<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 30, 1999
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 30, 1999, at 8:30 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 1999
Stock Option Plan.
(3) To consider and act upon a proposal of the Board of Directors to
adopt an amendment to the Certificate of Incorporation of the
Company to increase the number of authorized shares of the
Company's Common Stock, $1.00 par value, from 15,000,000 to
30,000,000.
(4) 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 March 5, 1999 will be entitled to vote at
the meeting.
By Order of the Board of Directors,
Max Crisp
Secretary
March 22, 1999
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 30, 1999
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 30, 1999, at 8:30
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 22, 1999 to stockholders of record
at the close of business on March 5, 1999 (the "Record Date").
At the close of business on the Record Date, there were outstanding and
entitled to vote 6,589,539 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,
<PAGE> 4
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.
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
BENEFICIAL PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER TITLE OF CLASS OWNERSHIP OF 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
EQSF Advisers, Inc. Common Stock 975,700(1) 14.8
767 Third Avenue
New York, New York 10017
Private Capital Management, Inc. Common Stock 459,700(2) 7.0
3003 Tamiami Trail N.
Naples, Florida 34109
Brookhaven Capital Management Co., Ltd Common Stock 412,223(3) 6.3
3000 Sandhill Road, Suite 13
Menlo Park, California 94025
Franklin Resources, Inc. Common Stock 400,000(4) 6.1
777 Mariners Island Boulevard
San Mateo, California 94404
</TABLE>
- ----------
(1) EQSF Advisers, Inc. reported sole voting and dispositive power with respect
to all of such shares in its report on Schedule 13G/A filed February 16,
1999. Third Avenue Value Fund, an investment company registered under the
Investment Company Act of 1940, has the right to receive dividends from,
and the proceeds from the sale of, such shares.
(2) Private Capital Management, Inc. reported shared dispositive power and no
voting power with respect to such shares in its Schedule 13G filed February
17, 1999.
(3) 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.
(4) Direct and indirect investment advisory subsidiaries of Franklin Resources,
Inc. have sole voting and investment power with respect to all of such
shares. Information with respect to the ownership of such stockholder was
obtained from its report on Schedule 13G filed February 14, 1999. Such
report was also filed on behalf of Charles B. Johnson, Rupert H. Johnson,
Jr. and Franklin Advisory Services, Inc., affiliates of Franklin Resources,
Inc.
2
<PAGE> 5
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.
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>
MOUNT AND NATURE
OF BENEFICIAL PERCENT OF
NAME TITLE OF CLASS A OWNERSHIP(1) CLASS
- ----------------------------------------------- --------------------------- ------------------ ---------
<S> <C> <C> <C>
Carloss Morris................................. Common Stock 71,650 1.1
Stewart Morris................................. Common Stock 64,278 (2)
Malcolm S. Morris.............................. Common Stock 85,000(3) 1.3
Class B Common Stock 262,503 50.0
Stewart Morris, Jr............................. Common Stock 40,000(4) (2)
Class B Common Stock 262,503 50.0
Max Crisp...................................... Common Stock 7,500(5) (2)
C. M. Hudspeth................................. Common Stock 16,875(6) (2)
Nita B. Hanks.................................. Common Stock 183 (2)
Paul W. Hobby.................................. Common Stock 975 (2)
Dr. E. Douglas Hodo............................ Common Stock 975 (2)
Dr. W. Arthur Porter........................... Common Stock 975 (2)
Lloyd Bentsen, III............................. Common Stock 2,475 (2)
All officers and directors as a group Common Stock 290,886 4.4
(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) Less than 1%.
(3) Consists of 85,000 shares subject to stock options (see "Executive
Compensation--Option Grants and Exercises" at page 7).
(4) Consists of 40,000 shares subject to stock options (see "Executive
Compensation--Option Grants and Exercises" at page 7).
(5) Includes 6,000 shares subject to stock options (see "Executive
Compensation--Option Grants and Exercises" at page 7).
