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 sec. 240.14a-12
STEWART INFORMATION SERVICES CORPORATION
--------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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
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[ ] Fee paid previously with preliminary materials.
[ ] 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
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STEWART INFORMATION SERVICES CORPORATION
1980 POST OAK BOULEVARD
HOUSTON, TEXAS 77056
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 30, 2004
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, 2004, at 8:30 A.M. in the First
Floor Conference Room of Three Post Oak Central, 1990 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 2, 2004 will be entitled to vote at
the meeting.
By Order of the Board of Directors,
MAX CRISP
Secretary
March 29, 2004
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.
STEWART INFORMATION SERVICES CORPORATION
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 30, 2004
This Proxy Statement is furnished to the stockholders of Stewart
Information Services Corporation (the "Company"), 1980 Post Oak Boulevard, Suite
800, 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, 2004, at 8:30
A.M. in the First Floor Conference Room of Three Post Oak Central, 1990 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 29, 2004 to stockholders of record
at the close of business on March 2, 2004 (the "Record Date").
At the close of business on the Record Date, there were outstanding and
entitled to vote 16,548,821 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.
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:
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER TITLE OF CLASS OWNERSHIP OF CLASS
------------------------------------ -------------- ---------- --------
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
Artisan Partners Limited Partnership..... Common Stock 2,382,094(1) 14.4
1000 North Water Street, #1770
Milwaukee, Wisconsin 53202
Barclays Global Investors, N.A. ......... Common Stock 1,104,470(2) 6.7
45 Fremont Street
San Francisco, California 94105
Dimensional Fund Advisors, Inc. ......... Common Stock 1,104,900(3) 6.7
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
---------------
(1) Artisan Partners Limited Partnership reported shared voting and dispositive
power with respect to all of such shares in its most recent report on
Schedule 13G filed January 23, 2004. Artisan Partners is an investment
advisor registered under section 203 of the Investment Advisors Act of 1940.
The shares reported have been acquired on behalf of discretionary clients of
Artisan Partners. Persons other than Artisan Partners are entitled to
receive all dividends from and proceeds from the sale of the shares.
(2) Barclays Global Investors, N.A. reported sole voting and dispositive power
with respect to all of such shares in its report on Schedule 13G filed
February 17, 2004.
(3) Dimensional Fund Advisors, Inc. reported sole voting and dispositive power
with respect to all of such shares in its most recent report on Schedule
13G/A filed February 6, 2004. Dimensional is an investment advisor
registered under Section 203 of the Investment Advisors Act of 1940 and
furnishes advice to four investment companies registered under the
Investment Company Act of 1940. Dimensional also serves as investment
manager to certain other commingled group trusts and separate accounts. All
securities reported in this schedule are owned by these investment
companies, trusts and accounts. Dimensional disclaims beneficial ownership
of such securities.
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 or voluntary or involuntary disposition of
the shares of Class B Common Stock and upon certain other specified conditions.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Each director and certain officers of the Company are required to report to
the Securities and Exchange Commission, by a specified date, his or her
transactions related to Common Stock or Class B Common Stock. Based solely on a
review of the copies of reports furnished to the Company or written
representations that no other reports were required, the Company believes that
during the 2003 fiscal year, all filing requirements applicable to its executive
officers, directors and greater than 10% beneficial owners were met.
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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:
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
NAME TITLE OF CLASS OWNERSHIP(1) OF CLASS
---- -------------- ------------ --------
Malcolm S. Morris............................... Common Stock 149,738(2) 0.9
Class B Common Stock 525,006 50.0
Stewart Morris, Jr. ............................ Common Stock 169,000(3) 1.0
Class B Common Stock 525,006 50.0
Lloyd Bentsen, III.............................. Common Stock 7,247 *
Max Crisp....................................... Common Stock 41,000(4) *
Nita B. Hanks................................... Common Stock 1,566(5) *
Paul W. Hobby................................... Common Stock 4,247 *
Dr. E. Douglas Hodo............................. Common Stock 4,247 *
Gov. John P. LaWare............................. Common Stock 5,247 *
Dr. W. Arthur Porter............................ Common Stock 4,247 *
All officers, directors and nominees as a group
(9 persons)................................... Common Stock 386,539 2.3
Class B Common Stock 1,050,012 100.0
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* Less than 1%.
(1) Unless otherwise indicated, the beneficial owner has sole voting and
investment power.
(2) Includes 129,578 shares subject to stock options (see "Executive
Compensation -- Option Grants and Exercises" at page 9).
(3) Consists of 169,000 shares subject to stock options (see "Executive
Compensation -- Option Grants and Exercises" at page 9).
(4) Includes 38,000 shares subject to stock options (see "Executive
Compensation -- Option Grants and Exercises" at page 9).
(5) Includes 1,200 shares subject to stock options.
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.
COMMON STOCK NOMINEES
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.
NOMINEE, AGE AND POSITION WITH THE COMPANY DIRECTOR SINCE
------------------------------------------ --------------
Lloyd Bentsen, III, 59, Director............................ 1995
Nita B. Hanks, 50, Director................................. 1990
Dr. E. Douglas Hodo, 69, Director........................... 1988
Gov. John P. LaWare, 76, Director........................... 2001
Dr. W. Arthur Porter, 62, Director.......................... 1993
3
Each of such persons was elected to the Company's Board of Directors by the
holders of Common Stock at the annual meeting of stockholders held in 2003. 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 above, unless
otherwise specified.
Mr. Bentsen is a general partner and co-founder of Triad Ventures, Ltd., 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 Employee Services 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 also serves as a director of U.S. Global Investors Funds and
chairman of its audit committee.
