-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NGcBT35SmWp5buF450icZ0nJZRzrVby9+lS5HMge1iTpDCW+5971vMrdh5lJJ18Z HX2iGUNGnovu+OtmpyJQrw== 0000094344-98-000006.txt : 19981116 0000094344-98-000006.hdr.sgml : 19981116 ACCESSION NUMBER: 0000094344-98-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: STEWART INFORMATION SERVICES CORP CENTRAL INDEX KEY: 0000094344 STANDARD INDUSTRIAL CLASSIFICATION: TITLE INSURANCE [6361] IRS NUMBER: 741677330 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-02658 FILM NUMBER: 98745989 BUSINESS ADDRESS: STREET 1: 1980 POST OAK BLVD CITY: HOUSTON STATE: TX ZIP: 77056 BUSINESS PHONE: 7136258100 MAIL ADDRESS: STREET 1: 1980 POST OAK BLVD STREET 2: STE 830 CITY: HOUSTON STATE: TX ZIP: 77056 10-Q 1 10-Q FOR 9/30/98 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 (Mark One) [ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1998 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to _______________ Commission file number 1-12688 STEWART INFORMATION SERVICES CORPORATION ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 74-1677330 - ------------------------------- ------------------------------------ (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 1980 Post Oak Blvd., Houston TX 77056 ------------------------------------------------------------ (Address of principal executive offices, including zip code) (713) 625-8100 ---------------------------------------------------- (Registrant's telephone number, including area code) ------------------------------------------------------------------------------- (Former name,former address and former fiscal year,if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common 6,493,556 Class B Common 525,006 FORM 10-Q QUARTERLY REPORT Quarter Ended September 30, 1998 TABLE OF CONTENTS Item No. Page - -------- ---- Part I 1. Financial Statements 1 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 5 Part II 1. Legal Proceedings 10 5. Other Information 11 6. Exhibits and Reports on Form 8-K 9 Signature 12 STEWART INFORMATION SERVICES CORPORATION CONSOLIDATED STATEMENTS OF EARNINGS FOR THE QUARTERS AND NINE MONTHS ENDED SEPTEMBER 30, 1998 and 1997
THIRD QUARTER NINE MONTHS --------------------- --------------------- 1998 1997 1998 1997 ---------- ---------- ---------- ---------- ($000 Omitted) ($000 Omitted) Revenues Title premiums, fees and other revenues 233,385 168,924 632,912 466,522 Real estate information services 12,265 9,616 36,112 24,221 Investment income 4,703 3,962 13,479 11,550 Investment gains - net 72 124 403 305 --------- -------- -------- ------- 250,425 182,626 682,906 502,598 Expenses Amounts retained by agents 114,465 84,504 304,156 235,679 Employee costs 62,690 48,236 180,935 135,749 Other operating expenses 35,219 29,580 99,701 80,936 Title losses and related claims 10,284 8,035 28,523 22,138 Depreciation and amortization 3,809 3,110 10,670 8,729 Interest 306 400 1,089 966 Minority interests 1,233 561 3,662 1,471 --------- -------- -------- ------- 228,006 174,426 628,736 485,668 --------- -------- -------- ------- Earnings before taxes 22,419 8,200 54,170 16,930 Income taxes 8,371 2,713 20,239 5,851 --------- -------- -------- ------- Net earnings 14,048 5,487 33,931 11,079 ========= ======== ======== ======= Average number of shares outstanding (000) 7,094 6,900 7,064 6,867 Earnings per share - basic 2.00 0.80 4.87 1.63 Earnings per share - diluted 1.98 0.80 4.80 1.61 ========= ========= ======== ======= Comprehensive earnings: Net earnings 14,048 5,487 33,931 11,079 Changes in unrealized investment gains, net of taxes 2,582 2,032 1,971 1,288 --------- -------- -------- ------- Comprehensive earnings 16,630 7,519 35,902 12,367 ========= ========= ======== =======
-1- STEWART INFORMATION SERVICES CORPORATION CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
SEP 30 DEC 31 1998 1997 ---------- ---------- ($000 Omitted) Assets Cash and cash equivalents 43,066 30,391 Short-term investments 49,022 35,761 Investments - statutory reserve funds 148,280 138,462 Investments - other 76,891 71,044 Receivables 37,706 31,868 Property and equipment 33,562 30,415 Title plants 23,631 21,778 Goodwill 19,069 18,427 Deferred income taxes 14,735 15,632 Other 25,635 23,913 ---------- ---------- 471,597 417,691 ========== ========== Liabilities Notes payable 16,631 19,087 Accounts payable and accrued liabilities 34,829 27,917 Estimated title losses 168,680 156,791 Minority interests 5,350 4,392 Contingent liabilities and commitments Stockholders' equity Common and Class B Common Stock and additional paid-in capital 61,886 59,828 Retained earnings 177,714 145,140 Other comprehensive earnings 6,507 4,536 ---------- ----------- Total stockholders' equity ($35.07 per share at September 30, 1998) 246,107 209,504 ---------- ----------- 471,597 417,691 ========== ===========
-2- STEWART INFORMATION SERVICES CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
1998 1997 -------- -------- ($000 Omitted) Cash provided by operating activities (Note) 58,697 16,894 Investing activities: Purchases of property and equipment and title plants - net (13,914) (9,612) Proceeds from investments matured and sold 37,281 33,020 Purchases of investments (62,772) (36,552) Increases in notes receivable (1,644) (1,756) Collections on notes receivable 1,303 594 Cash paid for the acquisition of subsidiaries - net (1,476) (2,608) ---------- --------- Cash used by investing activities (41,222) (16,914) Financing activities: Dividends paid (1,357) (1,196) Distribution to minority interests (2,763) (1,361) Proceeds from issuance of stock 2,228 96 Proceeds of notes payable 5,466 8,803 Payments on notes payable (8,374) (2,714) ---------- --------- Cash (used) provided by financing activities (4,800) 3,628 ---------- --------- Increase in cash and cash equivalents 12,675 3,608 ========== ==========
NOTE: Reconciliation of net earnings to the above amounts - Net earnings 33,931 11,079 Add (deduct): Depreciation and amortization 10,670 8,729 Provision for title losses in excess of payments 11,102 5,050 Provision for uncollectible amounts - net (502) 403 Increase in accounts receivable - net (4,033) (4,477) Increase (decrease) in accounts payable and accrued liabilities - net 7,389 (2,715) Minority interest expense 3,662 1,471 Equity in net earnings of investees (701) (922) Realized investment gains - net (403) (305) Other - net (2,418) (1,419) ---------- --------- Cash provided by operating activities 58,697 16,894 ========== =========
-3- STEWART INFORMATION SERVICES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1: Interim Financial Statements The financial information contained in this report for the nine month periods ended September 30, 1998 and 1997, and as at September 30, 1998, is unaudited. In the opinion of management, all adjustments necessary for a fair presentation of this information for all unaudited periods, consisting only of normal recurring accruals, have been made. The results of operations for the interim periods are not necessarily indicative of results for a full year. Certain amounts in the 1997 consolidated financial statements have been reclassified for comparative purposes. Net earnings, as previously reported, were not affected. -4- Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations GENERAL The Company provides title insurance and related services through more than 4,000 issuing locations in the United States and several international markets. A leading provider of real estate information technology and connectivity, Stewart also meets the needs of the real estate and mortgage industry through the electronic delivery of services needed for settlement. These services include title insurnace, title reports, flood determinations, property appraisals, document preparation, credit reports and other real estate information. In addition, Stewart provides expertise in tax-deferred exchanges, surveys and field services. In general, the principal factors which contribute to increases in title revenues include declining mortgage interest rates (which usually increase home sales), increases in refinancing transactions, rising home prices, higher premium rates, increased market share, additional revenues from new offices and increased revenue from non-residential, commercial transactions. Although relatively few in number, large commercial transactions usually yield higher premiums. A comparison of the results of operations of the Company for the first nine months of 1998 with the first nine months of 1997 follows: REVENUES Revenues from title premiums and fees increased $166.4 million, or 35.7%, from the comparable period in 1997. Mortgage interest rates declined by 67 basis points from the first week in October 1997 to the last week in September 1998, falling to 6.64%. Refinancing transactions, in particular, were higher in 1998. The number of closings handled by the Company increased 48.9%. Closings increased in California, Texas, Colorado and most other states. The average revenue per closing decreased slightly in 1998 due, in part, to a larger number of refinancings with their lower premiums. Increases in commercial transactions and revenues from agents also contributed to higher revenues in 1998. A 3% reduction in Texas title premiums became effective August 1, 1998. However, the Company is experiencing new home equity business in Texas that did not exist before 1998. Real estate information revenues were $36.1 million in 1998 and $24.2 million in 1997. The increase was primarily due to a significant number of new businesses started by the Company in 1997. Investment income increased 16.7% in 1998 due to an increase in the average balances invested and the increased yield on the balances. EXPENSES Amounts retained by agents increased $68.5 million, or 29.1%, over the comparable period in 1997. The percentage of retention by agents to the amounts of revenues from agents was 80.3% and 80.7% for the nine months ended September 30, 1998 and September 30, 1997, respectively. Employee expenses increased $45.2 million, or 33.3%, in 1998 primarily because of a higher average number of employees during 1998 compared to a year ago and increased average rates of compensation, including bonuses and profit sharing. The Company continued to maintain higher staff levels in comparison with a year ago. Increases were in areas of title operations from increased traction volume, automating services rendered to customers and improving its own processes, real estate information services that are being developed and sold to customers and the expansion of its national marketing efforts. The Company believes the development and sale of new products and services is important to its future. Through automated operating processes, the Company expects to add customer revenues and reduce operating expenses and title losses in the future. Other operating expenses increased by $18.8 million, or 23.2%, primarily because of the increase in transaction volume. Expenses that increased include appraisal fees, premium taxes, expenses of new offices, business promotion and search fees. Other operating expenses also include rent, supplies, travel, policy forms, delivery costs, title plant expenses and telephone. Most of these expenses follow, to varying degrees, the changes in transaction volume and revenues. -5- Provisions for title losses and related claims were up $6.4 million, or 28.8% in 1998. The industry and the Company continue to have improved claim experience. As a percentage of title premiums, fees and other revenues, the provision in 1998 decreased to 4.5% versus 4.8% in 1997. The provision for income taxes represented effective tax rates of 37% and 35% in 1998 and 1997, respectively. A comparison of the results of operations of the Company for the third quarter of 1998 with the third quarter of 1997 follows: REVENUES Revenues from title premiums and fees increased $64.5 million, or 38.2%, from a year ago. Mortgage interest rates were approximately 60 basis points lower in the third quarter of 1998 than the same period a year ago, increasing real estate transactions. Refinancing transactions, in particular, were higher in 1998. The number of closings handled by the Company increased 46.2%. Closings increased in Texas, California, Colorado and most other states. The average revenue per closing decreased slightly in 1998 due, in part, to a larger number of refinancings with their lower premiums. Increases in commercial transactions and revenues from agents also contributed to higher revenues in 1998. A 3% reduction in Texas title premiums became effective August 1, 1998. However, the Company is experiencing new home equity business in Texas that did not exist before 1998. Real estate information revenues were $12.3 million in 1998 and $9.6 million in 1997. The increase was primarily due to a significant number of new businesses started by the company in 1997. Investment income increased 18.7% in 1998 due to an increase in the average balances invested and the increased yield on the balances. EXPENSES Amounts retained by agents increased $30.0 million, or 35.5%, over the comparable period in 1997. The percentage of retention by agents to the amounts of revenues by agents was 80.6% and 80.8% for the nine months ended September 30, 1998 and September 30, 1997, respectively. Employee expenses increased $14.5 million, or 30.0%, in 1998 primarily because of a higher average number of employees during 1998 compared to a year ago and increased average rates of compensation, including bonuses and profit sharing. The Company continued to maintain higher staff levels in comparison with a year ago. Increases were in areas of title operations from increased transaction volume, automating services rendered to customers and improving its own processes, real estate information services that are being developed and sold to customers and the expansion of its national marketing efforts. The Company believes the development and sale of new products and services is important to its future. Through automated operating processes, the Company expects to add customer revenues and reduce operating expenses and title losses in the future. Other operating expenses increased by $5.6 million, or 19.1%, primarily because of the increase in transaction volume. Expenses that increased include premium taxes, search fees, telephone and supplies. Other operating expenses also include rent, travel, policy forms, delivery costs, title plant expenses and business promotion. Most of these expenses follow, to varying degrees, the changes in transaction volume and revenues. Provisions for title losses and related claims were up $2.2 million, or 28.0% in 1998. The industry and the Company continue to have improved claim experience. As a percentage of title premiums, fees and other revenues, the provision in the third quarter of 1998 decreased to 4.4% versus 4.8% in the third quarter of 1997. The provision for income taxes represented effective tax rates of 37% and 33% in 1998 and 1997, respectively. The 1998 effective tax rate was higher primarily because nontaxable income from municipal bonds was significantly less in relation to pretax profits and due to refunds received in 1997 for a federal net operating loss carryforward and a change in the filing method for a certain state. -6- Year 2000 Issue Information technology is a crucial part of the Company's business. The Company recognizes the technological challenges associated with the Year 2000 Issue ("Y2K"). It has established a formal compliance plan to address these challenges and a Y2K Team to carry out this plan. The plan includes several distinct phases: (1) assessment, (2) remediation, (3) testing and (4) implementation. The progress of the work of the Y2K Team is monitored by the Company's senior management and the audit committee of the Company's board of directors. Computer software is used in the title and real estate information segments of the Company's business. The uses of software in the title segment include searching and examining titles, closing transactions, accounting for agent policies and claims. In the real estate information segment, software is used in providing mortgage services, such as flood determinations, appraisals and assignments. Most of this software was developed by the Company in recent years, with Y2K issues in mind. The Company has substantially completed its assessment and remediation of all this software. All remaining remediation and testing of this software is scheduled to be completed by the first quarter of 1999. Implementation is expected to be completed by the second quarter of 1999. In addition to its work on its internally-developed computer software, the Company has conducted an inventory of its systems worldwide. This inventory includes software and hardware acquired from third parties for use by the Company. The inventory also includes critical non-information technology systems which may house non-compliant, imbedded technology, such as fax machines, photocopiers, telephone facilities and other common devices. Assessment and remediation of these systems is scheduled for completion by the first