(6) Includes 1,875 shares as to which C. M. Hudspeth has sole voting and
investment power and 15,000 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 1998, 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 1998, the Executive Committee held five meetings at which all members
were present and executed 47 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 1998, the Audit Committee held five 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 1998. 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>
DIRECTOR
NOMINEE, AGE AND POSITION WITH THE COMPANY SINCE
- ------------------------------------------ --------
<S> <C>
Nita B. Hanks, 45, Director............................................................... 1990
Dr. E. Douglas Hodo, 64, Director......................................................... 1988
Paul W. Hobby, 38, Director............................................................... 1989
Max Crisp, 64, Vice President-Finance, Secretary, Treasurer and Director.................. 1970
C. M. Hudspeth, 79, Director.............................................................. 1976
</TABLE>
For more than the past five years, Mrs. Hanks has been a Senior Vice
President of Stewart Title Guaranty Company ("Guaranty"), a subsidiary of the
Company.
Dr. Hodo has served as President of Houston Baptist University for more
than the past five years. Dr. Hodo is also a director of the United Services
Group of funds.
4
<PAGE> 7
Mr. Hobby has served since 1995 as Chairman of Hobby Media Services, Inc.,
a media software company. Mr. Hobby is also a Vice President of Hobby
Communications, L.L.C. Mr. Hobby served as Chairman of Columbine JDS Systems,
Inc. until October 31, 1997. Mr. Hobby also served as Vice President of H & C
Communications, Inc. until December 31, 1996.
Mr. Crisp has served as Vice President-Finance, Treasurer and Secretary of
the Company for more than the past five years.
Mr. Hudspeth has been of counsel to the law firm of DeLange, Hudspeth,
McConnell & Tibbets, L.L.P., Houston, Texas, and its predecessor firm, 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 1998.
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, 83, Co-Chief Executive Officer
and Chairman of the Board of Directors....................................................... 1970
Stewart Morris, 79, Co-Chief Executive Officer, President and Director.......................... 1970
Dr. W. Arthur Porter, 57, Director.............................................................. 1993
Lloyd Bentsen, III, 54, Director................................................................ 1995
</TABLE>
Carloss Morris and Stewart Morris have served as Co-Chief Executive
Officers of the Company for more than the past five years.
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 Dean of the College of Engineering and University
Vice President for Technology Development of the University of Oklahoma since
1998. Dr. Porter is also the Secretary of Science and Technology Development for
the State of Oklahoma. Prior to those appointments, he had served as President
and Chief Executive Officer of Houston Advanced Research Center, a nonprofit
research consortium, for more than five years. He also had served as an Adjunct
Professor of Electrical Engineering at Rice University for more than five years
prior to his appointment with the University of Oklahoma. Dr. Porter is also a
director of Electro Scientific Industries, Inc., Portland, Oregon, and Bookham
Technologies, Oxfordshire, England.
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 $50
million of capital that seeks to invest in Texas-based emerging growth
companies. Prior to founding his venture capital firm in 1979, Mr. Bentsen spent
ten years with Rotan Mosle, Inc., a regional investment banking firm, as a
member of the corporate finance department. Mr. Bentsen is a graduate of
Princeton University and holds an MBA from Stanford University.
5
<PAGE> 8
Carloss Morris, Stewart Morris, Malcolm S. Morris and Stewart Morris,
Jr., acting together, have the power to direct the management and policies of
the Company. Accordingly, they may be deemed to be "control persons" as such
term is used in regulations adopted under the Securities Exchange Act of 1934.