Gov. LaWare served on the Board of Governors of the Federal Reserve System
from 1988 until 1995. A Harvard graduate, he began his banking career in 1953 at
Chemical Bank in New York. During his 25 years with Chemical Bank, Gov. LaWare
spent several years as a senior lending officer before organizing its holding
company operations and marketing divisions. He also served as Chairman, Chief
Executive Officer and a director of Shawmut Corp., a regional bank holding
company, from 1980 to 1988. He served as Chairman of Shawmut National Corp., a
super-regional bank holding company, in 1988.
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. 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.
CLASS B COMMON STOCK NOMINEES
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.
NOMINEE, AGE AND POSITION WITH THE COMPANY DIRECTOR SINCE
------------------------------------------ --------------
Max Crisp, 69, Executive Vice President and Chief Financial
Officer, Secretary, Treasurer and Director................ 1970
Paul W. Hobby, 43, Director................................. 1989
Malcolm S. Morris, 57, Co-Chief Executive Officer and
Chairman of the Board of Directors........................ 2000
Stewart Morris, Jr., 55, Co-Chief Executive Officer,
President and Director.................................... 2000
Each of such persons was elected by the holders of the Class B Common Stock
at the annual meeting of stockholders held in 2003.
Mr. Crisp has served as Vice President-Finance (Executive Vice President
commencing in 2002), Treasurer and Secretary of the Company and as its Chief
Financial Officer for more than the past five years.
4
Mr. Crisp is also Secretary, Treasurer and Vice President-Finance of Guaranty
and Stewart Title Company ("Title"), a subsidiary of Guaranty.
Mr. Hobby serves as Chairman of Genesis Park GP Company LLC. Mr. Hobby
served as Chairman of Hobby Media Services, Inc., a media software company, from
1995 to 2002 and as Chairman of Columbine JDS Systems from 1995 to 1997. In 1999
and 2000, Mr. Hobby served as a Consultant and Interim Director of CinemaStar
Luxury Theaters, Inc. Mr. Hobby also served as Vice President of H & C
Communications, Inc. until December 31, 1996. In 1999 and 2001, Mr. Hobby served
as a director of Coastal Bancorp, Inc. and of Aronex Pharmaceuticals, Inc. Mr.
Hobby also serves as a director of EGL, Inc., a transportation, supply chain
management and information services company, and Southwest Bancorporation of
Texas, 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 Title.
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. Acting together they
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.
CORPORATE GOVERNANCE
BOARD OF DIRECTORS
The Company is managed by a Board of Directors comprised of nine persons,
five of whom are elected by the holders of the Company's Common Stock and four
are elected by the holders of the Company's Class B Common Stock. A majority of
the members of the Board of Directors are "independent" within the meaning of
the listing standards of the New York Stock Exchange. Those directors are: Lloyd
Bentsen, III, Paul W. Hobby, Dr. E. Douglas Hodo, Gov. John P. LaWare and Dr. W.
Arthur Porter. The Board of Directors has determined that none of such directors
have any material relationship with the Company or its management that would
impair the independence of his judgment in carrying out his responsibilities to
the Company. For this purpose, the Board of Directors considers any transaction,
or series of similar transactions, or any currently proposed transaction, or
series of similar transactions, between the Company or any of its subsidiaries
and a director to be material if the amount involved exceeds $60,000 in any of
the Company's last three fiscal years.
All directors of the Company hold office until the next annual meeting of
stockholders or until their respective successors are elected and qualified. 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. Action by the Board of Directors
requires the affirmative vote of at least six members.
During 2003, the Board of Directors held six meetings and executed one
consent in lieu of a meeting. Each director attended each of such meetings,
except that one director did not attend one meeting. The Board of Directors has
an Executive Committee, an Audit Committee, a Compensation Committee and a
Nominating and Corporate Governance Committee. See "-- Committees of the Board
of Directors" at page 6.
The Board of Directors has adopted the Stewart Code of Business Conduct and
Ethics and Guidelines on Corporate Governance and a Code of Ethics for Chief
Executive Officers, Principal Financial Officer and Principal Accounting
Officer, each of which is available on the Company's website at www.stewart.com.
The Company's Guidelines on Corporate Governance and the charters of the Audit
Committee, Nominating and
5
Corporate Governance Committee and Compensation Committee require an annual
self-evaluation of the performance of the Board of Directors and of such
committees, including the adequacy of such Guidelines and charters.
The Company's Guidelines on Corporate Governance strongly encourage
attendance in person by directors at the Company's annual meetings of
stockholders. All of the Company's incumbent directors attended the Company's
annual meeting of stockholders held in 2003.
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 four 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 and committees on which they serve as non-voting members. 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.
COMMITTEES OF THE BOARD OF DIRECTORS
Executive Committee. The Executive Committee may exercise all of the
powers of the directors, except those specifically reserved to the Board of
Directors by law. Malcolm S. Morris, Stewart Morris, Jr. and Max Crisp serve as
the members of the Executive Committee. During 2003, the Executive Committee
held six meetings at which all members were present and executed 29 consents in
lieu of meetings.
Audit 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 operates under a written charter adopted
by the Board of Directors of the Company, a copy of which is attached as Annex A
and is also available on the Company's website. The Audit Committee is comprised
of Dr. E. Douglas Hodo (Chair), Lloyd Bentsen, III, and Paul W. Hobby. During
2003, the Audit Committee held five meetings, at which all members were present
except that one director did not attend one meeting. Each of the members of the
Audit Committee is independent as defined under the listing standards of the New
York Stock Exchange and the Securities Exchange Act of 1934, and the Board of
Directors has determined that Dr. Hodo is an "audit committee financial expert"
as defined in the rules of the Securities and Exchange Commission. No member of
the Company's Audit Committee serves on the audit committees of more than three
public companies. The Audit Committee has the authority to engage independent
counsel and other advisers, as it determines necessary to carry out its duties.
