-----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, DV/mUKV7sH7+sk3sz5CKgfAX1KzfI3AZeAoud4q7ck1xFKQYAIUeyPbOZxbX8xeF 93y3caJNeI2MC9jeggdbnQ== 0000950129-98-001183.txt : 19980325 0000950129-98-001183.hdr.sgml : 19980325 ACCESSION NUMBER: 0000950129-98-001183 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980324 SROS: NYSE 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-K405 SEC ACT: SEC FILE NUMBER: 001-02658 FILM NUMBER: 98571707 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-K405 1 STEWART INFORMATION SERVICES CORP - DATED 12/31/97 1 - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] ------------ For the fiscal year ended December 31, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] 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 incorporation or organization) (I.R.S. Employer Identification No.) 1980 POST OAK BLVD., HOUSTON, TEXAS 77056 (Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 625-8100 Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, $1 PAR VALUE 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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] As of March 1, 1998, 6,389,846 shares of Common Stock, $1 par value, and 525,006 shares of Class B Common Stock, $1 par value, were outstanding. The aggregate market value as of such date of the Common Stock (based upon the closing sales price of the Common Stock as reported by the NYSE on February 27, 1998 of Stewart Information Services Corporation held by non-affiliates of the Registrant was approximately $200,513,000. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Stewart Information Services Corporation Annual Report to Stockholders for the year ended December 31, 1997 are incorporated by reference in Parts I and II of this document. Portions of the definitive proxy statement (the "Proxy Statement"), relating to the annual meeting of the Registrant's stockholders to be held April 24, 1998, are incorporated by reference in Parts III and IV of this document. - -------------------------------------------------------------------------------- 2 FORM 10-K ANNUAL REPORT YEAR ENDED DECEMBER 31, 1997 TABLE OF CONTENTS PART I
ITEM NO. PAGE --- ---- 1. Business ................................................................. 1 2. Properties ............................................................... 3 3. Legal Proceedings ........................................................ 4 4. Submission of Matters to a Vote of Security Holders ...................... 4 PART II 5. Market for Registrant's Common Equity and Related Stockholder Matters .... 5 6. Selected Financial Data .................................................. 6 7. Management's Discussion and Analysis of Financial Condition and Results of Operations ............................................................. 6 8. Financial Statements and Supplementary Data .............................. 6 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ............................................................. 6 PART III 10. Directors and Executive Officers of the Registrant ....................... 7 11. Executive Compensation ................................................... 7 12. Security Ownership of Certain Beneficial Owners and Management ........... 7 13. Certain Relationships and Related Transactions ........................... 7 PART IV 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K ......... 8 Signatures .............................................................. 9
i 3 P A R T I ITEM 1. BUSINESS Stewart's primary business is title insurance. Stewart issues policies through more than 3,800 issuing locations on homes and other real property located in all 50 states, the District of Columbia and several foreign countries. Stewart also sells computer-related services and information, as well as mapping products and geographic information systems, to government and private entities, both domestic and foreign. Examination and closing. The purpose of a title examination is to ascertain the ownership of the property being transferred, what debts are owed on it and what the title policy coverage will be. This involves searching for and examining documents such as deeds, mortgages, wills, divorce decrees, court judgments, liens, paving assessments and tax records. At the closing or "settlement", the seller executes a deed to the new owner. The buyer signs new mortgage documents. Closing funds are then disbursed to the seller, the prior mortgage company, real estate brokers, the title company and others. The documents are then recorded in the public records. A title policy is generally issued to both the lender and new owner. Title policies. Lenders in the USA generally require title insurance as a condition to making a loan on real estate, including securitized lending. This is to assure lenders of the priority of their lien position. The purchasers of the property want the assurance given in their policy against claims that may arise against their ownership. The face amount of the policy is normally the purchase price or the amount of the related loan. Title insurance is substantially different from other types of insurance. Fire, auto, health and life insurance protect against losses and events in the future. In contrast, title insurance seeks to eliminate most risks through the examination and settlement process. Losses. Losses on policies occur because of a title defect not discovered during the examination and settlement process. Other reasons for losses include forgeries, misrepresentations, unrecorded construction liens, the failure to pay off existing liens, mishandling of settlement funds, issuance by agents of unauthorized coverages and other legal issues. Some claimants seek damages in excess of policy limits. Such claims are based on various legal theories usually alleging misrepresentation by an issuing office. Although the Company vigorously defends against spurious claims, it has from time to time incurred a loss in excess of policy limits. Experience shows that most claims against policies and claim payments are made in the first six years after the policy has been issued, although claims may be made many years later. By their nature, claims are often complex, vary greatly in dollar amounts and are affected by economic and market conditions and the legal environment existing at the time of settlement of the claims. Factors affecting revenues. Title revenues are closely related to the level of activity in the real estate market and the prices at which real estate sales are made. Real estate sales are directly affected by the availability and cost of money to finance purchases. Other factors include demand by buyers, consumer confidence and family incomes. These factors may override the seasonal nature of the title business. Generally, the third quarter is the most active in terms of real estate sales and the first quarter is the least active. -1- 4 Selected information for the national real estate industry follows (1997 amounts are preliminary):
- ----------------------------------------------------------------------------------------------- 1997 1996 1995 - ----------------------------------------------------------------------------------------------- Housing starts - millions ............... 1.48 1.47 1.35 Housing resales - millions .............. 4.22 4.09 3.80 Housing resales - median sales price in $ thousands ............................. 124.1 118.1 112.9
Customers. The primary sources of title business are attorneys, builders, developers, lenders and real estate brokers. No one customer was responsible for as much as five percent of Stewart's title revenues in any of the last three years. Titles insured included residential and commercial properties, undeveloped acreage, farms and ranches. Service, location, financial strength, size and related factors affect customer acceptance. Increasing market share is accomplished primarily by providing superior service. The parties to a closing are concerned with personal schedules and the interest and other costs associated with the delays in the settlement. The rates charged to customers are regulated to varying degrees by different states. Market share. Estimating a title insurer's market share is difficult. Stewart believes it is the leading title insurer in Texas and in a number of cities across the USA. Based on unconsolidated statutory net premiums written for 1996 (1997 amounts are not available), Stewart Title Guaranty Company ("Guaranty") is the fourth largest title insurer in America. Competitors include (names are abbreviated) Chicago Title, Commonwealth, Fidelity, First American, Lawyers Title and Old Republic (Commonwealth and Lawyers Title merged in January 1998). As do most title insurers, Stewart also competes with abstractors, attorneys who issue title opinions and attorney-owned title insurance bar funds. A number of home builders, financial institutions, real estate brokers and others own or control title insurance agents, some of which issue policies underwritten by Guaranty. This "controlled" business also provides competition for Stewart's agents. Offices. The number of locations issuing Stewart policies was 3,798 at December 31, 1997, compared to 3,763 a year earlier and 3,549 two years earlier. Of these totals, 3,517, 3,488 and 3,302 were independent agents at December 31, 1997, 1996, and 1995, respectively. Title revenues by state. The approximate amounts and percentages of Stewart's consolidated title revenues (excluding other revenues) by state for the last three years were:
AMOUNTS ($ MILLIONS) PERCENTAGES ========================== ========================== 1997 1996 1995 1997 1996 1995 ---- ---- ---- ---- ---- ---- California ....... 123 119 97 19 20 20 Texas ............ 116 111 93 18 18 19 New York ......... 51 50 35 8 8 7 Florida .......... 47 40 29 7 7 6 Colorado ......... 20 18 16 3 3 3 Nevada ........... 19 18 14 3 3 3 Arizona .......... 19 17 14 3 3 3 All others ....... 262 236 198 39 38 39 ---- ---- ---- ---- ---- ---- 657 609 496 100 100 100 ==== ==== ==== ==== ==== ====
-2- 5 Regulations. Title insurance companies are subject to extensive state regulations covering rates, agent licensing, policy forms, trade practices, reserve requirements, investments and the flow of funds between an insurer and its parent or its subsidiaries and any similar related party transaction. Kickbacks and similar practices are prohibited by certain state and federal laws. Employees. Stewart and its subsidiaries employed approximately 4,569 persons at December 31, 1997. ITEM 2. PROPERTIES The Registrant and its wholly-owned subsidiary, Stewart Title Guaranty Company and its subsidiaries ("Guaranty"), own or lease the following properties: The following table sets forth information about the Registrant's other principal properties:
Location Type Use Size Acquired In - ------------------------ ---------------------- ------------------- -------------- ----------- Houston, Texas Leased office building Executive office of 218,318 sq. ft. (1) the Registrant and Guaranty Corpus Christi, Texas Leased office building Office of Guaranty 27,000 sq. ft (2) Houston, Texas Leased office building Office of Guaranty 26,420 sq. ft (3) Dallas, Texas Leased office building Office of Guaranty 25,117 sq. ft (4) Austin, Texas Leased office building Office of Guaranty 24,773 sq. ft. (5) Los Angeles, California Leased office building Office of Guaranty 22,466 sq. ft. (2) San Diego, California Leased office building Office of Guaranty 20,020 sq. ft. (4) Riverside, California Leased office building Office of Guaranty 20,968 sq. ft. (2) Fresno, California Leased office building Office of Guaranty 13,204 sq. ft. (2) San Antonio, Texas Owned office building Office of Guaranty 26,769 sq. ft. 1980 & 1982 Galveston, Texas Owned office building Office of Guaranty 50,000 sq. ft. 1905 Phoenix, Arizona Owned office building Office of Guaranty 24,459 sq. ft. 1981 Phoenix, Arizona Owned office building Office of Guaranty 17,500 sq. ft. 1985 Tucson, Arizona Owned office building Office of Guaranty 24,000 sq. ft. 1974
(1) This lease terminates in 2004. (2) These leases terminate in 1998. (3) These leases terminate in 2002. (4) These leases terminate in 2000. (5) This lease terminates in 2001. The Registrant leases offices at approximately 287 locations. The average term for all such leases is approximately six years. The leases expire from 1998 to 2006. The Registrant believes it will not have any difficulty obtaining renewals of leases as they expire or, alternatively, leasing comparable property. The aggregate annual rental expense under all leases was approximately $20,520,000. All buildings and equipment owned or leased by the Registrant are considered by the Registrant to be well maintained, adequately insured and generally sufficient for the Registrant's purposes. Substantially all of the Registrant's owned real property above is subject to mortgages. -3- 6 ITEM 3. 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. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. -4- 7 P A R T II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The following table sets forth the high and low sales prices of the Common Stock for each fiscal period indicated, as reported by NYSE, and the amount of cash dividends paid per share.
HIGH LOW DIVIDENDS ---- --- --------- 1997: First quarter ................................. 21.13 19.88 .06 Second quarter ................................ 21.00 18.75 .06 Third quarter ................................. 26.44 20.50 .07 Fourth quarter ................................ 29.25 25.00 .07 1996: First quarter ................................. 21.38 19.63 .06 Second quarter ................................ 21.25 19.63 .06 Third quarter ................................. 21.00 20.00 .06 Fourth quarter ................................ 22.63 20.25 .06
The Company has paid regular quarterly cash dividends on its Common Stock since 1972. The Company's Certificate of Incorporation provides that no cash dividends may be paid on the Class B Common Stock. While it is the current intention of the Board of Directors to continue to pay quarterly cash dividends on its Common Stock, the payment of future dividends necessarily will depend on the earnings and financial needs of the Company, as well as applicable legal restrictions. The number of shareholders of record as of December 31, 1997 was 2,220. -5- 8 ITEM 6. SELECTED FINANCIAL DATA Selected financial data have been included on Page 18 of the Registrant's Annual Report to Stockholders for the year ended December 31, 1997, and such information is incorporated herein by reference. See Exhibit 13 hereto. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information required by this Item is set forth on Pages 19 through 21 of the Registrant's Annual Report to Stockholders for the year ended December 31, 1997, and such information is incorporated herein by reference. See Exhibit 13 hereto. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
1997 Annual Report to Stockholders Page No. -------- Independent Auditors' Report ................................... 21 Consolidated Statements of Earnings and Retained Earnings for the Years Ended December 31, 1997, 1996 and 1995 .................... 22 Consolidated Balance Sheets as of December 31, 1997 and 1996 .... 23 Consolidated Statements of Cash Flows for the Years Ended December 31, 1997, 1996 and 1995 ................................ 24 Notes to Consolidated Financial Statements ...................... 25
See Exhibit 13. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. -6- 9 P A R T III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by this Item is set forth in the Registrant's Proxy Statement relating to the annual meeting of the Registrant's stockholders to be held April 24,1998, under the captions "Election of Directors" and "Executive Compensation", and such information is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION The information required by this Item is set forth in the Registrant's Proxy Statement relating to the annual meeting of the Registrant's stockholders to be held April 24, 1998, under the caption "Executive Compensation", and such information is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this Item is set forth in the Registrant's Proxy Statement relating to the annual meeting of the Registrant's stockholders to be held April 24, 1998, under the caption "Security Ownership of Certain Beneficial Owners and Management", and such information is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this Item is set forth in the Registrant's Proxy Statement relating to the annual meeting of the Registrant's stockholders to be held April 24, 1998, under the caption "Executive Compensation", and such information is incorporated herein by reference. -7- 10 P A R T IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) 1. and 2. Financial Statements and Financial Statement Schedules Item 8 of this Report on Form 10-K lists certain consolidated financial statements of the Registrant and its subsidiaries incorporated by reference to the Annual Report to Stockholders for the year ended December 31, 1997, which includes a reference to appropriate page numbers in such Annual Report.
--------- Form 10-K Page No. --------- Independent Auditors' Report ........................................ 10 Reports of Independent Auditors ..................................... 11 Schedule II - Financial information of the Registrant (Parent Company) 40 Schedule V - Valuation and Qualifying Accounts ....................... 44
All other schedules are omitted, as the required information is inapplicable or the information is presented in the consolidated financial statements or related notes. (b) Reports on Form 8-K No reports on Form 8-K were filed during the three months ended December 31, 1997. (c) Exhibits 3.1 - Certificate of Incorporation of the Registrant, as amended April 30, 1993 3.2 - By-Laws of the Registrant 4 - Rights of Common and Class B Common Stockholders (incorporated by reference to Exhibits 3.1 and 3.2 hereto) 10.1 - Summary of agreements as to payment of bonuses to certain executive officers 10.2 - Deferred Compensation Agreements dated March 10, 1986, amended July 24, 1990 and October 30, 1992, between the Registrant and certain executive officers. 13 - Annual Report to Stockholders for 1997 (the financial text of the annual report incorporated herein by reference in Item 6 of Part II of this report) 21 - Subsidiaries of the Registrant 23 - Consents of Independent Certified Public Accountants, including consents to incorporation by reference of their reports into previously filed Securities Act registration statements. 27 - Financial Data Schedule -8- 11 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities 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) By: Carloss Morris --------------------------------------- Carloss Morris, Co-Chief Executive Officer and Chairman of the Board of Directors By: Stewart Morris --------------------------------------- Stewart Morris, Co-Chief Executive Officer, President and Director By: Max Crisp --------------------------------------- Max Crisp, Vice President-Finance, Secretary, Treasurer, Director and Principal Financial and Accounting Officer Dated: March 18, 1998 Pursuant to the requirements of the Securities Exchange Act of 1934 this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated: Max Crisp Director March 18, 1998 - -------------------------------- -------------- (Max Crisp) E. Douglas Hodo Director March 18, 1998 - -------------------------------- -------------- (E. Douglas Hodo) C. M. Hudspeth Director March 18, 1998 - -------------------------------- -------------- (C. M. Hudspeth) Carloss Morris Director March 18, 1998 - -------------------------------- -------------- (Carloss Morris) Stewart Morris Director March 18, 1998 - -------------------------------- -------------- (Stewart Morris) -9- 12 Independent Auditors' Report To the Board of Directors and Stockholders of Stewart Information Services Corporation: Under date of February 13, 1998, we reported on the consolidated balance sheets of Stewart Information Services Corporation and subsidiaries as of December 31, 1997 and 1996, and the related consolidated statements of earnings and retained earnings and cash flows for each of the years in the three-year period ended December 31, 1997, as contained in the 1997 annual report to stockholders. These consolidated financial statements and our report thereon are incorporated by reference in the annual report on Form 10-K for the year 1997. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related financial statement schedules as listed in the accompanying index. These financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statement schedules based on our audits. In our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. /s/ KPMG PEAT MARWICK LLP Houston, Texas February 13, 1998 -10- 13 REPORT OF INDEPENDENT ACCOUNTANT Stewart Title Company El Paso, Texas We have audited the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts as of December 31, 1997 and 1996, prepared from the accounts maintained at your office at 500 N. Mesa, Suite 300, El Paso, Texas. This financial statement is the responsibility of the company's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts referred to above presents fairly, in all material respects, the assets and liabilities of such accounts handled by Stewart Title Company, El Paso, Texas, as of December 31, 1997 and 1996, in conformity with generally accepted accounting principles. Our audit has been made for the purpose of forming an opinion on the basic financial statement taken as a whole. The supplemental information contained in Exhibits C through F, inclusive, and Exhibit H of this report are presented as additional information and is not a required part of the basic financial statement. Such information has been subjected to the audit procedures applied in the examination of the basic statement of assets and liabilities, and is fairly stated in all material respects in relation to the basic statement of assets and liabilities, taken as a whole. /s/ M. TIMOTHY O'ROARK, C.P.A. M. TIMOTHY O'ROARK, C.P.A. El Paso, Texas February 3, 1998 -11- 14 To the Board of Directors Stewart Title of California San Jose, California INDEPENDENT AUDITOR'S REPORT We have audited the accompanying balance sheet of Stewart Title of California at December 31, 1996 and 1995 and the related statements of income, stockholders' equity and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Stewart Title of California as of December 31, 1996 and 1995, and the results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles. /s/ GRANT BENNETT ACCOUNTANTS GRANT BENNETT ACCOUNTANTS A PROFESSIONAL CORPORATION Certified Public Accountants January 16, 1997 -12- 15 To the Board of Directors Stewart Title of Monterey County Monterey, California INDEPENDENT AUDITOR'S REPORT We have audited the accompanying balance sheet of Stewart Title of Monterey County at December 31, 1996 and 1995 and the related statements of income, retained earnings and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Stewart Title of Monterey County as of December 31, 1996 and 1995, and the results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles. /s/ GRANT BENNETT ACCOUNTANTS GRANT BENNETT ACCOUNTANTS A PROFESSIONAL CORPORATION Certified Public Accountants January 7, 1997 -13- 16 To the Board of Directors Stewart Title of Fresno County Fresno, California INDEPENDENT AUDITOR'S REPORT We have audited the accompanying balance sheets of Stewart Title of Fresno County at December 31, 1996 and 1995 and the related statements of income, stockholders' equity and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Stewart Title of Fresno County as of December 31, 1996 and 1995, and the results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles. /s/ GRANT BENNETT ACCOUNTANTS GRANT BENNETT ACCOUNTANTS A PROFESSIONAL CORPORATION Certified Public Accountants January 8, 1997 -14- 17 To the Board of Directors Stewart Tide of Modesto Modesto, California INDEPENDENT AUDITOR'S REPORT We have audited the accompanying balance sheets of Stewart Title of Modesto at December 31, 1996 and 1995, and the related statements of income, retained earnings and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Stewart Title of Modesto as of December 31, 1996 and 1995, and the results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles. /s/ GRANT BENNETT ACCOUNTANTS GRANT BENNETT ACCOUNTANTS A PROFESSIONAL CORPORATION Certified Public Accountants January 7, 1997 -15- 18 INDEPENDENT AUDITOR'S REPORT The Board of Directors Stewart Title Dallas, Inc. dba: Stewart Title North Texas, Inc. We have audited the Statement of assets and Liabilities of Trust (Escrow) Fund Accounts as of December 31, 1997, prepared from the accounts maintained at your office at 5728 LBJ freeway, Dallas, Texas. This financial statement is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts referred to above presents fairly, in all material respects, the assets and liabilities of such accounts handled by Stewart Title Dallas, Inc. dba: Stewart Title North Texas, Inc, as of December 31, 1997 in conformity with generally accepted accounting principles. Our audit was conducted for the purpose of forming an opinion on the basic financial statement taken as a whole. The supplemental information contained in Exhibits C through F, inclusive, and Exhibit H of this report are presented as additional information and are not a required part of the basic financial statement. Such information has been subjected to the audit procedures applied in the examination of the basic statement of assets and liabilities, and is fairly stated in all material respects in relation to the basic statement of assets and liabilities, taken as a whole. /s/ WILKERSON & ARTHUR, P.C. Wilkerson & Arthur, P.C. January 28, 1998 -16- 19 INDEPENDENT AUDITOR'S REPORT The Board of Directors Priority Title Company of Dallas, L.L.C. We have audited the Statement of assets and Liabilities of Trust (Escrow) Fund Accounts as of December 31, 1997, prepared from the accounts maintained at your office at 5728 LBJ freeway, Dallas, Texas. This financial statement is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation, We believe that our audit provides a reasonable basis for our opinion, In our opinion, the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts referred to above presents fairly, in all material respects, the assets and liabilities of such accounts handled by Priority Title Company of Dallas, L.L.C. as of December 31, 1997 in conformity with generally accepted accounting principles. Our audit was conducted for the purpose of forming an opinion on the basic financial statement taken as a whole. The supplemental information contained in Exhibits C through F, inclusive, and Exhibit H of this report are presented as additional information and are not a required part of the basic financial statement, Such information has been subjected to the audit procedures applied in the examination of the basic statement of assets and liabilities, and is fairly stated in all material respects in relation to the basic statement of assets and liabilities, taken as a whole. /s/ WILKERSON & ARTHUR, P.C. Wilkerson & Arthur, P,C. January 28, 1998 -17- 20 INDEPENDENT AUDITORS' REPORT Board of Directors Stewart Title - Houston Division We have audited the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts of the National Title Services Division of Stewart Title Guaranty Company as of December 31, 1997, prepared from the accounts maintained in your office at 1980 Post Oak Boulevard, Houston, Texas. The financial statement is the responsibility of the company's management. Our responsibility is to express an opinion on this financial statement based on our audit. we conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts referred to above presents fairly, in all material respects, the assets and liabilities of such accounts handled by Stewart Title Guaranty Company as of December 31, 1997, in conformity with generally accepted accounting principles. Our audit has been made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental information contained in Exhibits C through F, inclusive, and Exhibit H of this report is presented as additional information and is not a required part of the