EXECUTIVE COMPENSATION
SUMMARY OF COMPENSATION
The following table summarizes compensation information concerning each
of the Company's executive officers for each of the three years ended December
31, 1998.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
- -------------------------------------------------------------------------------------------------------------------
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION (AWARDS)
----------------------------------- -------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS STOCK OPTIONS COMPENSATION
- ------------------------------------ ------- ---------- ------------ -------------- ----------------
<S> <C> <C> <C> <C> <C>
($) ($) (# shares) ($)
Carloss Morris 1998 135,000 365,000 -- 13,919(1)
Chairman of the Board and 1997 135,000 220,789 -- 17,713
Co-Chief Executive Officer(2) 1996 135,000 211,305 -- 28,310
Stewart Morris 1998 135,000 365,000 -- 13,050(3)
President and 1997 135,000 220,789 -- 15,399
Co-Chief Executive Officer(4) 1996 135,000 211,305 -- 19,470
Stewart Morris, Jr 1998 130,000 370,000 12,000 6,226(5)
Senior Executive Vice 1997 130,000 224,148 10,000 5,855
President--Assistant 1996 130,000 218,075 10,000 4,416
President(6)
Malcolm S. Morris 1998 130,000 370,000 12,000 2,027(7)
Senior Executive Vice Presi 1997 130,000 224,148 10,000 5,644
dent--Assistant Chairman(8) 1996 130,000 218,075 10,000 3,951
Max Crisp 1998 140,000 285,000 6,000 7,893(9)
Vice President--Finance(10) 1997 140,000 99,318 5,000 7,220
1996 140,000 94,460 5,000 7,670
</TABLE>
(1) Consists of matching contributions to the Company's 401(k) plan ($1,500),
director's fees ($1,950) and $10,469, 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 9).
(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 ($1,500),
director's fees ($1,950) and $9,600, 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 9).
(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.
6
<PAGE> 9
(5) Consists of matching contributions to the Company's 401(k) plan ($1,500),
director's fees ($2,650) and $2,076, 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 50, 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 ($1,500),
director's fees ($1,950) and $2,577, 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.
(8) Malcolm S. Morris, age 52, 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 ($1,500),
director's fees ($1,950) and $4,443, 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, 1998 to each of its
executive officers. All such grants were made on May 13, 1998, 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 1998 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.
7
<PAGE> 10
OPTION GRANTS IN FISCAL YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------------------------------------------
PERCENT OF
TOTAL OPTIONS GRANT DATE
OPTIONS GRANTED TO EXERCISE EXPIRATION PRESENT
NAME GRANTED EMPLOYEES PRICE DATE VALUE(1)
- ------------------------------ ---------------- --------------- --------------- --------------- -----------------
(# shares) (%) ($) ($)
<S> <C> <C> <C> <C> <C>
Stewart Morris, Jr............ 12,000 26 37.56 5/13/08 192,960
Malcolm S. Morris............. 12,000 26 37.56 5/13/08 192,960
Max Crisp..................... 6,000 13 37.56 5/13/08 96,480
</TABLE>
(1) The grant date present values are calculated under the Model. The Model is
a mathematical formula used to value stock options and is based on
assumptions regarding the stock's historical volatility (22.30%), dividend
rate (0.7%), option term (10 years) and risk-free rate of return (5.66%).
The grant date present value does not reflect any discount with respect to
prohibitions on transfer.
The following table sets forth information concerning each exercise of
stock options during the year ended December 31, 1998 by each of its executive
officers and the value of unexercised options at December 31, 1998. The Company
has not issued any tandem or freestanding stock appreciation rights.
AGGREGATED OPTION EXERCISES IN 1998 AND OPTION VALUES AT DECEMBER 31, 1998
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT DECEMBER 31, IN-THE-MONEY OPTIONS AT
SHARES 1998 DECEMBER 31, 1998
ACQUIRED ON VALUE --------------------------- ----------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------- -------------- ------------- ------------- ------------- ------------- --------------
(# SHARES) ($) (# SHARES) (# SHARES) ($) ($)
<S> <C> <C> <C> <C> <C> <C>
Stewart Morris, Jr........... 30,000 840,180 31,775 8,225 992,818 1,126,825
Malcolm S. Morris............ 15,000 448,350 76,775 8,225 3,190,322 1,126,825
Max Crisp.................... 14,000 363,850 6,000 -- 122,640 --
</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. The
Company also reimburses each director for the cost of an annual medical
examination.
8
<PAGE> 11
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, as amended, 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 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 1998, the net
death benefits to Carloss Morris and Stewart Morris under the SD policies were
$553,792 and $664,000, 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 the net death benefit under the SD Policies
will decline to approximately $400,000 for Carloss Morris by the year 2000 and
$400,000 for Stewart Morris by the year 2004.
