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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A (RULE 14a-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the SecuritiesSecurities Exchange Act of 1934 (Amendment No. )
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(1) To elect directors of the Company to hold office until the next Annual Meeting of Stockholders or until their respective successors are duly elected and qualified. | |
(2) To | |
By Order of the Board of Directors, | |
Secretary |
28, 200527, 2006
Amount and | Amount and | |||||||||||||||||||||||
Nature of | Nature of | |||||||||||||||||||||||
Beneficial | Percent | Beneficial | Percent | |||||||||||||||||||||
Name and Address of Beneficial Owner | Name and Address of Beneficial Owner | Title of Class | Ownership | of Class | Name and Address of Beneficial Owner | Title of Class | Ownership | of Class | ||||||||||||||||
Malcolm S. Morris | Malcolm S. Morris | Class B Common Stock | 525,006 | 50.0 | Malcolm S. Morris | Class B Common Stock | 525,006 | 50.0 | ||||||||||||||||
3992 Inverness | 3992 Inverness | |||||||||||||||||||||||
Houston, Texas 77019 | Houston, Texas 77019 | |||||||||||||||||||||||
Stewart Morris, Jr. | Stewart Morris, Jr. | Class B Common Stock | 525,006 | 50.0 | Stewart Morris, Jr. | Class B Common Stock | 525,006 | 50.0 | ||||||||||||||||
#8 West Rivercrest | #8 West Rivercrest | |||||||||||||||||||||||
Houston, Texas 77042 | Houston, Texas 77042 | |||||||||||||||||||||||
Artisan Partners Limited Partnership | Artisan Partners Limited Partnership | Common Stock | 2,373,494 | (1) | 13.9 | Artisan Partners Limited Partnership | Common Stock | 2,534,494 | (1) | 14.8 | ||||||||||||||
1000 North Water Street, #1770 | 875 East Wisconsin Avenue, Suite 800 | |||||||||||||||||||||||
Milwaukee, Wisconsin 53202 | Milwaukee, Wisconsin 53202 | |||||||||||||||||||||||
Dimensional Fund Advisors, Inc. | Common Stock | 1,349,743 | (2) | 7.9 | ||||||||||||||||||||
Goldman Sachs Asset Management, L.P. | Goldman Sachs Asset Management, L.P. | Common Stock | 1,515,371 | (2) | 8.8 | |||||||||||||||||||
1299 Ocean Avenue, 11th Floor | 32 Old Slip Road | |||||||||||||||||||||||
Santa Monica, California 90401 | New York, New York 10005 | |||||||||||||||||||||||
Goldman, Sachs Asset Management, L.P. | Common Stock | 964,040 | (3) | 5.6 | ||||||||||||||||||||
Dimensional Fund Advisors Inc. | Dimensional Fund Advisors Inc. | Common Stock | 1,426,943 | (3) | 8.3 | |||||||||||||||||||
32 Old Slip Road | 1299 Ocean Avenue, 11th Floor | |||||||||||||||||||||||
New York, New York 10005 | Santa Monica, California 90401 | |||||||||||||||||||||||
Putnam, LLC. d/b/a Putnam Investments | Common Stock | 860,222 | (4) | 5.0 | ||||||||||||||||||||
One Post Office Square | ||||||||||||||||||||||||
Boston, Massachusetts 02109 |
(1) | Artisan Partners Limited Partnership reported shared voting and dispositive power with respect to all of such shares in its most recent report on Schedule |
(2) | Goldman Sachs Asset Management, L.P. reported sole dispositive power with respect to all of such shares and sole voting power with respect to 1,140,851 of such shares in its most recent report on Schedule 13G/A filed February 8, 2006. |
(3) | Dimensional Fund Advisors Inc. reported sole voting and dispositive power with respect to all of such shares in its most recent report on Schedule 13G/ A filed February |
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Amount and | Amount and | |||||||||||||||||||||
Nature of | Nature of | |||||||||||||||||||||
Beneficial | Percent | Beneficial | Percent | |||||||||||||||||||
Name | Title of Class | Ownership(1) | of Class | Title of Class | Ownership(1) | of Class | ||||||||||||||||
Malcolm S. Morris | Common Stock | 154,738 | (2) | * | Common Stock | 129,578 | (2) | * | ||||||||||||||
Class B Common Stock | 525,006 | 50.0 | Class B Common Stock | 525,006 | 50.0 | |||||||||||||||||
Stewart Morris, Jr. | Common Stock | 194,000 | (3) | 1.1 | Common Stock | 194,000 | (3) | 1.1 | ||||||||||||||
Class B Common Stock | 525,006 | 50.0 | Class B Common Stock | 525,006 | 50.0 | |||||||||||||||||
Matthew W. Morris | Common Stock | 0 | * | Common Stock | 0 | * | ||||||||||||||||
Robert L. Clarke | Common Stock | 282 | * | Common Stock | 2,560 | * | ||||||||||||||||
Max Crisp | Common Stock | 41,000 | (4) | * | Common Stock | 41,000 | (4) | * | ||||||||||||||
Nita B. Hanks | Common Stock | 2,966 | (5) | * | Common Stock | 4,466 | (5) | * | ||||||||||||||
Paul W. Hobby | Common Stock | 4,529 | * | Common Stock | 4,807 | * | ||||||||||||||||
Dr. E. Douglas Hodo | Common Stock | 4,529 | * | Common Stock | 5,807 | * | ||||||||||||||||
Laurie C. Moore | Common Stock | 1,123 | * | Common Stock | 1,401 | * | ||||||||||||||||
Dr. W. Arthur Porter | Common Stock | 4,529 | * | Common Stock | 2,807 | * | ||||||||||||||||
All executive officers, directors and nominees for director as a group (10 persons) | Common Stock | 407,596 | 2.4 | Common Stock | 386,426 | 2.2 | ||||||||||||||||
Class B Common Stock | 1,050,012 | 100.0 | Class B Common Stock | 1,050,012 | 100.0 |
* | Less than 1%. |
(1) | Unless otherwise indicated, the beneficial owner has sole voting and investment power. |
(2) | Includes |
(3) | Consists of 194,000 shares subject to stock options (see “Executive Compensation — Option Grants and Exercises”) at page 9. |
(4) | Includes 38,000 shares subject to stock options (see “Executive Compensation — Option Grants and Exercises”) at page 9. |
(5) | Includes |
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Nominee, Age and Position with the Company | Director Since | |||
Robert L. Clarke, | 2004 | |||
Nita B. Hanks, | 1990 | |||
Dr. E. Douglas Hodo, | 1988 | |||
Laurie C. Moore, | 2004 | |||
Dr. W. Arthur Porter, | 1993 |
Ms. Hanks, Dr. Hodo and Dr. Porter were
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Nominee, Age and Position with the Company | Director Since | |||
Max Crisp, | 1970 | |||
Paul W. Hobby, | 1989 | |||
Malcolm S. Morris, | 2000 | |||
Stewart Morris, Jr., | 2000 |
2005.
, a nonutility power generation company.
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5
2005.
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• | Each director should be an individual of the highest character and integrity and have an inquiring mind, experience at a strategy or policy-setting level, or otherwise possess a high level of specialized expertise, and the ability to work well with others. Special expertise or experience that will augment the Board’s expertise is particularly desirable. | |
• | Each director should have sufficient time available to devote to the affairs of the Company in order to carry out the responsibilities of a director and, absent special circumstances, no director should be simultaneously serving on the boards of directors of more than three other entities, excluding non-public companies, such as those related to personal or family business and charitable, educational or other non-profit entities. Directors are not qualified for service on the Board unless they are able to make a commitment to prepare for and attend meetings of the Board and its committees on a regular basis. | |
• | Each independent director should be free of any significant conflict of interest that would interfere with the independence and proper performance of the responsibilities of a director. |
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• | Directors to be nominated for election by the holders of the Company’s Common Stock should not be chosen as representatives of a constituent group or organization; each should utilize his or her unique experience and background to represent and act in the best interests of all stockholders as a group. |
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www.stewart.com.
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2005.