basic financial statement. Such information has been subjected to the audit procedures applied in the examination of the basic statement of assets and liabilities, and is fairly stated in all material respects in relation to the basic statement of assets and liabilities, taken as a whole. /s/ GRATZER, CLEM & COMPANY, P.C. Gratzer, Clem & Company, P.C. Certified Public Accountants January 23, 1998 -18- 21 INDEPENDENT AUDITORS' REPORT Board of Directors Stewart Title - Houston Division I have audited the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts of the National Title Services Division of Stewart Title Guaranty Company as of December 31, 1996, prepared from the accounts maintained in your office at 1980 Post Oak Boulevard, Houston, Texas. The financial statement is the responsibility of the company's management. My responsibility is to express an opinion on this financial statement based on my audit. I conducted my audit in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made my management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion. In my opinion, the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts referred to above presents fairly, in all material respects, the assets and liabilities of such accounts handled by the National Title Services Division of Stewart Title Guaranty Company as of December 31, 1996, in conformity with generally accepted accounting principles. My audit has been made for the purpose of forming an opinion on the basic financial statement taken as a whole. The supplemental information contained in Exhibits C through F, inclusive, and Exhibit H of this report are presented as additional information and is not a required part of the basic financial statement. Such information has been subjected to the audit procedures applied in the examination of the basic statement of assets and liabilities, and is fairly stated in all material respects in relation to the basic statement of assets and liabilities, taken as a whole. /s/ GINNY SANDERS MAY, CPA January 21, 1997 -19- 22 INDEPENDENT AUDITORS' REPORT Board of Directors Stewart Title - Houston Division We have audited the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts as of December 31, 1997, prepared from the accounts maintained in your office at 1980 Post Oak Boulevard, Houston, Texas. The financial statement is the responsibility Of the company's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts referred to above presents fairly, in all material respects, the assets and liabilities of such accounts handled by Stewart Title - Houston Division as of December 31, 1997, in conformity with generally accepted accounting principles. Our audit has been made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental information contained in Exhibits C through F, inclusive, and Exhibit H of this report is presented as additional information and is not a required part of the basic financial statement. Such information has been subjected to the audit procedures applied in the examination of the basic statement of assets and liabilities, and is fairly stated in all material respects in relation to the basic statement of assets and liabilities, taken as a whole. /s/ GRATER, CLEM & COMPANY, P.C. Gratzer, Clem & Company, P.C. Certified Public Accountants January 21, 1998 -20- 23 INDEPENDENT AUDITORS' REPORT Board of Directors Stewart Title - Houston Division I have audited the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts as of December 31, 1996, prepared from the accounts maintained in your office at 1980 Post Oak Boulevard, Houston, Texas. The financial statement is the responsibility of the company's management. My responsibility is to express an opinion on this financial statement based on my audit. I conducted my audit in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made my management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion. In my opinion, the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts referred to above presents fairly, in all material respects, the assets and liabilities of such accounts handled by the Houston Division of Stewart Title as of December 31, 1996, in conformity with generally accepted accounting principles. My audit has been made for the purpose of forming an opinion on the basic financial statement taken as a whole. The supplemental information contained in Exhibits C through F, inclusive, and Exhibit H of this report are presented as additional information and is not a required part of the basic financial statement. Such information has been subjected to the audit procedures applied in the examination of the basic statement of assets and liabilities, and is fairly stated in all material respects in relation to the basic statement of assets and liabilities, taken as a whole. /s/ GINNY SANDERS MAY, CPA January 21, 1997 -21- 24 INDEPENDENT AUDITORS' REPORT Managers Priority Title Company of Houston, L.L.C. We have audited the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts as of December 31, 1997, prepared from the accounts maintained in your office at 1980 Post Oak Boulevard, Houston, Texas. The financial statement is the responsibility of the company's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts referred to above presents fairly, in all material respects, the assets and liabilities of such accounts handled by Priority Title Company of Houston, L.L.C. as of December 31, 1997, in conformity with generally accepted accounting principles. Our audit has been made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental information contained in Exhibits C through F, inclusive, and Exhibit H of this report is presented as additional information and is not a required part of the basic financial statement. Such information has been subjected to the audit procedures applied in the examination of the basic statement of assets and liabilities, and is fairly stated in all material respects in relation to the basic statement of assets and liabilities, taken as a whole. /s/ GRATZER, CLEM & COMPANY, P.C. Gratzer, Clem & Company, P.C. Certified Public Accountants January 15, 1998 -22- 25 INDEPENDENT AUDITORS' REPORT Managers Priority Title Company of Houston, L.L.C. I have audited the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts as of December 31, 1996, prepared from the accounts maintained in your office at 1980 Post Oak Boulevard, Houston, Texas. The financial statement is the responsibility of the company's management. My responsibility is to express an opinion on this financial statement based on my audit. I conducted my audit in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made my management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion. In my opinion, the statement of Assets and Liabilities of Trust (Escrow) Fund Accounts referred to above presents fairly, in all material respects, the assets and liabilities of such accounts handled by Priority Title Company of Houston, L.L.C. as of December 31, 1996, in conformity with generally accepted accounting principles. My audit has been made for the purpose of forming an opinion on the basic financial statement taken as a whole. The supplemental information contained in Exhibits C through F, inclusive, and Exhibit H of this report are presented as additional information and is not a required part of the basic financial statement. Such information has been subjected to the audit procedures applied in the examination of the basic statement of assets and liabilities, and is fairly stated in all material respects in relation to the basic statement of assets and liabilities, taken as a whole. /s/ GINNY SANDERS MAY, CPA January 21, 1997 -23- 26 INDEPENDENT AUDITORS' REPORT Managers Premier Title Company of Houston, L.L.C. We have audited the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts as of December 31, 1997, prepared from the accounts maintained in your office at 1980 Post Oak Boulevard, Houston, Texas. The financial statement is the responsibility of the company's management. Our responsibility is to express an opinion on this financial statement based on our audit. we conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts referred to above presents fairly, in all material respects, the assets and liabilities of such accounts handled by Premier Title Company of Houston, L.L.C. as of December 31, 1997, in conformity with generally accepted accounting principles. Our audit has been made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental information contained in Exhibits C through F, inclusive, and Exhibit H of this report is presented as additional information and is not a required part of the basic financial statement. Such information has been subjected to the audit procedures applied in the examination of the basic statement of assets and liabilities, and is fairly stated in all material respects in relation to the basic statement of assets and liabilities, taken as a whole. /s/ GRATZER, CLEM & COMPANY, P.C. Gratzer, Clem & Company, P.C. Certified Public Accountants January 16, 1998 -24- 27 INDEPENDENT AUDITORS' REPORT Managers MHI Title Company of Houston, L.L.C. We have audited the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts as of December 31, 1997, prepared from the accounts maintained in your office at 1980 Post Oak Boulevard, Houston, Texas. The financial statement is the responsibility of the company's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts referred to above presents fairly, in all material respects, the assets and liabilities of such accounts handled by MHI Title Company of Houston, L.L.C. as of December 31, 1997, in conformity with generally accepted accounting principles. Our audit has been made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental information contained in Exhibits C through F, inclusive, and Exhibit H of this report is presented as additional information and is not a required part of the basic financial statement. Such information has been subjected to the audit procedures applied in the examination of the basic statement of assets and liabilities, and is fairly stated in all material respects in relation to the basic statement of assets and liabilities, taken as a whole. /s/ GRATZER, CLEM & COMPANY, P.C. Gratzer, Clem & Company, P.C. Certified Public Accountants January 16, 1998 -25- 28 INDEPENDENT AUDITORS' REPORT Board of Directors Stewart Title Company - Beaumont Division Beaumont, Texas 77706 We have audited the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts as of December 31, 1997, prepared from the accounts maintained at your office at 2390 N. Dowlen Road, Beaumont, Texas. This financial statement is the responsibility of the company's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts referred to above presents fairly, in all material respects, the assets and liabilities of such accounts handled by Stewart Title Company - Beaumont Division, as of December 31, 1997, in conformity with generally accepted accounting principles. Our audit has been made for the purpose of forming an opinion on the basic financial statement taken as a whole. The supplemental information contained in Exhibits C through F, inclusive, and Exhibit H of this report are presented as additional information and is not a required part of the basic financial statement. Such information has been subjected to the audit procedures applied in the examination of the basic statement of assets and liabilities, and is fairly stated in all material respects in relation to the basic statement of assets and liabilities, taken as a whole. Very truly yours, /s/ EDGAR, KIKER & CROSS, L.L.P. EDGAR, KIKER & CROSS, L.L.P. Certified Public Accountants RTE/rh -26- 29 INDEPENDENT AUDITOR'S REPORT Board of Directors Stewart Title Company Houston, Texas I have examined the statements of assets and liabilities of trust (escrow) fund accounts as of December 31, 1997 and 1996, prepared from the accounts maintained at your office in San Antonio, Texas. My examination, which was limited to such accounts, was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as I considered necessary in the circumstances. In my opinion, the aforementioned statements of assets and liabilities of trust (escrow) fund accounts (not separately presented herein) present fairly the assets and liabilities of such accounts handled by the San Antonio Division of Stewart Title Company, as of December 31, 1997 and 1996, in accordance with generally accepted accounting principles, applied on a consistent basis. /s/ JIM S. WALKER --------------------------- Jim S. Walker Certified Public Accountant Beaumont, Texas January 20, 1998 -27- 30 INDEPENDENT AUDITOR'S REPORT Board of Directors Stewart Title Company Amarillo, Texas District Office We have audited the accompanying Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts as of December 31, 1997, prepared from the accounts maintained at your office at Amarillo, Texas. This financial statement is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit of the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts provides a reasonable basis for our opinion. In our opinion, the accompanying Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts referred to above presents fairly, in all material respects, the assets and liabilities of such accounts handled by Stewart Title Company, for the year then ended in conformity with generally accepted accounting principles. Our audit has been made for the purpose of forming an opinion on the basis financial statement taken as a whole. The supplemental information contained in Exhibits C through F, inclusive, and Exhibit H of this report are presented as additional information and is not a required part of the basic financial statement. Such information has been subjected to the audit procedures applied in the audit of the basic Statement of Assets and Liabilities, and is fairly stated in all material respects in relation to the basic Statement of Assets and Liabilities, taken as a whole. /s/ DOSHIER, PICKENS & FRANCIS, P.C. DOSHIER, PICKENS, & FRANCIS, P.C. January 16, 1998 -28- 31 INDEPENDENT AUDITORS' REPORT Board of Directors Stewart Title of Corpus Christi, Inc. Corpus Christi, Texas We have audited the Statements of Assets and Liabilities of Trust (Escrow] Fund Accounts as of December 31, 1997 and 1996, prepared from the accounts maintained at your office at Corpus Christi, Texas. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit of the financial statements provides a reasonable basis for our opinion. In our opinion, the Statements of Assets and Liabilities of Trust [Escrow] Fund Accounts referred to above presents fairly, in all material respects, the assets and liabilities of such accounts handled by Stewart Title of Corpus Christi, Inc., as of December 31, 1997 and 1996, in conformity with generally accepted accounting principles. Our audit has been made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental information contained in Exhibits C through F, inclusive, and Exhibit H of this report is presented as additional information and is not a required part of the basic financial statements. Such Information has been subjected to the audit procedures applied in the examination of the basic statements of assets and liabilities, and is fairly stated in all material respects In relation to the basic statements of assets and liabilities, taken as a whole. /s/ FANCHER AND COMPANY FANCHER AND COMPANY January 22, 1998 -29- 32 REPORT OF INDEPENDENT ACCOUNTANT Board of Directors Stewart Title of Lubbock, Inc, 7802 Indiana Avenue Lubbock, Texas 79423 I have audited the accompanying Statement of Assets and Liabilities of Trust (Escrow) Accounts as of December 31, 1997 and 1996, prepared from the accounts maintained at your office at 7802 Indiana Avenue, Lubbock, Texas 79423. These financial statements are the responsibility of the company's management. My responsibility is to express an opinion of these financial statements based on my audits. I conducted my audit in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a test basis evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audits provides a reasonable basis for my opinions, In my opinion, the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts referred to above present fairly, in all material respects, the assets and liabilities of such escrow accounts handled by Stewart Title of Lubbock, Inc., as of December 31, 1997, and 1996 in conformity with generally accepted accounting principles. My audits have been made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplementary information contained in Exhibit C through F, inclusive, and Exhibit H of these reports, is presented as additional information and is not a required part of the basic financial statements. Such information has been subjected to the audit procedures applied in the examination of the basic Statement of Assets and Liabilities, and is fairly stated in all material respects in relation to the basic statements of assets and liabilities taken as a whole, /s/ JESUS YEPEZ CPA Jesus Yepez Certified Public Accountant Lubbock, Texas January 29, 1998 -30- 33 REPORT OF INDEPENDENT ACCOUNTANT Board of Directors Stewart Title Guaranty Company Houston, Texas We have audited the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts as of December 31, 1997 and 1996, prepared from the accounts maintained at your office at 2401 Moores Lane, Texarkana, Texas. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinions. In our opinion, the Statements of Assets and Liabilities of Trust (Escrow) Fund Accounts referred to above present fairly, in all material respects, the assets and liabilities of such accounts handled by Stewart Title of Texarkana as of December 31, 1997 and 1996, in conformity with generally accepted accounting principles. Our audits have been made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental information contained in Exhibits C through F, inclusive, and Exhibit H of these reports are presented as additional information and are not a required part of the basic financial statements. Such information has been subjected to the audit procedures applied in the examinations of the basic statements of assets and liabilities, and is fairly stated in all material respects in relation to the basic statements of assets and liabilities, taken as a whole. /s/ WILLIAMS & PEARCY Williams & Pearcy, P.C. January 19, 1998 -31- 34 INDEPENDENT AUDITOR'S REPORT Stewart Title Company of Rockport, Inc. Rockport, Texas We have audited the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts as of December 31, 1997 prepared from the accounts maintained at your office at Rockport, Texas. The financial statement is the responsibility of the company's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts referred to above presents fairly, in all material respects, the assets and liabilities of such accounts handled by Stewart Title Company of Rockport, Inc. as of December 31, 1997, in conformity with generally accepted accounting principles. Our audit has been made for the purpose of forming an opinion on the basic financial statement taken as a whole. The supplemental information contained in Exhibits C through H, inclusive and Form T-19, of this report are presented as additional information and is not a required part of the basic financial statement. Such information has been subjected to the audit procedures applied in the examination of the basic statement of assets and liabilities, and is fairly stated in all material respects in relation to the basic statement of assets and liabilities, taken as a whole. /s/ FLUSCHE, VAN BEVEREN, KILGORE, P.C. FLUSCHE, VAN BEVEREN, KILGORE, P.C. Corpus Christi, Texas February 3, 1998 -32- 35 INDEPENDENT AUDITOR'S REPORT Stewart Title of San Patricio County, Inc. Portland, Texas We have audited the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts as of December 31, 1997 prepared from the accounts maintained at your office at Portland, Texas. The financial statement is the responsibility of the company's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts referred to above presents fairly, in all material respects, the assets and liabilities of such accounts handled by Stewart Title of San Patricio County, Inc. as of December 31, 1997, in conformity with generally accepted accounting principles. Our audit has been made for the purpose of forming an opinion on the basic financial statement taken as a whole. The supplemental information contained in Exhibits C through Exhibit H of this report are presented as additional information and is not a required part of the basic financial statement. Such information has been subjected to the audit procedures applied in the examination of the basic statement of assets and liabilities, and is fairly stated in all material respects in relation to the basic statement of assets and liabilities, taken as a whole. /s/ FLUSCHE, VAN BEVEREN, KILGORE, P.C. FLUSCHE, VAN BEVEREN, KILGORE, P.C. Corpus Christi, Texas February 17, 1998 -33- 36 To: Stewart Title Company - Galveston Galveston, Texas We have audited the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts of Stewart Title Company - Galveston as of December 31, 1997, prepared from the accounts maintained at your office at Galveston, Texas. This financial statement is the responsibility of the company's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. The financial statement does not disclose significant accounting policies used by the company and other disclosures ordinarily included as part of the financial statement because the financial statement has been prepared to comply with regulatory requirements which do not include such disclosures. In our opinion, disclosure of the information is required to conform with generally accepted accounting principles. In our opinion, the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts referred to above presents fairly, in all material respects, the assets and liabilities of such accounts handled by Stewart Title Company - Galveston, as of December 31, 1997, in conformity with generally accepted accounting principles. Our audit has been made for the purpose of forming an opinion on the basic financial statement taken as a whole. The supplemental information contained in Exhibits C through F, inclusive, and Exhibit H of this report is presented as additional information and is not a required part of the basic financial statement. Such information has been subjected to the audit procedures applied in the examination of the basic statement of assets and liabilities, and is fairly stated in all material respects in relation to the basic statement of assets and liabilities taken as a whole, except for omission of the information discussed in the paragraph above, January 14, 1998 /s/ AARONSON, WHITE & COMPANY Aaronson, White & Company 16010 Barker's Point Lane Suite 175 Houston, Texas 77079 -34- 37 To: Stewart Title of Montgomery County, Inc. The Woodlands, Texas We have audited the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts of Stewart Title of Montgomery County, Inc. as of December 31, 1997, prepared from the accounts maintained at your office at The Woodlands, Texas. This financial statement is the responsibility of the company's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. The financial statement does not disclose significant accounting policies used by the company and other disclosures ordinarily included as part of the financial statement because the financial statement has been prepared to comply with regulatory requirements which do not include such disclosures. In our opinion, disclosure of the information is required to conform with generally accepted accounting principles. In our opinion, the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts referred to above presents fairly, in all material respects, the assets and liabilities of such accounts handled by Stewart Title of Montgomery County, Inc., as of December 31, 1997, in conformity with generally accepted accounting principles. Our audit has been made for the purpose of forming an opinion on the basic financial statement taken as a whole. The supplemental information contained in Exhibits C through F, inclusive, and Exhibit H of this report is presented as additional information and is not a required part of the basic financial statement. Such information has been subjected to the audit procedures applied in the examination of the basic statement of assets and liabilities, and is fairly stated in all material respects in relation to the basic statement of assets and liabilities taken as a whole, except for omission of the information discussed in the paragraph above. January 14, 1998 /s/ AARONSON, WHITE & COMPANY Aaronson, White & Company 16010 Barker's Point Lane Suite 175 Houston, Texas 77079 -35- 38 REPORT OF INDEPENDENT ACCOUNTANTS To: Stewart Title Company Fort Bend Sugar Land, Texas We have audited the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts of Stewart Title Company - Fort Bend as of December 31, 1997 and 1996, prepared from the accounts maintained at your office at Sugar Land, Texas. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. The financial statement does not disclose significant accounting policies used by the company and other disclosures ordinarily included as part of the financial statement because the financial statement has been prepared to comply with regulatory requirements which do not include such disclosures. In our opinion, disclosure of the information is required to conform with generally accepted accounting principles. In our opinion, the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts referred to above presents fairly, in all material respects, the assets and liabilities of such accounts handled by Stewart Title Company - Fort Bend, as of December 31, 1997 and 1996, in conformity with generally accepted accounting principles. Our audit has been made for the purpose of forming an opinion on the basic financial statement taken as a whole. The supplemental information contained In Exhibits C through F, Inclusive, and Exhibit H of this report is presented as additional information and is not a required part of the basic financial statement. Such information has been subjected to the audit procedures applied in the examination of the basic statement of assets and liabilities, and is fairly stated in all material respects in relation to the basic statement of assets and liabilities taken as a whole. January 19, 1998 /s/ AARONSON, WHITE & COMPANY Aaronson, White & Company 16010 Barker's Point Lane Suite 175 Houston, Texas 77079 -36- 39 To: Stewart Title Austin, Inc. Austin, Texas We have audited the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts of Stewart Title Austin, Inc. as of December 31, 1997, prepared from the accounts maintained at your office at Austin, Texas, This financial statement is the responsibility of the company's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. The financial statement does not disclose significant accounting policies used by the company and other disclosures ordinarily included as part of the financial statement because the financial statement has been prepared to comply with regulatory requirements which do not include such disclosures. In our opinion, disclosure of the information is required to conform with generally accepted accounting principles. In our opinion, the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts referred to above presents fairly, in all material respects, the assets and liabilities of such accounts handled by Stewart Title Austin, Inc., as of December 31, 1997, in conformity with generally accepted accounting principles. Our audit has been made for the purpose of forming an opinion on the basic financial statement taken as a whole. The supplemental information contained in Exhibits C through F, inclusive, and Exhibit H of this report is presented as additional information and is not a required part of the basic financial statement. Such Information has been subjected to the audit procedures applied in the examination of the basic statement of assets and liabilities, and is fairly stated in all material respects in relation to the basic statement of assets and liabilities taken as a whole, except for omission of the information discussed in the paragraph above. January 20, 1998 /s/ AARONSON, WHITE & COMPANY Aaronson, White & Company 16010 Barker's Point Lane Suite 175 Houston, Texas 77079 -37- 40 To: Pacific Title, L.C. Sugar Land, Texas We have audited the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts of Pacific Title, L.C. as of December 31, 1997, prepared from the accounts maintained at your office at Sugar Land, Texas, This financial statement is the responsibility of the company's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. The financial statement does not disclose significant accounting policies used by the company and other disclosures ordinarily included as part of the financial statement because the financial statement has been prepared to comply with regulatory requirements which do not include such disclosures. In our opinion, disclosure of the information is required to conform with generally accepted accounting principles. In our opinion, the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts referred to above presents fairly, in all material respects, the assets and liabilities of such accounts handled by Pacific Title, L.C., as of December 31, 1997, in conformity with generally accepted accounting principles. Our audit has been made for the purpose of forming an opinion on the basic financial statement taken as a whole. The supplemental information contained in Exhibits C through F, inclusive, and Exhibit H of this report is presented as additional information and is not a required part of the basic financial statement. Such information has been subjected to the audit procedures applied in the examination of the basic statement of assets and liabilities, and is fairly stated in all material respects in relation to the basic statement of assets and liabilities taken as a whole, except for omission of the information discussed in the paragraph above. January 19, 1998 /s/ AARONSON, WHITE & COMPANY Aaronson, White & Company 16010 Barker's Point Lane Suite 175 Houston, Texas 77079 -38- 41 To: Stewart Title of Eagle Pass, Inc. d/b/a Title Guaranty Eagle Pass, Texas We have audited the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts of Stewart Title of Eagle Pass, Inc, d/b/a Title Guaranty as of December 31, 1997, prepared from the accounts maintained at your office at Eagle Pass, Texas. This financial statement is the responsibility of the company's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. The financial statement does not disclose significant accounting policies used by the company and other disclosures ordinarily included as part of the financial statement because the financial statement has been prepared to comply with regulatory requirements which do not include such disclosures. In our opinion, disclosure of the information is required to conform with generally accepted accounting principles. In our opinion, the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts referred to above presents fairly, in all material respects, the assets and liabilities of such accounts handled by Stewart Title of Eagle Pass, Inc, d/b/a Title Guaranty, as of December 31, 1997, in conformity with generally accepted accounting principles. Our audit has been made for the purpose of forming an opinion on the basic financial statement taken as a whole. The supplemental information contained in Exhibits C through F, inclusive, and Exhibit H of this report is presented as additional information and is not a required part of the basic financial statement. Such information has been subjected to the audit procedures applied in the examination of the basic statement of assets and liabilities, and is fairly stated in all material respects in relation to the basic statement of assets and liabilities taken as a whole, except for omission of the information discussed in the paragraph above. January 16, 1998 /s/ AARONSON, WHITE & COMPANY Aaronson, White & Company 16010 Barker's Point Lane Suite 175 Houston, Texas 77079 -39- 42 SCHEDULE II STEWART INFORMATION SERVICES CORPORATION (PARENT COMPANY) INCOME AND RETAINED EARNINGS INFORMATION