The Audit Committee has established procedures for the receipt, retention,
and treatment of complaints received by the Company regarding accounting,
internal accounting controls, or auditing matters and the confidential,
anonymous submission by employees of the Company of concerns regarding
questionable accounting or auditing matters. Persons wishing to communicate with
the Company's Audit Committee may do so by writing in care of Chairman, Audit
Committee, Stewart Information Services Corporation, 1980 Post Oak Boulevard,
Suite 800, Houston, Texas 77056.
Nominating and Corporate Governance Committee. The Nominating and
Corporate Governance Committee is comprised of Lloyd Bentsen III (Chair), Gov.
John P. LaWare and Dr. W. Arthur Porter, each of whom is "independent" as
defined in the listing standards of the New York Stock Exchange. It is the duty
of the Nominating and Corporate Governance Committee to (i) recommend to the
Board of Directors of the Company nominations of persons for election to the
Board of Directors of the Company by the holders of Common Stock, (ii) create
procedures for identification of nominees, (iii) consider and recommend to the
Board of Directors criteria for membership and (iv) receive and consider
nominations submitted by stockholders of the Company.
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The Company's Guidelines on Corporate Governance require that a majority of
the nine members of the Company's Board of Directors be "independent" as defined
from time to time in the rules of the New York Stock Exchange. Those Guidelines
also provide that the Nominating and Corporate Governance Committee shall be
guided by the following principles:
- Each Director should be an individual of the highest character and
integrity and have an inquiring mind, experience at a strategy or
policy-setting level, or otherwise possess a high level of specialized
expertise, and the ability to work well with others. Special expertise or
experience that will augment the Board's expertise is particularly
desirable.
- Each Director should have sufficient time available to devote to the
affairs of the Company in order to carry out the responsibilities of a
Director and, absent special circumstances, no Director should be
simultaneously serving on the boards of directors of more than three
other entities, excluding non-public companies such as those related to
personal or family business and charitable, educational or other
non-profit entities. Directors are not qualified for service on the Board
unless they are able to make a commitment to prepare for, and attend,
meetings of the Board and its committees on a regular basis.
- Each independent Director should be free of any significant conflict of
interest that would interfere with the independence and proper
performance of the responsibilities of a Director.
- Directors to be nominated for election by the holders of the Company's
Common Stock should not be chosen as representatives of a constituent
group or organization; each should utilize his or her unique experience
and background to represent and act in the best interests of all
stockholders as a group.
Directors should have an equity ownership in Stewart Information Services
Corporation. Toward that end, each non-employee Director shall be paid a portion
of his or her Director's fees in Stewart Information Services Corporation Common
Stock pursuant to the Company's 1996 Directors' Stock Plan, or any successor
plan, but only to the extent permitted by law and stock exchange rules.
The Nominating and Corporate Governance Committee, pursuant to the
Company's By-Laws, will accept and consider nominations by stockholders of
persons for election by the holders of Common Stock to the Board of Directors of
the Company. To be considered for nomination at the Annual Meeting of
Stockholders of the Company to be held in 2005, stockholder nominations must be
received by the Company no later than February 15, 2005. Persons wishing to
submit the names of candidates for consideration by the Nominating and Corporate
Governance Committee may write to the Nominating and Corporate Governance
Committee in care of Corporate Secretary, Stewart Information Services
Corporation, 1980 Post Oak Boulevard, Suite 800, Houston, Texas 77056, providing
the candidate's name, credentials, contact information and consent to be
considered as a candidate. The person proposing the candidate should include his
or her contact information and a statement of his or her share ownership,
including the number of shares and the period of time the shares have been held.
The Nominating and Corporate Governance Committee (including its
predecessor Nominating Committee) held three meetings during 2003, at which all
members were present. The charter of the Company's Nominating and Corporate
Governance Committee is available on the Company's website at www.stewart.com.
Compensation Committee. It is the duty of the Compensation Committee to
approve the compensation of the executive officers. The Compensation Committee
is comprised of Paul W. Hobby (Chair), Gov. John P. LaWare and Dr. W. Arthur
Porter. During 2003, the Compensation Committee held two meetings at which both
members then serving were present.
Each member of the Company's Audit Committee, Nominating and Corporate
Governance Committee and Compensation Committee has been determined by the Board
of Directors to be "independent" as that term is defined in the rules of the New
York Stock Exchange.
7
EXECUTIVE SESSIONS OF NON-MANAGEMENT DIRECTORS
The non-management directors of the Company, all of whom are independent,
meet at regularly scheduled executive sessions without management. The Chairman
of the Company's Audit Committee serves as the presiding director at those
executive sessions. Persons wishing to communicate with the Company's
non-management directors may do so by writing in care of Chairman, Audit
Committee, Stewart Information Services Corporation, 1980 Post Oak Boulevard,
Suite 800, Houston, Texas 77056.