Long-Term | Long-Term | |||||||||||||||||||||||||||||||||||||||||||||||||
Compensation | Compensation | |||||||||||||||||||||||||||||||||||||||||||||||||
Annual Compensation | (Awards) | Annual Compensation | (Awards) | |||||||||||||||||||||||||||||||||||||||||||||||
Minimum | Variable | Stock Options | All Other | Minimum | Variable | Stock Options | All Other | |||||||||||||||||||||||||||||||||||||||||||
Name and Principal Position | Name and Principal Position | Year | Salary ($)(1) | Bonus ($) | Bonus ($) | (# Shares) | Compensation ($) | Name and Principal Position | Year | Salary ($)(1) | Bonus ($) | Bonus ($) | (# Shares) | Compensation ($) | ||||||||||||||||||||||||||||||||||||
Stewart Morris, Jr. | Stewart Morris, Jr. | 2004 | 150,000 | 250,000 | 400,069 | 25,000 | 21,067 | (2) | Stewart Morris, Jr. | 2005 | 165,000 | 250,000 | 426,172 | 25,000 | 12,312 | (2) | ||||||||||||||||||||||||||||||||||
President and | 2003 | 150,000 | 250,000 | 559,450 | 25,000 | 32,051 | President and | 2004 | 150,000 | 250,000 | 400,069 | 25,000 | 21,067 | |||||||||||||||||||||||||||||||||||||
Co-Chief Executive Officer | 2002 | 150,000 | 250,000 | 436,575 | 25,000 | 8,669 | Co-Chief Executive Officer | 2003 | 150,000 | 250,000 | 559,450 | 25,000 | 32,051 | |||||||||||||||||||||||||||||||||||||
Malcolm S. Morris | Malcolm S. Morris | 2004 | 150,000 | 250,000 | 400,069 | 25,000 | 31,515 | (3) | Malcolm S. Morris | 2005 | 165,000 | 250,000 | 426,172 | 25,000 | 13,770 | (3) | ||||||||||||||||||||||||||||||||||
Chairman of the Board and | 2003 | 150,000 | 250,000 | 559,450 | 25,000 | 48,630 | Chairman of the Board and | 2004 | 150,000 | 250,000 | 400,069 | 25,000 | 31,515 | |||||||||||||||||||||||||||||||||||||
Co-Chief Executive Officer | 2002 | 150,000 | 250,000 | 436,575 | 25,000 | 10,922 | Co-Chief Executive Officer | 2003 | 150,000 | 250,000 | 559,450 | 25,000 | 48,630 | |||||||||||||||||||||||||||||||||||||
Max Crisp | Max Crisp | 2004 | 156,000 | 135,000 | 309,052 | 16,500 | 114,974 | (4) | Max Crisp | 2005 | 160,000 | 145,000 | 323,879 | 16,500 | 113,321 | (4) | ||||||||||||||||||||||||||||||||||
Executive Vice President | 2003 | 155,000 | 135,000 | 428,588 | 16,500 | 120,630 | Executive Vice President | 2004 | 156,000 | 135,000 | 309,052 | 16,500 | 114,974 | |||||||||||||||||||||||||||||||||||||
and Chief Financial | 2002 | 150,000 | 135,000 | 242,431 | 16,500 | 119,625 | and Chief Financial | 2003 | 155,000 | 135,000 | 428,588 | 16,500 | 120,630 | |||||||||||||||||||||||||||||||||||||
Officer, Secretary and Treasurer | Officer, Secretary and Treasurer | |||||||||||||||||||||||||||||||||||||||||||||||||
Matthew W. Morris | Matthew W. Morris | 2004 | (5) | 100,577 | 75,000 | 44,543 | — | 2,325 | (6) | Matthew W. Morris | 2005 | 150,000 | 75,000 | 75,469 | — | 2,896 | (6) | |||||||||||||||||||||||||||||||||
Senior Vice President | Senior Vice President | 2004 | (5) | 100,577 | 75,000 | 44,543 | — | 2,325 |
(1) | Includes salary earned in |
(2) | Consists of matching contributions to the Company’s 401(k) plan ($ |
(3) | Consists of matching contributions to the Company’s 401(k) plan ($ |
(4) | Includes $102,564 paid under a deferred compensation agreement. See “Deferred |
(5) | Matthew W. Morris joined the Company on April 30, 2004. |
(6) | Consists of matching contributions to the Company’s 401(k) plan. |
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9
Individual Grants | Individual Grants | |||||||||||||||||||||||||||||||||||||||
Percent of | Percent of | |||||||||||||||||||||||||||||||||||||||
Options | Total Options | Grant Date | Options | Total Options | Grant Date | |||||||||||||||||||||||||||||||||||
Granted | Granted to | Exercise | Expiration | Present | Granted | Granted to | Exercise | Expiration | Present | |||||||||||||||||||||||||||||||
Name | (# Shares) | Employees (%) | Price ($) | Date | Value(1)($) | (# Shares) | Employees (%) | Price ($) | Date | Value(1)($) | ||||||||||||||||||||||||||||||
Stewart Morris, Jr. | 25,000 | 29.4 | 47.10 | 02/02/14 | 472,303 | 25,000 | 27.6 | 42.11 | 02/02/15 | 446,750 | ||||||||||||||||||||||||||||||
Malcolm S. Morris | 25,000 | 29.4 | 47.10 | 02/02/14 | 472,303 | 25,000 | 27.6 | 42.11 | 02/02/15 | 446,750 | ||||||||||||||||||||||||||||||
Max Crisp | 16,500 | 17.9 | 47.10 | 02/02/14 | 311,750 | 16,500 | 18.2 | 42.11 | 02/02/15 | 294,855 |
(1) | The grant date present values are calculated under the Model. The Model is a mathematical formula used to value stock options and is based on assumptions regarding the stock’s volatility |
Number of Unexercised | Number of Unexercised | |||||||||||||||||||||||||||||||||||||||||||||||
Options at | Options at | |||||||||||||||||||||||||||||||||||||||||||||||
December 31, 2004 | December 31, 2005 | |||||||||||||||||||||||||||||||||||||||||||||||
Shares | Value of Unexercised In-the-Money | Shares | Value of Unexercised In-the-Money | |||||||||||||||||||||||||||||||||||||||||||||
Acquired on | Options at December 31, 2004 | Acquired on | Options at December 31, 2005 | |||||||||||||||||||||||||||||||||||||||||||||
Exercise | Value | Exercisable | Unexercisable | Exercise | Value | Exercisable | Unexercisable | |||||||||||||||||||||||||||||||||||||||||
Name | (# Shares) | Realized($) | (# Shares) | (# Shares) | Exercisable ($) | Unexercisable ($) | (# Shares) | Realized($) | (# Shares) | (# Shares) | Exercisable ($) | Unexercisable ($) | ||||||||||||||||||||||||||||||||||||
Stewart Morris, Jr. | — | — | 169,000 | — | 3,309,880 | — | — | — | 194,000 | — | 4,524,080 | — | ||||||||||||||||||||||||||||||||||||
Malcolm S. Morris | — | — | 129,578 | — | 2,536,179 | — | 844 | 8,229 | 153,734 | — | 3,440,718 | — | ||||||||||||||||||||||||||||||||||||
Max Crisp | 16,500 | 351,555 | 21,500 | — | 98,900 | — | — | — | 38,000 | — | 268,145 | — |
2004.2005.
Number of | Number of | |||||||||||||||||||||||
Securities to be | Number of | Securities to be | Number of | |||||||||||||||||||||
Issued Upon | Weighted Average | Securities | Issued Upon | Weighted Average | Securities | |||||||||||||||||||
Exercise of | Price of | Remaining Available | Exercise of | Price of | Remaining Available | |||||||||||||||||||
Outstanding | Outstanding | for Future Issuance | Outstanding | Outstanding | for Future Issuance | |||||||||||||||||||
Options, Warrants | Options, Warrants | Under Equity | Options, Warrants | Options, Warrants | Under Equity | |||||||||||||||||||
Plan Category | And Rights | And Rights | Compensation Plans | And Rights | And Rights | Compensation Plans | ||||||||||||||||||
Equity compensation plans approved by security holders | 372,478 | 24.44 | 474,722 | (1) | 449,634 | 27.75 | 910,366 | (1) | ||||||||||||||||
Equity compensation plans not approved by security holders | — | — | — | — | — | — | ||||||||||||||||||
Totals | 372,478 | 24.44 | 474,722 | 449,634 | 27.75 | 910,366 |
(1) | Does not include shares reserved for issuance under existing equity incentive plans if further issuances under these plans require stockholder approval in accordance with the Corporate Governance Guidelines of the New York Stock Exchange. |
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Audit | Audit | Other | Other | Audit | Audit | Other | Other | |||||||||||||||||||||||||||||||||||||
All | Committee | Committee | Committee | Committee | All | Committee | Committee | Committee | Committee | |||||||||||||||||||||||||||||||||||
Type of Compensation | Type of Compensation | Directors | Chairman | Members | Chairs | Members | Type of Compensation | Directors | Chairman | Members | Chairs | Members | ||||||||||||||||||||||||||||||||
Annual Retainer: | Annual Retainer: | Annual Retainer: | ||||||||||||||||||||||||||||||||||||||||||
Cash | $ | 16,000 | $ | 10,000 | (1) | $ | 2,000 | Cash | $ | 20,000 | $ | 12,500 | (1) | $ | 3,000 | |||||||||||||||||||||||||||||
Stock(2) | 10,000 | Stock(2) | 10,000 | |||||||||||||||||||||||||||||||||||||||||
Per-Meeting Fees: | Per-Meeting Fees: | Per-Meeting Fees: | ||||||||||||||||||||||||||||||||||||||||||
Attendance in person: | Attendance in person: | |||||||||||||||||||||||||||||||||||||||||||
Board meeting(3) | 3,000 | Board meeting(3) | 3,000 | |||||||||||||||||||||||||||||||||||||||||
Committee meeting | $ | 2,500 | $ | 2,000 | Committee meeting | $ | 2,500 | $ | 2,000 | |||||||||||||||||||||||||||||||||||
Out-of-state travel(4) | 1,000 | Out-of-state travel(4) | 1,000 | |||||||||||||||||||||||||||||||||||||||||
Attendance by telephone: | Attendance by telephone: | |||||||||||||||||||||||||||||||||||||||||||
Board meeting | 2,000 | Board meeting | 2,000 | |||||||||||||||||||||||||||||||||||||||||
Committee meeting | 2,500 | 2,000 | Committee meeting | 2,500 | 2,000 |
(1) | Includes $5,000 per year for service as the presiding director of executive sessions of the non-management members of the Company’s Board of Directors. |
(2) | The annual stock award to directors is valued based on the market value per share of Common Stock on the date of the award. |
(3) | The fee for attendance at the Company’s annual Board retreat is $4,000. |
(4) | Plus expenses incurred. |
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1999 | 2000 | 2001 | 2002 | 2003 | 2004 | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | |||||||||||||||||||||||||||||||||||||
Company | $ | 100.00 | $ | 166.67 | $ | 148.36 | $ | 160.68 | $ | 308.06 | $ | 319.91 | $ | 100.00 | $ | 89.01 | $ | 96.41 | $ | 184.83 | $ | 191.94 | $ | 227.75 | ||||||||||||||||||||||||
Russell 2000 Index | 100.00 | 102.49 | 81.49 | 120.03 | 142.12 | 148.70 | ||||||||||||||||||||||||||||||||||||||||||
Russell 2000 Financial Services Sector Index | 100.00 | 121.05 | 139.98 | 144.84 | 202.54 | 245.28 | 100.00 | 115.64 | 119.65 | 167.32 | 202.62 | 207.08 | ||||||||||||||||||||||||||||||||||||
Russell 2000 Index | 100.00 | 96.98 | 99.39 | 79.03 | 116.41 | 137.82 |
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Incremental Percent | ||||
Guaranty Consolidated Net Income Before Taxes | Payable as Bonus | |||
Up to $20 million | 1.00 | % | ||
$20 million to $40 million | 0.75 | % | ||
$40 million to $60 million | 0.50 | % | ||
Over $60 million | 0.25 | % |
2004,2005, the Committee recommended and the Company adopted the following bonus formula for Mr. Crisp:
Incremental Percent | ||||
Guaranty Consolidated Net Income Before Taxes | Payable as Bonus | |||
Up to $50 million | 0.50 | % | ||
$50 million to $75 million | 0.40 | % | ||
$75 million to $100 million | 0.30 | % | ||
Over $100 million | 0.20 | % |
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2005.