Year Ended December 31, --------------------------------------- 1997 1996 1995 --------- --------- --------- (In thousands) Revenues Investment income ....................................... $ 701 $ 439 $ 224 Other income ............................................ 3 -- 12 --------- --------- --------- 704 439 236 Expenses Employee costs .......................................... 201 163 211 Other operating expenses ................................ 2,098 1,515 1,634 Depreciation and amortization ........................... 90 100 101 --------- --------- --------- 2,389 1,778 1,946 Loss before taxes and equity in earnings of investees ...... (1,685) (1,339) (1,710) Income taxes (benefit) ..................................... (502) (458) (592) Equity in earnings of investees ............................ 16,471 15,318 8,125 --------- --------- --------- Net income ................................................. 15,288 14,437 7,007 Retained earnings at beginning of year ..................... 131,496 118,547 112,754 Cash dividends on Common Stock ($.26, $.24 and $.21 per share) ................................................. (1,644) (1,488) (1,214) Retained earnings at end of year ........................... 145,140 $ 131,496 $ 118,547 ======= ========= =========
See accompanying note to financial statements. (Schedule continued on following page.) -40- 43 SCHEDULE II (CONTINUED) STEWART INFORMATION SERVICES CORPORATION (PARENT COMPANY) BALANCE SHEET INFORMATION
December 31, ------------------------ 1997 1996 --------- --------- (In thousands) Assets Cash and cash equivalents ................................................. $ 13 $ 100 --------- --------- Short-term investments .................................................... 9,001 10,620 --------- --------- Receivables: Notes, including $7,324 and $6,960 from affiliates ...................... 7,435 7,094 Other, including $7,543 and $3,863 from affiliates ...................... 10,522 6,140 Less allowance for uncollectible amounts ................................ (20) (20) --------- --------- 17,937 13,214 Furniture and equipment at cost ........................................... 183 167 Less accumulated depreciation ............................................. (95) (85) --------- --------- 88 82 Title plants, at cost ..................................................... 48 48 Investments in investees .................................................. 182,754 168,243 Other assets .............................................................. 3,482 3,168 --------- --------- $ 213,323 $ 195,475 ========= ========= Liabilities Payables: Notes, including $ - and $ - from affiliates ............................ $ 685 580 Accounts payable and accrued liabilities ................................ 3,134 3,905 Contingent liabilities and commitments Stockholders' equity Common - $1 par, authorized 15,000,000 issued and outstanding 6,381,046 and 6,216,441 .............................................................. 6,381 6,216 Class B Common - $1 par, authorized 1,500,000 and outstanding 525,006 ..... 525 525 Additional paid-in-capital ................................................ 52,922 50,833 Net unrealized investment gains, net of deferred taxes ................... 4,536 1,920 Retained earnings (1) ..................................................... 145,140 131,496 --------- --------- Total stockholders' equity ($30.34 and $28.33 per share) ........... 209,504 190,990 --------- --------- $ 213,323 $ 195,475 ========= =========
(1) Includes undistributed earnings of subsidiaries of $142,596 in 1997 and $130,708 in 1996. See accompanying note to financial statements. (Schedule continued on following page.) -41- 44 SCHEDULE II (CONTINUED) STEWART INFORMATION SERVICES CORPORATION (PARENT COMPANY) CASH FLOWS INFORMATION
Year Ended December 31, ------------------------------------ 1997 1996 1995 -------- -------- -------- (In thousands) Cash flow from operating activities (Note) ................ $ 38 $ 7,033 $ 1,169 Cash flow from investing activities: Proceeds from investments sold ......................... 1,619 -- 147 Purchases of investments, excluding mortgage loans ..... -- (6,247) -- Increases in mortgages and other notes receivable ...... (364) (70) (262) Collections on mortgages and other notes receivable .... 23 227 31 -------- -------- -------- Cash provided (used) by investing activities .............. 1,278 (6,090) (85) -------- -------- -------- Cash flow from financing activities: Dividends paid ......................................... (1,644) (1,488) (1,214) Proceeds of notes payable .............................. 106 610 -- Payments on notes payable .............................. -- (30) -- Proceeds from issuance of stock ........................ 135 11 -- -------- -------- -------- Cash used by financing activities ......................... (1,403) (897) (1,214) -------- -------- -------- (Decrease) increase in cash and cash equivalents .......... $ (87) $ 46 $ (130) ======== ======== ======== Note: Reconciliation of net income to the above amounts: Net income ............................................. $ 15,288 $ 14,437 $ 7,007 Add (deduct): Depreciation and amortization ....................... 90 100 101 Provision for uncollectible amounts - net ........... -- 20 64 Increase in accounts receivable - net ............... (3,267) (3,207) (1,326) Increase (decrease) in accounts payable and accrued liabilities - net ................................ 671 264 (2,668) Equity in net earnings of investees ................. (16,471) (15,318) (8,125) Dividends received from unconsolidated subsidiaries . 4,583 11,090 5,650 Other - net ......................................... (856) (353) 466 -------- -------- -------- Cash provided by operating activities ..................... $ 38 $ 7,033 $ 1,169 ======== ======== ======== Supplemental information: Income taxes paid .................................... -- -- -- Interest paid ........................................ -- -- --
See accompanying note to financial statements. (Schedule continued on following page.) -42- 45 SCHEDULE II (continued) STEWART INFORMATION SERVICES CORPORATION (PARENT COMPANY) NOTE TO FINANCIAL STATEMENT INFORMATION The Registrant operates as a holding company transacting substantially all business through its subsidiaries. The consolidated financial statements for the Registrant and its subsidiaries are included in Part II, Item 8 of Form 10-K. The Parent Company financial statements should be read in conjunction with the aforementioned consolidated financial statements and notes thereto and financial statement schedules. Total dividends received from unconsolidated subsidiaries for 1997, 1996 and 1995 were $9,633,000, $8,583,000, and $9,390,000, respectively. -43- 46 SCHEDULE V STEWART INFORMATION SERVICES CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS DECEMBER 31, 1997
==================================================================================================================== Col. A Col. B Col. C Col. D Col. E Additions ==================================================================================================================== Balance Charged Charged to at to other Balance beginning cost and accounts -Deductions- at end Description of period expenses describe described of period ==================================================================================================================== Stewart Information Services Corporation and subsidiaries: Year ended December 31, 1995: Estimated title losses ......... $134,316,436 $29,590,891 - $25,594,793 (A) $138,312,534 Allowance for uncollectible amounts ....................... 6,123,049 1,333,744 - 957,846 (B) 6,498,947 Year ended December 31, 1996: Estimated title losses ......... 138,312,534 33,829,851 - 21,810,822 (A) 150,331,563 Allowance for uncollectible amounts ..................... 6,498,947 1,575,000 - 1,404,356 (B) 6,669,591 Year ended December 31, 1997: Estimated title losses.......... 150,331,563 29,794,444 - 23,334,625 (A) 156,791,382 Allowance for uncollectible amounts...................... 6,669,591 1,596,000 - 2,713,742 (B) 5,551,849 Stewart Information Services Corporation - Parent: Year ended December 31, 1995: Allowance for uncollectible $8,198 $64,382 - $72,580 (C) - amounts Year ended December 31, 1996: Allowance for uncollectible - 20,000 - - 20,000 amounts Year ended December 31, 1997: Allowance for uncollectible amounts 20,000 - - - 20,000
(A) Represents payments of policy losses and loss adjustment expenses during the year, less salvage collections. (B) Represents uncollectible accounts written off. (C) Represents an adjustment to accounts receivable previously reserved and current year write-off of uncollected accounts. -44- 47 INDEX TO EXHIBITS
Exhibit - ------- 3.1 - Certificate of Incorporation of the Registrant, as amended April 30, 1993 3.2 - By-laws of the Registrant 4 - Rights of Common and Class B Common Stockholders (incorporated by reference to Exhibits 3.1 and 3.2 hereto) 10.1 - Summary of agreements as to payment of bonuses to certain executive officers 10.2 - Deferred Compensation Agreements dated March 10, 1986, amended July 24, 1990 and October 30, 1992, between the Registrant and certain executive officers. 13 - Annual Report to Stockholders for 1997 (the financial text of the annual report incorporated herein by reference in Item 6 of Part II of this report) 21 - Subsidiaries of the Registrant 23 - Consents of Independent Certified Public Accountants, including consents of incorporation by reference of their reports to previously filed Securities Act registration statements. 27 - Financial Data Schedule
EX-3.1 2 CERT. OF INCORPORATION OF THE REGISTRANT, 04/30/93 1 Exhibit 3.1 RESTATED CERTIFICATE OF INCORPORATION OF STEWART INFORMATION SERVICES CORPORATION STEWART INFORMATION SERVICES CORPORATION, a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows: 1. The name of the corporation is STEWART INFORMATION SERVICES CORPORATION. The date of filing its original Certificate of Incorporation with the Secretary of State was March 25, 1970. 2. This Restated Certificate of Incorporation restates and integrates and also amends the Certificate of Incorporation to read as herein set forth in full: CERTIFICATE OF INCORPORATION OF STEWART INFORMATION SERVICES CORPORATION FIRST: The name of the corporation is Stewart Information Services Corporation. SECOND: The registered office of the corporation in the State of Delaware is located at 100 West Tenth Street in the City of Wilmington, County of New Castle. The name and address of its registered agent is The Corporation Trust Company, 100 West Tenth Street, Wilmington, Delaware. 2 Third: The nature of the business, objects and purposes to be transacted, promoted or carried on by the corporation are: The business of accumulating and dealing in information of all types, the guaranteeing of such information, the providing of services related to real estate and other services by use of such information or otherwise, either directly or through subsidiaries or affiliates; and To engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. Fourth: The total number of shares of stock which the corporation shall have authority to issue is 6,500,000 of which 5,000,000 shares of the par value of $1 each, amounting in the aggregate to $5,000,000, shall be designated Common Stock, and of which 1,500,000 shares of the par value of $1 each, amounting in the aggregate to $1,500,000, shall be designated Class B Common Stock. The designations and the powers, preferences and rights, and the qualifications, limitations or restrictions thereof are as follows: (1) Voting. The Common Stock and the Class B Common Stock shall have the exclusive right to vote for the election of directors and for all other purposes, each holder of the Common Stock and each holder of the Class B Common Stock being 3 entitled to one vote for each share held. For so long as there are issued and outstanding 175,000 or more shares of Class B Common Stock (adjusted proportionately for stock dividends and stock splits or combinations), at each election for directors the Common Stock and the Class B Common Stock shall be voted as separate classes, and the holders of the Common Stock shall be entitled to elect five of the nine directors (each holder of Common Stock having the right to vote, in person or by proxy, the number of shares owned by him for the five directors to be elected by the holders of the Common Stock and for whose election he has a right to vote, or to cumulate his votes by giving one candidate as many votes as five times the number of his shares shall equal, or by distributing such votes on the same principle among any number of such five candidates). The holders of the Class B Common Stock shall be entitled to elect the remaining four of the nine directors, and no holder of Class B Common Stock shall have the right of cumulative voting at any election of directors. In the event that issued and outstanding shares of Class B Common Stock are less than 175,000 shares but more than 100,000 shares (adjusted proportionately for stock dividends and stock splits or combinations), the number of directors to be so elected by the holders of the Common Stock shall be six and the number of directors to be so elected by the holders of the Class B Common Stock shall be three. Except as -3- 4 otherwise provided hereinafter in this paragraph and as otherwise required by law, all shares of Common Stock and Class B Common Stock shall, upon all matters other than the election of directors, be voted as a single class (and, in the event that the number of issued and outstanding shares of Class B Common Stock is ever less than 100,000 (adjusted proportionately for stock dividends and stock splits or combinations), 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); provided, however, that 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. (2) Dividends. The holders of the Common Stock and the Class B Common Stock shall be entitled to receive, when, as and if declared by the Board of Directors, out of funds legally available therefor, dividends payable in cash, stock or otherwise, subject to the following preferences and restrictions: (a) No cash dividends shall be declared or paid upon the Class B Common Stock; (b) Dividends payable in property (other than cash or stock) of the corporation shall be payable upon the shares of Common Stock and Class B Common Stock without distinction between the two classes; -4- 5 (c) If a dividend payable in stock of the corporation shall be declared at any time upon either the Common Stock or the Class B Common Stock, a like dividend shall be declared upon the other class of common stock. All dividends payable in stock of the corporation shall be paid in shares of Common Stock with respect to dividends upon shares of the Common Stock and in shares of Class B Common Stock with respect to dividends upon shares of the Class B Common Stock. (3) Preemptive Rights. No stockholder shall have any preemptive right to subscribe to an additional issue of capital stock of the corporation or to any security convertible into such stock. Any preferential rights to purchase stock or securities of the corporation which are granted to the stockholders shall be granted to the holders of the Common Stock and Class B Common Stock without distinction between the two classes. (4) Conversion. Each share of Class B Common Stock of the corporation shall, at any time at the option of the holder thereof, be convertible into one share of Common Stock of the corporation. In the event of any transfer, upon death or otherwise, of any share of Class B Common Stock to any person or entity other than a lineal descendant of William H. Stewart (who died in 1903 in Galveston County, Texas), a spouse of any such descendant or a personal representative, trustee or custodian for -5- 6 the benefit of any such spouse or descendant, such share shall thereupon become a share of Common Stock. (5) Liquidation. Upon any liquidation, dissolution or winding up of the corporation, whether voluntary or involuntary, the remaining net assets of the corporation shall be distributed pro rata to the holders of the Common Stock and the Class B Stock in accordance with their respective rights and interests. ***** Whenever the vote of stockholders at a meeting thereof is required or permitted to be taken for or in connection with any corporate action, the meeting and vote of stockholders may be dispensed with and such action may be taken with the written consent of stockholders having not less than the minimum percentage of the vote required by statue for the proposed corporate action, provided that prompt notice shall be given to all stockholders of the taking of corporate action without a meeting and by less than unanimous consent. Fifth: The name and mailing address of the incorporator is:
Name Mailing Address ---- --------------- William M. Ryan 800 Bank of Southwest Building Houston, Texas 77002
-6- 7 Sixth: The corporation is to have perpetual existence. Seventh: The Board of Directors of the corporation shall consist of nine members. In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized: (1) To make, alter or repeal the by-laws of the corporation. (2) To authorize and cause to be executed mortgages and liens upon the real and personal property of the corporation. (3) To set apart out of any of the funds of the corporation available for dividends a reserve or reserves for any proper purpose and to abolish any such reserve in the manner in which it was created. (4) By a majority of the whole Board of Directors, to designate one or more committees, each committee to consist of two or more of the Directors of the corporation. 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 the committee. Any such committee, to the extent provided in the resolution or in the by-laws of the corporation, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the corporation and may authorize the seal of the corporation to be affixed to all papers which may require it; provided, however, the by-laws may provide that 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. -7- 8 (5) When and as authorized by the affirmative vote of the holders of a majority of the stock issued and outstanding having voting power given at a stockholders' meeting duly called upon such notice as is required by statute, or when authorized by the written consent of the holders of a majority of the voting stock issued and outstanding, to sell, lease or exchange all or substantially all the property and assets of the corporation, including its good will and its corporate franchises, upon such terms and conditions and for such consideration, which may consist in whole or in part of money or property including securities of any other corporation or corporations, as the Board of Directors shall deem expedient and for the best interests of the corporation. Eighth: Whenever a compromise or arrangement is proposed between this corporation and its creditors or any class of them and/or between this corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this corporation under the provisions of section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this corporation under the provisions of section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number -8- 9 representing three-fourths in value of the creditors or class of creditors, and/or of the stockholder or class of stockholders of this corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this corporation, as the case may be, and also on this corporation. Ninth: Meetings of stockholders may be held within or without the State of Delaware, as the by-laws may provide. The books of the corporation may be kept (subject to any provision contained in the statutes) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the by-laws of the corporation. Elections of directors need not be by written ballot unless the by-laws of the corporation shall so provide. Tenth: The corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. -9- 10 3. This Restated Certificate of Incorporation was duly adopted in accordance with Sections 242 and 245 of the General Corporation Law of the State of Delaware, by written consent of the sole stockholder in accordance with Section 228 thereof. 