dr. W. Arthur Porter. During 1996, the
Compensation Committee held two meetings at which all members were present.
During 1996, the Company and its subsidiaries paid a total of $171,537 to
the law firm of DeLange & Hudspeth, L.L.P. C. M. Hudspeth is of counsel to
such firm.
10
<PAGE> 13
Compensation Committee Report on Executive Compensation
To the Board of Directors of
Stewart Information Services Corporation:
COMPENSATION COMMITTEE REPORT
Compensation Policy. The Compensation Committee of the Board of Directors
(the "Committee") is responsible for the oversight and administration of the
Company's executive compensation program. The Committee reviews the
compensation program of the Company during each year as it deems necessary.
The objective of the Committee is to provide executive officers of the Company
with a compensation package that is fair and reasonable based on their
individual levels of responsibility and performance in relation to the
compensation of executive officers of other publicly held companies in the
title insurance and comparable industries. In making its determinations as to
the reasonableness of the Company's executive compensation, the Committee
relies in part on the advice of a nationally recognized, independent
compensation consulting firm.
The principal elements of the Company's executive compensation program are
an annual salary, an annual cash bonus and stock option grants to officers of
the Company other than the co-chief executive officers. The Company also
provides life insurance to each of its executive officers.
Base Salary. For 1996, the Committee increased the base salary levels for
executive officers by an aggregate of approximately 3.1%. The base salaries of
each of the Company's co-chief executive officers was increased from $130,000
in 1995 to $135,000 in 1996. Historically, base salaries of the Company's
executive officers have remained relatively stable from year to year. Base
salaries are set at levels deemed reasonable by the Committee based upon its
subjective evaluation of the executive officer's level of responsibility.
Annual Bonus. Each of the co-chief executive officers is eligible to
receive an annual cash bonus based on the consolidated net income of Guaranty.
The annual bonus tends to link a portion of the executive's compensation to the
Company's annual results. The Committee believes that the consolidated income
of Guaranty, and the effect thereof on the level of dividends paid by the
Company and the Company's book value per share, are important determinants over
time of the value of the Company's Common Stock. For more than the past ten
years, each of the co-chief executive officers has received an annual bonus
equal to three percent of the annual consolidated net income of Guaranty. For
1994 and 1995, the maximum amount of such bonus was limited to $160,000 per
year per recipient. In 1996, the Committee reduced the bonus formula
percentage and eliminated the cap on bonuses payable to the co-chief executive
officers, which resulted in an increase of $51,305 in the bonus paid to each of
the co-chief executive officers in 1996 as compared with 1995. The bonus
formula for each of the co-chief executive officers was changed to 1.5% of the
first $13 million of income before taxes of Guaranty and 0.75% of such income
in excess of $13 million.
Stock Options. The Company has in effect its 1995 Stock Option Plan, the
purpose of which is to make available to the Committee a form of compensation
that will align the interests of executive officers with those of the
stockholders over a multi-year term. Executive officers, other than Carloss
Morris and Stewart Morris, who were omitted from the plan at their request, are
eligible for grants of options at a purchase price not less than the fair
market value of the shares on the date of grant. Pursuant to the plan, in 1996
the Committee granted options to Malcolm Morris, Stewart Morris, Jr. and Max
Crisp for 10,000, 10,000 and 5,000 shares, respectively. See "--Option Grants
and Exercises" elsewhere in the Proxy Statement in which this report is
included. The values of such options were taken into account by the Committee
in determining the reasonableness of the recipient officer's annual
compensation package. After giving effect to stock option grants in 1996, an
aggregate of 55,000 shares are available for stock option grants under the
plan.
Insurance. Pursuant to agreements dated December 1, 1993, the Company pays
the premiums on individual split-dollar life insurance policies for the
co-chief executive officers and their beneficiaries. The Company will recover
the full amount of premiums paid from the death benefit upon the death of the
insured. See "--Insurance" elsewhere in the Proxy Statement in which this
report is included. Except with respect to the co-chief executive
11
<PAGE> 14
officers, such insurance is not considered by the Compensation Committee to be
a significant part of the aggregate compensation package afforded by the
Company to its executive officers.
The Company's net earnings increased from $1.11 per share in 1995 to $2.13
per share in 1996, primarily due to lower mortgage interest rates in 1996. The
Committee recognizes that the title insurance industry is strongly affected by
nationally prevailing interest rates, and the Company's financial results from
year to year will depend largely on the level of real estate activity in its
primary markets. The Committee subjectively evaluates the performance of the
Company's executive officers, including the co-chief executive officers, with
respect to their efforts to provide for the long-term financial well being of
the Company and to respond to continuing changes in the industry environment.
In 1996, the Committee gave particular consideration to the efforts of the
co-chief executive officers and other executive officers in further developing
the Company's automation programs, increasing the Company's market share in
existing markets, entering new markets through acquisitions and pursuing
opportunities in international markets.