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 1998;
however, pursuant to applicable federal income tax regulations, taxable income
attributable to the such policies in 1998 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, 1998. The graph assumes that the value of the
investment in the Company's Common Stock and each index was $100 at December 31,
1993 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
[GRAPH]
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------------------------------------------------------------------
1993 1994 1995 1996 1997 1998
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Company ...................... $ 100.00 $ 77.99 $ 109.92 $ 107.35 $ 151.67 $ 305.20
Russell 2000 ................. 100.00 98.18 126.09 146.89 179.74 175.16
Russell 2000 Financial
Services Sector ........... 100.00 100.62 139.72 180.00 244.85 227.23
</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 1998, the Compensation
Committee held two meetings at which all members were present.
During 1998, the Company and its subsidiaries paid a total of $35,917 to
the law firm of DeLange, Hudspeth, McConnell & Tibbets, L.L.P. C. M. Hudspeth is
of counsel to such firm and receives no compensation from it.
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 1998, the base salary levels for the executive officers of
the Company were unchanged. 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 based on a
percent of the annual consolidated net income of Guaranty. 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. For 1997, the bonus formula for each of the co-chief
executive officers was changed to 1.5% of the first $13 million of consolidated
net income of Guaranty and 0.75% of such income in excess of $13 million, which
resulted in an increase of $9,484 in the bonus paid to each of the co-chief
executive officers in 1997 as compared with 1996. For 1998, the Committee
recommended and the Company adopted a bonus formula for each of the co-chief
executive officers of 1.0% of the first $20 million of income before taxes of
Guaranty and 0.75% of such income in excess of $20 million, with a minimum bonus
of $125,000 and a maximum base salary and bonus of $500,000. The formula adopted
for 1998 resulted in an increase of $144,211 in the bonus paid to each of the
co-chief executive officers in 1998 as compared with 1997.
Stock Options. The Company had in effect its 1995 Stock Option Plan (the
"1995 Plan"), the purpose of which was 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 1995 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 1995
Plan, in 1998 the Committee granted options to Malcolm S. Morris, Stewart
Morris, Jr. and Max Crisp for
11
<PAGE> 14
12,000, 12,000 and 6,000 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 1998, no shares were
available for stock option grants under the 1995 Plan. The Compensation
Committee continues to believe that stock options should be a significant
important part of an officer's compensation package. Accordingly, upon the
recommendation of the Compensation Committee, the Board of Directors of the
Company adopted the Stewart Information Services Corporation 1999 Stock Option
Plan and recommended that it be submitted to the stockholders of the Company for
their approval. See "Approval of the 1999 Stock Option Plan" at page 12 of this
proxy statement.
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 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 $2.22 per diluted share in 1997
(after deducting a nonrecurring charge of $.18 per share in the fourth quarter
of 1997) to $6.65 per diluted share in 1998, primarily due to favorable mortgage
interest rates in 1998. 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 1998, 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 1999 STOCK OPTION PLAN
BACKGROUND
On December 14, 1998, the Board of Directors of the Company adopted the
Stewart Information Services Corporation 1999 Stock Option Plan (the "1999
Plan"). A similar plan had been in effect since 1995. However, as of December
31, 1998, no shares remained available for options thereunder. The purpose of
the 1999 Plan is to provide compensation in the form of ownership of the
Company's Common Stock to executive officers of the Company. The 1999 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
1999 Plan is attached as Appendix A to this proxy statement.
12
<PAGE> 15
SUMMARY OF THE 1999 PLAN
The 1999 Plan is administered by the Compensation Committee, which may from
time to time grant stock options (either "incentive" or "non-qualified" stock
options) to executive officers of the Company other than Carloss Morris and
Stewart Morris, who were excluded at their request. At December 31, 1998,
Malcolm S. Morris, Stewart Morris, Jr. and Max Crisp were eligible to
participate in the 1999 Plan. The 1999 Plan provides that an aggregate of
300,000 shares of Common Stock of the Company shall be subject to the 1999 Plan.
The shares subject to the 1999 Plan consist of authorized and unissued shares or
previously issued shares reacquired and held by the Company or any subsidiary.
No member of the Committee is eligible to receive stock options under the 1999
Plan. No Stock Options may be granted under the 1999 Plan after January 2, 2004.