quarter of 1999. Mission critical systems have been given high priority. Certain subsidiaries that have been acquired by the Company and still operate with different systems from the Company's have been given high priority under the Company's Y2K plan. The Company expects to complete all phases of Y2K compliance for these subsidiaries in the first quarter of 1999. In addition to addressing the Company's own systems, as described above, the Y2K Team must assess the state of readiness of the systems of other entities with which it does business. These include independent title insurance agents and other business partners, such as county courthouses and lenders, whose condition or operational capability is important to the Company. Failure by these third parties to adequately resolve their Y2K problems could have a material adverse effect on the Company's operations. The Company believes its success in being Y2K compliant will not be conclusively known until the year 2000 is actually reached. Failure by one or more of the Company's own systems could result in lost revenues and additional expenses required to carry out manual processing of transactions. The magnitude of the failure of external forces on the business of the Company cannot be predicted. Failures by the telecommunications industry, banking institutions and others could have far-reaching, materially adverse effects on the Company, the title insurance industry and the entire economy. The Company expects to complete its Y2K program in a timely manner. However, the Company believes that it is not possible to determine with certainty that all Y2K problems affecting the Company have been identified or corrected. The number of devices that could be affected and the interactions among these devices are simply too numerous. In addition, the Company cannot accurately predict how many failures related to the Y2K problem will occur or the severity, duration or financial consequences of such failures. The Company has hired an outside Y2K consultant to assist the Company in meeting its goals and in developing contingency plans to define and address the worst-case scenario likely to be faced by the Company. The plan is expected to be in place in the first quarter of 1999. The Company has expended approximately $0.5 million during 1997 and the first three quarters of 1998 directly related to assessing, remediating and testing its information technology systems. These amounts have been funded from operations. As stated previously, the Company only recently developed most of the software it uses today. It has also purchased substantial amounts of hardware since 1996. The software development and hardware purchases were done as a part of the Company's goal to automate its operations rather than solely for the purpose of achieving Y2K compliance. These costs have been significant but are not included in the amount shown in the preceding paragraph. -7- The Company currently estimates that the total cost of its Y2K compliance program will not exceed $3.5 million. Approximately half of the remaining amount to be spent is for depreciable hardware purchases for certain offices which may need to be upgraded sooner than planned due to Y2K issues. Additional amounts relate to travel and labor costs associated with installing compliant internally-developed software, allocated management time and consulting fees. A significant portion of the remaining costs are expected to be incurred during the first and second quarters of 1999. This entire section ("Year 2000 Issue") is hereby designated a "Year 2000 Readiness Disclosure", as defined in the Year 2000 Information and Readiness Disclosure Act. LIQUIDITY AND CAPITAL RESOURCES Operating margins represent the primary source of financing for the Company, but this may be supplemented by bank borrowings. The capital resources of the Company, and the present debt-to-equity relationship, are considered satisfactory. FORWARD LOOKING STATEMENTS All statements, other than statements of historical facts, included in this report which address activities, events or developments that the Company expects or anticipates will or may occur in the future are forward-looking statements. Such forward-looking statements are subject to risks and uncertainties including, among other things, changes in mortgage interest rates, employment levels, actions of competitors, changes in real estate markets, general economic conditions and legislation, primarily legislation related to insurance, and other risks and uncertainties discussed in the Company's filings with the Securities and Exchange Commission. -8- PART II Page ---------- Item 1. Legal Proceedings 10 Item 5. Other Information 11 Item 6. Exhibits and Reports on Form 8-K (a) Index to exhibits (b) There were no reports on Form 8-K filed during the quarter ended September 30, 1998. -9- ITEM 1. LEGAL PROCEEDINGS The Registrant is a party to routine lawsuits incidental to its business, most of which involve disputed policy claims. In many of these suits, the plaintiff seeks exemplary or treble damages in excess of policy limits based on the alleged malfeasance of an issuing agent of the Registrant. The Registrant does not expect that any of these proceedings will have a material adverse effect on its financial condition. -10- ITEM 5. OTHER INFORMATION Proxies for the Company's annual meeting of stockholders to be held in 1999 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. -11- SIGNATURE Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Stewart Information Services Corporation ---------------------------------------- (Registrant) November 12, 1998 - ---------------- Date /S/ MAX CRISP ----------------------------------------------- Max Crisp (Vice President-Finance, Secretary-Treasurer, Director and Principal Financial and Accounting Officer) -12- INDEX TO EXHIBITS EXHIBIT NUMBER DESCRIPTION - ------- ----------- 3.2 - By-Laws of the Registrant, as amended September 1, 1998 4 - Rights of Common and Class B Common Stockholders 27.0 - Financial data schedule 28.2 - Details of investments, as reported in the Quarterly Report to Shareholders EX-3.(II) 2 10-Q FOR 9/30/98 EXHIBIT 3.2 BY-LAWS OF STEWART INFORMATION SERVICES CORPORATION ARTICLE I OFFICES SECTION 1.1. Registered office. The registered office of the corporation in the State of Delaware shall be in the City of Wilmington, County of New Castle, and the name of its registered agent shall be The Corporation Trust Company. SECTION 1.2. Other offices. The corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS SECTION 2.1. Place of Meeting. All meetings of stockholders for the election of directors shall be held at such place, either within or without the State of Delaware, as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting. SECTION 2.2. Annual Meeting. The annual meeting of stockholders shall be held at such date and time as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting. SECTION 2.3. Voting List. The officer who has charge of stock ledger of the corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice, or if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. SECTION 2.4. Special Meeting. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the Certificate of Incorporation, may be called by the Chairman of the Board or by the President or by the Board of Directors or by written order of a majority of the directors and shall be called by the President or the Secretary at the request in writing of stockholders owning a majority in amount of the entire capital stock of the corporation issued and outstanding and entitled to vote. Such request shall state the purpose of the proposed meeting. The Chairman of the Board or the President or directors so calling, or the stockholders so requesting, any such meeting shall fix the time and any place, either within or without the State of Delaware, as the place for holding such meeting. SECTION 2.5. Notice of Meeting. Written notice of the annual, and each special meeting of stockholders, stating the time, place and purpose or purposes thereof, shall be given to each stockholder entitled to vote thereat, not less than ten nor more than 60 days before the meeting. SECTION 2.6. Quorum. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at any meeting of stockholders for the transaction of business except at each election of directors and as otherwise provided by statute or by the Certificate of Incorporation. At each meeting for the election of directors the holders of a majority of the Common Stock and the holders of a majority of the Class B Common Stock, issued and outstanding of each such class, and entitled to vote thereat, present in person or represented by proxy shall constitute a quorum. Notwithstanding the other provisions of the Certificate of Incorporation or these by-laws, the holders of a majority of the shares of capital stock entitled to vote thereat, present in person or represented by proxy, whether or not a quorum is present, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. If the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally notified. SECTION 2.7. Voting. (a) Unless express provision of applicable statute, of the Certificate of Incorporation or of these by-laws shall provide to the contrary, at each meeting of stockholders each holder of capital stock of the Corporation shall be entitled to cast one vote for each share of capital stock registered in his or its name on the books of the Corporation on the record date for determination of stockholders entitled to notice of, and to vote at, such meeting on each matter properly submitted to stockholders at each meeting. If any stockholder entitled to vote at any meeting shall be present at such meeting and such stockholder shall abstain, whether in person or by proxy, from casting the vote or votes which he or it is entitled to cast at such meeting, such abstention shall not affect the determination of the presence of a quorum at such meeting. For all purposes of these by-laws, an abstention from voting on any matter properly submitted to stockholders at a meeting shall not be considered a vote cast for or against such matter. (b) Each stockholder having the right to vote shall be entitled to vote in person or by proxy appointed by an instrument in writing subscribed by stockholder, bearing a date not more than three years prior to voting, unless such instrument provides for a longer period, and filed with the Secretary of the Corporation before, or at the time of, the meeting. If such instrument shall designate two or more persons to act as proxies, unless such instrument shall provide to the contrary, a majority of such persons present at any meeting at which their powers thereunder are to be exercised shall have and may exercise all of the powers of voting or giving consents thereby conferred, or if only one be present, then such powers may be exercised by that one, or if any even number attend and a majority do not agree on any particular issue, each proxy so attending shall be entitled to exercise such powers in respect to the same portion of the shares as he is of the proxies representing such shares. (c) An instrument in writing subscribed by stockholder and appointing a proxy may confer upon such proxy discretionary power to vote on any matter that may come before an annual meeting of the stockholders of the corporation unless, with respect to a particular matter, (i) the corporation receives, by certified mail, return receipt requested, addressed to the corporation's Secretary, notice not later than the 15th day of February next preceding the annual meeting that the matter will be presented at the annual meeting and (ii) the corporation fails to include in its proxy statement for the annual meeting advice on the nature of the matter and how the corporation intends to exercise its discretion to vote on the matter. (d) When a quorum is present at any meeting of stockholders, a majority of the shares voted in person or by proxy shall decide any question brought before such meeting, unless the question is one upon which, by express provision of applicable statute, of the Certificate of Incorporation or of these by-laws, a different vote is required, in which case such express provision shall govern and control the decision of such question. (e) When a quorum is present at any meeting of stockholders at which the Board of Directors is to be elected, the stockholders shall elect such directors by a plurality of the shares voted in person or by proxy. All votes for election of directors that are cast in person shall be cast by written ballot. SECTION 2.8. Consent of Stockholders. Whenever the vote of stockholders at a meeting thereof is required or permitted to be taken for or in connection with any corporate action by any provision of the statutes, the meeting and vote of stockholders may be dispensed with if all the stockholders who would have been entitled to vote upon the action if such meeting were held shall consent in writing to such corporate action being taken; or if the Certificate of Incorporation authorizes the action to be taken with the written consent of the holders of less than all the stock who would have been entitled to vote upon the action if a meeting were held, then on the written consent of the stockholders having not less than such percentage of the number of votes as may be authorized in the Certificate of Incorporation; provided that in no case shall the written consent be by the holders of stock having less than the minimum percentage of the vote required by statute for the proposed corporate action, and provided that prompt notice must be given to all stockholders of the taking of corporate action without a meeting and by less than unanimous consent. SECTION 2.9. Voting of Stock of Certain Holders. Shares standing in the name of another corporation, domestic or foreign, may be voted by such officer, agent or proxy as the by-laws of such corporation may prescribe, or in the absence of such provision, as the Board of Directors of such corporation may determine. Shares standing in the name of a deceased person may be voted by the executor or administrator of such deceased person, either in person or by proxy. Shares standing in the name of a guardian, conservator or trustee may be voted by such fiduciary, either in person or by proxy, but no such fiduciary shall be entitled to vote shares held in such fiduciary capacity without a transfer of such shares into the name of such fiduciary. Shares standing in the name of a receiver may be voted by such receiver. A stockholder whose shares are pledged shall be entitled to vote such shares, unless in the transfer by the pledgor on the books of the corporation, he has expressly empowered the pledgee to vote thereon, in which case only the pledgee, or his proxy, may represent the stock and vote thereon. SECTION 2.10. Treasury Stock. The corporation shall not vote, directly or indirectly, shares of its own stock owned by it; and such shares shall not be counted in determining the total number of outstanding shares. SECTION 2.11. Fixing Record Date. The Board of Directors may fix in advance a date, not exceeding 60 days preceding the date of any meeting of stockholders, or the date for payment of any dividend or distribution, or the date for the allotment of rights, or the date when any change, or conversion or exchange of capital stock shall go into effect, or a date in connection with obtaining a consent, as a record date for the determination of the stockholders entitled to notice of, and to vote at, any such meeting and any adjournment thereof, or entitled to receive payment of any such dividend or distribution, or to receive any such allotment of rights, or to exercise the rights in respect of any such change, conversion or exchange of capital stock, or to give such consent, and in such case such stockholders and only such stockholders as shall be stockholders of record on the date so fixed shall be entitled to such notice of, and to vote at, any such meeting and any adjournment thereof, or to receive payment of such dividend or distribution, or to receive such allotment of rights, or to exercise such rights, or to give such consent, as the case may be, notwithstanding any transfer of any stock on the books of the corporation after any such record date fixed as aforesaid. ARTICLE III BOARD OF DIRECTORS SECTION 3.1. Powers. The business and affairs of the corporation shall be managed by its Board of Directors, which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or by these by-laws directed or required to be exercised or done by the stockholders. SECTION 3.2. Number, Election and Term. The number of directors which shall constitute the whole Board shall be NINE. Unless such number if fixed by express provision of the statutes or the Certificate of Incorporation, in which case such express provision shall govern and control, the number of directors shall from time to time be fixed and determined by the directors and shall be set forth in the notice of any meeting of stockholders held for the purpose of electing directors. The directors