C. M. Hudspeth Paul W. Hobby
Dr. W. Arthur Porter
Members of the Compensation Committee
APPROVAL OF THE 1997 STOCK OPTION PLAN FOR REGION MANAGERS
BACKGROUND
On September 16, 1996, the Board of Directors of the Company adopted the
Stewart Information Services Corporation 1997 Stock Option Plan for Region
Managers (the "1997 Plan"). A similar plan had been in effect since 1992. As
of December 31, 1996, 27,050 shares were available for options thereunder. The
purpose of the 1997 Plan is to provide compensation in the form of ownership of
the Company's Common Stock to Region Managers of the Company and its
subsidiaries. The 1997 Plan is intended to advance the best interest of the
Company by providing certain persons having substantial responsibility for its
management and growth with additional incentive and by increasing their
proprietary interest in the success of the Company, thereby encouraging them to
remain in its employ. A copy of the 1997 Plan is attached as Appendix A to
this proxy statement.
SUMMARY OF THE 1997 PLAN
The 1997 Plan is administered by the Compensation Committee, which may from
time to time grant stock options (either "incentive" or "non-qualified" stock
options) to full-time key employees who are employed at the time of grant as
Region Managers (or an equivalent position). At December 31, 1996, 10
employees, none of whom were officers or directors of the Company, were
eligible to participate in the 1997 Plan. The 1997 Plan provides that an
aggregate of 100,000 shares of Common Stock of the Company shall be subject to
the 1997 Plan. The shares subject to the 1997 Plan consist of authorized and
unissued shares or previously issued shares reacquired and held by the Company
or any subsidiary. Factors to be considered by the Compensation Committee in
making grants of stock options under the 1997 Plan are set forth therein. No
member of the Committee is eligible to receive stock options under the 1997
Plan. No Stock Options may be granted under the 1997 Plan after January 2,
2002.
Stock options under the 1997 Plan give the optionee the right to purchase a
number of shares of the Company's Common Stock at future dates not more than
ten years after the date of grant. The exercise price may be the fair market
value of the stock on the date of grant, or such other price as the Committee
may determine, but not less than 100% of such market value. On March 21, 1997,
the closing sale price of a share of the Company's Common Stock on the New York
Stock Exchange Composite Tape was $20-3/8.
The 1997 Plan permits an optionee to exercise an outstanding option after
termination of employment during the three months after such termination. In
the event of the death of an optionee while in the employ of the Company and
before the date of expiration of the option, the option shall terminate on such
date of expiration.
12
<PAGE> 15
The Board of Directors is authorized to amend or terminate the 1997 Plan.
Options shall not be transferable by the optionee except by will or under the
laws of descent and distribution and shall be exercisable, during his lifetime,
only by him.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Incentive Stock Options. The grant of incentive stock options does not
result in any income tax consequences. The exercise of an incentive stock
option does not result in any income tax consequences to the optionee if the
incentive stock option is exercised by the optionee during his employment with
the Company or a subsidiary, or within a specified period after termination of
employment. However, the excess of the fair market value of the shares of
stock as of the date of exercise over the option price is a tax preference item
for purposes of determining an optionee's alternative minimum tax. An optionee
who sells shares acquired pursuant to the exercise of an incentive stock option
after the expiration of (i) two years from the date of grant of the incentive
stock option, and (ii) one year after the transfer of the shares to him (the
"Waiting Period") will generally recognize a long-term capital gain or loss on
the sale.
An optionee who disposes of his incentive stock option shares prior to the
expiration of the Waiting Period (an "Early Disposition") generally will
recognize ordinary income in the year of sale in an amount equal to the excess,
if any, of (a) the lesser of (i) the fair market value of the shares as of the
date of exercise or (ii) the amount realized on the sale, over (b) the option
price. Any additional amount realized on an Early Disposition should be
treated as capital gain to the optionee, short or long term, depending on the
optionee's holding period for the shares. If the shares are sold for less than
the option price, the optionee will not recognize any ordinary income but will
recognize a capital loss, short or long term, depending on the holding period.
The Company will not be entitled to a deduction as a result of the grant of
an incentive stock option, the exercise of an incentive stock option, or the
sale of incentive stock option shares after the Waiting Period. If an optionee
disposes of his incentive stock option shares in an Early Disposition, the
Company will be entitled to deduct the amount of ordinary income recognized by
the optionee.
Non-Qualified Stock Options. The grant of non-qualified stock options
under the 1997 Plan will not result in the recognition of any taxable income by
the optionee. An optionee will recognize ordinary income on the date of
exercise of the non-qualified stock option equal to the difference between the
fair market value of the shares acquired on such date and the exercise price.
The tax basis of the shares for purposes of a subsequent sale includes the
option price paid and the ordinary income reported on exercise of the option.
The income reportable on exercise of the non-qualified stock option is subject
to federal and state income and employment tax withholding.
Generally, the Company will be entitled to a deduction in the amount
reportable as income by the optionee on the exercise of a non-qualified stock
option.