Stock options under the 1999 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 15, 1999, the
closing sale price of a share of the Company's Common Stock on the New York
Stock Exchange was $36-3/8.
The 1999 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.
The Board of Directors is authorized to amend or terminate the 1999 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
13
<PAGE> 16
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 1999 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 1999 Plan is subject to
approval of the 1999 Plan by the stockholders of the Company. Approval of the
1999 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 7,114,545
shares of Common Stock and Class B Common Stock were outstanding and entitled to
vote on the proposal to approve the 1999 Plan. Carloss Morris, Stewart Morris,
Malcolm S. Morris and Stewart Morris, Jr., collectively, have the power to vote
an aggregate of 660,934 shares of Common Stock and Class B Common Stock
(representing approximately 9.3% of the outstanding shares of the combined
classes entitled to vote) with respect to such proposal and intend to vote such
shares for approval of the 1999 Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE 1999 PLAN.
PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION TO
INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
GENERAL
At the meeting, the stockholders of the Company will be asked to vote upon
an amendment (the "Amendment") to the Certificate of Incorporation of the
Company. Approval of such Amendment requires the affirmative vote of the holders
of (i) a majority of the shares of Common Stock and Class B Common Stock that
are outstanding as of the Record Date, voting as a single class, and (ii) a
majority of the shares of Common Stock that are outstanding as of the Record
Date, voting as a separate class. The Amendment increases the number of shares
of Common Stock which the Company shall have authority to issue from 15,000,000
shares to 30,000,000 shares. The Company's Certificate of Incorporation
currently authorizes the Company to issue 1,500,000 shares of Class B Common
Stock, and this amount is not changed by the Amendment. The proposed Amendment
is set forth in full on Annex B attached to this proxy statement.
REASONS FOR THE AMENDMENT
The Board of Directors of the Company has approved a two-for-one stock
split to be effected in the form of a stock dividend on the outstanding capital
stock of the Company. Such approval is conditioned upon the approval of the
Amendment by the stockholders of the Company because, as further discussed
below, the Company does not have a sufficient number of authorized shares of
Common Stock to effect the stock dividend.
14
<PAGE> 17
If so approved, the stock dividend will be paid on or about May 21, 1999, to
stockholders of record of the Company on May 7, 1999. The Board of Directors has
reserved 8,020,273 shares of the Common Stock for the proposed stock dividend,
subject to approval of the Amendment by the stockholders of the Company.
The Company is currently authorized under its Certificate of Incorporation
to issue 15,000,000 shares of Common Stock, of which 6,662,449 shares were
issued and outstanding as of the Record Date and 1,222,649 shares were reserved
for issuance upon (i) the exercise of outstanding stock options, (ii) the
completion of pending acquisitions and (ii) the conversion of shares of Class B
Common Stock into shares of Common Stock. The following table sets forth
information about the Company's outstanding and reserved shares of Common Stock
as of the Record Date.
<TABLE>
<CAPTION>
COMMON STOCK OUTSTANDING AND RESERVED AS OF THE RECORD DATE
-----------------------------------------------------------
PRO FORMA FOR
STOCK SPLIT AND
PRO FORMA FOR CHARTER
ACTUAL STOCK SPLIT AMENDMENT
------------ ------------ --------------
<S> <C> <C> <C>
Authorized .................................. 15,000,000 15,000,000 30,000,000
------------ ------------ ------------
Outstanding(1) .............................. 6,662,449 13,324,898 13,324,989
Reserved for issuance under stock plans
for employees and directors ............ 576,462 1,152,924 1,152,924
Reserved for issuance in pending
acquisitions ........................... 121,181 242,362 242,362
Reserved for issuance upon conversion
of Class B Common Stock ................ 525,006 1,050,012 1,050,012
------------ ------------ ------------
Total outstanding and reserved .............. 7,885,098 15,770,196 15,770,196
------------ ------------ ------------
Available for Issuance ...................... 7,114,902 (770,196) 14,229,804
============ ============ ============
</TABLE>
(1) Includes 72,910 shares held by a subsidiary of the Company.