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,
2003.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION (AWARDS)
----------------------------------------- -------------
MINIMUM VARIABLE STOCK OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) BONUS ($) (# SHARES) COMPENSATION ($)
--------------------------- ---- ---------- --------- --------- ------------- ----------------
Stewart Morris, Jr. ...... 2003 150,000 250,000 559,450 25,000 9,544(1)
President and 2002 150,000 250,000 436,575 25,000 8,669
Co-Chief Executive 2001 135,000 250,000 250,660 25,000 8,157
Officer
Malcolm S. Morris......... 2003 150,000 250,000 559,450 25,000 12,003(2)
Chairman of the Board and 2002 150,000 250,000 436,575 25,000 10,922
Co-Chief Executive 2001 135,000 250,000 250,660 25,000 10,369
Officer
Max Crisp................. 2003 155,000 135,000 428,588 16,500 120,021(3)
Executive Vice President 2002 150,000 135,000 242,431 16,500 119,625
and Chief Financial 2001 144,000 126,000 239,792 16,500 123,366
Officer, Secretary and
Treasurer
---------------
(1) Consists of matching contributions to the Company's 401(k) plan ($2,640),
director's fees ($1,950) and $4,954, 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.
(2) Consists of matching contributions to the Company's 401(k) plan ($2,640),
director's fees ($1,950) and $7,413, 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.
(3) Includes $110,375 paid under a deferred compensation agreement. See
"-- Deferred Compensation Agreements" at page 11. Also includes matching
contributions to the Company's 401(k) plan ($2,640), director's fees
($1,950) and $5,056, representing the portion of insurance premiums paid by
the Company with respect to term life insurance plus the dollar value of the
benefit of the remainder of life insurance premiums paid by the Company.
Each executive officer of the Company holds office until the regular
meeting of directors following the annual meeting of stockholders or until his
successor is duly elected and qualified.
8
OPTION GRANTS AND EXERCISES
The following table sets forth information concerning individual grants of
stock options made during the year ended December 31, 2003 to each of the
Company's executive officers. All such grants were made on January 23, 2003,
under the terms of the Company's 1999 Executive Stock Option Plan. The
hypothetical values on the date of grant of stock options granted in 2003 shown
below are presented pursuant to the rules of the Securities and Exchange
Commission and are calculated under the modified Black-Scholes model (the
"Model") for pricing options. This hypothetical value of options trading on the
stock markets bears little relationship to the compensation cost to the Company
or potential gain realized by an optionee. The actual amount, if any, realized
upon the exercise of stock options will depend upon the market price of the
Company's Common Stock relative to the exercise price per share of Common Stock
issuable under the stock option at the time the stock options are exercised.
There is no assurance that the hypothetical present values of stock options
reflected in this table actually will be realized.
OPTION GRANTS IN FISCAL YEAR ENDED DECEMBER 31, 2003
INDIVIDUAL GRANTS
------------------------------------------------------------------
PERCENT OF
OPTIONS TOTAL OPTIONS GRANT DATE
GRANTED GRANTED TO EXERCISE EXPIRATION PRESENT
NAME (# SHARES) EMPLOYEES (%) PRICE ($) DATE VALUE(1) ($)
---- ---------- ------------- --------- ---------- ------------
Stewart Morris, Jr. ................ 25,000 27.9 21.87 1/23/13 290,500
Malcolm S. Morris................... 25,000 27.9 21.87 1/23/13 290,500
Max Crisp........................... 16,500 18.4 21.87 1/23/13 191,730
---------------
(1) The grant date present values are calculated under the Model. The Model is a
mathematical formula used to value stock options and is based on assumptions
regarding the stock's volatility (33.76%), dividend rate (0%), option term
(10 years) and a risk-free interest rate (4.25%).
The following table sets forth information concerning each exercise of
stock options during the year ended December 31, 2003 by each of the Company's
executive officers and the value of unexercised options at December 31, 2003.
The Company has not issued any tandem or freestanding stock appreciation rights.
AGGREGATED OPTION EXERCISES IN 2003 AND OPTION VALUES AT DECEMBER 31, 2003
NUMBER OF UNEXERCISED
OPTIONS AT
DECEMBER 31, 2003
SHARES --------------------------- VALUE OF UNEXERCISED IN-THE-MONEY
ACQUIRED ON OPTIONS AT DECEMBER 31, 2003
EXERCISE VALUE EXERCISABLE UNEXERCISABLE -----------------------------------
NAME (# SHARES) REALIZED ($) (# SHARES) (# SHARES) EXERCISABLE ($) UNEXERCISABLE ($)
---- ----------- ------------ ----------- ------------- --------------- -----------------
Stewart Morris, Jr. .... 56,000 918,168 144,000 -- 3,151,480 --
Malcolm S. Morris....... 95,422 1,567,064 104,578 -- 2,421,144 --
Max Crisp............... 53,000 482,135 21,500 -- 410,920 --
9
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information about our about our compensation
plans under which equity securities are authorized for issuance, as of December
31, 2003.
NUMBER OF
SECURITIES TO BE NUMBER OF
ISSUED UPON WEIGHTED AVERAGE SECURITIES
EXERCISE OF PRICE OF REMAINING AVAILABLE
OUTSTANDING OUTSTANDING FOR FUTURE ISSUANCE
OPTIONS, WARRANTS OPTIONS, WARRANTS UNDER EQUITY
PLAN CATEGORY AND RIGHTS AND RIGHTS COMPENSATION PLANS
------------- ----------------- ----------------- -------------------
Equity compensation plans approved by
security holders....................... 342,978 18.75 102,068
Equity compensation plans not approved by
security holders....................... 426,197(1)
------- ---------
Totals................................... 342,978 18.75 1,454,265
======= =========
---------------
(1) The Company has a Service Award Program under which shares may be granted to
employees who achieve specified length of service milestones. No specific
number of shares have been reserved for issuance under this program.