APPROVAL BY STOCKHOLDERS
The grant of incentive stock options under the 1997 Plan is subject to
approval of the 1997 Plan by the stockholders of the Company. Approval of the
1997 Plan will require the affirmative vote of a majority of the total votes
cast on such proposal, with holders of Common Stock and Class B Common Stock
voting together as a single class. On the Record Date, an aggregate of
6,804,343 shares of Common Stock and Class B Common Stock were outstanding and
entitled to vote on the proposal to approve the 1997 Plan. If the 1997 Plan is
not approved by the stockholders of the Company, the Compensation Committee may
nevertheless grant non-qualified stock options thereunder.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE 1997 PLAN.
13
<PAGE> 16
SELECTION OF INDEPENDENT AUDITORS
KPMG Peat Marwick LLP has been selected by the Company as its principal
independent auditors for the Company's fiscal year ending December 31, 1997,
and served in such capacity for the Company's fiscal year ended December 31,
1996. Representatives of KPMG Peat Marwick LLP are expected to be present at
the annual meeting with the opportunity to make a statement if they desire to
do so, and such representatives are expected to be available to respond to
appropriate questions.
CERTAIN TRANSACTIONS
During 1996, the Company and its subsidiaries paid a total of $248,704 to
the law firm of Morris, Lendais, Hollrath & Snowden, P.C., of which Carloss
Morris and Malcolm S. Morris are shareholders. In connection with real estate
transactions processed by Title, such firm receives legal fees from its clients
who are also customers of Title and who select such firm as their counsel.
During 1996, the Company and its subsidiaries also paid legal fees to a law
firm to which C. M. Hudspeth is of counsel (see "Executive
Compensation--Compensation Committee--Compensation Committee Interlocks and
Insider Participation" at page 10).
During 1996, Marietta Maxfield, a daughter of Carloss Morris, was a full
time attorney for Guaranty and was paid $91,029 for services rendered in such
capacity.
PROPOSALS AND NOMINATIONS FOR NEXT ANNUAL MEETING
Any proposals of holders of Common Stock or Class B Common Stock intended
to be presented at the annual meeting of stockholders of the Company to be held
in 1998 must be received by the Company at its principal executive offices,
1980 Post Oak Boulevard, Suite 800, Houston, Texas 77056, no later than
November 21, 1997, in order to be included in the proxy statement and form of
proxy relating to that meeting. Pursuant to the Company's By-Laws, nominations
of persons for election by the holders of Common Stock to the Board of
Directors of the Company at the annual meeting of stockholders of the Company
to be held in 1998 must be received by the Company no later than February 15,
1998.
OTHER MATTERS
The management of the Company knows of no other matters which may come
before the meeting. However, if any matters other than those referred to above
should properly come before the meeting, it is the intention of the persons
named in the enclosed proxy to vote such proxy in accordance with their best
judgment.
The cost of solicitation of proxies in the accompanying form will be paid
by the Company. The Company has retained Georgeson & Co., a proxy solicitation
firm, to assist it in soliciting proxies for the proposals described in this
proxy statement. The Company has agreed to pay Georgeson & Co. a fee for such
services, which is not expected to exceed $5,500, plus expenses. In addition
to solicitation by use of the mails, certain officers or employees of the
Company, and of Georgeson & Co., may solicit the return of proxies by
telephone, telegram or personal interview.
By Order of the Board of Directors,
Max Crisp
Secretary
March 26, 1997
14
<PAGE> 17
APPENDIX A
STEWART INFORMATION SERVICES CORPORATION
1997 STOCK OPTION PLAN
FOR REGION MANAGERS
1. Purpose. The purpose of the Stewart Information Services Corporation
1997 Stock Option Plan for Region Managers (the "Plan") is to provide
compensation in the form of ownership of the common stock, $1.00 par value
("Common Stock"), of Stewart Information Services Corporation, a Delaware
corporation (the "Company"), to Region Managers of the Company and its
subsidiaries, and is intended to advance the best interest of the Company by
providing certain persons having substantial responsibility for its management
and growth with additional incentive and by increasing their proprietary
interest in the success of the Company, thereby encouraging them to remain in
its employ.
2. Eligibility. The individuals who shall be eligible to participate in
the Plan shall be those full-time key employees, including officers and
directors, if they are employed at the time of grant as a Region Manager (or an
equivalent position) of the Company, or of any parent or subsidiary
corporation, as the Committee shall determine during the term of this Plan. As
used herein, "Region Manager" includes any such employee determined by the
Compensation Committee to have a position equivalent to a Region Manager. No
individual shall be eligible to receive an Option under the Plan while that
individual is a member of the Committee.
No person who owns stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company shall be eligible to
receive an Option that is an incentive stock option unless, at the time that
the Option is granted, (i) the option price is at least 110% of the fair market
value of the Common Stock at such time and (ii) the Option by its own terms is
not exercisable after the expiration of five years from the date the Option is
granted.