shall be elected at the annual meeting of stockholders, except as provided in Section 3.3, and each director elected shall hold office until his successor shall be elected and shall qualify. Directors need not be residents of Delaware or stockholders of the corporation. SECTION 3.3. Vacancies, Additional Directors and Removal From Office. If any vacancy occurs in the members of the Board of Directors elected by the holders of Common stock caused by death, resignation, retirement, disqualification or removal from office of any such director, or otherwise, or if any new directorship to be elected by the holders of Common stock is created by an increase in the authorized number of directors, a majority of the directors then in office elected by the holders of Common stock, though less than a quorum, or a sole remaining such director, may choose a successor or fill the newly created directorship; and a director so chosen shall hold office until the next annual election and until his successor shall be duly elected and shall qualify, unless sooner displaced. If any vacancy occurs in the members of the Board of Directors elected by the holders of Class B Common stock caused by death, resignation, retirement, disqualification or removal from office of any such director, or otherwise, or if any new directorship to be elected by the holders of Class B Common stock is created by an increase in the authorized number of directors, a majority of the directors then in office elected by the holders of Class B Common stock, though less than a quorum, or a sole remaining such director, may choose a successor or fill the newly created directorship; and a director so chosen shall hold office until the next annual election and until his successor shall be duly elected and shall qualify, unless sooner displaced. A director may be removed either for or without cause at any special meeting of stockholders duly called and held for such purpose except that only the stockholders entitled to vote for any such director may vote for the removal of such director. SECTION 3.4. Regular Meeting. A regular meeting of the Board of Directors shall be held each year, without other notice than this by-law, at the place of, and immediately following, the annual meeting of stockholders; and other regular meetings of the Board of Directors shall be held each year, at such time and place as the Board of Directors may provide, by resolution, either within or without the State of Delaware, without other notice than such resolution. SECTION 3.5. Special Meeting. A special meeting of the Board of Directors may be called by the Chairman of the Board or by the President and shall be called by the Secretary on the written request of any two directors. The Chairman or President so calling, or the directors so requesting, any such meeting shall fix the time and any place, either within or without the State of Delaware, as the place for holding such meeting. SECTION 3.6. Notice of Special Meeting. Written notice of special meetings of the Board of Directors shall be given to each director at least 48 hours prior to the time of such meeting; provided however, in instances where notice of such meeting is given orally, by telephone or telegraph, such notice need be given only 24 hours prior to such meeting. Any director may waive notice of any meeting. The attendance of a director at any meeting shall constitute a waiver of notice of such meeting for the purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any special meeting of the Board of Directors need be specified in notice or waiver of notice of such meeting, except that notice shall be given of any proposed amendment to the by-laws if it is to be adopted at any special meeting or with respect to any other matter where notice is required by statute. SECTION 3.7. Quorum and Vote Required. Six of the nine members of the Board of Directors shall constitute a quorum for the transaction of business at any meeting of the Board of Directors, and the act of six of the directors shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute, by the Certificate of Incorporation or by these by-laws. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. SECTION 3.8. Action Without Meeting. Unless otherwise restricted by the Certificate of Incorporation or these by-laws, any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof as provided in Article IV of these by-laws, may be taken without a meeting, if a written consent thereto is signed by all members of the Board or of such committee, as the case may be, and such written consent is filed with the minutes of proceedings of the Board or committee. SECTION 3.9. Compensation. Directors, as such, shall not be entitled to any stated salary for their services unless voted by the stockholders or the Board of Directors; but by resolution of the Board of Directors, a fixed sum and expenses of attendance, if any, may be allowed for attendance at each regular or special meeting of the Board of Directors or any meeting of a committee of directors. No provision of these by-laws shall be construed to preclude any director from serving the corporation in any other capacity and receiving compensation therefor. SECTION 3.10. Nomination of Directors to be Elected by Holders of Common Stock. Only persons who are nominated in accordance with the following procedures are eligible for election as directors by the holders of the Common Stock of the corporation. Nominations of persons for election by the holders of Common Stock to the Board of Directors of the corporation may be made at a meeting of stockholders provided such nominations are made by or at the direction of the Board of Directors or by a nominating committee appointed by the Board of Directors or a person appointed by the Board of Directors to make nominations. Nominations may also be made by any holder of Common Stock of the corporation entitled to vote for the election of directors at the meeting who complies with the notice procedures set forth in this section. Nominations, if made by a stockholder of the corporation, shall be made pursuant to timely notice in writing addressed to the secretary of the corporation. To be timely, a stockholder's notice shall be delivered to or mailed and received at the principal executive offices of the corporation not later than the 15th day of February next preceding the annual meeting of stockholders. SECTION 3.11. Advisory Directors. The Board of Directors may elect from one (1) to nine (9) (as it may decide) Advisory Members of the Board of Directors who may meet with the Board of Directors at such Board Meeting to which they are invited by the Chairman of the Board, or the President or Executive Vice President (it being realized that there may be meetings not deemed important enough to warrant time and travel expense of all or a part of the Advisory Members), and give the Board of Directors the benefit of their advice and counsel. The Advisory Members of the Board of Directors may be elected at any regular or special meeting of the Board of Directors. The Advisory Members of the Board of Directors shall receive the same fee for attending a meeting that a Director receives and shall be paid their travel expenses, if any, incurred in attending meetings of the Board of Directors. No such payment shall preclude any Director from serving the corporation in any other capacity and receiving compensation therefor. ARTICLE IV COMMITTEE OF DIRECTORS SECTION 4.1. Designation, Powers and Name. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, including, if they shall so determine, an Executive Committee, each such committee to consist of two or more of the directors of the corporation. The committee shall have and may exercise such of the powers of the Board of Directors in the management of the business and affairs of the corporation as may be provided in such resolution. The committee may authorize the seal of the corporation to be affixed to all papers which may require it. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of such committee. In the absence or disqualification of any member of such committee or committees, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Such committee or committees shall have such name or names and such limitations of authority as may be determined from time to time by resolution adopted by the Board of Directors. SECTION 4.2. Minutes. Each committee of directors shall keep regular minutes of its proceedings and report the same to the Board of Directors when required. SECTION 4.3. Compensation. Members of special or standing committees may be allowed compensation for attending committee meetings, if the Board of Directors shall so determine. ARTICLE V NOTICE SECTION 5.1. Methods of Giving Notice. Whenever under the provisions of the statutes, the Certificate of Incorporation or these by-laws, notice is required to be given to any director, member of any committee or stockholder, such notice shall be in writing and delivered personally or mailed to such director, member or stockholder; provided that in the case of a director or a member of any committee such notice may be given orally or by telephone or telegram. If mailed, notice to a director, member of a committee or stockholder shall be deemed to be given when deposited in the United States mail first class in a sealed envelope, with postage thereon prepaid, addressed, in the case of a stockholder, to the stockholder at the stockholder's address as it appears on the records of the corporation or, in the case of a director or a member of a committee, to such person at his business address. If sent by telegraph, notice to a director or member of a committee shall be deemed to be given when the telegram, so addressed, is delivered to the telegraph company. SECTION 5.2. Written Waiver. Whenever any notice is required to be given under the provisions of the statutes, the Certificate of Incorporation or these by-laws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. ARTICLE VI OFFICERS SECTION 6.1. Officers. The officers of the corporation are Chairman of the Board and Co-Chief Executive Officer, a President and Co-Chief Executive Officer, a Senior Executive Vice President-Assistant Chairman, a Senior Executive Vice President-Assistant President, one or more Vice Presidents, any one or more which may be designated an Executive Vice President and/or Senior Vice President, a Vice President-Finance, a Secretary, a Treasurer and a Controller. The Board of Directors may by resolution create the office of Vice Chairman of the Board and define the duties of such office. The Board of Directors may appoint such other officers and agents including Assistant Vice Presidents, Assistant Secretaries and Assistant Treasurers, as it shall deem necessary, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined by the Board. Any two or more offices, other than the offices of President and Secretary, may be held by the same person. No officer shall execute, acknowledge, verify or countersign any instrument on behalf of the corporation in more than one capacity, if such instrument is required by law, by these by-laws or by any act of the corporation to be executed, acknowledged, verified or countersigned by two or more officers. The Chairman of the Board and Co-Chief Executive Officer and the President and Co-Chief Executive Officer shall be elected from among the directors. With the foregoing exceptions, none of the other officers need be a director, and none of the officers need be a stockholder of the corporation. SECTION 6.2. Election and Term of Office. The officers of the corporation shall be elected annually by the Board of Directors at its first regular meeting held after the annual meeting of stockholders or as soon thereafter as conveniently possible. Each officer shall hold office until his successor shall have been chosen and shall have qualified or until his death or the effective date of his resignation or removal, or until he shall cease to be a director in the case of the Chairman of the Board and Co-Chief Executive Officer and the President and Co-Chief Executive Officer. SECTION 6.3. Removal and Resignation. Any officer or agent elected or appointed by the Board of Directors may be removed with cause by the affirmative vote of the Board of Directors whenever, in its judgment, the best interests of the corporation shall be served thereby, but such removal shall be without prejudice to the contractual rights, if any, of the person so removed. Any officer may resign at any time by giving written notice to the corporation. Any such resignation shall take effect at the date of the receipt of such notice or at any later time specified therein, and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. SECTION 6.4. Vacancies. Any vacancy occurring in any office of the corporation by death, resignation,removal or otherwise, may be filled by the Board of Directors for the unexpired portion of the term. SECTION 6.5. Salaries. The salaries of all officers and agents of the corporation shall be fixed by the Board of Directors or pursuant to its direction; and no officer shall be prevented from receiving such salary by reason of his also being a director. SECTION 6.6. Chairman of the Board and Co-Chief Executive Officer. The Chairman of the Board and Co-Chief Executive Officer shall preside at all meetings of the Board of Directors or of the stockholders of the corporation. In the Chairman's absence, or at the election of the President and Co-Chief Executive Officer and the Chairman of the Board and Co-Chief Executive Officer, such duties shall be attended to by the President and Co-Chief Executive Officer. The Chairman of the Board and the President shall formulate and submit to the Board of Directors or the Executive Committee matters of general policy for the corporation and shall perform such other duties as usually appertain to the office or as may be prescribed by the Board of Directors or the Executive Committee. The Chairman of the Board and Co-Chief Executive Officer shall, with the President and Co-Chief Executive Officer, be the principal executive officer of the corporation and, subject to the control of the Board of Directors, shall in general supervise and control the business and affairs of the corporation. The Chairman of the Board and Co-Chief Executive Officer, acting with the President and Co-Chief Executive Officers shall have the power to appoint and remove subordinate officers, agents and employees, except those elected or appointed by the Board of Directors. The Chairman of the Board and Co-Chief Executive Officer, acting with the President and Co-Chief Executive Officer, shall keep the Board of Directors and the Executive Committee fully informed and shall consult them concerning the business of the corporation. Either or both may sign with the Secretary or any other officer of the corporation thereunto authorized by the Board of Directors, certificates for shares of the corporation and any deeds, bonds, mortgages, contracts, checks, notes, drafts or other instruments which the Board of Directors has authorized to be executed, except in cases where the signing and execution thereof has been expressly delegated by these by-laws or by the Board of Directors to some other officer or agent of the corporation, or shall be required by law to be otherwise executed. Either or both the Chairman of the Board and the President shall vote, or give a proxy to any other officer of the corporation to vote, all shares of stock of any other corporation (except that the Board of Directors shall vote, or give a proxy to one or more member(s) of the Board to vote, all shares of the stock of Stewart Title Guaranty Company) standing in the name of the corporation and in general they shall perform all other duties normally incident to the office of the Chairman of the Board and Co-Chief Executive Officer and President and Co-Chief Executive Officer, and such other duties as may be prescribed by the stockholders, the Board of Directors or the Executive Committee from time to time. In the absence of the President and Co-Chief Executive Officer, or in the event such officer is unable or refuses to act, the Chairman of the Board and Co-Chief Executive Officer shall perform the duties and exercise the powers of the President and Co-Chief Executive Officer. If the office of the President is vacant, the Chairman of the Board shall be the Chief Executive Officer. SECTION 6.7. President and Co-Chief Executive Officer. The President and Co-Chief Executive Officer shall, with the Chairman of the Board and Co-Chief Executive Officer, be the principal executive officer of the corporation and subject to the control of the Board of Directors, shall in general supervise and control the business and affairs of the corporation. In the absence of the Chairman of the Board and Co-Chief Executive Officer, the President and Co-Chief Executive Officer shall preside at all meetings of the Board of Directors and of the Stockholders. The President and Co-Chief Executive Officer, acting with the Chairman of the Board and Co-Chief Executive Officer, shall