Members of the Compensation Committee | |
Paul W. Hobby, Chair | |
Robert L. Clarke | |
Dr. W. Arthur Porter |
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PROPOSAL TO ADOPT THE STEWART INFORMATION SERVICES CORPORATION
Background
The Company believes that equity-based incentive compensation is an important tool for attracting and retaining superior Associates and for aligning their interests with those of the stockholders. The Company currently has five plans under which equity-based compensation may be awarded. The following table provides information about the Company’s equity compensation plans as of December 31, 2004:
Number of | Shares | |||||||||||||
Eligible | Available | |||||||||||||
Title of Plan | Year Adopted | Persons Eligible to Participate | Participants | for Issuance | ||||||||||
1993 Associates Stock Bonus Plan(1) | 1993 | Region and district managers | 10,588 | (2)(3) | ||||||||||
1996 Directors’ Stock Plan(1) | 1996 | Non-employee directors | 18,034 | (2) | ||||||||||
1999 Executive Stock Option Plan(1) | 1999 | Executive officers | 214,500 | (2) | ||||||||||
2002 Stock Option Plan for Region Managers(1) | 2002 | Region Managers and persons with equivalent positions | 281,600 | |||||||||||
Service Award Program | 1994 | Associates upon the fifth anniversary of service to the Company | — | (2)(3) |
Under corporate governance guidelines promulgated by the New York Stock Exchange in 2004, substantially all equity-based compensation plans, as well as material amendments thereto, must be approved by a listed company’s stockholders. Also, certain of the Company’s equity compensation plans have exhausted most of the shares reserved for issuance under those plans. Accordingly, on March 11, 2005, the Board of Directors of the Company approved the combination of all of the Company’s equity compensation plans into a single plan designated as the Stewart Information Services Corporation 2005 Long-Term Incentive Plan (the “2005 Plan”) and directed that such plan be submitted to the stockholders of the Company for their approval. If the 2005 Plan is approved by the stockholders, no awards will be made thereafter under any of the Company’s existing equity compensation plans.
The Company has reserved 1,360,000 shares of Common Stock for issuance under the 2005 Plan, subject to stockholder approval. The 2005 Plan permits the grant of awards of the same types as the Company’s existing plans. At the Annual Meeting, stockholders are being asked to approve the 2005 Plan and the reservation of shares thereunder.
Summary of the 2005 Plan
The full text of the 2005 Plan is set forth as Appendix A hereto, and you are urged to refer to it for a complete description of the 2005 Plan. The summary of the principal features of the 2005 Plan that follows is qualified entirely by such reference.
Purpose. The purpose of the 2005 Plan is to reward corporate officers and other employees (whom the Company refers to as “Associates” of the Company and its Affiliates by enabling them to acquire shares of Common Stock of the Company and to receive other compensation based on the increase in value of the Common Stock of the Company or certain other performance measures. The 2005 Plan is intended to advance the best interests of the Company, its Affiliates and its stockholders by providing those persons who have
15
Term. If approved by the shareholders, the 2005 Plan will be effective as of March 11, 2005 and will terminate on March 11, 2015 unless sooner terminated by the Board.
Administration. The Compensation Committee (or a subcommittee comprised of at least two of its members) or, in the absence thereof, the Board, shall administer the 2005 Plan (the “Plan Committee”). In administering the 2005 Plan, the Plan Committee shall have the full power to:
All determinations and decisions made by the Plan Committee pursuant to the provisions of the 2005 Plan and all related orders and resolutions of the Plan Committee shall be final, conclusive and binding on all persons, including the Company, its shareholders, employees, holders and the estates and beneficiaries of employees and holders.
Eligibility. Employees who have substantial responsibility for or involvement with the management and growth of the Company or its subsidiaries will be eligible to receive awards under the 2005 Plan. Eligibility for various types of awards under the 2005 Plan will be the same as under the Company’s existing plans, as set forth in the table above under the caption “ — Background”.
Maximum Shares Available. The maximum number of shares of Common Stock which may be issued under the 2005 Plan may not exceed 1,360,000 shares, in the aggregate. The maximum number of shares of Common Stock with respect to each of the various types of awards that may be granted is:
Maximum Number of Shares | ||||||||
Type of Award | Aggregate | Per Associate in Any One Year | ||||||
Executive Options | 600,000 | 35,000 | ||||||
Region Manager Options | 200,000 | 2,500 | ||||||
Directors’ Shares | 30,000 | (1 | ) | |||||
Associates Stock Bonuses | 350,000 | (2 | ) | |||||
Service Awards | 80,000 | 10 |
Such limitations are subject to adjustment in accordance with the anti-dilution provisions of the 2005 Plan.
If any outstanding award expires or terminates for any reason, is settled in cash in lieu of shares of Common Stock or any award is surrendered, the shares of Common Stock allocable to the unexercised portion of that award may again be subject to an award granted under the 2005 Plan. If shares of Common Stock are withheld from payment of an award to satisfy tax obligations with respect to the award, such shares of
16
Options. The Plan Committee may grant options under the 2005 Plan to eligible persons in such number and upon such terms as the Plan Committee may determine, subject to the terms and provisions of the 2005 Plan. The Plan Committee may award incentive stock options intended to satisfy the requirements of section 422 of the Internal Revenue Code or nonqualified stock options that are not intended to satisfy the requirements of section 422 of the Internal Revenue Code.
The price at which shares of Common Stock may be purchased under an option shall be determined by the Plan Committee, but such price may not be less than 100% of the fair market value of the shares on the date the option is granted. No incentive stock option may be granted to any person who, at the time the option is granted, owns shares of outstanding shares of stock possessing more than 10% of the total combined voting power of all classes of stock of the Company, unless the exercise price of such option is at least 110% of the fair market value of the Common Stock subject to the option and such option by its terms is not exercisable after the expiration of five years from the date such option is granted.
Unless specified otherwise in an option agreement, an option shall expire on the tenth anniversary of the date the option is granted. An option shall not continue to vest after the termination of the employment relationship between the optionee and the Company and its subsidiaries for any reason, unless otherwise specified in an option agreement.
Unless an earlier expiration date is specified in an option agreement, an option that is or has become exercisable on the date on which an optionee ceases to be an employee of the Company:
The Plan Committee shall specify in the option agreement the time and manner in which each option may be exercised. Unless the Plan Committee specifies otherwise, the option agreement shall set forth the following terms:
Unless otherwise provided in the applicable option agreement, no stock option granted under the 2005 Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. All options granted to an optionee under the 2005 Plan shall be exercisable during the lifetime of the optionee only by the optionee and, with respect to incentive stock options, after that time by the optionee’s heirs or estate.
To the extent that the aggregate fair market value of Common Stock with respect to which incentive stock options first become exercisable by a holder in any calendar year exceeds $100,000, taking into account both shares of Common Stock subject to incentive stock options under the 2005 Plan and Common Stock subject to incentive stock options under all other plans of the Company, such options shall be treated as nonqualified stock options. In reducing the number of options treated as incentive stock options to meet the $100,000 limit, the most recently granted options shall be reduced first. To the extent a reduction of simultaneously granted options is necessary to meet the $100,000 limit, the Plan Committee may designate which shares of Common Stock are to be treated as shares acquired pursuant to the exercise of an incentive stock option.
An optionee shall not have any rights as a shareholder with respect to Common Stock covered by an option until the date a stock certificate for such Common Stock is issued by the Company.
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Stock Appreciation Rights. The 2005 Plan authorizes the Plan Committee to issue stock appreciation rights (“SARs”) to eligible persons in such number and upon such terms and conditions determined by the Plan Committee. A SAR granted under the 2005 Plan shall confer upon a recipient a right to receive, upon exercise of such SAR, an amount equal to the excess of the fair market value of one share of Common Stock on the date of exercise over the grant price of the SAR, which shall not be less than 100% of the fair market value of one share of Common Stock on the date of grant of the SAR and in no event less than par value of one share of Common Stock. Such amount may be paid to the grantee, in Common Stock of equivalent value. The Plan Committee may impose such conditions and/or restrictions on any shares of Common Stock received upon exercise of a SAR granted pursuant to the 2005 Plan as it may deem advisable or desirable. These restrictions may include, but shall not be limited to, a requirement that the holder hold the shares of Common Stock received upon exercise of a SAR for a specified period of time.
SARs may be exercised for all or part of the shares of Common Stock subject to the related option upon the surrender of the right to exercise the equivalent portion of the related option. A SAR may be exercised only with respect to the shares of Common Stock for which its related option is then exercisable. A SAR will expire no later than the expiration of the underlying option; the value of the payout with respect to the tandem SAR may be for no more than 100% of the excess of the fair market value of the shares of Common Stock subject to the underlying option at the time the SAR is exercised over the option price of the underlying option; and the tandem SAR may be exercised only when the fair market value of the shares of Common Stock subject to the option exceeds the option price of the option. The Plan Committee shall determine the right of each SAR holder to exercise the SAR following the termination of the holder’s employment with the Company or its subsidiaries.
The term of a SAR granted under the 2005 Plan shall be determined by the Plan Committee; provided that no SAR shall be exercisable on or after the tenth anniversary date of its grant. Except as otherwise provided in an award agreement, no SAR granted under the 2005 Plan may be sold, transferred, pledged, assigned or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, except as otherwise provided in an award agreement, all SARs granted to a holder under the 2005 Plan shall be exercisable during his or her lifetime only by the holder, and after that time, by the holder’s heirs or estate. A recipient of a SAR award, as such, shall have no rights as a stockholder.
