<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 MAY 1, 2000
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 Monday, May 1, 2000, 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 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 3, 2000 will be entitled to vote at
the meeting.
By Order of the Board of Directors,
Max Crisp
Secretary
March 23, 2000
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 MAY 1, 2000
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 Monday, May 1, 2000, at 8:30
A.M. in the Independence Room on the eleventh floor of the Company's offices,
1980 Post Oak Boulevard, Houston, Texas, or 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 23, 2000 to stockholders of record
at the close of business on March 3, 2000 (the "Record Date").
At the close of business on the Record Date, there were outstanding and
entitled to vote 13,679,806 shares of Common Stock and 1,050,012 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 600,000 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.
<PAGE> 4
The holders of Class B Common Stock, voting as a class, are entitled to
elect the remaining four of the nine directors of the Company. Each holder of
Class B Common Stock has the right to vote, in person or by proxy, the number of
shares owned by him for the four directors to be elected by the holders of Class
B Common Stock and for whose election he has a right to vote.
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 525,006 50.0
3992 Inverness
Houston, Texas 77019
Stewart Morris, Jr. Class B Common Stock 525,006 50.0
#8 West Rivercrest
Houston, Texas 77042
EQSF Advisers, Inc. Common Stock 2,281,200(1) 16.7
767 Third Avenue
New York, New York 10017
Private Capital Management, Inc. Common Stock 1,545,352(2) 11.3
3003 Tamiami Trail N.
Naples, Florida 34109
Artisan Partners Common Stock 1,502,400(3) 10.1
1000 North Water Street, #1770
Milwaukee, Wisconsin 53202
Franklin Resources, Inc. Common Stock 780,000(4) 5.7
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 14,
2000. Includes 279,800 shares owned by M. J. Whitman Advisers, Inc. 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, 1,951,400 of the shares reported by EQSF. Style
Select Small-Cap Value Series, 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 37,500 of, the shares reported by EQSF,
and Third Avenue Value Portfolio of the Third Avenue Variable Series Trust,
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,
12,500 of the shares reported by EQSF.
(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, 2000.
2
<PAGE> 5
(3) Such shares are owned by funds for which Artisan Partners is an investment
advisor. Artisan Partners reported shared voting and investment power with
respect to all of such shares in its Schedule 13G/A filed March 9, 2000.
Such report was also filed on behalf of Andrew A. Ziegler and Carlene
Murphy Ziegler.
(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 3, 2000. 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.
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.
The following table sets forth information as of the Record Date with
respect to each class of the Company's voting shares beneficially owned by
executive officers, directors and nominees for director of the Company and by
all officers, directors and nominees for director of the Company as a group:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER TITLE OF CLASS OWNERSHIP OF CLASS
- ----------------------------------------------- ---------------------- ------------ ---------
<S> <C> <C> <C>
Malcolm S. Morris.............................. Common Stock 215,000(2) 1.55
Class B Common Stock 525,006 50.0
Stewart Morris, Jr. ........................... Common Stock 125,000(3) *
Class B Common Stock 525,006 50.0
Lloyd Bentsen, III............................. Common Stock 5,316 *
Max Crisp...................................... Common Stock 44,500(4) *
Nita B. Hanks.................................. Common Stock 366 *
Paul W. Hobby.................................. Common Stock 2,316 *
Dr. E. Douglas Hodo............................ Common Stock 2,316 *
Dr. W. Arthur Porter........................... Common Stock 2,316 *
C. M. Hudspeth................................. Common Stock 34,116(5) *
Martin J. Whitman.............................. Common Stock 2,281,200(6) 16.7
All officers, directors and nominees as a Common Stock 2,712,546 19.3
group (10 persons)........................... Class B Common Stock 1,050,012 100.0
</TABLE>
- -----------
* Less than 1%.
(1) Unless otherwise indicated, the beneficial owner has sole voting and
investment power.
(2) Consists of 215,000 shares subject to stock options (see "Executive
Compensation--Option Grants and Exercises" at page 8).
3
<PAGE> 6
(3) Consists of 125,000 shares subject to stock options (see "Executive
Compensation--Option Grants and Exercises" at page 8).
(4) Includes 41,500 shares subject to stock options (see "Executive
Compensation--Option Grants and Exercises" at page 8).
(5) Includes 4,116 shares as to which C. M. Hudspeth has sole voting and
investment power and 30,000 shares owned by C. M. Hudspeth's wife and as to
which he has no voting and no investment power.