The Board of Directors has approved, and has directed that the proposal be
presented to stockholders for their approval, a proposed amendment to the
Company's Certificate of Incorporation that would increase the number of
authorized shares of Common Stock from 15,000,000 to 30,000,000. The text of the
proposed amendment is set forth in Annex A hereto. The proposed increase in the
authorized Common Stock has been recommended by the Board of Directors to assure
that an adequate supply of authorized unissued shares of Common Stock is
available for general corporate needs, such as future acquisitions, employee
benefit plans, financings, or stock dividends or stock splits. The additional
shares being authorized by the amendment will permit the Company to engage in
future financing activities and acquisitions without the delay and expense
associated with the holding of a special meeting or soliciting the consent or
approval of stockholders at the time such additional shares are needed. The
availability of additional shares of Common Stock for issue, without the need
for a special meeting of the stockholders, will afford the Company greater
flexibility in acting upon proposed financing or acquisition transactions.
Except for shares that may be issued in connection with employee benefit plans,
the Company has no current plans for the use of any material amount of the
additional shares of Common Stock to be authorized. Unless required by law or
regulatory authorities, no further authorization by vote of stockholders will be
sought for any future share issuances. Because the Company's Common Stock is
listed on the New York Stock Exchange, stockholder approval will be required for
certain
15
<PAGE> 18
issuances of Common Stock, including, generally, issuances of Common Stock under
stock option plans in which officers or directors may participate and issuances
equal to 20% or more of the outstanding Common Stock, other than in a public
offering.
CERTAIN CONSIDERATIONS
Stockholders should note that certain disadvantages may result from the
adoption of the proposed amendment to the Certificate of Incorporation. Such
disadvantages may include a reduction in their interest of the Company with
respect to earnings per share, voting, liquidation value and book and market
values per share if the additional authorized shares of Common Stock are issued.
Additionally, while not having such purpose, the amendment could have the
effect of deterring a future takeover attempt of the Company that the majority
of stockholders may deem to be in their best interest. Such event would arise if
the Board of Directors deemed it in the best interest of the Company to issue an
option to purchase Common Stock, a security convertible into shares of Common
Stock or shares of Common Stock to a party friendly to management in an amount
that would make it less likely for an unfriendly purchaser to attempt an
acquisition of shares by tender offer or other purchase. If a majority in voting
power of the current stockholders desire a takeover or change in control of the
Company, and if such takeover or change were opposed by the Board of Directors,
the additional shares of Common Stock could possibly be used by the Company to
thwart the desires of the majority.
The voting rights of the holders of the Class B Common Stock may have the
effect of rendering more difficult or discouraging unsolicited tender offers,
merger proposals, proxy contacts or other takeover proposals to acquire control
of the Company. So long as 525,000 or more shares of Class B Common Stock are
outstanding, the holders of the Common Stock are entitled to elect five of the
nine directors of the Company and the holders of the Class B Common Stock are
entitled to elect the remaining four of the nine directors. As of the Record
Date, there were 525,006 shares of the Class B Common Stock outstanding and the
voting rights with respect thereto are held by Malcolm S. Morris and Stewart
Morris, Jr. Pursuant to the Company's By-laws, six of the nine directors of the
Board of Directors constitute a quorum, and the vote of six directors is
required to constitute an act by the Board of Directors. Accordingly, the
affirmative vote of at least one of the directors elected by the holders of the
Class B Common Stock is required for any action to be taken by the Board of
Directors. The foregoing provisions of the Company's By-Laws may not be amended
or repealed without the affirmative vote of at least a majority of the
outstanding shares of each class of the Company's capital stock, voting as a
separate class.
The voting rights of the Class B Common Stock may make more difficult the
assumption of control of the Company by a holder of a large block of Common
Stock and the removal of incumbent management of the Company. Such voting rights
could make the accomplishment of a business combination transaction involving
the Company more difficult even if such transaction were favorable to the
interest of a majority of the stockholders of the Company. Thus, the holders of
the Class B Common Stock may possess a veto power over such business combination
transactions regardless of whether such transactions may be desired by or be
beneficial to a majority of the stockholders of the Company and thereby assist
incumbent management in retaining their present positions with the Company.