have the power to appoint and remove subordinate officers, agents and employees, except those elected or appointed by the Board of Directors. The President and Co-Chief Executive Officer, acting with the Chairman of the Board and Co-Chief Executive Officer, shall keep the Board of Directors and the Executive Committee fully informed and shall consult them concerning the business of the corporation. Either or both may sign with the Secretary or any other officer of the corporation thereunto authorized by the Board of Directors, certificates for shares of the corporation and any deeds, bonds, mortgages, contracts, checks, notes, drafts or other instruments which the Board of Directors has authorized to be executed, except in cases where the signing and execution thereof has been expressly delegated by these by-laws or by the Board of Directors to some other officer or agent of the corporation, or shall be required by law to be otherwise executed. Either or both the Chairman of the Board and the President shall vote, or give a proxy to any other officer of the corporation to vote, all shares of stock of any other corporation (except that the Board of Directors shall vote, or give a proxy to one or more member(s) of the Board to vote, all shares of the stock of Stewart Title Guaranty Company) standing in the name of the corporation and in general they shall perform all other duties normally incident to the office of President and Co-Chief Executive Officer and Chairman of the Board and Co-Chief Executive Officer and such other duties as may be prescribed by the stockholders, the Board of Directors or the Executive Committee from time to time. In the absence of the Chairman of the Board and Co-Chief Executive Officer, or in the event such officer is unable or refuses to act, the President and Co-Chief Executive Officer shall perform the duties and exercise the powers of the Chairman of the Board and Co-Chief Executive Officer. If the office of the Chairman of the Board is vacant, the President shall be the Chief Executive Officer. SECTION 6.8. Vice President. In the absence of the President and Co-Chief Executive Officer and the Chairman of the Board and Co-Chief Executive Officer, or in the event both are unable or refuse to act, either or both the Senior Executive Vice President-Assistant Chairman and the Senior Executive Vice President-Assistant President (or in the event both such offices are vacant or both such officers are unable or refuse to act, the Vice President-Finance) shall perform the duties and exercise the powers of the President and Co-Chief Executive Officer and the Chairman of the Board and Co-Chief Executive Officer. In the event the offices of both Chairman and President are vacant, the Senior Executive Vice President-Assistant Chairman shall perform the duties and exercise the powers of the Chairman and Co-Chief Executive Officer and the Senior Executive Vice President-Assistant President shall perform the duties and exercise the powers of the President and Co-Chief Executive Officer. Any Vice President may sign, with the Secretary or Assistant Secretary, certificates for shares of the corporation. The Vice Presidents shall perform such other duties as from time to time may be assigned to them by the Chairman, the President, the Board of Directors or the Executive Committee. SECTION 6.9. Secretary. The Secretary shall (a) keep the minutes of the meetings of the stockholders, the Board of Directors and committees of directors; (b) see that all notices are duly given in accordance with the provisions of these by-laws and as required by law; (c) be custodian of the corporate records and of the seal of the corporation, and see that the seal of the corporation or a facsimile thereof is affixed to all certificates for shares prior to the issue thereof and to all documents, the execution of which on behalf of the corporation under its seal is duly authorized in accordance with the provisions of these by-laws; (d) keep or cause to be kept a register of the post office address of each stockholder which shall be furnished by such stockholder; (e) sign with the President, or an Executive Vice President or Vice President, certificates for shares of the corporation, the issue of which shall have been authorized by resolution of the Board of Directors; (f) have general charge of the stock transfer books of the corporation; and (g) in general, perform all duties normally incident to the office of Secretary and such other duties as from time to time may be assigned to him by the President, the Board of Directors or the Executive Committee. SECTION 6.10. Treasurer. If required by the Board of Directors, the Treasurer shall give a bond for the faithful discharge of his duties in such sum and with such surety or sureties as the Board of Directors shall determine. He shall have charge and custody of and be responsible for all funds and securities of the corporation; receive and give receipts for monies due and payable to the corporation from any source whatsoever and deposit all such monies in the name of the corporation in such banks, trust companies or other depositories as shall be selected in accordance with the provisions of Section 7.3 of these by-laws, and in general, perform all duties normally incident to the office of Treasurer and such other duties as from time to time may be assigned to him by the President, the Board of Directors or the Executive Committee. SECTION 6.11. Controller. The Controller shall prepare, or cause to be prepared, for submission at each regular meeting of the Board of Directors, at each annual meeting of the stockholders, and at such other times as may be required by the Board of Directors, the President or the Executive Committee, a statement of financial condition of the corporation in such detail as may be required; and in general, perform all the duties incident to the office of Controller and such other duties as from time to time may be assigned to him by the President, the Board of Directors or the Executive Committee. SECTION 6.12. Assistant Secretary or Treasurer. The Assistant Secretaries and Assistant Treasurers shall, in general, perform such duties as shall be assigned to them by the Secretary or the Treasurer, respectively, or by the President, the Board of Directors or the Executive Committee. The Assistant Secretaries and Assistant Treasurers shall, in the absence of the Secretary or Treasurer, respectively, perform all functions and duties which such absent officers may delegate, but such delegation shall not relieve the absent officer from the responsibilities and liabilities of his office. The Assistant Secretaries may sign, with the President or a Vice President, certificates for shares of the corporation, the issue of which shall have been authorized by a resolution of the Board of Directors. The Assistant Treasurers shall respectively, if required by the Board of Directors, give bonds for the faithful discharge of their duties in such sums and with such sureties as the Board of Directors shall determine. ARTICLE VII CONTRACTS, CHECKS AND DEPOSITS SECTION 7.1. Contracts. Subject to the provisions of Section 6.1, the Board of Directors may authorize any officer, officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the corporation, and such authority may be general or confined to specific instances. SECTION 7.2. Checks, etc. All checks, demands, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the corporation, shall be signed by such officer or officers or such agent or agents of the corporation, and in such manner, as shall be determined by the Board of Directors. SECTION 7.3. Deposits. All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the corporation in such banks, trust companies or other depositories as the Board of Directors may select. ARTICLE VIII CERTIFICATES OF STOCK SECTION 8.1. Issuance. Each stockholder of this corporation shall be entitled to a certificate or certificates showing the number of shares of stock registered in his name on the books of the corporation. The certificates shall be in such form as may be determined by the Board of Directors, shall be issued in numerical order and shall be entered in the books of the corporation as they are issued. They shall exhibit the holder's name and number of shares and shall be signed by the President or a Vice President and by the Secretary or an Assistant Secretary. If any certificate is countersigned (1) by a transfer agent other than the corporation or any employee of the corporation, or (2) by a registrar other than the corporation