4. The capital of the corporation will not be reduced under or by reason of any amendment in this Restated Certificate of Incorporation. IN WITNESS WHEREOF, the corporation has caused its corporate seal to be affixed hereto and this Certificate to be signed by its President and attested by its Secretary, this 20 day of October, 1970. STEWART INFORMATION SERVICES CORPORATION BY James W. Davis ------------------------------------- Executive Vice President [SEAL] -10- 11 STATE OF TEXAS ) ) SS. COUNTY OF HARRIS ) BE IT REMEMBERED that on this 20 day of October, 1970, personally came before me a notary public in and for the State and County of aforesaid, James W. Davis, Executive Vice President of Stewart Information Services Corporation, a Delaware corporation, known to me personally to be such, and acknowledged that he signed the foregoing Restated Certificate of Incorporation, that the Restated Certificate of Incorporation is the act and deed of the corporation and that the facts stated therein are true. IN WITNESS WHEREOF, I have hereunto set my hand and seal of office the day and year aforesaid. B. Weaver --------------------- Notary Public NOTARY PUBLIC COUNTY OF HARRIS, TEXAS -11- 12 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF STEWART INFORMATION SERVICES CORPORATION Stewart Information Services Corporation, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: FIRST: That a meeting of the Board of Directors of Stewart Information Services Corporation, resolutions were duly adopted setting forth a proposed amendment to the Certificate of Incorporation of said corporation, declaring said amendment to be advisable and calling a meeting of the stockholders of said corporation for consideration thereof. The resolution setting forth the proposed amendment is as follows: RESOLVED, that the Certificate of Incorporation of this corporation be amended by deleting the Article thereof numbered "Fourth (1)" so that, as amended, said Article shall be and read as follows: (1) Voting. The Common Stock and the Class B Common Stock shall have the exclusive right to vote for the election of directors and for all other purposes, each holder of the Common Stock and each holder of the Class B Common Stock being entitled to one vote for each share held. For so long as there are issued and outstanding 175,000 or more shares of Class B Common Stock (adjusted proportionately for stock dividends and stock splits or combinations), at each election for directors the Common Stock and the Class B Common Stock shall be voted as separate classes, and the holders of the Common Stock shall be entitled to elect five of the nine directors (each holder of Common Stock having the right to vote, in person or by proxy, the number of shares owned by him for the five directors to be elected by the holders of the Common Stock and for whose election he has a right to vote, or to cumulate his votes by giving one candidate as many votes as five times the number of his shares shall equal, or by distributing such votes on the same principle among any number of such five candidates). The holders of the Class B Common Stock shall be entitled to elect the remaining four of the nine directors, and no holder of Class B Common Stock shall have the right of cumulative voting at any election of directors. In the event that issued and outstanding shares of Class B Common Stock are less than 175,000 shares but more than 100,000 shares (adjusted proportionately for stock dividends and stock splits or combinations), the number of directors to be so elected by the holders of the Common Stock shall be six and the number of directors to be so elected by the holders of the Class B Common Stock shall be three. Any amendment to, or rescission of, Section 3.7 of the Company's by-laws must be approved by a majority of the Company's outstanding Common Stock, and a majority of the Company's outstanding Class B Common Stock, voting as separate classes. Except as otherwise provided hereinafter in this paragraph and as otherwise required by law, all shares of Common Stock and Class B Common Stock shall, upon all matters other than the election of directors, be voted as a single class (and, in the event that the number of issued and outstanding shares of Class B Common Stock is ever less than 100,000 (adjusted proportionately for stock dividends and stock splits or combinations), 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); provided, however, that no change in the Certificate of Incorporation which would affect the Common Stock 13 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. SECOND: That thereafter, pursuant to resolution of its Board of Directors, the annual meeting of the stockholders of said corporation was duly called and held, upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware at which meeting the necessary number of shares as required by statute were voted in favor of the amendment. THIRD: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. FOURTH: That the capital of said corporation will not be reduced under or by reason of said amendment. IN WITNESS WHEREOF, said Stewart Information Services Corporation has caused its corporate seal to be hereunto affixed and this certificate to be signed by Stewart Morris, its President, and stressed by Max Crisp, its Secretary, this 27th day of April, 1979. STEWART INFORMATION SERVICES CORPORATION By /s/ STEWART MORRIS -------------------- President (Corporate Seal) ATTEST: /s/ MAX CRISP - --------------- Secretary THE STATE OF TEXAS ) COUNTY OF HARRIS ) BE IT REMEMBERED that on this 27th day of April, 1979, personally came before me, a Notary Public in and for the County and State aforesaid, Stewart Morris, President of Stewart Information Services Corporation, a corporation of the State of Delaware, and he duly executed said certificate before me and acknowledged the said certificate to be his act and deed and the act and deed of said corporation and the facts stated therein are true; and that the seal affixed to said certificate and attested by the Secretary of said corporation is the common or corporate seal of said corporation. IN WITNESS WHEREOF, I have hereunto set my hand and seal of office this the day and year aforesaid. /s/ SUE M. NOLZ --------------------------- NOTARIAL SEAL Notary Public in and for Harris County, Texas 14 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF STEWART INFORMATION SERVICES CORPORATION Stewart Information Services Corporation, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: FIRST: That at a meeting of the Board of Directors of Stewart Information Services Corporation, resolutions were duly adopted setting forth a proposed amendment to the Certificate of Incorporation of said corporation, declaring said amendment to be advisable and directing that said amendment be considered at the next annual meeting of the stockholders of said corporation. The resolution setting forth the proposed amendment is as follows: RESOLVED, that the restated Certificate of Incorporation of the Company be amended by deleting therefrom paragraph (4) of Article Fourth and adding a new paragraph (4) as follows: (4) Conversion Each share of Class B Common Stock of the corporation shall, at any time at the option of the holder thereof, be convertible into one share of Common Stock of the corporation. In event of any transfer, upon death or otherwise, of any share of Class B Common Stock to any person or entity other than a "qualified holder" (as hereinafter defined), such share shall thereupon become a share of Common Stock. As used in the preceding sentence, the term "qualified holder" means (i) a lineal descendant of William H. Stewart (who died in 1903 in Galveston County, Texas), (ii) a spouse of any such descendant and (iii) a personal representative, trustee or custodian for the benefit of any such spouse or descendant. A partnership shall be deemed to be a qualified holder if each of its partners is qualified holder; a corporation shall be deemed to be qualified holder if each holder of its capital stock is a qualified holder; and a trust shall be deemed to be a qualified holder if each beneficiary is a qualified holder. SECOND: That thereafter, pursuant to resolution of its Board of Directors, the annual meetings of the stockholders of said corporation was duly called and held, upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware, at which meeting the necessary number of shares as required by statute were voted in favor of the amendment. THIRD: Trust said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. FOURTH: That the capital of said corporation will not be reduced under or by reason of said amendment. 15 IN WITNESS WHEREOF, said Stewart Information Services Corporation has caused its corporate seal to be hereunto affixed and this certificate to be signed by Stewart Morris, its President, and attested by Max Crisp, its Secretary, this 2nd day of June, 1980. STEWART INFORMATION SERVICES CORPORATION By: /s/ STEWART MORRIS ----------------------- President (Corporate Seal) ATTEST: /s/ MAX CRISP - ---------------- Secretary THE STATE OF TEXAS COUNTY OF HARRIS BE IT REMEMBERED that on this 2nd day of June, 1980, personally came before me, a Notary Public in and for the County and State aforesaid, Stewart Morris, President of Stewart Information Services Corporation, a corporation of the State of Delaware, and he duly executed said certificate before me and acknowledged the said certificate to be his act and deed and the act and deed of said corporation and the facts stated therein are true; and that the seal affixed to said certificate and attested by the Secretary of said corporation is the common or corporate seal of said corporation. IN WITNESS WHEREOF, I have hereunto set my hand and seal of office this the day and year aforesaid. /s/ SUE M. NOLZ -------------------------- Notary Public in and for Harris County, Texas NOTARIAL SEAL 16 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF STEWART INFORMATION SERVICES CORPORATION Stewart Information Services Corporation, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: FIRST: That at a meeting of the Board of Directors of Stewart Information Services Corporation, resolutions were duly adopted setting forth a proposed amendment to the Certificate of Incorporation of said corporation, declaring said amendment to be advisable and calling a meeting of the stockholders of said corporation for consideration thereof. The resolution setting forth the proposed amendment is as follows: RESOLVED, that the Certificate of Incorporation of this corporation be amended by adding thereto Article Eleventh, which Article shall read as follows: Eleventh: A director of this corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. If the Delaware General Corporation Law hereafter is amended to authorize the further elimination or limitation of the liability of directors, then the liability of a director of the corporation, in addition to the limitation on personal liability provided herein, shall be limited to the fullest extent permitted by the amended Delaware General Corporation Law. Any repeal or modification of this paragraph by the stockholders of the corporation shall be prospective only, and shall not adversely affect any limitation on the personal liability of a director of the corporation existing at the time of such repeal or modification. SECOND: That thereafter, pursuant to resolution of its Board of Directors, the annual meeting of the stockholders of said corporation was duly called and held, upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware at which meeting the necessary number of shares as required by statute were voted in favor of the amendment. THIRD: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. FOURTH: That the capital of said corporation will not be reduced under or by reason of said amendment. 17 IN WITNESS WHEREOF, said Stewart Information Services Corporation has caused its corporate seal to be hereunto affixed and this certificate to be signed by Stewart Morris, its President, and attested by Max Crisp, its Secretary, this 18th day of May, 1987. STEWART INFORMATION SERVICES CORPORATION By /s/ STEWART MORRIS --------------------------------- President (Corporate Seal) ATTEST: /s/ MAX CRISP - --------------------------------- Secretary THE STATE OF TEXAS ) COUNTY OF HARRIS ) BE IT REMEMBERED that on this 18th day of May, 1987, personally came before me, a Notary Public in and for the County and State aforesaid, Stewart Morris, President of Stewart Information Services Corporation, a corporation of the State of Delaware, and be duly executed said certificate before me and acknowledged the said certificate to be his act and deed and the act and deed of said corporation and the facts stated therein are true; and that the seal affixed to said certificate and attested by the Secretary of said corporation is the common or corporate seal of said corporation. IN WITNESS WHEREOF, I have hereunto set my hand and seal of office this the day and year aforesaid. /s/ SANDI M. BRYANT ----------------------------------- SANDI M. BRYANT NOTARY PUBLIC IN AND FOR THE STATE OF TEXAS [SEAL OF NOTARY] 18 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF STEWART INFORMATION SERVICES CORPORATION Stewart Information Services Corporation, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: FIRST: That at a meeting of the Board of Directors of Stewart Information Services Corporation, resolutions were duly adopted setting forth a proposed amendment to the Certificate of Incorporation of said corporation, declaring said amendment to be advisable and calling a meeting of the stockholders of said corporation for consideration thereof. The resolution setting forth the proposed amendment is as follows: RESOLVED, that the Certificate of Incorporation of this corporation be amended by deleting the first full paragraph of Article thereof numbered "Fourth" and adding a new first paragraph of such Article as follows: "Fourth: The total number of shares of stock which the corporation shall have authority to issue is 16,500,000, of which 15,000,000 shares of the par value of $1 each, amounting in the aggregate to $15,000,000, shall be designated Common Stock, and of which 1,500,000 shares of the par value of $1 each, amounting in the aggregate to $1,500,000, shall be designated Class B Common Stock." SECOND: That thereafter, pursuant to resolution of its Board of Directors, the annual meeting of the stockholders of said corporation was duly called and held, upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware, at which meeting the necessary number of shares as required by statute were voted in favor of the amendment. THIRD: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. FOURTH: That the capital of said corporation will not be reduced under or by reason of said amendment. IN WITNESS WHEREOF, said Stewart Information Services Corporation has caused its corporate seal to be hereunto affixed and this certificate to be signed by Stewart Morris, its President, and attested by Max Crisp, its Secretary, this 30th day of April, 1993. STEWART INFORMATION SERVICES CORPORATION By /s/ STEWART MORRIS -------------------------------------- Stewart Morris, President (Corporate Seal) ATTEST: /s/ MAX CRISP - -------------------------------------- Max Crisp, Secretary EX-3.2 3 BY-LAWS OF THE REGISTRANT 1 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. 1 2 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 2 3 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 3 4 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 4 5 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. 5 6 (c) 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. (d) 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 6 7 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 7 8 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 8 9 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. 9 10 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, 10 11 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 11 12 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, 12 13 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 13 14 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 14 15 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 15 16 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 16 17 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 17 18 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 18 19 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. 19 20 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 20 21 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 21 22 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, 22 23 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. 23 24 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 24 25 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 25 26 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 26 27 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 27 28 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 28 29 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 29 30 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. 30 31 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 31 32 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 32 33 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 33 34 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. 34 35 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 35 36 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. 36 EX-10.1 4 SUMMARY OF AGREEMENTS 1 EXHIBIT 10.1 STEWART INFORMATION SERVICES CORPORATION AND SUBSIDIARIES MATERIAL CONTRACTS DECEMBER 31, 1997 STEWART MORRIS, JR., as Chairman of the Board, shall receive in addition to his salary, 1% on the first $20,000,000 of the consolidated income before taxes of Stewart Title Guaranty Company as reported to its stockholders and .5% of the profits exceeding $20,000,000. For the calendar year 1997, Mr. Morris shall receive no less that $125,000 in bonus compensation. For the calendar year 1997, Mr. Morris received $224,148 in bonus compensation. Total compensation shall exclude payments made by the company for insurance premiums, board fees or stock options granted. MALCOLM S. MORRIS, as President and Chief Executive Officer, shall receive in addition to his salary, 1% on the first $20,000,000 of the consolidated income before taxes of Stewart Title Guaranty Company as reported to its stockholders and .5% of the profits exceeding $20,000,000. For the calendar year 1997, Mr. Morris shall receive no less that $125,000 in bonus compensation. For the calendar year 1997, Mr. Morris received $224,148 in bonus compensation. Total compensation shall exclude payments made by the company for insurance premiums, board fees or stock options granted. CARLOSS MORRIS, as Chairman of the Executive Committee, shall receive in addition to his salary, 1.5% of the first $13,000,000 of the consolidated net income of Stewart Title Guaranty Company as reported to its stockholders and .75% of the profits exceeding $13,000,000. For the calendar year 1997, Mr. Morris shall receive no less than $100,000 in bonus compensation. For the calendar year 1997 Mr. Morris received $228,165 in bonus compensation. Total compensation shall exclude any insurance premiums, board fees or stock options granted. STEWART MORRIS, as Vice Chairman of the Executive Committee, shall receive in addition to his salary, 1.5% of the first $13,000,000 of the consolidated net income of Stewart Title Guaranty Company as reported to its stockholders and .75% of the profits exceeding $13,000,000 for calendar year 1997, Mr. Morris shall receive no less than $100,000 in bonus compensation. For the calendar year 1997 Mr. Morris received $228,165 in bonus compensation. Total compensation shall exclude any insurance premiums, board fees or stock options granted. EX-10.2 5 DEFERRED COMPENSATION AGREEMENTS 1 EXHIBIT 10.2 SALARY DEFERRED COMPENSATION AGREEMENT THIS AGREEMENT, made this 10th day of March 1986, by and between Stewart Information Services Corporation, hereinafter called the "Company" and Malcom S. Morris, an employee, hereinafter called the "Participant". WHEREAS, the Participant's competent and faithful efforts on behalf of the Company have resulted in substantial growth and profits to the Company, and, WHEREAS, the Company values the efforts, abilities and accomplishments of the Participant as an important member of management and recognizes that his future services are vital to its continued growth and profits and that the loss of his services would result in substantial financial losses, and, WHEREAS, the Company, in order to retain the services of the Participant, is willing to provide pre and post-retirement benefits to Participant or his designated beneficiary pursuant to the terms and conditions contained in this Salary Deferred Compensation Plan, NOW, THEREFORE, IT IS MUTUALLY AGREED THAT: 1. DEATH BENEFITS. If death occurs while Participant is serving as an employee of the Company or an affiliated Company prior to attaining the retirement age of 65 years, the company will pay the amount of dollars necessary to net after payment of Federal Income Taxes $133,333.33 per year, for a period of fifteen years, to such individual or individuals as the Participant shall have designated in writing, or in the absence of such designation, to the estate of the Participant. The first payment shall commence not later than three months following the Participant's death. Annual benefits are to be paid 1/12th each month. Definition of "net after payment of federal income taxes" (above). For the purpose of this agreement, to determine the amount to be paid, it will be assumed that the payment will be subject to tax at the highest federal marginal rate applicable to individuals for that year. Should the rate be increased during the year, the Participant will be entitled to an adjustment payment within three months of the effective date of the increase. 2. RETIREMENT BENEFITS. In addition to any other compensation, beginning at age 65 (whether or not the Participant retires at such time), the Participant shall be entitled to receive from the Company the amount of dollars necessary to net after payment of Federal Income Taxes $133,333.33 per year commencing not later than three months after the Participant has reached age 65, for a period of fifteen years. If the Participant should die during said fifteen year period, the sum of $133,333.33 per year shall be payable until the expiration of said fifteen year period to such individual or individuals as the Participant shall have designated in writing filed with the Company, or in the absence of such designation, to the estate of the Participant. Annual benefits are to be paid 1/12th each month. 2 3. FORFEITURE PROVISIONS. 3.1 Except as provided in sections 3.2 and 3.3, the participant's rights to the death benefit and retirement benefit provided in this agreement shall be vested one-seventh per year, the first one-seventh becoming invested December 31, 1986 and amounts so vested are nonforfeitable even though the Participant's employment with the Corporation terminates. 3.2 If the Participant's employment with the Corporation is terminated by reason of fraud, dishonesty, embezzlement or theft, the Agreement shall terminate and all payments whether vested or not under the terms of this Agreement shall be forfeited. 3.3 The Participant expressly agrees, as a condition to the performance by the Corporation of its obligations hereunder, that, during and after the Participant's employment with the Corporation, or if the Participant is suffering from total and permanent disability, the Participant will not, directly or indirectly, render any services of an advisory nature to or otherwise become employed by or participate or engage in any business competitive with any of the businesses of the Corporation, without the prior written consent of the Corporation; provided, however, that nothing herein shall prohibit the Participant from owning stock or other securities of a competitor which do not exceed one percent (1%) of the total outstanding stock of such competitor, and so long as the Participant in fact does not have the power to control or direct the management or policies of such competitor. The Corporation shall not be required to make any payments hereunder whether vested or not if the Participant fails to comply with the conditions of this section. 4. VESTING. This benefit shall vest one-seventh per year at the end of each calendar year beginning December 31, 1986 when the first one-seventh shall vest. If the Participant terminates his employment with Company, no further amounts shall vest thereafter. If Participant's employment is terminated by Company, he shall continue to vest one-seventh each year until fully vested, subject to the forfeiture provisions of Paragraph 3. Participant shall be fully vested on death even though prior to the end of the seventh year. Participant shall continue to vest in the event of permanent disability. 5. ASSIGNMENT OF RIGHTS. This Agreement may not be assigned. 6. CONSTRUCTION AGREEMENT. Any payments under this Agreement shall be independent of and in addition to, those under any other plan, program, or agreement which may be in effect between the parties hereto, or any other compensation payable to the Participant or the Participant's designee by the Company. This Agreement shall not be construed as a contract of employment and shall not operate to change in any way any of the other terms and conditions of Participant's employment and furthermore does not restrict the right of the Company to discharge the Participant for proper cause or the right of the Participant to discontinue service as an employee of the Company. Benefits under this Agreement are compensation for services and rendered and with respect to such benefit amounts shall constitute a liability of the Company to the Participant and/or the beneficiaries in accordance with the terms hereof. 3 6. Construction Agreement (continued). The Company shall be under no obligation whatever to purchase or maintain any contract, policy or other asset to provide the benefits under this Agreement. Further, any contract, policy or other asset which the Company may utilize to insure itself of the funds to provide the benefits hereunder shall not serve in any way as security to the Participant for the Company's performance under this Agreement. The right accruing to the Participant or any designated beneficiary hereunder shall be no greater than the right of any unsecured general creditor of the Company. The law of the State of Texas shall govern this Agreement. 7. AMENDMENT OF AGREEMENT. This Agreement may not be altered, amended or revoked except by a written agreement signed by the Company and the Participant. IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and year first hereinabove written. STEWART INFORMATION SERVICES CORPORATION ATTEST: By: /s/ SUE M. NOLZ By: /s/ CARLOSS MORRIS ---------------------------- ------------------------------------ Asst. Secretary Title: Chairman ----------------------------- By: /s/ MALCOM S. MORRIS ------------------------------------- Participant 4 DESIGNATION OF BENEFICIARY Pursuant to the terms of a Salaried Deferred Compensation Agreement, dated March 10, 1986, between myself and the Company, I hereby designate the following beneficiary(ies) to receive any payments which may be due under such Agreement after my death. This designation hereby revokes any prior designation which may have been in effect. /s/ REBECCA ANN MORRIS - ------------------------------- ------------------------------------- (Primary Beneficiary) (Secondary Beneficiary) Date: 3/12/86 By: /s/ MALCOM S. MORRIS -------------------------- ---------------------------------- Acknowledged by: STEWARD INFORMATION SERVICES CORPORATION By: /s/ CARLOSS MORRIS ---------------------------------- Title: Chairman 5 SALARY DEFERRED COMPENSATION AGREEMENT THIS AGREEMENT, made this 10th day of March 1986, by and between Stewart Information Services Corporation, hereinafter called the "Company" and Stewart Morris, Jr. an employee, hereinafter called the "Participant". WHEREAS, the Participant's competent and faithful efforts on behalf of the Company have resulted in substantial growth and profits to the Company, and, WHEREAS, the Company values the efforts, abilities and accomplishments of the Participant as an important member of management and recognizes that his future services are vital to its continued growth and profits and that the loss of his services would result in substantial financial losses, and, WHEREAS, the Company, in order to retain the services of the Participant, is willing to provide pre and post-retirement benefits to Participant or his designated beneficiary pursuant to the terms and conditions contained in this Salary Deferred Compensation Plan, NOW, THEREFORE, IT IS MUTUALLY AGREED THAT: 1. DEATH BENEFITS. If death occurs while Participant is serving as an employee of the Company or an affiliated Company prior to attaining the retirement age of 65 years, the company will pay the amount of dollars necessary to net after payment of Federal Income Taxes $133,333.33 per year, for a period of fifteen years, to such individual or individuals as the Participant shall have designated in writing, or in the absence of such designation, to the estate of the Participant. The first payment shall commence not later than three months following the Participant's death. Annual benefits are to be paid 1/12th each month. Definition of "net after payment of federal income taxes" (above). For the purpose of this agreement, to determine the amount to be paid, it will be assumed that the payment will be subject to tax at the highest federal marginal rate applicable to individuals for that year. Should the rate be increased during the year, the Participant will be entitled to an adjustment payment within three months of the effective date of the increase. 2. RETIREMENT BENEFITS. In addition to any other competition, beginning at age 65 (whether or not the Participant retires at such time), the Participant shall be entitled to receive from the Company the amount of dollars necessary to net after payment of federal Income Taxes $133,333.33 per year commencing not later than three months after the Participant has reached age 65, for a period of fifteen years. If the Participant should die during said fifteen year period, the sum of $133,333.33 per year shall be payable until the expiration of said fifteen year period to such individual or individuals as the Participant shall have designated in writing filed with the Company, or in the absence of such designation, to the estate of the Participant. Annual benefits are to be paid 1/12 each month. 6 6. Construction Agreement (continued). The Company shall be under no obligation whatever to purchase or maintain any contract, policy or other asset to provide the benefits under this Agreement. Further, any contract, policy or other asset which the Company may utilize to insure itself of the funds to provide the benefits hereunder shall not serve in any way as security to the Participant for the Company's performance under this Agreement. The right accruing to the Participant or any designated beneficiary hereunder shall be no greater than the right of any unsecured general creditor of the Company The law of the State of Texas shall govern this Agreement. 