Directors’ Shares. As a portion of his or her compensation for service on the Company’s Board of Directors, each person who is not a full-time employee of the Company or any of its subsidiaries and who shall be elected or re-elected as a director or advisory director of the Company shall be awarded shares of Common Stock annually on the first business day following the Company’s annual meeting of stockholders at which such person was elected or re-elected to serve.
The number of shares to be awarded annually to non-employee directors shall be the amount determined by dividing the amount authorized by the Company’s Board of Directors by the closing price of a share of Common Stock on the New York Stock Exchange on the date of the award.
Associates Stock Bonuses. During the first quarter of each year during the term of the 2005 Plan, the Company will issue to each Associate selected by the Plan Committee Common Stock having a value equal to one-ninth of the total amount of cash bonus earned by such Associate for the previous calendar year pursuant to the established bonus policy of Guaranty or Title, as the case may be. The shares of Common Stock awarded as Associates Stock Bonuses will be valued as of their closing price on the day following the Company’s year-end earnings release.
Service Awards. Ten shares of the Company’s Common Stock will be awarded to Associates selected by the Plan Committee upon their initial completion of five years of service with the Company or its affiliates. Upon completion of each additional five-year service period thereafter, the Company will provide a service recognition gift other than Stock. The service recognition gift will be selected by the eligible Associate from a schedule published by the Company from time to time. Service Award Shares will be issued in the Associate’s name only. No shared or joint issues of Service Award Shares will be made.
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Substitution Awards. Awards may be granted under the 2005 Plan in substitution for stock options and other awards held by employees of other corporations who are about to become Associates of the Company or any of its subsidiaries as a result of a merger or consolidation of the employing corporation with the Company, or the acquisition by the Company of substantially all of the assets of another corporation or the acquisition by the Company of at least 50% of the issued and outstanding stock of another corporation as the result of which it becomes an affiliate of the Company. The terms and conditions of the substitute awards granted may vary from the terms and conditions set out in the 2005 Plan to the extent the Board, at the time of grant, may deem appropriate to conform, in whole or in part, to the provisions of the options and stock awards in substitution for which they are granted, but with respect to options that are incentive stock options, no such variation shall be such as to affect the status of any such substitute option as an “incentive stock option” under section 422 of the Internal Revenue Code.
Non-Transferability. Except as specified in the applicable award agreements or in domestic relations court orders, awards shall not be transferable by the holder other than by will or under the laws of descent and distribution, and shall be exercisable during the holder’s lifetime only by him or her. In the discretion of the Plan Committee, any attempt to transfer an award other than under the terms of the 2005 Plan and the applicable award agreement may terminate the award.
Forfeiture. If the Plan Committee finds by a majority vote that a holder, before or after termination of his or her employment with the Company or any of its affiliates (a) committed a fraud, embezzlement, theft, felony or an act of dishonesty in the course of his or her employment by the Company or an affiliate, which conduct damaged the Company or an affiliate or (b) disclosed trade secrets of the Company or an affiliate, then as of the date the Plan Committee makes its finding any awards awarded to the holder that have not been exercised by the holder (including all awards that have not yet vested) will be forfeited to the Company. The findings and decision of the Plan Committee with respect to the matter shall be final for all purposes.
The Plan Committee may specify in an award agreement that a holder’s rights, payments, and benefits with respect to an award shall be subject to reduction, cancellation, forfeiture, or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions of an award. Such events may include, but shall not be limited to, termination of employment for cause, termination of the holder’s provision of services to the Company or its subsidiaries, violation of material policies of the Company or its subsidiaries, breach of non-competition, confidentiality, or other restrictive covenants that may apply to the holder, or other conduct by the holder that is detrimental to the business or reputation of the Company or its subsidiaries.
Requirements of Law. The Company shall not be required to sell or issue any shares of Common Stock under any award if issuing those shares of Common Stock would constitute or result in a violation by the holder or the Company of any provision of any law, statute or regulation of any governmental authority. Specifically, in connection with any applicable statute or regulation relating to the registration of securities, upon exercise of any option or pursuant to any other award, the Company shall not be required to issue any shares of Common Stock unless the Plan Committee has received evidence satisfactory to it to the effect that the holder will not transfer the shares of Common Stock except in accordance with applicable law, including receipt of an opinion of counsel satisfactory to the Company to the effect that any proposed transfer complies with applicable law. The Company may, but shall in no event be obligated to, register any shares of Common Stock covered by the 2005 Plan pursuant to applicable securities laws of any country or any political subdivision. The Company shall not be obligated to take any other affirmative action in order to cause or enable the exercise of an option or any other award, or the issuance of shares of Common Stock pursuant thereto, to comply with any law or regulation of any governmental authority.
Change in Control. The existence of outstanding awards shall not affect in any way the right or power of the Company or its shareholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the Company’s capital structure or its business, any merger or consolidation of the Company, any issue of bonds, debentures, preferred or prior preference shares ahead of or affecting the Common Stock or stock rights, the dissolution or liquidation of the Company, any sale or transfer of all or any part of its assets or business or any other corporate act or proceeding, whether of a similar character or
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If the Company shall effect a subdivision or consolidation of stock or other capital readjustment, the payment of a stock dividend, or any increase or reduction of the number of shares of Common Stock outstanding, without receiving compensation therefor in money, services or property, then (1) the number, class or series and per share price of Common Stock subject to outstanding awards under the 2005 Plan shall be appropriately adjusted as to entitle a holder to receive upon exercise of our option or other award, for the same aggregate cash consideration, the equivalent total number and class or series of Common Stock the holder would have received had the holder exercised his option or other award in full immediately prior to the event requiring the adjustment and (2) the number and class or series of Common Stock then reserved to be issued under the 2005 Plan shall be adjusted. If while unexercised awards remain outstanding under the 2005 Plan (1) the Company shall not be the surviving entity in any merger, consolidation or other reorganization (or survives only as a subsidiary of an entity other than an entity that was wholly-owned by the Company immediately prior to such merger, consolidation or other reorganization), (2) the Company sells, leases or exchanges or agrees to sell, lease or exchange all or substantially all of its assets to any other person or entity (other than an entity wholly-owned by the Company), (3) the Company is to be dissolved or (4) the Company is a party to any other corporate transaction (as defined under section 424(a) of the Internal Revenue Code and applicable Department of Treasury regulations) that is not described in clauses (1), (2) or (3) of this sentence (each such event is referred to herein as a “Corporate Change”), then, except as otherwise provided in an award agreement (provided that such exceptions shall not apply in the case of a reincorporation merger), or as a result of the Plan Committee’s effectuation of one or more of the alternatives described below, there shall be no acceleration of the time at which any award then outstanding may be exercised, and no later than ten days after the approval by the shareholders of the Company of such Corporate Change, the Plan Committee, acting in its sole and absolute discretion, shall act to effect one or more of the following alternatives, which may vary among individual holders and which may vary among awards held by any individual holder:
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If the Plan Committee chooses to effect alternatives 3, 4 or 5 above, it may, in its sole and absolute discretion and without the consent or approval of any holder, accelerate the time at which some or all awards then outstanding may be exercised.
With respect to a reincorporation merger in which holders of the Company’s ordinary shares will receive one ordinary share of the successor corporation for each ordinary share of the Company’s Common Stock, none of the alternatives set forth above shall apply and, without Plan Committee action, each award shall automatically convert into a similar award of the successor corporation exercisable for the same number of ordinary shares of the successor as the award was exercisable for ordinary shares of stock of the Company.
In the event of changes in the outstanding Common Stock by reason of recapitalizations, reorganizations, mergers, consolidations, combinations, exchanges or other relevant changes in capitalization occurring after the date of the grant of any award and not otherwise provided for above, any outstanding award and any award agreements evidencing such award shall be subject to adjustment by the Plan Committee in its sole and absolute discretion as to the number and price of Common Stock or other consideration subject to such award. In the event of any such change in the outstanding Common Stock, the aggregate number of shares of Common Stock available under the 2005 Plan may be appropriately adjusted by the Plan Committee.
Amendment and Termination. The Plan Committee may, at any time and from time to time, alter, amend, modify, suspend, or terminate the 2005 Plan and any award agreement in whole or in part. However, no termination, amendment, suspension, or modification of the 2005 Plan or an award agreement shall adversely affect in any material way any award previously granted under the 2005 Plan, without the written consent of the holder holding such award. The Plan Committee shall not directly or indirectly lower the option price of a previously granted option or the grant price of a previously granted SAR, and no amendment of the 2005 Plan shall be made without shareholder approval if shareholder approval is required by applicable law or stock exchange rules.
FEDERAL INCOME TAX CONSEQUENCES OF THE 2005 PLAN
The following is a general description of the federal income tax consequences generally applicable to the Company and a recipient of an award under the 2005 Plan.
Incentive Stock Options. When the Plan Committee grants an employee an incentive stock option to purchase shares of Common Stock under the 2005 Plan, the employee will not be required to recognize any taxable income as a result of the grant or as a result of the employee’s exercise of the incentive stock option; however, the difference between the exercise price and the fair market value of the shares of Common Stock at the time of exercise is an item of tax preference that may require payment of an alternative minimum tax. On the sale of the shares acquired through exercise of an incentive stock option (assuming such sale does not occur within two years of the date of grant of the option or within one year from the date of exercise), any gain (or loss) will be taxed as long term capital gain (or loss) and the Company will not be entitled to any deduction in connection with the sale (or the grant or exercise) of the incentive stock option. With respect to a sale of shares that occurs after the later of two years from the date of grant and one year from the date of exercise, the tax basis of the shares for the purpose of a subsequent sale includes the option price paid for the shares. However, if the employee sells the shares acquired upon exercise of an incentive stock option before the later of (i) two years from the date of grant and (ii) one year from the date of exercise, the employee will be treated as having received, at the time of sale, compensation taxable as ordinary income, and the Company
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With respect to a sale of shares that occurs before the later of two years from the date of grant and one year from the date of exercise, the tax basis of the shares for the purpose of a subsequent sale includes the option price paid for the shares and the compensation income reported at the time of sale of the shares.