A person will be considered as owning the stock owned, directly or
indirectly, by or for his brothers and sisters (whether by the whole or half
blood), spouse, ancestors, and lineal descendants. Stock owned, directly or
indirectly, by or for a corporation, partnership, estate or trust will be
considered as being owned proportionately by or for its shareholders, partners
or beneficiaries.
3. Administration of the Plan. The Plan shall be administered by the
Compensation Committee of the Board of Directors of the Company (the
"Committee"). No member of the Committee shall be liable for any act or
omission of any other member of the Committee or for any act or omission on his
own part, including but not limited to the exercise of any power or discretion
given to him under the Plan, except those resulting from his own gross
negligence or willful misconduct. All questions of interpretation and
application of the Plan, or as to options granted under it, shall be subject to
the determination of a majority of the Committee. The Committee in exercising
any power or authority granted under this Plan or in making any determination
under this Plan shall perform or refrain from performing those acts using its
sole discretion and judgment. Any decision made by the Committee or any
refraining to act or any act taken by the Committee in good faith shall be
final and binding on all parties. The Committee's decision shall never be
subject to de novo review. When appropriate the Plan shall be administered to
qualify certain of the Options granted under it as "incentive stock options"
described in Section 422 of the Internal Revenue Code of 1986, as amended.
4. Stock Reserved for the Plan. The shares subject to the Plan shall
consist of unissued shares of the Common Stock or previously issued shares
reacquired and held by the Company or its subsidiaries. The total amount of
the Common Stock with respect to which options may granted under the Plan
("Options") shall not exceed 100,000 shares in aggregate. The class and
aggregate number of shares that may be subject to Options shall be subject to
adjustment under Section 17. This number of shares shall be and is hereby
reserved for issuance pursuant to this Plan. Any of such shares that may
remain unsold and that are not subject to outstanding Options at the
termination of the Plan shall cease to be reserved for the purpose of the Plan.
Should any Option expire or be canceled before its exercise in full, the shares
theretofore subject to such option may again be made subject to an Option.
A-1
<PAGE> 18
5. Grant of Options. The Committee may grant the following options any
time during the term of this Plan to any Region Manager Company that it
chooses:
(a) "Incentive" Stock Options. The Committee may grant to a
Region Manager an Option, or Options, to buy a stated number of shares
of Common Stock under the terms and conditions of the Plan, which
Option or Options would be an "incentive stock option" within the
meaning of Section 422 of the Internal Revenue Code of 1986, as
amended.
(b) "Non-incentive" Stock Options. The Committee may grant
to a Region Manager an Option, or Options, to buy a stated number of
shares of Common Stock under the terms and conditions of the Plan,
which Option or Options would not constitute an "incentive stock
option" within the meaning of Section 422 of the Internal Revenue Code
of 1986, as amended.
Each option granted shall be approved by the Committee.
Subject only to any applicable limitations set forth in this Plan, the number
of shares of Common Stock to be covered by an Option shall be as determined by
the Committee.
6. Factors to be Considered. In determining the number of
shares subject to an Option granted in any given year to a particular Region
Manager, the Committee shall consider whether:
(i) pretax profits in the Region Manager's territory have
increased over the prior year as reported on the
Region Manager's profit center statement;
(ii) Cash to Houston for the Region Manager's territory
has increased over the prior year;
(iii) the percentage of claim dollars to revenues in the
Region Manager's territory as reported on Schedule XL
has decreased over the prior year;
(iv) delinquencies to STC - Houston have decreased or
maintained at zero level from the prior year;
(v) market share has increased in the Region Manager's
territory over the prior year;
(vi) the Region Manager has made efforts to expand
territory through expansion of markets and/or sale of
new products;
(vii) the Region Manager's territory complies with company
policy relating to agency visits, audits, automation,
training, benefit participation; and
(viii) the Region Manager incorporates the Company's goals
and strategies into the goals for his territory.
The Committee shall evaluate the relative importance of these
factors, and the Region Manager's standing among the recipient group as
reported on the Region Performance Summary Report, in its sole and absolute
discretion and shall have full power and authority to determine according to
the above criteria the amount of shares subject to any Option.
7. Stock Appreciation Rights. Stock appreciation rights
("Stock Appreciation Rights") may be included in each Option granted under the
Plan to allow the holder of an Option (an "Optionee") to surrender that Option
(or a portion of the part that is then exercisable) and receive in exchange,
upon a written request from the Optionee describing the special circumstances
that exist which create the need to use such Stock Appreciation Rights and
subject to any other conditions and limitations set by the Committee, an amount
equal to the excess of the fair
A-2
<PAGE> 19
market value of the Common Stock covered by the Option (or the portion of it
surrendered), determined as of the date of surrender, over the aggregate option
price of the Common Stock. The payment will be made in shares of Common Stock
valued at fair market value. Stock Appreciation Rights may be exercised only
when the fair market value of the Common Stock covered by the Option
surrendered exceeds the option price of the Common Stock.