The Company is subject to Section 203 of the Delaware General Corporation
Law ("Section 203"), which, subject to certain exceptions, prohibits a Delaware
corporation from engaging in any business combination with any interested
stockholder for a period of three years following the date that such stockholder
became an interested stockholder, unless (i) before such date the board of
directors of the corporation approved either the business combination or the
transaction that resulted in the stockholder becoming an interested stockholder,
(ii) upon consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the
16
<PAGE> 19
interested stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned (a) by persons
who are directors and also officers and (b) by employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer,
or (iii) on or after such date the business combination is approved by the board
of directors and authorized at an annual or special meeting of stockholders, and
not by written consent, by the affirmative vote of at least 66 2/3% of the
outstanding voting stock that is not owned by the interested stockholder.
Section 203 defines business combination to include (i) any merger or
consolidation involving the corporation and the interested stockholder, (ii) any
sale, transfer, pledge or other disposition involving the interested stockholder
of 10% or more of assets of the corporation, (iii) subject to certain
exceptions, any transaction that results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder, (iv)
any transaction involving the corporation that has the effect of increasing the
proportionate share of the stock of any class or series of the corporation
beneficially owned by the interested stockholder or (v) the receipt by the
interested stockholder of the benefit of any loans, advances, guarantees,
pledges or other financial benefits provided by or through the corporation. In
general, Section 203 defines an interested stockholder as any entity or person
beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by such an entity or person.
The additional shares of Common Stock for which authorization is sought
would be identical to the shares of Common Stock of the Company now authorized.
The holders of the Common Stock and Class B Common Stock do not have preemptive
or other rights to subscribe for additional shares of capital stock of the
Company or any security convertible into such shares.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSED AMENDMENT TO
THE CERTIFICATE OF INCORPORATION. If not otherwise provided, proxies will be
voted "FOR" approval of the proposed Amendment.
SELECTION OF INDEPENDENT AUDITORS
KPMG LLP has been selected by the Company as its principal independent
auditors for the Company's fiscal year ending December 31, 1999, and served in
such capacity for the Company's fiscal year ended December 31, 1998.
Representatives of KPMG 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 1998, the Company and its subsidiaries paid a total of $242,560 to
the law firm of Morris, Lendais, Hollrah & 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 1998, 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). Mr. Hudspeth receives no compensation from such law firm.
During 1998, Marietta Maxfield, a daughter of Carloss Morris, was a
full-time attorney for Guaranty and was paid $98,566 for services rendered in
such capacity.
17
<PAGE> 20
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 2000 must be received by the Company at its principal executive offices, 1980
Post Oak Boulevard, Suite 800, Houston, Texas 77056, no later than November 23,
1999, 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 2000 must be
received by the Company no later than February 15, 2000.
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.
Proxies for the Company's annual meeting of stockholders to be held in 2000
may confer discretionary power to vote on any matter that may come before the
meeting unless, with respect to a particular matter, (i) the Company receives
notice, by certified mail, return receipt requested, addressed to the Company's
Secretary, not later than the 15th day of February next preceding the meeting,
that the matter will be presented at the annual meeting and (ii) the Company
fails to include in its proxy statement for the annual meeting advice on the
nature of the matter and how the Company intends to exercise its discretion to
vote on the matter.
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 $6,000, 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 22, 1999
18
<PAGE> 21
ANNEX A
STEWART INFORMATION SERVICES CORPORATION
1999 STOCK OPTION PLAN
1. Purpose. The purpose of the Stewart Information Services Corporation
1999 Stock Option Plan (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
executive officers 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 ("Eligible Participants") shall be the executive officers of the Company
other than Carloss Morris and Stewart Morris. 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 (the "Code).
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 300,000 shares in aggregate. The class and
aggregate number of shares that may be subject to Options shall be subject to
adjustment under Section 16. 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.
5. Grant of Options. The Committee may grant the following options any time
during the term of this Plan to any Eligible Participant that it chooses:
(a) "Incentive" Stock Options. The Committee may grant to an Eligible
Participant 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 Code.