Nonqualified Stock Options. When the Plan Committee grants a nonqualified stock option to purchase shares of Common Stock under the 2005 Plan, the recipient will not be required to recognize any taxable income as a result of the grant. However, the recipient will be required to recognize ordinary income on the date the recipient exercises the nonqualified stock option. Generally the measure of the income will be equal to the difference between the fair market value on the date the shares are acquired and the option price. The tax basis of the shares acquired on exercise of the nonqualified stock option for the purpose of a subsequent sale includes the option price paid and the ordinary income reported on exercise of the nonqualified stock option. The income reportable on exercise of the nonqualified stock option is subject to federal tax withholding. Depending upon the applicable state and local laws, the income on exercise of an option may also be subject to state and local tax withholding. Generally, the Company will be entitled to a deduction in the amount reportable as income by the recipient on the exercise of a nonqualified stock option.
Stock Appreciation Rights. The grant of a SAR under the 2005 Plan generally will not be taxable to the recipient, and is not deductible by the Company (or an affiliate corporation), at the time of grant. However, the recipient will be required to recognize ordinary income on the date the recipient exercises the SAR. Generally the measure of the income will be equal to the amount realized on exercise of the SAR. The income reportable on exercise of the SAR is subject to federal tax withholding. Depending upon the applicable state and local laws, the income on exercise of the SAR may also be subject to state and local tax withholding. Generally, the Company will be entitled to a deduction in the amount reportable as income by the recipient on the exercise of a SAR.
Directors’ Shares, Associates Stock Bonuses and Service Awards. The grant of a stock award under the 2005 Plan will be taxable to the recipient, and is deductible by the Company (or an affiliate corporation), at the time of grant. The recipient will recognize ordinary income in an amount equal to the excess of the fair market value of those shares at that time over the amount (if any) the recipient paid for the shares. The Company (or an affiliate corporation) will be entitled to a deduction in the amount and at the time the recipient recognizes income.
Other Stock-Based Awards. Other stock-based awards granted under the 2005 Plan generally have the same tax consequences as set forth above, depending on the nature of the award.
Compensation Deduction Limitation. Under section 162(m) of the Internal Revenue Code, the Company’s federal income tax deductions for certain compensation paid to designated executives is limited to $1 million per year. These executives include the Company’s Chief Executive Officer and the next four highest compensated officers. Section 162(m) of the Internal Revenue Code provides an exception to this deduction for certain “performance based” compensation approved by a committee consisting solely of at least two “outside directors”. The Company believes that nonqualified stock options to purchase shares of Common Stock and performance based awards granted under the 2005 Plan generally should qualify as performance based compensation for purposes of section 162(m) of the Internal Revenue Code.
The Board of Directors recommends a vote “FOR” the proposal to adopt the Stewart Information Services Corporation 2005 Long-Term Incentive Plan.
SELECTION OF INDEPENDENT AUDITORS
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Year Ended December 31, | Year Ended December 31, | |||||||||||||||
2004 | 2003 | 2005 | 2004 | |||||||||||||
Audit Fees(1) | $ | 1,017,500 | $ | 534,300 | $ | 1,070,400 | $ | 1,017,500 | ||||||||
Audit-Related Fees(2) | 230,000 | 174,700 | 206,260 | 230,000 | ||||||||||||
Tax Fees(3) | 155,700 | 99,813 | 58,005 | 155,700 | ||||||||||||
All Other Fees(4) | 1,350 | 1,350 | 1,350 | 1,350 |
(1) | Fees for the audit of the Company’s annual financial statements, review of financial statements included in the Company’s Quarterly Reports on Form 10-Q, and services that are normally provided by KPMG LLP in connection with statutory and regulatory filings or engagements for the fiscal years shown. The |
(2) | Fees for assurance and related services by KPMG LLP that are reasonably related to the performance of the audit or review of the Company’s financial statements and that are not reported under “Audit Fees”. Primarily represents fees for separate statutory audits of minor subsidiaries and affiliates. Also includes fees for consultation on accounting questions. |
(3) | Fees for professional services rendered by KPMG LLP primarily for tax compliance, tax advice and tax planning. |
(4) | Fees not included under other captions. Consists of subscription for on-line accounting references. |
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1. The Audit Committee has reviewed and discussed the audited financial statements with the Company’s management. | |
2. The Audit Committee has discussed with the independent auditors the matters required to be discussed by SAS No. 61 (Codification of Statements on Auditing Standards, AU § 380). | |
3. The Audit Committee has received the written disclosures and letters from the independent accountants required by Independence Standards Board Standard No. 1 (Independent Discussions with Audit Committees) and has discussed with the independent auditors the independent auditors’ independence. | |
4. Based on the review and discussion referred to in paragraphs (1) through (3) above, the Audit Committee has recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, |
Dr. E. Douglas Hodo, | |
Robert L. Clarke | |
Laurie C. Moore |
Dated: March 28, 2005
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By Order of the Board of Directors, | |
Secretary |
March 28, 2005
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Appendix A
STEWART INFORMATION SERVICES CORPORATION
2005 LONG-TERM INCENTIVE PLAN
TABLE OF CONTENTS
Please Mark Here for Address Change or Comments | o | |
SEE REVERSE SIDE |
1. | Election of Directors — |
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listed at right (except | ||||||
Nominees: | 01 Robert L. Clarke, | |||||
to vote for all nominees | ||||||
contrary) | ||||||
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04 Dr. W. Arthur Porter, | ||||||
05 Laurie C. Moore | ||||||
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ARTICLE I
ESTABLISHMENT, PURPOSE AND DURATION
1.1 Establishment. The Company hereby establishes an incentive compensation plan, to be known as “Stewart Information Services Corporation 2005 Long-Term Incentive Plan,” as set forth in this document. The Plan permits the grant of Executive Options, Region Manager Options, Directors’ Shares, Associates Stock Bonuses, and Service Awards. The Plan shall become effective on the latest of (a) the date the Plan is approved by the Board, (b) the date the Plan is approved by the holders of at least a majority of the outstanding shares of voting stock of the Company and (c) if the provisions of the corporate charter, by-laws or applicable state law prescribes a greater degree of stockholder approval for this action, the approval by the holders of that percentage, at a meeting of stockholders (the“Effective Date”), and shall remain in effect as provided in Section 1.3.
1.2 Purpose of the Plan. The purpose of the Plan is to reward corporate officers and other Associates of the Company and its Affiliates by enabling them to acquire shares of common stock of the Company and to receive other compensation based on the increase in value of the common stock of the Company or certain other performance measures. The Plan is intended to advance the best interests of the Company, its Affiliates and its stockholders by providing those persons who have substantial responsibility for the management and growth of the Company and its Affiliates with additional performance incentives and an opportunity to obtain or increase their proprietary interest in the Company, thereby encouraging them to continue in their employment with the Company and its Affiliates.
1.3 Duration of Authority to Make Grants Under the Plan. No Awards may be granted under the Plan on or after the tenth anniversary of the Effective Date. The applicable provisions of the Plan will continue in effect with respect to an Award granted under the Plan for as long as such Award remains outstanding.
ARTICLE II
DEFINITIONS
The words and phrases defined in this Article shall have the meaning set out below throughout the Plan, unless the context in which any such word or phrase appears reasonably requires a broader, narrower or different meaning.
2.1 “Affiliate” means any corporation, partnership, limited liability company or association, trust or other entity or organization which, directly or indirectly, controls, is controlled by, or is under common control with, the Company. For purposes of the preceding sentence, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”), as used with respect to any entity or organization, shall mean the possession, directly or indirectly, of the power (a) to vote more than 50 percent (50%) of the securities having ordinary voting power for the election of directors of the controlled entity or organization, or (ii) to direct or cause the direction of the management and policies of the controlled entity or organization, whether through the ownership of voting securities or by contract or otherwise.
2.2 “Associate” means (a) a person employed by the Company or any Affiliate as a common law employee, (b) a person who has agreed to become a common law employee of the Company or any Affiliate and is expected to become such within six (6) months from the date of a determination made for purposes of the Plan or (c) a director or advisory director of the Company who is not an employee of the Company or any Affiliate.
2.3 “Associate Stock Bonuses”means an Award granted pursuant to Article IX of the Plan.
2.4 “Award” means, individually or collectively, a grant under the Plan of Executive Options, Region Manager Options, Directors’ Shares, Associates Stock Bonuses, and Service Awards, in each case subject to the terms and provisions of the Plan.
2.5 “Award Agreement” means an agreement that sets forth the terms and conditions applicable to an Award granted under the Plan.
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2.6 “Board” means the board of directors of the Company.
2.7 “Change in Control” means the occurrence of any of the following events: (a) there shall be consummated (i) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of the Stock would be converted into cash, securities or other property, other than a merger of the Company where a majority of the Board of the surviving corporation is, and for a two-year period after the merger continues to be, persons who were directors of the Company immediately prior to the merger or were elected as directors, or nominated for election as director, by a vote of at least two-thirds of the directors then still in office who were directors of the Company immediately prior to the merger, or (ii) any sale, lease, exchange or transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company; (b) the shareholders of the Company shall approve any plan or proposal for the liquidation or dissolution of the Company; or (c) (i) any “person” (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act, other than the Company or a subsidiary thereof or any Associate benefit plan sponsored by the Company or a subsidiary thereof, shall become the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company representing 20 percent or more of the combined voting power of the Company’s then outstanding securities ordinarily (and apart from rights accruing in special circumstances) having the right to vote in the election of directors, as a result of a tender or exchange offer, open market purchases, privately negotiated purchases or otherwise, and (ii) at any time during a period of two years after such “person” becomes such a beneficial owner, individuals who immediately prior to the beginning of such period constituted the Board shall cease for any reason to constitute at least a majority thereof, unless the election or the nomination by the Board for election by the Company’s shareholders of each new director during such period was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such period.
2.8 “Code” means the United States Internal Revenue Code of 1986, as amended from time to time.