Upon the surrender of an Option, or a portion of it, for Stock
Appreciation Rights, the shares represented by the Option (or that part of it
surrendered) shall not be available for reissuance under the Plan.
Each of the Stock Appreciation Rights (a) will expire not
later than the expiration of the underlying Option, (b) may be for no more than
100% of the difference between the exercise price of the underlying Option and
the fair market value of a share of the Common Stock at the time the Stock
Appreciation Right is exercised, and (c) may be exercised only when the
underlying Option is eligible to be exercised.
8. Option Price. The price at which shares of Common Stock
may be purchased pursuant to an Option that is an incentive stock option shall
be not less than the fair market value of the shares of Common Stock on the
date the Option is granted. The Committee in its discretion may provide that
the price at which shares may be purchased shall be more than the minimum price
required. If an individual owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company, the option price
at which shares may be purchased under an Option that is an incentive stock
option shall be not less than 110% of the fair market value of the Common Stock
on the date the Option is granted.
9. Duration of Options. No Option that is an incentive stock
option shall be exercisable after the expiration of 10 years from the date the
Option is granted. The Committee in its discretion may provide that the Option
shall be exercisable throughout the 10-year period or during any lesser period
commencing on or after the date of grant of the Option and ending upon or
before the expiration of the 10-year period. If an individual owns stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company, no Option that is an incentive stock option shall be
exercisable after the expiration of five years from the date the Option is
granted. No Option that is a non-incentive stock option shall be exercisable
after the expiration of 10 years from the date the Option is granted. The
Committee in its discretion may provide that the Option shall be exercisable
throughout the 10-year period or during any lesser period commencing on or
after the date of grant of the Option and ending upon or before the expiration
of the 10-year period.
10. Maximum Value of Stock Subject to Options That are
Incentive Stock Options. To the extent that the aggregate fair market value
(determined as of the date the Option is granted) of the stock with respect to
which incentive stock options are exercisable for the first time by the
Optionee in any calendar year (under this Plan and any other incentive stock
option plan(s) of the Company and any parent and subsidiary corporation)
exceeds $100,000, the Options shall be treated as non-incentive stock options.
In making this determination, Options shall be taken into account in the order
in which they were granted.
11. Exercise of Options. An Optionee may exercise such
Optionee's Option by delivering to the Company a written notice stating (i)
that such Optionee wishes to exercise such Option on the date such notice is so
delivered, (ii) the number of shares of Common Stock with respect to which the
Option is to be exercised and (iii) the address to which the certificate
representing such shares of Common Stock should be mailed. To be effective,
such written notice shall be accompanied by (i) payment of the Option Price of
such shares of Common Stock and (ii) payment of an amount of money necessary to
satisfy any withholding tax liability that may result from the exercise of such
Option. Each such payment shall be made by cashier's check drawn on a national
banking association and payable to the order of the Company in United States
dollars.
12. Transferability of Options. Options and Stock
Appreciation Rights shall not be transferable by the Optionee except by will or
under the laws of descent and distribution, and shall be exercisable, during
his lifetime, only by him.
13. Termination of Employment or Death of Optionee. Except
as may be otherwise expressly provided herein, all Options (whether incentive
or non-incentive) shall terminate on the earlier of the date of the
A-3
<PAGE> 20
expiration of the Option or one day less than three months after the date of
severance, upon severance of the employment relationship between the Company
and the Optionee, whether with or without cause, for any reason other than the
death of the Optionee, including retirement or disability, during which period
the Optionee shall be entitled to exercise the Option in respect of the number
of shares that the Optionee would have been entitled to purchase had the
Optionee exercised the Option on the date of such severance of employment.
Whether authorized leave of absence, or absence on military or government
service, shall constitute severance of the employment relationship between the
Company and the Optionee shall be determined by the Committee at the time
thereof.
In the event of the death of the holder of any Option (whether
incentive or non-incentive) while in the employ of the Company and before the
date of expiration of such Option, such Option shall continue in effect until
the date of expiration of the Option. After the death of the Optionee, his
executors, administrators or any person or person to whom his Option may be
transferred by will or by the laws of descent and distribution, shall have the
right, any time before the termination of an Option, to exercise the Option in
respect to the number of shares that the Optionee would have been entitled to
exercise if he had exercised the Option on the date of his death while in
employment.
Notwithstanding the foregoing provisions of this Section 13,
in the case of an Option that is a non-incentive stock option, the Committee
may provide for a different option termination date in the option agreement
with respect to such Option. For purposes of incentive stock options issued
under this Plan, an employment relationship between the Company and the
Optionee shall be deemed to exist during any period in which the Optionee is
employed by the Company, by any parent or subsidiary corporation, by a
corporation issuing or assuming an option in a transaction to which Section
424(a) of the Internal Revenue Code of 1986, as amended, applies, or by a
parent or subsidiary corporation of such corporation issuing or assuming an
option. For this purpose, the phrase "corporation issuing or assuming an
option" shall be substituted for the word "Company" in the definitions of
parent and subsidiary corporations in Section 2 and the parent-subsidiary
relationship shall be determined at the time of the corporate action described
in Section 424(a) of the Internal Revenue Code of 1986, as amended. For
purposes of non-incentive stock options issued under this Plan, an employment
relationship between the Company and the Optionee will exist under the
circumstances described above for incentive stock options and will also exist
if the Optionee is transferred to an affiliate corporation approved by the
Committee.