COMPENSATION OF DIRECTORS
Directors of the Company, other than employees of the Company, receive fees
in accordance with the following table:
AUDIT AUDIT OTHER OTHER
ALL COMMITTEE COMMITTEE COMMITTEE COMMITTEE
TYPE OF COMPENSATION DIRECTORS CHAIRMAN MEMBERS CHAIRMEN MEMBERS
-------------------- --------- --------- --------- --------- ---------
ANNUAL RETAINER:
Cash............................. $12,000 $ 10,000(1) $2,000
Stock(2)......................... 10,000
PER MEETING FEES:
ATTENDANCE IN PERSON:
Board meeting(3).............. 3,000
Committee meeting............. $2,000 $1,500
Out-of-state travel(4)........ 1,000
ATTENDANCE BY TELEPHONE:
Board meeting................. 2,000
Committee meeting............. 2,000 1,500
---------------
(1) Includes $5,000 per year for service as the presiding director of executive
sessions of the non-management members of the Company's Board of Directors.
(2) The annual stock award to directors is valued based on the market value per
share of Common Stock on the date of the award.
(3) The fee for attendance at the Company's biannual Board retreat is $4,000.
(4) Plus expenses incurred.
Directors of the Company who are employees receive directors' fees of $150
per meeting. The Company also reimburses each director for the cost of an annual
medical examination. In May 2003, Mrs. Hanks was granted, in her capacity as
Director of Employee Services for the Company, a 10-year option for 1,200 shares
of the Company's Common Stock at an exercise price of $26.10 per share, which
was the market value of a share of Common Stock on the option grant date.
10
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 federal income taxes thereon, result in a net annual payment of
$66,667 to Max Crisp and $133,333 to each of Malcolm S. Morris and Stewart
Morris, Jr. For purposes of such agreements, each Beneficiary is deemed to be
subject to federal income taxes at the highest marginal rate applicable to
individuals. Such benefits are fully vested and are forfeited only if a
Beneficiary's employment with the Company is terminated by reason of fraud,
dishonesty, embezzlement or theft. Any death or income benefits provided to a
Beneficiary under certain insurance policies currently maintained by the Company
will reduce payments due to such Beneficiary under his Deferred Compensation
Agreement.
11
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, 2003. The graph assumes that the value of the
investment in the Company's Common Stock and each index was $100 at December 31,
1998 and that all dividends were reinvested.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG THE COMPANY,
RUSSELL 2000 AND RUSSELL 2000 FINANCIAL SERVICES SECTOR
(PERFORMANCE GRAPH)
--------------------------------------------------------------------------------
1998 1999 2000 2001 2002 2003
--------------------------------------------------------------------------------
Company $100.00 $46.34 $77.24 $68.75 $74.46 $142.76
Russell 2000 100.00 121.26 117.59 120.52 95.83 141.15
Russell 2000
Financial Services
Sector 100.00 94.13 113.94 131.76 136.33 190.65
12
COMPENSATION COMMITTEE REPORT
To the Board of Directors of
Stewart Information Services Corporation:
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's operating subsidiaries during each year as it deems
necessary. The objective of the Company is to provide executive officers of the
Company, who are Malcolm S. Morris, Stewart Morris, Jr. and Max Crisp, 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. As a holding company, the
Company has no payroll, and the annual salaries and cash bonuses of its
executive officers are paid by a subsidiary of the Company.
Base Salary. For 2003, the base salary level, not including the minimum
bonuses described below, for each of the Co-Chief Executive Officers of the
Company increased to $150,000 from $135,000. For 2003, the base salary level of
the Company's third executive officer, Mr. Crisp, increased to $155,000 from
$150,000. Base salary amounts do not include the minimum bonuses described
below. Historically, the base salaries of the Company's Co-Chief Executive
Officers have remained relatively stable from year to year. Since the Company,
as a holding company, has no direct payroll, the base salaries of the Company's
executive officers are paid at the subsidiary level and 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 income before taxes of
Guaranty, including a minimum bonus of $250,000. The Committee believes that the
consolidated income before taxes of Guaranty, and the effect thereof on the
Company's book value per share, are important determinants over time of the
value of the Company's Common Stock. For 2003, the Committee recommended and the
Company adopted the following bonus formula for each of the Co-Chief Executive
Officers:
INCREMENTAL PERCENT
GUARANTY CONSOLIDATED INCOME BEFORE TAXES PAYABLE AS BONUS
----------------------------------------- -------------------
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%
For 2003, the Committee recommended and the Company adopted the following
bonus formula for Mr. Crisp:
INCREMENTAL PERCENT
GUARANTY CONSOLIDATED INCOME BEFORE TAXES PAYABLE AS BONUS
----------------------------------------- -------------------
Up to $50 million........................................... 0.50%
$50 million to $75 million.................................. 0.40%
$75 million to $100 million................................. 0.30%
Over $100 million........................................... 0.20%
Mr. Crisp's minimum bonus is $135,000 and his bonus may not exceed 75% of the
aggregate base salary and bonus earned by a Chief Executive Officer.
The consolidated income before taxes of Guaranty in 2003 was $203.8
million. Accordingly, each of the Co-Chief Executive Officers received a bonus
of $809,450 for 2003, and Mr. Crisp received a bonus of $563,588 for 2003.
13
Stock Options. Pursuant to the Company's 1999 Stock Option Plan (the "1999
Plan"), in 2003 the Committee granted options to Malcolm S. Morris, Stewart
Morris, Jr. and Max Crisp for 25,000, 25,000 and 16,500 shares, respectively.
See "-- Option Grants and Exercises" elsewhere in the Proxy Statement in which
this report is included. 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. Each of the
executive officers is eligible for grants of options at a purchase price not
less than the fair market value of the shares on the date of grant.