7. AMENDMENT OF AGREEMENT. This Agreement may not be altered, amended or revoked except by a written agreement signed by the Company and the Participant. IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and year first hereinabove written. STEWART INFORMATION SERVICES CORPORATION ATTEST: By: /s/ SUE M. NOLZ By: /s/ CARLOSS MORRIS ---------------------------- ---------------------------- Asst. Secretary Title: Chairman ------------------- By: /s/ STEWART MORRIS, JR. ---------------------------- 7 DESIGNATION OF BENEFICIARY Pursuant to the terms of a Salaried Deferred Compensation Agreement, dated _______________, between myself and the Company, I hereby designate the following beneficiary(ies) to receive any payments which may be due under such Agreement after my death. This designation hereby revokes any prior designation which may have been in affect. /s/ CARLOTTA BARKER - ------------------------------------ ------------------------------------ (Primary Beneficiary) (Secondary Beneficiary) Date: March 12, 1986 By: /s/ STEWART MORRIS, JR. - ------------------------------------ ------------------------------------ Acknowledged by: STEWART INFORMATION SERVICES CORPORATION By: /s/ CARLOSS MORRIS ------------------------------------ Title: Chairman ------------------------------------ 8 DESIGNATION OF BENEFICIARY Pursuant to the terms of a Salaried Deferred Compensation Agreement, dated March 10, 1986, between myself and the Company, I hereby designate the following beneficiary (ies) to receive any payments which may be due under such Agreement after my death. This designation hereby revokes any prior designation which may have been in effect. STEWART MORRIS, SR. CARLOTTA BARKER - ------------------------------ ---------------------------- (Primary Beneficiary as to the (Secondary Beneficiary as to first one million) the remainder) Date: 9/15/87 By: /s/ STEWART MORRIS, JR. ------------------------- ------------------------- Acknowledge By: STEWART INFORMATION SERVICES CORPORATION By: /s/ MALCOM S. MORRIS ------------------------- Title: SR EX V.P. ---------------------- 9 SALARY DEFERRED COMPENSATION AGREEMENT THIS AGREEMENT, made this 10th day of March 1986, by and between Stewart Information Services Corporation, hereinafter called the "Company" and Max Crisp, an employee, hereinafter called the "Participant". WHEREAS, the Participant's competent and faithful efforts on behalf of the Company have resulted in substantial growth and profits to the Company, and, WHEREAS, the Company values the efforts, abilities and accomplishments of the Participant as an important member of management and recognizes that his future services are vital to its continued growth and profits and that the loss of his services would result in substantial financial losses, and, WHEREAS, the Company, in order to retain the services of the Participant, is willing to provide pre and post-retirement benefits to Participant or his designated beneficiary pursuant to the terms and conditions contained in this Salary Deferred Compensation Plan, NOW, THEREFORE, IT IS MUTUALLY AGREED THAT: 1. DEATH BENEFITS. If death occurs while Participant is serving as an employee of the Company or an affiliated Company prior to attaining the retirement age of 65 years, the company will pay the amount of dollars necessary to net after payment of Federal Income Taxes $66,666.67 per year, for a period of fifteen years, to such individual or individuals as the Participant shall have designated in writing, or in the absence of such designation, to the estate of the Participant. The first payment shall commence not later than three months following the Participant's death. Annual benefits are to be paid 1/12th each month. Definition of "net after payment of federal income taxes" (above). For the purpose of this agreement, to determine the amount to be paid, it will be assumed that the payment will be subject to tax at the highest federal marginal rate applicable to individuals for that year. Should the rate be increased during the year, the Participant will be entitled to an adjustment payment within three months of the effective date of the increase. 2. RETIREMENT BENEFITS. In addition to any other compensation, beginning at age 65 (whether or not the Participant retires at such time), the Participant shall be entitled to receive from the Company the amount of dollars necessary to net after payment of Federal Income Taxes $66,666.67 per year commencing not later than three months after the Participant has reached age 65, for a period of fifteen years. If the Participant should die during said fifteen year period, the sum of $66,666.67 per year shall be payable until the expiration of said fifteen year period to such individual or individuals as the Participant shall have designated in writing filed with the Company, or in the absence of such designation, to the estate of the Participant. Annual benefits are to be paid 1/12th each month. 10 3. FORFEITURE PROVISIONS. 3.1 Except as provided in sections 3.2 and 3.3, the Participant's rights to the death benefit and retirement benefit provided in this agreement shall be vested one-seventh per year, the first one-seventh becoming invested December 31, 1986 and amounts so vested are nonforfeitable even though the Participant's employment with the Corporation terminates. 3.2 If the Participant's employment with the Corporation is terminated by reason of fraud, dishonesty, embezzlement or theft, the Agreement shall terminate and all payments whether vested or not under the terms of this Agreement shall be forfeited. 3.3 The Participant expressly agrees, as a condition to the performance by the Corporation of its obligations hereunder, that, during and after the Participant's employment with the Corporation, or if the Participant is suffering from total and permanent disability, the Participant will not, directly or indirectly, render any services of an advisory nature to or otherwise become employed by or participate or engage in any business competitive with any of the businesses of the Corporation, without the prior written consent of the Corporation; provided, however, that nothing herein shall prohibit the Participant from owning stock or other securities of a competitor which do not exceed one percent (1%) of the total outstanding stock of such competitor, and so long as the Participant in fact does not have the power to control or direct the management or policies of such competitor. The Corporation shall not be required to make any payments hereunder whether vested or not if the Participant fails to comply with the conditions of this section. 4. VESTING. This benefit shall vest one-seventh per year at the end of each calendar year beginning December 31, 1986 when the first one-seventh shall vest. If the Participant terminates his employment with Company, no further amounts shall vest thereafter. If Participant's employment is terminated by Company, he shall continue to vest one-seventh each year until fully vested, subject to the forfeiture provisions of Paragraph 3. Participant shall be fully vested on death even though prior to the end of the seventh year. Participant shall continue to vest in the event of permanent disability. 5. ASSIGNMENT OF RIGHTS. This Agreement may not be assigned. 6. CONSTRUCTION AGREEMENT. Any payments under this Agreement shall be independent of, and in addition to, those under any other plan, program or agreement which may be in effect between the parties hereto, or any other compensation payable to the Participant or the Participant's designee by the Company. This Agreement shall not be construed as a contract of employment and shall not operate to change in any way any of the other terms and conditions of Participant's employment and furthermore does not restrict the right of the Company to discharge the Participant for proper cause or the right of the Participant to discontinue service as an employee of the Company. Benefits under this Agreement are compensation for services and rendered and with respect to such benefit amounts shall constitute a liability of the Company to the Participant and/or the beneficiaries in accordance with the terms hereof. 11 6. Construction Agreement (continued). The Company shall be under no obligation whatever to purchase or maintain any contract, policy or other asset to provide the benefits under this Agreement. Further, any contract, policy or other asset which the Company may utilize to insure itself of the funds to provide the benefits hereunder shall not serve in any way as security to the Participant for the Company's performance under this Agreement. The right accruing to the Participant or any designated beneficiary hereunder shall be no greater than the right of any unsecured general creditor of the Company. The law of the State of Texas shall govern this Agreement. 7. AMENDMENT OF AGREEMENT. This Agreement may not be altered, amended or revoked except by a written agreement signed by the Company and the Participant. IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and year first hereinabove written. STEWART INFORMATION SERVICES CORPORATION ATTEST: By: /s/ SUE M. NOLZ By: /s/ CARLOSS MORRIS ------------------------------ -------------------------------- Asst. Secretary Title: Chairman ------------------- By: /s/ MAX CRISP -------------------------------- Participant 12 DESIGNATION OF BENEFICIARY Pursuant to the terms of a Salaried Deferred Compensation Agreement, dated March 10, 1986, between myself and the Company, I hereby designate the following beneficiary(ies) to receive any payments which may be due under such Agreement after my death. This designation hereby revokes any prior designation which may have been in effect. JIM CRISP ESTATE OF MAX CRISP - -------------------------- -------------------------------- (Primary Beneficiary) (Secondary Beneficiary) Date: March 10, 1986 By: MAX CRISP -------------------- ---------------------------- Acknowledged by: STEWART INFORMATION SERVICES CORPORATION By: /s/ CARLOSS MORRIS ----------------------------- Title: Chairman ------------------------- 13 FIRST AMENDMENT TO SALARY DEFERRED COMPENSATION AGREEMENT This First Amendment to Salary Deferred Compensation Agreement is made this 24th day of July, 1990, by and between Stewart Information Services Corporation (the "Company") and Malcolm Morris, an employee, (the "Participant"). WHEREAS, the Company and Participant entered into a Salary Deferred Compensation Agreement on March 10, 1986, (the "Agreement"); WHEREAS, the Company and Participant desire to amend the Agreement to provide for a specialized funding mechanism to informally fund the benefits to be provided under the Agreement; WHEREAS, the Company and Participant have provided for the establishment of an irrevocable trust (known as the Stewart Information Services Corporation Salary Deferred Compensation Trust) as the vehicle for this informal funding; NOW THEREFORE, it is mutually agreed that: 1. In accordance with the terms of Section 7 of the Agreement (pertaining to the Amendment of the Agreement), Section 6 (pertaining to Construction of the Agreement), shall be amended by deleting the second and third paragraphs thereof in their entirety and substituting therefor, the following two paragraphs: The Company shall establish an irrevocable trust (the "Trust") pursuant to a trust agreement, substantially in the form of Exhibit "I" attached to and made a part of this Agreement with Ameritrust Texas, N.A. as trustee. The Company shall transfer to the Trust such life insurance policies or other property or funds as the Company in its sole discretion deems appropriate for the purpose of making funds available to pay the benefits to the Participant under this Agreement. 14 Any such transfers to the Trust shall be irrevocable and be held by the trustee in accordance with the terms of the Trust for payment in accordance with this Agreement. In transferring any insurance contracts or other property rights to the Trust, the Company shall cause such contracts or rights to be assigned to and in the name of the Trust or trustee for the Trust and for the benefits thereunder to be payable to the Trust or trustee for the Trust. Benefits under the Agreement are compensation for services rendered and with respect to such benefit amounts, beyond what is funded by and paid to the Participant (or his beneficiaries) from the Trust, shall constitute a liability of the Company to the Participant (or his beneficiaries) in accordance with the terms of this Agreement. Apart from what the Company transfers to the Trust, the Company shall be under no obligation to purchase or maintain any assets to provide the benefits under this Agreement and any asset which the Company may utilize for the purpose of providing funds to pay the benefits under this Agreement shall not be considered as security to the Participant for the Company's performance under this Agreement. The right accruing to the Participant or any designated beneficiary under this Agreement, shall be no greater than the right of any unsecured general creditor of the Company. 2. The Agreement shall, except as otherwise hereby amended, continue and remain in effect. IN WITNESS WHEREOF, the parties hereto have executed, this First Amendment to Salary Deferred Compensation Agreement the day and year first hereinabove written. STEWART INFORMATION SERVICES CORPORATION Affix Corporate Seal By: /s/ STEWART MORRIS [SEAL] ------------------------------- Attest Title: President By: /s/ SUE M. NOLZ ----------------------------- ---------------------------------- Assistant Secretary By: /s/ MALCOLM S. MORRIS ------------------------------- Malcolm S. Morris, Participant 2 15 FIRST AMENDMENT TO SALARY DEFERRED COMPENSATION AGREEMENT This First Amendment to Salary Deferred Compensation Agreement is made this 24th day of July, 1990, by and between Stewart Information Services Corporation (the "Company") and Stewart Morris, Jr. an employee, (the "Participant"). WHEREAS, the Company and Participant entered into a Salary Deferred Compensation Agreement on March 10, 1986, (the "Agreement"); WHEREAS, the Company and Participant desire to amend the Agreement to provide for a specialized funding mechanism to informally fund the benefits to be provided under the Agreement; WHEREAS, the Company and Participant have provided for the establishment of an irrevocable trust (known as the Stewart Information Services Corporation Salary Deferred Compensation Trust) as the vehicle for this informal funding; NOW THEREFORE, it is mutually agreed that: 1. In accordance with the terms of Section 7 of the Agreement (pertaining to the Amendment of the Agreement), Section 6 (pertaining to Construction of the Agreement) shall be amended by deleting the second and third paragraphs thereof in their entirety and substituting therefor, the following two paragraphs: The Company shall establish an irrevocable trust (the "Trust") pursuant to a trust agreement, substantially in the form of Exhibit "I" attached to and made a part of this Agreement with Ameritrust Texas, N.A. as trustee. The Company shall transfer to the Trust such life insurance policies or other property or funds as the Company in its sole discretion deems appropriate for the purpose of making funds available to pay the benefits to the Participant under this Agreement. 16 Any such transfers to the Trust shall be irrevocable and be held by the trustee in accordance with the terms of the Trust for payment in accordance with this Agreement. In transferring any insurance contracts or other property rights to the Trust, the Company shall cause such contracts or rights to be assigned to and in the name of the Trust or trustee for the Trust and for the benefits thereunder to be payable to the Trust or trustee for the Trust. Benefits under the Agreement are compensation for services rendered and with respect to such benefit amounts, beyond what is funded by and paid to the Participant (or his beneficiaries) from the Trust, shall constitute a liability of the Company to the Participant (or his beneficiaries) in accordance with the terms of this Agreement. Apart from what the Company transfers to the Trust, the Company shall be under no obligation to purchase or maintain any assets to provide the benefits under this Agreement and any asset which the Company may utilize for the purpose of providing funds to pay the benefits under this Agreement shall not be considered as security to the Participant for the Company's performance under this Agreement. The right accruing to the Participant or any designated beneficiary under this Agreement, shall be no greater than the right of any unsecured general creditor of the Company. 2. The Agreement shall, except as otherwise hereby amended, continue and remain in effect. IN WITNESS WHEREOF, the parties hereto have executed, this First Amendment to Salary Deferred Compensation Agreement the day and year first hereinabove written. STEWART INFORMATION SERVICES CORPORATION [SEAL] By:/s/ STEWART MORRIS Attest ----------------------------- By: /s/ SUE M. NOLZ -------------------- Title: President Assistant Secretary -------------------------- By:/s/ STEWART MORRIS, JR. ----------------------------- Stewart Morris, Jr. Participant -------------------- 2 17 FIRST AMENDMENT TO SALARY DEFERRED COMPENSATION AGREEMENT This First Amendment to Salary Deferred Compensation Agreement is made this 24th day of July, 1990, by and between Stewart Information Services Corporation (the "Company") and Max Crisp, an employee, (the "Participant"). WHEREAS, the Company and Participant entered into a Salary Deferred Compensation Agreement on March 10, 1986, (the "Agreement"); WHEREAS, the Company and Participant desire to amend the Agreement to provide for a specialized funding mechanism to informally fund the benefits to be provided under the Agreement; WHEREAS, the Company and Participant have provided for the establishment of an irrevocable trust (known as the Stewart Information Services Corporation Salary Deferred Compensation Trust) as the vehicle for this informal funding; NOW THEREFORE, it is mutually agreed that: 1. In accordance with the terms of Section 7 of the Agreement (pertaining to the Amendment of the Agreement), Section 6 (pertaining to Construction of the Agreement) shall be amended by deleting the second and third paragraphs thereof in their entirety and substituting therefor, the following two paragraphs: The Company shall establish an irrevocable trust (the "Trust") pursuant to a trust agreement, substantially in the form of Exhibit "I" attached to and made a part of this Agreement with Ameritrust Texas, N.A. as trustee. The Company shall transfer to the Trust such life insurance policies or other property or funds as the Company in its sole discretion deems appropriate for the purpose of making funds available to pay the benefits to the Participant under this Agreement. 18 Any such transfers to the Trust shall be irrevocable and be held by the trustee in accordance with the terms of the Trust for payment in accordance with this Agreement. In transferring any insurance contracts or other property rights to the Trust, the Company shall cause such contracts or rights to be assigned to and in the name of the Trust or trustee for the Trust and for the benefits thereunder to be payable to the Trust or trustee for the Trust. Benefits under the Agreement are compensation for services rendered and with respect to such benefit amounts, beyond what is funded by and paid to the Participant (or his beneficiaries) from the Trust, shall constitute a liability of the Company to the Participant (or his beneficiaries) in accordance with the terms of this Agreement. Apart from what the Company transfers to the Trust, the Company shall be under no obligation to purchase or maintain any assets to provide the benefits under this Agreement and any asset which the Company may utilize for the purpose of providing funds to pay the benefits under this Agreement shall not be considered as security to the Participant for the Company's performance under this Agreement. The right accruing to the Participant or any designated beneficiary under this Agreement, shall be no greater than the right of any unsecured general creditor of the Company. 2. The Agreement shall, except as otherwise hereby amended, continue and remain in effect. IN WITNESS WHEREOF, the parties hereto have executed, this First Amendment to Salary Deferred Compensation Agreement the day and year first hereinabove written. STEWART INFORMATION SERVICES CORPORATION Affix Corporate Seal [SEAL] By: /s/ STEWART MORRIS Attest: ------------------------------ By: /s/ SUE M. NOLZ Title: President ------------------------------ ---------------------------- Assistant Secretary By: /s/ MAX CRISP ------------------------------ Max Crisp, Participant ------------------------------ 2 19 STEWART INFORMATION SERVICES CORPORATION SALARY DEFERRED COMPENSATION TRUST This Trust Agreement is entered into this 24th day of July, 1990 between Stewart Information Services Corporation (the "Corporation") as settlor and Ameritrust Texas, N.A., as Trustee (the "Trustee") which in conjunction with the Salary Deferred Compensation Agreement ("the Agreement") described below, is intended to be maintained, as an irrevocable, grantor trust for the purpose of setting aside and providing a specialized funding mechanism for the deferred compensation provided under the Agreement. The Corporation has transferred and delivered to the Trustee the property described in Exhibit "A" attached to and made a part of this Trust Agreement. The Trustee accepts such property in trust under the terms of this Trust Agreement. ARTICLE I DEFINITIONS 1.1 AGREEMENT. The term "Agreement" shall mean the Stewart Information Services Corporation Salary Deferred Compensation Agreement entered into on March 10, 1986, including any amendments thereto. 1.2 BENEFICIARIES. The term "Beneficiaries" shall mean any "participant" or the "beneficiary" of such participant, as those terms are defined or provided for under the Agreement. 1.3 EMPLOYER. The term "Employer" shall mean the Corporation. 1.4 TRUST. The term "Trust" shall mean all property transferred to the Trustee by the Employer and thereafter held by the Trustee pursuant to this Trust Agreement, including the investments and reinvestments thereof. This Trust shall be known as the Stewart Information Services Corporation Salary Deferred Compensation Trust. 1.5 TRUSTEE. The term "Trustee" shall mean the Trustee designated herein and any successor Trustee. 1.6 CODE. The term "Code" shall mean the Internal Revenue Code of 1986, as amended (or predecessor or successor codes thereto). 1.7 ERISA. The term "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. 20 ARTICLE II IRREVOCABILITY AND AMENDABILITY 2.1 GENERAL. Except as provided in Section 2.2 of this Article II, this Trust shall be irrevocable for its term and shall only terminate when all the assets of the Trust have been distributed in accordance with the terms of the Agreement and of this Trust Agreement, and the Corporation shall have no right or power to revoke this instrument. 2.2 AMENDMENT. This Trust Agreement may be amended by the express written agreement of the Corporation and Trustee executed and acknowledged in the same form of this Trust Agreement. ARTICLE III INCORPORATION OF OTHER DOCUMENTS 3.1 OTHER DOCUMENTS. The Agreement is hereby incorporated herein by reference. 3.2 ORDER FOR INTERPRETATION IN THE EVENT OF CONFLICT. If a conflict between the interpretation of this Trust and the Agreement occurs, then precedence shall be given to the provisions of the documents in the following order: (a) The Trust (b) The Agreement To the extent possible, the Agreement shall be interpreted as mutually consistent. ARTICLE IV LEGAL TREATMENT OF THE TRUST 4.1 TRUSTEE. The Trustee of this Trust is the person (or entity) named herein, and said person (or entity), evidenced by the authorized signature of its agent and representative hereon, accepts such position. The Trustee shall receive, hold and disburse the assets designated to be so handled under the Agreement in trust, for the Beneficiaries in accordance with the provisions of this Trust Agreement. 4.2 CONTRIBUTIONS. (a) The Employer shall make contributions to this Trust in accordance with the provisions of the Agreement as a means of -2- 21 providing deferred compensation to the Beneficiaries. The Employer shall transfer to the Trustee all amounts provided for in the Agreement in accordance with the terms and conditions of the Agreement, to be held by the Trustee, together with the investments and reinvestments thereof, in TRUST, for the purposes and with the powers and authorities provided by this Trust Agreement and subject to the terms and conditions of this Trust Agreement. Except as otherwise provided in the Agreement and this Trust Agreement, all contributions made pursuant to the provisions of the Agreement and this Trust Agreement and all assets and earnings of the Trust are solely and irrevocably dedicated to the payment of benefits to the Beneficiaries pursuant to the Agreement. The Trustee shall not have the responsibility for determining the amount of contributions or collecting contributions to the Trust from the Employer. The Trustee shall only be responsible for assets transferred to the Trustee by the Employer. (b) The Trustee shall not be required to determine amounts to be contributed or to take any legal action to collect such amounts or collect, preserve or maintain any Trust property unless it has been indemnified either by the Trust itself, with the approval of the Employer, or by the Employer with respect to any expenses or losses to which it may be subjected by taking such action. Any property acquired by the Trustee through the enforcement or compromise of any claim or claims it has as Trustee of this Trust will become a part of the assets of the Trust. 4.3 ALIENATION AND ASSIGNMENT; SPENDTHRIFT TRUST. The interest of each Beneficiary in this Trust shall be held subject to a "spendthrift trust" within the meaning of Section 112.035 of the Texas Trust Code. Accordingly, the interest of the Beneficiaries in the Trust may not be alienated or assigned, voluntarily or involuntarily and any such attempt at alienation, assignment, or attachment shall be void, and such interest is not subject to attachment by or subject to the claim of any creditors of the Beneficiaries, except for debts owed the Employer. 4.4 TRUST SUBJECT TO GENERAL CREDITORS OF EMPLOYER. (a) The assets of the Trust shall be treated as general assets of the Employer and, as such, shall remain subject to claims of the general creditors of the Employer (including Beneficiaries) under applicable state and federal law. Nothing in this Trust Agreement shall affect Beneficiaries' rights as general creditors of the Employer under the Agreement or this Trust Agreement. No Beneficiary shall have any preferred claim on or any beneficial ownership in the Trust prior to the time for -3- 22 distribution to such Beneficiary under the Agreement. By agreeing to participate in the Agreement, each Participant shall, in the event that the Employer of such Participant becomes insolvent, thereby waive any priority such Participant may have had under law as an employee with respect to any claim against the Employer for amounts or benefits payable to such Participant under the Agreement and Trust beyond the rights such Participant would have as a general creditor. (b) At any time the Trustee receives actual notice from the Employer that the Employer is insolvent, the Trustee shall deliver any undistributed principal and income in the Trust attributable to the Participants who are employees of such Employer to satisfy such claims of the general creditors of such Employer as a court of competent jurisdiction may direct. For purposes of the preceding sentence (i) the term "employees of such Employer" shall include former employees of such Employer to the extent such undistributed principal and income is attributable to contributions made by such Employer and (ii) the Trustee shall have the right to pay the assets of the Trust into such court in an interpleader proceeding for the purposes of being directed by such court as to the proper disposition of such assets. The Trustee and all other parties shall be bound by such direction, and payment of the Trust assets by the Trustee pursuant to such court's direction shall discharge it from liability with respect to such payment under the Trust. The Board of Directors of the Employer shall appoint an individual with notice to the Trustee who shall have the duty to inform the Trustee of the Employer's insolvency. If a creditor of the Employer files a claim with the Trustee against the assets of the Trust, the Trustee shall determine, within 30 days after receipt of such claim, whether the Employer is insolvent. Pending such determination of insolvency by the Trustee, the Trustee shall discontinue payments to the Beneficiaries with respect to such Employer. The Trustee shall resume holding the Trust assets for the benefit of the Beneficiaries and resume making any payments under the Agreement to the Beneficiaries only after the Trustee has determined that the Employer is not insolvent (or is no longer insolvent, if Trustee initially determined the Employer to be insolvent). Unless the Trustee has actual notice of the Employer's insolvency or has received a written claim against the Trust by a creditor of the Employer, the Trustee shall have no duty to inquire whether the Employer is insolvent. An Employer shall be considered "insolvent" for purposes of this Trust Agreement if (i) the Employer is unable to pay its debts as they mature, or (ii) the Employer is subject to a pending proceeding as a debtor under the Bankruptcy Code. The determination of insolvency shall be given to the Trustee by the Employer or shall be made by the Trustee in its reasonable discretion, whichever -4- 23 may be applicable, and the Trustee may rely on evidence of solvency provided by the Employer and shall not be liable to any person for any good faith actions it takes on account of any such determination. If more than one Employer participates in the Agreement and Trust, the provisions of this Section 4(b) shall only apply to the affected Employer. 