14. Requirements of Law. The Company shall not be required
to sell or issue any shares under any Option if issuing the shares shall
constitute a violation by the Optionee or the Company of any provisions of any
law or regulation of any governmental authority. Each Option granted under
this Plan shall be subject to the requirements that, if at any time the Board
of Directors of the Company or the Committee shall determine that the listing,
registration or qualification of the shares upon any securities exchange or
under any state or federal law of the United states or of any other country or
governmental subdivision, or the consent or approval of any governmental
regulatory body, or investment or other representations, are necessary or
desirable in connection with the issue or purchase of shares subject to an
Option, that Option shall not be exercised in whole or in part unless the
listing, registration, qualification, consent, approval or representations
shall have been effected or obtained free of any conditions not acceptable to
the Board of Directors. Any determination in this connection by the Committee
shall be final. In the event the shares issuable on exercise of an Option are
not registered under the Securities Act of 1933, the Company may imprint on the
certificate for those shares the following legend or any other legend which
counsel for the Company considers necessary or advisable to comply with the
Securities Act of 1933:
"The shares of stock represented by this certificate have not
been registered under the Securities Act of 1933 or under the
securities laws of any state and may not be sold or
transferred except upon registration or upon receipt by the
Corporation of an opinion of counsel satisfactory to the
Corporation, in form and substance satisfactory to the
Corporation, that registration is not required for a sale or
transfer."
The Company may, but shall in no event be obligated to, register any securities
covered by this Plan under the Securities Act of 1933 (as now in effect or as
later amended) and, in the event any shares are registered, the Company may
remove any legend on certificates representing those shares. The Company shall
not be obligated
A-4
<PAGE> 21
to take any other affirmative action to cause the exercise of an Option or the
issuance of shares under the Option to comply with any law or regulation or any
governmental authority.
15. No Rights as Stockholder. No Optionee shall have rights
as a stockholder with respect to shares covered by his Option until the date a
stock certificate is issued for the shares. Except as provided in Section 15,
no adjustment for dividends, or other matters shall be made if the record date
is before the date the certificate is issued.
16. Employment Obligation. The granting of any Option shall
not impose upon the Company any obligation to employ or continue to employ any
Optionee. The right of the Company to terminate the employment of any officer
or other employee shall not be diminished or affected because an Option has
been granted to him.
17. Adjustments. The existence of outstanding Options shall
not affect in any way the right or power of the Company or its stockholders to
make or authorize any or all adjustments, recapitalizations, reorganizations or
other changes in the Company's capital structure or its business, or any merger
or consolidation of the Company, or any issue of bonds, debentures, preferred
or prior preference stock ahead of or affecting the Common Stock or the rights
thereof, or the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of its assets or business, or any other corporate
act or proceeding, whether of a similar character or otherwise.
If the Company shall effect a subdivision or consolidation of
shares or other capital adjustment of, or the payment of a dividend in capital
stock or other equity securities of the Company on, its Common Stock, or other
increase or reduction of the number of shares of the Common Stock outstanding
without receiving consideration therefor in money, services, or property, or
the reclassification of its Common Stock, in whole or in part, into other
equity securities of the Company, then (a) the number, class and per share
price of shares of stock subject to outstanding Options hereunder shall be
appropriately adjusted (or in the case of the issuance of other equity
securities as a dividend on, or in a reclassification of, the Common Stock, the
Options shall extend to such other securities) in a way that entitles an
Optionee to receive, upon exercise of an Option, for the same aggregate cash
compensation, the same total number and class or classes of shares (or in the
case of a dividend of, or reclassification into, other equity securities, such
other securities) he would have held after such adjustment if he had exercised
his Option in full immediately before the event requiring the adjustment, or,
if applicable, the record date for determining shareholders to be affected by
such adjustment; and (b) the number and class of shares then reserved for
issuance under the Plan (or in the case of a dividend of, or reclassification
into, other equity securities, such other securities) shall be adjusted by
substituting for the total number and class of shares of stock then received,
the number and class or classes of shares of stock (or in the case of a
dividend on, or reclassification into, other equity securities, such other
securities) that would have been received by the owner of an equal number of
outstanding shares of Common Stock as the result of the event requiring the
adjustment. Comparable rights shall accrue to each Optionee upon successive
subdivisions, consolidations, capital adjustment, dividends or
reclassifications of the character described above.