(6) The shares listed for Mr. Whitman consist of shares beneficially owned by
EQSF Advisers, Inc. and M.J. Whitman Advisers, Inc., both of which are
investment advisors having sole voting and investment powers with respect
to such shares. Mr. Whitman is the chief executive officer and controlling
person of EQSF Advisers, Inc. and M.J. Whitman Advisers, Inc. Mr. Whitman
disclaims beneficial ownership of all such shares.
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 duly elected and qualified.
During 1999, the Board of Directors held five meetings and executed one
consent in lieu of meeting. 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, during
1999, was comprised of Carloss Morris, Stewart Morris, Max Crisp and C. M.
Hudspeth. The Executive Committee is currently comprised of Malcolm S. Morris,
Stewart Morris, Jr., Max Crisp and C. M. Hudspeth. During 1999, the Executive
Committee held six meetings at which all members were present and executed 47
consents in lieu of meetings. No member of the Executive Committee attended
fewer than 80% of the meetings of the Executive Committee.
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 1999, the Audit Committee held four meetings at which
all members were present.
See "Executive Compensation--Compensation Committee" at page 11 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. 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.
4
<PAGE> 7
<TABLE>
<CAPTION>
NOMINEE, AGE AND POSITION WITH THE COMPANY DIRECTOR SINCE
- ------------------------------------------ --------------
<S> <C>
Lloyd Bentsen, III, 55, Director................................................................ 1995
Nita B. Hanks, 46, Director..................................................................... 1990
Dr. E. Douglas Hodo, 65, Director............................................................... 1988
Dr. W. Arthur Porter, 58, Director.............................................................. 1993
Martin J. Whitman, 75, Nominee for Director..................................................... --
</TABLE>
Mrs. Hanks and Dr. Hodo were elected by the holders of the Common Stock at
the annual meeting of stockholders held in 1999. Mr. Bentsen and Dr. Porter were
elected by the holders of the Class B Common Stock at the annual meeting of
stockholders held in 1999. 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.
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.
For more than the past five years, Mrs. Hanks has been a Senior Vice
President of Stewart Title Guaranty Company ("Guaranty"), the Company's largest
subsidiary. Mrs. Hanks is Director of Human Resources for the Company and brings
a key perspective from the Company's employees to its Board of Directors.
Employee costs represent one of the Company's largest expenses.
Dr. Hodo serves as Chairman of the Company's Audit Committee. Dr. Hodo has
served as President of Houston Baptist University for more than the past five
years. Dr. Hodo is also Chairman of the Board of Directors of the United
Services Group of funds and chairman of its audit committee.
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. Whitman has served as Chairman and Chief Executive Officer of M. J.
Whitman, Inc., and its predecessors (a broker-dealer), since 1974; Chief
Executive Officer and a director of Danielson Holding Corporation since 1990
(and Chairman of the Board from 1990 to July 1999); Chairman, Chief Executive
Officer and a director of Third Avenue Trust and its predecessor and EQSF
Advisers, Inc. (the advisor to Third Avenue Trust) since 1990; and Chairman,
chief Executive and a Director of Third Avenue Variable Series Trust since June
1999. Mr. Whitman also serves as a director of Nabors Industries, Inc., a
Director of Tejon Ranch Co., and from March 1993 to February 1996 a director of
Herman's Sporting Good's, Inc., which filed a voluntary petition under Chapter
11 of the United States Bankruptcy Code in April 1996. Mr. Whitman is an Adjunct
Lecturer, Adjunct Professor and Distinguished Fellow in Finance, Yale University
School of Management from 1972 to 1984 and 1992 to present. Mr. Whitman is
co-author of The Aggressive Conservative Investor and author of Value Investing:
A Balanced Approach.
5
<PAGE> 8
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. 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>
Max Crisp, 65, Vice President-Finance, Secretary, Treasurer and Director........................ 1970
Paul W. Hobby, 39, Director..................................................................... 1989
Malcolm S. Morris, 53, Co-Chief Executive Officer
and Chairman of the Board of Directors....................................................... 2000
Stewart Morris, Jr., 51, Co-Chief Executive Officer, President and Director..................... 2000
</TABLE>
Mr. Crisp and Mr. Hobby were elected by the holders of the Common Stock at
the annual meeting of stockholders held in 1999. Malcolm S. Morris and Stewart
Morris, Jr. were elected to the Board of Directors of the Company on January 31,
2000, to fill the vacancies created by the resignations of Carloss Morris and
Stewart Morris.
Mr. Crisp has served as Vice President-Finance, Treasurer and Secretary of
the Company and as its Chief Financial Officer for more than the past five
years.
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. Hobby also serves as a
director of Aronex Pharmaceuticals, Coastal Bancorp, Cinema Star Luxury Theaters
and Propaganda Films, Inc.