The Company's net earnings increased from $5.30 per diluted share in 2002
to $6.88 per diluted share in 2003. 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, as well as
the other independent members of the Company's Board of Directors, 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 2003, the Committee gave particular
consideration to the efforts of the Co-Chief Executive Officers in further
developing the Company's automation programs, entering new markets through
acquisitions, increasing book value per share and pursuing opportunities in
international markets.
Members of the Compensation Committee
Paul W. Hobby
Dr. W. Arthur Porter
Gov. John P. LaWare
14
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, 2004, and served in
such capacity for the Company's fiscal year ended December 31, 2003.
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.
AUDIT AND OTHER FEES
The following table sets forth the aggregate fees billed for professional
services rendered by KPMG LLP for each of the Company's last two fiscal years:
YEAR ENDED DECEMBER 31,
-----------------------
2003 2002
---------- ----------
Audit Fees(1)............................................... $534,300 $506,000
Audit-Related Fees(2)....................................... 174,700 111,100
Tax Fees(3)................................................. 99,813 88,000
All Other Fees(4)........................................... 1,350 --
---------------
(1) Fees for the audit of the Company's annual financial statements, review of
financial statements included in the Company's Quarterly Reports on Form
10-Q, and services that are normally provided by KPMG LLP in connection with
statutory and regulatory filings or engagements for the fiscal years shown.
Less than 50 percent of the hours expended on KPMG LLP's engagement to audit
the Company's financial statements for 2003 were attributed to work
performed by persons other than KPMG LLP's full-time, permanent employees.
(2) Fees for assurance and related services by KPMG LLP that are reasonably
related to the performance of the audit or review of the Company's financial
statements and that are not reported under "Audit Fees". Primarily
represents fees for separate statutory audits of minor subsidiaries and
affiliates. Also includes fees for consultation on accounting questions.
(3) Fees for professional services rendered by KPMG LLP primarily for tax
compliance, tax advice and tax planning.
(4) Fees not included under other captions. Consists of subscription for on-line
accounting references.
The Audit Committee must preapprove all auditing services and permitted
non-audit services (including the fees and terms thereof) to be performed for
the Company by its independent auditor. The Audit Committee may form and
delegate authority to subcommittees consisting of one or more members when
appropriate, including the authority to grant preapprovals of audit and
permitted non-audit services, provided that decisions of such subcommittee to
grant preapprovals shall be presented to the full Audit Committee at its next
scheduled meeting. Since May 6, 2003, the effective date of the Securities and
Exchange Commissions rules requiring preapproval of audit and non-audit
services, 100% of the services identified in the preceding table were approved
by the Audit Committee.
15
REPORT OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
The Audit Committee of the Board of Directors of the Company serves as the
representative of the Board for the general oversight of the Company's financial
accounting and reporting process, system of internal control, audit process, and
process for monitoring compliance with laws and regulations and the Company's
standards for Corporate Compliance. The Company's management has primary
responsibility for preparing the consolidated financial statements and for the
Company's financial reporting process. The Company's independent accountants,
KPMG LLP, are responsible for expressing an opinion on the conformity of the
Company's audited consolidated financial statements to accounting principles
generally accepted in the United States of America.
In this context, the Audit Committee hereby reports as follows:
1. The Audit Committee has reviewed and discussed the audited
financial statements with the Company's management.
2. The Audit Committee has discussed with the independent accountants
the matters required to be discussed by SAS No. 61 (Codification of
Statements on Auditing Standards, AU sec.380).
3. The Audit Committee has received the written disclosures and
letters from the independent accountants required by Independence Standards
Board Standard No. 1 (Independent Discussions with Audit Committees) and
has discussed with the independent accountants the independent accountants'
independence.
4. Based on the review and discussion referred to in paragraphs (1)
through (3) above, the Audit Committee has approved that the audited
financial statements be included in the Company's Annual Report on Form
10-K for the year ended December 31, 2003, for filing with the Securities
and Exchange Commission.
Each of the members of the Audit Committee is independent as defined under
the listing standards of the New York Stock Exchange.
The undersigned members of the Audit Committee have submitted this report:
Dr. E. Douglas Hodo
Lloyd Bentsen, III
Paul W. Hobby
Dated: March 12, 2004
16
CERTAIN TRANSACTIONS
Stewart Morris is the father of Stewart Morris, Jr. and Carloss Morris is
the father of Malcolm S. Morris. Stewart Morris and Carloss Morris are brothers.
During the year ended December 31, 2003, Stewart Morris served as a director of
Title and Guaranty and as chairman of Title's executive committee, and Carloss
Morris served as a director of Title and Guaranty and as chairman of Guaranty's
executive committee. Aggregate salaries, bonuses and other compensation for 2003
for Stewart Morris and Carloss Morris were $471,001 and $443,440, respectively.
During 2003, the Company and its subsidiaries paid a total of $341,239 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 2003, Marietta Maxfield, a sister of Malcolm S. Morris, was a
full-time attorney for Guaranty and was paid $120,900 for services rendered in
such capacity.
PROPOSALS 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 2005 must be received by the Company at its principal executive offices, 1980
Post Oak Boulevard, Suite 800, Houston, Texas 77056, no later than November 24,
2004, in order to be included in the proxy statement and form of proxy relating
to that meeting.
17
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 2005
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 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 $6,500 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 29, 2004
18
ANNEX A
STEWART INFORMATION SERVICES CORPORATION
CHARTER OF THE
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
I. PURPOSE
The Audit Committee is appointed by the Board to assist the Board in
monitoring (1) the integrity of the financial statements of the Company, (2) the
independent auditor's qualifications and independence, (3) the performance of
the Company's internal audit function and independent auditors, and (4) the
compliance by the Company with legal and regulatory requirements.