4.5 GRANTOR TRUST. It is intended that the Trust be taxed as a grantor trust under the provisions of Section 671 and Section 677(a)(2) of the Code and that the Employer, as grantor, be treated as the "owner" within the meaning of those provisions. The Employer shall file its federal income tax return in a manner consistent with the provisions of the preceding sentence. ARTICLE V DISTRIBUTIONS; INDIVIDUAL ACCOUNTS; EMPLOYER LOANS; TERMINATION 5.1 DISTRIBUTIONS. This Trust shall be an accumulation trust. Principal and all currently earned income shall be accumulated during the term of the Trust. The Trustee shall hold, manage, invest and reinvest the assets of the Trust, collect the income therefrom and, after deducting all charges and expenses properly payable therefrom, hold and distribute the then principal of the Trust and the income therefrom, in accordance with the provisions of the Agreement and this Trust Agreement. 5.2 INDIVIDUAL ACCOUNTS. The Employer shall establish an individual account or accounts for each Beneficiary in accordance with the terms of the Agreement. 5.3 EMPLOYER LOANS. The Employer shall have the right to borrow an amount from the Trust to the extent that any life insurance policies held in the Trust have available cash loan values; provided that the maximum amount of such borrowings may not exceed the excess of the sum of any premiums paid on any such policy and interest paid to the life insurance carrier on any loans made with respect to any such policy over the outstanding balance of any previous borrowings made by the Employer hereunder. The terms of any loan entered into between the Trustee and the Employer hereunder shall be set by the Trustee based on reasonable terms that are mutually acceptable to the Employer. 5.4 TERMINATION. Unless earlier revoked pursuant to the provisions of Section 2.2 of this Trust Agreement, this Trust shall terminate upon (a) a complete distribution of the Trust as provided in the Agreement or (b) if earlier and if required by the applicable rule against perpetuities, one day prior to the -5- 24 last day of the period ending 21 years after the death of the last to die of the original "participants" under the Agreement. If the trust terminates pursuant to clause (b) above then the assets of this Trust shall be transferred to a successor trust established for this purpose; provided such a transfer does not result in the taxation of the transferred assets to the Beneficiaries. Except as otherwise provided in this Trust Agreement or the Agreement any assets remaining in the Trust (or in the case of multiple participants, in each respective participant's subtrust or separate account) at the time of termination of the Trust (or subtrust or separate account, as the case may be) shall be returned to the Employer. ARTICLE VI POWERS AND DUTIES OF TRUSTEE 6.1 GENERAL POWERS. Except as provided herein to the contrary, the Trustee shall have all the powers granted trustees under the Texas Trust Code, as amended from time to time, and shall have the power to perform every act necessary or appropriate to carry out the terms of this Trust to the maximum extent permitted by law, including, without limitation, the following: (a) The receipt of contributions or funding under the Agreement; (b) The investment of Trust assets in the forms of investment provided in Schedule "A" attached to and made a part of this Trust Agreement. The forms of investment listed on Schedule "A" may be modified in accordance with the provisions of Section 6.8 of this Trust Agreement. (c) The entering into and performance of any agreement; (d) Subject to the provisions of Section 4.2(b) of this Trust Agreement, the undertaking of any legal action, whether as plaintiff or defendant, on behalf of the Trust; (e) The payment of any tax or assessment incurred in the administration of the Trust; (f) The employment of any person, including attorneys, accountants, investment managers and agents, to advise and assist the Trustee in the performance of its duties; -6- 25 (g) The execution and delivery of all instruments necessary or appropriate to accomplishing or facilitating the exercise of the Trustee's powers; (h) The borrowing of money from any source as may be necessary or advisable to effectuate the purposes of the Trust on such terms and conditions as the Trustee, in the Trustee's absolute discretion, may deem advisable, and for this purpose to mortgage or pledge on a nonrecourse basis the assets of the Trust; provided however, except as may be otherwise provided in Section 5.3 of this Trust Agreement, the proceeds of any insurance company loan may not be paid from the Trust and, unless each respective Beneficiary otherwise consents, shall not be used for any purpose other then to maintain the insurance policy (with respect to which the loan was made) on a "paid up basis," i.e., to pay both current premium and interest expense on prior loans from that policy; (i) To release, in the discretion of the Trustee, any fiduciary power at any time, in whole or in part, temporarily or permanently, whenever the Trustee may deem it advisable, by acknowledged instrument; (j) To keep any and all securities or other assets of the Trust in the name of some other person or entity with a power of attorney for the transfer attached or in bearer or Federal Reserve Book - Entry form or in the name of the Trustee without disclosing the fiduciary capacity of the Trustee; (k) Subject to the provisions of Section 6.11 of the Trust Agreement, to vote, either in person or by proxy, any share of stock held as part of the assets of the Trust; and (l) To hold cash uninvested at any time and in any amount pending investment pursuant to the terms of the Agreement. 6.2 PRUDENT MAN STANDARD. Except to the extent otherwise provided in this Trust Agreement or the Agreement, in acquiring, investing, reinvesting, exchanging, retaining, selling, supervising and managing trust property, a trustee shall exercise the judgment and care under the current circumstances that persons of ordinary prudence, discretion and intelligence exercise in the management of their own affairs, not in regard to speculation, but in regard to the permanent disposition of their -7- 26 funds, considering the probable income from as well as the probable increase in value and the safety of their capital. Provided, however, except as may otherwise be provided under applicable law which cannot be waived, the Trustee shall incur no liability to any person or entity for any action taken pursuant to a direction, request or approval (given by any Beneficiary, the Employer or any agent appointed by or representing such person or persons) contemplated by the terms of this Trust Agreement, and to that extent shall be relieved of the Prudent Man standard regarding investments of the Trust. 6.3 Compensation of Trustee. The Trustee shall be paid reasonable compensation for its services as may be agreed upon between the Trustee and Company from time to time. Such payment shall be made by the person designated in Section 6.7 of this Trust Agreement. 6.4 Reliance by Third Parties. Any person dealing in good faith with the Trustee or in good faith assisting the Trustee in conducting a transaction shall be entitled to rely without inquiry upon the representation that the Trustee has the power it purports to exercise and has exercised such power in accordance with the provisions of this Trust Agreement, and in such event such person shall not be responsible for the application of money or property paid or delivered to the Trustee. 6.5 Receipt and Disbursement of Funds. The Trustee shall receive all contributions from the Employer and disburse the Trust in accordance with the provisions of the Agreement and the terms of this Trust Agreement. 6.6 Cooperation with Employer. The Trustee shall exert reasonable efforts to cooperate with the Employer and any investment manager or third party recordkeeper as to any filings, reports and disclosures required by United States federal, state and local law. Within thirty (30) days (or such other reasonable time mutually agreeable to the Trustee and the Corporation) following the end of each Agreement Year during the term of this Trust, the Trustee shall provide the Employer with a verified written statement of accounts based on the Trustee's best information and knowledge in a form which shall substantially reflects the following: (a) The period covered by the account; (b) The total principal with which the Trustee is chargeable according to the last preceding written statement of accounts or the original principal if there is no preceding statement; -8- 27 (c) An itemized schedule of all principal, cash and property received and disbursed, distributed, or otherwise disposed of during the period; (d) An itemized schedule of income received and disbursed, distributed, or otherwise disposed of during the period; (e) The balance of principal and income remaining at the close of the period, how invested, and both the inventory and current market values of all investments; and (f) A statement that the Trust has been administered according to its terms. Any information transmitted by the Trustee to the Employer hereunder shall be certified to as complete and accurate by the Trustee. Any information required to be provided for the preparation of any annual reporting and disclosure materials shall be provided on an annual basis not less than 30 days prior to the time required for filing the applicable report, disclosure or return (including extensions thereof), unless the Employer and Trustee shall in writing have agreed to a later date for the provision of such information. The Trustee shall not be responsible for complying with the provisions of this Section 6.6 to the extent that the underlying administrative responsibility has been allocated to a third party in accordance with Section 6.10 of this Agreement. The statements provided in accordance with the above shall be deemed correct and final and binding as to all parties 90 days after receipt by the Employer except to the extent objected to prior to the end of such period. 6.7 Payment of Expenses. (a) The expenses incurred by the Trustee in the performance of its duties, including fees for legal services rendered to the Trustee (whether or not rendered in connection with a judicial or administrative proceeding and whether or not incurred while it is acting as Trustee) and the costs of the accounting described in Section 6.6 above; (b) any compensation paid to the Trustee in accordance with Section 6.3 above; and (c) all other proper charges and disbursements of the Trustee shall be paid by the Employer. -9- 28 6.8 Direction of Investments. The Employer shall have the right to select the investment alternatives provided in Section 6.1(b) of the Trust Agreement and to modify them from time to time, provided however, that to the extent that the Trust shall be holding life insurance policies or contracts that are eligible for any significant advantages or benefits with respect to transitional rules and grandfathering protection under the Tax Reform Act of 1986 or other tax legislation, such contract or policy shall not be assigned, transferred, surrendered, exchanged or cancelled without the prior advice and consent of an independent insurance advisor mutually designated by the Trustee and the Company. 6.9 Valuation. The Trustee shall value the Trust at the fair market value of the assets in the Trust as of the last business day of each Agreement year and upon such other dates as may be determined by the Employer or the Trustee or as may be specified under the Agreement. The determination of the Trustee with respect to the fair market value of any asset shall be final and conclusive. In making such valuation, the Trustee shall deduct all charges, expenses and other liabilities, if any, contingent or otherwise, then chargeable against the Trust, in order to give effect to income realized and expenses paid or incurred, losses sustained, and unrealized gains or losses constituting appreciation or depreciation in the value of the Trust investments since the last previous valuation. 6.10 Appointment of Other Fiduciaries and Service Providers. The Corporation and Trustee agree that either party with the prior consent of the other may appoint third parties to be allocated administrative or investment responsibilities under the Trust as mutually agreeable between the Corporation and Trustee, including recordkeeping and investment fund managers or sponsors. 6.11 Investment Company Shares. The voting rights of any shares of any registered funds under the Investment Company Act of 1940 in the Trust shall be exercised in accordance with the direction given the Trustee by the Employer. 6.12 Limitation of Trustee Liability. The Trustee shall not be liable to the Trust or to any person having a beneficial interest in the Trust for any losses or decline in value which may be incurred upon any investment of the trust assets, as long as the Trustee acts in good faith and in accordance with the terms of the Agreement and this Trust Agreement. The Trustee shall not be liable for any act or omission by the Trustee, because of a direction of any Beneficiary, the Employer or any investment manager appointed by the Employer, nor for any act or -10- 29 omission of any Beneficiary, the Employer, any investment manager appointed by the Employer or any other agent appointed by the Employer except to the extent required by applicable state or federal law under which liability cannot be waived. The Trustee shall not be liable for any act or omission on the Trustee's own part (except for any act or omission as is attributable to gross negligence, a willful breach of trust or bad faith on the part of the Trustee) except to the extent required by the terms of applicable state or federal law under which liability cannot be waived. The Trustee shall not be accountable or held liable for any act or omission of any agent of the Trustee if the Trustee has used good faith and ordinary care in the selection of such agent, and in such event, any liability shall be solely that of such agent. 6.13 Reliance on Information. When the Trustee acts in good faith, the Trustee, in all matters pertaining to the Trustee's management and investment of the Trust, may rely upon any notice, resolution, instruction, direction, order, certificate, opinion, letter, telegram or other document believed by the Trustee to be genuine, to have been signed by a proper representative of any Beneficiary, the Employer or any investment manager or third party recordkeeper, if one is appointed, and to be the act of any Beneficiary, the Employer or the investment manager or third party recordkeeper, as the case may be. The Trustee shall accept any certificate or other instrument duly signed by a proper representative of any Beneficiary, the Employer or the investment manager or third party recordkeeper, if one is appointed which purports to evidence an instruction, direction or order of any Beneficiary, the Employer, the investment manager or third party recordkeeper, as the case may be, as conclusive evidence thereof. 6.14 Indemnification. The Employer hereby, jointly and severally, agrees to indemnify and hold harmless the Trustee from and against any and all losses, claims, damages, liabilities costs and expenses, including but not limited to, liability for any judgments, settlements consented to in writing by the Trustee, which consents will not be unreasonably withheld, and reasonable attorneys fees arising out of or in connection with or as a direct or indirect result of its serving as Trustee of the Trust established under this Trust Agreement, (including but not limited to the Trustee's acts or omissions with respect to (a) the voting of any share of stock held as part of the assets of the Trust, or (b) establishing or maintaining investment funds or effecting investments therein in accordance with the terms and provisions of the Trust, or the Trustee's determination of insolvency of any Employer and the Trustee's acts or omissions in accordance with the terms and provisions of the Trust following any determination of insolvency of any Employer), except only -11- 30 those losses, claims, changes, liabilities, costs and expenses, if any, arising out of or in connection with or as a direct or indirect result of the Trustee's bad faith, gross negligence or willful neglect or breach of trust. The Trustee shall promptly notify each Employer of any claim, action or proceeding for which it may seek indemnity, Such indemnity is a continuing obligation and shall be binding on each Employer and its successors, whether by merger or otherwise, and assigns. In addition, such indemnity shall survive the resignation or removal of the Trustee and/or the liquidation of the Trust. ARTICLE VII ENFORCEMENT AND REMEDIES 7.1 Right to Sue. The Trustee may maintain on behalf of the Trust in its representative capacity a civil action for any legal or equitable remedy against a third person that it could maintain in its own right if it were the party aggrieved. 7.2 Liens. The Trustee is entitled to a lien against the Trust - (a) for any advances made by it for the benefit of the Trust or for any unpaid expenses properly chargeable against the Trust; and (b) for payment of its compensation under Section 6.3 of this Trust Agreement. ARTICLE VIII REMOVAL, RESIGNATION AND APPOINTMENT OF TRUSTEES: AMENDMENTS 8.1 Removal of Trustee. The Trustee may be removed at any time by the Corporation. No such removal shall take effect until thirty (30) days from the date that a written notice was delivered to the Trustee unless prior thereto a successor Trustee shall have been appointed and accepted and the Trustee consents to such earlier date. 8.2 Resignation of Trustee. The Trustee may resign at any time upon seven (7) days written notice delivered to the Corporation. 8.3 Appointment of Successor Trustee; and Transfer of Funds. The Corporation shall appoint a qualified corporate -12- 31 fiduciary as Trustee to replace a removed or resigned Trustee and such appointment shall be made not later than the effective date of such removal or resignation of such Trustee. The predecessor Trustee shall assign, transfer and pay over the assets of the Trust to the Successor Trustee. The predecessor Trustee is authorized, however, to reserve such sum of money as is reasonable for the payment of its fees and expenses in connection with the settlement of its account or otherwise, and any balance of such reserve remaining after the payment of such fees and expenses shall be paid over to the successor Trustee. 8.4 Accounting of Removed or Resigned Trustee. Any Trustee removed under Section 8.1 above shall remain as Trustee until its successor shall have been appointed, but not more than thirty (30) days following notice of removal. Within ninety (90) days following the expiration of the thirty (30) day period following its removal or resignation, the Trustee shall provide the Corporation with a full and final accounting. The written approval of such an accounting by an Employer, or the failure of the Employer to notify the Trustee of their disapproval of such an accounting Within ninety (90) days after its receipt shall be final and binding as to the Trustee's administration of the Trust for the applicable accounting period upon the Employer and all persons who have or may thereafter have an interest in the Trust. ARTICLE IX MISCELLANEOUS 9.1 Controlling Law. This Trust has been entered into in the state of Texas and except to the extent preempted by ERISA or other federal law shall be construed and enforced in accordance with the laws of Texas. 9.2 Income Tax Deferral; ERISA Status. This Trust is intended to comply with the law and rulings under Sections 83, 402(b), 451 and 671 of the Code and the economic benefit and constructive receipt doctrines thereunder, including the ruling positions and criteria of the Internal Revenue Service as in effect from time to time, and the related rulings and regulations, which result in a deferral of income tax to the Participants (or Beneficiaries). This Trust is also intended to comply with Sections 201(2), 301(a) (3) and 401(a) (1) of ERISA and the related rules and regulations thereunder, applying to unfunded plans maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees. The Trust is also intended to qualify as maintaining separate accounts for each employee within the meaning of Section 404(a) (5) of the Code pertaining to the allowance of the Employer's deduction. -13- 32 9.3 Subtrusts. This Trust may receive contributions for more than one Participant, pursuant to the separate Agreement for each such Participant, provided in the event that more than one Participant is covered by the Trust, a separate subtrust shall be established for each such Participant in a manner that satisfies the provisions of the last sentence of the preceding section (9.2) of this Agreement. 9.4 Accountability For Funds Received. The Trustee shall be accountable only for funds or other property received by him pursuant to the Agreement and Trust. 9.5 Recourse Beyond Trust Assets. The Employer shall be liable to the Beneficiary for the payment of the benefits under the Agreement to the extent of any insufficiency in the funds available under and paid to the Beneficiary from the Trust. In addition, the rights of the Beneficiaries against the Employer for the payment of benefits under the Agreement shall be preserved in accordance with the provisions of Section 4.4(a) of this Trust Agreement in the event that the assets of this Trust are paid to the general creditors of the Employer in accordance with the provisions of Section 4.4(b) of this Trust Agreement. The provisions of this Section 9.5 shall not limit the rights of the Beneficiaries under this Trust Agreement or as otherwise allowed by law with respect to the Trustee. 9.6 Facility of Payment. If the Employer determines that a payee under this Trust Agreement is unable to care for his own affairs because of physical or mental condition or minority, any such payment (unless a claim shall have been made therefor by a duly appointed guardian or other legal representative) may be made to the payee's guardian or spouse, or to any descendant, parent, relative, or other person determined by the Employer to be trustworthy to utilize the payment for the benefit of the payee, and the payments so made shall completely discharge the liability of the Trustee with respect thereto. 9.7 No Bond Required. Except as otherwise required by law, no Trustee acting hereunder shall be required to give bond or other security in any jurisdiction. 9.8 Gender and Number. To the extent required by the context herein, each gender shall include the masculine, the feminine and the neuter, and each number shall include the singular and the plural. 9.9 Execution in Counterparts. This Trust may be executed in counterparts, each of which shall be deemed an original. -14- 33 IN WITNESS WHEREOF, the Corporation and Trustee have caused their respective seals to be hereunto affixed the date first above written. CORPORATION: ASSET STEWART INFORMATION SERVICES CORPORATION By /s/ [ILLEGIBLE] ----------------------------- Assistant, Secretary By: /s/ STEWART MORRIS -------------------------------- Stewart Morris, President TRUSTEE: AMERITRUST TEXAS, N.A. By: Name: /s/ [ILLEGIBLE] ------------------------------- -15- 34 THE STATE OF TEXAS ) ) COUNTY OF HARRIS ) BEFORE ME, the undersigned authority, on this day personally appeared Stewart Morris, known to me to be the President of Stewart Information Services Corporation whose name is subscribed to the foregoing instrument and acknowledged to me that he executed the same for the purposes and consideration therein expressed. GIVEN UNDER MY HAND AND SEAL OF OFFICE on this the 24th day of July, 1990. /s/ LOU ANN WOCLAND ---------------------------------- NOTARY PUBLIC IN AND FOR THE STATE OF TEXAS My Commission Expires: 7/14/92 THE STATE OF TEXAS ) ) COUNTY OF HARRIS ) BEFORE ME, the undersigned authority, on this day personally appeared Carl W. Pitschmonn Jr., known to me to be the person whose name is subscribed to the foregoing instrument as Trustee and acknowledged to me that such person executed the same for the purposes and consideration therein expressed, in the capacity therein stated and as the act and deed of said banking institution. GIVEN UNDER MY HAND AND SEAL OF OFFICE on this the 21st day of September, 1990. /s/ LAURA VALDES ------------------------------ [SEAL] NOTARY PUBLIC IN AND FOR THE STATE OF TEXAS My Commission Expires: 5/27/94 -16- 35 SCHEDULE "A" Pursuant to Section 6.1(b) of the Trust Agreement the Trustee shall make investments available under this Trust in the following categories of investments: (1) life insurance contracts and policies of a type mutually approved by or acceptable to both the Employer and the Beneficiaries -17- 36 EXHIBIT "A" The Corporation has transferred and delivered to the Trustee the property described below: Security Life of Denver Policy Number 000953922 Dated April 1, 1986 in the Face Amount of $604,084 for Martin M. Crisp, Insured. Security Life of Denver Policy Number 000957576 Dated April 1, 1986, Expiry Date April 1, 1987 in the Face Amount of $219,250 for Martin M. Crisp, Insured. Security Life of Denver Policy Number 000953920 Dated April 1, 1986 in the Face Amount of $877,655 for Malcolm S. Morris, Insured. Security Life of Denver Policy Number 000957578 Dated April 1, 1986, Expiry Date April 1, 1987 in the Face Amount of $300,000 for Malcolm S. Morris, Insured. Security Life of Denver Policy Number 000953921 Dated April 1, 1986 in the Face Amount off $958,222 for Stewart Morris, Jr., Insured. Security Life of Denver (Duplicate) Policy Number 000957577 Dated April 1, 1986, Expiry Date April 1, 1990 in the Face Amount of $220,000 for Stewart Morris, Insured. -18- 37 SECOND AMENDMENT TO THE SALARY DEFERRED COMPENSATION AGREEMENT This Second Amendment to Salary Deferred Compensation Agreement is made this 30th day of October, 1992 by and between Stewart Information Services Corporation (the "Company") and Malcolm S. Morris, an employee, (the "Participant"). WHEREAS, the Company and Participant entered into a Salary Deferred Compensation Agreement on March 10, 1986, (the "Agreement"); WHEREAS, the Agreement was amended on July 24, 1990; WHEREAS, the Company and Participant desire to amend the Agreement for a change in the informal funding mechanism for the benefits to be provided under the Agreement to accommodate a split-dollar arrangement; NOW, THEREFORE, it is mutually agreed that: In accordance with the terms of Section 7 of the Agreement (pertaining to the Amendment of the Agreement) the Agreement shall be amended as follows: 1. Section 1 (pertaining to Death Benefits) shall be amended by deleting it in its entirety and substituting therefor, the following: 38 1. DEATH BENEFITS If death occurs while Participant is serving as an employee of the Company or of an affiliated company prior to attaining the retirement age of 65 years, the Company will pay the amount of dollars necessary to net after the payment of federal, state, county and city income taxes $133,333.33 per year, for a period of 15 years, to such individual or individuals as the Participant shall have designated in writing, or in the absence of such designation, to the estate of the Participant. The first payment shall commence not later than three months following the Participant's death. Annual payments are to be paid 1/12 each month. For the purposes of this Agreement, to determine the "net after the payment of federal, state, county and city income tax," it will be assumed that the payment will be subject to tax at the highest marginal rates and highest surtax rates applicable to an individual taxpayer for the year of payment as set by the federal, State of Texas, Harris County and City of Houston government. The amount used for federal, state, county and city taxes shall be treated separately and shall not be deducted one from the other in the calculation of the payment to the Participant. Should the tax rates be increased during the year, the Participant shall be entitled to an adjustment payment within three months of the effective date of the increase. 