If the Company shall make a tender offer for, or grant to all
of its holders of its shares of Common Stock the right to require the Company
or any subsidiary of the Company to acquire from such stockholders shares of,
Common Stock, at a price in excess of the Current Market Price (a "Put Right")
or the Company shall grant to all of its holders for its shares of Common Stock
the right to acquire shares of Common Stock for less than the Current Market
Price (a "Purchase Right") then, in the case of a Put Right, the Option Price
shall be adjusted by multiplying the Option Price in effect immediately before
the record date for the determination of stockholders entitled to receive such
Put Right by a fraction, the numerator of which shall be the number of shares
of Common Stock then outstanding minus the number of shares of Common Stock
that could be purchased at the Current Market Price for the aggregate amount
that would be paid if all Put Rights are exercised and the denominator of which
is the number of shares of Common Stock that would be outstanding if all Put
Rights are exercised; and, in the case of a Purchase Right, the Option Price
shall be adjusted by multiplying the Option Price in effect immediately before
the record date for the determination of the stockholders entitled to receive
such Purchase Right by a fraction, the numerator of which shall be the number
of shares of Common Stock then outstanding plus the number of shares of Common
Stock that could be purchased at the Current Market Price for
A-5
<PAGE> 22
the aggregate amount that would be paid if all Purchase Rights are exercised
and the denominator of which is the number of shares of Common Stock that would
be outstanding if all Purchase Rights are exercised. In addition, the number
of shares subject to the option shall be increased by multiplying the number of
shares then subject to the Option by a fraction that is the inverse of the
fraction used to adjust the Option Price. Notwithstanding the foregoing, if
any such Put Rights or Purchase Rights shall terminate without being exercised,
the Option Price and number of shares subject to Option shall be appropriately
readjusted to reflect the Option Price and number of shares subject to the
Option that would have been in effect if such unexercised Rights had never
existed. Comparable adjustments shall be made upon successive transactions of
the character described above.
After the merger of one or more corporations into the Company,
after any consolidation of the Company and one or more corporations, or after
any other corporate transaction described in Section 424(a) of the Code in
which the Company shall be the surviving corporation, each Optionee, at no
additional cost, shall be entitled to receive, upon any exercise of his Option,
in lieu of the number of shares as to which the Option shall then be so
exercised, the number and class of shares of stock or other equity securities
to which the Optionee would have been entitled pursuant to the terms of the
agreement of merger or consolidation if at the time of such merger or
consolidation such Optionee had been a holder of a number of shares of Common
Stock equal to the number of shares as to which the Option shall then be so
exercised and, if as a result of such merger, consolidation or other
transaction, the holders of Common Stock are not entitled to receive any shares
of Common Stock pursuant to the terms thereof, each Optionee, at no additional
cost shall be entitled to receive, upon exercise of his Option, such other
assets and property, including cash to which he would have been entitled if at
the time of such merger, consolidation or other transaction he had been the
holder of the number of shares of Common Stock equal to the number of shares as
to which the Option shall then be so exercised. Comparable rights shall accrue
to each Optionee upon successive mergers or consolidations of the character
described above.
After a merger of the Company into one or more corporations,
after a consolidation of the Company and one or more corporations, or after any
other corporate transaction described in Section 424(a) of the Code in which
the Company is not the surviving corporation, each Optionee shall, at no
additional cost, be entitled at the option of the surviving corporation (i) to
have his then existing Option assumed or have a new option substituted for the
existing Option by the surviving corporation to the transaction that is then
employing him, or a parent or subsidiary of such corporation, on a basis where
the excess of the aggregate fair market value of the shares subject to the
option immediately after the substitution or assumption over the aggregate
option price of such option is equal to the excess of the aggregate fair market
value of all shares subject to the option immediately before such substitution
or assumption over the aggregate option price of such shares, provided that the
shares subject to the new option must be traded on the New York or American
Stock Exchange or quoted on the National Association of Securities Dealers
Automated Quotation System, or (ii) to receive, upon any exercise of his
Option, in lieu of the number of shares as to which the Option shall then be so
exercised, the securities, property and other assets, including cash, to which
the Optionee would have been entitled pursuant to the terms of the agreement of
merger or consolidation or the agreement giving rise to the other corporate
transaction if at the time of such merger, consolidation or other transaction
such Optionee had been the holder of the number of shares of Common Stock equal
to the number of shares as to which the Option shall then be so exercised.
If a corporate transaction described in Section 424(a) of the
code that involves the Company is to take place and there is to be no surviving
corporation while an Option remains in whole or in part unexercised, it shall
be canceled by the Board of Directors as of the effective date of any such
corporate transaction but before that date each Optionee shall be provided with
a notice of such cancellation and each Optionee shall have the right to
exercise such Option in full to the extent it is then still unexercised during
a 30-day period preceding the effective date of such corporate transaction.