The Audit Committee shall prepare any reports of the Audit Committee
required by the rules of the Securities and Exchange Commission (the
"Commission") to be included in the Company's annual proxy statement.
II. COMMITTEE MEMBERSHIP
The Audit Committee shall consist of no fewer than three members. The
members of the Audit Committee shall meet the independence and experience
requirements of the New York Stock Exchange, Section 10A(m)(3) of the Securities
Exchange Act of 1934 (the "Exchange Act") and the rules and regulations of the
Commission. At least one member of the Audit Committee shall be an "audit
committee financial expert" as defined by the Commission. Audit Committee
members shall not simultaneously serve on the audit committees of more than two
other public companies.
The members of the Audit Committee shall be appointed by the Board on the
recommendation of the Nominating and Corporate Governance Committee. Audit
Committee members may be replaced by the Board.
III. MEETINGS
The Audit Committee shall meet as often as it determines, but not less
frequently than quarterly. The Audit Committee shall meet periodically with
management, the internal auditors and the independent auditor in separate
executive sessions. The Audit Committee may request any officer or employee of
the Company or the Company's outside counsel or independent auditor to attend a
meeting of the Committee or to meet with any members of, or consultants to, the
Committee.
IV. COMMITTEE AUTHORITY AND RESPONSIBILITIES
The Audit Committee shall have the sole authority to appoint or replace the
independent auditor (subject, if applicable, to shareholder ratification). The
Audit Committee shall be directly responsible for the compensation and oversight
of the work of the independent auditor (including resolution of disagreements
between management and the independent auditor regarding financial reporting)
for the purpose of preparing or issuing an audit report or related work. The
independent auditor shall report directly to the Audit Committee.
The Audit Committee shall preapprove all auditing services and permitted
non-audit services (including the fees and terms thereof) to be performed for
the Company by its independent auditor, subject to the de minimus exceptions for
non-audit services described in Section 10A(i)(1)(B) of the Exchange Act which
are approved by the Audit Committee prior to the completion of the audit. The
Audit Committee may form and delegate authority to subcommittees consisting of
one or more members when appropriate, including the authority to grant
preapprovals of audit and permitted non-audit services, provided that decisions
of such subcommittee to grant preapprovals shall be presented to the full Audit
Committee at its next scheduled meeting.
A-1
The Audit Committee shall have the authority, to the extent it deems
necessary or appropriate, to retain independent legal, accounting or other
advisors. The Company shall provide for appropriate funding, as determined by
the Audit Committee, for payment of compensation to the independent auditor for
the purpose of rendering or issuing an audit report and to any advisors employed
by the Audit Committee.
The Audit Committee shall make regular reports to the Board. The Audit
Committee shall review and reassess the adequacy of this Charter annually and
recommend any proposed changes to the Board for approval. The Audit Committee
shall annually review the Audit Committee's own performance.
The Audit Committee, to the extent it deems necessary or appropriate,
shall:
FINANCIAL STATEMENT AND DISCLOSURE MATTERS
1. Review and discuss with management and the independent auditor the
annual audited financial statements, including disclosures made in management's
discussion and analysis, and recommend to the Board whether the audited
financial statements should be included in the Company's Form 10-K.
2. Review and discuss with management and the independent auditor the
Company's quarterly financial statements prior to the filing of its Form 10-Q,
including the results of the independent auditor's review of the quarterly
financial statements.
3. Discuss with management and the independent auditor significant
financial reporting issues and judgments made in connection with the preparation
of the Company's financial statements, including any significant changes in the
Company's selection or application of accounting principles, any major issues as
to the adequacy of the Company's internal controls and any special steps adopted
in light of material control deficiencies.
4. Review and discuss quarterly reports from the independent auditors on:
(a) All critical accounting policies and practices to be used.
(b) All alternative treatments of financial information within
generally accepted accounting principles that have been discussed with
management, ramifications of the use of such alternative disclosures and
treatments, and the treatment preferred by the independent auditor.
(c) Other material written communications between the independent
auditor and management, such as any management letter or schedule of
unadjusted differences.
5. Discuss with management the Company's earnings press releases, as well
as financial information and earnings guidance provided to analysts and rating
agencies. Such discussion may be done generally (consisting of discussing the
types of information to be disclosed and the types of presentations to be made).
6. Discuss with management and the independent auditor the effect of
regulatory and accounting initiatives as well as off-balance sheet structures on
the Company's financial statements.
7. Discuss with management the Company's major financial risk exposures and
the steps management has taken to monitor and control such exposures, including
the Company's risk assessment and risk management policies.
8. Discuss with the independent auditor the matters required to be
discussed by Statement on Auditing Standards No. 61 relating to the conduct of
the audit, including any problems or difficulties encountered in the course of
the audit work, any restrictions on the scope of activities or access to
requested information, and any significant disagreements with management and
management's response.
9. Review disclosures made to the Audit Committee by the Company's CEO and
CFO during their certification process for the Form 10-K and Form 10-Q about any
significant deficiencies in the design or operation of internal controls or
material weaknesses therein and any fraud involving management or other
employees who have a significant role in the Company's internal controls.