Malcolm S. Morris has served as Chairman of the Board and Co-Chief
Executive Officer of the Company since January 31, 2000, and as Senior Executive
Vice President-Assistant Chairman of the Company for more than five years prior
to that time. Malcolm S. Morris has also served for more than the past five
years as President and Chief Executive Officer of Guaranty and Chairman of the
Board of Stewart Title Company ("Title"), a subsidiary of the Company.
Stewart Morris, Jr. has served as President and Co-Chief Executive Officer
of the Company since January 31, 2000 and for more than five years prior to that
time as Senior Executive Vice President-Assistant President of the Company.
Stewart Morris, Jr. has also served for more than the past five years as
President and Chief Executive Officer of Title and Chairman of the Board of
Guaranty. Stewart Morris, Jr. and Malcolm S. Morris are cousins.
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.
6
<PAGE> 9
ADVISORY DIRECTORS
In addition to the directors elected by the holders of the Company's Common
Stock and Class B Common Stock, the Company has five advisory directors who are
appointed by the Company's Board of Directors. The Company's advisory directors
receive notice of and regularly attend meetings of the Company's Board of
Directors. They provide valuable insights and advice to the Company and
participate fully in all deliberations of the Company's Board of Directors but
are not included in quorum and voting determinations. Advisory directors receive
the same compensation for their services as do the members of the Company's
Board of Directors elected by the stockholders of the Company.
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,
1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION (AWARDS)
--------------------------------------------- --------------
MINIMUM VARIABLE ALL OTHER
NAME AND PRINCIPAL POSITION(1) YEAR SALARY BONUS BONUS STOCK OPTIONS COMPENSATION
- ------------------------------------ ------- ----------- ------------ ------------ -------------- ---------------
($) ($) ($) (# shares) ($)
<S> <C> <C> <C> <C> <C> <C>
Carloss Morris 1999 135,000 125,000 240,000 -- 14,241(2)
Chairman of the Board and 1998 135,000 125,000 240,000 -- 13,919
Co-Chief Executive Officer 1997 135,000 100,000 120,789 -- 17,713
Stewart Morris 1999 135,000 125,000 240,000 -- 13,902(3)
President and 1998 135,000 125,000 240,000 -- 13,050
Co-Chief Executive Officer 1997 135,000 100,000 120,789 -- 15,399
Stewart Morris, Jr. 1999 130,000 125,000 245,000 20,000 9,798(4)
Senior Executive Vice 1998 130,000 125,000 245,000 24,000 6,226
President-Assistant 1997 130,000 125,000 99,148 20,000 5,855
President(5)
Malcolm S. Morris 1999 130,000 125,000 245,000 20,000 9,878(6)
Senior Executive Vice Presi 1998 130,000 125,000 245,000 24,000 2,027
dent-Assistant Chairman(7) 1997 130,000 125,000 99,148 20,000 5,644
Max Crisp 1999 140,000 100,000 142,755 13,000 9,403(8)
Vice President-Finance(9) 1998 140,000 68,000 217,000 12,000 7,893
1997 140,000 68,000 31,318 10,000 7,220
</TABLE>
- --------
(1) On January 31, 2000, Malcolm S. Morris and Stewart Morris, Jr. were elected
to the Board of Directors of the Company. Malcolm S. Morris was also
elected Chairman of the Board and Co-Chief Executive Officer, and Stewart
Morris, Jr. was elected President and Co-Chief Executive Officer of the
Company. Carloss Morris and Stewart Morris, who had served in those
capacities since 1975, were elected advisory directors.
7
<PAGE> 10
(2) Includes matching contributions to the Company's 401(k) plan ($2,322),
director's fees ($1,950) and $9,563, 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 10).
(3) Includes matching contributions to the Company's 401(k) plan ($2,322),
director's fees ($1,950) and $9,224, 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 10).
(4) Includes matching contributions to the Company's 401(k) plan ($2,322),
director's fees ($3,300) and $3,770, 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.
(5) Stewart Morris, Jr. is also President and Chief Executive Officer of
Title and Chairman of the Board of Guaranty.
(6) Includes matching contributions to the Company's 401(k) plan ($2,322),
director's fees ($1,650) and $5,500, 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.
(7) Malcolm S. Morris is also President and Chief Executive Officer of
Guaranty and Chairman of the Board of Title.
(8) Includes matching contributions to the Company's 401(k) plan ($2,322),
director's fees ($1,950) and $4,725, 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.