2.9 “Committee” means a committee of at least two persons, who are members of the Compensation Committee of the Board and are appointed by the Compensation Committee of the Board, or, to the extent it chooses to operate as the Committee, the Compensation Committee of the Board. Each member of the Committee in respect of his or her participation in any decision with respect to an Award intended to satisfy the requirements of section 162(m) of the Code must satisfy the requirements of “outside director” status within the meaning of section 162(m) of the Code; provided, however, that the failure to satisfy such requirement shall not affect the validity of the action of any committee otherwise duly authorized and acting in the matter. As to Awards, grants or other transactions that are authorized by the Committee and that are intended to be exempt under Rule 16b-3 under the Exchange Act, the requirements of Rule 16b-3(d)(1) under the Exchange Act with respect to committee action must also be satisfied.
2.10 “Company” means Stewart Information Services Corporation, a Delaware corporation, or any successor (by reincorporation, merger or otherwise).
2.11 “Corporate Change”shall have the meaning ascribed to that term in Section 4.5(c).
2.12 “Directors’ Shares”means an Award granted pursuant to Article VIII.
2.13 “Effective Date” shall have the meaning ascribed to that term in Section 1.1.
2.14 “Exchange Act” means the United States Securities Exchange Act of 1934, as amended from time to time.
2.15 “Executive Officer”has the meaning given such term in the rules and regulations of the Securities and Exchange Commission.
2.16 “Executive Option”means an Option granted pursuant to Article VI.
2.17 “Fair Market Value” of the Stock as of any particular date means (1) if the Stock is traded on a stock exchange, the closing sale price of the Stock on that date as reported on the principal securities exchange on which the Stock is traded, or (2) if the Stock is traded in the over-the-counter market, the average between the high bid and low asked price on that date as reported in such over-the-counter market; provided that (a) if
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2.18 “Fiscal Year” means the Company’s fiscal year.
2.19 “Holder” means a person who has been granted an Award or any person who is entitled to receive shares of Stock under an Award.
2.20 “Incentive Stock Option”means an Option granted under the Plan that is designated by the Committee as an “Incentive Option” and satisfies the requirements of section 422 of the Code.
2.21 “Mature Shares” means shares of Stock that the Holder has held for at least six months.
2.22 “Minimum Statutory Tax Withholding Obligation”means the amount the Company or an Affiliate is required to withhold for federal, state and local taxes based upon the applicable minimum statutory withholding rates required by the relevant tax authorities.
2.23 “Nonqualified Stock Option”means an Option granted under the Plan other than an Incentive Option.
2.24 “Option” means an option to purchase Stock granted pursuant to Article V. An Option may be in the form of either an Incentive Stock Option or a Nonqualified Stock Option.
2.25 “Option Price” shall have the meaning ascribed to that term in Section 5.3.
2.26 “Optionee” means a person who is granted an Option under the Plan.
2.27 “Option Agreement” means a written contract setting forth the terms and conditions of an Option.
2.28 “Performance Goals”means one or more of the criteria described in Article VIII on which the performance goals applicable to an Award are based.
2.29 “Plan” means Stewart Information Services Corporation 2005 Long-Term Incentive Plan, as set forth in this document and as it may be amended from time to time.
2.30 “Region Manager”means a Region Manager of the Company or an Associate determined by the Committee to have comparable responsibilities.
2.31 “Region Manager Option”means an Option granted pursuant to Article VII.
2.32 “Section 409A”means section 409A of the Code and Department of Treasury rules and regulations issued thereunder.
2.33 “Service Award”means an Award granted pursuant to Article X.
2.34 “STC”means Stewart Title Company, a subsidiary of the Company.
2.35 “STG” means Stewart Title Guaranty Company, a subsidiary of the Company.
2.36 “Stock” means the common stock of the Company, $1.00 par value per share (or such other par value as may be designated by act of the Company’s stockholders).
2.37 “Ten Percent Stockholder”means an individual who owns stock possessing more than ten percent of the combined voting power of all classes of stock of the Company and its Affiliates. For this purpose, an individual will be considered as owning the stock owned, directly or indirectly, by or for his brothers and sisters (whether by the whole or half blood), spouse, ancestors and lineal descendants; and stock owned, directly or indirectly, by or for a corporation, partnership, estate or trust will be considered as being owned proportionately by or for its shareholders, partners or beneficiaries.
2.38 “Termination of Employment” means the termination of the Award recipient’s employment relationship with the Company and all Affiliates.
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ARTICLE III
ELIGIBILITY AND PARTICIPATION
3.1 Eligibility. The persons who are eligible to receive Awards under the Plan are as follows:
3.2 Participation. Subject to the terms and provisions of the Plan, the Committee may, from time to time, select the Associates to whom Awards shall be granted and shall determine the nature and amount of each Award.
ARTICLE IV
GENERAL PROVISIONS RELATING TO AWARDS
4.1 Authority to Grant Awards. The Committee may grant Awards to those Associates as the Committee shall from time to time determine, under the terms and conditions of the Plan. Subject only to any applicable limitations set out in the Plan, the number of shares of Stock or other value to be covered by any Award to be granted under the Plan shall be as determined by the Committee in its sole discretion.
4.2 Dedicated Shares; Maximum Awards. The aggregate number of shares of Stock with respect to which Awards may be granted under the Plan is 1,360,000. The aggregate number of shares of Stock with respect to which the following types of Awards may be granted under the Plan is:
Maximum Number of Shares | ||||||||
Per Associate in Any | ||||||||
Type of Award | Aggregate | One Fiscal Year | ||||||
Executive Options | 600,000 | 35,000 | ||||||
Region Manager Options | 300,000 | 2,500 | ||||||
Directors’ Shares | 30,000 | |||||||
Associates Stock Bonuses | 350,000 | |||||||
Service Awards | 80,000 | 10 |
Each of the foregoing numerical limits stated in this Section 4.2 shall be subject to adjustment in accordance with the provisions of Section 4.5. The number of shares of Stock stated in this Section 4.2 shall also be increased by such number of shares of Stock as become subject to substitute Awards granted pursuant to Article XI;provided, however,that such increase shall be conditioned upon the approval of the stockholders of the Company to the extent stockholder approval is required by law or applicable stock exchange rules. If shares of Stock are withheld from payment of an Award to satisfy tax obligations with respect to the Award, such shares of Stock will count against the aggregate number of shares of Stock with respect to which Awards may be granted under the Plan. To the extent that any outstanding Award is forfeited or cancelled for any
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4.3 Non-Transferability. Except as specified in the applicable Award Agreements or in domestic relations court orders, Options shall not be transferable by the Holder other than by will or under the laws of descent and distribution, and shall be exercisable, during the Holder’s lifetime, only by him or her. In the discretion of the Committee, any attempt to transfer an Award other than under the terms of the Plan and the applicable Award Agreement may terminate the Award.
4.4 Requirements of Law. The Company shall not be required to sell or issue any shares of Stock under any Award if issuing those shares of Stock would constitute or result in a violation by the Holder or the Company of any provision of any law, statute or regulation of any governmental authority. Specifically, in connection with any applicable statute or regulation relating to the registration of securities, upon exercise of any Option or pursuant to any other Award, the Company shall not be required to issue any shares of Stock unless the Committee has received evidence satisfactory to it to the effect that the Holder will not transfer the shares of Stock except in accordance with applicable law, including receipt of an opinion of counsel satisfactory to the Company to the effect that any proposed transfer complies with applicable law. The determination by the Committee on this matter shall be final, binding and conclusive. The Company may, but shall in no event be obligated to, register any shares of Stock covered by the Plan pursuant to applicable securities laws of any country or any political subdivision. In the event the shares of Stock issuable on exercise of an Option or pursuant to any other Award are not registered, the Company may imprint on the certificate evidencing the shares of Stock any legend that counsel for the Company considers necessary or advisable to comply with applicable law, or, should the shares of Stock be represented by book or electronic entry rather than a certificate, the Company may take such steps to restrict transfer of the shares of Stock as counsel for the Company considers necessary or advisable to comply with applicable law. The Company shall not be obligated to take any other affirmative action in order to cause or enable the exercise of an Option or any other Award, or the issuance of shares of Stock pursuant thereto, to comply with any law or regulation of any governmental authority.
4.5 Changes in the Company’s Capital Structure.
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4.6 Election Under Section 83(b) of the Code. No Holder shall exercise the election permitted under section 83(b) of the Code with respect to any Award without the written approval of the Chief Financial Officer of the Company. Any Holder who makes an election under section 83(b) of the Code with respect to any Award without the written approval of the Chief Financial Officer of the Company may, in the discretion of the Committee, forfeit any or all Awards granted to him or her under the Plan.
4.7 Forfeiture for Cause. Notwithstanding any other provision of the Plan or an Award Agreement, if the Committee finds by a majority vote that a Holder, before or after his Termination of Employment (a) committed a fraud, embezzlement, theft, felony or an act of dishonesty in the course of his employment by the Company or an Affiliate which conduct damaged the Company or an Affiliate or (b) disclosed trade secrets of the Company or an Affiliate, then as of the date the Committee makes its finding, any Awards awarded to the Holder that have not been exercised by the Holder (including all Awards that have not yet vested) will be forfeited to the Company. The findings and decision of the Committee with respect to such matter, including those regarding the acts of the Holder and the damage done to the Company, will be final for all purposes. No decision of the Committee, however, will affect the finality of the discharge of the individual by the Company or an Affiliate.
4.8 Forfeiture Events. The Committee may specify in an Award Agreement that the Holder’s rights, payments, and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture, or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions of an Award. Such events may include, but shall not be limited to, Termination of Employment for cause, termination of the Holder’s provision of services to the Company or its Affiliates, violation of material policies of the Company and its Affiliates, breach of noncompetition, confidentiality, or other restrictive covenants that may apply to the Holder, or other conduct by the Holder that is detrimental to the business or reputation of the Company and its Affiliates.