A-2
OVERSIGHT OF THE COMPANY'S RELATIONSHIP WITH THE INDEPENDENT AUDITOR
10. Review and evaluate the lead partner of the independent auditor team.
11. Obtain and review a report from the independent auditor at least
annually regarding (a) the independent auditor's internal quality-control
procedures, (b) any material issues raised by the most recent internal
quality-control review, or peer review, of the firm, by any inquiry or
investigation by governmental or professional authorities within the preceding
five years respecting one or more independent audits carried out by the firm,
(C)) any steps taken to deal with any such issues, and (d) all relationships
between the independent auditor and the Company. Evaluate the qualifications,
performance and independence of the independent auditor, including considering
whether the auditor's quality controls are adequate and the provision of
permitted non-audit services is compatible with maintaining the auditor's
independence, and taking into account the opinions of management and internal
auditors. The Audit Committee shall present its conclusions with respect to the
independent auditor to the Board.
12. Ensure the rotation of the audit partners as required by law. Consider
whether, in order to assure continuing auditor independence, it is appropriate
to adopt a policy of rotating the independent auditing firm on a regular basis.
13. Set clear policies for the Company's hiring of employees or former
employees of the independent auditor who participated in any capacity in the
audit of the Company.
14. Discuss with the national office of the independent auditor issues on
which they were consulted by the Company's audit team and matters of audit
quality and consistency.
15. Meet with the independent auditor prior to the audit to discuss the
planning and staffing of the audit.
OVERSIGHT OF THE COMPANY'S INTERNAL AUDIT FUNCTION
16. Review the appointment and replacement of the senior internal auditing
executive.
17. Review the significant reports to management prepared by the internal
auditing department and management's responses.
18. Discuss with the independent auditor and management the internal audit
department responsibilities, budget and staffing and any recommended changes in
the planned scope of the internal audit.
COMPLIANCE OVERSIGHT RESPONSIBILITIES
19. Obtain from the independent auditor assurance that Section 10A(b) of
the Exchange Act has not been implicated.
20. Obtain reports from management, the Company's senior internal auditing
executive and the independent auditor that the Company and its
subsidiary/foreign affiliated entities are in conformity with applicable legal
requirements and the Company's Standards and Procedures of Business Conduct and
Ethics and Code of Ethics for Chief Executive Officers, Principal Financial
Officer and Principal Accounting Officer. Review reports and disclosures of
insider and affiliated party transactions. Advise the Board with respect to the
Company's policies and procedures regarding compliance with applicable laws and
regulations and with the Company's Standards and Procedures of Business Conduct
and Ethics and Code of Ethics for Chief Executive Officers, Principal Financial
Officer and Principal Accounting Officer.
21. Establish procedures for the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal accounting
controls or auditing matters, and the confidential, anonymous submission by
employees of concerns regarding questionable accounting or auditing matters.
22. Discuss with management and the independent auditor any correspondence
with regulators or governmental agencies and any published reports which raise
material issues regarding the Company's financial statements or accounting
policies.
A-3
23. Discuss with the Company's General Counsel legal matters that may have
a material impact on the financial statements or the Company's compliance
policies or engage independent counsel and other advisers, as it determines
necessary to carry out its duties.
V. LIMITATION OF AUDIT COMMITTEE'S ROLE
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements and disclosures
are complete and accurate and are in accordance with generally accepted
accounting principles and applicable rules and regulations. These are the
responsibilities of management and the independent auditor.
A-4
Please
Mark Here [ ]
for Address
Change or Comments
on reverse side
The Board of Directors recommends a vote FOR:
1. Election of
Directors -
For all nominees WITHHOLD Nominees: 01 Lloyd Bentsen, III
listed at right AUTHORITY 02 Nita B. Hanks,
(except as to vote for 03 Dr. E. Douglas Hodo,
marked to the all nominees 04 Dr. W. Arthur Porter,
contrary) listed at right 05 Gov. John P. LaWare
[ ] [ ]
(INSTRUCTION: To withhold authority to vote for any nominee, write that
nominee's name on the line below.)
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The undersigned acknowledges receipt
of the Notice of Annual Meeting of
Stockholders and of the Proxy Statement.
_ _ __
| Dated: , 2004
| ----------------------------
|
----------------------------------------
Signature(s)
----------------------------------------
Signature(s)
please sign exactly as your name appear.
Joint owners should each sign
personally. Where applicable, indicae
your official position or representation
capacity.
--------------------------------------------------------------------------------
o FOLD AND DETACH HERE o
VOTE BY INTERNET OR TELEPHONE OR MAIL
24 HOURS A DAY, 7 DAYS A WEEK
INTERNET AND TELEPHONE VOTING IS AVAILABLE THROUGH 11:59 PM EASTERN TIME
THE DAY PRIOR TO ANNUAL MEETING DAY.
YOUR INTERNET OR TELEPHONE VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR
SHARES IN THE SAME MANNER IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY CARD.
---------------------------- ------------------------------ ----------------------
| Internet | | Telephone | | Mail |
| http//www.eproxy.com/stc | | 1-800-435-6710 | | Mark, sign and |
| Use the Internet to vote | | Use any touch-tone | | date your proxy |
| your proxy. Have your | OR | telephone to vote your | OR | card and return it |
| proxy card in hand | | proxy. Have your proxy | | in the enclosed |
| when you access the | | card in hand when you | | post-paid envelope |
| web site. | | call. | | |
---------------------------- ------------------------------ ----------------------
IF YOU VOTE YOUR PROXY BY INTERNET OR BY TELEPHONE,
YOU DO NOT NEED TO MAIL BACK YOUR PROXY CARD.
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, 2004
The undersigned appoints Ken Anderson, Jr. and Michael B. Skalka, 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 April 30, 2004, 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.
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Address Change/Comments (Mark the corresponding box on the reverse side.)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(Continued and to be signed on reverse side.)
* FOLD AND DETACH HERE *