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<PAGE> 22
(b) "Non-incentive" Stock Options. The Committee may grant to an
Eligible Participant 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 Code.
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. 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 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.
7. 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.
8. 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.
9. 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.
10. 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
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<PAGE> 23
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.
11. 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.
12. 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 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 12, 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 Code, as amended, applies, or by
a parent or subsidiary corporation of such corporation issuing or assuming an
option. 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.
13. 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."
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<PAGE> 24
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 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.
14. 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.
15. 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.
16. 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 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
A-4
<PAGE> 25
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 16, 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.
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.
A-5
<PAGE> 26
17. 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
Code and the regulations that may be issued under that Section as in existence
from time to time.
18. 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.
19. 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 19 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.
20. Effectiveness and Expiration of the Plan. The Plan shall be effective
January 1, 1999. 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-6
<PAGE> 27
ANNEX B
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
STEWART INFORMATION SERVICES CORPORATION
Stewart Information Services Corporation, a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of Stewart Information
Services Corporation, resolutions were duly adopted setting forth a proposed
amendment to the Certificate of Incorporation of said corporation, declaring
said amendment to be advisable and calling a meeting of the stockholders of said
corporation for consideration thereof. The resolution setting forth the proposed
amendment is as follows:
RESOLVED, that the Certificate of Incorporation of this corporation be
amended by deleting the first full paragraph of Article thereof numbered
"Fourth" and adding a new first paragraph of such Article as follows:
"Fourth: The total number of shares of stock which the corporation
shall have authority to issue is 31,500,000, of which 30,000,000 shares
of the par value of $1 each, amounting in the aggregate to $30,000,000,
shall be designated Common Stock, and of which 1,500,000 shares of the
par value of $1 each, amounting in the aggregate to $1,500,000, shall
be designated Class B Common Stock."
SECOND: That thereafter, pursuant to a resolution of its Board of
Directors, the annual meeting of the stockholders of said corporation was duly
called and held, upon notice in accordance with Section 222 of the General
Corporation Law of the State of Delaware, at which meeting the necessary number
of shares as required by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
FOURTH: That the capital of said corporation will not be reduced under or
by reason of said amendment.
IN WITNESS WHEREOF, said Stewart Information Services Corporation has
caused its corporate seal to be hereunto affixed and this certificate to be
signed by Stewart Morris, its President, and attested by Max Crisp, its
Secretary, this 30th day of April, 1999.
STEWART INFORMATION SERVICES CORPORATION
By:
-------------------------------------
Stewart Morris, President
ATTEST:
By:
----------------------------------------
Max Crisp, Secretary
(Corporate Seal)
<PAGE> 28
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 30,1999
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 the power to
vote, with all powers which the undersigned would possess if personally
present, at the annual meeting of stockholders thereof to be held on April 30,
1999, or at any adjournment thereof.
Unless otherwise marked, this proxy will be voted FOR the election of the
nominees named and FOR Proposals Nos. 2 and 3.
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
(Continued and to be signed on reverse side.)
<PAGE> 29
STEWART INFORMATION SERVICES CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY [X]
<TABLE>
<S> <C> <C> <C>
1. Election of Directors-- For Withhold For All
Nominees: Nita B. Hanks, Dr. E. Douglas Hodo, Paul W. Hobby. All All Except
Max Crisp, C.M. Hudspeth [ ] [ ] [ ]
- ----------------------------------
(Except nominee(s) written above.)
MANAGEMENT RECOMMENDS A VOTE FOR PROPOSALS 1,2 AND 3.
For Withhold For All
2. Adoption of the Company's 1999 All All Except
Stock Option Plan. [ ] [ ] [ ]
For Withhold For All
3. Adoption of the Amendment to the All All Except
Company's Certificate of Incorporation. [ ] [ ] [ ]
The undersigned acknowledges receipt of the Notice of Annual
Meeting of Stockholders and of the Proxy Statement.
Dated , 1999
--------------------
Signature(s)
------------------------------------------------
------------------------------------------------------------
Please sign exactly as your name appears. Joint owners should
each sign personally. Where applicable, indicate your official
position or representation capacity.
</TABLE>