2. Section 2 (pertaining to Retirement Benefits) shall be amended by deleting it in its entirety and substituting therefor the following: 2. RETIREMENT BENEFITS In addition to any other compensation, beginning at age 65 (whether or not the Participant retires at such time), the Participant shall be entitled to receive from the Company the amount of dollars necessary to net after the payment of federal, state, county and city income taxes $133,333.33 per year commencing not later than three months after the Participant has reached age 65, for a period of 15 years. If the Participant should die during the said 15 year period, the sum of $133,333.33 per year shall be paid until the expiration of said 15 year period to such individual or individuals as the Participant shall have designated in writing, or in the absence of such designation, to the estate of the Participant. Annual benefits are to be paid 1/12 each month. 2 39 3. Section 6 (pertaining to Construction), as amended by the first amendment, shall be amended by deleting it in its entirety and substituting therefor the following: 6. CONSTRUCTION AGREEMENT. Any payments under this Agreement shall be independent of, and in addition to, those under any other plan, program or agreement which may be in effect between the parties hereto, or any other compensation payable to the Participant or the Participant's designee by the Company. This Agreement shall not be construed as a contract of employment and shall not operate to change in any way any of the other terms and conditions of Participant's employment and furthermore does not restrict the right of the Company to discharge the Participant for proper cause or the right of the Participant to discontinue service as an employee of the Company. The Company shall establish an irrevocable trust (the "Trust") pursuant to a trust agreement, substantially in the form of Exhibit "A" attached to and made a part of this Agreement with Ameritrust Texas, N.A., as trustee. The Company shall transfer to the Trust such life insurance policies or other property or funds as the Company in its sole discretion deems appropriate for the purpose of making funds available to pay the benefits to the Participant under this Agreement. Any such transfers to the Trust shall be irrevocable and be held by the trustee in accordance with the terms of the Trust for payment in accordance with this Agreement. In transferring any insurance contracts or other property rights to the Trust, the Company shall cause such contracts or rights to be assigned to and in the name of the Trust or trustee for the Trust and for the benefits thereunder to be payable to the Trust or trustee for the Trust. Benefits under the Agreement are compensation for services rendered and with respect to such benefit amounts, beyond what is funded by and paid to the Participant (or his beneficiaries) from the Trust, shall constitute a liability of the Company to the Participant (or his beneficiaries) in accordance with the terms of this Agreement. Apart from what the Company transfers to the Trust, the Company shall be under no obligation to purchase or maintain any assets to provide the benefits under this Agreement and any asset which the Company may utilize for the purpose of providing funds to pay the benefits under this Agreement shall not be considered as security to the Participant for the Company's performance under this Agreement. The right accruing to the Participant or any designated beneficiary under this Agreement, shall be no greater than the right of any unsecured general creditor of the Company. 3 40 Although it is not required to do so, the Company may establish a split dollar agreement with the Participant for the purchase of life insurance as a means of meeting in whole or in part its obligations under this Agreement. It is hereby agreed that the amount of policy death benefits (in event of the Participant's death, to the extent that the death benefits are payable under the life insurance contract) and accumulated cash values owned by the Participant under the policy (collectively the "Insurance Benefits") which are paid to the Participant shall be deemed to be payments by the Company in discharging its obligations under this Agreement. In using the Insurance Benefits to offset obligations under this Agreement, the following steps shall be followed to calculate the amount of payments due to the Participant or the Participant's beneficiary: (1) the annual payments of $133,333.33 shall be increased to a pretax amount using the federal, state, county and city tax rates in effect at the date of the calculation (consistent with the methodology set forth in the second paragraph of Section 1 of this Agreement, as amended) and (2) the present value shall then be calculated based on the payment amount determined in (1), using a 7% interest rate, and a 15-year payment period. If the Company establishes a split dollar agreement the Company hereby agrees that if paying of the Insurance Benefits to the Participant does not fully satisfy the Company's obligation under this Agreement then the Company agrees to pay the Participant a lump sum from the Company's collateral assignment portion of the split dollar insurance contract and apply such lump sum in satisfaction of such deficiency to the extent necessary to satisfy such deficiency. To the extent that there are not sufficient amounts available from the Company's collateral assignment portion of the split dollar insurance contract to fully satisfy this deficiency and its obligations under this Agreement then the Company shall pay any remaining deficiency directly to the Participant in the form of a lump sum cash bonus or through installments as described in Section 1 and 2 of this amendment. The trustee of the Trust shall apply any Insurance Benefits, collateral assignment portion, and any other assets in the Trust in a manner consistent with the preceding provisions of this Section 6 of the Agreement, as amended, to satisfy the Company's obligations under this Agreement. To the extent the assets of the Trust are not sufficient for the purpose, the Company shall pay the Participant directly any remaining deficiency in its obligation under this Agreement. The laws of the State of Texas shall govern this Agreement. 4 41 4. The Agreement shall, except as otherwise hereby amended, continue and remain if effect. IN WITNESS WHEREOF, the parties hereto have executed, this Second Amendment to Salary Deferred Compensation Agreement the day and year first hereinabove written. STEWART INFORMATION SERVICES CORPORATION Affix Corporate Seal By: /s/ CARLOSS MORRIS ------------------------- Title: Chairman ---------------------- Attest By: /s/ SUE M. NOLZ -------------------------- ASST. SECRETARY By: /s/ MALCOLM S. MORRIS ------------------------- Malcolm S. Morris, Participant 5 42 SECOND AMENDMENT TO THE SALARY DEFERRED COMPENSATION AGREEMENT This Second Amendment to Salary Deferred Compensation Agreement is made this 30th day of October, 1992 by and between Stewart Information Services Corporation (the "Company") and Stewart Morris, Jr., an employee, (the "Participant"). WHEREAS, the Company and Participant entered into a Salary Deferred Compensation Agreement on March 10, 1986, (the "Agreement"); WHEREAS, the Agreement was amended on July 24, 1990; WHEREAS, the Company and Participant desire to amend the Agreement for a change in the informal funding mechanism for the benefits to be provided under the Agreement to accommodate a split-dollar arrangement; NOW, THEREFORE, it is mutually agreed that: In accordance with the terms of Section 7 of the Agreement (pertaining to the Amendment of the Agreement) the Agreement shall be amended as follows: 1. Section 1 (pertaining to Death Benefits) shall be amended by deleting it in its entirety and substituting therefor, the following: 43 1. DEATH BENEFITS If death occurs while Participant is serving as an employee of the Company or of an affiliated company prior to attaining the retirement age of 65 years, the Company will pay the amount of dollars necessary to net after the payment of federal, state, county and city income taxes $133,333.33 per year, for a period of 15 years, to such individuals or individuals as the Participant shall have designated in writing, or in the absence of such designation, to the estate of the Participant. The first payment shall commence not later than three months following the Participant's death. Annual payments are to be paid 1/12 each month. For the purposes of this Agreement, to determine the "net after the payment of federal, state, county and city income tax," it will be assumed that the payment will be subject to tax at the highest marginal rates and highest surtax rates applicable to an individual taxpayer for the year of payment as set by the federal, State of Texas, Harris County and City of Houston government. The amount used for federal, state, county and city taxes shall be treated separately and shall not be deducted one from the other in the calculation of the payment to the Participant. Should the tax rates be increased during the year, the Participant shall be entitled to an adjustment payment within three months of the effective date of the increase. 2. Section 2 (pertaining to Retirement Benefits) shall be amended by deleting it in its entirety and substituting therefor the following: 2. RETIREMENT BENEFITS In addition to any other compensation, beginning at age 65 (whether or not the Participant retires at such time), the Participant shall be entitled to receive from the Company the amount of dollars necessary to net after the payment of federal, state, county and city income taxes $133,333.33 per year commencing not later than three months after the Participant has reached age 65, for a period of 15 years. If the Participant should die during the said 15 year period, the sum of $133,333.33 per year shall be paid until the expiration of said 15 year period to such individual or individuals as the Participant shall have designated in writing, or in the absence of such designation, to the estate of the Participant. Annual benefits are to be paid 1/12 each month. 2 44 3. Section 6 (pertaining to Construction), as amended by the first amendment, shall be amended by deleting it in its entirety and substituting therefor the following: 6. CONSTRUCTION AGREEMENT. Any payments under this Agreement shall be independent of, and in addition to, those under any other plan, program or agreement which may be in effect between the parties hereto, or any other compensation payable to the Participant or the Participant's designee by the Company. This Agreement shall not be construed as a contract of employment and shall not operate to change in any way any of the other terms and conditions of Participant's employment and furthermore does not restrict the right of the Company to discharge the Participant for proper cause or the right of the Participant to discontinue service as an employee of the Company. The Company shall establish an irrevocable trust (the "Trust") pursuant to a trust agreement, substantially in the form of Exhibit "A" attached to and made a part of this Agreement with Ameritrust Texas, N.A., as trustee. The Company shall transfer to the Trust such life insurance policies or other property or funds as the Company in its sole discretion deems appropriate for the purpose of making funds available to pay the benefits to the Participant under this Agreement. Any such transfers to the Trust shall be irrevocable and be held by the trustee in accordance with the terms of the Trust for payment in accordance with this Agreement. In transferring any insurance contracts or other property rights to the Trust, the Company shall cause such contracts or rights to be assigned to and in the name of the Trust or trustee for the Trust and for the benefits thereunder to be payable to the Trust or trustee for the Trust. Benefits under the Agreement are compensation for services rendered and with respect to such benefit amounts, beyond what is funded by and paid to the Participant (or his beneficiaries) from the Trust, shall constitute a liability of the Company to the Participant (or his beneficiaries) in accordance with the terms of this Agreement. Apart from what the Company transfers to the Trust, the Company shall be under no obligation to purchase or maintain any assets to provide the benefits under this Agreement and any asset which the Company may utilize for the purpose of providing funds to pay the benefits under this Agreement shall not be considered as security to the Participant for the Company's performance under this Agreement. The right accruing to the Participant or any designated beneficiary under this Agreement, shall be no greater than the right of any unsecured general creditor of the Company. 3 45 Although it is not required to do so, the Company may establish a split dollar agreement with the Participant for the purchase of life insurance as a means of meeting in whole or in part its obligations under this Agreement. It is hereby agreed that the amount of policy death benefits (in event of the Participant's death, to the extent that the death benefits are payable under the life insurance contract) and accumulated cash values owned by the Participant under the policy (collectively the "Insurance Benefits") which are paid to the Participant shall be deemed to be payments by the Company in discharging its obligations under this Agreement. In using the Insurance Benefits to offset obligations under this Agreement, the following steps shall be followed to calculate the amount of payments due to the Participant or the Participant's beneficiary: (1) the annual payments of $133,333.33 shall be increased to a pretax amount using the federal, state, county and city tax rates in effect at the date of the calculation (consistent with the methodology set forth in the second paragraph of Section 1 of this Agreement, as amended) and (2) the present value shall then be calculated based on the payment amount determined in (1), using a 7% interest rate, and a 15-year payment period. If the Company establishes a split dollar agreement the Company hereby agrees that if paying of the Insurance Benefits to the Participant does not fully satisfy the Company's obligation under this Agreement then the Company agrees to pay the Participant a lump sum from the Company's collateral assignment portion of the split dollar insurance contract and apply such lump sum in satisfaction of such deficiency. To the extent that there are not sufficient amounts available from the Company's collateral assignment portion of the split dollar insurance contract to fully satisfy this deficiency and its obligations under this Agreement then the Company shall pay any remaining deficiency directly to the Participant in the form of a lump sum cash bonus or through installments as described in Section 1 and 2 of this amendment. The trustee of the Trust shall apply any Insurance Benefits, collateral assignment portion, and any other assets in the Trust in a manner consistent with the preceding provisions of this Section 6 of the Agreement, as amended, to satisfy the Company's obligations under this Agreement. To the extent the assets of the Trust are not sufficient for the purpose, the Company shall pay the Participant directly any remaining deficiency in its obligation under this Agreement. The laws of the State of Texas shall govern this Agreement. 4 46 4. The Agreement shall, except as otherwise hereby amended, continue and remain in effect. IN WITNESS WHEREOF, the parties hereto have executed, this Second Amendment to Salary Deferred Compensation Agreement the day and year first hereinabove written. STEWART INFORMATION SERVICES CORPORATION Affix Corporate Seal By: /s/ CARLOSS MORRIS ----------------------------- Title: Chairman -------------------------- Attest By: /s/ SUE M. NOLZ ----------------------------- Asst. Secretary By: /s/ STEWART MORRIS, JR. ----------------------------- Stewart Morris, Jr., Participant 5 47 SECOND AMENDMENT TO THE SALARY DEFERRED COMPENSATION AGREEMENT This Second Amendment to Salary Deferred Compensation Agreement is made this 30th day of October, 1992 by and between Stewart Information Services Corporation (the "Company") and Max Crisp, an employee, (the "Participant"). WHEREAS, the Company and Participant entered into a Salary Deferred Compensation Agreement on March 10, 1986, (the "Agreement"); WHEREAS, the Agreement was amended on July 24, 1990; WHEREAS, the Company and Participant desire to amend the Agreement for a change in the informal funding mechanism for the benefits to be provided under the Agreement to accommodate a split-dollar arrangement; NOW, THEREFORE, it is mutually agreed that: In accordance with the Terms of Section 7 of the Agreement (pertaining to the Amendment of the Agreement) the Agreement shall be amended as follows: 1. Section 1 (pertaining to Death Benefits) shall be amended by deleting it in its entirety and substituting therefor, the following: 48 3. Section 6 (pertaining to Construction), as amended by the first amendment, shall be amended by deleting it in its entirety and substituting therefor the following: 6. CONSTRUCTION AGREEMENT. Any payments under this Agreement shall be independent of, and in addition to, those under any other plan, program or agreement which may be in effect between the parties hereto, or any other compensation payable to the Participant or the Participant's designee by the Company. This Agreement shall not be construed as a contract of employment and shall not operate to change in any way any of the other terms and conditions of Participant's employment and furthermore does not restrict the right of the Company to discharge the Participant for proper cause or the right of the Participant to discontinue service as an employee of the Company. The Company shall establish an irrevocable trust (the "Trust") pursuant to a trust agreement, substantially in the form of Exhibit "A" attached to and made a part of this Agreement with Ameritrust Texas, N.A., as trustee. The Company shall transfer to the Trust such life insurance policies or other property or funds as the Company in its sole discretion deems appropriate for the purpose of making funds available to pay the benefits to the Participant under this Agreement. Any such transfers to the Trust shall be irrevocable and be held by the trustee in accordance with the terms of the Trust for payment in accordance with this Agreement. In transferring any insurance contracts or other property rights to the Trust, the Company shall cause such contracts or rights to be assigned to and in the name of the Trust or trustee for the Trust and for the benefits thereunder to be payable to the Trust or trustee for the Trust. Benefits under the Agreement are compensation for services rendered and with respect to such benefit amounts, beyond what is funded by and paid to the Participant (or his beneficiaries) in accordance with the terms of this Agreement. Apart from what the Company transfers to the Trust, the Company shall be under no obligation to purchase or maintain any assets to provide the benefits under this Agreement and any asset which the Company may utilize for the purpose of providing funds to pay the benefits under this Agreement shall not be considered as security to the Participant for the Company's performance under this Agreement. The right accruing to the Participant or any designated beneficiary under this Agreement, shall be no greater than the right of any unsecured general creditor of the Company. 3 49 Although it is not required to do so, the Company may establish a split dollar agreement with the Participant for the purchase of life insurance as a means of meeting in whole or in part its obligations under this Agreement. It is hereby agreed that the amount of policy death benefits (in event of the Participant's death, to the extent that the death benefits are payable under the life insurance contract) and accumulated cash values owned by the Participant under the policy (collectively the "Insurance Benefits") which are paid to the Participant shall be deemed to be payments by the Company in discharging its obligations under this Agreement. In using the Insurance Benefits to offset obligations under this Agreement, the following steps shall be followed to calculate the amount of payments due to the Participant or the Participant's beneficiary: (1) the annual payments of $66,666.67 shall be increased to a pretax amount using the federal, state, county and city tax rates in effect at the date of the calculation (consistent with the methodology set forth in the second paragraph of Section 1 of this Agreement, as amended) and (2) the present value shall then be calculated based on the payment amount determined in (1), using a 7% interest rate, and a 15-year payment period. If the Company establishes a split dollar agreement the Company hereby agrees that if paying of the Insurance Benefits to the Participant does not fully satisfy the Company's obligation under this Agreement then the Company agrees to pay the Participant a lump sum from the Company's collateral assignment portion of the split dollar insurance contract and apply such lump sum in satisfaction of such deficiency to the extent that there are not sufficient amounts available from the Company's collateral assignment portion of the split dollar insurance contract to fully satisfy this deficiency and its obligations under this Agreement then the Company shall pay any remaining deficiency directly to the Participant in the form of a lump sum cash bonus or through installments as described in Section 1 and 2 of this amendment. The trustee of the Trust shall apply any Insurance Benefits, collateral assignment portion, and any other assets in the Trust in a manner consistent with the preceding provisions of this Section 6 of the Agreement, as amended, to satisfy the Company's obligations under this Agreement. To the extent the assets of the Trust are not sufficient for the purpose, the Company shall pay the Participant directly any remaining deficiency in its obligation under this Agreement. The laws of the State of Texas shall govern this Agreement. 4 50 4. The Agreement shall, except as otherwise hereby amended, continue and remain in effect. IN WITNESS WHEREOF, the parties hereto have executed, this Second Amendment to Salary Deferred Compensation Agreement the day and year first hereinabove written. STEWART INFORMATION SERVICES CORPORATION Affix Corporate Seal By: /s/ CARLOSS MORRIS ----------------------------- Title: Chairman -------------------------- Attest By: /s/ SUE M. NOLZ ----------------------------- Asst. Secretary By: /s/ MAX CRISP ----------------------------- Max Crisp, Participant 5 EX-13 6 ANNUAL REPORT TO STOCKHOLDERS FOR 1997 1 EXHIBIT 13 MANAGEMENT DISCUSSION AND ANALYSIS A comparison of the results of operations of the Company for 1997 with 1996 and 1996 with 1995 follows. General. The Company's dominant segment of operations is the land title business. In general, the principal factors that contribute to increases in title revenues include declining mortgage interest rates (which usually increase home sales and refinancing transactions), rising home prices, higher premium rates, increased market share, additional revenues from new offices and increased revenues from nonresidential, commercial transactions. Although relatively few in number, large commercial transactions usually yield higher premiums. Mortgage interest rates, on the average, fell from 7.95% in 1995 to 7.81% 1996 to 7.60% in 1997. Rates begin in early 1995 at a little over 9% and then trended downward to end the year slightly over 7%. In 1996, rates rose in the first half of the year and fell in the second half. In the early months of 1997, rates rose again, but then began a fairly steady decline in May 1997 and fell each month that followed. At year end 1997, rates were approximately at or below the 7% level. Operating in these mortgage interest environments, together with a good general economy, real estate activity began to increase in the last part of 1997. Existing home sales moved to record levels in the last quarter. Refinancing transactions in the last month of 1997 and in early 1998 also rose to record levels. Title revenues. The Company's revenues from premiums, fees and other revenues increased 7.9% in 1997 over 1996 and 22.9% in 1996 over 1995. The number of title orders opened and closed by the Company and the average revenue per order closed follow (agent operations and certain other income have been excluded).
- ------------------------------------------------------------------------------- 1997 1996 1995 - ------------------------------------------------------------------------------- Number of orders opened (000s) . . . . . . . 331 319 278 Number of orders closed (000s) . . . . . . . 247 239 206 Average revenue per order closed . . . . . . $ 979 $ 938 $ 907 - -------------------------------------------------------------------------------
Total closings increased 3.2% in 1997 and 16.0% in 1996. The average revenue per closing increased 4.4% in 1997 and 3.4% in 1996. The average rate was increased each year by higher home prices. There were no major revenue rate increases in 1997 or 1996. Title revenues by state. The approximate amounts and percentages of Stewart's consolidated title revenues by state for the last three years were:
- ----------------------------------------------------------------------------------------------- Amounts ($ millions) Percentages 1997 1996 1995 1997 1996 1995 - ----------------------------------------------------------------------------------------------- California . . . . . . . . . . . . . . . . . 123 119 97 19 20 20 Texas . . . . . . . . . . . . . . . . . . . 116 111 93 18 18 19 New York . . . . . . . . . . . . . . . . . . 51 50 35 8 8 7 Florida . . . . . . . . . . . . . . . . . . 47 40 29 7 7 6 Colorado . . . . . . . . . . . . . . . . . . 20 18 16 3 3 3 Nevada . . . . . . . . . . . . . . . . . . . 19 18 14 3 3 3 Arizona . . . . . . . . . . . . . . . . . . 19 17 14 3 3 3 All others . . . . . . . . . . . . . . . . . 262 236 198 39 38 39 - ----------------------------------------------------------------------------------------------- 657 609 496 100 100 100 - -----------------------------------------------------------------------------------------------
REI revenues. Real estate information revenues were $35.3 million in 1997, $32.0 million in 1996 and $24.0 million in 1995. The increases in 1997 and 1996 were primarily due to a significant number of new businesses started in those two years and additional income earned from operations existing in 1995. The Company terminated an unprofitable business in late 1996 which reduced the amount of the revenue increase in 1997 over 1996. 19 2 The Company is engaged in negotiations to sell an unprofitable REI company in England. If the results of this company were excluded, the pretax loss for the REI segment would have been $2.5 million in 1997. The Company believes the losses incurred in starting its REI companies will yield significant earnings in future years. Investments. Investment income increased 10.2% in 1997 and 6.5% in 1996, primarily because of increases in yields and average balances invested. Investment gains in 1997, 1996 and 1995 were realized as part of the ongoing management of the investment portfolio for the purpose of improving performance. Agent retention. Amounts retained by title agents are based on contracts between the agents and the underwriters of the Company, Contractual rates, closing practices, remittance rates and agent retentions vary across the country. The percentage that amounts retained by agents bears to agent revenues may vary from year to year because of the geographical mix of agent operations and title revenues.