For purposes of this Section 15, Current Market Price per
share of Common Stock shall mean the last reported price for the Common Stock
in the New York Stock Exchange--Composite Transaction listing on the trading
day immediately preceding the first trading day on which, as a result of the
establishment of a record date or otherwise, the trading price reflects that an
acquiror of Common Stock in the public market will not participate in or
receive the payment of any applicable dividend or distribution.
A-6
<PAGE> 23
Except as hereinbefore expressly provided, the issue by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, for cash or property, or for labor or services either
upon direct sale or upon the exercise of rights or warrants to subscribe
therefor, or upon conversion of shares or obligations of the Company
convertible into such shares or other securities, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock then subject to outstanding Options.
18. Amendment or Termination of Plan. The Board of Directors
may amend, alter or discontinue the Plan, but no amendment or alteration shall
be made which would impair the rights of any Optionee under any Option
theretofore granted without his consent. The Board shall have the power to
make all changes in the Plan and in the regulations and administrative
provisions under the Plan or in any outstanding Option as in the opinion of
counsel for the Company may be necessary or appropriate from time to time to
enable any Option granted pursuant to the Plan to qualify as an incentive stock
option under Section 422 of the Internal Revenue Code of 1986, as amended, and
the regulations that may be issued under that Section as in existence from time
to time.
19. Written Agreement. Each Option granted under this Plan
shall be embodied in a written option agreement, which shall be subject to the
terms and conditions prescribed above, and shall be signed by the Optionee and
by the appropriate officer of the Company for and in the name and on behalf of
the Company. Each option agreement shall contain any other provisions that the
Committee in its discretion shall deem advisable.
20. Indemnification of the Committee. The Company shall
indemnify each present and future member of the Committee against, and each
member of the Committee shall be entitled without further act on his part to
indemnity from the Company for, all expenses (including the amount of judgments
and the amount of approved settlements made with a view to the curtailment of
costs of litigation, other than amounts paid to the Company itself) reasonably
incurred by him in connection with or arising out of any action, suit or
proceeding in which he may be involved because of his being or having been a
member of the Committee, whether he continues to be such member of the
Committee at the time of incurring such expenses; provided, however, that such
indemnity shall not include any expenses incurred by any such member of the
Committee (a) in respect of matters as to which he shall be finally adjudged in
any such action, suit or proceeding to have been guilty of gross negligence or
willful misconduct in the performance of his duty as such member of the
Committee, or (b) in respect of any matter in which any settlement is effected,
to an amount in excess of the amount approved by the Company on the advice of
its legal counsel; and provided further, that no right of indemnification under
the provisions set forth herein shall be available to or enforceable by any
such member of the Committee unless, within sixty (60) days after institution
of any such action, suit or proceeding, he shall have offered the Company, in
writing, the opportunity to handle and defend the same at its own expense. The
foregoing right of indemnification shall inure to the benefit of the heirs,
executors or administrators of each such member of the Committee and shall be
in addition to all other rights to which such member of the Committee may be
entitled to as a matter of law, contract or otherwise. Nothing in this Section
18 shall be construed to limit or otherwise affect any right to indemnification
or payment of expense, or any provisions limiting the liability of any officer
or director of the Company or any member of the Committee, provided by law, the
Certificate of Incorporation of the Company or otherwise.
21. Effectiveness and Expiration of the Plan. The Plan shall
be effective January 1, 1997. The Plan shall expire five years and one day
after the effective date of the Plan, and thereafter no option shall be granted
pursuant to the Plan.
A-7
<PAGE> 24
PROXY PROXY
STEWART INFORMATION SERVICES CORPORATION
THIS PROXY FOR HOLDERS OF COMMON STOCK IS SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS -- APRIL 25, 1997
The undersigned appoints Ken Anderson, Jr. and Tannie L. Pizzitola, Jr.,
and each of them, as proxies, with full power of substitution and revocation,
to vote, as designated on the reverse side hereof, all the Common Stock of
Stewart Information Services Corporation which the undersigned has power to
vote, with all powers which the undersigned would possess if personally
present, at the annual meeting of stockholders thereof to be held April 25,
1997, or at any adjournment thereof.
Unless otherwise marked, this proxy will be voted FOR the election of the
nominees named and FOR Proposal No. 2.
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
(Continued and to be signed on reverse side.)
<PAGE> 25
[reverse side of proxy card]
STEWART INFORMATION SERVICES CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. ///
<TABLE>
<S> <C> <C> <C>
1. Election of Directors-- / /
Nita B. Hanks, Dr. E. Douglas Hodo, Paul W. Hobby,
Max Crisp, C.M. Hudspeth
--------------------------------------------------
(Except nominee(s) written above)
2. Approval of the Company's 1997 Stock Option Plan / /
for Region Managers
The undersigned acknowledges receipt of the
Notice of Annual Meeting of Stockholders and
of the Proxy Statement.
Dated _________________, 1997
Signature(s)
--------------------------------
Please sign exactly as your name appears.
Joint owners should each sign personally.
Where applicable, indicate your official
position or representation
</TABLE>