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ARTICLE V
GENERAL PROVISIONS RELATING TO OPTIONS
5.1 Type of Options Available. The Committee may grant the following Options any time during the term of the Plan to any eligible Associate that it chooses:
5.2 Stock Appreciation Rights. Stock appreciation rights(“Stock Appreciation Rights”) may be included in each Option granted under the Plan to allow the holder of an Option (an“Optionee”) to surrender that Option (or a portion of the part that is then exercisable) and receive in exchange, upon a written request from the Optionee describing the special circumstances that exist which create the need to use such Stock Appreciation Rights and subject to any other conditions and limitations set by the Committee, an amount equal to the excess of the Fair Market Value of the Stock covered by the Option (or the portion of it surrendered), determined as of the date of surrender, over the aggregate option price of the Stock. The payment will be made in shares of Stock valued at Fair Market Value. Stock Appreciation Rights may be exercised only when the Fair Market Value of the Stock covered by the Option surrendered exceeds the option price of the Stock.
Upon the surrender of an Option, or a portion of it, for Stock Appreciation Rights, the shares represented by the Option (or that part of it surrendered) shall not be available for reissuance under the Plan.
Each of the Stock Appreciation Rights (a) will expire not later than the expiration of the underlying Option, (b) may be for no more than 100 percent of the difference between the exercise price of the underlying Option and the Fair Market Value of a share of the Stock at the time the Stock Appreciation Right is exercised, and (c) may be exercised only when the underlying Option is eligible to be exercised.
5.3 Option Price. The price at which shares of Stock may be purchased pursuant to an Option that is an Incentive Stock Option shall be not less than the Fair Market Value of the shares of Stock on the date the Option is granted. The Committee in its discretion may provide that the price at which shares may be purchased shall be more than the minimum price required. If an individual is a Ten Percent Stockholder, the option price at which shares may be purchased under an Option that is an Incentive Stock Option shall be not less than 110 percent of the Fair Market Value of the Stock on the date the Option is granted.
5.4 Maximum Value of Stock Subject to Options that are Incentive Stock Options. To the extent that the aggregate Fair Market Value (determined as of the date the Option is granted) of the Stock with respect to which Incentive Stock Options are exercisable for the first time by the Optionee in any calendar year (under the Plan and any other incentive stock option plan(s) of the Company and any parent and subsidiary corporation) exceeds $100,000, the Options shall be treated as Nonqualified Options. In making this determination, Options shall be taken into account in the order in which they were granted.
5.5 Exercise of Options. Each Option shall be exercised by request to the Committee setting forth the number of shares of Stock with respect to which the Option is to be exercised. Except in the case of exercise by a third-party broker, as provided below, payment of the exercise price and any applicable tax withholding amounts must be made at the time of exercise by any combination of the following: (a) cash, certified check, bank draft or postal or express money order payable to the order of the Company for an amount equal to the exercise price under the Option, (b) Mature Shares with a Fair Market Value on the date of exercise equal to the exercise price under the Option, (c) an election to make a cashless exercise through a registered broker-dealer (if approved in advance by the Committee or by an executive officer of the Company) or (d) except as specified below, any other form of payment which is acceptable to the Committee. As promptly as practicable
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The Committee shall not permit a Holder to pay such Holder’s exercise price upon the exercise of an Option by having the Company reduce the number of shares of Stock that will be delivered to the Holder pursuant to the exercise of the Option. In addition, the Committee shall not permit a Holder to pay such Holder’s exercise price upon the exercise of an Option by using shares of Stock other than Mature Shares.
An Option may not be exercised for a fraction of a share of Stock.
5.6 Duration of Options. Unless the Option Agreement specifies a shorter general term, an Option shall expire on the earliest of the date that is (a) the tenth anniversary of the date the Option is granted (the fifth anniversary of the date the Option is granted in the case of an Incentive Stock Option granted to a Ten Percent Stockholder), or (b) one day less than three months after the date of the Holder’s Termination of Employment (other than by reason of the Holder’s death) or (c) the date that is one year after the date of the Holder’s death. Unless the Holder’s Option Agreement specifies otherwise, an Option shall not continue to vest after the severance of the employment relationship between the Company and all Affiliates.
Whether authorized leave of absence, or absence on military or government service, shall constitute severance of the employment relationship between the Company and the Optionee shall be determined by the Committee at the time thereof.
In the event of the death of the holder of any Option while in the employ of the Company and before the date of expiration of such Option, such Option shall continue in effect until the date of expiration of the Option. After the death of the Optionee, his executors, administrators or any person or person to whom his Option may be transferred by will or by the laws of descent and distribution, shall have the right, any time before the termination of an Option, to exercise the Option in respect to the number of shares that the Optionee would have been entitled to exercise if he had exercised the Option on the date of his death while in employment.
Notwithstanding the foregoing provisions of this Article V, in the case of an Option that is a Nonqualified Option, the Committee may provide for a different option termination date in the option agreement with respect to such Option. For purposes of Incentive Stock Options issued under the Plan, an employment relationship between the Company and the Optionee shall be deemed to exist during any period in which the Optionee is employed by the Company, by any parent or subsidiary corporation, by a corporation issuing or assuming an option in a transaction to which section 424(a) of the Code, as amended, applies, or by a parent or subsidiary corporation of such corporation issuing or assuming an option. For purposes of Nonqualified Options issued under the Plan, an employment relationship between the Company and the Optionee will exist under the circumstances described above for Incentive Stock Options and will also exist if the Optionee is transferred to an affiliate corporation approved by the Committee.
5.7 Option Agreement. Each Option grant under the Plan shall be evidenced by an Option Agreement that shall specify (a) the Option Price, (b) the duration of the Option, (c) the number of shares of Stock to which the Option pertains, (d) the exercise restrictions, if any, applicable to the Option, (e) whether the Option is intended to be an Incentive Option or a Nonqualified Option, and (f) such other provisions as the Committee shall determine that are not inconsistent with the terms and provisions of the Plan.
5.8 Substitution Options. Options may be granted under the Plan from time to time in substitution for stock options held by employees of other corporations who are about to become employees of or affiliated with the Company or any Affiliate as the result of a merger or consolidation of the employing corporation with the Company or any Affiliate, or the acquisition by the Company or any Affiliate of the assets of the employing corporation, or the acquisition by the Company or any Affiliate of stock of the employing corporation as the result of which it becomes an Affiliate of the Company. The terms and conditions of the substitute Options
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5.9 No Rights as Stockholder. No Holder, as such, shall have any rights as a stockholder.
ARTICLE VI
EXECUTIVE OPTIONS
The individuals who shall be eligible to receive grants of Executive Options shall be the Executive Officers of the Company. No individual shall be eligible to receive an Option under the Plan while that individual is a member of the Committee.
ARTICLE VII
REGION MANAGER OPTIONS
The Committee may grant Options to those eligible Region Managers as it shall from time to time determine, under the terms and conditions of the Plan. Factors the Committee may consider include, without limitation:
The Committee shall evaluate the relative importance of these factors, and the Region Manager’s standing among the recipient group, in its sole and absolute discretion and shall have full power and authority to determine, according to the above criteria, the amount of shares subject to any option, subject only to any applicable limitations set out in the Plan.
ARTICLE VIII
DIRECTORS’ SHARES
8.1 Annual Grant to Directors. Each person who is not a full-time employee of the Company or any of its subsidiaries and who shall be elected or re-elected as a director of the Company shall be awarded shares
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8.2 Amount of Award. The number of shares of Stock to be awarded pursuant to this Article VII shall be the amount determined by dividing the amount authorized by the Company’s Board of Directors by the Fair Market Value of a share of the Stock on the date of the award.
ARTICLE IX
ASSOCIATES STOCK BONUSES
9.1 Award of Stock Bonuses. The Company shall, during the first quarter of each Fiscal Year during the term of the Plan, issue Stock to each Associate selected by the Committee having a value (as determined below) equal to one-ninth of the total amount of cash bonus earned by such Associate for the previous Fiscal Year pursuant to the established bonus policy of STG or STC, as the case may be. Any such Award shall be granted no later than March 15 following the close of the Fiscal Year with respect to which the applicable bonus was earned. The fact that an Associate is granted an Award pursuant to this Article IX with respect to one Fiscal Year shall not entitle the Associate to receive such a grant in a subsequent Fiscal Year.
9.2 Valuation. The shares of Stock to be issued pursuant to the Plan shall be valued as of their closing price on the day following the Company’s year-end earnings release.
ARTICLE X
SERVICE AWARDS
Service Awards of ten shares of Stock will be made to each eligible Associate selected by the Committee upon his completion of the Associate’s first five years of service for the Company and its Affiliates.
ARTICLE XI
SUBSTITUTION AWARDS
Awards may be granted under the Plan from time to time in substitution for stock options and other awards held by employees of other entities who are about to become Associates, or whose employer is about to become an Affiliate as the result of a merger of consolidation of the Company with another corporation, or the acquisition by the Company of substantially all the assets of another corporation, or the acquisition by the Company of at least 50 percent (50%) of the issued and outstanding stock of another corporation as the result of which it becomes a subsidiary of the Company. The terms and conditions of the substitute Awards so granted may vary from the terms and conditions set forth in the Plan to such extent as the Board at the time of grant may deem appropriate to conform, in whole or in part, to the provisions of the Award in substitution for which they are granted, but with respect to Options that are Incentive Stock Options, no such variation shall be such as to affect the status of any such substitute Option as an Incentive Stock Option under section 422 of the Code.
ARTICLE XII
ADMINISTRATION
12.1 Awards. The Plan shall be administered by the Committee or, in the absence of the Committee, the Plan shall be administered by the Board. The members of the Committee shall serve at the discretion of the Board. The Committee shall have full and exclusive power and authority to administer the Plan and to take all
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12.2 Authority of the Committee. The Committee shall have full and exclusive power to interpret and apply the terms and provisions of the Plan and Awards made under the Plan, and to adopt such rules, regulations and guidelines for implementing the Plan as the Committee may deem necessary or proper, all of which powers shall be exercised in the best interests of the Company and in keeping with the objectives of the Plan. A majority of the members of the Committee shall constitute a quorum for the transaction of business, and the vote of a majority of those members present at any meeting shall decide any question brought before that meeting. Any decision or determination reduced to writing and signed by a majority of the members shall be as effective as if it had been made by a majority vote at a meeting properly called and held. All questions of interpretation and application of the Plan, or as to award granted under the Plan, shall be subject to the determination, which shall be final and binding, of a majority of the whole Committee. No member of the Committee shall be liable for any act or omission of any other member of the Committee or for any act or omission on his own part, including but not limited to the exercise of any power or discretion given to him under the Plan, except those resulting from his own gross negligence or willful misconduct. In carrying out its authority under the Plan, the Committee shall have full and final authority and discretion, including but not limited to the following rights, powers and authorities, to:
The Committee may correct any defect or supply any omission or reconcile any inconsistency in the Plan or in any Award to a Holder in the manner and to the extent the Committee deems necessary or desirable to further the Plan’s objectives. Further, the Committee shall make all other determinations that may be necessary or advisable for the administration of the Plan. As permitted by law and the terms and provisions of the Plan, the Committee may delegate its authority as identified in Section 11.3.