- ------------------------------------------------------------------------------------ 1997 1996 1995 - ------------------------------------------------------------------------------------ ($000 Omitted) Amounts retained by agents ........................ 334,653 311,937 252,064 Agent revenues .................................... 412,970 383,676 307,645 Retained by agents (%) ............................ 81.0 81.3 81.9 - ------------------------------------------------------------------------------------
Employee and other expenses. Employee costs for the combined segments of business increased 10.2% in 1997 and 21.4% in 1996. The average number of employees increased in both years. The number of persons employed by the Company at December 31, 1997, 1996 and 1995 was 4,569, 4,111 and 3,757, respectively. The increase in staff in 1997 and 1996 was primarily in automation, real estate information areas, new offices and field service centers. The Company has chosen to increase cost levels in automation and real estate information areas because it believes the development and sale of new products and services to new and existing customers is important to its future. Through automating operating processes, the Company expects to add customer revenues and reduce operating expenses and title losses in the future. Other operating expenses increased 11.3% in 1997 and 14.9% in 1996. Excluding the effect of new offices, the increase was 10.4% in 1997 and 12.8% in 1996. The overall increase for each year was caused primarily by changes in transaction volume. Expenses that increased in 1997 were rent, premium taxes, business promotion and delivery costs. Expenses that increased in 1996 included business promotion, supplies, rent and premium taxes. Other operating expenses also include policy forms, title plant expenses, telephone and travel. Most of these expenses follow, to varying degrees, the changes in transaction volume and revenues. Provisions for title losses, as a percentage of title premiums, fees and other revenues, were 4.5%, 5.6% and 6.0% in 1997, 1996 and 1995, respectively. The continued improvement in industry trends in claims and the Company's improved experience in claims have also led to smaller provisions for title losses. The Company's labor and certain other operating costs are sensitive to inflation. Increases in consumer prices are considered in granting pay raises. To the extent inflation causes increases in the prices of homes and other real estate, premium revenues are also increased. Premiums are determined in part by the insured values of the transactions handled by the Company. Nonrecurring charge. A pretax writeoff of $1.9 million of goodwill in a subsidiary in England that may be sold under current negotiations was recorded in the fourth quarter of 1997. The subsidiary incurred after-tax operating losses of $1.0 million in 1997. This subsidiary has been included in the REI segment of the Company's operations. 20 3 Income taxes. The provisions for federal and state income taxes represented effective tax rates of 35.4%, 36.9% and 34.7% in 1997, 1996 and 1995, respectively. The 1996 effective tax rate was higher primarily because nontaxable income from municipal bonds was significantly less in relation to pretax profits. The Year 2000 issue. Currently, significant attention is being given by companies to the problem of how their computer operations may be adversely affected by the rollover of the calendar to the year 2000. The Company has taken steps to make software programs substantially compliant with the upcoming demands of the change. The Company is testing and reviewing the electronic data transfers conducted with business partners. The Company expects to substantially complete its work in this area in 1998. The related costs are being expensed as incurred and additional costs are expected to be insignificant. Liquidity and capital resources. Cash provided by operations was $33.8 million, $36.8 million and $20.6 million in 1997, 1996 and 1995, respectively. Internally-generated cash flow has been the primary source of funds for additions to property and equipment, expanding operations, dividends to shareholders and other requirements. This source may be supplemented by bank borrowings. A substantial majority of consolidated cash and investments is held by Stewart Title Guaranty Company (Guaranty), Stewart Title Insurance Company and other title insurer subsidiaries. Cash transfers between Guaranty and its subsidiaries and the Company are subject to certain legal restrictions. See Notes 5 and 6 to the financial statements. The liquidity of the Company itself, excluding Guaranty and its subsidiaries and excluding notes receivable from affiliates, consisted of cash and investments of $9.0 million, a dividend receivable of $7.5 million from Guaranty (received in early 1998) and short-term liabilities of $1.1 million at December 31, 1997. The Company knows of no commitments or uncertainties which are likely to materially affect the ability of the Company and its subsidiaries to fund their cash needs. See Note 16 to the financial statements. The Company's capital resources, represented primarily by long-term debt of $11.4 million and stockholders' equity of $209.5 million at December 31, 1997, are considered adequate. INDEPENDENT AUDITORS' REPORT To the Stockholders and Board of Directors of Stewart Information Services Corporation We have audited the accompanying consolidated balance sheets of Stewart Information Services Corporation and subsidiaries as of December 31, 1997 and 1996, and the related consolidated statements of earnings and retained earnings and cash flows for each of the years in the three-year period ended December 31, 1997. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Stewart Information Services Corporation and subsidiaries as of December 31, 1997 and 1996, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1997 in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Houston, Texas February 13, 1998 21 4 CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
- --------------------------------------------------------------------------------------------------------- Years ended December 31 1997 1996 1995 - --------------------------------------------------------------------------------------------------------- ($000 Omitted) REVENUES Title premiums, fees and other revenues . . . . . . . . . . . . 657,298 609,408 496,034 Real estate information services. . . . . . . . . . . . . . . . . 35,320 32,030 24,015 Investment income . . . . . . . . . . . . . . . . . . . . . . . . 15,929 14,451 13,564 Investment gains - net . . . . . . . . . . . . . . . . . . . . . 363 129 956 - --------------------------------------------------------------------------------------------------------- 708,910 656,018 534,569 EXPENSES Amounts retained by agents . . . . . . . . . . . . . . . . . . . 334,563 311,937 252,064 Employee costs . . . . . . . . . . . . . . . . . . . . . . . . 188,385 170,944 140,795 Other operating expenses . . . . . . . . . . . . . . . . . . . 114,422 102,768 89,408 Title losses and related claims . . . . . . . . . . . . . . . . 29,794 33,830 29,591 Depreciation and amortization . . . . . . . . . . . . . . . . . 12,115 11,007 9,855 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,343 1,140 1,194 Minority interests . . . . . . . . . . . . . . . . . . . . . . 2,614 1,514 933 Nonrecurring charge . . . . . . . . . . . . . . . . . . . . . . 1,905 - - - --------------------------------------------------------------------------------------------------------- 685,231 633,140 523,840 Earnings before taxes . . . . . . . . . . . . . . . . . . . . . . 23,679 22,878 10,729 Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 8,391 8,441 3,722 - --------------------------------------------------------------------------------------------------------- Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,288 14,437 7,007 Retained earnings at beginning of year . . . . . . . . . . . . . . 131,496 118,547 112,754 Cash dividends on Common Stock ($.26, $.24 and $.21 per share) . . (1,644) (1,488) (1,214) - --------------------------------------------------------------------------------------------------------- Retained earnings at end of year . . . . . . . . . . . . . . . . . 145,140 131,496 118,547 - --------------------------------------------------------------------------------------------------------- Average number of shares outstanding - assuming dilution (000 omitted) . . . . . . . . . . . . . . . . . . . . . . . . . 6,897 6,766 6,348 Earnings per share - basic . . . . . . . . . . . . . . . . . . . . 2.24 2.15 1.11 Earnings per share - diluted . . . . . . . . . . . . . . . . . . . 2.22 2.13 1.10 - ---------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements. 22 5 CONSOLIDATED BALANCE SHEETS
- - ------------------------------------------------------------------------------------------------------- December 31 1997 1996 - - ------------------------------------------------------------------------------------------------------- ($000 Omitted) Assets Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,391 18,484 Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,761 31,946 Investments in debt securities, at market: Statutory reserve funds . . . . . . . . . . . . . . . . . . . . . . . . . . . 141,769 127,057 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67,737 73,456 - - ------------------------------------------------------------------------------------------------------- 209,506 200,513 Receivables: Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,329 5,686 Premiums from agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,315 10,107 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,776 22,493 Less allowance for uncollectible amounts . . . . . . . . . . . . . . . . . . (5,552) (6,670) - - ------------------------------------------------------------------------------------------------------- 31,868 31,616 Property and equipment, at cost: Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,266 2,432 Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,372 6,354 Furniture and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,804 71,239 Less accumulated depreciation and amortization . . . . . . . . . . . . . . . (59,027) (51,840) - - ------------------------------------------------------------------------------------------------------- 30,415 28,185 Title plants, at cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,778 21,096 Real estate, at lower of cost or net realizable value . . . . . . . . . . . . . 1,583 1,866 Investments in investees, on an equity basis . . . . . . . . . . . . . . . . . 7,231 5,639 Goodwill, less accumulated amortization of $5,840 and $4,828 . . . . . . . . . 18,427 16,535 Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,632 15,155 Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,099 12,337 - - ------------------------------------------------------------------------------------------------------- 417,691 383,372 - - ------------------------------------------------------------------------------------------------------- Liabilities Notes payable, including $11,442 and $7,935 long-term portion . . . . . . . . . 19,087 12,324 Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . 26,553 25,033 Estimated title losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156,791 150,331 Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,364 419 Minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,392 4,275 Contingent liabilities and commitments Stockholders' equity Common - $1 par, authorized 15,000,000, issued and outstanding 6,381,046 and 6,216,441 . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,381 6,216 Class B Common - $1 par, authorized 1,500,000, issued and outstanding 525,006 . 525 525 Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . 52,922 50,833 Net unrealized investment gains, net of deferred taxes . . . . . . . . . . . . 4,536 1,920 Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145,140 131,496 - - ------------------------------------------------------------------------------------------------------- Total stockholders' equity ($30.34 and $28.33 per share) . . . . . . . . . . 209,504 190,990 - - ------------------------------------------------------------------------------------------------------- 417,691 383,372 - - -------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements. 23 6 CONSOLIDATED STATEMENTS OF CASH FLOWS
- - ------------------------------------------------------------------------------------------------------- Years ended December 31 1997 1996 1995 - - ------------------------------------------------------------------------------------------------------- ($000 Omitted) Cash provided by operating activities (Note) . . . . . . . . . . . 33,828 36,750 20,568 Investing activities: Purchases of property and equipment and title plants - net . . (13,209) (12,670) (6,700) Proceeds from investments matured and sold . . . . . . . . . . 40,133 47,724 59,897 Purchases of investments . . . . . . . . . . . . . . . . . . . (48,554) (69,213) (68,608) Increases in notes receivable . . . . . . . . . . . . . . . . . (2,644) (1,340) (1,081) Collections on notes receivable . . . . . . . . . . . . . . . . 1,006 2,833 2,069 Cash paid for the acquisition of subsidiaries - net . . . . . . . (3,592) (493) (5,175) Proceeds from issuance of stock . . . . . . . . . . . . . . . . 135 11 -- - - ------------------------------------------------------------------------------------------------------- Cash used by investing activities . . . . . . . . . . . . . . . . (26,725) (33,148) (19,598) Financing activities: Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . (1,644) (1,488) (1,214) Proceeds of notes payable . . . . . . . . . . . . . . . . . . . 10,688 4,366 7,937 Payments on notes payable . . . . . . . . . . . . . . . . . . . (4,240) (4,694) (7,209) - - ------------------------------------------------------------------------------------------------------- Cash provided (used) by financing activities . . . . . . . . . . . 4,804 (1,816) (486) - - ------------------------------------------------------------------------------------------------------- Increase in cash and cash equivalents . . . . . . . . . . . . . . 11,907 1,786 484 - - ------------------------------------------------------------------------------------------------------- Note: Reconciliation of net earnings to the above amounts Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . 15,288 14,437 7,007 Add (deduct): Depreciation and amortization . . . . . . . . . . . . . . . . 12,115 11,007 9,855 Provisions for title losses in excess of payments . . . . . . 6,460 12,019 3,996 Provision for uncollectible amounts - net . . . . . . . . . . (1,118) 171 376 Decrease (increase) in accounts receivable - net . . . . . . 2,660 (2,419) 2,814 Increase (decrease) in accounts payable and accrued liabilities - net . . . . . . . . . . . . . . . . . . . . . . 1,419 4,195 (1,834) Provision (benefit) for deferred income taxes . . . . . . . . . (1,886) 596 1,344 Increase (decrease) in income tax payable . . . . . . . . . . . 945 (1,184) (708) Minority interest expense . . . . . . . . . . . . . . . . . . 2,614 1,514 933 Equity in net earnings of investees . . . . . . . . . . . . . (1,964) (980) (700) Realized investment gains - net . . . . . . . . . . . . . . . (363) (129) (956) Stock bonuses . . . . . . . . . . . . . . . . . . . . . . . . 409 328 303 Increase in other assets . . . . . . . . . . . . . . . . . . (2,963) (1,151) (846) Nonrecurring charge . . . . . . . . . . . . . . . . . . . . . . 1,905 -- -- Other - net . . . . . . . . . . . . . . . . . . . . . . . . . (1,693) (1,654) (1,016) - - ------------------------------------------------------------------------------------------------------- Cash provided by operating activities . . . . . . . . . . . . . 33,828 36,750 20,568 - - ------------------------------------------------------------------------------------------------------- Supplemental information: Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . 7,636 9,004 3,283 Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . 1,222 1,092 1,199
See notes to consolidated financial statements. 24 EX-21 7 SUBSIDIARIES OF THE REGISTRANT 1 Exhibit 21 STEWART INFORMATION SERVICES CORPORATION AND SUBSIDIARIES
STATE OF NAME OF SUBSIDIARY INCORPORATION ------------------ ------------- Stewart Title of Mobile, Inc. ................................... Alabama Stewart Title & Trust of Phoenix, Inc. .......................... Arizona Citizens Title & Trust .......................................... Arizona Stewart Title & Trust of Tucson ................................. Arizona Stewart Title of Arkansas ....................................... Arkansas Landata of Arkansas ............................................. Arkansas Stewart Title of California ..................................... California Landata, Inc. of Los Angeles .................................... California Asset Preservation, Inc. ........................................ California Landata, Inc. of the West Coast ................................. California Stewart Valuations .............................................. California Stewart OnLine Mortgage Documents, Inc. ......................... California Stewart Title of Larimer County, Inc. ........................... Colorado Stewart Title of Aspen, Inc. .................................... Colorado Stewart Title of Eagle County, Inc. ............................. Colorado Stewart Title of Glenwood Springs, Inc. ......................... Colorado Stewart Title of Denver, Inc. ................................... Colorado Stewart Title Company of Colorado Springs ....................... Colorado Stewart Title of Pueblo ......................................... Colorado Landata, Inc. of the Rocky Mountains ............................ Colorado Stewart Title of Tampa .......................................... Florida Stewart Title Guaranty of Jacksonville, Inc. .................... Florida Stewart Title of Orange County, Inc. ............................ Florida Stewart Title of Clearwater, Inc. ............................... Florida Stewart Title of Polk County, Inc. .............................. Florida Stewart Title of Martin County .................................. Florida Stewart Title of Sarasota, Inc. ................................. Florida Stewart Title of Pinellas, Inc. ................................. Florida Landata, Inc. of Florida ........................................ Florida Stewart Title of Pensacola ...................................... Florida Stewart Title of Tallahassee, Inc. .............................. Florida Stewart River City Title ........................................ Florida Stewart Title of Northwestern Florida ........................... Florida Charlotte County Abstract & Title Company ....................... Florida Bay Title Services, Inc. ........................................ Florida Stewart Approved Title, Inc. .................................... Florida Advance Homestead Title, Inc. ................................... Florida Stewart Title Company of Idaho, Inc. ............................ Idaho Stewart Title of North Idaho, Inc. .............................. Idaho Stewart Title Company of Illinois ............................... Illinois Information Services of Illinois ................................ Illinois Landata, Inc. of Illinois ....................................... Illinois
(continued) 2 Exhibit 21 (continued) STEWART INFORMATION SERVICES CORPORATION AND SUBSIDIARIES
STATE OF NAME OF SUBSIDIARY INCORPORATION ------------------ ------------- Stewart Title Services of Indiana, Inc. ..................... Indiana O'Rourke Title .............................................. Kansas Stewart Title of Louisiana, Inc. ............................ Louisiana Stewart Title Company of Maryland ........................... Maryland Cambridge Landata, Incorporated ............................. Maryland Stewart Title of Detroit, Inc. .............................. Michigan Stewart Title Company of Minnesota .......................... Minnesota Rochester Title ............................................. Minnesota Stewart Title of Mississippi ................................ Mississippi Stewart Title, Inc. (Kansas City) ........................... Missouri Public Data Marketing, Inc. ................................. Missouri Landata, Inc. of Midwest .................................... Missouri Stewart Title of Douglas County ............................. Nevada Stewart Title of Northern Nevada ............................ Nevada Stewart Title of Carson City ................................ Nevada Stewart Title of Nevada ..................................... Nevada Stewart Title of Northeastern Nevada ........................ Nevada Stewart Title of Central Nevada ............................. Nevada Northeast Land Title ........................................ New Hampshire Stewart Title of Central Jersey, Inc. ....................... New Jersey Stewart-Princeton Abstract .................................. New Jersey Stewart Title Services of North Jersey, L.L.C ............... New Jersey Stewart Title of Bergen County .............................. New Jersey Stewart Hudson Title Services ............................... New Jersey Santa Fe Abstract Limited ................................... New Mexico Stewart Title Limited ....................................... New Mexico Stewart Title Insurance Company ............................. New York River City Abstract, L.L.C .................................. New York Stewart Title of Mecklenburg County ......................... North Carolina Stewart Title of North Carolina, Inc. ....................... North Carolina Stewart Title Agency of Ohio, Inc. .......................... Ohio Stewart Title Agency of Columbus, Ltd. L.L.C ................ Ohio Stewart Abstract & Title Co. of Oklahoma .................... Oklahoma Stewart Escrow & Title Services of Lawton ................... Oklahoma Landata Research ............................................ Oklahoma Stewart Title of Oregon ..................................... Oregon Stewart Title Insurance Company of Oregon ................... Oregon Stewart Title of Rhode Island, Inc. ......................... Rhode Island Ortem Investments, Inc. ..................................... Texas East-West, Inc. ............................................. Texas Stewart Title of San Patricio County, Inc. .................. Texas
(Continued) 3 Exhibit 21 (continued) STEWART INFORMATION SERVICES CORPORATION AND SUBSIDIARIES
STATE OF NAME OF SUBSIDIARY INCORPORATION ------------------ ------------- Nacogdoches Abstract & Title ................................ Texas Stewart Title Guaranty Company .............................. Texas Southland Information, Inc. ................................. Texas Stewart Title Company ....................................... Texas Stewart Title Austin, Inc. .................................. Texas Stewart Title of Lubbock, Inc. .............................. Texas Stewart Title Company of Rockport, Inc. ..................... Texas Texarkana Title and Abstract, Inc. .......................... Texas Pacific Title, L.C .......................................... Texas Premier Title, L.C .......................................... Texas Gracy Title Co., L.C ........................................ Texas Stewart Title of Eagle Pass ................................. Texas MHI Title Company of Houston, L.C ........................... Texas Brazoria County Abstract .................................... Texas Stewart Investment Services Corporation ..................... Texas Stewart Trust Company ....................................... Texas Landata RE-Source - Texas ................................... Texas Landata Systems, Inc. ....................................... Texas Landata, Inc. ............................................... Texas Landata RE-Source, Inc. ..................................... Texas Landata Group, Inc. ......................................... Texas Landata Field Services ...................................... Texas Landata Site Services ....................................... Texas Landata Technologies ........................................ Texas Fulghum, Inc. ............................................... Texas Stewart Mortgage Information Company ........................ Texas Stewart Mortgage Processing ................................. Texas Stewart Management Information, Inc. ........................ Texas Stewart - U.A.M., Inc. ...................................... Texas Baca-Landata, Inc. .......................................... Texas Primero, Inc. ............................................... Texas Landata Geo Services, Inc. .................................. Texas Priority Title - Houston .................................... Texas Priority Title - Dallas ..................................... Texas Stewart Title of North Texas ................................ Texas Stewart Information International, Inc. ..................... Texas Stewart Title of Corpus Christi ............................. Texas Backman-Stewart ............................................. Utah Landata Scan Systems ........................................ Utah Stewart Title and Escrow, Inc. .............................. Virginia
(Continued) 4 Exhibit 21 (continued) STEWART INFORMATION SERVICES CORPORATION AND SUBSIDIARIES
STATE OF NAME OF SUBSIDIARY INCORPORATION ------------------ ------------- Stewart Title - Shenandoah Valley, L.C ...................... Virginia Stewart Title Services of Virginia, L.C ..................... Virginia Signature & Stewart Settlements, L.C ........................ Virginia Stewart Title & Settlement Services, Inc. ................... Virginia Cedar Run Title & Abstract .................................. Virginia Land Title Research ......................................... Virginia Stewart Services of Greater Virginia ........................ Virginia Potomac Title & Escrow ...................................... Virginia Resource Title, L.L.C ....................................... Virginia Howell Title, L.L.C ......................................... Virginia Pacific Northwest Holding Company ........................... Washington Sheboygan Title Services, Inc. .............................. Wisconsin Stewart Title of Gillette, Inc. ............................. Wyoming INTERNATIONAL Stewart Information Hungary ................................. Hungary Stewart Data Slovakia ....................................... Slovakia Stewart Title Insurance Company (U.K.) Limited .................................................. United Kingdom Conquest Group .............................................. United Kingdom Michael Hickmott & Company ................................. United Kingdom Stewart Title Great Britain ................................. United Kingdom
EX-23 8 CONSENTS OF INDEPENDENT PUBLIC ACCOUNTANTS 1 EXHIBIT 23 The Board of Directors Stewart Information Services Corporation: We consent to incorporation by reference in the registration statements (No. 33-48519, No. 33-48520, No. 33-58156, No. 33-59747, No. 33-62535, No. 333-03981 and No. 333-24075) on Form S-8 of Stewart Information Services Corporation of our report dated February 13, 1998, relating to the consolidated balance sheets of Stewart Information Services Corporation and subsidiaries as of December 31, 1997 and 1996 and the related consolidated statements of earnings and retained earnings and cash flows for each of the years in the three-year period ended December 31, 1997, and all related schedules, which report appears in the December 31, 1997 annual report on Form 10-K of Stewart Information Services Corporation. Our report covering the December 31, 1995 financial statements refers to a change in accounting for long-lived assets. We also consent to the reference to our firm under the heading "Interests of Named Experts and Counsel" in such Registration Statements. /s/ KPMG Peat Marwick LLP Houston, Texas March 16, 1998 2 The Board of Directors Stewart Information Services Corporation I consent to the incorporation by reference in the registration statements (No. 33-48519, No. 33-48520, No. 33-58156, No. 33-59747, No. 33-62535 and No. 333-03981) on Form S-8 of Stewart Information Services Corporation of my report which appears in the December 31, 1997 annual report on Form 10-K of Stewart Information Services Corporation. I also consent to the reference to me under the heading "Interest of Named Experts and Counsel" in such Registration Statements. /s/ JESUS YEPEZ, CPA Lubbock, Texas January 29, 1998 3 March 9 , 1998 The Board of Directors Stewart Information Services Corporation We consent to the incorporation by reference in the registration statements (No. 33-48519, No.33-48520, No. 33-58156, No. 33-62535 and No. 333-03981) on Form S-8 of Stewart Information Services Corporation of our reports which appears in the December 31, 1997 annual report on Form 10 K of Stewart Information Services Corporation. We also consent to the reference to us under the heading "Interests of Named Experts and Counsel" in such Registration Statements. Sincerely, /s/ GRANT BENNETT ACCOUNTANTS --------------------------------- GRANT BENNETT ACCOUNTANTS Certified Public Accountants A Professional Corporation Sacramento, California 4 The Board of Directors Stewart Information Services Corporation We consent to the incorporation by reference in the registration statements (No. 33-48519, No. 33-48520, No. 33-58156, No. 33-59747, No, 33-62535, No. 333-03981 and No, 333-24075) on Form S-8 of Stewart Information Services Corporation of our reports which appear in the December 31, 1997 annual report on Form 10-K of Stewart Information Services Corporation. We also consent to the reference to us under the heading "Interest of Named Experts and Counsel" in such Registration Statements. Signed: /s/ WILKERSON & ARTHUR, P.C. ------------------------------------- Wilkerson & Arthur, P.C. Fort Worth, Texas March 2, 1998 5 The Board of Directors Stewart Information Services Corporation We consent to incorporation by reference in the registration statements (No. 33-48519, No. 33-48520, No. 33-58156, No. 33-59747, No. 33-62535, No. 333-03981 and No. 333-24075) on Form S-8 of Stewart Information Services Corporation of our report, which appears in the December 31, 1997 annual report on Form 10-K of Stewart Information Services Corporation. We also consent to the reference to us under the heading "Interests of Named Experts and Counsel" in such Registration Statements. /s/ M. TIMOTHY O'ROARK - --------------------------------- M. TIMOTHY O'ROARK El Paso, TX March 2, 1998 6 The Board of Directors Stewart Information Services Corporation I consent to the incorporation by reference in the registration statements (No. 33-48519, No. 33-46520, No. 33-58156, No. 33-59747, No. 33-62535, No. 333-03981 and No. 333-24075) on Form S-8 of Stewart Information Services Corporation of my reports which appear in the December 31, 1997 annual report on Form 10-K of Stewart Information Services Corporation, I also consent to the reference to me under the heading "Interest of Named Experts and Counsel" in such Registration Statements. Signed /s/ GINNY SANDERS MAY, CPA -------------------------------------------- Lake Jackson, Texas February 27, 1998 7 The Board of Directors Stewart Information Services Corporation We consent to the incorporation by reference in the registration statements (No. 33-48519, No, 33-48520, No. 33-58156, No. 33-59747, No. 33-62535, No. 333-03981 and No. 333-24075) on Form S-8 of Stewart Information Services Corporation of our report which appears in the December 31, 1997 annual report on Form 10-K of Stewart Information Services Corporation. We also consent to the reference to us under the heading "Interest of Named Experts and Counsel" in such Registration Statements. /s/ EDGAR, KIKER & CROSS ------------------------------ EDGAR, KIKER & CROSS, L.L.P. Certified Public Accountants Beaumont, Texas February 27, 1998 8 The Board of Directors Stewart Information Services Corporation I consent to the incorporation by reference in the registration statements (No. 33-48519, No. 33-48520, No. 33-58156, No. 33-59747, No. 33-62535, No. 333-03981 and No. 333-24075) on Form S-8 of Stewart Information Services Corporation of my report which appears in the December 31, 1997 annual report on Form 10-K of Stewart Information Services Corporation, I also consent to the reference to me under the heading "Interest of Named Experts and Counsel" in such Registration Statements. /s/ JIM S. WALKER - ----------------------- Beaumont, Texas March 3, 1998 9 The Board of Directors Stewart Information Services Corporation We consent to incorporation by reference in the registration statements (No. 33-48519, No. 33-48520, No. 33-58156, No. 33-59747, No. 33-62535, No. 333-03981 and No, 333-24075) on Form S-8 of Stewart Information Services Corporation of our report, which appears in the December 31, 1997 annual report on Form 10-K of Stewart Information Services Corporation. We also consent to the reference to us under the heading "Interests of Named Experts and Counsel" in such Registration Statements. /s/ DOSHIER, PICKENS & FRANCIS, P.C. - ---------------------------------------- DOSHIER, PICKENS & FRANCIS, P.C. Amarillo, TX March 3, 1998 10 The Board of Directors Stewart Information Services Corporation We consent to the incorporation by reference in the registration statements (No. 33-48519), No. (33-48520, No. 33-58156, No. 33-59747, No. 33-62535, No. 33- 03981 and No. 333-24075) on Form S-8 of Stewart Information Services Corporation of our report which appear in the December 31, 1997 annual report on Form 10-K of Stewart Information Services Corporation. We also consent to the reference to us under the heading "Interest of Named Experts and Counsel" in such Registration Statements. Signed /s/ FANCHER AND COMPANY -------------------------------- March 3, 1998 Corpus Christi, Texas 11 The Board of Directors Stewart Information Services Corporation We consent to the incorporation by reference in the registration statements (No. 33-48519, No. 33-48520, No. 33-58156, No. 33-59747, No. 33-62535, No. 333-03981 and No. 333-24075) on Form S-8 of Stewart Information Services Corporation of our report which appears in the December 31, 1997 annual report on Form-10-K of Stewart Information Services Corporation. We also consent to the reference to us under the heading "Interest of Named Experts and Counsel" in such Registration Statements. /s/ WILLIAMS & PEARCY, P.C. - ------------------------------- WILLIAMS & PEARCY, P.C. Texarkana, AR 71854 January 19, 1998 12 The Board of Directors Stewart Information Services Corporation We consent to the incorporation by reference in the registration statements (No. 33-48519, No. 33-48520, No. 33-58156, No. 33-59747, No. 33-62535, No. 333-03981, and No. 333-24075) on Form S-8 of Stewart Information Services Corporation of our reports which appear in the December 31, 1997 annual report on Form 10-K of Stewart Information Services Corporation. We also consent to the reference to us under the heading "Interest of Named Experts and Counsel" in such Registration Statements. /s/ FLUSCHE, VAN BEVEREN, KILGORE, P. C. - ------------------------------------------- FLUSCHE, VAN BEVEREN, KILGORE, P. C. Corpus Christi, Texas March 11, 1998 13 The Board of Directors Stewart Information Services Corporation We consent to incorporation by reference in the registration statements (No. 33-48519, No. 33-48520, No. 33-58156, No. 33-59747, No. 33-62535, No. 333-03981 and No. 333-24075) on Form S-8 of Stewart Information Services Corporation of our report, which appears in the December 31, 1997 annual report on Form 10-K of Stewart Information Services Corporation. We also consent to the reference to us under the heading "Interests of Named Experts and Counsel" in such Registration Statements. /s/ AARONSON, WHITE & COMPANY ------------------------------------ AARONSON, WHITE & COMPANY Houston, TX March 16, 1998 EX-27 9 FINANCIAL DATA SCHEDULE
7 This schedule contains summary financial information extracted from the balance sheet as of December 31, 1997 and the related statement of earnings for the year ended December 31, 1997 and is qualified in its entirety by reference to such financial statements. 1,000 YEAR DEC-31-1997 DEC-31-1997 209,506 0 0 0 0 0 245,267 30,391 0 0 417,691 156,791 0 0 0 19,087 0 0 6,906 202,598 417,691 692,618 15,929 363 0 29,794 0 0 23,679 8,391 15,288 0 0 0 15,288 2.24 2.22 150,331 27,188 2,606 5,991 17,343 156,791 0
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