or any employee of the corporation, any other signature on the certificate may be a facsimile. If the corporation shall be authorized to issue more than one class of stock or more than one series of any class, the designations, preferences and relative participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and rights shall be set forth in full or summarized on the face or back of the certificate which the corporation shall issue to represent such class of stock; provided that, except as otherwise provided by statute, in lieu of the foregoing requirements there may be set forth on the face or back of the certificate which the corporation shall issue to represent such class or series of stock, a statement that the corporation will furnish to each stockholder who so requests the designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and qualifications, limitations or restrictions of such preferences and rights. All certificates surrendered to the corporation for transfer shall be cancelled and no new certificate shall be issued until the former certificate for a like number of shares shall have been surrendered and cancelled, except that in the case of a lost, stolen, destroyed or mutilated certificate a new one may be issued therefor upon such terms and with such indemnity, if any, to the corporation as the Board of Directors may prescribe. Certificates shall not be issued representing fractional shares of stock. SECTION 8.2. Lost Certificates. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require or to give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate or certificates alleged to have been lost, stolen or destroyed, or both. SECTION 8.3. Transfers. Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. Transfers of shares shall be made only on the books of the corporation by the registered holder thereof, or by his attorney thereunto authorized by power of attorney and filed with the Secretary of the corporation or the Transfer Agent. SECTION 8.4. Registered Stockholders. The corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Delaware. ARTICLE IX DIVIDENDS SECTION 9.1. Declaration. Dividends upon the capital stock of the corporation, subject to the provisions of the Certificate of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property or in shares of capital stock, subject to the provisions of the Certificate of Incorporation. SECTION 9.2. Reserve. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the Board of Directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the Board of Directors shall think conclusive to the interest of the corporation, and the Directors may modify or abolish any such reserve in the manner in which it was created. ARTICLE X INDEMNIFICATION SECTION 10.1. Third Party Actions. The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. SECTION 10.2. Actions by or in the Right of the Corporation. The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for misconduct in the performance of his duty to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. SECTION 10.3. Determination of Conduct. The determination that an officer, director, employee or agent, has met the applicable standard of conduct set forth in Sections 10.1 and 10.2 (unless indemnification is ordered by a court) shall be made (1) by the Board of Directors by a majority vote of a quorum consisting of Directors who were not parties to such action, suit or proceeding, or (2) if such quorum is not obtainable, or even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (3) by the stockholders. SECTION 10.4. Payment of Expenses in Advance. Expenses incurred in defending a civil or criminal action, suit or proceeding shall be paid by the corporation in advance of the final disposition of such action, suit or proceeding as authorized by the Board of Directors upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the corporation as authorized in this Article X. SECTION 10.5. Indemnity Not Exclusive. The indemnification and advancement of expenses provided hereunder or granted pursuant hereto shall not be deemed exclusive of any other rights to which those seeking indemnification or the advancement of expenses may be entitled under any other by-law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. The indemnification and advancement of expenses provided hereunder or granted pursuant hereto shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. ARTICLE XI MISCELLANEOUS SECTION 11.1. Seal. The corporate seal shall have inscribed thereon the name of the corporation, and the words "Corporate Seal, Delaware." The seal may be used by causing it or a facsimile thereof to be impressed or affixed or otherwise reproduced. SECTION 11.2. Books. The books of the corporation may be kept (subject to any provision contained in the statutes) outside the State of Delaware at the offices of the corporation at Houston, Texas, or at such other place or places as may be designated from time to time by the Board of Directors. ARTICLE XII AMENDMENT These by-laws may be altered, amended or repealed at any regular or special meeting of the Board of Directors if (i) notice of such alteration, amendment or repeal is contained in the notice of such meeting and (ii) such alteration, amendment or repeal is approved by a majority vote of the directors elected by the holders of the Common Stock and a majority vote of the directors elected by the holders of Class B Common Stock; with each such class of directors voting separately. EX-4 3 10-Q FOR 9/30/98 EXHIBIT 4 STEWART INFORMATION SERVICES CORPORATION RIGHTS OF COMMON AND CLASS B COMMON STOCKHOLDERS September 30, 1998 Common and Class B Common stockholders have the same rights, except (1) no cash dividend may be paid on Class B Common Stock and (2) the two classes of stock are voted separately in electing directors. A provision in the by-laws requires an affirmative vote of at least two-thirds of the directors to approve any proposal which may come before the directors. This by-law provision cannot be changed without majority vote of each class of stock. Common stockholders, with cumulative voting rights, may elect five or more of the nine directors. Class B Common stockholders may, with no cumulative voting rights, elect four directors, if 350,000 or more shares of Class B Common stock are outstanding; three directors, if between 200,000 and 350,000 shares of Class B Common Stock are outstanding; if less than 200,000 shares of Class B Common Stock are outstanding, the Common Stock and the Class B Common Stock shall be voted as a single class upon all matters, with the right to cumulate votes for the election of directors. No change in the Certificate of Incorporation which would affect the Common Stock and the Class B Common Stock unequally shall be made without the affirmative vote of at least a majority of the outstanding shares of each class, voting as a class. Class B Common Stock may, at any time, be converted by its holders into Common Stock on ashare-for-share basis. Such conversion is mandatory on any transfer to a person not a lineal descendant (or spouse, trustee, etc. of such descendant) of William H. Stewart. EX-28.2 4 10-Q FOR 9/30/98 EXHIBIT 28.2 STEWART INFORMATION SERVICES CORPORATION DETAILS OF INVESTMENTS SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
SEP 30 DEC 31 1998 1997 --------- -------- ($000 Omitted) Investments, at market, partially restricted: Short-term investments 49,022 35,761 U. S. Treasury and agency obligations 26,691 24,867 Municipal bonds 120,358 110,627 Mortgage-backed securities 22,014 27,085 Corporate bonds 51,185 42,718 Equity securities 4,923 4,209 --------- -------- TOTAL INVESTMENTS 274,193 245,267 ========= ========
NOTE: The total appears as the sum of three amounts on the balance sheet presented on page 2: (1) `short-term investments', (2)`investments - statutory reserve funds' and (3) `investments - other'. EX-27 5 FDS 9/30/98
7 STEWART INFORMATION SERVICES CORPORATION THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AS OF SEPTEMBER 30, 1998 AND THE RELATED STATEMENT OF EARNINGS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1000 9-MOS DEC-31-1998 SEP-30-1998 225,171 0 0 0 0 0 274,193 43,066 0 0 471,597 168,680 0 0 0 16,631 7,019 0 0 239,088 471,597 632,912 13,479 403 36,112 28,523 0 0 54,170 20,239 33,931 0 0 0 33,931 4.87 4.80 156,791 27,538 1,772 (3,452) (13,969) 168,680 0 Includes short-term investments. Includes reserve balance increase of $787 from the acquisition of an existing underwriter.
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