The actions of the Committee in exercising all of the rights, powers, and authorities set out in this Article XI and all other Articles of the Plan, when performed in good faith and in its sole judgment, shall be final, conclusive and binding on all persons. The Committee may employ attorneys, consultants, accountants, agents, and other persons, any of whom may be an Associate, and the Committee, the Company, and its officers and Board shall be entitled to rely upon the advice, opinions, or valuations of any such persons.
12.3 Decisions Binding. All determinations and decisions made by the Committee or the Board, as the case may be, pursuant to the provisions of the Plan and all related orders and resolutions of the Committee or the Board, as the case may be, shall be final, conclusive and binding on all persons, including the Company, its stockholders, Associates, Holders and the estates and beneficiaries of Associates and Holders.
12.4 No Liability. Under no circumstances shall the Company, the Board or the Committee incur liability for any indirect, incidental, consequential or special damages (including lost profits) of any form incurred by any person, whether or not foreseeable and regardless of the form of the act in which such a claim may be brought, with respect to the Plan or the Company’s, the Committee’s or the Board’s roles in connection with the Plan.
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ARTICLE XIII
AMENDMENT OR TERMINATION OF PLAN
13.1 Amendment, Modification, Suspension, and Termination. Subject to Section 12.2 the Committee may, at any time and from time to time, alter, amend, modify, suspend, or terminate the Plan and any Award Agreement in whole or in part; provided, however, that, without the prior approval of the Company’s stockholders and except as provided in Section 4.5, the Committee shall not directly or indirectly lower the Option Price of a previously granted Option, and no amendment of the Plan shall be made without stockholder approval if stockholder approval is required by applicable law or stock exchange rules.
13.2 Awards Previously Granted. Notwithstanding any other provision of the Plan to the contrary, no termination, amendment, suspension, or modification of the Plan or an Award Agreement shall adversely affect in any material way any Award previously granted under the Plan, without the written consent of the Holder holding such Award.
ARTICLE XIV
MISCELLANEOUS
14.1 Unfunded Plan/ No Establishment of a Trust Fund. Holders shall have no right, title, or interest whatsoever in or to any investments that the Company or any of its Affiliates may make to aid in meeting obligations under the Plan. Nothing contained in the Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company and any Holder, beneficiary, legal representative, or any other person. To the extent that any person acquires a right to receive payments from the Company under the Plan, such right shall be no greater than the right of an unsecured general creditor of the Company. All payments to be made hereunder shall be paid from the general funds of the Company and no special or separate fund shall be established and no segregation of assets shall be made to assure payment of such amounts, except as expressly set forth in the Plan. No property shall be set aside nor shall a trust fund of any kind be established to secure the rights of any Holder under the Plan. All Holders shall at all times rely solely upon the general credit of the Company for the payment of any benefit which becomes payable under the Plan. The Plan is not intended to be subject to the Employee Retirement Income Security Act of 1974, as amended.
14.2 No Employment Obligation. The granting of any Award shall not constitute an employment contract, express or implied, nor impose upon the Company or any Affiliate any obligation to employ or continue to employ, or utilize the services of, any Holder. The right of the Company or any Affiliate to terminate the employment of any person shall not be diminished or affected by reason of the fact that an Award has been granted to him, and nothing in the Plan or an Award Agreement shall interfere with or limit in any way the right of the Company or its Affiliates to terminate any Holder’s employment at any time or for any reason not prohibited by law.
14.3 Tax Withholding. The Company or any Affiliate shall be entitled to deduct from other compensation payable to each Holder any sums required by federal, state or local tax law to be withheld with respect to the vesting or exercise of an Award or lapse of restrictions on an Award. In the alternative, the Company may require the Holder (or other person validly exercising the Award) to pay such sums for taxes directly to the Company or any Affiliate in cash or by check within one day after the date of vesting, exercise or lapse of restrictions. In the discretion of the Committee, and with the consent of the Holder, the Company may reduce the number of shares of Stock issued to the Holder upon such Holder’s exercise of an Option to satisfy the tax withholding obligations of the Company or an Affiliate; provided that the Fair Market Value of the shares of Stock held back shall not exceed the Company’s or the Affiliate’s Minimum Statutory Tax Withholding Obligation. The Committee may, in its discretion, permit a Holder to satisfy any Minimum Statutory Tax Withholding Obligation arising upon the grant or vesting (as applicable) of an Award granted pursuant to Article VIII, IX or X by delivering to the Holder of the Award a reduced number of shares of Stock in the manner specified herein. If permitted by the Committee and acceptable to the Holder, at the time of grant or vesting (as applicable) of an Award granted pursuant to Article VIII, IX or X, the Company shall
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14.4Written Agreement. Each Award shall be embodied in a written agreement or statement which shall be subject to the terms and conditions of the Plan. The Award Agreement shall be signed by a member of the Committee on behalf of the Committee and the Company or by an executive officer of the Company, other than the Holder, on behalf of the Company, and may be signed by the Holder to the extent required by the Committee. The Award Agreement may specify the effect of a Change in Control on the Award. The Award Agreement may contain any other provisions that the Committee in its discretion shall deem advisable which are not inconsistent with the terms and provisions of the Plan.
14.5Indemnification of the Committee. The Company shall indemnify each present and future member of the Committee against, and each member of the Committee shall be entitled without further action on his or her part to indemnity from the Company for, all expenses (including attorney’s fees, the amount of judgments and the amount of approved settlements made with a view to the curtailment of costs of litigation, other than amounts paid to the Company itself) reasonably incurred by such member in connection with or arising out of any action, suit or proceeding in which such member may be involved by reason of such member being or having been a member of the Committee, whether or not he or she continues to be a member of the Committee at the time of incurring the expenses, including, without limitation, matters as to which such member shall be finally adjudged in any action, suit or proceeding to have been negligent in the performance of such member’s duty as a member of the Committee. However, this indemnity shall not include any expenses incurred by any member of the Committee in respect of matters as to which such member shall be finally adjudged in any action, suit or proceeding to have been guilty of gross negligence or willful misconduct in the performance of his duty as a member of the Committee. In addition, no right of indemnification under the Plan shall be available to or enforceable by any member of the Committee unless, within 60 days after institution of any action, suit or proceeding, such member shall have offered the Company, in writing, the opportunity to handle and defend same at its own expense. This right of indemnification shall inure to the benefit of the heirs, executors or administrators of each member of the Committee and shall be in addition to all other rights to which a member of the Committee may be entitled as a matter of law, contract or otherwise.
14.6 Gender and Number. If the context requires, words of one gender when used in the Plan shall include the other and words used in the singular or plural shall include the other.
14.7 Severability. In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.
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14.8 Headings. Headings of Articles and Sections are included for convenience of reference only and do not constitute part of the Plan and shall not be used in construing the terms and provisions of the Plan.
14.9 Other Compensation Plans. The adoption of the Plan shall not affect any other option, incentive or other compensation or benefit plans in effect for the Company or any Affiliate, nor shall the Plan preclude the Company from establishing any other forms of incentive compensation arrangements for Associates.
14.10 Other Awards. The grant of an Award shall not confer upon the Holder the right to receive any future or other Awards under the Plan, whether or not Awards may be granted to similarly situated Holders, or the right to receive future Awards upon the same terms or conditions as previously granted.
14.11 Successors. All obligations of the Company under the Plan with respect to Awards granted hereunder shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.
14.12 Law Limitations/ Governmental Approvals. The granting of Awards and the issuance of Shares under the Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.
14.13 Delivery of Title. The Company shall have no obligation to issue or deliver evidence of title for shares of Stock issued under the Plan prior to:
14.14 Inability to Obtain Authority. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any shares of Stock hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such shares of Stock as to which such requisite authority shall not have been obtained.
14.15 Investment Representations. The Committee may require any person receiving Stock pursuant to an Award under the Plan to represent and warrant in writing that the person is acquiring the Shares for investment and without any present intention to sell or distribute such Stock.
14.16 Persons Residing Outside of the United States. Notwithstanding any provision of the Plan to the contrary, in order to comply with the laws in other countries in which the Company or any of its Affiliates operates or has Associates, the Committee, in its sole discretion, shall have the power and authority to:
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Notwithstanding the above, the Committee may not take any actions hereunder, and no Awards shall be granted, that would violate the Exchange Act, the Code, any securities law or governing statute or any other applicable law.
14.17 No Fractional Shares. No fractional shares of Stock shall be issued or delivered pursuant to the Plan or any Award. The Committee shall determine whether cash, additional Awards, or other property shall be issued or paid in lieu of fractional shares of Stock or whether such fractional shares or any rights thereto shall be forfeited or otherwise eliminated.
14.18 Arbitration of Disputes. Any controversy arising out of or relating to the Plan or an Option Agreement shall be resolved by arbitration conducted pursuant to the arbitration rules of the American Arbitration Association. The arbitration shall be final and binding on the parties.
14.19 Governing Law. The provisions of the Plan and the rights of all persons claiming thereunder shall be construed, administered and governed under the laws of the State of Texas.
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The Board of Directors recommends a vote FOR:
The undersigned acknowledges receipt of the Notice of Annual Meeting of Stockholders and of the Proxy Statement. | ||||||||
Dated: | , 2006 | |||||||
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STEWARDSTEWART INFORMATION SERVICES CORPORATION
28, 2006
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