(9) 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 duly 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, 1999 to each of the
Company's executive officers. All such grants were made on May 24, 1999, under
the terms of the Company's 1999 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 1999 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.
8
<PAGE> 11
OPTION GRANTS IN FISCAL YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------------------------------------------
PERCENT OF
TOTAL
OPTIONS GRANT DATE
OPTIONS GRANTED TO EXERCISE EXPIRATION PRESENT
NAME GRANTED EMPLOYEES PRICE DATE VALUE(1)
- ------------------------------ ---------------- --------------- --------------- --------------- -----------------
(# shares) (%) ($) ($)
<S> <C> <C> <C> <C> <C>
Stewart Morris, Jr............ 20,000 23.1 19.375 5/24/09 170,000
Malcolm S. Morris............. 20,000 23.1 19.375 5/24/09 170,000
Max Crisp..................... 13,000 15.0 19.375 5/24/09 110,500
</TABLE>
- ----------
(1) The grant date present values are calculated under the Model. The Model
is a mathematical formula used to value stock options and is based on
assumptions regarding the stock's historical volatility (34.1%), dividend
rate (0.8%), option term (10 years) and risk-free rate of return (4.7%).
The grant date present value does not reflect any discount with respect
to prohibitions on transfer.
The following table sets forth information concerning each exercise of
stock options during the year ended December 31, 1999 by each of the Company's
executive officers and the value of unexercised options at December 31, 1999.
The Company has not issued any tandem or freestanding stock appreciation rights.
AGGREGATED OPTION EXERCISES IN 1999 AND OPTION VALUES AT DECEMBER 31, 1999
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT DECEMBER 31, IN-THE-MONEY OPTIONS AT
SHARES 1999 DECEMBER 31, 1999
ACQUIRED ON VALUE --------------------------- ----------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------- -------------- ------------- ------------- ------------- ------------- --------------
(# shares) ($) (# shares) (# shares) ($) ($)
<S> <C> <C> <C> <C> <C> <C>
Stewart Morris, Jr........... -- -- 93,806 6,194 163,634 22,066
Malcolm S. Morris............ -- -- 183,806 6,194 949,257 22,066
Max Crisp.................... -- -- 25,000 -- -- --
</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. 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.
9
<PAGE> 12
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 $67,950 and
$57,000 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 1999, the net
death benefits to Carloss Morris and Stewart Morris under the SD policies would
have been $485,842 and $607,000, 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.
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 1999;
however, pursuant to applicable federal income tax regulations, taxable income
attributable to such policies in 1999 of $31,112 and $26,879 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
the five years ended December 31, 1999. The graph assumes that the value of the
investment in the Company's Common Stock and each index was $100 at December 31,
1994 and that all dividends were reinvested.
10
<PAGE> 13
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG THE
COMPANY, RUSSELL 2000 AND RUSSELL 2000 FINANCIAL SERVICES SECTOR
[GRAPH]
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------------------------------------------------------------------
1994 1995 1996 1997 1998 1999
------------- ------------- ------------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Company....................... $ 100.00 $ 141.32 $ 138.00 $ 194.98 $ 392.36 $ 181.83
Russell 2000.................. 100.00 128.44 149.62 183.08 178.41 216.34
Russell 2000 Financial
Services Sector............ 100.00 138.86 178.89 243.34 225.84 212.58
</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 1999, the Compensation
Committee held two meetings at which all members were present.
During 1999, the Company and its subsidiaries paid a total of $65,232 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.
11
<PAGE> 14
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. The
Company also provides life insurance to each of its executive officers.
On January 31, 2000, Malcolm S. Morris and Stewart Morris, Jr. were elected
to the Board of Directors of the Company. Malcolm S. Morris was elected Chairman
of the Board and Co-Chief Executive Officer, and Stewart Morris, Jr. was elected
President and Co-Chief Executive Officer of the Company. Carloss Morris and
Stewart Morris, who had served in those capacities since 1975, were elected
advisory directors.
Base Salary. For 1999, 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. For
2000, the base salary levels for Malcolm S. Morris and Stewart Morris, Jr. will
be increased $5,000 each.
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. A
portion of the annual bonus is guaranteed, and the remainder is a percentage of
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 net 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 1999, the Committee recommended and the Company
adopted the following bonus formula for each of the Co-Chief Executive Officers:
<TABLE>
<CAPTION>
CONSOLIDATED NET PERCENT PAYABLE
INCOME OF GUARANTY AS BONUS
------------------ ---------
<S> <C>
Up to $20 million....................... 1.00%
$20 million to $40 million ............. 0.75%
$40 million to $60 million ............. 0.50%
Over $60 million ....................... 0.25%
</TABLE>
12
<PAGE> 15
The consolidated net income of Guaranty in 1999 was $48.6 million. This would
have produced an annual bonus under the formula for each of the co-chief
executive officers of $392,755. However, Carloss Morris and Stewart Morris
agreed to limit their aggregate 1999 compensation to $500,000 each, which
reduced their bonuses to $365,000 each. For 2000, the bonus formula for Malcolm
S. Morris and Stewart Morris, Jr. is as set forth in the table above, subject to
a minimum bonus of $250,000 each.
Stock Options. Pursuant to the Company's 1999 Stock Option Plan (the "1999
Plan"), in 1999 the Committee granted options to Malcolm S. Morris, Stewart
Morris, Jr. and Max Crisp for 20,000, 20,000 and 13,000 shares, respectively.
See "--Option Grants and Exercises" elsewhere in the Proxy Statement in which
this report is included. The grant date values of such options were taken into
account by the Committee in determining the reasonableness of the recipient
officer's annual compensation package. The purpose of the 1999 Plan is to make
available to the Committee an additional 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 1999 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. For 2000, the Committee has granted options to
Malcolm S. Morris, Stewart Morris, Jr. and Max Crisp for 25,000, 25,000 and
16,500 shares, respectively.
Insurance. Pursuant to agreements dated December 1, 1993, the Company pays
the premiums on individual split-dollar life insurance policies for Carloss
Morris, Stewart Morris and their respective 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 those individuals, 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 declined from $3.32 per diluted share in 1998 to
$1.95 per diluted share in 1999, primarily due to higher mortgage interest rates
in 1999. 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 1999, 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
13
<PAGE> 16
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, 2000, and served in
such capacity for the Company's fiscal year ended December 31, 1999.
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 1999, the Company and its subsidiaries paid a total of $408,230 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 1999, 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
11). Mr. Hudspeth receives no compensation from such law firm.
During 1999, Marietta Maxfield, a daughter of Carloss Morris, was a
full-time attorney for Guaranty and was paid $103,497 for services rendered in
such capacity.
PROPOSALS AND NOMINATIONS FOR NEXT ANNUAL MEETING
Any proposals of holders of Common Stock or Class B Common Stock intended
to be presented at the Annual Meeting of Stockholders of the Company to be held
in 2001 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,
2000, 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 2001 must be
received by the Company no later than February 15, 2001.
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 2001
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.
14
<PAGE> 17
The cost of solicitation of proxies in the accompanying form will be paid
by the Company. The Company has retained Innisfree M&A Incorporated, a proxy
solicitation firm, to assist it in soliciting proxies for the proposals
described in this proxy statement. The Company has agreed to pay Innisfree a fee
for such services, which is not expected to exceed $10,000, plus expenses. In
addition to solicitation by use of the mails, certain officers or employees of
the Company, and of Innisfree, may solicit the return of proxies by telephone,
telegram or personal interview.
By Order of the Board of Directors,
Max Crisp
Secretary
March 23, 2000
15
<PAGE> 18
STEWART INFORMATION SERVICES CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [ ]
<TABLE>
<S> <C> <C> <C> <C>
The Board of Directors recommends a vote FOR:
Election of Directors -- Nominees:
01 - Lloyd Bentsen, III,
02 - Nita B. Hanks, Except nominee(s)
03 - Dr. E. Douglas Hodo, For Withheld For All number(s)
04 - Dr. W. Arthur Porter, All All Except written below
05 - Martin J. Whitman [ ] [ ] [ ] .............
</TABLE>
The undersigned acknowledges receipt of the Notice of
Annual Meeting of Stockholders and of the Proxy Statement.
Dated: ___________, 2000
Signature(s) _____________________________________________
__________________________________________________________
Please sign exactly as your name appears. Joint owners should each
sign personally. Where applicable, indicate your official position
or representation capacity.
0 FOLD AND DETACH HERE 0
YOUR VOTE IS IMPORTANT!
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
<PAGE> 19
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 -- MAY 1, 2000
The undersigned appoints Ken Anderson, Jr. and Tannie L. Pizzitola, Jr.,
and each of them, as proxies, with full power of substitution and revocation,
to vote, as designated on the reverse side hereof, all the Common Stock of
Stewart Information Services Corporation which the undersigned has power to
vote, with all powers which the undersigned would possess if personally
present, at the annual meeting of stockholders thereof to be held on May 1,
2000, or at any adjournment thereof.
Unless otherwise marked, this proxy will be voted FOR the election of the
nominees named.
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
(Continued and to be signed on reverse side.)
